Read the room at the Panel: costs are squarely on the table
Ahead of the Deal - Australian M&A Briefing
Key Insights
- As demonstrated in the recent Emu NL proceedings, parties (and their directors) who contribute to a failure to comply with the Takeovers Panel's interim orders or elongate Panel proceedings should not be surprised if the Panel decides that financial consequences are appropriate.
- The Panel is consulting on significant revisions to Guidance Note 4 'Remedies General' (GN 4). The proposed revisions signal a stronger approach to costs orders and standards of party conduct in Panel proceedings.
- A critical proposed change is the removal of the longstanding reference to costs orders being the 'exception not the rule'. The regular imposition of costs orders for conduct frustrating the Panel's process and purpose is on the table.
- The Panel's proposed revisions to GN 4 are a sensible and measured response to the increase in undesirable conduct in recent Panel proceedings.
The Emu in the room
The recent Emu NL 03 (Costs) [2025] ATP 36 reasons for decision (the Emu Decision) serve as a case study in how not to engage with the Panel. The underlying proceedings involved a whirlwind of events which saw the Panel declare unacceptable circumstances, including a proposed board spill at a shareholder requisitioned meeting (the EGM), the incumbent directors postponing that EGM on multiple occasions, a dilutive share placement shortly before the rescheduled EGM and contested conduct of the finally held EGM.
The conduct attracting costs orders occurred both before and after the Panel declared unacceptable circumstances.
The first category arose in relation to the Panel's interim orders. These orders required Emu to provide copies of all proxy forms by a specified deadline, which Emu missed by several days citing share registry issues. The Panel found this explanation unsatisfactory, noting non-compliance with Panel orders is an offence and something to therefore be taken seriously.
The second category arose in relation to the elongation of proceedings, with much of this conduct occurring after the Panel had made its declaration of unacceptable circumstances. For example, the Panel found that Emu and its incumbent directors vigorously opposed the Panel's orders, made no genuine offers to resolve the matters, and only informed the applicant that it considered a key procedural document (relating to a further EGM that the Panel ordered be held) invalid when the Panel proceedings were on foot. Additionally, when Emu finally issued the notice of meeting for this further EGM, Emu included a heavily redacted version of the requisitioning shareholders' statement which the Panel described as an 'opportunistically liberal interpretation' of the enabling legislation and 'against the spirit' of its orders.
Each category of conduct led to costs orders against the company and its (now) former directors personally, on a joint and several basis.
Notably, the directors were not parties to the proceedings. They unsuccessfully argued it would be unfairly prejudicial to make costs orders against them personally when they had only been involved as officers of the company. The Panel disagreed. Core to this was that the directors held their roles throughout the proceedings and, as decision makers, they played a key role in the relevant conduct.
What's changing?
Expectation reset
The Emu Decision did not emerge from a vacuum. As Panel President Alex Cartel observed in the Panel's 2024-25 Annual Report, the Panel 'continues to experience disruptive behaviour from parties … including failures to answer questions in briefs.' The Panel is now consulting on significant proposed revisions to GN 4 that take a stronger stance on remedies, the first major update proposed since 2008.
The proposed changes include a new purpose statement emphasising that GN 4 is 'designed to ensure that Panel applications are resolved as quickly and efficiently as possible by a specialist body largely comprised of takeover experts' and to 'help minimise conduct by parties or their legal advisers that may impede Panel proceedings'.
Significantly, the revised guidance proposes to remove the reference to costs orders being the 'exception not the rule' which to date has suggested cost orders would be rare. The revised approach would acknowledge that 'unlike the courts, costs orders do not follow to a 'successful' party as a matter of course'. This signals that costs orders may follow in circumstances where parties do not, for example, assist the Panel in resolving proceedings quickly and efficiently consistent with its mandate.
When costs may bite
The list of circumstances in which costs may be awarded is proposed to be expanded considerably, including where a party:
- presented a case that was not arguable,
- made misleading or unsubstantiated assertions,
- was unnecessarily hostile,
- defended circumstances that were clearly unacceptable,
- failed to answer questions directly or failed to produce documents when first requested,
- unreasonably refused to negotiate, or
- failed to comply with Panel directions, orders or undertakings.
Tightening the screws on undertakings
Undertakings have long been a convenient exit ramp for parties who find themselves in the hot seat of Panel proceedings. The proposed revised guidance would narrow that exit. The Panel flags that it may be less willing to accept undertakings where a party has been uncooperative or has unnecessarily delayed proceedings (or where drafting may become overly complex). The Panel also indicated it would be more receptive to undertakings offered towards the beginning of the process.
Our view
We welcome the Panel's proposed initiatives.
The Panel's role as 'first-rate commercial Panel, not a second-rate court' (as observed by the Panel all the way back in 2001 and which rings true 25 years later) gets to the crux of the Panel's core function and touches on what is needed for the Panel to retain market confidence as the primary forum for resolving takeover disputes outside of the courts.
The conduct described in the Emu Decision falls short of the standard of behaviour required of market participants to facilitate these objectives. The proposed revisions are a sensible and measured response to the recent increase in disruptive behaviour before the Panel, particularly given that the throughline of these revisions is simply asking parties and their advisers to be on their best behaviour.
Comments on the consultation draft of GN 4 are due in early March 2026.
