Bpesam Iv M Limited v DRA Global Limited - [2020] FCA 738

FEDERAL COURT OF AUSTRALIA
BPESAM IV M Limited v DRA Global Limited [2020] FCA 738

File number: WAD 103 of 2020

Judge: MCKERRACHER J

Date of judgment: 29 May 2020

Catchwords:
CORPORATIONS – selective share buy-back scheme – procedures in Div 2 of Pt 2J.1 of the Corporations Act 2001 (Cth) – general duty to make full and fair disclosure to shareholders – duty under s 257D(2) to disclose all information material to the decision how to vote on the resolution – special resolution passed approving share buy-back scheme – whether resolution invalid on the basis of incorrect financial information provided to shareholders – where valid shareholder approval was a condition precedent of the share buy-back agreements – whether s 259F of the Corporations Act cures any defect in the resolution – Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (2017) 254 FCR 559 considered

CORPORATIONS – misleading or deceptive conduct – s 1041H of the Corporations Act and s 12DA of the Australian Securities and Investments Commission 2001 (Cth) (ASIC Act) – materiality – financial statements issued and then re-issued due to discovery of substantial errors – whether initial financial statements were materially misleading in relation to shareholder approval of a share buy-back scheme – where company represented that the erroneous financial statements were a true and fair view of the company’s position – where errors were not known and could not have been ascertained at the time of approval – consideration of subjective knowledge test under s 257D(2) and the objective test under s 1041H of the Corporations Act – principle in Fraser v NRMA Holdings Ltd (1995) 555 FCR 452 applied

CONTRACTS – construction – condition precedent for execution of share buy-back agreement – waiver clause – whether authority to waive is absolute or confined to certain circumstances – where the terms require consideration only of likelihood and timing of the condition precedent being satisfied – whether ambiguity in the terms is required for regard to be had to the commercial context – where both the terms and the commercial context indicate authority to waive is confined to specific circumstances only

REMEDIES – injunctions and declarations – sources of power to grant orders sought derived from s 23 of the Federal Court of Australia Act 1976 (Cth), s 1324 of the Corporations Act and s 12GD of the ASIC Act – whether a sufficient nexus exists between the injunction sought and the conduct that constitutes the contravention – whether policy considerations underlying s 259F(1) provide a discretionary reason not to grant an injunction – whether the applicants lack standing to pursue injunctive relief

REMEDIES – injunctions and declarations – relief sought in relation to share buy-back agreements – where applicant is not a party to the agreements – where the relevant counterparties to the agreements have not been joined – whether counterparties must be joined in order for the relief to be granted – consideration of the effect of the relief on the counterparties – whether counterparties would be entitled to set aside any adverse orders based on the principle in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 – where relief sought is confined to enforcing the proper construction of the agreement – principle in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 applied

Legislation:
Australian Securities and Investments Commission Act 2001 (Cth) ss 12DA, 12GD(1)

Corporations Act 2001 (Cth) ss 9, 180, 256A, 256B, 256B(1), 256B(3), 256C, 256D(1), 256D(3), 257A(b), 257B(2), 257B(3), 257D, 257D(1)(a), 257D(1)(b), 257D(2), 259A, 259F(2), 296, 297, 311, 317, 317(1), 317(2), 1041H, 1324(1), 1324(1B), Div 2, Pt 2J.1

Federal Court of Australia Act 1976 (Cth) ss 21, 23

Trade Practices Act 1974 (Cth) s 52

Cases cited:
AG Cowley Holdings Pty Ltd v Central City Pty Ltd [2010] FCA 199

Allen v Atalay (1993) 11 ACSR 753

Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114; [1999] FCA 1387

Australian Securities and Investments Commission v Solution 6 Holdings Ltd (1999) ACSR 30 605

Bangaru v R (2012) 269 FLR 367

Bluebags Nominees Pty Ltd v Snowball [2012] FCA 1492

Re Boart Longyear Ltd (2017) 121 ACSR 377; [2017] NSWSC 756

Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157

Clarence City Council v Commonwealth of Australia [2019] FCA 1568

Cleary v Australian Co-operative Foods (No 3) (1999) 32 ACSR 701

Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226

ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302

Re Coopers Brewery (No 3) (2005) 57 ACSR 1

Devereaux Holdings Pty Ltd v Pelsart Resources NL [No 2] (1985) 9 ACLR 956

ENT Pty Ltd v Sunraysia (2007) 61 ACSR 626; [2007] NSWSC 270

Forsyth v Blundell (1973) 129 CLR 477

Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603

Fraser v NRMA Holdings Ltd (1995) 555 FCR 452

Re George Raymond Pty Ltd [2000] VSC 531

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

Grant-Taylor v Babcock Brown Ltd (in liq) (2015) 322 ALR 723; [2015] FCA 149

John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1

Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (2017) 254 FCR 559; [2017] FCA 866

Re Lantern Hotel Group [2015] AATA 428

Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd (No 2) [2017] FCAFC 99

McGrath v Australian Naturalcare Products Pty [2008] FCAFC 2

Re Murchison Holdings (2009) 235 FLR 417

News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1

Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317

Re Skiwing Pty Ltd [2009] FCA 347

Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426

Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89

TPT Patrol Pty Ltd v Myer Holdings Ltd [2019] FCA 1747

Re Village Roadshow Ltd (No 3) (2004) 52 ACSR 238

Waterhouse v Waterhouse (1998) 46 NSWLR 449

With v O’Flanagan [1936] Ch 575

Yates v Whitlam [1999] NSWSC 976

Date of hearing: 19 May 2020

Date of last submissions: 28 May 2020

Registry: Western Australia

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: Corporations and Corporate Insolvency

Category: Catchwords

Number of paragraphs: 275

Counsel for the Applicants: Ms EA Cheeseman SC with Mr D Habashy

Solicitor for the Applicants: DLA Piper Australia

Counsel for the First, Sixth, Seventh and Eighth Respondents: Ms J Taylor SC with Mr P Walker

Solicitor for the First, Sixth, Seventh and Eighth Respondents: Gilbert + Tobin

Counsel for the Second, Third, Fourth and Fifth Respondents: Mr KJ de Kerloy

Solicitor for the Second, Third, Fourth and Fifth Respondents: Herbert Smith Freehills

ORDERS

WAD 103 of 2020

BETWEEN:
BPESAM IV M LIMITED (COMPANY NUMBER C125835)

First Applicant

BPESAM IV N LIMITED (COMPANY NUMBER C125836)

Second Applicant

AND:
DRA GLOBAL LIMITED (ACN 622 581 935)

First Respondent

PETER MANSELL

Second Respondent

LEE GORDON GUTHRIE (and others named in the Schedule)

Third Respondent

JUDGE:

MCKERRACHER J

DATE OF ORDER:

29 MAY 2020

THE COURT DECLARES:
1.By representing to shareholders that the financial position and performance of the first respondent for the year ended 31 December 2018 was as set out in financial statements that the first respondent lodged with the Australian Securities and Investments Commission on 30 April 2019, the first, sixth and seventh respondents engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to section 1041H of the Corporations Act 2001 (Cth) (the Act) and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
2.That the resolution referred to as ‘Resolution 12’ in the first respondent’s Notice of 2019 Annual General Meeting dated 7 May 2019 and passed at the first respondent’s Annual General Meeting held on 31 May 2019 (Resolution 12), was and is now, invalid.
3.That in the events that have happened the discretionary power to waive the condition precedent in clause 3.2(b) of the share buy-back agreements between the first respondent and shareholders of the first respondent has not been enlivened.

THE COURT ORDERS
4.An injunction restraining the respondents, whether by themselves, their servants or agents or howsoever otherwise, from giving effect to, or taking any step in reliance on, Resolution 12.
5.An injunction restraining the first respondent, acting through or by the second to fifth respondents, whether by themselves, their servants or agents or howsoever otherwise, from waiving the condition precedent set out in clause 3.2(b) of the share buy-back agreements between the first respondent (on the first part) and selected shareholders of the first respondent who have entered into such a share buy-back agreement (on the second part), and from taking any steps to implement or give effect to any purported waiver of the condition precedent.
6.Subject to Order 7, the respondents pay the costs of the applicants to be assessed if not agreed.
7.Any party seeking an order differing from Order 7 file submissions not exceeding 3 pages within 5 days.
8.Any party wishing to respond to a party referred to in Order 7 respond by filing submissions not exceeding 3 pages within a further 5 days.
9.Unless the Court otherwise orders, costs be determined on the papers.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
MCKERRACHER J:

INTRODUCTION

[1]

THE APPLICATION

[5]

THE EVIDENCE

[6]

BACKGROUND

[13]

ANNUAL ACCOUNTS OVERSTATED BY AUD$78 MILLION

[56]

Applicants’ contentions

[56]

DRA’s response

[106]

The independent directors’ contentions

[136]

Analysis

[162]

WAS THE WAIVER OF THE CONDITION PRECEDENT VALID?

[182]

Consideration

[208]

ARE THE APPLICANTS’ ENTITLED TO RELIEF?

[218]

Consideration

[227]

CONCLUSION

[275]

