FEDERAL COURT OF AUSTRALIA

G8 Communications Ltd, in the matter of G8 Communications Ltd [2016] FCA 297

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 1322(4)(d) of the Corporations Act 2001 (Cth), the period set out in s 723(3)(b) and s 724(1)(b)(ii) of the Corporations Act for the admission to quotation by ASX Limited (ASX) of securities of the plaintiff issued pursuant to the prospectus dated 27 November 2015 (prospectus), be extended to the date which is five business days after the making of this order, being 18 March 2016.

2.    Subject to the plaintiff’s securities being admitted to quotation by ASX within five business days after the making of this order, being 18 March 2016, pursuant to s 254E and s 1322(4)(a) of the Corporations Act, the issue of shares by the plaintiff pursuant to the prospectus is hereby validated and confirmed.

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

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

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

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

REASONS FOR JUDGMENT

BARKER J:

1    On 11 March 2016, the Court made the above orders relating to the admission for quotation by the Australian Stock Exchange Limited (ASX) of securities of the plaintiff under s 254E(1) and s 1322(4)(a) and (d) of the Corporations Act 2001 (Cth).

2    These are the reasons for so doing, which reflect the careful submissions made by counsel for the plaintiff on the hearing of the originating process filed 9 March 2016.

3    This relief is sought in order to allow the plaintiff to complete a corporate restructure which commenced in mid-October 2015.

4    By the restructure, the plaintiff will have:

(a)    changed its name from “Leopard Resources NL” to “G8 Communications Limited”;

(b)    changed the business focus of the plaintiff, from mineral exploration to a wireless technology business;

(c)    changed its status from a “No Liability” or “NL” company to a “Limited” public company;

(d)    purchased shares in G8 International Connect Inc, which in turn holds shares in other companies with a prospective next generation wireless technology business, which purchase is conditional on completion of a capital raising (below); and

(e)    completed a public capital raising for $4,500,000.00 through the issue of further shares in the plaintiff pursuant to the prospectus of 27 November 2015, with those shares admitted to quotation on the ASX.

5    As at the end of February 2016, the plaintiff had essentially undertaken all steps necessary to complete this restructure, except that:

(a)    the change of company status would occur automatically on 27 February 2016 (being one month after the Australian Securities and Investments Commission (ASIC) published the notice of 27 January 2016 in the Gazette pursuant to s 164(3) of the Corporations Act); and

(b)    the ASX had to admit for quotation the newly issued shares from the prospectus on or before three months after 27 November 2015 (as required by s 723(3)(b) and s 724(1)(b)(ii) of the Corporations Act, otherwise the issue of those shares would be deemed void after 29 February 2016 and the plaintiff would be obliged to repay the money received from shareholders for those shares).

6    Ms Nicola Maxine Farley, company secretary for the plaintiff and an employee of the plaintiff’s corporate advisors, had made enquiries of the ASX on Thursday 25, Sunday 28 and Monday 29 February 2016 as to the final step of admitting the newly issued shares to quotation.

7    27 February 2016 was a Saturday. By application of the Acts Interpretation Act 1901 (Cth) s 2G(2) and s 36(1) and (2), the due date was actually Monday 29 February 2016:

(1)    sections 723(3)(b) and 724(1)(b)(ii) use the words “within 3 months after the date of the disclosure document” (emphasis added [in original submission]), so they specify a date (Friday 27 November 2015) then choose the date after that from which to calculate time (Saturday 28 November 2015) (see the effect of this under Item 6 of the Table in s 36(1) of the Acts Interpretation Act, that a period of time expressed to begin after a specified day does not include the day);

(2)    then, to determine the amount of time that three months is, s 2G(2) of the Acts Interpretation Act requires that the three months ends on the date before the date identified three calendar months later. Three months from Saturday 28 November 2015 ends on the day before the 28th of the month that is three calendar months later, such that three months from 28 November 2015 ends on 27 February 2016, which was a Saturday; and

(3)    as such, the provisions of the Corporations Act required a thing to be done and the last day for doing the thing was a Saturday, so the thing may have been done on the next day that was not a Saturday, a Sunday or a holiday: s 36(2) of the Acts Interpretation Act. That is, the admission to quotation could have been done by ASIC and ASX, respectively, on Monday 29 February 2016.

8    On 29 February 2016, the ASX did not admit the plaintiff’s newly issued shares to quotation. Later in the evening of 29 February 2016, a Senior Advisor of Listings at the ASX indicated by email that all conditions for the admission were satisfied and admission would likely occur on 7 March 2016.

9    It is apparent from correspondence passing between the corporate advisors and solicitors for the plaintiff and representatives of the ASX on 2 and 3 March 2016, that the final day for quotation by the ASX of 29 February 2016 may not have been readily understood by all involved. The last date for admission to quotation was missed and, unless remedied, could cause substantial injustice. The plaintiff would need to refund monies and re-start a capital raising process with considerable expense, delay and inconvenience (which is also contrary to the apparent desire of the subscribing shareholders).

10    Accordingly, the plaintiff seeks orders to address an identifiable procedural irregularity and to validate and confirm the newly issued shares.

11     The plaintiff relies on the following evidence:

(a)    the affidavit of Ms Farley sworn 9 March 2016 (Farley affidavit);

(b)    the affidavit of Mr Eric Peter de Mori sworn on 10 March 2016 (de Mori affidavit); and

(c)    the affidavit of Mr Brett Raymond Molony sworn on 10 March 2016 (Molony affidavit).

12    The Court has jurisdiction and power to make the orders sought.

13    By s 1337B(1) of the Corporations Act, original jurisdiction is conferred on this Court with respect to such civil matters arising under the Corporations Act: Federal Court of Australia Act 1976 (Cth) s 19.

14    Sections 254E and 1322 of the Corporations Act confer the necessary jurisdiction (and powers) upon the Court.

15    The legislative scheme for fundraising for companies and curative orders has been recently summarised by McKerracher J in Re Solco Ltd (ACN 084 656 691) (2015) 106 ACSR 591; [2015] FCA 635 at [15]-[19] as follows:

[15]     Section 723(3) of the Act relevantly provides that 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 the securities are not admitted to quotation within 3 months after the date of the disclosure document, then an issue or transfer of securities in response to an application made under the disclosure document is void and the person offering the securities must return the money received by the person from the applicants as soon as practicable.

[16]     By s 724(1), if a person offers securities under a disclosure document and the disclosure document states or implies that the securities are to be quoted on a financial market (whether in Australia or elsewhere) and the securities are not admitted to quotation within 3 months after the date of the disclosure document, the person must deal under s 724(2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities. Under s 724(2) the person must repay the money received by the person from the applicants or give the applicants the documents required by s 724(3) and 1 month to withdraw their application and be repaid, or issue or transfer the securities to the applicants and give them the s 724(3) documents and 1 month to withdraw their application and be repaid.

[17]     The documents required to be given by s 724(3) are set out in the table to that subsection. Relevantly, if the sole disclosure document is a prospectus, as is the case in this matter, then the document to be given is ‘a supplementary or replacement prospectus that corrects the deficiency or changes the terms of the offer’.

[18]     The other two sections relevant to this application are the remedial provisions, ss 254 and 1322 of the Act. Section 254E 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 lodgment of a copy of the order with ASIC, the order has effect from the time of the purported issue.

(emphasis added [in original])

[19]     Section 1322 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;

(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.

(emphasis added [in original])

…

(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; and

(b)    in the case of an order referred to in paragraph (4)(c) - that the person subject to the civil liability concerned acted honestly; and

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

16    By way of further summary in Solco, McKerracher J said (at [20]):

[20]     As noted above, in summary, the Act provides that if a disclosure document states or implies that the securities are to be quoted on a financial market, then ss 723 and 724 of the Act set out the consequences if time limits are not observed for an application being made for quotation or for admission to quotation. Under s 723(3) the issue or transfer of the securities is void and the offeror must return the application moneys. Under s 724(2) the offeror must either repay the application moneys or give a supplementary prospectus and 1 month to withdraw their application and be repaid. The intent of ss 723 and 724, is that investors who expect to be issued securities admitted to quotation on a financial market should receive such securities within the prescribed time frame so that they are able to take advantage of the quotation. Section 254E enables the Court to validate an issue of shares if the issue is or may be invalid for any reason. Section 1322 enables a Court, among other things, to declare any act matter or thing is not invalid by reason of contravention of a provision of the Act or to extend the period for doing any act, matter or thing. The power of the Court is confined by the conditions set out in s 1322(6).

