INP Consortium Ltd v Tourang Ltd

[1993] FCA 44

INP CONSORTIUM LIMITED v. TOURANG LIMITED; D. L. NICHOLL; K. W. SKINNER and
ORD MINNET SECURITIES LIMITED
No. G812 of 1991
FED No. 44
Number of pages - 5
Strike Out

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J(1)

CATCHWORDS

Strike Out - No reasonable cause of action - O.11 r.16 - breach of contract - s. 52 Trade Practices Act - estoppel - evaluation and acceptance of offers to purchase newspapers which do not comply with Broadcasting Act 1942.

Trade Practices Act 1976: s. 52

Broadcasting Act 1942

HEARING

SYDNEY, 5 February 1993

#DATE 19:2:1993

Counsel for the Applicant: F S McAlary QC and P Dowdy

Solicitors for the Applicant: Landerer and Co

Counsel for the Respondents: T F Bathurst QC

Solicitors for First Respondent: Freehill Hollingdale and Page

Solicitors for Second Respondent: Mallesons Stephen Jaques

Solicitors for Third Respondent: Clayton Utz

ORDER

THE COURT ORDERS THAT:

1. The motion of the second respondents, Mr D L Nicholl and Mr K W Skinner, be dismissed.

2. The second respondents pay the costs of the applicant of the motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

LOCKHART J The second respondents, Mr D L Nicholl and Mr K W Skinner, moved the Court to strike out paragraph 29F, and paragraphs 29H to 29Q inclusive of the second further amended statement of claim filed on 26 August 1992. The primary ground of the motion is that the paragraphs are said to disclose no reasonable cause of action against the second respondents. On the subsidiary ground, it is claimed that the paragraphs have a tendency to cause prejudice and embarrassment in the proceeding. The argument proceeded on the primary ground, and no additional arguments were put on the subsidiary ground. The motion is made pursuant to O.11 r. 16.

1. In the further amended statement of claim, which is apparently the fourth statement of claim filed by the applicant in this proceeding (I shall refer to it for convenience as the "statement of claim"), it is alleged that the second respondents are receivers to John Fairfax Group Pty Limited ("Fairfax"), appointed in 1990. It is alleged that Fairfax was the publisher of prominent newspapers in Sydney and Melbourne and that in December 1990 the second respondents as receivers of Fairfax made a general announcement that the company was to be sold and invited offers to purchase. The applicant (INP Consortium Limited) is a company formed specifically for the purpose of making a takeover offer. The first respondent, Tourang Limited ("Tourang"), also made an offer to purchase the shares in Fairfax. The third respondent is Ord Minnet Securities Limited ("Ord Minnet"), a company of stockbrokers which it is alleged at all material times was a wholly owned subsidiary of Westpac Banking Corporation Limited. Westpac holds television licences in Sydney and Melbourne. The relief sought by the applicant is damages against all respondents, including the receivers.

2. On 31 July 1992 a Judge of this Court (Foster J), on the application of the second respondents, made an order striking out paragraph 29 of the statement of claim in its then form and gave leave to the applicant to replead generally against the second respondents. Paragraph 29 still remains physically in the statement of claim in its earlier form, notwithstanding that it was ordered to be struck out by order of Foster J. It is obvious from what was said by counsel in this matter that its present retention is a mistake: it is to be treated as if it no longer exists.

3. It is necessary to set out the allegations in the statement of claim that are material for present purposes. They commence with paragraph 29A and conclude with paragraph 29Q.

4. The relevant paragraphs of the statement of claim are in the following terms:
   

"29A. The said senior debt lenders referred to in paragraph 2 hereof as at the date of the appointment of the Receivers were owed approximately $1.2 billion. 29B. At all material times after their appointment as Receivers their aim, purpose and intent was to sell and realise the assets of Fairfax for a sum which would repay and discharge the indebtedness of Fairfax to the said senior debt lenders and other creditors of Fairfax. 29C. Pursuant to and in accordance with the said aim, purpose and intent the Receivers in or about April 1991 invited prospective purchasers of the assets of Fairfax to apply for an Information Memorandum which constituted an invitation to treat in consideration of such prospective purchasers executing and entering into a Confidentiality Agreement. 29D. Further, at all material times it was well known to the Receivers that there were a number of interested prospective purchasers of the assets of Fairfax.

