Gull Petroleum (W.A.) Pty Ltd v Povey Corporation Ltd

TRADE PRACTICES - misleading and deceptive conduct - acquisition by publicly listed company of another company's assets - agreement concluded - settlement not proceeded with - purchasers advise Stock Exchange by letter of non-acqulsition - letter alleges misrepresentation by vendor inducing agreement - allegation said to constitute misleading and deceptive conduct - urqent clalm for interlocutory relief against purchasers and Stock Exchange - serious question to be tried - short term inlunction granted.

Trade Practices Act 1974

s.80, s.52

GULL PETROLEUM (W.A.)

PTY LTD as Trustee for THE GULL TRADING UNIT

TRUST V POVEY CORPORATION LIMITED and ST ANDREW PROPERTY HOLDINGS

PTY LTD and THE AUSTRALIAN STOCK EXCHANGE (PERTH) LIMITED

NO. WAG 103 Of 1987

FRENCH J.

PERTH

18 SEPTEMBER 1987

IN THE FEDERAL COURT	)
OF AUSTRALIA	)
WESTERN AUSTRALIA	)
DISTRICT REGISTRY	1

GENERAL

DIVISION

)

No. WAG 103 Of 1 9 8 7

B E T W E E N :

GULL PETROLEIJM (W.4.

) PTY LTD

as Trustee for THE GULL TRADING

UNIT TRUST

Applicant

and

POVEY CORPORATION LIMITED

and ST ANDREW PROPERTY

HOLDINGS PTY LTD

First Respondents

and

THE AUSTRALIAN STOCK EXCHANGE

(PERTH) LIMITED

Second Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER:	18 SEPTEMBER 1987
WHERE MADE:	PERTH

THE COURT ORDERS

THAT:

Upon the Appllcant undertaking

to pay to any party adversely

affected by any lnterlocutory lnjunctlon granted in favour of the Applicant such compensation (if any) as the Court thinks lust, in

such manner as

the Court directs:-

1. The Respondents be and are hereby restrained until 4 . 3 0 pm on Monday 21 September 1987 or further order from doing all or any of the following and/or any of them:-

2 .

(a)

further publlcatlon of the letter from the First Respondents' solicltors to the Second Respondent of 17 September 1987, a copy O E whlch forms annexure "A" to this order:

(b)

the publicatlon of any statement whether oral or in

writing in terms slm~lar

to the letter:

(c)

the publlcation whether orally or ln wrltlnq of any statement alleglng mlsrepresentatlon to the First Respondents by the vendors O E the buslncss conducted by the appllcant,

Provided that the restralnt shall not operate In relation to any communlcation between the Respondents and thelr Sollcitors or counsel or between the Flrst Respondents and any representatlve of Rothwells Ltd.

2. A copy of the order, applicatlon and supportlng affidavit to be served upon the Second Respondent no later than 9.30 am on Monday 21 September 1987.

3 . The Appllcant to make every reasonable endeavour to serve a copy of the order on either the manager of the Second Respondent, Mr Cato or the Chairrn?n of the Second Respondent as soon as posslble.

3 .

The

appllcatlon is llsted

for

2.15 p m on

Monday

September for further dlrectlons.

Note: Settlement and entry

of Orders 1s dealt with In

Order 36 of the Federal Court Rules.

" A

LJS

: DS

17 September, 1987

The Manager,

Australian Stock Exchange (Perth) Llmlted,

68 St. George's Terrace,

PERTH, W.A. 6000

Dear Sir,

We act for Povey Corporatlon

Llmlted In its purchase

of shares

and unlts In the Gull Group of Companies and on behalf of St.

Andrew Property Holdings Pty. Ltd wlth respect to purchase of

real

estate owned by

the Gull Group upon whlch Gull operates its

fuel

retall

outlets. The purchase agreements were made on the 24th

August 1987. Our cllents Instruct us that thelr lnvestlgatlons show there 1s insufficlent asset backing to support the conslderatlon.

A number of the representatlons made

to our cllent whlch induced

the contract have been found not

true These revelatlons

alone have placed obstacles In	the way of our cllents' flnanclal
arrangements.

Our clients are dolng what they can to resolve the sltuatlon

and

are

strlving to complete thelr lnvestlgatlons.

thls stage it

is becoming clear that our cllent wlll have thelr remedles at law;

we cannot however commlt our cllent

to any course of actlon at

present and they

are currently conslderlng

thelr

posltlon

decislon awaits the final outcome of the lnvestigatlon. Our clients' posltion should be formulated wlthln the next few working days.

