' IN THE FEDERAL COURT OF AUSTRALIA AVS - ES VG No. 150 of 1983 | oy VICTORIA DISTRICT REGISTRY { ' GENERAL DIVISION In the matter of The Trade Practices Act 1974, >. Between: A.2.M. INVESTMENTS PTY. LIMITED (Appellant) i TRADE PRACTICES COMMISSION (First Respondent) ' ' FIBRE CONTAINERS LIMITED, LEITGH-MARDON PTY. LITD., ASSOCIATED NOMINEES PTY. LTD., FRANCIS BURKE, PETER BECKER, WILLIAM GIBSON, JOHN FRANCIS ELFVERSON (FIFTH TO EIGHTH RESPONDENTS AS TRUSTEES FOR ' LEIGH-MARDON PTY. LTD.) AND root ARTHUR KEVIN SMITH (second to ninth Respondents) \l . S.C.I. OPERATIONS PTY. LTD. ' (S.C.I. PACKAGING PTY. LTD.) (Tenth Respondent) CORRIGENDA Amendments to the judgment of the Honourable Mr. Justice Smithers of 21 September 1983: p.27 Lines 12 and 13 shall read: "J... interlocutory injunction, with an opportunity to ADM to call evidence on relevant matters and be heard on the issue, ..." p.28 Second last line, the word incur" shall be "occur". p.34 Lines 21 - 23 shall read: "... shareholders and in a commercial sense suffered unfairly. In such a case there is much to be said for all bids awaiting ultimate clarification of the le--al situation." Cfaven Ama data CATCHWORDS Appeal - principles to be taken into account in an appeal against the exercise of a discretion by the primary Judge - ' q matters of practice and procedure - undertakings - nature of undertakings - when undertakings can be released — Trade Practices Act - interlocutory injunctions - whether interlocutory injunction application argued before primary t 1 1 judge. Trade Practices Act 1974 ss.50, 80 and 8l APM INVESTMENTS PTY. LIMITED v. TRADE PRACTICES COMMISSION & ORS. m VG No. 150 of 1983 . . Smithers, Fitzgerald & Jenkinson JJ. 21 September 1983 Melbourne. n IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION Between: VG NO. 150-of 1983 ee ee eee t q In the matter of The Trade Practices Act 1974 ' ' A.P.M. INVESTMENTS PTY. LIMITED And: ' ' (Appellant) TRADE PRACTICES COMMISSION Judges Making Order: Date of Order: Where Made: ~ Melbourne. (First Respondent) FIBRE CONTAINERS LIMITED, LEIGH-MARDON PTY. LTD., ASSOCIATED NOMINEES PTY. LTD., FRANCIS BURKE, PETER BECKER, WILLIAM GIBSON, JOHN FRANCIS ELFVERSON (FIFTH TO EIGHTH RESPONDENTS AS TRUSTEES FOR LEIGH- MARDON PTY. LTD.) AND ARTHUR KEVIN SMITH (Second to Ninth Respondents) + S.C.I. OPERATIONS PTY. LTD. (S.C.1. PACKAGING PTY. LTD.) (Tenth Respondent } Smithers, Fitzgerald & Jenkinson JJ. 21 September 1983 — r 2. . ORDER: . THE COURT ORDERS THAT: 1. The appeal be allowed and the order : set aside. : oy 2. The costs of and incidental to oa reserved. - ' ' {a a 1 - iF ' ~~ ok under appeal be the appeal be ee eee a naernerrmneneemanrarnnneireetetenarn aaa Sunnnnnegmn ae 2 me IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION Between: VG NO. 150-of 1983 ee we t w In the matter of The Trade Practices Act 1974 A.P.M. INVESTMENTS PTY. LIMITED And: ' ' (Appellant) ® TRADE PRACTICES COMMISSION (First Respondent) FIBRE CONTAINERS LIMITED, LEIGH-MARDON PTY. LTD., ASSOCIATED NOMINEES PTY. LTD., FRANCIS BURKE, PETER BECKER, WILLIAM GIBSON, JOHN FRANCIS ELFVERSON (FIFTH TO EIGHTH RESPONDENTS AS TRUSTEES FOR LEIGH- MARDON PTY. LTD.) AND ARTHUR KEVIN SMITH "(Second to Ninth Respondents) . S.C.I. OPERATIONS PTY. LTD. (S.C.1. PACKAGING PTY. LTD.) (Tenth Respondent) Coram: Smithers, Fitzgerald & Jenkinson JJ. . 21 September 1983 REASONS FOR JUDGMENT , ; w Smithers Jet This is an appeal in attion No. ,VG 84 of 1983 against an order of his Honour Mr. Justice Woodward, made on 24 August 1983 whereby upon certain undertakings peing given to the Court by the second respondent and the third, fourth, fifth, sixth, seventh and eighth respondents, his Honour released the first respondent, and the second - ninth respondents inclusive, from undertakings which had been given by those parties to the Court in these proceedings on 23 May 1983 and also released a company called SCI Operations Pty. Ltd. and related companies (SCI) from undertakings given by them to the Court also on 23 May 1983. The first respondent APM Investments Pty. Limited appeals against this order on various stated grounds, but in substance alleges that it operates unjustly to Australian Paper Manufacturers Ltd. and itself who are both comprehended , within the expression "APM" hereinafter appearing, in as much as it permits SCI to proceed with a takeover offer for all the shares in the second respondent (ECL) and at' the same time it creates conditions effectively "preventing APM from acquiring those shares pursuant to an offer which it desires to make for them in competition with SCI. ~ a -—. eer hae It is necessary to look at the form and history of action No. VG 84 of 1983 and the events shortly preceding the institution of those proceedings. ' K FCL is a company conducting business, including that of a converter of paper board into cardboard boxes which it t sells as containers for fruit, vegetables, wine 'and other goods. The first respondent is a subsidiary of the company called Australian Paper Manufacturers Ltd. APM and SCI are each producers in a large way of the raw materials from which such boxes are made. APM is a larger producer than 'is sctI. APM supplies a substantial part of the raw material used by FCL in the manufacture of the boxes which it sells. Of the paper board which is consumed in Australia 72% is supplied by AM and 23% by SCI. Imports comprised 3% and Visy Board, one of the converters, makes 2%. On 4 May 1983 SCI announced that it would offer $3.50 per share for all the shares in FCL. Thereupon APM bought shares of FCL on the market for $3.65 and thereby brought its holding in FCL to 18%. On 6 May an ex parte application was made by SCI in the Federal Court seeking an injunction to restrain APM from proceeding to acquire the shares of FCL. The application came before Mr. Justice Jenkinson and was refused. On 11 May 1983 APM announced that it intended to lodge a Part A statement with a view to the acquisition of iq 4. the remaining shares at the price of $4.00. On 19 May SCI issued proceedings in the Federal Court No. VG 82 of 1983 in which it seeks relief against APM on the ground that acquisition of the shares of FCL by APM would 'contravene the t w provisions of s.50 of The Trade Practices Act 1974 (the Act) and for other relief under the provisions of the'Act. Becoming aware of the imminence of the competing bids of SCI and APM to purchase all the shares of FCL the Trade Practices Commission (the Commission) sent telexes to SCI, APM and FCL on 6 May 1983 seeking undertakings that the status quo be maintained pending consideration by the Commission of the proposed offers. The telex to SCI was in the following terms:- "This is to confirm that the TPC has asked ADM not to take any action to acquire shares in Fibre Containers Ltd until 10.00 am-Monday 16 May 1983 to enable investigation of your clients suggestion that the acquisition may breach s.50 of the Trade Practices Act. t 2. No commitment can be obtained today but APM has been informed that any further acquisition of shares in the face of this request would result in TPC taking immediate court proceedings - 3. APM has also been informed that your client similarly undertakes to acquiré no share in Fibre containers during the same period. Your written confirmation is requested please. . 4. The Amatil Group has been approached and we understand they are prepared to undertake not to sell shares to either party for the same period." (p.270 AB) The parties complied with the request of the Commission by 5. stating their undertakings in telexés sent by them to the Commission. On 10 May 1983 a meeting was held between the representatives of APM and the Commission at which a possible bid by APM in response to the bid by SCI was discussed. On NX 12 May 1983 a meeting was held in Canberra between representatives of SCI and members of'the Commission at which the proposed offers were discussed. ' ' F + On 16 May 1983 SCI informed the Commission by telex that at its request and subject to certain conditions SCI undertook not to acquire or take any further steps to acquire any shares in FCL until: (a) the determination of the proceedings to be instituted by the Commission against APM pursuant to s.46 or s.50 of the Act or; ~ (b) the Commission determined not 'to institute such . proceedings. The specified conditions were: J (1) If the Commission has, by 4.00 p.m. on 18 May 1983 neither instituted such proceedings nor informed scI that it has determined to institute such ig proceedings, this undertaking shall lapse. : (2) This undertaking shall not bind Scr unless an identical undertaking is given to the Commission by APM by 4.00 p.m. on 18 May 1983 and remains in force concurrently with this undertaking. 6. (3) SCI shall be released from this undertaking if the ncsc fails to agree and declare that for the purposes of the Companies (Acquisition of Shares) Codes the period of fourteen days following the Ae delivery of Part A statements to Fibre Containers Ltd. by SCI and APM respectivély, shall cease to run while this undertaking and any identical ' ' undertaking by APM are in force to the intent that if and when this undertaking "ana any. identical undertaking by APM lapse, SCI and APM shall, upon such lapse be at liberty to act for the purposes of the code and at any time periods specified therein in relation to the service of a Part A statement or the despatch of officers consequent thereon as if the date of such lapse was 17 May 1983. s On 17 May 1983 APM informed the Commission that it acknowledged its advice that the Commission intended to move promptly in the Federal Court for appropriate orders to stop AP's acquisition of FCL shares and noted that it was seeking undertakingS so as to hold the present 'position between the parties until the Court had decided on the legality of the acquisition, by APM. APM advised that it "undertakes and agrees subject to conditions set out below not to acquire or take any further steps to acquire any shares in FCL until the determination of the proceedings being instituted by the Commission against APM or a related corporation pursuant to w 7. s.80 of the Trade Practices Act in respect of a contravention of s.50 of the Act by APM.". The specified conditions were: (1) Undertakings to be given to the Commission (a) by SCI to the same effect as ithe | above undertaking by APM; and ' (b) by the Amatil Group that the shares of FCL held by that Group will not be sold to either APM or SCI pending completion of the proceedings and such undertakings remaining in force concurrently with this undertaking. (2) That APM be released from the undertaking te the NCSC fails to agree that the fourteen days following delivery of Part A statements by SCI and APM respectively 'shall cease to run while this undertaking and the above undertakings are in x . force. On 20 May 1983 SCI confirmed. that it had received copies of the telex from APM and from "Mr. McComas of Freehill's" and confirmed that the undertakings given in its telex of 16 May 1983 remained current , subject to the current undertakings of APM remaining in :force and the third t condition concerning the extension ,time by ncsc. Such confirmation was forwarded to APM and McComas. On 19 May 1983 FCL sent a telex to the Commission the first paragraph of which is in the following terms:- one "I have received a copy of the APM undertakings given on behalf of that company by Russell W. Evans in his telex of 19th May and on the understanding that an undertaking to the like effect will issue from SCI Packaging Pty. Limited (Smorgon) or that Smorgon confirms' that the undertaking contained in Mr. Graham Smorgon's telex to the Commission on 16th May 1983 is revived. I confirm on behalf'of the Amatil Group that the undertaking contained in my telex No. 757 to you of 18th May is also revived and will remain on foot subject only to conditions 3 and 4 of my telex." : . r re 1 It should be noted that the expression "the Amatil Group" is used to refer to the third to eighth respondents being the holders of some 74% of the shares of FCL. Mr. McComas acted throughout for FCL and the Amatil Group. On 23 May 1983 counsel for the Commission, the applicant in the proceedings No. VG 84 of 1983, and for the respondents APM, FCL, the Amatil Group, and for SCI appeared before Northrop Jd. on an application by the applicant that certain undertakings proposed to be given by these parties bereceived by the Court and certain directions be given. Hereinafter the expression FCL is used to refer to FCL and the Amatil group of its shareholders unless the contrary is indicated. Mr. Williamson for the applicant said: : "May I take your Honour to the application in matter VG 84. That application sets out the relief that the applicant claims and the relief is for injunctions framed with respect to section 50 proceedings under the Trade Practices Act. There is also a claim for interlocutory relief, and to put the matter shortly the parties to the 9. application and my learned friend Mr. O'Callaghan's clients, [SCI] are here to give undertakings to the court which we envisage would take the place and stand instead of interim injunctions which we would otherwise have sought." (p.176 AB) . 1 7 a He explained that as a result of a round of activities in the previous few days, "we reached the point where, it was clear that on a certain basis undertakings would be given", and that in consequence only a formal affidavit was before the Court. It was pointed out by the learned Judge that SCI was not a party to the proceedings No. VG 84 of 1983. Mr. O'Callaghan replied: "We accept the proposition that we are inextricably bound up...". Mr. Williamson also referred the Court to the telexes "because they form the basis of the undertakings which will be given". Counsel for the parties then gave undertakings on behalf of their clients and their associated companies. Reflecting theSe proceedings an order of the Court for directions was made referring to undertakings which were given in the following terms:- "Upon the following undertakings being given by the First Respondent, SCI Operations Pty. Ltd. and SCI Packaging Pty. Ltd.:- _ APM Investments Pty. Ltd., SCI Operations Pty. Ltd. and SCI Packaging Pty. itd. each by their respective Counsel undertake ,to the Court: that they and any related corporations will not, prior to the hearing or determination of Application No. VG84 of 1983 or until further order, acquire or take any further steps to 'acquire any shares in the capital of Fibre Containers Ltd, AND upon the following undertakings being given by the Second to Ninth Respondents:- 10. that until the determination of these proceedings or further order —- i. The Third to Ninth Respondents will not sell to or accept any offer from APM INVESTMENTS PTY. LTD. (APM ) (or any related corporation of APM) or SscI PACKAGING PTY. LTD. (SCI) or any related corporation of SCI) to purchase any shares held by them or on their behalf in FIBRE CONTAINERS LTD. ' . ' 2. The Second to Ninth Respondents will not aid, abet, counsel or procure APM (or any related corporation of APM) or SCI (or any related corporation of SCI) to acquire directly or indirectly'any shares in FIBRE CONTAINERS LTD. or in any way be knowingly concerned in or a party to any such acquisitions. AND subject to the making of an appropriate Declaration by the National Companies and Securities Commission to enable effect to be given to the undertakings herein pursuant to the Companies (Acquisition of Shares) (New South Wales) Code. THE COURT ORDERS THAT: {There followed lengthy directions for the conduct of proceedings]" & It is to be noted that the original order taken out did not correctly reflect the undertakings given by the parties. What appears is the corrected form of the order. On 20 July 1983 FCL sought an order that it be released from so much of para. 2 of the order of 23 May 1983 as related: to scl. In support of this application it was said the duration of the proceedings and the uncertainty which would attend the outcome thereof had been and would continue to be disruptive of FCL's business and unsettling to its employees and customers. FCL also stated that it wished A Aw Nektar nama Am fd, Ale narrate Lane a bt aX "o 11. to be free to conduct discussions with SCI to ascertain whether that company would alter the conditions upon which it had given notice of its intention to make a take over offer for the shares of FCL so that the Directors of FCL would be t Ae able to recommend acceptance thereof to the shareholders of FCL. This application was opposed by'the Commission and APM. Mr. O'Callaghan also opposed the application on behalf of SCI , saying: "We understand and I sympathise with the position of Fibre' Containers, but the fact is that we gave the undertaking and we have in recent days indicated to the Trade Practices Commission that if the fact of Mr. McComas' undertaking would in any way prejudice the prospects of their pursuing their proceedings, then we would oppose Mr. McComas' application and pursuant to that we are committed to state our opposition to it, which I do." (p.223 AB) x. In the course of argument Mr. McComas added: » "I would say in the light of the suggestion made by my learned friend Mr. Shaw, for me to say that even if APM were free to have discussions with Fibre Containers Limited, Fibre Containers Limited would not feel itself free to have discussions with APM because of the existence of these proceedings and that in its turn is the very basis upon which the application is made. I suggest that the maintenance of that state of mind removes an injustice or, if you like, shifts the creator of that injustice from the ¢ourt, from the commission or indeed: from SCI squarely to the target because that is the target's view and I have the clearest instructions to make that clear to the Court." (p.225 AB) At the close of argument his Honour said: 12. "It seems to me that in relation to this matter I have received submissions from the four parties and bearing in mind that the status quo in a difficuit commercial situation has been maintained now for two months, I think that, in the light of the' attitudes of the respective parties, and what_I' perceive as being the justice of the situation the undertakings and orders that have been made should continue. I do not propose to vary them." (p.227 AB) On 11'August 1983 the second to eighth respondents namely FCL and the Amatil Group of its shareholders other than the ninth respondent applied upon motion that FCL and the Amatil group -of its shareholders be released from the undertakings given by them to the Court on 23 May 1983 in relation to SCI and that SCI be released from the undertakings given by SCI on 23 May 1983, upon the undertaking to the Court by the third to eighth respondents that: ' (a) they would not nor would any of them sell to or accept any offer from' APM Investments Pty. Ltd. or any corporation related to that company to purchase any shares held by them or on their behalf in FCL; and the undertaking by the second to eighth respondents that (b) they would not aid, abet, counsel or procure APM Investments pty. Ltd. or any corporation related to it, to acquire directly or indirectly any shares in FCL or in any way be knowingly concerned in or a party to any such acquisitions. 13. The hearing of the notice of motion took place on 17 August 1983 before Woodward J. In support of this motion evidence was submitted that by reason of the circumstance that APM and SCI had announced their intentions to bid for the shares of FCL and that there was a state of uncertainty surrounding the status of such bids, due to the proceedings in -the Federal 'Court of Australia, the business of FCL was being disrupted and its employees were being unsettled. It was said that the second to eighth respondents: --- Have given further consideration to their respective positions in the light of the circumstance hereinbefore referred to. [such circumstance being the view held by the Commission that an acquisition by APM of FCL's shares would be a breach of. s-50 of. the Act] They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the time which will be taken -to resolve these proceedings might have upon'*the value of the shares of the Second respondent and of the interests of the shareholders of the Second respondent in those shares. In all of these circumstances the Third to Eighth Respondents believe that the -circumstances in which the undertakings given ion their behalf to this Honourable Court on 23rd May 1983 in relation to SCI Packaging Pty. Limited :-have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from -the First Respondent (or any other company related to the First Respondent) to acquire shares held by them and each of them in the Second Respondent." (p.238 AB) J 14. On behalf of SCI which supported the motion although it was not a party to the proceedings brought by the Commission evidence was submitted that: ¢ 4 "SCI Packaging Pty. Ltd. (which together with SCI Operations Pty. Ltd. and other related companies is hereinafter referred to as "SCI") gave the undertakings contained in the exhibits to the affidavit of the said Stanley David Martin Wallace predominantly to ensure that the Trade Practices Commission instituted and pursued proceedings under Section:50 of the Trade Practices Act 1974 against APM Investments Pty. Ltd. ("APM"). There were undertakings given by SCI prior to those referred to in the said affidavit which are exhibited thereto and marked with the letter "A". : SCI believed that if such undertakings were not given then the Commission would not institute and pursue such proceedings and that Fibre Containers Limited and its shareholders ("FCL") were prepared to entertain offers by APM to acquire the subject shares." These are the submissions which appealed to the learned Judge and contributed to his decision that the application should succeed. But his Honour was conscious that "because of the interlocking nature of the undertakings which were given on the understanding that both APM and SCI would be similarly bound" it would be unfair to release FCL t and SCI from their undertakings without considering afresh t the position of APM. But it is clear that in so-doing he 4 , - took the view that APM's position must be considened on the basis that, in any event, APM must be prevented from acquiring the shares before the litigation was concluded and that an appropriate provision to that effect must be "" 15. maintained notwithstanding the provisions of s.81. In these circumstances the best he could do for APM was to propose that it might, on giving an undertaking not to acquire the shares until the proceedings were concluded, be permitted to negotiate for the shares on the condition that acquisition thereof should take effect only if thé Court should find that APM was not in breach of s.50 of the Act. The problem was dealt with by the acceptance by his Honour of an undertaking proffered by the Amatil group not to sell to APM until the proceedings were determined or further order and by FCL not to aid or assist in any such sale. On that basis he was able to and did release APM entirely from its existing undertaking. FCL and the shareholders gave the undertakings in the terms last stated and his Honour released all parties from their undertakings of 23 May 1983. It is apparent that from the point of view of APM it gained nothing