Cultus Petroleum v OMV Australia

(a) The information is material and therefore ought to be disclosed but is confidential and therefore ought not to be disclosed: in the circumstances, the offer cannot proceed until the information ceases to be confidential or material;

(b) Alternatively to (a), if the court is of the view that the conflict is to be overridden by giving clause 17 paramountcy over the private duty of confidentiality, the Part A Statement should not be sent out until amended;

(c) Alternatively to (a) and (b), if the information is not regarded as being subject to a duty of confidentiality, it should be disclosed in Part A. 4 Finally, the Plaintiff seeks a declaration that an agreement made 14 April 1999 between the Defendant and Portfolio Partners Limited (quoted at para 8 below) is in breach of s697 of the Corporations Law and thus void. This is on the basis that the agreement, said to be an option, gave rise to a "relevant interest" within the meaning of s9 of the Corporations Law when the agreement was entered into and the Defendant thus "acquired" those shares within the meaning of s51(1)(a) of the Corporations Law. It is then contended that, pursuant to the terms of that agreement, the Defendant derived a prohibited benefit, namely the right to be paid an additional amount calculated by reference to the takeover price. That argument proceeds on the basis that the initial $10 paid OMVA to acquire the "option" - in this case to buy 7.5 per cent of the shares in Cultus - involves a benefit by way of escalation of that amount to the amount paid under the takeover offer. 5 The Defendant's response to the injunction proceedings is first to deny that the relevant materials require disclosure at all, on the basis that the information is not material but rather speculative. It further contends that if it be found that any of the information is material, then as OMVA must then disclose it by compulsion of law, that disclosure will not involve any liability for breach of confidence. This relies on the circumstances in which the information was acquired and the exceptions to any restraint upon its use. The Defendant advances discretionary considerations on the balance of convenience favouring allowing the offer to proceed, on the basis that the offer is a cash offer, by an offeror obviously capable of satisfying it and readily capable of assessment by shareholders. Further, that the offer was very significantly above the market price when it was announced and it is now underpinning the value of the shares, such that if it were not to proceed this may cause very significant hardship and loss for shareholders. Finally, it contends that such contraventions, if any, as may be found are of such minor materiality in the context of such an offer that they ought not to prevent it proceeding. 6 Finally, OMVA contends that Cultus has disentitled itself to interlocutory relief, by delay. I quote from its written submissions: "11.1 Although Cultus was served with the Part A on Monday 19 April, and was agitating the matter in the press and rejecting the bid in the ASX by Wednesday 21 April, it left it until Wednesday 28 April to raise any issue in correspondence, and to the afternoon of Friday 30 April to approach the court for leave to file its summons, and comes before the Court seeking relief for the first time on Monday 3 May, the last day before the Part A and Offer is due to be dispatched to shareholders. 11.2 Such delay places an offeror such as OMVA, and the Court, in an impossible position. In this type of matter, a target company who wishes to restrain dispatch of a Part A must act very promptly, and not leave it until the last moment before the Part A is to be dispatched." 7 I should note that the factual matters stated in 11.1 above were not disputed.

Section 697 - prohibited escalator agreement? 8 I quote below (omitting formal parts) the relevant agreement followed by the relevant parts of s697 of the Corporations Law: "In consideration for $10 (which has been received), we agree with OMV Australia Pty Limited (OMV) that we will accept a takeover offer by OMV in relation to Cultus Petroleum NL (Cultus), and/or will cause parties holding shares in Cultus on our behalf or on our instruction to accept such an offer in respect of 15363 million Cultus shares (referred to as our Cultus Shares) on the terms set out in this letter. We further acknowledge and agree that OMV may only require us to accept its takeover offers: a) If OMV announces, within 5 business days after the date of this letter, that it will make takeover offers for al of the shares in Cultus; b) If OMV dispatches, within two months after the date of this letter, takeover offers for Cultus under the Corporations Law; c) If the takeover offers are or become unconditional; d) Only if we have not, in relation to our Cultus Shares, already accepted OMV's takeover offer; and e) Before the date which is six months from the date of this agreement. This agreement will terminate and our obligations hereunder will be released if another takeover bid for all the shares in Cultus is open for acceptance at a higher price or value and OMV does not increase its bid price to at least match that higher price or value before the date which is 3 business days before the close of the other bid. For the purposes of this paragraph, the value of securities which are offered under a takeover bid as consideration will be 98% of the weighted average sale price for those securities on the Australian Stock Exchange over the 5 trading days prior to OMV's takeover bid becoming unconditional. In the event this methodology cannot be applied, the value will be 98% of that assessed by an independent merchant bank (acting as expert) as at the date on which OMV's takeover offers become unconditional. Subject to satisfying the conditions above OMV may require us, by giving us a notice in writing (at any time prior to 5 business days before the end of the period the offers by OMV remain open for acceptance), to accept or cause acceptance of its takeover offer in respect of all our Cultus Shares. We must deliver a duly completed acceptance form for all our Cultus Shares to OMV by 10.00 am on the day 3 business days after receipt of this notice and must do anything else required of us to accept OMV's takeover offer in accordance with the SCH Business Rules. We acknowledge that OMV's takeover offer may be made on the basis that (subject to Division 4 of Part 6.3 of the Corporations Law) it may only be accepted in respect of all the shares held by a member of Cultus at the date of the Offer. We agree to ensure that our Cultus Shares are held by such persons and in such manner as will enable us to comply with the terms of OMV's takeover offer and this agreement." 9 Section 697 of the Corporations Law provides: " 697 (1) Where: (a) a person acquires shares in a class of shares in a company; (b) within 6 months beginning on the day after the day on which the acquisition referred to in paragraph (a) took place, an offeror: (i) makes takeover offers under a takeover scheme; or (ii) …… in respect of shares in that class; (c) at a particular time, whether before, at or after the end of the offer period, a person (in this subsection called the "relevant person"), being the offeror or an associate of the offeror: (i) gives, offers to give, or agrees to give, a benefit to; or (ii) receives, or agrees to receive, a benefit from; a person who had, immediately before the acquisition referred to in paragraph (a), a relevant interest in any of the shares acquired as mentioned in that paragraph, or an associate of a person who so had such a relevant interest; (d) the giving or receiving of the benefit, the offer to give the benefit, or the agreement to give or receive the benefit, as the case may be, is attributable to, or is attributable to matters including, the acquisition referred to in paragraph (a); and (e) the amount or value of the benefit was, or is to be, determined by reference to, or by reference to matters including: (i) if subparagraph (b)(i) applies - the amount or value of the consideration that, under an offer made under the takeover scheme (including such an offer as varied, deemed to be varied or proposed to be varied), is to be paid or provided for the acquisition of the shares to which the offer relates; (ii) …… (iii) ……

the relevant person contravenes this subsection. (2) Where: (a) a person acquires shares in a class of shares in a company; (b) as at a particular time within 6 months beginning on the day after the day on which the acquisition referred to in paragraph (a) took place, an offeror: (i) proposes to send takeover offers under a takeover scheme; or (ii) proposes to cause a takeover announcement to be made; in respect of shares in that class; (c) at the time referred to in paragraph (b), a person (in this subsection called the "relevant person"), being the offeror or an associate of the offeror: (i) gives, offers to give, or agrees to give, a benefit to; or (ii) receives, or agrees to receive, a benefit from; a person who had, immediately before the acquisition referred to in paragraph (a), a relevant interest in any of the shares acquired as mentioned in that paragraph, or an associate of a person who so had such a relevant interest.; (d) the giving or receiving of the benefit, the offer to give the benefit or the agreement to give or receive the benefit, as the case may be, is attributable to, or is attributable to matters including, the acquisition referred to in paragraph (a); and (e) the amount or value of the benefit was, or is to be, determined by reference to, or by reference to matters including: (i) if subparagraph (b)(i) applies - the amount or value of the consideration that, under an offer proposed to be made under the takeover scheme, is to be paid or provided for the acquisition of the shares to which the offer relates; (ii) …… (iii) ……

(3) An agreement is void to the extent that it purports to provide for: (a) a person to give, offer to give, or agree to give, a benefit to a person; or

(b) a person to receive, or agree to receive, a benefit from a person; in contravention of subsection (1) or (2)." 10 So far as the s697 attack is concerned, OMVA answer it by pointing out the following:

(i) The relevant agreement is not in fact an option agreement though that of itself is not material.

(ii) The "acquisition" of a "relevant interest" which occurred on 14 April 1999 involved only the benefit of the option fee of $10 which was not "determined by reference to …… the amount or value of the consideration" to be paid under the relevant takeover offers, as required by s697(2)(e).

(iii) The ability of Portfolio Partners to terminate its pre-acceptance upon the making of a higher bid does not constitute a benefit of the kind prohibited by s697; Savage Resources Ltd v Pasminco Investments Pty Ltd (1998) 159 ALR 304, 317-321; see also Primac Holdings Ltd v IAMA Ltd (1996) 22 ACSR 454; Boral Energy Resources Ltd v TU Australia (Queensland) Ltd (1998) 28 ACSR 1.

(iv) The benefit prohibited by s697 is not the benefit offered under the takeover bid itself, but any benefit additional to those offered under the takeover - for example, in the case of an escalator clause, where the earlier seller is guaranteed to receive the same price as is offered in a later takeover, the benefit of receiving the sale price early; RACV Investment Co Pty Ltd v Silbury Pty Ltd (1986) 13 ACLR 555. But see now Sagasco Amadeus Pty Ltd v Magellan Petroleum Australia Ltd (1993) 177 CLR 508, 518; 10 ACSR 398, in which the High Court held that mere earlier payment did not constitute a relevant benefit under s698. See also Aberfoyle Ltd v Western Metals Ltd (1998) 28 ACSR 187, 215-216. That does not apply here, because there is no early receipt of the sale price.

(v) In any event, the amount to be received by Portfolio Partners under the takeover bid is not attributable to the relevant acquisition (by OMVA) on 14 April, but to Portfolio Partner's acceptance, in its capacity as a shareholder (and not as vendor under the 14 April agreement), of the takeover offer itself. Accordingly, the benefits to be received under the takeover offers are not prohibited benefits; Savage Resources Ltd v Pasminco Investments Pty Ltd (supra) at 321.

(vi) While s697 may also apply to a benefit received by the offeror , such as preventing a rival offeror from being able to purchase the shares after the takeover commences (see Primac Holdings Ltd v ASC (1997) 15 ACLC 218), that is not the case here. This is because the terms of the agreement are such that Portfolio Partners is not prevented from dealing with a higher bidder. Further, such benefit bears no relationship to the consideration payable under the takeover bid, so that sub-para (d) could not be satisfied.

  Thus the Defendant contends that neither sub-paragraphs (c), (d) or (e) of s697 are satisfied.

11 Finally, the Defendant contends that even if the Portfolio Partners' agreement were in contravention of s697, it would be void only to the extent that it purports to provide a prohibited benefit. That would not affect the substantial accuracy of the statement in the Part A to the effect that OMVA was "entitled" to the shares the subject of that agreement, since an associate relationship would subsist between them such that the shares owned by Portfolio Partners would be part of the "entitlement" of OMVA, notwithstanding that the agreement to acquire the shares was on this hypothesis void. 12 It is convenient that I deal with the s697 point now. It occupied substantially less time and, it is fair to say, was subsidiary to the Plaintiff's main attack based on non-disclosure and confidentiality, the two horns upon which the Plaintiff sought to impale the Defendant.

