BETWEEN : WESTGOLD RESOURCES NL (ACN 009 260 306)

Interlocutory injunction - Corporations Act - Prospectus - Related parties transaction - No prior approval by shareholders - Whether prospectus contained omissions in breach of s 728(1)(b) of the Corporations Act - Balance of convenience

Corporations Act 2001 (Clth)

1 WHITE AUJ: This is an application for an interlocutory injunction, pursuant to s 1324 of the Corporations Act ("the Act"), restraining the respondent, until the trial of the application, from issuing any shares to shareholders pursuant to the prospectus dated 6 February 2002 and a supplementary prospectus ("the prospectus") issued by it for a 1 for 1 non-renounceable partly underwritten entitlements issue and from issuing any shares to the underwriters to the prospectus.

2 The principles applicable to the grant of an interlocutory injunction are well settled. The applicant must satisfy the court that the claim is not frivolous or vexatious, in other words that there is a serious question to be tried: Castlemaine Tooheys Ltd v South Australia [1986] HCA 58; (1986) 161 CLR 148 at 153; Hawkesdale Nominees Pty Ltd v Honda Australia Pty Ltd, unreported; FCt SCt of WA; Library No 8337; 22 June 1990. If there is a serious question to be tried, the court must consider whether the balance of convenience is for or against the grant of the injunction. If common law damages would be an adequate remedy, and the respondent would be able to pay them, an injunction would not normally be granted: American Cyanamid Co v Ethicon Ltd [1975] UKHL 1; [1975] AC 396 at 408. The proper test is whether, in a particular case, it is just in all the circumstances to confine the plaintiff to a remedy sounding in damages: Evans Marshall & Co Ltd v Bertola SA [1973] WLR 349 at 379; State Transport Authority v Apex Quarries Ltd [1988] VicRp 26; [1988] VR 187 at 193.

3 Where other factors are evenly balanced, it is appropriate to preserve the status quo: American Cyanamid Co v Ethicon Ltd (supra).

4 The applicant in the present proceedings is the seventh largest shareholder in the respondent, having been a shareholder since April 2000, and it has raised three separate complaints in respect of the prospectus. These are:

"2. The Applicant has 3 separate claims arising out of the Entitlements Issue and the underwriting arrangements in relation to that issue (the 'Underwriting'), namely:

2.1 that the Underwriting by companies associated with each of Messrs Smith, McKee and the Earl of Warwick, being directors of the Respondent, required approval by the Respondent's shareholders in accordance with Chapter 2E of the Corporations Act;

2.2 that the Prospectus contained misleading or deceptive statements in breach of section 728(1)(a) of the Corporations Act and also contained omissions in breach of section 728(1)(b) of the Corporations Act;

2.3 since the offer of shares pursuant to the Prospectus new circumstances have arisen which are materially adverse from the point of view of investors within the meaning of section 724(1)(d) of the Corporations Act, requiring the Respondent to deal with all applications received under the Prospectus in accordance with section 724(2) of the Corporations Act."

5 A copy of the prospectus is annexed at page 100 to the affidavit of Andrew David Chapman sworn on 8 March 2002. Mr Chapman is the Company secretary of the applicant. In the letter from the respondent's chairman, Mr Warwick, that forms section 1 of the prospectus, the purpose of the Entitlements Issue is stated as being to:

1. defend the litigation brought by the applicant against the respondent,

2. repay loans and capitalised interest and fees of $553,606 to two shareholders who are associated with directors Messrs Smith and McKee and to pay Messrs Smith and McKee their employee entitlements, including long service leave and holiday pay of $206,627,

3. complete the respondent's environmental obligations in respect of the decommissioning of the Palm Springs Gold Mine.

6 In relation to those purposes, the prospectus states at pages 7-8 thereof:

The Entitlements Issue will raise approximately $1,585,485 and it is intended to use the funds as follows:

(a) To Meet the Defence Costs of the Westgold Litigation

It is essential for the Company to fund the Westgold Litigation to preserve and protect the Company's assets and thereby shareholders' interests. The Directors are of the view that the Westgold litigation will be heard by the Court towards the latter part of the 2002 calendar year.

The defence costs likely to be incurred in the Westgold Litigation are not easily estimated, however, it is expected that the funds raised pursuant to this Prospectus, together with future payments of the Royalty, will be adequate to meet these costs and the other items referred to below.

Alternatively, the funds may be used to effect an early commercial resolution of this matter. Further details of the Westgold Litigation are set out in Section 7.

(b) To Pay Employee Entitlements and Repayment of Shareholder Loans

The Company has current liabilities in the form of employee entitlements (totalling approximately $206,627) owed to Messrs Smith and McKee who are directors of the Company and shareholders loans (approximately $553,606) owed to Pacific Quest Investments Pty Ltd and Adapt Pty Ltd, which are entities associated with Messrs Smith and McKee, respectively. The discharge, of these liabilities will have a positive effect on the Company's balance sheet. Further details of the shareholders loans and employee entitlements are set out in Sections 5, 6 and 7.

(c) To Meet Palm Springs Gold Mining Environmental Obligations

The Company has outstanding obligations in respect of the decommissioning and rehabilitation of the Palm Springs Gold Mine. A provision of $60,000 has been set aside to meet these costs.

(d) To Pay Expenses of this Entitlements Issue

It is anticipated that the expenses of the Entitlements Issue will be approximately $123,162.

(e) To Meet Working Capital, Interest and Other Expenses."

7 The prospectus describes the Entitlements Issue in the following terms:

The Entitlements Issue is made on the basis that for every 1 Share held by Eligible Participants at the Record Date, Eligible Participants will have the right (but not the obligation) to subscribe for 1 additional Share at an issue price of 10 (ten) cents per Share to raise approximately $1,585,485.

The Entitlements Issue is Non-Renounceable and Eligible Participants may not sell or transfer all or any part of their Entitlement to the Entitlements Issue.

Based on the issued capital of the Company at the date of this Prospectus approximately 15,854,855 Shares will be offered as Entitlements.

The number of Shares to which an Eligible Participant is entitled is shown on the personalised Entitlement and Acceptance Form accompanying this Prospectus.

Eligible Participants may accept the Entitlements Issue in whole or in part, or may decide not to accept their Entitlement (in the later case they will receive no benefit from the Entitlement Issue).

