/* 53 , oa alll Ylot for gerers! Oistribution IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) No. WA G67 of 1986 DISTRICT REGISTRY ) GENERAL DIVISION ) BETWEEN: CHARLES DAVID McCORMICK Applicant and ELECTRUM N.G. Yy Respondent .- ~~ .. ra ~. : FEOENAL COUPT » CORAM: MUIRHEAD J. FON ALIA 2 Jul ! uly 1986 i 22 JUL 986 ~ RARY REASONS FOR DECISION (EX TEMPORE) This application and the statement of claim were iw yesterday, the applicant applying for injunctive relief pursuant to s.80 of the Trade Practices Act 1974. The issue arises from the resolution of the respondent to issue shares to existing shareholders on a one-for-three basis, consequential acceptance of an offer to underwrite the rights issue, and subsequent steps including an announcement to the Stock Exchange by letter dated 7 May last, a circular issued by the Underwriter on 13 May and, perhaps of more importance a letter of offer by the respondent to shareholders dated the 26 May 1986. The applicant asserts that certain statements included in that documentation (and perhaps omissions) contained representations which were misleading or deceptive, or likely to mislead or deceive in contravention of 8.52 of the Act. The applicant, a director of the respondent company, a shareholder and a person who may well be termed its founder, supported the application by his own affidavit supported by a host of exhibits, the most significant of which perhaps is a telex sent by the applicant to the company dated 12 May last and which the evidence suggests has not been answered and which pre-dated the letter of offer dated 26 May. The telex clearly raised the essential issues debated upon the interlocutory proceedings. These commenced yesterday as it is proposed (and I am told the rules of the Stock Exchange so provide) that the certificates in respect of shares allotted are to be despatched to applicant shareholders today. By his application the applicant seeks orders restraining the allocation of shares; an order that the respondent disclose to the public or to its shareholders the current state of its financial affairs and an injunction in a form designed to enable those shareholders who have taken up their rights, the right to withdraw their acceptances. I make no comment as to whether it is in the power of the court to make the latter order. Appreciating as I do the wide powers of the Court under s.80 I make no comment as to whether it is in the power of this Court to make the latter order sought. The respondent contests the allegation contained in the statement of claim. The affidavit of another of its directors, Terry Brittliffe, and the exhibits thereto, are in evidence and have received my consideration. As may be expected the matter, at this interlocutory stage, has been conducted in haste and it is virtually impossible for me to make fair and considered findings on some aspects which go to the financial administration of the company, the genuineness or accuracy of pronounced expectations as to its future fortunes; matters such as that. Because of the background to the proceedings, the critical nature of the litigation from the company's point of view, it is I have decided preferable that I should pronounce no detailed findings as to matters which are or may yet be in dispute. It is sufficient if I state at this stage that I am satisfied the applicant has brought these proceedings bona fide and that the evidence upon which he relies is to say the least persuasive. He was subjected to cross-examination which in ny view did not impinge upon the accuracy of his affidavit evidence. That cross-examination was of course in the circumstances limited and did not range as far as would be the case upon a substantive hearing. It suffices to say his credit was not shaken - he indeed carries a genuine concern as to current developments. Be that as it may, the nature of the proceedings indeed the nature of the mining industry in which the company is engaged, makes precise findings as to the conduct of the company and those who effectively control its destinies an exercise which must be approached with caution. It suffices to say that I am well satisfied there is a serious question to be tried within the meaning of Epitoma Pty. Ltd. v. Australian Meat Industry Employees' Union (1984) 3 F.C.R. 55 anda host of subsequent decisions referred to by Neaves J. in his recently published and unreported judgment in Strathfield Car Radios Pty. Ltd. v. Ryda Car Radios Pty. Ltd. and Anor. (No. Gl68 of 1986 NSW District Registry) published on 11 June 1986. But a finding that there is a serious question to be tried is not sufficient, especially when possibly the fate of the company itself and the interests of its shareholders and I suppose its creditors or co-adventurers may be very much involved. I must weigh the balance of convenience and in that respect it is proper that I should endeavour not only to weigh that and seek a balance as between the parties but consideration must be given to those in the community who may be affected by the decision, brought as it is pursuant to the provisions of s.52 of the Trade Practices Act, legislation designed to safeguard the community or interested sections of the community. Should interlocutory relief not be granted at this stage, despite Mr Ainslie's stress upon the importance of individual shareholders (which has some merit), they nevertheless are entitled to the remedies, if any, which final resolution of the issue may bring. Those remedies may extend beyond relief which could be granted by this Court, and could of course ultimately be reflected in the composition of the company itself. There is some merit in Mr Bennett's argument that should this Court ultimately make a finding which gives rights in the shareholders qua the company, it is unlikely that shareholders who have suffered damage would be forced to individual litigation to recover their loss. This Court, would I think strive to avoid that type of situation. Be that as it may to now order interlocutory relief by directing a stay of the issue of certificates, will undoubtedly and whatever the final outcome may be have immediate and grave consequences in the commercial world, not only to the company and its directors, but perhaps to the shareholders whose interests are paramount. That is to say, should an appeal from my order granting an interlocutory injunction be successful or should this Court finally rule against the applicant, the effects of this interlocutory order will have spent their course and may I fear be irremedial. It is thus a situation which I must approach with great caution, appreciating as I do, that I have not heard the whole story. After admittedly anxious consideration, I have reached a firm view that dispassionately weighing the interests involved, the balance of convenience mitigates against granting interlocutory relief; - and I stress this carries with it no criticism of either the applicant or the reasonableness of the application. As far as I can judge, he had, in the circumstances, no reasonable alternative. It may be said that the refusal of the application effectively puts an end to the issue as' there is no further or alternative remedy available. I doubt whether this is so, The Trade Practices Act is of wide application and alternative forms of relief to those who may suffer damage should the essence of the applicant's claims be ultimately established, may well be available, not necessarily in this Court but in other forums and under other procedures. That is a matter upon which I should not speculate; it suffices to say that I amnot now persuaded that an injunction should be ordered. Accordingly the application must be dismissed. As to costs, I have given serious consideration to an order that despite the dismissal of the application, the respondent company should pay the applicant's costs of and incidental to the application. It would be an unusual order but the circumstances here are very unusual and time was perhaps of the essence. But I have decided, in deference to the court which may finally decide the issue, that I should reserve the question of costs of this application for that court to decide, and in so doing I merely state that in my view (which may not be shared by the Judge who finally decides the issue) the application was entirely reasonable and was brought by the applicant bona fide. I will therefore reserve the question of costs, but should the matter not proceed further I give liberty to the parties to apply on that issue and I believe I have made my own views clear. The orders will be as follows: l. The application is dismissed. 2. I reserve the question of costs, with liberty to the parties to apply. 3. I direct an expedited hearing of the application and I further direct that the District Registrar of this Court should as soon as possible after a direction hearing, communicate with the Registrar to arrange such a hearing, if possible in Perth. 4. I direct the parties should attend a directions hearing before me within 7 days. During the application I made an order preventing publication of the evidence which included the affidavit evidence and exhibits. Being aware of the sensitivity of the issues and likely reaction in the market place to assertion not yet found to 7. be proved I am satisfied that the order should be continued. To do otherwise may displace the status quo which at present [I consider should be preserved. The order will not of course continue beyond the commencement of the substantive hearing. I certify that this and the six preceding Pages are a true copy of the reasons for decision (ex tempore) of his honour Mr Justice Muirhead. Associate Dated 2 July 1986