Paringa Mining & Exploration Company Plc v North Flinders Mines Limited
[1988] HCATrans 227
IN THE HIGH COURT OF AUSTRALIA
Registry No Cl6 of 1988 B e t w e e n -
PARINGA MINING & EXPLORATION
COMPANY PLC
Applicant
and
NORTH FLINDERS MINES LIMITED,
C.L. MAY MELLOR LAING &
CRUICKSHANK LIMITED,
GEOFFREY HUGH STEWART,
CLEMENS FREDERICK WEGENER, JOHN JOSEPH den DRYVER, PETER RICHARD MITCHELL, DEAN WILFRED HOSKING
Respondents
Application for Interim Injunction
TOOHEY J
Paringa (In Chambers)
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY,· 7 OCTOBER 1988, AT 9.31 AM
(Continued from 6/10/88)
Copyright in the High Court of Australia
C3Tl/l/RB 45 7/10/88
HIS HONOUR: Yes, Mr Grieve.
MR GRIEVE:
Your Honour, overnight we have prepared a summary of the essential facts that
we
were
outlining to Your Honour yesterday. May we hand up two copies.
HIS HONOUR: Yes, thank you. MR GRIEVE: Without going through that in detail, we have copies being made for our friends - I pass the first
of them down the line. Without going through that summary by way of repetition of what we put
yesterday, could we go forward to the last page,
paragraph 13, which addresses the question that yourYour Honour raised at 4.30 yesterday evening, namely what is the worst case picture, and the way in which
the applicant puts it is that it is faced with a
dilemma; either it has to outlay an amount in the order of $80 million to preserve its equity in
North Flinders with the consequence having regard
to the expert's view as to the value of ADL that
its shareholding in North Flinders will only increase
in an overall sense by some $20 million-odd, leaving,
in reality it short by some $60 million.Alternatively - and the other horn of the dilemma is presented - if Paringa does not take up the
rights issue to assist North Flinders in the
acquisition at an overvalue of ADL, then
inevitably its equity in North Flinders will
diminish and by as much potentially as 29 per cent-odd,
and we apprehend and fear that the rights issue willbe taken up to a very large extent either by the
shareholders of NFM or by others pursuant to a
placement.
Now, all of that is predicated, Your Honour, on the proposition that the
proposal to pay
$2.75 cash for the ADL shares is a proposal
demonstrably at an overvalue. In paragraph 11 of the outline we make reference to what we submit
to be the preponderance of expert opinion on this
top. In volume V of the books Mr Keevers, at page 610 and following, and relevantly at page 610(0)
expresses the view that having regard to his
analysis of ADM's underlying assets, that a fair
assessment of the value of its shares is in the
range 86 cents to $1. 13.
(Continued on page 47)
C3Tl/2/HS 46 7/10/88 Paringa MR GRIEVE (continuing): Mr King at page 126 of the books,
Volume I at about point 7 on the page says:
Using the optimistic $40 million valuation
for the White Devil Mine and making adjustments
for cash assets of $2 million the net present
value per share for ADM is $1.09.
And on the next page - 127, says:
I can find no fundamental basis for supporting
ADM's share price at levels in excess of the calculated $1.60 per share.
Next Mr Levin in Volume II, page 146 -
HIS HONOUR: Is that Volume II?
MR GRIEVE:. Volume II, page 146. I am sorry, Your Honour, that
1s wrong.
HIS HONOUR: It should be be Volume II page 138.
MR GRIEVE: The affidavit starts at 138 and the expression of opinion is at 146. It is an expression of
opinion at about point 8 on page 146. As to thevalue of the company's assets, he puts that at
$40.59 million. Byway of mathematical deduction
the applicant I s experts in short compass. The that confirms a share value at a $1.09. They are only independent expert from the viewpoint of a valuation on a net asset backing basis put forward by the respondents is a firm called Armour Consultants and they affirm the value to be on the footing
of a gold price of $600, to be $1.19. I will just turn up the reference to that conclusion, Your Honour. It is page 332 which I apprehend is in Volume III - page 332 of the books.
Your Honour sees the firm has set out in a table form - "Australian Development - $600.00 11 , we understand to be a reference to $A600 per we went to this yesterday, Your Honour - "Net
fine ounce of gold and the figure stated - I think
present value shares - $1.19 11 • Thus the experts all appear to agree that the price of $2.75, leaving aside such considerations that the bid is unconditional and that there is a majority shareholder, Poseidon, holding 55 per cent yet
to express its attitude, fortifies what we
respectfully submit to be a compelling case forultimate relief on a final hearing. That then, Your Honour, takes us to an
assessment of the discretionary considerations
to be addressed in an application of this kind.We put it that if, as we submit it to be, the
C3T2/l/AC 47 7/10/88 Paringa case is a compelling one for the grant of interim
relief in the nature of an injunction pendingthe application for special leave in the sense
that it is one where the denial of such relief
may well visit an injustice on the applicant, the
questions going to the exercise of discretion
-~-are those formulated by Mr Justice Brennan in
the JENNINGS CONSTRUCTION V BURGUNDY ROYALE case,
69 CLR at 265, and we hand up two copies.
HIS HONOUR: I have it, thank you. MR GRIEVE: Mr Justice Brennan outlines the criteria at 267 line 38 in these terms:
(Continued on page 49)
C3T2/2/AC 48 7/10/88 Paringa MR GRIEVE (continuing): In exercising the extraordinary
jurisdiction to stay, the following
factors are material to the exercise
of this court's discretion. In each
case when the court is satisfied a
stay is required to preserve the
subject matter of the litigation, it
is relevant to consider -
and we pause to say, in our submission, Your Honour
could, in light of the facts, be satisfied that this
is an appropriate case in which to preserve thesubject-matter of the litigation, namely, Paringa's
controlling interest in North Flinders. His Honour
proceeds:
It is relevant to consider - first, whether
there is a substantial prospect that special
leave to appeal will be granted; secondly,
whether the applicant has failed to take
whatever steps are necessary to seek a stay
from the court in which the matter is
pending; thirdly, whether the grant of a
stay will cause loss to the respondent;
and fourthly, where the balance of
convenience lies.
In our submission, it may well be and we submit
this is a case in point where issues 3 and 4 tend
to run together. May we respectfully proceed to address each of those four issues as they arise
in this particular instance.
We submit that the applicant has a substantial
prospect of obtaining special leave for the
following reasons and, of course, one must have
regard to section 35A of the JUDICIARY ACT. May we pause to just advert to that section. It entitles the Court to have regard to any matters
words and then requires the Court to have regard: that it considers relevant in the general opening (a) Whether proceedings in which the judgment to which the application relates
was pronounced involve a question of law -(i) that is of public importance, whether because of its general application or
otherwise -That is the only limb of (a) that is presently
relevant and:
(b) whether the interests of the administration
of justice, either generally or in the
C3T3/l/SH 49 7/10/88 Paringa particular case, require consideration
by the High Court of the judgment to
which the application relates.
We submit that three questions will arise on the question of special leave although, of course,
---= - we accept that it is not for Your Honour to express
any view as to whether special leave will or will
not be granted. All that we have to make out isa case involving a substantial prospect that leave
will be granted.
The first matter which we submit arises under
the introductory words of the section is the fact
that the Full Court of the Supreme Court of
South Australia has declined to entertain any
application for urgent injunctive relief pending
an appeal to that court.
HIS HOIDUR: Does that not involve you in a threshold difficulty
in establishing that that decision is, itself,
appealable?
MR GRIEVE: We submit not in the sense that we submit that
we can at least point to it as an administrativedecision. Now, it may well be, although we have sought special leave to appeal against it, it may well be that it is not a decision in the sense of a judgment of the court from which any appeal could be brought but that fact or that proposition cannot, in our submission, gainsay the event, namely, that as a matter of administration within the Full Court
the court has, as it were, closed its doors andindicated that it will not afford what we submit
to be the applicant's right incidental to itsright of appeal, namely, a right to seek interim
relief pending the hearing of the appeal and we
submit that that is a matter to which the High Court,
this Court, can have regard as a relevant matterwithin the purview of the opening words of the section. HIS HONOUR: But I just have some difficulty with that notion. If you can get off the ground in the sense that you
can show that that decision is appealable withinthe terms of the JUDICIARY ACT, then the
circumstances surrounding the decision and its
implications may, of course, be quite relevant
but how do you make good the proposition that thisis a matter which could possibly come before the
High Court by way of an application for special
leave to appeal?
C3T3/2/SH 50 7/10/88 Paringa
MR GRIEVE:
We would simply point to it, if one assumes for the sake of discussion that it is not a decision
of the Full Court from which an appeal could be
brought to this Courti We would nevertheless point to the fact of the event, namely, that the applicant sought to invoke one of its ancillary rights, namely, _::-_ -ancillary to its right of appeal, the right to seek
interim relief, and was denied the opportunity of
applying for such relief.
HIS HONOUR: But in that event its relevance can only be in relation to the two decisions of Mr Justice Legoe
from which an application for special leave to
appeal can readily be brought.
MR GRIEVE: Yes. HIS HONOUR: Readily in the sense that it is a matter that
comes within the terms of the JUDICIARY ACT.
MR GRIEVE: Yes. It may serve to shed some light, and we will come to it in a moment, on the question arising
under subparagraph (b) which, as we would understand it,
was a que~tion that was perhaps troubling Your Honour to sorre
degree yesterday, namely, whether, in the interests
of the administration of justice, there is a requirement
that the High Court should consider the judgment to
which the application relates, the judgment being that
of Mr Justice Legoe.
HIS HONOUR: I am not sure that I follow that. MR GRIEVE: Well, Your Honour, as we would understand it, what
may be said against us, and we will reserve our rights
in reply, of course, but if it may be said that, well,
there is no inevitability of an appeal to this Court in thatin the meantime the Full Court may have heard and
favourably disposed of our appeal - I say favourably
in the sense of allow it - that would render
unnecessary any further pursuit of an appeal to this
Court by us. We apprehend that it may be said against us that, in that sense we cannot satisfy subparagraph (b).
Now, we would, however, respond to that, at least
pro tem, by saying that it cannot be guaranteed in
the light of the Full Court's refusal to entertain
any application for interim relief that the FullCourt
will necessarily give to our clienc any priority or
expedition in the hearing of its appeal to the the strength of our case, that in the light of that event, the Full Court will allow our appeal.
HIS HONOUR:
My point was rather a different one, Mr ,Grieve. Perhaps repeating what I said yesterday, namely, that
the application for injunctive relief must be seen as ancillary to the application for special leave to appeal and not the other way around.
C3T4/1/VH 51 7/10/88 Paringa
MR GRIEVE: Yes, of course. HIS HONOUR: Now, if it appeared beyond the shadow of a doubt that there was not~ing that had been done in the
Supreme Court of South Australia that was appealable - - -
MR GRIEV:E_~ Yes.
HIS HONOUR:
- - - then it does not assist the applicant to persuade the Court that there would be some
injustice if injunctive relief were not granted because the whole basis of the claim for injunctive had simply disappeared. MR GRIEVE: Yes, I understand that, Your Honour, yes. HIS HONOUR:
Well now, if, for instance, the only matter in respect of which special leave was sought was the refusal by the Full Court to grant your client an
accelerated hearing date for its appeal - - - MR GRIEVE: Yes. HIS HONOUR: - - - andif·it:appeared that that was not an order
or judgment of the Cour~ then all the argument that
could be addressed about injustice and so on reallywould not assist - - - MR GRIEVE: I understand that, Your Honour. HIS HONOUR:
- - -because there would be no foundation for the application for special to appeal.
MR GRIEVE: I understand that. HIS HONOUR: Well now, I appreciate that there is here as well a decision, in fact two decisions, of Mr Justice Legoe
in respect of which special leave to appeal is sought.
MR GRIEVE: That is right, Your Honour.
HIS HONOUR:
But then that takes us into the other area of the Court's readiness to grant an application for
special leave to appeal from a single judge,. whatever the strength of the case might be if it were an application in respect of a judgment of the Full Court. MR GRIEVE: Yes, we appreciate that, Your Honour, and while we accept the oft-stated view that this Court will not
ordinarily entertain an application for special leaveto appeal from a single judge in that this Court
seeks the assistance of the intermediate appellate
court, that proposition, of course, is not a universal
proposition in the sense that it would go so far as
to say this court cannot entertain an appeal from
a single judge; that it ordinarily would not do so
does not mean that it will never do so nor can neverdo so, and where the circumstances are such, as a
C3T4/2/VH 52 7/10/88 Paringa matter of fact, that the applicant for special
leave has done all within its power to obtain a
hearing before the intermediate appellate courtin relation to the subject-matter of the appeal,
namely, the refusal first to continue the
interlocutory relief and, secondly, a refusal
_.=-_-to grant interim relief pending an appeal, then
we submit that the appeals from those two decisions
of the single judge can properly be brought tothis Court if the fact is, as we submit it to be,
that the intermediate appellate court has simply
said, "We will not hear you."
(Continued on page 54)
C3T4/3/VH 53 7/10/88 Paringa
HIS HONOUR: But that does not assist you, at least, in respect of the decision regarding the hearing
of the Full Court appeal if you cannot bring
yourself within the terms of an appealable
decision.
MR GRIE\!'.E_: Yes, we are assuming when we put this submission that any argument to the effect that the Full
Court has made a decision from which an appeal can be brought would be rejected and that we
are forced back to the position of having but
two decisions from which we seek to appeal.
HIS HONOUR: Then that takes you into the second of the considerations that were mentioned by
Justice Brennan in the BURGUNDY ROYALE case.
MR GRIEVE: Yes. HIS HONOUR: Is it right to say that the doors of the ·
South Australian Supreme Court are closed to
you?
MR GRIEVE: We submit that it is in this sense: the doors personified by. a.single jud~e, are, in our submission,
closed as a matter of principle, having regardto Mr Justice Legoe's decision on Monday.
HIS HONOUR: say "as a matter of law 11, or do you? What do you mean by "principle"? You do not MR GRIEVE: Well, we mean "as a matter of law" when we
say "as a matter of principle". We mean that in the sense that Mr Justice Legoe has exhausted
the jurisdiction of a single judge of the SupremeCourt of South Australia to entertain the application
that we made , namely - - -
HIS HONOUR: Does that mean that if you could knock on the door of another judge of the supreme court and persuade that judge that this was a matter
which he ought to entertain that he would lack jurisdiction to deal with that application?
MR GRIEVE: Your Honour, we submit that it may well mean that in the sense that if one has regard to what Mr Justice Megarry sai~.the judge is not functus
merely by reason of his having refused
interluctory relief. He still has, as it were, a vestige of jurisdiction to go further and hear
an application for relief pending an appeal.
We submit that it follows, as a matter of logic,
that once he has exercised and exhausted that
last vestige of jurisdiction, by either granting
or refusing relief pending an appeal, that is
that - that is the end of the jurisdiction of
a court in a single judge.
C3T5/l/ND 54 7/10/88 Paringa
HIS HONOUR: So you do not relate that merely to the particular judge before whom the matter originally
came but you appear to be saying that that
exhausts jurisdiction so far as any single judge
of the Supreme Court of South Australia is concerned.
MR GRIE-VE-: That is our submission. HIS HONOUR: Is there any authority, to support that?
MR GRIEVE: No, Your Honour, we have none. We regret to say we have not been able to unearth any in the
limited time available but we submit that it
follows from what Mr Justice Megarry said in
the ERINFORD case, for the reasons we have just
put.
If we move on to the first question posed
by Mr Justice Brennan, the substantial prospect
of success in obtaining special leave, we submit
that the questions which the applications for
special leave raise are questions of public
importance. First, in relation to Mr Justice Legoe's
decision on 30 September the question which arises,
Court, is whether or not the principles relating
to the grant of interlocutory inj~nctions are
as stated in the AMERICAN CYANAMID case and as
endorsed by Chief Justice Gibbs in the AUSTRALIANyet to be considered by this Court as a Full expressed by this Court in the BEECHAM case.
That, we submit, is a matter properly warranting consideration by this Court as a Full Court.
In relation to Mr Justice Legoe's decision of
3 October, we submit that the question which
rises there of general importance is whetheror not the principle stated by Mr Justice Megarry in the ERINFORD case is, in fact, a correct principle and as to whether His Lordship's enunciation of the criteria to be applied in
determining whether of not a single judge who has refused interlocutory relief has nevertheless a vestigial jurisdiction and discretion to grant relief pending an appeal are all matters of general
importance.
(Continued on page 56)
C3T5/2/ND 55 7/10/88 Paringa MR GRIEVE (continuing): Proceeding, if we may, to the
second question proposed by Mr Justice Brennan, namely, whether or not the applicant has failed
to take whatever steps are necessary to obtain
relief from the Court in which the matter is
_pending, we have to a large degree, already,
--addressed that in dialogue with Your Honour. We simply say that the applicant has applied to a
single judge, namely Mr Justice Legoe, has
been refused, has applied to the Full Court, has been refused and we should mention, Your Honour, by way of additional fact as emerging from the
affidavit, the Chief Justice has given a direction,
application in the matter is to be made to so to speak, that any further single judge Mr Justice Legoe. Now that as a matter of fact rather than as a matter of principle would tend to support the inference that any other justice of the Supreme Court of South Australia to whom
an approach was made. would conformably with the
Chief Justice's direction, simply refer thematter back to Mr Justice Legoe.
HIS HONOUR: Where does that direction appear in the papers, Mr Grieve?
MR GRIEVE: Would Your Honour just pardon me one moment.
We are just fishing it out. Would Your Honour -
HIS HONOUR: Well you could go on, as long as you let me know before you finish.
MR GRIEVE: - - - bear with us for a moment while I find that. Yes. If we are correct in saying that that would
be the corollary of the Chief Justice's direction,
then it, we submit, would be inevitable, the full
argument having been put to Mr Justice Legoe as
to why he should grant an injunctive relief pending
an appeal and no particular matter of significance
that might bear on His Honour's view of that
having subsequently occurred, that His Honour would, as a matter of inevitability say, "Look, I have
decided this. I have made my decision plain. How
often do I have to tell you. I hold told you once. I don't have to tell you any more frequently", and thus, even if, as a matter of principle we had a
right to return to a single judge, given the
Chief Justice's direction, the return would be to
Mr Justice Legoe inevitably, and His Honour's attitude,
with respect to him,would be foregone.
It is in the affidavit of Miss Williams,
Your Honour, page 5, paragraph 1. 16:
Shortly afterwards on the evening of
3 October Mr Bagot was telephoned by
Mr Boziak who informed Mr Bagot that
C3T6/1 /HS 56 7 /10/88 Paringa he had spoken to the Chief Justice who
advised him that the Chief Justice was
not prepared to hear an appeal
and the order of Mr Justice Legoe
of 3 October, order list the matter
to be heard by the Full Court prior
to the November sittings, nor to hearing
such application for interlocutory relief
pending the hearing of the appeal, such
applications only to be made before
the Honourable Mr Justice Legoe.
Now, Your Honour, as we put a short time ago, the
third and fourth issues posed by Justice Brennan
in the BURGUNDY ROYALE case, namely whether the grant of an injunction would cause loss to the respondents,
and where does the balance of convenience lie,
to a certain extent run together. We have already put the proposition that the refusal of an injunction
would cause irreparable harm to the applicant,
and it is appropriate in this context, then to
see what the countervailing effect of an injunction
on the respondents would, or may, be. No doubt the respondents will assert that the balance
favours them and we will wait to hear what they
have to say about that, but in anticipation of
some of the arguments that may be put may we first,
of course, put it that we are offering the usual
undertaking as to damages and we submit that any
hardship that the respondents may arguably suffer
would be adequately protected by that undertaking.
We submit that no case of loss can, in reality,
be made out, first, because of the strong
possibility of success in Paringa's action at the
final hearing; secondly, any argument that may be
put to the effect that an injunction would cause
North Flinders to commit an offence under the
take-over's Code is irrelevant in that, if it were
otherwise, such a proposition could be said to deprive the courts of jurisdiction to restrain
activity demonstrably in breach of duty. (Continued on page 58)
C3T6/2/HS 57 7/10/88 Paringa MR GRIEVE (continuing): It is another way of s-aying, I suppose, --~- that one cannot take advantage of one's own wrong. One cannot set about undertaking a
course of action in breach of one's duties
and then plead that that course of actioncannot be prevented because any prevention
may puts its perpetrator in a position of
jeopardy.
In any event, even if that is not so, we
submit that there are a variety of reasons why
it would not follow, as a matter of inevitability,
that if injunctions were to go as we seek them,
there would be an offence committed by the
first respondent company or anyone else. First,
while it is said that such an offence would arise
under section 17(14) of the take-overs Code in
the sense that one cannot withdraw a bid and the
bid must remain open, there is a countervailing
power under subsection (12) to extend the term
of the bid.
Furthermore, the NCSC, the National Companies
and Securities Connnission, has wide powers under
sections 57 and 58 of the Code to either exempt
any party from its application, 57, or to modify
the Code so as not to have any of its provisions
apply in any given case. Furthermore section 33(6)
of the Code enables a part Coffer to be withdrawn
with the consent of the Commission if the Commission
is satisfied that it is just and equitable that
such a withdrawal should take place and, indeed,
it is Paringa's desire to invoke section 33(6)
in the ultimate and have the North Flinders bid
withdrawn on the footing that justice and equity
is made good by the fact that the bid was conceived
in breach of duty. A further answer to any such complaint on the part of the respondents is that the courts have
plenary power under section 47 and 48 to grant
appropriate relief in a given circumstance. We can develop on those matters if they are pursued
by any of our learned friends.
Now, Your Honour, the next matter to which we
would refer on this question of harm to the
respondents and the question of balance of
convenience is that, in reality, all that
North Flinders can point to as a consequence of
any injunctive relief is that its bids for ADL
C3T7/l/SH 58 7/10/88 Paringa and Paringa will be subjected to a relatively
short term delay. If one assumes, for the sake of the discussion, that Paringa fails in its ultimate claim, then North Flinders will be at liberty to proceed with its bids
--- then and thereafter. Now, the bid for Paringa -- itself can be seen as essentially hollow because Genoa will not accept it in any event
for reasons that we shortly addressed yesterday and thus, even the short delay that is entailed in relation to that bid is scarcely of any
prejudicial moment to ADL.
TOOHEY J: What do you mean by short delay? What are the
yardsticks?
MR GRIEVE: Well, Your Honour, we understand that the hearing
of the main suit is to cotm:I1ence in the Supreme Court
of South Australia on Tuesday next, 11 October and that suit should, by rights, be concluded within a matter of two to three weeks. Now, it may well be
that that estimatew.ill blow out as estimates often
do but it certainly will not blow out by any
matter of months or even many weeks beyond. We accept that there is a possibility that the trial
judge may wish to consider his decision for a
short time but, given the overall urgency of the
matter - - -
TOOHEY J: Well, that is a distinct possibility.
MR GRIEVE: Yes but,given the overall urgency of the matter,
we would anticipate that it will be the subject of a final decision, at least at first instance, this side of Christmas.
(Continued on page 60)
C3T7/2/SH 59 7/10/88 Paringa
MR GRIEVE (continuing): So, in reality, Your Honour, on a worst case view, the delay is not many many
months but perhaps, at worst, two months.
HIS HONOUR: That is so long as you put to one side the possibility of the unsuccessful party appealing
__ -:-to the Full Court and in turn one or other parties
seeking special leave from this Court. That takes
you well into next year.
MR GRIEVE: It does. It depends on which party is unsuccessful
though. If Paringa is unsuccessful in the main
suit it will have the running in the Full Court
to persuade the Full Court that notwithstanding
its failure, after an exhaustive factual inquiry,
to demonstrate to the satisfaction of the trial
judge that the plan was vitiated for want of good
faith on the part of the defendant directors
or by reason of oppression on the part of the
first defendant, it would have the burden of
persuading either the Full Court or this Court
that in the teeth of that finding the issue being,
in the ultimate perhaps, one of fact,nevertheless
injunctive relief should continue to go.
On the other hand, of course, if, as we
confidently expect, Paringa makes good its case
before the trial judge and demonstrates afteran exhaustive analysis of the evidence that the
plan was indeed vitiated by equitable fraud then,
Your Honour, it would follow necessarily that
the injunctions that we presently seek on an
interim basis would be ordered on a final basis
and properly so. So, Your Honour, we,while acknowledging that there may appeals beyond the
decision of a single judge, cannot express with
any confidence the expectation that in the event
of a failure by Paringa in the main suit thatit could hope to have any injunctions that
Your Honour was minded to grant today or any other
injunctive relief extended beyond that adverse
decision. And thus, as we put it, from the point of view of delay - the delay if North Flinders
is right and Paringa is wrong beyond some time
in December~is, in our respectful submission,
marginal.
(Continued on page 61)
C3T8/l/AC 60 7/10/88 Paringa MR GRIEVE (continuing): Now, as we put it, any suggestion that
delay would operate adversely in relation to the bid for Paringa itself is, we submit, without substance,
given Genoa's indication that it will not accept the
bid and given that the bid is conditional upon a
51 per cent acceptance. In other words, Genoa,
holding approximately 55 per cent of Paringa, has
--=---the power itself to block the bid for Paringa without
any curial intervention at all. It would not
necessarily stop NFM persisting with it, and hence
we seek relief in relation to it. But it is perhaps not so essential as the relief that we seek in
relation to the rights issue and the bid for ADL.
So far as the ADL bit is concerned, Your Honour,
the delay, in our submission, will not as a matter
of strong probability cause any harm or hardship or
loss to NFM - North Flinders - itself for a variety
of reasons. First, the evidence from the market-place,
if nowehre else, indicates that at least as matters
presently stand, the ADL shareholders regard the price
of $2.75 as particularly attractive, and that, ofcourse, we rely on in another context of suggesting
that that price is grossly excessive. We are, as was put yesterday, in an apparent climate in which the gold
price is in a downward spiral and as the gold price
continues to fall, logically the $2.75 remains
attractive and becomes even IIDre so to the ADL shareholders.
Now, whilst one cannot necessarily predict that
that downward trend will continue, there is no necessary
indication to the contrary. It cannot be said that a
delay of the North Flinders bid would subject
North Flinders to prejudice or hardship because some
third party may seek to take up a strategic stake of
10 per cent plus in ADL so as to thwart North Flinders
bid. That is so because North Flinders bid isunconditional in any event. It is so, further, because
Poseidon is and has always been in just that position
in any_~ event, holding 55 per cent of ADL' s capital.
Moreover, since North Flinders now has itself more than
10 per cent, it is in a position to thwart any third party's
aspirations for ADL. Thus, from almost any view, it is difficult, if not impossible, to suggest that a mere delay of the
North Flinders bid will cause it any loss or hardship.
The second respondent, the broking company, we submit ,
cannot point to any loss or hardship. Certainly we
submit it cannot point to any loss or hardship notcapable of quantification and thus adequately covered
by the undertaking as to damages in the event that it
was capable of being established. The broker has acted
with full knowledge of Paringa's allegations from theoutset and it has, in any event, an adequate indemnity
from North Flinders. We will return to that, if we have to, after our learned friends have said what they
have to say.
C3T9/l/VH 61 7/10/88 Paringa Finally, on this question of hardship and balance
of convenience - hardship to the respondents, balance of convenience and the like - although ADM itself has
been allowed to intervene in the proceedings it cannot
in its own right claim any hardship as distinct from
__ any possible hardship that may be asserted by its
shareholders. On the other hand, they are, or least
have been, since 23 September, on adequate notice of
Paringa's claims and we mentioned our position in that regard yesterday.
Whatever may otherwise be said about their position,
given the likelihood that the North Flinders bid will
remain attractive and can be pursued by North Flinders
in the due course of time, the worst loss to which they,
if they were here to talk about it, could assert
would be the loss of the use of their money or the money
for their shares between now and perhaps early December
at the latest. Now, even if they were here to complain
about that, that in our submission is a loss which is
readily calculable and equally, if recoverable, amply
within the ambit of the undertaking as to damages.
So, in our submission, the respondents can point really
to no loss, harm or hardship by the grant of the
injunction while, on the other hand, the applicantmaintains its claim that, given the critical link
between the rights issue and the bid for ADM, that if
those two proposals are to proceed, its damages will be
incalculable and, at all events, irrecoverable.
It is for those reason$, Your Honour, that we
respectfully submit that the injunctions should continue -to go.
(Continued on page 63)
C3T9/2/VH 62 7/10/88 Paringa HIS HONOUR: Thank you, Mr Grieve. Mr Myers?
MR MYERS: If Your Honour pleases. We are at a little bit of a disadvantage, Your Honour, :which I hope ~ill
not cause practical difficulties because we have·
not received any copies of the appli~ation books~: to which my learned friend has referred and which Your Honour has but we have attempted to do the
best we can working from someone else's to get
page references but I say that in a prefatory
way, Your Honour, in the hope that it will not
prove to be too great a difficulty.
The applicants have contrived applications
for special leave to appeal in these proceedings
for the purpose of gaining the interlocutory
relief that they have been twice refused in the
Supreme Court of South Australia. It is a case
of the tail wagging the dog. The applican~s claim is for an interlocutory injunction pending
the three special leave applications and it
is put on the basis that it is necessary to preserve
the subject-matter of the applciations.
We do not contest, of course, the jurisdiction
of the Court to grant an injunction pending an
application for special leave. My friend referred to the BURGUNDY ROYALE case; we remind Your Honour
of the decision in the ATTORNEY-GENERAL (UK)
V HEINEMANN PUBLISHERS (AUSTRALIA) PTY LTD,
(1987) 61 ALJR 612, and Your Honour's unreported
decision in the matter of NATIONAL MUTUAL LIFE
ASSOCIATION OF AUSTRALASIA LIMITED V GENERAL
TELEVISION CORPORATION PTY LTD.
Those cases show that the jurisdiction that
sought to be invoked is a jurisdiction which will
only be exercised in exceptional circumstances.
It is an extraordinary jurisdiction asMr Justice Brennan put it in the BURGUNDY ROYALE
case. No case has been put where an appeal against an interlocutory judgment has attracted the exercise of that jurisdiction.
In our submission, Your Honour, it is necessary to consider whether the applications for special
then plainly the injunction should not go. That is adopting the words of
leave have any substantial prospect of success. success,
Mr Justice Brennan in the BURGUNDY ROYALE case
which my learned friend read to Your Honour. The primary application, as we apprehend
it, although it is not the first in time, is
for special leave to appeal against a refusalto grant an interlocutory injunction pending
C3Tl0/l/ND 63 7/10/88 Paringa an appeal against a refusal to grant an
interlocutory injunction by Mr Justice Legoe.
So this is His Honour's decision on 3 October.
His Honour refused to grant an interlocutory
injunction pending an appeal against a refusal
to grant an interlocutory injunction and an
_::-_- application for special leave is brought to this
Court against that refusal.
We would say, with respect, that that
application for special leave is hopeless and
has no prospects of success whatever. The procedural manoeuvrings by the plaintiff in this case have
led to a Gilbertian situation where there are
interlocutory injunctions upon interlocutory
injunctions upon interlocutory injunctions.
In our respectful submission, one could not conceive,
quite apart from the question of the merits,
why this Court would grant special leave against
a decision of a single judge of a State court
where there has been instituted an appeal to
the Full Court on a discretionary judgment in
a matter of practice and procedure.The complaint that is made in substance
here boils down to this, that the Full Court
of the Supreme Court of South Australia on Monday
night would not upset its civil list which it
had commenced hearing on Monday in order to fitan application for an interlocutory iniunction
into its list, an interlocutory injunction against -
a refusal to grant an interlocutory injunction
pending an appeal against a refusal to grant
an interlocutory injunction.
(Continued on page 65)
C3Tl0/2/ND 64 7/10/88 Paringa
HIS HONOUR: Not quite right, is it, to say that the Full Court refused to disturb its list to allow an application for interlocutory injunction to be made to it. Rather, is it not, the Full Court was not prepared to
__ entertain, at that stage, an appeal from a
--- refusal of Mr Justice Legoe to grant an
interlocutory injunction.
MR MYERS: I think, with respect, Your Honour, it did both. We were not notified of this, the conversation with
the registrar,but we understood Miss Williams'
affidavit to say that the registrar or whoeverthe administrative officer is who communicated the
Chief Justice's decision said that the Full Court
would not hear the appeal against Mr Justice Legoe's
refusal nor would it convene to hear an application
for an interlocutory injunction pending that and I think is 1.16 of Miss Williams' affidavit and it is on page 47 - no, I am sorry, Your Honour. My learned junior will have to locate it in one of our friend's books.
HIS HONOUR: Well, you could let me know that later, Mr Myers.
MR MYERS: Page 546 - I beg Your Honour's pardon. I am sorry, we do not have the books - - -
HIS HONOUR: Put it to one side for the moment. Let me have
the rest.
MR MYERS: - - - but it is 1.16 of Miss Williams' affidavit and I am told it is not in the books so that is
why we cannot find it in the books.
It is an affidavit sworn in support of the
application made to Justice Wilson.
HIS HONOUR: Yes, I have her affidavit. What paragraph are you taking me to?
MR MYERS: 1.16, the last two lines: Nor to hear such applications for interlocutory
relief pending the hearing of the appeals.
HIS HONOUR: Yes, thank you. MR MYERS: One, with respect, can understand this because the Full Court has commenced its civil list which
is to run for two weeks. The matters which the
Full Court is being asked to consider have been debated before two judges of the court over no
less than six days in the preceding week, including
on a Sunday, up until midnight. So that quite apart from the matter of merits, in our submission,
this is a case where the High Court would not grant special leave and so. it cannot be said that there
C3Tll/l/SH 65 7/10/88 Paringa is a substantial prospect of a successful
application for special leave. Further to
that, Your Honour, in considering whether
special leave should be granted, the Court
would naturally consider whether the decision
of the judge below is plainly correct and if
-~~- the judge below is correct, then special leave
would not be granted.
Mr Justice Legoe, in reaching his decision
on 3 October, in our submission, was plainly
correct and for several reasons. The application
made to him was based on the ERINFORD PROPERTIES
principle. It was an application which it was
said was made to preserve the subject-matter of
the appeal against his earlier interlocutory order
pending the hearing of that appeal. That was thebasis of it. The subject-matter is not strictly
the subject-matter of the whole suit. It was made
to preserve the position pending the hearing of
the appeal against the decision of the 29th torefuse interlocutory relief.
Now, if Your Honour pleases -
HIS HONOUR: Just so I do not confuse myself unduly, you
said the 29th.
MR MYERS: I am sorry, the 30th. HIS HONOUR: The 30th.
MR MYERS: He began on the 29th. I beg Your Honour's pardon. It was the 30th.
It was said it was necessary to preserve that
subject-matter and that distinction is important,
in our respectful submission, to identify the
subject-matter that is being preserved. It is
the subject-matter of the appeal against the
earlier decision to refuse an interlocutory
injunction.
HIS HONOUR:
And what do you identify as the subject-matter of that material?
(Continued on page 67)
C3Tll/2/SH 66 7/10/88 Paringa MR MYERS: Well, it is the rights that the appellant has to
interlocutory relief pending the trial of the action.
That is the subject-matter of that appeal.
HIS HONOUR: But that is only lost or preserved by the outcome of the appeal, is it not?
MR MYERS-:- - In a sense, yes, what Your Honour says, with respect, be
correct, but the point that I want to take Your Honour
to is this: that Mr Justice Legoe was correct
because the probability is that that appeal will never be heard. That appeal cannot be heard until after the
trial and here is an application made to preserve the
subject-matter of an appeal which, in all probability,
will never be heard. Precisely the same thing applies,
in our respectful submission, in relation to theseapplications to the High Court. There are special
leave applications being made and injunctions being
sought pending the hearing and determination of the
application to preserve the subject-matter of the
special leave applications, yet the special leave
applications, in our respectful submission, are most
unlikely ever to be heard. The trial begins on Tuesday.
HIS HONOUR:
Is it a corollary of that proposition that it would be open to the applicant to seek from the trial judge
an injunction pending the hearing and completion of the action to begin next Tuesday? MR MYERS: Exactly, Your Honour, and with respect, Your Honour,
that was precisely the point that I wanted to come to.
The purpose of an interlocutory order is to preserve things pending the trial and once the trial commences
the trial judge is seized of it and application for an injunction in some terms or another can be made to him every day of the trial, depending upon the evidence that comes out. This highlights another evil of the application that is being made to Your Honour. What is being sought to be done now is to obtain
orders which will extend beyond the period of the trial and which will not be alterable by the learned '.trial
judge. That is opposed to the whole nature of
inte!:!l6cutory relief. The purpose of an interlocutory order is to preserve things until the trial, until
the hearing and determination of the action maybe, butalways giving the trial judge who is in command of the proceedings the right to alter, vary, extend, change, do what he wishes with the interlocutory injunctions. And what this application is about is to take away that power from the trial judge. In our respectful submission, on that account alone
it is hopeless. The idea of a court making orders which are so-called interlocutory orders which are not simply
till the trial of the action and being able to be
varied, altered, extended by the trial judge is opposed
to the whole notion of interlocutory relief. But I have taken myself a little bit off the track, Your Honour.
C3Tl2/l/VH 67 7/10/88 Paringa I began on that path by submitting that
Mr Justice Legoe was quite correct in saying that
the injunction sought on Monday on the basis of
the ERINFORD PROPERTIES principle should ·not_ be granted.He did not refuse to apply the ERINFORD PROPERTIES
principles and I will read his reasons to
-~- -Your Honour in a moment. On the contrary, he said, "I acknowledge that, but in this case there is not room for the application of that principle
because, amongst other things, the appeal is not
going to be heard until after the trial has been
commenced and one would expect concluded." We agree, with respect, with our learned friend that
this matter will take two to three weeks. We would hope it will take nearer two weeks than three weeks.
The issues of fact, again, with respect, are not awfully complicated. There are no difficult
principles of law involved. the trial judge will
have todetermine whether he accepts that the directors
whom he will see and he will see cross-examined are
telling the truth about their purposes. We would expect that the trial of this action would be
completed and there would be judgment in the course of this month. (continued on page 69)
C3Tl2/2/VH 68 7/10/88 Paringa
HIS HONOUR: One difficulty, perhaps, with the argument you were putting to me a moment ago - and if it
is inconvenient to deal with it now, Mr Myers,
deal with it whenever it is convenient - is that
has not Justice Legoe, by implication, refused -
well, not by implication, expressly refused to grant
--~- interlocutory relief pending the hearing of the
action?
MR MYERS: Yes, he has, Your Honour. HIS HONOUR: And it is true that the argument has moved to the area of the appellate process, that that
is because His Honour refused to grant an injunction
to preserve the position pending trial?
MR MYERS:
Yes b~t 1 with respect, the only order that has ever been sought, and the only order that could be sought, was one to preserve the position pending
the trial of the action. An application for an interlocutory injunction made before the trial of thaaction cannot be "to be determined by the Full Court depending upon the outcome of any appeal that might be instituted by any party". is always for an order until the trial of the
action able to discharged and varied by the trial judge, depending upon what happens at the trial. circumstances that would lead to the trial judge
reconsidering the position whether to grant or
discharge or vary any interlocutory injunction.HIS HONOUR:
But there would still be a hiatus, would there not, if for instance I dismiss the application
today unless an application were made to the
trial judge on Monday or late today, ~here wouldbe that period, at least_ of Monday,during which there would be no restraints upon the respondents. MR MYERS:
Yes, that is so, Your Honour. Monday is a public
holiday in South Australia. Could I mention that. That is the reason the trial is commencing on Tuesday. That may be immaterial but it is none the less a fact. HIS HONOUR: Well, I take it it is immaterial as far as
share dealings are concerned.
MR MYERS: It would be immaterial as far as share dealings
are concerned but, Your Honour, Mr Justice Legoe
considered, after six days of argument and 800 pages
of evidence, that there should not be an
interlocutory order restraining transactions
pending the trial. He was not satisfied that there should be an order both because he doubt~d
that there was a serious question to be tried
C3Tl3/l/ND- 69 7/10/88 Paringa and he thought that the balance of convenience
was in favour of the defendants - the respondents.
I will come to His Honour's reasons for
that, Your Honour. Your Honour has heard about half the story, or less, on that subject and
__ we believe that we can correct, perhaps, the misunderstandings that might arise about what
truly happened early in September in relation
to this company.
But the fact that there is a one day hiatus
is not something of which the applicants to
Your Honour can complain. They have had their day in court, in fact, they had six days and
they lost. But if when they open their case before the trial judge it appears that there is some other fact or circumstance they can apply
for their interlocutory injµnction. They can do it every morning. It is this aspect concerning the subject-
matter of the appeal which Mr Justice Legoe was
asked to preserve that really betrays the
applicants, in our respectful submission. Mr Gray, who appeared with Mr Lander, also one of Her Majesty's counsel, and Mr Bagot before Mr Justice Legoe seeking the interlocutory injunction,
submitted to His Honour that a trial was required
as soon as possible. That was at the forefront
of his submissions. He said "a trial at the earliest possible date". He put that, Your Honour, because that made it less painful to grant the
interlocutory injunction. If there was going
to be trial next week, obviously it is not too
difficult to hold things until next week.
