Glencore International AG & Anor v Takeovers Panel & Ors

THE SCHEME OF DIVISIONS 2 AND 3 OF PART 6.10 of the act 5 Under s 657A(1) of the Act, the Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. The Panel may do so whether or not the circumstances constitute a contravention of a provision of the Act. The effect of s 657A(2) of the Act is, relevantly, that the Panel may only declare circumstances in relation to the affairs of the company to be 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 the company or another company; or
• the acquisition, or proposed acquisition, by a person of a substantial interest in that company or another company. Further, the Panel may only make a declaration if it considers that doing so is not against the public interest and after taking into account any policy considerations that the Panel considers relevant. 6 Under s 657A(3)(a)(i), in exercising its powers under s 657A, the Panel must have regard to, inter alia, the purposes of Chapter 6 of the Act, as set out in s 602. Section 602 relevantly provides that the purposes of Chapter 6 are to ensure that:
• the acquisition of control over the voting shares in a listed company takes place in an efficient, competitive and informed market;
• the holders of the shares know the identity of any person who proposes to acquire a substantial interest in the Company and have a reasonable time to consider the proposal;
• as far as practicable, the holders of the relevant class of voting shares all have a reasonable and equal opportunity to participate in any benefits accruing to the holders pursuant to any proposal under which a person would acquire a substantial interest in the Company. 7 Under s 657D(1) of the Act, the Panel may make an order under s 657D(2) if it has declared circumstances to be unacceptable under s 657A. However, there are restrictions upon the making of such an order. The Panel must not make an order if it is satisfied that the order would unfairly prejudice any person. Further, under s 657D(1)(a), before making an order, the Panel must give, both to the parties to a proceeding before the Panel and to the Commission, as well as to each other person to whom a proposed order relates, an opportunity to make submissions to the Panel about the matter. 8 In addition, there is a further restriction on the Panel's power in so far as the Panel may, relevantly for present purposes, only make such order as it thinks appropriate:
• to protect the rights or interests of any person affected by the circumstances declared to be unacceptable; or · to ensure that a takeover bid proceeds (as far as possible) in a way that it would have proceeded if the circumstances had not occurred.

That is to say, the Panel must, before making an order, give consideration to the appropriateness of the order for the purpose of protecting the rights or interests of any person affected by the circumstances or for the purpose of ensuring a takeover bid proceeds in the way that it would have proceeded. 9 Under s 657F, a person who contravenes orders made under s 657D commits an offence. Under s 657F(2) such an offence is one of strict liability. 10 Under s 657EA of the Act, a party to a proceeding in which a decision of the Panel was made may apply for review by the Panel of that decision. The Panel, differently constituted, is then required to conduct a review de novo. After the review, the Panel may vary the decision reviewed, set aside the decision reviewed, or set aside the decision reviewed and substitute a new decision.

TAKEOVER OFFERS BY CENTENNIAL AND OTHER RELEVANT TRANSACTIONS 11 Glencore is an international supplier of commodities and raw materials and is also an investor. Fornax is a wholly owned subsidiary of Glencore. The Company is a miner of coking coal in southern New South Wales. It sells coking coal both domestically and internationally. The second respondent, Centennial Coal Company Limited ('Centennial'), is also a miner and marketer of coal. 12 On 23 February 2005, Centennial announced takeover offers for ordinary shares in the Company, by which Centennial offered to transfer 10 shares in its capital for every 37 shares in the capital of the Company. At that time, there were 263,463,465 issued shares in the Company, together with 40 million convertible notes. On 23 February 2005, the Company announced that its convertible notes could be converted into ordinary shares once Centennial's offers became unconditional. 13 On 21 March 2005, the Company lodged its target statement in accordance with s 648 of the Act, recommending the acceptance by its shareholders of the offers from Centennial. On 23 March 2005, Centennial declared its offers unconditional and, on 24 March 2005, announced that its relevant interest in the Company had increased to 16.5 per cent. Thereafter, Centennial continued to acquire shares in the Company pursuant to acceptance of its takeover offers. Centennial subsequently announced that, as at 20 July 2005, it had a relevant interest in 85.4 per cent of the shares in the Company. 14 At 18 March 2005, Fornax held 12,865,881 ordinary shares in the Company, representing 4.88 per cent of the issued shares at that time. On 24 March 2005, Glencore acquired a further 275,000 shares in the Company. That acquisition took its total holding to 4.99 per cent of the shares in the Company. 15 On 20 March 2005, Glencore and CSFB signed a non-binding summary of indicative terms and conditions in relation to a proposed cash settled equity swap agreement. Between 21 and 30 March 2005, CSFB acquired shares in the Company in order to hedge its potential exposure under that proposed equity swap agreement. On 4 April 2005, CSFB and Glencore entered into a binding equity swap arrangement in relation to shares in the Company. That arrangement was to expire in March 2008. 16 On 30 March 2005, ABN Amro provided a draft swap agreement to Glencore in respect of a proposed cash settled equity swap agreement. Between 31 March and 4 April 2005, ABN Amro acquired shares in the Company in order to hedge its potential exposure under that proposed equity swap agreement. On 4 April 2005, Glencore and ABN Amro entered into a binding equity swap arrangement in relation to shares in the Company. That arrangement was to expire in March 2006. 17 During those respective periods, CSFB acquired 12,100,000 shares in the Company and ABN Amro acquired 7,407,302 shares in the Company. By 4 April 2005, Fornax had acquired 13,715,443 shares in the Company. By reason of the exercise of convertible notes issued by the Company, the number of issued shares in the Company had increased such that, as at 4 April 2005, Fornax held 4.56 per cent of the issued shares of the Company, CSFB's shares represented 4.03 per cent and ABN Amro's shares represented 2.46 per cent. 18 As at 21 March 2005, the combined holding of shares in the Company by Fornax and CSFB was 5.13 per cent. As at 23 March 2005, the combined holding of shares in the Company by Fornax and CSFB was 8.18 per cent and, as at 29 March 2005, the combined holding was 9.4 per cent. As at 4 April 2005, the combined holding of shares in the Company of Fornax, CSFB and ABN Amro was 33,222,745 shares, representing 11.05 per cent of the issued shares of the Company. No announcement of any acquisition of shares in the Company by Glencore or Fornax was made before 4 April 2005. It has not been suggested in this proceeding that the failure to do so constituted a contravention of the Act. 19 However, on the evening of 4 April 2005, Glencore made the following public announcement, which was repeated to ASX at 9.30 am on the following day, 5 April 2005: 'Glencore… announces that, through a wholly owned subsidiary, it has acquired approximately 5 per cent of the ordinary shares in [the Company]. These shares have been acquired over recent weeks, with the last parcel of shares acquired having been acquired by Glencore today. A substantial shareholder notice would be filed with [the Company] and the ASX within the period prescribed under the Corporations Act. In addition, Glencore announces that it has entered into a number of cash settled equity swap agreements with well regarded investment banks. Glencore has no legal obligation to disclose these swap arrangements but it does so to assist the market. In aggregate, these swaps relate to approximately 7.5 per cent of the ordinary shares in [the Company].'