Conclusion 13 For the reasons earlier stated, I am satisfied that no contravention of s697 occurred, and, it necessarily follows, there was no failure to disclose in the Part A nor any misstatement in relation to the acquisition of the 7.5 per cent shareholding of Portfolio Partners under the terms of the relevant agreement. That agreement amounts to a conditional agreement to accept the takeover offer when made. The benefits Portfolio Partners derive from that agreement are essentially those derived from accepting the takeover offer and are conferred by that offer; they are not calculated by reference to it. The ability of Portfolio Partners to terminate its pre-acceptance upon the making of a higher bid does not constitute a benefit of the kind prohibited by s697. Though in relation to s698 of the Corporations Law, the observations of Hely J in Savage Resources Ltd v Pasminco Investments Pty Ltd at 319-320 are apposite: "In commercial terms, the sale agreements reflect an expectation that Pasminco will, in consequence of their execution, bid for all Savage shares, but that the selling shareholders are not to be disadvantaged in relation to the Pasminco bid or its sequelae by reason of having entered into these agreements. They are to have the same opportunities as all offerees have of selling into the Pasminco bid, or accepting another offer (provided, in the case of the selling shareholders, that it is a higher unmatched offer) unless they have already accepted the Pasminco bid. That may produce a difference in outcome between a selling shareholder (who has not sold into the bid) and a shareholder (who has accepted the bid) in the event that a higher unmatched offer emerges. But that difference in outcome is not the result of inequality of opportunity; it arises simply because one shareholder has accepted the bid, and the other has not. Viewed in that way, the termination events in cl 4 of the sale agreements are not s698 "benefits". Their purpose and their effect is to ensure that the selling shareholders are not disadvantaged vis-a-vis the general body of shareholders by reason of their having entered into the sale agreements which provided the catalyst for the bid. In the modern argot, a level playing field is preserved." 14 Put another way, such a "benefit" is not conferred upon Portfolio Partners but is simply retained, and its nature is inherently speculative depending as it does upon whether or not a competing higher bid does emerge. 15 I turn now to the factual background, starting with a Statement of Agreed Facts. FACTUAL BACKGROUND Statement of Agreed Facts 16 Attached to these reasons is a diagram setting out the material relationship between the Plaintiff and the Defendant for the purpose of these proceedings. 17 The Jabiru Challis Joint Venture relates to two oil producing fields called "Jabiru" and "Challis" which are situated offshore on Ashmore Cartier Territory in the Timor Sea and which are owned by the participants in the Jabiru Challis Joint Venture. The participants in the Jabiru Challis Joint Venture and the percentage share held by each of the participants are as follows:

(a) Cultus 18.75% (b) Gulf Australia (Cartier) Pty Limited 50% (c) Santos Offshore Pty Limited 10.3125% (d) Union Pacific Resources Inc 14.6875% (e) Mobil Australia Resources Company Pty Limited 6.25%

Gulf Australia (Cartier) Pty Limited, a subsidiary of Gulf Australia Resources Limited (Gulf), operates the oil producing facility at the oil fields on behalf of all Jabiru Challis Joint Venture participants. 18 The Jabiru Challis Joint Venture is governed by a Joint Venture Agreement between the participants. It contains certain confidentiality provisions, in particular, clause 14.01(b), which reads, relevantly: " ... all data and information acquired or received by any Party under this Agreement shall be held confidential during the continuance of this Agreement and for a period of five (5) years thereafter and shall not be divulged in any way to any third party, without the prior written approval of all the Parties which shall not be unreasonably withheld provided that:- (i) any Party may, without such approval, disclose such data and information: (aa) to any Affiliate or bona fide intended assignee of such Party upon obtaining a similar undertaking of confidentiality from such Affiliate or assignee in favour of all the Parties; (bb) to any outside consultants, upon obtaining a similar undertaking of confidentiality from such consultants in favour of all the Parties provided that such Party shall promptly inform the other Parties of the name of such consultants and the data and information disclosed to them; ... (dd) to the extent required by the Act, the Permit, any other applicable laws or regulations or the Securities and Exchange Commission of the United States of America or any other Security Commission having jurisdiction over a Party or the regulations of any recognised stock exchange on which are listed for quotation shares in the capital of such Party or any Affiliate of such Party ... " 19 On pages 10-11 of the Plaintiff's 1998 Annual Report (sent to shareholders of the Plaintiff in October 1998) the following statement is made: "In June 1998, Gulf Australia Resources Limited (Gulf) announced the purchase of BHPP's Timor Sea production assets. The sale installs Gulf as the new operator from January, 1999 and it is believed that this change will bring a renewed focus to maximising value of the assets through reduction of operating expense, increasing field life and production asset utilisation, and through further exploration". 20 Gulf Canada Resources Limited is in the process of offering its interest in Gulf Australia Resources Limited for sale. For that purpose it caused an Information Memorandum to be prepared. Gulf Canada required prospective purchasers to enter a confidentiality agreement before providing them with the Information Memorandum. 21 On 22 February 1999, HSBC Securities Australia Limited (on behalf of Gulf Canada) invited OMV Aktiengesellschaft (OMV) to investigate Gulf, for the purposes of considering whether OMV may be interested in acquiring Gulf. 22 On 30 March 1999, OMV executed a Confidentiality Agreement with Gulf Canada. The agreement restricts OMV's use and disclosure of certain confidential information acquired by it in the sale process. 23 Under clause 5(d) of the Confidentiality Agreement, disclosure of confidential information is permitted where that information is: "required to be disclosed under applicable law or by a governmental decree, order, regulation or rule or by any legal process, whether or not the requirement arises independently or as a result of any action taken by the Receiving Party before or after the date of this Agreement." 24 Clause 12 of the Confidentiality Agreement provides, in part, as follows: "The Disclosing Party warrants and represents that it has the right and authority to disclose its Confidential Information to the Receiving Party." 25 On 31 March 1999 a technical committee meeting of the Jabiru Challis Joint Venture parties was convened in Gulf's Perth offices. 26 At some time between 2 and 5 April 1999, OMV received from HSBC Securities Australia Limited (on behalf of Gulf Canada) an Information Memorandum prepared for the purposes of the proposed sale of Gulf Australia. 27 On or about 8 April 1999, directors of the Defendant considered the Information Memorandum and its content for the purpose of assessing whether or not any information contained in it should be disclosed in a Part A Statement it was shortly to lodge in respect of a proposed takeover bid for the Plaintiff. The directors of the Defendant believed that they were entitled to disclose any information contained in the Information Memorandum by reason of clauses 5(d) and 12 of the Confidentiality Agreement. They formed the view that the information was not material to a shareholder of the Plaintiff in deciding whether or not to accept the Defendant's proposed bid and, therefore, was not required to be disclosed in the Part A Statement. 28 On 14 April 1999, the Defendant entered into a pre-acceptance agreement with Portfolio Partners, under which Portfolio Partners agreed to accept the Defendant's takeover bid on the terms set out in the agreement quoted earlier. 29 On 14 April 1999 (the day before the Defendant announced its bid), the Plaintiff's closing share price was 50 cents per share. It increased to 72 cents per share within two days of the announcement and has remained at 71 or 72 cents per share since that time. 30 On 15 April 1999 the Defendant announced its intention to make a takeover bid for the Plaintiff. 31 The Part A Statement was lodged with ASIC on 15 April 1999, registered on 16 April, and served on the Plaintiff on 19 April. 32 Section 637 of the Corporations Law, in effect, provides that an offeror may serve its offer documents not earlier than 14 clear days after the day on which the Part A Statement was served on the target company. Accordingly, in the absence of a restraining order of the court, having served the Plaintiff on 19 April 1999, the Defendant would be entitled to dispatch its offers immediately after midnight on 3 May 1999. 33 On 20 April 1999, the Plaintiff made an announcement to the Australian Stock Exchange stating, in part, that: "Cultus Petroleum NL yesterday received a purported Part A Statement from OMV, which is being reviewed by the Company. Chairman, Mark Dunphy, has advised shareholders not to respond to the unsolicited takeover offer from OMV pending full consideration of the bid by the Cultus Board in the context of advice to be received form the Company's Bankers and other advisers. The Board considered that the price of 66c is inadequate. To maximise returns to shareholders, the board is prepared to consider alternative offers and proposals to the hostile bid received from OMV." 34 These comments were reflected in newspaper articles published across Australia on 21 April. 35 On 28 April 1999, the Plaintiff's solicitors wrote to the Defendant's solicitors detailing the Plaintiff's concerns regarding the Part A Statement, including that: · the Part A omitted material information, which the Defendant was unable to disclose as a result of an obligation of confidence owed to the Plaintiff; · the pre-acceptance agreement between the Defendant and Portfolio Partners breached s697 of the Corporations Law; · ASIC modifications obtained by the Defendant, allowing the offer to be extended to option holders who converted their options prior to the close of the offer, were invalid; · the Part A inadequately disclosed various other matters.

The Defendant was asked to provide undertakings to the effect that it would desist communication with the Plaintiff's shareholders, and would desist making public statements about the Plaintiff or the proposed bid, except as required by law. 36 On 29 April 1999, the Defendant's solicitors responded to the points raised by the Plaintiff's solicitors in their letter of 28 April 1999, and declined to give the requested undertakings. 37 On 30 April 1999, the Plaintiff commenced these proceedings by Summons filed in the Supreme Court of NSW. The Summons (and supporting affidavits) were served on the Defendant's solicitors shortly before 5pm on Friday, 30 April. 38 On 30 April 1999, the Plaintiff made an announcement to shareholders in relation to the Defendant's bid. LEGAL QUESTIONS Disclosure and Confidentiality 39 In answering those legal questions, I will deal with factual matters over and above those set out in the Statement of Agreement Facts, to the extent they bear upon the relevant issues.

Legal Questions 40 (a) Is the information contained in Information Memorandum in connection with the sale of its interest in Gulf Australia Resources Limited pertaining to the Jabiru Challis Joint Venture material such as to require disclosure by Cultus in its Part A Statement pursuant to s750 cl 17 of the Corporations Law, being "other information material to the making of a decision by an offeree whether or not to accept an offer, being information that is known to the offeror and has not previously been disclosed to the holder of shares in the target company",

(b) If so, is the information thus required to be disclosed or part thereof, confidential and precluded from disclosure, or is disclosure permitted notwithstanding confidentiality by reason of the circumstances under which the information became known to OMV and OMVA and by reason of any relevant exception contained in cl 5(d) of the Confidentiality Agreement and, to the extent relevant, cl 14.01(b) of the Joint Venture Agreement,

(c) If the information is material and confidential and its disclosure otherwise not permitted to be disclosed under any relevant exception as referred to in (b) above, is the offer precluded from proceeding until the information ceases to be confidential or material or is the conflict to be resolved by giving cl 17 of s750 paramountcy over the private duty of confidentiality such that the Part A should cease to be injuncted from dispatch when appropriately amended to include the relevant information or when it ceases to be confidential, and

(d) If the information is material but not regarded as being subject to a duty of confidentiality, should the Part A Statement be injuncted until it is amended (or ceases to be confidential) to incorporate the relevant information, or should discretionary considerations based on the balance of convenience and the degree of materiality of the relevant information and its likely inclusion in any Part B Statement, favour allowing the offer to proceed having regard also to Cultus' delay in bringing its proceedings?

Relevant Principles 41 It is convenient to start with certain principles to be applied in determining what is and is not material for the purposes of cl 17.

(i) The disclosure required by cl 17 is not to be read down in the light of the earlier specific requirements for disclosure of s750, for there is an overriding requirement that no material information known to the offeror should be omitted from the Part A Statement; Re Cumberland Holdings Ltd (1976) 1 ACLR 361 at 368-9; CLC 28,515 at 28,525; Re Rossfield Group Operations Pty Ltd [1981] Qd R 372 at 376; (1980) 5 ACLR 237 at 241; CLC 40-710 at 33,150; Re Evans Deakin Industries Ltd (1980) 5 ACLR 322 at 324; (1981) CLC 33,151 at 33,153.

(ii) A matter is material in this context if it might reasonably affect, or tend to affect the decision of the ordinary investor whether or not to accept the offer in the particular circumstances of the bid; Cackett v Keswick [1902] 2 Ch 456 at 464. Therefore, if a fact were omitted which, if known, would have either tended to deter offerees from accepting the bid ( Re Rossfield Group Operations Pty Ltd (supra) at 376; (1980) 5 ACLR 237 at 241; CLC 40-710 at 33,149; Carr Boyd Minerals Ltd v Queen Margaret Gold Mines NL (1987) 7 ACLC 1029 at 1038, and in Augold NL v Yaramin Pty Ltd (1987) 5 ACLC 295 at 299) or would be likely to encourage offerees to accept the bid, that fact is material. Thus a matter is material if it "is necessary to enable an offeree to make an informed assessment of the offer; Australian Consolidated Investments Ltd v Rossington Holdings Pty Ltd (1992) 35 FCR 226.

(iii) It has been put in the United States in relation to proxy solicitation that it is not even necessary to prove that the fact, if disclosed, would have been likely to alter an investor's decision; that it is sufficient if the omitted material would have assumed actual significance in the deliberations of reasonable offerees; TSC Industries Inc v Northway Inc (1976) 426 US 438, applied in the United States to merger negotiations in Basic Inc v Levinson (1987) 485 US 224 at 231-2. Certainly, a fact would be sufficiently material to fall within cl 17 if the information had a substantial bearing on the target's net worth, having regard to "competing possibilities including offers from other sources"; see Re Rossfield Group Operations Pty Ltd . In deciding what information is material, the Court should not arrogate to itself the question whether those omitted facts are ones which a reasonable shareholder would consider significant, as distinct from an omitted fact which would have a significant propensity to affect the shareholder's decision. That is an argument for adopting the United States test here, though always taking into account in determining materiality the circumstances of the takeover; for example whether or not there is a scrip bid. However, that question of a wider test for disclosure is best left for a case which requires that issue be resolved.

