Bateman v Newhaven Park Stud Ltd

CATCHWORDS : CORPORATIONS - ASX Listing Rules - principles of interpretation - whether serious question to be tried re alleged breach where ASX states it does not adopt literal construction on which allegation of breach based - CORPORATIONS - share buy backs - whether every selective buy back entails an "offer" triggering lodgment obligation under s.254E - observations on concept of "acquisition" in buy back provisions - CORPORATIONS - meetings of members - duty to provide information with notice of meeting - whether serious qiuestion to be tried as to insufficiency of disclosure LEGISLATION CITED : Australian Securities and Investment Commission Act 2001 (Cth) s.12DA Corporations Act 2001 (Cth) ss.233, 257, 259F, 793C, 1071B(2), 1101B(1)(d), 1324, Division 2 of Part 2J.1 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Bulfin v Bebarfalds Ltd (1938) 38 SR (NSW) 423 Coles Myer Ltd v Commissioner of State Revenue (1998) 4 VR 728 CASES CITED : Fire and All Risk Insurance Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760 Fraser v NRMA Holdings Ltd (1995) 15 ACSR 590 Re George Raymond Pty Ltd [2000] VSC 531 Harman v Energy Research Group Australia Ltd (1985) 9 ACLR 897 Re The Bank of Adelaide (1979) 22 SASR 481 Edmund Gregory Thomas Bateman - First Plaintiff Abtourk (Syd No 391) Pty Limited - Second Plaintiff Belinda Carwardine Bateman - Third Plaintiff PARTIES : Charado Pty Limited - Fourth Plaintiff Newhaven Park Stud Limited - First Defendant Frederick John Kelly, RIchard John Kelly, John Horace Ingham, Norman Eric Napper - Second Defendants Burst Pty Limited - Third Defendant Braylen Pty Limited - Fourth Defendant FILE NUMBER(S) : SC 3600/03 Mr M B Oakes SC/Mr G K Burton - Plaintiffs COUNSEL : Mr R J Weber SC/Mr C Mantziaris - First Defendant and First and Fourth Second Defendants Ms T G Middleton (Solicitor) - Second Second Defendant, Third and Fourth Defendants Abbott Tout - Plaintiffs SOLICITORS : Esplins - First Defendant and First and Fourth Second Defendants Macquarie Legal Practice - Second Second Defendant, Third and Fourth Defendants

• 25 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3600/03 - BATEMAN & ORS v NEWHAVEN PARK STUD LIMITED & ORS

1 The plaintiffs, Dr Bateman and persons associated with him, are members of the first defendant (which I shall call "Newhaven"), the shares in which are listed for quotation on the official list of Australian Stock Exchange Limited (or "ASX"). By their amended statement of claim, the plaintiffs claim certain relief against Newhaven, its directors and two other holders of shares in Newhaven. The claim is based on s.233 of the Corporations Act 2001 (Cth) and allegations of conduct in the affairs of Newhaven that, from the plaintiffs' point of view, involves oppression, unfair prejudice or unfair discrimination. The relief sought is directed towards producing the result that a transaction between Newhaven and certain of the defendants (sufficiently described, for present purposes, as "the Kelly interests"), being a transaction pursuant to two conditional contracts dated 23 December 2003, is not implemented and instead Newhaven either enters into a generally corresponding transaction with the plaintiffs or their associates (which I shall call "the Bateman interests") or, in the alternative, offers for sale on the open market the Newhaven assets involved in the transaction. 2 On 28 April the plaintiffs filed a notice of motion seeking interlocutory relief of an injunctive kind. Time for service was abridged to 5pm on that day. The orders sought in the notice of motion, if granted, would restrain the defendants from seeking to procure the passing of resolutions on the agenda included in a notice dated 7 April 2004 convening a general meeting of Newhaven to be held at 10.30am on Monday next, 10 May. The passing of the resolutions in this notice of meeting is an essential step in a chain of contractual events carrying into effect the composite transaction between Newhaven and the Kelly interests. 3 The notice of motion was, on the afternoon of Wednesday, 5 May, referred to me from the Duty Judge's list. During that afternoon and the whole of the following day, Thursday, 6 May, I heard the notice of motion. I reserved judgment at 4 o'clock on 6 May, indicating that I wished to consider the matter overnight and would deliver judgment orally this afternoon, which I now do. 4 The transaction, or proposed transaction, between Newhaven and the Kelly interests consists of two interconnected segments. One involves the buy back by Newhaven from the Kelly interests of their shares in Newhaven. The other involves sale of (or, more accurately, the creation of both a put option in the potential seller and a call option in the potential buyer in respect of) two properties owned by Newhaven, one a rural property that has been used as a horse stud and the other a hotel property at Kensington. Neither of these segments can, as a contractual matter, proceed to completion except in company with the other, or without the prior passing, at a general meeting of Newhaven, of the two resolutions included in the notice dated 7 April 2004 convening the meeting to which the claims for interlocutory injunctive relief relate. 5 The need for the resolutions to be passed at a meeting of shareholders of Newhaven arises, in part, from the listing rules of ASX and, in part, from the statutory provisions dealing with share buy backs contained in Division 2 of Part 2J.1 of the Corporations Act. The Bateman interests say that Newhaven has failed to comply with applicable provisions of both the listing rules and Division 2 of Part 2J.1. They also say that the disclosure made to members by Newhaven and its directors for the purposes of the meeting has been deficient. It is on these grounds that the Bateman interests consider injunctive relief to be warranted in relation to the meeting. As to the jurisdictional basis asserted, it is sufficient to say, at this point, that the Bateman interests rely on ss.793C and 1101B(1)(d) of the Corporations Act in relation to the alleged breaches of the ASX listing rules and s.1324 as to the alleged breach of the share buy back provisions. The general law and s.12DA of the Australian Securities and Investment Commission Act 2001 (Cth) are relied on in relation to the alleged deficiency, or deficiencies, in the material sent to shareholders. I shall defer further comment on these jurisdictional matters for the moment. 6 I consider, first, the part of the case concerning the ASX listing rules. It is common ground that listing rule 10.1 applies in relation to the put and call option arrangements involving the horse stud and Kensington hotel properties. Indeed, the resolutions and the material sent to shareholders with the notice of meeting are framed on that explicit basis. Listing rule 10.1, as it applies to a so-called "entity" that is a listed company, says, among other things, that the listed company is not to dispose of a "substantial asset" to, among others, a "related party" without the approval of the holders of the listed company's ordinary securities in general meeting. The Kelly interests, being directors of Newhaven or connected with directors, are acknowledged to be related parties for this purpose and the two properties are acknowledged to constitute a substantial asset of Newhaven. The Bateman interests' complaint is concerned with the adequacy of the so-called "voting exclusion statements" in the notice of meeting and accompanying documents. 7 A provision within listing rule 14 says, in effect, that the notice of meeting in a case within listing rule 10.1, as this one is, must contain a statement that neither "any party to the transaction" nor an "associate" of any such person is to vote on the resolution. The statement in fact included in this case refers to exclusion of the potential buyer parties under the option arrangements, plus their respective associates, but does not say that the exclusion extends also to Newhaven itself as vendor, and, perhaps more realistically, to associates of Newhaven. This, it is said, involves a non-compliance so far as the content of the voting exclusion statement is concerned, since Newhaven, being a contracting party to the option agreements as seller (or potential seller), is "a party to the transaction" as referred to in listing rule 14.1. 8 These submissions had been outlined to me when the court was adjourned on 5 May. The following morning, Mr Weber SC, who appeared for Newhaven, tendered an exchange of correspondence with ASX, in which it was confirmed, by a letter of that date, that is 6 May, from ASX to Newhaven's solicitors, that ASX does not consider the listed company concerned to be a "party to the transaction" for the purposes of listing rule 14.1. 9 Mr Oakes SC, who appeared for the Bateman interests, submitted that the views of ASX as to the construction of its listing rules are essentially beside the point and that, in the absence of a specific waiver by ASX in exercise of the power of waiver recognised in and reserved by the listing rules, those rules must take effect according to a proper construction of their terms, so that, where the relevant transaction is what is effectively a sale by the listed company, that company cannot but be regarded as a "party to the transaction", with the result that it (in abstract theory) and, more realistically, its associates must be identified in the voting exclusion statement as persons precluded from voting. 10 An uncompromisingly literal approach of this kind is, in my opinion, at odds with the nature and intent of the listing rules. The rules themselves go to some length, in their introduction, to state the principles on which they are based and by reference to which they will be applied. Of particular relevance for present purposes is the following statement under the heading "Application of the listing rules" in the introduction "ASX has an absolute discretion concerning the admission of an entity to the official list (and its removal) and quotation of its securities (and their suspension). ASX also has discretion whether to require compliance with the Listing Rules in a particular case (ie, apart from waiving the rules). In exercising its discretion, ASX takes into account the principles on which the Listing Rules are based. ASX may also waive compliance with a listing rule, or part of a rule, unless the rule in question says otherwise. The Listing Rules necessarily cast a wide net. However, ASX does not want to inhibit legitimate commercial transactions that do not undermine the principles on which the Listing Rules are based."

This has long been the approach of the ASX and its predecessor exchanges. 11 In Fire and All Risk Insurance Ltd v Pioneer Concrete Services Ltd (1986) 10 ACLR 760, Young J said:

"Indeed, in my view, one falls into error if one treats the requirements of the listing requirements as a technical document for construction in the same way as a statute. To my mind the listing requirements are a flexible set of guidelines for commercial people to be policed by commercial people. They are in the same category as guidelines or standards laid down by administrative bodies who are administering an Act of Parliament. These guidelines or standards are never intended to be inflexible rules, but rather principles to be administered and applied by an expert body in accordance with the prevailing ethos of those chosen to administer them." 12 I am not sure that the description of the listing rules as a flexible set of guidelines for commercial people has necessarily withstood the test of time, but I do consider to be of continuing relevance and validity the first sentence of his Honour's observations. I also consider to continue to be valid today in relation to the listing rules the comment of Brinsden J in Harman v Energy Research Group Australia Ltd (1985) 9 ACLR 897 that the discretions there reserved by the stock exchange to itself mean that the obligation to comply with the listing rules to which a listed company is subject may be seen, in reality, as: "an obligation to comply with such of the listing requirements as the Stock Exchange in its discretion has required the company to comply with."

This, in the present context and in circumstances prevailing today, reflects, in my view, not only ASX's waiver power but also the explicit power it now reserves to itself to decide whether to require compliance. 13 The letter of 6 May amounts, it seems to me, to an indication that ASX does not require compliance, to the extent that the construction, based on the view for which the Bateman interests contend, might otherwise be thought to involve a requirement to comply. These considerations lead to the conclusion that no basis for relief based on the supposed non-compliance with listing rule 14.1 has been made out. I therefore do not pause to consider further the jurisdictional foundation of that claim. 14 I would add, in relation to the aspect of the plaintiffs' case based on the listing rules that, even if the literal construction of rule 14.1 and "any party to the transaction" were to be accepted, the unequivocal message in the letter of 6 May that ASX would not pursue the technical breach would lead to a clear finding against the plaintiffs on the balance of convenience. 15 I turn next to the alleged non-compliance with the share buy back provisions in Division 2 of Part 2J.1 of the Corporations Act. The alleged non-compliance - or contravention, to use the word employed in s.1324 - arises in relation to s.257E: " Buy-back procedure - lodgment of offer documents with ASIC If section 257B applies this section to a buy-back, the company must lodge with ASIC, before the buy-back agreement is entered into, a copy of: (a) a document setting out the terms of the offer; and (b) any document that is to accompany the offer." 16 The requirement imposed by this section can only be understood in the context of the overall scheme of the buy back provisions. Section 257A - one of the permitted gateways through the general prohibition upon self-acquisition imposed by s.259A - says that a company may buy back its own shares if two conditions are satisfied. One of the conditions (s.257A(b)) is that the company follows the procedure laid down by Division 2. Section 257B(1) then provides, in a table, what is effectively a road map. It refers to five permitted types of buy backs and identifies which of the procedural provisions in Division 2 apply to each. 17 In the present case, the buy back is a "selective buy back". This conclusion comes from the definition of "selective buy back" in s.9, as, in effect, a residuary category after taking account of the other types of buy back defined in s.9 or Division 2 itself. That being so, s.257B(1) makes applicable ss.257D, 257E, 257F, 257G, 257H and 254Y. Each of these sections, with the exception of s.257D, is also applied by s.257B(1) to at least one other type of buy back. Some of the sections are applied to three or more types of buy back. 18 Returning to the provision about which the Bateman interests are concerned, being s.257E, we find that it applies not only to a selective buy back, as this one is, but also to an "equal access scheme", which is, in essence, a scheme under which like offers are made by the company concerned to all shareholders to buy back a stated percentage of each shareholding. 19 The requirement imposed by s.257E is a lodgment requirement. Before a buy back agreement is entered into, a copy of a document setting out the terms of the "offer" (s.257E(a)) and of any document accompanying the "offer" (s.257E(b)) must be lodged with ASIC. In the present case, the buy back agreement was entered into on 23 December 2003. There was no lodgment of any conceivably relevant kind with ASIC until 7 April 2004. It must follow, according to the Bateman interests, that there has been a failure to comply with s.257E. 20 I do not accept that this is so. Implicit in the submission is the proposition that every buy back agreement involves an offer. That proposition is correct in relation to an equal access scheme and a buy back agreement arising under such a scheme. This follows from the nature of the scheme to which brief reference has already been made. "Offers" play a central part. The proposition may be correct in relation to some selective buy backs, but not in relation to others. For example, if the company concerned sent to one shareholder a written offer to buy shares from that holder, being an offer capable of unequivocal acceptance in the classic contract law sense, the selective buy back would have the attribute with which s.257E is concerned. Another selective buy back may not have that attribute. 21 It is important to bear in mind that the offer and acceptance methodology is not the only available means of contract formation. I refer in this connection to the following a passage in the judgment of Wells J in Re The Bank of Adelaide (1979) 22 SASR 481: "Such an analysis [i.e., in terms of offer and acceptance] holds good for many cases but by no means for all. Let it be supposed that A and B meet to discuss their common business interests and jointly decide that they should record their agreement on certain of those matters. It is a common practice for men in such a position to transmit heads of agreement and general instructions to a third person to draft a full agreement along the lines indicated. If, after A and B have read and discussed the draft, they agree, without more, to execute it, it would be absurd to attempt to identify, in the relevant events, a stage where A made a formal offer to B or vice versa. The truth of the matter is that A and B have agreed to adhere to a form of contract brought to their joint attention, and about which they have already held fruitful discussions. To describe what has happened in terms of offer and acceptance would be to superimpose on the true facts a framework of artificiality." 22 I refer also to the more extensive treatment of the matter in the judgment of Heydon JA in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153: "Offer and acceptance analysis does not work well in various circumstances. One example is a contract for the transportation of passengers on mass public transport ( MacRobertson Miller Airline Services v Commissioner of State Taxation (Western Australia ) (1975) 133 CLR 125 at 136-140). Another is the contract between competitors in a regatta: though they did not communicate with each other but only with the organiser of the regatta, they are bound by their conduct in "entering for the race, and undertaking to be bound by [the] rules to the knowledge of each other" ( Clarke v Earl of Dunraven (The 'Satanita') [1897] AC 59 at 63). That case was applied in Raguz v Sullivan [2000] NSWCA 240 at [65]-[67]. Another example concerns the exchanges of contracts to sell land, which are hard to analyse in offer and acceptance terms; despite that Lord Greene MR observed of the practice: 'Parties become bound by contract when, and in the manner in which, they intend and contemplate becoming bound. It is a question of the facts of each case …' ( Eccles v Bryant [1948] 1 Ch 93 at 104).

Another example concerns simultaneous manifestations of consent (Horst K Lucke 'Striking A Bargain' (1962) 1 Adel LR 293 at 295-299). Another example concerns contracts between numerous parties, or even two parties, negotiated at meetings but not assented to until each party executes counterparts. Another is where the contract is made through a single broker acting for both parties. Another is where the parties are deadlocked and they agree to submit to a solution reached by a third party.

In New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167, Lord Wilberforce, in delivering the majority advice of the Privy Council about a bargain evidenced by a bill of lading between a shipper and a stevedore made through a carrier as agent, said: It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable consideration, that seems to present difficulty, but this same difficulty exists in many situations of daily life, e.g. sales at auction; supermarket purchases; boarding an omnibus; purchasing a train ticket; tenders for the supply of goods; offers of rewards; acceptance by post; warranties of authority by agents; manufacturers' guarantees; gratuitous bailments; bankers' commercial credits. These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration.' Anson's Law of Contract (27th ed, 1998) concludes: 'It would be a mistake to think that all contracts can thus be analysed into the form of offer and acceptance or that, in determining whether an exchange does give rise to a contract, the sole issue is whether the communications match and are identical. The analysis is, however, a working method which, more often than not, enables us, in a doubtful case, to ascertain whether a contract has in truth been concluded, and as such may usefully be retained.' Thus offer and acceptance analysis is a useful tool in most circumstances, and indeed is 'normal' and 'conventional' ( Gibson v Manchester City Council [1979] 1 All ER 972 at 974 per Lord Diplock). But limited recognition has been given to the possibility of finding that contracts exist even though it is not easy to locate an offer or acceptance. In Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR [97326] at 11,117-11,118 McHugh JA (Hope and Mahoney JJA concurring) said: 'It is often difficult to fit a commercial arrangement into the common lawyers' analysis of a contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of "offer", "acceptance", "consideration" and "intention to create a legal relationship" which are the benchmarks of the contract of classical theory. In classical theory, the typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship …

Moreover, in an ongoing relationship, it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too illusory to enforce at a particular time in the relationship may by reason of the parties' subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or will supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed.' Those passages were cited with approval by Ormiston J in Vroon BV v Foster's Brewing Group [1994] 2 VR 32 at 82-3. He also approved the following statement of Cooke J in Meates v Attorney-General [1983] NZLR 308 at 377: 'I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract. The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.'

Ormiston J said at 81: '… I am prepared to accept … that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances. In the language of para. 22(2) of the Second Re-statement on Contracts: "A manifestation of mutual assent may be made even though neither offer or acceptance could be identified and even though the moment of formation cannot be determine".'

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."

44 All these matters of complaint or criticism go, in my opinion, to issues of professional judgment. It is often easy for one professional to say of another's work, "I would have done that differently, or I would have emphasised this rather than that, or come to a different conclusion: I therefore consider the other person's work product to be deficient." I do not consider that any of the criticisms made under the headings I have mentioned raise an arguable case of failure by the directors to discharge their Bulfin v Bebarfalds duty. They commissioned Mann Judd to provide a report. It is not suggested that they sought to influence Mann Judd, or to withhold from Mann Judd material relevant to the formation of relevant opinions by Mann Judd. The directors submitted, for members' guidance, the report received from Mann Judd in the form in which it was received. I can see no basis on which they can be said thereby to have brought about a situation in which there were such deficiencies in the material before shareholders as to warrant the intervention of the court in the way sought. 45 It remains to consider briefly other criticisms levelled at the disclosure made in the materials sent to shareholders. These are enumerated in item (11) of the particulars to paragraph 23 of the amended statement of claim. Mr Weber handed up yesterday a document headed "Schedule 1 - submissions in response to particulars of point 11 of paragraph 23 of the amended statement of claim". I have placed that document in the court file. It deals point by point with the criticisms raised in item (11). 46 I do not intend to go through all the separate points. It is sufficient to say that I am satisfied that the schedule 1 document handed up by Mr Weber enunciates bases on which it is appropriate to conclude that none of the supposed shortcomings is of such a quality, or possesses such a degree of substance, that it can be regarded as presenting any relevant potential for distortion of shareholders' decision-making. I would go further and say that some of the criticisms are so clearly misconceived that they ought never to have been raised. I will mention two examples of this. 47 The example first relates to the first item in the list in (11) of the particulars to paragraph 23, being item 11.1. It was the subject of specific argument and submissions before me. The complaint there is that there is no disclosure of the amount of cash that will be left for addition to Newhaven's cash resources after the transactions involving the Kelly interests have been completed. The passage of the explanatory statement in question is on page 8. It refers to the proceeds of $15,052,000 to be derived from the sale of the stud property and the hotel and says that the company proposes to apply these proceeds, first, in paying the share buy back price of $8,078,649.05 to the Kelly interests, next, in discharging indebtedness secured by ANZ Bank mortgages over the two properties in question - that is, the stud property and the Kensington hotel - and, finally, "to carry the balance to cash reserves, to be utilised in future acquisitions considered advantageous by the board of the company". 48 Although no particular "future acquisitions" are mentioned, the document as a whole makes it clear that the directors see the company's future as lying in the hotel industry Any intelligent reader would infer that that is where further acquisitions are likely to be made. It is true that the statement on page 8 does not state the amount of the ANZ debt secured on the two properties that is to be satisfied out of the approximately $7 million of the $15 million property sale proceeds remaining after meeting the share buy back price of $8 million. The Bateman interests point ominously to the fact that there is secured debt of $21 million in the balance sheet, the suggestion being that the $7 million of proceeds left after the buy back price is satisfied will not clear all of that and that there will accordingly be nothing left to be added to cash reserves in the way mentioned on page 8. 49 There are two things to be said about this. First, and in a broad sense, the whole of the balance amounting to $7 million will come home to Newhaven and be enjoyed by it as an enhancement of its cash resources and members can derive appropriate comfort from that in a broad way. Secondly and more particularly, the materials before shareholders do show how much of the $7 million will be applied in retiring debt. It is just a matter of bringing to bear a small amount of analytical and deductive thinking and should not be beyond the abilities of any reasonably intelligent reader of the materials. Page 44 of the Mann Judd report contains, as I have already said, a comparison of the balance sheet position before and after the Kelly transaction. In the "before" column, there are two items of interest bearing liability which total $21,075,000. In the "after" column, there is one interest bearing liability item of exactly $21 million. Clearly, therefore, Mann Judd's report shows that the transaction will bring about a total reduction of $75,000 in interest bearing liabilities. The "before" and "after" columns also show different figures on the assets side under "cash". The "before" column shows $8,225,000 cash asset. The "after" column shows $15,019,000 cash asset. One does not need to look beyond these clearly disclosed items to find a complete answer to the criticism raised. 50 Having dealt, by way of specific example, with the first point in item (11) of the particulars to paragraph 23, I shall deal in the same way with the last which is equally devoid of merit and substance. It relates to the notice of meeting itself and is expressed this way: "In contravention of Corporations Regulation 7.11.37 the notice of meeting did not specify the time in accordance with that regulation."

This represents a complete misconception of the way the regulation works. It is true that regulation 7.11.37(5) says that the convener of a meeting must include in the notice of meeting particulars of the "determination", that is, the determination of the cut-off time for crystallising shareholdings for the purposes of the meeting. Regulation 7.11.37(5) uses the word "must" and thus imposes an obligation. But whether or not to determine a cut-off time for crystallising shareholdings for the purposes of the meeting - and thereby to bring the obligation into play - is a matter of choice. This is made perfectly plain by regulation 7.11.37(2), where the words are, quite simply, "may determine". Unless the power to determine a cut-off date, being a power that is available to be used or not as the convener of the meeting prefers and chooses, is actually exercised by the convenor, the compulsion arising from the words "must include" in regulation 7.11.37(5) does not arise. There is no evidence that the convener of this meeting has made a choice that brings that compulsion into play. 51 I am firmly of the view that the plaintiffs have not shown that there is a serious question to be tried on any of the matters put forward by them as warranting the intervention of the court by way of interlocutory injunction to prevent the general meeting of Newhaven going ahead at 10.30 on Monday morning as scheduled. 52 The plaintiffs' notice of motion filed on 28 April 2004 is dismissed with costs. **********

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