You will be

aware that Gull

have commenced proceedlngs on the

Agreement

against

our

client,

clalmlng

entltlement

to resclnd;

that entitlement is, for the reasons

set out above, and for reasons

we wlll not detail here, hotly

disputed.

Yours falthfully,

BD38734DLY2

IN THE FEDERAL COURT

OF AUSTRALIA

)

WESTERN

AUSTRALIA

DISTRICT

EGISTRY

)

GENERAL

DIVISION

)

No. WAG 103 of 1987

B E T W E E N :

GULL PETROLEUM

( W.A. ) PTY LTD

as Trustee for THE GULL TRADING

UNIT TRUST

Applicant

and

POVEY CORPORATION LIMITED

and ST ANDREW PROPERTY

HOLDINGS PTY LTD

First Respondents

and

THE ALISTRALIAK STOCK EXCHANGE

(PERTH) LIMITED

Second Respondent

CORAM:

FRENCH J.

18 SEPTEMBER 1987

EX TEMPORE REASONS FOR JUDGMENT

The substantive application 1n this matter, whlch was

instituted in this Court today, arises out of an agreement

be ween

Gull Petroleum (WA) Pty

Ltd ("Gull") and assoclated parties, as

vendors of a business known as "Gull Petroleum", and Povey

Corporation Limited ("Povey") and St. Andrew Property Holdings Pty

Ltd ("St. Andrew") as prospective purchasers of that business.

Affidavit material placed before the Court on the part

of the applicant, which is Gull, ln support of an urgent claim for

interlocutory injunctive relief under s . 8 0 of the Trade Practlces

Act 1974 indicates that on 17 June 1987 heads of agreement were signed recording the terms of the sale of the business of Gull and Its assets to Povey for $15 milllon.

A copy oE the heads oE agreement, whlch were latcr

embodied in formal agreements, is before the Court as one of the

exhibits to the affidavit

of Mr M.I. Green. The heads of

aqreement were executed on

June. Four Eormal contracts

embodying their terms were executed on 2 4 August. Those latter

documents are not before the Court.

Deposits totalling some $2,000,000 are said to have been paid under the agreements by the purchasers.

It is further s a i d

that each of the agreements provided for the settlement on 31

August 1987 and that settlement did not proceed.

Notices of default

were

subsequently

sent

to the

purchasers by the solicitors for the vendors. Such notices, it is

said, were issued pursuant to the terms of the agreements.

Correspondence then ensued between the solicitors for the vendors and the solicitors for the purchasers in which, inter alia, the solicitors for the purchasers asserted that the vendors, by their notices of default, have elected to affirm and were disentitled to rescind the contracts in question.

3 .

In particular, by a letter dated 14 September 1987, the

solicitors for Povey and St. Andrew, Messrs. Northmore, Hale, navy

& Leake, wrote to Messrs. Robinson C o x , the sollcitors €or the

vendors, saying, inter alia:-

"Your clients are not, with respect (and for the reasons we set out below) entitled to resc~nd (as you put it, "to enforce t h e ~ r rlghts of termination"). As your

clients must know, ours

have had lengthy but successful

discussions wlth their merchant bankers, Messrs. Rothwells, and have every confidence In their ablllty to settle on or before 30th September, 1987."

The letter went on to put certain propositions for, or associated with, the settlement for payment

interest and

payment of legal fees to the appllcant's sollcitors.

Subsequently, on 15 September, notlces of termlnation of

the contracts were sent

under cover of a letter from the vendor's

solicitors to the purchasers.

Contemporaneously, proceedings were

instituted in the Supreme Court of Western Australia seeking relevant declarations in relation to the status of the agreements.

It is unnecessary for present purposes to refer to the

detail of those.

On 17 September 1987, the solicitors for Gull and Its associated corporations and persons, the vendors, wrote to the solicitors for the purchasers and in their letter of that date said, among other things:-

4 .

“Our clients also consider that your client, Povey Corporation Limited, I S seriously in breach of its obligation to notify the Stock Exchange that it has defaulted under the Contracts, that the Contracts have been terminated and the deposlt of $2 mllllon has been

forfe 1 ted

Your client has nottfied the Stock Exchange that the acquisition would be completed on 3 1 August, 1 9 8 7 and has actually publicly announced that the acqulsitlon has been completed.

