FEDERAL COURT OF AUSTRALIA

Vinyl Group Ltd, in the matter of Vinyl Group Ltd [2025] FCA 595

ORDERS

THE COURT ORDERS THAT:

1.    In respect of the 6,704,545 fully paid ordinary shares of the applicant, which were issued to Linda Jenkinson on 7 March 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Corporations Act 2001 (Cth) (Act), the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the Australian Securities Exchange Limited (ASX) in respect to the shares referred to in Order 1, within the period provided in Order 1(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 1 made prior to the making of Order 1 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 1 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

2.    In respect of the 6,704,545 fully paid ordinary shares of the applicant, which were issued to Stephen Gledden on 13 March 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 2, within the period provided in Order 2(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 2 made prior to the making of Order 2 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 2 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

3.    In respect of the 5,000,000 fully paid ordinary shares of the applicant, which were issued to Robert Kenneth Gaunt on 14 March 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 3, within the period provided in Order 3(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 3 made prior to the making of Order 3 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 3 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

4.    In respect of the 4,078,947 fully paid ordinary shares of the applicant, which were issued to Ben Katovsky on 24 April 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 4, within the period provided in Order 4(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 4 made prior to the making of Order 4 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 4 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

5.    In respect of the 52,361,243 fully paid ordinary shares of the applicant, which were issued to Realwise Group Holdings Pty Ltd on 30 April 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 5, within the period provided in Order 5(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 5 made prior to the making of Order 5 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 5 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

6.    In respect of the 5,358,290 fully paid ordinary shares of the applicant, which were issued to Songtradr, Inc on 5 May 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 6, within the period provided in Order 6(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 6 made prior to the making of Order 6 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 6 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

7.    In respect of the 1,704,545 fully paid ordinary shares of the applicant, which were issued to Robert Kenneth Gaunt on 14 May 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 7, within the period provided in Order 7(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 7 made prior to the making of Order 7 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 7 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

8.    In respect of the 5,000,000 fully paid ordinary shares of the applicant, which were issued to Jorge Nigaglioni 16 May 2025, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 8, within the period provided in Order 8(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 8 made prior to the making of Order 8 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 8 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

9.    In respect of the 2,500,000 fully paid ordinary shares of the applicant, which were issued to Ben Katovsky on 5 March 2024, pursuant to an exercise of options:

(a)    pursuant to section 1322(4)(d) of the Act, the five business days referred to in section 708A(6)(a) of the Act be extended to 6 June 2025;

(b)    pursuant to section 1322(4)(a) of the Act, a notice under section 708A(5)(e) of the Act given to the ASX in respect to the shares referred to in Order 9, within the period provided in Order 9(a), is deemed to take effect as if it had been given to the ASX on the date of issue of those shares;

(c)    pursuant to section 1322(4)(a) of the Act, any offer of sale, or sale of, those shares referred to in Order 9 made prior to the making of Order 9 is not invalid by any reason of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act; and

(d)    pursuant to section 1322(4)(c) of the Act, any persons to whom any of those shares referred to in Order 9 were issued, or have been sold, and who have in turn on-sold any of those shares, is relieved in whole from any civil liability in respect of:

(i)    any failure of a notice under section 708A(5)(e) of the Act to exempt the sellers from the obligation of disclosure under the Act; and

(ii)    the sellers’ consequent failure to comply with sections 707(3) and/or 727(1) of the Act.

10.    As soon as reasonably practical after these orders are made, the applicant is to:

(a)    serve a sealed copy of these orders:

(i)    on the Australian Securities and Investments Commission;

(ii)    on the ASX;

(iii)    by post on each person to whom the shares in Orders 1 to 9 were issued at the address given by each person for recording on the applicant’s register of members; and

(b)    publish an announcement to the ASX including a sealed copy of these orders.

