Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd

[2007] NSWSC 318

Reported Decision: 62 ACSR 178
(2007) 25 ACLC 426

New South Wales

Supreme Court

CITATION:	Lionsgate Australia v Macquarie Private Portfolio [2007] NSWSC 318
HEARING DATE(S):	4 April 2007
JUDGMENT DATE :	5 April 2007
JURISDICTION:	Equity
JUDGMENT OF:	Austin J
DECISION:	Section 659B inapplicable
CATCHWORDS:	CORPORATIONS - takeover bid - application by bidder for specific performance of substantial shareholder's promise to sell into the bid - whether commencement of proceeding precluded by s 659B of Corporations Act - purpose and proper construction of s 659B - Takeovers Panel's power to make a declaration of unacceptable circumstances in relation to "affairs of a company" - whether conduct in relation to a contract of sale of shares by a substantial shareholder to a bidder relates to the affairs of the target company
LEGISLATION CITED:	Corporations Act 2001 (Cth) ss 53, 657A, 657E, 657AA, 657B, 657C
CASES CITED:	Al-Kateb v Godwin (2004) 219 CLR 562 Bropho v State of Western Australia (1990) 171 CLR 1 Chief Executive Officer of Customs v AMI Toyota Ltd (2000) 102 FCR 578 Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 78 ALJR 1231 First Provincial Building Society Ltd v Commissioner of Taxation (Cth) (1995) 56 FCR 328 Glencore International AG v Takeovers Panel (2005) 54 ACSR 708 Khatri v Price (1999) 95 FCR 287 Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583 National Parks and Wildlife Service v Stables Perisher Ltd (1990) 20 NSWLR 573 Plaintiff S157/2002 v Commonwealth (2003) 21 CLR 476 Potter v Minahan (1908) 7 CLR 277 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 R v Board of Trade, ex parte St Martin's Preserving Co Ltd [1965] 1 QB 603 R v Janceski (2005) 64 NSWLR 10 Re Tower Software Engineering Pty Ltd; Pendant Software Pty Ltd v Harwood (2006) 57 ACSR 653 St Barbara Mines Ltd v Australian Securities and Investments Commission (2001) 110 FCR 550 Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150
PARTIES:	Lionsgate Australia Pty Ltd (P) Macquarie Private Portfolio Management Ltd (D)
FILE NUMBER(S):	SC 2102/07
COUNSEL:	A J Sullivan QC (P) M J Leeming SC with C Withers (D)
SOLICITORS:	Piper Alderman, Solicitors (P) Chang Pistilli & Simmons (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

AUSTIN J

THURSDAY 5 APRIL 2007

2102/07 LIONSGATE AUSTRALIA PTY LTD V MACQUARIE PRIVATE PORTFOLIO MANAGEMENT LTD

JUDGMENT

1 HIS HONOUR: This judgment addresses the question whether, having regard to s 659B of the Corporations Act, a bidder under a takeover bid may commence court proceedings for specific performance of its contract with a substantial shareholder of the target company, under which the shareholder has undertaken to sell into the bid.

Facts

2 In late 2006 the plaintiff ("Lionsgate") became interested in acquiring Magna Pacific (Holdings) Ltd ("Magna Pacific"), a media distribution company listed on the Australian Stock Exchange. It ascertained that the defendant ("Macquarie") holds about 11.23% of the issued capital of Magna Pacific and is the largest shareholder holding shares on its own behalf.

3 On 1 February 2007 Lionsgate entered into a Deed of Irrevocable Undertaking with Macquarie ("the Deed"), having the general effect of giving Lionsgate access to Macquarie's shares in Magna Pacific through a takeover bid.

4 The first recital in the Deed records that Lionsgate intends to make a takeover bid to acquire all the issued ordinary shares held by Macquarie in Magna Pacific. Clause 1 contains definitions of such terms as "Bidder's Statement" and "Takeover Bid", effectively confirming that Lionsgate intends to make a general takeover bid for the shares of Magna Pacific.

5 By clause 4 of the Deed, Macquarie undertakes that until Lionsgate's takeover offers close, lapse or are withdrawn, it will not deal with or enter into any arrangement or understanding concerning any of its shares in Magna Pacific other than by accepting Lionsgate's offer.

6 Clause 5 is as follows:

" 5. Undertakings to accept the Offer
5.1 Offeree [Macquarie] shall accept the Offer or Offers (if any) made to it in respect of all the Offeree Shares in accordance with the procedure for acceptance set out in the Bidder's Statement and/or Offer not later than five Business Days after Offeror [scil, Bidder, i.e. Lionsgate] posts the Bidder's Statement to Offeree and other shareholders of Target, provided that the Offer price per ordinary share is not less than 32 cents;
(b) Offeree shall not withdraw its acceptance of the Offer;
(c) upon acceptance, Bidder shall acquire the Offeree Shares from Offeree free of any mortgage, lien, charge, option, equity or adverse interest or encumbrance and together with all rights of any nature attached to the Offeree Shares (including the right to all dividends declared or paid after the date of this deed); and
(d) Offeree shall not acquire a relevant interest in any further ordinary shares in Target.
5.2 Offeree agrees that, if Offeree fails to accept the Offer in accordance with the Undertaking [defined as the undertaking in clause 5.1] or breaches any of Offeree's obligations, damages would not be an adequate remedy and accordingly Bidder shall be entitled to the remedy of specific performance.
5.3 The Undertaking shall lapse and Offeree shall not be obliged to accept the Offer or Offers made to it if:
(a) an announcement of the Takeover Bid is not made, or the Bidder's Statement is not lodged, within two months of the date of this deed;
(b) the Offers lapse or are withdrawn;
(c) any condition of the Offer becomes incapable of being fulfilled and such condition is not waived by Bidder;
(d) a higher offer is made for all of the ordinary shares issued by Target and such offer is made by a party not associated with the Bidder (Competing Bidder) and the Bidder does not announce an increase in its Offers to a price per share not less than the Competing Bidder,
in which case, Offeree shall have no claim against Bidder whether for expenses, lost opportunity or otherwise."

7 Clause 16 is as follows:

" 16. Governing Law
16.1 This deed is governed by the law of New South Wales.
16.2 The parties irrevocably submit to the non-exclusive jurisdiction of the courts of New South Wales and the division of the Federal Court of Australia in that jurisdiction, and the courts of appeal from them.
16.3 No party may object to the jurisdiction of any of those courts on the ground that it is an inconvenient forum or that it does not have jurisdiction."

8 On the same day that it entered into the Deed, Lionsgate announced a cash offer of 32 cents per share for all of the ordinary shares in Magna Pacific. It issued a Bidder's Statement dated 13 February 2007, which was challenged by Magna Pacific before the Takeovers Panel. The Panel announced its determination on 21 March 2007, to the effect that the Bidder's Statement was misleading in various respects but that the Panel's concerns were addressed by a Replacement Bidder's Statement and therefore it was unnecessary to make a declaration of unacceptable circumstances.

9 The Replacement Bidder's Statement (hereafter "the Bidder's Statement") and Offers dated 23 March 2007 were dispatched to the shareholders of Magna Pacific over the period from 23 to 26 March 2007. The closing date of the Offers is 24 April 2007. The Chairman's Letter which accompanied the Bidder's Statement said that Macquarie had agreed to accept Lionsgate's offer in respect of its 11.23% of Magna Pacific. The Letter and the Bidder's Statement used Macquarie's acceptance as a principal reason why shareholders should accept the offer.

10 On 30 March 2007 destra Corporation and Magna Pacific made an announcement to the Australian Stock Exchange of their intention to implement a scheme of arrangement, under which destra would acquire all of the issued share capital in Magna Pacific, for a consideration per share of 38 cents cash or one fully paid destra ordinary share and 15 cents cash, at the election of each Magna Pacific shareholder. According to the announcement, the directors of Magna Pacific unanimously recommended that Magna Pacific's shareholders vote in favour of the scheme, in the absence of a superior proposal and subject to an independent expert's report.

11 The chairman of Lionsgate, Mr Franks, received a telephone call from executives of Macquarie on the same day. They said they wished to discuss Lionsgate's intentions in light of the new situation with regard to Magna Pacific. Mr Franks told them that Macquarie remained contractually bound to sell into the Lionsgate bid. Then on the same day Lionsgate's solicitors wrote to Macquarie, asserting that the five business day period for acceptance under the Deed would end on that day, and demanding immediate acceptance by Macquarie of the Lionsgate takeover offer. The letter claimed that destra's announcement did not relate to a "higher offer … for all the ordinary shares" in Magna Pacific, for the purposes of clause 5.3(d) of the Deed, because the announcement was not an offer and the scheme procedure would not involve an offer for all of the ordinary shares in the company. Macquarie's solicitors responded on 1 April 2007, asserting that destra's proposed acquisition was a "higher offer" within clause 5.3(d) and consequently that Macquarie's undertaking had lapsed and it was not obliged to accept Lionsgate's offer.

12 On 3 April 2007 Lionsgate made an ex parte application to me as Duty Judge for leave to file a summons with abridgment of service seeking, essentially, specific performance of what it alleges to be Macquarie's obligation to sell its shares under clause 5.1(a) of the Deed. Lionsgate also sought an ex parte injunction to restrain Macquarie from dealing with its shares in Magna Pacific prior to the return date. If the court proceeding is permitted to go ahead, a substantive issue between the parties (perhaps the only substantive issue) will be whether the undertaking in clause 5.1(a) has lapsed under clause 5.3(d), in light of the stock exchange announcement by destra and Magna Pacific.

