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Broken Hill Pty Co Ltd v National Companies & Securities Commission [1986] HCA 31; (1986) 160 CLR 492 (10 June 1986)

CATCHWORDS

HEARING

DECISION

2. Both B.H.P. and Elders made application in chambers for interlocutory injunctions pending the hearing of their actions and, because there was some urgency and it appeared that the determination of the applications would dispose of the actions, the whole of the case on each of the applications was directed to be argued before a Full Court pursuant to s.18 of the Judiciary Act 1903 (Cth).

3. The Commission is established by the National Companies and Securities Commission Act 1979 (Cth) ("the N.C.S.C. Act") and in the performance of a function or the exercise of a power under an Act (defined elsewhere as an Act of the Commonwealth Parliament) represents the Crown in right of the Commonwealth. In both actions, the Commission is sued on behalf of the Commonwealth in the original jurisdiction of this Court under s.75(iii) of the Constitution and no objection has been taken to jurisdiction.

4. The Commission has, under s.6(1) of the N.C.S.C. Act, such functions and powers as are conferred upon it by any Act that is a law of the kind referred to in s.122 of the Constitution. Section 122 refers to laws for the government of Commonwealth territories. Under s.6(2) of the N.C.S.C. Act, the Commission is to perform any functions and may exercise any powers that are conferred or expressed to be conferred upon it by any State Act. A distinction is thus drawn between functions and powers conferred upon the Commission by the N.C.S.C. Act and those conferred or expressed to be conferred by a State Act, although it would seem that in each case the capacity to perform the functions and exercise the powers is derived from the N.C.S.C. Act. Nothing turns on the distinction in these cases.

5. The N.C.S.C. Act forms part of a legislative scheme enacted pursuant to an Agreement made between the Commonwealth and the States for the purpose of establishing uniformity in the laws relating to companies and the regulation of the securities industry. The Agreement establishes a Ministerial Council and s.7 of the N.C.S.C. Act provides that the Commission shall comply with its directions. Section 9 provides that the Commission shall perform its functions and exercise its powers in accordance with the Agreement and shall comply with the provisions of the Agreement that are applicable to it. In each State there has been enacted a  National Companies and Securities Commission (State Provisions) Act , ("the State Provisions Act"), s.4(1) of which provides that, in the performance of a function or the exercise of a power under an Act (defined elsewhere as an Act of the relevant State Parliament), the Commission represents the Crown in right of the State. Section 4(2) provides that the Commission shall perform the functions and exercise the powers conferred or expressed to be conferred upon it by or under an Act (i.e. an Act of the relevant State Parliament) in accordance with the Agreement and shall comply in all respects with the provisions of the Agreement that are applicable to it in the performance of such functions and the exercise of such powers.

6. Under s.36(1) of the N.C.S.C. Act, the Commission may hold hearings for the purpose of the performance of any of its functions or the exercise of any of its powers. The equivalent provision under the State Provisions Act is s.7(1), under which the Commission may hold hearings for the purpose of the performance of a function or the exercise of a power conferred or expressed to be conferred on it by or under an Act (i.e., an Act of the relevant State Parlia- ment). Both the N.C.S.C. Act and the State Provisions Act in subsequent sections make substantially the same provisions with respect to the power of the Commission to summon witnesses and to take evidence and with respect to the nature of the proceedings at hearings. Both Acts set out, in a schedule, the text of the Agreement.

7. Clause 32(1) of the Agreement provides:

"Subject to this agreement, the functions of the
National Commission to be established by the
Commonwealth Acts shall be to have and to exercise,
subject only to directions from time to time of the
Ministerial Council, responsibility for the entire
area of policy and administration with respect to
company law and the regulation of the securities
industry."

