Paringa Mining & Exploration Company Plc v North Flinders Mines Limited

No judgment structure available for this case.

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 &
CRUIKSHANK LIMITED,
GEOFFREY HUGH STEWART,
JOHN JOSEPH den DRYVER,
CLEMENS FREDERICK WEGENER,
PETER RICHARD MITCHELL,
DEAN WILFRED HOSKING

Respondents

Application for Interim Injunction

TOOHEY J

Paringa
( In	Chambers)

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 6 OCTOBER 1988, AT 2.33 PM

(Continued from 4/10/88)

Copyright in the High Court of Australia

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MR D. GRIEVE, QC: May it please Your Honour, I appear
with my learned friend, MR C.N. BACOT, for the
applicant. (instructed by Piper Alderman)

MR A.J. MYERS, QC: If Your Honour pleases, I appear with
my learned friend, MR K.W.S. HARGRAVE, for the

~- respondents other than the second respondent.

(instructed by Baker O'Loughlin) fl.Hi.,Je.,.rs: MellorutAr&

MR P.C. HEEREY, QC: If Your Honour pleases, I appear with
my learned friend, MR N.W. MORCOMBE, for the

second-named respondent, C.L. May Mellor Laing & Cruikshank. (instructed by ~i~her Jeffries) Co'<'t~ Mt-1/ol

.

-Molli.S0,ty, Alif

MR A.C. ARCHIBALD, QC: May it please Your nonour, I appear
with my learned friend, MR P.R. HAYES, for
Australian Development Limited, the party given leave

to intervene below. (instructed by Mellison Litchfield) · Fis~ueffrf t, Al)t-

• , M4C ,ITti .r R.

HIS HONOUR: Given leave to intervene oy e oWan~ why?

MR ARCHIBALD: By Mr Justice Legoe, Your Honour, by an
order on 29 September.

HIS HONOUR: Yes, thank you, Mr Archibald.

MR GRIEVE:
Your Honour, the applicant seeks the continuance
of an ex parte·injunction granted by
Mr Justice Wilson on Tuesday last, 4 October.

HIS HONOUR: When was that scheduled to expire, Mr Grieve?
MR GRIEVE: It expires, as it were, at the determination

of this application. From recollection
His Honour's order was that the order runs
until such further order as may be made by
the Court upon the hearing of this application
to commence at 2.30 today.
(Continued on page 3)

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Paringa

HIS HONOUR:

What extension are you seeking at this

stage?

MR GRIEVE:

We are seeking an extension of the injunction

in terms until the hearing of the applications

_ ~--. for special leave, whenever they may come on.

HIS HONOUR:

You mean you are seeking that as the substantive

relief that is being sought today or - - -

MR GRIEVE:

Yes, Your Honour.

HIS HONOUR:

I see.

I thought you may have been looking

for some form of interim relief pending the
conclusion of this hearing but you think that
is sufficiently covered by the terms of
Justice Wilson's order?

MR GRIEVE:

We apprehend that it is, Your Honour.

HIS HONOUR: Well, I do not want to - - -

MR GRIEVE:	Would Your Honour just pardon me one moment.
HIS HONOUR:	I do not want to cast doubt where doubt does

not exist.

MR GRIEVE:

No.

If Your Honour would just bear with us for

a moment. Page 3 of His Honour's order:
Until such further order as may be made
on the further hearing ±nter partes of
this matter before a Justice of this
Court to commence -

at 2.30 pm today, we apprehend that that means
that unless and until Your Honour makes· some
further substantive order, the relief that we
have will inure.

Now, Your Honou½ may we just briefly go over

the essential chronology that brings us here. On
9 September 1988, a company called Atrank, for
short, a subsidiary of another company called
Genoa, for short, acquired Australian Gaslight
Corporation's 54 per cent interest in Paringa
and with it, of course, the effective control of
Paringa.

There then followed on that same day,

9 September 1988, a meeting in Adelaide between
representatives of Genoa and AGL on the one hand
and several of the directors of North Flinders on the other. The purpose of that meeting,called at
AGL's request,was to discuss the fact that Genoa
had obtained a majority interest in Paringa

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Paringa

(Continued on page 3A)

and to put forward a proposal that that majority
interest should be represented by a reconstitution
of North Flinders' board so as to reflect Paringa's
effective control.

(Continued on page 4)

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Paringa

MR GRIEVE (continuing):

I should have mentioned that

Paringa has, or at least had until fairly recent times, and it had at all events at the time of Genoa's acquisition from AGL, an
equity of 49.96 per cent in North Flinders'
capital. That meeting that took place in
Adelaide on 9 September was, to all appearances,
amicable and at it there was no mention made
by the directors of North Flinders of any proposal
of the nature that was subsequently announced
and the proposal that was announced on
19 September involves a three point plan, the
details of which we will come to shortly, that
is at the heart of this claim for injunctive
relief.

That plan was presented to the board of

North Flinders at a meeting on 19 September 1988.
It had not been disclosed to all of the directors
prior to that meeting and, in particular, it
had not been disclosed to the two AGL appointees
who had retained their office pending the outcome
of the discussions which took place in Adelaide

on the 9th. And as I have mentioned, we will
return to the details of the plan very shortly.
In essence, the applicant's complaint is
that the plan, being three point in terms
has, as its fundamental object, for the purpose
of diluting Paringa's equity in North Flinders
and it is said - and as is contended for by
us - that that involves oppressive conduct
on the part of North Flinders and involves
a breach of fiduciary duty on the part of the
defendant directors.
To restrain the implementation of the plan,
proceedings were commenced ex parte before
the Supreme Court of South Australia, personified
by Mr Justice Legoe on 23 September 1988.
His Honour granted certain limited interim relief and the proceedings were made returnable

or at least were returned on 25 September when

they resumed on an inter partes footing. They
continued inter parties from the 25th to the
26th, 27th, 29th and 30th, on which latter
date Mr Justice Legoe determined that he would
dissolve the interim injunction originally
granted.
I should mention that despite the apparent
length of that inter partes procedure, much
of the time that'was taken up in it involved
a consideration of what ultimately proved to
be an unsuccessful attempt by the respondents
to invoke the EDISON V BULLOCK principle of
non-disclosure.

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Paringa

At ·all events, His Honour's decision to
dissolve the injunction - - -

HIS HONOUR:

Mr Grieve, by that do you mean non-disclosure

of facts at the time the injunction was obtained
ex parte?

MR GRIEVE: Yes. In essence, it was contended that the applicant for whom we now appear had not told the judge ex parte the full story on the initial

approach on 23 September and after much debate
and discussion that issue was eventually resolved
adversely to its proponents and -in favour of Paringa.
Your Honour, Mr Justice Legoe, in determining to dissolve the injunction, applied, we submit
erroneously, the high standard or the high test
expounded by the Chief Justice in QUEENSLAND

V THE COMMONWEALTH. We will come back to that
shortly but special leave to appeal is sought
against that decision, the decision on
30 September to dissolve the injunctions.

HIS HONOUR:

Mr Grieve, the injunction that was sought

before Mr Justice Legoe was what, an injunction to restrain any relevant transactions until the
hearing of Paringa's claim?

MR GRIEVE:

Yes, an injunction pending suit, in short.

The next event, also taking place on 30 September,
more or less at the time of the dissolution of
the injunction, was that a trial date for the
hearing of Paringa's substantive claims was set
before Mr Justice Legoe to commence and continue
on and from 11 October 1988 - in other words,
next Tuesday.

HIS HONOUR:

And does that date remain?

MR GRIEVE: That date presently remains. Next, on

1 October 1988, last Saturday, there was an inter

partes application at Paringa's instigation to
Mr Justice von Doussa of the Supreme Court of
South Australia for an interim injunction pending

the hearing of Paringa's appeal from
Mr Justice Legoe's orders of 30 September. That
appeal, under the Rules of the Supreme Court
of South Australia, albeit from a refusal to
grant interlocutory relief, lies as of right
and does not require any prerequisite of leave
on the part of the Full Court.
(Continued on page 6)

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Paringa

MR GRIEVE (continuing):

Mr Justice von Doussa granted certain

limited interim relief pending Paringa's appeal but
limited that relief to run until 6.30 pm on the
following Wednesday, 5 October.

HIS HONOUR:

What was the significance at that time of

--=---5 October?

MR GRIEVE:

Nothing in particular. We envisage that

Mr Justice von Doussa may not have regarded himself
as sufficiently apprised of the matter to make any
more extensive an order and selected that date as
being sufficiently far down in the week in order to
give the parties an opportunity to clarify when it
would be that any appeal could come on. His Honour
specifically reserved liberty to all parties to
apply in relation to the orders that he made on the
Saturday.

HIS HONOUR:

Mr Grieve, could I just take you back to a moment

to 30 September when Mr Justice Legoe dissolved the

injunction that he had previously granted. Was he
then told that the trial date had been fixed for
11 October, or did that happen later that day?

MR GRIEVE:

No.

He effectively fixed it himself.

HIS HONOUR:	I see.
MR GRIEVE:	I should say that there was an application of sorts

made to Mr Justice Legoe on the afternoon of the 30th
for relief of the nature granted by Mr Justice von Doussa
on the following day, but Mr Justice Legoe was indisposed
to accede to that, considering, as the transcript
reveals, that he did not have jurisdiction to make any

such order. I am reminded, Your Honour, that - - -

HIS HONOUR:

I am not sure that I understand that - did not

have jurisdiction in what sense?

MR GRIEVE:

He considered, so the transcript would reveal, and,

in our submission, it is probably immaterial at this

stage, that having determined as he did to dissolve
the injunction, he was to all intents and purposes
functus.

HIS HONOUR:	Yes, I understand that.
MR GRIEVE:	I am reminded, Your Honour, that one of the

conditions of the relief granted by Mr Justice von Doussa
on the Saturday, 1 October, was that Paringa should file
any appeal papers that it wanted to file promptly and

essentially as we would apprehend it that was one
of the bases upon which His Honour limited that
interim relief in time, in that it was predicated
on an appeal being in place.

