JUDGMENT NO. sesnee2 Sosa! 0d Ln CATCHWORDS TRADE PRACTICES - misleading or deceptive conduct - proposal for corporate reorganisation - ""demutualization" and issue of shares or cash - prospectus - reasonable expectation of members of full and fair disclosure for the making of properly informed judgment on the proposal. CORPORATIONS - "control" of corporation - meaning thereof. Trade Practices Act 1974, ss. 52, 80, 87 Corporations Law, ss. 199, 749, 750, 995 Royal Aytomobile Cl of Victoria v Federal Commissioner of Taxation {1974] V.R. 651 Rhone-Poulenc Agrochimie SA v (1986) 12 F.C.R. 477 Demagogue Pty Ltd v Ramensky (1992) 39 F.C.R. 31 Warner v Elders Rural Finance Limited (1993) 41 F.C.R. 399 Peters' ican Delica o. Ltd v Heath (1939) 61 C.L.R. 457 Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 A.C.L.R. 94 Campbell v The Australian Mut al Provident Society (1906) 7 S.R. (N.S.W.) 99, affd. (1908) 24 T.L.R. 623 Re_ A. Ffrost & Co. Pty Ltd [1993] 1 Qd. R. 1 Walker v Wimborne (1976) 137 C.L.R. 1 Mendes v issioner of Probate Duties (Victoria) (1967) 122 C.L.R. 152 DAWN _ FRASER & ANOR v NRMA_HOLDINGS LIMITED & ORS No. NG 3479 of 1994 RECEIVED BEFORE: GUMMOW J. 14 OCT 1994 PLACE: SYDNEY. FEDERAL COURT OF DATE: 13 OCTOBER 1994. AUSTRALIA PRINCIPAL REGISTRY IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION No. NG 3479 of 1994 BETWEEN: DAWN FRASER First Applicant RICHARD JAMES TALBOT Second Applicant AND: NRMA HOLDINGS LIMITED First Respondent NRMA LIMITED Second Respondent NRMA_INSURANCE LIMITED Third Respondent BEFORE: GUMMOW J. PLACE: SYDNEY. DATE: 13 OCTOBER 1994. M FOR: UPON the claims to relief the subject of the order under 0.27 r.2 made 27 September 1994, THE COURT DECLARES THAT: By distributing to members of the second and third respondents the documents copies of which are Exhibits A, B and C, the first respondent, in trade or commerce, engaged in conduct which is misleading or deceptive or likely to mislead or deceive. ut AND_THE COURT ORDERS THAT: (1) (2) (3) (4) (5) (6) The respondents, by themselves, their servants and agents, and the servants and agents of each of them, be restrained from distributing to members of the second and third respondents copies of the documents Exhibits A, B and C. The second respondent, by itself, its servants and agents, be restrained from, without the leave of the Court, proceeding with any business at the general meeting of members, identified in the Notice of General Meeting, a copy of which is contained in Exhibit C, other than by the taking of such steps as are necessary or appropriate to adjourn the meeting. The third respondent, by itself, its servants and agents, be restrained from, without the leave of the Court, proceeding with any business at the general meeting of nembers, identified in the Notice of General Meeting, a copy of which 1s contained in Exhibit C, other than by the taking of such steps as are necessary or appropriate to adjourn the meeting. There be liberty to apply. The respondents pay the costs of the applicants of the proceeding up to and including 13 October 1994. Order (1) be suspended until noon on 14 October 1994, and the proceeding stand over to 9.30 a.m. on 14 October 1994 for the parties to speak to the form of orders (1), (2) and (3). 3. (7) The proceeding otherwise stand over to 9.30 a.m. on 25 October 1994 for directions as to the further conduct of the balance of the proceeding which remained after the order under 0.29 r.2 made 27 September 1994. Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION — ew No. NG 3479 of 1994 BETWEEN: DAWN FRASER First Applicant RICHARD JAMES TALBOT Second Applicant AND: N N I First Respondent NRMA_ LIMITED Second Respondent NRMA INSURANCE LIMITED Third Respondent BEFORE: GUMMOW J. PLACE: SYDNEY. DATE: 13 OCTOBER 1994. REASONS FOR MEN' The Present Structure and the Proposal The first and second applicants are directors and members of the second respondent, NRMA Limited ("the Association"). The second applicant is also a member of NRMA Insurance Limited, the third respondent ("Insurance"). The Association was previously styled National Roads and Motorists' Association Limited. It changed its name to NRMA 2. Limited on 17 November 1992. The Association was incorporated in 1920 as a company limited by guarantee under The Companies Act 1899 (N.S.W.) ("the 1899 Act"). It controls and has a significant ownership interest in eight companies. Insurance was incorporated in 1926 under the 1899 Act. It also is a company limited by guarantee. Insurance controls some ten companies. The total assets managed by the Insurance Group at 31 March 1994 was $4.401b. The total for the Association was the lesser but still substantial sum of $457m. This disparity assumed an importance for some of the submissions at the trial. The Association and Insurance conduct a wide range of operations which have made the term "NRMA" very well recognised. Perhaps most well known is the road service which has been supplied to generations of stressed motorists in broken down cars. On one rainy day in Sydney in February 1992, the Association dealt with more than 11,000 calls from members. In 1992-1993, 405 road patrol officers responded to over 2m. calls. There is a fleet of 470 NRMA road service vans. Eighty five per cent of all members of the Agsociation have only one car covered by their membership. A small number of members has hundreds or even thousands of vehicles. Insurance is one of the largest general insurers in the country. In addition to comprehensive car insurance it provides home buildings and contents policies. At 30 June 1994, there were approximately 4.2m. insurance policies in 3. force. The objects of insurance, set out in cl. 3 of its Memorandum of Association, include the conduct of all kinds of insurance business and the provision of insurance for members of the Association as well as for others. The only policy holders who are members of Insurance are those who are members of the Association. This is the effect of Article 3 of the Articles of Insurance. In the Annual Report of the Association for 1992/93, Mr R.B. Willing, its Chief Executive Officer, when dealing with results, wrote: "In general terms NRMA Ltd is owned by its Members (who are, in short, NRMA Road Service members), while NRMA Insurance Ltd is owned by its policyholders who are also members of NRMA Ltd. When considered in the context of legal ownership, then, NRMA Ltd and NRMA Insurance Ltd are two different groups, so I will deal separately with the results of each group." Telephone and face to face advice to members is a feature of the operations of both the Association and Insurance. The official journal "The Open Road" appears six times a year and has a readership of 2.15m. The uncontradicted evidence suggests that there has been a high degree of satisfaction with the services supplied to members. These bodies comprising what in the general consciousness is the unigue institution known as "the NRMA"" have grown and prospered, but not as corporations deriving profits for 4. distribution to shareholders. Rather, as companies limited by guarantee, they have been operated for the mutual benefit of members. In 1992-1993, some $87m. in rebates were afforded to policy holders. The annual subscription for the provision of road service using the Association is $36. In May 1994, the Board of Management of the Association resolved not to increase the fee for the next 12 months. Road and other services are provided to members at a loss. For the year 1993-1994, this appears to have been $12m. The cheap membership services and insurance rebates may illustrate the proposition that some mutual organisations benefit their members, not by dividends to shareholders, but by way of reduction in the price for services. However, Mr Willing, who is also Managing Director of Insurance, gave evidence that he regards the provision of rebates as an unsatisfactory "capital management tool". In particular, this is because it is not in the interest of Insurance to maintain on a long term basis artificially low insurance premiums supported by capital reserves. The evidence indicates that whether or not the present proposal is given effect, rebates are unlikely to be continued beyond 31 July 1995. Subscriptions of members to the Association are not taxed in the hands of the Association. Further, the Association and Insurance hold assets acquired before 20 September 1985 to which, by reason of the date of their acquisition, capital gains tax does not apply. 5. The first respondent, NRMA Holdings Limited ("Holdings") was incorporated in New South Wales on 15 July 1994. This followed the public announcement on 17 March 1994 of a proposal to restructure the Association and Insurance. Holdings was formed for listing on the Australian Stock Exchange and the five subscribers were to remain the only shareholders until the listing was implemented. Holdings has not traded. Holdings has a share capital and invites members of the Association and of Insurance to become shareholders. The vast body of members of these two bodies would cease to be such. The Association would have Holdings as its sole member, and Holdings and the Association would be the members of Insurance. The former members would become shareholders of Holdings or receive cash. The means by which this proposal would be achieved has been promoted by its supporters as "unlocking" that "wealth" which is at present "inaccessible" to members. The Memorandum of Association of Holdings provides that whilst it is the holder of not less than 50% of the ordinary shares on issue in the capital of the Association, Holdings shall procure that the Memorandum of Association of the Association includes objectives to the effect of (a) promoting the interests of motorists and other road users throughout Australia in good roads, safety and consumer protection, and (b) providing motorists and others with a range of services 6. including provision of emergency or breakdown relief service and other services to vehicles. The Articles of Holdings contain (Article 3) complex provisions with the evident purpose of limiting to 5% any shareholding in Holdings. This restraint is to operate until 1 January 2000. If Holdings is listed, any sale or disposal of its main undertaking shall be conditional upon approval or ratification by resolution at a meeting of members held in accordance with the listing rules (Article 20.2). The Insurance Acquisitions and Takeovers Act 1991 also is relevant. It provides, in effect, that without the prior approval of the Treasurer, no person or associated person may acquire shares in any insurance company if those shares when aggregated would to amount to a more than 158% holding. The proposal brought the parties into dispute. There are 16 directors of the Association, and of these I3 are in favour of the proposal. The applicants are two of the three directors who are against the proposal. There are eleven directors of Insurance. Eight of these are also directors of the Association. Only one director of Insurance is against the proposal, that director being one of the three dissentients on the board of the Association. .The organisation of the Association and Insurance as companies limited by guarantee, rather than by shares, with members who are not shareholders, is of significance for the proposal in several respects. 