Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd

Re: AUSTRALIAN CONSOLIDATED INVESTMENTS LIMITED
And: ROSSINGTON HOLDINGS PTY LIMITED
No. G3048 of 1992
FED No. 154
Corporations Law
(1992) 10 ACLC 561

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Corporations Law - Validity of Part A statement - whether offer related to preference shares capable of conversion to ordinary shares during offer period - meaning and purpose of "other information material" under clause 11(b) s. 750 - sufficiency of particulars of source of consideration of offer - requirement to disclose conditions precedent to offer and status of such conditions precedent.

Corporations Law - Clauses 8, 11 and 17 of s. 750, s. 743.

HEARING

SYDNEY

#DATE 30:3:1992

ORDER

The application be dismissed.

The applicant pay the costs of the respondent.

The cross claim be dismissed.

There be no orders as to costs of the cross claim.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicant, Australian Consolidated Investments Limited, is the target of a proposed takeover offer by the respondent, Rossington Holdings Pty Limited, for all of the issued fully paid ordinary shares in the capital of the applicant at $0.23 each.

The issued share capital of the applicant consists of:

1. 379,256 "series B" partly paid ordinary shares paid to $0.17 each;

2. 3,907,326 "series C" partly paid ordinary shares paid to $0.17 each; and

3. 553,921,713 fully paid ordinary shares of $0.50 each.

4. 53,060,000 10.5% cumulative convertible preference shares of $0.50 each which on 30 April 1992 will automatically convert into fully paid ordinary shares and rank equally with all existing fully paid ordinary shares in the capital of the applicant.

The respondent is jointly owned by Brierley Investments Limited ("BIL") and GPG plc. The respondent is entitled to 93,860,000,000 ordinary and 980,000,000 preference shares in the capital of the applicant.
BIL wrote a letter dated 19 February 1992 to the applicant in the following terms:

"I am writing on behalf of Rossington Holdings Pty Ltd which proposes to make offers to acquire all of the issued fully paid ordinary shares of Australian Consolidated Investments Ltd (ACIL) at 23 cents each.

Rossington is jointly owned by Brierley Investments Ltd and GPG plc. It is entitled to 93.86 million ordinary and 9.80 million preference shares in the capital of ACIL. The proposed offers will be subject to the usual terms and conditions including 90% acceptance and FIRB approval. Additional specific conditions will require:

(a) That ACIL does not exercise or permit the exercise of any purported put or call option in respect of its interest in National Brewing Holdings Ltd; and

(b) That the proposed flotation of the Bass Strait royalty for A$220 million does not proceed.

Preference shares will be eligible for acceptance upon conversion to ordinaries. A formal 'Part A' statement will be lodged with you as soon as possible. If you require further information, please contact Don Conway, Gary Weiss or myself."

A copy of that letter was sent to the Australian Stock Exchange on or about 19 February 1992.
On 24 February 1992 the solicitors for the respondent wrote to the Australian Securities Commission ("the Commission") applying for a declaration pursuant to s. 730 of the Corporations Law that the application of Chapter 6 of the Corporations Law to the respondent in the case of the proposed offer be modified or varied in the following ways:-

"1. the extension of the offer to shares issued after the date of the offers pursuant to the conversion of convertible preference shares;

2. to ensure that the offer may relate only to the fully paid ordinary shares in ACIL and not the partly paid ordinary shares in ACIL;

3. to allow the business addresses of the directors of the offeror to be disclosed in the Part A Statement rather than their home addresses."

Section 730 of the Corporations Law empowers the Commission to modify the operation of Chapter 6 of the Corporations Law (which relates to the acquisition of shares).
The solicitors for the respondent wrote a further letter to the Commission on 27 February 1992 reading as follows so far as relevant:

"We have passed on your comments of this morning to our client in relation to the proposed modification to the Corporations Law to allow the offer by Rossington Holdings Pty Limited

('Rossington') to extend to the fully paid ordinary shares issued upon conversion of the convertible preference shares in Australian Consolidated Investments Limited after the date of the offer.

We are instructed to advise that if the ASC resolves to persist with its current requirement that the offer price for all ordinary shares be increased to $0.25 per share, Rossington will proceed to make the offers exclusive of the additional shares. The opportunity being offered to the holders of the convertible preference shares would then be lost to them. Accordingly, if the ASC's view on this issue remains unchanged we would withdraw our request for modification of the Law in this respect. If the ASC wishes to discuss this matter please contact us urgently.