It is important that Eligible Participants consider this Prospectus carefully. If Eligible Participants decide to accept their Entitlements (either in whole or in part), they must do so in accordance with the instructions on the accompanying Entitlement and Acceptance Form. If you are an Eligible Participant and you are in doubt as to the course you should follow you should consult your professional adviser."

8 In Section 7 of the prospectus the following reference to the "Westgold litigation" is made:

(a) Westgold Litigation - Supreme Court of Western Australia Action No. 2705 of 2000

On 15 December 2000 Westgold Resources NL ('Westgold') commenced proceedings in the Supreme Court of Western Australia against the Company and two of its directors Messrs Smith and McKee ('Westgold Litigation'). Westgold has alleged that the defendants engaged in misleading or deceptive conduct with respect to the issue by the Company of shares to Westgold in April 2000. The claim is for damages in the sum of $3,090,770 plus interest and costs. It is the Company's belief that Westgold's claim is unfounded and the action is being vigorously defended.

The matter has not yet been entered for trial, however, it is anticipated that it will be heard by the Supreme Court towards the later part of the 2002 calendar year."

9 There is in that section also a reference to other litigation.

10 At page 32 of the prospectus, there is the following definition of "Shortfall shares"

Shortfall shares means the difference, if any, between:

(a) the number of Securities the subject of the Entitlements Issue subscribed for under the Prospectus by Eligible Participants and includes the number of Securities required to be applied for or procured by the Underwriter prior to the Closing Date; and

(b) the number of all the Securities the subject of the Entitlements Issue offered for subscription or acceptance under the Prospectus pursuant to this issue.

12 In the Underwriting Agreements between the respondent and each of Adapt Pty Ltd, Pacific Quest Investments Pty Ltd and Tagora Pty Ltd respectively, the term "Shortfall" is defined as follows:

Shortfall means the number of Shares comprising the difference between the Number of the Total Underwritten Shares and the number of Shares in respect of which Applications, as at the date of the Shortfall Notice, have been received and accepted by the company and are still held.

13 The Total Underwritten Shares is defined as meaning 12 million shares.

14 It is accordingly apparent that there is a significant difference in the meaning of the terms "Shortfall shares" as defined in the prospectus and "Shortfall" as defined in the Underwriting Agreements. In the prospectus, the "shortfall shares" are the difference between 15,854,855 and the number of shares acquired pursuant to the prospectus, whereas, in the Underwriting Agreements, the shortfall is the difference between 12,000,000 and the number of shares acquired pursuant to the prospectus. That difference was addressed in the Deed next referred to hereunder. and the number of shares acquired pursuant to the prospectus

15 By a Deed of Variation of the Underwriting Agreements dated 18 March 2002, the definitions of "Shortfall" and of "Underwritten Shares" was changed and new definitions were inserted. (I should mention that the difference between the 12,000,000 shares referred to above and the 12,800,000 shares referred to in the Deed represents the 800,000 shares later underwritten by a shareholder - Vagg - who is not a related party within the meaning of that term in the Act.) Clause 2.1 of that deed provides:

"2.1 In clause 1.1 of the Underwriting Agreement, the definition of:

(a) 'Shortfall' is deleted and replaced with the following:

(i) the difference between the number of Shares in the Offer (15,854,855) and the aggregate number of Shares in respect of which Applications (not including Applications by Underwriters to the Offer pursuant to their respective underwriting agreements) have been received and accepted by the Company (5,778,644),

(ii) multiplied by the Total Underwritten Shares (12,800,000);

(iii) divided by the Shares in the Offer (15,854,855).

'Total Underwritten Amount' means one million two hundred and eighty thousand dollars ($1,280,000)'

'Total Underwritten Shares' means the twelve million eight hundred thousand (12,800,000) Shares'.

'Underwriters to the Offer' means all underwriters secured by the Company who underwrite the Offer and includes Vagg Investment Management Services Pty Ltd'.

(e) 'Underwritten Shares' is deleted and replaced with the following:

'Underwritten Shares' means 508,423 Shares being that proportion of the Shortfall as the Underwritten Amount bears to the Total Underwritten Amount up to a maximum of 800,000 Shares."

16 The respondent contends that the present proceedings form part of a sustained campaign against the respondent by the applicant, pointing out that the applicant:

"(a) in December 2000 commenced proceedings in CIV 2705 of 2000 against PMA and two of its directors, Smith and McKee, seeking damages in excess of $3 million concerning events in March and April 2000: see the statement of claim which is 'ADC2' p15 et seq of Chapman's affidavit;

(b) wrote to ASIC on 21 February 2002 complaining of PMA prospectus issued 6 February 2002, although Westgold did not act, and had no intention of acting, in reliance on the prospectus: see 'ADC5' (p83) of Chapman's affidavit and also see Westgold's statement of intent at p92 of Chapman's affidavit;

(c) made application to this Court (in COR 56 of 2002) on 5 March 2002 to obtain PMA's share register as at five dates in 1999 and 2000 (three of which were before Westgold first became a shareholder of PMA);

(d) made application to the Takeovers Panel on 7 March 2002;

(e) has by advertisement on 13 March 2002 sought persons to join in a contemplated class action against PMA's directors in respect of three prospectuses in 1999 and 2000 (where Westgold only subscribed for securities pursuant to the last prospectus): see para 13 and 'AKM9' p7 of McKee's affidavit."

"4. The PMA prospectus dated 16 February 2002 states that one of the purposes of the fundraising is to enable PMA to fund its defence of Westgold's action in CIV 2705 of 2000: see the prospectus at pp52, 54 and 75 of Chapman's affidavit.

5. Westgold's actions in this proceeding (COR 69 of 2000), its complaints to ASIC and to the Takeovers Panel concerning PMA's prospectus of 6 February 2002, can only be seen as the actions of an adversary keen to stifle PMA's defence of the substantial claim in CIV 2705 of 2000.

6. Further, Westgold is engaged in a broader aggressive strategy against PMA as evidenced by its seeking of the PMA share register (in COR 56 of 2002) while contemporaneously advertising for persons to join in a class action in respect of some prospectuses which it did not subscribe to."

18 The applicant indignantly rejects these submissions and says that it is concerned to protect its interests as a shareholder in a company which has issued a thoroughly uncommercial prospectus, the effect of which is likely to be that control of the respondent will be acquired by the directors pursuant to the underwriting agreements and at little expense to them.

