, a "JUDGMENT io, 7O 67..&.t. TRADE PRACTICES - misleading and deceptive conduct - acquisition by publicly listed company of another company's assets - agreement concluded - settlement not proceeded with - purchasers advise Stock Exchange by letter of non-acquisition - letter alleges misrepresentation by vendor inducing agreement ~ allegation said to constitute misleading and deceptive conduct - urgent claim for interlocutory relief against purchasers and Stock Exchange - serious question to be tried - short term injunction granted. Trade Practices Act 1974 s.80, s.52 GULL PETROLEUM (W.A.) PTY LTD as Trustee for THE GULL TRADING UNIT TRUST v POVEY CORPORATION LIMITED and ST ANDREW PROPERTY HOLDINGS PTY LTD and THE AUSTRALIAN STOCK EXCHANGE (PERTH) LIMITED NO. WAG 103 of 1987 FRENCH J. PERTH 18 SEPTEMBER 1987 " FT * ERPS TR IN THE FEDERAL COURT ) OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY GENERAL DIVISION No. WAG 103 of 1987 BETWEEN: GULL PRETROLFUM (W.A.) PTY LTD as Trustee for THE GULL TRADING UNIT TRUST Applicant and POVEY CORPORATION LIMITED and ST ANDREW PROPERTY HOLDINGS PTY LTD First Respondents and THE AUSTRALIAN STOCK EXCHANGE (PERTH) LIMITED Second Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 18 SEPTEMBER 1987 WHERE MADE: PERTH THE COURT ORDERS THAT: Upon the Applicant undertaking to pay to any party adversely affected by any interlocutory injunction granted in favour of the Applicant such compensation (if any) as the Court thinks just, in such manner as the Court directs:- 1. The Respondents be and are hereby restrained until 4.30 pm on Monday 21 September 1987 or further order from doing all or any of the following and/or any of them:- 2. (a) further publication of the letter from the First Respondents' solicitors to the Second Respondent of 17 September 1987, a copy of which forms annexure "A" to this order; (b) the publication of any statement whether oral or in writing in terms similar to the letter; (c) the publication whether orally or in writing of any statement alleging misrepresentation to the First Respondents by the vendors') of the business conducted by the applicant, Provided that the restraint shall not operate in relation to any communication between the Respondents and their Solicitors or counsel or between the First Respondents and any representative of Rothwells Ltd. A copy of the order, application and _ supporting affidavit to be served upon the Second Respondent no later than 9.30 am on Monday 21 September 1987. The Applicant to make every reasonable endeavour to serve a copy of the order on either the manager of the Second Respondent, Mr Cato or the Chairmen of the Second Respondent as soon as possible. 3. The application is listed for 2.15 pm on Monday 21 September for further directions. Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules. "aw LJS:DS 17 September, 1987 The Manager, Australian Stock Exchange (Perth) Limited, 68 St. George's Terrace, PERTH, W.A, 6000 , = NY Dear Sir, Meo We act for Povey Corporation Limited in its purchase of shares and units in the Gull Group of Companies and on behalf of St. Andrew Property Holdings Pty. Ltd with respect to purchase of real estate owned by the Gull Group upon which Gull operates its fuel retail outlets. The purchase agreements were made on the 24th August 1987. Our clients instruct us that their investigations show there is insufficient asset backing to support the consideration. A number of the representations made to our client which induced the contract have been found not to be true These revelations alone have placed obstacles in the way of our clients' financial arrangements. Our clients are doing what they can to resolve the situation and are striving to complete their investigations. At this stage it is becoming clear that our client will have their remedies at law; we cannot however commit our client to any course of action at present and they are currently considering their position A decision awaits the final outcome of the anvestigation. Our clients' posation should be formulated within the next few working days. You will be aware that Gull have commenced proceedings on the Agreement against our client, claiming entitlement to rescind; that entatlement is, for the reasons set out above, and for reasons we will not detail here, hotly disputed. Yours faithfully, BD38734/DLY2 _—- Ea SET IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION ~~ rw No. WAG 103 of 1987 BETWEEN: GULL PETROLEUM (W.A.) PTY LTD as Trustee for THE GULL TRADING UNIT TRUST Applicant and POVEY CORPORATION LIMITED and ST ANDREW PROPERTY HOLDINGS PTY LTD First Respondents and THE AUSTRALIAN STOCK EXCHANGE (PERTH) LIMITED Second Respondent CORAM: FRENCH J. 18 SEPTEMBER 1987 EX TEMPORE REASONS FOR JUDGMENT The substantive application in this matter, which was instituted in this Court today, arises out of an agreement between Gull Petroleum (WA) Pty Ltd ("Gull") and