Ridley M I Pty Ltd v Joe White Maltings Ltd
[1996] FCA 995
•5 NOVEMBER 1996
CATCHWORDS
CORPORATIONS - takeover bid for shares of a public company by a proprietary company - Part B statement sent to shareholders by target company as required by s 750 of the Corporations Law - statement urged shareholders to reject offer on basis that well below fair market value - did not outline source of information on value of shares - whether a reference to a "report" in s 647(3) of the Corporations Law requires all information given by an expert to the target company to be revealed - content of duty to shareholders - whether subsequent letter to shareholders adequately satisfies requirements of s 750 of the Corporations Law
Corporations Law ss 634, 647(1)(2)(3)(5), 604(5), 731, 739(1)(3) and 750
Metals Exploration Ltd v Samic Ltd [1994] 181 CLR 109
Re BNQ Sugar Pty Ltd [1994] 12 ACSR 695
Re Rossfield Group Operations Pty Ltd [1981] Qd R 372 at 376
Scott v Lawrence [1982] 6 ACLR 579
RIDLEY M.I. PTY LIMITED v JOE WHITE MALTINGS LIMITED
NG 3552 of 1996
EINFELD J
SYDNEY
5 NOVEMBER 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3552 of 1996
GENERAL DIVISION )
Between:RIDLEY M.I. PTY LIMITED
(ACN 074-472-709)
Applicant
And: JOE WHITE MALTINGS LIMITED
(ACN 004-287-352)
Respondent
MINUTE OF ORDERS
The Court orders:
Application dismissed.
Injunction pronounced on 19 August 1996 and continued on 21 August 1996 discharged.
Respondent to pay applicant's costs of the proceedings except the proceedings for and relevant to the injunction referred to in 2.
Note: Settlement and entry of orders are dealt with in accordance with Order 36 of the Federal Court Rules.
EINFELD J
SYDNEY
5 NOVEMBER 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 3552 of 1996
GENERAL DIVISION )
Between:RIDLEY M.I. PTY LIMITED
(ACN 074-472-709) Applicant
And: JOE WHITE MALTINGS LIMITED
(ACN 004-287-352)
Respondent
REASONS FOR JUDGMENT
EINFELD J SYDNEY 5 NOVEMBER 1996
Introduction
By an application dated 5 August 1996 the applicant (Ridley) sought declarations and injunctions in respect of statements made, and information allegedly omitted, by the respondent (White) in a Part B statement supplied to its shareholders and the Australian Stock Exchange (ASX) on 30 July 1996 in response to a takeover bid for White by Ridley. The Australian Securities Commission (ASC) intervened in the proceedings pursuant to section 1330 of the Corporations Law.
Factual background
Ridley, a company formed for the purpose of acquiring shares in White, is a wholly owned subsidiary of Ridley Corporation Limited, the holding company of a group whose activities include
stockfeed milling and salt production and refining. White's operations include malting plants in Australia and overseas, and food production.
On 29 April 1996 Ridley commenced on-market acquisition of White's shares. On 1 July 1996 Ridley made a takeover bid for all of White's shares, offering $4.85 per share, or $1 above the market price of the shares prior to the on-market acquisitions. The offer was expressed to be conditional upon Ridley becoming entitled to at least 90% of White's shares by the time the offer closed at 5pm Melbourne time on Monday 19 August 1996. At the date of the registration of the Part A statement by the ASC on 1 July 1996, Ridley was entitled to 4.98% of the issued shares of White. The Part A statement and a copy of the proposed offer was served on White on 2 July 1996, and White made an announcement to that effect to the ASX on that day. The offer, together with a copy of the Part A statement and accompanying material, was despatched by Ridley to White's shareholders on 17 July 1996. In an announcement to the ASX on 28 June 1996 White advised that the offer was considered inadequate. This statement read in part:
Announcement to the Stock Exchange
Ridley Offer completely inadequate
The Chairman of Joe White Maltings, Mr S E K Hulme, A.M., Q.C., last night acknowledged the takeover offer announced by Ridley Corporation Limited for Joe White.
Mr Hulme said that the offer was completely inadequate. He said that Joe White is performing extremely well and, as previously publicly stated, will shortly announce a record profit.
...
Mr Hulme also stated that "our advisers, Macquarie Corporate Finance Limited (Macquarie), have informed the Board that the $4.85 per share offer is inadequate and does not reflect the value of Joe White shares."