17    Orders to extend the time for admission to quotation and/or validate and confirm issued shares were made in Solco, and have also been made by this Court in such matters as Re Golden Gate Petroleum Ltd (ACN 090 074 785) (2004) 50 ACSR 659; [2004] FCA 1119; Re Tony Barlow Australia Ltd (ACN 008 787 988) (2005) 53 ACSR 1; [2005] FCA 363 (as to validation and confirmation of issued shares); Re NuSep Ltd (ACN 120 047 556) (2007) 62 ACSR 301; [2007] FCA 613 (as to an extension of time for admission to question); and Re Laserbond Ltd (2007) 25 ACLC 1, 658; [2007] FCA 2056.

18    Some of the essential principles on such an application under s 1322 are:

(1)    the prescriptive requirements of the wording in s 1322(4)(a) and (d) and the pre-conditions in s 1322(6) need to be satisfied (Weinstock and Another v Beck and Another (2013) 251 CLR 396 at 416 [43] (French CJ), 419 [53] (Hayne, Crennan and Kiefel JJ) and 422-423 [64] (Gageler J); [2013] HCA 14);

(2)    the Court retains a discretion under s 1322(4)(a) and (d) as to whether it makes the orders sought;

(3)    these broad powers reflect a broad legislative policy that the law should not inflict unnecessary liability or inconvenience or invalidate transactions because of non-compliance with its requirements where such non-compliance is the product of honest error or inadvertence and where the court can avoid its effects without prejudice to third parties or to the public interest in compliance with the law (Re Wave Capital Ltd (ACN 006 031 161) (2003) 47 ACSR 418 at 426 [29]; [2003] FCA 969, as cited in Solco at [23]);

(4)    limitations to the broadly expressed powers in s 1322 will not be readily implied (Weinstock at 416 [43] (French CJ) and 419-420 [55]-[56] (Hayne, Crennan and Kiefel JJ));

(5)    the Court can make orders under s 1322(4)(a) and (d) on conditions and also make such consequential and ancillary orders as it thinks fit (s 1322(4)); and

(6)    an order can be made under s 1322(4)(a) notwithstanding that the contravention or failure concerned resulted in the commission of an offence (s 1322(5)).

19    Section 254E provides the Court with a broad discretion to be exercised in all the circumstances of the case.

20    The first proposed order in the originating process is:

Pursuant to sections 1322(4)(a) and 1322(4)(d) of the Corporations Act, 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 ASX Limited (ASX) of securities of the plaintiff issued pursuant to the prospectus dated 27 November 2015 (Prospectus) be extended to the date which is 5 business days after the making of this order.

21    The reference to s 1322(4)(a) can be removed from the prefatory words of the order. Otherwise, the statutory requirements of s 1322(4)(d) and (6) are met, as follows. The plaintiff is an interested person who may seek relief, as required by s 1322(4), and as is consistent with earlier authorities.

22    The order sought is an order extending the period for the doing of any act, matter or thing or taking any proceeding under the Corporations Act or in relation to a corporation for the purpose of s 1322(4)(d), in that the time for admission to quotation under each of s 723(3)(b) and s 724(1)(b)(ii) of the Corporations Act is being extended.

23    The period to be extended can be extended even if expired, as provided for by s 1322(4)(d), as is the case here where the period expired on 29 February 2016.

