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Federal Court of Australia |
ADMINISTRATIVE LAW - relevant and irrelevant considerations - whether the failure of the primary decision maker to hear an interested party an irrelevant consideration on review by the Administrative Appeals Tribunal - nature of review before the Tribunal.
CORPORATIONS LAW - takeovers - power of the Australian Securities Commission to modify the operation of takeover provisions of the Corporations Law - whether power to modify should be used `sparingly'.
Administrative Appeals Tribunal Act 1975 (Cth) ss 43(1), 43(6), 44(1)
Corporations Law ss 618, 730, 731
OPSM Industries Ltd v National Companies and Securities Commission (1982) 7 ACLR 192 referred to
TNT Ltd v National Companies and Securities Commission (1986) 11 ACLR 59 referred to
Minister for Aboriginal Affairs v Peko-Wallsend [1986] HCA 40; (1986) 162 CLR 24 considered and applied
BTR plc v Westinghouse Brake and Signal Company (Australia) Ltd (1992) 34 FCR 246 referred to
Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 considered
Collins v Minister for Immigration and Ethnic Affairs [1981] FCA 147; (1981) 36 ALR 598 considered
Drake v Minister of Immigration and Ethnic Affairs [1979] AATA 179; (1979) 24 ALR 577 applied
Murphyores Incorporated Pty Ltd v Commonwealth [1976] HCA 20; (1976) 136 CLR 1 applied
The Queen v Marks; Ex parte Australian Building Construction Employees and Builders Labourers' Federation [1981] HCA 33; (1981) 147 CLR 471 followed
Judicial Review of Administrative Action de Smith, Woolf and Jowell, (5th ed, 1995)
OTTER GOLD MINES LTD v AUSTRALIAN SECURITIES COMMISSION and BEACONSFIELD GOLD NL and BURDEKIN RESOURCES NL and TENNSCOURT OIL PTY LTD
VG 117 of 1997
BEAUMONT, SUNDBERG AND MERKEL JJ
MELBOURNE
5 NOVEMBER 1997
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VG 117 of 1997 |
on appeal from a decision of the administrative appeals tribunal, general administrative division, constituted by DEPUTY PRESIDENT G L McDonald and Mr d l elsum, member
|
BETWEEN: | OTTER GOLD MINES LIMITED
Applicant |
|
AND: | AUSTRALIAN SECURITIES COMMISSION
FIRST RESPONDENT
BEACONSFIELD GOLD NL second Respondent
BURDEKIN RESOURCES NL THIRD RESPONDENT
tennscourt oil pty ltd Fourth Respondent |
|
JUDGES: | BEAUMONT, SUNDBERG AND MERKEL JJ |
| DATE OF ORDER: | 5 november 1997 |
| WHERE MADE: | MELBOURNE |
THE COURT ORDERS THAT:
1. The decision of the Administrative Appeals Tribunal be set aside.
2. The matter is remitted to the Administrative Appeals Tribunal to be determined in accordance with law.
3. The second, third and fourth respondents pay the appellants' taxed costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VG 117 of 1997 |
|
BETWEEN: | OTTER GOLD MINES LIMITED
Applicant |
|
AND: | AUSTRALIAN SECURITIES COMMISSION
First Respondent
BEACONSFIELD GOLD NL Second Respondent
BURDEKIN RESOURCES NL Third Respondent
TENNSCOURT OIL PTY LTD Fourth Respondent |
|
JUDGES: | BEAUMONT, SUNDBERG AND MERKEL JJ |
| DATE: | 5 november 1997 |
| PLACE: | MELBOURNE |
BEAUMONT J
I have had the benefit of reading the reasons of Merkel J. I agree with them and with the orders proposed.
|
I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont |
Associate:
Dated: 5 November 1997
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VG 117 of 1997 |
|
BETWEEN: | OTTER GOLD MINES LIMITED
Applicant |
|
AND: | AUSTRALIAN SECURITIES COMMISSION
First Respondent
BEACONSFIELD GOLD NL Second Respondent
BURDEKIN RESOURCES NL Third Respondent
TENNSCOURT OIL PTY LTD Fourth Respondent |
|
JUDGES: | BEAUMONT, SUNDBERG AND MERKEL JJ |
| DATE: | 5 november 1997 |
| PLACE: | MELBOURNE |
SUNDBERG J
I agree with the reasons of Merkel J and with the orders his Honour proposes.
|
I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg |
Associate:
Dated: 5 November 1997
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| VICTORIA DISTRICT REGISTRY | VG 117 of 1997 |
on appeal from the administrative appeals tribunal, general administrative division, constituted by DEPUTY PRESIDENT G L McDonald and Mr d l elsum, member
|
BETWEEN: | OTTER GOLD MINES LIMITED
Applicant |
|
AND: | AUSTRALIAN SECURITIES COMMISSION
FIRST RESPONDENT
BEACONSFIELD GOLD NL second Respondent
BURDEKIN RESOURCES NL THIRD RESPONDENT
tennscourt oil pty ltd Fourth Respondent |
|
JUDGES: | BEAUMONT, SUNDBERG AND MERKEL JJ |
| DATE: | 5 november 1997 |
| PLACE: | MELBOURNE |
INTRODUCTION
The applicant ("Otter") has appealed to the Court pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") from a decision of the Administrative Appeals Tribunal ("the AAT") setting aside a declaration made by the Australian Securities Commission ("the ASC") made pursuant to s 730 of the Corporations Law ("the Law"). The declaration modified the operation of s 618 of the Law in respect of the acquisition of shares in Allstate Explorations NL ("Allstate") by Otter.
The Appeal, on questions of law, has come on for hearing before a Full Court pursuant to s 44(3) of the AAT Act.
BACKGROUND
Allstate is listed on the Australian Stock Exchanges ("the ASX"). At the date of the declaration the approximate shareholding (including that held by associated entities) in Allstate was as follows. Otter held 46.3 per cent of the issued capital, the second respondent ("Beaconsfield") held 38.5 per cent and the third and fourth respondents ("Burdekin") held 4.99 per cent. The remaining shares were held by the public.
In April 1996, Beaconsfield made a Part A offer to the public for shares in Allstate under Ch 6 of the Law ("the takeover provisions"). Beaconsfield acquired 38.5 per cent of Allstate but Beaconsfield was prohibited under the takeover provisions from acquiring further shares until March 1997.
The problems giving rise to the present dispute had their genesis in a share placement made on 18 April 1996 which had the effect of involuntarily diluting Otter's holding in Allstate from 46.32 per cent to 43.21 per cent. It was the policy of the ASC to consider the grant of relief from the takeover provisions in favour of a shareholder whose shareholding is involuntarily diluted so as to enable the shareholder to restore itself to its previous undiluted position in the company within 6 months of the dilution: see ASC Policy Statement 57 (paras 51A to 51K). The relief, if granted, would be by way of a declaration under s 730 modifying the operation of the takeover provisions, including s 618 of the Law. Such a modification is necessary for shareholders holding more than twenty per cent of the shares in a listed company as:
* s 615 of the Law prevents a shareholder acquiring more than 20 per cent of voting shares in a public company without making a takeover
offer; and
* s 618 of the law exempts from the twenty per cent limit the acquisition of no more than three per cent of voting shares over any
six month period ("the creeping entitlement").
As Otter held more than twenty per cent of Allstate, unless it obtained a declaration in accordance with Policy Statement 57 it could not fully restore itself to its undiluted position in the six months following the dilution and if it partially restored itself to that position it would exhaust its creeping entitlement in doing so.
On 16 May 1996, in reliance upon Policy Statement 57, Otter applied to the ASC for a modification of s 618 which would enable it to return its percentage entitlement to its pre-dilution position and to use its creeping entitlement of three per cent in the same six month period after the dilution.
The modification sought was granted by the ASC on 31 May 1996 ("the first modification"). However, under it Otter was afforded 6 months from 31 May 1996, rather than the dilution date of 18 April 1996, to return to its pre-dilution percentage entitlement of 46.321 per cent and use its creeping entitlement.
At the time of the modification Otter had expressed its concern to the ASC that the modification it sought might unfairly restrict its creeping entitlement after the six month period. The ASC officer dealing with the matter acknowledged that the modification was not "all that clear" but said that as he was going on leave it would be better to issue the modification and address shortfalls at a later date.
The modification was as follows:
SECTION 730 DECLARATION
1. subsection 618(1) was varied by omitting paragraph (b) and substituting:
"(b) the acquisition does not result in the percentage entitlement of the relevant person to voting shares in the company increasing to a figure greater than the sum of:
(i) the percentage entitlement of the relevant person to voting shares in the company at a date six months before the date of the acquisition; and
(ii) 3%"; and
2. section 618 was varied by omitting subsection (2).
On 3 June 1996 Otter issued a release to the ASX and New Zealand Stock Exchange stating, inter alia:
"The Company has obtained a Section 730 Declaration from the Australian Securities Commission entitling it to increase its investment in Allstate Explorations NL ("Allstate") to 49.32% in the period to 30 November 1996."
No mention was made in the release to the possibility of a second modification. For commercial reasons Otter desisted from buying shares in Allstate in the early part of the six month period. By 18 October 1996, being six months from the dilution date, Otter had increased its holding to 43.39 per cent. By 30 November 1996 Otter had increased its holding to 46.12 per cent.
In substance, the first modification only suspended the operation of s 618, in relation to Otter, to 30 November 1996. In the six months to 30 November 1996 Otter's acquisitions had virtually exhausted its creeping entitlement with the consequence that, without a second modification, any purchases of Allstate shares by Otter in the months immediately following 30 November 1996 would probably constitute a breach of the takeover provisions. Notwithstanding that problem, in the period from 1 December 1996 to 10 January 1997 Otter appeared to employ "self help" by continuing to acquire shares in Allstate thereby increasing its holding from 46.12 per cent to 46.55 per cent.
As a result of the contest for Allstate shares and the restrictions imposed under the takeover provisions on the two contestants, Otter and Beaconsfield, Burdekin saw an opportunity arising for itself in the market for Allstate shares. It was aware of the modification granted to Otter and of the restriction imposed on Beaconsfield's purchases of Allstate shares prior to March 1997. On that basis Burdekin proceeded to acquire its holding of 4.99 per cent in the latter part of 1996. As a result of the competition between Otter and Burdekin during November 1996 the price of Allstate shares increased sharply.
On 20 December 1996 Otter applied to the ASC for a second modification. It claimed that, although it had substantially restored itself to its pre-dilution position, it had not used, and thereby had lost, the creeping entitlement for the relevant period and a large part of the ensuing six months. In substance, Otter requested a further modification to s 618 so that shares acquired by it to restore its entitlement to 46.32 per cent would not be counted against it in the formula for determining its creeping entitlement.
The ASC requested submissions from Beaconsfield. Although it was aware of Burdekin's strategic holding of about five per cent it did not call for or receive submissions from Burdekin.
By a decision made on 10 January 1997, the ASC granted a second modification to Otter enabling Otter to fully utilise the creeping entitlement under s 618 unaffected by the acquisitions made pursuant to the first modification. The modification was to operate from 10 January 1997. It was not announced by Otter to the ASX until 15 January 1997. In that period Otter increased its holding from 46.55 per cent to 47.20 per cent.
The second modification was as follows:
SECTION 730 DECLARATION
"being acquisitions made in reliance on the declaration dated 31 May 1996 made by the Commission to restore the person's percentage entitlement to 46.321% of the issued capital of the company, or acquired by the person"
The AAT commenced its hearing of the review on 26 February 1997. Otter, Beaconsfield, Burdekin and the ASC were legally represented. Save for the ASC all parties called evidence and extensive documentation was tendered. Submissions were made by all parties.
On 7 March 1997 the AAT decided that the ASC's decision of 10 January 1997 was to be set aside and the matter remitted to the ASC with a direction that the second modification applied for by Otter, and granted on 10 January 1997, ought not to have been made. One of the AAT's reasons was that Burdekin's position had been adversely affected by the decision to make the second modification, and that it had not been consulted prior to the making of the decision. Although the AAT's decision was to remit the matter back to the ASC clearly it was intended to operate, and did operate, as a direction to the ASC to reject the application of Otter. On 17 March 1997 Otter appealed to the Court from the decision of the ASC.
Although the parties canvassed a wide range of issues on the appeal, including matters that seemed to go more to the merits of the AAT's decision rather than to errors of law made by the AAT, I have not found it necessary to deal with all of those issues in order to determine the appeal. However, as the matter is to be remitted back to the AAT it is desirable to clarify a number of the issues raised in argument concerning the role of the ASC and the AAT.
THE ROLE OF THE ASC UNDER s 730
Under the Law broad discretionary powers are conferred on the ASC to exempt persons or classes of persons from the operation of the takeover provisions in Ch 6 of the Law (s 728) or to modify the operation of those provisions either generally or in a particular case (s 730). The present appeal concerns ss 730 and 731 of the Law which provide:
"730(1) The Commission may on application by the person or persons concerned or by a person or persons included in the class or classes of persons concerned, declare, in writing, that this Chapter shall apply in relation to a specified person or persons, or a specified class or classes of persons, either generally or in a particular case or classes of cases, as if a specified provision or provisions of this Chapter were omitted or were modified or varied in a specified manner, and, when such a declaration is made, this Chapter applies accordingly.
730(2) The Commission shall cause a copy of an instrument by which a declaration was made under subsection (1) to be published in the Gazette.
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."
The power of modification conferred by s 730 (and its predecessor, s 58 of the Companies (Acquisition of Shares) Code) is expressed in wide terms and in language that offers little support for any implied limitation on the scope of the power conferred under it: see OPSM Industries Ltd v National Companies and Securities Commission (1982) 7 ACLR 192 at 194-195 per Needham J and TNT Ltd v National Companies and Securities Commission (1986) 11 ACLR 59 at 62 per Gobbo J.
Subject to the matters referred to in s 731 the ASC's discretion is confined only by the subject matter, scope and purpose of the relevant statutory provisions in the Law: see Minister for Aboriginal Affairs v Peko-Wallsend [1986] HCA 40; (1986) 162 CLR 24 at 40, BTR plc v Westinghouse Brake and Signal Company (Australia) Ltd (1992) 34 FCR 246 at 257 and Peninsula Gold Pty Ltd v Australian Securities Commission (1996) 21 ACSR 246 at 249.
Section 731 is based on the recommendations of the Eggleston Committee and contains what are known as the Eggleston principles: see BTR at 255-6 and Brierley Investments Limited v Australian Securities Commission (1997) 15 ACLC 1341 at 1347-1350. The section states the matters that the ASC is to "take account of" and "have regard to", in a particular case, prior to the exercise of any of the powers conferred by ss 728 and 730. The ASC must thus give way to those matters as fundamental elements in exercising the powers: R v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; (1979) 180 CLR 322 at 329 per Mason J and Queensland Medical Laboratory v Blewett (1988) 84 ALR 615 at 623 per Gummow J.
For the detailed takeover code in Ch 6 to be workable broad discretions of exemption and modification are necessary and desirable, inter alia, for "ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market". In pursuance of that and other objectives the ASC has issued a number of policy statements, including Policy Statement 57 in relation to takeovers. The role of policy in relation to the exercise of broad statutory discretions has been considered in a number of cases: see for example Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth [1977] HCA 71; (1977) 139 CLR 54, Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-641 per Brennan J, and Bread Manufacturers of New South Wales v Evans [1981] HCA 69; (1981) 56 ALJR 89 at 99-100 per Mason and Wilson JJ. The AAT is entitled to give weight to published policy and normally would be expected to do so: see Collins v Minister for Immigration and Ethnic Affairs [1981] FCA 147; (1981) 36 ALR 598 at 602. To the extent that the policy enunciated in Policy Statement 57 reflects or seeks to give effect to the Eggleston principles, the ASC could be expected to have regard to the policy, as required by s 731, always reserving unto itself the decision as to whether, and if so how, it should exercise its power.
The consistent and fair application of published ASC policy, inter alia, seeking to give effect to the Eggleston principles in the light of the facts of the particular case is conducive to and compatible with an efficient, competitive and informed market. Decision making on an ad hoc basis, although seeking to be fair as between the parties, might be at the expense of the certainty and consistency upon which the market is entitled to rely. Informed participants in the market can be taken to be aware of the broad discretions under ss 728 and 730 but are entitled to expect that the ASC will not lightly depart from its published policy in exercising those discretions.
In outlining these matters I do not intend to restrict or fetter the broad discretion conferred on the ASC under ss 728 and 730. Rather, I am setting out certain matters which may be appropriate for consideration by the ASC or, on review, the AAT when called upon to exercise the discretionary power conferred under either of the sections in a particular case.
These observations are pertinent to the present case. The AAT, whilst accepting that the power of modification under s 730 is necessarily a broad power, added that "it should be used sparingly". If the AAT was purporting to state a general proposition, which I do not accept as necessarily being the case, then the proposition is wrong. For the reasons I have set out above the power is not so confined or constrained. The power of modification is to be exercised when the ASC determines, in its discretion, that it is appropriate to do so after having regard to the considerations set out in s 731 and any other matters which it determines to be relevant including any applicable ASC policy. In some cases, such as a departure from published policy, it may well be that the power of modification should be used with caution by reason of the facts of the particular case. However, there is no statutory foundation for stating that the power under s 730 should be used "sparingly".
THE ROLE OF THE AAT
Pursuant to s 1317B(1)(b) of the Law Beaconsfield applied to the AAT for review of the second modification decision of the ASC. The parties to the review were Beaconsfield as applicant, the ASC as respondent and Otter and Burdekin as added parties. The review is governed by s 43(1) of the AAT Act which provides:
"For the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision and shall make a decision in writing -
(a) affirming the decision under review;
(b) varying the decision under review; or
(c) setting aside the decision under review and -
(i) making a decision in substitution for the decision so set aside; or
(ii) remitting the matter for reconsideration in accordance with any directions or recommendations of the Tribunal."
The decision of the AAT comes into operation on the date of the decision or such later date as is specified in the decision: see ss 43(5A) and 43(5B). However s 43(6) provides:
"A decision of a person as varied by the Tribunal, or a decision made by the Tribunal in substitution for the decision of a person, shall, for all purposes (other than the purposes of applications to the Tribunal for a review or of appeals in accordance with section 44), be deemed to be a decision of that person and, upon the coming into operation of the decision of the Tribunal, unless the Tribunal otherwise orders, has effect, or shall be deemed to have had effect, on and from the date on which the decision under review has or had effect."
When reviewing an administrative decision under s 43(1) the AAT stands in the place, and is empowered to exercise all of the relevant powers and discretions, of the decision maker in respect of the decision under review. The AAT hears the matter de novo in the light of the evidence placed before it.
As was said by Bowen CJ and Deane J in Drake v Minister of Immigration and Ethnic Affairs [1979] AATA 179; (1979) 24 ALR 577 at 589:
"The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal."
Putting to one side the possibly different case of a decision maker who has special expertise, the AAT is neither entitled nor required to place weight upon the fact that the original decision maker had exercised his or her discretion in a particular way: see Collins at 603.
In the present case the duty of the AAT was to determine the application by Otter under s 730 for a second modification to s 618 of the Law on the basis of the relevant facts and submissions placed before it and then to give effect to that determination by exercising the power conferred under s 43(1)(a) (b) or (c) of the AAT Act. The determination of the application is to be on its merits as at the date of hearing before the AAT and not as at the date of the decision of the ASC, 10 January 1997.
THE ROLE OF THE FEDERAL COURT
The appeal to the Court is under s 44(1) of the AAT Act which provides:
"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."
As was pointed out in BTR by Lockhart and Hill JJ at 257:
"It is not for [the] Court to substitute its opinion for that of the Tribunal. The role of the court is limited to reviewing whether the exercise of discretion by the Tribunal miscarried by virtue of some error of law. Such an error may be demonstrated, for example, if it appears that the Tribunal took into account some irrelevant matter in exercising its discretion, or failed to take into account some matter which it was bound to take into account."
A critical issue arising on the appeal to the Court is whether the AAT, by taking into account the failure of the ASC to afford Burdekin an opportunity to be heard, took into account an irrelevant consideration. The initial question is whether that matter affected or influenced the decision of the AAT.
DID THE FAILURE OF THE ASC TO HEAR BURDEKIN AFFECT OR INFLUENCE THE DECISION OF THE AAT?
In its reasons for decision, after setting out and commenting upon the facts and the parties' submissions, the AAT considered the effect of the second modification on Beaconsfield and Burdekin. The AAT said:
"However, the Tribunal perceives a general unfairness arising as the result of the issuance of the second modification, in that it gives Otter a second opportunity, i.e. beyond that which was conveyed to the market in the wording of the first modification, and on which the market had been operating for a period in excess of 6 months."
After concluding that the second modification was detrimental to Beaconsfield the AAT considered Burdekin's position:
"The Tribunal is also satisfied that the position of Burdekin has been adversely affected by the ASC's decision to grant the second modification, and that Burdekin was not consulted prior to the making of the decision. The general proposition was put to the Tribunal that it would be impossible for the ASC to consult every shareholder in circumstances where a modification may be said to affect that shareholder or those shareholders. The Tribunal has no trouble in accepting this proposition. It was submitted that, while Burdekin's share was 4.99 per cent as distinct from 5 per cent, and therefore it was not necessary for the ASC to technically contact Burdekin prior to reaching a decision to issue the second modification. Section 708(1) of the Corporations Law provides a person has a "substantial shareholding" in a body corporate if the person is entitled to not less than the prescribed percentage of the voting shares. The prescribed percentage is 5 per cent (see s.708(5)). Section 731 does not refer to a "substantial shareholding" or "substantial shareholder", but rather to a person who would acquire a "substantial interest" - a term which is not defined. An unduly technical approach, however, would ignore the broad policy considerations of ensuring that people with a substantial interest should be kept informed of changes that are likely to affect that interest. The events surrounding the takeover, the issuance of the option programme, the rights issue in November 1996, and comment in the press, must be taken to have alerted the ASC of the "play" surrounding Allstate shares, such that it should be taken to have been aware of who the major players are and to, accordingly, have contacted them for comment prior to the reaching of a decision in order to accord them natural justice. Such an approach would accord with the ASC policy with respect to extending procedural fairness to parties whose interest may be adversely affected by any such modification (see Policy Statement 92 (T17)). In Burdekin's case this did not happen. The Tribunal is satisfied that Burdekin was not afforded the opportunity of making a submission to the ASC about the proposed second modification in circumstances where it was appropriate that it should be given that opportunity."
The AAT then concluded that
"For the above reasons, the Tribunal has determined to set aside the decision under review."
The AAT then referred to the submission by Otter to the effect that if the second modification is set aside certain aspects of the matter made it undesirable for the order to operate as from 10 January 1997 pursuant to s 43(6). Rather, Otter submitted that the order should only operate from the date of the decision of the AAT or, at the earliest, the date of the stay, being 20 January 1997. In determining that it was appropriate that the second modification be set aside as from 10 January 1997 as provided by s 43(6), the AAT said:
"Those undesirable aspects, however, do not, in the opinion of the Tribunal, outweigh the greater undesirability of allowing Otter to retain its position in Allstate as the result of its representations to the ASC for the second modification, which the Tribunal has determined ought not to have been accepted. Accordingly, the balance falls in not exercising the discretion under the provisions of s.43(6).
The decision under review is set aside and the matter is remitted to the respondent with a direction that the modification applied for by Otter, and granted on 10 January 1997, ought not to have been made."
Clearly, unfairness was a matter at the forefront of the AAT's mind. The failure of the ASC to afford Burdekin an opportunity to be heard was viewed by the AAT as an integral aspect of the unfairness visited upon Burdekin by the second modification. In my view, the passages set out above demonstrate that the failure of the ASC to afford Burdekin an opportunity to be heard in relation to the second modification was treated by the AAT as a consideration which was material, not insignificant and which affected and influenced the decision it made.
WAS THE FAILURE OF THE ASC TO HEAR BURDEKIN AN IRRELEVANT CONSIDERATION?
In general, irrelevant considerations are those which, of their nature are "extraneous to the power conferred": Murphyores Incorporated Pty Ltd v Commonwealth [1976] HCA 20; (1976) 136 CLR 1 at 12 per Stephen J or "extraneous to any objects the legislature had in mind": Murphyores at 23 per Mason J. The law in relation to irrelevant considerations was summarised by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24 at 39-40.
"What factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion. If the statute expressly states the considerations to be taken into account, it will often be necessary for the court to decide whether those enumerated factors are exhaustive or merely inclusive. If the relevant factors - and in this context I use this expression to refer to the factors which the decision-maker is bound to consider - are not expressly stated, they must be determined by implication from the subject-matter, scope and purpose of the Act. In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation on the factors which the decision-maker may legitimately have regard."
If the effect of the irrelevant consideration on the decision is material or not insignificant then a court will normally hold that the power has not been validly exercised even if it is not satisfied that the irrelevant consideration was the sole or dominant consideration affecting or influencing the decision: see Peko-Wallsend at 40; Judicial Review of Administrative Action de Smith, Woolf and Jowell, (5th ed, 1995) at 346-347.
For present purposes the starting point for determining irrelevance is the statutory power exercised by the AAT. The AAT was hearing and determining an application by Beaconsfield for the review of a decision of the ASC under s 730 of the Law. In setting aside the decision of the ASC and remitting the matter back to it with a direction that the declaration ought not be made the AAT was finally determining Otter's application for a modification on the merits under s 43(1)(c)(ii) of the AAT Act. In these circumstances it did not form any part of the AAT's statutory function to determine whether the ASC's decision ought, or ought not, have been made by the ASC on the basis of the submissions and material before the ASC. Rather, the AAT's statutory function was to determine whether the decision the subject of review was the correct or preferable one on the material and submissions before the AAT and to then exercise the power conferred on it under s 43(1) accordingly.
As pointed out above one of the reasons for the decision of the AAT was the failure of the ASC to afford Burdekin an opportunity of being heard on the original hearing. However, Burdekin had received a full and fair hearing on the review, which was a hearing de novo in respect of which the AAT was empowered to exercise all of the relevant powers and discretions of the ASC. Any failure by the ASC to hear Burdekin at the original hearing was irrelevant: see The Queen v Marks; Ex parte Australian Building Construction Employees and Builders Labourers' Federation [1981] HCA 33; (1981) 147 CLR 471 at 485 per Mason J. In my view any requirement to accord natural justice at the original hearing was implicitly excluded under the statutory scheme for review to which I have referred, including s 43(1) of the AAT Act, from being a relevant consideration in determining the matter on the merits at the later hearing before the AAT. Put another way that consideration, of its nature, was extraneous to the power conferred and exercised by the AAT under s 43(1)(c)(ii) in the present case.
CONCLUSION
Otter has succeeded on its appeal. However its success should not be taken as offering any encouragement to the ASC not to consult with or seek submissions from parties who may be adversely affected by a decision it is proposing to make in the exercise of its power under ss 728 or 730. Whilst such parties may have a right to a rehearing before the AAT, substantial harm can occur not just to those parties, but to the public, in the interim period. Being aware of Burdekin's acquisition of a 4.99 per cent interest in Allstate in a market from which Beaconsfield and Otter were excluded in the short term, it was clearly unwise of the ASC not to inform Burdekin of Otter's application. That is particularly so in light of the fact that although the first modification was granted in accordance with published ASC policy there was no provision in that policy for a second modification in the event that the beneficiary of the first modification failed to obtain the full benefit of it. However, in making these observations I am not saying that the ASC was under a duty to afford Burdekin an opportunity to be heard in relation to the second modification. That issue is a vexed and difficult question upon which it has not been necessary to express a view for the purpose of determining the present case; cf Calvin v Carr [1979] UKPC 1; [1980] AC 574.
Otter has established that the AAT erred in law in exercising its power and is entitled to an order that its appeal be allowed, the decision of the AAT be set aside and the matter be remitted to the AAT to be heard and determined in accordance with law. The further hearing and determination of Otter's application is a matter for the AAT. As Otter has succeeded on its appeal it is appropriate that Beaconsfield and Burdekin pay Otter's taxed costs of the appeal. No order should be made as to the costs of the ASC.
|
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice
Merkel |
Associate:
Dated: 5 November 1997
|
Counsel for the Applicant: | Mr S Rares SC with Mr C Maxwell |
| Solicitor for the Applicant: | Mallesons Stephen Jaques |
| Counsel for the First Respondent: | Mr N O'Bryan |
| Solicitor for the First Respondent: | Australian Securities Commission |
| Counsel for the Second Respondent |
Mr T J P Walker |
| Solicitor for the Second Respondent | Freehill Hollingdale & Page |
| Counsel for the Third and Fourth Respondents | Mr S M Anderson |
| Solicitor for the Third and Fourth Respondents | Clayton Utz |
| Date of Hearing: | 8 October 1997 |
| Date of Judgment: | 5 November 1997 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1997/1199.html