(Continued on page 71)
C3Tl3/2/ND 70 7/10/88 Paringa MR MYERS continuing): That application was supported by
the parties for whom I appear and the parties
for whom my learned friend, Mr Heerey, now
appears and so the earliest possible trial date,leaving just one week - and therewas a public
_::-_- holiday on the Monday - was fixed. At 5.30 on Friday, the 30th, at the end of argument,
Justice Legoe said, "If I were disposed to
dissolve the interim injunction and not to grant
an interlocutory injunction, would the parties
still desire an early trial date''. So, he is putting Mr Gray to the test and Mr Gray said,
"Yes, we would like even an earlier trial".
That is at page 315 of the transcript of the
judgment. "Yes, we would like even an earlier trial". Then, that night, the tactics have
changed. There is going to be an appeal against
the refusal to grant the interlocutory injunction
and it is realised, of course, that if the appeal
against that refusal cannot be heard before the
trial commences, there can be no ground for
seeking an ERINFORD PROPERTIES injunction in the
meantime because the subject-matter that is sought
to be preserved by the ERINFORD PROPERTIES
injunction is the hearing of an appeal which will
never occur or will occur after the trial and,
hence, there is no basis for the application of
the ERINFORD principle.
So what does a notice of appeal that has
got out that night provide? It has, as one of
the orders that it has appealed against, the
early trial. Overnight, or in the course of the
night, from wanting an even earlier trial, a new
tactic has been thought up so we say, "No. We
appeal against the decision to grant the early
trial" and then my learned friend, Mr Grieve,
on Monday, comes before - my learned junior will
find that notice of appeal - on the Monday when
Mr Grieve is now retained and appears before
Justice Legoe for an extension of the interim order that was granted by Justice von Doussa
on Saturday, he says, at page 367 of the
transcript:
Could Your Honour hear me before giving
effect to that order?
Because His Honour had said that he will not extend
the injunction granted by Justice von Doussa:
Would Your Honour be disposed to defer giving effect to that order and I imagine one can do that by directing it not be entered until a
time later than now for this reason. It
would appear, with respect, Your Honour's
C3Tl4/l/SH 71 7/10/88 Paringa reasoning has been influenced if not
decisively, at least, substantially by
the pendency of the trial.
--=--- Quite properly, we say:
We would wish to consider our position
in regard to that matter and without
wishing to be cryptic about it, it may well be that our instructions would be
to move to vacate the hearing date with
a view to endeavouring to press our appeal
at the earliest possible time.
So that it is realised that the fact that the trial
is going to commence soon, very soon, is the objection
to these ERINFORD PROPERTIES-type injunctions and so,
having said on Friday night, having put at theforefront of their submissions on Friday that they
want an early trial for tactical reasons, they
find that the tactics of tying people up with
interlocutory applications require putting off
the trial.
(Continued on page 73)
C3Tl4/2/SH 72 7/10/88 Paringa
MR MYERS (continuing): The notice of appeal is in appeal book number V, at page 835, and the sixth order,
or paragraph of the order was that:
There be an early trial of the
action commencing on 11 October.
HIS HONOUR: Just one moment, please, Mr Myer. How is that volume identified?
MR MYERS: It is appeal book volume V. HIS HONOUR: Did you say page 835? MR MYERS:
Page 835, yes. It begins at page 834, but the paragraph of the order that I want to rely upon is
at page 835. HIS HONOUR:
My volume V, assuming I have the right volume, seems to peter out a:t about page 741.
MR GRIEVE: Your Honour will find the page in volume VI.
It is the same pagination, different covers.
MR MYERS: It is volume VI, my learned friend says. I am indebted to him.
HIS HONOUR: You may have to rely on him from time to time, Mr Myers, to give you the correct volume.
MR MYERS: I do beg Your Honour's pardon. I am now using my learned friend, Mr Hayes', volume of these appeal
books, I think supplied by my learned friend
Mr Grieve , and it certainly says volume Von the
outside, but it is page 834. The pagination is consistent.
HIS HONOUR: Yes, I have that. MR MYERS: Would Your Honour turn to page 835:
The appellant hereby appeals to the Full Court -
page 835. Page 836: That there be an early trial of the
act ion commencing on 11 October -
and complains of paragraphs 1, 4 and 6 only.
So the complaint is about the early trial of the
action. This change occurs overnight. Mr Gray, when tactics suit us, he is saying, "Yes, we want an
early trial because that will help us get an
interlocutory injunction". Then when they fail to get the interlocutory injunction the only basis
of not getting substantially the same order is to
C3Tl5/l/HS 73 7/10/88 Paringa preserve the subject-matter of an appeal against
the refusal of the grant of the interlocutory
injunction, and of course if that appeal cannot
come on before the trial, then there is no basis
for an ERINFORD PROPERTIES order, so they complain
about the early trial.
Your Honour, this whole business, including
the application to this Court, is the most blatant
and bare-faced attempt to tie up the respondents by
interlocutory applications. So that that circumstance, we say, is a very important aspect
of the matter and certainly justified Justice Legoe
refusing that application made by Mr Grieve on the
Monday. I have referred Your Honour to what Mr Grieve said to His Honour about applying to vacate the trial date.
HIS HONOUR: I am just looking to see what ground was formulated to support that particular aspect
of the appeal. I cannot immediately find it.
MR MYERS: No, it is a very short notice of appeal. It was obviously knocked out overnight to support the
application to Justice von Doussa and Mr Grieve
spoke to the same effect to His Honour Justice von Doussa
immediately before His Honour Justice von Doussa
refused the extention of the interim relief on the
Monday and said that "he may well be getting
instructions to apply to vacate the trial date",
and I have read those words to Your Honour.
(Continued on page 75)
C3T15/2/HS 74 7/10/88 Paringa
HIS HONOUR: The matter would return to Justice Legoe by the due date.
MR MYERS: Mr Justice Legoe, yes. There is something that really bears on the
~~- propositions that have I have been putting to
the Court about the form of the order being sought
from the Full Court and this Court. I am not just complaining about the form of the order sought but the form of the order sought also
shows -the misconceived-nature of the application.
The order being sought from the Full Court and the order being sought from this Court, and in fact obtained from Justice Wilson - first of
all the Full Court, it is on page 837 of that
book, is:
That .until further order the defendant,
North Flinders, be restrained .....
That until further order the defendant,
C.L. May Mellor Laing and Cruickshank .....
be restrained.
The same orders have been sought from this Court
but, Your Honour - and the same orders are being
sought from this Court but, in fact, the most
they could possibly be entitled to would be orders
pending the trial of the action because thisCourt could not make - or should not, perhaps
I should say, nor should any Full Court, make
an order for an interlocutory injunction which
might be inconsistent with the final determination
of the matter by the trial judge.
The whole point about the interlocutory
injunction is to preserve things until the trial
and put it in the hands of the trial judge who
has the conduct of the matter as to how it will
be dealt with. An interlocutory injunction restra]ning matters pending a trial is a matter of practice and procedure. It is simply a matter
of achieving some sort of balance of interestsuntil the trial judge commences the trial and
is seized on the whole issue.
So the very form of order that is being
sought from the Full Court and here shows why
the application is, in our respectful submission,
hopeless.
HIS HONOUR:
I remain a little uncertain as to what precisely is sought from this Court because there is no
motion seeking in any precise terms injunctive relief so that is to be spelt out from the order
C3Tl6/l/ND 75 7/10/88 Paringa itself which I assume resulted from a minute
or draft handed up by Mr Grieve when the matter
was before Justice Wilson.
MR MYERS: We do not know anything about that, Your Honour, because one of the other things I am going to
-~--have a bit of a complain about is the fact that
the application to Justice Wilson was made without
notice to us.
HIS HONOUR: But the order itself, as emerged from the discussion I had with Mr Grieve yesterday, is
simply an order injuncting the first respondent
and the second respondent until such further
order as may be made, although it is apparent
from what Mr Grieve said yesterday that he is
seeking a continuance of that injunction until
disposition of the appeal to the Full Court.
MR MYERS: Yes, and what I am really saying is twofold, that the Court should not make such an order
b~cause it is only an appeal against a refusal
td grant an interlocutory injunction. If they
had· succeeded on their interlocutory injunction
the matter simply would have been until the trial
for the trial judge to consider day by day as
the trial proceeded. So they are seeking more from this Court than they could possibly have
got if they had succeeded before Justice Legoe
on 30 September. They could have only got an order until the trial and that is not just a
proposition about the form of order that should
be made by this Court. It is an illustration
of the fact that the proceeding in this Court
is based upon a fundamental misconception.
(Continued on page 77)
C3Tl6/2/ND 76 7/10/88 Paringa
MR MYERS (continuing): The ERINFORD principle preserves the subject-matter of whatever it is that is going to be done
a~J here it would be the subject-matter of the
special leave application. But if the special
leave application cannot come on as a practical
matter until after the commencement of the trial,
7
- --then there cannot be an ERINFORD order. If Your Honours pleases, may I next refer
to the decision of this Court in
ADAM P. BROWN MALE FASHIONS PTY LTD V PHILIP MORRIS INC,
148 CLR 170. In this case an application was
made to a judge of the Federal Court to vary
an undertaking as to damages or to discharge it
and substitute another undertaking. The application was opposed but the judge ordered that the
respondent be discharged from the original undertaking.
The applicant appealed to the Full Court of the
Federal Court which allowed the appeal and then
there was an appeal to the High Court and at page 177
the High Court comprising the Chief JusticeSir Harry Gibbs and Justices Aickin, Wilson and
Brennan said this:
An interlocutory order for an injunction
is a matter of practice and procedure -
obviously so. And then they go on: Nor is there any serious dispute between
the parties that appellate courts exercise
particular caution in reviewing decisions
pertaining to practice and procedure. Counselfor Brown urged that specific cumulative
bars operate to guide appellate courts in
the discharge of that task. Not only must
there be error of principle, but the decisionappealed from must work a substantial injustice
to one of the parties. The opposing view is that such criteria are to be expressed
disjunctively. Cases can be cited in support
of both views: for example on the one hand, NEIMANN V ELECTRONIC INDUSTRIES LTD -
that is a decision of the Full Court of the
Supreme Court of Victoria -
on the other hand, DE MESTRE V A.D. HUNTER
PTY LTD. For ourselves we believe it to be unnecessary and indeed unwise to lay
down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of
Sir Frederick Jordan in IN RE THE WILL OF
F.B. GILBERT (dee.):
C3Tl7/l/AC 77 7/10/88 Paringa
· I am of the opinion that, ... there is a material difference between an exercise
of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein
were not kept upon interference with the
orders of Judges of first instance, the
result would be disastrous to the proper
administration of justice. The disposal
of cases could be delayed interminably,
and costs heaped up indefinitely, if a
litigant with a long purse or a litigious
disposition could, at will, in effect transfer
all exercises of discretion in interlocutory
applications from a Judge in Chambers to
a Court of Appeal."
And here, of course, it is the High Court as well. In our respectful submission those words apply remarkably well to what has happened here
and to those whom my learned friend Mr Grieve
represents. Here a plethora of applications for interlocutory and interim orders is being made
and maintained in order to tie up the respondents
pending the trial of the action, so that in effect
the relief which was refused after six days of
hearing by Justice Legoe is obtained by a variety
of interim applications to various judges and
various courts.
Furthermore, the applicants go even further.
They now say that not having obtained the interlocutory
injunction which would have entitled them to an
order until the trial of the action, that is,
until Tuesday when the matter would be considered
day by day by the trial judge, they are entitled
to an order in the same terms until the hearing
of an application for special leave which will
occur after the trial. And because of those observations in ADAM P. BROWN, in our respectful
submission, it is almost inconceivable that there could be a successful application for special
leave. To grant it would be to sanction and condone the very thing that the Court has condemned in
the ADAM P. BROWN case.
(Continued on page 79)
C3Tl7/2/AC 78 7/10/88 Paringa
MR MYERS (continuing): Now, Justice Legoe's reasons on 3 October have not been read to Your Honour.
Has Your Honour read them, may I inquiry, privately?
HIS HONOUR: No, I have not. MR MYERS: No. They are exhibited as W4 to the affidavit of Wicks, sworn on - - -
HIS HONOUR: You mean as part of the transcript of proceedings? MR MYERS: Yes, as part of the transcript and is at page 363. Your Honour will recall that what my learned friend,
Mr Grieve, put is that Justice Legoe refused to accept as correct the ERINFORD principle; not at
all, as this will show. At line 28:
This is an application to dissolve an injunction granted by Justice von Doussa
in chambers on Saturday, 1 October, that
is, two days ago. However, His Honour's
order granted liberty to all parties and
the intervener to apply upon short notice.
As I understand it, that is this application.
I have been referred to the authorities
touching on the question of the jlrisdiction
of this Court to continue or rather to grant
an injunction pending the hearing of an
appeal and, as all counsel agree, there is
an undoubted jurisdiction in this regard.
The authority for that proposition is that
of ERINFORD PROPERIES LTD V CHESHIRE COUNTY
COUNCIL -
and he refers to it:
On this application counsel has informed me
.of the nature of the proceedings before
Justice von Doussa on Saturday last.
Although the transcript is not before me
believe that it is essential for my proper and is not currently available, I do not consideration of this afternoon's application
to peruse that transcript. Mr Grieve counsel for the plaintiff has presented a closely reasoned argument based on the ERINFORD case, in particular, and upon the passage in that case which appears
in Sir Robert Megarry's judgment at page268, in particular, principally arguing that if this injunction is not allowed to continue then the appeal may be
nugatory. He also presented very forcefully an impressive argument relating to the other matters referred to by Sir Robert, in particular, that granting
C3Tl8/l/SH 79 7/10/88 Paringa of the injunction would not, in this
case, inflict a greater hardship than
it would avoid. The fact of the matter
is that when the appeal papers werebrought on in chambers before the
learned Chief Justice this morning I
am informed and I have been advised by
His Honour the Chief Justice, that the
Full Court which is currently sitting
in banco this week and next week for
the purpose of hearing
appeals has a full list and it is just
not physically possible to list the
plaintiff's appeal for hearing during
the course of this October monthly
sittings for the purpose of hearingappeals.
I understand from the learned
Chief Justice that he had informed the
parties that if they still wished to
proceed with the appeal, then, of course,
the appropriate application for listing
the matter in the next monthly list for
hearing appeals, would be given appropriateconsideration and, no doubt, could be heard
then but, as we now know, and as has been
confirmed by the Chief Justice, the trial
of this matter will be heard as from 10.15 am
next Tuesday, 11 October.
So, the appeal is going to be after the trial:
In my judgment, the matters that are appropriate to consider for the purposes
of extending or granting an injunction
until .the hearing of the appeal are
synonymous with the matters that were
extensively canvassed and upon which
very erudite submissions were made
for the whole of last Friday. I admit that was done on a time basis but that was because there had been a considerable debate during the earlier applications which I heard in the course of the week prior to last Friday, including a more informal sitting which was really to inform the defendants of the position on Sunday, 26 September and, of course, the more extensive submissions that were made on Monday night, the 26th and carried
over until Tuesday, the 27th. I have previously referred to the fact but it seems
to me that once again it is appropriate to
repeat it in respect of the current opposition
to this afternoon's application to dissolve theinjunction of Saturday night.
C3Tl8/2/SH 80 7/10/88 Paringa
MR MYERS (continuing):
As I consider the issues to be synonymous,
I accordingly indicate that it is my view
I have exhausted my functions for the purpose
of determining whether I should exercise a
discretion to extend the injunction.
Admittedly, last Friday, ,that was for the purpose of granting an injunction until the
trial, that is to say, until judgment, was
the matter that was being considered by my
brother von Doussa on Saturday night and is
accordingly before me this afternoon, is to
consider whether the injunction, or whether the injunction should be granted until the
disposal of the appeal. But the appeal could not be heard now until early next month. I do not know, and I could not forecast what stage the trial would have reached by the time
that the appeal would be heard, but it is quite
clear in my mind that a substantial amount of
factual material and all legal submissions wouldhave been ventilated in open court.
In the light of these circumstances, it seems
to me that it is totally inappropriate to allow
the injunction to stand and I have not mentioned,
although I hasten to add, that I am not
unconscious of the fact that we have now reached
the stage where the part Coffers have been
despatched I understand some time between
Friday night and Saturday high noon. Around
about that time the processes of the Code have now been put into operation and that
therefore very serious questions relating to
the balance of convenience are even more apt in consideration of the present stage that we have
reached and what should be done in relation to
holding or freezing the situation, that is to
say, in granting any further or other interlocutory
or even interim injunction. That being the case, I grant the application for dissolving the
~njunction that. ~as granted··on Saturday night. And then Mr Grieve goes on into that passage that I
have earlier read to Your Honour. He understood, as everyone understood, as His Honour makes clear, that
the reason he is not granting the injunction is that
the appeal will now be heard after the trial and it will
be heard, as he says at line 24 on page 666:
I could not forecast what stage the trial would
have reached by the time that the appeal would
be heard but it is clear in my mind that a
substantial amount of factual material and alllegal submissions would have been ventilated
in open court.
The trial judge is then in a position to determine further whether the injunction should continue.
C3Tl9/l/VH 81 7/10/88 Paringa Your Honour, they are the submissions why there
is no substantial prospect of a successful
application for special leave in relation to the
first order, that is, the order of 3 October.
The applicants also seek special leave to appeal
against the refusal of the Chief Justice~
"determined administratively," as they put it in
___ their affidavit, "to convene a Full Court to hear
--- an interlocutory appeal against the decisions of
Mr Justice Legoe on 30/9 and 3/10." In our
respectful submission, there is simply no basis
for an appeal against that decision. It is not
even a decision that falls within the words of
section 73 of the CONSTITUTION which define thepowers of this Court in its appellate jurisdiction:
The High Court shall have jurisdiction .....
to hear and determine appeals from all
judgments, decrees, orders, and sentences.
Well, this is not a judgment, decree, order or sentence,
and we did not hear our learned friend even faintly
argue that it was otherwise. He put all his argument on the supposition that there was nothing appellable
in this respect. So no question of special leave can arise because there is not the requisite order.
If we are wrong about whether there is a judgment or
not, this question arises: what is - and really,
this is a question that arises in relation to all
these applications - what is the High Court being
asked to do? It is being asked to direct the Chief Justice of South Australia how he is to list his civil appeals.
(C.Ontinued on page 83)
C3Tl9/2/VH 82 7/10.88 Paringa MR MYERS (continuing): Now, let us suppose our learned friend
makes out a very good case for urgency in relation
to this civil appeal, and so someone else's civil
appeal is not heard. Presumably they come up to the High Court and say, "We are aggrieved by the
decision of the Chief Justice to bump us out of
-=-- -the 1 is t so that Mr Grieve' s appeal can be put in."
Logically, Your Honour, perhaps what my learned friend wants is a call-over before a Justice of
this Court of the civil lists in the supreme courts
of the various States so that a Judge of this Court
can determine which is to get priority. I say no more about that. The third application is for special leave to appeal against the decision of Justice Legoe on
30 September. There is an appeal as of right to the Full Court of the Supreme Court of South
Australia and that appeal has already been instituted.
That can be heard in November. So the application for special leave will never be determined. So an ERINFORD order is being made, or is being sought in
relation to an application for special leave that
will never be heard, in relation to an appeal which
can never be heard.
The same applies to the appeal to the Full Court
of South Australia. It will never be heard because
the trial begins on Tuesday. The reasons of the
learned trial judge have been criticized by my
friend, we say quite unjustifiably. They &efu~e same volume, if Your Honour pleases, at page 315.
HIS HONOUR: Do you mean the volume that contains the transcript of proceedings?
MR MYERS: Yes, Your Honour. It is page 315 of that transcript. I do not think the whole of the transcript before
Justice Legoe on 30 September is in, but page 315 is,
and following. May I inquire if Your Honour has found that?
HIS HONOUR: Yes, I have.
MR MYERS: I am indebted to Your Honour. Could I just point out the observation of Mr Gray who was then leading
counsel for the plaintiff, the applicant here, at
page 315. His Honour said at point 14:
I leave that for a moment. I have just received a message the Chief Justice wants
to speak to me. Before I say much more I think I should go down and see the
Chief Justice. If I was to rule that the
interlocutory injunction should not be in place, in other words, there should be no
interlocutory injuction, is it still
C3T20/l/HS 83 7 /10/88 Paringa agreed by counsel that this matter should
go to an early trial?
And I say:
We would say, "Yes". In fairness to all I think we would require that
even in that event.
MR MORCOMBE: I support that.
MR GRAY; Yes. We would like even an earlier trial.
Yet he is drawing notices of appeal, or settling
notices of appeal that evening that are appealing
against an early trial, and his successor in officeon Monday is talking about vacating the trial date.
Then His Honour goes on:
Last Friday I made an ex parte order for
an interim injunction. I have expressed or indicated the basis upon which I did that
and the matters that I have referred to
are in the transcript. I do not take up
any time to elaborate on that except
basically the decision in ZAFIROPOULOS V
THE REGISTRAR-GENERAL, 24 SASR, contains
the principle upon which I then acted.
