Lion Nathan Enterprises Limited v New Zealand Stock Exchange HC Auckland M1168-Sw01

[2001] NZHC 739

IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY M1168-SW01

UNDER Part I of the Judicature Amendment Act 1972

AND

UNDER Part VII of the High Court Rules

BETWEEN LION NATHAN ENTERPRISES LIMITED
Applicant

AND THE NEW ZEALAND STOCK EXCHANGE
First Respondent

AND MONTANA GROUP (NZ) LIMITED
Second Respondent

Hearing: 10 August 2001
Counsel: A R Galbraith QC and M Peters for Lion Nathan
R A Dobson QC for New Zealand Stock Exchange
J A Farmer QC, R J C Partridge and D J Cooper for Montana
J G Miles QC, S J Mills and A S Ross for Allied Domecq Plc
R J Craddock QC, C J Allan and A J Lloyd for Credit Suisse First Boston

Judgment: 13 August 2001

JUDGMENT OF ANDERSON J

SOLICITORS
Russell McVeagh (Auckland) for Lion Nathan
New Zealand Stock Exchange (Wellington) for New Zealand Stock Exchange
Bell Gully (Auckland) for Montana
Chapman Tripp Sheffield Young (Auckland) for Allied Domecq
Rudd Watts & Stone (Auckland) for Credit Suisse First Boston

[1] Lion Nathan has been engaged in a stern takeover contest with Allied Domecq for the control of Montana. By 12 February this year it believed it had achieved its objective but the New Zealand Stock Exchange, acting through a Standing Committee of its Market Surveillance Panel, has decided that 19% of Lion Nathan’s shares in Montana must be sold on the grounds that on 8 February Lion Nathan breached the Notice and Pause requirements under the Stock Exchange’s Listing Rules. The disposition of that 19% would reduce Lion Nathan’s shareholding to approximately 43%, thereby depriving it of control. The Standing Committee made a further ruling which, if complied with, would prevent Lion Nathan from selling the 19% in question in the context of a Notice of Intention to make an offer for 11% of the shares in Montana at $5.50 per share. The Notice also contained reference to a subsequent offer to buy further shares at $3.70 per share. The Standing Committee held that the link between the sale of the defaulted shares and the offer to buy is such that, in reality, the purchasers have the right to sell back the shares and that this was in substance a put option. A sale of the 19%, in those circumstances, was held not to comply with the Standing Committee’s previous ruling that the 19% be sold. That decision proscribed the Notice of Purchase in conjunction with the sale of the 19%.

[2] The effect of the first two rulings of the Standing Committee was such that Montana could sell the 19% unless Lion Nathan had itself done this by 1 August. Decisions made by the Exchange under a power to waive, described in Listing Rule 1.7.1, defer Montana’s power of sale until 18 August. Accordingly, if Lion Nathan wishes itself to sell down the 19% it must have entirely completed the transfer of that amount of shares by the advent of midnight on 17 August. The completion of a book build, notice, sale process and transfer must now be effected by Lion Nathan within a critical timeframe if it is to avoid alienation by Montana under the Default Consequences of Listing Rule 4.7.2(b).

[3] On 2 August Lion Nathan commenced these proceedings for judicial review of the decisions of the Standing Committee and applied for urgent interim relief pursuant to s 8 of the Judicature Amendment Act 1972. The nature of the relief sought envisages interim restraint of Montana’s default power of sale and an extension of the time within which Lion Nathan might be permitted itself to carry out the 19% sell-down in the event that it should ultimately fail in this proceeding to have the three decisions of the Standing Committee adjudged invalid.

[4] Time is also a pressing issue for Allied Domecq which has extant an offer to buy all Montana shares at $4.80 each. Its present Notice has been extended to 31 August and although it could change its Notice it has already been compelled to do this because of the inherent delays of the decision process and time for compliance relating to Lion Nathan’s February dealings.

Amended Statement of Claim

[5] The factual and regulatory context of this litigation is set out with admirable clarity in the plaintiff’s amended statement of claim. It is expedient to avoid tautology by reproducing those portions of the amended statement of claim which immediately hereunder appear:-

“1. The Applicant, Lion Nathan Enterprises Limited (“Lion Nathan”), is a duly incorporated company having its registered office at Auckland. It carries on business as a holding company.

