Reported Decision : 53 ACSR 610 (2005) 23 ACLC 746 New South Wales Supreme Court CITATION : Alan Davis Group v Rivkin Financial Services [2005] NSWSC 369 HEARING DATE(S) : 14/04/05, 18/04/05 JUDGMENT DATE : 26 April 2005 JUDGMENT OF : Gzell J DECISION : Plaintiff entitled to declaration that buy-back agreement validly terminated and to damages for breach of contract and/or under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM. Not entitled to declarations and injunction with respect to voting right. CATCHWORDS : CORPORATIONS - Transactions affecting share capital - Selective share buy-back agreements in consideration for other shares and cash negotiated by others in settlement disputes - Agreements conditional upon special or unanimous approval of shareholders - Plaintiff's agreement contained provision that directors agreed to recommend shareholder approval - Market value of other shares rose - Notice of general meeting contained statement that majority of directors recommended approval if other share price at specified amount - One director recommended against - Plaintiff purported to terminate - Whether termination valid - ASX listing rule 10.1 required approval of general meeting to disposal of a substantial asset under another selective share buy-back - Whether plaintiff an associate as acting in concert with party that negotiated settlement - Whether plaintiff excluded from voting under listing rule 14.11 Australian Securities and Investments Commission Act 2001 (Cth) LEGISLATION CITED : Trade Practices Act 1974 (Cth) Corporations Act 2001 (Cth) Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 Scanlan's New Neon Ltd v Tooheys Ltd (1942-1943) 67 CLR 169 Global Network Services Pty Ltd v Legion Telecall Pty Ltd [2001] NSWCA 279 Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1986-1987) 162 CLR 549 CASES CITED : Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26 Thorby v Goldberg (1964) 112 CLR 597 Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558 at 43717 Ford's Principles of Corporations Law, Butterworths, Australia, 2000 Industrial Equity Ltd v Commissioner for Corporate Affairs (1990) VR 780 IPT Systesm Ltd v MTIC Corporate Pty Ltd (2000) 158 FLR 349 at 355-356). Alan Davis Group Pty Ltd - Plaintiff PARTIES : Rivkin Financial Services Ltd - Defendant FILE NUMBER(S) : SC 2133/05 Mr J Gleeson SC/ Mr B Debuse COUNSEL : Mr SD Rares SC/ Mr T Faulkner Snelgrove Boyle Neilson Lawyers SOLICITORS : Deacons Lawyers LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J TUESDAY 26 APRIL 2005 2133/05 ALAN DAVIS GROUP PTY LTD v RIVKIN FINANCIAL SERVICES LTD JUDGMENT Introduction 1 The defendant, Rivkin Financial Services Ltd, entered into an agreement with the plaintiff, Alan Davis Group Pty Ltd, to buy back its shares. The agreement contained a provision that Rivkin would use its best endeavours to procure approval of a special or unanimous resolution of its shareholders approving the agreement and a further provision that its directors agreed to recommend that the shareholders vote in favour of it. The consideration for the buy-back was the transfer to Davis Group of shares in Drillsearch Energy Ltd plus cash. The notice convening the general meeting of the shareholders of Rivkin for the purpose of considering the buy-back stated that the majority of the Rivkin directors recommended that shareholders approve the buy-back if Drillsearch shares were trading at or below a specified average price for the last five trading days before the meeting and that one of the directors recommended that shareholders vote against the resolution. Davis Group purported to terminate the buy-back agreement. 2 The issues before the Court were whether the buy-back agreement was validly terminated or whether it ought to be declared void under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM, the provision with respect to financial services equivalent to the Trade Practices Act 1974 (Cth), s 87. If the buy-back agreement was terminated or void, the question arose whether Davis Group is entitled to vote at the general meeting on all matters other than in favour of the resolution to approve the buy-back of shares from it and whether it was precluded from voting as an associate of other entities with which Rivkin entered into similar buy-back agreements subject to approval at the meeting. In addition, there was the question whether Davis Group was entitled to damages for breach of contract and whether the buy-back agreement contained representations that constituted misleading or deceptive conduct in terms of the Australian Securities and Investments Commission Act 2001 (Cth), s 12DA, the equivalent of the Trade Practices Act 1974 (Cth), s 52. If either of those questions was answered in the affirmative, the question of damages was to be determined separately. 3 The question whether a company can bind its directors to a course of conduct that might infringe their statutory duties or their fiduciary duties is likely to arise. This is not that case. Whilst it was mooted that the defence would raise the issue whether the provision in the buy-back agreement that the directors would recommend approval of it to the shareholders was unenforceable, that defence was specifically disavowed. Nor did it raise a defence that changed circumstances excused Rivkin from performance of the promise that its directors would recommend approval of the buy-back to its shareholders. Rivkin confined its defence to the proper construction of the buy-back agreement. Background 4 The Corporations Act 2001 (Cth), s 9 defined a "selective buy-back" as a buy-back that was not under an equal access scheme, a minimum holding buy-back, an on-market buy-back, or an employee share scheme buy-back. The buy-back of shares from Davis Group was a selective buy-back. Section 257B required a selective buy-back to conform with s 257D(1). It required the buy-back agreement to be approved prior to entry by a special or unanimous resolution of shareholders (with no votes cast in favour by the shareholder being bought out) or that the agreement be conditional on such approval. It was in the following terms: "If section 257B applies this section to a buy-back, the terms of the buy-back agreement must be approved before it is entered into by either: (a) a special resolution passed at a general meeting of the company, with no votes being cast in favour of the resolution by any person whose shares are proposed to be bought back or by their associates; or (b) a resolution agreed to, at a general meeting, by all ordinary shareholders; or the agreement must be conditional on such an approval." 5 Under a heading "Conditions Precedent", cl 2.1 of the buy-back agreement provided that the agreement and the buy-back were subject to and conditional on the approval of the shareholders of Rivkin by special resolution or unanimous resolution in accordance with the above provision. Clause 2.2 under that heading required Davis and Rivkin to use their best endeavours to procure the fulfilment of the condition of shareholder approval. It was in the following terms: "RFS and ADG must use their best endeavours to procure the fulfilment of the condition in clause 2.1." 6 Under a heading "Buy-Back", cl 4.1 provided that Rivkin would buy back from Davis Group and Davis Group would sell to Rivkin the shares in it for the buy-back consideration, the transfer of the shares and the provision of the buy-back consideration to be provided on the completion date. Clause 4.2 provided that the directors of Rivkin agreed to recommend approval of the buy-back to the shareholders. The buy-back agreement was between Rivkin and Davis Group. The directors of Rivkin were not parties to it. Clause 4.2 was in the following terms: "The directors of the Company agree to recommend that shareholders of the Company vote in favour of the Buy-Back." 7 Following proceedings in the Federal Court, selective buy-backs of Rivkin shares from Pinnacle Asset Management Pty Ltd, through its associates IWL Broking Solutions Ltd and IWL Ltd, from Network Ltd, from Cole Kablow Superannuation Pty Ltd and from Davis Group together with the sale to IWL Broking of Rivkin's share in Avcol Strockbroking Pty Ltd were negotiated with representatives of Rivkin by Otto Buttula of IWL and Christopher Bregenhoj of Network. 8 Alan Andrew Davis, a director of Davis Group, described the agreements emanating from these negotiations: "It was a rolled up omnibus solution between all the problems between all the parties." 9 On behalf of Rivkin, the negotiations were conducted by Farooq Khan, its chairman, and William Johnson one of its four directors. They told Messrs Buttula and Bregenhoj that Rivkin would support the buy-back agreements. That information was relayed to Mr Davis. 10 The buy-back agreements were not inter-dependent. The agreements between Rivkin and the other companies were executed on Friday 4 February 2005. On that day, Mr Davis received a draft of the buy-back agreement with Davis Group. He instructed his solicitor, John Anthony Snelgrove, to require the inclusion of a clause that the directors of Rivkin would recommend the buy-back to shareholders. He said he would not sign the agreement without it. 11 On Saturday, 5 February 2005, Mr Snelgrove showed Mr Davis a re-drafted agreement. It contained cl 4.2 in its final form. It also contained a cl 5.3 that enabled Rivkin to dispose of Drillsearch shares upon increasing the cash consideration by 6.25 cents per Drillsearch share. It was in the following terms: "If the Company disposes of any Drillsearch Shares prior to Completion then the Company must increase the amount of cash payable under clause 5.2(1)(c) by an amount equal to 6.25 cents per Drillsearch Share disposed of." Mr Davis told Mr Snelgrove that cl 5.3 had to be deleted. 12 On Monday, 7 February 2005, the final version of the buy-back agreement was sent to Davis Group by facsimile. Clause 5.3 had been deleted and it contained cl 2.2 and cl 4.2. Mr Davis was content. He said Davis Group would not have entered into the agreement had it not contained cl 2.2 and cl 4.2. 