HIS HONOUR:

I am sorry to keep interrupting you

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Paringa

MR GRIEVE:	Not at all, Your Honour.
HIS HONOUR:	But it is probably easier if I do it as you go along.
MR GRIEVE:	Yes, certainly.
HIS HONOOR:	- - - than try and remember all these matters at

the end. When Justice Legoe dissolved the injunction
on 30 September, can you just tell me in a summary
way what it was that prompted him to make that order?

MR GRIEVE:

What he said, in substance, if I can endeavour to

capture the essence of his reasons as then given
extempore, was that he considered that the applicant
had failed to make out a strong case, that being his
apprehension of the relevant test and in that regard
he applied what the Chief Justice had to say in
QUEENSLAND V COMMONWEALTH, and he put it, if I may
quote directly from the transcript, in these terms:
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 of the High Court in the
QUEENSLAND V COMMONWEALTH case is a principle
which has, shall I put it, tipped the balance
on the overall question that I have to consider.

That is, this is not the same case, because .
it is substantially different. When one looks
at the two principal matters in combination,

namely, the serious question to be tried
andthe balance of convenience, I have not been~
able to persuade myself that I should make the
order.

And so on.
(Continued on page 8)

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Paringa

MR GRIEVE (continuing):

He, in our submission, by approaching

it as if it were a case analogous or at all akin to

the case of QUEENSLAND V THE COMMONWEALTH made
an essential error, namely by imposing upon the
applicant far too high a standard as the criterion

for interlocutory relief. Now, Your Honour, the
-~-- -next event following the event of Saturday, 1 October,
when Mr Justice von Doussa made his orders, was an
approach on Monday, 3 Octobe~ at about 9. 15 in the

morning to Chief Justice King. That approach was
inter partes and involved a request on Paringa's
part for an early hearing of its appeal before the

Full Court. The Chief Justice indicated that the
Full Court had its list fully committed for the current sittings which I understand, in fact,
commenced on that day, and in light of its
commitments, the Full Court simply could not
entertain any appeal from Paringa until, at earliest,
the November sittings.
The next event occurred on the afternoon of the 3rd when there were, as it were, cross-applications
to Mr Justice Legoe pursuant to the leave reserved

by Mr Justice von Doussa on the Saturday. On the
one hand there was an application by the defendants
to discharge Mr Justice von Doussa's interim
injunctions and, on the other hand, there was an
application by the plaintiff, the applicant here,
Paringa, for an extension of Mr Justice von Doussa's
orders both as to time and as to their terms.
In short, Paringa sought to have those orders enlarged in their terms and extended in time to the
ultimate hearing of its appeal to the Full Court.
Mr Justice Legoe acceded to the defendant's

cross-application to dissolve the injunctions ordered
by Mr Justice von Doussa and in that regard we
apprehend, and indeed will be submitting, that
His Honour implicitly refused to apply what we can

characterize, for short as the ERINFORD test. We will
come back to that shortly, but the test that we

refer to, of course, is that applied or expounded
by Mr Justice Megarry in ERINFORD PROPERTIES V applied by Your Honour in the BERCOVE V HERMES
case when Your Honour was a judge of the Federal Court.
His Honour, in terms, expressed himself as apprehending that he was confronted with a question
synonymous with the question which he had
determined on the preceding Friday, and on that
approach he took the view that having formed the
view on the preceding Friday, the issue being the

same, the result was inevitable. Now, special leave
to appeal is also sought, and will be sought in due
course, against that decision. The next event was
that on the evening of 3 October a request was made
of Chief Justice King, through his administrative

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Paringa

officer, to convene an urgent Full Court sitting
to hear an application by Paringa for further
injunctive relief pending its appeal against
Mr Justice Legoe's decision of the 30th.
Chief Justice King declined to do so.
Then, on the 4th, Tuesday, an application was

made in this Court, ex part~~ Justice Wilson
for the injunctions which we now seek to have

extended in time. On the same day the special leave
application was filed. Your Honour, the essential
reason for the application to this Court is that in
light of the fairly detailed facts of the matter,
and we will have to go to them shortly, our client
claims that unless it is afforded some injunctive
relief pending its appeals, any ultimate success in
those appeals will almost certainly prove to be
nugatory, and in terms, of course, that is an
appeal to what we characterize as the ERINFORD
principle.
Can we just remind Your Honour very briefly of

what Mr Justice Megarry said in the ERINFORD case.
It is reported in(l974) Ch 261.
(Continued on page 10)

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Paringa

MR GRIEVE (continuing):

We hand up a copy of ERINFORD

and copies of Your Honour's decision in
BERCOVE. In ERINFORD, at page 267, His Lordshin,
after reviewing the argument put by leading counsel
for the county council, said:
I do not think that these contentions

are sound. Mr Finlay disclaimed any
contention that injunctions stood in a
category by themselves, and said that
if, for example, the plaintiff failed
in a claim to have a receiver appointed,
the judge could not appoint a receiver
pending an appeal, and only the Court
of Appeal could. The argument seemed
in the end to come to the alleged
inconsistency between granting, pending
appeal, the self same relief that has
been refused at the trial or on motion.
On this argument such a case should, it seems, be treated quite differently from
the case of an inconsistency between a
declaration or decision that A owns
certain property and an injunction
fettering A's rights of ownership pending
appeal, as by enjoining him from making
any distribution of the property pending
the appeal; the latter form of inconsistency
is no bar to the judge granting upon which
the successful party -

There must be a line cut off there. I do apologize.
Granting relief, I think it must read. If I can
read on:
One of the important factors in making such
a decision, of course, is the possibility
that the judgment may be reversed or varied.
Judges must decide cases even if they are
hesitant in their conclusions; and at the

other extreme a judge may be very clear in
his conclusions and yet on appeal be held

to be wrong. No human being is infallible,
and for none are there more public and
authoritative explanations of their errors
than for judges. A judge who feels no
doubt in dismissing a claim to an interlocutory
injunction may, perfectly consistently with his
decision, recognise that his decision might
be reversed, and that the comparative effects
of granting or refusing an injunction pending
an appeal are such that it would be right to
preserve the status quo pending the appeal.
I cannot see that a decision that no
injunction should be granted pending the
trial is i~consistent, either logically or

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otherwise, with holding that an
injunction should be granted pending
an appeal against the decision not to
grant the injunction, or that by refusing an injunction pending the trial the judge
becomes functus officio quoad granting
any injunction at all.
Pausing there, Your Honour, we submit that

Mr Justice Legoe in expressing the issue to be

the issue before him on the 3rd be synonymous
with that before him on the 30th implicitly rejected

what Mr Justice Megarry had to say. His Lordship
continued:
There will, of course, be many cases

where it would be wrong to grant an injunction
pending appeal, as where any appeal would be
frivolous, or to grant the injunction would
inflict greater hardship than it would avoid,

and so on. But subject to that, the principle
is to be found in the leading judgment of
Cotton L.J. in WILSON V CHURCH (No 2), 12 Ch.
D. 454, where speaking of an appeal from the
Court of Appeal to the House of Lords, he
said, at p. 458, ". . . when a party is
appealing, exercising his undoubted right
of appeal, this court ought to see that the
appeal, if successful, is not nugatory."

And so on. Then, of course, Your Honour, in

BERCOVE made reference to that decision. BERCOVE,
of course, is in 51 ALR 105. Your Honour made reference to it at 107 with, in our respectful
submission, implicit approval.

(Continued on page 12)

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Paringa

MR GRIEVE (continuing):

One of the questions which will

arise, in our submission, on the leave application
will be whether as a matter of general importance
the criteria expressed by Mr Justice Megarry and
approved by Your Honour in BERCOVE and applied
by several other single Justices of this Court
-~1s, indeed, the correct approach to take in a
circumstance such as this.

HIS HONOUR:

Mr Grieve, one matter that concerns me and

you can either deal with it now or deal with it
at some more appropriate time and it is this:
the substantive document filed in the Registry
is the application for special leave to appeal.
As I understand it there is no motion by way of
seeking injunctive relief.

MR GRIEVE:	I think there was, Your Honour, with respect.
HIS HONOUR:	I may be wrong about that.
MR GRIEVE:	I have among my papers, at least, Your Honour,

a document titled notice of motion.

HIS HONOUR:

Yes. There is no shortage of those.

MR GRIEVE: It starts off:

TAKE NOTICE that the Full Court of the
High Court be moved at Canberra on
4th October
et cetera. It is misconceived in its terms but at least it was treated by Mr Justice Wilson as
being effectively an interlocutory motion for
an injunction pending the hearing of the special
leave application.

HIS HONOUR:

Yes.

I am not seeking to put any technical

obstacle in the· way but, it is prompted by' this wider
consideration, I suppose, that you will be seeking

in due course special leave to appeal from this
Court.

MR GRIEVE:

To this Court.

HIS HONOUR:

Yes.

From Judges of this Court to submit

material to this Court. You have also got on
foot an appeal to the Full Court of the Supreme
Court of South Australia and I assume that, broadly speaking, both appeals would be comparable if
not identical.

MR GRIEVE:	They are indeed. Yes.
HIS HONOUR:	The application for special leave to appeal to this Court is,with one qualification that I

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will mention in a moment,. an application for
special leave to appeal from the decision of a
single judge.

MR GRIEVE:	That is correct, Your Honour.
HIS HON(')tlft-:	The qualification is that formulated in

paragraph 2 of the motion which is described as
a refusal administratively to do certain things.
Now, I would take it there is a question mark
hanging over paragraph 2 as to whether, in fact,
that is an appealable matter.

MR GRIEVE:	Yes, of course.
HIS HONOUR:	And I am not suggesting it is necessary for

me to resolve that except to point out that in
broad the application for special leave to appeal
is from a single judge - - -

MR GRIEVE:	That is correct.
HIS HONOUR:	- - - and, as you would appreciate, it is

generally the desire of this Court to have the
decision of the Full Court, whether it be of the
Supreme Court or of the Federal Court, before

entertaining an appeal from that Court. So I
have got to approach the matter I suppose in terms
that the application for injunctive relief is
ancillary to an application for special leave
to appeal.

