FEDERAL COURT OF AUSTRALIA

Eastern Field Developments Limited v Takeovers Panel [2019] FCA 311

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the costs of the respondents, to be assessed if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

TABLE OF CONTENTS

MCKERRACHER J:

INTRODUCTION

1    Eastern Field Developments Limited challenges a decision of the Takeovers Panel, specifically, a Review Panel (Finders Resources Limited 03R [2018] ATP 11 (the Review TP Decision)). Eastern Field has been the bidder in an off-market takeover offer for shares in Finders Resources Limited ACN 108 547 413. Eastern Field contends that it acted upon statements made by Taurus Funds Management Pty Limited ACN 121 452 560. Taurus held approximately 11% of the shares on issue in Finders. Taurus made statements that it would not accept the bid made by Eastern Field. The statements made by Taurus were publicly released by Finders. Taurus and two independent directors of Finders subsequently, however, did accept Eastern Field’s bid.

2    The Australian Securities and Investments Commission (ASIC) sought and obtained from an Initial Panel (Finders Resources Limited 02 [2018] ATP 9 (the Initial TP Decision)) a Declaration of Unacceptable Circumstances and relief by which the acceptance by Taurus of the takeover bid was cancelled. Taurus then sought review by the Review Panel, which affirmed the Declaration of Unacceptable Circumstances but made Substitute Orders.

3    The Substitute Orders of the Review Panel do not include any permanent cancellation of Taurus’ acceptance. The orders of the Review Panel provide for a deferral of Eastern Field’s payment obligations in relation to the acceptance by Taurus. Those orders, Eastern Field said in passing, effectively grant Taurus an indefinite put option which Eastern Field contends would be a prohibited collateral benefit under s 623 of the Corporations Act 2001 (Cth). The submission was not developed. The Review Panel reached its decision on a majority basis. The majority, according to Eastern Field:

(a)    did not consider and discharge their statutory task when it came to awarding the relevant relief;

(b)    failed to properly consider the prejudice to Eastern Field and the takeover process itself; and

(c)    imposed, without warrant, an evidential burden on Eastern Field, contrary to the established flexible practice of the Takeovers Panel generally.

ISSUES

4    The grounds for review, and their particulars, essentially raise four questions for determination:

(1)    Did the Review Panel correctly address the relevant requirements of s 657D(2) of the Corporations Act so as to award relief appropriate to protect Eastern Field’s rights and to ensure that the takeover bid proceeded in a way that it would have, absent the unacceptable circumstances?

(2)    Was the Review Panel’s decision not to cancel Taurus’ acceptance so unreasonable that no reasonable Takeovers Panel could have made it?

(3)    Did the Review Panel fail to take into account a relevant consideration, being the prejudice visited upon Eastern Field, by reason of an erroneous approach to the evidence required to show Eastern Field’s reliance, and a consequent erroneous finding that there was no reliance?

(4)    Was the Review Panel’s conclusion, that Eastern Field was not unfairly prejudiced by the orders, without basis or unreasonable?

THE NATURE OF REVIEW

5    The decisions of the Takeovers Panel are administrative in nature. As such, they are subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act). Section 5 of the ADJR Act stipulates the grounds of review which are, in essence, a reflection in summary form of the grounds on which administrative decisions are susceptible to challenge at common law: see the explanation from Mason J (as the Chief Justice then was) in Kioa v West (1985) 159 CLR 550 (at 576). It is fundamental to such challenges that they are not simply rehearings on their merits. Rather, they must be based on one or more of the grounds in s 5 of the ADJR Act, namely the following:

5    Applications for review of decisions

(1)    A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Circuit Court for an order of review in respect of the decision on any one or more of the following grounds:

(a)    that a breach of the rules of natural justice occurred in connection with the making of the decision;

(b)    that procedures that were required by law to be observed in connection with the making of the decision were not observed;

(c)    that the person who purported to make the decision did not have jurisdiction to make the decision;

(d)    that the decision was not authorized by the enactment in pursuance of which it was purported to be made;

(e)    that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;

(f)    that the decision involved an error of law, whether or not the error appears on the record of the decision;

(g)    that the decision was induced or affected by fraud;

(h)    that there was no evidence or other material to justify the making of the decision;

(j)    that the decision was otherwise contrary to law.

(2)    The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:

(a)    taking an irrelevant consideration into account in the exercise of a power;

(b)    failing to take a relevant consideration into account in the exercise of a power;

(c)    an exercise of a power for a purpose other than a purpose for which the power is conferred;

(d)    an exercise of a discretionary power in bad faith;

(e)    an exercise of a personal discretionary power at the direction or behest of another person;

(f)    an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;

(g)    an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;

(h)    an exercise of a power in such a way that the result of the exercise of the power is uncertain; and

(j)    any other exercise of a power in a way that constitutes abuse of the power.

(3)    The ground specified in paragraph (1)(h) shall not be taken to be made out unless:

(a)    the person who made the decision was required by law to reach that decision only if a particular matter was established, and there was no evidence or other material (including facts of which he or she was entitled to take notice) from which he or she could reasonably be satisfied that the matter was established; or

(b)    the person who made the decision based the decision on the existence of a particular fact, and that fact did not exist.

6    A relevant consideration for an administrative decision-maker is a consideration which the decision-maker is bound to take into account in the course of reaching the decision under review: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 (at 39). To determine what factors a decision-maker is bound to consider, it is necessary to construe the relevant statute in which the discretionary power is conferred: Peko-Wallsend (at 39). If the discretion is unconfined by the statute, the factors which may be taken into account are similarly unconfined, except insofar as such factors may be held to be implied having regard to the subject matter, scope and purpose of the statute: Peko-Wallsend (at 39-40).

Legal unreasonableness

7    In relation to unreasonableness, it is well established that the formation of a requisite state of satisfaction or opinion cannot be arbitrary, capricious or irrational. Ordinarily, an unreasonable view is one that no reasonable decision-maker could have formed. This is mirrored in the language of s 5(2)(g) of the ADJR Act, set out above.

8    In Minister for Immigration and Citizenship v Li (2013) 249 CLR 332, it was reiterated that the standard of reasonableness is not limited to a decision that is so unreasonable that no reasonable person could have made it. Rather, a decision might be unreasonable if it is outside the parameters of reasonable decision-making raised by the statute or which lacks an evident and intelligible justification: see Li per Hayne, Kiefel and Bell JJ (at [67] and [76]).

9    It is well established that a reviewing court should not examine the reasons of a decision-maker with an eye keenly attuned to finding error. The competing weight to be given to different considerations is ordinarily a matter for the decision-maker. A court would generally not conclude what weight should be given to one matter at the potential expense of another.

10    In relation to legal unreasonableness, I accept the submissions for Taurus that:

(a)    a court’s task in determining whether a decision is vitiated for legal unreasonableness is strictly supervisory and courts should not be involved in merits review nor act in accordance with their own views of reasonableness: see Li per Hayne, Kiefel and Bell JJ (at [66]) and Minister for Immigration and Border Protection v Stretton (2016) 237 FCR 1 per Allsop CJ (at [8] and [12]);

(b)    it is critical that courts not exceed their supervisory role by undertaking a review of the merits of an exercise of discretionary power: Li per Hayne, Kiefel and Bell JJ (at [66]) and Stretton per Griffiths J (at [56]);

(c)    properly applied, the standard of legal reasonableness does not involve substituting a court’s view as to how a discretion should be exercised for that of a decision-maker: Li per Hayne, Kiefel and Bell JJ (at [66]) and Stretton per Allsop CJ (at [21]). The task for a court is not to assess what it thinks is reasonable and thereby conclude that any other view displays error: Stretton per Allsop CJ (at [12] and [21]);

(d)    there is an area of ‘decisional freedom’ within which a decision-maker has a genuinely free discretion: Li per Hayne, Kiefel and Bell JJ (at  [66]) and Gageler J (at [105]) and Stretton (at [7]-[11]);

(e)    it is necessary to construe the relevant statute because the question to which the standard of reasonableness is addressed is whether the statutory power has been abused: Li per Hayne, Kiefel and Bell JJ (at [67]);

(f)    it is harder to be satisfied that an administrative body has acted unreasonably when the administrative discretion is wide in scope, or is affected by policies of which courts have no experience: In the Marriage of Norbis (1986) 161 CLR 513 per Brennan J (at 541) and Li per Gageler J (at [111]);

(g)    where reasons for the decision are available, and the reasons provide an evident and intelligible justification for the decision, it is unlikely that the decision could be considered to be legally unreasonable: Li per Hayne, Kiefel and Bell JJ (at [76]) and Stretton per Allsop CJ (at [13]) and Griffiths J (at [61]);

(h)    the evaluation of whether a decision is legally unreasonable should not be approached by way of the application of particular definitions, fixed formulae, categorisations or verbal descriptions. The concept of legal unreasonableness is not amenable to rigidly defined categorisation or precise textural formulary: Stretton per Allsop CJ (at [2] and [10]) and Griffiths J (at [62]); and

(i)    in the end, the task is to ascertain whether the decision cannot be said to be within the range of possible lawful outcomes as an exercise of the statutory power: Stretton per Allsop J (at [11]).

11    In considering this application for judicial review, regard is had to the experience of the Takeovers Panel members in evaluating the takeovers process. The legislature in this instance has conferred on the Takeovers Panel specialist expertise with particularly wide discretion to decide whether unacceptable circumstances exist and what relief to award, if any. The orders made by the Initial Panel were unanimous (each of the three member panel agreeing). The Review TP Decision was by majority 2:1. So while deference to the expertise is always appropriate, the closeness of the outcome indicates that highly experienced minds may also reasonably differ.

12    Importantly, Takeover Panel decisions are made without laws of evidence necessarily applying and in abbreviated timeframes. Any assessment of the reasonableness of a Takeovers Panel decision needs to be considered in this context.

13    In relation to s 5(1)(h) of the ADJR Act, as will be apparent from the examination of s 5 as a whole, subs (h) is affected by s 5(3), which provides that subs (h) shall not be taken to be made out unless, relevantly, there is no evidence from which a decision-maker could reasonably be satisfied that a matter required by law to be established is established or where the decision-maker bases his or her decision upon a particular fact and that fact does not exist, that is, there is no evidence of this fact. A decision-maker can, in the absence of some statutory constraint, act on material that would not be evidence in accordance with the usual rules. Subsection (h) is consistent with this prospect.

BACKGROUND FACTS AND CHRONOLOGY

14    Eastern Field is incorporated in the British Virgin Islands with a Singapore registered address. The shares in Eastern Field are held by a consortium of three members.

15    Eastern Field is the bidder under an off-market takeover offer for shares in Finders.

16    Finders is an Australian Stock Exchange (ASX) listed company (ASX: FND) which operates the Wetar Copper Project located on Wetar Island in the province of Maluku, Indonesia.

17    The offer under Eastern Field’s bid was made pursuant to a replacement bidder’s statement dated 17 November 2017, which was lodged with ASIC on the same date. The replacement bidder’s statement set out the terms of Eastern Field’s off-market takeover Offer for all of the ordinary shares in Finders at a price of $0.23 per share (the Takeover Bid).

18    On 5 December 2017, Finders lodged a target’s statement with ASIC in respect of the Takeover Bid stating that the independent directors of Finders recommended that shareholders reject the Takeover Bid.

19    On 7 December 2017, Finders published an ASX announcement in relation to the Takeover Bid, including the following statement (the Taurus Intention Statement):

Taurus Funds Management Pty Ltd (“Taurus”) currently manages 87,339,525 Finders shares, being equal to 11.31% of the Finders shares currently on issue, making it the second largest Finders shareholder after the bidder consortium that owns Eastern Field.

Taurus has notified Finders that it does not intend to accept the Offer at the Offer Price of $0.23 per Finders share in respect of the Finders shares that Taurus manages, on the basis that Taurus considers that the Offer Prices does not reflect the fair value of Finders shares.

20    On 12, 13 and 15 December 2017, Finders published further ASX announcements in which statements were made repeating that Finders had received notification from Taurus that Taurus did not intend to accept the Takeover Bid. These ASX announcements referred to notifications from further shareholders in Finders that they did not intend to accept the Takeover Bid either.

21    Following publication of Taurus’ Statements (including the first of them on 7 December 2017), Eastern Field says it took the following steps in reliance on the fact that Taurus (and others) would not accept the Takeover Bid:

(a)    on 12 December 2017, Eastern Field waived its 50% minimum acceptance condition in respect of the Takeover Bid;

(b)    on 13 December 2017, Eastern Field extended the offer period for the Takeover Bid to 19 January 2018;

(c)    on 10 January 2018, Eastern Field further extended the offer period for the Takeover Bid to 28 February 2018;

(d)    on or about 14 February 2018, Eastern Field declared the Takeover Bid wholly unconditional;

(e)    in late-February 2018, Eastern Field altered its financing arrangements by obtaining a $50 million bank facility from Standard Chartered Bank;

(f)    on 1 March 2018, by an earlier application to the Takeovers Panel by Eastern Field concerning disclosures in Finders’ target’s statement, Eastern Field sought orders, relevantly, releasing Taurus and other persons who had given non-acceptance statements from such statements, though the Takeovers Panel declined to conduct proceeding on this application (Finders Resources Limited [2018] ATP 6);

(g)    on 8 March 2018, Eastern Field further extended the offer period for the Takeover Bid to 23 March 2018;

(h)    on or about 12 March 2018, Eastern Field made a ‘no increase’ statement, stating that it would not increase the $0.23 per share consideration under the Takeover Bid; and

(i)    on 15 March 2018, Eastern Field further extended the offer period for the Takeover Bid to 30 March 2018.

Taurus strenuously objects to the contention that there was ever any such reliance or any proven reliance. This is a central issue in the dispute.

22    On 19 March 2018, Taurus accepted the Takeover Bid at the offer price of $0.23 per share.

23    Also on 19 March 2018:

(a)    Finders published an ASX announcement in which it stated that the Independent Directors now recommended shareholders consider accepting the Takeover Bid; and

(b)    Eastern Field announced that it had acquired voting power in Finders of 60.22% (this included the shares the subject of Taurus’ acceptance).

24    On 21 March 2018, Eastern Field released a second supplementary bidder’s statement in which it stated (amongst other things) that:

(a)    the effect of Taurus’ Statements might be that Taurus was prevented from accepting the Takeover Bid at all, for the reasons set out in ASIC Regulatory Guide 25 ‘Takeovers: false and misleading statements’ (RG 25) (discussed below in these reasons);

(b)    Eastern Field had raised the matter of Taurus’ purported acceptance of the Takeover Bid with ASIC; and

(c)    Eastern Field might be required to adjust the aggregate relevant interest it had disclosed on 19 March 2018 (60.22%) to exclude the shares the subject of Taurus’ purported acceptance (and possibly other shares) ‘once the validity of the Taurus acceptance has been resolved’.

25    On 28 March 2018, ASIC lodged an application with the Takeovers Panel under s 657C(2) of the Corporations Act in relation to the affairs of Finders. By its application, ASIC sought a Declaration of Unacceptable Circumstances pursuant to s 657A(1) of the Corporations Act in respect of the departure by Taurus, on or about 19 March 2018, from Taurus’ Statements.

26    On or about 29 March 2018, the Takeovers Panel’s President appointed the three-member Initial Panel to determine ASIC’s application for a Declaration of Unacceptable Circumstances.

27    On 3 April 2018, the Takeovers Panel notified the parties that it had decided to conduct proceedings in relation to ASIC’s application.

28    On 26 April 2018, the Initial Panel made the Declaration of Unacceptable Circumstances in relation to the affairs of Finders. The Initial Panel made orders cancelling Taurus’ acceptance of the Takeover Bid. In short, Eastern Field was required not to take any action to process acceptance of the Takeover Bid in relation to shares managed by Taurus.

29    On 9 May 2018, the Initial Panel published its reasons for decision: the Initial TP Decision. Amongst other things, the Initial Panel said (at [32] and [35]-[36]):

32.    We consider, drawing on our experience, that the market would have expected Taurus, as a manager of 11.31% shares who could block compulsory acquisition, to be bound by its statement and departure from that statement resulted in the acquisition of control over Finders shares not taking place in an efficient, competitive and informed market.

…

35.    Eastern Field submitted that Taurus had ample opportunity to qualify its statement as contemplated by RG 25 and the fact that the Takeover Bid did not play out the way Taurus anticipated did not give it free reign to ignore its intention statement. ASIC made a similar submission.

36.    We consider that the matters referred to above were matters which could be foreseen by market participants and do not provide justification for Taurus departing from its statement. If Taurus had wanted the flexibility to change its intention statement in any of these circumstances, it should have qualified its statement accordingly.

(Citations omitted.)

30    Specifically in relation to its order cancelling Taurus’ acceptance of the Takeover Bid, the Initial Panel said (at [67]):

We consider that while an order cancelling Taurus’s acceptance prejudices Taurus, such prejudice is not unfair when that prejudice is considered with the detriment to Eastern Field and the market if such an order is not made. Taurus had a holding in Finders that could block compulsory acquisition. We consider, drawing on our experience, that this would have a greater market impact than intention statements made by other shareholders which are not covered by RG 25. Taurus in making an intention statement should have known that there was a risk that it would be held to that statement.

31    On 30 April 2018 (prior to the Initial TP Decision being published), Taurus applied for internal review by the Takeovers Panel of the Initial Panel’s Declaration of Unacceptable Circumstances and orders pursuant to s 657EA(1)(a) of the Corporations Act. The Initial Panel’s orders were subsequently stayed on the same day.

32    On 3 May 2018, the Takeovers Panel’s President appointed the three-member Review Panel to determine Taurus’ review application.

33    On 6 June 2018, the Review Panel affirmed the Initial Panel’s Declaration of Unacceptable Circumstances, but – by a 2:1 majority – set aside the Initial Panel’s orders and made the Substitute Orders.

34    The majority of the Review Panel comprised Messrs Jackman SC and Williamson. The sitting President, Mr Malek, dissented, holding that the Initial Panel’s orders should be maintained.

35    Under the Substitute Orders, Eastern Field was effectively obliged to acquire all of the shares in Finders managed by Taurus and this obligation was merely deferred. Taurus was separately required to compensate a class of Finders shareholders who the Review Panel considered were (or might have been) affected by the unacceptable circumstances.

36    On 27 June 2018, the Review Panel published the Review TP Decision, comprising both majority reasons (from Messrs Jackman SC and Williamson) and separate minority reasons (from Mr Malek).

37    The majority of the Review Panel considered that, despite the Declaration of Unacceptable Circumstances being upheld, the appropriate orders did not mandate a permanent cancellation of Taurus’ acceptance. In dissent, Mr Malek considered an order cancelling Taurus’ acceptance to be appropriate in order to protect the rights and interests of persons affected by the unacceptable circumstances and ensure that the Takeover Bid proceeded as it would have if the circumstances had not occurred.

38    On 13 July 2018, ASIC issued an instrument under s 655A(1)(b) of the Corporations Act declaring that Ch 6 of the Corporations Act applied to Eastern Field as if subsection 659B(1) were omitted. This instrument allowed Eastern Field to bring the application for judicial review in this Court under the ADJR Act even though the Takeover Bid remained open.

39    On 18 July 2018, this Court made orders suspending or staying the operation of the orders of both the Initial Panel and the Review Panel pending further order of the Court. Orders were also made staying any proceedings brought for the enforcement of the Substitute Orders. These suspensions or stays were put in place to preserve the status quo pending the final determination of these proceedings.

Taurus’ factual contentions

40    Taurus contends, in addition to the background detailed above, that the following factual issues are also pertinent:

(1)    The circumstances in which the Taurus Intention Statement was made and the circumstances in which the qualification of the statement was omitted.

(2)    Details of the manner in which intention statements were obtained from other Finders shareholders and aggregated with subsequent Taurus’ Statements.

(3)    Details of the application made by Eastern Field to the Takeovers Panel for an order releasing shareholders (including Taurus) from any intention statements.

(4)    Details of the manner in which Eastern Field encouraged Finders shareholders to accept the Takeover Bid, notwithstanding that those shareholders had made statements that they did not intend to accept.

(5)    The circumstances in which Taurus accepted the Takeover Bid.

(6)    The range and multi-faceted nature of the circumstances:

(a)    which formed the subject of ASIC’s application for the Declaration of Unacceptable Circumstances;

(b)    which were found to exist by the Initial Panel in the Declaration of Unacceptable Circumstances; and

(c)    which the Review Panel confirmed by agreeing with the Declaration of Unacceptable Circumstances made by the Initial Panel.

(7)    The bases on which the Review Panel decided to make the Substitute Orders, including:

(a)    that it did not consider it appropriate to make an order which addressed the effects of only one of a complex and interrelated set of unacceptable circumstances; and

(b)    that it was not satisfied that Eastern Field relied on Taurus’ Statements to any significant extent in declaring the Takeover Bid unconditional and declaring its offer price final.

41    I turn to each fact in turn.

Circumstances surrounding the Taurus Intention Statement

42    As to the circumstances in which the Taurus Intention Statement was made, Taurus stresses the Independent Directors of Finders, for the purposes of the target statement lodged on 5 December 2017, were Mr Gary Comb, Mr Barry Cahill and Mr Gordon Galt. There was an additional director at that date, a Mr Gavin Caudle, who was not considered an ‘Independent Director’ due to certain shareholdings. The target statement confirmed that Mr Comb and Mr Cahill, the two Independent Directors who owned or controlled Finders shares, intended to reject the Offer. Mr Galt did not own any Finders shares. Rather, Mr Galt is a director of Finders and a principal of Taurus. Taurus is a manager of two vehicles which together, as noted above, held a substantial holding of approximately 11.31% in Finders as at December 2017, comprising 87,339,525 shares (Taurus Shares).

43    As to the events of 6 December 2017, Taurus notes:

(1)    At 10.05 am (AWST) on 6 December 2017, Mr Comb sent an email to Mr Galt, attaching the following documents:

(a)    a draft letter from Taurus to Finders, which stated that:

(i)    Taurus consented to Finders releasing an ASX announcement containing a statement that Taurus ‘does not intend to accept the Offer at the Offer Price of $0.23 cash per Finders share in respect of the shares that Taurus currently owns or controls’ (the Taurus Intention Statement); and

(ii)    Taurus confirmed that it would ‘notify Finders as soon as reasonably practicable if Taurus’ intentions with respect to accepting the Offer change’ (the Taurus Qualification Statement); and

(b)    a draft ASX announcement, which included the Taurus Intention Statement but not the Taurus Qualification Statement.

The covering email from Mr Comb to Mr Galt did not note or explain why the draft ASX announcement did not include the Taurus Qualification Statement. Both of the above draft documents had been provided to Mr Comb in an email dated 5 December 2017 from Ashurst (Finders’ solicitors). Mr Galt was not informed that ASIC RG 25 may apply to the Taurus Intention Statement. Taurus did not take legal advice on the draft documents.

(2)    At 2.42 pm (AWST) on 6 December 2017, Mr Galt sent an email to Mr Comb attaching a signed version of the letter from Taurus to Finders. The email asked for an amendment to be made to the draft ASX announcement to reflect the fact that Taurus managed (rather than owned or controlled) the Finders shares held. The email did not comment on the omission of the Taurus Qualification Statement from the draft ASX Announcement.

(3)    At 7.39 pm (AWST) on 6 December 2017, Finders’ solicitors sent an email to Messrs Comb, Galt and Cahill attaching an updated draft of the ASX announcement, amended to reflect the change requested by Mr Galt. Again, the email did not note or explain why the draft ASX announcement did not include the Taurus Qualification Statement.

(4)    At 8.27 pm (AWST) on 6 December 2017, Mr Galt sent an email in reply to Finders’ solicitors confirming that the ASX announcement was ‘Ok from me’.

44    On 7 December 2017, Finders released the ASX announcement, which included the Taurus Intention Statement but not the Taurus Qualification Statement.

Intention statements obtained from other Finders shareholders

45    As to the circumstances in which the intention statements by other Finders shareholders were made, Taurus stresses that between 11 and 13 December 2017, Mr Tim Lyons and other representatives of the company Finders engaged to provide marketing support services, Euroz Securities Limited, obtained statements from various Finders shareholders (the Rejecting Shareholders) that they did not intend to accept the Offer (the Rejecting Shareholders Intention Statements). The Rejecting Shareholders Intention Statements did not include any qualifications and the Rejecting Shareholders were not informed that RG 25 may apply to the Rejecting Shareholder Intention Statements.

46    Between 12 and 15 December 2017, Finders made the following ASX announcements:

(1)    an announcement, dated 12 December 2017, that stated shareholders representing 33.19% of Finders shares in aggregate had notified Finders that they did not intend to accept the Offer;

(2)    an announcement, dated 13 December 2017, that stated shareholders representing 37.58% of Finders shares in aggregate had notified Finders that they did not intend to accept the Offer; and

(3)    an announcement, dated 15 December 2017, that stated shareholders representing 38.21% of Finders shares in aggregate had notified Finders that they did not intend to accept the Offer.

47    The Finders shareholdings owned by Messrs Comb and Cahill and the Taurus Shares were included in the aggregated percentage figure referred to in each of the three announcements.

Eastern Field’s application

48    As to the application made by Eastern Field to the Takeovers Panel on 1 March 2018 seeking a Declaration of Unacceptable Circumstances in relation to Finders’ affairs (the First Panel Application), Taurus notes the First Panel Application asserted that:

(a)    Finders’ failure to provide up to date and relevant information to the market; and

(b)    the Independent Expert Report having been prepared on the basis of unrealistic, untested (and therefore misleading) and outdated inputs and assumptions,

meant that:

(c)    the unconditional takeover Offer for Finders was not able to occur in an efficient, competitive and informed market; and

(d)    Finders shareholders had not been given enough information to enable them to assess the merits of the Offer.

49    The First Panel Application made by Eastern Field sought orders, inter alia, that:

(a)    Finders promptly lodge a supplementary target statement containing certain proscribed information; and

(b)    that persons who had given non-acceptance statements in relation to the Offer be released from any statements given prior to the date of such supplementary target’s statement.

50    On 12 March 2018, the Takeovers Panel declined to conduct proceedings in respect of the First Panel Application: Finders Resources Limited [2018] ATP 6.

Eastern Field’s targeting of the Rejecting Shareholders

51    Taurus says that Eastern Field took various steps to encourage or persuade the Rejecting Shareholders to accept the Takeover Bid, for example:

(1)    On 8 February 2018, Iffla Wade (a legal advisor of Eastern Field) sent an email to Mr David Fowler of Merdeka (one of the members of the Eastern Field consortium). The email:

(a)    was titled ‘Tim Lyons’ shareholders’;

(b)    attached a list containing a number of Rejecting Shareholders;

(c)    suggested that Mr Fowler ‘steer away from the Lyons Family’ and noted that the ‘addresses etc can be obtained from the shareholders register we previously circulated’;

(d)    was forwarded by Mr Fowler to Mr Greg Southee of Argonaut (Eastern Field’s financial adviser), with a request that Mr Southee discuss whether Argonaut’s brokers knew anyone on the list, as it ‘[w]ould be good if we could get a letter to them or arrange meetings to discuss’.

(2)    In a discussion between advisers and representatives of Eastern Field on the WhatsApp messaging service between 14 February 2018 and 15 March 2018, Mr Caudle of Provident (another member of the Eastern Field consortium) stated (on 9 March 2018) ‘[l]et’s try to focus the buying ideally on people who are on Tim [Lyons’s] 38% list’ (ie the Rejecting Shareholders).

(3)    On or about the period from 28 February to 11 March 2018, Mr Caudle sent ‘iMessages’ on Apple’s messaging service to Mr Robert Martin (one of the Rejecting Shareholders) trying to arrange a call and trying to ascertain his position in relation to the acceptance of the Takeover Bid. The final text message from Mr Caudle stated that ‘anyone can accept the offer. It’s unconditional. And they will be paid within 30 days of acceptance’.

(4)    On 13 March 2018, Mr Eddie Rigg of Argonaut sent an email to other representatives of Argonaut. The email:

(a)    stated that ‘Argonaut has funds to acquire 50m [Finders] shares on-market’;

(b)    contained a script for Argonaut dealers to use when speaking to Finders shareholders, which sought to persuade them to accept the Takeover Bid;

(c)    included a list of ‘Shareholders to Target’, which contained a number of Rejecting Shareholders, referred to as ‘Euroz bloc members’;

(d)    was forwarded to Messrs Fowler and Caudle, with a request to consider sending further funds to ensure that Argonaut was ‘ready to execute trades with sellers as they emerge’, in response to which Mr Fowler:

(i)    requested an ‘updated status after all calls today’; and

(ii)    asked ‘[a]re people who say they will accept the off market bid really going to accept? Until we get the acceptances can[’]t rely on it’.

