Kazakhstan Potash Corporation Limited and Australian Securities and Investments Commission (Freedom of information)
[2019] AATA 5035
•26 November 2019
Kazakhstan Potash Corporation Limited and Australian Securities and Investments Commission (Freedom of information) [2019] AATA 5035 (26 November 2019)
Division:FREEDOM OF INFORMATION DIVISION
File Number: 2016/6931
Re:Kazakhstan Potash Corporation Limited
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
Ben Butler
OTHER PARTY
DECISION
Tribunal:Deputy President S A Forgie
Date of decision: 26 November 2019
Place:Melbourne
The Tribunal decides to affirm the decision of the Australian Information Commissioner dated 25 November 2016 that the Statement of Concerns issued by the respondent to the applicant and dated 19 December 2013 is not conditionally exempt under s 47G(1)(a) of the Freedom of Information Act 1982.
.................[sgd].....................................................
Deputy President S A Forgie
Catchwords
FREEDOM OF INFORMATION – whether document is conditionally exempt under s 47G(1)(a) of the Freedom of Information Act 1982 – whether disclosure would unreasonably affect lawful business, commercial or financial affairs – disclosure not unreasonable – public interest not considered – document not conditionally exempt –decision affirmed
Legislation
Freedom of Information Act 1982 s 47G(1)(a)
Corporations Act 2001 Part 6D
Cases
Attorney-General’s Department and Another v Cockcroft [1986] FCA 35; (1986) 10 FCR 180; 64 ALR 97; (1986) 12 ALD 468
Corrs Pavey Whiting & Byrne v Collector of Customs [1987] FCA 266; (1987) 14 FCR 434; 74 ALR 428; 13 ALD 254; 7 AAR 187
Director of Public Prosecutions v Smith [1991] VicRp 6; [1991] 1 VR 63; (1991) 100 FLR 6
McKinnon v Secretary, Department of Treasury [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516; 43 AAR 151; 80 ALJR 1549; 63 ATR 409
O’Sullivan v Farrer [1989] HCA 61; (1989) 168 CLR 210; 89 ALR 71; 64 ALJR 87
Re Bell and Secretary, Department of Health and Robert de Castella’s Smartstart for Kids Limited [2015] AATA 494
Re Mangan and The Treasury [2005] AATA 898
Re Prinn and Department of Defence [2016] AATA 445
Right to Life Association (NSW) Inc v Secretary, Department of Human Services and Health [1995] FCA 1060; (1995) 56 FCR 50; (1995) 128 ALR 238; 37 ALD 357
Sankey v Whitlam (1978) 142 CLR 1
Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 36 FCR 111; 108 ALR 163; 16 AAR 28
Secondary Material
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves: JORC Code 2012 Edition
Australian Securities Exchange, Listing Rules (19 December 2016)
Guidelines issued by the Australian Information Commissioner under s 93A of the Freedom of Information Act 1982
REASONS FOR DECISION
Deputy President S A Forgie
At all relevant times, Kazakhstan Potash Corporation Limited (KPC) was a publicly listed mineral exploration company. It had been focused on interests in Western Australia but had changed its focus to potash deposits in Kazakhstan. In order to raise funds, it offered to sell up to 30 million shares at the offer price of $1.80. The offer was set out in its prospectus dated 12 December 2013. This case centres on a Statement of Concerns dated 19 December 2013 and issued by the Australian Securities and Investments Commission (ASIC) in relation to that prospectus. Together with other documents, Mr Ben Butler sought access to that Statement of Concerns in a request made under the Freedom of Information Act 1982 (FOI Act) to ASIC dated 6 October 2014. I am concerned only with the Statement of Concerns. After consulting with KPC as it was required to do under the FOI Act, ASIC decided on 12 February 2015 to refuse his request to have access to the Statement of Concerns.
Mr Butler applied to the Information Commissioner to review ASIC’s decision. On 25 November 2016, he set aside ASIC’s decision and substituted a decision that the Statement of Concerns was not exempt. KPC applied to this Tribunal for review of the Information Commissioner’s decision relying only on the conditional exemption under s 47G(1)(a). I have decided that it is not a conditionally exempt document under that provision and have affirmed the Information Commissioner’s decision. I now set out my reasons for reaching that decision.
BACKGROUND
At the time of the hearing, Mr Marco Marcou was the Executive Director and Secretary of KPC. He was principally responsible for its Australian operations but he was also responsible for its transactions in Kazakhstan in relation to the Zhilyanskoye and Chelkar Projects. In that latter role, he worked closely with the regulatory, legal, financial, engineering and political sectors in Kazakhstan. At the time of hearing Mr Marcou was the only person associated with KPC based in Australia. Others are based in Hong Kong, the People’s Republic of China (PRC) and Kazakhstan. In making the findings set out in this section of my reasons, I have relied on his written and oral evidence and have also relied on evidentiary material produced both by KPC and by Mr Butler.
Fortis Mining Limited
KPC was incorporated as a public company on 3 May 2010 and admitted to the Official List of the Australian Stock Exchange (ASX) on 13 December 2010. It is based in Melbourne. At that time, it was named Fortis Mining Limited (Fortis) and the official quotation of its shares commenced on 15 December 2010. Until March 2011, Fortis’s principal activities were exploration for gold and base metals in Western Australia.[1] In March 2011 and through its ownership of Ji’an Resources Investment Ltd (registered in Hong Kong) (Ji’an Resources), which owned Wiyot S.A. (registered in Panama), which owned Aktobe Tuz LLP (registered in Kazakhstan), Fortis entered into a legally binding Heads of Agreement to acquire a 95% economic interest in two potash projects in the Republic of Kazakhstan (Kazakhstan) operated by Batys Kali LLP. The other 5% was held by NC SEC Batys. Both were incorporated in Kazakhstan. Batys Kali LLP held the subsoil rights for the two potash projects.[2] The projects, which were to be acquired under the Heads of Agreement, were the Zhilyanskoye and Chelkar Projects. The activities under them were considerably different from the company’s activities in Western Australia.[3]
[1] Exhibit JP4: Tab 0 at 22
[2] Exhibit JP4: Tab 0 at 8
[3] Exhibit JP4: Tab 1 at 29
On the basis of Mr Marcou’s evidence, I find that:
(1)The Zhilyanskoye Project is situated in the Aktobe Province approximately ten kilometres south east of the city of Aktobe. Aktobe is a major industrial hub of north western Kazakhstan. KPC has a subsoil use contract of 88 square kilometres. It has access to infrastructure in the region including the Trans Russian railway that travels from Moscow to Alashankou of Xinjiang by way of Aktobe and Almaty.
(2)The Chelkar Project is situated approximately 98 kilometres south of Uralsk. KPC has a subsoil licence covering an area of 779 square kilometres. A partially sealed road provides access to the project. There are a number of small villages within the licence. Further development of the project requires an upgrade of existing infrastructure assets.
Fortis issued a prospectus dated 27 October 2011 relating to an issue of its shares. It issued a replacement prospectus dated 9 November 2011 for the purposes of satisfying Chapters 1 and 2 of the ASX Listing Rules and to satisfy ASX requirements for the re-listing of the company following a change in the nature and scale of its activities brought about by its acquisition of the two potash projects. The offer made in the prospectus was stated to be conditional upon shareholders’ approving the issue of the shares and the change in the scale and nature of the company’s activities.[4] A total of 35,000,000 shares were offered at an issue price of $1.00. At the top of the first substantive page of the replacement prospectus, the following statement was made:
“The ASX requires the Company to re-comply with Chapters 1 and 2 of the ASX Listing Rules. The Company will be suspended from Official Quotation from the time of the General Meeting of Shareholders referred to in this Prospectus until it has successfully re-complied with Chapters 1 and 2 of the ASX Listing Rules.
There is a risk that the Company may not be able to meet the ASX’s requirements for re-listing.”[5]
[4] Exhibit JP4: Tab 1 at Covering page
[5] Exhibit JP4: Tab 0
On 28 December 2011, Fortis made an ASX Announcement to the market referring to its replacement prospectus dated 9 November 2011 as amended by a Supplementary Prospectus dated 22 November 2011. The Supplementary Prospectus dated 22 November 2011 advised of the appointment of new directors of Fortis. ASIC requested Fortis to provide further detail regarding the interests and remuneration of the new directors as required by ss 711(2) and (3) of the Corporations Act 2001 (Corporations Act). On the evening of 23 December 2011, ASIC issued an interim order that no issues, sales or transfers of ordinary shares be made under the replacement prospectus dated 9 November 2011 as amended by the supplementary prospectus dated 22 November 2011 until Fortis had complied with its request and it had revoked the interim order. Fortis advised the market that it intended to lodge a further supplementary prospectus with ASIC including that information and would do so on 3 January 2012.[6] A draft of a further supplementary prospectus was lodged with ASIC on 10 January 2012 for review.[7]
[6] Exhibit JP3: Tab 8
[7] Exhibit JP3: Tab 0
On the previous day, 9 January 2012, Fortis advised the market that the vendors of the Zhilyanskoye Project and Chelkar project had taken arbitration proceedings in Kazakhstan against Ji’an Resources in order to seek to terminate the sale and purchase agreement. Fortis advised that these proceedings had arisen as a result of communications made by a former director of Ji’an Resources to the vendors.[8]
[8] Exhibit JP3: Tab 1
Fortis made a further ASX Announcement on 16 January 2012 referring to the prospectuses and the interim order made by ASIC on the prospectus. Fortis asked ASIC to adjourn a hearing in relation to that interim order. ASIC did so but also issued a second interim order that no issues, sales or transfers of ordinary shares be made under the prospectus until it had revoked the order. Fortis advised that the second interim order would allow the company further time within which to complete the second supplementary prospectus. It was working with ASIC to ensure that ASIC was satisfied with the information it had disclosed.[9]
[9] Exhibit JP3; Tab 3
In an ASX Announcement dated 20 March 2012, Fortis announced that, on 6 March 2012:
“… it had entered a conditional pricing agreement with New Standard Investments Limited to place up to 13 million ordinary shares in the capital of … [Fortis] to raise up to 13 million ordinary shares in the capital of … [Fortis] to raise up to $13 million (before expenses). The placement of those shares and the other sercurities outlined in the ASX announcement dated 6 March 2012, is subject to … [Fortis] shareholder approval. The meeting to approve that placement was originally scheduled to be held on 20 April, 2012 but now will be held later in the month.
In light of this fund raising initiative with New Standard Investments Limited, the … [Fortis] directors have decided not to proceed with the offer under the prospectus lodged with ASIC on 9 November, 2011. Application moneys totalling approximately $80,000 will be returned to applicants without interest.
… [Fortis] is in the process of determining its future funding requirements. On completion of that process, the directors will look to issue a new prospectus to reflect the revised capital requirements of … [Fortis] . The issue of the new prospectus will also be a step in having the suspension of … [Fortis’s] securities lifted.