29E. Further, it was well known to the Receivers at all material times that any prospective purchasers of the assets of Fairfax would need to spend very large amounts of money in investigating and evaluating the business of Fairfax prior to making any offer to buy. 29F. The applicant was at all material times as was well known to the Receivers a prospective purchaser of the assets of Fairfax and executed such a Confidentiality Agreement (the terms and conditions of which it craves leave to refer to as though fully set forth herein) and in consideration therefor received a copy of the said Information Memorandum (to the full terms and effect of which the applicant will refer as though fully set forth herein) and by so providing the Information Memorandum the Receivers represented to the applicant that they were interested in receiving offers from the applicant and from rival bidders which complied with all relevant statutory and legal requirements and in particular the provisions of the Broadcasting Act 1942. 29G. By the Information Memorandum the Receivers represented that Fairfax was an extremely large and complex firm having projected total revenues of the very largest order and that any serious prospective purchaser would need to expend very large sums in order to evaluate Fairfax and the Receivers provided the Information Memorandum for the purpose of inducing prospective purchasers to expend the very large sums necessary to evaluate Fairfax. 29H. The said Confidentiality Agreement was thereafter varied by the extension contained in the letter dated 18th September 1991 of the Receivers' agent being Baring Brothers Burrows and Co. Ltd. to the applicant (to the terms of which the applicant further craves leave to refer as though fully set forth herein) and by the said letter the Receivers represented to the applicant that all prospective purchasers would be accorded equitable treatment by the Receivers in the consideration and evaluation of their respective offers to purchase and that only offers to purchase which satisfactorily complied with the relevant statutory legal requirements and in particular the provisions of the Broadcasting Act 1942 would be considered by the Receivers.

29I. In the premises it was a term of the Confidentiality Agreement as extended that all prospective purchasers would be accorded equitable treatment by the Receivers in the consideration and evaluation of their respective offers to purchase and that all offers to purchase must satisfactorily comply with relevant statutory and legal requirements and in particular the provisions of the Broadcasting Act 1942. 29J. Further in the premises it was a term of the Confidentiality Agreement as extended that in the event that the applicant made an offer to purchase the assets of Fairfax the Receivers if they accepted any other offer for such assets would not accept any offer which did not comply with relevant statutory and legal requirements and in particular the provisions of the Broadcasting Act 1942. 29K. Further, the applicant says that in the premises it was a basic assumption of the said transactions between the applicant and the Receivers that if they accepted any other offer for such assets they would not accept an offer which did not comply with relevant statutory and legal requirements and in particular the provisions of the Broadcasting Act 1942, which assumption it would be unconscionable for the Receivers to deny and which they are estopped from denying.

29L. The Receivers received three offers for the assets of Fairfax inclusive of the applicant's offer but by reason of the matters pleaded in paragraphs 6 to 25 hereof the Tourang offer did not comply with the Broadcasting Act 1942 and by accepting the Tourang offer in breach of the representations referred to in paragraphs 29F, 29G and 29H; the terms referred to in paragraphs 29I and 29J, and the basic assumption referred to in paragraph 29K the Receivers have caused loss and damage to the Applicant. 29M. Further, the Receivers in the circumstances referred to in paragraphs 1, 2, 3, 29A, 29B, 29C, 29D, 29E, 29F, 29G, 29H, 29I, 29J and 29K by their conduct represented that they would treat the prospective purchasers equitably and they would not accept any offer for the purchase of the assets of Fairfax which did not comply with the relevant statutory and legal requirements and in particular the provisions of the Broadcasting Act 1942. 29N. In reliance upon the representations referred to in paragraphs 29F, 29G, 29H, and 29M the applicant proceeded to make an offer to purchase the assets of Fairfax and spent large amounts of money in investigating and evaluating the business of Fairfax and in formulating its offer to purchase.

