These appeals, which were heard together, concerned the extent of the power given to the Australian Securities and Investments Commission ("the Commission") by s 730 of the then Corporations Law ("the Law"), to declare that Ch 6 of the Law (ss 602-759), which dealt with the acquisition of shares and, in particular, with takeovers, shall apply as if specified provisions of the Chapter were omitted or modified or varied.
Facts
The appellant, Southcorp Wines Pty Limited ("Southcorp"), pursuant to a successful takeover bid, acquired the whole of the then issued shares in the capital of Coldstream Australasia Limited ("Coldstream"). There were also in existence a number of options to acquire Coldstream shares. Southcorp ultimately acquired most of those by agreement. DB Management Pty Limited, Batoka Pty Limited and Winpar Holdings Limited ("the respondent option holders"), who between them held 3,100 options, refused to sell. Southcorp obtained from the Commission a declaration under s 730 which enabled Southcorp, when Coldstream shares were issued pursuant to the exercise of the options, compulsorily to acquire those shares. The respondent option holders challenged the Commission's decision by seeking a review in the Administrative Appeals Tribunal ("the Tribunal"). The Tribunal affirmed the Commission's decision. The matter then went to the Federal Court on an "appeal … on a question of law" pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The contention was that the Tribunal had erred in law in its review of the Commission's decision. At first instance in the Federal Court, (Whitlam J) held that there was no error of law in the Tribunal's decision, and dismissed the appeal. There was a further appeal to the Full Court of the Federal Court. By majority, (O'Connor and Dowsett JJ, Beaumont J dissenting), the Full Court allowed the appeal, holding that the Commission, the Tribunal and Whitlam J had misconstrued s 730, and that the Commission's declaration, which permitted the compulsory acquisition of shares resulting from the exercise of the options, was outside the power given by the section. The Commission and Southcorp appealed to the High Court who allowed the appeal. As part of the reasons the following was stated:
"The language of s 730 does not support a construction which would confine an exercise of the power there given to one which affects only the person or persons making an application for a declaration. In most takeover situations, the rights of third parties will be potentially affected, even by what might be regarded as a relatively straightforward modification of Ch 6. To take an example referred to in argument, a declaration varying the time for the taking of some step by an offeror may ultimately affect the offeror's capacity compulsorily to acquire shares of third parties. A declaration under s 730 is one that Ch 6 "shall apply in relation to a specified person or persons, or a specified class or classes of persons" as if provisions of the Chapter were omitted, or modified, or varied. The new rights and liabilities created by such a declaration cannot be confined in their operation so as to affect no person other than the applicant for the declaration. It is difficult to understand how, in practice, the power could be limited so that its exercise did not affect, directly or indirectly, the rights of third parties. It may be added that an examination of the cases in which s 730, or its legislative predecessor, has been held to apply reveals that it has commonly been invoked, successfully, in circumstances where the rights of third parties were necessarily affected.""The legislature, by not including in s 701 a right of compulsory acquisition of options, or shares resulting from an exercise of options in circumstances of the kind presently in question, has not manifested an intention to exclude the creation of such a right from the operation of s 730. Rather, the effect of giving the words of s 730 a literal meaning is that, although there is no such right which may be invoked by an offeror without need for further justification, the Commission has a discretionary power to create such a right, to be exercised in the light of the Eggleston principles and any other relevant considerations, having regard to the individual circumstances of a particular case, and subject to the possibility of judicial review. That is a much more restricted right than the right conferred by s 701, but it is within the purview of the legislation." "There is no warrant for giving the words of s 730 a meaning other than their literal meaning."
