Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd

Re: AUSTRALIAN CONSOLIDATED INVESTMENTS LIMITED
And: ROSSINGTON HOLDINGS PTY LIMITED
No. G3048 of 1991
FED No. 269
Corporations
(1992) 7 ASCR 515

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies J.(1)

CATCHWORDS

Corporations - non-compliance with takeover code - application for orders of a remedial nature.

Corporations Law, ss.739, 743

HEARING

SYDNEY

#DATE 24:4:1992

Counsel for the Applicant: Mr T.F. Bathurst QC and Mr N. Hutley

Solicitor for the Applicant: Freehill Hollingdale and Page

Counsel for the Respondent: Mr G.K. Downes QC and Mr M.A. Pembroke

Solicitor for the Respondent: Rosenblum and Partners

ORDER

THE COURT DECLARES THAT:

1. Notwithstanding its failure to comply with clause 11 of s.750 of the Corporations Law, the Respondent's Part A statement is valid.

Notwithstanding the previous declaration, the Applicant is not in breach of the Corporations Law by reason of not having despatched its Part B statement.

THE COURT ORDERS THAT:
1. Time for the dispatch of the Respondent's Part B statement be extended to 1 May 1992.

Time for the acceptance of the Applicant's offer be extended to 15 May 1992.
The Respondent pay the Applicant's costs of today's application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is an application for orders of a remedial nature arising out of the declaration made by the Full Court on 16 April that the Part A statement dispatched by Rossington Holdings Pty Limited ("Rossington") to Australian Consolidated Investments Limited ("Austcon") and its ordinary shareholders did not set out the particulars required by clause 11 of s.750 of the Corporations Law. Rossington had dispatched the Part A statement and an offer to acquire with respect to the ordinary shares of Austcon.

Clause 11 of s.750 of the Corporations Law requires a Part A statement to state in relation to a cash offer particulars sufficient to identify the person or persons who are to provide, whether directly or indirectly, some or all of the cash for the takeover from those persons' own funds and to state also particulars of the arrangements by which that cash would be provided by that person or persons.
The Part A statement did not comply with clause 11 in two respects. In the first instance, relying upon the view which had been expressed, for example, by Kearney J. in North Sydney Brick and Tile Co Limited v. Darvall (1986) 5 NSWLR 662, the Part A statement proceeded upon the footing that it was sufficient to identify only the persons who were to supply directly to Rossington cash funds to enable Rossington to fund the takeover, not those persons who were to provide the cash indirectly to Rossington but from their own funds. The Part A statement failed also to give sufficient particulars of the arrangements by which the cash would be provided. Two companies were specified as supplying the cash to Rossington and the statement did not disclose the proportions in which the contributions would be made.
For those reasons and having no other information before it, the Full Court simply declared that the Part A statement did not set out the particulars required by clause 11 of s.750. The Court remitted the matter to a single Judge for the purpose of entertaining an application by Rossington in respect of orders of a remedial nature pursuant to s.739 of the Corporations Law or an application by Rossington for the excuse of a contravention pursuant to s.743 of the Corporations Law. This application seeks orders under both sections.
The Part A statement indicated that the funds of Rossington were to come from two associated companies, GPG plc and BIL (Australia Finance) Limited. The evidence given today shows that there was an agreement that BIL (Australia Finance) Limited will provide 90 per cent of the takeover funds and that GPG plc will provide 10 per cent thereof. Evidence was also given that the funds of BIL (Australia Finance) Limited will be provided by Brierley Investments Limited from its own funds and the 10 per cent funds to be provided by GPG plc will be provided by GPG plc out of its own funds. All three companies, BIL (Australia Finance) Limited, GPG plc and Rossington are part of the Brierley group of companies.
It would have been a sufficient compliance with clause 11 of s.750 had there been, in addition to the statement made, a simple, clear and straight-forward statement that the cash funds were to come as to 90 per cent from Brierley Investments Limited from its own funds and that the funds from Brierley Investments Limited were to be lent to BIL (Australia Finance) Limited and from BIL (Australia Finance) Limited to Rossington.
The question now arises what should be done in this position. I am of the view that no purpose would be served by sending out to shareholders a further notification which would make good the failure of the Part A statement. A further statement would simply delay the takeover and, in view of the fact that the funds are coming from the Brierley group out of its own funds, I think that no purpose would be served by delaying the takeover any longer or by putting the parties to the expense of a further notification.
That leaves the position that there has been a declaration of non-compliance with a provision of s.750. A declaration of non-compliance would not be made if a matter were entirely trivial. But, as the matter was put to the Full Court, it did not then seem to be a matter so trivial that no declaration should be made. A declaration having been made, what is the consequence? The consequence seems to me to be that, subject to the making of appropriate orders, particularly under s.739, the Part A statement is invalid. In my view, s.739 is directed to the type of problem which has arisen in this case. It specifically enables the Court to make any orders necessary or desirable to protect the interests of a person affected by the takeover.
There are many persons affected by the fault that has occurred. Rossington no doubt could be protected under s.743. But the shareholders and Austcon are affected. It seems to me that, when a declaration of non-compliance is made, the Court should go on to say what will be the effect of that so far as the takeover is concerned, whether the takeover is invalid or whether the takeover is validated and will go ahead. That was I think the view which was taken by Jacobs J. in TNT Australia Pty Limited v. Normandy Resources NL (1989) 15 ACLR 99 where his Honour referred to the operation of s.47 of the Companies (Acquisition of Shares) (SA) Code.
It seems to me that all necessary orders can be made under s.739. That is a section which, as Mr T.F. Bathurst QC, with whom Mr N. Hutley appeared for Austcon, has pointed out, was said in Target Petroleum NL v. Petroz NL (1987) 16 FCR 1 at 3 to be a section that lends itself to a liberal interpretation. But just in case that view was incorrect and because, in any event, Rossington is seeking the orders of a remedial nature and s.743 plainly applies to it, I prefer to exercise power under both ss.739 and 743 in formulating the orders which I shall make.
I am of the view that a further letter need not be sent to the shareholders, but that the takeover should be validated as it stands.
I propose to declare that, notwithstanding its failure to comply with clause 11 of s.750 of the Corporations Law, the Part A statement be validated ab initio.
The next matter to consider is the position of Austcon which could be affected because it has not sent out the Part B statement. I think the Court should declare that, notwithstanding the declaration by the Full Court, Austcon is not in breach of the Corporations Law by reason of not having dispatched its Part B statement. The time for the dispatch of the Part B notice will be extended to Friday of next week, that is 1 May.
The question then arises as to what is the position of shareholders.
The next order that should be made is an order extending the time for the acceptance of the offer. Mr G.K. Downes QC, with whom Mr M.A. Pembroke appeared for Rossington, has indicated that he is content to have the time for the acceptance of the offer extended. The issue then arises as to whether it should be extended to the time usually available to shareholders after the dispatch of the Part B notice. I think it would be proper to give the shareholders the usual time, namely 14 days, in which to consider the matter having received the Part B notice.
That means that the offer will be extended until 15 May.
Orders will be made accordingly. Rossington should pay the costs of today's application.

[1992] FCA 269

24 APRIL 1992