8. In National Companies and Securities Commission v. News Corporation Ltd [1984] HCA 29; (1984) 58 ALJR 308, at p 313; [1984] HCA 29; 52 ALR 417, at p 425, Gibbs C.J. referred to cl.32(1) and commented that for the purpose of performing any of the functions so widely described, the Commission might hold a hearing. Brennan J. agreed with the reasons of the Chief Justice. Mason, Wilson and Dawson JJ., at p.320 of A.L.J.R., p.438 of A.L.R., referred to s.36(1) of the N.C.S.C. Act and expressed the view that the functions of the Commission included, subject to directions from time to time of the Ministerial Council, "'responsibility for the entire area of policy and administration with respect to company law and the regulation of the securities industry': the agreement, cl.32(1)." In the present cases, counsel for the plaintiffs sought to question these observations upon the scope of cl.32(1), or to confine them, having regard to the context in which they were made. Some further examination of the scope of cl.32(1) is, we think, necessary but it is convenient first to outline the manner in which the Commission set about the hearing in question.

9. On 14 April 1986, the Commission announced in a news release that it would hold a public hearing into the circumstances surrounding the recent acquisition of shares in B.H.P. by Elders and the acquisition of convertible bonds and redeemable preference shares in Elders by B.H.P. It said that the hearing would include inquiries into the course of negotiations and the relevant financing arrangements. It expressed concern to ensure that the market was fully informed and to establish whether the conduct of the parties involved was acceptable. On 16 April 1986 the Commission made a further news release and sent a telex message to B.H.P. and Elders in which it said that the purpose of the hearing was to determine whether the relevant circumstances and conduct did not contravene the Companies Code, the Companies (Acquisition of Shares) Code and the Securities Industry Code. It specified ss.129, 229, 563, 564 and Pt 4 of Div.IV of the Companies Code, s.128 of the Securites Industry Code and s.11 of the Companies (Acquisition of Shares) Code. It also said that it would inquire into the circumstances of the acquisitions for the purpose of determining whether the Commission should be satisfied that the conduct of the persons concerned in the transactions was acceptable and, if not, whether it should exercise its powers under s.60 of the Companies (Acquisition of Shares) Code. It added that the hearing would provide an opportunity for B.H.P. and Elders to demonstrate that the transactions were not improper and did comply with the law.

10. There was a meeting with the Commission on 21 April 1986 and submissions were made by B.H.P. and Elders that the Commission ought not to proceed with the proposed hearing. In rejecting these submissions, the Commission said that it required information which it would examine in order:

"(a) if the conduct of the various parties is
acceptable, and not against the public
interest, to reassure the market and to
restore confidence in the honesty, efficiency
and fairness of the market of securities.

(b) to determine if the conduct complies with the
law, whether it is against the public
interest, and if, as a consequence, there
should be a change in the law.

(c) to determine if the conduct is or is not
acceptable within the meaning of that
expression in section 60 of the Companies
(Acquisition of Shares) Code, and if not, what
remedial action is appropriate.

(d) to determine if the circumstances provide
reasonable grounds to suspect that there has
not been compliance with the statutory and
regulatory provisions, so as to warrant
further investigation and remedial action."

11. The legislative scheme to which we have referred includes the Companies Act 1981 (Cth), the Companies (Acquisition of Shares) Act 1980 (Cth) and the Securities Industry Act 1980 (Cth). Each of these statutes is an Act of the Commonwealth Parliament which applies in the Australian Capital Territory. The States have passed application Acts applying each of the Commonwealth Acts, with any necessary adaptations, as a code within each State. Without recourse to specific provisions, it is apparent that under this legislation the Commission has a wide variety of functions which may well entail responsibility for the entire area of policy and administration with respect to company law and the regulation of the securities industry. That is, of course, the description given to the functions of the Commission by cl.32(1) of the Agreement and it is a description which was accepted in News Corporation. However, none of the judgments in that case saw cl.32(1) as conferring independent functions or as an independent source of power and in our view it cannot be so regarded. Notwithstanding this, the effect of cl.32(1) is somewhat more than mere description because it provides a plain indication of the width of the role which the Commission is intended to play in policy and administration in company law and the securities industry. Having regard to s.9 of the N.C.S.C. Act, which requires the Commission to perform its functions and exercise its powers in accordance with the Agreement, cl.32(1) serves to indicate the wide scope which should be given to the functions and powers specifically bestowed upon the Commission. It provides the context within which those functions and powers must be interpreted. In these cases, however, it is unnecessary to pursue the effect of cl.32(1) further because it is, in our view, apparent without reference to that provision that there are ample functions and powers residing in the Commission for the performance of which it might hold the hearing which it has commenced.

