He concluded at 83:
'there is now sufficient authority to justify the court inquiring as to the existence of an agreement evidenced otherwise than by offer and acceptance.'"
23 In the present case, the buy back agreement is in the form of a written contract, signed by all parties, and drawn up generally in the kind of form one would expect in a share sale or conveyancing transaction. The precise manner by which it came into existence does not appear from the evidence but must have been either signing by all parties of one document or exchange of identical parts each executed by some of the parties. The recitals in the agreement do not refer to anyone having made an offer to anyone else. The closest they come is a statement that Newhaven "wishes" to buy back the relevant shareholders' shares, and that they "wish" to sell their shares. Nor was I taken to any other evidence warranting a finding that one party had made an offer to the other at any time.
24 My conclusion on this aspect of the case concerning alleged non-compliance with s.257E is that, on the evidence, there was never, in the circumstances in which this particular buy back agreement came into existence, any offer of the kind referred to in paragraph s.257E(a), with the result that no occasion for compliance by way of lodgment under that section ever arose. There is, therefore, in this particular part of the plaintiffs' case, no basis (by way of serious question to be tried) for the grant of the injunctive relief sought in relation to the meeting.
25 I might add, in this connection, that the particular steps taken by Newhaven have involved an ASIC lodgment, being the lodgment in fact made by Newhaven on 7 April 2004, to which I have already referred. That lodgment was made under s.257F. A brief reading of that section confirms that its general purpose is to cause to be lodged in a case not within s.257E the same kind of information as is called for by s.257E. Indeed, if there has been a s.257E lodgment, that is, by virtue of s.257F(2), satisfaction of the s.257F requirement. Newhaven's s.257F lodgment has caused all relevant matters to be communicated to ASIC and it can be said that, even if a s.257E lodgment was necessary and was not made, the fact that all relevant information had been communicated by the lodgment actually made at a later time would compel the conclusion that the substantive result that the various lodgment provisions are intended to produce has come about in a way that adequately protects the interests that lodgment is intended to protect. This would be of powerful force in relation to the balance of convenience, were it necessary for that matter to be considered.
26 The conclusion I have reached on this aspect involving compliance with Division 2 of Part 2J.1 makes it unnecessary for me to deal with submissions made by Mr Oakes based on s.259F, which deals with the consequences of contravention of s.259A, which, as I have said, prohibits acquisition by a company of shares in itself, except in certain ways, including by buy back under s.257A. I will, however, digress to make observations on one matter that arose in that context, namely, the concept of "acquisition" of shares (referred to in s.259F) as it relates to a buy back under Division 2 of Part 2J.1 - noting that the s.9 definition of "acquire", which takes one, via s.761A, to s.761E seems to be concerned with other and irrelevant concepts.
27 It is clear, to my mind, that s.257H recognises a distinction between an agreement by a company to buy shares in itself and transfer to the company of the shares so bought. There is no explicit requirement in Division 2 for the execution and delivery of a transfer of the purchased shares in favour of the company itself as transferee but, as was confirmed by the majority of the Victorian Court of Appeal in Coles Myer Ltd v Commissioner of State Revenue (1998) 4 VR 728, albeit in relation to an earlier version of the buy back provisions, the scheme of the provisions recognises explicitly that there will be a transfer of shares which is registered (see the present s.257H(3)). By clear implication, therefore, the buy back provisions accept and rely upon the rule in s.1071B(2) that a transfer of shares is not to be registered unless a proper instrument of transfer has been delivered.
28 Section 257H, taken in its context, seems to me to show that what might be thought of in broad terms as notions of conveyancing are implicit in the buy back provisions. Section 257H(1) refers to an agreement to buy back shares and thus draws an analogy with a contract for sale and purchase entailing future completion. Earlier provisions contemplate that such an agreement may be conditional. Transfer, it may be expected, will occur after and in accordance with the agreement and, in the case of a conditional agreement, once it is unconditional. The relevant concept of acquisition, it seems to me, pays attention to the act of transfer under which the company is transferee and which arms the company with the means to achieve the registration contemplated by s.257H(3). Such an analysis is, I think, consistent with what was said by Byrne J in Re George Raymond Pty Ltd [2000] VSC 531 but, as I have said, I do not need to express any concluded view of the matter in this case.
29 I turn now to the last and probably most substantial ground asserted by the plaintiffs, based on allegedly defective disclosure in the notice of meeting, or, more precisely, in documents accompanying it. Shareholders in Newhaven were sent, with the notice of meeting dated 7 April 2004, an explanatory statement of fifteen pages and a report prepared by H L B Mann Judd Corporation (NSW) Pty Limited (which I shall call "Mann Judd"), in addition to a copy of the agreement for buy back of the Kelly interests' shares.
