Fast Scout Ltd v Bergel & Ors [2001] WASC 326 (8 November 2001)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : FAST SCOUT LTD -v- BERGEL & ORS [2001] WASC 326

Corporations - Management and administration - Board meetings - Removal and replacement of directors

Corporations - Shareholder meetings - Timing - Improper purposes - Turns on own facts

Corporations - Take over offers - Proceedings before Corporations and Securities Panel

Injunctions - Interlocutory - Interim relief - Urgency - Strength of serious question to be tried - Principles to be applied - Turns on own facts

Plaintiff : Mr C L Zelestis QC & Mr P D Evans (appearing on 5 & 6 November 2001)

First Defendants : Ms N Johnson QC (appearing on 5 & 6 November 2001), Mr M I Handcock & Mr C B Edmond (appearing on 8 November 2001)

Second Defendant : Ms N Johnson QC (appearing on 5 & 6 November 2001), Mr M I Handcock & Mr C B Edmond (appearing on 8 November 2001)

Third Defendant : Mr A R Beech (appearing on 5 & 6 November 2001) & Mr S J Penrose (appearing on 8 November 2001)

Bell Resources v Turnbridge (1988) 6 ACLC 842

Browne & Anor v Panga Pty Ltd & Anor (1995) 17 ACSR 75

Link Agricultural Pty Ltd v Shanahan & Ors [1998] VSCA 3; (1998) 28 ACSR 498

McPherson & Ors v Mansell & Ors (1995) 13 ACLC 767

Smith v Paringa Mines Ltd (1906) 2 Ch 193

1 These are my reasons for refusing on 6 November, an application for an interim injunction made by the plaintiffs on 5 November, and for refusing on 8 November an application for an interim injunction brought by the second defendant.

2 In this matter an affidavit was made by Mr Farooq Khan, who is the Managing Director of the plaintiff corporation ("Fast Scout"). The facts which I now recount are drawn from that affidavit and from reasons of the Corporations and Securities Panel in an application ("Bigshop 2") to which I will later refer. The second defendant ("Bigshop") is a corporation, of which the first defendants are directors, and the third defendant ("Macquarie") is a separate corporation.

3 Bigshop floated in April 2000. It issued 32 million new shares raising $8 million and was listed on the Australian Stock Exchange (ASX). It has 80 million shares on issue following the float. Of those shares, approximately 46 per cent were subject to ASX escrow conditions. In its prospectus, Bigshop described its business purpose as being an Australian "online virtual department store". It has developed its website and most, or all, of the software necessary for its venture and had commenced trading, but it is fair to say that its trading volume does not, at present, appear to be significant and it had as at mid-2001 still over $6 million in unspent capital. Its shares have always traded below their issued price of 25 cents and were trading at about 7 cents per share at mid-2001.

4 The first defendants, collectively, appear to have a relevant interest in just over 19 million fully paid ordinary shares in Bigshop ("the incumbent board block"), representing approximately 24 per cent of its issued ordinary share capital. Atkins, one of Bigshop's founding directors, is the registered holder of approximately 10.5 million fully paid ordinary shares while Oliver, another founding director, is the registered owner of 8 million so that collectively Atkins and Oliver own approximately 18.5 million fully paid ordinary shares in Bigshop, representing approximately 23.15 per cent of its issued ordinary share capital.

5 On 24 November 2000 the first defendants were re-elected as members of Bigshop's board of directors at its annual general meeting. At the same meeting, resolutions to re-elect Atkins and Oliver were defeated with the incumbent board block voting against them. The defeat was by a margin of less than 1 per cent. Prior to the meeting in July 2000 Bigshop had announced a conditional contract to merge with another company called Rumble and Bigshop's shares were suspended until 30 November, when it announced that that transaction was not to proceed.

6 Mr Khan took the view that the future direction of Bigshop was affected by the circumstance that control of it was polarised between the incumbent board block and the Atkins/Oliver block. He says that in early 2001 he identified it as a company in which a shareholding could be taken to resolve the impasse between those blocks for, as he described it, "the mutual benefit of all parties and the minority shareholders of [Bigshop]". In late January 2001 he therefore approached the second-named first defendant ("Morton") to enquire as to whether the board of Bigshop would support a takeover bid by the plaintiff. The response was that the board was not interested at that stage.

