Gambotto v Resolute Samantha Ltd [1995] HCA 48; (1995) 131 ALR 263; (1995) 13 ACLC 1564; (1995) 69 ALJR 752 (28 September 1995)

HIGH COURT OF AUSTRALIA

GIANCARLO GAMBOTTO v RESOLUTE SAMANTHA LIMITED
No. S7 of 1995
GIANCARLO GAMBOTTO AND OTHERS v BEACH PETROLEUM NL
No. S12 of 1995
S. 95/003
Number of pages - 6 [1995] HCA 48; (1995) 131 ALR 263, (1995) 13 ACLC 1564, (1995) 69 ALJR 752

HIGH COURT OF AUSTRALIA
GUMMOW J

CATCHWORDS

HEARING

SYDNEY, 18 September 1995
28:9:1995

ORDER

Action dismissed in both matters.

DECISION

GUMMOW J Mr Giancarlo Gambotto ("Mr Gambotto") is the plaintiff in action No S7 of 1995 against Resolute Samantha Limited ("Samantha") which, when the action was instituted, was Samantha Gold NL. The change in name and status was effected on 17 July 1995.

2. Mr Gambotto also is a plaintiff in action No S12 of 1995 against Beach Petroleum NL ("Beach"). Mr Gambotto appeared for himself in the first matter and, without opposition, I permitted him to appear for all plaintiffs in the second action.

3. Mr Gambotto now resides in the State of Queensland. When the actions were commenced, Mr Gambotto lived in Sydney.

4. Orders were made before trial that the actions be tried concurrently.

5. The facts are in short compass and not disputed. Mr Gambotto was the registered holder of 18,285 shares in Resolute Resources Ltd ("Resources"). Samantha made an offer to acquire all the shares of Mr Gambotto in Resources. If the offer had been accepted by Mr Gambotto, he would have received 5,224 shares in Samantha. Mr Gambotto did not accept the offer. Samantha and Resources both are incorporated in the State of Western Australia. The offer was made under a takeover scheme and s 701 of the Corporations Law ("the Law") became applicable to those shareholders who were dissenting offerees. Section 701, in short, is a provision for compulsory acquisition of the shares of dissenting offerees.

6. Mr Gambotto and the other plaintiffs in the action against Beach were the registered holders of a total of 88,598 shares in Claremont Petroleum NL ("Claremont"). Beach made an offer to acquire all those shares and, if accepted, this would have resulted in the plaintiffs receiving a total of 44,301 shares in Beach. The offer was not accepted by the plaintiffs. Claremont is incorporated in the State of Queensland and Beach in the State of South Australia. Again, s 701 of the Law became applicable to the dissenting offerees.

7. In each case, the offeror has invoked the compulsory acquisition provisions of s 701 of the Law against the plaintiffs. The gist of the case of the plaintiffs against both offerors is that a declaration should be made that the provisions of s 701 are invalid. The requisite notices under s 78B of the Judiciary Act 1903 (Cth) were given. The Attorney-General for the Commonwealth intervened in response to the notice and appeared by counsel in support of validity of the legislation.

8. Section 701 of the Law was amended by the Corporations Legislation Amendment Act 1994 (Cth) ("the 1994 Act"), with effect from 15 July 1994. Nothing turns on these changes (the amendment of sub-s (7) and addition of sub-s (7A)). The crucial provisions which empower compulsory acquisition of the shares of the plaintiffs were unchanged.

9. I have spoken of s 701 as a provision of the Law. However, it was agreed in argument that such a statement somewhat obscures the correct legal analysis of the situation. The Corporations Act 1989 (Cth) ("the Corporations Act") enacts the Law for the Government of the Australian Capital Territory (ss 3(1), 5, 82). The effect of s 7 of each of the Corporations (Western Australia) Act 1990 (WA) and the Corporations (Queensland) Act 1990 (Q) is to apply, as a law of the respective State, the Law set out in s 82 of the Corporations Act "as in force for the time being".

10. The effect of this phrase is to make the application of the Law as State legislation ambulatory in nature and to accommodate changes effected by laws of the Parliament of the Commonwealth. There was no submission that the legislative scheme thus effected by the legislatures of the Commonwealth and the States involves what is, in substance, as to subsequent changes to the Law from time to time made by the Parliament of the Commonwealth, a reference of a matter to the Parliament of the Commonwealth by the Parliaments of the States, within the meaning of s 51(xxxvii) of the Constitution(1). In any event, as I have indicated, the changes made to s 701 by the 1994 Act are not immediately in point for the compulsory acquisitions of which Mr Gambotto complains.

11. In the result, the issues which arise in the present case are (a) whether s 701 is validly enacted by an exercise of power under s 122 of the Constitution, for the Government of the Australian Capital Territory under the Corporations Act, so as to be picked up by s 7 of each of the State Acts and (b) whether s 701 is validly applied by s 7 of each of the relevant State Acts, as an exercise of State legislative power.

12. The relevant State statutes are those of Western Australia (where the target company Resources is incorporated) and Queensland (where the target company Claremont is incorporated)(2).

13. The shares held by the plaintiffs were shares in respect of which offers were made under a full takeover scheme (as defined in s 603 of the Law) but not accepted by them. The plaintiffs thus were "dissenting offerees" within the meaning of par (d) of s 701(1). The offers were accepted by other shareholders in sufficient numbers to satisfy the quota fixed by s 701(2). In such a case, the offeror may, before the end of two months after the end of the offer period, give notice, as prescribed, to a dissenting offeree to the effect that the offeror desires to acquire the outstanding shares held by the dissenting offeree (s 701(2)). Notices were given on 16 December 1994 by Samantha in respect of the holding in Resources and on 2 February 1995 by Beach in respect of the holdings in Claremont. Section 701(5) goes on to provide that, where notice has been given under s 701(2), the offeror is "entitled and bound" to acquire the shares in question "on the terms that were applicable in relation to the acquisition of shares under the takeover scheme ... immediately before the end of the offer period".

14. Upon application by the dissenting offeree under s 701(6), the court may order that sub-s (5) does not apply in relation to that dissenting offeree. Unless the court has ordered to the contrary on such an application, then the offeror shall, before the end of the last of the periods specified in s 701(10), serve a copy of the notice on the company that issued the shares, together with an instrument of transfer signed on behalf of the holder by a person appointed by the offeror and signed by the offeror, and the offeror shall pay, allot or transfer to the target company the consideration for the transfer. The target company shall thereupon register the offeror as the holder of those shares (s 701(10)). The consideration so received is to be held in trust by the target company for the former holder of the shares. The target company is obliged by s 701(11) to give written notice to the former holder that the consideration has been received and is being held by it pending instructions from the former holder as to how it is to be dealt with.

15. In the present litigation it was accepted by the defendants that, if Mr Gambotto were successful in obtaining declarations of invalidity, the taking of steps under the above sub-sections of s 701 during the pendency of the litigation would be no barrier to the restoration of title to the shares in question.

16. In par 6(b) of the Statement of Claim accompanying the writ in the Samantha action, and in par 6(b) of the Amended Statement of Claim in the Beach action, reference is made to the operation of s 92 of the Constitution. In his written submissions, Mr Gambotto also referred to s 51(xxxi) of the Constitution, dealing with acquisition of property on just terms.

17. Counsel for the defendants and for the intervener submit, correctly in my view, that s 92 of the Constitution has no application to this case. First, what might be called the "trade and commerce" limb of s 92 does not apply because neither on its face nor in its practical application does s 701 operate to discriminate against interstate trade, nor does it have a protectionist character(3). Secondly, the "intercourse" limb of s 92 has no application because neither on its face nor in its practical operation does s 701 burden or restrict movement or communication(4). Nor does s 701 discriminate against interstate intercourse nor restrict any interstate intercourse more than is appropriate to the legitimate aim pursued(5).

18. As to s 51(xxxi), counsel pointed to authority in this Court which establishes that, however much the exercise may be deprecated, it is not beyond the power of a State legislature to deprive a person of property without compensation, provided the deprivation is otherwise effected according to law(6). Further, in so far as there is any issue as to whether s 701 of the Law is validly enacted for the government of the Australian Capital Territory, pursuant to s 122 of the Constitution, authority(7) indicates that the guarantee provided by s 51(xxxi) does not apply in respect of laws enacted under s 122 of the Constitution, whether for external territories or those which were surrendered by a State to, and accepted by, the Commonwealth.

19. In any event, and this is the crucial point, the constitutional guarantee is directed to acquisition "on just terms". Mr Gambotto did not put any argument that the terms provided by s 701(5) were not just terms in the relevant sense, or were incapable of being made so by court order under s 701(6).

20. Rather, Mr Gambotto's complaint is directed to acquisition by compulsion, that is to say, without the consent of the offeree shareholder, whether or not the terms provided are just. In oral argument, Mr Gambotto emphasised that, whilst he could not effectively gainsay the authorities relied upon by his opponents, nevertheless there was to be extracted from the Constitution, particularly by reference to the terms "free" in s 92 and "acquisition" in s 51(xxxi), a general principle. This principle was said to impose a restraint upon the exercise of legislative power to enact a law such as s 701; further, this restraint was imposed by the Constitution not only upon the Parliament of the Commonwealth but upon the Parliaments of the States.

21. No such restraint inheres in the instrument of government which is the Constitution so as to operate as part thereof(8). Indeed, such a restraint would be broader than that expressly imposed upon the Parliament of the Commonwealth by s 51(xxxi). That being so, it is scarcely conceivable that there is imposed through the Constitution a restraint upon State legislation which is greater than that imposed upon the federal legislature in respect of acquisition of property by compulsion.

22. Each action is dismissed.

23. Upon delivery of these reasons, I will hear any submissions Mr Gambotto may then wish to make as to why costs of the actions should not follow the event.
Footnotes

1 R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd [1964] HCA 15; (1964) 113 CLR 207 at 225-226.
2 This follows from the definition of "company" in s 9 of the Law and from ss 615, 616, 634 and 701.
3 Cole v Whitfield [1988] HCA 18; (1988) 165 CLR 360 at 399, 407-408.
4 Cole v Whitfield [1988] HCA 18; (1988) 165 CLR 360 at 393-394; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 55-56, 82-83.
5 Cunliffe v The Commonwealth (1994) 182 CLR 272 at 346, 366, 384, 392, 395-396.
6 Pye v Renshaw [1951] HCA 8; (1951) 84 CLR 58 at 79-80; Mabo v Queensland (No 1) [1988] HCA 69; (1988) 166 CLR 186 at 195, 202, 241.
7 Teori Tau v The Commonwealth [1969] HCA 62; (1969) 119 CLR 564 at 570; Clunies-Ross v The Commonwealth [1984] HCA 65; (1984) 155 CLR 193 at 201; Mutual Pools and Staff Pty Ltd v The Commonwealth [1994] HCA 9; (1994) 179 CLR 155 at 169, 177, 193.
8 cf Australian Capital Television Pty Ltd v The Commonwealth [1992] HCA 45; (1992) 177 CLR 106 at 135.