Brisbane Gas Co. Ltd v Hartogen Energy Ltd

[1982] FCA 154

Re: BRISBANE GAS CO. LTD.
And: HARTOGEN ENERGY LTD. and STREET NOMINEES PTY. LTD. (1982) 64 FLR 1
Qld No. G76 of 1982
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Fitzgerald J.(1)

CATCHWORDS

Trade Practices - acquisition of shares - control or domination of market - interim injunction pending determination of application for declaration and order of divestiture - "control or dominate" - "market".

Trade Practices Act, ss. 50,81

Trade Practices - Shares allegedly acquired in contravention of s. 50 of Trade Practices Act - Interlocutory relief sought to restrain dealings in shares and attached voting rights pending determination of applications for substantive relief by way of declaration and order for divestiture - Preliminary objection to application for ancillary interlocutory relief - Whether Federal Court has power to grant interlocutory injunctions - Whether s. 23 of Federal Court Act empowers granting of interlocutory relief - "Market" - "Control or dominate" - "Control or domination of market" - Trade Practices Act 1974 (Cth), ss. 4E, 50, 80(1A), 81.

HEADNOTE

The respondents, Hartogen Energy Ltd. (Hartogen) and its nominee company, Street Nominees Pty. Ltd. (Street), acquired 14,032,000 ordinary shares in the capital of Oil Company of Australia N.L. (O.C.A.). The applicant, Brisbane Gas Company Ltd. (Brisbane Gas), which was a registered shareholder in O.C.A., sought substantive relief by way of a declaration that the respondents' shares in O.C.A. were acquired in contravention of s. 50 of the Trade Practices Act 1974 (the Act) and an order for divestiture securing the disposal of the shares by the respondents, pursuant to s. 81 of the Act.

Brisbane Gas applied for interlocutory relief by way of, inter alia, an interlocutory injunction pending the determination of the application for a declaration and an order for divestiture, to restrain Hartogen and Street from dealing with the shares and from exercising the voting rights attached to the shares.

The respondents contended in a preliminary objection that the Federal Court of Australia had no power to grant an interlocutory injunctive order, except on the application of the Minister or the Trade Practices Commission (the Commission) pursuant to the provisions of s. 80 of the Act.

The court refused to dismiss the application for an interlocutory injunction to restrain the respondents from dealing with the shares and exercising the voting rights attached to the shares, pending the determination of the application for a declaration and an order for divestiture.

However, the court would expedite the hearing of an appeal by the respondents against this decision to be heard, if possible, before the date upon which the extraordinary general meeting of O.C.A. was proposed to be held.

Held: (1) In addition to its power to grant permanent substantive injunctive relief, the Federal Court of Australia also has power to grant an interlocutory injunction which is reasonably related to the orderly procedure of the court or the subject matter of the litigation, although it is set in a form which falls within s. 80 of the Act.

(2) The interlocutory injunction sought by the applicants would be refused. However, the court would not dismiss the application by Brisbane Gas for interlocutory relief on the footing that it had not sufficiently shown that Hartogen had practical control of O.C.A. at shareholder level.

(3) It could not be supposed that by its control of O.C.A., together with its natural gas resources, Hartogen would be or would be likely to be in a position to control or dominate the relevant market, which was not confined to the purchase of natural gas from producers but extended at least to oil-derived products such as naphtha and liquid petroleum gas.

Semble: A corporation, against which an order is sought requiring it to divest itself of shares, ought not necessarily to be restrained from voluntarily disposing of its shares pending the trial of that issue, or from exercising the voting rights attached to the shares, even to the point of preventing it from voting for an adjournment at a general meeting.

On the other hand, the use of voting power, prima facie acquired in contravention of s. 50 of the Act to further and consolidate the control gained through the acquisition of the shares, should properly be restrained pending determination of whether an order for divestiture should be made to ensure that such an order would be fully efficacious.

An example of conduct which should properly be restrained would be an attempt to use the voting power attached to shares acquired in contravention of s. 50 of the Act in order to obtain control of the board of directors of the body corporate in which the shares were acquired.

Quaere: Whether the right to relief in respect of a contravention of s. 50 of the Act is exhausted if, although the contravention did take place, a subsequent change in shareholding or some other later conduct weakens the position of the contravening corporation.

Quaere: Whether s. 23 of the Federal Court of Australia Act empowers the granting of interlocutory relief incidental to an order for divestiture which is necessary to prevent any judgment for the substantive claim for divestiture from being a mere brutum fulmen.

HEARING

Brisbane, 1982, July 21-22, 26. #DATE 26:7:1982

APPLICATION.

Application for an interlocutory injunction pending the determination of an application for substantive relief by way of a declaration and an order for divestiture to restrain dealings in shares and exercising voting rights attached to shares allegedly acquired in contravention of s. 50 of the Trade Practices Act 1974.

I. D. F. Callinan Q.C., R. E. Cooper and R. W. Gotterson, for the applicant.

C. W. Pincus Q.C., D. E. Grieve and J. A. Dowsett, for the respondents.

Cur. adv. vult.

Solicitors for the applicant: Neil O'Sullivan & Rowell.

Solicitors for the respondents: Chambers McNab Tully & Wilson.

