REASONS FOR JUDGMENT
FINKELSTEIN J:
1 The Australian Gas Light Company (AGL) and Alinta Limited (Alinta) (now Alinta 2000 Ltd) describe themselves as Australia's leading energy infrastructure companies. They have interests in gas transmission and distribution networks and in electricity generation and distribution networks. By a series of complex agreements made and put into effect in 2006 AGL and Alinta "merged" their respective infrastructure operations. The question has arisen whether as a result of the agreements Alinta acquired a relevant interest in AGL's 30 per cent interest in the Australian Pipeline Trust (APT) (a managed investment scheme) in contravention of s 606 of the Corporations Act 2001 (Cth). Alinta also purchased 10.25 per cent of the units in APT in circumstances which may have resulted in a further contravention of s 606. Australian Pipeline Ltd (APL), the responsible entity for APT, brought an action seeking declarations that the section had been contravened. The trial judge (Emmett J) found there was no breach. APL appeals that decision.
2 APL also applied to the Takeovers Panel for a declaration under s 657A that the acquisition of the 10.25 per cent parcel was an unacceptable circumstance. The Panel made the declaration. Alinta sought judicial review of the Panel's decision. The judge refused that relief and Alinta appeals from that refusal.
3 It was convenient for both actions to be heard by the same judge as the issues in each were closely related. For the same reason both appeals were heard by a single Full Court.
4 The events begin in March 2006. Alinta was a public company whose shares were on the official list of the Australian Stock Exchange (ASX). On 13 March 2006 AGL announced that it intended to make a takeover bid for Alinta. Section 631 of the Corporations Act required AGL to make its offer for the shares within two months of the announcement. AGL's bidder statement which contained the offer was sent to Alinta's shareholders on 24 April 2006.
5 In the meantime, by what in the 1980s was known as the "pacman defence", Alinta announced that it proposed to make a bid for all the shares in AGL except for the 19.9 per cent it already owned. AGL was also a public company whose shares were on the official list of the ASX. Alinta's bidder statement containing its offer was sent to AGL shareholders in early April 2006. The offers were open for acceptance between 18 April 2006 and 31 May 2006.
6 Some time between 8 am and 9 am Eastern Australian Time on 26 April 2006 Alinta and AGL signed Heads of Agreement (commonly referred to by the parties as HOA) designed to bring to an end their competing hostile takeover bids. By the Heads of Agreement AGL and Alinta agreed to merge their infrastructure businesses. The arrangement was that Alinta shareholders as to 54 per cent and AGL's shareholders as to 46 per cent would, through their shareholding in a new company (then referred to as Merge Co), own all AGL's and Alinta's infrastructure assets. This would require the transfer by AGL to the new entity of assets including its 30 per cent stake in APT. In the Heads of Agreement this interest fell within what were referred to as the "Alinta Scheme Assets". The interest was valued at $363 million. Further, AGL shareholders, through a new company, would own AGL's existing energy assets, together with 33 per cent of Alinta's retail and cogeneration business in Western Australia with an option to acquire the balance over five years.
7 The following provisions in the Heads of Agreement are important. Clause 2 provided that: "AGL and Alinta have agreed all the key terms of their agreement as set out in this Heads of Agreement and intend to be immediately legally bound to the performance of those terms. However, AGL and Alinta agree that those terms will be restated in [a Merger Implementation Agreement] and other relevant transaction documents to give effect to the Transaction (elsewhere defined as Transaction Documents) in a form which will be fuller or more precise but not different in effect and the parties agree to use all reasonable endeavours to agree the MIA by the MIA Sunset Date." Clause 4 recorded that: "Following the implementation of the Alinta Scheme of Arrangement, Alinta's assets will include [among others, AGL's] 30 per cent interest in APT". Clause 16 provided that: "(a) AGL and Alinta will work together in good faith to determine the most efficient structure or structures to effect the implementation of the transactions contemplated by this HOA …; (b) The parties acknowledge that their current preferred structure is interdependent schemes of arrangement structured in the manner described in Schedule 12; (c) The parties agree and acknowledge that they will enter into Transaction Documents that are customary for a transaction of this nature, including [a Merger Implementation Agreement] …". Clause 21 provided that: "Alinta is not permitted to dispose of, or grant any right in, over or in respect of the Alinta Scheme Assets in the period from Completion [defined as the completion of the transaction] to the First Anniversary [defined to mean the day which was one year after Completion]." Clause 23 provided that: "The transfer of the Alinta Scheme Assets is not conditional on approvals from any Public Authority (including ACCC approval)." Clause 30(c) provided that: "The parties' obligations in relation to AGL's securities in APT are subject to the parties obtaining, if necessary, ASIC relief within three months after the date of this HOA and this HOA does not confer any control over voting rights attaching to those APT's securities". It is common ground that the parties did not obtain any "ASIC relief".
8 The means by which it was contemplated that the merger would be implemented was described in Sch 12. In summary those steps were as follows. A company, Merge Co, was to be established with an issued capital of two ordinary shares, one to be held by Paul Anthony (the CEO of AGL) and the other by Robert Browning (the CEO of Alinta). AGL and Alinta would procure a Merge Co subsidiary to acquire the entire issued share capital of Alinta under a scheme of arrangement for a consideration comprising Merge Co ordinary shares (the Alinta scheme). AGL and Alinta would procure the Merge Co subsidiary to acquire the entire issued share capital of AGL under a scheme of arrangement for a consideration comprising Merge Co ordinary shares and Merge Co converting shares (the AGL scheme). AGL and Alinta would procure AGL Energy (now a wholly owned subsidiary of Merge Co) to subscribe for and have issued to it a number of ordinary shares and loan notes in Alinta AGL (a new company) equivalent to 33 per cent of Alinta's WA retail and cogeneration business after the issue. AGL and Alinta would procure that following the implementation of the Alinta scheme and the AGL scheme and the issue of shares and loan notes in Alinta AGL to AGL Energy, Merge Co buy back all Merge Co converting shares in consideration of Merge Co procuring the issue by AGL Energy of AGL Energy shares. Alinta would procure that Merge Co be admitted to the official list of ASX and that all Merge Co ordinary shares be listed for quotation on ASX. AGL would procure that AGL Energy be admitted to the official list of ASX and that all AGL Energy ordinary shares be listed for quotation on ASX.
9 Provision was made for the termination of the Heads of Agreement. Relevantly cl 28(b) provided that the Heads of Agreement would "automatically terminate if the MIA had not been entered into by the MIA Sunset Date" which was defined in the Dictionary in Sch 1 to be 31 May 2006 or later if agreed. In the event, the MIA was not executed until 2 June 2006.
10 The first question that arises is whether by the Heads of Agreement Alinta acquired a relevant interest in AGL's units in APT (the AGL parcel) in contravention of s 606. Alinta admits having acquired a relevant interest in the AGL parcel but says that the interest was acquired before it entered into the Heads of Agreement pursuant to acceptances of offers under its takeover bid.
11 Section 606(1) provides that a person must not acquire a relevant interest in issued voting shares in a company if: "(a) the company is … a listed company …; (b) the person acquiring the interest does so through a transaction in relation to securities …; and (c) because of the transaction, that person's or someone else's voting power in the company increases: (i) from 20% or below to more than 20%; or (ii) from a starting point that is above 20% and below 90%." It is necessary to note that an acquisition of a relevant interest which falls within one of the exceptions in s 611 will not result in a contravention of s 606(1): s 606(1A). An acquisition that results from the acceptance of an offer under a takeover bid is an exempt acquisition: s 611 item 1.
12 Section 608(1) provides that a person has a relevant interest in securities (relevantly shares or an interest in a managed investment scheme) if they are the holder of the securities (s 608(1)(a)); or have power to exercise, or control the exercise of, a right to vote attached to the securities (s 608(1)(b)); or have power to dispose of, or control the exercise of a power to dispose of, the securities (s 608(1)(c)). Further, s 608(3) provides that a person has the relevant interest in any securities that a body corporate has when the person's voting power in that body corporate is above 20 per cent.
