Mitsui & Co Ltd v Hanwha

Federal Court of Australia|2007-12-20|Before: Gilmour J

BACKGROUND TO THE LEGISLATION 25 In its Compulsory Acquisitions Report of January 1996, the Legal Committee of the Companies and Securities Advisory Committee reported, amongst other things, that: 'Compulsory acquisitions also involve the extinction of property rights in the company. The legitimate interests of minorities therefore need to be recognised and protected; [1.12] The regulatory objective was to balance the interests of all shareholders, to avoid either minority oppression or minority dictation;' [1.13] 26 The Explanatory Memorandum to the Corporate Law Economic Reform Bill (CLERP) 1998, contains the following: 'The Bill will extend the current legislative mechanisms for the compulsory acquisition of securities. These are intended to balance the interests of facilitating changes and corporate ownership with the need to protect the rights of minority shareholders;' [7.30] 27 The Parliamentary Joint Committee on Corporations and Securities into the CLERP Bill 1998 in its Report stated: '… the absence of any time limits on this extended power may place minority shareholders in a position of ongoing uncertainty about the status of their shareholding in a company. The Committee therefore feels that some time limit should be imposed on this extension of the compulsory acquisition provisions' [3.60] and recommended that: "… section 664A be amended so that a compulsory acquisition can only occur within 6 months of the proclamation of the legislation or within 6 months of the person seeking to make the acquisition becoming a 90% holder". [3.61] 28 In a media release, dated 2 June 1999, the Minister for Financial Services and Regulation said that "the Government had carefully considered the Committee's recommendations" and the Government, in its response to the Parliamentary Joint Committee report, an attachment to the media release, said the following: 'The Committee recommended that the Bill be amended so the new compulsory acquisition power can only be used within 6 months of the proclamation of the legislation or within 6 months of the person seeking to make the acquisition becoming a 90% shareholder (recommendation 3I). The Government considers that introducing a time limit is a sensible recommendation, which will provide additional certainty for minority shareholders. However, the 6 month time limit may disadvantage existing 90% holders who have to implement a compulsory acquisition within months of the commencement of the legislation or lose that right altogether. In these circumstances, the Government will seek to amend the Bill to provide that existing 90% holders have 12 months from the commencement of the Bill to use the new compulsory acquisition power. A person who becomes a 90% holder after commencement of the Bill will have 6 months of becoming a 90% holder to use the new compulsory acquisition power'. 29 Recommendation 3 of the Commonwealth Parliamentary Joint Committee report, as modified in terms of the Government's response to the report, was incorporated into the CLERP Bill 1998 in s 664AA and explained in the supplementary explanatory memorandum (at page 10) in the following terms: "Item 26 Compulsory acquisition provisions - section 664AA 3.10. The proposed amendments will implement recommendation 3 of the report into the CLERP Bill by the Parliamentary Joint Committee on Corporations and Securities, with modifications. The Committee recommended that s 664A be amended so that a compulsory acquisition can only occur within 6 months of the proclamation of the legislation or within 6 months of the person seeking to make the acquisition becoming a 90% shareholder (emphasis added). 3.11 The modification is to allow a longer period of 12 months from the proclamation of the legislation for an existing 90% holder to utilise the new compulsory acquisition power. This will effectively allow a transitional period for existing 90% holders who would otherwise be forced to use the compulsory acquisition power within 6 months of commencement of the CLERP Bill or lose that right. The 6 month period will apply to persons who become a 90% holder after commencement" (emphasis added). 30 Hanwha submits that it is evident from this material that the legislature was seeking to balance the interests of the two groups of parties, that is, the interests of 90% holders in facilitating changes in corporate ownership, other than by ordinary commercial activities, with the need to protect the rights of the minority shareholders. One consideration was certainty in relation to the period during which minority shareholders were vulnerable to the exercise of the compulsory acquisition power; and certainty in relation to the date by which the consideration had to be paid. 31 Mitsui points to further extrinsic material which it submits is also relevant to understanding the policy considerations underpinning Part 6A.2 of the Act. I have set these out below. These were intended to emphasise that, in part, the policy considerations and legislative objective were to remove the potential of minority shareholders from demanding a price for their securities that is above fair value, a practice commonly described as 'greenmailing': Capricorn Diamonds Investments Pty Ltd v Catto (2002) 5 VR 61at [28] cited with approval by Steytler P in Batoka Pty Ltd v Conocophillips WA-248 Pty Ltd [2006] WASCA 44 at [40]. 32 The Explanatory Memorandum CLERP Bill 1998 also reveals that it was the primary intention of the new compulsory acquisition provisions to: • [...] reduce costs for companies by making it easier to rationalise corporate groups. Removing tactical litigation and disputes from the courts would lead to a more timely resolution of those matters reducing costs for the parties involved." (at [2.19]); • facilitate the acquisition of the outstanding securities in a class by any person who already holds 90 per cent of the class (at [4.4] and [7.32]); and • discourage minority shareholders from demanding a price for their securities that is above a fair value (often referred to as 'greenmailing') (at [7.31]). 33 The Compulsory Acquisitions Report of the Legal Committeeexpressed the view that compulsory acquisitions at [1.1]: [...] can be a necessary and desirable means of corporate rationalisation. They may produce considerable economic, administrative and taxation benefits including: • facilitating financial restructuring; • permitting the transfer of tax losses between wholly-owned grouped companies; • reducing administrative and reporting costs; • avoiding greenmailing; and • protecting the confidentiality of commercial information and otherwise eliminating possible conflicts of interest in partially owned companies. 34 The Legal Committee considered, also, that the objective was "... to balance the interests of all shareholders, to avoid either minority oppression or minority dictation" (at [1.13]). 35 In relation to the new compulsory acquisition power the report stated: 10.1 [...] It would assist a controlling entity to achieve the legal and economic advantages of full ownership, ensure equal and fair treatment of minorities and reduce the opportunity for greenmailing. 36 The Commonwealth Parliamentary Joint Committeefound: The rules relating to compulsory acquisition will be modified to facilitate the acquisition of the outstanding securities in a class by any person who already holds 90% of the class (at [3.6]); and While the Committee is not unsympathetic to [minority shareholder] views it is also aware that those minority shareholders are not the only stakeholders who need to be considered. The presence of a small minority interest can impede the efficient running and profitability of a corporation. This then affects the value of the business to the ultimate owners of the majority shareholder and can also have some effect on Australia's overall economic efficiency [...] provided the minority shareholders receive fair compensation, this extension of the compulsory acquisition provisions is justified (at [3.59]).

SECTION 1322(4)(d) OF THE ACT 37 Section 1322 of the Act seeks to obviate company proceedings being invalidated by procedural defects. 38 Section 1322(4)(d) of the Act provides that the Court may make an order, either unconditionally, or subject to such condition as the Court imposes, extending the period for doing any act, matter or thing under the Act and may make such consequential or ancillary orders as the Court thinks fit. 39 Section 1322(4)(d) confers an unfettered discretion upon the Court, subject to the requirement of s 1322(6) of the Act, namely, the Court must not make an order unless it is satisfied that no substantial injustice has been or is likely to be caused to any person. 40 It has been said in a number of cases that s 1322(4) is a remedial provision to be construed liberally: Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd [2001] NSWCA 427 at [74]; Re Wave Capital Ltd [2003] FCA 969 at [29]. 41 However, "although s 1322 has been held to be a very wide provision which is to be construed liberally …. there are limits as to what the court can do under it …." per Young J in Re Infomedia Pty Ltd (2000) 34 ACSR 682 at [9]. 42 Hanwha contends that s 1322(4)(d) is not a relevant source of power for the Court to extend time under s 664AA(b) of the Act. It points to the context of Part 6A.2 Division 1 of the Act, by which a minority shareholder is at risk of having his or her shares compulsorily acquired by a 90% holder. Hanwha submits that the time limit in s 664AA(b) has the effect that, at the end of the period of 6 months, such a person will know whether his or her shares remain at risk of being compulsorily acquired and, if they do, at what price. This, it says, is a perfectly reasonable requirement in a legislative scheme which seeks to balance conflicting commercial interests of this character. It follows, so Hanwha contends, that a 90% holder, who wishes to avail himself of the power to compulsorily acquire, must act within the time period of 6 months set out in s 664AA: cf BP Australia Ltd v Brown (2003) 58 NSWLR 332 per Spigelman CJ in at [115]. 43 A particular application of s 1322(4)(d) was considered by the High Court of Australia in David Grant & Co Pty Ltd v Westpac Banking Corp (1995) 184 CLR 265. In that case the appellant companies had been served with statutory demands but had failed to comply with the demands within 21 days pursuant to s 459E(2)(c). They each also had failed to apply to the Supreme Court of Victoria in accordance with s 459G for an order setting aside the demands. Section 459G(2) provided that an application for such an order "may only be made within 21 days" after review of the demand. The appellants did serve such applications but outside the statutory 21 day period. 44 Gummow J, with whom the other four members of the Court agreed, predicated his reasons by observing that the "difficulty in construction arises, perhaps not so much from the particular text of either s 459G or s 1322, as from the interrelation between the two provisions in circumstances where the enactment of s 1322 preceded that of s 459G, and the earlier section is general and the later section specific in its operation." 45 So much may also be said about the present case. 46 Section 1322(4)(d) was found to have no application. The s 459G time limit was held to "define the jurisdiction of the court in respect of an application to set aside a statutory demand" (p 276) and "… attach a limitation or condition upon the authority of the court to set aside the demand" (p 277). The force of the term "may only" was: 'to define the jurisdiction of the court by imposing a requirement as to time as an essential condition of the new right conferred by s 459G. An integer or element of the right created by s 459G is its exercise by application made within the time specified. To adapt what was said by Isaacs J in The Crown v McNeil (1922) 31 CLR 76 at 100-1, it is a condition of the gift in subs (1) of s 459G that subs (2) be observed and, unless this is so, the gift can never take effect. The same is true of subs 3.' 47 It was also germane to the High Court's decision that the statutory scheme within Pt 5.4 contained its own powers and procedures for the Court to extend time, thereby introducing a degree of flexibility to mitigate hardship or unfairness which otherwise might flow from the strict application of s 459G. 48 In Newtronics Pty Ltd v Gjergja (2007) 63 ACSR 611, Byrne J in the Supreme Court of Victoria held that s 1322(4)(d) could not be called in aid to extend the 6 year time limit imposed by the then Corporations Act s 1317HD(2) for the commencement of proceedings under that section. 49 Section 1317HD(2) was in these terms: '(2) Proceedings under this section may only be begun within 6 years after the contravention.' 50 Importantly, Byrne J observed that the right to apply to the court in David Grant under s 459G(1) and the time limit in subs(2) were each in terms very similar to those contained in s 1317HD(2) with which his Honour was concerned. [15] 51 Byrne J, too, relied upon the presence of the word "only" as pointing in context, to a "severe application of the time limit".[18] His Honour also placed weight on the "surprising" location of the word "only" which might otherwise have been expected to be located immediately before the phrase "within 6 years after". [15] 52 In concluding that s 1322(4)(d) had to yield to the specific provisions of s 1317HD(2), Byrne J followed not only David Grant but also BP Australia Ltd, which was very similar to Newtronics, involving as it did an attempt to rely upon s 1322(4)(d) in order to extend the statutory time limit prescribed by s 588FF(3) of the Act for liquidators bringing an application to the Court for orders with respect to voidable transactions.

WHETHER SECTION 1322(4)(d) EMPOWERS A COURT TO EXTEND THE TIME PROVIDED FOR IN SECTION 664AA(b) OF THE ACT 53 Against the legislative background outlined above, the issue is whether the 6 month time limit on exercising the compulsory acquisition power is a condition and restriction "which must be observed" (Anthony Hordern & Sons Ltd v Amalgamated Clothing & Allied Trades Union of Australia (1932) 47 CLR 1 at 7) or a "condition, limitation or direction" which has the effect of "appointing a course to be followed" (R v Wallis; Ex parte Employers Association of Wool-Selling Brokers and H V McKay Massey Harris Pty Ltd (1949) 78 CLR 529 at 550), in each case, to the exclusion of the general power in s 1322(4)(d). 54 To adapt what was said by Gummow J in David Grant (p 277) in relation to the time limits in s 459G(2) and (3) of the Act, the issue is whether an integer or element of the power created by s 664A is its exercise by lodging the compulsory acquisition notice for the acquisition with ASIC within the time specified. Again, to adapt what was said by Isaacs J in The Crown v McNeil (1922) 31 CLR 76 at 100-101, referred to by Gummow J in David Grant at p 277, is it a condition of the gift in s 664A that the time period in s 664AA be observed and, unless this is so, the gift can never take effect? 55 In Gordon v Tolcher (in his capacity as Liquidator of Senafield Pty Ltd (in liq)) & Anor (2006) 231 ALR 582 at [37], the High Court saw the relevant distinction, in relation to the time period in s 588FF(3) of the Act, being whether the provision in the section as to time was of the essence of the provision or whether the provision in the section was to be "characterised merely as a time stipulation of a procedural nature". 56 Hanwha submits that, having regard to the legislative background material and the legislative scheme itself, the intention may be discerned that the 90% holder exercise its compulsory acquisition power, or gift, within the relevant 6 month period or 'lose that right' to echo the words of the Parliamentary Joint Committee. I do not agree. The material to which I have referred does not give paramountcy to the interests of minority shareholders. The legislation is a balancing exercise involving a number of competing considerations. Indeed there is an important national economic perspective discernible particularly in the Explanatory Memorandum. Protection of minority shareholders is but one of a number of objects. For example, one primary object in thelegislative schemeidentified by Steytler P in Batoka [39] was that shares are acquired at fair value. 57 This intention, Hanwha says, is also manifest in the words "only if" and its location within s 664AA, and that to permit s 1322(4)(d) to override the time limit expressed in such emphatic terms in s 644AA is to deny meaning to the word "only". 58 Hanwha submits that in its context, the word "only" has the role of meaning "not otherwise", rather than that of merely providing a non imperative emphasis to the time limit. There is no basis, it contends, for not giving full force and effect to the meaning of the word "only" in circumstances where a fixed time period is prescribed in emphatic terms in relation to the exercise of a statutory power to expropriate shares. 59 However, I do not consider the use of the word "only" to be determinative of the question. I respectfully agree with the observations of Spigelman CJ in BP Australia Ltd. There, the Chief Justice, with whose judgment the other members of the Court agreed, considered the significance of the word "only". He said at [88]: The word "only" in a time limitation statutory provision can characterise the provision as a "time so emphatically prescribed". (Texel Pty Ltd v Commonwealth Bank of Australia [1994] 2 VR 298 at 300; per Hayne J, in a case under s 459G which was a precursor of David Grant v Westpac). However, the use of the word "only" is not of itself determinative. (See eg Emanuele). Its force is affected by the relevant statutory scheme considered as a whole, as the analysis in David Grant v Westpac shows. 60 In Emanuele v Australian Securities Commission (1996) 188 CLR 114 the High Court gave consideration to s 459P of the then Corporations Law which provided that an application by the Commission for a company to be wound up in insolvency "may only" be made with the leave of the Court. 61 The majority were not persuaded, despite the strength of that language that the failure to comply with the relevant time limit should be rigidly applied. An order nunc pro tunc was made. Re Testro Bros Consolidated Ltd [1965] VR 18 is another case where despite emphatic statutory language: "Except by leave of the Court … no action or proceeding shall be proceeded with or commenced …", a nunc pro tunc order was made. 62 Accordingly, the use of the word "only" is but one ingredient in the constructional spectrum: cf Newtronics at [29]. 63 David Grant and the other cases, involving as they did statutory provisions concerning applications to a Court, may be distinguished from cases such as the present, on the basis that conformity with the procedural time limit was a pre-condition to the jurisdiction of the Court from which relief was claimed: David Grant at 276-277; Emanuele at 152 per Kirby J; Newtronics at [25]. 64 However, that distinction does not delineate the limits of the present enquiry. 65 In Emanuele, Kirby J said at 153: 'In the morass of modern legislation, it is easy enough, even for skilled and diligent legal practitioners (still more lay persons who must conform to the law) to slip in complying with statutory requirements. The Law is a case in point. Its complexity and detail is such that it has necessitated, within a short time of its enactment, the passage of the First Corporate Law Simplification Act 1995 (Cth). A number of further stages of simplification are promised. An undue rigidity in insisting upon strict compliance with all of the procedural requirements of the Law could become a mask for injustice and a shield for wrong-doing. Against that risk, courts generally retain the facility to cure slips and to repair oversights in proceedings before them, in appropriate cases where justice requires it.' 66 Whether s 664AA(b) is such a procedural requirement lies at the heart of the question. 67 I have concluded that s 664AA(b), despite its strong language, does not operate to exclude the operation of s 1322(4)(d). In so finding, I have been mindful that this new provision postdates the commencement of s 1322(4)(a) and the observations in that respect, generally, of the High Court in David Grant at 275-276. 68 However in that case, in addition to the 'jurisdiction' point of difference, it was also of significance to the result that the legislative scheme established by the new Pt 5.4 itself contained specific provisions conferring upon the court an express power to extend time, firstly in relation to the period for compliance with the statutory demand and secondly in relation to the relevant 6 month period. Other aspects within the statutory regime emphasised the importance of s 459G as an integral part of the particular scheme established by Pt 5.4. In particular insurmountable difficulties would have arisen, were an extension of time available under s 1322(4)(d) in relation to the presumption of insolvency under s 459C(2) and the operation of the definition of the 'period for compliance' with the statutory demand set out in s 459F(2): David Grant at pp 277-278. There are no similar difficulties associated with the compulsory acquisition provisions under Pt 6A.2. 69 Section 669, contained in Chapter 6 of the Act, invests ASIC with wide powers to exempt persons from provisions of the Chapter or to declare that the Chapter applies to a person as if specified provisions were omitted, modified or varied. These powers are expressed widely enough to have enabled ASIC in effect to have removed the time limit under s 664AA(b) or to have extended it. They are not however curial remedies. 70 I accept the following further submissions made by Mitsui. First, the issuance of a compulsory acquisition notice depends upon the appointment of an independent expert, from a panel nominated by ASIC, who must prepare a report to be issued simultaneously with the notice. The completion of the report by the independent third party is a necessary predicate to the issuance of the compulsory acquisition notice: s 664C(2)(b)(ii). 71 The requirement that the independent expert's report accompany the compulsory acquisition notice, places the timing of the issuance of the notice outside the complete control of the compulsory acquirer. In this respect, s 664AA is quite different to ss 459G and 588FF. Under s 459G, the power to apply to set aside a statutory demand rests entirely with the company. Under s 588FF, a long period (3 years) is provided within which all that need happen is that an application is made by a liquidator and that step is not subject to the involvement of any independent third party. 72 Secondly, the 90% holder, as in the present case, may only be able to obtain access to information belonging to the target company at or about the date that it becomes the 90% holder and thus may not be able to commence the process of gathering the relevant material and briefing the independent expert until the time has commenced running under s 664AA. 73 When taken in conjunction with the 90% holder's dependence on the independent expert, it is clear that there may well be circumstances where relief might be sought by a 90% holder as a result of matters beyond its control, either because the briefing of the expert is delayed or the expert himself takes longer than expected to complete his report. Given such circumstances, it is not possible to attribute to Parliament an intention that the 6 month limit be immune to judicial extension under s 1322(4)(d). 74 Thirdly, in BP Australia Ltd, the Court regarded the recognition in the Harmer Report (General Insolvency Inquiry (ALRC 45)) of the considerable commercial uncertainty and inconvenience of "general delays associated with the winding up of insolvent companies" as the policy behind the abridgement of the period within which a transaction may be avoided, and which led to the introduction of the phase "may only be made" in s 588FF(3): at 343-344. In Gordon v Tolcher, the High Court cited the Harmer Report to the same effect in relation to "inordinate delays in commencing proceeding in respect of voidable transactions" (at [38]). No such consideration applies with respect to s 664AA. 75 In Gordon v Tolcher, the Court considered the 3 year period within which to bring applications under s 588FF(3) to be immutable by rule of Court, in part because s 588FF(3)(b) specifically provided a judicial power to extend time: at [41]. The existence of a wider regulatory power to modify Chapter 6 is not a reason for discerning an intention to exclude the applicability of the judicial power under s 1322(4)(d). In the context of a complex piece of legislation such as the Act, there is no reason to assume that a role allocated to the regulator should be the foundation for contracting the scope of an otherwise broadly expressed power given to the Court. 76 On the contrary, the whole point of the power under s 669 is to allow a considerable measure of flexibility in the operation of Chapter 6 and such a fundamental legislative intention entirely supports the continued applicability of s 1322(4)(d) under Chapter 6. 77 The decisions, to which I have referred, which have limited the applicability of s 1322(4)(d) in relation to other provisions of the Act concern provisions that have significantly different legislative purposes to relevant provisions of Chapter 6. They do not concern circumstances where the whole of the relevant Part is subject to amendment by ASIC and where the party seeking an extension of time is dependent upon the conduct of others in order to meet the statutory deadlines. They are therefore not decisive of the applicability of s 1322(4)(d) here. 78 Chapter 6 is not, in my opinion, a self contained and complete code for the resolution of disputes involving the statutory process: cf Emanuele at p 56 per Kirby J; BP Australia Ltd per Spigelman CJ at [79]. 79 It is of significance too, in arriving at this conclusion, that wide curative powers are found in s 1325D(1)(a) of the Act which enables the Court to declare, for example, a document not to be invalid merely because a person contravened a provision of Chapter 6, 6A, 6B or 6C. Pt 6A.2 in which s 664AA(b) sits is within Chapter 6A. This was a matter which was also considered to be significant by Mandie J when the offer period under s 650C(1) of the Act and the period for giving notices under s 650D(1)(c)(ii) of the Act were extended pursuant to s 1322(4)(d). In so concluding, David Grant was distinguished: Pinnacle VRB Ltd v Reliable Powerline [2001] VSC 262 at [17]-[20]. A similar approach was taken by Warren J in Capricorn at [260].

EXTENSION AFTER END OF PERIOD 80 Under s 70 of the Act, the power to extend the period for doing an act may be exercised even if, as here, the relevant period has ended. 81 Accordingly, there is power under s 1322(4)(d) to extend time under s 664AA, notwithstanding that the 6 month time limit has run.

SHOULD TIME BE EXTENDED: DISCRETION 82 It is for the plaintiff to satisfy the Court that the justice of the case requires that the extension sought be granted: Newtronics at [40]; cf Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 554. 83 In relation to the discretion afforded to the Court under s 1322, French J said in Re Wave Capital Ltd at [29] that: 'Each application for the exercise of the court's relieving power will require consideration of all circumstances of the case to ensure that the indulgence sought is appropriate and does not undermine the requirements of the Act. … the power conferred by s 1322 must be exercised having regard to the requirements of the purposes of the Corporations Act … It must also be exercised having regard to the interests of all parties affected and the public interest in ensuring compliance with statute law and company constitutions. Evidence of a blatant disregard of the provisions of the Act or the constitution of the company may lead to refusal of relief …'

Chronology 84 I will now consider the events which occurred from the time of acquisition by Mitsui of the securities in SAH through to September 2007. These events bear on the question of the exercise of the Court's discretion.

Period from Acquisition until Lodging and Giving the Notice 85 On 31 July 2006, Mitsui and Mitsui Australia acquired their aggregate 94.2% interest in the ordinary shares of SAH (and the A class shares of SAH). By operation of s 664AA(b) of the Act, Mitsui had until 31 January 2007 to lodge compulsory acquisition notices with ASIC concerning Hanwha and Sempurna's ordinary (and A class) shares in SAH. 86 In August 2006 Mitsui decided to seek to compulsorily acquire the remaining ordinary (and A class) shares in SAH held by Hanwha and Sempurna. 87 On or about 15 September 2006 Mitsui engaged PKF to prepare the independent expert's report to accompany the Notices. 88 From August 2006 to January 2007 Mitsui sought to obtain, and obtained, an independent expert's report . 89 In September 2006 Mitsui first prepared notices to give to Hanwha and Sempurna. However, Mitsui could not settle the notices until receipt of PKF's independent expert's report. 90 On 19 January 2007 PKF issued to Mitsui its final independent expert's report, in which it concluded that Mitsui was a 90% holder of the ordinary and A class shares in SAH under s 664A(2)(c) of the Act, and that Mitsui's offer to Hanwha and Sempurna under the notices for their ordinary and A class shares in SAH gave a fair value. 91 Mitsui prepared the notices so that the value offered to Hanwha and Sempurna for their ordinary and A class shares in SAH mirrored the price to be paid by Mitsui to Akzo under the Sale Agreement for Akzo's ordinary and A class shares in SAH. 92 On 25 January 2007 Mitsui lodged with ASIC and dispatched to Hanwha and Sempurna compulsory acquisition notices concerning the ordinary and A class shares in SAH held by Hanwha and Sempurna.

Period from Notice to ASIC Application 93 By objection form dated 15 February 2007 Sempurna objected to Mitsui compulsorily acquiring its A class shares in SAH on the terms in the relevant Notice. Sempurna did not object to Mitsui compulsorily acquiring its ordinary shares in SAH under the relevant Notice. 94 By objection forms dated 22 February 2007 Hanwha objected to Mitsui compulsorily acquiring its ordinary and A class shares in SAH on the terms in the relevant notices. 95 In March 2007 Mitsui instructed its solicitors to seek relief from ASIC under s 669(1) of the Act for any possible non-compliance by Mitsui with s 664C(3) of the Act, by reason of difficulties of service. Such application was lodged with ASIC on 23 April 2007. 96 On 11 April 2007 the Court made orders concerning objections to be made by Hanwha and Sempurna. 97 On 4 May 2007 Hanwha provided reasons for its grounds of objections in "Hanwha's Statement Pursuant to Paragraph 2 of the Orders made by Nicholson J on 11 April 2007", filed in Action No. WAD 63 of 2007. 98 In April 2007 the "Cyclone Insurance Payment", the first component of the "Cyclone Adjustment", was determined. 99 In May 2007 the "Completions Account Adjustment" to the "Purchase Price" was determined by Ernst & Young in accordance with the Sale Agreement. 100 On 24 August 2007 Mitsui gave Akzo details of its claimed Repair Liabilities. Accordingly, Akzo had until 7 September 2007 to dispute Mitsui's claimed Repair Liabilities. 101 Akzo requested, and was granted, an extension of the Objection Date to 12 October 2007 and then to the end of October 2007. Akzo requested the extensions on the basis that it required further information, including a site visit, to consider Mitsui's claimed Repair Liabilities. 102 On 12 September 2007, ASIC declined to deal with the applications which had been lodged with it on 23 April 2007 (which application had been undetermined for approximately 5 months) and also declined to deal with the "Three Month Declaration" application lodged on that same date.

HANWHA'S SUBMISSIONS 103 Hanwha submits that Mitsui has adopted an arrogant and high-handed approach to the rights of Hanwha and delayed inordinately in the conduct of the proceedings in the related matter number WAD 63 of 2007 and in commencing these proceedings for an extension of time. 104 Hanwha says that the plaintiff's conduct in relation to Hanwha's rights has been arrogant and high handed in the following respects: (a) the plaintiff has commenced these proceedings in order to protect its position in the event that the preliminary issue in matter number WAD 63 of 2007 is decided against it. On 23 February 2007, the plaintiff was informed by the defendant that it objected to the compulsory acquisition notice in relation to the ordinary shares it held in Salt Asia Holdings Pty Ltd (SAH) on the grounds that the notice did not set out the "cash sum" for which the plaintiff proposed to acquire the shares. The plaintiff took no steps to attempt to remedy the invalidity of its compulsory acquisition notice for 8 months, until it launched these proceedings on 23 October 2005; (b) even if the plaintiff and its legal representatives did not understand on 23 February 2007 the objection that was being taken by the defendant in relation to the "cash sum" issue, which is unlikely, that objection was spelt out in detail in the defendant's statement, dated 4 May 2007, pursuant to paragraph 2 of the Orders made by Nicholson J on 11 April 2007. The plaintiff still took no step to attempt to remedy the invalidity of its notice for more than 5½ months; (c) on 23 April 2007, the plaintiff made an application to ASIC, pursuant to s 669(1)(b) of the Act, for a declaration amending the time for dispatch of the notice documents in s 664C(3) of the Act to 5 business days after the day the plaintiff lodged them with ASIC, rather than the next business day. The defendant was given no notice of that application, in which it clearly had an interest. The defendant first learned of the application to ASIC, dated 23 April 2007, on receipt of Mr Matsuyama's affidavit, sworn on 9 October 2007, in which it was referred to because it was in the interests of the plaintiff to do so. In the ASIC application, dated 23 April 2007, the plaintiff was content to say, in seeking to establish hardship, the following: "Part 6A.2 of the Act sets out the procedure for the general compulsory acquisition of securities. The provisions are detailed, with specific deadlines, which we understand need to be strictly complied with as compulsory acquisition under Part 6A.2 may involve the expropriation of property against the owner's will, albeit for a fair value." The plaintiff was aware of its obligations under Part 6A.2 of the Act and how the right or power which it was seeking to exercise fundamentally affected the defendant's interests in the relevant shares, yet it proceeded leisurely and suppressed information which vitally affected the defendant's interests; (d) without informing the defendant of the ASIC application, dated 23 April 2007, the plaintiff was idle for a period of more than 4 months. Mr Matsuyama expressed the position in his second affidavit, dated 9 October 2007, in the following terms: "From 23 April 2007 until 12 September 2007 Mitsui waited for ASIC's determination of the First ASIC Application" (e) on 28 April 2007, one of the adjustments, to which the price offered in the compulsory acquisition notice was subject, namely, the Cyclone Insurance Payment component of the Cyclone Adjustment, was determined. The plaintiff gave no notice to the defendant of that determination or how it affected the price offered for the shares. The defendant first learnt of the determination, fortuitously, on about 12 September 2007, on receipt of the plaintiff's Second ASIC Application, in which the fact of the determination (not the amount) was disclosed because it was in the interests of the plaintiff to do so; (f) on 25 May 2007, a further adjustment, to which the price offered in the compulsory acquisition notice was subject, namely, the Completion Account Adjustment, was finally determined. The defendant first learned of the Completion Account Adjustment, fortuitously, on about 12 September 2007, on receipt of the plaintiff's Second ASIC Application, in which the fact of the determination (not the amount) of the Completion Account Adjustment was referred to because it was in the interests of the plaintiff to do so; (g) on 12 June 2007, the defendant's solicitors proposed to the plaintiff's solicitors that the "cash sum" issue be heard as a preliminary issue. The defendant's solicitors sought a response from the plaintiff to its proposal on 29 June 2007 and 27 July 2007. Again, the plaintiff inexplicably remained idle for a period of approximately 3 months and did not respond to the proposal until 4 September 2007. In the words of Mr Matsuyama, in his second affidavit: "From June 2007 to September 2007 I and the people referred to in paragraph 59 above considered the proposal by Hanwha's solicitors that there be a hearing of a preliminary issue." (h) on 24 August 2007, the plaintiff gave AKZO Nobel Chemicals International BV (AKZO) details of a further adjustment to which the price for the ordinary shares in SAH was subject, namely, the Repair Liabilities component of the Cyclone Adjustment. Again, the plaintiff gave no notice to the defendant of this step in the determination of the price or what its likely effect would be on the price, until 9 October 2007, when it was referred to by Mr Matsuyama, in his second affidavit, because it was in the interests of the plaintiff to do so; (i) without keeping the defendant apprised of developments, the plaintiff extended AKZO's contractual right to accept or reject Mitsui's claim for Repair Liabilities from 7 September 2007 to 31 October 2007, a period of more than 7 weeks. The defendant only learned of those developments on receipt of Mr Matsuyama's third affidavit, sworn 9 November 2007, again only because it was in the interests of the plaintiff to refer to them; and (j) on 12 September 2007, the plaintiff's solicitors informed the defendant's solicitors that the plaintiff required 4 weeks from 13 September 2007 in order to prepare this application and the application for the hearing of the preliminary issue. 105 The plaintiff, so Hanwha submits, further delayed inordinately in the conduct of the proceedings in the related matter number WAD 63 of 2007 and in commencing these proceedings for an extension of time, in the following respects: (a) the plaintiff delayed for 8 months (from 23 February 2007 to 23 October 2007) or, at least, 5½ months (from 4 May 2007 to 23 October 2007) before launching these proceedings; and (b) the originating process in matter number WAD 63 of 2007 was filed on 28 March 2007. From that date, until early September 2007, the only step which the plaintiff took in the proceedings was to attend a directions hearing on 11 April 2007 before Nicholson J, at which Orders were made requiring the defendant to file its succinct statement, which it did timeously. 106 The inordinate delay, it is said, has resulted in this application commencing some 9 months after the expiry of the 6 month period provided for under s 664AA(b) which was 31 January 2007. 107 In summary, the contentions of Hanwha are that: (a) the plaintiff was allegedly inactive for a period of some 4 months; (b) the plaintiff did not give notice to the defendant of the dates on which price adjustments under the notice were crystallised; (c) the issue of a compulsory acquisition notice in or about March 2008 may adversely affect the defendant; and (d) the defendant is restricted in its ability to sell the shares or retain the shares in the ordinary commercial context.

MITSUI'S subMISSIONS 108 Mitsui makes the following submissions: (a) Mitsui's notices provided for cash consideration to be paid to Hanwha and Sempurna, which mirrored the consideration payable to the controlling majority share purchased by Mitsui from Akzo; (b) The objective of replicating the price paid to Akzo was to: (i) ensure that all shareholders in SAH would be treated equally, by being treated identically to Akzo, consistent with s.664B(1); and (ii) satisfy the policy of having regard to recent material transactions (by replicating the most recent and most significant share sale) which is embodied in ss.664C(1)(d) and 667C(2); (c) To the extent, if any, that the Notice did not set out a "cash sum" such deficiency arose from the Notice's identical replication of the consideration provided to Akzo which consideration, although definite and objective, has not been fully crystallised. Further, the date by which such consideration will crystallise cannot yet be identified with certainty; (d) Mitsui's evident intention that the minorities should receive the same price as did Akzo was entirely proper. Mitsui was not seeking to obtain any benefit for itself in framing the Notice as it did; (e) The legislative history of Part 6A of the Act reflects the significance attached by the Legislature to the facilitation of compulsory acquisitions where an offer gives fair value; (f) The legislative history of s 664AA demonstrates that although a time limit was understood to be an important aspect of the protection of minority interests, no particular significance was attached to the period itself, the Joint Parliamentary Report concluding that "some time limit should be imposed", which it set at 6 months (at [3.59] to [3.61]); (g) Mitsui has proceeded with appropriate expedition to resolve the outstanding adjustments and advance the compulsory acquisition process; and (h) No evidence of "substantial injustice", in the event that the relief were granted, has been adduced by Hanwha. 109 Furthermore, the plaintiff has deposed, in the second affidavit of Mr Matsuyama that if it is granted leave to issue second notices, the plaintiff will set out a fixed dollar amount per share, together with simple interest at 10.5% per annum. 110 The plaintiff will undertake, on condition that it is granted a 3 month extension of the period within which it may issue further compulsory acquisition notices, that it will issue any such notices in a fixed amount not less than the theoretical maximum price, together with simple interest at 10.5% per annum. 111 In summary, Mitsui submits that the following considerations support the application for relief: (a) in the absence of the relief sought, Mitsui will be - contrary to the legislative purposes of Part 6A.2 - frustrated from proceeding with its compulsory acquisition process as a result of what will have been an innocent error, if any, borne of a proper intention to treat all shareholders equally; (b) the extension of time would permit the issuance of second notices to Hanwha and Sempurna, otherwise permissible under s 664C(6)(b); (c) any further notices that will be issued upon any grant of relief will eliminate any uncertainty arising from the mirroring of the price under the Sale Agreement; (d) any further notices will remain subject to all the minorities' protections in Part 6A.2, including a fairness hearing; (e) the interest component proposed will eliminate any prejudice caused by delay; and (f) no substantial injustice will arise from the relief.

REASONING 112 In all of the circumstances, I do not consider that Mitsui has acted in an arrogant or high-handed manner. Indeed, I regard that language in the context of this case as both intemperate and inappropriate. I consider that during the period between when Mitsui acquired its interest in SAH on 31 July 2006, and when it filed its application with ASIC on 12 September 2007, Mitsui sought at each stage to advance the resolution of the compulsory acquisition process. 113 I accept the submissions of Mitsui in this respect, which are reflected below. 114 The plaintiff was active through until 23 April 2007, its activity on that date being an application to ASIC for comfort relief, pursuant to s 669. On 4 September 2007, approximately 4 months from that date, the plaintiff filed a second application to ASIC for relief pursuant to s 669 in relation to, among other things, the "cash sum" requirement in the notices of compulsory acquisition. 115 The plaintiff awaited ASIC's determination of the 23 April 2007 application, which was sought to resolve uncertainties arising from Hanwha not accepting service. It was not until 12 September that ASIC first responded to the plaintiff on either of the applications. Had the application with respect to the "cash sum" question been granted, the present proceedings would have been unnecessary, such that it was prudent to await that determination. 116 Although the compulsory acquisition notices clearly set out that there were events which would further crystallise the offer price, Hanwha did not seek information about those matters. Nor was it necessary to provide that information in a piecemeal fashion. The question whether the offer price offered fair value was not immediately in issue, as the parties had not yet agreed upon a discovery regime appropriate to the commercially sensitive information concerning the operations of SAH. Discovery and the issue of fair value have been deferred pending this application. 117 If Mitsui is granted leave to issue second notices, it will set out a fixed dollar amount per share, together with simple interest at 10.5% per annum. 118 The maximum price that could theoretically now be achieved under the current compulsory acquisition notices is $16.57481362, calculated as follows: Item Amount Affidavits of Hirofumi Matsuyama Mitsui's offer in Notice 16.16571198 Second Aff. Table at p. 00056. Cyclone Insurance Claim Adjustment +0.65459840 As above Completion Account Adjustment +0.16183371 As above Cyclone Repair Adjustment based on Mitsui's claimed Repair Liabilities -0.78311122 Second Aff. ¶153; Third Aff. ¶33 Mitsui Anticipated Price 16.19903287 Second Aff. ¶167 Adjustment assuming Akzo's claimed Repair Liabilities in full +0.37578075 Third Aff. ¶34 Total 16.57481362

This price, which exceeds Mitsui's expectation of price, constitutes the theoretical maximum price. 119 The plaintiff has informed the Court that it will undertake, on condition that it is granted a 3 month extension of the period within which it may issue further compulsory acquisition notices, that it will issue any such notices in a fixed amount not less than the theoretical maximum price, together with simple interest at 10.5% per annum, from the date that the first notices were lodged. 120 The consequence of this proposal is that Hanwha will not be prejudiced by any change in the business conditions or value between the date of issuance of the first and any second notice. If the value of SAH falls between the date of the first notice and any second notice, Mitsui will have undertaken to offer a price not less than the price proposed under the terms of the first notice (and will, in that circumstance, offer to pay a greater price than the value of the securities). If the value of SAH increases between the date of the first notice and any second notice, Hanwha has the protection of the fair value standard under s 664F(3). In either case, Hanwha (and PT Sempurna Caturguna) will not be adversely affected. 121 If an extension of time is granted, Hanwha will be compensated for delay. Although the compulsory acquisition notices must be issued within 6 months, there is no requirement or assurance that the compulsory acquisition itself will be completed within 6 months. As the plaintiff has proposed interest from the date on which the first notices were lodged, Hanwha will be compensated for delay, as if the compulsory acquisition had occurred instantly. 122 There is no restriction on sale of the securities in SAH as a consequence of the compulsory acquisition process. Hanwha has not tendered evidence to support a suggestion that any offer to purchase, or sale of, the securities in SAH has been frustrated or prevented by the compulsory acquisition process. 123 Whilst Hanwha has no burden of demonstrating that grounds exist for the Court not to exercise its discretion to extend time, it is likely, were Hanwha to have suffered and or be likely to suffer particular prejudice, that it would have deposed to this. It did not. I accept however that there is a degree of general prejudice arising from uncertainty as to its shareholding in SAH. 124 Furthermore, in this case there is no evidence of a blatant disregard by Mitsui of the requirements of the Act: Re Wave Capital Ltd at [29]. Rather, the need for this application is the consequence of the determination of the preliminary issue in the related proceeding, where I found that the Notice did not contain a "cash sum", for which Mitsui, as a 90% holder, proposed to acquire Hanwha's ordinary shares in SAH, as provided in s 664C(2) of the Act: Mitsui & Co Ltd v Hanwha (HK) Co Ltd [2007] FCA 2070. 125 Accordingly, I am persuaded that relief should be granted as sought in the application. I propose to make orders extending, by 3 months from the dates of these orders, the period set out in s 664AA of the Act for lodging compulsory acquisition notices under s 664C with ASIC, upon conditions that Mitsui give undertakings to the Court in terms of those which are referred to at para [110] above. Mitsui must pay Hanwha's costs. I will invite counsel to bring in a Minute of Orders which will include the relevant undertakings to give effect to these reasons.

I certify that the preceding one hundred and twenty-five (125) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Associate: Dated: 20 December 2007 Counsel for the Plaintiff: Mr C L Zelestis QC and Mr R Douglas

Corporations Act 2001(Cth)ss 459E(2)(c), 459G, 588FF(3), 664AA, 664C(1)(a), 664E, 664F, 666B, 1317HD(2), 1322(4)(d), 1322(6)

First Corporate Law Simplification Act 1995(Cth)

THE PRELIMINARY ISSUE 18 The Cash Sum Objection was, in its effect, an issue whether on the proper construction and application of s 664C(1)(a) of the Act, the Notice sets out a 'cash sum' when it specifies a sum that is subject to the specified adjustments set out under para [9] above. 19 The preliminary issue has been determined, in effect upholding the Cash Sum Objection (Mitsui & Co Ltd v Hanwha (HK) Co Ltd [2007] FCA 2070). Mitsui accordingly cannot, without further order of the Court, seek to compulsorily acquire the ordinary shares, as the 6 month period for issuing a notice of compulsory acquisition has ended. The Court now requires to determine Mitsui's application for the Extension of Time Order in this proceeding, to enable it to lodge with ASIC and despatch to Hanwha and Sempurna further compulsory acquisition notices.

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