Trade Practices Commission v Rank Commercial Ltd
[1994] FCA 560
•12 Aug 1994
560 99
JUDGMENT No. ,..,A ...-.,. CATCHWORDS
TRADE PRACTICES - acquistion of shares in alleged contravention of s.50 -
interlocutory injunction - balance of convenience - effect of various undertakings - relevance of conduct allegedly accessorial to contravention - expedited hearing -
case management.
corpomtions Law
Thde hct ices Act 1974 Fedem1 Court of Australia Act 1976
Fedeml Court Rules
Decor Corpomrion Ply Ltd v Dart Indus* Inc (1991) 33 FCR 397 Yorke v Lucas (1985) 158 CLR 661
lltomson Austmliun Holdings Ply Ltd v nude hct ices Commirswn (1981) I48 CLR
150ICIAustmlia Operations Ply Ltd v Thde Ractices Commirsion (1992) 38 FCR 248
Thde hct ices Commissw~t v Santos Ltd [l9921 ATPR 40,618 No. G395 of 1994 TRADE PRACTICES COMMISSION
RANK COMMERCLAL LLMITED
First respondent
COLES MYER LIMITED
Second respondent
GRAHAM RICHARD HART
12 August 1994
Melbournelhird respondent
AUSTRALlAN GROCERY HOLDINGS PTY LIMITED
Fourth respondent
M I U S r n E T I W S r n E N T s LIMITED
Fifrh respondent
HOTHFIELD HOLDINGS LIMITED
Sirth respondent
FOODLAND ASSOCUTED LIMITED
Seventh respondent
Black CJ, Jenkinson and Branson JJ 1 No. G 395 of 1994
BETWEEN: T R A D E P R A C T I C E S COMMISSION Applicant AND. K CO=CIAT. J .m First respondent
Second respondent
Third respondent
Fourth respondent
TREET INVESTMENTS
LIMITED
Fifth respondent
H 0 T H F I E J . D H O L D I N G S J.umE.2
Sixth respondent FOODLAND ASSOCIATEB LIMITED Seventh respondent
COURT: Black CJ, Jenkinson and Branson JJ PLACE: Melbourne
DATE: 26 July 1994
Each motion for leave to appeal be granted.
Each appeal be dismissed.
The applicant's costs of each motion and each appeal be paid as to one half by Cola Myer Limited and as to the other half by Rank Commercial Limited, Graham Richard Hart, Australian Grocery Holdings Pty Limited, Millstreet Investments Limited and Hothfield Holdings Limited.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
REASONS FOR JUDGMENT
On 12 July 1994 Beaumont J ordered that the fourth respondent, Australian Grocery
Holdings Pty Ltd ("AGH) be restrained, up to and including 12 September 1994, from lodging for registration under s.644 of the Corpomtiom Law a Part A statement in respect of a proposed take-over offer by AGH for the shares of Foodland k i a t e d Limited ("FAL"). The order was made in relation to a principal proceeding in which the applicant, the Trade Practices Commission ("the TPC') claims that, unless restrained by the Court, the first respondent, Rank Commercial Limited ("'Rank''), the second respondent, Coles Myer Limited ("CML"), the third respondent, Graham Richard Hart, the fourth respondent, AGH and the sixth respondent, Hothfield Holdings Limited ("Hothfield'), will seek directly or indirectly to acquire shares in the capital or assets of the seventh respondent, FAL, and thereby, in various ways, contravene s.50 of the l h d e Practices Act 1974 ("the Act"). It is also
claimed that certain of the respondents intend to engage in conduct that would aid
and abet a contravention of s.50 and which would involve being knowingly concerned in or a party to a contravention. Section 50 (l)(a) of the Act provides that a corporation must not, directly or indirectly, acquire shares in the capital of a body corporate if the acquisition "would have the effect, or be likely to have the effect, of substantially lessening competition in a market". In the principal proceeding the TPC seeks permanent injunctions restraining the respondents, other than FAL, from
As well as ordering that AGH be restrained from lodging the Part A statement for making the aquisition. registration, Beaumont J directed that the final hearing of the principal proceeding be fixed to commence on 29 July 1994 at 10.15 am. The judge also directed that the TPC and FAL file and serve by 20 July 1994 any witness statement upon which either of them would seek to rely and that the respondents to the principal proceedings, other than FAL, file and serve by 27 July 1994 any witness statement on which any of them would seek to rely. Discovery was to be dispensed with and the matter was to be listed before the trial judge in Melbourne on 15 July 1994 for directions as to the venue for the final hearing. On 19 July 1994 CML filed a notice of motion for leave to apped against the whole of the judgment of Beaumont J and on the same date the other respondents, except FAL, also filed a notice of motion seeking leave to appeal. The respondents sought orders that, if leave were granted, the appeals be heard concurrently with, or immediately after, the applications for leave to appeal.
A Full Court was urgently convened to hear the motions, which were listed for hearing three days later, on 22 July 1994. Leave to appeal was required because the orden and directions made by Beaumont J were interlocutory in nature: see Federal
C b N of -lip Act 1976, s.24(1A). At the conclusion of argument on 25 July 1994 the Court announced that it would deliver its decision on the following morning. On 26 July 1994 the Court announced ita dccipion which, in relation to each motion, was to grant leave to appeal but to dismiss the appeals with costs. The Court announced that it would deliver reasons latcr, but as soon as possible. These are the Court's reasons.
