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The Federal Court recently dismissed an appeal against the Takeovers Panel’s declaration of unacceptable circumstances in relation to the affairs of Molopo Energy, upholding the finding of an undisclosed association between substantial holders Aurora and Keybridge.1 The decision confirms that shareholders can be associates based on an understanding between them supported by consensus (e.g. through knowledge of and acquiescence to parallel conduct) without any direct communication.

In brief

  • The Molopo saga is finally over.
  • Shareholders can be associates based on an understanding between them without having any direct communication.
  • Indirect ‘control effects’ by people with significant influence on shareholder affairs can constitute unacceptable circumstances (for policy reasons) even if those people are not themselves associates.


We have written about the long-running saga between Molopo and two of its substantial shareholders (Keybridge and Aurora) before.

The saga dates back to April 2017, when Molopo and ASIC applied to the Panel about the relationship between its two major shareholders (Keybridge and Aurora) after Keybridge requisitioned a meeting to spill the Molopo board. It was alleged that Keybridge and Aurora were undisclosed associates in breach of Chapter 6 (at the time their aggregate voting power was 22.49%).

The Panel considered that, on balance, the shareholders were not associates. However, the Panel did determine that the role of Mr Nicholas Bolton (who had substantial influence over the affairs of both Aurora and Australian Style Group (which held 21.16% of Keybridge)) and Mr John Patton (a director of Aurora and Keybridge’s executive chairman) in their entities’ decision making was so significant that it gave rise to unacceptable circumstances because of its effect on the control (or potential control) of Molopo.

On review, Molopo successfully argued that the initial Panel also ought to have found that Keybridge and Aurora were in fact associates, the review Panel inferring an association between them based on cumulative evidence of consensus (albeit no direct communication) between them.

Aurora appealed the review Panel’s findings in the Federal Court.

The Federal Court’s decision

The Federal Court found that the review Panel had sufficient grounds to find an association based on the cumulate evidence of an understanding between Aurora and Keybridge. The evidence included consensus inferred from parallel conduct, including agreement or acquiescence by the Aurora and Keybridge boards to Mr Bolton’s investment strategies.

Noting that circumstantial evidence (at least) is usually needed to show an understanding sufficient to constitute an association, and that parallel conduct alone is generally not enough, the Court emphasised the review Panel’s finding that Aurora and Keybridge embarked on conduct ‘which each was aware or understood the other was engaging in, to achieve their mutual objectives’.2

The Court confirmed that the review Panel was entitled to find that an understanding existed between Aurora and Keybridge despite no evidence of direct communication. The Court left open whether direct communication would have been needed to prove the shareholders were acting in concert (which would only have been relevant if the Panel or the Court did not already consider that there was an understanding that constituted an association).

The Court also affirmed the Panel’s power to make a declaration of unacceptable circumstances on policy grounds given the control effect of Mr Bolton and Mr Patton’s roles. The Court noted that the Panel had found:

  • Mr Bolton to be a person with substantial influence over the affairs of both Aurora and a major shareholder of Keybridge (Australian Style Group). Mr Bolton ‘used this capacity to influence or orchestrate strategies and actions at Keybridge and Aurora that have as their ultimate aim control of Molopo and access to Molopo’s cash’.3
  • Mr Patton was conflicted in his role at Keybridge (given he was also a director of Aurora) in relation to the acquisition and use of Molopo shares and there were not effective information barriers in place to deal with this.


It is well established that the test for association is broad. The Federal Court’s support for the Panel’s position provides further guidance on what can constitute an understanding (and therefore a relevant agreement) between shareholders for the purpose of the test.

The decision makes it clear that a relevant agreement can exist through an ‘understanding’ inferred by:

  • evidence of parallel conduct and/or shared goals, including a board’s knowledge of and acquiescence to aligned conduct;
  • the presence or absence of communications, with neither alone being conclusive evidence of whether there is an understanding; and
  • the role of third persons, such as investment advisers and consultants, with the knowledge and capacity to exert influence or substantially influence company affairs with a view to obtaining control.

While the Panel’s decision and the Court’s affirmation of it gives useful guidance on what can constitute an understanding, the outcome (as always) turned on the specific facts of the case. Molopo involved closely linked affairs and a long history of control, influence and power – this uncommon confluence of factors all suggested an undisclosed association. However, simply doing the same thing as another shareholder (even when they both have the same objectives) is not in and of itself enough for an association.

The Federal Court’s dismissal of Aurora’s application for judicial review is also another example of the Court agreeing with the approach taken by the Takeovers Panel at first instance. This continues the validation of the Panel’s broad decision-making freedom by the Court.


  1. See Aurora Funds Management Limited v Australian Government Takeovers Panel (Judicial Review) [2020] FCA 496; Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12.
  2. Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12 at [60].
  3. Molopo Energy Limited 03R, 04R & 05R [2017] ATP 12, Annexure D (Declaration) at [22].

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