Attorney-General of the Commonwealth v Davids Holdings Pty. Ltd

[1993] FCA 424

ATTORNEY-GENERAL OF THE COMMONWEALTH v. DAVIDS HOLDINGS PTY. LTD. and QIW
RETAILERS LTD.
No. NG575 of 1992
FED No. 424
Number of pages - 8
Judgments and Orders

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Drummond J(1)

CATCHWORDS

Judgments and Orders - undertaking given to secure an interlocutory injunction - order and injunction both expressed to apply "until further order" - final judgment delivered - order intended to have interlocutory application only - undertaking endured only until judgment pronounced.

HEARING

BRISBANE, 2 June 1993

#DATE 2:6:1993

Counsel for the applicant: R.W. Gotterson, QC

Solicitor for the applicant: Australian Government

Solicitor

Counsel for the first respondent: C. Sweeney, QC

Solicitors for the first respondent: Allen Allen and Hemsley

Counsel for the second respondent: R.N. Chesterman, QC

and G.A. Thompson

Solicitors for the second respondent: Clarke and Kahn

ORDER

The Court orders that:

1. Pursuant to O. 3, r. 3(1) the time for filing and serving a notice of appeal is extended to 24 May, 1993.

2. The second respondent's notice of motion insofar as it seeks a release from the undertaking referred to in paragraph 1(a) of the notice of motion is dismissed.

3. The second respondent's notice of motion insofar as it seeks a release from the undertaking referred to in paragraph 1(b) of the notice of motion is dismissed.

4. The first respondent pay half of the second respondent's costs of and incidental to the notice of motion filed on 31 May, 1993, to be taxed.

The Court declares that:

1. On proper construction of order 10 of Gummow J on 18 August, 1992, the second undertaking given by the second respondent was one which endured only until judgment was pronounced on 30 April, 1993.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

DRUMMOND J This application by QIW Retailers Ltd. ("QIW") arises out of an order made by Gummow J in interlocutory proceedings in the action on 18 August, 1992.

1. The action was brought by the Attorney-General, who was successful in obtaining a final judgment from Spender J, after a lengthy trial, on 30 April last. In his judgment, Spender J declared the acquisition by Davids Holdings Pty. Ltd. ("Davids") of the issued shares in QIW, as proposed in the purported Part A statement lodged with the Australian Securities Commission on 17 June, 1992, would contravene s. 50 of the Trade Practices Act 1974. His Honour then issued an injunction against Davids restraining it from acquiring, directly or indirectly, a majority of the issued shares in QIW. It is common ground that, since Davids already owns a little less than the 20% threshold figure of the shares in QIW, the effect of this injunction was to restrain Davids from acquiring any further shares in QIW.

2. The action also involved an issue as to whether Davids' Part A statement contravened the relevant provisions of the Corporations Law. By interlocutory order it was directed that this issue be tried separately from the point arising under s. 50 of the Trade Practices Act. No determination has been made on this second point, but it is common ground that the Part A statement in question has now lapsed. The judgment of 30 April thus finally disposed of the action. The statements Spender J made on 30 April after delivering that judgment, about the matter being still interlocutory, appear to me to have been misconceived. This misconception arose, no doubt, from there being no argument on, and his Honour thus failing to appreciate, the significance of the fact that the only Part A statement that was relevant to the action had lapsed.

3. By the notice of motion, QIW seeks, firstly, release from its undertaking to pay any party adversely affected by the interlocutory injunctive relief granted in the action to the applicant against Davids, such compensation, if any, as the court thinks just. It is clear that this undertaking as to damages was given as the price QIW had to pay for the restraint which Gummow J imposed on Davids on 18 August, 1992. That undertaking has served its purpose in conferring rights to damages on Davids, contingent upon Davids succeeding in the action. There is no ground for releasing QIW from it. This part of the notice of motion was ultimately not pressed and it must be dismissed.

4. It is the release of QIW from the second undertaking which it gave before Gummow J on 18 August, 1992 that is the core of the dispute today. That was an undertaking that QIW would not issue any shares, save under its employees share scheme or save by way of a bonus issue to existing shareholders, and it was further an undertaking not to dispose of any of its assets other than in the ordinary course of business. Mr. Sweeney QC has foreshadowed that, should QIW obtain the release it seeks in relation to this second undertaking, Davids would apply for a restraint on QIW similar to that imposed by the undertaking, pending the determination of Davids' appeal against Spender J's judgment.

5. The question I have now to determine is a threshold one of whether paragraph 10 of the order of 18 August, 1992 was interlocutory, and so ceased to operate upon the determination of the action by judgment on 30 April last; or whether that paragraph of the order, and in particular the second undertaking, has continuing effect. If it has continuing effect, it must operate until it is changed by another order of this Court, even if Davids' appeal is successful. That was, in effect, the position that Mr. Sweeney ultimately contended for.