MR GRIEVE:

Yes.

HIS HONOUR:

That application being with the qualification that I have just mentioned - an application for

special leave to appeal from a single judge. that there is pending before the supreme c~urt -

before the Full Court of South Australia, an appeal
as of right raising precisely the same matters

special leave.

that were foreshadowed by the application for

MR GRIEVE: With respect, that is right.

HIS HONOUR:	Now that seems to me to raise some problems and I just offer them to you at this stage to
deal with as you think appropriate.
MR GRIEVE:	We will, if we may do so both now and later,

in the sense of making this at least preliminary
response to Your Honour's remarks. Ordinarily
we accept that this Court would be loath to grant
special leave without having the benefit of the
intermediate appellate court's views on the subject.

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Paringa

(Continued on page 13A)

But in this instance, of course, the intermediate
appellate court has, as it were, declined to hear
our client with a view to expressing those views
in a circumstance where, if our client does not
seek the interlocutory relief to which it claims
to be entitled,the appeal to that intermediate ----appellate court and any eventual appeal to this
Court would, even if successful, or indeed, would
if successful be nugatory.
(Continued on page 14)

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Paringa

HIS HONOUR: I appreciate that. At the same time, it seems
to me to make the application for special leave
almost ancillary to the claim for injunctive
relief instead of the conventional method by which
the application for inj1:t1ctive relief is quite
ancillary to the application for special leave

- - to appeal.

MR GRIEVE: Yes, we accept that oddity, if we can
characterize it as such, but it is brought about
by matters entirely beyond our control and in
circumstances where, if we cannot move as we
have moved, we,·according to our submission,
will suffer manifest and very grave injustice.

HIS HONOUR: Should I not assume that that was a consideration
before Justice Legoe? At any rate, whether I
should make any sort of assumption in regard
to the administrative direction concerning the
hearing of the Full Court appeal is another matter.

MR GRIEVE:
We would submit that Your Honour ought not
to make any assumption as to how Mr Justice Legoe
viewed it otherwise than by viewing his judgment
in the light of its terms, namely, "I regard
the question before me", this is on the Monday,
"as synonymous with the question that was before
me on the Friday", and in that sense, in our
respectful submission, His Honour just completely

erred and misunderstood the correct test. He
had, as it were, fallen into the same·error that
he expressed on the preceding_ Friday, namely
that he was functus or that if he was no½ then
his decision on the Monday could only be consistent
with his decision on the preceding Friday in
that the question was the same question and there
was no material matter that had altered the position
between the Friday and the Monday.

It was contended before him on behalf of the respondents for whom our learned friends

appear that there had been a change in circumstance
between the Friday and the Monday which favoured
their clients, namely that the part Coffer had
been sent out to the target company shareholders.
That expression requires elaboration and requires

some examination of the facts in order to make sense of it but it was contended that that was
a factor that intervened between the Friday and
the Monday and that it favoured the dissolution
of Mr Justice von Doussa's orders. We would
contend to the contrary of that but, be that
as it may, to all intents and purposes His Honour
appears to have approached the matter on the
footing that it did not matter that Paringa had,
in the meantime, lodged an appeal to the Full
Court - as it had foreshadowed that it would.

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Paringa
So-far as His Honour saw it, he had decided the matter one way and he was not going to change
his mind regardless of any claim of prejudice.

HIS HONOUR:

Would it be right to say - and I do not suggest

~~- so I can understand the matter, would it be right this is fatal to your application, but just again
to say that you are only before this Court by
reason of your inability to get some interim
relief pending the hearing of the appeal to the
Full Court of the Supreme Court of South Australia.

MR GRIEVE:	That is right, Your Honour, yes.
HIS HONOUR:	Thank you.
MR GRIEVE:	Your Honour, it is now appropriate, with respect,

for us to have a look at the factual matters
as they presently emerge from the evidence. A
vast amount of evidence has already been filed

in the South Australian proceedings. We do not
intend to take Your Honour through the whole
of that line by line, of course, but we would
wish to draw attention to some of its more salient
features in order to apprise Your Honour of
the facts that are in issue.

HIS HONOUR:

Perhaps I should make this clear, Mr Grieve, for your benefit and for that of other counsel,

I have been, to put it mildly, swamped in the

last few hours with volumes of material.

I do

not propose, for the purpose of any decision the extent that counsel take me to it.

(Continued on page 16)

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Paringa

MR GRIEVE: Yes, may it please Your Honour. Your Honour,
despite the volume of material, in our submission,
the essential facts are not really in dispute.
The key issue in dispute concerns, or arises out
of the rival contentions as to what was the purpose
underlying the plan to which we earlier briefly

----referred. Paringa charges that North Flinders has embarked on the plan and the plan has, it is common
ground, although the expression "plan" may not
be cqmmon ground, but the proposals, it is common
ground, have three essential ingredients, not

necessarily in order. They involve a take-over
bid by North Flinders for a company called
Australian Development Limited, for short ADL.
That take-over bid was announced on 19 September as an on-market part C bid, which is to say it is an
unconditional bid for the whole of ADL's capital.
The price offered is $2.75 per share. That is
component one.
Component two is the making by North Flinders of

a non-renounceable share rights issue to its own
shareholders and what is offered there is two shares for every three held in North Flinders at a price all up of $5.50, which is to say
20 cents par, plus a $5.30 premium per share, plus
an option the price of which in each instance would
be $l~OO to take up two further North Flinders shares
for every three held and at the same premium,

ie, total price $5.50. No~ that is step two.
Step three is a take-over offer by North

Flinders for Paringa itself and that is being put
forward under part A of the Code and involves
a share swap, two North Flinders shares for every

seven Paringa shares. Now, the allegation that i8
at the heart of Paringa' s claim in the proceedings is that
the purpose for which this three-part plan has been
put forward is to dilute Paringa's equity in North
Flinders which, at least as at 19 September was,

as I have mentioned, some 49.96 per cent. Now, of

course, if Paringa makes that allegation good, there
can, in our submission, be little doubt that the
defendant directors, being the proponents of this
plan, would be plainly in breach of their fiduciary
duties to North Flinders.
It is also Paringa's case that the plan amounts

to oppression within the meaning of section 320 of
the COMPANIES CODE in that it is discriminatory

against, and unfairly prejudicial to Paringa. Now,
the rival contention, of course, advanced on behalf of
North Flinders and the defendant directors is that
this plan is put forward as a proposal in the legitimate
commercial interests of North Flinders as a whole.

C3T9/1/HS 16 6/10/88

Paringa (Continued on page 16A)
Now, perhaps a word of background. North

Flinders is, it is common ground, a gold-mining company. It is not an exploration company. It
has, in fact, an operating gold mine in the Northern
Territory, and that gold mine is perceived to be

___ of considerable value, so much so that it produces

-- -sufficient revenue to enable North Flinders to

declare dividends. ADM is also a gold-mining
company, and it has, too, an operating gold mine

in another part of the Northern Territory. The
two mines are physically quite some distance apart
but they are both operating gold mines and they are
both gold mines that are exploited with similar
technology, that is they are underground mines,
as distinct from open-cut mines.
(Continued on page 17)

C3T9/2/HS	16A	6/10/88
Paringa

MR GRIEVE (continuing): The significance of that is that on behalf
of North Flinders it is said that its legitimate
corrnnercial interests would be served by an
effective merger of these two gold-mining companies'
operations as a result of the take over. In
other words, North Flinders, on its own case does

----= -not suggest that the attraction of ADM lies in its

share price on the market. ADM is not perceived to
be attractive as it may to somebody who sought to
trade in or speculate on the stock market value of

the ADM shares. ADM is perceived, according to
North Flinders' own case,• to be attractive to
North Flinders because of its asset backing, or,

to put it more simply, because of its assets. And
Paringa rejoins to that by saying well and good,
if this bid for ADM is supposedly legitimate, it is
right and proper to assess the realism and prudence

of the offered price for ADM, $2.75, having regard
not to its market price but to the value of its
underlying assets.
Now, Your Honour, the three parts of the plan,

we submit, are interlinked, and are interlinked with
the objective that we charge, namely, the objective of

diluting Paringa's equity. As we understand it,
North Flinders, according to its own case, accepts
at least in two respects the plan has interlocking
components, namely, the rights issue and a take over for ADM, because it is said that North Flinders will obtain in due course the funds which it requires for the purpose of financing its bid for ADM from its
own shareholders by the rights issue that has been

mentioned; $5.50 per share; three North Flinders
shares for every two - I am sorry I have got that in
reverse - two North Flinders shares for every three

held.plus the options.
Now, when one analyses the rights issue and
the position of ADM, there are certain unusual, to
say the very least, features that emerge from the
relationship of those two components in the plan,

and we will develop that in some further detail shortly. Paringa puts its case in support of the charge that the purpose of all this is to water down
its equity, its controlling equity, and so it must
follow that the conduct is in breach of directorial
duties. At least prima facie Paringa puts its case
on the following considerations. First - and this
again is not necessarily in any particular order -
first the somewhat surreptitious way in which the
plan was hatched. Secondly, the fact that the plan,
on any objective view, contains certain features
which are difficult of explanation; certainly call
for explanation, but have yet to be the subject of
any attempted explanation on the part of the
defendant directors.

Thirdly, Paringa asserts that when one has regard
to the assets of ADL, the offered price of $2.75,
particularly in view of the shareholding within ADL

C3Tl0/l/VH 17 6/10188
Paringa
and the terms on which the offer is put forward,
is manifestly excessive and cannot be justified

by proper commercial considerations. And, finally,
Paringa contends that the inevitable fact is that
unless it outlays a very substantial sum of money
___ in exercising its rights under the rights issue its
equity will diminish - its equity in North Flinders

will go down. And in broad terms, if it were to
exercise its rights under the rights issue in full
that would entail it in an expenditure of
$80 million-odd.
Now, that would entail, in expending $80 million-odd

in order to finance North Flinders's acquisition of
ADL at a price which, according to a body of expert
opinion is manifestly excessive,. and Paringa,
not unreasonably in that circumstance, is unwilling
to see its money spent in subscribing for capital
in North Flinders to enable the latter to embark on
a cornmercially:irrprudent venture.

