CATCHWORDS

TRADE PRACTICES - misleading or deceptive conduct - proposal for corporate reorganisation - "demutualization" and issue of "free" shares or cash - prospectus - reasonable expectation of members of full and fair disclosure for the making of properly informed judgment on the proposal.

CORPORATIONS - "control" of corporation - meaning thereof.

Trade Practices Act 1974 s.52

NRMA HOLDINGS LIMITED, NRMA LIMITED and NRMA INSURANCE LIMITED V DAWN FRASER AND RICHARD JAMES TALBOT

No. NG3479 of 1994

BEFORE:   BLACK CJ, VON DOUSSA & COOPER JJ

PLACE:    SYDNEY

DATE:     30 JANUARY 1995

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 3479 of 1994

GENERAL DIVISION                  )

On Appeal from the judgment of Gummow J.

                   BETWEEN:      NRMA HOLDINGS LIMITED

                                  Appellant

                                  NRMA LIMITED

                                  Appellant

                                  NRMA INSURANCE LIMITED

                                  Appellant

                        AND:      DAWN FRASER

                                  Respondent

                                  RICHARD JAMES TALBOT

                                  Respondent

COURT:    BLACK CJ, VON DOUSSA & COOPER JJ

PLACE:    SYDNEY

DATE:     30 JANUARY 1995

                      MINUTES OF ORDER

JUDGES MAKING ORDER     :    BLACK CJ, VON DOUSSA

                             AND COOPER  JJ

WHERE MADE              :    SYDNEY

DATE OF ORDER           :    30 JANUARY 1995

THE COURT ORDERS THAT:

(1)       Paragraph (1) of the orders appealed from be varied by adding after the words, "be restrained from" the words "without the leave of the Court".

(2)       The Appeal be otherwise dismissed.

(3)       The appellants pay the respondents' costs of the appeal on a solicitor and client basis.

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

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG3479 of 1994

GENERAL DIVISION                  )  

On Appeal from the judgment of Gummow J.

                   BETWEEN:      NRMA HOLDINGS LIMITED

                                  Appellant

                                  NRMA LIMITED

                                  Appellant

                                                                                           NRMA INSURANCE LIMITED

                                  Appellant

                        AND:      DAWN FRASER

                                  Respondent

                                  RICHARD JAMES TALBOT

                                  Respondent

COURT:    BLACK CJ, VON DOUSSA & COOPER JJ

PLACE:    SYDNEY

DATE:     30 JANUARY 1995

                                      REASONS FOR JUDGMENT

THE COURT:

At the conclusion of the hearing of the application for leave to appeal the parties requested that, in circumstances such as have occurred, they be allowed the opportunity to address the Court about the terms of the orders to be made disposing of the appeal. We agreed that such a course would be appropriate and, having concluded that we should

grant leave to appeal from the declaration and orders made by Gummow J on 13 and 14 October 1994 and having published our reasons, we ordered that the matter be relisted for argument about the terms of the orders that ought to be made.

The declaration and orders made by the learned trial judge are set out near the beginning of our reasons for judgment on the application for leave to appeal but it is convenient to set out again Orders (1), (2) and (3), as modified by the further orders made by his Honour on 14 October 1994:

          (1)     The respondents, by themselves, their servants and agents, and the servants and agents of each of them, be restrained from distributing to members of the second and third respondents copies of the documents Exhibits A, B and C.

          (2)     The second respondent, by itself, its servants and agents, be restrained from, without leave of the Court, proceeding with any business at the general meeting of members, identified in the Notice of General Meeting, a copy of which is contained in Exhibit C and from relying upon any proxies obtained or given in respect of that meeting, other than by the taking of such steps as are necessary or appropriate to adjourn the meeting.

          (3)     The third respondent, by itself, its servants and agents, be restrained from, without the leave of the Court, proceeding with any business at the general meeting of members, identified in the Notice of General Meeting, a copy of which is contained in Exhibit C and from relying upon any proxies obtained or given in respect of that meeting', other than by the taking of such steps as are necessary or appropriate to adjourn the meeting.

