Acacia Resources Ltd v Delta Gold NL

Supreme Court of Victoria|1999-10-27|Before: Warren J

CORPORATIONS LAW ss.637, 653 and 746 - takeover offer - Part A Statement - withdrawal of offer - whether permanent injunction should be ordered - costs.

The applicant, Acacia Resources Ltd ("Acacia") applied pursuant to the Corporations Law to restrain the respondent, Delta Gold NL ("Delta") from dispatching a Part A Statement and offer by Delta to the shareholders of Acacia. On 4 October 1999 I granted interlocutory orders restraining the dispatch of the statement and offer and published reasons. My reasons delivered on 4 October 1999 set out in further detail the history of the matter and, in particular, the circumstances preceding and following the preparation of the Part A Statement by Delta (see Acacia Resources Ltd v Delta Gold NL

In summary, on 2 September 1999 Delta issued an announcement to the Australian Stock Exchange that it intended to make a takeover offer for all of the issued shares in Acacia in consideration of the issue of fully paid ordinary shares in Delta on a one for one basis. Acacia alleged a substantial number of significant deficiencies in the Part A Statement of the offer and, also, complained that there were misleading and deceptive elements of the statement and offer.

After the interlocutory injunction was granted orders were made so as to expedite the matter and a trial date was fixed for 3 November 1999. Subsequently, a significant development occurred in the market place. On 11 October 1999 another corporation, AngloGold Limited, announced a competing offer for Acacia. On 21 October 1999 Delta made an announcement to the Australian Stock Exchange withdrawing its offer for Acacia announced on 2 September 1999 and stating, among other matters:

"'After giving serious consideration to increasing its offer for Acacia, Delta has decided to withdraw,' Managing Director Terry Burgess said. This decision is based on one of the conditions in Delta's offer being triggered, namely the announcement of AngoGold's offer for Acacia which the directors of Acacia intend to recommend, in the absence of a higher offer. Delta considers that to continue to respond to the legal challenge and to enter into a possible bidding contest with AngloGold would go against Delta's aim of building value for shareholders".

On the same day as the announcement to the Australian Stock Exchange on 21 October 1999 the solicitors for Delta wrote to the solicitors for Acacia confirming the announcement, namely, that following the bid by AngloGold, Delta no longer proposed to dispatch the Part A Statement. The solicitors served upon Delta's solicitors amended points of defence and counterclaim in the proceeding reflecting the change in position of Delta. Delta's solicitors proposed to Acacia's solicitors that the proceedings were of no utility and should be discontinued.

The proceedings returned to the court on the basis that Acacia sought an undertaking from Delta that it would not dispatch the Part A Statement and form of offer dated 13 September 1999 as registered with the Australian Securities and Investments Commission ("ASIC") and that it would not dispatch the document entitled "Chairman's letter and other information in relation to Delta's offer to acquire all of your ordinary shares in Acacia Resources Limited" ("the Chairman's letter"). Acacia sought, also, that Delta pay its costs of the proceeding.

Mr N. Young QC who appeared with Mr J. Beach for Acacia submitted that the matter ought not proceed to trial as to do so would be otiose or futile in light of the fact that the takeover offer had been withdrawn. Nevertheless, it was submitted that an undertaking as sought should be required, alternatively, a permanent injunction should be granted restraining Delta from proceeding to dispatch the relevant documents in order to ensure that Delta did not act further in any way upon the offer and, also, to finally resolve the issue as a matter of law. It was submitted that it was insufficient and inappropriate for Delta to be able to rely upon a unilateral and unbinding statement to the Stock Exchange.

There was no issue between the parties that the offer was now "stale" for the purposes of s.637 of the Corporations Law. It appeared not to be an issue, further, that if the offer was ever to be proceeded upon it would be necessary to obtain an extension of the relevant time periods from the Australian Securities and Investments Commission ("the Commission").

There were conditions subsequent attached to the offer by Delta that enabled a shareholder in Acacia to accept the offer in any event. It was submitted for Acacia that the conditions contained in the offer, in particular, clauses 9.1 and 9.3 did not prevent a contract to acquire from a shareholder of Acacia any shares resulting from acceptance of the Delta offer. Furthermore, it was submitted for Acacia that until the matter was finally disposed of it was open to Delta to re-activate the offer.

In any event, it was submitted that it was not open to Delta to unilaterally withdraw the takeover offer without the written consent of the Commission pursuant to s.653 of the Corporations Law. In addition, it was submitted for Acacia that, in any event, upon Delta having made the announcement of the proposed takeover bid as it did on 2 September 1999 the requirements of s.746 of the Corporations Law applied. Section 746(4) of the Law provides that where a person makes a public announcement of a proposed takeover bid that person shall before the end of two months after the day on which the announcement was made make a takeover bid in accordance with the public announcement. Section 746(8) of the Corporations Law provides that where, among other matters, s.746(4) is contravened the person who made the announcement is liable to pay compensation to another person who has suffered loss as a result of reliance on the public announcement. Section 746(10) of the Law provides that a person is not guilty of an offence under s.746(4) if it is proved that the person could not reasonably have been expected to make the takeover bid. In the present circumstances and in light of the matters stated in the announcement to the Australian Stock Exchange it is arguable that Delta could not reasonably have been expected to make the takeover bid in light of the existing higher offer by AngloGold and which latter offer had already obtained the support and recommendation of the directors of Acacia to the shareholders.

Clearly, at the very least, Delta has taken a commercial and pragmatic approach to the takeover bid and considered that it was not in the interests of Delta and indeed was a waste of time proceeding further. It was submitted by Mr Young that Delta in any event had obligations under s.653 and 746 to proceed with the takeover bid announced on 2 September 1999 and that, therefore, it was necessary for this court to extract the undertaking proposed or, alternatively, grant the permanent injunction sought. Mr Glick who appeared for Delta submitted that such approach was misconceived as the provisions of s.746 of the Code are enforcement provisions that lie within the province of the Commission. I note that the Commission does not appear to have taken any particular interest in the proceeding and has not at any point sought to intervene in the proceeding before this court.

In my view it is superfluous to determine whether or not arising from the provisions of the Corporations Law it is necessary for orders to be made in the nature of injunctive relief in order to prevent Delta from acting upon its takeover bid announced on 2 September 1999. The simple fact of the matter is that for commercial and practical reasons Delta has resolved and determined not to proceed with its takeover bid and has made an announcement to the Stock Exchange accordingly. Furthermore, the bid is stale pursuant to the provisions of the Corporations Law. If it transpired that Delta endeavoured to re-activate the takeover bid by virtue of the offer previously announced and which was the subject of the interlocutory injunctions ordered on 4 October 1999 an urgent application could be made to this court and may well be granted. That however is not the issue before the court at this point in time. So far as the applicant seeks an extraction of an undertaking from the respondent, alternatively, a permanent injunction against Delta I could not form a proper view on these applications in the absence of determining all the evidence, giving full consideration to all issues, tantamount to the conduct of the trial into the proceeding. I consider to embark on this course would be a waste of judicial resources and lead to the unnecessary incurring of costs. The more expeditious course is to exercise the inherent jurisdiction of the court. I am satisfied that neither the applicant nor the respondent wishes the matter to proceed. It follows that if the proceeding continued until the trial date on 3 November 1999 precious and valuable court resources would be wasted upon dealing with a hypothetical and futile issue. The fact is that the takeover offer by Delta will not now proceed. Accordingly, in the exercise of the inherent jurisdiction of the court I will dismiss the proceeding.

I turn now to consider the question of costs. Mr Glick for Delta relied upon a line of authorities commencing with J.T. Stratford & Son Ltd v Lindley & Ors (1969) 3 All ER 1122 to support the proposition that where an action has not proceeded for trial and "nobody has lost" and "nobody has won" the appropriate order is an order that costs lie where they fall. When the interlocutory injunction was ordered on 4 October 1999 I ordered costs be costs in the cause and which order was agreed to on behalf of Acacia. Mr Glick submits that for the purposes of determining the interlocutory injunction I determined that there was a serious question to be tried on a number of issues and then proceeded to determine that the balance of convenience favoured Acacia. This submission correctly sums up the position. Accordingly, costs were ordered to be costs in the cause on that occasion because it was not necessary for me at that stage to form a view as to whether one party or the other had acted unreasonably in all the circumstances, that is, whether Acacia was unreasonable in seeking the injunction or, alternatively, whether Delta was unreasonable in resisting the injunction.

Mr Glick relied upon the five principles expressed by Hill J in Australian Securities Commission v Aust-Home Investments Limited & Ors [1993] FCA 585; (1993) 44 FCR 194. In that matter the learned judge considered the issue of costs where the court was not called upon to adjudicate on the merits in the proceeding. After referring to the judgment of Lord Denning MR in J.T. Stratford & Son Ltd v Lindley and other authorities, Hill J observed:

"These cases seem to me to support the following propositions being made. (1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case. (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB). (4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371. (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration."

The approach adopted by Hill J in the Aust-Home case has largely been followed by the courts on many occasions and Mr Glick referred me to some of these authorities. (See Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai King QIN [1997] HCA 6; (1997) 186 CLR 622; Gribbles Pathology Pty Ltd v Health Insurance Commission and Ors (1997) 80 FCR 283; WST Securities Pty Ltd v Go-Tell Nominees Pty Ltd & Ors, unreported judgment of Mandie J delivered 30 May 1997).

With respect I adopt the five principles stated by Hill J in Aust-Home Investments. The principles apply common sense and pragmatism to circumstances where for a number of reasons the court is not called upon to adjudicate upon a proceeding on the merits. Rather, for various reasons the matter has resolved itself either by the intervention of outside parties or as a result of developments in circumstances between the litigating parties themselves.

In accordance with the first principle articulated by Hill J the present matter is one in which the parties have demonstrated expressly or at the very least tacitly that they do not wish to proceed with the litigation and accordingly I consider it appropriate to make an order for costs. Given that I have formed that view and as there will not be a trial on the merits in the ordinary course it would be difficult if not undesirable for this court to proceed to determine the costs between Acacia and Delta. However, in accordance with the third and fourth principles expressed by Hill J in the Aust-Home case it is appropriate to allocate consideration to the reasonableness or otherwise of Acacia in commencing the proceedings and Delta in defending them. On the basis of the matters described in my earlier reasons, in particular, the arguable deficiencies in the takeover offer and the chairman's letter I consider that Delta did not act reasonably in defending the proceedings. In this respect I note that prior to the commencement of the proceedings the solicitors for Acacia went to great lengths to endeavour to persuade Delta to withdraw the takeover offer, alternatively, provide further information to shareholders.

In my earlier reasons I described the course of correspondence between the respective solicitors as follows:

"From 8 September 1999 onwards correspondence ensued between Acacia and Delta in relation to certain confidentiality arrangements that bound Acacia, Delta and Placer in relation to the Sunrise Dam and the Sunrise Pit. Acacia expressed the view to Delta that there needed to be clarification as to how the joint venture arrangements between Placer and Delta in relation to the Sunrise Pit would operate in relation to the Sunrise Dam if Delta succeeded in securing control of Acacia. Essentially the position of Acacia was that there should be disclosure to the market. On about 15 September 1999 Delta informed Acacia that it considered the Part A Statement contained a proper disclosure of the terms of the Placer Agreement and, in particular, advised "Delta does not believe that further negotiations are warranted until it is in control of Acacia and in possession of all relevant information (so as to be capable of negotiating the detailed arrangements in a fully informed manner). To negotiate any further with Placer at this time may be adverse to the interests of Delta and Acacia shareholders". It is significant at the point of this communication that there was a continual refusal by Delta to disclose a document described as the "Working Principles" or a subsequent deed. Furthermore, despite the statement of Delta to Acacia concerning negotiations with Placer as events transpired, within a week Delta had negotiated an agreement with Placer. In any event, on 14 September 1999 Delta registered the Part A Statement and form of offer with the Australian Securities & Investments Commission ("the Commission"). Acacia received the Part A Statement and offer on 15 September 1999. On 20 September 1999 Acacia through its solicitors informed the solicitors for Delta of the concerns of Acacia with respect to alleged material deficiencies in the Part A Statement. Furthermore, Acacia informed Delta that it considered a shareholder of Acacia could not make an informed assessment of the value of Delta shares offered as consideration for acceptance of the takeover offer or determine the effect of the takeover offer upon a shareholder of Acacia who decided to retain his or her shares. Correspondence was exchanged and on 22 September 1999 Delta rejected the concerns of Acacia but advised that it intended sending out additional information together with a further deed entered into between Delta and Placer to Acacia shareholders. The additional information was to include information in relation to a new deed made between Placer and Delta on 22 September 1999, (hereafter referred to as the "September Placer deed"); the fact of the proposed acquisition of Delta of the 50% interest of North Limited in Kanowna Belle; if negotiations were completed prior to Delta's offers being sent to Acacia shareholders; the commitment of Delta not to waive the minimum acceptance condition in its takeover offer at level of acceptances less than 50.1% of Acacia's issued shares and; finally, information concerning the voting regimes contained in the Granny Smith joint venture agreement. Delta informed Acacia that it intended to dispatch the Part A Statement and offer in its original form to Acacia shareholders on 30 September 1999. Acacia complained to Delta about this proposed course and Delta maintained its position to not make any further disclosure to Acacia shareholders or to withhold the issue of the Part A Statement and the offer. Specifically, despite a request from Acacia, Delta refused to incorporate the supplementary information just outlined to Acacia shareholders in a new Part A Statement. As a result, Acacia instituted these proceedings. In affidavits and summary documents Acacia provided the court with a thorough description of its perceived deficiencies in the Part A Statement as prepared at 13 September 1999. It transpired during the course of the hearing as a result of the service of supplementary documents by Delta upon Acacia that there was additional information available to Delta which Delta indicated its intention to disclose to Acacia shareholders in addition to the Part A Statement and offer in their original form."

During the course of submissions on behalf of Acacia during the hearing of the interlocutory injunction additional information was served on Acacia. I can reasonably conclude from the course of correspondence between the solicitors and the progress of Acacia's submissions before me on the interlocutory application that the additional information was produced by Delta at that point as a result of the complaints by Acacia concerning the adequacy of the takeover offer and attached material. The additional information included the chairman's letter. In my previous reasons I observed:

"Well into the submissions on behalf of Acacia, Delta served an affidavit to which was exhibited a copy of material described as "additional information" and which it was said Delta proposed to send to Acacia shareholders with the Part A Statement and offer. The production of the additional material during the course of argument was the first opportunity Acacia had to consider that material. The additional material consisted of a document entitled "chairman's letter and other information in relation to Delta's offer to acquire all of your ordinary shares in Acacia Resources Limited". For convenience I will hereafter refer to this document as "the chairman's letter". The document was approximately 23 pages in length and consisted of a letter from the chairman of Delta dated 30 September 1999, a description of reasons why Acacia shareholders should accept the offer of Delta, a revised profile of the merged entity of Delta and Acacia description of production and cash costs, a summary of the offer, a description of the acquisition of North's 50% interest in Kanowna Belle, additional financial information, additional forecasts of earnings and cash flow but only up to the period ending 30 June 2000, description of proposed tax reforms, description of arrangements with Placer and the setting out of the actual deed with Placer. In the short time available to it Acacia prepared a comprehensive comparison of the Part A Statement with the chairman's letter. The comparison ran to some pages in length but gave rise to the following conclusive assertions on behalf of Acacia: the consolidated balance sheets for Delta, Acacia and the merged entity are incorrect because they did not take into account the Kanowna Belle acquisition; the assertion that the gearing of the merged entity would be 12% was a "gross" understatement in the context of the Kanowna Belle acquisition; projections and forecasts for the merged entity were incorrect in light of the Kanowna Belle acquisition; the projected share of production of Delta from various mines was incorrect in light of the acquisition of Kanowna Belle; the total gold production, average cash costs and weighted average total production costs were incorrect in light of the Kanowna Belle acquisition; various tables contained in the chairman's letter intended to be substituted for tables in the Part A Statement were incorrect in light of the Kanowna Belle acquisition; discrepancies between the description in the Part A Statement as to the description of terms of the Placer agreement and the actual terms of the Placer deed; various discrepancies in tables and footnotes; that the description of reserves and resources of the merged entity were not updated to allow for the Kanowna Belle acquisition; misstatement as to the cost effectiveness of the Kanowna Belle in view of the increased costs of underground mining; the lack of indication as to whether purported cash savings were one off or projected to be continuous; the implication that the full share price increase between the announcement date and 27 September 1999 was attributable to the offer without appropriate allowance for the impact of the increase in the gold price; alleged misstatement as to forecast hedge pricing; and alleged uncertainty as to voting rights. In summary, in the time available to it arising from the comparison between the Part A Statement and offer and the chairman's letter, Acacia submitted that the chairman's letter contradicted parts of the Part A Statement, included information that was inconsistent and, overall, constituted a document that did not merely update the Part A Statement but in fact purported to amend it."

The creation, production and extent of the additional documents served by Delta upon Acacia at an advanced stage of the interlocutory proceedings was significant. In my view Delta's conduct both before and after the commencement of the proceedings was unreasonable. I form this view for the purposes of determining where costs ought fall and I do so on the basis that the provision of the chairman's letter or what I have previously referred to as additional information was an attempt by Delta to overcome the criticisms laid at its door by Acacia. For the purposes of the costs application I consider that the provision of the later material was tantamount to an admission by Delta that it needed to remedy the material upon which it relied for the purposes of the takeover bid. As events transpired the rival bid was made by AngleGlobe. It is apparent that the rival bid provided Delta with the opportunity to avoid continuation of the proceeding as it were with commercial honour.

The practical outcome of the proceeding is that Delta has withdrawn its takeover bid and, accordingly, the substratum that underlies the proceeding has been removed. It also follows that Acacia has achieved the outcome which it purported to achieve by the institution of these proceedings. The Full Court of the Supreme Court of Queensland in R v Gold Coast City Council, ex parte Raysun Pty Ltd (1971) QWN 13 held that it is not necessary to determine the merits of a matter as a condition precedent to an order for costs. The court considered the individual circumstances of the matter before it and where the party seeking costs had reasonable grounds for its complaint and in light of the prevailing circumstances of the particular matter costs ought be awarded to the party that in the effect achieved the outcome it set out to achieve by commencing the proceedings. In this matter it is the conduct of Delta before and after the commencement of the proceedings as borne out by the course of correspondence between the respective solicitors and described in my earlier reasons and the production of the chairman's letter and related material that lead me to conclude that this proceeding falls outside the usual case where there has been no trial on the merits and a court would normally order that parties bear their own costs or make no order as to costs. For the purposes of exercising the discretion I consider that there is compelling evidence of an attitude and conduct of Delta that demonstrated a failure to have adequate and reasonable regard to its obligations under the Corporations Law.

Accordingly, I will order that the costs of the proceeding of Acacia be paid by Delta.

At a glance

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Before

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Judgment (27 paragraphs)

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Cases Cited (3)