The High Court today made orders in AG (Cth) v Alinta Ltd. The Court found that section 657(A)(2)(b) of the Corporations Act (the Act) – which empowers the Takeovers Panel (the Panel) to make findings about breaches of the takeovers provisions of the Act – is constitutionally valid.
The decision is welcome news, as it avoids the uncertainty that would have occurred in the market at a time of unprecedented takeover activity. It is business as usual for the Panel. The Panel has issued a media release today advising that it will once again accept applications founded on a breach of the takeover provisions of the Act.
The Constitutional challenge to section 657(A)(2)(b) was made by Alinta Ltd. In April 2006, Alinta and Australian Gas Light Company Limited (AGL) merged some of their interests. Following the merger arrangements, Alinta acquired AGL's 30% holding in Australian Pipeline Trust (APT) (a managed investment scheme). In August 2006, Alinta also purchased a 10.25% interest in APT.
Australian Pipeline Limited (APL), the responsible entity for APT, asserted that Alinta's acquisition of the further 10.25% interest in APT was a breach of section 606 of the Act. It sought a declaration of unacceptable circumstances from the Panel.
The Panel found that Alinta's further acquisition of 10.25% in APT resulted in a breach of section 606 of the Act. It made a declaration of unacceptable circumstances, and ordered Alinta to divest itself of the 10.25% interest.
Alinta sought judicial review of the Panel's decision in the Federal Court. Emmett J upheld the Panel's decision. Alinta appealed to the Full Court of the Federal Court, arguing that section 657A(2)(b) of the Act was constitutionally invalid because it permitted the Panel to exercise a judicial power. Under section 71 of The Constitution, a judicial power can only be exercised by courts invested with Federal jurisdiction (which did not include the Panel).
By a 2-1 majority (Gyles and Lander JJ, with Finkelstein J dissenting), the Full Court found that section 657A(2)(b) of the Act was constitutionally invalid because it purports to confer judicial power on the Panel, and does not do so in accordance with section 71 of the Constitution.
The High Court overturned the Full Court's decision, making an order that section 657A(2)(b) of the Act is, in fact, constitutionally valid. The High Court's reasons are to be published at a later date.
The High Court's decision vindicates the purposes for which the Panel was established. It was established to be the primary forum for the resolution of disputes during takeovers. The right for private parties to commence court proceedings, and to obtain injunctions to restrain takeover activity was abolished, in response to the well known tactic of impeding takeover activity through technical attacks on takeover documents.
Today's decision enables takeover activity to resume with the certainty and confidence that disputes can and will be adjudicated by the Panel in a timely and practical manner, consistent with the purposes for which it was established.
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