Eastern Field Developments Limited v Takeovers Panel

Case [2019] FCA 311

FEDERAL COURT OF AUSTRALIA

Eastern Field Developments Limited v Takeovers Panel [2019] FCA 311

File number: WAD 319 of 2018
Judge: MCKERRACHER J
Date of judgment: 8 March 2019
Catchwords:

CORPORATIONS – application for judicial review of a decision of the Takeovers Panel – where the Review Panel affirmed the Initial Panel’s decision of unacceptable circumstances, but reversed the permanent cancellation of the acceptance of the takeover bid – whether there was jurisdictional error in the Review Panel’s decision pursuant to s 5 of the ADJR Act – whether the Review Panel’s orders ought to be substituted with those of the Initial Panel – no jurisdictional error on the part of the Review Panel

Held:  application dismissed

Legislation:

Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 5, 5(2)(g), 5(1)(h)

Australian Securities and Investments Commission Act 2001 (Cth) ss 1(2)(a), 1(2)(b), 184, 184(1), 184(2), 184(4), 195

Australian Securities Commission Act 1989 (Cth) Pt 10

Companies (Acquisition Shares) Act 1980 (Cth) ss  11, 45, 60

Corporate Law Economic Reform Program Act 1999 (Cth)

Corporations Act 2001 (Cth) ss 5B, 9, 602, 602A, 606, 623, 624(2), 655A, 655A(1)(b), 656A, 657A, 657A(1), 657B, 657C, 657C(2), 657D, 657D(1), 657D(2), 657D(2)(a), 657D(2)(b), 657EA, 657EA(1), 657EA(1)(a), 657EA(4), 659B(1), 662A, 673, 1324B, Ch 6

Corporations Amendment (Takeovers) Act 2007 (Cth)

Australian Securities and Investments Commission Regulations 2001 (Cth) regs 13, 16(2)
Cases cited:

Commissioner for ACT Revenue v Alphaone Pty Ltd (1994) 49 FCR 576

Finders Resources Limited [2018] ATP 6

Finders Resources Limited 02 [2018] ATP 9

Finders Resources Limited 03R [2018] ATP 11

Glencore International AG v Takeovers Panel (2005) 220 ALR 495

Glencore International AG (ACN 114 271 055) v Takeovers Panel [2006] FCA 274

Hneidi v Minister for Immigration and Citizenship (2010) 182 FCR 20

Kioa v West (1985) 159 CLR 550

Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24

Minister for Immigration and Citizenship v Li (2013) 249 CLR 332

In the matter of Summit Resources Limited [2007] ATP 09

SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152

SZQJH v Minister for Immigration and Border Protection [2013] FCAFC 147

Telstra Corporation Limited v Kendall (1995) 55 FCR 221

The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13

Date of hearing: 23-24 October 2018
Registry: Western Australia
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 187
Counsel for the Applicant: Mr SK Dharmananda SC with Mr TC Russell
Solicitor for the Applicant: Johnson Winter & Slattery
Counsel for the First Respondent: Mr A Bulman
Solicitor for the First Respondent: Australian Government Solicitor
Counsel for the Second Respondent: Mr JP Moore QC with Mr BC Gauntlett
Solicitor for the Second Respondent: King & Wood Mallesons
Solicitor for the Third Respondent: The Third Respondent submits to any order of the Court, save as to the question of costs
Counsel for the Fourth and Fifth Respondents: The Fourth and Fifth Respondents did…

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AGLC
Eastern Field Developments Limited v Takeovers Panel [2019] FCA 311
Case
[2019] FCA 311
Decision Date

CaseChat Overview and Summary

Eastern Field Developments Limited sought judicial review of a decision of the Takeovers Panel, which had affirmed the Initial Panel's decision of unacceptable circumstances but reversed the permanent cancellation of the acceptance of the takeover bid. The primary issue was whether there was a jurisdictional error in the Review Panel's decision under section 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth). The court considered whether the Review Panel correctly exercised its discretion in awarding relief and whether its decision not to cancel Taurus' acceptance was unreasonable.

The Federal Court held that the Review Panel's decision did not involve any jurisdictional error. The court found that the Review Panel's determination that Eastern Field had not relied on Taurus' non-acceptance statements, except in relation to the financing arrangements, was legally rational and reasonable. The Review Panel exercised its discretion to make orders that were appropriate and not unduly prejudicial, considering the unacceptable circumstances that had the effect of preventing an efficient, competitive, and informed market. The court further held that the Review Panel's decision not to cancel Taurus' acceptance was not unreasonable and did not amount to an abuse of power.