52    The attempts referred to above to persuade Rejecting Shareholders to accept the Takeover Bid, Taurus contends, directly contradict the assertion by Eastern Field that it took various steps ‘in reliance on the fact that Taurus (and others) would not accept the Takeover Bid’. Indeed, Taurus suggests it is illogical for Eastern Field to suggest that it took any substantive steps to its detriment in reliance on the assumption that Taurus and the Rejecting Shareholders could not accept the Takeover Bid when it was actively taking steps to have them accept the Takeover Bid.

Taurus’ acceptance of the Takeover Bid

53    As to the circumstances in which Taurus accepted the Takeover Bid, Taurus says that on 14 March 2018, Mr Martin Boland, a director of Taurus, sent an email to other representatives of Taurus, which stated, inter alia, that:

(a)    there had been an ‘uptick’ in acceptances of the Offer, the majority of which had come from Mr Lyons on behalf of his clients (the Rejecting Shareholders, who, Taurus notes, had been deliberately targeted by Eastern Field);

(b)    the acceptances meant that Eastern Field’s voting power in Finders was around 42%;

(c)    Mr Boland had spoken to Mr Lyons over the previous week and Mr Lyons had confirmed that he had put ‘up the white flag’ and would be telling his clients to accept the Offer which would comfortably increase Eastern Field’s voting power in Finders to over 50%;

(d)    Mr Boland recommended that Taurus accept the Offer, noting that the Offer had been declared final and was ‘due to close the next Friday’ (23 March 2018); and

(e)    whilst this left ‘value on the table’, selling at $0.23 was considered a better outcome than remaining as a minority shareholder once Eastern Field had control of Finders.

54    On 19 March 2018, Taurus accepted the Offer in respect of the Taurus Shares.

Nature of the circumstances

55    In relation to the range and multi-faceted nature of the circumstances giving rise to the ‘unacceptable circumstances’, Taurus notes the application to the Panel by ASIC dated 28 March 2018, sought a Declaration of Unacceptable Circumstances under s 657A(1) of the Corporations Act in respect of the following circumstances:

(1)    ‘Truth in takeovers’: Departure by Taurus and the Independent Directors on or about 19-20 March 2018 from ‘last and final statements’ they made that they do not intend to accept the bid at the price offered.

(2)    Disclosure of intention statements: The disclosure between 12-15 December 2017 via ASX announcements of intention statements consented to by around 62 shareholders of Finders collectively holding just under 25% of the target which were aggregated with the statements referred to in (1) above without qualification or any indication as to whether those shareholders considered themselves bound by those statements in terms of the truth in takeovers policy.

56    It was on 26 April 2018 that the Initial Panel made the Declaration of Unacceptable Circumstances. The Initial Panel considered that the following circumstances, inter alia, were unacceptable:

(a)    The ‘Intention Statement Unacceptable Circumstances’ (as Taurus defines it) comprising of:

(i)    the Taurus Intention Statement and Finders’ omission of the Taurus Qualification Statement and Taurus’ failure in a short timeframe, to pick up the omission; and

(ii)    the subsequent acceptance of the Offer by Taurus; and

(b)    the ‘Aggregation Unacceptable Circumstances’(again, as Taurus defines it) comprising of Finders’ actions in providing the draft announcement to Taurus and authorising the solicitation of similar statements from other shareholders who were not informed that RG 25 may apply.

57    The Review Panel agreed with the Declaration of Unacceptable Circumstances made by the Initial Panel and did not make any changes to it.

58    It is clear from the Declaration of Unacceptable Circumstances that the departure by Taurus from the Taurus Intention Statement was not the only unacceptable circumstance:

(a)    the departure formed part (but not the entirety of) the Intention Statement Unacceptable Circumstance, which also included Finders’ failure to qualify the Taurus Intention Statement and Taurus’ failure, in a short timeframe, to pick up the omission; and

(b)    the departure was separate to the Aggregation Unacceptable Circumstance, in respect of which Finders was at fault.

59    In light of these observations as to the Declaration of Unacceptable Circumstances made by the Initial Panel and endorsed by the Review Panel, Taurus contends that Eastern Field’s submissions appear to be based on an inaccurate factual premise: that the departure by Taurus from the Taurus Intention Statement was the only (or only relevant) unacceptable circumstance.

Deficiencies in the orders of the Initial Panel

60    As to the failure of the Initial Panel orders to address the range of unacceptable circumstances, Taurus refers the Court to its application for review of the decision of the Initial Panel, where it was stated that:

(a)    the Initial Panel identified the Intention Statement Unacceptable Circumstances and the Aggregation Unacceptable Circumstance but the Initial Panel orders did not address the Aggregation Unacceptable Circumstance; and

(b)    the compensation orders proposed by Taurus to the Initial Panel, whereby shareholders who acquired Finders shares after the Taurus Intention Statement was released would be compensated, were the only orders that could be made that would fairly balance the prejudice between the parties.

61    On 8 May 2018, the Review Panel provided a Brief to the parties. The Brief requested that the parties address, inter alia, the following questions:

Are there unacceptable circumstances, not addressed by the [Initial Panel] Orders, which have affected rights or interests or the way in which the Takeover Bid has proceeded? If so, are there any additional or alternative orders that would better address the totality, or more, of the unacceptable circumstances?

62    In response to the Brief, Taurus refers the Court to the following submissions made by the parties:

(1)    Taurus submitted that there were unacceptable circumstances not addressed by the Initial Panel orders and highlighted the failure of the Initial Panel orders to address the Aggregation Unacceptable Circumstances. Taurus submitted that, unless the Review Panel held all the Rejecting Shareholders to the Rejecting Shareholder Intention Statements, the compensation remedy was the only order that would appropriately address the totality of the unacceptable circumstances.

(2)    Eastern Field submitted that the conduct of the Independent Directors went to the heart of the Aggregation Unacceptable Circumstances but was not addressed in the Initial Panel orders and that holding the Independent Directors to their intention statements (in addition to the Initial Panel orders) would address more of the unacceptable circumstances than the Initial Panel orders.

(3)    ASIC submitted that it had sought orders in the Initial Panel proceedings cancelling the acceptances of the Offer by the Independent Directors in order to address the Aggregation Unacceptable Circumstances and ASIC’s view was that these orders would address more of the unacceptable circumstances.

63    Taurus therefore contends that the parties recognised that the Initial Panel orders did not address all of the unacceptable circumstances identified by the Initial Panel, although they disagreed as to what the consequence of this should be.

64    The Substitute Orders made by the Review Panel would:

(a)    implement a deferred payment mechanism for the acquisition of Taurus’ Finders shares (Orders 1-6) (Deferred Payment Orders) in order to protect the interests of Eastern Field; and

(b)    require Taurus to compensate persons acquiring Finders shares above Eastern Field’s offer price (Orders 7-36) (Compensation Orders), in order to protect the interests of persons trading in Finders shares.

65    In making the Substitute Orders, Taurus notes that the Review Panel considered the submission by ASIC and Eastern Field that the cancellation order was the appropriate order to make under s 657D(2)(b) to ensure that the Takeover Bid proceeded (as far as possible) as it would have proceeded if the unacceptable circumstance had not occurred. The Review Panel considered that:

(a)    the submission treated Taurus’ conduct in resiling from Taurus’ Statements, as the only relevant unacceptable circumstance in determining how the Takeover Bid would have proceeded;

(b)    the Declaration of Unacceptable Circumstances by the Initial Panel identified a number of other unacceptable circumstances, including the Aggregation Unacceptable Circumstance;

(c)    there was room for reasonable minds to differ as to the significance of the various unacceptable circumstances;

(d)    it was possible, and perhaps even likely, that if the draft intention statements provided by Finders to Taurus and the Euroz clients had been appropriately qualified, they would have been free to accept as they had done;

(e)    how the Takeover Bid would have proceeded, if not for the unacceptable circumstances, depended on which of the circumstances in the Declaration of Unacceptable Circumstances were emphasised;

(f)    the unacceptable circumstances relating to the manner in which the intention statements were prepared and solicited could not be ignored in determining what was appropriate under s 657D(2);

(g)    it was not appropriate to make an order under s 657D(2)(b) that addressed the effects of only one of a complex and interrelated set of circumstances; and

(h)    if regard were had to all of the unacceptable circumstances, the Review Panel thought it as likely as not they made little difference to the ultimate outcome.

Eastern Field’s reliance on Taurus’ Statements

66    As to the Review Panel’s rejection of Eastern Field’s alleged reliance on Taurus’ Statements, Taurus says Eastern Field asserts that it took various steps to progress the Takeover Bid (as detailed in [21]), in reliance on the fact that Taurus (and the Rejecting Shareholders) would not and could not accept the Takeover Bid and Eastern Field could therefore not ever acquire a 90% (or greater) interest in Finders. Taurus says that it is important to distinguish this reliance (which Taurus refers to as ‘Alleged Bid Conduct Reliance’) from the reliance by Eastern Field in making its financing arrangements (which the Review Panel accepted).

67    Taurus contends Eastern Field frequently asserted its Alleged Bid Conduct Reliance to the Initial Panel and the Review Panel. However, it was clear from the following submissions that the Alleged Bid Conduct Reliance was disputed:

(1)    In its Rebuttal Submissions on Brief to the Initial Panel dated 6 April 2018, Finders refuted the Alleged Bid Conduct Reliance and submitted, inter alia, that:

… Eastern Field’s application to the Panel of 1 March 2018 (in the matter of [the Initial TP Decision]) suggests that Eastern Field did not, in fact, rely on [Taurus’ Statements] in making those decisions.

(Emphasis in the original.)

(2)    In its Rebuttal Submissions on Supplementary Brief to the Initial Panel dated 16 April 2018, Taurus also disputed the Alleged Bid Conduct Reliance and submitted that:

We consider that asserting this reliance is entirely inconsistent with the order Eastern Field sought in the Panel’s proceedings in [the Initial TP Decision]. We understand on 1 March 2018, Eastern Field sought orders from the Panel permitting all persons who gave Intention Statements (including Taurus) to be released from their statements. In our view, this means that as late as 1 March after the bid was declared unconditional, Eastern Field considered that it would be preferable to, and had the funding to, acquire Taurus’s stake ...

(3)    In its Submissions on Brief to the Review Panel dated 19 May 2018, Taurus attached (as Annexure C), the submissions referred to at subpara (2) above.

68    Taurus refers to the Review Panel’s statement, having considered the Alleged Bid Conduct Reliance, that:

… we are not satisfied on the material before us that Eastern Field relied on the Taurus’s intention statement to any significant extent in declaring the Takeover Bid unconditional on 14 February 2018 and declaring its offer price final on 12 March 2018…

69    The Review TP Decision provides a detailed explanation of why the Review Panel reached the conclusion that it was not satisfied that the Alleged Bid Conduct Reliance actually took place.

70    First, the Review Panel noted that it had not been provided with any contemporaneous evidence of Eastern Field’s alleged reliance. In circumstances where Eastern Field asserts that Taurus’ Statements were critical to its decision to declare the Takeover Bid unconditional and declare the offer price final (and given that this Alleged Bid Conduct Reliance was disputed), Taurus contends it is relevant that Eastern Field did not produce any documentation to demonstrate the alleged reliance, especially in the context of the countervailing materials. Significantly, it provided no material to show that, had Taurus’ Statements not been made, it would not have taken the steps that it took to progress the Takeover Bid.

71    Further, Taurus contends the contemporaneous documentation produced by Eastern Field to the Panel containing discussions regarding the Offer Price Notice contains no mention of Taurus’ Statements. By way of example, on 9 March 2018, Mr Rigg sent an email to representatives and advisers of Eastern Field, which stated, inter alia, that:

I believe that you should consider making the price final at the appropriate time. This will stop the instos from holding out for a price bump and we will have a clearer idea of when to close offer (i.e. no more extensions). On the last points I was at pains to indicate to our dealers that there is virtually no chance of a price bump but if necessary, EFD would keep the bid open until it gets its desired ownership level. I did indicate that we expect this soon and that instos should accept or be prepared to be stuck in a cray pot.

On the same day Mr Rigg sent a message via Whatsapp to representatives and advisers of Eastern Field, which stated, inter alia, that:

Agree, let’s announce 23 cents final. Once we see funds we will be able to buy. Have a seller now for 17m shares (Jetosea and associated parties) and hopefully Rob Martin will sell. Will push Cape Bouvard as well.

72    These communications above suggest, Taurus submits, that the decision to issue the notice declaring the offer price final was part of a co-ordinated strategy in which Eastern Field received advice from its financial adviser to exert maximum pressure on Finders shareholders, including Rejecting Shareholders, to accept the Offer. A decision which did not rely on Taurus’ Statements.

73    Secondly, and as noted by the Review Panel, when declaring the Offer unconditional on 14 February 2018, Eastern Field made no mention of relying on Taurus’ Statements, but did state:

Now that our offer is unconditional and we are Finders’ largest shareholder with a 25% stake, we urge Finders’ other shareholders to make the most of the certainty of our 23c per share cash offer, accept as soon as possible and receive cash within one month of their acceptances.

The Review Panel expected that, given Eastern Field only had a 25% stake at the time and was urging acceptance of a ‘nil-premium’ offer, ‘Eastern Field would have been reluctant to rule out Taurus accepting if that proved to be the only way to acquire effective control of Finders’.

74    Similarly, the Review Panel considered that on 12 March 2018 when Eastern Field had voting power of approximately 34.2% and declared its offer price final, it would be surprised if Eastern Field was sufficiently confident to rule out relying on Taurus’ acceptances to obtain control. This expectation was supported by the First Panel Application by Eastern Field.

75    Thirdly, the Review Panel considered, based on its experience, that Eastern Field should reasonably have expected that it would need to declare its offer unconditional in order to encourage acceptance. This proposition is supported by the fact that at the date of the notice of the Offer being unconditional, Eastern Field’s voting power in Finders was only 25%. It is also consistent with Eastern Field’s statement in the notice (extracted at [73]).

