Reported Decision : 52 ACSR 204 New South Wales Supreme Court CITATION : Dolby Australia v Catto [2004] NSWSC 1196 HEARING DATE(S) : 6/12/04 - 8/12/04 JUDGMENT DATE : 7 December 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Evidence rejected CATCHWORDS : CORPORATIONS - take-over offers - compulsory acquisition of minority shareholdings - plaintiff seeks to have court approve acquisition pursuant to notice given under section 664C Corporations Act 2001 (Cth) - time at which evaluation under section 667C Corporations Act 2001 is required to take place for purpose of court deciding whether value offered is a fair valuation - whether time of notice pursuant to section 664C Corporations Act 2001 appropriate time - whether events occuring after date of notice capable of being used to determine what value was at date of notice LEGISLATION CITED : Corporations Act 2001 (Cth) Evidence Act 1995 Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485 Austrim Nylex Ltd v Kroll (No. 2) (2002) 42 ACSR 18 CASES CITED : Bromley Investments Pty Ltd (ACN 001 109 628) v Elkington (2003) 47 ACSR 273 Capricorn Diamonds Investment Pty Ltd v Catto (2002) 5 VR 61 Teh v Ramsay Centauri Pty Ltd (2002) 42 ACSR 354 PARTIES : Dolby Australia Pty Ltd - Plaintiff Robert John Charles Catto - Defendant FILE NUMBER(S) : SC 5494/04 COUNSEL : T F Bathurst QC; A S Bell - Plaintiff In person - Defendant SOLICITORS : Mallesons Stephen Jaques - Plaintiff In person - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST CAMPBELL J TUESDAY 7 DECEMBER 2004 5494/04 DOLBY AUSTRALIA PTY LIMITED v ROBERT JOHN CHARLES CATTO JUDGMENT - Ex Tempore (On Admissibility of affidavit of Robert John Charles Catto of 7 December 2004) 1 HIS HONOUR: Mr Catto has filed in Court today an affidavit which he has sworn today. There is no objection to the reading of paragraphs 1 and 2 of that document. 2 Paragraph 3 annexes the text of an Initial Public Offering document made by Dolby Laboratories Inc in the United States, being a document filed with the United States Security and Exchange Commission on 19 November, 2004. The plaintiff objects to paragraph 3 of the affidavit and the annexure. 3 The first basis on which the plaintiff objects is that the notice that was given under section 664C of the Corporations Act 2001 (Cth), which the plaintiff seeks to have the Court approve an acquisition pursuant to, is one which was given on 20 August 2004. The plaintiff submits that the valuation is required to take place at that date, for the purpose of the Court deciding whether the value offered is a fair valuation, of the type required by section 667C, and that the document sought to be tendered is too recent to be relevant. 4 In Capricorn Diamonds Investment Pty Ltd v Catto (2002) 5 VR 61 at [88] - [90] Warren J held that the appropriate date for valuation is the date on which notice was given to ASIC pursuant to section 664C. That decision has been followed by Warren J in Austrim Nylex Ltd v Kroll (No. 2) (2002) 42 ACSR 18 at [25] - [26]. It has also been followed by Jerrard JA and Holmes J in the Supreme Court of Queensland, Court of Appeal in Bromley Investments Pty Ltd (ACN 001 109 628) v Elkington (2003) 47 ACSR 273 at [45], [48] and by Barrett J in Teh v Ramsay Centauri Pty Ltd (2002) 42 ACSR 354 at [28] - [29]. I have not been directed to any contrary decision. 5 In Australian Securities Commission v Marlborough Gold Mines Limited (1993) 177 CLR 485 at 492 the High Court instructs trial judges to follow decisions of other Australian intermediate appellate courts in matters involving construction of a piece of legislation of national application, like the Corporations Act 2001 (Cth), unless convinced that the interpretation is plainly wrong. I do not only take that approach here, in following the decision of the Queensland Court of Appeal in Austrim Nylex. As well, I follow Warren J's decision in Capricorn Diamonds because it seems to me, with respect, to be right. The appropriate date of valuation, under section 667C(1) Corporations Act 2001 (Cth) is the date of the giving to ASIC of the compulsory acquisition notice under section 664C. I adopt the reasons of Warren J for that conclusion. I also note that section 667C states a procedure for determining fair value for the purpose of the entire Chapter 6A - that is, for the purpose of the report which is required to be sent to objecting security holders, as well as for the purpose of the Court making its determination. In circumstances where Part 6A.2 sets short timeframes for the taking of the steps which are involved in the compulsory acquisition procedure it lays down, it is an understandable exercise of policy to make the valuation occur at the date of notice under section 664C. Further, there would be serious practical difficulties in the Court considering valuation as an ongoing matter. The construction also accords with the meaning on their face of the words of the various sections in Part 6A.2. 6 However, even given that the appropriate date of valuation is 20 August 2004, it is possible for events occurring after that date to throw light on what the value was at that date. Thus, it is necessary to consider whether there is relevance in the particular document tendered. I have been taken to particular parts of the document by Mr Catto. These are portions which appear at pages 8, 16, 93, 94, 126, and 133 of the document. These portions are ones to which I was directed after I requested that he direct my attention to the specific portions of the document from which he expected to derive the most help. The portions to which I have been directed provide evidence that Dolby is in a business which overlaps, in some fashion, with that of Lake. They provide evidence that it is a business where technological change is occurring. They provide evidence that there are competitors of Dolby, such as Microsoft and Real Networks, who may be able to offer integrated system solutions in certain markets for sound or non-sound entertainment technologies. They provide evidence that there are a variety of intellectual property items, including trademarks, to which Dolby Laboratories Inc has access. In a one-page consolidated balance sheet, Mr Catto points to the fact that no mention is made of there being any Lake minority interests. In circumstances where the basis of preparation of the accounts has not been gone into, I am unable to place any significance on this. Further, he points to the fact that between 26 September 2003 and 24 September 2004, there has been a significant decline in the value attributed to investments, from some $US3,773,000 to $US244,000. He submits that that, "may have something to do with treatment of the Australian entity." That sort of speculation is not a demonstration of relevance. 7 While there are some circumstances in which events which occur after the date as at which a valuation is required to take place can cast light on the value of an item being valued at that date, I am not persuaded that the items to which I have been taken are of that nature. The items I have mentioned before the balance sheet are at a high level of generality. Further, the significance of none of the items has been analysed in any way by any expert. How they make more probable any proposition about what is the fair value of shares in Lake as at 20 August 2004 (the relevant matter in issue in these proceedings) is not shown. The evidence is sought to be adduced now, contrary to the terms of a direction which required Mr Catto to file and serve his evidence and an outline of submissions at an earlier date (though I should say that I place comparatively small weight on this factor in comparison with others). Further, even if there were to be any relevance in the material – which at present I cannot see – the specific propositions sought to be derived from it have not been put to the valuer who has been called and whose cross-examination is now complete, nor reduced to writing in any way. In these circumstances, I do not regard the material as relevant. Even if it were relevant, I would reject it under section 135 of the Evidence Act 1995. ********** Last Modified: 12/20/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.