On Sunday I agreed to meet counsel for the
defendant North Flinders. The matter was referred to again on Monday morning in
relation to certain undertakings andproceeded to a lengthy hearing on Monday
night in relation to North Flinders'
application for lifting of the interim
injunction -
That went beyond midnight, I am told, Your Honour -
That matter was dealt with on Tuesday when
I dismissed or rejected rather the application for North Flinders to discharge the interim injunction. That all leads to the proceedings which I have heard yesterday and today which is the plaintiff's application for an interim -
that should be interlocutory -
injunction.
C3T20/2/HS 84 7 /10/88 Paringa MR MYER (continuing): The principles are, I think, very fully
expounded in the very useful written
submissions which I requested counsel to
prepare for me for the purpose of today's
hearings.
And they were quite· full. The applicants for the injunction put in a written submission
referring to the authorities and facts of about
40 pages.
I am most grateful to all counsel for their
co-operation in enabling this matter to
be heard today. The differences between the parties, not so much as to the primary
facts which are contained in the affidavits
and which have been and analysed and stressed
in the written submissions I have already
referred to, but more in the application
of those facts to the well-known principles
for the granting of an interlocutory
injunction.
I do not propose to go into them at any
length but to say this, that I have given
serious consideration to the matters that
counsel have stressed on both sides and,
in particular, tried to concentrate on
the principal question which arises on the
plaintiff's claim in relation to the
part C take-over offer made to the target
company, Australian Development Limited~ and the
non-renounceable rights issues which was
resolved upon by the board of North Flinders
on 19 September.
I should have said both of those matters
were resolved on that day. I have also been referred to a few cases and I am grateful
to counsel that they have not cluttered up their submissions with lengthy references
to the cases on the relevant principles.
I believe that I have been referred to the
important cases in this regard and the
principles which are to be extracted from
those cases. I simply wish to say that having given servious consideration to the
main factual matters and the principles
in the cases, I have come to the conclusion
that I should not grant the interlocutory
injunction.
It has been a difficult decision to make
because there are a number of aspects about
the case which have caused me or given me
C3T21/l/ND 85 7/10/88 Paringa cause rather to give considerable thought
as to how the serious issue is to be
analysed and thus articulating for thepurposes of the application for an
interlocutory injunction. When one considers the issue or issues and there are issue
or issues between the parties, certainly
it seems to me that the approach of the
Chief Justice in the High Court in QUEENSLAND
V THE .COMMONWEALTH case referred to by
Mr Morcombe. is a principle which has, shall
I put it, tipped the balance on the overall
question that I have to consider.
This is.not the same case, of course, it
is substantially different. When one looks at the two principal matters in combination,
namely the serious question to be tried
and the balance of convenience, I have not
been able to persuade myself that I should
make the order.
With this brief indication of reasons why
I have come to this conclusion, I am not
prepared to make - and my order is that
I am not prepared to grant the interlocutory
injunction which was applied for. There
are, however, other questions -
and he goes on to other questions.
So that His Honour stressed, on page 316,
that the principal issue related to the part C
take-over offer and he refers to the authorities
in a compendious or shorthand way by reference
to the written submissions that were put to him
and also refers in particular to QUEENSLAND V
THE COMMONWEALTH case. My learned friend has
launched an attack on His Honour's reasons on the basis that he refers to the QUEENSLAND V THE COMMONWEALTH case. That was a case where
Chief Justice Sir Anthony Mason said that in
determining whether there is a serious issue
to be tried one has to consider that the Commonwealth is doing no more than giving effect to its statutory and treaty obligations. That was in a different context to the main
issue that was argued before His Honour. Before
His Honour considerable weight was placed in
submissions in relation to the part C statement
about the effect of granting an interlocutory
order upon the operation of the statutory code
comprising the COMPANIES ACQUISITION OF SHARES
CODE and the other legislation regulating the conduct of companies and the stock exchange.
C3T21/2/ND 86 7/10/88 Paringa
MR MYERS (continuing): On Friday, 19 September, Your Honour, an announcement was made on the floor of the
Adelaide Stock Exchange by the second respondent
on behalf of the first respondent that the first
respondent would stand in the market for a period
of a month to buy shares in ADL at $2.75 each.When that announcement was made, the provisions
of the take-over Code came into operation in relation
to t. The Code provides, in section 17, that the
announcement having been made, it constitutes an
offer to each and every shareholder in the company
to acquire the shares at that price, on the floorof the stock exchange, for the period of a month
which cannot be withdrawn. The effect of the
statute is to give every shareholder in ADL a
right to notify acceptance of that offer. Nothing
has to be done by North Flinders except to pay
for the shares. The orders that are sought and
have been made by Justice Wilson are very curious
in this respect: either they affect third party
rights or they do not. They are not directed against the shareholders of ADL. They are directed against North Flinders. North Flinders is restrained
from doing anything towards implementation of the
part Coffer.
North Flinders does not have to do anything
except pay for shares where contracts are formed
by acceptance of the offer that is given statutory
force by section 17 of the ACQUISITION OF SHARES
CODE. The order - - -
HIS HONOUR: That is paragraph 3 of the existing order.
MR MYERS: Yes. HIS HONOUR: I take it you are saying, Mr Myers, in relation to paragraph 1 of the present order, that it simply
achieved nothing.
MR MYERS: It probably, in truth, does achieve nothing although it is very worrying to have it there because there
is no offering to acquire to be done. I mean, that was done by the announcement on the stock exchange. I should add one thing, Your Honour, if I can just
distract Your Honour for a moment. The statutory code provides that where a part C announcement has
been made the person who makes the part C announcement
under section 17 has to send a circular to each of
the shareholders informing them of the announcement
that has been made on the stock exchange. That is
a statutory obligation and that has to be performed
within 14 days of making the announcement. Now, that 14 days ran out some time ago and the· notices
were sent out on the Saturday after Justice Legoe
C3T22/l/SH 87 7/10/88 Paringa dissolved the interim injunction that he had granted. So they were sent out on Saturday,
1 October. But that document that circulated, Your Honour, is not the offer. The offer is what happens,on the stock exchange and it is
~- only capable of being accepted on the stock
exchange. That circular that section 17
provides for, in effect, informs the shareholders
who did not have their ears pricked at the stock
exchange on that day that there has been an offer
made on the stock exchange and it is open foracceptance by them at the stock exchange for a
period of a month.
HIS HONOUR:
But is it that document, the one that was sent out on the Saturday, that contains the notification
of acceptance?
MR MYERS: No. Acceptance has to be on the floor of the stock exchange.
HIS HONOUR: Yes. MR MYERS: The offer is the announcement made on the floor of the stock exchange by a person who is authorized
to make announcements on the floor of the stockexchange, May Mellor, in this case, and they say on 19 September, North Flinders will be standing
in the market to purchase all the shares in ADL
for $2.75 and that offer is open under the statute
until, now, 4 November.
(Continued on page 89)
C2T22/2/SH 88 7/10/88 Paringa
HIS HONOUR: But it is the offer, as I understand it from what you have said, that triggers off the operation
of the Code provisions.
MR MYERS: Yes, it is. But once that offer has been made nothing more is to be done by the offeror save
-~~-to send out this written notification and that written notification has been sent out. But that written notification is not the offer, that is
what I am wanting to make perfectly clear. The offer has been made. Now, any shareholder in ADL has a right
under the statute to come along to the market-place
and accept the offer. That cannot be restrained
unless every shareholder of ADL is joined but
then if they were joined there would be no basis
for a restraint against them. They are perfectly innocent; they are just exercising their statutory
rights; they should all have an equal bite at
the cherry; they.should all be entitled if the
wish to sell their shares for $2.75.
HIS HONOUR: In any event I take it you would say, Mr Myers, that there is nothing in the existing order that
could restrain shareholders of ADL from accepting
North Flinders offer?
MR MYERS: Nothing at all, Your Honour. That is, in truth, the point and I would go a step further and say
there is nothing that could be put in any orderby the Court which would do that. So what does it amount to? Then order 3 says North Flinders
is not to pay them. Your Honour, what we say about that is quite simply this: if we can come
along to the stock exchange North Flinders is
bound to pay them. It has a statutory duty to
do so. It has a contractual obligation to do
so and Justice Legoe was influenced by this and
that is what he is saying in his reasons. He refers to the part C and then he refers to QUEENSLAND V THE COMMONWEALTH. He does not want to interfere with the statutory scheme of the
take-over's Code. It is not a subject for.criticism,
it is absolutely right and, indeed, in ourrespectful submission, this is really the
unanswerable argument against any form of
interlocutory relief where the part C announcement
has been made because there is nothing more that
the person who sought to be restrained has todo other than to perform his statutory obligation to pay those who have a statutory right to accept
his offer which he is compelled by statute to
keep open for a period of a month or so. Now my
learned friend's answer pro tern, as he put it,
was that there are lots of provisions under this
C3T23/l/AC 89 7/10/88 Paringa legislation whereby a court can excuse from a
contravention of the statute. It may be that
if it is restrained and North Flinders contravenes
the statute it would be able to go along to the
court and get an order saying, "We should be excused
from this contravention because your order caused
--~ - us to contravene it" or it might be possible to
go along to the National Companies and Securities
Commission and get some order under section 57 or 58
of the Code. They are possibilities, Your Honour, but they are only possibilities and, in our
respectful submission, it is very unlikely that
any variation of the Code would be given simply
because to do so would be to affect the rights
of ADL shareholders. It is all very well forthe NCSC to vary the Code where third-party rights
are not affected but here they are affected -
15 per cent, or however many, of the ADL shareholders
have accepted the $2.75. The point about the Code is that everyone should have an equal opportunity to consider and accept the offer and they do not
have to rush in,the Code gives them time - it
gives them a month to consider and they know that.
And in our respectful submission, that is
the complete answer to the application for an
interlocutory injunction and that was the answer that Justice Legoe is referring to when he says:
"I have given particular consideration to the
part C announcement."
At page 716 of my learned friend's books,
Your Honour - - -
HIS HONOUR: Which volume do you think it is, Mr Myers? MR MYERS: Mine is volume IV but Your Honour's will be
volume V.(Continued on page 91)
C3T23/2/AC 90 7/10/88 Paringa
MR MYERS: A verv odd letter was put in by the applicant for the
interlocutory relief before Justice Legoe and it isthis letter addressed to "Piper Aldman", the solicitors for the applicant, from Mr R. J. Schoer, executive director of the National Companies and Securities
-=-~-Commission. They went along to the National Companies and Securities Commission, or their Mr Samuel did,
to ask the commission whether it would vary the Code
so as to release North Flinders from its obligations
under the part C statement, and this is the reply that was received; I will not read the prefatory parts - half-:-way down: We are able to confirm the following advice
given to Mr Graham Samuel of Grant, Samuel andAssociates, in relation to this matter. The
National Companies and Securities Commission
has power under section 57 of the Code to exempta person from compliance with all or any of the
requirements of the Code. The Commission also
has power under section 58 to declare that the
Code shall have effect in its application to
or in relation to a particular person in
a particular case as if the provisions of theCode were omitted, modified or varied.
That is not contested:
2. If the interim injunction currently in force
was maintained for a limited period and if NFM
was to apply to the National Companies and
Securities Commission for it to exercise its
powers in such a way so that NFM's inability
to proceed would not thereby give rise to a
breach of the Code by NFM,staff of the Commission
would, on the existing information -
we do not know what that is -
recommend that action to the Commission. Then we get to the real rub:
In the event that at trial a final injunction
was to prevent NFM from proceeding at all with
the take -over announcement, on application byNFM, staff of the Commission, would, on the existing information, recommend to the
Commission that it issue a no-action letter
in respect of the failure of NFM to proceed
with its bid.
So it would not prosecute it:
Staff would not, however, recommend any modification in this case which would remove the rights of any
third parties in respect of the take -over
announcement.
Paringa C3T24/l/VH 91 7/10/88 So the commission is saying that it will not remove the rights of third parties - that is the ADL shareholders - by modification under section, 57 or
58. Now, that means, Your Honour, that if, in the
end, the commission will not modify them there is
no point in modifying them in the meantime. If, at
__::--_ -the end of the day, the ,~rnmission is going to say,
"even if there is a final order, we are not going
to exercise our powers to modify," there is nopoint on an interim basis restraining shareholders
from accepting, because the c~mmission is saying that
ultimately it is going to ensure that the statutory
Code is given effect to.
The court simply does not have power to order
North Flinders not to perform its statutory
obligations. That is what it comes down to in the
end. Mr Justice Legoe did not really like it being put that way. He said, "The court does not have power." I said, "Well, if Your Honour prefers, then
the court, in the exercise of its discretion should not exercise its powers so as to purport to prevent
a person performing his statutory obligations."
And as to what the NCSC will do, they have told us,
they will not modify.
So the next proposition that we make as regards
the prospect of a~ special leave application from
the order of Mr Justice Legoe of 30 September is
that, quite the contrary of what my friend said, his
reasons are correct and cogent,and primarily on the
basis that I have put to Your Honour.
(Continued on page 93)
C3T24/2/VH 92 7/10/88 Paringa
MR MYERS (continuing): Next we say that there is nomatter raised in relation to this application
for special leave which satisfies any of the
criteria specifically mentioned in section 35A.
Again, we refer to the ADAM~ BROWN decision
-- which makes it remote in the extreme that there
--- would be any grant of special leave.
Finally, in regard to the decision of
Justice Legoe on 30 September, we feel that
we must say something about the facts,
Your Honour. A great deal of my learned friend's
address concerned the strength of the case that
he says Paringa has that the defendant directors
of North Flinders have been in breach of their irrelevant to Your Honour's consideration of this
fiduciary duties. All this was argued beforematter, because so much weight was placed on it,
we feel we should say a few words about it so that
Your Honour does not get what we would say is the
entirely false impression that Paringa has a good
case or an overwhelming case, as my learned friend
kept putting.
Paringa has an extremely weak case, in fact.
The facts that are stated on this document that
my learned friend handed up this morning are
more or less uncontraverted. Item 7 on the first
page refers to Genoa and the two AGL directors on
the North Flinders' board. They are not AGL
directors at all on the North Flinders' board.
They are Paringa directors. Williams and Mason and Down - there were three of them originally - were the Paringa representatives on the North
Flinders' board. AGL was not the North Flinders' shareholder; Paringa was and is and there were three men who were nominees of Paringa, Mason, Williams and Down and Mason resigned some little
time ago, about 19 September.
If Your Honour pleases, paragraph 9, the
exercise of the options is referred to. That will
lead to receivingofa further $134 million - theyare three-year options. I do not believe that is contraverted. My learned friend put it to Your Honour yesterday and it appears somewhere
in the material. So, the further $134 million
will not come in for three years.
HIS HONOUR: You have got altered figures in that paragraph 9, have you, Mr Myers?
MR MYERS: Yes, I have. MR GRIEVE: I made the alterations.
C3T25/l/SH 93 7/10/88 Paringa MR MYERS: Yes, if Your Honour pleases. We do not know whether they are precisely correct or not but
we do not take any issue with it.
. In paragraph 10 there is a reference to
the working capital requirements. I invite Your Honour to look at that page 312 and then page 310 - not now, Your Honour. It will just
take too much time but the reference to the
$12 million there was not to the whole of the
working capital requirements of North Flinders.
That was quite clear from the context, especially
on page 310. It was a reference to their requirementsfor exploration expenditure or capital to fund exploration expenditure and it simply does not
sustain what my friend put.
Now, as to the experts and what is the right price for the shares:. Your Honour, there are a
whole lot of experts who are referred to in
paragraph 11 who say that the net asset backing
of ADL is somewhere between 86 cents and $1.60.
They are so expert that they can have a range
which is of a 100 per cent of the lowest level.They were talking about net asset backing. The
value of a company is not determined by the net
asset backing. It is elementary that shares in
a company which has an operating business are
determined on the basis of future maintainableprofits. That is a matter that has been considered
by this Court in innumerable cases, mainly probate
duty cases dealing with the valuation of assets for probate duty purposes. All those cases are
considered and analysed by Mr Adamson in his
book entitled Valuation of Shares. I think it is in its fifth or sixth edition now. I do not want to take Your Honour to them. The so-called experts have just misconceived
their task or they have been told to determine what is the net asset backing, not what are the
value of the shares. The value of the shares,
for the purposes of valuation, where there is not
a ready market in the shares, is determined by
sustainable future profits but if there is a
ready market in shares, then the value of the
shares is determined by what the market says.
(Continued on page 95)
C3T25/2/SH 94 7/10/88 Paringa
MR MYERS (continuing): Here there is a ready market. The shares are listed on the stock exchange, and
at all material times in the month or so before this
offer of $2.70 was made the stock-market price of the shares was in the region of $2.40. It was as
high as $2.45. Your Honour, that appears most
-~- - clearly from page 710 of the book. There is a whole schedule of the stock-market prices.
On 2 September they were down to $2.35,
6 September $2.45, 14 and 15 September $2.45,
16 September $2.40, and so on. Your Honour, that is an exhibit to the affidavit of Lim, which is at page 700 and the relevant page of the exhibit
is at page 710, and that is all I want to refer
to, Your Honour. There are other parts where
that evidence is set out, but once is enough.
So the offer is 10 per cent or 15 per cent above
the prevailing stock-market price. We are at a loss to know how - and with respect we believe
Justice Legoe was too - at a loss to know how a
complaint can be made that an offer is outrageously
overpriced if it is a mere 10 or 15 per cent
above the stock-market price. The offer has to be pitched above the existing stock-market price if one is to gain any shares, and all the effort
that my learned friend put into convincing
Your Honour that this is somehow a terrible
conspiracy, or it is a terrible wasting of the assets
of North Flinders on account of the outrageously highprice is just, in our submission, quite wrong.
The stock-market sets the price of the shares
and if you are going to buy them there is no point
in saying, "Net assets are $1.00", when the stock-
market says, on the basis presumably of estimations
of the market about future maintainable earnings,
"They are worth $2.45". May I add orally some facts to that chronology, Your Honour, and I
will do briefly by reference to the provisions
of the material that is in those volumes that our learned friend has provided to you. The first is this, Your Honour: the submission was made that
Genoa Hartogen and Actrait No 71, that well-known
share dealer, have acquired control of Paringa from
AGL because of their successful tender offer.
With respect to our learned friends, that is
not quite true. They have been the successful tenderers. They have paid a 10 per cent deposit to
AGL for the Paringa shares. The completion of that transaction is subject to conditions that have not
yet been satisfied - the approval of it by the
Genoa and Hartogen shareholders - and a shareholder
in Paringa called Panfida has instituted
proceedings in the Supreme Court of South Australiacomplaining that the acceptance of that tender offer
is a breach of the take-over's Code. So it is
C3T26/1 /HS 95 7/10/88 Paringa not exactly the position that the acquisition by
Hartogen Genoa of the Paringa shares is completed,
a thing done and past.
If Your Honour pleases, at page 305, which is
in volume II, the terms of the acquisition - I do not
_--_·want to read it to Your Honour. What I have said I believe is an accurate summary. The terms of the acquisition by Hart6gen Genoa of the Paringa shares
are set out and it makes it clear that there are
conditions to be satisfied. Now, Your Honour
will appreciate that that is the position that
obtains on 9 September. On 9 September Mr Burke and others who are in some sort of management
position in Hartogen Genoa come to South Australia
and they have a meeting with Mr den Dryver and other
executives of North Flinders, and what they said was, "We now control Paringa. We want to reconstitute the
board of North Flinders". Our learned friend gave you the references to that meeting this morning, and
I will not repeat it.
The directors of North Flinders said, "We're not too sure about that. You've paid 10 per cent
and it is subject to some conditions. We don't want to have the board of North Flinders reconstituted
in the meantime until this deal goes through because
our duties are not to you as the people who hope to
control Paringa, but to all the North Flinders
shareholders, including the 51 per cent who do not
constitute the 49 per cent held by Paringa~. So what happened, Your Honour, was that there was a meeting of the board of North Flinders on 19 September,
and it is at that meeting that the things that are
complained of were done.
(Continued on page 97)
C3T26/2/HS 96 7/10/88 Paringa MR MYERS (continuing): At page 265 in volume II, that
board meeting is dealt with by Mr den Dryver
in his affidavit:
At the board meeting on 19 September
the take over of ADL by NFM, the take over
of Paringa by NFM, the rights issue and
the reconstitution of the board of NFM andthe deferment of the date of the annual
general meeting were discussed and
HIS HONOUR: Just one moment, please, Mr Myer,s. Volume II?
MR MYERS: It is volume II in mine, Your Honour.
HIS HONOUR: 265? MR MYERS: 265. HIS HONOUR: And the numbered paragraph? MR MYERS: 75. HIS HONOUR: No, it is 267 in the pagination I have. MR MYERS: I beg Your Honour's pardon. HIS HONOUR: I have it now, thank you. MR MYERS: I had read the opening part of that: the following resolutio~s were passed.
First, the board unanimously passed a
resolution not to reconstitute the board
of NFM.
Your Honour, at that meeting, as this affidavit
shows above, were Mr Mason, Mr Williams and
Mr Down's proxy~ They are the Paringa directors. That fact, which is omitted from our learned
friend's recital of things, is absolutely vital
to an understanding of this case. His own· directors voted not to reconstit11te the board.
Paringa's directors. Of course, they could not conscientiously do so because the deal with AGL
has not been completed. Until it is completed
they cannot allow Mr Burke and his friends, right
up the tree, to dictate how this company is to
be run. Not in the interests of the shareholders but in the interests of Mr Burke, and his friends.
That circumstance, in our respectful
submissio~ is very important because the basis
of all the complaints is that these directors
are trying to hang on to control of North Flinders:
when they should roll over and let Mr Burke take
control. Paringa's own directors voted against
C3T27/l/ND 97 7/10/88 Paringa
that. The people who have filed affidavits in support of the application for an interlocutory
injunction voted not to reconstitute the board
as Burke had demanded.I do not want to take Your Honour too far
into the facts. Six days were spent investigating
these facts but Your Honour will appreciate
immediately the signficance of that. It just
cuts the entire ground from under the case that
is put by the applicants that there is here some
improper purpose by men who are trying to hang
on to control of the board. Not at all. Their
own directors vote for no change in the constitution
of the board.
The next thing is this, Your Honour. There were three resolutions passed there df which
complaint is made. One was the resolution to make an offer to acquire shares in ADL. That resolution was passed with Mason and Williams
abstaining. The Paringa directors did not vote
against it, they simply abstained, Your Honour.That is over the page on - - -
HIS HONOUR: Yes, I have that.
MR MYERS: They abstained. How can they now complain that something they did not even vote against is wrong.
I will draw to Your Honour's attention why·they
did not in a moment. Next, the board passed
a resolution that NFM make a take-over bid for
Paringa. Mr Williams voted against the proposed resolution and Mr Mason~abstained. So that one of the Paringa directors did not even vote against
the take-over offer for Paringa which is now
complained of.
So of all the resolutions that are complained
of there was either unanimous approval or no
voting by the Paringa directors, save that in
one case one of the directors voted against the proposed resolution.
If Your Honour pleases, in order to establish that directors have improperly exercised their
powers, it is necessary to apply the test that
the High Court has recently set out in the case
of CARLTON HOTEL V WHITEHOUSE, 162 CLR 285.
And there, there was some question·.about whether
the impermissible purpose had to be the dominant
purpose or merely one of the purposes or whatever.At the bottom of page 293, the majority, comprising
Justiees Mason, Deane and Dawson said, at about
point 9:~
C3T27/2/ND 98 7/10/88 Paringa MR MYERS (continuing):
In such cases of competing purposes, practical considerations have prevented the
law from treating the mere existence of the
impermissible purpose as sufficient to render
voidable the exercise of the fiduciary power
to allot shares.
So it is not the mere existence of the purpose,
and then they go on over the next page, line 3:
In this Court, the preponderant view has tendered to be that the allotment will be
invalidated only if the impermissible purpose
or a combination of impermissible purposes
can be seen to have been dominant - "the
substantial object" -
or -
"the moving cause."
So it is a "but for" test which requires the impermissible
purpose to be a substantial cause. It has to be something
but for the occurranceof which the decision that is
attacked would not have been made. Now, Your Honour not only has the voting at this meeting of 19 September,
but the history of the matter. The Paringa take-over offer is easily dealt with, Your Honour. Paringa's
only asset of any significance is its 49 per cent
holding in North Flinders. North Flinders had been
considering for some time a rationalization of that
company structure by having a share swap of Paringa
shares for North Flinders shares.
When the AGL - Australian Gas Light Company -
offered to sell by tender its controlling interest in
Paringa, North Flinders tendered. The board approved
North Flinders making a tender and North Flinders'
tender offer was two for five with the promise to extend
that offer to all other shareholders. In other words,
North Flinders' tender offer was precisely the same - not a jot different - from its take-over offer that
it had determined to make on 19 September and that was
a tender offer which the board had supported long
before 19 September.
So no complaint whatever can be made of impermissible
purpose there. The very sequence of events makes it plain that that was a decision reached by the board
long before 9 Septemb_er and in making the take-over
offer it is implementing or attempting to implement
a decision of the board made long before. Now, I refer Your Honour to page 292, which is volume II,
which sets out the decision of the board:
On Tuesday, 19 July 1988 -
C3T28/l/VH 99 7/10/88 Paringa
MR GRIEVE: Volume III, Your Honour. MR MYERS: It is in volume III, it is page 292 on my pagination. Does Your Honour have it?
HIS HONOUR: Yes, I do. MR MYERS7_- Look, I am not going to read it to Your Honour.
Simply it is sufficient for me to say this: that the tender offer which was resolved on 19 July is in
precisely the same terms as the part A offer. How can it be said that that was something motivated
by the events of 9 September? The very sequence of
events makes it incontrovertible that it was not.
And on page 255 Mr den Dryver refers to that in his
affidavit. That is paragraph 39 of·:the affidavit,
if Your Honour pleases.
That does not appear in my learned friend's
chronology, of course. Very inconvenient that the
board had made the decision on 19 July when, in order
to sustain the case it has to be made in response
to events of 9 September. As to the take over of ADL, the evidence is that the board of North Flinders had
been considering since March a take over of ADL;that, at the beginning of September it had instructed
solicitors to prepare take over documents and that
those take over documents were receivea by the company
on 5 September. So that,if Your Honour pleases, again
the chronology of events belies the allegation that
is made that this take-over offer is something
concocted to defeat Mr Burke's rightful control through
Actrait No. 71, Genoa, Hartog~n, Paringa, of
North Flinders.
(Continued on page 101)
C3T28/2/VH 100 7/10/88 Paringa
MR MYERS (continuing): My learned junior is just getting the reference to that, if Your Honour pleases.
That appears on page 259 paragraph 51 of
Mr den Dryver's affidavit.
On 30th August 1988 I instructed the
company's administrator Mr Andrew Olsen
to request from the company's solicitors,
Minter Ellison, the preparation of a
part A take-over document. I am informed and verily believe that Mr Olsen instructed
Minter Ellison on 30th August and that he confirmed the instructions in writing by letter dated 5th September, a copy of which
letter is now produced and shown to me marked
with the letters "JJRDD8". A draft of the part A statement was duly receiv.ed by NFM from
Minter Ellison on 9 September
I am sorry I said 5 September, Your Honour, it
is 9 September. All that the meeting resolved
to do was to proceed by way of a part Coffer
rather than a part A offer but the decision to
take over or attempt to take over ADL was not
motivated by the events of 9 September, it issomething that had been determined before that
date. I feel as though I am exhausting Your Honour's patience going into the merits but there are a
few matters that just need to be corrected. And
the last one I think is this, Your Honour, concerning
the rights issue.The part A take-over offer that was proposed involved a share swap. North Flinders shares
were going to be given in exchange for ADL shares.
That, of course, would have watered down Paringa's
shareholding because all the ADL shareholders
would have come in and watered down the shareholding
of Paringa. There would have been more shares
issued to satisfy the ADL shareholders.
HIS HONOUR: Yes, I follow that. MR MYERS: Now, what they decided to do on 19 September
was to make a cash offer for ADL. The effect of that,Your Honour,is that Paringa will not be
watered down. The change from a part A share swap to a cash offer is beneficial to Paringa.
It is the very thing that does not water down
its shareholding. My learned friend said repeatedly to Your Honour yesterday that every time a share
in ADL was purchased by North Flinders on the
stock exchange pursuant to the part Coffer, Paringa
had its shareholding watered down. That is
demonstrably wrong. Paringa's shareholding isnot affected. It still has its 49 per cent.
C3T29/l/AC 101 7/10/88 Paringa What North Flinders does is part with cash every time it buys a share - so that is wrong.
What he says though is, "Oh well, there is this
rights issue and we do not think" - not that,
"we do not have money" - he did not put it that
way - "We do not think at Paringa that this rights
_-_- issue is a very good thing because we do not think
that the purchase of ADL is a very good idea".
Well, Paringa can make up its own mind. If it
wants to take up its entitlement to rights it
will not be watered down. What was done on
19 September is absolutely fair to all shareholders,
including Paringa, by saying,in effect, to them,
"We have had these plans to take over ADL. We are doing so; we are financing it by a rights
issue. If you want to stay with the company with
your same shareholding put your hand in your
pocket and you can. If you do not want t~ well
then someone else might take up your rights underthe underwriting agreement."
So, the very thing that is complained of
is the thing that is most fair to Paringa. If
Paringa is saying to the Court, "We do not like
the purchase of ADL", that is just a difference
of view that they have with the persons who are
charged with the management of the company. Inour respectful submission the case, far from being
strong, is very weak.
There was some mention in the material about Poseidon. It was suggested in the material that
there might be some deal with Poseidon, "We fear
there is some deal with Poseidon" - this is in
Miss Williams affidavit and that was adverted
to briefly by my learned friend yesterday. There
is no evidence whatsoever for that - none whatsoever,
Your Honour,and the burden of the complaint before
Justice Legoe on the hearing of the interlocutory
injunction was that there was no deal with Poseidon -
because you have not got a deal with Poseidon you
cannot be sure that your part C will be successful - that is what they said before Justice Legoe.
What Miss Williams says here is that she believes
there is a deal with Poseidon and that is a very
bad thing. Wel~ I suppose one can change from day to day about what one believes but if there
is no factual basis for it, that should not affect
anyone.
If Your Honour pleases they are the submissions
that I wish to put on the question of whether
there is a substantial prospect of obtaining special
leave. Even if there were a substantial prospect of obtaining special leave the question is whether the injunction should be granted and can I briefly
refer to those matters.
C3T29/2/AC 10 2 7/10/88 Paringa
MR MYERS (continuing): In relation to the part C statement, as I have put to Your Honour, the effect
of the injunctions would be to, on one view, affect
the rights of third parties, and on any view,
purport to restrain North Flinders from performing
its statutory obligations. The effect upon the --=---market-place of those injunctions must be to cause
considerable confusion because there has been an
announcement properly made in accordance with the
take-over Code that the shareholders in ADL do not
know whether or not they can accept those offers.
In relation to the renounceable rights issue,
again there is a problem of that same character.
Section 42 of the SECURITIES INDUSTRIES ACT gives
the stock exchange listing requirements the force
of statute. The stock exchange listing
requirements - I do not think this will be
controverted, so I will not refer to it in detail,
Your Honour - the stock exchange listing requirements
require that once an announcement has been made of anissue of securities, and the renounceable
rights issue is that, then the company has to proceed
with it. That follows from rule 3E, especially rule 3E(10). So that any order restraining the renounceable rights issue would, in effect,
controvert the stock exchange rules, the announcement
having been made.
The next matter that we put to Your Honour is
that to give the relief sought, or indeed any
significant relief, would be to give relief greater
than could have been obtained from Justice Legoe,
because all they could have obtained from him is an
order restraining things until the trial of the action,
and then the trial judge would have liberty to day
by day consider that order. WHat they are asking for is something extraordinary. It is an order
inconsistent with the possible outcome of the trial
which will be unable to be affected by the trial
judge, whatever the evidence might be, and whatever
might happen at the trial and, in our submission, that alone is a reason not to give the relief that
is sought.
Furthermore, the relief that is sought is not
necessary to preserve the subject-matter of any
application to this Court because, quite simply, the
special leave application will never come on and thereis no basis, on the ERINFORD principle, for granting
relief given that the application for special leave
will be overtaken by events next Tuesday. It is not
a case for the ERINF0RD principle because the purported
basis of the application, the preservation of the
subject-matter of the special leave application,cannot be made out because there will not be a special
C3T30/l/HS 103 7 /10/88 Paringa
leave application. In any event, in this matter damages are quite an adequate remedy. There is no
evidence whatsoever to suggest that the defendant
directors will not be able to meet any award of
damages, not a shred of evidence, Your Honour.
It was all speculation by my learned friend from
~~- the bar table.
All that will happen at worst in this case is that Paringa, if it succeeds at a general meeting
in replacing the existing board and the new board
decide that they do not like the purchase of ADL isthat the new board will sell the ADL shares and the
difference between the purchase price and the sale
price will be the damages that North Flinders
have suffered if they succeed in establishing that
the directors of North Flinders were actuated by
an improper purpose in bidding for ADL, and the
difference between those two amounts will be a modest
amount of damages. The next consideration that we address to Your Honour as being a reason for not
giving relief is that the whole proceeding here is
quite Simply a manipulation of procedural and
interlocutory processes to obtain relief which was
refused after six days of hearing in the supreme
court.
(Continued on page 105)
C3T30/2/HS 104 7/10/88 Paringa MR MYERS (continuing): In every single take-over case
precisely what is being done at the other end
of the bar table could be done and, in our
respectful submission, this Court should not countenance its procedures being manipulated as they have been by the applicants.
Your Honour, on that matter we also say
this: that the applicants have not come to this
Court with clean hands. This is a matter of some
importance. In the first place, the approach to
the Chief Justice on Monday night was made without
notice to any of the defendants. That should not
have occurred. It should not have occurred becausethere had already been a number of contested matters.
Solicitors and counsel engaged in this litigation
were well known to those who made the approach to
the Chief Justice.In the next place Minter Ellison, the Victorian solicitors for North Flinders, as long
ago as 22 September wrote to Simons and Baffsky,
the Sydney solicitors for Paringa, and this
letter is exhibited to the affidavit of Wicks
sworn 5 October, that is before Your Honour.
HIS HONOUR: Which exhibit is it, Mr Myers? MR MYERS: It is Wl, if Your Honour pleases. HIS HONOUR: Yes, I have read that letter. MR MYERS: Re Paringa Mining and Exploration Company.
We refer to earlier correspondence. As
you are aware, we act for North Flinders
Mines Limited. We also act for certain of its directors. We understand that your client may be contemplating court
proceedings against NFM or its directors although the basis for the proceedings against our clients is not immediately apparent to us. Should your client seek to make application to the court for interim or interlocutory orders against any
of our clients, we wish to be heard onsuch an application. We are able to appear and be heard on behalf of our
clients at any such proceedings on short notice. Minter Ellison. Despite that letter, on 23 September Paringa
went and got interim relief from Justice Legoe
C3T31/l/SH 105 7/10/88 Paringa and the letter was not drawn to His Honour's
attention. That may be bad enough but, then,
after a contested hearing before Justice Legoe
on 3 Octobe4 there is an approach to the
Chief Justice without notice. That is deposed
to by Mr Wicks.
Then, Your Honour, the approach to this
Court to Justice Wilson was again made
without notice to us. It bespeaks a blatant
premeditated manipulation of the court processes
to get an interim injunction without any one
being there to be heard to raise a contraryvoice and, Your Honour, I wish to read some
parts of Mr Wicks' affidavit that deal with
this point, beginning at page 5 at paragraph 11,
if Your Honour pleases:
On Monday 3rd October 1988, the respondents
and ADL applied to Justice Legoe for
dissolution of the interim injunctions
granted by Justice Von Doussa. Mr D.E. Grieve Q.C. and Mr Bagot appeared for
Paringa. Mr Myers QC and Mr Hargrave
instructed by me appeared for NFM and
the independent directors. For part
of the hearing, Mr Lander QC was present
in court observing the proceedings.
His Honour decided to dissolve the interim unjunctions granted by
Justice Von Doussa.
12. On Thursday 4th October 1988 at
approximately 10.20 am I received a
telephone call from Mr Bagot. He was calling from Canberra. He informed me
of the Orders made herein that morning
by the Honourable Justice Wilson.
13. No notice was given to me of the
intention of Paringa to apply to
Justice Wilson. I was easily contactable in the afternoon and evening
following the hearing on 3rd October
before Justice Legoe, either in my
office (until approximately 9.00 pm)
or at home (after approximately 9. 20 pm,).
14. I have been informed by staff at the Hilton Hotel, Adelaide, and believe, that
Mr Grieve QC was a guest of that Hotel on the evening of 3rd October and that he checked out at approximately 6.00 am on
4th October. Mr Myers QC and Mr Hargrave were also guests of that Hotel.
C3T31/2/SH 106 7/10/88 Paringa MR MYERS (continuing): They informed me and I believe that
Mr Grieve gave them no notice of the application before Justice Wilson or of
any application to King CJ. Mr Hargrave informs me, and I believe, that Mr Grief QC
was present for a short while on the evening
of 3 October in the dining room of the
Hilton Hotel whilst he and Mr Myers dined.
Mr Grieve did not speak to Mr Hargrave.
15. Further, My Myers QC informs me, and
I believe, that he spoke with Mr Lander QC
in Mr Lander's Chambers shortly after
6:00 pm on 3rd October, that they discussed the trial of the proceedings in the Supreme Court of South Australia fixed for 11th
October, that no mention was made by
Mr Lander of any intention by Paringa to
apply to this Court on the following day or to King CJ and that Mr Myers informed
Mr Lander that he was staying at the Hilton
Hotel in Adelaide.
If Your Honour pleases, that bespeaks bad.faith
and we must, regretably, ·dr-aw·it to the attention
of the Court. Nothing has been put in in replyto that. That is not controverted, Your Honour.-
it is not controverted.
Further to that, Your Honour, if I could
read on:
17. Now produced and shown to me and
market "W3" is a true copy of a Release made by Paringa to the Australian Stock Exchange Limited at Adelaide on 4th October
1988.
That, Your Honour, in the second paragraph, says
this: Under these legal proceedings, Paringa is seeking orders which, amongst other things, declare that the part C announcement and all acquisitions of shares in ADL by NFM are not binding on NFM and can, in due course, be set aside. That is just wrong, Your Honour. We do not know that they are seeking those orders and, in any
event, there is no legal basis for those orders.
Paringa wishes to place all shareholders
of ADL and their brokers on notice that
C3T32/l/ND 107 7/10/88 Paringa if it obtains the court orders being sought
by it Paringa will take all necessary steps
to challenge any acquisition of ADL shares
by NFM. Specifically, Paringa will take
any necessary steps, including legal
proceedings if appropriate, to avoid payment
to shareholders or their brokers or, if
appropriate, recover from shareholders or
their brokers any moneys paid or payable
as a result of the purportive acquisitionof ADL shares by NFM.
Your Honour, that is designed simply to mislead
and frighten the shareholders. There can be
no possible legal basis for that, either at general
law or under the Code.
So that concurrently with these manipulative
secret applications being made, false information
is being disseminated on the stock exchange.
The final matter that ~e draw attention to,
Your Honour, is this: even after the order of Justice Wilson was obtained, and I take
Your Honour to pa~agraph 20 of Wicks' affidavit,
there was a considerable delay in notifying my
clients properiy:of the order.
20. A facsimile copy of the orders made
by the Honourable Justice Wilson herein
was first served on Baker O'Loughlin at
7:14pm on 4 October. No other documents herein were served until approximately
11:45am today -
that is, the 5th -
when copies ot the following documents were
served -
and that is all the documents that have been
served on Baker O'Loughlin. Yet, Your Honour, Mr Frith, a writer in The Australian newspaper was better informed.
If I can take Your Honour briefly to "W8", this
is the article that begins at page 19 and continues
over the page:
(Continued on page 109}
C3T32/2/ND 108 7/10/88 Paringa
MR MYERS (continuing): Mr Frith had been told everything about
the proceedings in this Court. He was able to quote from what Mr Grieve had said and he had access to all
the Court documents as is evident from this article
which they had omitted to serve on the most affected
parties. The purpose of these proceedings in _:~-this Court is in part to attract favourable publicity
to them or adverse publicity to North Flinders with
the purpose of frightening shareholders or otherwiseinducing shareholders into not accepting the part C
offer which is before them under the provisions of the
Code. If Your Honour pleases, they are the submissions on behalf of North - - -
HIS HONOUR: Thank you, Mr Myers. Mr Heerey?
MR HEEREY:
If Your Honour pleases. Our client, C.L. May Mellor Laing and Cruickshank Limited are the brokers who have
the part Coffer on behalf of North Flinders. There
is not the slightest suggestion that our clients haveacted otherwise than in good faith and in the ordinary
course of business as a stock broker. Whatever the
dispute is about - the internal affairs of North Flinders -
there is allegation that we are in any way involvedin them and we are concerned that, having made an
announcement in the market-place, that we wouldacquire shares in ADL and in accordance with the Code should not be restrained from doing so. Your Honour, in general we adopt the submissions that were made by our learned friend, Mr Myers.
HIS HONOUR: Sorry, Mr Heerey, I was just looking for the order
made by Justice Wilson to see precisely what it did
to your client. I just seem to have lost the sequence of the document.
MR HEEREY: I hand up to Your Honour a copy of the order as it is immediately to hand.
HIS HONOUR: Thank you.
