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Federal Court of Australia |
Last Updated: 22 September 1998
Companies Act 1960 (Vic) s 180L
Securities Industry Act 1970 (Vic) s 5B(2)
Corporations Law Ch 6, Pt 6.3, Div 5; ss 109Y, 607, 610, 654(1), 656(1), 657(1) and (3), 659(1), 660, 663(2), 698, 743, 743(3), 744(2), 1322; pars 657(1)(a) and (b)
Corporations Regulations reg 6.1.01
Elkington v Vockbay Pty Ltd (1993) 10 ACSR 785 - applied
Hamilton v Property Investments Ltd [1983] WAR 317 - referred to
Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456 - referred to
Re John Francis Walker and Kahlua Pty Ltd (1996) 22 ACSR 104 - referred to
Re Haughton & Co (1977) 2 ACLR 320 - considered
Waldon v M G Securities [1975] VR 508 - referred to
DIAMOND ROSE NL (ACN 075 860 472) v STRIKER RESOURCES NL (ACN 009 153 119)
WG 3020 of 1998
LEE J
PERTH
6 AUGUST 1998
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| WESTERN AUSTRALIA DISTRICT REGISTRY | WG 3020 of 1998 |
|
BETWEEN: | DIAMOND ROSE NL (ACN 075 860 472)
Applicant |
|
AND: | STRIKER RESOURCES NL (ACN 009 153 119)
Respondent |
|
JUDGE: | LEE J |
| DATE OF ORDER: | 6 AUGUST 1998 |
| WHERE MADE: | PERTH |
THE COURT DECLARES THAT:
1. The applicant's act of sending its Notice of Variation of Offer dated 21 July 1998 to the shareholders of Striker Resources NL commencing on Friday, 24 July 1998 and ending on Monday, 27 July 1998 is not invalid and at all times has had effect as if it were completed prior to 5.00 pm (Perth time) on Wednesday, 22 July 1998.
2. The applicant has, in accordance with ss 656 and 657 of the Corporations Law, validly varied the takeover offers made by the applicant dated 20 May 1998 (as varied by its Notice of Variation of Offer dated 10 June 1998) ("Offers") by extending the date on which the Offers close to 20 August 1998.
3. The offer period in relation to the Offers closes at 5.00 pm (Perth time) on 20 August 1998 (unless otherwise extended).
4. The respondent pay the applicant's costs of the application.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| WESTERN AUSTRALIA DISTRICT REGISTRY | WG 3020 of 1998 |
|
BETWEEN: | DIAMOND ROSE NL (ACN 075 860 472)
Applicant |
|
AND: | STRIKER RESOURCES NL (ACN 009 153 119)
Respondent |
|
JUDGE: | LEE J |
| DATE: | 6 AUGUST 1998 |
| PLACE: | PERTH |
In this application Diamond Rose NL ("Diamond Rose") seeks an order under s 743, or alternatively s 1322, of the Corporations Law ("the Law"), declaring that its act of varying a takeover offer by extending the date on which the offer is to close, not be invalid because of contraventions of ss 656 and 657 of the Law.
On 20 March 1998 Diamond Rose announced that it would make a takeover offer for Striker Resources NL ("Striker"). In due course the offer was served on Striker and despatched to shareholders. The offer was to expire on 22 June 1998.
In accordance with ss 656 and 657 of the Law and the terms of the offer documents, the offer was varied by extending the date of the expiry of the offer from 22 June 1998 to 22 July 1998. A copy of a notice of variation of the offer was registered with the Australian Securities and Investments Commission ("ASIC") on 11 June 1998, the notice served on Striker and copies of the notice sent to Striker shareholders before 22 June 1998.
On 8 July 1998, in accordance with s 663(2) of the Law and the offer documents, the offer was declared unconditional. On or about 14 July 1998 Diamond Rose resolved to vary the offer by extending the expiry date. On 15 July 1998 Diamond Rose submitted to ASIC for comment a draft of a proposed notice of variation of the offer, extending the date of the expiry of the offer from 22 July 1998 to 20 August 1998.
A notice of variation was not prepared until 21 July 1998 and a copy of the notice not lodged with ASIC for registration until 4.00 pm on 22 July 1998. The copy notice was registered with ASIC and the notice served on Striker on 22 July 1998.
Copies of the notice were prepared after 22 July 1998 and posted to approximately 3,500 Striker shareholders on Friday 24 July 1998 and Monday 27 July 1998.