24    The pre-condition and requirement in s 1322(6)(c), that no substantial injustice has been or is likely to be caused to any person, is also satisfied:

(1)    as to the plaintiff, the Farley affidavit confirms that if no extension were granted, then it would have to refund the capital it has raised (at [61]) and incur significant corporate and legal expense as well as delay in a replacement capital raising (at [62]-[67]), which would be substantial injustice if no curative orders were made (Taruga Gold Limited, in the matter of Taruga Gold Limited [2015] FCA 892 at [13]);

(2)    as to the existing shareholders of the plaintiff (from prior to the capital raising under the prospectus), it may be inferred that they would be affected as their shares in the plaintiff would not be reinstated for trading and their shares in the plaintiff would be affected by the absence of the immediate capital raised in order to purchase and pursue the new G8 wireless technology venture, which would be substantial injustice if no curative orders were made;

(3)    as to the new shareholders of the plaintiff (from the prospectus), they presently have the option of seeking repayment of their monies under s 723(3)(c) and (d) of the Corporations Act and they have had the opportunity to make that request since 1 March 2016;

(4)    as to the new shareholders of the plaintiff (under the prospectus), as there is no indication from any of them (Farley affidavit at [69]) that they want their funds repaid and some have made contact asking when the shares will be admitted for quotation (Farley affidavit at [68]), it may be assumed that shareholders generally desire the admission of their issued shares for quotation and, without the orders, may not get them at all or immediately, which could cause them substantial injustice;

(5)    as to the new shareholders of the plaintiff (under the prospectus), who may have wanted their funds returned, they could have requested so much since 29 February 2016 and received them, but no such requests have been made; and

(6)    as to all of the above, in the event that the curative orders that are sought are made, then substantial injustice will not be caused.

25    As to the discretion to extend time, the circumstances favour an extension:

    First, the extension order is for a relatively short period of time. It is a period of about 11 to 18 days from 29 February 2016. Longer extensions have been sought and granted (Golden Gate at 667, orders 5-7 (10-11 months) and Solco at [35] (8 months)).

    Secondly, there is a genuine and good reason for an extension. That is, as explained above, the plaintiff, its advisors and the ASX have not fully appreciated the precise deadline for admission to quotation, such that it has been missed by a matter of days.

    Thirdly, the conduct of the plaintiff is not disentitling. The plaintiff had done all that it was required to do to obtain admission to quotation. It must be accepted that the final date for conversion of the plaintiff’s status from a No Liability to Limited company would fall on or about the same date for admission to quotation and some final forms for the preference shares were provided on 29 February 2016, and these two could cause some administrative inconvenience in confirming those matters to perfect the admission to quotation. However, it is apparent from the evidence that the plaintiff and its advisors had otherwise complied with all of the ASX’s requirements for admission to quotation, most of which some time before the end of February 2016, and was awaiting a final confirmation and notice of admission from the ASX. Also, the plaintiff did attempt to follow up on the admission for quotation with the ASX in late February.

    Fourthly, the plaintiff’s company secretary and corporate advisors, experienced in such “back door listings”, identified that they were accustomed to much shorter periods of time for such transactions, effectively, such that it had not been an issue before (Farley affidavit at [55]).

    Fifthly, the additional orders 3, 4 and 5 provide an extension on terms such that there is notice to all persons potentially affected and the capacity for them to return before the Court under liberty to apply to raise any matters they see fit.

    Sixthly, as McKerracher J said in Solco at [33]:

The making of the orders sought is consistent with facilitating the conduct of commerce generally, including by maintaining market confidence that technical difficulties will not necessarily prevent or unduly hinder the raising of capital by the issue of securities to be admitted to quotation.

    Seventhly, as is shown by the Molony affidavit, neither ASIC or ASX oppose the extension order.

26    In all of the circumstances, an order for an extension of the period for admission to quotation ought to be made.

27    This order is in a standard form, as made more recently by the Court in Solco and Taruga (with respect to an extension of time to apply for admission to quotation under s 723(3)(a)).

28    The second proposed order in the originating process is:

Subject to the plaintiff’s securities being admitted to quotation by the ASX within 5 business days after the making of this order, then pursuant to section 254E of the Corporations Act, the issue of shares by the plaintiff pursuant to the Prospectus is hereby validated and confirmed.

29    This order should also include the additional statutory basis for the order, being s 1322(4)(a). Section 254E(1) allows the Court to validate and confirm the shares. Section 1322(4)(a) allows the Court to confirm the shares are not invalidated by reason of a contravention.

