Mutual Home Loans Fund of Australia Ltd v Attorney General (NSW)

[1973] HCA 61

HIGH COURT OF AUSTRALIA

. Barwick C.J., McTiernan, Menzies, Gibbs and Stephen JJ.

MUTUAL HOME LOANS FUND OF AUSTRALIA LTD. v. ATTORNEY GENERAL (N.S.W.)

(1973) 130 CLR 103

21 December 1973

Companies

Companies—Prospectus—Advertisement deemed to be prospectus—Offering or calling attention to an offer of shares—Advertisement inviting public to buy from one company options to purchase shares in another—Advertisement inviting application for further documents—Whether advertisement alone or with further documents an offer of shares—Companies Act, 1961 (N.S.W.), s. 40 (1).* * Section 40 (1) of the Companies Act, 1961 (N.S.W.) provides : "Every advertisement offering or calling attention to an offer or intended offer of shares in or debentures of a corporation or proposed corporation to the public for subscription or purchase shall be deemed to be a prospectus (and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses or otherwise relating to prospectuses shall apply and have effect accordingly) if it contains any information or matter other than the following . . . "

Decisions

December 21.
The following written judgments were delivered :-
BARWICK C.J. Section 40 (1) of the Companies Act 1961-1965 (N.S.W.) (the Act), so far as presently material, provides :

"Every advertisement offering or calling attention to an offer or intended offer of shares in or debentures of a corporation or proposed corporation to the public for subscription or purchase shall be deemed to be a prospectus . . . if it contains any information or matter other than the following",

and there follows a list of matters, and concludes :

"and unless it states that applications for shares or debentures will proceed only on one of the forms of application referred to in and attached to a printed copy of the prospectus". (at p105)

2. Sub-section (3) applies the abovementioned provisions to advertisements published or disseminated in the State by newspaper, broadcasting, television, cinematograph or any other means whatsoever. (at p105)

3. Sub-section (4) makes the person who published or disseminated an advertisement which is deemed to be a prospectus and which does not comply with the Act's requirement as to prospectuses, guilty of an offence against the Act. (at p105)

4. The first-named appellant (Mutual Home Loans Fund of Australia Ltd.) advertised in each of two newspapers published in Sydney a scheme whereby home owners or intending home owners could obtain mortgage finance on favourable terms. The scheme has features akin to the arrangements of a Starr-Bowkett Society. However, instead of being carried out by an unincorporated group, it is implemented by means of two companies registered under the Act, one company (Mortgage and Discounting) being a management company and the other, the first appellant (Mutual Home Loans), providing the capital to provide the necessary loan money. (at p106)

5. Broadly, the scheme is that an intending borrower should, by nomination of Mortgage and Discounting, obtain an option or options to subscribe for shares in Mutual Home Loans. The latter company granted to the former for valuable consideration an option over all its unissued capital, with the right in the former to nominate persons to acquire and exercise an option or options to subscribe for shares in the latter company which agreed to fulfil such options. An intending borrower need not exercise the option or options when acquired : but, if exercised, the holding of shares in Mutual Home Loans carries the right to participate in ballots conducted by Mortgage and Discounting, success in which gave a right to a loan on most favourable terms as to interest and repayment, and such shares carry as well an entitlement in any case to a loan according to the priority of allotment of the shares. (at p106)

6. Sufficient details of each advertisement and the documents obtained by response to it appear in the report of the judgment of the Supreme Court in this matter (1971) 2 NSWLR 162 . (at p106)

7. In a suit commenced by originating summons in the Supreme Court of New South Wales in Equity, the Attorney-General for that State sought declarations that each of two advertisements published in daily newspapers circulating in Sydney, both alone and as in each case taken together with certain documents supplied in answer to inquiries made in pursuance of an invitation in that behalf in the published advertisement, constituted an advertisement published in contravention of s. 40. He also sought an injunction to restrain each of the defendants (the now appellants) from publishing or disseminating in the State by newspaper, broadcasting, television, cinematograph, or any other means, any advertisement relating to the first-named appellant in breach of the provisions of s. 40. (at p106)

8. The Supreme Court (McLelland C.J. in Eq.) by decretal order made the declaration and granted the injunction as sought by the respondent Attorney-General. On appeal, the Supreme Court (Court of Appeal Division) affirmed the declaration and injunction. The present appeal is by both appellants against the order of the Court of Appeal Division. (at p106)

9. The question, therefore, on this appeal is whether either of the advertisements published in a newspaper, either alone or taken with the material supplied in response to a request the making of which the advertisement encouraged (the supplied material), offered for subscription or purchase or invited subscription for or purchase of, shares in a corporation, or called attention to an offer or intended offer for subscription or purchase of such shares, or to an invitation or intended invitation to subscribe for or purchase any such shares. Neither the advertisement nor the supplied material conformed to the other requirements of s. 40. Consequently, if the question I have posed is answered affirmatively, the section will have been infringed. (at p107)

