Gantry Acquisition Corp v Parker and Parsley Petroleum Australia Pty Ltd
(1994) 123 ALR 29(Judgment by: Beazley J)
Gantry Acquisition Corp
vParker and Parsley Petroleum Australia Pty Ltd
Judges:
Sheppard J
Burchett J
Beazley J
Subject References:
Corporations
take over offer
PtA statement issued by offeror said to be deficient because of failure to set out particulars of offeror's intentions regarding the continuation of the business of the target company, major changes to be made to its business and the future employment of the present employees of the target company
whether breaches established
discussion of proper approach to construction of applicable provisions of Corporations Law
Legislative References:
Trade Practices Act 1974 - s 52
Case References:
A v B - (1969) NZLR 534
Associated Dairies Ltd v Central Western Dairy Ltd - (1993) 11 ACLC 827
Bond Corp Holdings Ltd v Sulan - (1990) 3 WAR 49
House v The King - (1936) 55 CLR 499
Neil v Nott - (1994) 121 ALR 148
Re Green's Will Trusts - (1985) 3 All ER 455
Re Karounos Ex parte Official Trustee in Bankruptcy - (1989) 89 ALR 580
Re Paddle River Construction Ltd - (1961) 35 WWR 605
Sagasco Amadeus Pty Ltd v Magellan Petroleum Australia Ltd - (1993) 177 CLR 508
Samic Ltd v Metals Exploration Ltd - (1993) 60 SASR 300
Judgment date: 20 July 1994
Judgment by:
Beazley J
This matter was heard urgently on 1 July 1994. On 4 July 1994 the court announced its decision and stated that it would deliver its reasons at a later date.
Since that time I have had the opportunity of reading the reasons for judgment of Sheppard and Burchett JJ. Save for one matter, I agree with the reasons of Sheppard J. The matter upon which I differ from his Honour is in relation to the sufficiency of the last paragraph of cl15.1 of the PtA Statement. The consequence of this difference is that I have reached a different conclusion as to the outcome of the appeal, which I would allow. As the appeal is determined by the agreement of Sheppard and Burchett JJ in relation to the sale by Bridge Oil USA (BOUSA) of a term overriding royalty interest for approximately $60 million, it is sufficient for me to state briefly the reasons why I have come to a different conclusion.
S750(20) of the Corporations Law requires that the PtA Statement state particulars of the offeror's intentions in relation to the matters specified, in respect of, relevantly, any major changes to be made to the target company, including any redeployment of the fixed assets of the target company. The legislature's use of the word "particulars" clearly indicates a requirement that the Statement set out details of the matters specified in s750(20). Notwithstanding this, I am of the opinion that that requirement is relative. The legislation requires the statement of matters specified in the clause, with sufficient particularity to enable an offeree to make an informed decision as to whether to accept or reject the offer.
In the present case, the Statement informs a shareholder in the target company that:
"Gantry intends to cause BOUSA to sell to Cactus Hydrocarbons III, a limited partnership in which Enron Cactus III Corp is the general partner, a term overriding royalty interest (a real property interest in leases, entitling the holder to ownership of the oil and gas in the ground) in its South Texas oil and gas leases for a purchase price of approximately US$60 million".
One knows from this information that there is intended to be the sale by a subsidiary of the target company of an asset of that subsidiary. It is also known what the intended purchase price is, in approximate terms, and who the purchaser is. Further, one knows that the purchaser of the royalty interest is a partnership who is owned, in part, by a party who is related to a corporation which has a 50% interest in the limited partnership which owns the appellant. In my opinion, to state these matters is to state particulars of the offeror's intentions regarding the continuation of the business of the target company and any major changes to be made to that business, including any redeployment of assets, as is required by s750(20). However, as Sheppard J has specified a number of matters which he considers ought to have been stated to comply with cl20, it is appropriate that I set out my attitude to those particular matters, as they represent the points of difference between us.
It appears from para15.1 that the appellant must be in at least the advanced stages of finalising an agreement in relation to the sale of the royalty interest in BOUSA's South Texas oil and gas leases, should the take-over offer be successful. It may be, as Sheppard J suggests, that an agreement has already been entered into, although such agreement would have to be conditional upon the take-over offer being successful. It may also be, as he says, that there is an arrangement or understanding pursuant to which the sale is to be effected. His Honour suggests that it should be revealed whether such agreement, arrangement or understanding, if any, is in writing. However, the question arises, as to how the fact that it was or was not in writing would affect the mind of an offeree in determining whether or not to accept the offer? For myself, I do not see that it would have any effect. It follows that I do not consider that there is anything in s750(17) or s750(20) which calls for that detail.