In any event, we would ask that the other modifications requested on behalf of Rossington be completed immediately to enable us to lodge takeover documents with the ASC in due course. ..."

The Commission replied by letter of 28 February 1992 stating that it had:

"determined that it would be minded to grant your client an extension of time in which to make the offers, to enable your client to make the offers on 1 May 1992. This would allow your client to include the then converted preference shares in the offer for the ordinary fully paid shares.

It would be appreciated if you would inform the Commission whether your client wishes to apply for relief as outlined above."

By letter dated 28 February 1992 the solicitors for the respondent replied to the Commission's letter of 28 February 1992 and said:

"Our client wishes to proceed with the making of its takeover offers as soon as possible and accordingly does not wish to apply for the relief outlined in your letter."

By letter dated 3 March 1992 from the Commission to the solicitors for the respondent the Commission stated:

"We refer to your application for a modification to enable offers to be made for ordinary shares which will be issued by the target after the despatch of the offers. The subject shares will be issued after the preference shares convert to ordinary shares on 30 April 1992. The Commission determined that it would be prepared to grant the relief sought if the offer price was equal to the highest price paid for the preference shares in the 6 months preceding the offers being dispatched. You indicated by letter dated 27 February 1992 that your client was not interested in relief on this basis. The Commission then indicated that it would be prepared to extend the time for dispatch to the offers. You indicated by letter dated 28 February 1992 that your client wished to make the offers as soon as possible and was therefore not interested in such relief. The Commission has considered your application and determined that it is not prepared to grant the relief sought without imposing a condition that the offer price be not less than the highest price paid for the convertible preference shares in the preceding 4 months. At all material times the difference between the preference shares an the ordinary shares has been the rights to deferred dividends; as these rights are extinguished upon conversion and the target is in no position to pay any dividend prior to that date, there is no commercial difference between the two classes of securities. Accordingly the Commission is not prepared to exercise its discretion to facilitate the acquisition of the shares issued as a result of the conversion at a price below the highest price paid for the convertible preference shares in the preceding four months. It is noted that in your public announcement you stated that an offer would be made for the ordinary shares issued as a result of the conversion. Presumably you will be applying to the Commission for an extension of time in which to make the takeover offers in respect of these shares."

On 10 March 1992 the respondent wrote to the applicant a letter which so far as relevant stated as follows:-

"We refer to our letter of 18 February 1992 concerning our intention to make takeover offers to acquire all of the fully paid ordinary shares of 50 cents in ACIL.

For the purposes of s. 637(1) of the Corporations Law, we enclose a Part A Statement which relates to the proposed offers and a copy of one of the proposed offers. We advise that the Australian Securities Commission has refused to exercise its discretion to allow offers on these terms to extend to the holders of ordinary shares issued as a result of conversion of convertible preference shares on 30 April 1992."

The Part A Statement which accompanied this letter was also sent to the Australian Stock Exchange.
Throughout the Part A Statement the expression "ACIL shares" is mentioned and it is defined in clause 1.1 as meaning "the fully paid ordinary shares of $0.50 each in ACIL". In the same clause the expression "ACIL convertible preference shares" is defined as meaning "the 10.5% cumulative convertible preference shares of $0.50 each in ACIL".
The other relevant provisions of the Part A Statement include the following:

"2. THE TAKEOVER SCHEME

The Takeover Scheme relates to all ACIL Shares issued at the date the Offers bear when despatched. The Offers shall extend to all persons registered or entitled to be registered as holders of ACIL Shares at the date the Offers bear when despatched, and to all assignees or transferees of those shares who become registered or entitled to be registered as holders of those shares during the Offer Period. Full particulars of the Offers are set out in the document headed 'Offer' accompanying this statement.

3. OFFER PERIOD

Subject to variation, extension or withdrawal in accordance with the Corporations Law, the Offers are intended to remain open for the period from and including the date of the Offers to 5.00 pm Sydney Time on 6 May 1992.

