In the matter of Hotel Property Investments Ltd in its own capacity and in its capacity as trustee of the Hotel Property Investments Trust

By Originating Process filed on 29 October 2024, the Plaintiff, Charter Hall Wholesale Management Ltd in its capacity as trustee of the CH Investment Trust and the CH Investment Co Trust (“CHWM”), seeks a declaration that offers it has made in an off-market takeover bid comply with s 630(1) of the Corporations Act 2001 (Cth) (“Act”) or, alternatively, relief under ss 1325A, 1325D or 1322(4) of the Act. I heard the application on 30 October 2024 and have drawn on the helpful submissions of Mr Wood, who appears for CHWM, in this judgment.

By way of background, on 9 September 2024, CHWM made an off-market takeover offer for stapled securities in the Defendant, Hotel Property Investments Ltd in its own capacity and as trustee for the Hotel Property Investments Trust (“HPI”), comprising one ordinary share in HPI and one unit in the Hotel Properties Investment Trust. That offer was subject to defeating conditions (as defined in s 9 of the Act) and s 630(1) of the Act required that CHWM’s offer specify a date for giving a notice on the status of the condition which was not more than 14 days and not less than 7 days before the end of the offer period. This application raises a narrow question of construction as to that requirement, and whether relief should be permitted as to any contravention of that requirement.

On 25 September 2024, CHWM lodged a Second Replacement Bidder’s Statement which specified that the offer closed at 7.00 pm (Sydney time) on 4 November 2024 and that the date for the giving of notice on the status of the defeating conditions was 28 October 2024. On 18 October 2024, CHWM lodged a Supplementary Bidder’s Statement that repeated the date for the end of the offer period and the date for giving a notice on the status of the relevant conditions. On 23 October 2024, CHWM lodged a Second Supplementary Bidder’s Statement and a notice under ss 650C and 650D of the Act extending the offer period until 7.00 pm (Sydney time) on 11 November 2024, which had the consequence of extending the date for giving the notice of the status of the condition until 4 November 2024.

By letter dated 21 October 2024, HPI’s solicitors contended that CHWM’s bid has contravened s 630(1) of the Act because the date for the giving of notice on the status of the defeating conditions, initially 28 October 2024, was only six clear days before the end of the offer period and not seven clear days before the end of that period. After HPI’s solicitors raised that issue, CHWM sought relief from the Australian Securities & Investments Commission (“ASIC”) which was intended to address the suggested non-compliance with that section. On 25 October 2024, ASIC declined to grant that relief on the basis that, inter alia, s 630(1) of the Act requires seven clear days between the end of the offer period and the date specified for the giving of notice of the status of conditions; any contravention had already occurred and ASIC cannot grant retrospective relief; and it was open to CHWM to seek an order for relief under s 1325D of the Act. On 29 October 2024, ASIC made ASIC Instrument 24-0849 under s 655A(1)(b) of the Act, which permitted CHWM to commence this proceeding before the end of the offer period for its offer, despite s 659B(1) of the Act which (it was thought) may have prohibited CHWM from doing so before that time.

CHWM reads the affidavit dated 29 October 2024 of Mr Phillips, a solicitor acting for CHWM in respect of its takeover bid for HPI. Mr Phillips outlines the history of the bid, to which I have referred above, and to the issue of CHWM’s bidder’s statement and subsequent documents, including the Second Replacement Bidder’s Statement which first included the date of giving of notice as to the status of the defeating conditions required by s 630 of the Act as 28 October 2024, and specified the offer period as ending on 4 November 2024 or any later date to which that period was extended in accordance with the Act, giving rise to the issue that is addressed in this application. Mr Phillips noted that he caused 28 October 2024 to be specified as the notice date because it was the seventh day before the end of the offer period and he considered that his doing so complied with the requirements of s 630 of the Act, and he was not then aware of ASIC’s position that the latest date that could be specified in that notice was 27 October 2024. Mr Phillips in turn refers to the correspondence from HPI’s solicitors which raised the suggested non-compliance with s 630 of the Act and to the subsequent unsuccessful application for relief from ASIC, to which I referred above. He also refers to his review of conditional off-market takeover bids in 2024, which discloses that several other offers set a date that is six clear days prior to the close of the offer for the purposes of s 630 of the Act, although some set a date that is seven or more days prior to the close of the offer.