INITIAL PROCEEDINGS BEFORE THE PANEL 20 On 3 June 2005, Centennial made an application to the Panel pursuant to s 657C of the Act, requesting the Panel to make a declaration that circumstances in relation to the affairs of the Company were unacceptable, as provided for in s 657A(2) of the Act. Centennial also asked the Panel to make orders under s 657D of the Act. On 28 June 2005, the Panel, constituted by Ms Meredith Hellicar, Mr Guy Alexander and Mr Hamish Douglass ('the Initial Panel'), made a decision by which it declared that the failure of Glencore to disclose promptly and publicly various facts, including the fact that the combined holding of Fornax, CSFB and ABN Amro of shares in the capital of the Company exceeded 5 per cent and increased by more than 1 per cent on several occasions prior to 4 April 2005, constituted unacceptable circumstances in relation to the affairs of the Company. The Initial Panel indicated that it proposed to make a disclosure order, a restoration order and other ancillary orders. 21 The disclosure order involved Glencore announcing to ASX information relating to the cash settled equity swap agreements with CSFB and ABN Amro. The restoration order required Glencore to make an offer, to each person who sold shares in the Company on ASX during the period 22 March 2005 to 5 April 2005, to sell to any such person the number of shares sold by that person. In addition, provision was made for Glencore to give notice to ABN Amro or CSFB to close out a swap in respect of a specific number of shares and to require that Bank to sell that number of shares to Glencore.

PROCEEDING BEFORE THE REVIEW PANEL 22 On 30 June 2005, Glencore and Fornax applied under s 657EA of the Act for review of the decisions of the Initial Panel of 28 June 2005. The Panel that considered the matter de novo, pursuant to the application under s 657EA, was constituted by the first respondent, Professor Ian Ramsay, Mr Norman O'Brien QC and Mr David Gonski ('the Review Panel'). 23 On 20 July 2005, the Review Panel made a declaration in the following terms: 'that the circumstances relating to: (1) Glencore's failure to disclose to the market, from 9.30 am on 22 March 2005 until 4 and 5 April 2005, the fact that the combination of Glencore's holding of voting shares in [the Company] and the swap exposure agreed to be provided under the Glencore Swap (Combined Holding) exceeded 5% of the voting shares in [the Company]; and (2) Glencore's failure to disclose to the market, from 9.30 am on each relevant trading day between 23 March and 5 April 2005, any increase of 1% or more of the Combined Holdings; constitute unacceptable circumstances in relation to the affairs of [the Company].' The term 'Glencore Swaps' was defined in the declaration by reference to:

• equity swap arrangement entered into by Glencore on or before 21 March 2005 with CSFB in relation to shares in the Company, the practical effect of which was that CSFB confirmed the swap exposure it offered Glencore from time to time as it acquired shares in the Company as a hedge;
• similar equity swap arrangement entered into by Glencore on 31 March 2005 with ABN Amro with the same practical effect. According to their written statement of reasons for making the declaration of unacceptable conduct, the Review Panel found, in effect, that Glencore, on the one hand, had reached 'commercial understandings or arrangements' with each of the Banks, individually, on the other hand, to proceed with swaps at the time when the relevant Bank began buying shares in the Company, to support its proposed exposure under swap arrangements. The Review Panel did not consider as decisive the question of whether or not any equity swap arrangement was legally enforceable. 24 Dr Melissa Perry QC, who, with the Solicitor General, appeared for the third respondent, Australian Securities and Investments Commission ('Commission'), which was the only effective contradictor of the case mounted by Glencore, observed, in the course of oral argument, that the decision of the Review Panel is not an easy one to follow. Senior Counsel therefore proceeded, as she put it, 'to deconstruct' the Review Panel's reasoning with a view to exposing the steps that led to the conclusion that Glencore's failure to disclose information constituted unacceptable circumstances in relation to the affairs of the Company that had a relevant effect. With the benefit of that 'deconstruction', the Review Panel's reasoning might be summarised as follows:
• Having regard to s 606, which sets a 20 per cent threshold for disclosure of a relevant interest, and s 671B, which sets a 5 per cent threshold for a substantial holding, the Legislature regards the effect on control of holdings well below actual control as being material to potential control. Accordingly, the fact that Glencore itself could not be regarded as exercising control or potential control of the Company was not decisive as to the effect of the relevant circumstances on control or potential control of the Company.
• Glencore's and the Banks' holdings should be treated together because: (a) there was a commercial understanding reached between Glencore and the Banks to proceed with swaps when the Banks started buying shares to support their offers of swaps; (b) the Banks had no option but to hedge the swaps with holdings of shares in the Company, since they could otherwise be left without an effective hedge in the event that Glencore, or another bidder, commenced a rival takeover bid, which could significantly increase the share price for shares in the Company and decrease the number of shares available for the Banks to hedge their exposure.
• Having found that the holdings of the Banks and Glencore should be treated as a combined holding, the question was whether the non-disclosure of that combined holding had an effect on the control or potential control of the Company, or upon the acquisition or proposed acquisition of a substantial interest in the Company.
• The combined holding had the effect that the number of shares available to be traded, or to be the subject of acceptance of Centennial's bid, was 'materially reduced': the acquisition of shares in the Company by Fornax, CSFB and ABN Amro had the effect of 'withdrawing' from the market all of the shares acquired by them and the combined holding of shares in the Company substantially reduced 'the free float' of the Company's shares. .
• It was commercially highly likely, if not inevitable, that the Banks would hold the shares in the Company acquired by them until the equity swaps were terminated or decreased. Glencore could therefore be reasonably certain that no one else, whether Centennial or another rival bidder, could acquire the shares held by the Banks while the equity swaps were in force. The effect was similar to that which would have followed had Glencore itself acquired the shares instead of the Banks.
• Disclosure at the relevant time of:
  • the numbers of shares in the Company that were the subject of the equity swaps to which Glencore was a party,
  • the identity of Glencore as a participant in the coal industry and
  • Glencore's own holding of a material parcel of shares (4.9 per cent) would have identified: (a) Glencore as a natural potential bidder for shares of the Company or as a blocker of Centennial's bid and (b) the Banks as holders of shares in the Company that would not be traded for so long as the equity swap arrangements continued in existence.
• Market participants in possession of that information would have made their own assessments about Glencore's intentions and factored that into their decisions on whether:
  • to buy shares in the Company,
  • to sell shares in the Company, either on market or by accepting Centennial's bid, or o to retain shares in the Company

and may have made different decisionsabout those matters, had they been given that information.

• The fact that market participants may have made different decisions means that the non-disclosure had an effect on Centennial's bid for the Company and, therefore, had an effect on: (i) the control or potential control of the Company; (ii) the acquisition or potential acquisition of substantial interests in the Company, at least by Glencore and Centennial and possibly others; (iii) the efficiency, competitiveness and information available to the market for control of shares in the Company, since it was information that the market would have expected and needed. 25 However, the Review Panel made no finding as to what effect the non-disclosure had. That is to say, the Review Panel did not make any attempt to speculate or determine what different decisions would have been, or were likely to have been, made by such market participants. 26 The orders made under s 657D by the Review Panel on 25 July 2000 are as set out in the schedule to these reasons. The Panel published its reasons for making those orders on the same day. Those reasons supplemented reasons for making orders published on 20 July 2005. However, the reasons of 25 July 2005 were, in most respects, identical to the reasons for making orders published on 20 July 2005. 27 The Review Panel accepted that it could not determine exactly what would have happened in the market if Glencore had properly disclosed the existence of the combined holdings of Fornax and the Banks. The Review Panel also accepted that, even if it could determine what would have happened in the market, it could not return to their previous positions all persons who traded in the 'uninformed' market. The Review Panel said that its orders sought to give the persons who sold their shares in the Company in that uninformed market an opportunity to buy back the shares they sold and then reassess their positions in light of the information that had by then emerged and that the Review Panel said they should have had before they sold. The Review Panel considered that giving that opportunity to those persons, which it described as 'the persons affected', was the appropriate form of order. 28 The Review Panel accepted that Centennial was also entitled to proper disclosure of the combined holdings at the time when Centennial declared its offers free from conditions. However, the Review Panel considered that Centennial knowingly took the risk that it might end up, at the end of its takeover bid, unable to acquire compulsorily all the outstanding shares in the Company. The Review Panel observed that Centennial declared its offers free of conditions when it held only 9.6 per cent of the shares in the Company. While the Review Panel considered that the unacceptable circumstances found were not circumstances that Centennial might reasonably have expected to face, the Review Panel considered that it was quite foreseeable that Centennial could have faced a 10 per cent holder who acquired shares in the Company after Centennial had decided to declare its bid free from conditions. On that basis, while the Review Panel accepted that Centennial may have been harmed by the unacceptable circumstances, the harm did not, in the Review Panel's view, warrant any order to facilitate Centennial achieving compulsory acquisition of the shares held by the Banks. 29 The Review Panel stated in its reasons that the orders were made to protect the interests of those persons who sold shares in the Company during the relevant period in transactions on ASX. However, the Review Panel made no other findings about such interests. Thus, no finding was made as to whether any such person had actively suffered any detriment by reason of the non-disclosure.