MR HEEREY: We are affected by paragraph number two of the order which restrains us from offering to acquir~ acquiring or
receiving acceptance of any such offer. I will have something to say in a moment about the appropriateness
of that terminology. And we are also affected - although it does not appear on the face - by paragraph 3
because that restrains North Flinders from making
any payment pursuant to any person pursuant to the
acceptance of an offer by it. So we as brokers, acting as principal as well as agent, are liable to the
selling brokers and we have to pay them and item 3
would operate to prevent us being reimbursed by our
principal, North Flinders.
We adopt what our learned friend,Mr Myers,said
in relation to the BURGUNDY ROYALE case and the
appropriate tests to be considered in this Court when
CjT33/l/VH 109 7/10/88 Paringa an applicant seeks an injunction pending an application
for special leave. It is perhaps worthy of emphasis
that this is, . in the words of Justice Brennan, "an extraordinary jurisdiction," and the reason that
it is, of course, is that unlike the position of alitigant at first instance, who prays in aid
-~~-the ERINFORD principle, the applicant here does not
have an appeal as of right. The ERINFORD case itself makes it clear that the existence ::,f an appeal as of right
is fundamental to the approach of the Court when
an injunction of that nature is sought. the old case of WILSON V CHURCH in 1979, where it
was said - it is about the middle of the page:
When a party is appealing, exercising his
undoubted right of appeal, this court ought
to see that the appeal, if successful, is
not nugatory.
Here, of course, there is no appeal as of right, and
hence the requirement adumbrated in the BURGUNDY ROYALE
case of showing a substantial prospect of obtaining special leave and we would submit that it is a fact
equally as notorious as the declining price of gold
that special leave is not granted in this Court as ofcourse, and if one is permitted to look at crude,
historial statistics, a one in ten chance is probably
not an unreal assessment.
Now, looking at the prospects here, we say that
there is no question of law of public importance raised.
The - what is called - refusal administratively of the
Full Court to list the applicants of appeal, even if
that be a judgment or order for the purposes of the
JUDICIARY ACT, plainly did not raise a question of law at all, let alone one of public importance, and
we adopt what our learned friend, Mr Myers, said in
relation to this and simply add that, of course, the
supreme court is par excellence the body to decide
the competing claims for the attention of the Court.
Only that court can decide as between competing cases many of which claimed urgency,.which are more urgent
than others. The matter is really self-evidence and we do not want to labour it, Your Honour, but before parting from it we would say that, standing back from
this case, the reality is that we are all here because
the applicant is unhappy with the result of the listing
procedures of the FullCourt of South Australia.
If they had got the listing they wanted, their
appeal as of right from Justice Legoe would have
proceeded in the normal way, and what is being done here
is an attempt to dress up a special leave case because
the applicant is dissatisfied with what the Supreme
Court did about listing its appeal.
C3T33/2/VH 110 7/10/88 Paringa
MR HEEREY (continuing): Turning to Mr Justice Legoe's decision, firstly his decision of 30 September, the first point to be
made about that, that that now has no practical effect
anyway, because the position at the weekend was held
by Mr Justice von Doussa's order and, in any event,
it has been taken over by events. So the rightness
-~-or wrongness of what His Honour did then is quite
academic. But it is worth mentioning that there was an attempt to dredge up a special leave point arising
out of what was done on the 30th, whenit was said it
would give the Full Court of this Court an opportunity
to resolve the conflict as to the appropriate test
to be adopted on an application for an interlocutory
injunction. That opportunity, however, has already
been taken, and we refer Your Honour to MURPHY V LUSH,
it is a decision of the Full Court reported in
60 ALJR 523, and at page 524, in the first column,
the left-hand column, Their Honours, after explaining
why the unusual step was taken of convening a
Full Bench to hear an application for an interlocutory
injunction said, half-way through that first paragraph:
There was no reason why the Court should,
in this case, depart from the ordinary
procedure when an interlocutory injunction
is sought, and that means that except in
relation to one of the arguments advanced on
behalf of the plaintiff, it will be sufficient
to inquire whether there is a triable issue
and, if so, whether the balance of convenience
favours the grant of an injunction.
And that has been widely accepted professionally in
resolving finally the CYANAMID verses BEECHAM dispute
because although Their Honours do not say it in as many words they plainly adopt the language used by the House of Lords.
Turning, Your Honour, to Mr Justice Legoe's
decision of Monday the 3rd, much of that has been
covered by Mr Myers. It was simply an exercise of what
was accepted on all sides as a jurisdiction to make an ERINFORD order grant:L.1g an in~cti.on pending an appeal and all His Honour did was to exercise that undoubted undisputed discretion adversely to the applicant in the light of two special circumstances, namely that they had just discovered the appeal would not be heard
until after the trial and, secondly, that· the circularsabout the part Coffers had already been sent out, and this was made by a judge, of course, who made it against the background of extensive argument over the previous week on the merits of the case and the balance of convenience which would, of course, be factors equally applicable to an injunction pending appeal.
C3T34/ 1 /HS 111 MR HEEREY, 7 /10/88 Paringa So if it is sought to create a special leave
point by saying that the Full Court would want to
consider the application of the ERINFORD principle
that, in our submission, does not run because it
was common ground before His Honour that the
ERINFORD principle was a valid one. It was simply-~-a question of whether it should be applied in that particular case.
| T35 | Now, on the merits we ane coming to the question of the balance of convenience which we deal with | |
| for two reasons: firstly, the balance of convenience | ||
| bears on the prospects of success of any appeal against | ||
| Mr Justice Legoe's order, that is to say whether he | ||
| misapprehended or wrongly dealt with the issue, and | ||
| also, secondarily, it is directly relevant to the | ||
| exercise of Your Honour's discretion in granting the | ||
| ||
| what our learned friend Mr Myers said in relation to | ||
| the critical importance in this context of the fact | ||
| that an announcement has been made under the | ||
| ||
| is now in operation and the injunction sought | ||
| involves completely cutting across that statutory | ||
| ||
| regulation of acquisition of shares is to ensure that | ||
| shareholders are equally and fairly treated when control of the company is sought to be achieved and | ||
| there is not the unfairness whereby a holder of a | ||
| substantial parcel can sell out at a high price which | ||
| is not shared by other smaller shareholders, and one | ||
| of the ways that that is achieved is by the on-market | ||
| offer which has been adopted in this case. |
A central feature of that procedure is that once
the announcement is made, after 14 days the offerer and its broker stand in the market and are bound to
accept at the fixed price any offers from existing
shareholders of the target company. Now, it is on that basis that shareholders in the target company and
the rest of the market are entitled, in our submission,
on 19 September of the $2.75 offer shareholders in ADL to order their affairs. Once the announcement was made were entitled to say, "The price of gold might go up. The shares might be worth more than that, or another bidder might come on the scene, but we'll wait and see because we have, in effect, six weeks to make up our
mind". Equally people who might have been minded to buy ADL shares were entitled to treat that as one constant in the shifting sands of the share market, namely that
ADL shares were on offer for effectively six weeks from 19 September. ADL shareholders were entitled to treat, as it
were, as money in the bank $2.75 for every share they
held because they were entitled to say, "At any time
C3T35/l /HS 112 MR HEEREY, 7 /10/88 Paringa during the ensuing six weeks I can get $2.75 for
my share and there is not only North Flinders
but a broker bound to pay me that price", and
it does not need a great deal of imaginationto assume that many people might have organized
their own affairs and made commitments, financial
__ -:-and otherwise, on the basis of that price being
available.
(Continued on page 114)
C3T35/2/HS 113 7 /10/88 Paringa MR HEEREY (continuing): Now, quite apart from the statutory
provisions which I will come to in a moment,
Your Honour, any court, in the exercise of the
discretion, would be extremely reluctant, indeed,
to affect totally innocent third parties with not the slightest connection with this
controversy who have ordered their affairs inthe light of the offer that was made.
If I could just take Your Honour, in a little
more detail, to the provisions of the Code, the
section principally providing for the on-market
offer is to be found in section 17(2) which I
will not read,but the rest of section 17 deals
with the details of the offer and section 33
deals with the circumstances in which the
on-market offer can be withdrawn. Section 33(1)
provides, in substance, that after the take-over
announcement has been made, if what is called
"a prescribed occurrence" takes place, the offerer
can withdraw it.
"A prescribed occurrence" is defined 1n
section 6 - I will not repeat it but, broadly
speaking, they deal with events that affect the
target company, for example, a.winding up of
the target company, appointment of receiver or
so forth, none of which is relevant in the present case. And the other relevant provision which enables the offer to be withdrawn is contained
in section 33(6) which provides that:
After the making of a take-over
announcement and before the end of the period
in which offers constituted by the take-
over announcement remain open -
(a) the on-market offerer may, with the
consent of the Commission ..... withdrawsuch of the offers as have not been accepted;
or
by causing an announcement to that effect to be made on his behalf by a member of the stock
exchange - as referred in section 17(2).
(b) deals with the corresponddng position
of our client, the broker,. that is the member
of the stock exchange and it is all subject tothe rider:
but the Commission shall not grant its consent
to such a withdrawal unless it is satisfied
that in all the circumstances it is just
and equitable to permit the withdrawal of
the offers.
C3T36/l/ND 114 7/10/88 Paringa
MR HEEREY ~ontinuing): Now, a number of things, perhaps, need to be said about that. Firstly, the section
seems to make clear that it is a matter between,
as far as initiation goes, the offeror or his
broker and the Connnission and there does not seem
_:~- to be provision for somebody else, like the applicant in this case, to come along to the
Commission and say, "Well, the offeror does
not want to withdraw the offer but we think the
offerer ought to withdraw the offer".
Secondly, and perhaps more importantly, the decision whether the offer should be withdrawn
is reposed in the Connnission which is an expert
body. It is expressly required to consider all
the circumstances, whether it is just and equitable.
One would imagine that in exercising that power
there would be obligations of procedural fairness
to hear others involved, in particular the targetcompany and its shareholders,and it is a carefully hedged-about power conferred on the Connnission, in
our respectful submission, an exclusive power and
one that a court, in the exercise of the discretion
either simply has no jurisdiction to interfere with
or, as was put in the alternative polite fashion,
as put by Mr Myers, should in this exercise not
do so.
Now, similar connnents can be made about
section 34 which deals with suspension of the
take-over announcement and that makes explicit what
seems to be implicit in section 33, namely, that it
is only the offeror or his broker that can make that
application for suspension. Again, the decision is
reposed in the Commission itself and we would -
I did not want to take the time of the Court but
we would respectfully suggest that, if there is
to be withdrawal or suspension of an on-market
offer, the powers to be exercised should be those
specific powers in-· 33 and 34. and not
the more general powers of variation of the Code
contained in 57 and 58. So, we say, therefore, that not only should
that not be done but there is the added fact here,
of course, that some ADL shareholders completely
properly have accepted the offer. I think it was 19 per cent between the 19th and the 23rd and
another 4 per cent last Tuesday morning and, if the injunction were to be granted, once again,
one would see how the policy behind the Code would
be thwarted because those shareholders who have the
good luck to accept the offer in those - to use the
modern jargon - windows of opportunity when it was
available, would be advantaged as against completely
innocent people who might have wanted to accept the
C3T37/l/SH 115 7/10/88 Paringa offer but ~e prevented by the injunction and who then
expected to wait for some totally indefinite periodof time before they could accept that offer.
Before passing from the significance of the
statutory scheme, we might make this comment,
-=---Your Honour, and it turns on the form of the part C
offer which is at page 706 of the appeal book. Does Your Honour have that?
HIS HONOUR: Yes, I have it. MR HEEREY: Now, as our learned friend pointed out, this is the offer, the sub.sequent circular that says, by
way of info:mnation, that the offer has been made,
and it is stated that:
The offer constituted by this announcement
may be accepted at an official meeting of
the Australian Stock Exchange Limited or
(2) if the offers cannot be accepted at a
particular official meeting of the Australian
Stock Exchange Limited, (a) because neither
May Mellor nor its representatives is present
at that official meeting; (b) because dealings
in Australian Development shares are not
permitted at that official meeting, or for
any reason - by notice, that is -
may be accepted by notice in writing signed
by or on behalf of a holder of Australian
Development shares to which this offer relates,
and is served on the Australian Stock Exchange
(Adelaide) Limited on the day of that official
meeting.
Now, at least arguably that indicates to us that,
quite independently of any restraint or lack of
restraint on North Flinders or our client, the
shareholders can accept the offer and make a binding contract simply by notice in writing served on the
Adelaide Stock Exchange.
HIS HONOUR: Are you moving to some other topic, Mr Heerey? MR HEEREY: Yes, Your Honour. HIS HONOUR: All right, well we will adjourn until 2 pm. AT 12.50 PM LUNCHEON ADJOURNMENT
C3T38/1/VH 116 7/10/88 Paringa UPON RESUMING AT 2.00 PM:
HIS HONOUR: Yes, Mr Heerey. MR HEEKEY: If Your Honour pleases. Ihe significance of
the effect of the proposed injunction on the
statutory scheme created o~ce the part C statement
had been made was obviously a relevant consideration
and that is the explanation why reference was
made by Mr Justice Legoe to QUEENSLAND V THE
COMMONWEALTH. It was put to His Honour - and
this appears at page 295 of the transcript which
is not in the appeal books but it is exhibit DW4 to the affidavit of Mr Wicks, and it was simply
put in this way, that a relevant factor ~eighing
against the grant of an injunction is that it
would cut across a statutory scheme and that
it was not for a moment suggested the.QUEENSLAND
case was on all fours but it was simply an
analogy.
And another useful analogy is to be found
in CASTLEMAINE TOOHEYS V SOUTH AUSTRALIA,
67 ALR 553, and at page 557, the present
Chief Justice, at line 30, after discussing the
CYANAMID versus BEECHAM controversy and opting
for the CYANAMID test, at line 41, His Honour
says:
However, it may be that in some cases where
the public interest would be adversely
affected by the grant of an injunction the
plaintiff may need to show a probability,
even a distinct probability of success,
in order to obtain an interlocutory injunction.
The degree of likelihood of success in the
action is a factor that is related to the
balance of convenience in a way shortly
to be mentioned.
And so it was perfectly proper, in our respectful submission, for His Honour to take into account
that critical element in that case, that is that
it would cut across the statutory scheme and
adversely affect thousands.of people who were
entitled to order their affairs on the assumption
that the take-overs Code would be complied with.
Your Honour, finally, we, as I have said,
really, are in a sense of looking over the fence at this dispute. We have listened with interest
to the trenchant criticisms thar Mr Myers has
made of the ultimate merits of the applicant's
~laims and would submit that they carry great
C3T39/l/ND 117 7/10/88 Paringa
weight. Can we just make, in conclusion, two, as it were, jury points that occur to us as going
to the ultimate merits of the applicant's case.
The first of those is this: it is rather
inconsistent, we submit, for the applicant to say, on the one hand, that to offer a premium for the control of ADL is somehow improper when
they do not know that Poseidon will accept the
offer, and then, on the other hand, to say that an injunction should be granted, one of the reasons
being that they fear Poseidon may have found
some appeal in the offer and may accept it.
The second jury point is this, Your Honour:
if this was an elaborate scheme, the rights issue
and the take over of ADL and the take over of
Paringa, an elaborate scheme with the wrongful
and sinister purpose of diluting Paringa's equity,
it really only makes sense if Paringa could not
take up the entitlement under the rights issue
because it simply did not have the money or couldnot borrow the money and that North Flinders
knew that Paringa was in that position.
So one can understand a possible situation
where a shareholder with control, by some
misfortune, is in a parlous financial position
and the board think, "Well this is an opportunity,
we will makes a rights issue, they won't have
the monex now and therefore we will dilute their
control. ', but essential to that sort of scheme
is the knowledge that the shareholder you want
to dilute out simply cannot take up his rights.
And that is not alleged here, not alleged in
the pleadings, there is no evidence to it and,indeed, this morning the highest that our friend
Mr Grieve could put it was that Paringa were
put in a dilemma and implicit in what he says
is that they had the money, if necessary, to
take up their rights issue.(Continued on page 119)
C3T39/2/ND 118 7/10/88 Paringa
MR HEEREY (continuing): Now, if that is the position and
we cannot assume that Paringa does not have the
funds or could not borrow them, the North Flinders'
directors would know that that was the situation
and would know that it was highly probable, or
at least on the cards, that Paringa rather than
lose control or have its shareholding diluted
would take up its entitlement. And if they did,
and if they kept their majority hold the veryfirst thing that they would do at the next meeting
would be to sack the board, one would imagine,
if they were unhappy about the take-over scheme
and the acquisition of ADL.So, if it was a devious scheme with the purpose of watering down the Paringa shareholding
it really amounted to kamikaze tactics in that
it was unlikely to achieve the desired resultand would, in the end, only rebound on those who
thought it up. So we submit these are points worthy of consideration but we respectfully
urge Your Honour not to lose sight of the fact
that the overwhelmingly important consideration
here is that regardless of the pros and cons ofthe debate about these issues and take overs the
applicants have to satisfy this Court that there
is a reasonable prospect of getting special leave.
We submit that they simply have come nowhere near making out that case and that there are important
considerations which weighed with the judge below
and, respectfully we say, should weigh with this
Court why an injunction should not go and, inparticular,the effect it would have on the operation
of the Code and the rights and reasonable expectations
of shareholders of ADL and the market in general.
Those are our submissions, if Your Honour
pleases.
HIS HONOUR: Thank you, Mr Heerey. Mr Hayes.
MR HAYES: Your Honour, there has been to date no opposition to our standing to address Your Honour and I will
not address Your Honour on that question unless
Your Honour wishes me to.
HIS HONOUR: Unless what you have just said invites something, Mr Hayes, you can just go ahead.
MR HAYES: Your Honour, we have little to add to what has been said and we, with respect, adopt what Mr Myers
and Mr Heerey have said. We wish to explain to the Court how the position of Australian Development
Limited and its shareholders is affected by the
orders as they stand. Your Honour, Australian Development Limited is the target company, as
C3T40/l/AC 119 7/10/88 Paringa Your Honour knows, and it has shareholders some
55 per cent of which is one shareholder, Poseidon, and the other 45 per cent individual shareholders.
A part Coffer stands in the market and some
shareholders have accepted that offer. There is
now great uncertainty in the light of the orders
as they stand as to what is the position in respect of the remainder of the period of offer the subject
of the part C statement. Because whilst it is true that the order does not name ADL or its
shareholders and does not express a ban on those
shareholders accepting the offer, the effect ofthe order is to make it very difficult and uncertain
for shareholders to ascertain their position and
casts a real doubt about their right to accept
the offer.
HIS HONOUR: Is that the basis upon which your client was granted leave to intervene?
MR HAYES: I did not argue that, Your Honour, but argument along those lines were put.
HIS HONOUR:
So it is really the interests of the shareholders in the company rather than the company itself?
MR HAYES: And the company, Your Honour, because the company has an interest in the price of the shares which are affected by this dispute and by these injunctions. There is evidence that the share price has dropped during the currency of one or more of the injunctions
and that affects the company, it affects the shareholders as well. Your Honour, the announcement that is
exhibit "W3" to Mr Wicks' affidavit threatens a dire result in the event of these proceedings
being successful. They will seek a declaration
that the part C announcement and all acquisition
of shares in ADL are not binding and can, in due
course, be set aside. Now that was referred to
this morning, Your Honour. It is not in the appeal books. Does Your Honour have this?
HIS HONOUR: Yes, I have that. MR HAYES: Now, Your Honour, that announcement coupled with the public knowledge of the existence of the
injunction and the public knowledge that acceptances
if now made will not be paid at least until these
proceedings are resolved casts a real doubt on
the ability of the shareholders to accept the
offer to the point, we would say, as to effectively
frustrate their right to do so.
C3T40/2/AC 120 7/10/88 Paringa
MR HAYES (continuing): And it also puts the offeror in a difficult position in that if it unwittingly accepts,
receives an acceptance of its offer by reason of nottaking any step but by the simple operation of the
part Coffer, it is thereby in breach of the order
made by this Court. Now, Your Honour, there are ----- probably a series of ·stock exchange regulations,
and whatever, that affect the transactions so that
it cannot be said that the acceptance of the offer
does not involve any step by the offeror, but we
content ourselves with saying that at the very leasttwo difficulties created by the present situation are that shareholders wishing to accept are under
threat, they will not be paid, they might have their
acquisition set aside, there are very real doubtsabout the legality of what is happening, and that any
acceptance they make, even if it does not involve
the step by the company, puts the company in breach
of the injunction.
Also, Your Honour, people who do not wish
or are uncertain about accepting the offer are faced
with a reducing share price and are also adversely
affected. There is no evidence that would separate Poseidon from the other individual
shareholders when making these considerations.
So, Your Honour, they are factors very relevant to
the balance of convenience and there is no undertaking
as to damages standing in favour of the company or
its shareholders. So any loss that the company ADL or its shareholders suffer by reason of these
injunctions will not be met by an undertaking as to
damages and that, we submit, is a vital point
overlooked by the applicant in the way it has
structured its proceedings.
