IN THE FEDERAL COURT OF AUSTRALIA \ é ) VICTORIA DISTRICT REGISTRY ) No. VG 84 of 1983 ) ) GENERAL DIVISION BETWEEN: THE COURT TRADE PRACTICES COMMISSION and A.P.M. INVESTMENTS PTY. LIMITED First FIBRE CONTAINERS LIMITED Second LEIGH-MARDON PTY. LINITED Third ASSOCIATED NOMINEES PTY. LIMITED Fourth FRANCIS JAMES BURKE Fifth PETER BECKER Sixth WILLIAM GIBSON Seventh and JOHN FRANCIS CLFVERSON Eighth Fifth to Eighth Respondents as Trustees for LEIGI~MARDON PTY. LIMLTED and ARTHUR KEVIN SMI{TH Ninth ORDER JUDGE MAKING ORDER : Woodward J. DATE OF ORDER WHERE MADE 15 November 1983 Melbourne ORDERS THAT: The notice of motion be dismissed. Costs be reserved. Liberty be reserved to aJl parties to Applicant Respondent Respondent Respondent Responcent Respondent Respondent Respondent Respondent Respondent apply for the fixing of a further directions hearing. IN THE FEDERAL COURT OF AUSTRALIA GENERAL ) ) VICTORIA DISTRICT REGISTRY ) No. VG ) ) DIVISION BETWEEN: CORAM: DATE: TRADE PRACTICES COMMISSION and A.P.M. INVESTMENTS PTY. LIMITED First PIBRE CONTALNERS LIMITED Second LEIGH-MARDON PTY. LIMITED Third ASSOCIATED NOMINEES PTY. LIMITED Fourth FRANCIS JAMES BURKE Fifth PETER BECKER Sixth WILL{LAM GIBSON Seventh and JOHN FRANCIS ELFVERSON Eighth Fifth to Eighth Respondents as Trustees for LEIGH-MARDON PTY. LIMITED and ARTHUR KEVIN SMITH Ninth Woodward J. 15 November 1983 REASONS FOR JUDGMENT 84 of 1983 Applicant Respondent Respondent Respondent Respondent Respondent Respondent Respondent Respondent Respondent This is the third time the Court has been asked to grant releases from undertakings given at the commencement of these proceedings last May. The history of the proceedings, and of the two earlier applications, 1s set out fully in judgments (as a yet unreported) delivered by me on 22 August 1983 and by the Full Court (Smithers, Fitzgerald and Jenkinson JJ.) on 2] September 1983. In these reasons, T shall set out in summary form Just enough of that history to put the present application into context. Fibre Containers Ltd. ('FCL') is the target company for two competing takeover bids made last May. The first was by S.C.I. Packaging Pty. Ltd. ('SCI') and the second by A.P.M. Investments Pty. itd. ('APM'). The APM bid has given rise to two applications to the Court pursuant to s.50 of the Trade Practices Act 1974 ('the Act'). The action in which the present notice of motion is brought has been commenced by the Trade Practices Commission ('TPC'). It seeks injunctions to prevent the takeover of FCL by APM, alleging that it would represent a breach of s.50 of the Act because of the substantial power already enjoyed by APM in the relevant markets in which APM, SCl and FCL operate. In the other action (VG No. 82 of 1983) SCI is seeking declarations that the proposed APM takeover would constitute a breach of s.50 of the Act. SCT also secks other relicf pursuant to other sections of the Act, not relevant for present purposes. These two actions were called on together in a series of directions hearings beginning on 23 May 1983. It was not until 28 July that it was decided by the Court that they should not be heard together - as had been requested by SCI with the support of FCL but opposed by APM. Reasons for this decision were published on August 4. Before the first directions hearing in the present matter, the TPC sought undertakings from APM, SCI and FCL which would have the effect of freezing the two takeover bids until after the TPC case against APM had been determined. These undertakings were given on behalf of all three companies and also on behalf of the third to ninth respondents, substantial shareholders in FCL, all but the last of whom are closely connected with Amatil Ltd. It 1S convenient to refer to the third to eighth respondents as 'Amatil'. The precise forms of the undertakings not to deal in the shares of FCL are not relevant for present purposes. It should however be noted that FCL and its shareholders remained free to deal with any bidder for its shares other than APM and SCI. The reasons why the rival bidders, APM and SCI, were prepared to offer parallel undertakings in the circumstances described seem clear enough. It no doubt suited APM to contest the TPC's action before waging its commercial battle. And although SCI was not a party to the action, it wanted to ensure that the TPC continued the action, and 1t hoped to be joined in 1t. This explains its willingness to become involved in the giving of parallel undertakings. Jt is not so clear why FCL and Amatil were prepared to offer undertakings, and this 1s a question to which I shall return later. Whatever the motivation of the participants may have been, the fact remains that such undertakings were offered to and accepted by the Court. On July 20 the Court considered a notice of motion from FCL asking that it be released from so much of its undertaking as would enable it to sound SCI out about the possibility of a revised offer. The material adduced in support of that application was minimal, it was opposed, for differing reasons, by the TPC, APM and SCI, and it was refused. A further notice of motion was heard on August 17. Tnis time FCL and Amatil sought release from all parts of their undertakings so far as negotiations with SCI were concerned. To quote from my judgment of 22 