The hearings

13 At the ex parte hearing on 3 April, senior counsel for Lionsgate submitted that the commencement of the court proceeding would not contravene s 659B. I reached the view that the submission was plausible, but I made it plain that I would need to give further consideration to the possible application of s 659B when the matter returned to me on a contested basis. I decided that the best course was to grant the ex parte relief sought by Lionsgate while making provision for an early inter partes hearing.

14 When the matter returned to me on 4 April, Macquarie was represented by senior counsel, who informed me that in his client's contention, s 659B applied and consequently the proceeding should be dismissed. I did not require Macquarie to make any application (for instance, for a stay or summary dismissal). The only application before the court was Lionsgate's application for continuation of the ex parte injunction granted on the previous day. Nevertheless the question whether s 659B applies was squarely before the court, since the section is cast in such terms that the court has a responsibility to satisfy itself as to whether it applies, regardless of any application. In the circumstances, Macquarie's submissions were made and received for the purpose of assisting the court to make its decision on the application of s 659B.

15 I mention these matters because a consequence is that Macquarie has not, by appearing and making submissions about s 659B, objected to the jurisdiction of this court (notwithstanding the terms of a letter written by its solicitors on 3 April 2007), and therefore by its appearance and submissions it has not acted contrary to clause 16.3 of the Deed. That being so, it is unnecessary for me to consider whether, for the purposes of clause 16.3, s 659B is a provision going to the jurisdiction of the court (cf St Barbara Mines Ltd v Australian Securities and Investments Commission (2001) 110 FCR 550 at 552); nor, if it is, whether the consent to jurisdiction reflected in clause 16 is capable of defeating a prohibition on jurisdiction contained in the section (cf Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163; Khatri v Price (1999) 95 FCR 287 at [13]-[15]; National Parks and Wildlife Service v Stables Perisher Ltd (1990) 20 NSWLR 573 at 585).

Section 659B

16 To the extent relevant, s 659B is in the following terms:

"(1) Only the following may commence court proceedings in relation to a takeover bid, or proposed takeover bid, before the end of the bid period:
[subparagraphs (a)-(e) provide a list of public purpose entities].
Note: This restriction starts to apply as soon as there is a takeover bid, or a proposed takeover bid; it does not start to apply only when the bid period commences.
(2) A court may stay:
(a) court proceedings in relation to a takeover bid or proposed takeover bid; or
(b) court proceedings that would have a significant effect on the progress of a takeover bid;
until the end of the bid period.
(3) In deciding whether to exercise its powers under subsection (2), the court is to have regard to:
(a) the purposes of this Chapter; and
(b) the availability of review by the Panel under Division 2.
(4) For the purposes of this section:
court proceedings in relation to a takeover bid or proposed takeover bid :
(a) means any proceedings before a court in relation to:
(i) an action taken or to be taken as part of, or for the purposes of, the bid or the target's response to the bid; or
(ii) a document prepared or to be prepared, or notice given or to be given, under this Chapter; and
(b) includes:
(i) proceedings to enforce an obligation imposed by this Chapter; or
(ii) proceedings for the review of a decision, or the exercise of a power or discretion, under this Chapter; or
(iii) proceedings for the review of a decision, or the exercise of a power or discretion, under Chapter 6C in relation to securities of the target of a takeover bid during the bid period; and
(iv) proceedings under Part 2F.1A for leave to bring, or to intervene in, proceedings referred to in paragraph (a) or subparagraph (b)(i), (ii) or (iii).
This is not limited to proceedings brought under this Chapter or this Act but includes proceedings under other Commonwealth and State or Territory laws (including the general law).
(5) Nothing in this section is intended to affect the jurisdiction of the High Court under section 75 of the Constitution."

17 The court's powers after the end of the bid period are limited by s 659C, generally to the effect that if the Panel refuses to make a declaration of unacceptable circumstances in relation to particular conduct and the court subsequently finds that the conduct contravenes the Act, its powers are limited to dealing with any criminal offence and making an order for the payment of money.

18 Where an applicant comes to court for relief under some other provision of the Corporations Act which expressly confers jurisdiction on the court, there is a question whether that other provision prevails over s 659B so as to allow the proceeding to be commenced and maintained notwithstanding a takeover bid or proposed bid. In Re Tower Software Engineering Pty Ltd; Pendant Software Pty Ltd v Harwood (2006) 57 ACSR 653 at [22], Goldberg J explained that at an earlier stage of the proceeding before him, he had held that there was a serious question to be tried as to whether the court had jurisdiction, notwithstanding s 659B which is a general provision, to grant interlocutory relief where the ultimate relief sought was under s 1071F, a specific provision dealing with the court's power to review the directors' refusal to register a transfer of shares. Here, however, Lionsgate does not invoke any other provision of the Corporations Act, and relies instead on its common law and equitable rights of enforcement of a contract. The Tower Software case is of no direct assistance.

The statutory purpose

19 Section 659B was introduced as part of a suite of reforms of statutory takeover law enacted in the Corporate Law Economic Reform Program Act 1999 ("CLERP Act"), designed to promote a more competitive market for corporate control and to improve the resolution of takeover disputes. Under the CLERP Act, the Takeovers Panel (previously called the Corporations and Securities Panel) was reconstituted and access to it was made available to any person whose interests would be affected by the relevant circumstances (rather than, as previously, ASIC alone).

20 The general objective of these reforms, and specifically the object of ss 659B and 659C, was to make the Panel "the main forum for resolving disputes about a takeover bid until the bid period has ended" (s 659AA; see also Explanatory Memorandum for the Corporate Law Economic Reform Program Bill 1998, para 4.4). The Explanatory Memorandum explains the underlying concern as follows:

"7.14 Takeover disputes are currently principally determined by the courts, with the jurisdiction of the Corporations and Securities Panel (Panel) depending upon referrals from ASIC. There have been only three matters brought before the Panel since it was established in 1991.
7.15 Target companies often resort to litigation in hostile takeover bids, sometimes for tactical reasons. This can result in bids being delayed and, where a final hearing cannot be held within the bid period, the courts have to decide between disrupting the bid by granting an injunction without the benefit of full evidence and allowing the bid to proceed even though it may later be found to be defective.
7.16 To meet these concerns, a reconstituted Panel will take the place of the courts as the principal forum for resolving takeover disputes under the Corporations Law, with the exception of civil claims after a takeover has occurred and criminal prosecutions. This will allow takeover disputes to be resolved as quickly and efficiently as possible by a specialist body largely comprised [sic] of takeover experts, so that the outcome of the bid can be resolved by the target shareholders on the basis of its commercial merits. Other benefits of an effective panel for dispute resolution include the minimisation of tactical litigation and the freeing up of court resources to attend to other priorities."

21 In my view, the underlying policy concerns identified in the Explanatory Memorandum are not in evidence in the present case. Here Lionsgate wishes to enforce a contract, in circumstances where there is a dispute about the meaning of one of the clauses of the contract. The issue is about the meaning and enforceability of a contract, not about whether the takeover bid should be disrupted or allowed to proceed. If Macquarie is not required to sell into Lionsgate's bid, the bid will still proceed, subject to Chapter 6, and will either succeed or fail. The resolution of the dispute between Lionsgate and Macquarie may have an impact on whether the proposal for a scheme of arrangement proceeds, but schemes are not within the purview of s 659B in any case. The specialist body with the greatest expertise to resolve the dispute is a commercial court. Assuming that the only issue is as to the proper construction of clause 5.3(d), one would expect the court, with the co-operation of the parties, to move swiftly to a final hearing of the application, without any substantial interlocutory hearing attracting the sorts of concerns identified in the Explanatory Memorandum. The final hearing of the construction point would be unlikely to take more than a few hours at the outside, and one would expect a fully-reasoned judgment to be given either immediately or within one or a few days of the hearing. That is as speedy and efficient a method of resolution of the dispute as could reasonably be expected to be achieved by any tribunal. Although the takeover tactics of both sides may lay behind the litigation, what brings the matter to court is the existence of a contract and (if the plaintiff is right) the defendant's threat to repudiate it.

The court's approach to the construction of s 659B

22 The defendant's submissions support the proposition that in the circumstances identified in s 659B, the Parliament has legislated to deprive a contractual party of the right to enforce the contract by court order, at least until the end of the bid period and perhaps (where s 659C applies) indefinitely thereafter. That would be a substantial interference with a fundamental private right. Indeed, on that view s 659B would operate to defeat the clearly expressed intention of the parties (in clause 5.2 of the Deed) that Lionsgate would be entitled to the remedy of specific performance.

23 Senior counsel for Lionsgate placed reliance on certain presumptions of statutory construction. First, he drew attention to some well-known observations of O'Connor J in Potter v Minahan (1908) 7 CLR 277, at 304:

"It is in the last degree improbable that the legislature would overthrow fundamental principles, infringe rights, or depart from the general system of law without expressing its intention with irresistible clearness; and to give any such effect to general words, simply because they have that meaning in their widest, or usual, or natural sense, would be to give them a meaning in which they were not really used."

24 That statement has been endorsed by the High Court frequently, in its application to legislation alleged to interfere with fundamental rights, freedoms or immunities: for example, Bropho v State of Western Australia (1990) 171 CLR 1 at 17-18; Coco v R (1994) 179 CLR 427 at 437; Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 78 ALJR 1231 at 1236 [21]; Plaintiff S157/2002 v Commonwealth (2003) 21 CLR 476 at 492 [30]; Al-Kateb v Godwin (2004) 219 CLR 562 at 577 [19], 616 [150] (see also the other cases cited by DC Pearce and RS Geddes, Statutory Interpretation in Australia (6th edition, 2006), [5.24]-[5.30]).

