FEDERAL COURT OF AUSTRALIA
Blaze Asset Pty Ltd v Target Energy Limited [2009] FCA 698
Community Life Ltd v Kilmory Developments Pty Ltd [2007] NSWSC 943
Diamond Rose NL v Striker Resources NL (1998) 85 FCR 76
Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283
Re Centennial Coal Co Ltd [2006] NSWSC 62
Re Emerald Capital Ltd [2008] FCA 1739
Re Insurance Australia Group Ltd (2003) 128 FCR 581
Re Laserbond Ltd (2003) 25 ACLC 1
Re MacMahon Holdings Limited [2008] FCA 1079
Re Wave Capital Limited (2003) 21 ACLC 1
Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144
BLAZE ASSET PTY LTD v TARGET ENERGY LIMITED
WAD 100 of 2009
BARKER J
26 JUNE 2009
PERTH
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 100 of 2009 |
|
BLAZE ASSET PTY LTD Plaintiff
|
|
|
AND: |
TARGET ENERGY LIMITED Defendant
|
|
JUDGE: |
|
|
DATE OF ORDER: |
26 JUNE 2009 |
|
WHERE MADE: |
PERTH |
THE COURT ORDERS THAT:
1. The time for service of the originating process in this action be abridged.
2. The time for lodgement of the plaintiff's notice of variation (being the supplementary bidder's statement dated 5 June 2009) dated 5 June 2009 is extended to 8 June 2009.
3. The time to lodge a notice of variation (notice) as required by s 650D(1) of the Corporations Act 2001 (Cth) with ASIC is extended to 4pm on the date of these orders provided that:
(a) the notice informs the recipients that:
(i) the notice has been sent by order of this Court;
(ii) the offer period is due to expire on 17 July 2009 unless otherwise extended by the plaintiff; and
(iii) the offer is freed from all defeating conditions; and
(iv) the time for payment of the consideration under the takeover bid for all persons who had accepted the offer prior to the date of the notice is accelerated to 19 July 2009; and
(b) the plaintiff lodges the notice with ASIC and ASX by 4pm on the date of these orders; and
(c) within 3 days after the date of these orders the plaintiff sends the notice to the defendant and to everyone to whom offers were made under the plaintiff's bidder's statement dated 16 April 2009.
4. The time for lodgement of the notice in s 630(3) is extended to 4pm on the date of these orders.
5. Costs reserved, in the event the parties cannot agree costs within 14 days.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
|
IN THE FEDERAL COURT OF AUSTRALIA |
|
|
WESTERN AUSTRALIA DISTRICT REGISTRY |
WAD 100 of 2009 |
|
BETWEEN: |
BLAZE ASSET PTY LTD Plaintiff
|
|
AND: |
TARGET ENERGY LIMITED Defendant
|
|
JUDGE: |
BARKER J |
|
DATE: |
26 JUNE 2009 |
|
PLACE: |
PERTH |
REASONS FOR JUDGMENT
plaintiff'S CLAIM
1 By originating process filed 22 June 2009, the plaintiff, Blaze Asset Pty Ltd (Blaze) makes application under s 1322(4) and s 1325(D) of the Corporations Act 2001 (Cth) (CA) for orders extending the offer period of Blaze's takeover offer (pursuant to its bidder's statement dated 16 April 2009) for all the ordinary shares in the defendant, Target Energy Limited (Target) to 17 July 2009. At the hearing of the application, however, the claim under s 1325D was not pressed.
2 Blaze sought orders in the following terms:
1. The time for service of the originating process in this action be abridged.
2. The time for lodgement of the plaintiff's notice of variation (being the Supplementary Bidder's Statement (SBS) dated 5 June 2009) dated 5 June 2009 is extended to 8 June 2009.
3. The time to lodge a notice of variation as required by s 650D(1) of the Corporations Act 2001 (Cth) (notice) with ASIC is extended to 4pm on the date of these orders provided that:
(a) the notice informs the recipient that:
(i) the notice has been sent by order of this Court;
(ii) the offer period is due to expire on 17 July 2009 unless otherwise extended by the plaintiff; and
(iii) the offer is freed from all defeating conditions; and
(b) the plaintiff lodges the notice with ASIC and ASX by 4pm on the date of these orders; and
(c) within three days after the date of these orders the plaintiff sends the notice to the defendant and to everyone to whom offers were made under plaintiff's bidder's statement dated 16 April 2009.
4. The time for lodgement of the notice in s 630(3) is extended to 4pm on the date of these orders.
Facts giving rise to the application
3 On 8 April 2009, Blaze announced on the ASX companies' platform its intention to make a takeover bid for Target.
4 On 17 April 2009, Blaze lodged its bidder's statement with ASIC and ASX and served the bidder's statement on the defendant.
5 The bidder's statement specified that the offer closed at 5pm (Perth time) on 5 June 2009 unless it was withdrawn or extended in accordance with the CA (see cl 2.7).
6 On 5 June 2009, Blaze lodged its initial substantial holder's notice with ASIC and announced this to ASX.
7 On 5 June 2009, Blaze purported to increase the consideration offered under the takeover. This was announced to ASX together with the relevant SBS.
8 On 5 June 2009, Alexander John Devlin McHenry, corporate consultant engaged to assist Blaze in the takeover, posted the SBS by ordinary mail to ASIC's mailing address.
9 The SBS was received by ASIC for the purposes of lodgement on 8 June 2009.
10 On 11 June 2009, Blaze announced an extension of the offer period for four weeks and lodged a notice of variation with ASIC.
11 On 19 June 2009, Target released an announcement on the revised offer consideration recommending to shareholders that they do nothing.
12 On or about 10 June 2009, Garrick John Archer, a solicitor employed in the firm of solicitors acting for Blaze in this proceeding, and who had the conduct of the firm's assistance to the plaintiff in the takeover, was telephoned by Michelle Cobb of ASIC. Ms Cobb advised Mr Archer that the SBS was the notice of variation for the increased consideration under the takeover and that a $1,000 filing fee had not been paid for the filing of the SBS and that she would contact Blaze for payment in that amount.