[Mr Hulme also stated that] "Macquarie was requested several weeks ago to advise the Joe White Board on the value of Joe White shares. This request followed recent unusual activity on the share register."
On 25 July 1996 the Chairman of the trustees of Joe White Bequest, a substantial White shareholder, advised the White Board that the Bequest intended to reject the Ridley offer. White's Part B statement, under attack in these proceedings, was mailed to shareholders on 31 July 1996. The title page to the statement implored:
REJECT RIDLEY'S MISERABLE OFFER
and in support, Chairman Hulme wrote:
The board is of the view that the Ridley offer is completely inadequate and does not reflect the fair value of shares in Joe White Maltings. This view is supported by advice from our financial adviser, Macquarie Corporate Finance.
In the booklet accompanying the Part B statement, White's directors outlined why they were of the opinion that shareholders should reject the offer, repeating that the offer was well below the fair value of the shares. Although the earlier announcement to the ASX had quoted Macquarie as its adviser in this respect, the Part B statement did not outline precisely from where the
directors derived their information on the value of the shares. On the penultimate page of the statement it was said:
12 Other Material Information
Except as stated in this Statement, the Part A Statement and the remainder of the booklet of which this Statement forms part and in which this Statement is contained, there is no other information material to the making of a decision by an offeree whether or not to accept an offer, being information which is known to any of the directors of JWM, and which has not previously been disclosed to the holders of JWM shares...
The evidence
Pursuant to a Notice to Produce served on White and a Subpoena for Production served on Macquarie (which was separately represented), material was produced to the Court which the parties agreed was of a commercially sensitive nature. For this reason, when the material was tendered and admitted into evidence, access was restricted to the lawyers retained in the proceedings. It will be necessary to describe some of these documents without revealing their specific content. Exhibit A1 was a letter dated 1 July 1996 from Macquarie to White which set out the terms, including fees, upon which it accepted to do the work requested of it in connection with the takeover. From this document it can be seen that Macquarie was asked to advise on the merits of any offer made and the indicative value of the shares. Exhibit A2, entitled "Joe White Maltings: Discussion Paper: 17 July 1996", included an analysis of Ridley's likely tactics in its takeover offer, and advice and recommendations as to possible
strategies which could be adopted by White. Exhibit A3 was a document entitled "Structure Overview" which included original source data in respect of White's recent financial performance, together with financial models prepared by Macquarie projecting White's likely future financial performance based on the source data. Exhibit A4 was described as Macquarie's working papers revealing no final conclusions as to the value of the shares. Also in evidence were affidavits of Paul Nicols, Solicitor, sworn 5 August 1996 and 19 August 1996.
The legislation
Chapter 6 of the Corporations Law provides in part:
OFFERS MUST COMPLY WITH THIS DIVISION
For the purposes of this Chapter, offers to acquire shares are made under a takeover scheme if, and only if, the offers relate only to a class of shares in a company (in this Division called the "relevant class") and the requirements of this Division have been complied with.
...
PART B STATEMENT
647(1)A target company shall:
(a)before the end of 14 days after the day on which it received a Part A statement, give a Part B statement to the offeror; or
(b)before the end of 14 days after the day on which it received a notice served under subsection 646(1):
(i)give a Part B statement to the offeror; and
(ii)give a copy of that statement to each person to whom an offer to which the Part A statement relates was made.
647(2)The Part B statement shall:
(a)be signed by all the directors or by not fewer than 2 directors authorised to sign the statement by a resolution passed at a meeting of the directors or, in the case of a company that has only one director, by that director; or
(b)if the company is being wound up or is under administration - be signed by the liquidator or administrator, as the case may be; or
(c)if the company has executed a deed of company arrangement that has not yet terminated - be signed by the deed's administrator.
647(3)The Part B statement shall not refer to any report made by an expert (other than a report set out in the Part A statement or a report that accompanies the Part B statement in accordance with section 648) unless:
(a)the report is set out in the Part B statement; and
(b)the Part B statement contains or is accompanied by a statement that the person or each of the persons by whom the report is made consents to the inclusion of the report in the form and context in which it is included.
...
647(5)A Part B statement may contain, in addition to the information referred to in Part B in section 750, such information (other than information that is false in a material particular or materially misleading) as the directors, or the liquidator or official manager, as the case may be, think or thinks fit.