(iv) It is in the context of a scrip bid that an earnings forecast for the offeror may assume greater significance than, as here, a cash bid where the principal question for the shareholder is whether the cash can be counted upon having regard to the funding of the offer and any conditions attaching to it. Thus in Pancontinental Mining Ltd v Goldfields Ltd (1995) 16 ACSR 463, in a scrip bid, Tamberlin J held that an earnings forecast for the offeror, covering a two year period and spelling out any assumptions and qualifications, was required though not a discounted cashflow valuation of the offeror's assets. Importantly, he stated that earnings forecasts may not be essential in every case as a matter of law. He held they were appropriate where the offeror in the case before him was a new company with no track record issuing its shares rather than paying cash.

(v) However, "the duty is a duty to disclose information and not speculation" ( Wesfi Ltd v Blend Investments Pty Limited (SCWA, Wheeler, J, 16 April 1999, unreported)). But it does not follow that any matter of prediction is of necessity speculative. That depends upon whether some reasonable basis in the way of assumptions and material in support of those assumptions, as can be tested, has also been included. As Wheeler J put it in Wesfi Ltd (supra); "While speculation is not required and is generally to be discouraged, where speculative or predictive material is included, there should be some means of assessing that material" such as by "disclosure of assumptions upon which any forecasts or assessments are made and, where it exists, disclosure of information relevant to the question of whether assumptions are likely to be correct".

(vi) It may thus be going too far to state, not only is there no obligation to disclose, but there is a positive obligation not to disclose in a Part A statement matters of opinion about which minds may differ, assessments that are based on variable assumptions or predictions, or the assumptions or predictions upon which those assessments are based. The duty not to disclose such material must depend firstly upon whether it is mere speculation, or instead a prediction properly substantiated in a way which avoids that material being misleading. Thus, for example, forecasts which are subject to there being "no major deterioration" in the market or the weather ( Re Primac Holdings Ltd (1996-97) 22 ACSR 212) would not represent a proper substantiation if that were all there were, and would be potentially misleading.

(vii) The fact that a bid is a cash bid makes less relevant how valuable the acquisition will be to the offeror, since the accepting shareholder is not concerned with the future value of the offeror's shares. Thus disclosure of the offeror's future plans in relation to the target need not be disclosed under cl 17; compare Pancontinental Mining Limited (supra) and Solomon Pacific Resources NL v Acacia Resources Ltd (No. 1) (1996) 19 ACSR 238. Whether disclosure is required in a cash bid of some special value to the offeror of the target, based on information concerning the offeror not publicly available, is a question not yet resolved; see the discussion in Renard and Santamaria Takeovers and Reconstructions in Australia (Butterworths) at 8044.

(viii) Whether the Court is dealing with an interlocutory or a final injunction, the deficiencies in the Part A Statement should be "clear and serious" before an injunction will be granted; see Wesfi Limited and also Austen & Butta Ltd v Shell Australia Ltd & Anor (1992) 10 ACLC 735, Australian Consolidated Investments Ltd v Rossington Holdings (No. 2) (1992) 10 ACLC 600, Re Primac Holdings Ltd (1996) 22 ACSR 212 and GIO Australia Holdings Ltd v AMP Insurance Investment Holdings Pty Ltd (1998) 29 ACSR 584. In that context, short of an injunction the Court has open to it the capacity to order that supplementary material be sent where this is capable of curing any less serious deficiency. The Court should not lend itself to assisting tactical litigation whose real purpose is not to assist shareholders in being informed of all matters material to them, but rather to delay the then unpreferred bidder in the interests of encouraging others. In recent times the courts have moved from a greater readiness to grant injunctions of this kind to a more sceptical approach, as illustrated by the recent cases dealing with merely speculative material in Part A documents.

Application of Principles 42 Against that background of principle, falls to be tested the matter contained in the Information Memorandum. The Defendant in its written submissions of 3 May 1999 fairly describes the Information Memorandum in the following terms: "The Information Memorandum is a marketing document. It contains forecasts, potential strategies and other speculative projections which are dependent upon factors and assumptions which are beyond the knowledge and/or control of OMVA, cultus or Gulf - such as oil price movements, "probabilistic" geological and other technical data. It contains an extensive disclaimer. The matters relied upon by Cultus are described in the Information memorandum as a "conceptual plan", by a vendor (Gulf) who has owned the assets for only four months and is now on-selling them. Analysis of the Joint Venture Agreement shows that the potential cost reductions, production increases and increases in reserves are at a very early stage and highly speculative, and it is clear that there are very many uncertainties about whether they will or can be achieved. This is not the sort of information with which s750, Pt A, cl 17 is concerned." 43 The Defendant's witnesses were not cross-examined and included Mr David Archibald, an independent expert resources analyst whose affidavit of 2 May 1999 demonstrates the kind of uncertainties referred to above. Thus for example, he states that while he was at Esso he was given a set of field parameters for Jabiru by a broking analyst from a stockbroking firm and calculated that recoverable reserves were likely to be about 100 million barrels. Following appraisal drilling at Jabiru by BHP, it downgraded its estimate of recoverable reserves to 18 million barrels. BHP subsequently sold its interest in Jabiru to Gulf Australia. Paragraph 6.3.3 of the Gulf Information Memorandum states that Gulf Australia's estimate of ultimate recoverable reserves at a figure markedly different; I here avoid stating the figure in order to avoid any potential breach of confidentiality. 44 Mr Archibald gives further striking illustrations including in relation to a joint venture group including Cultus which drilled a well called Cornea-1. Initially it was described by one of the Cornea joint venturers as "big as Bass Strait". It has subsequently been the subject of a research report by Mr Archibald in June 1997 which concluded that any development of the Cornea field would be marginal and that the field is worth significantly less than that reflected in the Cultus share price. Cornea is not of course one of the assets the subject of the Information Memorandum but is illustrative of the problem. 45 Similarly, Mr Archibald deals with the question of potential cost reductions and points out that "there is considerable uncertainty as to whether or not further projected cost reductions …… will be able to be achieved or not" and noting that "5 million of these projected cost reductions are intended to arise from negotiations with four unions, including the MUA". 46 At paragraph 29 of his affidavit he states, "claims for potential cost reductions in respect of Jabiru/Challis could be offset by shortfalls of field performance (relative to prediction) as the fields are late in their lives. Gulf Australia noted in paragraph 6.3.3 of the Gulf Information Memorandum 'the complexity of the reserves and the inability of the previous operator to history match the performance'." (The above quotation appears to omit the words "effectively" before the word "history".) 47 The Plaintiff attempted to overcome this difficulty in its case by evidence given by the General Manager of Cultus, Mr Graham Dwyer, particularly in his second affidavit of 3 May 1999. His first affidavit was supplemented by a confidential exhibit "GD3" which became PX4. In his first affidavit of 30 April 1999 he described it in these terms: "(a) confidential information relating to the Jabiru Challis JV which is contained in the Information Memorandum and which is not contained in the Part A Statement ( the Confidential Information ); and (b) the reasons I believe that the Confidential Information would be material to a Cultus shareholder determining whether the takeover offer made by OMVA in the Part A Statement is adequate." 48 It was stated in argument that PX4 was not intended to be a statement of what should be included in the Part A Statement. Rather it was to be treated as a statement identifying the confidential information omitted and reasons for why that information would be material in the opinion of Mr Dwyer. 49 In fact the further evidence given by Mr Dwyer did more to damage the Plaintiff's case than to assist it. In particular, both his second affidavit and his evidence in cross-examination made abundantly clear these matters:

(a) That 6.7 and 6.8 at pages 44 and 45 of the Information Memorandum state the intentions of Gulf in its two year plan to lower operating costs and otherwise with respect to oil production rates and ultimate reserves, making clear there is a substantial discrepancy between the optimum outcome "unrisked" the terms "unrisked" and "risked" can be illustrated by saying that the difference is that the risked reserve or result involves multiplying the unrisked reserve or result by the probability of success, taking into account the various risk factors; see Transcript at 21. (described in PX4 as "potential" without mention at all of risk) and the more realistic outcome "risked"; yet only the unrisked outcome is included in the later forecasts at pages 51 and 52 under the heading "Proved and Probable Profile" without any cross-reference to the earlier risk factors or statement that the forecast is unrisked.

(b) That the Information Memorandum required to be appraised and qualified by reference to what was referred to in evidence as "actualities" being in particular: (i) knowledge of the negotiations with the MUA and other matters only capable of being known through participation in the joint venture with Gulf such as knowledge of operating budgets, works programmes and numerous meetings, conversations and correspondence as well as knowledge of the actual production rates in the first few months of 1999; see affidavit of Mr Dwyer of 3 May 1999 paras 7 to 13. (ii) file note of 1 April 1999 annexed to Mr Dwyer's affidavit in which the dual options of proceeding with what is called the "Rapid Oil Development Plan" and abandonment are compared, and (iii) the Rapid Oil Development Plan itself which, though referred to in the Information Memorandum, is not set out or annexed to it but is an annexure to Mr Dwyer's affidavit. 50 It is difficult to imagine a clearer case of the potential for misleading statements to be made in a Part A Statement, were the Defendant to take those parts of the Information Memorandum and quote them or excerpt them in the Part A Statement. It is self-evident from Mr Dwyer's evidence that he himself could only appraise what is in the Information Memorandum by reference to his knowledge of the joint venture - knowledge that is not known to OMVA, and certainly not at the time of the lodgment of the Part A Statement. 51 Indeed this point was illustrated with quite dramatic emphasis when, in cross-examination, Mr Dwyer had to acknowledge that the final paragraph ((e)) of PX4 in which he stated his estimate of the extent to which the present value of Cultus' share of operating cashflows would increase with consequent increase in value in the share price of Cultus was substantially based not on the Information Memorandum alone but on the Information Memorandum coupled with information he had derived from the joint venture itself, as set out in PX7; see T,30-33 and in particular at T, 33 line 3-10 where he acknowledges that "the joint venture parties though have more material than is available in the Information Memorandum". It is no answer to say that Gulf itself drew upon that information in preparing the Information Memorandum because Gulf did not identify that information so drawn upon in the Memorandum and clearly omitted some material items. 52 Against that description of what the Plaintiff contends is material, it will be recalled that the Part A Statement already states that Cultus is engaged in the Gulf sale process. Furthermore, Cultus has conceded that whatever constraints there may be on confidentiality, if OMVA is allowed to proceed with a valid Part A Statement, Cultus is not constrained in its Part B Statement from stating that which it contends is material, drawing in its case upon all of the information that it has including not only from the Information Memorandum but also as a participant in the joint venture. 53 I should add that no argument was put that information derived from what is termed "Data Room Information" would have required separate disclosure in the Part A Statement and likewise nothing to suggest that information relating to what is termed the "Joint Study and Bidding Group", or the terms of the North Sea Oil Contract should have been disclosed independently of what is in the Information Memorandum by OMVA. Indeed it was not disputed that the Bidding Group broke up without making a bid for the subject tenements nor that the North Sea Oil Contract was on other than ordinary commercial terms. Furthermore, it was not disputed that certain of the information, being the Data Room Information was not in the possession of OMVA at the date of the Part A Statement, and accordingly its non-disclosure could not be a contravention of s750. 54 There is one further matter of some significance. Whilst neither OMVA or its affiliates are quoted companies in Australia, Cultus is. As such, Cultus is subject to the continuous disclosure requirements of the ASX. Section 3.1 requires that once an entity "is or becomes aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity's securities, the entity must immediately tell ASX that information", unless the information satisfies each of the following three cumulative requirements. 55 The exceptions by way of three cumulative requirements, I quote below: "3.1.1 A reasonable person would not expect the information to be disclosed.

3.1.3 One or more of the following applies. (a) It would be a breach of a law to disclose the information. (b) The information concerns an incomplete proposal or negotiation. (c) The information comprises matters of supposition or is insufficiently definite to warrant disclosure. (d) The information is generated for the internal management purposes of the entity. (e) The information is a trade secret." 56 Cultus was advised on 30 April 1999 by Allen Allen & Hemsley that the continuous disclosure requirements did not apply and state in the concluding paragraph of that letter: "We are satisfied that there is material information that falls within one or more of the exceptions set out in Listing Rule 3.1.3. Those exceptions apply to confidential information if: · the information concerns an incomplete proposal or negotiation; · the information comprises matters of supposition or insufficiently definite to warrant disclosure; · the information is generated for the internal management purposes of the company. (Cultus should not pursue allegations of non-disclosure in relation to information which should be disclosed under Listing Rule 3.1.)" The above advice is contained in its letter of advice of 30 April 1999 being DX5 57 Clearly enough Allen Allen & Hemsley did not differentiate between whether the information concerned an "incomplete proposal or negotiation" or whether the information comprised "matters of supposition or insufficiently definite to warrant disclosure" or for that matter generated for internal management purposes. However, in argument, it was put that the basis for considering that 3.1.3 applied was solely that the information concerned an incomplete proposal. While it is not necessary for me to determine whether that contention is correct, on one view of matters the only aspect of incompleteness about the proposal, being the Rapid Oil Development Plan is that such programme requires to be put by the operator (Gulf) to the participants including Cultus before it could be carried out, insofar as it involved the expenditure of significant amount of money, and that had not taken place. That indeed emphasises the speculative character of the programme itself, though insofar as Cultus may have knowledge as a joint venturer of its prospects, it is in a different position in terms of the superiority of its knowledge than OMVA. However, be that as it may, there must be some question as to whether Cultus is now obliged to make disclosure under Rule 3.1, having regard to the cumulative requirements of the relevant exception and noting that requirement 3.1.1 has not been addressed. It has been assumed that the information is confidential. This is either in the sense that the ASX uses that term in the sense of "secret" such that confidentiality in this sense will not exist simply because a confidentiality agreement has been entered into (ASX Guidance Note: Continuance Disclosure: Rule 3.1, para 20) or in the sense that it has some trade significance to Cultus, which is the only entity at this point asserting confidentiality. Thus (T, 32) the following question and answer concedes the latter does not apply either: "Q And there is nothing particularly secret or sensitive about any of that, is there? A Secret or sensitive I'm not sure how - I would say it is certainly still information that is confidential to the joint venture.

Q I know you say that, but it is not information which needs to be hidden from competitors because a competitor cannot have any influence on it? A I think that is a fair statement, yes." Conclusion 58 I am satisfied that the materials contained in the Information Memorandum were not such as should have been required to be disclosed by OMVA in its Part A Statement, on the basis that its disclosure would have been of speculative material which was potentially misleading and that OMVA, given the state of its knowledge, was not capable of adding such additional information as would be capable of rendering it in a form where it could be provided to shareholders in a way that was not potentially misleading. In particular, OMVA did not have access to any materials outside the Information Memorandum such as are available to Cultus as a joint venturer. In so concluding, I do not wish it to be understood that Cultus should in any way be precluded from disclosing such information in its Part B Statement, provided it is disclosed in a way that is not misleading and in particular provided it is disclosed in a way that identifies relevant risks in a fair manner.