13 At approximately 4pm on 16 June 2009, Mr Archer was telephoned by Kim Demarte and Michelle Cobb of ASIC. Mr Demarte informed Mr Archer that the SBS was posted to ASIC on 5 June 2009 and received by ASIC on 8 June 2009. Mr Demarte said this meant that the offer period for the takeover had expired – on 5 June 2009 and any subsequent variation of the takeover period was ineffective under s 650D(1) of the CA.
14 Prior to this telephone conversation Mr Archer was unaware that the SBS had been posted by ordinary mail to ASIC. He had assumed that, as on previous occasions to do with the takeover, Mr McHenry, the person he had been dealing with at Blaze in relation to the takeover, would have lodged the SBS personally at ASIC's Perth office.
15 Soon after the conversation with the ASIC employees on 16 June 2009, Mr Archer telephoned Mr McHenry and left a message for him to return his call. Later in the evening on 16 June 2009, Mr McHenry telephoned Mr Archer and confirmed that he had indeed posted the SBS to ASIC, but said he had done so based on advice from ASIC, the details of which he would explain in an email.
16 On 17 June 2009, Mr Archer received from Mr McHenry an email explaining the circumstances in which he had posted the SBS to ASIC, which Mr Archer forwarded to Mr Demarte the same day, asking whether ASIC would change its position based upon the information in Mr McHenry's email.
17 Mr McHenry explained in his email, which explanation was confirmed by affidavit evidence in this proceeding, that on 5 June 2009, a Friday, he decided to enquire of ASIC as to whether the SBS could be lodged at ASIC by post. At approximately 12 noon he telephoned the ASIC Customer Call Centre on 1300 300 630 and spoke to an ASIC representative. He said in effect he was calling on behalf of Blaze and that Blaze had made an off market takeover bid for all the shares in Target. He said that Blaze had increased the consideration offered under the takeover and that he had lodged the SBS electronically with ASX on the companies platform. He said in effect that the takeover was due to end that day and he needed to lodge the SBS with ASIC before the end of the takeover, that is, that very day. He asked the representative whether he needed to personally attend at ASIC to lodge the SBS or whether he could post it to ASIC. He said the representative told him, in effect, that he would comply with the requirements of the CA if he loaded the SBS onto the ASX platform and posted the SBS to ASIC. The representative said, in effect, that he had notified ASIC by loading the SBS on the ASX platform. As a consequence of this advice he posted the SBS by ordinary mail to ASIC at its usual mailing address.
18 Mr Demarte from ASIC responded to Mr Archer's email on 17 June 2009 stating that ASIC had not changed its position. Mr Archer saw this email during the early evening of 17 June 2009.
19 At approximately 9am on 18 June 2009, Mr Archer sought instructions from Blaze to commence this proceeding and instructed counsel to appear on the application. He telephoned ASIC and the solicitors for Target that morning and informed them of the intended application.
20 At approximately 10am on 19 June 2009, Mr Archer sent to Mr Demarte and Ms Cobb, by email, draft copies of the originating process, draft notice of variation, the affidavit of Mr McHenry and his own affidavit in support of the application. At approximately 11.50am on 19 June 2009, Mr Archer spoke by telephone with Mr Demarte about the documents and no substantive amendments were made to them.
21 Mr McHenry says that had he known that the SBS needed to be received by ASIC before the close of business on 5 June 2009, he would have and easily could have personally lodged the SBS at ASIC's Perth office before the close of business on 5 June 2009, in the same way he had personally lodged other documents to do with the takeover at ASIC's Perth office on earlier occasions.
Court's power under s 1322 CA
Introduction
22 Section 1322 CA is headed "Irregularities". Subsection 4 provides as follows:
(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.
23 Counsel for Blaze particularly relies, for the orders sought, upon the power of the Court given by s 1322(4)(d) of the CA to make an order, either unconditionally or subject to such conditions as the Court imposes, extending the period for doing "any act, matter or thing" 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.
24 In this regard, Blaze contends that it is appropriate for the Court to make two extension orders under s 1322(4)(d):
1. That sought in order 2 set out above, extending the period for lodgement of Blaze's notice of variation, being the SBS dated 5 June to 8 June 2009 (being the date it was actually lodged with ASIC);
2. That sought in order 3 set out above, extending to 4pm on the date of the Court making the order, the time to lodge a notice of variation as required by s 650D(1) of the CA on the conditions there specified.
25 The defendant, Target, appeared by counsel on the hearing of the application by Blaze and opposed the relief sought, both on discretionary grounds and also, particularly in relation to proposed order 3, on the ground that the Court does not have the power to make an order in the circumstances and terms sought.
Order 2
26 Section 624(1) of the CA provides that the offers made under a takeover bid must remain open for the period stated in the offer and sets out rules concerning the relevant period. As noted above, the initial bidder's statement lodged 17 April 2009 specified an offer period that closed on 5 June 2009.
27 Section 624(2)(a) effects an automatic extension of the offer period if, within the last seven days of the offer period, for an off‑market bid, the offers under the bid are varied to improve the consideration offered. In that case, the offer period is extended so that it ends 14 days after the offer is so varied.
28 Here, Blaze purported to vary the bid by way of improving the consideration offered on 5 June, 2009 – the last day of the offer period. However, as noted, it failed to register the proposed variation by lodging notice of the proposed variation with ASIC on 5 June 2009 in accordance with s 650D(1)(b) of the CA.
29 In my view, there is good reason, in a case such as this, to make an order in terms of proposed order 2, extending the time for lodgement of Blaze's SBS dated 5 June 2009, to 8 June 2009.
30 While s 1322(4) does not require the Court in exercising the power to extend time, to take account of any particular criteria. Obviously the power should be exercised having regard to the general objects and purposes of the CA: see Re Wave Capital Limited (2003) 21 ACLC 1, 995. Section 1322(6)(c), however, specifies that, in a case such as the present, the Court must not make an order unless it is satisfied that "no substantial injustice has been or is likely to be caused to any person".
