Pyrox Ltd v Bristile Ltd in the matter of the Trade Practices Act 1974

[1978] FCA 119

In the Matter of

THE TRADE PRACTICES ACT 1974

BETWEEN: PYROX LTD. Applicant

- AND: BRISTILE LTD. Respondent

O R D E R

JUDGE MAKING ORDER	: SMITHERS J
DATE OF ORDER	: 15 DECEMBER 1978
WHERE MADE	: MELBOURNE

THE COURT ORDERS THAT:

1.	The interlocut4ry injunction granted herein on 13 December	1978
be dissolved.
2.	Matter adjourned until 19 December 1978 at 10.15 a.m.
3.	Costs herein be reserved.

IN THE FEDERAL COURT OF AuSTRALIA )

GENERAL DIVISION VG NO. 67 OF 1978

VICTORIA D STRICT REGISTRY I

In the Matter of

THE. TRADE PRACTICES ACT 1974

BETWEEN: PYROX LTD. Applicant

- AND: BRISTILE LTD. Respondent

Smithers J

15 December 1978

REASONS FOR JUDGMENT

This is an application for the continuance of an

interlocutory injunction granted under s.80 of the Trade Practices

- 1974 for breach Act of s.52 thereof. It has been argued by Mr.

Shaw th& inis Courg should ref'raifi-fr.& iealing with the matter

at all because it involves the validity of certain transactions

the validity of which is a matter, for the Supreme Court of

.Victoria in proceedings brought before it if such proceedings

were brought there.

This particular applicant has not brought proceedings

in the Supreme Court and if the argument of the applicant is

correct, the particular relief sought in this proceedings before

this Court would not be obtainable in the Supreme Court unless

that Court acting under its inherent jurisdiction, in some way

saw fit to deal with the matter. I do not think that this Court

can escape exercising its jurisdiction in such circumstances if it

is proper for it so to do.

In this case the matter is complicated by the fact that

a company called O.T. Lempriere & Co. Limited has taken

proceedings in the Supreme Court seeking a declaration, as I

understand it, that the contract, which is attacked by the applicant

in this Court,is illegal and void and seeking other remedies

which would be appropriate on the basis that there has been some

conspiracy or other wrongful conduct by the defendants in hat

case. It could be that interlocutory remedies may be granted in

the Supreme Court proceedings which would be of such a nature as to

make unnecessary the exercise of the jurisdiction of this Court. In

2

other words, the remedies may be s o wide as t o absorb what might be

done i n t h i s Court.

M r . Shaw referred t o the s i tuat ion which a rose in

(unreported

B o r s a r i v. Nation Trustees Executors & Agency Co. of Australasia /

i n September 1977. It is t o be noted however tha t the cause of

ac t ion in this Court i n t h a t case and the cause of ac t ion in the

Supreme Court brought by the same plaint i f f against the same

defendant were d i f fe ren t . The r e l i e f which was sought i n this court

was d i f fe ren t from t h a t which was sought i n the Supreme Court.

It might be worthwhile mentioning tha t it has always been

ordinary practice, where rel ief has been sought i n this Court on

causes of ac t ion jus t ic iab le in t h i s Court but t o some extent

duplicating o r dealing with matters somewhat on the periphery of

those just ic iable in a Supreme Court according t o the ordinary

pr inciples of the common law and equity and not under the Trade

Practices Act, and where on balance, justice and convenience s o

require t o stay proceedings in this court pending the determination

of proceedings i n tha t Supreme Court. Had t h e p l a i n t i f f i n

Borsari 's Case pers is ted w i t h h i s proceedings i n this Court a f t e r

commencing proceedings i n t h e Supreme Court continuance o f those

proceedings would have been subject t o consideration according

t o that pract ice . . Reference may be made t o L. G r o l l o & Co. Pty. L t d .

V. Swanson Bros. Pty. L t d . Australian Industrial Court, 10 October,

1976 B NO. 144 of 1976) and L. Grollo Darwin Management PtY. L td .

V. Victor Plaster Products Pty. L td . (Federal Court)fl9782

19 A.L.R. 6.71 and Hughes Motor Services Pty. Ltd . V Wana Computer

ptv. L t d . (Federal Court of Australia 15 December 1978)

3

In this case if the appl icant?s arguments were correct , it

could quite well be tha t t he r e l i e f which the plaint i f f seeks can

only be obtained i n t h i s Court. In such circumstances, it would

not be proper f o r t h i s C ; m x t t o refuse t o en te r ta in an application

f o r such r e l i e f .

Going t o the substance of the matter before me, I am uch

affected by the contention that even i f t h e r e has been a f a i l u r e

t o observe the requirements of s.180C of the Companies Act 1961 (vie)

in respec t of the negotiation and conclusion o f the transaction

re f lec ted in exhib i t s 1 and 2 t o the aff idavi t of M r . Hogan, the

resu l t ing arrangement whatever it was, i s no t i l l ega l o r void.

Certainly, in those circumstances, it Would be t h a t an

mad

offence had been committed under s.180W.Normally where a contract was/

i n circumstances i n which it was an offence t o make it, O r where 'offers o r inv i ta t ions were made i n circumstances i n which it was

an offence t o make them, the resul t ing t ransact ion would be

i l l e g a l and void. However, i n this Act there are indications t o

the contrary. The f i rs t i s t o be found i n s.180R - the terms of

which I do not repeat; Cartainly that section only operates where

there i s a takeover scheme. Nevertheless, s.18OW would be

appl icable in such cases as well as in other cases. And in cases

where there i s a takeover scheme the indication from s.180R i s t h a t

the contracts o r arrangements which have come into exis tence by reason

takeover

of a f a i l u r e t o observe the provisions of the/code are not necessarily

i l l e g a l . And indeed it i s possible f o r tha t reason tha t the SupremeCO

has been given a wide d i sc re t ion in s .18CF. to be exercised t o protect

the r igh ts of persons affected by a takeover scheme i n which

i r r e g u l a r i t i e s have occurred.

