Corporations Act 2001 and case law. Various Issues and defenses

  Austin Retail Ltd (Austin Retail) has issued a prospectus seeking to raise $12 million via an issue of 12 million $1.00 shares. It has lodged the prospectus with ASIC. Its current share price is $3.50. In the prospectus Austin Retail said that its forward book of orders was in excess of $25 million over the next three years. This estimate was incorrect, and based on poorly researched consultant’s report given to Bob Brown, Austin Retails commercial sales manager. Bob suspected the advice was incorrect and failed to query the report with DB Consultants let alone make his own inquiries. The real order book was more like $15 million over three years. Dendy Securities Ltd the underwriter for Austin Retail did not query the DB Consultants report or the advice given by Austin Retail. Dendy Securities was the named underwriter in the prospectus and as the share offering was fully subscribed there was no need to have to honour the contractual promise it made to Austin Retail under the underwriting agreement. During the time the prospectus was lodged with ASIC, Austin Retail increased its general retail advertising for its goods. The $12 million shares were issued with a premium of 25c making the issue price $3.75. Three months after the share issue the $25 million forward orders collapsed to $7 million over two years. It was thought that this happened because of a new entrant into the market. The Board of Austin Retail gradually became aware of this and a Board meeting was held to discuss the issue. The share price of Austin Retail fall to $2.50 on the back of this news. The institutional, professional and retail investors who bought the share at $3.75 based on the prospectus are upset and dismayed at the fortunes of Austin Retail and are seeking to recover their losses. Required: Consider the various issues that arise on these facts and advise the investors of their rights against Austin Retail Ltd and any of the other parties that may be liable on these facts. Your answer should consider the relevant sections of the Corporations Act 2001 and case law. Advise Austin Retail Ltd and any other parties whether they can rely on any defences available to them under the Corporations Act 2001. (Total of 30 marks) SUGGESTED REFERENCES: Lipton, P., and Herzberg, A., Welsh, M, Understanding Company Law, 18 edition Thomson Reuters 2018. Students should remember to look at the Lipton and Herzberg website. www.lipton-herzberg.com.au Bottomley S, Hall K, Spender P, and Nosworthy B, Contemporary Australian Corporate Law 1st edition 2017 Sydney Cambridge Harris, J. Hargovan, A. Adams, M., Australian Corporate Law LexisNexis Butterworths 5th edition, 2015. Austin R.P. & Ramsay, I., Ford's Principles of Corporations Law, Butterworths, Australia, 16th edition, 2014. Baxt, R., and Fletcher, K.L., Fridman, S., Corporations and Associations Cases and Materials on, Butterworths, Australia, 10th edition, 2008. Hanrahan, P., Ramsay I., Stapledon G., Commercial Applications of Company Law. Oxford 18th edition 2017 Redmond, P., Companies and Securities Law - Commentary and Materials, Law Book Co., Sydney, 5th, 2009. Parker, Clarke, Veljanovski, Posthouwer, Corporate Law, Palgrave 1st edition 2012 Ciro T, Symes C, Corporations Law in Principle LBC Thomson Reuters, Sydney, 9th edition 2013 Li, G, Riley, S. Applied Corporate Law: A Bilingual Approach LexisNexis 1st Edition 2009. Cassidy J., Corporations Law Text and Essential Cases. Federation Press, 4th edition Sydney 2013 Harris J, Corporations Law, LexisNexis Study Guide 1st edition 2008 Harris J, Butterworths Questions and Answers Corporations Law:, LexisNexis, 3rd Edition Sydney 2009. Fisher S, Anderson C, Dickfos, Corporations Law - Butterworths Tutorial Series, 4th Edition Butterworths, Sydney 2014 Tomasic, R.,Jackson, J.,Woellner, R., Corporations Law - Principles, Policy and Process 4th Edition Butterworths., Sydney, 2002. Tomasic, R. Bottomley,S. McQueen,R. Corporations Law in Australia, 2nd Edition Federation Press, Sydney 2002. Latimer, P, Australian Business Law CC, 2017 Edition. Vermeesch,R B, Lindgren, K E, Business Law of Australia Butterworths, 12th Edition, 2011. Graw, Parker, Whitford, Sangkuhl and Do, Understanding Business Law 7th ed LexisNexis Butterworths, 2015. Davenport, S and Parker D, Business and Law in Australia, Thomson Reuters, 2012 Fitzpatrick, Symes, Veljanovski, Parker, Business and Corporations Law; LexisNexis 3rd edition 2017 Crosling G M, Murphy H M, How to Study Business Law 4th Edition, Butterworths, 2009.