10. In my opinion, on its proper construction, sub-s. (1) relates only to offers and invitations made or extended to the public. Consequently, it is in that sense that I have posed the question arising in this appeal. (at p107)

11. It is to my mind abundantly clear that neither advertisement as published in the newspaper contained or called attention to an offer or invitation to subscribe for or to purchase any shares in any corporation ; and in particular any shares in either of the appellants. This conclusion results from consideration of the terms of the published material. The first advertisement does not mention shares at all. The second advertisement goes further than the first towards indicating how membership of the "fund" is to be obtained and gives the impression that shares in one of the companies will need to be held if the benefits of the scheme are to be secured : but clearly no reference is made to an offer of or invitation to purchase or subscribe for any shares. I would therefore conclude that neither advertisement standing alone infringed the section. Indeed it was not contended to the contrary by counsel ; nor was the contrary held by either court below. (at p107)

12. There was no claim in the originating summons that read together these advertisements infringed. But, in any case, nothing would be gained by the respondent if both were read together ; neither infringed ; and in sum they did not infringe. (at p107)

13. However, the matter cannot be ended there. The submission of the respondent, accepted by the Courts below, is that each published advertisement should be read with the supplied material so that the matter contained in that material could properly be regarded as having been part of the published advertisement. (at p107)

14. To deal with this submission it is necessary to refer to a detail of the facts. Each advertisement contained a coupon which interested persons were invited to complete and despatch to Mortgage and Discounting in order to obtain information as to the working of the scheme. It is worthwhile, I think, reproducing the text of the invitation :

"If you have housing finance problems, forward the coupon on this page and find out how simply you can arrange the best housing finance available from the various sources today."

The coupon to be sent to Mortgage and Discounting contained the request "Please send details of available finance". (at p108)

15. It is at once observable that nothing in the coupon or the invitation to its use calls attention to an offer of, or to an invitation to purchase, shares in any company. The text of the advertisement in this respect affords no clue so far as shareholding is concerned as to the manner in which the scheme will be carried out or the finance made available : nor does it in terms or by implication indicate that there will be any reference to any offer of shares in the response to the request. But the respondent Attorney-General claims that, though the published advertisement, including the text of the coupon, may not make or call attention to an offer of or invitation to purchase shares, the supplied material does so and is part of the advertisement because it was supplied in consequence of the making of the request contained in the coupon. (at p108)

16. The information conveyed in the supplied material did include a reference to the method of obtaining by nomination of Mortgage and Discounting an option or options to take up shares in Mutual Home Loans. I would agree with the Supreme Court that in general to call attention to the offer of an option to subscribe for shares is to call attention to an offer of shares within the meaning of the section. Thus, if it were now material, I would reject the appellants' argument to the contrary. But there would remain a question whether, having regard to the fact that Mutual Home Loans was already bound to issue its unissued capital to Mortgage and Discounting, there was in this case any offer to the public of that unissued capital. Mortgage and Discounting offered to nominate the intending borrower as an optionee in its place. However, having regard to the opinion I have formed upon the Attorney-General's submission, there is no need for me presently to decide whether this circumstance would be material in deciding whether attention was being called in the supplied material to an offer or invitation to the public. (at p108)

17. The proposition submitted by the Attorney-General is largely founded on a decision of a Divisional Court in England, Earp v. Roberts (1947) 1 All ER 136 . There Goddard L.C.J., with the concurrence of Lewis J., without affording any reason therefor other than the statement that a contrary decision would frustrate the intention of the legislature, held that all the material supplied in response to a request, the making of which was invited by an advertisement, was itself advertised so as to infringe a prohibition on advertising information of the nature of that contained in the supplied material. I am unable to accept this conclusion as a general proposition ; and in particular as correct in relation to the statutory provisions with which we are here concerned. The statute requires the published advertisement to make or to call attention to an offer or invitation of a particular kind. If no indication is given in the published material of the nature of the information to be supplied, I cannot regard the supplied information as part of the advertisement for the purposes of the section in this case. To advertise that if a request is made information to the advantage of the enquirer will be given, is not in my opinion as a general proposition to publish in that advertisement what the advertiser might be minded to vouchsafe to the optimistic inquisitor. No doubt such a course is a method of bringing what is supplied to the notice of the enquirer. It may even be regarded in an appropriate context as a means of bringing the facts contained in the supplied material to the notice of the public. But that is not, in my opinion, to publish an advertisement containing that material within the meaning of the section. It must be remembered that the offence is to publish or disseminate an advertisement. The offence is not to advertise. It is not satisfied by any method of bringing an offer or invitation to public attention. The offer or invitation or the reference to it is to be found in the published advertisement. (at p109)