30    The statutory requirements of s 254E and s 1322(4)(a) are each met, as follows.

31    The plaintiff is an interested person who may seek relief, as required by s 1322(4), and as is consistent with earlier authorities, and is the company for the purposes of s 254E(1).

32    For s 254E(1)(a), the requirement that it be shown the shares may be invalid for any reason is demonstrated by s 723(3)(c), which provides that result.

33    For s 1322(4)(a), the proposed order is an order declaring that any act, matter or thing purporting to have been done under the Corporations Act or in relation to a corporation is not invalid by reason of any contravention of a provision of the Corporations Act, as:

(1)    the proposed validation order is framed in a declaratory form;

(2)    the act, matter or thing, is the admission for quotation for the purposes of s 723(3)(b) and s 724(1)(b)(ii) of the Corporations Act; and

(3)    the contravention is of those provisions of the Corporations Act for non­compliance with their prescriptive requirements, including to not return monies under s 723(3)(c) and (d) .

34    Further, the pre-condition of s 1322(6)(a)(i) is satisfied in that the act, matter or thing is essentially of a procedural nature, being as to admission to quotation when the plaintiff has complied with the ASX’s requirements.

35    The pre-condition in s 1322(6)(a)(ii) is also satisfied in that there is no failure of the persons concerned or the plaintiff to act honestly. There is no evidence before the Court in the Farley affidavit or the de Mori affidavit that the plaintiff or its directors and officers have acted dishonestly, nor do the circumstances suggest there could have been dishonesty.

36    The pre-condition in s 1322(6)(a)(iii), that it is “just and equitable” for the order to be made, is also satisfied essentially for the discretionary reasons set out above in respect of the s 1322(4)(d) extension order.

37    Further, as to the requirement in s 1322(6)(c), that no substantial injustice has been or is likely to be caused to any person, the validation orders proposed (on terms) for the shares recently issued under the prospectus will cause no substantial injustice if made but may do if not made, for the same reasons as set out above.

38    As to the discretions under each of s 254E and s 1322(4)(a), again, by reason of the circumstances already addressed in respect of the extension of time, the Court ought make the curative validation orders sought (as made in Solco, Laserbond and Golden Gate).

39    There is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or constitution of the plaintiff so as to warrant refusal of the relief sought (Re Wave Capital at 426 [29]).

40    It should be noted, as identified in the Farley affidavit at [38] and [42], the requirements of lodging the special resolutions of shareholders as to the change of name and company type, within 14 days of those resolutions, as required by s 157(2) and s 162(3) of the Corporations Act, were contravened. They were 14 days late. This is not a matter that warrants refusal of relief sought on this application. It is not serious or flagrant disregard of the law or the constitution of the plaintiff.

41    The reason for this is that if the special resolutions were lodged within the required 14 days then it was likely that the ASIC register would be updated immediately, and the name and status change in the register would not reflect the true legal position: Farley affidavit at [41]. As such, there is a rational explanation for this contravention.

42    ASIC issued a $225.00 fine which has been paid: Farley affidavit at [42]. That is, the plaintiff’s contravention has already been addressed by a fine and, further, ASIC has obviously not considered this to be a reason to oppose this application.

43    A matter for disclosure raised by counsel at the hearing was whether there may be any concern as to any potential breach of the statutory trust created by s 722(1) of the Corporations Act.

44    Such a breach could affect the discretion of the Court under s 254E and s 1322(4)(a) and (d) as to:

(a)    the further need any omission or contravention would create for the relief to be granted; and/or

(b)    if there was a contravention, how this may amount to disentitling conduct.

45    From the earlier instances of this Court making curative orders concerning admission to quotation on the ASX, it is not apparent that the issue has been addressed before. See Golden Gate, NuSep and Laserbond, where s 722 is not addressed in detail.

46    Yet, in cases where more substantial extensions of time have been granted for accidentally missing dates for admission to quotation, it might often be the case that money paid by subscribing shareholders has been accessed and used by the company raising funds.

47    In the present case, Ms Farley was sworn and gave oral evidence additional to the bank statement at pp 730 to 737 of her affidavit.