19 As to the respondent's duties in relation to the prospectus, the applicant referred me to a number of authorities.

20 In Ampolex Ltd v Mobil Exploration & Producing Australia Pty Ltd (1996) 19 ACSR 354, Sackville J was dealing with a question as to whether a Part A statement issued by Mobil Exploration & Producing Australia Pty Ltd was defective and not in compliance with the provisions of s 750 of the Corporations Law. His Honour held, inter alia, (and I quote from the headnote) that:

" (i) The requirement of CL s 750 is to put shareholders in possession of information required to enable them to make an informed assessment of an offer and an informed decision as to whether to accept it.

Samic Ltd v Metals Exploration Ltd (1993) 60 SASR 300; applied.

Gantry Acquisition Corp v Parker & Parsley Petroleum Australia Pty Ltd [1994] FCA 1212; (1994) 123 ALR 29, followed.

(ii) Where it is said that an offeror has engaged in misleading or deceptive conduct, the person claiming relief must establish materiality.

Fraser v NRMA Holdings Ltd (1995) 127 ALR 543, followed.

(iii) Information relating to Mobil's assessment of the likely outcome of the convertible note litigation is material to shareholders wishing to make an informed and critical assessment of the offer for their shares and as to the relationship between that assessment and the price offered by Mobil for the convertible notes."

21 While that decision was concerned with circumstances different from those of the present application, the findings I have referred to are helpful in considering the terms of the prospectus issued by the respondent.

22 In Pancontinental Mining Ltd v Goldfields Ltd, (1995) 16 ACSR 463 at 466 - 468, Tamberlin J has conveniently collected the general guidelines to be derived from the decisions of the courts in relation to the information to be furnished in a part A statement and it seems to me that his Honour's remarks are equally applicable, mutates mutandis, in relation to a prospectus under the Act.

23 In Fraser v NRMA Holdings Ltd (supra) at 601, it was said by the Full Court of the Federal Court of Australia (Black CJ, von Doussa and Cooper JJ) that:

"A duty to make disclosure of relevant information arises as part of the fiduciary duties of the directors to the company and its members in relation to proposals to be considered in general meeting and under s 1022 of the Law in respect of the contents of a prospectus. The fiduciary duty is a duty to provide such material information as will fully and fairly inform members of what is to be considered at the meeting and for which their proxy may be sought. The information is to be such as will enable members to judge for themselves whether to attend the meeting and vote for or against the proposal or whether to leave the matter to be determined by the majority attending and voting at the meeting ... "

24 Their Honours cited a number of authorities in support of that finding.

25 McLelland J in Solomon Pacific Resources NL v Acacia Resourses Ltd (1996) 19 ACSR 238 held, inter alia, that:

"The overriding consideration for the court in deciding whether to grant or refuse an interlocutory injunction is what course is best calculated to achieve justice between the parties, having due regard also to the interests of other affected persons as well as the public interest, in the circumstances of the present case."

26 In relation to the first issue, the applicant relies upon Chapter 2E of the Act, which provides in relevant part:

"Section 207 Purpose

207 The rules in this Chapter are designed to protect the interests of a public company's members as a whole, by requiring member approval for giving financial benefits to related parties that could endanger those interests.

Section 208 Need for Member Approval for Financial Benefit

208(1) [Giving a financial benefit] For a public company, or an entity that the public company controls, to give a financial benefit to a related party of the public company:

(i) obtain the approval of the public company's members in the way set out in sections 217 to 227; and

(ii) give the benefit within 15 months after the approval; or

(b) the giving of the benefit must fall within an exception set out in sections 210 to 216.

...

Section 210 Arm's Length Terms

210 Member approval is not needed to give a financial benefit on terms that:

(a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm's length; or

(b) are less favourable to the related party than the terms referred to in paragraph (a)."

27 Section 228(2) of the Act defines the term "related parties" of a public company to include, inter alios, directors of the public company and s 228(4) has the effect that an entity controlled by a director of the public company is also a related party of that company. There is no dispute in the present proceedings that each of the companies associated with Messrs Smith and McKee and with the Earl of Warwick is a related party of the respondent.

28 Section 229 of the Act provides as follows:

Section 229 Giving a Financial Benefit

229(1) [Circumstances of financial benefit] In determining whether a financial benefit is given for the purposes of this Chapter:

(a) give a broad interpretation to financial benefits being given, even if criminal or civil penalties may be involved; and

(b) the economic and commercial substance of conduct is to prevail over its legal form; and

(c) disregard any consideration that is or may be given for the benefit, even if the consideration is adequate.

229(2) ['Giving a financial benefit'] Giving a financial benefit includes the following:

(a) giving a financial benefit indirectly, for example, through 1 or more interposed entities;

(b) giving a financial benefit by making an informal agreement, oral agreement or an agreement that has no binding force;

(c) giving a financial benefit that does not involve paying money (for example by conferring a financial advantage).

229(3) [Examples] The following are examples of giving a financial benefit to a related party;

(a) giving or providing the related party finance or property;

(b) buying an asset from or selling an asset to the related party;

(c) leasing an asset from or to the related party;

(d) supplying services to or receiving services from the related party;

(e) issuing securities or granting an option to the related party;

(f) taking up or releasing an obligation of the related party."

29 The submissions by the applicant include the following:

"6. The Entitlements Issue is conditionally underwritten by:

6.1 Pacific Quest Investments Pty Ltd ('Pacific Quest') a company controlled by Mr Roderick Smith, who has agreed to underwrite to the tune of $400,000 and who stands to receives [sic] a total of approximately $368,754 by way of underwriting fees, loan repayments and employee entitlements out of the proceeds.

6.2 Adapt Pty Ltd ('Adapt'), a company controlled by Mr Andrew McKee, who has agreed to underwrite to the tune of $400,000 and who stands to receive a total of approximately $414,761 by way of underwriting fees, loan repayments and employee entitlements out of the proceeds;

6.3 Tagora Pty Ltd ('Tagora'), a company controlled by the Earl of Warwick, who has agreed to under [sic] to the tune of $400,000 and who stands to receive a total of $20,000 by way of underwriting fees; and

6.4 a further unnamed underwriter not associated with any director, to the extent of $80,000.

7. Each of Messrs Smith, McKee and the Earl of Warwick are directors of the Respondent. It is therefore not in dispute between the parties that each of Pacific Quest, Adapt and Tagora are 'related parties' of the Respondent for the purposes of Chapter 2E of the Corporations Act, nor that the Underwriting by each of these entities is a 'related party transaction' within the meaning of that chapter.