7 Mr Khan kept in touch with Morton and in May or June 2001 had a further discussion with him, suggesting that Khan was interested in resolving the deadlock between the two blocks of shareholders. During Khan's discussions with Morton he put to Morton the proposition that a 15 per cent placement of shares in Bigshop be made, that one of the directors resign, and that three new directors nominated by Mr Khan should join the Board. I pause to note, although it will become obvious in due course, that there is significant similarity between the proposition which Mr Khan put to Morton, which the plaintiff does not suggest carried with it any taint of improper purpose or association, and the arrangement later arrived at in relation to Macquarie. The plaintiff complains of this later arrangement as being in breach of the fiduciary duties of the first defendants.

8 Morton indicated to Mr Khan that Bigshop was in discussion with an undisclosed third party. It is not clear whether this party was at that stage Macquarie or some other party. There was discussion about what premium to the current market price would be paid for the placement, on the basis that it would amount to a transfer of control of the company. Mr Khan indicated that, should his proposal be rejected, it was likely that a takeover bid would be launched. Further discussions took place between that time and 13 June, but the outcome was not satisfactory to Mr Khan.

9 On 13 June 2001 Fast Scout announced its intention to make a proportional takeover bid for 51 per cent of the Bigshop shares it did not own subject to certain waivable preconditions which included ASX's approval of Fast Scout's application for a waiver of ASX Listing Rules 9.17 and 9.18 to allow holders of shares held in escrow to accept the plaintiff's offer. The consideration was to be 7.6 cents per share.

10 The plaintiff became a substantial shareholder of Bigshop from June 2001, with its shareholding on 30 July being 10.2 per cent, 14.8 per cent on 13 September and 12.6 per cent on 18 September.

11 In July the ASX refused the plaintiff's application for a waiver of the Listing Rules, which had been made on 19 July, on the basis that ASX's policy was to consent to the release of escrow shares only where a full takeover bid was made for the target. On 30 July the plaintiff withdrew that conditional offer and announced an intention to make a further bid, on similar terms, but subject to the precondition that ASX approve a revised form of waiver of the relevant Listing Rules. The consideration was 7.8 cents per share. The announcement noted that the precondition might not be met.

12 ASX Listing Rule 7.9 prohibits a listed entity from issuing shares in the three months after the entity is advised of the making, or of a person's intention to make, a takeover bid for it, except with shareholder approval. On 30 August Fast Scout met with the ASX. The ASX advised that in its view the three month period under Listing Rule 7.9 would end on 14 September, three months from the first announcement, and did not commence anew from the announcement on 30 July.

13 On 4 September the plaintiff made an application to ASX seeking consent under Listing Rule 9.17, which was declined on 14 September.

14 On 28 August 2001, Bigshop announced that it had agreed with Macquarie to proceed with a placement of 10 million Bigshop shares at 7.5 cents per share, to enter an agreement for Macquarie Technology Investment Banking (MTIV) (a "division" of Macquarie) to become Bigshop's financial advisor, and for Macquarie to assist in finding up to three additional non-executive directors. ("The proposed placement"). The announcement stated that the agreement was subject to two conditions, they being:

(a) ASX not approving the waivers requested by the plaintiff. This condition, as I have noted, was later satisfied; and

(b) The placement not being in breach of Listing Rule 7.9.

15 It appears that the proposal originally discussed between Bigshop and Macquarie, prior to Fast Scout's announcement of 13 June, was for a placement of 6.667 million shares. Bigshop's 28 August announcement advised that the proposed size of the placement had been increased to 10 million shares "in response to" the plaintiff's acquisition of over 10 per cent of Bigshop, in order to ensure that Macquarie would still be perceived by other investors as having the status of a "cornerstone" investor. During proceedings before the Panel, Bigshop and Macquarie offered again to reduce the size of the placement from the 10 million shares to 6.67 million shares.

16 Bigshop announced in its placement announcement that it had obtained a waiver of Listing Rule 7.9 from the ASX to allow it to enter into the agreement, so that it appears that the second condition referred to in the placement announcement would be satisfied.

