Paringa Mining & Exploration Co plc v North Flinders Mines Ltd

On 23 September 1988 Paringa Mining & Exploration Co. Plc. ("Paringa") issued a summons out of the Supreme Court of South Australia directed to North Flinders Mines Ltd. ("N.F.M."), its sharebroker and certain of its directors as defendants. Paringa thereafter delivered its statement of claim. Paringa alleges that the defendant directors on 19 September resolved to implement a three-part proposal, consisting in: (i) a Pt C offer by N.F.M. for all the fully paid ordinary 10 cent shares in Australian Development Ltd. ("A.D.L.") for a consideration of $2.75 per share, the offer to remain open for one month; (ii) in order to fund the offer, the issue to shareholders of N.F.M. of a non-renounceable right to the issue of two shares at $5.50 each with two attaching options at $1 each for every three ordinary shares held at 14 October 1988, the closing date for receipt of acceptances being 4 November 1988; and (iii) a Pt A offer by N.F.M. for all the issued capital of Paringa for a consideration of two N.F.M. shares for every seven Paringa shares, the offer to remain open for a minimum period of one month. Paringa alleges that it was the beneficial owner of 49.96 per cent of the issued capital of N.F.M. but the directors of N.F.M. who were Paringa's "nominees to the Board of Directors of N.F.M." had no knowledge that the proposal was in contemplation prior to a meeting of the Board on 19 September. Paringa alleges that the defendant directors who passed the resolution to implement the proposal on 19 September acted in breach of their duty to act bona fide in the best interests of N.F.M. as a whole. Paringa claimed, inter alia, an injunction restraining the defendants from taking steps to implement the proposal.

On 23 September Legoe J. granted an interim injunction until midnight on 28 September on an ex parte application by Paringa. The defendants applied on Tuesday 27 September to have the ex parte injunction dissolved but the application was refused. However, his Honour made an order varying the injunction and extending it until midnight on 29 September. The injunction was subsequently extended until midnight on Friday 30 September. But on that day his Honour refused to continue the injunction until the hearing or determination of the action, though he fixed 11 October as an expedited date of trial.

In refusing the interlocutory injunction, Legoe J. said:

I simply wish to say that having given serious consideration to the main factual matters and the principles in the cases I have come to the conclusion that I should not grant the interlocutory injunction. It has been a difficult decision to make because there are a number of aspects about the case which have caused me or given me cause rather to give considerable thought as to how the serious issue is to be analysed and thus articulating for the purposes of the application for an interlocutory injunction. When one considers the issue or issues and there are issue or issues between the parties, certainly, it seems to me that the approach of the Chief Justice of the High Court in Queensland v. The Commonwealth [1] , referred to by Mr. Morcombe is a principle which has, shall I put it, tipped the balance on the overall question that I have to consider. This is not the same case, of course, it's substantially different. When one looks at the two principal matters in combination, namely the serious question to be tried and the balance of convenience, I have not been able to persuade myself that I should make the order. 1. (1988) 62 A.L.J.R. 143; 77 A.L.R. 291.

Paringa, apprehensive that irremediable damage would be done to its interests during any gap in the injunctive protection it was seeking by reason of receipt of acceptances of the Pt C offer, sought an injunction pending the determination of an appeal to the Full Court of the Supreme Court against the refusal by Legoe J. to grant an interlocutory injunction. On Saturday 1 October von Doussa J. granted a limited injunction until 5 October, giving liberty to apply for its earlier dissolution or continuance. Late in the afternoon of Monday 3 October Legoe J. dissolved that injunction. His Honour said:

In my judgment the matters that are appropriate to consider for the purposes of extending or granting an injunction until the hearing of the appeal are synonymous with the matters that were extensively canvassed and upon which very erudite submissions were made for the whole of last Friday

As I consider the issues to be synonymous, I accordingly indicate that in my view I have exhausted my functions for the purpose of determining whether I should exercise a discretion to extend the injunction. Admittedly last Friday that was for the purpose of granting an injunction until trial, that is to say, until judgment, whereas the matter that was being considered by my brother von Doussa on Saturday night and is accordingly before me this afternoon, is to consider whether the injunction, or whether an injunction should be granted until the disposal of the appeal. But the appeal could not be heard now until early next month. I don't know and I could not forecast what stage the trial would have reached by the time that appeal would be heard but it is quite clear in my mind that a substantial amount of factual material and all legal submissions would have been ventilated in open court.

In the light of all these circumstances it seems to me that it is totally inappropriate to allow the injunction to stand and I have not mentioned, although I hasten to add that I am not unconscious of the fact, that we have now reached the stage where the Pt C offers have been dispatched I understand sometime between Friday night and Saturday high noon, round about that time, and that the processes of the [Code] have now been put into operation and that, therefore, very serious questions relating to the balance of convenience are even more apt in consideration of the present stage that we have reached and what should be done in relation to holding or freezing the situation, that is to say, in the granting of any further or other interlocutory or even interim injunction.

That being the case I grant the application for dissolving the injunction that was granted on Saturday night.

His Honour's understanding that the appeal could not be heard until November was confirmed to Paringa's advisers by the Chief Justice. The Full Court's list for October was full. The Chief Justice further informed Paringa's advisers that the Full Court could not entertain an application for interim relief pending the appeal and directed that all interlocutory injunctions should be heard by Legoe J. who was to preside at the trial.

The next day, 4 October, between 9 a.m. and 11.18 a.m., approximately 4.4 per cent of the shares in A.D.L. the subject of the Pt C offer were sold to N.F.M. That morning Paringa made an application to this Court for special leave to appeal against the orders made by Legoe J. on 30 September and 3 October and against the Full Court's refusal to entertain either an application for an expedited hearing of Paringa's appeal to the Full Court or an application for an interim injunction pending the hearing of that appeal. At 11.00 a.m. on 4 October Wilson J. granted an ex parte application for an interim injunction pending an inter partes hearing on 6 October. Toohey J. heard the parties on 6 and 7 October. His Honour reserved his decision and the injunction was extended.

On Tuesday 11 October the trial commenced before Legoe J. Toohey J. was to announce his decision in Canberra that afternoon. That morning, senior counsel for Paringa sought an injunction from Legoe J. to cover the period of the trial. It was said that further material supporting the grant of an injunction had appeared on discovery. The argument proceeded until the luncheon adjournment at 1.20 p.m. Before adjourning, his Honour said:

I have entertained your submissions now for, I don't know how long you have been on your feet but I suppose it is the best part of an hour, but whatever it is I have got the point, I understand what you are getting at and I am not satisfied they raise new issues, even the Panfida order, which would warrant me in delaying any further the commencement of these proceedings and I so rule without giving any further reasons. That is my ruling. After the luncheon adjournment, counsel for Paringa informed his Honour that Toohey J. was to deliver his decision in Canberra at 4.30 p.m. that afternoon, that the application for special leave to appeal would be listed for hearing on Friday 14 October and that Wilson J. would be available to entertain an application for an interim injunction until the Friday afternoon. Counsel then renewed Paringa's application to Legoe J. for an interim injunction until Friday 14 October. This exchange occurred: His Honour: I know but you are going to ask Wilson J. to do that this afternoon. What is the point in me entertaining an application or even hearing. Surely the ball is in the High Court now.

Mr. Lander: In the event that your Honour made that order there would be no necessity to make an application of Wilson J.

Mr. Lander: Well, I do apply for your Honour to make that order.

Following Toohey J.'s refusal of the injunction Paringa, pursuant to a suggestion made in his Honour's reasons for judgment, renewed its application to Legoe J. for an interim injunction. The application was refused, evidently on the ground that it did not raise a new issue.

After Toohey J. refused injunctive relief in this Court, Wilson J. on 12 October granted a further interim injunction until Friday 14 October. We extended that injunction until today.

In the ordinary case, it would be most inappropriate for this Court to entertain an appeal from the refusal of an interlocutory injunction by a court of trial. Several considerations make it inappropriate. In the first place, such an appeal would produce a confusing division of judicial control over the proceedings. Next, the questions whether there is a serious issue to be tried, where the balance of convenience lies and what should be done to preserve the status quo could seldom give rise to a point of principle which would warrant the intervention of this Court. In cases relating to acquisitions of shares, the exigencies of the market may frequently require such a speedy determination of an application as to preclude the nice examination of the facts which a court ordinarily undertakes. And, where an interlocutory order does not determine the rights of the parties, the order would usually be an exercise of discretion on a point of practice or procedure. In Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. [2] , a case relating to an interlocutory undertaking, this Court repeated with approval what Jordan C.J. said in a well-known passage in In re Will of F.B. Gilbert (dec.) [3] :

I am of opinion that, there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. These considerations weighed strongly with Toohey J., and rightly so, in the judgment which he delivered on 11 October. 1. (1981) 148 C.L.R. 170, at pp. 177, 180. 2. (1946) 46 S.R. (N.S.W.) 318, at p. 323.

In general, the orderly administration of justice would be impeded if this Court intervened in interlocutory proceedings in a matter pending in a court of trial. It is the responsibility of a court of trial to determine the course of interlocutory proceedings, subject to appeal to the relevant intermediate appellate court. In this case, an appeal lay as of right to the Full Court of the Supreme Court of South Australia from the order made by Legoe J. on 30 September refusing an interlocutory injunction: Supreme Court Act 1935 S.A., s. 50(3)(b)(iii). That appeal was not without prospects of success, for the case which "tipped the balance" in his Honour's thinking (Queensland v. The Commonwealth [4] ) was an unusual case involving a contest between governments about Australia's performance of its obligations under an international convention. The case presented issues very different from the issues which arose for determination in the present case. And it is by no means clear that his Honour had posed for himself the relevant question: was there a serious issue to be tried? Although his Honour expressly referred to the existence of a serious issue to be tried and the balance of convenience, his reliance on Queensland v. The Commonwealth suggests that he was putting some gloss on the first of these elements by requiring Paringa to establish a clear and strong case for interlocutory relief. Mr. Castan Q.C. has submitted that Legoe J.'s reference to Queensland v. The Commonwealth should be understood as a reference to the principle in Castlemaine Tooheys Ltd. v. South Australia [5] . According to Mr. Castan, the true explanation is that Legoe J. rejected the application because he gave primary weight to the "public interest" of the 4,500 shareholders in A.D.L. who were not parties to the proceedings. Part II of the Code, so the argument ran, is a complete "code" of protection for shareholders. The argument was developed and refined in the submissions of Mr. Heerey Q.C. and Mr. Archibald Q.C. to the point where it was suggested that s. 17(2A) of the Companies (Acquisition of Shares) (South Australia) Code conferred a statutory vested right on A.D.L. shareholders to accept the offer for their shares. It is not necessary for us to determine the effect of Pt II. But it is clear that the statutory provisions do not oust the jurisdiction of the Court to grant in appropriate cases relief moulded to leave the operation of the Code intact. An injunction in the form granted by Wilson J. does not affect the operation, if any, which Pt II may have in this case.

1. (1988) 62 A.L.J.R. 143; 77 A.L.R. 291. 2. (1986) 161 C.L.R. 148.

It is perhaps possible that Legoe J. had it in mind that damages would be an adequate remedy. However, when we bear in mind that Paringa's complaint was that the decision of the N.F.M. directors to make the Pt C offer was oppressive to Paringa, it seems scarcely likely that his Honour would have concluded that damages would afford an adequate remedy to Paringa.

Although Legoe J. exercised a discretion, it is at least arguable that the refusal of an interlocutory injunction would allow N.F.M. to implement its three-part proposal and might thereby preclude the grant by the Court of the substantive relief sought by Paringa if it should be found entitled to the relief claimed at the conclusion of the trial. In this respect it is at least arguable that the refusal of interlocutory relief amounted to something more than a decision on a mere matter of practice and procedure. Moreover, as Legoe J. did not advance any explanation for his conclusion that Paringa had failed to show that there was a serious issue to be tried, it was a case in which Paringa was fully entitled to exercise its right of appeal to the Full Court.

The Full Court of the Supreme Court of South Australia was unable, because of pressure of business, to hear the appeal. In that situation, it was incumbent on the Court - that is, the Supreme Court - properly to consider Paringa's application to grant an injunction pending the determination of the appeal.

Although the judge appealed from has jurisdiction to maintain the status quo pending an appeal, that jurisdiction is concurrent with the jurisdiction of the appellate court to grant similar relief as an incident of its substantive appellate jurisdiction: cf. Jennings Construction Ltd. v. Burgundy Royale Investments Pty. Ltd. [No. 1] [6] . We shall assume without deciding, because we have not heard argument on the point, that the appellate court's jurisdiction may be exercised (subject to the appropriate rules) by a single judge of that court (cf. s. 48 of the Supreme Court Act) but it is not satisfactory to leave to the judge whose order is under review the exercise of the appellate discretion to grant or refuse the injunction pending the appeal, especially when a refusal is said practically to preclude the granting of the substantive relief claimed in the action. The judge appealed from is necessarily disadvantaged when it comes to an evaluation of the strength of the appellant's attack on the judge's original exercise of his discretion. So it was in the present case. Legoe J., when he dissolved the injunction granted by von Doussa J., perceived the issues which then fell for determination to be "synonymous with the matters" canvassed on the original application for an interlocutory injunction.

This view was incorrect, as Toohey J. has pointed out. Legoe J. should have been concerned not only to evaluate the argument against his original decision but also to inquire whether refusal of interim relief would have rendered the appeal nugatory. The result is that the appellant to the Full Court has been denied the independent consideration of its application for an injunction pending the appeal to which it was entitled. So long as the direction restricting the making of interlocutory applications to Legoe J. alone remains, the Supreme Court will disable itself from independently considering that application. This is therefore an extraordinary case but it will cease to be so once the implication of the disabling procedure adopted in the Supreme Court is noted. In the meantime, it is necessary for this Court to make an order which will reserve to the Supreme Court an effective jurisdiction to determine what should be done.

It is not necessary to examine the facts of the case to review the order made by Legoe J. on 3 October. His Honour failed to evaluate the strength of the appeal against his refusal of an injunction on 30 September. As no appeal against the order of 3 October will be heard by the Full Court, it is appropriate to grant special leave to appeal from that decision to this Court in the interests of the administration of justice (Judiciary Act 1903 Cth, s. 35A (b)), to allow the appeal instanter and, in lieu of the order appealed from, grant an injunction in the terms of the injunction granted by Wilson J. until Paringa's appeal from the order of Legoe J. of 30 September is heard and determined or until further order of the Full Court or of a judge of the Supreme Court of South Australia (other than the judge appealed from) or until the expiration of twenty-four hours from the delivery of judgment at the trial, whichever is the earliest. All other applications for special leave are refused. The matter is otherwise remitted to the Supreme Court of South Australia.

Paringa is entitled to its costs of and incidental to its successful appeal to this Court including reserved costs, in Matter C16 of 1988. No order is made as to costs of the various applications in the Supreme Court.