76    Fourthly, Eastern Field acted consistently with being open to Taurus accepting the Offer by making the First Panel Application. As noted, the application by Eastern Field sought an order, inter alia, that persons who had given non-acceptance statements in relation to the Offer be released from any such statements given prior to the date of such supplementary target’s statement. This order, if made, would have explicitly released Taurus from Taurus’ Statements.

77    Finally, Taurus notes, Eastern Field did not refer to its alleged reliance in its second supplementary bidder’s statement dated 21 March 2018. The Review Panel referred to that statement, which included the comment:

Eastern Field considers that the effect of Taurus’s statement (that it would not accept the offer at the Offer Price of $0.23) may be that Taurus is prevented from accepting the Offer for the reasons set out in ASIC’s Regulatory Guide 25 (Takeovers: false and misleading statements). Eastern Field has raised this matter with ASIC.

78    It is said to be clear from the use of the word ‘may’ in the comment above that Eastern Field was aware that Taurus may or may not be held to Taurus’ Statements. Such an awareness is consistent with the fact that in previous cases involving intention statements made by shareholders the Takeovers Panel did not make orders holding the shareholders to statements that they intended to reject the offer: see, for example, In the matter of Summit Resources Limited [2007] ATP 09. The Takeovers Panel’s Guidance Note: 4 ‘Remedies General’ cites Summit Resources when noting that ‘[t]he Panel may make a Declaration of Unacceptable Circumstances but no orders’.

THE RELEVANT STATUTORY PROVISIONS

79    Chapter 6 of the Corporations Act concerns the acquisition of control over the voting shares in a listed company. It provides, relevantly:

602    Purposes of Chapter

The purposes of this Chapter are to ensure that:

(a)    the acquisition of control over:

(i)    the voting shares in a listed company, or an unlisted company with more than 50 members; or

(ii)    the voting shares in a listed body (other than a notified foreign passport fund); or

(iii)    the voting interests in a listed registered scheme;

takes place in an efficient, competitive and informed market; and

(b)    the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme:

(i)    know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and

(ii)    have a reasonable time to consider the proposal; and

(iii)    are given enough information to enable them to assess the merits of the proposal; and

(c)    as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and

(d)    an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1.

Note 1:    To achieve the objectives referred to in paragraphs (a), (b) and (c), the prohibition in section 606 and the exceptions to it refer to interests in “voting shares”. To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in “securities”.

Note 2:    Subsection 92(3) defines securities for the purposes of this Chapter.

602A    Substantial interest concept

(1)    A reference in this Chapter to a substantial interest in a company, listed body (other than a notified foreign passport fund) or listed registered scheme is not to be read as being limited to an interest that is constituted by one or more of the following:

(a)    a relevant interest in securities in the company, body or scheme;

(b)    a legal or equitable interest in securities in the company, body or scheme;

(c)    a power or right in relation to:

(i)    the company, body or scheme; or

(ii)    securities in the company, body or scheme.

(2)    A person does not have a substantial interest in the company, body or scheme for the purposes of this Chapter merely because the person has an interest in, or a relationship with, the company, body or scheme of a kind prescribed by the regulations for the purposes of this subsection.

(3)    The regulations may provide that an interest of a particular kind is an interest that may constitute a substantial interest in a company, listed body (other than a notified foreign passport fund) or listed registered scheme for the purposes of this Chapter.

…

657A    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.

Note:    Sections 659B and 659C deal with court proceedings during and after a takeover bid.

(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.

(3)    In exercising its powers under this section, the Panel:

(a)    must have regard to:

(i)    the purposes of this Chapter set out in section 602; and

(ii)    the other provisions of this Chapter; and

(iii)    the rules made under section 658C; and

(iv)    the matters specified in regulations made for the purposes of paragraph 195(3)(c) of the ASIC Act; and

(b)    may have regard to any other matters it considers relevant.

In having regard to the purpose set out in paragraph 602(c) in relation to an acquisition, or proposed acquisition, of a substantial interest in a company, body or scheme, the Panel must take into account the actions of the directors of the company or body or the responsible entity for a scheme (including actions that caused the acquisition or proposed acquisition not to proceed or contributed to it not proceeding).

(4)    The Panel must give an opportunity to make submissions in relation to the matter to:

(a)    each person to whom a proposed declaration relates; and

(b)    each party to the proceedings; and

(c)    ASIC.

(5)    The declaration must be in writing and published in the Gazette.

(6)    As soon as practicable, the Panel must give each person to whom the declaration relates:

(a)    a copy of the declaration; and

(b)    a written statement of the Panel’s reasons for making the declaration.

(7)    This section does not require the Panel to perform a function, or exercise a power, in a particular way in a particular case.

657B    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.

657C    Applying for declarations and orders

(1)    The Panel may make a declaration under section 657A, or an order under section 657D or 657E, only on an application made under this section.

(2)    An application for a declaration under section 657A or an order under section 657D or 657E may be made by:

(a)    the bidder; or

(b)    the target; or

(c)    ASIC; or

(d)    any other person whose interests are affected by the relevant circumstances.

Note:    The Administrative Appeals Tribunal cannot review ASIC’s decision whether to apply to the Panel (see paragraph 1317C(gc)).

(3)    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.

657D    Orders that Panel may make following declaration

(1)    The Panel may make an order under subsection (2) if it has declared circumstances to be unacceptable under section 657A. It must not make an order if it is satisfied that the order would unfairly prejudice any person. Before making the order, the Panel must give:

(a)    each person to whom the proposed order would be directed; and

(b)    each party to the proceedings; and

(c)    ASIC;

an opportunity to make submissions to the Panel about the matter[.]

(2)    The Panel may make any order (including a remedial order but not including an order directing a person to comply with a requirement of Chapter 6, 6A, 6B or 6C) that it thinks appropriate to:

(a)    if the Panel is satisfied that the rights or interests of any person, or group of persons, have been or are being affected, or will be or are likely to be affected, by the circumstances—protect those rights or interests, or any other rights or interests, of that person or group of persons; or

(b)    ensure that a takeover bid or proposed takeover bid in relation to securities proceeds (as far as possible) in a way that it would have proceeded if the circumstances had not occurred; or

(c)    specify in greater detail the requirements of an order made under this subsection; or

(d)    determine who is to bear the costs of the parties to the proceedings before the Panel;

regardless of whether it has previously made an order under this subsection or section 657E in relation to the declaration. The Panel may also make any ancillary or consequential orders that it thinks appropriate.

Note:    Section 9 defines remedial order.

(3)    The Panel may vary, revoke or suspend an order made under this section. Before doing so, it must give an opportunity to make submissions in relation to the matter to:

(a)    each person to whom the order is directed; and

(b)    each party to the proceedings in which the order was made; and

(c)    ASIC.

(4)    If the Panel makes an order under this section, the Panel must give a copy of the order, and a written statement of its reasons for making the order, to:

(a)    each party to the proceedings before the Panel; and

(b)    each person to whom the order is directed if they are not a party to the proceedings; and

(c)    for an order relating to specified securities of a company—the company; and

(d)    ASIC.

The Panel must also publish the order in the Gazette. The order takes effect as soon as it is made and not when all the requirements of this subsection are met.

(5)    If the Panel makes an order of the kind referred to in paragraph (j) of the definition of remedial order, the exercise of rights attached to shares is to be disregarded as provided in the order.

(6)    If the Panel makes an order of the kind referred to in paragraph (k) of the definition of remedial order, then, by force of this subsection, the agreement or offer specified in the order is cancelled, or becomes voidable, as from the making of the order or any later time that is specified in the order.

…

657EA    Internal Panel reviews

(1)    The following may apply under this section for review by the Panel of a decision of the Panel made on an application under section 657C:

(a)    a party to the proceedings in which the decision was made; or

(b)    ASIC.

For these purposes, decision has the same meaning as in the Administrative Appeals Tribunal Act 1975.

(2)    If the decision is not:

(a)    a decision to make a declaration under section 657A; or

(b)    a decision to make an order under section 657D or 657E;

the person may apply for review only with the consent of the President of the Panel.

(3)    The regulations may provide for the time limits within which an application may be made for review of a decision.

Note:    Regulations made under the ASIC Act deal with the constitution of the Panel for the purposes of conducting a review under this section and the procedures to be followed in conducting the review.

(4)    After conducting a review under this section, the Panel may:

(a)    vary the decision reviewed; or

(b)    set aside the decision reviewed; or

(c)    set aside the decision reviewed and substitute a new decision.

In conducting the review, the Panel has the same power to make a declaration under section 657A, or an order under section 657D or 657E, as it has when it is considering an application under section 657C.

(5)    Despite section 657B, the Panel can only make a declaration under section 657A after conducting a review under this section if the declaration is made within:

(a)    3 months after the circumstances in relation to which the declaration is made occur; or

(b)    1 month after the application for review was made;

whichever ends last. The Court may extend the period on application by the Panel.

…

80    ASIC published RG 25, which addresses the issue of ‘truth in takeovers’. It is for the guidance of market participants (bidders, targets and substantial holders) making public statements during bids.

81    At RG 25.2, the ambit of RG 25 is described as covering:

A    Last and final statements: These are statements made by market participants that they will or will not do something in the course of the bid. If a market participant intends to reserve the right to depart from its statement on the happening of an event, it must clearly qualify its statement. Merely stating “we presently intend that” is not a clear qualification. Otherwise the market participant risks regulatory action by us for contravention of misleading or deceptive conduct provisions or an application by us or another party to the Takeovers Panel for a declaration of unacceptable circumstances.

see RG 25.4-RG 25.45

B    Making, correcting or updating statements: Bidders and targets must make, correct or update material statements during the offer period by preparing a supplementary bidder’s or target’s statement.

see RG 25.46-RG 25.66

C    Other misleading statements: We discuss some other issues: confusing or ambiguous statements, and statements by the bidder or target about acceptances.

see RG 25.67-RG 25.78

82    RG 25.4 provides a market participant that makes a last and final statement and then seeks to depart from it risks:

(a)    regulatory action by ASIC for contravention of misleading or deceptive conduct provisions, particularly s 670A and s 1041H; or

(b)    an application by ASIC or another party to the Takeovers Panel for a declaration of unacceptable circumstances.

THE ROLE OF THE TAKEOVERS PANEL

83    The Takeovers Panel has made submissions in these proceedings without taking an adversarial position, consistent with the principle in The Queen v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13 (at 35-36) to address aspects of the Takeovers Panel’s powers and procedures.

History of the Takeovers Panel legislation

84    The first statutory takeovers code in Australia was contained in the uniform ‘Companies Acts’ adopted by each state and territory in an effort to remove difficulties arising due to differing legislation. The takeovers code was adopted by most jurisdictions after the Second Interim Report of the Company Law Advisory Committee to the Standing Committee of Attorneys-General (the Eggleston Report). Article 16 of the Eggleston Report set out a number of principles regarding takeovers which have appeared in successive versions of takeover legislation.

85    The Companies (Acquisition Shares) Act 1980 (Cth) (CASA) included s 60 which gave the then National Companies and Securities Commission (NCSC) power to declare unacceptable certain acquisitions of shares and certain conduct in the context of takeovers. The effect of a declaration made under s 60 of the CASA was to enliven the powers of a Supreme Court to make orders under s 45 of the CASA as if the person who made the acquisition or engaged in the conduct had contravened s 11 of the CASA which was the prohibition on acquisition of more than 20% of a company. Section 45 and s 11 of the CASA correspond in a broad sense to the current s 1324B and s 606 of the Corporations Act.

86    The Takeovers Panel was established by Pt 10 of the Australian Securities Commission Act 1989 (Cth). At that time it was called the Corporations and Securities Panel. In the Second Reading Speech on the Australian Securities Commission Bill 1988, the Attorney-General explained that a major new feature of legislation was the establishment of the Corporations and Securities Panel to exercise the power to make declarations that ‘acquisitions of shares or conduct in relation to a takeover unacceptable’. The Supplementary Explanatory Memorandum explained that this was to overcome the criticisms levelled against the NCSC ‘for acting as prosecutor, judge and jury’. The Corporations and Securities Panel could declare an acquisition of securities or conduct during a bid to be unacceptable on the application of what was then the Australian Securities Commission (now ASIC).

87    By the Corporate Law Economic Reform Program Act 1999 (Cth), the declaration power of the Corporations and Securities Panel was recast in the general terms of current s 602 and s 657A of the Corporations Act with respect to the Takeovers Panel.

88    The powers of the now Takeovers Panel to make declarations and orders was amended by the Corporations Amendment (Takeovers) Act 2007 (Cth). Amendments were made to s 657A and s 657D of the Corporations Act, which according to the Explanatory Memorandum were designed to achieve the following benefits:

Item 2 - Effect of circumstances

3.7    Paragraph 657A(2)(a) of the Act currently provides that the Panel may declare circumstances to be unacceptable if it appears to the Panel that they are unacceptable having regard to their effect on the matters specified in sub-paragraphs (i) and (ii). The amendment allows the Panel to make a declaration having regard to what the Panel is satisfied is the past, present, future or likely effect of the circumstances. This makes it clear that it is for the Panel to satisfy itself as to what the effect or likely effect is, and that the Panel can make a declaration before any effect has actually occurred.

Item 3 - Jurisdiction to make declaration

3.8    A new paragraph 657A(2)(b) is inserted in the Act to give the Panel jurisdiction to declare circumstances unacceptable having regard to the purposes of Chapter 6 of the Act set out in section 602. This is a significant change, designed to ensure the Panel can address circumstances which impair those purposes, without having to also establish either a contravention of the Act or an effect on control or potential control of a company or on the acquisition or proposed acquisition of a substantial interest in a company. The intention is to give the Panel a wider power to give effect to the spirit of the Act. The purpose of the words in brackets in the new paragraph is to ensure that the Panel can make a declaration of unacceptable circumstances in relation to the affairs of one company, being the company referred to in subsection 657A(1), where the effect of the unacceptable circumstances relates to or is primarily manifest on another company or the securities of either company.

3.9    Paragraph 657A(2)(c) is a replacement for the current paragraph 657A(2)(b), expanded so it covers past, present, future and likely contraventions, for consistency with the amended paragraph 657A(2)(a) and the new paragraph 657A(2)(b). Each of paragraphs 657A(2)(a), (b) and (c) are worded to cover past, present, future and likely effects and contraventions.

Item 4 - People to be given opportunity to make submissions

3.10    Paragraph 657D(1)(a) of the Act currently requires the Panel, before making an order, to give an opportunity to make submissions to each person to whom the proposed order relates. If this is interpreted to include more than just persons on whom the order imposes obligations, there could be tens of thousands of such people in some cases, including each current and potential shareholder in the relevant companies. The amendment means that the opportunity required by paragraph 657D(1)(a) need only be given to each person to whom the order is directed. Paragraphs 657D(1)(b) and (c) will continue to require the Panel to provide each party to the proceedings and ASIC an opportunity to make submissions about the orders which it proposes to make.

Item 5 - Protecting the people affected

3.11    Paragraph 657D(2)(a) of the Act currently allows the Panel to make orders it thinks appropriate to protect the rights or interests of any person affected by the circumstances. The amendment means that this is not confined to rights and interests directly affected by the circumstances. The amendment ensures that the Panel can make any order it thinks appropriate to protect any rights or interests of a person or group of persons, where the Panel is satisfied that their rights or interests have been, are being, will be or are likely to be affected by the unacceptable circumstances. This will allow the Panel to protect the interests of those persons more effectively. The amendment will also ensure that the Panel may make orders which protect the interests of a group of persons whose interests have been affected, rather than requiring it to address the effects person by person.

89    At the date of these reasons and at the date of the decision of the Review Panel, the Panel has and had 43 specialists with expertise relevant to mergers and acquisitions, including investment bankers, lawyers and company directors. An application to the Takeovers Panel is considered by a sitting panel constituted by three members (s 184(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act)). The members are appointed by the President of the Takeovers Panel pursuant to directions made under s 184(2) of the ASIC Act.

Takeovers Panel procedures, approach and powers

90    In proceedings before it, the Takeovers Panel is to follow the procedure laid out in the ASIC Act and the requirements of the Australian Securities and Investments Commission Regulations 2001 (Cth) (the ASIC Regulations): see s 195 of the ASIC Act.

91    The Takeovers Panel’s Procedural Rules refer to the parties providing material, but also states that evidence may be provided to the Takeovers Panel and indicates the manner and form in which the evidence may be provided: r 6.3.1 of the Procedural Rules. The Takeovers Panel is not bound by the rules of evidence and may act on any logically probative material.

92    In circumstances where the Takeovers Panel is to determine an application under s 656A of the Corporations Act for review of an ASIC decision, the Takeovers Panel takes a similar approach to ASIC’s published policies to that taken by the Administrative Appeals Tribunal. An approach approved by the courts in relation to policies formulated by the repository of a statutory power to guide the exercise of discretion in making a decision that is subject to appeal: see, for example, Hneidi v Minister for Immigration and Citizenship (2010) 182 FCR 20 per Spender, Emmett and Jacobson JJ (at [33]-[36]). The Takeovers Panel will ordinarily apply ASIC’s published policies when reviewing an ASIC decision made under s 655A or s 673 of the Corporations Act, unless there are persuasive reasons not to: Takeovers Panel ‘Guidance Note 2: Reviewing Decisions’ (at [10]).

93    The Guidance Notes issued by the Takeovers Panel are the subject of consideration by all Takeovers members and public consultation and seek to promote consistency in the exercise of the Takeovers Panel’s discretionary powers.

94    Broadly speaking, if the Takeovers Panel declares circumstances to be unacceptable under s 657A, it may make an order under s 657D(2). It must not make an order if it is satisfied that the order would unfairly prejudice any person. Before making any order, the Takeovers Panel must give each person to whom a proposed order would be directed, each party to the proceedings and ASIC an opportunity to make submissions to the Takeovers Panel about the matter.

95    Under s 657D(2), the Takeovers Panel ‘may make any order … that it thinks appropriate’, including a remedial order (as defined in s 9), but not including an order directing a person to comply with a requirement of Chs 6, 6A, 6B or 6C.

96    The discretionary language used at the commencement of s 657D(1) and s 657D(2) of the Corporations Act implies a discretion which is conditioned upon, amongst other things:

(a)    the formation of an opinion as to what the Takeovers Panel thinks appropriate; and

(b)    in the case of s 657D(2)(a), the Takeovers Panel being satisfied that rights or interests of a person or group of persons have been or are being affected, or will be or are likely to be affected, by the unacceptable circumstances.

97    Like any other administrative decision, the exercise of the discretion and the formation of any opinion or satisfaction must not be legally unreasonable and must otherwise be in accordance with law.

98    In submissions to this Court, the Takeovers Panel requested that if the Court determines that it should set aside the Takeovers Panel’s Substitute Orders, it would be of assistance if the Court were willing to indicate:

(a)    whether Taurus’ applications under s 657EA, in relation to the Initial Panel orders, remains on foot to be determined by the Takeovers Panel according to law;

(b)    if so, whether that determination admits of only one possible outcome, such that an order in the nature of mandamus would be available; and

(c)    if more than one outcome is possible, whether the Court considers it appropriate to remit the matter either to the Review Panel or to a differently constituted Takeovers Panel. (It may be necessary to reconstitute the Takeovers Panel because, for example, one or more of the members of the Takeovers Panel ceases to be available: s 184(4) of the ASIC Act.)

99    In light of the reasons and conclusions which follow, the matters in [98] do not fall for consideration.

THE ROLE OF ASIC

100    As indicated, ASIC neither consents to nor opposes the relief sought by Eastern Field. It appears on this application as the entity with the general administration of the Corporations Act under s 5B. This includes Ch 6 and the other provisions relevant to the regulation of takeovers. In administering these takeover provisions, ASIC must strive to, amongst other things, maintain, facilitate and improve the performance of the financial system and the entities within that system in the interests of commercial certainty. It must try to promote the confident and informed participation of investors and consumers in the financial system as dictated by s 1(2)(a) and s 1(2)(b) of the ASIC Act.

101    In relation to the takeover provisions, ASIC monitors takeover transactions, including by reviewing announcements made and documents lodged with ASIC with a view to assessing, amongst other things, whether or not the requirements of Ch 6 have been met and whether unacceptable circumstances may have arisen. It also issues regulatory guidance, setting out ASIC’s approach to administering the requirements of, and exercising its discretions under, the takeover provisions. A common example is RG 25. In appropriate instances ASIC takes regulatory action, including by making applications to the Takeovers Panel, as it did on 28 March 2018 when it applied to the Takeovers Panel seeking a Declaration of Unacceptable Circumstances and orders in relation to the affairs of Finders. The rest is history (or rather is set out in the Background Facts and Chronology section in these reasons).

THE REVIEW PANEL’S ORDERS AND REASONS

102    Relevantly, the Substitute Orders of the Review Panel were:

Deferral of Payment of Consideration to Taurus

1.    Eastern Field is not obliged to take any action to process an acceptance of the Takeover Bid or pay consideration in respect of the Taurus Shares except as contemplated by these Orders.

2.    Immediately after the Offer Close, all acceptances in respect of the Taurus Shares and all takeover contracts resulting from those acceptances are cancelled.

3.    Taurus must not exercise any rights under s662C of the Corporations Act 2001 (Cth) in respect of the Taurus Shares.

4.    Without the consent of Eastern Field, Taurus must not sell or offer to sell any of the Taurus Shares prior to 30 November 2018 except as contemplated by these Orders.

5.    If Eastern Field gives written notice to Taurus under this Order 5 after the Offer Close, Taurus must sell and Eastern Field must acquire (or must procure that its nominee acquires) all Taurus Shares held by Taurus at the time Taurus receives the notice for 23 cents per Finders share on the same terms as the terms of the Takeover Bid immediately before the Offer Close (except that interest is payable on the consideration after 30 November 2018 at the rate applied by the Federal Court of Australia for pre-judgment interest).

6.    If Taurus gives written notice to Eastern Field under this Order 6 after the later of the Offer Close and 30 November 2018, Eastern Field must acquire and Taurus must sell all Taurus Shares held by Taurus at the time Taurus gives the notice for 23 cents per Finders share on the same terms as the terms of the Takeover Bid immediately before the Offer Close (except that interest is payable on the consideration after 30 November 2018 at the rate applied by the Federal Court of Australia for pre-judgment interest).

Administration Expenses

7.    Taurus must pay the fees and expenses of any person engaged by the Panel to assist with the administration of these Orders.

Compensation

8.    Subject to Order 22, Taurus must pay to each Affected Shareholder who signs and returns a claim form (within the applicable period specified in Order 17) the Compensation Amount.

…

103    The Substitute Orders which followed principally concerned the procedures and administration to be carried out in the making of the compensation payments to the Affected Shareholders.

104    In the Review TP Decision, after setting out the facts, the majority of the Review Panel referred to RG 25 noting that it had been revised, after consultation, following criticism that ASIC’s previous policy encouraged bidders to make ‘no increase’ statements to pressure shareholders to accept, confident that if the tactic failed ASIC would allow an increase provided the bidder paid compensation. The risk of having to compensate did not necessarily discourage such tactics by bidders since the compensation payable was likely to be small relative to the cost of increasing the bid.

105    The majority continued (at [10]-[12]):

10.    The revised RG 25 indicated among other things that:

(a)    market participants need to expressly reserve any right to depart from certain “last and final statements” (a previous exception for “unforeseeable circumstances” was deleted from the policy)

(b)    market participants should be held to those statements “as with a promise” and

(c)    compensation does not adequately address ASIC’s regulatory concerns.

11.    In addressing “last and final statements”, RG 25 is focused primarily on statements by bidders and targets. It also deals with acceptance statements by substantial holders and foreshadows possible regulatory action where a substantial holder departs from an unqualified statement. In this context, RG 25 focuses on the impact on other shareholders in a target company, not on the bidder.

12.    As the initial Panel acknowledged, while the Panel may have regard to RG 25, a decision as to whether circumstances are unacceptable and, if so, the appropriate orders (if any), is a matter for the Panel. The Panel has endorsed “truth in takeovers” principles and RG 25 in several decisions and has cited RG 25 in Guidance Notes. We agree with that endorsement, but it must always be understood to be subject to the duty of the Panel to exercise its powers in accordance with the Act, including by complying with s657A in making a declaration and s657D in making orders. The orders that it is open to the Panel to make in a particular case under s657D(2)(a) or (b) will depend on what circumstances have been declared to be unacceptable and:

(a)    the effects of the circumstances on rights or interests that the Panel is satisfied are affected or

(b)    the way that a takeover bid or proposed takeover bid would have proceeded if the circumstances had not occurred.

(Emphasis added, citations omitted.)

106    Despite arguments to the contrary, the Review Panel majority agreed with the Declaration of Unacceptable Circumstances made by the Initial Panel and ‘[do] not wish to make any changes to it’ (at [19]).

107    As to the relief, the majority explained (at [22]) that its new orders required Taurus to compensate persons acquiring Finders shares above Eastern Field’s offer price and allow Eastern Field (in effect) to defer payment for the acquisition of Taurus’ Finders shares.

108    It noted (at [23]) that under s 657EA(4) and s 657D the Review Panel is empowered to make ‘any order’ if 4 tests are met and that it was satisfied these were met:

(a)    it has made a declaration under s657A. The [I]nitial Panel did so on 26 April 2018.

(b)    it must not make an order if it is satisfied that the order would unfairly prejudice any person. For reasons below, we are satisfied that our orders do not unfairly prejudice any person.

(c)    it gives any person to whom the proposed order would be directed, the parties and ASIC an opportunity to make submissions. This was done on 8, 15, 22, 28 and 30 May 2018 and 3 June 2018.

(d)    it considers the orders appropriate under one or more of the paragraphs in s657D(2). For reasons below, we are satisfied that our orders are appropriate to protect rights or interests of persons who have been, are being or will be or are likely to be affected by the unacceptable circumstances.

109    The majority then explained why the Substitute Orders were preferable, saying (at [24]-[26]):

No orders to ensure the takeover bid proceeds as it would have otherwise

24.    ASIC and Eastern Field submitted that orders cancelling Taurus’s acceptances are appropriate orders to make under s657D(2)(b) to ensure that the Takeover Bid proceeds (as far as possible) as it would have proceeded if the unacceptable circumstances had not occurred. That argument treats Taurus’s action in resiling from its statement as the only relevant unacceptable circumstance in determining how the Takeover Bid would have proceeded. However, the Declaration identifies a number of other unacceptable circumstances, including Finders’ actions in providing the draft announcement to Taurus and authorising the solicitation of similar statements from other shareholders, who were not informed that RG 25 may apply. There is room for reasonable minds to differ as to the significance of the latter set of circumstances in determining what order is appropriate under s657D(2)(b). In our view, it is at least possible, and perhaps even likely, that if the draft intention statements provided by Finders to Taurus and the Euroz clients had been appropriately qualified, they would have been free to accept as they have done. How the Takeover Bid would have proceeded, if not for the unacceptable circumstances, depends very much on which of the circumstances in the Declaration are emphasised.

25.    Since this is a de novo review on the merits, we must form our own view as to what is the correct or preferable decision on this issue. We do not think that the unacceptable circumstances relating to the manner in which the intention statements were prepared and solicited can be ignored in determining what is appropriate under s657D(2). We do not believe RG 25 requires us to do so. We do not think it appropriate to make an order under s657D(2)(b) that addresses the effects of only one of a complex and interrelated set of unacceptable circumstances. If regard is had to all of the unacceptable circumstances, we think it as likely as not they made little difference to the ultimate outcome.

26.    There are also a number of ameliorating factors arising from the facts of this case that support our view that it is not appropriate to permanently cancel Taurus’s acceptance of the Takeover Bid:

(a)    In our view, it is not surprising that where directors of a target company (Finders) are recommending against acceptance of a hostile offer, a holding associated with a director – ie Taurus – would make a statement (analogous to those made by Messrs Comb and Cahill in relation to shares they control) that it did not intend to accept the (Eastern Field’s) offer.

(b)    Taurus’s initial statement to Finders was accompanied by a qualification, albeit – and Taurus acknowledges it was at fault here – that qualification was not sufficiently clear and was not repeated in Finders’ announcements to ASX.

(c)    It seems clear Taurus was aware that its intentions statement was to be aggregated with similar statements by other Finders shareholders.

(d)    ASIC did not query Taurus (or Finders) regarding Taurus’s statement or the aggregated statements until more than three months after they were announced.

(e)    No contemporaneous evidence was provided of reliance by Eastern Field or any other person on Taurus’s intention statement. Notwithstanding Eastern Field’s claim that it relied on Taurus’s intention statement, Eastern Field did not query Taurus regarding its statement.