Out clients have Incurred substantial losses as a result

of your clients conduct.

Without pre~udice to their other rlghts our clients

require that your

clients

now formally issue a

correcting

statement

to the Stock Exchange. If your

clients do not issue a statement by 10.00 a.m.

tomorrow

our clients will take action to advise the Exchange.”

The reference In the letter to the obligations of, in

particular, Povey to the Stock Exchange, appears to have been a

reference to the Listing Rules which provide, lnter alia:-

“SECTION 3 - CONTINUING LISTING RULES

While a company remains on the Officlal List it is required to comply with the following Listing Rules and to provide forthwith any explanations requested by the Home Exchange.

NOTICES - SECTION 3 A

To notify the Home Exchange immediately of -

(4)(a) Any acquisition or dlspositlon of fixed assets and/or lnvestments including shares in another company by a listed company or a subsidiary of a listed company -

(i) where the total assets being acquired or disposed of represent an amount in excess of 10 per cent of the written down value of the listed company’s consolidated fixed assets and investments as disclosed in its last audited accounts, or

(ill where it could reasonably be expected that the inclusion or exclusion,

respectively, of the

total current year's profit (loss) of such acquisition or disposition would result in an increase in or diminution of the listed company's consolidated pre-tax operating profit or loss for the year of acquisition or

disposal 1n excess

of 10 per cent compared

with that consolidated pre-tax operating profit or loss disclosed in its last audited accounts,

(1ii)in the case of an acquisition to which Listing Rule 3A(4)(a) applies the amount is the cost price of the asset and in the case of a disposition to which Listing Rule 3A(4)(a) applies the amount is the book value or the consideration on disposal whichever is the greater,

(iv)

for the purposes

Listing Rule 3A(4)(a)

capltallsation of mining exploration expenditure, cost of mining tenements, options, goodwill and other expenses related thereto shall not be taken into account when determining the value of the company's consolidated fixed assets and investments except where the Home Exchange in its discretion allows it to be so included.

(b) With respect to such an acquisition

disposition the notice shall state	-
(i) the date of the transaction;

(11) a general description of the nature of the assets and/or investments and if same consists

of	shares in whole or part the same and

general description of the activities of the

company in which the shares are or were held;

( i i l ) the total consideration and the terms and

composition thereof;

(iv) the basis

of the valuation placed on the

assets at the time of acquisition or disposition thereof, and the designation of the valuer; and

(v) in the case of a disposition the excess or deficit of the proceeds over the book value."

b .

It is unnecessary for present purposes to go beyond that first provision in s.3A. I am prepared to infer, but only €or the purposes of this interlocutory application, that information communicated to the Stock Exchange in discharge of the obligation under s.3A could, in the ordinary course, be expected to be disseminated to persons who might be concerned with the value of the company’s securities; that is to say, to stock brokers and members of the general public.

On 18 September 1987, the solicitors €or the purchasers sent a letter to the solicitors €or the vendors enclosing a copy of a letter they had sent to the Stock Exchange on the previous day. That letter said:-

“We act for Povey Corporation Limited In its purchase of shares and units in the Gull Group of Companies and on behalf of St. Andrew Property Holdings Pty. Ltd. with respect to purchase of real estate owned by the Gull Group upon which Gull operates its fuel retail outlets. The purchase agreements were made on the 24th August 1987. Our clients instruct us that their investigations show there is insufficient asset backing to support the consideration. A number of the representations made to our client which lnduced the contract have been found not to be true. These revelations alone have placed

obstacles in the way of our

clients’

financial

arrangements.

Our clients are doing what they can to resolve the

situation and are striving to

complete

their

investigations. At this stage it 1s becoming clear that our client will have their remedies at law: we cannot however commit our client to any course of action at present and they are currently considering their

position. A decision awaits the final outcume of the investigation. Our clients’ position should be formulated within the next few working days.

You will be aware that Gull have commenced proceedings

on the Agreement

against

our

client,

claiming

entitlement to rescind: that entitlement is, f o r the

reasons set out

above, and for reasons we wlll not

detail here, hotly disputed."

On 18 September, having received a copy of the letter to the Stock Exchange, the applicant's solicitors wrote back to the solicitors for the purchasers contendlng that the statements made in the letter were totally untrue and that the purchasers'

inability to settle had nothing to do with any allegedly untrue

representations made by the vendors.

The letter went on to contend that from discussions

which had taken place both with the purchasers, their solicitors and their financiers, Rothwells Llmited, it was clear that the purchasers' inability to settle was due solely to their inability

to raise finance. That, it was said, was the first occasion upon

which the solicitors for the vendors had been made aware of any

alleged misrepresentation by their client.

Now, there is some support for that contentlon in the letter of 14 September from Northmore, Hale, Davy & Leake to Robinson Cox, which, on the face of it, plainly contemplates that the purchasers were intending to proceed to settle and that it was

merely a matter of arranging appropriate finance

wlth Rothwells.

In the letter of response of 18 September, Robinson Cox

sought from Northmore, Hale, Davy & Leake, a retraction of the letter to the Stock Exchange together wlth an undertaking from the

purchasers and their solicitors not to repeat the statements made

in the letter or any similar statements and indicating that they

had instructions to commence proceedings under s.52 oE the Trade

Practices Act.

The letter also put the solicitors on notice that the vendors would seek an in~unction	later on the same day restraining
publication of the letter.

afEidavit in support of the claim for

interlocutory relief, Malcolm Ian Green, a director of Gull Petroleum says, at para. 18, that he was personally involved in all negotiations between the Gull parties and the Povey parties both before and after the settlement date.

He contends that it was a basis of the negotiations between Gull and Povey which resulted in the agreements being executed, that the Gull parties were not prepared to make any representations concerning the viability or otherwise of the Gull business. Apart from minor matters the only statements made by the representatives of the Gull parties concerned the number of sites operated by Gull Petroleum, the volumes of sales of petroleum products in terms of lltreage from such sites, the number of propertles in which the Gull business held leasehold and freehold interests respectively.

9 .

He also says

that during negotiations a representative

of Povey was given access to the books and records of Gull to satisfy Povey of the accuracy of the representations concerning those specific matters and vigorously disputed any suggestion that there had been any misrepresentation made by Gull concerning any of the matters, the subJect of the agreement.

He says that, the agreements now having been termlnated, Gull is anxious to be able to sell the Gull buslness to any other lnterested phrchaser and contends that any publication of statements concerning misrepresentations by Gull in its negotiations with Povey would be substantially pre~udiclal to the business of Gull and that any statement that the consideration

expressed

in the agreements with Povey is not correct, would

substantially deflate the price which might be obtained for the

sale of the Gull business.

He went on to deny that the total purchase price In the agreements was not represented by the value of the assets of the business of Gull.

The injunctive relief claimed on the applicatlon would restrain the respondents, including the Australian Stock Exchange (Perth) Limited, from further publicatlon of the letter of 17 September, the publication of any statement whether oral or in

writing

in terms slmilar

to the letter and the publication,

whether orally or in writing, of any statement alleging

10.

misrepresentations to the first respondents by the vendors of the

business conducted by the applicant.

I understand, although it is not clear from the terms of

the application, that the claim for interloctury relief would

reflect the claim for substantive and final relief, albeit for a

shorter period.

It has been brought on before th is Court at very sh

ort

notice Indeed. The first respondents, who appear to answer the claim, have not been in a position to properly mount a response to the evidentiary material that has been adduced on behalf of the applicant.

Any observations therefore, and findings of fact which I make in connection with this claim are provisional and purel.,, Cor the purpose of the interlocutory relief. They depend, as is obvious, upon material put before me at very short notice, some of which would probably not be admissible at a final hearing.

For the purposes, however, of determining whether or not to grant the relief sought on an interlocutory basis, the usual tests require me to be satisfied that there is a serious question to be tried and that the balance of convenience favours the grant of the relief sought. To some extent those two questions are not independent. The strength of the case demonstrated by the applicant may have some bearlng upon the extent to which a marked

1 1 .

balance of convenience would be required to ~ustify	the grant of
the relief.

In my opinlon, the appllcant has demonstrated that there

is a serious question to

be tried as to whether or not the

statements contained in the letter of 17 September 1987 to the Stock Exchange are misleading or deceptive. I am satisEied also that there is a serlous question to be tried as to whether those statements are made in trade and commerce and made by a trading corporatlon within the meaning of that term in s.52 of the Trade Practices Act.

Mr Stone makes the point on behalf of the respondents,

that the letter was written purely as a result of the request

contained in the letter of 17 September from the solicitors for

the vendors,

and further says that neither his firm nor its

clients have any Intention of repeating the statements contained in that letter, sub~ect to any requirements that might be imposed in that regard by the Stock Exchange.

