Healthscope Limited v Symbion Health Limited

[2009] NSWCA 191

New South Wales

Court of Appeal

CITATION:	Healthscope Limited v Symbion Health Limited [2009] NSWCA 191
HEARING DATE(S):	9 June 2009
JUDGMENT DATE:	9 July 2009
JUDGMENT OF:	Allsop P at 1; Giles JA at 2; Young JA at 62
DECISION:	Appeal dismissed with costs.
CATCHWORDS:	CONTRACTS - agreement on payment of "break fee" in certain events - some events involved an announcement "prior to the date of" a meeting - meeting convened but not held - whether contract meant the date for which the meeting was convened or the date on which it was held - construction of one-off provisions - no question of principle.
CATEGORY:	Principal judgment
CASES CITED:	Idameneo (No 123) Pty Ltd v Symbion Health Ltd [2007] FCA 1823; (2007) 165 FCR 19.
PARTIES:	Healthscope Limited - Appellant Symbion Health Limited - Respondent
FILE NUMBER(S):	CA 40310/08
COUNSEL:	B W Walker SC & J R J Lockhart - Appellant T F Bathurst QC & S M Nixon - Respondent
SOLICITORS:	Allens Arthur Robinson - Appellant Mallesons Stephen Jaques - Respondent
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 50025/08
LOWER COURT JUDICIAL OFFICER:	Hammerschlag J
LOWER COURT DATE OF DECISION:	1 September 2008
LOWER COURT MEDIUM NEUTRAL CITATION:	Healthscope Limited v Symbion Health Limited [2008] NSWSC 893

CA 40310/08
SC 50025/08

ALLSOP P
GILES JA
YOUNG JA

Thursday 9 July 2009

HEALTHSCOPE LTD v SYMBION HEALTH LIMITED

Judgment

1 ALLSOP P: I agree with Giles JA.

2 GILES JA: The appellant (“Healthscope”) claimed from the respondent (“Symbion”) $19.575 million as a “break fee” payable under a Transaction Implementation Deed (“the Deed”) made between them. The parties were agreed that entitlement to the break fee turned on whether “announced prior to the date of the Symbion Health General Meeting” in cl 13.9(a)(iii) of the Deed meant prior to the date for which the meeting was convened (“the Healthscope meaning”), or prior to the date on which the meeting was held (“the Symbion meaning”).

3 The trial judge, Hammerschlag J, held that the latter was the correct meaning, with the result that the break fee was not payable: Healthscope Ltd v Symbion Health Ltd [2008] NSWSC 893.

4 In my opinion, his Honour came to the correct conclusion. The appeal should be dismissed.

The approach to construction of the Deed

5 There was no dispute over the approach to the construction of the Deed. The parties implicitly accepted the trial judge’s brief statement of governing principles -

“56 The meaning of words used in the Deed is to be determined by what a reasonable person would have understood them to mean. This requires consideration of the language used, the surrounding circumstances known to the parties, the purpose of the transaction and the objects which it was intended to secure: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179; International Air Transport Association v Ansett Australia Holdings Ltd (Subject to Deed of Company Arrangement) (2008) 212 ALR 47 at [8].

57 The whole of the instrument has to be considered. Preference is given to a construction supplying a congruent operation to the various components of the whole of an instrument: Wilkie v Gordian Runoff Limited (2005) 221 CLR 522 at 529.

58 If the words used are unambiguous, the Court must give effect to them. If the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust: Australian Broadcasting Commission v Australasian Performing Right Association Limited (1973) 129 CLR 99 at 109.”

6 The Deed was a long and complex document, plainly carefully and intricately crafted by the parties’ lawyers. The circumstances in which it was entered into are described, and relevant provisions are set out, in the trial judge’s reasons. I will not again set provisions of the Deed out at length.

Background to the Deed

7 Symbion owned businesses providing health, diagnostic and “wellness” services. Through a subsidiary, they included pathology, medical centre and diagnostic imaging businesses (“the diagnostic businesses”).

8 In December 2006 Primary Health Care Ltd (“Primary”) made a proposal to Symbion for “investment in” it, which the information in the appeal papers does not further elucidate. In January 2007 Symbion responded that it did not consider that the proposal was in the best interests of its shareholders. In February 2007 the proposal and the response were publicly announced. The proposal did not proceed.

