Metals Exploration Limited v Samic Limited

[1993] HCATrans 334

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Adelaide No A24 of 1993

B e t w e e n -

METALS EXPLORATION LIMITED

Applicant

and

SAMIC LIMITED

Respondent

Application for special leave

to appeal

MASON CJ
BRENNAN J

TOOHEY J

Metals 1 28/10/93

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON THURSDAY, 28 OCTOBER 1993, AT 11.22 AM

Copyright in the High Court of Australia

MR A.R. EMMETT, QC: May it please Your Honours, I appear

with my friend, MR B.W. WALKER, for the applicant.

(instructed by Norton Smith & Co)

MR T.A. GRAY, OC:  May it please the Court, I appear with my

learned friends, MR C.N.H. BAGOT and

MR G.J. GRIEVE, for the respondent. (instructed by

Piper Alderman)

MASON CJ:	Mr Emmett.
MR EMMETT:	Your Honours, there are two aspects of the reasoning of the Full Court which, in our
submission, make this case an appropriate one for
leave.  The first is a question as to the proper
construction and effect of Chapter 6 of the unfairness which, in our submission, arises from the way in which one of the judges of the majority
in the Full Court dealt with the matter. He based
his decision on a conclusion which all other three
judges in the proceedings held it was not open to
the respondent to raise.

In order to explain the legal question, it

seems to us desirable to just go briefly through

the relevant sections of Chapter 6. Do

Your Honours have copies of the Corporations Law

or, alternatively, we have some extra copies if

Your Honours do not have copies.

Chapter 6 of the Law is concerned with

acquisition of shares and took the place of the

Companies Acquisition of Shares Code when the Law

was enacted. The pivotal provision of Chapter 6 is

section 615 which appears at page 18,301 if

Your Honours are looking at the CCH reprint. That is the beginning of Part 6.2, section 615 is then

at page 18,302. The pivotal prohibition is that:

a person shall not acquire shares in a company

if:

(a) any person .....

would, immediately after the acquisition, be

entitled to more than the prescribed -

20 per cent of the issued share capital of the

company. That follows from section 615(l)(a)(ii)

and 615(7)(a) in the present instance.

There then follow, in sections 616 to 633

inclusive, a number of exceptions to that

prohibition. There are two relevant exceptions.

The first is section 617 which is concerned with

Metals 2 28/10/93

the acquisition of shares pursuant to offers made

under a takeover announcement and the circumstance

of this case involve a takeover announcement.	I
will come back to that in a moment.

The second relevant exception for the purpose

of this case is section 620(2) which provides that:

Where a takeover announcement is

made ..... section 615 does not prohibit the

acquisition during -

what is described as the takeover period -

of shares ..... in the ordinary course of

trading on the stock market of that stock

exchange.

The scheme of those exceptions is that you cannot

acquire shares if that would take you over the

20 per cent limit unless you do it in accordance

with a takeover announcement. That notion is

defined in section 603 as being - this is on

page 18,013:

an announcement ..... made in accordance with

Division 1 of Part 6.4;

Once an announcement has been made, it is then

possible also to acquire shares in the ordinary

course of trading on a stock exchange. So where

you have a takeover announcement, there are in

effect two exceptions to the prohibition in

section 615. First of all, you can acquire the

shares pursuant to the announcement itself but you

have to wait for 14 days and you can only acquire

them during a period of one month after that 14

days elapses. However, once the takeover

announcement has been made, the second exception is

that you can acquire shares under section 620 in
the ordinary course of trading on the stock

exchange.

A takeover announcement is one which complies

with Part 6.4 which appears at pages 19,402 and

following and it says:

offers to acquire shares ..... are made under a

takeover announcement if, and only if:

(a) the offers are made in accordance with

this Division;

Section 674 - - -

BRENNAN J: That is the provision which was not in the Code

before, is that right?

Metals	28/10/93
MR EMMETT:	Not precisely in that language, yes,

Your Honour.

BRENNAN J:	Not at all in that language.
MR EMMETT:	There were definitions as to what - - -

BRENNAN J: Definitions corresponding with section 603, but

section 673 found no part in the previous Code.

