BHAGAT V. ROYAL & SUN ALLIANCE LIFE ASSURANCE AUSTRALIA LIMITED & ORS. [2000] NSWSC 159

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

NO. 3018 OF 1999 BHAGAT V. ROYAL & SUN ALLIANCE LIFE ASSURANCE AUSTRALIA LTD. & ORS.

1 On 15th February 2000, I delivered a judgment in these proceedings, in which I made certain orders including an order for costs against Mr. Bhagat. However, when I handed the judgment down in Court, I offered Mr. Bhagat an opportunity to make further submissions on costs if he wished to do so. Mr. Bhagat did wish to do so, and in those circumstances, I stayed the order in relation to costs, and I heard submissions on costs on 9th March 2000. 2 One matter which Mr. Bhagat raised in his submissions requires me to re-visit one aspect of the judgment. Mr. Bhagat pointed out that the time for making an application under s.701(6) of the Corporations Law did not expire until fourteen days after a dissenting offeree had been given a statement under s.701(9); and in those circumstances, he submitted that his summons, filed within that time, was a valid application under s.701(6). He pointed out that he had asked for a list of dissenting offerees on 24th June 1999, and that his summons was filed on 6th July 1999. 3 In order to consider this submission, it is necessary to have regard to s.701 of the Corporations Law, which is in the following terms: 701.(1) For the purposes of this section: (a) where takeover offers have been made under a full takeover scheme in respect of shares in a class of shares, the shares in respect of which the offers were made (other than shares to which the offeror was entitled when the first of the offers was made) are shares subject to acquisition; (b) where a takeover announcement has been made in respect of shares in a class of shares, the shares in that class (other than shares to which the offeror is entitled) are shares subject to acquisition; (c) a reference to outstanding shares is a reference to: (i) shares subject to acquisition by virtue of paragraph (a) in respect of which a takeover offer was made but has not been accepted, excluding shares acquired by the offeror otherwise than under the takeover scheme; or (ii) shares subject to acquisition by virtue of paragraph (b) in respect of which an offer made under a takeover announcement has not been accepted, excluding shares acquired by the offeror otherwise than by the acceptance of offers made under the takeover announcement; and (d) a reference to a dissenting offeree is a reference to: (i) in relation to shares in respect of which takeover offers have been made---a person who is the holder of shares that are outstanding shares by virtue of subparagraph (c)(i); and (ii) in relation to shares in respect of which a takeover announcement has been made---a person who is the holder of shares that are outstanding shares by virtue of subparagraph (c)(ii).

(2) Where: (a) takeover offers have been made under a full takeover scheme, or a takeover announcement has been made, in respect of a class of shares; (b) during the takeover period the number of shares in that class to which the offeror is entitled has become not less than 90% of the shares in that class (notwithstanding that that number of shares may subsequently become less than that percentage as a result of the issue of further shares in that class); and (c) if the shares subject to acquisition constitute less than 90% of the shares in that class: (i) three-quarters of the offerees have disposed of to the offeror (whether under the takeover scheme or by acceptance of offers made by the takeover announcement, as the case may be, or otherwise) the shares subject to acquisition that were held by them; or (ii) at least three-quarters of the persons who were registered as the holders of shares in that class immediately before the day on which the Part A statement was served on the target company or the takeover announcement was made are not so registered at the end of one month after the end of the offer period; the offeror may, before the end of 2 months after the end of the offer period, give notice, as prescribed, to a dissenting offeree to the effect that the offeror desires to acquire the outstanding shares held by the dissenting offeree.

(3) For the purposes of subparagraph (2)(c)(ii), 2 or more persons registered as holding shares jointly shall be deemed to be one person.

(4) An offeror to whom subsection (2) applies in relation to a particular company shall, on the first day on which the offeror gives a notice under that subsection in relation to that company, lodge a copy of that notice or, if on that day the offeror gives 2 or more notices under that subsection in relation to that company, a copy of any one of those notices.

(5) Where a notice is given under subsection (2), the offeror is entitled and bound, subject to this section, to acquire the shares to which the notice relates on the terms that were applicable in relation to the acquisition of shares under the takeover scheme or pursuant to the takeover announcement immediately before the end of the offer period.

(6) Subsection (5) does not apply in relation to a dissenting offeree where, on an application made by the dissenting offeree: (a) before the end of one month after the day on which the notice was given under subsection (2); or (b) before the end of 14 days after the day on which the dissenting offeree was given a statement under subsection (9); whichever is the later, the Court orders that subsection (5) is not to apply in relation to the dissenting offeree.

(7) Where alternative terms were offered under a takeover offer to which this section applies, the dissenting offeree may, by notice given to the offeror: (a) before the end of one month after the day on which the notice was given under subsection (2); or (b) before the end of 14 days after the day on which the dissenting offeree was given a statement under subsection (9); whichever is the later, specify which of those terms the dissenting offeree prefers, and the terms so specified shall apply to the acquisition of the outstanding shares held by the dissenting offeree.

(7A) A notice under subsection (7): (a) if it relates to shares that are entered on an SCH subregister---must be in an electronic form approved by the SCH business rules for the purposes of this Part; or (b) if it relates to shares that are not entered on an SCH subregister---must be in writing.

(8) If a dissenting offeree fails to give a notice before the time applicable under subsection (7), the offeror may, unless the Court otherwise orders, determine which of the terms referred to in that subsection is to apply to the acquisition of the outstanding shares of the dissenting offeree.

(9) A dissenting offeree may, by written notice given to the offeror before the end of one month after the day on which the notice under subsection (2) was given, ask for a written statement of the names and addresses of all other dissenting offerees and the offeror shall as soon as practicable give a written statement accordingly.

(10) Unless the Court, on an application made under subsection (6), has ordered to the contrary, the offeror shall, before the end of 14 days after: (a) the end of one month after the day on which the notice under subsection (2) was given; (b) the end of 14 days after the last day on which a statement under subsection (9) was given; or (c) where an application has been made to the Court under subsection (6)---the day on which the application has been disposed of; whichever last happens, serve a copy of the notice under subsection (2) on the company that issued the shares, together with an instrument of transfer of the shares signed on behalf of the holder of the shares by a person appointed by the offeror and also signed by the offeror, and pay, allot or transfer to the target company the consideration for the transfer, and the target company shall thereupon register the offeror as the holder of those shares.

(11) The target company shall hold the consideration so received in trust for the former holder of the shares and shall as soon as practicable give written notice to the former holder that the consideration has been received and is being held by that company pending instructions from the former holder as to how it is to be dealt with.

(12) Where consideration held as provided by subsection (11) consists of or includes money, that money shall be paid into a bank account opened and maintained for that purpose only. 4 Mr. Bhagat's summons, as originally filed on 6th July 1999, sought the following orders: 1. A declaration that the First, Second, Third and Fourth Defendants were aware, or must have been aware, that the controlled entity of the Third Defendant, Tyndall Funds Management (NSW) Limited may be in breach of its duty and that its directors, who were also the directors of the Third Defendant, may have acted dishonestly prior to the takeover scheme takeover offers made by the First Defendant for the acquisition of the fully paid ordinary shares of the Third Defendant.

2. A declaration that the First, Second, Third and Fourth Defendants failed to make full and proper disclosure to the Third Defendant's shareholders, that the controlled entity of the Third Defendant, Tyndall Funds Management (NSW) Limited, may have been in breach of its duty and that its directors, who were also the directors of the Third Defendant, may have acted dishonestly prior to the takeover scheme takeover offers made by the First Defendant for the acquisition of the fully paid ordinary shares of the Third Defendant.

3. A declaration that the Directors of the Third Defendant who are also the Directors of its controlled entity Tyndall Funds Management (NSW) Limited may, on the determination of Supreme Court Proceedings No. 1848/1999 Equity Division, be convicted for dishonesty prior to the recommendation made by them to the Third Defendant's shareholders, including the Plaintiff, to accept the First Defendant's takeover offer.

4. An order that the First Defendant not acquire the shares of the Plaintiff held in the Third Defendant until the determination of Supreme Court proceedings No. 1848/1999 Equity Division and the completion of the Australian Securities and Investment Commission's enquiries.

6. Other or further orders. 5 Mr. Bhagat submitted that Order 4 did amount to an order that s.701(5) not apply, and for that reason the summons was an application within s.701(6). 6 In paragraph 53 of my judgment dated 15th February 2000, I noted that Mr. Bhagat had not adopted the statutory remedy given by s.701 of the Corporations Law. I went on to say that, in my opinion, there was no possibility of a case being made out for extension of time for initiating the procedure under s.701(6). At that stage, I had not understood Mr. Bhagat to have submitted that his summons was in truth such an application. However, plainly now he does so, and I should consider that submission. 7 The making of an application under s.701(6) has significant consequences. For example, under s.701(10) it means that the time within which the offeror must complete the acquisition of shares is extended to fourteen days from disposal of the application. Having regard to the seriousness of the offeror's obligation under s.701(5), and the importance of the time limits in s.701(10), in my opinion, for something to count as an application under s.701(6), it must be reasonably clear that that is what it is. 8 In considering whether Mr. Bhagat's summons of 6th July 1999 could be so considered, I accept that it is relevant to take account of the fact that he is a litigant in person, and to have regard to the principles concerning litigants in persons set out in Wentworth v. Rogers (No.5) (1986) 6 NSWLR 534 at 536-7. In relation to the question I am considering, I think one would not expect such accurate draftsmanship from a litigant in person, and any unsuitability to s.701(6) in the drafting may carry more weight, in suggesting that an application is not an application under s.701, when the drafting is by lawyers, than when it is by a litigant in person. In my opinion, the mere fact that s.701(5) or s.701(6) is not expressly referred to would not be conclusive against the application being one under s.701(6). 9 However, even allowing for those considerations, I do not think that the summons in this case was an application under s.701(6). Order 4 is plainly expressed as an order to hold a position temporarily until certain other things happened, whereas an order under s.701(6) would have final effect, namely that s.701(5) would not apply in relation to the dissenting offerees' shares. The evidence put on by Mr. Bhagat was also directed to the matters referred to in the first three orders, and to the appropriateness of holding the position until those matters had been investigated. It did not in fact ever occur to me, in my consideration of the case, that the summons could possibly itself have been an application under s.701(6), until Mr. Bhagat made his submission on 9th March 2000. 10 That is sufficient to dispose of this aspect of Mr. Bhagat's submissions. However, I would also note that the structure of s.701 makes it plain that it is important that an application under s.701(6) be pursued quickly to finality. Even where a s.701(6) application is made, s.701(5) continues to apply, unless and until an order is made, leaving the offeror still entitled and bound to acquire the shares: all that s.701(10) does is to extend the ultimate time limit for this to happen. If an application is made, but not pursued in the Court, and the s.701(10) procedure is completed before the matter is considered by the Court, I think it probable that an order could still be made; but this would mean that the s.701(10) steps would have to be reversed. This consideration confirms in my mind how important it is that s.701(6) applications be made clearly and pursued expeditiously. It may even be that a s.701(6) application is not made at all until actually made to a judge or other judicial officer of the Court: s.459G in relation to statutory notices has a particular provision as to what is required for an application to be made, whereas there is no such provision in relation to s.701(6). 11 Mr. Bhagat made further submissions in support of his contention that costs should not be ordered against him. He submitted that he was a litigant in person, at a significant disadvantage; and referred me to Wentworth v. Rogers (No.5). He submitted that it is possible that in due course, discovery against the third and fourth defendants could show such knowing participation in fraud as to justify the action against the first and second defendants. He submitted that he was a public interest litigant. He was pursuing the interests of several thousand pensioners, at great personal cost. Such a person deserved a "fair go", in this case by not having costs ordered against him. 12 Finally, he referred me to the case of Village Roadshow Broadcasting Pty. Limited v. Austereo Limited (1997) 24 ACSR 185, for the proposition that costs would not be ordered in s.701 proceedings, except in favour of a successful objector. I would say straight away that that submission has no relevance, having regard to my earlier decision on s.701. 13 Dealing with his other submissions, I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they otherwise would be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event. 14 As regards Mr. Bhagat's submission that he is a public interest litigant, this may have some relevance in relation to the claim he is bringing as a unit holder of the Meridian Trust. However, it seems to me that it has no merit in relation to this claim, as against the first and second defendants. In this claim, he was seeking a remedy which could detrimentally affect the holders of millions of shares, on the basis of what could at best be a very small affectation of the value of his very small number of shares. 15 The possibility that he may in the future obtain evidence which may support a cause of action against the first and second defendants is in my opinion irrelevant. 16 For those reasons, I adhere to the view that Mr. Bhagat should be ordered to pay the costs of the first and second defendants. The stay of that order will cease, and it will take effect as originally proposed. 17 The other matter debated on 9th March 2000 concerned the costs of the third and fourth defendants of Notices of Motion to which they were respondents. Those Notices of Motion did seek relief which would have affected those defendants. They were entitled to oppose them, although in the event they did little more than rely on the opposition of the first and second defendants. In my opinion, those defendants are entitled to the costs of the Notices of Motion brought against them, although I would expect that those costs would be relatively small, having regard to the limited role which those defendants took in opposing the Notices of Motion. I would also make it clear that those costs orders should not be enforced until the end of the proceedings against the third and fourth defendants. 18 For those reasons, apart from leaving the earlier order standing, I make the following order:

I order that the plaintiff pay the costs of the third and fourth defendants of his Notices of Motion filed 2nd August 1999 and 13th October 1999, but that those costs not be enforced until the conclusion of these proceedings. ***********

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