9 In May 2007 Symbion and Healthscope announced a proposed transaction whereby Healthscope would acquire all the shares in Symbion for a combination of cash and Healthscope shares. The acquisition would be via a scheme of arrangement, and Symbion’s pharmacy and consumer businesses would then be sold to a third party.

10 In June 2007 Sigma Pharmaceutical Ltd (“Sigma”) announced a formal bid for Symbion’s pharmacy and consumer businesses. Healthscope made a counter-proposal: again, the information in the appeal papers does not provide any details. Symbion announced that it considered the counter-proposal superior to the Sigma bid. Sigma announced that it remained interested in acquiring the businesses.

11 In September 2007 the Healthscope counter-proposal, it seems still involving the acquisition of all the shares in Symbion and subsequent sale of the pharmacy and consumer businesses to the third party, went to a meeting of shareholders. It had Symbion’s recommendation. However, it did not receive adequate votes, according to a Symbion announcement because Primary voted its 20 per cent shareholding in Symbion against the proposal.

12 Symbion and Healthscope then entered into discussions with a view to an alternative transaction. Primary announced to the ASX that it continued to consider its options in relation to investment in Symbion, and Symbion announced in response that anyone, including Primary, could put a proposal to it and any detailed proposal would be considered.

13 On 8 October 2007 Symbion and Healthscope entered into the Deed. It embodied the terms of a proposed transaction under which Healthscope would acquire the subsidiary through which Symbion owned the diagnostic businesses, called in the Deed the Diagnostics Transaction, in return for shares in Healthscope. Symbion entered into another deed with a third party whereby the third party would acquire all the shares in Symbion after the subsidiary was sold to Healthscope.

The break fee

14 In cl 13.8 of the Deed the parties agreed upon payment of break fees, said to represent reasonable compensation for the costs incurred in relation to the original transaction and the Diagnostics Transaction. The costs were described as advisory costs, costs of management and directors’ time, out of pocket expenses and opportunity costs. A break fee was payable by Symbion in the circumstances set out in cl 13.9, and a break fee was payable by Healthscope in the circumstances set out in cl 13.10. The break fee was the same in either case, “an amount equal to $19.575 million”.

15 It was common ground that the break fees were not in the nature of liquidated damages. The circumstances in which they could become payable included where the Deed had been terminated for particular breaches, but also where there was no breach but the Diagnostics Transaction otherwise did not proceed to completion. If the Deed was terminated, cl 15.3 provided that cll 13.9 and 13.10 survived the termination, but that did not enlarge the circumstances in which the break fees could become payable: that is, termination was not a bar to a break fee having become or becoming payable.

16 By cl 13.11, the break fees were not payable if a court or the Takeovers Panel determined, in substance, that there would thereby be illegality or breach of duty or the break fee was unenforceable. A Federal Court challenge to the Deed so far as providing for payment by Symbion of a break fee, mounted by Primary as 20 per cent shareholder (through a subsidiary) on the ground amongst others of breach of directors’ duties, did not succeed: Idameneo (No 123) Pty Ltd v Symbion Health Ltd [2007] FCA 1823; (2007) 165 FCR 19. It was not in contest in the present case that cl 13.9()(iii) should be given effect according to its terms.

17 Healthscope’s claim under cl 13.9(a)(iii) should be seen as part of cl 13.9 as a whole. Clause 13.9(a) refers to announcement prior to “the date of the Symbion Health General Meeting” also in cl 13.9(a)(i), and should be set out in full -

“ 13.9 Symbion Health Break Fee
(a) Subject to clauses 13.9(c) and 13.11(a), Symbion Health must pay Healthscope the Symbion Health Break Fee in accordance with clause 13.9(b) without withholding or set off if:
(i) a Superior Symbion Health Proposal is announced prior to the date of the Symbion Health General Meeting and is publicly recommended by the Symbion Health Board;
(ii) any director of Symbion Health fails to recommend or publicly changes or withdraws his or her recommendation of the Diagnostics Transaction, or publicly recommends a Superior Symbion Health Proposal;
(iii) a Competing Proposal is announced prior to the date of the Symbion Health General Meeting and is completed at any time prior to the first anniversary of the date of this deed and, as a result, a Third Party:

A. acquires control of Symbion Health or the Symbion Health Group within the meaning of section 50AA of the Corporations Act (or acquires an equivalent shareholding or economic interest in Symbion Health pursuant to the implementation of a dual-listed company structure or a reverse takeover);

B. directly or indirectly acquires, has a right to acquire or otherwise acquires an economic interest in, all or a significant part of the Diagnostics Businesses;

C. acquires control of the Diagnostics Businesses or any of the Diagnostics Entities within the meaning of section 50AA of the Corporations Act;

D. directly or indirectly acquires, merges with, or acquires a significant shareholding or economic interest in any of the Diagnostic Entities or all or a significant part of the Diagnostic Businesses, whether by way of takeover offer, scheme of arrangement, shareholder approved acquisition, capital reduction, share buy-back, sale or purchase of assets, joint venture, reverse takeover, dual-listed company structure, recapitalisation, establishment of a new holding company for the Symbion Health Group or any of the Diagnostics Entities or other synthetic merger or any other transaction or arrangement; or
(iv) Healthscope terminates this deed in accordance with clause 15.1(b), 15.1(e)or 15.1(f).

(b) Symbion Health must pay Healthscope the Symbion Health Break Fee within 5 Business Days after receiving a written notice from Healthscope setting out the relevant circumstances and requiring payment of the Symbion Health Break Fee.

(c) Despite any other term of this deed:

(i) the Symbion Health Break Fee will not be payable to Healthscope if Completion of the Diagnostics Transaction occurs notwithstanding the occurrence of any event in clause 13.9(a);

(ii) the Symbion Health Break Fee is only payable once;

(iii) the Symbion Health Break Fee will not be payable to Healthscope if:

A. the value of the Consideration Shares is below the assessed valuation range of the Diagnostics Businesses (assuming completion of the Recapitalisation Steps), excluding from that valuation range the impact of any Competing Proposal, set out in the Symbion Health Diagnostics Independent Expert’s Report (including in any update to such report, other than any update which is prepared solely as a result of the announcement of a Superior Symbion Health Proposal or a Competing Proposal or any public recommendation of a Superior Symbion Health Proposal or a Competing Proposal by any director of Symbion Health);

B. the Healthscope VWAP is less than $5.30 (or if the Symbion Health General Meeting is not held, the value which would have been the Healthscope VWAP, if the Symbion Health Meeting had been held on the date on which it was first scheduled to be held, is less than $5.30), and (unless this deed has been otherwise terminated prior to that date) Symbion Health terminates this deed pursuant to clause 15.2(f) on or before the date that is 2 weeks after Symbion Health becomes entitled to terminate this deed pursuant to that clause; or

C. Symbion Health is entitled to terminate this deed under clause 15.2(b), 15.2(d), 15.2(e), 15.2(f), 15.2(g), 15.2(h), or 15.2(i).
(d) For the avoidance of doubt the Symbion Health Break Fee will not be payable merely by reason that the Symbion Health Resolutions are not approved by Symbion Health Shareholders at the Symbion Health General Meeting.”

What happened

18 For cl 13.9(a)(iii), it was necessary that a Competing Proposal be “announced prior to the date of the Symbion Health General Meeting” and that the Competing Proposal be thereafter completed within the time and with one of the results stated in the sub-clause. A Competing Proposal was a transaction proposed by a third party whereby, in an inaccurate summary, it would acquire a significant interest in Symbion or its businesses. In short, a Competing Proposal was announced prior to the date for which the Symbion Health General Meeting was convened, but the Diagnostics Transaction was by agreement called off for failure of a condition precedent and the meeting was not held. The Competing Proposal was thereafter duly completed. More detail follows.

19 Clause 4.1 of the Deed provided that the obligations to complete the Diagnostics Transaction were subject to a great many conditions precedent. One was that there were particular class rulings (cl 4.1(m)) and a particular private ruling (cl 4.1(n)) by the ATO in relation to the taxation treatment of what was to occur in the implementation of the transaction. Another was that Symbion’s shareholders approved resolutions for entry into and implementation of the transaction (cl 4.1(a): the “Symbion Health Resolutions”). Symbion agreed to use its best endeavours to ensure that the conditions precedent were satisfied (cl 4.2(b)(ii)), and to take all reasonable steps necessary to convene the meeting of its shareholders and to propose the Symbion Health Resolutions (cl 7.2).