MR EMMETT:  I think that is fair to say, yes, Your Honour,

although the general scheme of these exceptions was

certainly to be found in the Code.

BRENNAN J:	Oh yes.
MR EMMETT:	But bear in mind that there are two concepts

that are involved. One is offers to acquire shares

made under a takeover announcement and the other

concept is the takeover announcement itself.

BRENNAN J:  Though the takeover announcement itself is the

announcement of an offer under section 674.

MR EMMETT:  Yes. The takeover announcement, in our

something that only occurs if you otherwise comply with the whole of Part 6.4. That is what follows

submission, is something which satisfies 674.

from section 673.

BRENNAN J:  Can there be a departure from the terms of a

takeover announcement under 674 in the Part C

statement?

MR EMMETT: That is not a relevant question in this case,

but the answer would be no, because otherwise there

would not be offers made in accordance with

Part 6.4. Part 6.4 contemplates several stages in

the procedure. First of all there is the

announcement in accordance with 674.	The next
step, though, is section 679 and it requires that

on the day on which the announcement is made a

Part C statement is delivered to what is referred to as the target company.

Part C statement is defined in section 603 as

a statement which complies with section 750. Now,

although it was in issue below, it is accepted for

the purposes of this application that the Part C

statement in this case did not comply with that

definition and therefore 679 was not complied

with.

However, section 620 is a separate exception

to the prohibition in 615 which is predicated upon

the takeover announcement. The takeover

Metals 4 28/10/93

announcement is made at one point in the day.

Immediately thereafter section 620 permits

acquisitions made in the ordinary course of trading

on the stock exchange, even before any obligation

has arisen to give or deliver the Part C statement.

The other two sections which are then

relevant, before I indicate how the question

arises, are sections 737 and 739 which are the

provisions giving remedial powers to the Court.

Section 737 is at page 20,702. It provides that:

Where a person has acquired shares ..... in

contravention of section 615, the

Court ..... may make -

remedial orders, which includes directing disposal.
But the important thing about section 737 is that
it is predicated upon contravention of section 615.

Section 739 is a wider provision in one sense in

that it provides, relevantly, that where a takeover

announcement has been made and a provision of

Chapter 6 has been contravened, then the Court may make a remedial order, the difference being that

section 737 is predicated on the contravention of
section 615, whereas 739 is predicated on any

contravention of Chapter 6.

The circumstances of this case were, briefly,

this: on 14 April MEX, the present applicant, had

become entitled to just under 20 per cent of the

issued capital. On the morning of 15 April it made

a takeover announcement which complied with

section 674. Thereafter, on 15 April, it acquired delivered a document to Samic, the respondent, the target, which purported to be a Part C statement but which it was subsequently held did not comply
another eight and a half per cent of the issued
share capital which took it up to 28.3 per cent.

with section 750 and therefore did not satisfy the

requirement.

The target then sought declarations in the

Supreme Court of South Australia which it was

successful in obtaining, namely that the Part C

statement did not comply. It also sought orders

pursuant to 737 or 739 for divestiture. The trial

judge, Mr Justice Debelle, declined to order

divestiture. There was then an appeal to the Full

Court of the Supreme Court of South Australia.	The
Full Court by majority directed divestiture.	It is
there that the problems arise.

The Chief Justice, with whom Mr Justice Cox

agreed, except as to the final conclusion, held

that there was no contravention of section 615 in

Metals 5 28/10/93

the acquisition of the 8 per cent of shares on

15 April. He expressly said that it was not open

to the respondents, the present respondents, to

contend contravention. Mr Justice Cox agreed with

that conclusion, and I will take Your Honours to
the passages in a moment if need be. That was the

same conclusion that Mr Justice Debelle had come

to.

At the heel of the hunt Samic had sought to

raise the question of whether or not the

acquisitions on the 15th were, in the ordinary

course of trading on the stock exchange, within the

meaning of section 620. Mr Justice Debelle, at

application book 53, said this, line 24:

There was, at one stage, a suggestion

BRENNAN J:  Did you say that Chief Justice King did not say

there was a breach of section 615?

MR EMMETT:  Oh yes, but that was where the error of law

arises. It is later in time that he says there is

a contravention. That is where we say the error of

law that he made arises.