31 In my view, the exercise of the power under s 1322(4) involves in effect a two stage process. First, the Court needs to determine whether, having regard to the circumstances of the case and the general objects of the CA it is appropriate to make an order extending a relevant period, or abridging a relevant period. Secondly, if those circumstances are made out, then the Court must address the question whether any substantial injustice has been or is likely to be caused to any person by the making of such an order.
32 In dealing with the first consideration, general discretionary matters no doubt included factors touching upon the reasons for the need to extend time. Questions of deliberate strategy and inadvertence may fall for consideration. However, it should be noted that s 1322(4)(d) does not condition the exercise of the Court's power on an applicant showing its conduct was due to inadvertence. In this regard, s 1322(4) may be contrasted with s 1325D under which the Court may declare any act, document or matter not invalid by reason of contravention of a provision of Ch 6, 6A, 6B or 6C, where regard must be had to whether the contravention was caused by a person's inadvertence or mistake, not having been aware of the relevant fact or occurrence, or circumstances beyond the control of the person. In my view, it is clear that mere "inadvertence" is not the sole or a governing criterion by which the Court may be moved to exercise its power under s 1322(4)(d), even though such a factor may be considered relevant.
33 There is no doubt that s 1322 is intended to be exercised liberally, so as not to unreasonably stifle corporate and financial activity; that is to say, restrict such activity merely on technical grounds: Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144, Giles JA (with whom Beazley JA agreed) at [74]; Re Insurance Australia Group Ltd (2003) 128 FCR 581 at [27] per Lindgren J; Re Wave Capital Limited (2003) 21 ACLC 1, 995, French J at [30]; Re MacMahon Holdings Limited [2008] FCA 1079, McKerracher J at [21].
34 As to what conduct on the part of an applicant may be considered disentitling conduct in relation to the exercise of the Court's power, it is not appropriate to delimit the possibly relevant categories. Each case will suggest circumstances perhaps which should lead to the power not being exercised. Delay may be relevant in some cases: see Re Laserbond Ltd (2003) 25 ACLC 1, 658; Re Insurance Australia Group Limited (2003) 128 FCR 581; Re MacMahon Holdings Ltd [2008] FCA 1079, McKerracher J at [15]. Similarly, "Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief": Re Wave Capital Limited (2003) 21 ACLC 1, 995, French J at [29].
35 To the extent that "inadvertence" is of itself a relevant consideration to the exercise of the s 1322(4)(d) power, the authorities suggest that inadvertence generally means "not properly attentive" or not directing one's mind to the doing of an act, amongst other things, to being ignorant of a requirement that an act be done, or done in a particular way or by a particular time: Diamond Rose NL v Striker Resources NL (1998) 85 FCR 76, Lee J at 81; Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283, Hamilton J at 285 at [10].
36 In my view, the conduct of Blaze, through Mr McHenry, in not personally lodging the SBS on Friday afternoon of 5 June 2009 at the Perth offices of ASIC, has been fully explained. Whether or not one characterises this conduct in posting and not lodging personally the statement as inadvertence, oversight, mistake or error, does not matter much in these circumstances. It may simply be characterised as an error of judgment. There is no doubt that, had Mr McHenry appreciated the statement had to be personally lodged at ASIC's offices, he would have done that, that afternoon, just as he had lodged other documents to do with the takeover in person on earlier occasions. The reason why Mr McHenry did not take that course of action on this occasion seems to have been because it was a Friday afternoon, it was the last day of the offer being open and because he was advised, following due inquiry on the ASIC Help Desk, that posting the notice would be sufficient.
37 The conduct of Mr McHenry on the part of Blaze should not disentitle Blaze from having the benefit of an order of the Court extending the time for lodgement of the statement. There was no ulterior purpose or design on the part of Mr McHenry, or Blaze, in his conduct in posting, rather than personally lodging the statement. He did not set out deliberately to defeat the requirements of the CA.
38 Once the error in judgement of not personally lodging the statement on the Friday afternoon came to the attention of Blaze, it instructed its solicitors to take immediate steps to rectify the situation and to apply to this Court for appropriate relief extending the time for lodgement of the statement.
39 I do not consider that it can be said that Blaze is guilty of undue delay in bringing this proceeding to rectify the error so identified.
40 The next question is whether the making of an order in terms of order 2 of the application, is likely to cause any substantial injustice to any person, or whether substantial injustice has been caused to any person as a result of the omission of Blaze to lodge the SBS on time.
41 It seems that up to 4 June 2009, there had been a partial 5.14% acceptance of the takeover offer (as explained in exhibit AM2 to the affidavit of Mr McHenry at p 13). In the period that followed the SBS being placed on the ASX platform, it is unclear how many more acceptances may have been given. Counsel for Target suggests that it could not have been more than 1% above the 5.14% acceptance, otherwise Blaze would have been obliged to give Target a Substantial Shareholder Notice in accordance with s 671B(1)(b) of the CA, and Target has not received any such notice.
42 In my view, in the circumstances, it is difficult to see what "substantial injustice" has been caused or is likely to be caused if an order in terms of order 2 is now made. If an order is made, those shareholders who have accepted the offer purportedly after 5 June 2009, will have the opportunity to confirm their acceptance. If an order were not to be made, they would of course lose the opportunity to maintain their purported acceptance of the offer. However one looks at it, there is no evidence before the Court, and none seriously identified by counsel for the parties, to suggest that any injustice that might be identified is "substantial".
43 In my view, it is appropriate to make an order in terms of proposed order 2 of the application. The making of the order will serve to remedy what in the end was an error of judgment made by Mr McHenry on behalf of Blaze.
44 The facts show that all parties, including Target, have acted on the basis that everything that has been done since the SBS was issued was done regularly. The market, through the ASX, has been informed and has acted on the basis that the information provided is regular. Indeed Target itself issued a letter to all shareholders responding to the further extension of offer lodged by Blaze on 11 June 2009, extending the offer period to 17 July 2009, recommending that the offer be rejected and that shareholders do nothing.