11.    For a period of 28 days from the date of publication of a copy of these orders on the ASX website, any person who claims to have suffered substantial injustice or is likely to suffer substantial injustice by the making of any or all of these orders has liberty to apply to vary or to discharge them.

12.    The applicant file any submissions in relation to costs by 5:00 pm on 6 June 2025.

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

ORDERS

THE COURT NOTES THAT:

1.    Following the making of the orders dated 5 June 2025, the applicant identified an error in the number of shares referred to in Order 5 of those orders, which had resulted from a further error made by the company, including in the evidence before the Court.

THE COURT ORDERS THAT:

2.    Order 5 of orders dated 5 June 2025 be amended to:

(a)    substitute “52,361,243” for “52,361,261”; and

(b)    insert the words “and conversion of convertible notes” after the words “pursuant to an exercise of options”,

such that the opening sentence to Order 5 reads as follows:

In respect of the 52,361,261 fully paid ordinary shares of the applicant, which were issued to Realwise Group Holdings Pty Ltd on 30 April 2025, pursuant to an exercise of options and conversion of convertible notes:

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

REASONS FOR JUDGMENT

MOORE J

Introduction

1    The applicant, Vinyl Group Limited (Vinyl), is a public company listed on the Australian Securities Exchange (ASX). These reasons relate to an application for urgent relief under s 1322 of the Corporations Act 2001 (Cth) (Corporations Act) relating to the late issuing of “cleansing notices” under s 708A(5) of the Corporations Act following issuances of certain shares by Vinyl.

2    Save for an issue of shares in March 2024 that was discovered on further checks, the present application relates to the issue of several parcels of shares between March and May 2025 (the Issuances) where there was a failure to lodge “cleansing notices” within five business days after the day on which the relevant shares were issued. This failure had the consequence that Vinyl, and shareholders who on-sold the shares, were potentially in breach of s 707(3) of the Corporations Act.

3    Vinyl approached me as the Commercial & Corporations Duty Judge on 3 June 2025 seeking orders to cure this failure by extending the time to lodge “cleansing notices” and relieving Vinyl and its shareholders of civil liability in relation to the failure. The application was heard on 5 June 2025, and I made orders granting Vinyl the relief they sought on that day. The following are my reasons for making the orders.

4    As discussed below, I made the orders not without a slight hesitation. This is because, as emerged during the hearing of the application, the present case did not involve an isolated oversight. Rather, the omissions the subject of the present application were somewhat numerous and were in addition to other errors. A certain level of carelessness was revealed. I nevertheless decided that the orders should be made.

Background

5    Vinyl was incorporated as a proprietary company on 30 September 2003 and was formerly named Jaxsta Ltd. Subsequently, Vinyl became a public company and was admitted to the official list of the ASX on 21 September 2010. Vinyl presently has a market capitalisation of approximately $163.71 million and has 1,361,590,887 ordinary shares on issue.

6    Over the last year the average daily volume of shares traded has been 596,669 shares per day. The register is comprised of 4,120 shareholders, with two significant shareholders, Realwise Group Holdings Pty Ltd (Realwise) and Songtradr, Inc. (Songtradr), owning 39.78% and 18.50% of the ordinary shares respectively. The top twenty shareholders own approximately 78.30% of Vinyl.

7    Mr Jorge Nigaglioni was appointed Chief Financial Officer and Company Secretary of Vinyl on 20 July 2020. As Company Secretary, Mr Nigaglioni has responsibility for, among other things, lodging all ASX notices and announcements and all notices required to be lodged with the Australian Securities and Investments Commission (ASIC). Those responsibilities are in addition to his role as Chief Financial Officer.

8    Mr Nigaglioni deposed in an affidavit affirmed on 3 June 2025 that he omitted to lodge “cleansing notices” for the Issuances due to an oversight on his part, and that this was likely the result of his very high workload at the time.

9    With one exception in March 2024 that was discovered in the subsequent check of historical issuances, the Issuances occurred in the period March, April and May 2025. Details of the nine parcels of shares, which are the Issuances, were exhibited in the affidavit of Mr Nigaglioni affirmed on 3 June 2025, and that table has been reproduced in the Schedule to these reasons with minor corrections for further errors Vinyl identified following the hearing.

10    Mr Nigaglioni gave evidence that it was an unusually busy period and that he was “under immense pressure given the volume of work and the number of duties required … in the dual roles of Chief Financial Officer and Company Secretary”. Mr Nigaglioni gave evidence of his other tasks and responsibilities during this period, in addition to his responsibilities for attending to lodgements with the ASX and ASIC.

11    In the same period between March and May 2025, further notices had also been issued to the ASX in relation to the subsequent sale of shares by directors Mr Stephen Gledden and Mr Ben Katovsky, and ASX announcements were made in relation to the issuance to Ms Linda Jenkinson (a director), and issuances to Realwise and Songtradr. There were also two other share issuances during that period and Mr Nigaglioni correctly issued “cleansing notices” for those issuances. Further, Mr Nigaglioni had to file some corrected forms and respond to an ASX query in relation to one of the director sales. In all, Mr Nigaglioni lodged 29 notices or releases with the ASX in the period 1 March 2025 to 27 May 2025.

12    Vinyl was required to lodge with the ASX notices under s 708A(5) of the Corporations Act within five days of each issue in the Schedule so that on-selling the shares would be exempt from disclosure under s 707(3) of the Corporations Act.

13    Mr Nigaglioni has admitted Vinyl failed to do so, characterising the omission as an oversight on his behalf. This oversight had the result that secondary sales in respect of issuances 1, 2, 4 and 9 in the Schedule were undertaken without the benefit of the exemption from disclosure provided for in s 708A(5), with the consequence that the sellers of those shares potentially (and unknowingly) breached ss 707(3) and s 727 of the Corporations Act.

14    Notwithstanding the oversight, Vinyl lodged on time certain documents also required to be lodged with ASX relating to the Issuances, that is:

(a)    Notification of issue, conversion or payment up of unquoted equity securities (Appendix 3G) for all Issuances; and

(b)    Change of Director’s Interest Notices (Appendix 3Y) for issuances 1, 2, 3, 4 and 7.

15    It appears that Mr Nigaglioni discovered Vinyl’s failure to lodge “cleansing notices” on 27 May 2025 while attending to the lodgement of other ASX notices. As a consequence, between 28 May 2025 and 30 May 2025, Mr Nigaglioni took steps to rectify the omission including (among other things):

(a)    informing the ASX of the missing “cleansing notices” and speaking to an ASX advisor on the phone to discuss the process for correction;

(b)    engaging Maddocks as Vinyl’s legal representatives to identify the proper procedure for addressing the omission and instructing them to commence an investigation of the relevant Issuances and to begin preparing an originating process for this application;

(c)    causing Vinyl to enter a voluntary trading halt on the ASX to avoid any further trading in relation to shares that had not had “cleansing notices” lodged; and

(d)    causing Vinyl to issue an announcement to the ASX regarding the delayed lodging of the “cleansing notices” and the intention to apply to this Court for relief.

16    Following a preliminary appearance before me on 3 June 2025, which is the date the originating process in this application was filed, Maddocks sent letters to each of the ASX and ASIC enclosing a copy of the originating process and relevant evidence, and advising them that the matter was set down for hearing on 5 June 2025. There were no appearances from the ASX or ASIC, or any other party, at the final hearing.

17    ASIC responded to the letter from Maddocks stating:

Having considered the above documents and subject to any orders being in the same form as the orders set out in the Originating Process, … ASIC neither supports nor opposes the application and does not intend to appear at the hearing of the matter in the Federal Court of Australia.

Relevant Principles

18    Part 6D.2 of Chapter 6D of the Corporations Act deals with disclosure to investors in the course of raising funds including, among other things, the issue of shares by a publicly listed company and their on-sale.

19    Section 707 of the Corporations Act is an anti-avoidance provision which seeks to prevent the circumvention of the disclosure requirements by various methods such as the issuing of shares to entities in respect of whom disclosure is not required who then on-sell to investors without disclosure: Pursuit Minerals Limited, in the matter of Pursuit Minerals Limited [2018] FCA 1127 at [5] – [7] per Banks-Smith J.

20    Section 707(3) provides that an offer of a body’s securities for sale within 12 months after their issue needs disclosure to investors under Part 6D.2 if the body issued the securities without disclosure and either:

(a)    the body issued the securities with the purpose of the person to whom they were issued selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or

(b)    the person to whom the securities were issued acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them,

and neither s 708 nor s 708A says otherwise.

21    Section 727(1) provides that where an offer of securities needs disclosure to investors under Part 6D.2, the person must not offer the securities if a disclosure document for the offer has not been lodged with ASIC.

22    Section 708A(5) provides that disclosure is not required if the company issues a notice in a particular form, commonly referred to as a “cleansing notice”. In order to be valid, the “cleansing notice” must comply with s 708A(6). Relevantly, s 708A(6)(a) provides that the notice must be given to the ASX within five business days after the day on which the relevant securities were issued. The form of disclosure required is prescribed by s 709.

23    Section 1322 of the Corporations Act 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.

(5)     An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence.

(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.

24    In Re Wave Capital Ltd (2003) 47 ACSR 418; [2003] FCA 969 (Wave Capital) at [29], French J observed as follows:

[Section]… 1322… may be taken to 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. That broad policy does not authorise the court lightly to set aside the requirements of the Act where they have not been observed. Each application for the exercise of the court’s relieving power will require consideration of all the circumstances of the case to ensure that the indulgence sought is appropriate and does not undermine the requirements of the Act… It must also be exercised have regard to the interests of all parties affected and the public interest in ensuring compliance with statute law and company constitutions… The provision is, however, remedial in character and should be given a liberal construction…

25    In Re Superior Resources Ltd (2020) 144 ACSR 677; [2020] FCA 635 (Superior Resources) at [16], Jackson J helpfully summarised relevant principles to be applied by a court when exercising its power under s 1322 of the Corporations Act, adopting his own previous summary, which in turn adapted an analysis by Banks-Smith J. His Honour observed:

In Re Golden Rim Resources Ltd (2019) 138 ACSR 134; [2019] FCA 1206 at [28] I summarised the following principles, which I took from Banks-Smith J’s analysis in Re iCandy Interactive Ltd (2018) 125 ACSR 369; [2018] FCA 533 (Re iCandy):

(a)    Section 1322 is remedial in nature and is to be given a liberal interpretation: Re iCandy at [43].

(b)     The provision has been used to validate non-disclosure by shareholders who on-sell shares on a number of occasions: Re iCandy at [44].

(c)    The company whose shares were on-sold in breach of the Corporations Act is an interested party with standing to bring the application: Re iCandy at [46].

(d)    In determining whether those concerned in or party to the breaches acted honestly, the court looks to absence of evidence of dishonesty. The court is concerned only with whether those people acted honestly in the ordinary meaning of that term. The concept of honesty can embrace inadvertence: Re iCandy at [54]–[56].

(e)    The honesty of the shareholders who sell shares without disclosure is relevant. It is open to the court to readily infer that those shareholders have acted honestly in on-selling the shares: Re iCandy at [58].

(f)    However the court may also consider the honesty of those responsible for the failure of the company to lodge a cleansing notice, including company officers. That is so even where, as here, the relief sought is framed only in terms of the contraventions committed by on-sellers: Re iCandy at [83], [87], [101].

(g)    The court takes into account whether the plaintiff has taken prompt action to remedy the error: Re iCandy at [54].

