CEMEX Australia Pty Ltd v Takeovers Panel

4 Before 12 noon, CEMEX also filed a copy of the Bid Agreement and a Notice of Variation with ASX. Under the heading, "Increase in Offer Price", the Notice of Variation stated: CEMEX Australia will not exercise its rights under clause 8.8(e) of the Offer terms in respect of the interim dividend of A$0.16 per Rinker Share declared by Rinker with a record date of 24 November 2006 but may exercise those rights in respect of any subsequent dividend. 5 On 27 April 2007, in its report for the year ending 31 March 2007 Rinker announced that it would pay a final dividend of $0.25 with a record date of 8 June 2007. On 7 May 2007, CEMEX announced to ASX that Rinker shareholders would be entitled to a final dividend of $0.25 per share if they accepted the offer and CEMEX would not deduct the dividend from its best and final offer price of $US15.85 for each Rinker share. 6 On 13 June, the second respondent, Australian Securities & Investments Commission (ASIC), concerned that CEMEX's conduct departed from the "best and final" offer, applied to the Panel pursuant to s 657A(2)(a) of the Corporations Act to make a declaration of unacceptable circumstances. On 12 July 2007, the Panel made a declaration that CEMEX's conduct between 10 April and 7 May constituted "unacceptable circumstances" and ordered that CEMEX pay the affected shareholders an amount of $0.25 per share for the net number of Rinker shares sold during the above period. On 16 July 2007 CEMEX sought a review of the Panel's decision.

THE TAKEOVERS PANEL 7 Before discussing the Panel's decision, a brief overview of its composition and function is appropriate. The following outline, draws heavily on the submissions made by the Panel, which, consistent with the principle in Queen v Australian Broadcasting Tribunal; ex parte Hardiman (1980) 144 CLR 13 at 35-36, made submissions limited to the Panel's powers and procedures and not in the role of a protagonist. 8 The written submissions of the Panel outlined its history, commencing with its establishment under Part 10 of the Australian Securities Commission Act 1989 (Cth). When that Act was repealed and replaced by the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act),the Panel continued in existence by operation of s 261 of that Act. Initially, the Panel was known as the Corporations and Securities Panel. Its name was changed to the "Takeovers Panel" by the Financial Services Reform Act 2001 (Cth). Interesting as the history is, it is not necessary to refer to it in any detail and I shall confine my comments to the present constitution and operation of the Panel.

The Panel's constitution and role 9 The members of the Panel are appointed by the Governor-General on the nomination of the Minister and may be full-time or part-time members. They must be persons with knowledge or experience in one or more of the fields of business, administration of companies, financial markets, financial products and financial services, law, economics, and accounting; ASIC Act s 172(4). The Panel is not a legal entity, but is merely a collective term for the individual members. 10 The Panel is intended to be the main forum for resolving disputes about a takeover bid until the bid period has ended; Corporations Act s 659AA. It is an important element in the scheme for regulating takeovers and for effecting the purposes of Chapter 6 of the Corporations Act. Those purposes arestated in s 602 as follows: The purposes of this Chapter are to ensure that:

(a) the acquisition of control over: (i) the voting shares in a listed company, or an unlisted company with more than 50 members; or (ii) the voting shares in a listed body; or (iii) the voting interests in a listed managed investment scheme; takes place in an efficient, competitive and informed market; and (b) the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme: (i) know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and (ii) have a reasonable time to consider the proposal; and (iii) are given in enough information to enable them to assess the merits of the proposal; and (c) as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, a body or scheme; and (d) an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interest or any other kind of securities under Part 6A.1.

The Panel's procedures 11 In proceedings before it the Panel is required to follow the procedure set out in the Corporations Act and the Australian Securities and Investments Commission Regulations 2001 (Cth). It has also made its own procedural rules under s 195 of the ASIC Act. Proceedings before the Panel are commenced by way of an application under the Corporations Act. ASIC's application in relation to the CEMEX takeover of Rinker was made pursuant to s 657C(2)(c) of the Corporations Act. The review application was made pursuant to s 657EA(1)(a) by CEMEX which was granted leave to be legally represented in the review proceedings. 12 An application to the Panel is considered by a sitting panel appointed by the President. The Panel is constituted by three members having a mix of expertise and including, if possible, a member with particular skills relevant to the matter. The parties are advised of any potential conflict of interest affecting a sitting member and given an opportunity to object. No party in the Rinker matter objected to the membership of either the original Panel or the review Panel.

