Reported Decision : 62 ACSR 522 (2007) 25 ACLC 796 New South Wales Supreme Court CITATION : Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 371 HEARING DATE(S) : 18/04/07 JUDGMENT DATE : 20 April 2007 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Declaratory relief and specific performance granted CATCHWORDS : CONTRACTS - general contractual principles - construction and interpretation - deed between shareholder in company and prospective bidder under off-market bid - covenant by shareholder to accept prospective bidder's bid - exception if "higher offer is made" - where target company and prospective competing acquirer announce intention to promote scheme of arrangement - whether any "offer ... made" - CORPORATIONS - takeovers - whether existence of prior deed caused offers under the off-market bid to offend s.619 or s.627 - EQUITY - equitable remedies - specific performance - contract relating to shares quoted on stock exchange - where bidder seeks all shares by off-market bid - preliminary contract to secure strategic parcel - whether damages adequate remedy for breach LEGISLATION CITED : Companies Act 1962 (SA), Part VIB Corporations Act 2001 (Cth), Part 5.1, Chapter 6, ss.411(1), 411(4), 611, 616, 618(1)(a), 619(1), 627, 631, 664A, 670E Attorney General v Australian Fixed Trusts Ltd [1974] 1 NSWLR 110 Attorney General v The Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 162 Australian Softwood Forests Pty Ltd v Attorney General (1981) 148 CLR 121 Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256 Duncuft v Albrecht (1841) 12 Sim 189 Glynn v Margetson & Co [1893] AC 351 Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 318 CASES CITED : McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 Quadrant Visual Communications Ltd v Hutchison Telephone (UK) Ltd [1993] BCLC 442 Re Equinox Resources Ltd (2004) 49 ACSR 692 Re National Bank Ltd [1966] 1 WLR 819 Re The Bank of Adelaide (1979) 22 SASR 481 Re Wallace Dairy Co Pty Ltd (1980) 5 ACLR 139 Rudder v George Hudson Holdings Ltd [1972] 1 NSWLR 529 Zhu v Treasurer of New South Wales (2004) 218 CLR 530 PARTIES : Lionsgate Australia Pty Limited - Plaintiff Macquarie Private Portfolio Management Ltd - Defendant FILE NUMBER(S) : SC 2102/07 COUNSEL : Mr A.J. Sullivan QC - Plaintiff Mr M.J. Leeming SC/Mr C.H. Withers - Defendant SOLICITORS : Piper Alderman - Plaintiff Chang Pistilli & Simmons - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J FRIDAY, 20 APRIL 2007 2102/07 LIONSGATE AUSTRALIA PTY LTD v MACQUARIE PRIVATE PORTFOLIO MANAGEMENT LTD JUDGMENT 1 Before me for decision in the first instance are questions of construction that have arisen in relation to a deed dated 1 February 2007 and made between the plaintiff ("Lionsgate") and the defendant ("Macquarie"). The questions arise in a specific performance suit brought by Lionsgate against Macquarie in respect of the deed. 2 The context in which the deed of 1 February 2007 was made appears from its recitals: "A. Bidder [that is, Lionsgate] intends to make a takeover bid to acquire all the issued ordinary shares held by Offeree [that is, Macquarie] in Magna Pacific (Holdings) Limited. B. Offeree holds shares in Magna Pacific (Holdings) Limited. C. The Offeree has agreed to accept the offer made to it under such takeover bid if the offer is made." 3 The shares held by Macquarie, as referred to in recital B, represented (and continue to represent) about 11.23% of the total issued share capital of Magna Pacific (Holdings) Limited ("Magna"). Macquarie's holding was (and is) the largest single holding, other than that of a nominee company holding for several principals. Shares in Magna are, and have been at all material times, listed for quotation on and traded through the stock market maintained by Australian Stock Exchange Ltd ("ASX"). 4 The provision of the deed to which the parties' dispute relates is clause 5 (in which Lionsgate is referred to as "Bidder", Macquarie is referred to as "Offeree" and Magna is referred to as "Target"): " 5. Undertakings to accept the Offer 5.1 Offeree undertakes (Undertaking) that: (a) Offeree shall accept the Offer or Offers (if any) made to it in respect of the Offeree Shares in accordance with the procedure for acceptance set out in the Bidder's Statement and/or Offer not later than five Business Days after Offeror posts the Bidder's Statement to Offeree and other shareholders of Target, provided that the Offer price per ordinary share is not less than 32 cents; (b) Offeree shall not withdraw its acceptance of the Offer. (c) upon acceptance, Bidder shall acquire the Offeree Shares from Offeree free of any mortgage, lien, charge, option, equity or adverse interest or encumbrances and together with all rights of any nature attaching to the Offeree Shares (including the right to all dividends declared or paid after the date of this deed); and (d) Offeree shall not acquire a relevant interest in any further ordinary shares in Target. 5.2 Offeree agrees that, if Offeree fails to accept the Offer in accordance with the Undertaking or breaches any of Offeree's obligations, damages would not be an adequate remedy and accordingly Bidder shall be entitled to the remedy of specific performance. 5.3 The Undertaking shall lapse and Offeree shall not be obliged to accept the Offer or Offers made to it if: (a) an announcement of the Takeover Bid is not made, or the Bidder's Statement is not lodged, within two months of the date of this deed; (b) the Offers lapse or are withdrawn; (c) any condition of the Offer becomes incapable of being fulfilled and such condition is not waived by Bidder; (d) a higher offer is made for all of the ordinary shares issued by Target and such offer is made by a party not associated with the Bidder ( Competing Bidder ) and Bidder does not announce an increase in its Offers to a price per share not less than the Competing Bidder, in which case, Offeree shall have no claim against Bidder whether for expenses, lost opportunity or otherwise." 5 This provision employs certain definitions found in clause 1: "'Bidder's Statement' means the bidder's statement in accordance with Chapter 6 of the Corporations Act to be issued by Bidder in relation to the Takeover Bid." "'Business Day' means any day except a Saturday or a Sunday or other public holiday in Sydney, Australia." "'Offers' means the takeover offers to be made by Bidder to acquire all of the ordinary shares in Target including the Offeree Shares held by Offeree and including any new, increased, renewed or revised offers made by or on behalf of Bidder on no less favourable terms." "'Target' means Magna Pacific (Holdings) Limited." 