The application for judicial review was dismissed with costs. The court held that the Review Panel's decision was consistent with its statutory obligations and did not proceed on a misconstruction of the statutory regime. The Review Panel's orders, which provided for a deferral of Eastern Field's payment obligations in relation to the acceptance by Taurus, did not constitute a prohibited collateral benefit under section 623 of the Corporations Act 2001 (Cth).

Orders

Orders of the court

1. The application be dismissed.

2. The applicant pay the costs of the respondents, to be assessed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

In relation to s 5(1)(h) of the ADJR Act, as will be apparent from the examination of s 5 as a whole, subs (h) is affected by s 5(3), which provides that subs (h) shall not be taken to be made out unless, relevantly, there is no evidence from which a decision-maker could reasonably be satisfied that a matter required by law to be established is established or where the decision-maker bases his or her decision upon a particular fact and that fact does not exist, that is, there is no evidence of this fact. A decision-maker can, in the absence of some statutory constraint, act on material that would not be evidence in accordance with the usual rules. Subsection (h) is consistent with this prospect. BACKGROUND FACTS AND CHRONOLOGY Eastern Field is incorporated in the British Virgin Islands with a Singapore registered address. The shares in Eastern Field are held by a consortium of three members. Eastern Field is the bidder under an off-market takeover offer for shares in Finders. Finders is an Australian Stock Exchange (ASX) listed company (ASX: FND) which operates the Wetar Copper Project located on Wetar Island in the province of Maluku, Indonesia. The offer under Eastern Field’s bid was made pursuant to a replacement bidder’s statement dated 17 November 2017, which was lodged with ASIC on the same date. The replacement bidder’s statement set out the terms of Eastern Field’s off-market takeover Offer for all of the ordinary shares in Finders at a price of $0.23 per share (the Takeover Bid). On 5 December 2017, Finders lodged a target’s statement with ASIC in respect of the Takeover Bid stating that the independent directors of Finders recommended that shareholders reject the Takeover Bid. On 7 December 2017, Finders published an ASX announcement in relation to the Takeover Bid, including the following statement (the Taurus Intention Statement):Taurus Funds Management Pty Ltd (“Taurus”) currently manages 87,339,525 Finders shares, being equal to 11.31% of the Finders shares currently on issue, making it the second largest Finders shareholder after the bidder consortium that owns Eastern Field. Taurus has notified Finders that it does not intend to accept the Offer at the Offer Price of $0.23 per Finders share in respect of the Finders shares that Taurus manages, on the basis that Taurus considers that the Offer Prices does not reflect the fair value of Finders shares. On 12, 13 and 15 December 2017, Finders published further ASX announcements in which statements were made repeating that Finders had received notification from Taurus that Taurus did not intend to accept the Takeover Bid. These ASX announcements referred to notifications from further shareholders in Finders that they did not intend to accept the Takeover Bid either. Following publication of Taurus’ Statements (including the first of them on 7 December 2017), Eastern Field says it took the following steps in reliance on the fact that Taurus (and others) would not accept the Takeover Bid: (a)on 12 December 2017, Eastern Field waived its 50% minimum acceptance condition in respect of the Takeover Bid; (b)on 13 December 2017, Eastern Field extended the offer period for the Takeover Bid to 19 January 2018;(c)on 10 January 2018, Eastern Field further extended the offer period for the Takeover Bid to 28 February 2018;(d)on or about 14 February 2018, Eastern Field declared the Takeover Bid wholly unconditional;(e)in late-February 2018, Eastern Field altered its financing arrangements by obtaining a $50 million bank facility from Standard Chartered Bank;(f)on 1 March 2018, by an earlier application to the Takeovers Panel by Eastern Field concerning disclosures in Finders’ target’s statement, Eastern Field sought orders, relevantly, releasing Taurus and other persons who had given non-acceptance statements from such statements, though the Takeovers Panel declined to conduct proceeding on this application (Finders Resources Limited [2018] ATP 6);(g)on 8 March 2018, Eastern Field further extended the offer period for the Takeover Bid to 23 March 2018;(h)on or about 12 March 2018, Eastern Field made a ‘no increase’ statement, stating that it would not increase the $0.23 per share consideration under the Takeover Bid; and (i)on 15 March 2018, Eastern Field further extended the offer period for the Takeover Bid to 30 March 2018.Taurus strenuously objects to the contention that there was ever any such reliance or any proven reliance. This is a central issue in the dispute.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Ground 3 cannot succeed. CONCLUSION The relief granted by the Review Panel did not ignore and was not inconsistent with its finding that the acceptance of the Takeover Bid by Taurus was part of the unacceptable circumstances. The finding was that the unacceptable circumstances had the effect that the acquisition of control of Finders did not take place in an efficient, competitive and informed market. The orders made were not inconsistent with that conclusion. A finding of unacceptable circumstances under s 657A of the Corporations Act does not automatically mandate that a particular order be made. It was for the Review Panel to exercise its wide discretion, as experts in the field, to make an appropriate order under s 657D(2) of the Corporations Act; an order that it was satisfied was appropriate and would not be unduly prejudicial. For the reasons stated above, the conclusions by the majority of the Review Panel that there was not reliance on the Taurus Intention Statement (save as to the financing arrangements) was a finding that the Review Panel was logically entitled to make and made in a manner which was legally rational and reasonable and did not proceed on a misconstruction of the statutory regime. No jurisdictional error has been established. The application must be dismissed with costs.

