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Australia – Challenge to President’s Club Panel Rejected.

7 July, 2014

 

 

What You Need To Know

 

  • A judicial review challenge to the Panel’s decision concerning The President’s Club Limited has been dismissed, but an appeal is pending 
  • The appeal may provide further guidance on several aspects of Panel procedure, including time limits for applications 

 
The Federal Court has dismissed a judicial review challenge to the Takeovers Panel’s decision in July 2012 concerning The President’s Club Limited (TPC), which operates the Palmer Coolum Resort time share scheme.

 
Background

 
Queensland North Australia Pty Ltd (QNA) and another company associated with Clive Palmer acquired a company holding 41.4% of the shares in TPC in July 2011. QNA acquired a further 2.9% in March 2012. The Panel found that TPC was subject to the takeover laws in Chapter 6 because it was a company with more than 50 members. Consequently, the Panel considered that:

 

  • the 2011 acquisition contravened the 20% threshold prohibition and
  • the March 2012 acquisitions were unacceptable since they were only covered by the 3% creep exception due to the 2011 acquisition.

 

Unless the Panel grants an extension, an application to the Panel must be made within two months after the circumstances occurred. In this case the application was not made until the end of June 2012, more than two months after the March 2012 acquisitions. The Panel decided that there were “ongoing circumstances” but also granted an extension “in case it should be necessary”.

 
Decision

 
QNA sought judicial review of the Panel’s decision arguing a number of grounds, including that the Panel acted in breach of natural justice by extending the time for making an application without giving QNA the opportunity to make submissions. ASIC submitted in response that QNA could still have addressed the issue of extension before the Panel determined the application.

 
Justice Collier of the Federal Court found that, had an extension been necessary, the Panel’s process would have been contrary to the rules of natural justice. However, the Court concluded that it was open to the Panel to find that the circumstances were ongoing, so that no extension was required, and endorsed a broad view of “circumstances” for this purpose. Numerous other challenges, including on natural justice grounds, were dismissed.

 
QNA also sought to argue that there was no evidence for certain findings made by the Panel, including that the acquisition was likely to inhibit an efficient, competitive and informed market and that remaining shareholders would not have a reasonable and equal opportunity to exit. The Court rejected these arguments, commenting that the Panel is entitled to use its judgment on these matters and form opinions which could not be challenged on “no evidence” grounds.

 
Comment

 
Justice Collier’s decision may mean that the Panel is more likely to rely on “ongoing circumstances” to make a declaration where circumstances with continuing effect first occurred more than 2 months before the application. (The Panel did so, citing Justice Collier’s decision, in Northern Iron Limited where deficiencies in substantial holding notices and responses to tracing notices had first occurred more than a year earlier. The Panel noted that there was ongoing non-disclosure and consequential contraventions, but also extended the time for making an application, for the avoidance of doubt, after considering the parties’ submissions.)

 
QNA is appealing Justice Collier’s decision. The appeal may well provide further guidance on several aspects of Panel procedure. QNA will presumably argue, among other things, that an extension was required and therefore, consistent with Justice Collier’s views, natural justice was breached. Even if that argument succeeds, it would not necessarily result in the Panel’s decision being set aside. Judicial review remedies are discretionary. QNA had the right to appeal the Panel’s decision to a Review Panel, but did not. Arguably, such an appeal could have “cured” any defects of natural justice, and QNA’s failure to appeal could give grounds for the Court to decline relief, despite any breach of natural justice. It is not clear whether this argument was put to Justice Collier – no mention is made of it in the judgment – but it would not be surprising if it is raised on appeal.

 
The appeal will further highlight the contrast in the time taken by courts, in comparison to the Panel, to resolve disputes in this area. The objective of resolving disputes as “quickly and efficiently as possible” was one of the key reasons for the re-establishment of the Panel in 2000. The Panel decision took a month whereas the initial judicial review proceedings took more than 20 months.

 

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For further information, please contact:

 

Bruce Dyer, Partner, Ashurst 
[email protected]

 

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