6 There is also a definition of "Takeover Bid" which, in conjunction with the definition of "Bidder's Statement", makes it clear that the mechanism in contemplation is an off-market bid within the meaning of Chapter 6 of the Corporations Act 2001 (Cth). 7 The effect of clause 5 of the deed is reinforced by clause 4. It provides that, until Lionsgate's takeover offers close, lapse or are withdrawn, Macquarie will not deal with its shares otherwise than by accepting Lionsgate's offer. 8 I am called upon to construe clause 5 (and, in particular, clause 5.3(d)) in light of the circumstance that, shortly after Lionsgate had despatched to the Magna shareholders (including Macquarie) its bidder's statement containing takeover offers at 32 cents per share, destra Corporation Limited ("DCL") delivered to ASX a document described as "ASX Announcement" and headed "destra Corporation to acquire Magna Pacific Holdings via Scheme of Arrangement". I shall refer to that document as "the DCL announcement". 9 The DCL announcement was delivered to ASX on 30 March 2007, the date it bears. The message it conveyed may be gathered from the opening paragraph: "destra Corporation Limited ( destra ) (ASX-DES) and Magna Pacific Holdings ( Magna ) (ASX-MPH) today announced their intention to implement a scheme of arrangement ( Scheme ) under which destra will acquire all of the issued capital in Magna. Destra will grow with this transaction to become the largest non-studio film, video and music content company in Australia and New Zealand." 10 The DCL announcement then referred to a per share consideration of 38 cents cash or one fully paid DCL share plus 15 cents cash, at the election of each Magna shareholder. 11 It may be presumed from the surrounding circumstances that DCL lodged the DCL announcement with ASX in the knowledge and with the intention that its content would be disseminated by ASX through the channels provided by its Company Announcement Platform and would thereby become generally available – and that this in fact happened. 12 On 13 April 2007, DCL and Magna delivered another announcement to ASX stating that their intentions, as announced on 30 March 2007, "are currently reflected in a Heads of Agreement executed by the parties on 30 March 2007, a copy of which is attached". The heads of agreement serves to confirm the several matters contained in the DCL announcement. 13 Lionsgate was represented before me by Mr A.J. Sullivan QC. He submitted that delivery of the DCL announcement to ASX did not in any way affect Macquarie's obligations under clause 5.1 of the deed. He further submitted that Macquarie should be compelled to perform its clause 5.1(a) promise. Macquarie, for which Mr M.J. Leeming SC and Mr C.H. Withers of counsel appeared, contends, however, that that event caused clause 5.3(d) to negate the obligations imposed by clause 5.1. 14 Before dealing with the questions of construction that arise in relation to the deed of 1 February 2007, I should say more about Lionsgate's bidder's statement. It is common ground that that document was posted to some of Magna's shareholders on Friday 23 March 2007 and to the other shareholders on Monday 26 March 2007. The document so posted was in fact a replacement bidder's statement, but the first version was never despatched. As well as providing relevant information and disclosure, the bidder's statement set out, in Section 7, "the terms of Lionsgate Australia's offer to buy Your Shares", that is, the Magna shares held by each Magna shareholder at 9am on 14 March 2007 and any shares to which the offers extended pursuant to specified provision. The point of relevance here is that an offer on the Section 7 terms was made to every shareholder in respect of the whole of the shareholder's shares. It is necessary to quote certain of the provisions of Section 7: "7.1.1 This is an Offer for all the Shares which exist, or will exist, the day after the date of the Bidder's Statement, namely 14 March 2007. Lionsgate Australia offers to acquire all your Shares together with any Rights, for $0.32 cash per Share (including the Rights) subject to the terms and conditions set out in this Offer. 7.1.2 You may only accept this Offer for all of Your Shares. … 7.5.1 By signing and returning the Acceptance Form to accept this Offer you will have: (a) accepted this Offer for all of Your Shares, regardless of the number of Shares specified in the Acceptance Form (subject to this section 7.5)), and the Rights; (b) agreed to transfer all of Your Shares to Lionsgate Australia, subject to this Offer and the Takeover Contract becoming unconditional; (c) irrevocably authorised Lionsgate Australia to complete your Acceptance Form by rectifying any errors in or omissions from it as may be necessary to make it an effectual acceptance of this Offer or to enable registration of the transfer of Your Shares to Lionsgate Australia or its nominee and, in particular, if you sign and return the Acceptance Form, but have indicated a number of Shares which is more or less than the number you actually hold, you irrevocably authorise Lionsgate Australia to complete or amend your Acceptance Form to be an acceptance for all Your Shares; (d) represented and warranted to Lionsgate Australia that: (1) Your Shares will at the time of transfer to Lionsgate Australia or its nominee be fully paid up and Lionsgate Australia or its nominee will acquire good legal title to them and Lionsgate Australia will acquire full beneficial ownership of them, in each case free from all mortgages, charges, liens, encumbrances (whether legal or equitable) and restrictions on transfer of any kind, and that you have full power and authority to sell and transfer all of Your Shares; … (e) appointed Lionsgate Australia (and any director, secretary or nominee of Lionsgate Australia) severally from time to time as your attorney to: (1) exercise all your powers and rights attaching to or arising from the holding of Your Shares and to receive all Rights in respect of Your Shares, including to perform any act, and to execute and deliver all forms, notices and instruments which relate to Your Shares (including without limitation documents to transfer Your Shares to Lionsgate Australia or its nominee, to change the registered address of your holding to a registered address care of Lionsgate Australia, to notify Magna Pacific that dividends in respect of Your Shares should be paid into a bank account nominated by Lionsgate Australia, to endorse any cheques in respect of Your Shares so that the cheques are payable to Lionsgate Australia or its nominee and to appoint a director of Lionsgate Australia as a proxy in respect of Your Shares); … from the date the Takeover Contract becomes unconditional until …; (g) agreed not to attend or vote in person at any general or other meetings of Magna Pacific or to exercise or purport to