Trade Practices - application for leave to appeal from a judgment of a single Judge of the Court refusing the application of the Trade Practices Commission for an interlocutory injunction to restrain Santos Limited proceeding with a takeover bid for Sagasco Holdings Limited, undertakings having been given to the Court by Santos Limited - principles to be applied.

Trade Practices Act 1974 - ss.50, 80(1), 80(1A), 80(2), 80(6)

Adam P. Brown Male Fashions Pty Ltd v. Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 177.

Federal Commissioner of Taxation v. Nestle Australia Ltd [1986] FCA 368; (1986) 69 ALR 445

Federal Commissioner of Taxation v. Hydrocarbon Products Pty Ltd (1987) 72 ALR 391 at 406-7

Counsel for the Appellants: Mr A.C. Chernov QC with Mr P.J. Jopling

Solicitors for the Appellants: Australian Government Solicitor

Counsel for the First Respondent: Mr A.H. Goldberg QC with Mr D. Shavin

Solicitors for the First Respondent: Freehill Hollingdale and Page

Counsel for the Second Respondent: Mr N.J. Young QC with Mr J. Beach

Solicitors for the Second Respondent: Arthur Ro Hedderwicks as agents

The applications for leave to appeal be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

SWEENEY J. I agree with the orders proposed by Hill J and with his reasons for them.

DAVIES J. These are applications brought by the Trade Practices Commission ("the Commission") and Sagasco Holdings Limited ("Sagasco") for leave to appeal from an order made by a single Judge of the Court, Heerey J., refusing to grant an interim injunction in proceedings brought by the Commission against Santos Limited ("Santos"), in which proceedings Sagasco was named as the second respondent. Counsel for the parties were heard both on the applications for leave to appeal and on the substance of the appeals should leave be granted.

2. Relevant provisions of the Trade Practices Act 1974 (Cth) ("the Act") are:-

"50 (1) A corporation shall not acquire, directly or indirectly,

any shares in the capital, or any assets, of a body corporate if:

(a) as a result of the acquisition, the corporation would be, or

be likely to be, in a position to dominate a market for

goods or services; or

(b) in a case where the corporation is in a position to dominate

a market for goods or services:

(i) the body corporate or another body corporate

that is related to, or associated with, that

body corporate is, or is likely to be, a

competitor of the corporation or of a body

corporate that is related to, or associated

with, the corporation; and

(ii) the acquisition would, or would be likely to,

substantially strengthen the power of the

corporation to dominate that market."

"80(1) Subject to subsections (1A) and (1B), where, on the

application of the Minister, the Commission or any other person,

the Court is satisfied that a person has engaged, or is proposing

to engage, in conduct that constitutes or would constitute:

(a) a contravention of a provision of Part IV or V;

(b) attempting to contravene such a provision;

(c) aiding, abetting, counselling or procuring a person to

contravene such a provision;

(d) inducing, or attempting to induce, whether by threats,

promises or otherwise, a person to contravene such a

provision;

(e) being in any way, directly or indirectly, knowingly

concerned in, or party to, the contravention by a person of

such a provision; or

(f) conspiring with others to contravene such a provision;

the Court may grant an injunction in such terms

as the Court determines to be appropriate.

...

(1A) Subject to subsection (1B), a person other than the Minister

or the Commission is not entitled to make an application under

subsection (1) for an injunction by reason that a person has

contravened or attempted to contravene or is proposing to

contravene, or has been or is proposing to be involved in a

contravention of, section 50 or 50A.

...

(2) Where in the opinion of the Court it is desirable to do so,

the Court may grant an interim injunction pending determination of

an application under subsection (1).

...

(6) Where the Minister or the Commission makes an application to

the Court for the grant of an injunction under this section, the

Court shall not require the applicant or any other person, as a

condition of granting an interim injunction, to give any

undertakings as to damages."

3. Santos and Sagasco are both publicly listed companies engaged in exploration for gas and oil reserves. Both are involved in the production of natural gas from the Cooper Basin in South Australia and from the Cooper Basin in Southwest Queensland. Both companies are participants in the South Australian Cooper Basin Unit Agreement and the Southwest Queensland Cooper Basin Unit Agreement and in the supply of natural gas to wholesalers in South Australia and elsewhere in Australia through the Moomba facilities. Sagasco also sells natural gas to domestic and commercial users in South Australia through its wholly owned subsidiary, South Australian Gas Company Limited. Another subsidiary, Sagasco LPG Proprietary Limited, sells liquid petroleum gas at the retail level in South Australia.

4. Sagasco has made a takeover bid for the shares in Magellan Petroleum Australia Limited, a company concerned particularly with the exploration for and production of natural gas in the Northern Territory. That takeover is the subject of proceedings in the Supreme Court of Queensland. At the same time, the South Australian Government Financing Authority ("SAFA"), an instrumentality of the State of South Australia, which holds 57% of the shares in Sagasco, has given consideration to disposing of its shares to Santos. No doubt, this course is a step in the privatisation of government assets and Santos would be seen as a suitable recipient of the transfer, having regard to its long and close involvement with the State of South Australia. To enable it to acquire those shares, however, Santos is required by Part 6.2 of the Corporations Law to make a takeover bid for all the issued shares in Sagasco at the price it has in mind to offer to SAFA. Santos prepared a Part A statement which it registered on 2 September 1992 and served on Sagasco on 3 September 1992. Santos proposes to offer to all the shareholders of Sagasco including SAFA to purchase their shares in Sagasco for the price of $2.70 per share. A term of the offer is that the takeover is conditional upon acceptance by the holders of 56% of the shares. Accordingly, if the offer proceeds, its success is dependent upon acceptance by SAFA. The issue to shareholders of the Part A statement and offer has not yet been effected.