August, "They also make it clear that they have no wish or intention to negotiate with APM while the TPC maintains that a takeover by APM would constitute a breach of s.50 of the Act and the Court has made no contrary finding. They therefore say that it is unnecessary that they be bound by undertaking or by injunction not to negotiate with APM, but they offer such an undertaking 1f it is required. I should make it plain that this unwillingness to negotiate with APM in present circumstances was also clearly indicated by Mr. McComas in his July application. The TPC has changed its attitude to the application. It now says that it does not oppose the making of the orders sought in the notice of motion, provided Fibre Containers remain suitably bound by undertakings not to negotiate with APM. Perhaps partly because of this change of attitude by the TPC, and certainly because of continuing assurances by the TPC that it intends to proceed with its action against APM (so long, I assume, as a takeover by APM remains a realistic possibility), SCI now feels free to support the application and has done so. In the result, therefore, the application is opposed only by APM." In reaching the conclusion that the application should be granted and FCL left free to negotiate with SCI, I placed great emphasis on the position of FCL as the innocent target of takeover pids, running a serious risk of damage in the course of protracted court proceedings and having no redress against any other party for that damage. I felt that FCL and Amatil "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". I accepted the argument that there could be no compulsion on FCL to consider a takeover bid from APM and, since 1 was satisfied that Amatil had reached a firm conclusion that it would not consider such an offer, I believed it should be free to deal lawfully with its own property. In effect, I accepted the argument. that a change of mind on the part of Amatil about its willingness to sell its shares in FCL to APM constituted such a change of circumstances that, together with the probability of losses heing sustained by FCL and its shareholders as a result of delayed sale and a long period of uncertainty, it justified release from the relevant undertakings. I was also influenced by the fact that the party which had sought those undertakings, the TPC, no longer required them. In the event, I ordered the release of all parties from their undertakings, but went on to accept a fresh undertaking from FCL and Amatil not to finalize any sale of shares to APM. On appeal to the Full Court this order was quashed. 'Two distinct reasons for this can be identified from the judgments handed down by the Court. In the first place, the acceptance of the fresh undertaking was seen as amounting, in effect, to an aunjunction against APM. APM had not been heard on that issue; and if a hearing had occurred, there could have been no certainty as to its outcome. Secondly, although the original undertakings were offered and accepted "until further order", the Court held that they should only have been released if new and unforeseeable circumstances had arisen since they were accepted, and if the interests of justice required their release. This was particularly so because the undertakings, being reciprocal, had a strong contractual element in them. The Full Court found that there were in fact no new and unforeseeable circumstances, and the ' interests of justice were strongly in favour of the undertakings being maintained. Each member of the Full Court, ain deciding that the order must be quashed, made clear his views as to the possible alternative that all parties could be released unconditionally from their undertakings, thus leaving the two contestants for FCL free, for the time being, to pursue their bids in the market place. Their Honours were clearly opposed to such a course (which is the one I am now being urged to follow) because of the importance they placed on the contractual nature of the undertakings agrecd to by the parties at the outset of the case, the ability of the parties to foresee the type of developments which had in fact occurred, and the injustice which would be done to APM if it were forced to bid for FCL shares at a time when it still had the TPC's action hanging over its head. It is clear that I must, in this present application, take the Full Court's decision as my starting point. Insofar as it involves a ruling on a question of law, I am of course bound by that ruling. Insofar as it involves the exercise of a discretion, in place of my exercise of discretion, I believe that I can only reopen the matter 1f£ it is -shown that substantial new considerations have emerged which the Full Court did not have before it and which are sufficiently cogent to justify such a reopening. If I am satisfied that such new considerations exist, then I think I must reconsider the whole discretionary issue for myself and, while giving proper respect to the views of the Full Court as to what matters are material and how much weight each should be given, I must make up my own mind on those matters. In other words, if the occasion is one for the fresh exercise of discretion, then I must exercise my own discretion, after carefully considering the views of the Full Court; I should not merely ask myself, "What would the Full Court have decided if these new considerations had been before 1t?" ° I turn now to consider the first of the two issues I have identified - whether there are sufficient new considerations to justify the fresh exercise of a discretion. The first new circumstance relied upon by SCL was APii's amendment of its defence to the TPC's action. The substance of the amendment was to foreshadow that if it were successful in acquiring the shares in Fibre Containers, APM would retain no more than half the productive capacity, in the form of manufacturing plants, of the company. This proposal was made in the hope or expectation that it would be acceptable to Amatil, and thus to FCL, and would sufficiently mollify the TPC to cause it to discontinue its action. In the event, the proposal was totally rejected by Amatil, and APM has applied to amend its defence again , by deleting all reference to such a proposal. "et A good deal of evidence: concerning this matter was put before me. Some of it was in affidavit form but that was largely supplemented by evidence from the witness box. ft have no reason to doubt the truthfulness of any of the witnesses, and I make the following findings of fact in the light of all the testimony. 1. The idea of splitting FCL was first seriously considered by APM un early September, after argument in the Full Court and before judgment. 2. It was decided upon as the aim to be pursued if the Full Court were to release all undertakings. Necessary resolutions to enable this course to be followed were passed on 20 Septemner and confirmed on the morning of 21 September, a few hours before the Full court handed down its decision. 3. APM had earlier sounded out the TPC about the Commission's likely reaction to a proposal that APM should, after acquiring FCL, dispose of about half its production capacity. APM had been encouraged by the TPC reaction to the proposal, although TPC had indicated (and has sance told the Court) that, before expressing any approval, it would need to know just who was ' acquiring the other half of the business. 4. . APM @id not inform FCL of this contingency plan which was to take effect if the Full Court released all undertakings. In the event the Full Court did not do so. However APM then - 10 - decided that, in any event, it would approach FCL for a reaction to its proposal to split the company after acquisition. Its motive for doing so was to secure an agreed release From alt undertakings, and enable a prompt result to be achieved by "a free bidding match" in the market place, thus avoiding the necessity for further protracted litigation. Fa 5. The approach was made by Mr. D.W. Rogers, solicitor for APM, to Mr. W.R. McComas, a director of, and solicitor for, FCL. They met in Sydney and, after an extensive discussion, Mr. Rogers was left with the impression that the APM proposal would at least receive sympathetic consideration. In his affidavit on the subject, on which he was not cross-examined, Mr. Rogers said "We had a wide ranging discussion. In particular, I said to him that APM was anxious to try to obtain some resolution of the action. I said that APM believed that if it were to amend its defence so that it expressed an intention to retain only about half Fibre Containers Lamited (FCL)'s fibre box business, this result would or might be achievable so tong as the proposal that APM would retain only half the business was not unacceptable to FCL and the Amatil shareholders. I suggested to Mr. McComas that it was in the interests of the FCL shareholders to have two bidders for the shares and he appeared to agree. I then said that the proposal would be fruitless if the Amatil shareholders were not prepared to deal with APM in the circumstances proposed. It 1s my recollection that Mr. McComas informed me that he believed FCL and the Amatil shareholders had no objection to dealing with APM, provided the difficulties with the Applicant could be overcome, but that this was just his personal view and he would have to obtain instructions from his client." ne - ll - "The following morning I received a telephone call from Mr. McComas. He informed me that Mr. Becker was on holidays but he had made contact with him. Mr. McComas stated that Amatil had no objection to the proposed course and would not oppose it subject to reading the proposed amendments to the defence." 6. Mr. Rogers' affidavit then goes on to relate a series of later telephone conversations with Mr. McComas in which Mr. McCecmas passed on to him concern expressed by some sentor executives of FCL about the difficulties which FCL would face when the news about the proposed splitting of the company became public. 7. However 1t was only after APM had formally amended its defence, by leave of the Court, on 10 October that the Amatil directors of FCL finally resolved that they would not consider selling their shares to any buyer who would split the company. At first sight it might appear as though Amatil had Geliberately allowed APM to commit itself publicly to this course of splitting FCL before informing APM that no such step would even be considered by the present owners of the shares in FCL. 