The Panel's powers 13 The Corporations Act gives the Panel power to declare circumstances in relation to the affairs of the company to be unacceptable circumstances and to make orders consequent upon that declaration; s 657A(1) and s 657D(1) respectively. Both provisions were amended by the Corporations Amendment (Takeovers) Act 2007 (Cth) which took effect after some of the circumstances identified by ASIC as relevant to the assessment of CEMEX's conduct had occurred. Despite this the amendments apply to the present matter by virtue of s 1478 of the Corporations Act. 14 The Panel's power to make a declaration of unacceptable circumstances is qualified with reference to the purposes in s 602 and to factors that are relevant to the conduct of takeovers. Relevantly, subsections (1)-(3) of s 657A provide: Section 657A (1) The Panel may declare circumstances in relation to the affairs of the company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances, to be unacceptable circumstances, whether or not the circumstances constitute a contravention of a provision of this Act. (2) The Panel may only declare circumstances, to be unacceptable circumstances, if it appears to the Panel that the circumstances: (a) are unacceptable, having regard to the effect that the Panel is satisfied the circumstances have had, are having, will have or are likely to have on: (i) the control, or potential control, of the company or another company; or (ii) the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; or (b) are otherwise unacceptable (whether in relation to the effect that that Panel is satisfied the circumstances have had, are having, will have or are likely to have in relation to the company or another company or in relation to securities of the company or another company), having regard to the purposes of this chapter set out in s 602; or: (c) are unacceptable because they: (i) constituted, constitute, will constitute or are likely to constitute a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C; or (ii) gave or give rise to, or will or are likely to give rise to, a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C. The Panel may only make a declaration under this subsection, or only decline to make a declaration under this subsection, if it considers that doing so is not against the public interest after taking into account any policy considerations that the Panel considers relevant. (3) In exercising its powers under this section, the Panel: (a) must have regard to: (i) the purposes of this Chapter set out in s 602; and (ii) the other provisions of this Chapter; and (iii) rules made under section 658C; and (iv) the matters specified in regulations made to the purposes of paragraph 195(3)(c) of the ASIC Act; and. (b) may have regard to any other information it considers relevant. In having regard to the purpose set out in paragraph 602(c) in relation to an acquisition, or proposed acquisition, of a substantial interest in a company, body or scheme, the Panel must take into account the actions of the directors of the company or body or the responsible entity for a scheme (including actions that caused the acquisition or proposed acquisition not to proceed or contributed to it not proceeding).

Review Panel 15 A party affected by a Panel decision may seek review of that decision by another Panel, the review Panel. The written submissions made on behalf of the review Panel whose orders are the subject of this application, gave a helpful overview of the usual procedures adopted by the Panel in dealing with applications in relation to unacceptable circumstances. The following is a revised and truncated summary of this overview. 16 A review Panel has the same powers as the initial Panel to make a declaration under s 657A and an order under s 657D or s 657E; s 657EA(4). The Constitution of a review Panel and the procedures to be followed in conducting the review are governed by regulations made under the ASIC Act. The review Panel considers the review application de novo and is not limited to the facts found by the initial Panel. In the CEMEX review presently under consideration, the review Panel was provided with the evidence, submissions, rebuttals and other documents circulated to parties in the proceedings before the initial Panel, as well as material and information relating to the review proceeding. 17 As required by s 657A(4) the review Panel gave the parties an opportunity to make submissions. All parties, except Rinker, provided submissions and rebuttal submissions. The Panel also has discretion to convene a conference during proceedings and may do so where it considers, having regard to any time pressures, that a conference will elicit information to assist it in reaching a decision promptly. The Panel did not convene any conferences in this matter. 18 On 13 August 2007 the review Panel advised the parties by email that it had made a declaration of unacceptable circumstances and that it proposed to make orders similar to those made by the original Panel. It also attached a draft media release. The email continued: The Panel seeks any new submissions from parties as to the proposed orders. … In particular, the Panel seeks comments on: 1. the practicalities and mechanics of the orders it proposes. 2. the time limits it has proposed in the orders on Affected Rinker Shareholders, ASIC, CEMEX, and Rinker's share registry. 3. the time it might take to settle the content of the proposed notices and claim forms. 4. how ASIC might assess its reasonable direct and indirect costs … 5. what input CEMEX might have in how ASIC carries out, or procures its agents to carry out, its responsibilities under the orders. 6. how Affected Rinker Shareholders might reasonably satisfy ASIC under order 20(a). 7. how CEMEX might reasonably satisfy ASIC under order 20(a). 8. any unfair prejudice that you contend that the orders would be likely to cause any person. 9. any steps that the Panel might take to mitigate the prejudice such that it is no longer unfair. 19 The Panel allowed the parties approximately two business days to make such submissions. It received submissions from ASIC and CEMEX. There were subsequent discussions concerning the orders and, in particular, the mechanics of the orders. On 10 September 2007 the Panel advised the parties that it had decided to make the orders in the form attached to its email of 13 August. 20 On 17 September 2007 the Panel provided its draft reasons for the decision to the parties and the parties were invited to comment on issues of fact or unfair prejudice. No party made any comments and the review Panel's reasons were published on 20 September 2007. The Panel's media release on final orders was also published on 20 September 2007.

DECISION OF THE REVIEW PANEL 21 The review Panel published detailed reasons for its conclusion that on 7 May 2007 CEMEX departed from its best and final offer statement, its decision to make a declaration of unacceptable circumstances and its subsequent orders. By way of overview, the Panel provided a short summary of its reasoning in which it made the following points: The review Panel considered that the 10 April announcement included a best and final statement. CEMEX did not clearly, unambiguously and proximately reserve the right to improve the Offer consideration (other than in the event of a superior proposal). An aspect of the best and final statement was that CEMEX was assuring the market that it would not improve its Offer consideration in the absence of a superior proposal. Allowing shareholders to retain the dividend was an improvement in the Offer consideration. There was no superior proposal. The 7 May announcement departed from and was inconsistent with the assurance in the 10 April announcement. The market for Rinker Shares between the 10 April announcement and the 7 May announcement reflected (among other things) CEMEX's best and final statement. Sellers sold on the basis of that market. After the 7 May announcement the market reflected (among other things) the improved Offer consideration. The review Panel was satisfied that the departure from the 10 April announcement was unacceptable having regard to the effect it had on: (a) the control or potential control of Rinker, (b) the acquisition of a substantial interest in Rinker by CEMEX, (c) the acquisition of control over voting shares in Rinker taking place in an efficient and informed market, or (d) holders of the relevant class having a reasonable and equal opportunity to participate in any benefits. 22 In its detailed reasons, the Panel referred to figures provided by ASIC which showed that in the 18 trading days after the 10 April announcement (that is until the 7 May announcement) approximately twice as many shares were traded, and twice as many trades were made, as in the 18 days before the 10 April announcement. The Panel also stated that, following the 7 May announcement: (a) the closing price of Rinker shares on the ASX was A$0.34 (on 7 May) above the closing price on 4 May (the previous trading day). (b) acceptances of the Offer went from approximately 3.24% on 7 May to 95.66% when the Offer closed on 16 July 2007. After the 10 April announcement, acceptances went from approximately 0.03% to 3.24% before the 7 May announcement. 23 The review Panel said that, for reasons that did not include a contravention of the Act, it was satisfied that the circumstances were unacceptable. It said: Contravention is not a factor in this case. While there may be a question about whether CEMEX varied its Offer without following section 650B, this is not the basis for the Panel's declaration. The declaration is based on CEMEX's departure from its best and final statement. 24 It may well be that the Panel's concern to make quite clear that it was not basing its decision on a finding that there had been a contravention of the Corporations Act was because its decision predated the decision of the High Court in Attorney-General (Cth) v Alinta Ltd (2008) 242 ALR 1. At the time, therefore, the question of whether s 657A(2)(b) involved the exercise of the judicial power of the Commonwealth had not been authoritatively determined. 25 The review Panel rejected CEMEX's submission that the terms of its best and final offer should be construed as retaining for CEMEX a discretion whether or not it would deduct the amount of the dividend paid to Rinker shareholders or that it had qualified its 10 April announcement by reserving such a discretion. It referred to analysts' reports submitted by CEMEX and found that of the seven reports submitted, only one expressed the view that CEMEX could allow Rinker shareholders to retain the benefit of the final dividend, two expressed a contrary view and the others did not address the matter. 26 The review Panel also referred to the statement made by Rinker on 27 April 2007, when it announced the final dividend of $0.25. The Rinker announcement said: Shareholders should note that under the terms of CEMEX's takeover offer for Rinker, CEMEX has the right to deduct the amount of the dividend (or an amount equal to its value, as are reasonably assessed by CEMEX) from the offer price payable to accepting shareholders who have or will receive that dividend. The Panel considered that the "ordinary reading of the statement" would merely remind shareholders of the terms of CEMEX's offer and would not convey the meaning that CEMEX might improve its offer, by allowing them to retain a dividend. 27 CEMEX submitted that it would not be in the public interest for the Panel to make a declaration of unacceptable circumstances. In support of this submission it said that there was "an absence of evidence" that its conduct had any adverse effect on the market or on shareholders' rights. The Panel disagreed, relying inter alia on the difference between the number of trades and number of shares traded before and after the announcement of 7 May. 28 CEMEX also submitted that there had been no allegation or finding of a contravention of the Corporations Act or any inquiry into whether the conduct might amount to a contravention of the Corporations Act. In the absence of such an inquiry CEMEX argued, by reference only to broad policy considerations and without any reference to questions such as "whether the relevant conduct affected the market or any party suffered loss", that the review Panel's orders would impose a significant penalty on CEMEX. The Panel rejected both those submissions. The review Panel's orders 29 Consequent on its declaration of unacceptable circumstances the Panel made a number of detailed orders. The Panel's power to make orders derives from s 657D(2) of the Corporations Act which relevantly authorised the Panel to make, any order (including a remedial order but not including an order directing a person to comply with a requirement of Chapter 6, 6A, 6B or 6C) that it thinks appropriate to: (a) if the Panel is satisfied that the rights or interests of any person, or group of persons, have been or are being affected, or will be or are likely to be affected, by the circumstances - protect those rights or interests, or any other rights or interests, of that person or group of persons; … 30 The Panel made a number of orders, the primary order being order 3 which was in the following terms: Subject to Order 14, CEMEX shall pay to each Affected Shareholder who signs and returns a claim form (within the applicable period specified in Order 10) $A0.25 per share for the net number of Rinker shares the Affected Shareholder disposed of a beneficial interest in during the Relevant Period as set out in the claim form. In the context of this order, "Affected Shareholder" was defined as meaning "a person who disposed of a beneficial interest in a net number of Rinker shares during the "Relevant Period"." The "Relevant Period" was defined to mean the period between 10 April and 7 May 2007. Order 14 dealt with disputes concerning entitlement to payment. 31 Orders 21, 22 and 23 provided that CEMEX was to establish a Special Purpose Account in which it was to deposit $15 million to be used to make the payments required by order 3. Other orders established procedures by which applications for payment were to be submitted and processed, how the money was to be paid, determinations of special circumstances, disputes as to entitlement to payment, requesting of further information, and other orders relating to the administration of the payments.

