Companies (Acquisition of Shares) Act 1980, ss.16(2)(c) and 1(d), 52(1) and (2), 53(1) and (3),

BT Australia Limited v. Bell Bros. Pty. Limited & Ors (1981) 27 SASR 557

He Kaw Teh v. The Queen [1985] HCA 43; (1987) 157 CLR 523

Sherras v. De Rutzen (1895) 1 QB 918

This is an appeal against conviction and sentence imposed upon the appellant in the Magistrates Court, Canberra, on 7 December 1987. The proceedings in the Magistrates Court were instituted by information on 26 February 1986 in respect of an offence against s.53(1) of the Companies (Acquisition of Shares) Act 1980 (the Act) in that on 6 October 1983 the appellant contravened the provisions of s.52(1) of the said Act by giving notice that it proposed to make take-over offers in relation to the shares in a company, to wit, Offshore Oil N.L., a company incorporated in the ACT., when it did not propose to make take-over offers in respect of shares in the said Offshore Oil N.L.

2. The information was heard in the Magistrates Court on 14 April, 28 and 29 September and 7 December 1987. Magistrate Nicholl convicted the appellant and imposed a pecuniary penalty of $200.

3. The relevant provisions are ss.52(1) and (2) of the Act which read:

alone or together with another person or other persons,

to make take-over offers or to cause take-over offers

to be made, or to cause to be made a take-over

announcement, in relation to shares in a company shall

not, whether alone or together with another person or

other persons, give notice or publicly announce that he

proposes, or that he and another person or other

persons propose together, to make take-over offers or

to cause take-over offers to be made, or to cause to be

made a take-over announcement, in relation to shares in

that company.

(2) Where -

(a) a person whether alone or together with another

person or other persons, gives notice or publicly

announces that he proposes, or that he and another

person or other persons propose together, to make

take-over offers or to cause take-over offers to

be made, or to cause to be made a take-over

announcement, in relation to shares in a company;

and

(b) the person does not, within 2 months, or such

further period as the Commission permits in

writing, whether alone or together with another

person or other persons, make take-over offers or

cause take-over offers to be made, or cause to be

made a take-over announcement, in relation to

shares in that company,

the person shall be deemed to have contravened

sub-section (1) unless the person establishes that

there was such a change in circumstances after the

notice was given or the announcement was made that he

could not reasonably be expected to make the take-over

offers or cause the take-over offers to be made or

cause the take-over announcement to be made."

4. The offence of which the appellant was convicted is created by s.53 which provides that a person who contravenes or fails to comply with a provision of the Act is guilty of an offence (s.53(1)). The penalty for an offence under the section is a fine not exceeding $2,500 or imprisonment for a period not exceeding 6 months, or both (s.53(3)).

5. In his oral reasons for judgment delivered on 7 December 1987 the Magistrate found that the appellant had given notice that it proposed to make take-over offers in relation to the shares in Offshore Oil N.L. and that it had not discharged the onus of establishing that there had been such a change in circumstances after the notice was given that it could not reasonably be expected to make the take-over offers in relation to the shares in Offshore Oil N.L. In the course of his oral reasons the Magistrate said:

"whilst there could be circumstances in which the

failure to satisfy requisitions of the Corporate

Affairs Commission might possibly be treated as such a

change in circumstances, it does not seem to me that,

in this case, that the matters that have been relied

upon by the defendant can properly be described as such

a change of circumstances as would, as it were, render

it unreasonable for them to be called on to continue

with their takeover offers.

Their problem was that they - a, by not giving

sufficient thought to what was required, their own

situation was somewhat complicated with the associated

companies and query with what were associate companies

for the purposes of the takeover offer and the material

that may have to be included in part A.

However, it is quite, quite clear that it is only the

deeming provision that establishes the prosecution. If

one looks at the rest of the evidence and the continued

negotiations with the Corporate Affairs Commission, it

is clear that there was throughout the period an

intention by part of the company to go on with the

takeover offer if they could only get their part A

documents registered, and that was as late as December

6. The substantial ground of appeal was that the Corporate Affairs Commission itself had prevented the appellant from printing and dispatching its Part A statement and, accordingly, had created a change in circumstances after the appellant gave notice of its proposal to make take-over offers. The change in circumstances, so it was submitted, was such that the appellant could not have been reasonably expected to make the take-over offers.

7. It was common ground on the hearing of the appeal that the appellant had given notice that it proposed to make take-over offers on 6 October 1983 and that, having given such notice it lodged with the Corporate Affairs Commission the relevant documents in an endeavour to seek the approval of that Commission and hence comply with the provisions of s.16(2)(c) and (d) of the Act. The Commission made certain requisitions. Negotiations continued between the Commission and the appellant extending beyond the two month period contemplated by s.52(2)(b) of the Act. The appellant applied for an extension of time within which to make the take-over offers but the application for an extension of time was refused. The appellant continued to negotiate with the Commission in respect of the Part A statement until December 1984 when the appellant gave up and abandoned its intention to make the take-over offers.

8. The last correspondence between the appellant and the Commission was a request or requisition from the Commission to the appellant in the following terms:

"To enable the Commission to consider and examine the

Part A statement and proposed offer by Southern Cross

for Offshore, please:

1. Forward the prescribed fees of $590.00

2. Submit an investigating accountants report for

Southern Cross Pursuant to sub-section 16(2A) of

the Act."

9. Sections 52(1) and 52(2) of the Act have been roundly criticised in BT Australia Limited v. Bell Bros. Pty. Limited & Ors (1981) 27 SASR 557. Wells J. said at p 579:

"Section 52 is an egregious legislative curiosity.