...
704(5)Where :
(a)there is:
(i)in a report that is set out in a statement that purports to be a Part B statement in accordance with paragraph 647(3)(a)or accompanies a statement that purports to be a Part B statement in accordance with section 648;
(ii)in a report that is set out in a statement that purports to be a Part D statement in accordance with paragraph 683(3)(a); or
(iii)in a report that accompanies a notice given under subsection 703(4);
matter that is false in a material particular or materially misleading; or
(b)there is an omission of material matter from such a report;
the person who made the report contravenes this subsection.
...
PART A, B, C AND D STATEMENTS
750The following Parts set out the requirements with which Part A statements, Part B statements, Part C statements and Part D statements are to comply:
...
PART B STATEMENT TO BE GIVEN BY TARGET COMPANY TO WHICH TAKEOVER SCHEME RELATES
RECOMMENDATIONS IN RELATION TO OFFERS
The statement shall set out:
(a)unless paragraph (b) applies - in relation to each director of the target company:
(i)if the director desires to make, and considers himself or herself justified in making, a recommendation in relation to the offers - whether the director recommends the acceptance of offers made or to be made by the offeror or recommends against such acceptance and, in either case, the reasons for so recommending;
(ii)if the director is not available to consider the offers - that the director is not so available and the reasons for being not so available; or
(iii)in any other case - that the director does not desire to make, or does not consider himself or herself justified in making, a recommendation and the reasons for not so desiring or considering; or
...
OTHER MATERIAL INFORMATION
The statement shall set out any other information material to the making of a decision by an offeree whether or not to accept an offer, being information that is known to:
(a)in the case of a Part B statement that is signed as mentioned in paragraph 647(2)(a) - any of the directors of the target company; or
(b)in the case of a Part B statement that is signed as mentioned in paragraph 647(2)(b) or (c) - any liquidator or administrator of the company, or any administrator of the deed of company arrangement, as the case may be;
and has not previously been disclosed to the holders of shares in the target company.
The powers of the Court in relation to share offers are conferred
by section 739:
ORDERS TO PROTECT RIGHTS UNDER TAKEOVER SCHEMES OR ANNOUNCEMENTS
739(1)Where:
(a)a statement that purports to be a Part A statement relating to offers under a takeover scheme has been served on a target company or a takeover announcement has been made;
(b)an application for an order under this section is made to the Court by the Commission, the offeror, the target company or a person who holds shares in the target company or held shares in the target company when the statement was so served or the takeover announcement was made; and
(c)the Court is satisfied that a provision of this Chapter has been contravened;
the Court may make such orders as it thinks necessary or desirable to protect the interests of a person affected by the takeover scheme or takeover announcement (including a person who is the holder of non-voting shares in, or renouceable options or convertible notes granted or issued by, the target company).
...
739(3)The orders that may be made under subsection (1) or (2) include one or more of the following orders:
(a)an order directing:
(i)where the Court is acting under subsection (1) - the offeror or the target company; or
(ii)where the Court is acting under subsection (2) - the offeror;
to supply to the holders of shares in the target company such information as is specified in the order;
(b)where a person has failed to do an act or thing that the person was required by this Chapter or the condition to do - an order directing that person to do that act or thing within a period specified in the order, notwithstanding that the period specified in this Chapter or the condition, as the case may be, for the doing of that act or thing has ended;
(c)a remedial order;
(d)for the purpose of securing compliance with any other order made under this section, an order directing a person to do or refrain from doing a specified act.
The issue at stake
Ridley submitted that the reference to a "report" in section 647(3) ought not to be construed as meaning a written document.
The contention was that the section required information given by an expert to the target company in any form to be revealed, even if given orally. It appeared to be common ground that Macquarie is an "expert" within the meaning of the Corporations Law.
