Attorney-General of the Commonwealth v Davids Holdings P/L

[1992] FCA 653

6 5 2 3 2 .

JUDGMENT No. ...,. , . . , . a . ,

NOT FOR DISTRIBUTION

m THE FEDERAL COURT OF AUSTRALIA	)
1

NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 575 of 1992

1

GENERAL DIVISION )

BETWEEN: ATTORNEY GENERAL OF THE

COMMONWEALTH

Applicant

AND :	DAVIDS HOLDINGS PTY LIMITED First Respondent
QIW RETAILERS LIMITED

Second Respondent

CORM:	GUMMOW J.
PLACE :	SYDNEY
DATE :	17 AUGUST 1992

PEASONS FOR JUDGMENT (EX TEMPO PRINCIPAL

The background to the present litigation to some extent
appears from the ex tempore reasons for judgment delivered by

His Honour made interlocutory orders which are still in force. The first order was that:

Heerey J in Brisbane on 3 July 1992 in matter number QG 3012

of 1992. Davids Holdings Pty Ltd ( "Davids") is the first

respondent in the proceedings before me, as it was in the proceedings before his Honour. QIW Retailers Ltd ("QIW") was the applicant before Heerey J and is the second respondent before me.

"The first respondent Davids Holdings Pty Limited be restrained until judgment or earlier order form sending or despatching to any member of QIW Retailers Limited the document lodged with the Australian Securities Commission on 17 June 1992, which purports to be a Part A statement and from sending or despatching any offers to any members of

QIW Retailers Limited under or pursuant to that

purported Part A statement."

The Part A litigation, if I may call it that, is next before a judge of the court in Brisbane for directions on 27 August 1992.

The moving party in the present litigation is the Attorney-General for the Commonwealth. The proceeding was instituted by application made on 13 August 1992. Ex parte interlocutory relief was given and when the matter came before

me on the next day, that is to say last Friday 14 August, I

made the following order.

"Upon the first respondent by its counsel giving to the court an undertaking that until 4.15 pm on 17 August 1992 it will not by itself, its servants and agents take any steps to acquire, or to offer to acquire, directly or indirectly:

(a) any shares in the capital of the second

respondent or

(b) any legal or equitable interest in any such

shares

and upon the second respondent by its counsel giving to the court in respect of the above undertaking by the first respondent the usual undertaking as to damages, stand the application for interlocutory relief over to 17 August 1992 at 10.15 am before

me. "

The presence of the Attorney-General as the applicant is

a product of the terms of sub-S. 80(1A) of the Trade Practices

&& 1974 ("the TP Act"). It relevantly provides that a person

other than the Minister or the Trade Practices Commission ("the TPC") is not entitled to make an application under sub- s. 80(1) in relation to alleged contraventions of ss. 50 or 50A of the TP Act. Section 50 deals, to put it shortly, with mergers having the relevant anti-competitive effect. There are, as is well known, provisions in the TP Act dealing with divestiture, and in such an action instituted after a merger

has taken place, the rules as to standing are not as confined	as they are in relation to injunctive applications under
section 80.
The complexities which can attend the administration of divestiture suits under the TP Act are, I think, sufficiently illustrated by consideration of the course of the litigation in australia Meat Holdina Ptv Limited v Trade Practices commission (1989) ATPR 40-932. The present suit is one which
from the material presently available to me would appear to require some two weeks to hear. Inquiries which I have made indicate that the Court would be able to set aside two weeks for a final hearing in Brisbane commencing on 2 November 1992.
Alternatively, if that proved, after hearing what counsel said, too short a preparation time, the court would also have two weeks available commencing on 30 November 1992. The institution of the present suit by the Attorney followed a
decision of the TPC announced on 12 August 1992 that it would
not oppose the Davids proposal to acquire a greater
shareholding in QIW. The TPC having made detailed inquiries
indicated that whilst it regarded the apprehended contravention of S. 50 as a very finely balanced question, it had decided not to seek to intervene by moving the Court.
This afternoon an undertaking is proffered to the court by Davids which is acceptable to the Attorney. It is, however, a proposal which has drawn opposition from QIW as a
matter. I heard counsel for QIW in accordance with the third party with a direct and immediate interest in the
ordinary considerations whereby the position of the third party allegedly adversely affected or likely to be subjected to hardship by a specific remedy, may have that hardship taken into account by the Court. I also allowed to be read an affidavit filed by QIW, sworn by Dr Graeme Edward Bullock today.
The effect of the undertakings, it is accepted, would be not to preserve the status auo but to allow Davids to proceed with further acquisitions pursuant to such legal means as were open to it, against an undertaking to abide the result of divestiture orders if such orders eventually were made after a trial.
The general principle is that undertakings which are loose and imprecise in character should not readily be accepted by the Court, bearing in mind that the giving and acceptance of the undertaking by the court carries with it the sanction of the contempt power in the event of later breach.
In the present case, paragraph l(e) of the undertaking states that pending the hearing or determination of the matter, Davids will not by itself, its servants or agents or otherwise however without the leave of the Court:

"Do or cause to be done any act or thing which would hinder or impede the effectiveness of any order for

divestiture or any other order under the Trade

Practices Act which the Court might hereafter make."

Paragraph (f) is an undertaking not to

"Do or cause to be done any act or thing which would hinder or impede the ability of Q I W to compete with Davids Holdings."

Paragraph (h) is an undertaking that Davids will not sell
the shares it presently holds in Q I W or any shares it

hereafter acquires save that nothing in this clause shall, subject to clause (e), prevent ordinary security arrangements to secure borrowings from a bank.

Paragraphs (e) (f) and (h) are pregnant with ambiguity. There is, I think, strength in the meaning which Mr Myers who appears for QIW draws from paras. (e) and (h), namely, that what is contemplated is that the shareholding acquired under the arrangements contemplated by the undertakings might be pledged as security to a third party. He points to the added complexities that might thereby be entailed in any divestiture process. Further, paragraph (e) to which I have referred, seems to me far too loosely expressed to attract the imprimatur of the Court with the attendant sanction of the contempt power.

Particular exception is also taken to paragraph (d) of
the propoeed undertakings. This deals with the composition of

the board of directors of QIW. It states that Davids would

not without leave of the Court: -

"exercise the voting rights attached to any shares

in QIW other than for the following purposes:

(i) The election of a Board of Directors which
shall comprise:

two continuing directors of QIW who were directors on 13 August 1992, but excluding the then chairman and deputy chairman;

two persons who are nominated by Davids, not being persons who are, or have been, directors of Davids or any of its related companies and who have given continuing undertaking of confidentiality in respect of the information acquired by them as directors of QIW;

five independent directors, including a chairman and deputy chairman agreed upon by the above four directors."

Under this proposal the voting rights attached to the Davids shares would not be exercised other than for the election of such a board of directors and also for effectuating other ordinary business at an annual general meeting. However, the affidavit of Dr Bullock emphasises (particularly in paragraphs 8. 9, 10, 11, 14, 15 and 16) the apprehended dislocation in the general conduct of the business of QIW which could flow from the change in the board in the

manner contemplated in these undertakings. I accept what is	said that the consequences could be such as to involve harm to
the interests of QIW as a whole which were not readily quantifiable in any way that could be reflected in a pecuniary remedy.
Taking all these matters into account I have reached the conclusion that the Court should not accept the proposed undertakings which were proffered this afternoon.

I certify that this and the preceding seven (7) pages are

a true copy of the Reasons for Judgment herein of the

Honourable Mr Justice Gummow.

Associate: sd Date: 17 August 1992

Counsel and solicitors	Mr D Officer QC and
for the applicant:	Mr M Walton instructed by
the Australian Government Solicitor
Counsel and solicitors	Mr C A Sweeney QC and
for the first respondent:	Mr R Parsons instructed by
Blake Dawson Waldron
Counsel and solicitors	Mr A Myers QC and
for the second respondent;	Mr D Robinson instructed by
Clarke and Kann