exercise any of the powers conferred on Lionsgate Australia or its nominee in section 7.5.1(e); … 7.6.3 If you accept this Offer, Lionsgate Australia is entitled to all Rights in respect of Your Shares. Lionsgate Australia may require you to provide all documents necessary to vest legal and beneficial title to those Rights in Lionsgate Australia, or otherwise to give it the legal and beneficial benefit or value of those Rights. If Lionsgate Australia has not received those Rights, or otherwise had the benefit or value of those Rights, at the time it provides the consideration to you, Lionsgate Australia will be entitled to deduct the amount (or value, as reasonably assessed by Lionsgate Australia) of such Rights from the consideration otherwise due to you. … 7.7.1 Conditions of this Offer Subject to section 7.7.2 and section 7.7.4, this Offer and any Takeover Contract are each conditional on the following (to the extent the relevant matter is not within the sole control of or is a direct result of action by Lionsgate Australia and/or its associates): [Conditions (a) to (p) follow] … 7.7.2 The nature of the conditions (a) Each condition in section 7.7.1(a) to section 7.7.1(p) inclusive constitutes and shall be construed as a separate, several and distinct condition. (b) The conditions in section 7.7.1(a) to section 7.7.1(p) inclusive are conditions subsequent to the Takeover Contract. The non-fulfilment of such conditions subsequent does not prevent a Takeover Contract to sell Your Shares to Lionsgate Australia being formed as a result of you accepting this Offer, but entitles Lionsgate Australia, by written notice to you, to rescind the Takeover Contract resulting from your acceptance of this Offer. (c) If, at the end of the Offer Period: (1) any of the conditions in section 7.7.1 (other than section 7.7.(b)) is not fulfilled; and (2) Lionsgate Australia has not declared this Offer and the Takeover Contracts free from that condition at least seven days before the end of the Offer Period, the Takeover Contracts are automatically void. (d) If: (1) The condition in section 7.7.1(b) is not fulfilled at the end of the Offer Period; and (2) Lionsgate Australia has not declared this Offer and the Takeover Contracts free from that condition not later than three Business Days after the end of the Offer Period, the Takeover Contracts are automatically void." 15 These provisions employ a number of definitions. I think that the only definitions that need be quoted are those of "Rights" and "Takeover Contract": "'Rights' means all accretions, rights or benefits of whatever kind, and whether arising before or after the acceptance of the Offer, attaching to or arising from the Shares directly or indirectly on or after the commencement of the Bid Period (including, but without limiting the generality of the foregoing, all rights to receive distributions and to receive or subscribe for shares, notes, options or other securities declared, paid or issued in relation to Magna Pacific)." "'Takeover Contract' means a contract that results from the acceptance of an Offer made under the Takeover Bid." 16 A particular matter to be mentioned is that one of the conditions in clause 7.1.1 – that IN paragraph (f) – was a minimum acceptance condition to the effect that, at the end of the offer period, Lionsgate have a relevant interest in more than 50% of the shares in Magna. On 16 April 2007, Lionsgate extended the offer period (so that it is now to close on 17 May 2007) and declared the offers and the takeover contracts to be free from all the clause 7.1.1 conditions, including the minimum acceptance condition in clause 7.1.1(f). 17 The section of the bidder's statement containing information, as distinct from offer terms, included the following: "The largest shareholder in Magna Pacific has agreed to accept the Offer: - Macquarie has agreed to accept the Offer in respect of its 11.23% interest; and ­- in the opinion of Lionsgate Australia, Macquarie's agreement to accept the Offer is testament to the strength of the Offer and, to Lionsgate Australia, suggests a lack of confidence in current management's ability to improve shareholder returns." "Reasons why you should accept this offer … 3 The largest shareholder in Magna Pacific has agreed to accept the Offer …" The same point is made in other places. 18 I return now to clause 5 of the deed of 1 February 2007. The effect of clause 5, taken as a whole, must be that the obligation to which Macquarie is subjected by clause 5.1(a) will be negated by clause 5.3(d) if an event described in clause 5.3(d) has occurred before the deadline fixed by clause 5.1(a), that is, on or before the fifth business day after the posting of Lionsgate's bidder's statement (and offer) to Macquarie and the other Magna shareholders. 19 As I have said, Lionsgate's bidder's statement was posted to some shareholders on Friday 23 March 2007 and to the others on Monday 26 March 2007. The DCL announcement was delivered to ASX and released by ASX to the market on Friday 30 March 2007, that is, on the fifth business day after the earlier of the posting dates and the fourth business day after the later of the posting dates. If the actions of 30 March 2007 in relation to the DCL announcement were actions described by clause 5.3(d), it will follow that an event specified in clause 5.3(b) occurred within the period referred to in the clause and that Macquarie was thereby freed from the clause 5.1(a) obligation. But if those actions were not within the clause 5.3(d) description, the clause 5.1(a) obligation was not affected and still binds Macquarie. 20 The central question is therefore whether an "offer [was] made for all of the ordinary shares issued by" Magna, as contemplated by clause 5.3(d) when, on 30 March 2007, DCL delivered the DCL announcement to ASX and its content was released to the market. If such an "offer" was thereby "made", it was, clearly enough, a "higher" offer because of the reference to a cash consideration of 38 cents compared with Lionsgate's 32 cents. 21 If the words "offer" and "made" were to be understood in their strict contractual sense, delivery of the DCL announcement to ASX in the circumstances described could not possibly entail the making of an offer – even an offer capable of being acted upon by the world at large or the section of the world capable of performing the obligations that acceptance would bring into existence: cf Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. This is because, according to its terms and having regard to its nature, the communication was not one making it possible for any person to perform some act amounting to acceptance so as to give rise to a contract in accordance with traditional approaches to contract formation. The DCL announcement communicated nothing capable of being accepted or rejected by anyone. 