In view of the above, the directors have decided to consent to ASIC issuing a final stop order in relation to the prospectus lodged with ASIC on 9 November 2011. ASIC had previously issued an interim stop order in relation to the prospectus late last year.”[10]
[10] Exhibit JP3; Tab 4
Kazakhstan Potash Corporation Limited
At some time between 20 March 2012 and 12 December 2013, Fortis changed its name to KPC. On 12 December 2013, KPC issued a prospectus inviting investors to apply for a total of up to 30,000,000 at an issue price of $1.80 per share with a view to raising up to $54 million. It is apparent from the Chairperson’s letter inviting prospective shareholders that the acquisition of the two potash projects had not yet been completed. She described the company as one that:
“… will hold substantial potash resources in Kazakhstan, through the acquisition of companies that hold the exploration and production rights to various potash deposits in Kazakhstan.
Following the completion of the Acquisition Transactions, the Company will have a 95% shareholding in Batys Kali LLP, which holds the subsoil rights for the Zhilanskoye Project and the Chelkar Project. …”[11] (emphasis added)
The letter also referred to KPC’s being “… currently in negotiations to acquire the Satimola Project. Subject to satisfactory terms being agreed, the Company is committed to proceeding with the acquisition.”[12]
[11] Exhibit JP4: Tab 0 at 8
[12] Exhibit JP4: Tab 0 at 8
On the basis of Mr Marcou’s evidence, I find that KPC was seeking to acquire ownership by acquiring a 100% shareholding in Satimola Limited (Satimola). Satbor LLP (Satbor) is a wholly owned subsidiary of Satimola. Satbor held the Satimola potash deposit in the Satimola Dome in western Kazakhstan (Satimola Project). The Satimola Dome lies approximately 40 kilometres east of the Ural Reiver and about 200 kilometres north of the Caspian Sea. It is 65 kilometres from the railhead at Inderbor, which has links to the railway system to the border between Kazakhstan and the PRC.
In its Statement of Facts and Contentions dated 19 May 2017, KPC acknowledged that ASIC had concerns that the offer under the prospectus would contravene s 728 of the Corporations Act.[13] On 19 December 2013, ASIC issued an interim stop order with respect to the prospectus preventing offers or issues of shares under the prospectus for a period of 21 days or until ASIC revoked the interim stop order, whichever was the earlier. ASIC gave KPC a Statement of Concerns with the interim stop order.
[13] Applicant’s Statement of Facts and Contentions dated19 May 2017 at [2.7]
On 20 December 2013, KPC issued a Market Update advising:
“On 19 December 2013, Kazakhstan Potash Corporation Limited (ASX:KPC) received an interim stop order from ASIC in relation to the prospectus dated 12 December 2013. The interim stop order from ASIC is a standard process in relation to questions of the prospectus by ASIC.
The issues raised by ASIC are now being addressed by the Company in consultation with its advisers with a view to resolution shortly, and with the lodgement of supplementary prospectus thereafter.”[14]
[14] Exhibit JP3: Tab 5
On the basis of Mr Marcou’s evidence, I find that, between 19 December 2013 and 28 January 2014, KPC’s solicitors were in discussions with ASIC. Following those discussions, KPC’s solicitors submitted a further prospectus to ASIC on 28 January 2014 to replace the first. It stated that it was a replacement prospectus for that dated 12 December 2103. The Chairperson’s letter was written in the same terms in that it described the acquisitions of KPC’s interests in the Zhilyuanskoye Project and the Chelkar Project as yet to be completed. Both the first prospectus issued on 12 December 2013 and the replacement prospectus began with a section headed “Important Information”. Both included tables setting out key dates and key offer details. The replacement prospectus included six additional points highlighting the differences between it and the first prospectus. The first key point concerned the Investment Overview in Section 3 of each prospectus. The point was made that the replacement prospectus now included:
“○ a general statement in respect of the financial position of each of Jian Resources, Wiyot and Aktobe Tuz;
○information as to the ownership and control of each of the Project Vendors;
○the respective percentage shareholdings of each of the Project Vendors post completion of the acquisition by KPC of the Zhilyanskoye and Chelkar Projects and the Offer (on a Full Subscription basis);
○a statement as to the risks associated with cross-jurisdictional ownership structure for the Zhilyanskoye and Chelkar Projects. This statement is also set out in Section 11.2;
○a list of the major Shareholders of the Company post completion of the Offer and their percentage shareholdings; and
○the matters of emphasis from the Investigating Accountant’s Report”[15]
[15] Exhibit JP3; Tab 10 at 4
Other key changes that had been made were, in summary, inclusion of a geologist’s report for the Zhilyanskoye and Chelkar projects and removal of a geologist’s report relating to the Satimola project. Three of the key changes related to financial matters including provision of non-recovery of $1.8 million against loans to former directors, the non-recovery of a non-secured loan of $9 million and the writing off of deferred expenses of $14.2 million. Additional information was included regarding the terms and conditions of a facility line, historical information in respect of Batys Kali and additional details regarding non-current liability in respect of convertible notes.
The replacement prospectus also contained further information regarding the projects in Kazakhstan. Both provided information under the headings “What are the projects in Kazakhstan?”, “What is the status of the Zhilyanskoye Project?” and “What is the status of the Chelkar Project?”. The replacement prospectus contained further information under the following headings: “Who are the vendors of the Zhilhyanskoye and Chelkar Projects?”, “How many Shares will the Project Vendors hold following the acquisition of the Zhilhyanskoye and Chelkar Projects?” and “Who are the directors of each entity in the proposed ownership structure of the Zhilhyanskoye and Chelkar Projects?”.[16] It also contained an Appendix to the Competent Person’s Report prepared by SRK Consulting that does not appear in the prospectus as issued in December 2013. The title to that Appendix refers to JORC Code 2012: Table 1 i.e. the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. The table is divided into Section 1 headed “Sampling Techniques and Data”, Section 2 headed “Reporting of Exploration Results” and Section 3 headed ‘Estimation and Reporting of Mineral Resources”. Each section was further divided into Criteria. Against each criterion was printed the JORC explanation and a Commentary.
[16] Exhibit JP3; Tab 10 at 10-12
On the basis of Mr Marcou’s statement, I find that KPC’s key objective is, and has been, to develop the Zhilanskoye and Chelkar Projects through the exploration, mine design, development and implementation cycle to mine production. In parallel with mine development, KPC is looking to secure contracts to supply most or all of the potash to be produced from the Zhilanskoye and Chelkar Projects with purchasers who will, on the whole, be in the PRC.
With that in mind and with the agreement with the governments of both Kazkhstan and the PRC, KPC signed a Strategic Cooperation Framework Agreement with the PRC’s CITIC Construction Co Ltd, the Industrial & Commercial Bank of China Limited and the Ministry of Investment and Development of the Republic of Kazakhstan (MID) in relation to its projects (Framework Agreement). Under the Framework Agreement, the KPC is to build a potash production base in Kazakhstan within ten years and is required to achieve potash fertiliser production capacity of over seven million tonnes per annum in order to meet the agricultural markets in Kazakhstan and the PRC.
The government of Kazakhstan developed a policy known as the “State Program of Industrial-Innovative Development of Kazakhstan for 2015-2019” highlighting the development of the chemical industry as a key objective. It has allocated resources to building transport infrastructure in the form of roads, railways, shipping and pipelines. It has emphasised the need to attract and support foreign investment. More recently, the government of the PRC has stressed the importance of its joint partnership and cooperation with its neighbours in the Central Asia region through its “One Belt, One Road” policy (OBOR). It has increased its investment in Kazakhstan with particular emphasis on transport infrastructure.
The Framework Agreement is seen as part of the OBOR, it is reviewed regularly by the governments of both Kazakhstan and the PRC. In the context of that agreement, KPC has a joint venture with the Chongquing Material of Agricultural Production (Group) Co Ltd (CMAG). CMAG is a fully integrated agricultural enterprise owned by the municipal government of Chongqing, a city in the PRC. That company is developing a fertiliser logistics and distribution hub to supply all major fertiliser producers in the PRC. In Kazakhstan, KPC has partnered with KTZ Express, which is the operator of Kazakhstan’s national railway) to ship its product through Kazakhstan and on to Chongqing.
The Directors’ report included in KPC’s Financial Report for the year ended 31 December 2016 indicates that the acquisition of the Zhilyuanskoye Project and the Chelkar Project had been completed. Acquisition of the Satimola Project remained incomplete.[17]
[17] Exhibit JP3: Tab 5 at 2-4
The request
On 6 October 2014, Mr Butler requested access to “letters written by ASIC staff members to companies that have issued prospectuses to raise money from investors raising queries or concerns (‘statements of concern’).”[18] Mr Butler went on to give details of the specific documents, to which he sought access:
[18] Documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents); T3 at 13
“1. Any statements of concern relating to the stop order issued over the prospectus for equities in ODFL1 Limited received by ASIC on September 1, 2014 (ASIC document number 027846569), together with any responses received from the company.
2. Any statements of concern relating to the stop orders issued over the prospectus for equities in Victory Mines Limited received by ASIC on April 30, 2014 (ASIC document number 025270153), together with any responses received from the company.
3. Any statements of concern relating to the stop orders issued over the prospectus for equities in Montech Holdings Limited received by ASIC on May 28, 2014 (ASIC document number 025270153), together with any responses received from the company.
4. Any statements of concern relating to the stop orders issued over the prospectus for equities in Victory Mines Limited received by ASIC on May 28, 2014 (ASIC document number 025270153), together with any responses received from the company. (sic)
5. Any statements of concern relating to the stop orders issued over the prospectus for equities in Kazakhstan Potash Corporation Limited received by ASIC on December 12, 2013 (ASIC document number 028284488), together with any responses received from the company.
6. Any statements of concern relating to the stop orders issued over the prospectus for equities in Priority One Network Group Limited received by ASIC on February 15, 2013 (ASIC document number 027728697), together with any responses received from the company.
7. Any statements of concern relating to the stop orders issued over the prospectus for equities in Priority One Network Group Limited received by ASIC on February 15, 2013 (ASIC document number 027728697), together with any responses received from the company. (sic)
8. Any statements of concern relating to the stop orders issued over the prospectus for equities in MAN AHL Diversified (AUD) Limited received by ASIC on June 19, 2012 (ASIC document number 027954788), together with any responses received from the company.
9. Any statements of concern relating to the stop orders issued over the prospectus for equities in MAN AHL Gold (AUD) Limited received by ASIC on December 5, 2012 (ASIC document number 027709948), together with any responses received from the company.
10. Any statements of concern relating to the stop orders issued over the prospectus for equities in MAN OM-IP 2AHL Limited received by ASIC on March 17, 2009 (ASIC document number 023745691), together with any responses received from the company.”[19]
[19] T documents; T3 at 13-14
In his request, Mr Butler also stated that:
“ASIC should not consult with any third parties while considering my request.