48    Mr Farley’s oral evidence was to the effect that:

(a)    the monies received from those who applied for shares was kept in a separate National Australia Bank account, on trust; and

(b)    the only withdrawals of money from that account, prior to the issue of shares on 18 January 2016, were for repayment to those who had overpaid for their allocations, and in particular two refunds were identified of $20,000.00 and $10,000.00 (that is, consistent with the requirements of s 722(1)(d)).

49    The effect of this is to confirm that no money was removed during the period of the statutory trust created by s 722(1) in existence until the new shares issued. That is, trust money was not used.

50    The remaining question that arose during the hearing is whether access to those funds could be regarded as a breach of trust under s 722(1) after that date of the shares issuing, if it was possible the trust arose again once an issue of shares became void under s 723(3)(c). It was submitted that it could not be such a breach as no trust continued by reason of the language of s 722(1), which provision is expressly limited in time and application; which must be correct, given the language of s 722(1).

51    To the extent that funds ceased to be trust money under s 722(1) and are said to have become capital of the plaintiff (to which it then also had beneficial ownership), then the plaintiff could and did use them after 18 January 2016. This was consistent with the view taken by the plaintiff and its advisors that the capital raised could be accessed after an issue of shares as there would be no trust after that time. (Counsel accepted that such a view taken by the plaintiff involved a substantial measure of calculated risk that the plaintiff may not be able to return all funds if the contemplated transactions failed).

52    The further question the Court raised was whether a new trust arises afresh or the old trust “resurrects” if the shares that were actually issued were later invalidated by s 723(3)(c), as they were invalidated in this case when they were not admitted to quotation on 29 February 2016.

53    In the circumstances:

(a)    counsel accepted that there may be a question of statutory construction, that has not yet arisen in other such cases;

(b)    in the absence of a contravener to determine the question it is difficult to conclusively decide the point; and

(c)    in any event, given the view taken by the plaintiff and its advisors based on a reading that the statutory trust ceased on 18 January 2016 and did not resurrect, if the construction issue were determined adversely, then this furthers the plaintiff’s case for curative relief - in order to avoid the consequences of such a breach.

54    The Court accepts counsel’s submission that it is apparent that the words and context of the legislative regime favour the plaintiff’s construction that the trust ceases on issue of shares (even if they later become invalid).

55    While it may be said that it was intended that a trust operate prior to the issue of shares, so it ought remain if the shares are later voided, counsel submitted that this would be incongruous with the proper construction of s 722(1), in its legislative context:

    First, the words of paramount importance are those within s 722(1) - which require money to be held on trust until “the securities are issued or transferred”. The provision does not say “until the securities are admitted to quotation” nor say “and if the shares are later invalid by reason of s 723(3)(c)”.

    Secondly, the words specify what monies must be held on trust in s 722(1)(a) and (b), being those monies paid by people applying for securities and all other money paid on account of the securities before they are issued. This wording also shows that the trust applies to the money belonging to people who are yet to receive anything in return (that is, their consideration in the form of securities). After the shares issue, they have received value.

    Thirdly, the words of s 722(1) still contemplate an ordinary commercial sale and do not displace the usual contractual position. When applicants receive securities they receive consideration and the trust ceases. As in any purchaser-vendor relationship, money is exchanged for something, and there is no warrant for a trust to be imposed once each party has their component of the bargain. Even though some aspect of the agreement is regulated by statute, it does not change the nature of an underlying contractual relationship: McHugh v Australian Jockey Club Ltd and Others (No 13) (2012) 299 ALR 363 at [1409]; [2012] FCA 1441.

    Fourthly, the words of s 723(3)(c) and (d) do not have the effect of creating or re-creating a trust. They do not say a new trust is created or a trust continues. To the contrary, all that the words do is create a statutory obligation in s 723(3)(d) to return the amounts of money received from the applicants as soon as possible. No where does that provision say “return trust money” or “return money held in trust under s 722(1)”. That is because it was not contemplated by these clear words that a trust in some way resurrects.