BRENNAN J:  You say that he did say that there was a

contravention, but he was wrong in saying it?

MR EMMETT: That is right.

BRENNAN J:	I see.
MR EMMETT:	He did not say there was a contravention in the

actual acquisition at the time of the acquisition,

he said the contravention occurred later in the

day. That is the critical point.

BRENNAN J:  He says there was no takeover announcement.

MR EMMETT: That is part of his error.

BRENNAN J: It may be, but if there was no takeover

announcement, there must have been a breach of

section 615 at the time at which the shares were

acquired.

MR EMMETT:  That depends on what one means by takeover

announcement. I do, with respect, need to take

Your Honours a bit further into the issue to

explain that difficulty that arises from the

reasoning of the Chief Justice.

Could I take you first to what

Mr Justice Debelle said on this topic. Page 53, line 24:

Metals 6 28/10/93

There was, at one stage, a suggestion that MEX

might have breached the requirements of s.615

but that submissions was not pursued. Had the

shares been sold other than in the ordinary

course of trading, I might have acceded to

Mr Gray's submission. But the trading of the

shares was effected by a crossing and, as

such, must be treated as though it had

occurred in the ordinary course of business.

So Mr Justice Debelle found that at the time when

the trading occurred, the acquisition occurred, it

was within section 620 because it was in the

ordinary course of her business.

The Chief Justice, at application book 73, the top of the page:

Mr Gray QC also contended that, even if

the failure to comply with s.679 did not
invalidate the announcement, s.620(2)
nevertheless did not overcome the s.615
prohibition because the shares were not
acquired "in the ordinary course of trading on
the stock market of that stock exchange." In

my opinion, however, this point is not open to

Sarnic on this appeal.

Then going down to line 15:

It appears that it was not made a live issue

so as to alert MEX's counsel to the need to

combat it, if necessary by calling evidence.

There are circumstances of suspicion attaching

to the transactions, but the suspicion might

have been dispelled by evidence if the issue

had been properly raised.

Mr Justice Cox said, at page 81:

I have had the advantage of reading in draft the reasons prepared by the Chief

Justice. I agree with him on all topics

except the matter of divestiture.

At line 16 he says:

Nor do I think that this is a proper case for

ordering MEX to dispose of the shares in some

other way. It has not been established that

MEX acted improperly with respect to any of those sales.

That, I think, meaning the sales to it. So that

three of the judges concluded that a contention

based on section 620 not having been satisfied was

not open.

Metals 28/10/93

What the Chief Justice said, however, was,

even though at the time when the shares were

actually acquired, immediately after the takeover

announcement, there was nevertheless a non-
compliance with section 615 because later in the

day MEX failed to comply with section 679. Now,

679 requires that on the day of the announcement a

Part C statement be served. So the contravention

of Chapter 6 which the Chief Justice found did not

in fact occur until midnight on 15 April. There

had been a purported service of a Part C statement,

but that was a nullity because it did not comply.

So that the contravention which the Chief Justice

relied upon, that is the contravention of

Chapter 6, was a failure which occurred at midnight

on 15 April.

Now, the error, in our submission, is not in finding that that was a contravention of Chapter 6,

because we have to accept that it was; the error

was in concluding that that in some way infected

the acquisition made earlier in the day which, at
the time when it was made, was perfectly lawful

because it was within section 620. Now, the Chief

Justice's reasoning on that question is to be found

at pages 71 and following of the application book

at line 22:

MEX submitted that failure to serve a valid

Part C Statement did not invalidate the

announcement and that s.620(2) would therefore

still operatae to authorize the acquisition of

shares notwithstanding the invalidity of the

Part C Statement. I cannot agree. I consider

that a statement of intention is a takeover

announcement within the meaning of the Law if,

and only if, the provisions of Division 1 of

Part 6.4, including s.679, are complied with.

If there is a failure to comply with those

provisions, the announcement is not made in

accordance with Division 1 of Part 6.4 as

required by the definition in s.603.

Then he sets out 673. It is then at line 12 is

really the nub of the matter:

Section 620(2) applied only where a "takeover

announcement is made". As there was no

"takeover announcement" within the meaning of

the Act, Division 1 of Part 6.4 not having

been complied with, s.620(2) does not operate

to save the acquisitions from being a breach

of s.615.

He therefore concluded that although at the time

when they were acquired there was no contravention,

the failure at the end of the day retrospectively

Metals 28/10/93

rendered the acquisition in the middle of the day a

contravention of section 615.

Now, the reasoning, in our submission, is

flawed because of the reliance on section 673. But

where, with respect, the Chief Justice errs, in our

submission, is in applying section 673 to every

step in the procedure.	What section 673 says is
that:

offers ..... are made under a takeover

announcement if, and only if:

.....

(b) the requirements of this

Division ..... apply.

Now, the significance of the concept of "offers

made under a takeover announcement" is relevant

only for section 617, not for section 620. That is

the proposition of law which, in our submission,

arises.

BRENNAN J: His Honour also relied, of course, upon the

definition in 603, did he not?

MR EMMETT:	Yes, but -
BRENNAN J:	And the proposition of law for which you

contend, as I understand it, is this, that it is a

question which is worthy of this Court's
consideration whether or not shares which are
acquired after a takeover announcement is made, and
prima facie in breach of section 615, are exempt
from that prohibition if they are made once the
takeover offer has been announced, even though the

Part C statement is defective.

MR EMMETT: With respect, Your Honour's formulation begs

the question.

BRENNAN J:  Let me put it in a way that does not. Your

proposition is that section 615 does not apply to	the acquisition of shares over 20 per cent if the
acquisition is made after the making of a takeover
announcement irrespective of the delivery of a
Part C statement.

MR EMMETT:  Yes. And it does have great significance

because the whole rationale for section 620 is that

people who sell their shares in the ordinary course

of trading do not need the protection of the

provisions, including the Part C statement. The

Part C statement is essential for those people who
accept offers pursuant to the takeover
announcement, not people who sell shares in the

ordinary course of trading on the stock exchange.

It makes a very substantial difference as to which

Metals 9 28/10/93

section authorizes any remedial order. Section 737
is predicated on contravention of section 615 and

permits the court to make whatever order it thinks

fit.

However section 739, which is predicated on any contravention, authorizes the court to make

whatever order is necessary to protect the persons

intended or affected by the contravention.

BRENNAN J: That really takes us to the second point,

because here the court did say that there was a

ground for making an order under 739, namely the

protection of the remaining shareholders - - -

MR EMMETT: But, with respect, that was a misapplication.

It was based upon the assumption that there was a

contravention of section 615.

BRENNAN J:  Not at all. Under 739 that question arose, did

it not?

MR EMMETT:	No.
BRENNAN J:	Why not?

MR EMMETT: Unless I misunderstand what Your Honour means by

that question.

BRENNAN J:  The question whether or not a divestiture order

was appropriate for the protection of the remaining

shareholders.

MR EMMETT:  But the reason why the Chief Justice thought it

was appropriate to make an order under 739 was

because there was a contravention of section 615

and he concluded, therefore, that MEX had acquired

some improper advantage by reason of the

contravention of section 615. So that even his

reasoning based on 739 is flawed in so far as it is

based on an assumption that there was an advantage

obtained by reason of the contravention which, if

our argument is right, had not occurred.

The people who are intended to be protected by

the order under section 739 would be those people

who are entitled to received a proper Part C

statement. Those people are not in any way
benefited by an order requiring disposition of
shares which were acquired at a time when the

acquisition was lawful. That is the point,

Your Honours.

Now, when one couples that reasoning on the

part of the Chief Justice with the reasoning of the
other judge in the majority, which is quite

different, it does lead to a conclusion that the

Metals 10 28/10/93

result ought not to stand. Mr Justice Olsson,

notwithstanding the views taken by his brethren, in

effect said there was a failure to comply with

section 620. Can I take Your Honours to that

passage at page 100 in the application book.

Having outlined ten factors which were

advanced by senior counsel for Samic as to why
there had been a failure to comply with section 620
or why the acquisition was not within 620,

Mr Justice Olsson concluded:

I consider that these are powerful and

reasonably based assertions which, inevitably,

lead to a conclusion that MEX cannot seek to

rely upon section 620 of the Law; and which

fundamentally undermine the conclusion of the

learned trial judge and the basis of exercise

of his discretion.