Further, it is the case that the Stock Exchanqe itself, which is named as second respondent 1n these proceedings, has given no indication of whether or not it intends to publish the	3
letter.

Mr Nelson, who gave short oral evidence,

stated that he

had spoken with an employee of the Stock Exchange who indicated

12.

that no decision had been made as to whether the terms of the

letter would be published.

Some problem seems to arise

in that

regard out of

the fact that the letter does not appear on the

letterhead of a listed company, but rather under the name of its

solicitors.

That is a decision which would be made by the manager of the relevant section of the Stock Exchange some time on Monday, he not being at the Stock Exchange today.

I do not think that the fact that the letter was sent in response to the request made by the solicitors for the applicant impinges on the question whether or not there is a serious question to be tried, nor do I think it impinges on the balance of convenlence.

On the face of it, the request made by the applicant was

for a corrective statement in relation to the progress of the

position with respect to the contract to purchase the Gull business and the forfeiture oE the deposit. It would not be far- fetched to infer that the applicant and its solicitors were not contemplating that the letter would be written asserting misrepresentation on the part of the applicant and inadequate asset backing for the considerations proposed in the agreement.

A s to the question of the risk of repetition of the

allegations contained in the letter, I have regard to sub-s.80(4)

13.

of the Trade Practices Act which provldes

in respect of the

Court's power to grant in~unctions,

and I take It a? applicable

also to the power of the court to grant Interim ~n~unctions	under
that provision:-

" ( 4 )

The power of the Court

to grant an in~unction

restrainlng a person Erom engaging in conduct may be

exercised -

(a)

whether or not

it appears to the Court that the

person lntends to engage again, or to continue to

engage, in conduct of that kind:

(b)

whether or not the person has previously engaged in conduct of that kind: and

(c)

whether or not there is an imminent danger

substantial damage to any person if the first-mentioned person engages in conduct of that kind."

On the materials presently before me, and on a provisional basis, I am prepared to infer that there is a risk and the basis for an inference that the purchasers intended that the content of the letter of 17 September should be made publlc and that in the ordinary course there is a significant likelihood that

the second respondent

will publish or make available to the public

that letter or its contents.

In the circumstances, therefore, I do not think that the statement from the bar table, albeit, that I accept Its

correctness as a reflection of the intentions of the purchasers'

solicitors and the instructions they have from the purchasers, is

a basis f w refusing to grant the injunctlon at this time. Of

.,+&

<h'?

c i

14.

course, Elr Stone has indicated from the bar table, and he was limited by the constraints of time within which he had to prepare for this matter, that his firm wss actlng upon instructions and had some basls or had discerned some basis, For the allegations made in the letter.

I think, as I indicated to him earlier, that I can and would be prepared to infer that his flrm acted upon that basis and I would be prepared to go further for the purposes of this application and accept that his firm had satlsfied Itself that there was some basis for the alleqations contained in the letter. But that does not, in the end, deflect me Erom the exercise of my discretion in favour of the applicant having regard to the determination that there is a serious question and that i t is plain, in the circumstances, that the balance of convenience will favour the grant of interlocutory relief.

I propose, however, that the grant

of interlocutory

relief should be as short term as is practicable in the circumstances, particularly having regard to the obligations of the second respondent to the public and to the fact that the

second respondent has not been served with the application and has

not had an opportunity to put its position before me today.

The relief that I will grant will only be granted until 4 . 3 0 pm on Monday and I will list the matter for further mention at 2.15 on Monday.

15.

I propose to make orders

which reflect broadly the terms

of the in~unctlve relief claimed in the application, but it will

have to be cast in the form which is suitable to interlocutory relief and I do so on the basis of the undertaking as to damages

signed for and on behalf of the applicant whlch	is dated 18
September 1987 and placed on the file.

I certify that this and the preceding

fourteen (14) pages are a true copy of the Reasons for Judgment of His Honour Justice French.

Associate:

~YLJ-L

Counsel for the Appllcant: Mr S. Archer with Mr C. Colvin

Solicitors for the

Applicant: Messrs. Robinson Cox

Counsel for the First Respondents: Mr D. Stone with Mr R. Mullins Solicitors for the First Respondents: Messrs. Northmore, Hale, Davy & Leake

Date of Hearing:

18 September 1987

Date of Judgment: 18 September 1987

[1987] FCA 706

18 Sep 1987