    Fifthly, in the overall context of the limited words of s 722(1) (explained above), the wording in s 723(3)(d) “return … the money received … from the applicants” is not open to being read as creating a trust as compared to simply creating a debt obligation. The latter reading ought to be preferred. The reason those words are used is that it is contemplated in the statutory context of a fundraising that the company would, having just undertaken a capital raising, be in possession of funds to return monies advanced to it by putative investors.

    Sixthly, the wording of s 723(3)(c) is actually within the rule in Shepherd v Hills (1855) 11 Exch 55 at 67; (1855) 156 ER 743 at 747, whereby a statutory obligation to pay money is created and there is then created an ability for the contemplated recipient to recover by a liquidated claim (by debt). This principle has long been recognised, including in Vale v Sutherland (2009) 237 CLR 638 at 646 [21] (Gummow, Hayne, Heydon, Crennan and Kiefel JJ); [2009] HCA 26; and Pape v Commissioner of Taxation of the Commonwealth of Australia and Another (2009) 238 CLR 1 at 31 [38] (French CJ), 65-66 [140] (Gummow, Crennan and Bell JJ), 155 [452] (Heydon J); [2009] HCA 23.

    Seventhly, if a trust were to arise even after issued shares became invalid, then this could have adverse consequences to companies raising capital and their management. That is, a company raising capital (as it is in need of capital) could not only have a capital raising fail, but after using the funds raised (for the purposes for which they were contemplated in the capital raising by the investors who had a desire to invest), would then be exposed to liability for breach of trust.

    Eighthly, the protective purpose of s 723(3)(c) and (d) is fulfilled by conferring upon intended investors a statutory right of action for recovery of a debt and need go no further than the words used to support the imposition of a new and further trust.

56    In the circumstances it is not necessary for the Court to express a final view on these questions of construction. The facts of the case support the making of the orders. There is no conduct that, in the Court’s view, disentitles the plaintiff from having the orders.

57    Even if the construction of counsel is not accepted, the circumstances add to the case for granting curative relief given an error of law about the existence of a trust (and that is even the case when the plaintiff’s knowing use of the funds with the prospect that they would all have to be paid back if the transaction failed was a corporate decision attended with risk) apparently was made by the plaintiff, on advice.

58    Finally, the procedure for change of name and status is not invalidated by this procedural irregularity, which has been brought to the Court’s attention as it will be automatically validated or cured under s 1322(2), unless the Court orders otherwise: Re Mosaic Oil NL (ACN 003 329 084) (No 2) (2010) 80 ACSR 281 at [14]­[15]; [2010] FCA 1186.

59    There is nothing to suggest there is any objector or intervening regulator, or that any minority shareholder interest might be oppressed. Further, and in any event:

(1)    the reservation of liberty to apply in the orders sought has, as in other cases, been considered sufficient to protect the interests of any aggrieved person that can raise a legitimate and sufficient concern; and

(2)    further, the plaintiff has not sought relief from civil liability for itself or its officers under s 1322(4)(c), such that there is no bar against those with rights affected who suffer loss or damage to commence appropriate proceedings (for example if a new shareholder perceives the delay in having issued shares admitted to quotation has caused them loss or damage and considers they were misled by the prospectus, then such statutory rights of action as may exist under s 1041H or otherwise will remain).

60    Finally, it has been said that a relevant factor for the Court to take into account in exercising the discretion to grant relief under s 1322(4), is the promptness with which the plaintiff has sought to remedy the irregularity: Azure Minerals Limited, in the matter of Azure Minerals Limited [2013] FCA 63 at [12]. In the present case, the plaintiff has acted promptly after Monday 29 February 2016, having liaised with the ASX on 2 and 3 March and then commenced proceedings and obtaining a listing within a week of filing, for Friday 11 March 2016 (compare relief sought in Golden Gate (10 months) and Solco (8 months)).

61    As indicated above, proposed orders 3, 4 and 5 are conditions of the relief in orders 1 and 2, to allow fair notice and permit any affected parties to be heard.

62    These orders are in standard form, as made recently by the Court in Solco and Taruga (with respect to an extension of time to apply for admission to quotation under s 723(3)(a)).

63    The orders as proposed in the minute dated 10 March 2016 should be made.

Associate:

Dated:    24 March 2016