8. Pursuant to section 208(1) of the Corporations Act the Respondent is required to obtain shareholder approval for each of the Pacific Quest, Adapt and Tagora Underwriting (in accordance with sections 217 to 227) unless the related party transaction falls within an exception set out in sections 210 to 216.

9. The Respondent has not obtained shareholder approval for either of the Pacific Quest, Adapt or Tagora Underwriting."

30 As I understand it, those submissions are not disputed, and the respondent relies upon the exception provided for in s 210 of the Act, which I have set out above.

"11. The Underwriting by Pacific Quest is clearly not on 'arms length terms' for the following reasons:

11.1 the provision of the Underwriting of a maximum of $400,000 is conditional on the Respondent paying to Mr Smith a total of $368,754 by way of underwriting fees, loan repayments and employee entitlements out of the proceeds of the Underwriting;

11.2 Pacific Quest is entitled to set off the monies owing to Mr Smith against the underwriting commitment, meaning the maximum total cash outlay that could be required by Pacific Quest pursuant to the Underwriting would be $31,246, and given that the Underwriting has only been called in part Pacific Quest will not actually have to outlay any cash;

11.3 given the insignificant potential cash outlay the Underwriting is not really an underwriting at all within the ordinary meaning of underwriting as 'assuming the risk that the intended investors will not take up an offer of securities' (see ASIC Policy Statement 61.3 annexed to the Submissions made by ASIC);

11.4 as a result of the take up by Mr Smith of the Entitlements Issue and the Underwriting by Pacific Quest, Mr Smith's relevant interest in the Respondent stood to increase from 12.84% to a maximum of 26.59% (substantially above the 20% 'takeover' threshold);

11.5 the loan and employee entitlements being paid to Mr Smith would be paid out at least 6 months earlier than the Respondent would otherwise have to pay them out, as Mr Smith has agreed not to make demand for payment of these amounts until 30 September 2002;

11.6 the terms on which the loan was originally made by Mr Smith to the Respondent and the terms of repayment of that loan were not themselves ever approved by shareholders or the Respondent as a 'related party transaction';

11.7 the terms of payment of the employee entitlements due to Mr Smith were not the subject of shareholder approval by the Respondent's shareholders under the 'related party transaction' provisions despite the fact that Mr Smith is being paid entitlements in lieu of holidays and long service leave without any explanation as to why Mr Smith was not requested to take the holidays or long service leave prior to termination of his contract;

11.8 the Underwriting did not require Mr Smith to take up his own entitlements under the Entitlements Issue, despite the fact that if all directors took up their entitlements under the Entitlements Issue in full there would have been no need for the Prospectus to be underwritten to the extent that it was;

11.9 Pacific Quest was entitled to receive an underwriting fee of $20,000 when the maximum amount of cash it could be required to contribute was only $31,246;

11.10 part of the funds being raised by the Underwriting are to be used by the Respondent to pay Mr Smith's personal legal costs as a defendant in the 'Westgold litigation'.

12. The Underwriting by Adapt is clearly not on 'arms length terms' for the following reasons:

12.1 the provision of the Underwriting of a maximum of $400,000 is conditional on the Respondent paying to Mr McKee a total of $414,761 by way of underwriting fees, loan repayments and employee entitlements out of the proceeds of the Underwriting;

12.2 Adapt is entitled to set off the monies owing to Mr McKee against the underwriting commitment meaning that no cash outlay would ever be required to be made by Adapt;

12.3 given there could never be any cash outlay the Underwriting is not really an underwriting at all within the ordinary meaning of underwriting as 'assuming the risk that the intended investors will not take up an offer of securities' (see ASIC Policy Statement 61.3 annexed to the Submissions made by ASIC);

12.4 the loan and employee entitlements being paid to Mr McKee would be paid out at least 6 months earlier than the Respondent would otherwise have to pay them out, as Mr Smith has agreed not to make demand for payment of these amounts until 30 September 2002;

12.5 the terms on which the loan was originally made by Mr McKee to the Respondent and the terms of repayment of that loan were not themselves ever approved by shareholders or the Respondent as a 'related party transaction';

12.6 the Underwriting did not require Mr McKee to take up his own entitlements under the Entitlements Issue, despite the fact that if all directors took up their entitlements under the Entitlements Issue in full there would have been no need for the Prospectus to be underwritten to the extent that it was;

12.7 the terms of payment of the employee entitlements due to Mr McKee were not the subject of shareholder approval by the Respondent's shareholders under the 'related transaction' provisions despite the fact that Mr McKee is being paid entitlements in lieu of holiday and long service leave without any explanation as to why Mr McKee was not requested to take the holidays or long service leave prior to termination of his contract;

12.8 Adapt was entitled to receive an underwriting fee of $20,000 even though no cash outlay would ever be required by Adapt;

12.9 part of the funds being raised by the Underwriting are to be used by the Respondent to pay Mr McKee's personal legal costs as a defendant in the 'Westgold litigation'.

13. The Underwriting by Tagora is clearly not on 'arms length terms' for the following reasons:

13.1 as a result of the take up by the Earl of Warwick of the Entitlements Issue and the Underwriting by Tagora, the Earl of Warwick's relevant interest in the Respondent stood to increase from 12.84% to a maximum of 26.59% (substantially above the 20% 'takeover' threshold);

13.2 the Underwriting did not require the Earl of Warwick to take up his own entitlements under the Entitlements Issue despite the fact that if all the directors took up their entitlements under the Entitlements Issue in full there would have been no need for the Prospectus to be underwritten to the extent that it was; and

13.3 part of the funds being raised by the Underwriting are to be used by the Respondent to pay the Earl of Warwick's personal legal costs as a defendant in the 'Westgold litigation'.

32 The Australian Securities and Investments Commission has filed certain written submissions outlining the Commission's policy on related party underwriting agreements. It is not the intention of the Commission to express a view as to whether or not the underwriting agreements in question do fall within the exception in s 210 of the Act, as to which it has not formed a view. I am obliged to the commission for its helpful submissions as amicus curiae.

33 The submissions, which were adopted by the applicant included the following:

"4. ASIC is of the view that shareholder approval, in terms of the procedure set out in sections 217 to 227 of the Act, is generally required where a public company wishes to enter into underwriting agreements which are on more favourable terms to the related party than if the parties were dealing at arms length.

5. An obvious example of 'more favourable terms' is where directors, or companies they control, are offered an underwriting of shares at a greater discount than that which could be negotiated with an independent underwriter.

...

