AAPT v Cable & Wireless Optus

AAPT Limited (P) PARTIES : v Cable & Wireless Optus Limited & Ors (D) JUDGMENT OF : Austin J

COUNSEL : G Lindsay SC and R Wright (P) J Sher QC and A Bell (D) SOLICITORS : Freehill Hollingdale & Page (P) Gilbert & Tobin (D) CATCHWORDS : Corporation - company - takeover - Part A statement - disclosure of intentions under clause 20 - disclosure of other material information under clause 17 - whether disclosure in Part A statement adequate ACTS CITED : Corporations Law, s 750 clauses 17 & 20 Aberfoyle Ltd v Western Metals Ltd (1998) 28 ACSR 187 Allstates Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.5) (1996) 64 FCR 73 Ampolex Ltd v Mobile Exploration and Producing Australia Pty Ltd (1996) 19 ACSR 354 Associated Dairies Ltd v Central Western Dairy Ltd (1993) 44 FCR 335 Betty's Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20 Bridge Oil Pty Ltd v Parker & Parsley Petroleum Australia Pty Ltd (1994) 15 ACSR 240 Commercial Union Assurance Co Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 Cultus Petroleum NL v OMV Australia Pty Ltd (Supreme Court of New South Wales, Santow J, 5 May 1999) Cumberland Credit Corporation Ltd v TNT Australia Pty Ltd (1988) 13 ACLR 371 Cunliffe v Goodman [1950] 2 KB 237 Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd (1994) 51 FCR 554 ICAL Ltd v County Natwest Securities Australia Ltd (1988) 39 NSWLR 214 Jones v Dunkel (1959) 101 CLR 298 CASES CITED : K-N Energy, Inc v Gulf Interstate Co 607 F Supp 756 Kresta Holdings Ltd v CHKP Capital Pte Ltd (1998) 26 ACSR 486 Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 Metal Manufacturers Ltd v Marsh Electrical Pty Ltd (1998) 28 ACSR 245 Pancontinental Mining Ltd v Goldfields Ltd (1995) 16 ACSR 463 QIW Retailers Ltd v Davids Holdings Pty Ltd (No.1) (1992) 36 FCR 386 R v G (1997) 42 NSWLR 451 Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300 Savage Resources Ltd v Pasminco Investments Pty Ltd (1998) 30 ACSR 1 Stirling Resources NL v Capital Energy NL (1996) 19 ACSR 701 Susquehanna Corp v Pan American Sulphur Co 423 F 2d 1075 (1970) USG Corp v Wagner & Brown 689 F Supp 1483 (ND Ill 1988) White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169 Yates Property Corporation (In Liq) v Boland (1998) 157 ALR 30 DECISION : Summons dismissed

THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2298/99 - AAPT LIMITED v CABLE & WIRELESS OPTUS LIMITED & ORS

JUDGMENT 1 HIS HONOUR: These proceedings arise out of a contested takeover bid and have been conducted on an extremely urgent basis. After some interlocutory skirmishes in the previous week, the case was heard on a final basis on 17 and 18 May 1999. On 20 May 1999 I delivered an ex tempore summary of the reasons for judgment which are set out more fully below, and made an order dismissing the plaintiff's summons. I dealt with costs after the parties had the chance to consider my full reasons for judgment. 2 AAPT ('AAPT') and the first defendant ('CWO') are listed companies which are competitors in the information technology and telecommunications industry. CWO, by its wholly owned subsidiary, the second defendant ('CWOI'), has announced a takeover bid for AAPT. It is a cash bid at $5 per share, subject to conditions which include a 90% minimum acceptance condition and a condition (clause 8.1(e) of the offer) relating to approval of the acquisition by the Australian Competition and Consumer Commission ('ACCC'). Documents purporting to be a Part A statement and Offer were registered with the Australian Securities and Investments Commission ('ASIC') on 27 April 1999 and copies of them were served on AAPT on 28 April 1999. By virtue of s 637 of the Corporations Law, the Part A statement and Offers could not have been sent to AAPT's shareholders prior to 13 May 1999. 3 On 4 May 1999 AAPT's solicitors wrote to the defendants' solicitors setting out AAPT's concerns as to alleged deficiencies in the Part A statement. Subsequent correspondence and a meeting between the solicitors did not resolve the differences between the parties and consequently AAPT commenced the present proceedings by summons filed on 10 May 1999. AAPT seeks various orders which would either enjoin the defendants from sending the Part A statement and Offers or require the dispatch of supplementary disclosure material. 4 As presented at the hearing, AAPT's case is that the Part A statement fails to comply with the content requirements of s 750 of the Corporations Law in four respects, and that the dispatch of the Part A statement would be misleading or deceptive conduct or conduct likely to mislead or deceive for the purposes of s 995 of the Corporations Law. A challenge to CWOI's purchase of 10.65% of the shares in AAPT on 16 April 1999, based on s 698 of the Corporations Law, was abandoned at the hearing. 5 The four challenges to the Part A statement are: (a) it does not adequately or accurately state the intentions of CWOI for the purposes of clause 20 of Part A of s 750 of the Corporations Law; (b) it does not disclose the anticipated synergies or benefits which would arise from the merger as required by clause 17 of Part A of s 750 of the Corporations Law;

(c) it does not disclose material information with respect to negotiations with the ACCC as required by clause 17; and (d) it does not disclose certain aspects of funding arrangements for the bid as required by clause 17. 6 I propose to set out the facts relevant to these contentions, and then to examine each of them in turn. Since I regard the question of disclosure of the offeror's intentions as a much more substantial question than the plaintiff's other complaints about the Part A statement, most of my reasons for judgment are directed to that question. However, before I turn to any of those matters I shall deal with some issues about the admissibility of the evidence of the plaintiff's financial expert, Mr Lonergan.

Mr Lonergan's evidence 7 Wayne Lonergan is a partner of PricewaterhouseCoopers, working in the Financial Advisory Services Group of the firm. He has practised for over 25 years as a chartered accountant specialising in valuations and associated financial advice. He says that during the course of his career he has advised many companies and their shareholders in takeover bids, at times advising an offeree and at times advising an offeror. He has held many positions of responsibility in his chosen field, and is presently a member of the Australian Accounting Standards Board and president of the National Council of the Securities Institute of Australia. However, he admitted in cross-examination that in the past five years he had not assisted anyone in the drafting of a Part A or Part B statement, or in the drafting of a prospectus. He also admitted that his expertise is largely centred on valuing assets such as shares or assets belonging to publicly listed companies.

8 According to his letter to AAPT's solicitors dated 10 May 1999, Mr Lonergan's retainer was to provide an assessment as to whether, from a financial perspective, he believed that the Part A statement provided sufficient information to enable a shareholder in AAPT to make an informed decision as to whether or not to accept the takeover offer for the shares. However, in his affidavit of the same date Mr Lonergan expressed his opinion as to the information material to the decision of an AAPT shareholder whether or not to accept the offer. The affidavit is not expressed to be limited to 'a financial perspective'.

9 The defendants have identified particular parts of the affidavit which they contend to be inadmissible. As the hearing developed, it emerged that the most appropriate course would be for me to rule on that contention in these reasons for judgment, and I shall now do so. The defendants object to paragraph 7(c), in which Mr Lonergan says he would expect to see a separate discussion of the offeror's intentions should the minimum acceptance condition be waived, and he expresses opinions as to the importance of such disclosure and says it is a reasonable commercial expectation that it is likely that the 90% minimum acceptance condition will be waived. The defendants also object to paragraph 15(d), where Mr Lonergan expresses his opinion that in view of the then current market price for AAPT shares, the offer would need to be increased and that the current disclosure may mislead investors into thinking that the offeror is unable to increase the bid. Mr Lonergan also expresses the opinion that it is unlikely that the full amount of the offeror's funding has been obtained. The defendants also object to part of paragraph 15(e), in which Mr Lonergan expresses the opinion from a commercial perspective that it is likely that the offeror will obtain less than 100% control of AAPT. The defendants object to paragraph 20 of the affidavit, in which Mr Lonergan identifies certain information about the offeror's intentions regarding AAPT (including such matters as future dividend policy and the basis upon which transactions between AAPT and CWO will occur), and says that facts about these matters will 'impact the risk' associated with continued investment in AAPT and the likely post-bid value of AAPT shares. He further expresses the opinion that consideration would have been given to and intentions formed as to the matters which he specifies. Finally, the defendants object to paragraph 24, in which Mr Lonergan comments on the briefing notes for the meeting with analysts on 3 May 1999, saying amongst other things that in his experience the type of information contained in the notes is the result of a long and careful analysis, and that substantially more details on areas of integration was provided in the presentation compared to the Part A statement. The defendant submits that the remainder of the affidavit should be given little or no weight.

10 The defendants contend that the specified paragraphs in Mr Lonergan's affidavit are inadmissible either because they are irrelevant to these proceedings or they are inadmissible opinion evidence. By s 76 of the Evidence Act 1995 (NSW) evidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed. However, s 79 provides that if a person has specialised knowledge based on the person's training, study or experience, the opinion rule does not apply to evidence of an opinion of that person that is wholly or substantially based on that knowledge.

11 I have decided that the paragraphs of the affidavit to which the defendants object should be ruled inadmissible by virtue of s 76, and that they are not saved by s 79. The paragraphs of the affidavit to which the defendants object are evidence of Mr Lonergan's opinions. They are entirely 'inferences from observed and communicable data': see Allstates Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.5) (1996) 64 FCR 73. Mr Lonergan's affidavit expresses opinions about matters which are either matters of fact falling within s 76 or matters of law. To the extent that he expresses opinions about matters of law, they are matters for the Court to determine by the application of legal principles without the aid of expert evidence: see, for example, Yates Property Corporation (In Liq) v Boland (1998) 157 ALR 30, 55 ff.

12 Opinion evidence is admissible under s 79 only if two conditions are satisfied. The first is that the witness has specialised knowledge based on his training, study or experience. Whatever be the precise scope of the requirement of 'specialised knowledge' (see R v G (1997) 42 NSWLR 451, 459), it is obvious that Mr Lonergan has specialised knowledge of the requisite kind.

13 However, Mr Lonergan's field of specialisation has its limits. He is an expert in the valuation of businesses and companies and company shares, and the interpretation of financial statements and other financial information. That expertise qualifies him to provide financial advice to shareholders and others, and he frequently gives such advice. Specialised knowledge and experience of those kinds does not, in my opinion, qualify him to give evidence of the kind which he purports to give in the paragraphs of the affidavit to which objection has been taken. The opinions in those paragraphs are expressed too widely to be wholly or substantially based on Mr Lonergan's specialised financial knowledge. He purports to speak 'from a commercial perspective' rather than strictly from a financial perspective. Some of his opinions are about what he regards as proper or standard or reasonably expected disclosures and practices in Part A statements, though he claims no recent experience in assisting in the drafting of those documents and in answer to questions in cross-examination, was not able to display any detailed familiarity with the contents of Part A statements in recent widely discussed takeovers. All things considered, his position is analogous to the position of the specialist US securities lawyer in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.6) (1996) 64 FCR 79, who was found not to be qualified to give expert opinion evidence of investor behaviour.

14 It is true that considered in isolation, some of the sentences in the paragraphs of the affidavit to which objection has been taken could be regarded as evidence of opinions based on Mr Lonergan's specialised knowledge, but in their context, those statements are components of broader evidence of Mr Lonergan's opinion of what is material to the decisions of AAPT shareholders.

15 Beginning with instructions to assess the Part A statement from a financial perspective, Mr Lonergan has in the end provided an affidavit which is not in any meaningful way limited to the financial perspective, and therefore is evidence which has drifted away from his specialised knowledge base. It seems to me that this observation, which leads me to uphold the defendant's objection to admissibility of the specified paragraphs, is applicable to the affidavit as a whole, and leads me to the view that I should give little or no weight to those parts of the affidavit which are in evidence.

16 Some of the questions for me to determine in this case are not questions which admit of evidence, but are simply questions of law - for example, whether paragraph 18 of the Part A statement complies with clause 20 of Part A of s 750 of the Corporations Law. Mr Lonergan's opinion, expert or otherwise, is simply not relevant to such issues. There may be room for expert opinion evidence on some of the matters which I have to determine, particularly as the standard of materiality for the purposes of clause 17 of s 750 requires the Court to consider whether certain kinds of information might reasonably affect the decision of the ordinary investor whether to accept the offer. But I am not convinced that Mr Lonergan has specialist knowledge of the field of investor behaviour generally, as opposed to specialist knowledge of matters of valuation and other financial matters which constitute some but not all of the factors which might reasonably influence investor behaviour.

Facts - introduction 17 In my judgment of 12 May 1999 I held that notices to produce and a subpoena served by AAPT on the two defendants and their solicitors respectively were valid to the extent that they required production of documents relating to the statement of intentions in the Part A statement. At the hearing on 17 and 18 May 1999 the evidence as to the offeror's intentions comprised documents produced by the defendants and the affidavits and oral evidence of the defendants' two witnesses. 18 Mr Peter George is the Director, Strategy and Policy Development of CWO. While his title is 'Director', he is not a member of the board of CWO though he is member of the board of CWOI. He reports directly to Mr Chris Anderson, the Chief Executive Officer of CWO. His responsibilities for CWO include consideration of acquisition opportunities and one of his specific responsibilities has been 'integration planning' in respect of the proposed acquisition of AAPT. This has involved identifying major issues in relation to the integration of AAPT and CWO, and also formulating the draft intentions clause of the Part A statement for the board of CWO to consider. The defendants' other witness was Paul O'Brien, CWO's company secretary. 19 No evidence was given by the Chief Executive Officer, Mr Chris Anderson, or by the Director of Corporate Financial Services of CWO, Jacqueline Giles, who was involved in the preparation of some of the relevant documents, or by the Director of Regulatory and Public Affairs of CWO, Stephe Wilks, who gave the briefing to analysts on 3 May 1999. AAPT submitted that I should draw the inference that those witnesses would not have assisted the defendants' case and that to have led evidence from those witnesses would have exposed facts unfavourable to the defendants. Counsel for AAPT cited Jones v Dunkel (1959) 101 CLR 298, 320-321; Commercial Union Assurance Co Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, 418-419; and White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169, 226-228. Though the submission is made in broad terms, a particular inference AAPT wishes me to draw is that the board did not form any intentions different from those disclosed in certain specified documents, including the board paper for the CWO board meeting of 22 April 1999 and the document referred to as the 'preliminary integration plan'. I propose to consider at length the content and status of the documentary evidence in this case. However, I do not regard it as appropriate to apply the Jones v Dunkel principle in view of the existence of other evidence which enables me to reach conclusions about the offeror's intentions. The witnesses who gave evidence for the defendants were the person responsible for integration planning and the drafting of the intentions clause in the Part A statement, and the person who as company secretary attended the board meeting at which the CWO board decided to modify the draft statement of intentions. They were appropriate witnesses and in particular, Mr George was in a position to give evidence as to the status of the documents, and he did so in cross-examination. In the circumstances, I see no room for any Jones v Dunkel inference. 20 It is not easy to piece together the significance and sequence of the documentary evidence, because substantial segments of the documents have been masked on the ground that the concealed portions are confidential and irrelevant. Hence, some of what follows is based on inference. 21 The documentary evidence shows that the possibility of CWO (and at an earlier stage, Optus Communications Ltd) acquiring AAPT was conceived no later than in July 1998. The acquisition project was named 'Project Merlin'. An Optus Communications paper on Project Merlin dated 24 July 1998, probably prepared by the Optus Corporate Finance Department referred to the advantages of a merger, which would combine the Optus and AAPT market shares in the small to medium business area, and achieve other identified advantages for specified areas of Optus' business. The project was developed between July 1998 and March 1999. 22 A paper headed 'Issues Relevant to the Determination of the Amortisation Period - Key Drivers to the Acquisition of Merlin', whose author was not identified, was evidently written no earlier than November 1998, since it refers to AAPT's then recent acquisition of the exclusive rights for LMDS Spectrum technology in Australia, an acquisition which according to Mr George occurred in about November 1998. The paper indicates that by this time, CWO's investigation of Project Merlin had reached a more specific stage. The paper identifies 'key drivers' which provide the opportunity to enhance and complement CWO's existing business in specified areas, including AAPT's exclusive rights to LMDS Spectrum technology (described in this paper as 'perhaps Merlin's biggest strategic asset'). These matters are quantified in the paper by reference (where appropriate) to figures on market share, numbers of employees and numbers of customers. The evidence does not enable me to conclude that this paper was adopted or approved by the CWO or CWOI boards, Mr Anderson or Mr George.

