Australian National Industries Ltd v Consolidated Press Securities Ltd

[1989] FCA 272

JUDGMENT NO, -2J.a&

W~ 1~3iganr

C A T C H W O R D S

Trade Practices - consumer protection - conduct

likely to mislead or deceive - comparative advertising -

"selective quotationn.

AUSTRALIAN NATIONAL INDUSTRIES LIMITED V. CONSOLIDATED

PRESS SECURITIES LIMITED

No. G293 of 1989

Beaumont J.

5 June 1989

Sydney

IN THE FEDERAL COURT OF AUSTRALIA )

1

NEW SOUTH WALES DISTRICT REGISTRY )

1

GENERAL DIVISION 1

BETWEEN:	AUSTRALIAN NATIONAL INDUSTRIES LIMITED
Applicant

AND :	CONSOLIDATED PRESS SECURITIES LIMITED
Respondent

SHORT MINUTE OF ORDER

JUDGE MAKING ORDER: Beaumont, J.

DATE ORDER MADE:	5 June 1989
WHERE MADE:	Sydney

1. Order that the respondent, by itself, its
servants and agents, be restrained from
publishing the statements set out in
sub-paragraphs A and D of para. 4 of the
application filed herein on 2 June 1989.

2.      Reserve liberty to apply.

3.	Stand over the applicant's further claims for

relief until 6 June 1989.

Note: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY )

GENERAL DIVISION

BETWEEN:	AUSTRALIAN NATIONAL INDUSTRIES LIMITED
Applicant

AND :	CONSOLIDATED PRESS SECURITIES LIMITED
Respondent

CORAH: Beaumont, J.

DATED: 6 June 1989

REASONS FOR JUDGMENT

On 5 June 1989, I granted injunctions in this matter and then indicated that I would give reasons for my decision at a later date. The following are these reasons.

Australian National Industries Limited, the applicant,
has applied for injunctive relief against Consolidated Press

Securities Limited, the respondent, seeking to restrain the

likely to mislead or deceive within the meaning of 6-52 of the	respondent from publishing statements which, it is alleged, are
Trade Practices Act, 1974.
The applicant is a listed public company. On 21 April 1989, the respondent announced that i t would make an on-market offer ("the Conspress offer") for all issued fully paid ordinary shares of 30 cents each ("AN1 sharesn) in the respondent to which it was not entitled at a cash price of $1.40 per share. The Conspress offer is open for the period 8th May 1989 to 8 June 1989 inclusive (unless extended as permitted by the Companies (Acquisition of Shares) (New South Wales) Code).
The applicant has retained PP Corporate Advice Limited ("PPn), a member of the Potter warburg Group, to advise on the financial aspects of the Conspress offer. By a report to the applicant dated 15 May 1989, PP reported to the applicant in writing ("the PP ceportn). Included in the PP report was an evaluation of the Conspress offer which, inter alia, considered a determination of an appropriate earnings multiple in the case of the AN1 shares as follows:

.-.* -- - --- -

The &fed d the Spedley Exposure 4 1 be j

. . cause the multiple to mave torprdstheupperendo

-F-. . L---

this range at aurent price# M at $140. the price

, U In evaluating ~ d ' i u r a n c i patbon as i

determuvd in this report it 18 aLo a p p q m t e to I	~multipleisatl75timerThismayintura&
have regard to pmjected pncelearmnga multrplm '	m ANI's share price tending to trade t . d n tha
given tbat this report deals n t h pmepectrve 1989	lower end of its pr*e/ennhp mulhple range a n
and 1990 p r o f b	Itarektivepnrr/edmingsrPnLmg

In thls context, AN1 has tended to trade in a Bahocingthese m~idembona lsan increase m

range between 82 a d 9.5 timea pmepective dividend yield that ail1 a r k a t the aurent l m

e a q over the Mthree yean. w i lereL

I

Thrsmulhple	ndmhted byapplylngeamings	At a ahare price of $140, the prospectme fully
ansing for the fodhmmhg balance date to h	frankeddrndendyleldisZ6percen~whlch	lshlgher
prices m the seven months p m	to the release of	than h t t e r Partner$ estimate of the average

the annual profit ammuncement to the S&&

market prospectwe dwldend yreld of 6 0 per cent

Exchange (franked as to 77 per cent)

Aa noted above. ANI's underlymg buslness In the avrentcvcumstanceaandmtheabsence

operatlonn have not been affeded by the Spedley of the Conspress $1.40 Offer, we belleve that AN1