'There would seem to have been ample time for Amatil to have told APM that it was at best wasting its time with such a proposal and, at worst, harming FCL by creating dangerous and pointless speculation, particularly amongst employees and customers of FCL, as to the company's future. A telephone call to Mr. Rogers, asking him to delay taking any positive steps until after Amatil had had a full opportunity toe consider the implications of the proposal, was all that would have been required by way of warning to APM. However it is not alleged by APM that it was deliberately misled by Amatil; and Mr. Becker, on behalf of Amatil, has explained that a decision was delayed to some ea«tent by the absence of senior Amatil directors. He said further that the issue was seen as being too important for any one person to communicate a possible or anticipated decision to APM, but it was not seen as being sufficiently urgent to require the calling of an early Board meeting. The Amatil decision was thus taken, in the ordinary course of events, after the APM defence had been publicly amended to make provision for the splitting proposal. I accept this explanation of events, while at the same time noting the reasonableness of APM's expectation that its proposal would be favourably accepted when made public, and the opportunities which FCL had to prevent or mitigate damage occurring to it as a result of the APM proposal. However I am unable to accept the predictions of Mr. Becker, Managing Director of FCL, and Mr. Castan, a director of SCl1, to the effect that FCL is likely to suffer grave and irreparable damage as a result of APM's proposal. It is to be noted that these predictions were given before APM had unequivocally withdrawn its proposal. On the other hand, I do accept that fears for FCu's continued profitability are genuinely entertained, and some additional uncertainty must have been created by the publicity given to the proposal and that, whatever may be said to staff by way of reassurance, they will still be worried by the possibility of an APM acquisition being followed hy the disposal of some part of FCL's capacity at some time. I can see that such fears may be particularly significant in head office areas such as market research and development, product research, quality control and accounting. However I am unable to find that the risk of such damage to FCL has been so greatly increased by the announcement of the abortive proposal as to amount to a new circumstance which would justify me in releasing FCL from its undertakings. When such an application was last before me I said, in my unreported judgment of 22 August, "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 can only work to the detriment of the company and its shareholders. Affidavit evidence to this general effect has not been challenged." ~ 14 - The judgments of the Full Court also accepted that some uncertainty was inevitable in cases such as the present, and their Honours said this should have been foreseen by FCL at the time when it gave its undertakings. It 1s certainly clear that scl, the other contender for FCL shares, has considered (among the many variations of courses open to it if it is successful in its bid) the possibility of selling off part of FCL's production capacity. But there is no evidence to suggest that any such rationalization by SCI after a successful takeover would have serious effects on FCL staff. The only direct evidence of damage likely to be suffered by FCL in the months before this case could be resolved, related to FCL being Forced to reduce prices by about 12% for some 10% of its products, these being in areas which were under special attack from competitors. I am prepared to believe that some part of this aggressive conduct of competitors may have been due to an assessment of FCL's commercial vulnerability while it is under a takeover cloud. The evidence, however, does not enable me to say just how much part this consideration has played in the pracing battle. The industry is in a position of over-supply, and price-cutting may appear to be the best (or only) available method of preserving or increasing market shares. The other material before the Court relating to actual losses by FCL, concerned the profits which could be made by FCL shareholders if proceeds of sale of those shares could be nee om invested, even at a currently modest 12% rate of tnterest. SCI has indicated a willingness to bid $4 per share when permitted to do so. This would give a purchase price of over $38m, which, invested at 12% p.a. would bring in over $4.5m per year. This can be compared with the last year's after-tax profit of the company, which was shown at about $3m in the 1982 Annual Report. So far as other possible losses are ccncerned, 1t was argued that if APM were unsuccessful in the action, and SCI in due course found itself the only bidder in the field, it could revert to its present bid of $3.50 per share or, 1£ FCL's worst fears had been realized and its profitability had suffered severely, SCI could reduce its pid still further, at a loss to FCL shareholders of many millions of dollars. The point, though speculative, 1s validly made. Opinion evidence was given by the managing director of APM, Mr. S.D.M. Wallis, to the effect that FCL was not likely to suffer any significant loss of employees or customers as a result of the APM proposal. He instanced the APM takeover of Tasman-UEB a few