FEDERAL COURT OF AUSTRALIA

 Laserbond Limited (ACN 057 636 692), in the matter of Laserbond Limited (ACN 057 636 692) [2007] FCA 2056

CORPORATIONS – application for listing to ASX lodged 1 day late – administrative error only – analysis of appropriate relief and considerations relevant to exercise of discretion if relief is to be granted – turns on own facts

Corporations Act 2001 (Cth) ss 254E, 723(3), 723(3)(b), 724(1)(b), 724(1)(b)(ii), 724(2), 1322(4)(a)

Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659

Howard v Mechtler (1999) 30 ACSR 434

Re Insurance Australia Group Ltd (2003) 21 ACLC 1,107

NRMA Ltd v Gould (1995) 18 ACSR 290

Re NuSep Ltd [2007] FCA 613

Re Onslow Salt Pty Ltd (2003) 198 ALR 344

Re Wave Capital Ltd (2003) 21 ACLC 1,995

IN THE MATTER LASERBOND LIMITED (ACN 057 636 692)

LASERBOND LIMITED (ACN 057 636 692)

WAD 247 OF 2007

MCKERRACHER J

19 DECEMBER 2007 (REASONS PUBLISHED)

PERTH

IN THE MATTER LASERBOND LIMITED

(ACN 057 636 692)

THE COURT ORDERS THAT:

1.                  The period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the ASX Limited (“ASX”) of securities issued pursuant to the Prospectus dated 3 September 2007 (the “Prospectus”) be extended to 5 business days after the making of this order.

2.                  Subject to the Applicant’s securities being admitted to quotation by the ASX within 5 business days after the making of this order:

(a)        Pursuant to section 254E of the Corporations Act, the issue of shares by the Applicant pursuant to the Prospectus is hereby validated and confirmed. 

(b)        Pursuant to section 1322(4)(a) of the Corporations Act, the issue of options by the Applicant pursuant to the Prospectus is not invalid by reason of any contravention of section 723 or section 724 of the Corporations Act.

3.                  The Applicant do forthwith lodge a copy of these orders with the Australian Securities & Investments Commission.

4.                  Upon the Applicant becoming listed on the ASX, the Applicant do make an announcement to the ASX disclosing the terms of these orders.

5.                  The Applicant and all other interested or affected parties have liberty to apply to vary these orders upon first giving 24 hours prior written notice. 

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

IN THE MATTER LASERBOND LIMITED

(ACN 057 636 692)

REASONS FOR JUDGMENT

INTRODUCTION

1                     The applicant, Laserbond issued a prospectus and lodged it with the Australian and Securities Investments Commission (ASIC) on 3 September 2007.  The prospectus made clear that Laserbond was intending to apply for its securities to be listed for official quotation on the Australian Stock Exchange (ASX).  The offer under the prospectus was fully subscribed.  However, through a misunderstanding, while all other formalities were complied with in relation to that process, the necessary documents to achieve admission to the ASX were provided to the ASX one day late.  ASX has confirmed that if remedial orders are made by the Court in relation to and consequential upon that one day delay, there is no reason why Laserbond should not be listed. 

2                     ASIC, in also indicating lack of opposition to the relief sought does so subject to the relevant securities being admitted to quotation within five business days of the making of the order.  I am now informed that has occurred.  These proceedings were commenced on 10 December 2007.  There is an obvious urgency about the matter.  The urgency includes the desire that if a listing is to be permitted, it should be within a market that is from a time point of view, reasonably close to the market which operated at the time at which the listing was intended to occur. 

3                     While it is not obvious that any person would be adversely affected by remedial orders being granted, leave has also been granted for any person interested or affected by the orders to be heard in relation to them on giving 24 hours notice. 

FACTUAL BACKGROUND

4                     Mr Suriano is a corporate consultant based in Sydney.  He was engaged by Laserbond to assist with the preparation of a prospectus giving rise to this application.  Mr Suriano’s instructions from Laserbond come through Mr Tim McCauley, the Chief Executive and Chairman and Messrs Wayne and Greg Hooper, directors. 

5                     A prospectus which was lodged by Laserbond with ASIC on 3 September 2007 provided for the issue of up to 15 million fully paid ordinary shares at an issue price of 20 cents each together with a free attaching option for every three shares issued.  The objective of the prospectus was to raise $3 million. 

