FEDERAL COURT OF AUSTRALIA Oil Basins Limited v Bass Strait Oil Company [2012] FCA 1122 Citation: Oil Basins Limited v Bass Strait Oil Company [2012] FCA 1122 Parties: OIL BASINS LIMITED v BASS STRAIT OIL COMPANY and SOMERTON ENERGY LIMITED File number: VID 624 of 2012 Judge: GORDON J Date of judgment: 16 October 2012 Catchwords: CORPORATIONS – constitution – construction of quorum requirement – unless directors decided differently, quorum required two directors, one of whom must be a managing director – whether directors had decided differently – whether directors can appoint a managing director in the absence of a managing director – validation of managing director's acts after purported appointment CORPORATIONS – ASX Listing Rules – breach of listing rule 7.1 in relation to placement of shares in excess of 15% of company's capital – whether shares issued to underwriter as fee for underwriting services included in calculation of number of shares able to be issued – Court's discretion in relation to enforcement of listing rules – Corporations Act 2001 (Cth), ss 793B, 1101B CORPORATIONS – validation of appointment of managing director – validation of resolution to issue securities – validation of issue of securities – act, matter or thing "essentially of a procedural nature" – whether no substantial injustice has been or is likely to be caused – Corporations Act 2001 (Cth), ss 201M, 1322 Legislation: Corporations Act 2001 (Cth) Federal Court of Australia Act 1976 (Cth) Cases cited: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 Australian Innovation Ltd v Petrovsky (1996) 14 ACLC 1357 Australian Securities and Investments Commission v McDougall (2006) 57 ACSR 175 AWB Ltd v Cole (No 6) (2006) 235 ALR 308 Barron v Potter [1914] 1 Ch 895 Bateman v Newhaven Park Stud Ltd (2004) 49 ACSR 454 Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76 Blair Open Hearth Furnace Company Ltd v Reigart (1913) 108 LT 665 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACLC 787 Gangemi v Osborne [2009] VSCA 297 Holmes v Keyes [1959] Ch 199 at 215 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 Nenna v Australian Securities and Investments Commission (2011) 86 ACSR 204 NRMA Ltd v Gould (1995) 18 ACSR 290 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 Plaintiff M61/2010E v The Commonwealth (2010) 243 CLR 319 Re Broadway Motors Holdings Pty Ltd (in liq) (1986) 6 NSWLR 45 Re Compaction Systems Pty Ltd & the Companies Act [1976] 2 NSWLR 477 Re Delta Gold Ltd (2001) 40 ACSR 347 Re Duomatic Ltd [1969] 2 Ch 365 Re Golden Gate Petroleum (2010) 77 ACSR 17 Re NRMA Ltd [2003] FCAFC 206 Re Wood Parsons Pty Ltd (in liq) (2002) 21 ACLC 111 Sheahan v Londish (2010) 80 ACSR 337 Stratford Sun Ltd v OM Holdings Ltd (No 5) (2011) 98 FCR 372 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 White v Shortall (2006) 68 NSWLR 650 Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144 Magner, Joske's Law and Procedure at Meetings in Australia (10th ed, 2007) Date of hearing: 8 October 2012 Date of last submissions: 12 October 2012 Place: Melbourne Division: GENERAL DIVISION Category: CATCHWORDS Number of paragraphs: 134 Counsel for the Plaintiff: Mr J J Gleeson SC and Ms R L Enbom Solicitor for the Plaintiff: Corrs Chambers Westgarth Counsel for the First Defendant: Mr N J O'Bryan SC and Mr A D Nash Solicitor for the First Defendant: Holding Redlich Solicitor for the Second Defendant: TressCox Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 624 of 2012 BETWEEN: OIL BASINS LIMITED Plaintiff AND: BASS STRAIT OIL COMPANY First Defendant SOMERTON ENERGY LIMITED Second Defendant JUDGE: GORDON J DATE OF ORDER: 16 OCTOBER 2012 WHERE MADE: MELBOURNE THE COURT DECLARES THAT: 1. The First Defendant breached ASX Listing Rule 7.1 by issuing 10,000,000 more ordinary securities than it was entitled to issue on 13 August 2012 without the approval of its ordinary security holders. THE COURT ORDERS THAT: 2. The parties are directed to confer and to seek to agree orders as to costs. If the parties are unable to reach agreement, each party is to file and serve a minute of proposed orders and a two page submission addressing the question of costs by 27 October 2012. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011 (Cth). IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 624 of 2012 BETWEEN: OIL BASINS LIMITED Plaintiff AND: BASS STRAIT OIL COMPANY First Defendant SOMERTON ENERGY LIMITED Second Defendant JUDGE: GORDON J DATE: 16 OCTOBER 2012 PLACE: MELBOURNE REASONS FOR JUDGMENT A. introduction 1 Oil Basins Limited (OBL) is a publicly listed company involved in the exploration for oil and gas offshore of South-East Australia and in two areas offshore of Western Australia. Bass Strait Oil Company Limited (BAS) is a publicly listed company and a specialist petroleum explorer focussed exclusively in South-East Australia. OBL has a substantial shareholding in BAS. The commercial purpose or purposes for this proceeding are not clear. OBL contends it concerns dilution of its shareholding in BAS and corporate governance. BAS contends that it arises because OBL was rebuffed in a request for board representation on BAS and possible control of BAS by OBL. 2 OBL alleges that BAS contravened ASX Listing Rule 7.1 (LR7.1) and the Constitution of BAS in issuing 56,205,492 BAS shares to Somerton Energy Ltd (Somerton) on 13 August 2012 (the Disputed Somerton Securities). Somerton is a fully owned subsidiary of Cooper Energy Ltd (Cooper). From early August 2012, Cooper had become involved in, and with, BAS. (The nature of that involvement is described later in these reasons.) 3 Immediately prior to issuing the Disputed Somerton Securities, OBL held 19.90% of the shares in BAS. Following the issue of the Disputed Somerton Securities, OBL's interest in BAS declined to 17.38% and Somerton's interest in BAS increased from 4.66% to 16.72%. Following a subsequent rights issue (the 2012 BAS Rights Issue), Somerton now holds 19.9% of the issued shares in BAS. OBL's interest is 17.39%. None of these facts is in dispute. 4 OBL seeks orders the effect of which would be to reverse the dilution of its shareholding in BAS. BAS opposes the orders sought. BAS submits that the issue of the Disputed Somerton Securities was not in contravention of LR7.1 or its Constitution. 5 These allegations of contravention are resolved by addressing two issues, namely: 1. whether the resolution of the Board of BAS on 13 August 2012 to issue the Disputed Somerton Securities was valid (the Placement Resolution), and if not, whether the Constitution and/or ss 201M and 1322 of the Corporations Act 2001 (Cth) (the Corporations Act) may validate that resolution; and 2. whether the issue of the Disputed Somerton Securities was a breach of LR7.1. 6 For the reasons that follow, the answers to those questions are as follows: 1. the Placement Resolution was valid. That conclusion depends, in part, on finding that a resolution on 13 August 2012 to appoint Mr Andrew Whittle as managing director of BAS was valid and a quorum was present at the 13 August 2012 meeting. In any event, s 1322 of the Corporations Act would validate Mr Whittle's appointment and the Placement Resolution; and 2. while the issue of the Disputed Somerton Securities was a breach of LR7.1, the Court ought not exercise its discretion under ss 793C(2) and 1101B(1)(d) of the Corporations Act and/or ss 21 and 23 of the Federal Court of Australia Act 1976 (Cth) to grant all of the relief sought by OBL. The Court should at this point make only a declaration of contravention. 7 I will deal with each question in turn. B. contravention of BAS' constitution? (1) Introduction 8 OBL alleges two contraventions of the Constitution of BAS. First, it contends that if the Court finds BAS contravened LR7.1, then it also breached rule 4(a) of the Constitution. This allegation will be addressed in Section C of these Reasons for Judgment. 9 The second basis on which OBL alleges that BAS contravened its Constitution concerns rule 45 of the Constitution. OBL alleges that BAS breached rule 45 of its Constitution when it passed the Placement Resolution because of the absence of a quorum. OBL alleges that there was not a quorum because Mr Whittle, who attended the meeting and was appointed as managing director at that meeting, was not validly appointed as managing director. 10 For the reasons that follow, Mr Whittle's appointment as managing director was valid and there was a quorum at the 13 August 2012 meeting. The Placement Resolution was validly passed. (2) Relevant Facts 11 The facts relevant to the issues about contravention of the Constitution of BAS are largely not in dispute. On 13 September 2000, a general meeting of shareholders of BAS adopted its Constitution. On 31 August 2005, Mr Andrew Adams was appointed chief executive officer (CEO) of BAS. 12 Then, on 19 July 2006, at a meeting of directors "[a] letter of appointment and related documents required to appoint Andrew Adams as managing director were executed". Mr Adams continued to also hold the position as CEO of BAS. 13 On 31 March 2011, Mr Adams' roles were terminated at a meeting of directors of BAS. Dr Steven Mackie was appointed acting CEO at the same meeting. On 9 June 2011, the BAS directors resolved to appoint Dr Mackie as CEO and, on 30 June 2011, Dr Mackie commenced as CEO of BAS. 14 On 8 September 2011, BAS announced a fully underwritten 1 for 2 non-renounceable pro rata rights issue (the 2011 Rights Issue). The underwriter of the 2011 Rights Issue, GMP Securities Australia Limited (GMP), was to receive an underwriting fee of 10 million options (the GMP Options) and cash. The 2011 Rights Issue closed on 7 October 2011. 21,493,534 shares had been taken up. The shortfall was 75,515,829 shares. 15 On 14 October 2011, Adelaide Equity Partners (AEP) released a Form 604 indicating that it and its associates had increased its relevant interest in BAS from 5.03% ordinary shares to 6.69% ordinary shares as a result of the 2011 Rights Issue and on-market purchases. 16 On 17 October 2011, BAS issued an ASX release. The release stated that it had issued 97,009,363 shares under the 2011 Rights Issue and that following that issue, BAS had on issue 388,039,613 fully paid ordinary shares and 10 million unlisted options. The 10 million options were the GMP Options. Five million of the GMP Options were issued to AEP at GMP's direction. (The options issued to GMP and AEP will be referred to as the GMP Options.) 