Corporations - Winding up - Distribution of assets by way of dividend pari passu declared by directors - Whether disposal of "substantial asset" - Whether approval of general meeting required - Subsequent general meeting resolved to wind up - Implied term of contract between company and its shareholders to comply with Listing Rules of Australian Stock Exchange ("ASX") - Whether declaration of dividend in breach of Listing Rules 10.1, 11.2 and 14.11 - Listing Rules 10.1, 11.2 and 14.11 of no application to distribution by pari passu dividend - ASX not a party to proceedings - Declaration that transaction in breach of Listing Rules void not available - Remedy limited to power of ASX to require corrective action under Rules - Parties registered as shareholders only after dividend declared not persons aggrieved and were without standing.

Appellants (Plaintiffs) : Mr M J McPhee & Mr S D Pentony

First Respondents (First Defendants) : Mr C J L Pullin QC & Ms C H Thompson

Second Respondent (Second Defendant) : Mr C J L Pullin QC & Ms C H Thompson

First Respondents (First Defendants) : Freehill Hollingdale & Page

Second Respondent (Second Defendant) : Freehill Hollingdale & Page

Re Spargos Mining NL (1990) 8 ACLC 1218

1 MALCOLM CJ: This is an appeal from a judgment of Anderson J in the Supreme Court on 19 August 1998 by which the learned Judge dismissed an action by the appellants against the respondents.

2 In 1998 the appellants commenced an action against the respondents, the first respondents being the first defendants who were the directors (to whom I shall refer as "the directors") of the second respondent, Cudgen RZ Limited ("Cudgen").

3 At the material times in 1997 Cudgen had an issued share capital of 36,651,161 fully paid ordinary shares. Until early 1997 the shares were listed on the Australian Stock Exchange. The company had two major shareholders, namely, RGC Ltd (approximately 76.7%) and QBE Insurance Group (approximately 20%). In May 1997 the major asset of Cudgen was a majority shareholding in Consolidated Rutile Ltd ("CRL"). That shareholding was 86,812,219 shares which represented 50.14% of the share capital of CRL. On 20 May 1997 Cudgen announced to the Australian Stock Exchange ("ASX") that, on completion of the accounts for the year ended 30 June 1997, a final dividend would be declared based on those accounts payable in CRL shares and an extraordinary general meeting of shareholders would be convened to consider a resolution to approve the solvent voluntary winding-up of the company. In other words, Cudgen would make a distribution of its CRL shares by way of a final dividend and would then be wound up. This would result in the distribution to its members of the remainder of its assets, namely, any remaining shares in CRL and, perhaps, some cash.

4 The appellants operated a corporate advisory service under the name Davis Samuel Corporate Advisory Services. The appellants were not then shareholders of Cudgen. However, they informed RGC of their desire to acquire from RGC a controlling interest in Cudgen. Their negotiations to that end were unsuccessful and on 1 August 1997 the appellants announced an intention to make a Part A offer to Cudgen's shareholders to acquire 60% of the ordinary shares of each shareholder at a price of $0.01 (one cent) per share payable "ex-entitlement". The offer was subject to the appellants receiving acceptances in respect of shares constituting not less than 51% of the issued ordinary capital of Cudgen. The offer was subject to Cudgen making a one for one renounceable rights issue ("the Rights Issue") of $0.01 (one cent) par value non-voting redeemable preference shares to its ordinary shareholders on the following terms and conditions:

"(a) Acceptances in respect of the entitlements offered by the Rights Issue will only be binding in the event that the Offeror receives acceptances under the Offers in respect of at least 51% of the ordinary shares in the Company;

(b) The record date in respect of the Rights Issue will be on a date which enables the Offeror to meet its legal obligations in respect of the Offers and to pay the consideration to accepting shareholders before the closing date of the Rights Issue;"

5 The issue price for each preference share under the Rights Issue was $1.25 payable as to $0.01 (one cent) in cash with $1.24 to be credited as fully paid (fully franked) by way of recourse to the retained profits reserve of the Company.

6 Provision was made for the redemption of the preference shares and the offer was subject to the obtaining of any necessary consents, approvals or authorisations from the shareholders of Cudgen, the ASX and the Australian Securities Commission ("ASC"). It was also a term of the offer that accepting shareholders transfer the shares to the Offeror "ex-entitlement" to participate in the Rights Issue.

7 On 12 August 1997 the board of Cudgen met and the company made a public announcement to the effect that it had received the appellants' announcement and that it was considering and taking advice on the proposal. It recommended to its shareholders that no action be taken for the time being. The proposed offer related to 60% only of the ordinary shares of each shareholder in Cudgen and was subject to the appellants receiving acceptances in respect of shares constituting not less than 51% of Cudgen's ordinary capital. It involved a renounceable rights issue of redeemable preference shares which, if not taken up, would pass to the appellants in their capacity as underwriters of the offer. Because of the 51% acceptance condition, the offer could not succeed without the support of Cudgen's two major shareholders, RGC and QBE.

8 On 20 August 1997, there was a meeting of Cudgen's board at which the Chairman of Cudgen informed the Board that both RGC and QBE had decided not to accept the appellants' proposed offer. On the same day Cudgen made a public announcement to the effect that the Board had concluded that the appellants' offer was not in the best interests of Cudgen's shareholders for reasons stated in the announcement. The announcement also said:

"The board of Cudgen has met with its major shareholders, RGC Ltd and QBE Insurance Group. RGC has advised Cudgen that it sees considerable uncertainty, delay and no net benefit in the Davis Samuel Offer and that it would not accept Davis Samuel's Offer for its Cudgen shares on the terms contained in the announcement of 12 August 1997. QBE has advised Cudgen that it will not accept the offer announced by Davis Samuel.

As the acceptance of both major shareholders is necessary for the Offer to succeed, the board of Cudgen has resolved to continue the distribution of its valuable assets to shareholders by dividend, followed by liquidation of the company."

9 On 25 August 1997, Cudgen's board resolved that a dividend of 117.69 cents per share be paid on 16 September 1997 to shareholders registered in the company's share register at the close of business on 8 September 1997; that the dividend be franked to 98.8% and be satisfied by a distribution of shares in CRL valued for the purpose at 67.3 cents per share.

10 On 27 August 1997, the appellants became registered as the holders of 100 shares in Cudgen. The appellants' action was commenced on 2 September 1997. They applied for but failed to obtain an interlocutory injunction to restrain Cudgen from implementing the dividend declaration. On 16 September 1997 Cudgen made an in specie distribution of 64,091,895 CRL shares to its members. A meeting of members was convened on 2 October 1997 at which it was resolved that Cudgen be placed into voluntary liquidation and a Mr Anthony Sherlock was appointed liquidator. On the same day, the shares of Cudgen were suspended from trading on the ASX and later delisted.

11 The appellants claimed the following relief in the action:

"(a) A declaration that the actions of the first and second [respondents] on 25 August 1997 and 8 September 1997 are void as contravening the Australian Stock Exchange Listing Rules and/or as contravening the first [respondents'] duties owed to both the second [respondent] and the [appellants] and/or contravening section 260 of the Corporations Law.

(b) An ... injunction restraining the first and second [respondents] from further and finally implementing their actions as pleaded in paragraphs 14 and 17 herein pending compliance with the said Listing Rule.

(c) An order that the voluntary liquidator of [Cudgen] be removed.

(d) An order that the [appellants] have leave to make [their] take-over offer pursuant to the directions of the Australian Securities Commission.

(e) An order, pending completion of the [appellants'] take-over proposal, nominees of the [appellants], being persons to be approved by the court, be appointed directors of [Cudgen].

(f) Alternatively damages against the first [respondents] and/or [Cudgen]."

12 Ground 1.1 of the grounds of appeal was that the learned Judge erred as a matter of fact and law in determining that:

"The declaration of a dividend by [Cudgen] comprising a disposal of substantial assets of [Cudgen] to substantial shareholders of [Cudgen] was not in breach of Australian Stock Exchange Listing Rules 10.1 and 11.2."

13 The appellants based their claim in respect of breach of contract on the assertion that it was an implied term of the contract between the appellants as shareholders and Cudgen that Cudgen would comply with the ASX Listing Rules. The appellants contended that Cudgen failed to comply with ASX Listing Rules 10.1 and 11.2 in declaring the dividend and distributing the CRL shares to its shareholders by way of dividend. Listing Rule 10.1 requires a company to ensure that it does not, without the approval of its shareholders, dispose of a substantial asset to a substantial shareholder. Listing Rule 11.2 provides, in effect, that a company may not dispose of its main undertaking without the approval of its shareholders. The appellants submitted at the trial and maintained the submission on appeal that the distribution by way of dividend of the major portion of Cudgen's shares in CRL was caught by both Listing Rules. It was said to be a disposal of a substantial asset to a substantial shareholder in the case of each of RGC and QBE and it was also a disposal of Cudgen's main undertaking.

14 Rule 10.1 of the ASX Listing Rules relevantly provides that:

"An entity ... must ensure that neither it, nor any of its child entities ... disposes of a substantial asset to, any of the following persons without the approval of the holders of the entity's ordinary securities.

10.1.3 A substantial shareholder who is entitled to at least 10% of the voting securities ...

If an entity breaks this rule, ASX may require it to take the corrective action set out in rule 10.9."

"An asset is substantial if its value, or the value of the consideration for it is, or in ASX's opinion is, 5% or more of the equity interest of the entity as set out in the latest financial statements given to ASX under the Listing Rules."

16 Section 777(1) of the Corporations Law provides that:

"Where a person who is under an obligation to comply with or enforce the business rules or listing rules of a securities exchange fails to comply with or enforce any of those business rules or listing rules, as the case may be, the Court may, on the application of the Commission, the securities exchange or a person aggrieved by the failure and after giving to the person aggrieved by the failure and the person against whom the order is sought an opportunity of being heard, make an order giving directions concerning compliance with, or enforcement of, those business rules or listing rules to:

(b) if that person is a body corporate - the directors of that body corporate."

"For the purposes of subsection (1), a body corporate that is, with its agreement, consent or acquiescence, included in the official list of a securities exchange ... shall be deemed to be under an obligation to comply with the listing rules of that securities exchange to the extent to which those rules purport to apply in relation to the body corporate ..."

"For the purposes of subsection (1), if a body corporate fails to comply with or enforce provisions of the business rules or listing rules of a securities exchange, a person who holds securities of a body corporate that are quoted on a stock market of a securities exchange is taken to be a person aggrieved by the failure."

"Subsection (4) does not limit the circumstances in which a person may be aggrieved by a failure for the purposes of subsection (1)."

20 In my opinion, because the appellants were shareholders of Cudgen, Cudgen was under a contractual obligation to the appellants to comply with the ASX Listing Rules quite independently of these statutory provisions: Repco Ltd v Bartdon Pty Ltd [1981] VicRp 1; [1981] VR 1 at 8; Design Build Australia Pty Ltd v Endeavour Resources Ltd (1980) 5 ACLR 610 at 634; and Zytan Nominees Pty Ltd v Laverton Gold NL [1989] 1 WAR 227 at 231-232 per Malcolm CJ.

21 At an earlier stage in their action the appellants sought an interlocutory injunction to restrain the first respondents and Cudgen from paying the final dividend to the shareholders of Cudgen and thereafter winding up the company, without first obtaining the approval to do so from a properly convened general meeting of the members of Cudgen. The application was heard by Templeman J and dismissed: Quancorp Pty Ltd v MacDonald & Ors (1997) 24 ACSR 745. The learned Judge held that ASX Listing Rule 10.1 did not apply to the present circumstances, which were concerned with the distribution of company assets by way of dividend to all members of the company on a pro rata or pari passu basis, depending upon the shareholding of each member. Templeman J held that the rule applied where it was proposed to make a distribution to "substantial shareholders" alone. The learned Judge said at 749-750:

"Mr McPhee's submission is that the distribution to Cudgen's members of its CRL shares constitute the disposal of a substantial asset. Furthermore, the distribution would be made to "substantial shareholders" namely RGC and QBE, each of which holds more than 10% of the voting shares of Cudgen: see ASX rule 10.1.

In those circumstances, Mr McPhee submits that the proposal should not be implemented without the holding of a general meeting at which, having regard to rule 14, neither RGC nor QBE should be entitled to vote.

I do not accept this submission. If correct it would have the result that the holders of nearly 97% of the company's issued share capital would not be entitled to vote in relation to a resolution for the distribution of the company's assets. The answer, I think, is that rule 10.1 has no application to the present circumstances. In my view, the rule applies where it is proposed to make a distribution to 'substantial shareholders' alone. The present case is concerned with the distribution of a company's assets by way of dividend to all members of the company on a pro rata base, depending on the shareholding of each."

"Listing Rule 10.1 has nothing to do with a pari passu dividend distribution. It is directed at transactions between the company and related parties/subsidiaries/substantial shareholders involving the company's assets where the transaction may be unfair or unreasonable from the standpoint of shareholders generally. Templeman J rested his conclusion on the proposition that it was unreasonable to suppose that the ASX intended that substantial shareholders were to be excluded from voting in relation to a resolution for the distribution of the company's assets by way of dividend. This assumes that, by operation of Listing Rule 14, only substantial shareholders would be precluded from voting at a meeting called pursuant to Listing Rule 10.1. I think it goes further than that. The requirement of Listing Rule 10.10 that the notice of meeting under Listing Rule 10.1 must include a 'voting exclusion statement' means that the notice of meeting must contain a statement complying with Listing Rule 14.1.1; that is, a notice to the effect that the company will disregard any votes cast by 'a party to the transaction': see Listing Rule 14.11.1. The 'transaction' must mean the transaction by which the assets are disposed of - in this case the distribution of the dividend. All shareholders are parties to a distribution of dividend pari passu. Therefore, if Listing Rule 10.1 applies to such a transaction, the notice of meeting would have to contain a statement to the effect that the company will disregard votes cast by any shareholder. There does not seem to be much point requiring a meeting of shareholders at which no shareholder can cast an effective vote.

I think it is impossible to include a pari passu dividend distribution in the prohibitions contained in Listing Rule 10.1."

23 In my opinion, the conclusion reached by both Templeman J and Anderson J was clearly correct. There is also an additional and fundamental obstacle in the way of the appellants. The primary relief which they seek is a declaration that the actions of the directors and Cudgen were void as contravening the Listing Rules of the ASX and/or as contravening the directors' duties owed both to Cudgen and the appellants. I am quite unable to perceive any basis upon which such a declaration could be made in proceedings to which the ASX was not a party. It appears that the appellants complained to the ASX about the alleged breach of the Listing Rules, but the ASX decided to take no action in the matter. Counsel for the appellants pointed out that at a directions hearing in the action the ASX had indicated that they had no wish to be joined as a party in the appellants' action. This is no answer. It was open to the appellants to join the ASX as a party whether or not the Exchange wished to be joined.

24 In any event, the consequence of a breach of Listing Rule 10.1 provided in the rule itself is that:

"If an entity breaks this rule, AXS may require it to take the corrective action set out in r10.9."

25 Listing rule 10.9 sets out possible forms of corrective action. There is no suggestion that the impugned transaction is void. The sole remedy for a party complaining of a breach of the rule is to apply to the ASX. If the ASX considers that there has been a breach it is then empowered to require the party in default to take corrective action of one of the kinds set out in the rule. The result of this is that, in any event, the appellants would not be entitled to the declaration claimed that the actions of the directors and Cudgeon on 25 August and 8 September 1997 were void.

26 If, contrary to my view, it was arguable that, if the ASX did not require corrective action to be taken, an aggrieved party could claim other relief, it would be necessary to plead and prove, not only the breach of the rule, but also the failure of the ASX to require the directors and Cudgeon to take corrective action set out in Listing Rule 10.9. Absent such proof the Court would not be entitled to declare the actions void. It would still be open to the ASX to require corrective action in terms of rule 10.9.2, namely, that the directors and Cudgeon seek the approval of holders of "ordinary securities" to the transaction. The transaction would still not be void. It follows that, even if it is assumed that an application to the ASX is not the sole remedy, the absence from the statement of claim of an allegation that the ASX does not require corrective action to be taken is fatal to the appellants' claim.

27 Having regard to the pleadings as they stand, I can well understand that the ASX did not wish to be joined. The statement of claim contains no allegation or claim for relief against it. Had there been an allegation that, for example, the ASX had wrongly concluded that there was no breach or that, although there was a breach, no corrective action was required, the attitude of the Exchange may well have been different.

28 Assuming that the Exchange was joined, the question would then be whether the appellants could establish that they were respectively within the definition of "a person aggrieved" for the purposes of s777, so that they had standing to seek a declaration and appropriate orders. The issue of standing was raised before Templeman J. His Honour dealt with the point in Quancorp v MacDonald, above, at 748-749 as follows:

"Mr McCusker submitted that the plaintiffs had no standing to pursue their application because they were not, at the material time, shareholders of Cudgen. It was common ground that the plaintiffs contracted to purchase shares in Cudgen on 21 August and were registered as members on 27 August.

In those circumstances, Mr McCusker submitted, the plaintiffs could not be persons aggrieved within s777 of the Corporations Law so as to have standing to seek the enforcement of the ASX Listing Rules.

Accepting, I think, that the plaintiffs had acquired shares in Cudgen long after the announcement of its intention to proceed by way of distribution and liquidation, so that they could have no reasonable basis for objecting to that course, Mr McPhee pointed to s777(4) and (5) of the Corporations Law. The effect of those provisions is that although a member of a company is taken to be a person aggrieved by its failure to comply with listing rules, that is not an exhaustive definition.

Mr McPhee submitted that the plaintiffs had undertaken the heavy burden of lodging a Part A statement and that they were liable to suffer penalties if they did not proceed in that way.

The answer to that proposition is, I think, to be found in s746(10) of the Corporations Law which provides that a person who does not pursue a takeover bid having announced his intention to do so, is not guilty of an offence if the failure results from 'a change of circumstances after the making of the announcement'.

In my view, the implementation of Cudgen's proposal to distribute its CRL shares to members following the plaintiffs' announcement would constitute such a change in circumstances. It could hardly be contemplated that a person in the plaintiffs' position should be obliged to pursue its takeover offer once the target company's assets had been dissipated. I therefore accept Mr McCusker's submission."

29 So far as the issue of standing is concerned, Anderson J said at 12:

"As I am of the opinion that there has been no breach of the Listing Rules, there is no need to consider whether the plaintiffs have standing under s777 of the Corporations Law to bring this action to enforce the Listing Rules or to consider whether the plaintiffs have a cause of action in contract arising out of such breach. I note, however, that Templeman J did not think the plaintiffs had standing to bring proceedings under s777 because if there was a breach of the Listing Rules, the plaintiffs were not, at that time, shareholders and therefore could not be 'persons aggrieved' within the meaning of s777. His Honour's reasoning ... appears to me, with respect, to be persuasive."

30 With all due respect to the submissions to the contrary by counsel for the appellants, it is sufficient to say that I consider the views expressed by Templeman J and Anderson J to be entirely correct.

31 Chapter 11 of the ASX Listing Rules is concerned with the requirements that an entity must satisfy if it proposes a significant change to its activities or disposes of its main undertaking. Rule 11.1 provides that:

"If an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable. It must do so in any event before making the change. The following rules apply in relation to the proposed change.

11.1.1 The entity must give ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for.

11.1.2 If ASX requires the entity must get the approval of holders of its ordinary securities and must comply with any requirements of ASX in relation to the notice of meeting. The notice of meeting must include a voting exclusion statement.

11.1.3 If ASX requires, the entity must meet the requirements in chapters 1 and 2 as if the entity were applying for admission to the official list."

"If the significant change involves entity disposing of its main undertaking, the entity must get the approval of holders of its ordinary securities and must comply with any requirements of ASX in relation to the notice of meeting. The notice of meeting must include a voting exclusion statement. The entity must not enter into an agreement to dispose of its main undertaking unless the agreement is conditional on the entity getting that approval. Rules 11.1.1 and 11.1.3 apply."

33 This submission was first made to Templeman J who dealt with it in Quancorp v MacDonald at 750 as follows:

"... Mr McPhee submitted that the proposed distribution by way of a dividend of Cudgen's CRL shares would constitute a disposition of Cudgen's main undertaking within the meaning of ASX rule 11.2. Again, Mr McPhee submitted, this would require a meeting at which, pursuant to rule 14, there would be excluded from voting:

'a person who might obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed'.

In my view, even if it is accepted that the proposal involved the disposition of Cudgen's main undertaking, its members, including RGC and QBE would not obtain any benefit except in their respective capacities as shareholders.

In these circumstances, I do not think that a proposal to distribute assets by way of a dividend falls within the ambit of rule 11.2. In any event, a meeting is to be held only if the ASX requires it. In the present case, the ASX was duly informed of the proposal to distribute shares by way of dividend but has not required a meeting.

In all these circumstances, I am not persuaded that there has been any breach by Cudgen of the ASX Listing Rules. I am supported in that view by a letter dated 3 September 1997 to the Secretary of Cudgen from Mr R W Marsh, the Executive Director - Brisbane of the ASX. The letter was written in response to Cudgen's letter setting out fully the circumstances of the proposed distribution. The letter was accompanied by a letter from Michell Sillar McPhee setting out the plaintiffs' views of the matter. Mr Marsh notified Cudgen that on the information available, the ASX agreed that Cudgen had not acted in contravention of Listing Rules 10.1, 11.1 and 11.2 in relation to the declaration and payment of the final dividend and the proposal to voluntarily wind up Cudgen."

34 So far as this aspect of the matter is concerned, Anderson J agreed with Templeman J that Listing Rule 11.2 is not concerned with dividend distribution, whether in cash or in specie. His Honour went on to say:

"Under Listing Rule 14.11.1, the persons not entitled to vote at any meeting under Listing Rule 11.2 are persons 'who might obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed'. Therefore Listing Rule 11.2 must be concerned exclusively with transactions in which persons may obtain a benefit, otherwise than a benefit enjoyed pari passu with all shareholders. It is not concerned with transactions such as the one under consideration, in which the benefits flow to all shareholders on an equal footing, in their capacity as shareholders.

I would, anyway, decline on discretionary grounds to grant the declaratory relief which is sought in relation to Listing Rule 11.2. It is quite clear that if [Cudgen] had held a meeting of its members to approve the distribution in specie by way of dividend of the CRL shares, the members would have approved it by an overwhelming majority. This would be so, because [Cudgen] would not have been required to disregard the votes of RGC or QBE, as those entities, not being 'persons who might obtain a benefit, except a benefit solely in the capacity of a security holder, if the resolution is passed' would not be entities required to be named in the voting exclusion statement. Furthermore, I accept the submission of Mr Pullen QC on behalf of the [respondents] that the declarations sought are of no practical utility because the dividend has been declared and paid."

35 Again, it is sufficient to dispose of the argument raised on appeal to say that I entirely agree with the reasons expressed by Templeman J and Anderson J in respect to the application of Listing Rule 11.2.

36 On the appeal it was submitted that there was nothing in Rule 11.2 which would support the view taken of it by either Templeman J or Anderson J as a result of the application of Listing Rule 14.11. This provides that:

"If a rule requires a notice of meeting to include a voting exclusion statement, the notice of meeting must contain a statement to the following effect.

The entity will disregard any votes cast on a resolution by:

· the (named) person (or class of persons) excluded from voting; and

· an association of that person (or those persons).

· it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form or

· it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides."

37 Rule 14.11.1 provides that the person excluded from voting must be named in the notice of meeting and sets out the categories of persons who must be named and whose votes are to be disregarded. Such persons include a party to a transaction the subject of rule 10.1, and in the case of a transaction the subject of rule 11.2, a person who might obtain a benefit "except a benefit solely in the capacity of a security holder, if the resolution is passed". If rule 10.2 applied, no shareholder could vote. Assuming that, contrary to the opinion I have already expressed, rule 11.2 applies to a dividend distribution made pari passu, whether in cash or in specie, every shareholder might obtain a benefit, but every shareholder would obtain such a benefit solely in the capacity of a security holder with the result that all shareholders, including RGC and QBE, would be entitled to vote.

38 Counsel for the appellants sought to rely upon the distinction between the declaration and the payment of a dividend as stated by Brightman J (as he then was) in Potel v Inland Revenue Commissioners [1971] 2 All ER 504 at 513 where his Lordship said:

"There is a difference between declaring a dividend and paying a dividend. The declaration of a dividend by a company in general meeting creates a debt enforceable immediately or in the future, according to whether the dividend is or is not expressed to be payable at a future date. The payment of the dividend is a different operation. It is an actual distribution of part of the assets of the company. The two processes declaration and payment are quite separate."

39 It was submitted that the payment of the dividend was the actual disposition within the meaning of rule 11.2. In my opinion, as was pointed out in the following passage in the judgment of Brightman J in Potel v Inland Revenue Commissioners, a further distinction was drawn between a declaration of a dividend by a company in general meeting, on the one hand, and an interim dividend proposed to be paid by the company on the basis of a resolution of the directors. The former creates a debt immediately following the adoption of the resolution in general meeting. The second does not create a debt simply as a result of the resolution of the board.

40 Counsel for the appellants contended that, in the light of the decision in Potel v Inland Revenue Commissioners, two separate resolutions for shareholder approval would be required, namely:

(a) one by Cudgen shareholders to approve the declaration and distribution to RGC, at which all shareholders, including QBE but not RGC, could vote; and

(b) a second by Cudgen shareholders to approve the declaration and distribution to QBE, at which all shareholders, including RGC but not QBE, could vote.

41 It was submitted that there was more than one transaction involved because, although there was only one resolution and the dividend was to be paid pari passu, to each and every one of the shareholders, it involved a transaction between the company, on the one hand, and every one of the shareholders, on the other and created a separate debt for each. That, of course, is the case with every declaration of a dividend approved by a company in general meeting. It was submitted that the present transaction was different because, in its terms, it provided for the payment or transfer of a substantial asset to substantial shareholders which could not be done without the approval of the general meeting. For the reasons which I have already expressed, I do not consider there is any substance in these submissions.

42 I note that, even assuming that the appellants established a prima facie entitlement to relief in relation to Listing Rule 11.2, Anderson J said:

"I would, anyway, decline on discretionary grounds to grant the declaratory relief which is sought in relation to Listing Rule 11.2. It is quite clear that if the second defendant had held a meeting of its members to approve the distribution in specie by way of a dividend of the CRL shares, the members would have approved it by an overwhelming majority. This would be so because the second defendant would not have been required to disregard the votes of RGC or QBE, as those entities, not being 'persons who might obtain a benefit except a benefit solely in the capacity of a security holder, if the resolution is passed' would not be entities required to be named in the voting exclusion statement. Furthermore, I accept the submission of Mr Pullen QC on behalf of the defendants that the declarations sought are of no practical utility because the dividend has been declared and paid."

43 I consider this conclusion to be entirely correct.

44 In view of the conclusions I have reached, all of the claims for breach of contract, express or implied, and for relief based upon those claims fall away. In these circumstances it is not necessary to deal with any of the other grounds of appeal. It is for these reasons that I joined in making the orders of the Court at the conclusion of the argument of the appeal on 12 March 1999 that the appeal be dismissed and that the appellant pay the respondents' costs of the appeal to be taxed with a certificate for second counsel and with liberty to the respondents to apply to a single Judge of the Court for any special order as to costs.

45 IPP J: I have read the reasons to be published by Malcolm CJ. I agree with them and his Honour's conclusions. I have nothing further to add.

46 WALLWORK J: I agree with the reasons for judgment of Malcolm CJ.