of practical benefit by its release because the potential sellers to whom it might make an offer to buy were restrained, until the determinatipn in its favour of the proceedings against it, from unconditional acceptance of such offer. During the period of the restraint SCI was at liberty to make and FCL was at Liberty to accept an unconditional offer to purchase the shares from SCI. From a practical point of view it would seem futile for it to make such an offer. And a conditional offer would, to say the least, be + 16. likely to be most unattractive to any offeree. In view of the circumstance that the undertaking of APM was given on the basis of reciprocal undef takings being given by SCI and FCL, it is a serious question whether the imposition of this potentially crippling condition should have been imposed upon APM as a condition of its release, when, in the same proceeding, SCI was unconditionally released from its undertaking and FCL were unconditionally released from their undertaking so far as it related to selling the shares in FCL to SCI. Did the imposition of the condition not do a substantial injustice to APM? It is a reasonable inference that had his Honour not felt that the case for restraining APM from acquiring the FCL shares while the Commission was asserting that such acquisition would contravene s.50 of the Act was irresistible, "he would not have made the order that he did. But as his Honour saw the inevitability of APM being restrained, in any event, from acquiring the shares until the claim under s.50 of the Act was disposed of, the element of injustice in an order the practical effect of which was that APM, could only acquire the shares from offerees who would accept, an offer on condition that acceptance took effect only after the prdceedings against APM were concluded and concluded in its favour was correspondingly reduced. But with deference to the view expressed by his Honour, to approach the problem on the basis that APM must inevitably be restrained from acquiring the 17. shares until the claim in relation to s.50 of the Act was disposed of, was not appropriate. Although there had always been on foot a claim for an injunction, and there had been an application for interlocutory relief by way of injunction to restrain APM from acquiring the proceedings, . that the application for an interlocutory injunction never been made to the Court. shares pending determination of the the course of the proceedings had been such, had Once the parties had given their undertakings the Commission was satisfied not to seek an interlocutory injunction. for the Mr. Shaw commented as follows: During the argument' before Woodward J. Mr. Williamson Commission said: . "In saying that the commission opposes the release of all the parties, one of course really means by that APM from its undertakings. To maintain that view, we accept as the equivalent to containing that the equivalent and interim injunctions should continue. We equate the existing undertaking with that position. So in saying we would oppose the release, we are in effect saying an injunctive type situation should continue." (p.303) ' ' ' - "My learned friend, Mr. Williamson, said that he applied for an injunction. If that was the view that your Honour did take in relation to the undertakings, and your Honour was minded to desolve them all, for our part we fail to understand how it could make such an application: he has no material before your Honour; the matter has not been argued; no notice has been give; it 18. seems, in our submission, rather the expression of a desire than the proper making of an application. The only application that would be before your Honour would be an application by Fibre Containers for the release of these undertakings." (p.317) In his closing address Mr. Williamson said: t wR 4 . "The main point is that the release oF APM from this undertaking in effect determines any subsequent injunction application because the issues are the same. In practical terms it comes down to the balance of converfience.with the same sort of factors that have beéSn canvassed today, and so for that reason we seek to persuade your Honour that the appropriate course is not to release APM for the reasons that have been put. If, contrary to that submission, your Honour were minded to release APM then our submission in relation to that would be that as part of the present proceedings concerning the re-arrangements of undertakings, that APM should be released on terms, that is conditions attached to the release promise undertaking, ... That is, to preserve the prospects for effective section 81 proceedings should the need for that arise. So we see no point in regurgitating an injunction application if the same material has been considered today. We prefer to take that course that I have just outlined. That is, no release, or if there is, on terms, and the question of appropriate terms can be readily advised." (p.323/4 AB) Thus the question of whether in these proceedings APM should be restrained by way of interlecutory injunction from taking steps: to acquire the FCL shares was not judicially investigated. APM had shown every intention of defending the . > case brought against it by the Commission. Had the Commission sought an interlocutory injunction there is every reason to believe that APM would have resisted it. It would have desired to file affidavits and argue the matter in full. or 19. The issue was not raised or debated before the learned Judge. And indeed it cannot be thought to have been a foregone conclusion that had the Commission sought such an injunction it would have been granted. It would have been pu that the bid which APM desired to make was purely as a 'matter of defence against the SCI bid which if successful would have deprived APM of one of its most important customers and led , to a considerable reduction in its :factory production and employment. The significance of s-81 of the Act might have appeared differently had the matter been argued. Obviously a strong case could be made that the loss suffered by APM might be extremely high if it were restrained by injunction and then ultimately succeeded in its defence in these proceedings. In such a situation the existence of the remedy provided by s-8l1 is most relevant. Where the parties concerned are large responsible entities the viability of the target company and thus the value of its shares would be capable of being maintained by appropriate conditions or undertakings if the shares were acquired before the action of the Commission against APM was determined. In addition, if APM acquiréd the shares before the, determination of the action by the Commission it would 'do so because it was offering to "the shareholders the best price available to the shareholders.On a divestiture, if it became a fact; any loss would be that of APM itself. The operation would have been to the distinct advantage of the shareholders. lf shareholders refrained from selling to APM in fear of being 20. found to have aided and abetted a contravention of s.50 of the Act then to that extent AP's offer would fail. If it was ultimately decided that there was a contravention the question whether those who sold to APM were in fact guilty of so aiding and abetting would remain to be decived. In respect of each individual vendor to APM it, could not be asserted that he would necessarily be in any way knowingly concerned in or a party to the contravention. 'Until the proceedings between the Commission and APM were concluded nobody could know that there was a contravention. In addition, an interlocutory injunction cbtained by the Commission carries no undertaking for the payment of damages by the Commission. Whilst this may be approriate in relation to the law enforcement operations of the Commission it cannot be irrelevant on the matter: of the granting of an interlocutory injunction in a matter which is genuinely contested, in respect of which the issue will depend on a judgment in a difficult field after a hearing of some three months, and where the consequences of the grant of an interlocutory injunction, later found to have been granted on ? a wrong assessment of the actual legal position, would be f irreparable loss. It is to be observed also,that an a ' - infringement of s.50 does not do immediate harm to any person. It results merely in a disturbance of what is considered the desirable state of national "economic organization which s.50 is designed to protect. If a 21. proposed acquisition of shares which it is thought may contravene the provisions of the section is carried out and is ultimately shown to be a contravention, irreparable harm is not normally likely to result because s-81 provides the means to correct the organizational disturbance that has occurred. Should an interlocutory injunction preventing the acquisition be granted and it not be established that the ' acquisition would contravene s.50, irreparable harm to the entity restrained is almost inevitable. The ordinary and normal flow of business would have been obstructed, and the entity restrained would have been prevented from protecting an important and perhaps vital business interest by competing in the market. In a case like the present where there are two suitors for the shares such interlocutory relief would eliminate competition in the market, a result hardly compatible with the general purposes "of the Act. It would appear, therefore, that although after considering such Matters, and such other factors as might have been raised on an application for an interlocutory injunction, there certainly were weighty arguments, meet for consideration of the Court, against the granting of such an application. The, critical consideration for present purposes is however that the learned Judge did not have such 'arguments pefore him. It would seem therefore, "that the learned Judge erred in assuming that APM could not escape from a position in which it was restrained from acquiring the shares or en tah -~ 22. making a bid while the Commission was claiming that to do so would offend s.50 of the Act. It would seem that one factor influencing the learned Judge to make the assumption was the ascription py him of a special significance to the view of the Commission that the proposed acquisition by APM would contravene s.50 of the Act. His Honour appears to have treated as, material to the course he took, that the possible detriment to APM, should it remain bound while SCI and FCL were released, was "a direct result of the view responsibly held by the government regulatory authority that it would be in breach of the Act if its takeover proceeded". With all respect, the reference to the responsible character of the Commission and its views were not really relevant to the problem. In relation to Part VI of the Act it is to ascribe too much to the role of the Commission to describe it as a regulatory authority. Its authority is to enforce the law and put its arguments to the Court in the same way as any other party to litigation. It is to be noted that the learned Judge himself in In re Queensland Co-operative Milling Association (1976) 25 FLR 169 sueens sane worcesrstawe neg a ssocnaenct at 176, in relation to a merger problem, drew attention to t the circumstance that, there was in his opinion, "no presumption that any particular finding by the Commission was correct.". But the practical effect of the order under appeal is to secure to the Commission the benefits of interlocutory relief against APM without it having had to ae ern re ne te ee ee — 23. fight for such relief. , It istto be observed that, within the limits set by his assumption that APM must inevitably be restrained from ' » acquiring the shares until the case against it was determined, he did all he could to put APM on equai terms with SCI. However, those limits were, in my opinion, wrongly set. This is important because it went to the question of the assessment of the requirements of justice as between the parties which arose out of "the giving of the undertakings on 23 May 1983. It is clear that SCI gave its undertaking for the express purpose of, as it thought, ensuring that the Commission would pursue APM to judgment effectively removing it as a competitor. The willingness of SCI to regard itself as "inextricably bound up" in action No. VG 84 of 1983 when on 23 May 1983 it gave its undertaking reflected its intense desire to be the only bidder. However, the price it paid was to be party to an arrangemént with APM under which APM gave its undertaking. The genesis of the arrangmenet was in the terms of the original telexes which were before the Court on 23 May 1983. Each of thoge telexes contained stipulations that the undertaking of each party was conditional on similar undertakings being' given by the others. The price which APM paid as part of the arrangement was that it undertook not to proceed with its offer pending the determination of the case. On ordinary considerations' of fairness, ~ save in special circumstances, one party could hardly be kept in the position in 24. it had accepted as part of the arrangement and the others be released. It seems that his Honour appreciated this, and would not have proceeded, to maintain, in a practical way, the disabilities endured by APM under its undertaking whilst relieving SCI and FCL had he not assumed APM cour' not, in any event, escape those disabilities. The result was that SCI having been a party to an arrangement which was, in its view, directed to encourage the Commission to proceed against APM, and having in a sense, induced APM" to give its undertaking, has reached a position that it is as free as it would have been had it remained aloof from action No. VG 84 of 1983 while APM is at great disadvantage. This appeal relates to an order made by his Honour in the exercise of a discretion. The manner in which an appeal against an exercise of discretion should be determined is set out in House v. The King (1936) 55 CLR 449 at 505 where Dixon Evatt and McTiernan JJ. said as follows: t "It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary .judge they would have taken a different coursd. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant Matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then' his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so." Gibbs C.J., Aickin, Wilson and Brennan JJ in Adam P. Brown 25. Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Philip Morris Ltd. (1981) ALJR 548 at 550 stated that not only must there be an error of principle but the decision appealed from must work a substantial injustice to one of the FoR parties. - : ' They went on to say that there was authority that the above criteria should be expressed ,disjunctively but they felt it was unneccesary and unwise 'to lay down rigid and exhaustive criteria because the circumstances of different cases were infinitely various. In any case they felt it was safe to say that the question of injustice flowing from the order appealed from would generally be a relevant and necessary consideration. In my opinion in this case, whether the criteria are expressed disjunctively or conjunctively, the appeal should succeed because his Honour's decision. was based on an error of principle and his decision works a substantial injustice to APM. ' . r It has been argued by FCL and SCI that the order t appealed from relates merely to matters of practice and procedure and does not determine any: substantive 'rights of the parties and therefore an appellate court should exercise particular caution in reviewing decisions of primary judges pertaining to practice and procedure. Adam P. Brown Male 26. Fashions Pty. Ltd. v. Philip Morris Incorporated and Philip Morris Ltd. (supra) at 550; In re the Will of F.B. Gilbert (deceased) (1946) 46 S.R. (NSW) 318 at 323; Brambles Holdings Ltd. v. Trade Practices Commission (1979) 28 ALR 191 at 193; t q Dougherty v- Chandler (1946) 46 SR (NSW) 370 at 374. . ' Although the order appealed from and the original order made by Northrop J. on 23 May, 1983 were prima facie procedural orders both orders also affected the substantive rights of the parties involved. The order made by Woodward J. operates to frustrate effectively a bid by APM to acquire the shares of FCL, and to enable SCI to press on with its bid free from equal competition from APM. Whilst I proceed in these reasons on the basis that the nature of the order is that it is made on a matter of practice and procedure, it remains relevant that it deprives APM of a most valuable commercial_interest, namely the capacity to make an unconditional offer to acquire property in which it has a special concern arising not only out of the value of the property but out of the necessity to protect a t valuable market for its goods which "is dependant on the f ownership of that property. And it restores to FCl and SCI the freedom to deal with each other forthwith which they had forfeited to achieve the undertaking by APM. There is much to be said for the view that FCL and SCI should be and should always have been free to deal with the shares in FCL. And -., 27. indeed, had they not, for their own 'purposes, intervened in the relationship between the Commission and APM, they would be and have been so free. But for that intervention APM would have been similarly free, subject of cour ée, to the possibility of the Commission seeking and obtaining an interlocutory injunction to restrain 'it from proceeding with its bid. As indicated above the opinion expressed by the learned Judge was that such an injunction against APM was inescapable. And this opinion was so important as an influence in the exercise of the judicial discretion, that to act on it in the absence of a formal claim for an interlocutory injunction, an opportunity to APM to call evidence on relevant matters to be heard APM on the issue, was really a departure from principle. It is difficult to think that this departure would have occurred had it not been for the atmosphere created by the request of the Commission that the parties give the reciprocal undertakings and the willingness of the parties, for - the advantages they presented, to give them. When, however, FCL assessed its best interest to be to ignore the benefits of having APM as a competing suitor and sought to have its undertaking be set aside, it was a critical factor that: its undertaking, like t that of scr, was given deliberately to the Court'. for good commercial reason, with eyes wide- open, as part of a transaction in which APM consented to a restriction of its commercial freedom. , a 28. It is suggested that the business difficulties now being expressed by FCL by reason of the uncertainties concerning the possible changes in the shareholding constitute new facts or circumstances the emergence of which ' X render the undertakings unjust to FCL and SCI. See Wood v. Sheriff of Queensland (1895) QLJ 163; Hutchinson v. Nominal Defendant (1972) 1 NSWLR 443, and Chanel Ltd. v. F.W. Woolworth & Co. Ltd. (1981) 1 WLR 485. However,' when FCL gave its undertaking it could not be that it did not realise that the bids of APM and SCI might remain frozen for quite a considerable time during the progress of the litigation. The intentions of both APM and SCI to proceed vigorously with their bids when legally able to do so would also be within their knowledge. That was public knowledge. As commercial entities the possibility of repercussions of a business nature from the existence of those bids and the imminence of their being pursued as soon as possible, and the surrounding uncertainty in the meantime, would ,_ one would think, be foreseen or readily foreseeable. At any rate objectively the possibility of such repercussions was clearly to be seen. Accordingly: the repercussions alleged in this case are new r facts only in the sense that they have occurred since the id giving of the undertakings. They are not new 'in their quality as unforeseen consequences of the giving of the undertaking. They were, in a real. sense, to have been anticipated. The risk that they might incur was part of the price paid for the benefit of the reciprocal undertakings. 29. There is much to be said for the view'that the change of mind of FCL is due to commercial considerations reducing the benefit to it of having an APM bid in competition with that of SCI at this stage. At any rate, to 'my mind, the repercussions do not qualify as the kind of new fact or circumstance which, having regard 'to the nature of the original arrangement for the giving of the reciprocal undertakings, would support the release of FCL and SCI from their undertakingas where the bid of APM remains frustrated. Reliance was placed by the FCL on the provision in the undertakings that they were to operate "until further order." The observations of Buckley L.d. in Chanel Ltd. v. F.W. Woolworth & Co. Ltd. (1981) WLR 485 at 493 are in point. His Lordship said:- - orp "In my judgment, an order or' an undertaking to the court expressed to be until further order by implication gives a right to -the party bound by the order or undertaking to apply to the court to have the order or undertaking discharged or modified if good grounds for doing so are shown. Such an application is not an application to set aside or modify any contract implicit in the ordér or undertaking. It is an application in accordance with such contract; being an exercise of a. right reserved by the coritract to the party bound by the terms of the order or undertaking. Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have known, or found out, in time for the first encounter." " 30. Accordingly the application by FCL which was heard on 17 August 1983 was authorised by the terms of its undertaking even if there were elements of contract in the arrangement under which it and APM's reciprocal undertaking was given. But on the question of whether the application should be granted the circumstance that there was such .ah element of contract would be relevant. The weight to be given to that element would depend upon circumstances, in particular, what each party had gained from the contract or arrangement and what each party had suffered thereby. Inevitably, on considerations of justice, the relief of the sufferings of one or some of the parties while one or others continued to suffer would be unfavourably regarded, and in most cases, one would think, decisive. To justify the release of a party circumstances such as those referred to by Buckley L.J. in the observations last cited would> be necessary. As indicated above those circumstances are not shown to exist in this case. . we Apart from the circumstance that, in seeking release, FCL and SCI were in a sense seeking to deprive APM of the benefits passing to it under the original arrangement for reciprocal 'undertakings and to regain the freedom they forfeited to achieve those undertakings and presumably profit thereby there would be much to be said for FCL being free to deal with whom it chooses, and for SCI to be free to bid for the shares. But it is the effect of the order in rendering a 31. bid by APM merely a futility which does the work which would be done by an interlocutory injunction if one were given. That part can be said to be unjust because the case for such an injunction had not been tried. And there 'is more to it t x than that. The arrangement expressed in the reciprocal undertakings secured for APM the opportunity,' if it were successful in its defence in the action by the Commission, to i bid for the shares in due course, free from any 'shadow of illegality. This was the benefit of the arrangement to FCL. So far as they were concerned the arrangement secured the possibility that after the action was disposed of a purchaser for the shares with every incentive to pay a good price could bid for the shares free from any shadow of illegality. So far- as SCI was concerned it tended to ensure that if APM's bid were illegal that illegality would be proved and AM removed as a competitor. For the parties to resile from the arrangement left APM in the position that, even if there were no interlocutory injunction, it could not shake off the shadow of illegality in time to make an effective bid. It is this feature of the situation that renders the desire of FCL and SCI to repudiate the arrangement of particular ij significance. t : ' ~ In the circumstances the fact that FCL has 'indicated a present intention not to deal with APM is not to the point. It may well be the product of the shadow of illegality. Intentions may change when the shadow is removed and APM's " o 32. unconditional bid is made. It is the freedom of APM to make a bid which may produce a change of intention which is at stake. And this Court was assured by Dr. Griffith that there is no private arrangement between FCL and SCI. : ke To my mind to hold APM in a pdésition where FCL cannot accept an unconditional bid by APM while SCI is free to make such a bid and have it accepted, there being no interlocutory injunction restraining APM, is manifest and fundamental. And in so saying I would regard myself as in agreement with the learned Judge, the point of difference in the result being that the learned Judge considered that APM ought, according to law and particularly to s.50 of the Act, and in the existing circumstances, to be treated as though the obtaining of an interlocutory injunction were a matter of course. It is at this point that, to my mind, "as previously stated, there was an error of principle in the approach of the learned Judge which resulted in an order which subjects APM to a disability which as a matter of justice is unacceptable. The' last question that requires this Court's consideration is what should be done about the undertakings given by the parties on 23 May 1983., It is said 'that all purpose has gone out of the undertakings as a result of the current state of mind of the Amatil shareholders not to deal with APM. Accordingly APM has nothing to gain from the maintenance of the restrictions upon FCL itself and its ~ "33. shareholders and SCI under the undertakings of 23 May 1983. But a result of the involvement of the Court as the recipient and guardian of the undertakings and the relationships of the parties thereunder a certain stability was imparted into that arrangment. Notwithstanding the words "until further order" it is not to be thought that the arrangement 'ought to be treated as one intended to persist only until FCL itself or its shareholders or SCI should change their minds. And basically, as previously stated, it must be in the interests of justice that an arrangement made by fully advised independent legal entities involving reciprocal obligations expressed and defined in undertakings tendered to the Court, and thereby made subject to enforcement, should be observed unless there are new facts or significant circumstances which would not reasonably have been known or foreseeable at the time of entering those undertakings. Te might be argued that ever since the announcement of SCI's* intention to make its takeover offer the parties ought to have been left to pursue their interests as they were entitled by law to do. It is arguable that that situation might now be recreated simply by releasing all parties from their undertakings of 23 May 1983. However, none of the parties in this: appeal indicated that the Court should approach the matter in this way. 1Tt is my view that the Court should not do so. That course would involve a serious departure from what is just. The whole basis of the arrangement was to preserve the status quo until either APM was shown to be excluded by law or completely free Po La 34. to buy the shares and hopefully make the higher bid. To send APM into the market now, free but for the shadow of allegat-— ions by the Commission that the proposed acquisition of shares was illegal, would be to impose upon APM: the very disability which the reciprocal undertakings given by each party for its own purposes, were interided to avoid. The kind of practical disability attaching to AP's bid in such circumstances is possibly exemplified by the change in the current intention of FCL, a change that could well persist until that shadow is removed. If in a takeover situation where there are competing parties and with respect to one of the parties the Commission publicly asserts that acquisition by that party of the shares in question is regarded as a contravention of s.50 there is inevitably a real possibility that ° shareholders will be nervous of their own position under s :80 of the Act and will refrain from accepting the offer by that party even 1£ it is the highest offer available. Should 'it be that the view of the Commission is ultimately found to be unsound, serious harm will have been suffered by the party concerned and the shareholders. In such a case there is much fairness in all t bids awaiting ultimate clarification of the legal situation and in a commercial sense suffered unfairly. Where that element of unfairness has been eliminated by an arrangement supported by reciprocal undertakings given for good commercial reasons, justice must be on the side of 35. maintaining the resulting situation; namely that all bids await clarification of the legal situation. Accordingly I would allow the appeal 'and "set aside tL ~ the order under appeal. So far as the costs of this appeal are concerned the parties should be given leave to make written submissions within fourteen days and the question of . costs is reserved. a, ret iAgsociate . | -~ se Lee A een Soy et ee Rl Am ne RE FR eR oD ee Sea a IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIAN DISTRICT REGISTRY } No. VG 150 of 1983 GENERAL DIVISTON ) BETWEEN : A.P.M. INVESTMENTS PTY LIMITED Appellant AND: TRADE PRACTICES COMMISSION First Respondent AND: FIBRE CONTAINERS LIMITED, ° ~ LEIGH-MARDON PTY LTD., ASSOCIATED NOMINEES PTV LTD., FRANCIS BURKE, PETER BECKER, WILLIAM GIBSON, JOHN FRANCIS BLEVERSON (Fifth to Eighth Respondents as Trustees for Leigh-Mardon Pty Ltd) and ARTHUR KEVIN SMITH Second to Ninth Respondents AND: S.C.1I. OPERATIONS PrY LTD (S.C.1T. PACKAGING PIY LTD) - Tenth Respondent CORAM: SMITHERS A.C.J., FITZGERALD AND JENKINSON Jd. DATE: 21 SEPTEMBER 1983 REASONS FOR JUDGMENT Fitzgerald J.: This is an expedited appeal from an order of a single judge of this Court (Woodward J.) made on 24 August 1983. The trial of the proceedings in which the order was made was due to commence on 22 August 1983 and to take some months but has been postponed, at least temporarily, by Wocdward J. There are obvious circumstances of urgency. TG af ee ol ke ee eye ° ewe VD ee ek ee ee ee ee thee eet ee ) On 4 May 1983, S.C.I. Packaging Pty Ltd ("S.C.I.") registered with the National Companies Securities Commission a Part A Statement under the Companies (Acquisition of Shares) Code in respect of an offer to acquire all of the issued shares in 'Fibre Containers Ltd ("F.C.L.") for a price of $3.50 per share. $.C.I. is a member of what is colloquially known as the Smorgon Group. There is no need to distinguish in these proceedings between $.C.Ir. and its related corporations. §.Cc.I. is a producer of the raw material used by F.C.L. in its business as a manufacturer of fibre containers. F.C.L. is one of the largest manufacturers of such containers in Australia. F.C.L. 18 a customer of the othex major producer of such raw material, A.P.M. Investments Pty Ltd ("A.P.M."), which is a subsidiary of Australian Paper Manufacturers Ltd. A.P.M. supplies significantly more than S.C.I. of the raw material used overall in Australia. There is no need to distinguish in these proceedings between A.P.M. and its related corporations. On 4, 5 and 6 May 1983, A.P.M. purchased a total of 1,179,929 shares in F.C.L. at a price of $3.65 per share. It is a reasonable inference that the market price of F.C.L. had previously been less than the price offered by S$.C.I. of $3.50 and it is obvious that F.C.L. has a special value to A.P.M. and §.C.1. fe ee eh en me ee a a Lone Cae at rs we re ene Sa tee i nen NM A em eee a ee = Be On 6 May 1983, $.C.I. unsuccessfully applied ex parte to a single judge of this Court for an interlocutory injunction to restrain A.P.M. from acquiring further shares in F.C.L. On the game day, 5.C.I. gave certain undertakings to the Trade Practices Commission, the substantial effect of which was that $.C.I. would not proceed with its attempt to take over F.C.L. for a period of 14 days. The purpose of such undertakings, according to an affidavit later sworn by a director of S.C.I., was "predominantiy to ensure that the Trade Practices Commission instituted and pursued proceedings under s.50 of the frade Practices Act 1974" ("the Act") against A.P.M., because §.C.I. believed that F.C.L. and its shareholders "were prepared to entertain offers by A.P.M." to acquire the shares in F.C.L. On 11 May 1983, A.P.M. publicly announced that it proposed to make a take-over offer for all of the issued shares in F.C.L. at a price of $4.00 per share, and, on 13 May 1983, A.P.M. registered a Part A Statement with the National Companies Securities Commission. By that date, A.P.M. held 2,395,990 shares in F.C.L., amounting to 18.17% af the issued capital of F.C.L. Approximately 74% of the issued capital of F.C.L. is held by nominees of Amatil Limited (the "Amatil shareholders"). The remaining 7 to 8% of the issued shares in F.C.L. are held by members of the public. On 16 May 1983, A.P.M., §.C.I., F.C.L. and the Amatil shareholders in F,.C.L. gave undertakings to the Trade Practices Commission that, in effect, neither take-over would proceed unLlil aA eee ee er ee ee a Re ona teh dt anne, mettle eA Let ie suet t ee i Sle a eM ed ow eee fe ne ee, ve ee the Trade Practices Commission had considered the matter. (There has been some difficulty throughout because of the inability of one of the Amatil shareholders to participate because of ill-health but that is not of any consequence to the outcome of the present appeal.) On 18 May 1983, the Trade Practices Commission notified A.P.M., S.C.I., F.C.L., and Amatil that the Commission considered that A.P.M.'s proposed acquisition of, control of F.C.L. would breach s.50 of the Act. On 19 May 1983, S.C.I. instituted preceedings in the Victorian Registry, No. VG 82 of 1983 (the "S.C.I. action"), for a declaration that the proposed acquisition by A.P.M. of the issued shares in the capital of F.C.L. would be a contravention of s.50 of the Act and an interlocutory injunction to restrain A.P.M. from taking any further steps to acquire any issued shares in the capital of F.C.L. pending trial. Australian Paper Manufacturers Limited was joined as a respondent and S.C.I. also asked in its Application for a declaration that the pricing policy adopted by Australian Paper Manufacturers Limited constitutes a contravention of s.46 of the Act. More recently, §.C.I. has commenced a further proceeding in the Victorian Registry, No. VG 126 of 1983, ain which breach of s.47 of the Act is alleged. On 20 May 1983, the Trade Practices Commission commenced proceedings in the Victorian Registry, No. VG 84 of 1983 ("the T.P.C. action"), against A.P.M., F.C.L., and the Amatil Nag Ae A Se tk ee A Ae hI ate Nee AM RN ee ee ed en ee Pee we Nee me ae a rd 5. shareholders sceking both final and interlocutory injunctions to restrain the acquisition by A.P.M. of the issued capital of F.C.L. No Statement of Claim yet delivered in the T.P.C. action contains any allegation against F.C.L.,. and the only allegation which has been pleaded against the Amatil shareholders is that they threaten and intend to consider acceptance of an offer by A.P.M. for their shares in F.C.L. No claim has been made to date.in any of the proceedings for the divestiture by A.P.M. of the shares which it already holds in the capital of F.C.L. Further, no claim has been made or seriously asserted by either A.P.M. or the Trade Practices Commission against 5.C.1. concerning $.C.1.'s proposed acquisition of the shares in F.C.L. On 19 and 20 May 1983 undertakings were given to the Trade Practices Commission by A-P.M., 5.C.I., F.C.L., and the Amatil shareholders. Each of the respective undertakings was conditional upon the undertakings given by the other parties. In effect, the undertakings temporarily froze the position in respect of each of the rival bids for the shares in F.C.L. On 23 May 1983, the T.P.C. action came on for directions and the Trade Practices Commission's application for an interlocutory injunction against A.P.M. before the Honourable Mr Justice Northrop. On the same day, on the application of S.C.I., the directions hearing in respect of the S.C.1I. action was advanced from 10 June 1983 to that day and both directions hearings took place together. Directions, the details of which a ane ae ae ee ee RAN ne 8 Pp epee mean id Me en a et ee ee i Pewee ne Me ee en ne 6. are not presently material, were given, and the directions hearings were adjourned to 9 June 1983. Further, im the course of the proceedings before Northrop J. on 23 May, undertakings were given and it is these undertakings which lie at the heart of the present controversy. Regrettably, to compound the complications which otherwise exist, no order has been taken out in respect of the directions hearing in the S.C.I. action on 23 May and the order taken out in respect of the T-.P.C. action on that dav inaccurately states the undertakings which were given. However, there is a transcript which records what occurred and the parties are agreed upon what is the proper form of order and have been given leave by this Court to correct the order entered. Further, it does not seem to be in dispute that the undertakings are to be considered as having been given in the T.P.C. action since the parties thought that, by virtue of sub-s. 80(1A) of the Act, there could be difficulties in the path of injunctions or undertakings in the S.C.I. action. It is unnecessary to consider here whether those fears were well-founded: see Brisbane Gas Co Ltd v. Hartogen Eneray Ltd (1982) 42 A.L.R. 85. Nor is it in dispute that the cross~-undertakings were given in compromise of the proposed application for an interlocutory injunction. The corrected order in the T.P.C. action is in the following terms: ea ees ORDER JUDGE: NORTHROP Jd. PLACE: MELBOURNE DATE: 23 MAY 1983 Upon the following undertakings being given by the First Respondent, 5.C.I. Operations Pty Ltd and S.C.I. Packaging Pty Ltd:- A.P.M. Investments Pty Lrd., $.C.1I. Operations Pty Ltd and §.C.I. Packaging Pty Ltd each by their respective Counsel undertake to the Court that they and any related corporations will not, prior to the hearing or determination of Application Wo. VG84 of 1983 or until further order, acquire or take any further steps to acquire any shares in the capital of Fibre Containers Ltd. ' AND upon the following undertakings being given by the Second to Ninth Respondents:- that until the determination of these proceedings or further order - 1. The Third to Ninth Respondents will not sell to or accept any offer from A.P.M. INVESTMENTS PTY LTD (A.P.M.) (or any related corporation of A.P.M.) or 3.C.I. PACKAGING PTY LTD (S.C.I.) or any related corporation of §.C.I.) to purchase any shares held by them or on behalf in FIBRE CONTAINERS LID. Ze The Second to Ninth Respondents will not aid, abet, counsel or procure A.P.M. (or any related corporation of A.P.M.) or $5.C.1I. (or any related corporation of §.C.I.) to acquire directly or indirectly any shares in FIBRE CONTAINERS LTD. of in any way be knowingly concerned in or a party to any such acquisitions. AND subject to the making of an appropriate Declaration by the Nationai Companies and Securities Commission to enabie effect to be given to the undertakings herein pursuant to the Companies (Acquisition of Shares) (New South Wales) Code. THE COURT ORDERS THAT: Chere followed directions J" oo, A.P.M. is the first respondent, F.C.L. is the second respondent, and the Amatil shareholders are the third to ninth respondents. The qualification to which each of the undertakings was subject is not now relevant. It is, however, important to observe that there is not the slightest doubt but that the respective undertakings were given pursuant to an arrangement between the parties, were interdependent, were given and accepted in lieu of a contested application for interlocutory relief in the T.P.C. action, and were intended to preserve the status quo pending the outcome of the T.P.C. action. When Northrop d. pointed out that $.C.I. was not a party to the T.P.C. action, he was met with the response from senior counsel for S.C.I. that §.C.I. was "inextricably bound up" with that action and counsel alluded to an application by $.C.I. to have the T.P.C. action and the Ԥ.C.I. action heard together. Later in the proceedings, counsel for 5.C.I. was at pains to point out that $.C.I. had not "come in on the back of" the Trade Practices Commission but had "initiated" the s.50 attacks on A.P.M. Two further statements made in the course of the proceedings before Northrop J. on 23 May should also be noted. Senior Counsel then appearing for A.P.M. (Mr Searby Q.C.) said: ",.- If I can simply come down to the timetable, which seems to us to be the material matter, the kind of stages that we have in mind would be governed by the consideration that this is 4 very serious matter for Fibre Containers as well as for De ett Rt Ne ee lee ee ee ae ee eet te ne to any person who is seeking to acquire their shares. Commercially, it would be highly disadvantageous to delay the finality and to extend the time during which this prevails and that must be not only to their market, but also to their employees and their shareholders as well as for the companies concerned here and their position." Later, the solicitor then representing F.C.L. and the Amatil shareholders said: «e+ My clients would with respect accept the submissions of my learned friend Mr Searby as to 4a shortening of the times in the draft minutes which my friend Mr Williamson has handed up to your Honour. As has been pointed out to you, there are numerous people within the Fibre Containers organisation vitally concerned to be enlightened as to their future and which having regard to the fact that there are two competing suitors for its hand, but there is overlaying that, I restrain from the words that first come to my mind, a (predator) seeking to waylay those suitors, but there are particular procedures making for a position of substantial uncertainty and in those circumstances I would ask your Honour to accept that in the interests of not only employees and shareholders, but the very business of Fibre Containers Limited, it is proper that these proceedings be determined at as early adate as is consistent with the presentation of the case before your Honour ina proper and prepared way. It does seem to me that Fibre Containers Limited at least, and if is from Fibre Containers Limited that the bulk of the evidence touching the interests of the clients for whom I appear would be relevant to the proceedings. Fibre Containers Limited would comply with the programme suggested by Mr Searby." The significance of these statements is in connection with the awareness which they show existed on the date when the undertakings were given that the proceedings would take some time and delay would or might affect F.C.L., (and thus those who are or 'become its shareholders. ) tt eee at re Lk le ee a 10. On 9 June 1983, both adjourned directions hearings came on before Woodward z. who extended the times for the interlocutory steps in both proceedings and adjourned both directions hearings to 13 July 1983. On that day, his Honour reserved for the consideration of the trial judge an application by 5.C.I. for an order that the 5.C.I. action should be heard at the same time as the T.P.C. action but gave the parties liberty to apply. : Both directions hearings again came on before Woodward J. on 13 July 1983 and were adjourned by his Honour to 20 July 1983. His Honour further directed that the question of whether both proceedings should be heard together or separately should be argued on 26 July 1983 and adjourned the trials to a date to be fixed not earlier than 2 August 1983. » By a notice of motion dated 18 July 1983 and returnable on 20 July 1983, F.C.L. applied to be released impart from paragraph 2 of the undertaking which it had given to the coury on 23 May 1983 insofar as it related to §.C.I. The application was supported by an affidavit by the Chairman of Directors of F.C.L. which, omitting formal parts, was in the following terms: "2. I am informed and verily believe that these -proceedings and all the preparation incidental thereto, will take a substantial amount of time and involve a large amount of work, effort and expense for ail parties involved including the second respondent. : ory Te ee a er ee eh et al a ee tee A eT Se lel te tr eo ct 3. I also believe that the likely duration of the proceedings and the uncertainty which would attend the outcome thereof is and will continue to he disruptive of the business of Fibre Containers Limited and unsettling to its employees and customers. . 4, Fibre Containers Ltd. seeks to be released from so much of paragraph 2 of the undertaking it has given to this court as relates to $.C.1. Packaging Pty Limited in order that 1t might conduct discussions with $.C.I. Packaging Pty Limited to - ascertain whether that company will alter the conditions upon which ic has given notice of its . intention to make a take-over offer for the shares , of Fibre Containers Ltd. such that the directors of Fibre Containers Lid. would be able to recommend acceptance thereof to the shareholders of Fibre Containers Ltd." F.C.L.'s application was opposed by A.P.M, and the Trade Practices Commission. It was also opposed by S.C.I. because, according to a later affidavit by a director of S.C.I., it- anticipated that, if the application was granted, "the prospect of the T.P.C. maintaining its application against A.P.M." might be prejudiced. F.C.L.'s application was dismissed by Woodward J. without detailed reasons on 20 July 1983. In a later judgment delivered on 22 August 1983, which has led to the present appeal and to which more detailed reference will be made below, his Honour said concerning the application dismissed by him on 20 July: "In view of the fact that all other parties opposed the application, and that the positions of all parties, in a difficult commercial situaticn, had already been frozen by mutual agreement for a period of two months, I tock the view that the balance of justice and convenience: required that the undertakings continue in force. I therefore refused the application." . wea 2 ee - tee pereren wet wn Se ee ed ta eke ee ee. ~~ =e 12. It is not strictly correct to say that all other parties opposed the application since: the 'Amatil shareholders did not do so. Further, it should be noted that his Honour knew when he decided the July application that F.C.L. and the Amatil shareholders were asserting an unwillingness to deal with A.P.M. whilst the T.P.C. persisted in its claim and the T.P.C. action was unresolved. Further mention of this changed attitude will be made below. On 20 and 21 July 1983, directions hearings also took place, both in the $.C.I. action and the T.P.C. action. Inter alia, A.P.M. appied to strike out part of the Statement of Claim in the T.P.C. action and, in the course of the hearing, the Trade Practices Commission sought leave to deliver an amended Statement of Claim. The directions hearings were adjourned to 26 July 1983 on which date it was indicated that the Trade Practices Commission would be given leave to deliver an amended Statement of Claim which it did on that day. The directions hearings continued into the following day, 27 July 1983. During the course of the directions hearings on 27 July 1983, 5.C.I. applied for an order that the $.C.1I. action be heard at the same time as the TI.P.C. action and mentioned as an alternative that $.C.I. might be added as a respondent in the T.P.C. action. 