INTRODUCTION

This urgent final proceeding has been brought by the applicants who hold 35% of the issued shares in an unlisted public company, to restrain the company acting upon a resolution supporting a share buy-back (SBB) agreement. The restraint is based on two main premises. First, it is said that the financial information that was provided to shareholders prior to their approval of the necessary resolution to permit the SBB scheme to proceed was substantially inaccurate. Secondly, it says that the conditions precedent to the SBB agreements were inappropriately waived by some of the respondent directors. The company in question is the first respondent, DRA Global Ltd (ACN 622 581 935). The second to eighth respondents are directors of DRA. The second to fifth respondents are independent non-executive directors. The sixth respondent is a non-executive director and the seventh and eighth respondents are executive directors who also hold shares in DRA.
No suggestion is raised in the proceedings that the company has not been generally successful. No suggestion is raised that the directors have acted improperly or negligently. They appear to have acted on advice and appear to have acted in what they regarded as being the best interests of DRA. Resolution of the dispute turns on questions of law as applied to the facts, properly found.
The parties in a short timeframe have marshalled thousands of pages of evidence and submissions, which these reasons can only address in relatively abbreviated form. The urgency of the situation arises as the decision needs to be given within a matter of days before expiry of a time limit in the SBB agreements on Sunday 31 May 2020. There is no suggestion that there has been delay in pursuing the proceedings, nor would such a suggestion be appropriate.
For reasons set out below, I consider that the relief sought should be granted.
THE APPLICATION
By an amended originating application, the applicants seek declaratory and injunctive relief restraining the respondents from acting on or giving effect to a resolution passed at the 2019 annual general meeting (2019 AGM) of DRA approving the execution of the SBB agreements (together the SBB scheme). That resolution is known as Resolution 12. The AGM was held on 31 May 2019. At an urgent hearing held on 30 April 2020, undertakings were given in lieu of interlocutory injunctive relief. At this final hearing, the applicants also seek injunctions restraining the individual respondents from waiving the condition precedent to the SBB agreements and thereby, it is said, participating in DRA’s breach of the Corporations Act 2001 (Cth), specifically, s 259A and s 256D(1) and, in turn, themselves breaching s 259F(2) and s 256D(3) respectively. In specific terms, the relief sought by the applicants is as follows:
1.A declaration that, by representing to shareholders that the financial position and performance of [DRA] for the year ended 31 December 2018 was as set out in financial statements that [DRA] lodged with the Australian Securities and Investments Commission on 30 April 2019, the first, sixth and seventh respondents engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to section 1041H of the [Act] and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).
2.A declaration that the resolution referred to as “Resolution 12” in [DRA’s] Notice of 2019 [AGM] dated 7 May 2019 and passed at [DRA’s] [AGM] held on 31 May 2019 (Resolution 12), was, or is now, invalid.
2A.Further or in the alternative to paragraph 2 above, a declaration that in the events that have happened the discretionary power to waive the condition precedent in clause 3.2(b) of the share buy-back agreements between [DRA] and shareholders of [DRA] has not been enlivened.
3.An injunction, pursuant to section 1324(1) of the [Act], section 12GD(1) of the ASIC Act or otherwise, restraining the respondents, whether by themselves, their servants or agents or howsoever otherwise, from giving effect to, or taking any step in reliance on, Resolution 12.
4.Further or in the alternative to paragraph 3 above, aAn injunction, pursuant to section 1324(1) of the [Act], section 12GD(1) of the ASIC Act or otherwise, restraining [DRA], acting through or by the second to fifth respondents, whether by themselves, their servants or agents or howsoever otherwise, from waiving the condition precedent set out in clause 3.2(b) of the share buy-back agreements between [DRA] (on the first part) and selected shareholders of [DRA] who have entered into such a share buy-back agreement (on the second part), and from taking any steps to implement or give effect to any purported waiver of the condition precedent ~~giving effect to, or taking any step in reliance on, Resolution 12~~.
5.Costs.
6.Such further or other order as the Court considers appropriate.
(Emphasis indicates amendments made by the applicants to the relief.)
THE EVIDENCE
The evidence in support of the application and in opposition to it was as follows.
There are three affidavits from Mr Paul Salomon, a Private Equity Executive. He is an advisor to the applicants as an employee of Stockdale Street (Pty) Limited. Mr Salomon has held that role since 2011 and gives the primary evidence on behalf of the applicants. He was formerly a director of DRA, from 16 July 2018 to 11 March 2020 and is currently an alternate director. As with other participants in this proceeding, he is working from his home in South Africa, where he resides due to the ongoing COVID-19 pandemic. Mr Salomon is a Chartered Accountant in Australia with a Batchelor of Business Science (Honours) from the University of Cape Town and has held various roles in corporate finance and private equity businesses.
For DRA, evidence on affidavit was given by Mr Andrew Naude, its CEO. Mr Naude is also the seventh respondent in the proceeding and is associated with one of the major beneficiaries under the SBB scheme. I make that point, not to doubt his credibility, but simply to point out that amongst the substantial volume of evidence and submissions which have been advanced for the respondents, it is reasonable to assume for the purposes of this urgent hearing that Mr Naude and his advisors have advanced the majority of sensible arguments which could properly be advanced in relation to the case which others in his position would be likely to advance. Mr Naude holds a Batchelor of Commerce and an Honours in Commerce from the University of Natal. He is a qualified Chartered Accountant in Australia, but also in New Zealand and South Africa. He is a Certified Practising Accountant in Australia, has completed an Advanced Management Programme at Harvard Business School and is a graduate member of the Australian Institute of Company Directors. Before joining DRA in 2013, he was a manager of KPMG Financial Services Advisory Group from 1999 to 2001, senior manager at KPMG Corporate Finance from 2001 to 2007, corporate finance executive of Tlotlisa Securities from 2007 to 2008, managing director of Moore Stephens Corporate Finance from 2008 to 2011 and managing director of BDO Corporate Finance from 2011 to 2013. He has also served on the boards of two South African companies.
Numerous objections were taken to the content of the affidavits of Messrs Salomon and Naude. Sensibly, the parties agreed to file the objections and the responses and to read the evidence, subject to any rulings on the objections.
Given the urgency of the matter, I intend to approach the evidence contained in the affidavits by accepting the common ground, which simply knits together the background and events which are not controversial and accepting the affidavits for the purpose of introducing into evidence the thousands of pages of documents which they supply. There is substantial material in the affidavits for all parties, which expresses a great deal of opinion, summary, hearsay and submission evidence. I do not, other than where I have expressly indicated, take into account any content to which objection is taken and I have confined the receipt of the affidavit evidence to the purpose indicated at the commencement of this paragraph.
The respondents took exception to both the lack of independence of Mr Salomon and an asserted lack of expertise. The applicants similarly pointed to the fact that Mr Naude had a substantial indirect personal benefit at stake and that no other respondent has given evidence on affidavit, nor has any attempt been made to adduce evidence from any third parties which might be affected by the relief sought by the applicants. As far as I am concerned, all these matters were incidental. Like most commercial disputes, the bulk of the story is on the papers and the questions for determination in this application are, essentially, questions of law on which I was ably assisted by counsel for all parties.
Having canvassed that explanation as to the manner in which I have treated the affidavit evidence, I move to consider the background and the key arguments.
BACKGROUND
DRA is a diversified global engineering, project delivery and operations management group. It is an unlisted Australian public company, headquartered in Perth, Western Australia.

Mr Naude explains that over the years DRA has had high levels of management ownership. This has been a contributing factor, he says, to DRA’s success. Mr Naude joined DRA Group Holdings (Pty) Ltd (DRAGH) in April 2013. DRAGH is a company incorporated in South Africa, which was acquired by Minnovo Global Limited, now known as DRA Global Limited, in July 2018. Although DRAGH and DRA Global are occasionally referred in these reasons separately, they have been described for most purposes together as DRA.
From 2016 to mid-2019, Mr Naude served as DRA’s chief financial officer and strategy director. As such, he was accountable for DRA’s group financial and commercial activities, including mergers and acquisitions, strategic investments and group-corporate service functions. As the Chief Executive and Managing Director of DRA now, he is accountable for the management of DRA’s group business activities. Until 2016, all of DRA’s shares were held by employees or former employees of the DRA Group. From time to time, prior to 2018, when DRA became a public company, the DRA Group Holding Share Purchase Trust facilitated the purchase of shares by management personnel and employees of DRAGH by way of funded Share Schemes. This was done as a means of promoting share ownership amongst the senior management team so as to align the interests of DRAGH’s management with its shareholders. The shares acquired under the Share Schemes ranked pari passu with other DRAGH shares. This arrangement is entirely conventional.
The Share Schemes entail the Trust offering funding to management personnel and employees (Share Scheme participants), which was used to acquire shares from those shareholders who had left DRAGH and wished to sell their shares on a willing-buyer, willing-seller basis. This arrangement gave rise to a series of loans (Shareholder Loans) from the Trust and other DRAGH group companies to the Share Scheme participants. Typically, the Share Scheme participants were required to pay a portion of the acquisition price in cash. The terms of the Shareholder Loans were such that any benefit (by way of dividend or otherwise) received by the holder in respect of the underlying DRAGH shares would first be applied in full to service the loan, firstly, to settle current and accrued interest and then to repay the principal. The only repayment requirements were that, as long as the loan was outstanding, any dividends declared on the shares would need to service the loan and, if the holder sold their shares, they would have to first apply the sale proceeds in discharge of the loan. DRAGH had no other recourse to the loan holders. According to Mr Naude, a total of 11 such Share Schemes have been implemented to date.
By 2015, a substantial number, (about 60%), of DRAGH shares were held by individuals who had either left DRAGH or whose retirement was imminent. To address this issue and facilitate an international growth strategy, DRAGH engaged with various investors to negotiate an investment that would facilitate a share purchase from those shareholders who had exited or who planned to exit DRAGH, that would realign the interests of DRAGH and its management and facilitate expansion of DRAGH outside South Africa.
On 13 July 2015, the applicants (known together in this transaction as Stockdale) submitted a non-binding expression of interest to subscribe for 30 million shares in DRAGH.
Following a due diligence process, DRAGH and Stockdale entered into a Transaction Umbrella Agreement and a Subscription Agreement under which:
(a)Stockdale agreed to subscribe for 30 million shares in DRAGH at a subscription price of R30 per share (‘R’ being shorthand for the South African Rand);
(b)DRAGH agreed to lend up to R300 million of the subscription funds to the Trust;
(c)the Trust would make an offer to shareholders to purchase up to 10 million shares in DRAGH at a purchase price of R30 per share (being the same price as Stockdale's subscription price) to facilitate an exit or liquidity event for shareholders; and
(d)DRAGH agreed that, within six months of the Subscription Closing Date (as defined in the Transaction Umbrella Agreement), the Trust would offer the 10 million DRAGH shares acquired by it for sale to members of the DRAGH group's management on a 80-90% funded basis to realign the interests of senior management with those of shareholders (Share Scheme 10).
(Stockdale Transaction)
The underlying documents are in evidence. Anticipating implementation of the Stockdale Transaction, the DRAGH Board resolved to convert all existing Shareholder Loans into a standard set of loan terms and issued a circular to directors in 2016 disclosing that it was a condition of the Stockdale Transaction that DRAGH implement Share Scheme 10. Shareholders approved the Stockdale Transaction in May 2016 and Stockdale acquired the shares. From this time onwards and as a result of this transaction, the applicants have continued to hold a 35% interest in DRA. In March 2017, DRAGH invited selected key management personnel to acquire DRAGH shares at a price of R30 per share on a 90% funded basis, in accordance with Share Scheme 10. The remaining 10% was to be borne by Share Scheme participants in the form of cash or a pledge of fully paid up shares. Consistent with the Share Schemes outlined above (at [16]), the Shareholder Loans were limited recourse, unsecured loans, with the only repayment being that any benefit by way of dividend or otherwise received by the holders in respect of the underlying shares first be applied in full to service the debt, firstly to settle current and accrued interest and then to repay the principal.
In March 2016, the DRAGH board developed a strategy to externalise its business from South Africa with the intention of creating future growth by transferring the DRAGH business into a new, non-South African holding company that could be publicly listed in North America or Australia. To facilitate this strategy, on 26 June 2017 DRAGH made a non-binding expression of interest to the shareholders of Minnovo, a privately held Australian company, to acquire 100% of its issued share capital and to consolidate each company’s businesses under an international holding company. This strategy was known as Project Wave.
Minnovo executed and returned an expression of interest and the DRAGH board agreed that the proposed merger with Minnovo should proceed subject to diligence and an international growth platform was to be developed through an Initial Public Offering (IPO) on the Australian Stock Exchange (ASX).
On the implementation of a revised scheme (the Minnovo Scheme) in July 2018, DRAGH and Minnovo each became subsidiaries of Minnovo Global Limited, which was renamed DRA. Mr Naude explains that as noted in the transaction documentation, the final step in the Project Wave transaction was for DRA to implement a SBB scheme to eliminate the Shareholder Loans. On 23 August 2018, a majority of the directors of DRA signed a resolution to undertake an SBB scheme at a price of R74.25 per buy-back share, being the same price as the scheme consideration under the Minnovo Scheme. Professional advisors made it clear that the SBB scheme was a necessary pre-listing step. As the evidence unfolded, I did not understand ‘necessary’ to mean an essential legal requirement, but an important commercial imperative for reasons which I will explain.
An SBB scheme requires approval of the members of a company at a general meeting. On 10 October 2018, DRA issued a notice of general meeting to be held on 9 November 2018 to consider and, if thought fit, approve the proposed SBB at a price of R74.25 per buy-back share. DRA entered into SBB agreements with each eligible shareholder between October and November 2018. However, after these initial steps towards obtaining shareholder approval for the SBB, by letter dated and circulated on 7 November 2018, DRA advised shareholders that the board had decided to cancel the general meeting scheduled for 9 November 2018 to consider the SBB scheme resolution.
This cancellation becomes important to the issue of materiality discussed below. In DRA’s letter to shareholders of 7 November 2018, it explained that the board decided to cancel the general meeting because:
(a)the board formed the view, in light of material transactions that it was considering at the time, that it was unable to comply with the requirements of s 257D of the Act, which requires disclosure of all information known to DRA that is material to the decision how to vote on the resolution; and
(b)the applicants (together as Stockdale) communicated that they would not vote in favour of the resolution as they considered that the proposed SBB scheme afforded participants the ability to realise value for a portion of their shares ahead of other shareholders at a time when, in their view, there was limited visibility as to the timing or success of the intended public listing.
This acknowledgement in (b) becomes important when considering the applicants’ attitude to Resolution 12 in its final form.
By letter dated 12 November 2018, the DRA board addressed a number of queries raised by shareholders related to the proposed SBB scheme, including queries regarding the cancellation of the general meeting scheduled for 9 November 2018. In early March 2019, DRA’s chairman resigned and in his place, Mr Cliff Lawrenson was appointed as an independent director. He was elected chairman of DRA. On 28 March 2019, members of the DRA board met in Johannesburg and agreed that Mr Lawrenson should undertake a review of the proposed SBB scheme from an independent perspective, obtain updated advice and make a final recommendation to the board as to the necessity of concluding the SBB scheme. On 30 March 2019, Mr Leon Uys, a non-executive director of DRA (and the sixth respondent in this proceeding), provided Mr Lawrenson with information concerning the review of the proposed SBB scheme. By letter dated 3 April 2019, SENET Pty Ltd, which holds about 10.5% of DRA’s issued share capital, requested that the board provide a firm commitment and undertaking to deal with the SBB scheme as soon as possible, well ahead of the formal IPO process and, in any event, by no later than DRA’s 2019 AGM.
On the same day, advices were received from Azure Capital and Pallidus Capital to the DRA board that retaining the Shareholder Loans would increase the execution risk in relation to DRA’s proposed IPO and that the loans should be extinguished to ensure that the outcome of an IPO was optimised.
Acting on this advice, the chair recommended that DRA implement the SBB scheme and Mr Lawrenson instructed Mr Naude to prepare a note for the board with this recommendation. The applicants’ nominee directors at the time, Mr Salomon and Mr Peter Maw, engaged directly with Mr Naude about renegotiating the terms of the SBB agreements, such that Stockdale and its principals, the applicants, would be willing to approve the SBB scheme. Mr Maw, on behalf of the applicants, proposed changes to the SBB agreements and new proposed conditions. In response, Mr Uys confirmed that based on DRA's approved strategy, previous shareholder communications and historical transaction documents, DRA would proceed with an IPO; the question was now only a matter of timing.
There is a conflict as to what communication was exchanged around this time concerning a disagreement as to the practicality of a condition precedent which was proposed on behalf of the applicants, which predicated the implementation of the SBB scheme on DRA Global raising at least AUD$100 million on IPO and a further commitment that the sellers of the shares would escrow post-IPO. In the absence of cross-examination at this urgent hearing, it is now not possible or appropriate to reach any conclusions as to what took place in these conversations or various others on which there are conflicting accounts on the affidavit evidence.
On 19 May 2019, DRA circulated a 2019 AGM notice of meeting (NOM), the contents of which will be examined in detail below. On 31 May 2019, DRA held the 2019 AGM in Perth, with a video-link to South Africa. Mr Naude attended in Johannesburg. A PowerPoint was presentation provided to shareholders and is included in the exhibit to Mr Naude’s affidavit. Mr Naude made a presentation on DRA’s financial performance, focussing attention on the ‘underlying EBITDA’ (Earnings Before Interest, Taxes, Depreciation and Amortisation) rather than the profit and loss statements. Resolution 12, which will be referred to below, was passed by the DRA shareholders, with the following results: 88.4% voting in favour, including the applicants; 11.6% voting against; 0.43% abstaining and 23.51% being excluded. A 75% majority was required to pass Resolution 12.
Resolution 12 authorised SBB agreements in relation to 83 eligible shareholders in total. Of the 83 eligible shareholders, three elected to settle their loans in full and six immaterial loan holders indicated they did not wish to sell their shares. There were 75 concluded SBB agreements. By value, the acceptance rate was approximately 99.5%, with the terms of the agreements being largely identical.
The SBB agreements provided for the SBB scheme to proceed in two tranches, Tranche 1 being DRA acquiring 10 shares at R74.25 per share from each shareholder, thereby partially discharging the relevant Shareholder Loan (Tranche 1 Consideration) and Tranche 2 involving DRA acquiring sufficient remaining shares from the shareholder in order to discharge the balance of the Shareholder Loan at the same price.
Following the 2019 AGM, DRA acquired and cancelled the shares bought back from shareholders under Tranche 1 of each of the 75 SBB agreements, being 750 shares in total and partially discharged each of the relevant Shareholder Loans. Tranche 1 commenced in July 2019 and was concluded in April 2020. The design of Tranche 1 to include only a small number of shares was essentially to satisfy the Australian Securities and Investment Commission (ASIC) timing requirements.
Completing Tranche 2 under the SBB agreements and discharging the balance of the Shareholder Loans has been an outstanding board matter since November 2019. The original deadline for listing imposed on DRA by the South African Reserve Bank (SARB), was 9 January 2020 or such other date as SARB allowed, but in any event no later than 31 May 2020, as reflected in cl 3.2(b) of the SBB agreements. The SBB agreements also provide for the completion of the sale and purchase of the Tranche 2 shares being conditional upon public listing being achieved by 31 May 2020, per cl 3.2(b) of the SBB agreements, unless that condition is waived under cl 3.3 of the SBB agreements. Clause 3.2(b) of the SBB agreements contains the relevant condition precedent that has already been alluded to in these reasons and applies only in relation to Tranche 2 of the SBB scheme. In August 2019, DRA approached SARB for an extension of the time limit for the proposed listing of DRA on the ASX and the secondary listing on the Johannesburg Stock Exchange (JSE). DRA requested that it have until 30 June 2021 to achieve the listing. The extension was granted. The reasons for seeking the extension included the need to attend to reconstituting the DRA board and re-issuing the Initial 2018 Financial Statements which are the focus of attention in these proceedings.
In September 2019, Mr Peter Mansell was appointed as the new chairman of DRA. He identified the SBB scheme and the Shareholder Loans as an issue that needed to be resolved with some urgency. There have been board meetings since that time addressing the issue. There have also been numerous communications, written and oral.
On 28 April 2020, DRA’s independent non-executive directors (the second, third, fourth and fifth respondents) met and agreed that they were in favour of waiving the condition precedent at cl 3.2(b) of the SBB agreements. The minutes of this meeting will be examined in some detail as the applicants contend that a number of conditions upon which the authority to waive is predicated have not been satisfied.
Almost a year before, on around 30 April 2019, DRA had lodged with ASIC the Initial 2018 Financial Statements for the year ended 31 December 2018. Amongst other things, the Initial 2018 Financial Statements reported an operating profit of approximately AUD$25,451,479 in respect of DRA’s fiscal year ended 31 December 2018. It also distributed at that time to its shareholders a copy of the Initial 2018 Financial Statements. This preceded the NOM which was issued on about 7 May 2019. Amongst other things, that NOM included the following:
(a)a statement on p 2 confirming that DRA’s 2018 annual financial statement had been sent to shareholders electronically;
(b)a list of ‘the items of business’ stated on p 5, which commenced with the following Item of Business as number 1:
‘DISCUSSION OF FINANCIAL STATEMENTS AND REPORT … [T]o receive and consider the Financial Report, Directors’ Report and Auditor’s Report for the financial year ended 31 December 2018’;
(c)the following statement on p 9 appeared as part of the ‘Explanatory Notes’ in respect of item of business number 1:
ITEM 1DISCUSSION OF FINANCIAL STATEMENTS AND REPORTS
Section 317 of the [Act] requires [DRA’s] Financial Report, Directors’ Report for the last financial year ended 31 December 2018 and Auditor’s Report to be laid before [DRA’s] [AGM].
In accordance with the [Act] Shareholders will have a reasonable opportunity to ask questions or make comments on [DRA’s] Financial Report, Directors’ Report and Auditor’s Report for the financial year ended 31 December 2018.
[DRA’s] auditor, BDO, will be present at the Meeting and Shareholders will have an opportunity to ask the auditor questions in relation to the conduct of the audit, the Auditor’s Report, [DRA’s] accounting policies and the independence of the auditor.
The auditor will also respond to any written questions provided these are submitted to [DRA] no later than five Business Days prior to the [AGM].
There is no requirement under the [Act] or [DRA’s] Constitution for Shareholders to approve [DRA’s] Financial Report, Directors’ Report and Auditor’s Report.
A copy of [DRA’s] 2018 Group Annual Financial Statements, which includes [DRA’s] Financial Report, Directors’ Report and Auditor’s Report has been sent to all Shareholders electronically.
The NOM also included the following Item of Business on p 7 as business item number 13 which provided for the consideration of and a vote on Resolution 12:

13. APPROVAL OF SHARE SCHEME BUY-BACK
To consider and, if thought fit, to pass the following as a Special Resolution:

“That for the purposes of section 257D(1) of the [Act], clauses 3.1(a) and 16(l) of [DRA’s] Constitution and all other purposes, approval is given for [DRA] to undertake a selective buy-back of such number of Shares in the capital of [DRA] that are held by the Shareholders who have received a buy-back offer from [DRA], as set out in Part 1 of Appendix B to this Notice of Meeting, and who have or will as at the date of this [AGM], subsequently enter into a Share Scheme Buy-Back Agreement with [DRA] in the form attached as Appendix C to this Notice of Meeting, which number in any event shall not exceed 5,485,939 Shares in the capital of [DRA], and the terms of the Share Scheme Buy-Back Agreement be approved and that [DRA] be authorised to give effect to its terms”
… …

The terms of the agreement between DRA and the shareholders participating in the SBB scheme referred to in the text of Resolution 12 was said to be ‘Appendix C’ to the NOM. The terms of the agreement as recorded in the pro forma agreement, entitled ‘Share Buy-Back Agreement’, was actually Appendix D, rather than Appendix C. Among other things, the SBB agreement included the following conditions precedent to completion of the sale and purchase of the Tranche 2 shares at cl 3.2:

3.2 Tranche 2 Conditions
Completion of the sale and purchase of the Tranche 2 Shares is conditional on:
(a) any necessary approvals or resolutions that may be required including:
(i)a resolution approving the [SBB scheme] and the terms of this Agreement being passed and remaining valid in accordance with section 257D of the [Act] (and the Company having complied in all material respects with the requirements necessary in order for such resolutions to be validly passed); and
(ii)to the extent applicable, exchange control approval from an authorised dealer in relation to any cross-border loans that may arise in relation the [sic] [SBB scheme]; and

(b)by not later than 9 January 2020 or such later date as the South African Reserve Bank may allow, but in any event by no later than 31 May 2020, [DRA] (or its nominee) receiving valid and irrevocable acceptances on terms and conditions acceptable to [DRA], for application monies to the value of at least [AUD]$100 million by way of a primary capital raise or sell down of existing Shares in relation to the proposed listing of [DRA] on ASX (either by way of an initial public offering or a reverse takeover) and the secondary listing on the Johannesburg Stock Exchange.
(Emphasis added.)