5. PRINCIPAL ACTIVITIES OF ROSSINGTON The principal activity of Rossington is to acquire and hold securities in ACIL. Rossington is the wholly owned subsidiary of Rossington Investments Pty Limited. The principal activity of Rossington Investments Pty Limited is to hold shares in Rossington. Rossington Investments Pty Limited is jointly owned by Brierley Investments Limited ('BIL') and GPG plc, and is part of the BIL group of bodies corporate. The principal activities of the BIL group of bodies corporate are engineering, building and construction, horticulture, manufacturing, investment in property and securities, retailing, transport and forestry."

Clause 7 states is titled "Particulars of Share Dealings" and, amongst other things, this clause states that during the period of four months immediately preceding the date on which the Part A Statement was lodged with the Commission for registration the only acquisitions of shares in the applicant by the respondent or persons associated with it were the purchases of both ordinary and convertible preference shares as set out in the document.
The other provisions of the Part A Statement which are relevant are clauses 5 and 9 which I shall mention later.
Attached to the Part A Statement is the form of offer of the respondent to acquire the fully paid ordinary shares in the capital of the applicant. Clause 7 defines the conditions to which the offer is subject and the relevant condition is 7(e) which reads:

"That during the Takeover Period the number of ACIL Shares to which Rossington is entitled has become not less than 90% of the total number of ACIL Shares."

The "Takeover Period" is defined in clause 7(a) as "the period commencing on the date of the ... Part A Statement and ending on the date upon which the Offer Period expires".
Correspondence ensued between the solicitors for the parties in which the solicitors for the applicant drew attention to what were said to be defects in the Part A Statement, sought confirmation that the respondent would amend its Part A Statement to remedy the alleged defects and said that unless a satisfactory response was received the applicant would take "appropriate action".
On 20 March 1992 the applicant commenced this proceeding against the respondent seeking:-
1. a declaration that the Part A Statement is invalid; and
2. an order that the respondent be restrained from acting pursuant to the Part A Statement and in particular from issuing or otherwise proceeding with any offers to which the Part A Statement relates.
Pursuant to the Court's directions a letter was sent by the solicitors for the applicant to the solicitors for the respondent setting out the contentions proposed to be relied upon in the case by the applicant and a short statement of the reasons why the provisions of the Corporations Law are alleged to have not been complied with. That letter is dated 20 March 1992 and it in essence summarizes the argument advanced on the final hearing by counsel for the applicant.
At the final hearing the respondent sought leave to file a cross claim against the applicant (which leave was granted without opposition from the applicant) which reads as follows:

"1. If it is found that the Cross-Claimant's Part A Statement does not comply with clause 8(b) or clause 17 of Section 750 of the Corporations Law by reason of it not disclosing the Cross-Claimant's intentions in relation to converted cumulative convertible preference shares of $0.50c each in the Applicant company, THEN an order pursuant to s. 743(1) of the Corporations Law that, in all the circumstances, the contravention ought to be excused and that the Part A Statement is not to be invalid because of the contravention.

2. If it is found that the Cross-Claimant's Part A Statement does not comply with clause 11 or clause 17 of s. 750 of the Corporations Law by reason of it failing to disclose the proportions in which BIL (Australia Finance) Pty Limited and GPG plc have agreed to finance the Cross-Claimant or by reason that it does not disclose whether BIL (Australia Finance) Pty Limited or GPG plc are able to fund the borrowings from their own funds, and if so which funds, THEN an order pursuant to s. 743(1) of the Corporations Law that, in all the circumstances, the contravention ought to be excused and that the Part A Statement is not to be invalid by reason of the contravention.

3. If it is found that the Cross-Claimant's Part A Statement does not comply with clause 17 of s. 750 of the Corporations Law by reason of it not disclosing whether relevant applications for FIRB approval have been made, the status of any such applications, whether any or all approvals required under the Foreign Acquisitions and Takeovers Act, 1975 have been given and what, if any, conditions apply to such approvals THEN an order pursuant to s. 743(1) of the Corporations Law that, in all the circumstances, the contravention ought to be excused and that the Part A Statement is not to be invalid because of the contravention."

Section 743(1) of the Corporations Law, which is the foundation of the cross claim, provides:

"743(1) Where a person has contravened a provision of this Chapter and, on application by any interested person, the Court is satisfied that, in all the circumstances the contravention ought to be excused, the Court may make an order declaring any act, document or matter not to be invalid because of the contravention and to have effect, and at all times to have had effect, as if there had been no such contravention."

