Skip to content.

Home

Allens Arthur Robinson

Client Update: Mergers & Acquisitions – 1 February 2008

High Court reasons deliver certainty on Takeovers Panel's powers

In brief: The High Court has handed down its reasons for the orders it made last year in the Alinta litigation. The court's reasons confirm that the Takeovers Panel has the power to declare 'unacceptable circumstances' based on contraventions of the Corporations Act 2001 (Cth). Partners Paul Nicols (view CV) and Andrew Finch (view CV) and Senior Associate Chris Peadon report.

Introduction

In AAR Client Update: Mergers & Acquisitions – 13 December 2007, we reported that the High Court had ordered that the power of the Takeovers Panel (the Panel) to declare 'unacceptable circumstances' based on a contravention of the Corporations Act 2001 (Cth) was valid. The validity of the power had been challenged on the basis that it conferred a Commonwealth judicial power on a non-judicial body. The High Court delivered its reasons yesterday for that decision.1 The High Court indicated that:

  • it saw commercial desirability in the Panel (and not courts) dealing with certain issues arising out of takeovers; and
  • in its view Parliament had taken care in drafting the legislation to ensure that the Panel's functions do not involve the impermissible exercise of judicial power.2
The facts

In short, after Alinta Limited (Alinta) and The Australian Gas Light Company (AGL) announced an agreement to merge their infrastructure assets (including AGL's holding of 30 per cent of the units issued by the Australian Pipeline Trust (APT)), a subsidiary of Alinta purchased approximately 10.25 per cent of the units issued by APT. The responsible entity of APT sought a declaration of unacceptable circumstances from the Takeovers Panel under section 657A of the Corporations Act on the basis that the subsequent purchase of the units contravened s606 of the Corporations Act. In broad terms, that section prohibits acquisitions of further interests from a starting point of above 20 per cent and below 90 per cent, except in certain circumstances (none of which was relevant). The Panel made the declaration sought and ordered that the subsequently acquired units be vested in the Australian Securities and Investments Commission (ASIC).

Court proceedings

Alinta applied to the Federal Court for a review of the Panel's decision under the Administrative Decisions (Judicial Review) Act 1977 (Cth), on the basis that s657A of the Corporations Act was invalid by reason that it conferred a judicial power of the Commonwealth on a non-judicial body (ie the Panel). The application was dismissed at first instance, but allowed by the Full Federal Court. In allowing the appeal from the Full Federal Court, the High Court held that the following factors indicated that the Panel was exercising administrative (and not judicial) power:

  • The Panel had to consider broad policy criteria (and not just whether there had been a contravention of the Corporations Act) in determining whether to make a declaration of unacceptable circumstances.
  • While the Corporations Act prohibits persons other than specified government authorities (eg ASIC) commencing court proceedings in relation to a takeover bid or a proposed takeover bid, that prohibition expires at the end of the bid period.
  • The Panel has the power to create new rights and obligations, and is not concerned with determining past controversies. Any findings the Panel makes about past facts is solely for the basis of determining what rights and obligations should be created in the future. This means that any declaration or order by the Panel purporting to determine a past controversy (and not create future rights or obligations) may be open to challenge. Moreover, the Panel cannot order that a party comply with a requirement of Chapter 6, 6A, 6B, or 6C of the Corporations Act.
  • The Panel cannot enforce its own orders. Orders of the Panel can only be enforced by a court. The court determines the binding effect of the order, and determines whether a person has committed an offence under s657F of the Corporations Act by failing to comply with an order.

As referred to in the introduction above, various members of the court acknowledged the desirability of ensuring that the Panel remains the principal forum for resolving disputes under the Corporations Act during the course of takeovers.

Analysis

The reasons delivered by the High Court clarify recent uncertainty as to the powers of the Panel and affirm the Panel's powers to consider applications for unacceptable circumstances on the basis that circumstances constitute or give rise to a contravention of the takeover provisions of the Corporations Act. However, the decision does not affect the right of a party to challenge a decision of the Panel on administrative law grounds (eg failing to take into account relevant considerations).

Footnotes
  1. Attorney-General of the Commonwealth of Australia v Alinta Ltd [2008] HCA 2.
  2. [2008] HCA 2, [177] (Crennan and Kiefel JJ, with whom Gleeson CJ agreed at [1]).

Return to top

For further information, please contact:

Return to top

Bookmark with

What are these?

Recent Mergers & Acquisitions publications