Consistent with this, the NOM also included the following statements on pages 24 and 27, as part of the ‘Explanatory Notes’ in respect of Item of Business number 13:
ITEM 13, RESOLUTION 12 APPROVAL OF SHARE SCHEME BUY-BACK
…
The buy-back of Shares under Tranche 2 is also conditional on [DRA] or its nominee receiving valid irrevocable acceptances for at least [AUD]$100 million by way of an primary capital raise [sic] or sell down of existing Shares under an initial public offering or reverse takeover on the ASX and a secondary listing on the Johannesburg Stock Exchange. This condition may be waived by the Independent Non-executive Directors of [DRA] only with consideration to be given by Independent Non-executive Directors only to the likelihood and the timing of the Condition being satisfied and subject to the [Act].
…
The Board considers it to be in the interests of all Shareholders that the Share Scheme Buy Back is completed and that the proposed structure largely mitigates most of the risks posed to other Shareholders as most of the Share Scheme Buy Back Shares will only be bought back under Tranche 2 when there is certainty that the Listing will occur and other Shareholders will have an opportunity to realise value.
Extensive safeguards which prescribe the level of disclosure required are contained in Division 2 of Part 2J.1 of the [Act] which are designed to ensure that Shareholders are adequately informed and not disadvantaged by buy-backs.
(Emphasis added.)
Around July 2019, Mr Salomon who was then one of two DRA directors nominated by the applicants because of their shareholding, was informed for the first time, by DRA’s management personnel, that the financial position and performance of DRA in the fiscal year ended 31 December 2018 was not as represented in the Initial 2018 Financial Statements, including by reason of DRA’s performance in respect of projects it was undertaking, known as the Elikhulu Project in South Africa, the Nokeng Project in South Africa, the Dargues Reef Project in New South Wales, the Limpopo Iron Ore magnetite Project and other matters. There was a meeting of directors in approximately August 2019 attended by representatives from BDO – DRA’s auditors – where these matters were discussed. In those discussions, BDO’s representatives made it clear that the Initial 2018 Financial Statements did not present a true and fair view of DRA’s financial performance in the 2018 fiscal year, and that the Initial 2018 Financial Statements would need to be restated. Also around August 2019, DRA’s accountants commenced preparation of a corrected version of the financial statements for the fiscal year ended 31 December 2018. On 17 December 2019, DRA lodged with ASIC ‘Reissued and Restated’ audited financial statements in respect of the year ended 31 December 2018 (Corrected 2018 Financial Statements). Among other things, the Corrected 2018 Financial Statements reported an operating loss of approximately AUD$52,711,138 in respect of DRA’s fiscal year ended 31 December 2018, rather than the operating profit of AUD$25,451,479 that had been recorded in the Initial 2018 Financial Statements. Shareholders received a communication from Mr Mansell, sent on behalf of DRA by email on 17 December 2019 notifying them that the Corrected 2018 Financial Statements had been lodged with ASIC, providing a brief summary as to matters that the DRA said led to the restatement, and informing shareholders that a copies of the Corrected 2018 Financial Statements were available upon request from DRA. The reasons for, and effect of, the corrections to DRA’s reported financial performance in the 2018 fiscal year are recorded in detail in the notes in the Corrected 2018 Financial Statements and are produced by Mr Salomon in Exhibit 1 to his first affidavit.
Over several months in late 2019, there ensued discussions between directors of the applicants and their advisers at Stockdale Street about the matters considered and approved at the AGM held on 31 May 2019. Mr Salomon gives evidence which for reasons explained below, I do accept, that he knew from his role at Stockdale Street as adviser to the applicants that the applicants had only voted in favour of resolutions at the 2019 AGM, including Resolution 12, based on:
(a)what the applicants understood to be the financial performance and position of the DRA as at the date of the meeting, as set out in the Initial 2018 Financial Statements; and
(b)the applicants’ view at the time that an IPO was imminent and that the likelihood of DRA raising AUD$100 million of capital on such an IPO was high, since DRA was presenting a strong and healthy financial position to the public markets. This was why the applicants supported Resolution 12 but importantly only on the basis that Resolution 12 approved the implementation of the SBB agreements which contained the condition precedent at cl 3.2(b) in relation to a capital raise of AUD$100 million.
Had the applicants known the true financial position of DRA at the time, the applicants would not have held such a view as to the likelihood of raising such an amount imminently by way of an IPO.
In late October 2019, Mr Salomon caused DLA Piper to obtain a legal opinion from senior counsel as to the validity of Resolution 12 (among other things). He shared a copy of the opinion provided by senior counsel, on a limited waiver basis, with Mr Mansell who was Director and Chair of DRA at the time. In that opinion, senior counsel concluded that Resolution 12 was invalid.
Notwithstanding concerns about the validity of Resolution 12, the applicants understood that the SBB scheme approved by Resolution 12 could not occur because the condition precedent in cl 3.2(b) had not been and could not be satisfied because, in light of the true position of the financial affairs of DRA, a successful IPO with a AUD$100 million capital raise before 31 May 2020 was not realistic.
Approximately one or two weeks prior to 20 April 2020, it became apparent to the applicants that :
(a)directors of DRA had been discussing the proposed SBB scheme pursuant to Resolution 12; and
(b)if any meeting was to take place to consider waiver of the condition precedent in cl 3.2(b), Mr Nel and Mr Eliasov (the applicants’ current representative directors) would be precluded from attending such a meeting.
On 20 April 2020, the applicants learnt that a meeting was proposed to occur the following day, on 21 April 2020, to consider waiving the condition precedent in cl 32(b). Discussions ensued. DRA made clear that it held a view to the contrary of that expressed by the applicants on the two main issues which arise on this application.
There were also exchanges of correspondence from respective solicitors.
Mr Naude comments on the reason for changes to the Initial 2018 Financial Statements to the following effect. The revenues from the Elikhulu Project in South Africa required a write-off of AUD$13.2 million and there was a further issue with the Dargues Reef Project in New South Wales including a profit of some AUD$2.9 million, which should not have been included in the 2018 financial year, but rather in the 2019 financial year. Taken alone, this would fall below DRA’s audit materiality threshold of AUD$4.5 million. The board decided to reissue the Initial 2018 Financial Statements, which required a sign-off from DRA’s auditors and also as part of that sign-off required a revisiting for the purpose of the accounts of every estimate, every provision and every contractual position or project position under review with the benefit of hindsight, having regard to events and circumstances arising after the preparation of the Initial 2018 Financial Statements. This led to further changes in estimates on several projects including:
(a)a loss provision of AUD$11.8 million for the Elikhulu Project;
(b)a loss provision of AUD$26.1 million for the Nokeng Project in South Africa;
(c)a loss provision of AUD$18.1 million the Limpopo Project; and
(d)a loss provision of AUD$2 million for a project known as the Glencore EFC Project.
Mr Naude says that despite this, independent valuations of its shares in October 2019 from Azure put the equity valuation range at AUD$6.31 to AUD$7.58 per share. The BDO report of January 2020 gave the value range between AUD$6.50 and AUD$7.55 per share.
The evidence does not point to any imminent proposed listing on a stock exchange or an IPO or any other urgent step DRA proposes to take in the near future. It is not seriously contested that the steps required for an IPO would take some time as DRA’s own board materials make clear and it is plain from the same internal documents that there is uncertainty in the present economic climate due, amongst other things, to COVID-19. It is clear that DRA hopes to list by 30 June 2021, which is over 12 months away.
The applicants describe their concern as to the SBB scheme proceeding in this way: If the condition precedent is waived and the SBB scheme contemplated by Resolution 12 proceeds, such that the shares in question are cancelled, the applicants and other shareholders not participating in the SBB scheme will sustain loss. That is because:
(a)the price at which the Tranche 2 shares are proposed to be bought back by DRA is significantly higher than that which the applicants regard as being fair value. Both of the valuations preceded the COVID-19 pandemic. The applicants consider that the price at which the buy-back would occur would be in excess of AUD$8 per share due to the rolled up interest in the formula in the SBB agreement relating the consideration: R74.25 x Tranche 2 shares plus the amount of interest which accrues on the shareholder’s loan between 1 August 2018 and the Tranche 2 completion date (Tranche 2 interim period)…’;
(b)as a result, the number of shares that would be bought back would be fewer than the number that would have been bought back if the buy-back price was at fair value. The total number of shares on issue therefore following the completion of the SBB scheme would be greater in number than there would have been had the SBB scheme been undertaken at fair value; and
(c)the shareholders not participating in the buy-back would suffer a reduction to the value of their shares.
Additionally, the applicants and shareholders other than the beneficiaries of the SBB (the agreements (the SBB counterparties) would also sustain loss, the applicants say, if the proposed SBB scheme proceeds because:
(a)the transaction would effectively transfer value from existing shareholders of DRA to those persons participating in the proposed SBB scheme by virtue of the transaction proceeding regardless of the fairness of the price;
(b)key management shareholders who participate in the SBB scheme would be allowed to de-risk and crystallise value ahead of all other shareholders after they oversaw significant value erosion sustained by shareholders not participating in the SBB scheme;
(c)there would be loss of a loan asset in the hands of DRA of approximately AUD$30 million; and
(d)there would be a loss of restrictions and leverage that the group of companies to which DRA belongs has over key management personnel who are the beneficiaries of the SBB scheme by virtue of such personnel being indebted to companies in the group.
In the absence of independent expert evidence, I am not in a position to determine whether or not all of these consequences would flow but for reasons I will explain, I accept the evidence that there is a real risk of disadvantage to the applicants if relief is not granted and that even though the applicants were plainly familiar with the SBB agreements at the 2019 AGM, they would only have given their necessary 35% support to the motion if they were satisfied that the terms of Resolution 12 and the stated financial position of DRA were sufficient to protect their financial position and preclude such disadvantage.
Mr Maw, a co-employee also employed by Stockdale, also gave evidence for the applicants, largely in response to Mr Naude’s affidavit. A substantial portion of his affidavit was devoted to various oral communications and denying certain communications referred to by Mr Naude. I cannot resolve these matters in the absence of cross-examination and while I can understand for completeness that they were included in the evidence on final hearing, my decision does not turn on who said what and when.
It seems apparent on the documents, however, that the applicants put to DRA their contentions that Resolution 12 was invalid and supported that view with an opinion from senior counsel. The respondents also sought their own advice. Nothing turns on this exchange of opinions other than to note that the debate about Resolution 12 has been ensuing for some months. It was only the proposed waiver of the condition precedent in cl 3.2(b) of the SBB agreements which caused the applicants to issue these proceedings. Up until that time, they were satisfied that the SBB scheme could not be implemented because the condition precedent in cl 3.2(b) could not possibly be waived. I accept this to have been a plausible view.
ANNUAL ACCOUNTS OVERSTATED BY AUD$78 MILLION
Applicants’ contentions
It will be recalled that the Initial 2018 Financial Statements reported an operating profit of AUD$28,451,479 and those statements were provided to the shareholders. About a week later, on 7 May 2019, DRA issued the NOM for the 2019 AGM which confirmed that the statements had been sent to the shareholders and indicated that the statements would be the first item of discussion at the 2019 AGM. Of course, the importance of that Item of Business is made clear by s 317(1) of the Act, which requires the directors of a public company (where that company is required to hold an AGM) to lay the financial report, directors’ report and auditor’s report before the members at the AGM. Section 317(2) of the Act creates an offence of strict liability for failure to do so. Clause 14.3 of DRA’s Constitution requires the business of an AGM to include consideration of DRA’s annual report.
The NOM also recorded the Item of Business number 13, which related to Resolution 12.
Importantly, the commercial background and purpose of the SBB scheme proposed by Resolution 12 was discussed in the NOM. Those matters can be summarised in this way:
(a)from time to time senior management personnel in DRA were invited to acquire shares in DRA. The purpose of promoting share ownership was to align the interests of senior management with all shareholders. The acquisition of the shares by Share Scheme participants was funded, at least in part, by loans advanced by companies in the DRA group to participants;
(b)in July 2018, the Minnovo Scheme had been implemented between DRA and former shareholders of another company in the DRA group, namely, DRAGH. As a result, shares held by previous shareholders in DRAGH, including the shares issued under the practice described in (a) above, were effectively exchanged for shares in DRA;
(c)as at the date of the NOM:
(i)a number of management personnel held shares in DRA;
(ii)the acquisition of those shares had been funded by loans to those management personnel from companies in the DRA group, which remained outstanding as at the date of the NOM;
(d)DRA proposed to become a listed entity (as it still does) and had in the NOM advised shareholders that the elimination of Shareholder Loans may enhance DRA’s prospects of listing successfully; and
(e)DRA has advised shareholders that the purpose of the SBB scheme pursuant to Resolution 12 was to facilitate the repayment of the Shareholder Loans. The amount payable by DRA under the proposed SBB agreements was to be applied as repayment of the loans outstanding between the companies in the DRA group and the shareholders participating in the SBB scheme
It was also made clear in the NOM, that the transactions under both Tranches must ‘be in accordance with the terms and conditions of [the SBB agreement] and subject to the applicable provisions of Division 2 of Part 2J.1 of the Act’. The SBB agreement included the conditions precedent set out above (at [39]). Relevantly, the conditions precedent contained in cl 3.2 required the following circumstances to be satisfied:
(a)by cl 3.2(a), DRA had to ensure that:
any necessary approvals or resolutions that may be required, including… a resolution approving the [SBB scheme] and the terms of [this SBB agreement] being passed and remaining valid in accordance with section 257D of the [Act].
(Emphasis added.); and
(b)by cl 3.2(b):
… by not later than 9 January 2020 or at such later date as the South African Reserve Bank may allow, but in any event by no later than 31 May 2020, [DRA] (or its nominee) receiving invalid and irrevocable acceptances on terms and conditions acceptable to [DRA] for application moneys to the value of at least AUD$100 million by way of a primary capital raise or sell down of existing Shares in relation to the proposed listing of [DRA] on ASX (either by way of an [IPO] or reverse takeover) and the secondary listing on the [JSE].
Importantly, however, under the SBB agreement, notice of which was given to the shareholders in the NOM for the 2019 AGM it was possible to waive the conditions set out in cl 3.2(b) in certain circumstances. Those circumstances were described in cl 3.3 of the SBB agreement that was put before the shareholders. It is convenient to restate cl 3.3 which is as follows:
3.3 Waiver of Condition
(a)The Condition in clause 3.2(b) is for [DRA’s] sole benefit and [DRA] may waive it in its discretion in accordance with clause 3.3(ii), with consideration to be given by [DRA] only to the likelihood and the timing of the Condition in clause 3.2(b) being satisfied and subject to the [Act]. For the avoidance of doubt, while [DRA] intends to seek admission to the Official List of the ASX by way of an initial public offering or reverse takeover and a secondary listing on the [JSE] it is not obliged for the purposes of this Agreement to do so if this would be contrary to the best interests of [DRA’s] shareholders as determined by the Board, acting reasonably.
(b)Any decision as whether to waive the Condition in clause 3.2(b) must only be taken by the independent directors of [DRA], being those directors of [DRA] that are not employed by [DRA] or any Related Body Corporate (and who have not been employed by [DRA] or a Related Body Corporate in the past 3 years) and who are also not associated with a substantial shareholder of [DRA] or an existing executive of [DRA].
(Emphasis added.)
The applicants point out that although cl 3.3 details the process and standards against which a waiver of the condition precedent in cl 3.2(b) could be effected, cl 3.3 does not contemplate or provide for the waiver of the conditions set out at cl 3.2(a) regarding ‘any necessary approvals or resolutions that may be required.’