13 It was accepted on all sides that if Alinta acquired a relevant interest in the AGL parcel as a result of acceptances of offers under its takeover bid (taking it over the 20 per cent threshold and invoking s 608(3)) then whatever interest Alinta acquired under the Heads of Agreement in relation to that parcel would not result in a breach of s 606. This is because in that circumstance Alinta could not "acquire" an interest in securities in which it had already acquired an interest: see for example TVW Enterprises Ltd v Queensland Press Ltd [1983] 2 VR 529, although decided under a differently worded provision. The first issue to be considered, therefore, is whether Alinta had acquired more than 20 per cent of AGL shares before the Heads of Agreement were signed. For this task it is necessary to refer to further facts.
14 As at 25 April 2006 Alinta held 19.98 per cent of the issued capital of AGL. The Heads of Agreement were signed between 8am and 9am on the following day. On that day Alinta received acceptances in respect of a further 175,261 AGL shares, some 0.04 per cent of the capital. Of these, 77 acceptances related to 107,507 shares that were CHESS offeror initiated acceptances. CHESS is the acronym for the Clearing House Electronic Sub-register System operated by ASX Settlement and Transfer Corporation Pty Ltd (ASTC), a subsidiary of ASX. The acceptances were "processed" on 26 April 2006. So, at some point during that day Alinta's interest in AGL increased to 20.02 per cent and, by the operation of s 608(3), it picked up a relevant interest in the AGL parcel. The question is whether the acceptances that were received on 26 April 2006 were processed before or after the Heads of Agreement were signed. If they were processed before 8am, there could be no finding of a contravention of s 606 whatever the effect of the Heads of Agreement. If they were processed after 9am, and if Alinta acquired a relevant interest in the AGL parcel by virtue of the Heads of Agreement, there would be a breach of s 606. If they were processed between 8am and 9am it would be impossible to determine whether or not the relevant interest was acquired in breach of s 606.
15 Before answering the question raised I must also refer to s 653A. That section provides that if "(a) an offer is made under an off-market bid for quoted securities; and (b) regulations made for the purposes of this paragraph set out any requirements for the manner in which the acceptance of the offer … must be complied with; an acceptance of the offer for those securities is effective only if it is made in that way". Regulation 6.8.01 of the Corporations Regulations is also relevant. It provides that "if the operating rules of a prescribed CS facility require an acceptance of an offer to which paragraph 653A(a) applies to be made in a particular way … the acceptance must be made in that way".
16 ASTC is a prescribed CS facility. A "CS facility" is a clearing and settlement facility (that is, an entity which provides a mechanism for parties to meet obligations arising from transactions in the financial markets) which is licensed as such under the Act. ASTC has rules which provide for the means by which takeover offers in relation to securities held in a CHESS holding must be accepted. The rules are known as the ASTC Settlement Rules. The applicable rule is r 14.14 which is headed "Takeover Acceptances". Rule 14.4.2 provides that the acceptances of a bid for securities in a CHESS holding "must be initiated by a Valid Originating Message that is transmitted to ASTC ...". There are definitions of "Valid" and "Originating Message" in r 2.13. There is no need to set them out. It is sufficient to note that they contemplate a valid message will be transmitted electronically following the input into the transmission facility of certain information concerning the acceptances. Rule 14.14.4 provides that: "If a Message complies with 14.14.2 and there are sufficient [shares] in the Holding specified in the Message, ASTC will reserve the number of [shares] specified in the Message in an Offer Accepted Subposition in favour of the Participant Bidder for the takeover bid".
17 In my opinion, until the 77 CHESS offeror initiated acceptances were accepted in the way set out in r 14.14.4 Alinta acquired no interest in those shares. The trial judge, however, took a different view. He said that by completing and delivering the acceptance forms to Computershare Investor Services Pty Limited (Computershare), the company that was providing registry services to Alinta, "Alinta was placed in a position where it had power to dispose of, or control the exercise of, the power to dispose of the shares that were subject of the acceptance forms". The unstated assumption behind this finding is that the common law rules of offer and acceptance apply to offers made under an off-market takeover bid. I respectfully disagree. In my view, the combined effect of s 653A, reg 6.8.01 and the ASTC Settlement Rules is that the ASTC rules alone regulate in what circumstances and by which process an offer can be accepted. Unless and until the relevant rules are complied with there is no acceptance of an offer and, accordingly, the offeror has acquired no rights in respect of the shares the subject of the acceptance. If the position were otherwise the acceptances would not fall within s 611, item 1.
18 It is therefore necessary to determine when the acceptances were processed. Two Computershare witnesses were called by Alinta. The first, Mr Farrant, was the team leader of Computershare's Melbourne mailroom. He said the Computershare used a GPO Box address for incoming mail and that "in the ordinary course of business the contents of the GPO Box are usually delivered to Computershare by Messenger Post (an arm of Australia Post) daily by 8am." The purpose of this evidence was to suggest that the acceptances processed on 26 April 2006 had been received by Computershare by 8am. The second witness, Mr Cain, was a project leader involved in managing corporate activities for clients, one of them being Alinta. Mr Cain said Computershare received more than one mail delivery each day. Thus the acceptances processed on 26 April had most likely been received throughout the day, with only some being received in the first delivery which arrived at around 8am. He went on to explain that when mail was received in the mailroom it was first opened (and I would add manually sorted) and then acceptances that required processing were delivered to the processing area. He was not aware how long it took to open the mail or when it would be delivered to the processing area. He did say that processing of acceptances took place from time to time during the course of the day. His answer to the question: "So it could be the case, in so far as an application by mail arrived at Computershare, that could have been processed either at 10 o'clock or at 2 o'clock or indeed at 7 o'clock on a particular day?" was: "Yes".
19 The judge said that this evidence did not enable him "to be satisfied one way or the other as to whether a valid message had been transmitted to ASTC by or on behalf of Alinta in respect of the 77 acceptance forms in question, prior to the entry into of the Heads of Agreement". I respectfully take a different view. In my view, the facts show that Alinta could not have acquired the 0.04 per cent parcel in time. That could only have happened if before 9am (at the latest): all the acceptances had been received (that is they all arrived in the 8am delivery); all the mail received at 8am (which no doubt included not only the acceptances but a good deal of other material) had been opened and sorted; all the acceptances had been delivered to the processing section; and all the acceptances had been processed. For all this to have happened in less than one hour is against the odds.
20 Having decided that Alinta did not have a relevant interest in the AGL parcel prior to the signing of the HOA, it is now necessary to consider whether, as APL contends, the Heads of Agreement gave Alinta power to control the exercise of the power to dispose of the AGL parcel. The judge thought it probably did not, but I am of opinion that the Heads of Agreement directly conferred that power. An important purpose of the Heads of Agreement was for Alinta to become the owner of the AGL parcel. That was made clear in cl 4, although this clause is more like a recital than a covenant or promise. However, the power to control the exercise of the power of disposal need not be by way of a promise. Section 608(2)(a) provides that the control includes control that is indirect and s 608(2)(b) that it can be exercised by an "agreement" which according to the definition in s 9 is a reference to a "relevant agreement" which in the same section is defined to mean an agreement, arrangement, or understanding whether formal or informal, whether written or oral, and whether or not having legal or equitable force. It seems to me that cl 4 points to an underlying understanding between AGL and Alinta that the AGL parcel would move from AGL to Alinta and that in the meantime AGL would retain the parcel.
21 But, as I say, the requisite power is more direct. The key provisions in the Heads of Agreement are cl 16(a) - by which the parties agreed to work together in good faith to determine the most efficient structure to effect the implementation of the transaction under consideration; cl 25 - a no shop and no talk provision which prevents AGL from participating in discussions with any person wishing to acquire an economic interest in all or a substantial part of AGL's assets; and cl 21 - which prevented Alinta from disposing of the Alinta Scheme Assets (which included the AGL parcel) for one year. In my opinion by reason of these provisions if AGL took any step to sell the AGL parcel Alinta could, if it were so minded, obtain an injunction to restrain the sale as being an act in breach of contract. It could obtain the injunction because it is implicit in these provisions that AGL would retain the AGL parcel pending its transfer to Alinta.