J. D. WHITEHEAD

ORDER

1. The application for an injunction in terms of paragraph 7 of the Application herein is dismissed with costs.

2. Direct that, subject to any contrary or further direction by the Chief Judge or a Full Court of this Court:

(i) That, the hearing of the appeal by Hartogen and Street in respect of my decision in these proceedings on 21 July 1982, and the hearing of any appeal by Brisbane Gas which is lodged today in respect of my decision in these proceedings today, be expedited.

(ii) That such expected appeal or appeals be heard before a Full Court of this Court at Sydney on Wednesday next, 28 July 1982, at 10.15 a.m.

(iii) That each party have available for the Full Court three copies of any Application, Pleading, Affidavit, Exhibit or other document filed and read or tendered on the hearing of the Application before me for an interlocutory injunction and of the Order appealed from and the Notice of Appeal, unless it is agreed by the solicitors for the parties that all or any such document will not be referred to before the Full Court.

(iv) That Brisbane Gas have available for the Full Court three copies of the transcript of proceedings before me on Wednesday, 21 July 1982, and Hartogen and Street have available for the Full Court three copies of the transcript of proceedings before me on Thursday, 22 July 1982, subject to any agreement between the solicitors for the parties that all or any part or parts of such transcript will not be referred to before the Full Court.

(v) That all documents referred to in Order 52 rule 23 of the Rules of this Court be forthwith transmitted to the New South Wales District Registry of this Court and that each of the parties have full access to such documents for the purpose of complying with these directions.

(vi) That compliance with rules 24-29 of Order 52 of the Rules of this Court be dispensed with.

(vii) That no later than 9.15 a.m. on Wednesday, 28 July 1982, a copy of all papers required to be available for the Full Court in accordance with these directions be delivered to the Associate of each of the Judges who are to constitute the Full Court.

(viii) That all costs of and incidental to these proceedings other than the costs of the unsuccessful application by Brisbane Gas for an interlocutory injunction be reserved. Orders accordingly.

JUDGE1

1. INTRODUCTION

The applicant, Brisbane Gas Co Ltd ("Brisbane Gas"), has commenced proceedings in this Court seeking injunctive and other relief. It alleges that the first respondent, Hartogen Energy Ltd ("Hartogen"), is a party to a contract arrangement or understanding which contravenes s.45 of the Trade Practices Act, 1974, ("the Act"). It further alleges that Hartogen and the second respondent, Street Nominees Pty Ltd ("Street"), have acquired shares in Oil Company of Australia N.L. ("O.C.A.") in contravention of s.50 of the Act. The substantive relief claimed by Brisbane Gas in respect of the alleged contravention of s.50 of the Act is stated in the Application as follows:
"(3) A declaration that in acquiring fourteen million and thirty two thousand ordinary shares in the capital of Oil Company of Australia No Liability, the first respondent and the second respondent contravened s.50 of the Trade Practices Act 1974.

(4) An order for directions pursuant to s.81 of the Trade Practices Act, 1974 for the purpose of securing the disposal by the first respondent and the second respondent of all of the shares so acquired in contravention of s.50 of the Trade Practices Act 1974."
By paragraph 5 of the application, Brisbane Gas asks, in addition, an injunction pending the disposal of the said shares "restraining the first respondent and the second respondent and themselves, their servants or agents or otherwise, from dealing with the said shares and from exercising such voting rights which attach thereto". A substantially identical injunction is sought by paragraph 7 of the application "pending the hearing". The present proceedings before me concern only the latter application for interlocutory relief. It is not in dispute that each respondent is a corporation within the meaning of the Act and that Street is, relevantly, merely a nominee for Hartogen. Of course, the facts cannot be finally determined at this stage, and I have been mindful of the need not to resolve adversely to Brisbane Gas disputed issues upon which it might succeed at the trial. However, the areas of disagreement as to matters of primary fact have been minimal, although the evidence has not otherwise been without its difficulties.

II. BACKGROUND FACTS: THE PRODUCTION, SUPPLY AND USE OF NATURAL GAS IN SOUTH-EAST QUEENSLAND

Brisbane Gas, a subsidiary of Boral Gas Ltd is the holder of franchises under the Gas Act, 1965-1981 (Qld). It has the sole right, and the obligation, to supply reticulated gas to consumers in areas in and about the City of Brisbane and the City of Ipswich. The prices which it may charge and the profits which it may make are controlled under the Gas Act. The quantity of gas it supplies under its Ipswich franchise is about one-quarter of the quantity supplied in Brisbane. The other present or potential major purchasers of natural gas in Brisbane are Allgas Energy Ltd ("Allgas"), which has a franchise under the Gas Act to supply gas in an area south of the Brisbane River, and Consolidated Fertilizers Ltd ("C.F.L."). C.F.L. is the largest consumer of natural gas in Queensland and, pursuant to an exemption granted to it under the Gas Act, purchases its supplies direct from the natural gas producers in the Surat-Bowen Basin. C.F.L. consumes approximately two-thirds of the natural gas sold in Queensland. Its requirements vary with the demand for its fertilizer products but, the evidence suggests that it will, overall, continue to increase. It purchases roughly one-quarter of its requirements of natural gas from a group of producers associated with A.A.R. Ltd ("A.A.R."), a subsidiary of C.S.R. Limited ("C.S.R."), and another quarter from joint ventures associated with Bridge Oil Ltd ("Bridge). Roughly one-half is purchased from Hartogen and those associated with Hartogen. Allgas purchases its natural gas from A.A.R. under contracts due to expire in 1984 and from Bridge under contracts due to expire in 1989.