22 It was accepted by Mr Leeming on behalf of Macquarie that DCL has not made a contractual offer capable of acceptance so as to give rise to a contract. As Mr Leeming pointed out, however, the word "offer" is sometimes used otherwise than in its strict contractual sense. What is, in contractual terms, an invitation to make an offer may, in some contexts, be viewed as an offer: Attorney General v The Mutual Home Loans Fund of Australia Ltd [1971] 2 NSWLR 162; Australian Softwood Forests Pty Ltd v Attorney General (1981) 148 CLR 121. The word "offer" may also refer to solicitation to enter into a course of negotiations calculated to result in a contractual relationship between the person soliciting and the person solicited: Attorney General v Australian Fixed Trusts Ltd [1974] 1 NSWLR 110. In contexts of these kinds – contexts, it must be noted, involving steps on the way to contract formation – an "offer" would be regarded as "made" by communication of the relevant invitation or other solicitation to the person intended by the initiator to act upon or respond to it. 23 The DCL announcement was not addressed to shareholders of Magna. It was addressed to ASX and delivered to ASX in a way calculated to ensure that its content should become widely known. The DCL announcement referred to an intention, being the intention of both DCL and Magna, "to implement a scheme of arrangement ('Scheme') under which [DCL] will acquire all of the issued capital of Magna". The DCL announcement also said: "Under the Scheme, [DCL] will acquire all of the issued ordinary shares in Magna …" 24 Among several "conditions precedent" to which "[i]mplementation of the scheme" was said to be subject is: "execution of a Merger Implementation Agreement acceptable to [DCL] and Magna". 25 It was thus made clear by DCL in the DCL announcement that the objective it had in view (acquisition of all the issued shares in Magna), if achieved at all, would be achieved by means of a scheme of arrangement under Part 5.1 of the Corporations Act and a "merger implementation agreement" between DCL and Magna. It is possible to infer from this and from the heads of agreement released on 13 April 2007 (and I do infer) that the envisaged methodology entails a combination of stipulations made binding on and in favour of Magna's shareholders pursuant to Part 5.1 (being, of necessity and having regard to s.411(4), stipulations operative between Magna itself and each and all of its shareholders) and stipulations made binding as between DCL and Magna by a contract to which those two companies are parties. 26 Having regard to the form that arrangements of this kind have typically taken in recent years, the likelihood is that, by force of the scheme of arrangement and Part 5.1, Magna would be invested with the authority of each of its shareholders to transfer the shareholder's Magna shares to DCL and, by force of the contract between DCL and Magna (supplemented, perhaps, by deed poll or deposit arrangement for ensuring payment), DCL would be obliged to provide to Magna's shareholders (either directly or via Magna) the envisaged compensation or consideration for the shares transferred by Magna, as their agent, to DCL. 27 The underlying concept is thus not that each Magna shareholder will be given an opportunity to sell the shareholder's shares. Rather, each shareholder will be given an opportunity to vote for or against (or to abstain or refrain from voting on) a resolution intended to be placed before shareholders at a meeting of shareholders convened in accordance with an order that a court of competent jurisdiction will be asked to make under s.411(1). An individual shareholder's response to that opportunity will not of itself determine the fate of that shareholder's shares. One of two results will ultimately emerge: either every shareholder will retain the whole of the shareholder's shares or every shareholder will, whether the shareholder likes it or not, see the whole of the shareholder's shares transferred to DCL, in which event every shareholder will receive consideration or compensation provided by DCL. Assuming eventual court approval of the arrangement under s.411(4)(b), a particular shareholder will become subject to one of these two eventualities in respect of the shareholder's shares; and this will be so whether the shareholder votes for the resolution, votes against the resolution or does not vote at all on the resolution. 28 If the matter is looked at in terms of solicitation of persons holding Magna shares, the most that will occur is that Magna and its directors, acting in concert with DCL, will solicit shareholders' support for the proposed Part 5.1 arrangement by means of the casting of positive votes at the meeting of Magna's shareholders. DCL may itself actively solicit Magna's shareholders to cast positive votes. If the resolution is passed by the requisite majority and the court approves the arrangement by order made under s.411(4)(b), each shareholder of Magna will, through the agency of Magna, transfer the shareholder's shares to DCL. But such a transfer will not represent an exercise of the will of the particular shareholder that the shares be transferred. It will occur because of the binding force upon both the shareholder and Magna produced through Part 5.1. 29 The circumstances envisaged by the DCL announcement are such that Magna, no doubt at the prompting of and in conjunction with DCL, will propose to its members what is intended to be done, but it will be for the members to say whether they will confer the power on Magna to do what is foreshadowed. The form of words I have just employed corresponds with that used by Wells J in Re The Bank of Adelaide (1979) 22 SASR 481 at p.509 to describe a similar process embarked upon by the Bank of Adelaide qua its members in relation to a scheme of arrangement involving cancellation of all existing shares by reduction of capital, issue of equivalent new shares to the ANZ Bank and provision by ANZ of consideration to the former holders of the cancelled shares. It was held by a majority of the Full Court of the Supreme Court of South Australia in that case that such a scheme of arrangement did not entail either an offer to acquire shares or an invitation to offer to dispose of shares caught by Part VIB of the Companies Act 1962 (SA). Reference may also be made to the following observation of Jenkinson J in the analogous case of Re Wallace Dairy Co Pty Ltd (1980) 5 ACLR 139 (at p.143): "… to invite the holder of shares to cast a vote at a meeting of the company for a resolution that those shares and other shares of the same class be cancelled is not in my opinion to invite the holder to offer to dispose of shares …". 30 According to the same reasoning, to invite the Magna shareholders as a body and each shareholder individually to cast a vote at a meeting of Magna shareholders in favour of a motion for the approval of a scheme of arrangement between Magna and its members of the kind I have outlined (entailing the creation of compulsion for all members to suffer transfer of their shares by Magna as their agent) does not involve any offer, whether "for all the ordinary shares issued by" Magna or of any other kind. 31 But all these matters lie in the future. And, more significantly, they lay in the future on 30 March 2007. This is an important point. The question posed by clause 5.3(b) of the deed is whether an "offer" was "made for all of the ordinary shares issued by" Magna when, on 30 March 2007, DCL delivered the DCL announcement to ASX and its content was disseminated. It is the immediate and contemporary impact of the DCL announcement on 30 March 2007 that must be considered. 32 The clear message that came from the DCL announcement on 30 March 2007 was that DCL and Magna had formed and held a common intention as to future action. Persons becoming aware of the content of the DCL announcement would have been justified in thinking that DCL and Magna held the stated intention. But no other message could have been derived from the DCL announcement. There was no message of solicitation. There was no request or invitation to embark upon any particular course of action. As I have said, there was nothing to be accepted or rejected. Delivery and dissemination of the DCL announcement on 30 March 2007 did not create any avenue for disposal of shares by Magna shareholders. Nor did it create any avenue for the acquisition of Magna shares by DCL. There was nothing that a Magna shareholder or anyone else could (or was expected) to do in response to the DCL announcement. 33 It is submitted on behalf of Macquarie that, despite the character of the DCL proposal being as I have described, it is still an "offer" – and, of course, a "higher offer" as referred to in clause 5.3(d). Macquarie points to a statement of Magna's CEO, of which the market has been informed, that he "proposes to accept the offer of one destra fully paid ordinary share and 15 cents cash in exchange for one Magna share". Macquarie here resorts to what is said to be the market's understanding. When I asked Mr Leeming what the CEO would do to accept the "offer" from DCL, he said that he would exercise a positive vote at the scheme meeting. 34 Mr Leeming also referred to recognition in case law and ASIC statements of the reality that both Chapter 6 takeover bid and part 5.1 arrangement may achieve takeover of a company, with neither method having dominance over the other: see, for example, Re Equinox Resources Ltd (2004) 49 ACSR 692 at p.695 and cases there cited; and ASIC Policy Statement No 60. It is pointed out that this ASIC publication uses the language of "offer" in relation to Part 5.1 arrangements. I note that in paragraph 15 there is reference to "the 'offeror' company (ie the company whose shares are offered as consideration)". 35 Submissions on behalf of Macquarie also refer to ASIC Policy Statement 188 paragraph 5 of which reads: "An invitation to vote at a reconstruction or capital reduction meeting on the issue or transfer of securities constitutes an offer for the purposes of Ch 6D." 36 Chapter 6D imposes disclosure rules and proscribes certain forms of conduct unless disclosure has been made in accordance with those rules. One of the relevant forms of conduct is the offering of securities for subscription – the activity that was held to warrant an extended meaning of "offer" in Attorney General v The Mutual Home Loans Fund of Australia Ltd (above) and Australian Softwood Forests Pty Ltd v Attorney General (above). 37 These ASIC pronouncements – or, perhaps more accurately, passing observations – are of no assistance in the present case. Policy Statement 60 is concerned with Part 5.1 schemes by which takeovers are achieved. That it may, in places, equate the acquiring company under such an arrangement with an "offeror" can be no more than resort to analogy or metaphor. Policy Statement 188 is concerned with a different context (involving solicitation of essentially contractual behaviour) in which "offer" has long been recognised as having an extended meaning (see the cases mentioned at paragraph [22] above). 38 It cannot be doubted that a Part 5.1 arrangement can achieve the same outcome as offers to buy made to all shareholders. That has been clear at least since Re National Bank Ltd [1966] 1 WLR 819. But the availability of the alternatives does not mean that a Part 5.1 arrangement is an offer or that any element of it or step in it constitutes the making of an offer. As Mr Sullivan said, one can travel to Parramatta by car or by train. But that does not make a train a car or a car a train. The two modes of proceeding are quite distinct despite their capacity to produce the same result. 39 Both parties emphasise that a commercial document such as the deed now before me must be construed so as to avoid making commercial nonsense or working commercial inconvenience: Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at p.559. It must be approached in a commercial way and given what Gleeson CJ, in McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at p.589, called "a businesslike interpretation". His Honour also said (at p.589): "Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure." 40 I have already dealt with the language used by the parties. But I should refer briefly to the commercial circumstances and the intended objectives, in so far as they are discernible. 41 When the deed of 1 February 2007 was made, Macquarie held a parcel of shares in Magna which, as I have said, represented 11.23% of the issued share capital of Magna and was the largest single shareholding. Lionsgate proposed to initiate a Chapter 6 takeover bid at 32 cents per share in relation to all shares in Magna. An 11.23% parcel was of particular significance both because of the ability of its holder to block compulsory acquisition under s.664A of the Corporations Act and by reason of the voting strength attached to it (something that will be of particular significance if the proposal the subject of the DCL announcement is progressed). Macquarie, by entering into the deed, committed itself to accept Lionsgate's bid for the 11.23% strategic stake and to do so within the first five business days of the bid period. It was recognised by the parties that Lionsgate might be out-bid and might not wish to match or better the competing bid. It was accepted that, if and to the extent that it became possible for Macquarie to take advantage of any more favourable offer made before the agreed deadline for its acceptance of Liongate's bid, then Macquarie should be free to do so. Otherwise, Macquarie was to honour its commitment to Lionsgate. 42 The intended objectives were, it seems to me, to ensure that Macquarie accepted Lionsgate's bid promptly in order to get that bid off to a strong start and to enable Lionsgate to represent itself as having a commitment to that effect from Macquarie, but with Macquarie preserving its ability to choose some alternative method of disposal more favourable to it should that alternative become available to be taken up by Macquarie before the contracted deadline for acceptance of the Lionsgate bid. It cannot have been part of the parties' objectives to allow Macquarie to retain its shares and reserve its decision-making with respect to them to some future time because of the emergence of some possibility that a combination of a vote of Magna shareholders and court approval might at some stage subject Macquarie's shares, along with those of all other shareholders, to a regime of compulsory disposition. 43 The parties are apparently sophisticated commercial operators. They (or, at least, their legal and investment banking advisers) may be taken to be aware of the various mechanisms available to complete transactions in the market for corporate control, including transactions which see the whole of the issued share capital of a target company come to be owned by a single entity. They could have framed clause 5.3(d) in a way that clearly comprehended all such mechanisms, including, for example, "off-market bid" and "market bid" as referred to in s.616, acquisition approved as mentioned in Item 7 of s.611 and acquisition by Part 5.1 arrangement as referred to in Item 17 of s.611. They could also have used words referring to the announcement of a proposal or the notification of an intention, both of which are concepts expressly recognised by the statutory provisions in the context of which the parties struck their bargain: see, for example, ss.631 and 670E. Instead, the parties chose to use a form of words embodying the particular and specific concept of the making of an offer. 44 Having regard to the commercial context and the objectives that must be attributed to the parties, there is no need to give "offer" and "made", as used in clause 5.3(d), extended or special meanings. There is no reason to think that the emergence of a stated intention of pursuing a goal achievable only through future voting by Magna shareholders and subsequent approval by the court would have been seen by the parties as presenting an opportunity to dispose of shares within the stipulated period that Macquarie should be free to take up. 45 In summary, the words used in clause 5.3(d), viewed in light of the surrounding circumstances and the objectives that may be gathered from the parties' compact as a whole, warrant a conclusion that the making of the DCL announcement on 30 March 2007 was not an event within the description in that clause. No commercial nonsense or commercial inconvenience flows from that conclusion. The making of the DCL announcement did not cause clause 5.3(d) to negate the obligation imposed on Macquarie by clause 5.1. 46 With the questions of construction answered favourably to Lionsgate, it is necessary to consider other aspects of Lionsgate's claim for relief by way of specific performance as against Macquarie. The first contention of Macquarie in that respect is that performance by it of the deed would entail contraventions of the Corporations Act and that, for that reason, the court must decline to compel performance of the clause 5.1 promise. 47 Two statutory provisions were referred to in the submissions made on behalf of Macquarie. The first is s.619(1): "All the offers made under an off-market bid must be the same." (Section 619(2) allows differences related only to matters such as different members of securities held.) 48 The second provision on which Macquarie relies is s.627: "Offers under an off-market bid must not be subject to a condition that allows the bidder to acquire, or may result in the bidder acquiring, securities from some but not all of the people who accept the offers. It does not matter how the condition is expressed." 49 In arguing that there will be contravention of these provisions, Macquarie points to clauses 5.1(b) and 5.1(c) of the deed (see paragraph [4] above). The thesis is that those provisions gave Lionsgate rights other than those that will arise from Macquarie's acceptance of Lionsgate's takeover bid. It was argued on behalf of Lionsgate that this is not so – or, at worst, that it is so only as to one matter of timing. 50 The deed of 1 February 2007 was made in contemplation of the making of an off-market bid by Lionsgate under Chapter 6. The processes by which such bids are made are highly regulated. At the time the deed was made, Lionsgate had not embarked upon any of those procedures. It did not do so until some time later – although, on the day on which the deed was made, it did announce publicly that it intended to make a bid. 51 The parties obviously recognised that any off-market bid initiated by Lionsgate would entail the making of a contractual offer to every holder of Magna shares. They also recognised that acceptance of such an offer by a shareholder (and acceptance by Macquarie in particular) would bring into existence a contract upon the terms specified in the contractual offer. The deed did not purport to lay down any exhaustive statement of the terms of the contemplated offer by Lionsgate. That was left entirely to Lionsgate – although, in view of clause 5.1(a) of the deed, Macquarie would be under no obligation to accept unless the price offered by Lionsgate was at least 32 cents per share. Subject to that (and to the exempting provisions in clause 5.3), it became the obligation of Macquarie to accept whatever offer Lionsgate made by means of Chapter 6 off-market bid. It was to do so, according to clause 5.1(a), in accordance with the procedure for acceptance set out in the bidder's statement. Once that had been done and a new and distinct contract had arisen accordingly as between Lionsgate and Macquarie, there would no longer be any obligation still remaining to be performed pursuant to the deed nor any provision of the deed still requiring to be carried into effect. 