The preliminary integration plan 23 By early March 1999 a team comprising Jacqueline Giles (Director, Corporate Financial Services), Paul Donovan (Chief Commercial Officer) and Peter George were drafting what appears to have been a fairly substantial 'Merlin paper' which was finalised on about 9 March 1999. The full paper is not in evidence, but a draft of it comprising 28 pages was faxed to London on 9 March 1999 and the final version was dispatched for delivery on the same day. It appears to have included sections on 'strategic context' and 'integration approach' which were adapted into a three page paper identified by Mr George as the 'preliminary integration plan'. 24 This preliminary integration plan was referred to in a board paper for a meeting of the board of Cable & Wireless plc later in March 1999, and in a CWO board paper which was probably, having regard to the date of facsimile transmission, a paper for the board meeting of either 15 or 22 April 1999 (though at one stage in his evidence Mr George said it may have been for a March meeting). On balance, I find it was a paper for the CWO board meeting of 22 April 1999. On that basis, the preliminary integration plan appears to have been or been part of the 'management's current plans' referred to in the minutes of a meeting of the directors of CWO held on 22 April 1999. Mr George said he thought the plan had become 'largely historical' in the board by 22 April and referred to a 'change of heart' regarding sale of CDMA, but since the preliminary integration plan does not envisage sale of CDMA, but only internal transfer, whereas the draft board paper of 12 March 1999 envisages external sale, I infer that in this evidence Mr George was confusing the two papers. I conclude that the preliminary integration plan is a document of some importance. 25 The preliminary integration plan sets out succinctly a number of strategic considerations for CWO. They include an frank assessment of CWO's market position as Australia's second carrier and the business strategies which arise from that assessment, implications for CWO's involvement in the mass consumer market, and in light of that, a presentation of synergies which AAPT would offer, having regard to the latter's cost structure and market position. The document proceeds to set out the 'ideal split of businesses post-acquisition', in a way which proposes the transfer of some of the businesses of each of CWO and AAPT to the other. The paper states that 'in due course, part of Merlin could be divested by re-flotation or trade sale'. Under the heading 'Integration Issues', the preliminary integration plan proposes some 'guidelines' for the post-acquisition transition period, including the appointment of a designated full-time integration manager and the establishment of a transition steering committee, and explicit efforts to retain key personnel. It is true that the paper itself is merely a series of bullet points, some of which are little more than headings. However, the reader is left in no doubt that the document is a distillation of the fruits of a substantial planning process. 26 At about the same time as preparation of the preliminary integration plan, Mr George wrote by hand a single page paper headed 'Merlin Integration Initiatives', indicating that he had engaged the former head of AAPT's corporate advisers to assist him, and that a full-time integration manager would be appointed. I do not regard this document as indicating any intention or possible course of action beyond what is disclosed in the Part A statement.

The draft board paper dated 12 March 1999 27 A 'final draft' board paper dated 12 March 1999 (which may be the document faxed in draft to London on 9 March 1999) contains sections on 'business integration' and 'key risks'. As with the preliminary integration plan, this document outlines a process of reorientation of business, government and consumer customers between CWO and AAPT after the acquisition, and outlines plans for the Connect.com and Microplex networks and business operations, and proposals for the conduct of Cellular One's business. The document proposes to 'investigate and assess' the potential to sell residual assets and business areas not complementary to CWO's ongoing strategy, and one of those assets is specified. Mr George's evidence is that the draft board paper of 12 March 1999, which he refers to as 'preliminary material', represented the view of management regarding the business and assets of AAPT at that time, based on the publicly available information. 28 Also in evidence is an undated document headed 'Merlin Synergies - Breakdown', prepared by the Corporate Finance Department of CWO. The document includes 'values' for various business subdivisions, expressed in terms of estimated earnings before income tax, depreciation and amortisation. The document includes estimated cost savings resulting from rationalising the direct sales forces and tele-marketing, head office operations, network management centres, and customer service operations. It estimates the number of staff who would become redundant. It appears to me likely that this document was produced before the UK board meeting of March 1999, and in any event before the CWO board meeting of 15 April 1999. The evidence does not indicate that this paper was adopted or approved by the CWO or CWOI board, Mr Anderson or Mr George.

Cable & Wireless plc's board meeting, March 1999 29 This appears to have been the documentary state of affairs when the proposed acquisition was reported to a meeting of the Cable & Wireless plc board in March 1999. That meeting had before it a board paper containing headings 'Synergies and Benefits', 'Business Integration/Organisational Issues' and 'Key Risks'. It was prepared by Robert Lerwill, Chief Financial Officer of the UK company, who is also a director of CWO. It was based, at least in part, on the preliminary integration plan and the draft CWO board paper of 12 March 1999. It expresses CWO's plans in concrete and positive terms. It says that CWO 'has established' the total value of synergies and states a figure. It says that CWO believes the synergies to be 'realistic and achievable'. Some of the synergies, according to the paper, are derived from anticipated savings in carrier spend, lower interconnect charges and operational savings in network areas. According to the paper, CWO believes that these benefits can be captured quickly with relatively low risk. 30 The paper continues: 'Further synergies will be realised from merging customer service, operations and administrative functions in the key long distance and mobile product area. The timing of the realisation of these synergy benefits will be determined post transaction after a brief assessment of the feasibility of the CWO management approach to business integration. Provision has been made for loss of customers resulting from the merger.' 31 The paper then refers to longer term opportunities for savings from combining billing systems and from the abandonment or more selective application of a certain specified technology. Then the paper refers to the preliminary integration plan, some of which it summarises, and notes key risks. 32 Some time in April 1999 Jacqueline Giles prepared a paper which gives a quantitative comparison of CWO and AAPT in terms of total business and business divisions. Again, the evidence does not indicate that this paper was adopted or approved by the CWO or CWOI boards, Mr Anderson or Mr George.

CWO's board meetings, 15 and 22 April 1999 33 At a meeting on 15 April 1999 the board of CWO resolved to authorise the acquisition of the issued shares of AAPT and to appoint a committee to determine certain specified matters. On 16 April 1999 CWOI purchased 10.65% of the shares in AAPT and announced a takeover bid for the company. CWO's public relations department prepared written questions and answers on the AAPT bid. 34 The CWO board met again on 22 April 1999. According to the agenda, the first item for discussion was Project Merlin, and Mr Anderson was responsible for presenting the matter to the board. The paper which (as I have found) was before the board was to the extent it was relevant to these proceedings, almost identical with the board paper considered by the Cable & Wireless plc board in March. It stated that CWO had established the total value of synergies at a figure which was expressed, and that those synergies were believed to be realistic and achievable. It referred to and summarised the preliminary integration plan. The principal and possibly the only difference between this paper and the previous UK paper is that on this occasion, the paper referred to 'an assessment of the feasibility of the CWO management approach', rather than a 'brief assessment'. I infer that the word 'brief' was deleted so as bring the paper into line with the draft intentions clause in the Part A statement, which had been sent to London on 20 April 1999. 35 The minutes of the meeting of 22 April 1999 contain the following: 'Chris Anderson assured directors that the statements made in the draft offer document tabled at this meeting concerning the company's intentions regarding AAPT's business, assets and employees represented a true and fair view of management's current plans. These intentions however, may need to be reconsidered following the proposed review of the AAPT business at the end of the offer period as stated in the offer document. Following further discussion IT WAS AGREED that the intention statement concerning current employees of AAPT be reviewed to the satisfaction of the Chief Executive and external legal advisers to ensure that it represents a true reflection of management's current intentions based upon all relevant materials available to the company.' 36 It is clear that the reference to the 'draft offer document' is a reference to the draft Part A statement, and the reference to the draft concerning the company's intentions is a reference to paragraph 18 of that document. Mr Anderson assured the directors that the draft paragraph 18 was a true and fair view of 'management's current plans'. What were 'management's current plans' at that time? On one construction of the minute, Mr Anderson was telling the board that as far as management's thinking was concerned, the draft board paper of 12 March 1999 and the preliminary integration plan had been superseded by draft paragraph 18. An alternative construction of the minute is that Mr Anderson was assuring the board that the draft paragraph 18 was a true and fair view of the thinking of management as expressed in those other documents, to the extent necessary to comply with the disclosure requirements of the Corporations Law. 37 In my opinion the latter is the correct construction of the minute. I find nothing in the evidence to indicate that management, and in particular Mr George, resiled from the preliminary integration plan and the draft board paper of 12 March 1999 prior to the board meeting of 22 April 1999. The board paper on Project Merlin for the 22 April meeting referred without qualification to the preliminary integration plan. Had there been a basic and wholesale change in management thinking, one would have expected to see a minute expressed in more specific terms than the minute set out above. The evidence shows that management's thinking evolved during the period from 12 March to 22 April. Management's thinking about the post-acquisition relationship between CWO and AAPT with respect to the residential and small business customer bases appears to have been changed or clarified (see Mr George's affidavit of 13 May 1999, paragraph 7(e)). Thinking appears also to have evolved on the LMDS technology and CDMA spectrum. But I find that most of the views in the 12 March paper, and all of the preliminary integration plan, remained management's current thinking on 22 April. 38 It is plausible to infer that at the meeting of 22 April 1999, one or more directors may have expressed disquiet at the rather subdued level of disclosure of the offeror's intentions, in light of what the directors knew about the amount of planning which management had already undertaken. I construe the minute of the meeting to mean that Mr Anderson gave an assurance to the directors that draft paragraph 18 was true and fair disclosure notwithstanding the extent of management's current plans. In giving that assurance, he would have been fortified by the views of Mr George. Though Mr George did not attend the meeting, it is reasonable to infer that he had discussed the agenda with Mr Anderson. Mr George's view, disclosed in his affidavit of 13 May 1999, was that in the absence of AAPT's confidential information concerning its business and assets, it was 'not possible to be certain that integration was either possible or desirable'. He said that 'it would only be with the benefit of that information that it would be possible to identify with precision what steps would be implemented'. Taking that view, he was satisfied with the draft intentions clause from management's point of view. Evidently he saw a distinction between 'intentions', which could only be formed with the benefit of AAPT's confidential information, and 'integration plans' which could be developed and refined, and used as the basis for a decision to make a bid, without ever becoming intentions. 39 As the minute notes, the board decided to review the intention statements concerning employees of AAPT. The draft clause which had been placed before the board stated that the integration of activities which the proposed Business Review and Integration Committee may recommend could give rise to some reductions in the number of employees. CWOI would ensure that appropriate redundancy arrangements would apply. Mr O'Brien's evidence is that a director expressed concern that the company was making too much of the issue of redundancies, and that AAPT's skilled employees should be redeployed in other parts of the business. Clause 18 was subsequently revised and approved by Mr George in its revised form. As revised, it stated that the integration of activities would be likely to result in duplication of functions and where that occurred, it was intended to consider whether the employees concerned could be redeployed in other areas of the combined businesses, and that re-training would be provided to employees. 40 On 23 April 1999 the board of CWOI approved the Part A statement and Offer documents.

Events after board approval of the Part A statement 41 Subsequently CWO's Public Affairs Department produced more questions and answers and the Human Resources Department prepared an e.mail which was sent to all CWO staff on 28 April 1999. The e.mail announced that the Part A statement had been released and described the proposal for a Business Review and Integration Committee. The document proceeded: 'Our intentions are to: • expand the range and depth of products and services available to AAPT customers, for example, we'll offer Optus Local Calls to AAPT customers who live in cabled (HFC network) areas; • integrate corporate and government customer bases to provide unmatched customer focus and depth of product innovation; • integrate network infrastructures of both companies to achieve broader coverage and cost efficiencies; • in the Internet/data area, integrate Microplex and Connect.com to achieve efficiencies and broader coverage; • sell any assets that are seen as being surplus to our future requirements; • seek to reduce any duplication of corporate office costs and support functions.' 42 The letter stated that 'all this is subject to the review, which will start once the deal has been done.' The letter said that 'our immediate intention is to ensure that the AAPT business continues uninterrupted'. 43 Then on 3 May 1999 CWO held a briefing for analysts. Present were Stephe Wilks (Director, Regulatory and Public Affairs of CWO) and Lisa Carver (a trade practices lawyer from Gilbert & Tobin, CWO's lawyers). A set of briefing notes comprising 37 pages of headings, evidently copies of overhead transparencies, is in evidence. The briefing notes addressed, inter alia, 'synergies and network/asset complementarity'. The notes on that subject imply that substantial thinking had been devoted to the matching of the businesses of the two companies. While most of the briefing notes concentrate on competition issues, there is particular coverage of the LMDS Spectrum, which draws attention to the advantage to CWO of acquiring that technology indirectly through the acquisition of AAPT, and the likely auction of additional LMDS Spectrum later this year.

Offeror's intentions - clause 20 of Part A, section 250 44 Section 750 of the Corporations Law sets out the requirements with which a Part A statement is to comply. They include the following: '20(1) The statement shall set out particulars of the offeror's intentions regarding: (a) the continuation of the business of the target company; (b) any major changes to be made to the business of the target company, including any redeployment of the fixed assets of the target company; and (c) the future employment of the present employees of the target company.' (2) Without limiting the generality of subclause (1), if the offeror has not made a decision on a matter referred to in paragraph (1)(a), (b) or (c) but is considering a possible course of action, or 2 or more possible courses of action, in relation to that matter, the statement shall set out that fact and specify the course of action or courses of action concerned and the reason why the offeror has not made a decision on the matter.' 45 In my judgment delivered on 12 May 1999 I noted that as a matter of literal construction, clause 20 of s 750 is not subject to any overriding requirement of materiality. The legislature has itself determined, by prescribing disclosure of the matters set out in clause 20, that disclosure of those matters is to be made to shareholders and therefore they are presumed to be material. This is not to deny that there may be information about the offeror's intentions which is material information and must be disclosed under clause 17, even thought it does not fall within the wording of clause 20. Nor is it to deny that clause 20, like every other clause in s 750, must be construed by reference to the object of s 750 as a whole, which is that offeree shareholders should be in possession of the information required to enable them to make an informed and critical assessment of the offer and an informed decision as to whether to accept it: Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300, 303 per King CJ; Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd (1994) 51 FCR 554, 561 per Sheppard J.

The defendant's disclosure of intentions in the Part A statement 46 Paragraph 18 of the Part A statement, which runs for three pages, contains the defendants' disclosure with respect to their intentions. The intentions of CWO are the same as the intentions of CWOI (para 18.1). There are two matters of disclosure of intentions which are relatively self-contained: • CWOI intends to seek the appointment of nominees as directors of AAPT and in doing so, it will take into account the percentage holding of AAPT shares which it has at the end of the offer period (para 18.3); • if at the end of the offer period CWOI is entitled to proceed to compulsory acquisition, it will do so and will seek to remove AAPT from the official list of the Australian Stock Exchange. 47 The remainder of paragraph 18 discloses the following: • CWOI's intentions are based on its review of publicly available information, since it has not had access to internal, confidential information of AAPT concerning its operations, business plan, financial position, strategic objectives and other relevant matters (para 18.2); • at the end of the offer period CWOI intends to propose to AAPT's board that a Business Review and Integration Committee be established, comprising senior executives of CWO and AAPT, to conduct a strategic and financial review of each of AAPT's businesses, develop a detailed integration plan for those businesses of CWO and AAPT which the Committee decides should be integrated, and consider whether the steps listed in para 18.6 can and should be implemented (para 18.5); • CWOI intends to consider whether the steps set out in para 18.6 should be implemented with respect to the businesses, activities and assets of AAPT; • 'final decisions' on the matters set out in para 18.6 will be made following the results of the review referred to in para 18.5 and implementation will be subject to para 18.8 (para 18.2); • apart from the intention to establish the Business Review and Integration Committee and intentions concerning some of the businesses of AAPT which are referred to in para 18.6, CWOI has not formed any intention concerning any of the businesses, assets and employees of AAPT other than to continue the businesses as going concerns and to maintain the required capital support and management resources for and the existing employment of all current employees of those businesses (para 18.7); and • the steps referred to in para 18.6 can only be implemented by the directors of AAPT agreeing to do so, and this is subject to the directors complying with all legal and regulatory requirements and their duties, including the requirement that they act in the best interests of AAPT and its shareholders, and unless AAPT is a wholly owned subsidiary at the time, any plan to integrate the assets and businesses of AAPT with those of CWO may require the approval of the shareholders of AAPT (para 18.8). 48 Paragraph 18.6 is of central importance. It lists the steps which CWOI intends to consider regarding the businesses, activities and assets of AAPT through the Business Review and Integration Committee which it will propose to the board of AAPT at the end of the offer period. The steps which are listed are: '• increase the range of products acquired by AAPT from CWO on a wholesale basis; • integrate the corporate and government customer bases and the corporate and government sales and management divisions of both CWO and AAPT in order to both retain and provide enhanced services to the corporate and government customers of CWO and AAPT; • integrate the network and business operations of Microplex Pty Ltd ACN 076 698 756 with the network and business operations of Connect.com.au Pty Ltd ACN 054 112 435; • integrate the network infrastructure and related resources of both CWO and AAPT; • integrate the corporate office functions, network management functions and customer service functions of AAPT with those of CWO in order to eliminate duplicated activities and costs; • dispose of any assets which are identified by the Business Review and Integration Committee referred to in paragraph 18.5 as being surplus to the ongoing requirements of the CWO and AAPT Groups.' 49 Paragraph 18.6 then points out that the integration of these activities is likely to result in duplication of functions, particularly in the corporate office, network management and customer service areas. Where there is such duplication, the intention is to consider whether the employees concerned can be redeployed within the CWO and AAPT Groups, and redeployment will be facilitated by retraining where appropriate. If in spite of this it is necessary to reduce the number of employees, CWOI will ensure that appropriate redundancy arrangements will apply. Selection of employees of the integrated activities will as a general principle be based on merit.

History of clause 20 of Part A of section 750 50 Some guidance as to the scope and purpose of clause 20 of s 750 can be obtained from a brief examination of its history. Prior to the enactment of the National Co-operative Companies and Securities Scheme during the period 1979 to 1982, Australian companies legislation did not require a takeover offeror to make any statement about its intentions for the business and employees of the target. Part A of the Tenth Schedule to the Companies Act 1961 (NSW) required the Part A statement to set out 'full particulars of the takeover offer' but that was interpreted as a relatively formal requirement. Much broader disclosure requirements were proposed in Schedules 6 and 7 to the Corporations and Securities Industry Bill 1974 (Cth). Clause 5 of Schedule 6 would have required the offer document to set out particulars of 'any plans or proposals that the offeror has formulated with respect to the target corporation or any related corporation for implementation if the takeover scheme is wholly or partially successful'. Clause 6 proceeded to specify a number of matters, including disclosure of plans or proposals for re-organisation or merger of the target corporation or the sale of its assets, or any other major change in the business or structure of the target. According to the explanatory memorandum (para 212), the Bill aimed to give effect to the recommendations of the Eggleston Committee in its Second Interim Report (Company Law Advisory Committee to the Standing Committee of Attorneys-General, February 1969). However the Eggleston Committee had recommended only modest revisions to the offeror's disclosure document, not relating to disclosure of intentions. It is probable that the inclusion of disclosure of 'plans and proposals' had its origin in US federal securities law, which was a strong influence upon the drafters of the Bill. 51 The Williams Act amendments to the Securities Exchange Act of 1934 (US), which took effect in 1968, made it unlawful for any person 'to make a tender offer for, or request an invitation for tenders of' any class of registered equity security if consummation of the offer would make that person the beneficial owner of more than 5% of the class, unless a disclosure document was filed with the Securities and Exchange Commission (section 14(d)(1)). The content of the disclosure document, a tender offer statement, is prescribed in Schedule 14D-1 to the Rules, item 5 of which requires a statement of the purpose or purposes of the tender offer, and a description of 'any plans or proposals' which relate to or would result in various matters, including a merger or re-organisation, sale of a material amount of assets of the target, a change in board composition of the target, a material change in the target's capitalisation or dividend policy, and any other material change in the target's corporate structure or business. Additionally, section 13(d)(1)(C) of the 1934 Act, which imposes a 'substantial shareholder' disclosure obligation where a person is the beneficial owner of more than 5% of a class of registered equity securities, states that if the purpose of the purchase is to acquire control of the business of the issuer of the securities, the purchaser must disclose any plans or proposals to liquidate the issuer, to sell its assets or to merge it with another entity, or to make any other major change in its business or corporate structure. Item 4 of the Schedule 13D form of disclosure required by the Rules is in terms broadly similar to item 5 of Schedule 14D-1. 52 Case law under section 13(d) indicates that the purpose behind the acquisition must be disclosed even if there is no present implementation plan or the plan is less than definite: K-N Energy, Inc v Gulf Interstate Co 607 F Supp 756 ( D C Colo 1983). However, in Susquehanna Corp v Pan American Sulphur Co 423 F 2d 1075 (1970) Ainsworth J remarked (at 1085) that section 13(d) requires a potential bidder to disclose only material information, and therefore the disclosing party need not 'walk a tortuous path': 'He must, of course, be precise and forthright in making full and fair disclosure as to all material facts called for by the various items of the schedule. At the same time he must be careful not to delineate extravagantly or to enlarge beyond reasonable bounds. The securities market is delicately arranged and needs only slight impetus to upset it. As Judge Friendly has pointed out in the only other appellate court decision thus far involving the new tender offer provisions of the Act, 'It would be as serious an infringement of these [SEC] regulations to overstate the definiteness of the plans as to understate them.' Electronic Speciality Co. v. International Controls Corp ., 2 Cir., 1969, 409 F.2d 937, 948. Judge Friendly finds that the congressional standard of disclosure is one requiring 'basic honesty and fair dealing' by the offeror. Id . At 948. In the cited case the Second Circuit rejected an attack against the offeror's Schedule 13D statements, Judge Friendly observing, 'Probably there will no more be a perfect tender offer than a perfect trial.' Id. At 948. Though the offeror has an obligation fairly to disclose its plans in the event of a takeover, it is not required to make predictions of future behaviour, however tentatively phrased, which may cause the offeree or the public investor to rely on them unjustifiably. See Note, Cash Tender Offers, 83 Harv.L.Rev. 377, 394, 395 (1969). Target companies must not be provided the opportunity to use the future plans provision as a tool for dilatory litigation. 83 Harv.L.Rev. at 394.' (See also USG Corp v Wagner & Brown 689 F Supp 1483 (ND Ill 1988).) 53 When the Corporations and Securities Industry Bill was abandoned after a change of government in 1975, the reform of takeover regulation became part of the proposals for the National Co-operative Companies and Securities Scheme. Although the self-regulatory model of the London City Panel on Takeovers and Mergers was not adopted, much attention was given to the substantive provisions of the London City Code. Rule 15(2) of the London City Code said at that time: 'The offeror will normally be expected to cover the following points in the offer document and the board of the offeree company should, in so far as relevant, comment upon such statements in a letter to its shareholders: (a) its intentions regarding the continuation of the business of the offeree company; (b) its intentions regarding any major changes to be introduced to the business, including any re-deployment of the fixed assets of the offeree company; (c) the long-term commercial justification for the proposed offer; and (d) its intentions with regard to the continued employment of the employees of the offeree company and of its subsidiaries.' 54 Rule 15(2) (now Rule 24) did no more than set out the expectations of the Panel in normal circumstances, in the context of a self-regulatory system in which the Panel is available to give confidential advance rulings on points of interpretation. 55 The national takeover legislation when first enacted (Companies (Acquisition of Shares) Act 1980) did not include any requirement to disclose the offeror's intentions with respect to the business and employees of the target. However, the first amending Bill (Companies (Acquisition of Shares) Amendment Bill 1980) introduced paragraph 5A to Part A of the Schedule to the Act, which took effect prior to the Act's commencement on 1 July 1981. Paragraph 5A was identical to the present clause 20(1) of s 750. The explanatory memorandum to the amending Bill, para 43, stated without further explanation that 'similar requirements' were contained in Rule 15 of the London City Code and section 13(d)(1)(c) of the Securities Exchange Act of 1934. 56 In my opinion the history of clause 20 of s 750 is not merely of interest to the comparativist or antiquarian. The history shows that the London City Code was the direct precedent for the drafter of clause 20. But the wording of the City Code was developed in a commercial rather than a legal context, in a system of regulation by principles to be applied according to their spirit. In that context it is unlikely that the word 'intentions' would be taken either as confined to strict corporate intentions formally adopted at board level, or as extending to all management proposals postulated during planning of the bid; and compliance with the disclosure rule would be judged by the quality and pertinence of the information considered as a whole. The acknowledged influence of the US federal regulatory system points in the same direction. Although the US system contains much more 'black-letter' prescription than London's, the US courts insist on a purposive interpretation, shown in the US cases to which I have referred. Given the direct and indirect influence of US Law on the drafter of clause 20, the US cases are an available source of guidance to the proper interpretation of our law.