6                     On 7 September 2007, Laserbond lodged an application for listing with the ASX.  On 22 October 2007, Laserbond extended the offer under the prospectus from the expected closing date of 23 October 2007 to 16 November 2007.  On that date it closed the offer under the prospectus having received applications for shares totalling in value $3,079,200. 

7                     Seven days later a letter from the ASX to Laserbond’s solicitors dated 23 November 2007 indicated that ASX had decided that Laserbond would be admitted to the official list of the ASX subject to compliance with specific conditions precedents. 

8                     Shortly after receipt of the letter on 23 November 2007 a solicitor engaged by Laserbond forwarded advice in an email to Mr Wayne Hooper, Mr Tim McCauley and to Mr Suriano.  It stressed that Laserbond ‘must be admitted (not necessarily listed) on or before 3 December 2007, accordingly the required documents must be provided to ASX asap’.  This date marked the expiry of a 3 month period from the lodging of the prospectus. 

9                     Although this advice focussed on the need for Laserbond to be admitted on or before 3 December 2007, it did not spell out specifically the significant effect of the operation of s 723(3) and s 724(1) CA as referred to below.  Specifically, it did not underline that if the 3 month time limit was not met, an issue of securities under the prospectus would be void.  The solicitor concerned who swore an affidavit confirming these events and the fact that he was not aware at that time of the operation in that respect of those two subsections.  Neither were any of the company’s directors aware of the effect of those subsections and nor was Mr Suriano. 

10                  Mr Suriano himself also experienced some difficulties during the period around the closure of the offers on 16 November 2007 until 30 November 2007.  These were simply administrative and technical difficulties in that a number of deposits of money had been made directly into Laserbond’s bank account and it was not possible to swiftly reconcile all of those deposits with the applications which had been made in respect of the funds.  There was also a delay with the dishonour of two cheques and a delay with a discrepancy in the reconciliation between the amounts received by way of payment and the amounts referred to in the applications. 

11                  There was a different sort of delay in complying with the conditions imposed by the ASX.  It was not caused by any of the persons mentioned thus far.  The email of 26 November 2007 from the solicitors for Laserbond setting out the ASX requirements was, in relevant content, mirrored in an email from Mr Suriano to those in charge of the Sydney based share registry on 28 November 2007.  It sought documents and information.

12                  As the documents and information had not in their entirety been provided by the share registry by the morning of 3 December 2007, the solicitor pursued the share registry by email.  He informed Mr Suriano at 2.14 pm that day that he had not received those documents from the share registry and asked Mr Suriano to chase them up.  Mr Suriano then made several unsuccessful attempts to contact the share registry by phone and emailed the share registry office at 4.47 pm that day requesting a phone call.  The phone call did not come until the following morning at which stage it was too late. 

13                  The solicitor was telephoned by an officer of the ASX on 4 December 2007 advising that the ASX required the immediate finalisation of the documents from Laserbond to enable Laserbond to achieve its listing.  Following receipt of that phone call, the solicitor at 2.15 pm emailed officers of the ASX the documents required by it to enable Laserbond’s securities to be admitted for quotation on the ASX.  However, following receipt of the email, the original ASX officer telephoned the solicitor again to say that the ASX could not admit Laserbond to the official list due to the operation of s 723(3) CA.  On the following day the solicitor briefed counsel who appeared before me in this application instructing him to seek the relief which has been sought. 

14                  The ASX has since written to Laserbond making it clear that if the Court makes the orders the subject of the application and, if there is no reason for it not to, it will admit Laserbond to the official list of the ASX. 

RELIEF SOUGHT

15                  To overcome the one day delay and the consequences attaching to it which are described below, Laserbond has sought the following orders:

1.                  The period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the ASX Limited (“ASX”) of securities issued pursuant to the Prospectus dated 3 September 2007 (the “Prospectus”) be extended to 5 business days after the making of this order.

2.                  Subject to the Applicant’s securities being admitted to quotation by the ASX within 5 business days after the making of this order:

(a)     Pursuant to section 254E of the Corporations Act, the issue of shares by the Applicant pursuant to the Prospectus is hereby validated and confirmed. 

(b)     Pursuant to section 1322(4)(a) of the Corporations Act, the issue of options by the Applicant pursuant to the Prospectus is not invalid by reason of any contravention of section 723 or section 724 of the Corporations Act.

3.                  The Applicant do forthwith lodge a copy of these orders with the Australian Securities & Investments Commission.

4.                  Upon the Applicant becoming listed on the ASX, the Applicant do make an announcement to the ASX disclosing the terms of these orders.

5.                  The Applicant and all other interested or affected parties have liberty to apply to vary these orders upon first giving 24 hours prior written notice. 

LEGAL FRAMEWORK

16                  Section 723(3) of the Corporations Act 2001 (Cth) (CA) is in the following terms:

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.

17                  As observed in the matter of Re Insurance Australia Group Ltd (2003) 21 ACLC 1,107 at 1,111, while this section does not impose a duty, its effect is that it prescribes the adverse consequences of not applying and achieving quotation within the stipulated periods.  The same observation applies in relation to the consequence which flow by reason of s 724(2) CA.  Again, it prescribes a consequence rather than a duty as such. 

18                  In s 724 CA, subss (1)(b) and (2) provide relevantly:

(1)       If a person offers securities under a disclosure document and:

            …

(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

…

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…

(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.

19                  The 3 month time limits in each of these sections, expired on 3 December 2007, the prospectus having been lodged with ASIC on 3 September 2007.  Purported compliance was achieved a day late on 4 December 2007.

20                  Section 1322 CA relevantly provides:

(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;

…

(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:

…

(c)     in every case – that no substantial injustice has been or is likely to be caused to any person.

21                  A liberal construction is given to s 1322 (per Lindgren J at [27] in Insurance Australia Group Ltd 21 ACLC 1,107 above and as adopted by French J in Re Wave Capital Ltd (2003) 21 ACLC 1,995 at [30]).  Using this approach, it follows that s 1322(4)(d) enables the Court to extend the time periods referred to above in ss 723 and 724 even though no absolute positive obligation to make the application for listing and to achieve quotation on the ASX is spelt out in the time periods designated in those sections.

22                  In addition to the statutory requirements to be taken into account by the Court pursuant to subs (6) of s 1322, there is, as with the exercise of any discretion, a requirement to exercise it judicially having regard to the subject matter, scope and purpose of the specific provisions and the general legislative framework.  As French J observed in Wave Capital 21 ACLC at [29]:

Like the discretion to validate invalid share issues under s 254E, the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue.  It must also be exercised having regard to the interest of all parties affected and the public interest in ensuring compliance with statute law and company constitutions.  Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief.

23                  As well as the extension of time sought by Laserbond, it also seeks relief to validate the issue of shares that has already taken place.  The reason for this is to put beyond doubt the legitimacy of that issue given that since 4 December 2007, the issue will have been regarded as having been void pursuant to the effect of s 723(3) CA.  For those reasons, Lee J in Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659 at [33] granted relief validating an issue as did French J in Re Onslow Salt Pty Ltd (2003) 198 ALR 344 at [31]. 

24                  Section 254E CA provides:

(1)        On application by a company, a shareholder, a 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 lodgement of a copy of the order with ASIC, the order has effect from the time of the purported issue.

25                  In the circumstances of this case there is no doubt that the company has brought an application in relation to a purported issue of shares which may be invalid for any reason.  In construing the meaning of ‘invalid’ in s 254E, the liberal approach is again applied.  This is because of the remedial purpose behind the section and thus requires that ‘invalid’ includes ‘void’.  This is consistent with the approach taken in the cases on which Austin J commented in Howard v Mechtler (1999) 30 ACSR 434 at [47]-[48].  It was also expressly the view of Lee J in Golden Gate50 ACSR at [34] where his Honour said:

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 ACLC 168 per Gillard J at 171-2; cf Harman v Energy Research Group Australia Limited [1986] WAR 123 per Brinsden J at 127). 

26                  However, the earlier observations (at 22) above about the exercise of discretion in relation to s 1322 apply equally to s 254B. 

SECTION 1322(4)(a)

27                  It is not possible to validate the issue of the options issued under the prospectus by the means of s 254E as that section applies only in relation to shares.  Accordingly, Laserbond has sought relief pursuant to s 1322(4)(a) in relation to the options referred to in the prospectus.  Section 1322(4)(a) has been set out above.  It is clear once again that s 1322(4)(a) is to be given a beneficial or liberal construction.  As was observed by Young J in NRMA Ltd v Gould (1995) 18 ACSR 290 at [20], a contravention should be construed in a very wide sense. 

28                  However, the Court should not make an order pursuant to s 1322 unless it is satisfied on one or more of the following (to be read disjunctively):

(a)        that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

(b)        that the person or persons concerned in or party to the contravention or failure acted honestly; or

(c)        that it is just and equitable that the order be made.

29                  An issue of options can be an act, matter or thing purported to have been done in relation to Laserbond.  That expression is in wide terms.  As there has been non-compliance with ss 723 and 724, that would constitute (giving a wide meaning to the phrase ‘any contravention of a provision of this Act’) such a contravention. 

30                  But the Court is required to be satisfied of one or more of the grounds in (a), (b) or (c).  I will now consider that requirement. 

NATURE AND EXTENT OF DELAY

31                  In practical terms the relevant delay was of one day only and was of an administrative nature.  I accept Laserbond’s submission that there can be no suggestion of any blatant disregard for the terms of the relevant legislation or the bodies charged with its implementation.  There has certainly been no deliberate delay, let alone any motive for delay on the part of Laserbond.  Clearly Laserbond was keen to effect the admission to the ASX.  The delay concerned occurred because of the delay in receiving documents from the share registry.  Laserbond had been aware of the deadline and had been pressing for the documents from the share registry but it was not aware of the consequences of not meeting the deadline.  Obviously, had it been aware of the seriousness of the consequences, the steps taken to ensure compliance may have been more vigorously pursued at an earlier dateMCKERRACHER J

19 DECEMBER 2007 (REASONS PUBLISHED)

PERTH

IN THE MATTER LASERBOND LIMITED

(ACN 057 636 692)

THE COURT ORDERS THAT:

1.                  The period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the ASX Limited (“ASX”) of securities issued pursuant to the Prospectus dated 3 September 2007 (the “Prospectus”) be extended to 5 business days after the making of this order.

2.                  Subject to the Applicant’s securities being admitted to quotation by the ASX within 5 business days after the making of this order:

(a)        Pursuant to section 254E of the Corporations Act, the issue of shares by the Applicant pursuant to the Prospectus is hereby validated and confirmed. 

(b)        Pursuant to section 1322(4)(a) of the Corporations Act, the issue of options by the Applicant pursuant to the Prospectus is not invalid by reason of any contravention of section 723 or section 724 of the Corporations Act.

3.                  The Applicant do forthwith lodge a copy of these orders with the Australian Securities & Investments Commission.

4.                  Upon the Applicant becoming listed on the ASX, the Applicant do make an announcement to the ASX disclosing the terms of these orders.

5.                  The Applicant and all other interested or affected parties have liberty to apply to vary these orders upon first giving 24 hours prior written notice. 

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

IN THE MATTER LASERBOND LIMITED

(ACN 057 636 692)

REASONS FOR JUDGMENT

INTRODUCTION

1                     The applicant, Laserbond issued a prospectus and lodged it with the Australian and Securities Investments Commission (ASIC) on 3 September 2007.  The prospectus made clear that Laserbond was intending to apply for its securities to be listed for official quotation on the Australian Stock Exchange (ASX).  The offer under the prospectus was fully subscribed.  However, through a misunderstanding, while all other formalities were complied with in relation to that process, the necessary documents to achieve admission to the ASX were provided to the ASX one day late.  ASX has confirmed that if remedial orders are made by the Court in relation to and consequential upon that one day delay, there is no reason why Laserbond should not be listed. 

2                     ASIC, in also indicating lack of opposition to the relief sought does so subject to the relevant securities being admitted to quotation within five business days of the making of the order.  I am now informed that has occurred.  These proceedings were commenced on 10 December 2007.  There is an obvious urgency about the matter.  The urgency includes the desire that if a listing is to be permitted, it should be within a market that is from a time point of view, reasonably close to the market which operated at the time at which the listing was intended to occur. 

3                     While it is not obvious that any person would be adversely affected by remedial orders being granted, leave has also been granted for any person interested or affected by the orders to be heard in relation to them on giving 24 hours notice. 

FACTUAL BACKGROUND

4                     Mr Suriano is a corporate consultant based in Sydney.  He was engaged by Laserbond to assist with the preparation of a prospectus giving rise to this application.  Mr Suriano’s instructions from Laserbond come through Mr Tim McCauley, the Chief Executive and Chairman and Messrs Wayne and Greg Hooper, directors. 

5                     A prospectus which was lodged by Laserbond with ASIC on 3 September 2007 provided for the issue of up to 15 million fully paid ordinary shares at an issue price of 20 cents each together with a free attaching option for every three shares issued.  The objective of the prospectus was to raise $3 million. 

6                     On 7 September 2007, Laserbond lodged an application for listing with the ASX.  On 22 October 2007, Laserbond extended the offer under the prospectus from the expected closing date of 23 October 2007 to 16 November 2007.  On that date it closed the offer under the prospectus having received applications for shares totalling in value $3,079,200. 

7                     Seven days later a letter from the ASX to Laserbond’s solicitors dated 23 November 2007 indicated that ASX had decided that Laserbond would be admitted to the official list of the ASX subject to compliance with specific conditions precedents. 

8                     Shortly after receipt of the letter on 23 November 2007 a solicitor engaged by Laserbond forwarded advice in an email to Mr Wayne Hooper, Mr Tim McCauley and to Mr Suriano.  It stressed that Laserbond ‘must be admitted (not necessarily listed) on or before 3 December 2007, accordingly the required documents must be provided to ASX asap’.  This date marked the expiry of a 3 month period from the lodging of the prospectus. 

9                     Although this advice focussed on the need for Laserbond to be admitted on or before 3 December 2007, it did not spell out specifically the significant effect of the operation of s 723(3) and s 724(1) CA as referred to below.  Specifically, it did not underline that if the 3 month time limit was not met, an issue of securities under the prospectus would be void.  The solicitor concerned who swore an affidavit confirming these events and the fact that he was not aware at that time of the operation in that respect of those two subsections.  Neither were any of the company’s directors aware of the effect of those subsections and nor was Mr Suriano. 

10                  Mr Suriano himself also experienced some difficulties during the period around the closure of the offers on 16 November 2007 until 30 November 2007.  These were simply administrative and technical difficulties in that a number of deposits of money had been made directly into Laserbond’s bank account and it was not possible to swiftly reconcile all of those deposits with the applications which had been made in respect of the funds.  There was also a delay with the dishonour of two cheques and a delay with a discrepancy in the reconciliation between the amounts received by way of payment and the amounts referred to in the applications. 

11                  There was a different sort of delay in complying with the conditions imposed by the ASX.  It was not caused by any of the persons mentioned thus far.  The email of 26 November 2007 from the solicitors for Laserbond setting out the ASX requirements was, in relevant content, mirrored in an email from Mr Suriano to those in charge of the Sydney based share registry on 28 November 2007.  It sought documents and information.

12                  As the documents and information had not in their entirety been provided by the share registry by the morning of 3 December 2007, the solicitor pursued the share registry by email.  He informed Mr Suriano at 2.14 pm that day that he had not received those documents from the share registry and asked Mr Suriano to chase them up.  Mr Suriano then made several unsuccessful attempts to contact the share registry by phone and emailed the share registry office at 4.47 pm that day requesting a phone call.  The phone call did not come until the following morning at which stage it was too late. 

13                  The solicitor was telephoned by an officer of the ASX on 4 December 2007 advising that the ASX required the immediate finalisation of the documents from Laserbond to enable Laserbond to achieve its listing.  Following receipt of that phone call, the solicitor at 2.15 pm emailed officers of the ASX the documents required by it to enable Laserbond’s securities to be admitted for quotation on the ASX.  However, following receipt of the email, the original ASX officer telephoned the solicitor again to say that the ASX could not admit Laserbond to the official list due to the operation of s 723(3) CA.  On the following day the solicitor briefed counsel who appeared before me in this application instructing him to seek the relief which has been sought. 

14                  The ASX has since written to Laserbond making it clear that if the Court makes the orders the subject of the application and, if there is no reason for it not to, it will admit Laserbond to the official list of the ASX. 

RELIEF SOUGHT

15                  To overcome the one day delay and the consequences attaching to it which are described below, Laserbond has sought the following orders:

1.                  The period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the ASX Limited (“ASX”) of securities issued pursuant to the Prospectus dated 3 September 2007 (the “Prospectus”) be extended to 5 business days after the making of this order.

2.                  Subject to the Applicant’s securities being admitted to quotation by the ASX within 5 business days after the making of this order:

(a)     Pursuant to section 254E of the Corporations Act, the issue of shares by the Applicant pursuant to the Prospectus is hereby validated and confirmed. 

(b)     Pursuant to section 1322(4)(a) of the Corporations Act, the issue of options by the Applicant pursuant to the Prospectus is not invalid by reason of any contravention of section 723 or section 724 of the Corporations Act.

3.                  The Applicant do forthwith lodge a copy of these orders with the Australian Securities & Investments Commission.