HIS HONOUR:· Mr Grieve, how far should I go into these matters

for the purpose of the present application? I understand
the relevance of it as background material and
I understand, too, I think, in the sense that you may
be aiming to show that the action that has been brought
is not simply frivolous.

MR GRIEVE:

Yes.

HIS HONOUR:

But beyond that, how far should I go?

Am I being

invited to make some sort of assessment of the
likelihood of success of this action?
(Continued on page 19)

C3Tl0/2/VH	18	6/10/88
Paringa

MR GRIEVE:

Your Honour, in our submission, it is necessary for Your Honour to make some sort of an assessment
on that issue but, more importantly -

HIS HONOUR: I thought in a way that was one of your criticisms
___ of Mr Justice Legoe's approach.

MR GRIEVE: No, in our submission, the criticism that we
advance of the approach taken by Mr Justice Legoe, I suppose, in one sense, with respect, Your Honour
is right in that rather than assess the issue as
to whether or not there was a serious question to
be tried, His Honour seemed to be saying that
Paringa had not convinced him that its merits
were so strong as to warrant injunctive intervention
but, Your Honour, the reason why Your Honour has to
have some familiarity with this rather complex web
of facts is to determine the critical question of
whether or not an appeal would be nugatory if
Paringa were to maintain it successfully without the protection of some injunctive relief in the
meantime.

HIS HONOUR: Yes, I understand that.

MR GRIEVE:

To put it shortly, Paringa advances its case, without any unnecessary overstatemen4 in these
terms: that, leaving aside for one moment its
prospects of success in an appeal, although that
is not an irrelevant consideration, Paringa contends
that absent any injunctive relief in the meantime, it
would be inevitable that it would suffer catastrophic
and irremedial loss and that its appeal would be
entirely nugatory and that we put forward in
those, perhaps, perjorative terms not in any
sense by way of overstatement of the position.

There are, of course, very large sums of money involved in this case but, as Your Honour will see
when we run through the facts, if the other parties
are at liberty to proceed as they have threatened,
then it will be inevitable that Paringa's stake

in North Flinders will be reduced to some fairly

substantial extent. I use the expression "fairly
substantial" advisedly in the sense that the precise
extent of that is dependent upon a series of
alternative possibilities but I can tell
Your Honour that in the few days in which the
offer for ADL has been, as it were, not the subject

of any injunction, Paringa's equity has already been reduced by a number of percentage points and we will
go to the particular figures in due course.

HIS HONOUR: I did not think it had been put as high as that

but maybe I did not see the appropriate figure.
I thought there was mention of some .09 or
something of that sort.

C3Tll/l/SH 19 6/10/88
Paringa

MR GRIEVE:

No, Your Honour.

HIS HONOUR: It is higher than that, is it?

MR GRIEVE:

It has gone down by more than that.

I think I

___ have noted it here, Your Honour, so if Your Honour

-- ·will just bear with me for a moment. In the four
days from 19 to 23 September, 12.95 per cent of
the capital of ADL was the subject of acceptances
and in the half hour or so on Tuesday of this week a further 4.4 per cent were the subject of acceptances - - -

HIS HONOUR:

I

got

.09 from the affidavit of Mr Cathro which

was anhypothetical calculation based on what had
happened during that period that dealings were not
frozen.

MR GRIEVE:

Yes, that is right.

I am sorry, Your Honour is

quite correct, with respect. Mr Cathro was
directing his attention to the half hour or so's
trading in paragraph 6 on Tuesday of this week.
I am not certain- in fact, I rather suspect that
he has not made a similar calculation in relation
to the four days' trading which took place between
19 and 23 September.
Yes, at paragraph 7, I think, it is there,

Your Honour. He says on the assumptions set out,
if the proceeds of the rights issue were to be
used to fund those acquisitions, that is, on the
four days and on Tuesday of this week, and Paringa
did not participate:
Then Paringa's percentage shareholding
would be reduced to 46.03%.

HIS HONOUR:	Yes, I see.
MR GRIEVE:	So that on that assumed picture, the loss of

E[J.Uity is in the order of 3\ per cent to date as

a result of a fairly short period of activity.

HIS HONOUR:

Yes, thank you.

(Continued on page 21)

C3Tll/2/SH	20	6/10/88
Paringa

MR GRIEVE (continuing): So, Your Honour, it is for that
reason necessary for us to delve into these facts
in order to make good our primary proposition
that the appeal would be rendered nugatory absent
any belief.
Your Honour, I have outlined the nature

of the plan in broad terms. If I can give
Your Honour some more detailed figures, and all this, I think, Your Honour can take as common
ground, the North Flinders part C bid for ADL
at $2.75 cash per share is for a total of 38,700,000
shares or such of them as their holders accept
the offer and if the total were acquired the
aggregate consideration payable by North Flinders
would amount to $106,425,000. And that is a
figure of some significance, Your Honour, in
the overall scheme of things - in broad terms,
106 million.
The rights issue, having regard to the extent

of the present issued capital in North Flinders,
was likely to produce several possible results
depending on the extent to which it is subscribed.
We should digress to mention an important
consideration that although the rights issue
is expressed to be non-renouncable, the mere
fact that a shareholder elects not to exercise
his rights or take up his rights, does not mean
an end to the matter.
The North Flinders' board has reserved the

right, as is contemplated by the articles, to
place any shares that are not taken up by any
shareholder who decides not to exercise his rights.
So that it does not depend solely on the discretion
of the shareholders as to the extent to which the rights issue.is subscribed. In short, if
Paringa, for example, elects, as it is presently
minded to do, not to exercise its rights, then
the North Flinders' board can place the shares

represented by those rights elsewhere and that,
in turn, would have a substantial dilutionary
impact on Paringa's equity.
We should mention, Your Honour, that the

part Coffer - the take-over offer was announced
on 19 September and so was capable of being accepted
as from that time but the part Coffer itself

runs from 4 October until 4 November. The rights
issue operates from 14 October until 4 November.
Your Honour, the mathematics tell us that if
the rights issue is fully subscribed, that is
for the shares, either by the shareholders in
toto or by some of them and by others following

C3Tl2/l/ND 21 6/10/88
Paringa
a placement, the company North Flinders will
receive some $134 million.
And if the $1.00 options are all tc>'.:en up the company will further receive some $24 million and some hundreds of thousands in addition.
In other words, a full subscription for the shares
and options will bring into North Flinders something
in the order of 158-159 million, the shares

alone 134. This is to be borne in mind in the
light of the figure earlier mentioned, namely
that all that is needed for the acquisition of
ADL is 106 million-odd and that is if all of
the ADL shareholders accept.
Of course, if a substantial number of them

do not, then the requirement will be for significantly
less than the 106 million and this is one of

the curious features that we foreshadowed earlier
of this plan that calls for some explanation
and yet none has been proffered to date. Why
is it that the rights issue appears to be structured
and designed to raise potentially a great deal
more capital than the company requires for its
presently stated object of acquiring ADL.
Of course, that is not necessarily the end

of it. If the options were to be exercised, if
the options were first to be taken up and then
later exercised - and I am not sure that I mentioned
it but the exercise period is a period of three
years - a further $134 million would come into

the coffers. So that in all, the potential amount
of capital available for North Flinders could conceivably be more than $290 million, almost
three times the amount that it apparently needs
to take over ADL.

HIS HONOUR:	Why is that a subject of complaint?
MR GRIEVE: It is not the subject of complaint, Your Honour,

it is the subject of a question mark. One would
expect, where the directors are charged with
arranging a capital subscription and where the -
where the directors are charged with arranging a
capital subscription for an ulterior or collateral
purpose, namely a capital subscription which
is made for a purpose other than for the purpose
of the company as a whole and for the benefit
of the company as a whole, the charge being that
the purpose of the capital subscription is to
dilute the equity of one of the shareholders,
one would expect that the directors against whom
the charge is made would be forthcoming with
some statement to the effect that, "Well the

need for this capital to do X, Y or Z. 11 canpany has a need for this capital, a legitimate carmercial

C3Tl2/2/ND	22	6/10/88
Paringa

MR GRIEVE (continuing): Now, to a degree, there has been
some such response in that the company has said the
company has a need for this capital to finance the
acquisition of ADL, but that is all that they have
said. They have not said what it is that they intend to do with the rest of the capital, and

-~-Your Honour, the evidence I can take Your Honour to for one moment as to what capital the company
apparently thought it required immediately before
this was all announced is in the large volume,
and we take Your Honour particularly to the passage.

It is exhibit JJRDD12A to the affidavit of

Mr John den Dryver, sworn 26 September 1988.

HIS HONOUR:

Just one moment, Mr Grieve.

You will have to

identify the large volume. There are several
of those of that description.

MR GRIEVE:

Yes. That, Your Honour, is in volume III

at page 309. The pages are at the top right hand
corner.

HIS HONOUR:	I have it, thank you.
MR GRIEVE:	Your Honour sees that that document on that page and onwards is a reproduction of the minutes of
North Flinders' directors meeting held on
22 August, and on the fourth page of those minutes.
the page numbered in the minute book itself, apparently, page 618, there appears against the expression "share placement" the words:

It was resolved that, subject to
confirmation of our market and legal
advisers this board believes it should
immediately move to make a placement
of 2,000,000 shares at market price
to assist in funding our planned
capital expenditure -

and so on. Perhaps I should read on -

It was agreed that the timing should be
dependent on the advice of our brokers
and the managing director was requested
to refer back to the board after obtaining
broking advice.

