In brief

  • A court has held that if the Takeovers Panel (Panel) makes a decision to accept undertakings in lieu of making a declaration of unacceptable circumstances:
  • the Panel has no further power in relation to making that particular decision, and
  • there is no power to extend the time to allow the Panel to make a declaration of unacceptable circumstances, unless its decision is vitiated by jurisdictional error.
  • The effect of the court’s decision is that the Panel may be inclined, where the effect or future application of an undertaking is uncertain, to make a declaration of unacceptable circumstances to preserve its right to make new orders or vary previously made orders in the future.

Introduction

The recent court case of Chaudhri v Takeovers Panel [2011] FCA 1488 concerned an application by the Panel for an extension of time to make a declaration of unacceptable circumstances in relation to proceedings which had ended four months earlier.

Background

The case related to the Bentley Capital matter before the Panel. During that matter, undertakings from some of the parties were accepted by the Review Panel in lieu of making a declaration of unacceptable circumstances.

Approximately four months after the undertakings had been accepted by the Review Panel, a disagreement as to the practical effect of the undertakings arose, such that the Review Panel did not consider that the undertakings could be complied with in the manner it had envisaged.

The Panel can only make a declaration of unacceptable circumstances within three months after the relevant circumstances occur or, within one month after the application for review is made, whichever is later. Accordingly, it was necessary for the Panel to apply to the court for an extension of time to make the declaration.

The approach of the court

The court concluded that an order for an extension of time in which to make a declaration of unacceptable circumstances was not available as the Panel’s function is ‘at an end’ once it determines to accept an undertaking in lieu of making such a declaration.

The court did, however, note that there may be three circumstances where it may make an order for an extension of time for the Panel to make a declaration of unacceptable circumstances, being where the Panel has:

  • made a jurisdictional error,
  • proceeded on the wrong factual basis, or
  • not disposed of the application which was before it.

None of these was applicable to the matters in question.

Will the Panel’s willingness to declare unacceptable circumstances change?

Following the decision of the court, the Panel may be more inclined, where the effect or future application of a proffered undertaking is not certain, to make a declaration of unacceptable circumstances. It could then decide whether to make final orders or instead accept an undertaking.

Since the Panel may make a new order outside the three month time limit for making a declaration of unacceptable circumstances, and may subsequently vary, supplement or revoke a previously made order, it has much more scope to adjust its remedies if it has made a declaration of unacceptable circumstances than where it has accepted an undertaking in lieu of making such a declaration.