4

Although there i s no provision for any shareholder in the

t a rge t company t o take action under that section, there nevertheless

i s a provision f o r the Commissioner of Corporate Affairs t o do so.

I have also been referred t o s . 7 8 0 N which declares the

avoidance of contracts in cer ta in cases where, under ordinary

circumstances by reason o f s.18OW they would be void already because

o f the fa i lure t o observe the provisions of the code; and I think

the provisions	ofs.180S	are a lso relevant in re la t ion	t o t h a t
matter.

It i s , curiously, an attractive argument t h a t , with

respect t o t h i s area of commercial ac t iv i ty , t he l eg i s l a tu re has -

r igh t ly or wrongly - attempted t o ensure the observance of the code

by making it an offence t o departtherefrom,but, recognising that

notwithstanding such	non-observance many transactions w i l l take
place, has refrained	from deciding that a l l those t ransact ions are

void and has re l ied upon the jurisdiction conferred upon the

Supreme Court t o protect the r ights o f persons who may have been

affected by the transactions in question.

I said it was an a t t r ac t ive argument; I do not mean

necessar i ly that the pol icy o f what I have sa id i s a t t rac t ive but

tha t , a s an in te rpre ta t ion of the whole scheme, it i s a t t r ac t ive .

It makes the scheme operate in a way which ult imately w i l l

produce r a t iona l i t y whereas, on the other basis, as was pointed

out by M r . Jus t ice Murray i n Payne v. Adelaide Steamship Company

(Supreme Court of Victoria, unreported 20 May 1976) in many cases

chaos would r e su l t .

The whole code i s intended t o provide an o rde r ly method of

5

carrying on the transactions which it contemplates. It seems t o

recognise tha t there may be breaches and that as a r e s u l t o f those

breaches the rights o f people w i l l have t o be reconciled. It has

chosen the method disclosed in s.180R rather than the mere method

of making everything void and i l l e g a l .

O f course, the argument before me has not been carr ied t o

i t s conclusion and I do not express any concluded view about this,

but as at present advised I f ee l t ha t t he be t t e r view i s that the

contracts in question were not i l l ega l .

If the contracts were not i l legal then the quest ion ar ises

whether notwithstanding that fact the proposed statements that the

offeror.-company i s e n t i t l e d t o 44% of the shareholding i s misleading.

It is sa id by the applicant, in t h i s case, t o be misleading and

deceptive i n a general sense even if it i s not inaccurate technically.

A s I understand the argument it i s not contended that the

posi t ion resul t ing from the arrangement between B r i s t i l e and the

inst i tut ional shareholders under which those shareholders undertake

t o accept the takeover offer which i s contemplated will be made by

B r i s t i l e , i s such that there i s not suff ic ient

en t i t l ement - in respec t of those shares in Bris t i le t o j u s t i f y

as a technical statement a t any r a t e , a statement that those shares

are shares in respect	o f	which	B r i s t i l e has	the entitlement	which
i t s t a t e s it has.

But it i s sa id tha t because of the poss ib i l i ty that there

has been a non-observance of t he provisions of the code that tha t

entitlement i s not an absolute entitlement o r , a t any r a t e , t ha t

6

it is an entitlement subject to possible rights in other people to

remedies which may bring about, in effect, a disentitlement.

Therefore it is said the statement is misleading and deceptive.

I do not wish to finally deal with this matter at this

stage, suffice it to say that from the point of view of the making

of an application for an interlocutory injunction, even if that

agreement is valid, and if it performed then any persons who relied up01

it will have received what they expected. It is the fact that

d

persons may rely upon that statementF It is likely to be performed.

If that takes place then, i substance, I do not see that there is

any real danger of any person being deceived to his detriment.

wen one comes to other items affecting the balance of

convenience it is quite possible that some possible bidder for the

whole of the shares may be deterred by the statement that 44%, Or

thereabouts, is already committed to Bristiles; but of course, in

truth and in fact that is the true situation. No potential bidder

has been pointed to - except possible Lempriere's; but Lempriere's

is fully aware of everything which has occurred and the possible

rights that might arise out f the alleged failure to observe the

provisions of the takeover code. An injunction which continued

into the middle of next week would certainly be of very great

disadvantage to the respondent if the respondent's situation

was subsequently discovered to be perfectly sound and valid. As at

present advised I do not consider the applicant's chances of

success in ultimately obtaining a final injunction are sufficiently

good to justify the Court in continuing the interlocutory injunction.

7

I think it is desirable that before this matter is

finally dealt with by this Court the decision which is likely to

be made in respect of interlocutory proceedings in the Supreme

Court should be known. It is highly likely that that decision will

be made before next Tuesday and on next Tuesday everybody will be

at least wiser to that extent. I do not think that it is necessary

to extend this injunction to next Tuesday and if I do not, then the

respondent can go ahead preparing his statutory forms subject, of

course, to the risk of this matter being finally argued and an

injunction being made, with the result that he will have expended

his money for no result. But I think that the justice of this

case would be served, on the whole, if I discharged the injunction

as it stands; adjourned this case until 10.15 next Tuesday morning

December 19, 1978 and reserved costs. I make these Orders.