FEDERAL COURT OF AUSTRALIA C P Ventures Pty Ltd v Withnall [1999] FCA 1437 C P VENTURES PTY LTD v NEROLIE WITHNALL and SIMON MORDANT W 94 of 1999 BRISTILE LTD and BLEND INVESTMENTS PTY LTD v NEROLIE WITHNALL, SIMON MORDANT and ALICE McLEARY W 96 of 1999 CARR J 14 SEPTEMBER 1999 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 94 of 1999 BETWEEN: C P VENTURES PTY LTD Applicant AND: NEROLIE WITHNALL and SIMON MORDANT Respondents W 96 of 1999 BETWEEN: BRISTILE LTD and BLEND INVESTMENTS PTY LTD Applicants AND: NEROLIE WITHNALL, SIMON MORDANT and ALICE McLEARY Respondents JUDGE: CARR J DATE: 14 SEPTEMBER 1999 PLACE: PERTH EX TEMPORE REASONS FOR JUDGMENT 1 The court has before it two urgent applications for interlocutory relief. In application W94 of 1999 the applicant, CP Ventures Pty Ltd, ("CP Ventures"), seeks an order to review certain decisions said to have been made by two members of the Corporations and Securities Panel, ("the Panel") who constitute the respondent in those proceedings. 2 The Panel has embarked upon an inquiry in relation to the acquisition by CP Ventures of shares in Wesfi Ltd, ("Wesfi"). By a notice of motion filed with its originating application yesterday, CP Ventures seeks an order staying the Panel's decision to convene a conference today and tomorrow and also an order restraining the Panel from proceeding further with its inquiry until the hearing and determination of its originating application. 3 In application W96 of 1999, also filed yesterday, the first applicant, Bristile Ltd, ("Bristile") and Blend Investments Pty Ltd, ("Blend") also seek orders to review similar decisions made by the Panel. Bristile and Blend seek urgent interlocutory orders the effect of which would be to stay the Panel's inquiry until further order and to compel the Panel to provide reasons for various decisions mentioned in the originating application. When these two motions were called on for hearing together yesterday afternoon, Mr R. Le Miere QC appeared for the Panel and sought an adjournment on the basis that the proceedings had only just been served and he was unable to obtain instructions from his clients. I was informed that the members of the Panel were travelling from interstate to Perth to conduct a conference as part of their inquiry today. Mr Le Miere sought an adjournment of about a week. Such an adjournment would, in practical terms, have had the result of depriving the applicants in each application of the chance of obtaining the urgent interlocutory relief which they sought. By the expiration of a week the Panel would have concluded its conference. Accordingly I decided to hear the applicant's side of each motion and adjourn them for further consideration today. 4 When the Court resumed hearing these matters at 11.30 this morning, Mr Le Miere addressed me in opposition to the orders sought. He also tendered evidence, including evidence of matters which transpired when the Panel convened this morning. I shall return to that evidence in a moment, but first I shall explain something of the factual background. 5 CP Ventures owns 19.62% of the ordinary shares on issue in Bristile. Mr Alan Newman is a director of both CP Ventures and Bristile. On 1 April 1999 Bristile announced its intention to make a takeover offer through its wholly-owned subsidiary, Blend who, it will be recalled, is the second applicant in application W96 of 1999, for all the issued shares in Wesfi. Blend despatched its Part A statement and offer to the shareholders of Wesfi on 30 April 1999. On 14 May 1999, Wesfi despatched its Part A statement to all its shareholders. 6 The offer, in summary, was for one share in Bristile and 10 cents cash, increased to 25 cents on 26 May 1999, for each Wesfi share. The conduct in respect of which the Panel is conducting an inquiry is the purchase by CP Ventures between 16 April 1999 and 28 June 1999 of 1.9% of the issued share capital of Wesfi on the Australian Stock Exchange, followed by its sale of those shares to Blend by accepting the takeover offer made by the latter. 7 On 9 August 1999 the Australian Securities and Investments Commission, ("the Commission") applied under s 733 of the Corporations Law to the Panel for a declaration that unacceptable circumstances had occurred in relation to that acquisition and the proposed acquisition of further shares in Wesfi by CP Ventures. 8 I think that it is important for the disposal of today's proceedings to recognise the fairly narrow range of factual circumstances which have given rise to this inquiry. The relevant conduct is the acquisition by CP Ventures of those shares in Wesfi and its on-sale to the takeover vehicle, Blend, together with its proposal to acquire additional shares in Wesfi. 