25 To the extent that O'Connor J's statement refers to a wider presumption that the legislature does not intend to alter the common law, even where fundamental rights are not involved, it has been doubted in later cases (for example, R v Janceski (2005) 64 NSWLR 10, at 23-24, where Spigelman CJ described it as being of "minimal weight" and reflecting "an earlier era when judges approached legislation as some kind of foreign intrusion"). However, it is unnecessary to give further consideration to the wider presumption in the present case, where Macquarie's argument would have the effect of depriving Lionsgate of a fundamental contractual right. Here, in my opinion, the presumption is strong.

26 It is clear that s 659B is intended to prevent the commencement of proceedings that rest on a claim to general law rights, or rights under a Commonwealth, State or Territory statute other than the Corporations Act, in cases where the statutory wording applies (see the last sentence of s 659B(4)). Nevertheless the presumption against interference with common law rights is relevant to the extent that the statutory language is ambiguous.

27 There is another relevant presumption. Pearce and Geddes say "it is clear that the courts will interpret any provision affecting their jurisdiction in such a way as to have the minimum effect on it" (Statutory Interpretation in Australia, op. cit., [5.29]). In my opinion, the same approach is to be taken where a statute purports to prevent proceedings from being commenced during a stated period, even if the provision does not in its terms deprive the court of jurisdiction.

28 The combined effect of these two presumptions is that the court should not hold s 659B to be applicable in the present case unless the statutory words clearly and unambiguously apply.

The statutory wording

29 Section 659B(1) has the effect of preventing a person, other than those listed, from commencing "court proceedings in relation to a takeover bid, or proposed takeover bid", before the end of the bid period. The quoted words are defined in subsection (4) in two steps: first, in subparagraph (a) there is what appears ex facie to be a definition of the scope of the quoted words; and secondly, there is in subparagraph (b) a list of things included (or, perhaps, deemed to be included) in the definition. The last sentence of subsection (4) is introduced by the highly ambiguous word "This", but in its context the word "This" probably refers to subparagraph (a), or both subparagraphs (a) and (b), rather than to subparagraph (b) alone. So construed, the last sentence operates to require that the definition as a whole be read so as to encompass court proceedings under the general law or any statutory provisions.

30 None of the inclusory provisions of subparagraph (b) is applicable here. The question is whether the present proceeding falls within subparagraph (a). Some of the submissions made on behalf of Macquarie, particularly the written submissions, suggest that s 659B(1) raises a broad question as to whether the present proceeding is "in relation to" the pending takeover bid. But in my view that misunderstands the effect of s 659B(4)(a), which is an exhaustive definition of the words "court proceedings in relation to a takeover bid or proposed takeover bid". If subsection (4) does not apply, then the present proceeding is not a court proceeding "in relation to a takeover bid or proposed takeover bid" for the purposes of s 659B(1), and consequently there is no restriction on the plaintiff commencing or continuing the proceeding, even if in some more general sense the proceeding relates to the bid.

31 Senior counsel for Macquarie cited authorities for the familiar proposition that the words "in relation to" (or, equivalently, the words "relates to") are words of very wide connotation: for example, Chief Executive Officer of Customs v AMI Toyota Ltd (2000) 102 FCR 578 at [30], per Hill, North and Merkel JJ; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [87], per McHugh, Gummow, Kirby and Hayne JJ. The width of those words as used in s 659B(1) was confirmed by Hill J in St Barbara Mines Ltd, at 552.

32 However, while those words are wide, their meaning is qualified by two considerations. First, orthodox canons of statutory construction recognise that broad words must take colour from the context in which they appear: Chief Executive Officer of Customs v AMI Toyota Ltd, at 589-590, per Hill, North and Merkel JJ; First Provincial Building Society Ltd v Commissioner of Taxation (Cth) (1995) 56 FCR 328-333, per Hill J; St Barbara Mines Ltd, 110 FCR at 552, per Hill J. In s 659B the meaning of the words "in relation to" is affected not so much by the wording of subsection (1) as the wording of subsection (4), as I shall explain.

33 Secondly, in Project Blue Sky, McHugh, Gummow, Kirby and Hayne JJ held (at 387[87]), in the particular context under consideration in that case, that the words "relates to" required the existence of a connection or association between the matters with respect to which a relationship was required by the statute (essentially, a Standard and the Australian content of programs), and they added:

"No doubt the association or connection must be a relevant one in the sense that it cannot be accidental or so remote that the Standard has no real effect or bearing on the Australian content of programs."
For reasons I shall explain, that limitation is relevant in the present case.