2. Lion Nathan is a subsidiary of Lion Nathan Limited, a public company listed on the national stock exchange operated by the New Zealand Stock Exchange and on the Australian Stock Exchange (“Exchange”, “NZSE” and “ASX” respectively). Through its subsidiaries it carries on business in New Zealand and elsewhere principally as a brewer.

3. The First Respondent, NZSE, is an incorporated body established by section 3 of the Sharebrokers Amendment Act 1981 (“Act”) and has its office at Wellington.

4. The Second Respondent, Montana Group (NZ) Limited (“Montana”), is a public company listed on the Exchange and the ASX. It carries on business through its subsidiaries as a winemaker.

5. In the exercise of its functions and powers, the NZSE has made rules (“Rules”) with which public companies listed on the Exchange and their shareholders must comply.

6. At all material times:

(a) Montana has been subject to the Rules and has been an Issuer within the meaning of those Rules; and

(b) Montana’s shares have been Quoted Equity Securities for the purposes of the Rules; and

(c) clauses 11 and 12 respectively of Montana’s constitution have included the notice and pause provisions and enforcement provisions referred to in Rule 4.3.1.

7. The Rules relevant to this proceeding, as they were at all material times, are set out in Schedule A to this statement of claim.

8. At all material times, Lion Nathan was an Insider of Montana in that it was an Associated Person of a director of Montana, Mr Gordon Cairns, the Chief Executive Officer of Lion Nathan Limited.

9. Section 4 of the Rules deals exclusively with takeovers and contains the notice and pause provisions of the Rules.

10. Paragraph 7 of the Foreword to the Listing Rules provides that:

‘The standard assumptions which the Exchange considers necessary to facilitate efficient trading in equity securities are:

7.5 that the Constitution of an issuer confers on holders of equity securities carrying votes, a regime for the conduct of a takeover which has been adopted by the holders. Where the regime chosen requires a notice to be given in advance of a transfer, the purpose of the notice period is to allow holders an opportunity to act in the knowledge of the takeover bid, and also to create an opportunity for other bidders to contest the bid and maximise the value to holders selling in the transaction. To that end, the Rules seek to prevent the bid from being accepted during the notice period.’

14. Montana has an issued share capital of 214,660,528 shares.

15. As at 24 November 2000, Lion Nathan:

(a) Was the holder of 60,675,156 shares in Montana, being approximately 28.27% of Montana’s issued capital.

(b) Lion Nathan had engaged Credit Suisse First Boston NZ Limited, investment bankers, to act on its behalf in acquiring shares in Montana.

16. On 24 November 2000, in compliance with the notice and pause provisions, Lion Nathan gave a Restricted Transfer Notice (“Lion RTN”) to the Exchange and to Montana of an intention to acquire up to a further 48,801,700 ordinary shares in Montana at a price in the range of $3.20 to $3.80, such intention to be effected within the period commencing 15 December 2000 and ending 1 July 2001.

17. Completion of those acquisitions would have seen Lion Nathan’s shareholding in Montana increase to 51%.

18. The Lion RTN provided, inter alia, that:

‘Acquisitions may, in the discretion of Lion Nathan, be effected:

(i) on the order matching market of the NZSE or by transactions effected off that market and reported through the NZSE; or

(ii) by private treaty with holders of Shares; or

(iii) pursuant to a written offer for Shares made by Lion Nathan in accordance with section 4 of the Companies Amendment Act 1963.’

19. On 10 December 2000, as required by Rule 4.5.8, PricewaterhouseCoopers delivered an appraisal report to the Directors of Montana commenting on, inter alia, the value of Montana shares for the purposes of the restricted transfer proposed in the Lion RTN. That report valued Montana shares within the range of $4.16 and $4.64 per share.

20. As at Wednesday, 7 February 2001, Lion Nathan had not purchased any shares pursuant to the Lion RTN and continued to hold 60,675,156 shares in Montana.

21. As at 7 February 2001, Millstream Equities Limited, a wholly owned subsidiary of Allied Domecq Plc, owned 56,956 Montana shares (equivalent to 0.03% of the issued shares in Montana).