Although the proceeding was commenced as recently as 20 March 1992, the parties agreed at the hearing before the Court on 24 March that it should be treated as a final hearing and the Court heard the case on that basis.
I wish to say that the parties and their counsel and solicitors are to be commended on taking a sensible and practical view of this case, both in treating the hearing before me (which was originally scheduled to be an interlocutory hearing) as the final hearing and for the way in which the case was approached by both parties and their lawyers including the precision and brevity of argument. Whether the case proceeds further or not, it is an example of litigation in the commercial sphere that can be instituted and completed within a very short time, but this requires trust and good sense between the legal advisers of the parties which was fortunately evident in this case.
The applicant attacks the Part A Statement on three principal grounds. I will consider each ground in turn.
Convertible Preference Shares
The applicant submits that the Part A Statement is invalid in that it does not comply with clauses 8(b) and 17 of s. 750 of the Corporations Law. Those provisions read as follows:

"750. The following Parts set out the requirements with which Part A statements, Part B statements, Part C statements and Part D statements are to comply ... PART A - STATEMENT TO BE GIVEN BY OFFEROR UNDER TAKEOVER SCHEME

...

8. Where:

(a) the offeror has sent offers or invitations relating to:

(i) the acquisition of shares in the target company (whether voting shares or not) of a different class from the shares to which the takeover offers relate; or

(ii) the acquisition of renounceable options or convertible notes granted or issued by the target company; being offers or invitations that are open or expressed to be open on the day on which the statement is served on the target company; or

(b) the offeror proposes to send, while the takeover offers remain open, offers or invitations relating to:

(i) the acquisition of shares in the target company (whether voting shares or not) of a different class from the shares to which the takeover offers relate; or

(ii) the acquisition of renounceable options or convertible notes granted or issued by the target company; the statement shall set out the terms or proposed terms of those offers or invitations. ...

17. The statement shall set out any other information material to the making of a decision by an offeree whether or not to accept an offer, being information that is known to the offeror and has not previously been disclosed to the holders of shares in the target company."

The applicant draws attention to what it describes as the announcement of the proposed bid made on 19 February 1992, being the letter of that date, the terms of which were set out earlier, in which the penultimate paragraph said:

"Preference shares will be eligible for acceptance upon conversion to ordinaries."