'The Trade Practices Commission did not consent to §.C.I.'s application and it was opposed by A.P.M. The a i a ae Rea ne aka eee 13. : application was dismissed by Woodward J. In reasons for judgment delivered on 4 August 1983, his Honour said in substance that the additional length and cast which would thereby be occasioned in the T.P.C. action was unwarranted and "contrary to the spirit and scheme" of the Act. His Honour also said: "ae Nor, in my opiniion, does the fact that a person has given undertakings not to take advantage of the s.50 proceedings against a rival bidder to improve his own chances of a successful take-over, give that person any entitlement to a voice in those proceedings. If those proceedings are successful, the. third party may be advantaged but that is no reason why he should be entitled to add to his rival's burdens in the trial of the action." Woodward J. veferred also to a variety of other considerations but stated that, on balance, the application should be refused. No appeal has heen brought from that refusal. On 28 July 1983, Woodward J. gave further directions in both the $.C.I. action and the T.P.C. action. In each, leave to deliver an amended Statement of Claim was given and detaiied directions were given with respect to a number of other interlocutory matters. The directions in the T.P.C. action were aimed ata trial commencing in August 1983. The directions hearing in the $.C.I. action was adjourned for further hearing 14 days after judgment in the T.P.C. action. On 10 August 1983, further directions were given in the T.P.C. action and the trial of that action was fixed to commence on 22 August 1983. 14, : By a Notice of Motion dated 11 August 1983, F.C.L. and the Amatil shareholders applied for orders that they be released from the undertakings given by them to the Court on 23 May in relation to §.C.iI., and that $.C.I. and its related corporations be released from the undertaking given by them to the Court on 23 May 1983, subject to the following undertakings being given by F.C.L. and the Amatil shareholders: "That whilst the Trade Practices Commission holds the view that acquisition by A.P.M. Investments Pty Ltd {or any related corporation of A.P.M. Investments Pry Ltd (or any related Corporation of A.P.M. Investments Pty Ltd) of the shares of Fibre Containers Ltd would be in breach of s.50 (of) the Trade Practices Act 1974 or until this. Honourable Court decides to the contrary of that view: (i) as to (the Amatil shareholders) they will not nor will any of them sell to or accept any offer from A.P.M. Investments Pty Ltd (or any related corporation of A.P.M. Investments Pty Ltd) to purchase any shares held by them or on theic behalf in Fibre Containers Ltd. (it) As to (the Amatil shareholders) they will not aid, abet, counsel or procure A.P.M. Investments Pry Ltd (or any related corporation of A.P.M. Investments Pty Ltd) to acquire directly or indirectly any shares in Fibre Containers Ltd or in any way be knowingly concerned in or a party to any such acquisitions." It is by no means clear to me what standing F.C.L. or the Amatil shareholders had to apply for the release of §.C.I. from its undertaking and no similar application was formally made by $.C.1I. However, S.C.I. supported the application of F.C.h. and the Amatil shareholders, and in substance orally applied for its release in the course of the hearing and the matter has been conducted on that basis. It is of interest to note that, ee te ee i is. notwithstanding what was said by F.C.L.'s chairman in his affidavit in support of F.C.L.'s application dismissed on 20 July as the reason for that application, _ there was, despite the dismissal of that application, some contact between F.C.L. and §.C.I. prioc to the further application. F.C.L.'s chairman swore an additional affidavit for the further application and was cross-examined ueon it. In the course of his cross~examination he said that the object of the further application was to "free up" §.C.1I. He also said that, on 8 August 1983, he had telephoned Mr Sam Smorgon and: "...The substance was simply that I wished to talk to him about the conduct of this case and this possible application that has come before the court now, even to talk to my legal advisers, and after a number of telephone conversations between the legal advisers this conference took place on the 8th." (The date of the conference was subsequently altered to 9th August.) Elsewhere he said: iy -»» I communicated with Mr Smorgon the tactics that would be followed in this case right here. Thereupon he caused his counsel and ours to get together and discuss that as is recorded in affidavit." " The substantial basis of the further application, as deposed to on behalf of F.C.L. and the Amatil shareholders, may be summarized as follows:- eee ke ee Bam Aes A eh Le oe a F.C.L. is a major manufacturer throughout Australia of corrugated and solid fibre containers but each of two competitors is estimated to have a greater share of the market than F.C.L. The rival bids for F.C.L. and the Court proceedings have been well publicised and have led to difficulties for F.C.L. in the market for flbre containers which is highly competitive. Approaches have been made to some of F.C.L.'s large customers suggesting that ats future reliability as @ supplier is uncertain, ona number of occasions accompanied by offers of price concessions. Although F.C.L. has not lost business, its profitability has been affected by the need to reduce its prices to such customers. Further, attempts, as yet unsuccessful, have been made to persuade employees of F.C.L. to join its competitors and other attempts to take advantage of F.C.L.'s position have taken place. The effects on F.C.L.'s employees and customers were described as "unsettling and 'disruptive. F.C.L.'s General Manager swore: "15, Whilst it has to date been possible to date to retain customers (at substantial expense) and to retain employees to whom alternative employment has been offered and to allay fears of employees as to their future, I am concerned that it may not be possible to continue to do so if the uncertainty attaching to the position of the Second Respondent continues for a lengthy period. It is now more than three months since notice of the takeover offers was received and it is almost the same period since the proceedings in this Honourable Court were commenced. I have been advised by the legal representatives of the Second Respondent that estimates of time likely to be taken before the proceedings in this Honourable Court ars resolved are not less than three months and might be considerably longer. —- - ee, — 16. 17. . 17. In those circumstances, I believe that the Second Respondent is being disadvantaged in the Fibre Container Market and in its business generally because of the uncertainty of its position and that the employees of the Second Respondent are being unsettled through uncertainty as to their future. I further believe that this uncertainty is being deepened not only by competitors but by the indeterminate period which will elapse before the situation is clarified by the determination of these proceedings and that the delay consequent thereon 1s and will continue to be disadvantageous to the Second Respondent, inimical to its business interests and unfair to its management, employees and shareholders. I am ~ informed by the legal representatives or the Second Respondent that whilst the takeover situations not subject to Court proceedings certain minimum statutory periods must elapse before the outcome of the takeover becomes known, nevertheless in circumstances such as those of the Second Respondent (where one associated group of shareholders controls some 74% of the shares of the Second Respondent) the outcome of a takeover proposal would be known at the latest within six weeks of the service of a Part A Statement under the Companies (Acquisition of Shares) (New South Wales) Code. It follows in my respectful opinion that, in the normal course of events, any uncertainty as to the matters to which I have referred could reasonably have been tolerated by the management of the Second Respondent but such is not in fact the case here." The Chairman of Directors of F.C.L. swore: "ll. The Second to Eighth Respondents have given further consideration to their respective positions of the light of the circumstances hereinbefore referred to. They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the time will be taken ta resolve these proceedings might have upon the value of the shares of the -Pan en a a a cn Fe te i8. Second Respondent and of the interests of the shareholders of the Second Respondent in those shares. 12. In all of these circumstances the Third to Eighth Respondents believe that the circumstances in which the undertakings given on their behalf to this Honourable Court on 23 May 1983 in relation to §.C.I. Packaging PUY Limited have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from the e First Respondent (or any other company related to the First Respondent) to acquire shares held by them and each of them in the Second Respondent. 13. The Third to Ninth Respondents now seek to be released from the said undertakings and to have §.C.1I.Packaging Pty Limited . released from the undertaking given on . its behalf to this Honourable Court on 23rd May 1983 and, subject to this Honourable Court making the orders sought in the Notice of Motion in support of which this Affidavit is filed, the Second to Eighth Respondents hav authorised their Counsel to give the frollowing undertakings on their behalf to this Honourable Court and to the Trade Practices Commission:- . (There followed the undertakings set out in the Notice of Motion.} In the course of cross-examination, F.C.L.'s chairman acknowledged that there had been no meeting at which F.C.L. had arrived at its decision but that a series of informal meetings had occurred "over the past couple of months". He also said that the reason why F.C.L. and the Amatil shareholders were unwilling to deal with A.P.M. whilst the Trade Practices "Gommassion continued its action and the action was undecided was that they were not prepared to take the risk "of helping it to a possible breach of s.50." Further,. he revealed that the 5.C.2. offer had 3 - eer ey wen om Te, ee eee a 19. been rejected, and said that there had been no discussions, since the commencement of the actions, between F.C.L. and 5.C.I. about the price to be offered for 5.C.1. shares. On the hearing of the appeal, counsel for F.C.L. and the Amatil shareholders at one point asked us to infer that, if Woodward J's offer stands, an offer in excess of the $4.00 per share offered by A.P.M. will be forthcoming from §.C.1I. Counsel for §$.C.I. declined to confirm that that would occur and was at pains, to establish that 9.C.I. had scrupulously observed its undertaking and its obligaion under the Companies (Acquisition of Shares) Code. As has already been stated, S.C.1I. supported the application by F.C.L. and the Amatil shareholders. An affidavit by a director of &.C.I. deposed to both its original motive for giving an undertaking and its reason for opposing F.C.L.'s application in July 1983 for a partial release. Reference has already been made to these matters. According to the affidavit, §.C.I. had changed its attitude because the Trade Practices Commission was prepared to continue against A.P.M. in any event and $.C.I. intended, if released from its undertaking, to "make every effort to acquire the subject shares". A.P.M. opposed the application. An affidavit by its Managing Director did little but point out the basis on which the undertakings had been giver on 23 May and that the likely outcome of acceding to the application by F.C.L. and the Amatil shareholders would be that A.P.M. would fail in its bid for F.C.L. "without having any opportunity to contest the allegations" made by the Trade Practices Commission. 20. The application for release from the undertakings was heard by Woodward J. on 17 August 1983. On 22 August 1983, the date fixed for the commencement of the T.P.C. action, Woodward J. published reasons for judgment but postponed making any orders until 24 August. He indicated an intention then to release all parties from their existing undertakings in exchange for further undertakings from A.P.M. F.C.L. and the Amatil shareholders in relation to the proposed acquisition of shares in P.C.L. by A.P.M. When the proceedings again came before Woodward J. on 24 August 1983, A.P.M. indicated its unwillingness to give a further undertaking and his Honour was persuaded by other parties that an undertaking by A.P.M. was unnecessary in view of the fresh undertakings proferred by F.C.L. and the Amatil shareholders. Accordingly, on that day, the following order was made: "UPON the following undertaking being given by the Third to Eighth Respondents:- (the Amatil shareholders) That until the determination of these proceedings or further order they will not sell to or accept any offer from A.P.M. Investments Pty Limited ("APM") (er any related corporation of APM) to purchase any shares held by them or on their behalf in Fibre Containers Limited. we ee nen ee ee ai. AND UPON the following undertaking being given by the Secorid Respondent: (F.C.L.) That until the determination of these proceedings or further order 1t will not aid, abet, counsel or procure APM (or any related corporation of APM) to acquire directly or indirectly any shares in Fibre Containers Limited or in any way be knowingly concerned in or a party to any such acquisition. THE COURT ORDERS THAT: - 1. The First Respondent (A.P.M.) and related companies be and are hereby released from the undertaking given by them to the Court on 23rd May 1983. 2. The Second to Ninth Respondents inclusive be and are hereby released from the undertakings given by them to the Court on 23rd May 19683. 3. $.C.1. Packaging Pty. Limited, §.C.I. Operations Pty. Limited and related companies be and are hereby released from the undertaking given by them to the Court on 23rd May 1983. 4, Cests of the Notice of Motion of the Second to Ninth Respondents dated lith August 1983 reserved." A stay was granted that day to permit A.P.M. to appeal which it did on 25 August 1983 and the appeal was argued on 31 August and 1 and 2 September 1983. I have already set out the passage from the reasons for judgment published by Woodward J. on 22 August 1983 in which he recorded his reasons for dismissing F.C.04.'s first application Ren te ee | , 22. for release from its undertaking, made in July 1983. His Honour went on to describe the August application for release as involving the re-argument of "the issue ... at greater length, on a somewhat different basis, and with two parties assuming changed 'attitudes to it". He then proceeded to describe as the changed basis the desire of the Amactil shareholders to be released and the attitude of F.C.L. and the Amatil shareholders to the offer of A.P.M. and S.C.I., and to discuss the changed attitudes of the T.P.C. and S.C.I., and said: "In the result, therefore, the application is opposed only by A.P.M. There 1s the background against which I must consider the arguments for and against the application." After discussion of a question not now relevant concerning the validity of the undertakings, his Honour continued: "I turn now to consider whether, as a matter of discretion, the Court should grant the present application. The arguments in favour of granting the application may be summarized as follows: 1. Fibre Containers Ltd., as the target company of a takeover bid, is an innocent party, whose freedom of action should not be curtailed. The same applies to 1ts shareholders. 2. It is quite possible that Fibre Containers could negotiate an early sale of shares on terms which could be worth $50m. to the shareholders. Such a sum invested at, say 16% interest would bring in $6m. per year. The present annual profits of the company are about $3m. ae io re Sars © an een heh md ee eT me ee ee ee 23. 3. Because of the uncertainty created by the present litigation, Fibre Containers Ltd. is in danger of losing valuable staff and customers. It seems that some attempts have recently been made by unnamed competitors to make inroads in both areas, although these attempts have not been successful. There must, however, be some loss of confidence in the company due to the uncertainty of its future and this cann only work to the detriment of the company and its shareholders. Affidavit evidence to this general effect has not been challenged. 4. Fibre Containers have given no undertaking not : to sell shares to any company other than APM and ScI. Since there is no suggestion that a sale to SCI would be in breach of 5.50 of the Act, there is no good reason why SCI should be treated differently from other possible purchasers. 5S. Fibre Containers have na recourse to the TPC or APM for any losses which they may suffer as a result of adherence to the undertakings given. 6. The hearing of the present case is likely to last three months or more. There could well be one or more appeal hearings, and the Court might he persuaded that undertakings which had been in force for a number of months should be allowed to continue in force to cover the period of appeals. 7. Fibre Containers should not be penalized for having complied, in a responsible way, with a request of the government regulatory authority, the TPC, to maintain their present shareholding position at a time when the TPC was investigating the situation and instituting proceedings. 8. When it became apparent that Fibre Containers could become the innocent victims of the general 'freeze' which had been agreed to, they sought release from their undertakings. They should not now be penalized because they then sought only a limited release and were not able to attract the support of other parties, particularly the TPC. 9. There can be no compulsion on Fibre Containers to consider a takeover bid from APM. In the present circumstances, Fibre Containers have reached a firm conclusion that they will not consider such an offer. They should ctherwise be free ta deal lawfully with their own property. 10. Any harm which might be suffered by APM as a result of the success of this application 1s a direct result of the view responsibly held by the government regulatory authority, the TPC, that APM would be in breach of the Act if its takeover proceeded. . . wee tte atk a ek ee cr a een CnS 24. The arguments which APM can advance against any variation in the present application of undertakings are:- A. The undertakinos have been in force now for three months. In that period a great deal of time and effort have gone into the preparations for hearing of this case. The costs, both in legal fees and in staff time, have been vey great indeed. B. The case 18S now ready to begin. it has been prepared with all possible speed on all sides and the hearing will not be unnecessarily prolonged by any party to it. Cc. It would be unfair for one of the two suitors for Fibre Containers to be held to its undertaking not to negotiate while the other was released from its parallel undertaking. D. Fibre Containers have already made one unsuccessful attempt to obtain release from their undertakings. The onus is now on them to shor changed circumstances since that time. E. The very giving of the mutual undertakings in this case, and the resulting 'freeze' in negotiations for three months, have apparently produced the result that Fibre Containers are no longer ready to negotiate with APM - as they were when the undertakings were sought and given. APM has thus been prejudiced by the existence of the undertakings and the delay in seeking to have them lifted. F. If undertakings such as those in the present case are not sought, given and maintained, many takeovers could be totally frustrated by the mere institution of proceedings by the TPC. Another bidder could seize the opportunity to play on the concerns of the target company about cost of litigation, uncertainty and delay, and might succeed in arranging a takeover, possibly even at a lower price then that originally offered. The ofiginal offeror would probably be restrained from negotiating, and it would never have the opportunity to defend itself in court against the TPC's allegation." - ON Fer we eee 25. His Honour then continued: " These arguments against granting the present application are cogent. If the length of likely further operation of the undertakings had been measured in days or weeks, I think they should have prevailed. But the reality of the situation is _ that the undertakings, if continued in force, will operate for at least a number of months. If kept in force during possible appeals - and consistency would probably require that result - they could operate for a year or moce. In these circumstances, I find that che probable cost to the innocent target company becomes a factor of very great importance and, together with other factors I have listed in paragraphs 1-10 above is sufficient to overcome the contrary arguments. I have therefore, in spite of a great deal of sympathy for the position of APM, reached the clear conclusion that this application should succeed." I find difficulty in identifying from what his Honour has there stated, what it is that explained the change in his attitude from a convenience, few weeks earlier concerning the balance of justice and I am also somewwhat uncertain what his Honour had in mind in the successive passages in his judgment, which continued: " That however, is not the end of the matter. Because of the interlocking nature of the undertakings in this case, which were sought and given on the understanding that both APM and SCI would be similarly bound, I think it would he unfair to release Fibre Containers and §cI from their undertakings without considering afresh the position of A.P.M." T accept the argument which was put tome by counsel for the TPC that it is not appropriate in this case to allow APM to pursue its takeover bid while relying upon the as-yet-untried powers, given wean wee ee ere ee ae ee ~ eae eH ee Pe eens 26. under s.81 of the Act, to order divestiture of shares found to have been acquired in breach of