Australian Securities Commmission v Titan Hills Aust Ltd

[1991] FCA 321

JUDGMENT No. 321 /...%!L-

IN THE FEDERAL COURT	)
OF AUSTRALIA	1
VICTORIA DISTRICT REGISTRY	1
GENERAL DIVISION	1 No. VG 3020 of 1991
B E T W E E N :

AUSTRALIAN SECURITIES COMMISSION

Applicant

- and -

RECEIVED	TITAN HILLS AUSTRALIA LIMITED
17 I U N 1991	DABBY PTY LTD

FEDERAL COURT OF

AUSTRALIA

PRINCIPAL	GODFREY DAVID CULLEN
REGISTRY
MAXWELL ROGER LATIMER

Respondents

Coram:	Olney J
Place :	Melbourne
Date :
-	6 May 1991

EX TEMPORE JUDGMENT

It may be thought that Messrs Selack and Spark were put under some pressure, but they did at least have 24 hours in which to reach a conclusion in this matter, and that is a luxury that I do not enjoy. I am, however, firmly of the view as to how this matter should be disposed of.

day, in view of the urgency of making a decision, to	said, I do not feel it appropriate at this hour of the
attempt to go into the sort of detail one would go into if the luxury of a reserved decision was an option open. I propose, therefore, to express my conclusions and make some very brief comments about them.
First, I refer to section 1324 of the Corporations Law which empowers the Court to grant injunctions in certain circumstances. It is to be noted that the granting of an injunction may occur where a person has engaged, is engaging or is proposing to engage in conduct that constitutes or would constitute a contravention of the Corporations Law, and there is reference also to the various shades of contravention or attempt, and aiding or abetting which is quite common to find in this type of legislation. The starting point for granting of an injunction is the proof of a contravention or a proposed contravention of the Corporations Law; proof to the standard of the balance of probability is all that is
required.
Subsection (4) gives the Court the power, where in its opinion it is desirable to do so, to grant an interim inlunction pending determination of an application under subsection (1). The statute is silent as to the matters that ought to be addressed by the Court in determining whether it is desirable to grant an interim injunction, but I would accept for the purposes of the present
proceedings that the conventional approach to the granting of interim injunctions ought to be followed here. It would seem to me to be a radical departure from normal practice if this section were construed otherwise than as consistent with the usual powers of a court to grant an interim injunction. In particular, I think it would be an incorrect use of the powers contained in subsection (4) merely to say: I think it is desirable that this matter be looked at, I cannot decide whether there is a serious case to be tried on the material before me and I think the parties ought to go away and get some more material and then come back, and in the meantime I will grant an interim injunction. That does not appear to me to be the correct approach, and I would approach the situation in the conventional manner.
There are a number of particular sections of the statute which are said to have been breached, or in respect of which it is said there may be a breach, or a proposed breach. I will deal very briefly with the particular sections that have been referred to.
Section 777 deals with the question of compliance with the Stock Exchange Rules. In my view, the report obtained by the company from the independent expert which accompanied the notice of meeting satisfies the provisions of the Stock Exchange Rules. The applicant says that the report is wrong, or lacks any basis for the conclusion that is reached, and it says that the conclusions are based upon false information. Any examination of the report indicates that it was given as a result of the expert's own enquires based on being satisfied as to the matters that he considered material, and I would reject the suggestion that the report is otherwise than a report which complies with the provisions of the Stock Exchange Rule.
There are a bunch of sections, notably 995, 999 and 1308 and I think 1309 which have to do with the question of whether false statements have been made and like matters. To a large extent, the complaints here are based upon the suggestion or the assertion that Precision Data had a particular capacity to earn profits. I have reached the conclusion that there is no evidence to support the belief of the present applicant that there has been a
made his own enquires and formed his own view, which is breach of these various sections. There is evidence based upon the conclusion of the independent expert who
supported by evidence of the auditor, and indeed to some extent by the bank, that this company is in fact earning profits and the suggestion that it is not open to conclude that it has some value based upon the maintenance of future earnings is one which I would reject.

In the circumstances of a very full and detailed argument on both sides which has been recorded and can be transcribed if it ever becomes important to know what was

I would also comment that Mr Selack's view that the company probably is experiencing a liquidity crisis - I think he used the term it is highly likely - is but speculation and it is patent that due to the constraints of time he had incomplete information before him when he made this comment.

The next assertion made is that there has been a breach of section 997 and that either Mr Cullen or Dabby or a combination of individuals and companies have engaged in price rigging. Cullen has explained the circumstances whereby he entered the market on 23 March 1991 to test the market. He found a seller at 20 cents late in the day after there had been a crossing of a large number of shares earlier in the day at one cent. There seems to me to be no basis upon which to question the intention that Mr Cullen says he had in entering the market that day. There is no basis to doubt the reason why he has since

were good buying at those prices.	purchased further shares in the company at lower prices. He has explained that by saying that he considered they	There is absolutely no explanation of the transactions at one cent earlier in the day on 28 March and the fact that it is now 6 May, that these matters have been drawn to the attention of the appropriate authorities to investigate and that after some 6 weeks there is no information to be put to this Court can only lead to the suspicion that the crossing of shares was not a bona fide transaction and may in some way be related to the announcement two days earlier of the proposed takeover.
I do not think there is any basis upon which any relief
ought to be granted to restrain Cullen, Dabby or anyone else from dealing in shares in Precision Data. It is said that Dabby will be in a better position if the takeover proceeds, and that this therefore amounts to an offence under section 232(6). As to this, it seems to me that that conclusion is dependent upon having a proper understanding of the relative worth of the two companies concerned, as to which there is a divergence of expert opinion and, indeed, what happens following a merger, or the takeover, is of course still a matter of final resolution.
It may well be that if this takeover proceeds and it is implemented in the manner that the documents suggest it
will be and if the consequences flow that have been suggested, Dabby will be in a better position. But by the same token, it may well be that the improved financial arrangements with the bank will leave the company itself in a better position and therefore there will also be advantage to the shareholders. I do not think that on the material that I have before me I can form any conclusion one way or another and it seems to me that the sort of enquires that may be required in order to reach a conclusion are enquires that can be usefully made leisurely and in the fullness of time rather than under the shadow of an interim injunction.
I have come to the conclusion that there is no serious case to be tried in respect of the various matters alleged against the respondents to this application. I would comment, for what it is worth, that if I had come to the conclusion that the material produced indicated that there is a serious case to be tried, I would have had to address the question of whether on the balance of convenience it would be appropriate to disrupt the activities of the company as presently planned by granting an injunction. Such a decision would to some extent be governed by what it was thought was the mischief to be overcome, but there does appear to me to
be no reason on the material presently before me why, even if there were some arguable case, the meeting should
not proceed and the offer be sent out. I think appropriate remedies, if they become necessary, can be pursued at a later time.
For all these very poorly expressed reasons I would dismiss the application.

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I certify that this and the	1-
preceding 7 pages are a .
true copy of the Reasons	I:, 1

for of the I

Honourable	stice Olney	1 -!
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Assocla -	1 , ~
Dated:	6 May 1991

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