Ian Francis Yates v NRMA Limited [1999] NSWSC 897

New South Wales Supreme Court CITATION : Ian Francis Yates v NRMA Limited [1999] NSWSC 897 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3730/999 HEARING DATE(S) : 02/09/1999 JUDGMENT DATE : 2 September 1999

PARTIES : Ian Francis Yates (Plaintiff) JUDGMENT OF : Santow J

COUNSEL : A J L Ogborne (Plaintiff) T E F Hughes, QC/S J Gageler (Defendant) SOLICITORS : Bruce & Stewart (Plaintiff) Freehill Hollingdale & Page (Plaintiffs) CATCHWORDS : CORPORATIONS — Campaigning by director or board in a contested board election must not be misleading or deceptive; PRACTICE & PROCEDURE — Need for compliance with undertaking for corrective advertising — Attempt to justify taking a week when no express time period and therefore in what in the circumstances had to be a reasonable time period — Cost orders for plaintiff where delay sought to be excused by Defendant's stated need for further legal advice following press release and advertisement by plaintiff — No attempt to obtain leave of court by defendant. DECISION : Undertakings given to augment corrective advertising and costs awarded.

REVISED — 3 September, 1999 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY

SANTOW J

No. 3730/99 IAN FRANCIS YATES Plaintiff NRMA LIMITED Defendant

JUDGMENT — ex tempore 2 September 1999 1 What follows are brief observations in the context of undertakings proffered by the NRMA without admissions and noted in the transcript. The matter came before me on an urgent basis by Notice of Motion filed by Mr Yates as Plaintiff against the NRMA as Defendant. In the events that happened, the Defendant was able to deal with the Notice of Motion this evening though received at short notice, after the Plaintiff made clear that he did not move on paragraphs 4 and 5 and corrected the dates in paragraph 3 to substitute Monday and Tuesday dates next week for the incorrect reference to October 1999. 2 The undertakings the subject of to-day's Notice of Motion were proffered by the Defendant without admissions on Friday last 27 August 1999 following another urgent and late afternoon sitting. No time limit was expressly stated in the undertaking and in particular that part of it dealing with corrective advertising. But it was clear from my statement in Court — that I would not having regard to the seriousness of the matter, defer matters to the following Monday — that proper expedition was required to deal with the corrective advertising within the parameters of what was reasonable. 3 On Friday 27 August 1999 Mr Yates issued a press release which continued a campaign of criticism of the NRMA Board. However, while the statements were amplified so as to make clear that a capital decline was complained of, no attempt was made to repeat the reasons given in evidence by the NRMA for why it took fifteen months to dispose of the relevant parcels of shares, more particularly elaborated in my judgment of 20 August 1999. That omission may or may not have been misleading and I deliberately reach no conclusion on that matter, as there is no Motion before me about it. 4 I similarly note that in a television advertisement on Wednesday 1 September 1999 Mr Yates refers to a "$71m capital decline in two shareholdings in just two months". 5 As I stated in my judgment, a director who makes statements of that kind has a fiduciary duty to ensure that they are not misleading either by reason of commission or omission. Again I make no finding on whether the quoted statement was unduly economic, though I pause to note that the complaint about the NRMA's advertisement which led to last Friday's proceedings was that it omitted reference to anything other than the profit that would be derived by comparing the historical cost of the shares to the sale price received. It was that statement that I likewise described at the time as economic, insofar as no reference was made to the accounting loss of $37 million; this led to the NRMA proffering without admissions the undertakings to which I have earlier referred. 6 I wish to state with proper emphasis that in a contested application for the election of a board, it is incumbent on directors, whether speaking as individuals or collectively, to ensure that any campaigning they choose to carry out is not misleading or deceptive or otherwise contrary to the fiduciary duties applicable to directors. There is no reason why, consistent with a director's duty, campaigning could not be carried out with the appropriate care to ensure that those who are members of the NRMA have the benefit of opposing views, but without misleading or deceptive material in breach of fiduciary duty, including statements misleading by omission. Accordingly, I should warn that further applications of the present sort, which have taken a great deal of Court time and no doubt expense to the parties will be met with a serious emphasis on making orders, including cost orders and, if warranted, contempt orders, which are directed to ensuring that shareholders are not misled. In other words, it may not be appropriate on the next occasion simply to deal with the matter by way of undertakings.