s.50. I have no doubt that APM should be restrained from acquiring any additional shares in Fibre Containers Ltd. before this litigation is concluded." Although apparently only directing his remarks to the question whether A.P.M. should also be released from its undertaking (as it later was because his Honour accepted that fresh undertakings from F.C.L. and the Amatil shareholders would render it unnecessary) he seems in effect, to have decided that an interlocutory injunction would appropriately be "granted against A.P.M., notwithstanding that there was no application before him for such an injunction and no material to support such an order. I interpolate to say that I consider that the submission of counsel for S.C.I. that Woodward J., without telling anybody, may have relied on material informally handed up to him to read as background for the trial which he was to commence on 22 August, is completely untenable. His Honour then continued: On the other hand, I see no reason in principle why APM should be restrained from negotiating for the acauisition of shares, such acquisition to take effect only if the Court finds that it would not be in breach of s.50 of the Act. This requirement could perhaps be met by undertakings or injunctions using the language of paragraph 1 of Fibre Containers' existing undertakings. But because this proposition is novel, I would prefer to give the parties to this action the opportunity to consider and, I would hope, agree upon an appropriate form of words to produce the result I have indicated. ° I recognize that, in view of the firmly expressed intention of Fibre Containers not to have any dealings with APM in present circumstances, his 27. such limited undertakings may be both unnecessary and, from APM's point of view, unhelpful. However, parties acting in good faith may sometimes depart from their expressed intentions, and I believe tha even-handed justice requires undertakings of the kind indicated." :- When the matter came back before him on 24 August paragraph in the following terms: "I should say that it was never my view that 1t would be possible to create a situation in which APM could enter into competition for the shares on an equal basis with SCI given the circumstances that are dealt with in my judgment. All that I was trying to achieve was that if your client felt that it was worth entering the lists under a disability with one hand tied behind its back, if you like, that that was an opportunity that ought not be denied to it. IT fully appreciate the difficulties that you have been adverting to and I have always been conscious of them." To return to the reasons for judgment delivered August 1983, his Honour said: i propose therefore to do no more at present than state my intention to release all parties from their existing undertakings when APM and Fibre Containers have prepared fresh mutual undertakings, along the lines indicated, which are acceptable to the Court. The views of the TPC will of course be important to this connexion. ---T simply want to stress that each case will have to be dealt with in the light of its own facts and surrounding circumstances. Nothing I have said should be taken as disapproving the practice adopted here or obtaining wide-reaching undertakings in the early stages of such © 1983, Honour elaborated upon the; subject matter of the final on 22 re wet ee te a 28. litigation, so that all parties involved can concentrate on preparing for that litigation, free from concern about what may be happening to shares in the market place or in deals arranged behind closed doors. The main point which emerges from these proceedings is that, on proper notice and proper material, a party should be able to have injunctions varied, or to be relieved of its undertakings, where the justice of the developing situation so requires. The fact that others have been similarly bound, all have acted for some time on the assumption that ali parties will continue to be bound, is a consideration zrmportant to the exercise of discretion, but is not necessarily conclusive. I shall sit again, at times to be arranged, to -determine the form of, and to receive, appropriate undertakings and to consider the future conduct of these proceedings and of the related matters VG No 82 and VG No 126 of -1983." The transcript records his Honour as stating on 22 August 1983: "In this Notice of Motion by Fibre Containers Limited and other resvondents, I have prepared reasons for judgment which I shall shortly publish. Since I do not intend to make any order in the matter today, I shall read the last three pages of iy reasons so that the parties can understand the nature of my decision: The arguments against granting the present application are cogent . . . ta consider the further conduct of these proceedings and of the related matters, VG 82 and VG 126 of 1983. I publish my reasons for judgment. Subject to any submission to the contrary, TI proposes to adjourn now until 10.15 next Wednesday morning, 24 August. I shall then hear submissions about the precise form of Tresh undertakings and I hope receive such undertakings and release all parties from their existing undertakings. 29. After that, I think a reasonable time should be allowed in which negotiations between parties can proceed and thought can be given to the future course of litigation in the three matters before me. I propose to list all three matters for directions hearings on Tuesday 6 September 1983. If IT can repeat the gist of what I have just said, I propose to adjourn now until 10.15 on Wednesday, 24 August, on the question of undertakings and then, subject to anything that may be said at that time, to adjourn further until Tuesday, 6 September , to allow the dust to settle, if I can put it like that, and any further submissions to be made as to the further conduct of the three matters." On 24 August 1983, after making the order set out above in these reasons which is the subject of this appeal, his Honour adjourned the directions hearings in all three actions, the §.C.I. action, the T.P.C. action, and Application VG 126 of 1983, to a date to be fixed. This appeal is brought from an interlocutory order which involved the exercise of a discretion by the primary judge. It is well established that there are severe constraints upon an appellate court in dealing with such an appeal: see Adam P. Brown Male Fashions Pty Ltd v. Philip Morris Incorporated and Philip Morris Ltd (1981) 55 A.L.UR. 548, at pp 550 ff. At p.550, second column F, four members of the High Court (Gibbs C.d., Aickin, Wilson and Brennan JJ) pointed out that, although there is also contrary authority, there is authority that before an appeal court can interfere with such an order the decision appealed from must work a substantial injustice to one of the parties and there must also be error of principle.- Whilst the High Court did not expressly disapprove such a proposition, non-acceptance of it is perhaps implicit in the further statement ee ee 1 30. at p.550 second column G, that it is "unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various". It may be added that it seems difficult to conceive how an interlocutory order which is productive of substantial injustice to one of the parties can be made without error of principle, but as will appear, I have found it unnecessary to express a concluded view on that question. Compare, however, House v. R. (1936) 55 C.L.R. 449, at p.505, where Dixon, Evatt, and McTiernan JJ. pointed out that, in deciding whether an error has heen made in the exercise of a discretion, even if the error 1s unidentifiable if upon the facts the decision "is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the dicretion is reviewed on the ground that a substantial wrong has in fact occurred". Certainly, on any view of the matter, "the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration": Adam P. Brown Male Fashions Pty Ltd, supra, p.551, first column B. If there must also be error of principle, the judgment above referred to from House v. R., supra, provides a classic exposition of what that involves. Commencing at the top of p.504, their Honours said: "It is not enough that the judces composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some wee ee ee a ee ee eee 31. error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or effect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise his own discretion in substitution for his if it has the materials for doing so." Then follows the passage set out above. Whilst according due respect to his Honour's view, I am in favour of allowing the appeal because I am satisfied that discernible error of principle in the sense above indicated did intrude into the primary judge's deliberations and because I am persuaded that his Honour' s order or any other interference with the undertakings which have stood from the commencement of this litigation would have a serious effect which is substantially unjust. It is accordingly unnecessary for me to comment further upon what course I would consider appropriate if substantial injustice appeared without other identifiable error of principle. It is, however, my tentative view that, if this Court were persuaded, as Iam, that the order under appeal involved a miscarriage of justice, that not only would establish that, as an interlocutory order setting aside or varying a previous order, it must be infected by error of principle, but also would constitute a sufficient basis for this Court's intervention. I should add that I do not think that the joint judgment in Adam P. Brown Male Fashions Pty Ltd, supra, is authority for the propesition that there can be no error in principle if, after extensive argument which covered the entire ground, a judge gives an ex tempore (or quick) judgment since he must have had the relevant considerations to mind and given them proper consideration. a mC ee 24 ~ a. each een ne ere Ee tee nt cent nen er ee a ee re 32. A proper appreciation of this controversy and the need to allow the appeal requires that the order appealed from to be placed in historical perspective. This is not the occasion on which to consider the suitability of the undertakings in the form in which they were given on 23 May or the appropriateness otherwise of the course which was followed. Although it does not much matter for present purposes, the primary undertakings were those of A.P.M. and $.C.I. Neither offer can proceed if the offeror (or the offeres) is restrained. The ancilliary undertakings of F.C.L. and the Amatil shareholders were largely if not wholly irrelevant, except perhaps as insurance that neither A.P.M. nor §.C.I. would circumvent its undertaking, and even for that purpose it is doubtful if undertakings from F.C.L. and the Amatil shareholders were necessary. It may be added that it is not easy to perceive why F.C.L. and the Amatil shareholders are joined in the T.P.C. action, or indeed why it was proper for them to be joined. Reference has already been made to the absence of any allegations against them in the pleadings and TI do not find it obvious how a shareholder who sells or the company in which shares are sold can ordinarily be inculpated in any breach of s.50 by the purchaser of shares. It would be extremely regrettable if F.C.L. and the Amatil shareholders had been joined in the T.P.C. action merely as a means of "frightening off" F.C.L. and the Aratil sharsholders from the A.P.M. bid in order to ensure that that bid did not succeed, whatever the merits, particularly now that the attitude of F.C.L. and the Amatil shareholders has in fact been | 33. influenced by the "risk" to which they consider they are exposed. It would, in my opinion, be quite wrong for any governmental agency to seek to usurp the functions of the Courts by attempts to biurf apparently innocent parties by threats. However, I do not say that that has occurred in this case and there 1s no present reason to discuss such matters further. The object of the undertakings is not in doubt and their effectiveness has not been questioned. It is now accepted by all parties that there was power to accept the undertakings in the T.P.C. action of all concerned, including 5.C.I., and it is not in contest that the undertakings were then appropriate. lf, when the T.P.C. action came before Northrop J. on 23 May 1983, the Trade Practices Commission had prosecuted its application for an interlocuory injunction, it would at least have been necessary for it to establish that there was a serious question ta be tried: Australian Coarse Grain Pool Pty Ltd v. of Barley Marketing Board yueensland (1983) 46 A.L.R. 398 ver Gibbs C.J. Had that been established, at would then have been necessary fIor Worthrop J. to determine whether or not an interlocutory injunction should have been granted to restrain the A.P.M. takeover bid proceeding by reference to the balance of convenience. That would not have been an easy task. There would have been many factors to be considered. It is now impossible to know the strength of the case which the Trade Practices Commissicn could have raised against A.P.M. at that point. A restraint ae ee ~~ se te 34. upon the A.P.M. takeover bid twould potentially have been of direct effect not only upon A.P.M. but also F.C.L. and the Amatil shareholders, and indeed upon the public shareholders in F.C.iL. who were not before the Court: cf: Hartlepool Gas and Water Co. v. West Hartlepool Harbour and Railway Co £18651 12 L.T. 366, 368; 4 Halsbury's Laws of England, Vol. 24, para. 1045. In that connection, it might have been significant that the A.P.M. offer was significantly higher than the §.C.I. offer. Sub-section 80(6) of the Act would have precluded the exaction of any undertaking as to damages from the Trade Practices Commission. The absence of such an undertaking would have had to be taken into account in the context that there was a vival bidder, §.C.I., and the advantage which it would, or at least might, take of the Trade Practices Commission's attack on A.P.M. As it was put to us by counsel for $.C.1I., "...5.C.1. endeavoured to ensure that the interests of T.P.C. would be both maintained and manifested by appropriate action". In considering any possibility of requiring $.C.I. to submit to a like restraint as a condition of granting an interlocutory injunction against A.P.M., it would have been necessary to keep in mind again the position of F.C.L. and its shareholders; the matters now raised by them in support of the application for release which has led to the present appeal would no doubt have been deserving of very considerable weight on that occasion. If F.C.L. and the Amatil shareholders had then taken their current stance that they do not intend to deal with A.P.M. while the T.P.C. pursues its claim against it ana that claim is unresolved, it might well have been thought that that was amatter for them and that, in those circumstances, they should not be embcoiled in the litigation. wheats tee 2 hee ' ae 35. But it might then also have been thought that an injunction against A.P.M. should be refused as it became unnecessary. It 1s @ special feature of this dispute that, in order to acquire control of the "rarget company", F.C.L., an offeror has only to obtain one group °'of shares, those held by the Amatil shareholders. Further, there 1s no suggestion that any other bid is likely to be made and A.P.M. and §.C.I. are the two major producers of the raw material used by F.C.L. Particularly perhaps if the case against A.P.M. at that time was not especially strong, it might have been thought better to refuse an interlocutory injunction restraining the takeovers from proceeding, leaving the Trade Practices Commission to apply for an order of divestiture under s.81 of the Act if it succeeded against A.P.M. at the trial. Especially in the context of rival bids, appropriate injunctions might often be only those which are necessary to ensure the effectiveness of any divestiture order which may be made in due course. Northrop J. was spared the need to consider these and all the other various matters which would no doubt have been ventilated through the ingenuity of counsel for the different pacties. The parties struck a bargain. Cross-undertakings were given. It was mutually agreed, in effect, that until the determination of the T.P.C. action or further order neither takeover bid vould proceed. It was not for the Court on the current application for release to review the outcome of the proceedings on 23 May or to reconsider, de novo, the balance of convenience between the parties and perhaps the public shareholders. Wnat was done on 23 May stands as the startire point and its correctness 1s not in question. 36. Nonetheless, there was undoubtedly power to grant the applications for a release of the undertakings and indeed, other considerations aside, that power was by the words "or further order" implicitly reserved by the undertakings themselves: Chanel Ltd v. F.W. Woolworth and Co Ltd £19641 1 W.L.R. 485, 492. However, it does not seem that such' a qualification in the undertakings was essential; the undertakings were interlocutory and remained under the control of the Court. In Chanel Ltd, supra, Buckley L.d.,-with whom the other members of the English Court of Appeal agreed, said at the foot of p.492 and the top of p.493: "Even in interlocutory matters a party cannot fight over again a battle which has already been fought unless there has been some significant change of circumstances, or the party has become aware of facts which he could not reasonably have know, or found out, in time for the first encounter. The fact that he capitulated at the first encounter . cannot improve a party's position." In Adam P. Brown Male Fashions Pty Ltd, supra, Gibbs C.d., Aickin, Nilson and Brennan JJ. said in their joint judgment at p.551 first column C; "Just as an anterlocutory injunction continues 'until further order' so must an interlocutory order based on an undertaking. A Court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which vender its enforcement unjust..." ~ or wee ee, eee eee ane mene ae ee nn All ea tee ee 37. At letter D, their Honours went on to say that the changed circumstances must be established by evidence. Then, at letter F and thereafter, it seems to have been accepted that subsequent discovery that the undertaking which there had been given by Lhe defendant "was restrictive of its freedom to prepare its defence in the way it wished to do so" constituted changed circumstances which it was held warranted, 'in all the circumstances, a modification of that undertaking. Order 35, sub-rule 7(2)(c), now permits this Court in its original jurisdiction to vary or set aside an interlocutory order "if it thinks fit". It is unnecessary to consider whether that rule effects any significant departure from the previous position. I doubt whether it does. The discretion vested by the rule in the Court plainly cannot be exercised arbitrarily. Without seeking to express an exhaustive statement of the circumstances which might be appropriate for consideration in the exercise of the discretion, 1t seems safe to assume that they will generally be those described in Adam P. Brown Male Fashions Pty Ltd, supra. Whether or not "new facts" in the sense there referred to are always necessary under 0.35, sub-rule 7(2)(c), the parties seeking the discharge or modification of an interlocutory order will have the onus of establishing that enforcement of the order is unjust. In the absence of "new facts", it will not ordinarily be unjust to insist that a party abides by an order made or an undertaking given. Even where "new facts" can be pointed to, justice may require that the order or undertaking be adhered to, for example if any alternative course would be productive of injustice to the other party. In the eee ee mee ee ee oe ke ee ee ee re ee 38. event that, whichever course is followed, there will be detriment to one party or another, the court's task will not involve a mere reassessment of the balance of convenience. The onus will remain on the party seeking to have the existing order set aside or varied. Even if the possibility be acknowledged that, despite a lack of "new facts", substantial detriment which an order is causing one party may constitute injustice in the absence of some detriment to the other party from the variation or alteration of the order, in a contest in which, whichever course if followed, there will be detriment to one or other party (and this case provides a striking example of such a contest), an absence of "new facts" will usually be of critical significance and will generally be decisive that justice requires that the order he permitted to stand. In any event, in my opinion, there were no "new facts" established in the present case to support the applications for release from the undertakings and, further, it could not be concluded that the maintenance of the undertakings would he unjust. It may also be noted, although I have not found it necessary to rely upon this matter as an additional consideration, that his Honour's order involved a devarture fron not only the undertakings of 23 May but also his own previous order of 20 July. "New facts" do not arise for consideration when that which occurs ought reasonably to have been anticipated, still less when what has occurred is no different from what was actually expected. It is implicit in the description of the effect of the undertaking in Adam P. Brown Male Fashions Pty Lrd. supra, as "discovered subsequently" that the High Court accexsted I - 39. in that case that the effect which the undertaking proved to have was unexpected at the time when the undertaking was given. Further, there the "grounds on which the application for release was based ... were supported by evidence" (p.551, first column). Woodward J. accepted the affidavit evidence by the directors of F.C.L. However, in my opinion, that evidence does not establish the existence of new facts. There has not been unforeseeable or indeed unforeseen delay and there is no suggestion that A.P.M. has contributed to any delay. Indeed, the litigation has proceeded at a cracking pace. The first step, $.C.I.'s takeover offer only took place in May and the trial could and would have commenced in August and finished this year but for the application which has led to this appeal. The fact that the trial will occupy a substantial period of time would come as no suprise to anyone. It may conveniently be added at this point that it was not for the learned judge from whom this appeal is brought to concern himself on the subject application with the possibility that, in the event of an appeal after the trial, either the trial judge or an appeal court might have imposed a further restraint on the freedom of the parties to deal in the shares in F.C.L. pending the determination of the appeal. His Honour referred to that possibility in at least two places and obviously, and in my opinion erroneously, placed considerable weight upon it as a factor favouring the order which he made. Likewise, possible adverse business consequences to F.C.L. were both reasonably foreseeable and in fact expected. Whilst I have some misgivings concerning the position of the anak 40. public shareholders, it seems reasonable to proceed on the basis that their interests accord with those of the Amatil shareholders, and that,' when the Amatil shareholders and the directors of F.C.L. decided