Before discusing the issues before us on the applications for leave to appeal and on the appeals it is necessary to refer to the findings made by Beaumont J about the relationships between the respondents and about some other matters, to refer to his Honour's description of the case the TPC seeks to make out in the principal
proceeding (a case that has been expanded somewhat since the matter was before Beaumont 1) and to the relevant terms of a Deed of Co-operation entered into by the rc tpdents , other than FAL
the rcspondena:
Beaumont J concluded, and it was not contested before us, that Mr Hart controls RanL and that he also controls Hothfield, which controls Millstreet, which in turn controls AGH. His Honour found that Rank is the beneficial owner of 38,794 shares (i.e. 14.9%) in the capital of FAL In June 1994 the respondents, other than FAL, entered into a Deed of Co-operation dated 23 June 1994 ("the Deed of Co- operation") and other arrangements. The Deed of Co-operation is central to the TPCs case in the principal proceedings, as it was to the TPC's application before Beaumont J.
by the TPC in the ~ r i n d ~ a l Dnxxeding
It appears that the TPC has expanded its points of claim since the matter was before Bcaumont J, but nothing turns on that for present purposes. In the points of claim considered by Beaumont J the TPC makes, in essence, the following allegations:
(1)
(a)
FAL conducts business as a wholesale supplier of grocery products to independent grocery retailers being supermarkets, top up stores and convenience stores, throughout Western Australia ("W.A."). It also operates, through its subsidiary, Action Food Barns (W.A.) Pty. Limited ("Action"), several retail supermarkets in W A
@)
Market shares in the W A market for the acquisition by wholesale of grocery products are: CML and FAL - 70%; Woolworths Ltd. and
others - 30%. (c)
Market shares in the W.A. market for the sale by retail of grocery products are: CML - 23.5%; Woolworths - 25%; Action - 10%; other
independent retailers who obtain wholesale supplies from FAL - 41.5%.
(2) Under the Deed of Co-operation, the following is provided:
(a)
A subsidiary of Rank will make a take-over offer ("the Offer") for the shares in FAL.
@) AGH (in the Deed of Co-operation referred to as "Bidco") will acquire
shares in FAL from those accepting the Offer and Rank will sell its
shares in FAL to Bidco.
(c) After acquisition of the capital of FAL by Bidco, the business of FAL will be divided and its New Zealand operations divested, leaving its
Australian operations as its main asset.
(d)
Upon the Ollcr becoming unconditional, CML is granted:
(i)
an option to purchase all the capital of Bidco for a nominal consideration;
(ii)
the right to appoint a director to, and to obtain information in respest of the business of, FAL,
(iii)
certain (confidential) rights in the alternative to the exercise of the option rights in (i) above.
(c)
Unless Rank and CML agree, Bidco must not, inter alia, vary or withdraw the Offer or acquire any FAL shares otherwise than pursuant to the Offer.
(3) CML has provided, and will provide, essential financial assistance in respect of the carrying out of the provisions of the Deed of Co-operation. (4) The acquisition of FAL shares by Rank or AGH pursuant to the Deed of Co- operation will be partly for themselves and partly for CML in that -
(i) the shares are to be held subject to CML's direction and are the subject of CML's option.
(ii) Rank and AGH are bound not to prejudice any prospective interest of
CML in the FAL shares.
( 5 )
If CML obtains control of FAL, or of FAL's W.A. operations, there is likely to be a substantial lessening of competition in the retail market because, inter
alia:
(a) CML will control about 75% of W.A. retail grocery sales; @) CML will directly control FAL retail outlets;
(c)
CML,
although now a competitor in the retail market, will also control supplies and services to its most significant competitors.
(6) If CML obtains control of FAL, or of FAL's W.A. operations, there is likely to be a substantial lessening of competition in the wholesale market because, inter alia:
(a)
suppliers will have no alternative but to deal wth CML and will have little ability to influence the terms of trade;
@) there are already substantial barriers to entry into the wholesale market.
nl5-of-tkm
As Beaumont J pointed out, many of the provisions of the Deed of Co-operation are
adequately summarised in the points of claim but it will assist in the understanding of
the issues if we set out some of the provisions of the Deed in these reasons.
The recitals to the Deed state:
"D I f the offers are succ@l, it is proposed that Bidco will use its best endeavours to procure that FAL either:
distributes or otherwise transfers to its shareholders on a pm rata bash shares in a company which owns the Core NZ Assets and Rank or an enriry nominated by Rank will
pwr:huse Bidco's shares in this company. offers its shareholders the right on a pm rata basis to subscribe for or purchase shares in a company which owns
the Core NZ Assets and Rank or a person nominated by
Rank will underwrite the issue or sale of shares in this
C ~ P M Y .
E It is also propared that: I f the offers are successful, Bidco will continue to own and
control the FAL Group while Coles seeks to obtain any necessary approvals to acq'uire the balance of the FAL C& will have an option to purchase all of the issued shares in the capital of Bidco in accordance with this document. "
The "nature of the relationship" under the Deed is described in these terms:
"2 MTURE OF RELATIONSHIP l%e parks have entered into this document for the purpose op
(a) facilitating the m e n ; (b) enabling Bidco to own and control the FAL Group; (c) providing Rank or an entity nominated by Rank with the oppomity to purchase some or all of the shares in a
company which ownr the Core NZ Ass&; and
(d) providing Coles with an opportunity to app3, for and obtain any necessary Authorkationr to acquire the balance of the
FAL Group.
Coles' h agreed to provide a standby commitment in respect of certain financial accommodation ro be provided to Bidco or Bidco
Holdings to fund the m e m and certain of Bidco or Bidco Holdings' holding costs. In order to protect:
(a)
Coles' qwsure to loss in respect of its standby commitment; and
(b)
C&' pmspective interest in Bidco under the Coles Option, the parks have agreed that Coles may impose certain rest&iom on Bidco in accordance with r h k document. ntese controls are intended to protect Coles fnun any dkipt ion in the value of Bidco or the F A Group. Nothing in this document should be consbued m giving Coles any corn1 or significant infruence over the conduct of any of the trading operations of the FAL Group prior to
exercise of the Coles Option."
CML's option is dealt with in c1.6 of the Deed. Clauses 6.8 and 6.9 provide:
Subject to clousc 62, as soon as practicable afrer it obtains all required Aurhoriratiom, C& shall tawrise the C& Option. Coles will w e its reasonable endeavows to obtain all required AuthoriFntions at the earliest practicable date but nothing in this
churc 68 or in drrurcr 37, 5.10 W 6 9 shall oblige Coles to agree
to any conditihlls imposed in relation to any Authonkation or to give any undemking or commitment of any kind to any Government Agency.