7. The first concerns the operation of the revenue laws and has been foreshadowed in what has been said above. The . structure of the Association and Insurance has been said to attract what has been called "the mutuality principle". Where this applies, the circumstance that members are joined in a corporation limited by guarantee is not of itself destructive of the principle. In t i Vic ia v Federal Commissioner of Taxation [1974] V.R. 651, the taxpayer was a company limited by guarantee. The case concerned the extent to which the mutuality principle had the effect of relieving the taxpayer from the incidence of income tax in relation to various activities it conducted. The Supreme Court held that the mutuality principle applied to certain activities, such as the road service, the touring service and the technical and testing service, but that it did not apply to activities such as the provision of the driving service for non-members. Currently the income and expenses of the Association arising from the provision of its mutual services are not assessable and deductible, respectively. If the present proposal goes ahead, the income of the Association should be assessable and its expenses deductible. The second matter is the effect of the structure of the Association and of Insurance upon the formulation of the proposal. If the two bodies were corporations limited by shares, the nature of the offer made by Holdings might have been characterised as one to acquire the shares in these two companies in exchange for shares in Holdings or a cash : payment. If the proposal had been, as a matter of law, framed in that way, there could have been no suggestion that the shares in Holdings were "free shares". It could not credibly have been asserted that the shares issued by Holdings were "free" because no cash subscription of the par value was required. It also would have been a curious (at best) metaphor to say that sales of shares to Holdings "unlocked" any "wealth". Furthermore, the Association and Insurance each would have been a "target company" within the meaning of Chapter 6 of the Corporations Law ("the Law"). Chapter 6 deals with the acquisition of shares under takeover schemes. Part 6.12 (ss. 749-750) requires the issue of certain statements, including Part B statements, to be given by a target company. Clause 1 of Part B, subjéct to an immaterial qualification, requires that the Part B statement set out certain material, in relation to each director of the target company, if the director desires to make and considers himself or herself justified in making a recommendation in relation to the offer. The material is whether the director 'recommends' the acceptance of offers made or to be made by the offeror or recommends against such acceptance and, jn ejther case, the reas [e) ". [Emphasis supplied] 9. The substance of the proposal in relation to Holdings, the Association and Insurance involves, broadly, the acquisition of what in the evidence (but not the prospectus) is identified as the "Transfer Value" of the Association and its subsidiaries and the application of this by Holdings to pay up the par value of the shares to be offered to members of the Association and of Insurance. The estimated total market value of Holdings is $2.2b. The Law requires the issue of a prospectus in relation to the offer of these shares by Holdings. In it, these shares are identified repeatedly as "Free Shares". There is, however, no takeover offer attracting the operation of Chapter 6 of the Law. Therefore, there is no statutory platform afforded by Chapter 6 to any dissentient directors of the Association or of Insurance from which they may disseminate to members the reasons for which they recommend against acceptance of the proposal. It is in this setting that the applicants, who are dissentient directors, seek to avail themselves of the standing given by s. 80 of the Trade Practices Act 1974 ("the Act") to "any person" to seek injunctive relief in respect of alleged contravention of s. 52 of the Act. The spect On 23 August 1994, Holdings and Perpetual Trustee Company Limited ("the Trustee") issued a booklet (Exhibit C) bearing 10. on the cover the word "PROSPECTUS" ("the prospectus"). The prospectus was distributed in clear plastic packages. with accompanying material. This comprised two sheets, each double sided. There was a Proxy Voting Paper for the Association, with, at the foot, a form headed "Acceptance of Free Shares", and, on the reverse, a Proxy Voting Paper for Insurance. This is Exhibit B. The other sheet (Exhibit A) was headed "Important Information Inside". It is this latter sheet which would be the first page to be seen by a person picking up the plastic packet. It bears in eye catching red print the phrases "How to Vote!" and "How Many Shares You Will be Gaven!". The form headed "Acceptance of Free Shares" has particulars completed for each addressee of the prospectus. In each case it specifies a number of shares to which the addressee is said to be ""entitled" and states what the directors of Holdings are said to estimate as the approximate market value of those shares. This yields a sum of $2 per share. Thus, a statement of entitlement to 300 shares is followed by a statement that their approximate value is $600. The value is said to have been fixed at 30 June 1994, assuming Holdings had then been listed on the Stock Exchange. The form continues: "The actual price when listing occurs may be higher or lower. See Section 2 of the prospectus." 11. Mailing of the prospectus packet to members of the Association and of Insurance commenced on 31 August 1994. The documents have been sent out at an average rate of 150,000 per day, and have been directed to almost every household in New South Wales and the Australian Capital Territory. There are over 1.8m. members of the Association. Of these, approximately 1.3m. are members also of Insurance. The addressees of the offer of "Free Shares" are linked by what in a sense is the private characteristic of membership of the Association and Insurance. But the scale of the proposal, in terms of the number of members and of money values, is such that in substance and reality Holdings is dealing with a very large proportion of the adult public in New South Wales and the Australian Capital Territory. The addressees of the prospectus may be expected to include significant numbers of people who, whilst quite astute in dealing with their day to day financial affairs, have no experience in dealing with shares, with corporate reorganisation, or with a prospectus. Furthermore, what one might inelegantly call "de-mutualization" is an unusual form of corporate re-organisation, even to many experienced aunvestors. The prospectus contains more than 100 pages. It includes (pp- 18, 19) notices of general meetings of members of the Association and of Insurance. Both meetings are to be held on 19 October 1994, that of the members of the Association at 10 12. a.m. and the other at 3.30 p.m. Each notice is dated 18 August 1994. Significantly, each is stated to have been issued by order of the Board of directors of the company in question. Proxies must be received by 3.30 p.m. on 17 October. But Exhibit A encourages early posting so that there will be receipt by 12 October. The prospectus also includes, in pages appearing after p. 50, forms of application on what is called the members' Sale Offer, with provision for payment of the application moneys. These will not be accepted until after the date, expected to be 24 October 1994, on which the making of the sale offer and the application price are notified. Throughout the prospectus, stress is laid upon the requirement for 75% of those members of the Association and of Insurance who are voting to vote in favour of what is described as "the proposal". The requirement, as regards the changes to the Memorandum and Articles of Association of the two companies, for approval by 75% of those voting stems from the general provisions of the Law, ss. 172, 176, 253. The documentation also indicates that "the proposal" involves the change of status by "NRMA" and the issue of what are identified as "Free Shares" to members. This term appears on the leaflet headed "Important Information Inside". An asterisk beside the term "Free Shares" leads the eye to the following: 13. "The Free Shares (or cash alternative) are in exchange for membership under the Articles of each of NRMA Limited and NRMA_ Insurance Limited. Whether you accept the Free Shares or the cash alternative, Road Service and policies continue as usual." This reassurance as to the continuation of the usual is a theme which is repeated in the prospectus. The "cash alternative" applies to each member who does not want the Free Shares or from whom a valid Acceptance of Free Shares form is not received. The shares attributable to each such member will be sold and the proceeds, less sale costs of an estimated 5 cents per share, will be paid to the member. The precise nature of the inter-relation between the .ssue of "Free Shares" and the -elingu:shment of membership appears only by going to the texts of the proposed new Articles of Association of the Association and of Insurance. These are in evidence. Counsel for the respondents said that the picture might be built up from summaries in the prospectus. Copies of the new Memoranda and Articles' are said in the prospectus to be available on request. Nevertheless, none of the proposed text is set out in the prospectus. In the case of the Association, the new Article 117 will provide as follows: "117 Cessation of Membership 14. If the conditions attaching to the offer by NRMA Holdings of Shares to Participating Members as set out in the prospectus are satisfied then: . (a) the members of the [Association], other than NRMA Holdings, shall cease to be members on the Changeover Date; and (b) the [Association] shall refund to each member who has ceased to be a member the amount that equals the unexpired portion of the member's annual subscription on the Changeover Date and apply that to the Service Contract for the period from the Changeover Date to the date on which the member's annual subscription would have fallen due if the member had not ceased to be a member on the Changeover Date, on condition that upon NRMA Holdings becoming the sole member of the [Association]; (Cc) NRMA Holdings first applies the Transfer Value to pay up the par value of the Shares and then applies the balance to a Share Premium Account; and (d) NRMA Holdings allots and issues those Shares accepted by Participating Members in accordance with the terms of the offer and allots and issues the balance of those Shares to the NRMA Offer Trust." Article 117 of the proposed new Articles of Insurance is to similar effect as the new Article 117 of the Association. Several of the terms in Article 117 are defined in Article 115. "Participating Members" are stated to be those entitled to an offer of the ordinary shares of $1 each in accordance with the entitlement rules which are applied by Holdings and "summarised" in the prospectus. The "Changeover Date" is that date which is one business day after the day on which the Australian Securities Commission ("the ASC") issues 15. to the Association a certificate of registration specifying its change of status to a company limited by shares and guarantee. The term "Transfer Value" is central to the operation of Article 117 (c). It is defined in Article 115 as meaning "the fair value of all assets and liabilities of the {Association} and its subsidiaries as at the Changeover Date". From perusing Article 117, the question arises as to how Holdings is to "apply" the fair value of the assets and liabilities of the Association and its subsidiaries. In response to a question from the bench as to how his client contemplated the operation of Article 117, counsel for Holdings responded: "well, one would expect that upon' the cancellation of the membership, the interest of Holdings in the two companies increases in value very substantially. That would create presumably an asset revaluation reserve. That asset revaluation reserve can then be applied and be distributed to members in effect, by applying that wealth in crediting unissued shares as fully paid upon their allotment first to members who accept the shares on the one hand, and those shares which are not accepted are then allotted to the Trustee who is in effect a trustee for sale, the beneficiaries under that trust for sale being the members who elect to take the cash or the members who elect to do nothing." Further, on p. 60 of the prospectus, the following appears: "The directors of NRMA Holdings intend to have transferred $500 million of the share premium reserve created in the process of the proposed restructure, to a retained earings account. 