Natural gas presently constitutes approximately 5.5% of the total energy consumed in Brisbane. One of its principal uses is as a fuel. The only major Brisbane user of natural gas for that purpose which is able to obtain direct supplies from the natural gas producers is C.F.L. which, as stated, has been granted an exemption under the Gas Act. C.F.L. uses approximately 40% of the natural gas which it purchases for fuel. Obviously, various other commodities (including electricity if it may be described as a commodity) are or may be available alternatives to the use of natural gas as a fuel. Examples besides electricity (which relevantly requires other fuel for its generation) include coal, oil, and oil-derived products including liquid petroleum gas. The relative advantages and disadvantages between natural gas and other fuels, and the extent to which, and the ease or difficulty with which, use of the one can be altered to use of another, were canvassed in evidence at some length but seem to me of no particular moment on the present application. It is at the least sufficiently arguable for present purposes on behalf of Brisbane Gas that the relevant market for the purpose of s.50 of the Act does not relate to the acquisition of natural gas for use as a fuel, either from the producers or from intermediate suppliers such as Brisbane Gas, in which market Brisbane Gas participates as a vendor and not, as in dealings with producers of natural gas, as a purchaser.

A major part of the natural gas acquired by the major Brisbane purchasers such as Brisbane Gas and C.F.L. is not used as fuel. Approximately 60% of the natural gas acquired by C.F.L. is used as a feedstock, that is as part of the chemical process by which it produces fertilizer. Practically all of the natural gas acquired by Brisbane Gas will be either used as a feedstock to produce town gas or supplied unchanged to customers, industrial and domestic. Oil-derived products such as liquid petroleum gas and naptha can be used as a feedstock in both cases instead of natural gas, although some adaptation of the plant is required and some time is needed to effect the changeover. It may be that coal can also be used, at least theoretically, as a feedstock to product town gas. However, at least so far as Brisbane Gas is concerned, that is not a real possibility both for environmental reasons and because of the expensive capital works which would be necessary to convert its plant. On the other hand, Brisbane Gas seemed to me really to have no support at all in the evidence for its submission that in no relevant sense is any other product substitutable for or competitive with natural gas. Apart from a passing reference to a suggestion that the availability of naptha may be decreasing, the material evidence all seemed to the same effect, viz., that other products besides natural gas are suitable for the needs of Brisbane Gas. The choice between natural gas and products such as naptha and liquified petroleum gas depends primarily on their respective costs. Cost aside, the most that can be said is that natural gas has some advantages for the gas supply companies such as Brisbane Gas. It is clean-burning and gives greater flexibility than naptha. It may not need to be reformed to town gas but may be able to be supplied as received, and, when reformed, is more effectively reformed than naptha. Because oil prices are so volatile, it may be that longer term price stability can be obtained in respect of contracts for the acquisition of natural gas than in the case of the oil-derived products.

For about the last ten years, Brisbane Gas has produced the gas which it supplies to its consumers from naptha, which it acquires from the Ampol Petroleum Refinery in Brisbane. The price presently payable by Brisbane Gas under its contract with Ampol is considerably less than the ruling market price for naptha but the term of the contract is drawing to a close. As a result of anticipated increases in the price payable by it for naptha, Brisbane Gas early in 1980 decided to seek to acquire natural gas.

Although there is some disagreement as to matters of definition and boundaries, the Surat/Bowen Basin are now, and so far as is presently foreseeable will remain for the immediate future, the only source of natural gas supplied to Brisbane and Ipswich. That is not to say that that position may not change quickly and dramatically.

The Roma-Brisbane pipeline is the only practical method of transporting natural gas from the Surat/Bowen Basin to Brisbane (and Ipswich). That pipeline, which was constructed and is operated pursuant to a licence granted under the Petroleum Act, 1923-1981 (Qld) is owned by Associated Pipelines Ltd ("A.P.L."), a company in which C.S.R. has a controlling interest. The pipeline's capacity is limited, but has not yet been reached.

Hartogen, either directly or through a subsidiary, produces natural gas for sale in a part of the Surat/Bowen Basin known as the Kincora Gas Field which is connected to the Roma-Brisbane pipeline by a spur-line.

Bridge, Offshore Oil No Liability ("Offshore"), and International Oil Pty Ltd, a subsidiary of the Moonee Oil Company No Liability ("Moonee"), have equal shares in a joint venture, the "Wunger Joint Venture", which produces natural gas for sale in a part of the Surat/Bowen Basin known as the Silver Springs/Boxleigh Gas Fields. Bridge and Offshore also have equal shares in another joint venture, the "Noone Joint Venture", which produces natural gas for sale in another part of the Silver Springs/ Boxleigh Gas Fields. Those gas fields are also connected to the Roma-Brisbane pipeline by a spur-line.

