Takeovers Panel v Keybridge Capital Limited, in the matter of Molopo Energy Limited

BEACH J: 1 Efficiency, expedition and expertise are the defining characteristics of the Takeovers Panel. 2 The principal function of the Panel under s 657A of the Corporations Act 2001 (Cth) (the Act) is to declare in an appropriate case whether circumstances in relation to the affairs of a company are unacceptable; in most cases, it is not necessary to establish that such circumstances constitute a contravention of the Act. Such a declaration may only be made if the unacceptable circumstances relate to the control or potential control of that company (or another company), the acquisition or proposed acquisition of a substantial interest in that company (or another company), or because the circumstances constitute a contravention of the provisions of the Act relating to takeovers or compulsory acquisitions. If a finding of unacceptable circumstances is made, the Panel has power under s 657D to make various remedial or other orders to protect the interests of any person or group of persons affected or likely to be affected by the unacceptable circumstances or to ensure, for example, that a takeover bid proceeds in a way that it would have proceeded (so far as is possible) if the unacceptable circumstances had not occurred. 3 An application for a declaration of unacceptable circumstances can only be made by the bidder, the target, ASIC or a person whose interests are affected by the asserted unacceptable circumstances. Importantly for present purposes, and as stipulated in s 657B, a declaration can only be made by the Panel within three months after the unacceptable circumstances occur or one month after the application for the declaration, whichever ends last. But in an appropriate case the Court has power on the application of the Panel to extend the period (concluding words to s 657B). 4 In the present case and in the circumstances that I will now explain, the Panel has applied under s 657B for an extension of time within which the Panel can make any relevant declaration, which time otherwise expires tomorrow. I propose to grant such an extension.

BACKGROUND 5 There are two applications before the Panel that are relevant to the present matter. Each was made on 11 April 2017; for the purposes of s 657B it is likely that the last day for making a declaration is tomorrow absent any extension. 6 The first application was made by ASIC, which sought a declaration of unacceptable circumstances under s 657A of the Act in relation to the affairs of Molopo Energy Limited (Molopo), the fourth defendant (the ASIC application). The ASIC application was brought pursuant to s 657C(2)(c) of the Act. 7 Molopo is an ASX-listed company. The first defendant (Keybridge) apparently has a current relevant interest in 19.44% of the shares in Molopo. The second defendant (Aurora) apparently has a current relevant interest in 17.89% of the shares in Molopo. A question arising in the ASIC application is whether Keybridge and Aurora are associates such that Keybridge and Aurora are to be taken as having significant collective control of Molopo with an aggregated voting power of 37.33%. If so, various likely contraventions of ss 606 and 671B of the Act may be said to arise. Moreover, it is said that there may not be a fully informed market with respect to shares in Molopo. 8 The second application was made by Molopo, which has sought a declaration of unacceptable circumstances under s 657A of the Act in relation to its affairs (the Molopo application). The Molopo application was brought pursuant to s 657C(2)(d); Molopo is not yet a "target" (cf s 657C(2)(b)). The Molopo application deals with similar subject matter to the ASIC application.

The Panel's consideration 9 On 12 April 2017, the President of the Panel constituted a sitting panel for the proceeding in relation to the ASIC application, with Mr John Sheahan QC presiding, together with Ms Karen Phin and Ms Shirley In't Veld. On 13 April 2017, the President of the Panel constituted a sitting panel for the proceeding in relation to the Molopo application which comprised the same panel constituted for the ASIC application. 10 On the dates set out below, a number of persons interested in each of the Panel proceedings lodged notices of appearance with the Panel, which were accepted by it, making each person a party to the relevant proceeding: (a) On 11 April 2017, notice was given by ASIC in relation to the ASIC application. (b) On 13 April 2017, notice was given by Keybridge in relation to the ASIC application. (c) On 13 April 2017, notice was given by Aurora in relation to the ASIC application. (d) On 13 April 2017, notice was given by Molopo in relation to the ASIC application. (e) On 11 April 2017, notice was given by Molopo in relation to the Molopo application. (f) On 13 April 2017, notice was given by Keybridge in relation to the Molopo application. (g) On 13 April 2017, notice was given by Aurora in relation to the Molopo application. 11 On 11 April 2017, the Panel sent each of the parties and other persons who may have had an interest in the ASIC application a process letter. On 13 April 2017, the Panel sent each of the parties and other persons who may have had an interest in the Molopo application a process letter. Each process letter set out identical procedural matters and invited any person not a party to the particular proceeding to submit a notice of appearance to become a party to that proceeding. 12 Other than those identified above as parties, no interested person has submitted a notice of appearance in either application.

The Panel brief 13 Pursuant to reg 20 of the Australian Securities and Investments Commission Regulations 2001 (Cth) (the ASIC Regulations), as soon as practicable after receiving an application the Panel must decide whether to conduct proceedings and, if it does, issue a brief. 14 Apparently, it is the practice of the Panel, given the time limit in s 657B of the Act within which a sitting Panel can make a declaration of unacceptable circumstances, to require submissions on a brief within two business days and rebuttal submissions within a further one business day. 15 Pursuant to reg 16(1)(a) of the ASIC Regulations, the Panel may direct that two or more related matters are to be considered together in Panel proceedings. The Panel made such a direction in relation to both the ASIC application and the Molopo application. 16 Pursuant to regs 16(1)(g), 23 and 24 of the ASIC Regulations, the Panel may invite non-parties to make a submission. 17 On 20 April 2017, the Panel issued a brief to parties and invited submissions in response to questions that it had asked. Parties were directed to make any submissions no later than 5.00pm (Melbourne time) on 24 April 2017 and to make any rebuttal submissions no later than 5.00pm (Melbourne time) on 26 April 2017. The Panel also invited submissions from non-parties. 18 On 21 April 2017, Keybridge sought an extension of time within which to respond to the brief until 2.00pm (Melbourne time) on 26 April 2017. The Panel agreed to extend time for all parties until 2.00pm (Melbourne time) on 26 April 2017 for submissions and 5.00pm (Melbourne time) on 27 April 2017 for rebuttal submissions. 19 On 25 April 2017, Keybridge sought a further extension of time, which the Panel agreed to for all parties. The Panel extended time for all parties until 5.00pm (Melbourne time) on 26 April 2017 for submissions and 5.00pm (Melbourne time) on 28 April 2017 for rebuttal submissions. 20 Submissions from the parties (and from those non-parties invited to make a submission and who did so) were received by the Panel and the parties at approximately 5.00pm (Melbourne time) on 26 April 2017. Rebuttal submissions from the parties were received by the Panel at approximately 5.00pm (Melbourne time) on 28 April 2017. Additional documents, and a confidential submission restricted to ASIC and the Panel, were subsequently received by the Panel. 21 In total, the documents provided to the Panel in submissions and rebuttals have comprised over 6,000 pages. 22 The Panel is still considering the material filed in respect of both the ASIC application and the Molopo application. 23 The Panel has met on 18 April 2017, 27 April 2017, 2 May 2017 and 4 May 2017. In the time available to the Panel since the making of each of the applications, Easter (being from 14 April through to 17 April 2017) and ANZAC Day (being 25 April 2017) have intervened, thereby reducing the available time. 24 Further, on 5 May 2017 the Panel issued a notice to the parties convening a conference under Part 3, Division 5 of the ASIC Regulations.

Extension of time under s 657C by the Panel 25 Section 657C(3) of the Act, which is a separate extension power available to the Panel, provides: An application for a declaration under section 657A can be made only within: (a) 2 months after the circumstances have occurred; or (b) a longer period determined by the Panel. 26 The ASIC application has alleged that unacceptable circumstances likely first occurred before the two months immediately preceding the making of that application. Accordingly, ASIC has sought an extension of time for the making of its application. 27 The Molopo application has alleged that circumstances that comprised part of the unacceptable circumstances dated back more than two months immediately preceding the making of that application. In response to the Panel brief dated 20 April 2017, Molopo submitted that it "agrees that some of the circumstances noted in Molopo's application occurred more than 2 months prior to the date of the application" and submitted also that "[t]o the extent that the Panel considers an extension of time is necessary and that it cannot rely on the fact the circumstances are ongoing, Molopo seeks such an extension of time." 28 In Queensland North Australia Pty Ltd v Takeovers Panel (2015) 320 ALR 726; [2015] FCAFC 68, a Full Court of this Court explained how the Panel should consider the exercise of its discretion under s 657C(3) of the Act (at [75]): … Before the discretion to extend time may be exercised under s 657C(3) those circumstances require to be proved. There may be a factual contest. There is no difficulty, in that situation, for the panel first resolving the factual questions and thereafter determining whether or not to extend time under s 657C(3)…. 29 Mr Allan John Bulman, director of the Panel, has sworn an affidavit deposing that the Panel is still resolving factual questions relevant to the s 657C(3) question and whether it should extend the time for the making of either the ASIC application or the Molopo application under s 657C(3) of the Act. The convened conference (see [24] above) may address that question.

Extension of time under s 657B by the Court 30 Members of the Panel believe that an extension of time under s 657B is needed in order to allow the Panel to properly and fairly consider: (a) the voluminous material provided to it; (b) the matters that will arise out of the conference described in [24] above; (c) whether it should extend time for the making of either application under s 657C(3) of the Act; (d) whether unacceptable circumstances exist and, if so: (i) whether it should exercise, in the public interest, its powers to address those circumstances; and (ii) if a declaration is made, whether, and what, orders to make under s 657D of the Act. 31 In the usual course after having received submissions and rebuttal submissions, the Panel would make a decision, seek further information, or of its own motion refer a question of law arising in a proceeding to the Court for decision. 32 If the decision proposed to be made by the Panel is to make a declaration of unacceptable circumstances, apparently the Panel practice is to advise the parties of the proposed declaration (and proposed orders if the Panel has considered this at this stage), together with a brief explanation of its proposed approach. Pursuant to s 657A(4) of the Act, before making a declaration the Panel must give each person to whom a proposed declaration relates, each party to the proceedings and ASIC an opportunity to make submissions. 33 In the present case, members of the Panel believe that if there are no further requests for extensions of time to make submissions or rebuttal submissions, then an extension of time until 31 May 2017, being a date slightly less than three weeks from the last likely day on which the Panel may make a declaration of unacceptable circumstances (should it decide to make such a declaration and to extend time under s 657C(3) of the Act), should be sufficient for the Panel to complete the above steps. 34 Given that each of the ASIC application and the Molopo application are dated 11 April 2017, the time under s 657B(b) within which the Panel may complete its deliberations, give parties an opportunity to make submissions about any proposed declaration (if that is the outcome of the deliberations) and finalise its decision is 10 May 2017. This timeframe assumes that any unacceptable circumstances that the Panel ultimately may find includes circumstances that occurred more than two months immediately preceding the making of the relevant application(s).

The parties' positions on the application before the Court 35 On 3 May 2017, before filing the application now before me, the Panel wrote to the parties indicating that the Panel intended to seek orders extending the time for the Panel to make a declaration (if any) until 31 May 2017, and seeking confirmation of the parties' consent to such an extension. 36 The responses received by the Panel have been to the following effect. First, each party has either consented to or does not oppose an extension to 31 May 2017. Second, Keybridge, Molopo and Aurora have each raised the possibility of interim orders (in different terms) being made. Third, each party has consented to or does not oppose an abridgment of the time for service of the Panel's application to this Court.