Ratio Decidendi

Legal Principle Established

The Substitute Orders of the Review Panel do not include any permanent cancellation of Taurus’ acceptance. The orders of the Review Panel provide for a deferral of Eastern Field’s payment obligations in relation to the acceptance by Taurus. Those orders, Eastern Field said in passing, effectively grant Taurus an indefinite put option which Eastern Field contends would be a prohibited collateral benefit under s 623 of the Corporations Act 2001 (Cth). The submission was not developed. The Review Panel reached its decision on a majority basis. The majority, according to Eastern Field:(a)did not consider and discharge their statutory task when it came to awarding the relevant relief;(b)failed to properly consider the prejudice to Eastern Field and the takeover process itself; and(c)imposed, without warrant, an evidential burden on Eastern Field, contrary to the established flexible practice of the Takeovers Panel generally.ISSUES The grounds for review, and their particulars, essentially raise four questions for determination:(1)Did the Review Panel correctly address the relevant requirements of s 657D(2) of the Corporations Act so as to award relief appropriate to protect Eastern Field’s rights and to ensure that the takeover bid proceeded in a way that it would have, absent the unacceptable circumstances?(2)Was the Review Panel’s decision not to cancel Taurus’ acceptance so unreasonable that no reasonable Takeovers Panel could have made it?(3)Did the Review Panel fail to take into account a relevant consideration, being the prejudice visited upon Eastern Field, by reason of an erroneous approach to the evidence required to show Eastern Field’s reliance, and a consequent erroneous finding that there was no reliance?(4)Was the Review Panel’s conclusion, that Eastern Field was not unfairly prejudiced by the orders, without basis or unreasonable?THE NATURE OF REVIEW The decisions of the Takeovers Panel are administrative in nature. As such, they are subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act). Section 5 of the ADJR Act stipulates the grounds of review which are, in essence, a reflection in summary form of the grounds on which administrative decisions are susceptible to challenge at common law: see the explanation from Mason J (as the Chief Justice then was) in Kioa v West (1985) 159 CLR 550 (at 576). It is fundamental to such challenges that they are not simply rehearings on their merits. Rather, they must be based on one or more of the grounds in s 5 of the ADJR Act, namely the following:5 Applications for review of decisions(1)A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Circuit Court for an order of review in respect of the decision on any one or more of the following grounds:(a)that a breach of the rules of natural justice occurred in connection with the making of the decision;(b)that procedures that were required by law to be observed in connection with the making of the decision were not observed;(c)that the person who purported to make the decision did not have jurisdiction to make the decision;(d)that the decision was not authorized by the enactment in pursuance of which it was purported to be made;(e)that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;(f)that the decision involved an error of law, whether or not the error appears on the record of the decision;(g)that the decision was induced or affected by fraud;(h)that there was no evidence or other material to justify the making of the decision;(j)that the decision was otherwise contrary to law.(2)The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:(a)taking an irrelevant consideration into account in the exercise of a power;(b)failing to take a relevant consideration into account in the exercise of a power;(c)an exercise of a power for a purpose other than a purpose for which the power is conferred;(d)an exercise of a discretionary power in bad faith;(e)an exercise of a personal discretionary power at the direction or behest of another person;(f)an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;(g)an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;(h)an exercise of a power in such a way that the result of the exercise of the power is uncertain; and(j)any other exercise of a power in a way that constitutes abuse of the power.(3)The ground specified in paragraph (1)(h) shall not be taken to be made out unless:(a)the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or(b)the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.