Each of the parties shall use irs best endeavours to obtain all
necessary Authonkations in relation to the tmnsactions
contemplated by this clolrPc 6 Each of the parties shall co-operatefully with the others in rhis regard and shall provide each of the
othets with drafts of any proposed submkiom to a Government Agency in respect of any required Authorisations and use irs best endeavorus to agree to the term of the submission with each other
parry. However, for the avoidance of doubt Coles shall have sole
respnsibiUy for any dealings with the m d e hct ices Commiuwn
in Aurtmlia." red bv the a e n i s other than FAL:
Before Beaumont J it was submitted on behalf of the respondents, other than FAL., that in considering whether, on the balance of convenience, the making of the take- wer offer should be restrained pending a final hearing, the Court should take into account undertakings offered by those respondents. They submitted that, even if the
bid now proceeded, the offered undertakings, which were to remain in place until a
final determination of the principal proceeding, would be effective to hold the status quo in other respects. They argued before Beaumont J, as they did before us, that
the effect of the undertakings would be to ensure that no contravention of s.50 of the
Act could be permitted to occur before that final determination.
(a) unde- offered bv Mr Hart. AGH. Millstreet and Hothfieu
These respondents ("the Hart respondents") offered the following undertakings:
n(a) they will notifv the Applicant immediately upon receipt from the
Second Respondent ('CML') of a notice of:
(i) m k of any rights arising under Clause 6.1 of the Co- operation Deed ...
[By cl 6.1, CML's Option is granted]
(ii) exemise of any rights arising under Clause 6.7 of the Co-
operation Deed;
[Cl 6.7 is confidential: it is not necessary to refer to it for
present purposes]
(iii) acceptance by CML of any offer made pursuant to Clause
6 4 of the Co-operation Deed; or
[Cl 6.4 is confidential: it is not necessaly to refer to it for
present purposes](iv) nomination by CML of a person to be a member of the Board of Directon of the Fourth Respondent ('ACHY
pursuant to Clause 7.1 of the Co-operation Deed;
(b) they will not, without givbzg 30 days prior wri#en notice to the Applicant, except by v i m of being a party to the Co-operation Deed with CML, sell, or offer to selt directly or indirectly, any legal or equitable interest in the shares or assets of the Sixsh Respondent ('FAL') to CML; (c) they will not act at the direction of CML in relation to the conduct of the business of FAL; (d) they will not p v i d e to CML, whether in accordance with Clauses 4.3, 6.5 or 10.3 of the Co-operation Deed or otherwise, any
information in the posrtwwn of FAL within the following
categories:
* FAL's tmding terms with itr suppliers; * FAL's tmding terms wiih itr customers; the identity of FAL's suppliers and customers;
b.ading and jinancial information rehting to FAL's
customers;
* FAL's marketing and advertking strategies; *
FAL's plans relating to prop* development and site plMnLtg for retail sites; and
(c) for the relief sought by the Applicant not being granteri, on the fact
they will not n3, at the trial of the c m n t proceedings, as a gmund that e-:
the p p e d take-over offer by AGH for all of the hued
(i) shares in FAL has proceeded pumunt to clause 3 of the Co-opemrion Deed; or
(ii) the Con NZ Assets (as dejined in the Co-operation Deed)
have been dealt with in accordance with clause 5 of the Co-
operation Deed"
@l
CML offered the following undertakings which were intended to reciprocate those
tendered by the Hart respondents:
"l, It will not withour giving 30 days prior wrinen notice to the Applicant:
(a) aercie any of itr rights arising under Clause 41 of the Co- operation Deed ...
(b) operation deed;
are& any of itr rights arising under C l m e 67 of the Co- (c) accept any offer made pursuant to Clause 4 4 of the Co- operation Deed;
(d) Deed, appoint any officer or employee of CML or any of its in &ing its rights under Clause 7.1 of the Co-operation related corporations to the Board of Directors of the Fourth
Respondent (AGH%.
except by v& of being a parry to the Co-operation Deed, (C) acquire or offer to acquire, direct& or indtectly, any legal or equitable interest in the shares or assets of the Sixth Respondent ('FAL') including (without limitarion) exercising any rights to acquire any security held by lenders to any of the Hart Respondem over any shares or assets of FAL;
03
seek to &ct any of the Hart Respondents in relation to the conduct of the business of FAL; and
(g) request or seek to obtain from either:
(i) any of the Hart Respondem or any officer or empbee of the Hart Respondem in exemise of CML's rights under Clauses 4.3, 6 5 or 10.3 of the Co-operation Deed or othenvke; or (ii) Directors of AGH under Clause 7.1 of the Co- any person nominated by CML to the Board of
operation Deed,
information in the possession of FAL within the following
categories:
* FAL's trading terms with its supp1i.e~~;
FAL's trading terms with its customers; the idmrity of FAL's suppliers and customers;
* trading and jhncial information relating to FAL's
customers;FAL's marketing and adverhing smtegies; F a ' s plans relating to p r o m development and site planning for retail sites;
2. ii will not re& at the trial of the current proceedings, as a ground for
the relief sought by the Applicant not being granted, on the fact that
either:
(a) shares in FAL has proceeded pumcant ro clause 3 of the the p p e d take-over offer by AGH for all of the issued
Co-opemtion Deed; or
(b) the Core NZ Assets (as dejined in the Co-operation Deed) have been dealt with in acconiance with clause 5 of the CO- opemtion Deed"
Beaumont J concluded that a temporary injunction, limited so as to expire in two months, should be granted to restrain the making of the bid during that period. He considered that the matter should proceed to a final hearing as soon as practicable, with a view to its expeditious disposition within two months and he gave directions accordingly. He expressed the view that there was no reason, provided discovery was dispensed with, why the matter could not finally be disposed of within two months with proper case management. For the reasons that he gave, Beaumont J considered that it was appropriate to dispense with discovery and he so directed.