Counsel for the respondent took some exception to the description of this document as "the announcement of the proposed bid" because it was a letter from Brierley Investments Limited to the applicant and there is no evidence that it was made public. But the letter was itself sent to the Australian Stock Exchange so to that extent it was agreed that it was an announcement of the proposed bid.
The applicant has on issue 53,060,000 cumulative convertible preference shares of 50 cents each which will automatically convert to ordinary shares on 30 April 1992 which is within the period of the proposed offers (6 May 1992).
The first complaint of the applicant is that, although the announcement of 19 February 1992 states that "Preference shares will be eligible for acceptance upon conversion to ordinaries", the Part A statement itself which later issued is plainly drafted on the assumption that the takeover offer is not intended to encompass the preference shares, notwithstanding that they will be automatically converted to ordinary shares on 30 April 1992 during the currency of the offer. The applicant asserts that it was not made clear in the Part A statement why there had been a change of attitude by the respondent between the dates of the announcement of 19 February 1992 and the issue of the Part A statement.
The applicant says shareholders who may have been aware of the terms of the announcement of the proposed bid made on 19 February (from which they would assume that preference share would be eligible for acceptance upon conversion to ordinary shares) receive a Part A statement which proceeds on a quite different footing without knowing why this is so, and more particularly why there has been a change of mind on the part of the respondent. In these circumstances it was asserted by the applicant that the Part A statement contravened clause 17 of s. 50 in that it failed to set out information material to the making of the decision by an offeree whether or not to accept an offer of the kind to which clause 17 is directed because it would leave the prospective offeree puzzled, having seen the public announcement of 19 February 1992 and seeing that the Part A statement and proposed offer did not encompass the convertible preference shares, and would cause him to wonder why the change of mind had occurred.
It is clear from the evidence that the reason for the change of attitude by the respondent was that, although the respondent initially intended that its takeover offer would apply to the ordinary shares and to the preference shares once they had been converted to ordinary shares on 30 April 1992, the Commission would not accept this because the offer price would need to be different and insisted that the Part A statement and the subsequent offer be confined to the ordinary shares to the exclusion of the preference shares.
It is common ground that the Part A statement does not and could not encompass within the scope of the offer the preference shares that will become ordinary shares on 30 April 1992, and this is plainly correct: see the definition of "ACIL Shares" and "ACIL convertible preference shares" in clause 1.1 of the Part A statement and the provisions of clause 2 mentioned earlier relating to the takeover scheme from which it is clear that the takeover scheme is to relate to all ordinary shares issued at the date the offers bear when despatched. It is clear from the provisions of s. 637 of the Corporations Law that the takeover offers, a pro forma of which is attached to the Part A statement, must be sent before 30 April 1992 (s. 637(1)), so that plainly the takeover offer and the Part A statement cannot include the convertible preference shares in the proposed bid.
The Part A statement is confined in its operation to the prospective offer to be made for the ordinary shares in the capital of the applicant and not the cumulative preference shares to be converted to ordinary shares on 30 April 1992. The Part A statement plainly recognises that there are cumulative preference shares on issue because it says so: see, for example, the definition of "ACIL shares" and "ACIL convertible preference shares" in clause 1.1 of the statement. It is plain that that statement relates only to ordinary shares issued at the time the offer is to be sent out which must be before 30 April 1992. In my opinion the takeover offer is not intended to relate to the convertible preference shares.
Even if one assumes the hypothetical shareholder who had seen the public announcement of 19 February 1992 (but care must be exercised here because that document is simply a letter from Brierley Investments Ltd to the applicant, a copy of which was sent to the Australian Stock Exchange and there is no evidence that it was made public), and even if such shareholder had cause to wonder why the attitude of the respondent had changed, he would know plainly enough from the terms of the Part A statement and the proposed form of offer that it was confined to the ordinary shares and did not include the cumulative preference shares to be converted to ordinary shares on 30 April. There could not be any remaining bewilderment once the Part A statement and proposed form of offer were read, assuming that there was such a state of mind in the first place. The argument based on clause 17 fails.
It was argued in the alternative by the applicant that the public announcement of 19 February, in saying in the penultimate paragraph that "Preference shares will be eligible for acceptance upon conversion to ordinaries" did not necessarily mean that the terms of the proposed offer would apply to those preference shares but that at some stage in the future, a separate offer would be made to acquire the preference shares. Yet, so it was said, the Part A statement contained no disclosure of the respondent's intention in this respect and the statement did not set out the terms or proposed terms of that offer as required by the provisions of clause 8(b) of s. 750 of the Corporations Law.
A further alternative argument was put by the applicant, namely, that the statement in the penultimate paragraph of the letter of 19 February 1992 was capable of being construed as meaning that either by that offer or by some subsequent offer the preference shares would be included in an offer of acquisition by the respondent. Hence, so it was said, the Part A statement failed to state the terms or proposed terms of any offer by the respondent relating to the acquisition of the preference shares during the currency of the takeover offer, thus conflicting with clause 8(b) of s. 750.
In my opinion the public announcement of 19 February 1992 clearly indicates that at the time it was made the respondent intended that its prospective takeover offer was to acquire all the issued fully paid ordinary shares in the capital of the applicant and that this would apply to the preference shares which would be converted to ordinary shares on 30 April 1992 and they would be eligible for acceptance. The position changed between that date and the date of the issue of the Part A statement because the Commission indicated that it would not permit the takeover offer to proceed on the basis that it included the convertible preference shares. It had to be confined to the shares which were ordinary shares at the date of the dispatch of the offer, and this of necessity had to be before 30 April 1992 by reason of the terms of the relevant provisions of the Corporations Law. There was no proposal by the respondent of the kind to which clause 8(b) of s. 750 is directed and I accept the submission of counsel for the respondent in this respect. The letter of 19 February does not bear either of the alternative constructions for which the applicant contends.
Funding of Offer - Clause 9 of the Part A statement
The applicant submits that the Part A statement is invalid by reason of its failure to comply with clauses 11 and 17 of s. 750 of the Corporations Law.
First, it is submitted by the applicant that the Part A statement fails to disclose the proportions in which BIL (Australia Finance) Limited and GPG plc have agreed to finance the respondent. Also it is said that the Part A statement does not disclose whether either or both of BIL (Australia Finance) Pty Limited and GPG plc are able to fund the borrowings from their own funds, and, if so which funds; or, if they are to borrow the funds, the source of and arrangements for such borrowings.
Second, it is submitted that the requirement for disclosure made under clause 11 of s. 750 is that the Part A statement disclose sufficient information to make clear to shareholders the offeror's financial arrangements and the capacity of the offeror to meet its obligations under the offer. The omission of this information has the consequence that the Part A statement does not comply with this requirement and is invalid.
Third, it is submitted that the information mentioned above is material to the decision of the offerees as to whether to accept the bid or to take alternative action such as selling shares on the market. The absence of that information thus constitutes a contravention of clause 17 of s. 750.
Clause 9 of the takeover offer is the relevant clause for the purposes of this branch of the applicant's case and its terms are as follows:-