Now, Your Honour, it is, we apprehend, common ground,
that the prevailing price of the North Flinders shares
is in the order of $5.70 per share. Again, thus,
as a matter of arithmetic, that proposal, if
implemented, would bring in something in the
vicinity of $11 million. Now, that was the
company's understanding of its capital requirements

as at 22 August 1988. Less than a month later it
announces a plan by which it would raise potentially
something in excess of $290 million for the stated

C3T13/1/HS	23	6/10/88
Paringa

purpose, and for apparently no other purpose -
certainly no other purpose has been stated - of
financing the acquisition of a company at a cost
of, at maximum, $106 million.
We are left to guess as to just why it was that

within a matter of a month the company suddenly
perceived that it had a need for so much more money.
Again, if we may just address the consequences of
all this so far as Paringa is concerned, if Paringa
does not take up any of its entitlement under the
rights issue, and all other shareholders do, or all
other rights are taken up either by the shareholders
or under replacement, we calculate that Paringa's
equity will go from 49-plus per cent to approximately
37 per cent, and that would follow from Paringa's
decision not to spend more than $80 million in that
manner.

We further calculate that if the other

shareholders take up and exercise the options,
Paringa·'s equity will go down to 29 per cent-odd -

I am sorry, I have misled Your Honour. The
reduction from 49 per cent to 37 per cent occurs if Paringa, of its own volition, simply does not
take up its parcel and all - again, I apologize.
I have put it correctly. If Paringa does not take
up its entitlement that all other entitlements are
taken up, then the reduction is from 49 per cent
to 37 per cent.
(Continued on page 25)

C3Tl3/2/HS	24	6/10/88
Paringa

MR GRIEVE (continuing): If the options are taken up and

exercised, the reduction goes down to 29 per cent
and, finally, if Paringa's rights are placed
elsewhere its equity goes down to 20 per cent.
So Your Honour can see that it would be a very
substantial effect on Paringa's position and that

___ is one the factors to which Paringa, of course, adverts in making good its case. Your Honour,
perhaps I can refer again to some evidence, this
time in voltuie VI . for a fairly lucid outline of
what the scheme means, so far as Paringa is concerned.
Now, the material is at 820 and following in
volume VI where the affidavit of Graham Julian Samuel
sworn in the lower court on 1 October 1988 is
reproduced.
Your Honour, Mr Samuel commences by outlining

briefly his background and qualifications - - -

MR MYERS:

If Your Honour pleases, before

my learned friend

goes on, something must be made clear about this
affidavit unfortunately_. It was not tendered anywhere
below, as far as we are aware. It was sworn but was
never read.

MR GRIEVE: Well, we understand it was, in fact, read before

Mr Justice von Doussa, but at all events we would
seek to read it to Your Honour in any event, as
evidence in this Court.

HIS HONOUR:

Mr Myers, are you objecting to the affidavit being

now tendered?

MR MYERS:	We are objecting to it being now tendered, Your Honour.
HIS HONOUR:	On what basis?
MR MYERS:	Your Honour, I do not have it immediately before

me. It· is some time since I have read it. If Your Honour
pleases, the affidavit contains a great deal of
opinion evidence. It is almost entirely opinion
evidence which the deponent is not qualified to give.

He is not qualified because he purports to give
evidence - if I can take Your Honour first of all

paragraph 5, the beginning of it - it is on page 822
of the book that Your Honour has, along these lines -
Your Honour will immediately see the objection:
Proposals having been announced at the same
time can, in my opinion, only be viewed from
a commercial standpoint as a single coherent scheme, the aim and purpose of which scheme can be inferred from the proposals in the
context in which they are made.

That is not expert testimony of any sort, Your Honour.
It is opinion evidence and it is not expert opinion evidence,
it is mere opinion on inferences to be drawn from

facts otherwise established. And he goes on:

C3T14/l/VH	25	6/10/88
Paringa

I believe that the principal aim of the shareholding.
I mean, that is the very matter in issue in the
litigation. It is not an expert opinion - and so
-~_on, Your Honour.

HIS HONOUR:

Yes, thank you, Mr Myers.

Mr Grieve, are the

paragraphs of the affidavit to which you wish to
take me paragraphs in which assertions of fact are
made or are they assertions of opinion?

MR GRIEVE: Essentially assertions of opinion, Your Honour.

HIS HONOUR:

Of the sort that Mr Myers has just referred to?

MR GRIEVE:

No, Your Honour.

Having made those, as it were,

pref-atory alle8ations, Mr Samuel then proceeds to
dissent to particularity in analysing - in the
opinions which he holds - which, as it were, lead
him back to those conclusionary expressions. Now,
we probably do not require, with respect, to take
up time with the two particular - or three particular -
sentences to which our learned friends have just

referred. Your Honour will see that later in the
affidavit Mr Samuel sets out some of the facts and
then sets out their ramifications from the viewpoint
of his own experience and expertise and, Your Honour,
in our submission - - -

HIS HONOUR: Well, I am not anxious to become involved, in the

course of this hearing, in some sort of process of
dissection of the affidavit.

MR GRIEVE:

No.

HIS HONOUR: Certainly, at first glance,the objection seemed

well founded in regard to paragraph 5 and the sentence
at paragraph 6 that Mr Myers referred me to.

MR GRIEVE:

Yes.

HIS HONOUR:

Are the

other matters

not matters that you

can make part of your submissions? •

(Continued on page 27)

C3Tl4/2/VH	26	6/10/88
Paringa

MR GRIEVE: Well, I suppose they are, Your Honour.

HIS HONOUR: It seems to me it would be a more satisfactory
way of doing it.

MR GRIEVE-: Yes, certainly.

HIS HONOUR: No doubt, other counsel would be heard to
complain if they think you have flown too far
in your assertions.

MR GRIEVE: No doubt. If we may invite Your Honour to take

this course, with respect: Mr Samuel puts the
matter as eloquently or more so than I could and
if Your Honour would take on board what he has
written as if it were a written submission - - -

HIS HONOUR: Well, why not plagiarize.
MR GRIEVE: Well, I can read it to Your Honour,

and I am happy to do that. I would rather not
try to paraphrase but if Your Honour would take
it as submissions, rather than evidence, at the
top of page 7 he - - -

HIS HONOUR: Well, I was not suggesting you do it quite as
cold-bloodedly as that but rather if you can draw
on the material for the purpose of your own
submission.

MR GRIEVE: Yes, certainly. Would Your Honour just bear with

me for one moment. Your Honour, one matter to which
he refers and to which I have not referred as yet but
it is appropriate if I do so now, that has a very

significant bearing on the wisdom or otherwise of
the offered price of $2.75 for the ADL shares is
the fact that ADL's capital is held as to 55 per
cent by Poseidon Limited and Poseidon did not, prior
to the announcement of the offer and nor has it since
to this moment, indicated its hand. It has made no indication, at least of which we are aware, that it intends to either accept or reject the offer and
Your Honour, this is one of the points of criticism
that we advance in support of our case that the
offer is an excessive offer. Those who defend
the offer advance their defence on the footing that
the ADL shares traded in a band $2.40 or thereabouts
shortly prior to the offer and that a small premium
on market in the region of 30 cents or so is
conunercially necessary in order to attract the
interests of the sitting shareholders.

It is our contention, when one has regard to
the true test, namely, the asset backing value of
the ADL shares, that that approach is wholly
unjustified not only for the reasons already

C3Tl5/l/SH 27 6/10/88
Paringa
mentioned bu~ in addition, because the $2.75
carrying with it a premium on market, carries
with it what might be described as a premium
for control and such a premium could only be
commercially justifiable if it were payable
in circumstances and only in circumstances where
control was assured.

HIS HONOUR:

Mr Grieve, once you get to that point or to

that detail, it seems to me you are going beyond

those areas that go to point up that unless
injunctive relief is granted, the appeal will be
nugatory.

MR GRIEVE:	Yes.
HIS HONOUR:	How does it properly determine that aspect to

go into all the refinements of the rights issue
and the take-over offer?

MR GRIEVE: Well, Your Honour, in our submission, it points

up the prospects of Paringa's successfully obtaining
special leave. If one takes the criteria as laid
down by Mr Justice Brennan in the BURGUNDY ROYALE
case,and we will go to it in detail in due course,
the tests that His Honour there expounded were that
an applicant such as the party for whom we appear
has to demonstrate a substantial prospect of success
in obtaining special leave in order to mount an

presently claimed. We apprehend that we must entitlement for injunctive relief of the sort
demonstrate to Your Honour that His Honour
Mr Justice Legoe was gravely in error in his
conclusion on 30 September that there was not
a substantial question to be tried on the Paringa
claim and that, I suppose, leads me on necessarily
to address the question that would arise on the
special leave application itself and that question,
as we apprehend it is a question of whether or not,
in a case of this sort, the criterion expounded by
case and as approved by Chief Justice Gibbs in

the House of Lords in the AMERICAN •....
THE AUSTRALIAN COARSE GRAIN case is, truly, the
appropriate criterion to be applied on the grant
or refusal of interlocutory relief rather than
the criterion that has been previously expressed
by this Court to be appropriate, namely, in the
BEACHAM case.
(Continued on page 29)

C3Tl5/2/SH	28	6/10/88
Paringa

HIS HONOUR: But once your injunctive relief is sought
ancillary to the hearing of an appeal, are you
not in a different area from that in which a
judge finds himself when he is asked to grant
interlocutory relief pending the hearing of an
application? Does not the emphasis shift very

___ much to preservation of the subject-matter?

MR GRIEVE: Indeed, it does, and that is why it is
necessary for us to address the subject-matter
of the suit, namely our equity in North Flinders.

HIS HONOUR: Yes, but it is rather what happens to your
client if injunctive relief is not granted than
what might happen to North Flinders if it goes

ahead with its various proposals. And I have
to say that, sitting as a single Justice, I have
always had some diffidence about expressing views
as to a 1 i k e 1 i hood or the success or otherwise of
a special leave application, especially if I
am not going to be a member of the Court.

MR GRIEVE:

Indeed.

Mr Justice Deane in the SPYCATCHER

application - and, again, we will take
Your Honour to that in due course but there
His Honour expressly eschewed any expression
of view as to what the Court in bane would
consider to be the right result on the leave
application itself.