16. Following the transfer, retained earnings will be available for distribution as dividends." It is then said that the transfer will be technically a reduction of capital and will be subject to approval of a general meeting of Holdings in early 1995 and subsequent Court confirmation. The prospectus is divided into what are described as "Sections". Each commences with a full page colour photograph of a smiling NRMA staff member, beside which is a circular device with an NRMA symbol surrounded by the words "SHARE THE FUTURE". Section 1 (pp. 5-20) is headed "Information for Members", Section 2 (pp. 21-34) "Details of Members Free Offer and the Sale Offer", Section 3 (pp. 35-38) "Guide for Investors", Section 4 (pp. 39-50) "The NRMA and (Its Businesses" Section 5 (pp. 51-60) "Financial Information", Section 6 (pp. 61-80) "Independent Accountant's Report", Section 7 (pp. 81-84) "Actuarial Reports", Section 8 (pp. 85- 96) "Additional Information", and Section 9 (pp. 97-100) "Definitions and Technical Terms". The role of the Trustee in the preparation of the prospectus has been limited to Section 8 and so much of Section 2 as deals with the terms of the trust. The booklet is titled "PROSPECTUS" and I have, for convenience, used that term to identify it. However, the applicants submit that much of the mischief of which they 17. complain in this case flows from the melding into the one document of, on the one hand a prospectus for the issue of shares in Holdings, and on the other of notices of general meetings of members of the Association and of Insurance. The expressions "Free Shares" and "Free Share" appear throughout the prospectus. In the first 31 pages, "Free Shares" and "Free Share" together appear 100 times. In the prospectus as a whole they appear 117 times. On the proxy form and "Important Information Inside" leaflet, they appear 13 times. In the prospectus "Free Shares" is defined in Section 9 {p. 98) as meaning "the NRMA shares offered to members under the Members Free Offer", that being in turn defined as "the offer of Free Shares to members as described in Section 2". The term "member" is defined as "member of the Association"; there is no separate definition for members of Insurance. It will be necessary to refer in greater detail to the anterrelation between these memberships. ""NRMA shares" is defined as some or all, depending on the context, of the fully paid ordinary shares of $1 par value each in Holdings which are offered under the prospectus. In Section 9 (p. 99) is an important definition of "the NRMA". It is as follows: "NRMA Holdings and, as the context requires, the consolidated NRMA Group comprising the Association Group and the Insurance Group where the chief entity prior to the restructuring is the Association and, after the restructuring, is NRMA Holdings." 18. The Association Group comprises the Association and the companies to which I have referred. The same is the case as regards the Insurance Group. The booklet is, in a visual sense, attractively presented and well laid out. The applicants point, as setting the stage for what follows, to a passage in a letter from the President, on the letterhead of Holdings, which appears on pp. 3 and 4 of the prospectus, immediately before Section 1. The applicants stress, rightly in my opinion, the significance which the President's letter would have for the ordinary reader. Such a person is likely to turn to this first before setting off into the detail of the following 90 or so pages. The letter uses the expression "the NRMA" without apparent distinction between the Association, Insurance and Holdings. The curious reader might turn to p. 99 for a definition. The letter is addressed "Dear Member". "Member" is defined as a member of the Association. The President says he speaks as a member of the Board of the Association for 14 years. He asserts that like many other mutual organisations "[t]he NRMA" has reached a crossroads. It is time to decide whether to continue to operate within the current structure or to adopt a new structure "which will build on the current successes and permit members to share in the wealth and future financial successes of the 19. organisation". The reference to wealth is repeated in the next paragraph. This states: "In short, the proposal _is to unlock the wealth of the organisation by giving members Free Shares. The Proxy Voting Paper that came on the outside of this prospectus will have told you the number of Free Shares you will receive and an estimate of their value. The proposal and its implications for you are detailed in Section 1 of this prospectus. If the proposal is adopted, members' financial ownership of the NRMA will be formalised. The Boards of the Association and NRMA Insurance have each considered the options and have concluded that the share issue is in the best interests of members and policyholders. The restructure wi not affect the way we e. wil] c inue_t rovide efficient Road Service and competitive s nce. There will be no change in the road patrols. The restructure will however give us greater flexibility in developing businesses for the benefit of all members and policyholders. The Boards therefore strongly recommend that ou vote in favour of the proposal and accept the Free Shares." [Emphasis supplied] I accept the submissions for the applicants that the attention of the interested but unpersevering reader is likely to be attracted and retained by the President's letter, followed by Section 1, "Information for Members". Significantly, the reader of the notices of general meeting is specifically invited to refer to the "Information for Members". This significance attached to the "Information for Members" is to be taken into account when evaluating submissions that alleged deficiencies and obscurities in this section are remedied by material which is to be found in the balance of the document. 20. The general tenor of the "Information for Members" (as of the prospectus as a whole) is to encourage a favourable - response to the proposed new structure and to agree with the recommendation of what are called (p. 6) the "NRMA Boards". This is that members of each of the Association and Insurance vote in favour of "the proposal" and that members of the Association choose the "Free Shares". The term "the proposal" 1s set out under a heading using those words on the first page of the "Information for Members" (p. 6). It is as follows: "THE PROPOSAL Members have the opportunity to become shareholders of NRMA Holdings Ltd, a new company which will own the NRMA businesses. If you were a member of the Association on 16 March 1994, you are being offered Free Shares in NRMA Holdings Ltd. You may choose to take the Free Shares or to take the cash alternative. If you choose to take your Free Shares, you will become a shareholder of NRMA Holdings Ltd." Earlier, on the same page, under the heading "BENEFITS OF CHANGE", it is said: "Under the NRMA's current structure the wealth that is the product of this success is locked away, inaccessible to members of each of the Association and NRMA Insurance. The challenge for the NRMA was to find a way of unlocking that wealth while ensuring that it continues to provide excellent service. The NRMA is proposing to change its legal structure to enable its financial success to be shared with its members. At the same time, the new structure will allow the NRMA to remain a unique institution which continues to provide quality service. 21. The primary benefit of the proposal is that members of the Association will receive Free Shares allowing them to share in the future financial success of the NRMA." Reference to wealth which would otherwise remain locked up and inaccessible to members is made elsewhere in this Section (p. 11). Thus, there appears early in probably the most significant Section of the prospectus the themes which are to recur in the document. One is the making available of otherwise inaccessible wealth to members by Free Shares or receipt of cash. Another is that despite what are described as changes to the legal structure of the NRMA, it will still be, to use a phrase employed by counsel in addresses, "business as usual". Both themes are expressed and repeated in a fashion apt to induce a sympathetic response by the reader. There is force in the applicant's submission that, on a reasonable view of the matter, the wealth of the two bodies is not "locked-up". To a degree the current structure of the bodies provides advantages to members by such means as cheap road service and, at least for the present, insurance rebates. Further, the basic questions for members to decide, with the assistance of what is put befare them in the prospectus, are (a) whether they will be better off by remaining as members, or by becoming shareholders or recipients of the proposed cash distribution in lieu of shares, and (b) why the Boards have 22. concluded that the share issue is in "the best interests" of members and policy holders. The applicants also make the point that whilst it literally is true that the Boards do strongly recommend acceptance of the proposal, not all of the directors favour it. Information in that regard is found on p. 15 of Section 1. This identifies the numbers of directors for and against. It does not give any indication of the reasons for the dissentients acting as they did. As I have indicated, the business of each meeting called for 19 October is the consideration and passage, if thought fit, of a special resolution. The status of Association is to be converted from that of a company limited by guarantee to that of a company limited both by shares and by guarantee. The nominal capital of the Association is to be $10b. divided unto 10b. shares of $1 each. The proposal for Insurance also is that it be converted to a company limited both by shares and guarantee; its nominal capital would be $100b. divided into 100b. shares of $1 each. In each case, new Articles are to be adopted. At the foot of the notice of general meeting for the Association, there appears material referring to what is identified as the "Information for Members". This is a reference to Section 1 of the Prospectus (pp. 5-20) which thus includes the notices themselves. The Material at the foot of 23. the notice of general meeting of the Association (p. 18) is as follows: "Note: The Information for Members 1s important and should be read carefully. The purpose of the resolution is to make legal changes which would result in NRMA Holdings Ltd issuing shares to members of NRMA Ltd (and certain members of N.R.M.A. Insurance Ltd). Within three days of the issue of the prospectus NRMA Holdings Ltd will apply for listing on the Stock Exchange. As part of the legal changes all members of NRMA Ltd (other than NRMA Holdings Ltd) will no longer be members of NRMA Ltd and Road Service will be provided under the Service Membership contract on much the same terms as presently apply. This will be on condition that Free Shares in NRMA Holdings Ltd are offered by it. It is the new company which will control the NRMA. Further information on this is set out in the Information for Members. Copies of the proposed Memorandum and Articles of Association of NRMA Holdings Ltd and of NRMA Ltd are available on request from the Secretary at 151 Clarence Street, Sydney." The notice of general meeting of Insurance includes a Note in the same terms. There is no statement in specific summary form of the particular changes to be brought about by the new articles. The significance of what 1s proposed is dealt with elsewhere (e.g. p. 12, in the passage under "LEGAL STEPS INVOLVED IN CHANGE"). Pursuant to leave, counsel for the ASC appeared as amicus curiae. The ASC gave Holdings various allowances under the Law. These included a modification to ss. 1020 and 1025 of the Law allowing a personalised acceptance and Proxy Voting Paper to be .despatched with, but not attached to, the prospectus. On p. 2 of the prospectus there appears a 24. disclaimer that the ASC takes no responsibility as to the contents of the prospectus. The "Information for Members" explains (pp. 7-8) the interdependence between the changes proposed to the structure of the Association and Insurance and the issue of shares in Holdings. It does so in the following terms: "NRMA shares are now being offered free to all members of the Association as at 16 March 1994. You may choose to take the Free Shares or the cash alternative. If we do not receive a valid Acceptance of Free Shares form from you, you will get the cash alternative. Make your choice by filling out the Acceptance of Free Shares form which came on the outside of the prospectus and return it in the postage paid envelope. Any NRMA shares which members have not accepted will then be offered for sale. Members and non-member policyholders will be the first to be given the opportunity to buy NRMA shares, except for some NRMA shares set aside to enable a fair price to be established." This is a reference to