22 There is one final observation I wish to make about the Heads of Agreement, for it might affect the kind of relief available for a contravention of s 606. I have mentioned that cl 28(b) provided for the automatic termination of the Heads of Agreement if the MIA was not entered into by 31 May 2006. I have also mentioned that the MIA was not executed until 2 June 2006. So far as I can tell, neither AGL nor Alinta intended the Heads of Agreement to come to an end on 31 May 2006. To the contrary, the recitals in the MIA recorded that: "A. AGL and Alinta entered into the HOA for the purpose of recording their agreement to implement the Transaction; B. Merge Co, AGL and Alinta have entered into this agreement to record in a fuller and more precise way the terms and conditions upon which they propose in good faith to implement the Transaction". This suggests that each of AGL and Alinta was precluded from contending that the Heads of Agreement were at an end. But it is not necessary to go that far. It is sufficient to infer, as I do, that the parties had implicitly agreed to extend the life of the Heads of Agreement until the MIA was signed. This is confirmed by cl 33.10(b) of the MIA which provided that the MIA "prevails to the extent of any inconsistency with the HOA"; a provision that only makes sense if the HOA continued to be binding upon the parties.
23 I should mention in this connection, lest it be thought I have overlooked the point, the principle that where parties intend to immediately be bound by an agreement but at the same time propose to have the terms stated more fully in a later agreement, the later agreement when made will usually replace (that is discharge) the earlier one. There certainly will be an implied discharge if there is complete overlap in the terms. If there is only a partial overlap it may be that the first agreement remains in force at least in so far as it contains terms not found in, or not inconsistent with, the terms in the second agreement. I have not examined whether this is true in the instant case. It should be said, however, that cl 33.10(b) assumes this to be so.
24 There is another basis upon which APL asserts that Alinta acquired a relevant interest in the AGL parcel, namely by the MIA. The purpose of this part of the argument was not to found separate relief for a contravention of s 606 but as a foundation for an argument that a later purchase by Alinta of AGL units did infringe the section. Alinta also says that by reason of the MIA, Merge Co acquired a relevant interest in the AGL parcel and it did seek relief in respect of that alleged contravention. Here I should mention that in fact two MIA were executed. The first was the MIA entered into on 2 June 2006. By cl 28 provision was made for the "automatic termination" of the MIA if any of the Transaction Documents were not executed by 21 June 2006. There was a delay in the preparation of the Transaction Documents and they could not be executed by 21 June. But a new MIA, in all relevant respects the same as that dated 2 June, and the Transaction Documents were executed on 22 June 2006. The case against both Alinta and Merge Co is the same under each MIA.
25 To appreciate precisely how this alternative case is put it is necessary to refer to further facts. By the end of the day on 26 April 2006 Alinta held a little over 20.02 per cent of the AGL shares and thereby (as a result of s 608(3)) had a relevant interest in the AGL parcel. It is common ground that on 4 August 2006, as a result of the withdrawal of acceptances of offers in accordance with s 650E, Alinta's interest in the AGL shares fell below 20 per cent. In consequence it no longer held a relevant interest in the AGL parcel through s 608(3). Now the argument is that Alinta acquired a relevant interest in the AGL parcel when it entered into the MIA or, alternatively, if it already had a relevant interest in the AGL parcel by reason of s 608(3) it acquired a relevant interest in the AGL parcel via the MIA immediately upon its holding in AGL falling below 20 per cent. In any event APL contends that Merge Co acquired a relevant interest in the AGL parcel when the MIA was executed.
26 In considering the effect of the MIA it is necessary to have regard to a declaration made by ASIC under s 655A. Section 655A authorises ASIC to declare that Chapter 6 of the Corporations Act (the chapter dealing with Takeovers) "applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration."
27 On 3 July 2006, ASIC made a declaration in the following terms:
"Pursuant to paragraph 655A(1)(b) of the Corporations Act 2001 ("Act"), the Australian Securities and Investments Commission ("ASIC") declares that Chapter 6 of the Act applies to the person specified in Schedule A in respect of an agreement of the kind referred to in Schedule B and the class of securities specified in Schedule C, as if subsection 609(7) of the Act was omitted and replaced as follows:
'A person does not have a relevant interest in securities merely because of an agreement if the agreement:
(a) is conditional on:
(i) a resolution under item 7 in the table in section 611
being passed; or
(ii) ASIC exempting the acquisition under the agreement from the provisions of this Chapter under section 655A; or
(iii) a scheme of arrangement approved by the Court under Part 5.1 taking effect; and
(b) does not confer any control over, or power to substantially influence, the exercise of a voting right attached to the securities; and
(c) does not restrict disposal of the securities for more than 4 months from the date when the agreement is entered into.
The person acquires a relevant interest in the securities when the condition referred to in paragraph (a) is satisfied.'
Schedule A
Alinta Limited ACN 087 851 001 ("Alinta")
Schedule B
The Merger Implementation Agreement between Alinta, The Australian Gas Light Company ACN 052 167 405 ("AGL"), AGL Energy Limited ACN 115 061 375 and Alinta Mergeco Limited ACN 119 985 590 dated 22 June 2006 that is conditional on a Part 5.1 scheme of arrangement between AGL and its members taking effect.
Schedule C
Units in Australian Pipeline Trust ARSN 091 678 778
Dated: 3 July 2006"
Before I consider the effect of this declaration it is necessary to explain the scope and operation of the MIA.
28 The parties to the MIA were Alinta Merge Co Ltd (the new name for Merge Co), AGL, Alinta and AGL Energy Limited. The principal obligations imposed by the MIA were set out in cl 2. Clause 2.1 provided that "AGL agrees to propose the AGL Scheme" and that "AGL agrees with Merge Co and Alinta to perform its obligations under the AGL Scheme". Clause 2.2 provided that "Alinta agrees to propose the Alinta Scheme". Finally clause 2.3 provided that "Merge Co agrees with AGL and Alinta to perform its obligations under the AGL Scheme and Alinta Scheme …". The description of the AGL Scheme was contained in cl 5 and a description of the Alinta Scheme in cl 6.
29 Clause 3.1 contained conditions precedent for the AGL Scheme. Relevantly cl 3.1 read: "The obligations of AGL and Merge Co to implement the AGL Scheme are subject to the satisfaction of each of the following conditions precedent … (a) that the AGL Scheme and the Alinta Scheme become Effective by the Sunset Date [the Sunset Date was defined as 31 December 2006 or later if agreed] … (g) that except for any AGL Approved Matter, none of the following events occurs or has occurred during the period from 26 April 2006 to 8am on the Second Court Date in relation to the AGL Infrastructure Businesses without Alinta's prior written consent (such consent not to be unreasonably withheld or delayed) (i) … (ii) except where ancillary to a transaction which is permitted under paragraph (i), AGL or any Subsidiary of AGL Disposes of, makes an irrevocable offer to Dispose of, agrees to Dispose of, or comes under an obligation to Dispose of one or more companies, businesses or assets (or an interest in one or more companies businesses or assets), for an amount, or whose book value (as recorded in AGL's balance sheet as at 31 December 2005) is in aggregate, greater than $45 million …" Only two definitions need be noted. The "Second Court Date" was defined to be the first day of the hearing of an application for orders under s 411 of the Corporations Act approving the AGL and Alinta schemes of arrangement and "AGL Infrastructure Businesses" was defined as "as business and activities undertaken by AGL other than the AGL Energy Business". The AGL parcel is plainly covered by cl 3.1(g).