17 On 25 November 2011, Mr Jayme McCoy and Mr David Lindh (a director of AEP) were appointed as directors of BAS. BAS also announced that a Mr Jack Tuohy had resigned as a director. The announcement to the ASX stated, in part, that: These changes have occurred as an outcome of both formal correspondence and informal exchanges over the period 8 November to 21 November 2011 with [AEP], a substantial shareholder of [BAS]. In summary, [BAS] was finally informed by [AEP] that failing the immediate agreement to these Board appointments and the resignation of Mr Tuohy they would requisition a General Meeting with a view to the implementation of these demands. Mr Lindh advised Mr Tuohy that [AEP] wished to replace two incumbent Directors with himself and Mr McCoy and that this was the reason why he was being asked to stand down. Notwithstanding numerous requests from the Company, there was no indication given as to the planned future direction for the Company. 18 On 3 January 2012, BAS announced that Dr Henry Askin had retired from the Board and "that the Board of BAS is now comprised of John McInnes (Chairman), Andy Whittle, David Lindh and Jayme McCoy". 19 On 9 March 2012, BAS' half yearly results as at 31 December 2011 were published. The results stated that "[i]n October 2011, 2,000,000 share options were vested to the CEO and 10,000,000 share options were vested to the underwriter, as part of the cost of the capital raising." The 10 million options were the GMP Options. 20 In late June 2012, Dr Mackie announced his intention to resign as CEO of BAS from the end of August 2012. 21 On 26 July 2012, Cooper announced that it had completed the compulsory acquisition of all of the shares in Somerton following a takeover bid. 22 On 8 August 2012, Mr Kim McGrath, the Executive Chairman of OBL, sent an email to Mr John McInnes (the Chairman of BAS) in the following terms: Very good to meet you yesterday. I think that there are real grounds for mutual interest between OBL and BAS. We were concerned with Steve Mackie going but agree with you that the BAS emphasis going forward should be on marketing. If you need someone to fill-in for 6-8 weeks to hold the technical effort and keep it on track with the younger staff, we suggest you and Steve Mackie may like to consider Geoff Geary who Steve Mackie knows. … … Incidentally, I notice that Rule 45(b) of the BAS Constitution says: "Until the directors decide differently, 2 directors, one of whom must be a managing director, constitute a quorum." Hopefully this has somehow been addressed in the past as with no managing director present it would appear the board cannot function! Even more of a conundrum is how the board can properly act to appoint a managing director without a managing director present – it would seem you always need more than one managing director (which the Constitution allows for) which is somewhat farcical. I think the "must" should be "may". I confirm that OBL would be pleased to receive an invitation to nominate someone to the board of BAS. … 23 On 13 August 2012, a meeting of BAS' directors was held. The minutes record that the meeting commenced at 9.00am and concluded at 11.00am. The minutes relevantly record the following: Present: J L C McInnes (Chairman) A P Whittle (via phone) D J Lindh (via Skype) J A McCoy (via Skype) In attendance: S I Mackie (CEO) (via phone) Robyn Hamilton (Company Secretary) Daniel Blue (Holding Redlich) Nick Buttner (Holding Redlich) Apologies: None Welcome and Apologies The Chairman welcomed all in attendance. 1. Appointment of a Managing Director Resolved that effective immediately Andy Whittle be appointed Managing Director for an interim period pending the appointment of Steve Mackie's successor. Further resolved that, to the extent necessary, all board decisions made since the coming into effect of the Company's current constitution be ratified. 2. Resolutions on documents to lodge on the ASX and Trading Halt The Chairman tabled: • Appendix 3B 13 August 2012 Final • BAS Media Release • ASX Release • Cleansing Notice 70SAA Entitlement Final 20120S12 • Cleansing Notice 70SA(5)(e) Placement final 20120812 • BAS Due Diligence Questionnaire 20120810 final • DD Appendix I • DD Appendix 2 • DD Appendix 3a • DD Appendix 3b • DD Appendix 4 • DD Table 1 • Investor Presentation August 2012 Final • Update on PEP 167 Joint Venture 20120S13 • Correspondence concerning technical services agreement "Update on PEP 167 Joint Venture" Mr Neville Martin from Minter Ellison has assisted with drafting a letter to Interra from Steve Mackie in response to their letter of 30 July 2012. Neville Martin will formally respond to the Company after conducting further investigation and obtaining depositions this week. Mr Martin had also assisted with draft announcement. Resolved that the Update on PEP 167 Joint Venture be approved for release in due course. "ASX Announcement on Capital Raising and New MD" Resolved that the draft announcement on Capital Raising be amended to include the appointment of Andy Whittle as Managing Director and once amended be approved for release in due course. Cleansing Notice for Placement. … Trading Halt … 3. Placement to, and service agreement with, Cooper Energy Ltd Resolved subject to the Company receiving satisfactory confirmation of the payment of the full amount of the funds due to the Company from Cooper Energy Ltd (Cooper Payment) that a placement of 56,205,942 ordinary shares at an issue price of 0.015 cents be made to Cooper Energy Ltd and the Company Secretary be authorised to attend to the necessary arrangements to effect the issue including the issue of the ASX Announcement of Capital Raising and New MD and the Cleansing Notice for the Placement Resolved further that the Company agree to enter into a technical services agreement with Cooper Energy Ltd in the form set out in the exchange of correspondence with Cooper Energy Ltd. [These are the Disputed Somerton Securities and this is referred to as the Placement Resolution] 4. Rights Issue Resolved, subject to the Cooper Payment, that the Company undertake an underwritten 1:6 non-renounceable rights issue to shareholders at 0.015 cents pursuant to which a maximum of 76,040,926 ordinary shares be issued (Issue). GMP had agreed to fully underwrite the Issue. It was noted that the priority of allocation of any shortfall of applications on the Issue were, under the underwriting agreement, applied firstly with Cooper Energy Ltd, so that it may bring its shareholding up to 19.9%, secondly to any Company shareholders at the discretion of the Board and finally as allocated via GMP to their sub-underwriters at GMP's discretion. Resolved that the Company enter into the underwriting agreement with GMP. Resolved that a Due Diligence Committee be formed, that the members of the Due Diligence Committee be John McInnes, Andrew Whittle, David Lindh and Robyn Hamilton, and that the Due Diligence Committee have the power to co-opt other members. 5. Trading Halt … 6. Recruitment … Signed as a true and correct record. The meeting concerns three issues relevant to these proceedings – the appointment of Mr Whittle as managing director (Item 1), the Placement Resolution (Item 3) and the 2012 BAS Rights Issue (Item 4). 24 At 1.53pm on 13 August 2012, Mr McGrath wrote again to BAS. The email relevantly stated: It is noted that Rule 45(b) of the BAS Constitution says: "Until the directors decide differently, 2 directors, one of whom must be a managing director, constitute a quorum." Could you advise please whether the BAS directors have in any way 'decided differently' prior to the last managing director of BAS leaving, or does Rule 45(b) of the BAS Constitution still stand as forwarded? 25 At approximately 2.00pm on 13 August 2012, BAS issued an ASX release. The release stated, in part, that: [BAS] to Raise ~$2m and Welcomes Cooper … as a Strategic Shareholder • Cooper … to invest up to $1.3M in BAS, potentially increasing its investment to 19.9% • Agreement to enter a Service Agreement with Cooper … established • Fully underwritten 1 for 6 non-renounceable entitlement issue to be conducted at 1.5c/$ to raise $1.1M • Andrew Whittle appointed as Managing Director pending appointment of Dr Mackie's successor. [BAS] is pleased to announce that it has placed 56.2 million shares at 1.5 cents per share to Cooper … for total proceeds of $843,089 (Placement). … Management change … As an interim measure pending an appointment of Dr Mackie's successor, the Board of BAS is pleased to announce the appointment of Mr Andrew Whittle as Managing Director. Mr Whittle has been a Non-executive Director of the company since August 2011, and has had a long and successful career in the oil and gas industry. Placement The placement was made to Cooper … under the company's 15% placement capacity pursuant to ASX Listing Rule 7.1 at an issue price of $0.015 per share. … Entitlement issue BAS will be offering shareholders with registered addresses in Australia and New Zealand the opportunity to participate in a 1 for 6 non-renounceable entitlement issue at a price of $0.015 per share, which represents a 12% discount to the 5 day VWAP. The Entitlement Issue will raise gross proceeds of approximately $1.1 million. … Timetable Item Date … Settlement of the Placement Thursday, 16 August 2012 … 26 Also on 13 August 2012, Cooper announced that it had agreed to sub-underwrite the 2012 BAS Rights Issue, such that its holding in BAS might increase to 19.9%. 27 On 15 August 2012, one day before the planned issue of approximately 56.2 million shares to Cooper, OBL applied for an injunction to restrain BAS from issuing the shares to Cooper. At 1:20pm on 15 August 2012, approximately 50 minutes before the return of OBL's application before the Federal Court, OBL's solicitors received a letter from BAS' solicitors which indicated that: 1. settlement of the placement had already occurred; 2. the shares were issued to Somerton, not Cooper; 3. 5 million options had been issued to AEP instead of to GMP; and 4. BAS had appointed Mr Whittle as managing director immediately prior to the issue of the shares to Somerton. 28 At approximately 2:19pm on 15 August 2012, OBL's application for an injunction came on for hearing before another Judge of this Court. The application was dismissed. Costs were reserved. 29 On 17 August 2012, BAS issued documentation in respect of the 2012 BAS Rights Issue, including a document entitled "Entitlement Issue". Section 4 of the documentation entitled "General Matters" included the following statements: 1. PLACEMENT CAPACITY BAS has been in discussion with the ASX concerning the number of shares it calculated to be available to issue under [LR7.1] and placed with Cooper …. Arising from that discussion BAS has offered to undertake to the ASX for the period until 13 August 2013 to reduce by 10,000,000 the number of securities able to be issued under [LR7.1] other than an issue available as an exception under [LR7.2]. 2. AGREEMENT WITH COOPER … As announced on 13 August 2012, BAS has entered into an in principle agreement to enter into a technical service agreement with Cooper … under which BAS may utilise the technical and commercial expertise of Cooper …. Such technical and commercial support may include without limitation: • geological, geophysical and engineering studies; • economic analyses; and • management of seismic and drilling operations. 