18. If the advertisement sufficiently indicated the nature of the information to be given in response to the use of the coupon and if information of that nature would fall within the prohibition of the statute it may be proper to treat the further particularity of that information contained in the supplied material as part of the advertisement for present purposes. But in that case there would be no need to resort to the supplied material. The advertisement itself would infringe. But if, as in this case, no indication is given in the published advertisement, including the coupon and the request for its use, of the existence of a relevant offer or invitation, I could not conclude that whatever information is given in response to the use of a coupon forms part of the published advertisement for the purposes of s. 40 (1). It is, in my opinion, an insufficient reason for concluding to the contrary that otherwise a ready means of evading the statute may be available. To incorporate the supplied material in the published advertisement in such a case would, in my opinion, involve the Court in legislating and changing the nature of the offence, by doing for the draftsman what he has failed to do by the language in which the section is cast. (at p109)

19. Reference was also made to a decision of Northcroft J. in Telford v. Shaw (1944) NZLR 481 . But, in my opinion, that case turned exclusively upon a statutory definition not present in the Act in this case : I find no need further to discuss that decision. Therefore, in my opinion, neither advertisement as published in the newspaper can be read with the supplied material to form in totality an advertisement issued or published in contravention of s. 40. It follows that, in my opinion, the section was not infringed by either appellant. (at p110)

20. There was a suggestion that the supplied material was itself an advertisement because it was supplied in response to an invitation forming part of an advertisement. But, in the first place, no declaration to this effect was sought by the Attorney-General or made by the Courts below: and, in the second place, the supplied material furnished to the individual enquirer was, in my opinion, not the subject of an advertisement. The fact that it was supplied in response to the coupon contained in the advertisement does not, in my opinion, suffice to make it a published advertisement within s. 40. Nor, in my opinion, is the supply of the material to the individual enquirer the publication or dissemination of the supplied material as these terms ought to be understood in the section. The evident purpose of the section is to compel particular information to be given as to offers or invitations to purchase or subscribe for shares, made or extended to the public. The final words of s. 40 (3) "any other means" ought to be read ejusdem generis with the preceding words. Thus, what is in fact a private communication between Mortgage and Discounting and the individual enquirer ought not be held to be a publication or dissemination "by any other means" within the scope of the sub-section, notwithstanding the fact that the communication resulted from a published advertisement. (at p110)

21. No point was taken in this case that the declarations sought related to a criminal offence and the injunction to the commission of further criminal offences. The ability of the Attorney-General to bring such a proceeding has been said to depend upon persistent breaches of the criminal law antecedent to the commencement of the suit. See Attorney-General v. Premier Line Ltd. (1932) 1 Ch 303, at p 313 ; Attorney-General v. Sharp (1931) 1 Ch 121 . See also, however, Attorney-General v. Shrewsbury (Kingsland) Bridge Co. (1882) 21 Ch 752, at p 756 . It would seem to be otherwise where the suit is to restrain breach of a statutory provision not enforceable by penalty or other criminal sanction. In such a case the Attorney-General may sue to protect the public interest in the due observance of the statute. Attorney-General v. Shrewsbury (Kingsland) Bridge Co. (1882) 21 Ch 752 was such a case. (at p111)

22. Having regard to my opinion that the suit should fail, I have no need to resolve the question of the competence of the Attorney-General to commence it or whether, if the decisions be accepted, the reference in this case to two advertisements is sufficient to satisfy the requirement of antecedent persistent breaches. Nor need I consider what bearing the substantial nature of the penalty in this case may have upon the propriety of making a declaration as to a breach of the criminal law. (at p111)

23. In my opinion, the appeal should be allowed. (at p111)

McTIERNAN J. I have read the reasons for judgment of the Chief Justice and I agree with them. (at p111)

MENZIES J. This is an appeal by special leave from the judgment of the Court of Appeal of the Supreme Court of New South Wales affirming an order of McLelland C.J. in Eq. (at p111)

2. The Attorney-General of New South Wales instituted proceedings in the Supreme Court seeking certain declarations and orders against two companies : The Mutual Home Loans Fund of Australia Ltd. - "the fund company" - and N.S.W. Mortgage and Discounting Co. Ltd. - "the management company" - by reason of advertisements published in Sydney newspapers which the Attorney-General claimed were, by themselves or together with other documents sent on request to a reader of the advertisements, in contravention of certain provisions of the Companies Act (N.S.W.). By his decretal order the Chief Judge in Equity declared that each of the following advertisements was, by virtue of s. 40 of the Act, to be deemed a prospectus and that the prospectus failed to comply with the provisions of the Act relating to prospectuses :
1. Advertisements appearing in the Sydney Daily Mirror of 24th April 1969 and in the Sydney Sunday Mirror of 7th September 1969.
2. The aforesaid advertisement appearing on 24th April 1969 together with certain documents supplied in accordance with requests made in accordance with an invitation contained in the advertisement.
3. The aforesaid advertisement of 7th September 1969 together with certain documents supplied in accordance with a request invited by the advertisement. (at p111)

