Coopers Brewery Ltd v Lion Nathan Australia Pty Ltd - [2005] SASC 400

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
COOPERS BREWERY LTD v LION NATHAN AUSTRALIA P/L
Judgment of The Full Court
(The Honourable Justice Bleby, The Honourable Justice Gray and The Honourable Justice Anderson)
19 October 2005
CORPORATIONS - CONSTITUTION AND LEGAL CAPACITY - MEMORANDUM AND ARTICLES OF ASSOCIATION - ARTICLES OF ASSOCIATION - PARTICULAR ARTICLES -- CONSTRUCTION
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
Articles of Association – Construction – Articles conferring third ranking pre-emptive right of purchase upon appellant – Article permitting revocation of pre-emptive right without appellant’s consent if a change in control of appellant occurred – Acquisition by foreign corporation of 45% of voting shares in appellant’s parent company and where parent company held controlling interest in appellant – Whether foreign corporation acquired “relevant interest” within meaning of Articles of Association – Whether “change in control” of respondent within meaning of Memorandum of Association – Terms incorporated into a contract – Application of these principles to Article 44 – Importation of definition of “relevant interest” from s 9 and Div 5 of Corporations Law – Whether importation included s 33 Corporations Law – Imported definition of “relevant interest” to be consistent with other provisions of Article 44 – Appeal dismissed.
Corporations Law s 9, s 11(a), Div 5 s 30 - s 45 inclusive, s 235, s 615; Corporations Act 2001 (Cth) s 140, referred to.
Tradigrain SA v King Diamond Shipping SA [2000] 2 Lloyd's Rep 319; Hamilton & Co v Mackie & Sons (1889) TLR 677; Thomas (TW) & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1; Modern Buildings Wales Ltd v Limmer & Trinidad Ltd [1975] 1 WLR 1281; Haughton Properties Pty Ltd v Sandridge City Development Company Pty Ltd (1995) 13 ACLC 1; McCann v Switzerland Insurance (2003) 203 CLR 579, applied.

COOPERS BREWERY LTD v LION NATHAN AUSTRALIA P/L
[2005] SASC 400
Full Court: Bleby, Gray and Anderson JJ
BLEBY J
The respondent and its Constitution

Coopers Brewery Ltd, the respondent to this appeal (“Coopers”), is a company incorporated in South Australia. It conducts the business of a brewery.
The Constitution of Coopers contains restrictions on the transfer and registration of the transfer of shares in Coopers. Save where there is a transfer of shares inter vivos or by testamentary disposition from a member to a Member’s relative[1], a person proposing to transfer shares must give a Transfer Notice to the company.[2] That initiates a procedure[3] whereby the shares must be offered by the Directors first to an existing member or Member’s relative. If no member or Member’s relative is willing to purchase all or any of the shares, the remainder must be offered to the trustees of the Coopers Superannuation Fund. If the trustees are not willing to purchase all or any of the shares, Article 49 requires that they must be offered to Lion Nathan Australia Pty Ltd, the appellant (“LNA”). Any unsold shares may then be offered to any person. There are provisions for fixing the value at which the shares may be transferred between the vendor and the purchaser. In effect, LNA has a third pre-emptive right of purchase.
[1] See Article 53. “Member’s relative” is defined in Article 2(p).
[2] Article 40.
[3] Articles 41-52.
The proper interpretation of Article 44 is at the core of the argument in this case. It provides:
If there is a Change in Control in any member, that member is deemed to have offered to sell all of its shares to the other members. In such event that member irrevocably authorises and empowers the Directors and for such purposes appoints the Directors as its agent and attorney to serve a Transfer Notice under Article 40 with respect to the shares held by such a member. The price of the shares will be the value as certified by the auditor under Article 42.
For the purposes of this Article, ‘Change in Control’ means any transfer of any shares or other equity interest in a member or in any entity that directly or indirectly controls or influences the member or any reconstruction, amalgamation or reorganisation of a member or any entity that directly or indirectly controls or influences the member if, after such transaction, there would be a change in the person having the power to direct its management and policies, or if no one person has such power, a change in the majority of such persons who, acting together, have such power or without limiting the generality of the foregoing, if any person acquires a relevant interest (as that term is defined in the Corporations Law) in 40% or more of the voting shares of the member.
For the purpose of this Article no Change of Control will occur where the person or persons having the power or interest referred to above following the relevant transactions are persons who would be permitted transferees in terms of Article 53 of the person or persons who previously had that power or interest, if such person or persons who previously had that power or interest had been a member or members of the Company.
LNA is not a member of Coopers. Article 44, in its terms, therefore has no application to it. However, its importance in this case arises by virtue of Regulations 6, 7 and 8 of the Memorandum of Association of Coopers:
6.     A special resolution:-
(a)     altering or omitting Articles 38 to 54 (inclusive) or 143 of the Articles of Association of the Company; or
(b)     purporting to amend or delete an existing article or inset a new article, which is inconsistent with the rights granted to Lion Nathan Australia Pty Limited (ACN 008 596 370);
does not have any effect unless and until the consent of Lion Nathan Australia Pty Limited (ACN 008 596 370) is obtained.
7.A special resolution altering or omitting regulation 6 of the Memorandum of Association of the Company, does not have any effect unless and until the consent of Lion Nathan Australia Pty Limited (ACN 008 596 370) is obtained.
8.Regulations 6 and 7 of this Memorandum of Association will cease to have effect on a Change in Control (as that term is defined in Article 44 of the Articles of Association as at that date of adoption of this Regulation) of Lion Nathan Australia Pty Limited (ACN 008 598 370) or if Lion Nathan Australia Limited (ACN 008 596 370) and its related bodies corporate cease to be substantial brewers of beer.
The question on this appeal is whether, in the circumstances which have happened, there has been a Change in Control of LNA, thus enabling the pre‑emptive rights of LNA contained within Articles 38-54 to be altered or omitted without the consent of LNA.