The problem with such an interpretation is that by using a bland term like "information given by an expert", the precise ambit and form of the information to be revealed is unclear. It seems to me quite difficult to identify what oral information ought to be disclosed in a given case and how it could or should be made available in some cases. It would also be difficult for the Court to formulate appropriate orders to allow the effective enforcement of such a wideranging provision. Moreover, the requirement of paragraph (b) of section 647(3) that the expert must expressly consent to the inclusion of the "report" in the Part B statement seems to presuppose something visible which the expert has authored. On this view of the legislation, the existence of the report must be physically manifest. Indeed, Ridley submitted, apparently correctly, that if the information which White was bound to have revealed was oral advice given to them by Macquarie, it must automatically follow that there has been a contravention of section 647(3)(b) in that Macquarie has not expressly consented to that advice being quoted. Undoubtedly such consent cannot be implied, and is indicative of an unequivocal undertaking of responsibility for the accuracy of the report and the opinions expressed in it.
One obvious view of the subsection is that it is quite unlikely that such a procedure would have been prescribed for what may have been a casual verbal statement or a summary of a point of view by an officer of Macquarie. One of the purposes of a visible report and its endorsement by its author(s) is to enable the reader to understand how the opinions expressed were reached. On the other hand, the legislation makes clear in many places the desire of Parliament that the maximum possible disclosure be made to shareholders so that no secret or insider information is withheld from them.
Ridley submitted further that if the Court found that the Part B statement supplied to shareholders was sufficient for the purposes of the legislative requirements, this finding would be inconsistent with the brief that Macquarie was given to advise on the indicative value and merits of the offer. Even if true, as seems to be the case, there is to my knowledge no legislative or other requirement which mandates advisers to corporations, or for that matter other advisers such as barristers, to speak or write only on, and precisely within, the brief they are given, other than as governed by the law of contract.
White made abundantly clear to Ridley that it was not in possession of a written report. In a letter of 1 August 1996, the Managing Director of White, Mr J.B. Hannaford, wrote to the Managing Director of Ridley, Mr G.P. Busenshut:
Both Ridley and its advisers have made numerous statements regarding a report by Macquarie Corporate
Finance which is said to value Joe White. Macquarie has not prepared a valuation report and I am unclear as to how you came to the conclusion that such a report exists.
Joe White's Chairman, Mr S.E.K. Hulme, has stated publicly that Joe White sought advice from Macquarie in relation to the value of Joe White shares. He also stated that Macquarie's advice is that the Ridley offer is totally inadequate and does not reflect the value of Joe White shares. This advice is reflected in the Part B Statement.
White's solicitors reiterated to Ridley's solicitors on 2 August 1996 that they were not aware of the existence of a report:
Firstly, Macquarie Corporate Finance ("Macquarie") has not provided any report to JWM. As financial adviser to JWM, Macquarie has advised that the Ridley offer of $4.85 per share is inadequate. The written material which accompanies the Part B Statement conforms with the advice given by Macquarie why the offer should be rejected.
Secondly, your assumption that Macquarie could only form the view that $4.85 is inadequate by comparing that figure with another, or with a range of figures, is incorrect.
Macquarie's advice was primarily based on the offer price representing:
•a multiple of Joe White's expected 1996 after tax earnings that is lower than for comparable companies;
•a multiple of Joe White's expected 1996 earnings before interest and tax that is lower than for comparable companies;
•a multiple of Joe White's net tangible assets that is lower than for comparable companies; and
•a price that is lower than would be expected, having regard for the market requirement that there would be a control premium.
Each of these points is made in the material accompanying the Part B Statement and, apart from the other information contained in the Part B Statement
and the accompanying material, JWM holds no other information which is material for its shareholders to decide whether or not to accept your client's offer.
It may be taken as true that White does not possess a formal written report from Macquarie. However, it equally seems quite clear that White did have in its possession at the time of the Part B statement the content of the advice given or view expressed by Macquarie to White on the takeover offer. This information, which led White's Chairman and directors to advise shareholders to "reject Ridley's miserable offer", has not been disclosed to shareholders or the ASX.
I am persuaded that, in addition to the summary view of Macquarie made public, there has in fact been information obtained by White from Macquarie which has influenced White's directors' response to, and advice to shareholders concerning, the Ridley offer. As this information has affected the directors of White and has been publicly quoted as supportive of their view, it can be assumed to be at least potentially material to the formation of views by shareholders. It would certainly be anomalous to find that such information could be withheld from shareholders merely because an expert was told not to put it in writing or omitted to do so or preferred not to do so, perhaps because the expert had not undertaken, or been asked and paid to undertake, the depth of analysis which the opinion or point of view would require to give it weight and credibility.