the Members Extra Shares Offer, to be made by the Trustee. Its final details will depend upon how many Free Shares are accepted and consequently how many shares in Holdings are available for sale. Two application forms follow p. 50 of the prospectus. The Trustee is trustee of the NRMA Offer Trust, constituted by trust deed dated 18 August 1994, between it and Holdings. The term "non-member policyholder" is given meaning in the definitions on p. 99. It identifies a person who is not a member of Association at 16 March 1994, but who was then holder of a policy of 25. insurance issued by Insurance, being a policy of a certain description. The "Information for Members" continues (p. 8): "The money which will be paid to those members who do not want NRMA shares or from whom we do not receive a valid Acceptance of Free Shares form, comes from the sale of these shares." The eye of the reader is then taken to a diagrammatic representation headed "Where does the money come from?" The "Information for Members" carries on: "The amount of money these members receive depends on how much these shares are sold for and the cost of selling them. The maximum cost these members will bear is 5 cents per share. -Members choosing the cash alternative will receive no more payments once the cash has been paid. Members who choose Free Shares can expect to receive income in the form of dividends on their Free Shares in the future. The proposal will not go ahead unless at least 75% of the Association members who vote are in favour of it and at least 75% of the NRMA Insurance members who vote are also in favour. Members who vote against the proposal will still be entitled to get Free Shares or the cash alternative, if the votes of the other members who are in favour carry the day. It is therefore important to indicate if you want your Free Shares or the cash alternative, whether or not you vote in favour of the proposal. A full description of the Offer is set out in Section 2 of the prospectus." 26. The "Information for Members", then, under the heading "DETERMINING YOUR SHARE ALLOCATION", deals with the manner in which shares are allocated. It states (p. 8): "Shares are being allocated in a way the Boards believe to be fair. The basic rules are: . an automatic entitlement to Free Shares is offered to each member of the Association as at midnight on 16 March 1994; . an additional allocation is offered if that membership was linked to an NRMA Insurance policy (other than a Travel or Life policy) at 16 March 1994; and . the longer the membership (using five year intervals) the greater the entitlement. 25 year members and above will receive the maximum." There follows a table setting out what is stated to be the result of the application of these rules. The length of membership is broken up into perio. 3 of ur to 4 years, 5 to 9, 10 to 14, 15 to 19, 20 to 24, and 25 or more. In each case, a member with one or more policies receives twice the number of Free Shares allocated to a member who falls within the same temporal bracket, but who is not a policy holder. _ Thus, a member of up to 4 years standing with no policy has an allocation of 250 shares, whilst a member of that standing with one or more policies has an allocation of 500 shares. The maximum allocation is 500 and 1000 shares respectively for members with 25 years or greater standing. It is said (p. 9) that it was thought fair to reward loyalty by taking account of the length of membership, and that this also recognised the 27. fact that long-standing members tend to have more business with the NRMA. On p. 12 in Section 1, there appears the following, commencing with the second paragraph beside and below the heading "LEGAL STEPS INVOLVED IN CHANGE" (I have referred to this passage earlier in these reasons): "The legal elements of the approval by members of the Association and members of NRMA Insurance are: . changing the legal status of the Association and NRMA Insurance from companies limited by guarantee to companies limited by shares and guarantee; . adopting new Articles for each company, the central element of which means that members (other than NRMA Holdings) agree to give up their membership of the Association and NRMA Insurance on condition that Free Shares are offered by NRMA Holdings. This leaves NRMA Holdings as the only member of the Association, and NRMA Holdings and the Association as the only members of NRMA Insurance, and hence each 1s under the control of NRMA Holdings. By resolution of the Boards, NRMA Holdings was admitted as a member of the Association on 4 August 1994 and as a member of NRMA Insurance on 16 August 1994. The special resolutions (if passed) constitute an agreement which binds all members of the Association and of NRMA Insurance, even if they voted against the proposal or did not vote at all; . approving, first, the allocation of entitlements to Free Shares as described earlier (people who are being allocated entitlements to Free Shares are referred to as 'those entitled' in this paragraph), second, the allotment by NRMA Holdings of the Free Shares to those entitled who elect to take up the Free Shares and, third, the allotment to the NRMA Offer Trust of shares not so taken up. The 28. Trust will sell the shares and distribute the net proceeds of sale to both those entitled who choose the cash alternative and those entitled from whom we do not receive a valid Acceptance of Free Shares form; . in the case of the Association approving changes to the Memorandum and Articles of NRMA Insurance so that the Association ceases to control NRMA Insurance with the result that NRMA Holdings controls NRMA Insurance; and . approving the overall changes in the structure of the NRMA so that each of the Association and NRMA Insurance is owned and controlled by NRMA Holdings. You will find the Notice of Meeting for the Association and NRMA Insurance at the end of this Section." This j The present proceeding was instituted on 22 September 1994. On 27 September the Court ordered, pursuant to 0. 29 r. 2 of the "Rules of Court, that the claims to relief in sub- paras. 1 (a) and (b) and para. 2 of the Application be tried separately from any other questions, and be set down for hearing to commence on 5 October 1994. The orders which will dispose of this part of the whole proceeding will be interlocutory, not final: NZ] Securities Australia Ltd v Poignand (1994) 123 A.L.R. 11 at 20-21. _Paragraph 1 of the Application seeks declaratory relief that upon the true construction of the Prospectus, the notices of general meeting of the Association and of Insurance, and the forms of proxy: 29. "1 (a) Members of NRMA Limited and NRMA Insurance Limited are not fully, fairly and adequately informed of the proposals the subject of the resolutions to 'be put before them or of the offers made in the Prospectus; (b) The Prospectus and the information in it are misleading and deceptive in certain particulars, inter alia: (i) insofar as it is suggested that the shares in NRMA Holdings Limited to be offered are 'Free Shares'; (ii) insofar as it is suggested that members of the Association and members of NRMA Insurance have similar interests; (iii) insofar as the Prospectus fails to inform members of NRMA Limited or NRMA Insurance Limited either or at all or adequately of the matters set out in paragraphs 18 (c) to (g) and 19 (a) to (d) of the affidavit of [the second applicant). " Paragraph 2_ seeks injunctive relief including orders restraining the relevant respondents from proceeding with the meetings except for the purpose of adjourning them, and from proceeding in any way with the offers or the implementation of the offers and restructuring proposed in the Prospectus. The claim to injunctive relief is based in s. 80 of the Act, being in respect of alleged contravention of s. 52. Some of the complaints made by the applicants are said by the respondents to be in respect of representations with respect to future matters within the meaning of s. 51A of the Act. 30. This would present an issue as to the existence of reasonable grounds. It was submitted by the respondents that, in addition, some of the passages in the prospectus of which the applicants complained, were no more than mere expressions of opinion by the companies issuing the prospectus; that meant, the respondents contend, that there was no contravention of s. 52 if there was a basis for the opinion: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 F.C.R. 82 at 88. In Industrial Equity Ltd v North Broken Hil] Holdings Ltd (1986) 9 F.C.R. 385 at 393, Burchett J. referred to the inapplicability of s. 52 to argumentative opinions expressed in the course of public debate. But the prospectus is of quite a different character. It has as its central feature, stated in several places, and emphatically, that the Boards of the Association and of Insurance recommend members vote in favour of the proposal and choose the Free Shares. In a real sense, the balance of the prospectus 158 put forward to encourage acceptance of the recommendation of the Boards. A statement of claim has been filed and there are defences. The statement of claim was filed pursuant to a direction requiring it to reflect the limited nature of the issues now to be tried under the order made 27 September. In some respects, the pleading departed from that requirement. As a result, several portions thereof were struck out. 31. At the trial some of the pleaded defences were not pressed. The second and third respondents, the Association and Insurance, abandoned a defence raising issues of delay laches and acquiescence on the part of the applicants. The first respondent, Holdings, did not press a defence raising an issue as to whether some of the conduct complained of was not "in trade or commerce" within the meaning of s. 52 of the Act. This concession was no doubt wisely made. It would have required a restrictive view of trade and commerce and an exaggerated effect for the preposition "in" to take the "conduct" with which this case is concerned outside s. 52. In any event, there is the concurrent reach of s. 995 of the Law, to which I refer below. The complaint of the applicants is, broadly, that the prospectus, the notices of general meeting and the forms of proxy do not put members in possession of information appropriate to enable them to make an informed and critical assessment of the proposal, and to make an informed decision as to their response. They say that if proper regard is had to what is said and left unsaid this shows contravention of s. 52 of the Act. The fundamental allegation is that by distribution to members of these documents, there has been an engagement, in trade or commerce, in conduct that is misleading or deceptive or likely to mislead or deceive. As I have said, the applicants complain of the blending into the one document of a prospectus for the issue of shares 32. in Holdings, and of notices of general meetings of members of other corporations. In that regard, counsel for the ASC drew the attention of the Court to sub-s. 995 (2) of the Law. This draws inspiration from s. 52 of the Act, but obviates any arguments which arise from time to time as to the effect of the phrase therein "in trade or commerce". The sub-section states: "995 (2): A person shall not, in or in connection with: (a) any dealing in securities; or (b) without limiting the generality of paragraph (a): (i) the allotment or issue of securities; (ii) any prospectus issued, or notice published, in relation to securities; (iii) the making of takeover offers or a takeover announcement, or the making of an evaluation of, or of a recommendation in relation to, takeover offers or offers constituted by a takeover announcement; or (iv) the carrying on of any engage in conduct that is misleading or deceptive or is likely to mislead or deceive." 