(f)    What occurred when Eastern Field acquired effective control of Finders was not unlike the ordinary course of control passing in many targets subject to hostile bids. The Independent Directors changed their recommendation and accepted Eastern Field’s offer in respect of shares they controlled, as did Taurus also in respect of its holding associated with Mr Galt. This was to be expected. A target board is often apprehensive as to the new controlling shareholder’s intentions and/or about shareholders being locked into a minority position.

(Emphasis added, citations omitted.)

110    The majority then considered the question of whether it was appropriate to make orders under s 657D(2)(a) (and if so what orders) to protect rights or interests of persons affected by the unacceptable circumstances. The majority said (at [27]), inter alia:

Determining whether we are satisfied rights or interests have been affected requires us to engage in a degree of speculation, drawing on our commercial expertise. We must, of course, have a suitable foundation for any conclusion, but once again there is considerable scope for reasonable minds to differ.

(Citations omitted.)

111    In its reasoning, the majority said (at [28]-[30]):

28.    We accept that it may be appropriate to make orders protecting rights or interests of a bidder where they are affected by unacceptable circumstances. For example, if a bidder’s interests are affected by circumstances that the Panel considers unacceptable, having regard to s602(a), because the acquisition of control over voting shares has not taken place in an efficient, competitive and informed market, we see no reason in principle why the bidder’s interests should not be protected to the same extent as any other market participant. However, we note that the purposes in paragraphs (b), (c) and (d) of s602 are largely for the benefit of target shareholders and it may not be appropriate to make orders that are inconsistent with those purposes. In the context of “truth in takeovers” principles, this may mean that the Panel has greater power to make orders regarding a bidder’s last and final statements for the benefit of current or former shareholders (which orders may be supported by all of s602(a), (b) and (c)) than it does to make orders regarding statements by shareholders for the benefit of a bidder (which orders may be supported only by s602(a), and may even be contrary to s602(b) and (c)).

29.    Eastern Field submitted that it would be adversely affected in various ways by achieving voting power of 90% due to Taurus resiling from its intention statement and accepting the Takeover Bid. Eastern Field submitted that, despite making a bid for all ordinary shares on issue, it “always envisaged that [it] could get control” without being required to make a compulsory buy-out offer. Eastern Field submitted that it relied on Taurus’s intention statement in declaring its offer unconditional and extending the offer, believing it could never reach 90% because Taurus could not accept, and consequently it would be adversely affected in ways including:

(a)    Eastern Field would be required to acquire Taurus’s shares (at a cost of more than $20 million) and, if it did so, would not have sufficient funding available to it to make a loan to Finders that it considered Finders was likely to require.

(b)    Eastern Field would be required to make compulsory buy-out offers under section 662A.

(c)    Eastern Field’s intention was now to maintain Finders’ ASX listing (including by taking measures to ensure appropriate spread if required by ASX) due to the treatment under Indonesian tax laws of Indonesian residents holding more than 50% in unlisted foreign companies.

(d)    Eastern Field had fixed the amount of its banking facility on the basis that Taurus would not (and could not) accept.

30.    We accept that Eastern Field may have hoped that Taurus could be prevented from accepting the Takeover Bid, but we are not satisfied on the material before us that Eastern Field relied on Taurus’s intention statement to any significant extent in declaring the Takeover Bid unconditional on 14 February 2018 and declaring its offer price final on 12 March 2018. We were not provided with any contemporaneous evidence of such reliance. We note also that:

(a)    When declaring its offer unconditional, Eastern Field made no mention of relying on Taurus’s intention statement, but did state:

“Now that our offer is unconditional and we are Finders’ largest shareholder with a 25% stake, we urge Finders’ other shareholders to make the most of the certainty of our 23c per share cash offer, accept as soon as possible and receive cash within one month of their acceptances.”

Eastern Field may well have considered the effect of Taurus’s intention statement before declaring its offer unconditional. However, given Eastern Field had only a 25% stake at the time and was urging acceptance of a “nil-premium” offer, we expect that Eastern Field would have been reluctant to rule out Taurus accepting if that proved to be the only way to acquire effective control of Finders.

(b)    The terms of an order sought in [the Initial TP Decision] on 1 March 2018 (at which time Eastern Field had increased only to 26.32%) was also consistent with Eastern Field being open to Taurus accepting the Takeover Bid.

(c)    On 12 March 2018, when Eastern Field had voting power of approximately 34.2%, it declared its offer price final. Even at this stage, we would be surprised if Eastern Field was sufficiently confident to rule out relying on Taurus’s acceptance to obtain control.

(d)    On 15 March 2018, when Eastern Field had voting power between 44% and 48%, it extended its offer period to close on 30 March 2018 (unless further extended).

(e)    On 21 March 2018, Eastern Field lodged its second supplementary bidder’s statement, which stated (after noting that its voting power had increased to 60.22%):

“Eastern Field considers that the effect of Taurus’ statement (that it would not accept the offer at the Offer Price of $0.23) may be that Taurus is prevented from accepting the Offer for the reasons set out in ASIC’s Regulatory Guide 25 (Takeovers: false and misleading statements). Eastern Field has raised this matter with ASIC.”

Eastern Field did not expressly state that it was or had been relying on Taurus’s statement or disclose any intention to maintain Finders’ ASX listing or that it had arranged its banking facility on the basis that Taurus could not accept.

(Emphasis added, citations omitted.)

112    The majority observed (at [31]) that Eastern Field should reasonably have expected, when it announced a ‘nil-premium’ bid for all ordinary shares on issue, that it would need to declare its offer unconditional in order to encourage acceptance and would then have limited control over the level of acceptances it would achieve. The majority reasoned that an unconditional bid that achieves 50% acceptance will often go on to reach 90% acceptance, sometimes within a day or two. Shareholders are often persuaded to accept in light of the change of control, a concern that the share price will fall after the bid closes and/or the risk of remaining a minority shareholder in a company with reduced liquidity. No doubt Eastern Field hoped to close its offer shortly after reaching its desired level of acceptance, but its ability to do so was limited by s 624(2).

113    The majority said (at [32]) given the above, it was not satisfied that the consequences of Eastern Field obtaining voting power of 90% or more should be attributed to the unacceptable circumstances rather than to Eastern Field’s own decisions to make an offer for all ordinary shares on issue, declare its offer unconditional and extend the offer. Moreover, the majority did not think it appropriate to make orders protecting Eastern Field from those consequences.

114    The majority was satisfied however that Eastern Field changed its financing arrangements in reliance on Taurus’ Statements and its interests were affected by the unacceptable circumstances to that extent. It was, in the majority’s opinion, appropriate to protect those interests by effectively allowing Eastern Field to defer payment for the acquisition of Taurus’ shares until 30 November 2018 and thereby give Eastern Field sufficient opportunity to mitigate the effects of any reliance on Taurus’ Statements.

115    The majority then considered the payment of compensation to persons trading in Finders shares saying (at [37]-[38]):

37.    In our view, it is likely that trading in Finders shares has been affected by the unacceptable circumstances. Determining whether we are satisfied that rights or interests of persons have been affected (and if so, which group or groups of persons) requires an exercise of judgement, drawing on our commercial expertise. In doing so we have had regard to a range of matters including: Finders’ production and recovery history, the fact that the Takeover Bid offered no premium over the pre-announcement closing price and only what we consider a relatively small premium based on other metrics, and the likely impact of the production and disclosure issues raised in [the Initial TP Decision]. We are not satisfied that interests of persons who accepted the Takeover Bid (before or after Taurus accepted) have been materially affected. However, we consider that there is sufficient material to support a conclusion that the intention statement of Taurus and actions of Finders are likely to have led some market participants to place a higher probability on Eastern Field increasing its offer, supporting acquisitions above Eastern Field’s offer price.

38.    Accordingly, we are satisfied that the interests of persons who acquired shares above Eastern Field’s offer price of $0.23 between the release of Taurus’s intention statement and Taurus accepting the Takeover Bid have been affected by the unacceptable circumstances. We think it appropriate to protect the interests of this group of persons by requiring Taurus to pay compensation. Orders 7-36 provide for this. They are based on draft orders proposed by Taurus and amended to accommodate comments by parties. The terms are self-explanatory. We will not discuss them except to note that we considered that:

(a)    other shareholders who made intention statements should be excluded from claiming compensation due in part to their involvement in and greater personal knowledge of the unacceptable circumstances

(b)    Finders should not be required to contribute to the compensation given that Eastern Field now owns more than 90% of Finders and

(c)    the Orders should provide a process for resolving disputes, with Taurus bearing the cost of its administration.

(Citations omitted.)

116    The majority knew it must not make an order if satisfied it would unfairly prejudice any person. It noted (at [41]-[43]) that:

41.    Eastern Field submitted that the grant of an unlimited put option to Taurus in Order 6 was unfairly prejudicial to Eastern Field. We note, however, that Eastern Field has an unlimited call option under Order 5 that enables it to put an end to Taurus’s put option at any time. We indicated to parties that we considered Orders 1-6, in combination, appropriate to give Eastern Field (effectively) a means to defer payment for the acquisition of Taurus’s shares until 30 November 2018, and we would not consider it appropriate to make Orders 1-4 without also making Orders 5 and 6. Eastern Field did not request that we refrain from making all of Orders 1-6. We are satisfied that Orders 1-6 in combination confer a benefit on Eastern Field (namely, a means to defer payment of consideration to Taurus) and do not unfairly prejudice Eastern Field or any person.

42.    Had we considered it appropriate to make orders cancelling Taurus’s acceptances while the Takeover Bid remains open we would have considered further whether such orders would unfairly prejudice persons likely (if those orders were not made) to receive buy-out offers under Part 6A.1 Division 2. We note that:

(a)    the likely prejudice to those persons could be considerable, particularly for those who were not entitled to accept the Takeover Bid. Finders advised that Standard Bank Plc holds 12,248,538 Finders shares (issued on conversion of convertible notes) and 11 Finders employees hold a total of 4,150,000 Finders shares (issued on conversion of performance rights) that could not be accepted into the Takeover Bid and

(b)    on our view of the unacceptable circumstances, the initial Panel’s basis for concluding there was no unfair prejudice may not have been open to us.

43.    Given we do not think it appropriate to make such a cancellation order, we did not need to reach a conclusion on that issue. For the same reason we did not need to decide whether an order holding Taurus to its intention statement would unfairly prejudice Taurus.

(Citations omitted.)

117    The President in his minority reasons agreed with the majority that the Declaration of Unacceptable Circumstances should be affirmed but considered the orders of the Initial Panel were appropriate for similar reasons given in the Initial TP Decision. Mr Malek said (at [49]-[53]):

49.    Taurus submitted that it believed when giving its intention statement that greater than 20% of shareholders would also give similar statements. The majority cite this as a factor supporting their view that it is not appropriate to cancel permanently Taurus’s acceptance. I draw different conclusions. Taurus ought to have realised that the significance of its holding meant its intention statement was critical to the strategy’s success and would encourage other shareholders to make similar statements. Taurus’s statement was deliberate and calculated to prevent Eastern Field acquiring control. Unlike the other shareholders who made intention statements, Taurus had the benefit of one of its principals, Mr Galt, being on the Finders board.

50.    The initial Panel, in concluding that an order cancelling Taurus’s acceptance was not unfairly prejudicial, stated:

Taurus had a holding in Finders that could block compulsory acquisition. We consider, drawing on our experience, that this would have a greater market impact than intention statements made by other shareholders which are not covered by RG 25.

51.    I agree and consider that making an order cancelling Taurus’s acceptance is appropriate to protect the rights and interests of persons affected by the unacceptable circumstances and to ensure that the Takeover Bid proceeds as it would have if the circumstances had not occurred.

52.    The Original Orders also have the benefit of supporting, in ASIC’s submission, “a consistent approach between ASIC’s day to day administrative approach in seeking to identify and address unacceptable circumstances arising from ‘last and final statements’ and the Panel’s approach to those statements when disputes come before it”.

53.    Therefore I think this is an entirely appropriate circumstance for a substantial shareholder to be held to their intention statement in accordance with RG 25. To do otherwise would in my view lead to uncertainty as to exactly when RG 25 might or might not be strictly applied.

EASTERN FIELD’S GROUNDS OF REVIEW

118    The amended grounds of review are as follows:

…

Grounds of application

Ground 1 - Erroneous exercise of power- sections s 5(1)(e) and 5(2)(a), (b) and (g) of the ADJR Act

2.    Having affirmed the decision of the Initial Panel that, in accordance with section 657A of the Corporations Act, there were unacceptable circumstances in Taurus’ conduct in connection with [Eastern Field’s] Takeover Bid for Finders, the Review Panel’s decision to make Orders 1 to 6, reversing the Initial Panel’s decision to permanently cancel Taurus’ acceptance of [Eastern Field’s] Takeover Bid, was an improper exercise of power in that:

(a)    the Review Panel was relevantly required by section 657D(2) of the Corporations Act to make orders that were appropriate to protect the rights and interests affected by the unacceptable circumstances, or to ensure that the Takeover Bid proceeded so far as possible in a way that it would have absent the unacceptable circumstances; and

(b)    the Review Panel did not properly address the relevant requirements of section 657D(2) of the Corporations Act, but rather directed attention to other considerations; or

(c)    the Review Panel’s decision not to make any order under section 657D(2)(b) of the Corporations Act was unreasonable, involving illogical or irrational reasoning, or was of such an unreasonable character that no reasonable panel could have made it.

Particulars of Grounds 1(b) and (c)

(i)    the Review Panel’s finding that it was as likely as not that the unacceptable circumstances made little difference to the ultimate outcome was irrational, illogical and not based on findings or proper inferences of fact; and

(ii)    the Review Panel:

(a)    failed to consider, or properly consider as a relevant consideration, that Taurus’ conduct did not conform with Policy RG 25 and was declared to be an unacceptable circumstance;

(b)    failed to consider that [Eastern Field] relied on [Taurus Intention Statement] in waiving its minimum 50% acceptance condition in respect of the Takeover Bid on 12 December 2017, in declaring the Takeover Bid unconditional on 14 February 2018 and in declaring its offer final on 12 March 2018, on the basis that contemporaneous evidence of such reliance was required;

(c)    considered an irrelevant matter that [Eastern Field] did not query [Taurus Intention Statement]; and

(d)    considered an irrelevant matter that ASIC did not query Taurus (or Finders) regarding its intention statement.