His Honour approached the matter by asking whether there was a serious question to be tried at the final hearing and concluded that there was. He noted that CML had
acknowledged, correctly in his view, that any acquisition by it of shares in FAL raised
a serious question whether s.50 of the W het ices Act would thereby be
contravened. He rejected a contention that the Hart respondents were in a different position and he rejected the contention that the TPC case against them was without any prospect of success so that no serious question arose of the grant of final relief against them. Whilst recognising that it was true, in the ultimate analysis, that the interests of the Hart respondents lay in the acquisition of FAL's New Zealand assets,
hip Honour observed that there was much more involved than that. He said:
'As the public announcements by the parties have emphasised, and as the terms and M p t i o n of the Deed of Co-operation m n h , the relationship between CML and
the 'Hart' respondents in the subject transaction is that of joint venturers.'
Later the judge said:
'Whether the 'Hart' respondents would be liable primarily, or secondarily as a party 'invohd', is not necawq to decide here. It suflias to say that, given the adstem of the joint-venture and the interdependence, legally, commerdally and finaacislly, of all cup- of the pehrm~ncc of the terms and condit~ons of the Deed of Cooperation,
m my opinion, any acquisition by CML in the manner contemplated by the Deed RLa a raiOu8 queatmn as to the liability to the 'Hart' respondents to be enjoined at
a W buring h m further exercising thew rights, and perfomng their obligat~ons, undef the Deed'
His Honour then turned to the balance of convenience which he said he found the
more d i B d t aspect of the motions before him, especially having regard to the circumstance that, by reason of the provisions of s.80(6) of the Act, the Court could not require the applicant or any other person, as a condition of granting an interim injunction, to give an undertaking to pay damages.
Bcaurnont J said that if the bid were to be disregarded there could have been substantial force in the contention that the Court should accept the undertakings offered by CML and the Hart respondents but he concluded that the bid should not be disregarded since it was central to the performance of the joint venture. His Honour considered that complications were likely to arise from the making of the bid and that this likelihood was a significant matter to be taken into account in assessing
were looked at alone, ignoring the other, subsequently arising aspects of the joint the balance of convenience. The problem, as his Honour saw it, was that if the bid venture, the bid would be removed from its true commercial context. His Honour considered that if the bid were to proceed upon the footing that, instead of restraining it, the Court accepted the undertakings, the bidder would face a dilemma. On the one hand, it might mislead shareholders by its silence if it said nothing about the undemkhga and the litigation and on the other hand, if shareholders were to be told about such matters, then given the interdependence of all aspects of the provisions of the joint-venture, uncertainty could be created in the minds of shareholders as to the outcome of the bid. Such uncemty, his Honour considered, could not assist in the creation of a well-informed market.
Accordingly, to avoid such complications his Honour considered that the case should be accorded such a priority as would bring about a final determination by the Court within two months. A resolution within that time frame would, his Honour considered, be reasonable, in terms of timing, from the standpoint of all concerned. It
would not unduly delay the making of the bid and it would allow the bid to be made, if at all, with the benefit of knowing the outcome of the litigation. Any present uncertaiaty or confusion in the shareholder's minds should then have been removed.
His Honour observed that all the parties had at their disposal the resources capable of preparing and conducting litigation of the present kind urgently. The respondents, other than F& argued that leave to appeal should be granted because the decision appealed from was wrong, affected substantive rights and was
productive of substantial injustice. They referred to the recent discussion in Decor Covpwotion Ply Lid v Dart Industries Inc (1991) 33 FCR 397 at 398-399 of the circumstamxs under which leave to appeal will be granted. Having regard to the
practical consequences to the parties of the decision from which leave to appeal is sought and to the view we have reached about one aspect of the primary judge's
of leave to appeal. consideration of the case, we decided that these were appropriate cases for the grant It war not disputed that there was a serious question to be tried as to whether the acquisition by CML of shares in FAL, pursuant to the option contained in the Deed of Co-operation, would contravene s.50 of the Act as having the effect, or as being
likely to have the effect, of substantially lessening competition in a market or markets in Western Australia.
It was submitted however that the judge should not have granted an injunction under
s.80 of the Act unless he was satisfied that the registration of the Part A statement
and the acquisition of shares by AGH would of themselves give rise to a serious risk
of contravention of s.50 and that the risk of contravention was such as to make it
appropriate to restrain the registration of the offer and the acquisition of shares by
AGH. It was submitted that instead of considering those questions, the judge
determined to grant the injunction on the basis of the different and, relevantly,
hypathctid question whether the acquisition of shares or assets by if it did
come to pass, would create a serious risk of contravention of s.50. As we have noted,the judge concluded that given the existence of the joint venture, and the relationship between the parties, it was difficult for the Hart respondents to dispute that a serious qucstion arose whether, at the final hearing, they should be held v e s to a contravention to s.50 in the event that CML were to acquire shares in, or assets of,
FAL
In much the same way, it was argued that since there was no serious question to be tried, m that the take-over bid, of itself, could not have resulted in any breach of s.50, the Court had no power under s.80 of the Act to restrain any conduct merely in
furtherance of that bid. It was said that because of the undertakings that had been offered there could be no
would be lawful and therefore no serious risk that the acquisition of the FAL shares acquisition by CML unless and until it was determined at the trial that the acquisition by AGH would contravene s.50 of the Act. It was said too that the judge was wrong m placing reliance upon the possibility of accessorial liability in terms of s.80(l)(c)-(Q of the Act because to do so involved a failure to have regard to the effect of the undertakings on the risk of contravention and the effect of the undertakings on the requisite element of intention. We therefore turn to consider the effect of the offer of undertakings by CML and the Hart respondents. It should be noted at once that the undertakings were merely interlocutory; they did not bear upon the ultimate intentions of CML or the Hart respondents. Moreover, consistently with their interlocutory nature, the relevant undertakings offered by the Hart respondents related only to notice. They were, for presently relevant purposes, undertakings to give notice to the TPC upon receipt by the Hart respondents of notice of -the happening of certain events, including the cxcrcise of any rights arising under c1.6.1 of the Deed of Co-operation (CML's option). The relevant undertakings offered by CML were also related to notice, in that CML undertook not to exercise nghts arising under c1.6.1 of the Deed without giving thirty days prior written notice to the TPC. Accordingly, whilst the