The excuse for delay in acting on the intention to extend the offer was said to be, first, uncertainty over whether ASIC would exercise its discretion to modify the application of s 698 of the Law to the offer in respect of a transaction Diamond Rose had entered with a major shareholder in Striker, and second, uncertainty whether Diamond Rose would succeed in an application to the Court for an interim order restraining Striker from, inter alia, dealing with its property.
Neither of these issues had been resolved by 22 July 1998 when Diamond Rose purported to proceed to give notice extending the offer. On 28 July 1998 Diamond Rose filed this application. Striker appeared on the application and opposed the order sought by Diamond Rose.
Division 5 of Pt 6.3 of the Law governs withdrawal and variation of takeover offers under takeover schemes. The relevant provisions are ss 654(1); 656(1); 657(1), (3); 659(1) and 660 which provide as follows:
"654(1) An offeror may not vary a takeover offer except:
(a) in accordance with this Division;
(b) in accordance with the regulations; or
(c) with the written consent of the Commission and in accordance with any conditions specified by the Commission in the consent.
...
656(1) An offeror may vary an offer under a takeover scheme:
...
(b) if the offer is not subject to such a condition - before the end of the offer period;
by extending the offer period for a further period but, subject to subsection 657(2), so that the total offer period does not exceed 12 months.
...
657(1) Variations of offers under a takeover scheme shall be made by:
(a) serving on the target company a notice:
(i) signed in the same manner as a Part A statement is required by subsection 637(1) to be signed;
(ii) setting out the terms of the proposed variation and particulars of such modifications of the Part A statement as are necessary having regard to the variation;
...
(b) sending a copy of that notice in an approved manner to each person to whom an offer was made under the takeover scheme (including, subject to subsection (3), a person who has accepted an offer).
...
(3) It is not necessary to send under subsection (1) or (2) a copy of a notice to a person who has accepted an offer under the takeover scheme if the variation of offers under the takeover scheme relates only to an extension of the offer period and:
(a) the offers are not subject to a defeating condition; or
(b) the offers were subject to such a condition but at the time of the service of the notice on the target company the offers are free from the condition or the condition has been fulfilled.
...
659(1) An offeror is not entitled to serve a notice under section 657 unless a copy of the notice has been registered by the Commission.
...
660 An acquisition of shares as a result of the acceptance of a takeover offer is not invalid because:
(a) the offeror has purported to vary the takeover offer in accordance with this Division but has contravened a requirement of this Division;
(b) the offeror has purported to vary the takeover offer in accordance with the regulations but has contravened a requirement of the regulations; or
(c) the offeror has purported to vary the takeover offer with the consent of the Commission given under paragraph 654(1)(c) but has contravened a condition imposed by the Commission under that paragraph."
In summary, the offeror must lodge a copy of the notice of variation with ASIC and ASIC must agree to register it; the offeror must serve on the target company the notice of variation, and the offeror must send "in an approved manner" a copy of the notice of variation to all the persons to whom the offer was made under the scheme.
The first two requirements were met in the present case.
Under s 607 of the Law the expression "in an approved manner" was, in this case, "in the prescribed manner" as defined in reg 6.1.01 of the Corporations Regulations which reads as follows:
"6.1.01 For the purposes of paragraphs 607(2)(b) and (c) of the Corporations Law, a document may be sent:
(a) where the addressee is in an external territory or outside Australia - by pre-paid airmail post; and
(b) in any other case - by pre-paid ordinary post or by courier."
Section 109Y of the Law states:
"109Y Where a provision of this Law authorises or requires any document to be served by post, whether the expression `serve' or the expression `give' or `send' or any other expression is used, then:
(a) the service is taken to be effected by properly addressing and posting (under pre-paid post) the document as a letter to the last known address of the person to be served; and
(b) unless the contrary is proved, the service is taken to have been effected at the time at which the letter would have been delivered in the ordinary course of post."
It is necessary, therefore, to consider whether the word "sending" is used in par 657(1)(b) in the sense of posting or despatching, or in the sense of service, with the intent that service of the notice is to be effected on all shareholders prior to the expiration of the offer period.
The proper construction of par 657(1)(b) is that a copy of a notice of variation is to be despatched to each shareholder before the offer expires, not that a copy be served on each shareholder. As a matter of practical and commercial reality, variation of an offer would become unmanageable if the operation of s 657(1) turned on service of the notice on shareholders before the expiry of the offer, notwithstanding any assistance in that regard that may be provided by s 109Y. Shareholders in Australian corporations may reside in various countries other than Australia and what constitutes "the ordinary course of post" in those cases will vary and in some cases will be difficult to ascertain. Furthermore, proof of receipt after the date on which the notice was to be "sent" would render the act of extension invalid. It could not have been the intention of the legislature to introduce such uncertainty into the straight-forward exercise of extending a takeover offer. This conclusion would also appear to be supported by the distinction in drafting used in pars 657(1)(a) and (b). Paragraph 657(1)(a) requires "serving" of the notice on the target company whilst par 657(1)(b) requires the "sending" of copies of the notice to shareholders. If Parliament had intended that service on the shareholders be effected, it is likely that the same word would have been used in par 657(1)(b).
Notwithstanding the foregoing, Diamond Rose contravened s 657(1)(b) of the Law by sending copies of the notice to shareholders on 24 and 27 July 1998, and not before 5.00 pm on 22 July 1998, the time at which the offer was to expire.
Under s 743 of the Law the Court may excuse a contravention of ch 6 and make appropriate orders if the Court is satisfied that the contravention ought to be excused in all the circumstances. Section 743 provides in relevant parts:
"743(1) Where a person has contravened a provision of this Chapter and, on application by any interested person, the Court is satisfied that, in all the circumstances the contravention ought to be excused, the Court may make an order declaring any act, document or matter not to be invalid because of the contravention and to have effect, and at all times to have had effect, as if there had been no such contravention.
...
(3) The circumstances to which the Court may have regard in deciding whether or not a contravention of a provision by a person ought to be excused include the contravention having been due to the person's inadvertence or mistake, to the person not having been aware of a relevant fact or occurrence or to circumstances beyond the control of the person.
(4) This section applies notwithstanding anything contained in any other provision of this Chapter."
Striker contends that there was no inadvertence or mistake nor circumstances beyond the control of Diamond Rose. On the contrary, it is said that Diamond Rose deliberately delayed taking steps to extend the offer in order to keep its commercial options open, and only when it became apparent that there would be no resolution of the matters referred to above was an attempt made to vary the offer.
Striker also submitted that if there had been inadvertence or mistake it was inadvertence or mistake based on ignorance or mistake on a matter of law which pursuant to s 610 of the Law was to be disregarded under s 743 of the Law. Section 610 provides:
"610 In determining for the purposes of a provision of this Chapter, whether or not a person's contravention of the provision was due:
(a) to the person's inadvertence or mistake;
(b) to the person not being aware of a relevant fact or occurrence; or
(c) to circumstances beyond the person's control;
the person's ignorance of, or mistake on the person's part concerning, a matter of law shall be disregarded."
To determine whether the relevant conduct of a person is affected by a mistake of law it is necessary to examine all relevant facts. If a person acts on legal advice it does not follow that the contravention was due to a mistake of law. As Owen J said in Elkington v Vockbay Pty Ltd (1993) 10 ACSR 785 at p 804:
"In my opinion it is taking too narrow a view of the section to say that acting on legal advice could never constitute inadvertence, just as it would be erroneous to suggest that the mere fact that the company had acted on legal advice would attract the application of the section. A solicitor is an agent and the company can be seen as acting through its agent. It is necessary to look closely at the conduct in question. For example, acting on advice deliberately sought and deliberately given as to the proper interpretation of the Law could hardly be said to be inadvertent. On the other hand, accepting a particular interpretation of the Law, seeking a modification of its operation in a particular case, obtaining such a modification and then proceeding purportedly in accordance with the modification but on a misapprehension as to its requirements, could, it seems to me, be regarded as inadvertent conduct. It is not an error as to "the law" (of which a solicitor should have knowledge); but rather a failure to take an administrative or mechanical step properly to comply with the law..."
I am of the view that Diamond Rose's contravention of the Law by the acts undertaken in purported variation of the takeover offer did not involve a mistake of law in the application of an erroneous interpretation of s 657(1). Diamond Rose failed to take the "administrative or mechanical step" of putting itself in a position to be able to send out copies of the notice of variation to shareholders within time. Inadvertence generally means being "not properly attentive" or not directing one's mind to the doing of an act due, inter alia, to being ignorant of a requirement that an act be done, or done in a particular way, or by a particular time: Hamilton v Property Investments Ltd [1983] WAR 317 and Sanwa Australia Finance Ltd v Ground-Breakers Pty Ltd (in liq) [1991] 2 Qd R 456.
