Edensor Nominees Pty Ltd v Australian Securities & Investments Commission

· the shareholding structure and membership of the boards of directors of Yandal Gold Holdings and Yandal Gold

· the composition of and voting on the board of directors of Great Central

· the financing of the bid by way of a loan facility with Chase Manhattan Bank ("Chase").

3 The Chase facility was a $285 million syndicated term debt facility in which Chase acted as agent for and with other lenders financing the bid. Under the facility Normandy and Edensor were liable to repay the debt and interest, but Edensor was not liable to Chase if it defaulted. In that event Normandy was to have recourse only to Edensor's shares in Yandal Gold Holdings. If Edensor defaulted when the loan was due for repayment, or before that date, it was to bear no risk of loss but was to be entitled to receive 90% of the value of its shareholding in Yandal Gold from Normandy. This feature of the agreement was described by ASIC and the primary judge as Edensor's "carried interest". 4 A consequence of the shareholders agreement was that all parties to it became associates of each other and entitled to relevant interests in the shares in Great Central held by the other parties (see ss 12(1)(b), (c) and (e), 15(1)(a) and (c) and 609(1) of the Corporations Law ("the Law")). Hence on 11 January 1999 Edensor's entitlement to a relevant interest in shares in Great Central increased from 12.56% to 40.37% and the Normandy Group's entitlement increased from 27.81% to 40.37%. On that day Yandal Gold and Yandal Gold Holdings held no shares directly in Great Central, but their entitlement to a relevant interest in Great Central shares likewise became 40.37%. 5 The takeover offers were sent to shareholders in Great Central on or about 9 February 1999. The offers were conditional on Yandal Gold becoming entitled to 90% of the shares in Great Central and not less than three quarters of the offerees accepting the offers, thereby entitling Yandal Gold to compulsorily acquire the remaining shares under s 701 of the Law. The Part A statement recorded that Edensor and Normandy Mining Holdings had informed Yandal Gold that they would not accept the offers applicable to their holdings. Great Central forwarded a Part B statement to its shareholders on 23 February 1999. It recommended that unless a higher offer was made the offers be accepted. Accompanying the Part B statement was a report from a merchant banker pursuant to s 648 of the Law that the fair value of the shares in Great Central (including a 20% control premium) lay between $1.07 and $1.54. 6 On 15 March 1999 Yandal Gold declared that the takeover offers and any contracts arising from their acceptance were unconditional. The offers remained open for acceptance, in the events that happened, until 21 April 1999, being the day after closure of the offers. On that day Yandal Gold became "entitled" to 94.37% of the shares in Great Central, including the 40.37% referred to earlier. Accepting shareholders received $248,431,349, that amount being drawn down under the Chase facility. As at 21 April 1999 the requirements of s 701 were satisfied and, subject to the proceedings with which the appeal is concerned, Yandal Gold was entitled to proceed to compulsory acquisition. On 4 June 1999 Yandal Gold gave shareholders who had not accepted the offers notice that they were entitled under s 703(2) to require Yandal Gold to acquire their shares at the original offer price of $1.50 less 3 cents dividend paid on the shares during the offer period. 7 The first respondent ("ASIC") formed the view that the shareholders agreement had resulted in a contravention of s 615 of the Law, which prohibits the acquisition of shares in certain circumstances. It commenced proceedings in the Court on 25 March 1999 against Edensor and the second to seventh respondents ("the respondents at first instance"). The proceedings were amended so as to allege a further contravention of s 615 arising from entry into what are referred to in the judgment appealed from as the "non‑acceptance agreement" and the "retention agreement". The non‑acceptance and retention agreements were said to be informal agreements, arrangements or understandings between the parties to the shareholders agreement that were not intended to be legally binding, to the effect that Edensor and Normandy Mining Holdings would not accept the takeover offers and would retain their shares for the purpose of the bid. Declarations were sought that the respondents had breached s 615 in entering into the non‑acceptance agreement, the retention agreement and the shareholders agreement. As a result of amendment to the pleadings, declarations were also sought that by issuing and despatching the Part A statement Yandal Gold had engaged in conduct in trade and commerce that was misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth), alternatively s 12DA of the Australian Securities and Investments Commission Act 1989 (Cth) and s 995(2)(b) of the Law. In addition ASIC sought ancillary relief. 8 The primary judge held that there had been breaches of s 615 of the Law, s 52 of the Trade Practices Act, alternatively s 12DA of the Australian Securities and Investments Commission Act, and s 995(2)(b)(iii) of the Law, and made declarations accordingly. The orders he made included the following:

· accepting shareholders be entitled to withdraw and avoid the offers

· shareholders whose shares had been compulsorily acquired under s 701(5) be entitled to give notice of avoidance and return the consideration received

· Yandal Gold, Edensor and Normandy Mining Holdings be restrained from acting upon or giving effect to the non‑acceptance and retention agreements

· Edensor pay ASIC $28.5 million for distribution on a pro rata basis to the shareholders in Great Central (other than the respondents at first instance)

· who had accepted the offers and had not exercised their entitlement to withdraw their acceptances

· whose shares had been acquired by Yandal Gold under s 703(2) of the Law and who had not avoided the acquisition

· whose shares had been compulsorily acquired under s 701(5) and who had not avoided the acquisition

· in the event that Edensor defaulted, self executing orders for the disposal of all the shares Yandal Gold had acquired and had not retransferred, and for any net profit realised by Yandal Gold to be paid to accepting shareholders who had elected not to avoid their acceptances, and those whose shares had been compulsorily acquired but who had not sought to avoid that acquisition.

It is from these orders that Edensor appeals. The other respondents at first instance did not appeal. It is for that reason that they have been joined as respondents to the appeal. They have submitted to any order the Court may make on the appeal.

THE LEGISLATION 9 Section 615(1) of the Law, which is in Chapter 6 (Acquisition of Shares), provides:

"Except as provided by this Chapter, a person shall not acquire shares in a company if:

(i) is not entitled to any voting shares in the company; or

(ii) is entitled to less than the prescribed percentage of the voting shares in the company;

would, immediately after the acquisition, be entitled to more than the prescribed percentage of the voting shares in the company; or

(b) any person who is entitled to not less than the prescribed percentage, but less than 90%, of the voting shares in the company would, immediately after the acquisition, be entitled to a greater percentage of the voting shares in the company than immediately before the acquisition."

"A person shall not offer to acquire, or issue an invitation in relation to, shares in a company if the person is prohibited by subsection (1) from acquiring those shares."

An acquisition of shares is not invalid because of a contravention of s 615: sub‑s (6). The "prescribed percentage" for the purpose of sub‑s (1) is 20%: sub‑s (7).

10 Section 51(1) provides that for the purposes of Ch 6 a person acquires shares in a body corporate if, and only if:

"(a) the person acquires a relevant interest in those shares as a result of a transaction entered into by or on behalf of the person in relation to those shares, in relation to any other securities of that body corporate or in relation to securities of any other body corporate; or

(b) the person acquires any legal or equitable interest in securities of that body corporate or in securities of any other body corporate and, as a result of the acquisition, another person acquires a relevant interest in those shares."

The reference to entering into a transaction in relation to shares in s 51(1) and Ch 6 includes a reference to "entering into, or becoming a party to, a relevant agreement in relation to the shares or securities": s 64(a). A "relevant agreement" is defined in s 9 as

(a) whether formal or informal or partly formal and partly informal;

(b) whether written or oral or partly written and partly oral; and

(c) whether or not having legal or equitable force and whether or not based on legal or equitable rights."

It follows from the foregoing provisions that a person who acquires a relevant interest in shares as a result of a relevant agreement entered into by or on behalf of a person in relation to those shares acquires the shares for the purposes of s 615(1). A "relevant interest" is defined in s 31 as a power to vote in respect of a voting share or a power to dispose of a share. Section 30(3) provides that

"A reference to power to dispose of a share includes a reference to power to exercise control over the disposal of the share."

Section 30(4) extends the meaning of "power" and "control" to a power or control that is

"direct or indirect or is, or can be, exercised as a result of, by means of, in breach of, or by revocation of, trusts, relevant agreements and practices, or any of them, whether or not they are enforceable."

A person is entitled to a relevant interest in the shares in a body corporate held by a person who is an associate of the body corporate in accordance with Div 2 of Pt 1.2 of the Law. As indicated in par 4, by entering into the shareholders agreement the respondents at first instance each became entitled to a relevant interest in the shares in Great Central held by Normandy Mining Holdings and Edensor.