20 On 26 October 2007 Symbion convened an extraordinary general meeting of shareholders, to be held at 10.30 am on 30 November 2007 to consider and vote on the Symbion Health Resolutions.

21 On 8 November 2007 Primary announced a cash offer for the shares in Symbion. This was a Competing Proposal. Symbion publicly advised its shareholders to reject the offer.

22 On 27 November 2007 Symbion announced that the ATO private ruling had been adverse to the required ruling, and that for that reason the proposed acquisition of the diagnostic businesses would not proceed.

23 The Deed provided for consultation and ultimately that Symbion or Healthscope could unilaterally terminate if a condition precedent became incapable of satisfaction (cl 4.5). The process was not followed. Instead, also on 27 November 2007 Symbion, Healthscope and the third party entered into a Termination Deed, under which Symbion and Healthscope agreed that the Deed was terminated and ceased to have effect and be binding, save for certain provisions including the break fee provisions. This was treated in the proceedings as if there had been termination of the Deed in accordance with its provisions; neither party submitted that the fact that termination was by agreement affected whether the break fee claimed by Healthscope was payable.

24 Also on 27 November Symbion cancelled the meeting convened for 30 November 2007. The Court questioned how the meeting could be cancelled, but it remained common ground that it had been cancelled and the appeal should be determined on that basis. The meeting was not held.

25 Primary pursued its Competing Proposal. In February 2008 it announced that it had acquired a relevant interest in more than 50 per cent of Symbion’s shares. Symbion announced that it recommended acceptance of the Primary bid. Within the time and with a result stated in cl 13.9(a)(iii), the Competing Proposal was completed.

26 The Diagnostics Transaction did not proceed to completion, but not because of termination for breach but because of termination when a condition precedent to completion was not satisfied. Announcement of the Competing Proposal was not an event with contractual effect in the termination.

27 Hence the question on which the parties agreed. Healthscope accepted that, if “announced prior to the date of the Symbion Health General Meeting” in cl 13.9(a)(iii) had the Symbion meaning, the break fee was not payable because the meeting was not held. Symbion accepted that, if “announced prior to the date of the Symbion Health General Meeting” had the Healthscope meaning, the break fee was payable because the Competing Proposal was announced prior to the date for which the meeting was convened.

Consideration

28 The trial judge summarised and dealt with the parties’ submissions as to the meaning of “announced prior to the date of the Symbion Health General Meeting” over some seventeen pages. On appeal the written submissions as to the meaning, in part addressing the trial judge’s reasons and in part presenting different considerations, occupied some 28 pages. More was said in oral submissions. The eleven words were given extensive attention. I have had regard to all the arguments, but do not propose to recount all that was said for and against the respective meanings. For the following reasons, the Symbion meaning is to be preferred.

29 The definitions in the Deed included -

“’Symbion Health General Meeting’ means the meeting of Symbion Health Shareholders to be convened by Symbion Health as required by clause 7.2.”
“’Symbion Health Meeting Date’ means the date that the meeting convened by Symbion Health in accordance with clause 7.2 for the purposes of Symbion Health Shareholders approving the Symbion Health Resolutions is held (or, if the meeting is opened and then adjourned, the date on which the voting on the Symbion Health Resolutions takes place (or is concluded, if later).”

30 Clause 7.2(e) provided that Symbion must -

“(e) take all reasonable steps necessary to convene the Symbion Health General Meeting in accordance with Symbion Health’s constitution, the Corporations Act, and the Listing rules, so that the Symbion Health Meeting Date occurs substantially in accordance with the Timetable.”

31 The timetable was an “indicative timetable” in a schedule to the Deed or such other indicative timetable as the parties agreed. The indicative timetable date for the meeting was 30 November 2007.

32 The Symbion Health General Meeting, although for the future, was an event. It was identified by reference to its convening, and the definition took up the futurity of “to be convened” in the obligation under cl 7.2(e), but it was still an event. The event had a date. The date was spelled out in the definition of the Symbion Health Meeting Date, extending to an adjourned date. The key to the date was when voting on the Symbion Health resolutions was concluded; the reference in cl 7.2(e) to the Symbion Health Meeting Date must be seen with that flexibility.

