GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd & Anor [1998] FCA 1670

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NG 3172 of 1998

BETWEEN: GIO AUSTRALIA HOLDINGS LIMITED

applicant

AND: AMP INSURANCE INVESTMENT HOLDINGS PTY LTD

First Respondent

AMP LIMITED

Second Respondent

JUDGE: EMMETT J

DATE: 27 NOVEMBER 1998

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT HIS HONOUR: In my reasons of 25 November 1998, I indicated that I had concluded that there are deficiencies in the Part A statement delivered by AMPII to GIO on 8 September 1998. I have now heard further submissions as to the orders, if any, which I should make in the light of the findings which I then published. I have been asked by GIO to make declarations as follows: 1. A declaration that the AMP Part A statement contravenes sections 704 and 995 of the Corporations Law in that it contains what I have defined as the "relevant statements" and the statement concerning exchange rate fluctuations as set out in my reasons. 2. A declaration that the AMP Part A statement does not comply with the requirements of clauses 17 and 18 of Part A of section 750 of the Law, such that it is not a Part A statement for the purposes of Division 1 of Part 6.3 of the Law as it omits information which is material, namely the quantum of the recovery in equity markets which is necessary for the AMP profit to fall within the Prospectus Forecast range. 3. An order that the respondents be restrained from sending to any shareholder the purported Part A statement and any accompanying offer. AMP and AMPII, on the other hand, have sought a declaration that there has been a contravention of clause 18 of Part A of section 750 and an order that, notwithstanding that contravention, the Part A Statement be validated ab initio. AMP and AMPII also sought an order that they supply to shareholders of GIO certain supplementary material with the offer and the accompanying Part A statement. In addition, orders are sought pursuant to section 739 of the Law that the takeover period in relation to the offers made pursuant to the Part A statement be taken to end at the end of the offer period as that term is defined in section 603 of the Law and that AMPII will not contravene section 746(4) provided it despatches the offers by 7 December 1998. There are two matters that trouble me in relation to the situation which I now find before me. The first is my concern that there have already been, by reason of this litigation, delays in the dispatch by AMPII to GIO shareholders of the offers which they have foreshadowed. We are now coming up to the holiday season and, while there will no doubt be frenetic activity between now and Christmas Eve, from then on the prospects of an informed decision making process drop away, at least until the end of January. The second matter of concern is the question of adequate information being furnished to the shareholders of GIO concerning the prospects of AMP. I indicated in my reasons that, on the material which I have before me, it would be impracticable for a forecast for a company such as AMP to be made otherwise than as at or for a period which coincided with the financial year. The evidence indicated that a forecast which did not coincide with the financial year would be fraught with uncertainty. The conclusion I reached, therefore, was that the options open to AMP were either a forecast to the end of the current financial year or a forecast which would have required an assessment to be made at equity market levels as at 31 December 1999 and later. I indicated that I considered that the volatility which the markets had exhibited in the 12 months to September 1998 justified AMP's reluctance to make any longer forecast. Accordingly, I considered that the Prospectus Forecast amounted to a forecast with effect from the date of the Part A statement, which I considered was adequate. Since then, close to ten weeks have elapsed, such that even if an offer is dispatched to shareholders within the next seven days, they will, in effect, have a forecast for a period which will expire within about three weeks. I have been informed from the bar table that it would be impracticable for AMP to produce a useful forecast within a month. I would not be disposed to act on the basis of that although I have no doubt that what was said was in accordance with instructions given to senior counsel. However, my concern at the possibility that a forecast will be furnished for only a short period requires that, if I were to act on that sort of matter as a fact, I have some evidence before me. I consider that the deficiencies to which I have referred in my reasons are such that it is not appropriate to restrain the dispatch of takeover offers pursuant to the AMP Part A statement if there are included with the Part A document sufficient particulars to ensure that the deficiencies in the Part A statement are overcome. AMPII has tendered a proposed form of supplement to be dispatched with the offers and Part A statement. The general concept of the supplement would accord with my expectation as to an adequate furnishing of particulars to overcome deficiencies. However, in the course of argument, further refinement of the document has been indicated. Subject to being satisfied, when I see a final version of that document which incorporates those refinements, I would be disposed to accept that the deficiencies which I identified in my reasons of 25 November 1998 would be overcome by such a document. I therefore propose to stand the matter over until Monday morning to enable AMPII to produce a further version of the proposed supplement. That version should be submitted to GIO and its advisers for consideration. I can then hear further argument, if necessary, as to the adequacy of the final document. My present disposition would be to make orders which would permit the dispatch of offers so long as the offers are dispatched no later than 4 December 1998 and so long as I am satisfied, on proper evidence, that it is truly impracticable for a meaningful forecast to be furnished to GIO shareholders with documents dispatched by that date. I am conscious of the fact that there is a delicate balancing exercise involved in the orders which I am asked to make. I do not regard the interests of AMPII as paramount although AMPII and AMP have bona fide and significantly genuine interests which must be accommodated. My real concern is for the interests of shareholders who, on the material before me, are entitled to have offers as soon as reasonably practicable, provided that those offers are accompanied by information which is reasonably available in the circumstances and which will enable them to make an informed decision. As I have indicated above, AMPII seeks a declaration that, notwithstanding any failure to comply with Part A of section 750 of the Law, the AMP Part A statement be validated ab initio. Section 743 of the Law provides that when a person has contravened a provision of Chapter 6 and, on application by any interested person, the Court is satisfied that, in all the circumstances, the contravention ought to be excused, the Court may make an order declaring any act, document or matter not to be invalid because of the contravention. Such a provision may have been the source of power to make orders such as are sought by AMPII. However, AMPII has not asked me to make an order under section 743. Rather, I have been asked to make an order under section 739, which relevantly provides that where a statement that purports be a Part A statement has been served on a target company, and an application for an order under the section is made to the Court by, inter alia, the offeror, and the Court is satisfied that a provision of the Chapter has been contravened, the Court may make such orders as it thinks necessary or desirable to protect the interests of a person affected by the takeover scheme. That would require me, in making an order, to have regard not only to the interests of the offeror, AMPII, but also the interests of all offerees, being the shareholders of GIO, and GIO itself as the target. There is some doubt as to the extent of the power conferred by section 739. In Target Petroleum NL v Petroz NL (1987) 16 FCR 1,the Full Court of this Court considered section 47 of the Acquisition of Shares Code, which is the predecessor of section 739. The Court said (at 13): Section 47 does not in terms empower the Court to amend a Pt A statement. Nor can any such power be inferred. The exercise of any power of amendment appears to be confined to the Commission … pursuant to which a declaration has at least the practical effect of amending the Pt A statement. Section 47 is, however, an appropriate vehicle for the exercise of a power by the Court to require an offeror to send with a Pt A statement some document which, though not amending it, nevertheless contains statements intended to clarify or amplify statements made in it or to remove ambiguities or uncertainties. The evident purpose of the Act is to ensure that the acquisition of shares in companies "takes place in an efficient, competitive and informed market": s 59. Section 47 lends itself to a liberal interpretation. It is an enabling provision and is part of (indeed, central to) a statutory scheme designed to streamline and facilitate the making and consideration of takeover offers and the making of informed decisions with respect to them by shareholders, consonant with the public interest requirements of the Act which operate in a commercial environment often volatile and requiring dispatch and efficiency. I am reminded by those comments of two matters which I have indicated are troubling me, namely the requirement that the offers be received in an informed market and, secondly, the requirement that any takeover offers take place in an efficient and competitive market. The latter seems to me to be relevant to the question of any delay occasioned by the need to resort to the Court. Accordingly, I am satisfied that section 739 would permit me to require the dispatch of the supplementary document to which I have referred. In the exercise of my discretion, it would be open to me to decline to make any order restraining the dispatch of the offers on the condition that such a supplement accompany the offer document and Part A statement. I would only be prepared to do so, of course, if I am satisfied that the document itself achieves the desired end and is not itself confusing or misleading. The additional step which AMPII asks me to take, however, is to make a declaration validating the Part A Statement, notwithstanding its failure to comply with section 750 and section 1022, insofar as section 750 also incorporates section 1022. In Australian Consolidated Investments v Rossington Holdings Pty Ltd (1992) 7 ACSR 515, Davies J considered the orders that should be made consequent upon the determination of a Full Court that a Part A statement delivered by Rossington Holdings did not comply with the requirements of the Law. Davies J said (at 517) as follows: That leaves the position that there has been a declaration of non-compliance with a provision of s 750. A declaration of non-compliance would not be made if a matter were entirely trivial. But, as the matter was put to the full court, it did not then seem to be a matter so trivial that no declaration should be made. A declaration having been made, what is the consequence? The consequence seems to me to be that, subject to the making of appropriate orders, particularly under s 739, the Part A statement is invalid. In my view, s 739 is directed to the type of problem which has arisen in this case. It specifically enables the court to make any orders necessary or desirable to protect the interests of a person affected by the takeover. There are many persons affected by the fault that has occurred. Rossington no doubt could be protected under s 743 but the shareholders and Austcon are affected. It seems to me that, when a declaration of non-compliance is made, the court should go on to say what would be the effect of that so far as the takeover is concerned, whether the take-over is invalid or whether the takeover is validated and will go ahead. After referring to the judgment of Jacobs J in TNT Australia Pty Ltd v Normandy Resources NL (1989) 15 ACLR 99, his Honour went on: It seems to me that all necessary orders can be made under s 739. That is a section which … lends itself to a liberal interpretation. But just in case that view is incorrect and because, in any event, Rossington is seeking the orders of a remedial nature and s 743 plainly applies to it, I prefer to exercise power under both ss 739 and 743 in formulating the orders which I shall make. ………………………………………………… I propose to declare that, notwithstanding its failure to comply with cl 11 of s 750 the Corporations Law, the Part A statement be validated ab initio. His Honour, thus, did not quite go so far as to say that an order for validation under 739 could be made without also relying on section 743. It is fair to say that, notwithstanding that reliance was placed by his Honour on section 743, the report does not indicate that the prerequisites of section 743 were made out in that case, although it appears that there was no opposition to an order being made under section 743. As presently advised, I would be disposed to consider that, notwithstanding that the prerequisites of section 743 have not been made out, if I am otherwise satisfied that a provision of Chapter 6 has been contravened, I would have power under section 739 to make such orders as I think necessary or desirable to protect the interests not only of the shareholders of GIO but also of AMPII by declaring that the AMP Part A statement is to be validated to the extent that it should be treated as being a Part A statement within the meaning of Chapter 6 for the purposes of the application of section 637. I will not make any orders this afternoon. I have indicated provisionally the conclusion which I have reached. However, I will have to be satisfied that the proposed supplementary statement is satisfactory and that it is not practicable to produce a meaningful forecast within the time that would otherwise be required for the recommencement of the Part A process.