7. When determining whether an underwriting has been entered into on more favourable terms, the Court should not restrict itself to determining, in isolation, whether the share pricing or fee structure of an underwriting is reasonable.

8. The Court should also determine whether there are any other financial benefits that flow to the underwriters from the underwriting, which, when added to the underwriting, make the transaction as a whole favourable or unreasonable if the parties were dealing at arm's length.

9. This may include, for example, debt for equity swaps and the effect that the underwriting, if called upon, has on the control of the company. ASIC regards that these could, in certain circumstances, amount to financial benefits (see s 229(1) of the Act).

10. If the effect of an underwriting, if called upon, is to give a related party a relevant interest (as defined in section 608 of the Act), in excess of the percentages set out in section 606 of the Act, then the Court should take into account ASIC Policy Statement 61, particularly at paragraphs 61.3, 61.14 and 61.35, as well as NCSC Policy Statement 112. These policy statements are attached as annexures B and C.

11. The reason is that ASIC would not expect an 'arm's length party' to reasonably enter into an agreement whereby shares may be issued to it if it could have the effect that the underwriter exceeds the percentage limits set out in section 606 of the Act without the benefit of one of the exceptions to section 606 set out in section 611 of the Act, such as item 13 of section 611.

12. When all of the above factors and policy considerations are taken into consideration, what may sometimes at first instance appear to be reasonable in terms of share issue pricing or fee structure, or even less favourable than the terms referred to in section 210(a) of the Act, (eg. a director underwriting for the same issue price and fee as was offered to independent underwriters who failed to accept the offer), may, when control issues are included, appear to amount to unreasonable or favourable terms in the sense that an underwriter could gain control of a company not only without paying a premium for control, but also for a discount to the market price."

34 The provisions of the ASIC Policy Statement 61, referred to in para 10 of those submissions are:

[PS 61.3] In general, underwriting means assuming risk. It is not a term of legal art. As used by stockbrokers, it means assuming the risk that the intended investors will not take up all of an offer of securities. An underwriter of an offer of securities agrees to take up any securities not taken up by the intended investors (the shortfall). If the whole offer is taken up by the market, the underwriter takes up none of the securities (as underwriter) (Australian Investment Trust Ltd v Strand and Pitt Street Properties Ltd (1931) 31 SR(NSW) 266, reversed [1932] AC 735, in the absence of a provision such as s204).

...

[PS 61.14] In deciding whether a transaction is squarely within the exemptions, the ASC will consider the commercial nature of the transaction rather than its legal form. Factors which it will consider include:

(a) whether the underwriter engages in underwriting or sub-underwriting as an ordinary part of its business; and, where it does not,

(b) whether the circumstances surrounding the transaction are more consistent with a bona fide agreement to assume the risk of the shortfall, or with a placement.

...

[PS 61.35] The ASC also endorses the tenor and intent of NCSC Release 112 'Arrangements Contrary to the Purpose of the Takeovers Code - Companies (Acquisition of Shares) Act and Codes s60'. It is reviewing the Release with the intention of issuing an ASC replacement. In the interim the ASC advises that it takes the Release to be a guide to acceptable practices in relation to any form of underwriting and that it will enforce similar standards, either by recourse to the Court or by referral of appropriate matters to the Corporations and Securities Panel.

35 The NCSC Policy Statement 112 referred to the provisions of s60 of the Companies (Acquisition of Shares) Act and Codes and dealt with "Arrangements Contrary to the purpose of the Legislation", indicating the circumstances in which the NCSC would examine a transaction to determine whether its discretionary powers should be exercised. I do not think it necessary to reproduce the contents of that policy statement for the purposes of these Reasons.

"15. The linked repayment of the loans and employee entitlements and the Underwritings make it clear that the Pacific Quest and Adapt Underwritings are no more than a 'debt for equity swap' (as referred to in paragraph 9 of the ASIC submissions). This conclusion is reinforced by the fact that in June 2001 the Respondent despatched a notice of general meeting seeking shareholder approval to issue shares to repay the loans to Smith and McKee, but those resolutions were subsequently withdrawn from the general meeting in question when the adequacy of disclosure to shareholders was challenged in this Court. Clearly the Respondent is merely trying to achieve the outcome it sought to achieve in June 2001 without obtaining shareholder approval.

16. The Underwriting, if called upon clearly also has a marked effect on control of the Respondent (as referred to in paragraph 9 the ASIC submissions). The 3 directors of the Respondent currently hold between them a relevant interest in just over 30% of the Respondent's shares. No one director holds in excess of the 20% takeover threshold. After the Entitlements Issue and the Underwriting 2 of the 3 directors stand to increase their relevant interest in the Respondent substantially above the 20% takeover threshold, and the relevant interests of the 3 directors collectively stand to substantially exceed 50%. The effect of this would be to give the 3 directors the ability to collectively control the company."

37 The respondent's submissions in relation to this complaint are as follows:

"7. Westgold complains that the underwriting agreements for PMA's prospectus of 6 February 2002 are in breach of Chapter 2E of the Corporations Act. (Unless otherwise indicated all statutory references herein are to the Corporations Act).

8. It must be noted that this is a matter in respect of which Westgold has already complained to ASIC (on 21 February 2002: see 'ADC5' at p83 of Chapman's affidavit) and to the Takeovers Panel (on 7 March 2002: see 'ADC6' at 90 of Chapman's affidavit).

9. It is significant that neither ASIC nor the Takeovers Panel has taken any action to date concerning this Westgold complaint. This application is Westgold's third 'bite of the cherry' on this point.

10. In any event, Westgold's complaints about a contravention of Chapter 2E disclose no serious question to be tried.

11. Section 210 provides an exception to the requirements of Chapter 2E. That provision provides that shareholder approval of a transaction is not required if it is on terms that:

'(a) would be reasonable in the circumstances if the public company or entity and the related party were dealing at arm's length; or

(b) are less favourable to the related party than the terms referred to in paragraph (a).'

12. As is made clear by the affidavit of McKee, the underwriting agreements complained of are in substantially the same terms as those negotiated with Kirke Securities. Further, the underwriting agreements only came into being because no third party, apart from Vagg, was prepared to underwrite the PMA issue pursuant to its prospectus of February 2002.

13. The only material difference between the underwriting agreement negotiated at arm's length with Kirke Securities and with the underwriting agreements negotiated with Pacific Quest, Adapt, Tagora and Vagg is that Pacific Quest and Adapt are able to set off their obligations to pay any underwritten subscription monies against monies which were already due and payable to the underwriters or their associates by PMA.

14. In considering the application of section 210, one must compare like with like. Kirke Securities (and Tagora and Vagg for that matter) was not owed any money by PMA. Some of the underwriters and their associates were and are. There is no challenge to the bona fides of the sums owed to those underwriters and their associates. Given that Kirke Securities was not owed anything by PMA, the set off allowed under the underwriting agreements does not mean that the exception in section 210 does not apply.

15. Further, Westgold's complaints ignore the fact that the sums owed by PMA to the underwriters and associates were sums which are bona fide owed and which must be repaid. The fact that Smith and McKee have gratuitously agreed to not seek repayment of some of the sums owed to them or to the associated underwriters until 30 September 2002 does not alter the fundamental fact that the sums are owed bona fide and must be repaid by PMA. That agreement is disclosed in the prospectus (see p68 of Chapman's affidavit) and was disclosed to be 'subject to [PMA] being able to repay the sums at an earlier time'.

16. It must be noted that ASIC in October 2001 investigated whether the loans made by companies associated with the directors breach Chapter 2E. ASIC issued a notice to PMA requiring it to produce its relevant books (see p20 et seq of Sanders' affidavit of 13 March 2002). ASIC concluded its enquiries on 8 November 2001 and took no further action on the matter (see p26 of Sanders' affidavit of 13 March 2002). Westgold's submissions about the sums owing to the companies associated with PMA's directors must be viewed against that backdrop.

17. In the circumstances, it could not be said to be unreasonable, within the meaning of section 210, that PMA repay the sums bona fide owing by converting them into equity.

18. Further, two of the directors associated with the underwriters took up their full entitlements as existing shareholders under the prospectus which involved them putting further cash into PMA. This cash was not subject to any set off. There was no attempt to not take up their entitlement so as to only receive equity via the underwriting agreements."

38 I find that the arrangements between the respondent and each of Pacific Quest, Adapt and Tagora whereby the latter agreed to underwrite part of the shares comprising the Entitlements Issue was, at least arguably, the giving of a financial benefit by the respondent to related parties. I do not understand that to be disputed by the respondent, which calls in aid the provisions of s 210 of the Act (which I have set out above.) The respondent argues that members approval is not needed because the terms upon which the financial benefit was given to the related parties would be reasonable in the circumstances if the respondent and the related parties were dealing at arm's length. I have quoted above the relevant written submission by the respondent in this regard.

39 The fact that the underwriting agreements may contain substantially the same terms as those negotiated by Kirke Securities (save of course for the right of set-off in favour of the related parties) does not, in my judgment, establish that those terms would necessarily be reasonable if the respondent and the related parties were dealing at arm's length. In my opinion, the question whether the terms would have that character is not frivolous or vexatious and raises a serious question to be tried.

Misleading and deceptive Statements and Omissions - s 728 of the Act

40 The second complaint by the applicant is of alleged misleading and deceptive statements and omissions in the prospectus. The applicant submitted:

"17. There are a number of separate and distinct areas in which the Entitlements Issue Prospectus either contains statements that are misleading or deceptive in breach of section 728(1)(a) of the Corporations Act, or where there are omissions from the Prospectus in breach of section 728(1)(b) of the Corporations Act.

18. One of the stated uses of funds raised under the Prospectus is to repay loans and employee entitlements in the sum of $760,233 to 2 directors, namely Messrs Smith and McKee. The amount of funds in question represent approximately 60% of the total funds raised under the Entitlements Issue, after deducting the costs of the issue set out in the Prospectus.

19. Notwithstanding the substantial amount of funds to be used for this purpose, the Prospectus says very little about the loans or employee entitlements.

20. Recipients of the Prospectus need to know the essential terms and conditions of the loans to determine whether it is appropriate for the company to be using their subscription monies to repay the loans, including:

20.1 interest rate;

20.2 the repayment date;

20.3 whether there are any conditions on repayment of the loan; and

20.4 whether the company has a right to set off against the loans any monies owing by the directors to the company.

21. Recipients of the Prospectus need to know sufficient details about the employee entitlements to determine whether it is reasonable for the company to be using their subscription monies to pay them out. The Prospectus does little more than state that the entitlements relate to accrued annual leave, long service leave and payment in lieu of notice, without detailing why, for example, the employees were not required to take the relevant annual leave or work out their notice period.

22. Another of the stated purposes of the issue is to meet the defence costs of the 'Westgold litigation'. Despite this, the Prospectus contains only 2 paragraphs of disclosure in relation to that litigation (and in fact substantially less disclosure than the disclosure in relation to another piece of litigation which is not one of the stated purposes of the Prospectus).

23. Any prospectus will as a matter of course have a summary of material litigation, as this is clearly material information necessary for investors. Where one of the stated purposes of the Prospectus is to raise funds to defend litigation, however, investors have a need to know much more.

24. Set out in paragraph 17 of the affidavit of Andrew David Chapman sworn 8 March 2002 are a number of specific issues in relation to the 'Westgold litigation' which are not disclosed in the Prospectus and which are clearly material to investors' decisions as to whether to subscribe or not.

25. The Prospectus fails to disclose in the section in relation to the interests of directors, their interest as defendants in the 'Westgold litigation' and the fact that funds raised under the prospectus are being used to meet the costs of defending that litigation, including the directors' legal costs.

26. The Prospectus does not include a statement as to the intentions of the directors in relation to their entitlements under the Entitlements Issue, nor any recommendation by the directors. These forms of statements typically appear in prospectuses because it is clearly of material importance to shareholders to know whether the directors themselves are prepared to put their money into the company and whether they are prepared to recommend the issue to their shareholders.

27. Whilst the Prospectus is only partially underwritten, the Prospectus does not include disclosure in relation to the use of funds raised in the event that the offer is not fully subscribed (see in particular the ASIC Media and Information release appearing as annexure 'DGS10' to the affidavit of David Sanders sworn 3 April 2002).

28. The omission is compounded by the fact that for 2 of the 5 intended uses of the funds (namely meeting the defence costs of the 'Westgold litigation' and meeting working capital, interest and other expenses) there is no indication anywhere in the Prospectus the amount of money needed for these purposes.

29. Arising out of the combination of these issues, and the fact that there has been a shortfall of approximately $200,000, it is not clear from the Prospectus which of the proposed funding areas will not be funded to the full extent they otherwise would be, or whether the reduced funding will be sufficient to meet the company's financial needs."

41 In answer to those submissions, the submissions of the respondent are:

"19. The principal complaint made by Westgold is that there is insufficient information in the PMA prospectus concerning the 'Westgold litigation' which is CIV 2705 of 2000.

20. Westgold has previously complained about this aspect of the prospectus to ASIC (on 21 February 2002 see 'ADC5' at p86 of Chapman's affidavit), and to the Takeovers Panel (on 7 March 2002 see 'ADC6' at p93 of Chapman's affidavit).

21. Despite those complaints, both ASIC and the Takeovers Panel have declined to take any action. Again, this application is Westgold's third 'bite of the cherry'.

22. The complaints made by Westgold in this respect would involve PMA potentially disclosing privileged advice and decisions strategic to its conduct of the litigation (see para 17 of Chapman's affidavit) and also the estimated costs to PMA of defending the proceedings.

23. Given that Westgold has not, and will not, subscribe for shares under the PMA prospectus (see p92 of Chapman's affidavit) and that Westgold is the plaintiff in the 'Westgold litigation', the only reasonable inference to be drawn is that Westgold wishes PMA to make the disclosures so as to further Westgold's purposes and prospects in CIV 2705 of 2000.

24. It is difficult to discern, in those circumstances, any genuine complaint on the part of Westgold that PMA has contravened section 728. No serious issue to be tried has been disclosed."

42 It is apparent from the decision in Ampolex Ltd v Mobil Exploration & Producing Australia Pty Ltd (supra) that information relating to the respondent's assessment of the likely outcome of the Westgold litigation is material to shareholders wishing to make an informed and critical assessment of the offer of the shares the subject of the Entitlements Issue and I am satisfied that the issue of whether the prospectus should have contained that information, and is defective for not so doing, raises a serious question to be tried.

Materially Adverse New circumstances - s 724 of the Act

43 The third complaint by the applicant is supported by the following submissions:

"30. Section 724(1)(d) of the Corporations Act provides (for relevant purposes) that:

'If a person offers securities under a disclosure document, and the person becomes aware of a new circumstance that has arisen since the disclosure document was lodged, and would have been required ... to be included in the disclosure document if it had arisen before the disclosure document was lodged, and is materially adverse from the point of view of an investor, that person must deal under subsection (2) with any applications for the securities made under the disclosure document that have not resulted in an issue or transfer of the securities.'

31. None of the applications received under the Entitlements Issues have yet resulted in an issue or transfer of shares. As such, if section 724(1) applies to the Prospectus, the Respondent is required to comply with section 724(2) of the Corporations Act.

32. Section 724(2) of the Corporations Act, in summary, gives the Respondent the choice to either:

32.1 repay application monies received;

32.2 give applicants a Supplementary Prospectus and one month to withdraw their application and be repaid; or

32.3 issue the shares and give applicants a Supplementary Prospectus and one month to withdraw their application and be repaid upon which the relevant shares are cancelled.

33. A number of circumstances have arisen since the Prospectus was lodged that would have been required to be disclosed had they arisen before the Prospectus was lodged, and which either individually or in combination are materially adverse from the point of view of an investor.

34. The Prospectus contains a statement at page 16 that in their 30 June 2001 audit report the company's auditors identified 'inherent uncertainty' regarding the Respondent's continuation as a going concern.

35. On 15 March 2002 the Respondent released to the Australian Stock Exchange its Half Year Financial Report for the period to 31 December 2001. This included a statement by its auditor at page 8 that there was 'significant uncertainty' whether the Respondent would be able to continue as a going concern.

36. The word 'inherent' is defined in the Macquarie dictionary to mean 'existing in something as a permanent and inseparable element, quality or attribute'. The word 'significant' by contrast is defined to mean 'important; of consequence; expressing a meaning; indicative; having a special or covert meaning; suggestive'.

37. The identification of a 'significant uncertainty' in relation to the Respondent's solvency is a new circumstance that is clearly materially adverse in comparison to an 'inherent uncertainty'.

38. By far the most substantial asset of the Respondent as disclosed in its Prospectus is its royalty interest in the Windimurra Vanadium Project, shown in the Prospectus at a value of A$21.5 million.

39. Page 9 of the Half Year Financial Report makes reference to the significant write-down of the carrying value of the Windimurra Vanadium Project in the accounts of Xstrata AG, from US$73.6 million to US$28 million.

40. The substantial write-down of the overall value of the project is at the very least suggestive that the carrying value of the royalty interest in the books of the Respondent should be reviewed, and could potentially mean that the royalty is in fact worth no more than the value of the minimum royalty payments due.

41. The very substantial write-down of the value of the project as a whole in the books of its owner, therefore, is a new circumstance that is materially adverse to investors.

42. As referred to previously, one of the stated uses of funds raised pursuant to the Entitlements Issue is to meet the defence costs of the 'Westgold litigation'. Subsequent to the lodgement of the Prospectus the Applicant foreshadowed the commencement of a class action against the Respondent and its directors in respect of the Prospectus issued by the Respondent in July 1999 and June 2001. The Respondent issued a Supplementary Prospectus in relation to this matter.

43. Since the issue of the Supplementary Prospectus, there have been 3 further separate sets of proceedings initiated between the Applicant and the Respondent, namely:

43.1 action COR 56 of 2002, in which the Applicant in these proceedings is seeking to obtain copies of the share register maintained by the Respondent in these proceedings as at certain historical dates;

43.2 action COR 69 of 2002, being the within proceedings; and

43.3 action COR 82 of 2002, being proceedings commenced by the Respondent to this application seeking an injunction restraining the Applicant in these proceedings from using the Respondent's share register for certain purposes.

44. The Respondent will inevitably incur further legal costs in defending the applications in actions COR 56 and 69 of 2002.

45. Even more importantly, rather than merely incurring legal costs in the defence of proceedings, the Respondent in these proceedings has in fact chosen to initiate its own proceedings in COR 82 of 2002. Not only will this expose the Respondent to additional legal costs, the Respondent also has exposure under an undertaking as to damages it has given in those proceedings in support of an application for an interlocutory injunction.

46. In circumstances where one of the stated purposes of the Entitlements Issue is to pay legal costs in defending litigation, the fact that the Respondent is:

46.1 now incurring legal costs in relation to 3 additional sets of legal proceedings;

46.2 is actually the Plaintiff in one of those proceedings; and

46.3 has given an undertaking as to damages in one of those proceedings,

represent new circumstances materially adverse to investors."