This is because, in the case of stop orders that have been revoked, the information sought by ASIC must by definition have been placed on the public record in the offer document eventually approved by ASIC.
And, in the case of final stop orders, the company has clearly been unable to provide the information sought by ASIC which therefore cannot have been disclosed in the answers provided by the company.
Thus, it is by definition impossible that the documents sought contain any ‘trade secrets or commercially valuable information’, as defined in s 47 of the FOI Act and consultation under s 27 would be unwarranted.
Further, it is also not open to ASIC to argue that release of the documents would prejudice its ability to gather information (s. 47E)”[20]
[20] T documents; T3 at 14
ASIC’s decision
ASIC identified 95 documents coming within Mr Butler’s request and described them in a Schedule of Documents by reference to their date, description and length. It consulted with the eight companies identified in his request under s 27 of the FOI Act. Montech Holdings Limited acknowledged ASIC’s correspondence but it and Priority One Network Group Ltd did not give a substantive response to ASIC’s request. Victory Mines Limited advised that it had no objections to the disclosure of the documents relating to its prospectuses. The remaining five companies objected to the disclosure of the documents relating to their prospectuses on the basis that disclosure would unreasonably affect their business affairs.
After considering the documents and taking account of the objections, ASIC refused Mr Butler access to each of the documents in a decision dated 17 December 2014. Relying on ss 47C, 47E(d) and 47G(1)(b) of the FOI Act, a delegate of the principal officer of ASIC decided that each of the 95 documents was an exempt document. That information was added to the Schedule of Documents and given to Mr Butler together with the delegate’s reasons for coming to that decision. When Mr Butler sought internal review of that decision, ASIC affirmed its decision relying on ss 47E(d) and 47G(1)(a) and (b) as well as s 45.
Information Commissioner’s review of ASIC’s decision
On 17 February 2015, Mr Butler applied to the Information Commissioner under s 54L of the FOI Act for review of ASIC’s decisions (IC review). Later, on 28 September 2015, ASIC advised the Officer of the Australian Information Commissioner (OAIC) that it considered it necessary to notify an additional five entities of Mr Butler’s application for IC review. In October 2015, four companies applied to the Information Commissioner to be joined as parties to the IC review. Those companies included KPC.[21]
[21] The other companies were MAN AHL Gold (AUD) Limited, MAN OM-IP 2 AHL Limited and MAN AHL Diversified (AUD) Limited.
On 24 March 2016, Mr Butler narrowed the scope of his request to seven statements of concerns. They are identified in ASIC’s Schedule of Documents in the following way:
Doc No.
Date of document
Description of document
Pages
…
2
08/09/14
Statement of Concerns – ODFL1 Limited
22
…
6
08/05/14
Statement of Concerns – Victory Mines Limited
1
…
12
16/05/14
Further Statement of Concerns – Victory Mines Limited
6
…
23
13/06/14
Statement of Concerns – Montech Holdings Limited
2
…
36
19/12/13
Statement of Concerns – Kazakhstan Potash Corporation Limited
[not stated]
…
54
5/12/12
Statement of concerns [Priority One Network Group Limited]
20
…
76
20/12/11
Statement of concerns [MAN AHL Gold (AUD) Limited
27
The Information Commissioner set aside ASIC’s decision on 25 November 2016 and substituted his decision that none of the seven documents is exempt. KPC applied to the Tribunal for review of that decision in relation to the document of concern to it i.e. Document 36.
Requirements under Corporations Act regarding disclosure to investors about securities
Chapter 6D of the Corporations Act is entitled “Fundraising”. In general terms, it is concerned with offering securities for issue or for sale. A condition of a contract for the sale or issue of securities is void if it provides that a party to the contract is required or bound to waive compliance with any requirement of Chapter 6D or taken to have notice of any contract, document or matter not specifically referred in the disclosure document for the offer.[22]
[22] Corporations Act; s 703
The word “securities” has the meanings that it is given in Chapter 7 but does not include the meanings specified in paragraphs (e) and (f) of the definition of the word “security” in s 761A.[23] Therefore, its meanings are:
[23] Corporations Act; s 700(1)
“(a) a share in a body; or
(b)a debenture of a body; or
(c)a legal or equitable right or interest in a security covered by paragraph (a) or (b); or
(d)an option to acquire, by way of issue, a security covered by paragraph (a), (b) or (c);
(e)…
(f)…
but does not include an excluded security. …”.
In broad terms, an “excluded security” is concerned with a share or debenture, or a unit in a share or debenture, where there is attached to that share or debenture a right to participate in a retirement village scheme.[24]
[24] Corporations Act; s 9
Sections 706, 707, 708, 708AA and 708A specify when an offer of securities needs disclosure to investors under Part 6D.2 of Chapter 6D and when it does not.[25] If an offer of securities needs disclosure to investors, s 705 sets out the disclosure documents to use. Item 1 of the table in that section describes one of the disclosure documents as a “prospectus”. A “prospectus” is a prospectus lodged with ASIC.[26] Section 709(1) provides that:
“If an offer of securities needs disclosure to investors under this Part, a prospectus must be prepared for the offer unless subsection (4) allows an offer information statement to be used instead. Under section 712, the prospectus may simply refer to the material already lodged with ASIC instead of including it.”
The content of the prospectus is regulated by ss 710, 711 and 713, its procedure by s 717, liability by ss 728 and 729 and defences by ss 731 and 733.
[25] Corporations Act; s 704
[26] Corporations Act; s 9
Section 710 sets out the general disclosure test. In so far as it relates to an offer to issue shares, s 710(1) provides:
“A prospectus for a body’s securities must contain all the information that investor and their professional advisers would reasonably require to make an informed assessment of the matters set out in the table below. The prospectus must contain this information:
(a)only to the extent to which it is reasonable for investor and their professional advisers to expect to find the information in the prospectus; and
(b)only if the person whose knowledge is relevant (see subsection (3)):
(i)actually knows the information; or
(ii)in the circumstances ought reasonably to have obtained the information by making enquiries.
Disclosures [operative]
Offer
Matters
1
offer to issue (or transfer) shares, debentures or interests in a managed investment scheme
●
the rights and liabilities attaching to the securities offered
●
the assets and liabilities, financial position and performance, profits and losses and prospects of the body that is to issue (or issued) the shares, debentures or interests
2
…
…
…”
In deciding what information should be included under s 710(1) when shares are offered, regard must be had to the nature of the securities and of the body, the matters that likely investors may reasonably be expected to know and that fact that certain matters may reasonably be expected to be known to their professional advisers.[27] Those persons whose knowledge will be relevant include a director of the body offering the securities or proposed director.[28] The prospectus must disclose the nature and extent of any interests held at any time during the previous two years by persons identified in s 711(4) in the formation or promotion of the body or in the property acquired or proposed to be acquired by the body.[29] Those persons included directors and prospective directors. The information in a disclosure document must be worded and presented in a clear, concise and effective manner.[30] The disclosure document must be dated with a date that is the date on which it was lodged with ASIC.[31]
[27] Corporations Act; s 710(2)
[28] Corporations Act; ss 710(3)(b) and (c)
[29] Corporations Act; ss 711(2) and see also s 711(4)(a)
[30] Corporations Act; s 715(1)
[31] Corporations Act; s 716(1)
Section 727 provides that a person must not make an offer of securities, or distribute an offer from for an offer of securities, that needs disclosure to investors under Part 6D.2 unless a disclosure document for the offer has been lodged with ASIC.[32] If a prospectus is used for the offer, the offer or form must either be included in the prospectus or be accompanied by a copy of the prospectus.[33]
[32] Corporations Act; s 727(1)
[33] Corporations Act; s 727(2)(a)
Section 728 is concerned with misstatements in, or omissions from, a disclosure document. Section 728(1) provides:
“(1) A person must not offer securities under a disclosure document if there is:
(a)a misleading or deceptive statement in:
(i)the disclosure document; or
(ii)any application form that accompanies the disclosure document; or
(iii)any document that contains the offer if the offer is not in the disclosure document or the application form; or
(b)an omission from the disclosure document of material required by section 710, 711, 712, 713, 714 or 715; or
(c)a new circumstance that:
(i)has arisen since the disclosure document was lodged; and
(ii)would have been required by section 710, 711, 712, 713, 714 or 715 to be included in the disclosure document if it had arisen before the disclosure document was lodged.
Note 1:The person may make further offers after making up the deficiency in the current disclosure document by lodging a supplementary or replacement document.
Note 2:See sections 731, 732 and 733 for defences.
Note 3:Section 1041H imposes liabilities in respect of other conduct related to the offering of the securities.”
A person commits an offence by contravening s 728(1) and either the misleading or deceptive statement or the omission or new circumstance is materially adverse from the point of view of an investor.[34] A person who suffers loss or damage because of a contravention of s 728(1) may recover that loss or damage from a person identified in the table to s 729(1) as the person liable for that loss or damage. Liability attaches to that person even if that person did not commit, and was not involved in, the contravention. An action under s 729(1) may be taken at any time within six years after the day on which the cause of action arose.[35] Part 6D does not affect any liability that a person may have under any other law. That is the effect of s 729(4). Conduct that contravenes s 728 is not also in contravention of s 1041H and so does not, by reason of that, give rise to civil action for loss or damage under s 1041I of the Corporations Act.[36]
[34] Corporations Act; s 728(3)
[35] Corporations Act; s 729(3)
[36] Corporations Act; s 1041H(3)(a)(ii)
Section 727 also regulates the circumstances in which a person may accept an application for, or issue or transfer, non-quoted securities offered under a disclosure document. A person must not do so until the period of seven days after lodgement of the disclosure document with ASIC has ended.[37] ASIC may extend the time by notice in writing to the person offering the securities. The period as extended must end no more than 14 days after lodgement.[38]
[37] Corporations Act; s 727(3)
[38] Corporations Act; s 727(3)
Section 739 provides for what it describes as “stop orders”. The section applies if ASIC is satisfied that:
“(a) information in a disclosure document lodged with ASIC is not worded and presented in a clear, concise and effective manner (see section 715A); or
(b)an offer of securities under a disclosure document lodged with ASIC would contravene section 728; or
(c)an advertisement of publication of a kind referred to in subsection 734(5) or (6) that relates to securities is defective (see subsection (6) of this section).”