There are many other known natural gas fields in the Surat/Bowen Basin besides those to which I have referred. A joint venture involving A.A.R. produces gas at some 30 fields in the Roma Shelf region which is supplied to Brisbane at the Roma Gas Field. Its reserves are, however, diminishing and it has no natural gas available for sale to Brisbane Gas. Moonee also has producing fields but not, it seems, producing natural gas available for sale to Brisbane Gas. The production capacities of Hartogen and the Wunger and Noone joint venture from their existing reserves are also substantially required for existing commitments. Contracts for the sale of natural gas are entered into for terms of years and many have options or rights of pre-emption in respect of future supplies. Another field, the Beldene Gas Field, is in the process of being connected to the Roma-Brisbane pipeline and will produce natural gas for supply to the Brisbane market. It is not, however, a large field. Hartogen has a 50% interest in the joint venture which owns the Beldene Gas Field, and controls Cluff Oil (Australia) N.L. which has a further 12 1/4%; the balance is shared between 2 other companies.

Numerous other known natural gas fields in the Surat/Bowen Basin, including fields in which neither Hartogen nor any of the Wunger or Noone joint venturers has any interest, are not yet producing. The estimated reserves of many of the fields are large, and there is evidence that the aggregate estimate is not less than two and one-half billion cubic metres. Estimates are, however, notoriously unreliable, and usually vary, often substantially, between the Mines Department, the developers, and technical auditors who are employed to estimate proved reserves. It is statistically probable that new fields will be found in proximity to existing fields, including those now producing.

Fields in the vicinity of a pipeline are the most economical source of supply, and all of the currently producing fields in the Surat/Bowen Basin are in the vicinity of the existing pipeline. As reserves in currently producing fields are consumed, the economic feasibility of developing further fields comes under closer consideration. Regard must be had to the size of the reserves, market opportunities, competition from alternative fuels, including price relativity and the facilities for and cost of the transportation of the natural gas. Not suprising, the cost of construction of a pipeline is extremely high, and the operator charges transportation fees which reflect that cost. At present, the fee for transportation along the Roma-Brisbane pipeline is approximately one-third of the total cost of natural gas to a Brisbane purchaser.

Exploration areas respectively controlled by Hartogen and the Wunger and Noone joint venturers near their currently producing gas fields are most likely to yield the next commercially producable natural gas. Hartogen, or joint ventures in which it is interested, and the Wunger and Noone joint ventures, were at all times, material for present purposes, are now, and for the next few years are likely to remain, the sole or at least the principal producers of natural gas available for sale and supply to Brisbane. Again, however, the position could change quickly and dramatically.

In or about April 1980, Brisbane Gas commenced negotiations with Hartogen and with Bridge, the operating partner of the Wunger and Noone Joint Ventures, with respect to the purchase of natural gas required by Brisbane Gas for supply under its Brisbane and Ipswich franchises. Whilst those negotiations were in train, it also commenced negotiations with A.P.L. with respect to the transportation of the natural gas which it hoped to purchase.

Brisbane Gas insisted on negotiating separately with Hartogen and Bridge and rejected their attempt to negotiate a contract with it jointly. It obtained an offer from each. On 2 December 1980, Hartogen offered a base price of $2.10 per million B.T.U's. The price offered by Bridge on 11 December 1980 was less favourable, but the following day Bridge altered its price to that which had been quoted by Hartogen. The contractual terms offered, however, differed. On 12 December 1980, Brisbane Gas notified Hartogen that its offer was acceptable. On the same day, Brisbane Gas wrote to A.P.L., accepting an offer which had been made with respect to the transportation of natural gas along the Roma-Brisbane pipeline. A formal contract between Brisbane Gas and Hartogen was executed on 2 July 1981.

Although Brisbane Gas had not departed from its stand that it would not deal with Hartogen and Bridge collectively, Hartogen "sub-contracted" to the Wunger and Noone joint ventures 60% of its commitment to Brisbane Gas. The terms of agreement between Hartogen and those two joint ventures have not yet been finalised, although a draft contract has been submitted which contains no suggestion of any anti-competitive arrangement or understanding. Statements issued on behalf of Hartogen and the Wunger and Noone joint ventures described the "joint supply arrangement" as marking "a new phase of co-operation in the exploitation of gas reserves in the Surat Basin. . . ". Reference will later be made to other statements by Hartogen in a different context.

The Agreement between Brisbane Gas and Hartogen provides for the sale and purchase of 85 million cubic metres (3 billion cubic feet) over an initial period of three years, and gives Brisbane Gas the option to purchase a further quantity of 198 million cubic metres (7 billion cubic feet) over a second period of 5 years commencing at the end of the original term. Hartogen's obligation to sell the additional quantity during the second term is conditional upon its having advised Brisbane Gas prior to 1 July 1983 that it has sufficient reserves of natural gas. There is no suggestion that Hartogen has taken that step, so that there is no present certainty that Brisbane Gas will be entitled to purchase natural gas from Hartogen beyond the initial 3 year term. As yet, Brisbane Gas has acquired only a small quantity of natural gas from Hartogen for supply under its Ipswich franchise. The probability is, however, that substantial quantities will commence to be required some time next year. Brisbane Gas will either reticulate natural gas to its consumers or use the natural gas, as it presently uses naptha, as a feedstock to manufacture town gas which it will then supply. There is no suggestion that the quantities which Brisbane Gas will acquire from Hartogen will not be adequate for its needs over the initial term.