There is another point, Your Honour, linked to
that, of a more fundamental nature, and that is clear
authority of this Court to the effect that the mere
existence of a breach of fiduciary duty by the
directors of North Flinders would not lead
necessarily to the setting aside of shares thus acquired unless it was shown that the third parties
who sold their shares pursuant to the scheme were notinnocent, and apart from one reference in the recent
affidavits which is quite inconsistent with the
statement of claim which suggests or hints at
a conspiracy involving ADL and Poseidon, there is
no other suggestion that any of the shareholders ofADL in any way have had notice of any impropriety.
Now, I gave You~·Honour a handwritten .list of
authorities the other day in which were contained
HARLOWE'S NOMINEES and RICHARD BRADY FRANKS V PRICE,
if I could briefly refer Your Honour to those cases.
I have the cases here, if Your Honour does not have
them in Court.
C3T41/l/HS 1 2 1 MR .. HAYES 7 /10/88 Paringa
HIS HONOUR:
I think we have them, Mr Hayes. Just let us have the report reference, please.
MR HAYES: Your Honour, HARLOWE'S NOMINEES V WOODSIDE, 121 CLR 483, and RICHARD BRADY FRANKS V PRICE is
58 CLR 112. I wish to take Your Honour to short
_ _::-_-passages in those cases and to page 500 of the
judgment in the HARLOWE'S NOMINEE case.
HARLOWE'S NOMINEES, Your Honour, was a case
where the suggestion was that the directors had
acted for an improper purpose in relation to an
allotment of shares. Indeed, the trial judge
had found that they had not and the matter went on
appeal and having dealt with the facts - and it was
an appeal that largely dealt with the learned trial
judge's finding of fact - the judgment of the Court
consisting of the Chief Justice and
Justices McTiernan and Kitto said at page 500 as
follows:
What has been said is enough to dispose
of the appeal. If we had been of the
contrary opinion a serious question would
have remained, namely whether proof of
the Woodside directors' breach of duty
would have entitled Harlowe to have the
allotment set aside as against Burmah.
We need not discuss this question; but
we must make it clear that we are not to
be taken as denying that Burmah's legal
title to the shares would have provided
an effective answer to a claim for the
relief that Harlowe seeks, in the absence
of a finding that at the time of the
allotment Burmah had notice of the breach
of duty. There is no need to consider thefurther defence of laches and acquiescence.
(Continued on page 123)
C3T41/2/HS 122 HAYES 7 /10/88 Paringa
MR HAYES (continuing): The matter is dealt with also, Your Honour, by His Honour Justice Dixon in
the RICHARD BRADY FRANKS case which was another
case of alleged improper purpose in the conduct
of the affairs of a company and, at page 142,
of that report, about eight lines from the
bottom, there is a passage commencing:
But, at the same time, if his act is
otherwise within the scope of his
authority it binds the principal
in favour of third parties who deal
with him bona fide and without noticeof his fraud.
A number of cases are there cited.
The rule, no doubt, is the same with
respect to the acts of directors.
So, Your Honour, we would say that those two
cases and the passages I have referred to support
the fundamental contention that the plaintiff in
this case could only succeed in the relief that
it currently seeks in setting aside the relevant
transactions, if it could show complicity by the
third parties who were taking up the offer to sell
the shares. Without that, its relief would be different and, no doubt, there might be relief for breach of directors' duty and damages but it could not be, we would submit, obtain the relief sought
in the proceedings and sought to be preserved by the injunctions we are now considering and there
is no su?gestion, apart from the one passage in
Mr Bagot s affidavit-and I have noted it appears
at page 870 of the appeal book- where he suggests
that he believes there was an agreement of an
improper kind involving Poseidon, ADL and other
parties. I will just refer Your Honour to the particular passage at page 870. He says: Paringa believes that it may well be
an agreement between NFM, Australia Development Limited and Poseidon
and then lists the impropriety he now complains
of. That, we would say, is a boot straps attempt
to overcome this fundamental problem, to show
complicity by ADL, Poseidon, its principal
shareholder but, Your Honour, that is simply a
statement of belief without any basis expressed
for the belief and it is quite inconsistent with
the statement of claim in the action which,Your Honour, does not contain any such allegation and nor was such an allegation made before
Mr Justice Legoe in any of the proceedings before
him.
C3T42/l/SH 123 7/10/88 Paringa So, this Court is the first time any
suggestion has been made of complicity by any
of the shareholders of ADL in the conduct,
the subject of the complaint and, indeed, it
is put in such a way as to be of no probative
value. There is no evidence before Your Honour
_::-_ - to suggest any complicity in any impropriety
by Poseidon or by any of the other individual
shareholders of Australian Development Limited.
For that reason, we would submit, whatever else
is said, and we would, with respect, adopt what
Mr Myers said, the case must fail in so far as
it seeks relief of the sort now sought to be
preserved by these injunctions.
Now, the point 'linked with that that I started off with Your Honour is that, on the balance of
convenience, ADL and its shareholders stand to be
prejudiced in a real way by the maintenance of
undertaking as to damages and that, we would say, these injunctions without the protection of an is a very relevant factor in the exercise of the
Court's discretion. The other points we had tomake have already been made and I do not wish to repeat them. If Your Honour pleases.
HIS HONOUR: Yes, thank you, Mr Hayes. Mr Grieve.
MR GRIEVE:
With respect, we agree with Mr Hayes when he says there are very real doubts about the legality
of what has happened and that is the very basis upon which Paringa inured the Court in the first place and continues so to do. Your Honour, we are, with respect, indebted to our learned friends for having demonstrated by
their arguments that there are real questions of general importance ventilated by these leave applications and that there is one particular
question of general importance. We will develop it in a moment in detail but may we flag it in
an outline at this point. At the heart of each of the arguments that has been advanced lies the proposition that a part C statement purportedly made in compliance with the take-over legislation has been issued by North Flinders and that whatever may be, the circumstances and purposes underlying the issue of that part C statement,whether those purposes
on the part of the directors of North Flindersmay have been flagrantly in breach of their fiduciary duties, is beside the point.
C3T42/2/SH 124 HAYES 7/10/88 Paringa MR GRIEVE (continuing): According to the argument that
is presented against us, the Code is supreme
and the part Coffer, having been made, deprives
the Court of any jurisdiction to control or
prevent an alleged abuse of power on the partof the defendant directors.
Your Honour, if that is what the Code says,
that is an extraordinary piece of legislation
and we would respectfully submit that it cannot
be construed in that way.
HIS HONOUR: As I understood that proposition, Mr Grieve, it came in by way of explanation with the
reference by Mr Justice Legoe to QUEENSLAND V
THE COMMONWEALTH.
MR GRIEVE: Indeed, it did. HIS HONOUR: There is no way, as I see it, in which the grounds of appeal the subject of the application
for special leave to this Court would require
me to express any - certainly no concluded view
and I doubt any view at all on those matters
except for any relevance they may have to the
aspect I just mentioned.
MR GRIEVE: But the argument seems to go thus, Your Honour, with respect. It seems to be that
Mr Justice Legoe was pefectly right., ,:41.ether he
needed to refer to QUEENSLAND V THE COMMONWEALTH
or not, when he concluded what he did in that
the Code was ~11 powerful, the offer had been
made in aPEarent COlil)liance with the Code, a machinery
was set in train and the Court could not grant
any injunctive relief at the suit on any party
to prevent that machinery from running its course.
HIS HONOUR: I do not understand the argument to have been put that high. It was certainly, I suppose,
formulated that way but very quickly transposed
into an argument that the Court, in the exercise of its discretion, would have regard to statutory
obligations and not do anything which might prevent
a party from interfering - or ought not do anything
which would prevent a party from interfering
with those obligations.
MR GRIEVE: Subject, of course, to the circumstances and
this, in our submission, necessitates some
consideration of the strength or otherwise of
the case that the offer has been made in abuse
of power. If one can demonstrate an arguable case
that the whole purpose of the offer is foreign
to the directors' powers to act in the interests
of the offer or as a whole but, instead, is directed
towards some collateral purpose, such as the
C3T43/l/ND 125 7/10/88 Paringa ones we charge, namely the dilution of a
controlling interest, then that, in our submission
is a matter that warrants inquiry by the Court
at the suit of the complaining party and the
Code is no more than a factor in the overall equation. It is a factor, it is by no means
a predominant or even a dominant factor. However; may we come back to that point in a little more
detail in due course.
Your Honour, at the outset of his argument,
Mr Myers put the proposition that Mr Justice Legoe's
decision on 3 October was correct in that, as
he put it, the subject-matter of the application
then made on behalf of Paringa to extendMr Justice von :Doussa's orders of the Saturday,
and ie the injunctions pending the appeal, was
a different subject-matter to the subject-matter
of the main proceeding. That was the first premise
in Mr Myers' argument, that the subject-matter
of the application of Mr Justice Legoe for
injunctive relief pending the appeal was different
from the subject-matter of the main proceedings.
HIS HONOUR: Different, as I understood, for this reason,
that the application for interlocutory injunction
which was the subject of the decision given on
30 September was an injunction sought until trial
which it is said is a decision that this Court
is unlikely to grant special leave in respect
of because the trial itself is about to begin
on the following Tuesday and that if special
leave were granted, or rather that even the
application for special leave itself is not likely
to be heard before the trial begins and perhaps
not until after it has concluded.
MR GRIEVE: Mr Myers has said that the application for interlocutory relief before Mr Justice Legoe
took the form of an application for an injunction
until the trial and he said it not once but on
a number of occasions. We can look, if necessary at the papers, but, in substance if not in form,
the application for the interlocutory relief
was an application for interlocutory relief pending
suit, in other words, not until the commencement
of the trial but until the conclusion of the
trial. True it is that the trial judge, as my
learned friend has submitted, retains a discretion
throughout to vary that relief either by enlarging
it, diminishing it or, indeed, dissolving it
but to say that all that we were looking for
was relief until we were able to hear the case
called on and·the applicant or plaintiff's counsel
commences his opening address is, with respect,
not to state the matter with complete accuracy.
We would be no less vulnerable during the currency of the
trial, without injunctive relief, than we are prior to
_.the ccm:nencement of the trial.
126 7/10/88
Paringa
MR GRIEVE (continuing): Bu~ Your Honour, Mr Myers proceeded to say that the subject-matter of the application to
Mr Justice Legoe on 3 October was different from
the subject-matter of the main proceeding in that,
as he put it, "It was merely the right of theapplicant to seek interlocutory relief pending
the hearing of an appeal". The argument proceeded that Mr Justice Legoe properly acknowledged the
existence of the ERINFORD principle but proceeded, properly, to disregard it because, so the argument
ran, that subject-matter, namely the right of
the applicant to seek interlocutory relief pending
the hearing of the appeal had ceased to existat the point in the afternoon on 3 October when
Mr Justice Legoe was entertaining the application
for that relief.
The argument went on to say, "that it ceased to exist" - that is that subject-matter so-called -
"by reason of the factual event" - that had become
apparent earlier in the day - "that the appeal wouldbe unlikely to be heard before the commencement and"
as the argument goes - "in all probability,
the conclusion of the trial. Thus, it is said,
the right was a mere right or practice or procedure
as distinct from a substantive right - it had
ceased to exist - Erinford had no application. . It M r Justice Legoe was correct. Our response to that, Your Honour, is simply to join issue, with all respect, to the fundamental proposition that
the subject-matter of the application to
Mr Justice Legoe on 3 October was, in some way,
fundamentally different from the subject-matter
of the proceedings as a whole. The subject-matter of the proceedings as a whole, in our respectful
submission, is the right of the applicant to have
the courts intervene to prevent an abuse of poweror a breach of fiduciary duty on the part of the
defendant's directors and the defendant directors.
And that right however it is pursued, whether
by application to a single judge for interlocutory
relief; whether by application to the court for final relief as claimed in the instant proceedings;
whether by way of application to an appellate
court, or indeed to a single judge pending anappeal for interlocutory relief pending an appeal
in the proceedings is still-the same essential
right and it does not cease to exist, in our
respectful submission,~ntil a court of ultimate
appeal has determined that there is no basis upon
which the applicant is entitled to the relief
sought.
In this particular instance we submit that
the only way in which the Court can intervene
to prevent an abuse of power, or a breach of fiduciary
C3T44/l/AC 127 7/10/88 Paringa duty is to grant an injunction and we have sought
that both by way of final relief in the proceedings
and from the outset on an interlocutory basis.
In practical terms, as distinct from technical terms or legal terms, the subject-matter of the
proceedings is Paringa's controlling interest
in North Flinders mines. Tha~ if one views it from, that aspect, can only be protected by an
injunction and will be otherwise lost if there
is no injunction.
Your Honour, having regard to the argument advanced by Mr Myers we could, with respect, and
do offer as an alternative formulation the question
for special leave purposes arising out of a decision
of Mr Justice Legoe - - -
MR MYERS: If Your Honour pleases, I object to this. This
is an entirely fresh way of putting the case it
seems. It has not hitherto been raised. In reply
my learned friend is now attempting to formulate
a new case and -
HIS HONOUR: I do not know what he 1s going to sa~ that is my difficulty.
MR MYERS: He said - I did not want him to go any further - "We will now formulate our special leave question
in a fresh way" and, with respect, Your Honour,
he ought not to be able to do that. I know the
stock exchange in Perth is open until quarter
past four but my learned friend need not go on
all the afternoon. If Your Honour pleases.
HIS HONOUR: Mr Grieve. MR GRIEVE: If you think that I propose to abuse my right of audience by this Court with regard to what may
be happening in Perth is completely and utterly
unwarranted.
HIS HONOUR: Mr Grieve, without going to it in any detail,
what is it that you were about to say?
MR GRIEVE: Thank you, Your Honour. HIS HONOUR: In the most summary form, if you will. (Continued on page 129)
C3T44/2/AC 128 7/10/88 Paringa
MR GRIEVE: What I was about to say is very short and I will
say it - summary or otherwise. We can and may well re-forrrulate our question as an alternative and
cumulative question for special leave purposes in
these terms, having regard to the argument advanced
by Mr Myers. What is the subject of an application
for the purposes of the application of the ERINFORD -=----principle? Is it, as our learned friend, Mr Myers,
contends, merely a right of practice or procedure
to seek interlocutory relief pending the hearing of
an appeal as distinct from the subject-matter of the
suit as a whole, or is it, as we contend, the right
to have the courts intervene to prevent an abuse
of power by the grant of appropriate injunctive
relief pending the ultimate determination of the
proceedings?
HIS HONOUR: Well, I do not quite see how that differs from
what you put a few minutes ago.
MR GRIEVE: No, it does not, Your Honour. It is a summary of what we put.
HIS HONOUR: Well,_ . perhaps you unduly alarmed Mr Myers by speaking of a fresh formulation.
MR GRIEVE: No, Your Honour. Well, if I did, that is his
look-out, with respect. Your Honour is quite right. What I was saying was only a summary of what has
Tliat rather overstates the fact in any
been put by us. Now, Your Honour, our learned hearing."
friends proceeded to make much of the fact that
event and that the Court can take into account or
take into consideration that he reached his view that that
injunction should go after assessing the arguments that had been put pro and con over that period.
We did inform Your Honour, and it cannot be
disputed, in-chief, that a substantial amount of the
time before Mr Justice Legoe was spent on what proved
to be a false issue, namely, an allegation that the
applicant here had been less than fully frank and candid with Mr Justice Legoe when the initial application
for ex parte interim relief was made. Such an argument was advanced and took a deal of time; Mr Justice Legoe eventually rejected it. While we are just on that
topic, if we may correct a submission put by Mr Myers,
in point of fact. I:e suggested as part of his clean-
hands argument, to which we will come in due course,
that our supposed lack of clean hands can be taken
from the failure to disclose to Mr Justice Legoe
the pre-proceeding letter from Minter Ellison. Our learned friend, with respect, is misinformed. The letter was made available to Mr Justice Legoe on
the first occasion; Mr Bagot was present, he assures
me that was so, and we will say no more about it.
Your Honour, while there may be some 'Jury point force:'
to use Mr Heerey' s expression, in the proposition that
C3T45/l/VH 129 7/10/88 Paringa Mr Justice Legoe considered the matter over some time,
it is not without interest to note that
Mr Justice von Doussa on an inter partes hearing,reached
_an entire ":y opposite. result aft er on]_y a r1atter of_ t:}iree hours.
It is not also without interest to note that
Mr Justice Wilson in an ex parte hearing at which
-~-there is no allegation of lack of candour, reached
an opposite result after about a half an hour.
Your Honour, there is a suggestion on the part of
our learned friend that this is a cynical exerciseinvolving a tampering with the court's procedures and
so on and so forth. Support for this argument was ~ou3ht : to be extracted from the material being
the notice of appeal reproduced at pages 834 and 835
and following in volume VI.
It was suggested that that material indicated
the document having come into existence on the evening
of Friday 30th - indicated that there had been an
about-face, a tactical volte-face from the time that
Mr Gra·,y had announced, a matter of hours earlier, that
the applicant still sought an early trial and the
time the document was prepared later in the evening.The suggestion was that the notice of appeal involved
a complaint about there being an early trial. With
respect to our learned friend, the submission is
quite specious and it be exposed as such when one
looks to see an obvious typographical error in the
numbering of the paragraphs down the left-hand side
of page 835.
HIS HONOUR: I had. noticed that paragraph 4 is missing but I did not take it to have any relevance.
MR GRIEVE: Well, it does, Your Honour, in complete rebuttal
of the argument.
(Continued on page 131)
C3T45/2/VH 130 7/10/88 Paringa
MR GRIEVE: The paragraph should be numbered 3, 4, 5, 6
and 7, and that is so in that, if Your Honour sees -
we complain ,of paragraph 4 - if one renumbers 5 to 4,of course we complain .about the dissolution of the injunction. It would be odd indeed to read it literally and to say that we do not complain of --~-the paragraph numbered 5 as the number stands. That
is the very matter we do complain about, and so on
it goes.
HIS HONOUR:
Why would you be complaining about paragraph 7, assuming it is to be renumbered as paragraph 6?
MR GRIEVE: Presumably the complaint was that Mr Justice Legoe should have granted the injunction
with costs.
HIS HONOUR: No. the question of damages?
MR GRIEVE: Would Your Honour just pardon me? Why would we be complaining about -
HIS HONOUR:
I take you to be saying as a consequence of renumbering - - -
MR GRIEVE: Well it would not arise, Your Honour. We would not complain aboutit. If we were ultimately wrong
in the suit and if we were ultimately found not
entitled to injunctive relief then it would be right
and proper for our undertakings given during the
currency of the interlocutory injunction to remain
enforceable and for an order along those lines to
be made.
HIS HONOUR: At any rate, Mr Grieve, I take you to be saying that there is a typographical error in the notice of
appeal and that it was not intended to challenge the
decision .that there be an early trial?
MR GRIEVE: Not at all, Your Honour.
HIS HONOUR: Yes~ thank you.
MR GRIEVE: That is right, and as Your Honour observed to o~r learned friend during the course of argument,
that is fortified by the fact that the grounds that
follow in the ensuing pages do not anywhere ~ead
in support of any complaint about the early trial.
Your Honour, the next point that our learned friends
advanced was that we are here seeking an order beyond
the control of the trial judge, an order until the
hearing of the application for special leave andthat in that sense we are seeking an order in
excess of that to which we would ordinarily be
maximally entitled. Your Honour, we are and would
be content with an order formulated in terms of
an order pending special leave, or until further
C3T46/1/HS 131 7 /10/88 Paringa
order, with liberty to apply. Some such formulation could readily meet the complaint that our learned
friends make about that. Any order that Your Honour were to make would not tie the parties'
hands to any immutable timetable if it became
apparent that during the course of the trial the
_...:-:.-evidence, as it were, had shifted preponderantly
in favour of the defendants in the suit; they could invoke their liberty and return at short
notice to have the injunction dissolved.
HIS HONOUR: That would be an odd position, Mr Grieve, to have this Court, as it were, monitoring the
proceedings in the Supreme Court of South Australia,
and attempting to make some sort of judgment as to
how the case was going.
MR GRIEVE: It is problematic, certainly, Your Honour, but - - - HIS HONOUR: That is to put it mildly; MR GRIEVE: --- - but it is no answer, in our submission, to the proposition that we advance in-chief - and
if we are correct in it the proposition must run -
that absent some curial intervention in the case of -
where a strong case for relief is made, irreparable
harm will be done and result in justice ..
HIS HONOUR: That seems to me to raise two questions; one is what is there to prevent you on Tuesday seeking from
the trial judge, whose identity may or may not be
known at this stage - whether it is to be
Mr Justice Legoe or not, I do not know - but what is
to stop you seeking from the trial judge injunctive
relief while the trial is continuing?