The Lion Nathan group of companies
LNA has at all material times, by means of various intermediate subsidiary companies, been a wholly owned subsidiary company of Lion Nathan Ltd, a public listed company. The precise nature of the holdings of Lion Nathan Ltd in the intermediate companies and of the intermediate companies’ holdings in LNA has changed, but not in a way as to diminish Lion Nathan Ltd’s ultimate ability to control, directly or indirectly, all the issued shares in LNA. At all material times, Lion Nathan Ltd has had the power to direct the management and policies of LNA.
The insertion of LNA’s rights in the Coopers Constitution
On 1 August 1993, LNA entered into a deed (“the Coopers Deed”) with Southcorp Holdings Ltd (“Southcorp”) whereby LNA purchased from Southcorp an interest in a parcel of shares in Coopers. Coopers and certain Coopers shareholders disputed the provisions of the Coopers Deed and the claim of LNA to an interest in those Coopers shares.
Also in August 1993, Coopers commenced proceedings in the Federal Court of Australia against Adelaide Bottle Co Pty Ltd, SA Brewing Co Ltd and others (“the Bottle Proceedings”). It is not necessary for the present purposes to stay with the nature of the dispute the subject of those proceedings.
In February 1995, Coopers and LNA agreed to settle their differences in respect of the Bottle Proceedings and the Coopers Deed. On 3 March 1995, they entered into an agreement (“the Coopers Shares Agreement”). By that Agreement –
·Coopers agreed to use its best endeavours to ensure that the Memorandum and Articles of Coopers were amended in a manner set out in Schedule 1 of the Coopers Shares Agreement.
·LNA and Coopers would enter into a Release Agreement with the respondents to the Bottle Proceedings under which Coopers would discontinue the Bottle Proceedings and release the respondents to those proceedings from any further claims in respect of those proceedings.
·LNA would enter into an agreement with Southcorp (“the Termination Agreement”) whereby the interest of LNA in the shares the subject of the Coopers Deed would be sold back to Southcorp, and the Coopers Deed would be terminated.
The amendments to the Memorandum and Articles of Coopers provided for in Schedule 1 of the Coopers Shares Agreement included the insertion of Regulations 6, 7 and 8 of the Memorandum of Association, the clauses in the Articles of Association creating the third level pre‑emptive rights of LNA to purchase shares in Coopers, together with various ancillary and enabling provisions, including what is now Article 44.
The Termination Agreement also contained a provision whereby, if Southcorp offered to sell all the Coopers shares held by it by giving a Transfer Notice within three months after the date of the Agreement, LNA would purchase all the shares offered to it under the relevant pre-emptive purchase provisions at an agreed price.
All the conditions of the Coopers Shares Agreement were fulfilled, including the alteration of the Memorandum and Articles of Coopers. In fact, Southcorp did not give notice of sale of the shares, and LNA has never become a shareholder of Coopers. However, as Mr Whitington QC, counsel for Coopers, pointed out, all the agreements, including the alterations to the Memorandum and Articles of Coopers, were prepared and agreed to by LNA and Coopers as an integrated package, and in the knowledge that LNA was a wholly owned subsidiary of Lion Nathan Ltd.
The proceedings below
In April 1998, Kirin Brewing Co Ltd (“Kirin”), through an intermediary, acquired a relevant interest in approximately 45% of the voting shares in Lion Nathan Ltd. Coopers claims that this amounted to a “Change in Control” of LNA for the purposes of Regulation 8 of the Memorandum of Association, and that therefore Regulations 6 and 7 no longer have effect. On 25 March 2002, Coopers commenced proceedings in this Court seeking declarations to that effect.
In the proceedings, two questions were formulated as a preliminary issue to be tried. They were:
1.Whether in April 1998 Kirin Brewing Co Ltd acquired a relevant interest in more than 40% of the issued share capital of Lion Nathan Ltd within the meaning of Article 44 of (Coopers’) Articles of Association; and
2.If so, whether there has been a change in control of (LNA) within the meaning of Regulation 8 of (Coopers’) Memorandum of Association.
The trial Judge ordered that both questions be answered “Yes”, and as a consequence made a declaration that:
1.There has been a change in control of (LNA) for the purpose of Regulation 8 of (Coopers’) Memorandum of Association.
2.Regulations 6 and 7 of (Coopers’) Memorandum of Association have ceased to have effect by reason of the change in control of (LNA).
LNA now appeals against those orders.
Issues on the appeal
Some issues argued before the trial Judge and decided against LNA are not challenged in the grounds of appeal. Those grounds which seek to argue that the definition of “Change in Control” in Article 44 only applies to LNA if it is a member of Coopers were abandoned at the hearing. The issue is therefore the proper interpretation of Article 44 and the effect of the importation into that definition of the definition of “relevant interest” in the Corporations Law.
Article 44
The structure of the second paragraph of Article 44 was a matter of some argument before this Court. I set out below a re-arrangement of that paragraph designed to assist in an understanding of its structure. All that has been added are two dashes and identification letters against the several sub-paragraphs for ease of later reference. Punctuation remains the same. The modifications have no effect on the meaning of the paragraph. Words appearing in bold are merely for assistance in the review which follows. As re-arranged, the paragraph reads:
For the purposes of this Article, “Change in Control” means –
(a)any transfer of any shares or other equity interest in a member or in any entity that directly or indirectly controls or influences the member
or
(b)any reconstruction, amalgamation or reorganisation of a member or any entity that directly or indirectly controls or influences the member
(c)     if, after such transaction, there would be –
(i)    a change in the person having the power to direct its management and policies,
or
(ii)     if no one person has such power, a change in the majority of such persons who, acting together, have such power
or, without limiting the generality of the foregoing,
(d)if any person acquires a relevant interest (as that term is defined in the Corporations Law) in 40% or more of the voting shares of the member.
I hasten to add that, if there were some way, grammatically, of making sub‑paragraph (d) part of sub-paragraph (c) I would do so. The point is that there are three alternatives to be considered if a relevant transaction occurs.
A number of observations need to be made about that paragraph as it applies to Regulation 8 of the Memorandum of Association of Coopers.
The first observation to be made is that, as transposed into Regulation 8 of the Memorandum of Association, and as now conceded by LNA, any reference to “member” in the definition must be read, for the purposes of Regulation 8, as a reference to LNA. To have any meaning at all the definition must be transposed mutatis mutandis in that manner.
The second observation to be made is that before there can be any relevant Change in Control of LNA there must be a transfer of shares in or a reconstruction, amalgamation or re-organisation of LNA, or there must be a transfer of shares in or a reconstruction, amalgamation or re-organisation of any entity that directly or indirectly controls or influences LNA. In this case, it is not now disputed that the transaction which fits one of those criteria is the transfer of the beneficial interest in 45% of the shares of Lion Nathan Ltd to Kirin.
Thirdly, para.(c) is not presently relevant in that Coopers does not argue, for present purposes, that any such relevant change has in fact occurred. It does, however, reserve its position in that regard. This paragraph requires a factual inquiry that goes beyond the scope of the questions which the trial Judge was required to answer. It should be noted, however, that the expression “such transaction” must refer to one of the transactions mentioned in sub-paras.(a) and (b).
Fourthly, although it is inelegantly worded, I accept that sub-para.(d) in the re-arrangement does not stand alone. In my opinion it relates to the acquisition of a relevant interest as a result of one of the transactions referred to in sub-paras.(a) and (b). The repetition of “if” at the beginning of sub-paras.(c) and (d) makes that apparent. In my view that is the only sensible way of interpreting the paragraph. That accords substantially with the interpretation urged upon us by Mr Wells QC, counsel for LNA. It differs from Mr Wells’ interpretation of the trial Judge’s approach to the paragraph which Mr Wells used as a springboard to criticise the trial Judge’s conclusion. Because I do not differ substantially from the structure of the paragraph argued for by Mr Wells, it is not necessary to consider his argument based on the expression in sub-para.(c) “without limiting the generality of the foregoing”. Mr Wells sought to use that expression to negate his understanding of the trial Judge’s interpretation of the paragraph.
The final observation to be made is that, not only is the definition of “Change in Control” in Article 44 imported into Regulation 8 of the Memorandum, but the definition itself imports the definition of “relevant interest” in the Corporations Law. Because the result of this case turns on the extent to which certain sections of the Corporations Law are thereby incorporated, it is necessary to examine briefly the principles governing the incorporation of such definitions into a document such as the constitution of Coopers.
Terms incorporated into a contract
A company’s constitution has effect as a contract between the company and each member, between the company and each director and between a member and each other member.[4] In particular, in this case Article 44 was the product of an agreement between Coopers and LNA. It is therefore appropriate to apply to Article 44 the principles applicable to the incorporation into a contract of terms defined elsewhere. The fundamental principle is that where parties expressly incorporate terms into a contract, the incorporated terms must be construed as if they have been written out in full in the contract, and accordingly must be construed in the context of the contract into which they have been incorporated.[5]
[4] Section 140 Corporations Act 2001.
[5] Lewison, “The Interpretation of Contracts”, Sweet and Maxwell 2004 at [3.06].
In Tradigrain SA v King Diamond Shipping SA[6], Rix LJ, with whom Brooke and Henry LLJ agreed, said:
The first rule relating to the incorporation of one document’s terms into another document is to construe the incorporating clause in order to decide on the width of the incorporation … A second rule, however, is to read the incorporated wording into the host document in extenso to see if, in that setting, some parts of the incorporated wording nevertheless have to be rejected as inconsistent or insensible when read in their new context: see e.g. Porteus v. Watney, (1878) 3 Q.B.D. 534 at p. 542, per Lord Justice Brett:
But then there is another rule which applies, which is, that if taking all the conditions to be in the bill of lading, some of them are entirely and absolutely insensible and inapplicable, they must be struck out as insensible; not because they are not introduced, but because being introduced they are impossible of application.
Sometimes the two rules have been read together, as in Hamilton & Co. v. Mackie & Sons, (1889) 5 T.L.R. 667, but more recently they have been recognized as distinct approaches, see Skips A/S Nordheim v. Syrian Petroleum Co. (The Varenna), [1983] 2 Lloyd’s Rep. 592; [1984] 1 Q.B. 599. In determining that second question, the Court has to have regard to the wording of both documents, to the extent that the charter-party is prima facie incorporated.
[6] [2000] 2 Lloyd’s Rep 319 at 335-336.
Incorporated terms may not always be entirely appropriate to the contract into which they are incorporated, and this will involve application of the second rule mentioned by Rix LJ. By way of illustration, in Hamilton & Co v Mackie& Sons,[7] the judgment of Lord Esher MR, with whom Cotton and Lindley LJJ agreed, is summarised as follows:
The Master of the Rolls said that the law on the subject had been laid down several times. Where there was in a bill of lading such a condition as this, “All other conditions as per charterparty,” it had been decided that the conditions of the charterparty must be read verbatim into the bill of lading as though they were there printed in extenso. Then if it was found that any of the conditions of the charterparty on being so read were inconsistent with the bill of lading they were insensible, and must be disregarded. The bill of lading referred to the charterparty, and therefore when the condition was read in, “All disputes under this charter shall be referred to arbitration,” it was clear that that condition did not refer to disputes arising under the bill of lading, but to disputes arising under the charterparty. The condition therefore was insensible, and had no application to the present dispute, which arose under the bill of lading.[8]
[7] (1889) 5 TLR 677.
[8] See also Thomas (TW) & Co Ltd v Portsea Steamship Co Ltd [1912] AC 1.

The process of qualifying the imported terms was described by Buckley LJ in Modern Buildings Wales Ltd v Limmer & Trinidad Ltd[9], in the following terms:
… Where parties by an agreement import the terms of some other document as part of their agreement those terms must be imported in their entirety, in my judgment, but subject to this: that if any of the imported terms in any way conflict with the expressly agreed terms, the latter must prevail over what would otherwise be imported.