Quite recently, a joint venture in which O.C.A. has a 40% interest has found two significant new natural gas fields in the Surat/ Bowen Basin, the Merivale and Yellowback Gas Fields. The major share in the joint venture is held by A.A.R. which may now have an interest as high as 60%, sufficient under the terms of the Joint Venture Agreement to prevail in any dispute. In any event, A.A.R.'s interest is at least 51%, and thus its position under the joint venture is necessarily stronger than the position of O.C.A. Brisbane Gas has sufficiently proved for the purpose of its present interlocutory application the likelihood of development of these O.C.A./A.A.R. reserves, and the construction of a spur-line to the Roma-Brisbane pipeline. Evidence was given for Brisbane Gas which, if accepted at the trial, would establish that, although as I have said the exploration areas of Hartogen and the Wunger and Noone joint ventures near their currently producing gas fields are those next most likely to yeild further reserves of commercially producable natural gas, the Merivale and Yellowback fields, either alone or in conjunction with other known gas fields nearby which are owned by A.A.R. known as Arcturus, Glentullock, Rolleston and Westgrove Gas Fields, are otherwise those most likely to be next developed and to be the next source of natural gas supplied to Brisbane. Whilst there cannot be certainty that the reserves in which O.C.A. has an interest will be developed, its Secretary swore an affidavit in these proceedings on which he was not cross-examined, in which he deposed that A.A.R. and O.C.A. intend to apply for production leases so that they may produce the natural gas for sale. Once again, however, there could be a quick and dramatic alteration in the situation. For example, the production of gas from the reserves in which O.C.A. is interested for supply to Brisbane could be affected if another district such as Gladstone, were to require supplies of natural gas. Further, other fields in the Surat Bowen Basin, in a number of which Hartogen or one or more of the Wunger and Noone joint ventures is interested, will also likely produce natural gas for supply to Brisbane in the not too distant future.

Although under its Joint Venture Agreement with A.A.R., O.C.A. has no entitlement in respect of any natural gas in the Arcturus, Glentullock, Rolleston and Westgrove Gas Fields, its 40% interest does extend to any additional gas found beyond the previous limits of those fields. The evidence indicates that the development of O.C.A.'s interest is unlikely to take place other than in conjunction with development of reserves held by A.A.R. in the same areas, and perhaps other fields such as Avondale, and the marketing of the O.C.A. product could only economically take place in conjunction with the marketing of the A.A.R. gas.

No natural gas is likely to be produced by O.C.A. for supply to Brisbane within the next 2 years and it may not be available for a considerably longer period. However, a gas supply company such as Brisbane Gas must plan ahead in order to ensure continuity of supply to meet the requirements of its customers.
III. HISTORY OF THE PRESENT DISPUTE

The authorised capital of O.C.A. is $100,000,000.00 divided into 200,000,000 shares of 50 cents each. Its present issued capital, apart from unlisted subscribers' shares and staff shares, consists of 77,175,659 contributing shares paid to 35 cents each. There are, in addition, 24,390,032 options to subscribe for shares which expire on 30 July 1984.

O.C.A. issued a large number of shares partly paid to 25 cents, and options to subscribe for shares, pursuant to a prospectus dated 2 July 1979. By a notice dated 16 April 1982, it made a call of 10 cents per share on all of the quoted ordinary contributing shares in its capital. Such call was due and payable on 12 May 1982 and, pursuant to it, O.C.A. received a total of $6,650,181.20. Shares upon which the call was unpaid on 26 May 1982 were forfeited by O.C.A. and were advertised for sale by public auction.

By purchases on the stock market over a period of months in its own name and in the name of nominees including Street, Hartogen acquired 14,032,000 ordinary contributing shares in O.C.A. by 28 May 1982, then amounting to 19.9% of its issued capital. Approximately half of these shares had been purchased in numerous smaller transactions and the balance acquired at the end in a single transaction. O.C.A.'s shares as at 28 May 1982 were otherwise "owned by diverse persons in diverse proportions". Hartogen's shareholding in O.C.A. at that time "conferred upon it effective control of (O.C.A.) or the prospect of exercising such control insofar as the same is exercisable by a majority of shareholders in general meeting". (Both quoted statements were made in a pleading delivered by Hartogen in other proceedings.)

On 31 May 1982 Hartogen requested O.C.A. to appoint to its Board three additional directors nominated by Hartogen.

On 2 June 1982, pursuant to resolution of its then directors, O.C.A. allotted to Brisbane Gas and an associated company 7,000,990 contributing shares paid to 35 cents each at a price of 60 cents per share and issued to Brisbane Gas and its associates 2,215,259 options to acquire shares, at a price of 30 cents per option. The price of 60 cents per share is in the middle range of prices which, since 12 May 1982, have been quoted on the official list of the Sydney Stock Exchange Limited in respect of shares in O.C.A. Companies associated with Boral have also purchased a large number of the O.C.A. shares which had been previously issued.

On the same day, 2 June 1982, an Agreement was entered into between O.C.A. and Brisbane Gas and two associated companies, whereby for a consideration expressed to be the issue of such shares and options, O.C.A. granted to Boral Gas Limited a right of first refusal to pruchase all gas produced and owned by O.C.A. or to which it is or may become beneficially entitled with the intention (as stated in the Agreement) that the option should ensure for the benefit of Brisbane Gas in respect of gas required for use within its franchise area as provided in the Gas Act and for the benefit of certain associated companies in respect of gas required for use within their respective franchises as provided in the same statute. No occasion arises for me to rule upon the efficacy of that Agreement although it may not be without its difficulties, both legal and practical. It seems that, although joint venture agreements in the natural gas industry invariably provide that each of the joint venturers becomes the owner of its appropriate share in the product and is entitled to market that share either in conjunction with the other joint venturer or separately, in practice it is most unlikely that one joint venturer would permit the other to take out what it considered to be its share of joint venture reserves without at the same time removing its own share, and gas produced by joint ventures is always sold by them collectively. In a sense, the Agreement with O.C.A. may be rather against the present application by Brisbane Gas, suggesting that Brisbane Gas has an assured future supply of natural gas from O.C.A. irrespective of who controls it.