Entirely consistently with the SBB agreement, shareholders were advised that:
the [SBB scheme] shares will only be bought back under Tranche 2 when there is certainty that the Listing will occur and other Shareholders will have an opportunity to realise value.
As noted, the board of DRA formed the view that the Initial 2018 Financial Statements contained a material error, such that they no longer gave a true and fair value of DRA’s financial position and performance as at the relevant date. In August 2019, the board decided that a restated version of the Initial 2018 Financial Statements needed to be prepared correcting the identified errors.
On 17 December 2019, DRA lodged the Corrected 2018 Financial Statements with ASIC.
The Corrected 2018 Financial Statements disclosed an operating loss of AUD$52,711,138, rather than the operating profit of AUD$25,451,479 recorded in the Initial 2018 Financial Statements. That is the first essential point which the applicants stress, contending that the material put before shareholders in the Initial 2018 Financial Statements was misleading and deceptive. I will return to the arguments concerning this financial issue after identifying some other alleged problems to which the applicants point. The applicants say that the Corrected 2018 Financial Statements contained significantly changed information regarding the nature of the Shareholder Loans. The NOM stated that:
the purpose of the [SBB scheme] is to facilitate the settlement of the Shareholder Loans and to reduce the total number of shares in issue to [DRA’s] advantage.
(Emphasis added.)
The NOM referred to the Shareholder Loans as:
having “no fixed terms or annual repayment requirement”;
… the terms “(which are ring-fenced against the Shares and have no fixed terms of repayment)” …
Using this language, the applicants say that the NOM indicated that the Shareholder Loans were repayable on demand. The NOM to shareholders was consistent with the Initial 2018 Financial Statements before correction, which recorded that the Shareholder Loans ‘do not have fixed terms of repayment’. The Corrected 2018 Financial Statements qualified the statements as to the loans having no fixed terms of repayment by including an express statement that:
These loans are limited recourse loans and accounted for as share options in equity.
The applicants point to the fact that in correspondence, which is in evidence, the solicitors for the independent non-executive directors asserted that the Shareholder Loans (which they describe as ‘management facility agreements’, but which were defined as ‘Shareholder Loans’ in the NOM) are only repayable in two circumstances:
(1)Out of declared dividends; and
(2)From the proceeds of sale of those shares.
The applicants contend that it is clear that information as to the limited recourse nature of the Shareholder Loans, the extinguishment of which was the raison d'être of the SBB scheme, was information that was known to DRA at the time of the 2019 AGM and was material to the decision on how to vote on Resolution 12 and was required to be provided under s 257D(2) of the Act. DRA’s failure to provide this information, it is argued, is a breach of s 257A(b).
As the applicants note, the substantial revision to DRA’s profit for the 2018 fiscal year prompted serious discussions between DRA’s officers about the validity of Resolution 12 and notwithstanding the concerns expressed as to its validity, no steps were taken at any time to prevent reliance on Resolution 12. At that time, as a practical matter, the SBB scheme contemplated by Resolution 12 could not, in any event, occur, as the condition precedent under cl 3.2(b) of the SBB agreement had not been satisfied and there had been no suggestion that the condition precedent could be waived in circumstances where there was no likelihood of the condition being met and there was no certainty that a listing would occur. At short notice, in late April, however, the applicants became aware, for the first time, that the directors proposed to waive the condition precedent.
Part 2J.1 of the Act contains provisions enabling share capital reduction in share buy-back transactions. Amongst other things, the purpose of the Part is to protect the interests of shareholders and creditors by seeking to ensure fairness between company shareholders and requiring the company to disclose all material information (s 256A). Part 2J.1 of the Act is relevantly in the following terms:
Part 2J.1—Share capital reductions and share buy backs
256A Purpose
This Part states the rules to be followed by a company for reductions in share capital and for share buy‑backs. The rules are designed to protect the interests of shareholders and creditors by:
(a)addressing the risk of these transactions leading to the company’s insolvency
(b)seeking to ensure fairness between the company’s shareholders
(c)requiring the company to disclose all material information.
…
Division 2—Share buy backs
257A The company’s power to buy back its own shares
A company may buy back its own shares if:
(a)the buy‑back does not materially prejudice the company’s ability to pay its creditors; and
(b)the company follows the procedures laid down in this Division.
Note 1:If a company has a constitution, it may include provisions in the constitution that preclude the company buying back its own shares or impose restrictions on the exercise of the company’s power to buy back its own shares.
Note 2:A company may buy‑back redeemable preference shares and may do so on terms other than the terms on which they could be redeemed. For the redemption of redeemable preference shares, see sections 254J‑254L.
…
257DBuy‑back procedure—special shareholder approval for selective buy‑back
Selective buy‑back requires special or unanimous resolution
(1)If section 257B applies this section to a buy‑back, the terms of the buy‑back agreement must be approved before it is entered into by either:
(a)a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates; or
(b)a resolution agreed to, at a general meeting, by all ordinary shareholders;
or the agreement must be conditional on such an approval.
Information to accompany the notice of meeting
(2)The company must include with the notice of the meeting a statement setting out all information known to the company that is material to the decision how to vote on the resolution. However, the company does not have to disclose information if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders.
Documents to be lodged with the ASIC
(3)Before the notice of the meeting is sent to shareholders, the company must lodge with ASIC a copy of:
(a)the notice of the meeting; and
(b)any document relating to the buy‑back that will accompany the notice of the meeting sent to shareholders.
(4)ASIC may exempt a company from the operation of this section. The exemption:
(a)must be in writing; and
(b)must be granted before the buy‑back agreement is entered into; and
(c)may be granted subject to conditions.
…
(Emphasis added.)
Section 9 of the Act defines a selective buy-back as meaning a buy-back that has none of the following:
(a)a buy-back under an equal access scheme within the meaning of s 257B(2) and s 257B(3);
(b)a minimum holding buy-back;
(c)an on-market buy-back; and
(d)an employee share scheme buy-back;
As s 257A(a) indicates, a company may buy-back its owns shares if the buy-back does not materially prejudice the company’s ability to pay its creditors and the company follows the procedures laid down in Div 2 of Pt 2J.1 of the Act. For a selective buy-back, the requirements under the Act are that:
(a)a special resolution be passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates (s 257D(1)(a)), or alternatively, a resolution agreed to, at a general meeting, by all ordinary shareholders (s 257D(1)(b)); and
(b)the company includes with the notice of meeting a statement setting out all the information known to the company that is material to the decision how to vote on the resolution. An exception applies if it would be unreasonable to require the company to do so because the company had previously disclosed the information to its shareholders (s 257D(2)).
Section 259A prohibits the buy-back of shares except in certain circumstances which circumstances include, relevantly for present purposes, a buy-back under s 257A. That provision, in turn, requires compliance with the procedures in Div 2 of Pt 2J.1 of the Act. Section 256B prohibits reductions of capital unless, amongst other requirements, shareholder approval is obtained in compliance with s 256C (there are also civil penalty provisions in s 259F(2) and s 256B(3) prohibiting involvement in the company’s contravention of s 259A and s 256B(1) respectively).
Where injunctive relief is sought on the basis that, amongst other things, proceeding with the proposed buy-back would amount to a contravention of s 257A, the Court is required to assume that the conduct in question would constitute a contravention of s 257A unless the respondents prove otherwise (s 1324(1B)).
The obligation of a company to disclose to shareholders information relevant to the proposals to be considered at an AGM rests on a number of grounds. In this instance, s 257D(2) requires information known to the company that is material to the decision to be disclosed. This may be taken to be a subjective view of directors’ knowledge, which is relevant to one of the arguments advanced for the respondents, but the respondents also accept that information known includes information which should be known as a result of reasonable enquiry were it made.
The second ground is an obligation at general law to make a full and fair disclosure of all matters which would enable members to make a properly informed judgement on the matters in question: Re Boart Longyear Ltd (2017) 121 ACSR 377 per Brereton J (at [15]-[16]) and ENT Pty Ltd v Sunraysia (2007) 61 ACSR 626 per Austin J (at [14]-[22]). The applicants say that this general law obligation is tested on an objective view.
The third source of obligation is that when information is in fact given to shareholders in purported discharge of the general law duty immediately referred to above, a number of statutory provisions engage so as to require that the information given is not misleading or deceptive or likely to mislead to deceive. These provisions include s 1041H of the Act and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) upon which the applicants rely in this application. Those provisions provide respectively:
1041H Misleading or deceptive conduct (civil liability only)
(1)A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.
Note 1:Failure to comply with this subsection is not an offence.
Note 2:Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4.
(2)The reference in subsection (1) to engaging in conduct in relation to a financial product includes (but is not limited to) any of the following:
(a) dealing in a financial product;
(b) without limiting paragraph (a):
(i)issuing a financial product;
(ii)publishing a notice in relation to a financial product;
…
(x)carrying on negotiations, or making arrangements, or doing any other act, preparatory to, or in any way related to, an activity covered by any of subparagraphs (i) to (ix).
…
12DAMisleading or deceptive conduct
(1)A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.
…
The question whether conduct is misleading or deceptive or is likely to mislead or deceive is judged objectively. A question arises as to whether this general position is qualified by the subjective content of s 257D(2). The contravention will occur, the applicants argue, even if DRA through its directors and officers do not have knowledge of the matters rendering the conduct misleading or deceptive. The applicants argue that a contravention of the statutory provisions may occur without knowledge or fault on the part of DRA and notwithstanding the exercise of reasonable care. Remedies for the contravention of these provisions include injunctive relief.
The position is explained in Fraser v NRMA Holdings Ltd (1995) 555 FCR 452, where Black CJ, von Doussa and Cooper JJ said in relation to s 52 of the Trade Practices Act 1974 (Cth) (at 467E-G):
This is not necessarily the same question as the one which would have arisen if the applicants had alleged breaches of directors' duties under the general law. For example, if the applicants had sought relief for a breach of the directors' duties described in Bulfin a question would have arisen whether the directors had knowledge or must be taken to have had knowledge of facts said not to be disclosed, whereas for the purposes of s 52, if by reason of what was said and what was left unsaid the conduct of the corporation is misleading and deceptive or likely to mislead or deceive, a contravention would occur even if the corporation through its directors and officers did not have knowledge of the undisclosed facts which rendered the conduct in breach of s 52. A contravention of s 52 may occur without knowledge or fault on the part of the corporation, and notwithstanding the exercise of reasonable care: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd at 197.
Where the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive. Errors and omissions to have that potential must be relevant to the topic about which it is said that the respondents' conduct is likely to mislead or deceive.
For the proposition that injunctive relief is available, the applicants refer to s 1324(1) of the Act and s 12GD(1) of the ASIC Act, each of which provide respectively as follows:
1324 Injunctions
(1)Where a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute:
(a)a contravention of this Act; or
(b)attempting to contravene this Act; or
(c)aiding, abetting, counselling or procuring a person to contravene this Act; or
(d)inducing or attempting to induce, whether by threats, promises or otherwise, a person to contravene this Act; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of this Act; or
(f)conspiring with others to contravene this Act;
the Court may, on the application of ASIC, or of a person whose interests have been, are or would be affected by the conduct, grant an injunction, on such terms as the Court thinks appropriate, restraining the first mentioned person from engaging in the conduct and, if in the opinion of the Court it is desirable to do so, requiring that person to do any act or thing.
…
…
12GD Injunctions
(1)If, on the application of the Minister, ASIC or any other person, the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute:
(a)a contravention of a provision of this Division; or
(b)attempting to contravene such a provision; or
(c)aiding, abetting, counselling or procuring a person to contravene such a provision; or
(d)inducing, or attempting to induce, whether by threats, promises or otherwise, a person to contravene such a provision; or
(e)being in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such a provision; or
(f)conspiring with others to contravene such a provision;
the Court may grant an injunction in such terms as the Court determines to be appropriate.
The applicants argue that, notwithstanding the subjective knowledge requirement of s 257D(2), they are entitled to rely upon s 1041H of the Act and s 12DA of the ASIC Act in the assertion that the state of individual director’s subjective knowledge at the time of the AGM does not detract from the fact that the Initial 2018 Financial Statements provided to the shareholders in advance of the 2019 AGM and presented to shareholders at the 2019 AGM as the first Item of Business, were in fact misleading and materially so.
The respondents, as will be seen, rely heavily on the absence of knowledge of the directors of the inaccuracies. The respondents also contend the inaccuracies were not material.
The applicants further contend, and again this is strongly opposed, that, to the extent that the buy-back transactions have not yet occurred, DRA may be precluded from relying on Resolution 12 if information previously disclosed in support of that Resolution has been overtaken by events. This assertion has analogues in the general law of misleading and deceptive conduct. For instance, the principle was formulated in McGrath v Australian Naturalcare Products Pty [2008] FCAFC 2 by Allsop J (as his Honour then was) in the following way (at [147]):
A so-called continuous representation may take a number of forms, recalling, of course, that though s 51A requires the consideration of a representation, s 52 is concerned with conduct. If a representation is made and it becomes evident to the maker that what has been represented, though accurate when made, has become false, there may well be a duty to speak. In such circumstances, the conduct, including the failure to correct the position, may be taken to be misleading or deceptive.
(see also: With v O’Flanagan [1936] Ch 575 (at 583); Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426 (at 458-459); Australian Securities and Investments Commission v Solution 6 Holdings Ltd (1999) ACSR 30 605 (at [25]-[35]); Re Skiwing Pty Ltd [2009] FCA 347 (at [19]); TPT Patrol Pty Ltd v Myer Holdings Ltd [2019] FCA 1747 (at [1477]-[1480]).
Of course, in this case DRA did rectify the errors through the issue of the Corrected 2018 Financial Statements but the question as to the validity of Resolution 12 based on the incorrect statements remains.
In the specific context of this case, the applicants also rely on ASIC’s ‘Regulatory Guide 110: Share Buy-Backs’, which records at RG 110.22:
When previously disclosed information is overtaken by events
If an event occurs in the 12 months after the shareholders approve the buy-back that makes any previously disclosed information misleading or deceptive, the company can no longer rely on that approval to carry out a valid buy-back.
As will be seen, the respondents contend that this statement in the ASIC Guide is wrong, is not based on any statutory foundation and is not supported by any authority.
The applicants also rely upon a takeover panel decision in ReVillage Roadshow Ltd (No 3) (2004) 52 ACSR 238 (at [33]), where the panel said:
Although it did not accept ASIC’s submissions that the price at which VRL proposed to buy shares under the buy-back should be specified in the buy-back resolution, the panel was of the view that if the price at which VRL was able to buy back its shares in compliance with the ASX Listing Rules differed materially from the indicative terms disclosed in the notice of meeting, at some point VRL would no longer be entitled to rely on the buy-back resolution as a valid approval of continued buying of VRL shares on-market.
(Emphasis added.)

