Trade Practices Commission v Bowral Brickworks Pty Ltd

[1984] FCA 254

Re: TRADE PRACTICES COMMISSION
And: BOWRAL BRICKWORKS PTY. LIMITED; MIDLAND BRICK COMPANY PTY. LIMITED and
BRISTILE LIMITED (1984) 2 FCR 552
No. G294 of 1984
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Fox J.(1)

CATCHWORDS

Trade Practices - Motion to dissolve injunctions restraining acquisition of shares - Relevant considerations - Meaning of "related" corporation; "acquire".

Trade Practices Act 1974 - ss.50(1), 50(2), 81.

Trade Practices - Merger - Whether corporations "indirectly acquire" shares - Whether corporations "related" - Trade Practices Act 1974 (Cth). ss 50(1), 50(2), 81.

HEADNOTE

Held: (1) The reference in s. 50(2) of the Trade Practices Act 1974 (Cth) to related bodies corporate is a reference to such bodies corporate as are related within the terms of s. 4A(5) of the Act; "related" does not bear its "natural" meaning, if indeed the term has such a meaning.

(2) A corporation does not "acquire indirectly" any shares within the meaning of s. 50(1) of the Trade Practices Act 1974 merely because some other corporation, not an agent, with which it has some commercial connection, acquires such shares.

HEARING

Sydney, 1984 August 22, 23. #DATE 23:8:1984

NOTICE OF MOTION.

Notice of motion to dissolve injunctions granted ex parte.

T. Hughes Q.C. and W.R. McComas, for the applicant.

B. W. Rayment Q.C., T. M. Jucovic and D. Stewart, for the respondents.

Cur. adv. vult.

Solicitors for the applicant: Clayton Utz.

Solicitors for the respondents: Australian Government Solicitor.

G.F.V.

ORDER

The injunctions granted on 20 August 1984 be dissolved.

The costs of the proceedings on 22 August 1984 be the respondents' costs in the proceedings.

These orders to take effect from 10.15 a.m. on 23 August 1984.

Orders accordingly.

JUDGE1

On 20 August 1984 injunctions were granted against the respondents on the ex parte application of the applicant, the Trade Practices Commission. The relief was based on s.50 of the Trade Practices Act 1974 which, put shortly, prohibits an acquisition of shares which will result in the control or domination, or increased control or domination, of a market for goods or services.

The injunctions related to a proposed takeover by the first respondent, which I will call Bowral Brickworks, of shares in a public company known as Calsil Limited, which I will refer to as Calsil. The injunctions were expressed to run until further order, but liberty was given to apply to vary or discharge the orders made. The respondent companies have filed a notice of motion to dissolve the injunctions, and this is opposed by the applicant.

The only further evidence which has been tendered before me is the printed document containing the offer and the part C statement, with a sheet therein, headed "Additional information". It has not been found necessary to refer me to much of the detail of the evidence. There has been no cross-examination of the deponents whose evidence was before the judge. The respondents in the hearing before me commenced first. Counsel argued that what is being done does not contravene the statute, and that in any event, as a matter of discretion, the injunctions should not go, or be continued.

In the circumstances it did not seem unsatisfactory for the respondents to commence, although it would perhaps have been more usual for the applicant to have been in a position where it had to move to continue injunctions already granted, their operation being initially limited in time.

The matter was brought before me as one of urgency, and I will proceed to deliver judgment forthwith. In the course of doing so it is likely that I will not be able to pay full respect to the arguments of counsel, but I will deal with what seem to be the more salient matters.

Bowral Brickworks already owns about fifteen per cent of the issued capital of Calsil and it seeks to acquire all the balance of it by its on-market offer. The shares in Bowral Brickworks are owned as to one half by the respondent Midland Brick Company Pty. Limited and as to one half by the respondent Bristile Limited. Calsil and the two last-mentioned companies carry on business in the supply of brick and paving units in Western Australia.

The extent of the market has not been treated as material for present purposes, but in some documents it is referred to as being the whole of the State. The respective shares in the market, including those of two companies not involved in the present case, are dealt with in the evidence of Mr. Schaffer as follows:

"10. I would estimate the market shares of the companies which carry on business in the market to be as follows:-

Bricks Paving Units

Midland 60% 60% Bristile 25% 15% Calsil 6% 20% Whitemans 7% 4% Manx and Others 2% 1%

. . .