Section 739(1A) sets out what it is that ASIC may order. If either s 739(1)(a) or (b) applies,, ASIC may order that no offers, issues, sales or transfers of the securities be made while the order is in force. If s 739(1)(c) applies, ASIC may order that specified conduct in relation, to the securities to which advertisement or publication relates, must not be engaged in. Before making an order under s 739(1A), ASIC must hold a hearing and give a reasonable opportunity to any interested people to make oral or written submissions to it on whether an order should be made.[39]
[39] Corporations Act; s 739(2)
ASIC also has power to make an interim order if it considers that any delay in making an order under s 793(1A) pending the holding of a hearing would be prejudicial to the public interest. The interim order that ASIC may make is that no offers, issues, sales or transfers of the securities be made while the interim order is in force. The interim order may be made without holding a hearing and, unless it is revoked at an earlier time, lasts for 21 days after the day on which it is made.[40] At any time during a hearing, ASIC may make an interim order. It lasts until the conclusion of the hearing if it is not revoked at an earlier time.[41] An order made by ASIC must be in writing and must be served on the person who is ordered not to offer, issue, sell or transfer securities under the disclosure document.
[40] Corporations Act; s 739(3)
[41] Corporations Act; s 739(4)
THE EVIDENCE
A holder of a subsoil licence for potash in Kazakhstan may explore and develop assets. If the MDD determines that there is a change in control of the holder, it may withdraw the subsoil licence. A licence typically confers rights for six months and can be extended. An application for an extension must be accompanied by a new set of documents. KPC had acquired the licence but, at the time of the hearing, it had lapsed.
In his statement, Mr Marcou said that the matters raised by ASIC in its Statement of Concerns had been addressed by KPC and related to a superseded prospectus. Therefore, in substance, ASIC’s concerns are obsolete. Notwithstanding that the concerns are obsolete, Mr Marcou said that the release of the information within the Statement of Concerns would serve only to raise speculative concerns about KPC. He identified the following three areas of concern in particular:
“(1) The nature of the information contained in the Statement of Concerns refers to alleged inadequacies in KPC’s compliance with the Corporations Act 2001.
(2)The language used by ASIC in the Statement of Concerns to describe its concerns is of a critical nature and, without appropriate context, is likely to be interpreted negatively. The negative interpretation of that information could result in a diminished perception of KPC’s reputation, both in the potash market and in the Australian, China, Hong Kong and Kazakhstan business communities.
(3)Without proper context, the alleged inadequacies suggested by ASIC could be repeated or published in a manner that will adversely impact KPC’s reputation.
(4)Even though the information is obsolete, by its nature, the information gives a negative impression of KPC, which is likely to attract attention from KPC’s stakeholders and consequently place strain on the relationships between KPC and its stakeholders.”[42]
[42] Exhibit A at [26]
If the Statement of Concerns is released, it will raise unfounded concerns, Mr Marcou said. Those concerns will be raised both internally within KPC and externally both in Australia and overseas but particularly in Kazakhstan, the PRC and Hong Kong. At the time, KPC was in discussions with a number of financiers in relation to the proposed Satimola Project as well as for its potash projects generally. Those discussions were at various stages but Mr Marcou feared that release of the Statement of Concerns would be likely to be perceived in a negative way by the potential financiers leading to their referring them to their respective risk committees for further evaluation. Negative perception of the content of the Statement of Concerns any referral to a risk committee had the potential to harm KPC’s relationships with the potential financiers and to limit is opportunities to obtain finance.
In cross-examination by Mr Butler, Mr Marcou was asked to expand upon what he meant by his reference to the “proper context” and there being an adverse impact on KPC’s operations if there were none. He said that his experience of the media is that newspapers are less liberal with the truth. Their business is to sell newspapers. Mr Marcou could not point to a specific example when asked to do so by Mr Butler but was sure that he could find some. In selling newspapers, the media raises unfounded perceptions that will lead to a negative impact on KPC’s business.
In his second statement, Mr Marcou noted that finance had been approved for KPC by a private bank, the China Menshing Bank, for the purpose of completing the initial deal with Satimola Limited. The approval had, however, only been for a specified period and that period had lapsed before KPC could complete the transaction. Despite that, KPC had remained in discussions and negotiations regarding the transaction continued. Progress had been made. Consistent with its intention to continue with the transaction, KPC had sought finance from private individuals as well as the China Development Bank. None of those financiers had been involved in KPC’s attempts to finance the earlier agreement.
Release of the Statement of Concerns would erode the goodwill that had been fostered with KPC’s shareholders, potential financiers and financiers Mr Marcou said. That would lead to a rise in negative sentiment towards KPC in the potash market. Release of the Statement of Concerns would also raise unfounded concerns that would have a negative impact on KPC’s ability to close the transaction with Satimola Limited, which still required funding and approvals from the MID. KPC might then become the subject of an enquiry or investigation by the MID in order for it to ascertain the facts in relation to the Statement of Concerns. Any enquiry by the MID might halt any pending applications KPC might have within the MID. Disclosure would also have a negative impact on KPC’s ability to secure finance from potential financiers for the Satimola project. KPC’s major vendors and shareholders who are mentioned in the Statement of Concerns will be confused as to why concerns have been raised by ASIC in relation to a project in which they are involved.
Mr Marcou said that the contents of the Statement of Concerns related to the Satimola project. He believed that the information is likely to be misinterpreted by various agencies within the MID. Mr Marcou drew on his experience with dealing with MID and, in particular, with dealing with the MID Working Group responsible for overseeing Batys Kali LLP (a KPC subsidiary), the Sub-soil Use Department, the Committee of Geology and Subsoil Use, the Directorate for Monitoring and Control over Rational and Comprehensive Use of Subsurface Resources, the Contracts Board of the Subsoil Use Department, the Directorate for the granting of subsoil use right and the Anti-Monopoly Agency. There was a real possibility of KPC’s receiving “please explain” requests both from MID and from KPC’s broader stakeholder spectrum. There would be a consequential material strain to the relationships that KMPC has within those groups. The negotiations regarding the Satimola project have been extremely difficult and complex and queries that may follow from the release of the Statement of Concerns. The vendors of Satimola may also view the release of the ASIC concerns in a negative way which may cause a material degradation in KPC’s ability to close the transaction. The financiers involved in the Satimola project are likely to refer ASIC’s concerns to their respective risk committees.
When Mr Marcou’s attention was drawn to the section in the replacement prospectus dated 28 January 2014, which set out key changes that had been made to the earlier prospectus dated 12 December 2013, he said that he could not recall the reasons for making those changes. He acknowledged that the changes had been made. ASIC had made some requests to change information and KPC had adhered to those requests. He recalled that there was some financial information that had been changed and the removal of a geologist’s report. KPC had a due diligence committee working on the changes and that was a normal approach to take.
Mr Butler drew Mr Marcou’s attention to an email sent by Mr Gordon Toll, Satimola’s Chairman, to KPC’s Chairman and Managing Director, Madame Freada Cheung, and copied to its directors on 13 February 2015. Mr Toll wrote:
“I draw your attention to the fact that as of today all agreements between Satimola Limited and KPCL have lapsed and are not effective due to your inability to raise funds and complete the deal before December 31, 2014. The extension of completion until June 30, 2015 which you requested has not become effective as you have failed to comply with defined conditions precedent to such extension.
We strongly emphasize that your announcement to the ASX dated 31 December, 2014 was misleading and did not disclose those important conditions and terms preceding the extension. Clearly, on this occasion and many others, KPCL has failed to comply with the disclosure provisions of the ASX listing rules.
By this letter Satimola Limited is giving you an opportunity to (1) comply with the conditions precedent as listed in the letter of December 30, 2014 by the close of the ASX (Sydney) on Tuesday 17th February and (2) correct your announcement to ASX.
If the conditions precedent to the extension are not met within 24 hours or you do not make a full statement and accurate release to the ASX in a form satisfactory to the board of Satimola by the same time Satimola Limited will publish this letter and the announcement attached hereto in Australian and Kazakhstan business press and via other media outlets.”[43]
The announcement said to be attached to the letter was not part of the letter tendered and admitted in evidence during the hearing.
[43] Exhibit JP2: Tab 0
In a letter dated 18 February 2015 and addressed to the Senior Adviser Listings Compliance (Melbourne) at the ASX, Mr Toll drew attention to what he believed to be significant breaches of the ASX Listing Rules. The essence of those breaches lay in what he said were KPC’s repeated failures to comply with the “Continuous Disclosure” provisions of the ASX’s listing rules and particularly those set out in Listing Rule 3.1.[44]
[44] Rule 3.1 of the ASX Listing Rules provides that:
The breaches, Mr Toll wrote, related to the Sale and Purchase Agreement for KPC to acquire 100% of Satimola. He set out three conditions precedent and subsequent to the Sale and Purchase Agreement. The first two, which related to payments, had not been complied with by the due date on 6 January 2015, Mr Toll said. KPC had, instead, reached an agreement with Batys Kali to provide a loan facility by 4 February 2015 to cover those two conditions precedent. The market, Mr Toll said, was not informed of this. As at 18 February 2015, none of the conditions of the Sale and Purchase Agreement had been met. It followed that the extension of its completion date until 30 June 2015 had not become effective. Mr Toll said that KPC had failed to meet working capital commitments and loan repayment commitments under the terms of the now lapsed Sale and Purchase Agreement and its predecessors. KPC had never informed the market of these failures. Those failures brought into question KPC’s ability to purchase Satimola but most certainly it would raise serious doubts as to its ability to fund and manage what is a significant, large resource development. Furthermore, it raises serious questions that should be addressed under Listing Rule 12.2.[45]
[45] Exhibit JP5
Referring to Mr Toll’s two letters, Mr Butler asked Mr Marcou how he thought that Mr Toll could develop a more negative view of KPC than he already had. Mr Marcou responded that KPC’s handling of this issue lead to a new deal being signed with Mr Toll two months later. The letters could have been written as a matter of tactics. KPC was very mindful of the letters and shared them with the business adviser on the ASX. Everyone was satisfied. Announcements were made regarding a new deal. Mr Toll excused himself from the negotiations and, eight weeks later, there was a new deal. Funding issues were solved in May 2015 and agreements reached in November 2015 and October 2016.
An email from Mr Toll dated 12 October 2015 and addressed to KPC’s Board of Directors refers to basic terms already agreed between KPC and Satimola. It sets out a timetable for the various steps required for the sale of shares in Satimola to KPC. In the course of the email, Mr Toll asked KPC why it had never advised the ASX and its shareholders that exclusivity between KPC and Satimola had expired on 7 August leaving Satimola free to enter discussions with other parties had it wished to do so. Mr Toll described its actions as clearly another of many breaches of the ASX continuous disclosure rules. He referred also to KPC’s having disregarded legally binding contracts on three earlier occasions.[46]
[46] Exhibit JP2: Tab 3
Mr Marcou’s response to the email was that Mr Toll had been unhappy but that he had still put his pen to paper. As a vendor, he was happy to take his working capital. These issues happen and some are more difficult than others. When those issues arise in different jurisdictions, their complexity increases. Mr Marcou stated that the ASX’s compliance officer was across the issues and KPC had complied with its obligations.
Mr Butler drew Mr Marcou’s attention to KPC’s Financial Report for the year ended 31 December 2016, which he agreed he had signed on 30 March 2017 as a director. He noted that KPC had incurred a loss of $21,870,079 in that year. Mr Marcou responded that, as an exploration company, it is necessary to spend money in order to make money. Once there is an income flow, there is a profit. This is typical of all mining and exploration companies. KPC had been incurring a loss since it was listed on the ASX in 2010.
Mr Butler questioned Mr Marcou about the following paragraph from Note 1 to the Financial Statements for the same year:
“the ability of the Consolidated Entity to continue as a going concern is dependent upon the successful implementation of exploration programmes and feasibility studies and potential mine development activities on the potash projects in Kazakhstan which will require the group to raise additional funds through debt and equity. The existence of these conditions indicates a material uncertainty that may cast significant doubt on the Consolidated Entity’s ability to continue as a going concern.”[47]
[47] Exhibit JP3: Tab 9 at 32
Mr Marcou responded that the paragraph was correct. As a public company, KPC was externally audited twice each year by external auditors for the ASX and for ASIC. The paragraph acknowledged that there was a “bit of risk going forward”. This is standard in mining and exploration companies.
Mr Marcou agreed with Mr Butler that KPC’s share price was not trending well in the period from 17 December 2010 to 19 May 2017. In re-examination, Mr Marco said that the share price had dropped in 2013 and that there was potential for the share price to fall still lower. The fall had a negative impact on current investors with their suffering a loss of confidence and making a flurry of phone calls to him, Mr Marcou said.
In response to Mr Butler, Mr Marcou said that he believed that KPC needed to try to continue as a developer. The market price was out of kilter of where it should be. It has been tough – very tough - for KPC. Not every Australian exploration company listed on the ASX is exploring assets in potassium. KPC had tried to close off the Satimola project a few times but had failed. It was trying to buy the sub-soil use licence so that it could develop potash but first it had to obtain a pre-emptive waiver from the MID to allow the transaction to go ahead.
Mr Marcou agreed with Mr Butler that the outcome of the Satimola transaction would be price sensitive in so far as KPC’s share price was concerned. Under the continuous disclosure obligations imposed by the ASX, KPC would be obliged to disclose closure of the Satimola transaction. Mr Marcou said that KPC had not made any such disclosure to the ASX; no new agreement is in place. KPC continues to be in negotiation on the acquisition and has been for the past four years.
Mr Marcou said that he had met some of Satimola’s shareholders and some of the members of its Board of Directors. The shareholders of Satimola, of whom there were 88, were the vendors in the Satimola transaction, Mr Marcou said. Mr Toll had ceased to be part of Satimola’s negotiating team although Mr Marcou believed that he remained a director and a shareholder. Since Mr Toll had left the team, Mr Marcou said that he has been dealing with Mr John Alen. Mr Marcou was not sure whether Mr Alen was as shareholder. When agreement was reached, Satimola’s Board of Directors would make a recommendation to the company’s shareholders to sign the agreement. Until their signatures were obtained, there was no completed agreement.
THE SUBMISSIONS
ASIC has maintained a neutral stance on the review. While it has complied with its obligations under ss 37 and 33 of the AAT Act, it has not taken issue with the views expressed by either party or sought to put a position.
On behalf of KPC, Mr Solomon-Bridge submitted that the Information Commissioner had put forward a proposition at [36] of his reasons that is fundamentally misconceived. As I understand his submission, the proposition was that, given that any disclosure concerns raised by ASIC had to be resolved within a certain period, the Statement of Concerns would not relate to any current concerns it held and that might affect investor confidence or KPC’s reputation. That is not correct when viewed against a background of newspaper articles read by those who do not have a copy of the Corporations Act at hand. Historical evidence can lead to permanent harm. Mr Solomon-Bridge referred to the judgment of Gummow J in Corrs Pavey Whiting & Byrne v Collector of Customs.[48] Re-release of historical information can lead to damage to current relations.
[48] [1987] FCA 266; (1987) 14 FCR 434; 74 ALR 428; 13 ALD 254; 7 AAR 187; Sweeney and Jenkinson JJ; Gummow J dissenting
The overlap between disclosure that would, or could reasonably be expected to, unreasonably affect a person adversely in his or her lawful business affairs and that would, at the same time, not be contrary to the public interest is considered in my earlier decision of Re Bell and Secretary, Department of Health and Robert de Castella’s Smartstart for Kids Limited[49] (Bell). He referred also the decisions of Attorney-General’s Department and Another v Cockcroft[50] (Cockcroft) and Re Mangan and The Treasury[51] (Mangan) regarding when disclosure could reasonably be expected to unreasonably affect a person adversely in the manner specified in s 47G(1)(a).
[49] [2015] AATA 494
[50] [1986] FCA 35; (1986) 10 FCR 180; 64 ALR 97;
[51] [2005] AATA 898; Deputy President Walker
The scheme of stop orders and compliance provided for under the Corporations Act is intended to be a fluid process occurring over seven days. What happened in such a process cannot inform public debate or, if it can, it cannot do so when the time has passed and errors are taken into account. None of the usual public interest touchstones are relevant.
Mr Butler rejected KPC’s submission that disclosure will damage its ongoing business interests. If disclosure has the potential to do that, he submitted, it must follow that KPC has not met its obligations under listing rule 3.1 of the ASX to disclose market-sensitive material immediately. If ASIC’s concerns have been adequately addressed in KPC’s replacement prospectus, then no damage should be done by publication of the Statement of Concerns as the market will already have been fully informed. The exemption under s 47G(1)(a) of the FOI Act does not operate to protect unlawful behaviour. Furthermore, disclosure would not, and could not, reasonably be expected to unreasonably affect KPC in its lawful business, commercial or financial affairs because the information is historical only and some has already been disclosed by way of the changes between the prospectus and replacement prospectus, the publication in 2011 of a previous Statement of Concerns and public records and media articles.
KPC, Mr Butler submitted, had portrayed the stop order as “a standard process in relation to questions of the prospectus by ASIC”. In doing so, it portrayed the order as a routine matter and this is not consistent with the position taken by KPC that disclosure of the Statement of Concerns will cause it damage. The evidence shows that KPC lacks the ability to close the Satimola project. It has been unable to do so in the four years that the project has been on foot and has generated hostility with the Executive Chairman of Satimola Ltd, Mr Toll. The evidence also shows that the Chinese financier mooted to finance the project has been aware of problems with the transactions since at least October 2015. KPC has not demonstrated that it has any current goodwill with shareholders, potential investors and financiers to be damaged. None was identified and there is no evidence of the effect that disclosure may have upon them. A lengthy suspension from the ASX tells against KPC’s assertion.
Mr Butler referred to the objects of the FOI Act in support of his submission that those who are asked to invest in a project, including “mum and dad” investors should be fully informed. If matters have been addressed and the market is fully informed then there cannot be a problem. If publication of the Statement of Concerns leads to a drop in KPC’s share price, that means that the market was not fully informed and KPC should have disclosed further information. Mr Butler rejected KPC’s submission that s 11B(4)(d) of the FOI Act does not exclude from consideration the prejudice that KPC might suffer as a result of misunderstandings or misapprehensions by others.
THE FOI ACT
Objects and outline of legislation
The objects of the FOI Act are to give the Australian community access to information held by the Government of the Commonwealth. It achieves those objects in two ways. The first is by requiring agencies to publish information under the Information Publication Scheme established under Part II of the legislation. The second is by providing a right of access to documents.[52] Part III regulates the right of access to documents. It is not an unlimited right and its boundaries are described in s 11 when it provides:
[52] FOI Act; s 3(1)
“(1) Subject to this Act, every person has a legally enforceable right to obtain access in accordance with this Act to:
(a)a document of an agency, other than an exempt document; or
(b)an official document of a Minister, other than an exempt document.
(2)Subject to this Act, a person’s right of access is not affected by:
(a)any reasons the person gives for seeking access; or
(b)the agency’s or Minister’s belief as to what are his or her reasons for seeking access.”
A person wishing to obtain access to a document of an agency or an official document of a Minister may request access to it.[53] If he or she does so, the request must be in writing and comply with the requirements of s 15(2). Once a person has made a request and paid any charge that, under the regulations, is required to be paid, regard must be had to s 11A.[54] That section applies subject to the legislation itself. Therefore, even though s 11A(3) provides that the agency or Minister must give the person access to the document in accordance with the FOI Act, it also provides that they do so “subject to this section”. Section 11A(2) lists examples of provisions which are relevant to decisions about access to documents. They are ss 12, 13, 15A and 22. None is relevant in this case.
[53] FOI Act; s 15(1)
[54] FOI Act; s 11A(1)
Right to obtain access does not extend to an exempt document
Returning to s 11(1), there is no issue that the Statement of Concerns is a document of an agency being, in this case, ASIC. The issue is whether it is an exempt document as the right of access does not extend to an “exempt document”. The expression “exempt document” is defined in s 4(1) to have three meanings but only the first set out in paragraph (a) is relevant. It provides that an exempt document means “a document that is exempt for the purposes of Part IV (exempt documents) (see section 31B)”. Part IV, which includes s 31B, specifies those documents that are exempt documents. Section 31B provides:
“A document is exempt for the purposes of this Part if:
(a)it is an exempt document under Division 2; or
(b)it is conditionally exempt under Division 3, and access to the document would, on balance, be contrary to the public interest for the purposes of subsection 11A(5).
Note 1:… [Definition of “exempt document” in s 4(1) set out.]
Note 2:Access must generally be given to a conditionally exempt document unless it would be contrary to the public interest (see section 11A).”
The scope of the conditional exemption provided under section 47G
Section 47G(1)(a), on which KPC relies, is included under Division 3 of Part IV. It provides:
“A document is conditionally exempt if its disclosure under this Act would disclose information concerning a person in respect of his or her business or professional affairs or concerning the business, commercial or financial affairs of an organisation or undertaking, in a case in which the disclosure of the information:
(a)would, or could reasonably be expected to, unreasonably affect that person adversely in respect of his or her lawful business or professional affairs of that organisation or undertaking in respect of its lawful business, commercial or financial affairs; …
(b)…”[55]
[55] Section 47G(1)(b) provides that a document is conditionally exempt if the disclosure of the information could reasonably be expected to prejudice the future supply of information to the Commonwealth or an agency for the purpose of the administration of a law of the Commonwealth or of a Territory or the administration of matters administered by an agency. Section 47G(1)(b) does not have any application for ASIC issued its Statement of Concerns as part of the regulatory scheme I have summarised above. Like any other corporate entity subject to that regulatory scheme in Part 6D, KPC had statutory obligations if it wished to offer securities to the market. Disclosure under the FOI Act could not reasonably be expected to prejudice the future supply of information by a corporate entity required to meet its obligations under Part 6D.
Under s 11A(5):
“The agency or Minister must give the person access to the document if it is conditionally exempt at a particular time unless (in the circumstances) access to the document at that time would, on balance, be contrary to the public interest.
Note 1:Division 3 of Part IV provides for when a document is conditionally exempt.
Note 2:A conditionally exempt document is an exempt document if access to the document would, on balance, be contrary to the public interest (see section 31B (exempt documents for the purposes of Part IV)).
Note 3:Section 11B deals with when it is contrary to the public interest to give a person access to the document.”
As the information in the Statement of Concerns does not concern any trade secrets or other information to which s 47 relates, the qualification to the exemption set out in s 47G(2) does not apply. The qualification in s 11A(6) does not apply as no exemption under Division 2 of Part III is relevant in this case.
In working out whether access to a document would, on balance, be contrary to the public interest, regard must be had to s 11B[56] but, at the same time, s 11B does not limit s 11A(5).[57] Factors favouring access and those that are irrelevant are the subject of ss 11B(3) and (4):
[56] FOI Act; s 11B(1)
[57] FOI Act; s 11B(2)
“Factors favouring access
(3)Factors favouring access to the document in the public interest include whether access to the document would do any of the following:
(a)promote the objects of this Act (including all the matters set out in sections 3 and 3A);
(b)inform debate on a matter of public importance;
(c)promote effective oversight of public expenditure;
(d)allow a person to access his or her own personal information.
Irrelevant factors
(4)The following factors must not be taken into account in deciding whether access to the document would, on balance, be contrary to the public interest:
(a)access to the document could result in embarrassment to the Commonwealth Government, or cause a loss of confidence in the Commonwealth Government;
(b)access to the document could result in any person misinterpreting or misunderstanding the document;
(c)the author of the document was (or is) of high seniority in the agency to which the request for access to the document was made;
(d)access to the document could result in confusion or unnecessary debate.”
A. The onus
Generally, the onus of establishing that the document should not be disclosed under the FOI Act would fall upon ASIC.[58] This, however, is a case in which ASIC was required to, and did, consult an affected third party, being KPC, under s 27 of that legislation. As KPC is the applicant, and so a party to these proceedings, the effect of s 61(2) is that it carries the onus of establishing that a decision refusing access to the Statement of Concerns is justified.
B.Twin obligations to review the Information Commissioner’s decision independently and to have regard to the FOI Guidelines
[58] FOI Act; s 61(1)
An agency or Minister must have regard to any guidelines issued by the Information Commissioner for the performance of a function, or the exercise of a power, under the FOI Act (FOI Guidelines). Specific, but not exclusive, reference is made to the performance of a function, or the exercise of a power, for the purposes of three provisions including s 11B(5).[59] I have previously considered the obligation imposed by s 93A(2) on the Tribunal in the exercise of the functions and powers under the FOI Act as an integral obligation in providing independent review of the decisions made by the Information Commissioner. In my reasons for decision in Re Prinn and Department of Defence,[60] I reached the conclusion that the FOI Guidelines:
[59] FOI Act; s 93A(2)(b)
[60] [2016] AATA 445; [46]-[57]
(1)are not binding upon decision-makers, including the Tribunal;
(2)are matters to which decision-makers, including the Tribunal, must have “regard” i.e. they must take them into account but they are not bound to apply them;
(3)are made for the purposes of the “performance of a function, or the exercise of a power, under this Act”;
(4)are made on particular assumptions regarding the scope of those functions and powers but those assumptions:
(a)cannot be inconsistent with the scope of those functions and powers as conferred by the FOI Act;
(b)cannot, and cannot be allowed to, dissuade the Tribunal from carrying out its statutory obligations on review which include ascertaining the scope of the decision-maker’s powers; and
(c)cannot be applied by the Tribunal if it were to conclude that they are inconsistent with the functions and powers as it has ascertained them to be.
C. Would, or could reasonably be expected
In this case, there is no question that the information in the Statement of Concerns is information concerning KPC’s business, commercial or financial affairs. It is information that comes within the scope of the criteria specified in the opening words to s 47G(1). The issue is whether that information comes within the scope of s 47G(1)(a). That requires focus to be placed on the effect of disclosure of the information. “Would” disclosure in this case unreasonably affect KPC in respect of its lawful business, commercial or financial affairs? Could it “reasonably be expected to” have that outcome. What is meant by “unreasonably affect” is part of the consideration but I will come to those words shortly.
The FOI Guidelines state that:
“5.16 The test requires the decision maker to assess the likelihood of the predicted or forecast event, effect or damage occurring after disclosure of a document. …
5.17 The use of the word ‘could’ in this qualification is less stringent than ‘would’, and requires analysis of the reasonable expectation rather than certainty of an event, effect or damage occurring. It may be a reasonable expectation that an effect has occurred, is presently occurring, or could occur in the future.…
5.18 The mere risk, possibility or chance of prejudice does not qualify as a reasonable expectation. … There must, based on reasonable grounds, be at least a real, significant or material possibility of prejudice. …”[61]
[61] Citations omitted
In its ordinary usage, the word “would” suggests that, as a matter of probability, disclosure under the FOI Act would lead to that outcome as a logical or necessary consequence.[62] In its ordinary usage, the word “could” is “used to express a possibility”[63] that would be the outcome but the word is qualified by the words “reasonably be expected to” and all the words must be understood as they stand together rather than individually. The expression “could reasonably be expected to” has been considered in past authorities in relation to the FOI Act both as previously drafted and in its current form. They establish:
(1)“In our opinion, in the present context, the words ‘could reasonably be expected to prejudice the future supply of information’ were intended to receive their ordinary meaning. That is to say, they require a judgment to be made by the decision-maker as to whether it is reasonable, as distinct from something that is irrational, absurd or ridiculous, to expect that those who would otherwise supply information of the prescribed kind to the Commonwealth or any agency would decline to do so if the document in question were disclosed under the Act. It is undesirable to attempt any paraphrase of these words. In particular, it is undesirable to consider the operation of the provision in terms of probabilities or possibilities or the like. To construe s 43(1)(c)(ii) as depending in its application upon the occurrence of certain events in terms of any specific degree of likelihood or probability is, in our view, to place an unwarranted gloss upon the relatively plain words of the Act. It is preferable to confine the inquiry to whether the expectation claimed was reasonably based (see Kioa v West (1985) 60 ALJR 113 per Mason J and Gibbs CJ).”[64]
(2)“… stringent though that test may be, it does not go so far as to require the decision-maker to be satisfied upon a balance of probabilities that the production of the document will in fact prejudice the future supply of information.”[65]
(3)In the application of an exemption such as s 47B(a) requiring consideration of whether an outcome would, or could reasonably be expected to follow from disclosure under the FOI Act, “… there would ordinarily be material before the decision-maker which would show whether or not the … [outcome could be expected to follow] if the information were disclosed. It would be for the decision-maker to determine whether, if there were an expectation that this would occur, the expectation was reasonable.”[66]
D.Unreasonably affect adversely in respect of lawful business, commercial or financial affairs
[62] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers (Chambers)
[63] Chambers
[64] Attorney-General’s Department and Another v Cockcroft [1986] FCA 35; (1986) 10 FCR 180; 64 ALR 97 at 190; 106 per Bowen CJ and Beaumont J. Putting aside the introduction of a separate public interest test, 43(1)(c)(ii) was drafted in terms reflecting the current s 47G(1)(b).
[65] [1986] FCA 35; (1986) 10 FCR 180; 64 ALR 97 at 196; 112 per Sheppard J
[66] Searle Australia Pty Ltd v Public Interest Advocacy Centre and Another (1992) 36 FCR 111; 108 ALR 163; 16 AAR 28 at 123; 176; 40 per Davies, Wilcox and Einfeld JJ
The FOI Guidelines address this aspect of s 47G(1)(a):
“6.187 The presence of ‘unreasonably’ in s 47G(1) implies a need to balance public and private interests. The public interest, or some aspect of it, will be one of the factors in determining whether the adverse effect of disclosure on a person in respect of his or her business affairs is unreasonable. … A decision maker must balance the public and private interest factors to decide whether disclosure is unreasonable for the purposes of s 47G(1)(a); but this does not amount to the public interest test of s 11A(5) which follows later in the decision process. It is possible that the decision maker may need to consider one or more factors twice, once to determine if a projected effect is unreasonable and again in assessing the public interest balance. Where disclosure is not unreasonable, the decision maker will need to apply the public interest test in s 11A(5). This is inherent in the structure of the business information exemption.
6.188 The test of reasonableness applies not to the claim of harm but to the objective assessment of the expected adverse effect. For example, the disclosure of information that a business’ activities pose a threat to public safety, damage the natural environment; or that a service provider has made false claims for government money may have a substantial adverse effect on that business but may be reasonable in the circumstances to disclose. Similarly, it would not be unreasonable to disclose information about a business that revealed serious criminality. … These considerations require a weighing of a public interest against a private interest, preserving the profitability of a business, but at this stage it bears only on the threshold question of whether the disclosure would be unreasonable. …
6.189 The AAT has said, for example, that there is a strong public interest in knowing whether public money was accounted for at the appropriate time and in the manner required; and in ensuring that public programmes are properly administered….
6.190 The AAT has distinguished between ‘truly government documents’ and other business information collected under statutory authority. The first category includes documents that have been created by government or that form part of a flow of correspondence and other documents between the government and business. The AAT concluded that such documents inclined more to arguments favouring scrutiny of government activities when considering whether disclosure would be unreasonable. … By implication, the exemption is more likely to protect documents obtained from third party businesses.
6.191 Where disclosure would result in the release of facts already in the public domain, that disclosure would not amount to an unreasonable adverse effect on business affairs. …”[67]
[67] Citations omitted
I would add to these guidelines only to emphasise the need to have regard to all of the relevant circumstances in coming to a decision and to be aware that an assessment that an effect of disclosure is unreasonable may well require a consideration of public interest factors. That is a consideration that precedes any separate consideration of the public interest in the context of ss 11A(5) and 11B of the FOI Act. I will come to that now.