22. At 4.39pm on 7 February 2001, Millstream gave a Restricted Transfer Notice (“Allied RTN”) relating to its intention to acquire shares in Montana, the relevant aspects of which were that Allied would:

(a) acquire up to a further 214,603,572 shares in Montana (equivalent to approximately 99.97% of the issued shares in Montana) at $4.40 per share;

(b) commence acquiring those shares upon the opening of the Exchange on Friday, 9 February 2001;

(c) acquire the shares on the order matching market of the NZSE pursuant to Rule 4.5.5.

23. But for the waiver referred to below, Lion Nathan would have been precluded from responding to Allied’s RTN because of the notice requirement that applied in respect of any change to the Lion RTN, principally here as to price.

24. Allied’s officer was conditional on:

(a) the sub-committee of Independent Directors of Montana (being Messrs Neville-White, Mogridge, Coote and Dr Le Grice) unanimously recommending to shareholders the Allied offer, by notice to the NZSE to that effect no later than 6pm on 7 February 2001;

(b) Mr Peter Masfen and Masfen Holdings Limited accepting the Allied offer in respect of all shares held by them by no later than 10am on 9 February 2001; and

(c) receipt of sufficient acceptances to raise Allied’s shareholding to not less than 50.01% of shares in Montana (or 107,351,730 shares) by no later than 5pm on Friday, 9 February 2001.

25. On 7 February 2001 Masfen Holdings Limited advised that it intended to accept the offer made by Allied in respect of its total shareholdings in Montana. Masfen Holdings Limited was the owner of 44,418,825 (equivalent to approximately 20.69%) of shares in Montana.

26. On or about 5.50pm on 7 February 2001, the Independent Directors of Montana unanimously recommended that Montana shareholders accept the proposed offer contained in the Allied RTN and stated that they would be accepting that offer in respect of their own shareholdings.

27. At 9.07am on Thursday, 8 February 2001, pursuant to Rule 4.5.4 Lion Nathan gave notice to the Exchange and to Montana of a change to the Lion RTN, to the effect that Lion Nathan was increasing its offer price for Montana shares to a price within a range of $4.65 to 54.80 per share (“notice of change”).

28. Under the notice and pause provisions, that change could not take effect before Monday, 12 February 2001.

29. At 12.56pm on 8 February 2001, following its notice of change, Lion Nathan sought a waiver from the Panel, pursuant to Rule 1.7.1, so that it could give effect to a change in price from 9 February 1001, i.e. the same day as Allied was to be purchasing shares in Montana.

30. At approximately 4.30pm on 8 February 2001, Lion Nathan was advised that the Panel had granted a waiver (“waiver”) from Rule 4.5.4 and the equivalent clause of Montana’s Constitution:

‘to allow Lion Nathan to change the price stated in its [RTN] given to the Exchange [that] morning to take effect [the next day] 9 February 2001.’

31. The effect of the waiver was that Lion Nathan was entitled to effect the purchase of shares pursuant to the Lion RTN, at the changed price, after midnight 8 February 2001.

32. At the request of the NZSE, Lion Nathan gave notice of the waiver to Montana and to the Exchange.

35. After the waiver was granted, by letter dated 8 February 2001, Lion Nathan authorised Credit Suisse First Boston NZ Limited to acquire up to 51% of Montana at a price of NZ$4.65:

‘commencing Friday, 9 February 2001 (ie after midnight tonight).’

36. At all material times the authority contained in the 8 February 2001 letter referred to in paragraph 35 above was subject to a specific instruction from Lion Nathan that it would not acquire or offer to acquire shares in Montana until it had determined the position and attitude of a major US based shareholder (“US shareholder”), which as at 8 February 2001 held 15,200,000 shares in Montana, towards Lion Nathan’s proposal.

37. On 8 February 2001 Credit Suisse First Boston NZ Ltd briefed Credit Suisse First Boston NZ Securities Ltd (together referred to as “CSFB”) to carry out the instructions received from Lion Nathan.

38. Prior to midnight on 8 February 2001, CSFB contacted, or was contacted by, 17 shareholders (or representatives of shareholders) in Montana.