Erposure. Although ~t is not possible to draw any hares wuld trade a t a sl~ght discount to its normal

precise concluslonn as to whether fhe earnmgs prospectme multiple range

multiple trends set out above n l l continue m the	Therefore. we wuld elpect that m -	t
lrghtofrecentevents,~tisreaso~ble	to assume that	market condlt~ons AM shares would trade in a
the kends should canhue to be applied in	range of 72 to 8 5 lames pro-f~rrna	1989 earnlngs or
determinmg an appropriate capltallsahon rate	a range of $l	18 to $1 40

A full n ~ l r e off of the Spedley Exposure u ~ l l We pomt out. however, tlvt u e would expect the

result m kYI's gearing mcreaslng and rts I K L	mulhple a t whch ANI uould trade (and
tangiile assets per share fallmg Over the last h e	consequent?y the AN1 share pr~ce) would adjust
years. ANI's share pnce as a muluple of its net	upwarda over the next few months as the market

tangible assets appma- the forthcomg tmk a more mformed vrew of t1.e consequences of

balance date has generally been m the order of1 4	the Spedley Ekposure
to 17 tunes the reported net tangible assets m the	Based on a normal tradmg range of 8 2 to 9 5
f o l l m g per~od	tunes pmspectme earnlngs, we would expect ANI's share pnce to trade m a range of S1 35 toSl56once
the uncertamt~es u.ere.reduced ''8

The respondent has caused to be advertised material in the terms of the document set out as follows:

AN1 Directors' own zdvisers say ANI shares

may trade at $1.18 wit:lout the Conspress offer

which doses Just 8 and cannot and

SHARE PRICE

Why should you bclicvc lhe~ll	no\\@'
1 /.NI's	Dlrccton havc lost or placed
at mk at last S300 m~llion	of your ysels

-

4 Wncn .my AYI may havc to pay off

some of IS Spcdlcy-lnduced debt soon AN1

D~rccrors havc alrcadv announced hey must do h Do you m n r ro sec AN13 Dlrccrors brclk up AN1 a n 6 1 demand more of y c r

moncy ro pay f o r k	rnsukes'
5 Wuers and k e *'I	Directors h.wc

6 No one else h is mlde n h ~ g w
Accept clle Con5press offer today

` he applicant complains that, inter alia, the following

statements in the advertisement are likely to mislead or
deceive:-

"l. "AN1 Directors' own advisers say AN1 shares may trade at $1.18 without the Conspress offer which closes June 8 and cannot and will not be extended or increased." (sub-para. A of para. 4 of the application herein)

2.     "ANI's own financial advisors, Potter Warburg, say AN1 shares could trade as low as $1.18 in the absence of the Conspress offer." (sub-para. D of para. 4 of the application herein)

In my opinion, each of these statements is likely to

mislead or deceive.

It is convenient to deal with these questions

separately.

1. The first statement complained of:

According to this statement, the advisers (i.e. PP),
"say [that the] shares may trade at $1.18 without the Conspress

offer which closes 8 June.. ." It is common ground that this is a

PP report which is set out above.

reference to the opinion expressed by PP in the extract from the

A contravention of s.52 of the Trade Practices Act will be made out if it can be demonstrated that the statement attributing to PP the opinion that the shares "may trade at $1.18 without the Conspress offer..." is false. The issue for determination, then, is whether this assertion accurately states what PP said on the subject in its report.

In exposing its process of reasoning in its report, PP relevantly makes the following statements of its opinion:

(a)	Over the last three years, AN1 shares have tended to trade in a range between 8.2 and 9.5 times prospective earnings.
(b)	Over the last five years, the price of AN1 shares as a

multiple of its net tangible assets approaching the forthcoming balance date has generally been in the order of 1.4 to 1.7 times the reported net tangible assets in the following period.

(C) The effect of the Spedley Exposure will be to cause the multiple to move towards the upper end of this range.

(d) At current prices as at $1.40, the price/NTA multiple is

1.75.

( e )	This may result in the price tending to trade towards the lower end of its price/earnings multiple range and its
relative price/earnings ranking.
(f)	In the current circumstances (i.e. having regard, in

particular, to the Spedley Exposure) and absent the Conspress offer, PP believes that the shares would trade at a slight discount to its normal prospective multiple range

(g) In current market conditions (i.e. having regard, in

particular, to the Conspress offer), PP believes that the shares would trade in a range of 7.2 to 8.5 times 1989 earnings (i.e. $1.18 to $1.40).

(h)	However, over the next few months, as the market took a
more informed view of the Spedley Exposure, the share price would adjust upwards.