Now, that is a finding made in circumstances where

the other two judges on the Full Court said that

contention simply was not open to Samic, having

regard to the conduct of the case below.

So that one has this circumstance in terms of procedural unfairness, that the Chief Justice came

to a conclusion that divestiture ought to be

directed, based upon what we submit is an erroneous

view of the legislation. Mr Justice Cox, although

he supported the Chief Justice's view of the

legislation, did not consider that it was

appropriate to make a divestiture order.

Mr Justice Olsson did not deal with that matter but

concluded that there had been a contravention of
section 620, or a failure to get within

section 620, which all other of the three judges

involved in the proceedings said was not open to

Samic to raise.

BRENNAN J:  Your argument really nullifies the Part C

procedure, does it not, if a takeover offerer is

willing to purchase on the exchange during the

takeover period? I mean, the offerer can just

ignore the Part C provisions with impunity.

MR EMMETT:  But that is the rationale of section 620.

BRENNAN J: That is your argument?

MR EMMETT: 

Yes. There is, of course, an obligation imposed

by section 679 to deliver a Part C statement and
then copies of the Part C statement must be sent to
all other shareholders so that they are aware of
the offer that is made after the expiration of

14 days and which must then remain open for one

month. But in terms of buying on the stock

Metals 11 28/10/93

exchange, that is certainly so, but there	is
nothing startling about that conclusion.	That is
the very rationale for section 620. That	is what
section 620 is concerned with.

BRENNAN J: Let me put it more starkly to you. If an

offeror makes a takeover announcement on the stock

exchange and has no intention of delivering a

Part C statement and does not do so, what are the

consequences?

MR EMMETT:  He can be punished. It is an offence. He can

be directed by section 739 to deliver a Part C

statement. That is the very purpose of 739; to ensure that 679 and the like are complied with.

There is an obligation imposed and the court can

say to the offeror, "If you haven't given a Part C statement, we will require you to give one." That, with respect, is the remedy that was appropriate in

this case.

If, with respect, Their Honours had analysed

the matter properly, that is the only result that

they could have come to. The only people who would

have been prejudiced would have been those people

who did not get a proper Part C statement and the

order should have been, "You, MEX, immediately

despatch a proper Part C statement." Once that is

done, all of the unfairness arising from the

failure to deliver a Part C statement disappears,

bearing in mind that the delivery of the Part C

statement is not something that, to shareholders,

does not have to be done on the day of the takeover

offer. That is given to the target on the day of

the takeover and given to the exchange, but it is

thereafter that the - - -

BRENNAN J:  Is that not the purpose of the Part C statement,

to ensure that there is an immediate informed

market on which trading can take place?

MR EMMETT:  If there had been any acquisition on the stock

exchange on the basis of an uninformed market, that

would be a different matter, but there was a

finding below which was not challenged, it

certainly was not the subject of a finding

overturning it, that the sellers were not in any

way prejudiced because they, of course, sold before

the Part C statement had been given. So if there

had been acquisitions on the stock market - and

perhaps this is a qualification of an answer that I

gave to a general question Your Honour put to me

before - if there are acquisitions on the stock

market after a misleading or incomplete Part C

statement has been given, then it may well be that

it might be appropriate then to order divestiture

of those shares. But not because of a

Metals 12 28/10/93

contravention of section 615 but because of the
contravention of section 679, the failure to give

the Part C statement.

BRENNAN J: Yes.

MR EMMETT:  So that there is, in our submission, no

startling consequence from the proposition that

Your Honour put to me. By necessity, the language

of section 679 assumes that there can be
acquisitions even before the Part C statement is

delivered.

Those, in our submission, are the reasons why

this is an appropriate case for the Court to

reconsider the matter. First of all it does raise

the question of the true effect of Part 6.4.

Perhaps just two matters that I should say by way

of supporting the argument that we want to advance. In section 679 itself reference is made to a person

making offers by an announcement in accordance with

section 674. So that section 679 itself

contemplates that you can have an announcement in

accordance with 674 without necessarily yet

complying with the requirement in 679. Whereas the

Chief Justice's reasoning says that you can never

have a takeover announcement at all unless you

subsequently comply with 679.