"9. SOURCES OF CASH CONSIDERATION If all of the holders of ACIL Shares to whom the Offers are made (excluding any offerees who are associated with Rossington all of which have indicated an intention not to accept the Offers) accept the Offers, the total amount that Rossington would be required to pay would not exceed $107,450,000. Rossington has access to the full amount of $107,450,000 should it be required to pay that amount. BIL (Australia Finance) Limited, the Australian finance subsidiary of BIL, and GPG plc have agreed to lend up to $107,450,000 to Rossington. The loan agreements between BIL (Australia Finance) Limited and GPG plc, respectively, and Rossington are subject to no fetters or conditions precedent to draw down."

Clause 9 should be examined in the light of clause 5 which is cast in the following terms:

"PRINCIPAL ACTIVITIES OF ROSSINGTON The principal activity of Rossington is to acquire and hold securities in ACIL. Rossington is the wholly owned subsidiary of Rossington Investments Pty Limited. The principal activity of Rossington Investments Pty Limited is to hold shares in Rossington. Rossington Investments Pty Limited is jointly owned by Brierley Investments Limited ('BIL') and GPG plc, and is part of the BIL group of bodies corporate. The principal activities of the BIL group of bodies corporate are engineering, building and construction, horticulture, manufacturing, investment in property and securities, retailing, transport and forestry."

Thus the respondent was obviously formed as the vehicle to make this takeover offer and is part of the BIL group of companies and is jointly owned by BIL and GPG plc. Clause 9 makes it clear that BIL (Australia Finance) Limited is the Australian finance subsidiary of BIL; hence the source of the finance is loans from the two companies BIL (Australia Finance) Limited and GPG plc to the respondent. Clause 9 states that the loan agreements between those two companies and the respondent are subject to no fetters or conditions precedent to draw down.
Clause 11 of s. 750 of the Corporations Law provides:

"If the consideration for the acquisition of he shares to which the takeover offers relate or for the acquisition of any shares, renounceable options or convertible notes referred to in clause 9 is to be satisfied in whole or in part by the payment of cash, the statement shall set out:

(a) if the offeror is to provide some or all of the cash from the offeror's own funds - particulars sufficient to identify the cash amounts held by the offeror for or in respect of payment of the consideration; and

(b) if the offeror is not to provide all of the cash, or is not to provide any of it, from the offeror's own funds:

(i) particulars sufficient to identify the other person who is, or each of the other persons who are, to provide, whether directly or indirectly, some or all of the cash from that person's or those persons' own funds; and

(ii) particulars of the arrangements by which that cash will be provided by that other person or those other persons."

Though it is relevant to examine the whole of clause 11 the part which is of particular relevance to this case is clause 11(b)(ii). It is plain from clause 9 of the Part A statement that the consideration for the acquisition of the shares to which the takeover offers relate is to be satisfied in whole by the payment of cash, and that the two companies, BIL (Australia Finance) Limited and GPG plc, are the two companies which are to provide between them all of the cash from their own funds. The real question is whether clause 9 sufficiently states the requisite "particulars of the arrangement" by which that cash will be provided by those two companies.
The predecessor of clause 11 of s. 750 of the Corporations Law was clause 3 of the Part A Schedule to the Companies (Acquisition of Shares) Codes. That clause has been considered in a number of cases: I shall refer to three of them. First in Wright Heaton Limited v PDS Rural Products Limited (1982) 2 NSWLR 301 Needham J. treated a reference to the provision of loan finance in the Part A statement, expressed in general terms, as being a sufficient statement of particulars to comply with clause 3(b). In North Sydney Brick and Tile Co. Limited v Darvall (1986) 2 NSWLR 662 Kearney J. said at 679:

"I do not consider that in order to satisfy the requirements of cl 3(b) it is necessary to pursue the details of arrangements made by the financier providing funds to the offeror with the ultimate lending institution. The 'arrangements' are directed to identifying the flow of funds to be received by the offeror. Information is to relate to the terms of the offer and the capacity of the offeror to perform the obligations assumed in consequence of making the offer. It is submitted by the plaintiff that the shareholders, particularly if selling only part of their shares, are concerned to know who is financially involved in the offer by the offeror. I do not consider that this is the purpose of clause 3(b). The proper interest of shareholders is to be made aware of the financial arrangements ensuring the capacity of the offeror to meet his obligations under the offer. This approach was indicated by Needham J. in Wright Heaton Limited v PDS Rural Product Limited (1982) 2 NSWLR 301, where his Honour treated the reference to loan finance in general terms as constituting a sufficient statement of particulars to comply with cl 3(b). While this statement may have been only a comment, a similar statement of 'a credit facility of $16 million from Boston Australia Limited' was specially considered by Rowland J. in Peters

(WA) Limited v National Companies and Securities Commission (30 June 1986, unreported) in the Supreme Court of Western Australia to constitute sufficient particulars of arrangements for the purposes of cl 3(b). His Honour stated (at 7 of transcript of judgment):

'I cannot think that the details of the credit facility would be of much interest to either the shareholder who accepts or the shareholder who does not. The object of the clause seems to be to ensure that sufficient information is given to establish that the offeror is able to pay for the shares from its own resources. The information given appears to me to comply with the provision in the schedule.'"

In ICAL Limited v County Natwest Securities Aust Limited (1988) 13 ACLR 129 Bryson J. took a substantially similar approach to that adopted in the other two cases (see in particular at 137).
Clause 11(b) is designed to ensure that offerees know the identity of the person or persons who are to provide the cash to the offeror to enable the shares to be acquired by it, and in broad terms how the funds are to pass from that person or those persons to the offeror. The Part A statement does not have to state all the details of the arrangements between the offeror and the providers of funds. It is sufficient that "particulars of the arrangements" are stated.