GLENCORE'S GROUNDS FOR QUASHING THE PANEL'S DECISIONS 30 In the Amended Application, Glencore and Fornax claim all relief on the following grounds: 'Ground 1 The Panel was required, in exercising its power under s657A(1) of the [Corporations Act] to declare circumstances to be unacceptable circumstances, to have regard to the effect of the circumstances on the control or potential control of a company, or the effect of the circumstances on the acquisition or proposed acquisition by a person of a substantial interest in the company: see s657A(2)(a)(i) and (ii) of the Corporations Act. The Panel purported to determine that there was the requisite effect because it considered that the disclosure of the "Combined Holding": (a) would have been likely to lead to speculation by market participants about a possible rival bid by Glencore, or the possible purchase of shares at a higher price in order to build a position (at [56], [58], [65]); (b) might have led [the Company's] shareholders to make different decisions in relation to their acceptance of the Centennial bid (at [59]); and (c) might have led to the emergence of other bidders for [the Company] (at [63]). None of those matters, whether individually or in combination, amounted to the circumstances having an effect as required by s657A(2)(a). In considering that those matters did constitute the requisite effect, thereby enlivening the power to make a declaration under s657A(1), the Panel asked itself the wrong question, and failed to ask the right question - namely, what actual effect on the market did the non-disclosure of the "Combined Holding" have? - with the result that the conditions for the exercise of the power did not exist in law. Ground 2 Alternatively to ground 1, the Panel's determination that the circumstances had an effect as required by s657A(2)(a) was irrational, illogical and not based on findings or inferences of fact supported by logical grounds, or alternatively was so unreasonable that no reasonable Panel could reasonably have so determined. Ground 3 Alternatively to grounds 1 and 2, in the light of the Panel's finding that there had been no contravention of the Corporations Act and the fact that transactions of the nature entered into by Glencore with ABN AMRO and CSFB were commonplace and not hitherto disclosed to the market by the parties thereto (except in the case of some actual takeover bidders or publicly announced proposed takeover bidders), no reasonable Panel could reasonably have concluded that the circumstances were unacceptable circumstances. Ground 4 Further, the power to make orders required the Panel to form the opinion that the orders were appropriate, relevantly, to protect the rights or interests of any person affected by the circumstances, or to ensure that the takeover bid proceeded so far as possible in a way that it would have proceeded if the circumstances had not occurred: s657D(2)(a) and (b), s657D(2)(c) and (d) not being applicable. The Panel's opinion that the orders were appropriate to ensure that the takeover bid proceeded so far as possible in a way that it would have proceeded if the circumstances had not occurred was irrational, illogical and not based on findings or inferences of fact supported by logical grounds, or alternatively was an opinion that no reasonable Panel could reasonably have held. The Panel's opinion that the orders were appropriate to protect the rights or interests of the persons affected by the circumstances was irrational, illogical and not based on findings or inferences of fact supported by logical grounds, or alternatively was an opinion that no reasonable Panel could reasonably have held. Ground Five Further, the Panel was prohibited, by reason of section 657D(1), from making orders if it was satisfied that the orders would unfairly prejudice any person, and, on the true construction of that provision, was only empowered to make orders if it were satisfied that the orders would not unfairly prejudice any person. In making the orders it made on 25 July 2005, the Panel's opinion that the orders would not unfairly prejudice [Glencore] and [Fornax] was irrational, illogical and not based on findings or inferences of fact supported by logical grounds, or alternatively was so unreasonable that no reasonable panel could reasonably have held that opinion. Ground Six Subdivision B of Division 2 of Part 6.10 of the Corporations Act, contrary to Ch III of the Constitution, purports to confer the judicial power of the Commonwealth in a body which is not a court. In particular, s657A purports to authorise the Takeovers Panel to make declarations of unacceptable circumstances and s657D purports to authorise the Takeovers Panel to make orders. The provisions in Subdivision B of Division 2 of Part 6.10 of the Corporations Act are as a consequence invalid. Pursuant to the provisions in Subdivision B of Division 2 of Part 6.10, the Panel purported to exercise judicial power bypurporting to make a declaration of unacceptable circumstances in relation to the failure of Glencore to disclose that it had entered into cash settled equity swap arrangements with the Fifth and Sixth Respondents on 20 July 2005, and by purporting to make the Orders on 25 July 2005 requiring Glencore to sell shares in [the Company].' 31 The proceeding was brought on with some expedition. I indicated to the parties at an early stage that I was personally acquainted with two members of the Review Panel. The parties raised no objection to my hearing the proceeding, since there was no question as to the propriety of the conduct of the Review Panel and the Review Panel did not propose to play a substantive part in the proceeding. The Review Panel was represented by counsel at the hearing and provided written submissions. However, the Review Panel's submissions were limited to the powers and procedures of the Panel, including legislative events in the development of the Panel and its powers to make declarations of unacceptable circumstances. 32 Centennial, the Company, CSFB and ABN Amro all submitted to such order as the Court sees fit to make, save as to costs. Thus, the Commission was the only effective contradictor. The Commission was represented by the Solicitor General of the Commonwealth and Dr Perry QC. The Solicitor General dealt only with the Constitutional validity of the Act and Dr Perry dealt with all substantive matters raised in the proceeding, other than the Constitutional issues.