that the undertakings should be given on 23 May 1983, the interests of F.C.L. and all its shareholders were thought to be served by such a course. The submission that new facts exist because the details of the detriment which has now emerged were not and could not have been foreseen is without substance, at least where, as here, what has occurred is not different in character and cannot be considered markedly different in degree from what was or ought to have been anticipated. Tt is not without significance that there is no evidence to suggest that anything which has occurred has come as a suprise. Nor is there any finding by Woodward J. that actual or potential detriment to F.C.L. exceeds what was or could have been anticipated by F.C.L. or its shareholders or S.C.I. as at 23 May 1983. The further submission that F.C.L. and the Amatil shareholders gave the undertakings merely in a spirit of co-operation and without heed to consequences or at least without hope of benefit seems to me fanciful. Nor are the facts that the sale of the shares in F.C.L. to either A.P.M., or S.C.I. will be worth a very large sum to the present shareholders in F.C.L., or concerning the amount which could be earned by the investment of that sum, or that the interest on that sum would exceed the profits of F.C.L. over a like period, "new facts". Such matters would have been obvious commercial considerations at the time the undertakings were given. Similarly, it would have been obvious that F.C.L. and the - 4l. Amatil shareholders (and the public shareholders) and §.C.I. are innocent (or are not alleged to be otherwise) and may have no recourse for any loss which they may suffer. There is no basis in the material for a conclusion that all parties did not consider, on adequate opportunity, all the relative advantages and disadvantages when the undertakings were given. The only changed circumstances are the altered perceptions which have been adopted by one or more of the parties as to how its interests will be best served and the altered attitudes which have been taken to the respective bids and the litigation, including the T.P.C.'s determination to proceed. If these are "new facts" in any relevant sense, which I take leave to doubt, they must I think be accorded reduced importance in the overall assessment of what is just and certainty they do not seem to be matters which could normally be regarded as primary considerations in such a determination. When attention is focused more directly on the question of whether it would be just to release the undertakings, the balance seems to me to lie heavily in favour of A.P.M., so much so that no other view appears open. It is true that F.C.L. its shareholders, and S.C.I. are all innocent parties, as indced they were in May this year. The proceedings and the attendant publicity are causing some damage to F.C.L. which will in turn operate to §.C.1I.'s detriment if it acquires the shares in F.C.L. There are no undertakings as to damages in their favour. What that damage is, or will be, is oom eke = te econ ee a oes oe Dad Ww largely speculative, perhaps necessarily so at this point. Both $.C.I. and A.P.M., however, presently remain anxious suitors for the shares in F.C.h. There isa theoretical possibility that one or other of A.P.M. and 3.C.1I. might on application be permitted by the National Companies Securities Commission to withdraw or reduce its bid, for example because of damage to F.C.L.'s business, or that one or both bids might expire. There is no basis upon which that possibility couid at this time be considered to be other than remote, even 1f regard is had to evidence sought to be tendered on the appeal by F.C.L. and the Amatil shareholders to establish that the present expiration date of the §.C.I. bid now is 4 November 1983 and that that of the A.P.M. offer is 13 November 1983. Either date can be extended on application by the offeror. Indeed, F.C.L. and the Amatil shareholders have been confident enough of their position to reject the lower S.C.I. bid. They are also confident enough to adopt the attitude that they will not deal with A.P.M. until ait is cleared either by the Court cr the Trade Practices Commission. And, the damage which is deposed to 1s apparently not so acute as to cause an announcement that the Amatil shares are not for sale to either bidder, a course which would presumably mean the end of both takeovers and the proceedings and any damage which has been occasioned, or even to state, without qualification, that the Amatil shares are not for sale to A.P.M. at any time or in any circumstances or for any price. There is no present reason tc doubt that, if at the end of the T.P.C. action A.P.M. is free to bid and is the highest bidder, it will have its bid recommended and accepted. 8 ete ' 43. Although it was implicit in each of the undertakings that it might, in appropriate circumstances, be released, the mutual undertakings provided a basis upon which the litigation was conducted from the very inception and APM has acted both 'within and without the litigation on that basis. Steps have been taken, e.g. applications have been made and decided, directions have been given, including leave to amend the Statement of Claim with, one would suppose, at least minor delay. A.P.M. has forfeited or been denied the opportunity to resist the interlocutory injunction and acquire the shares at that time. Although it is not nov possible to do more than speculate what might have occurred had A.P.M. successfully resisted the interlocutory injunction, there is certainly nothing to indicate that the Amatil shareholders would not then have accepted A.P.M.''s offer which was significantly higher than the §.C.I. offer, or that F.C.L. would not have registered transfers of the Amatil shares to A.P.M. Whilst the material does not really permit one to be certain, at least the S.C.I. affidavit suggests that that might well have occurred. That prospect has now been denied A.P.M. at least until the determination of the T.P.C. action and almost certainly forever if the order appealed from stands. Even if all undertakings are released, F.C.L. and the Amatil shareholders say that they will not deal with A.P.M. prior to the determination of the T.P.C. action while the Trade Practices Commission continues (as it does) to maintain its assertions against A.P.M. On the other hand, it is plain that it is intended by §.C.I. and F.C.L. and the Amatil shareholders to continue immediately and to culminate their transaction, if possible. The possibility of a fresh offer by A.P.M. of sucha ; - 44, magnitude that F.C.L. and the Amatil shareholders will wait must be heavily discounted and, in any event, it is grossly unfair to A.P.M. to be obliged in this way to increase its bid. If the order stands and the other parties are now permitted to resile from the undertakings insofar as is necessary to permit the §.C.I. offer to proceed, A.P.M. will clearly sustain a powerful and grave detriment. To my mind, no conclusion is possible other than that, in the circumstances, that would be plainly unjust. If it is appropriate to weigh the various advantages and disadvantages to the different parties to see how the detriment to A.P.M. measures against the detriment to ail or any of the other parties, in my opinion there is no possible way in which the detriment to A.P.M. could be equalled or exceeded by whatever disadvantages accrue to the others by reason of the position which they voluntarily accepted in May in what I do not doubt they then perceived to be their own best interests. It could not be suggested that Woodward J. failed to appreciate the practical consequences of his order upon A.P.M. However, he seems to have been influenced by, inter alia, the innocence ot the other parties, the effect of their undertakings on them, the time required to dispose of the dispute (including appeals), and, perhaps, although it is not entirely clear, his assumption "that A.P.M. should be restrained from acquiring any additional shares in Fibre Containers Ltd before this litigation is concluded". In my opinion, in the absence of either an application for an interlocutory injunction against A.P.M. or any material to support such an apolication, no warrant whatever c » existed for such a factor being considered, or indeed fer 45. separating A.P.M. out from the other parties which had given undertakings. It is unnecessary to consider whether, as was submitted, his Honour attached* weight to the fact that allegations or a claim had been made against A.P.M., that it had been responsibly made, and/or that it had been made by a government authority; if he did, that also was an error. The Trade Practices Commission is just another litigant and its assertions have no special status and carry no particular weight. In the absence of material to the contrary, A.P.M. must be treated as entirely "innocent", whatever allegations were made against it and irrespective of by whom they were made. Even leaving out of account the possibility that the primary judge made an unwarranted assumption against A.P.M. that it ought to have been restrained, this approach of the primary judge seems to me to have been vitiated by his regarding of the situation in which §.C.I. and F.C.L. and the Amatil shareholders find themseives as having been produced by changed circumstances. In my opinion, his Honour failed to distinguish sufficientiy between the assessment of what was or might have been just and convenient in May, and what is now just, taking into account the undertakings then given, the consequences which have flowed from their existence, and the onus which fell upon those seeking ta escape. Accordingly, in my opinion, the primary judge erred in principle in the exercise of his discretion. Further, the reasons which I have qiven for my opinion that the circumstances were such that justice required the continuation of the undertakings lead inevitably in this case to the conclusion that the order releasing the undertaking was productive of injustice to the appellant, A.P.M. 46, Interlocutory appeals are properly discouraged by the Courts, even though many interlocutory orders may have a practical effect on substantive rights. However, this is an exceptional case. Although the order appealed from was technically only procedural, it effectively determined, in a practical sense, that §.C.I. not A.P.M. should win the race for the F.C.L. shares. That was done in the absence of material to support a conclusion that A.P.M. would breach s.50, or any investigation of the merits. Given the circumstances in which 1t was made, including the anterior events, the order involved a miscarriage of justice. The contrast between the nature of the order under appeal in this case and that made at first instance in Adam P. Brown Male Fashions Pty Ltd, supra, which was entirely devoid of significance for any purpose other than the conduct of the litigation, is too stark to requice elaboration. For the above reasons, I am of opinion that the appeal should be allowed. The parties should have an opportunity to make written submissions in respect of the costs here and below. I cortify that this and the "57 preceding ges are a irue copy of the reasons for judgment herein of His Horour Mr Justice Fitzgerald Pook 6. PRTe~ Accociate Dated 20 deg teeten , (EFS '. IN THE FEDERAL COURT OF AUSTRALIA " VICTORIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN : u . y ) NO. VG 150 OF 1983 ) A.P.M. INVESTMENTS PTY. AND: LIMITED ' j So im a Appellant TRADE PRACTICES COMMISSION CORAM : PLACE: Mebourne DATE: 21 September 1983 s ' Sy) First 4 Respondent FIBRE-CONTAINERS LIMITED, LEIGH-MARDON PTY. LTD., ASSOCIATED NOMINEES PTY. LTD., FRANCIS BURKE, PETER BECKER, WILLIAM GIBSON, JOHN FRANCIS ELFVERSON (Fifth to Eighth named Respondents as Trustees for Leigh-Mardon Pty. Ltd.) and ARTHUR KEVIN SMITH Second to Ninth Respondents SiC.I. OPERATIONS PTY. LTD. (S.C.1. PACKAGING PTY. LTD.) + Tenth ~ Respondent Smithers, A.C.J., Fitzgerald and Jenkinson, JJ. : i Netthezateee a terrane ahrteon nat Lie ae os ann emrer Saber oat D Sm ee a, Bo aa nD EE Paty Anette ok acres we mee —e tS ta edna FL, eee eer tt ae Oe pa WE eee ane wee aaa ROFL ELeS PRLS ee atm Oe Om ener MR tial idee reenacaaee toetin pe nee , oro, rc. —od ee ene Ae wie H Bae NT BEY PEE ABET EEE NN oy EP, RR NAY TE a + ¥ 2. ° REASONS FOR JUDGMENT JENKINSON J. Appeal by A.P.M. Investments Pty. Ltd. against orders releasing all the respondents to a proceeding in this Court's original jurisdiction and certain other persons from undertakings previously given by them to the Court. The application' of the Trade Practices Commission (the Commission), by the filing of which that proceeding was commenced, claims injunctive orders to prevent the first-named respondent in the proceeding (APM Investments ) from acquiring any shares in the capital, or any assets, of the second-named respondent in the proceeding (FCL). On and since the commencement of the proceeding about 74 per centum of the shares in FCL have been held by the respondents in the proceeding other than APM Investments and FCL. Both FCL and the third-named respondent, by which almost 71 per centum of the shares in FCL have been held during that period, are subsidiaries of a company named Amat1l Ltd.. APM Investments has held since the commencement of the proceeding in May 1983 about 18 per centum of the shares and the other shares (about 8 per centum) have been held during that period by more than 700 persons who are not parties to the proceeding. The grounds of the claims disclosed in the amended statement of claim are that APM Investments proposes to acquire all the shares, that ,the. \ lee tf ola a tle 7 -t roe - a Serer eee > a [. '" ELT REEF EIT I TT Ee PE FONT PORTIS TO ETT OTE EE Te 3. respondents other than FCL and APM Investments intend to consider acceptance of an offer by APM Investments to acquire all their shares and that acquisition of all the shares would constitute a contravention of s.50(1) of the Trade Practices Act 1974. That sub-section provides: "A corporation shall not acquire, directly or indirectly, any shares in the capital, or any assets, of a body corporate if - (a) as a result of the acquisition, the corporation would be, or be likely to be, in a position to control or dominate ' a market for goods or services; or (b) in a case where the corporation is in a position to control or dominate a market for goods or services - (i) the body corporate or another body corporate that is related: to that body corporate is, or is Likely to be, a competitor of the corporation or of a body corporate that is related to the corporation; and (ii) the acquisition would, or would be likely to, substantially strenthen the power of the corporation to control or dominate that market." On 23 May 1983 an application for interlocutory injunctive orders, claimed in the application against all the respondents, came before Northrop J.. His Honour was asked by all parties to accept certain undertakings to the Court which senior counsel for the applicant Commission told His Honour that counsel for the Commission "envisage would take the place and stand instead of interim injunctions which we would otherwise have sought". As entered, the order made on 23 May 1983 by Northrop J. - - . ' . - a ~ a weet > 4.0... & recited the undertakings incorrectly, but this Court made an te ner eth at > order, pursuant to 0.35 R.7(3) of the Federal Court Rules, eyo correcting the errors. The "corected order is in these terms © (which were proposed by the parties to the proceeding): f i] ! "Upon the following undertaking being given by the First Respondent, S.C.I. Operations Pty. Ltd. and S.C.I. Packaging Pty. Ltd. :- . ° A.P.M. Investments Pty. Ltd., s.c.I. . Operations Pty. Ltd. and S.C.I. Packaging Pty. Ltd. each by their respective Counsel - undertake to the Court that they and any related corporations will not, prior to the hearing or determination of Application No. veGed of 1983 or until further order, acquire 2 or take any further steps to acquire any shares in the capital of Fibre Containers ' Ltd., AND upon the following undertakings being given by the Second to Ninth Respondents:- that until the determination of these proceedings or further order - 1. The Third to Ninth Respondents will not . sell to or accept any offer from A.P.M. INVESTMENTS PTY. LTD. (A.P.M.) (or any related corporation of A.P.M.) or S.C.I. PACKAGING PTY. LTD. (S.C.1I.) (or any , related corporation of S§.C.I.) to 1 purchase any shares held by them or on their behalf in FIBRE CONTAINERS LTD. 2. The Second to Ninth Respondents will not aid, abet, counsel or procure A.P.M. (or any related corporation of A.P.M.) or I S.C.~E. (or any related corporation of . S.C.I.) to acquire directly or fe : indirectly any shares in FIBRE CONTAINERS LTD. or in any way be Knowingly concerned in or a party to any such acquisitions. ars AND subject to the making of an t appropriate Declaration by the National \ Companies and Securities Commission to enable effect to be given to the : popece nce pe es c ~ ites Fore BERRIEN POT TT (BR PTOI OD TE TE Ty PTET EET a! TIS: ay pate GPa ee IT TERS te fh ae Ver De asa? nee tT eee ae ot West ay a Ne eye i . a : . a . woe oy ' ~ mete - ten f ao. e* . ~ owe . . e . a . . e 5. undertakings herein pursuant to the Companies (Acquisition of Shares) (New South Wales) Code. THE COURT ORDERS THAT: 1. The Application to proceed by way of pleadings. 2. The Applicant to deliver their Statement of Claim on or before 30 May 1983. 3. The Respondents to deliver their Defences on or before 6 June 1983. 4. Any subpoenaes to produce documents to be ' , made returnable before a Judge of this Court on Tuesday 14 June 1983 for directions with . respect to the production of document according to those subpoenaes. 5. The parties be at liberty to deliver Notices . to Admit to any other party on or before 28 June 1983. > 6. Any Notices to Admit to be the subject matter of Responses by the party in receipt therecf on or before 8 July 1983. 7. The Application herein be fixed for hearing on Monday 18 July 1983. 8. The Directions hearing be adjourned to 9 June 1983 at 10.15. 9. Liberty be reserved to any party to Apply upon giving 48 hours notice to the other party. 10. The cost of the day to be reserved." The evidence before Northrop J., and before Woodward J. by whom the undertakings were released, established that S.C.I. Operations Pty. Ltd. (S.C.I. Operations) and S.C.I. Packaging Pty. Ltd. (S.C.I. Packaging) were subsidiaries of Smorgon Consolidated Industries Pty. Ltd.; and that S.C.I. Packaging had proposed, 6. : ° shortly before APM Investments proposed to acquire all the shares in FCL, to acquire those shares itself; and that S.C.I. Packaging was persevering in the desire to make that acquisition. ec It was not suggested, except by AMM Investments as a consequence of a conclusion by this Court, if such a conclusion were ever reached, that its own acquisition of the shares would contravene the sub-section, that acquisition of the shares by S.C.I. Packaging might contravene s.50(1) of the Trade Practices Act 1974. The price proposed, at and before commencement of the preceeding, to be offered by S.C.I. Packaging was $3.50 per share, . whereas the price proposed by APM Investments was $4.00 per share. . wa In August 1983 the Court was moved, by counsel for all ° the respondents except APM Investments, for these orders: "lh. Upon the following undertakings being given by the Second to Eighth Respondents: - That whilst the Trade Practices Commission holds the view that acquisition by A.P.M. Investments Pty. Limited (or any related corporation of A.P.M. Investments Pty. Limited) of the shares of Fibre Containers Limited would be in breach of Section 50 the Trade Practices Act 1974 or until this Honourable Court decides to the contrary of that view:- ' . . "(i) As to the Third to Eighth Respondents they will not nor will any of them sell to or accept any offer from A.P.M. Investments Pty. . Limited (or any related corporation of A.P.M. Investments Pty. Limited) : to purchase any shares held by them , or on their behaif in Fibre . ' Containers Limited. . . e . ° oo Serra RWIS WATE OE Oe CEE he Pap ed PSS SORT VET IE, TT AT E77, PRG EE SOT RIO 4 -4 i ae o) . . ' . - ° . ° ° . 2 os soa os .- (ii) As to the Second to Eighth Respondents they will not aid, abet, counsel or procure A.P.M. Investments Pty. Limited (or any related corporation of A.P.M. .Investments Pty. Limited) to acquire directly or indirectly any -shares in Fibre Containers Limited " - or ain any way be knowingly concerned in or a party to any such acquisitions. . THE COURT ORDERS THAT: 7 (i). The Second to Ninth Respondents - inclusive be and are hereby released from the undertakings given by them to the Court on 23rd May 1983 in relation to- §.C.I. Packaging Pty. Limited (or any related corporation of S.C.I. Packaging Pty. Limited). . _ (ii) S.C.I. Packaging Pty. Limited (or any related corporation of S.C.I. Packaging Pty. Limited) be and are hereby released from the undertakings given by ' them to the Court on 23rd May 1983. | , 2. Such further orders as the Court sees fit." Counsel for S.C.I. Operations and S.C.I. Packaging were A heard, as well as counsel or solicitor for all the parties to the proceeding. On 24 August 1983 Woodward J. made the following orders on the motions: "UPON the following undertaking being given by the Third to Eighth Respondents:- That until the determination of these + proceedings or further order they will not sell to or accept any offer from A.P.M. Investments Pty. Limited ("APM") (or any related corporation of APM) to purchase any shares held by them or on their behalf in Fibre Containers Limited. ' « « 1 RR ER ne Ee SOI REET SE ELLE AN AEE IE AT PLT PEA I AEP TET OL ESOT GROEN at REE NH EOP AE, ry Poa ee eee . - 8 : . 2 1 2. ali st . we | | 8. AND UPON the following undertaking being given by the Second Respondent:- That until the determination of these proceedings or further order it will not aid, abet, counsel or procure APM (or any related corporation of APM) to acquire directly or indirectly any shares in Fibre Containers Limited or in any way be knowingly concerned in or a party to any such acquisition. THE COURT ORDERS THAT: -— l. The First Respondent and related companies be and are hereby released from the undertaking given by them to the Court on 23rd May 1983. 2. The Second to Ninth Respondents inclusive be . and are hereby released from the undertakings given by them to the Court on 23rd May 1983. 3. S.C.I. Packaging Pty. Limited, S.C.I. Operations Pty. Limited and related companies be and are hereby released from the undertaking given by them to the Court on 23rd May 1983. 4. Costs of the Notice of Motion of the Second to Ninth Respondents dated lith August 1983 reserved." No undertaking was given by or on behalf of the ninth-named respondent because he was too ill to give either an undertaking or authority for an undertaking on his behalf. It is, I think, unnecessary to consider the references in the orders to "related companies". The evidence adduced on the motions consisted of four affidavits and the exhibits thereto and the oral evidence of one of the deponents. That evidence disclosed the shareholdings in FCL which I have summarised and the belief of the respondent Peter Becker, the chairman of the directors of FCL, whose affidavit was TT ARO aa ae PE "1 + METS EO PTET PRES SHOT ONT, ETT YE Ie YO ET RTF ect . 9. : sworn on ll August 1983, that the likely duration of the proceeding and the uncertainty which would in his belief attend the outcome of the proceeding was disruptive, and would continue . > « to be disruptive, of FCL's business; and was "unsettling", and would continue to be unsettling, to FCL"s employees and customers. The affidavit of the respondent Francis James Burke, which was sworn on 11 August 1983 and was read in support of the motion, included the following paragraphs: : . > "1. I am a Director and the General Manager of _ : Fibre Containers Limited the Second Respondent to these proceedings. ' 2. I have occupied these offices since 1973 and . as General Manager of the Second Respondent I am accountable to its Board of Directors for > the efficient management operations and profitability of the Second Respondent. 3. The Second Respondent is a manufacturer of corrugated and solid fibre containers (hereinafter called "Pibre Container Products") produced at plants located in Queensland, New South Wales, Victoria, South Australia and Western Australia which products are sold to consumers throughout those States and in the Northern Territory of Australia. The principal activities of the Second Respondent also include the manufacture and sale of folding cartons, plastic bags and timber products and general printing. . 4. The Second Respondent also has a fifty « percent interest in a company which manufactures corrugated and solid fibre . containers in Tasmania which containers are sold to consumers in that State. 5. The Second Respondent employs 1422 people of ' whom 1102 are employed in or in connection with the manufacture and sale of Fibre Container Products. . 6. The market in which the Second Respondent's > , ° se 2 . ° cent pap aye erg 73 aes SPT LIS SA ae My ae! - . - - ' taer L an -- wo .o¢ : . . . . ° 1 : . - " o, ? . ° . oe Sa precedee ante Dae ESC aE tee Mele COE A a I a le hab eps RIM tee SSR AE A ale ea tea ret Neate li te ban al ae Rts RES d | ( 10. , Products are sold (hereinafter called "the Fibre Container Market") is highly . competitive, the major competitors of the Second Respondent being James Hardie Containers Limited and VisyBoard Co.- Pty. Limited each of which competitors I estimate 3 to have a greater share of the Fibre Container Market in Australia than I estimate is held by the Second Respondent. 1 7. On or about 4th May 1983 S.C.I. Packaging Pty. Limited (hereinafter called "SCI") served upon the Second Respondent a Part A Statement pursuant to Section 16 of the : Companies {Acquisition of Shares) (New South : Wales) Code and in compliance with the requirements of Part A of the Schedule to . that Code stating its intention to make offers to acquire all of the Ordinary shares ' of the Second Respondent under a takeover scheme more particularly describe@ in the said Part A Statement. my ere eee ee Las OPP RNEE, SEP OREN ne PUNO Ne ies 8. On or about 13th May 1983 A.P.M. Investments Proprietary Limited (hereinafter callled "APM") served on the Second Respondent a Part A Statement pursuant to Section 16 of the said Companies (Acquisition of Shares) (New . South Wales) Code and in compliance with the requirements of Part A of the Schedule to that Code stating its intention to make offers for all of the Ordinary shares of the Second Respondent (other than those Ordinary shares to which APM is entitled within the meaning of sub-Section 7(3) of the said Code) under a takeover scheme more particularly described in the said Pact A Statement. eee ere gee ee ee ON we teen eee wv eee tee Alenia, 10. Certain publicity has followed the announcements of the proposals of APM and SCI to make takeover offers for the shares of the Second Respondent and the institution of proceedings in this Honourable Court by the Trade PracticesCommission to restrain APM from acquiring the shares of the Second Respondent to which APM's proposed takeover scheme relates and in consequence of that publicity the employees and the customers as well as the competitors of the Second Respondent are well aware of the proposals of a APM and SCI and of the said proceedings. " ll. Since the service of the Part A Statement of | , APM and SCI and the commencement of the ~ eT ee eet a mr eNO AE He Ce LRA cn al i Ee tm ke —. , « G =: 2 - , & il. proceedings hereinbefore referred to the intensity of price competition in the Fibre Container Market has grown and I have received reports from certain State Managers of the Branches of the Second Respondent that approaches have been" made to some of the large customers of the Second Respondent by competing fibre container manufacturers pointing out that as the Second Respondent is the subject of impending takeovers, the Second Respondent's position as a supplier is one of uncertainty and unreliability and that such customers should change their business to that of the competing suppliers. In a number of instances such approaches have been accompanied by substantial price cuts below the prices of the Second Respondent and although I have received no reports to date that the business of any large customers has been lost by the Second Respondent, it has been necessary for the Second Respondent to reduce the prices of its Fibre Containers Products to the relevant customers in order to retain the business with consequent loss of profitability in respect of that business. It has also been reported to me:- (1) That in Western Australia one of the major competitors of the Second Respondent in the Fibre Container Market has approached the Second Respondent's Sales Representative responsible for handling sales to the fishing industry and offered him alternative employment. (2) That in New South Wales three employees employed as Designers in the Second Respondent's Container Division in that State have been approached by two of the major competitors of the Second Respondent in the Fibre Container Market offering alternative employment. Designers are very important skilled employees in a fibre container making plant in view of the work they perform and the time which it takes to train them to perform such work. (3) That in New South Wales the Production Manager of the Second Respondent's Liquid Packaging Division sought permission to retire earlier than his normal retiring age in order to protect fae tate Mead oer oie a AP bene 2 ae aes a Sa Sanaa eee hee aanuinahenanata or ee boy tole (—. . 12. , his superannuation position which he 'y . felt might be at risk. , ' None of the employees so approached for ; alternative employment has accepted offers ; made to him and it has been possible to allay | the fears of the said Production Manager at 7 ' this stage. 13. It has also been reported to me that in relation to the General Printing Division of the Second Respondent known as Bell Press, E . competitors have attempted to persuade 3 ° certain large customers of the said Bell F . Press to take their business away on the 4 ° basis that upon the Second :Respondent being hy taken over, by either of APM or SCI, its c non-fibre container making activities will be wound up because each of APM and SCI is a paper manufacturer and will not be interested . to continue such activities. Such has been the seriousness with which such attempts have been regarded that the Divisional Manager of the said Bell Press found it necessary to write letters to its major customers and : annexed hereto and marked with the letter "A" is a sample of the said letter to which is - attached a list of the customers to which a . similar letter was sent. ° 14. Knowledge of approaches of the kind to which I have referred, the attempts to secure business from the Second Recpondent because of the takeover offers and the Court proceedings to which the Second Respondent is subject has spread through the various plants and offices of the Second Respondent and is unsettling and disruptive to the staff and the customers of the Second Respondent and injurious to the profitability of the Second Respondent. 15. Whilst it has to date been possible to date to retain customers (at substantial expense) and to retain employees to whom alternative ° ° employment has been offered and to allay fears of employees as to their future, I am concerned that it may not be possible to continue to do so aif the uncertainty ° attaching to the position of the Second Respondent continues for a lengthy period. It is now more than three months since notice of the takeover offers was received and it is almost the same period since the proceedings TD Fe a NE OTE VIMY TH — ' oe 13. ian this Honourable Court were commenced. I have been advised by the legal representatives of the Second Respondent that estimates of time likely to be taken before the proceedings in this Honourable Court are resolved are not less than three months and might be considerably longer. 16. In those .circumstances I' believe that the . . Second Respondent is being disadvantaged in the Fibre Container Market and in its business generally because of the uncertainty of its position and that the employees of the Second Respondent are being unsettled through uncertainty as to their future. I further believe that this uncertainty is being deepened not only by competitors but by the indeterminate period which will elapse before the situation is clarified by the determination of these proceedings and that the delay consequent thereon is and will continue to be disadvantageous to the Second Respondent, inimical to its business . interests and unfair to its management, employees and shareholders. 17. I am informed by the legal representatives of ' the Second Respondent that whilst in takeover situations not subject to Court proceedings certain minimum statutory periods must elapse before the outcome of the takeover becomes known, nevertheless in circumstances such as those of the Second Respondent (where one associated group of shareholders controls some 74% of the shares of the Second Respondent) the outcome of a takeover proposal would be known at the latest within six weeks of the service of a Part A Statement under the Companies (Acquisition of Shares) (New South Wales) Code. It follows in my respectful opinion that, in the normal course of events, any uncertainty as to the matters to which I have referred could reasonably have been tolerated by the management of the Second Respondent but such is not in fact the case here." Peter Becker deposed to his sharing "the beliefs and concerns" expressed in Mr. Burke's affidavit. u e « ° ° . os o* . Se a Oe Th AO IRR LT iS a Cr OE AS i a : : : : on . . by woe - - - be oe . * . her ve e - °, et ee < 2 . « . - . te we we TER ID ast . oO Q "y BS) J " 14... . « The application- had been ,filed on 20 May 1983. An affidavit which was sworn by Stanley David Martin Wallis on 16 August 1983 and which was read in opposition to the motion, included the following paragraphs: . 1. I am the Managing Director of Australian . Paper Manufacturers Ltd. ("APM"). I am ' authorized by the first named respondent ("Investments") to make this affidavit. Investments is a wholly owned subsidiary of APM. 3. On 23rd May 1983 Investments gave an undertaking to the Court that it would not, before the hearing and determination of the Trade Practices Commission's application, or ° until further order, acquire or take any further step to acquire any shares in the second respondent ("FCL"). That undertaking and the other undertekings given to the Court that day were given in the following circumstances. (a) On 4th May 1983 SCI Packaging Pty. Ltd. ("SCI") announced an offer to acquire -all the issued capital in FCL. ' {b) After considering the effects that a takeover of FCL by SCI would have on APM, APM decided to make a bid to acquire all the issued capital in FCL and on 19th May 1983 Investments announced a bid. (c) On or about 16th May 1983 the Trade Practices Commission ("TPC") sought undertakings from both scl and Investments that neither would proceed with its bid until the TPC had considered the matter and it also sought . ° undertakings from FCL. SCI, Investments and FCL each gave the undertakings that were sought. Wow produced and shown to me marked "SW1" are copies of the ° telexes setting out those undertakings. 4 4. As appears from all of those telexes which are exhibit "SW1" , each of the parties > . {including Investments) gave the undertaking aa a . 3 « « . ° eo 7 ° oo 9S SRR SIE TER pee 4 = weet ae recy OR TTS oe NR AE Ee SUPT ST GE ri Y 7 wa migt te "2 eres Ras ropa ag @ del ar : oe] ts jie nea a BSCR A AS AEA EAS A SAS AACS IRE Ae Eo da Ne werantrsion farina "eee ~ (° 15. that was sought on the condition that the other parties not only gave but also Maintained like undertakings. 5. To release FCL and SCI from the undertakings which they gave on 23rd May 1983 would change the whole basis on which Investments gave its undertaking: namely that the situation would be frozen pending resolution of these proceedings. To release FCL and SCI from 4 their undertakings while at the same time i requiring Investments to continue to adhere 4 to its undertaking would lead to Investments | being denied the opportunity to prosecute its bid for FCL without having any opportunity to contest the allegations made by TPC. If the damage which Messrs. Becker and Burke allege : is being done to FCL is as serious as they say, I assume that if FCL and SCI are . | released, FCL will seek to put an end to what 3 is described as the uncertainty of FCL's i future by recommending acceptance of SCI''s offer." The affidavit of George Castan was read. It includes the | following paragraphs: it | "il. I am the General Manager of papermaking operations of S.C.I. Operations Pty. Ltd. I | am authorised to make this affidavit on its ; behalf and on behalf of S.C.I. Packaging Pty. id Ltd. 3. S.C.I. Packaging Pty. Ltd. (which together with S.C.I. Operations Pty. Ltd. and other related companies is hereinafter referred to as "SCI") gave the undertakings contained in the exhibits to the affidavit of the said Stanley David Martin Wallace predominantly to . ensure that the Trade Practices Commission instituted and pursued proceedings under Section 50 of the Trade Practices Act 1974 against APM Investments Pty. Ltd. ("APM"). There were undertakings given by SCI prior to those referred to in the said affidavit which are exhibited thereto and marked with the letter "A". re 4. SCI believed that if such undertakings were a2, I Ne Te = a. ee ne NRE A RRS ee ee rege tat ae perenne - - 4 wot ra ' cea yk . aoe eee barat memanemanmetinandaemmn mie Peat mm mae ae ne es mans mn et te ee ' OT 2 ' + NSE Devnet fae ye UOm Cen Dee Ton tenen La) SP NUE eee ean vent eee Tn ee ed wi . ( 16. -° . : ° not given then the Commission would not institute and pursue such proceedings and ' that Fibre Containers Limited and its ' . shareholders ("FCL") were prepared to entertain offers by APM to acquire the 'subject shares. : . Prior to FCL making its application to the Court on the 20th of July, 1983 for a partial release from its undertaking, SCI was asked to indicate its attitude to such application. Consequent upon inquiries and discussions with the Trade Practices Commission SCI . formed the view that if it supported the application this might prejudice the prospect .! of the TPC maintaining its application against APM. Consequently SCI indicated to the Commission that in order to ensure the continuance of the proceedings SCI would . oppose the application by FCL. Notwithstanding that on the 19th July, 1983 ° the Commission circulated the telex being the exhibit marked "A" in the affidavit of Peter Becker, SCI considered that it had committed itself to oppose FCL's application and did so. we om per ey ee en er tr we a ees eee ene ee SH ne meena Pr RTD eo On or about the 8th August, 1983 FCL asked scr to indicate its attitude to an application by FCL and its shareholders (particularly Leigh-Mardon) for release from . its undertaking given in VG84. On the 9th August, 1983 SCI stated its attitude as follows: aT TT fon) . "lL. SCI has been asked to indicate its attitude to an application by Fibre Containers Ltd. and its shareholders (particularly Leigh-Mardon) for release from its undertakings given in VG84. SCI is prepared to indicate its attitude but only upon the bases that in doing so it will in no way breach the letter or .the spirit of the undertaking given by SCI in Application VG84 or any provision of the Companies Acquisition of Shares Code. wee see a ere ee ee wen eee oe ee ee es "es Soli Str Siete Alen ntl eA oh a nA nl ' No . te sit _-} ° ' ° . > 3. SCI makes it clear therefore that it does not intend or desire in consequence of indicating its attitude aforesaid to take or to be taken to have taken a further step in the acquisition of ° re 4 . . is . i . 5 _ . °° o- r wet batt ft : see vA 3 + 4 show B - ote ~ . od " ' avd ' . - ony - ' . ° ze . - aos . . 2 > - Douy tet - 77 2 Re e Ss ° ra) ~ 17. shares in Fibre Containers Ttd. It follows that if the Court refuses any application for release, discharge or variation of the said undertakings ipso facto the position of SCI and the other parties qua the undertakings and the Acquisition of Shares Code remains unchanged and shall be as if . the Application for release or variation had never been made. 4. Subject to the above SCI states that it will support the Application by Fibre Containers Ltd. and Leigh-Mardon Pty. Ltd. provided : (i) that Fibre Containers Ltd. and its Directors, AMATIL Ltd. and © Leigh-Mardon Pty. Ltd., undertake . or proffer to undertake to the TPC and the Court that they will not (even if released from their ' undertaking not to do so) sell any of the shares in Fibre Containers Ltd. to APM or a related company whilst and so long as TPC maintains the views expressed in the Telex 19/7/83 that the acquisition by APM would contravene S50 of the Act and that the TPC re-affirms such views in the course of the Application for variation and before SCI is required to indicate its attitude to the application. (ii) that pursuant to such undertaking there shall be tendered in evidence in support of such application the minutes of a resolution or other evidence of AMATIL Ltd. and Leigh-Mardon directing and authorising the giving of such undertaking. ' 5. This statement is made on the specific understanding and acknowledgement that the rights and entitlement of SCI itself to acquire the said shares is in no way added to detracted from advanced or qualified by the making of this statement or by supporting the proposed . Application to the Court.' , 7. SCI accordingly supports the Application nee fasts ae? . a ey ope —_—n_— PA A NI ER IE ON TE eee a! . - - - " 2 Mee " Pete Ty oe . m ¢ thes f'e91 - 27 soe wy Rhed ts D a ep re ee ere ee re en aa eS pity eer pean ee Te Aa ce ne) teem = que 8 ween en br as Daerah al A en Eine cae neti ante aL AD yd hohe sell aw meee te ele Py an \ by FCL. 8. With respect to the concluding sentence of paragraph 5 of the affidavit by the said Stanley Wallace, I say that if SCI is released from its undertaking it will make every effort to acquire the subject shares. 9. With respect to the affidavits of Messrs. Becker and Burke, I say that from my own knowledge and observations of the industry and from what I have been informed and do verily believe, I consider that FCL has suffered or wiil suffer substantial prejudice whilst it is in the position: of a 'target company.'" The text of the telex to which reference is made in paragraphs 5 and 6 of that-affidavit is as follows: "The Trade Practices Commission has today informed APM that it intends to continue its Court . proceedings under Section 50 of the Trade Practices Act. Acquisition by APM of Fibre Containers Limited would, in the Commission's view, be in breach of Section 50, notwithstanding other action AM indicated it was taking or proposing to take if the Commission withdrew its proceedings. 2. I am letting you know as soon as possible." The application made by FCL on 20 July 1983, to which reference is made in paragraph 5 of the affidavit, had been refused. The affidavit of Peter Becker included the following paragraphs: "11. The Second to Eighth Respondents have given further consideration to their respective positions in the light of the circumstances hereinbefore referred to. They are concerned at the effect which these proceedings are having and will continue to have upon the business of the Second Respondent and upon its employees and at the effect which the ' ota Ne ~ te a - ON a - ee ee ip ne ee NET _— - — RS FT net rte re etapa ee EES Meee mr Py PaCS aa A ES eas : eae ¥ peeramas es > vue ( % 19. time which will be taken Lo resolve these 3 proceedings might have upon the value of the shares of the Second Respondent and of the { interests of the shareholders of the Second Respondent in those shares. 12. In all of these circumstances the Third to Eighth Respondents believe that the circumstances in which the undertakings given on their behalf to this Honourable Court on 23 May 1983 in relation to S.C.I. Packaging Pty. Limited have sufficiently changed to justify the Third to Eighth Respondents deciding that they should not entertain an offer from the First Respondent (or any other company related to the First Respondent) to ' acquire shares held by them and each of them . in the Second Respondent." Upon cross-examination the respondent Peter Becker gave oral evidence that the decision to which reference is made in paragraph 12 of his affidavit is a decision that while the applicant "holds the view expressed in its telex, unless this court decides to the contrary, we will not sell to APM". He explained that, after taking legal advice, the shareholding respondents had concluded that, if APM Investments became free to buy their shares before judgment in this proceeding, they would "run the risk of helping it to a possible breach of section 50" by selling the shares "and we are not prepared to take that risk". Mr. Becker swore that the request by- FCL for an indication of the attitude of "SCI", to which reference is made in paragraph 6 of the affidavit of George Castan, was first communicated by him to a Mr. Smorgon on 8 August 1983. ' The reasons Woodward J. gave for his decision to release e eat the respondents and the other two companies from the undertakings which had been given demonstrate that his Honour had regard not ' a wee tee PR nent gE TS ge One ee ee ee ye a ere or wT Te mo TOIT . Ped TT OE LS ST eT er TE a PE EY * _ \¢ wee = Sais. L at scart tir siicenaic coe teietediicae haat onott : ate tie tm ee Bed Cent hi ti tn ot ela ee ee ee ee ee Pn tet ell a Nat Pear eeU ne errant mast nar ta re tne One ee e ' U _~ Le enegtea ime nae aedceioetmenate te cate met com ee ear eT ee ee a ee ae . 