The definition of “relevant interest” in the Corporations Law
[9] [1975] 1 WLR 1281 at 1289.
What is incorporated in Article 44 is the definition of “relevant interest” in the Corporations Law. In accordance with the authorities just reviewed, that means the whole of the definition of that term so far as it is consistent with and not in conflict with any other provisions contained in Article 44. The definition of “relevant interest” in s 9 of the Corporations Law, in relation to a share, provides that it “has the meaning given by Division 5 (other than s 44)”. Division 5 comprises ss 30-45 inclusive. Such of those sections as are applicable will therefore be incorporated into Article 44.
Section 31 provides:
31(1) Except for the purposes of section 235, a person who has power to vote in respect of a voting share in a body corporate has a relevant interest in the share.
(2) A person who has power to dispose of a share has a relevant interest in the share.
The exception contained in s 235 is not relevant for present purposes.
Section 30 relevantly provides:
30(1) This section applies for the purposes of this Division.
(2)Power to vote in respect of a share is power to exercise, or to control the exercise of, the right to vote attached to the share.
(3)A reference to power to dispose of a share includes a reference to power to exercise control over the disposal of the share.
(4)A reference to power or control includes a reference to power or control that is direct or indirect or is, or can be, exercised as a result of, by means of, in breach of, or by revocation of, trusts, relevant agreements and practices, or any of them, whether or not they are enforceable.
(5)Power to vote in respect of a share, or power to dispose of a share, that is exercisable by 2 or more persons jointly shall be deemed to be exercisable by either or any of those persons.
…
(7) A reference to the prescribed percentage is a reference to:
(a) if a percentage less than 20% is prescribed for the purposes of section 615 – the percentage so prescribed; or
(b) otherwise – 20%.
Subsections (1) to (6) of this section obviously qualify the expressions “power to vote” and “power to dispose of a share” used in s 31. It is by this means that it is established that Lion Nathan Ltd has a relevant interest in 100% of the shares of LNA. It was not suggested that these qualifications were not necessary or appropriate for incorporation into Article 44.
Sections 32 and 33 provide:
32 Where a body corporate has, or is by this Division deemed to have:
(a)power to vote in respect of a share; or
(b)power to dispose of a share;
a person shall be deemed for the purposes of this Division to have in relation to the share the same power as a the body has, or is deemed to have, if:
(c)the body is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person in relation to the exercise of the power referred to in paragraph (a) or (b); or
(d)the person has a controlling interest in the body.
33Where a body corporate or an associate of a body corporate has, or is by this Division (other than this section) deemed to have:
(a)power to vote in respect of a share; or
(b)power to dispose of a share;
a person shall be deemed for the purposes of this Division to have in relation to the share the same power as the body or associate has, or is deemed to have, if:
(c)the person has;
(d)an associate of the person has;
(e)associates of the person together have; or
(f)the person and an associate or associates of the person together have;
power to vote in respect of not less than the prescribed percentage of the voting shares in the body.
These sections will also be incorporated into the definition unless they are insensible and inapplicable or conflict with the express terms of Article 44.
Coopers’ argument
Coopers relies on the incorporation of s 33 as being material to the definition of “relevant interest” for the purpose of Article 44. The body corporate referred to in s 33 in this case is Lion Nathan Ltd. It has power to vote in respect of all the shares of LNA. That much is not disputed. Kirin is the person referred to in para.(c) of s 33. By the acquisition of 45% of the shares in Lion Nathan Ltd, it has power to vote in respect of not less than the prescribed percentage of the voting shares in Lion Nathan Ltd, the prescribed percentage being 20% as defined in s 30(7).
I mention in passing that Mr Whitington QC, counsel for Coopers, argued that that figure of 20% may have to be amended to 40% in order to give consistency with para.(d) of Article 44. I will return to that part of the argument later. For present purposes, it does not matter whether the percentage is 20% or 40%.
Kirin, by the operation of s 33 and by its acquisition of 45% of the voting shares in Lion Nathan Ltd, is deemed to have, for the purposes of Division 5, the same power as Lion Nathan Ltd has in relation to the shares in LNA. That is the power to vote in respect of 100% of the shares. That is more than 40% of the voting shares in LNA, and for the purposes of Article 44 there has therefore been a Change in Control of LNA.
That argument must be accepted unless there is good reason, consistent with the authorities cited above, for holding that s 33 is not incorporated into the definition of “relevant interest” for the purposes of Article 44.
LNA’s arguments
Mr Wells QC argued that Article 44 is all about change in control. He argued that there can be no change in control unless rights of control previously possessed by one person or group are transferred to another in such a way as to effect a practical change in control or unless there is a transfer of shares which vests a relevant interest of 40% or more of the voting shares in LNA to another. He pointed to the fact that under the deeming provisions of s 33 Lion Nathan Ltd still retains voting control of 100% of the shares in LNA. All that s 33 does is to deem Kirin to have the same power in respect of those shares as Lion Nathan Ltd, without any change in actual control. There has been no transfer of control. Therefore, s 33, being inconsistent with the object and purpose of Article 44 can have no application and cannot be imported into the definition.
I reject that argument. Article 44 is not contingent upon a transfer of control from one person or group to another. It is contingent, in this case, on a transfer of shares of LNA or of an entity which directly or indirectly controls LNA. If such a transfer occurs, as it did with the Kirin acquisition, all that is necessary for the Change in Control to be effective by means of the operation of sub-para.(d) is an acquisition by a person (in this case, Kirin) of a relevant interest in 40% or more of the voting shares in LNA. There is nothing in Article 44 to require that the acquisition of the relevant interest in these shares must be by transfer of shares from one to another, or that it must be accompanied by a corresponding diminution of the same interest by another. There is nothing in Article 44 which would prevent the relevant interest, as a matter of law, from being deemed to be held coextensively with another (in this case, Lion Nathan Ltd).