39. Of the 17, 15 were institutional shareholders and two represented private interests.

49. By 4.30pm on 12 February 2001, Lion Nathan had purchased sufficient shares in Montana to bring its shareholding to 109,476,856 shares equivalent to approximately 51% of the issued shares in Montana.

50. Lion Nathan paid the same price for all Montana shares it acquired between the time the waiver was granted and the close of business on 12 February 2001.

51. As at 5 May 2001 Lion Nathan’s shareholding in Montana remained at 109,476,856 shares.

52. As at 23 June 2001, the shareholding in Montana of the Lion Nathan group of companies was 134,143,795 (equivalent to approximately 62.49% of the issued shares in Montana).

53. As at 12 July 2001 the shareholding of the Lion Nathan group of companies was 134,890,121 (equivalent to approximately 62.84% of the issued shares in Montana).

54. On 22 February 2001 Montana requested that the Panel appoint a standing committee under Rule 4.7.8 to investigate whether Lion Nathan had breached the notice and pause provisions as a result of the activities of CSFB prior to midnight on 8 February 2001.

56. On 26 February 2001 the Panel agreed to appoint a standing committee as requested by Montana.

57. On or about 28 February 2001 the Panel appointed a standing committee comprising the Right Honourable Sir Duncan McMullin, the Honourable Sir Ian Barker and William Wilson QC (“Standing Committee”).

58. At all material times the Standing Committee was a delegate of the Panel.

59. On 5 and 6 May 2001 the Standing Committee conducted a hearing into whether a transfer of shares in Montana had taken place in favour of Lion Nathan in the period between Lion Nathan obtaining the waiver and midnight on 8 February 2001.

60. On 5 June 2001 the Standing Committee ruled that on 8 February 2001 Lion Nathan did breach the notice and pause provisions in respect of 9.97% of shares in Montana acquired from the 17 shareholders referred to above and thus became a Defaulter within the meaning of Rule 4.1.1.

61. Subsequently, further issues were referred to the Standing Committee, in respect of which it made decisions on 29 June and 16 July 2001 (these decisions, together with the decision of 5 June 2001, are referred to as the “Rulings”).

72. On 15 and 20 June 2001, the Panel referred to the Standing Committee the issues of:

(a) which shares in Montana owned by Lion Nathan were “Defaulter’s Securities” as a consequence of the Standing Committee’s decision of 5 June 2001.

(b) whether Lion Nathan should be required to transfer to another party all or any of its Defaulter’s Securities and, if so, how many.

73. By decision dated 29 June 2001 (“29 June decision”), the Standing Committee determined that:

(a) all of the shares in Montana held by Lion Nathan were susceptible to treatment as Defaulter’s Securities within the meaning of Rule 4.7.2.

(b) Lion Nathan’s ability to cure its breach of the notice and pause provisions by selling the shares purchased in breach did not assist Lion Nathan because it had not sold those shares.

(c) Lion Nathan should sell shares representing 19% of the capital of Montana.

76. On 1 July 2001 Lion Nathan gave notice to Montana pursuant to the Takeovers Code of its intention to make an offer for 11% of the shares in Montana at $5.50 per share, that offer to be open to all shareholders.

77. Lion Nathan proposed to sell the 19% shareholding ordered by the Standing Committee prior to making any offer to Montana shareholders.

78. On 6 July 2001, the Panel referred to the Standing Committee or to any two of them the issue of:

“Whether the context in which Lion Nathan is proposing to sell its defaulted 19% stake in Montana:

- complies with the clear and express requirements of LR 4.7.2(b)(iii) - which are to transfer all relevant interest in those securities to a person who is not a defaulter; and

- complies with the Standing Committee’s decision of 29 June 2001 as reflected at pages 11 - 12 of that decision - ‘-provided it does not do so pursuant to any form of contract, arrangement or understanding in place at the time of transfer.’”

79. On 12 July 2001, Sir Duncan McMullin and Mr W M Wilson QC heard submissions from Lion Nathan and Allied on the said issues.

80. On 16 July 2001 the Standing Committee decided that the manner in which Lion Nathan proposed to sell the 19% of Montana did not comply with the requirements of Rule 4.7.2(b)(ii), or with the Standing Committee’s 29 June 2001 decision.