33. {Emphasis supplied] Counsel submitted that the changes to the structures of the Association and Insurance, to be brought about by the special resolutions, would be the doing of acts preparatory to or related to the allotment or issue of securities by Holdings. Therefore, counsel submitted, and had it been necessary to do so I would have accepted, that the whole complex of arrangements dealt with in the prospectus would have attracted the operation of s. 995 (2) of the Law. However, as I have indicated, the reliance is placed upon s. 52 of the Act. It would appear to follow that in the present case, a finding of contravention of s. 52 would have been accompanied by a finding of contravention of s. 995. The Law The applicants rely upon what was said in Demagogque Pty Ltd v Ramensky (1992) 39 F.C.R. 31 at 32, 40-41. In particular, they submit that the issue is whether in the light of all of the relevant factual circumstances, constituted by acts, Omissions, statements or silence, there has been conduct that is or is likely to be misleading or deceptive. See also Warner v Elders Rural Finance Limited (1993) 41 F.C.R. 399 at 401-402, Beach Petroleum NL v Johnson (1993) 43 F.C.R. 1 at 44-45. Partial disclosure of a state of affairs may contravene the section. So also may Silence itself, if the circumstances are such as to give rise to a reasonable 34. expectation that silence would be broken if particular matters exist. The respective positions of the parties and other circumstances, which provide the basis for the imposition of a fiduciary relationship with a particular content, may also assist in explaining why in a course of dealing or other relationship, it is misleading or deceptive or likely to be such, if the defendant speaks only to a limited extent. In Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pt td (1986) 12 F.C.R. 477 at 490, Bowen C.J. identified what are various fiduciary relationships as involving an obligation of disclosure. His Honour said that whilst the Court will not be restricted to such cases, the notion of relationships giving rise to an obligation to make disclosure may well prove useful in determining some disputes which arise under s. 52 of the Act. In the same case (at 504) Lockhart J. pointed out, as subsequent authority has emphasised, that contravention of 5s. 52 will not always arise from misrepresentations as understood at general law, and that what is involved is the conduct of the alleged contravener in the light of all relevant circumstances "constituted by acts, omissions, statements or silence". It is, of course, well settled that directors are bound to exercise their powers in good faith for the benefit of the company as a whole. In Whitehouse v Carlton Hote] Proprietary 35. Ltd (1987) 162 C.L.R. 285 at 290, Mason, Deane and Dawson JJ. pointed to the distinction between "the indirect proprietorship and ultimate control of the shareholders on the one hand and the powers of management entrusted to the directors on the other". In that sense, the directors exercise powers to affect the interests, in a legal and practical sense, of the members. No relevant distinction is to be drawn between members of a company with a share capital or a company limited by guarantee. Hence, the requirement that directors make to members what Latham C.J. described as "proper and accurate disclosures": Peters' American Delicacy Co. Ltd v Heath (1939) 61 C.L.R. 457 at 486. Hence also the entitlement of members to believe that such disclosures will be made to them in relation to proposals of directors which would significantly affect thei. inte.est as members; or to express the point differently, byt not significantly so, members may have the reasonable expectation that there will be such disclosure to them: Ramensky at 41, Warner at 404-405. One of the authorities cited by counsel for the ASC was Chequepoint Securities Ltd v Claremont Petroleum NL (1986) 11 A.C.L.R. 94. There a corporation had agreed to sell certain of its assets subject to the passing of certain resolutions by its shareholders. The immediate question was whether a number of documents sent out by the company to its shareholders, including a notice of extraordinary general meeting and an 36. explanatory letter from the directors, was misleading. McLelland J. said (at 96-97) that there was before him: "([A] challenge to the validity of the meeting on equitable grounds based on a breach of the fiduciary obligation of the directors to the company in connection with the consideration by the company in general meeting of business proposed by the directors. That obligation would, for example, require the directors to make full and true disclosure of any benefits which any director may derive from the passing of any resolution at the general meeting. As I have already indicated, no non-disclosure of that kind is now alleged in the present case. The fiduciary obligation of directors, however, goes further than that. Where directors take it upon themselves to urge or recommend or advise members to exercise their powers in general meeting in a particular way, they are in general required to make a full and fair disclosure of all matters within their knowledge which would enable the members to make a properly informed judgment on the Matters in question: see generally Bulfin v ebarfald' td (1938) 38 S.R. (N.S.W.) 423, the cases therein cited and the other cases cited by Young J. in Devereux Holdings Pty Ltd v Sart Resources NL . (1985) 9 A.C.L.R. 956." His Honour later pointed out (at 98) that breach of such a fiduciary obligation did not have to be dishonest nor involve moral turpitude. Analogous reasoning has been employed, but in a statutory context, where what has been in issue has been the deficiencies in Part A statements: Gantry Acquisition Corporation v Parker §& Parsley Petroleum Australia Pty Ltd (1994) 123 A.L.R. 29 at 35, 40-41. Counsel for the second and third respondents submitted that there was significance for the present dispute in the 37. line of cases of which a significant member is Campbell] v The Australian Mutual Provident Society (1906) 7 S.R. (N.S.W.) 99, affd. (1908) 24 T.L.R. 623 (P.C.). That case is authority for the proposition that at the expense of the company directors may issue and distribute by post to members circulars explaining and advocating the proposals of the directors, together with proxy papers to enable members to vote in respect thereof at meetings of the company to be held to consider those proposals. However, it may be improper for the directors to use such a means of communication and source of funding to solicit support in a contested re-election: Advance Bank Australia Ltd v FA] Insurances Ltd (1987) 9 N.S.W.L.R. 464. Campbell] is also authority that there 1s no obligation upon the Board to circulate contrary arguments on behalf of the dissentient members, it being for the dissentients to circulate their views at their own cost. It is unnecessary to consider whether, if at all, the general law should respond to modern statutes such as the Part B provisions of Chapter 6 of the Law, in a way which would require modification of: previous authority such as Campbell; cf Public Service Board of New South Wales v Osmond (1986) 159 C.L.R. 656 at 669-670, 675- 676; Moorgate Tobacco Co. Ltd v Philip Morris Ltd (No. 2] (1984) 156 C.L.R. 414 at 445. However, even if the law does not in terms require it, in a given case a practical and effective means of equipping 38. members of a widely held corporation to make a properly informed judgment and of avoiding their being misled or deceived by inadequate disclosure, may be the distribution of written reasons advanced by minority directors for their dissentient views upon a particular proposal which is to be put before a general meeting of members. The present litigation does not turn directly upon failure to distribute what might be described as a "no" case. It turns upon the alleged inadequacy of the material which was distributed and alleged contravention of s. 52 of the Act. Enthusiastic advocacy may be consistent with observance of the norm set down by s. 52. The fundamental issue is whether by reason of what was said and left unsaid in the prospectus, there was, in all the circumstances, a contravention of s. 52. In that regard, members of the Associacion and of Insurance were entitled, in relation to such a significant proposal, reasonably to expect that what was put before them involved no "half truths" and contained a full and fair disclosure of matters to enable them to make a properly informed judgment on the proposal. Contentions of the Parties The case presented for the applicants involved a number of allegations but, broadly, they fall into three groups. The first concerns inadequate treatment of the Association and Insurance as distinct entities; particular complaint is made 39. of the statement in the prospectus that the interests of members of the Association and of Insurance are "similar". Secondly, it is said that what is on offer are not truly "Free Shares". The third area of complaint concerns alleged assertions there is to be "business as usual" and no change in the nature of the services now provided to members. The submissions in support of these propositions, and those put to refute them, involved numerous points of detail in the text of the prospectus and supporting documents. The detail is significant, but it is important to bear in mind that, in the end, the question is a comparatively broad one. It as whether there has been misleading or deceptive conduct, or conduct likely to mislead or deceive the members of the Association and of Insurance by denying a reasonable expectation of adequate disclosure to equip members to make a properly informed decision on "the proposal" put before them in the prospectus. For their part, the respondents point to the unusual and complex nature of "the proposal" and say that any attempt to lay it before members will be open to some criticism. Whilst I speak of "the respondents", I should emphasise that the distinct interests of on the one hand the Association and Insurance, and on the other of Holdings, were recognised by the appearance of two sets of counsel. That the proposal is unusual and complex may be granted. Indeed, there is force in the counter-submission for the applicants, that the more 40. unusual the nature of the proposal and the greater the diversity and the numbers of the members, the greater their reasonable expectations as to the adequacy of the explanations and material laid before them. Counsel for Holdings stressed the statement at the foot of p. 1 of the prospectus which invites the reader who has questions about the prospectus to telephone what is identified as the NRMA "Share the Future" Hotline on 008 64 90 90; this message is repeated on p. 2. It also appears on the reverse side of the leaflet accompanying the proxy voting paper in the packet enclosing the prospectus. Special provision is made for those concerned with the impact of the proposal upon their Social Security benefits. On p. 16 of the prospectus it is explained that the NRMA has funded a free independent phone service to be conducted by the Council of the Ageing and details of the service, with the telephone number, are given. The applicants, rightly in my view, respond that the utility of the "Share the Future* Hotline will vary with the degree of sophistication and interest of the reader of the prospectus. In particular, the invitation is to those with "any questions about this prospectus", whereas many of the concerns upon which the applicants rely relate not so much to what' is in the prospectus as to inadequate explanations and information supplied by it and, the applicants say, omissions. 