13 The facsimile copy of the buy-back agreement was executed by Davis Group on Monday 7 February 2005 and given to Mr Snelgrove to arrange an exchange. Late in the afternoon, Mr Snelgrove telephoned Mr Davis and informed him that he had received copies of emails passing between Mr Buttula and Christopher Ryan, another director of Rivkin. Mr Ryan raised objections to the Davis Group buy-back including an objection to Rivkin agreeing to sell Drillsearch shares at a discount to market. He observed that Rivkin had been prepared to consider the deal on the basis that Davis Group received Drillsearch shares or cash at Rivkin's option but that option had been removed from the agreement. Mr Ryan inquired of Mr Buttula what the attitude of IWL would be if Rivkin decided not to proceed with the buy-back of the Davis Group shares. Mr Buttula expressed his opposition to this course in strong language. Mr Snelgrove read portions and paraphrased potions of the emails to Mr Davis. 14 Shortly afterwards, Mr Snelgrove spoke with the solicitors for Rivkin asking what was happening with cl 5.3. He was informed: "There is no news yet but they are working on Chris Ryan to get him around. It won't happen today". Mr Snelgrove relayed that information to Mr Davis. Shortly thereafter, Mr Snelgrove received a telephone call from the solicitors for Rivkin saying: "All is okay, the agreement is fine". Mr Snelgrove conveyed that information to Mr Davis and said he would send the executed facsimile to the solicitors for Rivkin by facsimile. That he did. Later that evening, Mr Snelgrove called on Mr Davis and provided him with copies of the emails between Mr Buttula and Mr Ryan and informed Mr Davis that Rivkin would execute the agreement that day and they would tidy things up with hard copy agreements later. Rivkin executed the agreement on 7 February 2005. 15 In varying degrees, Mr Davis did not trust the directors of Rivkin. He worked out what he thought was in their self-interest and relied upon them taking that course. But he said he would trust them if they were subject to an express obligation in a contract. I have no reason to doubt that assertion and I accept the evidence of Mr Davis on that issue. Before the buy-back agreement with Davis Group was forwarded to the solicitors for Rivkin, Mr Davis was assured that the board of Rivkin had agreed to execute it with no changes. It was assumed that Mr Ryan had agreed to its terms. He relied on the statement of the solicitors for Rivkin that all was in order as relayed to him and the buy-back agreement, executed by Davis Group, was then dispatched to the solicitors for Rivkin. 16 Two meetings of the board of directors of Rivkin were held on 7 February 2005 before that communication to Mr Davis was made. At the first meeting, Mr Ryan raised the issue of the directors' fiduciary obligations to shareholders and it was agreed by all directors that their decision to approve or reject the buy-back agreement with Davis Group must be consistent with those obligations. Mr Ryan advised the meeting he proposed to vote against Rivkin entering into the agreement in light of his assessment of the likely share price of Rivkin shares after the buy-back and the pricing level set for the Drillsearch shares that was below current market prices. It was noted that Drillsearch shares were trading at 6.6 cents and the consideration priced at 6.5 cents was $1,611,221, slightly higher than the buy-back consideration of $1,607,272 negating the need for Rivkin to pay an additional cash sum to Davis Group. 17 Mr Ryan advised that he would not vote against the proposal and would abstain from voting if the agreement allowed Rivkin to elect whether to provide Drillsearch shares or cash to Davis Group. The meeting considered the potential for Drillsearch shares to increase in value between the date of execution of the agreement and the date of the general meeting of shareholders to approve it. It was agreed that Mr Ryan contact Mr Buttula to ascertain his position if Rivkin was not able to reach agreement with Davis Group. 18 There followed the exchange of emails between Mr Ryan and Mr Buttula that were drawn to the attention of Mr Davis. At the second meeting of the board of directors of Rivkin on 7 February 2005, Mr Ryan reported on the exchange of emails. It was noted that unless Davis Group was to receive Drillsearch shares under its buy-back agreement, IWL would terminate its agreement to purchase Avcol Stockbroking from Rivkin and, accordingly, the Pinnacle buy-back agreement. It was resolved, with Mr Ryan dissenting, that subject to any minor drafting or technical changes the board approved the company entering into the Davis Group share buy-back agreement. Later that day Rivkin executed a facsimile copy of the buy-back agreement previously executed by Davis Group. 