17 On 12 September the plaintiff announced that it had called a meeting of Bigshop shareholders to remove the current board of directors of Bigshop and replace them with directors nominated by the plaintiff ("the Board spill meeting"). That meeting was called for 26 October 2001. Also on 12 September the plaintiff made a market announcement, and wrote to the directors of Bigshop, expressing the view that the first defendants had now become "caretaker directors" and could not proceed with the proposed placement prior to the meeting of 26 October, without the approval of shareholders. It sought, but did not obtain, undertakings from the first defendants that the placement would not proceed prior to the "earlier of member approval in general meeting, or the close or withdrawal of the plaintiff's bid". Also on 12 September, the plaintiff announced that its bid would proceed even if the ASX did not give the consents referred to in its preconditions.

18 On 14 September 2001, the plaintiff made an application to the Panel pursuant to s 657A of the Corporations Law, seeking a declaration of unacceptable circumstances in relation to Bigshop's proposed placement. It also sought interim relief. On 17 September 2001 the plaintiff served on Bigshop and lodged with the ASIC and ASX its bidder's statement containing its offer.

19 In the course of the Panel proceedings there were four distinct determinations:

(a) The termination of the first application (Bigshop 1) on 27 September 2001 in which the plaintiff was unsuccessful.

(b) The determination of an application on 4 October 2001 for consent for review of the decision in Bigshop 1, in which the plaintiff was successful.

(c) The determination of an application on 4 October 2001 for an extension of the time within which the plaintiff had to distribute its bidder's statement to the members of Bigshop, in which the plaintiff was successful.

(d) The determination of the application for review of Bigshop 1 in which the plaintiff was successful (Bigshop 2).

20 During the course of those proceedings Bigshop had agreed to postpone the proposed placement until the Panel had made its decision in Bigshop 1 and in the proceedings determined on 4 October, and did not take steps to proceed with the proposed placement prior to decision of Bigshop 2.

21 In the proceedings in Bigshop 2, the first issue which the Review Panel considered was whether the proposed placement would have the effect of triggering a bid condition which was likely to lead to the defeat of the bid. It accepted Fast Scout's assertion that the proposed placement to Macquarie and arrangements to add up to three directors would be likely to lead to the defeat of the bid, and therefore unreasonably reduce the prospect of the plaintiff achieving effective control of Bigshop. It considered that, in the absence of shareholder approval, implementation of the proposed placement would be "frustrating action".

22 The Review Panel considered that neither Bigshop nor Macquarie made a compelling case for there being a commercial imperative for the proposed placement. It did not consider that if the proposed placement did not proceed there would be very material harm to Bigshop shareholders in the sense of loss of a "once in a lifetime" opportunity. It also noted, as had the Panel in Bigshop 1, that Bigshop appeared to have been in a position since 13 June to convene a meeting of shareholders to ratify elements of the proposed placement but had chosen not to do so. It agreed with the Panel in Bigshop 1 that this would have been a sensible course of action by Bigshop which would have obviated the need for those proceedings.

23 However, the Review Panel also considered that the delay by the plaintiff in putting its bid before Bigshop shareholders had been unacceptable. It noted that the threat of a takeover bid causes targets a degree of hardship in reducing their abilities to act quickly in uncertain business times and to seize opportunities as they arise. It considered that the plaintiff should have made far better preparations for its applications for Listing Rule waivers from ASX and should have been far more advanced before it made any announcement to the market concerning its bid. It did not accept the reasons advanced by the plaintiff as providing any reasonable basis for the delay in prosecuting the applications.

24 The Review Panel provided the parties with its draft decision and orders on 15 October. That decision was that the proposed placement should not go ahead without Bigshop's shareholder approval while the Fast Scout bid was still viable. It received submissions from all parties and advised the parties on 17 October of the orders it proposed to make. The plaintiff was concerned that the Panel, while originally contemplating a declaration of unacceptable circumstances, had in the end decided that it should make interim orders and suspend its proceedings until after the relevant meetings. The plaintiff requested an opportunity to make further submissions. On 19 October the Panel agreed and listed issues on which the plaintiff was invited to make further submissions.

25 The plaintiff responded to that opportunity on 19 October. Its primary concern was that the Panel not postpone the Board spill meeting called for 26 October until after the meeting to deal with the proportional bid. The panel offered Bigshop and Macquarie the opportunity to make submissions in response to that concern and received them on 23 October. The Review Panel met again on 24 October and decided that the further submissions from the parties did not materially alter the information before it or the decision that should flow from that information.

26 The Review Panel prefaced its orders with the observation that the intention of the orders was to ensure "as far as possible, that the shareholders of Bigshop make informed decisions on the two alternatives for the future of their company in the most efficient and clear way possible". The Review Panel did not formally order that it would not make a declaration of unacceptable circumstances, but the entirety of its reasons are prefaced with the observation: "These are our reasons for our decision not to make a declaration of unacceptable circumstances in relation to a proposed placement of Bigshop shares to Macquarie Bank Limited".

27 The Review Panel's orders, and its explanation of those orders, relevantly were as follows:

"Order 1

Bigshop.com.au Limited postpone the Extraordinary General Meeting (EGM) currently due to be held on 26 October 2001, until after the EGM which is currently due to be held on 2 November 2001;

The Panel considered that the three issues relating to control of Bigshop i.e. Fast Scout's takeover, the replacement of the Bigshop board (the 'Spill Resolution') and the Macquarie Proposal, had become inextricably linked, not least of all because of the improved terms of the takeover that were offered in Fast Scout's undertakings. There are a number of possible permutations and combinations of the passage of those relevant resolutions which we endeavour to address and explain below.

Because the takeover is most central to control of Bigshop, and various other things flow from whether the takeover proceeds, we considered that Bigshop's shareholders should know the result of the Proportional Bid Resolution first. Consequently we ordered that the other meeting be postponed until after meeting to put the resolution under section 648E had been decided. Fast Scout and its associates may not vote on that resolution (section 648D(1)(b)).

If the Proportional Bid Resolution is lost, Fast Scout's bid will not proceed and the Macquarie Proposal would not then constitute frustrating action. Bigshop directors should then act according to what they, as the board of the company, consider is in the best interests of Bigshop. The Review Panel would not object to the Macquarie Proposal then proceeding if the board of Bigshop consider that to be in the best interests of Bigshop. The Review Panel would not consider it to constitute unacceptable circumstances for the Bigshop board to proceed with the Macquarie Proposal prior to the meeting to consider the Spill Resolution.

However, if the Proportional Bid Resolution is passed the Macquarie Proposal would still be restrained without shareholder approval. Under Fast Scout's original undertaking to the Review Panel on 11 October, Fast Scout undertook that if the Spill Resolution failed, Fast Scout undertook to the Panel to withdraw its bid (subject to ASIC's consent to allow Fast Scout to withdraw its bid). However, Fast Scout's later undertaking did not include this provision.

Weighing up these matters, the Panel decided that there was no need for it to order a resolution of Bigshop shareholders to vote on the Macquarie Proposal.

28 Since those orders were made the first defendants have sent to shareholders information notices clearly setting out the terms of the proposed placement and informing them that if the plaintiff's bid is approved the proposed placement will not proceed; the documents present the vote to be taken at the meeting on 2 November as a choice between the plaintiff's bid and the proposed placement. On 2 November the plaintiff's bid was rejected, and that the plaintiff subsequently obtained the approval of the ASX to withdraw its bid so as to bring the bid period to an end.

Principles governing interlocutory injunctions

29 I take the principles governing an interlocutory application from the summary to be found in the decision of Owen J in Mott v Mount Edon Gold Mines (Aust) Ltd (1994) 12 ACLC 319. This is relief of an interim nature. I do not think that that makes any difference to the principles to be applied, although the urgent nature of such an application often makes it more difficult to discern whether or not there exists a serious question to be tried, and where the balance of convenience may lie. In some cases, the fact that relief will endure, if granted, only for a very short time may tilt the balance somewhat in favour of the plaintiff. However, in this case, the timetable of meetings to which I have referred above means that if relief were granted which was likely to continue past the morning of 9 November, it would be necessary, in order to ensure that the plaintiff did not obtain an unfair advantage, to make orders which would adjourn that meeting. The Panel, a specialist body, the views of which are entitled to be accorded significant weight, has expressed the view that delay of the meeting past 16 November at the latest, would not be desirable in the interests of the second defendant and its members as a whole. The history which I have recounted demonstrates that the effect of the plaintiff's bid and renewed bid has been to delay the proposed placement for some time already, with, of course, the consequent commercial risk that the third defendant may in the end decide not to proceed with the proposed placement. Whilst I accept that, as the Panel indicated, the proposed placement is not necessarily to be characterised as a "once in a lifetime" opportunity, nevertheless it is undesirable that it should be frustrated if it is genuinely in the interests of Bigshop. For those reasons, it does not seem to me that the shortness of the term of the relief sought has a significant impact on balance of convenience questions.

30 No challenge is made to the plaintiff's assertion that it has standing to raise all of the issues it seeks to ventilate. It is not therefore necessary to consider this issue.

31 The issue was put on a number of bases. The first was that of improper purpose. The second was a breach of ch 6 of the Corporations Law because of an alleged association between the first and third defendants. Both of those bases rely upon the drawing of rather similar inferences. Thirdly, there was an alleged provision of financial assistance to the third defendant in the acquisition of the placement shares.

32 The third ground was not pressed, the first two being described as the "main grounds" of the application. The third rests solely upon the proposition that an agreement to provide fees to an entity of Macquarie over the next 12 months for services to be provided by it, in an area in which it apparently holds itself out as offering services, is, without more, to be seen as financial assistance. That does not appear on these facts to be an arguable proposition.

33 So far as the improper purpose/association argument is concerned, the correct approach appears to me to be that which I enunciated in Emlen Pty Ltd v St Barbara Mines Ltd (1997) 24 ASCR 303. In this case, the relevant inferences are put in this way. If one looks to the reasons advanced for the placement, they come down to four matters set out in Bigshop's market announcement, dated 28 August 2001. It is then argued that those reasons lack any substance. In the absence of any evidence of a proper purpose, the inference of improper purpose can be drawn.

34 I note the plaintiff faces a difficulty in its argument in identifying the improper purpose with any precision. In particular it was put on the alternative bases, in Mr Khan's affidavit, of frustrating the plaintiff's bid or of retaining the first defendants' control of the board. The reason for the alternatives appears to be that there is some material to suggest that discussions about the proposed placement were on foot before the plaintiff's bid was announced, and that it was the bid which happened for a time to frustrate the placement, notwithstanding that later the proposed placement could have had an effect upon the bid.

35 Turning to the reasons in Bigshop's announcement, the first of those that:

"The arrangement with Macquarie Bank Ltd adds a reputable institutional investor to Bigshop's share register. Smaller listed companies such as Bigshop do not typically attract institutional investors."

That assertion is not disputed, but it is pointed out that there is no evidence of a strategic plan to attract further institutional investors. While the submission is accurate, the absence of a plan to acquire further such investments does not appear to me to detract from the perceived advantage which is alleged.

36 Next it is said it "provides new capital of $750,000 to the company". It is pointed out that Bigshop already has $6,000,000 approximately of unspent capital that it is doing little with at present, and that there is no evidence of concrete plans to spend any of it on any particular enterprise in the near future. I accept that submission. The acquisition of further capital does not appear to be a likely purpose.

37 Third, it is said it "allows Bigshop to expand its Board". It is suggested in this context, that where the directors have only recently ousted directors favoured by the Atkins/Oliver block, it would be naive to expect that three further directors would be appointed unless there were an agreement or understanding that they would act in concert or in sympathy with the first defendants. I do not accept that submission. The first defendants were opposed to the continuation of Atkins and Oliver as directors, but there is no evidence before me as to their reasons, the nature of any dispute which may have arisen, or the qualifications of Oliver and Atkins to be directors. Also, it appears that the first defendants are not enthusiastic about any significant role for the plaintiff and Mr Khan in the second defendant, but again there is no evidence of what the plaintiff could bring to the second defendant or what qualifications and expertise Mr Khan would have which would make that involvement desirable.

38 It does not necessarily follow from the proposal to expand the board to include three directors identified by Macquarie Technology Investment Banking, that the first defendants must be actuated by an improper purpose rather than, for example, by a desire to obtain assistance and advice in the task of managing a company which is plainly languishing somewhat at present. It is, of course, potentially the case that such an improper purpose may have existed but there is no particular reason in the circumstances of this case to prefer that inference.

39 Fourth, it is said that "Macquarie Technology Investment Banking is a well respected and competent technology adviser which has identified a number of initiatives that the directors consider will add value to Bigshop. In addition it will accelerate the strategic review of Bigshop being undertaken by Directors". The expertise of that entity is not questioned, although it does not of course necessarily follow that the placement is the only way to achieve the benefit of the advice referred to in that paragraph.

40 My view is in those circumstances the most that can be said is there is some material which suggests that at the end of a trial, after hearing from relevant witnesses in relation to these matters, the drawing of an inference of improper purpose or association cannot be ruled out. There is not however sufficient material at present to suggest there is any reason why the inference is likely to be drawn. To adopt the distinction drawn by Owen J in Woonda Nominees v Chng [2000] WASC 173 at 28, although the plaintiff's case may be arguable, I am inclined to the view that it has not reached even the strength required of a serious question to be tried.

41 In the interval between preparing my reasons for discharging the orders made on 5 November and declining to grant interim relief, and the time for delivery of those reasons, the withdrawal of the plaintiff's bid and the conclusion of the bid period occurred. I had prepared reasons on the basis that the bid period was still as a matter of law on foot. I had formed the view that, broadly speaking, the statutory scheme which entrusts a wide jurisdiction and discretion to the Panel pursuant to s 657A was such that, assuming it to be open to the court to grant an injunction, it would not have been appropriate to do so in these circumstances. That part of the reasons has become moot. I do not therefore propose to express any view on the arguments which were addressed to me in relation to the court's jurisdiction or to the effect upon the court's discretion of Pt 6.10 of the Corporations Law. Difficult questions arise in relation to the interplay between s 657A, s 659B, and s 659C. The first focuses principally on two issues, they being the lawfulness or otherwise of conduct pursuant to s 657A(2)(b) and the effect of conduct or circumstances pursuant to s 657A(2)(a); the second focuses upon the purpose of conduct, with the definition of relevant court proceedings pursuant to that section, meaning proceedings taken "as part of, or for the purposes of" bid or the response; while the third of them focuses simply, it appears, on conduct, being apparently any conduct in relation to which a relevant application is made. It is not desirable to express a view upon those complex matters unless an issue clearly arises.

42 Issues of delay by the plaintiff were raised by the first and second defendants. It is not necessary to determine this issue, but I would make some brief observations.

43 First, I note that the Panel was critical of what it saw as the plaintiff's slowness in the earlier stages of its bid, and in a context where part of the balance of convenience to be taken into account is any effect on the proper ordinary management of Bigshop, any delay in seeking relief should be seen, in my view, against the whole of that background. I note also, of course, the Panel's observations that it would have been possible to settle the placement question earlier if the first defendants had called a meeting for that purpose.

44 The proposed placement itself was announced on 28 August, and at that time it appears that the plaintiff was concerned only with its effect upon the plaintiff's bid, rather than upon the Board spill meeting. It would be odd if questions of the timing of the proposed placement in relation to the Board spill meeting were not raised with the Panel, if the plaintiff had a concern about them, at least at the time at which the Panel's proposed orders were made known. Assuming the plaintiff to have a concern about the relationship between the proposed placement and the Board spill meeting, it is not clear to me why action of this kind was not initiated once the general thrust of the Panel's decision was known on 17 October, it being by then apparent that it was unlikely that any party might be persuaded to depart from the views as to the desirability of proposed courses of action expressed during the course of Panel proceedings.

45 These observations are not intended to suggest that relief should in any event be refused because of the plaintiff's delay; I expressly refrain from analysing that question. However, they do tend to reinforce the earlier comments I have made to the effect that the principles applicable to the grant of interlocutory relief are not to be seen in this case as being significantly affected by the fact that the relief sought is of an interim nature only. The impression created by the parties' dealings with one another, from June until immediately prior to the application to me, was that all parties saw questions of interrelationship between the plaintiff's bid and the proposed placement as the issues of central importance, and it was against that background that the Panel carefully analysed the relevant issues and arrived at the timetable which I have described, on the basis that it was most likely to serve the interests of the Bigshop and its members as a whole.

46 These, in somewhat fuller form, are my reasons for refusing on 6 November to continue the interim relief which I had granted on 5 November for the sole purpose of affording sufficient time for consideration of the issues involved in the application.

The second defendant's application of 8 November

47 On 8 November the second defendant came before me with an application seeking that First Scout be restrained from exercising any voting and other rights attached to any securities in the second defendant issued to it, in relation to the meeting convened for 9 November, or in relation to a proposed motion by the first defendants to adjourn that meeting. The background to that application was as follows.

48 Immediately following my delivery of a truncated form of extempore reasons on 6 November, the defendants sought costs of the application. It was submitted by counsel for the plaintiff, and I agreed with the submission, that costs should be reserved until further order, on the basis that if the plaintiff were successful at trial that could be a reason for granting the plaintiff the costs of the application also. Counsel for the first and second defendants expressed the view that whether there would be a trial was "questionable", but nevertheless the possibility was plainly open.

49 It appears that at approximately 6.00 pm on that day the solicitors for the plaintiff advised the solicitors for the defendants that they proposed to appeal. They sought certain undertakings from the defendants in relation to the proposed placement. The defendants, in turn, sought undertakings from the plaintiff. There was a dispute about what precisely was meant by some of the correspondence. I do not think it is necessary to go into any of those matters. In the meantime, time passed until a point was reached when it was impossible for the proposed placement to be made in time to enable Macquarie to vote at the meeting called for 9 November.

50 There were two bases of the defendants' application. The first concerned the date of the meeting, and had several different aspects. The meeting had originally been convened for 26 October and it was argued that the directors lacked power to postpone it to another date. The Panel, it was submitted, could not by its order confer upon the directors a power which they lacked. Therefore, as I understood the argument, since the postponement was without power, the meeting on 9 November was not validly convened and actions taken at it would be a nullity. It was further argued that in any event the information provided to members in relation to the purpose of the proposed meeting was inadequate and that the period of notice given on 12 September was inadequate pursuant to s 203D of the Corporations Law.

51 Although the plaintiff submitted that it had a complete answer to the last limb of this aspect of the argument, I refused this aspect of the application primarily on the basis of the defendants' delay. The notice of meeting was dated 12 September. So far as any inadequacy in the notice period was concerned, or any insufficiency of information to members, the defendants had had ample time to raise those issues, and there was no reason to wait to seek relief until the day preceding the meeting. So far as the orders of the Panel are concerned, the draft orders were made available to the parties on 17 October. No party appears to have raised with the Panel any question of a lack of power to make or to carry out those orders. As late as 5 November, the defendants not only failed to raise with me any question of the Panel's power to make the impugned order but also relied upon the Panel's orders in their submissions. They submitted on 5 November that one reason why I should refuse the plaintiff's application was that the Panel was the appropriate body to deal with the dispute and that it had made careful and considered orders. Finally, so far as this aspect of the argument was concerned, the relief sought by the defendants was not adapted to deal with the harm which they apprehended; rather than seeking to restrain the holding of the meeting, they were merely seeking to restrain the plaintiff alone from voting at it.

52 The second part of the defendants' argument was somewhat more difficult to follow. It was to the effect that the plaintiff's action in announcing that it proposed to appeal, at the time at which that announcement was made, indicated an abuse of process or oppression or fraud upon the minority of some kind. As I have indicated earlier in these reasons, I have not found the plaintiff's case to be wholly unarguable. It is not clear to me how the mere timing of the proposal to appeal could give rise to such an inference. The plaintiff had already indicated on 6 November that it was at least considering proceeding with the action. The plaintiff would have been entitled to the benefit of the usual appeal period in relation to my decision of 6 November. In those circumstances, the mere additional factor that the plaintiff indicated that it was at that stage intending to exercise its rights to appeal is not something that it could reasonably have apprehended would have deterred the defendants from proceeding with the proposed placement. Indeed, I note that the correspondence relating to the undertakings which each side sought from the other is predicated on the assumption that it was open for the placement to proceed as a matter of law.

53 It was open to the plaintiff to seek an order staying the proposed placement pending an appeal. It did not do so. In the absence of any such order, as I have indicated, the proposed placement was open. In those circumstances, it is in my view not arguable that the mere announcement of a proposed appeal could constitute an abuse of process.

54 So far as the oppression and fraud arguments were concerned, they seem to me in the end to boil down to the proposition that if the proposed placement did not take place at a time which would entitle Macquarie to vote at the Directors' spill meeting, the existing directors were likely to be replaced by Fast Scout nominees and that in those circumstances Macquarie would never proceed with the proposed placement, to Bigshop's detriment. However it is analysed, this seems to me to be no more than the proposition that the existing shareholders are likely to make a bad commercial decision at the meeting on 9 November. It is not, as I understand it, a function of the court to protect shareholders from making decisions which are open to them on the basis that those decisions may not be commercially the most desirable course.

55 For the reasons outlined above, I refused the defendants' application on 8 November.