41. The service to be provided by the Council of the Ageing is in a different position. The service is funded by the NRMA but it is to be provided by an independent body. Further, this service is directed to a particular area of concern and a particular portion of the membership. This is those persons for whom the acceptance of the Free Shares may affect their continued Social Security benefits. Under the heading (p. 16) "How will the Free Shares affect my Social Security benefits?", it is pointed out that although their payments and benefits may change slightly, for most people who receive Social Security benefits the proposal will be financially beneficial. It is said that the issue is a complex one, there being many different categories of Social Security beneficiaries, and that an independent investigation was commissioned to consider the position of such people in the light of the proposal. Tie prospectus cont.nues: "Based on an extensive examination, it was found that only a relatively small number of pensioners would face unintended consequences. These people are already close to cut-off points and many already receive very small benefits, due to the size of their income and assets. A smaller number may be more seriously affected. To ensure the best possible outcome for this small group (representing less than 1% of the NRMA membership), the NRMA has funded a free independent phone service, to be conducted by the Council on the Ageing. If you think you might be amongst this small group, and need help to arrange your affairs, you can call 008 65 63 63 and have the options explained to you. This service will be available from '5 September, between the hours of 9am and 3pm" 42. The independent investigation referred to was conducted by the Australian Council of Social Service ("ACOSS"). In June 1994, it produced an "Information Package" of 13 pages, excluding annexures. It also published an article on the NRMA share issue in its news monthly "Impact" for July 1994. The investigations of ACOSS disclose that about 17,487 pensioners who receive $2,000 worth of shares will be subject to the assets and income tests for the first time. This supplied the "small group" representing less than 1% of the NRMA membership which is referred to in the prospectus as those for whom the free independent phone service has been established. However, the invitation is extended to those who think they might be amongst that small group and who need help to arrange their affairs. In all the circumstances, rere .5, in my view, no shortcoming of the nature alleged by the applicants in the treatment in the prospectus of the social security consequences of the proposal. The same is true of the treatment (p. 13, and also 37-38, 87-88) of tax considerations for individual shareholders. It remains to consider other contentions put forward by the applicants concerning the treatment of the relationship between the Association and Insurance, the use of the term "Free Shares" and the stress upon "business as usual". 43. The Contentions of the Applicants It is appropriate first to consider the present . relationship between the Association, Insurance and the members thereof. On 18 August 1994, there were 1,823,154 members of the Association of whom 1,330,529, or 72.98%, were also members of Insurance by reason of having a policy of insurance linked to their membership of the Association. The balance, of 492,625, or 27.02%, were members of the Association only. The structure was such that there were no members of Insurance who were not also members of the Association. The independent accountant's report, which is Section 6 to the Prospectus, shows as at 31 March 1994 the total members' equity attributable to members of the Association as $243.7m., and as attributable to members of Insurance as the much greater sum of $1,768.2m. Holdings estimated on 18 August 1994 that of the 1.09b. shares which 1t will issue, 909.9m. will be allocated to members of the Association who also have a linked policy with Insurance. That is to say, it estimated that there would be a total share entitlement in respect of members of the Association only of approximately 158m. The present Articles of the Association provides for the setting of membership fees by the Board of Directors and identifies the members as those who have agreed to become a 44. member and whose name is entered on the Register, after satisfying such conditions as the Board may from time to time : determine (Article 3). There is a power (Article 6) for the Board to expel any member without giving any reason. The management and control of the Association and its business and affairs is vested in the Board (Article 52). The Board is elected by the members. There is a Board of Management, consisting of not less than 5 nor more than 10 persons (Article 114), whose duty it is to transact the business and carry on the management of the affairs of the Association (Article 116) but with responsibility to the Board of Directors (Article 117). The current Memorandum of the Association provides (cl. 5) that if upon its winding-up or dissolution there remains any property it shall not be paid or distributed among members of the Association; it is to be given or transferred to some other institution or institutions having similar objects, as determined by members of the Association at or before the time of dissolution and, in default thereof, by the Chief Judge in Equity of the Supreme Court of New South Wales; if that fails, then the property is to be held for "some charitable object". The present Memorandum and Articles of Association of Insurance are designed to link its fortunes closely with those of the Association. I have referred earlier in these reasons to cl. 3 of the -Memorandum of Insurance. Upon the winding-up or dissolution of Insurance, otherwise than for 45. reconstruction, any surplus assets are to be transferred to the Association (cl. 5). Clause 3 of the Articles of Insurance provides that the members of Insurance are to be the Association, any director appointed by "the Council" of the Association (semble the Board of Directors), and those policy holders who, when the policy is issued are, to put it broadly, members of the Association who have agreed in writing to be bound by the Memorandum and Articles of Insurance. If a policy is held by more than one person, only the person first named in the policy becomes a member (Article 4). Article 5 of the Articles makes the duration of membership of Insurance coterminous with the existence of a policy of insurance issued by the company. The President for the time being of the Association shall during tenure of that office be a director and chairman of Insurance; the Council of the Association appoints directors >ther than the chairman, provided that only members of the Association may be appointed directors of Insurance and a majority of directors of Insurance must be members of the Council of the Association. Article 25 of the Articles of Insurance so provides. Counsel for the respondents submitted that the effect of the above provisions was to render the Association a class of member of Insurance with special rights requiring, for their variation or abrogation, the consent of the Association. This was said to be the result of sub-s. 199 (2) of the Law. That 46. section applies to a company which does not have a share capital. The sub-section states: "199 (2) Where: (a) members of the company included in a class of members have special rights; (Db) no provision is made by the memorandum or articles for the variation or abrogation of those rights; and (Cc) neither the memorandum nor the articles declares or declare those rights to be unalterable; the company may, with the consent in writing of three-quarters of the members included in that class or with the sanction of a special resolution passed at @ meeting of members included in that class, vary or abrogate those rights or alter the memorandum or articles so as to authorise the variation or abrogation of those rights." Counsel for the applicants did not dispute that for the purposes of the sub-section one member might constitute a class and that, in the case of the Association, the removal, for example, of its rights under cl. 5 of the Memorandum of Insurance, or of the right to appoint directors under Article 25, would amount to variation or abrogation within the meaning of sub-s. 199 (2). However, counsel submitted that the "special rights" referred to in the sub-section must be conferred upon the member "as a member". Clause 5 of the Memorandum did not confer a special position upon the Association by virtue of its being a member of Insurance. Article 25 made the President of the Association virtute 47. efficii chairman of Insurance, and the power of appointment of directors was conferred not on the Association as a member, but upon the Council of the Association. Counsel referred, by way of analogy, to decisions such as Re A. Ffrost §& Co. Pty Ltd [1993] 1 Qd. R. 1 at 3-4, which deal with the statutory provisions protecting rights attached to classes of shares. It is unnecessary for the purposes of this case to resolve these questions. The immediate point is that it is at best unclear whether, as matters stand, the body of members of Insurance may, without the consent of the Association, change the Memorandum or Articles of Insurance so as to abrogate or vary the special position in the affairs of Insurance now given to the Association. This uncertainty 1s a significant matter in any reasoned evaluation of a community or disparity of interests in a commercial or legal sense between those members of the Association who are, and those who are not, also members of Insurance. The point for the applicants is that the matter 1s nowhere adverted to in the prospectus. Certainly the effect of the Memorandum and Articles of Insurance is to place the Association in a special position which, for some purposes, may render Insurance "controlled" by Association. An example will he given below. However, as a matter of ordinary usage and for some statutory purposes, "control" of a company rests with those who, by the exercise of voting power, can control the decisions of a general meeting: Mendes v Commi ° ° e ties 48. (1967) 122 C.L.R. 152 at 160-165. It may be, as Windeyer J. pointed out in that case (at 170) that an inability to control the decision on some minor and incidental matter might not necessarily be regarded as displacing control in the relevant sense. That decision also decides that if in the general meeting one person or group has the majority of votes on some subjects and another on other subjects, neither can truly be said to control the company. The control is divided. This reasoning would indicate that the Association does not "control" Insurance. For example, as present events show, the Association cannot bring about the changes in the structure of Insurance which is committed to special resolution of the members at the meeting called for next week. Insurance retains its d2stinct corporate personality. The directors of Insurance could not discharge their duties to it by treating it as the alter ego of the Association: Walker v Wimborne (1976) 137 C.L.R. 1 at 6-7 per Mason J. The statement, set out later in these reasons, that the Association "presently controls NRMA Insurance by appointing its Board", in its context is at best a half truth and, as such, apt to mislead or deceive. Some of the distinctions foreshadowed above are highlighted in the following passage from the independent 49. audit report accompanying the annual report of the Association for 1992-93. The report stated: "As required by the Corporations Law the [Association] has, in the preparation of the consolidated balance sheet and consolidated profit and loss account for the economic entity consolidated NRMA Insurance Limited and the entities it controls in accordance' with Accounting Standard AASB1024, 'Consolidated Accounts'. AASB1024 requires that the consolidated accounts for the economic entity should include all entities which are controlled by {the Association]. (The Association] controls [Insurance] and the entities it controls by virtue of it appointing the Board of Directors of [Insurance]. The Directors are of the opinion, however, that application of AASB1024 has not resulted in the financial statements giving a true and fair view of the matters required by Part 3.6 of the Corporations Law. The Directors have therefore provided additional disclosures in the form of a consolidated profit and loss account, balance sheet and certain notes in respect of the NRMA Group, which is defined in Note l(a). These . additional disclosures exclude [Insurance] and the entities it controls, and are, in the Directors' opinion required in order that the financial statements give a true and fair view. The Directors believe that the resulting economic entity is a reporting entity for which there exists users of the accounts who may rely on them for financial decision-making purposes. Because the Board of f[Insurance}) has an overriding fiduciary responsibility towards: the members and policyholders of that company' and are not accountable to the members of [the Association] it is inappropriate for {Insurance} and its controlled entities to be 'consolidated with [the Association] and it is our opinion that: (a) application of AASB1024 has, in this instance, resulted in a_ consolidated balance sheet and profit and loss account that could be potentially misleading; (b) the additional disclosures provided by the Directors in