(i)   Based on a normal trading range of 8.2 to 9.5 times

prospective earnings, PP would expect the shares to trade in a range of $1.35 to $1.56 "once the uncertainties were

reduced. "

On behalf of the respondent, it was submitted that the statement now complained was literally true in the sense that, in their report, PP did state that it would expect that, in current market conditions, the shares would trade in a range of $1.18 to $1.40.

It is, of course, literally true that the figure of $1.18 was mentioned in the report. But, in my view, it does not follow that the statement now complained is not likely to mislead.

It 1s well established that a "half-truth", where only part of the true picture is disclosed, may create a misleading impression. For instance in The King v. Kylsant ( ~ o r d ) [l9321 1

R.6, 442, the appellant was convicted of making a false statement

in a prospectus. It was stated in the prospectus that certain dividends had been paid by the company. ~t was admitted by the prosecution that every statement in the prospectus, in itself, was true, but the prosecution alleged that the document as a whole was misleading and false in that it failed to state that, in some years, the company suffered substantial trading losses and was only able to pay dividends in those years by the intsoduction of items of a non-recurring nature such as adjustments of income tax reserves. It was held that a statement might be false not only because of what it stated, but also because of what it concealed, or omitted or implied. The Court rejected an argument for the appellant that every word of the prospectus was true and that the statute did not "penalise mere

economy of information" (at p.445). Avory J. said (at pp.448-9):

"The falsehood in this case consisted in putting before intending investors, as material on which they could exercise their judgment as to the position of the company, figures which apparently disclosed the existing position, but in fact hid it. In other words, the prospectus implied that the company was in a sound financial position and that the prudent investor could safely invest his money in its debentures. This inference would be drawn particularly from the statement that dividends had been regularly paid over a

term of years, although times had been bad - a	statement which was utterly misleading when the fact
that those dividends had been paid, not out of current earnings, but out of funds which had been earned during the abnormal period of the war, was omitted."

In my opinion, this reasoning is applicable here. To state that PP says that shares "may trade at $1.18 wlthout the Conspress offern is to expose only a part of the total reasoning process advanced in the relevant sectlon of the PP report. That reasoning process was complex. It involved the expression of a series of opinions expressed in various ways and upon different assumed circumstances. To pick out the figure of $1.18 from its context in this fashion is, in my view, likely to create the impression that PP had stated, quite simply, that, in the absence of the Conspress offer, the shares may trade at $1.18. Such an impression would be false. Although PP did mention $1.18, it was in the context of "current market conditions". Even in that context, PP also referred to $1.40. More important, PP expressed the view, finally, that a price of $1.35 to $1.56 would be expected, "once the uncertainties were reduced." In my view, an explanation of the whole of the process of reasoning is necessary to understand properly what opinion was being expressed by PP. In the absence of such an explanation, a misleading impression is likely to be conveyed by a reference merely to a single part of that process. In my opinion, a contravention of 6.52 has been established.

In my view, there is no reason why, as a matter of discretion, the Court should decline to intervene and grant injunctive relief.

2.     The second statement complained of:

It is true that, in this statement, there is a reference to the shares trading "as low as $1.18". This would convey to the reader the impression that this is Pp's worst case assumption. To some extent, therefore, the capacity of the statement to mislead because it was taken out of context has been reduced. But, even if this be granted, the statement is still inaccurate. It asserts that PP says that the shares could trade as low as $1.18 in the absence of the Conspress offer. But in their report, PP stated that the range of $1.18 to $1.40 would be achieved in current market conditions, which must assume the existence of the Conspress offer, that is, an assumption different to that attributed to PP in the statement now complained of.

In any event, in my view, the inclusion of the words "as low as" ($1.18) cannot overcome the misleading impression conveyed by the reference to part only of PP'S reasoning process. For the reasons earlier expressed, in my opinion, unless a fair summary of the whole of that process is given, a misleading impression of what PP actually said in its report is likely to be given.

I certify that this and the

preceding E\hNT ( S 1
pages are a true copy of the

his Honour Mr. Justice Beaumont.

Reasons for Judgment herein of

m& Associate

Dated: 6 June 1989

Counse l and S o l l c l t o r s M r . B . I . O s l l n g t o n Q . C . and

f o r t h e applicant:  M r . M.A. Pembroke l n s t r u c t e d

by A l l e n A l l e n & Hemsley

Counse l and S o l l c l t o r s M r . G . A . Pa lmer Q . C . ,

f o r t h e r e s p o n d e n t : M r . P.P. S t r a s se r and

M r .	L.S.	E l n s t e l n	l n s t r u c t e d
by	L a n d e r e r	&	Co.

Dates of h e a r l n g : 5 and 6 June 1989

Date o f ludgment: 6 June 1989