44 In answer to the applicant's submissions, the respondent contends:

"25. The 'new circumstances' of which Westgold complains do not raise a serious question to be tried as to whether there has been a contravention of section 724.

26. The difference between 'inherent uncertainty' (as used in the PMA prospectus: see p63 of Chapman's affidavit) and 'significant uncertainty' (as used in PMA's half yearly statement: see p15 of Sander's affidavit of 3 April 2002) is merely semantic and represents Westgold playing at words for its own purposes. It discloses no serious question to be tried: this is no 'new circumstance'.

27. Further, the complaints about the subsequent proceedings are contrived. The proceedings in COR 56 of 2002 are directly linked to Westgold's attempts to initiate a class action against PMA and its directors (in respect of some prospectuses which it did not subscribe to) which has already been disclosed by PMA in its supplementary prospectus: see p81 of Chapman's affidavit. PMA's action in COR 82 of 2002 is simply an attempt to prevent Westgold misusing PMA's share register for its own purposes and so breaching subsection 177(1)."

45 The argument that there is an important distinction to be found in the use of the words "inherent uncertainty" on the one hand and "significant uncertainty" on the other hand bears in my opinion an air of artificiality. Each expression conveys clearly the fact of uncertainty, which is the matter of importance (and not whether that uncertainty is inherent or significant.) The mere mention of the uncertainty in the context suggests, I think, that is a significant matter.

46 The fact of the write-down of the value of the project by Xstrata AG is stated in the Notes to the Financial Statements for the half-year ended 31 December 2001, sent to shareholders. The respondent added: "The company is not privy to the assumptions made by Xstrata in its calculation of the net present value."

47 On balance, I am of the view that the third complaint does not raise a serious question to be tried.

48 The applicant submitted that the balance of convenience favours the grant of the interlocutory injunction sought by it. The submissions were:

"47. If an injunction is not granted restraining the Respondent from issuing shares to Pacific Quest, Adapt and Tagora pursuant to the Underwriting the Respondent will be free to issue shares to the Underwriters prior to the hearing of the substantive Application.

48. Once shares have been issued to the underwriters, even if they are done so in breach of Chapter 2E of the Corporations Act, the Court has no power to 'unwind' the share issue, by virtue of the terms of section 209(1)(a) of the Corporations Act.

49. It is for this reason that the final relief sought in the substantive Application in relation to the Underwriting is itself an injunction. If the interlocutory injunction is not granted, therefore, this aspect of the substantive Application will effectively be disposed of at the interlocutory stage.

50. By contrast, if an injunction is granted restraining the issue of shares pursuant to the Pacific Quest Underwriting, the immediate cash position of the Respondent will be improved. This is because the amount to be received by the Respondent out of the Underwriting is less than the amount the Respondent has to pay to Mr Smith as a condition of him completing the Underwriting.

51. Similarly, if an injunction is granted restraining the issue of shares pursuant to the Adapt Underwriting, the immediate cash position of the Respondent will also be improved, for the same reason.

52. If an injunction is not granted to restrain the issue of share to subscribers pursuant to the Entitlements Issue Prospectus, the Respondent will be able to issue shares to subscribers pursuant to that Prospectus without giving subscribers the benefits of the statutory protection afforded by section 724(2) of the Corporations Act.

53. If the shares are so issued, the subscribers will be unaware that their rights may be affected by the hearing of the substantive Application, and that depending on the outcome of that Application they may well ultimately be afforded an opportunity to withdraw their application for shares.

54. Without this knowledge the new shareholders may choose to dispose of their shares and therefore prejudice their ability to withdraw their applications if they are subsequently given an opportunity to do so. Conversely, the Respondent may spend the monies subscribed and therefore not be in a financial position to refund subscription monies even if ultimately ordered to do so by the Court.

55. There is no evidence that the Respondent would suffer prejudice if an injunction to restrain the issue of shares to subscribers pursuant to the Entitlements Issue was granted.

56. Of the funds raised pursuant to the Prospectus a large component is intended for payment to Messrs Smith and McKee which payment is not required to be made until 30 September 2002 at the earliest. Another substantial component of funds raised will be used to pay the Underwriting fees, which will not be payable until the Underwriting proceeds.

57. There is no evidence that the Respondent has a pressing need to access the balance of the funds raised pursuant to the Prospectus. The Respondent has made no announcement to the Australian Stock Exchange that it has insufficient funds to meet its obligations in the short term. Such an announcement would have been required by the continuous disclosure requirements of the Australian Stock Exchange, if the Respondent had insufficient funds to meet its short term obligations."

"28. At their highest, Westgold's complaints which support this application for interlocutory injunctions are weak. That is a matter which is most relevant to the weighing of the balance of convenience.

29. The irresistible inference is that these proceedings have been commenced, and these interlocutory injunctions sought, for Westgold's own strategic reasons in the substantive proceedings in CIV 2705 of 2000. Clearly, Westgold is attempting to pressure PMA in CIV 2705 of 2000 by denying PMA access to funds to defend the proceedings. The inference is irresistible when one consider the concerted efforts being made by Westgold on a number of fronts (ie its duplicitous complaints to ASIC and to the Takeovers Panel and its attempts to launch a class action against PMA and its directors).

30. It is submitted that at its best, in these proceedings and injunction applications, Westgold is engaging in officious intermeddling. Westgold has not subscribed, and will not subscribe for shares pursuant to the PMA prospectus which is the subject of these proceedings. Either Westgold is acting as an altruistic corporate citizen, or it has brought these proceedings to further its own strategic aims in the main litigation of CIV 2705 of 2000. The same point, of course, may be made in respect of the foreshadowed class action against PMA and its directors.

31. The balance of convenience clearly supports the refusal of the interlocutory injunctions as:

(a) PMA requires the money to defend CIV 2705 of 2000;

(b) there is a benefit to PMA in reducing its debts by issuing equity;

(c) the complaints made by Westgold are, at the highest, weak and do not disclose a serious question to be tried;

(d) Westgold in bringing this application is acting as an officious intermeddler;

(e) it may be clearly inferred that Westgold has motivations outside of these proceedings in bringing this application."

50 I accept the applicant's submissions in relation to the balance of convenience. The matters in issue could probably readily be remedied by the issue of a further supplementary prospectus, if the respondent so chose.

51 Having concluded that there are serious questions to be tried and that the balance of convenience favours the applicant, I shall grant an interlocutory injunction in the terms sought.