FEDERAL COURT OF AUSTRALIA

Charter Hall Limited, in the matter of Charter Hall Limited [2007] FCA 1316

CORPORATIONS – failure to comply with time limit in relation to placement of stapled securities – failure to comply with time limit was inadvertent – unlikely to be any substantial injustice to any party in dispensing with the time limit – applied proviso that any party who later claims to have suffered a substantial injustice by reason of the orders has liberty to apply to discharge or vary them within a limited time

Corporations Act 2001 (Cth), ss 708A(6)(a), 1012DA(6)(a), 1322  

Re Australian Wealth Management Pty Ltd [2005] FCA 311 followed

Re Bounty Industries Ltd [2007] FCA 956 cited    

Re Insurance Australia Group Ltd (2003) 128 FCR 581 cited

Re Wave Capital Limited (2003) 47 ACSR 418 cited

Re Westpac Banking Corp (2004) 53 ACSR 288 cited

Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398 cited

IN THE MATTER OF CHARTER HALL LIMITED AND CHARTER HALL FUNDS MANAGEMENT LIMITED AND THE CORPORATIONS ACT 2001 (CTH)

CHARTER HALL LIMITED ABN 57 113 531 150 AND CHARTER HALL FUNDS MANAGEMENT LIMITED ABN 31 082 991 786  

NSD 1555 OF 2007

GYLES J

15 AUGUST 2007

SYDNEY

IN THE MATTER OF CHARTER HALL LIMITED AND CHARTER HALL FUNDS MANAGEMENT LIMITED AND THE CORPORATIONS ACT 2001 (CTH)

THE COURT ORDERS THAT:

1.                   In respect of the 44,444,445 stapled securities comprising one paid ordinary share in Charter Hall Limited and one unit in Charter Hall Property Trust which were issued on 13 June 2007 (the relevant securities), the period of five business days referred to in s 708A(6)(a) and s 1012DA(6)(a) of the Corporations Act 2001 (Cth) be extended to the second business day after the day on which these orders are entered.

2.                   A notice under s 708A(5)(e) and s 1012DA(5)(e) of the Corporations Act 2001 (Cth) given to Australian Securities Exchange Limited in respect of the relevant securities within the period provided for in order 1 be deemed to take effect as if it had been given to Australian Securities Exchange Limited on 14 June 2007.

3.                   These orders be entered forthwith.

4.                  A sealed copy of these orders be served as soon as practicable on the Australian Securities and Investments Commission, Australian Securities Exchange Limited, Macquarie Equity Capital Markets Limited, and each person named in the list at tab 28 of Exhibit NCF-1 to the affidavit of Nathan Cain Francis affirmed on 7 August 2007.  A copy of these orders also be placed on the website of the first plaintiff as soon as practicable and remain there for at least 28 days.

5.                  Any interested party have liberty to apply within 28 days of the entry of these orders to revoke or vary the orders.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF CHARTER HALL LIMITED AND CHARTER HALL FUNDS MANAGEMENT LIMITED AND THE CORPORATIONS ACT 2001 (CTH)

REASONS FOR JUDGMENT

1                     This is an application made under s 1322(4) of the Corporations Act 2001 (Cth) (the Act).  I have decided that the relief claim should be granted and I will give reasons immediately, although that will mean that they will be somewhat abbreviated.  The application arises out of a failure to comply with a time limit referred to in s 708A(6)(a) and s 1012DA(6)(a) of the Act in relation to a placement of stapled securities by a publicly listed entity.  

2                     The effect of the breach is that parties with whom the securities were placed would be inhibited from disposing of them for 12 months.  Apart from that consequence it seems clear that some of those securities have been further traded and the unscrambling of those eggs is a question of some uncertainty.  I am quite satisfied that the failure to comply with the relevant time limit was inadvertent due to personal circumstances of the responsible corporate officer.  I am also satisfied that the steps to regularise the position were taken within a reasonable period once the defect was appreciated.  The first port of call was to seek dispensation, as it were, from the Australian Securities and Investments Commission (ASIC).  When that did not succeed, further advice was taken and this application was made to the Court and has been pursued with reasonable diligence. 

3                     The purpose of the provisions in question is to ensure that, where what might be called the prospectus obligations in relation to the issue of securities are sidestepped by reason of appropriate circumstances, the purchasers of such securities receive the same relevant level of disclosure as might have been achieved by other means but without the more stringent and costly requirements of a prospectus and prospectus type provisions.