34 I turn, first, to subparagraphs (a)(ii). However wide the words "in relation to" may be if considered in isolation, the present proceeding cannot be described as a proceeding "in relation to a document prepared or to be prepared, or a notice given or to be given" under Chapter 6. The present proceeding is in relation to the Deed between the parties, and in relation to the enforcement of Macquarie's alleged contractual obligation. True it is that the Deed contemplates the takeover bid that has subsequently been made, and in particular the Bidder's Statement that has subsequently been issued by Lionsgate, and the time limits for the contractual obligations undertaken in the Deed are set by reference to the bid period. That may be enough to warrant the conclusion that the Deed is a document "in relation to" Lionsgate's takeover bid. But as I have pointed out, that is not the issue under subparagraph (a). For the purposes of subparagraph (a)(ii), the question is whether the court proceeding is in relation to a document or notice prepared or given under Chapter 6. The Deed is clearly not such a document.

35 It may be arguable that the court proceeding, seeking as it does to enforce clause 5.1(a) of the Deed, is in relation to a document prepared under Chapter 6, namely the Bidder's Statement, because the obligation created by clause 5.1(a) is triggered by the posting of the Bidder's Statement. But in my view the fact that the Bidder's Statement triggers the obligation to sell the shares is merely "accidental" to the subject matter of clause 5.1(a), in the sense in which the word "accidental" is used by the High Court in Project Blue Sky. It would unduly strain even the wide words "in relation to" to say that a proceeding to enforce clause 5.1(a) by requiring Macquarie to sell its shares into the bid is a proceeding in relation to the Bidder's Statement.

36 I turn to subparagraph (a)(i). The question is whether the present proceeding is in relation to some action taken or proposed to be taken as part of or for the purposes of the takeover bid. The "action" to which the subparagraph refers cannot be the action of commencing the proceeding, because the commencement of the proceeding is the conduct prohibited by subsection (1), once it is established that there are court proceedings in relation to the bid as defined in subsection (4). In other words the "action" referred to in the definition must be something anterior to the commencement of the proceeding. Therefore it is beside the point to submit that Lionsgate requires performance of Macquarie's promise for the purposes of the bid (cf Transcript 14.5).

37 Senior counsel for the defendant submitted that there were several components of "action" for the purposes of the definition. First he submitted, in substance, that Macquarie's future performance of what Lionsgate contended was a binding obligation to sell the shares into the bid was "an action … to be taken as part of, or for the purposes of, the bid" (Transcript, 4.23). It seems to me, however, that if Macquarie sold into the bid, purportedly in performance of the contractual obligation, its action in doing so would not be action as part of or for the purposes of Lionsgate's bid, but rather it would be action in response to the bid. Senior counsel then submitted that Macquarie's actions included its promises in clause 5, its conduct subsequent to the announcement communicating its intention not to comply with clause 5.1(a), and the letters of demand that followed thereafter (Transcript, 4.36). Again, however, these matters seem to me to relate to the question whether an offeree shareholder should accept a takeover bid or proposed bid - that is, they relate to the offeree's response to the bid (or proposed bid), and are therefore not actions taken or to be taken as part of, or for the purposes of the bid (and they are obviously not taken as part of or for the purposes of the target's response to the bid). Therefore I have reached the conclusion that subparagraph (a)(i) does not apply to any of the actions identified by senior counsel for Macquarie in submissions.

38 Since it is necessary for the court to be satisfied that s 659B(1) does not apply, before allowing a proceeding to be commenced, I need to go beyond the submissions of counsel and consider whether there is some other way in which the statutory wording might be applicable to the present case. In principle subparagraph (a)(i) is capable of applying to actions of some person other than the defendant in the court proceeding, including the plaintiff. Specifically, Lionsgate has engaged in an action by issuing the Bidder's Statement and Offers. In my view, that action falls within subparagraph (a)(i). It is an action taken as part of or for the purposes of Lionsgate's bid. But in my opinion the present proceeding is not "in relation to" that action, for reasons I have already given. That is, it is properly characterised as a proceeding in relation Macquarie's undertaking in the Deed to sell into Lionsgate's bid, and the fact Macquarie's obligation is triggered by the posting of the Bidder's Statement does not serve to make the proceeding one in relation to that document. In terms of the High Court's observations in Project Blue Sky, that connection is not a relevant one and is merely accidental.

39 Senior counsel for Macquarie placed particular emphasis on the fact that Lionsgate had told the shareholders of Magna Pacific, in the Bidder's Statement and the Chairman's Letter, that one of the reasons they should accept the offer was that Macquarie, the largest shareholder, had promised to do so. In my view this fact does not serve to alter the characterisation of the actions under consideration so as to bring them within the statutory language. In particular, the fact that Lionsgate used Macquarie's promise to sell into the bid as a reason for target shareholders to accept does not mean that the "action", constituted by the promise itself, is to be characterised as part of the bid or an action for the purposes of the bid. The connection with the bid is merely accidental. The actions under consideration were actions for the purpose of an offeree committing to a response to the bid.

