80 On the basis of Mr Andrews' figures, Mr Lonergan's recalculated "special value" figure, if taken into account at all, based upon a yielded cost saving of $5,362 (as opposed to $280,000) would amount to $0.0004 per share, pro rated across the entire shareholding. If 50% were allocated exclusively to the preference shares, this would produce $0.009 per preference share, assuming that figure were then pro rated across all 300,000 preference shares. If, contrary to s667C(1)(c), 50% of the saving were allocated to the 20 out of the 524 non-Kelly-Springfield preference shares (being 6.8% of all preference shares), the figure is still only a modest 13 cents per share. This, when added to Mr Lonergan's range for the value of shares as a secure income producing asset ($2.37 to $2.62) is still well under the offered $3 per share.
81 To this it may be said that the allocation of value among the classes of issued shares prescribed by sub-paragraph (b) must take into account the particular matters referred to in sub-paragraph (b). But that requirement, as I have said, is not exhaustive of the matters to be taken into account. Thus if it be the case that other matters bear upon a fair allocation of the value of the company as a whole, those other matters should also be taken into account. That sub-paragraph (b) is not exhaustive is confirmed firstly by the parenthetic reference to "taking into account" the specified matters. That clearly suggests that these factors are subject to the paramount consideration of what is fair in terms of value whilst offering guidance to the valuer as to specific factors which undoubtedly would be relevant in every case. To those factors subsection (2) of s667C adds yet a further factor which "must be taken into account". It is the "consideration (if any) paid for securities in that class within the previous six months". Significantly, subsection (2) makes clear what is the purpose of the valuer's exercise. It is "in determining what is fair value for securities for the purposes of this Chapter", not merely for the purpose of an allocation formula in sub-paragraph (b). That is not however to say that such sales, as a factor, should prevail over clear evidence of a lower value, especially if the sales may be driven by other considerations than value.
82 In the present case when regard is had to the value of $3 as against a capitalised valuation of between $2.01 and $2.54 per preference share used by Mr Ryan, or the $2.37 to $2.62 range chosen by Mr Lonergan, there is ample margin to accommodate such portion of the special value, if any, as should be allocated to the preference shares. That Mr Ryan chose to value the Goodyear preference shares at $2.99 per share as a debt instrument simply illustrates that there is more than one "fair value", or basis for reaching it, within a range or spectrum of what is fair. It does not justify further increments to that value for what is not a debt instrument in reality, by allocating some further increment by reference to "special benefit" or "special value" to the preference shares; that is to say, on some basis that is not justified by the factors in sub-paragraph (b) or cognate factors, or s667C(2) (sales in the preceding six months).
83 I should add that Mr Ryan, in valuing the preference shares at $2.99 per share as a debt instrument, by reference to ten year Commonwealth Bonds as an appropriate comparator, insofar as he was considering relative financial risk, was giving a very generous weighting. After all he was valuing what was in reality still equity albeit with ample asset cover. He might fairly have reflected that such asset cover was not as secure as having actual security, or the security represented by a promise to pay by the Commonwealth.
84 Accordingly, subject to consideration of sub-paragraph (c), I see no basis for concluding that the fair value attributed by the valuer Mr Ryan should have been increased to give any further amount by reference to "special value" or "special benefit" given the circumstances of his valuation with its generous upper end, itself exceeded (by one cent) in the $3 paid. This is in order to represent "fair value" in either the statutory sense or its meaning at general law or, for that matter, its meaning in the expression "just terms" in s51(xxxi) of the Constitution. In so concluding, I do not wish to suggest that in other circumstances there may not be a basis for attributing additional special value earlier taken into account in the value of the company to shares being compulsorily acquired. This is so long as shared equally with all other shares of the same class and allocated fairly between classes. It is more likely to be appropriate to do so where such shares would, unlike these preference shares, share in surplus assets on a winding-up and have dividends reflecting the overall profitability of the company. Such indeed would be the case were this compulsory acquisition instead to be of ordinary shares.
85 Turning to sub-paragraph (c), it is here and here alone that reference is made to any premium. Consistent with precluding greenmailing, sub-paragraph (c) makes clear that no premium (or discount) is to be applied when allocating the value of each class "among the securities in that class". Thus sub-paragraph (c) makes clear, it is "without allowing a premium or applying a discount for particular securities in that class". [emphasis added]
86 So viewed, the very generally expressed policy of precluding greenmailing in the travaux preparatoires, is reflected in a mandatory requirement to allocate the value of each class pro rata among the securities within that class. That is to say, no benefit or premium can be given to the "hold-out" members of that class, so impermissibly discriminating against others within the class. That does not however preclude some portion of a premium for what I have called reflexive benefits within what is the overall "value" of the company as a whole being allocated between classes. Such premium must be capable of justification on objective grounds. In so doing, the valuer must make such allocation taking into account the matters specifically referred to in s667C(1)(b) as well as other cognate matters of the kind which would bear on what is a fair allocation between classes of that premium. Greenmailing typically involves allocating a special premium to the hold-out members. It has nothing to say to the allocation between classes of the money equivalent of a special benefit, when it is itself objectively justified as part of the value of the company as a whole, post 100% ownership. Thus if all shares of a class being acquired including, but not limited to, those compulsorily acquired, share in such a justified reflexive benefit, reflecting a fair allocation of it between classes, that is permissible, so long as that allocation takes into account the factors in sub-paragraph (b) and any relevant cognate factors (as well as subsection (2) if applicable).
87 This analysis thus leads to three conclusions. First is that there can be no discrimination in favour of the shares to be compulsorily acquired, as against other shares in the same class. Second is that the allocation of a reflexive benefit is allowable, but only if carried out non-discriminatorily, pro rata within the relevant class and fairly between classes. Third, and in consequence, no premium for forcible taking of the kind Mr Lonergan held to be mandatory is in fact required in order to pay fair value or is indeed allowable, if discriminatory. Such a premium is, on Mr Lonergan's analysis, only to be paid to the shares to be compulsorily acquired. That immediately contravenes the directive in sub-paragraph (c) not to allow a premium for particular securities in the class being acquired. That means here, the shares being compulsorily acquired as compared to the shares of the same class earlier acquired or already owned. Such a premium for forcible taking is the very premium by another name which the greenmailer seeks to exact. It does not lose that character as a greenmail exaction because dressed up as a "premium for forcible taking".
88 It is no answer to this difficulty to say that the same premium could then have been paid to all of the preference shares not limited to those compulsorily acquired. Such an argument is in direct contradiction to the very rationale for such a premium being payable in the first place, namely that it is compensation for forcible taking. Those of the preference shareholders who accept without compulsory acquisition have done so willingly and could thus not qualify on any view for a premium for the forcible taking. Whether they come in early or late, "the last shall be first and the first shall be last", so all members of the class are treated the same; compare Matthew 20:1-16 treating equally the labourers in the vineyard who come at different times.
89 Where, however, all preference shares can legitimately benefit is from the "liberal estimate" as compensates a compelled vendor, here for expected future reflexive benefits, along with those who receive the same consideration by reason of having accepted an offer in the same terms; compare Holt v Cox (supra) at 339. Such a liberal estimate for compulsory expropriation is not to require any more than what is fair within a range, though it should be on the generous side within that range of what is fair, reflecting well-settled principles applicable to expropriation generally. Thus as I said in Holt v Cox at 337:
"It is thus appropriate to look at matters first from the vendor's point of view, in considering the rights of the shares, and what, to the vendor, they may be expected to yield him in the future by way of benefits, for loss of which a fair sale price is compensation. This is particularly when, as here, the vendor has no choice but to sell. It is necessary to ask what a willing, but not anxious vendor would consider a 'fair price' for being deprived of the shares with all [their] existing advantages and with all [their] possibilities (McCathie, supra), not what the purchasers with their greater bargaining power might in reality be able to exact on a compulsory sale … A liberal estimate of the shares is the approach to be taken.
