Bhagat v Royal Sun Alliance Life Assurance Australia Ltd & Ors [2001] NSWCA 90

New South Wales Court of Appeal

CITATION : Bhagat v Royal Sun Alliance Life Assurance Australia Ltd & Ors [2001] NSWCA 90 revised - 19/04/2001 FILE NUMBER(S) : CA 40269/00; 40145/00 HEARING DATE(S) : 11 December 2000 JUDGMENT DATE : 10 April 2001

PARTIES : Hari Bhagat v Royal Sun Alliance Life Assurance Australia Limited; Duncan Boyle; Tyndall Australia Limited; Michael Wilkins JUDGMENT OF : Priestley JA at 1; Giles JA at 27

LOWER COURT JURISDICTION : Supreme Court - Equity Division LOWER COURT ED 3018/99 FILE NUMBER(S) : LOWER COURT Hodgson CJ in Eq JUDICIAL OFFICER :

Claimant - In person COUNSEL : Opponents 1 & 2 - N. Hutley Opponents 2 & 3 - Dr. A. Bell Claimant - In person SOLICITORS : Opponents 1 & 2 - Middleton Moore & Bevin Opponents 2 & 3 - Mallesons Stephen Jaques CATCHWORDS : Applications for leave to appeal - little change of success if leave granted - cases not suitable for leave - applications dismissed with costs LEGISLATION CITED : Corporations Law s 701 DECISION : Applications dismissed with costs

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40269/00 CA 40145/00 ED 3018/99

PRIESTLEY JA GILES JA

Tuesday, 10 April 2001

BHAGAT v ROYAL & SUN ALLIANCE LIFE ASSURANCE AUSTRALIA LIMITED & ORS

1 PRIESTLEY JA: Mr Bhagat, the claimant in these proceedings, seeks leave to appeal against orders made by Hodgson CJ in Eq on 15 February 2000 and 17 March 2000. 2 From the materials in the claimant's summons papers it appears that in 1998, as a unit holder in the Meridian Investment Trust, he brought proceedings against Tyndall Australia Ltd (TA) as the controlling entity of the Manager of Meridian Investment Trust. It also appears that Mr Bhagat held 220 of the 260,686,620 issued shares in TA. In the proceedings against TA Mr Bhagat made allegations, inter alia, of fraud. 3 These proceedings were still on foot when in February 1999 Royal Sun Alliance Life Assurance Australia Limited (RSA) took the first steps in making a takeover offer for the shares in TA. The formal takeover offer was made on 24 March 1999. 4 Mr Bhagat learned in February 1999 of the impending takeover offer. From then onwards he wrote, first to TA, and in March to RSA, drawing their attention to his pending proceedings against TA alleging fraud. His position was that RSA should inform TA's shareholders of the allegations and that there should be no final acceptance of RSA's offer until the proceedings alleging fraud had been determined. 5 RSA did not respond to Mr Bhagat's requests and followed the procedures under the Corporations Law which led ultimately to its acquisition of all the shares in TA. Mr Bhagat never agreed to his shares being acquired. Their acquisition by RSA by the compulsory procedures under the Corporations Law took place on 23 July 1999. 6 On 6 July 1999 Mr Bhagat filed a summons against RSA as first defendant, Mr Boyle its managing director as second defendant, TA as third defendant, and Mr Williams its managing director as fourth defendant. In the summons (3018/99), Mr Bhagat claimed three declarations that, stated summarily, 1. the defendants must have been aware of the alleged fraud, 2. the defendants had failed to make proper disclosure of the alleged fraud to TA's shareholders and 3. certain of TA's directors, on the determination of Mr Bhagat's fraud proceedings, "may ... be convicted for dishonesty" for recommending TA's shareholders should accept RSA's takeover offer. 7 As well as asking for these declarations, Mr Bhagat sought in par 4 of his summons an order that RSA not acquire his shares in TA until the determination of his fraud proceedings and the completion of enquiries by the Australian Securities and Investment Commission. 8 By notice of motion dated 22 September 1999 the first and second defendants sought summary dismissal of the proceedings (3018/99) against them. Mr Bhagat had previously filed a notice of motion dated 2 August 1999 seeking orders setting aside the compulsory acquisition until the hearing of the case (3018/99); another motion filed 13 October 1999 seeking the same orders and also dismissal of the summary dismissal proceedings of RSA and Mr Boyle; and a third filed 5 November 1999 seeking orders requiring RSA to disclose Mr Bhagat's claims in certain circumstances. 9 Hodgson CJ in Eq heard the notice of motion by the first and second defendants and Mr Bhagat's three notices of motion on 3 December 1999. At the end of the oral submissions on the motions Mr Bhagat left a written submission with the court, the main heading of which was "Section 701 of the Corporations Law. Provisions relating to dissenting shareholders." 10 By the time of this hearing RSA had compulsorily acquired Mr Bhagat's shares. Thus the relief he was seeking under par 4 of his summons was in substance akin to an interim mandatory injunction. 11 Hodgson CJ in Eq delivered judgment on 15 February 2000. In his reasons he summarised the arguments for RSA and Mr Boyle. He also summarised Mr Bhagat's arguments, mentioning his written submissions. One of the oral submissions that he recorded was that Mr Bhagat had submitted, in relation to his own shares, that their acquisition was liable to be set aside under s 701(6) of the Corporations Law and that the court should dispense with the time limit provided in that provision. 12 Hodgson CJ in Eq then stated his conclusions concerning the opposing submissions. He held that RSA and Mr Boyle had been under no duty to communicate to any person the allegations Mr Bhagat had transmitted to them. This led him to conclude that the making of the takeover offer without reference to Mr Bhagat's allegations could not possibly be a breach of s 704 or s 705 of the Corporations Law nor a misrepresentation at general law nor misleading conduct. He stated the same view in regard to later communications by RSA to the TA shareholders and also as to the notice given to dissenting offerees, pursuant to the compulsory acquisition procedures, on 28 May 1999. On the basis of those opinions Hodgson CJ in Eq concluded there was no material supporting a claim for a breach of the Corporations Law, or a claim for misrepresentation or misleading conduct. 13 Hodgson CJ in Eq added that he did not see that the fraudulent conduct alleged by Mr Bhagat could cause him any loss, and, even if he were wrong about that, the scale of any loss in respect of his 220 shares could not conceivably justify relief by way of mandatory injunction. He said this was particularly so "where a statutory remedy is given by s 701 of the Corporations Law, which Mr Bhagat did not adopt. In my opinion, there is no possibility of a case being made out for extension of time for initiating the procedure under s 701(6)." 14 Finally, he said that the proposed statement of claim which Mr Bhagat had put before the court did not take the matter any further in the absence both of material supporting a claim for breach of the Corporations Law, misrepresentation or misleading conduct and of material suggesting loss to Mr Bhagat. He said he did not believe there was any possibility that Mr Bhagat's case against RSA and Mr Boyle could be reformulated to avoid the objections he had stated. 15 He therefore found the case was an appropriate one for the remedy of summary dismissal and dismissed the proceedings as against RSA and Mr Boyle. He further dismissed Mr Bhagat's three notices of motion. 16 Mr Bhagat was dissatisfied with the statement by Hodgson CJ in Eq in his reasons for judgment that Mr Bhagat had not applied for the statutory remedy given by s 701 of the Corporations Law. In a further hearing on 9 March 2000, Hodgson CJ in Eq permitted Mr Bhagat to make submissions to the effect that the order 4 sought in his summons of 6 July 1999 should have been understood as an application under s 701(6). He further submitted that he had complied with the time limit for making such an application, such time limit being ascertained by reference to s 701(6)(b) and s 701(9). 17 Hodgson CJ in Eq ruled against Mr Bhagat on his contention that the order sought in par 4 of his summons was or could or should be read as an application under s 701(6). In his view the language of the claimed order 4 was not appropriate for a s 701(6) application and the proceedings before him had not been conducted on the basis that it was. The judge noted that the evidence that had been put on by Mr Bhagat was directed to the matters referred to in the three claimed declarations and to the appropriateness of holding his position until those matters had been investigated. What was being sought was in substance an interim mandatory injunction whereas an order under s 701(6) finally made the compulsory acquisition procedure inapplicable to a dissenting offeree by virtue of s 701(5). On this basis Hodgson CJ in Eq left his earlier orders standing. 18 Mr Bhagat's principal submission in support of his application for leave to was that Hodgson CJ in Eq was in error in the way he had treated the order claimed in par 4 of the claimant's summons. In support of this submission he relied particularly on the fact that Hodgson CJ in Eq in his reasons of 17 March 2000 after remarking that the evidence put on by Mr Bhagat had been directed to the declarations he was claiming and to obtaining an interim order had added "It did not in fact ever occur to me, in my consideration of the case, that the summons could possibly have been an application under s 701(6), until Mr Bhagat made his submission on 9 March 2000". 19 Following delivery of the judgment of 17 March 2000, Mr Bhagat wrote a number of letters to Hodgson CJ in Eq's Associate in which he asserted that it was plain from the written submissions left with the court on 3 December 1999 that the claimed order 4 showed an application was being made under s 701(6). These letters were answered by the Associate. In her last letter she said she had been asked to respond by the judge and continued: "His Honour clearly understood, on 3 December 1999, that you did submit that an order should be made under s 701(6) of the Corporations Law, and he carefully read your submissions. However, he understood your oral submission to be that the time limits in s 701(6) should be dispensed with and not that you had complied with those time limits because your summons was itself an application under s 701(6). It is that last possibility which did not occur to him until 9 March 2000." 20 In his applications for leave Mr Bhagat claimed to understand that the first sentence in the quoted paragraph showed that Hodgson CJ in Eq had understood the claimed order 4 as an application under s 701(6). Mr Bhagat converted this understanding of the judge's Associate's letter into a submission that the letter showed that the orders made by the judge were "perverse, arbitrary and unreasonable". 21 It seems to me that those adjectives were quite unwarranted. The judge had said in his reasons of 15 February 2000 that Mr Bhagat had in his oral argument submitted that in relation to his own shares "the acquisition was liable to be set aside under s 701(6) ...; and the court should dispense with the time limit provided in that provision." Mr Bhagat did not assert in this court that he had not made that submission. I can see no reason why the submission would have been attributed to Mr Bhagat if he had not made it. 22 Accepting as I do that the trial judge's recording of that submission was accurate, it seems to me that first, it provides powerful support for the judge's interpretation of claimed order 4 (in the sense that it showed that on 3 December 1999 not even Mr Bhagat read the claimed order as asking for what Mr Bhagat later said it did); and second, it shows quite plainly what the judge's Associate was reporting as the judge's understanding in the letter of 6 June 2000, namely that the judge understood that Mr Bhagat was seeking, or might be seeking the setting aside of RSA's acquisition of his shares and that to enable that application to proceed he needed time limits to be dispensed with. That this was the judge's understanding at the time is shown not only by par 42 of his reasons but also by par 53. 23 In the face of those indications, and also of the submission made by Mr Bhagat himself orally on 3 December 1999 it seems to me to be wrong for him to put the construction on the Associate's letter of 6 June 2000 which he does, and to ask this court to adopt that construction and then to proceed to make accusations against the judge which in my opinion are quite unwarranted. 24 I agree with Hodgson CJ in Eq's construction of par 4 in Mr Bhagat's summons. I also agree with his reasoning generally on the various matters he considered before making the orders in respect of which leave to appeal is sought. I do not think that what I regard as Mr Bhagat's extremely slim chances of success on appeal justify granting leave to appeal. Nor do I see any other basis for granting leave. 25 There were further matters in the judgments against which Mr Bhagat directed submissions but I do not think that they are of any weight, or that they would be leave points in any event. 26 In my opinion the applications for leave to appeal should be dismissed with costs. 27 GILES JA: I agree with Priestley JA. ***********