His Honour next considers that the terms of such agreement, arrangement or understanding should be stated. There is no doubt that there is a requirement to state particulars of aspects of such a proposal - namely, such particulars as reveal the offeror's intentions regarding the continuation of the business of the company and any major changes to that business including redeployment of any of the target company's fixed assets. In the present case, the core terms of the proposal have been stated, that is, the fact of the sale, the purchase price and the identity of the purchaser. I do not see that there is a requirement to state all of the terms of such a proposal, unless such terms do fall within the requirements of cl17 or cl20. It seems to me, in this case, that an inference has effectively been drawn against the appellant that, in failing to set out more terms of the agreement than it has, it has failed to disclose something which ought to have been stated pursuant to cl17 or cl20. There is no evidence upon which such an inference can or should be drawn.
Nor do I consider that s750(20) requires an explanation of the nature of the limited partnership which is to purchase the term overriding royalty interest, which, I should state in passing, is simply and sufficiently explained in the Statement. With respect to Sheppard J, I am unsure what his Honour considers should have been stated in relation to the nature of the limited partnership. Does he mean, for example, that the business of that limited partnership should have been disclosed? Or perhaps the identity of the partners? If he means either of these, I do not see how such information is called for by cl20. If he means that there should be an explanation of what is meant by a limited partnership, a concept with a later provenance in Australian law than in American law, but nonetheless a well known concept in both jurisdictions, I do not consider that the requirements of the legislation go that far. If they did, it would be necessary to set out the meaning of a whole range of legal concepts on the off-chance that some offerees may not understand the terms used in the Statement. There is nothing in the express words of the legislation or its underlying rationale which requires this.
For the same reason, I do not see that it is relevant to explain the significance of Enron Cactus 111 Corp being the general partner as the meaning and function of the general partner is defined by legislation. Stated briefly, the general partner is a partner with unlimited liability, as opposed to a limited partner, whose liability is limited and who cannot take part in management decisions. It is possible that American legislation governing limited partnerships is not in precisely the same terms as the legislation in the Australian States. However, in broad terms, the concepts in each jurisdiction are similar, and I consider that the statement in para15(1), as to who is the general partner is sufficient for the purposes of cl17 and cl20.
Further, there is information in the PtA Statement as to the Enron group and its activities. Cl4 informs the reader that Gantry is wholly owned by Joint Energy Development Investments Ltd Partnership (JEDI), a USA limited partnership, of which Enron Capital Corp owns a 50% partnership interest and is JEDI's general partner. There is sufficient information in para15(1) of the Statement to indicate that the proposed sale of the term overriding royalty interest involves a sale to an entity in the Enron group. It is true that there is more information in cl4 as to the role of the general partner and the limits on its management functions than is to be found in para15.1 in relation to Cactus Hydrocarbons III and Enron Cactus III. To be consistent this information could have been provided in this part of para15. However, the mere fact that more information could have been provided, does not, of itself, mean that there has been non-compliance with cl20. Nor do I consider it is relevant information which should have been disclosed pursuant to cl17.
Finally, there remains the question of whether there should have been a statement of what was intended to be done with the $60 million purchase price for the sale of the royalty interest. I do not consider that cl20 requires particulars of that matter. It seems to me that to require such particulars imposes an additional obligation in respect of matters which have been decided, subject only to the take-over being successful, as opposed to those in respect of which a possible course of action is being considered but in respect of which no decision has been made (see subcl20(2)). It is true that the imminence of a particular proposal, of which particulars are required under cl20, will affect the degree of specificity which is called for, for the simple reason that more facts are known. However, it seems to me that, if there is no requirement in respect of matters which fall within subcl20(2), to specify what is under consideration in relation to, for example, dealing with the proceeds of assets which the offeror is considering it might sell, similarly, there should be no such requirement in respect of matters which have been decided. It is implicit in the view which I have reached in respect of the first part of para15, namely that it complies with cl20, that I do not consider that there is any such requirement in respect of matters which falls within subcl2. In my opinion, it would be illogical to require some different requirement in point of principle for matters which fall within subcl1 but not within subcl2.