19 The Drillsearch share price remained reasonably static until about 21 February 2005 when the price started to climb. It reached 10.5 cents per share and closed at 9 cents on 8 March 2005. The independent expert's report of 9 March 2005 concluded that the resolutions to approve the disposal of the Avcol Stockbroking shares and the selective share buy-back agreements with Pinnacle, Network and Col Kablow were fair and reasonable but the selective share buy-back agreement with Davis Group, while reasonable, was not fair. 20 On 22 March 2005, Mr Snelgrove wrote to the solicitors for Rivkin proposing a compromise. It included a variation of the consideration for the Davis Group buy-back to $1,607,272.40 in cash. The offer was not accepted. 21 On 24 March 2005, Rivkin issued a notice convening a general meeting on Thursday 28 April 2005 together with an explanatory memorandum. The documents reported that the attached independent expert's report regarded the resolution with respect to the Davis Group share buy-back as not fair but reasonable. The documents stated that the majority of the board of Rivkin recommended that shareholders approve the Davis Group share buy-back if Drillsearch shares were trading at or below a volume weighted average price of 6.6 cents per share for the last five trading days before the general meeting. The documents also noted that Mr Ryan recommended that shareholders vote against the resolution. 22 Mr Davis wrote to the directors of Rivkin on 24 March 2005 stating that Davis Group regarded the selective share buy-back agreement as being at an end by rescission or termination. He stated that Davis Group would vote against the resolution for the sale of Avcol Stockbroking, against the resolution for the buy-back from Network and in favour of the resolution for the buy-back from Cole Kablow. 23 On 29 March 2005, Mr Davis wrote again stating that if the letter of 24 March 2005 did not bring about a termination of the buy-back agreement, it was then terminated for a fundamental breach of the agreement by Rivkin amounting to a repudiation of the agreement that Davis Group accepted. The letter went on to give particulars of breaches of cl 2.2 and cl 4.2 of the agreement. The contract claim 24 It was submitted on behalf of the Davis group that both cl 2.2 and cl 4.2 of the buy-back agreement were conditions the breach of which entitled it to terminate the contract. 25 While expressed to be a condition precedent, I do not regard cl 2.2 of the buy-back agreement as requiring the directors of Rivkin, in all circumstances, to urge shareholders to vote in favour of the resolution to approve the buy-back from Davis group. The condition precedent appeared in cl 2.1. The share buy-back agreement was conditional upon approval by special or unanimous resolution. The best endeavours to achieve that result required the directors to do all they reasonably could in the circumstances to achieve that contractual object, but no more. The extent of the obligation was governed by what was reasonable in the circumstances (Transfield Pty Ltd v Arlo International Ltd (1980) 144 CLR 83 at 100-101, Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 64-65, 91-92). 26 Clause 4.2 of the buy-back agreement stood in a different light for it was a promise by Rivkin that its directors agreed to recommend that the shareholders vote in favour of the buy-back from Davis Group. It was submitted on behalf of Rivkin that the clause was to be construed to allow for the possibility that the directors might be obliged to give a conditional recommendation in order to comply with their fiduciary and statutory duties. I reject that submission. 27 The directors were conscious of their statutory and fiduciary obligations at the time they considered authorising Rivkin to enter into the agreement. They considered the then price at which Drillsearch shares were trading and the likelihood of a rise in market value. The agreement was couched in terms that Rivkin bore the risk of an increase in the value of Drillsearch shares while Davis Group bore the risk of an increase in the traded price of Rivkin shares. 28 Clause 4.2 of the buy-back agreement was absolute in its terms. As Latham CJ said in Scanlan's New Neon Ltd v Tooheys Ltd (1942-1943) 67 CLR 169 at 200, if parties contract in such terms, they should be held to their bargain. If they wished the obligation to be conditional, they could have said so. In Global Network Services Pty Ltd v Legion Telecall Pty Ltd [2001] NSWCA 279, a provision of a contract provided that all call processing requests, with one exception, should be directed through Global's Psychic Call Centre. Meagher JA, with whom Beazley JA agreed, concluded that the clause was unambiguous, wide and comprehensive. He noted at [115]: "It will be noted that Legion's contractual obligation was to direct all requests to the appellant, not to use its best endeavours to do so, not to do so if and when other parties consented, not to do so if it thought it commercially sensible to do so, not to do so substantially." 