30 The plaintiffs' complaints relate to the first two of these, that is, the explanatory statement and the Mann Judd report. To understand those complaints, it is necessary to go somewhat further into the facts. First, however, I should outline the legal basis put forward by the plaintiffs. They rely on both general law principles and statutory provisions.
31 So far as general law principles are concerned, the plaintiffs point to the aspect of the fiduciary duties of directors one of the most often cited formulations of which is that of Long Innes J in Bulfin v Bebarfalds Ltd (1938) 38 SR 423. The relevant duty, briefly stated, is a duty to state in the documents accompanying a notice of meeting all matters material to properly informed decision-making by shareholders. Comprehended by this are not only decisions as to the way in which a vote should be cast at the meeting itself, but also decisions as to whether or not to attend the meeting, whether or not to appoint a proxy, and, if there is a decision to appoint a proxy, as to whether the proxy should be directed concerning the manner of voting and, if so, what the direction should be. The principle is summarised in a passage in the judgment of the Full Federal Court in Fraser v NRMA Holdings Ltd (1995) 15 ACSR 590:
"A duty to make disclosure of relevant information arises as part of the fiduciary duties of the directors to the company and its members in relation to proposals to be considered in general meeting and under s 1022 of the Law in respect of the contents of a prospectus. The fiduciary duty is a duty to provide such material information as will fully and fairly inform members of what is to be considered at the meeting and for which their proxy may be sought. The information is to be such as will enable members to judge for themselves whether to attend the meeting and vote for or against the proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting: Jackson v The Munster Bank Ltd (1884) 13 LR Ir 118 at 136-7; Tiessen v Henderson [1899] 1 Ch 861869 at 866-7, 869-71; Peel v London and North Western Railway [1907] 1 Ch 5 (CA) at 12-14, 16-17, 31; Baillie v Oriental Telephone and Electric Company Ltd [1915] 1 Ch 503 (CA) at 514-15, 518; Pacific Coast Coal Mines Ltd v Arbuthnot [1917] AC 607 (PC) at 618; Goldex Mines Ltd v Revill (1974) 54 DLR (3d) 672 (Ont CA) at 679 and the cases there cited. Examples of a failure to provide sufficient information to enable a member to make an informed decision as to the worth or otherwise of a proposed reconstruction or amalgamation can be found in Garvie v Axmith (1962) 31 DLR (2d) 65; Re National Grocers Co Ltd [1938] 3 DLR 106; Re N Slater Co Ltd [1947] 2 DLR 311. A proper discharge of the duty may require that the directors take reasonable steps to ascertain relevant information for communication to members if that information is not known to the board. Directors must not consciously refrain from seeking relevant information or turn a blind eye to relevant material in order to avoid placing before members information which may contradict or qualify any particular position taken or advocated by the directors or a majority of them."
32 The statutory provision upon which the plaintiffs rely is s.12DA(1) of the ASIC Act:
"A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive."
33 This is the counterpart in relation to "financial services" of s.52 of the Trade Practices Act 1974 (Cth). I must say that, in the short time available to me, I have not been able to work my way through the definition of "financial service" in s.12BAB of the ASIC Act (being the definition made applicable by s.5) and the various related definitions in order to come to a conclusion whether the provision of information to members of a company in connection with a meeting at which they are invited to vote involves a "financial service". However, because the general law duty is clear and, as is shown in Fraser v NRMA, occupies very substantial common ground with statutory provisions in relation to misleading or deceptive conduct, I do not pause to try to get to the bottom of this. It is sufficient to deal with the matter on the basis of the general law.
34 I turn then to the factual issues. The main assets of Newhaven consist of four hotels (that is, the Kensington hotel and three others) and the horse stud property. The stud is no longer operating and competition, particularly from imports now permitted and operations of international horse breeding enterprises in Australia, have led the directors to the view that Newhaven should, in future, confine itself to the hotel business.
35 In the first half of 2003, the Kelly interests proposed a transaction generally the same in nature as that to be considered by shareholders on Monday next. That too required shareholder approval and a meeting was held on 25 July 2003. Shortly before that meeting, the Bateman interests had submitted to Newhaven an equivalent or corresponding proposal, but on improved terms from Newhaven's point of view. The Kelly proposal was considered by the meeting of shareholders on 25 July 2003 and the resolutions did not achieve the level of support necessary for them to be passed. Newhaven then proceeded to negotiate with the Bateman interests. There was a volume of correspondence during the second half of 2003. In late 2003, the Kelly interests came forward with an improved proposal. On 22 December 2003, Newhaven entered into the agreements with the Kelly interests to which I have already referred. An announcement was made to ASX by Newhaven and it was from that source that the Bateman interests learned what had happened.
36 One of the complaints made by the Bateman interests about extent and quality of disclosure in the meeting documents is that they do not adequately deal with the fact that the Bateman interests are willing buyers. I do not consider that criticism to be justified. On the contrary, the explanatory statement contains a fair description of events concerning negotiations with the Bateman interests, including the fact that, despite efforts and work done, it had not been possible, by 18 December 2003, to convert the Bateman proposal into a binding agreement. Importantly, there is also reference to a revised and improved proposal subsequently received from the Bateman interests after the agreements had been entered into with the Kelly interests on 22 December 2003. It is also stated that the directors of Newhaven took the view that, because of the commitments represented by the 22 December agreements, it was appropriate to advise the Bateman interests that their new proposal could not be considered. Those agreements, it might be noted, contained provisions making completion of the agreements with the Kelly interests conditional on shareholders' approval, as well as provisions for the convening of the necessary meeting and events preliminary to, and associated with it.
37 Another significant point is that the Mann Judd report goes to some lengths to consider not only the impacts and effects of the transactions under the agreements of 22 December with the Kelly interests, but also the impacts and effects of the subsequently notified Bateman proposal. In addition to narrative discussion, there is, on page 44, a depiction of the balance sheet position both as it currently stands and as it would be changed by the implementation of the 22 December agreements. There is, on page 48, a precisely corresponding depiction in relation to the revised Bateman proposal, as against the current position. Each transaction (or, in the Bateman case, proposed or possible transaction) is seen to involve an improvement for shareholders, compared with the present position. As between the two, the comparison differs according to the treatment to be afforded to unbooked capital gains tax on revaluation. The view of Mann Judd in that respect is stated at subparagraph (iv) on page 56 of the report:
"The Bateman Proposal, ignoring its non-binding nature at the present time, is comparable to the Transaction [ie, the transaction with the Kelly interests] before allowing for unbooked capital gains tax on revaluation of non-current assets and is only marginally better (one per cent share) after that allowance. In our opinion, as a matter of commercial judgment, where two approximately financially equal possibilities exist, it is better to proceed with a contract that is binding on the other party (that is, the Transaction) than to pursue (with unknown outcomes) a proposal that is presently not binding on the other party (that is, the Bateman Proposal)."
38 I do not consider that there is any substance in the complaint that shareholders are not adequately informed about the revised Bateman proposal or possibility - and I emphasise the words "proposal" and "possibility" - which stands in contradistinction to the concluded, although conditional, contracts with the Kelly interests.
39 Concentrating still on the Mann Judd report, the Bateman interests allege three classes of deficiency warranting the relief sought. Identification of these arose from a process in which the Bateman interests retained another expert, Mr Gower, who prepared a critique of the Mann Judd report. Mann Judd, in turn, responded to Mr Gower's criticism. Mr Gower made comments on the Mann Judd responses. All this is contained in affidavits before me.
40 The first alleged class of deficiency of this kind is that the Mann Judd report does not analyse the impact of the transactions under the 22 December 2003 agreements upon Newhaven's earnings per share. Mann Judd say that any such discussion would be speculative and potentially misleading because of factors of uncertainty as to both past and future earnings. There is no reason to think that that is not a cogent and valid comment.
41 The second criticism is that Mann Judd did not incorporate into its report the whole, or any relevant part, of property valuations on which Mann Judd had relied in coming to its conclusions. These were valuations by property valuers of the stud property and the hotel at Kensington, as well as the remaining hotels. (I interpolate here that the material sent to shareholders refers quite clearly to the margin above valuation that Newhaven would receive from the sales). The real point made by Mr Gower, as I understand it, is that absence of the property valuations and, therefore, of knowledge of the assumptions and methodology used by the property valuers, throws some kind of cloud or doubt over those parts of the Mann Judd report that draw on the property valuations. The response of Mann Judd is that the valuations are bulky and that the hotel valuations contain commercially sensitive information. It is not necessary, in this case, to go into the question whether commercial confidentiality can justify not making disclosure otherwise required, although general principle would say that it cannot.
42 But that is not the real issue here. Mann Judd were bringing professional judgment to bear. In the course of that, they cannot but have considered the appropriateness of the assumptions and methodology adopted by the property valuers. Real property is the major asset of this company. It is axiomatic that Mann Judd would pay close and critical attention to all matters relevant to the value of the properties in reaching their own conclusions, including the general cogency of the property valuations and the appropriateness of the valuers' assumptions and methodology. There is no evidence that Mann Judd failed to do so, nor is there any requirement that they should refer, in minute detail, to every step of analysis and reasoning that leads them to the conclusions they state.
43 The third general complaint is that Mann Judd assessed the transaction with the Kelly interests inclusive of a premium for control, and that it was incorrect to do so, since the shareholding of the Kelly interests is a minority shareholding, and really ought to attract a discount on that account. The Mann Judd response is that the value per share which they consider applicable to all shares in the company includes a premium for control and that the share buy back price in fact to be paid is 6.6 per cent below the per value share considered by Mann Judd to be the more "critical" of the two figures which were seen as alternatives, in light of the possibilities as to appropriate treatment of unbooked capital gains tax liability. Mann Judd makes further comments on this at paragraph 3.3 of the annexure to Mr McGrane's affidavit of 4 May 2004 (the references there to "the McGrane report" are references to what I am calling the Mann Judd Report):
"The McGrane report at page 44, paragraph 7.13 shows a valuation per share (inclusive of premium for control) of $0.91 before allowing for unbooked tax liability or $0.80 after such allowance. The McGrane report at page45, paragraph 7.15 indicated an opinion that the valuation before allowing for unbooked tax liability was the more critical. A share buy-back price of $0.85 per share represents a discount of only 6.6% on a value of $0.91. Such a discount is below the normal range considered appropriate for minority discounts. However, I make the following comments:
(a) As noted at 3.2 above, the essential issue is whether or not the non-associated shareholders will on balance be better off if the transaction is accepted and the value of the consideration to be paid is only one element of the transaction. This is especially so in the Kelly Transaction as the proposed share buy-back and the proposed assets disposals are mutually dependent in that those two elements of the Kelly Transaction can only proceed together or not at all. The McGrane report at page 53, paragraph 9.4 (and elsewhere) concludes that the value per share after the Kelly Transaction is greater than the value before the Kelly Transaction. The McGrane report at page 58, paragraph 9.7, after reviewing other relevant matters as set out on pages 53 to 58 inclusive, paragraphs 9.5 and 9.6, concludes that the Kelly Transaction is fair and reasonable in an aggregate sense of that phrase.
(b) As set out in the McGrane report at page 36, paragraph 5.8 and page 37 at paragraph 5.10, the share buy-back price of $0.85 per share is consistent with ASX prices (for transactions that are themselves minority parcels). For example, the McGrane report states that the weighted average price per share was:
(i) $0.86 for the six months ended 8 March 2004, excluding a large transaction within a substantial shareholder;
(ii) $0.85 for the six months ended 8 March 2004, including that large transaction within a substantial shareholder;
(iii) $1.07 for the six months ended 8 September 2003;
(iii) $1.03 for the period from 1 January 2001 to 8 March 2003;
(iv) $1.05 from 9 to 30 March 2004 (only one small sale).
I accept of course that, and as acknowledged in the McGrane report at page 45, paragraph 7.18, inferences available from the company's ASX prices need to be treated with caution as the company's turnover is very thin.
(c) I understand that the large ASX transaction within a substantial shareholder as mentioned at (b)(i) above was a dealing within shareholdings associated with Bateman. That transaction occurred on 10 December 2003 and was for 905,504 shares at $0.85 per share.
(d) The Bateman Proposal sets the share buy-back price per share also at $0.85.
(e) As stated in the McGrane report at page 30 paragraph 4.4(a), ASIC PN29 on selective capital reductions (different to share buy-backs in some respects, but there are similarities) requires that, where an independent expert's report is provided, it should state whether or not a selective capital reduction is "fair and reasonable" to the holders of shares to be cancelled and to the other shareholders in that it strikes a fair balance between those whose shares are to be cancelled and those who will remain shareholders in the company. It is true of course to say that a share buy-back price at say 20% to 25% discount to ASX prices (assuming a liquid and informed market in the company's shares) will on its own mean that the share buy-back price is almost certainly fair to those who will remain shareholders in the company. However, in my opinion, it does not follow that a share buy-back price at no or little discount to ASX prices (assuming a liquid and informed market in the company's shares) will on its own mean necessarily that the share buy-back price is unfair to those who will remain shareholders in the company. In that context, whilst not stated in the McGrane report, it does occur to me that, given all the matters known to me and as set out in the McGrane report, it is unlikely that a substantial shareholder would be prepared to have shares bought-back at less than $0.85.
(f) As the Explanatory Memorandum at page 14 indicates, the directors of the company have advised Bateman that the company is prepared to buy-back Bateman's shares at $0.85, being the same price as that proposed in the Kelly Transaction."