Summary

  • We believe the decision in Careers Australia is an important reminder for applicants of the function of the Panel and clarifies that it will not be the forum for all control-related disputes.
  • The Panel will not decide on issues where it believes a court or another forum is better placed to hear a dispute.
  • When considering whether to conduct proceedings on an application, the Panel will have regard to factors such as the time that has passed, the evidence required to establish unacceptable circumstances and the existence of other forums to decide the issues.

Overview

The Takeovers Panel (Panel) has sent a timely reminder to applicants that it will be reluctant to fulfil the role of the courts as a resolver of disputes long after control transactions have ended in the recent decisions of the Careers Australia Group Limited 03 [2015] ATP 1 and on review in Careers Australia Group Limited 03R [2015] ATP 2. These decisions provide a cautionary tale for those wishing to use the Panel’s jurisdiction to avoid the more costly and time-consuming court processes after a bid has closed.

Background

The applicants were former shareholders in Careers Australia Group Limited (CAG), which received a takeover proposal from Cirrus Business Investments Limited (Cirrus) initially in May 2013.

At the time of Cirrus’ initial bid, Cirrus held approximately 45.2% of CAG and had two directors on CAG’s board.

In its bidder’s statement, Cirrus made statements to the effect that CAG in their opinion would need to reinvest available cash to finance ongoing growth and would be unable to pay dividends for some time. It was also suggested that further capital may be required to support growth (Statements). Following a series of competitive bids from a rival bidder and counter-bids by Cirrus, Cirrus was ultimately successful in securing control of CAG in August 2013 and the applicants sold their shares into the bid.

Under Cirrus’ ownership, CAG underwent changes to its business structure and revenue mix and a new debt facility was entered into, providing access to further capital. As a result in financial year 2013/2014 CAG made certain dividend and capital returns to Cirrus.

On 23 December 2014, the applicants lodged an application with the Panel seeking a finding of unacceptable circumstances for the Statements.

Decision at first instance

The Panel declined to conduct proceedings on the application at first instance.

On the threshold question of whether the application had been brought in time, the Panel found that the application was not made within a two month period of the circumstances occurring as required by the Corporations Act2001 (Cth) (Act). Although the Panel has the ability to extend that period, the Panel declined to exercise it discretion in this matter, on the basis that the Panel would have declined to conduct proceedings on the application had it been brought in time.

In reaching this decision, the Panel concluded that the courts were the more appropriate forum to hear a dispute of this nature, primarily because the Panel was not as well equipped to undertake the information gathering and forensic analysis that was necessary in the circumstances.

Cirrus submitted that a court, not the Panel, exists to adjudicate on legal rights and that the nature of the application sought an adjudication on legal rights. The Panel did not wholly endorse this characterisation, instead noting that there was at times overlap in considering contraventions of the Act that may give rise to a finding by the Panel.

Among other things, Cirrus further submitted that the nature of the final orders being sought by the applicants were more appropriate in the context of a court hearing.

As for the final orders, Cirrus argued that they were in effect an award of damages, and while the Panel has the power to make a compensation order, it would be overextending that power to rely on it to conduct an action in damages for a closed bid. The Panel acknowledged that the Act made clear that after the bid period a court could address  an action for damages and deemed the courts the more appropriate forum to pursue such an action in the circumstances.

Decision on review

The applicant sought to commence a review of the decision of the sitting Panel, but first needed to gain consent to do so from the Panel President pursuant to the Act.

The President has not often exercised their discretion to refuse consent for a review. However, in what we believe to be a positive use of the discretion, the President declined to grant consent for a review of the sitting Panel’s decision. In exercising this discretion the President has demonstrated that they will not be afraid to prevent reviews where, based on the merits of the application, it was unlikely that a review Panel would agree to conduct proceedings.

The President noted in their reasons that that the applicants would not be denied access to justice as a result of refusing consent because they had access to the courts and that given the takeover was completed almost 18 months ago, there was no convincing case for swift action by the Panel.

Commentary

The hallmarks of the Panel, namely its speed and cost effectiveness in dealing with concerns involving control transactions, have made it an alluring destination for claimants. However, in the Careers Australia decisions, the Panel has made it clear that, outside special circumstances of the bid period, the Panel is unlikely to consider itself as the appropriate forum hear disputes.

Based on the significant time that had passed since the takeover bid had completed, the lack of necessary urgency in delivering a resolution for the complaints, the complexity of the evidential analysis that would be required and the quasi-damages nature of the orders being sought, the Panel held that the courts are better placed to hear matters of this nature. In doing so, the Panel implicitly acknowledged that hearing disputes it is ill equipped or not designed to hear might negate the very features that have made the Panel attractive – namely, its ability to deal with matters within its scope quickly and cost effectively.

This article was written by Kam Jamshidi, Senior Associate, Melbourne.