, (ID - CATCHWORDS Broadcasting and Television - Application for general certificate , authorizing investments in certain companies holding television licences - Reference of questions of law - Whether s.91D covers interests neither held nor proposed to be held at time of application ~ Whether interests may be specified as a percentage of all shareholding interests or as a percentage of paid-up capital - Use of second reading speeches and explanatory memorandum to identify mischief. Preadcasting and Television Act, 1942 ss.22B, 91, 91D, 92F. TCN CHANNEL NINE PTY. LIMITED, GENERAL TELEVISTON CORPORATION PROPRIETARY LIMITED, UNITED TELECASTERS SYDNEY LIMITED AND AUSTARAMA TELEVISION PTY. LIMITED v AUSTRALIAN MUTUAL PROVIDENT SOCIETY No. G112 of 1982. COPAM: Bowen C.J., Leckhart and Ellicott Ju. 20 August, 1982. Sydney. Answer: Cuesticn 2: issue a certificate authorizing a person to held shareholding interests in a company some or all of which interests are not, at the time of the application, held by the person applying for the issue of the said certificate. The Tribunal is empowered by s.91D of the Act to issue a certificate authorizing a person to hold shareholding interests in a company holding a licence if the person applying for the aissue of the saicé certificate at the time of the application either holds the shareholding interest the subject of the application or 1s a party to a proposed transaction under whach, if it comes into effect, he will hold the shareholding interest, the subject of the application, but not otherwise. Whether the Tribunal is empowered by s.91D of the Act, on its true construction, to issue a certificate authorizing a person to hold shareholding interests in a Licensee corpany such interests being specified in the said certificate as a percentage of all shareholding interests in the said licensee company. i a ne Sie Sd oT Ce ok. ei. ai. | a ere ory mr BS as eee (c) the likelihood of an applicant either alone or in association with any other person ocr persons exercising either directly or indirectly a significant anfluence on a licensee company in respect of which an application hs been made. Answer: In view of our answer to question 1 above this question does not arise. 2. The Australian Mutual Provident Society pay to the Applicants the1r costs of the reference. -2- ("the Act"). It is convenient to mention the relevant facts before stating the particular questions of law. By application dated 20 January 1982 the respondent, Australian Mutual Provident Society ("the Society"), applied to the Tribunal for written certificates pursuant to s. 91B cf the Aet authorising the Society to hold shareholding interests up to 9.99992 ain certain companies. The names of those companies together with the "shareholding anterest" held by the Society in each of them et the date of its application are as follows:- Austarama Television Pty. Limited 7.1769% United Telecasters Sydney Limited 0.7135% Universal Telecasters Qld. Limited 4.9997% Terald-Sun TV Pty. Limited 2.23488 Amalgamated Television Services Pty. Limited 4.95662 Brisbane TV Limited 1.65562 Television Broadcasters Limited 3.31988 TCN Channel Nine Pty. Limited 3.22623 General Television Corporation Proprietary Limited 2.87018 A person has a "shareholding interest" 1n a company (see sub-s. 91 (3)):- ».-1f he is beneficially entitled to, or 1s beneficially entitled to an interest an, any shares in the company (whether or the Inquiry, of the Act. certificates. -4- The applicants opposed the granting to be represented before it for the purposes of s. 22 of the Evidence was tendered by the Society to the Tribunal:- "Ca) (a) of the Society's past and present policy with regard to portfolio investments; of the Society's practice not to intervene in the management of companies in which it holds shares; of the Society's willingness to undertake to the Tribunal nct to seek to exert any influence over the operations conducted under or by virtue of any commercial television licence held by a licensee in which the Society has a shareholding anterest; con the basis of which the Society seeks to establish that it is unlikely as the holder of eny shareholding interests in relation to which ea certificate under Section 91D of the Act may be granted that it would interfere wath the Licensce's management of the commercial television station to which any such certificate relates." At the request of the applicants the Tribunal referred the following questions of law to this Court pursuant to s. 22B:- Whether the Tribunal 1s emrowered by s. 91D of the Act, on its true constructicn, to issue a certificate authorising a person to hold shareholding interests in a company some or all of which interests are not, at the time cof the application, ~6- of its portfolio investment activities; (b) the stated intentions of an applicant in respect of its present interests in or its proposed interests in the licensee company; (c) the likelihood of an applicant either alone or in association with any other person or persons exercising either directly oF indirectly a significant influence on a lLicensée company in respect of which an application has been made. Section 91D 1s a lengthy section, but it must be sct out in full. It provides:- "91D (1) A person may apply to the Tribunal, ain eccordance with the form approved by the Tribunal, For a certificate under this section authorizing him to hold interests in a compeny holding a licence. (2) On receipt of an application under this section relating to interests in a eccmpany, the Tribunal may, an ats discretion, but subject to sub-sections (3) and (4), issue a written certificate to the applicant authorizing him to hold either or both of the following, as specified in the certificate, namely-- (a) shareholding interests in could be submitted to such a poll or as regards one or more only of such questions; (b) the holder of interests in the company exceeding in amount 10% of the total of the amounts of all the iunterests in the company that would exist if sections 91A and 91B had not been enacted; or (ec) the holder of shareholding interests in the company exceeding in amount 10% of the total of the amounts paid on all shares of the company. (5) A certificate under this section may be made subject to the condition that it ceases to have effect on a specified date, being not less than 12 months after the date on which the certificate is issued. (6) If, at any time after a certificate has been issued authorizing a person to hold interests in a company, the Tribunal becemes aware of circumstances by reason ef which it would be prohibited by sub-section (3) from issuing a certificate authorizing the person to hold those interests, the Tribunal shall serve @ notice in writing on the pcorson setting out particulars of the circumstances and inviting him to lodge with the Tribunal, within a specified period, bezung not less than ]4 Gays after the service of the notice, a submission in writing stating why the certificate should not be revoked. (7) After the expiraticn of the period specified in a notice served on a person under sub-section (6) anc after considering any submission ledged in response to the notice, the Tribunal spall, by notice in writing, revoke the certificate concerned if 1t would be prohibited by sub-section (3) from issuing a certificate authorizing the -10- Section 91D in effect exempts from the ownership and control provisions of the Act certain persons holding shareholding interests or loan interests in companies holding televisicn Licences. The section speaks of "interests", and that word is defined in sub-s. 91 (1) as meaning a shareholding interest or a loan interest. We have already referred to subk-s. 91 (3) which defines the circumstances in which a person has a shareholding interest in a cempany for the purposes of Davision 3 of Part IV of the Act. As to loan interests, sub-ss. 91 (4) and (5) provide:- "(4) For the purposes of this Division but subject to sub-section (5) - (a) a person has a loan interest in a company holding a licence if he is, or would be, bereficially entitled to, or to a part of, moneys of any of the following descriptions payable or becoming payable by the compeny (whether the mcneys are presently payable or not, whether the Liability of the company is unconditional or not and whether or not there 1s security for the payment of the moneys), namely: (1) moneys, Other than interest, payable under, ocr secured by, debentures of the company; (121) other moneys payable by the company, being moneys payable by way of repayment of moneys lent to, or deposited with, the company by any person; or (iai) moneys payable under a negotiable anstrument to the extent that the instrument 1S in respect of, or the liability to pay those moneys is in substitution for, a liability to pay moneys to which suk-paragraph (i) or (21) relates; and (b) the amount of the loan interest 1s the Fy . yum i -12- An important qualification on the issue of certificates 1s that they cannot authorise shareholding cr loan interests orcater than 10% of the total interests in the licensee company (sub-s. 91D (4)). That sub-section expresses that qualification by repeating the three tests of paras. 91 (2) (c) to (e) relating to prescribed interests substituting a limit of 10% for the normal 5%. The Trabunal may issue a certificate to last undefinitely or for a specified period being not less than 12 months (sub-s. 91D (5)). If the Tribunal later becomes awarc of circumstances py reason of which it would be prohibited by sub-s. 91D (3) from issuing a certificate, 1t must serve a notice in writing on the person to whom the certificate was issued inviting him to ledge within a specified pericd a submission in writing stating why the certzficate should not be revoked (sub-s. 91D (6)). After the expiration of the period specified in the notice and after considering any submission ledged in response to the notice the Tribunal shall revoke the certificate 1f it would be prohibited by sub-s. 93D (3) from issuing a certificate authorising the person to hold the anterest to which the certificate in fact issued relates (sub-s. 91D (7) ). The revocation of the certificate takes effect not earlier than the expiration of six months after the date of service of the notice of revocation (sub-s. 9]b (8) ). It 1s convenient to summarise the principal submissions -14- transaction that had already taken place (sub-s. 92F (1) ) and who thus held interests in the licensee company at the time of the application or by persons who would be parties to a proposed transaction if it were to take effect (para. 92F (2) (b) and sub-s. 92F (3) ). It was submitted that this construction was consonant with the language of s. 91D and with the scheme of Division 3 of Part IV of the Act, in particular s. 92F. The Society conceded that inadvertent contraveners of ss. 92 cr 92F could apply for certificates under s. 91B, but submitted that the plain words of the section permitted any person to apply