81. On 25 July 2001, the Standing Committee gave the following reasons for its decision of 16 July 2001:

(a) Lion Nathan had made a firm offer to buy back at $5.50 per share 11% of the 19% ordered to be sold. That offer:

‘[. . .linked] the purchase of the remaining Montana shares not already held by Lion Nathan with the selldown of the defaulter’s shares in such a way that the bait for the selldown is the ability of the purchaser to take advantage of the attractive exit offer of $5.50 per share. [. . .] the firm offer to buy 11% back at $5.50 per share, although not made with specific parties, was a clear indication to the institutional investors to whom it was made that their purchase of shares in the selldown would be rewarded by a selling price of $5.50 per share.’

(b) The sale of the 19%, at a price likely to be no more than $4 per share, coupled with the proposed offer found by the Standing Committee, was a clear indication to institutional investors who purchased shares in the sell-down that they would be rewarded by a selling price of $5.50 per share.

(c) The announcement of the sell-down and purchase of the 11% at $5.50 amounted to “an arrangement or understanding” which would come into effect when the two transactions were completed.

(d) The link between the sale of the defaulted shares and the offer to buy was such that, in reality, the purchasers had the right to sell back the shares to Lion Nathan and that that was, in substance, a put option.”

Lion Nathan’s challenge to the decisions of the Standing Committee

[6] Of central concern in this litigation are the Notice and Pause provisions of the Listing Rules. The purpose of those provisions, as indicated in paragraph 7.5 of the Foreword to the Listing Rules is:-

“to allow holders an opportunity to act in the knowledge of the takeover bid, and also to create an opportunity for other bidders to contest the bid and maximise the value to holders selling in the transaction. To that end, the Rules seek to prevent the bid from being accepted during the notice period.

[7] LR 4.5.2 stipulates the requirements as to particularity, contained in a Notice. LR 4.5.4 affects any change in, or addition to, particulars notified under Rule 4.5.2 and requires a Notice of Change. LR 4.1.1 defines “default” and “defaulter” whilst LR 4.7 prescribes the consequences of default. It is provided in LR 1.8.1 that:-

“In the exercise of the powers to make Rulings the Exchange shall be guided by the policy set out or explained in the Foreword to the Rules and in the footnotes and any other Practice Notes or Rulings promulgated to issuers.”

[8] Lion Nathan contends that the decisions of the Standing Committee, attributable to the Exchange, are amenable to review under the Judicature Amendment Act 1972 and that they should be reviewed and held invalid. The alleged grounds of invalidity are essentially error of law in connection with the interpretation of the Notice and Pause provisions. In particular Lion Nathan challenges the Standing Committee’s determination that notification of the price change on 8 February was subject to Pause; that in dealing with other shareholders on 8 February CSFB was not acting as Lion Nathan’s agent; that nothing in the nature of a “transfer” as defined in LR 4.1.1 occurred on 8 February and accordingly there was no breach of the Notice and Pause provisions; and that generally the Standing Committee was wrong in law to conclude that Lion Nathan was a defaulter. It is also contended that the Standing Committee breached Lion Nathan’s legitimate expectation that determinations of other Standing Committees in respect of similar issues would be followed by the particular Standing Committee.

[9] Lion Nathan further claims that the Standing Committee erred in law when it concluded that in terms of the enforcement provisions of the Listing Rules a default by Lion Nathan rendered the whole of its shareholding amenable to alienation by Montana rather than merely those shares which may have been obtained in breach of the Notice and Pause provisions; that if the Listing Rules did so provide then they amounted to an unenforceable penalty; and that in any event forfeiture of more than the shares acquired in breach was a disproportionate response to the alleged particular default. It is claimed on behalf of Lion Nathan that only 9.97% of shares were obtained in consequence of the alleged default and accordingly no more than that percentage should be forfeited, with the result that Lion Nathan, by virtue of subsequent purchases, would still be left in control.

[10] In respect of the third decision of the Standing Committee, Lion Nathan claims that it was wrong to conclude that Lion Nathan was effectively offering a put option having the effect of retention of a Relevant Interest and therefore, if implemented, would fall short of the transfer required to remedy the default which the Standing Committee had previously held to have occurred.