4.                  Upon the Applicant becoming listed on the ASX, the Applicant do make an announcement to the ASX disclosing the terms of these orders.

5.                  The Applicant and all other interested or affected parties have liberty to apply to vary these orders upon first giving 24 hours prior written notice. 

LEGAL FRAMEWORK

16                  Section 723(3) of the Corporations Act 2001 (Cth) (CA) is in the following terms:

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.

17                  As observed in the matter of Re Insurance Australia Group Ltd (2003) 21 ACLC 1,107 at 1,111, while this section does not impose a duty, its effect is that it prescribes the adverse consequences of not applying and achieving quotation within the stipulated periods.  The same observation applies in relation to the consequence which flow by reason of s 724(2) CA.  Again, it prescribes a consequence rather than a duty as such. 

18                  In s 724 CA, subss (1)(b) and (2) provide relevantly:

(1)       If a person offers securities under a disclosure document and:

            …

(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

…

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…

(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.

19                  The 3 month time limits in each of these sections, expired on 3 December 2007, the prospectus having been lodged with ASIC on 3 September 2007.  Purported compliance was achieved a day late on 4 December 2007.

20                  Section 1322 CA relevantly provides:

(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;

…

(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:

…

(c)     in every case – that no substantial injustice has been or is likely to be caused to any person.

21                  A liberal construction is given to s 1322 (per Lindgren J at [27] in Insurance Australia Group Ltd 21 ACLC 1,107 above and as adopted by French J in Re Wave Capital Ltd (2003) 21 ACLC 1,995 at [30]).  Using this approach, it follows that s 1322(4)(d) enables the Court to extend the time periods referred to above in ss 723 and 724 even though no absolute positive obligation to make the application for listing and to achieve quotation on the ASX is spelt out in the time periods designated in those sections.

22                  In addition to the statutory requirements to be taken into account by the Court pursuant to subs (6) of s 1322, there is, as with the exercise of any discretion, a requirement to exercise it judicially having regard to the subject matter, scope and purpose of the specific provisions and the general legislative framework.  As French J observed in Wave Capital 21 ACLC at [29]:

Like the discretion to validate invalid share issues under s 254E, the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act and any other relevant statutes whose application may be in issue.  It must also be exercised having regard to the interest of all parties affected and the public interest in ensuring compliance with statute law and company constitutions.  Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief.

23                  As well as the extension of time sought by Laserbond, it also seeks relief to validate the issue of shares that has already taken place.  The reason for this is to put beyond doubt the legitimacy of that issue given that since 4 December 2007, the issue will have been regarded as having been void pursuant to the effect of s 723(3) CA.  For those reasons, Lee J in Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659 at [33] granted relief validating an issue as did French J in Re Onslow Salt Pty Ltd (2003) 198 ALR 344 at [31]. 

24                  Section 254E CA provides:

(1)        On application by a company, a shareholder, a 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 lodgement of a copy of the order with ASIC, the order has effect from the time of the purported issue.

25                  In the circumstances of this case there is no doubt that the company has brought an application in relation to a purported issue of shares which may be invalid for any reason.  In construing the meaning of ‘invalid’ in s 254E, the liberal approach is again applied.  This is because of the remedial purpose behind the section and thus requires that ‘invalid’ includes ‘void’.  This is consistent with the approach taken in the cases on which Austin J commented in Howard v Mechtler (1999) 30 ACSR 434 at [47]-[48].  It was also expressly the view of Lee J in Golden Gate50 ACSR at [34] where his Honour said:

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 ACLC 168 per Gillard J at 171-2; cf Harman v Energy Research Group Australia Limited [1986] WAR 123 per Brinsden J at 127). 

26                  However, the earlier observations (at 22) above about the exercise of discretion in relation to s 1322 apply equally to s 254B. 

SECTION 1322(4)(a)

27                  It is not possible to validate the issue of the options issued under the prospectus by the means of s 254E as that section applies only in relation to shares.  Accordingly, Laserbond has sought relief pursuant to s 1322(4)(a) in relation to the options referred to in the prospectus.  Section 1322(4)(a) has been set out above.  It is clear once again that s 1322(4)(a) is to be given a beneficial or liberal construction.  As was observed by Young J in NRMA Ltd v Gould (1995) 18 ACSR 290 at [20], a contravention should be construed in a very wide sense. 