GROUNDS OF REVIEW 32 CEMEX seeks review of the declaration and orders of the review Panel on a number of grounds. I shall deal with each ground of review in turn.

Declaration 33 CEMEX's first ground of review is that making the declaration of unacceptable circumstances was, within the meaning of s 5(1)(e) of the ADJR Act, an improper exercise of the power conferred by s 657A of the Corporations Act. CEMEX alleged that the Panel failed to take into account: (i) whether, and if so the extent to which, CEMEX's conduct constituted or gave rise to a contravention of Chapters 6, 6A, 6B or 6C of the Corporations Act; (ii) the extent to which any person was misled or confused or suffered loss by any conduct of CEMEX; (iii) the matters referred to in s 657A(3) of the Corporations Act; … 34 Moreover, it was alleged that the failure in (a) above, and the failure to consider the specific effect of the unacceptable circumstances, was so unreasonable an exercise of the power conferred by s 657A that no reasonable person could have so exercised the power. 35 The ADJR Act provides that an improper exercise of power includes, inter alia, taking an irrelevant consideration into account in the exercise of the power and failing to take a relevant consideration into account: s 5(2). CEMEX submitted that in declining to have regard to whether its conduct gave rise to a contravention of Chapters 6, 6A, 6B, or 6C of the Corporations Act or was otherwise contrary to law, the Panel ignored a consideration that it was bound to take into account in making the decision: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40. It is not in dispute that the Panel expressly declined to consider this question. Therefore the only issue for me to decide on this point is whether the Panel was required to have regard to it. 36 Section 657A(3)(a)(ii) imposes an obligation on the Panel, when contemplating a declaration of unacceptable circumstances, to have regard to "the other provisions of this Chapter [6]". CEMEX submitted that, because of the express reference in s 657A(2)(c) to Chapters 6A, 6B and 6C, the obligation extends also to those chapters. It accepted that a declaration of unacceptable circumstances may be made even if the circumstances do not give rise to a contravention of the Act; s 657A(1). It submitted, however, that a consideration need not be determinative to render it relevant. CEMEX referred to the Panel's observation that forming a view about whether a contravention had occurred would only be one aspect of considering whether the circumstances were unacceptable. It argued that it did not follow that the issue could be ignored. 37 CEMEX's submissions advocate a mechanistic approach to the interpretation of s 657A(3)(a). This is not what the section requires. An obligation to have regard to Chapter 6 does not require the decision maker to consider whether there has been a contravention of each and every applicable provision. The task of the Panel was to consider whether, as ASIC alleged, unacceptable circumstances had arisen. Section 657A(3)(a) sets out the matters that it is mandatory for the Panel to consider. The question of whether there has been a contravention of Chapters 6, 6A, 6B, 6C is not included as a mandatory matter. The fact that s 657A(1) specifically provides that it is not necessary for there to be a contravention of a provision of the Act, indicates that if the Panel considered CEMEX's conduct resulted in unacceptable circumstances irrespective of there being a contravention, it was not necessary for it to consider if there had been a contravention. It is clear that the fact of a contravention would be highly relevant to the question of whether the circumstances should be characterised as "unacceptable". If, however, such circumstances exist irrespective of a contravention, it is not necessary for the Panel to consider that issue. 38 The regulatory framework which Chapter 6 establishes is, as Gleeson CJ observed in Attorney General (Cth) v Alinta Ltd at 4, designed "to preserve an efficient, competitive and informed capital market". Section 657A(1) recognises that the conduct of a takeover may be inconsistent with such a market even where it does not contravene a specific provision of the Corporations Act. Emmett J recognised this in Glencore International AG v Takeovers Panel (2006) 151 FCR 77 at 108: The panel, of course, is expressly empowered by s 657A(1) to make declarations notwithstanding that there has been no contravention of the Act. Part 6.10 of the Act provides flexibility in the regulation of the acquisition of shares in circumstances where the literal operation of the regulatory regime is either unnecessarily restrictive or ineffective to achieve the object of Ch 6. It is clear enough that the regime involving the panel is designed to ensure regulation of the acquisition of shares over and above the provisions contained in the balance of Ch 6: … The panel made its declaration because, notwithstanding compliance by Glencore and the Banks with the disclosure regime prescribed by the Act, the purposes of Ch 6, as expressed in s 602, were not achieved. That is precisely the circumstance for which s 657A provides. It is not unreasonable for the panel, if its decision was otherwise lawful and authorised, to reach that conclusion. 39 The Corporations Act specifically reposes in the Panel the responsibility for deciding whether conduct is "unacceptable". The conclusion which the review Panel reached was open to it and I find no error in it reaching that conclusion. 40 CEMEX also submitted that the Panel had misconstrued its Bidder's Statement, its best and final offer statement made on 10 April 2007, the notice of variation of offer made on 10 April 2007, the fourth supplementary bidder's statement dated 17 April 2007, the fifth supplementary bidder's statement dated 18 April 2007. It submitted that, correctly construed, clauses 8.1(c), and 8.8(e) of the Bidder's Statement had the effect of preserving for CEMEX a discretion as to whether or not it would take steps to receive the benefit or value of any future Rinker dividend from accepting Rinker shareholders. It also argued that on a correct construction, the best and final offer statement indicated that CEMEX reserved a discretion to decide whether or not it would take steps to receive the benefit or value of any future Rinker dividend from accepting Rinker shareholders. 41 In essence, all of these allegations make the same basic point, which is that in all of the statements referred to above, CEMEX had reserved to itself a discretion (Dividend Discretion) to decide in respect of each and every dividend declared by Rinker, whether or not it would deduct the amount of any such dividend from payments made to Rinker shareholders for each share sold to CEMEX. The review Panel considered the arguments put to it by CEMEX that it had at all times, reserved a Dividend Discretion and rejected the arguments. 42 I agree with the submission made by ASIC that these contentions are, in substance, a challenge to the Panel's findings of fact. This challenge is not available to CEMEX in the present proceeding. In any event, I do not accept the construction for which CEMEX contends. In my view the Panel correctly interpreted CEMEX's best and final offer statement as being a statement that the offer would not be increased except in the context of a higher offer from another source. In its statement of 7 May 2007 CEMEX offered Rinker shareholders an additional sweetener by allowing them to retain the benefit of the dividend of $0.25 per share. This was an increase in the consideration for the shares and, in my view, it was contrary to the position advanced in CEMEX's best and final offer statement. 43 I do not accept that clause 8.8(e) of the Bidder's statement gave CEMEX a discretion to decide whether or not to take the benefit of future dividends. In my view the Panel's analysis of the Statement was correct for the reasons it gave. It is consistent with the plain meaning of the Statement and, as ASIC submitted, it is reinforced by the clear terms of s 8.1(c) of the Bidder's Statement, to the effect that if CEMEX bought a shareholder's Rinker securities, then CEMEX was entitled to all rights in respect of those securities. There is nothing in the other statements to which CEMEX referred that casts doubt on this construction and it is not necessary to add anything more on this point. Orders 44 CEMEX challenges the orders made by the Panel on grounds that may be summarised as follows:

1. The orders were not authorised by s 657D, as that provision: (a) did not authorise the Panel to order a person to pay an amount of money to another person, either at all or, alternatively, in the absence of satisfaction that the latter person has suffered loss or damage as a result of the circumstances declared to be unacceptable; and (b) did not authorise the Panel to delegate to ASIC the duty to decide whether a person must pay an amount of money to another person.
2. the Panel improperly exercised the power conferred by s 657D by: (a) failing to take into account relevant considerations, being whether CEMEX's conduct constituted a contravention of Chapters 6, 6A, 6B or 6C of the Act; whether any Affected Shareholder relied on or suffered loss as a result of any conduct on the part of CEMEX; and whether the takeover bid would have proceeded differently, if the unacceptable circumstances had not occurred; and (b) making a decision in the context of the absence of evidence concerning the extent to which the rights or interests of Affected Shareholders were actually affected by the unacceptable circumstances, that being unreasonable in the Wednesbury sense.
3. The Panel erred in law within the meaning of s 5(1)(f) of the ADJR Act in various respects, arising out of the above grounds, including by concluding that an order could be made to "protect" rights or interests which no longer existed at the time the orders were made. 45 These grounds raise three issues: (1) whether the Panel had power to order CEMEX to pay each Affected Shareholder $0.25 in respect of each share sold during the Relevant Period in the absence of a finding that each Affected Shareholder had suffered a loss; (2) whether the orders involved an impermissible delegation of power to ASIC; and (3) whether the orders invalidly attempted to "protect" rights or interests that no longer existed.

Did the Affected Shareholders need to prove individual financial loss? 46 The essence of this complaint is that s 657D(2)(a) while the Panel is authorised to make orders that protect rights or interests affected by the unacceptable circumstances, it is not given power to order that payment be made to individuals who have not shown financial loss. Consequently, where there is no evidence before the Panel that any individual Rinker shareholder suffered financial loss as a result of CEMEX's conduct order for payment is beyond power. The absence of such evidence meant the Panel was not in a position to determine whether there was a "reasonable connection between the extent to which the right/interest has been affected and the extent to which it is sought to be protected". As CEMEX stated in its written submissions: In the absence of such evidence, the Panel lacked the ability to determine whether any person's rights or interests had been affected and whether any order made by it would "protect" the shareholders' rights/interests. This is because individual shareholders may have suffered no loss or may have suffered a loss lesser or greater than the final dividend. 47 As an example of a shareholder who suffered no loss CEMEX put forward the hypothetical case of a shareholder who utilised the proceeds from the sale of Rinker shares to purchase stock in BHP and whose BHP shares increased in value at a higher rate than the Rinker shares would have increased in an efficient market. Such a shareholder, it submitted, would have suffered no loss and therefore the review Panel's orders would confer a windfall on that shareholder at the expense of CEMEX. This example assumes that the only relevant loss is financial. 48 The notion that s 657D(2)(a) does not permit the Panel to make orders on the basis of a so-called "en globo" assessment of the likely loss or damages suffered by Rinker shareholders was said by CEMEX to be supported by Emmett J's comments in Glencore International AG v Takeovers Panel (2005) 54 ACSR 708 at 722, where his Honour said: [T]he review panel took no steps to determine whether, and if so, in what manner, any right or interest of any such person was affected by the non-disclosure. While the orders were purportedly made for the purposes of protecting the rights or interests of persons affected by the non-disclosure, the order applied indiscriminately to any person who sold shares on ASX during the relevant period, irrespective of whether any such person would have taken any different course had the relevant disclosure been made. 49 This submission does not take account of the amendments to the Corporations Act made by the Corporations Amendment (Takeovers) Act 2007 (Cth). The Explanatory Memorandum to the corresponding Bill makes it clear that the amendments were designed to respond to the concern that, following Glencore, "it may be open to read the Panel's powers and jurisdiction in the current legislation in way that is too narrowly formulated to enable the Panel to perform effectively the role envisaged for it by Parliament", in particular the power to make orders to protect the rights or interests of persons affected by unacceptable circumstances. In relation to s 657D(2)(a) the Explanatory Memorandum stated: Paragraph 657D(2)(a) of the Act currently allows the Panel to make orders it thinks appropriate to protect the rights or interests of any person affected by the circumstances. The amendment means that this is not confined to rights and interests directly affected by the circumstances. The amendment ensures that the Panel can make any order it thinks appropriate to protect any rights or interests of a person or group of persons, where the Panel is satisfied that their rights or interests have been, are being, will be or are likely to be affected by the unacceptable circumstances. This will allow the Panel to protect the interests of those persons more effectively. The amendment will also ensure that the Panel may make orders which protect the interests of a group of persons whose interests have been affected, rather than requiring it to address the effects person by person. (Emphasis added.) 50 I am satisfied that the Court was entitled to proceed en globo in its assessment of the extent to which shareholder's rights or interests were affected by the unacceptable circumstances. First, as well as being consistent with the express words of s 657D(2)(a) ("if the Panel is satisfied that the rights or interest of any person, or a group of persons…"), such an approach recognises that the unacceptable circumstances misinformed the market as to the status of CEMEX's offer, thereby affecting the rights and interests of vendors of Rinker shares in that market, as a group. Counsel for ASIC, in my view accurately, summarised the steps taken by the Panel as follows: · identifying a group of persons, namely those who sold their Rinker shares between 10 April and 7 May 2007; · identifying the interests of those persons affected by the conduct, being the interest in ensuring that the relevant trading occurred in an efficient and informed market, and the interest in having a reasonable opportunity to participate in the benefits of the improved offer; · making a finding that the market value of the improved offer consideration was around $0.25; and · forming the view that an appropriate order was to compensate those persons in that amount. 51 In my view, there is no error in this approach. Disclosed in those steps was a reasonable connection between the extent to which the right or interest has been affected and the extent to which it was sought to be protected. That connection was based on the finding, open to the Panel, that persons who sold shares between 10 April and 7 May did so in a market that was not efficient and informed, and in particular they lost the opportunity to include as part of their decision to sell, the information that the offer consideration might be improved; and that the value of the final dividend was the best estimate of the value of the lost opportunity. That opportunity was lost whether or not any particular shareholder went on to purchase BHP shares which increased in value at a rate higher than Rinker shares would have in an efficient market. That is, the opportunity was lost by each Affected Shareholder irrespective of whether any individual Affected Shareholderactually suffered a financial loss because of the unacceptable circumstances. It therefore cannot be said that the Panel failed to have regard to whether loss was suffered. 52 The concept of the loss as the opportunity to participate in an informed and efficient market is underpinned by the purposes of Chapter 6 of the Corporations Act, referred to above at [14]. In particular, the purpose of ensuring that acquisition take place in an efficient, competitive and informed market is a legitimate interest of all persons participating in the market. Where, as here, the actions of a person or a company are found to have detracted from the openness and competitiveness of the market, the purpose of Chapter 6 is to redress that problem. Were I to accept CEMEX's submission that purpose would be subverted. 53 I am therefore satisfied that it was within the Tribunal's power to order CEMEX to pay each Affected Shareholder $0.25 per share sold in circumstances where they did not make a finding that each Affected Shareholder had suffered a loss. 54 A related argument put by CEMEX was that the Panel did not satisfy itself as to whether its order would "unfairly prejudice" CEMEX, as required by s 657D(1). According to CEMEX: In order to properly consider whether an order has the potential to be unfair it must be relevant to consider whether the conduct of the intended payer is a contravention of Chapter 6, 6A, 6B or 6C of the Act. That is because an order is more likely to unfairly prejudice a person if his or her conduct gives rise to unacceptable circumstances but does not involve a contravention of the Act 55 As I have already concluded, s 657A does not require the Panel to consider if there has been a contravention before making a declaration of unacceptable circumstances. Section 657D(1) requires that the Panel "must not make an order if it is satisfied that the order would unfairly prejudice any person". The Panel reached the requisite level of satisfaction in this case: (a) As a result of the unacceptable circumstances persons who sold shares between the 10 April and 7 May announcements did so in a market that was not efficient and informed. They lost the opportunity to include as part of their decision to sell the information that the Offer consideration might be improved. The value of the final dividend is, in the review Panel's opinion, the most logical and best estimate of the value of the lost opportunity. (b) CEMEX's best estimate to the initial Panel of the relevant number of shares involved (i.e., the net sales between the two announcements) was 44,849,359, and the amount involved was A$11,212,340. That must be compared to the benefits that CEMEX received by departing from its best and final statement. Allowing shareholders to retain the benefit of the final dividend significantly, if not wholly, contributed to the success of the Offer. The total value of the Offer was approximately $A17 billion. CEMEX submitted as its best estimate to the initial Panel, that the value of the final dividend was approximately A$223.7 million. Relative to these amounts, the likely amount of the payment order is not out of proportion or otherwise unfair. 56 It follows that CEMEX's argument that the Panel improperly failed to take into account whether their conduct constituted a contravention of Chapters 6, 6A, 6B or 6C of the Corporations Act must be rejected. It also follows from my findings that the Panel's orders cannot be said to be unreasonable in the Wednesbury sense; Associated Provincial Picture Houses Limited v Wednesbury Corporation [1948] 1 KB 223.

Was there an impermissible delegation of power? 57 CEMEX alleges that the orders involve an impermissible delegation of power in that they establish, by orders 14-16, a mechanism by which ASIC is given the power to determine authoritatively whether a person is an Affected Shareholder and is therefore entitled to the payment. The mechanism set up by orders 14-16 is as follows: 14. CEMEX may refer a claim to ASIC, within 2 weeks of CEMEX or the ISP receiving the claim form (whichever is earlier). CEMEX must provide to ASIC, with the referred claim form, the reasons it considers that the person submitting the claim form may not be entitled to the payment set out in the claim form because: (a) CEMEX considers that the person submitting the claim form is not an Affected Shareholder; (b) Special Circumstances do not apply; (c) CEMEX dispute some or all of the details, supporting documents or evidence submitted in all with the claim form; or (d) CEMEX considers that payments have already been made or claimed for in respect of some or all of the Rinker shares claimed for. 15. If CEMEX refers a claim form to ASIC under Order 14, ASIC shall within 2 weeks of receipt of that claim form make a determination, after consultation with CEMEX if ASIC considers it desirable, as to whether or not the person submitting the claim form is entitled to be paid in accordance with the Orders and if necessary, for how many Rinker shares. 16. If ASIC is unable to make a determination under Order 15, it shall refer the claim form to the Panel within 2 weeks of receipt by ASIC of that claim form for decision. 58 According to CEMEX, where the power to determine authoritatively whether a person falls within the group is delegated to a third party it is not possible forthe review Panel to reach the requisite state of satisfaction that the rights or interests of a group of person have been affected. 59 For several reasons I do not accept that the mechanism provided in orders 14-16 involves an impermissible delegation. First, ASIC has not been given the power to determine conclusively whether a person is an Affected Shareholder. The orders clearly define membership of that category. Initially it is CEMEX which considers the question. Disputes are referred to ASIC which, if it is unable to make a determination, may refer the matter to the Panel. It is therefore the Panel which ultimately has the power to resolve a dispute about whether a person is an Affected Shareholder. 60 Secondly, given the nature of the Panel, and its constitution, I accept ASIC's submission that: Parliament cannot be taken to have intended that the Panel itself would be required to administer each and every step of any order made by the Panel. Indeed, ASIC is specifically charged with the function of providing staff and support facilities to the Panel. Even if the assignment of administrative responsibilities to ASIC is not within the terms of s 657D, it would be implied into the power given the sheer administrative necessities of the legislative scheme. 61 Thirdly, the relevant criterion is whether Rinker shares were sold in the relevant period. This is a matter of fact that will be established or not by the evidence. It is not a matter that depends on the decision-maker's discretion.

Do the orders involve a protection of rights or interests that no longer existed? 62 The final argument made by CEMEX challenging the orders of the Panel was that because s 657D(2)(a) requires that any order made be appropriate to protect rights and interests, those orders must be protective rather than compensatory; and that the Panel erred in concluding that an order could be made to protect rights or interests which no longer exist at the time the order is made. This is on the basis that: … the opportunity said to have been lost by the Panel could only have been enjoyed by Affected Shareholders while they continued to own Rinker shares. Moreover, given the delisting of Rinker, Affected Shareholders could never be in a position to enjoy that opportunity again. As a result, any such right or interest, even though not now in existence, cannot be characterised as prospective or contingent in nature. 63 CEMEX went on to submit that: The orders provided for in section 657D are prophylactic in nature. They are designed to negate, for the future, any detrimental effect suffered to a person's right or interest by virtue of an unacceptable circumstance. That policy cannot be achieved where the right or interest no longer exists. An order requiring the payment of money is such circumstances must, necessarily, be characterised as compensatory in nature. 64 ASIC submitted that this contention is inconsistent with the wording of the Corporations Act, which expressly contemplates the protection of rights or interests that, at the time the order is made, have already been affected; ("… if the Panel is satisfied that the rights or interests of any person, or group of persons, have been or are being affected"). This submission does not distinguish between merely impairing rights or interests and affecting them to the point of extinction. The applicant relies on such a distinction. In my view the distinction is unwarranted. I accept ASIC's submission that such an approach is inconsistent with the policy of the legislation and that there is nothing in s 657D(2) to indicate that rights and interests must exist at the time the order is made. ASIC made the further point that: Such a conclusion is reinforced by the distinction between s 657D(2)(a) and (b). Sub-paragraph (b) is obviously intended to be used, if it can be, during the course of a takeover. Sub-paragraph (a) is obviously intended to have an operation outside the terms of sub-paragraph (b). An obvious instance of when this could occur is after the takeover has been completed. 65 In Australian Securities & Investments Commission v Yandal Gold Pty Ltd (1999) 32 ASCR 317, Merkel J considered a contravention of s 615 of the then-applicable Corporations Law. Section 737 empowered the Court to "make such order or orders as it thinks just" and s 739(1) empowered a court to make "such orders as it thinks necessary or desirable to protect the interests of a person affected by the takeover scheme". His Honour held at 354-355: However, there might be a more appropriate and just remedy. It relates to Edensor's carried interest. Mr Lonergan's evidence, which valued that interest at $27-30 million, was only partly challenged by the respondents. As explained earlier, that is effectively the "price" paid by the Normandy group to Edensor to secure the bid structure agreement and the Shareholders Agreement or, put another way, a measure of the benefit obtained by Edensor by its contraventions of s 615. As a consequence of the payment of that "price" the shareholders were deprived of the opportunity of receiving an offer of a significantly higher price at the time of the bid and were left with little practical choice but to accept the offer made or to now exercise their right to require the acquisition by Yandal Gold of their shares pursuant to s 703(2). Is it just that that "price" be redirected to those who suffered the detriment arising from its payment? In my view an order that Edensor be required to disgorge to those shareholders the value of the benefit it received for its contravening conduct is "just" under s 737 and is protective of the interests of the shareholders under s 739. 66 It follows from the above that I am satisfied that the Panel made no error in making the orders. 67 For all of the above reasons the application must be dismissed. In the ordinary course, the respondents, having been successful, would be entitled to their costs. However, neither party made any submissions as to costs either orally or in writing. That being so I shall allow all parties time to make submissions as to costs before making any orders. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Stone.

Associate: Dated: 23 October 2008 Counsel for the Applicant: I M Jackman SC, J R J Lockhart

Solicitor for the Applicant: Allens Arthur Robinson

Counsel for the First Respondent: J G Santamaria QC

Solicitor for the First Respondent: Australian Government Solicitor

Counsel for the Second Respondent: S Gageler SC, I R Pike

Solicitor for the Second Respondent: Australian Securities & Investments Commission