Re Australian Potash Ltd; Ex parte Australian Potash Ltd

Australia

15.04.2021

Commercial

When error in the cleansing notice is due to inadvertence and was promptly rectified upon its discovery by Plaintiff, Courts can grant the extension of time

On 23 March 2021, the Plaintiff, Australian Potash Limited (Australian Potash), filed an originating process seeking orders under Section 1322 of the Corporations Act, 2001 relating to contraventions of Section 707(3) and Section 727(1) of the Act. The contravention occurred as a result of the issue of a cleansing notice under Section 708AA of the Act, which concerns shares issued pursuant to a rights issue, rather than under Section 708A of the Act.

Part 6D.2 of the Act imposes disclosure obligations on corporations in relation to rights issues and the issue and sale of quoted securities. Section 708AA of the Act governs offers under a rights issue and Section 708A of the Act governs the issue of quoted securities, including shares. In certain circumstances, the disclosure obligations can be satisfied by lodging a cleansing notice (Section 708AA(2) and Section 708A(5)). The cleansing notice exception can only be relied upon if the pre-conditions in these sections are met. If disclosure has not been made by the issuer and the shares are on-sold within 12 months, the party to whom the shares are issued may be obliged to make disclosure. There is no evidence of any substantial misconduct, serious wrongdoing or flagrant disregard of the corporate law or the company's constitution so as to warrant refusal of the relief sought. There is nothing in the evidence that suggests that any minority shareholder interest might be oppressed or any other interest might be affected.

In the circumstances of this case, it is appropriate to grant the extension of time within which to lodge the cleansing notice until 23 March 2021 as sought by the Plaintiff in their originating process. The extension sought is for a relatively short period, being four months and 12 days. Courts have previously issued extensions for the lodgement of cleansing notices for similar periods. The error in the cleansing notice was due to inadvertence and was promptly rectified upon its discovery by the Plaintiff. Ms. Raven's evidence is that she mistakenly re-used a cleansing notice previously issued by the Plaintiff without checking which section of the Act was relevant. As soon as she became aware of the error, she immediately took steps to inform the Plaintiff's managing director who sought the advice of external counsel to rectify the position.

In present case, an error occurred in the Plaintiff failing to lodge a cleansing notice for the Placement Shares that complied with Section 708A(6) of the Act. This error was inadvertent, through the use of a previous cleansing notice under the different section of the Act, rather than any deliberate disregard by the Plaintiff or its officers of the obligations under chapter 6D of the Act. Present is not a case where there has been a failure of the Plaintiff's directors to take an active interest in the company's compliance with the Act or to properly define roles of company officers. Application granted.

Tags : Cleansing notice Time Extension

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