HIS HONOUR:

One can say, in some cases, they are probably

fairly rare, that the appeal is so frivolous
that special leave is not likely to be granted
but that is a more unusual situation.

MR GRIEVE:

Indeed, but Your Honour raised the question of, "Why should Your fll"'lnour be concerned with

North Flinders' fate?; we are only looking

to see what Paringa's fate is.~ Your Honour,

the two are intertwined for so long as Paringa has

a substantial equity in North Flinders. If

North Flinders acts in such a way as to spend

its money unwisely, then its shareholders,

Paringa included - and Paringa included in a

large measure - suffer significantly and it is

therefore necessary, albeit we accept somewhat
tortuous, to consider some of the commercial
ramifications of this large-scale corporate

manoeuvre and it is necessary also, in our

submission, to look at these matters to see just

what Paringa's ultimate prospects of success·

in its appeal are. One has to look not only
at the prospects of success without second guessing

the Full Bench

to see what the application

for special leave is not frivolous just as much

as to see that the appeal itself is not frivolous.

C2Tl6/l/ND 29 6/10/88
Paringa

HIS HONOUR:

I just have the feeling that the more I am

taken into the detail of the transaction, and
its various permutations and combinations, the
more it points up the perhaps rather special
nature of the transaction and takes you further
an9 f~rther away from questions of general
~-- pr1nc1ple.

MR GRIEVE:

No, Your Honour, we would submit to the contrary.

Although the transaction is complex, in the
ultimate, it is our contention that Mr Justice Legoe
was quite wrong in considering that no injunction
should lie in that even if the test was as stated
by him, Paringa's claim is, on any view of it,
an overwhelmingly strong one. Its claim that
the directors are motivated by collateral
considerations is almost, we submit, undeniable.
To appreciate that, it is appropriate, in our
submission, to look at some of the intricacies
of the transaction.

At first blush it appears a complex maze

but by highlighting the essential structure of
the scheme and its essential components, one
can see almost as a matter of inevitability that
it cannot be justified in the light of commercial
prudence.
(Continued on page 31)

C3Tl6/2/ND	30	6/10/88
Paringa

HIS HONOUR:

That may well be. It may not be enough of itself

though to get you to first base on anapplication
for special leave.

MR GRIEVE:

Your Honour, we appreciate that section 35A

requires us to demonstrate the existence "of a II ubl . 11

. f 1 " f . B

_--:. ·quest 1On o aw or o p 1.c 1mp0rtance . ut
that, of course, is qualitie~ whether because
of its general application or otherwise, but we
also respectfully draw attention to subparagraph (b)
where:
the interests of the administration of justice,
either generally or in the particular case,
require consideration by the High Court
of the judgment to which the application
relates.

HIS HONOUR:

I understand that but this matter is complicated

by the fact that there is already pending before
the Full Court an appeal as of right and I put
to you some time ago that it seemed to me that
the problem that faced you was the fact that you
were here because, and only because, of your inability
to obtain injunctive relief from the Supreme Court
of South Australia to hold the position pending
the hearing of an appeal to that court.

MR GRIEVE:	Yes.
HIS HONOUR:	I think I said I did not want to be taken as

suggesting it was fatal to your application but
equally I do not want to be taken as suggesting
that it is not. It seems to me it is a question
on which I have an open mind at the moment but
it is an important consideration that has to be
faced.

MR GRIEVE:	Yes.
HIS HONOUR:	And just if I could take it one step further:

it seems to me to follow from that that the emphasis
perhaps ought to be on the proposition that a
failure to grant injunctive relief would render
an appeal to this Court, if special leave were
granted, nugatory rather than perhaps exploring
the prospects of success in an appeal from
Mr Justice Legoe because as events turn out, whether
injunctive relief is granted by this Court or
not, it may be that the appeal to the Full Court
of the Supreme Court of South Australia would
be heard even before an application for special
leave were entertained by this Court or if special
leave were granted almost certainly before an
appeal were heard. In which case so much of this
is just water under the bridge.

C3Tl7/l/AC	31	6/10/88
Paringa

MR GRIEVE:

We accept that, with respect, Your Honour, but the question, we respectfully submit, is this:

we know that the Supreme Court of South Australia,

both at first instance and in bane, is indisposed

to afford us any tnterlocutory relief.

The question

then - - -

HIS HONOUR:

I wonder, do we?

I mean we know of the judges

before whom or the judge before whom the application
for interlocutory relief came and was refused.
All we know about the Full Court is that the appeal to that court cannot be heard until November.
Do we know with certainty that an application
for injunctive relief to that court could not
be heard before November?

MR GRIEVE: Yes.

HIS HONOUR:

I know you did say something of the approach

made to the Chief Justice on 3 October. Do I
take it from that that the position so far as
the Full Court is concerned is that not only will
any appeal from Mr Justice Legoe not be heard
before November but that any application for
injunctive relief pending the hearing of that
appeal will not be heard before November?

MR GRIEVE:

That is right, Your Honour, and that is made

plain - I am sorry I did not take Your Honour
to it earlier - by the affidavit filed in this
Court - - -

HIS HONOUR:

I am content to accept your say-so, Mr Grieve.

(Continued on page 33)

C3Tl7/2/AC	32	6/10/88
Paringa

MR GRIEVE:

I just mention, that Katherine Williams deposes

to the substance of the communication with the
Chief Justice's officer on this particular topic
in pa~agraph 1.16 in which she says that Mr Bagot
who made the telephone call was told by the
Chief Justice that:
the Chief Justice was not prepared to hear an application for an extradited
appeal from the order of
Mr Justice Legoe of 3 October or to
sittings of the Full Court, nor to hear such applications for an
list the matter to be heard by the
interlocutory relief pending the
hearing of the appeals, such applications only
being able to be made before the
Honourable Mr Justice Legoe.

HIS HONOUR:

I am sorry, I did not catch the last part of

that?

MR GRIEVE:

such applications -

so the affidavit reads -
only being able to be made before
the Honourable Mr Justice Legoe.

HIS HONOUR: Is that an invitation to go back to

Mr Justice Legoe?

MR GRIEVE:

It did not apparently sound that way at the time

and in view of Mr Justice Legoe's decision in
the matter on the Monday afternoon, one could not
see, with respect, any point in returning to
His Honour, in the sense that, while he may, with
respect, have been in error on the previous
Friday in considering that he was functus at
that point, we would acknowledge that he having

dealt with the application for injunction pending

. an appeal on the Monday and having dealt with

it finally was thenfunctus on that particular
point and any other in an interlocutory environment.
And that being so, the only door, as it were, that

is open to us is the door of this Court. The
Full Court said it will not hear us on any basis
and Justice Legoe has heard us and has determined
our application adversely and we are therefore
compelled to seek relief here and that is what it
basically comes down to.

HIS HONOUR:

Yet there is a certain irony in it, is there not,

that you are here to seek relief primarily, I think
you would acknowledge, to preserve the position pending
the hearing of the appeal to the Full Court?

C3Tl8/l/SR	33	6/10/88
Paringa
MR GRIEVE:	We have to accept that that is so.	We are here

to protect the position in order that our appeals,
both to the Full Court and to this Cour~_if
successfully pursued and for the purpose of discussion
one must assume that they will be, will not be

rendered nugatory. And in order to consider whether
-::_·they would or would not it is necessary to
consider the implications of this plan if it were
allowed to be carried into effect, primarily so
far as Paringa is concerned, but to a lesser
extent but no lesser significance so far as
North Flinders is concerned, given Paringa's status
as a shareholder in it. And it is also necessary,
Your Honour, to, in our submission, look at these
matters in the light of the sufficiency or otherwise
of any relief alternative to injunctive relief.
We submit that damages are and would be a wholly inadequate remedy in the circumstances of this
case for two essential reasons. First, any order
for damages against North Flinders itself would
be an order which would only serve further to deplete
its reserves to the detriment of its shareholders
generally and included among them Paringa in particular.
Secondly, any order for damages against the
defendant directors would, as we apprehend it, be
substantially beyond their resources and would
therefore be irrecoverable.
(Continued on page 35)

C3Tl8/2/SR	34	6/10/88
Paringa

HIS HONOUR:	Mr Grieve, I meant to ask you earlier: are the respondents, save for the first and second respondents,
all directors of the first respondent?

MR GRIEVE:

Yes, they are, Your Honour.

I should have informed

Your Honour of that, yes. They are all of the directors
~~-of the first respondent, save, as I apprehend it, two,
one Williams and one Down. Earlier there was an
additional director, one Mason, but in the course of

these events, he has resigned. Now, the directors

who are named as respondents in these proceedings are
the directors who we apprehend to have composed this
plan and who certainly advocate its implementation.
Now, Your Honour, in order to assess the sufficiency
or otherwise of the remedy of damages it is necessary
again to consider some of the implications of the

whole affair in some detail in order to appraise the
likely extent of Paringa's loss in the event that it
is denied injunctive relief and the plan is allowed to
go ahead, and if Your Honour will just bear with us
for a moment - - -

HIS HONOUR:

You would have to take it further than that,

would you not? If injunctive relief were refused; if
North Flinders went ahead with its proposals and if
your client's action against the respondents ultimately
succeeded - - -

MR GRIEVE:

Yes.

HIS HONOUR: - - - then they are the conditions upon which the

question of damages will arise.

MR GRIEVE:

That is right, yes. And in that sense, Your Honour,and

for that reason it is necessary to see what our
ultimate prospects are to determine the essential

question of nugatory or not. If, on any view of it,
it could be seen that our claim for substantial as

distinct from - final as distinct from interlocutory
relief, was frivolous or had little prospect of

success, then the Court would be assisted in assessing
this question of nugatory or no, and it is for that
reason that we do wish to take Your Honour to some
detail of the events in order to demonstrate that, far
from the claim being a frivolous one, it is, in fact,
a very strong one indeed.
It all ultimately ties back to the same central

question. Now, what will Paringa irretrievably suffer
in the event that it is not given injunctive protection
pending the hearing of the appeal?

C3Tl9/l/VH	35	6/10/88
Paringa

MR GRIEVE (continuing):

Now, Your Honour, we would wish

observation by Mr Samuel and would put them to return to these matters, the subject of
forward as matters of submission. One of the
features of the bid by North Flinders for ADL
is,as we have mentioned, that 55 per cent of
the latter's capital is controlled by Poseidon.
The bid is an unconditional bid for 100 per cent
of ADL's capital. It is apparently pitched at
a price which would only be warranted if control
of ADL could be assured. Such control cannot be

assured, given Poseidon's position. So it follows
that North Flinders proposes to pay an above market
price for what could prove to be a minority interest
in which North Flinders will be effectively locked.
Now, that is yet another factor to which we would
refer in pointing to the essential and undeniable
purpose of this whole plan.
Now, Your Honour, the plan itsel~ if we may

support what we have said by way of submission, is
to be found in exhibits JJRDD14 and 15 to
Mr den Dryver's affidavit sworn 26 September 1988.
Those exhibits are in volume 3 at pages 316 and
following, in particular, 316 to 367.
Now, without taking up the time of the Court

unnecessarily, 316 sets out the documents to be
tabled at the board meeting on 19 September.
Page 317 sets out the essential resolutions which were passed regarding the offer for ADL; 318 sets
out the resolutions passed in relation to the offer
for Paringa. One can pass over 319 to 320.
Pages 321, 322 is a consideration by the - a proposed
consideration of the request by Paringa for a
restructuring of the North Flinders' board and
is, therefore, of some relevance.

HIS HONOUR:

By restructuring, do you mean the request to

have two of the Paringa directors appointed to

the board of North Flinders? (Continued on page 37)

C3T20/l/SH	36	6/10/88
Paringa

MR GRIEVE:	This was the request that was conveyed by Genoa on behalf of Paringa at the meeting on -
9 September 1988 to the North Flinders board, that
in view of the acquisition by Genoa of AGL's

-- -interest in Paringa, Paringa desired a greater
--position on the North Flinders board. This
document records the then state of recommendation
within North Flinders in relation to that request.
The next documents in the exhibit, 323, would

be matters upon which we rely,as 324, 325. 326
concerns the recommendation and some of the
background to the recommendation leading to the

bid for ADL. 331 is what purports to be an evaluation
on behalf of North Flinders of the ADL shares and
it is material, although apparently the subject
of reliance on the part of the defendant directors in
justifying their action, indeed on analysis,
supports the complaint made by Paringa that the
price of 2.75 is excessive.

Your Honour sees at 332 the author of the

report assesses the npv of Australian ~velopment to be $1.19 per share, predicated a few lines

further up on a gold price of $600. We assume,
contrary to ordinary practice, that the author
is stating a gold price in Australian dollars
rather than US dollars. That would equate to,
on our calculations, $US470. This makes it
appropriate for us to advert to another matter
of fact which has a bearing on the issue in the
ultimate suit. Your Honour would know as a
matter of notorious fact that the gold price is
presently falling on international markets and,
indeed, as today's price, we understand, is

$US397-odd. So that the author of this report,
the Armour company, put a value of $1.19 on the
ADL shares at the time he wrote the report,
16 September, based on a US gold price of $470.
Presumably he would revalue it downwards by some

proportionate consideration appropriate to the
fall of $70.00 in the last few weeks - $US70.00-odd.
(Continued on page 38)

C3T21/l/MB	37	6/10/88
Paringa

MR GRIEVE (continuing):

That valuation was apparently

obtained for the purpose of attempting to justify
the bid of $2. 75 and then we would - the defendants
draw attention to page 339, another document
upon which the defendants apparently rely in

:;_justification of their bid. Page 340 to page 343
is a letter from the State Bank of South Australia
confirming the temporary commercial bill
facility of $94 million-odd to fund the proposed
take over of ADL. That, it is envisaged, will be
used, as it were, on a bridging basis, pending the
bringing into existence of the rights issue.
Page 344 confirms an underwriting arrangement.

Page 346 sets out the resolutions that were passed
in relation to the proposed purchase of ADL,
and pages 347 and 348 deal with the proposed
bid for Paringa itself, and finally page 349 deals
with the deferral of an annual general meeting of
North Flinders. Now, that is, of course, another matter of fact which is not without significance in
the sense that the Paringa Company would wish to
exercise its voting rights at an annual general

meeting of the company. Its deferral would seem
consistent with a desire to reduce those voting
rights by reducing the company's percentage equity
in North Flinders.
The next exhibit JJRDD 15 from page 350 onwards

is the part C statement, which we need not trouble
Your Honour with in detail, save to say that as the
Code requires it is an unconditional offer and it does
amount to an offer for the whole of the target
company's capital at the stated price of $2.75 per

share. Your Honour, the next matter that arises in
connection with the bona fides, or otherwise, of this
particular plan arises out of the way in which it
was brought into being and we will give Your Honour
some very short evidentiary references to
substantiate the factual propositions that we wish

to advance. (Continued on page 39)

C3T22/1/HS	38	6/10/88
Paringa

HIS HONOUR:

Is this with a view - presumably it is not with

a view to demonstrating that Justice Legoe applied
the wrong principle, but with a view to showing
that he had applied the correct principle, he
would have granted the injunction?

MR GRIEVE-:-

Yes, which takes up, as it were, the second limb

of section 35A.

HIS HONOUR: This is on a basis that, what, there was a serious

question to be tried?

MR GRIEVE:	Yes.
HIS HONOUR:	That does not require you to demonstrate prospects of success, does it?
MR GRIEVE:	No, no, it does not.
HIS HONOUR:	If you were before the Full Court today - - -
MR GRIEVE:	Yes.
HIS HONOUR:	- - - arguing your appeal from the two decisions

of Mr Justice Legoe, the one discharging the injunctions
he had earlier granted and the on~ in turn,acceding
to the respondent's application to discharge
Justice von Doussa's injunction - - -

MR GRIEVE:	Yes.
HIS HONOUR:	- - - and refusing to grant you any further injunction, what is it that you would be seeking to
persuade the Full Court?
MR GRIEVE:	We would be saying that, as to the first matter,

that is, His Honour's decision to dissolve the
injunctions initially ordered by him, that he made
an error of principle in applying the wrong test by
adverting to the Chief Justice's approach in the
QUEENSLAND case and by considering that, notwithstanding

the overwhelming strength of Paringa's case, it had
failed to satisfy him of what he apprehended to be the
very high test required to obtain an interlocutory
injunction.

HIS HONOUR:

I suppose you might have to go further and satisfy

the Full Court that if the wrong test - or rather, if
the right test had been applied, the injunction ought
to have been granted - - -

MR GRIEVE:

That is right, with respect, Your Honour.

HIS HONOUR:

- - -

it would not be enough perhaps simply to

show that a wrong principle had been applied.

MR GRIEVE: That is right, Your Honour, with respect, that is

right. We would have a twofold burden to discharge.

C3T23/l/VH

39

6/10/88

Paringa

(Continued on page 39A)

We would have the burden of demonstrating that
His Honour had applied the wrong principle and
then we would have the burden of persuading the
Full Court that if they were to substitute their
discretion, applying the right principle, that
an injunction would go.

(Continued on page 40)

C3T23/2/VH	39A	6/10/88
Paringa

HIS HONOUR: I still have the feeling, Mr Grieve, that
I am being drawn into that area all the time
instead, perhaps, of being invited to focus on
the case for an injunctive relief to preserve
the situation of the parties o~, in particular,
the situation of your client pending the hearing

- - of the application for special leave to this
Court or of~the hea~ing of the appeal to the
Full Court.

MR GRIEVE: Yes, with respect, I take the force of
Your Honour's observations and -

HIS HONOUR: Having said that, that may be taking too narrow

a view. I do not know. But perhaps for the
purposes of your own case it would be enough
to demonstrate that there was a serious question
to be tried. Coonsel for the respondents sought
to show, in fact, your client had no prospect

of success, that the claim was frivolous. Then
maybe that is a matter that you could look at more closely in reply. I do not know whether
that is a very satifactory way of approaching
the matter but it may be that there is a certain
area of common ground between you making it
unnecessary to go into all this detail.

MR GRIEVE: Yes, that may well be, Your Honour. We would
certainly combine - if we can put the propositions
in support of the essential claim that we make,
namely that our rights of appeal will be rendered
nugatory unless we are protected by some interim
restraining order in this propositional form.
We can establish, by reference to a body of
respectable opinion, that the price bid for ADL,
having regard to the purpose for which the bid
is said to be warranted, is manifestly excessive.
That price is said to justify the way in

which the rights issue has been structured and
yet, on an analysis of the rights issue itself

it is plain that if all the rights are taken
up .substantially more than is needed would be
obtained and the third limb of the scheme, overall,
of which we have said comparatively little to
date, namely tjat the bid by North Flinders for
Paringa can be exposed as tainted with the same collateral purpose, namely the dilution of the
Paringa equity in North Flinders by the way in
which it has been structured - two North Flinders'
shares for every seven Paringa shares - I am
sorry, two for every - - -

HIS HONOUR: Three.

C2T24/l/ND 6/10/88
Paringa

MR GRIENE:

Five - it is two for three in the rights

issue, it is two for five in the - I am sorry,
I have misread my notes again. It is two for
seven. I was looking at a note of an earlier
formulated offer by North Flinders for ADL.
(Continued on page 41)

C3T24/2/ND	40A	6/10/88
Paringa

MR GRIEVE (continuing): Now, Your Honour, those three

aspects of the matter can and are, in our
submission, of themselves sufficient to
demonstrate that the proposal is vitiated by
the obvious purpose of watering down our interest.

---- We say obvious in the sense that there is just no

rational explanation and, indeed, no explanation
has been forthcoming that is at all satisfactory

in support of those factors. Now, if that is the
objective, a fortiori if the scheme is designed to
achieve that result, it will achieve it if it is
permitted to be implemented and it follows from
that that we will suffer harm. The next question,
I suppose, is what will be the extent of our harm

and would it be compensable in damages. Now,
that - - -

HIS HONOUR: Well, that may be another aspect, I do not know.