30 Clause 3.7(b) provided that Alinta alone had the benefit of the conditions precedent in cl 3.1(g) and any breach or non-fulfilment of such conditions may be relied upon only by Alinta. Clause 3.9 provided that to the extent within their control and subject to the terms of the agreement "each of AGL and Alinta agree[d] to use its best endeavours to implement the AGL Scheme and the Alinta Scheme as soon as practicable and, in particular, to procure that each of the conditions precedent in clauses 3.1 and 3.2 (as the case may be) is satisfied as soon as practicable after the date of [the MIA]."
31 Clause 17 is an important provision. By that clause AGL agreed with Alinta that it would, and would ensure that each of its subsidiaries would:
"carry on the AGL Infrastructure Businesses in the ordinary course of business consistent with the business practices of the AGL group … and including
(a) …;
(b) …;
(c) using best endeavours to obtain and maintain in full force and effect all material Authorisations required for the conduct of the AGL Infrastructure Businesses;
(d) …;
(e) …;
(f) maintain the businesses and assets which comprise the AGL Infrastructure Assets;
(g) to (n) …
The parties agree and acknowledge that … an action which is permitted under cl 3.1(g) would not constitute a breach of this clause 17."
The AGL parcel is expressly included in the definition of AGL Infrastructure Assets.
32 Clause 22 was a no-shop no-talk provision. Clause 27 provided that Merge Co must not, and must procure that its subsidiaries would not, dispose of the AGL Infrastructure Assets from Completion to the date which is one year after completion. Termination was dealt with by cl 28. Among other things cl 28.1 provided that the MIA would automatically terminate if any of the Transaction Documents (that is a Relationship Deed, a Regulatory Deed and a Transaction Implementation Deed) was not executed by 21 June 2006. Clause 28.2 provided that neither Merge Co nor Merge Co Sub could terminate the MIA.
33 It is convenient now to consider whether the MIA gave Alinta power over the disposal of the AGL parcel. Clause 3.1(g) is important in this regard. Standing on its own cl 3.1(g) does not prohibit AGL from disposing of the AGL parcel. It merely records an event upon the occurrence of which Alinta may terminate the MIA. On the other hand, by cl 3.9 AGL promised to use its best endeavours to procure that the conditions precedent (including the condition in cl 3.1(g)) were satisfied. In substance this was a promise not to dispose of assets with a value of more than $45 million. The AGL parcel exceeded that value. Using the language of s 608, this promise conferred on Alinta the power to control the power to dispose of the AGL parcel. It was, in my opinion, a power that could be enforced in a court of competent jurisdiction, although I need not go that far for s 608 to apply.
34 Other provisions of the MIA give a like power, in my opinion. One is the no-shop no-talk provision. As well, I read cl 17(f) as a promise by AGL not to dispose of an AGL Infrastructure Asset. It will be recalled that by that clause AGL agreed to "maintain the businesses and assets which comprise[d] the AGL Infrastructure Assets." "Maintain" can mean to keep or retain, or to keep in good condition. The judge thought it had the latter meaning. He said that if the parties had intended it to mean "to keep or retain" they would have used different language such as was used in cl 3.1(g) which specifically addressed the topic of disposal.
35 That argument does not, in my respectful opinion, have the force it might otherwise have had when in cl 17 itself the word "maintain" was used in the sense "to keep", as it was in cl 17(c). There are other indications that "maintain" meant "to keep". Many AGL Infrastructure Assets (the AGL parcel among them) were of a kind that to impose an obligation to keep them in good condition made no sense. In addition, there is the proviso to cl 17 that an act that was permitted under cl 3.1(g) (which was concerned with the disposal of assets) would not constitute a breach of the clause. Finally, it is important not to lose sight of the fact that the MIA was the repository of the arrangement by which Alinta and AGL agreed to merge their assets, one important aspect of which was that the AGL parcel would go to Alinta. With such an arrangement one would expect to find an obligation on AGL to keep intact those assets that on implementation would pass to Alinta. If such an obligation were not express (as I think it was), it would need to be implied.
36 I will now deal with the case against Merge Co. None of the covenants to which I have referred expressly conferred rights or privileges on Merge Co. While the MIA gave power over the AGL parcel to Alinta, it is less clear whether a like power was conferred on Merge Co. The trial judge was of opinion that the MIA conferred no rights on Merge Co. That is only partly true. Certainly, the benefit of the condition precedent that AGL not dispose of any assets (cl 3.1(g)(2)) was, as a result of cl 3.7(b), for the benefit of "Alinta alone". In contrast, the benefit of the promises in cl 3.9 was not confined to AGL and Alinta. I suppose it is possible to read cl 3.9 to mean "each of AGL and Alinta agrees with each other to use its best endeavours, etc." But the last sentence of the clause (which reads "The parties will provide to each other in a timely manner such information as reasonably requested to enable them to negotiate these documents." (emphasis added)) suggests that the beneficiaries of the provision were not to be confined just to AGL and Alinta. I accept that the rights of Merge Co on a breach were not coterminus with the rights of AGL and Alinta. Clause 28.2 denied to Merge Co the right to terminate the MIA, although such a provision could prevent Merge Co from terminating for repudiation: see eg Walters v Cooper [1967] VR 583. I also think that the "no-shop no-talk" provision (cl 22) was intended to favour all parties. In my opinion, Merge Co acquired a relevant interest in the AGL parcel on 2 June 2006.
37 Strictly speaking this conclusion makes it unnecessary to consider the application of s 608(8). That section provides another avenue for the acquisition of a relevant interest in securities. To paraphrase its terms, if at a particular time (a) a person has a relevant interest in securities; (b) the person has entered into an agreement with another with respect to the securities; and (c) the other person would have a relevant interest in the securities if the agreement were performed, the other person is taken to already have a relevant interest in those securities. It seems to me that each of these conditions is satisfied in the case of Merge Co. AGL was a person with a relevant interest in the AGL parcel. AGL entered into an agreement (the MIA) with several other persons, including Merge Co. The agreement was, in part, "with respect to" the AGL parcel, in the sense that the agreement specifically dealt with that parcel. Finally, when the agreement was performed Merge Co acquired a relevant interest in the parcel.
38 As a result of finding that the MIA conferred power on Alinta to control the power to dispose of the AGL parcel, it is necessary to consider whether the ASIC declaration operated to prevent a finding that the MIA conferred on Alinta a relevant interest in the parcel. I note the ASIC declaration could not have undone any contravention of s 606 that occurred before 3 July 2006. However, if the declaration applies to the MIA then from the time of the declaration it could not be said that Alinta had a relevant interest in the AGL parcel by reason of the agreement.
39 APL has two bases for contending that the ASIC declaration does not apply. The first is that the MIA was not, as required by the ASIC declaration, "conditional on a scheme of arrangement approved by the Court." The second is that the MIA did not satisfy the condition that "it [did] not restrict the disposal of the AGL parcel for more than 4 months from the date when the agreement [was made]."
40 The first ground can be disposed of in short order. The declaration required an agreement of the kind referred to in schedule B to be conditional on a scheme of arrangement approved by the Court. The agreement referred to in schedule B was the MIA dated 22 June 2006. The agreement was described as being "conditional on a Part 5.1 scheme of arrangement between AGL and its members taking effect." APL contends that the MIA itself was not conditional upon a scheme of arrangement being approved, but accepts that AGL's obligation to implement the AGL scheme was so conditioned. In my view there is nothing in the distinction. It is clear from the description of the MIA in schedule B that the draftsman of the ASIC declaration regarded it as being conditioned on a scheme of arrangement being approved by the court. I do not read the body of the declaration as imposing a different kind of obligation. When the ASIC declaration required the agreement to be conditional that was just a shorthand way of describing relevant terms of the MIA.
41 The second ground has substance. The relevant condition is that the agreement "does not restrict disposal of the [AGL parcel] for more than four months from the date [of the MIA]". The restrictions on disposal in the MIA lasted for much longer. The MIA contemplated that the restrictions would remain in force until the Sunset Date - namely the 31 December 2006 or even later if that were agreed.