Ground 2 - Failure to consider relevant matters and proceeding without evidence - sections 5(1)(e), 5(1)(h), 5(2)(b) and 5(2)(g) of the ADJR Act

3.    Although required by section 657D(1) of the Corporations Act to refrain from making any order if satisfied that the order would unfairly prejudice any person, the Review Panel:

(a)    failed, or failed properly, to take into account the effect of the Orders on [Eastern Field] and the unfair prejudice visited by the Orders on [Eastern Field]; or

(b)    concluded without basis, in an irrational or illogical manner, that the Orders would not unfairly prejudice [Eastern Field] or that [Eastern Field’s] rights and interests were appropriately protected.

Particulars of Ground 2(b)

(i)    the Review Panel misconstrued section 657D(2)(a) of the Corporations Act as requiring it to be satisfied, by contemporaneous evidence, that [Eastern Field] relied on [Taurus Intention Statement] in declaring the Takeover Bid unconditional on February 2018 and declaring its offer final on 12 March 2018;

(ii)    the Review Panel’s finding that [Eastern Field] did not rely on Taurus ‘intention statement in declaring the Takeover Bid unconditional on 14 February 2018 and declaring its offer final on 12 March 2018 was irrational, and not based on findings or proper inferences of fact; and

(iii)    the Review Panel’s conclusion that the consequences of [Eastern Field] obtaining voting power of 90% or more were not attributable to the declared unacceptable circumstances was irrational, illogical and not based on findings or proper inferences.

Ground 3 - Error of law - section 5(1)(f) of the ADJR Act

4.    In the alternative to particular (ii)(b) of Grounds 1(b) and (c) and particular (i) of Ground 2(b), the Review Panel made an error of law by misconstruing section 657D(2)(a) of the Corporations Act as requiring it to be satisfied, by contemporaneous evidence, that [Eastern Field] relied on [Taurus intention statement] in declaring the Takeover Bid unconditional on 14 February 2018 and declaring its offer final on 12 March 2018.

ARGUMENTS IN SUPPORT OF THE GROUNDS AND CONSIDERATION

Ground 1 – unreasonableness and failure to address relevant considerations

Unreasonableness

119    Eastern Field stresses that the effect of the unacceptable circumstances deprived it of the opportunity to trade in an efficient, competitive and informed marked. That, it is said, is the starting point from which the majority of the Review Panel should have undertaken its assessment as to what orders were appropriate under s 657D(2) of the Corporations Act. Instead it undertook an analysis by which it concluded that Taurus’ conduct was not the only unacceptable circumstance the subject of the Declaration of Unacceptable Circumstances by reference to Finders’ actions in soliciting and aggregating the intention statements of other Finders shareholders. But the Review Panel also found that Taurus was actually aware that its intention statement was to be aggregated with similar statements by other Finders shareholders. The majority of the Review Panel, rather than considering the effect of the conduct on Eastern Field, was concerned with how the Takeover Bid would have proceeded if Taurus’ Statements had been appropriately qualified, concluding (at [25]) ‘[i]f regard was had to all of the unacceptable circumstances, we think it is as likely as not that they made little difference to the ultimate outcome’.

120    Eastern Field complains that the Review Panel’s treatment of the issue did not address how the Takeover Bid could be put ‘back on track’ in the face of the unacceptable circumstances. Rather, it raised a counterfactual assuming compliance by Taurus with RG 25. This skewed the analysis, Eastern Field says, and did not address the matters in s 657D(2)(b) of the Corporations Act. The counterfactual raised was irrelevant because if Taurus’ Statements had been appropriately qualified, the unacceptable circumstances would not have occurred. Each of the matters in s 657D(2) of the Corporations Act are matters that must, once the relevant situation arises, be taken into account and reflected in the orders made.

121    Eastern Field contends that the finding (at [25]) by the Review Panel’s majority, was the basis upon which it declined to make an order under s 657D(2) and that this finding, and its conclusion, lacked an ‘evident and intelligible justification’ for the following reasons:

(1)    First, a finding that it was ‘as likely as not’ is not definitive as to the effect of the unacceptable circumstances on Eastern Field. It merely records that one outcome is as likely as another. It provides no sound basis for declining to make an order under s 657D(2)(b) of the Corporations Act.

(2)    Secondly, the finding is inconsistent with the effect of the unacceptable circumstances as found in the Declaration of Unacceptable Circumstances. The Review Panel’s conclusion that it was not appropriate to make an order that under s 657D(2)(b) requires Eastern Field to proceed to the acquisition of Taurus’ shares in Finders, which only arose because of the unacceptable circumstances and despite the declared effect of those circumstances on Eastern Field’s acquisition of control over Finders.

(3)    Thirdly, the finding is said to be illogical as, but for Taurus’ conduct, the unacceptable circumstances would not have occurred irrespective of whether there were other relevant causes of the unacceptable circumstances.

(4)    Fourthly, the finding is said to be inconsistent with clear evidence available to the Review Panel of Eastern Field’s reliance on Taurus’ Statements.

(5)    Finally, a number of the ameliorating factors identified by the Review Panel (at [26]) are either irrelevant or lack an evident and intelligible justification to support the conclusion of the Review Panel because the circumstances of a hostile takeover tend to explain why an intention statement should be appropriately qualified to ensure that an acquisition takes place in an efficient, competitive and informed market. The prospect that substantial shareholders may change their recommendation and that may affect market participants is the very reason why care is required in making intention statements.

Failure to address relevant considerations

122    Eastern Field says that the Review Panel failed to properly consider the effect of the unacceptable circumstances of the Takeover Bid, arising from the actions of both Finders and Taurus on Eastern Field. This was a consideration, it is said, that the Review Panel was obliged to take into account in considering what orders were appropriate under s 657D(2)(a) of the Corporations Act in light of Taurus’ conduct in resiling from its statements being wholly inconsistent with the principles underpinning RG 25.

123    Further, the Review Panel was not satisfied on the material before it that:

Eastern Field relied on Taurus’ statement to any significant extent in declaring the Takeover Bid unconditional on 14 May 2018 in declaring its offer price final on 12 March 2018.

124    That finding was made on the basis that the Review Panel was ‘not provided with any contemporaneous evidence of such reliance’. This is said to be central to the Review Panel’s decision for making only the Deferred Payment Orders and declining to make orders under s 657D(2)(b) of the Corporations Act.

125    Eastern Field stresses that the legislative and regulatory regime does not require particular evidence. The evidentiary standard imposed by the majority requiring contemporaneous evidence of reliance was inconsistent with the statutory scheme under which the Review Panel operated. It was sufficient to find only that the market had been misinformed and there was no justification for imposing a requirement that, in considering whether to make orders under s 657D(2) of the Corporations Act, the Review Panel had to be satisfied by contemporaneous evidence of reliance.

126    Indeed, the Review Panel’s own procedures do not support such an evidentiary standard as the Review Panel is expected to operate flexibly both as to procedure and substantively. This is one of the key advantages of using an administrative tribunal to resolve a dispute of this kind.

127    Regulation 13 and reg 16(2) of the ASIC Regulations, which the Takeovers Panel is required to follow, reinforce this situation. In both instances, before the Initial Panel and the Review Panel, the parties proceeded by way of written submissions with some limited supporting documentation, rather than by statements and oral evidence although permitted by the notes to r 6.3.1 of the Procedural Rules.

128    Eastern Field had repeatedly submitted that it had relied upon the statements by Taurus. At no stage did the Review Panel give any notice of its ‘evidentiary standard’. Eastern Field relied upon what was said by the Full Court (Northrop, Miles and French JJ) in Commissioner for ACT Revenue v Alphaone Pty Ltd (1994) 49 FCR 576 (at 591-592) regarding, in essence, the obligations on administrative decision-makers to give the subjects of their decisions the opportunity to respond to critical issues.

129    Had the evidentiary standard by which the Review Panel would assess reliance been identified, Eastern Field submits it would have had the opportunity to provide statements in support of its submissions as contemplated by the Procedural Rules. However, at no point did the Review Panel invite Eastern Field to provide evidence of reliance.

Consideration – ground 1

130    I will deal first with the question of unreasonableness.

131    In my respectful view, Eastern Field falls well short of establishing unreasonableness. The Initial Panel’s orders were:

1.    Eastern Field not take any action to process an acceptance of the Takeover Bid in relation to shares managed by Taurus.

2.    On the expiry of three business days after the relevant date, any acceptances of the Takeover Bid in relation to shares managed by Taurus are cancelled.

3.    While the Takeover Bid remains open for acceptance, Taurus must not accept the Takeover Bid or sell any shares it manages for a price at or below $0.23 per share.

4.    Eastern Field must, within 14 days after the relevant date, send a letter to each Accepting Shareholder (in a form approved by ASIC and the Panel) that includes:

(a)    a description of how an Accepting Shareholder has until 15 business days after dispatch of the letter a right to withdraw their acceptance, which is equivalent to the right conferred by section 650E of the Corporations Act 2001 (Cth) (except to the extent contemplated by these orders)

(b)    a summary of the Panel’s declaration and orders

(c)    Eastern Field’s current intentions regarding the business of Finders, including its intentions as to whether it will keep Finders as a listed entity and

(d)    any other information known to Eastern Field that is material to the making of the decision by an Accepting Shareholder whether to withdraw their acceptance.

5.    Eastern Field must ensure that each Accepting Shareholder has, for a period of 15 business days after dispatch of the letter referred to in paragraph 4, a right to withdraw their acceptance which is equivalent to the right conferred by section 650E (except to the extent contemplated by these orders).

6.    Eastern Field must not purport to rely on item 9 of section 611 in circumstances where it would not have been able to rely on that section if it had been taken to have never acquired voting power in shares that are the subject of the cancellation under paragraph 2 or the withdrawal under paragraph 5.

7.    In these orders the following terms apply.

…

The Review Panel carefully considered whether or not to confirm the existing orders, but explained its reasons for declining to do so (at [24]-[26]) of its reasons.

132    There can be nothing wrong in the approach of considering whether a takeover would have proceeded in the way that it did if the circumstances had not occurred. Section 657D(2)(b) makes this clear. The extent to which a market participant’s interests are adversely affected by the unacceptable circumstances must plainly be a relevant consideration in determining whether or not to make orders under s 657D(2)(a). In all the circumstances of this case, an alternative decision may have been reached, as the Initial Panel did and as the dissenting member of the Review Panel did. Nonetheless, that does not make the views of the majority in the Review Panel irrational or legally unreasonable. In the context of the reasoning supplied, even if one might have adopted the firmer approach taken by the Initial Panel and the minority member of the Review Panel, it certainly cannot be said that the conclusion reached by the Review Panel was of the standard of jurisdictional error prescribed by s 5 of the ADJR Act.

133    One of the apparently key reasons for the Review Panel’s decision to decline to make orders under s 657D(2)(b) was that it did not consider it appropriate to ‘make an order under s 657D(2)(b) that addressed the effects of only one of a complex and interrelated set of unacceptable circumstances’. It is implicit from this comment that it was difficult to ascertain the precise consequences, if any, of the unacceptable circumstances on the ultimate outcome of the Takeover Bid. That process of reasoning is apparent from the Review Panel’s use of terms such as ‘as likely as not’, ‘little difference’ and ‘ultimate outcome’ within the Review TP Decision (at [25]) and its statement that there ‘is room for reasonable minds to differ as to the significance of the [Aggregation Unacceptable Circumstances]’ (at [24]).

134    This approach was in conformity with the need to determine with confidence (or ‘as far as possible’) what impact the unacceptable circumstances had on the Takeover Bid in order to satisfy the threshold of making an order under s 657D(2)(b) of the Corporations Act. It was reasonable and logical for the majority of the Review Panel to reach this conclusion given also that, based on its experience, the progression to the ultimate outcome (including the notice issued on 14 February 2018 that the Offer was unconditional and the rapid increase in acceptance once the Offer achieved 50% acceptance) was consistent with the ordinary progression of a successful takeover bid and, secondly, that it was not satisfied as to Eastern Field’s actual reliance. The contention by Eastern Field, that the Review Panel’s conclusion that reliance was not established is inconsistent with the clear evidence, cannot be accepted. There was no such clear evidence. Indeed, the Review Panel considered all of the submissions and evidence, but rejected Eastern Field’s contentions regarding the alleged reliance (save as to the contentions regarding the financing arrangements). This was a conclusion it was entitled to reach. It is not open to review this conclusion simply on the basis that another conclusion of fact might have been reached. That is not the standard of review open to this Court.

135    Finally, it must be emphasised in relation to legal unreasonableness that, as a matter of statutory construction, the decisional freedom of the Takeovers Panel conducting a review is broad and the Review Panel, given its expertise, was entitled to engage in reasonable speculation in endeavouring to determine what would have happened if relevant circumstances did not exist. It was entitled to use its expert judgement, based on the material before it and the experience of its members, when making this evaluation. In reaching its conclusion, it provided an evident and intelligible justification. This ground of review contending legal unreasonableness must be rejected.

136    In relation to the contention that there was a failure to consider a mandatory relevant consideration, or consideration of an irrelevant matter, in my view this submissions also fails. The matters put forward by Eastern Field are:

(a)    a failure to properly consider that Taurus’ conduct did not conform with RG 25;

(b)    a failure to properly consider Eastern Field’s reliance upon Taurus’ Statements in waiving its minimum 50% acceptance condition, in declaring the Takeover Bid unconditional and declaring its offer final and doing so on the basis that contemporaneous evidence of such reliance was required;

(c)    the Review Panel imposed an evidentiary standard requiring contemporaneous evidence which is inconsistent with the statutory scheme under which it was established;

(d)    it gave no notice of its purported evidentiary standard;

(e)    it acted inconsistently on the issue of evidence; and

(f)    it considered irrelevant matters in that Eastern Field and ASIC did not query Taurus’ Statements.

137    The suggestion that the Review Panel did not take into account that the conduct of Taurus did not conform with RG 25 is difficult to understand. The Review Panel was not obliged to ensure there was compliance with the object of the ‘truth in takeovers’ policy laid out in RG 25. Specifically, there was no obligation to find that Taurus’ resiling from its intention statement was inconsistent with the policy objectives in RG 25 that market participants be held to a final and last statement particularly where made without qualification. It is clear that the Review Panel did consider these matters, but it was not bound to ensure compliance. The Review Panel said (at [45]):

Eastern Field submitted that our decision on the orders would create “absolute confusion” as to the regulation of “truth in takeovers” in Australia. We do not agree. In our view, the circumstances of this case raised quite distinct issues from the more common and familiar use of “last and final” statements by bidders.