associated parties, as vendors of a business known as "Gull Petroleum", and Povey Corporation Limited ("Povey") and St. Andrew Property Holdings Pty Ltd ("St. Andrew") as prospective purchasers of that business. Affidavit material placed before the Court on the part of the applicant, which 1s Gull, in support of an urgent claim for interlocutory injunctive relief under s.80 of the Trade Practices 2. Act 1974 indicates that on 17 June 1987 heads of agreement were signed recording the terms of the sale of the business of Gull and 1ts assets to Povey for $15 million. A copy of the heads of agreement, which were later embodied in formal agreements, 1s before the Court as one of the exhibits to the affidavit of Mr M.I. Green. The heads of agreement were executed on 17 June. Four formal contracts embodying their terms were executed on 24 August. Those latter documents are not before the Court. Deposits totalling some $2,000,000 are said to have been paid under the agreements by the purchasers. It 1s further said that each of the agreements provided for the settlement on 3] August 1987 and that settlement did not proceed. Notices of default were subsequently sent to the purchasers by the solicitors for the vendors. Such notices, 1t 18 said, were 1ssued pursuant to the terms of the agreements. Correspondence then ensued between the solicitors for the vendors and the solicitors for the purchasers in which, inter alia, the solicitors for the purchasers asserted that the vendors, by their notices of default, have elected to affirm and were disentitled to rescind the contracts in question. 3. In particular, by a letter dated 14 September 1987, the solicitors for Povey and St. Andrew, Messrs. Northmore, Hale, Davy & Leake, wrote to Messrs. Robinson Cox, the solicitors for the vendors, saying, inter alia:- "your clients are not, with respect (and for the reasons we set out below) entitled to rescind (as you put it, "to enforce their rights of termination"). As your clients must know, ours have had lengthy but successful discussions with their merchant bankers, Messrs. Rothwells, and have every confidence in their ability to settle on or before 30th September, 1987." The letter went on to put certain propositions For, or associated with, the settlement for payment of interest and payment of legal fees to the applicant's solicitors. Subsequently, on 15 September, notices of termination of the contracts were sent under cover of a letter from the vendor's solicitors to the purchasers. Contemporaneously, proceedings were instituted in the Supreme Court of Western Australia seeking relevant declarations in relation to the status of the agreements. It 1S unnecessary for present purposes to refer to the detail of those. On 17 September 1987, the solicitors for Gull and its associated corporations and persons, the vendors, wrote to the solicitors for the purchasers and in their letter of that date said, among other things:- 4. "Our clients also consider that your client, Pavey Corporation Limited, is seriously in breach of its obligation to notify the Stock Exchange that 1t has defaulted under the Contracts, that the Contracts have been terminated and the deposit of $2 million has been forfeited. Your client has notified the Stock Exchange that the acquisition would be completed on 31 August, 1987 and has actually publicly announced that the acquisition has been completed. Our clients have incurred substantial losses as a result of your clients conduct. Without prejudice to their other rights our clients require that your clients now' formally issue a correcting statement to the Stock Exchange. If your clients do not issue a statement by 10.00 a.m. tomorrow our clients will take action to advise the Exchange." The reference in the letter to the obligations of, reference to the Listing Rules which provide, inter alia:- "SECTION 3 - CONTINUING LISTING RULES While a company remains on the Official List it 1s required to comply with the following Listing Rules and to provide forthwith any explanations requested by the Home Exchange. NOTICES - SECTION 3A To notify the Home Exchange immediately of - (4)(a) Any acquisition or disposition of fixed assets and/or investments including shares 1n another company by a listed company or a subsidiary of a listed company - (i) where the total assets being acquired or disposed of represent an amount in excess of 10 per cent of the written down value of the listed company's consolidated fixed assets and investments as disclosed in its last audited accounts, or in particular, Povey to the Stock Exchange, appears to have been a Flees gee 7 TRE ee (i1) 5. where it could reasonably be expected that the inclusion or exclusion, respectively, of the total current year's profit (loss) of such acquisition or disposition would result in an increase in or diminution of the listed company's consolidated pre-tax operating profit or loss for the year of