Case law before the enactment of clause 20(2) 57 The scope and content of paragraph 5A were considered in Cumberland Credit Corporation Ltd v TNT Australia Pty Ltd (1988) 13 ACLR 371 (Beach J) and ICAL Ltd v County Natwest Securities Australia Ltd (1988) 39 NSWLR 214, 13 ACLR 129 (Bryson J). 58 In Cumberland Credit the bid was apparently for cash and no conditions were referred to in the judgment. The company's sole assets were a large amount of cash on deposit and some shares. The Part A statement said that if the takeover was successful, the offeror's intention was to replace the majority of directors, and to review and evaluate the activities, investments and assets of the target. The review might or might not lead to the conclusion that activities should be developed, assets reinvested and staff changed. The offeror did not have the information necessary to form specific intentions concerning those possibilities. Pending the outcome of the review, the offeror's intention was to continue the business and employees of the target and make no major changes. 59 Beach J held that this level of disclosure was inadequate to comply with paragraph 5A, on two grounds. First, he found that the Part A statement was inconsistent with other evidence which indicated that the offeror had in fact made a final decision to make major changes to the business of the target, including redeployment of fixed assets. Four days before service of the Part A, the offeror's managing director had said on television 'we know what we will do with the company'. Two days before service of the Part A, he was reported in a newspaper as saying that the offeror would simply absorb the target's cash if the bid was successful. 60 Secondly, there was evidence that management of the offeror had given consideration to three alternative possibilities, namely to redeploy the assets of the target within the offeror's business, to liquidate the target's share portfolio, or in the event that the offeror did not acquire 100% of the target, to manage the target as a public listed company. In his Honour's view, it was incumbent on the offeror to reveal those alternative intentions in the Part A statement. The offeror could not circumvent paragraph 5A by simply saying that it had considered various alternatives but would not come to a final conclusion until the offer has proved to be successful. That approach would not be consistent with the Code's purpose of ensuring that the acquisition of shares takes place in an informed market. He observed that the word used in clause 5A was 'intentions', rather than 'intention', and he referred to the meaning of the word 'intention'. Noting dictionary definitions that an intention is a 'purpose or design', he referred to Betty's Cafes Ltd v Phillips Furnishing Stores Ltd [1959] AC 20, where Viscount Simonds (at 33) approved of Asquith LJ's observation in Cunliffe v Goodman [1950] 2 KB 237 that a party 'intending', rather than merely contemplating, decides to bring something about by his own act of volition. In Beach J's view, a person may have intentions in this sense even if they are in the alternative. 61 The defendants in the present case sought to distinguish the Cumberland Credit case on the ground that there, the evidence caused the court to disbelieve the offeror's statement that it had not made a final decision. However, this overlooks the second ground for Beach J's decision. Even so, in my opinion Beach J's second ground for decision was based closely on the facts before him, which enabled him to characterise evidence about 'various alternative possibilities' as revealing 'alternative intentions'. On other facts, a court might conclude that consideration of possibilities has not matured into the adoption of alternative intentions, assuming that the word 'intentions' has the meaning which his Honour attributed to it. 62 The ICAL case related to a Part C statement, but the requirement to disclose intentions is and was at that time the same for a Part C as for a Part A statement. The Part C statement disclosed that the offeror's intention was to seek board appointments consistent with its shareholding after expiry of the offers. As regards major changes to the business of the target, it said that the offeror's intention was to rationalise those aspects of the target's operations where duplication existed within the operations of the offeror's group. A strategic review would also be conducted in respect of the target's properties and investments. The offeror would assess the strategic value of the fishing interests of the target's wholly owned subsidiary, but otherwise intended to continue the subsidiary's business as presently conducted. Subject to all those matters, the offeror's intention was that the target's business would continue as a separate trading entity and the target would continue to employ its present management and employees. 63 Bryson J found this disclosure to be inadequate. He said that although the word 'rationalise' meant on its face to make rational any duplicated operations, and that the reader might suspect that the word was used as a euphemism for closing down or selling off some unidentified aspects of the target's operations, the words used were not capable of indicating the offeror's intention as to what would be done with the target's operations. His Honour described the expression 'strategic review' as indeterminate figurative language with vaguely military connotations, leaving to guesswork the meaning of that expression in relation to particulars of the offeror's intentions for continuation of and major changes to the target's business. 64 In that case evidence was given by the person who was the decision-maker for the offeror, and therefore its directing mind and will. Bryson J reviewed that evidence fully and concluded that in several respects the Part C Statement had failed to disclose the offeror's intentions as deduced from that evidence. It should have indicated that if the takeover was successful, the prospect of advantage to the target from subcontracting for the ANZAC Ship Project would be significantly reduced, since the offeror intended that decisions on subcontracting would be taken with a view to protecting its own investment and interests. Further, there was evidence that the offeror's group would dispose of operations of the target and its subsidiary which did not fit its consortium's objectives. Business activities of the target had been identified and a probable sale price had been calculated. On the basis of a substantial amount of evidence, Bryson J concluded that the offeror had formed a 'fairly firm' intention to sell off a large part of the target's assets, although that intention was open to reconsideration with respect to timing, amount and identification of particular assets. 65 The offeror had decided not to disclose this intention to the target's shareholders because it was apprehensive that to do so might injure its future relations with the target's staff. On that point, Bryson J observed (at 239) that 'if a disclosure is required by Part C it must come out, no matter how much alarm it causes or how much it complicates future business'. He found (at 240) that there was an intention to sell significant assets of the target, 'no less so because the intention is not complete, unreserved and final, and there is room for further consideration of the choice of particular assets and the time of sale'. In his opinion the case was not one about disclosure of alternative intentions, because there was an actual intention which ought to be disclosed, 'even if contingent and subject to further consideration or possible review'. 66 Again, the court's conclusions in the ICAL case were closely related to the evidence, which appears to have been voluminous. The case indicates that depending on the facts, the court may conclude that the offeror's consideration has moved beyond mere contemplation to the stage of decision - that is, the adoption of a purpose or design - even though contingent or subject to further consideration or review. The case did not imply that under the law as it then stood, everything which is under consideration must be disclosed, because some matters under consideration may not have matured from the realm of contemplation to the realm of decision.

Case law after the enactment of clause 20(2) 67 The Corporations Law replaced the Companies (Acquisition of Shares) Codes on 1 January 1991. Clause 20(1) of Part A of s 750 replicated paragraph 5A of the Code, while clause 20(2) was added. The explanatory memorandum for the Corporations Bill 1988, para 2310, states somewhat uninformatively: 'The requirement to set out particulars of the offeror's intentions (clause 20) is different to the requirement found in clause 5A of the Part A to the Schedule of CASA in that it provides that, where a relevant intention has not been finalised but the offeror is considering possible courses of action, those possibilities are to be specified (sub-clause 20(2)).' 68 It appears to me that clause 20(2), while confirming Beach J's second ground of decision in Cumberland Credit, expands the disclosure requirement. In ICAL, Bryson J was careful to find, on the basis of substantial evidence, that an actual intention had been formed, albeit dependent on conditions and subject to possible review; and in Cumberland Credit Beach J treated evidence about possible courses of action as signifying that the offeror had formed some alternative intentions . On the reasoning in those two cases, it would not have been necessary, prior to 1 January 1991, to disclose possible courses of action which were merely under consideration or, in Asquith LJ's words, a state of affairs which the offeror had done no more than 'merely contemplate'. Clause 20(2) advances the disclosure obligation to merely possible courses of action, provided that the offeror 'is considering' them. 69 The expanded disclosure obligation in clause 20 has been the subject of discussion in the following cases: QIW Retailers Ltd v Davids Holdings Pty Ltd (No.1) (1992) 36 FCR 386, 8 ACSR 245; Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300, 11 ACSR 84; Associated Dairies Ltd v Central Western Dairy Ltd (1993) 44 FCR 335, 11 ACSR 234; Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd (1994) 51 FCR 554, 14 ACSR 11; Bridge Oil Pty Ltd v Parker & Parsley Petroleum Australia Pty Ltd (1994) 15 ACSR 240; Stirling Resources NL v Capital Energy NL (1996) 19 ACSR 701; Ampolex Ltd v Mobile Exploration and Producing Australia Pty Ltd (1996) 19 ACSR 354; Kresta Holdings Ltd v CHKP Capital Pte Ltd (1998) 26 ACSR 486; Savage Resources Ltd v Pasminco Investments Pty Ltd (1998) 30 ACSR 1. 70 In the QIW case the Part A statement said that the offeror 'has not yet formulated a detailed merger plan', and the offeror contended that no 'detailed' plans had been made as to precisely how the merger would take place, how it would be funded, and what precise assets would be transferred. Heerey J observed that the qualifiers 'detailed' and 'precisely' suggested that there were in fact plans of some sort, and referred to evidence of discussions between the offeror and the target well before the making of the bid which indicated that even then, details of funding proposals had been worked out. He concluded that according to the evidence, the offeror had a present intention with respect to major changes to the target's business, even though a decision may not have been made as between a number of possible courses of action. 71 In the Samic case the target's assets were entirely in cash. The Part C statement said that the intention of the offeror was to identify investments for the target which would earn a higher yield than existing bank deposits, with the ultimate objective of increasing the value of shareholders' interests in the target. The judge at first instance found that the offeror intended to use the target's cash for corporate acquisitions or investment in substantial holdings in companies, rather than merely for passive investment in listed securities. One of the witnesses explained the transaction as 'a case of buying cash at a discount'. The Full Court of the Supreme Court of South Australia concluded that the statement of intention in the Part C statement concealed rather than revealed the offeror's true intentions. King CJ observed (60 SASR at 303) that the true nature of the offeror's intentions could affect the assessment by offeree shareholders of whether the offeror was likely to improve its offer, the prospects of a competing offer, and the prospects for the shares if they were retained under new management. 72 In the Associated Dairies case, the Part A statement for a cash bid which was subject to a 50% minimum acceptance condition, made the following points about the offeror's intentions: if the offer became unconditional, the offeror would conduct a review of the target's business in conjunction with existing management to examine whether opportunities existed to improve operating and organisational efficiencies and increase overall profitability; pending the results of the review, and on the basis of the information known to it, the offeror's intention was to continue the business and employees of the target and not to make any major changes; if the offeror became entitled to all of the target's shares, its intention was to de-list the target and 'integrate its operations with those currently conducted' by the offeror, with the result that the target would continue as the subsidiary responsible for developing the group's presence in the Victorian market. Ryan J found that the concept of 'integration' which had been used in the Part A statement was ambiguous, just as the word 'rationalise' had been found to be ambiguous by Bryson J in ICAL. The word might have connoted the amalgamation of some head office functions with consequent redundancies of employees, and might have connoted the redeployment of fixed assets. Therefore the Part A statement failed to comply with clause 20. 73 In the Gantry Acquisition case the Part A statement of one of two competing offerors who had made cash bids contained a lengthy clause dealing with intentions. The clause stated that the offeror intended ultimately to concentrate its activities within the United States, and consequently it intended to cause the target to divest its non-US operations and assets at an appropriate time and on the most favourable terms. It identified several options under consideration, namely a sale of assets in whole or in part, and a possible Australian public offering of all or a proportion of the non-US assets. The offeror had not made a decision in respect of those options in the absence of sufficient information, and any decision would be made only after it had examined the operations and assets and further considered its position. Its intention was that the non-US assets would continue to be managed in their best long term interests. The offeror said it intended to cause a royalty interest to be sold for an approximate purchase price which was specified. Subject to those matters, the offeror intended to continue the business and employees of the target and did not intend to made major changes to the business. 74 Sheppard and Burchett JJ held, Beazley J dissenting, that the Part A statement failed to comply with clause 20 of s 750. Sheppard J regarded the disclosure as generally satisfactory, but found that the subparagraph which disclosed the intended sale of a royalty interest was expressed in a confusing and incomplete manner. Noting that clause 20(1) requires 'particulars', and that clause 20(2) requires the offeror to 'specify' possible courses of action, he said (51 FCR at 560): 'Accordingly, an offeror must do the best it can to be particular and specific about its intention. Nevertheless the document is dealing with a commercial situation. It is being delivered in a context in which the offeror does not have control of the target company. In those circumstances it is not only reasonable, it is also necessary to express itself in a guarded way. If it does not do this, it runs the risk that statements it makes may, because of their very particularity, be found to have been misleading.' 75 As to the sale of the royalty interest, he reasoned that further particularisation and an indication of the ultimate destination or use of the sale proceeds would give the offeree shareholder an idea of how important the acquisition of the target was to the offeror; this would better enable the offeree shareholder to gauge the likelihood of being able to gain an increased offer by refusing acceptance for the time being. He said (51 FCR at 561): 'It is a question of being given full and sufficient information to make a judgment concerning how valuable the acquisition will be to the appellant and thus of making an informed assessment of whether the appellant may be prepared to pay more for the shares than its offer suggests.' 76 Burchett J also stressed the use of the words 'particulars' and 'specify', which left him in no doubt that precision was essential for compliance with clause 20. Finding that the disclosure of intentions fell far short of what was required by clause 20, he observed that words such as 'ultimately' and 'at an appropriate time' reduced the disclosure to such generality that the information which it provided was useless (51 FCR at 569). 77 In Stirling Resources the Part A statement for a scrip bid stated the offeror's intentions if the bid was 'successful' and its nominees constituted the majority of directors on the board of the target. The intentions in those circumstances were to continue the target's business in its present form but to focus the target more on its core activities of petroleum exploration and production, and to evaluate non-core businesses in terms of their strategic value and future benefits. The divestment of non-core assets that produce a marginal return and have no strategic value might be considered. Subject to that, no major changes were intended to be made to the business of the target, other than that the offeror would consider pooling office administration and technical facilities. The staffing requirements of the combined group would be reviewed and the present employees would be given due consideration for continued employment, but to the extent that there would be a duplication of functions, the employment of surplus staff could be terminated. 78 Hill J rejected a submission that this disclosure was simply too vague to be satisfactory. However, he held that the disclosure did not comply with clause 20 because it dealt only with intentions in the event that the bid was successful and the offeror's nominees became a majority of the board of the target. He held that clause 20 is not satisfied by disclosure of particulars of the offeror's intentions only in limited circumstances but not in other circumstances. He also rejected a submission that the Part A statement was inaccurate because some correspondence between two directors indicated that they had formed a more specific intention. In Hill J's opinion, views in the minds of individual directors not communicated to other directors nor made the subject of board decisions could not be taken to be the plans of the company. He said that 'a company's intentions can only be judged by reference to the intentions of the directors, not the directors singularly but the directors acting as a board', although there may be cases in which 'a particular person may be found as a fact to be the governing mind of a company so that that person's intentions may be taken as being the intentions of the company' (14 ACLC at 1010). 79 In the Ampolex case the Part A statement for a conditional cash bid stated that the offeror's intention, if the bid was successful, was that the target's business and the employment of employees would be continued and no changes would be made. However, if the bid were successful, the offeror's executives would discuss with executives of the target the best way to utilise the assets and the experience and expertise of the target's employees for the benefit of the group. In accordance with usual practices of the offeror, the target's assets would be subject to regular scrutiny and review. The Part A statement referred to a review which the target had announced with respect to its United States assets, and said that the offeror proposed to discuss that review process with executives of the target to determine whether the United States assets should be retained, merged with existing assets of the offeror's affiliates or divested. The offeror stated that it recognised that an issue which will need to be resolved is the rationalisation of functions presently carried out by the respective Australian offices of the offeror and target, and that the offeror intended to identify and realise potential costs savings associated with avoiding duplication of functions. 80 Sackville J held that the statement of intentions did not comply with clause 20 and was misleading. There was significant evidence to indicate that the offeror had a well developed strategy to integrate the business of the target into the offeror's worldwide operations. In particular, a director of the offeror's parent set out the strategy in a letter to the managing director of the target, after the letter had been reviewed by the offeror's chairman and managing director. Sackville J said that the bland statement that the offeror intended to discuss with executives of the target the best way to utilise the assets and experience of the target for the benefit of the offeror's group, obscured the true position and was apt to mislead shareholders. A shareholder reading the Part A statement would gain the impression, not merely that the offeror contemplated no change in relation to the business and assets of the target, but that the offeror had been unable to form a clear view as to the future conduct and direction of the business until discussions with the target's management had taken place. He said (14 ACLC at 769): 'The point is not that MEPA is obliged to specify in a Part A statement the details of all plans it is considering for Ampolex's future operations. In order to avoid misleading shareholders it is clearly necessary for an offeror to couch its language carefully. It is also necessary to avoid speculation. General statements may well be enough, especially if intentions cannot be formulated precisely until after a takeover is completed. … But the defect in [the Part A disclosure of intentions] in my opinion, is not merely that it omits material information, it is that it creates the impression that MEPA is much less advanced in its planning with respect to the development and exploitation of Ampolex's under performing resource base than is in fact the case.' 81 In Kresta Holdings the Part A statement for a partial takeover bid said that the offeror's overall strategy was to 're-engineer' the target into a professional, lean and fighting fit company, successful in Australia, New Zealand, the Middle East and Asia. The first plan was to stem losses and return the target to profitability quickly. Thereafter the target would be expanded aggressively into the Middle East and Asia by 'leveraging' on the bidder's extensive overseas business network. Templeman J conceded that this disclosure may have been little more than advertising puff, but he said that it did provide some indication of intentions, and the matter could be made the subject of comment in the Part B statement. 82 In the Savage Resources case, the Part A statement for a cash bid subject to a minimum acceptance clause set out the offeror's intentions concerning the target in the event that the target became its wholly owned subsidiary. Those intentions included the achievement of synergistic benefits from operating the target's US zinc assets in conjunction with the offeror's Australian and European zinc operations; disposal of the target's coal interests and its interest in a copper and gold project; a review of whether to continue to develop or dispose of certain other exploration assets; and the probable closure of the target's Sydney head office as part of a process of reducing or eliminating costs arising from the maintenance of a separate share registry, secretarial and head office functions for the target. No complaint was made about the sufficiency of this disclosure. However, the target complained that the offeror had not adequately disclosed its intentions should the target become a controlled entity but not a wholly owned subsidiary. The Part A statement said that although the offeror had no present intention of waiving the minimum acceptance condition in the offer, if this were done and the target became a controlled entity but not a wholly owned subsidiary, the offeror would review whether continuation of the target's listing was worthwhile, replace some or all of the directors of the target to reflect the offeror's ownership interest, and implement such of its intentions as were consistent with the target being a controlled entity but not a wholly owned subsidiary. The Part A statement said that the offeror would only make a decision on these possible courses of action following receipt of legal and financial advice, and its intentions must be read subject to the legal obligation of the board of directors of the target to have regard to the interests of all of the target's shareholders. 83 Hely J held that the statement of intentions was adequate, and that there was no evidence which would establish that the offeror had any intentions which had not been disclosed. He noted the law's rigorous insistence that a majority shareholder cannot dictate to directors how they should discharge their duties of office, and took the view that clause 20 does not require the formation of specific intentions which would pay only lip service to the basis company law. He said that statements as to the offeror's intention should its preferred position that there be no waiver of the minimum acceptance condition change must necessarily be guarded, because in that event the reconstituted board would have to act in the interests of the target's shareholders as a whole.

Management plans and corporate intentions 84 It is plain from my account of the facts that various management groups and individuals within CWO had developed plans prior to 22 April 1999 relating to the business, assets and employees of AAPT. It would be absurd to require that all of these plans be disclosed in the Part A statement. Clause 20 does not do so. It confines the disclosure obligation to particulars of the offeror's intentions regarding stated matters, and possible courses of action which the offeror is considering. 85 Although clause 20(2) is undoubtedly very wide, a possible course of action need not be disclosed in the Part A statement unless it is being 'considered' by the offeror. In my opinion, clause 20(2) does not require disclosure of possible courses of action which have no rational attraction or likelihood of adoption, even if they have been discussed at board or senior management level, since mere discussion does not imply that the offeror 'is considering' the matter which is discussed. Disclosure of such matters would be likely to mislead offeree shareholders, because disclosure that a course of action is being considered implies that there is at least a plausible possibility of implementation. The commonsense observations in the Susquehanna Corp case (cited above), that the offer must be careful not to 'delineate extravagantly' or 'overstate the definiteness of the plans', are adaptable to the proper construction of clause 20(2), and are reinforced by the observations of Sheppard J in Gantry Acquisition (51 FCR at 560) and Sackville J in Ampolex (14 ACLC 769) which I have extracted above. 86 In the present case it cannot and has not been asserted that any distinction should be drawn between the intentions of and consideration of possible courses of action by CWO and CWOI. But counsel for the defendants submits there is an important distinction between the intentions of and consideration by those companies and the intentions of and consideration by individuals and working groups within the CWO management. He says that when clause 20 requires disclosure of the intentions of and consideration by a corporate offeror, what must be disclosed are the intentions and consideration of the offeror's board of directors. According to counsel, the court may examine the evidence in order to determine whether the Part A statement accurately and completely states the intentions of and consideration by the board, but it cannot impute to the corporate offeror intentions held and considerations undertaken by management which have not expressly or impliedly been adopted or undertaken by the board. He submits that there are indications in the Corporations Law that it is the board's intentions and considerations that matter: s 637(1)(a)(ii) requires that the Part A statement by signed by directors of the offeror; s 704(2)(b)(i) attributes liability to the directors, unless they were not present when the board authorised the signing of the Part A statement or they voted against that resolution. He also seeks to draw support from ss 656 and 657, which limit the circumstances in which an offer can be varied, and s 663(2) which limits the circumstances in which the offeror may declare the offer to be free from the condition, though it seems to me that these sections are of no assistance because they relate to the offer rather than the content of the Part A statement. Counsel concedes that the documentary evidence shows an evolution of thinking on the part of CWO's management personnel, but he submits that this is no more than one would expect to find. 87 This is an important submission with which I propose to deal fully. For the sake of simplicity, I shall refer only to the disclosure of particulars of the offeror's intentions under clause 20(1). However, the observations which I shall make in response to counsel's submissions also apply, mutatis mutandis, to the offeror's obligation in clause 20(2) to specify possible courses of action which the offeror is considering. 88 I cannot agree with the defendants that the disclosure requirement of clause 20 is confined to the intentions adopted by the board, either expressly or by virtue of their implied assent to board papers written by management. If the submission were correct, the offeror's management could emasculate clause 20 by strictly limiting the amount of information about planning which they presented to the board. On the other hand, it cannot be right that the Part A statement must disclose a statement of intention expressed by an officer of the offeror whenever the officer has corporate authority to make the statement - for example, I would not think it necessary in normal circumstances to disclose in the Part A statement representations about the offeror's intention made by its Public Relations Department. 89 In the Stirling Resources case Hill J declined to attribute to the offeror some statements of intention expressed by individual directors, on the ground that a company acts through its board of directors rather than through individual directors (14 ACLC at 1010). He contemplated an exception to that proposition where a particular person is as a matter of fact the directing mind and will of the offeror. In the ICAL case evidence given by a witness who was found to be the controlling mind and decision-maker for the offeror was treated as evidence of the offeror's intention. In other cases, however, including Cumberland Credit and Ampolex, evidence by an executive officer was treated without discussion as going to the offeror's intention. 90 In my opinion evidence about the intentions of the directors of the offeror as a body, including evidence about intentions implied from the fact that they have not demurred from a management paper, and evidence about the intentions of a person (if any) who is the directing mind and will of the offeror, can safely be regarded as evidence of the intentions of the corporate offeror. However, in my view, evidence of the intentions of the offeror may arise from another source. If an individual has the board's authority to plan the acquisition as a whole, or to develop an integration plan for the acquired entity, that individual's intentions with respect to relevant matters may be evidence of the intentions of the offeror, even if they have not been placed before the board or the chief executive (if the person is not the chief executive), and even if the individual concerned would have no separate authority to implement the plans. 91 The knowledge of a corporate officer may be attributed to the company for the purpose of applying statutory provisions, if the policy underlying those provisions makes it appropriate to do so: Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500. Thus, an investment officer's knowledge about a securities transaction may be attributed to his employer even though its managing director and board were unaware of the transaction, for the purpose of determining whether the company has failed to comply with a statutory obligation to disclose a substantial shareholding, because the policy of the substantial shareholding provisions is to compel immediate disclosure. That is a case where, to use Lord Hoffmann's words, neither the company's 'primary rules of attribution' nor the general principles of the law of agency would be adequate to identify the individuals whose knowledge should be attributed to the company, and so a special rule of attribution is needed. 92 By analogy, it seems to me that a special rule of attribution is needed for the purpose of identifying the corporate officers whose intentions are capable of being attributed to their company for the purposes of clause 20 of s 750. In my opinion, the intentions of those corporate officers who are responsible for planning an acquisition or the integration of the acquired entity may be attributed to their company for the purpose of establishing the offeror's intentions which must be disclosed under clause 20, having regard to the policy underlying that clause, which is to put shareholders in possession of the information required to enable them to make an informed and critical assessment of the offer and an informed decision as to whether to accept it: Samic, 60 SASR at 303 per King CJ. Management plans developed by those who are responsible for planning may form part of the information which the offeree shareholder needs in order to make a critical assessment of the offer and an informed decision, if the plans are current and have not been disavowed by the offeror's board. 93 Any question about the status of such management intentions is answered when the board reviews a draft Part A statement which sets out all relevant management intentions. If the board adopts the draft, then clearly the stated intentions are then the intentions of the offeror. If a management plan is incorporated into the draft Part A statement and the board rejects that part of the draft, then the plan is not, at least thereafter, part of the offeror's intentions. In effect, this is what happened to the disclosure in the Part A statement of CWO's intentions with respect to AAPT's employees. The board disagreed with management's draft and the draft was revised to accord with the board's intention. But if the draft which is reviewed and adopted by the board omits a relevant management intention, held by an officer with responsibility for planning the acquisition or developing an integration plan for the acquired entity, the Part A statement is open to challenge for failure to comply with clause 20. Though the outcome will depend on the facts, it is unlikely that the Court would conclude that management's intention has been effectively countermanded and extinguished by the board's adoption of the Part A statement, if the board's attention has not been drawn to that intention - even if the Part A statement adopted by the board purports to be an exhaustive statement of the offeror's intention. 94 It is a consequence of this view that directors may be liable for a deficiency in a Part A statement caused by the omission to refer to relevant management intentions in the statement of the offeror's intentions. The risk of liability to directors may be addressed by the responsible officers ensuring that all relevant intentions are set out in the draft Part A statement placed before the board for approval; and by the directors satisfying themselves that management has not omitted any such matters. 95 In the present case there is no evidence to suggest that there was any dominant 'directing mind and will' in CWO or CWOI. However, the evidence indicates that Mr Anderson had overall responsibility for planning the acquisition, and that Mr George was responsible for integration planning. My opinion is that the Part A statement should have included in the offeror's intentions the intentions which had been formed by Mr George as well as by Mr Anderson, having regard to their respective positions and responsibilities, except to the extent that the board considered and rejected those intentions or they had been abandoned. This conclusion entails that I must assess the adequacy of paragraph 18 of the Part A statement by reference to the evidence of Mr George and the documents which, according to my findings, disclose Mr George's current intentions at the time of adoption of the draft Part A statement by the boards of CWO and CWOI on 22 and 23 April 1999. I shall undertake this assessment later in my reasons for judgment. 96 If I am wrong with respect to the relevance of management intentions to the disclosure obligation in clause 20, it nevertheless seems to me that in the present case the contents of the preliminary integration plan, the board papers for the UK board's March 1999 meeting and the CWO board's 22 April meeting, and probably also the draft board paper dated 12 March 1999, should all be treated as relevant to the disclosure of the offeror's intentions in this case for another reason. The paper of 12 March and the board paper for 22 April 1999 (based closely on the UK board paper) were considered by CWO's board which made decisions in light of them. It can be inferred, in the absence of other evidence, that the board approved and impliedly adopted the plans which they contained. The preliminary integration plan was summarised in the board paper for the 22 April meeting and to that extent, the CWO board impliedly adopted that plan as well. The plans and intentions in those papers therefore became part of the offeror's intentions for the purposes of Part A disclosure. 97 As I have indicated previously, the observations which I have made about disclosure of intentions under clause 20(1) are also applicable to the disclosure of possible courses of action considered by the offeror, for the purposes of clause 20(2). In my opinion clause 20(2) requires disclosure of possible courses of action considered by the board, either through express discussion and resolutions or by virtue of the fact that the course of action is contained in a board paper impliedly adopted by the board, and also courses of action considered by those who had the responsibility for the conduct of the acquisition and integration planning - in this case Mr Anderson and Mr George.

The adequacy of the defendants' disclosure of intentions in the Part A statement 98 The plaintiff attacks paragraph 18 of the Part A statement on many grounds. However, on analysis there are only two kinds of criticism: first, that paragraph 18 inherently fails to comply with clause 20; and secondly, that paragraph 18 is inaccurate or incomplete and therefore misleading, because it contradicts or omits external facts about the defendants' intentions. 99 As to the first category of complaints, I agree with the plaintiff that paragraph 18 is not especially informative. It is expressed in relatively legalistic rather than commercial terms and uses guarded and qualified language. But these matters do not of themselves render paragraph 18 deficient. 100 Some of the language used in paragraph 18 is vague. The word 'integrate' figures prominently in paragraph 18.6, notwithstanding Ryan J's criticism of the use of that word in the Associated Dairies case (44 FCR at 343). A 'strategic and financial review' is proposed. In ICAL, Bryson J criticised the expression 'strategic review' as indeterminate language with vaguely military connotations. The addition of the word 'financial' makes the matter worse, vaguely suggesting collaboration between the military and business worlds. 101 In the present case, however, paragraph 18 uses these inherently vague words in a context which adds meaning to them. Thus, here we are not merely told of an intention to integrate the operations of the offeror and the target, as were the shareholders of Associated Dairies; we are told the particular business operations which are possible candidates for integration. Paragraph 5.2 gives some further content to paragraph 18.6 by summarising CWO's business divisions. It is true that paragraph 18 does not identify the kind of integration which is to be considered or the way in which it will be proposed to be achieved. Paragraph 18.2 says, in effect, that the offeror does not and cannot make decisions on these questions until the proposed review has taken place. In the Cumberland Credit case Beach J contemplated that there may be cases where, in effect, clause 20 imposes a duty on the offeror to form an intention before issuing the Part A statement. But in Savage Resources, Hely J pointed out that clause 20 should not be used to override the basic principle of company law that a majority shareholder cannot dictate management decisions to the board, which must act in the best interests of the company and its shareholders as a whole. In the present circumstances, it may well be misleading to set out specific mechanisms for integration even if they are only presented as intentions or possible courses of action, because their specificity might suggest to the lay reader that the target board has no option but to comply, even if the minimum acceptance condition is waived. Both Sheppard J in Gantry Acquisition and Sackville J in Ampolex drew attention to the need for careful language which reflects the commercial situation and avoids encouraging speculation, in a case where intentions cannot be formulated precisely until the takeover is completed. Here the language heeds those warnings and paragraph 18.8 reminds the reader of the overriding responsibilities of the target board, as did the statement of intentions in the Savage Resources case. 102 Details of the agenda and procedures of the Business Review and Integration Committee are not given in the Part A statement, but paragraph 18 goes beyond the disclosure of intentions in the ICAL case, because it tells us that the strategic and financial review by the Committee will encompass the steps listed in paragraph 18.6, and will not merely be a review of business operations at large. 103 In the Savage Resources case the Part A statement contained a list of intentions in the event that the target became the offeror's wholly owned subsidiary, that list being at approximately the same level of generality as the bullet points in paragraph 18.6. That aspect of the Part A statement was not challenged. The target's challenge was to a paragraph in the Part A statement which said that if the offeror waived the minimum acceptance condition and the target became a controlled but not wholly owned entity, it would implement such of the listed intentions as were consistent with that position. In the present case, Mr George considered whether the statement of intentions should distinguish between 100% ownership and a lesser level of control, and concluded that the defendants' intentions would be the same whether the outcome was complete ownership or merely control, although the prospect of achieving the integration which would be considered after close of the bid would obviously be affected by the level of ownership. Assuming for the time being that the Part A statement is in that respect an accurate reflection of the offeror's intentions, there can be no objection to disclosure in that form. Specifically, I reject the notion that an offeror whose intentions are the same whatever the level of control might be has a legal duty to subdivide the disclosure of its intentions by reference to whether it achieves 100% ownership. And I also reject the submission that clause 20 imposes a duty on the offeror to form an intention which it otherwise would not have formed, regarding such matters as business plans, asset disposals and dividend policy for the target in the event that it is not wholly owned after the bid. An objection would arise, relevantly, only if the disclosure of intentions was contingent and incomplete, as in the Stirling Resources case. 104 The last bullet point of paragraph 18.6 has been the subject of particular criticism. It says that the offeror will consider whether to dispose of assets identified by the Committee as being surplus to the ongoing requirements of the combined groups. There are two problems here - one, which is discussed later, is that this broad statement would be inadequate if the evidence indicated that the offeror had a more specific intention; the other is that the statement is so broad that it might be seen as meaningless. On the latter point, it seems to me that the statement conveys some limited information to the reader, and is therefore not inherently objectionable. It tells the reader that one of the agenda items for the Committee's review is the question of asset disposal, and that the criterion for decisions on that question will be whether the assets are surplus to ongoing requirements. The criterion may be broad and obvious, but it is not without content. One may have wished for a more informative statement, but if the statement accurately reflects the offeror's intention and there is nothing more to say about asset disposals at this stage (see below), then the complaint must fail. 105 Perhaps the principal complaint about paragraph 18 is that it proceeds on too narrow a view of the concept of 'intention', and overlooks the requirements of clause 20 that the offeror disclose intentions which are alternative or contingent or subject to further consideration or review (requirements arising out of the Cumberland Credit and ICAL cases), and that it disclose all possible courses of action which the offeror is considering. 106 In my opinion paragraph 18 is not confined to disclosure of 'final decisions'. If it were, the paragraph would be much shorter, as the defendants say that no final decisions have been reached. The point of paragraph 18.6, for example, is to disclose a series of intentions which amount to less than final decisions, namely intentions to consider the listed steps. Echoing the reasoning of Heerey J in the QIW case, AAPT says that the reference in paragraph 18.22 to 'final decisions' implies that there must be some decisions or formed intentions of an interim kind, which have not been disclosed. I agree that the expression 'final decisions' implies that there has been or will be a process of thinking about the issues prior to finality being reached. In my opinion, however, the Part A statement makes disclosure of this interim stage, principally in paragraph 18.6. There we are told that the offeror intends to consider various steps in light of the Committee's review; it will make 'final decisions' at that stage. 107 I was initially more troubled by AAPT's submission that paragraph 18 was incorrectly confined to the disclosure of intentions, and failed also to disclose of possible courses of action which are under consideration. On reflection, however, I have concluded that there is adequate disclosure of possible courses of action in paragraph 18.6, combined with the procedural course of action constituted by the proposal to establish the Committee and conduct a review. The fact that paragraph 18.6 identifies the listed steps as matters which the offeror 'intends to consider' does not preclude me from treating those steps, for the purpose of clause 20(2), as possible courses of action. My conclusion would have been easier if the matters listed in paragraph 18.6 had been expressly identified as possible courses of action and it had been made clear that the offeror is already considering them, while intending to give them further consideration and make final decisions after the Committee's review has been completed. However, to accept nothing less than explicit drafting of that kind would be to place form over substance. The present drafting implies, clearly enough, that the listed steps are being considered as possible courses of action, for otherwise it would be hard to explain their appearance in the Part A statement. I specifically reject the submission that the language of paragraph 18.6 implies as a matter of construction, that no consideration has yet been given to the listed matters. 108 My conclusion is that the challenge to paragraph 18 fails, in so far as it relies on patent deficiencies in the drafting of the paragraph.

The Part A disclosure and extrinsic evidence of the offeror's intentions 109 The next question is whether paragraph 18 is an accurate and complete account of particulars of the offeror's intentions, and the possible courses of action being considered by the offeror, relating to the matters set out in clause 20. This requires me to return to the evidence. 110 I have already given my reasons for concluding that the documentary evidence relevant to the offeror's actual intentions is limited to the documents authorised or adopted by the CWO board (and the CWOI board), Mr Anderson or Mr George. The following are the relevant documents: · the minutes of the board meetings of CWO of 15 and 22 April 1999, and CWOI of 23 April 1999; · the CWO board paper for the meeting of 22 April 1999; · the Cable & Wireless plc board paper for the March 1999 meeting; · the preliminary integration plan; · the draft CWO board paper of 12 March 1999.

Also relevant is the evidence of Mr George and Mr O'Brien with respect to what occurred at the CWO board meeting of 22 April 1999, and the consequent changes to paragraph 18 of the Part A statement. 111 The July 1998 paper has not been attributed to the board or any executive with special responsibility concerning the acquisition, and in any case it does not add to or contradict paragraph 18 in any meaningful way. The 'amortisation/key drivers' paper has not been attributed to any persons whose intentions are relevant for the purposes of clause 20, and neither has the 'Merlin synergies-breakdown' paper or the single page 'comparison of CWO and AAPT'. The various question and answer papers by the Public Affairs Department are in the same category. 112 As to Mr Anderson's e.mail of 28 April 1999, it is unnecessary to determine whether it represents a statement of intentions which should be attributed to him, for even if it were, it would not in my opinion imply or even suggest that paragraph 18 was inaccurate or incomplete, particularly as what is said there is expressed to be 'subject to the review'. 113 The briefing notes show that the defendants were in possession of a great deal of information relevant to their negotiations with the ACCC, but for reasons I shall explain, this is not information which was required to be included in the Part A statement. On the question of intentions, my opinion is that while the briefing notes imply that a great deal of planning had occurred within CWO's management, the notes do not identify any matter which constitutes an intention or possible course of action and which contradicts or is omitted from the Part A statement, even if one assumes that the author of the briefing notes was a person whose intentions and consideration counts for the purposes of clause 20. The nearest one comes to relevant information about intentions is the information about LMDS on page 33 of the notes. But that information is directed towards an analysis of market power rather than intentions, and while it notes some restrictions on deployment of the LMDS Spectrum and a likely auction of additional LMDS Spectrum in 1999, none of this suggests anything about continuation of or major changes to AAPT's business and assets. 114 Moreover, in my opinion it has not been shown that the briefing notes, in so far as they may relate to intentions and consideration of possible courses of action, reflect intentions of and consideration by a person whose intentions and consideration count for the purposes of clause 20. Mr George's evidence is that he did not know about the briefing notes until 13 May 1999. There is no evidence that either Mr Anderson or the board expressly or impliedly approved them. 115 The provisional integration plan was prepared by Mr George, whose intentions and consideration count, in my opinion, for the purposes of clause 20. In part, the plan is an analysis of the market position, weaknesses and needs of CWO. Those matters, presumably confidential, are not intentions or considerations of courses of action and are therefore not required to be disclosed by clause 20. There is then a statement of synergies offered by the acquisition of AAPT. In my opinion, to the extent that the synergies identify or imply intentions or possible causes of action, paragraph 18 in fact discloses the integration steps which are to be considered in order to take advantage of those synergies. The 'integration issues' which the paper discusses, are best regarded as matters of process and pitfalls of implementation, not relating to the intention of integration but rather to its satisfactory implementation. They are therefore not required to be disclosed by clause 20. 116 This leaves us with the disclosure in the plan of the 'ideal split of businesses post acquisition'. This is a list of business segments of CWO and AAPT connected by arrows which signify the direction in which 'integration' will be achieved. In some cases, the arrow appears to signify that a business segment of AAPT will be integrated into a business segment of CWO, and in other cases the reverse will occur. The notes immediately below this table speak of the 'transfer' of businesses. AAPT therefore contends that paragraph 18 is deficient because the plan discloses a more specific set of intentions than the 'integration' which the offeror 'intends to consider', according to paragraph 18.6. 117 In my opinion, it would be incorrect to regard this part of the provisional integration plan as a statement of intentions or a consideration of possible courses action going beyond what is disclosed in paragraph 18.6. In reaching this conclusion I have taken into account several factors. The plan is described in the UK and CWO board papers as a 'provisional' plan, and its drafting reflects this characterisation. It is a commercial rather than legal document. Consequently the reference to the 'transfer' of business should not be construed in a precise legal manner, but rather as signifying a commercial intention that various business units be folded together and in that process, one or other of the existing business units would be dominant. The legal mechanism for achieving the 'transfers' to which the plan refers could not be determined at this stage, since much will depend upon whether AAPT is wholly owned or merely controlled after the takeover is complete. That is made clear in paragraph 18.8. In those circumstances, it is wrong-headed to criticise paragraph 18.6 for use of the vaguer word 'integration', since use of the word 'transfer' would be misleading. 118 Mr George's oral evidence reinforces my view that the word 'transfer' was used in the preliminary integration plan in a broad commercial sense, rather than to designate a particular form of legal transaction. He used the expressions 'transfer', 'merge' and 'integrate' interchangeably. He distinguished between his commercial concept of 'transfer' and what he called 'the actual method' by which integration would be achieved. 119 I have reached a similar conclusion concerning the draft CWO board paper of 12 March 1999. Under the heading 'Business Integration', the paper recommends a carefully planned integration, to be achieved by taking a number of steps. The steps listed in the paper may be compared with the bullet points in paragraph 18.6. As with the provisional integration plan, the paper uses the word 'transfer' in a commercial and imprecise way, and for the reasons already given I reject any criticism of paragraph 18.6 based on the use of the word 'integrate' in the corresponding bullet points. The first specific step mentioned in the paper no longer represents management thinking, according to the evidence of Mr George. Some of the matters disclosed in the paper do not go to the matters relevant to clause 20. Other matters are, in my opinion, adequately covered by paragraph 18. 120 I should mention, in particular, the question of redeployment of fixed assets, in view of the relative vagueness of the last dot point of paragraph 18.6. Fortunately, on the view which I take of the facts, it is unnecessary for me to form an opinion on the meaning of 'fixed assets', a concept borrowed, perhaps unhappily, from the London City Code. The paper of 12 March 1999 proposes to 'investigate and assess the potential to sell residual assets including the CDMA spectrum and specific business areas not complementary to CWO's ongoing strategy'. This suggests a more particular intention or possible course of action than is disclosed in paragraph 18.6. However, the matter is explained in Mr George's affidavit of 13 May 1999. He says that in formulating the draft intentions clause during the period between 31 March and 22 April 1999, he decided that consideration should only be given after the acquisition of AAPT to any potential sale of the CDMA spectrum, since no view could be formed until a review had been undertaken of AAPT's confidential information concerning this asset. Considered together, the evidence suggests that in March 1999 the eventual sale of the CDMA spectrum was being considered as a possible course of action, though it probably could not be said that it had been elevated to the status of an intention, or even an alternative intention. But by 22 April 1999, when the CWO board approved the Part A statement, further consideration had been suspended by Mr George, and it was not true at that time that the sale was even being considered as a possible course of action. Mr George had decided that the matter should no longer be considered for the entirely plausible reason that no view could be formed until AAPT's confidential information was obtained. 121 Those conclusions are consistent with the evidence about thinking on the LMDS technology. The board papers for the UK board meeting of March 1999 and the CWO board meeting of 22 April 1999, in the context of 'longer term opportunities for savings', say 'there may also be considerable savings arising from the abandonment or more selective application' of the LMDS technology. That was not presented as a factor in the calculus of 'synergy benefits' and was postponed for later consideration. 122 As to the two board papers, AAPT seeks to make much of the fact that the word 'brief', which appeared in the UK paper, was omitted from the CWO paper. But in my view this merely suggests that thinking about the proposed review by the Business and Integration Committee had matured during the period between mid-March and mid-April, and by the latter time management realised, no doubt after receiving legal advice, that the review would need to be more than a 'brief assessment'. I reject AAPT's submission that according to the evidence, CWO and CWOI did not intend the Committee to consider whether to integrate, but only to carry out a brief review of the process of integration. Mr George's evidence, in particular, implies that paragraph 18.5 accurately states the offeror's intentions and proposals with respect to the Committee. 123 As to the 'established' synergies which are 'realistic and achievable', according to the board papers, the evidence does not show that the relevant calculations by management were made or adopted by Mr Anderson or Mr George, and therefore the board papers do not reflect or imply any intentions or the consideration of any possible courses of action for the purposes of clause 20, other than as disclosed in paragraph 18.6. The reference to abandonment or more selective application of the LMDS technology does not, in my opinion, denote an intention or consideration of a possible course of action, the board papers being consistent with the view that any consideration of such matters should be undertaken only after the defendants have obtained access to AAPT's confidential information. 124 My conclusion is that there is nothing in the provisional integration plan, the draft CWO board paper of 12 March 1999 or the two board papers, nor in the evidence of Mr George and Mr O'Brien, which would lead me to the view that paragraph 18 is inaccurate or incomplete. 125 I turn to AAPT's complaint about disclosure of the offeror's intentions regarding the future employment of present employees of the target, and possible courses of action being considered. I reject AAPT's submission on this point for reasons which I have already given. To recapitulate: some of the material on which AAPT relies to show a more specific intention on CWO's part than is disclosed in paragraph 18 is contained in documents which the evidence does not show to have been adopted or approved by the CWO or CWOI boards, Mr Anderson or Mr George. As to the intentions of Mr Anderson and Mr George, their views were embodied in the draft Part A statement which was considered by the CWO board on 22 April 1999, and the board rejected the draft on this point. The Part A statement was then redrafted to reflect that board's opinion. There is no basis for suggesting that it failed to do so nor, in my opinion, any ground for concluding that the statements about employees in the final document were an inaccurate or incomplete account of the offeror's intentions and the possible courses of action which, at the time of adoption of the Part A statement by CWOI's board on 23 April 1999, were being considered by the offeror. 126 Consequently AAPT's challenge under clause 20 of Part A of s 750 to the disclosure of the offeror's intentions in the Part A statement fails. AAPT also submitted that the fact that the defendants have engaged in extensive analysis with respect to AAPT should have been disclosed under clause 17 of Part A of s 750. I accept that clause 17 may require disclosure of aspects of the offeror's intentions not required to be disclosed by clause 20. But in my opinion the bare fact that extensive analysis has been undertaken is not a material fact required to be disclosed under clause 17.

The other grounds of challenge - clause 17 of Part A of s 750 127 AAPT's other three grounds for challenging the Part A statement are that it fails to disclose other material information in contravention of clause 17. The other material information relates to synergies and benefits, competition issues and aspects of funding. 128 Clause 17 states: 'The statement shall set out any other information material to the making of the decision by an offeree whether or not to accept an offer, being information that is known to the offeror and has not previously been disclosed to the holders of shares in the target company.'