138    Both the Review Panel and the Initial Panel expressly declared the conduct to be an unacceptable circumstance. It was one of the bases on which the Initial Panel made the Declaration of Unacceptable Circumstances (and which was agreed to by the Review Panel) and which enlivened the Review Panel’s power to make orders under s 657D of the Corporations Act. It invited submissions on orders that would address the totality of the unacceptable circumstances and formulated orders designed to protect the extent to which rights or interests were affected by the unacceptable circumstances in light of those submissions.

139    This contention (if not the entire challenge) is really a submission as to weight. The dissenting member of the Review Panel gave great weight, as the Initial Panel did, to the unacceptable circumstances in crafting the appropriate relief. That does not mean that the relief granted by those members was the only relief open. There is no doubt that the majority of the Review Panel took into account the unacceptable circumstance (see, for example, at [28] and [45] of the Review TP Decision).

140    As to the evidentiary contentions, as previously indicated, the majority of the Review Panel was entitled to reach the conclusion that there was no reliance on the basis of the material that was properly before it and having regard to its own experience and expertise. It is quite clear that the absence of contemporaneous evidence of actual reliance was simply one factor considered by the Review Panel. The absence of such evidence was certainly not the only factor it took into account.

141    The evidentiary standard argument appears to proceed on a misapprehension as to the evidentiary provisions provided for in the ASIC Act, ASIC Regulations and Procedural Rules. The intent of the statutory regime governing the Takeovers Panel and its decision-making is not to preclude the Takeovers Panel from applying rules of evidence. The regime is intended to ensure a commercially viable and expeditious process by avoiding strict adherence to formal or technical rules of evidence which may occasion delay and hardship in circumstances of urgency. The fact that the Review Panel may proceed without regard to the rules of evidence does not mean that it, or the parties, must always do so. The logical extension of Eastern Field’s argument is that the Review Panel is bound not to proceed by rules of evidence.

142    In any event, the Review Panel’s remark about the lack of any contemporaneous evidence was only one observation by which it justified its conclusion that there was no reliance. The observation did not mean that the Review Panel could not accept reliance due to the lack of evidence. It simply meant that the absence of any contemporaneous indicators in the evidence and material before the Review Panel was another factor to support its conclusion that in the particular circumstances discussed it was not satisfied that there had been reliance. This does not elevate the state of affairs to some special rule of evidence or suggest that the Review Panel applied this as an evidential threshold whilst failing to advise Eastern Field of its intention to do so. It was relevant, as it would always be in commercial fact finding, to look for contemporaneous evidence because the parties provided numerous documents to the Review Panel for it to take into account. Some 76 documents were provided, 23 by Eastern Field. It can hardly come as a shock to Eastern Field that contemporaneous documentary support would assist its reliance case. Indeed, it does assert that it provided ‘clear evidence’ of reliance. The difficulty Eastern Field faces is that the Review Panel took a different view as to what the ‘clear evidence’ illustrated.

143    The Review Panel was entitled to conclude that there was not clear evidence that Eastern Field relied on Taurus’ Statements in waiving conditions of the Takeover Offer, in extending the offer period and in making a ‘no increase’ statement. It was also, in contrast, an appropriate comparator that the materials did justify a conclusion that Eastern Field relied on Taurus’ Statements in relation to the arrangement of its funding. It made Deferred Payment Orders to address this. The Review Panel was entitled to make these findings on the facts as to whether or not in fact Eastern Field established the necessary reliance. This did not involve invocation of any particular ‘evidentiary standard’.

144    Importantly, the Review Panel is not required to simply accept disputed assertions and craft its orders on the basis of those assertions being correct. There was no requirement for the Review Panel to give notice of any ‘evidentiary standard’, but further as already indicated, there was no ‘evidentiary standard’ imposed. In these circumstances, there cannot possibly be any obligation to give notice of a process of thinking.

145    It is well established that decision-makers will not normally be required to disclose their thought processes or proposed conclusions (Telstra Corporation Limited v Kendall (1995) 55 FCR 221 (at 230-231)), nor to give a running commentary on a party’s prospects (SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152 (at [48])). There can be an obligation in some circumstances to disclose certain adverse inferences and conclusions when the issue concerned is critical to the decision and, importantly, not apparent from its nature or the terms of the statute and not obviously open on the known material (Alphaone (at [26]) and SZBEL (at [29])). That is not this case. Reliance was a live issue throughout. Indeed, Eastern Field itself submitted to this Court that ‘clear evidence’ of reliance was available to the Review Panel.

146    Eastern Field also contends that the Review Panel acted inconsistently in making the Deferred Payment Orders on the basis of Eastern Field’s reliance while rejecting Eastern Field’s reliance in another context because of a lack of contemporaneous evidence. This contention cannot be accepted. Indeed, the process of consideration and the outcome demonstrate genuine and logical consideration of the extent to which Eastern Field relied upon Taurus’ Statements. The finding reached was based on the extract which Eastern Field provided to the Review Panel from its Facility Agreement dated 17 April 2018. In other words, the Review Panel was satisfied that there was contemporaneous evidence of reliance in this respect.

147    Eastern Field contends its failure, and ASIC’s failure, to query Taurus’ Statements was an irrelevant factor. The reasoning given for taking into account this fact was logical. As the majority of the Review Panel explained, the fact that Taurus’ Statements were not queried was worthy of note because any lack of qualification in a statement will inevitably have greater significance if maintained despite a request for clarification (at fn 23 of the Review TP Decision). This is simply one feature amongst several which, taken together, led to the majority’s conclusion that reliance was not established. No basis is made out for the contention that it was inappropriate or irrelevant to take into account that fact. The majority might equally have said that reliance was well established because (had it been the case), when Eastern Field expressly questioned the lack of qualification, that position was confirmed. That neither of these events occurred is simply an indication that this was not a case in which the majority of the Review Panel was able to satisfy itself as to reliance on the basis of a question and confirmation.

148    It was wrong, Eastern Field says, for the Review Panel to take into account ameliorating factors in respect of Taurus’ conduct. It will be recalled that those factors included:

(1)    The directors of Finders were recommending against acceptance of the hostile offer, it was not surprising that a holding associated with directors of Finders would make a statement that it did not intend to accept the offer.

(2)    The initial statement by Taurus to Finders was indeed accompanied by a qualification, albeit that the qualification was not sufficiently clear and was not repeated in the announcement by Finders to the ASX.

(3)    Taurus was aware that its intention statements were to be aggregated with similar statements by Finders shareholders.

(4)    ASIC did not query Taurus (or Finders) regarding Taurus’ Statements or the aggregated statements until more than three months after they were announced.

(5)    No contemporaneous evidence was provided of reliance by Eastern Field or any other person on Taurus’ Statements. Notwithstanding Eastern Field’s claim that it relied on Taurus’ Statements, Eastern Field did not query Taurus regarding its statement.

(6)    It is not uncommon when a bidder achieves control in a target that the independent directors change their recommendation and accept an offer in respect of shares they control which is what Taurus did in respect of the holding associated with Mr Galt.

149    None of these factors meant that the Declaration of Unacceptable Circumstances should change. But it cannot be accepted that, having regard to the broad discretion of the Review Panel under s 657D of the Corporations Act, the Review Panel cannot consider relevant ameliorating factors. There would be just cause for complaint in fact if it did not consider such factors if it thought they were relevant in crafting the appropriate relief. Just as Eastern Field contends that the Review Panel was required to consider whether the conduct of Taurus did not conform with RG 25 (and the Review Panel did take this into account), it was entirely appropriate for the Review Panel to consider the degree of culpability when it crafted the Substitute Orders.

150    There is no fundamental rule that once circumstances have been found to be unacceptable there must be a cancellation of the transfer of shares. As noted, RG 25 does not have the force of law and it is not binding on the Review Panel. It is an important statement of ASIC policy as to what it considers to be appropriate in general rather than in specific cases and indicates what ASIC might do if its policy is not observed. But, in any event, it is difficult to see how that assists in the determination of this application because it is common ground that there was a departure from RG 25. The question before this Court is whether there were errors in terms of the relief granted as a consequence of that departure, such that the ADJR Act grounds of judicial review are enlivened.

151    It is true that the effect of the relief is that Eastern Field has been left with an obligation to acquire many more shares than it would have acquired in the absence of the unacceptable conduct. On the other hand, it went about an acquisition of 100% and that is what it has got. It is not as though Taurus has escaped unscathed. Its obligation to pay compensation has been estimated by ASIC as being in the order of $500,000.

152    The complicating factors were complex. The majority of the Review Panel was conscious that the case was not about Taurus’ conduct alone. Rather, it involved unacceptable circumstances relating to the conduct of other parties as well. First, was the position of Finders, the target company who procured Taurus’ Statements. Taurus provided the letter to Finders, but included with that letter was a qualification that Taurus would advise Finders if it changed its mind. Finders, however, made the announcement to the ASX with the Taurus Intention Statement and excluded from that announcement the Taurus Qualification Statement. Taurus bore some culpability because it knew of the announcement and failed to ensure that it contained the qualification, but Finders also bore responsibility for that situation. The degree of culpability of persons whose interests are affected by orders crafted as a result of a conclusion as to unacceptable circumstances is certainly a factor to take into account.

153    Ground 1 cannot succeed.

Ground 2 – the Review Panel failed to consider relevant matters and proceeded without evidence

154    As to this contention, Eastern Field stresses that s 657D(1) of the Corporations Act imposes a mandatory requirement; the Review Panel must not make an order if it is satisfied that the order would unfairly prejudice any person.

155    In considering s 657D, the Initial Panel noted the balancing exercise referred to by Emmett J in Glencore International AG v Takeovers Panel (2005) 220 ALR 495 (Glencore No 1) (at [32]) and Glencore International AG (ACN 114 271 055) v Takeovers Panel [2006] FCA 274 (Glencore No 2) (at [124]) and then undertook the balancing exercise detailed in the Initial TP Decision by identifying persons whose rights or interests were affected by the unacceptable circumstances, the appropriate order to protect those rights or interests and the prejudice that would be suffered by reason of the proposed orders.

156    The Review Panel, however, having determined that it would not make a cancellation order under s 657D(2)(b) of the Corporations Act, Eastern Field says, gave no consideration to the effect of the Substitute Orders on Eastern Field except for the discussion at [41] of the reasons concerning the Deferred Payment Orders. At [41] the Review Panel said:

41.    Eastern Field submitted that the grant of an unlimited put option to Taurus in Order 6 was unfairly prejudicial to Eastern Field. We note, however, that Eastern Field has an unlimited call option under Order 5 that enables it to put an end to Taurus’s put option at any time. We indicated to parties that we considered Orders 1-6, in combination, appropriate to give Eastern Field (effectively) a means to defer payment for the acquisition of Taurus’s shares until 30 November 2018, and we would not consider it appropriate to make Orders 1-4 without also making Orders 5 and 6. Eastern Field did not request that we refrain from making all of Orders 1-6. We are satisfied that Orders 1-6 in combination confer a benefit on Eastern Field (namely, a means to defer payment of consideration to Taurus) and do not unfairly prejudice Eastern Field or any person.

(Citations omitted.)

157    Eastern Field argues that no adequate consideration was given to the prejudice that Eastern Field would suffer from having to proceed at all with the acquisition of Taurus shares, contrary to Taurus’ Statements, and despite:

(a)    the findings as to the effect of the unacceptable circumstances identified in the Declaration of Unacceptable Circumstances;

(b)    the cumulative and earlier evidence of Eastern Field’s reliance on Taurus’ Statements; and

(c)    the clear and cumulative effect of the prejudice that Eastern Field would suffer by proceeding with the acquisition of Taurus’ shares in Finders.

158    Eastern Field notes that the Review Panel did correctly identify the prejudice that Eastern Field claimed it would suffer as being as follows (at [29]):

(a)    it would be required to acquire Taurus’ shares at a cost of more than $20 million and, if it did so, would not have sufficient funding available to it to make a loan to Finders that it considered Finders was likely to require;

(b)    Eastern Field would be required to make compulsory buyout offers under s 662A of the Corporations Act;

(c)    Eastern Field’s intention was now to maintain Finders’ ASX listing (including by taking measures to ensure appropriate spread if required by ASX) due to the treatment under Indonesian tax laws of Indonesian residents holding more than 50% in unlisted foreign companies; and

(d)    Eastern Field had fixed the amount of its banking facility on the basis that Taurus would not and could not accept.

159    Eastern Field contends that the prejudice it claimed to suffer was not considered by the Review Panel because it applied an inappropriate evidentiary standard. Further, all the Review Panel granted to Eastern Field was time to arrange finance to meet the costs of acquisition of the Taurus shares. The effect of the Deferred Payment Orders was, essentially, to require that the Takeover Bid actually proceed afflicted by the unacceptable circumstances, being Taurus’ acceptance of the Takeover Bid contrary to its own statements.

160    Eastern Field argues that an appropriate order would have protected Eastern Field’s rights and interests from such a consequence. Time to arrange financing does not cure the effects of the unacceptable circumstances, particularly given the obligation to acquire compulsorily. The Substitute Orders are said to ignore the obvious detriment suffered by Eastern Field in having to acquire the stake at all and in having to make compulsory offers which would not have been required had Taurus kept its promise to the market.

161    The Compensation Orders made by the Review Panel had no application to Eastern Field. The making of orders under s 657D(2)(a) of the Corporations Act that protect certain affected shareholders from the consequences of the unacceptable circumstances, but not Eastern Field (except by deferral of payment), is contended by Eastern Field to be irrational and illogical.

162    The absence of a proper basis is premised on two central contentions by Eastern Field. First, the Review Panel did not have to be satisfied in a causal sense that Eastern Field had relied on Taurus’ Statements. It was sufficient, as the Review Panel had declared, that Eastern Field’s acquisition of control over Finders’ shares did not take place in an efficient, competitive and informed market.

163    Secondly, there was clear evidence of Eastern Field’s reliance on Taurus’ Statements. Eastern Field waived its minimum acceptance condition (and subsequently all of its bid conditions), made numerous decisions to extend its bid period and declared its price final. Each of those decisions was made before Taurus had resiled from the impugned statements. In that context, Eastern Field says its decisions were made because Taurus would not (and could not) accept, such that Eastern Field would not: