One missing elephant in the BrisConnections room has been that of Australia’s corporate watch-dog, ASIC. Despite the confusion regarding partially-paid shares and the accumulation of units by Nick Bolton and interests represented by Jim Byrnes, it was not until last week that ASIC intervened in the proceedings between Bolton’s Australian Style Investments and a host of other parties in the Victorian Supreme Court. Yesterday, ASIC finally went further and stated that they were investigating events surrounding Tuesday’s controversial BrisConnections unit holders meeting while the ASX questioned BrisConnections regarding its knowledge and disclosure of the deal between Bolton and the toll-road’s builder, Leighton.

Meanwhile, former adviser to Alan Bond, Jim Byrnes (who is believed to be acting on behalf of a mysterious US “hedge fund”) has stated that he might consider an injunction to prevent BrisConnections making the $1 per unit call on unitholders next week. Byrnes also told The Australian that he was considering launching a class action against BrisConnections and Macquarie for false and misleading conduct on the basis that the product disclosure statement was deeply flawed.

BrisConnections’ more immediate problem lies with a possible ASX and ASIC investigation as to whether it, or Leighton, may have breached continuous disclosure requirements when both companies neglected to inform the market of the deal struck between Australian Style Investments and Thiess/John Holland regarding the now infamous “vote renting” deed.

Leighton obtained a substantial relevant interest in BrisConnections on Wednesday 8 April 2009 (at the time when Leighton subsidiaries, Thiess and John Holland entered into the transfer deed with Bolton’s Australian Style Investments). Leighton followed the requirements of the Corporations Act by lodging a substantial holder notice on Tuesday 14 April 2009 — fortunately for Leighton, it was able to withhold disclosure of its notice until after the unit-holders meeting had commenced due to the Easter public holidays on Friday and Monday (the law requires disclosure within two business days of the relevant interest being acquired).

(Leighton appeared extremely concerned to maintain extreme confidentiality of its agreement with Bolton. In the Deed agreed to between the parties, clauses stated that neither ASI, nor Bolton, would be permitted to “disclose [the] agreement or any of its terms to any person either before, at or after the 14 April [unitholders] meeting except as required by law and then only after consultation with [Thiess and John Holland].”)

BrisConnections also seemed intent on ensuring that the deal was not made public prior to the meeting — possibly, for fear that another unit-holder would use legal means to attempt to prevent the meeting from taking place — and so much so that is stated earlier this week (and to ASIC) that it had no prior knowledge of the secret deal reached between Bolton and Leighton.

However, yesterday BrisConnections clarified the situation, confirming in a reply to an ASX query that it had actually received ASI’s proxy form on Easter Saturday — four days prior to the general meeting. Given the importance of the proxy form to BrisConnections (arguably, the entire $4.7 billion project was dependant on Bolton’s votes), for BrisConnections to claim that “the Trusts were not aware of the existence of the Deed until… during the course of the general meeting of unitholders on 14 April 2009” appears disingenuous.

While the failure to lodge a substantial shareholder notice for six days fell within the letter of the law, arguably, both BrisConnections and Leighton breached their continuous disclosure obligations from the ASX Listing Rules by failing to inform the market of the deal between Bolton and Leighton. The ASX Listing Rules state that (subject to several carve-outs, most notably for confidential dealings) an entity must inform the ASX once if becomes aware of any information that a reasonable person would expect to have a material effect on the price or value of the entity’s securities.

It is certainly arguable that Bolton’s about-face had a material effect on BrisConnections unit price and also Leighton’s share price (at $4.7 billion the BrisConnections development is the most valuable toll-road project undertaken in Australia). In its response to the ASX, BrisConnections claimed that disclosure was not required due to knowledge of a potential proxy position being “hazardous and of very limited information value to members”. BrisConnections also stated that the “proxy intentions of the unitholders… is a matter of the intentions of those holders and could be overridden if relevant members… attend the meeting and vote. Information of such uncertainty could not be regarded as material to the price or value of the Trust’s securities.”

Many, including BrisConnections unit-holders, would disagree with the Trust’s reasoning. For example, it could be argued that had the meeting been prevented prior to its occurring, a resolution may have been worked out between unit-holders and underwriters or BrisConnections which may have resulted in a $1 call being avoided — this would have a significantly material effect on the value of BrisConnections units. Further, while a proxy can be amended, it would appear highly unlikely that Nick Bolton would have gone to such trouble to make himself $4.5 million only to renege on the deal six days later.

On ethical grounds, a large number of BrisConnections unit-holders went to significant expense and inconvenience attending a meeting which for all practical purposes was completely irrelevant due to the agreement between Bolton and Leighton. The expense and inconvenience could have easily been avoided had BrisConnections disclosed the existence of the deed.

Regardless of the final result of the BrisConnections-Bolton-Byrnes-Leighton imbroglio, it appears that BrisConnections Chairman Trevor Rowe’s position as a non-executive director of the Australian Securities Exchange is now completely untenable. BrisConnections’ attitude towards it unit-holders has been immoral at best and possibly a breach of its obligations under the ASX’s own Listing Rules — a body for which Rowe remains a director.