45 In these circumstances, it might be said that the making of an order as proposed in order 2 of the application maintains the status quo and ensures the parties and the market continue to act with the certainty they had assumed to this point.
Order 3
46 The Court's power to make an order in terms of order 3 of the application is challenged by Target.
47 The order that the Court proposes to make in terms of order 2 of the application will remedy the error of Blaze in not personally lodging the SBS with ASIC on 5 June 2009. The time for lodging the notice will be extended to 8 June 2009, the date the notice was actually lodged with ASIC. Nothing further need be done then in relation to the physical lodgement of the SBS.
48 If nothing more were done than the Court make an order in terms of order 2, then the SBS would contain a new offer that is open for 14 days after the offer is varied – that is until either 19 June (14 days after 5 June) or 22 June 2009 (14 days after 8 June 2009). The better view is, I think, that 19 June is the relevant date, as the extended lodgement date does not, I consider, extend the close date for accepting the initial bid. Counsel for the parties do not suggest otherwise.
49 In essence, counsel for Target contends that any further variation under s 650D, such as that purportedly made on 11 June 2009 to extend the offer period to 17 July 2009, can only be effected if made during the period that the pre‑existing offer was in fact open and it is not now within the Court's power to facilitate the lodgement of a variation in terms of that purportedly lodged on 11 June 2009 after 19 June. Consequently, Target contends that any proposed variation extending the offer period to 17 July was required to be the subject of a notice, or a court order, made prior to 19 June 2009.
50 Target does not contend that s 1322(4)(d) of the CA does not empower the Court to make order 2. It concedes that it is probable that s 1322(4)(a) applies to the defective act of Mr McHenry in posting the SBS notice. However, it contends Blaze has not sought for a declaration to be made pursuant to s 1322(4)(a) of the CA that the act of Mr McHenry in posting the notice was valid for the purposes of s 650D(1)(b) of the CA.
51 Counsel for Target refers to Re Centennial Coal Co Ltd [2006] NSWSC 62, where the Court relied upon s 1322(4)(a) of the CA, not s 1322(4)(d), to achieve what counsel says was a similar end, namely, to declare that the extension of an offer period under s 650C of the CA was valid despite a defective act purporting to be done under s 650D(1)(c)(ii), 80 minutes after the expiry of the offer period, the defect being only as to timing of a step that should have been taken before the end of the offer period: Barrett J at [2], [13], [16] and [24].
52 Counsel for Target contends that by contrast to both Re Centennial Coal and order 2, order 3 as sought by the plaintiff does not simply seek the validation of a defective step in the process of varying an offer. Instead, it seeks that the Court validate a whole new process to vary an offer, well after the expiry of the offer period chosen by the plaintiff in the SBS that expired on 19 June 2009.
53 Counsel says this is evidenced by the terms of the orders sought. Order 2 is framed such as to validate something that already occurred when it states:
"The time for lodgement [under s 650D(1)(b)] … is extended …"
(emphasis added).
By contrast, order 3 is framed in terms intended to validate something that is yet to happen, namely:
"The time to lodge a notice [under s 650D(1)(b)]… is extended … "
(emphasis added).
54 Counsel submits this intention was confirmed in the plaintiff's oral submissions to the Court on 24 June 2009, where the plaintiff indicated that order 3 was not being sought to validate the notice (revised offer extending the acceptance period) issued on 11 June 2009, but something different again, no copy of which has been put before the Court or provided to the defendant.
55 Target therefore contends that, while the Court's powers under s 1322(4)(d) of the CA are wide, there are limits to it, as also demonstrated in Community Life Ltd v Kilmory Developments Pty Ltd [2007] NSWSC 943, where the Court held that the power did not permit the re-establishment of the period prescribed under s 263(1) of the CA for the purpose of lodging a charge after that period had expired, the charge having been discharged well after that period expired.
56 By analogy, counsel for Target contends, assuming that order 2 is made, s 1322(4)(d) of the CA does not permit the re-establishment of the offer contained in the SBS when that offer expired because of the very terms of the SBS. In effect, counsel contends the plaintiff relies on s 1322(4)(d) of the CA as conferring power on the Court to, first, effectively validate all of the terms of the SBS by the making of order 2, but then to invalidate or delete the date of 19 June 2009 inserted in the SBS by the plaintiff, and to insert another date instead, on behalf of the plaintiff, such that the offer is still on foot until 17 July 2009. Target contends this is not an exercise in extending any period at all and there is no power in s 1322(4)(d) of the CA permitting it.
57 Furthermore, Target contends there is no defective act as such, akin to Mr McHenry's defective act of posting the notice instead of lodging it personally, that can be declared valid in accordance with s 1322(4)(a) of the CA.
58 Counsel says that, as noted in Re Centennial (Barrett J at [5] and [7]), the requirement that some action be taken to extend before the end of the offer period, has been recognised for a long time. The prescribed steps represent the only effective way of varying unaccepted offers.
59 Target finally says that, in this case, even if order 2 is made, the offer contained therein expired on 19 June 2009. That being the case, s 1322(4)(d) of the CA does not empower the Court to re-establish the offer.
60 In response, counsel for Blaze submits it is well established that:-
Section 1322(4) is a source of power for making remedial orders where there has been a contravention of the bid variation provisions of the CA: Pinnacle at [17] – [19] and [25]; and see the decision of Mullins J in the Supreme Court of Queensland in Barondene Pty Ltd v Breakfree Ltd (2003) 22 ACLC 910 at 912. So is s 1325D: Pinnacle at [17] – [19].
Primelife Corporation Limited v Aevum Ltd (2005) 53 ACSR 283, Hamilton J, particularly at [8]; Re McMahon Holdings Limited [2008] FCA 1079.
61 Counsel says order 3, in contrast with Kilmory, is truly remedial in character. There is no reason to consider that it is outside the scope of orders empowered by s 1322(4) or outside the general expressions of principle referred to above. In Kilmory the plaintiff had lodged a charge, given a perfectly valid notice of the charge to ASIC, and then consciously and deliberately discharged the charge. The order sought was not to remedy some form of irregularity e.g. a failure to give notice of the charge in the time permitted by statute, but rather directed to "eradicating the effect of the plaintiff having given notification of discharge" of the charge: see [40]. Plainly what was sought was not a remedial order – and for that reason it was in excess of power. The order sought in this case is remedial in character.