9 I accept that a key element in the Panel's inquiry will be whether CP Ventures can be thus said to have acquired, "a substantial interest" in Wesfi, see s 732(1)(a) to (d) of the Corporations Law. But I think it is useful to bear in mind that the factual circumstances at the core of this matter fall within the relatively compact area which I have just described. The decisions and conduct which the applicants have asked the Court to review in each of their principal applications are broadly similar, although I acknowledge that there are some differences. For the purposes of today's proceedings I propose to treat them as being substantially the same. 10 First, the applicants seek review of the Panel's decision on 9 September 1999 to refuse an offer of undertakings from them pursuant to s 201A of the Australian Securities and Investments Commission Act ("the ASIC Act"). CP Ventures describes that as "the First Decision". Secondly, CP Ventures seeks review of the decision that Wesfi be entitled to attend and fully participate at any conference conducted by the Panel, and in particular at a conference to be held today and tomorrow. It describes that as "the Second Decision". 11 Next, CP Ventures seeks to challenge six directions orders concerning the procedure to be adopted by the Panel at that conference. CP Ventures describes that as "the Third Decision". Finally, CP Ventures seeks an order of review of the Panel's decision on 9 September 1999 to reject its application that the conference be convened for dates later this week. That is described as "the Fourth Decision". CP Ventures seeks review of those decisions on the basis that they are reviewable decisions or, in the alternative, constitute conduct relating to the making of decisions. 12 CP Ventures has filed two affidavits in support of its application, one of which is specifically in support of its motion for stay orders. In the latter affidavit sworn by Miss J M Hill, Miss Hill swears that she believes unless the Court grants an order staying the Panel's decision, the application will be rendered nugatory. In her other affidavit Miss Hill deals in sequence with the undertaking proffered by the three applicants, the circumstances of the directions given by the Panel, certain other procedural matters relating to the question of whether notices to produce have been given by the Panel, the availability of Mr Newman and the availability of counsel for CP Ventures. 13 The complaints thus fall into three categories, namely first the Panel's decision not to accept the applicant's undertakings as finalising the matter but deciding to proceed with its inquiries. This is said to have been in error on various bases, including improper use of power and unreasonableness in the administrative law sense. 14 Secondly, that Wesfi should not be entitled to attend and fully participate at the Panel conference. Thirdly, the applicants complain that in a number of different ways the Panel proposes to deny them procedural fairness in the conduct of the inquiry by virtue of the manner in which the Panel intends to proceed. 15 In summary, the applicants say that they require full knowledge of the case being brought against them and adequate time to test and rebut matters put to the inquiry. Among many other things the applicants point to the fact that the Panel proposes to call some 12 witnesses and that there exists an unknown body of documents to which they have not had access. Numerous other complaints have been made of a similar nature in written and oral submissions. 16 There have been some developments this morning which I mentioned a moment ago. First of all, the Panel reviewed its procedural guidelines and the framework proposed for the conference. The Panel promulgated revised procedural directions. It has also made it clear that these directions are designed to assist it in the orderly conduct of its inquiry and will be applied flexibly. Those revised directions are now Exhibit R1 in both applications. I incorporate those directions by referring to them in these reasons, but I shall not read them out as there is a confidentiality order in relation to that exhibit. However, in my view, contrary to the applicants' submissions in reply, the revised directions in Exhibit R1 go a very long way towards removing the bulk of the bases for their complaints of procedural unfairness. I say this despite the timeframe to which all concerned will need to adhere. 17 I now turn to some statutory and regulatory matters. It is clear that Parliament intends an inquiry of the type being conducted by the Panel to take place as quickly as possible. There is a time limit in s 733(2) of the Corporations Law for the Commission to make its application to the Panel. That time limit can be extended, but only for a maximum of a further 30 days. A time limit is also imposed on the Panel. Section 733(4) provides that the Panel may only make a declaration that an acquisition has been an unacceptable acquisition or that conduct has been unacceptable conduct, within 90 days of the acquisition or conduct taking place, or 30 days after the Commission's application, or such other period as the Court, that is the Supreme Court, may order, whichever is the later date. 18 In the present matter the Panel applied to the Supreme Court of Western Australia for an extension of time until early October 1999. Bristile opposed that application. The Supreme Court granted an extension to the Panel until 28 September 1999, that is some 11 working days from now, but with liberty to apply. The applicants contend that the Panel should now renew its application for a further extension of time. That is part of their argument in support of the stay orders which they seek. 19 At the heart of this matter is the question of procedural fairness being extended by the Panel. Section 195(3) of the ASIC Act provides that the rules of procedural fairness, to the extent that they are not inconsistent with the provisions of that Act and the regulations made under it, apply to the Panel's inquiry. I turn to other relevant provisions of the Act and regulations. Section 195(1) of the ASIC Act provides that an inquiry is to be conducted in accordance with, in order of priority, (a) the requirements of Division 3 of the ASIC Act, a Division which deals with inquiries by the Panel; (b) the requirements of the regulations and, (c) the requirements of the Panel. 20 Section 195(2) provides that the regulations may deal with the making of submissions or the giving of evidence to or at an inquiry, the right of any person to appear or be represented at an inquiry and the matters to be taken into account by the Panel when making a decision in the course of an inquiry. Section 733(5) of the Corporations Law provides that the Panel may only make a declaration that there has been an unacceptable acquisition or unacceptable conduct if it has given each person to whom the declaration relates an opportunity to make submissions to the inquiry. The Panel has done that in this matter. 21 Regulations 17 and onwards of the ASIC Regulations govern the conduct of the inquiry. Regulation 17 provides that subject to Part III of the regulations the procedure to be followed by an inquiry "is to be determined by the Panel". Regulation 21 provides that when the Panel decides to conduct an inquiry it must, as soon as practicable, notify the decision to the Commission and to each company to which, or person to whom, the relevant application relates. The Panel has done that. 22 Regulation 22 provides that if the Panel decides to hold an inquiry it must, within five business days after receiving the application from the Commission, give a copy of a brief (which Regulation 20 requires it to prepare) to the Commission and each such company or person. It must also invite each body or person to lodge with the Panel a written submission addressing the issues identified in the brief. The Panel has taken those steps. 23 In terms of being given fairly particular notice of the case being made against them, the applicants have been provided with the brief which sets out, as required by Regulation 20(b), a general description of the matters to be examined in the inquiry, a summary of the grounds presented in the application and the issues to be addressed in submissions to the inquiry. The applicants also have the application itself, that is the application by the Commission to the Panel, which is a very carefully-worded and detailed document to which is annexed about 1000 pages of other documents upon which the Commission relies in its application. In terms of further documents, Exhibits R2 and R3 comprise respectively a notice to produce and a witness summons, both issued by the Panel. In my view, those exhibits show that the Panel intends to explore the Wesfi-Cullity share interest issue. 24 Regulation 25 deals with the form of submission and its contents. It requires that the submission address the issues identified in the brief or part of the brief supplied to the person, that it include copies of any other written material that is referred to in the submission, that it should state any decision that the person making the submission proposes that the Panel should make, and should contain sufficient information to permit a proper consideration by the Panel of those issues, documents and proposed decision. There are other provisions in Regulations 25 and 26 concerning the subject matter of submissions. 