Associated World Investments Pty Limited v Aristocrat Leisure Limited

[1999] NSWCA 106

NEW SOUTH WALES COURT OF APPEAL

CITATION:         ASSOCIATED WORLD INVESTMENTS PTY LIMITED v ARISTOCRAT LEISURE LIMITED [1999]  NSWCA 106

FILE NUMBER(S):
40003/98

HEARING DATE(S):          31 March 1999

JUDGMENT DATE:           02/07/1999

PARTIES:

Associated World Investments Pty Limited - A
Aristocrat Leisure Limited - R

JUDGMENT OF: Sheller JA Beazley JA Fitzgerald JA   

LOWER COURT JURISDICTION:    Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S):
4072/97
LOWER COURT JUICIAL OFFICER:             Windeyer J

COUNSEL:
R V Gyles QC/F G Lever/F Clarke - A
T F Bathurst QC/F Kunc - R

SOLICITORS:
Barker Gosling - A
Allen Allen & Hemsley - R

CATCHWORDS:
COMPANIES - disposal notice - whether validly made
PRACTICE & PROCEDURE - late filing of submissions - whether counsel should have costs of preparation of submissions

ACTS CITED:
Casino Control Act 1992
Registered Clubs Act 1976
Liquor Act 1982

DECISION:
Appeal allowed

JUDGMENT:

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA  40003/98
ED 4072/96

SHELLER JA
BEAZLEY JA
FITZGERALD JA

ASSOCIATED WORLD INVESTMENTS PTY LIMITED v ARISTOCRAT LEISURE LIMITED

The respondent gave a written disposal notice to the appellant requiring the appellant to dispose of all the shares it held in the respondent within 90 days of the date of the notice.  The notice was allegedly pursuant to article 8.10 of the Articles of Association of the respondent.  The notice was accompanied by a letter stating that the NSW Casino Control Authority had advised a subsidiary of the respondent that the shareholdings of the appellant in the respondent were in breach of an undertaking given by the respondent and its subsidiary to the Authority.  The terms of the undertaking were set out in a letter from the respondent to the Authority stating that neither the respondent or its subsidiary would allow “Mr Ainsworth to be “in anyway associated or connected with its ownership, administration or management of its operations or business.”  Mr Ainsworth was a director and secretary of the appellant.

The appellant claimed a declaration that the disposal notice was null and void, or alternatively, ineffective as a notice issued pursuant to article 8.10 of the Articles of Association of the respondent.  The appellant also claimed a declaration that prior to the issue of the disposal notice the respondent denied the appellant natural justice.  The appellant requested that the disposal notice be set aside and injunctions restraining the respondent from acting upon it.  The appellant also requested damages.

Article 8.10 stated that if a shareholder was not eligible to hold shares in the company pursuant to articles 8.7 or 8.8, the directors may give notice in writing that the shareholder must dispose of all or some of its shares.  Article 8.7 states that a shareholder is ineligible to hold shares in the respondent if such holding would cause the company or its subsidiaries to contravene any gaming law.  Article 8.8 states that a shareholder is ineligible to hold shares in the respondent if such holding would cause a licence to be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of the licensee.

The trial Judge dismissed the proceedings. His Honour held that a contract between the respondent and the Sydney Harbour Casino to service poker machines, and a proposed contract to provide new machines for the permanent casino which was to be built at Darling Harbour were both controlled contracts under the provision of section 36 of the Casino Control Act. Consequently, as regulatory approval is required for those contracts, they are licences for the purposes of article 8.8. As a result, the disposal notice was valid. The appellant appealed against this decision. The trial judge made other findings which were subject to this appeal, but the Court did not find it necessary to consider them. No order was made restraining the disposal of shares pending the appeal and the shares were sold. The appellant sought relief by way of declarations and damages.

On appeal there was a further issue relating to the late filing, by the appellant, of submissions.  This was done without any application for an extension of time.
Held:
By Sheller JA, Beazley and Fitzgerald JJA agreeing:

1. The non-objection or approval by the NSW Casino Authority of the controlled service contract or the proposed supply contract was not necessary for the lawful operation of the respondent’s gaming and related businesses, but was only necessary for the respondent to engage in supplying goods or services to the Sydney Harbour Casino. Article 8.8 speaks not of the particular but in general, not of the validity of contracts with specific casinos but the operation of gaming and related businesses generally.

2. The appellant was not a person ineligible to hold or to continue to hold shares in the respondent because the holding of those shares and any other relevant circumstance meant that a licence necessary for the lawful operation of gaming and related businesses engaged in by the respondent or any subsidiary would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of the licensee within the meaning of article 8.8.  Accordingly the disposal notice purported to have been given under article 8.10 was not validly given.

3. Counsel did not provide a satisfactory explanation for the late filing of submissions, particularly in the absence of any attempt to seek an extension of time until the failure to comply with Pt 51 r47 of the Supreme Court Rules had been brought to the attention of the appellant’s solicitors. Knowledge and compliance with such a fundamental rule is an ethical obligation of the legal practitioner. As counsel had apologised to the Court and the respondent had indicated that it was not prejudiced in the presentation of its case, the Court decided not take it any further on this occasion, but emphasised that Pt 51 r47 must be complied with.

Statutes:

Casino Control Act 1992

Registered Clubs Act 1976
Liquor Act 1982
Supreme Court Rules

Cases:

Whyte v Brosch, (1998) 45 NSWLR 354
Lorbergs v State Transit Authority of NSW, (unreported) 10 March 1999, NSWCA

ORDERS

1. Appeal allowed;

2. Respondent to pay the appellant’s costs of the appeal; 

3. Set aside orders 1 and 2 made by Windeyer J on 5 December 1997;

4. In lieu thereof declare that the disposal notice dated 10 June 1997 from the defendant to the plaintiff is null and void and ineffective as a notice pursuant to Art 8.10 of the Articles of Association of the defendant;

   5.          Remit the matter to the Equity Division to make such other orders including any order for damages as may be appropriate in light of this declaration and the events which have happened;

5. The defendant to pay the costs of the proceedings to date before Windeyer J.  

*****

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA  40003/98
ED 4072/96

SHELLER JA
BEAZLEY JA
FITZGERALD JA

Friday, 2 July 1999

ASSOCIATED WORLD INVESTMENTS PTY LIMITED v ARISTOCRAT LEISURE LIMITED

JUDGMENT

1. SHELLER JA: 

   Disposal Notice

   On 10 June 1997 the respondent, Aristocrat Leisure Limited, gave a written disposal notice to the appellant, Associated World Investments Pty Limited, expressed to be pursuant to Art 8.10 of the respondent’s Articles of Association, requiring the appellant to dispose of all the shares it held in the respondent within 90 days of the date of the notice, advising of the suspension from the date of the notice of all dividend and voting rights as set out in Art 8.14 of the respondent’s Articles and stating that if the appellant failed to dispose of all its shares in the respondent within 90 days from the date of the notice the directors of the respondent might take steps to sell and transfer the shares in accordance with the Articles.  The notice was dated 10 June 1997.

2. The notice was accompanied by a letter of the same date from the respondent’s company secretary and corporate counsel, Peter Friend, to Mr L H Ainsworth (Mr Ainsworth), director and secretary of the appellant.  Mr Friend said that a review of the respondent’s share register revealed that the appellant (AWI) was the registered holder of 205,000 ordinary shares in the respondent (the Company).  A search disclosed that Mr Ainsworth was the sole shareholder and officer listed in relation to the appellant.  The letter continued:

   “Aristocrat Leisure Industries Pty Limited (‘ALI’), a subsidiary of the Company, has been advised by the Casino Control Authority (‘CCA’) that the CCA regards that shareholding by AWI in the Company to be a breach of the 1995 undertaking given by the Company and ALI in support of the approval by the CCA of the Company and ALI as parties to approved contracts with the Sydney Harbour Casino.

   Articles 8.7 and 8.8 of the Company’s articles of association provide that a person is not eligible to hold or to continue to hold shares in the Company if, because of holding those shares and any other relevant circumstance, a licence (as defined in the articles) would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of a relevant Aristocrat licensee or would contravene any one or more of the provisions of any gaming laws (as defined in the articles).  A copy of the articles is enclosed for reference.

   As a result of the advice from the CCA, AWI is not eligible to hold or to continue to hold any shares in the Company.  Accordingly, we enclose a Disposal Notice in terms of article 8.10 of the Company’s articles of association requiring AWI to dispose of its shares in the Company within 90 days of the date of  the Notice.

   If AWI fails to dispose of its shareholding in the Company within 90 days of the date of the Disposal Notice, the directors are authorised under the Company’s articles of association to take such steps as may be required to procure the transfer of the shares on behalf of AWI either to a third party or to the Company itself.  In that regard your attention is drawn to articles 8.11 et seq.”

   The 1995 Undertaking

3. The 1995 undertaking referred to was contained in a letter dated 28 July 1995 from the respondent to the New South Wales Casino Control Authority (the Authority).  In that letter the respondent was referred to as “ALH”, an acronym for its then name Aristocrat Leisure Holdings Pty Limited.  “LHA” meant Mr Ainsworth.  The letter referred to previous discussions and acknowledged that ALI proposed to enter into a supply contract with Sydney Harbour Casino and that ALI, the respondent or related companies might enter into other contracts from time to time.  The supply contract was a controlled contract for the purposes of the Casino Control Act 1992.  Relevantly, clause 4 of the letter stated as follows:

   “4.   Each of ALI and ALH hereby undertakes to the Authority that, subject to the excluded activities, at all times during the period commencing on the date of this letter:

   (a)It shall not permit LHA to be in any way associated or connected with its ownership, administration or management of its operations or business.”

4. Clause 5 of the letter stated that each of ALI and the respondent acknowledged that upon and at any time after a breach of any of the provisions of the letter the Authority might serve a notice on each party to any contract pursuant to s39 of the Casino Control Act.

5. Later correspondence passed between the Authority and the respondent about the meaning of the undertaking.  The respondent obtained advice from Mr Hely QC.  On 28 May 1997 the chief executive of the Authority wrote to ALI saying that he disagreed with Mr Hely’s interpretation of cl 4 (a) of the undertaking and in any event, even if it could be argued that cl 4 (a) did not apply on the basis that Mr Ainsworth had no association or connection with the company’s ownership of its operations or business, Mr Ainsworth had the necessary association of connection by virtue of his association or connection with the ownership of the company through the appellant.  The chief executive wrote:

   “Subject to considering what action your company proposes to take in connection with its compliance with the July 1995 undertaking …….the Authority may also have to consider the standing of the licences of all the directors of the company.

   Other issues which the Authority will now need to address include a consideration as to whether or not the Authority will object to the proposed controlled contract relating to the provision by your company of slot machines for the permanent casino and whether or not to issue a Show Cause Notice under s39 of the Casino Control Act in connection with the existing maintenance contract with the casino.

   To enable the Authority to consider its position I would appreciate, in the first instances, your advice by close of business on 6 June 1997 as to the action your company proposes to take in connection with the undertaking of July 1995 in relation to LHA…..”

   Other matters were raised in this letter not pertinent to this appeal.

   The Casino Control Act

6. The Casino Control Act Part 3 provides for the supervision and control of casino operators. In Division 2, which is headed “Contracts”, “contract” is defined to include “any kind of agreement or arrangement” and “controlled contract” to mean “a contract that relates wholly or partly to the supply of goods or services to a casino or to any other matter that is prescribed as a controlled matter for the purposes of this definition” with exceptions not here material. In the same division, s37 (1) provides that a casino operator must not enter into or become a party to a controlled contract, or the variation of a controlled contract, relating to the casino until the operator has given the Authority written notice (contract notice) of the details of the proposed contract or variation of contract and the investigation time that the Authority is allowed by this section has elapsed. Section 37 (2) provides:

   “(2)The Authority may object to the proposed contract or variation of contract by a notice in writing given to the casino operator during the investigation time that the Authority is allowed by this section, in which case the casino operator must not enter into or become a party to the contract or variation of contract.”

   The investigation time is 28 days starting from when the contract notice is given to the Authority.  This time may be shortened or extended in a particular case;  s37 (3).  Section 37 (6) makes it a condition of a casino licence that the casino operator comply with s37 but provides that a failure to comply with the section does not affect the validity of any contract or variation of contract.

7. Section 39 (1) in Div 2 provides:

   “(1)The Authority may serve on each party to a controlled contract a notice in writing affording the party an opportunity to show cause within 14 days why the contract should not be terminated on the ground that it is not in the public interest for the contract to remain in force.”

8. Section 41 in Div 2 makes it an offence for a party to a contract terminated in accordance with Div 2 to give any further effect to any part of the contract.

   The Respondent’s Articles of Association

9. In Art 1.1 “Gaming Laws” are defined to mean the laws, regulations and administrative declarations made by a government or gaming authority in any jurisdiction in which the company or any of its subsidiaries operates from time to time or has lodged an application to operate which has not been withdrawn, and “License” is defined to mean a license or other regulatory approval (including without limitation admission to a roll or list) necessary for the lawful operation of gaming and related businesses now or in the future engaged in by the company or any subsidiary in any jurisdiction issued or given by a gaming authority.

10 The appellant accepted that the Authority’s failure to exercise its power to object to the proposed contract or variation of contract pursuant to s37 (2) could be regarded as a regulatory approval within the first part of the definition of “licence” in the Articles. Accordingly, in the language of Art 8.8 “a Licence would be revoked, suspended, not granted” if the Authority objected under s37 (2) and, a fortiori, terminated a contract consequent on a notice under s39 (1). The question remains whether that regulatory approval was within the meaning of the definition of licence in the Articles “necessary for the lawful operation of gaming and related businesses now or in the future engaged in by the company …… issued or given by a gaming authority”.

11    The respondent’s Articles include fourteen articles grouped under the heading “8 Gaming Regulation - Limitation on Ownership”.  Article 8.1 acknowledges that the Gaming Laws impose a number of conditions and restrictions on persons having influence over or financial interests in a body corporate which holds a licence.  “Compliance with those conditions and restrictions is essential as a failure to comply may lead to severe hardship and penalties to the body corporate including loss of a Licence held by a licensee.”  Articles 8.4 - 8.8 are as follows:

“8.4The Company and its Members acknowledge and recognise that the exercise of the powers given to the Company and its Directors under this Article 8 may cause individual Members considerable financial disadvantage but the Company and the Members acknowledge that such a result is necessary to preserve the value of the Company’s Licences or investments in any subsidiary company or other corporation that holds or may hold a Licence.

8.5The powers conferred under this Article 8 are to be interpreted widely, however, these are subject to the Listing Rules.  In exercising the powers under this Article 8, the Directors are entitled to have sole regard to the interests of the Company and its subsidiaries and may disregard any loss or disadvantage that may be suffered by individual Members affected by the exercise of those powers.  Members acknowledge that they have no right of action against the Directors or the Company for any loss or disadvantage incurred by them as a result, whether directly or indirectly, of the Directors exercising the powers under this Article 8.

8.6The provisions of this Article 8 cease to have effect at any time during which neither the Company nor any subsidiary is the holder of a Licence or has applied for a Licence.

Ineligible Members

8.7A person is not eligible to hold or continue to hold shares in the Company if, because of holding those shares and any other relevant circumstance, the Company or its subsidiaries would contravene or continue to contravene any one or more of the provisions of the Gaming Laws.

8.8A person is not eligible to hold or continue to hold shares in the Company if, because of holding those shares and any other relevant circumstance, a Licence would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of the relevant licensee.”

12    Articles 8.10 and 8.11, which are found under the heading “Directors’ Powers to Disenfranchise and Dispose”, are as follows:

“8.10If a Member fails to comply with the requirements of Article 8.9 or if a Member is not eligible to hold or continue to hold shares in the Company under Articles 8.7 or 8.8, the Directors may give notice in writing (‘Disposal Notice’) to the Member requiring that all or some of the shares held by that person will, within 30 days (or such longer period as is specified in the Disposal Notice) be disposed of.  The Company is to advise the Member of the suspension of all dividend and voting rights as set out in Article 8.14, provided that failure to give such advice as required by this Article 8.10 will not affect the operation of Article 8.14.

8.11If the Disposal Notice is not complied with by the holder of the shares within the time limits specified, the Directors may appoint a person to execute any documents and implement any procedures as may be required to procure the transfer of the shares on behalf of the holder (to a third party or to be bought back by the Company) and to receive and give a good discharge for the purchase price, such purchase price to be not less than the amount determined in accordance with Article 8.12 (unless a Gaming Authority directs the sale to be at the lesser of fair market value of the shares and the price at which those shares were acquired by the Member, in which case that price is to be adopted).  If the Company does not wish to buy-back and cannot sell the shares for a sum equal to or greater than the amount determined in accordance with Article 8.12 within 30 days of determining that amount, the Company must ascertain third parties who may be interested in acquiring the shares and the Directors may appoint a person to execute any documents and implement any proceeds may be required to procure the transfer of the shares at the best price which the Company using its best endeavours is able to obtain.”

13    Article 8.14 provides that all dividend and voting rights attaching to all the shares of the company held by a member and any right of the member to receive any compensation or remuneration of any kind from the company or its subsidiaries shall be suspended immediately upon the issue to the member of a disposal notice until the relevant shares are disposed of or the reason for the giving of the disposal notice no longer exists.

Proceedings in Equity

14    The appellant, by summons filed in the Equity Division, claimed a declaration that the disposal notice dated 10 June 1997 was null and void or, alternatively, ineffective as a notice issued pursuant to Art 8.10 of the Articles of Association of the respondent.  The appellant also claimed a declaration that prior to the issue of the disposal notice the respondent denied the appellant natural justice in that it:

“(a)did not advise the [appellant] of the relevant terms and conditions attaching to licences held by the [respondent] or undertakings given by the [respondent] in relation to those licenses;

(b)did not advise the [appellant] that it intended to issue the disposal notice;

(c)did not provide the [appellant] with an opportunity to make submissions to the [respondent] about why the disposal notice should not be issued in the circumstances;

(d)has purported to make a decision requiring the [appellant] to dispose of its shares in the [respondent] without providing the plaintiff with an opportunity to be heard.”

The appellant claimed an order that the disposal notice be set aside and injunctions restraining the respondent from acting upon it.  In addition, the appellant claimed damages.

15    Windeyer J heard the proceedings and on 5 December 1997 dismissed them.  The appellant appeals from that decision.  No order was made restraining the disposal of the shares pending the appeal and the shares have now been sold.  Accordingly, the substantive relief now sought is by way of declarations and damages rather than injunctions.

Trial Judge’s Findings

16    One complaint the appellant made was that the respondent consistently refused to advise Mr Ainsworth of the undertakings which it had given to the Authority.  Windeyer J found that while Mr Ainsworth’s solicitor had made valiant efforts over a long period to obtain the terms of those undertakings which had been given to the Casino Control Authority, he got them after the disposal notice in question had issued through obtaining copies of documents lodged in Colorado in respect of an application by ALI for gaming licences there.  Windeyer J said:

“Aristocrat informed the Casino Control Authority of the acquisition of the shares by AWI as those acquisitions were made. The notifications were apparently given on 4 and 6 March 1997. On 5 March the Authority wrote asking what action Aristocrat proposed to take in connection with the share purchase by Mr Ainsworth, having regard to the undertaking previously given to the Authority. On 15 April it again sought a response to that letter and stated: ‘You are also advised that the satisfactory resolution of issues arising from the above will be significant factors in the Authority’s consideration of Aristocrat’s continued involvement with the Sydney Casino.’ On receipt of that letter Aristocrat sought advice from senior counsel. That advice is not in evidence although judging by the material which is in evidence it seems reasonably clear that Aristocrat took the view that the holding of the shares by Mr Ainsworth did not involve a breach of the undertaking in paragraph 4a which has been set out. In any event the Authority did not agree with that view and considered that the association of Mr Ainsworth with the ownership of Aristocrat through his control of AWI was sufficient to establish the breach. The letter stating this dated 28 May 1997 also stated that depending on what action Aristocrat took on the matter the Authority might have to consider: the standing of the licences of the directors of the company; whether the Authority would object to the proposed controlled contract relating to the provision of slot machines for the permanent casino; and whether or not it would issue a notice under s39 of the Act in connection with the existing maintenance contract. A meeting of the directors of Aristocrat was held on 10 June 1997 at which this matter was discussed. It is apparent from the evidence that the directors considered that there was a serious risk to the well-being of Aristocrat if AWI continued to hold shares in Aristocrat. The directors accordingly resolved to issue a disposal notice pursuant to Article 8.8.”

Power to give Disposal Notice

17 The principal issue in this appeal is whether the directors had power to give the disposal notice. The appellant put the argument in two ways. First, it submitted that under Art 8.8 a person was not eligible to hold or to continue to hold shares in the respondent if a licence “would” be revoked because of the holding of those shares and any other relevant circumstances. As a matter of language this required more than a possibility. There was no evidence, so it was said, that the appellant’s holding of the shares would result in revocation, suspension or the non-granting of approval under Div 2 of Pt 3 of the Casino Control Act.  Secondly, the appellant submitted that the licence or approval was not within the definition of licence in the Articles “necessary for the lawful operation of gaming and related businesses….engaged in” by the respondent or any subsidiary.  I shall deal first with the definition of licence.

18    The enabling condition relied upon to permit the directors to give a disposal notice under Art 8.10 was, according to the accompanying letter, that the appellant was ineligible to hold or to continue to hold shares in the respondent, if, because of holding those shares and any other relevant circumstance, a licence as defined in the Articles would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of the relevant licensee.  Although Art 8.7 was referred to in the letter, it was not relied on in argument.  The directors’ powers invoked under Art 8.10 depended upon the ineligibility of the appellant under Art 8.8.

19    Windeyer J said at 10:

“As there can be no doubt that the service contract is a controlled contract and the contract for the provision of gaming machines for the permanent casino is a controlled contract, I consider that regulatory approval is required for such contracts so as to bring them within the definition of licence under the articles of association.”

20 The appellant submitted that his Honour was in error and that the Authority’s approval or non-objection to a contract which related wholly or partly to the supply of goods or services to a casino was not a licence necessary for the lawful operation of gaming and relating businesses now or in the future engaged in by the respondent. By way of contrast the appellant referred to Pt 2 of the Casino Control Act concerned with the licensing of the casino and Pt 4 concerned with the licensing of casino employees. Division 2 of Pt 11 of the Registered Clubs Act 1976 provides in s90 for the granting of gaming related licences namely a poker machine dealer’s licence, seller’s licence, technician’s licence, or adviser’s licence. Such licences are, it was submitted, necessary for the lawful operation of the gaming business described. Other gaming related licences may be granted under Div 2 of Pt 11 of the Liquor Act 1982.  The appellant’s researches in Australia suggested not dissimilar licensing patterns in other States and Territories.

21    There was no evidence which indicated the extent of the services provided under the existing contract or how many machines would be supplied under the proposed contract.  The respondent’s directors at the time they met on 10 June 1997 considered there was a serious risk for the well being of the respondent if the appellant continued to hold shares in it.  If the controlled service contract was lost or the proposed supply contract was not entered into it can be assumed that the respondent would lose a considerable amount of business.  But the non-objection or approval by the Authority of such contracts was not necessary for the lawful operation of the respondent’s gaming and related businesses but only necessary for the respondent to engage in supplying goods or services to the Sydney Harbour Casino.  The Article speaks not of the particular but in general, not of the validity of contracts with specific casinos but the operation of gaming and related businesses generally.  An example of a licence necessary for the lawful operation of gaming and related businesses engaged in by the respondent would be a dealer’s licence without which the respondent could not lawfully operate at all in the jurisdiction of the gaming authority.

22    In his evidence, Mr Ainsworth said that the respondent was the largest manufacturer in Australia of poker machines and other gaming devices and the second largest manufacturer in the world of casino style poker machines.  There was no evidence that the Authority’s approval of the contract to provide slot machines for the permanent casino or the existing maintenance contract with the casino was necessary for the lawful operation of the respondent’s gaming and related businesses in the jurisdiction.  The respondent’s position, on the evidence, was no different from that of any other licensed supplier, such as the holder of a liquor licence, whose service arrangements to a casino were, within the definition, a controlled contract.  In such case the approval of the controlled contract could not be described as necessary for the lawful operation of the supplier’s liquor business.

23    In my opinion, the appellant was not a person ineligible to hold or to continue to hold shares in the respondent because the holding of those shares and any other relevant circumstance meant that a licence necessary for the lawful operation of gaming and related businesses engaged in by the respondent or any subsidiary would be revoked, suspended, not granted or made subject to a condition or conditions that would have a material adverse effect on the operations of the licensee within the meaning of Art 8.8.  Accordingly the disposal notice purported to have been given under Art 8.10 was not validly given. This conclusion means that the appeal must be upheld.

24    This conclusion makes it unnecessary to consider the first way in which the appellant put this argument.  I observe that Windeyer J found on the material that the Casino Control Authority had threatened to revoke the controlled contract in force at the date of the notice and clearly, had the notice not been given, it would have objected to the contract for the permanent casino machines going forward.

25    His Honour said:

“In such circumstances on an objective test it was open to the directors of Aristocrat to take the view that it would lose its contracts and not gain the most valuable contract against which decision there could be no appeal.  Thus there was a proper basis to issue the disposal notice whether or not the test was objective or subjective.”

Other Grounds of Appeal

26    The appellant relied on other grounds in support of its appeal as follows:

• That the disposal notice was bad in form as the basis on which it was issued was not shown on its face;

• That the disposal notice was bad because the appellant was not afforded natural justice;

• That the powers under Art 8.10 had to be exercised reasonably and that they had not been so exercised because

  (1)the grounds were not stated;

  (2)   there was no opportunity given to the plaintiff to be heard.

• There was no breach of the undertaking given on 28 July 1995.

  Windeyer J found none of these grounds of appeal persuasive.  However, in the circumstances it is unnecessary for this Court to deal with them.

  Costs

27 The date on or before which the appellant’s written submissions and chronology should have been filed in accordance with the requirements of Pt 51 r47 of the Supreme Court Rules was 18 March 1999.  In fact, the written submissions and chronology were received on 22 March 1999.  When the delay was brought to the attention of the appellant’s solicitors a belated application for an extension of time was made which the President refused.  His Honour said that counsel should come prepared on the hearing date to argue why they should get their costs of the preparation of the submissions.

28    At the conclusion of the hearing of the appeal, counsel for the appellant were asked to put their submissions in writing.  The explanation given was that senior counsel, Mr Lever SC, responsible for preparing the submissions, was involved in other court commitments, notably in Papua New Guinea, during the whole of the week ending 12 March 1999 and then in the Industrial Relations Commission in proceedings which began on 15 March and did not settle until late on the afternoon of 19 March.  Mr Lever prepared the written submissions during the following weekend and on Monday, 22 March 1999.

29    None of this provides a satisfactory explanation, particularly in the absence of any attempt to seek an extension of time until the failure to comply with the rule had been brought to the attention of the appellant’s solicitors.  In Whyte v Brosch (1998) 45 NSWLR 354 at 355, Spigelman CJ said, with the approval of four other members of this Court:

“….that the Court regards compliance with these rules to be a matter of considerable significance.  Legal practitioners, both solicitors and barristers, owe duties to the Court.  That is what distinguishes the practice of a profession from a business or a trade or a job, in so far as the legal profession is concerned.  Those duties include a duty to ensure that proceedings before the Court are conducted efficiently and expeditiously.”

30    In Lorbergs v State Transit Authority of NSW and two other matters (unreported) 10 March 1999 Mason P said that rule 47 operates in a context where the Court of Appeal allocates special fixtures two or three months in advance of a hearing date.  A special fixture allocated in this manner usually means that counsel of choice is briefed from as early as call over and counsel knows from that time onwards of the hearing date.  In any event it means that the appellant and/or the appellant’s solicitor know of the fixture well in advance.  Rule 47 is, or should be, well-known to any practitioner who seeks to practise in the Court of Appeal.  In any event it is the practice of the Registrar to remind the appellant, or the appellant’s solicitor, of this obligation when the fixture date is confirmed.  Knowledge of and compliance with such a fundamental rule is an ethical obligation of the legal practitioner.  His Honour referred to the warning issued by Spigelman CJ in Whyte about possible consequences of failure to comply with the rule.  Mason P observed:

“Unfortunately this warning appears to have gone unheeded.  I say that, not just because of what has been disclosed in these three matters, but in the light of experience in a number of other matters where submissions have not been filed on time over recent weeks.  An alarming percentage of appeals continue to see the late filing of the appellant’s submissions.  (A survey of 69 matters listed for hearing in March 1999 reveals that 67% of matters in which the appellants were in default).  Seldom is this accompanied by an apology to the Court.  It is most rare for any application to be made in advance to the Registrar for any extension of time.

A climate of complacency pervades.

Nothing appears to get done until phone calls are made from the Court.  These phone calls are at times greeted with disbelief and annoyance rather than any sense of recognition of the burden which lax practices are imposing upon the Court and its staff.

Without suggesting this remark is applicable to any of the present cases, I should say that these attitudes are indicative of contempt in both its technical and lay senses.”

31    Having referred to possible sanctions and possible problems that the legal practitioner may unexpectedly face, Mason P said:

“But one suspects that more often than not the real problem lies with the practitioner who takes on too much work, or who traditionally leaves matters to the last minute, or who treats the rules as indicative of something less than an obligation.”

32 In the present case Mr Lever has apologised to the Court. The respondent has not suggested that the presentation of its case was prejudiced by the failure to comply with r47. For the reasons that Mason P explained in Lorbergs the explanation given for delay in this case is not acceptable. There is no explanation for the failure to apply for an extension of time. Highly experienced and competent counsel were involved in this case and I hope that, without the need for the Court to take it any further on this occasion, the word will spread to the profession that Pt 51 r47 must be complied with.

Orders

33    I propose the following orders:

1.     Appeal allowed;

2.     Respondent to pay the appellant’s costs of the appeal;

3.Set aside orders 1 and 2 made by Windeyer J on 5 December 1997;

4In lieu thereof declare that the disposal notice dated 10 June 1997 from the defendant to the plaintiff is null and void and ineffective as a notice pursuant to Art 8.10 of the Articles of Association of the defendant;

5.Remit the matter to the Equity Division to make such other orders including any order for damages as may be appropriate in light of this declaration and the events which have happened;

6.The defendant to pay the costs of the proceedings to date before Windeyer J. 

34    BEAZLEY JA:  I agree with Sheller JA.

35    FITZGERALD JA:  I agree with Sheller JA.

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LAST UPDATED:              02/07/1999