acquisition or disposal in excess of 10 per cent compared with that consolidated pre-tax operating profit or loss disclosed in its last audited accounts, (111)1n the case of an acquisition to which Listing (iv) (b) Rule 3A(4)(a) applies the amount 1s the cost price of the asset and in the case of a disposition to which Listing Rule 3A(4)(a) applies the amount is the book value or the consideration on disposal whichever is the greater, for the purposes of Listing Rule 3A(4)(a) capitalisation of mining exploration expenditure, cost of mining tenements, options, goodwill and other expenses related thereto shall not be taken into account when determining the value of the company's consolidated fixed assets and investments except where the Home Exchange in its discretion allows 1t to be so included. With respect to such an acquisition or disposition the notice shall state - (i) (11) the date of the transaction; a general description of the nature of the assets and/or investments and 1f same consists of shares in whole or part the same and general description of the activities of the company in which the shares are or were held; (ii1l)the total consideration and the terms and (iv) (v) composition thereof; the basis of the valuation placed on the assets at the time of acquisition or disposition thereof, and the designation of the valuer; and in the case of a disposition the excess or deficit of the proceeds over the book value." 6. It 18 unnecessary for present purposes to go beyond that first provision in s.3A. I am prepared to infer, but only for the purposes of this interlocutory application, that information communicated to the Stock Exchange in discharge of the obligation under s.3A could, in the ordinary course, be expected tu be disseminated to persons who might be concerned with the value of the company's securities; that 18 to say, to stock brokers and members of the general public. On 18 September 1987, the solicitors for the purchasers sent a letter to the solicitors for the vendors enclosing a copy of a letter they had sent to the Stock Exchange on the previous day. That letter said:- "We act for Povey Corporation Limited in its purchase of shares and units in the Gull Group of Companies and on behalf of St. Andrew Property Holdings Pty. Ltd. with respect to purchase of real estate owned by the Gull Group upon which Gull operates its fuel retail outlets. The purchase agreements were made on the 24th August 1987. Our clients instruct us that their investigations show there 1s insufficient asset backing to support the consideration. A number of the representations made to our client which induced the contract have been found not to be true. These revelations alone have placed obstacles in the way of our' clients' financial arrangements. Our clients are doing what they can to resolve the situation and are striving to complete their investigations. At this stage it 1s becoming clear that our client will have their remedies at law; we cannot however commit our client to any course of action at present and they are currently considering their position. A decision awaits the final outcume of the investigation. Our clients' position should _ be formulated within the next few working days. You will be aware that Gull have commenced proceedings on the Agreement against our client, claiming 7. entitlement to rescind; that entitlement is, for the reasons set out above, and for reasons we will not detail here, hotly disputed." On 18 September, having received a copy of the letter to the Stock Exchange, the applicant's solicitors wrote back to the solicitors for the purchasers contending that the statements made in the letter were totally untrue and that the purchasers' inability to settle had nothing to do with any allegedly untrue representations made by the vendors. The letter went on to contend that from discussions which had taken place both with the purchasers, their solicitors and their financiers, Rothwells Limited, 1t was clear that the purchasers' inability to settle was due solely to their inability to raise finance. That, it was said, was the first occasion upon which the solicitors for the vendors had been made aware of any alleged misrepresentation by their client. Now, there 1S some support for that contention in the letter of 14 September from Northmore, Hale, Davy & Leake to Robinson Cox, which, on the face of it, plainly contemplates that the purchasers were intending to proceed to settle and that it was merely a matter of arranging appropriate finance with Rothwells. In the letter of response of 18 September, Robinson Cox sought from Northmore, Hale, Davy & Leake, a retraction of the letter to the Stock Exchange together with an undertaking from the a0 8. purchasers and their solicitors not to repeat the statements made in the letter or any similar statements and indicating that they had instructions to commence proceedings under s.52 of the Trade Practices Act. The letter also put the solicitors on notice that the vendors would seek an injunction later on the same day restraining publication of the letter. In an affidavit in support of the claim_ for ynterlocutory relief, Malcolm Ian Green, a director of Guill Petroleum says, at para. 18, that he was personally involved in all negotiations between the Gull parties and the Povey parties both before and after the settlement date. He contends that it was a basis of the negotiations between Gull and Povey which resulted in the agreements being executed, that the Gull parties were not prepared to make any representations concerning the viability or otherwise of the Gull business. Apart from minor matters the only statements made by the representatives of the Gull parties concerned the number of sites operated by Gull Petroleum, the volumes of sales of petroleum products in terms of litreage from such sites, the number of properties in which the Gull business held leasehold and freehold interests respectively. 9. He also says that during negotiations a representative of Povey was given access to the books and records of Gull to satisfy Povey of the accuracy of the representations concerning those specific matters and vigorously disputed any suggestion that there had been any misrepresentation made by Gull concerning any of the matters, the subject of the agreement. He says that, the agreements now having been terminated, Gull is anxious to be able to sell the Gull business to any other interested purchaser and contends that any publication of statements concerning misrepresentations by Gull in its negotiations with Povey would be substantially prejudicial to the business of Gull and that any statement that the consideration expressed in the agreements with Povey 1S not correct, would substantially deflate the price which might be obtained for the sale of the Gull business. He went on to deny that the total purchase price in the agreements was not represented by the value of the assets of the business of Gull. The injunctive relief claimed on the application would restrain the respondents, including the Australian Stock Exchange (Perth) Limited, from further publication of the letter of 17 September, the publication of any statement whether oral or 1n writing in terms similar to the letter and the publication, whether orally or in writing, of any statement alleging Po FERRET ITF 10. misrepresentations to the first respondents by the vendors of the business conducted by the applicant. I understand, although 1t 1s not clear from the terms of the application, that the claim for interloctury relief would reflect the claim for substantive and final relief, albeit for a shorter period. It has been brought on before this Court at very short notice indeed. The first respondents, who appear to answer the claim, have not been in a position to properly mount a response to the evidentiary material that has been adduced on behalf of the applicant. Any observations therefore, and findings of fact which I make in connection with this claim are provisional and purely tor the purpose of the interlocutory relief. They depend, as is obvious, upon material put before me at very short notice, some of which would probably not be admissible at a final hearing. For the purposes, however, of determining whether or not to grant the relief sought on an interlocutory basis, the usual tests require me to be satisfied that there is a serious question to be tried and that the balance of convenience favours the grant of the relief sought. To some extent those two questions are not independent. The strength of the case demonstrated by the applicant may have some bearing upon the extent to which a marked Il. balance of convenience would be required to justify the grant of the relief. In my opinion, the applicant has demonstrated that there 1S a serious question to be tried as to whether or not the statements contained in the letter of 17 September 1987 to the Stock Exchange are misleading or deceptive. I am satisfied also that there 1S a serious question to be tried as to whether those statements are made in trade and commerce and made by a trading corporation within the meaning of that term in s.52 of the Trade Practices Act. Mr Stone makes the point on behalf of the respondents, that the letter was written purely as a result of the request contained in the letter of 17 September from the solicitors for the vendors, and further says that neither his firm nor its clients have any intention of repeating the statements contained in that letter, subject to any requirements that might be imposed in that regard by the Stock Exchange. Further, 1t is the case that the Stock Exchange itself, which 1S named as second respondent in these proceedings, has given no indication of whether or not it intends to publish the letter. Mr Nelson, who gave short oral evidence, stated that he had spoken with