(h)    In considering whether it is just and equitable to validate the on-sales (s 1322(6)(a)(iii)), the court will generally focus on the interests and conduct of the shareholders: Re iCandy at [110].

26    This statement of principles was quoted with approval by Derrington J in Lake Resources N.L., in the matter of Lake Resources N.L. [2022] FCA 197 (Lake Resources) at [22].

27    In Micro-X Limited, in the matter of Micro-X Limited [2019] FCA 1154 (Micro-X Limited), Moshinsky J made the following observations in respect of s 1322(4)(c) at [17]-[19]:

17    Fourthly, MX1 seeks orders under s 1322(4)(c) relieving any sellers from civil liability arising out of a contravention of ss 707(3) and 727(1) of the Corporations Act in respect of any sales of securities that occurred before receiving notice of the orders.

18    Section 1322(4)(c), when read together with ss 1322(6)(b) and (c), enables the Court to make an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure to have done any act, matter or thing in contravention of a provision of the Corporations Act, so long as the Court is satisfied that:

(a)    the act, matter or thing is essentially of a procedural nature;

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

(c)     no substantial injustice has been or is likely to be caused to any person.

19    In my view, it is appropriate to grant the relief from liability, for the same reasons as set out above. I also note that the mischief to which s 707(3) is directed is to minimise the opportunity for issuers of securities to avoid giving disclosure by first selling to an intermediary and then having the intermediary on-sell to retail investors. That is not what occurred here. On the material before the Court, there was no intention by the issuer, MX1, in issuing the notes or the shares to avoid any of the provisions of the Corporations Act.

Consideration

Interested Person

28    Section 1322(4) provides that an application may be made by an “interested person”.

29    As recognised by Jackson J in Superior Resources at [16] and by Banks-Smith J in Re iCandy Interactive Ltd (2018) 125 ACSR 369; [2018] FCA 533 at [46], a company whose shares were sold in breach of the Corporations Act is an interested person with standing to bring the application.

30    I am satisfied that Vinyl meets the definition of an “interested person” on the basis that the extension of time for the lodging of “cleansing notices” will have the effect of relieving it and any of its shareholders who have sold the uncleansed shares from any civil liability: Re Sprint Energy Limited [2012] FCA 1354 at [40] per McKerracher J. The extension will also allow future sales of the shares for the balance of the 12-month restriction periods, which sales would otherwise be prohibited without disclosure.

Relief is within s 1322(4)

31    Vinyl sought relief pursuant to ss 1322(4)(a), (c) and (d) of the Corporations Act.

32    In relation to s 1322(4)(d), Vinyl sought an order extending the time for the lodging of the “cleansing notices” in respect of the Issuances. The prescribed time limit for lodging such a notice was five business days after the date on which the shares were issued pursuant to s 708A(6)(a) of the Corporations Act.

33    Vinyl sought that the extended date be 6 June 2025 for all of the Issuances. That would allow Vinyl 24 hours after the grant of any extensions granted by the Court, if made on 5 June 2025, to lodge the relevant notices. I was provided with copies of the draft notices Vinyl proposed to lodge if the Court granted the extension. By reference to the Schedule, that means an extension of around three months is sought in relation to Issuances 1 to 8 and around 13 months for Issuance 9.

34    Subject to the Court granting the extension of time for lodgement and those notices being duly lodged, in respect of s 1322(4)(a), relief was also sought by way of orders that:

(a)    the notices take effect as if they had been lodged with the ASX on the date of issue of the shares; and

(b)    the offer for sale, or sale of those shares during the period after their issue and prior to the date of an order by this Court granting the relief sought, is not invalid by any reason of:

(i)    any failure of a notice under s 708A(5)(e) of the Corporations Act to exempt the sellers from the obligation of disclosure under the Corporations Act; and

(ii)    the sellers’ consequent failure to comply with s 707(3) or s 727(1) of the Corporations Act.