Furthermore, their value to the purchaser, ignoring the purchaser's expropriatory power (except as justifying a liberal estimate) must reciprocally be taken into account in determining a fair price. This is precisely as [the vendors] continued shareholding rights do detract from the value of the remaining shares .." [at p.337]"
90 The approach I have here taken is consistent with that taken by the Court of Appeal in Winpar Holdings Ltd v Goldfields Kalgoorlie Limited [2001] NSWCA 427 on appeal, in particular Giles JA at paras [112] to [117]. It is true that in that case the question was whether or not a selective reduction of capital was fair and reasonable to the company's shareholders as a whole (see Giles JA at [113]). Here, one is concerned rather with whether fair value is being paid for the shares acquired under a takeover. Functionally, takeover or selective reduction (as also many schemes) are all a means with varying process to the same end, namely 100% ownership of a company, though carried out under different statutory regimes. Any distinction between them is more apparent than real. In the present case one is determining what is fair value under a takeover, to be liberally estimated pursuant to an allocation which must bring about that result without paying any premium discriminatorily within the class of shares being acquired. A selective reduction of capital operates similarly, such that its end result must be fair. Each will necessarily involve a judgment as to what part, if any, of any special benefit should be allocated to the shares being compulsorily acquired along with the remainder of that class. Here, I am satisfied, that "a" fair value has been provided under the terms set out in the compulsory acquisition notice. Any reflexive benefits have been fully taken into account as they should be, and the price paid has been liberally estimated within a range of what is fair value. Any transaction costs in replacing this well secured preference share investment should not, on the evidence, alter that result. Dr Elkington and any other preference shareholder whose shares were acquired could invest the $3 per share (which confers on him and the other Respondents a capital gain) in Commonwealth bonds at the current rate and derive even greater asset security as well as a slightly higher yield (T, 217 and T, 28 on 18 December 2001). Though such bonds may not generate capital gains - that depends on the movement of interest rates - transaction costs would be minimal. I do not of course need to determine whether a lower value than the $3 would also have been fair. It suffices that I am satisfied that the terms offered at least equal what is fair, indeed, in the Shakespearean sense "exceeding fair".
91 At [112] Giles JA deals with an argument that the whole of the special value should have been allocated to the non-Goldfield's shareholders whose shares were being cancelled by the selective reduction of capital, as distinct from the 50% proposed by Mr Lonergan as fair in the present case. He properly rejects that argument. In doing so, he distinguishes the observations by the High Court in Commonwealth of Australia v Milledge (1953) 90 CLR 157 at 164:
"… compensation must include not only the amount which any prudent purchaser would find it worth his while to gift the land, that also any additional amount which a prudent purchaser in the position of the owner, that is to say with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land."
92 Such an allocation whether 50% or 100% would on the Applicant's evidence, which I accept, produce a result which would not exceed in fair value terms the $3 here paid. But even applying the Milledge test, I would not assume that Kelly-Springfield would pay any more than it is offering to pay, rather than "fail to obtain" the preference shares. I would adopt what Giles JA said at the conclusion of [113]
"… The allocation of the special value was one feature only of fairness and reasonableness between the shareholders as a whole. Taken to the full, if an acquiring majority had to pay to the last cent to an acquired minority a pecuniary value for every benefit flowing from the capital reduction, there would be no reason to make the capital reduction. The vendor-purchaser transaction approach is not determinative."
93 Moreover, as Giles JA observed at [116], it is perfectly legitimate to take into account in determining what is fair value, a margin already allowed the preference shares over and above the strict capitalisation of their value "as a secure income producing security". I refer here to the margin above $2.62 in the Lonergan valuation or above $2.50 being the midpoint of $2.01 to $2.99 in the Ryan valuation. In each case the 50 cent differential far exceeds any conceivable allocation of any justified special benefits. Under the Ryan valuation, had $2.50 been stipulated, then the same result would be achieved. That is, by taking into account a notional allocation of the special benefits, even valued at an amount considerably more generously than was, according to Mr Andrews' evidence, the correct figure.
94 Moreover, if a premium for forcible taking were required to be paid to the compulsorily acquired minority or if some special benefits premium were required to be so paid on an exclusive or disproportionate basis to such minority, this would preclude compulsory acquisition for fair value properly allocated between classes and paid pro rata within a class. It would breach the prohibition in s667C(1)(c) if paid only to the minority compulsorily acquired and not to the rest of the class. Importantly, it would lead to the absurd result, inconsistent with the language of s667C(1)(a) of mandating a value for the shares so acquired as would, when added to value of all other shares, exceed any rational calculation of the fair value of the company as a whole. That would in turn be incompatible with the mandatory direction for the calculation of fair value in s667C(1) and (2) and in particular s667C(1)(a), which defines the pot to be divided up in share value terms as "the value of the company as a whole"; See exchange between bench and witness (Mr Lonergan) at T, 209-213 especially T, 212.
95 Finally, in considering whether the terms offered to acquire the preference shares represented not only "fair value" in terms of the Corporations Act but also "just terms" in terms of s51(xxxi) of the Constitution I am satisfied that they do.
96 It is primarily for Parliament to determine what is the appropriate compensation for a compulsory acquisition. It is then for the Court to determine whether that compensation might (or might not) reasonably be regarded as on just terms. Thus, "[i]f that compensation satisfies the requirements of 'just terms' the Court will not declare the terms unjust and the law in excess of power for the reason that the Court entertains an opinion that other terms would have been fairer or more appropriate". See the Commonwealth v Tasmania (1983) 158 CLR 1 at 289 per Deane J and the cases there cited. Whether the compensation is "just" is determined by reference to whether the compensation is "fair" as between the owner of the property and the person acquiring the property; see Grace Bros Pty Ltd v The Commonwealth (1946) 72 CLR 269, 280 per Latham CJ, 286 per Starke J, 290 per Dixon J, 295 per McTiernan J; Nelungaloo Pty Ltd v The Commonwealth (1948) 75 CLR 495, 569 per Dixon J; Smith v ANL Ltd (2000) 75 ALJR 95, [48] per Gaudron and Gummow JJ. cf Commonwealth of Australia v State of Western Australia (1999) 196 CLR 392, 461 per Kirby J.
97 I accept that when it comes to attributing the value of any special benefit, to allocate that special benefit by an allocation formula which produces a fair value in the manner I have earlier set out, may on one view be more generous than the longstanding common law principle reflected in Commonwealth land acquisition legislation. That common law principle is that the value of what is acquired pursuant to a compulsory acquisition should be determined without regard to the purpose for which the acquisition occurs; Emerald Quarry Industries Pty Ltd v Commissioner of Highways (SA) (1979) 142 CLR 351, 356 and 367 per Gibbs J and 367 per Mason J. See also Lucas v The Chesterfield Gas and Water Board [1909] 1 KB 16; Cedar Rapids Manufacturing and Power Company v Lacoste & Ors [1914] AC 569, 576; Fraser v city of Fraserville (1917) AC 187, 194; Pointe Gourde Quarrying and Transport co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, 572; Grace Bros Pty Ltd v The Commonwealth (supra) at 280, 286, 291-292, 295, contra 301-302; Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196, 205. Here however, it is a question of determining value on the basis of 100% ownership, consistent with Gambotto principles.
98 Nor could it be said to be intrinsically unfair to provide for the allocation of the value as a whole between the classes of issued securities in the company; that is, having regard to the stipulated and other relevant characteristics of those classes; see s667C(1)(b). Nor is it intrinsically unfair as between the 90% holder and the minority security-holders to provide for the allocation of the value within the class of securities being acquired, pro rata among the securities in that class, without allowing any premium or applying any discount for particular securities in the class (s667C(1)(c)). Rather, such provision is designed to protect the rights of shareholders within a class and to avoid a greenmail type reward for the hold-out members for that class as against those within that class who have accepted the offer.
99 Finally, I would adopt the reasoning in paragraph 21 of the Commonwealth's submissions which I quote below:
"21. If the minority security holders could require a premium for their securities, Parliament's express intention (and power) to provide for the compulsory acquisition of property on just terms would be frustrated. In particular, the inclusion of a premium in the determination of 'fair value' would suggest a capacity in the minority security holders effectively to veto the compulsory acquisition process by seeking prohibitive prices (based solely on the security holders' minority status) for the acquisition of their securities."
OVERALL CONCLUSION
100 Question 1 should therefore be answered in the affirmative. It follows that the terms of acquisition of the relevant preference shareholders are such as to constitute both "fair value" within the meaning of s667C of the Corporations Act, and also constitute just terms for the purposes of s51(xxxi) of the Constitution.
101 In those circumstances, it is not necessary for me to answer question 2, as regards whether s51(xxxi) of the Constitution is capable of application to the acquisition and, if so capable, is nonetheless satisfied by the application of s1350 of the Corporations Act were otherwise the terms not just.
102 There is ample authority for the stricture that Constitutional questions should not be decided beyond what is necessary for the decision in the case; see most recently the High Court in Re Patterson; ex parte Taylor (2001) 75 ALJR 1439 at [251] to [252] per Gummow and Hayne JJ citing Starke J in Universal Film Manufacturing Co (Australasia) Ltd v New South Wales (1927) 40 CLR 333 at 356. It is clearly not necessary for the decision in the present case that I deal further with the constitutional questions and thus I refrain from doing so.
COSTS AND ORDERS
103 Prima facie, costs should follow the event, though the parties may address me on costs if they wish. I direct the parties to prepare orders giving effect to this judgment within seven days.