13. Each of the companies referred to in paragraph 10 above operates brick and paving units manufacturing plants in the Perth metropolitan area or close thereto. The location of each of those plants together with the approximate total brick and paving unit manufacturing capacity of each company's plants is set out below:

Midland Middle Swan 300,000,000 Bristile Byford and Armadale 110,000,000 Whitemans Middle Swan 50,000,000 Calsil Jandakot and Cannington 45,000,000 Manx Dianella 10,000,000"

The case has been put by the Trade Practices Commission on two bases. In one, Bowral Brickworks has been treated as the "corporation" and Calsil as the "body corporate" for the purposes of s.50(1). It is accepted by the applicant that there would not by reason of those facts alone be evidence that Bowral Brickworks will acquire control or domination within the meaning of s.51. The applicant, however, calls in aid s.50(2), which deals with related corporations, and it submits that Bowral Brickworks is related to the other respondents, or one of them. The notion of one corporation being related to another is dealt with in s.4A(5), but the applicant concedes that Bowral Brickworks would not be related to the others in any way that the sub-section provides. There is no other statement in the Act as to the meaning of related, although that term is used in a number of places.

The argument is that in s.50(2) the term is used in what is called its "natural" sense. The trouble with this approach is to comprehend what could be regarded as the "natural" sense, especially in the context of the Trade Practices Act. It is not a term of art. My view is that the word has in s.50(2) the meaning it is given in s.4A(5). It is true that in that section it is stated that in the events mentioned corporations "shall be deemed" to be related to each other. It does not follow, however, that in s.50(2), or anywhere else in the Act, "related" has a wider or different meaning than its deemed meaning. The effect of the "deeming" is rather to provide a reasonably clear and positive meaning for a term which would otherwise be vague, if not meaningless. Doubtless the use of the term suggests that there may be artificiality, but it is not possible to arrive at a true, or less artificial, meaning.

The other approach made by the applicant is to treat the second respondent, Midland, or both companies, as corporations for the purposes of s.50(1), and Bowral Brickworks as an intermediary, with Calsil remaining as the body corporate. It is then argued that the two respondent companies are principals which will acquire the shares through Bowral Brickworks. Depending on all the relevant facts, some of which are not dealt with by evidence, this argument could, in a broad commercial sense, have some merit, but it is necessary to have regard to the language of the section. It is not contended, and I don't think could be contended, that Bowral Brickworks is acting as agent for the other two companies. Reliance is placed on the use of "indirectly" in s.50(1). This was said to include the "interposition", as it was referred to, of Bowral Brickworks. This argument, if correct, would, like the earlier one, render sub-section (2) largely or wholly redundant.

The more obviously fatal objection in this case is that the two companies will not in any relevant sense "acquire" the shares. (This term is partially defined in s.4(1), but not in a way which assists here.) Their ownership, between them, of the shares of Bowral Brickworks will not achieve that result. So far as there is evidence on the subject, it is to the effect that Bowral Brickworks will, if successful in its take-over bid, continue to conduct the present operations of Calsil. So far as appears it will itself have control over the shares. The mechanism of any control exercised or available by the other two companies has not been made at all clear by the evidence.

It is in my view that this limb of the argument also fails. It seems to me, therefore, that on the present evidence the case for the injunctions sought must fail.

The respondents raised a number of other matters with which it is unnecessary for me to deal. I will merely note them. I have referred to the question of the discretion as to whether an injunction should go. In that connection the respondents placed reliance upon s.81 as a factor of major importance in relation to the exercise of a discretion. This section reads as follows:

"81. (1) The Court may, on the application of the Minister, the Commission or any other person, if it finds, or has in another proceeding instituted under this Part found, that a corporation has contravened section 50, by order, give directions for the purpose of securing the disposal by the corporation of all or any of the shares or assets acquired in contravention of that section.

(2) An application under sub-section (1) may be made at any time within 3 years after the date on which the contravention occurred."

My present view is that while the possible use of the section is a factor, its significance on an interlocutory application will vary from case to case.

Also, reference was made to the delay said to have occurred from the time, on 26 July, that the respondent, Bowral Brickworks, by its counsel, first informed the applicant Commission about what was intended, until action was actually taken on 20 August. There was, it would seem, ample opportunity for the Commission to have moved earlier, before the take-over offer became effective, on 13 August. While the Commission says that it is quite possible that attempted reliance on s.81 would not have been satisfactory in any event because the share position and relevant activities would have become so scrambled, the reply made is that there was a chance to do something before the scrambling process was even started.

It seems to me that I should dissolve the injunctions granted. There has not been an opportunity for the applicant to move the Court on notice and no full opportunity for the parties to come before the Court on a contested application for an injunction. It seems to me that this avenue should be left open.

The learned judge who granted the ex parte injunctions of course did so without the benefit of argument on both sides and I have been provided with some evidence he did not have. I have not seen any transcript of the proceedings before him. There may be further evidence which the parties, or one of them, would want to adduce if there were any contested application. I do not wish to invite one but, as I have said, the avenue should be left open.

I order that the injunctions granted be discharged. I have been asked to stay this order so that leave to appeal may be sought. I refuse that application, but order that the discharge of the injunction not take effect until 10.15 a.m. tomorrow, 24 August 1984. The costs of this application are to be the respondents' costs in the proceedings.