Now, the more startling consequence of the

Chief Justice's reasoning is in section 739 itself.

If the Chief Justice's reasoning is correct, then

there was no jurisdiction to make any order at all

under section 739. Section 739 is predicated upon

three things: the first is that a statement that

purports to be a Part A statement has been served

or a takeover announcement has been made; not that

something that purports to be a takeover

announcement has been made. If the Chief Justice's

reasoning is correct, and he says in express terms

"no takeover announcement was made" in this case,

it follows that there was no jurisdiction to make

an order under section 739.	Now, that must be
wrong.	Even we concede that there was jurisdiction
to make an order under 739.	It just highlights the

fallacy in the Chief Justice's reasoning.

We did, in our affidavit, refer to the

judgment of Mr Justice Bryson in ICAL which

involved a similar sort of question. Unless

Your Honours want me to take Your Honours to it, I

was not proposing to, although we have copies here

if need be, but Mr Justice Bryson took a view which

is certainly not on all fours with that of the

Chief Justice in that he expressed the view that an

acquisition made in accordance with section 620

before the delivery of a faulty Part C statement

Metals 13 28/10/93

was not a contravention of section 615. He then

went on, as a matter of discretion, to say that in

appropriate circumstances it may be possible to

make an order. But he does take a different view

of the law.

So that one does have this situation, that a

single judge of the New South Wales Supreme Court

has at least tentatively suggested a view contrary

to that of the Chief Justice in South Australia.

I did not take Your Honours to the bottom of

page 72 which was really the passage where the

Chief Justice makes clear that his finding and his

reasoning on a contravention of section 615 is

critical to his conclusion. At line 29:

The second consequence is that in exercising

his discretion -

that is the judge below -

the learned judge, who proceeded upon the

footing that there was no breach of s.615,

failed to take into account the important

consideration that the acquisition of the

shares was in breach of s.615.

So it is quite clear that the Chief Justice put his

decision to uphold the appeal very much on his

conclusion that there was a contravention of

section 615 by the acquisition as distinct from the

contravention of section 679 by the failure to give

the Part C statement.

I should say just before I sit down that if

Your Honours were disposed to grant leave, there

would be a question of an application for a stay by

the present applicants. The Full Court granted a

stay of the orders for vesting which they made

until the determination of the leave application.

If Your Honours were disposed to grant leave, then

we would wish to make an application for an

extension of the stay until Your Honours have

disposed of the appeal.

MASON CJ:  Mr Emmett, I must say your argument has certainly

made clear the ground of your challenge to the

judgment of the Chief Justice in particular. I

must confess to not appreciating that that was the

point with that clarity on reading the affidavit in

support of this application. Now, it may be the

affidavit does bring that point out, but it has not

succeeded in doing so in the way in which you have

presented it here this morning. I do think that

that is a matter of some concern because the Court

does rely very heavily on the way in which the

Metals 14 28/10/93

grounds are presented in the affidavit in support

of the application.

MR EMMETT:  I accept that criticism, Your Honours. I accept

responsibility for it in that I assisted in

settling the affidavit.

MASON CJ:  I think one ought to bear in mind that the

members of the Court are not familiar with the

interaction of all these provisions in a scheme of

legislation of this kind.

MR EMMETT:  That is why it seemed desirable to give

Your Honours a little school lesson before I

started, and perhaps we should have done that in

the affidavit.

MASON CJ: Exactly; that is really what I had in mind.

Thank you, Mr Emmett. Yes, Mr Gray.

MR GRAY:  May it please the Court. We submit that special

leave should not be granted for several reasons.

One is that there were two routes that would allow

for the divestiture order that was made, either 737

or 739. The question of breach of 615 does not

infect, we say, the reasoning in regard to the acts

of discretion under 739. So we say that there were

ample grounds for the court, as it did, to utilize

that power and the line of reasoning is quite

distinct. In particular, Justice Olsson relied on

739, the Chief Justice relied on both routes.