undertakings, if accepted, would have given the TPC notice to enable it to apply to the Court for an injunction restraining the exerclse of CML's option before it was cxcr- the parlies to the Deed remained bound by its terms and must be taken to have intended to act as it required or allowed unless restrained by the Court. (We would add that the Deed of Co-operation, although contemplating an application for
authorisation, does not make the operation of the Deed conditional upon the obtaining of an authorisation.) In these circumstances there remained, irrespective of the offered undertakings, a serious question to be tried at the hearing of the principal proceeding whether conduct in which CML proposed to engage would constitute a contravention of Part IV, and specifically of s.50. The offered undertakings were of course relevant to the
balance of convenience, and Beaumont J so treated them. We consider too that the offer of the undertakings did not affect the power of the Court to grant an injunction restraining the lodging of the Part A statement on the footing that there was a serious question to be tried as to whether the Hart respondents should be held to be parties to a contravention of s.50 in the event that CML were, through the process provided for by the Deed, to acquire shares in FAL. W o n 80(1) is concerned with the prevention of contraventions of Parts IV, IVA and V and, to that end, its scope extends to empowering the Court to restrain conduct in which a penon proposes to engage that would constitute ' W i g in any way, directly or indirectly, knowingly concerned in, or party to, the contravention by a person of such provisionn (s.gO(l)(e)) or that would constitute "aiding, abetting, counselling or procuring a person to contravene such a provision" (~.80(l)(c)). The offer of the undertakiqs did not, for the reasons we have given, bring about the result that the
pnrties to the Deed of Co-operation no longer proposed to do what the Deed provided they should or could do. Having regard to the interdependence, legally, ammercially and financially of all aspects of the performance of the terms of the Deed of Cooperation, to which Beaumont J referred, there must be a serious question to be tried whether the parties are proposing to engage in conduct that falls
within s.80(l)(c) or (c). Whilst it may be said that the conduct in which the Hart respondents propose to engage has as its object the furtherance of their interests, it could not be suggested that the evidence does not raise a serious question whether the Hart respondents have the knowledge that s.80(l)(c) and s.80(l)(e) of the Act require (see York. v h a s (1985) 158 CLR 661) of the essential facts constituting the perticular contravention of s.50 postulated. It is of course true that an injunction should not prohibit conduct falling outside the boundaries drawn by s.80 (see Tbmson Auraolian Holdings Ply Ltd v l h d e Ractices Conmiwion (1981) 148 CLR 150 at 161 and see ICI Australia Operations Pty Ltd v R& RacCiCes Cornminion (1992) 38 FCR 248) but, as we have noted, although those boundaries are all rcferabk to a contravention of the Act, they are wide and they encompass proposed
conduct and awessorid conduct.
It follows that we do not think that Beaumont J considered the wrong questions or that there was a lack of power in the circumstances to grant the injunction. The respondents argued that Beaumont J was in error in assessing the balance of mvenience by finding that an expedited timetable for the preparation of the evidence for the trial would bring about a final determination by the Court within about 2 months. It was said that there was no basis for a finding that the proceeding could be finally disposed of within 2 months, that the expedited timetable allowed hufficient time for the preparation of the case for trial and that the expedited timetabk created a risk that the determination by the trial judge would be founded on insufficient or inadequate evidence. The Hart respondents claimed that the final determination of the proceeding would "take many months" and that 'by then the
damage to the bid will .be irreparable". Where it is daimed that a take-over bid will, if successful, involve a breach of s.50 of the Act and the TPC or the Minister seeks an injunction to restrain the bid pending a final heating of a proceeding challenging the lawfulness of the bid there is of course
an inevitable conflict between, on the one hand, the interest of the bidder in procctding with the bid without disturbance (and the interests of those who might wish to accept the take-over offer) and, on the other hand, the interest of the applicant in preventing in the public interest what it claims will be a contravention of a centrally important provision of Part IV of the M PmctiCes Act. This conflict could for practical purposes be avoided if a final determination of the issues could be
achimd within a matter of days but, however much the courts may give appropriate priority to cases that require very urgent determination in the public interest, proceedings in which a contravention or threatened contravention of Part IV of the Act is alleged are likely to raise issues of such a nature that their fair and proper resolution will inevitably take some considerable time.
can be substantially reduced by proper case management. This may involve much Experience shows however that the time taken for the resolution of civil proceedings more than fixing a timetable for the taking of steps in the proceeding. The range of d i r d 0 ~ that may be given in the course of case management in a civil proceeding may be discerned from Order 10 r. 1 (1) and (2) of the Federal Court Rules. Order 10 r.1 provides that on a directions hearing the Court shall "give such directions with
respect to the conduct of the proceedings as it thinks proper!' Order 10 r.1(2) provides:
'Witbout prejudice of the generality of sub-rule (1) or (1A) the Court may-
(a) make orden with respect to-
(i) diacowy and inspection of documents; (ii) mterrogatories; (iii) inspeaions of real or personal property;
(iv) -ions of fact or of documents;
(v) the defining of the issue8 by pleadings or otherwise; (vi) the standing of affidavits as plea-; (viii) the mode and suflicicncy of service; (U) amendments; (xii) the p i n g of particulars; (M) the place, time and mode of h-g; (xiv) the giving of W n c e at the heanng, including whether evidence of mtnesses m chef shall be given
orally or by afMavit, or both;(xv) the dlJcl08ure of reports of experts;
(4) colts; and
(xvii) the filing and exchange of signed statements of
evidence of intended witnesses and their use m
evidence at the hearing.
(m) where, m any proceahng mmmenced in reapezt of any aUeged or threatened bruch of a provrsion of Part IV of the 7hde Prachccs Act 1974, an order pursuant to secuon 80 of that Act is sought, direct that
notice be given of the order sought by public advertkment or in such
other form as the Court directs;
@)
nomtbstanding that the appt~cation is supported by a statement of
drim, order that the proceeding continue on affidavits; (c) karing- order that the evidence of a particular fact or facts be given at the
(i) by statement on oath upon information and belief; (U) by production of documents or entnes in books; (i) by copied of documents or entnes; or (W) otherwise as the Court directs; (a) order that an agreed bundle of documents be prepared by the partles; (d) order that no more than a specified number of expert witnesses may be called; (d.) order that the reports of experts be exchanged, (c) appoint a court expert in accordance mth Order 34, rule 2; (f)
direct that the proceeding be transferred to a place at which there is a Rcgistq other than the proper place. Where the proceeding is so transferred, the Registrar at the proper place from which the proceeding is transferred sM1 transmit all documents in his charge relating to the proceeding to the Registrar at the pmper place to which the proceeding is transferred.
(g)
order, under Order 72, that proceedings, part of proceedings or a nutter arising out of proceedings be referred to a medurtor or arbitrator,
(h) order that the prth attend before a Reptrar for a conference mth a view to satisfying the Registrar that reasonable s tep to achieve a ncptmted outcome of the pmceedimgs have been taken, or otherwise. ckdjing the real issues m dispute so that appropriate directions may be made for the disposition of the matter, or otherwise to shorten the time in preparation for all at the trial;
(i)
in a caae in which the Court wnsiders it appropriate, direct the putres to attend a case management conference wth a Judge or Registrar to mnsider the most ecanomic and effiaent means of brfnging the proaedmngs to vlal and of wnductrng the tnal, at which conference the Judge or Registrar may give further duecuons;
) in pnmaQings in which a party seeks to rely on the opinion of a person involving a subject in which the person has specialist qual~fiations, direct that all or part of such oplnron be received by way of submssion in such manner and form as the Court may think
fit, whether or not the opinion would be admissible as evidence.'
Particular reference may be made in the present case to Order 10 r.1 (2)(a)(i), (xiv),
(m) and (xvii) and to r.1(2) (c), (m), (d), (da), (i) and Q). Without compromising the
rights of the parties to a fair hearing of their case, much saving of time can be achieved through case management especially if, as is to be expected, counsel and solicitors for the parties co-operate fully in the process.
In the present case the judge was obviously very well aware of the potential of case management to reduce delay. He specifically referred to proper case management.
In the circumstances of the case, which included the ready availability of industry
statistics, he was able to take what he described as the extraordinary course of dispensing with discovery, thereby removing a major impediment to a speedy trial. He proposed the exchange of witness statements, including expert reports. The judge was well aware of the extent of the evidentiary conflict between the parties, noting that it appeared that in virtually every respect the TPC case would be vigorously denied. He was also aware of course that all of the parties had at their disposal the resources capable of preparing and conducting litigation of the present kind urgently, a circumstance that became especially relevant once discovery with its attendant delays had been dispensed with. He was doubtless also aware of the various other
ways in which the case management he contemplated as a means to a very speedy
resolution of the matter could be implemented by the trial judge. The matter was very much one for the informed judgment of the primary judge and we are far from persuaded that Beaumont J was in error in assessing the balance of convenience on the basis that the proceeding would be determined within the time he proposed. We should add that it would of course always be open to a party to apply to the trial judge for an adjournment for good cause shown and for the trial judge to consider
what orders might be required in the light of changed circumstances. Faihnc to relevant mattem into account:
It was contended that the judge failed to take into account the effects upon shareholders of being deprived of the opportunity to accept a bid, the public interest
in the free trading of publicly listed securities without interference and the fact that,
given the absence of an undertaking as to damages, any loss or damage that might be suffered by the Hart Respondents through the delay or abandonment of the bid would never be compensated.
Accepting for the purpases of argument, but without deciding, that the absence of an
undertaking as to damages is a matter proper to be taken into account in assessing the balance of convenience, notwithstanding the provisions of s.80(6) of the Act, it is clear that the judge did take into account the circumstance that no undertaking as to damage had-been-given and that he turned his mind to the possibility of loss and damage for which there would be no compensation. That point must therefore fail. h to the other matters - reading his Honour's reasons as a whole, we do not consider that he failed to take into account the effect of an injunction on shareholden or the public interest in the free trading of securities.
We have referred to the conclusion reached by Beaumont J that if the bid were to
proceed upon the footing that, instead of restraining it, the Court accepted the
undertakings, the bidder would face a dilemma with respect to the information it should provide in its Part A statement and uncertainty could be created in the minds of shareholders. It was argued on behalf of CML and the Hart respondents that Beaumont J was in error in having regard to these matten in assessing the balance of convenience.
It is clear from his Honour's reasons that he did regard the confusion of shareholders
as a significant, if not decisive, matter to be taken into account in assessing the
balance of convenience. CML and the Hart respondents submitted, in substance, that
Beaumont J was in error in taking into account uncertainty or confusion because there would in fact be none; this was because Rank would be bound by the
Co~oMtiolls Law to make appropriate disclosure in its Part A Statement of the
existence of the litigation and of the undertakings. Reference was made to s.750 of the Copmnnionr Low and to clauses 17 and 20 of the requirements of Part A. It was pointed out, too, that FAL would be astute to see that the Part A statement complied
with requirements of the Corpo~tiom Law and could be expected to challenge in the
courts any Part A statement that it considered might not comply.
