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Federal Court of Australia |
Last Updated: 15 February 2000
Sabatica Pty Ltd v Allstate Explorations NL [2000] FCA 92
SABATICA PTY LIMITED (ACN 001 987 748) v ALLSTATE EXPLORATIONS NL (ACN 000 679 023) & AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
N 1514 OF 1999
BEAUMONT, EMMETT & HELY JJ
SYDNEY
11 FEBRUARY 2000
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
N 1514 OF 1999 |
ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY DEPUTY PRESIDENT B J McMAHON
BETWEEN: |
SABATICA PTY LIMITED (ACN 001 987 748) APPLICANT |
AND: |
ALLSTATE EXPLORATIONS NL (ACN 000 679 023) FIRST RESPONDENT AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION SECOND RESPONDENT |
JUDGES: |
BEAUMONT, EMMETT & HELY JJ |
DATE: |
11 FEBRUARY 2000 |
PLACE: |
SYDNEY |
Substitute "Ms S Dowling" for "Mr S Dowling" on page 16.
I certify that this is a true and correct copy of the corrigendum to the Reasons for Judgment of the Honourable Justices Beaumont, Emmett & Hely JJ. |
Associate:
Dated: 11 February 2000
Sabatica Pty Ltd v Allstate Exploration NL [2000] FCA 92
ADMINISTRATIVE LAW - application to review decision of Administrative Appeals Tribunal (AAT) - whether AAT made error of law in application of Australian Securities and Investments Commission (ASIC) Policy Statement 71
CORPORATIONS - attempted acquisition of parent company listed on New Zealand Stock Exchange - acquisition would result in acquisition of shares in downstream company listed on Australian Stock Exchange Limited - application of section 615 of the Corporations Law - application of section 629 of the Corporations Law - unrestricted declaration by ASIC under section 730(1) modifying application of section 629 of the Corporations Law - whether shareholders in downstream company would be disadvantaged - whether approach of AAT to Policy Statement 71 too rigid - whether purpose of acquiring upstream company was to acquire control of downstream company - whether Corporate Law Economic Reform Program Act 1999 (CLERP) relevant - whether AAT overlooked significance of international comity
Administrative Appeals Tribunal Act 1975 (Cth), s 44
Companies (Acquisition of Shares) Code, s 12(k)
Corporate Law Economic Reform Program Act (CLERP) 1999 (Cth), ss 2, 606, 611
Corporations Law, ss 431, 615, 629, 730(1), 731
BTR Plc v Westinghouse Brake and Signal Company (Australia) (1992) 34 FCR 246
Australian Securities and Investments Commission (ASIC) Policy Statement 71
SABATICA PTY LIMITED (ACN 001 987 748) v ALLSTATE EXPLORATIONS NL (ACN 000 679 023) & AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
N 1514 of 1999
BEAUMONT, EMMETT & HELY JJ
SYDNEY
11 FEBRUARY 2000
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY DEPUTY PRESIDENT B J McMAHON
1. The application be dismissed.
2. The applicant pay the first respondent's costs.
3. No order be made as to the second respondent's costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA |
|
NEW SOUTH WALES DISTRICT REGISTRY |
ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY DEPUTY PRESIDENT B J McMAHON
BETWEEN: |
SABATICA PTY LIMITED (ACN 001 987 748) APPLICANT |
AND: |
ALLSTATE EXPLORATIONS NL (ACN 000 679 023) FIRST RESPONDENT AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION SECOND RESPONDENT |
JUDGES: |
BEAUMONT, EMMETT & HELY JJ |
DATE: |
11 FEBRUARY 2000 |
PLACE: |
SYDNEY |
THE COURT:
1 The applicant, Sabatica Pty Limited ("Sabatica"), is incorporated in Australia and is a wholly owned subsidiary of Mid-East Minerals Limited ("Mid-East"). Mid-East is also incorporated in Australia and is listed on Australian Stock Exchange Limited ("ASX"). Otter Gold Mines Ltd ("Otter") is incorporated in New Zealand and is listed for quotation on the New Zealand Stock Exchange ("NZSE") and on ASX. Sabatica has a relevant interest in 19.87 per cent of the issued share capital of Otter and wishes to acquire further shares in Otter. Since Otter is incorporated in New Zealand, such acquisition would not of itself be regulated by the Corporations Law ("the Law").
2 However, Otter has a relevant interest in 58.58 per cent of the issued share capital of the first respondent, Allstate Explorations NL ("Allstate"). Allstate is incorporated in Australia and is listed on ASX. If Sabatica becomes entitled to more than 20 per cent of the issued capital of Otter, Sabatica will also be deemed to have acquired a relevant interest in, and have become entitled to, the shares in Allstate held by Otter. That acquisition is regulated by Part 6 of the Law. Since Sabatica would be deemed to acquire more than 20 per cent of the issued capital of Allstate, that acquisition, constituted by the acquisition of shares in Otter, would be prohibited by section 615 of the Law unless it were made in accordance with one of the permitted methods set out in Part 6.2 of the Law.
3 None of those methods is applicable to the proposed acquisition by Sabatica. However, section 629 would afford an exemption if Otter were incorporated in Australia and the acquisition resulted from acceptance of offers made under a takeover scheme or a takeover announcement in accordance with Part 6.2 of the Law. Section 629 is in the following terms:
"629 Section 615 does not apply in relation to an acquisition of shares in a company as a result of the acquisition of shares in another body corporate if:(a) at the time of the last-mentioned acquisition, the other body corporate is incorporated in Australia and is a listed body; and
(b) the acquisition of the shares in the other body corporate:
(i) results from the acceptance of an offer to acquire those shares that was made under a takeover scheme or takeover announcement; or
(ii) would, but for subsection 620(1) or (2), contravene section 615."
BACKGROUND TO THE APPEAL
4 Section 730 of the Law provides that the second respondent, the Australian Securities and Investments Commission ("ASIC"), may declare, in writing, that Chapter 6 shall apply in a particular case as if a specified provision or provisions of Chapter 6 were modified in a specified manner. When such a declaration is made, Chapter 6 applies accordingly.
5 On 15 September 1999, Sabatica applied to ASIC for a declaration that Chapter 6 apply as if section 629 was modified or varied. The modification requested was that:
* The reference to a body corporate which is a listed body and incorporated in Australia include a reference to any body corporate which is listed on ASX; and
* The acquisition of shares in the "other body corporate" in paragraph 629(b) was by takeover or stand in the market exchange transactions regulated in accordance with the NZSE Listing Rules and Companies Amendment Act 1963 (NZ).
6 On 8 October 1999, ASIC made a declaration that Chapter 6 of the Law apply in relation to Sabatica in relation to the acquisition of shares in Allstate as if section 629 was modified or varied so that:
* The reference to the "other body corporate" in paragraph (a) of section 629 included a reference to a body corporate listed on ASX; and
* The acquisition of shares in the "other body corporate" in paragraph (b) of section 629 was by a takeover offer in accordance with the Companies Amendment Act 1963 (NZ) or on market exchange transactions in accordance with the "Minority Veto Provisions" of the NZSE Listing Rules (Listing Rule 4.6).
7 On 10 November 1999, Allstate applied to the Administrative Appeals Tribunal ("the Tribunal") for review of ASIC's decision to make that declaration. On 24 December 1999 the Tribunal directed that the decision be set aside.
8 On 30 December 1999, Sabatica filed a notice of appeal to the Federal Court of Australia from that decision pursuant to section 44 of the Administrative Appeals Tribunal Act 1975 (Cth). Section 44 provides that a party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.
9 Under section 44(3) of the Administrative Appeals Tribunal Act 1975 (Cth) the Federal Court of Australia has jurisdiction to hear and determine such an appeal. That jurisdiction may be exercised by the Federal Court constituted as a Full Court and must be so exercised if the Tribunal's decision was given by a Presidential Member and, after consulting the President of the Tribunal, the Chief Justice of the Federal Court considers that it is appropriate for the appeal to be heard and determined by the Federal Court constituted as a Full Court. The Chief Justice has determined that this appeal be heard and determined by a Full Court.