BRENNAN J: But why would it be appropriate to order

a divestiture under 739 for the protection of the

shareholders who had not received a Part C
statement in respect of shares that had been
lawfully acquired in the course of trading on the

stock exchange?

MR GRAY:  Because the danger or the prejudice they suffered

was the prospect of another bidder being impeded by
what had occurred.

BRENNAN J: But if Mr Emmett's argument is right that it is

legitimate for an offerer to trade on the stock
exchange and acquire shares irrespective of a

Part C statement, then why would one be concerned

to think that the position of the remaining

shareholders who have not received a Part C

statement is to be affected by ordering a

divestiture of shares acquired in accordance with

Chapter 6?

MR GRAY:  If the Court pleases, we say there are two answers

to that. The first is that by the offerer having

moved immediately to acquire a further 8 per cent,

just short of 30 per cent, that that fact would

Metals 15 28/10/93

dissuade another bidder corning forward once the

takeover announcement and the Part C were

available. And His Honour the Chief Justice

referred to that wider prejudice.

BRENNAN J:	Why does that lead to an order for divestiture?
MR GRAY:	Because the offerer had been advantaged by moving

in the way that it did, in a way that would inhibit

other competitors corning forward. So that although

ultimately other shareholders would obtain a proper

Part C, they would do so in circumstances where it

was quite unlikely that another bidder would come

forward. So the competition in the market, one of

the three goals to be achieved by this scheme,
there would not be fair competition and another

bidder would be dissuaded from corning forward

because this offerer had already moved to just

below 30 per cent.

The second basis for dealing with this issue

is that the Chief Justice reasoned that it could

not be assumed that the persons who accepted the
bid immediately did so without knowledge of the

Part: statement. Although Justice Debelle, the

trial judge, had found that, the Chief Justice at

page 78, line 15 and thereafter, specifically

concluded that that assumption could not be made.

The Chief Justice said:

Mr Emmett argued that the Part C

Statement had no influence on the sale of the shares to MEX -

the offerer, which is the argument he just put to

this Court.

I do not think that that can be assumed.

There was no evidence from the vendors or the

brokers. I do not attach importance to -

a deeming section -

It is quite possible, however, that the

vendors were aware of the impending takeover

and of the proposed Part C Statement before
the transfer on 14th April. It is perhaps
even more likely that they were aware of the
Part C Statement before the sales of the 15th

April. Be that as it may, the sales on the

15th April were made under cover of the

invalid takeover announcement and Part C

Statement.

So for my learned friend to succeed in his argument

he is going to, with respect, have to overturn that

conclusion, a conclusion that Justice Cox agreed

Metals 16 28/10/93

with and also, we say, implied by Justice Olsson.

So that my learned friend's argument, we say, fails

at the threshold.

If the Court pleases, our contention in that

regard is that the exercise of the discretion under

739 cannot fairly be challenged. It stands alone

as an appropriate exercise of discretion, given the

other findings of the court.

In regard to the question of the breach of

section 615, the reasoning of the Chief Justice was

to start with the definition in section 603 which

defined a takeover announcement to mean an

announcement "made in accordance with Division 1 of

Part 6.4". The findings of the court that are not

challenged demonstrate that that did not happen;

there never was an announcement made in accordance

with Division 1 of Part 6.4 because the

announcement had to be accompanied at a point of

time with a Part C statement that did comply. That

in fact did not happen.

Therefore, by definition, there was only ever

a purported takeover announcement, there never was

in fact a takeover announcement. Section 615,

which allows for an exclusion is predicated on

there being a takeover announcement. By

definition, that had not occurred. There was but a

purported takeover announcement. Later events

demonstrated that to be the factual position. So

we would say that that reasoning is, on the face of

the legislation, plainly correct.

The Chief Justice then had regard to

section 673, not suggesting that that applied

directly to the particular circumstances but rather

the view of the Code as reinforced by the language

appearing in section 673 and, in particular, the

words "if, and only if".

My learned friend suggested that that line of

reasoning created an absurdity with the
interpretation of section 739 and he drew the

contrast between the use of the words "purported

Part A Statement" and "takeover announcement". In our respectful submission, as a matter of construction the word "purported" qualifies both

the events that followed, namely the Part A

statement or the takeover announcement, and that

section 739 correctly construed is referring to, on

the one hand, purported Part A, on the other a

purported takeover announcement.