52 The thesis advanced on behalf of Macquarie is that because of the contract that had existed between Lionsgate and Macquarie since 1 February 2007, the offer made by Lionsgate to Macquarie when the bidder's statement was delivered to Macquarie as a result of posting on 23 or 26 March 2007 was not "the same" as the offers delivered at the same time to the other Magna shareholders. This is said to have been the result of an inconsistency between provisions that would become contractually binding if the offer was accepted by Macquarie and provisions already binding by virtue of the execution of the deed. Several points were advanced: first, that the prohibition upon withdrawal of acceptance in clause 5.1(b) of the deed was inconsistent with the take-over bid's recognition of the limited statutory right to withdraw acceptances in special circumstances; second, that clause 5.1(c) would make the deed itself the source of the acquisition of Macquarie's shares following acceptance of the bid; third, that the assurance of freedom from encumbrance in clause 5.1(c) would operate at an earlier time than the corresponding assurance in the contract resulting from acceptance of the bid; and, fourth, that there would be a like acceleration in relation to Lionsgate's entitlement to dividend and other rights in respect of Macquarie's shares. 53 The elements of a "Takeover Contract", as defined by Lionsgate's bidder's statement, that, on the case Macquarie seeks to make, would involve contractual stipulations inconsistent with clauses 5.1(b) and 5.1(c) of the deed are those contemplated by the offer provisions concerning freedom from encumbrance and accrual of "Rights", particularly as to timing. 54 Even if Macquarie's contentions as to inconsistency are correct, I do not accept that the matters relied upon affected the content of the offer made by Lionsgate to Macquarie under the takeover bid, compared with the content of the offers made by Lionsgate to the other Magna shareholders under the takeover bid. When Lionsgate made offers under its off-market bid, it sent precisely the same document to every shareholder. The pre-existing context in which that was done did not affect the content of the document sent to Macquarie, compared with the documents sent to other persons. In the same way (and having regard to s.627), the pre-existing context cannot have caused the offer to Macquarie under the off-market bid to be subject to a condition that was not expressed in that offer. 55 I return to the alleged inconsistency between, on the one hand, clauses 5.1(b) and 5.1(c) of the deed and, on the other, the provisions of the offers under the off-market bid as to withdrawal of acceptance, freedom from encumbrance and acquisition of what the bid calls "Rights". Let it be assumed that the inconsistencies exist. It is necessary to decide how they would be reconciled if and when Macquarie accepted the offer made to it under Lionsgate's off-market bid. 56 Mr Leeming submitted that precedence must be given to the terms of the deed. Indeed, that proposition is at the heart of the case he sought to make on the basis of ss.619(1) and 627. Mr Sullivan submitted to the contrary. He says that any inconsistent provisions of the deed were intended to be overtaken by the contract constituted by Macquarie's acceptance of any offer made to it under the off-market bid. 57 The obvious purpose of the deed was to cause Lionsgate to have an assurance that the 11.23% shareholding of Macquarie would become the subject of early acceptance if and when Lionsgate launched the off-market bid that it had in contemplation when the deed was made. The opinion of Lionsgate that the deed had caused that objective to be achieved was clearly reflected in the bidder's statement subsequently issued by it: see paragraph [17] above. Lionsgate wished to be able to portray Macquarie's agreement as an influential expression of support for its bid. Macquarie was held out to other shareholders as having made a sensible decision that they should emulate and as having provided a lead that they should follow. Macquarie, it should be inferred, was content to put itself into a position where it could be portrayed in that way. It must have known that it would be so portrayed. 58 The objectively ascertained intentions of the parties, thus understood, are inconsistent with any expectation that, as regards ownership of the 11.23% interest and enjoyment of the rights it carried, the deed itself should be a source of any right of Lionsgate beyond the right to have Macquarie accept any offer made by it under the foreshadowed bid. 59 Mr Sullivan drew attention to the well-known passage in the speech of Lord Halsbury LC in Glynn v Margetson & Co [1893] AC 351 at p.357: "Looking at the whole of the instrument, and seeing what one must regard, for a reason which I will give in a moment, as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract." 60 In the present case, the main purpose – indeed, I would go so far as to say the sole purpose – of the deed was to ensure acceptance by Macquarie of any off-market bid that Lionsgate might initiate at or above 32 cents per share within the stipulated period. Both parties knew that any such bid would include contractual terms of various kinds. I am satisfied that subsequent adoption of and subjection to the contract resulting from acceptance of an offer at or above the minimum price mentioned in the deed was the main purpose of the deed and that, to the extent that that contract, when made, contained provisions inconsistent with those of the deed itself, the deed provisions were to be rejected in the way to which Lord Halsbury referred. The subsequent contract was intended to supersede the deed. If and when Macquarie accepted the offer described in the deed, all obligations under the deed were to be regarded as discharged. In particular, provisions of the takeover contract resulting from acceptance dealing with matters already covered in some different way by the deed were intended to replace those deed provisions. 61 Mr Leeming's submissions concerning ss.619(1) and 627 rely on the proposition that the deed was intended to have some operation and effect in relation to the acquisition of Macquarie's shares and rights attached to them that would survive performance of Macquarie's covenant by the act of acceptance. For the reasons stated, I do not accept those submissions. 62 It remains to consider the question whether damages would be an adequate remedy to Lionsgate for breach of the clause 5.1 promise and whether, for that reason, specific performance should be refused. 