Golden Gate Petroleum Ltd (ABN 090 074 785), in the matter of Golden Gate Petroleum Ltd (ABN 090 074 785) [2010] FCA 40

FEDERAL COURT OF AUSTRALIA

Golden Gate Petroleum Ltd (ABN 090 074 785), in the matter of Golden Gate Petroleum Ltd (ABN 090 074 785) [2010] FCA 40 Citation: Golden Gate Petroleum Ltd (ABN 090 074 785), in the matter of Golden Gate Petroleum Ltd (ABN 090 074 785) [2010] FCA 40

Parties: IN THE MATTER OF GOLDEN GATE PETROLEUM (ABN 090 074 785) GOLDEN GATE PETROLEUM LTD (ABN 090 074 785)

File number: WAD 9 of 2010

Judge: MCKERRACHER J

Date of judgment: 22 January 2010

Catchwords: CORPORATIONS - offers of sale and sale of placement options - obligation of disclosure-failure to disclose - acquisition of shares invalid - seeking declaratory relief - each case to be decided on its merits - applicant acted honestly - no substantial injustice to third parties - declaratory relief granted

Legislation: Corporations Act 2001 (Cth) ss 707, 707(3), 708A, 708A(5)(e), 708AA, 727(1), 1012C, 1322, 1322(4)(a), 1322(4)(c)

Cases cited: Diversified, in the matter of Diversified United Investment Limited [2008] FCA 720 Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACSR 157 Jordan v Avram (1997) 141 FLR 275 NRMA Ltd v Gould (1995) 18 ACSR 290 Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283 Re Centennial Coal Co Ltd (2006) 226 ALR 341 Re Chameleon Mining NL [2009] NSWSC 660 Re Charter Hall Ltd [2007] FCA 1316 Re Commonwealth Bank of Australia (2005) 57 ACSR 28 Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659 Re Insurance Australia Group Ltd (2003) 128 FCR 581 Re MLC Ltd (2006) 60 ACSR 187 Re RCR Tomlinson [2009] FCA 1130 Re Wave Capital Ltd (2003) 47 ACSR 418 Re Westpac Banking Corporation (2004) 53 ACSR 288 Re Wood Parsons Pty Ltd (in liq) (2002) 43 ACSR 257 Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450

Date of hearing: 22 January 2010

Place: Perth

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 70

Solicitor for the Plaintiff: Blakiston & Crabb

Counsel for the Plaintiff: MJ Feutrill with T O'Leary

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION WAD 9 of 2010

IN THE MATTER OF GOLDEN GATE PETROLEUM LTD (ABN 090 074 785) GOLDEN GATE PETROLEUM LTD (ABN 090 074 785)

Plaintiff

JUDGE: MCKERRACHER J

DATE OF ORDER: 22 JANUARY 2010

WHERE MADE: PERTH

THE COURT ORDERS THAT:

1. Pursuant to section 1322(4)(a) of the Corporations Act 2001 (Cth) ("Act") it is declared that any offer for sale or sale of the quoted securities being 65,381,808 options, quoted on 8 December 2009, and 16,000,000 options, quoted on 24 December 2009, to acquire ordinary shares in the Plaintiff exercisable at 8 cents and expiring on 31 August 2012 ("Securities") during the period after the date of their issue on 8 December and 24 December 2009 respectively until 12 January 2010 is not invalid by reason of the failure of notices, purportedly issued by the plaintiff on 8 and 24 December 2009 pursuant to section 708A(5)(e) of the Act, to exempt the seller from the obligation of disclosure under the Act and the seller's consequent failure to comply with s707(3) and 727(1) of the Act ("Seller"). 2. Pursuant to section 1322(4)(c) of the Act, any Seller be relieved from any civil liability arising out of a contravention of section 707(3) and 727(1) or by reason of the Plaintiff's failure to satisfy section 708A on 8 December and 24 December 2009 respectively. 3. A sealed copy of these Orders is to be served upon the Australian Securities and Investments Commission ("ASIC") as soon as reasonably practicable and upon service of these Orders on ASIC, ASIC is to include these Orders on its database. 4. A copy of these Orders is to be given to each person to whom the Securities were issued and an announcement in which a copy of these Orders is included is to be published on the ASX website as soon as reasonably practicable. 5. For a period of 28 days from the date of reinstatement by the ASX of the class of securities "GGPO" and the publication by the ASX of these Orders on the ASX website, any person to whom substantial injustice has been or is likely to be caused in respect of the orders made pursuant to subsections 1322(4)(a) and (c) of the Act has liberty to apply to vary or discharge that order. 6. The Plaintiff have liberty to apply to vary orders made pursuant to subsections 1322(4)(a) and (c) of the Act. 7. The Plaintiff do make a request of the ASX forthwith that the class of the securities "GGPO" be reinstated. 8. There be no order as to costs. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION WAD 9 of 2010

IN THE MATTER OF GOLDEN GATE PETROLEUM LTD (ABN 090 074 785) GOLDEN GATE PETROLEUM LTD (ABN 090 074 785)

Plaintiff

JUDGE: MCKERRACHER J

DATE: 22 JANUARY 2010

PLACE: PERTH

REASONS FOR JUDGMENT

INTRODUCTION 1 The plaintiff (Golden Gate) seeks urgent declaratory and incidental relief pursuant to s 1322(4)(a) and s 1322(4)(c) of the Corporations Act 2001 (Cth) (CA) with regard to past offers of sale and sales of the Placement Options (as defined below) that may have occurred between 8 December 2009 and 12 January 2010 and that may have been in contravention of s 707(3) CA (indirect issue of securities). The application is supported by several affidavits. 2 The materials have been served on the Australian Securities and Investments Commission (ASIC) and the Australian Stock Exchange (ASX). Each person to whom the Placement Options were issued has been notified electronically of the application. Further, Golden Gate has published an announcement on the ASX website providing details of this application and the reasons for it. 3 For the reasons which follow, relief was granted substantially in the form sought.