62 Contrary to Target's contention, Blaze contends the effect of proposed order 3 is to firstly extend the time for the service of the notice under s 650D extending the offer period and, secondly, to impose conditions on the grant of relief. It is the conditions which affect the form of the notice which will be given if an order is made, and make it different, in form, from that given on 11 June 2009, that is, the substance of the notice, extending the offer period, to 17 July 2009 will be the same. The substance of the order, is reflected by the following words:-
The time to lodge a notice of variation as required by Section 650D(1) of the Corporations Act 2001 (Cth) (Notice) with ASIC is extended to 4pm on the date of these orders. (Emphasis in original)
and is essentially the same as the order made in, for example, Re Emerald Capital Ltd [2008] FCA 1739 and the same form of words as used in order 1 in Re Emerald Capital and could, if the Court thinks appropriate, be adopted. In Re Emerald Capital, the order permitted the plaintiff to serve a:
new notice under sections 650D(1), 630(2) and 630(3) of the Act.
(Emphasis supplied)
63 Blaze contends that the plaintiff:
(a) attempted to do that which would have extended the offer period by a notice dated 5 June 2009 – but failed;
(b) attempted to further extend the offer period by a notice dated 11 June 2009, which was appropriately served and lodged, but failed to achieve the extension because, and solely because, of the failure of the 5 June 2009 notice to achieve an extension (under s 624 of the CA).
64 Blaze also submits there is no warrant for Target's submission that an offer cannot be re‑established by court order and contends it is contrary to the well established principle that:-
The use of the words 'may only' in s 650A(1) does not evince an intention to exclude the operation of the remedial provisions in ss 1322(4) or 1325D or an intention that the constructional approach in David Grant & Co Pty Ltd v Westpac Banking Corp (1985) 185 CLR 265 is to be taken: Pinnacle at [17] and [19].
Primelife (supra):McMahon (supra).
65 Blaze emphasises that s 1322(4) indeed provides for:-
an order extending the period for doing any act, matter or thing or instituting or taking any proceedings 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)…”
(Emphasis supplied)
which is this case.
66 Counsel for Blaze finally contends the defendant's submission would confine s 1322(4)(d) to a case where there was no invalidating consequence of the failure to do the act matter or thing referred to in time, so the thing purported to be done was despite the irregularity, effectively done. This would deprive s 1322(4)(d) of much of its utility and severely curtail its field of operation and there is no warrant for such an approach.
67 In my view, Kilmory Developments [2007] NSWSC 943 is helpful, but distinguishable from the present case. It concerned a fixed and floating charge which on 24 October 2006 the plaintiff company took from the defendant company. Notice of the charge was lodged under the Corporations Act 2001 and the charge was registered on 25 October 2006. However, on 22 November 2006 the plaintiff lodged a memorandum or notification of discharge or release of charge. The plaintiff company then applied to the Supreme Court of New South Wales for an order that the period within which it may lodge notice of the charge be extended to a future date or, in the alternative, that the register kept under the CA be rectified by the charge being re‑registered. The application in both forms relied in part on s 1322(4)(d) of the Act.
68 At [37] – [40], Hammerschlag J noted that:
[37] Section 1322(4)(d) permits the Court to extend the period for doing an act, matter or thing under the Act.
[38] It accordingly presupposes that the act, matter or thing has not occurred at all or that it has occurred late.
[39] Once again that is not this case. The act, matter or thing here, namely notification of the charge, occurred. No relief is directed to that act.
[40] It seems to me that the substance of what is sought is directed not towards late notification of the charge but rather to eradicating the effect of the plaintiff having given notification of discharge. In my view s 1322(4)(d) is not capable of bringing that result about and therefore also not available to the plaintiff.
69 At [41], Hammerschlag J considered that in any event, even if s 1322(4)(d) had been available discretionary factors would count against relief being granted. Further, His Honour considered at [45] that to re‑register the charge could not be said to be without substantial injustice caused, or likely to be caused, to any person.
70 Section 650D(1) CA provides as follows:
650D Off‑market bids—method of making variation
Variation to be made by notice to the target and holders
(1) To vary offers under an off‑market bid, the bidder must:
(a) prepare a notice that:
(i) sets out the terms of the proposed variation; and
(ii) if the bid is subject to a defeating condition and the proposed variation postpones for more than 1 month the time by which the bidder must satisfy their obligations under the bid—informs people about the right to withdraw acceptances under section 650E; and
(b) lodge the notice with ASIC; and
(c) after the notice is lodged, give the notice to:
(i) the target; and
(ii) everyone to whom offers were made under the bid.
Note: Sections 648B and 648C provide for the manner in which documents may be sent to holders.
71 This provision covers all off‑market bid variations. Accordingly as noted above, it applied to the SBS. It would also have applied to the notice of variation that Blaze purported to lodge with ASIC on 11 June 2009, if the notice of the SBS had been regularly lodged.
72 Unless the Court has the power effectively to permit the late lodgement of the purported notice lodged with ASIC on 11 June 2009, Blaze is simply out of time and unable to lodge a notice in accordance with s 650D(1). In that event, it would be obliged, as counsel for Target contends it should, to restart the takeover process.
73 What Blaze now asks the Court to do is make an order permitting it to lodge a notice under s 650D(1) that would achieve, in substance, what the purported notice of variation lodged with ASIC on 11 June 2009 would have achieved if the SBS had been regularly lodged.
74 The fact is that, without any valid Court order, any attempt by Blaze to lodge a notice along the lines of that it lodged on 11 June 2009, in consequence of an order in terms of para 2 of the current application, would be ineffectual. The question is whether the Court has the power to extend the time for lodging the proposed variation, on the conditions proposed in order 3.
75 Blaze relies upon the express wording of s 1322(4)(d) of the CA for the making of such an order. In my view, the Court does have the power to make such an order in a case such as this. This is because the making of an order in terms of order 3 of the application would be:
• An order
• extending the period for doing any act, matter or thing (being the lodgement of a notice of variation)
• under the Act (the CA)
• extending a period where the period concerned ended before the application for the order was made (being the period created by the CA for lodging a notice that ended on 19 June 2009).
76 While counsel for Target contends there is no relevant "period" in respect of which the Court may make an extension order for the purposes of lodging a notice under s 650D(1) of the CA, I disagree, for the reasons just explained.
77 Once the Court makes an order extending the period for lodging notice of the SBS in accordance with order 2 of the application, as a matter of law, Blaze, if it wishes to lodge a further notice in order to vary by extending the offer period, is obliged to do so before the 14 day period during which the SBS remained effective, expired by force of s 624(2) CA. That period, in the usual circumstances of this case, has now passed. In my view, the Court has the power under s 1322(4)(d), to extend the 14 day period to enable Blaze to lodge a further notice of variation. The Court should take a liberal approach to the exercise of the power in such circumstances.
78 It would, as counsel for Blaze suggests, be an odd thing if the Court's power to extend time did not permit it to do so in a case such as this.
79 So far as discretionary factors are concerned, they are very much the same as those that led me to consider that it is appropriate to make an order in terms of order 2.
80 All parties, including Target, and the market generally through the ASX, have acted to this point on the basis that the SBS, and the further notice lodged on 11 June 2009 extending the revised offer until 17 July 2009, are effectual. To make an order in terms of order 3 would, in substance, confirm what the market currently understands the position to be.
81 In this regard, counsel for Target notes that the plaintiff contends that if the orders sought are not made, any acceptances of the original takeover offer are void by reason of s 650G of the CA, because the original offer was subject to the defeating conditions in cl 10.8 of the original bidder's statement.
82 Counsel contends that if that is the effect of s 650G, then it is difficult to determine any prejudice one way or the other to those shareholders who accepted the original offer. This is because they did so knowing about, and on the basis of, the defeating conditions and can be taken to know the consequences of that.
83 Furthermore, if there acceptances are void because of s 650G, then it simply means that they are left holding their shares in the defendant for the value they are worth, which shares they may still trade if they wish.
84 In response, counsel for Blaze points out that the CA empowers a takeover offeror to move defeating conditions under s 650F of the CA by notice given to the target company and lodged at ASIC or ASX (s 650F(1) and (3)). Notice to shareholders is not required. The acceptors doubtlessly thought, and were entitled to think, that the defeating conditions would be removed or likely be removed and if they had thought otherwise they would not have accepted the offer.
85 Thus, the acceptors will, unless a remedial order is made, lose the benefit of a bargain which may, in all the circumstances, prove to be a very good one for them, and which it was their commercial judgment to make.
86 In my view, while the merits of these arguments may be debated, no substantial injustice has been demonstrated and I find it difficult to discern how any has been or is likely to be caused to any person by making an order in terms of order 3.
Conditions of order 3
87 The orders proposed by Blaze, however, condition the lodgement of the further notice of variation on a number of factors set out in subs (a), (b) and (c) above. It is undoubted the Court has the power to make any order under s 1322(4) on conditions.
88 It appears that the terms of the order 3(a) have been discussed and found acceptable to ASIC. Exhibit GJA2 to the affidavit of Mr Archer, sworn 24 June 2009, is a letter dated 24 June 2009 addressed to Mr Archer from ASIC (signed by Kim Demarte). ASIC's letter advises:
In principle, ASIC has no objection to the making of orders which would permit Blaze's bid to be extended to 17 July 2009, and for the bid to be declared unconditional.
We note that the third order of the Draft Orders is expressed to extend the time for the lodgement of a notice of Variation (Variation) under section 650D(1)(a) of the Act, to the date of the Court's orders. We think that this should refer to either section 650D(1) or alternatively section 650D(1)(b). We note that in the matter of Re Emerald Capital Limited [2008] FCA 1739 the Court made orders extending the period for the bidder to give a new notice under section 650D(1).
We further note that under section 650C(2) of the Act, where a bid is subject to a defeating condition, the bidder may extend the offer after the publication of the notice under section 630(3) only if certain prescribed events occur after that date. Those prescribed events do not apply to Blaze's bid and the proposed Variation purports to extend the bid in circumstances where Blaze had not given the notice required by section 630(3). Accordingly, we think the draft orders ought to include an order extending the time for publication of the notice required under section 630(3). We note that these orders were also sought in the Emerald case.
We also note the note that proposed order 3(a)(i) would require the Variation to refer to orders of the Court. We think it may be preferable to require Blaze to explain the effect of the orders granted, to minimise potential confusion about the status of Blaze's bid.
89 The terms of order 3(a)(i) of the order, if made, ensured that a notice issued under s 650D(1) has been sent by order of the Court. I am prepared to accept that as sensible in that, given that a number of persons in the market would currently understand that there is a valid variation of the bid in the market, this will help to clarify and confirm the position.
90 The terms of order 3(a)(ii), if made, specify that the notice inform recipients that the offer period is due to expire on 17 July 2009 unless otherwise extended by the plaintiff. That is also appropriate as it confirming the closing date.
91 The terms of order 3(a)(iii) of the order, if made, require that the notice inform the recipients that the offer is freed from all defeating conditions. This, as the ASIC letter notes, has the effect of making the offer unconditional. In the circumstances, that is plainly an advantage to shareholders. Or at least it would ordinarily be viewed in that way.
92 The terms of para 3(b) of the order, if made, would require Blaze to lodge the notice with ASIC and ASX by 4pm on the date of the making of the orders of this Court. That is appropriate, as the matter requires expedition to achieve commercial certainty.
93 The terms of para 3(c) of the orders, if made, would require that within three days after the date of the orders, Blaze sends the notice to Target and everyone to whom the offer has been made under the initial bidder's statement dated 16 April 2009. That also is appropriate.
94 Counsel for Target raises a further issue, namely, whether it should be made a condition of order 3, if made, that any shareholder of Target who has already accepted the offer be given the right to withdraw.
95 Section 650E(1) of the CA deals with the right to withdraw acceptance and provides:
650E Right to withdraw acceptance
(1) A person who accepts an offer made under an off‑market bid may withdraw their acceptance of the offer if:
(a) the bid is subject to a defeating condition; and
(b) the bidder varies the offers under the bid in a way that postpones for more than 1 month the time when the bidder has to meet their obligations under the bid; and
(c) the person is entitled to be given a notice of the variation under subsection 650D(1).
96 Blaze accepts that, had the two relevant "extensions" been effective and the plaintiff had decided not to free the bid of defeating conditions until later, rights of withdrawal would have arisen. Blaze contends, however, that as a consequence, however, of the plaintiff's decision to free the bid of defeating conditions at this stage those rights will not arise. This is said not to be a consequence of the order sought, but of the plaintiff's decision to free the bid of conditions by notice if order 3 is granted. This is because the plaintiff's decision (to free the bid of conditions) has the effect that the period referred to in s 650E(1)(b) is not exceeded.
97 Blaze observes that the condition suggested by the defendant, a takeover target with a commercial interest in securing the condition, would afford a right of withdrawal in circumstances where the Parliament considers it neither necessary nor appropriate.
98 Blaze submits that the references in s 650E(1)(G) to the bidder meeting "their obligations under the bid"is a reference to payment of the consideration under the bid: Explanatory Memorandum to the Corporations Bill 1988 para 2040; s 658 of the Corporations Law.
99 Blaze says the obligation of the plaintiff under the bid was to cause the offeree, who had accepted, to receive the cash component and Advance Share on the earlier of:-
• one month after the offer was accepted, or the contract resulting from its acceptance becomes unconditional (whichever is the later); and
• 21 days after the end of the offer period.
See cl 5.1 and cl 5.2 of the bidder's statement dated 16 April 2009.
100 In terms of the bidder's statement, the offer period closed on 5th June 2009.
101 At all times up to 5 June 2009 the contract resulting from acceptance of the offer was conditional: that is, the bid was subject to the defeating conditions referred to in cl 10.8 of the bidder's statement. If as a consequence of Mr McHenry's mistake, the offer period closed on 5 June 2009, these contracts were void – because the defeating conditions had not been removed, s 650G.
102 As a consequence, in the case of the shareholder who had accepted the offer prior to 5 June 2009, no consideration was payable. No right of withdrawal under s 650E is lost if order 3 is made.
103 Had the defeating conditions been removed prior to 5 June 2009 (and they were not), likely the last contractual date for payment was 26 June 2009. (Clause 2.6 of bidder's statement).
104 Section 650E only affords a right of withdrawal when the bidder varies offers under the bid in a way that postpones for more than one month the time when the bidder has to meet its obligations under the bid, that is, pay the consideration.
105 Counsel for the plaintiff contends that s 650E is of no application if:-
• the offer period is by notice given on 26 June 2009 extended to 17 July 2009; and
• the offer is extended on the terms that the defeating conditions are removed; because the pre-5 June 2009 acceptor will be entitled to receive his/her consideration within one month of his/her contract becoming unconditional. This occurs one month after the notice of variation removing the defeating conditions is given. If notice is given on 26 June 2009, he/she becomes entitled to receive the consideration on 26 July 2009, which is not more than one month after he/she would become entitled to receive the consideration under the bidder's statement - also 26 July 2009.
106 Blaze puts forward as an example the situation of a shareholder who has "accepted" the "offer" in the period between 5 June 2009 and 11 June 2009 – that is the period between the expiration of the offer period under the bidder's statement and the date upon which the Plaintiff, by notice, further "extended" the offer period:
• If the offer period ended on 19 June 2009, since the defeating conditions had not been removed, the contracts would have been void, and there would have been no entitlement to payment: s 650G. No right of withdrawal under s 650E could arise:
• Had the defeating conditions been removed prior to 19 June 2009 (and they were not) and the offer period terminated on that day, likely the last contractual date for payment was 10 July 2009 (21 days from the end of the offer period – 19 June 2009). Necessarily this is only 14 days after the contractual date in the bidder's statement. No right of withdrawal under s 650E could arise.
107 Blaze says all the shareholders who accepted after 11 June 2009, contracted on the basis that the offer period will expire on 17 July 2009. They become entitled to their consideration 21 days thereafter, that is, on 8 August 2009, which would be 21 days after the offer period expired. If an order is made in the terms sought, they will become entitled to payment of their consideration on 26 July 2009 – because that is one month after their contracts became unconditional by service of a notice freeing the bid of conditions. No right of withdrawal under s 650E is lost as a consequence of the order sought – and as a consequence of the freeing of the bid of conditions, it may be that the shareholders receive their consideration at an earlier date than otherwise.
108 Thus, Blaze contends, conditioning an order for extension on shareholders being afforded a right of withdrawal is neither necessary nor appropriate. But, if contrary to these submissions, the Court considers a condition in the terms sought by the defendant appropriate, the plaintiff will of course submit to it.
109 Subsequent to the parties making submissions at hearing and in writing soon afterwards on the question of withdrawal rights, on 25 June 2009 Mr Demarte at ASIC provided the solicitor's for Blaze with further comment on the question of withdrawal rights and related question of voidance of offers. Mr Demarte requested that this advice be provided to the Court and counsel for the defendant. By consent of the parties, the observations made by Mr Demarte have been received by the Court.
110 Mr Demarte for ASIC, makes the following observations in relation to the terms of order 3 as proposed by Blaze and set out above:
Withdrawal Rights
In the ordinary course of events, as the original closing date of the offer was 5 June 2009, in accordance with s 650E(1) Blaze could have (individually or cumulatively) extended the bid to on or about 5 July 2009 without needing to either offer withdrawal rights or declare the offer unconditional prior to the extension.
As discussed during our conversation of 16 June 2009, the notice of variation lodged with ASIC on 11 June 2009 would not have validly extended the bid to 17 July 2009 as it did not include the withdrawal rights noted in s650E. At that point, due to the operation of s650C(2) of the Act, had the bid been validly extended to on or about 19 June 2009 in the first instance, Blaze would have needed to drop the defeating condition pursuant to s650F(1)(a) prior to that date in order to further extend the bid (ie to 17 July 2009).
If order 2 of the Draft Orders are made, this is the position that Blaze would have been in. Had Blaze dropped the condition and further extended the bid on 19 June 2009, in accordance with the terms required by s620(2)(a) of the Act, the time for payment of the consideration under the bid would have been the earlier of:
(a) 19 July 2009 (one month after the takeover contract became unconditional) or for those who accepted later one month after the bid was accepted; or
(b) 21 days after the end of the offer period.
ASIC does not necessarily oppose remedial orders which would require Blaze to drop its defeating condition as an alternative to offering withdrawal rights. However, given the elapse of time since 19 June 2009 during which the condition has not been able to be dropped, the Court may wish to include as a condition of any remedial order that Blaze either:
(1) meet its obligations under the bid by 19 July 2009 by accelerating the terms of payment (as described in ASIC Regulatory Guide 6 - Variation of takeover offers (RG 6) under the heading 'Comment' on page 11); or
(2) offer withdrawal rights in accordance with s650E.
Voidance of Offers
We also note your comments at paragraph 7 of your outline of submissions provided to Target Energy on 24 June 2009, to the effect that if the offer closed on 5 June 2009, the contracts resulting from acceptance of the offer would be void by operation of s650G because the defeating conditions had not been removed. We make the observation that the effect of s650G (as modified by ASIC Class Order 01/1543) is that takeovers contracts are void if a defeating condition remains and that condition has not been fulfilled at the end of the offer period.
As such, whether the contracts are void may depend on whether the defeating condition was fulfilled at the end of the offer period. If in the court's opinion, those contracts are not void then we presume that the time for payment of the bid consideration under those contracts would currently be 21 days after the end of the offer period. If this is the case, this time for payment would be affected by the remedial orders sought and, in ASIC's view, it would be preferable for Blaze to be required to offer withdrawal rights (or accelerated payment terms of equivalent effect) to those accepting shareholders affected, in addition to Blaze immediately declaring the bid unconditional.
111 In light of this advice, Blaze moved to amend order 3 by adding a new para (a)(iv) as follows:
(iv) the time for payment of the consideration under the takeover bid for all person who had accepted the offer prior to the date of the Notice is accelerated to 19 July 2009; and
112 In respect of the ASIC advice and the condition (a)(iv) proposed by the plaintiff, counsel for Target, while maintaining his opposition to the making of an order in terms of order 3 for the reasons earlier set out, submits in the alternative that, if any order is to be made in terms of order 3, then in the exercise for the Court's discretion, it would be just and reasonable that a condition of such order be that any person who has already purported to accept the offer under the takeover offer be notified by the plaintiff that they may withdraw their acceptance of the offer – for example, by giving notice in writing to the plaintiff within one month beginning on the day after the day on which such person receives notice of their right to withdraw.
113 For my part, in the circumstances, I consider appropriate the proposition put on behalf of ASIC that given the elapse of time since 19 June 2009 during which the condition has not been able to be dropped, there should either be an accelerated payment requirement or the creation of offer withdrawal rights in accordance with s 650E.
114 ASIC plainly does not have any strong view as to the adoption of one alternative over the other.
115 In my view, in light of the fact that the market has until very recent days been acting on the basis that the extension announced to the ASX on 5 June 2009 is regular, and the revised offer announced to the ASX on 11 June 2009 is regular, it seems to me to be sufficient if order 3 requires the offer now to be unconditional, with a further safeguard that the bidder meet its obligations under the bid by 19 July 2009 by accelerating the terms of payment.
116 In those circumstances, I consider the amendment to order 3 by the insertion of (a)(iv), as proposed by Blaze, to be an appropriate protection of existing shareholder's interests in the case of those shareholders who have to date accepted the offer.
conclusion and order
117 For the reasons given above, I would exercise the powers of the Court under s 1322(4)(b) of the CA to make the orders sought by the plaintiff.
118 Subject to the finally hearing from counsel as to the terms and form of the orders, I would order that:
1. The time for service of the originating process in this action be abridged.
2. The time for lodgement of the plaintiff's notice of variation (being the supplementary bidder's statement dated 5 June 2009) dated 5 June 2009 is extended to 8 June 2009.
3. The time to lodge a notice of variation (notice) as required by s 650D(1) of the Corporations Act 2001 (Cth) with ASIC is extended to 4pm on the date of these orders provided that:
(a) the notice informs the recipients that:
(i) the notice has been sent by order of this Court;
(ii) the offer period is due to expire on 17 July 2009 unless otherwise extended by the plaintiff; and
(iii) the offer is freed from all defeating conditions; and
(iv) the time for payment of the consideration under the takeover bid for all persons who had accepted the offer prior to the date of the notice is accelerated to 19 July 2009; and
(b) the plaintiff lodges the notice with ASIC and ASX by 4pm on the date of these orders; and
(c) within 3 days after the date of these orders the plaintiff sends the notice to the defendant and to everyone to whom offers were made under the plaintiff's bidder's statement dated 16 April 2009.
4. The time for lodgement of the notice in s 630(3) is extended to 4pm on the date of these orders.
5. Costs reserved, in the event the parties cannot agree costs within 14 days.
|
I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker. |
Associate:
Dated: 26 June 2009
|
Counsel for the Plaintiff: |
Mr DM Stone |
|
|
|
|
Solicitor for the Plaintiff: |
Hardy Bowen |
|
|
|
|
Counsel for the Defendant: |
Mr THR Caspersz |
|
|
|
|
Solicitor for the Defendant: |
Maxim Litigation Consultants |
|
Date of Hearing: |
24 June 2009 |
|
|
|
|
Date of Judgment: |
26 June 2009 |
