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Client Update: Mergers & Acquisitions – 13 December 2007

High Court decision restores power to the Takeovers Panel

In brief: The High Court has overturned a decision of the Full Federal Court that had cast uncertainty over the future of the Takeovers Panel. As Lawyer Shelley Golden reports, today's historic decision restores the full powers of the Panel as Australia's principal takeover dispute resolution forum.

The High Court today handed down its decision in Attorney General (Commonwealth) v Alinta Limited, allowing the appeal and finding that the powers vested in the Takeovers Panel by section 657A(2)(b) of the Corporations Act 2001 (Cth), as it then was1, do not contravene Chapter III of the Australian Constitution.

The High Court's ruling results in a restoration of the full powers of the Takeovers Panel, meaning that the Panel may make a declaration of 'unacceptable circumstances' based on contraventions of the Corporations Act.

The High Court heard this case on appeal from the Full Federal Court2, a majority of which, in April this year, held that the former s657A(2)(b) contravened the Constitution, by vesting judicial power in the Panel. In finding the provision to be unconstitutional, the Full Federal Court distinguished earlier High Court decisions on the basis of subsequent legislative changes.

The Full Federal Court's decision had the potential to greatly diminish the powers of the Panel, prompting the Panel to issue a media release on 30 April 2007, stating that it would not accept applications under the former s657A(2)(b), but would continue to accept applications that did not allege, or require a finding that, a party had contravened the Corporations Act. The Panel stated that it was confident that a vast majority of takeover disputes could be framed in terms of the queried, but (at the time) unchallenged3, remaining powers of the Panel under s657A(2)(a) (and from 13 May 2007, by extension, under the new s657A(2)(b)). However, the majority of the Full Federal Court, and subsequent academic commentators, were less optimistic about the Panel's remaining powers and future.

The reasons for the High Court's decision are yet to be handed down. But the decision itself re-establishes the full extent of the Panel's powers under s657A(2). The Panel said today that it would once again accept applications that sought a declaration of 'unacceptable circumstances' based on alleged contraventions of the Corporations Act.4 This will be relevant to future Panel applicants who may otherwise have been faced with more limited options. As the Panel is the primary forum for resolving disputes during a takeover bid, this upholding of the constitutional validity of its powers is a most important decision.

Footnotes
  1. The original provision considered in the case was subsequently amended by the Corporations (Takeovers Amendments) Act 2007 (Cth) on 13 May 2007. The amendments do not affect the basis for the constitutional challenge, but re-numbered (and amended in certain respects) the relevant provision, so that it is now section 657A(2)(c).
  2. Australian Pipeline Limited v Alinta Limited [2007] FCAFC 55
  3. The constitutionality of the remaining provisions is the subject of a current challenge in CEMEX Australia Pty Ltd v McKeon & Ors. This case has been adjourned until February 2008.
  4. TP 07/105

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