4                     It is submitted, and I accept, that the critical matter in a case of this kind is that circumstances which would call for disclosure in the interests of purchasers, but which might not be caught by the continuous disclosure regime, which are called “excluded information”, should be disclosed.  I am satisfied on the evidence, albeit, of course, this is done ex parte, that there was no “excluded information” which should have been, and was not, disclosed in the present case.  So, if the time limits had been met, that would not have altered the information base of those concerned.

5                     That being the case, it is difficult to see that there is any substantial injustice to any party occasioned by regularising the situation save for the possibility that a purchaser may be able to prove that there was “excluded information” which should have been disclosed.  However, it is submitted that a purchaser who was able to prove such circumstances would have independent causes of action available and, indeed, the causes of action which would have been available would have regard to these particular provisions.  Put shortly, compliance in the circumstances here would not have improved the position of such a purchaser.  Furthermore, as will be noted, there is a proviso to the order which gives some limited protection in relation to that situation.  I might say that the evidence is that the great bulk of, perhaps all of, the persons who received placements are what might be called professional or sophisticated investors.  Furthermore, the orders provide that each of those parties will receive notice of these orders and of the proviso which these orders contain.

6                     The orders sought to be made will be made pursuant to s 1322(4) and therefore subsection (6) is applicable and provides a barrier to the making of orders subject to the satisfaction of the Court as to the matters there listed.  Counsel has referred me to a number of authorities as to the application of these provisions which establish that the provisions are remedial and are meant to have regard to the substantive effect of what is done and, in certain circumstances, may involve balancing interests which are affected (Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398; Re Insurance Australia Group Ltd (2003) 128 FCR 581; Re Westpac Banking Corp (2004) 53 ACSR 288; Re Wave Capital Limited (2003) 47 ACSR 418; and Re Bounty Industries Ltd [2007] FCA 956).

7                     I am satisfied that the provisions in s 1322(6)(a) are disjunctive and not cumulative.  In the present case, I am quite satisfied that all of the conditions are met no matter how the section is read.  There is no question, in my view, of any dishonesty.  I am satisfied that no substantial injustice has been, or is likely to be, caused to any person by reason of the making of an order.  I am also satisfied that in the circumstances it is just and equitable that the order be made.

8                     I have indicated the extent to which I think there may be any disadvantage to any person which is not met by the orders and I weigh against that the severe effect upon those who have taken the placement.  That effect is hardly a reasonable result bearing in mind that the default was not by those parties.  All in all, I am satisfied that it is a very strong case for the application of these provisions.

9                     I should mention the significance of the unsuccessful application to ASIC in case that causes any concern.  I say unsuccessful, although there had been no formal rejection of it.  It had been considered at a level within the organisation which was not able to give the necessary dispensation, principally because of the fact that it concerned events which had taken place and was not restricted to things that might happen.  However, as a matter of substance, there was concern within the ranks of the relevant officers as to whether or not there was “excluded information” not disclosed and that concern was drawn to the attention of the company.  That question has been the subject of evidence before me which was not available to the officers of ASIC.  Furthermore, ASIC has now been given all of this information, served with relevant documents in connection with this application and advised of the time and place at which the application will be made.  It has indicated it has no objection to the orders made and has not chosen to appear.

10                  Counsel for the plaintiffs has listed a number of factors which point in the direction of approval.  I do not need to reproduce those points now.  I think they are well-founded.

11                  It should also be noted that all relevant parties, save for any purchasers from placees, appear to me to have been served with notice of the proceeding, although not in a formal sense of being made parties.  It seems to me that would be going too far to directly involve such possible purchasers.  The notice which is going to be given to ASIC, the Australian Stock Exchange and to the persons who would have sold to those purchasers does seem to me to give a reasonable possibility of the word getting out to any purchasers substantial enough to be interested in pursuing any remedies.  I referred earlier to a proviso.  That proviso appears in a decision of Hely J in Re Australian Wealth Management Pty Ltd [2005] FCA 311.  It gives liberty for a party, who claims to have suffered substantial injustice by reason of the orders, to apply to vary or discharge them within a limited period.  That is a prudent proviso in matters dealt with ex parte and there are no other parties albeit that many of the people concerned have notice of the proceeding. 

12                  I will simply make orders in accordance with the short minutes of order which I have initialled and placed with the papers.

Associate:

Dated:         24 August 2007