Confidentiality 59 In light of the conclusion I have earlier reached, it is not necessary for me to consider whether the relevant materials are confidential and such as could not be disclosed under any relevant exception to the constraints on disclosure contained in the confidentiality agreement, and, so far as relevant, the joint venture agreement. However, I deal with both those matters briefly now. 60 The starting point is clause 5(d) of the Confidentiality Agreement. This permits disclosure of confidential information, where that information is: "required to be disclosed under applicable law or by a governmental decree, order, regulation or rule or by any legal process, whether or not the requirement arises independently or as a result of any action taken by the Receiving Party before or after the date of this agreement." 61 Clause 12 of the Confidentiality Agreement provides a warranty and representation that the disclosing party has the right and authority to disclose its Confidential Information to the Receiving Party. 62 Clearly enough the words starting "whether or not" remove any possible argument that the disclosure could not be "required to be disclosed under applicable law" where that requirement arises by virtue of an action, here issuing a Part A Statement following announcement of an offer, taken by the Receiving Party OMVA. It is true that the parent company OMVA received the material, but OMVA as the Receiving Party is by clause 6 of the Confidentiality Agreement permitted to disclose it to "an Affiliate of the Receiving Party". No suggestion was made that the "Receiving Party" namely OMVA has failed to ensure that the Affiliate to whom disclosure is made, is made aware of the confidential nature of the Confidential Information. 63 However, the Plaintiff contends that while concededly OMVA and OMV could not have been on notice of any constraint under the joint venture agreement applicable to the Disclosing Party, Gulf Canada Resources Limited, OMVA is now on notice of a constraint under the joint venture agreement, namely that contained in clause 14.01(b). It then contends that if now, being informed of such constraint, OMVA seeks to include the relevant information from the Information Memorandum, on the assumption that it is obliged by law to do so, it is on notice of the constraint and cannot do so. This is because there is no applicable exception to the constraint in the joint venture agreement which would free Gulf to impart it to OMV and through OMV to OMVA, or which would free OMVA in turn to disclose it in the Part A Statement. 64 Thus the Defendant contends that the fact that OMV and OMVA believed, in good faith, that the exception in its Confidentiality Agreement was one that Gulf was entitled to make does not alter the fact that OMVA is now aware of the confidential nature of the information and of the fact that it can only be disclosed with the consent of all joint venture parties. In Malone v Commissioner of Police [1979] 2 All ER 620, it was held that where confidential information has been disclosed to a third party, who at the time of disclosure is unaware of any breach of any obligation of confidence but subsequently becomes aware of that breach, the third party becomes obliged to maintain the confidentiality of the information. 65 Sir Robert Megarry V-C (at page 634) held that "if A makes a confidential communication to B, then A may not only restrain B from divulging or using the confidence, but may also restrain C from divulging or using it if C has acquired it from B, even if he acquired it without notice of any impropriety. See the authority cited in Snell's Equity, one of which, Printers & Finishers Ltd v Holloway [1963] 1 WLR 1 at 7 was put before me. In such cases it seems plan that, however innocent the acquisition of the knowledge, what will be restrained is the use or disclosure of it after notice of the impropriety." In this case, notice of a breach of the confidentiality obligation under the Joint Operating Agreement was given by the Plaintiff's solicitor to the Defendant's solicitors by letter on 29 April 1999. 66 To this contention, the Plaintiff has two answers. The first is that a relevant exception does apply in clause 14.01(b), namely (aa) read with (dd). Second, in any event either such conflict is to be overridden by giving cl 17 paramountcy over the private duty of confidentiality, or as the Defendant prefers, there is no such conflict simply because in these special and particular circumstances, the Defendant has altered its position in good faith by incurring binding legal obligations and in circumstances where the rights of third parties, namely shareholders in the Plaintiff, would otherwise be deprived of a bid. 67 So far as the relevant exception is concerned, clause 14.01(b)(i)(aa) is said to apply because OMVA is a "bona fide intended assignee" of the relevant Gulf company, which has entered into a "similar undertaking of confidentiality …… in favour of all the Parties". Note the undertaking only has to be "similar", not "the same". 68 It is then contended that whilst para (dd) of the clause 14.01(b)(i) does not contain the extra words in the Confidentiality Agreement starting with "whether or not the requirement arises independently ……" nonetheless all that is required is a "similar" undertaking and such an undertaking so qualified is sufficiently similar. That contention is disputed by the Plaintiff who contends that the words in the exception in clause 14.01(b)(i)(dd), only contemplate being subjected to applicable mandatory laws requiring disclosure where this is not the result of an action which the party has independently chosen to take, such as here announcing a takeover offer and lodging a Part A Statement. 69 The Plaintiff relies on the judgment of Moynihan J in Queensland Coal Pty Ltd v Arco Resources Limited & Ors [1998] QSC 222 (20 October 1998) which involved disclosure in a registration statement required pursuant to the United States Securities Act 1933. However, the wording in that case was different from the wording in clause 14.01(b) in that the words used were: "required pursuant to necessarily applicable legislation ……." [my emphasis]. Moynihan J held that the clause in the agreement before him "is absolute in that it does not qualify or juxtapose necessity by linking it with other considerations; for example expedience or convenience so as to provide a margin of discretion …… the test of stark necessity is a strict one reinforced by the limitation 'if and to the extent required' in clause 18.1(b) …… I do not think that the Securities Act 1933 is necessarily applicable legislation in terms of clause 18.1(b)." 70 Here, there is no requirement that the legislation be "necessarily applicable". All that is necessary is that there be a requirement of any applicable laws, with no provision precluding the recipient of the information from subjecting itself to a compulsory disclosure law as would arise on the making of a takeover offer. 71 However, even if I were wrong in that conclusion, I am satisfied that the only obligation of confidentiality which applies to OMVA, if any applies at all, is an equitable obligation to maintain the confidentiality of that which it now has notice but did not have notice at the relevant times. These times were when it issued the Part A Statement and earlier when it entered into the Confidentiality Agreement and expressly negotiated words which left no room for argument that it was free to bid and disclose compulsorily as a result. 72 Having subsequently lodged and served its Part A OMVA has radically altered its situation by being subjected to an obligation to proceed with its bid which arose before OMVA had any notice of any constraint indirectly applicable via the joint venture agreement. In those special and particular circumstances, and having regard also to the interests of innocent third parties being shareholders in Cultus who would otherwise be deprived of an offer, I am satisfied that OMVA is not precluded by any such equitable obligation, if it exists, from disclosure of the relevant confidential information. 73 Finally, even if there were a conflict between cl 17 and a private equitable duty of confidentiality, cl 17 must prevail. These circumstances are very different from those before Brownie J in Austen & Butta Ltd v Shell Australia Ltd (1992-93) 10 ACSR 556, where the relevant offeror had entered into a consent order precluding the offeror from disclosing information obtained from the target in confidence. Brownie J concluded that the Defendant's consent to the grant of the interlocutory injunction required the Defendant to show a significant change in circumstances or that new facts had been discovered which rendered enforcement of the earlier order unjust. At 561, Brownie J made clear that he was not deciding the kind of case now before me: "It may also be that, in another case, an offeror may be permitted to disclose in a Part A statement material which he obtained in confidence or in breach of fiduciary duty, but this question does not arise for decision now. Nor is it necessary to decide now whether a target company must in any event disclose the relevant information in its Part B statement, although the language of s750, Part B, cl 13 seems to be fairly explicit. It may also be that, in other circumstances, an offeror who is in possession of information which is confidential to the target company cannot make a Part A statement without offending against the provisions of s750 Part A, cl 17, or without exposing himself to some claim by the target company for relief; and it may follow that, in such a case that s750 means that he cannot make a takeover offer at all; but neither of these questions needs to be decided now."

Conclusion 74 If, contrary to the conclusion I have earlier reached, the material in question were such as required to be disclosed in the Defendant's Part A Statement, I am satisfied that it could be so disclosed without contravention of any confidentiality obligation in the circumstances in which the relevant information was obtained. DISCRETION 75 If, contrary to the conclusion I have earlier reached concerning materiality, the Part A Statement should have included materials derived from the Information Memorandum, such contraventions that have occurred are minor in character. It can reasonably be anticipated that the Part B Statement will draw upon both the joint venture information and the Information Memorandum in making such disclosure as Cultus is obliged and entitled to make, avoiding being misleading. It is for the directors of Cultus to put such matters by way of advocacy as would properly dissuade acceptance, being both accurate and not misleading. It is not for the bidder in the Part A, provided it has disclosed in accordance with cl 17 and s750. 76 The other factors going to balance of convenience including the interests of shareholders in Cultus who would otherwise be deprived of an offer from OMVA and Cultus' delay in seeking relief, strongly militate against any injunction being granted in the circumstances. 77 There has developed a pattern in takeover defences in indulging in wasteful and expedient tactical litigation, designed not for the benefit of ensuring that shareholders are properly informed but simply to buy time. To issue proceedings such as this at the last minute casts doubt upon the bona fides of the Plaintiff, an impression reinforced by a number of other grounds raised and subsequently abandoned as to the alleged misleading nature of the Part A Statement. That is not to say that in a proper case where a Part A statement is misleading the target should not take proper action promptly to restrain the sending out of the offer or at any rate restrain it until appropriate additional material has been included. This was not such a case. ORDERS 78 The Plaintiff's summons should be dismissed. No occasion arises for my making any remedial order pursuant to s743 of the Corporations Law in relation to the Defendant's Cross-Claim. 79 Costs ordinarily should follow the event and I give leave to the parties to address me on costs if they wish.

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