respect of the consolidated profit and loss account, balance sheet and 50. notes for the NRMA Group are necessary to ensure the financial statements as a whole are true and fair and in accordance with Statements of Accounting Concepts, which require among other things that all relevant and reliable information be provided; and (c) the information in respect of the NRMA Group is true and fair and in accordance with Statements of Accounting Concepts." The applicants point out that quite a different note is struck in that part of the prospectus which contains the "Information for Members". Earlier in these reasons I have set out the second and third paragraphs of the passage on p. 12 of the prospectus, beside the heading "LEGAL STEPS INVOLVED IN CHANGE". The first paragraph is significant, for it 15 the statement relied upon to specify the distinction between the two bodies. It is followed much later in the document (p. 52) by a consolidated profit and loss summary and (p. 57) consolidated balance sheets. An independent accountant's report commences at p. 62. The purpose of the report is stated to be "to provide financial information relevant to a decision to choose to take shares in [Holdings] or the cash alternative, and to provide potential investors with financial information relevant to their decision on whether to invest in [Holdings ]". The applicants make the point, which I accept, that before members make their decision to choose to take the 51. shares or cash, and to further invest in Holdings, they would reasonably expect information dealing with the worth to them of their present membership of the mutual organisations. There is, after all, at issue the translation of a mutual form of ownership to that of a shareholding, each, no doubt, having benefits and detriments. It is only from some of the Notes to the report (e.g. Notes 8 and 11 at pp. 74-75) that there may be discerned separate treatment of the investments of Insurance and the Association, and of the members' equity and reserves of each body. Hence the importance to the reader of the prospectus who concentrates upon the "Information for Members" of the statement in the first paragraph on p. 12. This states: "Members' approval will mean members of the Association and members of NRMA Insurance will no longer be members of those companies. The Association resent controls N surance by appointing 1ts Board. For an NRMA Insurance policyholder to be eligible to have become a member of NRMA Insurance, the policyholder must have been a member of the Association. Members of the Association are, therefore, being offered an automatic entitlement to Free Shares, with an additional allocation if that membership was linked to an NRMA_ insurance policy (other than Life or Travel). Fo e a s the Boards consi h S bal ance vi te s_ simi of the members of the Assocjation."" (Emphasis supplied} The applicants point to this passage as illustrative of the failure in dealing with the affairs of three corporations in the one document with no full identity of membership 52. between them, to make to members an adequate disclosure which differentiates between the impact of the proposal. They make the following points, which I accept: (1) (ii) (iii) That the Association appoints the Board of Insurance may mean that for some statutory purposes it "controls" Insurance but' the ultimate control of Insurance rests with the members 75% of whom must agree to a change in the Memorandum or Articles; indeed, it is the favourable exercise of that ultimate control which is solicited from members of Insurance by the prospectus itself. The circumstance that any member of Insurance must be a member of the Association does not mean that the interests of the two bodies of members are relevantly similar, because, as the facts show, not all members of the Association are members of Insurance and the information later given at p. 75 shows that the total members' equity of Insurance exceeds that of the members of the Association in a ratio of about 7.5:1. In the present context, it is likely to mislead for the Boards to state that they consider that the two bodies of members have interests which are "similar" without 53. going on to make clear whether the Boards consider that that similarity of interest extends to the purposes and effects of the proposed restructuring outlined in the prospectus. The applicants also complain of the treatment in the prospectus of the criteria used by the Boards for the differing scales of entitlement to Free Shares as between membership of the Association and membership of Insurance. They say that the criteria inadequately reflect the value of the assets and undertaking of Insurance and the rights of members of Insurance and the value of their membership. The criteria (pp. 8-9) favour long-standing members, as a reward for their loyalty and on the footing that they tend to have more business with the organisations. The criteria expressly do not contain any weighting in favour of those members of the Association with many vehicle subscriptions; as I have said, 65% of all members have only one car covered by their membership. The allocation of shares is doubled in respect of those members with one or more policies (with Insurance) not being Travel or Life policies; there is no weighting in favour of those members with multiple policies. The .reasoning which led to the adoption of these criteria is explained. 54. It may be that the applicants are correct in taking the next point that the criteria of issue to members of Insurance are inadequate because they do not make allowance for the comparative value of the assets of Insurance and the Association. Nor, it is said, is allowance made to reflect adequately the rights of members and the value of their membership of Insurance. I have referred earlier to the apparent disparities between the "wealth" of Insurance and the Association to which they point. The applicants submit that the prospectus suggests that the criteria which are used are adequate, contrary to the true situation. That, it is said, involves contravention of s. 52. It is unnecessary to decide this point. What is important is that the apparent discrepancy to which the applicants point would properly be a matter of interest and concern to those members of the Association who were also members of Insurance. Counsel for the respondents says that this should not be so because the body of policy holders is a fluctuating one and terms of policies may vary. That may be so, but the scheme for the offering of Free Shares to certain policy holders who are members operates by linkage to length of membership of the Association. . The point taken by the applicants is a significant one, and whether it be correct or not, it is a subject upon which members would expect disclosure to enable them to make a properly informed judgment as a step to deciding whether to 55. accept the proposal. It is in this sense that, in my view, there is a contravention of s. 52, by the dissemination of the. prospectus in its present form. Free Shares No doubt one adjectival use of "free" is to describe that which is provided without, or not subject to, a charge or payment. Counsel for Holdings submits that that is what is meant in the prospectus with the use of the phrase "Free Shares". He pointed, in particular, to the use, on p. 21, the first page of Section 2, of the heading: "Details of the Members Free Offer and the Sale Offer." But, as .I have andicated, the particular phrase is "Free Shares" and this is used in the prospectus on many occasions. In particular, as counsel for the applicants pointed out, the first two Sections of the prospectus are replete with use of "Free Shares" which 1s not in any apposition to the "Sale Offer". Rather, the phrase is used to identify and attract the reader by suggesting there are available for acquisition dividend yielding shares at no outgoing to the member. This accords with another adjectival use of ""free", to identify that which is given without consideration and as a gift. 56. It is true that in several places in Exhibits A, B and C, including the passage identified by the asterisk on the - leaflet headed "Important Information Inside" and on p. 12 of the prospectus, it is said that the "Free Shares" are in exchange for membership or that membership is to be given up on condition of the offer of the "Free Shares". Nevertheless, the effect of the persistent reiteration of the phrase "Free Shares" is to engender in the reader the notion that the shares may be acquired without any significant loss or outgoing to the offeree who accepts them. Counsel for the respondents pointed to the provisions in the memoranda of Insurance and the Association which would deny the members a distribution of assets on a winding-up. That, as. I understood the submissions, was used to support the submission that, in truth, there could be no significant consideration moving from the members, so that the shares were "free". I have referred earlier to what might be called the ultimate control of Insurance by the members, notwithstanding the manner in which the Board is appointed. The Board of the Association is in a different position, it being responsible for its election to the members. Furthermore, Article 26 of the present Articles of the Association obliges the Board on the written requisition of 200 or more members forthwith to convene a meeting of members to be held as soon as practicable 57. and, in any case, not later than 2 months after the date of the requisition. The relinquishment of membership thus, in a legal sense, involves the relinquishment of significant rights to the control of the affairs of the two corporations. Further, "demutualization" removes the possibility of further enjoyment of the advantages described earlier in these reasons. A basic question for members to decide, as pointed out earlier in these reasons, is whether they will be better off remaining as members or becoming shareholders or recipients of the proposed cash distribution in lieu of shares. It is a matter of weighing the respective advantages and disadvantages of each course of action. In that setting, in my view it is likely to mislead or deceive to describe repeatedly in the prospectus, particularly in the passages most likely to be studied by the ordinary reader, that which is offered to members in connexion with their consent to the reorganisation as "Free Shares". The theme of Free Shares is linked to that of unlocking the wealth of the organisation which otherwise remains "locked up" and inaccessible to members. A passage (p. 11) in the prospectus headed "OTHER OPTIONS" states that "the NRMA has considered the advantages and disadvantages of a range of options" and has concluded "that the share issue and listing on the Stock Exchange is in the best interests of members and 58. the NRMA". Five other options are stated to have been examined. The passage is as follows: "1. Doing nothings: The NRMA could continue to operate under its present structure, but the Boards believe that, by becoming shareholders, members will be better off. No organisation can rest on its laurels and assume that the way things have always been done will work in the future. The NRMA has made many changes to its operations in the past and has always looked for better ways to do business. That has made it a market leader. This is another change which the Boards believe will significantly benefit members and make the NRMA stronger in the future. 