25 Regulation 28 provides for short time limits for the submissions to be lodged with the Panel, that is, in the case of a person being a party to the inquiry five business days after receipt of the brief. Regulation 28(2) provides for a copy of submissions to be supplied to each party and any intervener. Persons who receive such copies are entitled to file no more than one submission that rebuts a matter or matters in the submission and does not include material that is not necessary to support the rebuttal. The time limit for filing submissions of rebuttal is within five business days in the case of a declaration or such further period as the Panel may allow. All these procedural steps have taken place in this matter. Regulation 30 provides that the Panel may invite further submissions, and regulates the time and form and rebuttal of such submissions. Regulations 35 to 41 contain detailed provisions governing the conduct of a conference. The Panel may at its discretion conduct such a conference to clarify matters arising from documents in its possession relating to the inquiry to resolve inconsistent statements, either in documents or made orally to the Panel or otherwise to inform itself on matters relating to the inquiry. 26 Regulation 36(a) relevantly provides that in the case of this inquiry any person to whom any declaration would relate is entitled to be present at such a conference. The Panel is not under any obligation to convene a conference. It has a discretion whether to do so. It is important to recognise that the conference is not like a trial in court proceedings. Regulation 37 provides for the time at which the President of the Panel may convene a conference; that is expressed in terms of five business days from two specified events, whichever is the earlier. 27 Regulation 38 governs the procedures at conferences. It requires the Panel to provide a relevant person with a statement setting out the matters which the Panel proposes to raise at the conference and any other matter of which the Panel wishes that person to be aware of for the purposes of the conference. The applicants complain about the adequacy of that statement and say that it merely restates s 733(1) of the Corporations Law. Regulation 38(2) provides that at a conference the Panel is not obliged to consider matters that are not set out in such a statement. 28 Regulation 39 provides that a person who attends a conference may address the Panel. Regulation 39(2) deals with the content of such an address. Regulation 40 provides that at a conference a person must not ask a witness about a matter unless it is a matter on which the person may address the Panel in accordance with Regulation 39. The applicants complain about not being able to cross-examine witnesses. It should be remembered that the Panel is not conducting an adversarial type proceeding such as a trial in a court. Its proceedings are essentially inquisitorial in nature. 29 In any event I consider that the provisions of paragraph 5 of Exhibit R1 go a very long way towards providing a basis upon which the applicants will be able to cross-examine witnesses. They complain about not having time to examine documents and prepare for cross-examination. My impression is that, given their knowledge of the whole matter from the start of the takeover onwards, that this complaint has been overstated. Regulation 40(2) provides that a witness must not make a statement on a matter at a conference unless it is a matter on which the witness or the person who called that witness to give evidence may address the Panel in accordance with Regulation 39. 30 There are other provisions in the ASIC Act concerning the procedure at an inquiry. Section 189(1) provides that an inquiry is to take place in private unless the Panel directs that the inquiry or a part of it is to take place in public. Section 189(2) provides that a person must not be present at an inquiry unless the person is a member of the Panel, a member of the Commission or a staff member approved by the Panel or is a person entitled to be present under a direction given by the Panel. 31 At this stage I should mention that the applicants contend that the reference to a person entitled to be present under a direction given by the Panel does not apply to Wesfi because it is a corporation. It is not necessary for me to decide that matter finally today but I doubt whether that is the correct construction of the subparagraph. In my view, on a prima facie basis, the Panel may give a direction that any person may be present. In this case it has directed that a corporate representative and a legal representative of Wesfi may be present. 32 The applicants, in particular Bristile, complain that it is not necessary for Wesfi to be present all the time and that it, that is Wesfi, will get unfair access to its strategies. Again, on a prima facie basis, I consider that the contents of Exhibit R1 considerably reduce the likelihood of that happening. Section 191 of the ASIC Act governs how information or evidence is given to the Panel. It provides that generally information or evidence is to be given to the Panel by lodgment of a written submission in accordance with the regulations. 33 However, s 191(2) provides that a person may appear before the Panel and give evidence at the inquiry if required by summons under s 192 to do so or the Panel decides in its discretion to allow the person to do so. Section 192 confers power on the Panel to summons witnesses. Section 194 deals with the matter of representation at an inquiry. 34 The applicants say that the Panel should be restrained now from any further consideration of the Commission's application for several reasons. 35 The first is that they have offered an undertaking in terms which are acceptable to the Commission which of course made the application to the Panel in the first place. The applicants say that it is not appropriate in those circumstances to permit the Panel to hear the matter at all, or in the manner in which it proposes to do so, and then afterwards if the Court finds that the procedure has miscarried, to force the parties back to a further hearing before the Panel. They say that to prosecute the conference in those circumstances is simply a waste of resources. 36 On a prima facie basis I am inclined to the view that even if the Commission is content to accept the proffered undertakings in settlement of the matter, the Panel is not obliged by the terms of s 201A to accept them. That section is not expressed in mandatory terms; it is facultative. I do not think that, speaking provisionally, there is sufficient material before the Court to suggest that in so refusing, that is, in refusing to accept the undertakings, the Panel acted unreasonably in the administrative law sense. 37 The applicants submit that the Panel is now moving with great expedition, exposing them to a risk that the Panel may make a declaration of unacceptable conduct very promptly after the termination of the conference. This may be before the applicants can renew their application for relief in this Court. The applicants contend that the taking of evidence on the basis foreshadowed by the Panel, together with what they described as a "predisposition" on the Panel's part to make a declaration of unacceptable conduct, coupled with what is described as the inability of the applicants and other parties to adduce material in rebuttal or impeach evidence given, will prejudice them in any subsequently ordered rehearing of the matter. 38 The applicants say that the denial of an opportunity to present their best case, by being obliged to present what they describe as an impaired case, is not remedied by the prospect of being entitled later to present that best case. 39 The test which I propose to apply as to whether a stay of the Panel's proceedings should be granted will be a combination of the guidelines applied when a Court considers whether to grant an interlocutory injunction and also what is fair and just as between the parties and in the public interest, being the public interest reflected in Part 6.9 of the Corporations Law. 40 I think that there is a serious question to be tried as to whether the decisions and conduct of the Panel which are under challenge involve or may involve a denial of procedural fairness. There are arguments about whether reviewable decisions or conduct are involved. There are questions about the extent or content of the obligation of the Panel to extend procedural fairness in the circumstances of this particular matter. There is no Australian authority directly in point or at least none has been cited to me. 41 I find it extremely difficult to make a sensible assessment of the strength or otherwise of the applicants' cases. The statutory provisions to which I have referred indicate that the applicants are entitled to a degree of procedural fairness. The question is whether the content of that requirement extends in the manner claimed by the applicants. I take into account the various qualifications in the ASIC Act itself and in the regulations on the content of procedural fairness. I also take into account Parliament's clear intention that the Panel should proceed expeditiously in its inquiry. While I find that there is a serious question to be tried, my assessment is that the applicants' case is somewhere near the borderline. Furthermore I take into account that the Panel has not concluded its proceedings. It may very well be that matters will be conducted before the Panel in a manner more favourable to the applicants than they apprehend at present. Exhibit R1 certainly is a most optimistic indicator in that regard. To the extent that what may transpire at the conference will not be prejudicial to the applicants, or will not be prejudicial to the applicants to the extent that they apprehend, there is an element of the hypothetical about this application for urgent relief. I take that factor into account. 42 I note that the Panel is receiving legal advice on a continuing basis. It has retained one of the leading firms of solicitors in Perth who, in turn, have briefed senior counsel with extensive experience in administrative law, together with junior counsel. On an interlocutory application such as this I feel that I am entitled to take that into account and I do so. Exhibit R1 looks very much as though it is the product of well-informed legal advice. I infer that more advice will be forthcoming as and when required. However, I also take into account the possibility that the advice which is given to the Panel may at a subsequent hearing differ from what a court may hold to be the relevant level of the content of procedural fairness. 43 The authorities in relation to interlocutory injunctions show that the two aspects of a serious question to be tried and the balance of convenience or, as it is sometimes described, the relative risk of doing an injustice to either party are not to be considered in compartments. A strong case may tilt the balance in favour of an applicant for urgent interlocutory relief even though the balance of convenience tilts against the applicant. In that light I turn to the question of the balance of convenience. 44 Insofar as CP Ventures' chosen counsel is unavailable, I understand that it has now retained alternative counsel. Insofar as Mr Alan Newman is unavailable, there is little evidence on the point, save that he is overseas. The Panel made it known nearly a month ago that it would conduct an inquiry. The time limits to which I have referred must have made it apparent that the inquiry would be held within a matter of a few weeks. In any event, I was told that Mr Newman will appear by telephone. Mr Bennett, counsel for CP Ventures, complained that this was unsatisfactory where credit is concerned. However, there was no evidence of the unavailability of any video link. I do not place any weight on these factors when assessing the stay applications. 45 The applicants point to financial prejudice and the risk of damage to their reputations in the commercial world if the Panel makes a declaration of unacceptable conduct, even if they are successful eventually in having such a declaration set aside. I accept that there are such risks in relation to the applicants, but I do not give those factors quite the weight which the applicants urged upon me. There is no suggestion of illegal conduct. The applicants are to be taken to be aware of the provisions relating to conduct which may subsequently be found not to be illegal but unacceptable in terms of the Corporations Law. In that knowledge CP Ventures chose to buy shares in Wesfi on the market and sell them into the takeover offer. 46 I take into account the public interest in the expeditious hearing of an inquiry and the fact that if matters transpire as the applicants' fear, they will have another remedy. That remedy will be to apply for review of any declaration made by the Panel. All in all, I consider that the balance of convenience is against the granting of a stay to the extent that it outweighs as a relevant factor the fact that there is a serious question to be tried. Furthermore, to the extent that the matter of public interest may not properly form part of the balance of convenience, ie, if I am wrong in thinking that it does, I consider that it is a factor relevant to the exercise of my discretion not to grant interlocutory relief and I place weight on that factor in deciding not to grant such relief, that is, I have regard to the public interest, reflected in s 731 of the Corporations Law, of the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market. 47 I take into account the public interest in matters which are referred to the Panel in the course of a takeover bid being dealt with as speedily as is consistent with the degree of procedural fairness which Parliament has prescribed. It is not in the public interest, in my opinion, to have the Panel's proceedings fragmented unduly by court proceedings. It is to be noted that between them the applicants have been involved in two actions in the Supreme Court of Western Australia, one of which was not of their making, one application in the Administrative Appeals Tribunal and four applications in this Court, all bar one concerned with staying the Panel's work. 48 I do not consider that the applicants have made out their case for a stay. The Panel should be allowed to get on with its work. If in doing so it falls into reviewable error, the applicants will have adequate protection by further recourse to this Court. For those reasons the applications for interlocutory relief are dismissed. I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Justice Carr Associate: Date: Counsel for the applicant in W94 of 1999: Mr M L Bennett Solicitors for the applicant in W94 of 1999: Messrs Bennett & Co Counsel for the first and second applicants in W96 of 1999 Mr P D Evans Solicitors for the first and second applicants in W96 of 1999 Messrs Freehill Hollingdale & Page Counsel for the respondents in W94 and W96 of 1999: Mr R L Le Miere QC Solicitors for the Respondents: Messrs Blake Dawson Waldron Date of Hearing: 13 September 1999 Date of Judgment: 13 September 1999