The position of Credit Suisse First Boston

[11] CSFB has not yet been joined as a party to this litigation but is entitled to be joined having been a party to the decisions sought to be reviewed. It has a clear interest in the outcome of the litigation both in terms of professional reputation and the contractual implications of its agency. Its interest is allied, for obvious reasons, to those of Lion Nathan and submissions were received on its behalf on the hearing of this application for interim relief.

Position of Montana

[12] The independent directors of Montana support the decisions of the Standing Committee and they recommend to shareholders the Allied Domecq bid at $4.80 per share. Montana contends that the Stock Exchange is not amenable to review in respect of the decisions of the Standing Committee; that if it is amenable to review then discretionary relief should be withheld for reasons of policy relating to the operation of the Market; and that in any event the decisions of the Standing Committee were correct in law and their determinations of fact inappropriate for review. It is also argued that in announcing to the public including the Market on 5 July that it would comply with the Standing Committee decision and sell the 19% of Montana, Lion Nathan has waived recourse to judicial intervention.

Position of Allied Domecq

[13] Allied Domecq is also entitled to be joined as a party in the substantive proceeding, having been a party to the hearings of the Standing Committee and its interests are clearly affected by the litigation. It supports the position of Montana in relation to this proceeding and for the same reasons.

Position of the Stock Exchange

[14] The Stock Exchange did not actively participate in the hearing but instructed counsel to appear to assist the Court in relation to any requests for discovery or otherwise to facilitate the litigation. It supports joinder of Allied Domecq. In a memorandum filed on 6 August it explains its practice in these terms:-

“The practice of the Exchange is to actively oppose market participants disrupting market activity by resort to Court proceedings. The Exchange seeks to be self policing in the administration of the Listing Rules. This works through an independent Market Surveillance Panel and, in isolated cases, by appointment of Standing Committees in respect of some matters under section 4 of the Rules. The Listing Rules of the Exchange emphasise this self policing aspect by inclusion of a privative provision so that those participating in the market operated by the Exchange are aware that business conducted on it is subject to the Exchange’s own determination on its Rules. This is reinforced by provisions in Listing Agreements completed as a condition of access to the Exchange by all listed companies, including overseas listed companies such as Lion Nathan.”

[15] The privative provision in the Rules is LR 4.7.6 which reads as follows:-

“Limitation of Remedies: Subject to Rule 4.7.7, the sole remedy of an Issuer, a holder of Securities of an Issuer, a Director of an Issuer, or any other person, in respect of a breach or alleged breach of this section 4, or of provisions in the Constitution of an Issuer required or permitted by this section 4, shall be to exercise, or require the Issuer or its Directors to exercise, the powers referred to in Rule 4.7.2(a) and (b). Without limiting the preceding sentence, no person shall be entitled to seek any injunction or other remedy to prevent a transaction alleged to be in breach of the provisions referred to in that sentence.”

[16] Although not specifically identified in the Exchange’s memorandum, there is also an agreement entered into on 1 June 2000 between the Exchange and Lion Nathan Limited relating to Lion Nathan’s listing on the Exchange as an Overseas Listed Issuer. Clause 4.1 of that agreement provides as follows:-

“The Overseas Listed Issuer

(a) will not take any proceedings of any kind against the Exchange, any officer, employee, or delegate of the Exchange, the Panel, any member of the Panel, or the Surveillance Executive, for anything any such person may do or say or fail to do or say in the course or purported course of exercising any of his or her duties or powers under the Listing Rules, unless it is shown that such person acted in bad faith; and

(b) would ensure that no Subsidiary, officer, or employee of the Overseas Listed Issuer takes any such proceedings.”

Judgment

[17] The jurisdiction to make interim orders in respect of proceedings under the Judicature Amendment Act 1972 lies in s 8 of that Act which provides as follows:-

“(1) Subject to subsection (2) of this section, at any time before the final determination of an application for review, and on the application of any party, the Court may, if in its opinion it is necessary to do so for the purpose of preserving the position of the applicant, make an interim order for all or any of the following purposes:

(a) Prohibiting any respondent to the application for review from taking any further action that is or would be consequential on the exercise of the statutory power:

(b) Prohibiting or staying any proceedings, civil or criminal, in connection with any matter to which the application for review relates:

(c) Declaring any licence that has been revoked or suspended in the exercise of the statutory power, or that will expire by effluxion of time before the final determination of the application for review, to continue and, where necessary, to be deemed to have continued in force.

(2) Where the Crown is the respondent (or one of the respondents) . . . [not relevant to present case]

(3) Any order under subsection (1) or subsection (2) of this section may be made subject to such terms and conditions as the Court thinks fit, and may be expressed to continue in force until the application for review is finally determined or until such other date, or the happening of such other event, as the Court may specify.

[18] The term “proceedings, civil” appearing in s 8(1)(b) must be interpreted in terms of s 2 of the Judicature Act 1908 which defines “civil proceedings” as “any proceedings in the Court, other than criminal proceedings”. Accordingly the power to prohibit or stay proceedings contained in s 8(1)(b) of the Judicature Amendment Act 1972 is confined to the prohibiting or staying of proceedings in a Court. It cannot mean proceedings in a contractually constituted Tribunal such as the Standing Committee.

[19] This means that the Court does not have jurisdiction in terms of the Judicature Amendment Act 1972 to enlarge the period within which Lion Nathan may itself conduct the sell-down of the 19% of shares. If any interim relief can or should be granted it could take the form of an interim order under s 8(1)(a) prohibiting Montana from exercising the power of sale of the 19% of shares, but any such order could not prevent the expiration of the period, presently defined by reference to midnight on 17 August, within which Lion Nathan may remedy its default. Nor in my view could any final order in the event that the Standing Committee’s decisions survive the substantive proceedings for review. The Exchange has general powers of waiver under LR 1.7.1 but this Court cannot purport itself to exercise that power, nor direct the Exchange to do so. Jurisdiction to affect the passage of time is confined to licences, as indicated in s 8(1)(c), but the jurisdiction is otherwise prohibitory, not mandatory. It follows that even if Montana were restrained, in the interim, from exercising the default power, Lion Nathan must, as things presently stand, either conduct its own sell-down by 17 August or hope that it wins substantively and submit to alienation by Montana if the proceedings for judicial review fail.

[20] The issue then is whether interim relief should be granted to restrain Montana from exercising the default power of sale. I think not, and for the reasons set out hereunder.

Reasons for declining interim relief

[21] The Court of Appeal held in New Zealand Stock Exchange v Listed Companies Associated Inc [1984] 1 NZLR 699 that the Exchange is entitled as a matter of contract to enforce its listing requirements in respect of companies wishing official listing, and a decision by the Exchange to suspend listing a company is not the exercise of a statutory power of decision within s 3 of the Judicature Amendment Act 1972. I do not take that decision to indicate that the Exchange is entirely immune from judicial review, particularly having regard to developments in public law since 1984. If that case is authority for total immunity from review then this Court is bound accordingly but would have to acknowledge the possibility of the Court of Appeal revisiting that issue in the light of contemporary jurisprudence and circumstances. Regard might be had, for example, to the decisions of the English Court of Appeal in R v Panel-on-Takeovers and Mergers, Ex Parte Datafin Plc and Another [1987] 1 QB 815; and R v Panel-on-Takeovers and Mergers, Ex Parte Guinness Plc [1990] 1 QB 146. My decision to withhold interim relief is therefore not founded on a want of jurisdiction to review.

[22] This is not to say, however, that jurisdictional constraints do not exist or have no relevance. One of the jurisdictional restraints relates to the inability to extend the period of grace beyond 17 August. An order restraining Montana from exercising the default power will not obviate present uncertainty in relation to control of Montana.

[23] The Court should also exercise restraint before interfering in a market whose participants voluntarily enter in order to obtain its benefits on their undertaking that they will not disrupt the market by litigation. Although the parties cannot by contract ouster the Court’s jurisdiction, a matter very relevant to this Court’s discretionary power to intervene is the agreement for what amounts to alternative dispute resolution within the Exchange itself, and the agreement by experienced and professionally advised participants in the market to submit to that process.

[24] In the present case the Standing Committee is eminent in its reputation, expertise, and experience. The Rt Hon Sir Duncan McMullin was for many years a Judge of the High Court and then of the Court of Appeal. He is an experienced arbitrator of weighty disputes. The Hon Sir Ian Barker QC is a retired Judge of the High Court on which bench he sat for two decades. He was the Senior Puisne Judge for some years and was the initiator of the Commercial List. He also is an experienced arbitrator. Mr W Wilson QC is an eminent Queen’s Counsel known to have a large practice in commercial law.

[25] All relevant interests were represented before the Standing Committee by members of the front rank of the commercial bar. The hearings were plainly conducted in the style of arbitrations with witnesses being examined and cross-examined and submissions being made by counsel.

[26] Even the most eminent Judges may err in law and error of law can always be corrected by the Courts. But where a decision-maker, in this case the Standing Committee, has carefully examined and evaluated the evidence and given reasons for its findings on the evidence, judicial restraint is even more strongly indicated. Judicial review is not, after all, an appeal.

[27] I turn to the question of alleged error of law. The legal reasoning of the Standing Committee is extensively set out in the three decisions. I do not intend to reiterate their reasoning. The necessity for such may fall to the Judge who presides over the substantive hearing, if there is one. I have, however, carefully re-examined the decisions in the light of counsels’ submissions and the relevant Listing Rules. In my judgment there is every likelihood that on a substantive hearing the rulings would be found to be entirely legally correct.

[28] The integrity and stability of the market is crucially dependent on submission by its voluntary participants to the Exchange’s regulatory regime. It is also crucially dependent on its assumption that participants will be open in their dealings and frank in their announcements. Shilly-shallying ill becomes it. On 7 June after the first decision of the Standing Committee the plaintiff stated publicly that it was considering issuing judicial review proceedings. On 15 June it stated that its overriding objective was to get a decision on the sanction for its default “quickly and effectively”. On 30 June, the day after the second decision of the Standing Committee, Lion Nathan stated publicly that it was considering judicial review, but on 5 July it made another public statement that it would comply with the Standing Committee’s decision and would sell the 19%. When it found itself stymied in relation to its buy-back proposal it commenced the present proceedings challenging all the decisions and thereby seeming to vindicate the finding of an unacceptable connection between the sell-down and the intended purchase.

[29] The Exchange has ruled that Lion Nathan may bid to purchase after it has sold down and it is plain that Lion Nathan’s concern is the severance of the two processes, but the relief sought is directed to restraining the sale rather than permitting related purchase.

[30] The Takeovers Panel, established by the Takeovers Act 1993 and applying the new Takeovers Code, has come to the same view as the Standing Committee in respect of the two tier purchase offer, and Lion Nathan has announced its abandonment of that proposal.

[31] In short, the present proceedings are at odds with Lion Nathan’s publicly stated intentions.

[32] In any event, the third decision of the Standing Committee is in the nature of a declaratory ruling, not an executory one. While the Court could make an interim order prohibiting the Exchange from taking action in the light of that ruling, the ruling itself cannot be stayed. It is elementary that the Court cannot stay a non executory decision.

[33] Lion Nathan argues that unless interim relief is granted it will suffer a loss of more than $30 million. If so, it is a loss which follows rulings of the Standing Committee which it has said publicly it will conform to. It cannot manage that potential loss unless it conducts its own sell-down. But Montana may choose to sell Lion Nathan shares after a slight delay so as to take advantage of Allied Domecq’s offer, in which case there may be no loss. The default power of sale is not necessarily constrained to immediate exercise. Because of Lion Nathan’s proprietorial interest in the proceeds of sale, Montana may choose to sell in that way in order to minimise the Lion Nathan loss.

[34] Given that interim relief cannot postpone the loss of Lion Nathan’s opportunity to sell, if the impugned decisions stand, the strength of its case in legal terms is very relevant to the exercise of discretion. In my view the case is not strong. It does not justify continuing uncertainty in the market or judicial intervention in the conduct of the Exchange.

[35] For all of these reasons the application for interim orders is declined. Costs are reserved.