It will be seen that the learned trial judge made Orders (2) and (3) subject to the leave of the Court.

His Honour did not make Order (1) subject to the leave of the court with the result that,
as a practical matter, the prospectus could not be further distributed at any time.

Mr Garnsey QC, for the respondents to the appeal, submitted that for a number of reasons none of the orders should be  disturbed and in particular that no order should be made that could result in any further distribution of the prospectus, whether accompanied by a supplementary prospectus, other explanatory or correcting matter, or otherwise.  His primary contention was that no correction could possibly overcome the deficiencies in the prospectus.

Mr Bennett QC for the appellants, on the other hand, submitted that the deficiencies, as identified in our reasons for judgment, could be overcome by an appropriate document and he sought an order that would allow the original prospectus to be distributed if the ASC so required consequent upon a supplementary  prospectus being lodged with it.

Although we have concluded that the distribution of Exhibits A, B and C did involve conduct in contravention of s.52 of the Trade Practices Act 1974 we have reached that conclusion on a more limited basis than the trial judge.  We are not persuaded that it would be impossible to correct the contravening effect of those documents, although this is not, of course, to be taken as a positive finding that correction is possible.  If it were sought to correct the prospectus and the other documents and the matter came before the Court the question would have to be decided in the light of the evidence then before the Court, including the precise terms of the correcting material and all other relevant circumstances. Those circumstances might include the effect of past advertising and any proposed future advertising.  We did not think it appropriate in these circumstances to deny to the appellants the opportunity of seeking to persuade the Court, should they wish to avail themselves of it, that it should grant leave to distribute Exhibits A, B and C or any of them, in conjunction with correcting material. 

Mr Bennett submitted that there should be provisoes to Orders (1), (2) and (3) which would have the practical effect of allowing the appellants to proceed with the business of the general meetings once a supplementary prospectus had been lodged with the ASC subject only to the requirements of the ASC, and without further order of the Court.  In our opinion, whilst this course might have attractions in other circumstances, we do not consider that it should be taken when there are other unresolved challenges to the validity of the decisions made by the boards of the second and third named appellants pending in relation to the proposal.

Mr Bennett submitted that we should only concern ourselves with the discrete Trade Practices Act issue but we consider that the resolution of the issues outstanding between the parties in this Court may affect the discretion to grant or not to grant leave to send out further material, if such leave were sought, or to proceed with the meetings.  The Court should also take into account the desirability that all issues be resolved as expeditiously as possible, and in one forum.

In these circumstances we consider that Order (1) should be amended to insert after the words, "be restrained from", the words "without the leave of the Court".  The order would therefore read:

          "The respondents by themselves, their servants or agents and the servants or agents of each of them, be restrained from, without the leave of the Court, distributing to members of the second and third respondents copies of the documents Exhibits A, B and C."

In the circumstances we are not persuaded that we should vary any of the other orders.

We should add that we see no reason why any application for leave, which may involve making findings on contested issues of fact, should not be made to a judge of the Court in the ordinary way and the orders we make should be interpreted accordingly. 

The parties have agreed upon an order for the costs of the appeal.

The Court therefore orders that:

          (1)               Paragraph (1) of the orders appealed from be varied by adding after the words, "be restrained from" the words "without the leave of the Court" .

          (2)               The Appeal be otherwise dismissed.

          (3)               The appellants pay the respondents' costs of the appeal on a solicitor and client basis.

                                                                   I certify that this and the preceding  pages are a true copy of the Reasons for Judgment of the Court.

                                                                   Associate:

                                                                   Date:

Counsel for the Appellants           :         D.M.J. Bennett QC

                                                          A.R. Emmett QC

                                                          M.I. Bozic

Solicitor for the Appellants          :         Abbott Tout

Counsel for the Respondents        :         J.J. Garnsey QC

                                                          B.J. Camilleri

Solicitor for the Respondents       :         Gadens Ridgeway

S. Rares SC appeared with T. Davie as amicus curiae by leave granted.

Dates of hearing                         :         30 January 1995

Place of Hearing                         :         Sydney

Date of Judgment                        :         30 January 1995