29O. The Receivers received the said three offers to purchase the Fairfax assets inclusive of the applicant's offer and accepted the Tourang offer which by reason of the said matters pleaded in paragraphs 6 to 25 hereof did not comply with the Broadcasting Act and which non-compliance the Receivers either were aware of or ought to have been aware of before their final acceptance or alternatively final completion of the said Tourang offer and by accepting the Tourang bid the Receivers did not treat all prospective purchasers equitably for the reason that the Tourang bid did not comply with the Broadcasting Act 1942. 29P. Further, the Receivers having made the representations referred to in paragraphs 29L and 29M had it well within their power and capacity to make good and comply with such representation but were recklessly indifferent to the fact that they had made the representations referred to in paragraph 29L and to the fact that the applicant had spent millions of dollars preparing its offer, in accepting the Tourang bid in breach thereof. 29Q. In the premises in the making of the said representations and thereafter accepting the Tourang offer the Receivers:-

(i) engaged in misleading and deceptive conduct by them and each of them;

(ii) engaged in conduct for and on behalf of the company to which they had been appointed Receivers by which conduct they aided and abetted, counselled and procured and were knowingly involved in misleading and deceptive conduct of the said company;

(iii) engaged in conduct for and on behalf of the corporations which had appointed them to be Receivers by which conduct they aided and abetted, counselled and procured and were knowingly involved in the misleading and deceptive conduct of the said corporations."

1. It will be seen from a perusal of those paragraphs of the statement of claim that the applicant pleads its case against the second respondents alleging three separate causes of action: (1) breach of contract, (2) misleading or deceptive conduct under s. 52 of the Trade Practices Act 1974 ("the Trade Practices Act"), including representations as to future matters under s. 51A of that Act, (3) estoppel (see Walton Stores (Interstate) Limited v Maher (1988) 164 CLR 387).

2. The relevant material to consider in the present motion consists of: the statement of claim; a letter of 9 September 1992 from the solicitors for the second respondents to the solicitors for the applicant seeking particulars of the material allegations in the statement of claim; a letter furnishing particulars in reply of 1 October 1992; and, a letter dated 18 September 1991 from Baring Brothers Burrows and Co Limited to a company known as Independent Newspapers PLC of Ireland which it appears is the company that promoted or controlled the applicant directly or indirectly. The writer of the lastmentioned letter acted as agent for the second respondents in the sale of the issued capital or assets of Fairfax and its subsidiaries when in receivership. The other relevant documents are what is described as the Information Memorandum volume 1 dated April 1991 which was sent by the agents for the second respondents to persons interested in making offers of acquisition, and a document referred to as the Confidentiality Agreement.

3. There is also in evidence press clippings and correspondence tendered by the applicant on the hearing of the motion. I admitted them subject to relevance and objection. Having read them, I find that the press clippings are irrelevant for present purposes. I therefore reject them. Some of the correspondence is relevant but, with the exception of a few letters, it is of little probative value for present purposes.

4. The second respondent intended to sell and realize the assets of Fairfax or the issued share capital of Fairfax for a sum which would at least repay and discharge the indebtedness of Fairfax to certain of its creditors. City Security Limited is a secured creditor of Fairfax which appointed the second respondents as receivers and managers of Fairfax on 10 December 1990. In about April 1991 the second respondents invited prospective purchasers of the shares or assets of Fairfax to apply for the Information Memorandum which they received, provided they entered into the Confidentiality Agreement. The Confidentiality Agreement sought to ensure that a party interested in considering the acquisition of the shares or assets of Fairfax would keep to itself material in the Information Memorandum which was confidential to the affairs of Fairfax and the second respondent.

5. Counsel for the second respondents accepted the high threshold to be crossed before they could succeed in the motion to strike out. The relevant principles are set out in the well known cases of Dey v Victorian Railways Commissioners (1949) 78 CLR 62 and General Steel Industries v Commissioner for Railways (NSW) 112 CLR 125. The motion should succeed only where the absence of cause of action is clearly demonstrated. It is only in a very clear case that the jurisdiction to strike out should be exercised. Reference was also made by counsel to subsequent decisions of the High Court and other courts, to which it is not necessary for me to refer; the principles are well known.

6. Counsel for the second respondents argued that the case pleaded against them was manifestly groundless and would inevitably fail, whether based on contract, misleading or deceptive conduct or equitable estoppel.

7. Paragraph 29G is curiously phrased, but it became common ground in the course of argument that it should be read as if it alleged in its last few lines that the second respondents provided the Information Memorandum knowing that prospective purchasers would spend large sums of money in their evaluation of Fairfax.