BACKGROUND 4 On 4 September 2009, Golden Gate issued a prospectus for a rights issue (Rights Issue) of up to 185,128,519 new shares in Golden Gate and 92,564,260 options with an exercise price of 8 cents and an expiry date of 31 August 2012 (GGPO). 5 Following acceptances of offers in the Rights Issue, 42,794,130 GGPO were issued and listed on the ASX on 6 October 2009. 6 On 30 November 2009 Golden Gate held its Annual General Meeting. At that meeting its shareholders approved the issue of a further 65,392,933 options in the same class as the GGPO pursuant to various agreements entered into between August and October 2009 (AGM Placement Options). 7 The AGM Placement Options comprised: (a) 20,000,000 to be issued to sophisticated investors pursuant to a placement agreement entered into in August 2009; (b) 7,150,000 to be issued to sophisticated investors pursuant to a placement agreement entered into with Novus Capital Limited (Novus Capital) on 23 October 2009; (c) 5,196,094 to be issued to certain convertible note holders as part of an agreement to satisfy a debt owed to the note holders; and (d) 33,046,839 to be issued to other convertible note holders as part of an agreement to extinguish their notes: 8 On 8 December 2009 Golden Gate issued 65,381,808 of the AGM Placement Options and these were listed on the ASX. 9 On 21 December 2009 Golden Gate entered into a further placement agreement with Novus Capital pursuant to which it agreed to issue up to 16,000,000 options in the same class as GGPO to sophisticated investors (December Placement Options). 10 On 24 December 2009 Golden Gate issued the December Placement Options and these were listed on the ASX. 11 In the Appendices 3B lodged by Golden Gate with the ASX seeking the listing of the AGM Placement Options and the December Placement Options (together Placement Options) Golden Gate: (a) gave a warranty to the ASX to the effect that an 'offer of the securities for sale within 12 months after their issue will not require disclosure under section 707(3) or section 1012C of the Corporations Act'; and (b) gave a s 708A notice which makes a representation to the effect that offers for sale of the securities referred to in the Appendix 3B would not require disclosure under s 707(3) as these would fall within the exemption in s 708A(5): 12 Each Appendix 3B, including both the representations referred to above, was published on the ASX website. 13 As will be evident from the statutory provisions which follow, to the extent these representations concerned the Placement Options they were inaccurate. The issue of the Placement Options did not comply with s 708A(5) because the issue of the Placement Options (8 and 24 December 2009) occurred less than 3 months after they were first listed on the ASX (6 October 2009). 14 However, Golden Gate contends that: (a) While it was not possible for the sale of the Placement Options to fall within the exemption in s 708A(5), it was open to Golden Gate to lodge prospectuses with ASIC on or about 8 and 24 December 2009, before any of the Placement Options were offered for sale, and, thus, bring any offer for sale taking place after those dates within the exemption in s 708A(11); or (b) Golden Gate could have delayed issue of the Placement Options until after 6 January 2010 and given a s 708A notice in compliance with s 708A(5). 15 On 11 January 2010 Golden Gate became aware of the inaccurate representations. It notified the ASX and ASIC and took steps to notify the persons to whom the Placement Options were issued as soon a practicable. 16 On 12 January 2010 Golden Gate requested the ASX to suspend trading in all GGPO while it obtained legal advice relating to the s 708A notices. On the same day the ASX suspended trading in GGPO and issued a market release stating that GGPO would be suspended from official quotation 'pending legal advise (sic) in respect of the cleansing notices issued on 8 December and 24 December 2009'. 17 The circumstances in which Golden Gate came to make the representations referred to above and the reason for Golden Gate's failure to comply with s 708A(11) in December 2009 are set out in affidavit material but do not warrant repetition in these reasons. 18 It transpires that some persons, to whom the Placement Options were issued, in turn, offered those securities for sale and sold them between 8 December 2009 and 12 January 2010. 19 I am satisfied on the evidence that it is not possible, may occasion considerable delay or would otherwise be very difficult, to determine to whom any Placement Options sold between 8 December 2009 and 12 January 2010 were transferred. 20 On 19 January 2010 Golden Gate lodged a prospectus for the issue of an option in the same class as the Placement Options (GGPO) with ASIC (January Prospectus). 21 The January Prospectus complies with the requirements of s 708A(11). Thus, any offers of sale of the Placement Options after 19 January 2010 will not require disclosure. 22 The only financial information included in the January Prospectus that was not publicly available to investors in the period between 8 December 2009 and 12 January 2010 was the 30 November 2009 'Consolidated Balance Sheet Pro-forma Reflecting Proposed Offer' (Pro-forma) at page 9 of the transaction specific prospectus. 23 I am satisfied on the evidence, however, that investors had publicly available financial information from which comparable information to that contained in the 30 November 2009 Balance Sheet could be derived. Investors had available Golden Gate's audited financial statements for the period ended 30 June 2009, additional financial information provided at the AGM released to the wider market on 30 November 2009, and the various market releases containing information concerning the strengthening of Golden Gate's balance sheet through its fundraising activities.