In the present circumstances it would undoubtedly be difficult to draw a Part A statement that properly provided the requisite information in a way that was not likely to lead to uncertainty or confusion. The difficulty was acknowledged by counsel but we agree with the submission that it should not be concluded that the task is so difficult a~ to be beyond accomplishment. Further, the avoidance of uncertainty or confusion of shareholders to whom a take-over offer is being proposed by respondents
to a motion under s.90(2) of the Act for interim postponement of the offer is not one of the primary objectives for the attainment of which the power to grant such interim
relief is conferred. Those objectives are to be found in the provisions of Part IV or Part IVA or Part V, as the case may be, of the Act. Beaumont J, noting that "the shares in FAL are reasonably widely held, so that undesirable complications arising in a bid now proceeding could impact adversely upon a significant section of the public", considered that the shareholders' interests "should be accorded substantial weight in judging where the balance of convenience presently lies". But the interests of the shareholders, qua shareholders to whom a take-over offer is proposed, are not those which it i the object of s.50 of the TPA to protect. The protection of those interests is one of the objectives of the Corporations Law. It is not easily seen why those shareholders should be considered a section of the public so significant that their interests in certainty concerning take-over offers should be accorded substantial weight, as distinct perhaps from some relatively minor weight, in the exercise of a discretion conferred by s.80(2). We consider, therefore, that there is reason to
judge's consideration of the balance of convenience. We were urged by counsel for conclude that, in these respects, there was an error affecting the learned primary the TPC, h m v e r , to look at other matters that justified the conclusion reached by
Beaumont J and it is to these questions that we now direct our attention.
: - f o
A restraint upon the registration of the Part A statement for a period of two months might cause lors to the Hart respondents in various ways. The passage of time, even of a relatively short time, must have an effect on the bid because if it were to proceed at a later time it would do so in circumstances that would inevitably be different in some respects, and perhaps in very important respects, to those prevailing at the time when the bidder originally wished to make the bid. The public interest in investing and trading fieely in the securities of public listed companies, referred to by Heerey J in M Aocn%es C o m W n v Santos Ltd [l9921 ATPR 40,618 at 40,622 should be taken into account as well, of course, as the public interest in compliance with s.50 of the Act.
As Beaumont J recognised, there is considerable attraction in the argument that the
undertakings should be accepted and no s.80(2) injunction be granted because, by
reason of the undertakings, CML could not acquire the FAL shares if in fact the acquisition would contravene s.50. The Court would have ruled on the acquisition before it in fact occurred. If the proposed acquisition were found to involve a contravention of s.50, FAL might have been changed in the meantime but only in ways, so the argument went, that were perfectly lawful. Section 50 did not prevent
FAL £mm disposing of its core New Zealand assets and the running of the company
was entirely outside the area of operation of s.50. If, at the end of the day, the acquisition was not shown to involve a contravention of s.50 then the opportunity to make the bid at the time of the bidder's choosing would not have been denied to the
bidder and the market would not have been interfered with.
In our vim however this approach involves the error of overlooking or giving little
weight to the fact that changes in the status quo affecting FAL, its ownership, control
and structure would be likely, and they would be brought about by a number of steps constituting conduct as to the lawfulness of which there is a serious question to be tried. The interdependence of the various aspects of the transactions covered by the Deed of Co-operation is of central importance in this respect.
In furtherance of the legislative policy of prohibiting, in the public interest, various restrictin trade practices, the Act provides in s.76 for the imposition of very substantial penalties not only for contravention of a provision of Part IV but also in rupect of a range of other conduct. Section 76(1) provides:
'(l) If the Court IS satisfied that a person:
(a) haa contravened a prowlon of Pan W, (B) haa attempted to contravene such a provipmn; (c) to contravene such a provisaon; haa a~ded, abetted, counseued or procured a person (d) has induced, or attempted to induce, a person, whet& by threats or prormses or othe-, to
contravene such a provision;
haa been in any way, directly or mdirectly, knowingly
(e) conceracd in, or party m, the contravention by a penon of such a p m i o n ; or
(Q bar conspired anth others to contravene such a provision; the Court may order the person to pay to the Commonwealth such prmnimy penally, in respect of each act or omissimn by the person to which this section applies, as the Court determines to be appropriate having regard to all relevant matters including the nature and extent of the m or omisaion and of any bss or damage suffered as a result of the m or omission, the drcumtancea m which the act or ormssion took p k a lad whether the person has prmously becn found by the Cowt in pnxxdhgs under this Pan to have engaged in any similar conduct"
The strength of the legislative concern to prevent the accessorial conduct, against which s.76(1) is in part aimed, is underlined by the circumstance that the limit upon
whether there is a direct contravention of a provision of Part IV or whether the the very large pecuniary penalties payable under s.76(1) does not differ according to conduct is accessorial. In any such case, the maximum penalty payable by a body corporate is $10 million for each act or omission to which 9.76 applies: see s.76(1A)@). Section 80(1) covers the same categories of conduct as s.76(1) but it goes further and empowers the Court to grant an injunction restraining conduct in which a person is proposing to engage. Section 80(2) then gives the Court power to
grant an interim injunction pending the determination of an application under s.80(1) including, of course, an application to restrain proposed conduct. Although it is not a criminal offence to engage in any of the accessorial conduct described in s.76(1), or even in a direct contravention of s.50, the legislative policy against such conduct appears clearly from s.50 itself and from ss.76 and 80. Sections 76 and 80 will apply
to conduct where the requisite elements are present even though the party engaging in the conduct may have its own commercial objects primarily in mind and is not
concerned to acquire shares in contravention of s.50.Looking ahead to the final determination of this proceeding, there will be a serious question to be tried aa to the lawfulness of the conduct proposed to be engaged in by the Hart respondents. This question will arise by reason of the interdependence of the various aspects of the proposed transactions. If at that time the proposed conduct has not been completed there will be a serious question as to whether it should be restrained. However, if the bid has succeeded it will be too late then to restrain it. Irreversible changes will have taken place in the ownership, control and structure of
FAL To the extent that such changes might operate to the advantage of the Hart respondents, that advantage will have been achieved by conduct which after trial
might be found to have been unlawful.The evidence further suggests that a heavy burden of debt will be borne by the Hart respondents in funding the proposed take-over should CML be restrained after trial from acquiring the FAL shares. Mr Nettle QC, who appeared with Mr Collison for the Hart respondents, submitted that a sale of FAL shares by AGH which was forced
on the Hart respondents by their inability to manage the burden of borrowed funds
could not be thought to contravene s.50. He contended, therefore, that there was no public interest in guarding against such an eventuality. There is, however, a public interest in preventing an impairment of FAL's competitiveness if such an impairment is seen to be a possible consequence of an acquisition of shares, undertaken in anticipation of a further proposed acquisition, where there is a serious question to be tried about the lawfulness of both acquisitions. As mentioned, there is a serious question to be tried in this case as to the lawfulness of the proposed acquisition by CML of shares in FAL. As a consequence there is a serious question to be tried whether the interdependent conduct undertaken or proposed to be undertaken by the Hart respondents would be subject to penalty pursuant to either s.76(l)(c) or s.76(l)(e) of the TPA. Section 80(2) of the Act affords power in the circumstances to grant an injunction to restrain such conduct by the Hart respondents pending the final determination of the proceeding. In considering whether it is desirable to exercise such power the Court may surely have regard to the apprehended substantial lessening of competition in a market resulting
h such conduct. In our view it does not in the circumstances matter that the conduct proposed to be undertaken by the Hart respondents might not of itself contravene s.50 of the Act. Such conduct is claimed to be accessorial to conduct
which there is a serious question as to its contravention of s.50.