63 A matter to be mentioned immediately is the express contractual recognition that damages would not be an adequate remedy in case of failure by Macquarie to perform its bargain. A clear acknowledgement by Macquarie to that effect is contained in clause 5.2 of the deed: see paragraph [4] above. Macquarie submits that this provision cannot be conclusive on the question whether damages are an adequate remedy. That is undoubtedly true. The remedy of specific performance lies in the discretion of the court and that discretion cannot be fettered by the parties' agreement: see Quadrant Visual Communications Ltd v Hutchison Telephone (UK) Ltd [1993] BCLC 442 at p.451 (Stocker LJ), p.452 (Butler-Sloss LJ). The court must have regard to the circumstances as a whole. In doing so, it will recognise that Macquarie, which now seeks to resist specific performance, saw fit to give an express contractual acknowledgment of the inadequacy of damages as a remedy. 64 Generally speaking, the court will not decree specific performance against the seller under a contract for the sale of shares quoted on and freely traded through a stock market maintained by a stock exchange. This is because, as Shadwell VC observed in Duncuft v Albrecht (1841) 12 Sim 189 at p.199; 59 ER 1104 at p.1108, such a commodity "is always to be had by any person who chooses to apply for it in the market". The buyer can satisfy himself by resort to the market and may then look to the seller for monetary compensation if he has had to pay more than the contracted price. Damages are accordingly an adequate remedy. As Shadwell VC further observed, a commodity of the kind thus readily obtainable is to be distinguished from, for example, "a certain number of railway shares of a particular description, which railway shares are limited in number, and which, as has been observed, are not always to be had in the market". 65 A party embarking upon an attempt to acquire the whole of a company's issued capital by takeover bid has a particular interest in obtaining the actual subject matter. It was submitted by Mr Sullivan that such a party stands in a special position, in that the party's objective of acquiring the totality of the shares leaves no room for the view that money may be a satisfactory substitute. I accept that submission. It is borne out by the following passage in the judgment of Street J in Rudder v George Hudson Holdings Ltd [1972] 1 NSWLR 529 at p.535: "In the present case the Court is concerned with a contract for the sale of shares; not of land. But it is a contract specific performance of which would properly be the subject of equitable jurisdiction. A purchaser bidding in a single offer for the acquisition of the entire issued capital in a company, be it a public company or a proprietary company, has a sufficient interest in the due performance of the contract or contracts arising from his takeover offer to seek the aid of equity in the specific performance of those contracts. Clearly enough damages would not be an adequate remedy for such a purchaser." 66 Mr Leeming sought to portray Lionsgate as someone who no longer aims to acquire the whole of the issued share capital of Magna. He pointed to the fact that the minimum acceptance condition contained in the off-market bid (see paragraph [16] above) was concerned with only a bare majority of shares and that, on 12 April 2007, Lionsgate had dispensed with that condition. That, to my mind, is beside the point. Lionsgate made an off-market bid of the kind referred to in s.618(1)(a) entailing offers for all the shares in Magna. The fact that it has foregone the ability to retire from the field if acceptances are not forthcoming so as to secure a certain minimum number of shares does not change the fact that it is seeking to acquire all shares. The offers under its off-market bid are open for acceptance and will remain so until 17 May 2007. The "sufficient interest" to which Street J referred is possessed by Lionsgate. 67 It should be added that the subject matter of Macquarie's clause 5.1(a) covenant is a parcel of shares representing 11.23% of the issued capital. I have already referred to its strategic significance both in a takeover context where questions of resort to compulsory acquisition may be expected to arise and in circumstances where a vote of shareholders may be contemplated (as will be the case if the DCL proposal is progressed). That 11.23% stake, viewed in the commercial situation where, at the time the deed was made, Lionsgate was considering a full takeover bid and counter proposals might emerge, was a unique commodity or, at the least, a commodity of very special significance. It stood apart from the fungibility that the stock market entails. Furthermore, its special characteristics have been consolidated and accentuated by subsequent events. The position is as described by Dr Spry at p.64 of the sixth edition of "Principles of Equitable Remedies": "So if shares are not listed for quotation, or the parcel in question is a controlling interest or is of such a size or nature that to acquire it elsewhere would involve undue difficulty or uncertain expenditure, damages may be regarded as inappropriate." 68 In this case, damages for breach of contract would not be a sufficient or appropriate remedy for Lionsgate. The circumstances are such as to confirm Macquarie's own assessment reflected in clause 5.2. 69 Lionsgate has made out its claims for relief in the form of declaration and orders for specific performance and ancillary restraint. No discretionary factors operate to make it inappropriate to compel performance by Macquarie. The court will therefore grant the following relief as sought in the summons: 1. Declare that the defendant is obliged to accept the plaintiff's offer to acquire the defendant's shares in Magna Pacific (Holdings) Limited in accordance with the procedure for acceptance set out in the plaintiff's bidder's statement posted to the defendant and some other shareholders in Magna Pacific (Holdings) Limited on 23 March 2007 and posted to the remaining shareholders on 26 March 2007 ("offer"). 2. Order that the defendant accept the plaintiff's offer to acquire the defendant's shares in Magna Pacific (Holdings) Limited in accordance with the procedure for acceptance set out in the offer. 3. Order that the defendant be restrained, whether by itself, its employees or agents, from selling, transferring, mortgaging, charging, encumbering, granting any option over, otherwise disposing of or dealing with any of the defendant's shares in Magna Pacific (Holdings) Limited or doing anything that would create a relevant interest in some or all of the said shares in any person who does not have such an interest at the date of this order, other than pursuant to the defendant's acceptance of the offer in the plaintiff's bidder's statement. 70 Having regard to both this result and the outcome before Austin J at the earlier stage (see Lionsgate Australia Pty Ltd v Macquarie Private Portfolio Management Ltd [2007] NSWSC 318), it will be ordered that the defendant pay the plaintiff's costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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