The most casual perusal of the Act discloses that that

section is a cardinal weapon in Parliament's scheme for

the control of take-overs. One would have expected,

therefore, that it would be enacted in such a form that

its use in implementing that scheme would be

straightforward, and unencumbered by doubt and

misgiving. It has not been so enacted. Sub-sections

(1) and (2) create one offence, not two. The central

offence, as appears from sub-s. (1), consists in a

person's publicly announcing a proposal to make

take-over offers when that person does not propose to

do so. Anyone acting in breach of the sub-section,

disengaged from any association with sub-s. (2), in

effect, commits a fraud on the public; he commits it,

if at all, on the day he makes the public announcement,

because it is on that day that he possesses the

intention not to proceed. Obviously, proof of such an

intention would be difficult, and I have no doubt that

its legislative predecessor, s.180q. of the Companies

Act, demonstrated the need for amplification of its

provisions."

"Counsel said that the mischief which the

legislature intended to overcome was the manipulation

of the share market by persons making fraudulent and

baseless announcements from which they could reap

profit for themselves on the share market; and this

legislative objective is intended to be achieved by

punishing the announcer for making an announcement with

a fraudulent intention on the day thereof.

I agree that the above mischief is one of the

mischiefs aimed at by s.52 and that the above object is

one of its objects. However, there is in my opinion a

further mischief aimed at and sought to be overcome by

the sub-sections (1) and (2), that is to say, the

mischief of harm done to the other investors by a

person who (unless excused by sub-s.(2)) fails to

proceed with an offer in accordance with his announced

intention. And the legislative objective of avoiding

this mischief is intended to be achieved by forcing an

announcer to go ahead with the offer as originally

announced within the ensuing two months. He is not to

be permitted to 'wriggle out' of his announced

intention lightly. On the contrary, he will be

prosecuted for inaction if he fails to proceed without

good reason. The onus is upon the defendant announcer

to prove the existence of good reason, a relevant

change in circumstances. The time for proceeding with

the offer might be extended by the Commissioner; or the

announcer might be exempted by the Attorney-General.

Subject to those two possibilities, he must proceed to

carry out his announced intentions within two months

under pain of prosecution and penalty. For all

practical purposes, any prosecution would have to be

delayed for two months to give the announcer the

opportunity to avail himself of the locus poenitentiae

afforded by sub-s. (2). Whilst an announcer may, in

some extraordinary circumstances, commit a provable

offence against sub-s. (1) on the day of the

announcement (for example, by making unequivocal

admissions of his fraud on that very day), the usual

circumstances surrounding an announcement will no doubt

be that the announcer will protest that he had an

honourable intention to proceed on the day of the

announcement but that a relevant change of

circumstances arose in the following two months. The

intention would not, in the usual circumstances, be

known until after the expiration of the statutory two

months or of such extended time as the Commissioner

allows. Subsections (1) and (2) of section 52 embrace

both the usual and the extraordinary circumstances, in

my opinion. I take a simple example. Suppose that an

announcer made a fraudulent announcement with the

secret intention of not going ahead with an offer; and

that he did not admit to anyone his secret and

unprovable intention; and that he changed his mind and

proceeded with the offer at the end of the two month

period. He could not be prosecuted successfully

because there would be no proof of his original

fraudulent intention, either actual proof or deemed

proof. Nevertheless, the section would have achieved

its object and the originally contemplated manipulation

of the market for personal profit and the reckless

disregard for the harm to other investors would both

have been nullified. In the hypothetical case, the

announcer has a locus poenitentiae on each and every

day of the two months. I agree with Wells J. that the

deeming device adopted in sub-s. (2) has the

unfortunate effect of jumping together two different

kinds of intention as constituting the commission of

the one offence under sub-s. 91). Even if the section

were to be amended as suggested by him, I think that

its form then would, as its form now does, evince an

intention on the part of the legislature to punish more

effectively, and thus to discourage, the manipulation

of the market to the benefit of the fraudulent

announcers and to the detriment of other investors. In

other words, the legislature intends that announcers

will proceed with their offers and in that sense

'obliges' them to do so unless lawfully excused."

11. I venture to add to those observations only that by s.52(2) the legislature has given a clear indication that the presumption that mens rea is an essential ingredient in every offence has been displaced. In He Kaw Teh v. The Queen [1985] HCA 43; (1985) 157 CLR 523 each member of the High Court took the relevant principle to be as stated in Sherras v. De Rutzen (1895) 1 QB 918 at 921:

"There is a presumption that mens rea, an evil

intention, or a knowledge of the wrongfulness of the

act, is an essential ingredient in every offence; but

that presumption is liable to be displaced either by

the words of the statute creating the offence or by the

subject-matter with which it deals, and both must be

considered."

Clearly the presumption has been displaced by s.52(2) of the Act.

12. The appellant contended that, in relying upon the failure of the Commission to endorse the Part A statement, the Magistrate was wrong in holding that the appellant had not discharged the onus of proving on the balance of probabilities the change of circumstances necessary to excuse what would otherwise have been the commission of an offence. The Magistrate adverted to that issue and was not satisfied. He has not misdirected himself or construed the legislation incorrectly.

14. On the appeal against sentence, it was submitted on behalf of the appellant that, having regard to the Magistrate's finding that the appellant had an intention to make take-over offers throughout the duration of the relevant period, the Magistrate could have deemed it inexpedient to record a conviction against the appellant particularly because the imposition of a fine would have severe commercial repercussions for the appellant. The substance of the submission is undoubtedly correct but the maximum penalty for the offence is $2,500 (the alternative of imprisonment is inapplicable in the case of a corporation). In the circumstances, a penalty of $200 is not demonstrably wrong and is well within the range of appropriate penalty in all the circumstances.