Section 80, like s.50, has as an object the prevention of certain conduct likely to have the effect of substantially lessening competition in a market. It is a relevant consideration in the exercise of the discretionary power conferred by S. 80(2) that the aaesorial conduct said to fall within s.80(1) may have the effect of substantially
lessening competition. Here the evidence justifies a conclusion that the risk of such
an effect is more than a m r e possibility.
Finf there m the risk that FAL's competitiveness may be impaired because of the financial burden that could fall upon the Hart respondents should CML be restrained
after trial from acquiring the FAL shares. Secondiy, in the event of the bid succeeding, FAL would lose a substantial part of its capital base upon the disposal of ita core New Zealand assets and there is a real issue about the effect of that 1 0 s . Morcover FAL would lose the proceeds arising from the disposition of those assets and the income produced by such assets. There is also a real issue of whether FA& by reason of the involvement of CML, would be at risk, after a take-over by AGH, of being expelled from Amalgamated Australian Wholesalers Pty Ltd ("AAW"), a company owned by independent wholesalers which manufacturers generic grocery products and provides commercial information for its members. JZxpulsion would deprive FAL of the competitive advantage which it now enjoys of access to 'Black and Gold" and other AAW products.
It follows that we would place considerably less importance upon the offer of the undertakings than the learned primary judge appears to have done. We would however place substantial-importance, as did Beaumont J, upon the attainable speedy resolution of the case. As we have said, we are far from persuaded that Beaumont J
was in error in assessing the balance of convenience on the basis that the matter would be determined within the time he proposed. Having regard to the capacity of case management, as it is now being developed, to expedite the &position of complicated litigation and the strong public interest in the courts doing so, especially in litigation of this type, and having regard particularly to the circumstance that it was poa~~'ble in this case to dispense with the time-consuming and delaying process of discovery, we would assess the balance of convemence on substantially the same basis
as to the speedy disposition of the case as the primary judge did. Taking all these matters into account we consider that the balance of convenience lay where Beaumont J considered that it lay, namely in favour of the injunction he granted. We consider that the other orders made by his Honour were correctly made in the circumstances and, accordingly, although we are of the view that Beaumont J was in error with respect to the apprehended confusion of shareholders we agree with
the orders he made. It is for these reasons that we dismissed the appeals.
that the aquisition by AGH would itself contravene s.50 or that there was an We should add that we have not found it necessary to consider the TPC's submissions acquisition by CML by virtue of the option conferred upon it by c1.6 of the Deed of
Co-operation.We should also add that we have not taken into account the announcement made by senior counsel for CML during the hearing before us that in the event that the injunction were maintained, the Deed of Co-operation would be terminated and the bid would therefore not proceed. We do not doubt for a moment that such were counsel's instructions and that an announcement had been made to the Australian
Stock Exchange to that effect. However, the statement was not relevant to the consideration of the issues before us. It was a statement by counsel for CML of that
party's intention at the time the statement was made, and nothing more.
I certify that this and the preceding
28 pages are a true c q y of the reasons for judgment herein of the
Court.
Associate: --- Date: 1zpdf9
Mr B Rayment QC, Mr J Beach and Mr G
Camans.
Australian Government Solicitor.
the 1st Resoondent: Mr G A Nettle QC and Mr P Collinson.
: - Arthur Robinson & Hedderwicks. Mr S P Charles QC, Mr A Myen QC and
Mr N O'Bryan.Minter Ellison Monis Fletcher.
v: Mr D Heydon QC and Mr I M Jaclanan.
the 7th Resoondea: - Antanaskaic Hartnell 22, 25 and 26 July 1994.
CHIEF JUSCICE'S CHAMBERS
FEDERAL COURT OF AUSTRALIA450 LITTLE BOURKE STREET
FACSIMILE MELBOURNE 3MM
To: Sonia Cornale From: Secretary to the Chief Justice (Fax no: (03) 600 1320) Re: TPC v Rank, Cola Myer & O n Date: 17 August 1994 Pages: l + 2
Could you please replace the Minute of Order for the TPC v Rank Cola Myer
judgment forwarded to you yesterday and also could you please add the attached additional front page of the judgment to the judgment forwarded to you. (Originals
will be forwarded to you by mail).
Thank you.
CHIEF JUSTICE'S CHAMBERS
FEDERAL COURT OF AUSTRALIA
450 LIlTLE BOURKE STREETMELBOURNE 3000
To: Sonia Cornale From: Secretary to the Chief Justice Re: TPC v Rank Cola Myer & On Date: 14 August 1994
Attached please find the judgment for P C v Rank; Coles Myer & Ors matter No.
G395 of 1994 deliver in Melbourne on 12 August 1994; Black U, Jenkinson and
Branson JJ.
4