30 On 23 August 2012, BAS issued a further ASX Release entitled "Entitlement Issue Offer Documents and Placement Capacity" which stated that the 2012 BAS Rights Issue documentation had been despatched to eligible shareholders on 23 August 2012. It also confirmed that it had given an undertaking to the ASX that for the period until 13 August 2013 it would reduce by 10 million the number of securities it was able to issue under LR7.1, other than an issue available as an exception under LR7.2. 31 On 7 September 2012, the 2012 BAS Rights Issue closed. On 19 September 2012, Cooper lodged a Notice of Change of Interest of Substantial Holder with the ASX which stated that: 1. Somerton had taken up its full allocation of 12,379,368 shares by its participation in the 2012 BAS Rights Issue; and 2. Somerton had taken up an additional 16,483,426 shares in relation to Cooper's sub-underwriting of the 2012 BAS Rights Issue. OBL and its CEO, Mr Neil Doyle, also took up their full allocation by participation in the 2012 BAS Rights Issue. (3) Applicable legal framework 32 It is not in dispute that the Constitution of BAS is a contract between BAS and each of its shareholders: s 140 of the Corporations Act. It is now well established that a constitution must be read and interpreted as a whole and that general principles of construction of commercial contracts are applicable to corporate constitutions: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2006) 156 FCR 1 at [28], [97], [232]-[233], [251]. Next, a constitution should be construed so as to give it business efficacy and not narrowly or pedantically: Holmes v Keyes [1959] Ch 199 at 215 and Lion Nathan at [27], [97] and [244]. In ascertaining the objective meaning of a rule in a constitution, preference is to be given to a construction supplying a congruent operation of the various components of the entire constitution: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 529. And, consistent with the earlier analysis, any rule must be considered in the light of the whole text of the constitution: Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 and Lion Nathan at [29], [97]-[98]. Extrinsic evidence may be adduced as an aid to construction, in accordance with the principles laid down in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165: Lion Nathan at [46]-[59], [98]-[102], [122]-[124], [238], [251]-[257]. Finally, the principles applicable to implying terms into a contract apply, although courts have been slow to do so: Lion Nathan at [239]-[243]. 33 What then are the relevant terms of the Constitution at issue here? Rule 3(f) provides that: Where this constitution confers a power to make appointments to an office or position (except the power to appoint a director under rule 35(a)), the power is, unless the contrary intention appears, to be taken to include a power: (1) to appoint a person to act in the office or position until a person is appointed to that office or position; … (3) to appoint another person temporarily in the place of any person removed or suspended or in the place of any sick or absent holder of the office or position. 34 The application of the ASX Listing Rules is addressed in Rule 4. It provides in part that: During such time as the Company is admitted to the Official List of the Stock Exchange the following clauses apply: (a) Notwithstanding anything contained in this constitution, if the Listing Rules prohibit an act being done, the act shall not be done. (b) Nothing contained in this constitution prevents an act being done that the Listing Rules require to be done. … 35 Directors are addressed in rules 34-51. Rule 34 entitled "Number and residence of directors" provides that the "minimum number of directors is 3": rule 34(a). At least two of the directors shall ordinarily reside in Australia: rule 34(b). 36 Rule 36 entitled "Vacating office" provides that the office of a director becomes vacant if the director, inter alia, "(c) resigns by written notice to the company". Rule 41 entitled "Powers and duties of directors" provides that: (a) The management and control of the company's business and affairs are vested in the directors, who may exercise all powers and do all things that are within the company's power and are not expressly required by the Law or this constitution to be exercised by the company in general meeting. … 37 Rule 45 entitled "Quorum at meetings of directors" is in the following terms: (a) No business may be transacted at a meeting of directors unless a quorum of directors is present at the time the business is dealt with. (b) Until the directors decide differently, 2 directors, one of whom must be a managing director, constitute a quorum. (c) If there is a vacancy in the office of a director, the remaining directors may act. But, if their number is not sufficient to constitute a quorum, they may act only in an emergency or to increase the number of directors to a number sufficient to constitute a quorum or to call a general meeting of the company. (Emphasis added.) This is the rule which lies at heart of this dispute. It must be recalled that rule 34 addressed the minimum number of directors: see [35] above. 38 The authority and decisions of directors was addressed in rule 47. It provided that: (a) A meeting of directors at which a quorum is present may exercise all the authorities, powers and discretion vested in or exercisable by the directors generally or under this constitution. (b) Questions arising at a meeting of directors must be decided by a majority of votes cast by the directors present and entitled to vote on the matter. The decision is for all purposes a decision of the directors. … 39 Finally under the heading of "Directors", rule 51 is relevant. It is entitled "Validity of acts" and it provides that an act done by a meeting of directors or a person acting as a director is not invalidated by "a defect in the appointment of a person as a director …. or to act as a director … if that circumstance was not known by the directors ... or person when the act was done" (emphasis added). 40 "Executive officers" are addressed in rules 52-54. Rule 52 is entitled "Managing director" and it provides: (a) The directors may appoint and set the remuneration of a managing director (or managing directors) who must be a director or who, if not already a director, must be appointed a director within 2 months after his or her appointment. (b) A managing director's appointment automatically terminates if he or she does not become a director within 2 months of his or her appointment or, unless the directors decide differently, at any time he ceases to be a director. (c) … (d) The managing director may only be removed by the directors. 41 Rule 54 entitled "Provisions applying to executive officers" states: (a) The appointment of a managing director, executive director or secretary (each in this rule an executive officer) may be for the period, at the remuneration and on the conditions the directors decide. (b) The remuneration payable by the company to a managing director or an executive director must not include a commission on, or percentage of, operating revenue. (c) The directors may: (1) delegate to or given an executive officer any powers, discretions and duties they decide; (2) withdraw, suspend or vary any of the powers, discretions and duties given to an executive officer; and (3) authorise the executive officer to delegate any of the powers, discretions and duties given to an executive officer. (d) Unless the directors decide differently, the office of a director who is employed by the company or by a subsidiary of the company becomes vacant if the director ceases so to be employed. (e) An act done by a person acting as an executive officer is not invalidated by a defect in the person's appointment as an executive officer, the person being disqualified to be an executive officer or having vacated office if he or she did not know that circumstance when the act was done. (4) Analysis 42 The first issue concerns whether there was a quorum at the meeting of directors of BAS on 13 August 2012. Four directors of BAS were at the meeting. They comprised the only directors of BAS at that time. 43 OBL submits that there was no quorum at that meeting because, contrary to rule 45(b), BAS did not have a managing director at the start of the meeting and, further and as a result of that fact, the subsequent appointment of Mr Whittle as managing director at the 13 August 2012 meeting was invalid. BAS does not agree. It submits there was a quorum at the meeting on 13 August 2012. It relies on three alternative grounds. First, that no managing director was necessary for there to be a quorum. Second, the Board validly appointed Mr Whittle as managing director at the 13 August 2012 meeting. Third, that s 1322(4) of the Corporations Act would operate to validate the appointment. 44 I will deal with each submission in turn. (a) Whether managing director necessary to constitute quorum 45 Rule 45(a) provides that no business may be transacted at a meeting of directors unless a quorum of directors is present at the time the business is dealt with. There is nothing unusual about that. As noted earlier, all four directors of BAS were at the 13 August 2012 Board meeting. So far as good. The problem arises with rule 45(b). It states that "[u]ntil the directors decide differently, 2 directors, one of whom must be a managing director, constitute a quorum" (emphasis added). Rule 45(b) has two requirements for a quorum - a minimum of two directors, one of whom must be a managing director. That is unusual. But, of course, rule 45(b) includes a proviso: "[u]ntil the directors decide differently" (emphasis added). 46 BAS invites the Court to conclude that in the present situation the directors of BAS had "decide[d] differently", not on the basis of a resolution passed at the 13 August 2012 Board meeting, or an earlier meeting, but on the basis of some informal decision or understanding of the directors. Mr McInnes and Mr Whittle, each a director of BAS, gave evidence that he considered a quorum would be present if all of the directors of BAS were present at the meeting. Counsel for BAS submitted that this "understanding" constituted sufficient evidence for the Court to conclude that the board had "decide[d] differently" for the purposes of rule 45(b). I reject that submission. 47 Rule 47 of the Constitution governs how directors make decisions: see [38] above. Of the four directors of BAS, only Mr McInnes, the Chairman of the Board, and Mr Whittle gave evidence and were cross examined. The other two BAS directors, Mr Lindh and Mr McCoy, were not called to give evidence. 