JURISDICTION OF THE COURT 33 Section 659B(1) of the Act has the effect that Glencore and Fornax are prohibited from commencing any proceeding before a court for the review of the exercise by the Panel of the powers conferred by ss 657A and 657D. That is the nature of the proceeding commenced by Glencore and Fornax. However, notwithstanding that privative provision, Constitutional writ relief would be available in respect of a decision or order of the Panel affected by jurisdictional error. 34 There will be jurisdictional error if a decision maker identifies a wrong issue, asks a wrong question, ignores relevant material, relies on irrelevant material in such a way as affects the exercise of power. There will also be jurisdictional error where the decision maker fails to make a determination of a matter that is a precondition of the making of the decision. By so doing, the decision maker would exceed the authority or power given by the relevant statute. It is within the jurisdiction of the Federal Court under s 39B of the Judiciary Act 1903 (Cth) to entertain an application for Constitutional writ relief in respect of the declaration and orders made by the Review Panel if it be established that the Panel identified a wrong issue, asked a wrong question, ignored relevant material or relied on irrelevant material in such a way as affected the exercise of the power conferred by s 657A and s 657D or exercised a power predicated on a finding on a relevant matter without making a finding on that matter. 35 Having regard to the clear policy evinced by the privative provisions of s 659B of the Act, the Court should be slow to interfere with a decision of the Panel, in circumstances where the market is significantly volatile by reason of the currency of takeover offers. However, in the present case, while Centennial's bid is still current, there is probably unlikely to be any significant volatility in the market since Centennial already has a relevant interest in more than 85 per cent of the shares in the Company and the combined holding of Fornax, CSFB and ABN Amro exceeds 11 per cent of the shares.

EVIDENCE 36 Glencore and Fornax sought to rely on affidavits sworn by Messrs Malcom McComas and Peter Kennedy as to market practice and expectations prior to April 2005. The Commission objected to the evidence on the basis that it was not relevant. The evidence was to the effect that, according to such practice and expectations, interests under a cash settled equity swap arrangement would not be disclosed and would not be expected to be disclosed, simply by reason of the fact that the exposure of a party to the swap arrangement and its voting power in shares, combined with that of the other parties, exceeded 5 per cent of the issued capital of the company to which the swap relates. The evidence was not before the Panel. 37 The object of judicial review based on jurisdictional error is not to show that the decision-maker made a wrong or incorrect decision. A question may arise as to whether the decision was open to the decision maker, on the material before it. However, it was not suggested by Glencore and Fornax that the Review Panel's conclusion, that the market would have expected disclosure, was not open to it on the evidence before it. I consider that the affidavits are irrelevant and should not be admitted.

REVIEW PANEL'S DECISION UNDER SECTION 657A 38 The exercise of the power to make a declaration under s 657A of the Act is not predicated upon it appearing to the Panel that particular circumstances have an effect on:

• the control or potential control of a company; or
• the acquisition or proposed acquisition, by a person, of a substantial interest in that company. The exercise of the power to make a declaration is predicated upon it appearing to the Panel that particular circumstances are unacceptable, having regard to the effect of the circumstances on those matters. Thus, the premise upon which the exercise of power is predicated is that the circumstances have a particular effect: the power is predicated upon a judgment of unacceptability, having regard to that effect. 39 It is therefore necessary, before the Panel considers whether it appears that particular circumstances are unacceptable, having regard to the effect of the circumstances, to make a determination as to the effect of those circumstances. It is only unacceptability of the effect that must appear to the Panel and the Panel must make a finding as to that effect before it considers whether that effect is unacceptable. In a sense, it is a precondition of the making of a declaration that the Panel make a finding as to the effect, on control, or acquisition as, referred to in s 657A(2), that the relevant circumstances had. Thus, the Review Panel was required to make a finding that the circumstances will have some effect on either of those matters. 40 While the Review Panel purported to conclude that the failure to disclose the relevant information had an effect on the control or potential control of the Company and an effect on the acquisition or potential acquisition of substantial interests in the Company, the Review Panel did not make a finding as to just what that effect was or might be. The Review Panel found that shareholders of the Company 'may have made different decisions in relation to their acceptance of Centennial's bid'. The Review Panel then reasoned that, because shareholders may have made different decisions, the non-disclosure 'materially affected the control or potential control of the Company because the market was not aware that the number of shares available to be traded or be the subject of acceptance of Centennial's bid had been materially reduced'. However, the Review Panel did not say what effect the lack of knowledge of the reduction in the number of available shares had, or might have had, on either control or the acquisition of a substantial interest, as referred to in s 657A(2). 41 An aspect of the reasons of the Review Panel that was somewhat difficult to follow was the observation made that disclosure of the combined holding of Fornax, CSFB and ABN Amro would have had an effect: 'because the market would have seen acquisition of the Hedge Shares as a commercially highly likely, if not inevitable, consequence of the circumstances surrounding [the Company] at the time, and also, critically, a consequence of Glencore being the common entity behind the [Combined Holding] of Glencore, CSFB and ABN Amro'. That observation seems to suggest that the Review Panel had in mind the possibility that Glencore should have disclosed, before any shares had been acquired by the Banks, the existence of the unenforceable and informal preliminary arrangements for equity swaps. That is to say, the reasoning appears to be that, had those arrangements been disclosed before shares were acquired by the Banks, the market would have expected the Banks to acquire shares in the Company. Indeed, one of the circumstances declared by the Review Panel to be unacceptable was the failure to disclose the fact that the combination of the holding of Fornax and the swap exposure agreed to be provided by the Banks exceeded 5 per cent of the voting shares in the Company. 42 However, the Review Panel made no finding that there was an understanding or arrangement as to an equity swap before the Banks had actually acquired shares in the Company. Rather, the Review Panel considered that the evidence demonstrated that the Banks' acquisitions of shares in the Company preceded confirmation of the swap exposure that they would offer Glencore from time to time and that the exposure never exceeded the number of shares previously acquired by the Banks. 43 In assessing what would have happened had there been disclosure, the way in which the market in fact reacted, when disclosure of the relevant information was actually made, must be of particular significance and relevance. The Review Panel appears to have treated the announcement made by Glencore on 4 April 2005 as disclosing the relevant information, since the orders under s 657D were directed only to those who sold shares up to the time that that announcement was published on ASX. Yet, there is nothing in the Review Panel's reasons to indicate that it had regard to the effect of the announcement. If the Review Panel was endeavouring to make a finding as to the effect of disclosure of that information, the effect of the announcement would be very relevant. 44 The fact that the Review Panel made no reference to the effect of the announcement in its reasoning as to whether the disclosure would have had an effect on control or acquisition, as referred to in s 657A(2), coupled with the matters referred to above, confirms that the Review Panel failed to make a determination of just what effect the non-disclosure had on control, or acquisition of a substantial interest, as referred to in s 657A(2). It concluded that there was an effect without saying what the effect was, and failed to address the question of precisely what effect the non-disclosure had on such control or acquisition. I consider that that failure constituted jurisdictional error on the part of the Review Panel.

REVIEW PANEL'S DECISION UNDER SECTION 657D 45 In its reasons for making orders under s 657D, the Review Panel did not refer to the object of ensuring that Centennial's takeover bid proceeded in a way that it would have proceeded, had there been disclosure of the relevant information. Rather, the reasons referred to the object of protecting the rights or interests of persons affected by the non-disclosure. The Review Panel said that it made the orders 'to protect the interests of those persons who sold shares in [the Company]… in transactions reported to the ASX' during the relevant period. 46 However, the 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. 47 Steps might have been taken by the Review Panel to ascertain whether any person who sold shares was in fact adversely affected. Indeed, as indicated above, before making an order under s 657D, the Panel is required to give each person to whom the proposed order relates the opportunity to make submissions about the matter. That provision is primarily directed to ensuring procedural fairness. Nevertheless, persons who sold shares on ASX during the relevant period are persons to whom the orders relate. It would have been open to the Review Panel, for example, to issue a media release to the market inviting any person, other than the Company or Centennial, who believed that he, she or it was adversely affected by the non-disclosure, to make submissions about the adverse effects suffered and about the orders that should be made as a consequence. To the extent that any person notified some detriment, as a consequence of having sold shares in the Company in circumstances where that person would not have sold the shares if there had been disclosure of the relevant information, appropriate orders could then be moulded to protect the rights and interests of that person. 48 The total number of shares in the Company sold on ASX during the period from 22 March 2005 to 5 April 2005 was 35,510,614. Third parties purchased 15,804,945 of those shares, being approximately 44.5 per cent of the number of shares sold. Although Fornax purchased only 849,562 shares during the relevant period and at the end of the period held 13,715,443 shares, the orders under s 657D could, at least as a possibility, require Glencore to sell 35,510,614 shares. While the Banks purchased 18,856,107 shares during the period, there was no suggestion that Glencore had any entitlement to require the Banks to sell any shares to it. Since, by the time the orders under s 657D were made, Centennial had acceptances in respect of in excess of 87 per cent of the issued shares in the Company, it was patently obvious that Glencore had no right to acquire in excess of 15 million shares. 49 The Review Panel made a concession to the possibility that Glencore might be required to sell more shares than it owned. In paragraph 8 of the orders made under s 657D, the Review Panel provided that Glencore could apply to the Panel for further or supplementary orders if it received acceptances for more shares in the Company that it owned 'or can obtain'. Any such application was to address why Glencore could not obtain enough shares from the market or by acquisition of shares from the Banks. 50 The effect of the orders made by the Review Panel under s 657D is that any person who happened to have sold shares in the Company on ASX during the relevant period has an option to require Glencore to sell shares to that person, at a price that may bear no relationship whatsoever to the market price of shares in the Company at the time of exercising that option. The orders under s 657D had the effect of exposing Glencore to expropriation of its property, acquired lawfully without any contravention of the Act, for the benefit of unspecified numbers of sellers, without any determination as to whether those sellers suffered any detriment by reason of the non-disclosure. 51 The Review Panel failed to have regard to the state of the market in July 2005, when the orders were to be operative, in circumstances where the rights and interests intended to be protected were rights and interests that existed in the period from 22 March to 5 April 2005. There was material available to the Review Panel as to the prices at which shares in the Company were traded on ASX both during the relevant period and up to the date of the orders of 25 July 2005. That material does not appear to have been considered by the Review Panel, notwithstanding that Glencore submitted that the orders proposed by the Review Panel would be unfairly prejudicial to Glencore because of their retrospective and expropriatory nature. 52 In considering whether to make orders under s 657D, the Panel is required to engage in a balancing exercise. It must weigh the object of protecting rights or interests of any person affected by the relevant circumstances against the prejudice to any person that would flow from the making of an order, in order to determine whether that prejudice would be unfair. It was incumbent upon the Review Panel to make a determination as to whether any prejudice to Glencore and Fornax was unfair, having regard to the extent of protection of the rights or interests of persons that would be afforded by the proposed order. That would have required, in the present case, the identification of persons whose rights or interests were affected by the non-disclosure, the appropriate order to protect those rights or interests and the prejudice that would be suffered by Glencore and Fornax by reason of the proposed order. 53 The considerations referred to above indicate that the Review Panel did not turn attention to the identification of the particular interests or rights that were affected by the non-disclosure that were intended to be the subject of protection, in order to balance those rights and interests against the prejudice that might be suffered by Glencore and Fornax. In the absence of enquiry as to that matter, the Review Panel did not address the question of whether the orders under s 657D would unfairly prejudice Glencore. Since the Review Panel did not turn a mind to that matter, it could not have undertaken the relevant balancing exercise. The failure by the Review Panel to address those issues, when considering whether, and in what manner, to exercise the power to make the orders under s 657D, was a failure to address relevant questions raised by s 657D. I consider that that failure constituted jurisdictional error on the part of the Review Panel.