3. The publishing of like advertisements by the companies was restrained by injunction. (at p112)

4. It was decided by the Chief Judge in Equity and by the Court of Appeal that the defendants had published advertisements "offering or calling attention to an offer or intended offer of shares in . . . a corporation to the public for subscription . . . " If it did so, it was not in dispute that the declaration and injunction should stand because the advertisements clearly enough did not comply with the provisions of the Act relating to prospectuses. (at p112)

5. The first question is whether the documents sent to a member of the public in response to a request for further information invited by an advertisement do form part of the advertisement for the purposes of the section. The invitation was as follows :

"If you have housing finance problems, forward the coupon on this page and find out how simply you can arrange the best housing finance available from the various sources today."

The coupon stated that it was to be posted to the management company, and contained the request "Please send details of available finance". In my opinion the documents sent in accordance with such a request do form part of an advertisement Earp v. Roberts (1947) 1 All ER 136 . To decide otherwise would be to render legislation for the protection of the public substantially ineffective. (at p112)

6. The real question here is whether the advertisements offered or called attention to an offer or intended offer of shares in a corporation. By the advertisement itself members of the public were invited to join a "home loans fund" and it was stated that "Fund members proceed to a home loan". The documents supplied upon request described the prospective borrower as a person making an investment in options. Thus, in one of the documents it is stated :

" . . . we ask that you give your attention to examining the following matters which are of vital importance to anyone considering making an investment of any type. (1) Is my investment in options safe? (2) Will I save money by investing in options? (2) Should the need arise can I convert my investment to cash?
Looking at these three important questions ; firstly, an investment in options is completely safe because all option payments are lent to Fund members, only upon the security of Real Estate. Your investment is therefore as 'safe as houses'. Next, by purchasing options, members not only guarantee themselves future housing finance, but also their Fund loan will save thousands of dollars in interest payments. Finally, to the person who unfortunately has to dispose of his options, there are several alternatives available You can yourself sell your options through the 'Money, Stocks and Shares' column of the daily press or, as detailed on the back of the Option Agreement, we will sell them for you and, if there is any delay, pay you 5% interest on your money."

The Form of Application for Nomination for Options in the Mutual Home Loans Fund of Australia Ltd., which was forwarded, was as follows :

"To the Directors, N.S.W. Mortgage and Discounting Co. Ltd., 340 Pitt Street, SYDNEY. N.S.W. 2000. I/We hereby make application for.......................... (number)

Options for Ordinary Shares in The Mutual Home Loans Fund of Australia Ltd., and enclose the following first payment at the rate of 20 cents per option. Total $ Send with application. I/We agree to accept the said nomination for Options and the conditions under which same are issued and I/We hereby authorise you to place my/our name(s) on the Register of Option Nominees in respect of the number of options allotted to me/us and upon exercising my option, I/we agree to be bound by the Memorandum and Articles of Association of The Mutual Home Loans Fund of Australia Ltd. If this application is signed by attorney, the attorney hereby states that he has no notice of revocation of the power of attorney under authority of which this application is signed. If under the age of 21 years, this application must be signed by a parent as trustee. The trustee is then entered in the register. Usual Signature(s) -------------------(Applications in joint names must be signed by both parties)" (at p113)

7. A further document headed "What is an Option?" states :

"Briefly, in relation to the Fund, this means that for each option held the purchaser has conferred upon him the legal right to take up one share in the Mutual Home Loans Fund of Australia Ltd. The main attraction of an option is that the Management Company is legally bound to sell the holder one share in the Fund for each option held. However the holder is not obliged to exercise his option to purchase same."

(at p113)

8. It is apparent, therefore, that the companies were, by their advertisements, offering so-called options to obtain ordinary shares in the fund company, carrying with them the right to participate in ballots for home loans upon security in the proportion of $100 for each $40 share held. The option-holder is given the right, exercisable within a specified time, to apply for shares which the fund company is bound to accept by making an allotment. This appears from the deed between the two companies. The advertisements and the documents taken together amount, in my opinion, to an invitation to subscribe for shares in two steps ; first by the purchase of an option from the management company, and, secondly, by making an application to the fund company for shares upon which that company is bound to act. There is, of course, no assurance that everyone taking an option will subscribe for a share, but that is unimportant. What is important is that members of the public are invited to buy options entitling them to subscribe for shares which must be allotted in accordance with their applications. (at p114)