By a further affidavit dated 30 October 2024, Mr Lloyd, a solicitor acting for CHWM in this application, refers to service of the documents relating to the application upon HPI and ASIC. Neither HPI nor ASIC sought to be heard in respect of the application.

The first question in issue in this application is whether the offers contained in the bidder’s statements referred to above complied with s 630(1) of the Act. I should first outline the relevant statutory provisions, to which Mr Wood drew attention in the course of submissions. Section 6(1) of the Act provides that the provisions of Pt 1.2 of the Act (in which s 105 appears) “have effect for the purposes of this Act except so far as the contrary intention appears in this Act”. Section 105(1) and (2) of the Act relevantly provide:

Section 606 of the Act prohibits a person acquiring a relevant interest in issued voting shares in specified circumstances and also prohibits a person making an offer if the person would contravene the section if that offer were accepted. Section 607 provides that a transaction is not invalid merely because it involves a contravention of s 606, although the person who contravened s 606 and persons involved in the contravention would potentially be exposed to penalties. That section is of significance because, irrespective of any relief that the Court may here order, any transactions arising from the acceptance of offers made by CHWM are not invalidated by any contravention of that section. Section 611 of the Act specifies exceptions to the prohibition of the acquisition of relevant interests in a company’s voting shares under s 606, which include (in item 1 of the table in that section) an acquisition that results from the acceptance of an offer under a takeover bid. Section 612 provides that the exception in item 1 of the table in s 611 does not apply to a takeover bid if the bid is carried out in contravention of, relevantly, s 630 of the Act.

Section 624 of the Act requires that the offers under a takeover bid must remain open for the period stated in the offer, which must start on the date the first offer under the bid is made, and provides for an automatic extension of the offer period if, relevantly, the offers under the bid are varied to improve the consideration offered or the bidder’s voting power in the target increases to more than 50% within the last 7 days of the offer period. Section 625(2) of the Act permits offers under an off-market bid to be subject to conditions that are not prohibited by ss 626-629 of the Act.

Section 630(1) of the Act relevantly provides:

I now turn to the construction issue raised by this application. As I noted above, CHWM relevantly seeks a declaration that its offers (“Offers”) under its off-market bid (“Bid”) contained in the Second Replacement Bidder’s Statement dated 25 September 2024, as supplemented by the Supplementary Bidder’s Statement dated 18 October 2024 and the Second Supplementary Bidder’s Statement dated 23 October 2024 (“Bidder’s Statements”), comply with s 630(1) of the Act. As I also noted above, the date specified in CHWM’s Second Replacement Bidder’s Statement and Supplementary Bidder’s Statement was 28 October 2024 and the end of the offer period was 4 November 2024. In the case of the Second Supplementary Bidder’s Statement, the date specified was 4 November 2024 and the end of the offer period was 11 November 2024. Mr Wood points out that, in each case, the date specified is the seventh day before the end of the offer period. However, it is not seven clear days before the end of the offer period.

Mr Wood submits that, in the absence of any contrary intention, in applying ss 105(1) or 105(2) of the Act (which I set out above) to s 630 of the Act (which I also set out above) in its application to the Second Replacement Bidder’s Statement and the Supplementary Bidder’s Statement, in determining which day is seven days before the end of the offer period (being 4 November 2024), that date of 4 November 2024 is not counted, but the date on which the notice must be issued is counted. He submits that, applying either of the approaches mandated by ss 105(1) or (2), the seventh day before the end of the offer period is 28 October 2024, and that the same analysis applies to the date specified in the Second Supplementary Bidder’s Statement (4 November 2024). On that basis, Mr Wood submits that CHWM has specified a date that is “not less than 7 days” before the end of the offer period in accordance with s 630(1) of the Act, on the basis that the seventh day is “not less than 7 days” before the end of the offer period.

I have regard to the decision in Associated Dominions Assurance Society Pty Ltd v Balmford (1950) 81 CLR 161 (“Associated Dominions”), where Fullagar J observed (at 183) that:

Mr Wood submits that the reference in s 630 of the Act to a “date (not more than 14 days and not less than 7 days before the end of the offer period) for giving a notice on the status of the condition” falls within the latter class of case specified by Fullagar J and not the former. There is force in that submission, although the position is more complex here where the reference to “not less than 7 days” operates to preserve a minimum period between the date of the notice and the end of the offer period and not only to specify the date by which the relevant act must be done. In that sense, it arguably has something in common with Fullagar J’s first category, although the calculation is to define a period on the expiration of which the act (ie the giving of the notice) can be done, but by counting back from the end of the offer period rather than forward from a specified date.

Mr Wood recognises that, in Forster v Jododex (1972) 127 CLR 421; [1972] HCA 61 (“Forster”), the High Court considered the question of whether an application to renew an exploration licence was made “not later than one month before the expiry of such licence” as required by s 83B(13)(a) of the Mining Act 1906 (NSW). Mr Wood recognises that Walsh J there observed (at 428-429) that the phrase “not later than one month before” should be interpreted according to a rule that was “generally applicable to provisions referring to an act being done ‘not less than’ a stated number of days before a given day or event”, as requiring that the period of one month shall be a “clear” month or a “full” month. His Honour also observed (at 429) that:

Gibbs J there observed (at 445) that:

His Honour there undertook a detailed review of earlier case and observed (at 446-447) that:

I recognise that former ASIC Regulatory Guide 7, Calculating time period, which was in place for a considerable time until withdrawn on 25 October 2023, treated that decision as authority that a reference to “not less than” a specified period meant that period exclusive of that days on which the relevant acts or events occurred.

However, that question was carefully considered by Gzell J in Goodlen Pty Ltd v BP Australia Pty Ltd (2004) 183 FLR 323; [2004] NSWSC 646 (“Goodlen”), where his Honour dealt with a requirement under s 16(3)(a) of the Petroleum Retail Marketing Franchise Act 1980 (Cth) that a notice terminating a franchise agreement should inform the franchisee that it was to be terminated on a specified date being a date not earlier than 30 days after the day on which the notice was served unless the court allowed a lesser period. In that case, the first notice of termination was served on the plaintiff on 9 January 2004 and specified 8 February 2004 as the date on which termination was to take place. His Honour observed (at [9]-[12] that:

In National Australia Bank Ltd v Meyers [2008] NSWSC 247, Harrison AsJ applied Associated Dominions and observed (at [21]-[22]) that:

Mr Wood submits that, where s 630(1) requires CHWM to specify a date which is not less than seven days and not more than 14 days before another date, the relevant question is different to the question which was considered by the High Court in Forster, namely whether a specific act was done not later than one month before another date. He submits that s 630(1) specifies a seven-day “window” in which a date must be specified for the notice, and the reasoning in Forster does not apply to the calculation of the earlier or later limit of the “window”. He also submits that the requirement for “clear days” would result in the bidder being able to nominate the 15th day before the end of the period as the date for giving the notice.

Mr Wood fairly accepts that, if Gibbs J’s reasoning in Forster were applicable, it would suggest that the use of the words “not less than” in s 630(1) of the Act indicate a “contrary intention” that would render s 105(1) of the Act inapplicable here; and that, although s 105 does not include the words “unless the contrary intention appears” that were contained in s 35 of the Interpretation Act 1897 (NSW), s 6 of the Act (to which I referred above) states that the provisions of Pt 1.2 (in which s 105 appears) “have effect for the purposes of this Act, except so far as the contrary intention appears in this Act”. In the event, the result that I reach below is consistent with that contemplated by s 105 of the Act. Mr Wood also refers to an observation of HPI’s solicitors, who contrasted the drafting of s 630(1) (“not less than 7 days”) with the drafting of s 624(2) (“within the last 7 days”), and suggested that that drafting would include the final day. I accept Mr Wood’s submission that, whether or not that analysis is correct, the different wording in s 624(2), dealing with the different topic of automatic extensions to the offer period, does not significantly assist with the proper interpretation of s 630(1). Mr Wood also submits, and I accept, that there is no particular policy to be served by a requirement for seven clear days, as distinct from the position for which CHWM contends. However, that does not assist CHWM, where there is a clear policy served by defining a time limit, and consistently applying it, even if the limit itself has a somewhat arbitrary character and could equally be more or less than that specified.

I do not find this to be an easy question. First, the decision in Forster and the case law to which Gibbs J there refers does not sit easily with the position for which CHWM contends. Second, where the concept of “not less than” here has, as Gibbs J there noted, an established meaning, there would be reason to allow it that meaning even where used as the end date within a “window” determined by a calculation of a number of days from the end of a period. Third, that meaning would not necessarily extend to the concept of “not more than” to have the consequence which Mr Wood contends would be unreasonable. Fourth, the approach adopted by ASIC in former RG 7, Calculating time periods, had stood for a considerable time, although parties’ commercial expectations as to the application of s 630 of the Act would not be frustrated by departing from that approach, where a notice that was given seven clear days before the end of the offer period would also comply with a less demanding approach.

On the other hand, the distinction drawn by Fullagar J in Associated Dominions has been applied in a very similar case in Goodlen and I am not persuaded that either decision is wrong; second, there is real force in the proposition that, absent a special rule of construction, words should be given their natural meaning; and third, as Mr Wood point out, in ordinary English, if a notice as to the defeating conditions is given on the seventh day before the end of the offer period, then it is given not less than seven days before the end of that period. With considerable hesitation, and despite the approach taken in former RG 7, Calculating time periods, I will follow Associated Dominions and Goodlen and, on that basis, I accept Mr Wood’s submission that CHWM has complied with s 630(1) of the Act and has not specified a date that is “less than” seven days before the end of the offer period. For these reasons, I will make the declaration sought in prayer 1 of the Originating Process.

Alternatively, CHWM seeks a declaration under ss 1325A or 1325D of the Act, or alternatively an order under s 1322(4)(a) of the Act declaring, that the Bid, the Offers and the Bidder’s Statements have had effect at all times as if there had been no contravention of s 630(1) of the Act; and an order under s 1322(4)(d) or s 1325A of the Act extending the date by which the Plaintiff must give notice under s 630(3) of the Act to 4 November 2024, or, if the offer period is further extended to a date determined by adding the period of the further extension to 4 November 2024. While this application was brought in the alternative, I should address it where the conclusion that I have reached above is plainly not inevitable and an appellate Court could readily take a different view. Mr Wood did not press any application to address any invalidity of any transaction arising from any contravention of s 630 of the Act, where there are no transactions that presently require validation and, I would add, s 607 of the Act preserves the validity of the relevant transactions.

Mr Wood points to potentially serious consequences arising from a contravention of s 630 of the Act (if, contrary to my view, a contravention was established) including, by reason of s 612(e), CHWM losing the protection of the exception in item 1 of s 611; CHWM contravening s 606(4) of the Act by making an offer that would result in it contravening s 606(1) if it was accepted; and CHWM contravening s 606(1) if its relevant interest in the target securities increases to more than 20%. I accept these are significant matters, although the validity of any transactions would be preserved, as I noted above, by s 607 of the Act.

It seems to me this aspect of the application is straightforward, and it is not necessary to consider the possibility of relief other than under s 1325A of the Act, which plainly authorises the relief sought by CHWM. Section 1325A(1)(a) of the Act relevantly provides that the Court may make any order or orders (including a remedial order) that it considers appropriate if a person contravenes a provision of Chapter 6. I recognise that the orders sought in paragraph 2 of the Originating Process are not “remedial orders” as defined in s 9 of the Act, but that section is not limited to orders that fall within that concept. Mr Wood also submits and I accept a failure to give notice within the period specified in s 630 may contravene that section for the purposes of s 1325A of the Act, and that result is reinforced by s 2B of the Acts Interpretation Act 1901 (Cth) which provides that, in any Act, “contravene” “includes fail to comply with”. I also accept that CHWM has standing to bring an application under s 1325A(3)(e) because it is, at least, a person whose interests are affected by any contravention of s 630 of the Act.

Mr Wood submits and I accept that the Court’s power to make an order under s 1325A requires only that the Court consider that there has been a contravention of Ch 6 and that the order sought is “appropriate”, and that the power conferred on the Court by that section is discretionary but may be exercised to advance the objectives of the statutory scheme of the Act. The Court’s power under this section is to be exercised in a way which advances the principal objectives of the statutory scheme under Ch 6, namely to ensure that the acquisition of shares in listed companies takes place in an efficient, competitive and informed market, including that shareholders of a company have reasonable and equal opportunities to participate in any benefits accruing to shareholders under a proposal by which a person acquires a substantial interest in the company: Australian Securities Commission v Bank Leumi Le-Israel (1995) 134 ALR 101; 18 ACSR 639, on appeal (1996) 69 FCR 531; 139 ALR 527; 21 ACSR 474; Australian Securities and Investments Commission v Yandal Gold Pty Ltd (1999) 32 ACSR 317; [1999] FCA 799; BC9903166, aff’d (2002) 41 ACSR 325; [1999] FCA 799. The purposes of a remedial order under this section includes, in an appropriate case, facilitating intended market behaviour by remedying a technical breach and there are, for example, many cases under this section extending the time for lodgement of an application for admission to quotation as required by s 625(3) where a failure to lodge that application resulted, for example, from an error in legal advice: Re Venturex Resources Ltd (2009) 177 FCR 391; 72 ACSR 358; [2009] FCA 677; Re Sandon Capital Investments Ltd [2019] NSWSC 1512; Re Strike West Holdings Pty Ltd [2023] FCA 15.

Mr Wood submits and the evidence makes plain that any contravention of s 630(1) of the Act which arose here (if, contrary to my view, a contravention occurred) was the result of inadvertence or a mistake on the part of solicitors acting on behalf of CHWM. As I noted above, Mr Phillips’ evidence is that he was responsible for selecting the date to be included in the Second Replacement Bidder’s Statement, and that he selected the date of 28 October 2024 because it was the seventh day before the end of the offer period and he considered that doing so complied with s 630(1) of the Act, because that date was not less than seven days before the end of the offer period. His evidence is that he was not aware of ASIC’s view that s 630(1) requires the bidder to specify a date that is seven clear days before the end of the offer period. Mr Wood submits and I accept that, if (contrary to my view) Mr Phillips’ understanding was wrong, his error was an honest mistake arising from inadvertence regarding the proper interpretation of s 630(1) of the Act. It is plain that Mr Phillips is not alone in making such an error (if, contrary to my view, he was in error) where several other recent takeover bids appear to have proceeded on the same basis. I accept that this is not a case of deliberate non-compliance.

I also accept that the orders sought in paragraph 2 of the Originating Process would not cause any substantial prejudice to HPI securityholders, where the time available to them to consider the notice of the status of the defeating conditions so that they can make an informed decision as to whether to accept CHWM’s offer would then be abridged minimally, by a day at most, if the relief were granted. I also bear in mind that, as Mr Wood points out, s 630(4) requires CHWM to publish a notice as soon as possible if a defeating condition is fulfilled before the date for publishing the notice on the status of the condition, and HPI securityholders would therefore have been notified of any defeating conditions which have been fulfilled prior to the notice date. I accept that the loss of one day’s notice does not prejudice HPI securityholders to an extent that would cause the Court to refuse to make the orders now sought, had been it necessary to do so.

I would have made the orders pressed in paragraph 2 of the Originating Process had it been necessary to do so, namely to declare that the Bid, the Plaintiff’s Offers and the Bidder’s Statement had effect at all times as if there had been no contravention of s 630(1) of the Act and order that the date by which CHWM must give notice under s 630(3) of the Act be extended to 4 November 2024; or, if the offer period is further extended, to a date determined by adding the period of the further extension to 4 November 2024. I do not make those orders where the relevant contravention is, on my view, not established.

For these reasons, I make orders that: