Australian Securities & Investments Commission v Yandal Gold Pty Ltd

Federal Court of Australia|1999-07-01|Before: Adam P, Merkel J

Introduction 1 The present proceeding concerns contraventions of s 615 of the Corporations Law which are alleged by the applicant ("ASIC") to have occurred in relation to takeover offers made by the first respondent ("Yandal Gold") for all of the 308,960,662 shares on issue in Great Central Mines Ltd ("Great Central Mines"), a company listed on the Australian Stock Exchange. Yandal Gold is a wholly owned subsidiary of the second respondent ("Yandal Gold Holdings") which is owned as to 50.1% by the third respondent ("Edensor") which is the trustee of a discretionary trust for the benefit of the Gutnick family, and as to 49.9% by the sixth respondent ("Normandy Consolidated Gold"), which is part of the Normandy group of companies. The fourth respondent ("Normandy") is a company listed on the Australian Stock Exchange and is the ultimate holding company in the Normandy group. Each of the other Normandy respondents is a wholly owned subsidiary of Normandy. 2 On 12 January 1999, Yandal Gold served on Great Central Mines an Offer and Part A Statement in relation to offers for all of the shares on issue in Great Central Mines at $1.50 per share. At that time Yandal Gold had a relevant interest in 40.37% of the issued shares in Great Central Mines. The interest arose as a result of a Shareholders Agreement entered into between the respondents on 11 January 1999 in relation to the takeover offers proposed to be made by Yandal Gold. 3 Prior to the respondents entering into the Shareholders Agreement, Edensor held 38,796,342 shares, being 12.56% of the shares on issue in Great Central Mines, and the seventh respondent, ("Normandy Mining Holdings") held 85,912,369 shares, being 27.81% of the shares on issue in Great Central Mines. As a consequence of the various parties entering into the Shareholders Agreement, each became associates of the other and was therefore entitled to relevant interests in the shares in Great Central Mines held by the other parties to the agreement: see ss 12(1)(b), (c) and (e), 15(1)(a) and (c) and 609(1) of the Corporations Law. Accordingly, on 11 January 1999 Edensor's entitlement to a relevant interest in shares in Great Central Mines increased from 12.56% to 40.37% and the Normandy group's entitlement to a relevant interest in shares in Great Central Mines increased from 27.81% to 40.37%. Yandal Gold and Yandal Gold Holdings held no shares in Great Central Mines; accordingly, their entitlement to a relevant interest in shares in Great Central Mines increased from zero to 40.37%. 4 The takeover offers by Yandal Gold were sent to shareholders in Great Central Mines on or about 9 February 1999 (being the first day on which the takeover offers were capable of acceptance) and, in the events that occurred, remained open for acceptance until 21 April 1999 (being the day immediately after closure of the takeover offers). By 21 April 1999 Yandal Gold had become "entitled" to 94.37% of the issued shares in Great Central Mines, of which 40.37% related to the shares held by Normandy Mining Holdings and Edensor. Yandal Gold has made payments totalling $248,411,349 to accepting shareholders in respect of the acceptances received by Yandal Gold under the takeover offers. The money was drawn down pursuant to a $285 million Syndicated Term Debt Facility provided on 11 January 1999 by the Chase Manhattan Bank ("Chase") as agent for and with certain other financiers. 5 From an early stage of the takeover ASIC was concerned about the consequences of the Shareholders Agreement. ASIC's investigations resulted in the present proceeding being commenced on 25 March 1999. ASIC contended that as a result of the Shareholders Agreement Yandal Gold, Yandal Gold Holdings, Edensor and certain companies in the Normandy group were deemed to have relevant interests in the shares held by Edensor and Normandy Mining Holdings in Great Central Mines under s 33 of the Corporations Law and had acquired the relevant interests in respect of those shares in contravention of s 615 of the Corporations Law. 6 ASIC applied to the Court on 25 March 1999 for interim relief, in effect, to freeze the takeover offers until the Court had an opportunity to determine whether the Shareholders Agreement had resulted in a contravention of s 615 of the Corporations Law. ASIC's main concern was that, as a result of the takeover being launched by Yandal Gold from a "platform" of 40.37%, there was no realistic prospect of a rival bid and either no, or an inadequate, premium for control was being offered to shareholders in Great Central Mines who were not being paid a fair or reasonable price for their shares. The application for interim relief was refused for the reasons set out in my Reasons for Judgment on 26 March 1999 but directions were given for an expedited final hearing. 7 Subsequently, ASIC amended its statement of claim and alleged that: · on, or shortly before, 11 January 1999 Yandal Gold entered into relevant agreements, as defined in s 9 of the Corporations Law, with each of Edensor and Normandy Mining Holdings to the effect that neither of them would accept the takeover offers ("the non-acceptance agreement") and would retain their shares for the purposes of the takeover bid to enable Yandal Gold to reach the 90% threshold so as to entitle it to compulsorily acquire the remaining shares in Great Central Mines under s 701 of the Corporations Law ("the retention agreement"); · as a result of the non-acceptance and retention agreements Yandal Gold, Edensor and Normandy Mining Holdings obtained power to exercise control over the disposal of the shares in Great Central Mines held by Edensor and Normandy Mining Holdings and each thereby acquired the shares held by any of the others in contravention of s 615; · by reason of the contraventions of s 615 the Part A Statement dispatched to shareholders contained statements in relation to relevant interests and acquisitions of shares in Great Central Mines by Yandal Gold, Edensor and the Normandy group of companies that were misleading or deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth) alternatively s 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) and s 995 of the Corporations Law. 8 ASIC seeks orders pursuant to s 737 or s 739 of the Corporations Law vesting in it all of the shares in respect of which the contraventions had occurred being 94.37% of the shares, constituted by the respective shareholdings of Edensor (38,796,342 shares) and Normandy Mining Holdings (85,912,369 shares) and the shares acquired by Yandal Gold pursuant to the takeover offers (166,866,016 shares). Further or alternatively, ASIC seeks orders pursuant to s 737 or s 739 of the Corporations Law requiring Yandal Gold to offer to each person from whom it has acquired shares under the takeover offers the option to cancel the contract arising from each acceptance of the offer and recover those shares on repayment of the amount paid to them by Yandal Gold. Certain other relief, including compensatory relief for the shareholders who accepted the takeover offers is also sought in respect of contraventions of s 615 and the misleading and deceptive conduct. 9 The main issues arising in the proceeding are: · whether Yandal Gold, Edensor and Normandy Mining Holdings entered into the non-acceptance agreement and the retention agreement and, if so, thereby contravened s 615 of the Corporations Law; · whether any of the respondents, by entering into the Shareholders Agreement, contravened s 615 of the Corporations Law; · in the event that there has been a contravention of s 615 of the Corporations Law, the relief that is appropriate. 10 At the initial hearing there were two main areas of factual dispute. The first area related to whether there was a non-acceptance and a retention agreement as alleged by ASIC. The second related to whether if, contrary to the respondents' contentions, there had been contraventions of s 615, the contraventions were technical, inadvertent and did not result in any loss, detriment or unfairness to the shareholders in Great Central Mines. An aspect of the second area of dispute related to whether the offer price of $1.50 for each share in Great Central Mines was fair or reasonable. Towards the conclusion of submissions, and after each party had closed its case, a further area of contention arose. The respondents and Great Central Mines claimed that vesting orders would unfairly prejudice Great Central Mines as it would bring about a change in control that would trigger an obligation by the company to repurchase US$300,000,000 worth of 8 7/8% Senior Notes due 2008 at 101% of the face value of the Notes. After the conclusion of submissions a further and discrete hearing was held in respect of that claim. Background 11 The economic relationship between Normandy, Edensor and Great Central Mines commenced in August 1997. At that point of time Edensor held 18.2% of the shares in Great Central Mines. On 21 August 1997 Normandy acquired a 9.1% holding in Great Central Mines by a share placement at $2.45 per share, lent $100 million for 5 years to Edensor on generous terms, lent $155 million to Great Central Mines and entered into a Technical Services Agreement with Great Central Mines. The terms of the Edensor loan were complex. For present purposes it is sufficient to say that the terms provided that if Edensor's holding in Great Central Mines fell below 42 million shares, less any shares sold by it to the Normandy group, the loan was to become repayable on terms highly disadvantageous to Edensor. Thus, Edensor had a significant disincentive to sell its shares other than to the Normandy group. Provision was also made for the Normandy group to retain its shares. 12 During the period from August 1997 to April 1998 Normandy increased its shareholding in Great Central Mines to 19.26% through purchases on the Australian Stock Exchange. In the same period Edensor increased its shareholding to 19.24%. 13 On 8 April 1998, Great Central Mines made a further placement to Normandy Mining Holdings of 21,520,219 shares increasing the Normandy group's shareholding to 25%. The placement was approved by shareholders of Great Central Mines pursuant to s 623 of the Corporations Law. 14 On 14 May 1998 Normandy Finance made two further loans, each of $30 million, to Edensor. Each loan was the subject of a separate loan agreement. The terms of the loans were complex. In substance, the lender's ultimate recourse was to two parcels, each of 4.4%, of Edensor's shareholding in Great Central Mines. Mortgages of the shares secured the loans and provided the only real recourse for Normandy Finance in the event of default. The loans transferred future economic risk in respect of the shares to Normandy Mining Finance Ltd. Additional minimum shareholding requirements were also imposed on Edensor. 15 As a consequence of the loan and shareholding arrangements, it became apparent to the "market" that the Normandy and Gutnick groups had formed a close economic association in relation to Great Central Mines which was expected to lead, sooner or later, to a takeover of Great Central Mines by Normandy. 16 In October 1998 Normandy increased its shareholding in Great Central Mines to 27.8%, principally by purchases from Edensor at $1.50 per share. Edensor also sold some 6 million shares to AMP, reducing its holding to 12.6% which was below the minimum number of ordinary shares it was required to hold under the August 1997 and May 1998 loan agreements. On 14 October 1998 Normandy and Edensor agreed to reduce the minimum shareholding requirements under the August 1997 and the May 1998 agreements to adjust for the sales made by Edensor. 17 In August 1998 Edensor approached Normandy concerning a possible bid for all of the shares in Great Central Mines. Edensor believed that the share price of Great Central Mines, which had declined approximately 55% between 30 June 1996 and 30 June 1998, made the shares an attractive investment opportunity. It was keen to seek Normandy's participation because of its position as the leading gold mining enterprise in Australia and its ability to secure acquisition financing on more favourable terms than Edensor would be able to obtain on its own. Edensor, which wanted to increase its own shareholding in Great Central Mines, believed that a joint effort with the Normandy group would present the best means to achieve its objectives. 18 The proposal of a joint bid was first raised at a meeting between Mr Gutnick and Mr Champion de Crespigny (each of whom was the Executive Chairman of Directors of companies in their respective groups) at which representatives of Chase were present. Normandy considered that a bid for all of the outstanding shares in Great Central Mines would be unlikely to succeed unless it was conducted with the support of Edensor and Mr Gutnick with whom Normandy had developed a good working relationship since its initial investment in Great Central Mines. In late September 1998 senior executives of the Normandy group and Edensor held preliminary discussions concerning the possibility of a joint bid for all of the shares in Great Central Mines that were not held at that time by Normandy or Edensor. 19 By late September 1998, Chase had offered to Normandy and Edensor finance facilities of $261 million to finance the acquisition of shares in Great Central Mines not already held by them. In late October 1998 Edensor and Normandy were in favour of making a bid. In discussions between their representatives it was agreed that any joint bid should be conditional upon the bidder becoming entitled to acquire 100% ownership of the outstanding shares. This effectively meant that there had to be an entitlement in the bidding entity to over 90% of the shares, as a result of acceptances from more than 75% of the shareholders, to enable compulsory acquisition of the remaining shares under s 701 of the Corporations Law. 20 After the decision had been made to proceed with the bid in late October and early November 1998, advisers of the Normandy group and Edensor were instructed to assist in establishing the legal structure for the transaction. On the basis of legal advice the Yandal Gold structure, supported by a Shareholders Agreement between the Edensor and Normandy interests, was determined to be the appropriate vehicle for the bid. In anticipation of the bid, legal advisers to the Normandy group incorporated Yandal Gold and Yandal Gold Holdings on 16 December 1998. It was subsequently confirmed that the shares in Yandal Gold Holdings, which was to own 100% of Yandal Gold, would be owned by Edensor as to 50.1% and Normandy as to 49.9%. 21 The funds to be provided by Chase increased to $274 million, and then subsequently to $285 million, on the basis of estimates made of the cost of acquiring the remaining 59.63% shareholding in Great Central Mines that was not held by Edensor or Normandy Mining Holdings, at $1.50 for each share. The price of $1.50 was based on the highest price paid for shares acquired in the four months preceding the offer: see s 641(1). The funding arrangements provided that the lenders' ultimate recourse was to the Normandy group, and not to Edensor, in the event of default. 22 The shareholding and financing structure was attractive to Edensor because, if the takeover was successful, it would allow Edensor to increase its ownership interest in Great Central Mines with little risk with respect to financing. The structure was also attractive to Normandy because, if the offers were successful, it would provide the Normandy group with an increased stake in the equity of Great Central Mines and its operations whilst not requiring consolidation of Great Central Mines indebtedness for Australian accounting purposes. Under the structure, Normandy would, however, be permitted to consolidate Great Central Mines' earnings in its group accounts. 23 On 7 January 1999, after considerable negotiation between representatives and legal advisers of the Normandy group and Edensor, near final drafts of the Shareholders Agreement, the Offer and Part A Statement and the Chase loan facility agreement documents were provided to the respective boards of Edensor and Normandy for final consideration and approval. Final execution versions of the Shareholders Agreement, the Part A Statement and the loan facility agreement documents were prepared (after negotiations over the weekend of 9 and 10 January 1999) and executed by duly authorised persons on 11 January 1999. 24 The Shareholders Agreement is complex. Essentially, it provided for the manner in which Edensor and the Normandy group interests were to participate in the conduct of the bid by Yandal Gold and in the conduct of Great Central Mines if the bid succeeded. The agreement dealt with the shareholding structure, membership of the boards of directors of Yandal Gold and Yandal Gold Holdings, the facility agreement, dividend policy, the composition of, and voting on, the board of directors of Great Central Mines and a number of other matters. Normandy, rather than Normandy and Edensor was to bear ultimate liability to Chase under the loan facility. Although Normandy and Edensor were each liable to service Yandal Gold Holdings' liability to Chase, in the event of default Normandy was to have recourse only to Edensor's shares in Yandal Gold Holdings. 25 If Edensor defaulted when the loan was due for repayment, or in the event that Edensor defaulted in its obligations prior to that date, it was to bear no risk of loss but was entitled to receive 90% of the value of its shareholding in Yandal Gold Holdings. Thus, Edensor received what was fairly described by ASIC as a valuable "carried interest" in respect of its 50.1% holding in Yandal Gold Holdings. Witnesses were in agreement that the "carried interest" received by Edensor was unprecedented. It represented the price Normandy was prepared to pay for Edensor's "support" for the takeover bid which was structured to achieve Normandy's objective of 100% ownership of Great Central Mines by Yandal Gold, Normandy and Edensor. ASIC contended that the price Normandy paid for Edensor's support was in lieu of a control premium being offered to shareholders. That price was estimated by ASIC's expert witness, Mr Wayne Lonergan, a Chartered Accountant with Price Waterhouse Coopers, to have a value of $27-30 million. 26 The offers made pursuant to the Part A Statement were sent out to shareholders on or about 9 February 1999 with the recommendation by Mr Gutnick, as Chairman of Great Central Mines, that they be accepted. The offers were conditional, inter alia, on Yandal Gold becoming entitled to 90% of the shares in Great Central Mines and not less than three-quarters of the persons to whom Yandal Gold made offers having accepted the offers, thereby entitling Yandal Gold to compulsorily acquire the remaining shares under s 701 of the Corporations Law. The Part A statement stated that Edensor and Normandy Mining Holdings had advised Yandal Gold that they "will not be accepting the Offers in respect of their respective holdings" in Great Central Mine shares. 27 The offers of Yandal Gold in the Part A Statement were lodged with ASIC and were deemed to be registered under s 646 of the Corporations Law on 12 January 1999. On 27 January 1999 ASIC executed an instrument under s 728 of the Corporations Law granting relief for a varied offer in respect of shareholders of Great Central Mines whose registered address was in the United States. On 2 February 1999 ASIC wrote to Yandal Gold stating it was of the view that the Shareholders Agreement had resulted in a contravention of s 615 of the Corporations Law. On 9 February 1999 ASIC notified Yandal Gold that it had commenced an investigation into the possible contravention and other related matters. On the same day the takeover offers were sent to shareholders. On 11 February 1999 ASIC registered, pursuant to s 657 of the Corporations Law, a notice of variation of the offer period pursuant to which Yandal Gold was authorised to extend the close of the original offer period from 9 March to 6 April 1999. 28 Great Central Mines sent the Part B Statement to its shareholders on 23 February 1999. In the Statement the independent director made a recommendation that, in the absence of a higher offer, the offers be accepted. The Part B statement was accompanied by a report from SG Hambros Australia Ltd pursuant to s 648 of the Corporations Law which stated that in the opinion of SG Hambros the fair value of the shares (which it regarded as including a 20% control premium) in Great Central Mines lay between $1.07 and $1.54. On 15 March 1999, Yandal Gold declared that the takeover offers, and any contracts arising from acceptance of the offers, were unconditional. 29 On 25 March 1999 ASIC commenced the present proceeding. On 30 March 1999 ASIC registered, pursuant to s 657 of the Corporations Law, a notice of variation of offer period pursuant to which Yandal Gold was authorised to extend the close of the original offer period from 6 April to 20 April 1999. 30 By 21 April 1999 Yandal Gold, which then held an entitlement to a relevant interest in 94.37% of Great Central Mines shares, had satisfied the requirements set out in s 701 of the Corporations Law and was, subject to this proceeding, entitled to compulsorily acquire all outstanding shares. No step has been taken, as yet, pursuant to s 701 to compulsorily acquire the shares not presently held by Yandal Gold. However, on 4 June 1999 Yandal Gold gave notice, under s 703(1) of the Corporations Law, to the shareholders who had not accepted its offer that they were entitled under s 703(2), within three months, to require that Yandal Gold acquire their shares at the original offer price of $1.50 less 3 cents dividend paid on the shares during the offer period. The Corporations Law 31 Section 615, which is in Ch 6, provides: "(1) Except as provided by this Chapter, a person shall not acquire shares in a company if: (a) any person who: (i) is not entitled to any voting shares in the company; or (ii) is entitled to less than the prescribed percentage of the voting shares in the company; would, immediately after the acquisition, be entitled to more than the prescribed percentage of the voting shares in the company; or (b) any person who is entitled to not less than the prescribed percentage, but less than 90%, of the voting shares in the company would, immediately after the acquisition, be entitled to a greater percentage of the voting shares in the company than immediately before the acquisition. … (4) A person shall not offer to acquire, or issue an invitation in relation to, shares in a company if the person is prohibited by subsection (1) from acquiring those shares. … (6) An acquisition of shares is not invalid because of a contravention of this section." 32 Section 615(7)(a) relevantly, provides that the prescribed percentage is 20%. 33 Section 51(1) provides that for the purposes of, inter alia, Ch 6, a person acquires shares in a body corporate if, and only if: "(a) the person acquires a relevant interest in those shares as a result of a transaction entered into by or on behalf of the person in relation to those shares, in relation to any other securities of that body corporate or in relation to securities of any other body corporate; or (b) the person acquires any legal or equitable interest in securities of that body corporate or in securities of any other body corporate and, as a result of the acquisition, another person acquires a relevant interest in those shares." 34 Section 64(a) provides that a reference in s 51 or Ch 6 to entering into a transaction in relation to shares includes a reference to: "entering into, or becoming a party to, a relevant agreement in relation to the shares or securities;" 35 A "relevant agreement" is defined in s 9 as meaning: "an agreement, arrangement or understanding: (a) whether formal or informal or partly formal and partly informal; (b) whether written or oral or partly written and partly oral; and (c) whether or not having legal or equitable force and whether or not based on legal or equitable rights;" 36 Accordingly, a person who acquires a relevant interest in shares as a result of a relevant agreement entered into by or on behalf of a person in relation to those shares acquires the shares for the purposes of s 615(1). 37 A relevant interest is defined in s 31 as a power to vote in respect of a voting share or a power to dispose of a share. Section 30(3) provides that: "A reference to power to dispose of a share includes a reference to power to exercise control over the disposal of the share." 38 Section 30(4) extends the meaning of "power" and "control" to a power or control that is: "direct or indirect or is, or can be, exercised as a result of, by means of, in breach of, or by revocation of, trusts, relevant agreements and practices, or any of them, whether or not they are enforceable." 39 A person is entitled to a relevant interest in the shares in a body corporate held by a person who is an associate of the body corporate in accordance with Div 2 of Pt 1.2 of the Corporations Law. As outlined earlier, by entering into the Shareholders Agreement the respondents each became associated with each other within the meaning of Div 2 and therefore each became entitled to a relevant interest in the shares in Great Central Mines held by Normandy Mining Holdings and Edensor. 40 The contravention of s 615 initially alleged by ASIC in relation to the Shareholders Agreement was said to arise by reason of s 33 which provides: "Where a body corporate or an associate of a body corporate has, or is by this Division (other than this section) deemed to have: (a) power to vote in respect of a share; or … (b) power to dispose of a share; a person shall be deemed for the purposes of this Division to have in relation to the share the same power as the body or associate has, or is deemed to have, if: (c) the person has; (d) an associate of the person has; (e) associates of the person together have; or (f) the person and an associate or associates of the person together have; power to vote in respect of not less than the prescribed percentage of the voting shares in the body." 41 Yandal Gold Holdings' ownership of Yandal Gold, and the shareholdings of Edensor and Normandy Consolidated Gold in Yandal Gold Holdings, resulted in each of them being deemed, by reason of s 33, to have power to vote and to dispose of the shares held by Edensor and Normandy Mining Holdings in Great Central Mines and therefore a relevant interest in those shares. The issue arising is whether that has resulted in each company acquiring the relevant interest that it is deemed to have. If that question is answered in the affirmative the acquisition will have contravened s 615. 42 The alleged contravention of s 615 in relation to the non-acceptance and retention agreements is said to arise by reason of Yandal Gold, Edensor and Normandy Mining Holdings acquiring a relevant interest in the shares in Great Central Mines held by any of the others by reason of entering into an agreement, arrangement or understanding not to accept the takeover offers and to retain their shares for the purposes of the bid. 43 The primary provision dealing with relief in respect of a contravention of s 615 is s 737 which provides that where a person has acquired shares in a company in contravention of s 615 the Court, on the application, inter alia, of ASIC may: "make such order or orders as it thinks just". 44 The orders which may be made include the making of a "remedial order" which is defined in s 613. In addition, s 739(1) empowers a court, inter alia, to make "such orders as it thinks necessary or desirable to protect the interests of a person affected by the takeover scheme" in the event of a contravention of a provision of Ch 6, which includes s 615. However, s 744(2) provides that the Court must not make an order under, inter alia, ss 737 or 739, if it is satisfied that the order will "unfairly prejudice" any person.

Contravention of s 615 - The non-acceptance and the retention agreements 45 ASIC alleges that between 16 December 1998 and 11 January 1999 Yandal Gold entered into the non-acceptance and the retention agreements. Although the agreements were separately pleaded, the reality is that the respondents only intended to agree to make their takeover bid for Great Central Mines upon entering into the Shareholders Agreement. Thus, the real issue on this aspect of the case is whether, in addition to the Shareholders Agreement, the parties also entered into the informal agreement, arrangement or understanding between them alleged by ASIC, possibly not intending that it create legal or equitable obligations, in relation to the shares held by Edensor and Normandy Mining Holdings. In that context it is appropriate, when considering whether any such "agreement" was entered into, to consider it as part of one overall "bid structure agreement" of which the Shareholders Agreement was part. 46 ASIC contends that the bid structure agreement can be inferred, inter alia, from the following matters about which, in my view, there can be no real dispute: (a) the takeover offer was for all of the issued shares in Great Central Mines; (b) the Part A Statement stated that Edensor and Normandy Mining Holdings have advised Yandal Gold that they will not be accepting the takeover offers in respect of their respective holdings of shares in Great Central Mines; (c) in the event that all shareholders, other than Edensor and Normandy Mining Holdings, accepted the takeover offer, Yandal Gold would be obliged to pay $276,377,926.50 the payment of which had been provided for by Chase's facility to its parent, Yandal Gold Holdings. No other provision had been made, nor was any stated in the Part A Statement to have been made, for any further funding for the takeover offers; (d) the matters set out in (a), (b) and (c) depended upon Yandal Gold, Edensor and the Normandy group agreeing, arranging or arriving at an understanding between them that the finance provided by Chase was all that would be required to enable the takeover offers for all of the issued shares in Great Central Mines to succeed; (e) the objective of the takeover offers was that Yandal Gold, upon becoming entitled to a relevant interest in 90% of the issued shares, compulsorily acquire all the outstanding shares in Great Central Mines not held by Edensor or Normandy Mining Holdings; (f) Yandal Gold could only become entitled to a relevant interest in 90% of the issued shares in Great Central Mines if Edensor and Normandy Mining Holdings accepted the takeover offer, which they stated they would not do, or retained their shares and did not sell them to any third party; (g) Chase agreed to provide its finance facility for the takeover on the basis of the matters set out above and recorded that the basis on which it was proceeding was that the legal and financial structure proposed for the bid has the "full support and co-operation of all parties hence no conflict will arise". 47 Although the Normandy and Gutnick groups had formed a close economic association in relation to Great Central Mines they were dealing with each other on an arms length basis and it is clear that Edensor's support for the bid was regarded by Chase and Normandy as "critical" to its success. 48 In these circumstances the case that ASIC contends is to be implied or inferred from the circumstances and the conduct of the parties concerning the non-acceptance and retention agreements is a strong one. ASIC's case is supported by references in notes of meetings and correspondence between representatives of the Normandy and the Edensor groups that demonstrate that Normandy saw "non-acceptance" and "retention" as significant issues arising between the parties and requiring resolution. In my view, the circumstances were such that it is probable that there was some communication with a "meeting of minds" between Mr de Crespigny and Mr Gutnick (each of whom was the person who undertook ultimate responsibility for the conduct of the bid for Normandy, Edensor and Yandal Gold respectively) on the issues of "non-acceptance" and "retention" for the purposes of the bid. The parties were likely to have been advised by their solicitors of the potential illegality of any such "agreements or arrangements" and were likely to have been conscious of the requirement that, if such agreements were entered into, that could not be done publicly. 49 The respondents' case was that there was no such communication or arrangement or understanding. Their only witness on that issue was Mr John Richards, a senior executive in the Normandy group. In his Affidavit Mr Richards stated that the allegation that there was an agreement, arrangement or understanding concerning whether the Normandy group or Edensor would accept the take-over offer was untrue and unfounded. He said that that subject matter was "simply not raised" or discussed in communications between the parties save for the occasion on which Yandal Gold's solicitor sought and received Mr Richards' authority to state in the Part A Statement that Normandy Mining Holdings would not be accepting the takeover offer. Mr Richards explained that there was no need for any such discussion as the commercial realities were such that the overall interests of Edensor and Normandy compelled their non-acceptance of the takeover offers. 50 The retention agreement was not pleaded or relied upon at the time Mr Richards swore his Affidavit, but it was raised as an issue during the hearing and in the course of his cross-examination. Although Mr Richards' evidence did not deal directly with that issue, I regard the substance of his evidence as denying the existence of both the non-acceptance and the retention agreements. Thus, while Mr Richards did not deny that each party had the same intention, he said that it was arrived at separately with no discussion or meeting of minds in relation to the matter. If I accepted that evidence, the arrangement or understanding would lack the requisite "meeting of minds" and mutuality that each party expects of the other to act or refrain from acting in a certain way or as part of a common undertaking: see British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 2 All ER 807 at 814, 816 and 819; Adsteam Building Industries Pty Ltd v The Queensland Cement and Lime Company Ltd (1984) 2 ACLC 829 at 832 and News Limited v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 573-575. 51 However, a quite different picture to that sought to be presented by Mr Richards emerged during the hearing, primarily as a result of documents obtained by ASIC shortly prior to the hearing and Mr Richards' response, in cross-examination, to those documents. It is appropriate that I outline my findings (which are additional to those set out in paras (a) to (g) above) in respect of this issue. 52 Prior to November 1998 both Mr Gutnick and Mr de Crespigny, as well as senior executives of the Gutnick group and the Normandy group, had been having extensive discussions concerning the proposed takeover bid for Great Central Mines. The parties were conscious of Normandy's objective of achieving the 90% threshold to enable compulsory acquisition and of the strategic importance of Edensor's 12.8% shareholding to the bid. Whilst it is possible that there was no discussion about the need for Edensor not to sell its shares into the bid, and to retain them for the purposes of the bid, it is highly probable that a matter of such crucial importance to the financing and outcome of the bid was the subject of discussion as a matter requiring resolution. For example, if Normandy and Edensor had not agreed to retain their shares for the purposes of the bid which was for all of the shares in Great Central Mines, then an additional $180 million finance would have had to be arranged to deal with the possibility of 100% rather than 59.37% acceptance. 53 Notwithstanding Mr Richards' denial of any discussion in relation to non-acceptance of the bid by Edensor, the documents adduced in evidence demonstrate that active consideration was given to the issues of non-acceptance of the bid by the parties and retention by them of their shares for the bid. Each matter was treated by the parties as a significant issue that was closely related to the proposed Shareholders Agreement. The two matters were certainly regarded as significant by Normandy as the only reason it was giving the "carried interest" to Edensor was to obtain its "support" for the bid. 54 The issue of non-acceptance most clearly emerges in notes of a meeting on 10 November 1998 taken by Mr Rodd Levy (a member of Freehill Hollingdale & Page) the solicitor responsible for advising the Normandy group in relation to the bid. The meeting was also attended by Mr Gutnick, Messrs Rosedale and Ehrlich (members of Clayton Utz the solicitors advising the Gutnick group), Mr Smith (Normandy's in house legal counsel) and Mr Richards. Under the heading "Shareholders Agreement", after reference to the $60 million loan agreements, there is a note to the effect that there was to be "no acceptance" by Edensor or Normandy. Plainly, the note was a reference to a discussion to the effect that there was to be no acceptance by Edensor or Normandy of the proposed bid. After reference to the possibility of approaching ASIC for relief in respect of any concerns that were held about the legality of the bid and a reference to associations there is a further note to the effect that funding will depend upon Edensor and Normandy "not accepting". There is then a reference to whether non-acceptance should be made a condition of the bid. 55 When confronted with the notes of the meeting Mr Richards was compelled to concede that it is possible that those matters were discussed. The notes demonstrate that non-acceptance of the bid by Edensor and Normandy was discussed and was regarded by those present at the meeting as a significant element to be agreed upon in structuring the financing for the bid. In my view Mr Richards' false denial of any discussion of "non-acceptance" was intentional. It reflects adversely on his credit and justifies an inference that the truth would be harmful to the Normandy group on whose behalf he was acting in the matter: see Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694 per Gibbs J. I would add that whilst I am prepared to draw that inference, I would have arrived at the same conclusion as I ultimately reach without doing so. 56 A letter dated 12 November 1998 from Mr Ehrlich of Clayton Utz to Mr Levy of Freehill Hollingdale & Page refers to the meeting of 10 November and makes reference to "some discussion about [Normandy] and [Edensor] acquiring pre-emptive rights over each others existing holding of [Great Central Mines] shares". The writer observes that a pre-emption agreement in respect to the existing holdings would clearly breach s 615 of the Corporations Law and points out that Edensor "for commercial reasons, would be very unlikely to dispose of any [Great Central Mines] shares currently held by it to any person other than [Normandy]". Although the writer observes that it is for Freehills to advise Normandy, the letter is plainly directed at concerns that Normandy expressed at the meeting on 10 November about requiring some assurance that Edensor would retain its shares for the purposes of the bid. 57 Whilst Normandy was aware that the August 1997 and May 1998 loan agreements had, to some extent, "tied up" Edensor's shareholding that does not seem to have been sufficient to eliminate the concerns about Edensor's shareholding raised by Normandy at the meeting on 10 November. The concerns are understandable when regard is had to Normandy's obligation to be responsible for the $285 million required to finance the bid and the fact that Edensor's 12.6% shareholding was a critical element in structuring the financing of the bid and in the bid achieving its objective of the 90% threshold for compulsory acquisition. In that context, Mr Ehrlich was seeking to persuade Normandy's solicitors that there was no need for their concern as, although a pre-emption agreement could not be entered into, he was contending that the "economic perspective" should adequately protect Normandy's position. 58 On 16 November 1996, in response to the above matters, a "Terms Sheet" was prepared by Mr Richards and then sent by him to Mr Gutnick. The Terms Sheet appears to address matters that Mr Richards regarded as requiring resolution as part of the joint agreement to make the bid. One of the topics addressed in the "Terms Sheet" was the consequences of the possible delisting of Great Central Mines for the 8.8% shareholding in Great Central Mines of Edensor, which had been mortgaged to secure the $60 million loan. The following note appears: "The formation of an association between Normandy and Edensor if [the bid] is successful - does this allow direct transfer to Normandy and removal of the existing trust arrangements?" 59 The note is suggestive of an agreement or arrangement that Edensor's 8.8% holding was held on trust for Normandy. If such an "agreement" was made it would appear to contravene s 615. When confronted with the note prepared by him, Mr Richards was unable to explain it or recall any details concerning it. When pressed by senior counsel for ASIC Mr Richards conceded that the note might be a reference to the two 4.4% parcels securing the $60 million loan made by Normandy to Edensor and Edensor's need to sell the shares to repay the loans. 60 Whilst there is no issue in the present proceeding as to whether there was any breach of s 615 concerning the $60 million loan, Mr Richards unsatisfactory explanation of his own notes, on an issue that was of obvious significance to Normandy, reflects adversely on his credit. In that regard, Mr Richards was a senior executive charged with conducting the proposed bid on behalf of Normandy. The Terms Sheet was prepared by him and sent to Mr Gutnick with the intention that it record the items that needed to be addressed. It is difficult to accept Mr Richards' memory lapse given the significance Normandy had attached to Edensor's shareholding in Great Central Mines. It is unnecessary for me to make a finding as to the existence of any "trust arrangements" of the kind set out in the note. However, I regard Mr Richards inability to offer a plausible explanation of his own note as further undermining the reliability of his evidence. 61 There is another troubling aspect to the evidence given by Mr Richards. The decision was made in December 1998 by the Normandy board to proceed with the bid of $1.50 per share on the basis of Normandy's valuation range of $1.37 to $1.75 per share. Mr Richards' evidence was to the effect that that valuation was superseded by a subsequent valuation of $1.21 to $1.47 per share based on a valuation by middle management prepared early in January 1999. However, the valuation does not appear to have been printed out at the time or made available for the Board Committee responsible for the bid or for the Board meeting held on 7 January 1999 at which the Board resolved to proceed with the bid for not more than $1.50 per share. Mr Richards' evidence was that the Board was not told of the lower range but was only informed in general terms of a downward adjustment to the valuation. The downward adjustment is not reflected in the Board minutes of the meeting. Whilst I do not go so far as to find that the valuation had been fabricated, I am of the view that its significance was exaggerated by Mr Richards as he thought that would assist Normandy's case. 62 Finally, neither Mr de Crespigny or Mr Gutnick, or any other representative of Normandy or Edensor including their legal representatives, were called to give evidence on the non-acceptance or retention agreements notwithstanding their availability to do so. The absence of such evidence entitles me to infer that their evidence would not be helpful to the respondents' case and to be "bold" or more confident as to the inferences I might draw from the evidence before the Court: Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320-321 and Insurance Commissioner v Joyce (1948) 77 CLR 39 at 49. 63 The Terms Sheet, under the heading of the "Shareholders Agreement", refers to the requirement that Normandy, Edensor and Yandal exercise their votes on the Great Central Board on the basis "that each of them shall be entitled to appoint one director for each 10% of the capital they hold in GCM." 64 Mr Richards, when cross-examined on that item, conceded that it carried the presumption that Normandy and Edensor would not sell their shares to the bid or to anyone else. Chase's agreement to finance the bid was sought and obtained upon the same presumption. Mr Richards also said that he understood that the structure of the bid was that Normandy and Edensor would be "retaining their respective shareholdings". 65 In my view, it is unlikely that Mr de Crespigny was prepared to finalise the bid financing, agree to Edensor's "carried interest" and proceed with the bid upon the terms set out in the Shareholders Agreement without an assurance from Mr Gutnick that not only would he personally support the bid but that Edensor would not accept the bid and would retain its shares for the purposes of the bid. 66 I am satisfied that it was probable, and I infer, that Mr de Crespigny (or his authorised representative) acting on behalf of the Normandy group and Mr Gutnick (or his authorised representative) acting on behalf of Edensor and each of them (or their representative) acting on behalf of Yandal Gold discussed and arrived at an arrangement or understanding in respect of each of those issues as part of their final agreement to proceed with the bid. I am also satisfied that it is likely that the parties were well aware of the legal difficulties involved in any agreement in relation to these issues and were therefore prepared to arrive at the arrangement or understanding on the basis of it not being enforceable or disclosed. 67 Accordingly, for the reasons set out above, the present case is one in which the Court can imply or infer from the circumstances and the conduct of the parties (see Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434 at 443-445) that the "bid structure agreement", as alleged by ASIC, was entered into between Mr Gutnick (or his authorised representative) and Mr de Crespigny (or his authorised representative) and I reject Mr Richards' evidence that no such "agreement" was entered into. I am also satisfied that the "agreement" was an informal and unenforceable arrangement or understanding between Edensor, Normandy Mining Holdings and Yandal Gold (which was effectively controlled by Normandy and Edensor) to the effect that Edensor and Normandy Mining Holdings would not accept Yandal Gold's takeover offer for their shares in Great Central Mines and that each would retain those shares for the purposes of the bid to enable compulsory acquisition of the shareholdings that were not sold into the takeover bid. 68 It was submitted by the respondents that such a finding would be inconsistent with Cl 1.5 of the Shareholders Agreement. The clause provides: "1.5 No relevant interest (a) Despite any provision contained in this agreement and despite any right arising (whether expressly or impliedly) from any provision of this agreement, each party to this agreement agrees with each other party to this agreement that: (1)(A) Edensor, Yandal Gold Holdings and Yandal Gold have no relevant interest (as defined by the Corporations Law) in any Target shares in which Normandy, Normandy Mining Limited, Normandy Mining Finance or Normandy Mining Holdings has a relevant interest as at the date of this agreement; and (B) Normandy, Normandy Mining Limited, Normandy Mining Finance, Normandy Mining Holdings, Yandal Gold Holdings and Yandal Gold have no relevant interest (as defined by the Corporations Law) in any Target shares in which Edensor has a relevant interest as at the date of this agreement; and (2) no such relevant interest arises or shall be taken to arise as a result of the entering into of this agreement. (b) Without limiting the generality of clause 1.5(a), the parties agree that: (1) Edensor is free to dispose of any Target shares owned by Edensor as at the date of this agreement and that neither Normandy, Yandal Gold Holdings, Yandal Gold (either together or alone or with any other person) or any other party to this agreement has any power to vote, nor to control the exercise of any voting rights attaching to, any of those shares; and (2) Normandy Mining Holdings is free to dispose of any Target shares owned by Normandy Mining Holdings as at the date of this agreement and that neither Edensor, Yandal Gold Holdings nor Yandal Gold (either together or alone or together with any other person) has any power to vote, nor to control the exercise of any voting rights attaching to, any of those shares. (c) Each party to this agreement agrees with each other party to this agreement that it will not act inconsistently with this clause 1.5." 69 The genesis of the clause was the concern of the solicitors acting for the Normandy group and Edensor to ensure that their "association" for the purposes of the bid did not result in either having a relevant interest in the Great Central Mines shares of the other. Whilst I accept that the clause is intended to operate according to its terms, in my view the clause does not answer the case put by ASIC of an informal and unenforceable arrangement or understanding which is a "relevant agreement" as a defined in s 9. The clause provides for the legally enforceable obligations that are to operate as between the parties to the agreement and is not concerned with, nor can it touch upon, unenforceable "obligations" such as those that I have found were the subject of the bid structure agreement. Such "obligations" may not only be unenforceable, they may be such that the parties are free to withdraw from or act inconsistently with them notwithstanding their adoption of those obligations: see Lutovi Investments Pty Ltd at 443, 444 and Cornwall v Waraluck (1997) 23 ACSR 571 at 573 per Burchett J. Whilst the clause can be relevant to the legally enforceable obligations in any "relevant agreement", it cannot operate to negative unenforceable "obligations" or a finding of a "relevant agreement" based on, and inferred from, the totality of the evidence before the Court. 70 It was next submitted that I should apply the Briginshaw standard ((1938) 60 CLR 336) to a contravention of s 615, particularly where it is based on an allegation that the agreement, arrangement or understanding was unlawful. In that regard reliance was placed on Cuming Smith & Co Ltd v Westralian Farmers Co-Operative Ltd (1978) 3 ACLR 906 at 924 and ICAL Ltd v County Natwest Securities Australia Ltd (1988) 39 NSWLR 214 at 244. See also Trade Practices Commission v David Jones (Australia) Pty Ltd (1986) 13 FCR 446 at 466 and Keygrowth Ltd v Mitchell (1991) 9 ACLC 260 at 270. I have not lightly arrived at my findings, which are on the balance of probabilities, in respect of the "relevant agreements" (see Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 171) and have had regard to the important and grave nature of the consequences flowing from them (see G v H (1994) 181 CLR 387 at 399). I am satisfied that the evidence clearly supports and justifies my inference of the making and entry into of the bid structure agreement as alleged by ASIC. 71 Finally, it was submitted that ASIC had not directly raised the retention agreement with Mr Richards and that the rule in Browne v Dunn ought to preclude any adverse finding on that issue. The Full Court in Amadio v Henderson (1998) 81 FCR 149 at 244 said of Browne v Dunn: "However, as has been pointed out recently by Tamberlin J in Raben Footwear Pty Ltd v Polygram Records Inc (1997) 75 FCR 88 at 101; 145 ALR 1 at 14 and by Heerey J in Australian Competition & Consumer Commission v J McPhee & Son (Australia) Pty Ltd (…Federal Court…, 26 February 1998) at p 34 the rule in Browne v Dunn is ultimately one of procedural fairness. Heerey J said (at p 34): 'An essential element of the rule - and one which was very much present in Browne v Dunn itself - is that the impugned witness has had no notice on the point on which his or her evidence is subsequently attacked.' and at (pp 34-35): 'In the present case there was an elaborate statement of claim with extensive particulars - so much so that counsel for the respondents in the earlier strikeout application complained of it being a 'play script'. Prior to trial the Commission served detailed witness statements. These largely comprised direct evidence of meetings and telephone conversations in which the various respondents participated. The respondents could be under no illusion as to the case sought to be made against them. They had every opportunity to give such evidence as they wished in order to meet that case.'" 72 In the present case I am satisfied that Mr Richards had notice of the issues raised by the retention agreement, the detail and particulars of which were pleaded and raised on a number of occasions during the course of the hearing, including during the course of his evidence. I regard Mr Richards' evidence as constituting a denial of the existence of any such agreement and am in no doubt that he had ample opportunity to give such evidence as he wished in order to meet ASIC's case on this issue. 73 The remaining question is whether the bid structure agreement conferred power on the parties to it to exercise control over the disposal of the shares held in Great Central Mines by Normandy Mining Holdings and Edensor (see s 30(3)) notwithstanding that the power or control may be indirect and be exercised as a result of a relevant agreement that is unenforceable (s 30(4)) or is informal or implied (s 36(1)). Although the power to exercise control may be informal, indirect and unenforceable I accept that it must involve some true or actual measure of control (that is, in the context of the extended meaning of "control" provided for in s 30(4)) over the disposal of the shares and not be "control" that is minor, peripheral, or merely hypothetical, theoretical or notional: see in Re Kornblums Furnishings Ltd (1981) 6 ACLR 25 at 35-36 per Beach J, TVW Enterprises Ltd v Queensland Press Ltd [1983] 2 VR 529 at 542-543, North Sydney Brick & Tile Co Ltd v Darvall (1986) 4 ACLC 539 at 545-547 per Mahoney JA (with whom Kirby P and Glass JA agreed generally) and Corumo Holdings Pty Ltd v C Itoh Ltd (1992) 10 ACLC 428 at 450 per Meagher JA. 74 The arrangement or understanding I have found to have been arrived at between the relevant respondents involves two significant elements; non-acceptance of the takeover offers and the retention of the shares for the purposes of the bid to enable compulsory acquisition. Whilst I accept that there may be some controversy as to whether the non-acceptance element alone involves some true or actual measure of control over the disposal of shares, I am satisfied that the combination of non-acceptance and retention plainly does. In that regard the circumstances may be said to be analogous to those that arose TVW Enterprises Ltd v Queensland Press Ltd at 536 in which an agreement that a party would not dispose of shares without affording the other an opportunity to acquire the shares was sufficient to satisfy the criterion of power to exercise control over the disposal of shares. 75 Accordingly, pursuant to a "relevant agreement" each of Yandal Gold, Normandy Mining Holdings and Edensor acquired the power to exercise control over the shareholdings of Normandy Mining Holdings and Edensor and therefore acquired a relevant interest which was: · in respect of Yandal Gold - in 40.37% of the shares in Great Central Mines being the shares held by Normandy Mining Holdings and Edensor; · in respect of Edensor - in an additional 28.81% of the shares in Great Central Mines being the shares held by Normandy Mining Holdings; · in respect of Normandy Mining Holdings - in an additional 12.56% of the shares in Great Central Mines being the shares held by Edensor. 76 Plainly, each of the acquisitions was an acquisition for the purposes of s 51(1) as a result of a transaction, being the bid structure "agreement" (see s 64), entered into by or on behalf of (at least) Yandal Gold, Normandy Mining Holdings and Edensor in relation to the shares held by Edensor and Normandy Mining Holdings in Great Central Mines. Accordingly, ASIC has made out its case of a contravention of s 615 by reason of the bid structure agreement. Contravention of s 615 - The Shareholders Agreement 77 It is not disputed that the Shareholders Agreement resulted in Yandal Gold, Yandal Gold Holdings, Edensor and companies in the Normandy group becoming associated with each other (see s 12(1)(b), (c) and (e)) and therefore entitled to the shares held by Edensor and Normandy Mining Holdings in Great Central Mines (see s 609(1)(b)). No question of an acquisition of a relevant interest in the shares arises under s 615(1) by reason of the "association" as, whilst resulting in an entitlement to shares, it did not involve the acquisition of a relevant interest in those shares. 78 At the relevant time the shareholdings for the purpose of s 33 were as follows: Normandy Mining

Normandy Mining Holdings Normandy Consolidated Gold Holdings

(27.81%) shares in Great Central Mines 49.9% of Yandal Gold Holdings

12.56% of shares in Great Central Mines 50.1% of Yandal Gold Holdings

79 Section 33 operates in respect of indirect holdings. It relevantly provides, that where an associate of a body corporate has power to vote in respect of a share or power to dispose of a share, a person shall be deemed to have in relation to the share the same power as the associate has if the person has power to vote in respect of not less than 20% of the voting shares in the body corporate. It is not disputed that ASIC's tabular representation of the consequences of the parties entering into the Shareholders Agreement accurately reflected its allegations in the Second Further Amended Statement of Claim. 80 The table is based upon the allegations in paras 11, 12, 13(a) and (b) and 14(a) and (b) of the Second Further Amended Statement of Claim which relate to the operation of s 33. By way of example paras 14(a) and (b), in substance, allege: Paragraph 14(a) Where...an associate [Edensor] of a body corporate [Yandal Gold Holdings] has... (a) power to vote in respect of a share; (b) power to dispose of a share; a person [Yandal Gold] shall be deemed...to have in relation to the share the same power as the...associate [Edensor] has...if: ... (d) an associate [Normandy Consolidated Gold Holdings] of the person [Yandal Gold]; ... has power to vote in respect of not less than [20%] of the voting shares in the body corporate [Yandal Gold Holdings] Paragraph 14(b) Where...an associate [Normandy Mining Ltd] of a body corporate [Yandal Gold Holdings] has...: (a) power to vote in respect of a share; (b) power to dispose of a share; a person [Yandal Gold] shall be deemed...to have in relation to the share the same power as the...associate [Normandy Mining Ltd] has, or is deemed to have, if: ... (d) an associate [Edensor] of the person [Yandal Gold]; ... has power to vote in respect of not less than [20%] of the voting shares in the body corporate [Yandal Gold Holdings].

The s 33 Table The person The associate of the person Para Para 11 Normandy Consolidated Gold 11 Not applicable 12 Edensor 12 Not applicable 13(a) & (b) Yandal Gold Holdings 13(a) & (b) Not applicable 14(a) & (b) Yandal Gold 14(a) Normandy Consolidated Gold 14(b) Edensor Ż Ż

20% of the voting power in Ż The body corporate The associate Para Para 11 Yandal Gold Holdings 11 Edensor 12 Yandal Gold Holdings 12 Normandy Mining Ltd 13(a) & (b) Yandal Gold 13(a) Edensor 14(a) & (b) Yandal Gold Holdings 13(b) Normandy Mining Ltd 14(a) Edensor 14(b) Normandy Mining Ltd Ż Ż relevant interest in share in Ż Great Central Mines Limited

81 There is no dispute that, as is represented in the table, by reason of the Shareholders Agreement: · Edensor, Normandy Consolidated Gold Holdings, Yandal Gold Holdings and Yandal Gold were deemed to have relevant interests, which each increased to 40.37%, in shares in Great Central Mines; · the relevant interests increased to 40.37% in a manner not provided for in Ch 6. 82 The issue is whether the increased relevant interest was acquired in contravention of s 615. Such an issue requires consideration of whether s 51(1) limits acquisitions for the purpose of s 615 to acquisitions of an actual, rather than a deemed, "relevant interest". The respondents contend that the proper construction of s 51(1), in the context of its operation in relation to Ch 6 and in particular s 615, requires that the acquirer obtain the title to, or dominion over, the actual relevant interest said to have been acquired. Thus, so it is said, a "deemed" relevant interest, by its nature, cannot be "acquired". Reliance was placed on the decision of Young J in Green v Crusader Oil NL [1985] 10 ACLR 118 at 122 where his Honour observed that the normal meaning of "acquire" in the present context usually involves obtaining title to the share or the relevant interest. 83 However, there are difficulties in applying that restricted view of the word "acquire" when regard is had to the extended definitions of a "relevant interest". As Finkelstein J pointed out in Aberfoyle Ltd v Western Metals Ltd (1998) 84 FCR 113 at 144. "But the usual meaning of the word [acquired] surely cannot have application to a case where the legislation contemplates the acquisition of a relevant interest by an informal arrangement or understanding that has no legal or equitable force." 84 In s 51(1)(a) the legislature has selected as the subject matter of an acquisition a statutory fiction, being "a relevant interest" in shares. In that regard the observation made by Finkelstein J concerning the extended definition of a "relevant agreement" can also be made concerning the extended meanings of "power to vote" in respect of a share or "power to dispose" of a share each of which constitutes a "relevant interest". Section 30(4) provides that the power or control that can give rise to the relevant interest may be indirect and be exercised as a result of an informal arrangement or understanding that has no legal or equitable force and s 36(1) and (2) provide that the power may be informal, implied and remote. Also Young J, in Green v Crusader Oil NL, was not considering the issue presently arising namely, whether a deemed relevant interest can be "acquired". 85 In my view there is also substance in ASIC's criticism that in Green v Crusader Oil, Young J considered the plain English meaning of the word "acquire" without adequate regard to its meaning in the particular section and statutory context with which the case was concerned: cf John Mackintosh & Sons v Barker's Bargain Stores (Seaford) [1965] 3 All ER 412 at 414-415. 86 Reliance was also placed by the respondents on the decision of Murray J in Re Stockridge Ltd (1993) 9 ACSR 637 at 651 where his Honour cited, with apparent approval, Green v Crusader Oil NL. However, in Re Stockridge, Murray J was concerned with the situation where the shares in question, at the conclusion of the process by which they were said to have been acquired, ceased to exist. In that context Murray J did not need to consider how or whether a requirement of acquisition of title to an actual relevant interest might operate in respect of a deemed relevant interest . I do not read anything his Honour said as indicating that an acquisition of a relevant interest can only occur where there has been some change in title to the share or a relevant interest therein. 87 The Oxford English Dictionary defines the word "acquire" as: "1. To gain, obtain or get as one's own, to gain the ownership of (by one's own exertions or qualities); 2. To receive, or get as one's own (without reference to the manner), to come into possession of." 88 Finkelstein J, in Aberfoyle Ltd at 144, concluded that the word "acquire", when used in sections such as s 698(5) of the Corporations Law, meant no more than "obtain" a relevant interest in the shares in question. In my view acquire has the same meaning in ss 615 and 51(1) with the consequence that a person may obtain an actual or a deemed relevant interest. I will endeavour to explain my reasons for arriving at that conclusion. 89 The respondents raised the spectrum of a wider definition leading to unlawful acquisitions in situations where the contravening party was not even a party to the relevant transaction. However, ss 51(a) and 64 protect against a "passive" acquisition by requiring that the acquisition of an interest must be as a result of a transaction (which includes a "relevant agreement") to which the person acquiring the interest is a party. Thus, an acquisition can only arise if a person obtains a relevant interest for the purposes of s 51(1) as a result of "a transaction" entered into by or on behalf of the acquirer in relation to the shares in which a relevant interest is said to have been acquired. The question whether "acquired" in the context of s 51(1) (and more generally in Ch 6) means "obtaining" rather than "obtaining title to or dominion over" the relevant interest, requires consideration of the purpose of the statutory provisions in question. 90 The fact that companies may exercise power or dominion over shares in many and diverse ways, whether direct or indirect (Target Petroleum NL v Petroz NL (1987) 16 FCR 1 at 10) has led the legislature to use artificial concepts and deeming provisions to ensure that the scheme provided for in Ch 6 is not circumvented. The object of Ch 6 generally is to ensure that the acquisition of shares in companies complies with the Eggleston principles and takes place in an efficient, competitive and informed market: see Brierley Investments v Australian Securities Commission (1997) 78 FCR 255 at 260-261 per Emmett J. That objective has been secured, in part, by the use of artificial concepts and statutory fictions such as "a relevant agreement", "associations" and "relevant interests" which have been defined with such width that on some occasions the statutory scheme will inevitably apply to transactions that were not intended to be prohibited as they are not inconsistent with the Eggleston principles. However, the legislature has chosen to deal with such anomalies by conferring extensive power on ASIC under ss 730 and 731 in Pt 6.9 to modify the provisions of Ch 6 and under s 633 to permit and thereby exclude from the operation of s 615 an acquisition of shares "made with the Commission's written approval": see s 633(c). These provisions suggest that the legislature was cognisant of the possibility that the width of its definitions could lead to some anomalous outcomes, but intended that they be dealt with by ASIC granting relief from the operation of the provisions in an appropriate case to avoid anomalies arising. As I stated in Otter Gold Mines v Australian Securities Commission (1997) 25 ACSR 382 at 388: "For the detailed takeover code in Ch 6 to be workable broad discretions of exemption and modification are necessary and desirable, inter alia, for 'ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market'." 91 Further, notwithstanding the apparent width of the provisions prohibiting certain transactions, the legislature recognised that there is nevertheless scope for additional regulation in respect of an unacceptable acquisition of shares or other unacceptable conduct engaged in relation to shares which is inconsistent with the Eggleston principles. For example, power is conferred on the Commission to apply for a declaration under s 733 of an unacceptable acquisition or unacceptable conduct. 92 These policy considerations demonstrate that the legislature did not intend that a restrictive view be taken of the prohibitions in Ch 6 or of the application of its extended definitions, inter alia, of a "relevant interest" which is a central element in the operation of Ch 6. Rather, any injustice, unfairness or anomaly arising in a particular case was to be dealt with by an appropriate application for relief from the operation of the Corporations Law. As Lord Hutton stated recently in Svenska International Pty Ltd v Commissioners of Customs and Excise (1999) 1 WLR 769 at 786, if Parliament chooses to achieve its objectives by the use of artificial concepts and deeming provisions it is for the Courts to apply those concepts or provisions. 93 The concept of a "relevant interest" serves two main functions in the Corporations Law. First, it is the determinant of whether a person has an entitlement to shares for the purposes of, inter alia, Ch 6 (see s 609). Secondly, it is the determinant of whether or not there has been an acquisition of shares for the purposes of, inter alia, Ch 6 (see s 51(1)(a)). Although an entitlement to shares provides the basis for measuring whether an acquisition of shares is prohibited by s 615, the subject matter with which that section is concerned is the prohibition of an acquisition of a relevant interest in shares other than in accordance with Ch 6. It is in that context that the role of the deeming provisions in Div 5 of Pt 1.2 are to be considered. 94 Sections 30 and 31 provide the rules for determining whether a person has a relevant interest in a share. The artificiality of the extended meanings in s 30 is confirmed by s 36 which provides that it is immaterial whether or not the power to vote or power to dispose of the share is, inter alia, implied, informal, cannot be related to a particular share, can be made subject to restraint or restriction or is remote. 95 Sections 32, 33, 34 and 35 are all concerned with the specific situations in which a person is deemed to have a relevant interest or deemed to have the power to vote or to dispose of the shares and therefore have a relevant interest in them. The legislature has not been concerned, in Div 5 or elsewhere in the Corporations Law, to distinguish between a relevant interest that is actual (ss 30, 31) and one which is deemed (ss 32, 33, 34, 35). In that regard I note that s 45(2) provides that a person does not have a relevant interest except as provided in Div 5. Further, s 36(2) provides that a relevant interest in a share shall not be disregarded merely because of its remoteness or how it arose. 96 In my view, unless a contrary intention appears in a particular statutory provision, it is consistent with the legislative scheme and will better give effect to and promote its objectives (see s 109H and Sagasco Amadeus Pty Ltd v Magellan Petroleum Australia Ltd (1993) 177 CLR 508 at 516) for no distinction to be drawn in Ch 6 between an actual or deemed relevant interest. I do not discern from the use of the word "acquire" in s 51(1) or s 615 a legislative intention that acquisitions are to be limited to actual interests or to acquiring title to or dominion over such interests. It is difficult to discern any policy reason why either an actual relevant interest or and a deemed relevant interest should give rise to entitlements for the purposes of the substantial shareholding and the compulsory acquisition provisions, but only actual relevant interests can be acquired for the purpose of the takeover provisions and, in particular, s 615 which is so central to the operation of Ch 6. Section 36(2) affords strong support for ASIC's contention that the distinction sought to be drawn by the respondents is inconsistent with the statutory scheme. 97 The anomaly arising from the respondents' proposed distinction between actual relevant interests and deemed relevant interests is manifest. The respondents' contention has the consequence that there are two categories of relevant interest but only one of which is capable of being acquired. Thus, if a party obtains a deemed relevant interest in a 51% shareholding there will be no acquisition for the purposes of s 615. If that party then acquires the 51% shareholding no contravention of s 615 will have occurred as the relevant interest that party has will not have increased by reason of the acquisition: see for example, TVW Enterprises Ltd v Queensland Press Ltd at 547. Yet, if the party had initially acquired the shares outright s 615 will have been contravened. The anomaly, which would have far-reaching consequences for the operation of s 615, only arises as a result of an unwarranted distinction being drawn between actual and deemed relevant interests. If no such distinction is drawn, the initial 51% entitlement will arise as a result of an acquisition of the relevant interest in that shareholding. I am in no doubt that the legislature did not intend that a person be able to acquire the beneficial ownership of shares in excess of 20% of a corporation through the process set out above without complying with Ch 6. Yet that is the very outcome that would result from the respondents' suggested construction of s 51. 98 Finally, it was also contended by the respondents that anomalies can go both ways. In particular, it was contended that in the present case there would have been no prohibition on Normandy Mining Holdings and Edensor combining for the purposes of making a joint bid for the remaining shares in Great Central Mines: see ss 12(1)(e), 15(1), the definition of "offeror" in s 603 and s 609(1). It is then contended that the choice between using a bid vehicle such as Yandal Gold or making a joint bid is a distinction without any practical consequences for the market or shareholders, as either way Normandy Mining Holdings and Edensor would be joining together and making their bid from a platform of 40.37%. In my view the fact that the same strategic objective might be able to be achieved by a different method in the present case cannot assist in the proper construction of s 51. The respondents' argument, if it be correct, may bear upon the seriousness of the contravention or whether relief from the operation of s 615 should be granted in a particular case, but does not bear upon whether there has been a contravention. That is particularly so given my earlier observations as to the legislature's provision for, inter alia, modification of the takeover provisions and permission of ASIC being sought in respect of what would otherwise be a prohibited acquisition. 99 In any event I doubt that the respondents' assumption of an unconditional entitlement to make a joint bid from a combined platform in excess of 20% is justified. Further, it seems fairly clear that ASIC would closely scrutinise "the agreement" to make such a joint bid and, even if satisfied that it was fair, might nevertheless seek to impose conditions before giving approval for it to proceed. 100 Accordingly, for the above reasons I am also satisfied that as a consequence of the respondents entering into the Shareholders Agreement Yandal Gold, Yandal Gold Holdings, Edensor and Normandy Consolidated Gold Holding obtained, and thereby acquired, relevant interests in shares in Great Central Mines in contravention of s 615. Inadvertence - s 743 101 In the event that a contravention of s 615 was established the respondents contended that they should be excused for the contravention under s 743. The respondents submitted that the contraventions of s 615 were innocent and arose only after legal advice had been given that the bid structure did not contravene s 615. 102 The two contraventions of s 615 that I have found to have occurred in the present case arose out of the same circumstances as parts of one overall transaction. The bid structure agreement, which was unlawful, was an integral element to the parties agreement to enter into the Shareholders Agreement which also resulted in s 615 being contravened. Thus, the question of inadvertence is to be approached by reference to the transaction as a whole. 103 Whilst it appears that the respondents' legal advisers were primarily concerned with whether the association for the purposes of the bid might contravene s 615 and, according to the documents in evidence, did not appear to give advice as to the consequences of s 33 of the Corporations Law, no evidence was given by any of the legal advisers to that effect. Further, the evidence is that the legal advisers for the respondents specifically adverted to the possibility of seeking ASIC's approval to the bid structure but ultimately the respondents rejected that course as it would lead to the apparently unwanted scrutiny by ASIC of the association between Edensor and the Normandy group. In that regard, it is relevant to note that in an initial approach to ASIC on a "no names" basis, the bidding parties were informed that ASIC believed the proposed bid was likely to involve an arrangement that was not permitted under the Corporations Law. The solicitors were informed that ASIC's approach to joint bids is to assume that there must be an agreement implicit between the bidders as to how they will deal with their existing shares so as not to frustrate the takeover bid. The parties were also informed of ASIC's concerns for fairness to minority shareholders. 104 Mr Richards' evidence was that ASIC was not approached by the bidders as their legal advice was that there was no need to seek any form of relief from ASIC. That evidence, whilst partially true, is incomplete and in my view is not the real reason why ASIC was not approached for its opinion on the proposed bid. Whilst the possible delay that would result if ASIC was approached was another reason proffered for the bidders deciding not to consult ASIC prior to the bid, the decision in December 1998 to defer making the offer until January 1999 meant that possible delay was very much a secondary and minor reason. 105 In my view a fear of scrutiny by ASIC of the arrangements between the Normandy group and Edensor was the real reason the parties decided not to seek ASIC's views or permission concerning the proposed bid. I am satisfied that the parties agreed to proceed with the bid fully aware of the risk that ASIC was likely to consider that the "joint" bid contravened s 615 and were prepared to take that risk, rather than have ASIC scrutinise the arrangements between them. Further, when ASIC informed the respondents on 2 February 1999 that it was of the view that the bid contravened s 615, that did not deter them from proceeding with the bid on 9 February 1999, without seeking any relief from ASIC. 106 The evidence does not satisfy me that inadvertence was involved in the contraventions of s 615 which arose as a result of the bid structure agreement and the Shareholders Agreement. As I later explain I regard those contraventions, cumulatively, as constituting serious contraventions of s 615 which resulted in a significant detriment to shareholders. The present case is, therefore, clearly not one in which the contraventions of s 615 ought to be excused under s 743. Misleading and deceptive conduct 107 A consequence of the contraventions of s 615 is that statements made in the Part A Statement are incorrect and therefore misleading. In particular, the Part A Statement: (a) incorrectly stated that Yandal Gold has no relevant interest in any of the Great Central Mine shares to which it is entitled and has no power to control the disposal of any of those shares (cl 6.1); (b) incorrectly stated that in the four months prior to the lodgment of the Part A Statement there had been no acquisitions of shares in Great Central Mines by Yandal Gold or by any associate of Yandal Gold, other than the acquisitions by Normandy Mining Holdings of 9,268,819 shares in October 1998 (cls 7.1 and 7.2); (c) omitted to state that by reason of the Shareholders Agreement and the bid structure agreement there had been acquisitions of relevant interests in shares by Yandal Gold and Yandal Gold Holdings (as to 124,708,711 shares), Edensor (as to 85,912,369 shares) and Normandy Consolidated Gold Holdings (as to 38,796,342 shares) in the four months prior to the lodgment of the Part A Statement in circumstances where: · Yandal Gold was required by Cl 4 in s 750 of the Corporations Law to state those matters in the Part A Statement; · shareholders in Great Central Mines, or persons in the market receiving and reading the Part A Statement, were likely to expect that the Statement disclosed the matters required to be disclosed under the Corporations Law and, as a consequence were likely, mistakenly, to conclude that the only acquisitions that had taken place were those disclosed. 108 The incorrect statements and omissions in the Part A Statement constitute misleading conduct, or conduct likely to mislead, in trade and commerce in contravention of s 52 of the TPA or alternatively s 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) as well as s 995(2)(b)(iii) of the Corporations Law. The misleading information provided to shareholders in the Part A statement was information deemed by the legislature to be relevant and of significance in ensuring that shareholders, and their advisers, were placed in a position to make an informed assessment as to whether to accept or reject the offer: see Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300 at 303. 109 Whilst it is difficult to assess the extent to which any shareholders might have reacted differently had the information required to be given been accurately stated, I am satisfied that in two areas at least the response might have led to different outcomes. First, the shareholders who did not accept the offer might have acted differently had they been aware that Yandal Gold had acquired a relevant interest in 40.37% of the shares in Great Central Mines and of the extent to which Normandy and Edensor had "agreed" to use their shares for the purposes of the bid. Those circumstances might have suggested that there could be no realistic expectation of a rival bid or a higher premium for control. Whilst those matters may have been perceived by the "market" in any event, it does not follow that all shareholders and their advisers held that perception. 110 Secondly, ASIC would have been put on notice of the bid structure agreement and would have been likely to have taken earlier action than it did, to prevent the bid proceeding on the basis of that contravening conduct. 111 Finally, I do not agree with the respondents' contention that the misleading conduct is irrelevant in the circumstances of the present case. The shareholders in Great Central Mines had an interest in and entitlement to control of the company not passing under a takeover offer without being provided, accurately, with the material information required to be given to them in accordance with the Corporations Law: see ICAL v County Natwest Securities Australia Ltd at 249. 112 Whilst these conclusions do not, of themselves, warrant the primary relief sought by ASIC they are nevertheless of significance on issues of culpability and detriment suffered as a result of the contravening conduct. Jurisdiction 113 Although the misleading conduct is a consequence of the contraventions of s 615 it is a part of the "matter" in controversy between the parties for the purposes of s 19 of the Federal Court of Australia Act 1976 (Cth). As the contraventions of s 615 and the consequential misleading conduct are not "severable", "distinct" or "unrelated" and arise from a "common substratum of facts", the Court has accrued jurisdiction to determine the whole of the matter in controversy: see Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 482, Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 and Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 291-293. Thus, even if Gould v Brown is overruled by the High Court I am satisfied that the Federal Court has jurisdiction to grant all of the relief sought by ASIC in the present matter. Delay 114 The respondents contended that ASIC's delay ought to result in the refusal of substantive relief in the present case. There is some force in the contention that ASIC ought to have brought these proceedings at an earlier point of time. By the time the proceeding was commenced the bid had advanced to a stage where interlocutory relief "freezing" the bid was unfair to shareholders who had not accepted the bid or who had not been paid the price due on their acceptance. ASIC was aware of the basic facts that made a contravention likely and was in a position to have brought these proceedings at an earlier date. However, the present case is not one where it could be said that ASIC, by its delay, misled the respondents into taking any particular course of action or into believing that their bid was lawful: see Lindsay Petroleum Co v Hird [1874] LR 5 PC 221 at 240. 115 The respondents were aware of the likelihood of ASIC's intervention but decided to take that risk. Further, notwithstanding ASIC's statement on 2 February 1999 that the bid contravened s 615, and its investigation as from 9 February 1999, the respondents did not seek any relief from ASIC and, instead proceeded with the bid. In any event, significant documentary evidence, which supported ASIC's case in respect of the bid structure agreement, only emerged shortly prior to the hearing. 116 In a case where a regulatory authority is intervening in the public interest the courts are "somewhat slower" in denying relief on the ground of delay: see Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538 at 560 per Lord Wilberforce. I do not regard ASIC's delay in commencing proceedings as a proper basis for refusing the relief that is otherwise appropriate. Relief 117 Section 737 confers power upon the Court on the application, inter alia, of ASIC, in circumstances where a person has acquired shares in a company in contravention of s 615, to make such orders "as it thinks just". Those orders may include a remedial order and an order directing a person to do or refrain from doing a specified act. Section 613 defines a "remedial order" as including: · an order directing the disposal of shares (s 613(1)(d)); · an order vesting in ASIC shares or an interest in shares (s 613(1)(e)); · an order declaring an agreement relating to a takeover scheme or any other agreement in connection with the acquisition of shares to be voidable: s 613(1)(j). 118 Whilst there is a significant public interest in ensuring that Ch 6 is complied with, the orders to be made under s 737 in respect of a contravention of s 615 of the Corporations Law are, in general, remedial rather than punitive. The discretionary power under the Corporations Law to make such orders as the Court "thinks just", although conferred in very wide terms, has been construed as a power to make orders which advance the principal objectives of the statutory scheme: see Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101 at 152 per Sackville J at first instance and on appeal ((1996) 69 FCR 531) at 545 per Lehane J. As pointed out earlier, the principal objective of the statutory scheme in Ch 6 is to ensure that the acquisition of shares in listed companies takes place in an efficient, competitive and informed market. A particular aspect of that objective is that, as far as practicable, all shareholders of a company, have reasonable and equal opportunities to participate in any benefits accruing to shareholders under any proposal under which a person would acquire a substantial interest in a company (see s 731(d)). 119 It has been widely accepted that orders that ensure that those who contravene provisions of the Corporations Law do not enjoy the advantages or benefits obtained by their contravention or orders which render their efforts fruitless are within the objects of the statutory scheme: see for example Australian Securities and Investment Commission v Terra Industries [1999] FCA 525 at para 97(e), Aberfoyle Ltd v Western Metals Ltd at 152 and ICAL Ltd v County Natwest Securities Australia Ltd at 252-253. Thus, divestiture orders have been regarded as an appropriate remedy to ensure that any person who contravenes s 615 is not allowed to "retain any benefit from its acquisitions made in breach of s 615": see Metals Exploration Ltd v Samic Ltd (1994) 181 CLR 109 at 132 per Deane and Toohey JJ. Whilst their Honours were in a minority in Metals Exploration Limited on the question of whether there had been an acquisition in contravention of s 615, their conclusion as to appropriate remedial orders under s 737(1) is not inconsistent with the majority judgment of Mason CJ, Gaudron and McHugh JJ who found that, as there had been a contravention of provisions other than s 615, the Court's jurisdiction under s 739 had been attracted. In that context, their Honours said (at 128) that under s 739 (which limits the Court's jurisdiction to such orders as it thinks necessary or desirable to protect the interests of persons affected by a takeover scheme or announcement) where a contravention of the law has led to the acquisition of shares to the detriment of shareholders in the target company as, for example, by deterring competing offers, then an order for divestiture will be permissible. In Corebell v NZ Insurance (1988) 13 ACLR 349 at 354 Marks J stated that in circumstances involving a "sufficiently serious" contravention of the then equivalent provision to s 615, the Court ought, so far as possible, return those interested to where they would have been if the acquisition had not occurred. See also Yaramin Pty Ltd v Augold NL (1987) 5 ACLC 783 and National Companies and Security Commission v Monsoon Nominees Pty Ltd (1990) 9 ACLC 43. 120 The main restriction on the Court's power to make orders under ss 737 and 739 is contained is s 744(2) which provides that orders cannot be made where the Court is satisfied that they would unfairly prejudice any person. Although the Court will determine each case according to the justice of the particular circumstances, the fact that a person is prejudiced by an order does not, of itself, establish that the order is unfair: see Waldron v MG Securities (Australasia) Ltd [1975] VR 508 at 532; Gjergja v Cooper [1987] VR 167 at 173-174 per McGarvie J and at 218-219 per Ormiston J and Bank Leumi Le-Israel at 152 per Sackville J. Even in circumstances where an "innocent person" is prejudiced by an order, such prejudice may not necessarily be unfair: see Gjergja v Cooper at 174. Sackville J observed in Bank Leumi Le-Israel (at 152) that the classification of prejudice as "unfair" may depend upon whether the order is essential to give effect to the relevant legislative policy and whether evidence is presented as to the precise nature of the prejudice said to have been suffered. I do not regard his Honour as importing a requirement that only orders that are "essential" to give effect to a relevant policy are to be made. Rather, his Honour was indicating that the extent to which the order is necessary or appropriate to give effect to the policy can be relevant to determining the "unfairness" of any prejudice flowing from it. 121 The exercise of the Court's discretion can require it to consider a range of possible remedies and select the appropriate one in the circumstances of the case: see Bank Leumi Le-Israel at 545 per Lehane J. In considering whether an order is unfairly prejudicial and whether the Court should exercise its power in a particular case, it is appropriate to take into account the degree of culpability of persons whose interests are affected by the orders: see Bank Leumi Le-Israel at 154 per Sackville J and on appeal at 545 per Lehane J. 122 The question of the appropriate relief to be granted in the present case is one of some difficulty. The case put by ASIC was that the contraventions denied to shareholders their right to a fair or reasonable offer for their shares which included an appropriate premium for control of the company. In addition, so it was contended, the 40.37% platform of the bidders and their unlawful takeover structure effectively deterred any rival bidder from entering the market. In support of its case ASIC adduced expert testimony to the effect that the offer made was for less than the fair value of the shares. The gist of ASIC's submission was expressed as follows: "If the Law had been observed (ICAL Limited v County Natwest Securities Australia Limited (1988) 39 NSWLR 214 at pp 248B-C), the respondents' case is that either, there would have been no bid at all or, it would have been of a higher price. But there has been a bid, on a false basis, which has yielded them an extra 54% of the shares in GCM." 123 The respondents' riposte was that as a result of the pre-existing economic association between the Normandy group and the Edensor interests, control of the company had effectively passed to the Normandy group and Edensor prior to the bid with the consequence that the control premium built into the bid offer price was, as was pointed out by SG Hambros, fair. Further, they contended, with some justification, that as the market believed that control had effectively passed to Normandy and Edensor there was no realistic prospect of a rival bid in any event. The respondents called their own expert evidence to support their contention that the bid price was fair in all the circumstances of the case. 124 I have had some difficulty in dealing with the rival contentions as, to some extent, they each depended upon the parties respective experts' assessments of what was a fair offer price for shares in Great Central Mines, which is a matter of great complexity. In order to arrive at a determination of the fair price for shares in Great Central Mines at the relevant time, the Court would have to carefully consider the validity of the many assumptions made by the expert witnesses in arriving at their respective views of the value of the company and in particular, of the manner in which net present value of its discounted cash flow was calculated.

125 However, in the circumstances of the present case I have not found it necessary to resolve that question for several reasons. First, the valuations relied upon have been overtaken by recent events. Since the bid was announced there has been a significant fall in the price of gold (from A$459 to below A$410 per ounce) and in the value of shares in the ASX Gold Index (from 1132 to approximately 838). Whilst hedging has protected Great Central Mines against the fall to some extent, when considering the relief that is now appropriate, both the value of the shares at the time of the bid and the current value of the shares are relevant factors. The evidence as to current value is, at best, problematic. Secondly, a bidder for a company is under no obligation to offer what it considers to be a fair price. It is for the market to determine whether the price offered is fair in all the circumstances of the case. Thirdly, the substantive issue is whether, by reason of the respondents' contraventions of the Corporations Law, the shareholders in Great Central Mines have suffered a detriment of a kind which ought to give rise to relief. In the present case a reasonably reliable and accurate answer to that question is to be found in Normandy's Board papers (which explain the proposed bid structure and the basis for the bid that was made) rather than in the Court seeking to independently ascertain a fair price for the shares at the time the bid was made.

126 The Normandy paper for the December Board meeting which was to consider the proposed structure and offer price of $1.50 per share stated: "The Yandal Gold structure means that Normandy will not be required to consolidate Great Central Mine's and Yandal Gold's debts. This would not be possible without Edensor's joint involvement. It is also clear that an offer that did not have Edensor's support would be less likely to achieve success or would require a significantly higher price." [Emphasis added] 127 The Normandy valuation of Great Central Mines was between $1.37-$1.75 per share depending on the discounted cash flow rate selected. The paper states that the valuation "is considered to be conservative" and sets out several reasons for that view. Under the heading "Edensor Relationship" the following observations appear: "At first glance, the proposed structure appears generous to Edensor with Chase's put option to Normandy effectively allowing Edensor the use of Normandy's balance sheet for its share of the acquisition. Against that, Normandy is putting itself in a position to move to full ownership of Great Central Mines in three years at a price which could not be achieved without Edensor's support." 128 At the December board meeting approval in principle was granted to the bid proceeding. The Board paper makes it quite plain that "Edensor's support" for the bid (which I have found was secured by the Shareholders Agreement and the bid structure agreement) was not only critical to the success of the bid but would result in Normandy not being required to offer "a significantly higher price" which it would otherwise have had to offer for a successful bid without Edensor's support. 129 A further Normandy Board paper was prepared for the January 1999 meeting. The paper observed, inter alia, that: "The bid proposal has now been discussed with the relevant Group Executives, all of whom support the proposal and agree that the purchase price provides more up-side than down-side risk." 130 The Normandy Board agreed to proceed with the bid on the basis of the Board papers. Whilst I accept that Mr Richards might have informed the Board at its January 1999 meeting, in general terms, that there had been some downward adjustment to the valuation by management, I am satisfied that the probability is that the Normandy Board agreed to proceed with the bid on the basis of the statements in the Board papers and, in particular, on the basis that $1.50 per share represented a sufficient and, from Normandy's point of view, an attractive price for it to offer for a successful bid provided it secured Edensor's "support". That price was regarded as having more "up-side than down-side risk". 131 In my view the contraventions of s 615 enabled the Normandy group and Edensor, using Yandal Gold as the bid vehicle, to make a highly successful takeover bid for Great Central Mines shares at a significantly lower price then would have had to be paid at that time had a bid proceeded without the unlawful "agreements" which secured Edensor's "support" and contravened s 615. The Shareholders Agreement, the bid structure agreement and Edensor's valuable "carried interest" resulted in significant benefits, including a bid of $1.50 per share which was assured of success, for the Normandy group and Edensor which, in my view, would not have been secured at that time without the contraventions. I am satisfied that those benefits resulted in a significant detriment to shareholders who were effectively and permanently deprived of the opportunity of a higher bid price on that or, a later occasion, and in a practical sense were left with little choice but to accept the bid on the terms offered. Whilst I accept that without the contraventions there may have been no bid in February 1999, the then likelihood was a bid by Normandy on that, or a later occasion, which would have had to be at a "significantly" higher price if Normandy was to proceed with the bid with no contravening "relevant agreement" with Edensor. Whilst it is correct that there might not have been a realistic prospect of a rival bid or a competitive takeover market for shares in Great Central Mines at the time, those are matters of speculation. What is clear is that the contraventions ensured: · a successful takeover at a then attractive price for the parties; · that a rival bid was even more unlikely and the takeover market for shares in Great Central Mines would be even less competitive. 132 I do not accept the respondents' contention that the same result could have been achieved by a lawful joint bid as I do not accept that there was any likelihood of a joint bid being made without an agreement similar to the contravening bid structure agreement. The bid structure agreement ensured Edensor's co-operation and support for the bid in all respects and was regarded by Normandy as a critical element in it agreeing to Edensor's "carried interest" and undertaking ultimate liability to Chase for the financing of the bid. In any event, a joint bid was not considered by the parties. Mr Richards' evidence was that a corporate bid structure was adopted from the outset for Normandy's accounting, financial and taxation reasons. Further, I doubt that a joint bid could have achieved the significant financial and accounting benefits that Normandy sought to gain from the bid by its use of a corporate bid vehicle. Accordingly, it is entirely hypothetical as to whether such a bid would, or could, have been made with the same financing and other arrangements that were put in place for the bid that was in fact made. Finally, it is fairly clear that ASIC would have imposed conditions on a joint bid which might not have been acceptable to the bidding parties. 133 For the above reasons I am satisfied that as a result of the contraventions the price offered to shareholders in the takeover offers made on 9 February 1999 was significantly less than that that would have had to be offered by the bidder to them on that occasion had the contraventions not occurred. Further, the contraventions secured and retained the platform of 40.37% for the purposes of the bid which virtually ensured the bid's success. In doing so, in a colloquial sense, the respondents moved from an "economic association" in respect of their shareholdings to bidding as "partners" in a common undertaking. It is interesting to note that Chase, with whom the respondents were in close contact, perceived the bid in that way. The best evidence that the contraventions were not merely technical is the significance attached by Normandy to securing the bid structure agreement by the highly unusual terms upon which it was prepared to finance Edensor's "carried interest". Whilst securing Mr Gutnick's personal support for the bid was an element, that support was incidental to and a consequence of obtaining Edensor's "support" which was secured in the Shareholders Agreement and the bid structure agreement. The price paid for Edensor's support was the carried interest. Thus, the contravention resulted in a significant detriment to shareholders, a corresponding benefit to the Normandy group and Edensor and ensured the bid's success. 134 On one view it might be said that the s 33 contravention was a technical one with little consequence and the bid structure agreement did little more than reflect the economic reality. However, such an approach is erroneous as it ignores the detriment suffered by shareholders who were deprived of the opportunity of the "significantly higher price" that would have had to be paid at that time if Normandy had not secured Edensor's support by the contravening conduct. Whilst it is possible that no bid would have been made at that time without Edensor's support, that does not assist the respondents as the bid that was made left shareholders with little alternative but to accept it. Further, the approach also ignores the importance the legislature has attached to requiring a takeover offer once the 20% threshold is passed. An unlawful arrangement that secures a 40% platform significantly undermines that fundamental legislative requirement that is a central element in giving effect to the Eggleston principles. For the above reasons, I regard the contraventions as sufficiently serious to warrant relief on the basis that it deprives the bidders of the benefits received from their contravening conduct and compensates shareholders for the detriment they have suffered as a consequence of the contraventions. 135 The benefits received by the bidders from the contraventions in the present case are the shares acquired as a result of the bid and the Yandal Gold's entitlement under s 701(1) of the Corporations Law to compulsorily acquire the shares that have not been the subject of acceptance of the takeover offers or which have not been acquired as a result of the notices under s 703. In that context the relief that is sought as being "just" is as follows.

Yandal Gold be restrained form proceeding to compulsorily acquire shareholders under s 701.
Any shareholders who accepted the takeover offers or who have required that their shares be acquired under s 703(2) be afforded an opportunity to avoid their contracts if they wish to do so by repaying the purchase price they received and receiving, free of charge to them, a retransfer of their shares in Great Central Mines.
The remaining shares (that is, those that are not required to be retransferred) acquired by Yandal Gold under the takeover offers be vested in ASIC with appropriate directions for their sale or orders be made directing the disposal of those shares by Yandal Gold in accordance with ASIC's directions.
The net profit (if any) that Yandal Gold is entitled to be paid on the sale of the shares be paid on a pro rata basis to the shareholders who accepted the bid or required that their shares be acquired under s 703(2) and did not avoid their contracts. It is contended that any profit might reflect part of a control premium or the higher price previously denied to the shareholders by reason of the contraventions of s 615.
In order to ensure a competitive market hereafter for the sale of shares in Great Central Mines the respondents be restrained from acting upon or giving effect to the non-acceptance or the retention agreements. 136 ASIC also sought a vesting order in respect of the shares held by Normandy Mining Holdings and Edensor which were the subject of the contraventions of s 615. Whilst ASIC is correct in its contention that the Court has power to make vesting orders in respect of those shares, it is not appropriate that that power be exercised in the present case. Vesting orders in respect of the pre-existing shareholding of Normandy Mining Holdings and Edensor would be punitive in effect and, in the present case, are neither necessary or appropriate to give effect to the relevant policy objectives of the legislative scheme. 137 An alternative approach to relief contended for by ASIC is to decline to make share vesting or disposal orders and to endeavour to compensate the shareholders for the detriment suffered as a consequence of the contraventions. 138 ASIC submits that it is appropriate that the Court endeavour to value Great Central Mines and determine a fair price for the shares sold pursuant to the takeover offers and order payment of the difference between the fair price (which it contends exceeds $1.50) and $1.50 by Yandal Gold for each share sold by shareholders who accepted its takeover offers. I have concluded that determination of the fair price or ordering payment of it is inappropriate because of the difficulties to which I referred earlier in the reasons. In particular, it involves an assumption, that is not warranted in the present case, that shareholders were entitled to payment of that price. 139 ASIC also claimed that the detriment suffered by shareholders can be measured by reference to the price Normandy paid to secure Edensor's support, being Edensor's carried interest, which was valued by Mr Lonergan at between $27-30 million. Unfair Prejudice 140 The Court cannot make any of the above orders if it is satisfied that the orders unfairly prejudice any person. 141 Plainly, the respondents are likely to be prejudiced by the orders sought. ASIC's submission on this issue was expressed as follows: "The central issue here was the risk run by the respondents in pursuing the bid structure (and the non-acceptance agreement) where they held together more than 20% of GCM's shares. The risk that, by a joint bid, relevant interests would be created was consciously run, knowing that this was ASIC's view. Mr Levy's letter of 18 September 1998 makes the point beyond peradventure. Mr Levy [Normandy's solicitor] told Normandy:- "…the general ASIC view that a necessary implication of two shareholders combining in order to make a joint takeover bid is that neither will sell their shares during the course of the bid. This is required by section 686 of the Corporations Law. As a result, the ASIC's view is that joint bidders obtain a relevant interest in each other's shares which may breach the 20% prohibition. He said that relief could be given." The course the respondents ran enabled them to avoid imposition of conditions by ASIC on their bid which could have protected the other shareholders… The very danger of the adverse findings of contravention of s 615 was adverted to in Mr Levy's letter. The respondents knew the risk and deliberately ran it rather than make disclosure to ASIC about matters concerning which they wished to avoid questions. The respondents are not mere innocent victims of a technical finding of breach." 142 For the reasons given earlier I accept that submission. However, my findings as to the respondents' culpability, their lack of "inadvertence" and the seriousness of the breaches are all relevant to the issue of unfairness. Whilst bidders were under no obligation to seek ASIC's approval of their bid structure, once they were put on notice by ASIC that their bid structure was likely to contravene s 615 (as occurred in the present case) and failed to seek relief, they did so at their peril. Notwithstanding the extensive submissions of the respondents as to unfairness it is difficult to escape the conclusion that, in so far as the orders prejudice particular respondents, each respondent took a calculated risk in agreeing to proceed as it did and undertook liabilities to third parties in doing so. 143 The vesting or disposal orders do not have punitive consequences as they do not forfeit the underlying beneficial or security entitlements in the shares: see Australian Securities and Investments Commission v Terra Industries at para 88. The net price received on a sale of the vested shares, after payment of costs and expenses will be payable to the beneficial owners or in accordance with security interests held in respect of the shares, although the effect of the orders sought would be that any profit ultimately received by Yandal Gold on the sale is to be paid to shareholders. In my view the orders sought are not unfairly prejudicial to the respondents. 144 I am not satisfied that Chase or any of the lenders under the Syndicated Secured Term Debt Facility will be unfairly prejudiced. Chase, acting as agent for all of the lenders, was well aware of the Shareholders Agreement and was able to form its own view as to whether it contravened s 615. Further, Chase was fully aware of the "full support and co-operation" between the Normandy group and Edensor and ought to have been cognisant of the consequential risk of a contravention of s 615. In that regard, Chase saw the proposed bid as a friendly acquisition by Normandy "in partnership with Mr Joseph Gutnick (through his private company Edensor Nominees)". Additionally, Chase was aware of the facts and circumstances from which it could be inferred that it was likely that the parties had entered into the bid structure agreement. Importantly, no evidence has been adduced from Chase that it was not aware of those circumstances or that it would be unfairly prejudiced by the orders sought by ASIC. 145 The proposed orders will not result in any significant financial detriment to Chase or the other lenders as the vesting orders do not forfeit beneficial or security interests and, to the extent the shares may loose value as a result of a "forced" sale, Normandy is well able to meet its liability for repayment of the loans or interest. As already explained, I do not accept that any prejudice to the Normandy group arising as a consequence of the contraventions of members of the group is unfair. 146 The substantive case of unfair prejudice related to the prejudice that Great Central Mines will suffer if the "change of control provisions" in its US$300,000,000 Senior Notes are triggered. A sale of 50% or more of the shares in the company to any persons other than Edensor or the Normandy group is likely to result in an obligation by Great Central Mines to offer to repay the Notes, which mature on 1 April 2008, at 101% of their face value. 147 The evidence establishes that there is a likelihood that a number of Noteholders may seek to take advantage of the offer in a manner that would result in a significant financial loss to Great Central Mines. The evidence is not that Great Central Mines will be unable to refinance its obligations. Rather, it is that significant loss and inconvenience will arise if it has to do so. Of course, if the order is for disposal of the shares by Yandal Gold, rather than by ASIC under a vesting order, the trigger will not be activated unless the sale is to a third party bidder. Thus, for that reason it would be more appropriate that disposal, rather than vesting, orders be made in the present case. 148 If Great Central Mines was truly an innocent third party the case for unfairness might be more compelling. However, in the context of s 744(2) it is inappropriate to view unfairness in a strictly legal context. The issue is whether, in justice or equity, the order will be unfairly prejudicial. Accordingly, in a case such as the present it is appropriate to look behind the corporate veil and identify where, in reality, the prejudice will fall. In that regard one is inexorably led back to the respondents who were actively involved in their own exclusion from the "change of control" provisions in the Senior Notes and whose contraventions might result in the trigger being activated. In such circumstances it is difficult to accept that prejudice to their "corporate veil" is unfair. As planned from the outset the respondents now hold in excess of 94% of Great Central Mines and will, if permitted to do so, move to compulsory acquisition of the remaining 6%. It is somewhat disingenuous for them to contend that they can do so free of the risk of vesting orders in respect of their contraventions of s 615. 149 I would have been concerned at possible prejudice to the 6% shareholding presently retained by the public. However, the current entitlement of those shareholders to require Yandal Gold to acquire those shares at the bid price (less the 3 cent dividend) under s 703(2) remains open for 3 months with the consequence that any prejudice to the company is unlikely to be passed down to the public shareholders and, if it is, it will not be unfair as they will have had the opportunity to sell their shares at the bid price and enjoy an entitlement to any profit made on their resale under orders of the Court. 150 In any event there is another, and simpler, answer to the prejudice claimed by Great Central Mines. As any loss to Great Central Mines will arise solely as a result of contravening conduct by the respondents, it would be appropriate for the Court to order that the contravening respondents indemnify the company in respect of the loss in order to protect the interests of its shareholders. Such orders are clearly within the purview of ss 737 and 739. 151 Finally, the issue of likely prejudice to Great Central Mines is, in my view, somewhat overstated. Normandy has currently invested in excess of $420 million in the company. It has undrawn facilities available to it in the sum of approximately $700 million, I am in no doubt that Normandy would act to protect its investment in a manner that minimised the risk of loss to Great Central Mines. Mr Richards' evidence to the contrary is implausible. Further, Mr Richards suggestion that Normandy would not act in that way, was no more than a managerial viewpoint proffered without consultation with the Normandy Board or Mr de Crespigny. 152 A valiant attempt was also made to raise a case of unfair prejudice on the basis of similar "change of control" provisions in the finance facilities provided by Great Central Mines' bankers. I do not accept that any serious risk of prejudice has been demonstrated in that regard. 153 Accordingly, I am not satisfied that the vesting, disposal or other orders sought by ASIC are unfairly prejudicial to any person. Orders 154 I am satisfied that it is just and protective of the interests of shareholders that shareholders who sold shares to Yandal Gold pursuant to its takeover offers have the right to avoid, that compulsory acquisition not be permitted and that the relevant respondents be enjoined from giving effect to any contravening "relevant agreement" (see orders 1, 2 and 5 above). The orders will deprive the contravening respondents of the fruits of their contravention. The orders in 1 and 2 above will also ensure that shareholders are entitled to exercise their right to avoid sales of their shares or are not obliged to sell their shares under s 701 as a result of takeover offers that have been made as a consequence, and on the basis, of contraventions of s 615. 155 But for one factor I would also have made the disposal and other consequential orders sought by ASIC on the basis that the respondents ought also to be deprived of the shares acquired under the takeover as benefits and advantages obtained by reason of their contraventions. Any shareholders, who accepted the offers, would be entitled, on a pro rata basis, to any net profit made on the sale of the shares. The factor is the significant and continuing fall in the price of gold and in the ASX Gold Index since the making of the bid. That factor may result in the possibility of a bid in excess at a price which, at the present time, exceeds $1.50 being illusory. The evidence before me does not enable me to expect that, in the present circumstances, such a bid, or sales of the shares of a price exceeding $1.50, is a likely or realistic possibility. In that regard I am in no doubt that in making an order that is "just" or protective of shareholders the Court is to have regard to the realities of the situation. 156 Thus, the likely result of an order for sale, on the basis of present market conditions, would be the re-acquisition of the shares by the respondents. Whilst ASIC raised the issue of the respondents being precluded from bidding or being permitted to bid only upon certain conditions, those suggested limitations are not an appropriate or warranted exercise of the Court's power under ss 737 or 739. Thus, sale orders would yield profits to brokers, and to lawyers as a result of the litigation, and vindicate principle but the litigation may prove to be of little or no benefit to the shareholders who suffered detriment as a result of the contravening conduct. If there was no other more appropriate or just remedy those factors would not have operated to dissuade me from making the disposal orders sought by ASIC. 157 However, there might be a more appropriate and just remedy. It relates to Edensor's carried interest. Mr Lonergan's evidence, which valued that interest at $27-30 million, was only partly challenged by the respondents. As explained earlier, that is effectively the "price" paid by the Normandy group to Edensor to secure the bid structure agreement and the Shareholders Agreement or, put another way, a measure of the benefit obtained by Edensor by its contraventions of s 615. As a consequence of the payment of that "price" the shareholders were deprived of the opportunity of receiving an offer of a significantly higher price at the time of the bid and were left with little practical choice but to accept the offer made or to now exercise their right to require the acquisition by Yandal Gold of their shares pursuant to s 703(2). 158 Is it just that that "price" be redirected to those who suffered the detriment arising from its payment? In my view an order that Edensor be required to disgorge to those shareholders the value of the benefit it received for its contravening conduct is "just" under s 737 and is protective of the interests of the shareholders under s 739. 159 As explained earlier, the carried interest was the benefit, that is the price regarded by Normandy as necessary to be paid to Edensor, in return for it agreeing to enter into the Shareholders Agreement and the bid structure agreement. Edensor's support was needed as its 12.56% shareholding was critical to the bid succeeding in obtaining Normandy's objectives. Although it is contended by the respondents that the benefit was paid to Edensor qua bidder that is only partially true. In reality it was paid to Edensor qua shareholder in order for it to be a bidder on the generous terms it extracted from Normandy. It was Edensor's capacity and role as a shareholder in Great Central Mines that led Normandy to regard Edensor's "support" as critical to the bid's success. Mr Gutnick's personal support for the bid was merely an incident to, and a consequence of, obtaining Edensor's support. The present case is an example of a benefit, being provided to a shareholder under a proposal under which a person was to acquire a substantial interest in a company, which was not provided to other shareholders (see s 731(d)). The detriment arose as a consequence of the contraventions for which the benefit was provided to Edensor. 160 The disgorgement order: · will enable the other shareholders to participate in the benefit; · is compensatory in that it operates to mitigate the detriment the shareholders suffered as a result of the contravening conduct; · will deprive Edensor of the value of the benefit it received as consideration for entering into the contravening "agreements". 161 I would add that the main reason why, with some hesitation, I have concluded that disgorgement alone, rather than disposal and disgorgement orders, is "just" and "protective" is that it will redirect the value of the benefit provided to Edensor to the shareholders who suffered detriment as a result of the contravening conduct thereby ensuring appropriate compensation for that detriment which cannot otherwise be satisfactorily measured or valued. As was observed by Bowen LJ in Ratcliffe v Evans [1892] 2 QB 524 at 533-534, uncertainty and difficulty of proof and method of calculation of loss is not to lead to an "absolute denial of justice and of redress for the very mischief" giving rise to the loss. See also Howe v Teefy (1927) 27 SR (NSW) 301 at 306. 162 Some criticism was made by the respondents of Mr Lonergan's methodology in valuing the carried interest at $27-30 million on the basis of his treatment of it as "similar in economic substance to a call option". After explaining the commercial benefits received by Edensor, Mr Lonergan assessed the value of the carried interest, being the benefit received by the Gutnick interests (that is, Edensor), as follows: "Assessment of benefit to Gutnick interests The Gutnick interests have obtained a benefit similar in economic substance to a call option. Based on: (i) GCM's assessed value of $1.50 per share (ii) The three year term of the Chase facility (iii) The Edensor servicing obligations thereof (net of assumed dividends of 6 cents per share per annum consistent with dividends paid by GCM in the previous two years); and (iv) The volatility of GCM's share price the estimated value of the benefit obtained by the Gutnick interests would be calculated as follows: Value per share Value of three year call option 37c - 40c Less: present value of net debt servicing obligations 8c - 8c 29c - 32c Economic interest in shares held by Yandal 50.1% x 59.6% (Note 1) x 309m shares 92.27m shares Value thereof $27 million - $30 million Notes: (1) Assuming 100% acceptances by interests other than Normandy and Edensor (2) The Gutnick interests have a further period of 180 days after the end of the three year period to contribute their pro rata share of the financing outstanding at that date. My assessed valuation range does not reflect this additional benefit. The valuation range of a three year call option has been calculated using the Black and Scholes and binomial models which are generally accepted option valuation methodologies. I have adopted this approach because from the Gutnick interests perspective, in economic substance, the Yandal structure and associated financing arrangements provide benefits similar to (but not identical to) a call option. It is possible therefore that the application of these models to the particular circumstances of GCM may be criticised on technical grounds. However, in my opinion these criticisms are of a technical rather than a substantive nature and do not detract from the essential proposition that the Gutnick interests have received a substantial net economic benefit as a result of the Yandal structure entered into and the associated financing arrangements and that other shareholders did not receive this benefit." 163 I have no hesitation in accepting Mr Lonergan's expertise to make the valuation. Indeed, he was only partly challenged in cross examination on the valuation (see particularly the transcript at 151-153). It was said, inter alia, that his choice of $1.50, rather than the prevailing price of Great Central shares prior to the bid, was inappropriate. It was also said that he failed to have regard to the advantages obtained in return by Normandy. The short answer to these and other criticisms (which were rejected by Mr Lonergan) is that they were not shown to have resulted in an incorrect methodology or wrong or unacceptable assumptions on the part of Mr Lonergan. A problem confronting the respondents at the outset on this issue is that they have not really challenged Mr Lonergan's use of the Black and Scholes and binomial models or demonstrated how those "generally accepted option valuation methodologies" are inappropriate in the present case. 164 The respondents have not satisfied me that the assumptions made by Mr Lonergan were erroneous or that, otherwise, it is not appropriate to rely on his valuation as ascribing, as best one can, an estimated value to the carried interest by way of analogy to a call option for the reasons explained by Mr Lonergan in his report and evidence. In such circumstances, doing the best I can on the evidence, (see Andrews v Fairfax & Sons Ltd [1980] 2 NSWLR 225 at 247 and ACOHS v RA Bashford Consulting Pty Ltd (1997) 144 ALR 528 at 536-538) $27-30 million is a reasonable estimate of the value of the "benefit" constituted by Edensor's carried interest. 165 It is not to the point that Normandy also got advantages from securing Edensor's support. Normandy saw the carried interest as "generous to Edensor with Chase's put option to Normandy effectively allowing Edensor the use of Normandy's balance sheet for its share of the acquisition". Normandy also viewed that interest as enabling it to move to "full ownership" in three years at a price that could not be obtained without Edensor's support. The price was said by Normandy to have "more up-side than down side risk". These observations by Normandy do not offer any support to the respondents' criticisms of Mr Lonergan's approach to valuing Edensor's interest and are consistent with it. 166 Finally, I do not accept ASIC's suggested approach of using the value of the carried interest to assess the fair value of shares denied to all shareholders on the basis that it was the value fixed by Normandy for Edensor's right to 50.1% of the shares through its indirect holding in Yandal Gold. Normandy provided the carried interest on the basis that it deemed it to be necessary to obtain Edensor's support rather than as a "value" it was placing on shares in Great Central Mines. 167 The disgorgement order is prejudicial to Edensor. However, as it was the price extracted by Edensor for its role in the conduct that contravened s 615, the disgorgement of that price is not unfair. In arriving at that conclusion I have only had regard to Edensor's role in respect of the conduct that contravened s 615. It is plainly arguable that the "carried interest" given by the Normandy group to Edensor contravened s 698(2): cf Aberfoyle v Western Metals at 142, 148-149 and 152. It appears that under the Shareholders Agreement and the Chase loan facility agreement members of the Normandy group, as associates of Yandal Gold, have given to Edensor (whose shares may be acquired under the takeover offers proposed to be sent at the time by Yandal Gold) a benefit, being the carried interest, that Yandal Gold was not proposing to provide for under the takeover offers: see s 698(2). Finkelstein J in Aberfoyle v Western Metals (at 148), in disavowing a literal construction of s 698, said that the benefit must have some connection with or have the potential to influence or induce the shareholder to act in a particular way in relation to the takeover offers. The way suggested by his Honour was to induce the recipient of the benefit to "sell shares in the target company". However, as the present case demonstrates, that might not be the only way a benefit might be offered to induce a shareholder to act in a particular way in relation to a takeover offer so as to advantage the offeror and particular shareholders to the detriment of other shareholders. As ASIC did not contend that s 698(2) had been contravened I do not pursue that issue further. 168 I have considered whether the Normandy group should pay one half of the value of the carried interest as I regard its culpability as no different to Edensor's but have decided against that course as the effect of my order will be to redirect the "price" the Normandy group paid to Edensor to the shareholders. It is not just that Normandy pay a further "price" or that Edensor only be required to disgorge one-half of the value of the benefit it received. An order that Normandy pay a further sum would be punitive rather than remedial. Further, it is not as if the orders made will not be prejudicial to Normandy. Plainly, the orders permitting avoidance, restraining compulsory acquisition and restraining continuance of contravening conduct have the capacity to be costly, but not unfairly so, to Normandy. 169 Finally, the primary reason I have declined to make disposal orders is that the shareholders can be appropriately compensated if they receive the benefit of the payment of $28.5 million. If that sum is received then, as pointed out earlier with some hesitation, I regard its disgorgement, rather than disposal and disgorgement orders, as a sufficient remedy. If that sum is not paid in accordance with my orders with the consequence that there is a serious risk, or even a likelihood that it may not be paid, then the disposal orders sought by ASIC are to be made in addition to the payment orders. Conclusion 170 For the above reasons it is appropriate, pursuant to ss 737 and 739 of the Corporations Law, for the Court to make orders allowing shareholders who accepted the takeover offers to avoid their contracts, to restrain compulsory acquisition under s 701 on the basis of the takeover offers and to restrain the relevant respondents from giving effect to the non acceptance and retention agreements. It is also appropriate that Edensor be ordered to pay to ASIC the sum of $28.5 million (being the mid-point between $27-30 million) for distribution to the shareholders in Great Central Mines (other than the respondents) who accepted the takeover offers of Yandal Gold or who require that Yandal Gold acquire their shares under s 703(2). If the sum is not paid in accordance with my orders then the disposal orders sought by ASIC are to be made in addition to the payment order. 171 In addition, the declaratory relief sought by ASIC is also appropriate. As the substantive relief granted under ss 737 and 739 appropriately compensates shareholders in Great Central Mines in respect of the contraventions of the Corporations Law it is unnecessary to grant any specific relief, other than declaratory relief, in respect of ASIC's case on misleading and deceptive conduct. 172 I have also made appropriate orders providing for the persons to whom s 703(1) notices have been sent to be made aware of their rights as a result of the orders made by the Court. As the notices were given very recently and no evidence has been forthcoming of any responses to them I have not made any provision for the avoidance by any of those persons of any requirement made by them under s 703(2). I note that the Court has power under s 703(2) to vary the terms of an acquisition on the application for the offeror or a shareholder. 173 In making the above orders I have not accepted the respondents' submissions that different orders should be made in favour of shareholders depending on when they acquired their shares that is, before or during the takeover bid or before or after the commencement of this proceeding. I am not satisfied that the respondents have demonstrated that it is just or appropriate to draw the distinctions sought to be drawn by them. 174 As ASIC has been successful in the proceeding the respondents are to pay its taxed costs of and incidental to the proceeding. Those costs are to include any costs or expenses incurred in paying the sum of $28.5 million to shareholders. 175 Finally, many of the difficult and complex issues in relation to relief which the Court has had to resolve in the present case have arisen as a result of relief to restrain the takeover not being sought by ASIC until a relatively late stage. In the events that have occurred that has led to a situation where the Court has been required to consider relief at a time when the successful, but contravening, bidder has moved to the final stage of the takeover, compulsory acquisition. Without seeking to apportion blame for that situation in the present case obviously, it is highly desirable that that situation be avoided in the future by prompt action (where appropriate) by ASIC, or any other applicant, at an early stage of a takeover. Further matters 176 The Court published its reasons for judgment and proposed orders this morning in order to afford the parties an opportunity to make submissions as to the form of the proposed orders. In the course of the submissions it became apparent that: · some shareholders may have exercised their right to require that Yandal Gold Pty Ltd acquire their shares under s 703(2) prior to being notified of their rights under the proposed orders; · Yandal Gold Pty Ltd, not having received an extension of time from ASIC, sent out notices of compulsory acquisition pursuant to s 701(2) to shareholders on 15 June 1999. 177 It was not disputed that in these circumstances certain variations to the proposed orders were appropriate if the orders were properly to give effect to the reasons for judgment. Accordingly, the final orders that were made later on 16 June 1999, reflect the matters raised

in the reasons for judgment and the further matters raised after the publishing by the Court of those reasons. I certify that the preceding one hundred and seventy-seven (177) numbered paragraphs are a true copy of the final Reasons for Judgment herein of the Honourable Justice Merkel.

Associate: Dated: 16 June 1999 Counsel for the Applicant: Mr S Rares SC with Mr R Strong

Solicitor for the Applicant: Australian Securities and Investments Commission

Counsel for the First and Second Respondents: Mr A Archibald QC with Mr L Glick and Mr I Martingdale

Solicitor for the First and Second Respondent: Clayton Utz

Counsel for the Third Respondent: Mr B Ross

Solicitor for the Third Respondent: Clayton Utz

Counsel for the Fourth to Seventh Respondents: Mr M Garner

Solicitor for the Fourth to Seventh Respondents: Freehill Hollingdale & Page

Counsel for Great Central Mines: Mr P Murdoch QC with Mr M Connock

Solicitor for Great Central Mines: Arnold Bloch Leibler

Date of Hearing: 13, 14, 17, 18, 19, 20, 21 May and 4, 8 June 1999

Date of Judgment: 16 June 1999

Trade Practices Act 1974(Cth)s 52

Australian Securities and Investment Act 1989(Cth)

Australian Securities & Investments Commission v Yandal Gold Pty Ltd [1999] FCA 799 CORPORATIONS LAW - takeovers - acquisition of shares - prohibition of acquisition of more than 20% of the shares in a company without making a takeover offer - two shareholders holding more than 40% of a listed company make a "takeover offer" using a corporate vehicle for the bid - whether agreement between shareholders not to accept the takeover offer and to retain shares for purposes of the bid to enable compulsory acquisition contravened s 615 of the Corporations Law - whether Shareholders Agreement which resulted in increases in the "relevant interests" deemed to be held by reason of s 33(a) were relevant interests in shares acquired in contravention of s 615 - whether acquisition of a relevant interest must be of an actual, rather than a deemed, relevant interest - whether contraventions were inadvertent - whether statements contained in the Part A Statement in relation to acquisitions were misleading - whether contraventions were sufficiently serious to warrant orders for the vesting or disposal of shares acquired as a result of the takeover offers - consideration of principles governing exercise of Court's discretion to grant a remedy that is just or which protects the interests of shareholders - whether relief will cause "unfair prejudice" WORDS AND PHRASES - "acquire shares in a company", "acquires a relevant interest in shares" Corporations Law - ss 30, 31, 33, 36, 51, 64, 109H, 609, 610, 615, 698, 701, 703, 731(d) 737, 739, 743, 744(2) and 995 Trade Practices Act 1974 (Cth) s 52 Australian Securities and Investments Commission Act 1989 (Cth) s 12DA

British Basic Slag Ltd v Registrar of Restrictive Trading Agreements [1963] 2 All ER 807 - cited Adsteam Building Industries Pty Ltd v The Queensland Cement and Lime Company Ltd (1984) 2 ACLC 829 - cited News Limited v Australian Rugby Football League Ltd (1996) 64 FCR - cited Federal Commissioner of Taxation v Lutovi Investments Pty Ltd (1978) 140 CLR 434 - cited ICAL Ltd v County Natwest Securities Australia Ltd (1988) 39 NSWLR 214 - cited Amadio v Henderson (1998) 81 FCR 149 - considered Re Kornblums Furnishings Ltd (1981) 6 ACLR 25 - cited TVW Enterprises Ltd v Queensland Press Ltd (1983) 2 VR 529 - considered North Sydney Brick & Tile Co Ltd v Darvall (1986) 4 ACLC 539 - cited Corumo Holdings Pty Ltd v C Itoh Ltd (1992) 10 ACLC 428 - cited Green v Crusader Oil NL [1985] 10 ACLR 118 - distinguished Aberfoyle Ltd v Western Metals Ltd (1998) 84 FCR 113 - considered Re Stockridge Ltd (1993) 9 ACSR 637 - distinguished Brierley Investments v Australian Securities Commission (1997) 78 FCR 255 - cited Otter Gold Mines v Australian Securities Commission (1997) 25 ACSR 382 - considered Svenska International Pty Ltd v Commissioners of Customs and Excise (1999) 1 WLR 769 - cited Sagasco Amadeus Pty Ltd v Magellan Petroleum Australia Ltd (1993) 177 CLR 508 - cited Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300 - cited Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 - cited Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 - cited Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 - cited Associated Minerals Consolidated Ltd v Wyong Shire Council [1975] AC 538 - cited Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101 - applied Australian Securities Commission v Bank Leumi Le-Israel (1996) 69 FCR 531 - applied Australian Securities and Investment Commission v Terra Industries [1999] FCA 525 - considered Metals Exploration Ltd v Samic Ltd (1994) 181 CLR 109 - applied Corebell v NZ Insurance (1988) 13 ACLR 349 - considered Waldron v MG Securities (Australasia) Ltd [1975] VR 508 - cited Gjergja v Cooper [1987] VR 167 - applied

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Judgment (23 paragraphs)

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Cases Cited (28)