12. It is true that the nature of the hearing which the Commission is conducting emerged with greater definition following its initial announcement. The Commission saw, however, the need for a swift response and under s.38(1) of the N.C.S.C. Act the proceedings are to be conducted with as little formality and technicality, and with as much expedition, as the requirements of the legislation and a proper consideration of the matters before the Commission permit. Nevertheless, it is clear that the Commission is not entitled to enter upon hearings at large: N.C.S.C. Act s.36(1). In order to ensure that it is acting within the ambit of the legislation, it is desirable when it proposes a hearing that it should as soon as possible identify the powers and functions upon which it relies, even if subsequent events may require a widening of the scope of its inquiry. The Commission may, of course, rely upon any one or more of its powers or functions in conducting a hearing. In these cases it had, on 21 April 1986, before it had commenced its actual inquiry, indicated with some particularity those matters upon which it relied.

13. These matters, listed by the Commission in items (a) to (d), are set out above and it should be added that the Commission also relied upon its "prime function" under cl.32(1) of the Agreement. We have already pointed out that cl.32(1) does not confer any function upon the Commission independently of those functions which are to be found in the legislation itself. The reassurance of the market and the restoration of confidence in it, which are specified as item (a), would, as separate functions, appear to be beyond its powers. No doubt in including this item, the Commission was acting upon a somewhat broader view of the effect of cl.32(1) than appears to us to be justified. Nevertheless, the matters referred to in item (a) are clearly matters which, having regard to cl.32(1) and s.9 of the N.C.S.C. Act, might in appropriate cases properly be taken into account in the performance of the functions and the exercise of the powers specifically conferred upon it.

14. Items (b) and (c) clearly fall within the functions and powers of the Commission. Under s.6(3) of the N.C.S.C. Act, the powers of the Commission include the power to make recommendations to the Ministerial Council for new laws, or changes in existing laws, for the Australian Capital Territory relating to companies or the regulation of the securities industry (including recommendations of a kind that the Companies and Securities Law Review Committee also has power to make) being laws or changes in laws that are to have effect in participating States and participating Territories in accordance with the Agreement.

15. It is unnecessary for the purposes of these cases to determine the ultimate scope of the law reform function of the Commission. It is sufficient to observe that it is wide and that no reason has been advanced why the Commission should not conduct a hearing such as the one which has been commenced for the purpose of performing its function under s.6(3). Indeed, having regard to item (c) of the matters referred to by it, that being the item which mentions the remedial action available to the Commission in the event of there having been unacceptable conduct in relation to the acquisition of shares within the meaning of s.60 of the Companies (Acquisition of Shares) Code, it cannot be said that the Commission is acting outside its powers in pursuing the question of the adequacy of the remedies available with a view to the recommendation of new or changed laws in the light of the conclusions which it may reach about the transactions in question.

16. Section 60(1) of the Companies (Acquisition of Shares) Code enables the Commission to declare that an acquisition of shares amounting to the acquisition of a substantial interest in a company is an unacceptable acquisition. A substantial interest is not defined. The declaration must be made within 90 days of the acquisition and may be made in specified circumstances which go to the disclosure of the identity of the person acquiring the interest, the sufficiency of time and information for the shareholders and directors of the company to consider any proposals to acquire the interest and the opportunity of the shareholders to participate in any benefits arising from the acquisition. Under s.60(3), the Commission may declare conduct engaged in by a person in relation to shares in, or the affairs of, a company to have been unacceptable conduct. The declaration must be made within 90 days of the acquisition and may be made in circumstances which are the same as those specified under s.60(1). In the event of a declaration under either s.60(1) or s.60(3), a court is empowered to make any one or more of a number of wide-ranging orders directed towards limiting or reversing the effect of the unacceptable acquisition or the unacceptable conduct: ss.11, 45, 60(2) and 60(4) of the Companies (Acquisition of Shares) Code. Under s.60A, the Commission itself may, where it has made a declaration under s.60, make orders similar to those which may be made by a court but within a more limited range and the duration of any order made under this section is limited to a period of 30 days. This is a sufficient description of the effect of s.60 to indicate the breadth of its operation. The making of a declaration under the section, which may have far-reaching effects, requires the Commission to be satisfied of certain matters upon which the Commission may clearly need to inform itself. If for this purpose the Commission wishes to hold a hearing, then it is empowered to do so under s.36(1) of the N.C.S.C. Act.

