Case Review in Relation to Judicial Enforcement of Listing and Market Rules

FAI Insurances Ltd v Pioneer Concrete Services Ltd (No. 2) (1986) 10 ACLR 801 was decided in New South Wales Court of Appeal. It Is a leading case in relation to the principles of law that apply in relation to judicial enforcement of listing and market rules in Australia. In December 1982 Ampol, being a subsidiary of Pioneer acquired the petroleum business of Total.

Part of the transaction involve the issue to Total redeemable preference shares in Ampol. These shares could be redeemed in a shorter period between 1984 and 1986 or in a longer period between 1986 and 1988. If they were redeemed in a shorter period, the first company was obliged to invest the proceeds in shares in its holding company which was in turn obliged to allot the shares. The transaction was publicly announced. The company being purchased decided to redeemed shares within a shorter period and became entitled to have the Pioneer shares allotted to it. By April 1986, before the allotment had been made, the company being purchased had disposed of its rights in favour of several investment institutions.

One 29 May 1986 a larger company announced its intention to make takeover offers for the purchasing company to increase its holding from 17% to 67%. Its bid price was to be $2.75 cash ordinary shares. Onto June 96 Pioneer allotted 41 million shares to institutions which had acquired political rights. The issue was made for $2.45 per share. On 12 to 19 six Sydney stock exchange on which Pioneer was listed granted quotation to the 41 million shares. The larger the purchasing company commenced proceedings to have the allotment set aside. It claimed that the allotments were in breach of listing requirements, as the rules were then called, and that the predecessor to section 793C gave listing requirements statutory force. It sought orders rectification of Pioneer’s register under the counterpart of section 175 of the corporations legislation.

The listing requirement which the ultimate purchasing company alleged Piney had infringed was regulation three are which provided that where a listed company receives notice of a takeover offer it to issue shares to a period of three months unless the issue is approved by the company in general meeting, make a right to existing members or had been notified to the exchange prior to receiving notice of the bid. At first instance, just as young held that the allotments infringe this regulation. Nonetheless the reasons outlined by President Kirby, he declined to make interlocutory orders restraining the disposal of the shares. FAI sought leave to appeal. Eventually the court decided that the interpretation of section 793C should be broad and that the original trial judges view of the application of that section was too narrow. Some argue that this case is more an indication of the purposive style of judicial decision-making which President Kirby often engaged in rather than a true reflection of the issues underlying the case. However, under the doctrine stare decisis, the decision led to the overruling of the original decision made by Justice Young. The broad interpretation of the major element of this legislation has since prevailed as a precedent in Australian law.