ANALYSIS 37 It is convenient to set out the relevant statutory provisions. 38 Section 657A of the Act relevantly provides: Declaration of unacceptable circumstances (1) The Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances to be unacceptable circumstances whether or not the circumstances constitute a contravention of a provision of this Act. (2) The Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel that the circumstances: (a) are unacceptable having regard to the effect that the Panel is satisfied the circumstances have had, are having, will have or are likely to have on: (i) the control, or potential control, of the company or another company; or (ii) the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; or (b) are otherwise unacceptable (whether in relation to the effect that the Panel is satisfied the circumstances have had, are having, will have or are likely to have in relation to the company or another company or in relation to securities of the company or another company) having regard to the purposes of this Chapter set out in section 602; or (c) are unacceptable because they: (i) constituted, constitute, will constitute or are likely to constitute a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C; or (ii) gave or give rise to, or will or are likely to give rise to, a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C. The Panel may only make a declaration under this subsection, or only decline to make a declaration under this subsection, if it considers that doing so is not against the public interest after taking into account any policy considerations that the Panel considers relevant. […] 39 Section 657B of the Act provides: When Panel may make declaration The Panel can only make a declaration under section 657A within: (a) 3 months after the circumstances occur; or (b) 1 month after the application under section 657C for the declaration was made; whichever ends last. The Court may extend the period on application by the Panel. 40 In the context of s 657B, Finkelstein J in Re Takeovers Panel [2002] FCA 1120 at [9] and [10] said the following: 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. 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. 41 His Honour then went on to consider and apply various of the following interrelated considerations relating to the exercise of his discretion: (a) First, the fact that the Panel operated in the public interest and there was a public interest in the Panel fulfilling its functions expediently and expeditiously, particularly given its position as the main forum for resolving disputes about takeovers before the expiration of any relevant bid period (s 659AA). (b) Second, whether the Panel had, in context, unreasonably delayed in carrying out its functions. (c) Third, whether there were any preliminary or threshold factual questions that needed to be dealt with, for example, an application to the Panel under s 657C(3). (d) Fourth, the stage that the Panel had reached in its investigations and deliberations. (e) Fifth, whether interested parties had engaged with the Panel in relation to its investigations or proposed findings. (f) Sixth, whether the additional time sought was beneficial in order for the Panel to form informed conclusions, including reducing or minimising the risk of any judicial review challenge. (g) Seventh, whether the additional time sought was extensive or modest. (h) Eighth, whether, if the extension sought was granted, the Panel would be very likely to finalise the matter within the time as extended. (i) Ninth, whether any actual or likely prejudice would be caused to any party before the Panel or any non-party if the extension was either to be granted or refused. 42 It would be supererogation on my part to supplement the synthesis of Finkelstein J (see also his analysis in Takeovers Panel v Glencore International AG (2005) 55 ACSR 453; [2005] FCA 1628). For completeness, I do not need to discuss Chaudhri v Takeovers Panel (2011) 218 FCR 574, which was dealing with the scenario where the Panel had sought an extension of time to consider making a declaration, but where it had already resolved some months earlier not to make a declaration; that case turned more on the question of whether the power to extend was available. 43 In my view, the extension sought is appropriate. 44 First, the extension sought is only for some three weeks. Given that it would appear that the alleged unacceptable circumstances likely occurred more than two months before the date of the applications to the Panel on 11 April 2017, being in or before February 2017, it is likely that for the purposes of s 657B, the period referred to in s 657B(b) "ends last". Accordingly, any s 657A declaration has to be made within one month after 11 April 2017 in the absence of any extension. 45 Second, the extension sought is well justified by the Panel's need to properly consider the voluminous material filed, any matters arising out of the conference that has been convened, and generally to take the steps discussed at [30] to [34] above. 46 Third and relatedly, a complicating feature of the Panel's present task is to address the s 657C(3) question that has arisen. That requires additional time for factual analysis in addition to considering the principal question of whether there are unacceptable circumstances and, if so, whether a declaration and other orders should follow. 47 Fourth, in context, the Panel has not delayed in discharging its functions to date or bringing the application for an extension before me. 48 Fifth, interested parties have engaged with the Panel's processes. Moreover, such parties have either consented to or not opposed the extension sought under s 657B. 49 Sixth and implied in the last point, no actual or potential prejudice to any interested party has been identified if I grant the extension. Moreover, I am able to infer that if an extension was not granted such that the Panel was not able to properly discharge its functions, potential prejudice may be caused to an interested party. 50 Seventh, if the extension is granted, the Panel is most likely to finalise the matter within the extended time. 51 Eighth and generally, given the breadth of the power to extend under s 657B albeit informed by its purpose and context, including the public interest considerations identified by Finkelstein J, in my view this is an appropriate case for an extension for the limited period sought. 52 I will make orders substantially to the effect of those sought by the Panel. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Beach.

SCHEDULE OF PARTIES VID 454 of 2017 Defendants Fourth Defendant: MOLOPO ENERGY LIMITED