10 The Tribunal considered that it was bound to decide the question before it in accordance with Policy Statement 71 issued by ASIC on 15 November 1993 and updated on 1 July 1996 ("Policy Statement 71"). Policy Statement 71 is said to be designed to provide guidelines for decision-makers and for the commercial community in making applications under section 730 so as to ensure uniformity in decision-making as far as possible. The purpose of Policy Statement 71 is stated in paragraph 1 as follows:
"In this Policy Statement, the [ASIC] sets out the extent to which it will use its discretionary power under s730 of the Corporations Law (Law) to modify s629. Modification is needed for it to apply to the acquisition of shares in an Australian company (downstream acquisition) as a result of the acquisition of shares in a foreign body corporate, listed overseas or in Australia (upstream acquisition). It also discusses how it will consider applications in relation to downstream acquisitions as a result of the acquisition of shares in an unlisted foreign body corporate."
11 The Tribunal's decision of 24 December 1999 was principally concerned with the application of paragraph 13 of Policy Statement 71 to the case before the Tribunal. Paragraph 13 is in the following terms:
"The [ASIC] may modify s629 to extend its relief to a downstream acquisition in an Australian company resulting from a takeover of, or a merger involving, a foreign, listed body corporate. The [ASIC] will grant the relief without any acquisition or voting restrictions and without a requirement for the applicant to make a downstream bid (`unrestricted relief') if:(a) the applicant does not propose such restrictions or such a condition;
(b) the shares in the downstream company do not comprise a substantial part of the assets of the upstream body corporate;
(c) control of the downstream company is not one of the main purposes of the takeover or merger of the upstream body corporate;
(d) the upstream acquisition is by way of a takeover or merger which is legal in the jurisdiction in which it takes place; and
(e) the jurisdiction in which the upstream takeover or merger is made, or the stock exchange on which it is made, affords a comparable level of investor protection to that under the Law and the rules of ASX."
12 The Tribunal concluded that:
* Otter's shares in Allstate comprise a substantial part of the assets of Otter;
* Control of Allstate was one of the main purposes of the takeover of Otter by Sabatica; and
* New Zealand does not afford a comparable level of investor protection to that under the Law and the listing rules of ASX.
Accordingly, there was no occasion for the grant of unrestricted relief as contemplated by paragraph 13. However, the Tribunal drew attention to the fact that no application had been made for "restricted relief" in accordance with Policy Statement 71. Paragraphs 21 and 23 relevantly deal with restricted relief as follows:
"[21] Where an applicant does not meet the criteria for unrestricted relief, the [ASIC] may grant restricted relief. In considering restricted relief the [ASIC] will take into account in all cases, the shares in the downstream company to which the offeror is already entitled at the time of the application as well as the shares to be acquired."
"[23] If the downstream shares constitute more than 50% of the voting shares in the downstream company; and an applicant does not meet the criteria for unrestricted relief, any relief would normally be conditional on the offeror or a subsidiary making a downstream bid on similar terms to those considered by the Federal Court in the [BTR Plc v Westinghouse Brake and Signal Company (Australia) (1992) 34 FCR 246] case."
13 An important aspect of the contentions of Sabatica, supported on appeal by ASIC, is the statutory context within which Policy Statement 71 operates. The contention depends not only on the legislative history of section 629 but also on proposed amendments to section 629 and related provisions.
14 The predecessor of section 629 was section 12(k) of the Companies (Acquisition of Share) Code ("the Code"). Section 12(k) permitted the acquisition of shares in the circumstances contemplated by section 629, whether or not the "other body corporate" was incorporated in Australia. That is to say, section 12(k) afforded an exception to the prohibition contained in the Code on the acquisition of shares in one company by reason of the fact that that company held shares in another company. The exception applied whether the first company was incorporated in Australia or out of Australia. When Chapter 6 of the Law replaced the Code, the exception in section 629, corresponding with section 12(k), was narrower by reason of its being limited to direct acquisition of shares in an Australian company.
