FEDERAL COURT OF AUSTRALIA

Lanka Graphite Limited (formerly Viculus Limited)

[2015] FCA 798

IN THE MATTER OF LANKA GRAPHITE LIMITED (FORMERLY VICULUS LIMITED)

THE COURT ORDERS THAT:

1.    The time provided for the Plaintiff to satisfy Bid Condition (e) of the Plaintiff’s Takeover Bid for Euro Petroleum Ltd (ACN 147 870 362) (which Bid Condition is set out in Annexure A of the Plaintiff’s Bidder’s Statement dated 1 August 2014) be extended under s 1322(4)(d) of the Corporations Act 2001 (Cth) to 31 July 2015.

THE court declares that:

2.    Bid Condition (e) of the Plaintiff’s Takeover Bid for Euro Petroleum Ltd (ACN 147 870 362) (which Bid Condition is set out in Annexure A of the Plaintiff’s Bidder’s Statement dated 1 August 2014) is satisfied.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth).

IN THE MATTER OF LANKA GRAPHITE LIMITED (FORMERLY VICULUS LIMITED)

REASONS FOR JUDGMENT

1    Application has been made by the plaintiff (“Viculus”), a public company incorporated in Australia, for an order under s 1332(4)(d) of the Corporations Act 2001 (Cth) (“Corporations Act”) that the time provided for Viculus to satisfy a bid condition of its takeover bid for Euro Petroleum Ltd (“Euro”) be extended to 31 July 2015 and a declaration that the bid condition is satisfied. For the reasons that follow the order and declaration should be made.

facts

2    Viculus has been listed on the official list of the ASX since 27 October 1997. Currently the company is suspended from trading on the ASX because it does not carry on any business activities and holds no business assets. In order to be readmitted to the official list of the ASX, Viculus is required to acquire a business or assets which would enable Viculus to meet the admission requirements under Chapters 1 and 2 of the ASX Listing Rules.

3    On 11 February 2014, Viculus entered into a Heads of Agreement with Euro, an unlisted public company incorporated in Australia. Under the terms of the Heads of Agreement, it was agreed that Viculus would make an off-market takeover bid pursuant to Chapter 6 of the Corporations Act for all the issued shares in Euro (“the Takeover Bid”). In return, the board of Euro would recommend the Takeover Bid to all Euro shareholders.

4    On 1 August 2014, Viculus issued its Bidder’s Statement in connection with the Takeover Bid. The Bidder’s Statement contained nine conditions that needed to be satisfied or waived in order for the Takeover Bid to proceed. The conditions included Condition (e) as follows:

Viculus satisfactorily complying with the re admission requirements of Chapters 1 & 2 of the ASX Listing Rules and being granted in principle approval to re list on the ASX, including meeting the Minimum Subscription amount under this Prospectus.

5    The Minimum Subscription amount under the Prospectus was $3.5 million.

6    The Takeover Bid closed on 15 July 2015. By 15 July 2015, Viculus had received approximately 96.45% acceptance of the Takeover Bid from Euro shareholders and had received subscriptions totalling $3.85 million.

7    On 8 July 2015, Viculus released to the ASX and served on Euro a notice pursuant to s 630(4) of the Corporations Act of the conditions that had been fulfilled. On the same date, Viculus released to the ASX and served on Euro a notice pursuant to s 630(3) of the Corporations Act that the offer was free of all defeating conditions, save for three conditions. One of those conditions was Condition (e).

8    Viculus believed, based on all the steps and actions to date and communications with the ASX, that all the conditions were satisfied as at 15 July 2015, including the ASX in principle approval to relist on the ASX. On 17 July 2015, Viculus lodged with ASIC and the ASX a Notice of Compulsory Acquisition pursuant to s 661A of the Corporations Act.

9    By letter dated 21 July 2015, the ASX confirmed that it could see no reason why the securities of Viculus should not be reinstated to official quotation following compliance with Listing Rule 11.1 and Chapters 1 and 2 of the Listing Rules (subject to completion of certain pre-admission steps and conditions).

10    On 22 July 2015, Viculus issued an announcement to the ASX stating, amongst other things, that a Notice of Compulsory Acquisition for the remaining shares in Euro had been issued, Viculus had received subscriptions for a total of $3.85 million under the Prospectus and Viculus had received formal correspondence from the ASX stating that, subject to certain conditions and compliance with Listing Rule 11.1 and Chapters 1 and 2 of the Listing Rules, the ASX saw no reason why the shares in Viculus should not be reinstated to official quotation.

11    On 24 July 2015, representatives of ASIC contacted Viculus’ lawyer, Mr Burrell, expressing concern that Condition (e) of the Takeover Bid had not been satisfied as at 15 July 2015, the date by which that approval needed to be given under the Bidder’s Statement. If the condition was not satisfied, the Takeover Bid is void by force of s 650G of the Corporations Act.

12    In order to address ASIC’s concern, Viculus obtained a further letter from the ASX dated 31 July 2015 in which the ASX states that:

ASX confirms that subject to [Viculus] obtaining any and all Court Orders necessary for it to be able to satisfy condition 7 of the ASX Letter, [Viculus] will be compliant with listing rule 11.1 and chapters 1 and 2 of the Listing Rules and its securities can be reinstated to official quotation.

13    Viculus now makes application under s 1322(4)(d) of the Corporations Act to have the time by which Viculus was required to obtain ASX’s “in principle” approval to relist on the ASX extended from 15 July 2015 to 31 July 2015. A letter dated 3 August 2015 from ASIC was produced to the Court in which ASIC advised that it did not oppose the orders sought and did not intend to appear at the hearing of the matter. Also on 3 August 2015 Viculus made an announcement to the ASX that it had made the application to the Federal Court and that members of the public, including shareholders of the company, may attend the hearing. No shareholder attended.

the law

14    Section 1322(4)(d) of the Corporations Act provides as follows:

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)    …

(b)    …

(c)    …

(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.

15    Section 1322(6) imposes constraints on the exercise of power under s 1322(4). The section relevantly provides that:

The Court must not make an order under this section unless it is satisfied:

(a)    ….

(b)    …

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

16    Section 1322(4) has been given a wide operation and liberal interpretation by the courts. In Weinstock v Beck (2013) 251 CLR 396, French CJ observed as follows at [39]:

Corporations, in contemporary Australian society, serve the purposes of enterprises, large and small, owned and operated by men and women, some of whom are sophisticated, knowledgeable and well-advised on matters of corporate governance and some, perhaps many, of whom are not. Section 1322(4) and related provisions reflect a long-standing legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which may be corrected without substantial injustice to third parties.

In Blaze Asset Pty Ltd v Target Energy Ltd (2009) 177 FCR 488, Barker J stated that:

[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 Ltd (2003) 21 ACLC 1995. 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, Ch 6A, Ch 6B or Ch 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 Ltd 21 ACLC 1,995, French J at [30]; Re MacMahon Holdings Ltd (2008) 26 ACLC 861, 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 (2007) 25 ACLC 1,658; Re Insurance Australia Group Ltd 128 FCR 581; Re MacMahon Holdings Ltd 26 ACLC 861, 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 Ltd 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 [10].

In Re Insurance Australia Group Pty Ltd (2003) 128 FCR 581, Lindgren J made an order under s 1322(4)(d) of the Corporations Act to extend the time for a company to apply for the admission of its securities to quotation where, due to inadvertence, the time limit was not observed. His Honour observed at [28]:

Courts have had no difficulty in treating s 1322(4)(d) as being available even though the “period for doing any act, matter or thing or instituting or taking any proceeding under [the legislation] or in relation to a corporation” in question did not form part of a provision which in terms imposed an absolute positive obligation to do the act, matter or thing or to institute or take the proceeding: cf Elderslie (extension of time fixed in a condition of an exemption from ss 1021(5) and 1040 of the Corporations Law (the Law) granted by Australian Securities Commission (ASC) that a report be submitted to ASC within a certain time); Super John Pty Ltd v Futuris Rural Pty Ltd (1999) 32 ACSR 398 (time limit for making of an application by a dissenting offeree under s 701(6) of the Law); Pinnacle VRB Ltd v Reliable Power Inc (2001) 163 FLR 215 (mandatory time for service of any notices varying offers under an off-market bid); Brown v DML Resources Pty Ltd (In liq) (No 6) (2002) 166 FLR 393 (extension of mandatory time limit for liquidator to apply under s 588FF(3)(b) of the Act for leave to bring proceedings to challenge certain transactions as unfair preferences) ...

and at [41]–[42]:

The additional costs and administrative inefficiencies which would result from a refund of subscription moneys and subsequent redepositing of those moneys by subscribers favours the making of an order: cf Elderslie at 161.

I have no hesitation in exercising the Court’s discretion in favour of making the order.

See too Re Wave Capital Ltd (2003) 47 ACSR 418; [2003] FCA 969.

decision

17    The Court has the power under s 1322(4)(d) of the Corporations Act to extend the time limit for compliance with Bid Condition (e) and the order and declaration sought should be made for the following reasons.

18    First, the need to extend time arises from the fact that written confirmation from ASX of its “in principle” approval of the relisting of the company on the ASX was not received until after 15 July 2015. The approval, nonetheless, was received and confirmed by letter from ASX on 21 July 2015. Additionally, by its letter dated 31 July 2015 ASX has confirmed that subject to Viculus obtaining the order sought, the company will be compliant with Listing Rule 11.1 and Chapters 1 and 2 of the Listing Rules and its securities can be reinstated to official quotation.

19    Secondly, if the Takeover Bid is void, it would have far reaching consequences for Viculus, for its shareholders and for Euro. Those consequences were enumerated by Mr Burrell in his affidavit as follows:

(a)    Viculus and Euro have invested all their funds and resources towards completing the takeover bid;

(b)    Euro’s rights to the Tenements and Exploration Licence Applications would be at risk of being lost, which would mean Euro shareholders are at risk of losing any value in the capital they have invested and would have received from the relisting;

(c)    Viculus shareholders would lose the opportunity to release any value from their shareholding as Viculus is currently suspended and has no assets; and

(d)    all capital raised pursuant to the Prospectus would need to be returned to investors, leaving Viculus without any working capital moving forward. In consequence Viculus would be unlikely to be able to pay its debts as and when they fall due.

20    Thirdly, the board of Euro continues to support the Takeover Bid and the present application by Viculus.

21    Fourthly, I am satisfied that no substantial injustice has been caused, or is likely to be caused, to any person if the order is made.

22    Fifthly, ASIC does not oppose the application.

Associate:

Dated:    6 August 2015