Case: Re Cabcharge Australia Ltd [2007] FCA 421
Outcome: discussed
On Friday 30 March 2006, Mr Patel and Mr Smith met with senior counsel to arrange for an application to be made to the Court for relief under s 1322 of the Act . Senior counsel advised that it would be prudent for NuSep to write to all of the shareholders who had taken up the rights issue and to the underwriters, notifying them of the problem and of NuSep's intention of applying to the Court for relief, and inviting any of them who opposed that course or wished to be heard on the making of the application to contact NuSep. Senior counsel gave that advice in view of remarks made by Emmett J in Re Cabcharge Australia Ltd [2007] FCA 421 (" Cabcharge ") to which I refer below. 18 In accordance with senior counsel's advice, on Tuesday 10 April 1007 the chairman of the board of NuSep wrote to the shareholders and underwriters. Mr Patel states that he received his own copy of the letter in his capacity as a shareholder on Wednesday 11 April 2007. Omitting formal parts, the chairman's letter was as follows: "The Company lodged its application for listing with the Australian Stock Exchange (ASX) on 1 March 2007 expecting to complete the listing process by the latter part of that month. Unfortunately due to a technical oversight, the Company has inadvertently breached a section of the Corporations Act and is in the process of seeking a time extension to the prospectus. As a result, the Company now expects to list in early May. The breach I refer to above arises from the timing of the filing of our application to the ASX for the listing of NuSep Ltd shares and options. The company initially lodged a listing application with the ASX on 16 October 2006. The company mistakenly believed that this dispensed with a further requirement of the Corporations Act to lodge an application within 7 days of the date of the prospectus. The full completed application was not lodged until after all applications for shares and options had been received and considered and shares and options allotted on 1 March 2007. In the interim period, a further requirement of the Corporations Act that listing be completed within 3 months has not been fulfilled. Advice from Senior Counsel has been obtained and an Application to the Federal Court of Australia for an order excusing the mistake has been prepared. It is anticipated that the Application will be heard by the Court on 19 April 2007. Should you consider that your interests will be prejudiced in some way by the making of the application, please advise our Company Secretary Prakash Patel by e-mail ( Prakash.patel@nusep.com ) or by fax to 02 8977 9099. Please provide this notification by 5pm on Tuesday 17 April 2007. Any response that is received which opposes the making of the application for relief will be conveyed to the Court. The ASX has indicated that it will support NuSep's Application to the Court for relief. ASIC has also been advised of this matter." Mr Patel states that at the time of the swearing of his affidavit (18 April 2007), no shareholder or underwriter had contacted him indicating opposition. 19 Mr Patel further states that he is not aware of any other person whose interests would be prejudiced by the making of an order extending the periods of seven days and three months. He says that the conditions laid down by ASX have now been almost entirely complied with and that it only remains for NuSep to supply to ASX executed restricted securities agreements and a letter of undertaking in relation to the provision of registry services. He states that the form of these two documents has been agreed with ASX. 34 In Cabcharge , Emmett J dealt with an off-market takeover bid. Section 625 of the Act had the effect that if the consideration offered was or included securities and the bidder's statement stated or implied that the securities were to be "quoted on a financial market", then the offer was "subject to a condition" that an application for admission of the securities to quotation would be made within seven days after the start of the bid period, and the offer could not be made free from that condition. 35 His Honour expressed "some faint reservation" as to the availability of s 1322(4)(d) , because the Act had the effect of making it a condition of the contracts that came into existence by acceptance of the takeover offers that the application for admission to quotation would be made within seven days after the start of the bid period. Clause 9.1 of the bidder's statement provided that the Offer Conditions were conditions subsequent and did not prevent a contract for the acquisition of a share arising, unless the statutory offer condition to which I referred was not fulfilled. Thus, in effect, his Honour said, the statutory offer condition was made a condition precedent: "[i]t is a term of the contracts that might or might not come into existence, as between holders of shares in Newcastle Taxis on the one hand, and Cabcharge on the other" (at [8]). His Honour considered that in these circumstances s 1322 may not be entirely apt to remedy the difficulty that had arisen. 36 It was in the light of Cabcharge that NuSep advised all of its shareholders who had taken up the rights issue of the making of the present application and invited them to give notice of any objections they might have. 37 In the present case, the prospectus does not make the making of an application for quotation within seven days (or the admission of the securities to quotation within three months), a condition precedent. NuSep promised in cl 2.3 of the prospectus to apply to ASX within seven days after the date of the prospectus, for official quotation of all the shares and options. This promise became a term of the contracts between NuSep and those of its shareholders who took up the rights issue. 38 The orders that I am asked to make are to be made only "for the purposes of" s 723(3)(a) and (b) of the Act . The orders will therefore only overcome the adverse consequences provided for in s 723(3)(c) and (d), namely, that an issue of securities in response to an application made under the prospectus is void and that NuSep must return the money received by it from the applicants as soon as practicable. Importantly, the orders will not interfere with the contractual relationship between NuSep and its members who took up the rights issue, and, in particular, with the legal consequences of NuSep's failure to perform its contractual promise expressed in cl 2.3 of the prospectus. If any of those members have suffered loss or damage by reason of their shares or options not having been quoted on the ASX as early as they would have been if the application had been made within seven days after 14 December 2006, they will retain their right of action unaffected by the orders made. 39 I am satisfied that no substantial injustice has been or is likely to be caused to any person by the making of an order under s 1322: see s 1322(6)(c) of the Act . 40 Relief should be made available under s 1322(4)(d).