The fact that that might present conceptual difficulties at odds with the actual control of LNA does not matter. The very fact that the definition contains sub-paras (c) and (d) as alternatives contemplates that that may occur. Article 44 is, after all, only a trigger which, in the case of a member of Coopers, acts to divest the shares of a member, and in the case of LNA, acts to cause regulations 6 and 7 of the Memorandum of Association to cease to have effect. The deeming provisions of s 33 can sit quite happily with the terms of Article 44. There is no need to exclude them from the importation.
However, Mr Wells argued that, if that were the case, a number of anomalies would arise which cannot have been the intention of the drafters of Article 44. He cited the following by way of example. Suppose a person holds 50% of the voting shares of a corporate member of Coopers. Suppose that person is also a director of a public company, X Limited. By virtue of s 11(a) of the Corporations Law the person is an associate of X Limited. Suppose a second person acquires a prescribed percentage (20%) of the voting shares of X Limited. By virtue of s 33, that person is deemed, for the purposes of Division 5, to have, and therefore to have acquired, the same power as the first person over the 50% of the voting shares of the member. That is a relevant interest in more than 40% of the voting shares of the member, and the member would be required to dispose of its shares in Coopers. That, Mr Wells argued, would give rise to an absurdity, requiring divestment of the shares of a member triggered by a transaction having no relevant connection with the control of the member. However, the fallacy in the argument is that, for the purposes of Article 44, there has been no relevant transfer of shares or any reconstruction, amalgamation or re‑organisation of the type required by sub-paras.(a) or (b) of the second paragraph of Article 44. As that is an essential pre-requisite, the supposed anomaly does not arise. In other words, the literal operation of s 33 is curtailed by the requirements of Article 44 itself.
There may be a question whether the references to “associate” and “associates” in s 33 have any application at all in the incorporation of the definition into Article 44. It is not necessary to decide that in this case and I do not do so.
The application of s 33 may create different results within a group like the Lion Nathan group according to the level of subsidiary at which a share transfer takes place. At the time of the insertion of Article 44 into the Coopers Articles, LNA was a wholly owned subsidiary of Lion Nathan Ltd. However, that was through a series of subsidiaries where, at one point, the line of shareholding, and hence of control, was split between two wholly owned subsidiaries. For convenience I will refer to these as “the intermediate subsidiaries”. Both of the intermediate subsidiaries held 50% of the shares in the subsidiary which owned all the shares of LNA. Had Kirin acquired 45% of the shares of one of the intermediate subsidiaries, it would be deemed to have the same voting power over the LNA shares as that subsidiary had, namely 50%, and not 100% as in this case. That would still be a relevant interest in more than 40% of the voting shares of LNA, and would therefore amount to a Change in Control of LNA. Had the same interest been acquired by Kirin in the other intermediate subsidiary as well, Kirin would then be deemed to have held a relevant interest in 100% of the LNA shares. There is nothing anomalous about those results. Furthermore, they were possibilities of which both Coopers and LNA would have been aware when they agreed to promote the insertion of Article 44 in the Coopers Articles.
Another purported anomaly was relied on by Mr Wells. If Kirin had acquired any fewer than 40% of the shares in LNA directly, there would not have been a Change in Control for the purposes of Article 44. This is because para.(d) would have no application, and absent any other contractual arrangements, Kirin would not have the power to direct LNA’s management and policies because the only other effective shareholder of LNA shares, holding an absolute majority of the voting shares, would be Lion Nathan Ltd. However, acquisition by Kirin of a mere 20% of the shares of Lion Nathan Ltd would have the effect of a Change in Control of LNA by deeming Kirin to have acquired a relevant interest in 100% of the shares of LNA.
Mr Whitington sought to ameliorate that supposed anomaly by suggesting that it might be necessary to qualify the application of s 30(7) of the Corporations Law by substituting 40% as the prescribed percentage referred to in s 33. I am not satisfied that that is appropriate or necessary. Requiring the acquisition of 40% of an upstream controlling shareholder will still result, if achieved, in the deemed acquisition of a relevant interest of 100% of the voting shares of LNA. That would not satisfy Mr Wells’ complaint.
However, I am not satisfied that the result is anomalous. Acquisition by a person of something less than 40% of the voting shares of LNA would not, so long as the other effective shareholder was Lion Nathan Ltd, effect any practical change in control in the management of LNA. Acquisition by a person of more than 20% of the shares of Lion Nathan Ltd, depending on a number of factors, not least of which is the extent of the dispersal of the shareholding of Lion Nathan Ltd, could well effect or come close to effecting, a practical change of control of Lion Nathan Ltd and of LNA. I have little doubt that the negotiating parties in 1995 were aware of this. It is not surprising that they would, for that reason, wish to incorporate the deeming provisions of s 33. More importantly, however, this result is insufficient to justify a conclusion that s 33 cannot stand as part of the definition of “relevant interest” imported into Article 44.
Finally, Mr Wells sought to derive some support for his argument from the use of the phrase “as that term is defined in the Corporations Law” in sub-para (d). He contrasted that with a reference to “relevant interest” without qualification in Article 2(p), which contains the definition of “Member’s relative” and with reference to other terms in the same Article which are qualified by the phrase “within the meaning of” certain Acts of Parliament. As I understood the argument, it was that this indicated an intention in Article 44 to confine the importation to the definition of “relevant interest” to that contained in s 31, as contrasted with the other references in Article 2(p) where the importation is plainly at large. I reject that argument.
The definition imported to Article 44 is that contained in s 9. That requires that it have the meaning given by Division 5, subject only to any exclusions necessary to give effect to the relevant common law principles concerning exclusions. The definition imported is not that in s 31 alone.
In further support of that position Mr Wells pointed to the inappropriateness, for importation into Article 44, of the qualifications contained in ss 38-42 of the Corporations Law. Those sections require a relevant interest to be disregarded in certain circumstances, such as when held by money lenders, certain trustees, securities dealers and others. However, in that regard Mr Wells has difficulty in confronting the decision of Hayne J, as a Judge of the Supreme Court of Victoria, in Haughton Properties Pty Ltd v Sandridge City Development Company Pty Ltd.[10]
[10] (1995) 13 ACLC 1.
That case not only refutes this part of Mr Wells’ argument but supports the interpretation I have placed on the effect of the importation of the definition of “relevant interest” into Article 44.
The plaintiff Company (“Properties”) was a member of the defendant company (“SCDC”). A Receiver and Manager of Properties and its holding company (“Holdings”) was appointed by a bank. SCDC had pre-emptive sale provisions in its Articles not dissimilar from those in the Coopers Articles. The shares of SCDC owned by Properties were deemed to be offered for sale by SCDC if Properties became a “controlled member”. Under the Articles a member became a “controlled member” if another person acquired a relevant interest in at least 20% of the member’s voting shares. SCDC’s Articles provided that “words or expressions contained in these regulations shall be interpreted in accordance with the provisions of the Code as in force at the date at which such interpretation is required”. The “Code” was defined as the “Companies’ (Victoria) Code of the State of Victoria or any statutory modification, amendment or re-enactment thereof for the time being in force”. The relevant legislation at the time, as it happens, was the Corporations Law.
Upon the appointment of the Receiver to Holdings, SCDC considered that Properties became a “controlled member” and sold Properties’ shares to other members of SCDC. Properties disputed that right. The case turned on whether or not the Receiver of Holdings had acquired a “relevant interest” in the shares of Properties. SCDC relied on s 30(3) of the Corporations Law which, it claimed, gave the Receiver a relevant interest in the shares. Properties argued that any relevant interest should be disregarded under the provisions of s 38, which required the disregarding of a relevant interest acquired by a financier. In the course of deciding that the interest of the Receiver should be disregarded, Hayne J held that, by virtue of s 38, a relevant interest, for the purpose of the Articles, excluded an interest acquired by a financier.
Hayne J referred to the definition of “relevant interest” in s 9 of the Corporations Law and to the sections that were incorporated within Division 5. Having referred to ss 31 and 38, he said[11]:
The plaintiff contended that by force of s.38, any relevant interest that the National Australia Bank may have acquired in Properties’ shares because of the powers that the debenture conferred on it as mortgagee was an interest that was to be disregarded in determining whether there was a relevant interest within the meaning of Division 5 of the Law.
The defendants submitted that although s. 38 provides in terms that the relevant interest of a financier “shall be disregarded” the interest that the financier acquires either at the point when the financier takes a debenture or that debenture becomes enforceable, is nevertheless a relevant interest within the meaning of Division 5 and s. 9, or if it is not, it is a relevant interest within the meaning of article 30. I do not accept that is so. The argument amounts to contending that when s. 9 defines relevant interest as having the meaning given by Division 5, it is to be read as if account is to be taken of those provisions in Division 5 which extend the core meaning of “relevant interest” that is stated in s.31, but account is not to be taken of any provision in Division 5 that cuts down what otherwise is the meaning of relevant interest. So stated, the fallacy in the argument becomes apparent. In essence the argument is that a relevant interest as defined by the Corporations Law is an interest identified by some but not all of the provisions of Division 5. Of course, s. 38 is cast in terms of a “relevant interest” of a financier being disregarded and there is therefore some verbal indication that what is being disregarded is otherwise to be considered a “relevant interest” but the definition of the term for the purposes of the Law requires reference to all of the provisions of Division 5, not just some of them. It is the statutory meaning of the term that is taken up by the articles, not some other, broader meaning.
[11] Ibid at 5.
Even if, for the proper interpretation of the Articles of Coopers, it were necessary to exclude s 38 from the definition of “relevant interest”, the same cannot be said of s 33. It is part of Division 5 which goes to the prescription, along with other sections, as to how one identifies a relevant interest for the purpose of Article 44.
Conclusion

For these reasons I consider that the answers given by the trial Judge to the questions asked were correct. I would dismiss the appeal.
GRAY J
Coopers Brewery Ltd issued proceedings, seeking declarations that:
-there had been a change in control of Lion Nathan Australia Pty Ltd for the purposes of regulation 8 of Coopers Memorandum of Association:
-regulations 6 and 7 of Coopers Memorandum of Association had ceased to have effect by reason of the change of control.
Lion Nathan Australia Pty Ltd was named as defendant.
The proceedings came on for hearing before a Judge of this Court, who formulated the question for his determination in the following terms:
Whether in April 1998, Kirin Brewery Company Ltd acquired a relevant interest in more than 40 per cent of the issued share capital of Lion Nathan Ltd within the meaning of article 44 of the plaintiff’s Articles of Association.
If so, whether there has been a change in control of the defendant whin the meaning of regulation 8 of the plaintiff’s Memorandum of Association.
The learned trial Judge resolved the question in favour of Coopers as follows:
The two questions posed in the issue to be tried in the case are answered as follows:
“Whether in April 1998, Kirin Brewery Company Ltd acquired a relevant interest in more than 40 per cent of the issued share capital of Lion Nathan Ltd within the meaning of article 44 of the plaintiff’s Articles of Association”. Answer: Yes.
“If so, whether there has been a change in control of the defendant within the meaning of regulation 8 of the plaintiff’s Memorandum of Association”. Answer: Yes.
The Judge then made the following declarations:
In light of the ruling on the preliminary issue, the Court declares that:
There has been a change in control of the defendant for the purpose of regulation 8 of the plaintiff’s Memorandum of Association.
Regulations 6 and 7 of the plaintiff’s Memorandum of Association have ceased to have effect by reason of the change in control of the defendant.
To understand the way in which the issue has arisen, it is necessary to record a number of background matters. The detailed facts and circumstances are set out in the judgment of Bleby J. I respectfully adopt that analysis. The facts are only canvassed herein to the extent necessary to understand these reasons.