E. Access would, on balance, be contrary to the public interest
As s 11B(2) expressly provides that s 11B does not limit s 11A(5), the concept of “public interest” and what “would, on balance, be contrary to the public interest” at a particular time is informed by general principles relating to the identification of those principles. Those principles include:
(1)“… The public interest is a concept of wide meaning and not readily delimited by precise boundaries. Opinions have differed, do differ and doubtless always will differ as to what is or is not in the public interest. …”[68]
(2)“… [A] question about ‘the public interest’ will seldom be properly seen as having only one dimension. …”[69]
(3)There is a “… distinction between the public interest and a matter of public interest. The public interest is a term embracing matters, among others, of standards of human conduct and of the functioning of government and government instrumentalities tacitly accepted and acknowledged to be for the good order of society and for the well being of its members. The interest is therefore the interest of the public as distinct from the interest of an individual or individuals: Sinclair v Mining Warden at Maryborough [1975] HCA 17; (1975) 132 CLR 473, at p. 480, per Barwick CJ. There are, as appears to be implicit in the quoted passage of the judgment of Morris LJ in Ellis v Home Office (supra), several and different features and facets of interest which form the public interest. On the other hand, in the daily affairs of the community events occur which attract public attention. Such events of interest to the public may or may not be ones which are for the benefit of the public; it follows that such form of interest per se is not a facet of the public interest….”[70]
[68] Right to Life Association (NSW) Inc v Secretary, Department of Human Services and Health [1995] FCA 1060; (1995) 56 FCR 50; (1995) 128 ALR 238; 37 ALD 357 (Lockhart, Beaumont and Gummow JJ) at [34]; 59; 245; 364 per Lockhart J
[69] McKinnon v Secretary, Department of Treasury [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516; 43 AAR 151; 80 ALJR 1549; 63 ATR 409 at [55]; 444; 202; 531; 167; 1561; 424 per Hayne J
[70] Director of Public Prosecutions v Smith [1991] VicRp 6; [1991] 1 VR 63; (1991) 100 FLR 6 at 76; 18-19; Kaye, Fullagar and Ormiston JJ
I will begin with [6.4] to [6.6], where the concept of “public interest” is discussed:
“6.4 There is a single public interest test to apply to each of the conditional exemptions. This public interest test is defined to include certain factors that must be taken into account where relevant, and some factors which must not be taken into account.
6.5The public interest test is considered to be:
·something that is of serious concern or benefit to the public, not merely of individual interest …
·not something of interest to the public, but in the interest of the public …
·not a static concept, where it lies in a particular matter will often depend on a balancing of interests …
·necessarily broad and non-specific, … and
·related to matters of common concern or relevance to all members of the public, or a substantial section of the public. …
6.6It is not necessary for a matter to be in the interest of the public as a whole. It may be sufficient that the matter is in the interest of a section of the public bounded by geography or another characteristic that depends on the particular situation. A matter of particular interest or benefit to an individual or small group of people may also be a matter of general public interest.”[71]
[71] Citations omitted
The task required by s 11A(5) is to assess each of the factors that might favour a decision to grant access and those that might not. Generally, the weight or regard that should be paid to each factor will vary according to the particular circumstances in which the decision is made. If, for example, a particular fact about a person’s personal life were generally known about a person in the community, a decision-maker might conclude that disclosure under the FOI Act would be of little, if any, prejudice to that person. If, however, disclosure of that information in response to a particular request would, by reason of the nature of the documents coming within that request, reveal further information about that person, the consequences of disclosure might be seen in a very different light. Greater weight might be given to the harm that might follow from disclosure of the information than might otherwise be the case. As the FOI Guidelines note at [6.27]:
“To conclude that, on balance, disclosure of a document would be contrary to the public interest is to conclude that the benefit to the public resulting from disclosure is outweighed by the benefit to the public of withholding the information. The decision maker must analyse, in each case, where on balance the public interest lies based on the particular facts of the matter at the time the decision is made.”
Paragraph [6.11] of the FOI Guidelines note that each of the conditional exemptions, other than that in s 47C, may require a balancing of public interest and non-public interest factors in determining whether access under the FOI Act would have the effect specified in each. It goes on to emphasise that:
“… this is not a determination of where on balance the public interest lies as s 11A(5) requires a decision maker to separately undertake an balancing exercise of public interest factors. Section 11A(5) does not allow room for a consideration of factors that cannot be framed in terms of the public interest, or aspects of it. …”[72]
[72] Citations omitted
The FOI Guidelines expand upon the four factors identified in s 11B(3) as favouring access by giving examples. They then go on to add another seven factors, some of which are supported by reference to authorities. The factors listed in [6.19] are:
“(a) promotes the objects of the FOI Act, including to:
i.inform the community of the Government’s operations, including, in particular, the policies, rules, guidelines, practices and codes of conduct followed by the Government in its dealings with members of the community
ii.reveal the reason for a government decision and any background or contextual information that informed the decision
iii.enhance the scrutiny of government decision-making
(b)inform debate on a matter of public importance, including to:
i.allow or assist inquiry into possible deficiencies in the conduct or administration of an agency or official …
ii.reveal or substantiate that an agency or official has engaged in misconduct or negligent, improper or unlawful conduct
iii.reveal deficiencies in privacy or access to information in legislation …
(c)promote effective oversight of public expenditure
(d)allow a person to access his or her personal information, or
i.the personal information of a child, where the applicant is the child’s parent and disclosure of the information is reasonably considered to be in the child’s best interests
ii.the personal information of a deceased individual where the applicant is a close family member (a close family member is generally a spouse or partner, adult child or parent of the deceased, or other person who was ordinarily a member of the person’s household)
(e)contribute to the maintenance of peace and order
(f)contribute to the administration of justice generally, including procedural fairness …
(g)contribute to the enforcement of the criminal law
(h)contribute to the administration of justice for a person
(i)advance the fair treatment of individuals and other entities in accordance with the law in their dealings with agencies
(j)reveal environmental or health risks of measures relating to public health and safety and contribute to the protection of the environment
(k)contribute to innovation and the facilitation of research”[73]
[73] Citations omitted
The FOI Guidelines also set out in [6.22] a non-exhaustive list of factors that do not favour disclosure of documents. Omitting those relating to personal information or relevant to an individual, they are:
“(a) …
(b)…
(c)could reasonably be expected to prejudice security, law enforcement, public health or public safety
(d)could reasonably be expected to impeded the administration of justice generally, including procedural fairness
(e)…
(f)could reasonably be expected to impede the protection of the environment
(g)could reasonably be expected to impede the flow of information to the police or another law enforcement or regulatory agency
(h)could reasonably be expected to prejudice an agency’s ability to obtain confidential information
(i)could reasonably be expected to prejudice an agency’s ability to obtain similar information in the future
(j)could reasonably be expected to prejudice the competitive commercial activity of an agency
(k)could reasonably be expected to harm the interests of an individual or group of individuals
(l)could reasonably be expected to prejudice the conduct of investigations, audits or reviews by the Ombudsman or Auditor-General …
(m)could reasonably be expected to discourage the use of agency’s access and research services …
(n)could reasonably be expected to prejudice the management function of an agency
(o)could reasonably be expected to prejudice the effectiveness of testing or auditing procedures”[74]
[74] FOI Guidelines at [6.22] (Citations omitted)
I would add to these points the following principles drawn from the cases:
(1)“… The public interest is a concept of wide meaning and not readily delimited by precise boundaries. Opinions have differed, do differ and doubtless always will differ as to what is or is not in the public interest. …”[75]
(2)“… [A] question about ‘the public interest’ will seldom be properly seen as having only one dimension. …”[76]
(3)There is a “… distinction between the public interest and a matter of public interest. The public interest is a term embracing matters, among others, of standards of human conduct and of the functioning of government and government instrumentalities tacitly accepted and acknowledged to be for the good order of society and for the well being of its members. The interest is therefore the interest of the public as distinct from the interest of an individual or individuals: Sinclair v Mining Warden at Maryborough [1975] HCA 17; (1975) 132 CLR 473, at p. 480, per Barwick CJ. There are, as appears to be implicit in the quoted passage of the judgment of Morris LJ in Ellis v Home Office (supra), several and different features and facets of interest which form the public interest. On the other hand, in the daily affairs of the community events occur which attract public attention. Such events of interest to the public may or may not be ones which are for the benefit of the public; it follows that such form of interest per se is not a facet of the public interest….”[77]
(4)“ It is plain that the categories of public interest are not closed and that different minds will differ as to what is, or what is not, in the public interest. …”[78]
(6)“… [T]he expression ‘in the public interest’, when used in a statute, classically imports a discretionary value judgment to be made by reference to undefined factual matters, confined only ‘in so far as the subject matter and the scope and purpose of the statutory enactments may enable … given reasons to be [pronounced] definitely extraneous to any objects the legislature could have had in view’: Water Conservation and Irrigation Commissioner (NSW) v Browning … [(1947) 74 CLR 492 at 505], per Dixon J. …”[79]
(7)Where the public interest lies in a particular matter “… will often depend on a balancing of interests including competing public interests …”.[80]
[75] Right to Life Association (NSW) Inc v Secretary, Department of Human Services and Health [1995] FCA 1060; (1995) 56 FCR 50; (1995) 128 ALR 238; 37 ALD 357 (Lockhart, Beaumont and Gummow JJ) at [34]; 59; 245; 364 per Lockhart J
[76] McKinnon v Secretary, Department of Treasury [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516; 43 AAR 151; 80 ALJR 1549; 63 ATR 409 at [55]; 444; 202; 531; 167; 1561; 424 per Hayne J
[77] Director of Public Prosecutions v Smith [1991] VicRp 6; [1991] 1 VR 63; (1991) 100 FLR 6 at 76; 18-19; Kaye, Fullagar and Ormiston JJ and see also Director of Public Prosecutions v Smith [1991] VicRp 6; [1991] 1 VR 63; (1991) 100 FLR 6 at 74; 17 per Kaye, Fullagar and Ormiston JJ
[78] McKinnon v Secretary, Department of Treasury [2005] FCAFC 142; (2005) 145 FCR 70;[79] O’Sullivan v Farrer [1989] HCA 61; (1989) 168 CLR 210; 89 ALR 71; 64 ALJR 87 at 216; 74; 89 per Mason CJ, Brennan, Dawson and Gaudron JJ; Toohey J dissenting
[80] McKinnon v Secretary, Department of Treasury [2005] FCAFC 142; (2005) 145 FCR 70; 220 ALR 587; 88 ALD 12; 41 AAR 23 at [231]; 139; 653; 78; 92 per Jacobson J with whom Tamberlin J agreed, citing Sankey v Whitlam (1978) 142 CLR 1 at 60 per Stephen J
As the FOI Guidelines conclude, the approach to be taken is:
“6.25 The decision maker must determine whether access to a conditionally exempt document is, at the time of the decision, contrary to the public interest, taking into account the factors for and against disclosure. The timing of the request may be important. For example it is possible that certain factors may be relevant when the decision is made, but would not be relevant if the request were to reconsidered some time later. In such circumstances a new and different decision could be made.
6.26 In weighing the factors for and against release of a document, it is not sufficient simply to list the factors. The decision maker’s statement of reasons must explain the relevance of the factors and the relative weights given to those factors (s 26(1)(aa)) (see Part 3).
6.27 To conclude that, on balance, disclosure of a document would be contrary to the public interest is to conclude that the benefit to the public resulting from disclosure is outweighed by the benefit to the public of withholding the information. The decision maker must analyse, in each case, where on balance the public interest lies based on the particular facts of the matter at the time the decision is made.”