Turning to the question of whether the Court should exercise its discretion under s 743 to excuse the contravention of the Law in the present case, it must be emphasised that the proper approach is to consider whether "in all the circumstances" that discretion should be exercised: Elkington at 803, Re John Francis Walker and Kahlua Pty Ltd (1996) 14 ACLC 1715 at 1718. That requires an examination of the totality of the circumstances and includes, but is not limited to, those indicated in s 743(3). In addition, the effect of the contravention and any orders made under s 743 may be relevant. Under s 744(2) of the Law an order shall not be made under s 743 if the Court is satisfied that the order would unfairly prejudice any person: Elkington at 805.
I am satisfied that the failure to comply with the Law was due to mismanagement rather than deliberate indifference to the requirements of the Law. It is true that Diamond Rose waited until the last moment before attempting to vary the offer but that conduct did not reflect a contemptuous disregard of the Law. Diamond Rose complied with two of the three requirements in relation to the variation of a takeover offer by lodging a copy of the notice of variation for registration with ASIC, and serving the notice of variation on Striker but in leaving those steps so late it was not in a position to satisfy the full requirements of the Law. Due management of its affairs would have required sufficient copies of the notice of variation to have been prepared ready for posting at the time the notice was served on Striker.
If the Court is to exercise a discretion under s 743 it must be satisfied that the act of non-compliance does not involve a delay that is so inordinate that it should not be excused, whatever the cause. That question was raised in Re Haughton & Co (1977) 2 ACLR 320 in relation to a similar contravention of s 180L of the Companies Act 1961 (Vic) where copies of notices of variation were sent to shareholders after expiry of the time for acceptance set out in the takeover offer. In that case the copy notices were not sent to shareholders until ten days after the expiration of the offer period. Brooking J held at 327 that:
"Assuming, but without deciding, in favour of Boundary that it gave notice to the offerees within the meaning of sec. 180L(5) on the date of the posting of the notices, namely the 17th December, that act was not, I consider, done at substantially the same time as the act of giving notice to Haughton, which was done on 7th December, nor was it done at substantially the same time as the lodging of the copy of the notice with the Commissioner, which was also done on 7th December; whatever gap may be permissible, in my view ten days was too long."
To be satisfied that such a contravention ought to be excused it would be necessary that the acts be done sufficiently proximate to the time specified or otherwise in substantial accordance with the Law. As already indicated, the notices were sent on Friday 24 July 1998 and on Monday 27 July 1998. Although that length of time may test the limits of an excusable period, I am satisfied that it is sufficiently proximate to permit the discretion to be exercised. The extended period was not so compressed by the delay as to lose its meaning.
The next question is whether an order under s 743 would unfairly prejudice any person. In Waldon v M G Securities [1975] VR 508 at 532 the effect of a provision similar to s 744(2) of the Law, s 5B(2) of the Securities Industry Act 1970 (Vic) was considered by Pape J:
"The Act gives no guidance as to what constitutes unfair prejudice and it would appear that the Court is left at large to determine each case according to the justice and equity of the circumstances. It may well be that cases will occur where it is obvious from the material presented to the Court that a particular order will unfairly prejudice some person or persons. But in many cases the Court may not be in a position to say whether there will be such unfair prejudice or not in the absence of evidence as to specific transactions and the persons affected by those transactions..."
Striker has submitted that its shareholders will be prejudiced if the company is impeded from carrying on its business by reason of the continuing uncertainty associated with the takeover offer and its extension. Whatever intangible constraints a takeover offer may impose it is unlikely that it will interfere with the ordinary management of a target company. In the present case if the directors of Striker face problems in management it is likely they will be caused by circumstances other than the offer to shareholders. On the material presented it is not apparent that the making of any order under s 742 would inflict "unfair prejudice" on Striker.
The finding that the contravention should be excused under s 743 makes it unnecessary to consider the alternative submission that the contravention may be excused under s 1322 of the Law. I note the comments of Owen J in Elkington where his Honour doubted that the general provisions of s 1322 could be applied when there is a particular provision in ch 6 dealing with a contravention of the Law in relation to the acquisition of shares.
I am satisfied that in all the circumstances the contravention of par 657(1)(b) of the Law ought to be excused and an order made under s 743 in the terms of the application, declaring the act of varying the takeover offer not to have been invalid.
|
I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Lee. |
Associate:
Dated:
|
Counsel for the Applicant: | P I Jooste QC |
| Solicitors for the Applicant: | Steinepreis Paganin |
| Counsel for the Respondent: | A N Siopis
C L Readhead |
| Solicitors for the Respondent: | Craig Readhead & Co |
| Date of Hearing: | 6 August 1998 |
| Date of Judgment: | 6 August 1998 |
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