AMP Investments Pty Ltd v Trade Practices Commission

[1983] FCA 248

Re: A.P.M. INVESTMENTS PTY. LIMITED
And: TRADE PRACTICES COMMISSION; FIBRE CONTAINERS LIMITED; LEIGH-MARDON PTY.
LTD ; ASSOCIATED NOMINEES PTY. LTD.; FRANCIS BURKE; PETER BECKER; WILLIAM
GIBSON; JOHN FRANCIS ELFVERSON (fifth to eighth respondents as trustees for
Leigh-Mardon Pty. Ltd.) and ARTHUR KEVIN SMITH (second to ninth respondents);
S.C.I. OPERATIONS PTY. LTD. (S.C.I. PACKAGING PTY. LTD.) (tenth respondent)
No. VG150 of 1983
Appeal

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Smithers J.
Fitzgerald J.
Jenkinson J.

CATCHWORDS

Appeal - principles to be taken into account in an appeal against the exercise of a discretion by the primary Judge - matters of practice and procedure - undertakings - nature of undertakings - when undertakings can be released - Trade Practices Act - interlocutory injunctions - whether interlocutory injunction application argued before primary judge.

Trade Practices Act 1974 ss.50, 80 and 81

HEARING

MELBOURNE

#DATE 21:9:1983

ORDER

1. The appeal be allowed and the order under appeal be set aside.

2. The costs of and incidental to the appeal be reserved.

JUDGE1

This is an appeal in action No. VG 84 of 1983 against an order of his Honour Mr. Justice Woodward, made on 24 August 1983 whereby upon certain undertakings being given to the Court by the second respondent and the third, fourth, fifth, sixth, seventh and eighth respondents, his Honour released the first respondent, and the second - ninth respondents inclusive, from undertakings which had been given by those parties to the Court in these proceedings on 23 May 1983 and also released a company called SCI Operations Pty. Ltd. and related companies (SCI) from undertakings given by them to the Court also on 23 May 1983.

The first respondent APM Investments Pty. Limited appeals against this order on various stated grounds, but in substance alleges that it operates unjustly to Australian Paper Manufacturers Ltd. and itself who are both comprehended within the expression "APM" hereinafter appearing, in as much as it permits SCI to proceed with a takeover offer for all the shares in the second respondent (FCL) and at the same time it creates conditions effectively preventing APM from acquiring those shares pursuant to an offer which it desires to make for them in competition with SCI.

It is necessary to look at the form and history of action No. VG 84 of 1983 and the events shortly preceding the institution of those proceedings.

FCL is a company conducting business, including that of a converter of paper board into cardboard boxes which it sells as containers for fruit, vegetables, wine and other goods. The first respondent is a subsidiary of the company called Australian Paper Manufacturers Ltd. APM and SCI are each producers in a large way of the raw materials from which such boxes are made. APM is a larger producer than is SCI. APM supplies a substantial part of the raw material used by FCL in the manufacture of the boxes which it sells. Of the paper board which is consumed in Australia 72% is supplied by APM and 23% by SCI. Imports comprised 3% and Visy Board, one of the converters, makes 2%.

On 4 May 1983 SCI announced that it would offer $3.50 per share for all the shares in FCL. Thereupon APM bought shares of FCL on the market for $3.65 and thereby brought its holding in FCL to 18%. On 6 May an ex parte application was made by SCI in the Federal Court seeking an injunction to restrain APM from proceeding to acquire the shares of FCL. The application came before Mr. Justice Jenkinson and was refused. On 11 May 1983 APM announced that it intended to lodge a Part A statement with a view to the acquisition of the remaining shares at the price of $4.00. On 19 May SCI issued proceedings in the Federal Court No. VG 82 of 1983 in which it seeks relief against APM on the ground that acquisition of the shares of FCL by APM would contravene the provisions of s.50 of The Trade Practices Act 1974 (the Act) and for other relief under the provisions of the Act.

Becoming aware of the imminence of the competing bids of SCI and APM to purchase all the shares of FCL the Trade Practices Commission (the Commission) sent telexes to SCI, APM and FCL on 6 May 1983 seeking undertakings that the status quo be maintained pending consideration by the Commission of the proposed offers. The telex to SCI was in the following terms:-

"This is to confirm that the TPC has asked APM not to take any action to acquire shares in Fibre Containers Ltd until 10.00 am Monday 16 May 1983 to enable investigation of your clients suggestion that the acquisition may breach s.50 of the Trade Practices Act.

2. No commitment can be obtained today but APM has been informed that any further acquisition of shares in the face of this request would result in TPC taking immediate court proceedings.

3. APM has also been informed that your client similarly undertakes to acquire no share in Fibre containers during the same period. Your written confirmation is requested please.

4. The Amatil Group has been approached and we understand they are prepared to undertake not to sell shares to either party for the same period." (p.270 AB)

The parties complied with the request of the Commission by stating their undertakings in telexes sent by them to the Commission. On 10 May 1983 a meeting was held between the representatives of APM and the Commission at which a possible bid by APM in response to the bid by SCI was discussed. On 12 May 1983 a meeting was held in Canberra between representatives of SCI and members of the Commission at which the proposed offers were discussed.

On 16 May 1983 SCI informed the Commission by telex that at its request and subject to certain conditions SCI undertook not to acquire or take any further steps to acquire any shares in FCL until:

(a) the determination of the proceedings to be instituted by the Commission against APM pursuant to s.46 or s.50 of the Act or;

(b) the Commission determined not to institute such proceedings.

The specified conditions were:

(1) If the Commission has, by 4.00 p.m. on 18 May 1983 neither instituted such proceedings nor informed SCI that it has determined to institute such proceedings, this undertaking shall lapse.

(2) This undertaking shall not bind SCI unless an identical undertaking is given to the Commission by APM by 4.00 p.m. on 18 May 1983 and remains in force concurrently with this undertaking.

(3) SCI shall be released from this undertaking if the NCSC fails to agree and declare that for the purposes of the Companies (Acquisition of Shares) Codes the period of fourteen days following the delivery of Part A statements to Fibre Containers Ltd. by SCI and APM respectively, shall cease to run while this undertaking and any identical undertaking by APM are in force to the intent that if and when this undertaking and any identical undertaking by APM lapse, SCI and APM shall, upon such lapse be at liberty to act for the purposes of the code and at any time periods specified therein in relation to the service of a Part A statement or the despatch of officers consequent thereon as if the date of such lapse was 17 May 1983.

On 17 May 1983 APM informed the Commission that it acknowledged its advice that the Commission intended to move promptly in the Federal Court for appropriate orders to stop APM's acquisition of FCL shares and noted that it was seeking undertakings so as to hold the present position between the parties until the Court had decided on the legality of the acquisition by APM. APM advised that it "undertakes and agrees subject to conditions set out below not to acquire or take any further steps to acquire any shares in FCL until the determination of the proceedings being instituted by the Commission against APM or a related corporation pursuant to s.80 of the Trade Practices Act in respect of a contravention of s.50 of the Act by APM.". The specified conditions were:

(1) Undertakings to be given to the Commission

(a) by SCI to the same effect as the above undertaking by APM; and

(b) by the Amatil Group that the shares of FCL held by that Group will not be sold to either APM or SCI pending completion of the proceedings and such undertakings remaining in force concurrently with this undertaking.

(2) That APM be released from the undertaking if the NCSC fails to agree that the fourteen days following delivery of Part A statements by SCI and APM respectively shall cease to run while this undertaking and the above undertakings are in force.

On 20 May 1983 SCI confirmed that it had received copies of the telex from APM and from "Mr. McComas of Freehill's" and confirmed that the undertakings given in its telex of 16 May 1983 remained current subject to the current undertakings of APM remaining in force and the third condition concerning the extension time by NCSC. Such confirmation was forwarded to APM and McComas.

On 19 May 1983 FCL sent a telex to the Commission the first paragraph of which is in the following terms:-

"I have received a copy of the APM undertakings given on behalf of that company by Russell W. Evans in his telex of 19th May and on the understanding that an undertaking to the like effect will issue from SCI Packaging Pty. Limited (Smorgon) or that Smorgon confirms that the undertaking contained in Mr. Graham Smorgon's telex to the Commission on 16th May 1983 is revived. I confirm on behalf of the Amatil Group that the undertaking contained in my telex No. 757 to you of 18th May is also revived and will remain on foot subject only to conditions 3 and 4 of my telex."

It should be noted that the expression "the Amatil Group" is used to refer to the third to eighth respondents being the holders of some 74% of the shares of FCL. Mr. McComas acted throughout for FCL and the Amatil Group.

On 23 May 1983 counsel for the Commission, the applicant in the proceedings No. VG 84 of 1983, and for the respondents APM, FCL, the Amatil Group, and for SCI appeared before Northrop J. on an application by the applicant that certain undertakings proposed to be given by these parties be received by the Court and certain directions be given. Hereinafter the expression FCL is used to refer to FCL and the Amatil group of its shareholders unless the contrary is indicated. Mr. Williamson for the applicant said:

"May I take your Honour to the application in matter VG 84. That application sets out the relief that the applicant claims and the relief is for injunctions framed with respect to section 50 proceedings under the Trade Practices Act. There is also a claim for interlocutory relief, and to put the matter shortly the parties to the application and my learned friend Mr. O'Callaghan's clients, (SCI) are here to give undertakings to the court which we envisage would take the place and stand instead of interim injunctions which we would otherwise have sought." (p.176 AB)

He explained that as a result of a round of activities in the previous few days, "we reached the point where it was clear that on a certain basis undertakings would be given", and that in consequence only a formal affidavit was before the Court. It was pointed out by the learned Judge that SCI was not a party to the proceedings No. VG 84 of 1983. Mr. O'Callaghan replied: "We accept the proposition that we are inextricably bound up. . . ". Mr. Williamson also referred the Court to the telexes "because they form the basis of the undertakings which will be given". Counsel for the parties then gave undertakings on behalf of their clients and their associated companies. Reflecting these proceedings an order of the Court for directions was made referring to undertakings which were given in the following terms:-

"Upon the following undertakings being given by the First Respondent, SCI Operations Pty. Ltd. and SCI Packaging Pty. Ltd.:-

APM Investments Pty. Ltd., SCI Operations Pty. Ltd. and SCI Packaging Pty. Ltd. each by their respective Counsel undertake to the Court that they and any related corporations will not, prior to the hearing or determination of Application No. VG84 of 1983 or until further order, acquire or take any further steps to acquire any shares in the capital of Fibre Containers Ltd,

AND upon the following undertakings being given by the Second to Ninth Respondents:-
that until the determination of these proceedings or further order -

1. The Third to Ninth Respondents will not sell to or accept any offer from APM INVESTMENTS PTY. LTD. (APM) (or any related corporation of APM) or SCI PACKAGING PTY. LTD. (SCI) or any related corporation of SCI) to purchase any shares held by them or on their behalf in FIBRE CONTAINERS LTD.

2. The Second to Ninth Respondents will not aid, abet, counsel or procure APM (or any related corporation of APM) or SCI (or any related corporation of SCI) to acquire directly or indirectly any shares in FIBRE CONTAINERS LTD. or in any way be knowingly concerned in or a party to any such acquisitions.

AND subject to the making of an appropriate Declaration by the National Companies and Securities Commission to enable effect to be given to the undertakings herein pursuant to the Companies (Acquisition of Shares) (New South Wales) Code.
THE COURT ORDERS THAT: (There followed lengthy directions for the conduct of proceedings)"

It is to be noted that the original order taken out did not correctly reflect the undertakings given by the parties. What appears is the corrected form of the order.

On 20 July 1983 FCL sought an order that it be released from so much of para. 2 of the order of 23 May 1983 as related to SCI. In support of this application it was said the duration of the proceedings and the uncertainty which would attend the outcome thereof had been and would continue to be disruptive of FCL's business and unsettling to its employees and customers. FCL also stated that it wished to be free to conduct discussions with SCI to ascertain whether that company would alter the conditions upon which it had given notice of its intention to make a take over offer for the shares of FCL so that the Directors of FCL would be able to recommend acceptance thereof to the shareholders of FCL. This application was opposed by the Commission and APM. Mr. O'Callaghan also opposed the application on behalf of SCI saying:

"We understand and I sympathise with the position of Fibre Containers, but the fact is that we gave the undertaking and we have in recent days indicated to the Trade Practices Commission that if the fact of Mr. McComas' undertaking would in any way prejudice the prospects of their pursuing their proceedings, then we would oppose Mr. McComas' application and pursuant to that we are committed to state our opposition to it, which I do." (p.223 AB)

In the course of argument Mr. McComas added:

"I would say in the light of the suggestion made by my learned friend Mr. Shaw, for me to say that even if APM were free to have discussions with Fibre Containers Limited, Fibre Containers Limited would not feel itself free to have discussions with APM because of the existence of these proceedings and that in its turn is the very basis upon which the application is made.

I suggest that the maintenance of that state of mind removes an injustice or, if you like, shifts the creator of that injustice from the court, from the commission or indeed from SCI squarely to the target because that is the target's view and I have the clearest instructions to make that clear to the Court." (p.225 AB)

At the close of argument his Honour said:

"It seems to me that in relation to this matter I have received submissions from the four parties and bearing in mind that the status quo in a difficult commercial situation has been maintained now for two months, I think that, in the light of the attitudes of the respective parties, and what I perceive as being the justice of the situation the undertakings and orders that have been made should continue. I do not propose to vary them." (p.227 AB)

On 11 August 1983 the second to eighth respondents namely FCL and the Amatil Group of its shareholders other than the ninth respondent applied upon motion that FCL and the Amatil group of its shareholders be released from the undertakings given by them to the Court on 23 May 1983 in relation to SCI and that SCI be released from the undertakings given by SCI on 23 May 1983, upon the undertaking to the Court by the third to eighth respondents that:

(a) they would not nor would any of them sell to or accept any offer from APM Investments Pty. Ltd. or any corporation related to that company to purchase any shares held by them or on their behalf in FCL;

and the undertaking by the second to eighth respondents that

(b) they would not aid, abet, counsel or procure APM Investments Pty. Ltd. or any corporation related to it, to acquire directly or indirectly any shares in FCL or in any way be knowingly concerned in or a party to any such acquisitions.

The hearing of the notice of motion took place on 17 August 1983 before Woodward J.

In support of this motion evidence was submitted that by reason of the circumstance that APM and SCI had announced their intentions to bid for the shares of FCL and that there was a state of uncertainty surrounding the status of such bids, due to the proceedings in the Federal Court of Australia, the business of FCL was being disrupted and its employees were being unsettled. It was said that the second to eighth respondents:

" . . . Have given further consideration to their respective positions in the light of the circumstance hereinbefore referred to. (such circumstance being the view held by the Commission that an acquisition by APM of FCL's shares would be a breach of s.50 of the Act) They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the time which will be taken to resolve these proceedings might have upon the value of the shares of the Second respondent and of the interests of the shareholders of the Second respondent in those shares.

In all of these circumstances the Third to Eighth Respondents believe that the circumstances in which the undertakings given on their behalf to this Honourable Court on 23rd May 1983 in relation to SCI Packaging Pty. Limited have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from the First Respondent (or any other company related to the First Respondent) to acquire shares held by them and each of them in the Second Respondent." (p.238 AB)

On behalf of SCI which supported the motion although it was not a party to the proceedings brought by the Commission evidence was submitted that:

"SCI Packaging Pty. Ltd. (which together with SCI Operations Pty. Ltd. and other related companies is hereinafter referred to as "SCI") gave the undertakings contained in the exhibits to the affidavit of the said Stanley David Martin Wallace predominantly to ensure that the Trade Practices Commission instituted and pursued proceedings under Section 50 of the Trade Practices Act 1974 against APM Investments Pty. Ltd. ("APM"). There were undertakings given by SCI prior to those referred to in the said affidavit which are exhibited thereto and marked with the letter "A".

SCI believed that if such undertakings were not given then the Commission would not institute and pursue such proceedings and that Fibre Containers Limited and its shareholders ("FCL") were prepared to entertain offers by APM to acquire the subject shares."

These are the submissions which appealed to the learned Judge and contributed to his decision that the application should succeed. But his Honour was conscious that "because of the interlocking nature of the undertakings which were given on the understanding that both APM and SCI would be similarly bound" it would be unfair to release FCL and SCI from their undertakings without considering afresh the position of APM. But it is clear that in so doing he took the view that APM's position must be considered on the basis that, in any event, APM must be prevented from acquiring the shares before the litigation was concluded and that an appropriate provision to that effect must be maintained notwithstanding the provisions of s.81. In these circumstances the best he could do for APM was to propose that it might, on giving an undertaking not to acquire the shares until the proceedings were concluded, be permitted to negotiate for the shares on the condition that acquisition thereof should take effect only if the Court should find that APM was not in breach of s.50 of the Act.

The problem was dealt with by the acceptance by his Honour of an undertaking proffered by the Amatil group not to sell to APM until the proceedings were determined or further order and by FCL not to aid or assist in any such sale. On that basis he was able to and did release APM entirely from its existing undertaking. FCL and the shareholders gave the undertakings in the terms last stated and his Honour released all parties from their undertakings of 23 May 1983.

It is apparent that from the point of view of APM it gained nothing of practical benefit by its release because the potential sellers to whom it might make an offer to buy were restrained, until the determination in its favour of the proceedings against it, from unconditional acceptance of such offer. During the period of the restraint SCI was at liberty to make and FCL was at liberty to accept an unconditional offer to purchase the shares from SCI. From a practical point of view it would seem futile for it to make such an offer. And a conditional offer would, to say the least, be likely to be most unattractive to any offeree.

In view of the circumstance that the undertaking of APM was given on the basis of reciprocal undertakings being given by SCI and FCL, it is a serious question whether the imposition of this potentially crippling condition should have been imposed upon APM as a condition of its release, when, in the same proceeding, SCI was unconditionally released from its undertaking and FCL were unconditionally released from their undertaking so far as it related to selling the shares in FCL to SCI. Did the imposition of the condition not do a substantial injustice to APM? It is a reasonable inference that had his Honour not felt that the case for restraining APM from acquiring the FCL shares while the Commission was asserting that such acquisition would contravene s.50 of the Act was irresistible, he would not have made the order that he did. But as his Honour saw the inevitability of APM being restrained, in any event, from acquiring the shares until the claim under s.50 of the Act was disposed of, the element of injustice in an order the practical effect of which was that APM could only acquire the shares from offerees who would accept an offer on condition that acceptance took effect only after the proceedings against APM were concluded and concluded in its favour was correspondingly reduced. But with deference to the view expressed by his Honour, to approach the problem on the basis that APM must inevitably be restrained from acquiring the shares until the claim in relation to s.50 of the Act was disposed of, was not appropriate.

Although there had always been on foot a claim for an injunction, and there had been an application for interlocutory relief by way of injunction to restrain APM from acquiring the shares pending determination of the proceedings, the course of the proceedings had been such, that the application for an interlocutory injunction had never been made to the Court. Once the parties had given their undertakings the Commission was satisfied not to seek an interlocutory injunction.

During the argument before Woodward J. Mr. Williamson for the Commission said:

"In saying that the commission opposes the release of all the parties, one of course really means by that APM from its undertakings. To maintain that view, we accept as the equivalent to containing that the equivalent and interim injunctions should continue. We equate the existing undertaking with that position. So in saying we would oppose the release, we are in effect saying an injunctive type situation should continue." (p.303)

Mr. Shaw commented as follows:

"My learned friend, Mr. Williamson, said that he applied for an injunction. If that was the view that your Honour did take in relation to the undertakings, and your Honour was minded to desolve them all, for our part we fail to understand how it could make such an application: he has no material before your Honour; the matter has not been argued; no notice has been give; it seems, in our submission, rather the expression of a desire than the proper making of an application. The only application that would be before your Honour would be an application by Fibre Containers for the release of these undertakings." (p.317)

In his closing address Mr. Williamson said:

"The main point is that the release of APM from this undertaking in effect determines any subsequent injunction application because the issues are the same. In practical terms it comes down to the balance of convenience with the same sort of factors that have been canvassed today, and so for that reason we seek to persuade your Honour that the appropriate course is not to release APM for the reasons that have been put. If, contrary to that submission, your Honour were minded to release APM then our submission in relation to that would be that as part of the present proceedings concerning the re-arrangements of undertakings, that APM should be released on terms, that is conditions attached to the release promise undertaking, . . .

That is, to preserve the prospects for effective section 81 proceedings should the need for that arise. So we see no point in regurgitating an injunction application if the same material has been considered today. We prefer to take that course that I have just outlined. That is, no release, or if there is, on terms, and the question of appropriate terms can be readily advised." (p.323/4 AB)

Thus the question of whether in these proceedings APM should be restrained by way of interlocutory injunction from taking steps to acquire the FCL shares was not judicially investigated. APM had shown every intention of defending the case brought against it by the Commission. Had the Commission sought an interlocutory injunction there is every reason to believe that APM would have resisted it. It would have desired to file affidavits and argue the matter in full. The issue was not raised or debated before the learned Judge. And indeed it cannot be thought to have been a foregone conclusion that had the Commission sought such an injunction it would have been granted. It would have been put that the bid which APM desired to make was purely as a matter of defence against the SCI bid which if successful would have deprived APM of one of its most important customers and led to a considerable reduction in its factory production and employment. The significance of s.81 of the Act might have appeared differently had the matter been argued. Obviously a strong case could be made that the loss suffered by APM might be extremely high if it were restrained by injunction and then ultimately succeeded in its defence in these proceedings. In such a situation the existence of the remedy provided by s.81 is most relevant. Where the parties concerned are large responsible entities the viability of the target company and thus the value of its shares would be capable of being maintained by appropriate conditions or undertakings if the shares were acquired before the action of the Commission against APM was determined. In addition, if APM acquired the shares before the determination of the action by the Commission it would do so because it was offering to the shareholders the best price available to the shareholders.On a divestiture, if it became a fact, any loss would be that of APM itself. The operation would have been to the distinct advantage of the shareholders. If shareholders refrained from selling to APM in fear of being found to have aided and abetted a contravention of s.50 of the Act then to that extent APM's offer would fail. If it was ultimately decided that there was a contravention the question whether those who sold to APM were in fact guilty of so aiding and abetting would remain to be decided. In respect of each individual vendor to APM it, could not be asserted that he would necessarily be in any way knowingly concerned in or a party to the contravention. Until the proceedings between the Commission and APM were concluded nobody could know that there was a contravention.

In addition, an interlocutory injunction obtained by the Commission carries no undertaking for the payment of damages by the Commission. Whilst this may be appropriate in relation to the law enforcement operations of the Commission it cannot be irrelevant on the matter of the granting of an interlocutory injunction in a matter which is genuinely contested, in respect of which the issue will depend on a judgment in a difficult field after a hearing of some three months, and where the consequences of the grant of an interlocutory injunction, later found to have been granted on a wrong assessment of the actual legal position, would be irreparable loss. It is to be observed also that an infringement of s.50 does not do immediate harm to any person. It results merely in a disturbance of what is considered the desirable state of national economic organization which s.50 is designed to protect. If a proposed acquisition of shares which it is thought may contravene the provisions of the section is carried out and is ultimately shown to be a contravention, irreparable harm is not normally likely to result because s.81 provides the means to correct the organizational disturbance that has occurred. Should an interlocutory injunction preventing the acquisition be granted and it not be established that the acquisition would contravene s.50, irreparable harm to the entity restrained is almost inevitable. The ordinary and normal flow of business would have been obstructed, and the entity restrained would have been prevented from protecting an important and perhaps vital business interest by competing in the market. In a case like the present where there are two suitors for the shares such interlocutory relief would eliminate competition in the market, a result hardly compatible with the general purposes of the Act. It would appear, therefore, that although after considering such matters, and such other factors as might have been raised on an application for an interlocutory injunction, there certainly were weighty arguments, meet for consideration of the Court, against the granting of such an application.

The critical consideration for present purposes is however that the learned Judge did not have such arguments before him. It would seem therefore, that the learned Judge erred in assuming that APM could not escape from a position in which it was restrained from acquiring the shares or making a bid while the Commission was claiming that to do so would offend s.50 of the Act.

It would seem that one factor influencing the learned Judge to make the assumption was the ascription by him of a special significance to the view of the Commission that the proposed acquisition by APM would contravene s.50 of the Act. His Honour appears to have treated as material to the course he took, that the possible detriment to APM, should it remain bound while SCI and FCL were released, was "a direct result of the view responsibly held by the government regulatory authority that it would be in breach of the Act if its takeover proceeded". With all respect, the reference to the responsible character of the Commission and its views were not really relevant to the problem. In relation to Part VI of the Act it is to ascribe too much to the role of the Commission to describe it as a regulatory authority. Its authority is to enforce the law and put its arguments to the Court in the same way as any other party to litigation. It is to be noted that the learned Judge himself in In re Queensland Co-operative Milling Association (1976) 25 FLR 169 at 176, in relation to a merger problem, drew attention to the circumstance that, there was in his opinion, "no presumption that any particular finding by the Commission was correct.". But the practical effect of the order under appeal is to secure to the Commission the benefits of interlocutory relief against APM without it having had to fight for such relief.

It is to be observed that, within the limits set by his assumption that APM must inevitably be restrained from acquiring the shares until the case against it was determined, he did all he could to put APM on equal terms with SCI. However, those limits were, in my opinion, wrongly set. This is important because it went to the question of the assessment of the requirements of justice as between the parties which arose out of the giving of the undertakings on 23 May 1983. It is clear that SCI gave its undertaking for the express purpose of, as it thought, ensuring that the Commission would pursue APM to judgment effectively removing it as a competitor. The willingness of SCI to regard itself as "inextricably bound up" in action No. VG 84 of 1983 when on 23 May 1983 it gave its undertaking reflected its intense desire to be the only bidder. However, the price it paid was to be party to an arrangement with APM under which APM gave its undertaking. The genesis of the arrangement was in the terms of the original telexes which were before the Court on 23 May 1983. Each of those telexes contained stipulations that the undertaking of each party was conditional on similar undertakings being given by the others. The price which APM paid as part of the arrangement was that it undertook not to proceed with its offer pending the determination of the case. On ordinary considerations of fairness, save in special circumstances, one party could hardly be kept in the position it had accepted as part of the arrangement and the others be released. It seems that his Honour appreciated this, and would not have proceeded, to maintain, in a practical way, the disabilities endured by APM under its undertaking whilst relieving SCI and FCL had he not assumed APM could not, in any event, escape those disabilities. The result was that SCI having been a party to an arrangement which was, in its view, directed to encourage the Commission to proceed against APM, and having in a sense, induced APM to give its undertaking, has reached a position that it is as free as it would have been had it remained aloof from action No. VG 84 of 1983 while APM is at great disadvantage.

This appeal relates to an order made by his Honour in the exercise of a discretion. The manner in which an appeal against an exercise of discretion should be determined is set out in House v. The King (1936) 55 CLR 449 at 505 where Dixon Evatt and McTiernan JJ. said as follows:

"It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so."

Gibbs C.J., Aickin, Wilson and Brennan JJ in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Philip Morris Ltd. (1981) ALJR 548 at 550 stated that not only must there be an error of principle but the decision appealed from must work a substantial injustice to one of the parties.

They went on to say that there was authority that the above criteria should be expressed disjunctively but they felt it was unneccesary and unwise to lay down rigid and exhaustive criteria because the circumstances of different cases were infinitely various. In any case they felt it was safe to say that the question of injustice flowing from the order appealed from would generally be a relevant and necessary consideration.

In my opinion in this case, whether the criteria are expressed disjunctively or conjunctively, the appeal should succeed because his Honour's decision was based on an error of principle and his decision works a substantial injustice to APM.

It has been argued by FCL and SCI that the order appealed from relates merely to matters of practice and procedure and does not determine any substantive rights of the parties and therefore an appellate court should exercise particular caution in reviewing decisions of primary judges pertaining to practice and procedure. Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Philip Morris Ltd. (supra) at 550; In re the Will of F. B. Gilbert (deceased) (1946) 46 S. R. (NSW) 318 at 323; Brambles Holdings Ltd. v. Trade Practices Commission (1979) 28 ALR 191 at 193; Dougherty v. Chandler (1946) 46 SR (NSW) 370 at 374.

Although the order appealed from and the original order made by Northrop J. on 23 May 1983 were prima facie procedural orders both orders also affected the substantive rights of the parties involved. The order made by Woodward J. operates to frustrate effectively a bid by APM to acquire the shares of FCL, and to enable SCI to press on with its bid free from equal competition from APM.

Whilst I proceed in these reasons on the basis that the nature of the order is that it is made on a matter of practice and procedure, it remains relevant that it deprives APM of a most valuable commercial interest, namely the capacity to make an unconditional offer to acquire property in which it has a special concern arising not only out of the value of the property but out of the necessity to protect a valuable market for its goods which is dependant on the ownership of that property. And it restores to FCL and SCI the freedom to deal with each other forthwith which they had forfeited to achieve the undertaking by APM. There is much to be said for the view that FCL and SCI should be and should always have been free to deal with the shares in FCL. And indeed, had they not, for their own purposes, intervened in the relationship between the Commission and APM, they would be and have been so free. But for that intervention APM would have been similarly free, subject of course, to the possibility of the Commission seeking and obtaining an interlocutory injunction to restrain it from proceeding with its bid. As indicated above the opinion expressed by the learned Judge was that such an injunction against APM was inescapable. And this opinion was so important as an influence in the exercise of the judicial discretion, that to act on it in the absence of a formal claim for an interlocutory injunction, with an opportunity to APM to call evidence on relevant matters and be heard on the issue, was really a departure from principle. It is difficult to think that this departure would have occurred had it not been for the atmosphere created by the request of the Commission that the parties give the reciprocal undertakings and the willingness of the parties, for the advantages they presented, to give them. When, however, FCL assessed its best interest to be to ignore the benefits of having APM as a competing suitor and sought to have its undertaking be set aside, it was a critical factor that its undertaking, like that of SCI, was given deliberately to the Court for good commercial reason, with eyes wide open, as part of a transaction in which APM consented to a restriction of its commercial freedom.

It is suggested that the business difficulties now being expressed by FCL by reason of the uncertainties concerning the possible changes in the shareholding constitute new facts or circumstances the emergence of which render the undertakings unjust to FCL and SCI. See Wood v. Sheriff of Queensland (1895) QLJ 163; Hutchinson v. Nominal Defendant (1972) 1 NSWLR 443, and Chanel Ltd. v. F.W. Woolworth & Co. Ltd. (1981) 1 WLR 485. However, when FCL gave its undertaking it could not be that it did not realise that the bids of APM and SCI might remain frozen for quite a considerable time during the progress of the litigation. The intentions of both APM and SCI to proceed vigorously with their bids when legally able to do so would also be within their knowlege. That was public knowledge. As commercial entities the possibility of repercussions of a business nature from the existence of those bids and the imminence of their being pursued as soon as possible, and the surrounding uncertainty in the meantime, would, one would think, be foreseen or readily foreseeable. At any rate objectively the possibility of such repercussions was clearly to be seen. Accordingly the repercussions alleged in this case are new facts only in the sense that they have occurred since the giving of the undertakings. They are not new in their quality as unforeseen consequences of the giving of the undertaking. They were, in a real sense, to have been anticipated. The risk that they might occur was part of the price paid for the benefit of the reciprocal undertakings. There is much to be said for the view that the change of mind of FCL is due to commercial considerations reducing the benefit to it of having an APM bid in competition with that of SCI at this stage. At any rate, to my mind, the repercussions do not qualify as the kind of new fact or circumstance which, having regard to the nature of the original arrangement for the giving of the reciprocal undertakings, would support the release of FCL and SCI from their undertakingas where the bid of APM remains frustrated.

Reliance was placed by the FCL on the provision in the undertakings that they were to operate "until further order." The observations of Buckley L.J. in Chanel Ltd. v. F.W. Woolworth & Co. Ltd. (1981) WLR 485 at 493 are in point. His Lordship said:-

"In my judgment, an order or an undertaking to the court expressed to be until further order by implication gives a right to the party bound by the order or undertaking to apply to the court to have the order or undertaking discharged or modified if good grounds for doing so are shown. Such an application is not an application to set aside or modify any contract implicit in the order or undertaking. It is an application in accordance with such contract, being an exercise of a right reserved by the contract to the party bound by the terms of the order or undertaking.

Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter."

Accordingly the application by FCL which was heard on 17 August 1983 was authorised by the terms of its undertaking even if there were elements of contract in the arrangement under which it and APM's reciprocal undertaking was given. But on the question of whether the application should be granted the circumstance that there was such an element of contract would be relevant. The weight to be given to that element would depend upon circumstances, in particular, what each party had gained from the contract or arrangement and what each party had suffered thereby. Inevitably, on considerations of justice, the relief of the sufferings of one or some of the parties while one or others continued to suffer would be unfavourably regarded, and in most cases, one would think, decisive. To justify the release of a party circumstances such as those referred to by Buckley L.J. in the observations last cited would be necessary. As indicated above those circumstances are not shown to exist in this case.

Apart from the circumstances that, in seeking release, FCL and SCI were in a sense seeking to deprive APM of the benefits passing to it under the original arrangement for reciprocal undertakings and to regain the freedom they forfeited to achieve those undertakings and presumably profit thereby there would be much to be said for FCL being free to deal with whom it chooses, and for SCI to be free to bid for the shares. But it is the effect of the order in rendering a bid by APM merely a futility which does the work which would be done by an interlocutory injunction if one were given. That part can be said to be unjust because the case for such an injunction had not been tried. And there is more to it than that. The arrangement expressed in the reciprocal undertakings secured for APM the opportunity, if it were successful in its defence in the action by the Commission, to bid for the shares in due course, free from any shadow of illegality. This was the benefit of the arrangement to FCL. So far as they were concerned the arrangement secured the possibility that after the action was disposed of a purchaser for the shares with every incentive to pay a good price could bid for the shares free from any shadow of illegality. So far as SCI was concerned it tended to ensure that if APM's bid were illegal that illegality would be proved and APM removed as a competitor. For the parties to resile from the arrangement left APM in the position that, even if there were no interlocutory injunction, it could not shake off the shadow of illegality in time to make an effective bid. It is this feature of the situation that renders the desire of FCL and SCI to repudiate the arrangement of particular significance.

In the circumstances the fact that FCL has indicated a present intention not to deal with APM is not to the point. It may well be the product of the shadow of illegality. Intentions may change when the shadow is removed and APM's unconditional bid is made. It is the freedom of APM to make a bid which may produce a change of intention which is at stake. And this Court was assured by Dr. Griffith that there is no private arrangement between FCL and SCI.

To my mind to hold APM in a position where FCL cannot accept an unconditional bid by APM while SCI is free to make such a bid and have it accepted, there being no interlocutory injunction restraining APM, is manifest and fundamental. And in so saying I would regard myself as in agreement with the learned Judge, the point of difference in the result being that the learned Judge considered that APM ought, according to law and particularly to s.50 of the Act, and in the existing circumstances, to be treated as though the obtaining of an interlocutory injunction were a matter of course. It is at this point that, to my mind, as previously stated, there was an error of principle in the approach of the learned Judge which resulted in an order which subjects APM to a disability which as a matter of justice is unacceptable.

The last question that requires this Court's consideration is what should be done about the undertakings given by the parties on 23 May 1983. It is said that all purpose has gone out of the undertakings as a result of the current state of mind of the Amatil shareholders not to deal with APM. Accordingly APM has nothing to gain from the maintenance of the restrictions upon FCL itself and its shareholders and SCI under the undertakings of 23 May 1983. But a result of the involvement of the Court as the recipient and guardian of the undertakings and the relationships of the parties thereunder a certain stability was imparted into that arrangment. Notwithstanding the words "until further order" it is not to be thought that the arrangement ought to be treated as one intended to persist only until FCL itself or its shareholders or SCI should change their minds. And basically, as previously stated, it must be in the interests of justice that an arrangement made by fully advised independent legal entities involving reciprocal obligations expressed and defined in undertakings tendered to the Court, and thereby made subject to enforcement, should be observed unless there are new facts or significant circumstances which would not reasonably have been known or foreseeable at the time of entering those undertakings. It might be argued that ever since the announcement of SCI's intention to make its takeover offer the parties ought to have been left to pursue their interests as they were entitled by law to do. It is arguable that that situation might now be recreated simply by releasing all parties from their undertakings of 23 May 1983. However, none of the parties in this appeal indicated that the Court should approach the matter in this way. It is my view that the Court should not do so. That course would involve a serious departure from what is just. The whole basis of the arrangement was to preserve the status quo until either APM was shown to be excluded by law or completely free to buy the shares and hopefully make the higher bid. To send APM into the market now, free but for the shadow of allegations by the Commission that the proposed acquisition of shares was illegal, would be to impose upon APM the very disability which the reciprocal undertakings given by each party for its own purposes, were intended to avoid. The kind of practical disability attaching to APM's bid in such circumstances is possibly exemplified by the change in the current intention of FCL, a change that could well persist until that shadow is removed.

If in a takeover situation where there are competing parties and with respect to one of the parties the Commission publicly asserts that acquisition by that party of the shares in question is regarded as a contravention of s.50 there is inevitably a real possibility that shareholders will be nervous of their own position under s.80 of the Act and will refrain from accepting the offer by that party even if it is the highest offer available. Should it be that the view of the Commission is ultimately found to be unsound, serious harm will have been suffered by the party concerned and the shareholders and in a commercial sense suffered unfairly. In such a case there is much to be said for all bids awaiting ultimate clarification of the legal situation. Where that element of unfairness has been eliminated by an arrangement supported by reciprocal undertakings given for good commercial reasons, justice must be on the side of maintaining the resulting situation, namely that all bids await clarification of the legal situation.

Accordingly I would allow the appeal and set aside the order under appeal. So far as the costs of this appeal are concerned the parties should be given leave to make written submissions within fourteen days and the question of costs is reserved.

JUDGE2

This is an expedited appeal from an order of a single judge of this Court (Woodward J.) made on 24 August 1983. The trial of the proceedings in which the order was made was due to commence on 22 August 1983 and to take some months but has been postponed, at least temporarily, by Woodward J. There are obvious circumstances of urgency.

On 4 May 1983, S.C.I. Packaging Pty Ltd ("S.C.I.") registered with the National Companies Securities Commission a Part A Statement under the Companies (Acquisition of Shares) Code in respect of an offer to acquire all of the issued shares in Fibre Containers Ltd ("F.C.L.") for a price of $3.50 per share. S.C.I. is a member of what is colloquially known as the Smorgon Group. There is no need to distinguish in these proceedings between S.C.I. and its related corporations. S.C.I. is a producer of the raw material used by F.C.L. in its business as a manufacturer of fibre containers. F.C.L. is one of the largest manufacturers of such containers in Australia.

F.C.L. is a customer of the other major producer of such raw material, A.P.M. Investments Pty Ltd ("A.P.M."), which is a subsidiary of Australian Paper Manufacturers Ltd. A.P.M. supplies significantly more than S.C.I. of the raw material used overall in Australia. There is no need to distinguish in these proceedings between A.P.M. and its related corporations.

On 4, 5 and 6 May 1983, A.P.M. purchased a total of 1,179,929 shares in F.C.L. at a price of $3.65 per share. It is a reasonable inference that the market price of F.C.L. had previously been less than the price offered by S.C.I. of $3.50 and it is obvious that F.C.L. has a special value to A.P.M. and S.C.I.

On 6 May 1983, S.C.I. unsuccessfully applied ex parte to a single judge of this Court for an interlocutory injunction to restrain A.P.M. from acquiring further shares in F.C.L. On the same day, S.C.I. gave certain undertakings to the Trade Practices Commission, the substantial effect of which was that S.C.I. would not proceed with its attempt to take over F.C.L. for a period of 14 days. The purpose of such undertakings, according to an affidavit later sworn by a director of S.C.I., was "predominantly to ensure that the Trade Practices Commission instituted and pursued proceedings under s.50 of the Trade Practices Act 1974" ("the Act") against A.P.M., because S.C.I. believed that F.C.L. and its shareholders "were prepared to entertain offers by A.P.M." to acquire the shares in F.C.L.

On 11 May 1983, A.P.M. publicly announced that it proposed to make a take-over offer for all of the issued shares in F.C.L. at a price of $4.00 per share, and, on 13 May 1983, A.P.M. registered a Part A Statement with the National Companies Securities Commission. By that date, A.P.M. held 2,395,900 shares in F.C.L., amounting to 18.17% of the issued capital of F.C.L. Approximately 74% of the issued capital of F.C.L. is held by nominees of Amatil Limited (the "Amatil shareholders"). The remaining 7 to 8% of the issued shares in F.C.L. are held by members of the public.

On 16 May 1983, A.P.M., S.C.I., F.C.L. and the Amatil shareholders in F.C.L. gave undertakings to the Trade Practices Commission that, in effect, neither take-over would proceed until the Trade Practices Commission had considered the matter. (There has been some difficulty throughout because of the inability of one of the Amatil shareholders to participate because of ill-health but that is not of any consequence to the outcome of the present appeal.)

On 18 May 1983, the Trade Practices Commission notified A.P.M., S.C.I., F.C.L., and Amatil that the Commission considered that A.P.M.'s proposed acquisition of control of F.C.L. would breach s.50 of the Act.

On 19 May 1983, S.C.I. instituted proceedings in the Victorian Registry, No. VG 82 of 1983 (the "S.C.I. action"), for a declaration that the proposed acquisition by A.P.M. of the issued shares in the capital of F.C.L. would be a contravention of s.50 of the Act and an interlocutory injunction to restrain A.P.M. from taking any further steps to acquire any issued shares in the capital of F.C.L. pending trial. Australian Paper Manufacturers Limited was joined as a respondent and S.C.I. also asked in its Application for a declaration that the pricing policy adopted by Australian Paper Manufacturers Limited constitutes a contravention of s.46 of the Act. More recently, S.C.I. has commenced a further proceeding in the Victorian Registry, No. VG 126 of 1983, in which breach of s.47 of the Act is alleged.

On 20 May 1983, the Trade Practices Commission commenced proceedings in the Victorian Registry, No. VG 84 of 1983 ("the T.P.C. action"), against A.P.M., F.C.L., and the Amatil shareholders seeking both final and interlocutory injunctions to restrain the acquisition by A.P.M. of the issued capital of F.C.L. No Statement of Claim yet delivered in the T.P.C. action contains any allegation against F.C.L., and the only allegation which has been pleaded against the Amatil shareholders is that they threaten and intend to consider acceptance of an offer by A.P.M. for their shares in F.C.L.

No claim has been made to date in any of the proceedings for the divestiture by A.P.M. of the shares which it already holds in the capital of F.C.L. Further, no claim has been made or seriously asserted by either A.P.M. or the Trade Practices Commission against S.C.I. concerning S.C.I.'s proposed acquisition of the shares in F.C.L.

On 19 and 20 May 1983 undertakings were given to the Trade Practices Commission by A.P.M., S.C.I., F.C.L., and the Amatil shareholders. Each of the respective undertakings was conditional upon the undertakings given by the other parties. In effect, the undertakings temporarily froze the position in respect of each of the rival bids for the shares in F.C.L.

On 23 May 1983, the T.P.C. action came on for directions and the Trade Practices Commission's application for an interlocutory injunction against A.P.M. before the Honourable Mr Justice Northrop. On the same day, on the application of S.C.I., the directions hearing in respect of the S.C.I. action was advanced from 10 June 1983 to that day and both directions hearings took place together. Directions, the details of which are not presently material, were given, and the directions hearings were adjourned to 9 June 1983. Further, in the course of the proceedings before Northrop J. on 23 May, undertakings were given and it is these undertakings which lie at the heart of the present controversy.

Regrettably, to compound the complications which otherwise exist, no order has been taken out in respect of the directions hearing in the S.C.I. action on 23 May and the order taken out in respect of the T.P.C. action on that day inaccurately states the undertakings which were given. However, there is a transcript which records what occurred and the parties are agreed upon what is the proper form of order and have been given leave by this Court to correct the order entered. Further, it does not seem to be in dispute that the undertakings are to be considered as having been given in the T.P.C. action since the parties thought that, by virtue of sub-s. 80(1A) of the Act, there could be difficulties in the path of injunctions or undertakings in the S.C.I. action. It is unnecessary to consider here whether those fears were well-founded: see Brisbane Gas Co Ltd v. Hartogen Energy Ltd (1982) 42 A.L.R. 85. Nor is it in dispute that the cross-undertakings were given in compromise of the proposed application for an interlocutory injunction.

The corrected order in the T.P.C. action is in the following terms:
ORDER

JUDGE: NORTHROP J.
PLACE: MELBOURNE
DATE: 23 MAY 1983

Upon the following undertakings being given by the First Respondent, S.C.I. Operations Pty Ltd and S.C.I. Packaging Pty Ltd:-

A.P.M. Investments Pty Ltd., S.CI. Operations Pty Ltd and S.C.I. Packaging Pty Ltd each by their respective Counsel undertake to the Court that they and any related corporations will not, prior to the hearing or determination of Application No. VG84 of 1983 or until further order, acquire or take any further steps to acquire any shares in the capital of Fibre Containers Ltd.

AND upon the following undertakings being given by the Second to Ninth Respondents:-

that until the determination of these proceedings or further order -

1. The Third to Ninth Respondents will not sell to or accept any offer from A.P.M. INVESTMENTS PTY LTD (A.P.M) (or any related corporation of A.P.M.) or S.C.I. PACKAGING PTY LTD (S.C.I.) or any related corporation of S.C.I.) to purchase any shares held by them or on behalf in FIBRE CONTAINERS LTD.

2. The Second to Ninth Respondents will not aid, abet, counsel or procure A.P.M. (or any related corporation of A.P.M.) or S.C.I. (or any related corporation of S.C.I.) to acquire directly or indirectly any shares in FIBRE CONTAINERS LTD. or in any way be knowingly concerned in or a party to any such acquisitions.

AND subject to the making of an appropriate Declaration by the National Companies and Securities Commission to enable effect to be given to the undertakings herein pursuant to the Companies (Acquisition of Shares) (New South Wales) Code.

THE COURT ORDERS THAT:

(here followed directions)"

A.P.M. is the first respondent, F.C.L. is the second respondent, and the Amatil shareholders are the third to ninth respondents.

The qualification to which each of the undertakings was subject is not now relevant. It is, however, important to observe that there is not the slightest doubt but that the respective undertakings were given pursuant to an arrangement between the parties, were interdependent, were given and accepted in lieu of a contested application for interlocutory relief in the T.P.C. action, and were intended to preseve the status quo pending the outcome of the T.P.C. action. When Northrop J. pointed out that S.C.I. was not a party to the T.P.C.action, he was met with the response from senior counsel for S.C.I. that S.C.I. was "inextricably bound up" with that action and counsel alluded to an application by S.C.I. to have the T.P.C. action and the S.C.I. action heard together. Later in the proceedings, counsel for S.C.I. was at pains to point out that S.C.I. had not "come in on the back of" the Trade Practices Commission but had "initiated" the s.50 attacks on A.P.M.

Two further statements made in the course of the proceedings before Northrop J. on 23 May should also be noted. Senior Counsel then appearing for A.P.M. (Mr. Searby Q.C.) said:

" . . . If I can simply come down to the timetable, which seems to us to be the material matter, the kind of stages that we have in mind would be governed by the consideration that this is a very serious matter for Fibre Containers as well as for any person who is seeking to acquire their shares. Commercially, it would be highly disadvantageous to delay the finality and to extend the time during which this prevails and that must be not only to their market, but also to their employees and their shareholders as well as for the companies concerned here and their position."

Later, the solicitor then representing F.C.L. and the Amatil shareholders said:

" . . . My clients would with respect accept the submissions of my learned friend Mr Searby as to a shortening of the times in the draft minutes which my friend Mr Williamson has handed up to your Honour. As has been pointed out to you, there are numerous people within the Fibre Containers organisation vitally concerned to be enlightened as to their future and which having regard to the fact that there are two competing suitors for its hand, but there is overlaying that, I restrain from the words that first come to my mind, a (predator) seeking to waylay those suitors, but there are particular procedures making for a position of substantial uncertainty and in those circumstances I would ask your Honour to accept that in the interests of not only employees and shareholders, but the very business of Fibre Containers Limited, it is proper that these proceedings be determined at as early a date as is consistent with the presentation of the case before your Honour in a proper and prepared way.

It does seem to me that Fibre Containers Limited at least, and it is from Fibre Containers Limited that the bulk of the evidence touching the interests of the clients for whom I appear would be relevant to the proceedings. Fibre Containers Limited would comply with the programme suggested by Mr Searby."

The significance of these statements is in connection with the awareness which they show exiisted on the date when the undertakings were given that the proceedings would take some time and delay would or might affect F.C.L., (and thus those who are or become its shareholders.)

On 9 June 1983, both adjourned directions hearings came on before Woodward J. who extended the times for the interlocutory steps in both proceedings and adjourned both directions hearings to 13 July 1983. On that day, his Honour reserved for the consideration of the trial judge an application by S.C.I. for an order that the S.C.I. action should be heard at the same time as the T.P.C. action but gave the parties liberty to apply.

Both directions hearings again came on before Woodward J. on 13 July 1983 and were adjourned by his Honour to 20 July 1983. His Honour further directed that the question of whether both proceedings should be heard together or separately should be argued on 26 July 1983 and adjourned the trials to a date to be fixed not earlier than 2 August 1983.

By a notice of motion dated 18 July 1983 and returnable on 20 July 1983, F.C.L. applied to be released impart from paragraph 2 of the undertaking which it had given to the court on 23 May 1983 insofar as it related to S.C.I. The application was supported by an affidavit by the Chairman of Directors of F.C.L. which, omitting formal parts, was in the following terms:

"2. I am informed and verily believe that these proceedings and all the preparation incidental thereto, will take a substantial amount of time and involve a large amount of work, effort and expense for all parties involved including the second respondent.

3. I also believe that the likely duration of the proceedings and the uncertainty which would attend the outcome thereof is and will continue to be disruptive of the business of Fibre Containers Limited and unsettling to its employees and customers.

4. Fibre Containers Ltd. seeks to be released from so much of paragraph 2 of the undertaking it has given to this court as relates to S.C.I. Packaging Pty Limited in order that it might conduct discussions with S.C.I. Packaging Pty Limited to ascertain whether that company will alter the conditions upon which it has given notice of its intention to make a take-over offer for the shares of Fibre Containers Ltd. such that the directors of Fibre Containers Ltd. would be able to recommend acceptance thereof to the shareholders of Fibre Containers Ltd."

F.C.L.'s application was opposed by A.P.M. and the Trade Practices Commission. It was also opposed by S.C.I. because, according to a later affidavit by a director of S.C.I., it anticipated that, if the application was granted, the prospect of the T.P.C. maintaining its application against A.P.M." might be prejudiced. F.C.L.'s application was dismissed by Woodward J. without detailed reasons on 20 July 1983. In a later judgment delivered on 22 August 1983, which has led to the present appeal and to which more detailed reference will be made below, his Honour said concerning the application dismissed by him on 20 July:

"In view of the fact that all other parties opposed the application, and that the positions of all parties, in a difficult commercial situation, had already been frozen by mutual agreement for a period of two months, I took the view that the balance of justice and convenience required that the undertakings continue in force. I therefore refused the application."

It is not strictly correct to say that all other parties opposed the application since the Amatil shareholders did not do so. Further, it should be noted that his Honour knew when he decided the July application that F.C.L. and the Amatil shareholders were asserting an unwillingness to deal with A.P.M. whilst the T.P.C. persisted in its claim and the T.P.C. action was unresolved. Further mention of this changed attitude will be made below.

On 20 and 21 July 1983, directions hearings also took place, both in the S.C.I. action and the T.P.C. action. Inter alia, A.P.M. appied to strike out part of the Statement of Claim in the T.P.C. action and, in the course of the hearing, the Trade Practices Commission sought leave to deliver an amended Statement of Claim. The directions hearings were adjourned to 26 July 1983 on which date it was indicated that the Trade Practices Commission would be given leave to deliver an amended Statement of Claim which it did on that day. The directions hearings continued into the following day, 27 July 1983.

During the course of the directions hearings on 27 July 1983, S.C.I. applied for an order that the S.C.I. action be heard at the same time as the T.P.C. action and mentioned as an alternative that S.C.I. might be added as a respondent in the T.P.C. action. The Trade Practices Commission did not consent to S.C.I.'s application and it was opposed by A.P.M. The application was dismissed by Woodward J. In reasons for judgment delivered on 4 August 1983, his Honour said in substance that the additional length and cost which would thereby be occasioned in the T.P.C. action was unwarranted and "contrary to the spirit and scheme" of the Act. His Honour also said:

" . . . Nor, in my opinion, does the fact that a person has given undertakings not to take advantage of the s.50 proceedings against a rival bidder to improve his own chances of a successful take-over, give that person any entitlement to a voice in those proceedings. If those proceedings are successful, the third party may be advantaged but that is no reason why he should be entitled to add to his rival's burdens in the trial of the action."

Woodward J. referred also to a variety of other considerations but stated that, on balance, the application should be refused. No appeal has been brought from that refusal.

On 28 July 1983, Woodward J. gave further directions in both the S.C.I. action and the T.P.C. action. In each, leave to deliver an amended Statement of Claim was given and detailed directions were given with respect to a number of other interlocutory matters. The directions in the T.P.C. action were aimed at a trial commencing in August 1983. The directions hearing in the S.C.I. action was adjourned for further hearing 14 days after judgment in the T.P.C. action.

On 10 August 1983, further directions were given in the T.P.C. action and the trial of that action was fixed to commence on 22 August 1983.

By a Notice of Motion dated 11 August 1983, F.C.L. and the Amatil shareholders applied for orders that they be released from the undertakings given by them to the Court on 23 May in relation to S.C.I., and that S.C.I. and its related corporations be released from the undertaking given by them to the Court on 23 May 1983, subject to the following undertakings being given by F.C.L. and the Amatil shareholders:

"That whilst the Trade Practices Commission holds the view that acquisition by A.P.M. Investments Pty Ltd (or any related corporation of A.P.M. Investments Pty Ltd (or any related Corporation of A.P.M. Investments Pty Ltd) of the shares of Fibre Containers Ltd would be in breach of s.50 (of) the Trade Practices Act 1974 or until this Honourable Court decides to the contrary of that view:

(i) as to (the Amatil shareholders) they will not nor will any of them sell to or accept any offer from A.P.M. Investments Pty Ltd (or any related corporation of A.P.M. Investments Pty Ltd) to purchase any shares held by them or on their behalf in Fibre Containers Ltd.

(ii) As to (the Amatil shareholders) they will not aid, abet, counsel or procure A.P.M. Investments Pty Ltd (or any related corporation of A.P.M. Investments Pty Ltd) to acquire directly or indirectly any shares in Fibre Containers Ltd or in any way be knowingly concerned in or a party to any such acquisitions."

It is by no means clear to me what standing F.C.L. or the Amatil shareholders had to apply for the release of S.C.I. from its undertaking and no similar application was formally made by S.C.I. However, S.C.I. supported the application of F.C.L. and the Amatil shareholders, and in substance orally applied for its release in the course of the hearing and the matter has been conducted on that basis. It is of interest to note that, notwithstanding what was said by F.C.L.'s chairman in his affidavit in support of F.C.L.'s application dismiised on 20 July as the reason for that application, there was, despite the dismissal of that application, some contact between F.C.L. and S.C.I. prior to the further application. F.C.L.'s chairman swore an additional affidavit for the further application and was cross-examined upon it. In the course of his cross-examination he said that the object of the further application was to "free up" S.C.I. He also said that, on 8 August 1983, he had telephoned Mr Sam Smorgon and:

". . . The substance was simply that I wished to talk to him about the conduct of this case and this possible application that has come before the court now, even to talk to my legal advisers, and after a number of telephone conversations between the legal advisers this conference took place on the 8th."

(The date of the conference was subsequently altered to 9th August.)

Elsewhere he said:

". . . I communicated with Mr Smorgon the tactics that would be followed in this case right here. Thereupon he caused his counsel and ours to get together and discuss that as is recorded in affidavit."

The substantial basis of the further application, as deposed to on behalf of F.C.L. and the Amatil shareholders, may be summarized as follows:-

F.C.L. is a major manufacturer throughout Australia of corrugated and solid fibre containers but each of two competitors is estimated to have a greater share of the market than F.C.L. The rival bids for F.C.L. and the Court proceedings have been well publicised and have led to difficulties for F.C.L. in the market for fibre containers which is highly competitive. Approaches have been made to some of F.C.L.'s large customers suggesting that its future reliability as a supplier is uncertain, on a number of occasions accompanied by offers of price concessions. Although F.C.L. has not lost business, its profitability has been affected by the need to reduce its prices to such customers. Further, attempts, as yet unsuccessful, have been made to persuade employees of F.C.L. to join its competitors and other attempts to take advantage of F.C.L.'s position have taken place. The effects on F.C.L.'s employees and customers were described as "unsettling and disruptive". F.C.L.'s General Manager swore:

"15. Whilst it has to date been possible to date to retain customers (at substantial expense) and to retain employees to whom alternative employment has been offered and to allay fears of employees as to their future, I am concerned that it may not be possible to continue to do so if the uncertainty attaching to the position of the Second Respondent continues for a lengthy period. It is now more than three months since notice of the takeover offers was received and it is almost the same period since the proceedings in this Honourable Court were commenced. I have been advised by the legal representatives of the Second Respondent that estimates of time likely to be taken before the proceedings in this Honourable Court are resolved are not less than three months and might be considerably longer.

16. In those circumstances, I believe that the Second Respondent is being disadvantaged in the Fibre Container Market and in its business generally because of the uncertainty of its position and that the employees of the Second Respondent are being unsettled through uncertainty as to their future. I further believe that this uncertainty is being deepened not only by competitors but by the indeterminate period which will elapse before the situation is clarified by the determination of these proceedings and that the delay consequent thereon is and will continue to be disadvantageous to the Second Respondent, inimical to its business interests and unfair to its management, employees and shareholders.

17. I am informed by the legal representatives of the Second Respondent that whilst the takeover situations not subject to Court proceedings certain minimum statutory periods must elapse before the outcome of the takeover becomes known, nevertheless in circumstances such as those of the Second Respondent (where one associated group of shareholders controls some 74% of the shares of the Second Respondent) the outcome of a takeover proposal would be known at the latest within six weeks of the service of a Part A Statement under the Companies (Acquisition of Shares) (New South Wales) Code. It follows in my respectful opinion that, in the normal course of events, any uncertainty as to the matters to which I have referred could reasonably have been tolerated by the management of the Second Respondent but such is not in fact the case here."

The Chairman of Directors of F.C.L. swore:

"11. The Second to Eighth Respondents have given further consideration to their respective positions of the light of the circumstances hereinbefore referred to. They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the time will be taken to resolve these proceedings might have upon the value of the shares of the Second Respondent and of the interests of the shareholders of the Second Respondent in those shares.

12. In all of these circumstances the Third to Eighth Respondents believe that the circumstances in which the undertakings given on their behalf to this Honourable Court on 23 May 1983 in relation to S.C.I. Packaging Pty Limited have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from the First Respondent (or any other company related to the First Respondent) to acquire shares held by them and each of them in the Second Respondent.

13. The Third to Ninth Respondents now seek to be released from the said undertakings and to have S.C.I. Packaging Pty Limited released from the undertaking given on its behalf to this Honourable Court on 23rd May 1983 and, subject to this Honourable Court making the orders sought in the Notice of Motion in support of which this Affidavit is filed, the Second to Eighth Respondents have authorised their Counsel to give the following undertakings on their behalf to this Honourable Court and to the Trade Practices Commission:-

(There followed the undertakings set out in the Notice of Motion.)

In the course of cross-examination, F.C.L.'s chairman acknowledged that there had been no meeting at which F.C.L. had arrived at its decision but that a series of informal meetings had occurred "over the past couple of months". He also said that the reason why F.C.L. and the Amatil shareholders were unwilling to deal with A.P.M. whilst the Trade Practices Commission continued its action and the action was undecided was that they were not prepared to take the risk "of helping it to a possible breach of s.50." Further, he revealed that the S.C.I. offer had been rejected, and said that there had been no discussions, since the commencement of the actions, between F.C.L. and S.C.I. about the price to be offered for S.C.I. shares. On the hearing of the appeal, counsel for F.C.L. and the Amatil shareholders at one point asked us to infer that, if Woodward J's offer stands, an offer in excess of the $4.00 per share offered by A.P.M. will be forthcoming from S.C.I. Counsel for S.C.I. declined to confirm that that would occur and was at pains to establish that S.C.I. had scrupulously observed its undertaking and its obligation under the Companies (Acquisition of Shares) Code.

As has already been stated, S.C.I. supported the application by F.C.L. and the Amatil shareholders. An affidavit by a director of S.C.I. deposed to both its original motive for giving an undertaking and its reason for opposing F.C.L.'s application in July 1983 for a partial release. Reference has already been made to these matters. According to the affidavit, S.C.I. had changed its attitude because the Trade Practices Commission was prepared to continue against A.P.M. in any event and S.C.I. intended, if released from its undertaking, to "make every effort to acquire the subject shares".

A.P.M. opposed the application. An affidavit by its Managing Director did little but point out the basis on which the undertakings had been given on 23 May and that the likely outcome of acceding to the application by F.C.L. and the Amatil shareholders would be that A.P.M. would fail in its bid for F.C.L. "without having any opportunity to contest the allegations" made by the Trade Practices Commission.

The application for release from the undertakings was heard by Woodward J. on 17 August 1983.

On 22 August 1983, the date fixed for the commencement of the T.P.C. action, Woodward J. published reasons for judgment but postponed making any orders until 24 August. He indicated an intention then to release all parties from their existing undertakings in exchange for further undertakings from A.P.M. F.C.L. and the Amatil shareholders in relation to the proposed acquisition of shares in F.C.L. by A.P.M.

When the proceedings again came before Woodward J. on 24 August 1983, A.P.M. indicated its unwillingness to give a further undertaking and his Honour was persuaded by other parties that an undertaking by A.P.M. was unnecessary in view of the fresh undertakings proferred by F.C.L. and the Amatil shareholders. Accordingly, on that day, the following order was made:

"UPON the following undertaking being given by the Third to Eighth Respondents:- (the Amatil shareholders)

That until the determination of these proceedings or further order they will not sell to or accept any offer from A.P.M. Investments Pty Limited ("APM") (or any related corporation of APM) to purchase any shares held by them or on their behalf in Fibre Containers Limited.

AND UPON the following undertaking being given by the Second Respondent: (F.C.L.)

That until the determination of these proceedings or further order it will not aid, abet, counsel or procure APM (or any related corporation of APM) to acquire directly or indirectly any shares in Fibre Containers Limited or in any way be knowingly concerned in or a party to any such acquisition.

THE COURT ORDERS THAT:-

1. The First Respondent (A.P.M.) and related companies be and are hereby released from the undertaking given by them to the Court on 23rd May 1983.

16. In those circumstances I believe that the Second Respondent is being disadvantaged in the Fibre Container Market and in its business generally because of the uncertainty of its position and that the employees of the Second Respondent are being unsettled through uncertainty as to their future. I further believe that this uncertainty is being deepened not only by competitors but by the indeterminate period which will elapse before the situation is clarified by the determination of these proceedings and that the delay consequent thereon is and will continue to be disadvantageous to the Second Respondent, inimical to its business interests and unfair to its management, employees and shareholders.

17. I am informed by the legal representatives of the Second Respondent that whilst in takeover situations not subject to Court proceedings certain minium statutory periods must elapse before the outcome of the takeover becomes known, nevertheless in circumstances such as those of the Second Respondent (where one associated group of shareholders controls some 74% of the shares of the Second Respondent) the outcome of a takeover proposal would be known at the latest within six weeks of the service of a Part A Statement under the Companies (Acquisition of Shares) (New South Wales) Code. It follows in my respectful opinion that, in the normal course of events, any uncertainty as to the matters to which I have referred could reasonably have been tolerated by the management of the Second Respondent but such is not in fact the case here."

Peter Becker deposed to his sharing "the beliefs and concerns" expressed in Mr. Burke's affidavit.

The application had been filed on 20 May 1983. An affidavit which was sworn by Stanley David Martin Wallis on 16 August 1983 and which was read in opposition to the motion, included the following paragraphs:

1. I am the Managing Director of Australian Paper Manufacturers Ltd. ("APM"). I am authorized by the first named respondent ("Investments") to make this affidavit. Investments is a wholly owned subsidiary of APM.

3. On 23 rd May 1983 Investments gave an undertaking to the Court that it would not, before the hearing and determination of the Trade Practices Commission's application, or until further order, acquire or take any further step to acquire any shares in the second respondent ("FCL"). That undertaking and the other undertakings given to the Court that day were given in the following circumstances.

(a) On 4th May 1983 SCI Packaging Pty. Ltd. ("SCI") announced an offer to acquire all the issued capital in FCL.

(b) After considering the effects that a takeover of FCL by SCI would have on APM, APM decided to make a bid to acquire all the issued capital in FCL and on 19th May 1983 Investments announced a bid.

(c) On or about 16th May 1983 the Trade Practices Commission ("TPC") sought undertakings from both SCI and Investments that neither would proceed with its bid until the TPC had considered the matter and it also sought undertakings from FCL. SCI, Investments and FCL each gave the undertakings that were sought. Now produced and shown to me marked "SW1" are copies of the telexes setting out those undertakings.

4. As appears from all of those telexes which are exhibit "SW1", each of the parties (including Investments) gave the undertaking that was sought on the condition that the other parties not only gave but also maintained like undertakings.

5. To release FCL and SCI from the undertakings which they gave on 23rd May 1983 would change the whole basis on which Investments gave its undertaking: namely that the situation would be frozen pending resolution of these proceedings. To release FCL and SCI from their undertakings while at the same time requiring Investments to continue to adhere to its undertaking would lead to Investments being denied the opportunity to prosecute its bid for FCL without having any opportunity to contest the allegations made by TPC. If the damage which Messrs. Becker and Burke allege is being done to FCL is as serious as they say, I assume that if FCL and SCI are released, FCL will seek to put an end to what is described as the uncertainty of FCL's future by recommending acceptance of SCI's offer."

The affidavit of George Castan was read. It includes the following paragraphs:

"1. I am the General Manager of papermaking operations of S.C.I. Operations Pty. Ltd. I am authorised to make this affidavit on its behalf and on behalf of S.C.I. Packaging Pty. Ltd.

3. S.C.I. Packaging Pty. Ltd. (which together with S.C.I. Operations Pty. Ltd. and other related companies is hereinafter referred to as "SCI") gave the undertakings contained in the exhibits to the affidavit of the said Stanley David Martin Wallace predominatly to ensure that the Trade Practices Commission instituted and pursued proceedings under Section 50 of the Trade Practices Act 1974 against APM Investments Pty. Ltd. ("APM"). There were undertakings given by SCI prior to those referred to in the said affidavit which are exhibited thereto and marked with the letter "A".

4. SCI believed that if such undertakings were not given then the Commission would not institute and pursue such proceedings and that Fibre Containers Limited and its shareholders ("FCL") were prepared to entertain offers by APM to acquire the subject shares.

5. Prior to FCL making its application to the Court on the 20th of July, 1983 for a partial release from its undertaking, SCI was asked to indicate its attitude to such application. Consequent upon inquiries and discussions with the Trade Practices Commission SCI formed the view that if ti supported the application this might prejudice the prospect of the TPC maintaining its application against APM. Consequently SCI indicated to the Commission that in order to ensure the continuance of the proceedings SCI would oppose the application by FCL. Notwithstanding that on the 19th July, 1983 the Commission circulated the telex being the exhibit marked "A" in the affidavit of Peter Becker, SCI considered that it had committed itself to oppose FCL's application and did so.

6. On or about the 8th August, 1983 FCL asked SCI to indicate its attitude to an application by FCL and its shareholders (particularly Leigh-Mardon) for release from its undertaking given in VG84. On the 9th August, 1983 SCI stated its attitude as follows:

'1. SCI has been asked to indicate its attitude to an application by Fibre Containers Ltd. and its shareholders (particularly Leigh-Mardon) for release from its undertakings given in VG84.

2. SCI is prepared to indicate its attitude but only upon the bases that in doing so it will in no way breach the letter or the spirit of the undertaking given by SCI in Application VG84 or any provision of the Companies Acquisition of Shares Code.

3. SCI makes it clear therefore that it does not intend or desire in consequence of indicating its attitude aforesaid to take or to be taken to have taken a further step in the acquisition of shares in Fibre Containers Ltd. It follows that if the Court refuses any application for release, discharge or variation of the said undertakings ipso facto the position of SCI and the other parties qua the undertakings and the Acquisition of Shares Code remains unchanged and shall be as if the Application for release or variation had never been made.

4. Subject to the above SCI states that it will support the Application by Fibre Containers Ltd. and Leigh-Mardon Pty. Ltd. provided:

(i) that Fibre Containers Ltd. and its Directors, AMATIL Ltd. and Leigh-Mardon Pty. Ltd., undertake or proffer to undertake to the TPC and the Court that they will not (even if released from their undertaking not to do so) sell any of the shares in Fibre Containers Ltd. to APM or a related company whilst and so long as TPC maintains the views expressed in the Telex 19/7/83 that the acquisition by APM would contravene S50 of the Act and that the TPC re-affirms such views in the course of the Application for variation and before SCI is required to indicate its attitude to the application.

(ii) that pursuant to such undertaking there shall be tendered in evidence in support of such application the minutes of a resolution or other evidence of AMATIL Ltd. and Leigh-Mardon directing and authorising the giving of such undertaking.

5. This statement is made on the specific understanding and acknowledgement that the rights and entitlement of SCI itself to acquire the said shares is in no way added to detracted from advanced or qualified by the making of this statement or by supporting the proposed Application to the Court.

7. SCI accordingly supports the Application by FCL.

8. With respect to the concluding sentence of paragraph 5 of the affidavit by the said Stanley Wallace, I say that if SCI is released from its undertaking it will make every effort to acquire the subject shares.

9. With respect to the affidavits of Messrs. Becker and Burke, I say that from my own knowledge and observations of the industry and from what I have been informed and do verily believe, I consider that FCL has suffered or will suffer substantial prejudice whilst it is in the position of a 'target company.'"

The text of the telex to which reference is made in paragraphs 5 and 6 of that affidavit is as follows:

"The Trade Practices Commission has today informed APM that it intends to continue its Court proceedings under Section 50 of the Trade Practices Act. Acquisition by APM of Fibre Containers Limited would, in the Commission's view, be in breach of Section 50, notwithstanding other action APM indicated it was taking or proposing to take if the Commission withdrew its proceedings.

2. I am letting you know as soon as possible."

The application made by FCL on 20 July 1983, to which reference is made in paragraph 5 of the affidavit, had been refused. The affidavit of Peter Becker included the following paragraphs:

"11. The Second to Eighth Respondents have given further consideration to their respective positions in the light of the circumstances hereinbefore referred to. They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the time which will be taken to resolve these proceedings might have upon the value of the shares of the Second Respondent and of the interests of the shareholders of the Second Respondent in those shares.

12. In all of these circumstances the Third to Eighth Respondents believe that the circumstances in which the undertakings given on their behalf to this Honourable Court on 23 May 1983 in relation to S.C.I. Packaging Pty. Limited have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from the First Respondent (or any other company related to the First Respondent) to acquire shares held by them and each of them in the Second Respondent."

Upon cross-examination the respondent Peter Becker gave oral evidence that the decision to which reference is made in paragraph 12 of his affidavit is a decision that while the applicant "holds the view expressed in its telex, unless this court decides to the contrary, we will not sell to APM". He explained that, after taking legal advice, the shareholding respondents had concluded that, if APM Investments became free to buy their shares before judgment in this proceeding, they would "run the risk of helping it to a possible breach of section 50" by selling the shares "and we are not prepared to take that risk". Mr. Becker swore that the request by FCL for an indication of the attitude of "SCI", to which reference is made in paragraph 6 of the affidavit of George Castan, was first communicated by him to a Mr. Smorgon on 8 August 1983.

The reasons Woodward J. gave for his decision to release the respondents and the other two companies from the undertakings which had been given demonstrate that his Honour had regard not only to the submissions of counsel and to the evidence which had been first adduced on the motions before him, but also to other circumstances, which the file in another proceeding in the Court (VG No. 82 of 1983) disclosed, or which counsel had treated, in their submissions on the hearing of the motion, as though proved in evidence, or which appeared by admission in pleading or by affidavits previously filed in this proceeding. Except in respect of a minor matter of fact, no complaint was made to this Court of His Honour's consideration of those circumstances.

Woodward J. was confronted, as the primary judge in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Anor. (1981) 35 A.L.R. 625 had been confronted, with competing assertions based on justice to the several parties, in relation to a matter of practice and procedure. The undertakings had been given and accepted by Northrop J. in place of a contested hearing of the Commission's projected application for an interlocutory order to restrain APM Investments from acquiring shares in FCL until the determination of the proceeding. The questions for this Court, therefore, are whether the discretionary decision of Woodward J. proceeded from any error of principle and whether the decision worked a substantial injustice to APM Investments : Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Anor. (1981) 35 A.L.R. at 629.

The undertakings were given and accepted by Northrop J. "until further order". Release from such an undertaking may be justified by the occurrence, or by the discovery, of circumstances which, at the time the undertaking was given, were not in contemplation or were not accorded the significance they later assume, if the justice of the case requires release. (Cf. Chanel Ltd. v. F. W. Woolworth & Co. Ltd. (1981) 1 W.L.R. 485.)

The circumstances detrimental to FCL's interests which had occurred since the undertakings were given to Northrop J. were not sworn, nor were they expressly found by Woodward J., to have been outside the contemplation of any person concerned in deciding that those undertakings should be given. The order which Northrop J. made, upon those undertakings, that the application be fixed for hearing on 18 July 1983, may have stimulated a hope that the hearing would begin then. But, in the absence of evidence that the order raised also an expectation of such a beginning, it could hardly be supposed that persons who had the benefit of legal advice would be unaware that this proceeding, if fixed for hearing in July, might not come to hearing until August or September. Nor are the events recorded in the affidavits which have occurred since the undertakings were given, other than the decision not to sell shares to APM Investments, of a kind which it would be reasonable, in my opinion, to infer were outside the contemplation of the human respondents or the directors of the respondent companies, when the undertakings were given, as possible consequences of what had already happened and of the acceptance by the Court of the undertakings. And the same conclusion is required, in my opinion, concerning foresight by those persons at that time of certain future events the likely occurrence of which Woodward J. recorded in his reasons for decision as "arguments in favour of granting the application", thus: "The hearing of the present case is likely to last three months or more. There could well be one or more appeal hearings, and the Court might be persuaded that undertakings which had been in force for a number of months should be allowed to continue in force to cover the period of appeals." (His Honour had also recorded, as an argument on behalf of APM, but without contradiction by him : "The case is now ready to begin. It has been prepared with all possible speed on all sides and the hearing will not be unnecessarily prolonged by any party to it".)

The decision of the shareholding respondents, not to sell shares in FCL to APM Investments while the applicant "holds the view expressed in its telex, unless this court decides to the contrary", was not said by Woodward J. to be a decision in the making of which circumstances unforeseen at the time those respondents gave their undertakings to Northrop J. had been accorded consideration by the human respondents or by the directors of the shareholding respondent companies. But, if it was a decision of that character, whatever it was of importance in the judgment of those shareholders and directors that the passage of time had revealed to them after those undertakings had been given, there is in my opinion nothing in the evidence to justify a conclusion that by reason of what was so revealed the shareholding respondents had acquired a claim in justice to release from their undertakings.

Although the undertakings are expressed to endure until the determination of the proceeding or until further order, the circumstances in which each person gave his undertaking were in my opinion such that none of those persons could reasonably have contemplated as possible his release from his undertaking before determination of the proceeding, unless circumstances the existence or the significance of which could not reasonably have been foreseen on 23 May 1983 should be demonstrated to make it unjust that such a release be refused, or, possibly, unless the Court should restrain APM Investments by interlocutory order from buying the shares. (I express no opinion whether the making of such an order would justify release from any of the undertakings.) The undertaking of each was given upon the condition that the others' undertakings be given. Each suffered a detriment in exchange for the advantages which the undertaking of one or more of the others conferred on him. There is in my opinion nothing in the evidence to justify a conclusion that any of the respondents gave his undertaking for any reason but that he conceived the giving of the undertaking to serve his own interests better than the withholding of the undertaking. The duty of the directors of each respondent company and S.C.I. Operations and S.C.I. Packaging requiring that they authorise the giving of the undertaking only if they so conceived the company's interests, a court would not lightly find that they had disregarded that duty. Woodward J. stated, as an argument in favour of granting the motions for release from the undertakings, the following : "Fibre Containers should not be penalized for having complied, in a responsible way, with a request of the government regulatory authority, the TPC, to maintain their present shareholding position at a time when the TPC was investigating the situation and instituting proceedings". (His Honour used the expression "Fibre Containers" to comprehend all the respondents except the first and ninth-named respondents.) If, as seems to me unlikely, Woodward J. is to be understood from that passage to have found that in deciding to give the undertakings some of the respondents preferred compliance with the Commission's request to the furthering of their own interests, I would not accept the finding as one which was open to His Honour on the evidence. The prejudice to the interests of APM Investments which would be caused by substitution of undertakings not to sell shares to APM Investments, in place of undertakings not to sell shares to APM Investments or to S.C.I. Packaging, was so grave that only strong considerations could, in my opinion, justify the release of undertakings in order to enable that substitution to be effected. The detriment to which APM Investments had submitted by itself giving undertakings to Northrop J. - surrendering for a time its right to offer to buy the shares - had been suffered on the condition that those undertakings from which release was sought before Woodward J. should also be given. The giving of those latter undertakings afforded a substantial advantage to APM Investments. It could not be said - and Woodward J. contradicted the assertion when he observed that "parties acting in good faith may sometimes depart from their expressed intentions" - that the right APM Investments had surrendered had been rendered valueless by the shareholding respondents' decisions not to sell their shares to APM Investments. It might be said - the statement by Woodward J. in his reasons for decision "that APM Investment should be restrained from acquiring any additional shares in Fibre Containers Ltd. before this litigation is concluded" seems to justify the assertion - that the right APM Investments had surrendered had been rendered valueless by His Honour's conclusion that APM Investments should be restrained from buying the shares. There are questions, then, whether that statement by His Honour expressed a conclusion which His Honour might without error have reached and a conclusion which he might without error have taken into consideration in determining the motions before him. To each question the answer should in my opinion be in the negative.

In the course of submissions by counsel for the Commission in support of the motions before Woodward J. the following dialogue occurred:

"MR WILLIAMSON: In saying that the Commission opposes the release of all the parties, one of course really means by that APM from its undertakings. To maintain that view, we accept as the equivalent to continuing that the equivalent and interim injunctions should continue. We equate the existing undertaking with that position. So in saying we would oppose the release, we are in effect saying an injunctive type situation should continue.

HIS HONOUR: There would be some difficulty, would there not, about continuing the undertaking in view of the fact that all the undertakings were given on the clear understanding that they were inter-dependent?

MR WILLIAMSON: That is appreciated, and in a sense really comes back to whether it would have been appropriate to have granted an interim injunction in the first place without regard to the inter-relationship. I trust that at this stage it is perhaps unnecessary to dwell too long on the question of whether there was an argument or an issue before the court. The traditional cases seem to have come down to that as the test rather than simply talking about a prima facie case.

HIS HONOUR: Perhaps the last word is yet to be said on the matter?

MR WILLIAMSON: The most recent word that I am aware of, your Honour, is by Chief Justice Sir Harry Gibbs.

HIS HONOUR: Yes, that is what I had in mind.

MR WILLIAMSON: That, in my opinion, really reflects what has been said repeatedly in this court.

HIS HONOUR: I think the point I am concerned to make is that as at present advised it seems to me that if the other party were to be released from undertakings and it were thought proper that APM should continue to be bound appropriately, that it would be desirable to substitute an injunction for the undertaking in view of the fact that the basis upon which the undertaking had been given had been destroyed.

MR WILLIAMSON: Yes, unless it were replaced by another undertaking that were thought to be suitable in the circumstances.

HIS HONOUR: Yes.

MR WILLIAMSON: But failing that, yes, we would seek that appropriate injunction."

Later it was submitted by counsel for APM Investments:

". . . even the release of all the undertakings would produce a consequence, so far as APM is concerned, which is unjust to it because it flows from the effect of the undertakings themselves and the passage of time associated with their operation since they were first given, although, of course, if the undertakings are to be released, all the undertakings must be released, since one party cannot be. In our submission they all must.

The reason for that is each of the undertakings was given on the same basis, namely, that all the others were given, and to hold one party to an undertaking which depended for its being given on the fact that the others were being given would, in our submission, be really to hold a party to an undertaking which it had not given - if I can put it in that way.

My learned friend, Mr. Williamson, said that he applied for an injunction. If that was the view that your Honour did take in relation to the undertakings, and your Honour was minded to dissolve them all, for our part we fail to understand how it could make such an application: he has no material before your Honour; the matter has not been argued; no notice has been given; it seems, in our submission, rather the expression of a desire than the proper making of an application. The only application that would be before your Honour would be an application by Fibre Containers for the release of these undertakings.

Although we do take that view about the undertakings, that is not our primary position. Our primary position is that none of the parties should be released from their undertakings."

In reply counsel for the Commission said:

"The main point is that the release of APM from this undertaking in effect determines any subsequent injunction application because the issues are the same. In practical terms it comes down to the balance of convenience with the same sort of factors that have been canvassed today, and so for that reason we seek to persuade your Honour that the appropriate course is not to release APM for the reasons that have been put. If, contrary to that submission, your Honour were minded to release APM, then our submission in relation to that would be that as part of the present proceedings concerning the re-arrangements of undertakings, that APM should be released on terms, that is conditions attached to the release promise undertaking, and here I am referring to the same sort of factors or concepts as my learned friend, Dr Griffith, was referring to a moment ago.

That is, to preserve the prospects for effective section 81 proceedings should the need for that arise. So we see no point in regurgitating an injunction application if the same material has been considered today. We prefer to take that course that I have just outlined. That is, no release, or if there is, on terms, and the question of appropriate terms can be readily devised."

Save as appears in the passages I have just quoted, no indication had been given APM Investments by any person since 23 May 1983 that an application was being, or might be, made for an interlocutory injunctive order directed to it; and no indication had been given APM Investments by Woodward J. that he might consider whether such an order would or might be made if application for it were in future made, or whether such an order would or might have been made by him if an application for such an order had been made to him. In the face of the suggestion of counsel for the Commission - if indeed what he said is to be understood as a suggestion - that Woodward J. should make an interlocutory injunctive order against APM Investments, or should determine whether such an order should be made if it were sought, upon motions for quite other relief by other parties, without earlier or better notice to APM Investments than what was said by way of submission on the day the hearing of the motions concluded, and without any indication as to the evidence upon which the Commission sought, or would justify, that order, counsel for APM Investments declared, in effect, his intention not to enter into submission or evidence on the question whether such an order should be made, for reasons which he stated and which were in my opinion of obviously compelling strength. His Honour thereafter gave no indication that he might give consideration in the course of determining the motions before him to the question whether such an order should be made. In those circumstances APM Investments was not afforded an opportunity of being heard or of adducing evidence on that question, in my opinion, nor an opportunity of being heard on the further question whether a conclusion by His Honour that such an order should be made, if it were sought, could be taken into consideration in determining the motions before him. APM Investments could have expected when the hearing of the motions concluded that, if His Honour found that he was concerned in his deliberations on the motions to know whether an interlocutory injunction should, if sought, be granted against APM Investments, he would invite submissions on behalf of the Commission and on behalf of APM Investments before reaching a conclusion adverse to that respondent.

The reasons Woodward J. gave for his decision suggest that he did not take into consideration his opinion that APM Investments should be restrained from acquiring shares in F.C.L. until after he had decided that he would accede to the motions. Those reasons suggest that he took that opinion into consideration only for the purpose of determining, after he had decided to accede to the motions, whether APM Investments should be released from its undertaking. If that be so, APM Investments suffered no prejudice by reason of the fact that His Honour formed that opinion, for that respondent was released from its undertaking. On the other hand, it may be that His Honour took that opinion into consideration in determining that he would accept the substituted undertakings of the other respondents.

However that may be, it would not in my opinion be permissible for Woodward J., or for this Court, to determine whether any of the motions ought to be granted except upon the basis that no prediction could be made as to the decision of an application, if made, for an interlocutory injunction restraining purchase by APM Investments of shares in F.C.L.. My reason for that opinion is that I think that no opportunity has been afforded APM Investments to be heard against the conclusion that such an injunction, if sought, should be granted. But if I were wrong in thinking that, I would remain of the same opinion because I do not consider that the evidence and admissions in the appeal book could afford a basis for a prediction of any value as to whether such an injunction would be granted. (Woodward J. did not indicate what material he took into consideration in determining that APM Investments should be restrained.) If that opinion be correct, there is no basis for a conclusion that the right of APM Investments to offer to purchase the shares - a right surrendered for a time by the giving of that respondent's undertaking to Northrop J. - had become valueless by the time when Woodward J. acceded to the motions.

The right surrendered was restored, but was deprived of utility, by the undertakings accepted and the orders made by Woodward J.. But rights surrendered by other respondents' undertakings and by the undertakings of S.C.I. Operations and S.C.I. Packaging to Northrop J. on 23 May 1983 were restored by Woodward J. without impairment of their utility otherwise than as those persons were willing to accept by giving new undertakings to Woodward J.. They were rights the surrender of which greatly advantaged APM Investments, and the restoration of which deprived APM Investments of the advantages gained by their surrender. Nothing had in my opinion been shown to have occurred since 23 May 1983 which justified a disturbance, so prejudicial to APM Investments, of the reciprocal exchange of advantages and detriments between the parties to this proceeding and S.C.I. Operations and S.C.I. Packaging which had been effected by the offers of undertakings accepted by Northrop J. on that day.

The reasons for the decision of Woodward J. suggest that he gave anxious consideration to the rights of respondents other than APM Investments to unrestrained contractual activity in relation to the shares. It was not suggested that those respondents had fallen, before their undertakings were given to Northrop J., under any restraint on such activity which the law might authorise. But that consideration in my opinion had to be balanced against consideration of the restraint upon that activity which those respondents had in furtherance of what they conceived to be their own interests cast upon themselves by offering their undertakings to the Court. It seems to me that Woodward J. failed to make that balance. But I do not claim to have identified, from His Honour's reasons for his decision, an error made in exercising the discretion confided to him. "It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." (House v. The King (1936) 55 C.L.R. 499 at 505). I think that the order under appeal was unreasonable and that it worked a substantial injustice to APM Investments. I think that the only reasonable order in the circumstances was that each motion be dismissed.

Several applications were made during the hearing of the appeal for leave to adduce further evidence. In no instance were the criteria satisfied, upon compliance with which such an application may be granted. I would refuse those applications and would order that the appeal be allowed, that the order of Woodward J. be set aside and that each motion be dismissed.

I express no opinion as to whether S.C.I. Operations or S.C.I. Packaging, on each of which notice of appeal was served and each of which was heard by its counsel on the appeal, is a party to the appeal, or, if either is a party to the appeal, in what sense that may be said of it. Counsel announced appearance for those two companies when the appeal was called on for hearing and were then informed by me that I did not think that it should be assumed, in consequence of the Court's acceptance of that announcement, that the companies were parties to the appeal. No application of a kind which 0.52 R.14(2) of this Court's Rules seems to contemplate has been made in respect of either company.