It was introduced into Australian takeover law, without explanation in the explanatory memorandum, by the Companies (Acquisition of Shares) Act 1980. It is not unlike what was then Rule 15(1) of the London City Code (see now Rule 23). 129 The principles to be applied in determining what is and is not material for the purposes of clause 17 have been elucidated in several recent cases, including Cultus Petroleum NL v OMV Australia Pty Ltd (Supreme Court of New South Wales, Santow J, 5 May 1999), Aberfoyle Ltd v Western Metals Ltd (1998) 28 ACSR 187, Metal Manufacturers Ltd v Marsh Electrical Pty Ltd (1998) 28 ACSR 245 and Pancontinental Mining Ltd v Goldfields Ltd (1995) 16 ACSR 463. Questions of materiality were also considered in some of the cases dealing with clause 20, cited earlier in this judgment. In the Pancontinental and Cultus Petroleum cases Tamberlin J and Santow J respectively have usefully summarised some of the most important principles concerning materiality. 130 Before considering AAPT's submissions as to the specific inadequacies of the Part A statement, I wish to make some remarks about a question of principle which was agitated between the parties. The basic standard of materiality is whether the information in question might reasonably affect or tend to affect the decision of the ordinary investor whether or not to accept the offer: Cultus Petroleum, at 13 and cases there cited. There is a question whether it is necessary to prove that the information, if disclosed, would have been likely to alter the investor's decision, or merely that the information would have assumed actual significance in the investor's deliberations (Cultus Petroleum at 13, citing US authorities), but it is unnecessary to say more about that issue here. 131 The issue which has arisen in the present case arises in the following way. AAPT submits that the question for the ordinary investor to consider, when confronted with a Part A statement and offer, is not merely whether to accept or reject the offer. AAPT submits that offeree shareholders have five options: to accept the offer for all their shares; to accept for part of their shares; to reject the offer; to sell their shares on the stock market; or to wait and see whether a competing bid emerges, whether the offeror increases its bid, or, in the case of a conditional bid, such as the bid in the present case, whether the conditions are satisfied or waived. It follows, according to AAPT, that pursuant to clause 17, the Part A statement must contain information known to the offeror which is material to any of the offeree's choices. Therefore, says AAPT, the offeree shareholders are entitled to information which will help them to decide whether they should remain in the company, for all or part of their holding, as minority shareholders after control has passed to the offeror; and information going to the value of the target to the offeror, relevant to the offeree's assessment of the prospects of an increase in the bid price and waiver of the minimum acceptance condition. 132 The expanded concept of materiality for which AAPT contends has some support in the cases. In the Samic case, King CJ thought it relevant for the offeror to disclose information which could well affect the offeree shareholders' assessment of whether the offer was likely to be improved, the prospects of a competing offer, and the prospects of the shares if they were retained in the company under new management (60 SASR at 303). This reasoning was endorsed by Tamberlin J in the Pancontinental Mining case (13 ACLC at 581, proposition 6), and he added (at 581-582): '7. Consideration of a Part A statement involves a question as to whether full and sufficient information has been given to enable the offeree to make a judgment concerning how valuable the acquisition will be to the offeror, and thus making an informed assessment of whether the offeror may be prepared to pay more for the shares than its offer suggests.' 133 In the Gantry Acquisition case Sheppard J approved of King CJ's observations and said that they were just as relevant for Part A as for Part C statements (51 FCR at 561). 134 If it were necessary to disclose in the Part A statement all information known to the offeror which might reasonably affect the offeree shareholders' decisions in any of the options outlined above, some strange consequences would follow. It would become necessary for the offeror to disclose the highest amount it would be prepared to pay for target shares, or at least the matters of fact known to it which would be relevant to that assessment. It would be necessary to disclose any matter of fact or intention (in addition to intentions required to be disclosed by clause 20) which would be relevant to the position of minority shareholders of the target in the event that the offeror acquired control but not full ownership; and any decisions taken or facts relevant to decisions with respect to timing of any increase in the bid and the likelihood that another bidder might emerge. 135 It seems to me that to draw these implications would be contrary to the observations of Bryson J in the Metal Manufacturers case, where his Honour emphasised that questions of materiality under clause 17 are to be approached with due regard to the practicalities of a market (29 ACSR at 250). In the Aberfoyle case Finkelstein J said that in a cash bid, the offeree shareholders must decide whether to accept or reject the cash offer and it is of no consequence to them how the bid, if successful, will impact on the target or its shareholders (28 ACSR at 210). In Savages Resources Hely J noted that Finkelstein J's statement placed a narrower construction on clause 17 than the statement by Tamberlin J in the Pancontinental case, which I have set out above. Presumably the difference which his Honour had in mind was that Finkelstein J seemed to limit materiality to information relating to only two of the offeree's choices, namely whether to accept or reject the cash offer. 136 Hely J remarked that irrespective of whether the two approaches may be reconciled, it would be an exaggeration of the role of clause 17 to require that all perceptions, opinions and assumptions of the offeror as to why the acquisition is expected to deliver value to the bidder should be itemised in the Part A statement. He said (17 ACLC at 12): 'The statement in Pancontinental … cannot in my respectful opinion, be taken at the flood. For example, an offeror cannot be expected to disclose, in a market situation, how high it might be prepared to go in order to secure control.' 137 It seems to me that two points flow from Hely J's observations, with which I respectfully agree. The first is that material information for the purposes of clause 17 does not include information that is speculative or based on mere matters of opinion or judgment. I shall return to this point later. The second is that, at least in the case of a cash bid, it cannot be the case that clause 17 requires disclosure of all facts material to a decision by offeree shareholders to remain in the target company or to wait and see whether the bid is increased or a competing bidder emerges. Hely J's remarks imply that the offeror would not be required to disclose how high it is prepared to go even if its board has specifically resolved on a figure, so that the matter goes beyond speculation or opinion into the realm of fact. Nor, I would think, would an offeror be required to disclose otherwise confidential factual information about a potential competing bidder. 138 If that is so, the challenge is to articulate a principle which excludes from the realm of material disclosure at least some of the information which would be relevant to the offeree shareholders' decisions to wait and see or to sell in the stock market or to remain as a minority shareholder of the target. Having regard to the view I take as to the factual materiality of the matters, about the omission of which AAPT complains, it is not necessary for me to make a decision in this case at the level of principle. Since, however, issues of principle were raised in argument, I shall comment briefly. 139 A partial reconciliation of the inconsistent approaches identified by Hely J could be achieved by holding that: (i) in the case of a Part A offer, in contrast with a Part C, it is not material to disclose to offeree shareholders information about the prospects of an increase in the bid price, because they will receive the increased price whether they accept before or after the increase occurs (s 655(2); compare Gantry Acquisition , 51 FCR at 561 per Sheppard J); (ii) it is unnecessary to disclose in the Part A statement information which would assist the offeree shareholders to decide whether to sell on the stock market, because the disclosure obligation under clause 17 relates only to information material to their decision whether or not to accept the takeover offer, not their decision to enter into a different transaction; (iii) similarly, information which is relevant to the prospects of a competing bid need not be disclosed in the Part A statement because that information is outside the province of the bidder's takeover offer, and is not properly characterised as material to the offeree shareholders' decision whether or not to accept the bidder's offer; and (iv) it is material for offeree shareholders to know information which helps them to decide whether to remain shareholders of the target for all or part of their holdings, but there must in fact be such information (as opposed to mere speculation etc) and that information must be known to the offeror.

Synergies and benefits 140 AAPT submits that the Part A statement gives no information which would allow offeree shareholders to assess the benefits that might flow to them if they decide to remain as shareholders of the target after it comes to be controlled by the offeror. Of course, there is no obligation to make disclosure under clause 17 except where information is known to the offeror, and so AAPT seeks to establish that information about the benefits and synergies which might flow from the success of the bid was contained in CWO's documents. 141 AAPT refers in particular to the preliminary integration plan; the quantification of synergies contained in the 'Merlin Synergies - Breakdown' paper prepared by the Corporate Finance Department of CWO; and the board papers for the UK board meeting in March 1999 and the CWO board meeting on 22 April 1999, which assert that CWO has established the total value of synergies at a figure which is stated, and that CWO believes the synergies to be realistic and achievable. Additionally, AAPT submits that a limited amount of information as to synergies and benefits was provided in the briefing to analysts of 3 May 1999. The briefing notes refer to 'synergies and network/asset complementarity' and contain certain assertions of fact which include the assertion that 'CWO has premium wide bandwidth networks focused on large corporate and government, and AAPT SME focus in data services and Internet', and 'CWO has a GSM mobile network and AAPT has Cellular One's distribution network'. 142 APPT does not seek disclosure of the present quantification of the values of the synergies, but submits that the Part A statement should have disclosed the fact that CWO had made such an assessment, and the substance of the facts and circumstances known to CWO as to how and where those benefits might be achieved, so that AAPT shareholders could make a properly informed and not speculative assessment for themselves. Finally, AAPT submits that the offeror has clearly contemplated a scenario in which the minimum acceptance condition is waived and the target becomes a partly owned subsidiary of the offeror, but has failed to identify the synergies which might be available in that event. 143 For the purpose of assessing these contentions, I am prepared to assume that offeree shareholders are entitled to all material information known to the offeror to enable them to assess whether to sell on the stock market, and whether the offeror is likely to improve its offer or a competing offer is likely, and to give an idea of how important the acquisition is to the offeror. Even so, offeree shareholders are not entitled to receive everything that may bear on the offeror's rationale for the bid, the benefits which the offeror has identified, how the offeror proposes to obtain those benefits, and how the company will appear and function after the close of the bid. At a general level, the offeror must be 'careful not delineate extravagantly or to enlarge beyond reasonable bounds' (Susquehanna Corp case, 423 F 2d at 1085), and the Part A statement must be a document which can be understood and which will not confuse readers, so that a degree of selectivity is permissible in order to confine the information to that which is really useful (Pancontinental Mining 13 ACLC at 582, paragraph 10). Additionally, it is not necessary for the Part A statement to canvass the commercial desirability of the offer, since the framework of the takeover legislation assumes that that issue may be taken up in a critical fashion in the Part B statement (Pancontinental Mining 13 ACLC at 581, paragraph 3; see also Savage Resources 17 ACLC at 11). 144 A submission very similar to AAPT's submission in the present case was considered and rejected by Finkelstein J in the Aberfoyle case. His Honour rejected the contention that clause 17 requires an offeror to disclose its evaluation of the target shares or the economic assumptions upon which the evaluation is being based; or that it requires disclosure of matters of opinion about which minds may differ, assessments that are based on variable assumptions or predictions, or the assumptions or predictions upon which those assessments are based. Such 'information' would not usually assist a shareholder in making an informed decision whether to sell his shares. AAPT seeks to distinguish these observations on the ground that it does not seek, as the plaintiff did in that case, disclosure of the offeror's quantification of the value of the synergies. Additionally, AAPT submits that the decision in Aberfoyle was only that disclosure of matters of opinion and assessment would not be of assistance in that case, where the merger was between two established mining companies operating in a mature and well understood market where the possibilities for synergistic gains were obvious and easy to understand; in the present case, given that the telecommunications industry is new and the factors driving valuations are not easy to understand, a discussion of synergistic benefits would be of greater assistance to shareholders. 145 I disagree with AAPT's submissions on synergies and benefits for the following reasons. First, in my opinion an indication of the synergies and benefits which may flow from the takeover emerges from clause 18.6, when read together with the information on CWO's present business in paragraph 5.2 of the Part A statement. Paragraph 18.6 indicates the steps which will be investigated after the takeover. One can infer that the integration steps which are there described will be undertaken in order to strengthen the combined business operations for the benefit of the merged group. 146 Secondly, I am not persuaded that the documents in which synergies are analysed and quantified have any particular status within CWO, beyond the status of working papers of the Corporate Finance Department. This is particularly so of the 'Merlin Synergies - Breakdown' paper. 147 Thirdly, though the board papers for the UK board meeting of March 1999 and the CWO board meeting of 22 April 1999 assert that CWO 'has established the total value of synergies' and believes the synergies to be 'realistic and achievable', I am not satisfied that any document which is in evidence, other than the board papers themselves, was considered by the boards. The board papers indicate in general terms the various sources of the synergies, in a manner which correlates reasonably closely to the disclosure of integration steps in clause 18.6. 148 Fourthly, as to the briefing notes for the meeting with analysts of 3 May 1999, they contain some factual assertions as well as some broad expressions of opinion but I do not regard the factual assertions in the briefing notes as useful information for offeree shareholders. 149 Fifthly, the statements about synergies and benefits in the documents (including, in particular, the preliminary integration plan) appear to me to be matters of speculative assessment and opinion of the kind to which Finkelstein J referred in Aberfoyle. I conclude that the documents in evidence do not identify useful information about synergies and benefits known to the offeror but not disclosed expressly or impliedly in the Part A statement. 150 Sixthly, I am not persuaded that it is necessary or would be useful for the offeror to make the kind of disclosure which AAPT contends for. AAPT says that the plaintiff need not quantify the value of synergies but should disclose the fact that an assessment of synergies has been made, and the substance of the facts and circumstances known to it as to how and where the benefits might be achieved. To the extent that such information is to be found in the documents in evidence, I do not believe that there is any useful disclosure to be made, other than perhaps in the documents produced by the Corporate Finance Department which, as I have said, do not appear to be anything more than working papers not necessarily adopted or approved by management. 151 Finally, assuming that offeree shareholders are entitled to information which will allow them to assess the target's prospects as an independent but controlled entity, it has not been shown that there is any relevant information known to the offeror which ought to have been disclosed. 152 All in all, it seems to me that the submission on synergies and benefits here is very similar to the submission rejected in the Aberfoyle case, and also to the submission about benefits which was unsuccessfully made in the Savage Resources case. In the latter case, Hely J concluded (17 ACLC at 12), admittedly on different facts, that it was by no means apparent to him that the greater specificity for which the target contended in that case would have any real bearing on the decision by offeree shareholders whether or not to accept the offer. I hold the same view with respect to the matters which AAPT says should have been disclosed in the present case.

Competition issues 153 Clause 8.1(e) of the offer makes the offer subject to a condition that at the end of the offer period either the ACCC has not commenced legal proceedings seeking to restrain the acquisition, or it has confirmed in writing to the offeror that it does not propose to intervene or does not object to the acquisition. By clause 8.7 the offeror may, subject to the Corporations Law, declare the offer to be free from this condition. 154 AAPT submits that in view of this condition and the obvious competitive implications of the second largest player in the telecommunications industry acquiring the third largest where there are only three substantial players, information should have been given about competition issues in the Part A statement. At one stage AAPT submitted that the information should have been such as to enable offeree shareholders to make an assessment of the competitive implications of the bid. Expressed in those broad terms, the proposition is clearly unsustainable. Takeover law does not require an offeror to disclose the effect of the proposed acquisition on competition within the industry in which the offeror and the target operate. 155 AAPT's more plausible submission is that the Part A statement should have disclosed such information about the process of ACCC approval as would enable offeree shareholders to make an assessment of the likelihood that condition 8.1(e) will be satisfied and also an assessment of the kinds of concessions which the offeror might be prepared to make in order to obtain ACCC approval. AAPT says disclosure of these matters is material to the offeree shareholders' decision whether to accept the offer or to take some other course of action such as selling into the market. I shall assume for the purpose of considering this submission that the law requires the offeror to disclose information material to a decision by offeree shareholders to sell into the market, but I doubt that this is correct for reasons which I have already set out. 156 In the present case, counsel for the defendants conceded that if a decision had been taken by the Commission, it would have been necessary to disclose the decision. I infer from the evidence that no such decision has been made. 157 AAPT says that the offeror should have disclosed at least the following: whether there have been discussions or correspondence with the ACCC in relation to the proposed acquisition and if so, the outcome; whether CWO is willing to dispose of assets in order to obtain ACCC approval, and the effect of any such disposal; the likelihood that assets may have to be disposed of in order to obtain ACCC approval; CWO's willingness to give undertakings under s 87B of the Trade Practices Act 1974 (Cth); and some general indication of the assets of CWO or AAPT which may have to be disposed of in order to obtain ACCC approval. 158 In my opinion information of this kind need not be disclosed in the Part A statement, and there would be a real risk that its disclosure would be misleading. As Tamberlin J said in the Pancontinental Mining case (13 ACLC at 582), the Part A statement should illuminate the issues rather than confuse them, and a degree of selectivity is permitted in order to confine the information to that which is really useful. It would not, in my opinion, be useful for offeree shareholders to be told about the state of incomplete negotiations between the offeror and the ACCC, particularly as the making of the bid would itself be likely to add a new dimension to those negotiations, since one can assume that the target will itself make strenuous representations to the regulator, if it has not already done so. As I said in my judgment of 12 May 1999 (in which this issue arose in the context of a contest as to the validity of a subpoena and notices to produce), matters of negotiation and planning for ACCC approval are inherently unstable. Disclosure prior to inclusion of the negotiations would be a disclosure of 'matters of opinion about which minds may differ, assessments that are based on variable assumptions or predictions' (Aberfoyle, 28 ACSR at 210). Disclosure of the bare facts of the negotiation or correspondence could only generate speculation which would be likely to mislead offeree shareholders. It is true that, as Santow J pointed out in Cultus Petroleum at 15, there may be occasions when matters of opinion and assessment based on variable assumptions or predictions may be material information for the purposes of clause 17, where it is properly substantiated in a way which avoids it being misleading. Profit forecasts in a scrip bid, where the assumptions underlying the forecasts are carefully set out, preferably with a sensitivity analysis, may be an example. But disclosure of information which predicts, or is intended to provide the basis for predicting, the outcome of negotiations with a regulator is likely, at least in most cases, to be disclosure of merely speculative material for which there can be no proper substantiation. 159 Similarly, the fact that the offeror may have decided to dispose of a particular asset if required by the ACCC, or to give an undertaking if required, or even the fact that an offer to dispose of an asset or to give an undertaking has been made by the offeror to the ACCC, seems to me to be in the same category, because until the Commission responds to any such offer an assessment of its significance to offeree shareholders must be purely speculative. 160 Of course, once a decision has been made by the regulator, the matter ceases to be one of pure speculation, and if the regulator's decision is made before the date of the Part A statement it is likely to be disclosable. That would probably be so even if the regulator's decision is subject to review or appeal, or the offeror has submitted additional information in an effort to change the regulator's mind. I shall refrain from any further generalisation, because the question of disclosure will inevitably depend on the precise facts. One can imagine difficult situations, such as where the offeror is aware that a decision has been recommended to the Commission by its officers but the Commission has not taken it. 161 Additionally, AAPT submits that the Part A statement should contain the information referred to in the briefing to analysts on 3 May 1999 and the material which underlay what was disclosed at the briefing. The submission is that the tenor of the presentation, gleaned from a perusal of the briefing notes, is that the defendants had formed a view that the bid will not contravene the Trade Practices Act. That view, and the basis for it, are highly material and should have been disclosed to offeree shareholders. I disagree. The Part A statement is not a proper vehicle for the offeror to communicate its case for regulatory approval. The offeror's view that the acquisition would not contravene the Trade Practices Act is simply an opinion, and in all probability disclosure of the basis for that opinion in the Part A statement would merely encourage speculation and would potentially mislead offeree shareholders. It would be surprising if the law required an offeror in a hostile bid to disclose its hand publicly on the key issue of regulatory approval, to the principal advantage of those who may wish to counteract the offeror's submission to the ACCC (including the target and potential competing offerors). 162 My conclusion, therefore, is that clause 17 of Part A of s 750 does not require the offeror to disclose any of the matters to which AAPT's submission refers.

Funding issues 163 In clause 10 of the Part A statement the offeror states that: (a) funding for the offer will be provided under a loan facility which CWOI has entered into with Optus Administration Pty Ltd ('Administration') ('CWOI Facility')'; and (b) the funds to be advanced by Administration to CWOI under the CWOI Facility will be available to Administration by drawing down funds under two multi-option syndicate facility agreements ('Credit Facilities'). 164 Clauses 10.4 and 10.5 of the Part A statement state that the total amount of cash which the offeror may become obliged to pay offerees is approximately $1,384,661,255 and the amount of the CWOI Facility is $1,390,000,000. The conditions precedent for draw down under the Credit Facilities are summarised in clause 10.7 of the Part A statement. They include that certain representations and warranties remain true, and those representations and warranties are summarised in clause 10.8. Another condition precedent to draw down is that no potential event of default has occurred which has not been waived, and the events of default are summarised in clause 10.9, supplemented by an explanation of some definitions in clause 10.11. Clause 10.10 states that the offeror is not aware of anything which would prevent the conditions precedent to draw down from being satisfied, and that Administration will not draw down the Credit Facilities in a way that would render it unable to provide the offeror with funds to meet acceptances under the bid. 165 The disclosure of sources of funding in clause 10 runs to some eight pages of a 20 page document (excluding schedules). This makes clause 10 by far the longest clause in the Part A statement. 166 AAPT makes a number of specific criticisms of the disclosure of sources of funding. The submissions appear to be directed towards clause 17, not clause 11 of s 750. I propose to state and then deal with each one in turn. 167 First, AAPT says that the Part A statement fails to disclose the source of any additional funding which might be needed if the offer is increased. In my view, neither clause 11 nor clause 17 of s 750 requires any such disclosure. Clause 11 applies only to the acquisition of the shares to which the takeovers relate. The takeover offers are the offers accompanying the Part A statement, at the price which is stated in the offer document. Clause 17 requires disclosure of information material to the making of a decision by offeree shareholders whether or not to accept the offer. Again, the offer is that which is contained in the offer document accompanying the Part A statement. It is not suggested that the offeror has decided to increase the offer price and in those circumstances, the only material disclosure relates to the funding of the price stated in the offer. 168 Secondly, AAPT complains that there is no disclosure of the additional funding which may be required to meet costs and expenses (for example, stamp duty, advisers' fees and the cost of marketing the offer). There is no evidence as to how much these costs and expenses may be, but AAPT says they are likely to exceed the difference between the total consideration payable to accepting offeree shareholders and the amount of the CWOI Facility. Even assuming that this is the case, however, my view is that no such disclosure was required in the circumstances of this case. Clause 11 of s 750 does not require disclosure of the source of funding for costs and expenses: see Associated Dairies, 44 FCR at 340-341. I do not accept that the disclosure of the source of funding for costs and expenses would be material information for the purposes of clause 17, in the circumstances of the present case. This is a $1.385 billion takeover bid where the Part A statement indicates that there is a source of funds of $1.39 billion. A reasonable offeree shareholder would assume that there would be no difficulty funding costs and expenses in a transaction of that size, given that the offeror is a wholly owned subsidiary of a large Australian telecommunications company, the majority shareholder of which is in turn a very large United Kingdom company. The reasonable offeree shareholder would not regard it as material to know the source of funding of costs and expenses. In any event, Mr George's evidence is that costs and expenses will be borne by CWO rather than by CWOI, and it would be a reasonable assumption that CWO would be able to bear those costs and expenses out of operating revenue or other resources. 169 Thirdly, AAPT draws attention to clause 18.7 of the Part A statement, which says that CWOI has not formed any relevant intention other than, inter alia, to maintain the required capital support for the businesses of AAPT. AAPT complains that the source of funds to maintain that capital support is not disclosed. In my opinion no such disclosure is required by clause 17. According to clause 18.7 it is CWOI which has formed the intention to maintain capital support, but it would be absurd to infer that CWOI's intention is to maintain that capital support from its own resources. The reasonable assumption is that AAPT's businesses will be financially supported by the post-acquisition group, in a manner which may differ depending upon the level of ownership which has been achieved. This is not a matter disclosure of which might reasonably affect the decision of the ordinary investor whether or not to accept the offer: see Cultus Petroleum at 13. 170 Fourthly, AAPT complains that the Part A statement fails to disclose whether CWOI's source of funding is conditional on a minimum acceptance level. The Part A statement sets out the terms of the CWOI Facility in paragraph 10.5, and makes no mention of any such condition. In the absence of any evidence to indicate that there is such a condition, AAPT's submission fails. 171 Fifthly, AAPT draws attention to a representation and warranty by CWO in the Credit Facilities (set out in paragraph 10.8(b)(2) of the Part A statement) that: 'there is no subsidiary of CWO, with an aggregate of net tangible assets and net intangible assets exceeding 1% of the value of the shareholders' funds of CWO and its subsidiaries calculated on a consolidated basis (as disclosed in the last published financial statements of those companies), which has been in existence for more than two months and which has not executed guarantees as required by the negative pledge deed dated 28 June 1996 relating to the Credit Facilities to which Administration is a party.'

One of the conditions precedent which must be satisfied before Administration can draw down under the Credit Facilities is that the representations and warranties (including this one) remain true and correct in all material respects and are not materially misleading as at the date of the draw down notice (paragraph 10.7 of the Part A statement). 172 AAPT says that if CWOI acquires more than 50% but less than 100% of the shares in AAPT it will be uncertain whether this warranty will be satisfied, and therefore uncertain whether a draw down can take place to pay for the acquired AAPT shares. The uncertainty arises because in that event, AAPT will not be able to give the guarantee under the negative pledge deed without AAPT shareholder approval, because the transaction would be a related party transaction caught by Chapter 2E of the Corporations Law, and would amount to the provision of financial assistance in connection with the acquisition by CWOI of AAPT shares for the purposes of Part 2J.3 of the Corporations Law, and may not satisfy the common law principles which require that such a transaction be approved by shareholders unless it is for the corporate benefit of AAPT's shareholders. AAPT says that the Part A statement should draw attention to these difficulties and provide relevant information about them. 173 The question is whether such disclosure would be material information for the purposes of clause 17. In my opinion, it would not. The Part A statement discloses that a condition precedent to draw down under the Credit Facilities may be waived (paragraph 10.10(c)). If there were evidence that the offeror intends to waive the minimum acceptance condition to permit AAPT to become a subsidiary but not a wholly owned subsidiary, and that in those circumstances the financiers under the Credit Facilities would refuse to waive the requirement that AAPT give a guarantee, then it seems to me disclosure would be required under clause 17. But there is no such evidence. By a letter of 6 May 1999, the solicitors for the defendants informed AAPT's solicitors that the assumption that the offeror would waive the minimum acceptance condition, in circumstances where AAPT would then be required to give a guarantee without being a wholly owned subsidiary of CWOI, was an unwarranted and incorrect assumption. This only says that it is unwarranted to assume that the minimum acceptance condition would be waived; it does not assert or imply a disclosable intention not to waive the minimum acceptance condition in the stated circumstances. Thus the position as to waiver of the minimum acceptance condition is that there is no evidence to justify an assumption that it would or that it would not be waived if by waiver, the offeror could obtain control of AAPT but not 100% ownership. Further, the evidence indicates that on 6 May 1999 CWO applied for the consent of the financiers to the waiver of the requirement that AAPT give a guarantee in accordance with the negative pledge deed prior to AAPT becoming a wholly owned subsidiary. The waiver was given in a letter from the Commonwealth Bank of Australia as agent for the financiers, on 11 May 1999. 174 Counsel of AAPT says that the tender by the defendants of evidence of the waiver amounts to admission that as at the date of the Part A statement (23 April 1999) and the date of registration (27 April 1999), the Part A statement was defective or misleading. Further, to the extent that the effect of the new material is not disclosed, the Part A statement is factually incorrect and should not be permitted to be dispatched. I do not regard the tender of the additional material as an admission. To my mind, it demonstrates that there was no basis for assuming, as at the date of the Part A statement and the date of its registration, that the funding problem which AAPT asserts is a problem which would actually arise. Clause 17 does not require the offeror to close off all possible problems which could eventuate, by discussion in the Part A statement. A problem which was anticipated by the offeror or would have been anticipated by a reasonable person in the offeror's shoes may well be subject to the disclosure obligation in clause 17, but the evidence does not show that the subject matter of AAPT's submission is such a problem. Nor has it been shown that the Part A statement is factually incorrect with respect to this aspect of the disclosure of funding; nor that the offeror's statement in clause 10.10, that it is not aware of any circumstance which would prevent the condition precedent to draw down being satisfied, is correct. 175 Finally, AAPT complains that paragraph 10.5 of the Part A statement refers to terms and conditions of the CWOI facility set out in a letter of offer from CWO, rather than from Administration. In my opinion the reference to CWO is clearly a typographical error, and should be a reference to Administration. The Part A statement makes it clear that the Credit Facilities from external financiers have been granted to Administration, and that Administration will in turn provide funds to CWOI to finance the acquisition. The letter setting out the terms of that funding is obviously a letter from Administration. 176 CWOI has applied for and obtained from ASIC a s 728 exemption which will permit it to send Part A statements to AAPT shareholders which differ from the registered Part A statement by correcting the typographical error. There is therefore no substance to AAPT's complaint. 177 I conclude that none of AAPT's complaints about the disclosure of funding in the Part A statement should be upheld, and consequently that there is, in those respects, no failure to disclose material information under clause 17 and nothing misleading or deceptive or likely to mislead or deceive in the Part A statement.

Conclusion 178 All of AAPT's assaults on the Part A statement have failed. The summons has therefore been dismissed with costs. * * * * * * * * * *

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