years ago as a precedent supporting his contention. After hearing the evidence on that subject from Mr. Wallis, Mr. Becker and Mr. Castan I find myself unable to say that the history of that matter assists me either way in predicting the effect on FCL of the publication of the APM proposal. The differences between that case and the present are too great. There is certainly nothing in the facts and surrounding circumstances of the Tasman-UEKB takeover to cause me to doubt the general conclusion I have reached in the present case - that provided sensible steps, by way of reassurance, are taken by FCL to contain the damage, 1 do not believe the publication of the abortive proposal will add significantly to the damage which would otherwise have been suffered by FCL, arising from the mere facts of conflicting takeover offers and a delayed outcome of that conflict. I note in passing that, at least until now, FCL has been in the awkward situation that any positive steps taken to allay the fears of employees or customers that they might suffer from a split-up of the company, would have been used against FCL in the course of this debate. It is for these reasons that I do not believe that I can treat the APM proposal as a new circumstance, arising since the judgment of the Full Court, entitling me to depart from the discretion exercised by the Full Court. The other new circumstance relied on by SCI as justifying the fresh exercise of a discretion, was a decision by Amatil, expressed as a formal resolution of its Board of Directors, "that the Company will. not sell its shares in Fibre Containers Ltd. to APM Investments Pty. Ltd. or to any of its related corporations at any time or in any circumstances or for any price". In casting its resolution in these terms, Amatil's Board was deliberately using the language of Fitzgerald J. in the Full Court, when he said, FCL and the Amatil shareholders have been confident enough of their position to reject the lower SCI bid. They are also confident enough to adopt the attitude that they will not deal with APM until it is cleared either by the Court or the Trade Practices Commission. And, the damage which is deposed to is 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 occasicned, or even to state, without qualification, that the Amatil shares are not for sale to APM at any time or in any circumstances or for any price. There is no present reason to doubt that, 1f at the end of the TPC action APM is free to bid and is the highest bidder, it will have its bid recommended and accepted." I do not think it 1s necessary to set out all the circumstances surrounding the making of this resolution, which occurred on 17 October 1983, while the hearing before me was proceeding. It was preceded by an earlier resolution of October 12 which was recorded in the words ee ait was resolved that in all of the circumstances ... the company will not sell its shares in Fibre Containers Limited to APM Investments Ptyr Ltd. ... Mr. Becker' gave evidence about the passing of this resolution and 1t was because of questions raised in the course of that evidence that special meetings of Amatil were called, resulting in the final resolution set ouc above. I am satisfied that the resolution of 17 October is entirely genuine and not merely a device intended to procure a particular result - namely release from undertakings - although that is indeed its purpose. I have no doubt that if there were some way in which Amatil could bind itself even more firmly to the stand indicated, it would do so. It is deliberately and consciously prepared to sacrifice any chance of a future profitable APM bid, in order to create the possibility that 1t may be able to deal with SCI in the immediate future. To achieve this aim 1t is quite willing to burn its APM bridges and cut off that retreat. However, in spite of my satisfaction as to the genuineness of the Amatil resolution, I do not believe that 3t can be accepted without reservation. Company directors cannot bind themselves or their successors, merely by a resolution as to future intent, to a course of conduct which may, when the time comes, prove to be not in the best interests of shareholders. If the undertakings are not released, and APM were to resist the TPC case successfully on the basis of it retaining the whole FCL ~ 19 - operation, and if it were then, on the same basis, to make the highest bid for fFCL shares, Amatil would have no commercial or legal reason not to accept that bid. For this reason, and in spite of Amatil's adoption of language suggested by Fitzgerald J., I am unable to find that the hardening of Amatil's attitude to an APM bid (given that 1t arises solely from the circumstances of these proceedings) represents such a new circumstance, since the situation with which the Full Court dealt, as to justify me in re-opening the question of the undertakings. For the same reason, I am unable to accept the submissions which were put for SCI and FCL that, because of Amatil's stand, the proceedings have now become academic or futile. Accordingly, this application must fail. In these circumstances it becomes unnecessary for me to decide what I would do 1f I were_required to reconsider the whole question of the undertakings for myself. But in case the matter should be taken further, I think it is proper that I should say something on the subject. I am, of course, bound by the Full Court's ruling that the traditional principles concerning injunctions and undertakings, laid down in cases such as Chanel Ltd. v F.W. Woolworth & Co. Ltd. and Ors. 1981 1 WLR 485 apply fully to the present case. Although the matter was not argued before me when 1 heard the earlier applications, I had taken the view that these proceedings were out of the ordinary, and called for a more liberal approach than is normal to the maintenance of undertakings. In the first place, the undertakings had been sought by the TPC in what I had seen as being the interests of orderly and prompt litigation of a complex issue, rather than the protection of the proprietory interests which most plaintiffs or applicants have in mind when seeking tunterlocutory injunctions or undertakings. The absence of any provision for redress by way of damages also seemed to me to distinguish this case from the normal application for interlocutory relief, as did the fact that FCL and Amatil hardly seemed to be necessary parties to the procecdings at all, and SCI was not a party, in spite of its efforts to be joined. Since I was in error in taking a more liberal view of the permanence of these undertakings than is normal, and now applying instead the principles laid down by the Full Court, 1 think it must be said that all or most forms of damage to the target company arising from uncertainty as to its future, or to its shareholders arising from loss of an early opportunity to convert their shareholdings to cash, must have been foreseen by those parties when the undertakings were given. They may not have , foreseen the extent of the possible losses, but they should have foreseen their nature. Similarly I' think it must pe said that Amatil should have foreseen that a situation could develop in which it would make a firm decision that 1t would rather sell now to SCI than wait an uncertain time for the possibility of a sale to APM. Both these conclusions are, I believe, supported (1£ not required) by a careful reading of their Honours' reasons for judgment in the Full Court. If I am right in thus applying the Full Court's reasoning, no question of discretion could arise. The developments were foreseeable and sc they cannot provide grounds for release from the undertakings. If I am wrong and these questions could be open for consideration in the exercise of a discretion, then I would give great weight to the completely changed position adopted by Amatil, and thus by FChL, since these proceedings started. I think that it 1s anomalous that, having reached a firm and genuine decision not to sell to APM, Amatil should be required, with no possibility of redress for damage suffered, to await the outcome cf lengthy Court proceedings in case, at the end of them, APM should be free to bid and prove able to persuade Amatil to change its mind. a I have to say, with the greatest respect to the views expressed by the Full Court on these matters of discretion, that I still see the positions of FCL and Amatil in a rather different light. from that in which their Honours saw them. . Their Honours did appreciate the unusual position of those companies. Thus Smithers J. said, "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 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 course, to the possibility of the Commission seeking and obtaining an interlocutory inyuncticn to restrain it from proceeding with its bid." His Honour returned to this point in a later passage - "Apart from the circumstance that, i1n 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." Fitzgerald J. said, "No Statement of Claim yet delivered in the 'PC action contains any allegation against FCL, 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 APM for their shares in FCL." [It is to be noted that Amatil has sought leave to amend its defence to deny this allegation, which was previously not denied]. 4 a3 Later his Honour said, « "The ancillary undertakings of FCL and the Amatil shareholders were largely if not wholly irrelevant, except perhaps as insurance that neither APM nor SCI would circumvent its undertaking, and even for that purpose it is doubtful if undertakings from FCL and the Amatil shareholders were necessary. It may be added that it 1s not easy to perceive why FCL and the Amatil shareholders are joined in the TPC 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 I do not find it obvious how a shareholder who sells or the company in which shares are sold can ordinarily be inculpated in any preach of s.50 by the purchaser of shares." And later again his Honour made the observation, "If FCL and the Amatal shareholders had then [1.e. at the commencement of proceedings] taken their current stance that they do not intend to deal with APM while the TPC pursues its claim against it and that claim is unresolved, it might well have been thought that that was a matter for them and that, in those circumstances, they should not be embroiled in the litigation." The essential point on which I respectfully differ from the views of the Full Court is that I find it difficult to see that FCL and Amatil should be equated with SCI for the purpose of considering how they came to enter into undertakings and whether