It is unlikely, to say the least, that the provisions of the Corporations Law were intended to allow companies to take advantage of a technicality or a deliberately misleading tactic of not actually asking for a written report so that the substance of expert views constituting the basis or one of the bases of a decision by directors and a recommendation to shareholders cannot be disclosed. In my opinion, the Parliament should not be taken to have intended that if a company engaged an expert to comment on a takeover offer and an opinion is conveyed, the company can avoid the disclosure requirements merely because the expert's opinion was given orally and not in writing. Such a provision would subvert the manifest legislative intention, especially where the oral opinion is quoted and relied upon to justify and support the position taken by the directors on the offer.
Alternative statement of the issue in contention
The ASC submitted that the advice given by Macquarie to White ought to be put before shareholders so that they are in the same position as if the advice had been produced in a written report. The ASC said that by not supplying or elaborating upon the advice given by Macquarie to the directors, White has sidestepped the requirement to provide the expert's report or advice to the shareholders. The ASC was not concerned with the ambit of the advice. It was simply concerned to have the substance of the advice given by Macquarie on the takeover bid put to the shareholders. The ASC drew the attention of the Court to section 731 of the Corporations Law setting out the so-called "Eggleston principles", which the High Court has acknowledged are relevant
to the construction of this difficult legislation: Metals Exploration Ltd v Samic Ltd [1994] 181 CLR 109. The principles are:
COMMISSION TO TAKE ACCOUNT OF CERTAIN MATTERS
731In exercising any of its powers under section 728 or 730, the Commission shall take account of the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market and, without limiting the generality of the foregoing, shall have regard to the need to ensure:
(a)that the shareholders and directors of a company know the identity of any person who proposes to acquire a substantial interest in the company;
(b)that the shareholders and directors of a company have a reasonable time in which to consider any proposal under which a person would acquire a substantial interest in the company;
(c)that the shareholders and directors of a company are supplied with sufficient information to enable them to assess the merits of any proposal under which a person would acquire a substantial interest in the company; and
(d)that, as far as practicable, all shareholders of a company have reasonable and equal opportunities to participate in any benefits accruing to shareholders under any proposal under which a person would acquire a substantial interest in the company;
but nothing in this section requires the Commission to exercise any of its powers in a particular way in a particular case.
Of course, as this provision relates only to the exercise by the ASC of its powers, and no orders are sought against the ASC which is not a party to these proceedings, it is not directly available here. But its meaning is clear and the Court should give its intention full weight and attention.
The content of Part B statements
In Re BNQ Sugar Pty Ltd [1994] 12 ACSR 695, Justice Kiefel, when a member of the Supreme Court of Queensland, said of the purposes of Part B statements (at 697-8):
One can expect a Part B statement to be a criticism of the commercial desirability of the takeover both with respect to the company and from the point of view of shareholders as investors in it. The purpose of the statement is to enable shareholders to make an informed decision as to where their interests lie and it is important then that legislation of this type be strictly complied with (see the judgment of Connolly J in Re Rossfield Group Operations Pty Ltd [1981] Qd R 372 at 376) or, viewing it another way, it is important that the provisions as to its requirements are not judged too narrowly. Whether information must be included depends upon whether it is material to the shareholder's decision. It is not helpful to suggest simply that the courts will require "full information", for that conveys very little. If the information in question is such that it might reasonably affect the decision of the shareholder as to whether or not to accept the offer then it is material to the making of that person's decision and the court will make orders accordingly: see Rossfield Group Operations Pty Ltd, supra, at 376. The provisions look to the position of the shareholder and the importance of the information to that person. They do not address, as was suggested at one point, a concept such as a general duty directors might owe to shareholders. The sections themselves specify the content of that duty and where they leave further information to the discretion of the directors, they do so with the proviso that it not be misleading and with the overriding obligation that all material information known to them must be disclosed where it has not previously.
With respect to the content of Part B statements, her Honour stated at 698:
They do not require all information that an offeror or its experts might consider appropriate nor do they require that it be presented in a way which the offeror might think to be better balanced. They are not concerned with the question of a fair assessment of the offeror's offer. They are concerned with providing proper information to the shareholders in a way which will not mislead them. As Jacobs J pointed out in Scott v Lawrence (1982) 6 ACLR 579 at 597 there is a distinction to be drawn between a question as to whether shareholders are ill informed or misinformed and whether it might be considered to be desirable to explain a matter more fully.