9. The fact that the public were invited to have dealings with both the fund company and the management company does introduce complications but, to my mind, these complications do not affect the character of the invitation to the public. As I have said, the relationship between the two companies is governed by a deed whereby the management company was appointed the manager of the fund company and its agent to dispose of shares in the fund company. The fund company granted options over all its unissued ordinary shares to the management company. The management company was, therefore, in a position to dispose of options and to nominate option holders as allottees of shares. The position was, I think, well stated by Sugerman A.C.J. as follows (1971) 2 NSWLR 162, at p 167 :

"It will have been seen that the Fund Company has not only found it convenient not to proceed directly to the issue of shares to members of the public, but to require the intervention of an application for and grant of an option to take them. It has also found it convenient not to receive applications for, or to make grants, of, options directly from, or directly to, the intending applicant for shares, but to act through an intermediary, following the course of an initial granting to the intermediary of options over all its unissued shares and the succeeding steps set forth in the deed of 28th March, 1968, and outlined above. As to why it has been found necessary or thought desirable that this circuitous course should be followed, instead of the more direct method of an immediate allotments of shares on application, or if a precedent grant of options were thought necessary, such grant by the fund company itself, it is, in the absence of more information than is to be found in the evidence, impossible to speculate. But it is not necessary to consider the reasons. The adoption in this particular case of the procedure which has in fact been adopted does not, in my opinion, affect the application thereto of conclusions earlier stated as to the effect, in relation to the application of s. 40 of the Companies Act, of the interposition of an option."

Furthermore, I agree with his Honour's conclusion expressed in these words (1971) 2 NSWLR, at p 167 :

"Close examination of the newspaper advertisements in question, without reference to the further documents earlier mentioned, makes it clear that each was at least an 'advertisement calling attention to an offer of shares in a corporation to the public for subscription'. It may be said that this is even clearer in respect of the second advertisement (that in the Sunday Mirror) than in respect of the first advertisement (that in the Daily Mirror), but in each instance it is clear enough.

When the newspaper advertisements come to be considered in conjunction with the several documents, identical in each instance, sent in response to the sending in of the coupon contained in each advertisement enquiring for details of available finance, it is in my opinion abundantly clear that the totality of the advertisement disseminated in each instance amounted to an offer (in the relevant sense) of shares in a corporation to the public for subscription."

I also agree with Asprey and Mason JJ.A. when they said (1971) 2 NSWLR, at pp 168-169 :

"To bring the advertisements within s. 40 (1) it must appear that they related to an offer, or intended offer, of shares in a corporation to the public for subscription. The word 'subscription' is used in contradistinction to 'purchase' which signifies the acquisition of issued shares in a corporation. 'Subscription' on the other hand refers to the acquisition by issue and allotment of unissued shares . . . Once it is accepted that 'subscription' is satisfied by an agreement to take shares, it is immaterial that the agreement comes into existence otherwise than by means of a simple application for shares followed by an allotment. It is enough that the steps contemplated result in an agreement to take shares on the part of the person who, being an option holder, exercises his option to take shares in the corporation, thereby exercising the enforceable right which he acquires by taking up an option." (at p115)

10. It is for the foregoing reasons that I would dismiss this appeal. (at p115)

GIBBS J. This appeal raises for decision questions as to the effect of s. 40 of the Companies Act, 1961 (N.S.W.) (as amended) ("the Act"). That section was evidently designed to enlarge the scope of the provisions of the Act with regard to prospectuses by applying those provisions to certain advertisements to which they might not otherwise have been applicable, although in truth some advertisements within s. 40 would clearly enough also be prospectuses within the definition contained in s. 5 (1) of the Act. The original provisions of s. 40 have been omitted, and a new section has been inserted, by s. 14 of the Companies (Amendment) Act, 1971, but the material events in this case occurred, and the judgments in the Court below were given, before this amendment took effect and I shall confine my attention to s. 40 in its original form. Section 40 (1) provided (inter alia) as follows :

"Every advertisement offering or calling attention to an offer or intended offer of shares in or debentures of a corporation or proposed corporation to the public for subscription or purchase shall be deemed to be a prospectus (and all enactments and rules of law as to the contents of prospectuses and as to liability in respect of statements in and omissions from prospectuses or otherwise relating to prospectuses shall apply and have effect accordingly) if it contains any information or matter other than the following - . . ."

The following provisions of the sub-section need not be set out since it is common ground that the documents said to be advertisements in the present case did contain material other than that mentioned in the sub-section. Section 40 (3) and (4) provided :

"(3) This section shall apply to advertisements published or disseminated in the State by newspaper, broadcasting, television, cinematograph or any other means whatsoever.