they should continue to be bound by them in the situation as it has developed. , There was no direct evidence as to the deliberations of FCL and Amatil before they agreed to be bound. I would have thought it likely that they gave their undertakings because the ~ new e re aay a ee ate eae, -~ 24 - TPC and APM had asked for them, presumably as a matter of caution, and there seemed to be no point in not agreeing, in view of the fact that SCI and APM were both giving their undertakings which produced the same result. I am not persuaded that FCL or Amatil obtained any advantage either from the totality of the undertakings or from their own particular undertakings. So far as the totality of the undertakings were concerned, they were accepting a lengthy and uncertain delay in the bidding for FCL shares, and although that could end with both contestants being uninhibited ain their bidding, it was also guite possible that, at the end of the litigation, only one bidder would be left in the field. There would seem to be no good reason why they would not have preferred, had they had any choice in the matter, to have the bidding taken to a conclusion then and there. If SCI had been successful, no problems would have arisen; if APM had succeeded, the litigation would have ensued and, if judgment had been given against APM, negotiaticns with SCI could presumably have been resumed. So far as FCL's particular undertakings are concerned, given that SCI and APM would no doubt have exchanged undertakings anyway, I can only agree with Fitzgerald J. that "the ancillary undertakings of FCL and the Amatil shareholders were largely if not wholly irrelevant". cael Poe eee eer ny mee emt oe ee a were ee ee a ee ee iweb oe fe RT rl eee ee ee eae Se te er It can of course be argued that FCL and Amatil should have stood their ground at the time and refused to give any undertakings. I have expressed my view, in my earlier judgment, that they should not now be penalized for failure to do so; but the contrary view is clearly open. What I have difficulty in accepting, with due respect to the views of the Full Court, is that FCL, as well as SCI, in the words of Smithers J., "for their own purposes, intervened in the relationship between the Commission and APM", or that FCL's undertaking, "like that of SCI, was given deliberately to the Court for good commercial reason ...". Fitzgeraid J., dealing with this aspect of the matter, said, "The further submission that FCL 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." Jenkinson J. said, "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." TD ere ae peers momen see a ee ee eee ee ne eee — —-- me * Bd aed ee a ea are to sete rere " ~~ a ee - 26 - Having carefully considered the judgments of the Full Court on the issues of discretion, I still think it is arguable that this matter has become one which ought to be resolved in the market place first, and in the Court, if necessary, later - rather than the other way around. With the benefit of hindsight, 1t may be that this has been so from the outset. As Fitzgerald J. said, "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." fn saying this I have not forgotten the unearned benefit to SCI, or the obvious unfairness to APM, which would be likely to flow from a general release of undertakings. APM at any time since proceedings were first mooted would have been at a disadvantage in the market place while TPC proceedings were hanging over it. On the other hand, it would clearly have been improper for the TPC not to have indicated, at the earliest possible time, the view it took of the possibility of an APM takeover. While reférring, to the TPC I shoulda perhaps add that it was urged on behalf of SCI and FCL that the TPC should now discontinue its action, since Amatil had reached a firm and irrevocable decision not to sell its shares to APM and that has rendered the action'unnecessary and academic. Alternatively Mr. IMeComas, for FCL and Amatil, indicated a willingness to consent to Se er ea - - + eee ee ee one - eos SO de ee a On hte er ene et te Me RR eet me Re ee en wee a judgment for injunctions which would have the effect of preventing Amatil's Board of Directors from resiling from the decision it has taken never to sell to APM. The TPC has said that it will not take either course, at least until after this judgment has been delivered and considered. No doubt the TPC has been influenced in this by the reasons for judgment of the Full Court and by a desire to carry out its responsibilities in as even-handed a way as possible. Although the role of the TPC has now been adverted to in open Court, I do not believe that I should say anything to influence it in the performance of its statutory functions, and nothing I have said should be read as having that intention. The main points of this judgment may be summarized as follows: — 1. I am unabie to find that there are any new circumstances, which have occurred since the time dealt with by the Full Court, which would justify this Court in reopening the question of undertakings. a 2. If it were appropriate for this Court to look now at all changes which have occurred since the undertakings were first given, which in my view it is not, I would be constrained to hold, Whee G EF TAU orm wee ee em tem re tee se oo ee en ee ene '