28                  However, the Court should not make an order pursuant to s 1322 unless it is satisfied on one or more of the following (to be read disjunctively):

(a)        that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature;

(b)        that the person or persons concerned in or party to the contravention or failure acted honestly; or

(c)        that it is just and equitable that the order be made.

29                  An issue of options can be an act, matter or thing purported to have been done in relation to Laserbond.  That expression is in wide terms.  As there has been non-compliance with ss 723 and 724, that would constitute (giving a wide meaning to the phrase ‘any contravention of a provision of this Act’) such a contravention. 

30                  But the Court is required to be satisfied of one or more of the grounds in (a), (b) or (c).  I will now consider that requirement. 

NATURE AND EXTENT OF DELAY

31                  In practical terms the relevant delay was of one day only and was of an administrative nature.  I accept Laserbond’s submission that there can be no suggestion of any blatant disregard for the terms of the relevant legislation or the bodies charged with its implementation.  There has certainly been no deliberate delay, let alone any motive for delay on the part of Laserbond.  Clearly Laserbond was keen to effect the admission to the ASX.  The delay concerned occurred because of the delay in receiving documents from the share registry.  Laserbond had been aware of the deadline and had been pressing for the documents from the share registry but it was not aware of the consequences of not meeting the deadline.  Obviously, had it been aware of the seriousness of the consequences, the steps taken to ensure compliance may have been more vigorously pursued at an earlier date with the result that the delay of a day would probably not have occurred.

32                  Insofar as relief under s 1322 CA is concerned, the interests of the applicants for shares are also to be considered.  As Lindgren J concluded in Re NuSep Ltd [2007] FCA 613 at [33]:

… it would fulfil the expectations of shareholders and optionholders that their shares and options be admitted to quotation.

33                  I am mindful that subs 1322(6)(c) provides that the Court should not make an order for extension if any substantial injustice has been or is likely to be caused to any person.  On the evidence before me, that matter has been specifically addressed.  The Chairman of Laserbond has turned his mind to the question and deposes to the fact that he is unaware of any person who would be adversely affected in any way if the orders which are sought were made.  I am equally unable to discern any adverse effect of making the orders but, in any event, if there is an unforeseen adverse impact the urgent liberty to apply provision is likely to respond to that seemingly unlikely prospect.  As against that, many investors stand to be disappointed or prejudiced if the relief is not granted. 

34                  Again, in relation to the validation relief under s 254E CA I am conscious that an underlying purpose of the provisions set out in s 723 and s 724 CA is to ensure that where people apply for securities on the basis that they will be quoted on a stock exchange, they have the right to withdraw their application if there is a delay in pursuing that listing.  If prompt application for admission is not made and prompt admission is not obtained within the timeframes contemplated by the legislation and by the arrangements between the parties, there is a provision which ensures that there is adequate protection provided to those who have made a commitment on the assumption of prompt listing. 

35                  Again, however, it seems to me that making the orders sought rather than defeating the purpose of the provisions is more likely to advance than stop it and the interests of the parties affected by the relevant issues will be better protected by granting the relief which is sought. 

36                  Given all those circumstances I consider I should exercise a discretion to grant the relief which is sought both in connection with the extension of time and the validation. 

37                  Accordingly on 12 December 2007 when this matter was listed before me I made the following orders indicating that brief reasons (these being those reasons) would follow shortly:

1.                  The period set out in sub-sections 723(3)(b) and 724(1)(b)(ii) of the Corporations Act for the admission to quotation by the ASX Limited (“ASX”) of securities issued pursuant to the Prospectus dated 3 September 2007 (the “Prospectus”) be extended to 5 business days after the making of this order.

2.                  Subject to the Applicant’s securities being admitted to quotation by the ASX within 5 business days after the making of this order:

(a)     Pursuant to section 254E of the Corporations Act, the issue of shares by the Applicant pursuant to the Prospectus is hereby validated and confirmed. 

(b)     Pursuant to section 1322(4)(a) of the Corporations Act, the issue of options by the Applicant pursuant to the Prospectus is not invalid by reason of any contravention of section 723 or section 724 of the Corporations Act.

3.                  The Applicant forthwith lodge a copy of these orders with the Australian Securities & Investments Commission.

4.                  Upon the Applicant becoming listed on the ASX, the Applicant make an announcement to the ASX disclosing the terms of these orders.

5.                  The Applicant and all other interested or affected parties have liberty to apply to vary these orders upon first giving 24 hours prior written notice. 

Associate:

Dated:         19 December 2007