20. only to the submissions of counsel and to the evidence which had been first adduced on the motions before him, but also to other circumstances, which the file in another proceeding in the Court (VG No. 82 of 1983) disclosed, or which counsel had treated, in their submissions on the hearing of the motion, as though proved in evidence, or which appeared by admission in pleading or by affidavits previously filed in this proceeding. Except in respect of a minor matter of fact, no complaint was made to this Court of His Honour's consideration of those circumstances. Woodward J. was confronted, as the primary judge in Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Anor. (1981) 35 A.L.R. 625 had been confronted, with competing assertions based on justice to the several parties, in relation to a matter of practice and procedure. The undertakings had been given and accepted by Northrop J. in place of a contested hearing of the Commission's projected application for an interlocutory order to restrain APM Investments from acquiring shares in FCL until the determination of the proceeding. The questions for this Court, therefore, are whether the discretionary decision of Woodward J. proceeded from any error of principle and whether the decision worked a substantial injustice to APM Investments : Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Incorporated and Anor. (1981) 35 A.L.R. at 629. .The undertakings were given and accepted by Northrop J. "until further order". Release from such an undertaking may be ° - * . a a ee ad "as moos Eo - Ceteenniath-iaiiamntiar sar-ciet ennient"s- ic ri a Renee arene Remi a iene neta an alate ee ai rears : 5 rae - oars rol «Oe a) ~ H od t ee Pere cer ene pape ergs Fp Rene 220 Ee on CETTE en Gener an, ROSTER ewerigeee myn ar errs Eas ET Y 24) +730" 5 TA 87 on z 21. = - . justified by the occurrence, or by the discovery, of circumstances which, at the time the undertaking was given, were not in contemplation or were not accorded the significance they later assume, if the justice of the case requires release. (CE£. Chanel Ltd. v. F. W. Woolworth & Co. Ltd. [1981] 1W.L.R. 485.) ww . The circumstances detrimental to FCL's interests which had occurred since the undertakings were given to Northrop J. were not sworn, nor were they expressly found py Woodward J., to have been outside the contemplation of any person concerned in deciding that those undertakings should be given. The order which Northrop J. made, upon those undertakings, that the application be fixed for hearing on 18 July 1983, may have stimulated a hope that the hearing would begin then. But, in the absence of evidence that the order raised also an expectation of such a beginning, it could hardly be supposed that persons who had the benefit of legal advice would be unaware that this proceeding, if fixed for hearing in July, might not come to hearing until August or September. Nor are the events recorded in the affidavits which have occurred since the undertakings were given, other than the decision not to sell shares to AP Investments, of a kind which it would be reasonable, in my opinion, to infer were outside the contemplation of the human respondents or the directors of the respondent companies, when the undertakings were given, as possible consequences of what had already happened and of the acceptance by the Court of the undertakings. And the same conclusion is required, in my opinion, concerning foresight by those persons at © © . e © . " ov eT as DST Fee eee % ee ri Get im eon Ne Wes vig e .- - - - te a) . ° , ook - _- . . co - = . "e . . ccantdecgantahinetartammctane tarde conctesemanr: aL ial ar leh wt at Ale Rabid ated anion ve! Lows 22. . © that time of certain future events the likely occurrence of which Woodward J. recorded in his reasons for decision as "arguments in favour of granting the application", thus: "The hearing of the present case is likely to last three months or more. There could well be one or more appeal hearings, and the Court might be persuaded that undertakings which had been in force for a number of months should be allowed to continue in force to cover the period of appeals." (His Honour had also recorded, as an argument on pehalf of AM, but without contradiction by him : "The case is now ready to begin. It has been prepared with all possible speed on all sides and the hearing will not be unnecessarily prolonged by any party to it".) The decision of the shareholding respondents, not to sell shares in FCL to APM Investments while the applicant "holds the view expressed in its telex, unless this court decides to the contrary", was not said by Woodward J. to be a decision in the making of which circumstances unforeseen at the time those respondents gave their undertakings to Northrop J. had been accorded consideration by the human respondents or by the directors of the shareholding respondent companies. But, if it was a decision of that character, whatever it was of importance in the judgment of those shareholders and directors that the passage of time had revealed to them after those undertakings had been given, there is in my opinion nothing in the evidence to justify a conclusion that by reason of what was so revealed the shareholding respondents had acquired a claim in justice to release from their e e ° ° + NAA rm CE AE TTA TE TE A A NE SO I TN TE TI DE AO I AE TE 4 ' ~ w 7 ; Pes = . ? we eb we haa .. ey 'e TO, a TE Bat ey w-kYy "we ni br rs Sn co Ld . ary ' . ° oa re : se ° . - . *, - 8 ~ = - ar : + . ° ° d. 23. undertakings. - Although the undertakings are expressed to endure until the determination of the proceeding or until further order, the circumstances in which each person gave his undertaking were in my opinion such that none of those persons could reasonably have contemplated as possible his release from his undertaking before determination of the proceeding, unless circumstances the existence or the significance of which could not reasonably have peeh foreseen on 23 May 1983 should be demonstrated to make it unjust that such a release be refused, or, possibly, unless the Court should restrain APM Investments by interlocutory order from buying the shares. (I-express no opinion whether the making of such an order would justify release from any of the undertakings.) The undertaking of each was given upon the condition that the others' undertakings be given. Each suffered a 'detriment in exchange for the advantages which the undertaking of one or more of the others conferred on him. There is in my opinion nothing in the evidence to justify a conclusion that any of the respondents gave his undertaking for any reason but that he conceived the giving of the undertaking to serve his own interests better than the withholding of the undertaking. The duty of the directors of each respondent company and S.C.I. Operations and S.C.I. Packaging requiring that they authorise the giving of the undertaking only if they so conceived the company's interests, a court would not lightly 'find that they had disregarded that duty. Woodward J. stated, as an argument in favour of granting the motions for ed PE eet eed ied TPT Fu Flin? Bt Set Abe A Rentini Eke ae ™ we Dikters ar i | - : 1 Tp PO LR FS TL ER PE — ve iy } ' Ne 24. release from the undertakings, the following : "Fibre Containers should not be penalized for having complied, in a responsible way, with a request of the government regulatory authority, the TPC, to maintain their present shareholding position at a time when the TPC was investigating the situation and instituting proceedings". {His Honour used the expression "Fibre Containers" to comprehend all the respondents except the first and ninth-named respondents. ) If, as seems to me unlikely, Woodward J. is to be understood from * that passage to have found that in deciding to give the undertakings some of the respondents preferred compliance with the Commission's request to the furthering of their own interests, I would not accept the finding as one which was open to His Honour ' on the evidence. The prejudice to the interests of APM Investments which would be caused by substitution of undertakings © not to sell shares to APM Investments, in place of undertakings not to sell shares to APM Investments or to S.C.I. Packaging, was so grave that only strong considerations could, in my opinion, justify the release of undertakings in order to enable that substitution to be effected. The detriment to which APM Investments had submitted by itself giving undertakings to Northrop J. - surrendering for a time its right to offer to buy the shares - had been suffered on the condition that those undertakings from which release was sought before Woodward J. should also be given. The giving of those latter undertakings afforded a substantial advantage to APM Investments. It could not be said - and Woodward J. contradicted the assertion when he observed that "parties acting in good faith may sometimes depart « a " ~ e . . > © ° - . eo e ° . wt Tos . 7 . : - as BEE TR ET TY OO TTS GRATIN R OF ha +! ex - : ed : * - ae le -+ . cae) ramen ere. 25. from their expressed intentions" ~ that the right APM Investments had surrendered had been rendered valueless by the shareholding respondents' decisions not to sell their shares to APM Investments. It might be 'said - the statement by Woodward J. in his reasons for decision "that APM Investment should be restrained £rom acquiring any additional shares in Fibre Containers Ltd. before this litigation is concluded" seems to justify the assertion - that the 'right APM Investments had surrendered had been rendered valueless by His Honour's conclusion that APM Investments should be restrained from buying the shares. There are questions, then, whether that statement by His Honour S expressed a conclusion which His Honour might without error have reached and a conclusion which he might without error have taken into consideration in determining the motions before him. To each question the answer should in my opinion be in the negative. In the course of submissions by counsel for the Commission in support of the motions before Woodward J. the following dialogue occurred: "MR WILLIAMSON: In saying that the Commission opposes the release of all the parties, one ef course really means by that APM from its undertakings. To maintain that view, we accept as the equivalent to continuing that ° the equivalent and interim injunctions should continue. We equate the existing undertaking with that position. So in saying we would oppose the release, we are in effect saying an injunctive type situation should continue. HIS HONOUR: There would be some difficulty, would there not, about continuing the undertaking ° in view of the fact that all the undertakings . e . " ° eo eee metepricate cee ub YSU RN AOE TP CEE PUTO NE IO EE TON TH a ee eS Ee OTE YS Se ay ee a Pe reese arterial e : * ay : ° ° - oy ' - oo . eo. 7 oe . . . . ey '" . e ~ ' . . - 7 8 = :- e ° . . a ay wes eta we tye Lard «ow - . . Soe ' re 26. were given on the clear understanding that they were inter—dependent? MR WILLIAMSON: That is appreciated, and in a sense really comes back to whether 1t would have been appropriate to have granted an interim injunction in the first place without regard to the inter-relationship. I trust that at this stage it is perhaps unnecessary to dwell too long on the question of whether there was an argument or an issue before the court. The traditional cases seem to have come down to that as the test rather than simply talking about a prima facie case. HIS HONOUR: Perhaps the last word is yet to be said on the matter? ; ~ MR WILLIAMSON: The most recent word that I am aware of, your Honour, is by Chief Justice Sir Harry Gibbs. HIS HONOUR: Yes, that is what I had in mind. MR WILLIAMSON: That, in my opinion, really reflects what has been said repeatedly in this court. HIS HONOUR: I think the point I am concerned to make is that as at present advised it seems to me that if the other party were to be released from undertakings and it were thought proper that APM should continue to be bound appropriately, that it would be desirable to substitute an injunction for the undertaking in view of the fact that the basis upon which the undertaking had been given had been destroyed. MR WILLIAMSON: Yes, unless it were replaced by another undertaking that were thought to be suitable in the circumstances. HIS HONOUR: Yes. . MR WILLIAMSON: But failing that, yes, we would seek that appropriate injunction." Later it was submitted by counsel for APM Investments: ",..even the release of all the undertakings would Lae NT oR IT GTA NET UA PP ALR SPER, TR TA TT LP ETA MO TD Pee ne Ca I We ar a rd eH ey Tee - ~ a 27. produce a consequence, so far as APH is concerned, which is unjust to it because it flows from the effect of the undertakings themselves and the passage of time associated with their operation since they were first given, although, of course, if the undertakings are to be released, all the undertakings must be released, since one party cannot be. In our submission they all must. The reason for that is each of the undertakings was given on the same basis, namely, that all the others were given, and to hold one party to an undertaking which depended for its being given on the fact that the others were being given would, in our submission, be really to hold a party to an undertaking which it had not given - if I can put it in that way. . My learned friend, Mr. Williamson, said that he applied for an injunction. If that was the view that your Honour did take in relation to the undertakings, and your Honour was minded to dissolve them all, for our part we fail to understand how it could make such an application: she has no material before your Honour; the matter has not been argued; no notice has been given; it seems, in our submission, rather the expression of a desire than the proper making of an application. The only application that would be before your Honour would be an application by Fibre Containers for the release of these undertakings. Although we do take that view about the undertakings, that is not our primary position. Our primary position is that none of the parties should be released from their undertakings." In reply counsel for the Commission said: "Te main point is that the release of APM from this undertaking in effect determines any subsequent injunction application because the issues are the same. In practical terms it comes down to the balance of convenience with the same | sort of factors that have been canvassed today, and ' so for that reason we seek to persuade your Honour that the appropriate course is not to release APM for the reasons that have been put. If, contrary ! to that submission, your Honour were minded to release APM, then our submission in relation to ™ SR Rid ae LCE OCC SOL OE oy SBT IT YT TN ANE A BL yet ote Sea Pm ee ; 28. . . that would be. that as part' of the present .proceedings concerning the re-arrangements of undertakings, that APM should be released on terms, that is conditions attached to the release promise undertaking, and here I am referring to the same . sort of factors or concepts as my learned friend, Dr Griffith, was referring to a moment ago. That is, to preserve the prospects for effective . section 81 proceedings should the need for that arise. So we see no point in regurgitating an injunction application if the same material has been considered today. We prefer to take that course that I have just outlined. That is, no release, or if there 1s, on terms, and the question of appropriate terms can be readily devised." . Save as appears in the passages I have just quoted, no indication had been given APM Investments by any person since 23 May 1983 that an application was being, or might be, made for an interlocutory injunctive order directed to it; and no indication had been given APM Investments by Woodward J. that he _might consider whether such an order would or might pe made if application for it were in future made, or whether such an order would or might have been made by him if an application for such an order had been made to him. In the face of the suggestion of counsel for the Commission - if indeed what he said is to be understood as a suggestion - that Woodward J. should make an interlocutory injunctive order against APM Investments, or should determine whether such an order should be made if it were sought, upon motions for quite other relief by other parties, without earlier or better notice to APM Investments than what was said by way of submission on the day the hearing of the motions concluded, and without any indication as to the evidence upon which the Commission sought, or would justify,, that order, counsel for APM ° © « oy Ee ON RIS TI AE IY GF TO Og TR Lo NT NE ET ~ 5 a wre 7 v 2 7 ens ? = 7 * Bt L aly ee vit Pte sttp ten ee pa a . we on Per eh at von re aA. Sich ha SN nth oltre BARD Ee te hee tals rt a - eet "78 eee eer -— _ ROE fe CH TR ar DEST) a Roe ON a TE Se elrtetartic ys, oat eina : reo 7a cemeneene nen cemeeeeal 29. Investments declared, in effect, his intention not to entec into submission or evidence on the question whether such an order should be made, for reasons which he stated and which were in my opinion of obviously compelling strength. His Honour thereafter gave no indication that he might give consideration in the course of determining the motions before him to the question whether such an order should be made. In those circumstances APM Investments was not afforded an opportunity of being heard or of adducing evidence on that question, in my opinion, nor an opportunity of being heard on the further question whether a conclusion by His Honour that such an order should be made, if it were sought, could be taken into consideration in_determining the motions before him. APM Investments could have expected when the hearing of the motions concluded that, if His Honour found that he was concerned in his deliberations on the motions to know whether an interlocutory injunction should, if sought, be granted against APM Investments, he would invite submissions on behaif of the Commission and on behalf of APM Investments before reaching a conclusion adverse to that respondent. The reasons Woodward J. gave for his decision suggest that he did not take into consideration his opinion that AM Investments should be restrained from acquiring shares in F.C.L. until after he had decided that he would accede to the motions. Those reasons suggest that he took that opinion into consideration only fon the purpose of determining, after he had decided to accede to the motions, whether APM Investments should be released - eee ne np oes, oe ee eg te, ST TR, TEST EP ve noe ke te gt -< 1 Oy adtr { ey ° 30. from its undertaking. If that be so, APM Investments suffered no prejudice by reason of the fact that His Honour formed that opinion, for that respondent was released from its undertaking. On the other hand, it may be that His Honour took that opinion into consideration in determining that he would accept the substituted undertakings of the other respondents. However that may be, it would not in my opinion be permissible for Woodward J., or for this Court, to determine whether any of the motions ought to be granted except upon the basis that no prediction could be made as to the decision of an application, if made, for an interlocutory injunction restraining purchase by APM Investments of shares in F.C.L.. "My reason for that opinion is that I think that no opportunity has been afforded APM Investments to be heard against the conclusion that such an injunction, if sought, should be granted. But if I were wrong in thinking that, I would remain of the same opinion because I do not consider that the evidence and admissions in the appeal book could afford a basis for a prediction of any value as to whether such an injunction would be granted. (Woodward J. did not indicate what material he took into consideration in determining that APM Investments should be restrained.) If that opinion be correct, there is no basis for a conclusion that the right of APM Investments to offer to purchase the shares - a right surrendered for a time by the giving of that respondent's undertaking to Northrop J. - had become valueless by the time when Woodward J. acceded to the motions. é Beer te ae sf Pree 7. . - ~ oe - NI re er aE LN CTT Re en in nt nec ent te et NR SE Sys OS eS ae as : 31. The right surrendered was restored, but was deprived of utility, by the undertakings accepted and the orders made by Woodward J.. But rights surrendered by other respondents' undertakings and by the undertakings of S.C.I. Operations and §.C.I. Packaging to Northrop J. on 23 May 1983 were restored by Woodward J. without impairment of their utility otherwise than as those persons were willing to accept by giving new undertakings to Woodward J.. They were rights the surrender of which greatly advantaged APM Investments, and the restoration of which deprived APM Investments of the advantages gained by their surrender. Nothing had in my opinion been shown to have occurred since 23 May 1983 which justified a disturbance, so prejudicial to APM Investments, of the reciprocal exchange of advantages and detriments between the parties to this proceeding and S.C.I. Operations and S.C.I. Packaging which had been effected by the offers of undertakings accepted by. Northrop J. on that day. "The reasons for the decision of Woodward J. suggest that he gave anxious consideration to the rights of respondents other than APM Investments to unrestrained contractual activity in relation to the shares. It was not suggested that those respondents had fallen, before their undertakings were given to Northrop J., under any restraint on such activity which the law might authorise. But that consideration in my opinion had to be balanced against consideration of the restraint upon that activity which those respondents had in furtherance of what they conceived 32. to be their own interests cast upon themselves by offering their undertakings to the Court. It seems to me that Woodward J. failed to make that balance. But I do not claim to have identified, from His Honour's reasons for his decision, an error made in exercising the discretion confided to him. "It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the' court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred." (House v. The King (1936) 55 C.L.R. 499 at 505). I think that the order under appeal was unreasonable and that it worked a substantial injustice to APM Investments. I think that the only reasonable order in the circumstances was that each motion be dismissed. Several applications were made during the hearing of the appeal for leave to adduce further evidence. In no instance were the criteria satisfied, upon compliance with which such an application may be granted. I would refuse those applications and would order that the appeal be allowed, that the order of Woodward J. be set aside and that each motion be dismissed. «I express no opinion as to whether S.C.I. Operations or S.C.I. Packaging, on each of which notice of appeal was served and sary percarmeanr 3 ies eta Oats Bs Soe Sat SERREREAC ERR IT Ne en ne RE TE STE TE TT ,? - = ene we - osa trknee . ee oe Te NCI Seite ot -* el od a OR eB gnnementabe Jl, 33. 'each of which was heard by its counsel on the appeal, is a party to the appeal, or, if either is a party to the appeal, in what sense that may be said of it. Counsel announced appearance for those two companies when the appeal was called on for hearing and were then informed by me that I did not think that it should be assumed, in consequence of the Court's acceptance of that announcement, that the companies were parties to the appeal. No application of a kind which 0.52 R.14(2) of this Court's Rules seems to contemplate has been made in respect of either company. Saas — 5 rr = <= =a 3 hil Ge (13) * t ii ET cupty tt ths aac Sv oee abe --bea oa 'edaainiemhaah smn eaten shat deraaes Mnaees \ oeenmiads- antes ec-aemeanieiaaiameneme a re 2 7 ay : ps 7 Pi = ee Pooy ah ea et are - te - : w a -2 at ee ery! +