29 Similar remarks may be made of cl 4.2 of the buy-back agreement. Rivkin bound its directors to support the buy-back, not to use their best endeavours to do so, not to do so if the Drillsearch shares did not rise in value, not to do so if they thought it commercially sensible to do so, not to do so substantially. 30 In the alternative, in was submitted on behalf of Rivkin that it was an implied term of the buy-back agreement that any obligation created by cl 4.2 was subject to Rivkin and each of the directors acting in the manner specified in Rivkin's constitution, that is, the directors acting by a majority of directors properly discharging their fiduciary and statutory duties. 31 A company's promise that its directors will act in a particular way will, no doubt, if not expressly stated, often be subject to an implied term that performance of the obligation is subject to the directors discharging their statutory and fiduciary duties. In this case, however, I am of the view that no such implication should be made. 32 When cl 4.2 was inserted into the buy-back agreement, so was a cl 5.3. It gave practical expression to an exception from obligation under cl 4.2 if to recommend in favour of the buy-back might render the directors liable to a breach of statutory or fiduciary duty because of an upward movement in the value of the Drillsearch shares. The Davis Group would not enter into the agreement if cl 5.3 remained. The directors of Rivkin were well aware of this and, having considered their statutory and fiduciary duties, by majority they resolved to cause Rivkin to enter into the agreement. To imply the term would be tantamount to limiting the obligation under cl 4.2 to circumstances in which the Drillsearch market value remained static, thereby re-introducing the object of the rejected cl 5.3. Nor does the implication sit comfortably with the absolute language in which cl 4.2 was couched. 33 The question whether a term in a contract is a condition, and essential, or a warranty, and non-essential, depends upon its importance to the promisee and the promisee's insistence upon the assurance of its strict performance gleaned from the nature of the contract as a whole. In Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641-642 Jordan CJ said: "The question whether a term in a contract is a condition or a warranty, ie, an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor." 34 It was submitted on behalf of Rivkin, that cl 4.2 of the buy-back agreement was not a condition. It was not contained within the other conditions in the contract and was merely a warranty, breach of which sounded only in damages (Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1986-1987) 162 CLR 549 at 556-557). Alternatively, it was submitted that cl 4.2 was an intermediate or innominate term, only a serious breach of which was capable of operating as a condition, and no serious breach had occurred (Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26, Ankar at 561-562). 35 It was submitted that the breach of cl 4.2 of the buy-back agreement was trivial because Mr Davis had recognised the unfairness to Rivkin shareholders of the increase in market value of the Drillsearch shares and the independent expert had said it was not fair. I do not understand that submission. If it is said that because the expert considered the Davis Group buy-back was unfair, shareholders were unlikely to approve it, all the more serious was the directors' failure to recommend its approval. 36 In my view, cl 4.2 goes to the root of the buy-back agreement. The purpose of the agreement was for Rivkin to buy back its shares from Davis Group for consideration. Because of the Corporations Act 2001 (Cth), s 257D(1), the agreement had to be conditional upon the approval of the shareholders. Unless the directors recommended shareholders vote in favour of the resolution, from a commercial point of view, they were unlikely to do so. The promise that the directors recommend that shareholders vote in favour was an essential requirement of the Davis Group. Without it, there was little prospect of receiving the consideration. I find that cl 4.2 of the buy-back agreement was a condition. 37 It was submitted on behalf of Rivkin that cl 4.2 of the buy-back agreement should not be construed to require an unconditional recommendation by the directors nor a unanimous recommendation. It was said that this result was only achieved by interpolating concepts of unanimity and unconditionality into the clause. I do not agree. 38 The natural meaning of cl 4.2 of the buy-back agreement was that the directors were to make a recommendation. There were four directors. If one of them recommended against the buy-back, the directors did not recommend it. What was required was a recommendation that shareholders vote in favour of the buy-back. There was no warrant for the directors adding a proviso to their recommendation. To recommend that shareholders vote in favour if the Drillsearch shares traded at a specified price, did not satisfy the obligation. Particularly was that so in the instant circumstances, where the prospective cl 5.3 was rejected as a term of the contract. 39 It was submitted on behalf of Rivkin that the notice of meeting did not infringe cl 4.2 of the buy-back agreement because Drillsearch shares might trade at an average price of 6.6 cents per share before 28 April 2005 and the shareholders might vote in favour of the resolution. But the obligation of the directors was not to cause the general meeting to approve the buy-back: the obligation was for them to recommend in favour of it. They failed to do so and their failure, in my view, entitled Davis Group to terminate the agreement, which it did. 40 On behalf of Davis Group, reliance was placed on Thorby v Goldberg (1964) 112 CLR 597 at 605 for the proposition that a board of directors can bind a company to a sale agreement notwithstanding a period of time must elapse before completion during which values might change and the proper time for the directors to consider their statutory and fiduciary obligations is the time when the company is to enter the transaction. It was submitted on behalf of Rivkin that Thorby stood in a special category because all the members of the company were in favour of the transaction. 41 It is unnecessary for me to deal with this issue because the mooted defence of unenforceability of cl 4.2 of the buy-back agreement was specifically withdrawn. 42 Davis Group will be entitled to damages for breach of contract if it suffers loss as a result of the failure of the directors of Rivkin to recommend that shareholders approve the buy-back of Rivkin shares. This issue is to be determined separately. Australian Securities and Investments Commission Act issues 43 In light of my finding that Davis Group validly terminated the buy-back agreement, it is unnecessary to consider whether the agreement should be declared void under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM. 44 The Australian Securities and Investments Commission Act 2001 (Cth), s 12DA(1) provided that a person must not, in trade or commerce, engage in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive. Davis Group claimed that cl 4.2 of the buy-back agreement constituted a representation that was misleading or deceptive. I agree with that submission. 45 Mr Davis relied on the representation in cl 4.2 when he caused Davis Group to execute the agreement. Subsequently, when told that Mr Ryan's view had apparently altered and Rivkin was to execute the agreement in the terms proposed by Davis Group, Mr Davis relied upon the representation and the executed agreement was forwarded to the solicitors for Rivkin. Yet, unknown to Mr Davis, Mr Ryan dissented from the resolution authorising the execution of the agreement by Rivkin and the other directors sought to add a condition to their recommendation. 46 On behalf of Rivkin it was submitted that exclusionary clauses in the buy-back agreement prevented Davis Group making a claim for damages under the Australian Securities and Investments Commission Act 2001 (Cth). 47 Clause 6.2(3) of the buy-back agreement provided that it was binding and enforceable. It was in the following terms: "ADG warrants that: … (3) this Agreement constitutes a legal, valid and binding obligation on ADG enforceable in accordance with its terms by appropriate legal remedy;" That does not, by its terms, exclude a claim under the Australian Securities and Investments Commission Act 2001 (Cth), s 12DA. 48 Clause 9.1 of the buy-back agreement provided that it was entire and superseded any prior agreement. It was in the following terms: "This Agreement : (1) constitutes the entire agreement and understanding between the parties on everything connected with the subject matter of this Agreement; and (2) supersedes any prior agreement or understanding on anything connected with that subject matter." Again, the provision does not exclude a claim under the Australian Securities and Investments Commission Act 2001 (Cth). 49 Clause 6.3(1) of the buy-back agreement provided that Davis Group acknowledged that it had, without any inducement, representation or warranty from Rivkin, determined to enter into the agreement. It provided: "ADG agrees and acknowledges that: (1) it has independently and without the benefit of any inducement, representation or warranty (other than the warranties in clause 6.1 of this Agreement) from the Company or its agents, determined to enter into this Agreement;" That provision does not exclude a provision of the agreement itself constituting a representation. The representations to which it is directed are outside the agreement. 50 Clause 6.3(2) of the buy-back agreement provided, to the extent permitted by law, for the exclusion of terms, conditions and warranties. It provided: "Subject to any law to the contrary and except as provided in the warranties in clause 6.1 of this Agreement, all terms, conditions, warranties and statements, whether express, implied, written, oral, collateral, statutory or otherwise, are excluded and the Company disclaims all liability in relation to these to the maximum extent permitted by law." That provision did not seek to exclude cl 4.2. It was directed to terms, conditions, warranties and statements outside the contract. 51 In any event, there is a difficulty in relying upon exclusionary provisions. As Burchett J pointed out in Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR ¶41-558 at 43717, it cannot be thought that the very agreement obtained by a misrepresentation, can be made good by incorporating in it a further misrepresentation, falsely asserting that it was not procured by the means that were in fact employed. 52 Again, the issue of damages under the Australian Securities and Investments Commission Act 2001 is to be determined separately. The voting issue – statutory exclusion 53 The Corporations Act 2001 (Cth), s 257D(1) contained an embargo against a person whose shares are proposed to be bought back from casting any vote in favour of the resolution of approval of that buy-back. Section 257H(1) contained a suspension of rights with respect to shares proposed to be bought back so long as an agreement to buy back the shares is in place. It was in the following terms: "Once a company has entered into an agreement to buy back shares, all rights attaching to the shares are suspended. The suspension is lifted if the agreement is terminated." 54 In light of my finding that Davis Group validly terminated the buy-back agreement, any suspension of voting rights with respect to its shares in Rivkin was lifted when that agreement was terminated. It follows that, prima facie, Davis Group is entitled to exercise all its voting rights at the general meeting, save that it may not vote in favour of the resolution to approve the buy-back agreement with it. 55 Since that agreement has been terminated, however, the resolution approving the agreement is meaningless and will, no doubt, lapse. 56 Because the Corporations Act 2001 (Cth), s 257H(1) suspended all voting rights, there was no need for the provision excluding the exercise of voting rights in favour of the resolution approving the buy-back of a person's shares in s 257D(1). 57 It was submitted on behalf of Davis Group that the suspension of rights in the Corporations Act 2001 (Cth), s 257H(1) was limited to the entry into an unconditional contract and a distinction was drawn between an agreement, meaning an unconditional agreement, and an offer, meaning a conditional agreement, to buy back. Thus under s 257E, a company was required to lodge with ASIC, before the buy-back agreement was entered into, a copy of a document setting out the terms of the offer and any document that was to accompany the offer. Section 257G required a company to include with the offer to buy back shares, a statement setting out all information known to the company that was material to the decision whether to accept the offer. Section 257F required a company to satisfy lodgement requirements, if the buy-back agreement was conditional, within 14 days of the resolution being passed and, in any other case, when the agreement was entered into. This, it was submitted, pointed to a distinction between an unconditional agreement on the one hand, and a conditional agreement or offer on the other. 58 Support for the view that the suspension to which the Corporations Act 2001 (Cth), s 257H relates is limited to unconditional agreements, is to be found in Ford, Austin and Ramsay, Ford's Principles of Corporations Law, Butterworths, Australia, 2000 at [24.442]. 59 In view of my findings, it is unnecessary for me to resolve this issue. I was invited, nonetheless, to express my views. I decline to do so. The issue is an important one, better considered by direct decision rather than by an obiter dictum. The voting issue – listing rules exclusion 60 Rivikin's constitution required it to comply with the ASX listing rules. That constitution had effect as a contract between Rivkin and Davis Group as a shareholder in terms of the Corporations Act 2001 (Cth), s 140(1)(a). 61 Listing rule 10.1.4, as it applied to Rivkin, required it to ensure that it did not dispose of a substantial asset to an associate of a substantial holder without the approval of its ordinary shareholders. 62 Resolution 2 at the forthcoming general meeting is to approve the sale by Rivkin of all the issued capital of Avcol Stockbroking to IWL. Rivkin's shareholding in Avcol Stockbroking is a substantial asset as that term is defined in the listing rule 10.2. Pinnacle has a substantial holding in Rivkin as that term is defined in the Corporations Act 2001 (Cth), s 9. IWL is an associate of Pinnacle as that term is defined in s 10 to s 17. Thus, Rivkin is obliged to ensure that its disposal of the shares in Avcol Stockbroking is approved by its shareholders. 63 Listing rule 10.10.1 required a notice of meeting under rule 10.1 to include a voting exclusion statement. Rule 14.11, as it applied to Rivkin, required the notice for the forthcoming general meeting to contain a statement that Rivkin will disregard any votes cast on a resolution by a party to the transaction and an associate of that person. 64 IWL is a party to the transaction contemplated by resolution 2. It was argued on behalf of Rivkin that Davis Group was its associate. That term was not defined in the listing rules. A note to rule 14.11 said that its interpretation was to be found in the Corporations Act 2001 (Cth), s 11 and s 13 to s 17. Section 15(1)(a) provided that the associate reference included a reference to a person in concert with whom the primary person was acting or proposed to act. 65 It was argued on behalf of Rivkin that since Mr Buttula of IWL negotiated the buy-back agreements that, while not interdependent, were in similar terms, Davis Group had acted in concert with IWL. 66 To the contrary, it was submitted in Davis Group's behalf that Mr Davis's independent negotiations and his public statements that he would vote against resolution 2 denied acting in concert. 67 A concert is an agreement, arrangement or understanding. Acting in concert means little more than engaged in a concert. It is not necessary for a person to be doing any physical or overt act to be acting in concert (Industrial Equity Ltd v Commissioner for Corporate Affairs (1990) VR 780 at 784-785). What is involved is a common understanding or arrangement as to a common purpose (IPT Systesm Ltd v MTIC Corporate Pty Ltd (2000) 158 FLR 349 at 355-356). 68 While there was a degree of independence exercised by Davis Group, the fact remains that the principle for share buy-backs for consideration and the general structure of the buy-back agreement with respect to Davis Group was negotiated by Mr Buttula with the knowledge and consent of Mr Davis. They had the purpose of Rivkin entering into a number of buy-back agreements for its shares in similar terms. That was their common goal. IWL would not proceed with its purchase of the Avcol Stockbroking shares or the buy-back from Pinnacle unless Rivkin honoured its agreement with Davis Group. 69 The public statement that Davis Group intends to vote against resolution 2 is not to the point. Parties who have acted in concert may fall out or one party may change its mind. A subsequent stance does not affect the proper construction of antecedent events. 70 In my view, IWL and Davis Group were acting in concert and Davis Group is an associate of IWL for the purpose of the voting exclusion statement in relation to resolution 2 under listing rule 14.11. 71 I have not been referred to any provision of the listing rules that excludes a person named in a voting exclusion statement or its associates from casting a vote. The implication is that such persons are excluded. I am of the view that the chairman of the forthcoming meeting is entitled to refuse to receive any vote by Davis Group on resolution 2. 72 Resolution 3 at the proposed general meeting is to approve the selective buy-back and cancellation of Rivkin shares held by Pinnacle. Resolutions 2 and 3 are interdependent because part of the consideration for the cancellation of the Rivkin shares is the transfer of the share capital of Avcol Stockbroking. It follows that similar considerations apply to that resolution as they do to resolution 2. 73 In my view, for the reasons already given, since resolution 3 involves the disposal of a substantial asset by Rivkin, it also requires approval by the shareholders of Rivkin with respect to which a voting exclusion statement was needed and in conformity with which the chairman of the meeting may act. Conclusion 74 Davis Group is entitled to a declaration that the share buy-back agreement between it and Rivkin of 7 February 2005 was validly terminated. It does not need any alternative order under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM that the agreement be declared void. 75 Davis Group is not entitled to a declaration that it is entitled to vote at the forthcoming general meeting, or that on the proper construction of the Corporations Act 2001 (Cth) s 257H it is entitled to vote at that meeting on all matters other than in favour of the resolution to approve the buy-back of its shares in Rivkin. Nor is it entitled to an order that Rivkin be restrained from disregarding, or not counting, as valid votes at that general meeting, such votes as may be cast by it as the holder of ordinary shares in Rivkin. 76 Davis Group may be entitled to damages for breach of contract and damages under the Australian Securities and Investments Commission Act 2001 (Cth), s 12GM. Those are matters to be determined separately. I would have thought that the appropriate course is to refer those issues to a Master for investigation and determination. 77 I will hear the parties on the appropriate terms of orders and on costs. I direct the parties to bring in short minutes of orders reflecting these reasons. ********** 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.