15 Paragraph 8 of Policy Statement 71 states that:
"...the differences between s629 and s12(k) are not due to a policy decision by the legislature that downstream acquisitions are acceptable only where they result from takeovers under Australian law."
16 ASIC asserts in that paragraph that the differences between section 629 and section 12(k) represent a recognition that:
"[T]he Listing Rules of ASX no longer regulate takeovers of listed foreign companies, as they did at the introduction of [the Code] in 1980. Therefore, simply restricting the relief to acquisitions in listed bodies would no longer ensure that the upstream acquisition is subject to appropriate takeovers regulation...
s 12(k)... was capable of allowing a downstream acquisition where the upstream acquisition was regulated by neither Australian nor foreign takeover laws."
Section 629 avoided such consequences by requiring that the upstream body corporate be incorporated in Australia.
17 However, it appears that the Parliament did not intend to prohibit relief for bona fide upstream foreign acquisitions entirely. In paragraph 4 of Policy Statement 71 ASIC states:
"The prime reason for granting relief to offerors for foreign upstream bodies corporate is to ensure that Australia meets its obligations in relation to international comity. Where the purpose of the upstream acquisition is not to avoid the provisions of the Law, Australian legislation should not impede a bona fide, and otherwise lawful, takeover offer for a listed foreign body corporate. International comity requires Australia to strive for economic efficiency in international as well as Australian capital markets. Australian regulatory requirements should not impose excessive costs or obstacles on primarily foreign business transactions unless there is clear need for Australian investor protection. International comity requires the [ASIC] to ensure that Australian securities regulation is not used as an improper takeover defence by foreign bodies corporate. International comity also requires that Australian securities regulation similarly does not inhibit the liquidity and efficiency of foreign securities markets."
18 On 24 November 1999 the Corporate Law Economic Reform Program Act 1999 (Cth) ("CLERP") received royal assent. The effect of CLERP, when it commences, will be, inter alia, to repeal Chapter 6 of the Law and substitute a new Chapter 6, dealing with "Takeovers". The general thrust and effect of the proposed new Chapter 6 is similar to that of the existing Chapter 6.
19 Thus, there is a prohibition on acquiring a relevant interest in shares contained in new section 606, corresponding with existing section 615. Similarly, there are exceptions to that prohibition contained in the items in the table contained in new section 611, corresponding with existing sections 616 to 633. Item 14 of new section 611 corresponds with existing section 629. The table in section 611 sets out acquisitions that are exempt from the prohibition in section 606. Item 14 is in the following terms:
"14 An acquisition that results from another acquisition of relevant interests in voting shares in a body corporate included in the official list of:(a) a stock exchange; or
(b) a foreign body conducting a stock market that is a body approved in writing by ASIC for the purposes of this item."
Thus, when CLERP commences, there will be exempted from the prohibition contained in new section 606 all downstream acquisitions, provided that the upstream body corporate is listed on ASX (as Otter is) or is a body that conducts a stock exchange that is approved by ASIC.
20 The amendments to Chapter 6 of the Law have not yet commenced. Section 2(2) of CLERP provides, inter alia, that the items in Schedule 1 are to commence on a day or days to be fixed by proclamation. The amendment of Chapter 6 is contained in Schedule 1. However, section 2(3) of CLERP provides that if an item in Schedule 1 does not commence under section 2(2) within the period of six months beginning on the day on which CLERP received the royal assent, the item commences on the first day after the end of that period. Thus, if no relevant proclamation is made, the amendment to Chapter 6 would commence on 25 May 2000.
CHALLENGES TO THE TRIBUNAL'S DECISION
21 The decision of the Tribunal was, first, to set aside ASIC's decision to make the unrestricted declaration under section 730(1) of the Law modifying the operation of section 629 in the respect mentioned; and, secondly, if an application under section 730(1) for restricted relief is made, to remit that matter to ASIC for reconsideration. In its appeal from the Tribunal's decision, Sabatica seeks an order by the Court that the Tribunal's decision be set aside and that the matter be remitted to the Tribunal. Sabatica raised a number of grounds of appeal, supported by full written and oral submissions. Sabatica's arguments were grouped into four substantive points. We will deal with each separately.
(1) The Tribunal's finding that shareholders will be disadvantaged
22 By section 731 of the Law ("the Eggleston Principles"), it is provided as follows:
"731 In exercising any of its powers under section 728 or 730, the Commission shall take account of the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market and, without limiting the generality of the foregoing, shall have regard to the need to ensure:(a) that the shareholders and directors of a company know the identity of any person who proposes to acquire a substantial interest in the company;
(b) that the shareholders and directors of a company have a reasonable time in which to consider any proposal under which a person would acquire a substantial interest in the company;
(c) that the shareholders and directors of a company are supplied with sufficient information to enable them to assess the merits of any proposal under which a person would acquire a substantial interest in the company; and
(d) that, as far as practicable, all shareholders of a company have reasonable and equal opportunities to participate in any benefits accruing to shareholders under any proposal under which a person would acquire a substantial interest in the company;
but nothing in this section requires the Commission to exercise any of its powers in a particular way in a particular case."
23 On behalf of Sabatica, reference was made to the statements in paragraph 5 of the Tribunal's reasons first that it was Allstate's "principal complaint" that "insufficient weight" had been given to the considerations in paragraph (d) of section 731; and secondly that it was Allstate's case that ASIC's declaration "deprives the shareholders of Allstate (other than Otter) from participating in any share premium applicable in the takeover". Reference was also made to the Tribunal's subsequent conclusion, in paragraph 41, that "[i]f the bid proceeds ..., the shareholders of Allstate will be markedly and significantly disadvantaged, as will the shareholders in Otter". Sabatica contended that the Tribunal made no findings and gave no reasons to support that conclusion and, in particular, made no finding concerning Allstate's complaint that ASIC's declaration deprived Allstate's shareholders from participating in a share premium applicable to the takeover.
24 The observations of the Tribunal concerning the position of Allstate's shareholders must be viewed in their true context. In our view, as was submitted for Allstate, a principal element of that context was the Tribunal's treatment of the comparability of the New Zealand regularity regime. As has been noted, paragraph 13(e) of Policy Statement 71 calls for an inquiry into the "comparable level of investor protection" with the stated comparison being between the other jurisdiction or stock exchange, on the one hand, and the provisions of the Law and the listing rules of ASX on the other.
25 The Tribunal addressed this comparative issue in some detail (see paragraphs 37-41). Allstate's evidence to the Tribunal on this aspect was, by and large, unchallenged before the Tribunal and before us. The Tribunal accepted, inter alia, Allstate's statement of the position under the NZSE Listing Rules as follows:
"46 Section 4 of the NZSE Listing Rules requires that the same price and terms must be offered to all offerees, except where the offer is on-market, in which case the price may vary within the range notified by the bidder in its notice given under NZSE Listing Rule 4.6.1. Mid-East's notice specifies an extremely broad range, between NZ$0.40 and NZ$1.20 per Otter share.47 Where the offer is on-market, there is no obligation on the directors of the target company to obtain an independent appraisal report as to the fairness of the offer. Indeed, there is an extremely short response period in which the target directors may prepare and provide a detailed written report to shareholders if they thought it desirable as the offeror is only required to give five business days notice.
48 The directors of the target company are only required to provide limited information in response to the bid, including whether any director or associated person of a director is an acquirer, whether there is any material information about the company not available to the market, whether that information would make the bid more or less desirable to shareholders and whether that information is available to any acquirer.
49 The consequences of the applicable regime regulating Mid-East's proposed offer (if that regime can be said to include any substantive regulation of that offer) are that:
(a) Mid-East may buy at any price offered within the extraordinarily wide price range stated in its notice, so shareholders who accept may receive differential prices;
(b) the offer process will effectively be on a first-come first served basis and shareholders who are not aware of the offer, or are slow to respond, will not have the opportunity to accept unless the offer takes some time to be filled;
(c) Mid-East is not committed to buying the maximum number of shares stated in its notice and may withdraw from the market at any time; and
(d) Mid-East will be free to buy on-market immediately, within the terms of the notice and pause notice. Since it is likely that Mid-East, as is usually done, will have already approached larger shareholders to ascertain their willingness to sell, it is very possible that it will be able to receive and accept offers sufficient to meet its requirements immediately or very soon after the on-market offer opens. Control of Otter could pass to Mid-East within a matter of minutes."
26 The Tribunal then contrasted this scenario with the application of the Eggleston Principles in the present kind of situation, adopting Allstate's description of the contrast as "stark". No attempt was made by Sabatica in this Court to contest this aspect of the Tribunal's reasoning process.
27 When the observations made by the Tribunal in paragraphs 5 and 41 referred to above are thus viewed in context, it emerges clearly enough that the focus of the Tribunal's consideration on this aspect of the matter was the question whether the comparative element described in paragraph 13(e) of Policy Statement 71 was satisfied. This was plainly a potentially relevant field of inquiry for the Tribunal.
28 If paragraph 13(e) had been satisfied, that is, if a comparable level of investor protection to that under the Law and the ASX listing rules had been demonstrated, one of the five ingredients necessary to procure unrestricted relief would have been satisfied. If, on the other hand, paragraph 13(e) was not made out, unrestricted relief would not be granted, notwithstanding that the possibility of restricted relief remained. The question of comparative investor protection was not only a relevant aspect but a central question in this decision-making process. When the Tribunal's reasons are read as a whole, it appears that this was the consideration that underlay the observations made by the Tribunal in paragraphs 5 and 41 referred to above. We can perceive no error of law on the part of the Tribunal in this regard.
29 The Tribunal did not make a finding as to whether Sabatica's bid for Otter included any premium for control of Otter's shares in Allstate. There is no foundation for a conclusion that the Tribunal simply assumed that Allstate shareholders would be deprived of participation in a control premium if the modifications requested were made. The Tribunal made no findings on the point.
30 Rather, Allstate was able to succeed before the Tribunal without the need for the Tribunal to determine the potentially difficult factual question raised by Allstate as to whether the effect of the declaration was to deprive the shareholders of Allstate from participating in any share premium applicable to the takeover. There is no error of law in not deciding a factual issue raised by the successful party, which is not necessary for the decision.
(2) The Tribunal's approach to Policy Statement 71
31 Sabatica contended that the Tribunal adopted too rigid or too mechanical an approach to Policy Statement 71. In particular, it was said that the Tribunal failed to give consideration to the merits of the individual case and erred in regarding the discretionary relief as available to an applicant only if each of the requirements of paragraph 13 of the Policy Statement was met.
32 Sabatica further contended that the Tribunal overlooked the significance of the provisions of paragraph 4 of Policy Statement 71. It may be accepted that paragraph 4 states the rationale for granting relief to offerers for foreign upstream bodies corporate. But that objective may be achieved either by the grant of unrestricted relief (paragraph 13), or by the grant of restricted relief (paragraphs 21 and 23 in this case).
33 A conclusion that the purpose of the upstream acquisition is not to avoid the provisions of the Law, and is otherwise bona fide, may indicate that some form of relief is appropriate. But it does not provide a sufficient foundation for a conclusion that unrestricted relief, rather than restricted relief, is appropriate. For that reason the Tribunal was correct in its observation (paragraph 42) that it is simply not sufficient to say that if the takeover is not an artifice, then the applicant for unrestricted relief should be successful.
34 We agree with the Tribunal's conclusion that the conditions referred to in paragraph 13 are cumulative, in the sense that it is ASIC's policy to grant unrestricted relief if all are complied with. They are an expression of the cumulative circumstances which, in the opinion of ASIC, would justify an abandonment of the protections afforded by section 615 of the Law in relation to an Australian company in the context of a foreign upstream takeover. The Tribunal therefore had to consider the result produced by the application of Policy Statement 71 and whether there was any reason for departing from the policy there set out in the circumstances of the present case.
35 The Tribunal addressed each of these questions. It found that paragraphs 13(b), (c) and (e) of Policy Statement 71 were not satisfied. As to the second question, the Tribunal observed that:
* The policy does not truncate the decision-maker's discretion so as to preclude a consideration of the merits of the case (paragraph 18);
* The policy does not tend to produce an unjust decision in the circumstances of the particular case (paragraph 18);
* Unless there are cogent reasons for departing from the policy, the policy "should be given considerable respect" in the interests of consistency in decision making (paragraph 18); and
* There are no cogent reasons for departing from the policy in the circumstances of the present case (paragraph 42);
No error of law is involved in the Tribunal's approach.
36 In its reasons (paragraph 42), the Tribunal said that "[t]here are no cogent reasons why [Policy Statement 71] should be departed from in the present circumstances. It is simply not sufficient to say ... that if the takeover is not an artifice, then the applicant for relief should be successful" (our emphasis). This indicates that the Tribunal did, as it was bound to do, have regard to the circumstances of the present case, including (as has been noted) the absence of a level of comparable investor protection.
37 Paragraph 12 of Policy Statement 71 states that where an applicant does not meet the criteria for unrestricted relief, ASIC may grant restricted relief. The Tribunal here went on to remark (paragraph 42):
"To preserve consistency in decision making until such time as the legal basis for the statement is changed, the policy should be applied. The application of [paragraph 13] would therefore preclude the granting of unrestricted relief without a requirement for Sabatica to make a downstream bid. As is pointed out in [paragraph 21], however, there is no reason why it may not apply for restricted relief, a course which it has consistently refused to follow in the present circumstances."
38 Again, we perceive no error in this approach.
39 Nor, in our view, when its reasons are read as a whole, did the Tribunal overlook, as Sabatica contended, the significance of the general international comity objectives described in paragraph 4 of Policy Statement 71. It will be recalled that that part of Policy Statement 71 emphasises the need to protect Australian investors and states that where that need is clear, it will have priority, even if that imposes excessive costs or obstacles for primarily foreign business transactions.
40 The Tribunal specifically addressed the question of international comity as follows (paragraph 41):
"In my view, it is not offensive to the New Zealand regulatory regime, nor is it contrary to Australia's `obligations in relation to international comity' to point out the differences referred to above. They are simply facts. If in [paragraph 13] the word `comparable' means `equal' then clearly paragraph (e) is also negatived. There will, however, always be differences between the regulatory regimes of different countries. It would be astonishing to find an exact replica of chapter 6 elsewhere or even to find a near equivalent to the proposed CLERP provisions. No doubt this is why it is proposed that individual foreign stock exchanges be singled out and listed after a preliminary process has been carried out leading to the approval of that exchange by ASIC. Nevertheless, I find it difficult to accept that `comparable' can mean `adversely comparable' to a marked and significant extent. If the bid proceeds on the intended basis, the shareholders of Allstate will be markedly and significantly disadvantaged, as will the shareholders in Otter."
We find no legal error here.
(3) The Tribunal's findings on Sabatica's purpose in acquiring shares in Otter
41 The Tribunal's findings (paragraphs 34 - 36) addressed this issue in the context of paragraph 13(c) of Policy Statement 71. Whether one of the main purposes of Sabatica's bid for Otter was to acquire control of Allstate is, of course, a question of fact.
42 The Tribunal said (paragraph 34):
"There may be some ambivalence in the use of the word `control' in paragraph (c). It was Sabatica's case that they did not seek control of Allstate in the sense that they intended to continue to manage it as a going concern. Rather, it was said, their intention was to sell off the assets of Allstate in order to reduce the group's debt. To my mind, this is a distinction without a difference. To sell an asset it is first necessary to control it. It may be that Sabatica had no firm intention and did not know what it intended to do with the assets until it took control and was in a position to investigate the business possibilities. In either event, it can hardly be said, in my view, that it was not one of the main purposes of the takeover to control Allstate. Otter has three main assets, each of which are approximately equal in value. Sabatica would have three main purposes, namely to control each of the three main assets of Otter."
43 Sabatica contended that instead of conducting a factual enquiry, the Tribunal impermissibly reasoned that the existence of control in fact was sufficient to establish that one of the purposes of the takeover was to obtain that control. That complaint is based upon the following sentence in the Tribunal's reasons (paragraph 36):
"It seems to me that the mere fact of control is sufficient to enliven [paragraph 13(c) of Policy Statement 71] and to disqualify an entitlement to unrestricted relief."
44 In our view, the Tribunal was alive to the fact that it was conducting a factual enquiry and it did not fall into the error which Sabatica's contention attributes to it. In its reasons (paragraph 35), the Tribunal said that the evidence as to the purpose of Sabatica was left in an unsatisfactory state. A fair reading of the Tribunal's reasons on this point, taken as a whole, makes it clear that the Tribunal was not saying that always or in every given case a purpose of control must be inferred from the mere fact of control. Rather, the Tribunal was rejecting the proposition that an intention to sell an asset was sufficient of itself to negative a purpose of gaining control of that asset. The purpose of gaining control of an asset can exist even though continuing management of the asset is not in contemplation.
45 We see no error of law in what the Tribunal decided, or in the way it addressed this question. The Tribunal decided, as a matter of fact, that it was not satisfied that it was not one of the main purposes of the takeover to control Allstate: paragraph 13(c) involves the establishing of a negative. Given the Tribunal's finding that the evidence as to the purpose of Sabatica was left in an unsatisfactory state, that is hardly a surprising conclusion.
(4) The Tribunal's conclusion that the CLERP reforms were not applicable
46 As has been noted, the reforms to be effected by CLERP will come into effect on 25 May 2000, unless proclaimed to commence prior to that date. No such proclamation has been made. It follows, in our view, that the law applicable to these transactions was that in force before the CLERP reforms commence. The Tribunal approached the matter upon the footing that the law then in force governed the position for its purposes. In the absence of any relevant transitional provision the Tribunal was clearly correct to do so. By deciding to defer the operative date for the introduction of the reforms, the Parliament has expressed its intention that until that deferred date, the existing legislative regime is to govern. In those circumstances, it was not obligatory for the Tribunal to take the CLERP reforms into account before they come into effect. Nor did it seek to do so. It properly treated them as not then relevant.
47 Section 730 proceeds upon the basis that, whilst the Law generally applicable is as declared by Chapter 6, there may be justification for the modification of the operation of Chapter 6 in relation to a specified person or classes of persons, either generally or in particular circumstances. The assumption underlying section 730 is that there is something in the circumstances of the particular case or cases which makes it appropriate that there should be a departure from the general rule, although the general rule continues to apply in all other cases.
48 If ASIC were to use its powers under section 730 to accelerate the operation of amendments to the general law in relation to a particular case because the general law should be changed, or will in the future be changed, then it would be using the power for a purpose other than that for which it was conferred, and contrary to the intention of Parliament as declared in the enactment of the CLERP reforms. The power was conferred for the purpose of creating exceptions to the law generally applicable; not for the purpose of accelerating, in relation to a particular case, the date for the operation of changes to that law in advance of that fixed by Parliament. There was no error by the Tribunal in its approach to CLERP
CONCLUSION
49 It follows that the appeal fails. We propose to make the following orders:
1. That the application be dismissed;
2. That the applicant pay the first respondent's costs;
3. That no order be made as to the second respondent's costs
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Beaumont, Emmett & Hely. |
Associate:
Dated: 11 February 2000
Counsel for the Applicant: |
Mr D Heydon QC and Mr S Dowling |
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Solicitor for the Applicant: |
Coudert Brothers |
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Counsel for the First Respondent: |
Mr N Hutley SC and Mr A S Bell |
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Solicitor for the First Respondent: |
Mallesons Stephen Jaques |
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Counsel for the Second Respondent |
Mr M J Gething |
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Date of Hearing: |
2 February 2000 |
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Date of Judgment: |
11 February 2000 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2000/92.html