Takeovers Panel [2002] FCA 1120

REASONS FOR JUDGMENT 1 One of the principal functions of the Takeovers Panel when appropriate is to declare circumstances in relation to the affairs of a company to be unacceptable. Such a declaration can only be made if the unacceptable circumstances relate to the control or potential control of a company, the acquisition or proposed acquisition of a substantial interest in a company, or because the circumstances constitute a contravention of the provisions relating to takeovers or compulsory acquisitions. If a finding of unacceptable circumstances is made, the Panel has power to make a variety of appropriate, remedial orders to protect the interests of any person affected by the unacceptable circumstances or to ensure that things proceed as far as possible in a way that they would have proceeded if the unacceptable circumstances had not occurred. 2 A declaration of unacceptable circumstances can only be made on the application of a person with the requisite standing. As to the class of persons who have that standing see s 657C(2). A declaration must be made within three months after the unacceptable circumstances occur or one month after the application for the declaration, whichever last occurs: s 657B. In an appropriate case, however, the court has power to extend the period on the application of the Panel: see again s 657B. 3 The present application seeks an extension of time. The Panel received an application from McWilliam Nominees Pty Ltd on 4 July 2002 seeking a declaration of unacceptable circumstances in relation to the sale on 3 June 2002 of approximately 47 per cent of the issued share capital in On-Line Advantage Ltd. The shares were sold to approximately 100 purchasers by a number of vendors associated with the founders and promoters of On-Line. The sales occurred shortly after McWilliam announced its intention to make a proportional takeover bid for the company. 4 Immediately after the McWilliam application, the Panel commenced its investigation. Before the investigation could be completed, McWilliam attempted to withdraw its application. The Panel took the view that McWilliam could not withdraw its application without leave. It refused to grant that leave and continued with the investigation. As there was doubt about the Panel's jurisdiction to take that course ASIC made an application on 1 August 2002 seeking substantially the same relief in relation to the same events as the McWilliam application. 5 To date the Panel has sought and considered submissions from the parties to the proceeding before it. It has conducted numerous examinations of witnesses. Recently it invited further submissions from the parties why certain proposed findings of fact should not be made and certain relief granted. 6 As a result, a number of parties approached the Panel with a view to resolving the issues raised by the two applications. In particular, on 26 August 2002, the Panel Executive received a submission containing a proposal, which, if implemented, may resolve the matter to the Panel's satisfaction. 7 As things presently stand the Panel must hand down its decision by 3 September 2002. However, it is not yet in the position to do so. Moreover, the Panel is of opinion that if it is forced to make its decision by 3 September 2002, its decision may not be in accordance with the public interest. 8 Accordingly, the Commission seeks an extension of time within which to make a declaration if that is appropriate. It is anticipated that the present discussions between the parties can be concluded, and a resolution reached, within one week. However, the Panel may seek a further extension before the expiry of that period. 9 Prior to the establishment of the Panel it was the courts that had power to declare certain acquisitions of shares and certain conduct in relation to the affairs of a company to be unacceptable. However, it was soon discovered that proceedings before the courts were cumbersome, slow and expensive. Further, bringing a takeover case before a court, or even threatening to do so, was regarded by some as a tactic to be employed if one wished to delay or hinder the progress of a takeover. So Parliament decided that the powers of the court should be given to an administrative body (the Takeovers Panel) in the expectation that proceedings before that body would be fair, expeditious and inexpensive. 10 There can be no doubt that the public interest in good administration requires that persons potentially affected by unacceptable circumstances should not be kept in suspense as to the validity of action taken or whether the effect of that action is to be reversed. Most likely for this reason, Parliament has imposed a time limit within which the Panel must perform its task. The timetable reinforces the need for there to be a speedy means for determining whether certain conduct is unacceptable or not. Thus, it will not usually be appropriate to extend the period set by s 657B. Good reason must be shown before an order will be made. 11 In the present case there is good reason to grant the extension. The Panel correctly points out that, among others, the following considerations should inform the exercise of my discretion under s 657B: (a) That the Panel operates in the public interest and there is a public interest in the Panel fulfilling its functions; (b) The Panel has not delayed carrying out its functions, but has significantly progressed its investigations to the point of preparing indicative findings of fact; (c) Interested parties have engaged with the Panel in relation to its proposed findings; (d) The Panel views the discussions as beneficial to forming its conclusion and warranting further time; (e) The additional time sought (seven days) is not excessive, and it is reasonably certain that the Panel will finalise the matter in that slightly longer extended period. 12 The Panel also points to another important factor that must always be taken into account. That is the risk of prejudice to any party if the extension be granted. Many of the parties who might be adversely affected by an extension are the very people who have sought and are engaging in ongoing discussions with the Panel. They have indicated that they would not suffer prejudice if the discussions continue and an extension is granted for seven days. 13 In all the circumstances I propose to grant the orders sought. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.