40 In the result, while I accept that the words "in relation to" are words of very broad connotation when considered in isolation, here they are combined (in subparagraphs (a)(i) and (ii)) with words of a more specific kind which are not apt to apply to the present situation.

41 In my view, the thrust of the definition in subsection (4) is to identify court proceedings that raise the sorts of issues typically invoked in the tactical takeover litigation of the 1980s and 1990s, to do with such matters as misleading Bidders' Statements and Targets' Statements, whether the litigation was based on the provisions of corporations legislation, or other statutory provisions (such as s 52 of the Trade Practices Act) or general law matters (such as the law of deceit).

42 My construction of subsection (4) in its application to the present case is reinforced by the observations I have made to the effect that a case such as the present falls outside the mischief, identified in the Explanatory Memorandum, which was to be addressed by s 659B. My construction of the statutory wording also reflects the presumptions of construction of legislation interfering with fundamental rights and restricting the court's powers, to which I have referred.

The Panel's powers

43 Senior counsel for Lionsgate submitted that s 659B(1) can only apply to court proceedings concerning a matter over which the Panel could exercise jurisdiction and make orders. Although that submission was contested, in my opinion it is correct.

44 Section 659B, like the whole of the CLERP Act, is expressed in a form of plain English drafting. Relying on the fundamental principle of statutory construction that the words of a provision must be read in their context, the drafters have not always articulated every pre-requisite for the application of the instant provision. A good example of this approach is found in s 657E, which was referred to in argument. That section does not expressly say that the Panel's power to make an interim order is limited to circumstances where an application for a declaration of unacceptable circumstances under s 657A has been made or is proposed, or that in considering whether to make an interim order, the Panel should have regard to the probability that a declaration would be made if an application for a declaration were to be duly heard and determined. But it is obvious that there must be some such limitation. It cannot be the case that the Panel is given a limited power to make declarations and orders under ss 657A and 657D, but is nevertheless allowed to make an interim order in any circumstances at large. The context of s 657E provides an implied limitation.

45 In the case of s 659B, there is a contextual link between the restriction on commencement of court proceedings and the investing of decision-making powers in the Panel. An indication of the link is supplied by s 659AA, according to which the Panel is to be the main forum for resolving disputes about a takeover bid until the bid period has ended. The link is that the Panel is intended to have the power to deal, as an administrative body, with disputes that s 659B prevents a court, as a curial body, from dealing with during the bid period. The provisions of the Explanatory Memorandum to which I have referred reinforce that proposition. Its corollary is that if the Panel lacks the power to deal with a certain matter, and that matter could, but for s 659B, be dealt with by the court, then s 659B should not be construed in such a way as to prevent the court from dealing with that matter.

46 Having concluded that the construction of s 659B is linked to the powers of the Panel in this fashion, I turn to consider whether the Panel is empowered to entertain a proceeding covering any or all of the ground of the present proceeding before the court. The starting point is that the Panel is not empowered to adjudicate on disputed rights, or to exercise judicial power to resolve disputes. The distinction between the functions of the Panel and a court, such as this court or the Federal Court, was explained by Emmett J in Glencore International AG v Takeovers Panel (2005) 54 ACSR 708, at [55]-[56]:

"[55] The making of binding declarations of right, by way of adjudication of disputes about rights and obligations that arise from the operation of the law upon past events or conduct, is a classical instance of the exercise of judicial power. However, the declarations for which s 657A provides are not binding declarations of right, in the sense in which that term is used in the context of the exercise of judicial power. The adjudication made by the Review Panel in the present case was not an adjudication of a dispute about rights and obligations of the parties that had arisen from the operation of the law on past events or conduct. The object of the Review Panel's declaration and orders was not to resolve a dispute about existing rights and obligations, by determining what those rights and obligations were, but to determine what legal rights and obligations should be created.
"[56] The orders made under s 657D created rights and obligations that, prior to the making of the orders, did not exist. In that sense, the decisions of the Review Panel did not involve any adjudication of a dispute about existing rights and obligations. In applying for a declaration and orders, Centennial was not seeking the vindication of any right or obligation. The decision made by the Review Panel did not resolve any actual or potential controversy as to existing rights: see, generally, Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188-190 ….."