If the Court pleases, they are our essential

submissions. The Court has our outline of

argument, as I understand it. Could I turn to the

Metals 17 28/10/93

residual points that our learned friend raised.	He
suggested that there was some tension between some reasoning of Justice Bryson in the ICAL case and
the reasoning in this Full Court decision.	In our

respectful submission, Justice Bryson's decision turned on legislation that was different in word

and significantly so. But more importantly,

Justice Bryson's comment was not in any sense fully

reasoned or essential to his decision, and that

there is not the level of tension created to allow

for special leave.

May it please the Court, they are our

submissions in opposition.

MASON CJ:  Mr Emmett, the Court is minded to grant special

leave. What about your notice of appeal?

MR EMMETT:  We made a botch of that too, did we,

Your Honour?

MASON CJ:  I am just not sure. I must say I admire your

economy of expression, but your expression may be

so economic that it is not clear. But 2(a) is

directed to the principal ground of attack on the

judgment of the Chief Justice.

MR EMMETT: That is so, yes.

TOOHEY J: Otherwise we are in the area of discretion.

MR EMMETT:  Yes. We do not ask Your Honours to play around

with what particular orders necessarily, but that

is intended to raise the primary question.

MASON CJ: Yes.

MR EMMETT:  One could, instead of saying "unlawful" in 2(a),

one could have said "in contravention of

section 615" to highlight the way perhaps in which

I put it today.

MASON CJ: That would be a better way of doing it, I think.
BRENNAN J:	As to (b), you really want to contend that 737

did not arise, do you not?

MR EMMETT:  That is so, yes. The subsequent paragraphs were

addressed to a matter that was raised in our

affidavit, which I perhaps have not developed this

morning, namely that the way in which the order

operated in the particular circumstances was as a
deterrent rather than as a remedy. In other words,
if there was no section 615 breach, the effect of

the order was to punish MEX for its failure to

comply with section 739. That is really what those

grounds were addressed - in the sense, they are

Metals 18 28/10/93

just supplementary or ancillary to or perhaps

corollaries from the basic proposition.

MASON CJ: Yes, I do not see any reason why you cannot

maintain them, but they are very much subsidiary.

MR EMMETT:	Yes.
MASON CJ:	So that what you have in mind is to amend the notice of appeal, 2(a) and 2(b), in the respects
that have been discussed. That would cover it.
MR EMMETT:	If that clarifies the issue that we wish to

argue.

MASON CJ: Yes. On that footing, the Court will grant

special leave to appeal.

MR EMMETT:	May it please Your Honours, that then raises the question of the stay.	I do not know whether it is
opposed, but - - -

MASON CJ: Is it opposed, Mr Gray?

MR GRAY:  No, it is not opposed, if the Court pleases,

except we would seek, as a condition of the stay,

that there be a restraint on the voting for shares
that have been divested, so that neither party can

deal with that matter.

BRENNAN J: Are there any other undertakings which thus far

have governed the stay?

MR GRAY:	No, none that have not now been disposed of by
agreement.
MASON CJ:	Now, are you, broadly speaking, prepared to agree

to that?

MR EMMETT:  Yes, Your Honour, subject to having leave to

apply, if need be, if something crops up.

MASON CJ:  What I suggest the parties do is agree on a form

of order and submit it to the Court during the

course of the day.

MR EMMETT:  May it please Your Honours.

AT 12.13 PM THE MATTER WAS ADJOURNED

UNTIL LATER THE SAME DAY

Metals	19	28/10/93
UPON RESUMING AT 1.00 PM:
MASON CJ: Yes, Mr Walker

MR B.W. WALKER:  May it please Your Honours, might I hand up

a form of order on which counsel are agreed.

MASON CJ:  Yes. The Court will make an order in terms of

the document entitled "Minute of Order" which has

been handed up and which will be placed with the

papers.

MR WALKER:  May it please the Court.

AT 1.01 PM THE MATTER WAS ADJOURNED SINE DIE

Metals 20 28/10/93