11 The contravention of s 615 in relation to the shareholders agreement was alleged to arise by reason of s 33 which provides:

"Where a body corporate or an associate of a body corporate has, or is by this Division (other than this section) deemed to have:

a person shall be deemed for the purposes of this Division to have in relation to the share the same power as the body or associate has, or is deemed to have, if:

(f) the person and an associate or associates of the person together have;

power to vote in respect of not less than the prescribed percentage of the voting shares in the body."

Yandal Gold Holdings' ownership of Yandal Gold and the shareholdings of Edensor and Normandy Consolidated Gold resulted in each of them being deemed, by reason of s 33, to have power to vote in respect of and to dispose of the shares held by Edensor and Normandy Mining Holdings in Great Central, and thus to have a relevant interest in those shares. The contravention of s 615 in relation to the non‑acceptance and retention agreements was said to arise by reason of Yandal Gold, Edensor and Normandy Mining Holdings acquiring a relevant interest in the shares in Great Central held by any of the other respondents at first instance by reason of entering into an agreement, arrangement or understanding not to accept the takeover offers and to retain their shares for the purposes of the bid.

12 Section 737 of the Law provides that where a person has acquired shares in a company in contravention of s 615 the court, on the application of, inter alios, ASIC may "make such orders as it thinks just". The orders that may be made include a "remedial order", which is defined in s 613. In addition, s 739(1) empowers a court, inter alia, to make "such orders as it thinks necessary or desirable to protect the interests of a person affected by the takeover scheme" in the event of a contravention of s 615. However s 744(2) provides that the court must not make an order under ss 737 or 739 if it is satisfied that the order will "unfairly prejudice" any person.

PRIMARY JUDGE'S REASONING "Bid structure agreement" 13 When considering whether between 16 December 1998 and 11 January 1999 Yandal Gold entered into the informal agreements, arrangements or understandings alleged by ASIC in relation to the shares held by Edensor and Normandy Mining Holdings, the primary judge thought it appropriate to treat them as part of one overall "bid structure agreement" of which the shareholders agreement was part. His Honour noted seven matters from which, amongst others, ASIC contended that the bid structure agreement could be inferred. He described them as matters about which "there can be no real dispute". They were: (1) the takeover offer was for all the issued shares in Great Central Mines; (2) the Part A Statement recorded that Edensor and Normandy Mining Holdings had advised Yandal Gold that they would not be accepting the takeover offers in respect of their shares in Great Central; (3) in the event that all shareholders, other than Edensor and Normandy Mining Holdings, accepted the takeover offer, Yandal Gold would be obliged to pay $276,377,926.50 of the $285 million provided by Chase to Yandal Gold Holdings. No other provision had been made, and the Part A statement did not say any had been made, for any further funding for the takeover offers; (4) the matters in (1), (2) and (3) depended upon Yandal Gold, Edensor and the Normandy group agreeing, arranging or arriving at an understanding between them that the finance provided by Chase was all that would be required to enable the takeover offers for all the issued shares in Great Central to succeed; (5) the objective of the takeover offers was that Yandal Gold, upon becoming entitled to a relevant interest in 90% of the issued shares, would compulsorily acquire all the outstanding shares in Great Central not held by Edensor and Normandy Mining Holdings; (6) Yandal Gold could only become entitled to a relevant interest in 90% of the issued shares in Great Central if Edensor and Normandy Mining Holdings accepted the takeover offer, which they stated they would not do, or retained their shares and did not sell them to any third party; (7) Chase agreed to provide its finance on the basis of the matters set out above, and recorded that the basis on which it was proceeding was that the legal and financial structure proposed for the bid had the "full support and co-operation of all parties hence no conflict will arise". 14 The primary judge then made some additional findings that bore on whether the agreements, arrangements or understandings alleged by ASIC were to be inferred. They included the following:

· it was highly improbable that a matter of such crucial importance to the financing and outcome of the bid as Edensor's retention of its 12.56% shareholding was not part of the extensive discussions between the Gutnick Group and the Normandy Group

· documents adduced in evidence showed that active consideration was given to the issues of non‑acceptance of the bid by the parties and retention by them of their shares for the bid

· a senior executive in the Normandy Group, Mr John Richards, who had denied that there had been any discussion of "non‑acceptance", was compelled when confronted with one of these documents (a file note of a meeting at which he was present) to concede that it was possible that the matter had been discussed. The primary judge regarded Mr Richards' false denial as intentional, and thought it reflected adversely on his credit and justified the inference that the truth would be harmful to the Normandy Group's interest

· apart from Mr Richards, no representatives of Edensor or the Normandy Group present at the meeting were called to give evidence on the non‑acceptance or retention agreements notwithstanding their availability

· it was unlikely that Mr de Crespigny (Normandy Group) was prepared to finalise the bid financing, agree to Edensor's "carried interest" (see [37]), and proceed with the bid upon the terms set out in the shareholders agreement, without an assurance from Mr Gutnick that not only would he personally support the bid but that Edensor would not accept the bid and would retain its shares for the purposes of the bid.

On the basis of these findings together with those in [13], the primary judge concluded at [67] that

"the present case is one in which the Court can imply or infer from the circumstances and the conduct of the parties … that the 'bid structure agreement', as alleged by ASIC, was entered into between Mr Gutnick (or his authorised representative) and Mr de Crespigny (or his authorised representative) and I reject Mr Richards' evidence that no such 'agreement' was entered into. I am also satisfied that the 'agreement' was an informal and unenforceable arrangement or understanding between Edensor, Normandy Mining Holdings and Yandal Gold (which was effectively controlled by Normandy and Edensor) to the effect that Edensor and Normandy Mining Holdings would not accept Yandal Gold's takeover offer for their shares in Great Central Mines and that each would retain those shares for the purposes of the bid to enable compulsory acquisition of the shareholdings that were not sold into the takeover bid."

15 Before it could be concluded that there had been a contravention of s 615 by reason of the bid structure agreement, it was necessary to determine whether that agreement conferred power on the parties to it to exercise control over the disposal of the shares held in Great Central by Normandy Mining Holdings and Edensor (s 30(3)). The primary judge was of the view that although the power to exercise control may be informal, indirect and unenforceable (ss 30(4) and 36(1)), there must be some true or actual measure of control that is not minor, peripheral, or merely hypothetical, theoretical or notional. See, for example, TVW Enterprises Ltd v Queensland Press Ltd [1983] 2 VR 529 at 542‑543. His Honour concluded that while the non‑acceptance element of the arrangement or understanding standing alone might not involve a true or actual measure of control over the disposal of shares, that element in company with the retention element plainly did. He expressed his conclusion on this aspect of the case as follows:

"Accordingly, pursuant to a 'relevant agreement' each of Yandal Gold, Normandy Mining Holdings and Edensor acquired the power to exercise control over the shareholdings of Normandy Mining Holdings and Edensor and therefore acquired a relevant interest which was:

· in respect of Yandal Gold - in 40.37% of the shares in Great Central Mines being the shares held by Normandy Mining Holdings and Edensor;

· in respect of Edensor - in an additional 28.81% of the shares in Great Central Mines being the shares held by Normandy Mining Holdings;

· in respect of Normandy Mining Holdings - in an additional 12.56% of the shares in Great Central Mines being the shares held by Edensor."

Since each of those acquisitions was an acquisition for the purposes of s 51(1) as a result of a transaction, namely the bid structure agreement (s 64) entered into by or on behalf of Yandal Gold, Normandy Mining Holdings and Edensor in relation to the shares held by Edensor and Normandy Mining Holdings in Great Central, the primary judge held that ASIC had made out its case of a contravention of s 615 by reason of the bid structure agreement.

16 The primary judge rejected the submission that to find that the non‑acceptance and retention agreements had been made would be inconsistent with clause 1.5 of the shareholders agreement. This clause provided in part that "Despite any provision contained in this agreement and despite any right arising (whether expressly or impliedly) from any provision of this agreement, each party to this agreement agrees with each other party to this agreement that: (1)(A) Edensor, Yandal Gold Holdings and Yandal Gold have no relevant interest (as defined by the Corporations Law) in any Target shares in which Normandy, Normandy Mining Limited, Normandy Mining Finance or Normandy Mining Holdings has a relevant interest as at the date of this agreement …."

Sub‑clause (B) contained a comparable provision denying any interest on the Normandy Group's part in Edensor's shares. Clause 2 provided that "no such relevant interest arises or shall be taken to arise as a result of the entering into of this agreement". The primary judge said:

"Whilst I accept that the clause is intended to operate according to its terms, in my view the clause does not answer the case put by ASIC of an informal and unenforceable arrangement or understanding which is a 'relevant agreement' as defined in s 9. The clause provides for the legally enforceable obligations that are to operate as between the parties to the agreement and is not concerned with, nor can it touch upon, unenforceable 'obligations' such as those that I have found were the subject of the bid structure agreement. Such 'obligations' may not only be unenforceable, they may be such that the parties are free to withdraw from or act inconsistently with them notwithstanding their adoption of those obligations: see Lutovi Investments Pty Ltd at 443, 444 and Cornwall v Waraluck (1997) 23 ACSR 571 at 573 per Burchett J. Whilst the clause can be relevant to the legally enforceable obligations in any 'relevant agreement', it cannot operate to negative unenforceable 'obligations' or a finding of a 'relevant agreement' based on, and inferred from, the totality of the evidence before the Court."

Shareholders agreement 17 There was no dispute that by reason of the shareholders agreement Edensor, Normandy Consolidated Gold, Yandal Gold Holdings and Yandal Gold were deemed by s 33 to have relevant interests, which each increased to 40.37%, in shares in Great Central, and that these increases occurred in a manner not provided for in Ch 6 of the Law. Before the primary judge the bidders contended that the increased relevant interests were not acquired in contravention of s 615. They submitted that on its proper construction, in order that a person acquire a relevant interest, he must obtain the title to, or dominion over, the actual relevant interest said to be acquired. Thus a "deemed" relevant interest cannot be acquired. His Honour rejected this argument. Relief 18 The primary judge, having found the contraventions of s 615 referred to above, referred to s 733 of the Law. It confers power on the Court on the application, inter alia, of ASIC, in circumstances where a person has acquired shares in a company in contravention of s 615, to make such orders "as it thinks just". Those orders may include a remedial order as defined in s 613, and an order directing a person to do or refrain from doing a certain act. Section 613 defines a remedial order as including an order directing the disposal of shares (s 613(1)(d)), an order vesting in ASIC shares or an interest in shares (s 613(1)(e)), and an order declaring an agreement relating to a takeover scheme or any other agreement in connection with the acquisition of shares to be voidable (s 613(1)(j)). His Honour recognised the orders to be made under s 737 in respect of a contravention of s 615 are, in general, remedial rather than punitive, and that the discretionary power under s 737 should be exercised so as to make orders which advance the principal objectives of the statutory scheme: Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101 and 152 per Sackville J at first instance, and on appeal: (1996) 69 FCR 531 at 545 per Lehane J. The principal objective of the statutory scheme in Ch 6, as the primary judge observed, is to ensure that the acquisition of shares in listed companies takes place in an efficient, competitive and informed market. 19 The primary judge, in determining what was the appropriate relief in this matter, was confronted with conflicting expert assessments of what was a fair offer price for shares in Great Central. It proved to be unnecessary to resolve that conflict, because events had overtaken those assessments. Since 12 January 1999 when Yandal Gold announced the bid, the price of gold had significantly fallen. The value of the shares at the time of the decision was "at best, problematic", but it was a factor relevant to deciding the appropriate form of relief, as well as the value of the shares at the time of the offer. The primary judge also in this context noted that a bidder for a company is under no obligation to offer what it considers is fair in all the circumstances of the case, that judgment being made by the market in deciding whether or not to accept the offer. Thirdly, his Honour described the substantive issue as whether, by reason of the contraventions of s 615 by the respondents at first instance, the shareholders in Great Central have suffered a detriment of a kind which ought to give rise to relief. That question was answered affirmatively by the findings that the contraventions of s 615 enabled the Normandy Group and Edensor, using Yandal Gold as the bid vehicle, to make a successful takeover bid for Great Central shares "at a significantly lower price than would have had to be paid at that time had a bid proceeded without the unlawful 'agreements' which secured Edensor's 'support' and contravened s 615",

and which would not have been secured at that time without the contraventions. Those benefits were found to have resulted in a significant detriment to shareholders who were thereby deprived of the opportunity of a higher bid price and in a practical sense were left with little choice but to accept the bid in the terms offered. The primary judge further found that the likelihood was that, but for the contravention, a bid by Normandy was likely either at that time or at some later time at a significantly higher price. Consequently, the contraventions were found to have ensured a successful takeover at a then attractive price to the Gutnick Group and to the Normandy Group, that a rival bid was "even more unlikely", and the takeover market for shares in Great Central was even less competitive than it would have been but for the contraventions.

20 In addressing the question of unfair prejudice, as directed by s 744(1), the primary judge found that the respondents at first instance knew the risk that they were contravening s 615 and chose to run that risk rather than to disclose the bid structure agreement to ASIC. Their culpability, their lack of inadvertence, and the seriousness of the breaches led him to conclude the remedies proposed to be granted were not unfairly prejudicial to the respondents at first instance. Nor did he consider that Chase or any of the lenders under the syndicated debt facility would be unfairly prejudiced; it is not necessary to refer to his Honour's reasons for that latter conclusion. In addition, on this issue, the primary judge addressed the possibility of unfair prejudice to Great Central, as there was the risk that it would suffer significant loss and inconvenience by having to repay Senior Notes not maturing until 1 April 2008 if the "change of control provisions" in the Senior Notes were to be triggered by proposed remedial orders. His Honour found that, in reality, any such prejudice would fall upon the respondents at first instance, and he described it as "somewhat disingenuous" for those respondents to shield behind s 744(1) whilst at the same time seeking to maintain the 94% holding of Great Central and compulsorily to acquire the remaining 6% free of the risk of vesting orders in respect of their contraventions of s 615. The primary judge observed, in addition, that any prejudice to Great Central would arise solely as a result of those contraventions, so it would be appropriate for the Court to order that the respondents at first instance indemnify Great Central in respect of any such loss it suffers in order to protect the interests of its shareholders. Finally, his Honour considered that the likely prejudice to Great Central had been overstated, as Normandy with a very substantial investment in that company and with substantial available financial resources would act to protect its investment in a manner which minimised the risk of loss to Great Central. 21 The primary judge was not therefore satisfied that the vesting, disposal or other orders sought by ASIC were unfairly prejudicial to any person. 22 The orders which the primary judge made are summarised in [8] above. They reflect his Honour's view that it was just and protective of the interests of shareholders that those shareholders who accepted the Yandal Gold takeover offer, or whose shares may have been compulsorily acquired following that successful offer, should have the right to avoid those transactions, and that the respondents at first instance should be restrained from acting upon or giving effect to the non-acceptance agreement and the retention agreement. Those orders were to prevent the respondents at first instance from enjoying the fruits of their contraventions. 23 In the light of the significant fall in the price of gold, the primary judge considered that the possibility of a separate or further bid for shares in Great Central at a price exceeding $1.50 was unlikely and unrealistic. To make an order that was "just" or protective of the shareholders in that circumstance would not include an order that the respondents at first instance dispose of the shares acquired by reason of their contraventions. His Honour found that: "… effectively the 'price' paid by the Normandy group to Edensor to secure the bid structure agreement and the shareholders agreement or, put another way, a measure of the benefit obtained by Edensor by its contraventions of s 615"

was of the order of $27‑30 million. As a consequence of the payment of that "price", the shareholders in Great Central had been deprived of the opportunity of receiving a significantly higher offer price at the time of the bid, and were left with little practical choice but to accept the offer. Consequently, his Honour considered that an order that Edensor be required to disgorge to those shareholders the value of the benefit it received for its contravening conduct was "just" under s 737, and was protective of the interests of the shareholders under s 739. That benefit to Edensor was in effect the " carried interest" which Normandy was prepared to bear to secure Edensor's critical support to the bid structure agreement and the shareholders agreement, as it was in reality Edensor's 12.56% shareholding in Great Central which led Normandy to regard Edensor's support as critical to the bid's success. Hence, the primary judge described the circumstances as:

"… an example of a benefit being provided to a shareholder under a proposal under which a person was to acquire a substantial interest in a company, which was not provided to other shareholders (see s 731(d)). The detriment arose as a consequence of the contraventions for which the benefit was provided to Edensor."

The disgorgement order which was made was then to enable the other shareholders to participate in the benefit, and to deprive Edensor of the value of the benefit, Edensor had received as consideration for entering into the contravening "agreements". It also operated to compensate the disadvantaged shareholders of Great Central by mitigating the detriment those shareholders suffered as a result of the contravening conduct; and it redirected the value of the benefit provided to Edensor to the shareholders who suffered detriment as a result of the contravening conduct. The primary judge accepted the evidence of the expert called by ASIC as to the value of Edensor's "carried interest". The mid-point of that range was $28.5 million, which was the amount that the primary judge ordered to be paid by Edensor to ASIC for distribution pro rata to the shareholders in Great Western at the time of the bid other than Edensor and Normandy Consolidated Gold.

REASONING ON THE APPEAL Bid structure agreement 24 It was forcefully contended that the primary judge's determination that the bid structure agreement was to be inferred was "vitiated" because his Honour approached the matter upon the erroneous assumption that "a joint bid starting above 20% to get to 100% was bad per se". It was submitted that the seven objective facts listed in par 13 could not themselves support the inference drawn because they were founded on this assumption, and his Honour would not have made the inference he did based on the matters listed in par 14 alone. We are not persuaded that the starting point of this attack on the primary judge's approach is sound. We do not discern from his Honour's reasons that he assumed that a joint bid starting above 20% to get to 100% was bad per se. Counsel accepted that his Honour did not "articulate" that assumption. We were told that although its existence was not apparent on a first reading of his judgment, it became apparent on a closer analysis of the reasons. We have read the reasons several times, and do not detect the erroneous assumption. 25 We were taken to each of the objective facts in turn and invited to conclude that none of them, standing alone, justified the judge's inference. We think this an artificial exercise. His Honour did not say that each fact in isolation justified the inference. Rather he said that the bid structure agreement was to be inferred from the totality of the objective facts and the findings made after hearing Mr Richards' evidence and examining the various documents to which the judge referred. Thus, before his Honour said it was to be inferred that the bid structure agreement was entered into, he said it was appropriate that he outline his findings "which are additional to those set out in paras (a) to (g) above" (ie additional to the seven objective facts set out in [13]). It is true, as Edensor's counsel pointed out, that at first blush the primary judge appears to say that ASIC's case for the drawing of the inference from the seven objective facts alone was "strong". But a reading of this passage in context shows that his Honour was speaking of the objective facts as supported by references in notes of meetings and correspondence that demonstrated that Normandy saw non‑acceptance and retention as significant issues that required resolution. 26 We are in as good a position as the primary judge to determine whether the proper inference to draw from the facts found ([13] and [14]) is that the non‑acceptance agreement and the retention agreement were made. On the primary judge's findings we would infer that the non‑acceptance agreement was made. We attach particular importance to the file note of a meeting on 10 November 1998 made by Mr Rodd Levy, Normandy Group's solicitor. The meeting was attended by Mr Gutnick, two partners of Clayton Utz (Messrs Rosedale and Ehrlich), the solicitors advising the Gutnick Group, Normandy's in‑house counsel and Mr Richards. Two entries are of significance. The first is that there was to be "no acceptance" by Edensor or Normandy. This is plainly a reference to a discussion to the effect that there was to be no acceptance by them of the proposed bid. The second is a note that funding would depend on Edensor and Normandy "not accepting". We did not find helpful Edensor's counsel's submission that the words "no acceptance" by Edensor or Normandy were "not consistent necessarily with unlawful purpose at all" and that they were "not entirely inconsistent with it". As we have said, apart from Mr Richards, no‑one who attended the meeting was called to throw light on the meaning of the file note though the other participants were available to give evidence. 27 A detailed challenge was mounted to the primary judge's finding that the retention agreement had been made. It was said that his Honour's inference that the retention agreement was made was based on his finding that 100% ownership of Great Central was a fundamental objective of Normandy, and that as such there had to be an entitlement in the bidding entity to over 90% of the shares to enable compulsory acquisition, and there was no proper evidentiary basis upon which to make this finding. This was one of the matters (item (5) in [13]) about which his Honour said "there can be no real dispute". His Honour did not say, as Edensor submits, that there was no real dispute (ie no real dispute between the parties, in the sense that it was common ground between them). His Honour was expressing his own view that the matters he listed were clearly made out. In our view Mr Richards' evidence supports item (5), and also supports the basis upon which it was said that the judge's inference about the retention agreement was founded. In cross‑examination Mr Richards was asked about the meeting on 10 November at which he, and Messrs Gutnick, Rosedale, Ehrlich, Smith and Levy were present. He agreed that there was discussion about a condition of the bid that involved a 90 per cent minimum acceptance condition. He said that was discussed at a large number of meetings. Later this exchange occurred (5:198‑199):

"It was no part of the discussions that Edensor or Normandy would be accepting such a bid for the shares that they actually held, was it? ---- No, it wasn't.

Because the structure of the deal involved, as you understood it, Edensor and Normandy retaining their respective share holdings and mopping up all the outstanding shares in third parties? ---- Yes.

One of the things that this bid did was to give Normandy the springboard of having the support of somebody who could, with 12.6 per cent, have blocked compulsory acquisition. That's right? I will rephrase it because you're looking quizzical. If Mr Gutnick's company didn't support this bid there's no way that Normandy could have moved to compulsory acquisition of the outstanding shares because you could never get to the 90 per cent that you needed. Is that right? ---- But Normandy wasn't bidding in this instance.

If Normandy had not had Mr Gutnick's company's support there's no way that Normandy either as a bidder or through Yandal Gold could have moved to compulsory acquisition, could it? ---- That's true.

And it was very important in the structuring of the bid, as you understood it, that the opportunity to move to compulsory acquisition was there. Is that right? ---- I never considered that it wouldn't be there.

I mean, the Part A had that as a condition? ---- Yes.

It's always something that was raised with the bank as being an objective? --- Yes."

What Edensor submitted was the starting point for the retention agreement that the primary judge inferred had been made was amply supported by Mr Richards' evidence.

28 In an affidavit sworn at a time when only the non‑acceptance agreement had been pleaded, Mr Richards denied that any agreement, arrangement or understanding to that effect had been made. His evidence was that "the matter of whether Edensor or the Normandy Group would or would not accept the joint bid was simply not raised as between the Normandy Group and Edensor". The primary judge said that although Mr Richards' evidence did not deal directly with the retention agreement, the substance of his evidence amounted to a denial of both the non‑acceptance and the retention agreements. Later he said he regarded Mr Richards' evidence as constituting a denial of the existence of a retention agreement. It was open to his Honour to take that view of the evidence. When Mr Richards was cross‑examined ASIC had flagged the possibility that it would amend its pleadings to allege the retention agreement. The primary judge indicated that he would allow such an amendment if the evidence supported it. In the course of Mr Richards' cross‑examination it appeared he was asserting that Edensor had not agreed not to sell its shares to a third party. The following exchanges occurred in connection with a letter of 12 November 1998 from Mr Ehrlich (Edensor's solicitor) to Mr Levy (Normandy's Group's solicitor) referring to the meeting of 10 November:

"Therefore you understood that at the time you got this letter that one of the things that was being addressed was the question as to whether Edensor or Normandy might sell their shares either into the bid or to third parties? --- What's being addressed on this subject of pre‑emptive rights is, it would seem to me to be, its subsequent sale of shares.

The protection from an economic perspective of Normandy's position to which Mr Ehrlich's letter refers is that Edensor is not going to sell its shares? --- To a third party.

Full stop? --- I think what we're talking about here, selling the shares to a third party and that remains a concern for Normandy."

"[Mr Ehrlich's letter] also addresses the issue as to whether or not Edensor would be selling to third parties so as to attract the need to consider pre‑emptive rights, didn't it? --- Pre‑emptive rights is something we had discussed along the way.

So it was a concern of yours Edensor might sell to a third party, was it? --- It remains so."

The passages we have emphasised indicate Mr Richards' view that there was in place no agreement, arrangement or understanding that Edensor would not sell to a third party. Since the risk to Normandy was of the same nature whether Edensor sold into the bid or to third parties, it was not to be expected that Mr Richards would deny that the parties had "agreed" not to sell into the bid but not deny that they had "agreed" not to sell to third parties. Having heard and seen Mr Richards give evidence, having formed a view about his credibility, and being immersed in the evidence as a whole, the primary judge was well placed to evaluate the nuances of Mr Richards' evidence, including the passages set out above. It was open to him to conclude that the substance of the evidence amounted to a denial of the retention agreement.

29 The primary judge did not believe Mr Richards' evidence that the alleged non‑acceptance and retention agreements had not been made, and he gave his reasons for reaching this conclusion. His Honour regarded as a false denial his evidence that non‑acceptance had not been discussed at the 10 November meeting, and considered that this reflected adversely on his credit and justified the inference that the truth would be harmful to the Normandy Group. 30 The primary judge rightly attached importance to the fact that apart from Mr Richards no representatives of Normandy or Edensor, including their legal advisers, were called to give evidence on the non‑acceptance and retention issue notwithstanding their availability. As he said, the absence of such evidence entitled him to infer that their evidence would not have been helpful to the Normandy/Edensor case, and to be bold or more confident as to the inferences he might draw from the evidence before the court. See Jones v Dunkel (1959) 101 CLR 298 at 308, 312 and 320‑321. Edensor submitted that Jones v Dunkel cannot be used to fill an evidentiary void. There was no such void. The primary judge referred to Mr Ehrlich's pre‑emptive rights letter of 12 November 1998 and said it was plainly directed at concerns that Normandy had expressed at the 10 November meeting about requiring some assurance that Edensor would retain its shares for the purposes of the bid. Further, there was Mr Richards' evidence set out in par 22. Again we note that concern about non‑acceptance alone was pointless. What had to be put to rest were the twin risks that Edensor would accept the takeover offer or would sell to third parties. 31 We agree with his Honour's conclusion as to the relevance of clause 1.5 of the shareholders agreement. We would add that, as is implicit in his reference to a finding based on or inferred from the totality of the evidence, clause 1.5 is concerned to deny any relevant interest arising out of the shareholders agreement. The primary judge did not find that the non‑acceptance agreement or the retention agreement arose out of the shareholders agreement. Further, if in fact those agreements were made, the existence of clause 1.5 could not, in our view, negate that fact. 32 There is no substance in Edensor's claim that the primary judge "did not pay proper regard to the Briginshaw standard". His Honour referred to Briginshaw v Briginshaw (1938) 60 CLR 336, and said he had not lightly arrived at his findings, on the balance of probabilities, in respect of the relevant agreements, and had had regard to the important and grave nature of the consequences flowing from them. He was satisfied that the evidence "clearly supports and justifies" the inference of the making and entry into of the bid structure agreement. 33 Edensor took issue with the primary judge's conclusion that the bid structure agreement conferred power on the parties to it to exercise control over the disposal of the shares held in Great Central by Normandy Mining Holdings and Edensor. His Honour correctly summarised the law applicable to "control" in s 30(3) when he said ([73]) that although the power to exercise control may be informal, indirect and unenforceable, it must involve "some true or actual measure of control" over the disposal of the shares, and not be control that is "minor, peripheral, or merely hypothetical, theoretical or notional". He referred to Re Kornblums Furnishings Ltd [1982] VR 123, TVW Enterprises Ltd v Queensland Press Ltd [1983] 2 VR 529 at 542‑543 (TVW Enterprises), North Sydney Brick & Tile Co Ltd v Darvall (1986) 5 NSWLR 681 and Corumo Holdings Pty Ltd v C Itoh Ltd (1992) 10 ACLC 428 at 450. The primary judge appears to have accepted that while the non‑acceptance agreement standing alone might not involve some true or actual measure of control over the disposal of shares, the two agreements together did. Edensor contended that this conclusion was inconsistent with the finding that the retention agreement was unenforceable. We do not agree. What his Honour said was that there must be some true or actual measure of control "(that is, in the context of the extended meaning of 'control' provided for in s 30(4))". Control can be indirect and exercisable by means of unenforceable agreements and practices. Where what is involved is an unenforceable arrangement or understanding, the question whether some true measure of control exists must be determined on the assumption that the parties act in accordance with, rather than contrary to, their arrangement or understanding. His Honour was criticised for treating the unenforceable bid structure agreement as analogous to the pre‑emption agreement in TVW Enterprises. We do not understand his Honour to have been unaware of this difference between the two cases. Rather he was indicating that, given that "control" agreements can be enforceable or unenforceable, the substance of the "obligation" assumed in each case (one enforceable and the other unenforceable) was similar. In our view the primary judge correctly found that the non‑acceptance and retention agreements were in breach of s 615. Shareholders agreement 34 Depending on its context the word "acquire" may mean to gain title or ownership of something or simply to obtain something. This is reflected in the meanings given in the Oxford English Dictionary:

"1. To gain, obtain or get as one's own, to gain the ownership of (by one's own exertions or qualities) …

2. To receive, or get as one's own (without reference to the manner), to come into possession of."

In ss 615 and 51(1) of the Law the word is used in relation to a relevant interest in shares. The sections are not limited to acquisitions of shares, where the context would suggest the giving of title to or ownership of the shares. A relevant interest in a share is a power to vote in respect of the share or a power to dispose of the share: s 31. A power to dispose of a share includes a power to exercise control over the disposal of the share: s 30(3). For the purposes of s 30(3) power or control can be direct or indirect, or can be exercised as a result of agreements and practices whether enforceable or not: s 30(4). Section 36 provides that it is immaterial whether or not the power to vote or to dispose of the share is implied, informal, cannot be related to a particular share or is remote. In that context, the natural meaning of "acquire" is simply to obtain a relevant interest, which may be an actual or a deemed relevant interest. Our reasons for this conclusion are as follows:

· since a relevant interest can be acquired by an informal and unenforceable arrangement or understanding, it is difficult to imagine a legislative intention to restrict acquisition in ss 615 and 51(1) to transactions whereby title to or dominion over an actual relevant interest is derived

· section 36(2), which provides that a relevant interest in a share shall not be disregarded merely because of its remoteness or how it arose, supports the wider view

· the width of the definition of "relevant interest" and other concepts in the takeover provisions ("relevant agreement" and "associations") suggests an intention to cast as wide a net as possible

· the fact that the width of the applicable concepts is accompanied by the conferral on ASIC of power to modify the provisions of Ch 6 (ss 730 and 731) and to exclude from the operation of s 615 an acquisition made with ASIC's written approval (s 633), suggests an awareness that the wide concepts referred to might catch unintended transactions

· the construction advanced by Edensor has the anomalous result that there are two categories of relevant interest only one of which is capable of being acquired.

In relation to this last point the primary judge gave an apposite example (par 97):

"Thus, if a party obtains a deemed relevant interest in a 51% shareholding there will be no acquisition for the purposes of s 615. If that party then acquires the 51% shareholding no contravention of s 615 will have occurred as the relevant interest that party has will not have increased by reason of the acquisition …. Yet, if the party had initially acquired the shares outright s 615 will have been contravened. The anomaly, which would have far-reaching consequences for the operation of s 615, only arises as a result of an unwarranted distinction being drawn between actual and deemed relevant interests. If no such distinction is drawn, the initial 51% entitlement will arise as a result of an acquisition of the relevant interest in that shareholding. I am in no doubt that the legislature did not intend that a person be able to acquire the beneficial ownership of shares in excess of 20% of a corporation through the process set out above without complying with Ch 6. Yet that is the very outcome that would result from the respondents' suggested construction of s 51."

35 For the above reasons, which are essentially those given by the primary judge, we are unable to accept the meaning of "acquire" in ss 615 and 51(1) advanced by Edensor. 36 Edensor sought to obtain support for its interpretation of "acquire" in ss 615 and 51(1) from the observation of Young J in Green v Crusader Oil NL (1985) 10 ACLR 120 at 125 that "acquire" usually involves obtaining title to a share or relevant interest. His Honour held that a person who obtained the beneficial or equitable title to an option, or had the benefit of an arrangement or understanding that the option would be dealt with at his behest, did not thereby acquire the option for the purposes of s 12(h) of the Companies (Acquisition of Shares) (NSW) Code. In his view an option was not acquired until the acquirer was registered as holder in the company's books. Young J was thus not concerned with the issue in question here, which is whether a deemed relevant interest can be acquired. More to the point for present purposes is the observation of Finkelstein J in Aberfoyle Ltd v Western Metals Ltd (1998) 84 FCR 113 at 144. After referring to what was said in Green v Crusader Oil NL to be the usual meaning of 'acquired', his Honour said:

"But the usual meaning of the word [acquired] surely cannot have application to a case where the legislation contemplates the acquisition of a relevant interest by an informal arrangement or understanding that has no legal or equitable force. It is likely that the word 'acquire' when used in sections such as s 698(5) means no more than 'obtain' those shares."

In Green v Crusader Oil NL at 125 Young J relied on John McIntosh & Sons Ltd v Bakers Bargain Stores (Seafood) Ltd [1965] 1 WLR 1182 for the view that the usual meaning of "acquire" was to acquire title. In that case Browne J was concerned with the words in s 25(2)(a) of the Restrictive Trade Practices Act 1956 ‑ "a person who acquires those goods otherwise than for the purpose of resale in the course of business". While his Lordship held that in its context "acquires" meant obtain title to, he did not describe that as the usual meaning of the word. Indeed, as we read his reasons, his Lordship was of the view that the word has no usual meaning. Thus, at 1187, he said he did not get much help from the dictionary meanings of the word. We think it unhelpful to begin with a prima facie or usual meaning of a word such as "acquire" and to seek from its context a reason to discard that meaning. One is more likely to discern the intended meaning by going straight to the context with an open mind. For those reasons we are unable to agree with Murray J in Re Stockbridge Ltd (1993) 9 ACSR 637 at 651 that "acquire" in s 615 of the Law means "obtain title" on the ground that that is the "normal" meaning of the word which is not displaced by any other meaning in the definition provisions of the Law. 37 Edensor also contended that even if there were the acquisition of a relevant interest in the Great Central shares, that acquisition did not result from any "transaction … in relation to those shares" (s 51(1)). This argument does not appear to have been put to the primary judge, and no error on his part in this respect is asserted in the grounds of appeal. In any event the point has no merit. The effect of the shareholders agreement was that the respondents at first instance became entitled to a relevant interest in the shares in Great Central held by Edensor and Normandy Mining Holdings. An agreement that has that effect is, in the context in which s 51(1) is found, a transaction in relation to those shares. Clause 1.5 of the shareholders agreement cannot assist Edensor. It held shares in Great Central at the time the agreement was entered into, and the agreement acknowledged that holding. If by force of the Law the agreement had the effect it did in relation to those shares, clause 1.5 cannot operate to negate that effect. See par 25. 38 Edensor relied on Re Stockbridge Ltd to support its submission that the shareholders agreement was not a transaction in relation to shares. Stockbridge Ltd held more than 20% of the issued shares in three listed companies. A scheme of arrangement was proposed under which Excalibur would remain the only shareholder in Stockbridge and all other shareholders' interests would be cancelled. Murray J held that Excalibur had not obtained a relevant interest in any shares in Stockbridge because the cancellation of shares did not give rise to the acquisition of shares by the remaining shareholders. His Honour also held that Excalibur did not acquire a relevant interest in the shares held by Stockbridge in the other listed companies. Edensor submitted that this was because he held that the scheme of arrangement was not a "transaction" in relation to those shares. We are unable to extract that from Murray J's reasons. His Honour examined the meaning of "acquires" in s 51(1), but said nothing about the phrase "as a result of a transaction …". His reasons turn solely on the proposition that the cancellation of the shares did not give rise to the acquisition of them by the remaining shareholders. 39 We thus agree with the primary judge that as a consequence of the shareholders agreement Yandal Gold, Yandal Gold Holdings, Edensor and Normandy Consolidated Gold Holdings obtained, and thereby acquired, relevant interests in shares in Great Central in contravention of s 615.

Misleading and deceptive conduct 40 Once a contravention of s 615 of the Law was found, a necessary consequence was that the Part A Statement was rendered false, and thus misleading and deceptive for the purposes of s 52 of the Trade Practices Act, s 12DA of the Australian Securities and Investments Commission Act and s 995(2)(b)(iii) of the Law. Edensor has not appealed against the primary judge's consequential conclusion as to these contraventions.

Inadvertence 41 Before the primary judge it was submitted that any contravention of s 615 should be excused on the ground that it was "inadvertent" for the purposes of s 743 of the Law. The primary judge did not accept that submission. Amongst other things he was not satisfied of the truth of Mr Richards' evidence as to the reason why the bidders did not approach ASIC for its view or for permission concerning the proposed bid, namely that their legal advice was that there was no need to seek any form of relief from ASIC. In his Honour's view the real reason was that the bidders feared ASIC's scrutiny of the arrangements between Edensor and the Normandy Group. Further, he thought they had decided to proceed with the bid fully aware of the risk that ASIC was likely to consider that it contravened s 615, and were prepared to take that risk rather than submit to scrutiny. That, his Honour said, was not inadvertence. 42 Edensor appealed against the primary judge's refusal to excuse the contravention on the ground that his Honour erred in holding that the contraventions were not caused by inadvertence. However, in the course of argument counsel for Edensor accepted an observation from the Court that "inadvertence" involved doing something by accident, and that what was done here was deliberate. Counsel then abandoned the inadvertence ground of appeal.

Amendment of statement of claim 43 Edensor claims it was denied natural justice when the primary judge gave ASIC leave to amend its statement of claim so as to raise the bid structure/retention agreement after ASIC and Edensor had closed their cases. It was also claimed that ASIC was permitted to amend notwithstanding that it had earlier expressly abandoned the claim the subject of the amendment. Edensor claims that in reliance on the abandonment it did not call any evidence going to the issues raised by the amendment, and in particular it did not call Mr Gutnick, and the Normandy Group did not call Mr de Crespigny. 44 We have examined the transcript passages relied on to establish the alleged abandonment, and we do not think they sustain that claim. The transcript discloses that Mr Archibald QC, who appeared for the Yandal companies but effectively conducted the case for all respondents at first instance, sought to attribute to counsel for ASIC a decision to "stay with his pleadings". The primary judge did not accept that characterisation, or that ASIC had elected not to amend. Rather his Honour said "He's not seeking to amend his pleading at the moment". On 19 May his Honour invited Mr Archibald to consider whether he should call further evidence to deal with the amendment ‑ "I wouldn't want you to be prejudiced about your conduct of the case on that ground" (9/2348). On 20 May ASIC's counsel presented the proposed amendment and sought leave to amend. When Mr Archibald was asked for his attitude to the amendment he replied:

"I don't think there's a problem, on the footing that the material is introducing what's called the bid structure agreement, which is a way of putting together non‑acceptance and what I call non‑disposal. I think we can deal with that and I don't think I can argue against that amendment."

However counsel later "formally" opposed the amendment. His Honour gave leave to amend. Counsel did not then apply to re‑open their cases, seek an adjournment or apply to call additional evidence. In those circumstances his Honour's decision to allow the amendment cannot be impugned as a denial of natural justice. On a number of occasions, in the course of the discussion with counsel about the amendment, his Honour said that pleadings are a means to an end and not a straightjacket. In this respect he was acknowledging the long‑standing approach to the amendment of pleadings, recently affirmed by the High Court in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146.

Relief 45 The principal attack of Edensor on the orders made by the primary judge concerned the order that Edensor pay ASIC $28.5 million upon the terms referred to in [8] above. It is contended that there was no power under s 737 of the Law to make a compensatory order to mitigate the detriment to shareholders suffered as a result of conduct contravening s 615. The primary judge did acknowledge that the order made for the payment of $28.5 million would provide compensation to the Great Central shareholders. The submission of Edensor involves it asserting either that in no circumstances may an order be made under s 737 which has the effect of compensating shareholders who suffer detriment by a contravention of s 615, or that the principal or sole purpose of the primary judge in making the disgorging order was to compensate the Great Central shareholders and that it was wrong to have that purpose. We do not accept either of those assertions. 46 We see no reason why the power under s 737(1) to make "such order as [the Court] thinks just" should be construed to exclude the power to make an order, in appropriate circumstances, which results in providing compensation for those whose interests have been damaged by conduct contravening s 615. It is plainly within the intention of s 737(1) that the justice of a particular case might include depriving the wrongdoer of the fruits of that wrongdoing. Two particular instances of orders which may be made under s 737(1) are identified as a remedial order and an injunction, but they are expressly said not to limit the generality of the power. In The Queen v Australian Broadcasting Tribunal; ex parte 2HD Pty Ltd (1979) 144 CLR 45 at 50 the Court said:

"The general rule is that a discretion expressed without any qualification is unconfined except in so far as it is affected by limitations to be derived from the context and scope and purpose of the statute."

See also the observation of Gummow J (with whom Brennan CJ, Dawson, Gaudron and McHugh JJ agreed) in David Grant & Co. Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-276 to the following effect:

"As a general precept it is inappropriate to read provisions which confer jurisdiction or grant powers to a court by the making of implications or imposition of limitations not found in the express words of the legislative provision."

Sections 743 and 744 provide for circumstances in which the power to make an order thought to be just under s 737(1) should not be made, namely where the conduct ought to be excused or where it would be unfairly prejudicial to any person. The fact that elsewhere in the Law there are provisions expressly providing for compensation in respect of particular contraventions, e.g. ss 704(7), 716(1) and 1005, does not in our view limit the scope of the discretion granted in ss 737(1) in its context. 47 As to the alternative assertion, in our view the primary judge's focus was upon making a remedial order. His Honour, after forming the view in the light of s 744(1) that the vesting and disposal and other orders sought by ASIC would not be unfairly prejudicial to any person, first addressed possible orders which Edensor acknowledges would be remedial. That is, his Honour considered first that it was just and protective of the interests of shareholders that those shareholders who sold shares to Yandal Gold pursuant to the takeover bid should have the right to avoid those sales, and that those whose shares had been compulsorily acquired should have the right to avoid those sales. It was because of the significant fall in the price of gold that his Honour did not then proceed to order that the shares then held by Yandal Gold be vested in ASIC with directions as to their disposal, so as to deprive the respondents at first instance of the shares acquired under the takeover as benefits and advantages obtained by reason of their contraventions. The primary judge observed that, in making an order that is "just" or protective of the interests of the shareholders, the Court should have regard to the realities of the situation, including that the respondents at first instance would be able simply to re-acquire the shares "with little or no benefit to the shareholders who suffered detriment as a result of the contravening conduct", and it would seem at a lesser price than $1.50. 48 Hence, the primary judge addressed other possible orders. Having identified the "price" paid by the Normandy Group to Edensor under the arrangements as a measure of the benefit received by Edensor by its contraventions of s 615, his Honour found that the payment of that "price" deprived the Great Central shareholders of the opportunity of receiving an offer at a significantly higher price. In terms of s 737(1), his Honour then said:

"Is it just that the 'price' be redirected to those who suffered the detriment arising from its payment? In my view an order that Edensor be required to disgorge to those shareholders the value of the benefit it received for its contravening conduct is "just" under s 737 and is protective of the interests of the shareholders under s 739."

49 In our view, the primary judge's reasons indicate that his Honour's order that Edensor disgorge the $28.5 million was made in terms strictly in accordance with s 737(1), namely that such an order was just in all the circumstances of the case. His Honour's approach, whilst resulting in the shareholders of Great Central receiving the benefit of the "price" paid by Normandy to Edensor rather than Edensor retaining that benefit, demonstrates that he did not divert from the proper exercise of the power available under s 737(1) to an attempt to award damages or directly to compensate those shareholders by reason of the contraventions; the compensatory elements of that order were a consequence of making an order that was just in relation to the unlawful benefit Edensor received from Normandy under the arrangements. It was not inconsistent with, nor beyond the power granted by, s 737(1) for his Honour to have made an order which had that consequence. 50 We also reject the contention put on behalf of Edensor that, in making the order for the disgorgement by Edensor of the sum of $28.5 million, the primary judge was imposing a fine or penalty upon Edensor. The primary judge expressly noted that orders made under s 737 in respect of contraventions of s 615 are in general remedial rather than punitive. The focus of the primary judge then was upon making an appropriate remedial order, including relevantly an order depriving Edensor of the benefit it received under the shareholders agreement of its carried interest in the overall transaction. That focus is consistent with the principle expressed by Mason CJ, Gaudron and McHugh JJ in Metals Exploration Ltd v Samic Ltd (1994) 181 CLR 109 at 128 where their Honours said of the analogous discretion under s 739(1):

"… if by culpable conduct the offeror has secured an advantage which the offeror would not have obtained had it complied with the statutory prescription designed to achieve an efficient and informed market, then it is permissible to make such an order as will protect the interests of persons affected and ensure that the policy of the Law in bringing about an informed market is implemented and, at the same time, deprive the offeror of any advantage which it would not have obtained had it complied with the Law."

51 Edensor further contended that the primary judge erred in finding that there was any detriment to the Great Central shareholders by reason of the contraventions of s 615. That contention is based upon the assertions that "there was no third party bidder and no finding that Normandy was likely to have bid higher for the other shares", and that the takeover could have been made lawfully at $1.50 per share. In our judgment, that contention must also fail. The primary judge referred to the evidence upon which he reached the conclusion that the contraventions enabled the Normandy Group and Edensor, using Yandal Gold as the bid vehicle, to make the bid for Great Central shares at a significantly lower price than would have had to be paid at that time had a bid proceeded without the agreements which contravened s 615 and which secured Edensor's support. That evidence included the Normandy paper for its board meeting preceding the bid, which recorded that:

"It is also clear that an offer that did not have Edensor's support would be less likely to achieve success and would require a significantly higher price."

That board paper also observed that the structure proposed gave Normandy the opportunity to move to full ownership of Great Central at a later point at a price which could not be achieved without Edensor's "support", i.e. through the shareholders agreement and the bid structure agreement. The primary judge, moreover, expressly acknowledged that there might not at that time have been a realistic prospect of a rival bid for Great Central; he did not overlook that possibility. The evidence of Mr Richards explained that the bid structure was adopted by Normandy for accounting, financial and taxation reasons. The primary judge concluded from his evidence, and upon other evidence, that he doubted that a joint bid could have achieved the significant financial and accounting benefits that Normandy sought to gain from a differently structured bid arrangement. A joint bid might have attracted conditions imposed by ASIC which might not have been acceptable to Normandy. It was in that context that Normandy was prepared to enter into the shareholders agreement and the bid structure agreement and the retention agreement with Edensor to ensure Edensor's support for the bid. The Normandy board paper referred to provides ample support for the finding that the price offered in the takeover bid was significantly less than that which would have had to have been offered at that time to achieve the success of the bid, absent the contravening agreements.

52 Accordingly, the findings of fact by the primary judge that the contraventions of s 615 ensured a successful takeover at a price which was then attractive to the parties, and resulted in a rival bid being even more unlikely and the takeover market for shares in Great Central being even less competitive, are not shown to have been erroneous. In that context, the fact that a joint bid might have been made at $1.50 per share without entering into the contravening agreements is not to the point. The takeover bid was made in its terms because the parties perceived advantages in doing so which were secured by the contraventions of s 615. Those advantages led to the bid at that price at that time, and were advantages which included Normandy agreeing with Edensor to provide Edensor with its "carried interest" which the primary judge valued at $28.5 million. Nor does it follow, as Edensor contends, that those Central Gold shareholders who accepted the takeover offer after ASIC announced to the ASX its concerns in relation to the fairness of the takeover offer did not accept the offer at its then price in part at least because they had little practical option. Those shareholders at that time remained in ignorance of the shareholders agreement and the benefits it delivered to Edensor, and of the bid structure agreement and the retention agreement, and there had been at that time no determination as to any contraventions of s 615 by the respondents at first instance. Those matters do not lead to the conclusion that those findings of fact by the primary judge were erroneous. 53 Edensor also challenged the characterisation of the benefits to Edensor under the shareholders agreement as a "carried interest", and that those benefits were of the value of $28.5 million. Its contention that there was no evidence on which the benefit to Edensor under the unlawful arrangements could be valued is largely based upon the proposition that the evidence of the expert witness called by ASIC, whose evidence the primary judge accepted, was based upon a false premise. That so called "false premise" was that Edensor had a call option that could be valued on that basis. In our view, the primary judge did not address the issue of the value of the benefit received by Edensor in an erroneous way, or misconceive the nature of, or the foundations for, the expert evidence upon which he acted. Upon the basis of the terms of the shareholders agreement, his Honour identified the fact that Edensor received a valuable "carried interest". That was the price Normandy was prepared to pay to secure Edensor's support for the takeover bid. That bid was structured so that Normandy might achieve full ownership of Great Central in conjunction with Edensor, through Yandal Gold. It may be accepted that Edensor did not, in strict terms, have a call option in respect of the Great Central shares. But the primary judge did not address its position in that way. He looked to the price that Normandy was prepared to pay for the shares in Great Central, namely $1.50 per share plus the value of the carried interest granted to Edensor. Mr Richards said that the benefit to Edensor was in the nature of a call option because, if the value of the Great Central shares acquired by Yandal Gold under the takeover offer rose when the Chase financing facility came to be repaid in three years, then Edensor would or could realise a ready profit, and if the value of those shares fell then Edensor could "walk away" leaving Normandy as the bearer of the financial exposure. The shareholders agreement meant that in substantive terms there was no financial recourse to Edensor beyond the value of its holding in Yandal Gold. It was only in the sense of using a convenient simile that the expert witness called by ASIC described that arrangement as being like a call option. That simile is not inappropriate. It is not shown that that expert witness misunderstood the nature of the shareholders agreement. Nor is it shown that the primary judge erred in describing the benefits Edensor received under the shareholders agreement as a carried interest. In our judgment, that is an appropriate description for those benefits, notwithstanding the other features of the shareholders agreement to which senior counsel for Edensor directed our attention. Those features do not alter the fundamental character of those elements of that agreement to which Mr Richards referred in his evidence. 54 Edensor in its written submissions on the appeal complained that ASIC had not formally sought an order for payment by Edensor to ASIC of $28.5 million in its application. We are not persuaded that, in the circumstances, there was unfairness to Edensor in the primary judge making the order for payment by Edensor of $28.5 million. The fact that such an order might be made had been raised during the course of the hearing. The fact that ASIC wished to prove the value of Edensor's carried interest and its reasons for doing so was identified in the opening of its case, as well as being the subject of certain particulars to par 16 of the Further Amended Statement of Claim dated 27 April 1999. Almost at the end of the hearing, the respondents at first instance sought leave to amend their defences to raise the potential unfairness which might result to Great Central by the primary judge making vesting orders as sought by ASIC. That was because, it was alleged, the effect of such vesting orders would be to trigger a "change of control" provision in the Senior Notes referred to in [20] above for US$300 million, so that Great Central would be exposed to the detriment of the bondholders requiring the repurchase of those Senior Notes at a premium. The primary judge, in the light of that issue arising, was invited by ASIC to make the disgorgement order. His Honour gave to the parties the opportunity to address that issue specifically, as well as the opportunity to address the proposed amendment. The hearing was adjourned for a few days for the parties to do so. In the event, the primary judge did not consider that a vesting order would work unfair prejudice to Great Central so as to enliven s 744(1) by any vesting order. However, the course of events in our view indicates that Edensor was not deprived of the opportunity to confront and address the prospect of the primary judge making a disgorgement order. 55 We also reject the contention on behalf of Edensor that the primary judge failed to have regard or proper regard to its detailed submissions, and those put on behalf of the Normandy Group, on the question of the valuation of Edensor's "carried benefit", or that there is an inconsistency in his Honour's reasons in accepting the evidence of that expert witness on the one hand but in indicating that it was not necessary to resolve the question as to the fair price for the shares in Great Central at the time of the bid on the other. 56 As to the latter contention, we do not see any inconsistency in the approach of the primary judge. One issue which was the subject of evidence at the trial was the fair price to be offered for the Great Central shares at the time of the bid. The parties called expert evidence on that issue. The respondents at first instance did so to counter the case put by ASIC that, if the Law had been observed, either there would have been no bid at all or the bid would have been at a higher price because the contraventions of s615 enabled the bidders to launch the bid from a joint platform of 40.37% shareholding in Great Central and so no "premium for control" element needed to be included in the bid offer price. The respondents sought to show that, in substance, control had already passed in Great Central to the Normandy Group and Edensor, and that the control premium was built into the bid offer price to make the offer price a fair one. The primary judge did not resolve the dispute about whether the bid offer price was fair, for the reasons set out in [19] above. The amount of $28.5 million, the subject of the disgorgement offer, is not an assessment of any "control premium" element which should have been included in the fair price for shares in Great Central. It is an assessment of the value of Edensor's carried interest in the overall transaction. It was a value arrived at upon acceptance by the primary judge of the evidence of the expert witness called by ASIC. That evidence involved a process of valuation similar in economic substance to that applicable to valuing a call option. The exercise undertaken by that expert witness in that regard did not involve arriving at the fair value of the Great Central shares at the time of the bid. That expert witness adopted the value of those shares as $1.50, namely the bid offer price, for the purpose then of valuing the carried interest of Edensor. We accordingly see no inconsistency in the approach of the primary judge as claimed on behalf of Edensor. 57 The principal reason why the valuation of Edensor's carried interest accepted by the primary judge is now said to be erroneous is because it proceeded upon the basis of the bid offer price of $1.50 per share. It is contended that there was no basis for proceeding upon that foundation for valuing its carried interest, and that the valuation of its carried interest should have proceeded on the basis of the then prevailing price of Great Central shares. It was also contended at the trial, and on appeal, that it was also necessary to have regard to the advantages obtained in return by Normandy for granting to Edensor the benefits of its carried interest. Edensor also contended that, contrary to the observations of the primary judge that the expert witness called by ASIC "was only partly challenged in cross-examination on the valuation" and that his use of certain valuation models was "not really challenged", the respondents at first instance did in fact challenge the reliability of that expert witness and his methodology. The primary judge gave the "short answer" to the contention that a starting point for valuing Edensor's carried interest was wrongly accepted to be the bid offer price, that it was not shown that the witness had adopted an incorrect methodology or had made wrong or unacceptable assumptions. There was brief cross-examination only directed at the appropriateness of the use of the valuation models, but the expert witness called by ASIC maintained that they were generally accepted "option valuation methodologies" and that their use in valuing the carried interest of Edensor was appropriate. The expert witness called on behalf of the respondents at first instance, whose evidence on this aspect was referred to in the course of the submissions in reply of Edensor, did not really assert to the contrary. Once the step is taken, and as we have accepted, appropriately taken by the primary judge, that it was legitimate to approach the valuation of Edensor's carried interest on the basis that that the carried interest was similar to a call option, the review of that evidence does not demonstrate that, in relevant respects, the evidence of the expert witness called by ASIC was challenged in any substantial way so as to demonstrate that the primary judge's approach to the acceptance of that evidence involved appealable error. The acceptance of that witness' evidence, in particular for present purposes that in the circumstances the use of the bid offer price as one foundation for the valuation of Edensor's carried interest was appropriate, is also not shown to involve appealable error. The primary judge was entitled to conclude upon that evidence, as he did, that the assumptions made by that expert were proper assumptions and that his methodology was also appropriate. The valuation accepted by the primary judge was therefore one which he was entitled to accept on the evidence at trial, having had the benefit of seeing that witness cross-examined to the extent that cross-examination occurred and having had the benefit of seeing the limited extent to which evidence was adduced by the respondents at first instance in relation to the methodology adopted or criticising the assumptions made. 58 The primary judge dealt with the proposition that the valuation of Edensor's carried interest should be reduced to reflect the corresponding benefit received by Normandy in the following terms:

"It is not to the point that Normandy also got advantages from securing Edensor's support. Normandy saw the carried interest as "generous to Edensor with Chase's put option to Normandy effectively allowing Edensor the use of Normandy's balance sheet for its share of the acquisition". Normandy also viewed that interest as enabling it to move to "full ownership" in three years at a price that could not be obtained without Edensor's support. The price was said by Normandy to have "more up-side than down side risk". These observations by Normandy do not offer any support to the respondents' criticisms of [the expert's] approach to valuing Edensor's interest and are consistent with it."

59 It is not necessary to address the final contention on behalf of Edensor that it was erroneous for the primary judge to have ordered Yandal Gold to dispose of its shares in Great Central in the event that Edensor did not make payment of the sum of $28.5 million. That circumstance does not arise as Edensor in fact made that payment. ASIC also contended that, in the event that the appeal by Edensor was successful to the extent of having the disgorgement order set aside, orders should then be made requiring Normandy Mining Holdings, Edensor and Yandal Gold to dispose of all their remaining shares in Great Central, and directing that any net profit derived by Yandal Gold from the sale of its shares be rateably distributed to those who sold those shares to Yandal Gold. Edensor, and counsel appearing for the respondents other than ASIC, made submissions as to why in that event such orders should not be made. As we are of the view that the appeal against the decision and orders of the primary judge should be dismissed, those questions also do not arise.

ORDERS 60 In our judgment, the appeal should be dismissed. Edensor should pay to ASIC its costs of the appeal to be taxed. The other respondents to the appeal appeared by counsel to make submissions in relation to the alternative orders sought by ASIC, but did not otherwise support or oppose the appeal. We consider it appropriate that those respondents should bear their own costs of the appeal. I certify that the preceding sixty (60) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill, the Honourable Justice Sundberg and the Honourable Justice Mansfield.

Associate: Dated: 20 March 2002 Counsel for the Appellant: P A Hayes QC and I D Martindale

Solicitors for the Appellant: Clayton Utz

Counsel for the First Respondent: S Rares SC and RD Strong

Solicitors for the First Respondent: Australian Securities and Investment Commission

Counsel for the Second to Seventh Respondents N J Young QC and D J Batt

Solicitors for the Second to Seventh Respondents Freehills

Date of Judgment: 20 March 2002