Otter Gold Mines Ltd v Forrest, B M Deputy President of the Administrative Appeals Tribunal & Ors [1997] FCA 85

Australian Broadcasting Tribunal v. Bond (1990) 170 CLR 321 Faingold v. Zammit (1984) 1 FCR 87 Aboriginal Development Commission v. Ralkon Agricultural Co. Pty. Ltd. (1987) 74 ALR 505 Adam P. Brown Male Fashions Pty. Ltd. v. Phillip Morris Inc. (1981) 170 CLR 170 VG 52/1997 OTTER GOLD MINES LIMITED V. DEPUTY PRESIDENT B M FORREST OF THE ADMINISTRATIVE APPEALS TRIBUNAL & OTHERS COURT: MERKEL J PLACE: MELBOURNE DATE: 20 FEBRUARY 1997

IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY GENERAL DIVISION No. VG 52 of 1997 BETWEEN OTTER GOLD MINES LIMITED (ARBN 003 082 773) Applicant and DEPUTY PRESIDENT B M FORREST OF THE ADMINISTRATIVE APPEALS TRIBUNAL, VICTORIAN DISTRICT REGISTRY First Respondent AUSTRALIAN SECURITIES COMMISSION Second Respondent BEACONSFIELD GOLD NL (ACN) 057 793 834) Third Respondent BURDEKIN RESOURCES NL (ACN 059 326 519) Fourth Respondent ORDERS THE COURT ORDERS:

1. The application by the applicant for a stay of the decision of the Administrative Appeals Tribunal made on 28 January 1997 is dismissed. 2. The applicant pay the respondents' costs of and incidental to the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY GENERAL DIVISION No. VG 52 of 1997 BETWEEN OTTER GOLD MINES LIMITED (ARBN 003 082 773) Applicant and DEPUTY PRESIDENT B M FORREST OF THE ADMINISTRATIVE APPEALS TRIBUNAL, VICTORIAN DISTRICT REGISTRY First Respondent AUSTRALIAN SECURITIES COMMISSION Second Respondent BEACONSFIELD GOLD NL (ACN) 057 793 834) Third Respondent BURDEKIN RESOURCES NL (ACN 059 326 519) Fourth Respondent

COURT: MERKEL J PLACE: MELBOURNE DATE: 20 FEBRUARY 1997

The background facts Allstate Explorations NL ("Allstate") is a company which is listed on the Australian Stock Exchanges. The shares in Allstate may be fairly described as currently "in play" as part of a contest for control of the company. The applicant ("Otter"), the third respondent ("Beaconsfield") and the fourth respondent ("Burdekin") currently have the following approximate percentage shareholdings in Allstate: Otter 48.90% Beaconsfield 38.56% Burdekin 6.29% The remaining 6.25% shareholding is held by the public, but has been difficult to acquire in spite of the rising price of shares in Allstate. The matter before the Administrative Appeals Tribunal ("the AAT") and also the Court arose as a consequence of a share placement on 18 April 1996 which had the effect of involuntarily diluting Otter's holding in Allstate from 46.32% to 43.21%. The Australian Securities Commission ("the ASC"), which is the second respondent, has issued Policy Statement 57. Under the Statement, a declaration under s.730, by way of modification to the operation of s.618 of the Corporations Law ("the CL"), might be made in favour of a shareholder whose shareholding is involuntarily diluted. The declaration is to enable the shareholder to restore itself to its prior undiluted position in the company within 6 months of the dilution. The modification is necessary for shareholders holding more than 20% of the shares in a listed company as: • section 615 of the CL prevents a shareholder acquiring more than 20% of voting shares in a public company without making a takeover offer; • section 618 of the CL exempts from the 20% requirement the acquisition of no more than 3% of voting shares over any 6 month period ("the creeping entitlement"). In accordance with the Policy Statement, in May 1996, Otter applied to the ASC for a modification under s.618 to enable it to restore itself to its pre-dilution position within six months of the placement. The modification sought was granted on 31 May 1996. Under it Otter was afforded 6 months to: • return to its pre-dilution percentage entitlement of 46.321%; • increase that entitlement by the creeping entitlement. At the conclusion of the 6 month period, during which Otter was entitled to increase its holding to about 49.321%, Otter had only increased its shareholding to about 46.12%. On 20 December 1996 Otter applied to the ASC for a further modification. It claimed that although it had substantially restored itself to its pre-dilution position it had not used, and thereby lost, the creeping entitlement for the relevant period and possibly for the ensuing 6 months. The ASC received submissions from Beaconsfield opposing the modification. As a result of a take-over offer by it during 1996 Beaconsfield was not able to acquire shares in Allstate until March 1997. The ASC was aware that Burdekin had acquired a strategic holding in Allstate. However, the ASC did not call for or receive submissions from Burdekin as it considered that Burdekin's position was covered by Beaconsfield's submissions. By a decision made on 10 January, 1977 the ASC granted a second modification to Otter. Under the modification Otter was able to fully utilise the creeping entitlement under s.618 unaffected by the acquisitions made pursuant to the first modification which merely restored Otter to its pre-dilution position. Beaconsfield objected to the second modification. On 16 January 1997 it informed Otter that it proposed to apply to the AAT to set aside the modification. Beaconsfield also sought an undertaking from Otter that it would divest itself of shares acquired under the second modification if the application to the AAT was successful. Otter refused to give the undertaking. On 17 January 1997 Beaconsfield applied to the AAT to review the ASC's decision and applied for orders under s.41(2) of the Administrative Appeals Tribunal Act (1975) ("the AAT Act") for a stay of the decision. On 28 January 1997 the AAT conducted a 3 hour hearing on the stay application. Otter, Beaconsfield and Burdekin were legally represented and presented their respective cases for and against a stay at the hearing. At the conclusion of the hearing the AAT, constituted by Deputy President Forrest, stated its decision as follows: Given the history of the share placements and transactions and having read the material and heard what has been put to me this afternoon it is my decision that the implementation and operation of the decision under review, that is the declaration made on 10 January 1997, be stayed until the application be heard and determined or until further order. Further to that I would indicate that I would accept that given the nature of the matters in issue that it be given an expedited hearing.

Otter has requested written reasons from the AAT but these had not been provided as at the date of its application to the Court. The final hearing of the AAT matter is fixed for 26 and 27 February 1997. On 10 February 1997 Otter applied to the Court to review the decision of the AAT under the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act). On 13 February 1997 Otter applied to me to stay or suspend the AAT decision under s.15 of the ADJR Act. Burdekin and Beaconsfield opposed the application. The ASC and the AAT appeared before me to indicate that they would abide the order of the Court. Objection to competency Burdekin and Beaconsfield submitted that the Application under the ADJR Act was incompetent as no final or operative decision had been made by the AAT in the sense required in Australian Broadcasting Tribunal v. Bond (1990) 170 CLR 321 at 337 per Mason CJ: see also Director General of Social Services v. Chaney (1980) 47 FLR 80. However, as was pointed out by senior counsel for Otter, in Bond at 337 Mason CJ accepted that the requirement for a final or operative decision does not apply if: the statute provided for the making of a finding or ruling on [the] point so that the decision, though an intermediate decision, might be described as a decision under an enactment.

In the present case the AAT made its decision under s.41(2) of the AAT Act which provides: The Tribunal or a presidential member may, on request being made, as prescribed, by a party to a proceeding before the Tribunal (in this section referred to as the "relevant proceeding"), if the Tribunal or presidential member is of the opinion that it is desirable to do so after taking into account the interests of any persons who may be affected by the review, make such order or orders staying or otherwise affecting the operation or implementation of the decision to which the relevant proceeding relates or a part of that decision as the Tribunal or presidential member considered appropriate for the purpose of securing the effectiveness of the hearing and determination of the application for review.

It seems to me that a decision made under s.41(2) is a decision under an enactment in the sense discussed by Mason CJ at 337 and is therefore reviewable under s.5 of the ADJR Act. However, it is not necessary for me to finally determine the objection to competency as, for the purposes of the present application, I am prepared to assume that the Court has jurisdiction to review the decision of the AAT. Section 15 of the ADJR Act A broad discretion is conferred on the Court under s.15 to stay or suspend the operation of the decision of the AAT. In general it has been accepted that the applicant for a stay should satisfy the Court that reasons or circumstances exist which make it just that the Court make the order sought. Usually that will require that the applicant demonstrate that it has a point of substance to argue, which if successful, will result in judgment in its favour: see Faingold v. Zammit (1984) 1 FCR 87 at 91-2 and Aboriginal Development Commission v. Ralkon Agricultural Co. Pty. Ltd. (1987) 15 FCR 159 at 162-164. The matters which an applicant must establish to obtain an order for a stay under s.15 will depend on all of the circumstances of the case. However, where the decision sought to be reviewed involves a matter of practice and procedure or the exercise of a discretion on an interlocutory matter, as is the case in the present matter, the reviewing Court will exercise particular caution in interfering with or otherwise reviewing the decision: see Ralkon at 162. Whilst injustice may not be a precondition for relief, as was said in Adam P. Brown Male Fashions Pty. Ltd. v. Phillip Morris Inc. (1981) 148 CLR 170 at 177 in an analogous situation relating to an appeal from an interlocutory order: "the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration."

In my view the authorities to which I have referred result in it being appropriate in the present case to consider whether the applicant has demonstrated that: • it has a point of substance to argue; • injustice is likely to flow from the decision sought to be reviewed. The prospect of a successful challenge to the decision and the injustice said to flow from it are not necessarily separate considerations. The extent to which a point of substance must be clearly demonstrated might vary according to the injustice flowing from the decision: see Ralkon at 164. A point of substance? In the present case the AAT has been requested to give, but has not yet given, the reasons for its decision. In these circumstances the primary ground put forward by Otter was that the decision of the AAT was so unreasonable that no reasonable tribunal could have arrived at it. In substance it was argued that: • Allstate's shares were "in play"; • the shareholding of the three major shareholders was so finely balanced that the acquisition of a very small percentage of shares by Burdekin could put it in a position to control Allstate's destiny; • in all the circumstances it was demonstrably unfair and unjust to Otter and to the public to preclude Otter from competing in the market for those shares; • the unfairness and injustice is compounded by the fact that Otter has an overwhelming, or at the least a very strong case, for upholding the second modification which accorded with ASC policy; • fairness and justice required that Otter not be deprived of the benefit of the second modification as its utility might be at an end by the time the review of it is heard. It is important to recall that the stay power is conferred on the AAT to make an order under s.41(2) if it is desirable to do so after taking into account the interests of persons who may be affected by the review: "for the purpose of securing the effectiveness of the hearing and determination of the application for review."

In the present case, after apparently taking into account the interests of the persons affected by the review, the AAT considered it desirable to grant the stay sought by Beaconsfield and Burdekin for the purpose set out in s.41(2). The position confronting the AAT required it to exercise a discretion that would inevitably cause irreparable harm to one or more of the parties appearing before it as no undertaking as to damages was proffered by any of the parties. If no stay was granted and the modification was set aside: • Burdekin would have had to compete with Otter for a diminishing market in Allstate shares and have no right to compensation; • Otter would be able to acquire the balance of the shares the subject of the second modification prior to the hearing of the review and control Allstate without making a take-over offer, thereby locking Beaconsfield and Burdekin in to their shareholding in Allstate. If these events occurred then unless the modification was set aside ab initio the review would have been futile. In addition to the issue of whether the modification could or would be set aside ab initio the separate question would arise as to whether a court would make divestiture orders under s.737 of the CL on the ground that the shares were acquired in contravention of s.615 of the CL. These problems would have been obviated had Otter undertaken to divest itself of shares acquired after 28 January 1997 under the second modification if it was set aside. However, Otter, in keeping its options open as it was entitled to do, thereby ran the risk that the AAT might regard it as appropriate to grant the stay sought to secure the effectiveness of the hearing and determination of the application for review. If a stay was granted and the modification was not set aside: • Burdekin would be likely to have the market for Allstate shares to itself as the two main shareholders would each be precluded from acquiring shares in Allstate; • Otter might lose control of Allstate and itself be locked in without any entitlement to compensation; • Beaconsfield was able to enjoy the benefit of having Otter frozen out of the market whilst it was also out of the market; • until the final decision of the AAT Otter would have been precluded from receiving the benefit of the creep entitlement offered under the second modification and ASC policy. In the circumstances set out above an undertaking by Otter to divest itself of shares acquired under the second modification after 28 January 1997 would have made its case against a stay a strong one. However, for its own reasons, it chose not to proffer an undertaking. As a consequence the AAT was required to consider and balance the kind of considerations to which I have adverted as well as those raised by the parties. I am not satisfied on the material before me that there is any basis for the submission that the decision made was so unreasonable that no reasonable tribunal could arrive at it. Having regard to the complex and difficult discretionary issues arising for determination by the AAT under s.41(2) and the absence of reasons I am not satisfied that the decision involved any error of law on the part of the AAT. Put another way, Otter has not satisfied me that it has a point of substance or a serious issue to be tried. I would add that I do not accept that there is no real ground for the challenge by Burdekin and Beaconsfield to the second ASC modification. As the matter is presently awaiting a hearing in the AAT on 26 February 1997 it is undesirable that I comment on the merits any more than is necessary to dispose of the present application. Burdekin was not heard by the ASC. It and Beaconsfield contend that Otter enjoyed the entitlement afforded under the ASC policy statement by the first modification and has only itself to blame if it did not exercise all of its rights in relation to it. Beaconsfield and Burdekin put forward a number of factors which they propose to raise against the second modification including that it offends other ASC policies. It is sufficient for present purposes for me to conclude that it has not been demonstrated that the matters raised are irrelevant or that Otter's case for upholding the second modification is necessarily an overwhelming one. Otter raises no issue as to the jurisdiction or power of the AAT to review the decision of the ASC. Having regard to the wide powers conferred under s.43(1) of the AAT Act and s.730 of the CL, I am satisfied that it was open to the AAT to conclude at the hearing on 28 January 1997 that the outcome to the challenge to the second modification was an open question and that it was appropriate to exercise its power under s.41(2) of the AAT Act. Injustice Nevertheless, the Court might still intervene even if there is some doubt as to whether a point of substance is raised if the injustice arising from the decision is clearly demonstrated. Had an appropriate undertaking been proffered to the AAT and a stay still ordered then the injustice flowing from the decision might have been demonstrable. That did not occur. In my view, for the reasons I have set out, irreparable harm was inevitable whatever the outcome of the stay application. In all the circumstances I am not satisfied that the decision was unjust or has given rise to injustice. Otter's undertaking to the Court Otter proffered an undertaking to the Court after the conclusion of the hearing. The undertaking was in the following terms: The Applicant undertakes to dispose (on market) of all those shares in Allstate Explorations NL which are purchased by the Applicant in the period between: (a) the date of this Court's order in the terms set out in the Applicant's Notice of Motion dated 10 February 1997; and (b) the date that the Administrative Appeals Tribunal ("AAT") hands down its decision in the AAT Proceedings No V97/61, which shares are: (a) held by a Court (following any appeals) to have been acquired in contravention of section 615 of the Corporations Law, arising from a final determination setting aside the modification and refusing the Applicant's request for a modification in the AAT proceedings No V97/61 and any appeals from that final determination; and (b) not already disposed of by the Applicant prior to such holding by a Court.

There are several problems with the undertaking. As the hearing before me is not a hearing de novo the undertaking's significance, in reality, arises if I am satisfied that it was appropriate to interfere with the order of the AAT. For the reasons I have set out it is not appropriate that I do so. Further, the undertaking to divest does not operate on the basis of a setting aside of the second modification. It raises, rather than resolves, the difficult question of whether a breach of s.615 will have occurred for the purposes of s.734 if the AAT sets aside the second modification. Finally, the AAT granted a stay until the determination of the matter or further order. It is always open to Otter to return to the AAT and apply for the removal of the stay in the light of all the circumstances which might include the offer of an appropriate undertaking. If that occurred the course that might be taken by the AAT is a matter for it rather than the Court. Such a procedure is clearly open under the terms of the order made and s.41(2). It is more appropriate than a course which involves the Court in determining the interim situation which is to apply pending the final hearing in the AAT. Conclusion I am not satisfied that reasons or circumstances exist which make it just that the Court stay or suspend the operation of the decision of the AAT staying the second modification. The application for a stay or suspension of the AAT decision should be dismissed with costs. I certify that this and the preceding 13 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel

Associate: Date: HEARD: 13 February 1997 PLACE: Melbourne JUDGMENT: 20 February 1997 APPEARANCES: Mr. A. Archibald Q.C. with Mr. C. Maxwell instructed by Mallesons Stephen Jaques appeared for the applicant Mr. T. Santospirito of the Australian Government Solicitor appeared for the first respondent Ms. J. Nelson instructed by the Australian Securities Commission appeared for the second respondent Mr. M. Shand instructed by Freehill Hollingdale & Page appeared for the third respondent Dr. C. Pannam Q.C. with Mr. S. Anderson instructed by Clayton Utz appeared for the fourth respondent