Cemex Australia Pty Ltd v Takeovers Panel - [2009] FCAFC 78

FEDERAL COURT OF AUSTRALIA
Cemex Australia Pty Ltd v Takeovers Panel [2009] FCAFC 78
CORPORATIONS – application for review of declaration of unacceptable circumstances and orders made by Takeovers Panel – whether Panel bound to consider whether conduct amounted to a contravention of the Corporations Act 2001 (Cth) – whether Panel erred in construction of bidder’s statement and later documents – whether there was evidence before the Panel to justify a finding that the market was misinformed – whether Panel could make orders affecting group of shareholders in absence of evidence as to individual loss by shareholders – whether orders involved an impermissible delegation of power to the Australian Securities and Investment Commission – appeal dismissed.
Australian Securities and Investment Commission Act 2001 (Cth), s 11(2)(a)
Corporations Act 2001 (Cth), ss 602, 657A, 657D, 670A, 1041H
Corporations Amendment (Takeovers) Act 2007 (Cth)
Attorney-General (Cth) v Alinta LtdLimited (2008) 233 CLR 542 followed
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 referred to
Australian Pipeline Ltd v Alinta Ltd (2006) 237 ALR 158 referred to
Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301 referred to
Australian Retailers Association v Reserve Bank of Australia (2005) 148 FCR 446 referred to
Australian Securities and Investments Commission v Edensor Nominees Pty Limited (2001) 204 CLR 559 referred to
Australian Securities and Investments Commission v Yandal Gold Pty Ltd (1999) 32 ACSR 317 referred to
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 referred to
Ex parte Forster; Re University of Sydney [1963] SR (NSW) 723 referred to
Federal Commissioner of Taxation v St Helens (ACT) Pty Ltd (1981) 146 CLR 336 referred to
Glencore International AG v Takeovers Panel (2006) 151 FCR 77 referred to
Marks v GIO AustraliaHoldings Ltd (1998) 196 CLR 494 referred to
Minister for Aboriginal Affairs v Peko Wallsend Ltd (1986) 162 CLR 24 referred to
Re Reference under Section 11 ofthe Ombudsman Act 1976 for an Advisory Opinion; Ex parte Director-General of Social Services (1979) 2 ALD 86 referred to
Explanatory Memorandum to the Corporate Law Economic Reform Program Bill 2008 (Cth)
Aronson, Dyer and Groves, Judicial Review of Administrative Action (4^th Ed, 2009)
CEMEX AUSTRALIA PTY LTD (ACN 122 401 405) v SIMON MCKEON, ELIZABETH ALEXANDER AND JOHN O'SULLIVAN IN THEIR CAPACITY AS MEMBERS OF THE TAKEOVERS PANEL and AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
NSD 1764 OF 2008
RYAN, JACOBSON AND FOSTER JJ
30 JUNE 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1764 OF 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

CEMEX AUSTRALIA PTY LTD (ACN 122 401 405)
Appellant

AND:

SIMON MCKEON, ELIZABETH ALEXANDER AND JOHN O'SULLIVAN IN THEIR CAPACITY AS MEMBERS OF THE TAKEOVERS PANEL
First Respondent

AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION
Second Respondent

JUDGES:

RYAN, JACOBSON AND FOSTER JJ

DATE OF ORDER:

30 JUNE 2009

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellant pay the costs of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] FCAFC 78
Decision Date: 30 June 2009

CaseChat Overview and Summary

In the matter of Cemex Australia Pty Ltd v Takeovers Panel, the dispute arose from a decision made by the Takeovers Panel regarding unacceptable circumstances in relation to Cemex's actions affecting the company Rinker. The appeal was brought before the court to review the Panel's decision on several grounds, including the Panel's authority to make certain declarations and the adequacy of the evidence supporting its findings. The court was tasked with determining whether the Panel's decisions were legally sound, particularly in terms of its reliance on expert judgment and the sufficiency of the evidence presented.

The central legal issues before the court included whether the Panel's declarations and orders were an impermissible delegation of power to ASIC and whether there was sufficient evidence to support the Panel's findings regarding Cemex's actions. The court had to assess the extent to which the Panel could rely on its expertise to make judgments about market effects and whether these judgments were supported by the evidence. The court also needed to determine if the Panel's findings were reasonable and if the Panel's process was in line with statutory requirements.

The court found that the Panel's declarations and orders were not an impermissible delegation of power to ASIC, as ASIC did not step into the shoes of the Panel to exercise the power. The court affirmed the Panel's authority to make judgments based on its expertise and concluded that the Panel's findings were supported by the evidence, particularly considering the speculative nature of determining market effects. The court held that the Panel's process was consistent with statutory requirements and that the evidence was adequate to support the Panel's conclusions about the impact of Cemex's actions on the market and control of Rinker.

The appeal was dismissed, and Cemex was ordered to pay ASIC's costs of the appeal. The court did not make any orders regarding the Panel's costs, considering the submissions from both sides. The ratio of the decision emphasized the Panel's authority to declare unacceptable circumstances based on its expert judgment and the statutory framework provided by sections 602 and 657A of the relevant Act.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the costs of the second respondent.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Thus, the question before the Panel was not merely one of the construction of a document, or its terms. It was a question of fact, not a question of law: see Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 395. The primary judge was correct in coming to that conclusion.THIRD GROUND: THE “NO EVIDENCE” GROUND The primary judge did not deal with this ground, although it was raised below. CEMEX sought to review the Panel’s decision on the ground that there was no evidence or other material to justify it: see ADJR Act, s 5(1)(h). This was also said to amount to unreasonableness in the Wednesbury sense. The effect of CEMEX’s submissions on this ground of appeal was that there was no evidence to support the findings made by the Panel at [100]-[113] that CEMEX’s departure from its 10 April announcement had any causal effect on control of Rinker or upon the principle of informed markets stated in s 602. CEMEX submitted that the evidence was contrary to the findings made by the Panel. CEMEX relied, in particular, on the evidence of Mr Clarke which was said to show that the market was well informed of the possibility that CEMEX might permit shareholders to retain the benefit of the final dividend. Reference was also made to the article in “The Australian” newspaper mentioned in [60] above and to an analyst’s report of 27 April 2007. In Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 358, Mason CJ said that to enliven the ground of review under s 5(1)(h) of the ADJR Act, it is enough to show an absence of material from which the decision-maker could reasonably be satisfied that the particular matter was established. As Mason CJ observed at 358, this approach to the effect of s 5(1)(h) overcomes, to a limited extent, the restrictiveness of the “no evidence” ground at common law. The authorities were reviewed by Weinberg J in Australian Retailers Association v Reserve Bank of Australia (2005) 148 FCR 446 at [574] ff. In considering whether there was material from which the Panel could reasonably be satisfied of the effect on the market, and whether it had been misinformed, it is necessary to bear in mind the expertise of the Panel. We referred earlier to the role of the Panel and the commercial expertise of its members. As Emmett J said at first instance in Australian Pipeline Ltd v Alinta Ltd (2006) 237 ALR 158 at [148], the Panel must engage in speculation when it is endeavouring to determine what would have happened if relevant circumstances did not exist. He continued:-Having regard to the panel’s expertise, the making of a judgment as to whether potential bidders would be deterred, is not beyond the panel’s function as contemplated by s 657A(2)(a). Those observations apply equally to the expertise of the Panel to make a judgment as to the effect on the market. That is not to say that the Panel may, or did in the present case, engage in speculation without any foundation for its conclusion. In particular, there was evidence in the affidavit of Mr Clarke, to which the Panel referred at [102], that the Perpetual Group was one of the largest shareholders in Rinker and that it had indicated to CEMEX that it would accept the offer if, amongst other things, CEMEX permitted accepting shareholders to retain the final dividend.

Decision

Reasons for decision

RYAN, JACOBSON AND FOSTER JJ (dissent)

Accordingly, we reject the submission made by Mr Jackman that orders 14-16 are an impermissible delegation of power. This is not a case in which ASIC is a judge in its own cause. ASIC does not step into the shoes of the Panel to exercise the power conferred by s 657D(2)(a).CONCLUSION AND ORDERS For the reasons set out above, the appeal must be dismissed. CEMEX is to pay ASIC’s costs of the appeal. We have considered the submissions made by Mr Jackman and by Mr Bennett QC on behalf of the Panel. In our view, there should be no orders as to the Panel’s costs.

Ratio Decidendi

Legal Principle Established

Established by:

Section 657A states:-Declaration of unacceptable circumstances (1)The Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances to be unacceptable circumstances whether or not the circumstances constitute a contravention of a provision of this Act. (2)The Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel that the circumstances: (a)are unacceptable having regard to the effect that the Panel is satisfied the circumstances have had, are having, will have or are likely to have on: (i)the control, or potential control, of the company or another company; or (ii)the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; or (b)are otherwise unacceptable (whether in relation to the effect that the Panel is satisfied the circumstances have had, are having, will have or are likely to have in relation to the company or another company or in relation to securities of the company or another company) having regard to the purposes of this Chapter set out in section 602; or (c)are unacceptable because they: (i)constituted, constitute, will constitute or are likely to constitute a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C; or (ii)gave or give rise to, or will or are likely to give rise to, a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C. The Panel may only make a declaration under this subsection, or only decline to make a declaration under this subsection, if it considers that doing so is not against the public interest after taking into account any policy considerations that the Panel considers relevant. (3)In exercising its powers under this section, the Panel: (a)must have regard to: (i)the purposes of this Chapter set out in section 602; and (ii)the other provisions of this Chapter; and (iii)the rules made under section 658C; and (iv)the matters specified in regulations made for the purposes of paragraph 195(3)(c) of the ASIC Act; and (b) may have regard to any other matters it considers relevant. In having regard to the purpose set out in paragraph 602(c) in relation to an acquisition, or proposed acquisition, of a substantial interest in a company, body or scheme, the Panel must take into account the actions of the directors of the company or body or the responsible entity for a scheme (including actions that caused the acquisition or proposed acquisition not to proceed or contributed to it not proceeding). (4)The Panel must give an opportunity to make submissions in relation to the matter to: (a)each person to whom a proposed declaration relates; and (b)each party to the proceedings; and (c) ASIC. (5)The declaration must be in writing and published in the Gazette. (6)As soon as practicable, the Panel must give each person to whom the declaration relates: (a)a copy of the declaration; and (b)a written statement of the Panel's reasons for making the declaration. (7)This section does not require the Panel to perform a function, or exercise a power, in a particular way in a particular case.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1764 OF 2008

JUDGES:	RYAN, JACOBSON AND FOSTER JJ
DATE OF ORDER:	30 JUNE 2009
WHERE MADE:	SYDNEY