Background
As at March 1995, as a result of the settlement of other proceedings, the Coopers Memorandum and Articles for Association were amended. As a result of the amendment, Lion Nathan Australia was accorded third ranking pre-emptive status to acquire shares from a member wishing to sell, as well as an exemption from the prohibition on a member from holding an interest in a business competitive with Coopers.
By virtue of regulation 6 of the Memorandum of Association, Coopers were not able to alter or revoke the special status granted to Lion Nathan Australia without that party’s consent. By virtue of regulation 7, a special resolution altering or omitting regulation 6 was ineffective without the consent of Lion Nathan Australia.
However, regulation 8 provided that regulations 6 and 7 cease to have effect upon a change in control (as that term was defined in Article 44) of Lion Nathan Australia. Regulations 6 and 7 also cease to have effect if Lion Nathan Australia or its related bodies corporate cease to be substantial brewers of beer.
The provisions granting preference to Lion Nathan Australia were inserted in the Coopers Constitution, pursuant to an agreement known as the Coopers Share Agreement. That agreement was dated 3 March 1995 and was between Coopers and Lion Nathan Australia, whereby, in settlement of certain disputes between the parties, Coopers agreed to use its best endeavours to amend the company’s constitution in a manner that reflected the provisions described above. The amendments were duly made.
As at March 1995, Lion Nathan Australia was a wholly owned subsidiary of Lion Nathan Ltd. At that time, Lion Nathan Ltd was a company incorporated and registered in New Zealand and listed on the New Zealand stock exchange.
In or about April 1998, a Japanese brewer, Kirin Brewing Company Ltd acquired a relevant interest in approximately 45 percent of the issued shared capital of Lion Nathan Ltd. The evidence before the trial Judge disclosed, and it was also an agreed fact, that Kirin Brewery acquired an interest in 246,454,275 shares. The shares represented approximately 45 percent of the shares in Lion Nathan Ltd and were all voting shares.
The evidence disclosed that the interest acquired in the Lion Nathan Ltd shares was a relevant interest under New Zealand’s company law. However, the definition of relevant interest under that legislation was not coincident with the definition of relevant interest under the Australian legislative counterpart.
On 2 June 2000, the jurisdiction of incorporation of Lion Nathan Ltd was transferred from New Zealand to New South Wales.
The trial Judge found that Kirin Brewery acquired a relevant interest in the shares of Lion Nathan Ltd. Amongst other things, this meant that Kirin Brewery, at all relevant times, held a relevant interest in the shares within the meaning of that expression in Division 5 of the Corporations Law. This finding, although disputed at trial, is not challenged on this appeal.
At no time has Lion Nathan Australia in or since March 1995 been a member of Coopers.
Change in Control
Regulation 8 of the Memorandum of Association of Coopers provided that “on a Change in Control (as that term is defined in Article 44…) of Lion Nathan Australia ...”, the entrenchment of Regulation 6 ceased. It was then open to Coopers, by special resolution, to alter the Articles so as to remove Lion Nathan Australia’s preferred status under the pre-emptive rights regime.
Relevantly, Article 44 provided:
If there is a Change in Control of any member, that member is deemed to have offered to sell all of its shares to other members. In such event that member irrevocably authorises and empowers the Directors and for such purposes appoints the Directors as its agent and attorney to serve a Transfer Notice under Article 40 with respect to the shares held by such a member. The price of the shares will be the value as certified by the auditor under Article 42.
For the purposes of this Article, ‘Change in Control’ means any transfer of any shares or other equity interest in a member or in any entity that directly or indirectly controls or influences the member or any reconstruction, amalgamation or reorganisation of a member or any entity that directly or indirectly controls or influences the member if, after such transaction, there would be a change in the person having the power to direct its management and policies, or if no one person has such power, a change in the majority of such persons who, acting together, have such power or, without limiting the generality of the foregoing, if any person acquires a relevant interest (as that term is defined in the Corporations Law) in 40% or more of the voting shares of the member.
For the purposes of this Article no Change of Control will occur where the person or persons having the power or interest referred to above following the relevant transactions are persons who would be permitted transferees in terms of Article 53 of the person or persons who previously had that power or interest, if such person or persons who previously had that power or interest had been a member or members of the Company.
Within Article 44, and in the context of the pre-emptive rights regime generally, the function of the concept of change in control was to achieve the result that a corporate member of Coopers, which underwent a change in the identity of the individual(s) having control over that corporate member, was to be treated under a transfer notice given pursuant to another article as having offered its shares for sale and transfer. The commercial object of Article 44 would appear to be to keep membership of Coopers within the existing and known set of members and their relatives.
The Coopers constitution is a commercial (and contractual: see section 140 of the Corporations Act) document that should be given a businesslike interpretation.
Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances that the document addresses, and the objects that it is intended to secure.[12]
[12] McCann v Switzerland Insurance (2000) 203 CLR 579 at 589 (Gleeson CJ).
Regulation 8 picked up the definition of “change in control” in Article 44 and put it to work in a different context as a convenient drafting shortcut. The object and purpose of Regulations 6, 7 and 8 was to ensure that Lion Nathan Australia’s preferred status under the pre-emptive rights regime was entrenched while, but only for so long as, it remained in practical terms the same corporate entity as it was when the parties had reached agreement in terms of the 1995 Coopers Shares Agreement.
Relevant Interests
Article 44 conditions a finding of a change in control, inter alia, on the acquisition of a “relevant interest” as that term is defined in the Corporations Law.
Section 9 of the Corporations Law defined “relevant interest” in these terms:
In relation to a share – has the meaning given by Division 5 (other than section 44).
There is no reason to read Regulation 8 or Article 44 as not including all of the explication of “relevant interest” contained in Division 5 of Part 1.2 of the Corporations Law. The meaning of “relevant interest” cannot be determined without having regard to all of Division 5 of the Corporations law.
Lion Nathan Australia sought to confine the meaning of “relevant interest” to section 31 (and to ignore, for example, sections 32 and 33). This submission should be rejected. Those sections provide:
31(1)     Except for the purposes of section 235, a person who has power to vote in respect of a voting share in a body corporate has a relevant interest in the share.
(2)     A person who has power to dispose of a share has a relevant interest in a share.
32    Where a body corporate has, or is by this Division deemed to have:
(a)     power to vote in respect of a share; or
(b)     power to dispose of a share;
a person shall be deemed for the purposes of this Division to have in relation to the share the same power as the body has, or is deemed to have, if:
(c)     the body is, or its directors are, accustomed or under an obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the person in relation to the exercise of the power referred to in paragraph (a) or (b); or
(d)     the person has a controlling interest in the body.
33Where a body corporate or an associate of a body corporate has, or is by this Division (other than this section) deemed to have:
(a)     power to vote in respect of a share; or
(b)     power to dispose of a share;
a person shall be deemed for the purposes of this Division to have in relation to the share the same power as the body has, or is deemed to have, if:
(c)     the person has;
(d)     an associate of the person has;
(e)     associates of the person together have; or
(f)     the person and an associate or associates of the person together have;
power to vote in respect of not less than the prescribed percentage of voting shares in the body.
The incorporation of the full extent of the concept of “relevant interest” from Division 5 is entirely consistent with the operation of Regulation 8 and Article 44:
-Section 31 in Division 5 is no more than the starting point to an elaboration of the concept of “relevant interest”.
-Lion Nathan Australia was at all relevant times a wholly owned subsidiary within the Lion Nathan group at the end of a long chain of companies.
-The “change in control” definition in Article 44 expressly contemplates a change in control “upstream” of the immediate controller of Lion Nathan Australia. It would appear to recognise the reality of a chain of companies between the holding company and the ultimate subsidiary, and the capacity for a change in control to occur at any level in the chain.
-Even if it may be supported that the first part of the definition of “change in control” in Article 44 contemplates an actual change in control, not a presumed or inferred change in consequence of the occurrence of some other condition, the words following “without limiting the generality of the foregoing” cannot be so confined.
-The words, “or ... if any person acquires a relevant interest ... in 40 per cent or more of the voting shares of the member” expressly contemplate a change in control occurring with less than the acquisition of 40 per cent of the voting shares. It erects an agreed (and commercially realistic) bar above which an acquisition of shares may be presumed to pass control.
It is inappropriate to confine the acquisition of a relevant interest in Lion Nathan Australia to a direct acquisition of shares (or a relevant interest in shares) at the level of Lion Nathan Australia. That would be a non-commercial construction. Such a construction would frustrate the spirit and intent of Article 44. This suggested construction was correctly rejected by the learned trial Judge.
Lion Nathan Australia, as a wholly owned subsidiary of Lion Nathan Ltd, was a reflection of the corporate persona of Lion Nathan Ltd. If Lion Nathan Ltd underwent a change in control (either actual or presumed at the 40 per cent acquisition level), then a change in control of Lion Nathan Australia would follow.
These considerations are reinforced by the latter words of Regulation 8, which provides that Regulations 6 and 7 will cease to have effect “if Lion Nathan Australia Pty Limited ... and its related bodies cease to be substantial brewers of beer”. This provision expressly treats Lion Nathan Australia as a part of a group. It is sufficient if the cessation of brewing operations occurs anywhere “upstream” of Lion Nathan Australia.
The fact that the concept of relevant interest in the Corporations Law is put to use for the purposes of substantial shareholder disclosure (Part 6.7 of the Corporations Law) and the takeover trigger level (section 615 of the Corporations Law), and may result in certain anomalies when incorporated into a private agreement such as the Coopers constitution, is no reason not to allow its extended operation under Regulation 8 and Article 44 where it is capable of a perfectly sensible, rational and commercial operation in the circumstances of the present case.
In Haughton Properties Pty Ltd (Receiver and Manager Appointed) v Sandridge City Development Company Pty Ltd,[13] Hayne J as a member of the Victorian Supreme Court had occasion to consider change of control provisions in a company’s articles. The articles included a clause, which provided that “words or expressions contained in these regulations shall be interpreted in accordance with the provisions of the code as enforced the date at which such interpretation is required”. Hayne J observed:[14]
The defendants submitted that although s. 38 provides in terms that the relevant interest of a financier “shall be disregarded” the interest that the financier acquires either at the point when the financier takes a debenture or that debenture becomes enforceable, is nevertheless a relevant interest within the meaning of Division 5 and s 9, or, if it is not, it is a relevant interest within the meaning of article 30. I do not accept that is so. The argument amounts to contending that when s 9 defines relevant interest as having the meaning given by Division 5, it is to be read as if account is to be taken of those provisions in Division 5 which extend the core meaning of “relevant interest” that is stated in s. 31, but account is not to be taken of any provision in Division 5 that cuts down what otherwise is the meaning of relevant interest. So stated, the fallacy in the argument becomes apparent. In essence the argument is that a relevant interest as defined by the Corporations Law is an interest identified by some but not all of the provisions of Division 5. Of course, s. 38 is cast in terms of a “relevant interest” of a financier being disregarded and there is therefore some verbal indication that what is being disregarded is otherwise to be considered a “relevant interest” but the definition of the term for the purposes of the Law requires reference to all of the provisions of Division 5, not just some of them. It is the statutory meaning of the term that is then taken up by the articles, not some other, broader meaning.
Although this authority is of only indirect relevance, it does provide support for the preferred construction referred to earlier in these reasons.
[13] Haughton Properties Pty Ltd (Receiver and Manager Appointed) v Sandridge City Development Company Pty Ltd (1995) 13 ACLC 1.
[14] Haughton Properties (1995) 13 ACLC 1 at 5.
Conclusion
This appeal should be dismissed.
ANDERSON J I have read the draft reasons prepared by Bleby J and I agree with the conclusions he reaches and with his reasons for those conclusions. I would dismiss the appeal.