Federal Court decides in ASIC’s favour against Big Star Energy Ltd (formerly Antares Energy Limited)

The Federal Court of Australia has found that Antares Energy Limited (Antares), now known as Big Star Energy Ltd, has breached continuous disclosure laws with ASX announcements made in 2015 regarding the sales of Antares’ Northern Star and Big Star assets.

The continuous disclosure regime

he ASX publishes and maintains Listing Rules which apply to all the entities admitted to the ASX Official List.  Chapter 3 of the Listing Rules outlines the continuous disclosure regime applicable to Listed Entities and in particular ASX Listing Rule 3.1 provides:

“Once an entity is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s securities, the entity must immediately tell ASX that information."

This Listing Rule is given statutory force by section 674 of the Corporations Act 2001 (Cth) (the Act) which imposes statutory liability for breaches of the Listing Rules where the information which could materially effect market prices and is not generally available.

ASIC, is the regulator with the responsibility for the supervision of real-time trading on the ASX and for enforcement of misconduct. For an offence contrary to section 674 (2) of the Corporations Act 2001 ASIC must establish:

• there was information about specified events or matters within the meaning of Listing Rule 3.1 and section 674(2)(b);
• the Listed Company had that information and was aware of it;
• the information was not generally available; and
• a reasonable person would have expected that information to have had a material effect on the price or value of the shares in the Listed Company, if it has been generally available.

Antares Decision

In September 2015, Antares made ASX announcements to the market regarding the sale of its Northern Star asset for US$148,788,560 and its Big Star asset for US$105,069,420, however it did not specify the prospective purchaser.  Immediately following the announcements, trading in shares in Antares elevated and the share price jumped initially by some 250%.

ASIC alleged that Antares failed to disclose important information to the market at the time of the announcements in breach of its obligations of continuous disclosure. ASIC also claimed that Antares should have disclosed the name of the prospective purchaser.  In the alternative, ASIC further alleged that Antares should have disclosed the following:

• the name of the prospective purchaser;
• that Antares’ Chairman and Chief Executive Officer, Mr James Cruickshank had been told that the purchaser did not have financial approval in place for both relevant acquisitions; and
• that Antares had not independently verified or otherwise determined the capacity of the purchaser to complete the acquisitions.

Justice Banks-Smith found that Antares breached its continuous disclosure obligations by not notifying the ASX of the following cumulative information:

• that Wade Energy was the purchaser under the relevant sale agreements;
• that Antares had not, prior the announcements, independently verified or otherwise determined the capacity of Wade Energy to complete the purchases; and
• that Antares had been informed by Wade Energy that it had not yet received all funding approval necessary to complete the purchase of the Big Star Asset.

Her Honour also found that in contravention of section 180(1) of the Act, Mr Cruickshank failed to exercise the degree of care and diligence that a reasonable person in his position would have exercised in his consideration of whether Antares was required to disclose the information described above, and so in causing or otherwise permitting Antares to fail to disclose the information to the ASX.

Lavan Comment

In her reasons for decision, Her Honour said:

"The main statutory purpose of the continuous disclosure regime is to achieve a well-informed market, leading to greater investor confidence. The object is to enhance the integrity and efficiency of capital markets by requiring timely disclosure of price or market sensitive information."

The continuous disclosure regime is one of the most important statutory obligations directors must be familiar with and failure to do so can result in serious sanctions. This case is another demonstration of ASIC’s reinvigorated approach to enforcement and falls in line with its “Why Not Litigate Approach?”.

If you require advice or assistance with any aspect of your obligations as a director of a company, please contact Cinzia Donald or Iain Freeman.