Similarly, Windeyer J in Waterhouse v Waterhouse (1998) 46 NSWLR 449 (at 489) said:
… It is now clear that “interests” are not limited to rights of a proprietary nature; nor are they limited to interests special to the claimant for relief under s 1324. Shareholders have an interest, a creditor has been held to have standing: see Airpeak Pty Ltd v Jetstream Aircraft Ltd (1997) 144 ALR 448; 23 ACSR 715; an offeror company has an interest to restrain breach of law by an offeree company; [citing Broken Hill Pty Co Ltd]. …
Windeyer J, again, observed in Yates v Whitlam [1999] NSWSC 976 (at [12]), that shareholders have been held to have an interest.
It is clear, in my view, that the applicants have the necessary interest.
Moving then to the submissions for the respondents that declaratory relief should not be granted, the respondents rely upon Lifeplan, a decision of the Full Court (Allsop CJ, Middleton and Davies JJ), however, Lifeplan presented a difficulty to the Court in that the declaration did no more than state in detail certain factual findings made against the respondent in that case without any foreseeable consequence for the parties. Generally speaking, if a declaration has no function or purpose or is purely hypothetical, it will not be made. This is not that situation. A declaration as to a contravention of the statutory proscription against misleading conduct is significant because it enlivens remedies available under the statutory regime. There is no doubt that a party seeking injunctive relief may also obtain a declaration. This issues was discussed by Sheppard J, with whom Foster J agreed on this point, in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 (at 99 and 106). Sheppard J said (at 99):
Declarations of right are an important part of a court's armory of remedies and the power to make them ought not be cut down except where the language which Parliament has used is abundantly clear.
It is true that the conclusion I have reached, namely, that the court has power to make a declaration in a case brought by a person other than the Minister or the Trade Practices Commission for injunctive relief, would enable a member of the public, provided he had an arguable case for an injunction, to make out a case for a declaration notwithstanding that he himself had suffered no damage and that the case was found not to be one appropriate for injunctive relief. But anxiety that that circumstance may lead to a proliferation of applications for declaratory relief by a variety of persons should be allayed because the remedy is a discretionary one and the court will not grant declaratory relief in hypothetical cases nor in cases where the making of a declaration is of no utility. …The respondents also contend that the applicants lack standing to obtain declaratory relief as to the satisfaction of the condition precedent. There is precedent which would suggest to the contrary. In News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 (at 525D-E), the Full Court (Lockhart, von Doussa and Sackville JJ) expressly noted proceedings may properly involve the ascertainment of the meaning or effect of a contract to which a person not joined to the proceedings is a party.
It is to be recalled that the applicants’ argument runs this way:
(a)under s 259A, DRA must not acquire shares in itself except in buying back shares under s 257A;
(b)in turn, under s 257A, DRA may only buy back its own shares if it follows the procedures laid down in Div 2 of Pt 2J.1;
(c)the procedures laid down in Div 2 of Pt 2J.1 require, relevantly, a special resolution in accordance with s 257D(1)(a) or a resolution in accordance with s 257D(1)(b), approving the terms of the SBB agreement;
(d)in this case, the terms of Resolution 12 required that the buy-back be undertaken in accordance with the terms of ‘a Share Scheme Buy-Back Agreement … in the form attached as Appendix C’; and
(e)as a result, an implementation of the buy-back contrary to the terms of the agreement is contrary to Resolution 12 and therefore contrary to the requirement imposed by s 257D(1). Relevantly for present purposes, those terms include a closely controlled discretion to waive the condition precedent only in particular circumstances.
In my view those arguments are correct and the statutory power under the Act to grant the relief sought is enlivened. Of course considerations such as privity, joinder and adequacy of notice will all be relevant as to whether relief should be granted but it is not apparent why there should be any absence of power under the Act to grant the relief in an appropriate case. But in any event, were there any doubt as to the statutory basis under the Act to grant declaratory or injunctive relief, I note that the relief sought is not confined to empowering a restraint of waiver of the condition precedent pursuant to s 1324(1) of the Act or s 12GD(1) of the ASIC Act. I note that the words appearing in the relief sought ‘or otherwise’ which would include the Court’s general power under s 23 of the Federal Court of Australia Act 1976 (Cth) could be relied upon to grant the relief sought.
Section 23 of the Federal Court Act confers power on the Court ‘in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate’. Injunctive and declaratory relief have frequently been granted pursuant to the power in s 23 Federal Court Act provided the underlying legal or equitable foundation is established. The general position as to injunctions under s 23 was summarised by the High Court in Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 per Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ (at 29):
Once the jurisdiction conferred on the Federal Court by the Act is invoked, that Court has power under s 23 of the Federal Court of Australia Act 1976 (Cth) … to make “orders of such kinds, including interlocutory orders ... as the Court thinks appropriate”. That power may be exercised in any proceeding in which the Federal Court has jurisdiction unless the jurisdiction invoked is conferred in terms which expressly or impliedly deny the s 23 power to the Court in that class of proceeding. It cannot be invoked to grant an injunction where the Court acquires its jurisdiction under a statute which provides an exhaustive code of the available remedies and that code does not authorise the grant of an injunction.
I am not of the view, and no suggestion has been made here, that s 1324 of the Act and s 12GD of the ASIC Act set out an exhaustive code of the available remedies. That proposition is certainly not expressly provided for in either section. Such a construction would also be at odds with Logan J’s reasoning in Bluebags Nominees Pty Ltd v Snowball [2012] FCA 1492 where doubts were expressed about the applicant being a ‘person interested’ for the purpose of s 1324, his Honour said (at [8]) that:
To the extent, if any, to which s 1324 of the [Act] might not supply adequate power for the making of the orders sought that power would, in my opinion, be conferred by s 23 of the [Federal Court Act]. That section is not, of course, a source of jurisdiction but a jurisdictional foundation here is found in s 236 and s 237 of the [Act]. …Read together, s 1324 of the [Act] and s 23 of [Federal Court Act] supply, in my opinion, power to make the orders that are sought and which I have described in general terms.
As I have ruled above, the jurisdiction here to grant an injunction under s 23 is enlivened by the respondents’ contraventions of s 1041H of the Act and s 12DA of the ASIC Act. Similar principles are developed in the authorities in relation to declaratory relief arising under either s 21 or s 23 of the Federal Court Act. The statement in Tobacco Institute (at 99) set out above that declarations ‘ought not be cut down except where the language which Parliament has used is abundantly clear’ is pertinent in considering the Court’s powers in relation to the relief sought here pursuant to s 1324 of the Act, s 12GD of the ASIC Act, or otherwise.
The question of joinder of the counterparties, being the other shareholders who have executed SBB agreements was the subject of considerable focus in the submissions for the respondents. In practical terms, the applicants were unable to join the counterparties as they did not know who they were, let alone their addresses. The applicants sought this information from DRA when DRA made the point that the counterparties have not been joined. DRA did not provide the information, but indicated that it would accede to an order by the Court that the information be provided to the applicants so as to notify the counterparties of the existence of this litigation.
At the completion of the urgent hearing, such an order was made and the counterparties were to be notified of the existence and nature of the litigation, including the submissions made. That notification was to be effected urgently and counterparties were informed that if they wished to contribute to the debate, they should do so in writing to my associate in a period which was, in effect, a matter of a few business days. The reason for the curtailment of that opportunity was that a decision in this matter was required by Friday, 29 May 2020, as the 31 May 2020 deadline was to occur on a Sunday. Clearly, were circumstances otherwise, a more extensive period would have been afforded for such persons to make their contribution or even take advice as to whether they wished to do so. That was simply not possible in the circumstances.
As it happens, two sets of submissions were received, the first from a large group of participating shareholders who made a detailed written submission of some 10 pages which was received late on Monday, 25 May 2020. The emphasis was on providing input from a layman’s perspective, with special emphasis on the business as a whole. The point was made that DRA was established in 1984 and has over the years grown to be a well-respected global organisation with over 4,500 employees. It has traditionally been a company owned and run by the employees. It is a people-based business. Those who own shares reap the reward of dividends and capital growth for their retirement or other plans. Share Schemes have been an integral part of the growth of DRA. Share Schemes 10 and 11, which are affected by this judgment, were implemented in 2017-2018 respectively and generally focussed on senior management and other individuals whose engagement was acknowledged as being critical to DRA. Many of DRA’s employees have participated in a number of the schemes using dividends to pay off the Loans. In 2016, Stockdale (the applicants) were brought in as an external private equity shareholder with a supposed long term investment view and commitment to operate with a hands-off, non-interfering arms-length approach. This was the first time in DRA’s history that a significant shareholder was not an employee of DRA. The submission outlines the history, which has already been referred to. The submission describes the independent, non-executive directors as having the power to waive the required conditions and to effect the SBB scheme ‘should they consider this in [DRA’s] best interest’. The submission contends that at no point in the lead up to the voting on Resolution 12 was the financial status of DRA brought up as a factor for the voting shareholders to consider when casting their vote. The considerations were DRA’s preparations to list with the ultimate goal of liquidity of the shares and also to give effect to the off-set of sale proceeds against the Shareholder Loans. The submission suggests that the applicants ‘who had supported the original SBB scheme, now supported the extended SBB scheme and were integrally involved in the preparation of the wording of the scheme of arrangement’.
The submission stresses that all the SBB counterparties understood that the business is cyclic, with there being good years and bad years in terms of financial performance. Financial performance has recovered again to be successful.
The submission contends that if the SBB scheme does not proceed, the participants in the Shareholder Loans will go into uncharted territory. They will still have the debt of the non-recourse Loans, which will continue to accrue interest. DRA will have failed to keep its commitments and the senior management will be released from their escrow obligations. It is then likely that there would be protracted negotiations to come to agreement on a ‘new scheme of arrangement’ to settle the Shareholder Loans if, indeed, that was still able to be achieved before listing.
The submission contends there would be an unwillingness of management to accept new agreements and this may jeopardise the value of any listing. Senior management do not wish to ‘be taken advantage of by major shareholders that have seen a chance to enrich themselves at the cost of other shareholders in the long term success of the business’. The most likely outcome, it is contended, is that there will be a destruction of value in the DRA share price for all shareholders. Secondary outcomes may be a loss of morale and support for the business and further damage to the relationship with the applicants.
The submission expresses concern that the objective of the applicants’ is to get to a point where Resolution 12 is declared invalid with the intent to dispute the share price of R74.25 agreed for the SBB scheme. If the value is reduced, more shares would need to be surrendered, giving the applicants a larger shareholding percentage, which is counter to the objective of the share buy-back.
In contrast, the obvious direct benefit of the scheme to DRA, who will be paid in full for the outstanding loans will then be one step closer to being listing-ready. Additionally, the SBB counterparties will, for a substantial reduction in shareholding, have their loans repaid. All of the shareholders, including the applicants, would increase their holding in DRA by about 6%.
The submission concludes that:
(a)the commitment to the SBB scheme and the number of shares to be bought back was set in July 2018, based on an arms-length transaction and in accordance with the Loans terms;
(b)the Initial 2018 Financial Statements were not relevant in any material way to the decision as to how to vote on Resolution 12;
(c)there has been no material net change in DRA’s financial position or performance insofar as it relates to any decision on Resolution 12 as at 28 April 2020, the date the independent directors decided to waive the condition attached to Resolution 12;
(d)a decision to invalidate the SBB scheme on the unsubstantiated allegation by the applicants that they would have voted otherwise would be unnecessarily prejudicial to the SBB counterparties, DRA and the shareholders.
The submission is signed by eight senior executives of DRA and there is an extensive list of shareholders who have ‘mandated the eight signatories of the letter to represent them and support the views contained in the letter’.
There is a further appendix, which repeats a number of those submissions, stressing that the application is an opportunistic attempt by a single private equity shareholder to reverse an agreed and approved position based on the reissue of DRA’s Initial 2018 Financial Statements, ‘an unrelated event’. There are a number of other statements made on which, in my view, there is not presently adequate evidentiary support. That includes the statement that ordinary shareholders who voted for Resolution 12 have not raised any objections to validity. The importance of the SBB scheme to the success of DRA is stressed in this further appendix.
This further appendix, as I say, is entirely consistent with and replicates the contentions raised in the main body of the submission, which I have summarised above.
A second set of submissions was provided by Metcalfe Attorneys on behalf of VMF. VMF has previously been referred to in these reasons. It is a company with a single shareholding through VMF Investment Trust established as a discretionary Trust. Shares are held on trust for employees.
The submissions make the point that at DRAGH’s request, VMF was established in December 2019 for the purpose of holding shares in DRA for the benefit of members of DRA’s international management. It currently owns about 7.2 million shares in DRA, about 8.5% of the issued capital in the company. In relation to the SBB scheme specifically, VMF owns 3,075,625 shares out of a total of 4,947,218 that are subject to the SBB scheme. It has four named beneficiaries, as well as a foundation for the benefit of DRA employees. One of the named beneficiaries is a family entity associated with Mr Naude however Mr Naude is not a trustee and does not exercise control over the VMF Trust or VMF.
The submissions say that VMF was intended to hold the shares only until the Shareholder Loans were settled and that after the full and final completion of the implementation of the SBB scheme as initially envisaged and as discussed above in these reasons, the DRA shares held by VMF would be available for distribution to VMF Trust beneficiaries at the discretion of its trustees.
The submissions make the point that in October 2018, VMF, together with more than 70 other shareholders, agreed to the SBB scheme which was proposed by the DRA board, including directors nominated by the applicants. The DRA board represented that the mechanism was a convenient and clean method to achieve the required partial off-set of shares issued in DRA as consideration for the acquisition of DRAGH in order to settle Shareholder Loans due to DRAGH, which Loans had been utilised by various shareholders to acquire their shares in DRAGH.
Following the cancellation of the meeting scheduled for November 2018, after the applicants indicated their opposition, a new communication was sent to shareholders in April 2019 by the DRA board which included the two nominee directors of the applicants. The proposal for an SBB scheme was now broken into two parts, Resolution 12 and Resolution 15, with identical pricing and terms, save for the inclusion of the condition specified in Resolution 12. VMF contends, as do the other counterparties, that ‘nothing in the motivation for the SBB scheme, in respect of Resolution 12, related to nor could be construed as relating to the [Initial 2018 Financial Statements] of DRA’. Nor objectively were the Initial 2018 Financial Statements relevant to the SBB scheme or its implementation.
The submissions refer to the condition and the fact that the condition was capable of waiver by the independent non-executive directors of DRA:
in their sole discretion, at any time prior to 31 May 2020, taking into consideration the timing of the Listing and the likelihood of receipt of [AUD$100 million in] capital investment undertakings.
The Resolution was overwhelmingly approved. The accounts were subsequently reissued by DRA for reasons which were well documented in the reissue themselves. The applicants’ directors on the DRA board would have been well aware before December 2019 of the restatement and the reasons for it.
Further, during 2020 and well after issuing the Corrected 2018 Financial Statements, Resolution 15 was implemented. The submissions contend that it is significant that Resolution 15 was implemented after the reissuing of the account with no objection being raised by the applicants. Moreover, apart from the applicants, no shareholder who voted for Resolution 12 and Resolution 15 has, to the knowledge of VMF, raised any subsequent objection to the implementation of the SBB scheme based on the Corrected 2018 Financial Statements for DRA.

VMF says it only learned on 20 May 2020 that the applicants had brought legal proceedings against DRA and the independent directors seeking to restrain DRA from implementing the SBB scheme and having the SBB agreement, to which VMF is a party, set aside.
The submission contends that VMF has not been afforded the opportunity or the time to challenge the position of the applicants in Court and to concisely put forward the prejudices it will suffer, including but not limited to the implications of non-implementation/setting aside the SBB scheme and the potential delay or derailment of the listing planned for the early part of 2021 or the negative valuation impact on and after listing as well as expenses. VMF says this is highly prejudicial to the interests of VMF as a party to a binding and unconditional agreement with DRA to which the applicants are not even a party.
VMF complains about the delay in the applicants bringing their complaints about Resolution 12. VMF stresses that the Initial 2018 Financial Statements were not materially relevant to a reasonable DRA shareholder’s decision and that earnings per share, dividends per share and book value per share will still be higher for all shareholders, including the applicants, following the implementation of the SBB scheme.
In relation to the waiver, VMF says that it is reasonable to assume that the independent directors have:
in their informed opinion having regard to and considered all relevant information pertaining to the timing of the Listing and the likelihood of the required investment threshold being met on a Listing, elected to exercise the waiver and complete the [SBB agreements] in the best interests of [DRA].
In support of that decision, VMF contends that:
(a)the stated intention of DRA was to achieve a listing by the first part of 2021 in accordance with the regulative imperative. Timing of the listing is accordingly known;
(b)it is likely that investor appetite for a listing will be far greater if the Shareholder Loans that are intended to be fully and finally addressed by the SBB scheme are extinguished, as was always intended; and
(c)DRA’s December 2019 financial results were positive, significantly so, and have superseded and addressed any possible concerns regarding the financial performance of DRA in 2018.
From this it follows that there was no material or meaningful change in the reported performance at the time of Resolution 12.
VMF also asserts that the applicants cannot claim to represent a typical shareholder of DRA. The applicants are recent private equity investors in DRA, who have subsequently made clear that they wish to exit DRA by selling their shares for cash as soon as possible. As such, the applicants’ interests are hardly aligned with the interests of the remaining typical DRA shareholders, which overwhelmingly comprise management and employees or former employees or their nominated shareholder vehicles with a long term investment horizon. VMF opposes any attempt to set aside the SBB agreements.
The applicants and the respondents were given an opportunity to respond to this input from the counterparties to the SBB agreements. I have summarised both sets of submissions from the counterparties at some length but it is clear that they raise no new points of principle capable of being relevant to resolution of the dispute that have not already been advanced by the respondents. A deal of the content is inaccurate. The applicants have taken considerable exception to the content of the submissions but as I consider the submissions from the counterparties raise no new points of principle relevant to resolution of the dispute, it is equally unnecessary to address the applicants’ strong criticisms of those submissions. The arguments canvassed by the respondents have embraced everything that has been properly put forward for the counterparties.
The more crucial question is whether, despite their inability to join such counterparties, relief cannot be granted in favour of the applicants due to the non-joinder. (I note that this point is not amongst those made by the counterparties who made their submissions most eloquently.) As noted, the respondents assert that the Court should not entertain the applicants’ submission that the discretionary power to waive the condition precedent has not been enlivened as counterparties to the SBB agreements have not been joined. I am not satisfied that this is so.
The nature of the relief sought by the applicants, properly analysed, does not in my view directly affect the rights against or liabilities to a party in the sense discussed in News Ltd (at 524E-F) per Lockhart, von Doussa and Sackville JJ. The fact that the shareholders in question are counterparties to the SBB agreements and that the proceedings involve a question as to the construction of a clause of those contracts does not mean that those parties must be joined. As observed in News Ltd (525B-525D)
The test involves matters of degree, and ultimately judgment, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognises that many orders of a court are likely to affect other people to a greater or lesser extent.
…
The test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties.
(Emphasis added.)
Although the conduct of the counterparties is not in issue here and they only arise by virtue of their entry into the SBB agreements, the relief sought would if granted, undoubtedly have an effect on their entitlements under such agreements if the conditions precedent are (validly) to be waived. But the relevant relief sought is based on a narrow point, namely, that the proper construction of a clause in the SBB agreements does not confer a discretion to waive the condition precedent where such discretion is vested solely in the DRA, exercisable only by the independent directors and crucially subject to their consideration of the likelihood and timing of a successful listing.
The only parties who may possibly exercise that discretion have been joined as parties to this proceeding. They have made extensive submissions in opposition to the applicants’ relief. No attempt is made by the applicants to seek a declaration that the SBB agreements themselves are invalid or other injunctive relief restraining completion of the contracts generally or seeking a mandatory injunction compelling exercise by DRA of its right of termination under clause 7. The relief sought by the applicants has been appropriately targeted in the urgent circumstances. This is not mere semantics. The relief which is sought by the applicants does not deprive the counterparties of any contractual right conferred upon them by the terms of the SBB agreements. Rather, it seeks the enforcement of the proper construction of the SBB agreement. It may be accepted that the counterparties wish to proceed with the contracts, but that does not mean that the applicants cannot pursue the relief they have sought without joinder of the counterparties in the urgent circumstances discussed and where, to use the expression in News Ltd, ‘the effect of the order on non-parties can be characterised as only indirect or consequential’. A similar result was arrived at by Barker J in relation to the enforcement of obligations under a deed of settlement in AG Cowley Holdings Pty Ltd v Central City Pty Ltd [2010] FCA 199 where his Honour said (at [46]):
There is no reason in principle, however, why the applicants should not be entitled to enforce the settlement agreement arising out of the proceeding against the respondents discretely. The fact that another entity, not a respondent in this proceeding, is also a party to the deed seems to me to be irrelevant, at least on the facts of this case where the respondents have undertaken obligations under the deed which operate quite independently of that undertaken by Lisajoe Investments under the deed.
(Emphasis added.)
Though there are very different circumstances in this case to those before Barker J, I think that a relevant consideration in this instance is that although only DRA and the counterparties were parties to the SBB agreements, those agreements contained terms that were negotiated with the applicants and included conditions requiring shareholder approval such that DRA had obligations under the agreements that were discrete and separate from those of the counterparties.
It is not the case that an injunction will not or cannot be granted if it affects third parties. The effect on third parties is certainly to be taken into account. But as a number of authorities recognise, it is often the case that ‘the consequence of an injunction directed to one party will affect others. They may or may not be parties to the suit’: Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 per Kirby P (at 322E-F). See the discussion in that case (at 333C by Kirby P and 333C-D by Meagher JA) and Forsyth v Blundell (1973) 129 CLR 477. In John Alexander’s Clubs the passage (at [131]-[137], set out at [194] above) relied upon by the respondents was directed to proprietary interests. The point made in that case is that where the orders sought will establish or recognise a proprietary or security interest in land, chattels, or a monetary fund then persons who have or claim an interest in the subject matter are necessary parties. In such cases ‘the ascertainment of the necessary parties who ought to have been joined is not difficult’: News Ltd (at 524G-525A) That is not the nature of the relief sought in this case, nor is it is the nature of the claim which has been asserted on behalf of the counterparties by the respondents.
It is helpful in the present situation to consider the entirety of the passage in News Ltd (at 525B-525D) surrounding the portion cited with approval in John Alexander’s Clubs by the High Court. From the full passage it is worth re-iterating that the joinder requirement is not an immutable rule. Rather the test as to who should be joined as a party ‘involves matters of degree, and ultimately judgement, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected’. The requirement that a third party's rights against, or liability to, any party to the proceedings be directly affected is an important qualification that recognizes that many orders of a court are likely to affect other people to a greater or lesser extent. This is particularly so with remedies in the nature of an injunction: see Silktone per Kirby P (at 322). The requirement of a direct effect on rights or liabilities differentiates the case where a person ought to be joined, from other cases where the effect of the order on non-parties can be characterized as only ‘indirect or consequential.’ And further, the test is not whether the conduct of the third party is raised in the pleadings between the existing parties, or whether the third party is a party to a contract, the meaning or effect of which is pleaded as a matter relevant to the ascertainment of the rights between those parties.
In these urgent circumstances, I am satisfied that any arguments against the applicants’ assertions are more than adequately ventilated by the eight other respondents to the proceedings who are all legally represented by senior and capable counsel. In this regard, I note that the urgency of the relief sought is not the subject of complaint by the respondents. The intention to consider waiver of the condition precedent was given, quite properly, to the applicants only a matter of a days before commencing these urgent proceedings. Additionally comprehensive written submissions have been made by and for a significant number of the counterparties. Those shareholders will still have their proper contractual entitlement. It remains unaffected. If the resolution by the joined respondents to waive the condition precedent were permitted to stand, the counterparties’ rights would be affected by permitting them to acquire a benefit to which they are not presently entitled in the circumstances. The joinder rule is founded principally on notions of natural justice. It also avoids multiplicity of proceedings. But as News Ltd makes clear, the rule ‘involves matters of degree, and ultimately judgement, having regard to the practical realities of the case, and the nature and value of the rights and liabilities of the third party which might be directly affected’. The opportunity to be heard in the present circumstances has not been ideal but given the urgency and the lack of access to the identity and contact details of the counterparties, many of whom have now availed themselves of that opportunity, and having regard to the nature of the interests capable of being affected, the non-joinder should not be fatal to the applicants’ entitlement to relief. From the perspective of the respondents and other shareholders in DRA, granting the relief sought will occasion some delay and further expense in achieving the listing objective by the need to go back to the shareholders in general meeting. By no means is it clear however that such an objective will not be attained.
The nature and extent of the relief sought is commensurate with the protections to which the applicants are entitled.
CONCLUSION
For the foregoing reasons, in my view, the applicants are entitled to the relief that they seek and the relief should be granted. No party has suggested that costs should not follow the event but if there are contentions to the contrary then they can be addressed on the papers.

I certify that the preceding two hundred and seventy-five (275) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.
Associate:
Dated: [29 May 2020

SCHEDULE OF PARTIES

WAD 103 of 2020

Respondents

Fourth Respondent:

KATHLEEN BOZANIC

Fifth Respondent:

KENNETH THOMAS

Sixth Respondent:

LEON JOHAN UYS

Seventh Respondent:

ANDREW JAMES NAUDE

Eighth Respondent:

GREGORY LEWIS MCROSTIE

File number:	WAD 103 of 2020
Judge:	MCKERRACHER J
Date of judgment:	29 May 2020
Catchwords:	CORPORATIONS – selective share buy-back scheme – procedures in Div 2 of Pt 2J.1 of the *Corporations Act* 2001 (Cth) – general duty to make full and fair disclosure to shareholders – duty under s 257D(2) to disclose all information material to the decision how to vote on the resolution – special resolution passed approving share buy-back scheme – whether resolution invalid on the basis of incorrect financial information provided to shareholders – where valid shareholder approval was a condition precedent of the share buy-back agreements – whether s 259F of the Corporations Act cures any defect in the resolution – Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (2017) 254 FCR 559 considered CORPORATIONS – misleading or deceptive conduct – s 1041H of the Corporations Act and s 12DA of the Australian Securities and Investments Commission 2001 (Cth) (*ASIC Act) – materiality – financial statements issued and then re-issued due to discovery of substantial errors – whether initial financial statements were materially misleading in relation to shareholder approval of a share buy-back scheme – where company represented that the erroneous financial statements were a true and fair view of the company’s position – where errors were not known and could not have been ascertained at the time of approval – consideration of subjective knowledge test under s 257D(2) and the objective test under s 1041H of the Corporations Act* – principle in Fraser v NRMA Holdings Ltd (1995) 555 FCR 452 applied CONTRACTS – construction – condition precedent for execution of share buy-back agreement – waiver clause – whether authority to waive is absolute or confined to certain circumstances – where the terms require consideration only of likelihood and timing of the condition precedent being satisfied – whether ambiguity in the terms is required for regard to be had to the commercial context – where both the terms and the commercial context indicate authority to waive is confined to specific circumstances only REMEDIES – injunctions and declarations – sources of power to grant orders sought derived from s 23 of the Federal Court of Australia Act 1976 (Cth), s 1324 of the Corporations Act and s 12GD of the ASIC Act – whether a sufficient nexus exists between the injunction sought and the conduct that constitutes the contravention – whether policy considerations underlying s 259F(1) provide a discretionary reason not to grant an injunction – whether the applicants lack standing to pursue injunctive relief REMEDIES – injunctions and declarations – relief sought in relation to share buy-back agreements – where applicant is not a party to the agreements – where the relevant counterparties to the agreements have not been joined – whether counterparties must be joined in order for the relief to be granted – consideration of the effect of the relief on the counterparties – whether counterparties would be entitled to set aside any adverse orders based on the principle in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 – where relief sought is confined to enforcing the proper construction of the agreement – principle in News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 applied
Legislation:	Australian Securities and Investments Commission Act 2001 (Cth) ss 12DA, 12GD(1) Corporations Act 2001 (Cth) ss 9, 180, 256A, 256B, 256B(1), 256B(3), 256C, 256D(1), 256D(3), 257A(b), 257B(2), 257B(3), 257D, 257D(1)(a), 257D(1)(b), 257D(2), 259A, 259F(2), 296, 297, 311, 317, 317(1), 317(2), 1041H, 1324(1), 1324(1B), Div 2, Pt 2J.1 Federal Court of Australia Act 1976 (Cth) ss 21, 23 Trade Practices Act 1974 (Cth) s 52
Cases cited:	AG Cowley Holdings Pty Ltd v Central City Pty Ltd [2010] FCA 199 Allen v Atalay (1993) 11 ACSR 753 Australian Competition & Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114; [1999] FCA 1387 Australian Securities and Investments Commission v Solution 6 Holdings Ltd (1999) ACSR 30 605 Bangaru v R (2012) 269 FLR 367 Bluebags Nominees Pty Ltd v Snowball [2012] FCA 1492 Re Boart Longyear Ltd (2017) 121 ACSR 377; [2017] NSWSC 756 Broken Hill Pty Co Ltd v Bell Resources Ltd (1984) 2 ACLC 157 Clarence City Council v Commonwealth of Australia [2019] FCA 1568 Cleary v Australian Co-operative Foods (No 3) (1999) 32 ACSR 701 Commissioner of Taxation v The Trustee for the Michael Hayes Family Trust [2019] FCAFC 226 ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 Re Coopers Brewery (No 3) (2005) 57 ACSR 1 Devereaux Holdings Pty Ltd v Pelsart Resources NL [No 2] (1985) 9 ACLR 956 ENT Pty Ltd v Sunraysia (2007) 61 ACSR 626; [2007] NSWSC 270 Forsyth v Blundell (1973) 129 CLR 477 Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 Fraser v NRMA Holdings Ltd (1995) 555 FCR 452 Re George Raymond Pty Ltd [2000] VSC 531 Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 Grant-Taylor v Babcock Brown Ltd (in liq) (2015) 322 ALR 723; [2015] FCA 149 John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1 Knauf Plasterboard Pty Ltd v Plasterboard West Pty Ltd (in liq) (2017) 254 FCR 559; [2017] FCA 866 Re Lantern Hotel Group [2015] AATA 428 Lifeplan Australia Friendly Society Ltd v Ancient Order of Foresters in Victoria Friendly Society Ltd (No 2) [2017] FCAFC 99 McGrath v Australian Naturalcare Products Pty [2008] FCAFC 2 Re Murchison Holdings (2009) 235 FLR 417 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1 Silktone Pty Ltd v Devreal Capital Pty Ltd (1990) 21 NSWLR 317 Re Skiwing Pty Ltd [2009] FCA 347 Tiplady v Gold Coast Carlton Pty Ltd (1984) 3 FCR 426 Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) (1993) 41 FCR 89 TPT Patrol Pty Ltd v Myer Holdings Ltd [2019] FCA 1747 Re Village Roadshow Ltd (No 3) (2004) 52 ACSR 238 Waterhouse v Waterhouse (1998) 46 NSWLR 449 With v O’Flanagan [1936] Ch 575 Yates v Whitlam [1999] NSWSC 976
Date of hearing:	19 May 2020
Date of last submissions:	28 May 2020
Registry:	Western Australia
Division:	General Division
National Practice Area:	Commercial and Corporations
Sub-area:	Corporations and Corporate Insolvency
Category:	Catchwords
Number of paragraphs:	275
Counsel for the Applicants:	Ms EA Cheeseman SC with Mr D Habashy
Solicitor for the Applicants:	DLA Piper Australia
Counsel for the First, Sixth, Seventh and Eighth Respondents:	Ms J Taylor SC with Mr P Walker
Solicitor for the First, Sixth, Seventh and Eighth Respondents:	Gilbert + Tobin
Counsel for the Second, Third, Fourth and Fifth Respondents:	Mr KJ de Kerloy
Solicitor for the Second, Third, Fourth and Fifth Respondents:	Herbert Smith Freehills

JUDGE:	MCKERRACHER J
DATE OF ORDER:	29 MAY 2020

INTRODUCTION	[1]
THE APPLICATION	[5]
THE EVIDENCE	[6]
BACKGROUND	[13]
ANNUAL ACCOUNTS OVERSTATED BY AUD$78 MILLION	[56]
Applicants’ contentions	[56]
DRA’s response	[106]
The independent directors’ contentions	[136]
Analysis	[162]
WAS THE WAIVER OF THE CONDITION PRECEDENT VALID?	[182]
Consideration	[208]
ARE THE APPLICANTS’ ENTITLED TO RELIEF?	[218]
Consideration	[227]
CONCLUSION	[275]

WAD 103 of 2020
Respondents
Fourth Respondent:	KATHLEEN BOZANIC
Fifth Respondent:	KENNETH THOMAS
Sixth Respondent:	LEON JOHAN UYS
Seventh Respondent:	ANDREW JAMES NAUDE
Eighth Respondent:	GREGORY LEWIS MCROSTIE