'Oo do t eans t wi th of th anj j em 5 ock in ess e " [Emphasis supplied] The applicants complain, and I accept, that there are material omissions from this treatment of the retention of the status quo. It does not appear that ¢ parate consideration is given to the position of the Association and Insurance beyond the statement that the Boards believe that by becoming shareholders in Holdings members will be "better off". There is no attempt to quantify, even in broad terms, why the Boards consider that members will be better off beyond the suggestion that the wealth of "the organisation" will no longer remain locked up and "inaccessible" to members. The applicants point to the benefits which they say flow from the wealth of the two bodies to members by such matters as cheap road service. The "mutual" organisation of Insurance also permits rebates in premiums. This would change with "demutualization"; a question for members is the comparative advantages to them of 59. dividend income. Further, the suggestion in the paragraph is that the present proposal is "another change" to the way in which "the NRMA" has conducted its operations in the past; this serves to reinforce the general impression which the prospectus strives to create that the proposal involves "business as usual", whereas, in truth, the restructuring to be brought about by the implementation of the proposal is not merely a change in the way in which operations have been conducted in the past. The passage continues: "2. Reducing premiums and membership fees: Charging artificially low prices for our services means that current members subsidise the new customers who would undoubtedly rush to take advantage of artificially low prices. Reducing charges for NRMA services and products below their true cost will weaken the financial strength of the NRMA and increases pressure for large price rises in the future. 3. Continue insurance rebates: Many of the same problems mentioned above are also relevant to continuing insurance rebates. In addition, rebates only benefit policyholders - and not the .some 30% of members who do not hold insurance policies. By giving members Free Shares, all members can benefit directly from the success of the NRMA." The applicants contend that this obscures the message which only appears deeper in the body of the prospectus (p. 53, 70) that a significant decision has been taken. This is that, in any event, rebates are not expected to continue after 31 July 1995. I have referred also to the evidence of Mr Willing on this point. 60. "4. Making a one-off major payment' to Association or NRMA Insurance members: Such a major payment would deplete the NRMA's reserves, greatly reducing the NRMA''s financial strength. Such a payment could also be liable to significant tax when received by members. 5. Sell off NRMA Insurance: Selling off NRMA Insurance would effectively split the NRMA apart. The NRMA's strength lies in the value ef both road service and insurance, with each benefiting the other. If they were to be separated, each would be weakened. The value of the combination is greater than its parts. Separating the two would mean splitting the staff of the NRMA, thereby destroying the very Culture which has made the NRMA a success." I refer further to this invocation of the "culture" of the NRMA later in these reasons. he _* ture" of the and t Future On p. 14 of the prospectus, in the Section "Information for Members", there appears under the general heading "MEMBERS' QUESTIONS", the following: ". Will the NRMA change its culture? No. The NRMA's commitment to Road Service and competitive insurance is a tremendously successful formula and will remain. What changes is the structure of the organisation so that members get Free Shares. Our emphasis on service quality, coupled with being able to adapt to new and better ways of doing business, will not change, as these are the keys to the NRMA's success. - With shareholders, will the NRMA pursue profit at the expense of service? The NRMA's reputation for superior customer service is one of the main contributions to the organisation's success over the past 74 years. It 18-fundamental to the success of a business to get and 'keep customers. Profit alone is not the mission of any well-run company, it is the 61. result of serving customers better than your competitors. The culture of the NRMA has always demanded, and will continue to demand, that we serve our customers better than our competitors. It is because we have been 'customer-focused' for so long that we have generated the profits that underpin the NRMA's financial strength. Put another way, service has always been at the core of the NRMA's winning formula. ense ice?', but 'What new ways will the NRMA find to improve its service so that customers will continue to choose us and profits can be maintained?'. The NRMA's culture encourages innovations in customer service and rewards individual service initiatives. This reflects the NRMA's strong belief that profits and superior service, rather than being incompatible objectives, go hand-in-hand." {Emphasis supplied] The reader may puzzle at the use of the word "culture". Ordinarily, this suggests de-relopment or improvement by education or training, a particular state or stage of Civilisation, or a particular way of living enjoyed by a society. It is apparent that something less is involved here. The member who peruses this passage may also puzzle that the question whether, with shareholders, the NRMA will pursue profit at the expense of service is not answered. The "correct" and the member may wonder, convenient) question is stated as being something different. The curious reader may then continue to p. 16. There will be found the following: 62. ". Will the cost of my Service Membership go up? The change in legal structure of the NRMA will not mean that the cost of Service Membership will go up. Any increases in Service Membership will only be dictated by the need to properly price this product, which is the same basis of setting the cost of Road Service Membership as has been applied in the past." This appears. to indicate that whilst the change in legal structure does not necessarily mean that the cost of service membership will increase, there may be increases, but these will be dictated only by the need "to properly price this product". That need is suggested to be the same basis for setting the cost of "Road Service Membership" as has been applied in the past. Yet one of the aspects of the past mutual structure appears to have been the subsidisation of road services by running them at a loss. That would be suggested to a reader who turned to the financial information set out in the Profit and Loss Summary on p. 52. What is meant by the use of "Culture" in relation to the NRMA is suggested by material appearing on p. 46 beside the Note "THE NRMA CULTURE OF SERVICE". What is there said is short on specifics. The NRMA "service culture" is said to be based on the belief that satisfying customers and continually improving service is everyone's job. Members might be surprised if the contrary were the case. Likewise, with the proposition that ."[dJirectly serving customers and members has first priority over all other work". 63. Hence there is little practical assistance given members by the statement (p. 10): "Only the legal framework of the NRMA will change, not its culture." These themes are foreshadowed by the statement in the President's letter (p. 3): "The restructure will not affect the way we operate. The NRMA will continue to provide efficient Road Service and competitive insurance. There will be no change in the road patrols. The restructure will however give us greater flexibility in developing businesses for the benefit of all members and policyholders." On the one hand, there is, as it has been put, the suggestion of "business as usual". On the other, the suggestion is that there may be increases in service membership dictated by the need to properly price those services, coupled with the suggestion that this has been the case before demutualization. One way counsel for the applicants put their case is to submit that what comes out of this material are representations to the effect that Holdings will conduct its business and undertaking so as not to affect in any substantial way the extent of the services or the cost of services presently provided to members. Counsel for Holdings counters this by relying upon s. 51A of the Act. They submit 64. that were such a representation distilled from this material, it would be one with respect to a future matter and Holdings has shown that it has reasonable grounds for making such a representation, within the meaning of sub-s. 51A (2)). In my view, no such representation can be distilled from the perhaps colourful, but certainly imprecise, language employed in the passages I have identified. But that is not the end of the matter. Members might reasonably expect there to be put before them a full and fair disclosure of intentions as to future conduct of the undertaking to be acquired by Holdings after "demutualization". An important consideration is whether Holdings suggests that it will or will not conduct its business and undertaking so as not to affect in any substantial way the extent or costs of services presently provided to members, or whether Holdings chooses to make no statement on this subject. To deal with the topic in the manner described above is to leave it in half light. I accept the applicants' submission that to treat the subject in this way is to engage in conduct which is liable to mislead or deceive members. Conclusions The applicants have made out their case for declaratory relief as to contravention of s. 52 of the Act. The declaration should be to the effect that by distributing to 65. members of the second and third respondents, the Association and Insurance, documents copies of which are Exhibits A, B and C, the first respondent, Holdings, in trade or commerce, has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive. The nature of the contraventions is such that it is not practical to quarantine any particular portion of the prospectus. Nor, as the facts have unfolded and now stand, would there be efficacy in ordering, before the times appointed for the general meetings, the disclosure of anformation or the publication of corrective advertisements, by order under s. 87 of the Act. I note that the particular power in that regard conferred by s. 80A is exercisable only on the application of a Minister or the Trade Practices Commission. Even without the present exigencies of time, it might not be practicable and might be unwise for the Court to undertake the supervision, with the suggestion of its imprimatur, of the dissemination of "corrective" material. What is appropriate is injunctive relief under s. 80. There should be an injunction against the further distribution by the respondents of copies of Exhibits A, B and C to members of the Association and Insurance. The Court having been satisfied that Holdings has engaged in conduct that constitutes contravention of s. 52, it may grant an injunction in such terms as it determines to be 66. appropriate (sub-s. 80 (1)). The contraventions by Holdings are directed to encouraging a particular course of conduct by members of the Association and Insurance in relation to the general meetings called by the Association and Insurance for 19 October 1994. For the Association and Insurance to proceed with those meetings, as proposed, would be to become parties to and knowingly concerned in those contraventions. The injunctive relief should include a restraint upon the Association and Insurance from proceeding with any business at the general meetings of members, identified in the notices of general meeting in Exhibit C, other than by the taking of such steps as are necessary or appropriate to adjourn those meetings. These restraints upon the Association and Insurance should have the proviso "without the leave of the Court"; see IC] Australia erations Pt td v Trade ctices Commis (1992) 38 F.C.R. 248 at 266-267. The respondents should pay the costs of the applicants of the proceeding up to and including the delivery of these reasons for judgment. There should be liberty to apply; see Abigroup Ltd v Abignano (1992) 39 F.C.R. 74 at 88. . The proceeding should be stood over before me on 25 October 1994 at 9.30 a.m. for directions as to the further conduct of the balance of the proceeding remaining after the order under 0.29 r.2 made 27 September 1994. I certify that this and the preceding sixty six (66) pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Gummow. Associate: Date: Counsel and solicitors for the applicants: Counsel and solicitors for the first respondent: Counsel and solicitors for the second and third respondents: Counsel and solicitor for the amjcus curiae: Dates of hearing: Date of judgment: 13 October 1994. Mr J.J.J. Garnsey Q.C. and Mr B.J. Camilleri instructed by Gadens Ridgeway. Mr A.R. Emmett Q.C. and Mr J.L.B. Allsop instructed by Allen Allen & Hemsley. Mr P.G. Hely Q.C. and Mr R.G. Forster instructed by Abbott Tout. Mr S.D. Rares S.C. instructed by the Solicitor to the Australian Securities Commission. 5, 6, 7 October 1994. 13 October 1994.