35    Finally, relief was also sought under s 1322(4)(c) relieving any person to whom the shares were sold from any civil liability in respect of:

(a)    any failure of a notice under s 708A(5)(e) of the Corporations Act to exempt the sellers from the obligation of disclosure under the Corporations Act; and

(b)    the sellers’ consequent failure to comply with s 707(3) or s 727(1) of the Corporations Act.

36    The evidence shows that some sales have already occurred. Vinyl submits that this relief is therefore necessary to relieve the sellers, who were not aware of the omission, of liability.

Section 1322(6)

Section 1322(6)(a)

37    Pursuant to s 1322(6)(a), an order under s 1322(4)(a) must not be made unless the Court is satisfied that:

(a)    the act, matter or thing which is being declared not invalid is essentially of a procedural nature;

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

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

38    As observed by Banks-Smith J in Caeneus Minerals Ltd, in the matter of Caeneus Minerals Ltd [2018] FCA 560 (Caeneus Minerals) at [35], “[o]nly one of those limbs must be satisfied to meet the requirements of s 1322(6)(a)”.

39    While at the preliminary hearing Vinyl sought to characterise Mr Nigaglioni’s failure to lodge the “cleansing notices” in a timely manner as a simple oversight and an accident that had occurred during an unusually busy period of the company, at the final hearing on 5 June 2025 it became apparent that this was not an isolated omission by Mr Nigaglioni. Mr Atkin, who appeared for the applicant, stated at the final hearing that further checks had been conducted which revealed a number of other occasions in the past where Mr Nigaglioni had filed the wrong forms with the ASX relating to the issue of securities, though not in relation to “cleansing notices” or disclosure notices.

40    I accept that Mr Nigaglioni was under pressure at the time of the Issuances given his volume of work and the duties he was required to attend to as both Company Secretary and Chief Financial Officer. However, it is clear that the failure to lodge the relevant ASX notices on time with respect to the Insurance was not an isolated incident that could be characterised as a one-time accident. The conduct of Mr Nigaglioni in his role as Company Secretary, to date, reveals a level of carelessness in his duties and responsibilities in that role.

41    Mr Atkin conceded that this was a “wake-up call” for the company, and provided evidence by way of affidavit that Vinyl was taking immediate action to review the workload and responsibilities of Mr Nigaglioni following the discovery of further errors and omissions, and had been in contact with third party providers of company secretariat services to arrange for the replacement of Mr Nigaglioni. That appears to be an appropriate course of action in the circumstances. It does not seem appropriate for Mr Nigaglioni to continue his role as Company Secretary on top of his role as Chief Financial Officer, in light of what has transpired.

42    While Mr Atkin conceded Mr Nigaglioni’s conduct was not up to the necessary standard, he submitted that this was not a reason for refusing to grant the relief sought, particularly given the prejudice that would occasion Vinyl and its shareholders if the Court’s discretion to grant relief was not exercised.

43    Vinyl submitted that while Mr Nigaglioni had been careless in the exercise of his duties, including on several occasions, there was no evidence of dishonesty or a flagrant disregard of the law. Vinyl noted Banks-Smith J’s observation in Caeneus Minerals at [44] that “the mere fact that there were many separate incidents does not elevate his conduct to dishonesty”. In that decision, there were around 31 separate incidents where the requirements of Part 6D.2 of Chapter 6D of the Corporations Act were overlooked by the company.

44    I note that other documents required to be lodged with the ASX relating to the Issuances were lodged by Mr Nigaglioni on time, which suggests that the omissions were inadvertent.

45    Vinyl also points to the fact that upon becoming aware of the issue, Vinyl acted swifty and immediately to rectify the situation, including by:

(a)    notifying the ASX of the missing “cleansing notices”;

(b)    speaking to ASX officers regarding the process of correction;

(c)    issuing ASX announcements inform the market

(d)    seeking legal advice;

(e)    enquiring about the on-sale of relevant shares;

(f)    entering a voluntary trading halt on the ASX in order to avoid any further trading in relation to the shares that had not had “cleansing notices” lodged;

(g)    entering a voluntary suspension on the ASX;

(h)    causing an immediate review of all past share issuances back to 2020 to check whether any similar error had occurred in the past; and

(i)    causing the present application to be made.