CONSIDERATION
There is a clear public interest in ensuring that those who are asked to invest in securities, including shares in a company incorporated in Australia, are properly informed so that they may weigh the nature of the investment and make their own judgment of the risks associated with it and the extent, if any, to which they wish to make the investment. Part 6D of the Corporations Act is the legislative interpretation of that public interest. It imposes on a body such as KPC an obligation to disclose and sets the parameters of that obligation by prescribing the nature of the information that must be disclosed. I have outlined that obligation and those parameters above.
It is also in the public interest that there is oversight to ensure that bodies meet their obligations. Responsibility for that oversight is given to ASIC. There is a public interest in ASIC’s carrying out its responsibility. Given the nature of the obligations imposed by Part 6D, it is inevitable that ASIC will be engaged in considering the business of the body offering the securities and its commercial and financial affairs. KPC’s rationale for inviting investment in its shares was because it had moved from being an exploration company focusing on acquisition, exploration and development of mining assets in Australia to a company that would hold substantial potash resources in Kazakhstan through the acquisition of companies that held the exploration and production rights to those deposits. That meant that it had to consider, and comply with, its disclosure obligations under Part 6D in light of that rationale. Consequently, its business, commercial and financial affairs would come under consideration by ASIC to ensure that it had done so. It was also inevitable that ASIC would examine the affairs of those bodies holding the licences and production rights to the potash and from whom KPC sought to acquire them. ASIC would do so in order to ensure that, as required by s 710 of the Corporations Act, the prospectus contained all the information that investors and their professional advisers would reasonably require to make an informed assessment of the rights and liabilities attaching to the shares that were offered and the assets and liabilities, financial position and performance, profits and losses and prospects of KPC.
While ASIC is carrying out its obligations, a body that is an entity listed on the ASX, as KPC is, has separate duties to ASX. Mr Butler referred to the Listing Rules and I have set out Rules 3.1 and 11.1, in so far as they are relevant, at FN 44 above. Those rules require a listed entity to notify the ASX of significant changes to the nature and scale of its activities to be approved by shareholders. An entity may have to re-comply with the Chapters 1 and 2 of the Listing Rules to be re-listed. I have taken it as a matter of known fact that the ASX includes on its website Announcements released by each listed entity. Some of these announcements are generated at the instigation of the listed entity and some in response to queries by the ASX. Under Listing Rule 18.7A, a copy of any query made by the ASX is included in those Announcements and released to the market. I mention this merely to note that listed entities are subject to the scrutiny of the ASX and, through the ASX’s listing of “Announcements” in relation to each listed entity, the public is able to have insight into any queries it makes and any responses by listed entities. Its business, commercial or financial affairs are open to public scrutiny to the extent that they are raised in any queries made by the ASX and answered by the listed entity. That is part of the environment in which a listed entity conducts its business.
It is apparent from the replacement prospectus issued by KPC on 28 January 2014 that it is familiar with the JORC Code.[81] The JORC Code has been endorsed by The Australasian Institute of Mining and Metallurgy and the Australian Institute of Geoscientists. It has been adopted by, and included in, the Listing Rules of the ASX. Under the Listing Rules, Public Reports prepared by an entity must be prepared in accordance with Listing Rules 5.7 to 5.24 and the JORC Code reproduced in Appendix 5A to those rules if, among other matters, the report includes a statement relating to mineral resources.[82] Certain reports must include a statement that the information provided is an accurate representation of the available data and studies for the material mining project. That statement is made by a Competent Person.[83] Clause 4 of the Code provides:
“The principles governing the operation and application of the JORC Code are Transparency, Materiality and Competence.
∙Transparency requires that the reader of a Public Report is provided with sufficient information, the presentation of which is clear and unambiguous, to understand the report and not be misled by this information or by omission of material information that is known to the Competent Person.
∙Materiality requires that a Public Report contains all the relevant information that investors and their professional advisers would reasonably require, and reasonably expect to find in the report, for the purpose of making a reasoned and balanced judgment regarding the Exploration Results, Mineral Resources or Ore Reserves being reported. Where relevant information is not supplied an explanation must be provided to justify its exclusion.
∙Competence requires that the Public Report be based on work that is the responsibility of suitably qualified and experienced persons who are subject to an enforceable professional code of ethics (the Competent Person).
Transparency and Materiality are guiding principles of the Code, and the Competent Person must provide explanatory commentary on the material assumptions underlying the declaration of Exploration Results, Mineral Resources or Ore Reserves.
In particular, the Competent Person must consider the benchmark of Materiality is that which includes all aspects relating to the Exploration Results, Mineral Resources or Oil Reserves that an investor or their advisers would reasonably expect to see explicit comment on from the Competent Person. The Competent Person must not remain silent on any material aspect for which the presence or absence of comment could affect the public perception or value of the mineral occurrence.”
[81] Exhibit JP3; Tab 10 at 89-97
[82] Listing Rules; rule 5.6
[83] Listing rules; rule 5.12.10
Obligations of this sort imposed by the JORC Code and the Listing Rules more generally are also part of the environment in which a listed mining or resources company such as KPC conducts its business. Transparency to a level described in the JORC Code and the Listing Rules is required. So is transparency required to the level described in Part 6D of the Corporations Act when an offer is made to the market to purchase shares in KPC. Not only does an Australian listed company such as KPC know this but so too will those with whom it deals be they in Australia or overseas. Those with whom KPC was dealing, whether they be potential financiers or Kazakhstani authorities, can be expected to know that a certain level transparency is required in Australia. They can reasonably be expected to know that ASIC has a duty to issue a Statement of Concerns if it has queries regarding compliance with the requirements of Part 6D. They can see variations between the prospectus issued on 12 December 2013 and the replacement prospectus issued on 28 January 2014. Those variations may have been made for any number of reasons, which may, or may not, be found in the Statement of Concerns. The point that may be made, though, is that an examination of the prospectus and the replacement prospectus might reasonably raise questions in the minds of those with whom KPC was dealing as to why certain matters were addressed in one but not the other.
Disclosing the contents of ASIC’s Statement of Concerns at a time before KPC issued its replacement prospectus might have been regarded as an unreasonable disclosure of KPC’s business affairs. Had ASIC held a hearing in accordance with s 739(2) of the Corporations Act, disclosing the contents before that hearing, which would have been conducted in private, and before any final order had been made might have been regarded as unreasonable disclosure. Had KPC decided not to proceed with the share issue, disclosure might have been regarded as unreasonably disclosure. Once it had decided to issue a replacement prospectus, which seems not to have raised ASIC’s concerns, the subject matter of the Statement of Concerns becomes historical as part of the regulatory process.
Mr Marcou has asserted that potential financier and Kazakhstani authorities will have a negative perception of the Statement of Concerns and that, in turn, will harm KPC’s relationships. Without any evidence of particular relationships that have been harmed, I do not accept that this is so. As I have said, those groups will already be aware from publicly available documents in the form of the prospectus and replacement prospectus that there are variations in the information available in each. Questions can arise from those variations but, equally, the information in the replacement prospectus implicitly reflects KPC’s response to questions that might arise from ASIC’s Statement of Concerns should it be disclosed under the FOI Act. It may be that there are concerns expressed by ASIC that remain unanswered on that basis but, at this stage, they are of historical interest only. KPC has moved on. Given the time frame within which ASIC must act under Part 6D and in view of the replacement prospectus, it is difficult to see how the content of the Statement of Concerns would, or could reasonably be expected to, unreasonably affect KPC adversely in respect of its business, commercial or financial affairs.
I have also taken into account Mr Toll’s correspondence with ASX on 18 February 2015 between the date of ASIC’s decision and the review of that decision by the Information Commissioner. In that letter, Mr Toll drew attention to what he believed to be significant breaches of the ASX Listing Rules. The essence of those breaches lay in what he said were KPC’s repeated failures to comply with the “Continuous Disclosure” provisions of the ASX’s listing rules and particularly those set out in Listing Rule 3.1.[84] I have no evidence to suggest that the contents of Mr Toll’s letter is in the public arena but he was the Executive Chairman of Satimola, whose shares KPC sought to acquire and which controlled corporate bodies that held sub-soil licences to the potash deposits. He wrote harshly about KPC and its efforts to comply with its agreement with Satimola. All that I draw from that is that KPC’s difficulties in obtaining financing were not unknown to Satimola and to those from whom, to that time, KPC had sought finance.
[84] See FN 44 above
Taking all of these matters into account, I have concluded that disclosure of the contents of the Statement of Concerns would not, or could not reasonably be expected to, unreasonably affect KPC adversely in respect of its lawful business, commercial or financial affairs. Therefore, the Statement of Concerns is not conditionally exempt under s 47G(1)(a) of the FOI Act. As it is not conditionally exempt, I do not need to consider whether disclosure would be contrary to the public interest within the meaning of s 11B of the FOI Act.
For the reasons I have given, I affirm the decision of the Information Commissioner dated 25 November 2016.
| I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for the decision herein of Deputy President |
....................[sgd]..................................................
Associate
Dated: 26 November 2019
| Counsel for the Applicant: Solicitor for the Applicant: Solicitor for the Respondent: | Mr Alexander Solomon-Bridge Rajeev Pillay Ms Elizabeth Lee Self-represented |
“Once an entity is or becomes +aware of any +information concerning it that a reasonable person would expect to have a material effect on the price or value of the entity’s +securities, the entity must immediately tell ASX that information.…
Note: Section 677 of the Corporations Act defines material effect on price or value. …
Non-exhaustive examples of the type of information that, depending on the circumstances, could require disclosure by an entity under this rule:
·a transaction that will lead to a significant change in the nature or scale of the entity’s activities (see also Listing Rule 11.1 and Guidance Note 12 Significant Changes to Activities);
·…”
Chapter 11 is entitled “Significant transactions”.
“11.1 If an entity proposes to make a significant change, either directly or indirectly, to the nature or scale of its activities, it must provide full details to ASX as soon as practicable. It must do so in any event before making the change. The following rules apply in relation to the proposed change.
11.1.1the entity must give ASX information regarding the change and its effect on future potential earnings, and any information that ASX asks for.
11.1.2If ASX requires, the entity must get the approval of holders of its ordinary securities and must comply with any requirements of ASX in relation to the notice of meeting. The notice of meeting must include a +voting exclusion statement.
11.1.3If ASX requires, the entity must meet the requirements in chapters 1 and 2 as if the entity were applying for admission to the +official list.”
220 ALR 587; 41 AAR 23; 88 ALD 12; 80 ALJR 1549; 63 ATR 409; Tamberlin, Conti and Jacobson JJ at [246]; 142; 655; 94; 80; 1569; 434 per Jacobson J approved by Callinan and Heydon JJ in McKinnon v Secretary, Department of Treasury [2006] HCA 45; (2006) 228 CLR 423; 229 ALR 187; 91 ALD 516; 43 AAR 151 at [93]; 456; 212; 541; 177
0
17
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