48 First, it is necessary to consider whether the Board of BAS considered the matter formally. Mr McInnes gave evidence that, before Mr Whittle's appointment, the Board had discussed the matters raised in Mr McGrath's email (referred to at [22] above). Mr McInnes stated that, through those discussions, the Board concluded that if all four of BAS' directors were present at the 13 August 2012 Board meeting, then that would constitute a quorum. The evidence was general in nature. Mr McInnes could not identify precisely when, where or how those discussions with each of the directors occurred. At its highest, Mr McInnes' evidence was that he discussed Mr McGrath's email with each of the directors, but not necessarily on the same occasion. 49 Indeed, Mr McInnes admitted during cross examination that the Board of BAS did not formally consider, and no vote was cast as to, whether the presence of a managing director was necessary to constitute a quorum for a meeting of directors of BAS. Nothing is recorded in the minutes of the 13 August 2012 Board meeting in relation to this issue. Therefore, consistent with Mr McInnes' evidence that the presence of all of the directors of BAS would always constitute a quorum under rule 45(a), there was no occasion on 13 August 2012 for the Board to consider a decision of the kind contemplated by rule 45(b). And, indeed, that is what happened. The Board did not formally address the question. 50 As noted earlier, BAS' contention was that there was some informal decision or understanding of the directors of BAS and that informal decision or understanding was sufficient for the purposes of rule 45(b). That contention is rejected. It is rejected on two bases. First, as a matter of construction and, secondly, on the facts. First, the construction of rule 45(b). I do not accept that an informal decision or understanding of the directors of BAS (whatever that means) constitutes a decision for the purposes of rule 45(b). The question of a quorum at a meeting is a question for the meeting. It cannot be decided before the meeting. It must be decided at the meeting. And the position is not known until the meeting is held and starts. 51 What constitutes a quorum is determined by the constitution of the relevant entity. Here, the Constitution provides that the directors can decide to alter the requirement that a quorum must comprise a minimum two directors, one of whom must be a managing director. They must not only do that at a meeting of directors but they must do it in a particular way. Why? Because the Constitution says so. The directors may decide to alter the default position (rule 45(b)). If they wish to do so, they must meet and decide. 52 Second, there was no evidence that the directors met and made any such decision, even on an informal basis, on 13 August 2012, or on any other date. The mere physical presence or individual assent of directors is not sufficient to constitute a meeting: Barron v Potter [1914] 1 Ch 895 at 901; Magner, Joske's Law and Procedure at Meetings in Australia (10th ed, 2007) at [25.25]. Here, the only record available is the minutes of the Board meeting on 13 August 2012. It is common ground that those minutes do not record any such decision. There was no evidence to suggest that there was any other meeting of directors – informal or otherwise – which made any relevant decision. Indeed, two of the four directors did not give evidence. And, as stated in the Constitution, if the directors had met outside the 13 August 2012 Board meeting, they were required to transact business in a particular way: see rule 47. Again, there was no evidence that occurred. In those circumstances, the principle of informal unanimous consent propounded in Re Duomatic Ltd [1969] 2 Ch 365, and considered in Sheahan v Londish (2010) 80 ACSR 337 at [95]-[97], can have no operation. Finally, the fact that the Board of BAS appears to have conducted at least some of its meetings without addressing the question of whether there was a quorum and, in particular, rule 45(b), does not and cannot lead to the conclusion that the Board had decided differently. Indeed, the minutes of the 13 August 2012 Board meeting state that the Board "[f]urther resolved that, to the extent necessary, all board decisions made since the coming into effect of the Company's current constitution be ratified". Such a resolution would have been unnecessary if BAS' position was correct. 53 In this context it is important to recall Mr Whittle's evidence. He told the Court that he was appointed as managing director of BAS as a direct result of his view, and the view of his fellow directors, that a quorum would not be constituted without a managing director. However, he also told the Court that the members of the Board considered that the presence of all directors at the meeting of 13 August 2012 constituted a quorum. For the purposes of disposing of this aspect of BAS' submissions, Mr Whittle's evidence is consistent only with the conclusion that the directors had made no decision (informal or formal) of the kind contemplated by rule 45(b). For those reasons, the directors had not "decide[d] differently" for the purpose of rule 45(b). 54 It is therefore necessary to turn to consider whether Mr Whittle was validly appointed as managing director so that there was in fact a quorum. (b) Whether Mr Whittle validly appointed as managing director 55 As noted earlier, OBL's position is that Mr Whittle was not validly appointed to the role of managing director at the 13 August 2012 Board meeting because a quorum was not present at the time of his appointment. Mr Whittle's predecessor, Mr Adams, had been terminated and there was no additional managing director of BAS and none of the directors present at the time of the resolution was also a managing director. Therefore, according to OBL, there was no managing director at the meeting on 13 August 2012 and therefore no quorum present to enable business to be transacted at that meeting – including the resolution to appoint Mr Whittle and the Placement Resolution. OBL submits that the proper and appropriate course for BAS to follow was to call a meeting of shareholders under s 249CA of the Corporations Act to obtain approval to issue the Disputed Somerton Securities, to obtain approval to appoint Mr Whittle as managing director, or to obtain approval to amend the Constitution. For present purposes, we are concerned with the appointment of Mr Whittle as managing director. 56 BAS submits that Mr Whittle was validly appointed. Its primary submission is that, in the absence of a managing director, the Constitution permits the Board to fill a vacancy in the office of managing director. In the alternative, it submits that the Court should imply terms into the Constitution that, where there is no managing director, the remaining directors may resolve to appoint a managing director. 57 As has been already observed, on 13 August 2012, BAS had more than the minimum of three directors required by the constitution: rule 34(a). There were four directors and all attended the meeting on 13 August 2012: see [23] above. Prior to the meeting on 13 August 2012, none of those directors was a managing director. The existing directors were faced with a problem. They wished to appoint a managing director but, in the absence of an existing managing director, how were they to achieve that consistent with rule 45? The answer lies in the Constitution. 58 First, rule 52. The directors may appoint one or more managing director(s), but they are not compelled to do so: rule 52(a). A managing director must be a director or must be appointed as a director within two months: rule 52(a). A managing director can only be removed by "the directors": rule 52(d). Indeed, a managing director is not among those directors required to retire and seek re-election at a general meeting: rule 35(c). Consistent with that rule, the tenure, remuneration and other conditions of a managing director's appointment are set by directors: rule 54(a). The directors of BAS were and remain the appointing authority of the managing director – not the shareholders in general meeting. On 13 August 2012, all of the directors of BAS were present and resolved to appoint Mr Whittle as managing director of BAS. 59 Next, rule 45. It cannot be read in isolation. It must be read in the context of the Constitution read as a whole. Of course, it provides that no business can be transacted without a quorum: rule 45(a). However, rules 45(b) and (c) contain certain exceptions. First, under the proviso in rule 45(b), the directors could "decide differently". Rule 45(b) has been addressed above and may be put to one side. Second, under rule 45(c), if there is a vacancy in the office of a director, the remaining directors are entitled to act. However, if their number is not sufficient to constitute a quorum, they are entitled to act only in an emergency or to increase the number of directors to a number sufficient to constitute a quorum or to call a general meeting of the company. 60 What role then does rule 45(c) play? Rule 45(c) provides that: If there is a vacancy in the office of a director, the remaining directors may act. But, if their number is not sufficient to constitute a quorum, they may act only in an emergency or to increase the number of directors to a number sufficient to constitute a quorum or to call a general meeting of the company. Rule 45(c) provides a basis for the valid appointment of Mr Whittle as managing director. 61 As has been observed, the minimum number of directors is three: rule 34(a). A quorum requires two or more directors: rule 45(b). Because a quorum requires two or more directors, the need to invoke the second sentence in rule 45(c) would appear to arise in one of two circumstances: if there was only one director or if there were two (or more) directors but no managing director. The use of the word "they" in the second sentence suggests the rule relates to the latter situation. In other words, accepting that the directors could not constitute a quorum without a managing director, the requirements for rule 45(c) were met. It is true that rule 45(c) refers to increasing the number of directors to a number sufficient to constitute a quorum and that, by appointing Mr Whittle as managing director, the number of directors was not increased to constitute a quorum. However, the role of managing director is a role exclusively reserved for a director: rules 52(a) and 45(b). Mr Whittle satisfied that limb. He was already a director and it was his appointment as managing director that was necessary to constitute a quorum. 62 The combination of the power to appoint a managing director given to the Board (rule 54) with the quorum provision being in the form that it is (rule 45(b)) requires that the power to appoint carry with it the power to meet effectively to transact the business of appointing a managing director. Indeed, that position is expressly recorded in the Constitution: see rule 41(a) and rule 3(f). Were it not so, the company would not be paralysed but it would render rule 52 otiose. Such a construction is unlikely. 