33 The words “the date of” in cl 13.9(a)(i) and (iii), rather than the words “the date for”, were apt for the date of the event. They most naturally referred to the date on which the meeting was held, rather than the date for which it was convened. If the definition of the Symbion Health General Meeting be fed into cl 13.9(a)(i) and (iii), the expanded words were “announced prior to the date of the meeting of Symbion Health Shareholders to be convened by Symbion Health as required by clause 7.2”. The date of the event remained, and was given some support by the contrast with the futurity of “to be convened” as part of the identification of the event. A meeting was to be convened; the date of that meeting was the date on which it was held.

34 The defined phrase “Symbion Health Meeting Date” was used frequently in the Deed, for example in provisions that many things were to exist or occur or not occur “before 8.00 am on the Symbion Health Meeting Date”. One instance was the condition precedent that the ATO rulings were gazetted or issued before that time on that date (cl 4.1(m), (n)).

35 The Deed also used the words “the date on which the Symbion Health General Meeting was originally convened by Symbion Health to be held” (cl 1.1, definition of Healthscope VWAP Period), “the date on which the Symbion Health General Meeting has been scheduled to be held” (cl 4.7(a)(i)A, cl 4.7(a)(ii)); “the date on which [the Symbion Health Meeting [sic]] was first scheduled to be held” (cl 13.9(c)(iii) B); and “the date on which [the Symbion Health General Meeting] was scheduled to be held” (cl 15.2(f)).

36 The date on which a meeting was scheduled to be held is the same concept as the date for which it was convened. The distinction between the futurity of that concept and the actuality of the concept of the date on which a meeting was held, as found in the definition of the Symbion Health Meeting Date, is evident within the Deed.

37 The words “the date of the Symbion Health General Meeting” were used in the Deed only in cl 13.9(a)(i) and (iii). Complete congruity in language can falter in a long and complex document, and there were other signs that it faltered in the Deed. Whether accidentally or intentionally, cl 13.9(a) used words not found elsewhere: which concept was intended? In themselves or with the addition of the definition of the Symbion Health General Meeting, the words more naturally attract the concept the date on which the Symbion Health General Meeting was held. Had the parties meant to refer to the future convened date rather than the actual held date, the Deed could simply have provided that the Superior Symbion Health Proposal or the Competing Proposal be announced prior to “the date on which the Symbion Health General Meeting is scheduled to be held”. This has some significance when the Deed elsewhere uses those words.

38 The Deed could also have used the definition of the Symbion Health Meeting Date, and simply provided in cl 13.9(a)(i) and (iii) that the Superior Symbion Health Proposal or the Competing Proposal be announced “prior to the Symbion Health Meeting Date”. That it did not might suggest that the date was not, as that definition provided, the extended date that the meeting convened in accordance with cl 7.2 was held. Against that, however, cl 1.2(c) of the Deed provided that, if a word or phrase was given a defined meaning, “any other part of speech or grammatical form of that word or phrase has a corresponding meeting”. The phrase “date of the Symbion Health General Meeting” could readily be seen as a different grammatical form of the phrase “Symbion Health Meeting date”, so that the effect of the latter phrase was intended. Healthscope’s submission that the phrases differed because the definition of the Symbion Health General Meeting included “to be convened” falls away if, as I have said above, the definition referred to an event identified by reference to its convening.

39 Healthscope’s submissions included that the Symbion meaning failed to allow the flexibility of adjournment of the meeting date or conclusion of voting on a subsequent date. That is not so if the grammatical equivalence be accepted. In the Symbion meaning, the date on which the Symbion Health General Meeting was held can take up that flexibility.

40 Thus far, the words used in my opinion favour the Symbion meaning. However, so far as that depends on the defined meanings, they were subject to the contrary intention appearing (cl 1.2, chapeau), and the context and purpose of the provisions and the overall operation of the Deed must also be considered.

41 Clause 13.9(a) used the phrase “the date of the Symbion Health General Meeting” twice, each time in connection with the announcement of a proposal prior to the date. It is to be expected that the phrase as twice used has the same meaning; I understand that to have been common ground. What was the point of announcement of a proposal prior to the date of the Symbion Health General Meeting?

42 Symbion agreed in the Deed that its board would unanimously recommend that shareholders vote in favour of the Symbion Health Resolutions (cl 11.1) and would use reasonable endeavours to procure that each of its directors announced his or her intention to vote their shares in favour of those resolutions (cl 11.2). This was subject, amongst other things, to “no Superior Symbion Health Proposal being made” (cl 11.1(a); cl 11.2(a)).