fer a certificate, whether an inadvertent contravener or not, and whether or not it held a prescribed interest at the time cf the application. The Society argued that the languace of s. 91D was aprosite to include as an applicant for a certificate a person who Coes not hold a prescribed interest at the time of his application and may never do so; but wishes to have the protection of the certificate in the event that he acquires a prescribcd interest some time in the future. If sub-s. 91D (1) is read alone, its language is sufficiently wide to encompass interests which are held or are proposed to be held at the time the application is made to the Tribunal. The language of that sub-section would also include interests which are not held or even proposed to be held at the time of the application an@ which may never in fact be held by the applicant. On this approach the Socicty would qualify as an Ata ~16- give details of the particular interests the holding of which is authorised. To take a simple example. If A agrees with B to buy from him his holding of 10,000 ordinary shares in a licensce company subject to approval being given under s. 91D, any certificate which the Tribunal issues should state that authority 1s given to A to hold the specified parcel of 10,000 ordinary shares in the capital of the licensee company which B holds, identified in the certificate in some precise way, e.g. "the 10,000 crainary shares in the capital of the company numbered 1 tc 10,000" or, as the case may be. This does not mean that, in the case of a proposed transaction, the particular shzres which will be held pursuant to the certificate must be identified. For anstance, 1f A had agreed te sell to B 10,000 cf A's total holding cf 100,000 shares in the capital of a company it would be sufficiently specific to refer to 10,000 cf A's shares numbered 1] to 100,000". It could of course encempass other situations. An applicant might be abcut to acquire shares in different companies which would be, wholly or in part, the subject of the tracing provisions (see s. 91A) or he might be acquiring shares by means of an 1ssue. Whatever the commrercjal arrangement, the requirement of the section, in our view, 18 that the certificate must specifiy the unterest in question with sufficient particularity to enable rut to be identified as the relevant authcrised shareholding interest. This can be done where the interest 1s already held or where the appliccnt 1s @ party to a prceposed transaction for the acquisiticn of an interest. It cannot ke done where no specific propesal 1S enviseged. -18- This is not to say, of course, that the shareholding interest must be expressed in the certificate as a percentage of paid up capital. It might for instance be described as "amounting to § "or "amounting to § of the total paid up capital of" the company. It must be borne in mind that, under the Act, shareholding interests can be traced through a series of companies (s. 910A). Wath these matters in mind the words "amounLing to a specified amount" assume real significance. They are not a mere repetition cf the phrase "es specified 1n the certificate". They enable the Tribunal net only to particularise the holding in questicn bit also to specify, for example, the percentage of the peaic up capital of the company which that holding represents elther directly or as a result of the tracing provisions. This is a material factor because of the 10% limits prescribed by sub-s. 91D (4). If so specified it 1s at least a warning that, 12 exceeced, the provisions of the tlattcr suk-secticn might be anfringec. Paragraph 91D (3) (»b) also supports a comstruction of the secticn which includes particular interests helG or proposed to be hele at the time the appticaticn is made, but Goes not include interests which are not even the subject of a proposed transaction. The paragraph provides that a certificate shall not authorise a person to held interests in a company holding a licence unless:- "(b) the Tribunal 1s satisfied that the person 1s nct, and is not likely to be, whether alone or 1m assocl1ation with any other ' Bee Me RT NEF Ne beet et Serre ng Le metre Tet ee are oa ~20- possibilities, when exercising its powers under the section. It may issue a certificate for such period as it thinks fit being not less than twelve months (sub-s. 91D (5) ). It may review its decision fron time to time in the Light of chenged circumstances (sub-ss. 91D (6) and (7)). Thais runs counter to the notion that the Tribunal's task 1s one of conjecture based on hypothetical future possibilities - a proposition inherent in the Society's argument. It 1s present circumstances that concern the Tribunal. From them it may gauge the likely influence of the applicant on the licensee compeny. To import the consideration of mere hypothetical possibilities into the Tribunal''s role is to assign it an ampermissible task of speculation rather than inicrmed assessrent. Also if the Society's argument is correct the Tribunal will be obliged to speculate as to the identity of the person frem whom the applicant may acquire his intercst. The point is well 1llustrated by an example given by the first and second applicants an their wriiten submissicns. If a company 1s owned as to 18% by A, 9% by B and 72% by some thousands of small shareholders with no association inter se, and tf an applicant seeks a "prospective" certificate to hold 10% of the shares in the company, the answer @epends largely ou the identity of the seller of the shares to the applicant. If the applicant buys them from the other sundry shareholders there may be little change. If, however he buys them from A then the situation 1s totally altered and the applicant as the largest single shareholder, may, for all practicél purposes, -22- application. Notwithstanding that the section is an enabling provision and should be construed liberally 1t must be remembered that a certificate under s. 91D confers a considerable privilege upon its holder ian that it exempts him from the ownership and control provisions of the Act ain respect of the ainterest the subject of the certificate. Also, it is interesting tc note that all parties agreed that if the relevant application under s. 9]D 1s to hold shares directly in the licensee company 3tself (and not in a comrany which itself owns shares in the licensee company) it would be a considerable ccmmercial édvantage to the applicant to hold a cecrtificate under the section authorising him to hola shéeres up to a particular percentage of the paid up capital of the licensee company without being necessarily tied to a specific transection or proposed transaction. In the result we reject the view that s.91D can encompass applications for authorisation of prespective acquisitions of shareholding interests in a licensee company which are net the subject of actual or proposed transactions at the time the applications are made to the Tribunal. However we do not accede to the submission of the applacants that s. 91D 1s avallable cnly to anadvertent contraveners of ss. 92 or 92F or those who hold prescribed interests in the Licensee company at the time the application 15s made. To so construe the section would ke contrary to its plain lancuege, tenor and purpose. We agree with counsel for the ~24- breaches of section 92 of the Act by third 'parties acquiring excess prescribed interests as a result of share transactions by other persons. Experience has shown that an investor can be put in breach of the Act through the purchase of shares by another party in which the investor is a shareholder, because of the tracing provisions of the Act. The problem of the third party breaches of the Act has arisen with institutional investors, because of their Large and diversified portfolio shareholdings." Section 92, referred to in the Minister's speech, provides that 1t is an offence for a person to have a prescribed interest 1n more than a specified number of television licences. (1981) Mason J. said in Wacanéo v. Commonwealth of Australia A.L.R. 317 (at p. 335) and again in F.c. Vhitforés Beach Pty. Limited (1982) 39 A.L.R. 521 (at pp 534):- "In construing s. 1 it is permissible to have regard to the mischief to which the Act was airected. Generally speaking, reference cannot be made to what is said in Parliament fer the purpose of interpreting a statute. But 1n my opinion there are grounds for making an exception for the case where a bill is intrcduced to remedy a mischief. Then, to have regerad to the purpose for which the legislation was enacted as stated by the Minister in charge of the bill would ccnform to the rule that extrinsic material 15 aamissible to show the mischief which the statute 1s designed to remedy. I acknowledge that the iInacmissibility of parliamentary debates, as an aid to the construction of statutes 1S supported by powerful authority (see generally Bitumen and O11 Refineries (Aust.) Ltd. Vv. Cemmissicrner fer Government Trensport (1955) 92 C.L.R. 200; Australasian United Steam Navigation Co. Ltd,. v. Hiskens (1914) 18 C.L.n. 016 at 672; South Australia v. Cormonvealth (1942) 65 C.L.R. 373; Scuth cf T. v. » 533 and -26- Minister. We therefore propose to admit the Hansard reports of the second reading speeches of the relevant Ministers and the Explanatory Memcrandum. They support the view that inadvertent breaches of the Act by shareholders who acquire prescribed interests in television broadcasting licences through shere transactions by other persons constituted at least part of the mischicf designed to be remedied by s. 91D. Those passages dc not, however, support the argument of the first and second applicants that s. 91D 1s confined solely to inadvertent contraveners of the Act who acquired prescribed interests before they appliec to the Tribunal under the section. In the result we would answer question 1 as follows:- The Tribunal is empowered by s. 91D of the Act upon its true construction to issue a certificate authorising a person tc hold shareholding interests 1n a company holding a licence if the person epplying for the issue of the said certificate at the time of the application either holds the ( shareholding interest the subject of the application or 1s a party to a proposed transaction under which, 1f£ it comes into effect, he will hold the shareholding anterest the subject of the application, but not otherwise. -28- and specified therein as a percentage of the paid up capital of the Licensee company. As to question 4, in view of our answer to question 1, this question dces not arise. As to costs, the principal question involved in the reference to this Court was question 1. As the applicants have substantially succeeded on this question the Society should ray the1zr costs cf the reference (see G.T.K. Trading Preprietary Limitea v. Export Develcpnment Grarts Bcerd, a judgment of a Full Court of this Court 7 May 1982, unreported). beecrt sy _' - 27 o- pages ave fier Doct Letty Foe to eo ~ less . judgma.t fog he LAAN ae a Ssoerwes -