46    Vinyl took steps to notify both ASX and ASIC of the present application. Vinyl has been in regular contact with ASX both informally and by way of market announcements to inform the ASX of the initial discovery of the missing notices and the making of this application.

47    As indicated above, Maddocks formally wrote to both ASX and ASIC providing copies of the originating process and affidavit of Mr Nigaglioni, advising that the matter was set down for hearing on 5 June 2025, and inviting them to attend and seek to be heard, or otherwise provide their position to the solicitors in writing to be conveyed to the court. Neither ASIC nor ASX appeared at the hearings. ASIC indicated that it did not oppose the relief sought, but nor did it support it.

48    Mr Atkin gave evidence of the remedial action the board of the company had commenced immediately following the discovery of further omissions in the past by Mr Nigaglioni to ensure such omissions do not happen in the future. As mentioned earlier, this includes reviewing Mr Nigaglioni’s workload and possibly outsourcing the company secretary function to a third party with specialisation in that function.

49    I accept that Vinyl and its officers, including Mr Nigaglioni, acted honestly at all times, albeit that Mr Nigaglioni perhaps acted carelessly.

50    That is not the end of the matter. As mentioned earlier, it is apparent that certain Issuances have since been on-sold by certain shareholders. Therefore, whether the conduct of the sellers was honest is also a relevant consideration pursuant to s 1322(6)(a)(ii).

51    Derrington J in Lake Resources at [34] observed that there exists some difficulty in assessing the honesty of the conduct of any subsequent seller of the Issuances, and stated:

34    … It seems most unlikely that any such shareholder would have been aware of the failure to lodge the cleansing notice. That is largely a matter of inference but it is one which accords with good business common sense: Superior Resources [16(e)] ...

35    ... the inference should be drawn that the recipients of the allocations would not have been aware of the failure to lodge a cleansing notice and the subsequent non-disclosure. There is nothing in the circumstances of the issue of the uncleansed shares which might suggest that the omission occurred.

36    As Mr Pyle of Counsel submitted, there is simply no evidence of knowledge and indeed it might be surprising if there were. My Pyle referred to the fact that ASIC and the ASX have both been informed of the present application and have not sought to intervene or to oppose the orders made. That perhaps gives a slight inference that those regulatory authorities are unconcerned as to the possibility of any misconduct by subsequent vendors of the shares.

52    In the present case, I accept that non-director subsequent sellers acted honestly.

53    The circumstances in the present case are a little different from those in Lake Resources, because some of the shares involved were issued to directors of Vinyl, rather than to third party shareholders. Certain directors have on-sold shares the subject of Issuances 1, 2 and 4, as follows:

(a)    Linda Jenkinson – 3,750,000 shares sold to Buyer Red Leaf Securities Pty Ltd;

(b)    Stephen Gledden – 6,704,545 shares sold to HSBC Custody Nominees; and

(c)    Ben Katovsky – 3,500,000 (of 4,078,947) shares sold to Buyer Moresec Nominees Pty Ltd.

54    To address the question of honesty, Vinyl adduced evidence from the directors that they believed that all necessary documentation required for listing and trading the shares on-market had been lodged with the ASX, were not aware that “cleansing notices” had not been issued in relation to the shares, and were not aware that they were not entitled to sell and transfer them when they did. I accept this evidence.

55    Vinyl confirmed that the above subsequent purchasers have not further on-sold the shares. Further enquiries were also made in relation to other subsequent purchasers referred to in the Schedule and as far as Vinyl is aware, none of the shares issued (Issuances 3 and 5 to 9 of the Schedule) in the Issuance have been on-sold.

56    To date, it does not appear that Vinyl has received any complaint from holders of the Issuances.

57    In all the circumstances, I accept that the persons who offered the shares that were issued to them acted honestly and that s 1322(6)(a) is satisfied.

Section 1322(6)(b)

58    To make an order under s 1322(4)(c) the Court must also be satisfied that the person receiving relief from civil liability acted honestly: Avecho Biotechnology Limited, in the matter of Avecho Biotechnology Limited [2022] FCA 821 at [50].

59    Vinyl relied on the same submissions it made with respect to s 1322(6)(a) above, and further noted that, as in the case of Micro-X Limited, there was no attempt by Vinyl to engage in the mischief which s 707(3) seeks to remedy – that is, issuing shares through an intermediary to avoid the disclosure that would otherwise be required by the issuing party. I accept this submission.

Section 1322(6)(c)

60    In addition to the specific requirements in relation to ss 1322(4)(a) and (b), to make any order under s 1322, the Court must also be satisfied no substantial injustice has been or is likely to be caused to any person.

61    Vinyl submitted that there was nothing to suggest that any injustice, let alone substantial injustice, had been caused to any person. I accept this submission.

62    Vinyl also submitted that there were significant factors in favour of the requested orders being made, which I also accept.

63    Nevertheless, in the unlikely event that the relief sought would cause prejudice that is not currently perceptible, Vinyl invited me to make orders:

(a)    requiring Vinyl to serve the orders made on the ASX, ASIC and each person to whom the Issuances were issued and each identified buyer in respect of Issuances 1, 2, 4 and 9;

(b)    requiring it to publish the orders on the ASX announcement platform so that the market will be fully informed; and

(c)    to the effect that any person who contends that they have been prejudiced by the making of the orders will then have 28 days to make an application to vary or discharge any of the orders.

Should the power under s 1322(4) be exercised

64    While the omissions by Mr Nigaglioni have been unsatisfactory for the reasons explained above, I am persuaded that the Court should grant relief under s 1322. While there has been carelessness, the failure was honest and due to inadvertence, and certainly was not falling within the mischief that s 707(3) was designed to address.

65    I am also satisfied that considerable inconvenience and dislocation would result if the orders sought are not made. The making of these orders will have substantial benefits for Vinyl, including:

(a)    the regularising of share issues which occurred as a result of an oversight;

(b)    allowing further normal trading in the shares before the end of the 12 months restriction periods that would otherwise apply without disclosure;

(c)    relieving those who have on-sold the shares of their liability for breaches of ss 707(3) and 727 of the Corporations Act in circumstances where the breaches have occurred through no fault on their part; and

(d)    allowing Vinyl’s voluntary trading suspension in respect of the Issuances to be lifted and Vinyl to avoid being prejudiced by losing its entitlement to rely upon s 708A(5) in relation to future issues in the next 12 months.

66    If, notwithstanding my conclusion that any prejudice from the orders is unlikely, any person objects to the orders, then there is the ability for such a person to approach this Court and apply to vary or discharge the orders made.

Costs

67    As to costs, Mr Atkin quite properly pointed out that in Wave Capital a special costs order was made so that the company did not bear the costs of the application.

68    In the present case, I have determined to make no order as to costs.

69    This is consistent with the approach taken in Wangle Technologies Ltd, in the matter of Wangle Technologies Ltd [2018] FCA 864 where despite a finding by Colvin J at [19] that there was a “cavalier attitude to compliance with the obligations” by the company secretary, his Honour made no order as to costs. At [24], Colvin J distinguished the circumstances before him from those in Wave Capital, where there had been a failure to meet a requirement in circumstances where the company had made an express statement in a prospectus that it would meet that requirement. I adopt the same approach here.

Conclusion

70    For the reasons outlined above, I consider that it is appropriate for the Court to make orders pursuant to s 1322(4).

Associate:

Dated:    13 June 2025

Schedule