5. When the takeover was first mooted by Santos with the Commission, a tentative view was formed by the Commission and expressed in a letter dated 31 August 1992 that "it would not be appropriate for the Commission to intervene in relation to any bid which Santos may be proposing to make for Sagasco." However, the Commission later formed the view that the takeover would be likely to contravene s.50 of the Act in that, after the takeover, Santos would be likely to be in a position to dominate a market for natural gas, the market being the market in South Australia or perhaps a market defined by reference to supply through the Moomba facilities or from the Cooper Basins in South Australia and Southwest Queensland. As Santos declined to desist from the takeover, the Commission brought these proceedings under s.80 of the Act seeking an injunction restraining Santos from offering to acquire or acquiring directly or indirectly any shares in the capital of or any interest legal or equitable in the shares and the capital of or any assets of Sagasco. The Commission also sought an interim injunction pending the determination of the proceedings. It is from the order refusing that interim injunction that the application for leave to appeal is brought.

6. The principal proceedings are an application under s.80 for an injunction. The Commission seeks no other relief at this stage in its application. Nor at this stage is it entitled to seek other relief. The principal application is brought in the context that the action threatened and sought to be restrained is the making by Santos of a takeover bid for the whole of the share capital of Sagasco.

7. From a practical point of view, the fate of the interim injunction may effectively determine the fate of the principal application. Were an interim injunction granted, it could terminate the takeover bid as proposed. Were Santos ultimately to be successful in the proceedings, it would then be free to proceed with a takeover bid, but the circumstances would probably be different. The Part A statement would not be up to date and the market price of the shares of Santos and of shares of Sagasco would no doubt have altered. There may well be further developments in the industry. Accordingly, the grant of an interim injunction could bring to an end the takeover bid as proposed. Likewise, the refusal of an interim injunction may have a final effect so far as the principal application is concerned. If the takeover bid proceeds and if the SAFA accepts the offer, Santos will become the principal shareholder of and in control of Sagasco before the 1st March 1993, the date upon which the proceedings are fixed for trial. On that date, the application for an injunction may lapse because the takeover has occurred. If the SAFA does not accept the takeover offer, the takeover will not proceed, but it may be a moot point whether there will be any action on the part of Santos to be restrained. Its takeover bid will have failed.

8. As matters of principle are involved and having regard to the significance to the parties, to the shareholders of both Santos and Sagasco and to the public, the consumers of natural gas in South Australia, of the grant or refusal of an interim injunction, it seems to me that leave to appeal should be granted.

9. It is to be kept in mind, however, that an order as to the grant or refusal of an interim injunction is a matter of practice and procedure. Appellate courts exercise particular caution in reviewing such matters. Adam P. Brown Male Fashions Pty Ltd v. Philip Morris Inc [1981] HCA 39; (1981) 148 CLR 170 at 177. As the appeal is brought from a discretionary order, the appellate court will not interfere unless satisfied that the decision below involved an error of principle or of law or there was a failure to take into account a material consideration, reliance upon some immaterial consideration or that the decision was wholly unreasonable or untenable. An appellate court will not interfere with the exercise of a judicial discretion merely because if it considers that it may itself have come to a different conclusion. House v. The King [1936] HCA 40; (1936) 55 CLR 499 at 505. Not only must there be an error of principle, but the decision under appeal must work a substantial injustice to one of the parties. Adam P. Brown Male Fashions Pty Ltd v. Philip Morris Inc at 177.

10. Mr A. Chernov QC, with whom Mr P. Jopling appeared for the Commission, and Mr N.J. Young QC, with whom Mr J. Beach of counsel appeared for Sagasco, submitted that the trial Judge was in error in finding merely "a serious question to be tried". But whilst the strength of a case is not irrelevant to the question whether an interlocutory injunction should be issued, there are strong reasons of policy why, at the early stages of proceedings, a court should not embark upon a mini trial or attempt to form or express a firm view about the likely outcome of the proceedings. The principles to be applied and the elements of policy on which they are based were fully examined in American Cyanamid v. Ethicon Ltd [1975] UKHL 1; (1975) AC 396 which is now the accepted authority for the grant of interlocutory relief. Epitoma Pty Ltd v. Australasian Meat Industry Employees' Union (No 2) [1984] FCA 202; (1984) 54 ALR 730.

11. The respective contentions of the Commission and of Santos both raise matters of substance which can be determined only after trial. In my opinion, the trial Judge was correct both in finding that there was a serious question to be tried and in limiting his observations on the merits of the case to that finding. On the issue of the balance of convenience, Mr Chernov submitted that there were several errors of principle in the decision of the trial Judge. They submitted that the principal concern of the trial Judge should have been to preserve the status quo, which they defined as the situation wherein Santos wishes to acquire but has not acquired control of Sagasco in contravention of s.50 of the Act. They submitted that that situation should be preserved in the public interest, for the public interest would be adversely affected by any takeover by Santos of Sagasco in breach of the Act.

12. However, to describe the status quo in those terms is to overlook elements of the current position. It is public knowledge that Santos wished to offer to purchase all the shares in Sagasco for the price of $2.70 per share. The Part A statement and the offer are ready to be despatched. No court could hold the situation so that, if the proceedings were ultimately determined in favour of Santos, that same offer would necessarily at the conclusion of the proceedings and of any appeals therefrom be then made to shareholders. The effect of an injunction may be to stop forever the making of the offer which at the present time shareholders in Sagasco may be pleased to receive and may wish to accept. No doubt the interests of the shareholders, including SAFA, are private interests and may not carry the same weight as the public interest in the enforcement of the object and provisions of the Act. Nevertheless, in a situation such as this, the Court is unable to maintain the status quo.

13. Mr Chernov and Mr Young further submitted that the trial Judge was wrong to give weight to the availability of the remedy of divestiture provided by s.81 of the Act. They submitted that the several undertakings which his Honour extracted from Santos with a view to ensuring that Santos would not exercise control of Sagasco until the determination of the proceedings were unsatisfactory and they submitted that divestiture was an awkward and unsatisfactory procedure which could rarely restore full competition once the offending acquisition had occurred.

14. In dealing with the first aspect of this submission, I do not propose to set out in detail the undertakings which were given to his Honour on behalf of Santos. The undertakings which his Honour sought and obtained were, in my opinion, acceptable to ensure that Santos would not exercise its powers prior to the determination of the proceedings in such a way as materially to change the manner in which Sagasco and its subsidiaries carried on business.

15. As to the second aspect of this submission, it does not appear that there would in this case be any major problem with the remedy of divestiture. In some cases, it could be envisaged that an order for divestiture of assets would not be likely to restore the competitive situation existing prior to acquisition. It would seem that the circumstances considered by Gummow J. on 18 August 1992 in Attorney-General of the Commonwealth v. Davids Holdings Pty Ltd and QIW Retailer Ltd (unreported) were of that nature. On the other hand, divestiture was appropriate in the litigation the subject of Trade Practices Commission v. Australian Meat Holdings Pty Ltd [1988] FCA 244; (1988) ATPR 40-876 and (1989) ATPR 40-932 for the takeover or acquisition of shares involved the passing over of control of abattoirs, some of which were and remained in a competitive environment. Accordingly, the conditional orders made by WiL.C.ox J. which were directed to restoring competition in a particular area, North Queensland, were especially appropriate.

16. In the present case, his Honour was of the view that an order as to divestiture would be an appropriate and effective order. I accept his Honour's view in that respect, though that is not to say that it was not appropriate for the Commission to seek an injunction. An injunction would prevent a contravention of the Act whilst divestiture could only seek to restore the competitive environment which the takeover would inhibit.

17. The next matter relied upon by Mr Chernov and Mr Young raises a point of principle of some importance.

18. The trial Judge expressed preference for the views expressed by Smithers J. and Fitzgerald J. in APM Investments Pty Limited v. Trade Practices Commission (1983) 49 ALR 475 at 484-5 and 508-9 over those expressed by Sheppard J. in SCI Operations Pty Ltd v. Trade Practices Commission (1984) 2 FCR 118. In the former case, Smithers J. said at 485:-

"In addition, an interlocutory injunction obtained by the

Commission carries no undertaking for the payment of damages by

the Commission. Whilst this may be appropriate in relation to the

law enforcement operations of the Commission, it cannot be

irrelevant on the matter of the granting of an interlocutory

injunction in a matter which is genuinely contested, in respect of

which the issue will depend on a judgment in a difficult field

after a hearing of some three months, and where the consequences

of the grant of an interlocutory injunction, later found to have

been granted on a wrong assessment of the actual legal position,

would be irreparable loss."

"Section 80(6) of the Act would have precluded the exaction of any

undertaking as to damages from the Trade Practices Commission.

The absence of such an undertaking would have had to be taken into

account in the context that there was a rival bidder, SCI, and the

advantage which it would, or at least might, take of the Trade

Practices Commission's attack on APM."

On the other hand, in SCI, Sheppard J. said at 187:-

"But what has happened is not, in my opinion, due to any wrong

conduct on the part of the Commission or any of the other parties

to this litigation. It is a consequence of the existence of the

Act itself and of its administration by the Commission."

...

That must be so when one bears in mind that the Act is not

concerned with either benefitting or disadvantaging the companies

engaged in a take-over battle. Its purview and purpose are to

protect the public interest against a takeover or merger which by

s.50 is made unlawful. If companies engaged in a struggle such as

the present are hurt because of the administration of the Act, or

if the market for shares is held up because of litigation,

consequent upon the Commission's view that there is a threatened

breach of the law, that is a consequence which the parties must

bear."

19. The trial Judge expressed a preference for the view stated by Smithers and Fitzgerald JJ. But that view raises the meaning and effect of s.80(6) which provides that, in proceedings brought by the Minister of the Commission for an injunction to restrain a threatened contravention of the Act, neither the Minister nor the Commission nor any other party shall be required to give an undertaking as to damages as a condition of the grant of an interim injunction.

20. The Commission seeks an interim injunction in respect of an act which it alleges would, if it occurred, constitute a breach of s.50 of the Act. The position before the trial Judge was that the allegations made by the Commission constituted a serious question to be tried but that they were, nevertheless, undetermined. Thus, the opening words of s.80(1) were not fulfilled. The Court could not at that early stage be satisfied that the action complained of would breach the Act. What was sought was merely an interim order, the making of which was empowered by s.80(2) in the context that there was a serious issue to be tried.

21. When an interlocutory injunction is granted in ordinary litigation, it is the almost invariable practice of a court to insist that the party in whose favour the injunction is granted gives an undertaking as to damages so that, should the serious question be ultimately determined against that party, the party whose action has been restrained and other persons who might be affected by the undertaking will be recompensed in damages.

22. When the Crown or an emanation of the Crown acts in pursuance of its function to enforce the law, no such undertaking is ordinarily sought, and in the present case it was not offered. In many such cases, an interlocutory injunction will be granted notwithstanding the absence of an undertaking. But the absence of the undertaking is a factor to be taken into account for the party for whom the injunction is directed will have no recompense should the allegations of the Crown subsequently not be established. Such an issue was considered by the House of Lords in Hoffmann-LaRoche and Co Ag. v. Secretary of State for Trade and Industry (1975) AC 295. In that case, Lord Reid, Lord Morris and Lord Cross, Lord Wilberforce dissenting, thought that an interlocutory injunction should be granted notwithstanding the absence of an undertaking as to damages. All of their Lordships accepted that the absence of the undertaking was a relevant factor. See also The Commonwealth v. John Fairfax and Sons Ltd [1980] HCA 44; (1980) 147 CLR 39 at 59.

23. However, s.80(6) is a specific statutory provision on this point. Section 80(6) was introduced into the Act in 1977 by Act No. 81 of that year. Earlier in Trade Practices Commission v. Vaponordic (Aust) Pty Ltd (1975) 6 ALR 248, Joske J., sitting as a member of a Full Court of the Australian Industrial Court, said at 252:-

"No undertaking as to damages was obtained at the time the interim

injunctions were granted and the commissioner, as we were informed

during the course of the proceedings, takes the view that he has

no power to give an undertaking as to damages.

I suggested these interim injunctions could have caused a great

deal of harm to the respondent's business and the respondent has

not got any undertaking as to damages which can now protect him.

It is likely in future that the court before granting interim

injunctions will probably insist on an undertaking as to damages

or refuse the interim injunctions."

Subsequently, the Swanson Committee recommended that the Act be amended to do away with any need for the Commission to give such an undertaking as to damages.

24. Section 80(6) goes further than the Swanson Committee suggested. It provides that, in proceedings initiated by the Minister or the Commission "the Court shall not require" any person to give such an undertaking "as a condition of granting an interim injunction."

25. A court cannot compel any party or person to give an undertaking as to damages. The ordinary course is merely to refuse to grant the interlocutory injunction unless the undertaking be given. The possible detriment resulting from the grant of the injunction is thus offset against the undertaking given to recompense persons adversely affected by the injunction should the court later so order.

26. In this circumstance, the intent of s.80(6) would not be given effect if possible detriment arising from the grant of the injunction were taken into account and weighed against the lack of any countervailing undertaking by the Minister or the Commission. In my view, s.80(6) intends that the matter of the grant of an interim injunction will be considered as if the applicant had given an undertaking as to damages but that, in the formulation of its orders, the court shall not actually require an undertaking to be given.

27. In this light, the observations of Smithers and Fitzgerald JJ. in the APM case are not applicable to proceedings instituted by the Minister or the Commission. In respect of such proceedings, the observations of Sheppard J. are apposite, for if detriment results from the grant of an interim injunction on the application of the Commission, that is a consequence of the legislative provision. Section 80(6) removes the discretion which the Court otherwise would have.

28. Mr A. Goldberg QC, with whom Mr D. Shavin of counsel appeared for Santos, submitted that the Commission "clearly appears before the Court as an ordinary litigant". But that is not so. Only the Minister and the Commission may institute proceedings seeking an injunction in respect of a breach of s.50 of the Act. The Commission has special standing. And that special position is reinforced by s.80(6) which abrogates the ordinary principles as to an undertaking as to damages.

29. That is not to say that an interim injunction must always be granted on the application of the Commission should a serious question to be tried be established. The discretion of the Court is a broad one, as has been discussed by Lockhart, Gummow and French JJ. in ICI Australia Operations Pty Ltd v. Trade Practices Commission (delivered 23 September 1992). In particular, the circumstances may show that an injunction would be an inappropriate remedy or that divestiture would be a perfectly appropriate remedy and that to interfere with the course of events pending trial would be unjust or not in the public interest. Or it may be that an undertaking as to damages even if given would not appropriately deal with the detriment or harm which might result from an interim injunction. But these are different circumstances from the case where an injunction is refused because possible or probable detriment to the parties or others is not countervailed by an undertaking as to damages.

30. In the present case, I am troubled as to whether the trial Judge approached the matter on an incorrect basis and weighed up the balance of convenience by taking on the one hand the possible detriment to Santos and to the shareholders of Santos and Sagasco including SAFA should an interim injunction be granted and, on the other hand, the lack of any countervailing undertaking as to damages. However, although there are some remarks in his Honour's judgment which tend in that direction it seems to me that his Honour directed his attention not so much to the question of damages but rather to the issue whether it would be convenient and proper to interfere with the ordinary operation of the market in relation to the shares of both Santos and Sagasco. His Honour thought that it was important that the activities of the two publicly listed companies not be interfered with unless a contravention was proved. His Honour spoke of "the legitimate expectations of shareholders in public listed companies" and of "the right to invest and trade freely in the securities of public listed companies." Another judge may not have given the same weight to those factors but his Honour's decision was a discretionary one and matters of weight and balance were for him.

31. The trial Judge dealt with the issues as they were put to him and assessed the relevant factors as he thought best. In his view, the appropriate course was not to grant an interim injunction but to accept the interim undertakings offered by Santos with a view to exercising the remedy of divestment should the Commission ultimately establish its case.

32. The parties below appear to have accepted that the proceedings would encompass an application for divestment should the takeover proceed. It seems to me that that was not strictly the position. The application was one brought solely under s.80 at a time when the acquisition of shares in Sagasco was merely threatened. An application for an order of divestment could not arise until the acquisition occurred. An application for divestment, being an application in respect of an event which arose after the lodgment of the first application could not, in my opinion, be joined in the proceedings save by consent of the parties. But that such a claim would be made appears to have been common ground. Thus the undertakings given by Santos to the trial Judge were expressed to continue until the determination of the proceedings or further order and they dealt with the position should the takeover be successful. All parties had it in mind that the trial fixed for 1 March 1993 would be a trial of the issue of injunction, should the takeover not proceed or not be successful, and of divestment should the takeover occur.

33. In this circumstance, the trial Judge considered that the balance of convenience lay in favour of refusing the injunction and of protecting the public's interest in competition by accepting the undertakings offered by Santos, leaving the grant of ultimate relief, should the Commission be successful, to the remedy of divestment, a remedy which, in the circumstances of the case, seemed appropriate. In my opinion, no appealable error has been shown.

34. I need not discuss individually the several minor matters relied on by counsel. The factors referred to were all matters with which the trial Judge dealt and to which he gave such weight as he thought proper. They do not provide a basis for appeal from his Honour's discretionary judgment.

35. In the circumstances, I would dismiss the appeals with costs.

36. I should finally mention that Mr Goldberg submitted that Sagasco was not entitled to appeal for the reason that, under s.80(1A) of the Act, only the Minister or the Commission is entitled to make application for an injunction restraining a breach of s.50. However, the Court heard counsel for Sagasco. Sagasco was a party to the proceedings below and its interests were affected both by the takeover bid proposed by Santos and by the proceedings brought by the Commission. Being affected by the proceedings and by the grant or refusal of an injunction, Sagasco was entitled to be heard by its counsel notwithstanding that it was itself not entitled to seek an injunction.

HILL J. Each of the Trade Practices Commission ("the Commission") and Sagasco Holdings Ltd ("Sagasco") seeks, in several applications, leave to appeal from the judgment of Heerey J, refusing the Commission's application for an interlocutory injunction to restrain the first respondent, Santos Limited ("Santos"), proceeding with a takeover bid for Sagasco.

2. Having regard to the urgency of the matter, the Court heard submissions not only on the question as to whether leave to appeal should be granted but also on the merits of the appeal should that leave in fact be granted.

3. The background to the proceedings may be shortly stated. In doing so I have drawn from the facts as summarised in the judgment of Heerey J. I stress that in so doing I do not suggest that these are the only relevant matters or that there is no dispute about them. The matter is presently interlocutory and the facts summarised are what his Honour referred to as "the very barest outline" of what will clearly be complicated issues of fact.

4. Santos and Sagasco are both engaged in natural gas exploration and production. However, Sagasco also sells natural gas to domestic and commercial users in South Australia, through its wholly owned subsidiary South Australian Gas Company Limited ("SAGC"). Another subsidiary of Sagasco, Sagasco LPG Pty Ltd, sells liquefied petroleum gas by retail in South Australia.

5. Sagasco is owned as to 57% by the South Australian Government. That government announced on 10 July 1992 its intention to sell that shareholding. Santos wished to avail itself of this opportunity.

6. On 24 July 1992, Santos approached the Commission for an opinion whether the making by it of a takeover offer under the Corporations Law for all of the shares in Sagasco would contravene the provisions of s.50 of the Trade Practices Act 1974 ("the Act"). After consultation, the Commission, albeit in terms which his Honour described as being "guarded and tentative" indicated on 28 August 1992 its then intention not to oppose the bid. Thereafter, Santos lodged its Part A statement with the Australian Securities Commissions ("ASC"), which statement was registered on 2 September 1992.

7. The Commission changed its mind and advised Santos after the Part A statement was registered. According to the judgment appealed against, that change of mind was advised on 16 September 1992. We were told by counsel for the Commission that the change of mind was in fact communicated on 7 September 1992. Nothing turns upon that date. The Commission takes the view that the acquisition by Santos of shares in Sagasco pursuant to the bid, presuming that the bid was successful, would enable Santos to dominate or increase its existing domination of a number of markets. As submitted by the Commission, these markets were:

(a) the production of natural gas from the Cooper Basin in South

Australia and South West Queensland;

(b) the sale of natural gas in South Australia at wholesale and

retail level;

(c) the sale of natural gas at wholesale level in New South Wales,

Australian Capital Territory and Queensland;

(d) the exploration for oil products and hydrocarbons in the

Cooper Basin; and

(e) the production and wholesale sale of natural gas in the

Northern Territory.

8. For its part, Santos takes the view that there is only one relevant market, the market for energy in the southern and eastern states and territories of mainland Australia. In that market, so it is submitted by Santos, natural gas is substitutable for other energy sources. It relies also upon certain South Australian legislation as preventing any dominance by it of any market for the supply of natural gas in South Australia.

9. Where an interlocutory injunction is sought, there can be no doubt as to the proper test to be applied: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 46 ALR 398; 57 ALJR 425; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 52 ALR 651; 58 ALJR 283; Epitoma Pty Ltd v Australasian Meat Industry Employees' Union (No 2) [1984] FCA 202; (1984) 54 ALR 730 at 734. The court must determine whether it is satisfied that there is a serious question to be tried. The court will also determine where the balance of convenience lies. These two matters are not independent of each other, although it will often be convenient to consider them successively.

10. In the present case, after a relatively short argument, counsel for Santos conceded for the purposes of the application that there was a serious issue to be tried. That concession, having been made, the argument then shifted to the question whether the balance of convenience required the grant of an injunction to protect the public interest against contravention of the Act or whether, having regard to what was necessary to effect justice between the parties and the proffering of undertakings by Santos, the balance of convenience lay in refusing to grant the injunction.

"1. Undertakings

Santos undertakes to the Court that, if it becomes entitled to 20%

or more of the issued share capital in Sagasco, until the final

determination of the proceedings, unless it has the leave of the

Court, it will not take any steps:

(a) subject to paragraph 2, to change the composition of the board

of directors of any company in the Sagasco Group;

(b) to terminate, relocate or otherwise affect the employment of

persons employed within the Sagasco Group;

(c) to affect the separate existence of each member of the Sagasco

Group;

(d) to change the memorandum of articles of association of any

member of the Sagasco Group; or

(e) to intermingle the assets of the Sagasco Group with assets of

the Santos Group.

2. Appointment of Director

Santos may take steps to appoint up to two persons who are not

directors or employees of the Santos Group as directors of

Sagasco.

3. Liberty to apply

Santos will have liberty to apply to the Court for a discharge or

variation of any of these undertakings.

("Group" means a company and its subsidiaries)"

12. Before his Honour, the matter proceeded on the basis that the balance of convenience involved a comparison between the accepting of the undertakings on the one hand, with the consequent availability to the Commission of an order for divestiture in the event that ultimately it should be found that an acquisition, as a result of the takeover offers, breached s.50 of the Act and a grant of the injunction putting to an end, from a practical point of view, the present takeover scheme. Before his Honour, Santos pointed to the time that could lapse before a judgment could be given at first instance and the additional time that appeals might ultimately consume. Reference was made to the question whether the South Australian Government, which had in a news release published on 7 October 1992 indicated its intentions to continue negotiating to sell its shareholding, but its decision to wait on the outcome of the present proceedings before closing the bid process. It would, however, not necessarily be prepared to wait until all possible appeals had been concluded. His Honour's comments in this respect were criticised by counsel for the Commission, but in my view that criticism, even if it were well founded, is irrelevant to the real issue between the parties.

13. It is true that if ultimately the matter were decided favourably to Santos, that company would be in a position to renew a bid to purchase Sagasco shares. From a practical point of view, however, it is unlikely that the terms and conditions of the new bid would be identical to those presently offered. But whether or not that was so, inevitably it would be necessary for Santos to lodge a new Part A statement and initiate a new takeover scheme, assuming that in the meantime no steps had been taken by the South Australian Government to dispose of its shares in Sagasco to some other purchaser. In a real and practical sense, therefore, the granting of an injunction restraining Sagasco from proceeding with its takeover offer has, vis-a-vis Santos, the consequence of finally determining the proceedings against it, so far as the present takeover scheme is concerned.

14. It was for this reason, no doubt, that his Honour compared that consequence with the consequence to the Commission of a failure to grant an interim injunction.

15. The parties appear to have proceeded on the basis that, as an alternative to injunctive relief, the Commission would, if ultimately successful, be entitled to obtain from the Court an order for divestiture. Much of the argument before his Honour and before us turned upon the question whether divestiture was an appropriate remedy.

16. As Davies J has pointed out in his judgment in this case, which I have had the advantage of reading in draft, the only relief sought by the Commission in the present proceedings, and indeed the only relief which it could seek, is injunctive relief. At the time of the commencement of the litigation, as indeed at the present time, no acquisition has taken place. No jurisdiction is conferred by s.163A of the Act, in a proceeding instituted by the Commission, upon the Court to grant to the Commission a declaration as to whether a subsequent acquisition would constitute a breach of s.50: s.163A(3). It follows that the failure to grant an interlocutory injunction, in a case such as the present, would amount to a destruction of the very subject matter of the litigation itself. Failure to grant an injunction would remove any impediment upon Santos proceeding with its bid and ultimately, assuming that that bid is successful, acquiring the shares. Once there is an acquisition and unless the application now before the court is amended, no relief thereafter could be granted to the Commission.

17. Thus, in a real sense, the issue, in a case such as the present, involves the court, when weighing the balance of convenience, being confronted with the starkest of possible alternatives: either the injunctive relief is granted, in which case as a practical matter the relief is permanent as against the respondent, or the injunction is refused, in which case the relief may be permanent as against the applicant.

18. Differing views have been expressed as to the approach which the court should take to the grant of interlocutory injunctions to restrain a threatened breach of s.50 of the Act. In APM Investments Pty Ltd v Trade Practices Commission (1983) 49 ALR 475, a case where in fact no interlocutory injunction was in issue, Smithers J said (at 484):

"... it cannot be thought to be a foregone conclusion that had the

Commission sought such an injunction it would have been granted.

It would have been put that the bid which APM desired to make was

purely as a matter of defence against the SCI bid which if

successful would have deprived APM of one of its most important

customers and led to a considerable reduction in its factory

production and employment... Obviously a strong case could be

made that the loss suffered by APM might be extremely high if it

were restrained by injunction and then ultimately succeeded in its

defence in these proceedings. In such a situation the existence

of the remedy provided by s 81 is most relevant. Where the

parties concerned are large responsible entities the viability of

the target company and thus the value of its shares would be

capable of being maintained by appropriate conditions or

undertakings if the shares were acquired before the action of the

Commission against APM was determined. In addition, if APM

acquired the shares before the determination of the action by the

Commission it would do so because it was offering to the

shareholders the best price available to the shareholders. On a

divestiture, if it became a fact, any loss would be that of APM

itself. The operation would have been to the distinct advantage

of the shareholders. If shareholders refrained from selling to

APM in fear of being found to have aided and abetted a

contravention of s 50 of the Act then to that extent APM's offer

would fail...

In addition, an interlocutory injunction obtained by the

Commission carries no undertaking for the payment of damages by

the Commission. Whilst this may be appropriate in relation to the

law enforcement operations of the Commission, it cannot be

irrelevant on the matter of the granting of an interlocutory

injunction in a matter which is genuinely contested, in respect of

which the issue will depend on a judgment in a difficult field

after a hearing of some three months, and where the consequences

of the grant of an interlocutory injunction, later found to have

been granted on a wrong assessment of the actual legal position,

would be irreparable loss. It is to be observed also that an

infringement of s 50 does not do immediate harm to any person. It

results merely in a disturbance of what is considered the

desirable state of national economic organization which s 50 is

designed to protect. If a proposed acquisition of shares which it

is thought may contravene the provisions of the section is carried

out and is ultimately shown to be a contravention, irreparable

harm is not normally likely to result because s 81 provides the

means to correct the organizational disturbance that has occurred.

Should an interlocutory injunction preventing the acquisition be

granted and it not be established that the acquisition would

contravene s 50, irreparable harm to the entity restrained is

almost inevitable. The ordinary and normal flow of business would

have been obstructed, and the entity restrained would have been

prevented from protecting an important and perhaps vital business

interest by competing in the market. In a case like the present,

where there are two suitors for the shares, such interlocutory

relief would eliminate competition in the market, a result hardly

compatible with the general purposes of the Act. It would appear,

therefore, that although after considering such matters, and such

other factors as might have been raised on an application for an

interlocutory injunction, there certainly were weighty arguments,

meet for consideration of the court, against the granting of such

an application."

19. In contrast to this approach stand the views expressed by Sheppard J in SCI Operations Pty Ltd v Trade Practices Commission [1984] FCA 52; (1984) 2 FCR 113.

20. In discussing the commercial problem which would arise where a person making a takeover offer finds that as a result of the proceedings instituted by the Commission the vendor has changed his mind, Sheppard J commented (at 187-88):

"But what has happened is not, in my opinion, due to any wrong

conduct on the part of the Commission or any of the other parties

to this litigation. It is a consequence to the existence of the

Act itself and of its administration by the Commission. As the

majority of the High Court said in Thomson Australian Holdings Pty

Ltd v. The Trade Practices Commission [1981] HCA 48; (1981) 148 CLR 150 at 164:

'The appellant is bound to accept any damage to its business which

is consequential upon the enforcement by the Commission against

the defendants of the provision of the Trade Practices Act so long

as that damage does not constitute an infringement of the

appellant's legal rights, if any.'

Although what their Honours there said was directed to a somewhat

different problem, it is an apt statement of what has happened

here. That must be so when one bears in mind that the Act is not

concerned with either benefitting or disadvantaging the companies

engaged in a take-over battle. Its purview and purpose are to

protect the public interest against a takeover or merger which by

s. 50 is made unlawful. If companies engaged in a struggle such

as the present are hurt because of the administration of the Act,

or if the market for shares is held up because of litigation,

consequent upon the Commission's view that there is a threatened

breach of the law, that is a consequence which the parties must

bear. A fortiori is that the case if circumstances change to the

disadvantage of a party by reason of the institution by the

Commission of proceedings taken in good faith.

It is for reasons such as I have just mentioned that I would

respectfully disagree with that which Smithers J. said in his

judgment in the earlier case APMS Investments Pty Ltd v. Trade

Practices Commission (1983) 49 ALR 475 at 485 which seems to me to

have been intended to persuade the Commission in a situation such

as this to act only after an acquisition has taken place. My own

respectful view, for what it is worth, is that the matter will

always be one for the Commission to act as it thinks appropriate

in the public interest. An application for an injunction is one

of the weapons the legislature intended it to have in its armoury.

It is a matter for it to determine the circumstances under which

it will be used."

21. It may be that the language of s.80(6) (which provides that in proceedings initiated by the Minister or the Commissioner for injunctive relief no undertaking as to damages shall be required as a condition of granting the injunction) may prevent the Court taking into account any financial detriment to a respondent in the exercise of discretion to grant an interim injunction: cf per Bowen C.J. in Commercial Bank of Australia Ltd v Insurance Brokers Association of Australia (1977) ATPR 40-053 at 17,550-1. That is not a matter which was argued before us. The serious consequences to a respondent of that view prevailing caution against expressing a final view in the absence of full argument. But this is not a matter which arises in the present case. It is not suggested that Santos would suffer financial detriment in the event of an interlocutory injunction being granted. Rather, the complaint of Santos is that the grant of an interlocutory injunction would put to an end a commercial opportunity.

22. The Commission relied heavily upon what was said by Sheppard J in support of its submission before us that Heerey J had failed properly to consider the maintenance of the status quo, that being the present situation before any acquisition has taken place. Although senior counsel for the Commission disavowed the proposition that as a matter of law an injunction should be granted in every case since the failure so to do would always, subject to the qualification already mentioned, put an end to the litigation, he came indeed perilously close to supporting such a submission. However, as the judgment of the full court in ICI Australia Operations Pty Ltd v Trade Practices Commission (unreported, 23 September 1992) points out, even in the case of a final hearing where a contravention of the Act has been shown, the court is not obliged to grant injunctive relief restraining the repetition of the conduct complained of. Speaking of the power of the court in s.80(2) to grant interim injunctive relief, Lockhart J said (at 15-16):

"Subsection (2) of s. 80 empowers the Court to grant an interim

injunction 'where in the opinion of the Court it is desirable to

do so'. In World Series Cricket Pty Limited v Parish (1977) 16

ALR 181 (one of the first decisions of a Full Court of this Court

under the Act) it was stated by Bowen C.J. (at 185) that 'These

words confer a judicial discretion of the widest kind upon the

Court'; though his Honour then said:-

'It is not an arbitrary discretion but one to be exercised

judicially in accordance with principle. The principles

concerning the grant of interlocutory injunctions were developed

in the Court of Chancery, but have been moulded to what is

appropriate for different jurisdictions in which interlocutory

relief may be obtained'."

23. In the same case, Gummow J expressed his agreement (at 9) with a comment contained in Mr Hayden's work, Trade Practices Law, para.18.740, that whilst in concept the remedy provided under s.80 of the Act differs from the equitable remedy of injunction as administered by Courts of Equity, nevertheless:

"... in many practical respects it is not, however, fundamentally

distinct from the equitable remedy."

24. While due weight should be given to the fact that the failure to grant an interlocutory injunction would permit a respondent, in a case such as the present, to proceed to acquire, through its takeover offer, shares and thereby may possibly result in a breach of s.50, it, in my view, gives too much emphasis to form and not enough to substance to say that because the grant of the injunction could put an end to the subject matter of the litigation, therefore, in the ordinary case at least, interim injunctive relief should be granted. The remedy of divestiture is in reality an alternative remedy open to the Commission, albeit that it is one which could not be sought by the Commission until at least there had been an acquisition of the shares. In my view, a court considering whether to grant an interim injunction, in a case such as the present, must weigh up the real consequences to each party, taking in mind not only the public interest but also the private interests involved. There is, in my view, no presumption that an interim injunction should be granted, nor is there a presumption that an interim injunction should not be granted. The matter is one for a judicial exercise of discretion, taking into account all relevant matters.

25. As I said earlier, the question of whether there is a serious issue to be tried and the balance of convenience in granting an injunction are not two mutually exclusive matters. The one reacts upon the other. The stronger the case the Commission has on the merits, that is to say in the present case of a breach of s.50 in the event of an acquisition, the more the balance of convenience would, without the interaction of other factors, be weighted in favour of the Commission. Likewise, where the Commission's case appears weak, the more the balance of convenience may be weighed in favour of the respondent to the proceedings, all other factors being equal.

26. This is, however, not the way in which the matter proceeded below. Once the concession was made that there was an arguable issue, no further consideration was given by the parties to the strength or otherwise of the Commission's case. Hence, it is not surprising that his Honour's judgment likewise eschewed such a consideration.

27. His Honour's judgment carefully weighed up the competing hardships caused by the grant or refusal of the interlocutory relief. The judgment was criticised in the course of argument in a number of respects. I have already referred to a criticism of his Honour's treatment of a press release issued by the South Australian State Government. Criticism was addressed as well to what was said to be his Honour's erroneous view that the grant of injunctive relief would put an end to the takeover offer. It was said, no doubt rightly as a matter of theory, albeit naively as a matter of practice, that a further takeover offer could be made. His Honour's estimate of the time that might be taken before the matter was finally determined was criticised. It was suggested that the only relevant question was the time that might be taken in the actual hearing of the proceeding and that time thereafter that may be occupied in appeals was irrelevant. It was said that his Honour placed too little weight on what was said by Sheppard J in SCI Operations Pty Ltd, to which reference has already been made. The practicality of divestiture as a method of relief was criticised as was the wording of the injunctions proffered by Santos.

28. However, in my view, none of the criticisms made of his Honour's judgment indicate that, having regard to the manner in which the case was argued before him, his Honour erred in any way in principle in refusing to grant the interlocutory relief, nor, in my view, can it be said that the decision appealed from worked substantial injustice to any of the parties: cf Adam P. Brown Male Fashions Pty Ltd v Philip Morris Inc. [1981] HCA 39; (1981) 148 CLR 170 at 177; Federal Commissioner of Taxation v Nestle Australia Ltd [1986] FCA 368; (1986) 69 ALR 445; Federal Commissioner of Taxation v Hydrocarbon Products Pty Ltd (1987) 72 ALR 391 at 406-7. In these circumstances, I would accordingly refuse leave to appeal. Most of the matters raised by the Commission or by Sagasco went more to matters of the weight to be given to a particular matter rather than to matters of principle.

29. There remains one further matter, the question of the standing of Sagasco to seek leave to appeal. On the day before the hearing before Heerey J, Santos filed a notice of motion seeking an order that it was not a necessary and proper party. His Honour declined to grant leave to bring the motion on, having regard to the time that would be taken in debating it. Thereafter, Sagasco participated in the hearing. It was entitled so to do in his Honour's view as a person potentially affected by the grant of injunctive relief: cf Miller v Jackson [1977] EWCA Civ 6; (1977) QB 966. In my view, his Honour was correct in this.

30. However, the position of Sagasco as a potential appellant before us raises a quite different question. It was pointed out by senior counsel for Santos that, having regard to the provisions of s.80(1A) of the Act, Sagasco could not have been an applicant for injunctive relief at first instance. That sub-section provides:

"Subject to sub-section (1B), a person other than the Minister

or the Commission is not entitled to make an application under

sub- section (1) for an injunction by reason that a person has

contravened or attempted to contravene or is proposing to

contravene, or has been or is proposing to be involved in a

contravention of, section 50 or 50A."

31. The provisions of sub-sec.(1B) are for present purposes immaterial.

32. If leave to appeal were granted and an appeal by Sagasco were successful, no relief could be granted in such an appeal. Since Sagasco itself would not be entitled, at first instance, to apply for injunctive relief, a fortiori it could not seek an interim injunction in aid of its final rights. Conversely, on appeal, it could not obtain an order which it could not have obtained at first instance. It follows, in my view, that the application by Sagasco was misconceived. However, be this as it may, even if Sagasco had had standing, for the reasons already given, I would have refused to grant to it leave to appeal. In these circumstances, the applications for leave of both the Commission and Sagasco should be dismissed with costs.