8. The critical allegation, in whichever of the forms it is pleaded by the applicant, is whether the second respondents, in considering and evaluating offers to purchase, would only consider and evaluate offers which satisfactorily complied with the relevant statutory legal requirements, in particular the provisions of the Broadcasting Act 1942, and would not accept any offer that did not comply with those requirements. The foundation of the case for the applicants is the letter of 18 September 1991 from the agents for the second respondents to Independent Newspapers PLC. I have carefully considered this letter, together with all the other material mentioned earlier. Page 1 of the letter commences with this paragraph.
   

"This letter is intended to set out the procedures which will govern the submission of written proposals for the acquisition of the John Fairfax Group Pty Limited (Receivers and Managers Appointed) ('Fairfax') and all of its subsidiary companies in receivership (together 'the Fairfax Group') or the assets of the Fairfax Group. These procedures have been developed to ensure the equitable treatment of all prospective purchasers. They are also designed to determine which of the prospective purchasers should proceed to final, legal due diligence of the Fairfax Group with the aim of concluding a definitive agreement with the Receiver of the Fairfax Group."

1. On page 2 of the letter under the heading "Contents of Written Proposals" the following appears:
   

"All submissions shall address each of the following issues:

...

3 Sources of Equity and Quasi-Equity Finance:

...

In addition, the proposal should contain a statement identifying whether or not the bidding vehicle will, upon completion of the transaction, comply with the foreign ownership provisions of the FATA, the cross-media ownership requirements of the Broadcasting Act and s50 of the Trade Practices Act. If the bidding vehicle will not comply with any of these, the proposal should address what steps will be taken to ensure that the transaction contemplated in the proposal will be allowed to proceed by the relevant authority."

1. On page 3 under the heading "Rules for Submission of Written Proposals" the following is written:
   

"The following rules apply for the submission of proposals:

...

. Only proposals which are specific as to amount of consideration will be considered. Any proposal which contains provisions which trigger an automatic increase in the consideration offered depending upon the consideration offered by others will not be considered. ...

. Barings and the Receiver expressly reserve the right, without giving reasons therefore, at any time and in any respect, to amend or terminate these procedures, to terminate discussions with any or all prospective purchasers, to reject any or all proposals, or to negotiate with any party with respect to a transaction involving the Fairfax Group."

1. On page 4 of the letter under the heading "Miscellaneous" the following appears:-
   

"Neither this letter nor any proposal submitted by you shall be regarded as an offer capable of acceptance giving rise to an enforceable agreement. No agreement concerning the sale of any of the shares in or assets of the Fairfax Group shall arise or be deemed to exist between you and the Receiver unless and until a definitive agreement has been executed and delivered. Unless and until such a definitive agreement is executed neither Barings, the Receiver nor Fairfax have any obligation of any kind whatsoever to you in relation to any proposal to acquire any of the shares in or assets of the Fairfax Group. If you ultimately enter into a definitive agreement with the Receiver your rights against the Receiver, Barings and Fairfax will be strictly limited to the terms provided in that agreement. In this regard we wish to remind you that all information that Barings, the Receiver or Fairfax have provided to you in the past and all further information that they might from time to time provide to you, in any way relating to the affairs of the Fairfax Group has been and will be (as the case may be) provided to you subject to the terms of the Confidentiality Agreement which you have entered into with Barings, the Receivers and Fairfax."

1. It is, in my opinion, an arguable question as to whether the second respondents through their agent were entitled to consider and evaluate or accept an offer to purchase the shares or assets of Fairfax which did not comply satisfactorily with the relevant statutory legal requirements, in particular the provisions of the Broadcasting Act 1942. It is reasonably open to argument that the relevant documents give rise to a contract, representation or estoppel of the kind pleaded in the statement of claim in any one of the alternative forms appearing therein. I say nothing as to the degree of strength of the case. But it is for the second respondents to establish that it is a plainly untenable case, and I am not persuaded that the tests enunciated in the cases of Dey and General Steel have been satisfied by the second respondents.

2. It is high time that this case was advanced to the point where it approaches a final hearing. The arguments of the kind which the second respondents through their counsel put to the Court on the hearing of this motion would be more appropriately put at the final hearing. It does not strike me as a case, at least so far as the second respondents are concerned, that would involve undue length or complexity, provided any question of quantifying damage (if any) is severed from the main issues of liability. There are some cases where it is right that they be brought to a halt as soon as possible and before trial. I do not think this is such a case.

3. Accordingly the motion of the second respondents is dismissed. I order the second respondents to pay the costs of the applicant of the motion.