MR GRIEVE: In theory probably nothing, Your Honour. In practice, what will have happened between now
and then may well mean that the damage has been done.
In other words, there will have been a full-day's
market activity between now and then. The trial judge is, as matters presently stand, unli~ely to take any different view of the facts than he already does,
and so from a practical point of view, although we
could make such an application, its prospect of
success could not be by any means assured.
(Continued on page 133)
C3T46/2/HS 132 7 /10/88 Paringa
HIS HONOUR: Are you saying Mr Justice Legoe is to be the trial judge?
:MR GRIEVE:
That is so, Your Honour. That is as we understand the force of the Chief Justice's direction.
HIS HONOUR: Well, the other matter that I had in mind is
this: that because of the form in which the
papers have been filed and, as I pointed out
yesterday, there is no motion for an injunction,
there is an order made by Justice Wilson,and I
take it that what you are seeking is a continuance
of the substantive injunctive orders made by
Justice Wilson?·
:MR GRIEVE: That is right, Your Honour.
HIS HONOUR: But I think I need to know what else you are seeking? Until what, the hearing - you
did canvass this yesterday to some extent - until
the hearing of the application for special leaveto appeal?
:MR GRIEVE: Yes, or until further order with liberty to apply.
HIS HONOUR: Yes, thank you. :MR GRIEVE: Now, Your Honour, we will return for a moment to the proposition that the mere fact that a
take-over offer under section 17 has been announced
and followed up by a part C statement provides a
complete answer to the entire matter. It has been
put in a variety of ways. It has been put, for example, particularly by Mr Hayes that that cannot
or, rather, the applicant's complaints cannot in
any way inpinge upon the ADL shareholders.
We would accept that, with respect, so far
as those of the ADL shareholders who may have
accepted, without notice of the complaints that
Paringa makes, but, indeed, the HARLOWE'S NOMINEES case and the particular passage cited
supports the very proposition that any transferee
on notice of the complaints made cannot claim,
perforce the Code or anything else, an immunity
and there can be no doubt that the transferees
are on notice.
Your Honour, the proposition that all that
one has to do is to announce a take-over bid
under section 17 and proceed to issue a part C
statement provides you with an immunity from
suit at the hands of any shareholder who might
complain that your directors have acted in breach
of duty, is an alarming proposition and one, in
our submission, that simply cannot be right as a
C3T47/l/SH 133 7/10/88 Paringa matter of principle. The Code in its structure
and, for that matter, the SECURITIES INDUSTRIES
ACT which, as my learned friend, Mr Heerey,
pointed out, gives the stock exchange rules the
force of law, must presume regularity in the
--=-- - proceedings ancilliary to the making of the
offer and, in the case of the rights issue,
the announcement of the rights issue.
If, indeed, those proceedings are vitiated
by actions taken with equitable fraud, then the
courts must be, we respectfully submit, entitled
to intervene with appropriate relief. Now, Mr Myers then-proceeded to discuss the merits
of the case and criticized our experts by
supposedly valuing ADL without regard to future
maintainable earnings. In fact, if one hasregard to the valuations to which we referred in-
chief, the experts did, indeed, take that approach.
They used the expression "npv" standing, as I
understand it, for net present value but whatever
their particular expression may have been, it is
plain enough from their analyses that they were
not looking merely at the state of assets and
liabilities that presently obtain. They were
casting ahead to the likelihood of the company's
future revenue and its extent.
We respectfully submit that the stock-market
does not provide, as Mr Myers suggested, a more
reliable criterion to the true value of a company's
shares and that is a fortiori the case in our
submission where a market is in a volatile state
and is influenced by the existence of what purports
to be a take-over offer. Speculative factorsinvariably enter the scene, t:he point being,
Your Honour, that it is no answer to say, "Well,
our bid is a mere 15 per cent or so above the
market price that obtained in the month or so
before we made our bid". The very fact to which
Mr Hayes had pointed, the price has gone off fortify the proposition that this offer price apparently while we have held injunctions would is way above value and it is only when it stopped to· 1.the extent to which one can have regard to the
market value, the market values the shares down.
(Continued on page 135)
C3T47/2/SH 134 7/10/88 Paringa
MR GRIEVE (continuing): My learned friend, Mr Myers, thenattempted to justify or respond to our criticisms
of the enormity of the rights issue by making
reference in the material to the directors apprehended,
"need for working capital", saying that the
12 million of which we spoke in-chief was capital
for a certain purpose. That may, in theory, give
rise for some justification for some capital being
acquired beyond 12 million but surely not several
hundred million, Your Honour.
He then suggested that the decision by the
AGL directors to vote not to change the
North Flinders board provided a complete answer
to Paringa's case suggesting in the same breath
that that case is that North Flinders have acted
simply to keep Mr Burke and his associates off
the North Flinders board. That, with respect,
is not our case. The case is that the North Flinders actions are directed to diluting the Paringa equity
controlling interest in North Flinders. At all events the so-called complete answer is just one
of a number of factors which would, in due course,
be weighed up by the trial judge. It, in our
submission, cannot be said to be a complete answer.
He then proceeded to make reference to the fact
that a take over of ADL had been under earlier
consideration and drew Your Honour's attention
particularly to the fact that certain take-over
documents had been prepared and were received
on 9 September 1988, some 10 days or so before
the sudden announcement. He went on to submit, and I think I quote him accurately by saying,
"All· that the meeting decided was to proceed by
part C rather than part A". With respect to
Mr Myers that is a rather large understatement.
The difference between a part A bid and
a part C bid is, of course, notorious. The former
is conditional and requires, for that very reason,
the antecedent approval of the commission before
any steps can be taken. It, therefore, takes time. The offerer can impose a condition such as that the offer is subject to not less than
51 per cent acceptances. It can, and offerors
invariably do, impose any number of other conditions
and an examination of the draft part A statement
in volume V, pages 725 and following, indicates
that the proposed part A, in this instance, was
intended to be subject to a number of conventional
conditions and, in particular, to the important
condition that it was entirely subject to acceptanceto the extent of 51 per cent. Failing that condition
North Flinders was at liberty to withdraw. In
other words if Poseidon refused to accept, that
would have been the end of the matter.
C3T48/l/AC 135 7/10/88 Paringa There is another substantial difference
between the part A, as earlier contemplated, and
the part C. The part A as our learned fr±end
Mr Myers pointed out was on a share swap basis -
two North Flinders for five ADL. Valuing
North Flinders at $5.50, that puts a value on the
ADL shares of .$2.20 - some 55 cents less than
the unconditional offer price of $2.75 under the
part C plan.
Now, Your Honour, those factors are, of themselves, sufficient, we respectfully submit,
to make out a compelling case that this part C
bid, unexplained by any other commercial
justification was brought about for the purpose of which we complain. Moreover, if the bid had proceeded by way of part A and had resulted in
a 100 per cent acquisition of ADL, as a matter
of arithmetic the maximum extent to which Paringa's
equity in North Flinders would have been reduced
would have been to 35 per cent. Under the present
plan we have to spend a substantial sum of money,
as I put in-chief, to hold our equity and if we
do not we may lose it down to 20 per cent.
And, of course, the corollary of all that is under the part C, without the important protective
part A conditions, North Flinders being unaware
of Poseidon's position runs the risk of paying
a substantial cash premium - $2.75, for a minority
interest into which it will be permanently locked.
Now, Your Honour, our learned friend then concluded
his attack on•the·merits, so to speak, by saying,
"Well, if Paringa is correct then there is a
practical and easy solution to the whole problem.The new North Flinders board can simply res61ve
to sell the ADL shares and recover the loss and
that will be a measurable loss and it will be easily recoverable from.the,directors." But, Your Honour, that, with respect, overlooks the
whole point of the proceedings. Unless there
are injunctions in place.there simply will not be a new board. The defendant directors will
have achieved their objective by reducing the
Paringa control to being that of a uninfluential
minority shareholder.
May we move on, Your Honour, to the clean-
hands point. The point in our submission, is entirely without merit. The clean-hands doctrine as a matter of principle is that the party seeking
equitable relief must have himself behaved in some recognizably inequitable way so as to disentitle himself for relief.
C3T48/2/AC 136 7/10/88 Paringa MR GRIEVE (continuing): With respect, I have never heard it
suggested that exercising one's rights to approach
a court ex parte offering, as the cost of so doing,
the usual undertaking as to damages is,in any way,
disentitling inequitable conduct. Your Honour, at its highest the complaint is one of discourtesy
and that does not take the respondent to this
application anywhere. We were bound, in the circumstance, to act as we did given the volatility
of the market. The matter was extremely urgent; we had to protect ourselves by making the application
on a very urgent basis and the stockbroker's evidence
to the effeqt of what happened in the market-place on the
Tuesday nDrru.ng in the very short time beforeMr Justice Wilson granted us relief is eloquent evidence of our vulnerability.
HIS HONOUR:
I do not entirely follow that, Mr Grieve. say at the moment I do not see why it would not have
I must
been appropriate to alert the respondents to the
applicants' intention to seek an injunction from
this Court, given the history of the matter and the
proceedings that had taken place before the
Supreme Court of South Australia.
MR GRIEVE: Well, two questions spring to mind, with respect.
One, to what end? And, two, given that we did not
do that, what is the legal or equitable consequence?
We submit that - - -
HIS HONOUR: Well, the second one is perhaps the more important
one, and it may be that nothing turns on it at all.
MR GRIEVE:
Well, we submit that nothing can. We had, as every party who claims that his rights are threatened,
a right to seek the Court's intervention ex parte. The cost of claimin~ that right, as it were, is the cost invariably mposed of offering t.½.e usual undertaking as to
damages. That was readily incurred by us; weoffered it and of course, it was accepted. Your Honour, we would have nothing more to put on that.
(Continued on page 138)
C3T49/l/VH 137 7/10/88 Paringa
MR GRIEVE (continuing): Now it was first suggested that the purpose of our proceeding in this Court is simply
to obtain some favourable publicity to put out
fears in the market-place. With respect, that is
an extraordinary and serious allegation of an
abuse of process on my client's part. It is
--=--tmsupported by any evidence at all. There is no
proof of any such bail motive and,indeed, Your Honour
can take it from the very serious and substantial
commercial considerations involved - the very
substantial loss that we face, that we would not
have troubled to even be bothered about what the
newspapers had been writing - we have not had time
to read them. Now, Your Honour, the next matter on this general merits point, is that any suggestion
of discourtesy on our part or bad motive for
moving the Court which, in our submission, has no
substance at all, can be starkly contrasted with
the deception which proceeded the announcement on
19 September. There is clear and undisputed
evidence in volume I at pages 89 to 92, 118, 112
and following, that officers of Paringa visited
North Flinders in Adelaide on 14 and 15 September
for the purpose of undertaking a detailed study
of its natural and technical structure.Now comments have been made at the bar table that I may have been in error. Officers of Genoa,
I stand subject to correction. Those officers came
to Adelaide for the purpose of looking at
North Flinders'financial and technical structure.
They were not told a word about this massive proposal to increase the company's capital by
almost seven-fold. They were received amicably,
they were not as it were repelled I am reminded,
they were invited so the evidence indicates. They
were told that when they were in Adelaide that
North Flinders' holding in Paringa was defensive,
it was a non-productive investment and it would be
sold. Now, Your Honour, these are not minor matters
of deception, these are matters that go to the very
heart of the equities of the party in the case and serve to demonstrate, once again, the strength of
the claim for curial intervention.
Now, Your Hononour, we would not have troubled
this Court but for the magnitude of the matter. In
substantial commercial terms it is a very large sum
of money on any view. It involves, we submit
important questions of principle. It is regrettable
that we were forced to come .. here at short notice.
We make no secret of that fact, but we used the
word "forced" advisedly.
C3T50/l/SR 138 7/10/88 Paringa
MR GRIEVE (continuing): We sought and agitated our rights
elsewhere without success. But we submit that that failure was in no way· as attributable to a proper
assessment of the merits of our claim at all, but
rather,with respect, to an error of principle in
according to the arguments that the Code overriding
-~-all when, Your Honour,with respect, tne courts
power to intervene to prevent inequities must
survive any legislation absent ·the clearest of
language.
HIS HONOUR: Thank you, Mr Grieve. MR MYERS: If Your Honour pleases, may I just deal briefly with two matters that arose for the first time
in my learned friend's reply.
HIS HONOUR: Perhaps you could just signal if there is
any problems, Mr Myers.
MR MYERS: Yes, it is really the last matter of deception that it arises out of. My learned friend said that what was done by his clients in coming to
this Court without notice does not even compare
badly with what was done by the defendant directors
of North Flinders shortly before the 19th when
they - - -
HIS HONOUR: Well they are not comparable .. One, if it has any substance at all, the criticisms you have made might go to the Court's attitude towards
the grant or refusal of an injunction although
I rather doubt that. The other, if it has any
relevance at all, presumably is relevant to the
strength of Paringa' s case against North Flinders.
MR MYERS: With respect, Your Honour, that is right. In
regard to the first point, we say it should go to
the question of whether an injunction should be
granted because the effect of coming on an
unopposed basis to Justice Wilson, was to get the
benefit of this holding for a further three or four days and that is a matter that we say ought to be
taken into account. The men who came to the
company shortly before the 19th were neither
shareholders nor directors in North Flinders. They
were not told about things that had not then been
decided by the directors. Of course they could not
have been told, it would have been quite improper.
(Continued on page 140)
C3T51/l/SR 139 7/10/88 Paringa
MR MYERS (continuing): They were representatives of Hartogen Genoa. They were not Paringa, they were not shareholders,
they were not directors of North Flinders. Of course, the directors of North Flinders could not tell them
about what they were going to discuss at a forthcoming board meeting and, in our respectful submission, those
_pages that my learned friend referred to will show
--- that they were not persons whom disclosure could
properly have been made to. If Your Honour pleases.
HIS HONOUR: Yes, thank you, Mr Myers. There must• some time be an end tO this, Mr Grieve.
MR GRIEVE: Yes, I understand, Your Honour. There is one matter I want to raise and I am sure it will not be
problematic. We would seek leave to amend our application for special leave by deleting the word
"administratively," from paragraph 1.3.
HIS HONOUR: I am not sure that you need leave, but - - -
MR GRIEVE: Well, for more abundant caution, Your Honour,
we have not checked, but we would -
HIS HONOUR: Wait until I just find it - now what is it that you are asking, Mr Grieve?
MR GRIEVE: Leave, if we need it, Your Honour, to amend the application for special leave by deleting the word
"administratively," from paragraph 1.3, immediately
after the word "refusal," in the first line.
HIS HONOUR: Yes. Is that the only amendment you seek?
MR GRIEVE: That is the only amendment, Your Honour. HIS HONOUR: Does any counsel wish to be heard in regard to that matter? Very well, there will be leave to amend
paragraph 1.3 of the application for special leave toappeal by deleting the word "administratively,"
appearing in line 1. If there are no other housekeeping
matters I propose to reserve my decision and let you
have it as early as I can.
MR MYERS.: Your Honour, there is,.arising out of that one matter - in the time that was available on Tuesday morning, as
Your Honour heard, there were a substantial number of
shares purchased. They were completed lawfully. The reimposition of the injunction has they efiect that
they cannot be paid for - - -
HIS HONOUR: Well, is that the reimposition of the injunction?
The injunction continues until an order is made either
varying it or discharging it, does it not?
C3T52/l/VH 140 7/10/88 Paringa MR HEEREY: No. On the Tuesday morning, prior to the application to Justice Wilson there was no
application in foot - - -
HIS HONOUR: I beg your pardon. Yes, I see what you mean. MR HEERE-Y--~- - - - and we would ask Your Honour now to make an appropriate order to enable those purchases
to be settled.
HIS HONOUR: Now, how am I going to do that, under what aegis am I being asked to do that?
MR HEEREY: Under the liberty to apply reserved by Justice Wilson.
HIS HONOUR:
But the liberty to apply is in relation to the application for the injunction.
It did not seem to
me immediately to be an appropriate exercise
of a liberty to apply provision, but perhaps you
can persaude me.
MR HEEREY: It is, in effect, a variation of His Honour's injunction so that it would not operate to prevent
settlement of those purchases.
MR GRIEVE: No, we do not object to any appropriate modification, Your Honour.
HIS HONOUR: Well, then, perhaps you will spell it out,
if you will, Mr Grieve. How would you see it being expressed?
MR GRIEVE: The language I am about to read to Your Honour was used in the supreme court when a similar
variation was made. It is at page 610A of the appeal documents. That is the order Justice Legoe
made on 27 September; it is on the second page
of that order, and varying it mutatis mutandis
we would suggest that the order should be that:
Notwithstanding anything cdntained in the order of Justice Wilson,made on
4·0ctober 1988 it shall be lawful forthe respondents, North Flinders Mines
Limited and C.L. May Mellor Laing &
Cruickshank Limited~ to take all necessary steps to settla and make payment in respect of all contracts arising out of the
acquisition of fully paid ordinary shares
of 10 cents each in Australian Development
Limited in the ordinary course of trading
on the stock market on an Australian stock
exchan~e up to 11.18 am Eastern Standard
Time on,Tuesday, 4 October 1988.
C3T53/l/MB 141 7/10/88 Paringa
HIS HONOUR:
Is -that an order that you seek in respect only of - well, you only seek it in respect of your
client. I do not know whether it is sought by
North Flinders.MR MYERS: Yes, it is, Your Honour. HIS HONOUR: I say that because the order that you have taken me to is an order that is directed both
to North Flinders and to Mellor.May Lairg andCruickshank.
MR HEEREY: Yes, well, we certainly and I understand that Mr Myers does too.
MR MYERS: Xes, we seek the same variation and for the same reasons, Your Honour, because, Your Honour,
before Justice Wilson made his order and when
there was no restraint upon dealing, certain
acceptances. were communicated and plainly in the
fullest sense of the word there were accrued
rights and obligations as a result of those
acceptances being comm~nicaued:and we want to
pGy:for-the shares that we thought - - -
.·:HIS .HONOUR: I think. :what prompted me to question whether it was properly an exercise of liberty
to apply was :simply that Justice Wilson's order
would operate prospectively and this was a matter
which had occurred but I can see that the
injunction would stand.in the way of completing -
MR MYERS: The injunction is framed very widely. HIS HONOUR: - - - any of those transactions. MR MYERS: The injunction does, we think, affect those because it restrains payment.
HIS HONOUR: It does not purport to affect anything that has been done up until the granting of the
injunction but it might stand in the way of completing any of those transactions.
MR MYERS: Yes, paragraph 3, that Your Honour will recall refers to payment:
North Flinders is hereby restrained from making payment to any person -
and that is not limited in point of time.
HIS HONOUR: Yes, I see that. MR MYERS:
That is where the vice comes in and we join with Mr Heerey in that application and we do
not understand it is opposed. C3T54/1 /ND 142 Paringa
HIS HONOUR: Mr Grieve, do you want to say anything about that?
MR GRIEVE: No. HIS HONOUR: Let us take it step by step.
(Continued on page 140
C3T54/2/ND 143 7/10/88 Paringa
HIS HONOUR:
In the absence of any order by me varying or discharging the existing order, that order
will continue until further order. So that does not, as it were, require any order
directing its continuance. So that what _:-- I take it I am being invited to do at the
moment is to vary the order made by
Justice Wilson by introducing a paragraph -
well, perhaps not by introducing a paragraph,
just to vary the order by a provision in thepage 610, sa,;e that instead of the words "the
terms to which Mr Heerey referred which would,
close of business on Friday the 23rd day of
September 1988", I would substitute the words
"11.18 am -Eastern Standard Time on Tuesday
the 4th of October 1988".
Now, it may be important to get this quite
right so if that is not what is intended, please
let me know.
MR MYERS: Your Honour, that is partly right, if we could say so; with respect, but the shares that were bought before 23 September still have to be paid
for so there should be an exception in the terms
that Your Honour has before him and an exception for - I think I am wrong - it is up to the - - -
HIS HONOUR: The shares have been acquired, it does not really
matter whether they are acquired five minutes before
11.18 am or six weeks before, does it?
MR MYERS: If Your Honour pleases, I am quite wrong. Exactly, that is fine, Your Honour.
HIS HONOUR: Well, are counsel both clear as to what is
proposed and content with the formulation of it?
MR MYERS: Yes, Your Honour.
MR HEEREY: Yes, Your Honour. HIS HONOUR: In that event, there will be an order as I have just expressed it. Otherwise, as I indicated, I
reserve my decision and hope to be in a position
to let you have it some time next week. The Court will adjourn.
AT 3.17 PM THE MATTER WAS ADJOURNED SINE DIE
C3T55/l/SH 144 7/10/88 Paringa
Key Legal Topics
Areas of Law
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Commercial Law
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Civil Procedure
Legal Concepts
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Injunction
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Remedies
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Expert Evidence
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Jurisdiction
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