(4) Where an advertisement that is deemed to be a prospectus by virtue of subsection (1) of this section does not comply with the requirements of this Act as to prospectuses, the person who published or disseminated the advertisement, and every officer of the corporation concerned, or other person, who knowingly authorised or permitted the publication or dissemination, shall be quilty of an offence against this Act. Penalty : One thousand dollars." (at p116)

2. The learned primary judge made a declaration that each of two advertisements, published in newspapers on 24th April 1969 and 7th September 1969 were deemed by virtue of s. 40 (1) of the Act to be prospectuses and that each of the said advertisements failed to comply with the provisions of the Act relating to prospectuses, and made similar declarations in relation to the advertisement of 24th April 1969 together with other documents and the advertisement of 7th September 1969 together with other documents. He also granted an injunction restraining both appellants from publishing or disseminating any advertisement, relating to the Mutual Home Loans Fund of Australia Ltd., which is deemed by virtue of s. 40 (1) of the Act to be a prospectus and which does not comply with the provisions of the Act relating to prospectuses. (at p116)

3. The two advertisements published in the newspapers dilated upon the advantages to members of the public of joining the Mutual Home Loans Fund, a fund created to enable loans for housing purposes to be made to its members at a low rate of interest. It could have been inferred from statements in the advertisements, and more clearly from those in the second advertisement, that membership of the Fund meant membership of the company, the Mutual Home Loans Fund of Australia Ltd. (the first appellant). Each advertisement spoke of "Your opportunity to join a Home Loans Fund" and went on to suggest that a reader with "housing finance problems" should forward to the second appellant, which was referred to in the advertisement as "the option holder of the Mutual Home Loans Fund of Australia Ltd.", a coupon contained within the advertisement. The coupon simply said "Please send details of available finance". It appeared from the evidence that in response to a coupon extracted from each advertisement and posted to the second appellant there were sent documents from which it appeared that a person interested could apply to the second appellant for options for ordinary shares in the first appellant, and a form of application was in fact included amongst the documents for use for this purpose. It further appeared from the documents that the purchaser of an option had "the legal right to take up one share in" the first appellant and the right to take part in ballots for housing loans. Although the documents did not so state, in fact the appellants were parties to a deed executed on 28th March 1968, whereby the first appellant granted to the second appellant options over its unissued ordinary shares and gave to the second appellant the right to grant those options to other persons. The second appellant was not bound to accept an application by a person who wished to be granted an option, but after an application was accepted the option holder, or "nominee" as he was called, was entitled to request the first appellant to allot him the requisite number of shares, and the first appellant was required by the deed to do so, if the nominee had complied with the conditions set out in the deed. (at p117)

4. The learned primary judge found that "the literature which was sent to members of the public who responded to the invitation to seek further information formed part of the advertising and that the advertising was authorized by both the Fund Co. (the first appellant) and the Management Co. (the second appellant)". Before us, no challenge was made to this finding. (at p117)

5. In accordance with the arrangements made by and between the appellants, any member of the public might have applied to the second appellant for a so-called option, and, if this application had been granted, then had a right, provided that he had complied with the relevant provisions of the deed, to be allotted a specified number of unissued shares in the first appellant. There was, in my opinion, an offer of shares in the first appellant to the public for subscription, notwithstanding that in order to become a subscriber a member of the public had to obtain the grant of an option from the second appellant and had to comply with the requirements set out in the deed. The offer was hedged about by conditions, but could be accepted by any member of the public who complied with them. Having regard to the evident purposes of s. 40, I see no reason to restrict its operation to an offer of shares for subscription made in a more direct and conventional manner. (at p118)

6. The question then is whether the advertisements published in the newspapers called attention to this offer, I incline to the view that if those advertisements were to be considered without reference to the further documents sent in response to the coupons, this question should be answered in the negative. It is true that each advertisement endeavoured to encourage members of the public to become members of the Fund and, by inference, to acquire shares in the company, but neither advertisement itself suggested any particular manner in which the shares might be acquired or expressly referred to any offer to sell or to allot the shares. However, in the view that I take it is unnecessary to decide whether either advertisement, considered in isolation, would have fallen within the terms of s. 40 (1). In my opinion, when an advertisement informs the reader that, on request made in a particular way, he will be sent further information, it is proper to have regard to any document sent in response to a request made in that way for the purpose of deciding whether or not the advertisement calls attention to a specific matter. In such a case the advertisement calls the attention of a person who receives the additional document to the matters stated in it, just as effectively as if those matters were set out in the advertisement itself. The question raised by the words of s. 40 (1) is not what the advertisement contains but to what does it call attention. The advertisements in the present case called attention to an offer of shares to the public for subscription, not by expressly referring to that offer, but by stating that on request the reader would be given further information which, when supplied, in fact referred to the offer. It is true that the advertisement may not have called the attention of every reader to the offer but it did in this way call the attention of some readers to it, although it did so not directly but by reference. Put in another way, in deciding whether the advertisement called attention to an offer of shares, it is right to read the advertisement together with any other documents which were furnished as a result of a request which the advertisement itself suggested should be made. (at p119)

