[1993] FCA 414; (1993) 117 ALR 433

[1993] FCA 414; (1993) 44 FCR 335

Corporations Law - take-over offers - application to restrain despatch of Part A Statement - whether sufficient particulars of provision of cash consideration required for take-over - need to identify source of funds and the amount to be derived from each source - current intentions of offeror concerning business, assets and employees of target company - ambiguity in expression of intention by offeror to integrate its operations with those of the target - whether financial position of parent company of offeror required to be disclosed - balance of convenience - facility for remedial orders - whether shareholders should be denied opportunity of considering offer. Corporations Law: s.613, 729, 750.

Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd [1992] FCA 163; (1992) 7 ACSR 341 applied.

Cumberland Credit Corporation Ltd v TNT Australia Ltd (1988) 13 ACLR 371 distinguished.

Ical Ltd v County Natwest Securities Aust Ltd (1988) 13 ACLR 129 referred to.

QIW Retailers Ltd v Davids Holdings Pty Ltd (1992) 8 ACSR 245 distinguished.

Samic Ltd v Metal Exploration Ltd (Full Court, South Australian Supreme Court, 11 August 1993) referred to.

Trade Practices Commission v Santos Ltd [1992] FCA 523; (1992) 14 ATPR 41-194; (1992) 110 ALR 517 applied.

Counsel for applicant: Mr A Goldberg QC and Mr K Hargrave

Counsel for respondents: Mr A Myers QC and Mr C Scerri

Solicitors for respondents: Arthur Robinson and Hedderwicks

1. That the application for interlocutory relief be refused.

2. That the costs of all parties of the application be costs in the

cause.

3. That the directions hearing herein be adjourned to a date to be

fixed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

RYAN J Associated Dairies Limited ("Associated") seeks an interlocutory injunction to restrain the respondent Central Western Diary Limited ("Central") from despatching a Part A Statement and offers to shareholders of Associated. The following facts pertaining to Associated and its operations are revealed by an affidavit sworn by Mr Marks of its solicitors on 20 August 1993:

"2. Associated was established in 1926. It became a listed public

company in 1935. Presently Associated has a turnover of

approximately $128 million and employs approximately 320

people.

3. Associated is predominantly a processor, distributor and

marketeer of fresh dairy products. It is recognised as a

major supplier of dairy products to markets in Victoria, New

South Wales, Tasmania and South Australia. Associated exports

products to South East Asia. It despatches fresh milk to

Singapore on a daily basis and intends expanding in the South

East Asian area.

4. For the financial year ended 30 June 1992 the total operating

revenue of Associated reached $128 million. The net amount of

consolidated profit of Associated for that period after

extraordinary items and income tax was $3,398,000.

5. The current issued ordinary share capital of Associated is

24,270,650 ordinary shares of 50 cents each fully paid. The

present market capitalisation of the company is approximately

$72 million and there are approximately 700 members of the

company."

2. Central's Part A Statement dated 10 August 1993 has been furnished to Associated and, unless an interlocutory injunction had been granted, offers based on it could have been despatched on 27 August to shareholders of Associated. The offer is one to acquire "all or any" of each shareholder's sharehold in Associated for a cash price of $2.65 a share. It is expressed to be conditional upon Central becoming, during the period of the offer (one month), entitled to not less than 50.1% of the shares in Associated. The present application raises first the relatively narrow issue of the existence of a serious question to be tried as to whether the Part A Statement complies with the following clauses of s.750 of the Corporations Law:

"11 If the consideration for the acquisition of the shares to which

the takeover offers relate or for the acquisition of any shares,

renounceable options or convertible notes referred to in clause 9 is

to be satisfied in whole or in part by the payment of cash, the

statement shall set out:

...

(b) if the offeror is not to provide all of the cash, or is not to

provide any of it, from the offeror's own funds:

(i) particulars sufficient to identify the other person who

is, or each of the other persons who are, to provide,

whether directly or indirectly, some or all of the cash

from that person's or those persons' own funds; and

(ii) particulars of the arrangements by which that cash will

be provided by that other person or those other

persons."

...

17 The statement shall set out any other information material to

the making of a 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.

...

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.

20 (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."

3. The Part A Statement which is the subject of these proceedings identifies Central as a wholly-owned subsidiary of Australian Co-operative Foods Limited ("Australian Co-operative"). The Statement also provides the following information about Australian Co-operative:

"5.1 Background

Australian Co-operative Foods was formed in 1900 under the name The

Dairy Farmers Co-op Milk Company Limited. It was formed to handle

the distribution of milk and other dairy products for its dairy

farmer shareholders. It remains today an organisation owned almost

entirely by dairy farmers. In the 1920s it became a Co-operative

Society incorporated under the New South Wales Co-operation Act of

In the late 1980s, it adopted active membership rules pursuant to

which only persons who continue to supply product to the

Co-operative either directly or indirectly (e.g. through another milk

intake depot) may remain members. On 8th December 1989 the

Co-operative changed its name to Australian Co-operative Foods when the

Hunter Valley Co-operative Dairy Company Limited and Shoalhaven

Dairy Co-op Limited transferred their engagements and members to

Australian Co-operative Foods. The issued shares of Australian

Co-operative are not and cannot under present law be listed on any

stock exchange.

5.2 Principal Activities

4. The principal activities of Australian Co-operative Foods are:

A. The Milk Division

The Milk Division is the largest processor, distributor and

marketer of white and flavoured milk products in New South

Wales having over 55% of the New South Wales market. It

processes over 360 million litres of milk per annum sourced

from dairy farmers mostly located in New South Wales. It is

a processor for the New South Wales and ACT Milk Authorities.

It has strong brand names including "Dairy Farmers", "Oak" and

"Farmers Best".

B. The General Products Division

The General Products Division manufactures and markets

nationally a wide range of dairy foods with a turnover of

approximately 135 million dollars per annum. The product

range includes: yogurts, ice creams, custards, dairy desserts

and dips under various brand names including "Ski", "Dairy

Farmers" and "Oak".

C. The Rural Trading Division

The Rural Trading Division has Rural Trading stores

merchandising products for the farming and rural community."

5. The first deficiency or omission in the Part A Statement to which Mr Goldberg QC, who appears with Mr Hargrave for Associated, pointed, was said to arise from the description of how the cash consideration for the offer is to be provided. That is contained in cl. 10 which recites:

"10.1 The consideration for the acquisition of shares to which the

Offers relate and under the offers for Associated Dairies Preference

Shares is to be satisfied in whole by the payment of cash. The

maximum amount of cash which could be required under the Offers and

under the offers for Associated Dairies Preference Shares is

$52,975,393.

10.2 (a) The source for the cash consideration for the

acquisition of the Associated Dairies Shares and the

source for the cash consideration for the foreshadowed

offer for Associated Dairies Preference Shares and the

Share Scheme Shares referred to in paragraphs 8.1 and

8.2 will be provided to Central Western Dairy by

Australian Co-operative Foods either by way of loans or

by capital subscription (or a combination of both of

them).

(b) Australian Co-operative Foods has in place undrawn

credit facilities for $52,876,000 being the maximum

amount of the cash consideration which could be required

for the acquisition of the Associated Dairies Shares.

These credit facilities have been provided by Australia

and New Zealand Banking Group Limited (as to

$31,895,000) and Commonwealth Bank of Australia (as to

$20,981,000) under Loan Agreements dated 9th August,

(c) Australian Co-operative Foods has on deposit with

Australia and New Zealand Banking Group Limited the sum

of $99,799 being the amount of the cash consideration

for the foreshadowed offers for Associated Dairies

Preference Shares referred to in paragraph 8.1.

(d) The cash consideration for the foreshadowed offers

referred to in paragraph 8.2 for Share Scheme Shares

(other than those acquired pursuant to the Offers for

Associated Dairies Shares) will be funded out of

internal cash resources of Australian Co-operative

Foods.

(e) All preconditions to the availability of the funds

referred to above have been fully satisfied."

6. It is true that those clauses do not identify the term of the loan from each of the respective banks or the circumstances in which each loan might become repayable. Nor do they indicate the extent (if any) to which the loans are to be secured over the assets to be controlled by Central if the offer becomes unconditional. Since Central will be attracting a liability of up to $50m to acquire control of assets presently valued by the market at about $72m, these are all said to be material considerations to be weighed by a shareholder in Associated considering whether to sell for $2.65 a share or remain on the register as a minority shareholder with a highly-geared majority shareholder. In QIW Retailers Ltd v David's Holdings Pty Ltd (1992) 8 ACSR 245, Heerey J pointed out at 252:

"Counsel for Davids stressed the clear distinction drawn in s 750

between cash and scrip offers. Only in the latter case is there a

requirement for the material which would appear in a prospectus.

There is much force in this and in his point that a straight 90%

conditional acceptance cash offer may also leave minority

shareholders. However, for present purposes I think there is a

triable issue. The primary intention of Davids is that QIW will

remain listed but minority shareholders will retain 45%. The

financial standing of the majority shareholder in such circumstances

may well affect the share price of QIW. In this regard I would add

that an answer which Davids quite effectively made to many of QIW's

complaints - namely, that criticism could be made in the Part B

statement - does not apply here because this information will still

not be available at that stage. I should also add that QIW did not

argue that the relevant information was necessarily as extensive as

would be required for a prospectus."

7. The present is also a cash, not a scrip, offer. There is no requirement in s.750 for details to be provided of the financial position of a cash offeror but it is only in the light of those details that the impact on the offeror, and indirectly on post-takeover the price of shares in the target company can be assessed.

8. Counsel for Associated relied heavily in this context on some observations of Sheppard J as a member of a Full Court of this Court in Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd [1992] FCA 163; (1992) 7 ACSR 341 where his Honour observed, at 343:

"With respect to the primary judge, I do not think it sufficient

when an offeror purports to give particulars of arrangements by

which the cash is to be provided, to refer generally to two loan

agreements. I think that offerees are entitled to be told of the

essential provisions of the loan agreements. The only loan

agreement in evidence is that between BILAF and the offeror. A

reading of it discloses that it is a facility whereby BILAF agrees

to make advances to the respondent from time to time at the

respondent's request. The agreement is apparently unlimited in

amount but BILAF retains control of the situation because of cl 3.1

which provides that the borrower agrees to repay to the lender the

total amount outstanding on demand. That would always enable BILAF

to maintain control of the amount which it advanced and could lead

to a situation in which, in practical terms, it was not obliged to

advance anything. The terms of the GPG agreement were said to be

similar. That agreement is not in evidence nor is the agreement

which is said to exist between Brierley Investments and BILAF.

The fact that the advances may be in the discretion of the company

making them does not in any way mean that the facilities to which I

have referred may not properly be relied upon for the purposes of cl

11 of s 750. But offerees are entitled to know what the facts are.

In one sense it might have been right to say, as cl 9 of the Part A

statement said, that there were no fetters or conditions precedent

to draw down. But that does not tell the whole story."

9. However, Davies and Beaumont JJ, the other members of the Full Court in Rossington, decided that case on a narrower ground. Davies J, at 342, observed that cl 11 had a wider object than merely to require disclosure of the identity of the persons who were directly to supply the funds. His Honour continued:

"It seeks to ensure that the offerees will obtain sufficient

information so that they may make an informed judgment as to whether

the necessary cash is or will be available to carry through the

offer. Therefore, cl 11 uses the terms "directly or indirectly" and

"own funds". The clause requires a statement of the identity of the

person or persons out of whose own funds the cash will be provided.

The Part A statement did not do that for it referred only to

anticipated borrowings by the offeror from BIL (Australia Finance)

Ltd and GPG plc, not to the source from which those companies would

derive the cash. It appears from counsel's submissions that

Brierley Investments Ltd and GPG plc will fund the takeover using

their own funds and without recourse to external borrowings. But

the Part A statement did not say so.

The Part A statement did not disclose the proportions in which each

of the companies would provide the cash and the description of the

particulars of the arrangements was extremely brief. However, as

the overall financing arrangements are unknown to the court I

express no view as to whether material information was thereby

omitted."

"As Lockhart J also said: "Clause 11(b) is designed to ensure that

offerees know the identity of the person or persons who are to

provide the cash to the offeror to enable the shares to be acquired

by it, and in broad terms how the funds are to pass from that person

or those persons to the offeror."

I agree with this statement, but it must follow that the explanation

given by the respondent in the Part A statement and, in particular,

in cl 9 is insufficient for the purposes of cl 11(b) of s 750. No

distinction is made in the statement between the respective

contributions of the two lenders. The respondent is a subsidiary of

BIL, as is BIL (Australia Finance) Ltd. But GPG is an associate of

BIL and not its subsidiary. In my view, it would be material for

shareholders considering the bid to know how much each of the

lenders had agreed to advance. This has not been stated. That is

to say, the Part A statement did not, relevantly, identify the

lender qua the amount to be advanced in each case."

11. The purpose of cl 11 of s.750, in my opinion, is to allow offeree shareholders to assess how likely it is that the offeror can pay them if a cash offer is accepted up to the maximum number of shares which the offeror has undertaken to purchase. To that end, the clause requires the Part A Statement to identify each source of the funds and the amount to be derived from each source. I do not understand Sheppard J's reference in Rossington to "the essential provisions of the loan agreements" to go beyond those terms which are capable of making it more or less likely that the requisite funds will become available to complete the purchase. Particulars only of those provisions operating as conditions precedent or subsequent to the availability of the funds are required by cl 11(b)(ii). It is sufficient if the loan is, at the time of despatch of the Part A Statement, unconditionally available and will remain so long enough for the purchase to be completed. I do not regard cl 11 as requiring that the Part A Statement should set out, even in a summary way, terms of the agreement or arrangement pursuant to which the funds are to be made available, like those going to interest rates, principal or collateral securities or the date of repayment. That some details of arrangements for the provision of a cash consideration which a recipient of an offer needs to know must be disclosed, and that other details are immaterial, is provided by Ical Ltd v County Natwest Securities Aust Ltd (1988) 13 ACLR 129 where Bryson J observed, at 138:

"The terms of para 3(b) of Pt C seem to mean that even if the

arrangements are the usual arrangements there ought to be an express

statement that the arrangements are the usual arrangements but this

I would think is what the ordinary and reasonable reader would

assume if not told otherwise. However, that the reduction

arrangements required full clearance by 30 April 1988 was of

striking significance as that date was earlier than the expiry of

the offer period, so this part of the finance would have to be

repaid in full when there were still three trading days before

expiry of the offer. No one would really understand the

arrangements with the Commonwealth Bank unless he understood that

they were only to last until 30 April. In a statement of the

arrangements on which finance was available this was a very striking

omission.

On the other hand, the knowledge that another bank's approval was

for a period of 6 months, or 12 months, should not seem important to

a shareholder: the periods are long enough for the details to be

immaterial. The reasonable response would be: "Well, they have

enough finance" and paying the money back in 6 months' time would

not concern the shareholder. If the second defendant had

arrangements, or had no arrangements, or had well-based hopes for

getting other finance on and after 30 April, that matter ought to

have been stated."

12. In the light of these principles, I consider that cl 10 of the present Part A Statement contains enough information to serve the purpose which governs the construction of cl 11 of s.750.

CENTRAL'S INTENTIONS ABOUT BUSINESS, ASSETS AND EMPLOYEES OF ASSOCIATED

13. The next area in which Central's Part A Statement is said to be deficient is in respect of the offeror's intentions if it succeeds in gaining control of Associated. Clause 16 of the Statement is in these terms:

"16. CENTRAL WESTERN DAIRY'S INTENTIONS REGARDING ASSOCIATED

DAIRIES' BUSINESS

In the event of its offer becoming unconditional, Central Western

Dairy intends to conduct a review of the businesses of Associated

Dairies in conjunction with existing management to examine whether

opportunities exist to improve operating and organisational

efficiencies and increase overall profitability.

Pending the results of this review, it is the present intention of

Central Western Dairy, on the basis of the facts and information

concerning Associated Dairies known to it:

(a) to continue the businesses of Associated Dairies as currently

constituted;

(b) not to make any major changes to the businesses of Associated

Dairies nor to redeploy any of Associated Dairies' fixed

assets; and

(c) to continue the employment of Associated Dairies' present

employees.

In the event that Central Western Dairy becomes entitled to all the

Associated Dairies Shares its current intention is to proceed to

delist Associated Dairies and to integrate its operations with those

currently conducted by Australian Co-operative Foods.

In those circumstances, Associated Dairies would continue as a

wholly owned subsidiary of Australian Co-operative Foods responsible

for developing Australian Co-operative Foods' presence in the

Victorian market.

It is also the intention of Central Western Dairy that, in the event

of its offer becoming unconditional, its nominees should form a

majority on the Board of Associated Dairies."

14. Clause 20 of s.750 requires the offeror to set out its current intentions regarding the three matters specified in sub-cl. (1). In my view, the first two paragraphs of cl.16 of the Part A Statement inform the reader that Central has a present intention to continue the existing businesses of Associated, not to make any major changes thereto, and not to redeploy any of Associated's fixed assets. Those intentions, it is indicated, may change in the light of a review to be undertaken if the take-over is successful. Identical wording appeared in the relevant part of a Part A Statement considered by Beach J in Cumberland Credit Corporation Ltd v TNT Australia Ltd (1988) 13 ACLR 371. His Honour expressed the view, at 376, that the wording to which I have just referred:

"... does not amount to an expression of intention as to what TNT

proposes to do concerning the matters specified in cl 5A. It

amounts to nothing more than a statement that, until such time as

TNT forms its intentions, something it will not be able to do until

its take-over offer is successful and its review and evaluation

complete, the status quo will be preserved."

15. However, his Honour, regarded himself as relieved of the need to express a concluded view on a third argument by counsel for the plaintiff in that case that if the offeror "has not formed any intentions concerning the future of the take-over company and its assets, then it must form such intentions before it can make a take-over offer for the target company in the first place." That relief was afforded by extrinsic evidence that the managing director of TNT had made a public statement four days before the Part A Statement was served that "we know what we will do with the (target) company." That, together with evidence elicited by cross-examination in the course of the hearing, enabled his Honour to find that TNT had formed alternative intentions which should have been disclosed in its Part A Statement. I have no evidence before me of that kind, and would be inclined to refuse interlocutory relief on the basis of non-compliance with cl. 20 if the relevant part of the statement had been confined to the words considered by Beach J in Cumberland.

16. I was invited by Mr Goldberg to draw the inference, strengthened by the failure of the respondents to call evidence from any of the directors of Australian Co-operative, that those sponsoring the takeover must have formed intentions or considered options as to what is to happen in the event of acceptance for less than 100% of the shares in Associated. That inference is much more compelling where the target company is a "cash box" or investment vehicle and not, as here, an active trading company with substantial core businesses. In the present case, the inference is at least equally open that those responsible for the offer, perceiving Associated as a profitable company with activities and assets complementary to those of Australian Co-operative, intend, at present, only to continue Associated's businesses using its existing assets and employees until there is an opportunity, after review, to consider ways in which they might be made even more profitable. That is the expression of intention in the first two paragraphs of cl 16 of the Part A Statement and, in the absence of evidence tending to show it to be incomplete or otherwise misleading, I cannot regard it as inadequate. For these reasons, I decline to draw the inference suggested on behalf of Associated.

17. However, the present case is complicated by the presence in the Part A Statement of the Statement that:

"In the event that Central Western Dairy becomes entitled to all the

Associated Dairies Shares its current intention is to proceed to

delist Associated Dairies and to integrate its operations with those

currently conducted by Australian Co-operative Foods.

In those circumstances, Associated Dairies would continue as a

wholly-owned subsidiary of Australian Co-operative Foods responsible

for developing Australian Co-operative Foods' presence in the

Victorian market."

18. If all that is meant by that passage is that, in the event of Central's acquiring all the shares in Associated, the latter company would become an on-balance sheet asset of Australian Co-operative, that part of the statement may well be unexceptionable. However, the statement of intention to "integrate its (Associated's) operations with those currently conducted by Australian Co-operative" is far from clear. It may connote, for example, the amalgamation of some head office functions of the two enterprises with consequential redundancies of some employees of Associated. The ambiguities inherent in the concept of "integration" are analogous to those imported by the word "rationalise" as to which Bryson J in Ical v County Natwest (supra) observed, at 142:

"Rationalise" is a word of vague import; on its face it appears to

mean to make reasonable or to make rational duplicated operations

but the reader must, when he sees a word in a document like this be

left with a doubtful suspicion that what is indicated is an

intention to close down or sell off some unidentified aspects of

ICAL's operations and that "rationalise" which does not mean these

things is used as an euphemism to indicate them.

The words used are not capable of indicating what the intention held

is in terms what is to be done to ICAL operations. There is no

indication whatever of which are the operations to which this

exercise is to be applied; the meaning of "operations" is not

particularly clear but an endeavour to understand it can be made

only by those with a fairly good understanding of the business of

ICAL and of the business of the Transfield Group, and in that

endeavour they would not be assisted by any part of the Part C

statement."

19. Mr Myers QC who appeared with Mr Scerri for the respondents suggested that "the process of integration will necessarily involve the risk that any employee might be dismissed". I do not regard that as axiomatic. Clause 20(1) of s.750 does not relieve an offeror of the need to state intentions regarding the future employment of the present employees of the target company in the event of the offeror's succeeding in acquiring all the issued shares. That aspect of the legislation perhaps impliedly acknowledges that offeree shareholders may be motivated by considerations other than economic self-interest, including the target company. A similar acknowledgment was made by Bryson J in Ical v County Natwest (supra) when he said, at 148:

"The existence in other persons of interest in prospective dealings

with the assets of a take-over target is additional to what I regard

as the obvious materiality of intentions and prospects of carrying

out such exercises to shareholders who are considering whether to

accept or reject a take-over offer. Such shareholders would not

necessarily act solely on economically rational grounds: a

shareholder might regard it as important that a particular operation

should continue and might make a decision about disposal or

retention of his shares with a view to affecting that matter and I

regard those considerations as material.

The choices open to a shareholder are not to remain in or wholly

give up membership of a target company: a shareholder can also

dispose of part of his shares to an offeror with a view, for

example, to facilitating the offeror's gaining control so as to join

in the expected resulting prosperity. Shareholders do exist (and

this case furnishes examples of them) who are interested wholly and

solely in the price offered to them and care nothing for what the

offeror is going to do; such shareholders act well within the range

of reasonable conduct but they do not take the only reasonable

course."

20. For these reasons, I regard it as strongly arguable that the Part A Statement does not comply with cl 20 because of its failure to give any or sufficient particulars of Central's intentions regarding the deployment of the fixed assets of Associated and the future employment of its present employees in the event that Central becomes entitled to all the shares in Associated.

INFORMATION ABOUT PROPOSED ACQUISITION BY AUSTRALIAN CO-OPERATIVE OF CERTAIN ASSETS OF NATIONAL FOODS LIMITED

21. Associated's complaint about the Part A Statement under this head is encapsulated in the following paragraphs of a letter from its solicitors to the solicitors for Central dated 19 August 1993:

"4.6 According to press reports, Australian Co-Op has agreed to

purchase from National Foods Limited ("National Foods")

various assets in the event that National Foods' current take-over

bid for United Dairies is successful. The consideration

for such purchase is $21,600,000.

4.7 This proposed purchase is materially relevant to Associated

Dairies' shareholders in determining whether to accept the

intended take-over for their shares. The incurring of such

further significant debt (which would increase Australian Co-Op

borrowing commitment levels to more than $89,000,000) will

(to use the words of Heerey J in QIW Retailers Limited v

Davids Holdings Pty Ltd - p 253) "affect the share price of"

Associated Dairies. As your client must realise, if

Associated Dairies becomes a non-wholly owned subsidiary of

Australian Co-Op, its share price will be affected by the

financial strength or weakness of its parent. The failure of

the purported Part A statement to mention the National Foods

purchase, let alone deal with its effect on the financial

position of Australian Co-Op and its group of corporations

(including Central Western), invalidates such statement,

especially when one considers that the proposed purchase of

Associated Dairies is also to be totally funded by debt."

22. That letter elicited a reply dated 20 August 1993 which included the following passage:

"... we are instructed Central Western proposes to provide the

information set out below to shareholders of Associated Dairies to

whom the offer is made.

(a) Financial information in connection with Central Western

and Australian Co-operative Foods Limited ("Australian

Co-operative") and its subsidiaries. It is envisaged

this information would include audited financial

statements and directors' reports of Australian

Co-operative.

(b) Information concerning the intention of Australian

Co-operative to purchase the Kempsey and Wyong business of

United Dairies Limited ("United Dairies") and the Orange

milk and dairy business of National Dairies Limited

("National Dairies"), in the event that National Dairies

gains control of United Dairies. It is envisaged this

information would include details of the understanding

between Australian Co-operative and National Dairies in

relation to the intended purchase and of the financial

accommodation which would be provided by ANZ and CBA to

fund the intended purchase.

Central Western considers that the Part A statement contains all

information material to enable shareholders of Associated Dairies to

make a fully informed decision whether or not to accept the offer.

Central Western wishes, however, also to avoid unnecessary,

protracted and costly litigation which might delay the dispatch of

the offer. Accordingly, if Associated Dairies believes that

information in addition to that described in sub-paragraphs (a) and

(b) above should be included in the Part A statement would you

please provide us with full particulars of any such information so

that Central Western can give further consideration to the matter."

23. I can discern nothing in s.750 to suggest that matters concerning the financial affairs of the offeror or its parent or any associated company have to be disclosed in the Part A Statement. (I except from this observation, of course, the need to identify the source and mode of provision of funds to finance the proposed acquisition which I have already discussed). If there were a wider obligation having universal application of the kind contended for by Associated it would subsume the narrower, specific, obligation imposed by cl 11 of s.750.

24. In QIW Retailers Ltd v Davids Holdings Pty Ltd (1992) 8 ACSR 245, Heerey J regarded the financial position of the offeror as material information within the meaning of cl 17. However his Honour was clearly influenced by the considerations that any shares in QIW in excess of 55% which Davids might acquire would be "sold down" so that a substantial body of minority shareholders would exist after the proposed acquisition and by the proposal that the target company should purchase the Queensland business of Davids. In my view there are no similar features in the present case which make information about future activities of Australian Co-operative Foods, unrelated to the proposed takeover of Associated, material to be provided to Associated's shareholders.

25. If I be wrong in the approach which I have taken to the construction of s.750 in the present context, I would still refuse relief to Associated under this head for discretionary reasons grounded in the offer by Central's solicitors to provide further, albeit limited, financial information concerning Australian Co-operative Foods and its subsidiaries.

26. The statutory provisions governing the despatch of Part A Statement are manifestly designed to protect offeree shareholders by ensuring that they make their decision to accept or reject an offer in the light of information which is as full and accurate as practicable about the effect of the takeover on matters which may affect the value of those shares or otherwise touch on the future management of the target company. Accordingly, the convenience which has to be balanced in a case like the present is that of the shareholders in having a prospect that identified deficiencies in the provision of information will be corrected against the convenience of the same shareholders and the offeror in having the offers despatched without delay. A countervailing detriment to the shareholders is the prospect that if an interlocutory injunction goes, the offer may not proceed at all.

27. By s.637 the offeror must, not later than fourteen days, and not earlier than twenty eight days, before despatching the offer to shareholders, have served on the target company a copy of the Part A Statement and a statement that it has been registered by the Commission. On the facts of the present case that means that the offers must be despatched between 27 August and 10 September unless the Commission modifies that requirement. The need to resolve complex matters of discovery and probable questions of fact, allied with the strained resources of the Court, makes it certain that Associated's substantive application cannot be heard and determined before mid-September. It is not disputed that there is no means of compelling Central to seek from the Commission an extension of time in which to despatch its offers to shareholders or to revive its offer after the present litigation has concluded. Accordingly, to grant an interlocutory injunction now would incur the risk of depriving Associated's shareholders altogether of the offer which Central has foreshadowed. If that risk were to materialise, it necessarily could not be compensated by enforcing Associated's undertaking as to damages in favour of its own shareholders.

28. Moreover, the Court has a wide discretion by virtue of s.729 and the wide definition of "remedial order" in s.613 to afford other remedies if it eventually concludes that a contravention of the Corporations Law has occurred. Those remedies include an order for divestiture of shares acquired by Central like that made by a Full Court of the Supreme Court of South Australia in Samic Ltd v Metals Exploration Ltd (unreported 11 August 1993). Further or alternatively, the order could be moulded to require each affected shareholder to be given an opportunity to reverse his or her decision to sell or to retain shares in Associated.

29. These considerations have weighed heavily with me in deciding to refuse the present application, as they did with Heerey J at first instance in Trade Practices Commission v Santos Ltd (1992) 14 ATPR 41-194 and a Full Court of this Court in the same case [1992] FCA 523; (1992) 110 ALR 517 where Hill J, with whom Sweeney J agreed, observed at 532:

"While due weight should be given to the fact that the failure to

grant an interlocutory injunction would permit a respondent, in a

case such as the present, to proceed to acquire, through its

takeover offer, shares and thereby may possibly result in a breach

of s.50, it, in my view, gives too much emphasis to form and not

enough to substance to say that because the grant of the injunction

could put an end to the subject matter of the litigation, therefore,

in the ordinary case at least, interim injunctive relief should be

granted. The remedy of divestiture is in reality an alternative

remedy open to the Commission, albeit that it is one which could not

be sought by the Commission until at least there had been an

acquisition of the shares. In my view, a court considering whether

to grant an interim injunction, in a case such as the present, must

weigh up the real consequences to each party, taking in mind not

only the public interest but also the private interests involved.

There is, in my view, no presumption that an interim injunction

should be granted, nor is there a presumption that an interim

injunction should not be granted. The matter is one for a judicial

exercise of discretion, taking into account all relevant matters.

As I said earlier, the question of whether there is a serious issue

to be tried and the balance of convenience in granting an injunction

are not two mutually exclusive matters. The one reacts upon the

other. The stronger the case the Commission has on the merits, that

is to say in the present case of a breach of s.50 in the event of an

acquisition, the more the balance of convenience would, without the

interaction of other factors, be weighted in favour of the

Commission. Likewise, where the Commission's case appears weak, the

more the balance of convenience may be weighed in favour of the

respondent to the proceedings, all other factors being equal."

30. I have also been influenced by the fact that the presumptive deficiency of information which I have identified in the Part A Statement goes to the intentions of Central and its parent company as to what is to occur only in the event of the offeror's acquiring all the shares in Associated. On the present state of the evidence that is unlikely to happen. As well, the evidence indicates that shares in Associated are relatively tightly held so that the deficiency to which I have just referred, and any other valid criticisms of the Part A Statement, can be pointed up by the directors of Associated in their Part B Statement with some certainty that their strictures will come to the attention of an overwhelming majority of shareholders before they decide whether to accept or reject the offer.

31. For all of these reasons, I consider that a proper exercise of the Court's discretion requires me to refuse the application for interlocutory relief. As indicated on 27 August, the costs of the application shall be costs in the cause and the directions hearing herein is adjourned to a date to be fixed.