an employee of the Stock Exchange who indicated el a ek 12. that no decision had been made as to whether the terms of the letter would be published. Some problem seems to arise in that regard out of the fact that the letter does not appear on the letterhead of a listed company, but rather under the name of its solicitors. That 18 a decision which would be made by the manager of the relevant section of the Stock Exchange some time on Monday, he not being at the Stock Exchange today. I do not think that the fact that the letter was sent in response to the request made by the solicitors for the applicant impinges on the question whether or not there 1s a serious question to be tried, nor do I think it impinges on the balance of convenience, On the face of 1t, the request made by the applicant was for a corrective statement in relation to the progress of the position with respect to the contract to purchase the Gull business and the forfeiture of the deposit. It would not be far- fetched to infer that the applicant and its solicitors were not contemplating that the letter would be written asserting misrepresentation on the part of the applicant and inadequate asset backing for the considerations proposed in the agreement. As to the question of the risk of repetition of the allegations contained in the letter, I have regard to sub-s.80(4) 13. of the Trade Practices Act which provides in respect of the Court's power to grant injunctions, and I take it a3 applicable also to the power of the court to grant interim injunctions under that provision:- "(4) The power of the Court to grant an injunction restraining a person from engaging in conduct may be exercised - (a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in conduct of that kind; (b) whether or not the person has previously engaged in conduct of that kind; and {c) whether or not there 1s an imminent danger of substantial damage to any person lf the first-mentioned person engages in conduct of that kind." On the materials presently before me, and on a provisional basis, I am prepared to infer that there is a risk and the basis for an inference that the purchasers intended that the content of the letter of 17 September should be made public and that in the ordinary course there 1s a significant likelihood that the second respondent will publish or make available to the public that letter or its contents. In the circumstances, therefore, I do not think that the statement from the bar table, albeit, that I accept its correctness as a reflection of the intentions of the purchasers' solicitors and the instructions they have from the purchasers, is a basis for refusing to grant the injunction at this time. of 14. course, Mr Stone has indicated from the bar table, and he was limited by the constraints of time within which he had to prepare for this matter, that his firm was acting upon instructions and had some basis or had discerned some hasis, for the allegations made in the letter. I think, as I indicated to him earlier, that I can and would be prepared to infer that his firm acted upon that basis and I would be prepared to go further for the purposes of this application and accept that his firm had satisfied itself that there was some basis for the allegations contained in the letter. But that does not, in the end, deflect me from the exercise of my discretion in favour of the applicant having regard to the determination that there 1s a serious question and that 1t 1s plain, in the circumstances, that the balance of convenience will favour the grant of interlocutory relief. I propose, however, that the grant of interlocutory relief should be as short term as 1S practicable 1n_ the circumstances, particularly having regard to the obligations of the second respondent to the public and to the fact that the second respondent has not been served with the application and has not had an opportunity to put its position before me today. The relief that I will grant will only be granted until 4.30 pm on Monday and I will list the matter for further mention at 2.15 on Monday. 15. I propose to make orders which reflect broadly the terms of the injunctive relief claimed in the application, but it will have to be cast in the form which 1s suitable to interlocutory relief and I do so on the basis of the undertaking as to damages signed for and on behalf of the applicant which is dated 18 September 1987 and placed on the file. I certify that this and the preceding fourteen (14) pages are a true copy of the Reasons for Judgment of His Honour Justice French. Associate: Gees ofa USK Date: \& AaiprenrS® ! Is? Counsel for the Applicant: Mr S. Archer with Mr C. Colvin Solicitors for the Applicant: Messrs. Robinson Cox Counsel for the First Respondents: Mr D. Stone with Mr R. Mullins Solicitors for the First Respondents: Messrs. Northmore, Hale, Davy & Leake Date of Hearing: 18 September 1987 Date of Judgment: 18 September 1987