The dispute between Brisbane Gas and Hartogen, and their respective associates, extends beyond the proceedings in this Court and there is, in addition, extensive litigation in the Supreme Court of New South Wales. In one proceeding there, Hartogen has to date been prevented from proceeding with a partial takeover of O.C.A. The principal action in the New South Wales Supreme Court is an action in the Equity Division by Hartogen (and the second respondent) against Brisbane Gas and associated companies, O.C.A., and the directors of O.C.A., in which the plaintiffs seek a declaration that the allotment on or about 2 June 1982 of 7,000,990 ordinary shares of 50 cents each in O.C.A. to Brisbane Gas and an associated company, and the issue to them of 2,215,259 options to acquire further such shares, are void, and ancilliary relief. Hartogen's allegations in that action, which has not yet been heard, are that O.C.A. had no need of the capital raised by the allotment and that the issue of the shares and options to Brisbane Gas and to associated companies was made for the purpose of preventing Hartogen from securing effective control of O.C.A. insofar as such control is exercisable by a majority of shareholders in general meeting and of preventing Hartogen from obtaining representation upon the Board of O.C.A. commensurate with its shareholding in O.C.A. It is also alleged that O.C.A.'s entry on the same day into the Agreement with Brisbane Gas and associated companies provided to them a benefit substantially in excess of any valuable consideration or other benefit derived by O.C.A. from that transaction.

Further, the disputation has not been confined to Court proceedings. On 3 June 1982, the day after O.C.A. issued the shares and options to Brisbane Gas and its associate, Hartogen and others, most of whom presumably hold their shares in O.C.A. as nominees for Hartogen, requisitioned an extraordinary general meeting of the shareholders in O.C.A. for 10.30 a.m. on next Thursday 29 July 1982. The purpose of the meeting is to consider and if thought fit pass resolutions removing all existing directors of O.C.A., one of whom was appointed after 2 June 1982 to represent Boral on O.C.A.'s Board, and appointing in their place persons who are directors of Hartogen.

IV. THE PRESENT APPLICATION

No doubt one cannot be certain whether Hartogen now has practical control of O.C.A. It is not possible to be sure on the material whether Hartogen, together with any support it may attract, will have sufficient shares to outvote the Boral interests and the interests associated with the directors of O.C.A., and their possible supporters. It was agreed that Brisbane Gas and other Boral interests presently have 14.98% of O.C.A's issued capital. Hartogen's interest is now only slightly in excess of 18%. The Boral Group shareholding means not only that the Hartogen percentage of O.C.A.'s shareholding has been diluted but also that there is no longer one, but two, major shareholders, and that their interests are opposed.

Nonetheless, I would not dismiss the present application by Brisbane Gas for interlocutory relief on the footing that it has not sufficiently shown that Hartogen has practical control of O.C.A. at shareholder level. Presumably, Hartogen's own assessment of the position is that, by virtue of its shareholding, it will succeed in obtaining possession of all directorships of O.C.A., and thus real and effective control of that company, at the meeting which has been requisitioned.

Further, there seem to me to be questions concerning the operation of the relevant provisions of the Trade Practices Act which were not argued, and which are inappropriate for determination on an application such as this, which touch upon the topic of Hartogen's control of O.C.A.

Section 50 provides, so far as is relevant:
"50(1) A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate if -

(a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to control or dominate a market for goods or services; or

(b) in a case where the corporation is in a position to control or dominate a market for goods or services -

(i) the body corporate or another body corporate that is related to that body corporate is, or is likely to be, a competitor of the corporation or of a body corporate that is related to the corporation; and

(ii) the acquisition would, or would be likely to, substantially strengthen the power of the corporation to control or dominate that market.

(2) . . .

(3) In this section -

(a) a reference to a market for goods or services shall be construed as a reference to a substantial market for goods or services in Australia or in a State; and

(b) a reference to controlling or dominating a market for goods or services shall be construed as a reference to controlling or dominating such a market either as a supplier or as an acquirer of goods or services in that market."

"Market" is defined in s.4E, which provides:
"For the purposes of this Act, "market" means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services."

It is not clear to me that the right to relief in respect of a contravention of s.50 is exhausted if, although the contravention did take place, a subsequent change in shareholding or some other later conduct materially weakens the position of the contravening corporation. Conversely, it is not readily apparent to me how s.50 operates in respect of the earlier transactions in a series of share acquisitions over a substantial period, when only the later transactions, or perhaps the final transaction, are the direct basis for control of the body corporate in which the shares are acquired. Similarly, I am unclear as to which shares circumstances, may be made the subject of an order for divestiture under s.81 of the Act.

The real difficulties for Brisbane Gas lie in its inability to establish even a prima facie case that, assuming its control of O.C.A., Hartogen is, or is likely to be, in a position to control or dominate a market in respect of natural gas.

That is not to say that it is not easy to understand the concern of Brisbane Gas, as a prospective purchaser of natural gas, when regard is had to the attempt by Hartogen to wrest control of the O.C.A. Board from the present directors against a background of statements which have been made by Hartogen. I have already referred to Hartogen's comments upon "sub-contracting" a large part of the requirements of Brisbane Gas to the Wunger and Noone joint ventures. Elsewhere, Hartogen has described the O.C.A. natural gas interests as "highly prospective" and has stated that it acquired its 19.9% interest in O.C.A. in furtherance of its stated aim to maintain its pre-eminent position as a natural gas producer in the Surat/ Bowen Basin. It has expressed confidence in a "continuing expanding gas market in Brisbane", and claimed "a track record of negotiating historically the highest gas price in Australia". Again, its boast is that it "commands the highest price of any Australian supplier for natural gas and has supplied the Brisbane market since 1977". Its expressed attitudes are that producers of natural gas have "similar interests" and benefit from "closer association". "Among producers . . . unity is strength". "Producers (sellers) and distributors (buyers) belong on different sides of the negotiating table".

However, none of the views involved in these statements is other than perfectly legitimate unless some contravention can be pointed to. All that is presently relevant is a possible contravention of s.50 of the Act.

For Brisbane Gas, the most favourable market which is arguably the market for consideration in respect of Hartogen's alleged contravention of s.50 is the market in which Brisbane purchasers of natural gas from the Surat Bowen Basin deal with producers of that gas. More especially it is that market with respect to natural gas to be supplied to satisfy future requirements, say in the period after the end of the initial term of the existing contract between Brisbane Gas and Hartogen. Subject to any extension, it is at about the same time that the present contracts between Allgas and Bridge expire. Again in favour of Brisbane Gas, I exclude C.F.L. from consideration as a purchaser in that market. In a number of respects, it occupies a very special position. It is the sole end-consumer of natural gas in Brisbane which is entitled to purchase direct from the producers. Further, the quantities which it requires, and its ability to commit itself to long-term contracts under which it agrees to purchase large quantities, put it into a dominant position in its dealings with the producers and thus give it advantages in such dealings not possessed by Brisbane Gas or Allgas. The price the gas supply companies can afford to pay as purchasers of natural gas is influenced by their need to compete with other energy sources in the market in which they sell their products. In effect, they have to deal with natural gas producers after C.F.L. has satisfied its requirements and, to date, natural gas has been available to them only in consequence of C.F.L.'s policy not to take all available natural gas but to leave some for other purchasers.

Even were it assumed, solely for the sake of the present discussion, that Hartogen is able to influence the supply of natural gas by the Wunger and Noone Joint Ventures, it cannot be supposed that by its control of O.C.A. as a result of the shares which it has acquired in O.C.A., which control I have held is sufficiently established for the present application, taken in conjunction with its own natural gas resources and those which it is assumed to be able to influence, Hartogen would be, or would be likely to be, in a position to control or dominate the relevant market.

There are numerous obstacles in the path to success for Brisbane Gas. For example -

(i) If the Agreement of 2 June 1982 is binding, Hartogen cannot control O.C.A.'s natural gas, which is subject to contract in favour of Brisbane Gas.

(ii) The assumed contract arrangement or understanding by virtue of which, according to Brisbane Gas, Hartogen is able to influence the supply of natural gas by the Wunger and Noone joint ventures is, according to Brisbane Gas, contrary to s.45 of the Act, and thus unenforceable.

Such difficulties aside, it is indisputable that control of O.C.A. does not give control or anything more than a minority interest in, and a minority voice concerning the disposition of, the natural gas of the A.A.R./O.C.A. joint ventures which are central to the present controversy. If Hartogen, not O.C.A., were the other party to the joint venture with A.A.R, Hartogen would still not control or dominate the supply of natural gas from that joint venture or the Surat/Bowen Basin.

Further, as I earlier pointed out, the relevant market is not confined to the purchase of natural gas from the producers but extends, at least, to oil-derived products such as naptha and liquid petroleum gas.

It is unnecessary to go further. There seems to be no doubt that the interlocutory injunction must be refused. No occasion arises to discuss the balance of convenience or other matters argued concerning the proper exercise of the Court's discretion to refuse an interlocutory injunction even where an applicant establishes a basis for the grant of an injunction. Brief reference to two further matters is, however, appropriate.

No submission was made that the injunction sought in terms of paragraph 7 is not ancilliary or incidental to the order for divestiture claimed in paragraph 4 of the Application. However, I have reservations concerning that matter, and since it goes to the Court's power and perhaps its jurisdiction, it would have been necessary for me to resolve my doubts had I thought that an injunction should otherwise go. No threat by Hartogen to dispose of shares in O.C.A. was even suggested. In any event, as at present advised, I do not perceive why a corporation, against which an order is sought requiring it to divest itself of shares, ought necessarily be restrained, pending the trial of that issue, from voluntarily disposing of the shares. Likewise, it is not at the moment apparent to me why a corporation against which an order for divestiture is sought should be generally restrained from exercising the voting rights attached to its shares, even to the point of preventing it from voting for an adjournment at a general meeting. On the other hand, the use of voting power prima facie acquired in contravention of s.50 to further and consolidate the control gained through the acquisition of the shares does presently seem to me a matter properly to be restrained, pending determination of whether an order for divestiture should be made, in order to ensure that any order for divestiture is fully efficacious. An attempt to use the voting power attached to shares acquired in contravention of s.50 in order to obtain control of the Board of Directors of the body corporate in which the shares were acquired seems to me a classical example of such conduct. It is unnecessary for the Court to speculate whether, having obtained control of the Board of Directors as well as the general meeting of the body corporate in which it has acquired shares in breach of s.50, a corporation will then stop, or whether it will take further steps in the market which, by virtue of its illegitimate holding, it dominates or controls.