63 The issue may be tested by looking at the position of BAS immediately after it adopted its Constitution and had a minimum of three directors appointed. The appointment of a managing director was not essential but, if one was to be appointed, it was the directors (meeting without a managing director present) who were to make the appointment. The appointment was not one for the general meeting. It is the classic situation of the chicken and the egg. By the express power vested in the directors, the company has by its Constitution delegated to the Board the sole right to appoint a managing director: cf Blair Open Hearth Furnace Company Ltd v Reigart (1913) 108 LT 665 at 670. What took place on 13 August 2012 was the Board of directors exercising that power to appoint a managing director. Mr Whittle was validly appointed as managing director of BAS. There was therefore a quorum present at the 13 August 2012 Board meeting. 64 Given the views already formed, it is unnecessary to consider BAS' further contention that there are terms to be "implied" into the Constitution. It is sufficient to record that a term can be implied into a constitution where the true construction requires the implication of a term: see [32] above. In the present case, I do not accept that all of the requirements in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-3 are satisfied. The Constitution is effective without the implied terms. (c) Validation under s 1322 of the Corporations Act? 65 Given the views already formed, it is also strictly unnecessary to address BAS' cross claim that if Mr Whittle's appointment as managing director was invalid, that appointment should be validated under s 1322(4) of the Corporations Act. However, in the circumstances, it is appropriate to record some matters. 66 Section 1322(4)(a) of the Corporations Act provides an "interested person" with a means to obtain a declaration that any act, matter or thing purporting to have been done, or any proceeding purported to have been instituted or taken, in relation to a corporation is not invalid by reason of a contravention of a provision of the Corporations Act or a provision of the constitution. The affected corporation can be the "interested person": see, by way of example, Australian Innovation Ltd v Petrovsky (1996) 14 ACLC 1357 at 1362. 67 It is well established that s 1322(4) is a remedial provision to be interpreted liberally: Elderslie Finance Corp Ltd v Australian Securities Commission (1993) 11 ACLC 787; Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144; Re Golden Gate Petroleum (2010) 77 ACSR 17 at [38] and the authorities listed therein. Indeed, the Court's discretion is unfettered except for the requirements in s 1322(6): Re NRMA Ltd [2003] FCAFC 206 at [21] and Re Wood Parsons Pty Ltd (in liq) (2002) 21 ACLC 111 at [52]. The orders can be retrospective: Wood Parsons at [52]. And the relief can be conditional: s 1322(4). 68 "Proceeding" is interpreted broadly. It includes any procedure required to be taken if a company wished to achieve particular legal consequences (Re Broadway Motors Holdings Pty Ltd (in liq) (1986) 6 NSWLR 45 at 56 and Winpar Holdings at [65]) and applies whether the proceeding is a legal proceeding or not: s 1322(1)(a). "Contravention" is also read "in a very wide sense": NRMA Ltd v Gould (1995) 18 ACSR 290 at 293; Winpar Holdings; Sheahan v Londish and Beck v LW Furniture Consolidated (Aust) Pty Ltd [2012] NSWCA 76 at [133]ff. 69 A court can only make an order under s 1322(4) if it is satisfied that: 1. the appointment is essentially of a procedural nature or the directors acted honestly or it is in the public interest that the order be made: s 1322(6)(a)(i)-(iii); and 2. no substantial injustice has been or is likely to have been caused to any person: s 1322(6)(c). Of course, the conditions specified in s 1322(6)(a)(i)-(iii) are not cumulative: Winpar Holdings at [77]. 70 In the present case, the affected corporation (BAS) seeks to validate the appointment of Mr Whittle as its managing director. Contrary to OBL's submissions, that appointment is essentially of a procedural nature. The appointment was made to satisfy requirements under the Constitution for a quorum. The fact that the Board of BAS was aware that there was at least an issue about the absence of a managing director and the implications of that fact on the presence of a quorum at a Board meeting does not preclude the appointment being essentially of a procedural nature: Nenna v ASIC (2011) 86 ACSR 204 at [50]-[81]. It is therefore unnecessary to consider the other limbs of s 1322(6)(a). 71 The reference to "no substantial injustice" in s 1322(6)(c) (emphasis added) has been held to refer to a real and not insubstantial or theoretical prejudice. Whether there is real injustice requires a weighing of any prejudice if the order is made against the prejudice which would be suffered by other members and creditors of the company if an order was not made: Gangemi v Osborne [2009] VSCA 297 at [62] citing Re Compaction Systems Pty Ltd & the Companies Act [1976] 2 NSWLR 477 at 493. The only basis on which OBL asserts that it would suffer a substantial injustice is as a result of a dilution of its shareholding in BAS. The appointment of Mr Whittle as the managing director did not of itself result in any prejudice to OBL. The effect of the act of appointing Mr Whittle, if it was invalid (a view rejected above), was not to dilute OBL's shareholding. For those reasons, if it were necessary to do so, I would validate the appointment of Mr Whittle as managing director under s 1322(4) of the Corporations Act. (5) Validation of Mr Whittle's acts as managing director? 72 BAS submitted that if Mr Whittle's appointment as managing director of BAS was invalid, his acts as "managing director" (including voting in favour of the Placement Resolution) should nevertheless be validated under rule 54(e) of the Constitution, s 201M of the Corporations Act or s 1322(4) of the Corporations Act. Given the views already formed, it is strictly unnecessary to address these submissions. 73 In the circumstances, however, the following matters should be noted. First, I do not accept that rule 54(e) applies. The "act" with which we are concerned is the Placement Resolution. That is not "an act done by a person acting as an executive officer", being the subject matter of rule 54(e). 74 Next, s 201M of the Corporations Act. It deals with the effectiveness of an act done by a director in circumstances where their appointment as a director is ineffective. Here, the appointment of Mr Whittle as a director was not in issue. The issue was his additional appointment as managing director: see definition of director in s 9 of the Corporations Act and cf s 200AA of the Corporations Act. 75 The question of validation of the Placement Resolution under s 1322(4) of the Corporations Act is considered below: see [129]-[132] below. C. breach of listing rules? (1) Introduction and standing 76 BAS, as a company listed on the ASX, is required to comply with the Listing Rules at the time it issued the Disputed Somerton Securities. 77 Section 793C(1)(d) of the Corporations Act provides that where a person who is under an obligation to comply with any of a licensed market's operating rules fails to meet that obligation, an application to the Court may be made by a person aggrieved by the failure. 78 The ASX is a "licensed market": see the definition of "licensed market" in s 761A, the definition of "financial market" in ss 761A and 767A and the definition of "Australian market licence" in s 761A; see also Stratford Sun Ltd v OM Holdings Ltd (No 5) (2011) 98 FCR 372 at [37]-[39] and White v Shortall (2006) 68 NSWLR 650 at [334]-[340]. 79 The Listing Rules are the ASX's "operating rules" within the meaning of that expression in s 793C(1)(d): see the definition of "operating rules" in s 761A and Stratford Sun Ltd at [38]. 80 A person is taken to be "a person aggrieved by the failure" if the person holds financial products, that are able to be traded on the market, of the body corporate that failed to comply with the operating rules: s 793C(5). Shares are a "financial product": see the definition of "financial product" in s 761A and in Div 3 of Pt 7.1. 81 When BAS issued the Disputed Somerton Securities, OBL held shares in BAS that could be traded on the market. Accordingly, OBL is taken to be a person aggrieved by the failure and is entitled to bring this proceeding under s 793C(1)(d). OBL is also entitled to bring the proceeding under s 1101B(1)(d) of the Corporations Act which is to similar effect: see also s 1101B(2). OBL is taken to be a "person aggrieved … by the contravention" under s 1101B for the same reasons as s 793C(5): see Stratford Sun Ltd at [38] and White v Shortall. (2) What does LR7.1 provide? 82 LR7.1 states that: Issues exceeding 15% of capital Subject to rules 7.1A and 7.1B, without the approval of holders of +ordinary securities, an +entity must not issue or agree to issue more +equity securities than the number calculated according to the following formula. (A x B) – C 83 The formula in LR7.1 is (A x B) – C where: (a) A = the number of fully paid ordinary securities on issue 12 months before the date of issue or agreement, with some adjustments; (b) B = 15%; and (c) C = the number of equity securities issued or agreed to be issued in the 12 months before the date of issue or agreement to issue that are not issued: • under an exception in LR7.2; • under LR7.1A.2; • with the approval of the holders of ordinary securities under LR7.1 or LR7.4. 84 At trial, BAS tendered a number of ASX waiver decisions, to which OBL did not object. Those waiver decisions were said to evidence the policy underlying LR7.1, which was described by the ASX in decision WLC 120175-003 in respect of Comet Ridge Limited as follows: Listing Rule 7.1 protects a listed entity's security holders against dilution of their voting and economic interests in the listed entity by imposing a limit on the number of equity securities that may be issued by the entity without prior security holder approval. The actual number of equity securities that a listed entity may issue without prior ordinary security holder approval is calculated by reference to a formula in listing rule 7.1, and is approximately, 15% of the number of fully paid ordinary securities. (The formula is more complex than this description indicates, and is set out in full in listing rule 7.1). … 85 In general terms, LR7.1 prohibits a company, without the approval of ordinary security holders, from issuing or agreeing to issue more equity securities in one year than would represent 15% of its issued capital by reference to the formula in LR7.1. 86 OBL and BAS agree that at the time of issuing the Disputed Somerton Securities, variable "A" was 388,039,613 and variable "B" was 15%. Accordingly, the number of equity securities that could be issued by BAS without the approval of ordinary security holders was 58,205,941.95, before that number was reduced by variable "C". 87 OBL and BAS disagree as to variable "C". OBL contends that variable "C" was 12 million on the basis that in the 12 months before the Disputed Somerton Securities were issued, BAS had already issued 12 million equity securities. ASX Listing Rule 19.12 defines an "equity security" as, inter alia, a share or an option over an issued or unissued security. "Security" is defined in LR19.12 as including a share. 88 The 12 million equity securities comprised 2 million options vested to the CEO of BAS and the GMP Options. OBL contends that the 12 million options were not issued under an exception in LR7.2, under LR7.1A.2 or with the approval of the holders of ordinary securities under LR7.1 or LR7.4. Accordingly, OBL contends they were required to be taken into account in variable "C" by being subtracted from the number of equity securities that could otherwise be issued without approval of ordinary security holders. 89 BAS agrees that the CEO options must be subtracted (and those options have been cancelled) but alleges that the GMP Options were issued under an exception in LR7.2 and therefore are not required to be subtracted as part of variable "C". BAS alleges that the GMP Options were issued under exception 2 in LR7.2 (exception 2). 90 What in fact were the GMP Options for? The answer is to be found in an Underwriting Agreement - Rights Issue dated 7 September 2011 between BAS and GMP (the Underwriting Agreement). The terms of that agreement were confidential. However, it is important to understand the components of it. BAS proposed to offer to its shareholders what were defined as the "Underwritten Shares". That term was defined to mean 97,010,083 fully paid ordinary shares in BAS: cl 1.1. GMP underwrote the subscription of all the Underwritten Shares on certain terms and conditions: cl 2.1. GMP was entitled to sub-underwrite the offer and it did so: cl 2.2(a). "Shortfall Shares" were defined, in general terms, to mean the number of Underwritten Shares for which valid applications had not been received by the nominated Closing Date: cl 1.1. Under cl 6.1 of the Underwriting Agreement, GMP was obliged to subscribe (or cause its nominee to subscribe) for the Shortfall Shares by a nominated date. BAS was then obliged to issue the Shortfall Shares: cl 6.2. There is no dispute that the Shortfall Shares fell within exception 2. 91 However, there was of course an "Underwriting Fee" entitled to be charged by GMP if there were any Shortfall Shares. That fee was dealt with in cl 7.1 of the Underwriting Agreement. For present purposes, it is sufficient to note that the Underwriting Fee comprised three components – (1) an underwriting fee calculated as a percentage of the "Underwritten Amount" (being the number of Underwritten Shares multiplied by their price), (2) a management fee calculated as a percentage of the Underwritten Amount and (3) the issue of 10 million unlisted options to acquire shares in BAS with a stated exercise price, (namely, the GMP Options). 92 The central question is whether the GMP Options were within exception 2. If they were not, then BAS contravened LR7.1. (3) Interpretation of Listing Rules? 93 How then are the Listing Rules to be interpreted? The Listing Rules are not to be interpreted as a technical document in the same way as a statute: Bateman v Newhaven Park Stud Ltd (2004) 49 ACSR 454 at [10]-[12]. In determining whether the GMP Options were issued under exception 2, the Court is required by LR19.2 to interpret the exception: (a) in accordance with its spirit, intention and purpose; (b) by looking beyond form to substance; (c) in a way that best promotes the principles on which the Listing Rules are based. 94 The principles on which the Listing Rules are based relevantly embrace, inter alia, the interests of maintenance of investor protection and include the following: (a) securities must be issued in circumstances which are fair to new and existing security holders; and (b) practices must be adopted and pursued which protect the interests of security holders, including ownership interests and the right to vote. These principles are in the "Introduction" section to the Listing Rules and are incorporated as part of the Listing Rules by LR19.1. (4) Exceptions to LR7.1 95 LR7.2 relevantly states that: Rule 7.1 … do[es] not apply in any of the following cases. Exception 1 An issue to holders of +ordinary securities made under a +pro rata issue and to holders of other +equity securities to the extent that the terms of issue of the +equity securities permit participation in the +pro rata issue. Exception 2 An issue under an underwriting agreement to an underwriter of a +pro rata issue to holders of +ordinary securities if the underwriter receives the +securities within 15 business days after the close of the offer. Exception 3 An issue to make up the shortfall on a +pro rata issue to holders of +ordinary securities. The entity must make the issue within 3 months after the close of the offer, and the directors of the entity (in the case of a trust, the responsible entity) must have stated as part of the offer that they reserve the right to issue the shortfall at their discretion. The issue price must not be less than the price at which the +securities were offered under the +pro rata issue. 96 LR7.2 permits a company to issue securities representing more than 15% of its issued capital in limited circumstances. The first circumstance is the pro rata issue to existing holders of securities – a rights issue: exception 1 in LR7.2. In this context, it is important to understand the economic distinction between a rights issue and a placement of shares. A rights issue is considered to be fairer than a placement of shares because shareholders are offered the opportunity to participate in the share issue and thereby avoid dilution of their existing shareholding. As placements have the greatest potential to result in dilution they are subject to the 15% rule in LR7.1: see ASX Information Paper entitled "Capital Raising in Australia: Experiences and Lessons from the Global Financial Crisis" dated 29 January 2010 at pp 21 and 23 – 25. It is unsurprising that a pro rata rights issue which does not have the economic effect of diluting an existing shareholding is an exception to LR7.1. 97 The second exception is related to the first. It applies where the securities are issued under an underwriting agreement to an underwriter of a pro rata issue to holders of ordinary securities, if the underwriter receives the securities within 15 business days after the close of the offer. The issue in dispute is what exception 2 is intended to cover. 98 OBL submits exception 2 applies to an issue of shortfall shares under an underwriting agreement to an underwriter of a pro rata rights issue. BAS seeks to have exception 2 read so as to apply to any issue of securities to an underwriter under a relevant underwriting agreement, regardless of whether that has the effect of diluting the shareholdings of existing shareholders For the reasons that follow, I reject BAS' contention. 99 First, it is necessary to understand exception 1. As we have seen, it deals with a pro rata rights issue. That is, an offer to all existing shareholders to subscribe for additional securities in a company in proportion to their existing holding. Shareholders have the choice to accept the offer in whole or part. The offer and the subsequent choice are important because the offer enables an existing shareholder to ensure that its shareholding is not diluted. If the shareholder wishes to avoid dilution of its shareholding, it must subscribe to the offer. The shareholder achieves that by choosing to take up the pro rata offer. However, if the shareholder chooses not to take up the offer, not only does the shareholder have notice of the issue but that shareholder must be taken to have accepted a dilution of its shareholding by the issue of the additional shares to others. 100 As a shareholder can protect itself against dilution under a rights issue, an issue of securities to a shareholder under a rights issue is not subject to the 15% rule in LR7.1. Such an issue of shares is covered by exception 1 in LR7.2. It is important to recognise that exception 1 only applies to the issue of securities to shareholders under a rights issue. It does not apply to the issue of securities to an underwriter when the shareholders decide not to take up all of the shares on offer. Therefore, we have exception 2. 101 OBL's interpretation of exception 2 as applying to the issue to an underwriter of those securities not taken up by shareholders under a rights issue accords with the spirit, intention and purpose of LR7.1 and LR7.2. Its interpretation promotes the principles on which those Listing Rules are based; BAS's interpretation does not. The purpose of the 15% rule in LR7.1 is to protect a shareholder from dilution of their voting and economic interests in an entity. The purpose of the exceptions in LR7.2 is to exempt from the 15% rule those issues of securities where shareholders do not require the same protection. Exceptions 1 and 2 in LR7.2 exist to address those situations where the protection is not necessary because shareholders have the opportunity to participate and protect their shareholding from dilution. They can, alternatively, choose not to participate, and so allow their shareholding to be diluted by the underwriter taking up the shares and by other shareholders taking up their own entitlement. 102 What then is wrong with BAS's submission that exception 2 extends to the issue of securities to an underwriter as a fee for services (fee securities)? 103 The answer is that such a construction of exception 2 is inconsistent with the express words of exception 2 and the spirit, intention and purpose of LR7.1 and LR7.2. 104 The issue of fee securities is like a placement. Existing shareholders have no involvement in the underlying issue of shares. Existing shareholders have no way of protecting against the dilution of their voting and economic interests in the existing shares. It is for that reason that the issue of fee securities is subject to the 15% rule in LR7.1 in the same manner as a placement. That construction and result is consistent with the spirit, intention and purpose of LR7.1 and LR7.2: see [82]-[85], [94] and [95]-[101] above. 105 The contrary contention can be tested in this way. If the issue of fee securities was within exception 2 (a view I do not hold) and therefore the 15% rule did not apply to the issue of those securities, a company would be free to issue as many securities as it wished to an underwriter as payment of its fee, with the effect of diluting the voting and economic interests of its shareholders (remembering that the underwriter may then assign those securities to a nominee, as GMP did in this case, to AEP). That is, a company could circumvent LR7.1 and do so without restriction of any kind. That is contrary to the spirit, intention and purpose of LR7.1 and LR7.2. 106 Counsel for BAS submitted that it was necessary for small cap companies with limited cash to package the underwriting fee in the manner outlined (see [91] above), otherwise small cap companies who are cash poor have limited opportunities to seek to raise capital in the market. That contention is rejected. Companies can package the underwriting fee in a number of ways. The facts of this case provide clear and direct evidence of that fact. The manner in which it is packaged will depend on a number of factors including the state of the capital market, the size and nature of the company seeking the capital and, of course, the identity of the underwriter and its business. There are no restrictions on the underwriting fee being structured and paid in that manner. But those commercial factors and considerations do not and cannot alter the requirement that a publicly listed company comply with LR7.1 and the limited exceptions in LR7.2. 107 Senior Counsel for BAS rhetorically asked "why would it be inappropriate, or a breach of the [Listing Rules], for the whole of the [underwriting] fee to be payable by an issue of options if the company could convince an underwriter to do that?" His stated rationale being that it was in the interests of a cash poor, small cap company to keep its cash as cash was a valuable commodity. The answer is that such an arrangement is not inappropriate or a breach of the Listing Rules so long as the 15% rule in LR7.1 is not breached by the issue of the fee securities. What such an arrangement does not have is the benefit of one of the exceptions and, in particular, exception 2. 108 The problems with BAS' submission were revealed by BAS' own submissions. Senior Counsel for BAS submitted that: underwriters are placed in a special position by exception 2, and that anything which is issued to an underwriter in respect of an underwriting agreement – and we assume, perhaps, an implied term that it's a bona fide genuine underwriting agreement … – is exempt, and that there's nothing in the policy of the rule which would render any part of a fee payable to an underwriter if it happens to be payable by way of securities. Underwriters are not in a special position. A pro-rata issue of shares to shareholders is in a special position. 109 And where otherwise would the line be drawn? If BAS' interpretation of exception 2 were correct (and I do not accept it is), then any issue of securities under an underwriting agreement to an underwriter of a rights issue, whether as payment of the underwriter's fee or for some other purpose or reason, would not be subject to the 15% rule in LR7.1. The policy and purpose of both LR7.1 and LR7.2 would simply have no role to play. That would render the 15% rule ineffective or, at the very least, substantially ineffective. For those reasons, BAS' interpretation of exception 2 is rejected. 110 The GMP Options issued by BAS under the Underwriting Agreement were fee securities. They were therefore not issued under exception 2. They were to be included in the calculation under LR7.1 as part of variable "C", reducing the number of securities that BAS could place, without shareholder approval, to 46,205,941. (5) Rule 4(a) of the Constitution 111 As mentioned above, if the issue of the Disputed Somerton Securities (or some portion of them) was a breach of LR7.1, then BAS has also breached rule 4(a) of the Constitution: see [34] above. (6) Appropriate relief 112 OBL adopts alternative positions about the appropriate relief. Its primary submission is that, if the issue of the Disputed Somerton Securities was a breach of LR7.1, then the Court should order that the whole of the issue of the Disputed Somerton Securities be set aside and the register of members corrected accordingly. Alternatively, OBL seeks an order that the issue be set aside to the extent that it exceeded the number of securities permitted to be issued under LR7.1 and the register of members corrected. 113 What then was the relief sought by OBL? In reliance on s 739C(2) and / or s 1101B(1)(d) of the Corporations Act, ss 21 and 23 of the of the Federal Court of Australia Act 1976 (Cth) and the common law, OBL sought: 1. A declaration that [BAS] breached ASX Listing Rule 7.1 by issuing 52,205,942 ordinary shares to [Somerton] without the approval of its ordinary security holders. 2. Alternatively, a declaration that [BAS] breached ASX Listing Rule 7.1 by issuing 10,000,000 more ordinary securities than it was entitled to issue to [Somerton] without the approval of its ordinary security holders. 3 A declaration that the resolution by [BAS] to issue 56,205,942 ordinary securities to [Somerton] (the Resolution) was not validly passed in accordance with [BAS'] Constitution and is of no effect. 4. In the event that the Court finds that the Resolution was validly passed under [BAS'] Constitution, an order that the Resolution be set aside. 5. An order that the issue by [BAS] of 56,205,942 ordinary securities to [Somerton] be set aside. 6. An order that [BAS'] register of members be corrected by deleting any reference to the issue of the 56,205,942 ordinary securities to [Somerton]. 7 Alternatively to paragraphs 5 and 6 above: (a) An order that the issue of 10,000,000 of the 56,205,942 ordinary securities issued by [BAS] to [Somerton] be set aside. (b) An order that [BAS'] register of members be amended to delete any reference to the 10,000,000 ordinary securities. 8 In the event that [Somerton] acquires securities under the non-renounceable pro rata offer of new securities which closes on 7 September 2012: (a) An order that the acquisition of the securities be set aside; (b) An order that [BAS'] register of members be amended to delete any reference to the securities acquired. 9 Alternatively to paragraph 8 above, in the event that [Somerton] acquires securities under the non-renounceable pro rata offer of new securities which closes on 7 September 2012 based on the 10,000,000 ordinary securities referred to in paragraph 7(a) above: (a) An order that the acquisition of such securities be set aside. (b) An order that [BAS'] register of members be amended to delete any reference to the securities acquired. … BAS submits that the Court should decline to make any of these declarations and orders. 114 In considering the question of appropriate relief, it is necessary to consider two issues - (1) exercise of the Court's discretion under ss 793C(2) and/or 1101B(1)(d) of the Corporations Act, ss 21 and 23 of the of the Federal Court of Australia Act 1976 (Cth) and the common law; and, (2) validation of the Placement Resolution and/or the issue of the Disputed Somerton Securities under s 1322 of the Corporations Act. (a) Exercise of the Court's discretion 115 If the issue of the Disputed Somerton Securities contravened LR7.1, BAS submits that the Court should not exercise its discretion in favour of OBL. 116 Section 793C(2) of the Corporations Act provides: (1) If a person who is under an obligation to comply with or enforce any of a licensed market's operating rules fails to meet that obligation, an application to the Court may be made by: … (d) a person aggrieved by the failure. (2) After giving an opportunity to be heard to the applicant and the person against whom the order is sought, the Court may make an order giving directions to: (a) the person against whom the order is sought; or (b) if that person is a body corporate-the directors of the body corporate; about compliance with, or enforcement of, the operating rules. (3) For the purposes of this section, a body corporate that is, with its acquiescence, included in the official list of a licensed market, or an associate of such a body corporate, is taken to be under an obligation to comply with the operating rules of that market to the extent to which those rules purport to apply to the body corporate or associate. … (5) For the purposes of this section, if a body corporate fails to comply with or enforce provisions of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the market is taken to be a person aggrieved by the failure. (6) There may be other circumstances in which a person may be aggrieved by a failure for the purposes of this section. 117 The other provision is s 1101B(1)(d). It provides: (1) The Court may make such order, or orders, as it thinks fit if: … (d) on the application of a person aggrieved by an alleged contravention by another person of subsection 798H(1) (complying with market integrity rules) or a provision of the operating rules, or the compensation rules (if any), of a licensed market, it appears to the Court that: (i) the other person did contravene the provision; and (ii) the applicant is aggrieved by the contravention. However, the Court can only make such an order if the Court is satisfied that the order would not unfairly prejudice any person. (2) For the purposes of paragraph (1)(d), if a body corporate contravenes a provision of the operating rules of a licensed market, a person who holds financial products of the body corporate that are able to be traded on the licensed market is taken to be a person aggrieved by the contravention. … (Emphasis added.) Sub-section (4) sets out some examples of orders the Court may make under s 1101B(1) of the Corporations Act. 118 Each of these sections gives the Court a discretion as to whether, and in what form, it will make orders to address a contravention of the Listing Rules. In s 1101B(1), the discretion is expressly limited by the requirement that the Court must be satisfied that the order sought would not unfairly prejudice any person. Similarly, the Court's power to order declaratory and other relief under ss 21 and 23 of the Federal Court of Australia Act 1976 (Cth) and/or the common law is also a matter of discretion. 119 What then should the Court do? 120 OBL submits that the Court should make the orders it seeks on two grounds – dilution of its shareholding (and the associated consequences that accompany that dilution) and deterrence (specific and general). BAS disagrees. BAS submits that the Court should decline to make any of the orders sought by OBL on six principal grounds: 1. OBL led no evidence of any detriment other than the dilution of its 19.9% proportionate voting stake in BAS to 17.38% after the placement of the Disputed Somerton Securities; 2. OBL's submissions ignore the fact that all shareholders are always exposed to the potential for dilution through a share issue of up to 15% of BAS' capital annually. That is, OBL's proportionate shareholding at all relevant times was legitimately able to be diluted from 19.9% to 17.78% by a placement; 3. OBL's position is undermined by the fact that OBL makes no complaint about Cooper's underwriting of the 2012 BAS Rights Issue; 4. any potential prejudice to OBL has already been adequately addressed by an undertaking given by BAS to the ASX; 5. the GMP Options were issued on 17 October 2011 and, therefore, absent the undertaking given by BAS to the ASX, from 17 October 2012 the GMP Options will no longer be relevant in calculating the permitted number of securities that can be issued under LR7.1. That is, absent the undertaking given by BAS to the ASX, on 18 October 2012 BAS will be free to issue another 10 million shares; 6. the detriment to BAS and its shareholders (including OBL) by the making of the declarations and orders far outweighs any incremental benefit to OBL. 121 In addition to those six principal grounds relevant to OBL's application to set aside the whole of the issue of the Disputed Somerton Securities, as well as its alternative claim to the extent of 10 million shares, BAS seeks to rely on the following five additional considerations in respect of OBL's application to set aside the whole of the issue of the Disputed Somerton Securities: 1. the orders sought go beyond what is reasonably necessary to address OBL's alleged detriment; 2. the orders sought will unfairly prejudice Somerton and Cooper. This contention is based on the assertion that absent the availability of the disputed 10 million securities, Cooper could have, and most likely would have, secured a stake of between 18.06% and 19.09% and that the orders sought will effectively strip from Cooper and Somerton rights in respect of their BAS shares that they were always entitled to have; 3. the orders sought will cause substantial financial and other difficulties for BAS because, among other things, they will require all consideration paid by Cooper for the Disputed Somerton Securities to be returned and an unwinding of the 2012 BAS Rights Issue; 4. alternatively, the orders sought by OBL are pointless because, even on OBL's LR7.1 case, BAS will be entitled to immediately place 48,205,942 of the 56,205,942 Disputed Somerton Securities with Somerton and the remaining 10 million shares on 18 October 2012. That is, the effect of the orders sought by OBL will be simply to impose unnecessary costs of first unwinding the placement and 2012 BAS Rights Issue, and then re-issuing the Disputed Somerton Securities; and 5. the orders are ostensibly founded on the proposition that no decision of the Board has been valid since at least March 2011, throwing into doubt not just the Placement Resolution but a myriad of other Board decisions, including ones that have benefited OBL itself. 122 There was a contravention of LR7.1 and BAS' Constitution in respect of 10 million of the Disputed Somerton Securities, namely the GMP Options. This proceeding was not commenced by the Australian Securities Commission: cf Australian Securities and Investments Commission v McDougall (2006) 57 ACSR 175 at [55]. However, it is a proceeding where there is a dispute between the parties about the proper operation of LR7.1 and the exceptions in LR7.2. A declaration, properly framed, is necessary to determine the parties' respective positions in relation to that disputed issue. Moreover, given the nature of the issue and the identity of the parties, it is in the public interest for the Court to make a declaration of contravention in a specified respect: Plaintiff M61/2010E v The Commonwealth (2010) 243 CLR 319 at [102]-[104] and AWB Ltd v Cole (No 6) (2006) 235 ALR 308 at [5] and [6]. The form of the declaration should identify with precision the nature and extent of the contravention: AWB at [5]. Accordingly, I would make a declaration in the following terms: The First Defendant breached ASX Listing Rule 7.1 by issuing 10,000,000 more ordinary securities than it was entitled to issue on 13 August 2012 without the approval of its ordinary security holders. 123 The next issue is what further relief, if any, should be granted. OBL is an aggrieved person. It was entitled to commence these proceedings. It has succeeded in part. However, I would decline to grant OBL any further substantive relief. OBL's detriment was the dilution of its 19.9% proportionate voting stake in BAS to 17.38% after the placement of the Disputed Somerton Shares. However, as BAS submitted, having regard to the fact that 10 million more securities were issued than should in fact have been issued, it resulted in an illegitimate dilution of OBL's shareholding from 17.8% to 17.38%, less than half of one per cent. 124 Moreover, any potential prejudice to OBL has already been adequately addressed by an undertaking given by BAS to the ASX. The form of the undertaking was not in evidence. The only evidence before the Court was the ASX release: see [29]-[30] above. 125 Notwithstanding this gap in the evidence, it appears that BAS' undertaking to the ASX has the effect that for the period until 13 August 2013 it will reduce by 10 million the number of securities it is able to issue under LR7.1, other than an issue available as an exception under LR7.2. That undertaking is substantively and practically significant. It is substantively significant because it identifies the securities (both number and identity of security holder, namely the GMP Options) which were the subject of the contravention. It is practically significant because it effectively protects the further dilution of OBL's shareholding for a period beyond the expiry of the period specified in LR7.1. The GMP Options were issued on 17 October 2011 and, therefore, absent the undertaking given by BAS to the ASX, from 17 October 2012 the GMP Options would no longer be relevant in calculating the permitted number of securities that can be issued under LR7.1. That is, absent the undertaking given by BAS to the ASX, on 18 October 2012 BAS would be free to issue another 10 million shares. For those reasons, I would not exercise the discretion under ss 793C(2) and/or 1101B(1)(d) in favour of OBL to grant OBL any further of the relief that it seeks. OBL's two grounds have been addressed – its dilution and, to the extent relevant, deterrence. In the circumstances of this case, BAS' undertaking to the ASX addresses the question of OBL's dilution in a manner which is pragmatic, effective and equitable. The declaration addresses the need for the contravention to be recorded and, to the extent relevant, the question of deterrence. 126 I have not addressed the other grounds raised by BAS. In the circumstances, it is unnecessary. However, there is one aspect of BAS' submissions concerning the involvement of the ASX that should be addressed. 127 BAS relied on Re Delta Gold Ltd (2001) 40 ACSR 347 as authority for three propositions: (1) the Listing Rules are not a statute, (2) a breach of the Listing Rules is not an unlawful act, and (3) following from those two propositions, in a case where there is no doubt that the ASX knows about all of the facts and is not itself making any complaint or seeking to be heard, that is in itself a reason why the Court should stay its hand. I accept the first two propositions. I reject the third proposition. First, Delta Gold is not authority for the third proposition. Delta Gold considered LR10.8, which enabled an entity to seek the ASX's opinion on whether it needed approval to acquire or dispose of an asset. In such a case, Allsop J said at [58]: I think the view of the ASX which has been taken would be a powerful consideration why a court would not exercise its discretion. 128 LR7.1 is in very different terms. It does not provide for an entity to seek the ASX's opinion. Second, the evidence does not support the proposition that the ASX knows about all of the facts and is not itself making any complaint or seeking to be heard. BAS has given the ASX an undertaking. As noted, the circumstances in which the BAS gave that undertaking and its precise terms were not in evidence. (b) Validation of Placement Resolution and the issue of the Disputed Somerton Securities under s 1322(4) 129 As will be apparent, I do not consider that the Placement Resolution or the issue of the Disputed Somerton Securities to have been invalid or ineffective. They should not be disturbed. It is therefore unnecessary for the Court to consider BAS' application for the validation of the Placement Resolution and the issue of the Disputed Somerton Securities under s 1322(4) of the Corporations Act. 130 It is appropriate, however, to make the following points. The relevant principles concerning the operation of s 1322(4) apply: see [65] to [71] above. 131 BAS accepts that the placement of 10 million shares above the limit permitted by the Listing Rules was not an act "essentially of a procedural nature" under s 1322(6)(a)(i). However, that is not the end of the enquiry. There are two further bases on which BAS may be entitled to seek validation of the Placement Resolution and the issue of the Disputed Somerton Securities. First, BAS and Cooper made announcements to the ASX that detailed the proposed nature and extent of Cooper's investment, and the means by which it would be achieved. There was no evidence to suggest that the BAS personnel involved in the Placement Resolution and the issue of the Disputed Somerton Securities were acting other than honestly and in the interests of the members of BAS. Indeed, Senior Counsel for OBL stated, properly in my view, that OBL did not suggest that the personnel had acted dishonestly. Secondly, I accept BAS' submission that it is just and equitable that the Placement Resolution and the issue of the Disputed Somerton Securities be validated for the same reasons that I refused the additional relief sought by OBL: see [123]-[125] above. Also, for the same reasons, I accept that no substantial injustice will result from a validation of the Placement Resolution and the issue of the Disputed Somerton Securities. 132 Accordingly, if it was necessary to do so (and it is not), BAS would be entitled to orders under s 1322(4) of the Act validating the Placement Resolution and the issue of the Disputed Somerton Securities. D. orders 133 For those reasons, the Court will make the following declaration: The First Defendant breached ASX Listing Rule 7.1 by issuing 10,000,000 more ordinary securities than it was entitled to issue on 13 August 2012 without the approval of its ordinary security holders. 134 The Court will not grant any further relief. The undertaking given by BAS to the ASX will remain in place until 13 August 2013. The parties can confer and seek to agree orders as to costs. If the parties are unable to reach agreement, each party should file and serve a minute of proposed orders and a two page submission addressing the question of costs by 27 October 2012 and the Court will consider that issue on the papers. I certify that the preceding one hundred and thirty-four (134) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 16 October 2012