JUDICIAL POWER 54 Glencore and Fornax contended, in the alternative, that the powers conferred on the Panel by ss 657A(1) and 657D(1) of the Act are judicial powers and that, since the Panel is not a court upon which judicial power might be conferred by the Commonwealth Parliament under the Constitution, the provisions of the Act conferring those powers are invalid. Even if the declaration and orders made by the Review Panel are to be quashed or set aside, the appropriate order would be to remit the matter to the Panel for reconsideration according to law. There would be no utility in remitting the matter to the Panel if it had no power to make a determination following the remitter. It is appropriate for me, therefore, to express some provisional views on the validity of ss 657A and 657D. 55 The making of binding declarations of right, by way of adjudication of disputes about rights and obligations that arise from the operation of the law upon past events or conduct, is a classical instance of the exercise of judicial power. However, the declarations for which s 657A provides are not binding declarations of right, in the sense in which that term is used in the context of the exercise of judicial power. The adjudication made by the Review Panel in the present case was not an adjudication of a dispute about rights and obligations of the parties that had arisen from the operation of the law on past events or conduct. The object of the Review Panel's declaration and orders was not to resolve a dispute about existing rights and obligations, by determining what those rights and obligations were, but to determine what legal rights and obligations should be created. 56 The orders made under s 657D created rights and obligations that, prior to the making of the orders, did not exist. In that sense, the decisions of the Review Panel did not involve any adjudication of a dispute about existing rights and obligations. In applying for a declaration and orders, Centennial was not seeking the vindication of any right or obligation. The declaration made by the Review Panel did not resolve any actual or potential controversy as to existing rights (see, generally, Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188-190). 57 On remittal of the matter, the Panel, on the material before it, may conclude that, notwithstanding there was no binding arrangement between Glencore, on the one hand, and the Banks on the other, that there was something akin to a commercial arrangement or understanding to the effect that, upon the Banks' acquiring a number of shares in the Company, an equity swap arrangement would cause rate effect in respect of that number of shares. If the Panel were satisfied that the non-disclosure of the combined holdings of shares by Fornax and the Banks had some specific effect on either the control or potential control of the Company or the acquisition, or proposed acquisition, of a substantial interest in the Company, it would then be open to the Panel to determine whether having regard to that effect the circumstances were unacceptable. It could then make a declaration to that effect. Further, if, having considered the detriment to Glencore of any proposed orders, and weighed that detriment against the specific rights and interests intended to be protected by the proposed orders, it the Panel might make orders under s 657D in order to protect those specific rights and interests. To make such a declaration or such orders would not involve the exercise of judicial power.

CONCLUSION 58 The decision of the Review Panel to make a declaration under s 657A was affected by jurisdictional error. It follows that the declaration should be set aside. It would also follow that the orders made under s 657D, on the basis of that declaration, must also be set aside. In any event, even if the declaration were to stand, the orders under s 657D were otherwise affected by jurisdictional error. The orders should therefore be set aside on that ground as well. The matter, consisting of the application by Glencore and Fornax for review under s 657EA of the Act, should be remitted to the Panel for determination according to law. In the circumstances, there does not appear to be a need for a writ of Certiorari. 59 The only effective contradictor in the proceeding was the Commission. While the Review Panel made submissions, it did not go beyond the appropriate role of a decision maker. The Commission should pay Glencore's costs. There should be no other order as to the costs of any other party. SCHEDULE ORDERS MADE UNDER S 657D 1. Glencore International AG (Glencore) must make or cause to be made an offer to sell Austral Coal shares to each person who sold Austral Coal shares in a transaction reported to Australian Stock Exchange Limited (ASX), which sale took place between 9.30 am on 22 March 2005 and 9.30 am on 5 April 2005. 2. The offers must:

(a) be unconditional, except to the extent that Glencore may apply to the Panel under these orders, including for an order that a sale or sales be excluded from the Restoration Order.

(c) be contained in newspaper advertisements in a national newspaper and a newspaper in each Australian state and territory,

(d) be made within two weeks of the date of this order,

(e) clearly identify the class of persons to whom they are made (affected sellers),

(f) be for an equivalent number of Austral Coal shares to the number that the affected seller sold,

(g) be at a price no higher than the price at which the affected seller sold, not adjusting for commission or other costs of sale,

(h) remain open for at least one month, during which time an affected seller is entitled to withdraw the acceptance,

(i) set out that the affected seller may accept the offer, in whole or part, by sending an acceptance to Glencore at a specified Australian address, to be received by no later than the specified time,

(j) specify that affected sellers whose sales are not excluded from the Restoration Order will receive within 3 business days after the end of the offer period or within 1 business day of the Panel's order (whichever is later):

(C) a request for payment and for a certified copy of the contract note (or other acceptable evidence) of the sale, which must be given to Glencore within 5 business days, and

(D) any further information necessary to allow processing of the acceptance,

(k) specify that affected sellers whose sales are excluded from the Restoration Order by the Panel will be sent notification within 1 business day of the Panel's order, and

(l) specify a contact telephone number and an address to which queries can be directed. 3. The Panel will approve the content (and in the case of the advertisements the proposed placement, layout and size) of the draft announcement and newspaper advertisements, which must be given to the Panel for its approval before publication. The Panel will allow parties an opportunity to comment on the proposed announcement and advertisements. 4. Glencore must complete the transfer to affected sellers whose sales are not excluded from the Restoration Order within 2 business days after the 5 business days in paragraph 2(j) have elapsed. Ancillary orders 5. Glencore must provide a clear and reasonable mechanism for resolving disputes over: (a) who is entitled to accept the offer and in relation to which sales, and (b) technical deficiencies in an acceptance. 6. Glencore is entitled to make one application to the Panel for a variation of the Restoration Order in relation to specific sales which it says the Restoration Order should not apply to. The application by Glencore: (a) must be made within 2 business days after the end of the offer period,

(b) must be copied to all parties and any other person who may be affected by the proposed variation, and

(c) must set out its reasons and full supporting evidence for the request. The Panel will seek submissions from any person whose interests the proposed variation would affect. 7. The Panel may determine that a sale or sales be excluded from the Restoration Order. 8. In addition to the application in paragraph 6, Glencore may apply to the Panel for further or supplementary orders if it receives acceptances for more Austral Coal shares than it owns or can obtain. Any application should address (among other things) why Glencore could not obtain enough shares from the market or by acquisition of Hedge Shares (as defined in the decision letter of 20 July 2005). 9. Glencore must give the Panel a copy of any notification it gives to an affected seller whose sale or sales were excluded from the Restoration Order by the Panel. Glencore must do so at the time of giving the notification. 10. Centennial Coal Company Limited (Centennial) and Austral Coal must use their best endeavours to maintain the listing of Austral Coal on ASX during the period of the Restoration Order and for a period of one month after the end of the offer period. 11. Austral Coal must facilitate the making of the announcement to ASX. 12. If, during the offer period, Centennial or Glencore communicates with any person who may be an affected seller, concerning these orders or accepting the Centennial offer for Austral Coal shares, it must provide the person's contact details to the other party by 9.30 am on the next business day after contact was made. 13. Except as contemplated by these orders or with the consent of the Panel: (a) Glencore must not sell or otherwise dispose of Austral Coal shares until the orders are completed,

(b) Credit Suisse First Boston International must not sell or otherwise dispose of its Hedge Shares until the orders are completed, and

(c) ABN AMRO Bank NV must not sell or otherwise dispose of its Hedge Shares until the orders are completed. I certify that the preceding sixty (60) numbered paragraphs and Schedule are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Associate: Dated: 14 September 2005 Counsel for the Applicants: Mr TF Bathurst QC and Mr JRJ Lockhart

Solicitors for the Applicants: Atanaskovic Hartnell

Solicitors for the First Respondent: Arnold Bloch Leibler

Counsel for the Third Respondent Mr DMJ Bennett S-G QC, Dr M Perry QC and Mr J Hmelnitsky

Solicitors for the Third Respondent Australian Securities and Investments Commission

Date of Hearing: 22 and 23 August 2005

Date of Judgment: 14 September 2005