White submitted that it was possible to conclude that a price offered is inadequate and does not reflect the value of the shares without forming a conclusion as to the value of the shares. Accordingly, White said, it is not necessary to know the actual value of the shares to conclude that a particular offer is below, or indeed well above, the share price. I am not at all convinced that this formulation is not just a little disingenuous. But in any event, Chairman Hulme's original statement to the ASX on 28 June 1996 and the directors' dramatic advice to shareholders in the notice to shareholders accompanying the Part B statement revealed White as a company making it public knowledge that Macquarie had supported the view that the offer did not reflect the fair value of shares.
White explained that what Macquarie actually did was to produce a string of more than sixty different alternative share or company valuations dependent upon assumptions as to discount rates. It contended that Macquarie did not reach a single conclusion or even a set of conclusions with any finality. However, it seems to me highly unlikely that White's directors, headed by a most experienced Queen's Counsel, would be so cavalier about their responsibilities that they would not ask their advisers how much they thought the company was worth before publicly advocating that the offer was "miserable". When this
viewpoint was put to senior counsel for the respondent in argument, the following exchange occurred:
MR McALARY: I would have thought that if they had any commercial sense they would not ask their adviser, because the first thing that would happen would be that the opponent would seek as this company is seeking to do to find out what your expert says the price should be then ---
HIS HONOUR: As a means of upping the offer?
MR McALARY: Yes. Then just throwing in the offer at the level at which your expert puts it.
HIS HONOUR: But that is what the shareholders are supposed to want is it not?
MR McALARY: It may yet go higher. If you want to force the price up, you never disclose the price that your own experts think or your own advisers think is the appropriate price. You should proceed to bargain it up.
HIS HONOUR: Is that why the Parliament put in a requirement that an expert's report be included in the Part B statement, so as to tell nobody?
MR McALARY: And that is the reason why you do not get them.
HIS HONOUR: You do not get written reports?
MR McALARY: That is why you do not get any reports.
[T 58-9]
In practical terms it may well eventuate that Macquarie's detailed reasoning for its advice will be irrelevant to shareholders in this case. But that is not a decision which I am called upon to make. What the legislation requires is complete continuous disclosure to the shareholders and to the ASX. If anything, companies are required or ought to err in favour of disclosure as opposed to an unreasonably narrow or restrictive approach to their legal requirements. The interests
of shareholders demand that all information enabling them to make a fair assessment of the offer be presented. If the White directors regarded Macquarie's view as important, influential and politically powerful support for its own advocacy, as they clearly did, it is difficult to conclude that a legislative scheme requiring full disclosure of material actually or potentially relevant to the considered decision shareholders were being asked to make would not require Macquarie's view, and the material on which it was based, to be vouchsafed to them.
I am unimpressed by the use of the Court as a tactic in a takeover operation. During the hearing of this matter, it was as much admitted by at least one party to the dispute that this case was essentially a tactical exercise:
The problem is that one will place the bidder in a position of advantage if he has a precise knowledge as to what your own expert thinks the price can be pushed to. You will never get it above that. These cases are not really fought for any legal consideration, they are just fought for tactical considerations. I did not really want to get into that. [T 59]
As I stated at the time, the Court ought not lend itself to an interpretation of the statute which in effect puts the Court in the market place almost as a "co-conspirator" or tactician of silence. It is not the place of the Court to enter market forays nor to adjudicate disputes between commercial parties who ought to be and are well aware of the requirements and intent of the legislation.
As I have earlier demonstrated, the essence of Macquarie's advice has already been disclosed. What has not been disclosed by White are the assumptions or determinations upon which the advice was based. These assumptions should have been set out in or accompanied the Part B statement so that shareholders were enabled to test the advice or, if desired, to refer it to their own experts.
The injunction application
On 19 August 1996, after the hearing of this application had concluded and judgment had been reserved, Ridley applied to Justice Lockhart ex parte for an order that White be restrained from sending to shareholders a letter in the form of either or both of two letters dated 8 August 1996 and 13 August 1996 from Macquarie. The letter of 8 August stated in part:
In the Chairman's letter attached to the Part B Statement, reference is made to advice given by us to the board of Joe White Maltings Limited ("Joe White") that the offer of $4.85 per share is completely inadequate and does not reflect the fair value of shares in Joe White Maltings Limited. The reasons set out in pages four through seven of the Part B Statement under the heading "Why you should reject the Ridley offer" correctly reflect the reasons relied upon by us in giving this advice.
