Takeover tactics taken out of court

Takeovers are so much easier to pursue under the Corporations Law as the courts no longer have a role.

When the Takeover Code of the Corporations Law was amended in 2000 by, among other things, creating a revamped Takeover Panel (the Corporations and Securities Panel), the legislation made it clear that courts were no longer to adjudicate on takeover disputes. This decision by the Federal Government to take away the jurisdiction of the courts in takeovers was based on a perception that takeover cases are often brought simply to stall or delay takeovers. Correct or not, the Government's intention has once again been recognised by the courts. Hill J in St Barbara Mines Ltd v Australian Securities and Investments Commission & Anor ((2001) 37 ACSR 92) made this clear. This case concerned not so much a dispute between parties – that is the offeror and the offeree – but rather issues as to whether ASIC could be ordered to provide certain relief to the parties from the operation of the Law. The facts of the case are very simple. But the result is very clear – the Takeover Panel has supremacy in this area. ASIC had refused to accept for registration certain documents which St Barbara Mines Ltd had lodged in relation to its proposed takeover of Taipan Resources NL. ASIC took a different view to the company on the question of whether ordinary and partly paid shares comprised the same class. ASIC took the view that they did constitute the same class. St Barbara took the view that they were not. ASIC's decision meant that the takeover would be more costly. To overcome this difficulty St Barbara asked ASIC to modify the Corporations Law so that St Barbara's view would prevail. St Barbara did not wish to make the same offer to both the ordinary and the partly paid shareholders. ASIC refused to accept the documents and had refused to modify the Corporations Law.

Frustrated by this St Barbara brought proceedings under the Commonwealth Administrative Decisions (Judicial Review) Act in the Federal Court in Western Australia to review the decision of ASIC. Hill J who heard the case noted that he did not have jurisdiction. He held that by virtue of section 656A(1) of the Corporations Law jurisdiction was given to the Takeover Panel to review any decision of ASIC made under the Corporations Law to modify the law. The language that Hill J relied on were words in the section which indicated that any review of ASIC's decision "in relation to a takeover bid" was restricted to the Panel. St Barbara submitted that the present proceedings should not be seen as proceedings in relation to the takeover bid but rather "proceedings relating to the act of non-acceptance of bid documents by [ASIC]". Hill J held that this was too narrow a view of the legislation. In concluding, he noted that the legislation had a very clear policy. It was that "the Panel takes the place of the courts as the principal forum for resolving takeover disputes until the bid period has ended." Therefore the application of St Barbara was dismissed. Of course, if the Panel felt that this was an issue or a question of law that should be decided by the court, it could refer the matter to the court and the court would then be in a position to adjudicate on that issue. But, this was a matter for the Panel and not for the court.

For the time being, until the High Court has an opportunity to rule on this issue, it would appear that the courts will play a very limited role indeed in takeover battles.

Disclaimer

The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.