47 Consequently one would not expect to find in the Corporations Act any conferral of power on the Panel to order the specific performance of a contract, so as to vindicate the contractual rights of the plaintiff. But it is nevertheless relevant to inquire whether the Panel could make a determination that would create new rights by reference to the unacceptability of circumstances relating to the making of a contract for the sale of shares by a substantial shareholder in anticipation of a takeover bid, and subsequent conduct by the seller suggesting an intention to resile from the contract. If the Panel is able to make a declaration of unacceptable circumstances, and consequently to make orders (including remedial orders) in such a case, then while its powers do not directly overlap with the powers of the court, it is able to deal with conduct during the course of a takeover bid which would in other circumstances be amenable to the jurisdiction of the court; and therefore to construe s 659B as preventing the commencement of proceedings in the court would be consistent with the legislative objective.

48 The Panel's power to make a declaration of unacceptable circumstances is found in s 657A. Section 657A(1) empowers the Panel to declare circumstances in relation to the affairs of a company to be unacceptable circumstances, whether or not the circumstances constitute a contravention of a provision of the Act. The Panel's power to make orders, conferred by s 657D, arises when it has declared circumstances to be unacceptable under s 657A.

49 Senior counsel for Lionsgate submitted that the power conferred by s 657A is not wide enough to enable the Panel to make a declaration of unacceptable circumstances about the subject matter of the present proceeding. He said the present proceeding is about the private contractual arrangements of Lionsgate and Macquarie, rather than about any "affairs" of Magna Pacific.

50 Section 53 of the Corporations Act deals with affairs of a body corporate. It applies for the purposes of several specified provisions and other "prescribed provisions". By virtue of reg 1.0.18, s 657A is a prescribed provision. Therefore s 53 is applicable for the purpose of ascertaining the meaning of the expression "affairs of the company" in s 657A(1).

51 Senior counsel for Lionsgate correctly submitted that the meaning of the expression "the affairs of the company" is partly to be derived from s 53 and partly from the general law. This is because the definition in s 53 is merely an inclusive definition, so that the scope of the expression is partly to be derived from ordinary concepts in commercial usage, explicated by case law (note the Panel's decision in Re National Foods Ltd (2005) 54 ACSR 80 at [55], to the effect that as a matter of ordinary concept, the affairs of the company include its internal affairs such as board and company meetings and dealings with the company's subsidiaries).

52 Senior counsel for Lionsgate submitted that the cases dealing with the expression emphasise that although the expression is of wide ambit, it relates to the business of the company. He relied on R v Board of Trade, ex parte St Martin's Preserving Co Ltd [1965] 1 QB 603, where it was held that the expression "affairs of the company", as used in provisions of the Companies Act 1948 (UK) which conferred powers on Board of Trade inspectors, referred to the business affairs of the company, including its goodwill, profit and loss, contracts and investments and assets, and its shareholding in and ability to control a subsidiary or sub-subsidiary.

53 It is not necessary for me to decide whether the expression "the affairs of a company" when used in s 657A is limited to the meaning adopted in the St Martin's Preserving case. Whatever the meaning of the expression may be a matter of ordinary concepts and case law, there is an extended meeting conferred by s 53, which says that the affairs of a body corporate include:

"(a) the promotion, formation, membership, control, business, trading, transactions and dealings … of the body; "
"(e) the ownership of shares in, debentures of, and interests in a managed investment scheme made available by, the body;"
"(f) the power of persons to exercise, or to control the exercise of, the rights to vote attached to shares in the body or to dispose of, or to exercise control over disposal of, such shares".

54 Those provisions establish that a contract for the sale of shares in a company is capable of falling within the affairs of the company itself. Moreover, here the circumstances to which the Panel would be expected to have regard, if an application were made to it, would not be limited to the sale of the company's shares per se. The relevant circumstances would include the fact that the seller is a substantial shareholder, that the sale was entered into in anticipation of a takeover bid, and that the contractual obligation is to sell into the bid, triggered by the posting of the Bidder's Statement. These matters bring a transaction that might, conceivably, be regarded as a private transaction, remote from the company itself, within the ambit of matters affecting the company in connection with its membership, the ownership of shares, and control over voting and disposal of shares. That being so, I am satisfied that the circumstances which are the subject of, and surround, Lionsgate's court proceeding for specific performance, when taken together, constitute affairs of Magna Pacific for the purpose of a Panel application for a declaration that those circumstances are or include unacceptable circumstances.

55 In summary, while the proper construction of s 659B is affected by considering the Panel's power to deal with the subject matter of the court proceeding or circumstances including that subject matter, here it has not been shown that the Panel would lack the power to entertain an application. This part of Lionsgate's argument as to the scope of s 659B is unsuccessful, but Lionsgate succeeds on the proper construction of s 659B(4), for the reasons given above.

Conclusions

56 Section 659B is not an obstacle to Lionsgate's application for continuation of the interlocutory injunction granted on 3 April 2007. Subject to any further submissions on balance of convenience, the appropriate course is to continue the injunction until further order, and make arrangements for the early hearing of the proceeding on a final basis.

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