C P Ventures Pty Ltd v McKeon

[1999] FCA 1272

FEDERAL COURT OF AUSTRALIA

C P Ventures Pty Ltd v McKeon [1999] FCA 1272

CORPORATIONS LAW – takeovers – application by Australian Securities and Investments Commission (“the Commission”) to the Corporations and Securities Panel (“the Panel”) for a declaration that unacceptable circumstances had occurred – whether apprehended bias or perceived bias in relation to one of the sitting members of the Panel – whether that member invalidly appointed – whether her appointment should have been revoked – whether the Panel erred by refusing to expand its brief.

Administrative Decisions (Judicial Review) Act 1977 (Cth), s 5
Australian Securities and Investments Commission Act1989 (Cth), s 184(2), 185

Re Finance Sector Union of Australia; Ex parte Illaton Pty Ltd (1992) 66 ALJR 583 applied
Najjar v Haines (1991) 25 NSWLR 224 applied
Vakauta v Kelly (1989) 167 CLR 568 applied
Brooks v Upjohn (1998) 156 ALR 622 applied
Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 135 ALR 753 applied
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 cited

C P VENTURES PTY LTD v SIMON McKEON AS PRESIDENT OF THE CORPORATIONS AND SECURITIES PANEL and CORPORATIONS AND SECURITIES PANEL

W 83 of 1999

CARR J
13 SEPTEMBER 1999
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 83 OF 1999

BETWEEN:

C P VENTURES PTY LTD (ACN 006 306 565)
Applicant

AND:

SIMON McKEON AS PRESIDENT OF THE CORPORATIONS AND SECURITIES PANEL
First Respondent

CORPORATIONS AND SECURITIES PANEL
Second Respondent

JUDGE:

CARR J

DATE OF ORDER:

13 SEPTEMBER 1999

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.        The applicant pay the respondents’ costs of the application.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W 83 OF 1999

BETWEEN:

C P VENTURES PTY LTD (ACN 006 306 565)
Applicant

AND:

SIMON McKEON AS PRESIDENT OF THE CORPORATIONS AND SECURITIES PANEL
First Respondent

CORPORATIONS AND SECURITIES PANEL
Second Respondent

JUDGE:

CARR J

DATE:

13 SEPTEMBER 1999

PLACE:

PERTH

REASONS FOR JUDGMENT

Introduction

1. This application, filed on 23 August 1999, was given an expedited hearing on 8 September 1999. The applicant, C P Ventures Pty Ltd, applies pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the ADJR Act”) for an order of review of decisions made by the first respondent on 9 and “on and after” 20 August 1999 and a decision of the second respondent made on 20 August 1999. The first respondent, Mr Simon McKeon, is sued as the President of the second respondent, Corporations and Securities Panel (“the Panel”). The first decision challenged is Mr McKeon’s direction, under s 184(2) of the Australian Securities and Investments Commission Act1989 (Cth) (“the ASIC Act”), that Ms Alice McCleary be a sitting member on the Panel during the inquiry by it in relation to the acquisition by the applicant of shares in Wesfi Ltd (“Wesfi”) between 16 April 1999 and 28 June 1999. The second decision is his refusal to revoke that direction. The third decision under challenge is the Panel’s decision whereby, on the applicant’s case, the Panel is said to have refused to consider, as an issue forming part of its brief, what has been described as the “nature and extent of the relationship between Mr Dennis (sic) Cullity, the other directors of Wesfi and interests otherwise aligned with Cullity”.

   Factual Background

2. The applicant owns 19.62% of the ordinary shares on issue in Bristile Ltd (“Bristile”).  Mr Alan Newman is a director of both the applicant and Bristile.  On 1 April 1999 Bristile announced its intention to make a takeover offer, through its wholly-owned subsidiary Blend Investments Ltd (“Blend”), for all the issued shares in Wesfi.  Blend despatched its Part A statement and offer to the shareholders of Wesfi on 30 April 1999.  On 14 May 1999 Wesfi despatched its Part B statement to all its shareholders.  The offer, in summary, was for one share in Bristile and ten cents cash (increased to twenty-five cents on 26 May 1999) for each Wesfi share.  Between 16 April 1999 and 28 June 1999 the applicant acquired 1.9% of the issued share capital of Wesfi through purchases on the Australian Stock Exchange.  The applicant then sold those shares to Blend by accepting the takeover offer made by the latter.  The applicant has indicated that it proposes to acquire up to another 7% to 8% of the shares in Wesfi for the same purpose.

3. On 9 August 1999 the Australian Securities and Investments Commission (“the Commission”) applied, under s 733 of the Corporations Law, to the Panel for a declaration that unacceptable circumstances had occurred in relation to the acquisition and proposed acquisition of shares in Wesfi by the applicant and the conduct of the applicant in relation to shares in Wesfi. On the same date Mr McKeon, as Acting President of the Panel, directed that three persons, including Ms McCleary, would constitute the Panel in respect of the Commission’s application.

4. On 12 August 1999 the Panel notified the applicant’s solicitors that it had resolved to conduct an inquiry.  On 18 August 1999 the applicant’s solicitors caused searches to be made on the Internet for references to Ms McCleary.  Those searches disclosed that Ms McCleary was a consultant to Messrs PricewaterhouseCoopers (“PWC”).  The applicant’s solicitors were aware that PWC were the auditors of Wesfi and that a partner in PWC had provided to Wesfi an opinion for inclusion in its Part B statement and an expert report for use in proceedings commenced by Wesfi on 14 April 1999 in the Supreme Court of Western Australia to restrain the despatch by Blend of its Part A statement.  On the same date, 18 August 1999, the applicant’s solicitors wrote to the Panel advising it of those circumstances and asking it to enquire whether Ms McCleary was still a consultant to PWC.  On 19 August 1999, by letter of that date, the Panel’s solicitors responded by stating that their instructions were that Ms McCleary was still a consultant to PWC and in that role gave taxation advice in relation to specific matters to Adelaide-based clients.  On 20 August 1999 the applicant’s solicitors wrote to the Panel’s solicitors objecting, on their client’s behalf, to Ms McCleary being a member of the Panel and requesting that, on the basis of the alleged conflict of interest, she take no further part in the exercise of the Panel’s powers.  By a letter dated 20 August 1999 the solicitors for the Panel informed the applicant’s solicitors that “the Panel” did not consider that there was any proper ground of objection to Ms McCleary continuing as a member of it. 

5. The applicant’s solicitors’ letter of 18 August 1999 to the Panel raised a number of matters.  One such matter was a contention that a “key issue” to be considered in the inquiry was the nature of the association or relationship between the interests associated with Mr Denis Cullity, the other directors of Wesfi and interests said to be otherwise aligned with Mr Cullity.  It was asserted in the letter that the applicant could not make proper submissions to the Panel without it [the Panel] enquiring into and determining the nature of the relationship and connection between those interests.  The applicant sought an extension of the time for making its submissions to the Panel.  The Panel was asked to give notice of the inquiry to Mr Cullity, the directors and the other persons requiring them to lodge evidence and documents with the Panel.  The Panel was also asked to expand the scope of its brief to include an inquiry into the nature of the association or relationship between the shareholding interests in Wesfi associated or otherwise aligned with Mr Denis Cullity.  The response of the solicitors for the Panel (in their letter dated 19 August 1999), contained the following relevant passages:

   “The Panel does not accept your contentions in relation to the issues identified in the Brief.

   The Panel proposes to proceed with its enquiry on the basis of the issues presently identified in the Brief. It follows that the Panel does not grant an extension of time pursuant to regulation 16(1)(f) of the ASIC Regulations. If, following receipt of submissions, the Panel considers it appropriate to extend the scope of its enquiries, it has adequate power to do so. If this occurs, the Panel will necessarily consider the position of affected parties.”

6. I now turn, in sequence, to the respective grounds of review upon which the applicant relies for its challenge to the three decisions.

   The First and Second Decisions – Perceived Bias

7. The applicant does not assert actual bias on the part of Ms McCleary.  It claims that the appointment of Ms McCleary to sit as a member of the Panel and allowing her to remain as a sitting member of the Panel will give rise to a reasonable apprehension of bias.

   The Facts

8. Ms McCleary is a chartered accountant and a company director.  She has numerous statutory appointments, mainly in South Australia.  Her accounting career from 1982 can be traced through the respective Corporate Tax Divisions of Messrs Ernst & Whinney in Sydney (until 1984), Messrs Ernst and Young in Adelaide (between 1984 and 1990) and Messrs Coopers & Lybrand in Adelaide (from 1990 to 1997).  Ms McCleary was a partner in Coopers & Lybrand in Adelaide from 1993 to 1997.  In December 1997 she resigned from that partnership to pursue a career as a professional independent director.  At the time of her resignation Ms McCleary was the partner in charge of the firm’s Corporate Tax Division.  However, Ms McCleary did not completely sever her relationship with Coopers & Lybrand.  Arrangements were made for Ms McCleary to provide her services as a consultant to that firm after 1 January 1998.  The arrangements were documented by a letter dated 21 November 1997 (“the Letter”) from Coopers & Lybrand to Ms McCleary and an agreement, dated the same date, made between Coopers & Lybrand and Inverton Pty Ltd (“Inverton”) as trustee of the M J Lawry Unit Trust (“the Agreement”).  Ms McCleary is married to Mr Michael Lawry.  Under the terms of the Agreement, Inverton was engaged to provide taxation advisory work for clients of Coopers & Lybrand as requested.  Those services were to be provided by Inverton’s employee, Ms McCleary, or another person acceptable to Coopers & Lybrand.  The Agreement provided for a retainer fee of $2,500 per month and payment at the rate of $120 per hour of client-chargeable advisory work.  Coopers & Lybrand agreed to provide to Inverton an office, office equipment, including computer access to their network and to all databases and programs necessary for the provision of taxation advice, secretarial support and access to the firm's library.  The Agreement required Coopers & Lybrand to provide a car parking space for Inverton at a specified car park in Adelaide for the use of its personnel. 

9. The Letter relevantly provided as follows:

   “YOUR RESIGNATION FROM THE FIRM

   1.  This letter is additional to a letter we are preparing on financial matters consequent on your resignation from the firm and arrangements we are discussing with Inverton Pty Limited to provide services as a consultant to the firm after 1 January 1998.

   2.This letter responds to some points raised in the proposal you prepared which are not covered in the above documentation.

   . . .

   5.We confirm that, during the currency of our agreement with Inverton Pty Limited acting as trustee of the M J Lawry Unit Trust:

   ·     You will be entitled to attend the firm’s tax conferences at the firm’s expense and other appropriate training if agreed with your Business Unit Leader;

   ·     You will continue to work with the firm in relation to practice development and will use your best endeavours to ensure that your Business Unit Leader and tax managers develop good working relationships with all existing and potential clients with whom you have a connection;

   ·     The firm will store your board papers.  They remain your property.  Where storage is off-site, they will be available to you on reasonable notice.  They will not be destroyed without your approval;

   ·     The firm will use its best endeavours to assist you to obtain board appointments by appropriate introductions and by including you in relevant entertainment and other client functions;

   ·     You will work with the firm to promote positive relationships with existing and potential clients and to enhance the representation of the firm in the community;

   ·     You will use your best endeavours as a board member (subject to your duties as a board member) to make relevant companies aware of the services the firm offers and to facilitate introductions where appropriate;

   ·     You will use best endeavours to make yourself available for practice development functions at which the firm desires your attendance.”

10. During the six month period ended 30 June 1998, Ms McCleary worked an average of about nine hours per week providing corporate tax consulting services to clients of Coopers & Lybrand.  On 1 July 1998 that firm amalgamated with Messrs Price Waterhouse to form the firm PricewaterhouseCoopers.  By an agreement dated 30 June 1998 (“the Second Agreement”) between Coopers & Lybrand, PWC and Inverton, the terms of the Agreement were expressed to have been “novated” so that PWC would be substituted for Coopers & Lybrand as a contracting party to the Agreement.  The Second Agreement was otherwise fairly short.  It provided that notwithstanding “such novation” all rights and obligations between Coopers & Lybrand and Inverton would remain in full force and effect subject to an increase of $5 in the hourly rate, and an amendment to what was in effect Ms McCleary’s title to “Consultant to PricewaterhouseCoopers” instead of “Consultant to Coopers & Lybrand”.

11. During the next six months (i.e. from 1 July 1998) Ms McCleary provided corporate tax consulting services to clients of PWC at an average rate of 3.7 hours per week plus 2.5 days in November and December 1998 giving speeches for that firm in Sydney, Brisbane and Melbourne.  The speeches related to Ms McCleary’s work on the Ralph Review of Business Taxation.  Ms McCleary spent seven days in March 1999 giving similar speeches for PWC in Perth, Sydney, Melbourne, Adelaide and Brisbane.  Apart from that work, the evidence shows a very significant decline, during the period January to July 1999, in the hours spent by Ms McCleary in providing corporate tax consulting services to the clients of PWC.  There were nine hours so spent in February 1999, twenty minutes spent in April 1999 and seven hours in May 1999, but no hours whatsoever in the months of January, June or July.  All of Ms McCleary’s corporate tax consulting was done in Adelaide.

12. There is in evidence an affidavit from Ms McCleary.  She was not cross-examined on that affidavit, nor were any other deponents to the three other affidavits which are in evidence.  The following is an extract from Ms McCleary’s affidavit:

    “13.  Since the Ralph Review, I have taken on the Chairmanship of Buslink Adelaide Pty Ltd, a consortium bidding for Adelaide bus contracts and have been heavily involved in preparing tender documents and the like for those bids.  I am now doing very little work for PricewaterhouseCoopers.  Occasionally I will do a specific tax advice matter which comes along, which is self contained and in which I have special expertise.  This happened earlier this month, for example, when I did some expert evidence work in relation to the tax implications of co-operatives.  However the work I now do as a consultant to PricewaterhouseCoopers is a tiny proportion of the work I do overall. 

    14.  My remuneration from PricewaterhouseCoopers is limited to the retainer set out in the consultancy agreement and the actual work I do for clients under the consultancy agreement.  I am paid at an hourly rate for that work.  Otherwise no component of my remuneration is related to my financial performance under the consultancy agreement or to firm profits or to any factor other than the time I spent on the specific matters I undertake for the firm’s clients.  I have no financial connection with Price waterhouseCoopers other than under my consultancy arrangement.

    . . .

    25.  . . . I have not had, and do not have, a connection with any of the affected parties to this enquiry.

    26.  The handover of all my former major clients had essentially occurred by the end of March 1998 and with the exception of one or perhaps two individual clients, had entirely occurred by the end of June 1998.  After this time, very little was done by either party in relation to the matters set out in the letter of 21 November 1997.  I had effectively no involvement in practice development and equally the firm did not materially assist me in relation to Board appointments.

    . . .

    30.  I have only been in the PricewaterhouseCoopers Perth office once and that was earlier this year following a breakfast speech I gave for Pricewater houseCoopers’ clients on the Ralph Review.  I had no contact with the audit division of the Perth firm. 

    . . .

    33.  I have never had any commercial or personal dealings with any of the parties to the case.  Indeed, I had never heard of any of the affected parties before Mr McKeon spoke to me as referred to in paragraph 7 hereof.  When I read the ASIC application I recognised the name Futuris and Alan Newman, neither of whom are named as affected parties.  I know of Futuris and Mr Newman only through press reports, and have never had any personal or professional dealings with them.”

13. Ms McCleary deposes to the fact that in early August 1999, prior to her involvement with the Panel, discussions commenced between her and PWC which resulted in a decision by that firm to end the consultancy arrangement in December this year.  Ms McCleary exhibits to her affidavit an e-mail message (expressed in the friendliest of terms) concerning that termination.  Ms McCleary swears, and I accept, that neither that e-mail message nor PWC’s decision to terminate her consultancy arrangement is related in any way to her involvement on the Panel.  However, I note from the e-mail message that it is likely that there will be an ongoing arrangement whereby Ms McCleary will assist the Adelaide office of PWC from 1 January 2000.

    My Reasoning

14. The applicant relies, to start with, upon the terms of the Letter, the Agreement and the Second Agreement as showing a continuing relationship between Ms McCleary on the one hand and PWC on the other.  In particular, it refers to the mutual obligations in the Letter which I have set out above, the significant retainer fee and the provision of support services and facilities referred to in the Agreement, as renewed by the Second Agreement.

15. The respondent submits that the obligations contained in the Letter came to an end in July 1998 when Coopers & Lybrand ceased to exist.  I was referred to clause 18 of the Agreement which is an “entire agreement” clause.  The applicant, in turn, referred me to paragraph 20 of Ms McCleary’s affidavit from which it contended that Ms McCleary regards the previous arrangements, documented by the Letter, as continuing with PWC.  It is not necessary for me to decide the legal technicalities of that matter.  I am satisfied, on the evidence, that the consultancy arrangements originally made between Ms McCleary and Coopers & Lybrand have been continued in practice in much the same manner with PWC.  However, I am also satisfied, and so find, that the formal consultancy relationship has gradually lessened in strength to a point where it is about to terminate.  So far as that relationship with PWC is concerned, it started with an average time commitment of nine hours per week, which was then reduced to just under four hours per week during the next six month period and in the six months ended 31 July 1999 amounted only (on average) to 0.6 hours per week plus the seven days of speeches in March.  I take into account that this gradual process has extended to the point where the consultancy is to be terminated for reasons unconnected with Ms McCleary’s involvement with the Panel.  I have not overlooked the retainer.  By general community standards, a retainer of $30,000 per annum might well be regarded as a handsome one.  I infer, for the purposes of this decision, that such a retainer would probably be regarded in commercial circles as significant, and that Ms McCleary would so regard it.  It is a factor which I weigh in the balance in assessing the connection between Ms McCleary and PWC.  I take into account also the likelihood of some, perhaps less formal, arrangement being entered into under which Ms McCleary may assist the Adelaide office of PWC.

1. The next step in the applicant’s argument is to link the interests of PWC with the interests of Wesfi.  First, this is done by pointing to Ms McCleary’s obligations as expressed in the Letter, and in particular to work with PWC to promote positive relationships with existing and potential clients and to enhance the reputation of that firm in the community. 

2. The applicant refers to the fact that PWC are the auditors of Wesfi and are thus said to be clients within the scope of that obligation.  I reject that part of the applicant’s submissions for two reasons.  First, the obligation is expressed in terms of “work[ing] with the firm to promote …”.  This obligation suggests a co-operative endeavour rather than an individual obligation.  Secondly, if it does impose an individual free-standing obligation, I do not think that, by any stretch of the imagination, it would be construed as extending to apply to Ms McCleary’s duties as a member of the Panel.  The obligation is expressed to apply to “… all existing and potential clients with whom you have a connection” (emphasis added).  The obligation clearly does not apply indiscriminately to all clients of PWC.  Ms McCleary has never had any connection with Wesfi or the Wesfi interests.  Sitting on the Panel in this matter would not, in my opinion, amount to “a connection”.  If it did, I very much doubt whether the obligation would be legally enforceable.  I appreciate that, in this area, legal enforceability would not, on its own, determine the question.  In my view, the obligations expressed in the Letter, as a matter of construction, have no legal impact on the manner in which Ms McCleary is to conduct herself as a member of the Panel.  Nor could it be said, realistically speaking, to impose a commercial obligation upon her in carrying out that statutory function.  The same applies to the obligations expressed in the other paragraphs of the Letter upon which the applicant relies.

3. The applicant also relies upon the fact that Mr Wayne Lonergan, a partner of PWC, has provided opinions to Wesfi for the purposes of proceedings between Wesfi and Blend in the Supreme Court of Western Australia and also for inclusion in Wesfi’s Part B statement. 

4. Ms McCleary’s evidence, in summary, is that she does not recall ever having met Mr Lonergan professionally or socially and that she has never had a client assignment with him.  There were over 300 partners of Coopers & Lybrand in Australia and she says that there are apparently now 450 partners of PWC in Australia which, so she deposes, makes it not surprising that she had not had any contact with him particularly as he appears to be a senior Sydney corporate finance partner and Ms McCleary was a young Adelaide tax partner.  Ms McCleary says that her only contact with PWC Perth in the past 18 months has been a few phone calls and e-mails from a tax partner relating solely to Ralph Review matters.  I refer also to paragraph 33 of her affidavit, which I have set out above to the effect that she has not had any commercial or personal dealings with any of the parties to the case.

5. The principles which I propose to apply to the factual circumstances of this matter are, I think, well-settled.  In Re Finance Sector Union of Australia; Ex parte Illaton Pty Ltd (1992) 66 ALJR 583 at 583 the High Court of Australia said this:

   “The central principle involved … is well settled.  It is that a judge or person obliged to act judicially in the discharge of the functions of a public tribunal should not sit to hear a matter if, in all the circumstances, a party or the public might entertain a reasonable apprehension that she or he might not bring an impartial and unprejudiced mind to the resolution of the question or questions in it (See, eg Livesey v New South Wales Bar Association (1982) 151 CLR 288 at 293-294; Re Polites; Ex parte Hoyts Corporation Pty Ltd (1991) 173 CLR 78 at 85.)

   The precise practical requirements of that principle vary from case to case.  They will be influenced by the nature, function and composition of the particular Tribunal.  Thus, the operation of the principle in a case such as the present where it is sought to prevent a member of the Commission from participating in the determination of particular proceedings is governed by a number of considerations relating to the nature and functions of the Commission, the prescribed or desirable formal qualifications and practical experience of those appointed to discharge those functions, the nature of the contest involved, and the Australian industrial environment.”

6. In Najjar v Haines (1991) 25 NSWLR 224 (a decision of the New South Wales Court of Appeal) Clarke JA at 240 said this:

   “In order to determine whether the circumstances of the relationship gave rise to the relevant apprehension it would be necessary to have regard to all aspects of the relationship.  The question being whether the fair minded by-stander, would, knowing the broad content of the relationship under consideration, reasonably apprehend bias.”

7. The authorities also show, in my view, that the fair minded bystander must be moderately informed, see Toohey J in Vakauta v Kelly (1989) 167 CLR 568 at 585 and Brooks v Upjohn (1998) 156 ALR 622 (a decision of a Full Court of this Court) at 631 and the cases there cited. Furthermore, as was noted in Brooks, Merkel J pointed out in Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 135 ALR 753 at 763, that there is:

   “… the requirement for a cogent and rational link between the association and its capacity to influence the decision to be made in the particular case.”

8. In my view, the fair-minded objective bystander should be regarded as having been given all of the factual information which I have set out above.  However, he or she should not be provided with such subjective matters as, for example, in this case, Ms McCleary’s own assessment (see paragraph 34 of her affidavit) that she will bring an impartial and unbiased mind to any issue which arise in her role on the Panel.

9. I have weighed up all the factual matters and I have reached a conclusion that a fair-minded objective bystander, armed with the information which I have summarised above, would not reasonably apprehend that Ms McCleary might not bring an impartial and unprejudiced mind to the resolution of the questions which the Panel has to decide. 

10. I have already set out above my assessment of the relationship between Ms McCleary and PWC.  Her consultancy work with that firm has reduced to almost nothing, though it is still the source of a useful cash flow by way of a retainer.  However, PWC is a very big firm and (apart from matters arising out of the Ralph Committee) Ms McCleary’s connection with it has, for many years, been confined to South Australia.  Ms McCleary has had no direct or relevantly indirect association or relationship with Wesfi or its officers.  She has never met any of the partners or staff of PWC who have provided services to Wesfi and nor has she had any contact with Wesfi or any of its directors.  The evidence does not show that Ms McCleary stands to gain or lose by anything decided by the Panel.  In any event, it is not Wesfi’s conduct which is to be scrutinised by the Panel.  It will be the applicant’s conduct which will be inquired into.  That factor has to be qualified by an appreciation that the Panel could make orders which those who oppose the proposed takeover might regard as being in their interests.  I accept the respondents’ submission that any orders made by the Panel may concern shares in Wesfi, but will not concern Wesfi as a legal entity, but there is still the qualification which I have just mentioned.  All in all, I do not think that the facts of this matter give rise to a reasonable apprehension of bias on the part of a fair-minded objective bystander.  The association claimed between Ms McCleary and the Wesfi interests is so tenuously indirect as hardly to warrant the description of an “association”.  If it can be described as an “association”, the tenuousness and indirect nature of it precludes a “cogent and rational link” to any capacity to influence Ms McCleary’s discharge of her duties on the Panel.

    The Requirements of the ASIC Act

11. The second aspect of bias raised by the applicant is that the procedures required by law to be observed in connection with the making of the relevant decision were not observed. Probably due to the fact that the applicant (by consent and with leave) amended and re-amended its originating application at the hearing, there is a possible ambiguity in relation to this particular challenge. That arises because the final version of the application identifies two decisions, namely the decision to appoint Ms McCleary to be a sitting member of the Panel and the decision refusing to revoke such appointment. The grounds of the application refer only to “the decision” i.e. in the singular. Nevertheless, I think it is clear from the re-amended application that the applicant challenges the decision to appoint Ms McCleary, on the basis of a breach of the rules of natural justice being the ground of perceived or apprehended bias (grounds 1.1 and 1.3 – which I have dealt with above) and improper exercise of power by failing to have regard to all relevant considerations (ground 1.4). I deal with ground 1.4 below. Ground 1.2 raises the question of observing procedures which are required by law to be observed in connection with making “the decision”. When the applicant re-amended that ground it deleted reference to s 185(1A) of the ASIC Act and inserted, instead, a specific reference to s 185(2) of that Act. That subsection is concerned not with making of a direction, but only with revocation of a direction by the President under s 184(2) about the membership of the Panel.

12. Section 185 provides:

    “185   Disclosure of interests by members

    (1)Where a member is, or is to be, a member of the Panel as constituted for the purposes of the performance or exercise of its functions or powers in relation to a particular matter and the member has or acquires any interest, pecuniary or otherwise, that could conflict with the proper performance of the member’s functions in relation to that matter:

    (a)the member must disclose the interest to the President and to the parties involved in the matter; and

    (b)except with the President’s consent, the member must not take part in the performance or exercise of the Panel’s functions or powers in relation to the matter.

    (1A)The President must not, under paragraph (1)(b), consent to a member taking part in the performance or exercise of the Panel’s functions or powers in relation to a matter unless the President believes, on reasonable grounds, that the member’s interest is immaterial or indirect and will not prevent the member from acting impartially in relation to the matter.

    (2)Where the President becomes aware that a member who is, or is to be, a member of the Panel as constituted for the purposes of the performance or exercise of its functions or powers in relation to a particular matter has in relation to that matter such an interest as is mentioned in subsection (1), then:

    (a)the President must revoke the direction given under subsection 184(2) in relation to the matter unless the President believes, on reasonable grounds, that the member’s interest is immaterial or indirect and will not prevent the member from acting impartially in relation to the matter; or

    (b)if the President is not required to revoke that direction under paragraph (a), the President must cause the member’s interest to be disclosed to the parties involved in the matter.

    (3)In this section:

    functions or powers means functions or powers of the Panel under a national scheme law of this jurisdiction.

13. The applicant complained (see paragraph 42 of its outline of submissions) that Mr McKeon as Acting President failed to comply fully with the requirements of s 185(2)(b) by failing to disclose promptly Ms McCleary’s “interest in PricewaterhouseCoopers” to the applicant other than in very general terms. At the hearing, this complaint was expanded. The applicant claimed that Mr McKeon had not paid any attention at all to s 185 and, in particular, had not in any way attempted to discharge his obligations under s 185(2)(b). Eventually (see pages 25 to 26 of the transcript), counsel for the applicant confirmed that it challenged Mr McKeon’s decision not to revoke the direction in the sense that he never made any decision under s 185 at all. I turn now to the facts.

14. The uncontradicted evidence from Ms McCleary and from Mr McKeon is that on 9 August 1999 i.e. before Ms McCleary’s appointment to the Panel, she disclosed the following to Mr McKeon:

    ·     that she had formerly been a tax partner of Coopers & Lybrand in their Adelaide office and now was a consultant to PWC;

    ·     that she had resigned from Coopers & Lybrand before the merger and had never been a partner in PWC;

    ·     that under her consultancy she received a retainer and was paid an hourly rate for work done for their clients, although in recent times that work had reduced to almost nil;

    ·     that she was provided by PWC with an office in Adelaide and computer equipment and secretarial assistance;

    ·     that she had spent very little time in PWC’s office in the last year; and

    ·     that she did not share in the profits of PWC.

15. Mr McKeon told Ms McCleary that there was a possibility of an inquiry involving a takeover bid for Wesfi by interests associated with Bristile.  He mentioned that a company called C P Ventures was also involved and that on the other side of the takeover were Wesfi and the Cullity family.  Ms McCleary told Mr McKeon that she did not have any connection with any of those parties and that she was not aware of any connection which PWC had with any of those parties.

16. I think it would be useful for me to pause at this point and give my opinion on whether, at this stage of the events, there had been compliance with s 185. In my view, there was such compliance. The member’s obligation under s 185(1) is to disclose any interest that “could conflict” with the proper performance of his or her functions in relation to “that matter”. There are, of course, varying degrees of likelihood inherent in the idea of something which “could conflict” in the requisite manner. In my view, s 185(1) is not concerned with remote possibilities. As a matter of general practice, it might be prudent for a decision-maker (whether a judge, a person who is obliged to act judicially or an administrative decision-maker) to make disclosure of circumstances amounting to even a remote possibility of conflict of interest. That is because those circumstances, when added to additional circumstances (perhaps being circumstances not known to the discloser), might show an interest which amounted to a reasonable possibility of conflict of interest. On 9 August 1999, Ms McCleary took that prudent course. What she disclosed did not, in my view, amount to more than a remote possibility of relevant conflict. It needed something more to be added to the state of knowledge of those concerned before the circumstances could be escalated to a reasonable possibility of conflict. That “something more” was, in my opinion, the fact that Wesfi was a client of PWC’s Perth office and that Mr Lonergan of PWC’s Sydney office had provided advice to Wesfi in the Supreme Court proceedings and in relation to its Part B statement. Mr McKeon swears (in paragraph 10 of his affidavit) that as at 9 August 1999 he did not know whether PWC had any involvement in the takeover, but considered that there was a real prospect that in one way or another it might have some connection. I accept that sworn evidence over the statement in Messrs Blake Dawson Waldron’s letter of 20 August 1999 that at the time of appointing Ms McCleary to the Panel he knew of PWC’s role in acting for Wesfi. I now turn to whether, when those additional circumstances were brought to the notice of the respondents, Mr McKeon was obliged under s 185(2) to revoke the appointment [which he made under s 184(2)] of Ms McCleary to the Panel.

17. Mr McKeon deposes in his affidavit to the fact that he has read a copy of the application for an order of review and other documents including the Agreement, the Letter, the Second Agreement and a document summarising the hours worked by Ms McCleary in providing consultancy services to PWC’s clients. Mr McKeon does not say when he read those documents, but it was obviously at some time between 9 August 1999 and 6 September 1999 (the latter being the date on which he swore his affidavit). Mr McKeon says that when he appointed Ms McCleary as a sitting member on the Panel he did not have copies of and did not consider the specific contractual documents between her and PWC. Mr McKeon swears that he expected provisions similar to the provisions in the Agreement to be in such a consultancy agreement. He also swears that he expected arrangements of the kind referred to in the Letter in such a consultancy arrangement. Finally, he swears that he did not consider that the provisions of the Agreement would influence Ms McCleary’s decision or that the requirements of the consultancy arrangements would affect her ability properly to perform her functions on the Panel, or give rise to any conflict of interest. He swears that if Ms McCleary had any interest as a result of her connection with PWC, that interest was both immaterial and indirect and would not prevent her from acting impartially. I agree with his assessment, essentially for much the same reasons which I have given for finding that there was no apprehended or perceived bias in either Ms McCleary’s appointment to the Panel or her continuing to be a sitting member of the Panel. I acknowledge that the common law test and what is provided statutorily in s 185(2) [and also in s 185(1A)] may not be exactly the same. For example, the fair-minded objective bystander of the common law test may be in a different position to the President who is likely to have special skills and knowledge. However, it is not necessary for me to decide the extent, if any, of such differences. On the basis of the evidence concerning what took place on 9 August 1999 and the evidence contained in Ms McCleary’s and Mr McKeon’s affidavits (which I have recited above) all of which I accept, I find that Mr McKeon was not under any obligation in terms of s 185(2) to revoke the direction given by him. However, by the letter dated 18 August 1999, sent to him by the applicant’s solicitors, Mr McKeon was made aware of the connection between PWC and Wesfi to which I have referred earlier in these reasons. At that point, in my view, the circumstances advanced to a stage where there was the reasonable possibility of a relevant conflict. In other words, a reasonable possibility which gave rise to the need to consider whether there was actual bias, apprehended or perceived bias, whether the interest was material, or direct, and would prevent Ms McCleary from acting impartially in relation to the matter. It is clear from Mr McKeon’s affidavit that he has now carried out that task. What he has not done, in terms of what s 185(2)(b) requires, is to cause Ms McCleary’s interest to be disclosed to the parties involved in the matter (the matter being the inquiry upon which the Panel has embarked). The applicant is one of “the parties involved in the matter”. However, it was the applicant which brought to the attention of the respondents the connection between PWC and Wesfi. Accordingly, so far as the applicant is concerned, Mr McKeon’s breach is not, in my view, sufficiently material as to require relief to be granted under s 16 of the ADJR Act, and I exercise my discretion against granting such relief. In doing so, I am conscious of the fact that there are other parties to the matter. There is no time specified in s 185(2)(b) by which the President is obliged to effect the relevant disclosure. However, given the tight timeframe which the ASIC Act imposes on all those concerned with a Panel inquiry, I think that such disclosure would normally be required forthwith upon the President, having become aware of the interest, deciding not to revoke the direction. I do not propose to make orders that he should now make such disclosure to the parties concerned. That is not what the applicant seeks. The applicant seeks revocation of Ms McCleary’s appointment. In my view, for the reasons set out above, it is not entitled to such an order.

    Failure to take relevant considerations into account

1. This ground is expressed in the following terms:

   “1.4   That [the first respondent] failed to have regard to all relevant considerations, namely:

   1.4.1    Ms McCleary’s former partnership with PWC;
              1.4.2    the terms of Ms McCleary’s consultancy with PWC;

   1.4.3the frequency and extent of contact of Ms McCleary with PWC.”

   In my view, this ground has not been made out. The relevant consideration which Mr McKeon was obliged to take into account was whether any interest which Ms McCleary had, either at the time of appointment or subsequently, was immaterial or indirect and would not prevent her from acting impartially in relation to the inquiry. The evidence quite clearly established that Mr McKeon did have regard to that consideration at the time of appointing Ms McCleary as a sitting member and that he re-considered that matter either late last month or early this month. At the time of the appointment, the evidence, which I have summarised above, shows that he did give consideration to Ms McCleary’s former partnership with Coopers & Lybrand (she was never a partner with PWC), her consultancy with PWC, the basic terms of her consultancy with PWC and the frequency and extent of her contact with PWC. By the time he was asked to revoke the appointment, Mr McKeon had the further documentation to which I have referred above. To establish this ground of review the applicant had to show that the making of the decisions (the appointment of Ms McCleary and the decision not to revoke) were improper exercises of power by failing to take a relevant consideration into account, see s 5(1)(e) when read with s 5(2)(b) of the ADJR Act. There is a difference between taking into account relevant considerations and taking into account particular pieces of evidence – Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24. In terms of judicial review of administrative decisions, I do not think that the applicant has made out its case.

   The Third Decision

2. The applicant complains that on 20 August 1999 the Panel refused to consider, as an issue forming part of its brief, the nature and extent of the relationship between Mr Denis Cullity, the other directors of Wesfi and interests otherwise aligned with Mr Cullity. 

3. To assist in understanding this complaint I shall, as briefly as possible, summarise the statutory and regulatory framework. Section 732 of the Corporations Law defines the expression “unacceptable circumstances”. In the present matter, one of the relevant circumstances is whether the applicant has acquired or proposes to acquire “a substantial interest” in Wesfi. Section 733 of the Corporations Law provides that where it appears to the Commission that unacceptable circumstances have or may have occurred in relation to an acquisition of shares in a company, or as a result of conduct engaged in by a person in relation to shares in a company, the Commission may apply to the Panel for a declaration that the acquisition was “an unacceptable acquisition” or the conduct was “unacceptable conduct”. The remaining subsections of s 733 limit the time by which the Panel may make such a declaration and require the Panel to give “each person to whom the declaration relates” an opportunity to make submissions to an inquiry conducted by the Panel in relation to the matter. If the Panel makes such a declaration, s 734 sets out the various orders which the Panel may make. The range of such orders is very wide – see s 734(2).

4. The Panel itself is constituted under the ASIC Act under which have been promulgated the Australian Securities and Investments Commission Regulations 1990 (“the ASIC Regulations”). Regulation 20 of the ASIC Regulations requires the Commission, as soon as practicable after having received an application to it from the Commission, to decide whether to hold an inquiry in relation to that application. If it decides to hold an inquiry, the Panel must prepare a brief setting out:

   “(i)a general description of the matters to be examined in the inquiry; and

   (ii)a summary of the grounds presented in the application for the making of a declaration or an order by the Panel; and

   (iii)the issues to be addressed in submissions to the inquiry.”

5. Regulations 21 to 43 deal with procedural matters in relation to an inquiry by the Panel.  Regulation 25 relates to the matter of submissions which may be made by a person to an inquiry.  Regulation 25(1)(b) relevantly provides that if the Panel has given to a person a copy of the brief, or a copy of part of the brief, then that person’s submissions must address the issues identified in the brief or that part of the brief.  Regulation 26 provides that the Panel may disregard any matter in a submission that is not in accordance with, relevantly, sub-regulation 25(1) and that the Panel must disregard any matter in a submission that is not relevant to the inquiry. Sections 187 to 201A of the ASIC Act govern the conduct of an inquiry by the Panel. Section 195(3) provides that the rules of procedural fairness, to the extent that they are not inconsistent with the provisions of the Act and the ASIC Regulations, apply to an inquiry.

6. The essence of the applicant’s case is that the Commission has applied to the Panel for a declaration in respect of the applicant’s acquisition and proposed acquisition of shares in Wesfi, that the Panel has decided to hold an inquiry and has, in accordance with the ASIC Regulations, sent to it a copy of the brief. It says further that by the letter dated 18 August 1999 sent by its solicitors to the President of the Panel it has complained, in the manner which I have summarised earlier in these reasons, that the issues stated in the brief are not wide enough and should be expanded to include the matters which it describes in that letter and which are the subject of this portion of the applicant’s complaint. That is, the nature and extent of the relationship between Mr Denis Cullity, the other directors of Wesfi and interests otherwise aligned with Mr Cullity.

7. The applicant contends that in order for the Panel to decide whether its acquisition or proposed acquisition of shares in Wesfi amounted or will amount to the acquisition of a “substantial interest” it is necessary for the Panel to consider the nature of the relationship between Mr Denis Cullity, (who is the chairman of Wesfi and holds approximately 39% of the issued share capital in it) and the interests associated with him, (who hold a further 14% of the issued share capital of Wesfi).  The applicant submits that, if this relationship is investigated and is found to exist, it will mean that Mr Cullity and associated interests as a matter of fact control Wesfi with 53% of the issued share capital.  In those circumstances, the applicant contends that it would be impossible for the acquisition by the applicant of any shares in Wesfi to constitute the acquisition of a “substantial interest” in the company.

8. The applicant has, in its written submissions, referred to several cases relevant to the question of what constitutes a “substantial interest”.  They include Elders IXL Ltd v National Companies and Securities Commission (1986) 4 ACLC 465, Brierley Investments Ltd v Australian Securities Commission (1997) 15 ACLC 1,341 and Otter Gold Mines Ltd v Australian Securities Commission & Ors (1997) 15 ACLC 1,732. I accept for the purposes of this decision, but without deciding, the applicant’s contention that the authorities establish that in the context of deciding whether there has been an acquisition of a “substantial interest”, substantiality refers to a relationship between the acquisition of the interest and voting control.

9. The applicant points to the requirement of Reg 25(1)(e) that a submission must contain sufficient information to permit a proper consideration by the Panel of the issues identified in the brief.  It contends that unless the Panel enlarges the scope of its inquiry it (the applicant) will not be able to make proper submissions to the Panel, that is, so the applicant submits, because the question of the nature and association of what it calls the “Cullity bloc” is not raised in the brief.  Another consequence which the applicant apprehends is that the Panel will be obliged, under reg 26, to disregard any of the applicant’s submissions on that question.

10. Furthermore, the applicant contends that unless the issues are so expanded, the Panel will fail to take into account all relevant considerations by failing to take into account the significance of the Cullity share interests in Wesfi. This will mean, so it is put, that the Panel will conduct an inquiry in contravention of s 195(3) of the ASIC Act and various regulations identified in ground 2.2 of its application.

    My reasoning

11. The respondents did not put in issue whether the third decision was one to which the ADJR Act applies, i.e. whether it was relevantly a decision under an enactment. I have some reservations about whether it was such a decision, but the parties made no submissions on the point, conducted the case on the basis that the ADJR Act applied to all of the decisions, and sought an expedited judgment. By proceeding to determine the application I am, of course, accepting that the ADJR Act applies to all three decisions. However, I have recorded my reservations in relation to the third decision.

12. I do not accept the applicant’s submission that the Panel has decided to limit its inquiries in the manner which the applicant suggests.  I think the applicant reads too much into the rejection, in the letter dated 19 August 1999 from the Panel’s solicitors to the applicant’s solicitors, of the contentions which the latter made in their letter of 18 August 1999.  In any event, in its solicitors’ letter the Panel states that it proposes to proceed with its inquiry on the basis of the issues presently identified in the brief.  Its position at the hearing of this application was that it is open to the applicant to make submissions in relation to the nature of the relationship and connection of all the shareholding interests associated with the shareholding held by Mr Cullity and, in particular, to submit that by reason of that relationship and connection (or circumstances including that relationship and connection) its acquisition of 1.9% of the shares in Wesfi would not be “substantial”.  The Panel contends that any such submission by the applicant would address the issues identified in the brief as required by Regulation 25(1)(b)(i).  The Panel’s position is that it is not necessary to expand the brief in order for the applicant to make those submissions, because that issue is already within the brief. 

13. In my view, the Panel’s brief is sufficiently wide to enable the applicant to make proper submissions on the question of the nature and extent of the relationship between Mr Denis Cullity, the other directors of Wesfi and interests otherwise aligned with Mr Cullity.  I accept the second respondent’s submission that that issue is already within the brief. 

14. In my opinion, this can be seen by reading the brief in conjunction with the formal application by the Commission to the Panel. 

15. Starting with the formal application itself, it can be seen from paragraph 2.8 and 2.9 of that document that the shareholding of Mr Cullity and the other directors of Wesfi and interests otherwise aligned with Mr Cullity are specified as at 1 April 1999 and 6 August 1999 respectively.  Paragraph 5.10 states:

    “For the purposes of CL s 732(1)(d), the Acquisition is the acquisition of the 1.9% shareholding in Wesfi by CPV. This acquisition would be “substantial” given the tightly poised position between the Cullity interests in Wesfi (39.5% rising to 53% with known supporters) and that of Bristile/Blend (approximately 39%) (as to which, see paragraph 2.9 above). In addition the proposed acquisition of Westfi (sic) shares permitted under the $        [a figure in respect of which confidentiality orders exist] expenditure limit of CPV is substantial.”

16. The brief relevantly identifies the issues to be address as follows:

    “ISSUES TO BE ADDRESSED IN SUBMISSIONS TO THE INQUIRY

    10.      Parties should address the following issues in their submissions to the Panel:

    (a)All matters referred to in the Application in relation to Wesfi, including but not limited to each of the matters referred to in paragraph 1.7(a)-(d) on page 3 of the Application.

    (b)In the case of all parties other than ASIC:

    (i)whether the facts stated in sections 3 and 4 of the Application are incorrect in any material respect; and

    (ii)whether there are any other material facts of which the Panel should be aware which may qualify those facts or place them in their proper context.

    . . .”

17. In my view, the references in the Application, which I have mentioned above include the significance or otherwise of what the applicant calls “the Cullity share interests in Wesfi”.  That matter, by being referred to in the Application is thus an issue forming part of the Panel’s brief.

18. The applicant contended that such a conclusion would be wrong because the Commission’s Application expressly incorporated by reference all the documents which were forwarded with the Application to the Panel (see paragraph 9 of the Application). Those documents would appear to run to over a thousand pages. The applicant suggested that it could not be the case that any issue raised in those annexed documents was to be regarded as an issue identified in the brief. I do not have to decide that question. It is sufficient for me to hold, as I do, that the matters referred to in the Application itself (as distinct from documents incorporated by reference into the Application) fall within clause 10(a) of the brief and thus are issues identified in the brief within the meaning of reg 25(1)(b) of the ASIC Regulations.

19. The applicant submitted that it would not be able to make a proper submission to the Panel unless the Cullity interests were required to produce the documents setting out the arrangements between themselves. Otherwise, so it was put, their submissions would be mere argument. I reject that submission. I do not think that the evidence before the Court establishes that contention. Furthermore, the ASIC Act and the Regulations contain provisions for the obtaining of such information or evidence either oral or in documentary form. See for example s 192 of the ASIC Act.

20. For the above reasons, I reject ground 2.1 of the application where it is alleged that the effect of the third decision (there referred to as the second decision) is a breach of natural justice.  The applicant, by its counsel, acknowledged that grounds 2.2 and 2.3 did not take its case any further than as advanced under ground 2.1.

    Conclusion

21. For the foregoing reasons the application will be dismissed with costs.

I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment of Justice Carr .

Associate:

Dated:             13 September 1999

Counsel for the Applicant:	Mr M L Bennet
Solicitor for the Applicant:	Bennet & Co
Counsel for the Respondents:	Mr R L Le Miere QC with him Mr A C Willinge
Solicitor for the Respondents:	Blake Dawson Waldron
Date of Hearing:	8 September 1999
Date of Judgment:	13 September 1999