43 A Superior Symbion Health Proposal was a sub-class of a Competing Proposal. It was a Competing Proposal which in the view of Symbion’s board would, if completed, be more favourable to shareholders than the Diagnostics Transaction, or the Diagnostics Transaction and the transaction with the third party viewed in aggregate.

44 In substance, Symbion and its directors were obliged to advise shareholders to vote for the Diagnostics Transaction, except if Symbion received a better proposal. If Symbion received a better proposal, it and its directors could withdraw the advice and pursue the better offer. In that event Symbion or Healthscope could terminate the Deed (cl 15.2(c); cl 15.1(c)), but whether or not they did so the break fee could become payable pursuant to cl 13.9(a)(i). Symbion was able to act in the interests of its shareholders, but at the possible price of liability to pay the break fee.

45 The apparent reason for cl 13.9(a)(i) requiring that the Superior Symbion Health Proposal be announced prior to the date of the Symbion Health General Meeting was that it was at the meeting that the effect of the withdrawal of advice on voting would be felt. Perhaps the Symbion Health Resolutions would still be passed, and cl 13.9(c)(i) precluded payment of the break fee if they were passed. But this view of cl 13.9(a)(i) involved, as the preferable meaning for “the date of the Symbion Health General Meeting”, the date on which the meeting was held, understood according to the definition of the Symbion Health Meeting Date. It permitted Superior Symbion Health Proposal to be announced after the date for which the meeting was convened, but before the conclusion of voting. The Symbion meaning more fully allowed for the effect on voting of receipt by Symbion of a better proposal. It would be odd if Healthscope was entitled to payment of the break fee if the better proposal was announced prior to the date for which the meeting was convened, but not if it was announced after that date but before voting was concluded.

46 Account should be taken of cl 13.9(a)(ii). It did not refer to the date of the Symbion Health General Meeting, whether the convened date or the held date. But nor was it dependent on the announcement of a proposal, although there could have been announcement of a proposal which Symbion’s board thought more favourable to shareholders than the Diagnostics Transaction. There was overlap with cl 13.9(a)(i), since public recommendation by Symbion’s board of a Superior Symbion Health Proposal would necessarily mean that some directors of Symbion publicly recommended it.

47 The relationship between the separate but overlapping provisions is not entirely clear, and it should be recognised that complete congruity in drafting can also falter in a long and complex document. In most of the circumstances within cl 13.9(a)(ii) Healthscope could terminate the Deed (cl 15.1(c)), but Symbion could not (cf cl 15.2(c)). Healthscope could become entitled to payment of the break fee pursuant to cl 13.9(a)(ii), rather than cl 13.9()(i), if a Superior Symbion Health Proposal was announced after the date for which the meeting was convened but before voting was concluded and a director withdrew advice in favour of the Diagnostics Transaction. To that extent, what I have said loses some force. But it is difficult to see that cl 13.9(a)(ii) was intended to complement cl 13.9(a)(i) in this way. It dealt with other occurrences, and the sub-clauses were overlapping rather than complementary and each must be given its own operation.

48 There is this common basis, in the two sub-clauses, that the operation of both would by the break fee compensate for wasted costs if the Diagnostics Transaction did not go ahead because a Symbion director withdrew his or her advice that shareholders vote for it. Giving cl 13.9(a)(i) the Symbion meaning better promotes that purpose. But because cl 13.9(a)(ii) did not involve the date of the Symbion Health General Meeting I do not think it can be said, as Healthscope submitted it should, that the absence of reference to holding of the meeting suggested that the holding of the meeting was not required in cl 13.9(a)(i).

49 Clause 13.9(a)(iii) can not be explained in the same way as cl 13.9(a)(i). A Competing Proposal was necessarily one which the board did not consider more favourable to shareholders than the Diagnostics Transaction. Neither party was entitled to terminate the Deed because a Competing Proposal had been received or announced. Other than in cl 13.9(a)(iii), “Competing Proposal” as defined in the Deed was principally used in “lock-out” provisions to the effect that Symbion was not discussing a Competing Proposal with anyone and would not invite, initiate or engage in discussions in relation to a Competing Proposal with anyone unless Healthscope consented or it was reasonably expected that the Competing Proposal would be a Superior Symbion Health Proposal (cll 13.1-13.4). Announcement of a Competing Proposal was not likely to lead to withdrawal of advice to vote for the Diagnostics Transaction, with consequential effect on voting at the Symbion Health General Meeting.

50 There was, however, a possible effect on the meeting. On or after 5 pm on the day five business days before the day “on which the Symbion Health General Meeting has been scheduled to be held”, Symbion could put off the holding of the meeting, or hold it and adjourn it prior to voting on the Symbion Health Resolutions, if (amongst other occurrences) “a Competing Proposal has been communicated to Symbion Health” (cl 4.7). The postponement could not go beyond the End Date, which was before the year allowed in cl 13.9(a)(iii) for completion of the Competing Proposal.

51 Thus the announcement of a Competing Proposal could bring postponement of a vote on the Diagnostics Transaction, although the meeting still had to be held. Perhaps the shareholders would reject the Diagnostics Transaction, or perhaps there would be completion of the Competing Proposal although the shareholders approved the Diagnostics Transaction. To the extent that it was appropriate for shareholders to have the Competing Proposal in their knowledge when voting, there was no reason to exclude from cl 13.9(a)(iii) a Competing Proposal announced after the date for which the meeting was convened but before voting was concluded.

52 The parties clearly did not wish to promote acceptance of a Competing Proposal, and the provision for payment of the break fee may have been to provide a disincentive to others – Primary and Sigma were no doubt seen as possible sources of a Competing Proposal – by an entitlement in Healthscope to $19.575 million if a Competing Proposal was made and was successful.

53 Be that as it may, there was no evident reason for announcement of the Competing Proposal prior to the date for which the Symbion Health General Meeting was convened, rather than prior to the date on which it was held. The provision for postponement in cl 4.7 referred to the date “on which [the meeting] has been scheduled to be held”, but that express futurity was not maintained in cl 13.9(a)(iii). If there was no evident reason in the reference date for the Competing Proposal which ultimately succeeded being the date for which the Symbion Health General Meeting was convened, and some point in the date being the date on which it was held so that shareholders could have it in consideration when voting, the Symbion meaning seen in cl 13.9(a)(i) can readily be given to the same words in cl 13.9(a)(iii).

54 Each party submitted that there would be anomalous consequences in giving the other’s meaning to cl 13.9(a)(i) or (iii).

55 Healthscope submitted that, on the Symbion meaning, Symbion could avoid payment of the break fee pursuant to cl 13.9(a)(i) by terminating the Deed, as it could do pursuant to cl 15.2(c) if its board publicly recommended a Superior Symbion Health Proposal, because the Symbion Health General Meeting could not then occur. But the break fee would become payable pursuant to cl 13.9(a)(ii), in their overlapping operation. Clause 13.9(a)(i) should be considered in its own right.

56 Healthscope further submitted that, on the Symbion meaning, if it terminated upon a Superior Symbion Health Proposal being announced and publicly recommended, it would lose any entitlement to be paid the break fee because the meeting could not then occur. That, however, was a matter for Healthscope. It could allow the Diagnostics Transaction to go to the Symbion Health General Meeting, and if the transaction did not proceed it would be entitled to payment of the break fee. The trouble and expense of the matter going to the meeting would be incurred, but there might be approval and completion of the Diagnostics Transaction whereby the break fee was not payable (cl 13.9(c)(i)). This would be in the interests of Symbion. Other balances could have been agreed, but this is not an anomalous balancing of the parties’ interests.

57 Symbion’s submissions looked to the relationship between announcement of another proposal, whether a Superior Symbion Health Proposal or a Competing Proposal, and non-completion of the Diagnostics Transaction because a condition precedent was not satisfied. As I have said, there were a great many conditions precedent in cl 4.1, and in fact the parties agreed upon termination of the Deed because an ATO condition precedent was not satisfied.

58 Symbion made the general submission that it was not reasonable that, if the Diagnostics Transaction did not proceed because a condition precedent was not satisfied but without a meeting at which shareholders could consider its merits, Healthscope should receive compensation for its costs through the break fee The submission does not take Symbion far. That could happen, for example, under cl 13.9(a)(ii) if a director withdrew his or her advice that shareholders vote for the Diagnostics Transaction at a time before an unfavourable ATO ruling was issued. It was not regarded by the parties as anomalous.

59 More specifically, Symbion submitted that it would be anomalous if the break fee became payable where the order of events was convening of a meeting, then termination for failure of a condition precedent, then announcement of a Competing Proposal. The fact that the meeting had been convened, it was said, was not a rational criterion for the break fee becoming payable. The criterion that there should have been a meeting was rational, because it meant that (subject to the operation of cl 13.9(a)(ii)) Healthscope did not receive the break fee when the Diagnostics Transaction did not proceed for a reason unrelated to announcement of the Competing Proposal. There is some force in this.

60 None of these considerations is conclusive. As I have said, I have had regard to all the arguments, but the matters to which I have referred support giving the words used in the Deed the Symbion meaning and I consider that is the preferable construction of the Deed.

Orders

61 I propose that the appeal be dismissed with costs.

62 YOUNG JA: I agree with Giles JA, but wish to add a few thoughts of my own.

63 First, I would note that, although it is of limited value to compare cases involving different facts and documents, the result reached by Giles JA and the primary judge are consistent with the few cases that have considered this type of problem.

64 In North British Housing Association v Matthews [2005] 1 WLR 3133, the English Court of Appeal had to consider a statute which provided that a housing association could apply for possession if, both at the date of the service of a statutory notice and at the date of hearing, eight weeks’ rent was in arrears.

65 Dyson LJ giving the judgment of the Court said at [9]:

“So what is the date of the hearing? It may be surprising that it is necessary to ask this question. But we were told during the course of argument that some district judges take the view that the date of the hearing can be the date fixed for the hearing even if on that date an adjournment is granted without a hearing taking place at all. In our judgment, this view is plainly wrong. The date of the hearing is the date when the claim is heard.”

66 Even if one tended to favour the appellant’s construction, there would be difficulties in saying that 30 November 2007 was necessarily the date of the meeting.

67 In R v Coles (1993) 31 NSWLR 550, the relevant statute provided that an accused person could elect trial by judge alone before the date fixed for the person’s trial. In the Court of Criminal Appeal, Wood J (at 553) with whom Finlay and Grove JJ agreed, held that when a case was stood out of the list and relisted, the relisting date becomes the date fixed for the person’s trial.

68 It is probably arguable that once a convening authority has convened a meeting, at least after it has communicated that decision, that that authority has power to alter or revoke the details of the meeting.

69 As Giles JA has said [23**], despite our querying, the parties adhered to their common ground that the meeting was indeed cancelled.

70 That view could be supported on the basis that no-one actually attended and met on 30 November 2007.

71 However, if it is competent for the convening authority to cancel a meeting, or even to change the date and place of the meeting, then any certainty brought about by assuming the parties meant a definite date fades away, at least to an extent.

72 Some lawyers consider that the decision of Holroyd J in Re McCracken’s Brewery Co Ltd (1899) 24 VLR 784 tells against such authority. My decision in Re Park Lane Jewellers Pty Ltd (1985) 10 ACLR 138 goes the other way. Both decisions dealt with the power of the court to alter an order convening a court convened meeting. Both decisions can be explained on the power of a court to alter its order. However, Park Lane directs itself to the problem where the meeting needs to be relocated because of physical factors.

73 In such a situation, cases such as Jackson v Hamlyn [1953] Ch 577 indicate that the problems thrown up must be dealt with in a practical way. As Upjohn J said in that case at 589:

“Fortunately, metaphysics and business men seldom meet”.

74 It is clear that, if it is found that the place where the meeting is to be held is inadequate, the Chairman, though he or she has no authority to adjourn the meeting, may validly direct that it continue at a more suitable time and place: Byng v London Life Association Ltd [1990] Ch 170. It is only commercial common sense that if this is so and, if the inadequacy of the meeting room is apparent at an early date, those with authority to convene the meeting, if there is time to give proper notice, can alter its venue as long as they do not do so to a time and place which they would have cause to believe would exclude willing potential participants.

75 In any event, as cases like Jackson v Hamlyn demonstrate, even if a meeting is scheduled for a certain date, physical factors may mean that it will not actually be held on that date or may continue on some other day, even without a resolution for adjournment.

**********