In my opinion clause 9 of the Part A statement complies with this provision. The reader would be led to believe by clause 9 that the total funds will not exceed $107,450,000, that the Australian finance subsidiary of BIL, namely, BIL Australia Finance Limited, and GPG plc, have agreed with the respondent to lend that amount to it, that there are loan agreements in place between the three companies to achieve this objective and that those agreements are not subject to any "fetters or conditions precedent" which prevent the drawing down of the requisite facilities. In my view that is sufficient.
It is not incumbent upon the respondent to state the proportions in which the two lenders have agreed to finance the respondent. Certainly it may do so, but the fact that it has not done so does not offend the provision. Nor is clause 11 directed to the capacity of the two lenders to fund the relevant borrowings. Clause 11 is not intended to enable offerees to probe the financial viability of the companies who are the providers of funds to the offeror. It does not say that there must be stated in the Part A statement particulars of the assets, liabilities, income and expenditure of those companies or a summary of their business activities or a statement that they are solvent or anything of this kind. It is directed to "particulars of the arrangements" by which the cash will be provided by them to the offeror. If in fact the companies which are to provide funds to an offeror are, let me assume, insolvent so that they could not honour their obligations to put the offeror in funds to enable an acquisition to proceed, then, if those facts are known to the offerer, there may be a breach of clause 17 of s. 750 or s. 704(1)(b) of the Corporations Law or s. 995(2)(b)(iii) which prohibits a person in connection with the making of takeover offers from engaging in conduct that is misleading or deceptive or is likely to mislead or deceive. No such allegations are made in this case.
In my opinion clause 17 of s. 750 has not been contravened.
I do not accept, however, the submission of counsel for the respondent that clauses 11 and 17 of s. 750 are mutually exclusive. Clause 17 is a general provision and there may be cases where material relevant to the provision of cash consideration which is not expressly addressed by clause 11 should be provided under clause 17. I do not regard the present as being such a case.
I admitted into evidence subject to relevance a copy of the loan agreement between the respondent and BIL (Australia Finance) Limited dated 3 March 1992. It was agreed between the parties that there is a loan agreement between the respondent and GPG plc in substantially the same terms. The document is expressed in very general terms indeed; but general or not, it is an agreement whereby BIL (Australia Finance) Limited agrees to make advances from time to time at the request of the respondent and the respondent agrees to repay the same together with interest. No mention is made in the document of the specific sum that may be drawn down by the respondent. It must be remembered, however, that the respondent is a company formed expressly for the purposes of making this takeover offer. It is a member of the BIL group and BIL (Australia Finance) Limited is the Australian finance subsidiary of BIL. They are all members of the same group of companies (see clause 5 of the Part A statement). Although no statement is made of the maximum amount of the facility to be provided under the loan agreement it is unreal in this case to expect that the parties to it are not aware of the amounts that are required by the respondent to enable it to acquire the shares under the takeover offer, the maximum amount of which would appear to be $107,450,000. The fact that this figure is not stated in the loan agreement is not material for present purposes.
FIRB
The applicant next contends that the Part A statement is invalid in that it fails to comply with the requirements of clause 17 of s. 750. The applicant relies on the takeover announcement to which reference was made earlier which stated in part: "The proposed offers will be subject to ... FIRB approval". "FIRB" is an acronym for the Foreign Investments Review Board which is a body established to advise the responsible Minister with respect to certain matters under the Foreign Acquisitions and Takeovers Act 1975 (Cth).
The Part A statement is attacked on the basis that it does not disclose whether relevant applications for FIRB approval have been made, the status of those applications, whether any or all approvals required under the Foreign Acquisitions and Takeovers Act have been given and what, if any, conditions apply to such approvals.
It was argued that the presence or absence of FIRB approval is fundamental to the capacity of the respondent to proceed with the offers and is thus most material to the decision of the offerees whether to accept. The absence of this information constitutes, so it was argued, a failure to comply with clause 17 of s. 750.
The Part A Statement is silent in relation to FIRB. Assuming FIRB approval is necessary for the takeover offer to proceed, it does not follow that because the Part A Statement contains no reference to FIRB clause 17 is contravened. To tell the offerees the present state of any application by the offeror to the relevant authority under the Foreign Acquisition Takeover Act is not a matter of the kind to which clause 17 is directed. If indeed application had been made to FIRB and rejected or if it was never intended to make it (yet it was essential that it be made) may be matters which should be stated under clause 17; but the necessity of obtaining the approval of a statutory authority on the assumption that the respondent is a foreign person for the purposes of the Foreign Acquisitions and Takeover Act 1975 is not a matter in my opinion which need be stated pursuant to the requirements of clause 17. FIRB approval being a condition precedent to the offer strictly requires, in temporal terms, that the approval be given prior to acceptance by offerees. In other words, the offer is non-existent until FIRB approval is obtained. Once such approval has been granted the matter is irrelevant as far as potential offerees are concerned.
Also, the evidence is scant as to the information that is known to the respondent concerning this question of FIRB approval. So it cannot be asserted, on the evidence before the Court, that there is any such information known to the respondent beyond the reference to FIRB in the letter of 19 February 1992. Hence it has not been established that there has been non-compliance with clause 17. There is no evidence as to the role of FIRB in this matter save the brief statement in the takeover announcement to which reference was made earlier.
Nor is it necessary that, to comply with clause 17, the respondent should have mentioned in the Part A statement whether relevant applications for FIRB approval had been made, the status of any such applications, whether any or all approvals required under the Foreign Acquisitions and Takeovers Act have been given and what, if any, conditions apply to such a approval.
Counsel for the respondent pointed to s. 38 of the Foreign Acquisition and Takeovers Act in support of the proposition that, even if that Act had to be complied with and the takeover offer proceeded in contravention of its terms, this may constitute an offence against that Act but the takeover offer would not be invalidated. Section 38 provides:

"An act is not invalidated by the fact that it constitutes an offence against this Act."

It is not necessary for me to consider s. 38 in view of my earlier findings.
The attacks made by the applicant on the Part A statement therefore fail. In the circumstances it is not necessary to consider the cross claim of the respondent which is based on s. 743 of the Corporations Law.
The application is dismissed with costs. The cross claim is dismissed. I make no order with respect to the costs of the cross claim.

[1992] FCA 154

30 MARCH 1992