Leadenhall Australia and Australian Securities and Investments Commission
[2018] AATA 4612
•7 December 2018
Leadenhall Australia and Australian Securities and Investments Commission [2018] AATA 4612 (7 December 2018)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s): 2018/4217
Re:Leadenhall Australia
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Deputy President Britten-Jones
Date:7 December 2018
Date of written reasons: 14 December 2018
Place:Adelaide
For the reasons given orally at the conclusion of the hearing in this matter, the Tribunal affirms the decision under review
..........................[Sgnd]...........................................
Deputy President Britten-Jones
Catchwords
CORPORATIONS – Tracing of beneficial ownership of shares – Whether disclosure notice should be issued under s 672A(1) to require disclosure under s 672B – Whether ordering disclosure would be unreasonable in all the circumstances – Whether a person can be directed to disclose the details of another person who has a relevant interest in any shares in the company – Decision under review affirmed.
Legislation
Corporations Act 2001, ss 602, 672A and 672B
Cases
Re North Broken Hill Holdings Limited (1986) 10 ACLR 270; (1986) 4 ACLC 131
Re Murchison Holdings (2009) 235 FLR 417; (2009) 76 ACSR 50REASONS FOR DECISION
Deputy President Britten-Jones
14 December 2018
At the conclusion of the hearing of the above matter, the terms of the decision intended to be made and the reasons therefore were stated orally. After the giving of the oral reasons, the parties, pursuant to subsection 43(2A) of the Administrative Appeals Tribunal Act 1975, requested the Tribunal to provide a statement in writing of the reasons of the Tribunal for its decision.
The oral reasons for decision have been transcribed. Some minor amendments and additions have been made to that transcript. Whereas those oral reasons, as amended, may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.
The said transcript is annexed hereunto and furnished to the applicant and to the respondent as it is the reasons for the Tribunal’s decision.
I certify that the following twenty five (25) paragraphs are a true copy of the reasons for the decision herein of Deputy President Britten-Jones.
4.
.............................[Sgnd]...........................................
Administrative Assistant Legal
Dated: 14 December 2018
Date(s) of hearing: 6 and 7 December 2018 Advocate for the Applicant: Mr G Finlayson Solicitors for the Applicant: Diaspora Legal Advocate for the Respondent: Ms G Walker Solicitors for the Respondent: Australian Securities and Investments Commission ORAL DECISION OF DEPUTY PRESIDENT BRITTEN-JONES
DEPUTY PRESIDENT: This is an application for review of a decision by the Australian Securities and Investment Commission, the respondent, to refuse an application for notice of beneficial ownership to be issued under s 672B of the Corporations Act 2001 (the Act). The decision under review was made on 9 July 2018 in respect to the application requesting notice of beneficial ownership lodged with the respondent on 8 June 2018. The respondent provided a statement of reasons on 13 August 2018. No witnesses were called by either party, and the matter proceeded on the papers.
In making my decision I have taken into account the oral and written submissions of the parties, including the cases provided today by the applicant’s solicitor. The issue for the tribunal is whether it should exercise its powers under s 672A(1) to direct Janine Marie Squires as a shareholder in Kogi Iron Limited, the company, to make the disclosure required by s 672B.
Section 672A(1) is found within Chapter 6 of the Act, relating to takeovers. Part 6C.2 of that chapter provides for the tracing of beneficial ownership of shares. It provides a procedure to enable the respondent, or a listed public company, to trace the beneficial ownership of that company’s shares. It is frequently the case that the registered holder of shares is not the beneficial owner. It is common for shares to be registered in the name of a nominee, or for the registered holder to have some arrangement with another person which gives that other person a substantial degree of control over voting or disposal of the shares.
Section 672A(2) allows any member of the company, such as the applicant, to require the respondent to initiate the procedure with respect to tracing beneficial ownership of shares, and the respondent has the obligation to do so unless it would be unreasonable. The respondent, in making its decision on 9 July 2018, formed the view that it would be unreasonable, in all the circumstances, to give a direction to Ms Squires in relation to her relevant interests in the company. The applicant contends that there is no foundation for the respondent’s view.
The facts are largely uncontentious, and they can be set out as follows: the applicant was, at all relevant times, the registered holder of shares in the company, and has the necessary standing to make the application. Ms Squires and Mr Terry John Squires were, at all relevant times, the joint registered holders of 3,415,000 shares in the company. Mr and Ms Squires held shares in the company as trustee for the Terry Squires Personal Superannuation Funds.
On 10 May 2018 a notice of initial substantial holder, under s 671B of the Act, was lodged with the company on behalf of nine registered holders of shares in the company, including Mr and Ms Squires. The notice stated that by virtue of s 12(2)(b) of the Act, the shareholders in question were associated with persons who had issued a notice of intention to move a resolution to remove directors of the company. That resolution was to be moved at a general meeting requisitioned by those same shareholders, by a notice also dated 10 May 2018. Those shareholders held a total of 58,813,916 shares in the company.
On 8 June 2018 the applicant lodged the application requesting notice of beneficial ownership with the respondent, seeking that the respondent direct that Ms Squires disclose the information identified in s 672B of the Act. That application named Ms Squires as the shareholder who would receive the requested notice, and identified the relevant parcel of shares as being 3,415,000 in number. In response to the question as to why the market in shares of the company would be better informed if the information was disclosed, the applicant said, in Part 5 of the application, as follows:
The shareholders filing the substantial shareholder notice dated 11 May 2018, also gave, on the same day, a notice pursuant to section 249D of the Corporations Act, to remove and replace three out of the five directors of Kogi Iron Ltd. In filing the substantial shareholder notice they refer to section 12(2) of the Corporations Act, which refers to relevant agreement, and it is material to the interests of shareholders to understand what that agreement is, and how it may relate to the future conduct and control of KFE. Despite requests for information, the requisitioning shareholders have refused to provide a copy of the relevant agreement, or other information, and there are serious questions about the proper purpose of the section 249D notice, and the future intent of the requisitioning shareholders.
The application was sent by the applicant’s lawyer to the respondent by email on 8 June 2018, with a covering note that said, relevantly:
Leadenhall Australia Pty Ltd requests that ASIC issue a direction to Janine Marie Squires to produce all required information in respect of the relevant interests in voting shares in Kogi Iron Limited (including her relevant interest in the shareholdings registered to Scorpius Nominees Pty Ltd, Terry John Squires, Rodney Malcolm Hogg, Matthew Hogg, Arina Management Pty Ltd, Premier Cru Pty Ltd), in particular the relevant agreement referred to in the notice of substantial shareholding lodged with the ASX on 10 May 2018.
On 21 June 2018, the respondent wrote to Mr and Ms Squires and other shareholders in the initial substantial shareholder notice, and requested that they lodge a new notice which provided information, including details as to any relevant agreement or circumstances through which they acquired a relevant agreement in the voting shares in the company.
On 22 June 2018 a notice of change of interests of substantial holder was lodged with the company on behalf of those shareholders, and added a further five shareholders to the substantial holder (I will call them the voting shareholders) and identified that they had agreed to vote with persons who have issued a notice of intention to move a resolution to move directors of the company.
On 2 July 2018 a general meeting of the company was held, and the resolutions put forward by the voting shareholders relevantly failed. On 4 July 2018 a notice of change of interests of substantial holder was lodged with the company on behalf of the voting shareholders, stating that those persons had agreed to vote at the general meeting of the company in favour of the resolution to remove certain company directors. On 5 July 2018 a notice of ceasing to be a substantial holder was lodged with the company on behalf of the voting shareholders, noting that those persons had ceased to be associated. The decision under review was made by the respondent a few days later, on 9 July 2018.
The legislation that I consider relevant can be found in s 602 of the Act, which sets out the purposes of Chapter 6, which includes to ensure that the holder of shares and directors of the company know the identity of any person who proposes to acquire a substantial interest in the company. I also refer to ss 672A and 672B. The underlying legislative rationale behind the tracing laws was stated in Re North Broken Hill Holdings Limited (1986) 10 ACLR 270; (1986) 4 ACLC 131 at 142, and I quote:
The purpose of the tracing laws is to promote an informed market for the shares in public companies, and to prevent substantial transactions on an uninformed market. A practical means adopted for effecting this purpose is to compel disclosure of ultimate control of purchased shares by compelling disclosure of all links in the chain, between the purchaser on the record in the person who controls the shares purchased, and requiring registration of the facts disclosed.
Further, in the case of Re Murchison Holdings (2009) 235 FLR 417; (2009) 76 ACSR 50, Robson J said that:
The purpose of the tracing notice provisions is enunciated in section 602, which contains an implied purpose of enabling companies to ascertain relevant interests in their shares, and in turn protect against any breach of the substantial holding disclosure requirements of Part 6C(1).