STATUTORY FRAMEWORK 24 Section 707 and s 708A CA are set out in Ch 6D CA dealing with fundraising. Chapter 6 is designed to ensure that investors are provided with all information that they and their professional advisors would reasonably require to make an informed assessment in connection with securities offered for issue or sale. This includes the rights and liabilities attaching to securities (and the underlying securities in the case of interests in or options over securities) and the assets, liabilities, financial position and performance, profits and losses and prospects of the body that is to issue or issued securities (or the underlying securities in the case of interest in or options over securities) that are offered for issue and, in certain cases, for sale to investors (ss 706, 710‑715A, and 728 CA). 25 The application engages the provisions of ss 707, 708A and 1322 CA which respectively provide as follows: 707 Sale offers that need disclosure Only some sales need disclosure (1) An offer of securities for sale needs disclosure to investors under this Part only if disclosure is required by subsection (2), (3) or (5). Off-market sale by controller (2) An offer of a body's securities for sale needs disclosure to investors under this Part if: (a) the person making the offer controls the body; and (b) either: (i) the securities are not quoted; or (ii) although the securities are quoted, they are not offered for sale in the ordinary course of trading on a relevant financial market; and section 708 does not say otherwise. Note: See section 50AA for when a person controls a body. Sale amounting to indirect issue (3) An offer of a body's securities for sale within 12 months after their issue needs disclosure to investors under this Part if: (a) the body issued the securities without disclosure to investors under this Part; and (b) either: (i) 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 (ii) 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 section 708 or 708A does not say otherwise. Note 1: Section 706 normally requires disclosure for the issue of securities. This subsection is intended to prevent avoidance of section 706. However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (b). Note 2: The issuer and the seller must both consent to the disclosure document (see section 720). The purpose test in subsection (3) (4) For the purposes of subsection (3): (a) securities are taken to be: (i) issued with the purpose referred to in subparagraph (3)(b)(i); or (ii) acquired with the purpose referred to in subparagraph (3)(b)(ii); if there are reasonable grounds for concluding that the securities were issued or acquired with that purpose (whether or not there may have been other purposes for the issue or acquisition); and (b) without limiting paragraph (a), securities are taken to be: (i) issued with the purpose referred to in subparagraph (3)(b)(i); or (ii) acquired with the purpose referred to in subparagraph (3)(b)(ii); if any of the securities are subsequently sold, or offered for sale, within 12 months after issue, unless it is proved that the circumstances of the issue and the subsequent sale or offer are not such as to give rise to reasonable grounds for concluding that the securities were issued or acquired with that purpose. Sale amounting to indirect off-market sale by controller (5) An offer of a body's securities for sale within 12 months after their sale by a person who controlled the body at the time of the sale needs disclosure to investors under this Part if: (a) at the time of the sale by the controller either: (i) the securities were not quoted; or (ii) although the securities were quoted, they were not offered for sale in the ordinary course of trading on a relevant financial market on which they were quoted; and (b) the controller sold the securities without disclosure to investors under this Part; and (c) either: (i) the controller sold the securities with the purpose of the person to whom they were sold selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; or (ii) the person to whom the securities were sold acquired them with the purpose of selling or transferring the securities, or granting, issuing or transferring interests in, or options over, them; and section 708 does not say otherwise. Note 1: Subsection (2) normally requires disclosure for a sale by a controller. This subsection is intended to prevent avoidance of subsection (2). However, to establish a contravention of this subsection, the only purpose that needs to be shown is that referred to in paragraph (c). Note 2: See section 50AA for when a person controls a body. Note 3: The controller and the seller must both consent to the disclosure document (see section 720). The purpose test in subsection (5) (6) For the purposes of subsection (5): (a) securities are taken to be: (i) sold with the purpose referred to in subparagraph (5)(c)(i); or (ii) acquired with the purpose referred to in subparagraph (5)(c)(ii); if there are reasonable grounds for concluding that the securities were sold or acquired with that purpose (whether or not there may have been other purposes for the sale or acquisition); and (b) without limiting paragraph (a), securities are taken to be: (i) sold with the purpose referred to in subparagraph (5)(c)(i); or (ii) acquired with the purpose referred to in subparagraph (5)(c)(ii); if any of the securities are subsequently sold, or offered for sale, within 12 months after their sale by the controller, unless it is proved that the circumstances of the initial sale and the subsequent sale or offer are not such as to give rise to reasonable grounds for concluding that the securities were sold or acquired (in the initial sale) with that purpose. 708A Sale offers that do not need disclosure Sale offers to which this section applies (1) This section applies to an offer (the sale offer) of a body's securities (the relevant securities) for sale by a person if: (a) but for subsection (5), (11) or (12), disclosure to investors under this Part would be required by subsection 707(3) for the sale offer; and (b) the securities were not issued by the body with the purpose referred to in subparagraph 707(3)(b)(i); and (c) a determination under subsection (2) was not in force in relation to the body at the time when the relevant securities were issued. (1A) This section also applies to an offer (the sale offer) of a body's securities (the relevant securities) for sale by a person if: (a) but for subsection (5), disclosure to investors under this Part would be required by subsection 707(5) for the sale offer; and (b) the securities were not sold by the controller with the purpose referred to in subparagraph 707(5)(c)(i); and (c) a determination under subsection (2) was not in force in relation to the body at the time when the relevant securities were issued. Determination by ASIC (2) ASIC may make a determination under this subsection if ASIC is satisfied that in the previous 12 months the body contravened any of the following provisions: (a) subsection 283AA(1), 283AB(1) or 283AC(1); (b) the provisions of Chapter 2M as they apply to the body; (c) section 674 or 675; (d) section 724 or 728; (e) subsection (9) of this section; or (f) section 1308 as that section applies to a notice under subsection (5) of this section. (3) The determination must be made in writing and a copy must be published in the Gazette as soon as practicable after the determination is made. (4) A failure to publish a copy of the determination does not affect the validity of the determination. Sale offer of quoted securities—case 1 (5) The sale offer does not need disclosure to investors under this Part if: (a) the relevant securities are in a class of securities that were quoted securities at all times in the 3 months before the day on which the relevant securities were issued; and (b) trading in that class of securities on a prescribed financial market on which they were quoted was not suspended for more than a total of 5 days during the shorter of the period during which the class of securities were quoted, and the period of 12 months before the day on which the relevant securities were issued; and (c) no exemption under section 111AS or 111AT covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and (d) no order under section 340 or 341 covered the body, or any person as director or auditor of the body, at any time during the relevant period referred to in paragraph (b); and (e) either: (i) if this section applies because of subsection (1)—the body gives the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made; or (ii) if this section applies because of subsection (1A)—both the body, and the controller, give the relevant market operator for the body a notice that complies with subsection (6) before the sale offer is made. (6) A notice complies with this subsection if the notice: (a) is given within 5 business days after the day on which the relevant securities were issued by the body; and (b) states that the body issued the relevant securities without disclosure to investors under this Part; and (c) states that the notice is being given under paragraph (5)(e); and (d) states that, as at the date of the notice, the body has complied with: (i) the provisions of Chapter 2M as they apply to the body; and (ii) section 674; and (e) sets out any information that is excluded information as at the date of the notice (see subsections (7) and (8)). Note 1: A person is taken not to contravene section 727 if a notice purports to comply with this subsection but does not actually comply with this subsection: see subsection 727(5). Note 2: A notice must not be false or misleading in a material particular, or omit anything that would render it misleading in a material respect: see sections 1308 and 1309. The body has an obligation to correct a defective notice: see subsection (9) of this section. (7) For the purposes of subsection (6), excluded information is information: (a) that has been excluded from a continuous disclosure notice in accordance with the listing rules of the relevant market operator to whom that notice is required to be given; and (b) that investors and their professional advisers would reasonably require for the purpose of making an informed assessment of: (i) the assets and liabilities, financial position and performance, profits and losses and prospects of the body; or (ii) the rights and liabilities attaching to the relevant securities. (8) The notice given under subsection (5) must contain any excluded information only to the extent to which it is reasonable for investors and their professional advisers to expect to find the information in a disclosure document. Obligation to correct defective notice (9) The body contravenes this subsection if: (a) the notice given under subsection (5) is defective; and (b) the body becomes aware of the defect in the notice within 12 months after the relevant securities are issued; and (c) the body does not, within a reasonable time after becoming aware of the defect, give the relevant market operator a notice that sets out the information necessary to correct the defect. (10) For the purposes of subsection (9), the notice under subsection (5) is defective if the notice: (a) does not comply with paragraph (6)(e); or (b) is false or misleading in a material particular; or (c) has omitted from it a matter or thing the omission of which renders the notice misleading in a material respect. Sale offer of quoted securities—case 2 (11) The sale offer does not need disclosure to investors under this Part if: (a) the relevant securities are in a class of securities that are quoted securities of the body; and (b) either: (i) a prospectus is lodged with ASIC on or after the day on which the relevant securities were issued but before the day on which the sale offer is made; or (ii) a prospectus is lodged with ASIC before the day on which the relevant securities are issued and offers of securities that have been made under the prospectus are still open for acceptance on the day on which the relevant securities were issued; and (c) the prospectus is for an offer of securities issued by the body that are in the same class of securities as the relevant securities. Sale offer of quoted securities—case 3 (12) This subsection is satisfied if: (a) the body offered to issue securities under a prospectus; and (b) the body issued the relevant securities to: (i) a person (the underwriter) named in that prospectus as an underwriter of the issue; or (ii) a person nominated by the underwriter; and (c) the relevant securities were issued to the underwriter, or the person nominated by the underwriter, at or about the time that persons who applied for securities under the prospectus were issued with those securities; and (d) the relevant securities are in a class of securities that were quoted securities of the body. 1322 Irregularities (1) In this section, unless the contrary intention appears: (a) a reference to a proceeding under this Act is a reference to any proceeding whether a legal proceeding or not; and (b) a reference to a procedural irregularity includes a reference to: (i) the absence of a quorum at a meeting of a corporation, at a meeting of directors or creditors of a corporation, at a joint meeting of creditors and members of a corporation or at a meeting of members of a registered scheme; and (ii) a defect, irregularity or deficiency of notice or time. (2) A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. (3) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the accidental omission to give notice of the meeting or the non receipt by any person of notice of the meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void. (3AA) A meeting held for the purposes of this Act, or a meeting notice of which is required to be given in accordance with the provisions of this Act, or any proceeding at such a meeting, is not invalidated only because of the inability of a person to access the notice of meeting, unless the Court, on the application of the person concerned, a person entitled to attend the meeting or ASIC, declares proceedings at the meeting to be void. Note: Under paragraph 249J(3)(cb), a company may, in certain circumstances, give a member notice of a meeting by notifying the member that the notice of meeting is available and how the member may access the notice of meeting. (3A) If a member does not have a reasonable opportunity to participate in a meeting of members, or part of a meeting of members, held at 2 or more venues, the meeting will only be invalid on that ground if: (a) the Court is of the opinion that: (i) a substantial injustice has been caused or may be caused; and (ii) the injustice cannot be remedied by any order of the Court; and (b) the Court declares the meeting or proceeding (or that part of it) invalid. (3B) If voting rights are exercised in contravention of subsection 259D(3) (company controlling entity that holds shares in it), the meeting or the resolution on which the voting rights were exercised will only be invalid on that ground if: (a) the court is of the opinion that: (i) a substantial injustice has been caused or may be caused; and (ii) the injustice cannot be remedied by any order of the court; and (b) the court declares the meeting or resolution invalid. (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. 26 In summary, s 708 and s 708AA CA contain several exceptions to the general rule that offers of securities for issue need disclosure. These exceptions may be said to fall within one or more of the following general categories: (a) the public interest in commercial expediency in capital (fund) raising outweighs the public interest in disclosure (ss 707(1), (2), (19), (20) and (21) CA); (b) the person to whom the securities are to be issued is in a position to make an informed decision without disclosure (ss 707(8), (10), (11), (12), (13), (14) CA); (c) there is no consideration for the issue (ss 707(15) and (16) CA); (d) the issue is part of a scheme of arrangement, deed of company arrangement or takeover (i.e., there will generally be other forms of disclosure) (ss 707(17), (18) and (19) CA); or (e) disclosure similar to that provided in a prospectus has been provided by the body through compliance with the disclosure obligations under Pt 2M and continuous disclosure obligations under Ch 6 (s 708AA CA).

Anti-avoidance 27 Section 707 is directed to and sets out anti-avoidance provisions. The purpose of this section is to prevent the policy of Ch 6D being circumvented by the issue of securities to a party to whom disclosure is not required (under s 708 or s 708AA) and that party then offering those securities for sale to investors without disclosure. 28 Relevantly, s 707(3) provides that offers of securities in a body for sale within 12 months after their issue requires disclosure if: (a) the body issued the securities without disclosure; and (b) either: (i) 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 (ii) 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. 29 Pursuant to s 707(4)(b), securities are taken to have been issued or acquired with the purposes referred to in subparas (b)(i) and (ii) above if any of the securities are subsequently sold, or offered for sale, within 12 months after issue, unless it is proved that the circumstances of the issue and the subsequent sale or offer are not such as to give rise to reasonable grounds for concluding that the securities were issued or acquired with that purpose.

Exceptions - Exemption from Anti-avoidance 30 Section 708A CA contains three exceptions to the requirement to give disclosure for offers for the sale of securities that would otherwise contravene s 707(3) CA in circumstances where comparable information to that which would be given in a disclosure document is publicly available before an offer for sale is made. 31 Section 708A applies if: (a) but for s 708A(5), (11) or subs (12), disclosure to investors would be required by s 707(3) for the sale offer; and (b) the securities were not issued by the body with the intention that the person to whom they were issued would sell or transfer the securities, or grant issue or transfer interests in, or options over, them; and (c) a determination by the ASIC under s 708A(2) (to the effect that the body contravened certain provisions of the CA) was not in force in relation to the body at the time when the relevant securities were issued. 32 Sections 708A(5), (11) and (12) set out the three circumstances in which there is an exemption from s 707(3). 33 As can be seen, s 708A(5) (referred to both in commerce and in the Explanatory Memorandum as a cleansing notice) applies, relevantly, if: (a) the securities offered for sale are in a class that were quoted on the ASX at all times in the 3 months before the day on which they were issued: s 708A(5)(a); (b) trading in the class was not suspended for more than a total of 5 days in the shorter of the period during which the class was quoted or the period of 12 months before the day on which the securities were issued: s 708A(5)(b); (c) the body complied with the disclosure obligations under Pt 2M and s 674 CA: ss 708A(5)(c), (5)(d) and (6)(d) CA; and (d) a cleansing notice was given to the ASX within 5 days of issue of the securities stipulating certain information and including any information of a character that would have been in a disclosure document (had one been provided), which had been excluded from a continuous disclosure notice in accordance with the ASX listing rules: ss 708A(5)(e), (6), (7) and (8) CA; 34 Section 708A(11) applies, relevantly, if: (a) the securities offered for sale are in a class that is quoted on the ASX: s 708A(11)(a) CA; (b) a prospectus has been lodged with ASIC: (i) on or after the issue but before any offer of sale; or (ii) before any issue but where offers for sale under the prospectus remain open: s 708A(11)(b) CA; and (c) the securities offered for sale are in the same class as those in the prospectus: s 708A(11)(c) CA (the concurrent prospectus exemption) 35 Section 708A(12) applies, relevantly, if: (a) the body offered to issue securities under a prospectus; and (b) the body issued the relevant securities to an underwriter named in the prospectus as an underwriter of the issue or its nominee; and (c) the securities were issued to the underwriter or its nominee at or about the time that persons who applied for securities under the prospectus were issued with those securities; and (d) the securities are in a class of securities that were quoted securities of the body (the concurrent underwriting exemption). 36 The policy underlying s 708A CA appears to be that no further disclosure will be required where investors have the benefit of information comparable to or otherwise available in a prospectus. Specifically, with regard to s 708A(11) CA, this provision recognises that investors may receive relevant information through a prospectus, although not issued pursuant to the specific placement but that relates to the same class of securities as the placement: Explanatory Memorandum: Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Bill 2004, para 5.532 and para 5.542.

Section 1322(4) CA 37 In order to satisfy the requirements of s 1322(4) CA, Golden Gate must demonstrate that: (a) it is an interested person within the meaning of s 1322(4); and (b) there was an act, matter or thing purporting to have been done under the CA or in relation to a corporation that may be invalid by reason of a contravention of a provision of the CA: s 1322(4)(a); and (c) (i) the act, matter or thing was essentially of a procedural nature; or (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: s 1322(6)(a) CA; and (d) no substantial injustice has been or is likely to be caused to any person: s 1322(6)(c) CA. 38 As to the general approach, s 1322 is remedial in nature and is to be given a liberal interpretation: Re Wave Capital Ltd (2003) 47 ACSR 418 at [29]; Re Insurance Australia Group Ltd (2003) 128 FCR 581 at 586; NRMA Ltd v Gould (1995) 18 ACSR 290 at 292; Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACSR 157 at 160. 39 It is sufficient that Golden Gate meet any one of the three criteria in s 1322(6)(a) CA: Re Charter Hall Ltd [2007] FCA 1316 at [7]; Primelife Corporation Ltd v Aevum Ltd (2005) 53 ACSR 283 at [8] and [16]; Re Commonwealth Bank of Australia (2005) 57 ACSR 28 at [21]; Re Westpac Banking Corporation (2004) 53 ACSR 288 at [27]; Jordan v Avram (1997) 141 FLR 275 at 281. 40 The application of s 1322(4)(a) CA has not been confined to procedural or quasi procedural cases. It may be used to cure substantive as well as procedural contraventions of the CA: Jordan v Avram at 279. 41 For example, s 1322(4)(a) has been applied to validate: (a) the issue or transfer of shares in a company to a company it controls that were void under s 259C CA: Re Westpac Banking Corporation; Re Commonwealth Bank of Australia; Re MLC Ltd (2006) 60 ACSR 187; (b) the appointment of directors appointed in contravention of the companies' constitutions: NRMA Ltd v Gould; Jordan v Avram; (c) takeover offers that lapsed by operation of the CA where the bidder attempted to extend the offer period with non-conforming notices of extension: Primelife Corporation Ltd v Aevum Ltd; Re Centennial Coal Co Ltd (2006) 226 ALR 341; (d) the issue of options that were void for non-compliance with s 723(3): Re Golden Gate Petroleum Ltd (2004) 50 ACSR 659; (e) offers of sale and sale of securities made in contravention of s 707(3) where there was non-compliance with s 708A(5)(e): Re Charter Hall Ltd; Diversified, in the matter of Diversified United Investment Limited [2008] FCA 720; Re Chameleon Mining NL[2009] NSWSC 660; Re RCR Tomlinson [2009] FCA 1130. 42 The validation of a contravention may operate retrospectively: Re Wood Parsons Pty Ltd (in liq) (2002) 43 ACSR 257 at [52], [61]; Re Charter Hall Ltd; Re Diversified United Investment Limited; Re Chameleon Mining NL. 43 Notwithstanding the liberal approach to the interpretation of s 1322 CA, the broad policy underlying s 1322 CA does not authorise the Court lightly to set aside the requirements of the CA where they have not been observed. Each case is to be considered on its merits to ensure that the indulgence sought is appropriate and does not undermine the requirements of the CA: Re Wave Capital Ltd (at [29]) per French J (as he then was). However, interested persons should be relieved of unnecessary liability or inconvenience or the consequences of invalid transactions where: (a) non-compliance with the CA is the product of honest and reasonable error or inadvertence; (b) to do so is without prejudice to third parties; and (c) to do so is without prejudice to the public interest in compliance with the CA.

Interested Person 44 Golden Gate is an interested person. The legislature intended that s 1322(4) be available to a wide class of applicants. It is wide enough to include an applicant whose material legal rights or pecuniary or other economic interests are or may be substantially affected by the matter in issue: Twin v Deputy Commissioner of Taxation [2004] 1 Qd R 450 at [15], [16].

Act, Matter or Thing 45 Offers for the sale of Placement Options between 8 December 2009 and 12 January 2010 fall within s 1322(4)(a) CA for the following reasons. (a) the offers meet the description of any act purporting to have been done in relation to a corporation. That is, the offer for and ultimate sale and transfer of securities issued by Golden Gate; (b) the offers contravened s 707(3) CA, as s 708A(5) CA could not have applied to those transactions for the reason that the Placement Options were issued less than 3 months after GGPO was first quoted on the ASX and the January Prospectus had not been lodged with the ASIC before the offers were made; and (c) the transactions resulting from the offers may be void or voidable: s 1324(5) CA.

Procedural Act 46 I would not categorise the above act as 'essentially of a procedural nature'. Accordingly, s 1322(6)(a) CA is not satisfied. The description of the applicable circumstances of the sale was an important ingredient of a significant transaction.

Honesty 47 The concept of 'acting honestly' can embrace active but incorrect consideration of a legal issue, as well as failure to consider the issue at all: Primelife Corporation Ltd v Aevum Ltd at [8]. 48 In this case: (a) although generally familiar with the requirements of Ch 6D CA, the consultant, upon whose advice Golden Gate (through its company secretary) relied, was not legally qualified; (b) the consultant did not turn his mind to the question of whether a prospectus was required in order for the Placement Options to be offered for sale after issue; (c) the consultant made an assumption that s 708A(5) CA was applicable to both the shares listed on 8 and 24 December and the Placement Options; (d) as soon as Golden Gate became aware of the erroneous assumption the ASX and ASIC were informed, trading of the GGPO suspended and legal advice sought; and (e) Golden Gate brought this motion as soon as practicably thereafter. 49 I infer that the company secretary who relied on the consultant, was also labouring under an assumption that s 708A(5) CA was applicable to both the shares listed on 8 December and 24 December 2009 and the Placement Options. 50 On the basis of these facts, I conclude that Golden Gate's company secretary and the consultant advising him acted honestly but in ignorance of the legal requirements applicable in the particular circumstance of this case. It follows, in my view, that s 1322(6)(a)(ii) CA is satisfied.

Justice and Equity 51 The persons who subsequently offered the Placement Options for sale between 8 December 2009 and 12 January 2010 are likely to have done so in good faith and in reliance on Golden Gate's representations to the effect that offers for sale did not require disclosure under s 707(3) CA due to an exemption under s 708A CA. It is difficult to identify the persons to whom the Placement Options were transferred after 8 December 2009. 52 Persons who acquired GGPO via transactions on the ASX after 8 December 2009: (a) are unlikely to have known whether they were acquiring the Placement Options or GGPO listed on 6 October 2009; (b) had available to them information concerning the issue and listing of the Placement Options; (c) had available to them the s 708A CA notices given on 8 December and 24 December 2009 confirming that there had not been any disclosure information excluded from any continuous disclosure notices given by the Company; and (d) had available to them comparable information concerning the Placement Options to that which was included in the January Prospectus. 53 These considerations lead to a conclusion that it is in the interest of justice and equity that the sellers of Placement Options between 8 December 2009 and 12 January 2010 be relieved of the adverse consequences of Golden Gate's inadvertent failure to comply with s 708A CA before offers for sale were made.

No substantial injustice 54 It is unlikely that any person who acquired Placement Options between 8 December 2009 and 12 January 2010 was adversely affected by Golden Gate's failure to comply with s 708A(11) CA before 19 January 2010. 55 However, to the extent that any person who acquired Placement Options from the person to whom they were issued, or a subsequent seller claims to have suffered substantial injustice, I will permit an application to be made within 28 days to vary or dissolve any part of any of the orders made by the Court on the application. 56 For those reasons outlined above, the requirements of s 1322(6)(c) CA are satisfied.

Section 1322(c) CA 57 Section 1322(c) CA provides that the Court may, on an application of an 'interested person', make 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)'. 58 Pursuant to s 1322(6)(b) and (c) CA an order may only be made under s 1322(4)(c) CA if the person acted honestly and no substantial injustice has been or is likely to be caused to any person. 59 Golden Gate originally contended that: (a) the remedial nature and liberal construction of s 1322 CA apply equally to s 1322(4)(c) CA and that Golden Gate has satisfied the requirements of s 1322(4)(c) CA because: (i) as noted above, it is an 'interested person'; (ii) as noted above, there has been a contravention or failure of a kind referred to in s 1322(4)(a) CA; (iii) Golden Gate, its secretary and its consultant are exposed to civil liability in respect of that contravention as a result of making innocent, but inaccurate, representations in the Appendices 3B and s 708A CA notices lodged with the ASX. (b) for the reasons outlined above, Golden Gate, its secretary and its consultant acted honestly. Thus, s 1322(6)(b) CA is satisfied. (c) for the reasons outlined above, there was no or is unlikely to have been any substantial injustice caused to any person who acquired Placement Options from a person to whom they were issued or a subsequent seller. (d) further, assuming that an order is made under s 1322(4)(a) CA, there should not be any substantial injustice caused to any person who relied on any representation made by or on behalf of Golden Gate to offer Placement Options for sale between 8 December 2009 and 12 January 2010 without disclosure. To the extent any such person claims to have suffered substantial injustice they would be permitted to apply to vary or discharge any orders the Court may be minded to make. (e) for the reasons outlined in the two preceding paragraphs, it is submitted that the requirements of s 1322(6)(c) CA are also satisfied with respect to Golden Gate's application under s 1322(4)(c) CA. 60 As to those original submissions, ASIC in its communications provided urgently in response to Golden Gate's motion, disagreed that Golden Gate and its officers or servants or agents should reasonably be relieved of any liability. 61 ASIC makes the point that the exemption regime in s 708A(5) CA under which a company provides a cleansing notice does not apply in circumstances where the relevant class of securities has only recently been admitted to quotation (s 708A(5)(a) CA)). The present class differs from the circumstances in Re Charter Hall Ltd; Diversified Investment Ltd, Re Chameleon Mining NL and Re RCR Tomlinson where orders were sought and granted under s 1322(4)(d) CA extending the period for the giving of a cleansing notice in circumstances where the cleansing notice exemption regime was available. 62 In that regard, ASIC also referred to comments I made in Re RCR Tomlinson (at [17]-[18]) in which I noted that: Also central to the relief sought by this application is the fact that RCR would have been exempt in respect of the requirements under s 708A(5) CA in respect of the on-sale of the shares had it given a notice for the purpose of s 708A(5)(e) CA within 5 business days of the issue of the shares. RCR was then and has at all material times been able to issue a notice under that paragraph … 63 ASIC expressed the concern that orders providing relief to a company by way of validating compliance with an exemption regime in relation to circumstances where that regime was not meant to apply and where those orders are not necessary may undermine the intended operation of the regime. ASIC observed that a substantial percentage (approximately 58 per cent) of the Golden Gate Options in the relevant class were issued to a large number of investors during the period when the cleansing notice regime was not available. Therefore, in circumstances where: (a) the first order is made validating transactions which have already taken place; (b) the second order relieves market on-sellers of the options from civil liability in relation to their contraventions of s 727(1) CA; and (c) future offers for the sale of Options will not require disclosure on account of the lodgement by Golden Gate of the prospectus dated 19 January 2010. 64 ASIC was of the view that it was neither necessary nor desirable for the Court to make orders in relation to any liability which may remain (despite the above) on the part of Golden Gate, its directors, officers and agents. 65 Moreover, such relief was not necessary in order for trading in the Options to be regularised or for ASX to permit trading in the options to resume. 66 With those exceptions, ASIC did not oppose the granting of the orders. 67 Golden Gate modified the orders it sought by omitting the requisite relief in relation to the company and its servants and agents but expressly purporting to preserve the right to seek such relief pursuant to a liberty to apply provision to vary the orders should such an issue arise at a future time. 68 In all the circumstances, it seems to me that is the most appropriate course, especially given the desirability of the relief being granted urgently so as to permit the current suspension on the ASX to be released. The rights of all who may be affected by the error will be preserved for a limited period of time.

Relief is Appropriate 69 Although the requirements of s 708A CA were not met prior to the offer of sale of some of the Placement Options, the public policy of the CA would not be undermined in this case if any sale transactions of Placement Options between 8 December 2009 and 12 January 2010 were validated. Investors had available to them comparable information to that which would have been made available to them had Golden Gate complied with s 708A(11) CA on 8 December and 24 December 2009. The policy of adequate disclosure to investors was met in this case informally, but not formally. 70 Accordingly, the orders I propose making will be as follows: 1. Pursuant to section 1322(4)(a) of the Corporations Act 2001 (Cth) ("Act") it is declared that any offer for sale or sale of the quoted securities being 65,381,808 options, quoted on 8 December 2009, and 16,000,000 options, quoted on 24 December 2009, to acquire ordinary shares in the Plaintiff exercisable at 8 cents and expiring on 31 August 2012 ("Securities") during the period after the date of their issue on 8 December and 24 December 2009 respectively until 12 January 2010 is not invalid by reason of the failure of notices, purportedly issued by the plaintiff on 8 and 24 December 2009 pursuant to section 708A(5)(e) of the Act, to exempt the seller from the obligation of disclosure under the Act and the seller's consequent failure to comply with s707(3) and 727(1) of the Act ("Seller"). 2. Pursuant to section 1322(4)(c) of the Act, any Seller be relieved from any civil liability arising out of a contravention of section 707(3) and 727(1) or by reason of the Plaintiff's failure to satisfy section 708A on 8 December and 24 December 2009 respectively. 3. A sealed copy of these Orders is to be served upon the Australian Securities and Investments Commission ("ASIC") as soon as reasonably practicable and upon service of these Orders on ASIC, ASIC is to include these Orders on its database. 4. A copy of these Orders is to be given to each person to whom the Securities were issued and an announcement in which a copy of these Orders is included is to be published on the ASX website as soon as reasonably practicable. 5. For a period of 28 days from the date of reinstatement by the ASX of the class of securities "GGPO" and the publication by the ASX of these Orders on the ASX website, any person to whom substantial injustice has been or is likely to be caused in respect of the orders made pursuant to subsections 1322(4)(a) and (c) of the Act has liberty to apply to vary or discharge that order. 6. The Plaintiff have liberty to apply to vary orders made pursuant to subsections 1322(4)(a) and (c) of the Act. 7. The Plaintiff do make a request of the ASX forthwith that the class of the securities "GGPO" be reinstated. 8. There be no order as to costs. I certify that the preceding seventy (70) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Associate: Dated: 4 February 2010