42 Alinta accepts this but says that the duration of the restriction on disposal can be found outside the MIA. The MIA contemplated that the Transaction Documents would be entered into, one being a Transaction Implementation Deed. Such a deed was executed on 22 June 2006 and amended on 18 August 2006. The deed contained a timetable for the times at which steps needed to be taken to give effect to the MIA. By cl 2.2 the parties agreed to do all things in their power or control to ensure that the timetable was met. The timetable provided for the Second Court Date (the first day of the hearing of the application for the approval of the schemes of arrangement) to be the 15 September. The timetable also assumed that court approval would be obtained on that day. By an amending deed the date was changed to 9 October. Both the first and second date were within four months of the MIA.
43 I am prepared to accept, as did the judge, that the Transaction Implementation Deed can be looked at to determine whether the ASIC declaration is applicable. There is no reason why the duration of the restriction need be mentioned in the MIA itself.
44 But the deed did not limit the restriction on the disposal of the AGL securities to less than four months. I can explain why the deed did not achieve this result by reference to an hypothetical example. Let it be assumed that in accordance with the timetable the applications for approval of the schemes of arrangement were made returnable on either 15 September 2006 or 9 October 2006. Let it also be assumed that there was an opponent to the schemes who was heard on the return day. Finally let it be assumed that the judge hearing the application reserved his decision for several weeks and did not make an order until some time in November, that is well outside the four month period. Did the restrictions on disposal bind AGL until the order was made? I am in no doubt they did. All that cl 2.2 required of the parties was to do what was in "their power and control", and no more. In the hypothetical circumstances, that the judge reserved his decision was beyond the parties' control. In the meantime, (that is pending the decision) there was nothing in any of the Transaction Documents that cut down the obligation imposed upon AGL by the MIA not to dispose of the AGL parcel. The result is that the ASIC declaration could not apply to the MIA because the restraint on the disposition of the AGL parcel was not limited to four months.
45 Between 16 August and 22 August 2006 Alinta (through its subsidiary Trewas Pty Ltd) purchased approximately 10.25 per cent of the units in APT. If Alinta did not at that time have a relevant interest in the AGL parcel, that acquisition would be lawful. But, as I have found it did have a relevant interest in the AGL parcel there was a contravention of s 606 as Alinta's voting power in APT increased from the 30 per cent it had acquired under either the Heads of Agreement or the MIA to approximately 40.25 per cent.
46 The acquisition in August also gave rise to the proceeding before the Takeovers Panel for a declaration under s 657A that the acquisition constituted unacceptable circumstances. The Panel has power to make such a declaration if it appears to the Panel: "that the circumstances are unacceptable having regard to the effect of the circumstances on: (i) the control, or potential control of the company or another company" (s 657A(2)(a)); or, "(b) are unacceptable because they constitute or give rise to a contravention of a provision of [Chapter 6]" (s 657A(2)(b)).
47 In exercising its powers the Panel must have regard to certain matters including the purposes of, and provisions in, Chapter 6 (s 657A(3)) and may have regard to any other matter it considers relevant (s 657A(3)(b)). If it makes a declaration the Panel may make orders of a kind mentioned in s 657D(2)(a) to (d) provided it is satisfied that the orders will not unfairly prejudice any person. If an order is made it is an offence to contravene the order: s 657F. In addition, the order may be enforced by the Court on an application by ASIC, the President of the Panel, a person to whom the order relates or a party to the proceeding before the Panel: s 657G.
48 Following a hearing the Panel made the declaration. The Panel also made orders vesting the 10.25 per cent parcel in ASIC, directing that the parcel be sold and the net proceeds be paid to Alinta.
49 Alinta applied for internal review under s 657EA. The Review Panel (which for convenience I will refer to simply as the Panel) found that: "The Acquisitions [of 10.25 per cent parcel] constituted or gave rise to a contravention of s 606 of the Corporations Act". It also found that "the Acquisition, when considered in the context of the relief granted by ASIC, the forthcoming Schemes of Arrangement and the existing total of [30% of the] units in APT by AGL, have, or are likely to have an effect on the control of potential control of APT" Accordingly the Panel made a declaration that the Acquisitions were unacceptable circumstances having regard to the fact that the Acquisitions constituted, or gave rise to, a contravention of section 606 of the Corporations Act, and the effect of the Acquisitions or the control or potential control of APT." The Panel considered that divestment orders under s 657D were appropriate to protect the rights or interests of unitholders in APT and orders to that effect were made.
50 The Panel's declaration and orders were challenged in the judicial review proceeding on two distinct bases. First it was said that s 657A and s 657D provide for the exercise of the judicial power of the Commonwealth and are therefore contrary to Chapter III of the Constitution. The second basis assumed the Panel had power to deal with the application and was that the Panel had in several respects misdirected itself in law. As a matter of convenience, I will deal with the second basis first.
51 The best place to begin is with an explanation of how the Panel arrived at its decision. In the first instance the Panel investigated whether circumstances were unacceptable because of a contravention of a provision of Chapter 6, permitting a declaration to be made through the gateway provided by s 657A(2)(b). In this respect the Panel considered whether, as a result of the MIA or the acquisition of the 10.25 per cent parcel, Alinta breached s 606.
52 The Panel found that when it entered into the MIA Alinta already had a relevant interest in the AGL parcel by reason of it holding more than 20 per cent of the shares in AGL. It said that although the MIA gave Alinta a relevant interest in the AGL parcel, the MIA did not increase Alinta's voting power in APT and therefore there was no contravention of s 606. The Panel stated that: "Had Alinta not acquired a relevant interest in the AGL parcel on 26 April 2006, the Panel considered that Alinta would have breached s 606 on 1 June and again on 22 June 2006 by entering into the MIA." It noted that ASIC had advised Alinta when it granted the declaration under s 655A that the declaration would not protect against or undo the effect of any previous acquisition of a relevant interest in the AGL parcel.
53 The Panel explained why in its view Alinta had acquired a relevant interest in the AGL parcel by reason of the MIA. "The Panel considered that section (scil clause) 3.1(g)(ii) of the MIA gave Alinta both effective and actual power to control the disposal of the AGL parcel."
54 The Panel then examined whether that power should be disregarded because of the ASIC declaration. It concluded that: "[T]he MIA was an agreement which gave Alinta a relevant interest in the AGL Parcel and which restricted the disposal of the AGL Parcel. But it was not an agreement which limited the period within which AGL was restricted from disposing of the AGL Parcel to a period of less than four months. On the terms of the MIA, at the relevant times, AGL was restricted from disposing of the AGL Parcel until 31 December 2006 or such earlier time as the Second Court Date occurred." For this reason, so the Panel said, the MIA did not satisfy the terms of the ASIC declaration. In arriving at this conclusion the Panel did not have regard to any Transaction Document.
55 In my view the Panel's failure to have regard to the Transaction Implementation Deed was an error. However, for reasons that I have explained, this error did not cause the Panel to reach an incorrect conclusion. That is to say if the Panel were to have had regard to the Transaction Implementation Deed its conclusion should have been the same.
56 Having concluded that the MIA was not covered by the ASIC declaration the Panel said that the acquisitions in August 2006 resulted in a contravention of s 606. The Panel then found that the circumstances (namely the acquisitions) were unacceptable "because they constituted or gave rise to a contravention of s 606."
57 Notwithstanding this conclusion the Panel went on to consider whether the circumstances were unacceptable having regard to their effect on the control or potential control of APT and whether a declaration ought be made through the gateway of s 657A(2)(a)(i). The Panel introduced its consideration of this topic by stating that "even if the ASIC Declaration was effective to relieve Alinta of the relevant interest it acquired under the MIA and the Acquisitions did not give rise to a contravention of s 606, that only ha[d] the consequence that s 657(A)(2)(b) does not apply to the Acquisitions. However, it does not prevent section 657A(2)(a) from applying". I pause to note that the Panel did not state that it would also consider the case under s 657A(2)(a)(i) on the assumption, contrary to its finding, that the MIA did not confer power on Alinta to control the exercise of the power to dispose of the AGL Parcel.
58 The Panel decided that the circumstances were unacceptable "because (in broad summary) the Acquisitions, when considered in the context of the AGL parcel, the Schemes, and the relevant interest in the AGL parcel that Alinta would obtain following implementation of the Schemes, had, or were likely to have: (a) increased the degree of control Alinta will have over APT if the Schemes were approved; and (b) increased the likelihood of Alinta controlling APT i.e. affected the potential control of APT; and (c) further deterred any rival bidders who may have considered bidding for control of APT prior to the Schemes."
59 The Panel expanded on this "broad summary". It stated that "[w]ith the AGL parcel apparently closely tied to Alinta, there was only 70% of APT which was available to a rival acquirer." Moreover, it stated that following the acquisitions, Alinta "had its foot on" 40% of APT. The Panel explained that by the expression "had its foot on" it meant that "the market, APT and … Alinta considered that for all intents and purposes, Alinta had power to control the disposal of the parcel, and it was unavailable to any other person without Alinta's consent."
60 The Panel then examined the acquisitions from various other aspects to determine whether they were unacceptable circumstances. First, it found that the existence of the AGL parcel might have "deterred some potential bidders for APT, especially given that there had been no indication that AGL was free to dispose of the AGL parcel to the highest bidder in the period between Alinta and AGL entering the Heads of Agreement on 26 April 2006 and the implementation of the Schemes." On this basis, the Panel considered that the acquisitions would be likely to have an effect on the control or potential control of APT.
61 Secondly, the Panel considered whether the acquisitions were unacceptable having regard to the purposes of Chapter 6. It decided that the acquisitions offended those purposes. It noted that absent the ASIC declaration Alinta would have been prevented from making the acquisitions while the MIA was in place. It observed that Alinta had sought to acquire units in APT in circumstances where unitholders in APT were not given "the opportunity to approve or reject the increase in control over the level of the AGL parcel". It said that "[e]ven if Alinta had the benefit of the ASIC Declaration, it was at risk of having the Acquisitions declared to be unacceptable circumstances if it took advantage of the ASIC Declaration to make further acquisitions of APT units where the APT unitholders would not have an opportunity to approve or reject the additional acquisitions or sufficient information to assess the Acquisitions."
62 Next, the Panel considered the acquisitions in the context of the MIA and the proposed schemes of arrangement and in the light of the purposes of Chapter 6 as set out in s 602. It concluded that the acquisitions "did not promote an efficient competitive or informed market for the acquisition of control over units in APT, nor were APT unitholders provided with sufficient information to assess the merits of the Acquisitions in the context of the MIA and the Schemes, nor did the Acquisitions afford all unitholders in APT a reasonable and equal opportunity to participate in the benefits offered by Alinta … when Alinta made the Acquisitions". The Panel "concluded that the interests of APT unitholders suffered, against the purposes of Chapter 6, by any contest for control being largely closed off by the Acquisitions, when considered in the context of the MIA and the Schemes".
63 In relation to the ASIC declaration, the Panel said that "Alinta should have disclosed its intention to acquire further units in APT to ASIC. Had it done so ASIC may well have made it a condition of the ASIC Declaration that Alinta not acquire any units in APT prior to the implementation of the Schemes or the MIA lapsing, and in the Panel's view this would have been appropriate."
64 The Panel referred to a submission by Alinta that if it had acquired 10 per cent of APT before entering into the Heads of Agreement the acquisition would have been exempt under s 611, item 14, which exempts from s 606 an acquisition through the acquisition of a listed company. In the course of rejecting this submission as being an inappropriate analogy the Panel said: "[U]nitholders in APT should not have expected that a person could gain control over 30% of APT via an agreement such as the MIA and then, under the protection of s 609(7) actively acquire more units in APT, with the apparent intention of gaining control over APT, prior to the implementation of the Schemes."
65 Alinta's intentions were looked at for the purpose of determining whether item 14 would have been abused. The Panel said that one of Alinta's objects was to obtain control of APT. It then said that it "considers that, in the context of APT, 30% and certainly 40%, would equate to control (particularly in light of the significant retail holding)." In the result the Panel found that the acquisitions were not in accordance with the purposes of Chapter 6.
66 Accordingly the Panel concluded that a declaration of unacceptable circumstances should be made.
67 The first error alleged by APL is based on the judge's finding that Alinta had not contravened s 606. It will be remembered that the judge was of opinion that the MIA did not create a relevant interest in the AGL parcel because Alinta had previously acquired the interest when it received acceptances pursuant to its takeover bid for more than 20% of AGL shares. The argument is that the two independent bases the Panel identified for making the declaration (the contravention of s 606 and the likely effect on control) were, or might be, intertwined in the way that was impossible for the Panel to disentangle if it were wrong on one limb. Another way of putting this ground is that when the Panel considered whether these were unacceptable circumstances under s 657A(2)(b) it approached its consideration of that issue on the false assumption that the MIA gave Alinta power to control the power to dispose of the AGL Parcel, albeit the power not protected by the ASIC declaration.
68 It was accepted that if the MIA did (as I have found) give Alinta power to control the disposal of the AGL Parcel this ground could not be made out. Though this disposes of the point, I will briefly express my opinion on the assumption that the judge was correct in holding that the MIA conferred no power of control.
69 The judge found the ground was not made out in any event [at 129]. He said:
"I consider that, on a fair reading of the Panel's reasons, the Panel's conclusion that the relevant circumstances were unacceptable, having regard to their effect on control or potential control of the Trust was reached quite independently of the Panel's conclusion that the relevant circumstances were unacceptable because they constituted or gave rise to a contravention. The Tribunal considered both questions separately and reached its conclusion concerning contravention before embarking on a consideration of the effect of the circumstances or control or potential control."
70 If it were necessary, I would have reached a different conclusion. A close examination of the Panel's reasons shows, on one hand, that from time to time its approach did not depend upon the MIA giving an interest over the AGL parcel to Alinta. For example, on several occasions the Panel expressed concern about the control Alinta would obtain once the parties performed their obligations under the MIA. I have already referred to some of the relevant passages from the Panel's reasons. It will also be recalled that the Panel was troubled by what it saw as Alinta having "had its foot" on the AGL parcel. The Panel's reasons show that this was a reference to something less than control. The Panel described the situation as being control "for all intents and purposes", which I take to be less than the kind of control needed for the acquisition of a relevant interest. In my view the Panel's description of the situation as viewed from the perspective of "the market, APT and … Alinta" was justified.
71 On the other hand, it is impossible to deny that there are statements in the Panel's reasons where it says, in terms, that Alinta had acquired control over the AGL parcel through the MIA. It is difficult to know whether, when read in context, those statements show that the Panel arrived at its decision on a false premise, assuming of course that the judge was right in his analysis of the MIA. I am in two minds whether the ground would be made out, but, erring on the side of caution, I would have set aside the decision.
72 The second alleged error is that the Panel failed to give proper consideration to the existence of the ASIC declaration. Alinta contends that ASIC's decision to grant the declaration was a relevant consideration and that it was wrong for the Panel merely to assess the circumstances as if compliance or non‑compliance were neutral, as they appear to have done.
73 Once it is accepted that the MIA does not meet the requirements of the ASIC declaration this ground falls away. In any event, the point is not a good one. In substance Alinta's argument is that the acquisition of power to control the disposal of the AGL parcel through the MIA should not be counted against it when considering whether there are unacceptable circumstances because if the acquisition could lead to such a finding ASIC would not have made the declaration under s 655A. For present purposes I am prepared to proceed on the basis that if the only acquisition of a relevant interest was via an agreement covered by an ASIC declaration it would be difficult to hold the acquisition to be unacceptable circumstances. But it was not wrong for the Panel to consider, as it did, the circumstances produced by the combination of the acquisition of power to control the disposal of the AGL parcel under the MIA and the later purchase by Alinta of units in APT. Not only did the Panel not err in approach, in my view it was required to give consideration to the effect of the two acquisitions.
74 The third alleged error is that the Panel failed to apply the correct test when assessing whether the circumstances were unacceptable. To recapitulate, s 657A(2) permits the Panel to make a declaration of unacceptable circumstances "if it appears to the panel that the circumstances … are unacceptable having regard to the effect of the circumstances on … the control or potential control of [APT]". Alinta submits that the Panel did not approach the case on this basis but instead looked at the effect or likely effect of the circumstances on the control or potential control of APT.
75 In the course of its reasons the Panel certainly looked at the consequences that the acquisitions were likely to have on the control or potential control of APT. It decided that the acquisitions would likely have an effect on that control or potential control. In particular, the Panel said that with the acquisitions Alinta had its "foot on" 40 per cent of the units and that would deter others from seeking to acquire AGL's units.
76 In my opinion, however, the Panel did not apply an incorrect test. For one thing it did on occasion state the correct test. For example, in its opening statement the Panel identified the task it had set for itself as being to consider whether the effect of the acquisitions in the context in which they occurred "on the control or potential control of APT". Further, when the Panel used expressions such as "likely to be" it was, in my view, engaging in fact finding or making predictions about future events. That is to say, the Panel was using the yardstick of "likelihood" for the purpose of determining whether or not asserted facts were true and in deciding what might happen in the future. It was appropriate for the Panel to make findings on that basis.
77 On this aspect my view accords with that of the judge who said:
"The Panel's power to make a declaration of unacceptable circumstances is enlivened if it appears to the Panel that the circumstances are unacceptable, having regard to their effect on control or potential control. That requires a judgment. The Panel must direct its attention to some specific effect of the circumstances on either control or potential control. The Panel has directed its attention to specific effects, as those effects bear on control or potential control of the Trust. I do not consider that the Panel's use of the phrases in question signifies anything more than the degree of certainty with which it appeared to the Panel that the circumstances have the relevant effect."
78 The final argument to be considered is that ss 657A and 657D purport to confer judicial power on the Panel rendering those sections invalid. Before embarking on this issue it is useful to recall the comments of Isaacs J in Federal Commissioner of Taxation v Munro (1926) 38 CLR 153, 180:
"It is always a serious and responsible duty to declare invalid, regardless of consequences, what the national Parliament, representing the whole people of Australia, has considered necessary or desirable for the public welfare. The Court charged with the guardianship of the fundamental law of the Constitution may find that duty inescapable. Approaching the challenged legislation with a mind judicially clear of any doubt as to its propriety or expediency--as we must, in order that we may not ourselves transgress the Constitution or obscure the issue before us--the question is: Has Parliament, on the true construction of the enactment, misunderstood and gone beyond its constitutional powers? It is a received canon of judicial construction to apply in cases of this kind with more than ordinary anxiety the maxim Ut res magis valeat quam pereat [that the thing may have effect rather than fail]. Nullification of enactments and confusion of public business are not lightly to be introduced. Unless, therefore, it becomes clear beyond reasonable doubt that the legislation in question transgresses the limits laid down by the organic law of the Constitution, it must be allowed to stand as the true expression of the national will."
79 With this in mind, it is best to begin with a discussion of judicial power. It has proved to be impossible to lay down an exhaustive definition: Precision Data Holdings Limited v Wills (1991) 173 CLR 167, 188. A good working definition, though, was provided by Griffith CJ in Huddart Parker & Co Pty Ltd v Moorehead (1908) 8 CLR 330, 357 namely "the power … to decide controversies between … subjects or between, [the Crown] and its subjects … The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action."
80 Griffith CJ did not discuss all the characteristics of a decision made in exercise of judicial power. Later cases have. Generally, the decision must be one which affects rights or obligations arising from the operation of the law upon past facts or occurrences: R v Gallagher (1963) 37 ALJR 40, 47; Re Cram (1987) 163 CLR 140, 148-9. This may be contrasted with a decision that is not concerned to resolve a dispute about existing rights or obligations, but determines what legal rights should be created for the future. That kind of decision-making does not involve judicial power: Re Ranger Uranium Mines Proprietary Limited (1987) 163 CLR 656, 666.
81 Also important in deciding whether a tribunal is exercising judicial power is the process by which the tribunal arrives at its decision. So, if the decision is determined not so much by the application of legal principles to ascertained facts and events or by reference to an objective standard, but is informed by considerations of policy or the subjective evaluation of the consequence of things or by matters not specified by the legislation, the power being exercised is unlikely to be judicial: Precision Data Holdings (1991) 173 CLR at 189, 191. In Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245, 268 the High Court explained that a decision of the latter kind does not determine rights and obligations "according to law. That is to say, it [a judicial decision] does so by the application of a pre-existing standard rather than by the formulation of policy or the exercise of an administrative discretion."
82 Going back to Griffith CJ's formulation, an important attribute of a judicial decision is that it must be "binding and authoritative". This raises several considerations. First, decisions that are subject to general judicial review are usually not binding in the sense that judicial determinations are: Precision Data Holdings (1991) 173 CLR at 191; The Attorney-General for the Commonwealth v Breckler (1998) 197 CLR 83, 108.
83 Secondly, to be "binding and authoritative", a decision must be enforceable. The doctrine of enforcement is of ancient pedigree. It is the formal process by which a party entitled to the benefit of a judgment may obtain that benefit. It is the "practical forcing power of the law" which carries the judgment into effect: Freeman on Executions, 2nd ed, 1888, 2. In Re A Company [1915] 1 Ch 520, 527 Phillimore LJ explained that "it is the old common law process by which the sheriff in obedience to one of the common law writs procures for a judgment creditor the fruits of his judgment."
84 The traditional way of enforcing a judgment of a common law court was by the use of a judicial writ addressed to the county sheriff. There were many different types of common law writs of execution and which was selected depended on the form of the action and the nature of the judgment. For example, in real actions, the writs of habere facias seisinam (for freehold interests) and habere facias possessionem (for chattel interests)were directed to the sheriff commanding him to give actual possession of the real property in question to the plaintiff. In actions for personal property, upon a replevin, the writ of execution was the writ de returno habendo and successful plaintiffs in detinue had a distringas to compel the defendant to deliver the goods or a scire facias against a third party in possession: 3 Blackstone's Commentaries, 413. In money actions, by the writ of capias ad satisfaciendum (commonly called ca sa), a judgment debtor could be seized and imprisoned until the debt was paid (unless he fell within one of the exceptions such as peers of the realm, parliamentarians and servants of the king). The rule at common law was that, with some exceptions, land was not subject to execution of a money judgment at the suit of a commoner but, in certain limited circumstances, the writ of levari facias was used to direct the sheriff to levy a judgment debt from the goods and profits of the debtor's land. When neither land nor the profit from it was sought to satisfy the judgment, the writ of fieri facias (fi fa) was issued. It gave authority to the sheriff "for the seizure and sale of every thing that is a chattel, belonging to a defendant, except his necessary apparel. Even of two gowns, one may be taken." See generally, P Bingham, Judgments & Executions, (1815), p101 ff. In 1285, the Statute of Westminster, introduced an alternative procedure called elegit which allowed a judgment creditor to elect to have the debtor's goods and a moiety of his land delivered to him as passive security for the judgment debt. In practice this operated like a mortgage over the land until the debt was paid. This greatly broadened the extent to which freehold land could be subject to judgment debts. Under the writ of extendi facias (or "extent") the sheriff could immediately seize goods, land, debts and even the person of the defendant. Further common law writs included the venditioni exponas and the liberate. In Chancery, by the fifteenth century the practice was to enforce judgments by a writ of execution and, if that failed, by a writ of attachment, an injunction to deliver possession and a writ of assistance to the sheriff.
85 The demise of taught Latin and the progress of the plain English theorists have meant that many of these instruments, which have served the law since at least the thirteenth century, have suffered the fate of being given new names. Today, judgments are most commonly enforced by committal or sequestration or attachment or by the appointment of a receiver or, less commonly, by holding the defendant in contempt. Whatever the nomenclature used, the nature of enforcement is the same: it is to put the judgment into effect. This is entirely different from punishing or criminalising a party for failing to carry out the orders.
86 The importance of enforceability was emphasised by Barton J in Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434, 451 where he adopted the following definition of judicial power which had been given by Justice Miller of the Supreme Court of the United States: "It is the power of a Court to decide and pronounce a judgment and carry it into effect between persons and parties who bring a case before it for decision." Barton J then said "It is important to observe that the judicial power includes with the decision and the pronouncement of judgment the power to carry that judgment into effect between the contending parties. Whether the power of enforcement is essential to be conferred or not, when it is conferred as part of the whole the judicial power is undeniably complete."
87 Later cases (many are collected in Brandy 183 CLR at 268-269) have further developed this doctrine making clear that the power of enforcement need not be conferred on the tribunal itself. The Commission's decision in Brandy was enforceable because registration in the registry of the Federal Court immediately and automatically gave the decision the force of a Federal Court decision. It could then be enforced like any other Federal Court order. That is, registration converted a non-binding, unenforceable decision into a binding curially-enforceable determination.
88 Further, if a tribunal's decision "constitutes the factum by reference to which" rights and obligations become enforceable that will not necessarily involve judicial power: R v Trade Practices Tribunal (1969) 123 CLR 361, 378. Put another way, or putting it in the way it was put in Breckler, if the enforcement of a decision depends upon "an independent exercise of judicial power" the tribunal's decision is not relevantly "binding and authoritative". In Brandy, for example, if it were not for the ability to register and immediately enforce the Commission's decision, the decision would not be in exercise of judicial power: Brandy 183 CLR at 269.
89 In the light of the foregoing discussion, in the absence of a constitutionally valid ouster clause (sometimes called a "privative" or "no certiorari" clause) to make a tribunal's decision "binding" and in the absence of a mechanism for the immediate enforcement of a tribunal's decision to make the decision "authoritative", it would be difficult to conclude that the tribunal is exercising judicial power.
90 There is one final aspect of judicial power I wish to mention before applying the applicable principles to the Panel. Whether or not a tribunal is exercising judicial power may in part depend upon the character of the repository of the power. There is a line of cases, collected in Pasini v United Mexican States (2002) 209 CLR 246, 254, which establish "that there are some powers which appropriately may be treated as administrative when conferred on an administrative body and as judicial when conferred on a federal court or court exercising federal jurisdiction". In other words, a power which may in some circumstances be regarded as judicial may, depending on the character of the body upon which the power is conferred, in other circumstances be regarded as administrative: Farbenfabriken Bayer AG v Bayer Pharma Pty Ltd (1959) 101 CLR 652, 659-660.
91 In applying these principles to the facts, the first point of importance is to emphasise what the Panel does not do. It does not determine whether there has been a contravention of the Corporations Act and if there has make a declaration to that effect and then impose something in the nature of a penalty for the contravention. I accept that if this were the Panel's function it would be impossible to avoid the conclusion that it had impermissibly been conferred with judicial power. An examination of the relevant statutory provisions shows that the Panel's true function is of a different character.
92 The principal power entrusted to the Panel is that conferred by s 657A, namely to make a declaration of unacceptable circumstances. The circumstances in which the Panel may make such a declaration are confined. A declaration can only be made if it appears to the Panel that the circumstances are unacceptable: (a) because of their effect on (i) the control or potential control of a company; or (ii) the acquisition or proposed acquisition by a person of a substantial interest in that company; or (b) because they constitute or give rise to a contravention of a relevant provision of the Corporations Act: see generally s 657A(2). Whatever be the appropriate pathway to a declaration, the Panel can only act (that is, make a declaration and then any appropriate order) if it finds that the circumstances are unacceptable. It may be that those circumstances are constituted by facts that amount to a contravention of the Corporations Act. However not all contraventions will result in a declaration. Many contraventions would be so insignificant that only an entirely unreasonable Panel could conclude they amounted to unacceptable circumstances. More to the point, in order to arrive at a decision the Panel is required to consider the matters enumerated in s 657A(3) and, by reason of s 657A(3)(b), it may have regard to any other matter it considers relevant. This shows that deciding whether the facts as found give rise to a contravention of a provision of the Corporations Act is only one step along the path of deciding whether or not there are unacceptable circumstances justifying a declaration under s 657A. Admittedly, it may be an important step but not one that of itself could lead to the conclusion that the tribunal is exercising judicial power.
93 Once it is accepted that the Panel does not decide whether a person has contravened a provision of the Corporations Act and in consequence impose punishment for that contravention, two conclusions follow. The first is that the Panel is not concerned with the ascertainment or enforcement of existing rights. No such rights are brought into question in proceedings before the Panel. Hence, a declaration of unacceptable circumstances, if made, does not resolve any dispute about legal rights. The second conclusion, which is a corollary of the first, is that when the Panel makes an order under s 657D it is creating rights that operate for the future.
94 Then there are the factors in s 657A(3)(a) that the Panel must take into account. Having regard to those factors the Panel's ultimate decision will not involve the application of principles of law to facts as found but will be based on subjective evaluation and value judgment. As I have said, this is characteristic of administrative decision-making. It is the same kind of decision-making that was required of the Panel by the legislation considered in Precision Data Holdings in which the High Court held that the Panel did not exercise judicial power.
95 Finally, and perhaps most importantly, there is a point that is fatal to the argument that the Panel exercises judicial power. Its orders are not on any view "binding and authoritative". This is not because they are subject to direct attack by judicial review and collateral attack in other proceedings (perhaps not by itself a decisive point). It is because the intervention of a court is required for their enforcement. The enforcement of an order by the Panel is covered by s 657G which provides that if a person contravenes or proposes to engage in conduct that would contravene an order "the Court may make any orders it considers appropriate to secure compliance with the Panel's order, including (a) one or more remedial orders; and (b) an order directing a person to do, or to refrain from doing, a specified act." That is, a Panel order requires an independent exercise of judicial power to give effect to the order. And the court may refuse to give a Panel order effect either for (albeit limited) discretionary factors or if it be shown that the Panel committed jurisdictional error.
96 In Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd (1998) 79 FCR 469, 501 Sundberg J said: "A body with power to decide controversies between parties by the determination of rights and duties based upon existing facts and the law does not without more exercise judicial power. In my view Brandy establishes the body must as well have power to enforce its determinations, or there must be provided some other enforcement mechanism which does not involve an independent exercise of judicial power by some other body." This dissenting opinion is consistent with the decision of the High Court in Breckler. The opinion covers this case.
97 It will be apparent from what I have said that I do not regard s 657F as sufficient to constitute an enforcement mechanism. It is not a mechanism for actually putting the Panel's orders into effect. In any event, if it matters (and in my view it matters not at all) a maximum penalty of $2750 for the breach of an order of the Panel cannot seriously be regarded as a means of enforcement. With hundreds of millions of dollars at stake, as is often the case with takeovers, such a paltry fine would not even encourage compliance with the Panel's order, let alone enforce it.
98 In my view, the Panel does not exercise judicial power.
99 For the foregoing reasons I would dismiss the appeal in the judicial review proceeding with costs and allow the appeal in the action where I would set aside the orders made by the judge and declare that: (i) Alinta contravened s 606 when it acquired a relevant interest in the AGL parcel upon entry into the Heads of Agreement; (ii) Alinta and its subsidiary Trewas Pty Ltd contravened s 606 when in August 2006 it acquired an additional approximately 10.5 per cent of the units in AGL; and (iii) Merge Co contravened s 606 when it acquired a relevant interest in the AGL parcel upon entry into the MIA of 1 June 2006 and 22 June 2006. I would refer to the judge the determination of what other relief, if any, should be granted consequent upon those declarations. In my view APL should have its costs of the appeal in the action as well as the costs below.
I certify that the preceding ninety-nine (99) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.