If you do suffer harm, can that harm be undone, which is not the same thing as saying, "Will you
recover damages"?

MR GRIEVE: No, I appreciate that, Your Honour. Our short

proposition is that it cannot, in the sense that if
one looks down the track a few steps,the shareholders
in ADL if the plan is allowed to go ahead - or those
of them who accept the North Flinders' offer - will
have received their cash from North Flinders and
will have parted company with their shares and,save
only for any conceivable claim that we may have
under the BARNES V ADDY principle, they would be,
as it were, removed from the scene, the vendor
shareholders in ADL.
Now, looking at it from the point of view of
the rights issue, if the shareholders in North exercise of their rights and have received shares
in consequence of the exercise and, perhaps, options and, perhaps, shares consequent upon the exercise of

the options, it is not easy, indeed_ difficult, to see how that could be undone and, of course, if the shareholders in Paringa other than Paringa itself -
or other than Genoa, I should say - elect to accept
North Flinders' bid for Paringa, again absent any
BARNES V ADDY consideration, it is difficult to
see how that could be undone so that, Your Honour,
the machinery is in place and unless it is stopped
its effect will be inexorable and the extent to which
uninjuncted the plan will have an impact on Paringa
can be borne out from the activity as disclosed in
the stockbroker's affidavit that has been filed in
these proceedings, the affidavit of Gregory Alan
Cathro.

C3T25/l/SH 41 6/10/88
Paringa

MR GRIEVE (continuing):

Your Honour has glanced at it already

but Your Honour sees that in the four days between
the announcement of the offer and the first
injunction some five million odd-shares in ADL
changed hands in the direction of North Flinders,
----= representing 12. 95 per cent of the ADL capital for the grand total of some $13.7 million-odd.
Now in the half hour on Tuesday morning last,
4.4 per cent of ADL's capital was similarly the
subject of acceptance of the offer - 1.696 million
odd-shares priced for consideration passing
$4.66 million. In other words, in the very short
space of four days and a half an hour
North Flinders has already acquired some 17 per cent-
odd of the ADL capital.
That, of itself, rather indicates that the shareholders in ADL, particularly given the fall

in the price of gold, regard the offer as being
extremely attractive and if they have rushed to
accept it to date, one presumes that they will
continue to rush to accept it here on in, unless

restrained. Now, Your Honour, the total cost
that North Flinders has effectively incurred to
date is some $18.5 million. It is possible that
if matters stopped at this point and North Flinders
was not permitted to acquire any further shares
that it could curb the losses by funding that

acquisition out of its own resources. But if the
matter goes much further and North Flinders obtains
a substantial proportion of acceptance from the
remaining 25 per cent of ADL shareholders in the
market or, in perhaps more immediate terms, if
Poseidon were to accept the North Flinders bid,
then North Flinders would be unable to finance its
liability without proceeding with the rights_ issue
or some such issue to its shareholders. It would
have to raise capital and presumably having
planned to do so from its shareholders it would
proceed with that plan.

At all events it would set about seeking

capital from somewhere and given Paringa's view
of the excessive price for ADL it would not get
it from Paringa by all accounts. Thus -

HIS HONOUR:

Mr Grieve, we are obviously not going to even

begin to finish tonight.

MR GRIEVE:	I am sorry, Your Honour, I had not noticed.
HIS HONOUR:	It is all right, it is not concerning me, it is

just that clearly we are going to move into tomorrow.
Before I do adjourn, could you just tell me this,
using the current jargon, what is the worst ~ase
scenario so far as your client is concerned if
injunctive relief were refused and its action
were ultimately successful?

C3T26/1/SR	42	6/10/88
Paringa

MR GRIEVE: Well, it is very difficult to calculate that,
but one indication -

HIS HONOUR: I did not really want to know so much in money

terms, although if you can do that, fine, but

-~- rather the principles upon which you would approach
the matter.

MR GRIEVE:

Well, if I can at least pro tern give Your Honour some monetary indication of the likely measure of

loss, the evaluation in the North Flinders' bid of the worth of the Paringa shares, if correct,
and if the plan were brought into fulfilment,
that would ultimately bring about a loss to Genoa,
as the holder of the equity in Paringa - admittedly
Genoa is one step removed - of some $65 million
of it.
To evaluate the loss to Paringa if the plan is
allowed to go ahead is very difficult to work out in any concluded terms, in that it is so dependent upon
what various other people do.

HIS HONOUR: That is why I used the expression "worst case".

MR GRIEVE: But the "worst case" picture, Your Honour, can be
put in the abstract in this sense, that plainly
it will lose its control over North Flinders, and
that, of itself, has a substantial value, no doubt
difficult of valuation, but a value in the overall
scheme of things sounding in many millions of
dollars, and that is the essential answer to the
question.

HIS HONOUR: Yes, very well. I take it counsel were anticipating

that this matter would go over until tomorrow?

MR GRIEVE: Yes, Your Honour.

HIS HONOUR: Would a 9.30 start be convenient?

MR GRIEVE: Yes, certainly.

HIS HONOUR: If you want to start earlier I am quite happy to

do so. Yes, Mr Myers.

MR MYERS: My learned friend says he will be another half hour.
We have had the benefit of hearing all this four times
already, Your Honour, so we will take somewhat less
than an hour to deal with it, but because my learned
friend has gone into the facts somewhat we will have
to say a few words about that, Your Honour.

C3 T 27 /1 /HS 43 6/10/88
Paringa

HIS HONOUR:

I can take it, can I, that if we start at

9.30 there is no danger that we will not finish?

MR MYERS:

None at all.

HIS HO~QQR:

All right.

We will adjourn until 9.30 am

tomorrow.

AT 4.37 PM THE MATTER WAS ADJOURNED

UNTIL FRIDAY, 7 OCTOBER 1988

C3T27/2/HS	44	6/10/88
Paringa

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Citations

Paringa Mining & Exploration Company Plc v North Flinders Mines Limited [1988] HCATrans 223

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HIS HONOUR:	Given leave to intervene oy e oWan~ why?
MR ARCHIBALD:	By Mr Justice Legoe, Your Honour, by an

the essential chronology that brings us here.	On
9 September 1988, a company called Atrank, for
short, a subsidiary of another company called

or at least were returned on 25 September when
they resumed on an inter partes footing.	They

That is, this is not the same case, because	.
it is substantially different. When one looks
at the two principal matters in combination,
namely, the serious question to	be tried

Mr Justice Legoe	in expressing the issue to be
the issue before him on the 3rd	be synonymous

~~- so I can understand the matter, would it be right	this is fatal to your application, but just again
to say that you are only before this Court by reason of your inability to get some interim relief pending the hearing of the appeal to the
Full Court of the Supreme Court of South Australia.

as I have mentioned, some 49.96 per cent.	Now, of
course, if Paringa makes that allegation good, there

to put it more simply, because of its assets.	And
Paringa rejoins to that by saying well and good,

and we will develop that in some further detail shortly. Paringa puts its case in support of the	charge that the purpose of all this is to water down
its equity, its controlling equity, and so it must
follow that the conduct is in breach of directorial
duties. At least prima facie Paringa puts its case
on the following considerations. First - and this
again is not necessarily in any particular order - first the somewhat surreptitious way in which the plan was hatched. Secondly, the fact that the plan, on any objective view, contains certain features which are difficult of explanation; certainly call for explanation, but have yet to be the subject of any attempted explanation on the part of the
defendant directors.
Thirdly, Paringa asserts that when one has regard to the assets of ADL, the offered price of $2.75, particularly in view of the shareholding within ADL

MR GRIEVE:	Your Honour, in our submission, it is necessary for Your Honour to make some sort of an assessment
on that issue but, more importantly -
HIS HONOUR:	I thought in a way that was one of your criticisms

goes on, something must be made	clear about this
affidavit unfortunately_. It was	not tendered anywhere
below, as far as we are aware.	It was sworn but was
never read.

MR GRIEVE-:	Yes, certainly.
HIS HONOUR:	No doubt, other counsel would be heard to

significant bearing on the wisdom or otherwise of the offered price of $2.75 for the ADL shares is the fact that ADL's capital is held as to 55 per cent by Poseidon Limited and Poseidon did not, prior to the announcement of the offer and nor has it since to this moment, indicated its hand. It has made no	indication, at least of which we are aware, that it	intends to either accept or reject the offer and
Your Honour, this is one of the points of criticism
that we advance in support of our case that the offer is an excessive offer. Those who defend
the offer advance their defence on the footing that the ADL shares traded in a band $2.40 or thereabouts
shortly prior to the offer and that a small premium
on market in the region of 30 cents or so is
conunercially necessary in order to attract the
interests of the sitting shareholders.
It is our contention, when one has regard to the true test, namely, the asset backing value of the ADL shares, that that approach is wholly unjustified not only for the reasons already

$US397-odd.	So that the author of this report,
the Armour	company, put a value of $1.19 on the

the options, it is not easy, indeed_ difficult, to	see how that could be undone and, of course, if the	shareholders in Paringa other than Paringa itself -
or other than Genoa, I should say - elect to accept
North Flinders' bid for Paringa, again absent any
BARNES V ADDY consideration, it is difficult to
see how that could be undone so that, Your Honour,
the machinery is in place and unless it is stopped its effect will be inexorable and the extent to which uninjuncted the plan will have an impact on Paringa
can be borne out from the activity as disclosed in
the stockbroker's affidavit that has been filed in
these proceedings, the affidavit of Gregory Alan
Cathro.

MR GRIEVE:	Well, if I can at least pro tern give Your Honour some monetary indication of the likely measure of
loss, the evaluation in the North Flinders' bid of the worth of the Paringa shares, if correct,
and if the plan were brought into fulfilment, that would ultimately bring about a loss to Genoa,
as the holder of the equity in Paringa - admittedly
Genoa is one step removed - of some $65 million
of it.

HIS HONOUR:	That is why I used the expression "worst case".
MR GRIEVE:	But the "worst case" picture, Your Honour, can be

[1988] HCATrans 223

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