7. Although it is perhaps immaterial to decide whether the newspaper advertisement, or that advertisement together with the connected documents, constituted the "advertisement" within the meaning of s. 40 (1), it seems to me that, strictly speaking, it was the newspaper advertisement that answered that description, not because it would have done so if it had to be read in isolation but because it was designed to, and did in fact, call to the attention of the reader other documents that expressly referred to an offer of shares to the public for subscription. If it matters, I can, with respect, see no difficulty in treating a number of closely connected documents as an advertisement within s. 40 (1) - if the requirements of the Act as to prospectuses are not met by those connected documents the result simply is that s. 40 (4) will be infringed. On the view that I take, each advertisement was published in a newspaper and it is therefore unnecessary to consider whether the words "or any other means whatsoever" in s. 40 (3) should be confined to means of the same kind as those previously enumerated, although in saying this I am not to be taken as expressing a view that the means of communication previously specified do all belong to one category or genus. (at p119)

8. If it had appeared that the newspaper advertisement had been inserted by the first appellant, and that the documents sent in response to a request prompted by that advertisement had been sent by the second appellant, it should have been concluded that the first rather than the second appellant had published an advertisement of the kind to which s. 40 (1) refers. It was an inescapable inference that the documents were not forwarded accidentally or gratuitously, but in accordance with the intention held by the first appellant when it published the newspaper advertisement, and it was therefore immaterial that the first appellant did not itself actually despatch the documents. However, having regard to the unchallenged finding that the advertising was authorized by both appellants, and to the association between them, it does not seem to me inappropriate that the declarations made against them both should stand. (at p119)

9. No question was raised before us as to the propriety of the exercise of the discretion to grant an injunction in the circumstances of the present case, or as to its form, and it does not appear that these matters were canvassed at either of the hearings below. In these circumstances I see no need to consider further this aspect of the case. (at p119)

10. I would dismiss the appeal. (at p120)

STEPHEN J. This is an appeal from the judgment of the Court of Appeal of the Supreme Court of New South Wales affirming a decretal order of McLelland C.J. in Eq. (at p120)

2. That order declared that each of two newspaper advertisements, whether standing alone or considered together with other connected documents, constituted an advertisement deemed, by virtue of s. 40 (1) of the Companies Act, 1961 (N.S.W.), to be a prospectus and that in each case the resultant deemed prospectus failed to comply with the statutory requirements relating to prospectuses. The order also restrained each of the appellants from publication of any advertisement relating to the first-named appellant which might be deemed to be a prospectus and which did not comply with those statutory requirements. (at p120)

3. It is unnecessary for me to set out or discuss in any detail the two quite lengthy advertisements or the much longer associated documents ; nor need I analyse the details of the scheme described in the advertisements, which involves the provision of housing loans to participants. This task has already been undertaken by the learned primary judge and is referred to in the reasons for judgment of the members of the Court of Appeal (1971) 2 NSWLR 162 . (at p120)

4. Section 40 (1) of the Companies Act, 1961, so far as relevant to this appeal, deems to be a prospectus every advertisement "offering or calling attention to an offer or intended offer" to the public of shares in a corporation or proposed corporation for subscription or purchase. The question is whether the relevant advertisements, with or without associated documents, constitute such an advertisement. (at p120)

5. In my view neither of the two newspaper advertisements, viewed in isolation, is an advertisement offering shares to the public or calling attention to such an offer, even if "offer" is taken to include an invitation to the public to make offers, as I think it should be. (at p120)

6. The first advertisement, which appeared in a Sydney daily paper early in 1969, speaks, at persuasive length and with considerable imprecision, of the merits of the scheme for the provision of housing loans through fund membership and although the first-named appellant, sometimes referred to as "the fund", is also described as a limited company nothing is said about its shares nor about how membership may be attained. The treatment in this advertisement of the concept of fund membership suggests membership of some co-operative savings fund conducted by one or both of the appellants rather than membership in the first-named appellant itself. (at p121)

7. The second advertisement, which appeared in a Sydney Sunday newspaper late in 1969, does convey to the reader that membership of the fund may involve the holding of shares in the first-named appellant, but I cannot regard it as an advertisement which either offers shares to the public or calls attention to such an offer. It is little more than an eulogistic description of the virtues of a system of home financing apparently provided by the appellants. (at p121)

8. If these two newspaper advertisements viewed in isolation do not constitute advertisements for the purpose of s. 40 (1) the question arises whether either of them can be read together with other associated documents so that the whole may then be treated as an advertisement falling within the sub-section. In Earp v. Roberts (1947) 1 All ER 136 a Divisional Court, constituted by Lord Goddard C.J. and Lewis J., held that a newspaper advertisement which promised "full information on application" could be read together with a circular and covering letter which were supplied by the advertiser when application was later made to him ; together, it was said, the documents constituted the one advertisement the publication of which constituted an offence. No reasons for treating the three documents as one appear in the short judgment of the Lord Chief Justice, with which Lewis J. agreed, other than reference to the ready evasion of the statutory prohibition there in question to which any different interpretation would lead. (at p121)

9. The context of s. 40 suggests to me that an "advertisement" referred to in sub-s. (1) cannot consist of a number of documents such as are here relied upon by the respondent. Here it is sought to connect with each of the two newspaper advertisements a set of three documents forwarded by the second-named appellant in response to a coupon addressed to it, which coupon was cut out of the original newspaper advertisement, completed and then posted to it ; these three documents comprised, in each case, a standard form of letter from a director of the second-named appellant, a form of "application for nomination for options in" the first-named appellant, ready for signature by the recipient and return to the second-named appellant, and a twelve page booklet describing the first-named appellant and the home finance scheme which it conducted. (at p121)

10. Of these four documents the newspaper advertisement was caused to be published by the first-named appellant and is, in any event, by virtue of s. 40 (5), deemed to have been published by it because two of its directors supplied to the newspaper, which in fact published it, a certificate pursuant to that sub-section ; the letter, on the other hand, came from the second-named appellant, as did the application form ; the fourth document, the booklet, also came from it, although it may have originated with the first-named appellant. (at p122)

11. Section 40 (4), which creates the offence of publishing or disseminating a deemed prospectus which does not comply with the prospectus requirements of the Act, makes guilty of an offence "the person who published or disseminated the advertisement". It does not appear to contemplate a case in which the deemed prospectus is comprised of a number of documents, some published by one person and some by another. In such a case it may be that neither could successfully be prosecuted since neither would have published more than what is said to be only a part of a prospectus. Again, the terms of s. 40 (5) appear more consistent with the view that the advertisement there referred to is not one which may consist of a set of documents published by various persons. A similar inference seems to me to flow from those sub-sections of s. 40, sub-ss. (1), (2) and (3) , which are concerned to deem certain advertisements to be prospectuses which must comply with statutory requirements relating to prospectuses, exempting only those advertisements which satisfy the conditions imposed by sub-s. (1). Thus advertisements falling within s. 40 (1) and not so exempted must be printed in a minimum size of print - s. 39 (1) (a), must bear a date - s. 39 (1) (b), must contain specific indorsements or attachments - s. 39 (1) (e), and a duly signed copy must be registered with the Registrar ; these requirements all appear to contemplate a single advertisement. When, in this context, the language used throughout s. 40 treats the "advertisement" as one document only I am not disposed to treat the set of documents here in question as together capable of constituting an advertisement for the purposes of the section. (at p122)

12. However this is not to deny to one or more of the constituent parts of those two sets of documents the character of an advertisement within s. 40 (1). If any of them answers to the description of an offer of shares in a corporation to the public or calls attention to such an offer it will, in my view, fall within s. 40 (1). The fact that these documents were supplied in response to a request which was itself promoted and fostered by the public advertising of a printed coupon and accompanying advertising matter suffices to give these documents the quality of an advertisement for the purposes of s. 40 (1). To advertise for applications by the general public for the supply to them of material of this sort is, as Northcroft J. observed in Telford v. Shaw (1944) NZLR 481, at p 483 , as much a bringing of the material to the notice of the public as if it has been distributed in the streets and is, in the present instance and without the aid of a definition clause such as his Honour was there concerned with, nevertheless enough to justify describing that material as advertisements within s. 40 (1). (at p123)

13. If the three documents which in each case were sent in response to a completed coupon are examined it plainly appears that the letter from a director of the second-named appellant calls attention to an offer of options in respect of shares in the first-named appellant, that the form of application constitutes an offer of such options and that the booklet is both an offer and also constitutes a calling of attention to that offer. (at p123)

14. It only then remains to determine whether the fact that what are offered are options rather than the shares themselves and that those options are subject to the nomination of the second-named appellant suffices to prevent the application of s. 40 (1). On those aspects I am content to adopt, with respect, what has been said in the judgments in the Court of Appeal. (at p123)

15. It follows that in my opinion declarations should not have been made as sought but that declarations in similar terms could properly have been made in respect of each of the three documents which, on each of two occasions, were supplied in response to an application by way of completed coupon. The important relief obtained by the respondent was, however, the injuction and even upon my view of the declarations it was, I think, proper for such an injunction to issue. Since writing the foregoing I have had the opportunity of reading the reasons for judgment of the other members of the Court, which express differing views concerning the outcome of this appeal. Since I consider that the injuction should stand unaffected by this appeal I would, consistently with that view and notwithstanding my conclusions as to the precise form of the declarations made, join with Menzies and Gibbs JJ. in dismissing this appeal. (at p123)

Orders

Appeal dismissed with costs.