17. What we have said already is sufficient to indicate that the applications to restrain the Commission from continuing with its hearing must fail and it is unnecessary to deal with item (d) of the specified purposes of the hearing. That item asserts that the hearing is to determine whether the circumstances provide reasonable grounds to suspect that there has not been compliance with the statutory and regulatory provisions so as to warrant further investigation and remedial action. This item is apparently based, at least in part, upon s.16A of the Companies Code, which provides that where the Commission has reason to suspect that a person has committed an offence under a provision of the Code, the Commission may make such investigation as the Commission thinks expedient for the due administration of the Code. The possible offences in these cases include, presumably, those referred to in the earlier announcement by the Commission, but it is common ground that the Commission has as yet no reason to suspect the commission of any offences.

18. Section 16A was apparently thought necessary as a result of the decision in Gibbs v. National Companies and Securities Commission (1982) Qd R 328, in which Sheahan J. in the Supreme Court of Queensland held that a hearing could not be conducted by the Commission under s.7(1) of the relevant State Provisions Act in order to investigate whether circumstances would justify prosecutions, especially under s.11 of the Companies (Acquisition of Shares) Act or the Companies (Acquisition of Shares) Code. The decision was based upon the absence of an express investigative power for this purpose in the State Provisions Act. See also Combined Investments Pty Ltd v. National Companies and Securities Commission (1982) 40 ALR 132. However, the power of investigation given by s.16A of the Companies Code is conditional upon the Commission having reason to suspect that a person has committed an offence under the Code and, as we have said, it is not suggested that that condition is fulfilled in these cases. It is questionable that the having of a reason to suspect the commission of an offence is a function or power of the Commission for the purpose of the performance or exercise of which the Commission might hold a hearing under s.36(1) of the N.C.S.C. Act or s.7(1) of the State Provisions Act. It would be unusual to contemplate a hearing for the purpose of forming a suspicion (see Wiseman v. Borneman (1971) AC 297, at p 308) and the powers of inspection which are given to the Commission under Div.1 of Pt II of the Companies Code may be thought to be the intended method for the initial investi- gation of the commission of offences. Moreover, the opening words of s.16A of the Code - "Where the Commission has reason to suspect that a person has committed an offence" - appear to be intended to restrict the power to investigate under that section by laying down a prerequisite, namely, the existence as a fact of a state of mind, rather than to confer a function upon the Commission. Cf. Commissioner for Corporate Affairs v. Guardian Investments Pty Ltd [1984] VicRp 81; (1984) VR 1019. There is, however, no need to provide a conclusive answer to these questions in these proceedings since the ambit of the hearing being conducted by the Commission cannot be increased by the addition of item (d) as a power or function.

19. There remain the alternative claims that the Commission should be restrained from holding its hearing in public. Under s.36(2) of the N.C.S.C. Act and s.7(2) of the State Provisions Act, the Commission may either direct that the hearing take place in public or direct that the hearing take place in private. Since these cases were referred into this Court, the Commission has indicated that, unless it is restrained from doing so, it proposes generally to hold the hearing in public. The reference of these applications to the Full Court was upon the basis of the plaintiffs' contention that the Commission lacked power to hold a public hearing and not upon the basis of any submission that there had been any wrongful exercise of a discretion vested in the Commission. The argument which was put to us, however, went not to power but to the exercise of discretion and it is inappropriate for this Court to deal with that argument at this stage, dependent as it is upon the resolution of questions of fact. The course to be adopted by the plaintiffs in relation to this aspect of these proceedings is a matter for them and the future course of the actions, including any question of remitter under s.44 of the Judiciary Act, will depend upon what they do.

20. The Court has already indicated its decision, for which the foregoing are our reasons, that these applications should be dismissed and has ordered accordingly.

ORDER

Order that the interlocutory injunctions granted by Mr Justice Dawson on 22 April 1986 be dissolved.