6. On 18 August, 1992, in the course of the hearing before Gummow J, it emerged that there were some grounds for concern that QIW might, during the pendency of the action, issue further shares in circumstances in which that might be improper. For QIW to do so at that stage would, of course, have adversely affected Davids' position as the maker of a current take-over offer, the invalidity of which had not then been established. Gummow J said, at page 111 of the transcript of the proceedings before him that day:
   

"One question that does arise is preserving the status quo, obviously enough. From what (the witness whose cross-examination has just finished) has said there is some ground for some apprehension, to put it neutrally at this stage, that various steps could be taken in the interim during the currency of interlocutory relief and pending the final hearing which might destabilise the status quo as it were. What I need to know is whether any assurance is forthcoming from your side on that score?"

Counsel for QIW replied:

"During the course of this witness' evidence I have sought instructions on that and such an assurance can be given if it is to be in the form of an undertaking."

1. It was against that background that the order which incorporates the second undertaking in paragraph 10, came to be made. Paragraph 10 of Gummow J's order is as follows:
   

"10. That, upon the Second Respondent by its Counsel giving to the Court:

(a) an undertaking to pay any party adversely affected by the interlocutory injunctive relief granted herein to the Applicant against the First Respondent, such compensation (if any) as the Court thinks just, in such manner as the Court directs; and

(b) an undertaking that, until further order, the Second Respondent will not by itself or its servants or agents:

(i) issue, or enter into any arrangement or understanding to issue, any shares in the capital of the Second Respondent, save:

(A) under its employee share scheme or dividend reinvestment scheme; or

(B) by a bonus issue made pari passu to existing shareholders; or

(ii) dispose of any assets other than in the ordinary course of business,

the First Respondent by itself, or its servants or agents, be restrained, until further order, from taking 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, save that nothing in this Order shall restrain the First Respondent from registering with the Australian Securities Commission a fresh Part A Statement in relation to the acquisition of shares in the Second Respondent."

1. It can be seen, from a reading of paragraph 10, that the second undertaking was also part of a price paid by QIW for the restraint imposed on Davids, not by consent, but after a contested hearing before Gummow J. Davids was restrained "until further order" from taking any steps to acquire any shares in QIW. The undertaking given to procure that restraint on Davids was similarly expressed as a restraint on QIW, i.e., as a restraint "until further order."

2. I do not think it possible to read the restraint on Davids imposed by paragraph 10 of the order as operating beyond the determination of the action - something that occurred on 30 April last. The expression "until further order" in the restraint on Davids, imposed as it was at an interlocutory hearing, is the classic formulation of an order intended to have interlocutory operation only, i.e., intended to operate only until judgment in the action is given. That it was intended to have that effect is, I think, clear. The intent of the order was to restrain Davids only until the rights of the parties were determined by judgment. I cannot accept that it is open to a reading that would give the restraint a continuing operation even if Davids had obtained a final judgment in the action in its favour from the trial judge. I also doubt whether Gummow J, sitting as he was in interlocutory proceedings, would have had, at least in the absence of consent, any jurisdiction to pronounce an order which would operate beyond the pronouncement of judgment in the action. That is a further ground for giving the restraint imposed on Davids in paragraph 10 of the order the construction that I think it clearly is to bear.

3. So far as the second undertaking is concerned, it was given, as I have said, as part of the price for obtaining this interlocutory restraint on Davids. There is, thus, every justification for giving the expression in the undertaking "until further order" the same meaning as that phrase bears in the restraint on Davids. The context in which the undertaking was offered, and to which I have referred, confirms that it was given as part of the action adopted by Gummow J on 18 April to preserve the status quo pending a final hearing. That status quo came to an end with the judgment of 30 April.

4. It has been submitted on behalf of Davids that the risks, as they have been described, that led Gummow J to require the undertaking from QIW, are just as real now. But QIW has had its position, in opposing the Davids takeover offer, vindicated by the judgment. If Davids wants to restrain QIW from exercising lawful rights to issue shares that the judgment frees it to do, Davids must show grounds on proper evidence for that. There is, in my view, a significant difference between the position existing on 18 August last and the position obtaining now, in that, on 18 August, 1992, the question whether, having regard to s. 50 of the Trade Practices Act, Davids' offer was lawful or not, had not been resolved. It has now been resolved against Davids by Spender J's judgment. Although that judgment is under appeal, it is because the right of QIW to act as it chooses, untrammelled by the existence of an arguably valid takeover offer by Davids, has, in effect, been affirmed by the judgment, that the onus is on Davids to show, on proper evidence, a basis for restraining QIW in the manner which Davids seeks to maintain. That must await, as I have said, a later hearing. None of these considerations affects the question as to the proper construction of the second undertaking. My answer to that question makes it unnecessary for me to consider the other arguments that would have been advanced today for and against the continuance of that undertaking.

5. I think that it is not appropriate to grant the relief sought in paragraph 1(b) of the notice of motion. However, it is appropriate to declare that, on the proper construction of paragraph 10 of Gummow J's order of 18 August 1992, the second undertaking given by QIW was one which endured only until judgment was pronounced in the action on 30 April last.

6. It seems to me that there would have had to be the hearing today in relation to the position obtaining in respect of the second undertaking. However, in view of the fact that it can fairly be said that QIW have not been wholly successful particularly in relation to the motion brought in relation to release of the undertaking as to damages, I propose to order Davids to pay one half of QIW's costs of an incidental to this notice of motion, to be taxed.