The letter of 13 August 1996 sets out more fully the advice given
by Macquarie:
You have requested that Macquarie Corporate Finance Limited ("Macquarie Corporate Finance") provides a letter setting out in writing the advice we have given to the Board of Joe White concerning the offer for Joe White from Ridley.
This advice was provided in the first instance verbally, following the Ridley announcement that it proposed to make an offer for Joe White. The advice was confirmed, again verbally, prior to the dispatch of the Part B Statement to Joe White shareholders on 30 July.
You have asked us to set out this advice as at the date it was given, namely 30 July. However, we note that no circumstances have come to our attention between this date and the date of this letter which would lead us to an [sic] different view.
We have prepared this letter in order to confirm basis [sic] upon which Macquarie Corporate Finance formed the view that the Ridley offer was inadequate. As such, it sets out advice which we have already supplied to Joe White. This advice reflects the request made of us as to whether or not the Ridley offer was adequate, and the advice was limited to that issue alone. Accordingly, we have not sought to place a value on shares in Joe White.
The letter then proceeds to outline the terms of the Ridley offer and the information to which Macquarie had regard in preparing the advice, and concluded:
On the basis of the above, we advised the board of Joe White that the Ridley offer is completely inadequate and therefore does not reflect the fair value of shares in Joe White.
We note that this reasoning was also reflected in pages four through seven of the Part B Statement dated 30 July and previously sent to Joe White shareholders. (emphasis in original).
His Honour granted an injunction, on the usual undertaking as to damages, to restrain White from sending out either of these two letters until the return of the motion on 21 August. Then, without admissions, White consented to the continuation of the
injunction and Ridley consented to the continuance of the undertaking until the determination of the proceedings or further order. Costs were reserved.
The request for an injunction is surprising to say the least. It was Ridley which commenced proceedings seeking publication in the Part B statement of Macquarie's advice to White about the shareholders. Moreover, during the hearing of the matter, in response to questioning, senior counsel for White gave an undertaking that a suitable letter would be sent to shareholders explaining the Macquarie advice and the basis for it. It seems to me that the contents of these letters adequately address this undertaking by clarifying and expanding on the advice given by Macquarie to White. The despatch of at least the second letter is clearly in the interests of the shareholders and the market generally. This is a view held also by the ASC who in a letter to White dated 16 August 1996 wrote:
The ASC notes the view that the shorter letter (dated 8 August 1996) must be despatched to Joe White shareholders to satisfy the undertaking given to Einfeld J by Mr McAlary QC. In light of the content of the 4 page letter proposed to be sent, the ASC does not consider Joe White shareholders will benefit from receipt of both letters, and is prepared to release any undertaking which requires despatch of the shorter letter.
Further, the ASC agrees to withdraw from Federal Court proceedings G3552/1996 on condition that the 4 page letter dated 13 August 1996 (as amended by the inclusion of an additional sentence in clause 3 discussed by Rodd Levy and Kathy Cuneo) is signed and despatched to Joe White Maltings Ltd shareholders on or before 20 August 1996.
Conclusion
In my view, the failure of the Part B statement or any material accompanying it to state the matters set out in Macquarie's letter of 13 August 1996, was contrary to the requirements of section 647(3) as supplemented by the clear intent of sections 731 and 750 of the Corporations Law. However, the despatch of the letter of 13 August 1996 will adequately satisfy the requirements of the legislation. Consequently, nothing more is now needed to enforce the legislative scheme in this case. I discharge the injunction pronounced by Justice Lockhart and dismiss the application.
Although White has been ultimately successful in resisting the making of any orders, it is, in my opinion, appropriate in the circumstances to order that White pay the costs of the proceedings other than the costs of the injunction proceedings commenced before Justice Lockhart which are to be paid by Ridley. The ASC will pay its own costs.
For the applicant Mr T.F. Bathurst QC instructed by Allen Allen & Hemsley
For the respondent Mr F.S. McAlary QC and Mr A.S. Bell instructed by Michell Sillar
For the ASC (intervening) Mr N. Perram instructed by the Australian Securities Commission
Date of hearing 7 August 1996
Date of judgment 5 November 1996
0
1
0