FEDERAL COURT OF AUSTRALIA

Golden Iron Resources Ltd, In the matter of Golden Iron Resources Ltd  

[2010] FCA 693

IN THE MATTER OF GOLDEN IRON RESOURCES LTD (ACN 130 460 525)

THE COURT ORDERS THAT:

1.     The time for service and hearing of the application be abridged.

2.     Pursuant to s 1322(4)(d) of the Corporations Act (2001) (Cth) (the Act), the period of seven days referred to in s 723(3)(a) and s 724(b)(i) of the Act in respect of the Prospectus of the plaintiff dated 7 May 2010 and lodged with the Australian Securities and Investments Commission (ASIC) on 7 May 2010 be extended to and include 1 June 2010.

3.     An office copy of this order be lodged with ASIC as soon as practicable after the order is made.

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 Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     On 14 June 2010 I made orders in this proceeding.  I now publish my reasons for so doing.

2                     Golden Iron Resources Ltd, the plaintiff, seeks orders pursuant to s 1322 of the Corporations Act (2001) (Cth) (the Act) for an extension of time in which to lodge and serve an application for quotation of securities to be issued under a prospectus.

3                     On 7 May 2010, the plaintiff lodged with the Australian Securities and Investments Commission (ASIC) a prospectus, of the same date, for the offer of 17,500,000 fully paid ordinary shares at an issue price of 20 cents per share to raise a minimum of $3,500,000 with the right to accept oversubscriptions of up to a further 12,500,000 shares at an issue price of 20 cents per share to raise up to a further $2,500,000 (Prospectus).

4                     Pursuant to s 711(5) of the Act, within seven days after the date of the Prospectus the plaintiff would make an application to ASX Limited for the shares offered under the Prospectus to be admitted to official quotation on the Australian Securities Exchange (ASX).  In light of s 723(3)(a) and s 724(1)(b)(i) of the Act, the plaintiff was under an obligation to apply for such quotation within 7 days of the date of the ‘disclosure document’, in this case the Prospectus.

5                     However, the plaintiff failed to do this by 14 May 2010, being the date that is seven days after the date of the Prospectus.

6                     Mr David Rowbottam, the company secretary of the plaintiff, was charged with the job of preparing and lodging with ASX Limited the application for official quotation of the shares offered under the Prospectus.  He was unaware of the legislative requirement to lodge the application for quotation within seven days after the date of the Prospectus.  After he became aware of this omission he advised ASIC and the ASX of it.  Then on 31 May 2010, Mr Rowbottam on behalf of the plaintiff engaged a firm of lawyers to take the necessary steps to rectify the position.

7                     On 1 June 2010, the plaintiff lodged with ASX an Appendix 1A for quotation of the shares offered under the Prospectus on ASX (Application). 

8                     Notwithstanding that the plaintiff failed to make a timeous application to ASX it has at all times continued to act in relation to the Prospectus as if the 7 day period contained in s 723(3) of the Act had been met.

9                     I accept that the failure to meet the 7 day period set out in s 723(3)(a) of the Act was caused by an inadvertent error on the part of Mr Rowbottam.

10                  The Prospectus remains open for acceptances and no shares have yet been issued under it.

The law

11                  Section 711(5) of the Act provides:

If the prospectus for an offer of securities states or implies that the securities will be able to be traded on a financial market (whether in Australia or elsewhere), the prospectus must state that:

(a)        the securities have been admitted to quotation on that financial market; or

(b)        an application for admission of the securities to quotation on that financial market has been made to the operator of that market; or

(c)        an application for admission of the securities to quotation on that financial market will be made to the operator of that market within 7 days after the date of the prospectus.

12                  Section 723(3) provides:

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.

13                  Section 724(1)(b) provides:

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.

14                  Section 724(2) provides:

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 repair.

15                  This application is brought under s 1322(4) of the Act.

16                  Section 1322(4) of the Act permits the Court, on application by any interested person, to make any or all 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 the Corporations Act or a provision of the constitution of the 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); or

(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.

17                  Section 1322(4) also permits the Court to make such consequential or ancillary orders to the orders outlined above as it thinks fit.

18                  Section 1322(6) of the Act relevantly states that the Court must not make an order under this section unless it is satisfied in every case, that no substantial injustice has been or is likely to be caused to any person.

19                  The power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Act and any other relevant statutes whose application may be in issue.  It must also be exercised having regard to the interests of all parties affected and the public interests of all parties affected and the public interest in ensuring compliance with statute law and company constitutions: Re Wave Capital Ltd (2003) 47 ACSR 418 at para 29.

20                  Absent a remedial Court order, the issues or transfers of shares under the Prospectus would be void under s 723(3)(a) and the plaintiff would be liable to repay money to applicants for the shares under s 724(1)(b)(i) and 724(2)(a).

21                  It is well established that the Court has a discretion to extend the time limit provided for under s 723(3)(a) and 724 under s 1322(4)(d).  French J, as his Honour then was, in Wave Capital said at para [30]:

The power conferred by s 1322(4)(d) is to make an order for ‘extending the period for doing any act…under the Act or in relation to a corporation’.  Section 723(3) does not in terms impose an obligation to apply for quotation within seven days after the date of the Prospectus.  Rather, it conditions the validity of the share issue or transfer in response to an application under the Prospectus upon the application for quotation having been made within that time.  I am satisfied however that the ordinary meaning of the words of s 1322(4)(d) can readily accommodate the extension of the period for making an application for quotation.  The same is true in my opinion of the seven day period referred to in s 724(1)(b). 

22                  I make the following findings:

(a)        the plaintiff acted honestly in relation to the contravention;

(b)        upon becoming aware of the failure to lodge the Prospectus within 7 days Mr Rowbottam immediately took steps to instruct lawyers to rectify the position;

(c)        an application for quotation of the shares offered under the Prospectus has now been lodged with ASX Limited, and on 2 June 2010, ASX Limited confirmed receipt of that application;

(d)        the plaintiff has, as at 5pm on 8 June 2010, received 79 valid applications for 1,737,500 shares under the Prospectus totalling $347,500;

(e)        no shares have yet been issued under the Prospectus and no applicant for shares under the Prospectus has suffered any detriment caused by the failure;

(f)        all existing applicants under the Prospectus and any future applicants under the Prospectus will be subscribing for shares on the basis that the shares will be granted official quotation on ASX;

(g)        should the orders not be given, the applicant will be required to:

(i)         withdraw the Prospectus;

(ii)        return all existing application monies to those applicants that have already applied for shares under the Prospectus; and

(iii)       prepare and issue a new prospectus to be lodged with ASIC for a new offer, all at significant expense to the Company; and

(h)        notwithstanding that the grant of the orders sought by the Court will deprive those who have applied for shares of the provisions of Section 724(1)(b), no substantial injustice to any person has been or is likely to be caused by the grant of the orders.

23                  Notification of the originating application and supporting papers have been given to both ASIC and ASX. 

24                  ASX advised the plaintiff’s solicitors that it does not oppose the orders sought and did not intend to appear at the hearing.  In similar vein ASIC neither opposes nor consents to the application although it pointed out in correspondence that it would have granted the plaintiff relief by modifying sub-s 723(3)(a) of the Act to extend the seven day period to the thirty-eight required.  In fact the period is only twenty-five days.  ASIC also advised that it did not intend to appear at the hearing.

Orders

25                  For these reasons I am satisfied that it is appropriate to exercise my discretion in favour of the grant of orders in terms of those sought in the application. 

Associate:

Dated:         2 July 2010