The applicant contended, by its statement of facts, issues, and contentions, that the tribunal ought to issue a direction that Janine Marie Squires disclose to ASIC, firstly, full details of her own relevant interests in the shares and of the circumstances that gave rise to those interests; secondly, the name and address of each other person who has a relevant interest in any of the shares or interests, together with certain details; and thirdly, the name and address of each person who has given her instructions about the shares.
The applicant further contended, by its statement of facts, issues, and contentions in reply, that the notices lodged on 10 May, 22 June, 4 July and 5 July 2018 are incorrect and misleading to the extent that they omit, firstly, the relevant interest of Ms Squires in the shares held by Scorpius Nominees Pty Ltd; secondly, the relevant interest that Mr Squires has in the shares held by Scorpius Nominees Pty Ltd; thirdly, the relevant interest that Mr and Ms Squires have in the shareholding of Scorpius Nominees; fourthly, disclosure of the details of the nature of the association between Scorpius Nominees Pty Ltd and each of Mr and Ms Squires; and fifthly, reference to certain persons and a company named as associates.
It is not in dispute that Ms Squires has disclosed that she is the joint owner, together with Mr Squires, in shares in the company as trustee for the Terry Squires Personal Superannuation Funds. Consequently, any direction to disclose such information under s 672A would be unnecessary. The applicant contends that s 672B(1) should be construed so as to require a person given a direction under s 672A to disclose not only the full details of their own relevant interest in shares held by them, but also the details of any other person who has a relevant interest in any shares in the company.
The applicant contends that insofar as that information is not known to the person, then disclosure need not be made as set out in s 672B(1)(a). The applicant conceded that it would be unreasonable to give a direction requiring Ms Squires to disclose details of all other persons who hold shares in the company, but said that the construction of s 672B(1)(b) requires that she discloses details of those persons who have a relevant interest in all of the shares held by the voting shareholders, which amounts to 58,813,916 shares.
I reject the applicant’s contention with respect to the construction of s 672B(1). The respondent may issue a direction to a member of a company to make the disclosure required by s 672B. Unless the respondent considers that it would be unreasonable, the respondent must exercise its powers to make such a direction. The person given the direction, in this case Ms Squires, must disclose, first, full details of their own relevant interest in their own shares, and of the circumstances that give rise to that interest; and second, the name and address of each other person who has a relevant interest in those same shares.
The shares referred to in s 672B(1)(b) are the shares held by Ms Squires, namely the 3,415,000 shares in the company. They are not the shares held by any other person or entity. Section 672A would be virtually unworkable if it applied to not just the shares held by the relevant member, but all shares in the company held by other persons. The contentions of the applicant are misconceived insofar as it considers that if Ms Squire was given a direction, then she would need to disclose any information about shares in the company beyond the 3,415,000 shares held by her jointly with her husband.
Ms Squires has already disclosed that she owns the 3,415,000 shares jointly with her husband, as trustee for the Terry Squires Personal Superannuation Funds. That would be the extent of the disclosure required by her if a direction were to be made under s 672A(1). It is unnecessary and would be unreasonable for a direction to be made compelling Ms Squires to make disclosure that she has already given.
It is noted that the applicant has not sought that a direction be given to any of the other voting shareholders about whose shares the applicant would appear to seek information. For example, there is no reason why the applicant could not have sought a direction to Scorpius Nominees Pty Ltd, or any of the other associates referred to by the applicant.
I accept the contention of the respondent that the power to direct disclosure of particular information contained in ss 672A and 672B is directed at ascertaining the identity of the ultimate beneficial owners of securities, and it is not for the purpose of ascertaining information otherwise to be provided under s 671B of the Act.
The applicant’s primary purpose in making the application was to compel disclosure of the agreement between the various voting shareholders with respect to the notice of intention to move a resolution to remove directors of the company. The existence of any such agreement is not relevant to the question of the true beneficial ownership of the shares held by Ms Squires in the company. In any event, such an agreement has no current relevance to the shareholding in the company, given that the voting shareholders filed a notice of ceasing to be a substantial holder on 5 July 2018.
Insofar as the applicant maintains any contention that the tribunal has no jurisdiction, I reject that contention. Section 1317B(1) provides that applications may be made to the tribunal for review of a decision made under the Act, by the respondent. The decision made by the respondent to refuse the application to give a notice of beneficial ownership is such a decision. In all of the circumstances the respondent was justified in not exercising its powers under s 672A to direct Ms Squires to make the disclosure required by s 672B. Standing in the shoes of the original decision maker, I consider that it would be unreasonable to make such a decision.
The decision of the tribunal is to affirm the decision under review.
END OF ORAL DECISION
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