I would also be concerned, were I otherwise minded to grant an injunction, that the undertakings offered do not adequately protect Hartogen. Brisbane Gas and Boral undertook that they would not, whether by themselves or any Boral subsidiary (1) purchase any additional shares in the issued capital of O.C.A.; (2) sell or otherwise dispose of their shareholding in the issued capital; (3) enter into any contract with O.C.A. with respect to the interest held by O.C.A. in its joint venture with A.A.R., or the natural gas to which O.C.A. was entitled thereunder, or in any way seek to exercise any existing rights to purchase any natural gas so described; and (4) call or requisition any general meeting of the shareholders of O.C.A. No undertaking was given to support an adjournment of the proposed general meeting. It is conceivable that a defeat of Hartogen's motions would have adverse commercial consequences which could not properly be compensated by some later award of damages. Further, O.C.A. is not a party to the present proceedings and no undertakings from it were proferred. A Court could not entirely overlook the possibility that, were Hartogen neutralised by an injunction, O.C.A. could take a step which might have very adverse consequences for Hartogen and that, at the trial, the contravention of the Act alleged against Hartogen might not be made out.

However, as I have already indicated, the Application for an interlocutory injunction in terms of paragraph 7 of the Application will be refused. Brisbane Gas must pay the taxed costs of Hartogen and Street in respect of that application. The further hearing of the Application will be adjourned to 9.45 a.m. on Monday, 2 August 1982, when directions will be given for the future conduct of the proceedings. Each party must notify the other or others in writing no later than 4 p.m. on Thursday next, 29 July 1982, what directions it requires, when it anticipates that it will be ready for trial, and how long it anticiptes that the trial will take. A copy of the letters exchanged must be furnished to the Registry of this Court by the same deadline. The adjourned application for directions will take place at the State Law Courts Building, George Street, Brisbane.

V. EXPEDITION OF APPEALS

I also have before me an application to expedite the hearing of an appeal by Hartogen and Street from a decision which I gave during the course of the application by Brisbane Gas for an interlocutory injunction. I dismissed a preliminary objection related to the power of this Court to grant interlocutory relief in these proceedings insofar as they relate to the alleged contravention of s.50 of the Act by Hartogen and Street. I gave my decision on Wednesday 21 July 1982, and the proceedings then continued. On Friday, 23 July 1982, Hartogen and Street filed a Notice of Appeal and a motion for expedition of the hearing of the appeal came before me late that afternoon. I indicated then, without objection from Brisbane Gas, that I considered that it was appropriate that the appeal should be expedited and heard, if possible, prior to Thursday next, 29 July 1982, which is the day upon which the extraordinary general meeting of O.C.A. is proposed to be held. I also then indicated, and I took counsel for both parties to agree, that it seemed to me likely that, whichever way I decided the application by Brisbane Gas for an interlocutory injunction, the unsuccessful party would wish to appeal, and that it was appropriate that, if possible, the appeal from that decision should also be expedited and, if possible, be heard before Thursday next. Obviously, any such appeal if it is to be heard on Wednesday this week must be lodged today.

Accordingly, I propose to direct as follows, subject to any contrary or further direction by the Chief Judge or a Full Court of this Court:

(i) That the hearing of the appeal by Hartogen and Street in respect of my decision in these proceedings on 21 July 1982, and the hearing of any appeal by Brisbane Gas which is lodged today in respect of my decision in these proceedings today, be expedited.

(ii) That such expedited appeal or appeals be heard before a Full Court of this Court at Sydney on Wednesday next, 28 July 1982, at 10.15 a.m.

(iii) That each party have available for the Full Court three copies of any Application, Pleading, Affidavit, Exhibit or other document filed and read or tendered on the hearing of the Application before me for an interlocutory injunction and of the Order appealed from and the Notice of Appeal, unless it is agreed by the solicitors for the parties that all or any such document will not be referred to before the Full Court.

(iv) That Brisbane Gas have available for the Full Court three copies of the transcript of proceedings before me on Wednesday, 21 July 1982, and Hartogen and Street have available for the Full Court three copies of the transcript of proceedings before me on Thursday, 22 July 1982, subject to any agreement between the solicitors for the parties that all or any part or parts of such transcript will not be referred to before the Full Court.

(v) That all documents referred to in Order 52 rule 23 of the Rules of this Court be forthwith transmitted to the New South Wales District Registry of this Court and that each of the parties have full access to such documents for the purpose of complying with these directions.

(vi) That compliance with rules 24-29 of Order 52 of the Rules of this Court be dispensed with.

(vii) That no later than 9.15 a.m. on Wednesday, 28 July 1982, a copy of all papers required to be available for the Full Court in accordance with these directions be delivered to the Associate of each of the Judges who are to constitute the Full Court.

(viii) That all costs of and incidental to these proceedings other than the costs of the unsuccessful application by Brisbane Gas for an interlocutory injunction be reserved.