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Federal Court of Australia |
Last Updated: 29 April 2005
FEDERAL COURT OF AUSTRALIA
Golden Gate Petroleum Ltd (ACN 090 074 785) [2004] FCA 1119
CORRIGENDUM
IN
THE MATTER OF GOLDEN GATE PETROLEUM LTD (ACN 090 074 785)
W114 OF
2004
LEE J
4 JUNE 2004 (CORRIGENDUM 8 MARCH
2005)
PERTH
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IN THE FEDERAL COURT OF AUSTRALIA
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WESTERN AUSTRALIA DISTRICT REGISTRY
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W114 OF 2004
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IN THE MATTER OF GOLDEN GATE PETROLEUM LTD (ACN 090 074 785)
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GOLDEN GATE PETROLEUM LTD (ACN 090 074 785)
APPLICANT |
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JUDGE:
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LEE J
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DATE OF ORDER:
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4 JUNE 2004
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WHERE MADE:
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PERTH
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CORRIGENDUM
1. In the first sentence of paragraph 21 of the Reasons for Judgment delete "with" and substitute "within".
2. In the first sentence of paragraph 27 of the Reasons for Judgment delete "said" and substitute "void".
I certify that the
preceding (2) paragraphs
is a true copy of the Corrigendum to the
Reasons for Judgment in this matter
of the Honourable Justice
Lee.
Associate:
Date: 28 April 2005
FEDERAL COURT OF AUSTRALIA
Golden Gate Petroleum Ltd (ACN 090 074 785) [2004] FCA 1119
CORPORATIONS – application for validation of share issue
– where the time described in disclosure document for application for
admission
of securities to quotation on financial market not observed –
construction of relevant provisions of Corporations Act 2001
(Cth)
Corporations Act 2001 (Cth) ss 254E, 711(5), 723,
724, 727(4), 728, 737(1), 738, 739, 741, 1322
Harman v Energy Research Group Australia Limited [1986] WAR 123 cited
Morton v Hampson [1962] VR 364 cited
Re Insurance Australia Group Ltd [2003] FCA 581; (2003) 128 FCR 581 cited
Swan Brewery Co Ltd (No.2) (1976) 3 ACLR 168
cited
IN THE MATTER OF GOLDEN GATE
PETROLEUM LTD (ACN 090 074 785)
W114 OF
2004
LEE J
4 JUNE
2004
PERTH
IN THE MATTER OF GOLDEN GATE PETROLEUM LTD (ACN 090 074 785)
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GOLDEN GATE PETROLEUM LTD (ACN 090 074 785)
APPLICANT |
THE COURT ORDERS THAT:
1. The issue of shares by the applicant pursuant to the 7 July Prospectus is hereby validated and confirmed pursuant to s 254E(1) of the Corporations Act.
2. The issue of shares by the applicant pursuant to the 11 August Prospectus is hereby validated and confirmed pursuant to s 254E(1) of the Corporations Act.
3. The issue of options by the applicant pursuant to the 7 July Prospectus is not invalid by reason of any contravention of s 723 or s 724 of the Corporations Act.
4. The issue of options by the applicant pursuant to the 11 August Prospectus is not invalid by reason of any contravention of s 723 or s 724 of the Corporations Act.
5. The period set out in subss 723(3)(a) and 724(1)(b)(i) of the Corporations Act for the applicant to have applied to the ASX for the admission to quotation of the securities pursuant to the 7 July Prospectus be extended:
(a) to 15 July 2003, in respect of 5,000,000 shares and options the subject of the 7 July Prospectus; and
(b) to 11 August 2003, in respect of 2,5000,000 shares and options the subject of oversubscriptions accepted by the applicant under the 7 July Prospectus.
6. The period set in subss 723(3)(a) and 724(1)(b)(i) of the Corporations Act for the applicant to have applied to the ASX for the admission to quotation of the securities pursuant to the 11 August Prospectus be extended to four days after the pronouncement of this order.
7. The period set out in subss 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation on the financial market operated by the ASX of the securities issued pursuant to the 11 August 2003 Prospectus be extended to 14 days after the pronouncement of this order.
8. The applicant forthwith lodge a copy of these orders with the Australian Securities & Investments Commission ("ASIC").
9. The applicant forthwith make an announcement to the ASX disclosing the terms of these orders.
10. For a period of 28 days from the date of these orders, the following persons have liberty to apply to vary or discharge the orders:
(a) any person whose interests have been or may be affected by the orders of validation and confirmation made pursuant to s 254E of the Corporations Act;
(b) any person to whom substantial injustice has been or is likely to be caused in respect of the orders made pursuant to s 1322 of the Corporations Act for extension or declaring that the issue of options are not invalid.
11. The applicant have liberty to apply to vary these orders upon first giving 48 hours prior written notice to the ASIC.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE MATTER OF GOLDEN GATE PETROLEUM LTD (ACN 090
074 785)
REASONS FOR JUDGMENT
LEE J:
1 This is an application for remedial orders under s 254E and s 1322 of the Corporations Act 2001 (Cth) ("the Act").
2 In May 2002 the applicant ("GGP"), then known as Valdera Resources Limited ("Valdera"), was admitted to the official list of Australian Stock Exchange Limited ("the ASX") and the securities of GGP quoted on the ASX market.
3 In June 2003 Valdera was merged with a Canadian registered company, Golden Gate Resources Limited. The latter became a wholly owned subsidiary of Valdera. The name Valdera was then changed to GGP.
4 As a result of the merger, GGP acquired an interest in a joint venture formed to explore for oil and gas on tenements in North America. Participation in that joint venture became GGP’s principal activity. Prior to the merger GGP carried on the business of exploring for and mining minerals in Australia. Pursuant to the ASX Listing Rules the ASX considered that the business of GGP had undergone a substantial change by reason of the merger and it suspended trading in GGP securities on the ASX market.
5 To obtain "re-listing" of its securities GGP was required to make "a new listing application" to the ASX and satisfy the ASX that current listing requirements were satisfied, in particular, that GGP had net tangible assets of at least $2,000,000.
6 As at June 2003 GGP could not meet that requirement. It resolved to increase its capital base by offering shares to the public for subscription. By a prospectus dated 7 July 2003 ("the 1st Prospectus") GGP offered 5,000,000 shares at 20cents with an attaching option granted free for every share subscribed, the options being exercisable on or before 31 December 2006 at a price of 65cents.
7 The 1st Prospectus provided that if the offer was oversubscribed GGP could issue a further 2,500,000 shares and 2,500,000 options. Therefore, if the maximum number of shares available under the 1st Prospectus, including oversubscriptions, were issued, the amount of additional capital subscribed would be $1,500,000. The 1st Prospectus stated that the minimum subscription required was $500,000.
8 The 1st Prospectus informed investors that within 7 days of the date of the prospectus GGP would make an application for the shares and options to be issued thereunder "to be admitted to quotation on [the] ASX".
9 GGP lodged that application on 15 July 2003.
10 On 31 July 2003 the 1st Prospectus closed oversubscribed and GGP duly issued 7,500,000 shares and 7,500,000 options. The applications for shares and options in GGP were not satisfied in full and GGP resolved to offer a further 2,500,000 shares and 2,500,000 options to the public on the same terms as the previous offer. By a prospectus dated 11 August 2003 ("the 2nd Prospectus") the further offer was put to the public. The 2nd Prospectus informed investors that within 7 days of the date of the prospectus GGP would make an application for the shares and options issued thereunder "to be admitted to quotation on [the] ASX".
11 On the same day, 11 August 2003, GGP gave notice to the ASX of the issue to the public of the 2nd Prospectus . Attached to the notice was a form under the ASX Listing Rules for "application for quotation of additional securities". In that form GGP gave notice to the ASX of the total number of shares and options, including oversubscriptions, that had been issued pursuant to the 1st Prospectus.
12 On 13 August 2003 the ASX issued a "Market Release" which gave notice to the public of "Reinstatement To Official Quotation" of GGP securities and advised that "suspension of trading in the securities [would] be lifted" from the commencement of trading on 15 August 2003. The securities identified as reinstated to official quotation included all shares and options issued pursuant to the 1st Prospectus.
13 The 2nd Prospectus, fully subscribed, closed on 19 August 2003 and 2,500,000 shares and 2,500,000 options were duly issued.
14 It is not disputed by the applicant that an application to have securities admitted to quotation on the ASX market was not lodged "within 7 days after" the date of the 1st Prospectus. To meet that requirement it was necessary that the application be lodged by 14 July 2003. As noted above, the application was not lodged until the following day. (See: Morton v Hampson [1962] VR 364, 365). No application for the securities issued pursuant to the 2nd Prospectus to be admitted to quotation was lodged with the ASX by GGP. The securities issued pursuant to the 1st and 2nd Prospectuses were traded on the ASX market after issue. The evidence before the Court indicated that at all material times the securities traded at prices that exceeded the issue price.
15 An affidavit sworn by the secretary of GGP deposed that the failure of GGP to comply with the obligations undertaken in the 1st and 2nd Prospectuses, to make timeous applications for admission to quotation on the ASX market of the securities to be issued pursuant to those prospectuses, occurred by reason of oversight and inadvertence. The affidavit conceded that the application lodged on 15 July 2003 was also deficient in that it "did not address the possibility of oversubscriptions pursuant to the [1st] Prospectus".
16 The secretary deposed that in February 2004 GGP lodged a further prospectus with the ASX giving notice of the intention to raise further share capital. The ASX informed GGP that the number of quoted securities set out in the prospectus could be not reconciled with the records maintained by the ASX. In May 2004 the ASX advised that the GGP securities admitted to quotation by the ASX did not include the securities issued pursuant to the 2nd Prospectus, and further advised that no application to list those securities for quotation had been received by the ASX.
17 To avoid the operation of the provisions of Chapter 6D of the Act upon the issue of the securities pursuant to the 1st or 2nd Prospectuses, GGP now seeks orders under s 254E(1) of the Act to validate the share issues made pursuant to the 1st and 2nd Prospectuses and like orders under s 1322 of the Act in respect of the issue of options. Notice of the application was given to the Australian Securities and Investment Commission ("ASIC") and to the ASX, neither of which opposes the orders sought by GGP. The ASX has informed GGP that if an application to have the securities issued pursuant to the 2nd Prospectus admitted to quotation is lodged with the ASX the ASX will list those securities.
18 The relevant provisions of Chapter 6D are ss 723 and 724 of the Act which read as follows:
"723(1) If an offer of securities needs a disclosure document, the securities may only be issued or transferred in response to an application form. The securities may only be issued or transferred if the person issuing or transferring them has reasonable grounds to believe that:
(a) the form was included in, or accompanied by:
(i) the disclosure document; or
(ii) if subsection 721(2) allows a profile statement to be used – the prospectus or the profile statement;
when the form was distributed by the person issuing or transferring the securities; or
(b) the form was copied, or directly derived, by the person making the application from a form referred to in paragraph (a).
(2) If a disclosure document for an offer of securities states that the securities will not be issued or transferred unless:
(a) applications for a minimum number of the securities are received; or
(b) a minimum amount is raised;
the person making the offer must not issue or transfer any of the securities until that condition is satisfied. For the purpose of working out whether the condition has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.
(3) If a disclosure document for an offer of securities states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and:
(a) an application for the admission of the securities to quotation is not made within 7 days after the date of the disclosure document; or
(b) the securities are not admitted to quotation within 3 months after the date of the disclosure document;
then:
(c) an issue or transfer of securities in response to an application made under the disclosure document is void; and
(d) the person offering the securities must return the money received by the person from the applicants as soon as practicable.
(4) Strict liability offences. An offence based on subsection (1), (2) or (3) is an offence of strict liability.
724(1) If a person offers securities under a disclosure document and:
(a) the disclosure document states that the securities will not be issued or transferred unless:
(i) applications for a minimum number of t he securities are received; or
(ii) a minimum amount raised;
and that condition is not satisfied within 4 months after the date of the disclosure document; or
(b) the disclosure document states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and:
(i) an application for the admission to quotation is not made within 7 days after the date of the disclosure document; or
(ii) the securities are not admitted to quotation within 3 months after the date of the disclosure document; or
(c) the person becomes aware that:
(i) the disclosure document contains a misleading or deceptive statement; or
(ii) there is an omission from the disclosure document of information required by section 710, 711, 712, 713, 714 or 715;
that is materially adverse from the point of view of an investor; or
(d) the person becomes aware of a new circumstance that:
(i) has arisen since the disclosure document was lodged; and
(ii) would have been required by section 710, 711, 712, 713, 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged; and
(iii) is materially adverse from the point of view of an investor;
the person must deal under subsection (2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities. For the purpose of working out whether a condition referred to in paragraph (a) has been satisfied, a person who has agreed to take securities as underwriter is taken to have applied for those securities.
(1A) An offence based on subsection (1) is an offence of strict liability.
(2) The person must either:
(a) repay the money received by the person from the applicants; or
(b) give the applicants:
(i) the documents required by subsection (3); and
(ii) 1 month to withdraw their application and be repaid; or
(c) issue or transfer the securities to the applicants and give them;
(i) the documents required by subsection (3); and
(ii) 1 month to withdraw their application and be repaid.
(3) The documents to be given are set out in the following table:
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Documents to be given
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Circumstances
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Documents
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1
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the sole disclosure document is a prospectus
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a supplementary or replacement prospectus that corrects the deficiency
or changes the terms of the offer
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2
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the disclosure documents are a prospectus and a profile statement and
subsection (1) applies to the prospectus
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a statement that sets out the changes needed to the prospectus to
correct the deficiency or change the terms of offer;
and a statement that the person is entitled to a copy of the prospectus free of charge |
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3
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the disclosure documents are a prospectus and a profile statement and
subsection (1) applies to the profile statement
Note that item 2 and this item may both apply to the offer. |
a supplementary or replacement profile statement that corrects the
deficiency or changes the terms of the offer
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4
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the disclosure document is an offer information statement
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a supplementary or replacement offer information statement that corrects
the deficiency or changes the terms of the offer
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" |
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[Emphasis added].
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19 It does not appear that GGP requested ASIC to exercise the power granted to ASIC by s 741 of the Act to exempt a person from a provision of Chapter 6D.
20 The relevant provisions under which the orders are sought read as follows:
"254E(1) On application by a company, a shareholder, creditor or any other person whose interests have been or may be affected, the Court may make an order validating, or confirming the terms of, a purported issue of shares if:
(a) the issue is or may be invalid for any reason; or
(b) the terms of the issue are inconsistent with or not authorised by:
(i) this Act; or
(ii) another law of a State or Territory; or
(iii) the company’s constitution (if any).
(2) On lodgment of a copy of the order with ASIC, the order has effect from the time of the purported issue.
1322(1) In this section, unless the contrary intention appears:
(a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and
(b) a reference to a procedural irregularity includes a reference to:
(i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme, and
(ii) a defect, irregularity or deficiency of notice or time.
1322(2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid.
...
1322(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.
1322(5) An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.
1322(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."
21 The securities issued pursuant to the 1st Prospectus, save for those issued for oversubscriptions, were "admitted to quotation with 3 months after the date of the disclosure document". In respect of those securities the overall purpose of s 723(3) was fulfilled, namely, that within the period of 3 months from the date of the prospectus GGP became bound to comply with rules of the ASX in respect of those securities and the securities were admitted to quotation on the ASX market.
22 In the course of the submissions of counsel for GGP, I raised the question whether, in the full context of the Act, the word void was used in s 723(3) with the meaning voidable. Although in respect of the present application it is unnecessary to resolve that question of construction, some comments may be made.
23 It is not obvious why an application to the ASX, lodged outside the period that s 711(5) of the Act requires a prospectus to state, should result in an issue of shares pursuant to the prospectus being void where the securities have been accepted for quotation on the ASX market within the time prescribed in the prospectus, and the time required by s 723(3)(b). Unlike s 723(2), which prohibits the issue of securities pursuant to a prospectus if a condition of the prospectus relating to a minimum subscription has not been satisfied, s 723(3) does not prohibit the issue of securities where an application to the ASX is not made within time, or admission of the securities to quotation by the ASX is not obtained within the prescribed period. It is to be noted that the operation of subsection 723(3) is predicated upon securities having been issued.
24 No doubt the provisions of s 723(3) are intended to reinforce the intent of the Act that a corporation conduct its affairs in a manner that meets the objects of the Act but proper construction of those provisions requires consideration of the content of the Act as a whole.
25 If s 723(3) intends an issue of securities to be void ab initio if an application for admission of the securities to quotation on the ASX market is made out of time, notwithstanding that quotation of the securities is obtained within the prescribed period, it would be expected that the Act would enact consequential provisions in respect of investors who acquire the securities on the ASX market from vendors to whom the securities have been issued. Subscribers to a prospectus to whom securities have been issued, and purchasers of those securities on the ASX market, would be entitled to assume that requirements of the Act had been satisfied if the securities were tradeable on that market.
26 If, in such a circumstance, s 723(3) is to be read as making void the issue of securities pursuant to that prospectus, that construction would leave little room for the operation of ss 724(2), which inter alia, provides that the securities may be issued notwithstanding the default to which s 723(3) applies.
27 Section 724(2)(c) appears to contemplate that in the circumstance referred to above, and where securities have not been issued to a person who has subscribed for securities under the prospectus, the securities may be issued without the issue being treated as void unless the applicant elects within one month of the issue to treat the issue as said by, presumably, returning the securities and requesting repayment of the monies subscribed.
28 It is to be noted that if ASIC is satisfied that an offer of securities is made that contains a misleading statement then, under s 739 of the Act, ASIC may order, inter alia, that no sales of the securities take place for a specified period.
29 The provisions of ss 724(2), (3), which apply to any applications to acquire securities from a corporation raising share capital by subscription which "have not resulted in an issue or transfer of the securities" by the corporation, do not make obvious the purpose to be served in requiring a new prospectus to be issued to enable a further application to be made to the ASX within 7 days of the date of that prospectus in relation to securities already accepted for quotation on the ASX market within the period set out in the original prospectus. In that circumstance a requirement that a "supplementary or replacement prospectus that corrects the deficiency or changes the terms of the offer" be issued would impose on the corporation, and indirectly its shareholders, substantial additional expenditure for no apparent benefit.
30 It may be thought that provisions such as those contained in s 724(2)(c), s 727(4) s 737(1), and s 738, and the absence of any provisions relating to the position of third parties who purchase securities on the ASX market from applicants to whom the securities were issued in a circumstance to which s 723(3)(c) is said to apply, suggest that the word void as used in s 723(3)(c) is to be read as voidable at the election of the applicant for the securities, and that sale of the securities by that party would constitute an election to affirm the transaction. Of course, rights obtained by that party under s 728 of the Act may remain exercisable against the corporation.
31 With regard to the failure by GGP to make application to the ASX by 14 July 2003 for admission to quotation of the securities issued as oversubscriptions, I accept that the default resulted from an innocent oversight that appears to have been corrected serendipitously by the further application lodged on 11 August 2003. It does not appear that any officer of GGP realized that the applications lodged on 15 July and 11 August 2003 failed to satisfy the requirements of the 1st Prospectus under the Act.
32 With regard to the 2nd Prospectus, the failure to lodge within 7 days after 11 August 2003 an application for the securities issued under that prospectus to be admitted to quotation on the ASX market, is more difficult to explain. The lack of awareness of default under the 1st Prospectus was compounded by lack of knowledge or instruction as to what remained to be done by the officers of GGP after it had lodged the application for quotation of further securities with the ASX on 11 August 2003. It does not seem to have been understood by the secretary, for example, that further steps were required by GGP in respect of the 2nd Prospectus. The omission by GGP in that regard was not addressed until approximately 9 months later when GGP sought to raise further capital and found that the number of securities that it understood had been admitted for quotation on the ASX market was less than the number recorded by ASX.
33 Notwithstanding the extent of the default and the period of delay, however, I am satisfied that it is just and equitable, and in the interests of all parties, that remedial orders be made in the terms sought by GGP.
34 I am satisfied that s 254E uses the word "invalid" in a broad sense to encompass not only an issue of shares which is liable to be declared void under the Act but also an issue of shares which the Act stipulates to be void. (See: Swan Brewery Co Ltd (No.2) (1976) 3 ACLR 168 per Gillard J at 171-2; c.f. Harman v Energy Research Group Australia Limited [1986] WAR 123 per Brinsden J at 127).
35 With regard to the declarations and remedial orders sought pursuant to s 1322 of the act, I accept that, as with like provisions in corporations legislation that preceded the Act, s 1322 is to be given a liberal construction, allowing appropriate orders to be made that facilitate the conduct of commerce and serve the interests of the parties concerned where it is just and equitable that such orders be made. (See: Re Insurance Australia Group Ltd [2003] FCA 581; (2003) 128 FCR 581 per Lindgren J at [27].) I am satisfied that orders should be made under s 1322 to validate the issue of options pursuant to the 1st and 2nd Prospectuses and avoid the operation of s 723(3).
36 GGP also seeks orders under s 1322 extending the time for application to the ASX for admission to quotation of the oversubscription securities issued under the 1st Prospectus and the securities issued under the 2nd Prospectus. Whether such orders are necessary may be doubted but in the absence of any submissions to the contrary I will grant the orders sought.
37 Consequential orders will also be made preserving the right of any person affected by the orders to apply within 28 days to vary or discharge any order.
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I certify that the preceding thirty-seven (37) numbered paragraphs are a
true copy of the Reasons for Judgment herein of the Honourable
Justice
Lee.
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Associate:
Dated: 6 September 2004
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Counsel for the Applicant:
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S J Lemonis
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Solicitor for the Applicant:
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Fairweather & Lemonis
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Date of Hearing:
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4 June 2004
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Date of Judgment:
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4 June 2004
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