FEDERAL COURT OF AUSTRALIA Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2006] FCAFC 144 CORPORATIONS – construction of company's articles of association – whether articles require compliance with pre-emptive rights regime for share buy-back – relevant circumstances at time of buy-back - whether regard may be had to extrinsic materials in interpreting articles Australian Securities and Investments Commission Act 2001 (Cth), s 12CA, s 12DA Companies Code (Cth), s 133BC, s 133DA Corporations Act 2001 (Cth), Div 2 of Pt 2J.1, s 124, s 125, s 129, s 140(1), s1041H Corporations Law (Cth), s 206CA, s 206DA, s 615, s 633(c) Angostura Bitters (Dr JGB Siegert and Sons), Limited v Kerr [1933] AC 550 cited Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 referred to Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 112 ALR 627 referred to Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 cited Bowler v Hilda Pty Ltd (2001) 112 FCR 59 referred to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 26 referred to Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 cited Buche v Box Pty Ltd (1993) 31 NSWLR 368cited CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 referred to Codelfa Construction Proprietary Litd v State Rail Authority (1982) 149 CLR 337 cited Coles Myer Ltd v Commissioner of State Revenue [1998] 4 VR 728 cited Corporate Affairs Commission of New South Wales v Yuill (1991) 172 CLR 319cited Cotman v Brougham [1918] AC 514 cited Egyptian Salt and Soda Company, Limited v Port Said Salt Association, Limited [1931] AC 667 referred to Equitable Life Assurance Society v Hyman [2002] 1 AC 408 referred to Equuscorp Pty Ltd v HGT Investments Pty Ltd (2004) 218 CLR 471 referred to Genossenschaftsbank v Burnhope [1995] 1 WLR 1580cited Greenhalgh v Arderne Cinemas, Ltd [1946] 1 All ER 512 cited Holmes v Keyes [1959] Ch 199cited Industrial Equity Limited v Blackburn (1977) 137 CLR 567cited Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 cited Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2005)223 ALR 560 affirmed London Financial Association v Kelk (1884) 26 Ch D 107referred to McNeil v McNeil's Sheepfarming Co Ltd [1955] NZLR 15 cited National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224 referred to Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 referred to Oakbank Oil Company v Crum (1882) 8 App Cas 65 cited Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 applied Pilmer v Duke Group Ltd (in liquidation) (2001) 207 CLR 165 cited Prenn v Simmonds [1971] 1 WLR 1381cited Rayfield v Hands [1960] 1 Ch 1 cited Re Blue Arrow plc [1987] BCLC 585 referred to Re Exchange Banking Company; Flitcroft's Case [1882] 21 Ch D 519 cited Re GIGA Investments Pty Ltd (in admin) (1995) 17 ACSR 472 referred to Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989cited Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289referred to Santos Ltd v Pettingell (1979) 4 ACLR 110referred to Scott v Frank F Scott (London), Limited [1940] Ch 794referred to Simon v HPM Industries (1989) 15 ACLR 427 cited Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87 cited Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 294 cited The Mutual Home Loans Fund of Australia (Qld) Ltd v The Commissioner for Corporate Affairs [1978] Qd R 487 referred to Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 applied Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 cited Upper Hunter Country District Council v Australian Chilling and Freezing Co Ltd (1967) 118 CLR 429 cited HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law, 12th ed, Butterworths, 2005 E Peden and JW Carter, "Taking Stock: the High Court and Contract Construction" (2005) 21 Journal of Contract Law 172 at 178-80 LION NATHAN AUSTRALIA PTY LTD (ACN 008 596 370) v COOPERS BREWERY LTD (ACN 007 871 409), ARGO INVESTMENTS LTD (ACN 007 519 520), BAKSTOPER SERVICES PTY LTD (ACN 007 886 115), MARITA BOWDEN, KEITH PROSSER BOWMAN, ANNE LOUISE CHESTER, MARGARET ANN CORFIELD PIPER, RACHEL HANAN, LAWRENCE THOMAS HARROLD, JOHN COUNTER PIPER, FRANCIS GEOFFREY PIPER, ROBERT WILLIAM PIPER, JOSEPHINE MARY PROSSER, BARRY D SCHRAPEL, ANDREW DAVID SHORT, MARGARET HEATHER THOMSON, PETER PRATT THOMSON SAD 352 of 2005 WEINBERG, KENNY & LANDER JJ 16 OCTOBER 2006 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIADISTRICT REGISTRY SAD 352 OF 2005 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LION NATHAN AUSTRALIA PTY LTD (ACN 008 596 370) APPELLANT AND: COOPERS BREWERY LTD (ACN 007 871 409) FIRST RESPONDENT ARGO INVESTMENTS LTD (ACN 007 519 520) SECOND RESPONDENT BAKSTOPER SERVICES PTY LTD (ACN 007 886 115) THIRD RESPONDENT MARITA BOWDEN FOURTH RESPONDENT KEITH PROSSER BOWMAN FIFTH RESPONDENT ANNE LOUISE CHESTER SIXTH RESPONDENT MARGARET ANN CORFIELD PIPER SEVENTH RESPONDENT RACHEL HANAN EIGHTH RESPONDENT LAWRENCE THOMAS HARROLD NINTH RESPONDENT JOHN COUNTER PIPER TENTH RESPONDENT FRANCIS GEOFFREY PIPER ELEVENTH RESPONDENT ROBERT WILLIAM PIPER TWELFTH RESPONDENT JOSEPHINE MARY PROSSER THIRTEENTH RESPONDENT BARRY D SCHRAPEL FOURTEENTH RESPONDENT ANDREW DAVID SHORT FIFTEENTH RESPONDENT MARGARET HEATHER THOMSON SIXTEENTH RESPONDENT PETER PRATT THOMAS SEVENTEENTH RESPONDENT JUDGES: WEINBERG, KENNY & LANDER JJ DATE OF ORDER: 16 OCTOBER 2006 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The time within which the first respondent be at liberty to file and serve a notice of contention be extended to 24 April 2006. 2. Leave be given to the first respondent to rely on a copy letter from the appellant to the third respondent dated 14 July 2005, being exhibit "C" admitted at the hearing before the learned trial judge. 3. The appeal be dismissed. 4. Save for any costs attributable to the notice of contention, the appellant pay the respondents' costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIADISTRICT REGISTRY SAD 352 OF 2005 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LION NATHAN AUSTRALIA PTY LTD (ACN 008 596 370) APPELLANT AND: COOPERS BREWERY LIMITED (ACN 007 871 409) FIRST RESPONDENT ARGO INVESTMENTS LTD (ACN 007 519 520) SECOND RESPONDENT BAKSTOPER SERVICES PTY LTD (ACN 007 886 115) THIRD RESPONDENT MARITA BOWDEN FOURTH RESPONDENT KEITH PROSSER BOWMAN FIFTH RESPONDENT ANNE LOUISE CHESTER SIXTH RESPONDENT MARGARET ANN CORFIELD PIPER SEVENTH RESPONDENT RACHEL HANAN EIGHTH RESPONDENT LAWRENCE THOMAS HARROLD NINTH RESPONDENT JOHN COUNTER PIPER TENTH RESPONDENT FRANCIS GEOFFREY PIPER ELEVENTH RESPONDENT ROBERT WILLIAM PIPER TWELFTH RESPONDENT JOSEPHINE MARY PROSSER THIRTEENTH RESPONDENT BARRY D SCHRAPEL FOURTEENTH RESPONDENT ANDREW DAVID SHORT FIFTEENTH RESPONDENT MARGARET HEATHER THOMSON SIXTEENTH RESPONDENT PETER PRATT THOMSON SEVENTEENTH RESPONDENT JUDGES: WEINBERG, KENNY and LANDER JJ DATE: 16 OCTOBER 2006 PLACE: ADELAIDE REASONS FOR JUDGMENT WEINBERG J: 1 This appeal arises out of an attempt by Coopers Brewery Ltd ("Coopers"), an unlisted public company, to engage in a share buy-back under Div 2 of Pt 2J.1 of the Corporations Act 2001 (Cth) ("the Corporations Act"). The appellant, Lion Nathan Australia Pty Ltd ("Lion Nathan"), challenges Coopers' right to do so without first offering any shares that Coopers members might be willing to sell to Lion Nathan, in accordance with a pre-emptive rights regime established by Coopers in its Articles of Association ("Coopers' Articles"). 2 The central issue in the appeal is whether Art 38 of Coopers' Articles, which leads into a detailed three level (or tiered) pre-emptive rights regime, applies to a share buy-back. 3 Article 38, which appears under the heading "Transfer and Transmission of Shares", and precedes a series of articles that establish the pre-emptive rights regime (including Arts 40-53), is in the following terms: "Notwithstanding the provision of any other Article including Article 54, the Directors must register any transfer of shares which requires registration and which is expressly permitted by Articles 40-53 or which is made in compliance with such Articles. No member may make any transfer of shares and the Directors must not register any transfers of shares without complying with Articles 40-53." (Emphasis added) 4 The primary judge, Finn J, held that the expression "any transfer of shares" in Art 38 did not encompass a share buy-back, but meant a transfer to a third party only, thereby leaving the buy-back provisions of the Corporations Act unaffected by the pre-emptive rights regime: Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (2005)223 ALR 560. Lion Nathan submits that this conclusion was erroneous. It argues that the words "any transfer of shares" encompass a transfer of shares to any legal person, including Coopers. If Lion Nathan's argument is correct, Coopers' attempt to buy back its own shares, without first arranging for them to be offered to those parties with pre-emptive rights (one of which was Lion Nathan), represented a breach of its obligations under an agreement into which it had entered with Lion Nathan, and a contravention of Art 38. The practical effect of Lion Nathan's argument would be that Coopers could not engage in a share buy-back without Lion Nathan having first had the opportunity to acquire the shares, as it sought to do. 5 Lander J has set out comprehensively in his reasons for judgment the background facts giving rise to this appeal. I agree with his Honour, and with Kenny J that the appeal should be dismissed. I do so largely for the reasons that both their Honours give. I agree with their Honours' analysis of the rules of construction that apply to corporate constitutions. However, I disagree with their Honours as to the application of those rules in relation to only one of a number of surrounding circumstances that Finn J took into account when construing the particular provision of Coopers' Articles under consideration in this case. The Primary Judge's Reasoning 6 Finn J noted that Lion Nathan's claim against Coopers was grounded in what he termed "the Coopers Shares Agreement". That agreement was premised upon Coopers acting in strict compliance with its articles of association, including the pre-emptive rights regime under which Lion Nathan had a third tier pre-emption right. 7 In construing Art 38, his Honour said that this required a close consideration of its text "in the setting of Coopers' Constitution". He added that the resolution of the question of construction also required a like consideration of the "surrounding circumstances known to [Coopers and its members] and to the purpose and object of [art 38]". He discussed at some length both the nature of those "surrounding circumstances", and the "purpose and object" of Art 38. 8 His Honour began by setting out the principles that govern the interpretation of ordinary contracts. He referred in that regard to Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22] ("Pacific Carriers"), a case that concerned the construction of certain letters of indemnity. There, the High Court held that the construction of these letters was to be determined by what a reasonable person in the position of Pacific Carriers Ltd would have understood them to mean. That required consideration of, not only the text of the documents, but also the "surrounding circumstances" known to the contracting parties, as well as the "purpose and object" of the transaction. It is important to note that Pacific Carriers concerned the principles that govern the construction of commercial contracts. It had nothing to do with the manner in which a corporate constitution should be construed. 9 Finn J observed that the parties were in sharp disagreement as to whether or not Coopers had an unfettered right to utilise the power to buy back its own shares under s 257A of the Corporations Act. Coopers maintained that it had such a right, and Lion Nathan maintained to the contrary. 10 His Honour referred to s 140 of the Corporations Act, which provides that the constitution of a company is deemed to have effect as a contract between the various entities named therein. He held that despite its status as a statutory contract, a corporate constitution is not to be equated, when it comes to questions of construction, with contracts in general. That was because the precursors of the modern corporate constitution, namely the memorandum and articles of association of a company, had served public purposes going beyond the mere delineation of the rights and obligations of the contracting parties for their own benefit. 11 As authority for that proposition his Honour referred to Egyptian Salt and Soda Company, Limited v Port Said Salt Association, Limited [1931] AC 667 ("Egyptian Salt") at 682. He also referred to Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427 ("Simon"), Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87 ("Stanham") and Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 ("Bratton"). 12 His Honour observed that changes in Australia's corporations legislation had borne directly upon the significance to be attributed to the public purposes served historically by the documents making up a company's constitution. He referred specifically to the fact that by reason of ss 124 and 125 of the Corporations Act (and, it may be added, their predecessors), a company was no longer narrowly constrained by the provisions of its objects clauses. 13 Finn J said that there was now a substantial body of case law in this country which endorsed the well-accepted approach to the interpretation of corporate constitutions formulated by Jenkins LJ in Holmes v Keyes [1959] Ch 199. Put simply, that principle was that the articles of association of a company should be regarded as a business document, and construed so as to give them reasonable business efficacy, at least where a construction of that type is available. 14 His Honour referred to the controversy regarding the admissibility of evidence of surrounding circumstances when construing ordinary contracts, and in particular whether such evidence could be considered only if it first appeared that the language of the contract was ambiguous. The alternative view was that such evidence could be taken into account at the outset, without there first having to be any ambiguity, for the purpose of ascertaining the meaning of contractual language in its context. He noted that this controversy centred on the proper interpretation to be given to the observation of Mason J in Codelfa Construction Proprietary Ltd v State Rail Authority (1982) 149 CLR 337 ("Codelfa") at 352, where his Honour said: "The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning." 15 After discussing a number of cases dealing with this controversy, Finn J concluded that it had now been resolved by the decision of the High Court in Pacific Carriers. He held that the High Court had there accepted the broader view of admissibility. He described this broader approach to contractual interpretation as marking another step in the convergence of organising principles governing the construction of contracts and of statutes. In that regard, he referred to both s 15AB of the Acts Interpretation Act 1901 (Cth), and the decision of the High Court in CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384. He observed that what was common to both contracts and statutes was the recognition that all meaning is contextual. 16 His Honour concluded that Pacific Carriers represented the approach that should be taken to the construction of corporate constitutions, including of course, the pre-emptive rights regime contained in Coopers' Articles. 17 Importantly, however, his Honour qualified that conclusion by stating (at [79]): "Nonetheless I do recognise that a tight rein may well need to be kept on what should count as "surrounding circumstances" when construing at least aspects of a company's constitution. In taking the above approach I probably am doing no more than applying to the construction of articles of association the new understanding of what was conveyed by Mason J in Codelfa, earlier cases having applied a more limited understanding of what Mason J said to the construction of articles: see, for example, Buche v Box Pty Ltd (1993) 31 NSWLR 368 at 374". 18 In applying Pacific Carriers to the construction of Art 38, Finn J concluded that the pre-emptive rights regime set out in Coopers' Articles was neither intended to apply, nor on its proper construction did apply, to a share buy-back effected under the relevant provisions of the Corporations Act. The primary concern of the "Transfer and Transmission of Shares" provisions of Coopers' Articles (both before and after they were amended in 1995), was to "contrive and regulate prospective membership of the company when shares became available because a member had died or sought to dispose of shares in the company". Put simply, Coopers' Articles erected impediments to the introduction of new members into the company when the possibility of a change in membership resulted from death or the voluntary transfer of shares. 19 While a share buy-back might affect the membership of a company, it had no concern with regulating or impeding the introduction of new members. In Finn J's terms (at [86]): "The company that purchases its own shares does not in any meaningful or substantial sense become a member of itself enjoying the benefits and experiencing the burdens of that membership. By the very act by which it formally becomes a member of itself, that is, registration of the transfer of the shares bought back, that membership ceases immediately as the shares are cancelled by operation of the Corporations Act: s 257H(3)." 20 In arriving at this conclusion, and in rejecting Lion Nathan's submissions, Finn J referred to the purpose of the "Transfer and Transmission of Shares" provisions in the old, or pre-1995 amended articles, noting that their purpose was to regulate a member's capacity on death or by transfer of shares to introduce new members into the company. That purpose had been bluntly manifested in "old" Art 45, which stated: "No share shall save as provided by Articles 46 to 51 inclusive or Article 53 be transferred to any person." 21 His Honour commented that the term "person" in that setting could not be construed as including the company itself. Not only did the old memorandum and articles of Coopers not have a provision authorising a share buy-back, the articles expressly prohibited the use of company funds in the purchase of its own shares. 22 His Honour observed (at [89]): "I would note in passing that the construction I have given the old articles for present purposes has been arrived at without resort to surrounding circumstances, no evidence of such circumstances having been put into evidence." 23 When it came to construing the new, post-1995 articles, Finn J said that it was clear from the surrounding circumstances (which were known to both Coopers and Lion Nathan, and also known to the then members of Coopers who passed the amendments to the memorandum and articles), that those amendments were proposed and made against a particular background, and had particular purposes and objects. They were intended to implement the Coopers Shares Agreement. 24 His Honour then added (at [91]-[92]): "Given: (a) the small and in quite some degree closely held and relatively static membership of Coopers; (b) the distinctive character and purpose of the pre-emptive rights regime; and (c) the particular and publicised provenance of the 1995 amendments to it, I consider that a reasonable member of Coopers (whether or not that member joined the company prior to the 1995 amendments) would have known or had available the means of knowing that the purpose and intent of Arts 38 and 39 were such that they did not apply to a buy-back. I emphasise this because, as I earlier indicated, I consider these articles in the setting of this company are to be construed in light of the principles in PacificCarriers. I would add that the only "surrounding circumstances" material to which I have had resort beyond the new memorandum and articles are, first, the old articles and, secondly, the materials provided to the 7 March 1995 extraordinary meeting." 25 His Honour's reference to "the materials" provided to the extraordinary meeting of Coopers shareholders included a reference to the notice of meeting dated 10 February 1995 and accompanying papers, including explanatory notes provided for the information of shareholders. Those explanatory notes set out the reasons for the proposed amendments to the memorandum and articles of the company against the background of the dispute that had arisen between Lion Nathan and Coopers, and been resolved by the terms of the settlement as contained in the Coopers Shares Agreement. The Issues on the Appeal 26 Just how a corporate constitution should be construed remains a somewhat vexed question. As Finn J noted, s 140(1) of the Corporations Act provides that a company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract between the company and each member, between the company and each director and company secretary, and between a member and each other member. Under that contract each person agrees to observe and perform the constitution and rules so far as they apply to that person. 27 In Butterworths, Australian Corporation Law: Principles and Practice, vol 1 (at 132-3-2004) [2.4.0025], it is stated: "Most companies are formed to make a profit from carrying on a commercial venture. If alternative constructions of the provisions of a commercial company's constitution are possible, the construction which is most consonant with business efficacy should be preferred: see, for example, Mutual Home Loans Fund of Aust (Qld) Ltd v CAC [1978] Qd R 487 … Holmes v Keyes [1959] Ch 199 at 215 … per Jenkins LJ, CA; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 294 at 300 per O'Loughlin J, Fed C of A. See also Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596 per Lockhart J, Fed C of A." 28 It is not in dispute that the memorandum and articles of a company (and therefore a corporate constitution as well) should be read together, and as a whole. See, for example, In re Wedgwood Coal and Iron Company (1877) 7 Ch D 75 ("Anderson's case") at 99-100 per Jessel MR, and London Financial Association v Kelk (1884) 26 Ch D 107 at 135 per Bacon VC. In Angostura Bitters (Dr JGB Siegert and Sons), Limited v Kerr [1933] AC 550, the Privy Council agreed that the memorandum and articles had to be read together. However, their Lordships qualified this principle by observing that this course should only be adopted (at 554): "so far as may be necessary to explain any ambiguity appearing in the terms of the memorandum, or to supplement it upon any matter as to which it is silent". 29 There is ample authority for the proposition that the meaning to be given to a particular provision in the memorandum and articles of association can, and should, be influenced by the context in which that provision appears. See, for example, Industrial Equity Limited v Blackburn (1977) 137 CLR 567. 30 Formerly, when construing ordinary contracts, courts were reluctant to imply terms, or to permit extrinsic evidence to be led. They were even more reluctant to do so when it came to construing the memorandum and articles of association of a company. As Finn J noted, the reason given was said that, unlike ordinary contracts, the memorandum and articles of association were seen as instruments upon which third parties might rely. 31 In Simon, Hodgson J adopted this traditional approach. His Honour concluded (at 433) that the rules of construction that applied in relation to ordinary contracts should be applied with "great caution" to the articles of association of a company. The reason for this was that the articles of association were not purely consensual, but rather an instrument required by statute to be registered so that third parties could rely upon it. His Honour added that the court could not look to previous negotiations, discussions or the like, except where there was ambiguity. Indeed, he went further and observed that if words were unambiguous on their face, the court could not have recourse to external circumstances or extrinsic evidence so as to produce ambiguity or uncertainty. 32 This approach, which Lion Nathan submitted was correct, was said to be reflected in a number of other cases, some of which were cited in argument. See, for example, Greenhalgh v Arderne Cinemas, Ltd [1946] 1 All ER 512 ("Greenhalgh")at 515 per Lord Greene MR, Bratton at 697-700 and Buche v Box Pty Ltd (1993) 31 NSWLR 368 ("Buche"). 33 Lion Nathan relied in particular upon Bratton. There the English Court of Appeal held that the articles of association of a company constitute a statutory contract with its own distinct features. It was noted that, unlike ordinary contracts, the statutory contract could not be rectified on the ground of mistake: Scott v Frank F Scott (London), Limited [1940] Ch 794. Whereas a court might be able to infer a term purely by way of construction or implication, it could not go further and imply a term purely from extrinsic circumstances. 34 Steyn LJ, with whom Dillon LJ agreed, said (at 698): "Here, the company puts forward an implication to be derived not from the language of the articles of association but purely from extrinsic circumstances. That, in my judgment, is a type of implication which, as a matter of law, can never succeed in the case of articles of association. After all, if it were permitted, it would involve the position that the different implications would notionally be possible between the company and different subscribers. Just as the company or an individual member cannot seek to defeat the statutory contract by reason of special circumstances such as misrepresentation, mistake, undue influence and duress and is furthermore not permitted to seek a rectification, neither the company nor any member can seek to add to or to subtract from the terms of the articles by way of implying a term derived from extrinsic surrounding circumstances." 35 Sir Christopher Slade agreed, subject to the following qualification (at 699): "I accept that, in construing the articles of association of a company, evidence of surrounding circumstances may be admissible for the limited purpose of identifying persons, places or other subject matter referred to therein. Mr Asprey, however, has not invoked extrinsic evidence of surrounding circumstances in the present case for that limited purpose. He has sought to invoke it for the purpose of imposing additional financial obligations on the members far beyond those which the language of the articles of association of the company, read fairly on its own, would impose on them, because, he says, such an implication is required to give the articles business efficacy. No authority has been cited to us which begins to support the proposition that extrinsic evidence is admissible for that wide purpose in construing the statutory contract created by the articles of association of a company. In my judgment, the admission of such evidence for such purpose would be quite contrary to the principles governing this type of statutory contract." 36 In Stanham, Young J took a similar view. His Honour observed that it may be more difficult to imply a term where the parties have purportedly spelt out their rights and obligations in a comprehensive set of constitutional provisions, such as the memorandum and articles of association of a company, than where they have agreed to an abbreviated version of those rights and obligations, as in many ordinary contracts. He noted that, unlike ordinary contracts, a company can always alter its constitution to remedy a deficiency or defect. 37 To the same effect is Re Blue Arrow plc [1987] BCLC 585 at 590 ("Blue Arrow"), where Vinelott J refused to accept a construction of a listed company's memorandum and articles of association which was based upon an understanding or arrangement not recorded in those documents. In his Lordship's view, outside investors in a listed public company were entitled to assume that the company's memorandum and articles contained the full and complete bargain between the company and its members. 38 This general reluctance on the part of courts to admit extrinsic evidence as to the meaning of a corporate constitution is also manifested in Santos Ltd v Pettingell (1979) 4 ACLR 110 ("Santos") at 117-19 per Rath J. 39 Lion Nathan placed great reliance, in support of its contention that Finn J ought to have construed Coopers' Articles without regard to any surrounding circumstances, upon the decision of the Privy Council in Egyptian Salt. 40 There, Lord MacMillan, delivering the advice of their Lordships, said (at 682): "It must borne in mind that the purpose of the memorandum is to enable shareholders, creditors and those who deal with the company to know what is its permitted range of enterprise, and for this information they are entitled to rely on the constituent documents of the company. They have not access to other sources of information such as the antecedent transactions … The intention of the framers of the memorandum must be gathered from the language in which they have chosen to express it." 41 Finally, Lion Nathan sought to rely upon the recent decision of the New South Wales Court of Appeal in National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224 ("Parkin"). In that case, Ipp JA (with whom Santow and Bryson JJA agreed) noted, first, that the idea that a corporate constitution should inform the public with absolute precision of the field in which the company is to undertake its activities is no longer of significance. This was the consequence of ss 124 and 125 of the Corporations Act. It followed, so it was said, that nowadays a company could embark on new fields of endeavour untrammelled by objects clauses. Moreover, anyone who dealt with a company no longer needed to know beyond reasonable doubt whether the contract contemplated was within the company's corporate objects. 42 Ipp JA then (at [68]) discussed the approach traditionally taken by the courts to the construction of articles of association. His Honour said that the general principle was that laid down by Jenkins LJ in Holmes v Keyes. He then added (at [69]): "Holmes v Keyes was followed in Rayfield v Hands [1960] Ch 1, where Vaisey J, following In Re Hartley Baird Ltd [1955] Ch 143 at 4, said that the court approaches articles on the basis that they should be "validate[d] if possible". In Australia, Holmes v Keyes has been followed in Stillwell Trucks Pty Ltd v NectarBrook Investments Pty Ltd(1993) 115 ALR 294 at 300, Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 at 746 … per Young J, and Tosichv Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596, per Lockhart J. The Holmes v Keyes approach is consistent with the remarks of Barwick CJ in Upper Hunter [Upper Hunter County District Council v Australian Chilling and Freezing Limited (1968) 118 CLR 429] (at 436-437)." 43 Lion Nathan submitted that it was of particular importance, so far as this appeal was concerned, to note that the New South Wales Court of Appeal in Parkin had cited Egyptian Salt with approval. It had done so notwithstanding the fact that, by the time Parkin was decided in 2004, ss 124 and 125 had largely obviated the need for precision in the drafting of corporate objects clauses. 44 Indeed, Lion Nathan went further and noted that Ipp JA had also referred specifically to Bratton, Santos and Simon, stating that those cases should be followed. Lion Nathan submitted that this showed that Finn J's conclusion that Pacific Carriers governed the interpretation of corporate constitutions was simply wrong. Far from the traditional approach having been eroded by later authority, that approach was alive and well. conclusions 45 I am satisfied that Finn J's statement of the principles that now govern the interpretation of commercial contracts, having regard to Pacific Carriers, was correct. 46 I am also satisfied that the controversy engendered by the passage from the judgment of Mason J in Codelfa, to which to which Finn J referred, has now been largely resolved by recent High Court cases dealing with the use of surrounding circumstances when construing contracts. I refer, in particular, to Pacific Carriers, Equuscorp Pty Ltd v HGT Investments Pty Ltd (2004) 218 CLR 471, and Toll (FGCT) Pty Limited v Alphapharm Pty Limited (2004) 219 CLR 165 ("Toll"). In effect the High Court has determined that, at least when construing commercial contracts, the "surrounding circumstances" or "factual matrix" may be taken into account. This is so in all cases, even if the words at issue are not ambiguous, or susceptible of more than one meaning. See generally E Peden and JW Carter, "Taking Stock: the High Court and Contract Construction" (2005) 21 Journal of Contract Law 172 at 178-80. 47 Coopers submitted that the position now taken by the High Court in relation to the construction of contracts is, in substance, the same as that taken by the House of Lords in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 ("West Bromwich"). In that case, Lord Hoffmann said (at912): "My Lords, I will say at once that I prefer the approach of the learned judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in Prenn v. Simmonds [1971] 1 W.L.R. 1381, 1384-1386 and Reardon Smith Line Ltd. v. Yngvar Hansen-Tangen [1976] 1 W.L.R. 989, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summarised as follows. (1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. (2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man. (3) The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them. (4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see MannaiInvestments Co. Ltd. v. Eagle Star Life Assurance Co. Ltd. [1997] A.C. 749. (5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had." 48 Whether or not the High Court's current approach to the construction of contracts sits well with Lord Hoffmann's statement of principles is perhaps debatable. In Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289, the High Court left open the question whether statement of principles should be followed in this country. It should be noted however, that in Pacific Carriers (at [22]), West Bromwich was cited, with apparent approval, albeit only in a footnote. 49 What is more significant is that Pacific Carriers (at [22]) referred specifically to Mason J in Codelfa having set out "with evident approval" the statement by Lord Wilberforce in Reardon Smith Line Ltd v Yngvar Hansen-Tangen [1976] 1 WLR 989 ("Reardon Smith")at 995-6, where his Lordship said: "In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating." 50 In Prenn v Simmonds [1971] 1 WLR 1381, Lord Wilberforce anticipated his later comments in Reardon Smith. His Lordship emphasised (at 1384-85) the need to inquire beyond the language used and see what the circumstances were with reference to which the words were used as well as the object, appearing from those circumstances which the person using them had in view. However, he declined to accept a broader submission to the effect that prior negotiations could be considered in aid of the construction of a written agreement. Those negotiations were relevant to a claim for rectification, but had no bearing upon the interpretation to be accorded to that agreement. 51 It seems clear that Pacific Carriers supports the proposition that Codelfa should be understood as permitting regard to be had to context ahead of ambiguity. In language similar in some respects to that of Lord Wilberforce in Reardon Smith, the High Court in Pacific Carriers said (at [25]): "The terms of the document, understood in the light of the surrounding circumstances and the purpose and object of the transaction, and the market in which the parties were operating, meant that BNP was undertaking an obligation of indemnity." 52 Nothing in Pacific Carriers suggests that ambiguity is a precondition to taking into account matters of context. Writing extra-judicially, Lord Steyn described the assumption that one must first identify an ambiguity before turning to context as "the wrong starting point". See J Steyn, "The Intractable Problem of the Interpretation of Legal Texts" (2003) 25 Sydney Law Review 5 at 6. 53 Of course, Pacific Carriers does not detract in any way from the fundamental principle that the rights and liabilities of the parties to a contract are to be determined objectively. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. See generally Toll at [40]; see also Deutsche Genossenschaftsbank v Burnhope [1995] 1 WLR 1580 at 1587 per Lord Steyn. His Lordship, though he was in dissent as to the outcome of the appeal, formulated the relevant principles in a manner that undoubtedly would have commanded general assent. 54 The real question in this appeal is whether, as Lion Nathan contends, the High Court's recent, more flexible approach to the construction of contracts has no application to the construction of corporate constitutions, or whether, as Coopers contends, the principles are identical in each case. 55 In my view, neither formulation states the law entirely correctly. The true position is that set out by Finn J. The traditional view that surrounding circumstances are never to be taken into account in construing a company's memorandum and articles of association, can no longer be sustained. The various legislative changes to company law to which his Honour referred, and particularly the introduction of ss 124 and 125 of the Corporations Act, have significantly weakened the case for a company's objects to be stated with absolute precision. Those changes have therefore removed a central plank upon which the traditional view rested. 56 Nonetheless, as Lion Nathan submitted, the case for restraint in using surrounding circumstances as an aid to the construction of a corporate constitution remains a powerful one. A number of cases, including Egyptian Salt, Greenhalgh, Santos, Blue Arrow, Stanham, Simon, Bratton, Buche, and Parkin, support the proposition that the rules of construction applicable to ordinary contracts should be applied with great caution when construing a company's constitution. The correctness of this proposition has never, so far as I am aware, been doubted. There is nothing in any of the recent authorities dealing with the rules of interpretation of ordinary contracts which suggests that the broader and more flexible approach now favoured by the High Court in relation to such contracts, can be applied without qualification to the interpretation of corporate constitutions. 57 Despite the changes to company legislation to which Finn J referred, the statutory contract which s 140 of the Corporations Act deems to exist is, as his Honour recognised, very different from an ordinary contract. There are a number of sound reasons for adopting a different approach to its interpretation. It is a deemed contract, created by statute, without the normal elements of a contract having to be established, and without the usual defences being available to a defendant. Unlike ordinary contracts, it cannot be rectified, the rationale for that prohibition being so that third parties can be confident in relying upon it. 58 In addition, as a number of cases have noted, a corporate constitution is by its nature more likely to be read and relied upon by a third party than an ordinary contract. This consideration is particularly significant in the case of a company like Coopers, which is unlisted, and does not operate under a standard constitution. 59 That is not to say that a court can never have regard to extrinsic material when construing a corporate constitution. Even absent ambiguity or uncertainty, context is always relevant. Some "surrounding circumstances", particularly those that are likely to be well-known, not just to members of the company, but also to relevant third parties, are very much part of that context. 60 Coopers acknowledged that, in the ordinary case, a third party would be more likely to rely specifically upon the language used in a corporate constitution than they would to rely upon the language used in an ordinary contract. However, it submitted that this was not the position in the present case. Here, there was no third party seeking to rely upon Coopers' Articles. Lion Nathan did not claim any rights under those articles. Rather, it sought simply to enforce the Coopers Shares Agreement and, in particular, Coopers' undertaking in that agreement to use its best endeavours to have the company's articles amended in a particular way. 61 I am not persuaded by Coopers' contention that the principles of construction that govern the interpretation of Coopers' Articles are dependent upon whether or not a third party is seeking to enforce those articles directly, or otherwise invoke them without the aid of a collateral agreement. The rules of construction cannot alter depending upon who is seeking to rely upon a particular clause. The words of Art 38 cannot have different meanings to different people. 62 On the other hand, there is a difficulty with Lion Nathan's contention as well. Finn J was well aware of the need to exercise restraint when using surrounding circumstances as an aid to the construction of Coopers' Articles. His Honour did not, as Lion Nathan submitted, simply equate the construction of statutory contracts, such as Coopers' Articles, with the construction of ordinary contracts. 63 The question remains, however, as to whether his Honour applied the appropriate constraints upon the use that can be made of "surrounding circumstances". Those constraints are properly identified by reference to the rationale underlying the principle that ordinary rules of contractual construction do not always apply to corporate constitutions. As already indicated, that rationale centres upon the notion that some types of "surrounding circumstances", or some elements of "context", will not be known, or available, to third parties. 64 Finn J had regard to four types of "surrounding circumstances" in construing Art 38: · the form of the "Transfer and Transmission of Shares" provisions of the articles both before and after the 1995 amendments, in ascertaining the purpose of those provisions. His Honour referred in particular to "old" Art 45, noting that the reference to "any person" in that article excluded any share buy-back from the pre-emptive rights regime; · the fact that under "old" Art 45, not only was there no provision in Coopers' Articles authorising a share buy-back (so as to enable the company to buy back its own shares under s 133DA of the Companies Code 1981 (Cth), that section having come into force on 1 November 1989), but Coopers' Articles expressly prohibited the use of company funds for that purpose. The same position prevailed for a time under "new" Art 45. This was prior to the introduction in 1998 of the statutory scheme now contained in s 257A which no longer requires an express authorisation in the company constitution; · the well-publicised meeting of the members of Coopers who approved the alterations to Coopers' Articles in 1995, against the background of Coopers Shares Agreement, and the explanatory note prepared for that meeting; and · the "small and in quite some degree closely held and relatively static membership of Coopers" (at [91]). 65 Lion Nathan submitted, in relation to the fourth matter, that there was no evidence to support this finding. However, a careful reading of the evidence demonstrates that this submission is untenable. 66 In my view, even within the relative constraints of Egyptian Salt (which are by no means as absolute as Lion Nathan contended, and certainly allow for context), Finn J was entitled to have regard to the first, second and fourth of these "surrounding circumstances". That is predominantly because these "surrounding circumstances" were known to, or easily capable of being ascertained by, relevant third parties. 67 Lion Nathan submitted that Art 38 should be given its ordinary and natural meaning. It further submitted that the expression "any transfer of shares" was wide enough to encompass a share buy-back, given that the mechanics of such a buy-back necessitated a transfer of shares, albeit to Coopers rather than to anyone else, and albeit so that they could be cancelled. 68 If Art 38 is read in isolation, that submission might have some force. However, in accordance with established authority, the article cannot be read in that way. It must be read in conjunction with the remaining articles of association, and in particular Arts 40-53, with which it is specifically linked. When read against the background of those articles, it is tolerably clear that Art 38 does not encompass share buy-backs. 69 Finn J went further and construed Art 38 against the background of "old" Art 45, which applied before the 1995 amendments were introduced. In my view, he was entitled to do so. If any third party had doubts about whether Art 38 (and the pre-emptive rights regime to which it is specifically linked), encompassed a share buy-back, it would surely be sensible to have regard to the language used in the amending article's precursor. In some ways, the process is analogous to considering the legislative history of a statute when construing a particular provision. It is really only a matter of reading Art 38 in context. 70 If, as Finn J concluded, "old" Art 45, and the entire regime with which it was linked, did not encompass share buy-backs, and if there is no reason to suppose that the 1995 amendments were introduced in order to alter that position, this seems to me to provide useful support for his Honour's ultimate finding that a share buy-back falls outside the scope of that regime. 71 In the same way, I can see no reason why the fact that share buy-backs were either prohibited, or not available to Coopers when it amended its articles, should not be taken into account when determining whether the provisions creating the pre-emptive rights regime were objectively intended to encompass a share buy-back. See, for example, Corporate Affairs Commission of New South Wales v Yuill (1991) 172 CLR 319 at 322-3 per Brennan J, citing the maxim that "the best and surest mode of construing an instrument is to read it in the sense which would have been applied when it was drawn up". The state of the law is something that any third party construing a company's constitution ought to be capable of ascertaining. Moreover, the Privy Council held in Oakbank Oil Company v Crum (1882) 8 App Cas 65 (at 74 per Lord Selbourne LC and at 77 per Lord Blackburn), that the state of the law, at the time the memorandum and articles of association of a company were drafted, can be taken into account when issues of construction arise. There would be little point in Coopers' "old" or "new" Art 45 excluding share buy-backs when, until 1998, they were in any event prohibited by law (either outright or in the absence of express authorisation). 72 The fourth of the surrounding circumstances, the nature of the Coopers shareholding, was well-known to Lion Nathan and, I interpolate, widely known throughout the business community. In any event, the fact that Coopers had a "small and in quite some degree closely held and relatively static membership" could readily have been ascertained, whether from Coopers' Articles themselves, or by other means. Having regard to the rationale that underlies the Egyptian Salt principle, I can see no error in Finn J's use of this fact in construing Art 38. 73 I do, however, have serious misgivings with regard to his Honour's use of the explanatory note and other material provided to the 7 March 1995 extraordinary meeting. A third party would hardly be likely to be aware of the background to the Coopers Shares Agreement, still less of its terms. For that reason, such a party would be unlikely to appreciate that the reason that "new" Art 45 (now Art 38) was introduced was in order to give effect to the Coopers Shares Agreement. Nonetheless, Finn J held that the note and other material provided to the meeting could be considered as an aid to the construction of the relevant article because they were part of the surrounding circumstances. I doubt that this accords with the principles laid down in Egyptian Salt.I consider that his Honour erred in having regard to this material. I respectfully disagree with both Kenny and Lander JJ in this aspect of their reasoning. 74 The fact that I consider that Finn J should not have had regard to this material when construing Art 38 does not mean that I disagree in any way with his Honour's ultimate conclusion. I agree with the other members of the Court that his Honour's finding that Art 38 does not encompass share buy-backs was correct. I also agree that this conclusion could have been reached without resort to any extrinsic material, or surrounding circumstances. 75 If one has regard to the entire scheme under the heading "Transfer and Transmission of Shares", from Art 38 onwards, including the pre-emptive rights regime, it is apparent that what is contemplated is a regime for the sale or disposition of shares from one member to another, or to some other person who will thereby acquire membership. The regime presupposes that any shares sold or otherwise dealt with by a member will remain in existence after the sale or other dealing. 76 Article 40 makes this plain. It provides that, except where the transfer is made pursuant to Art 53, the person proposing to transfer any share shall give notice in writing to the company of that intent. Such notice must specify the sum that the proposing transferor fixes as the fair value, and constitutes the company as the agent for the sale "to any member of the company at the price so fixed". Article 53 makes provision for the transfer of shares by a member to the relatives of that member. Neither of these articles can have any sensible application to a share buy-back. 77 Articles 38 and 39 are specific and integral to the pre-emptive rights regime. They operate by reference to that regime alone, and are in no way linked to the buy-back provisions of the Corporations Act. I accept Coopers' submissions in this regard. These are conveniently summarised and adopted by Kenny J at [104]-[107]. 78 Having regard to my findings, it is unnecessary to deal with Coopers' notice of contention. However, I should indicate that I agree with the other members of the Court regarding the disposition of the issues raised by that notice. 79 In my opinion, the appeal should be dismissed, with costs. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg J. Associate: Dated: 16 October 2006 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 352 OF 2005 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LION NATHAN AUSTRALIA PTY LTD (ACN 008 596 370) APPELLANT AND: COOPERS BREWERY LTD (ACN 007 871 409) FIRST RESPONDENT ARGO INVESTMENTS LTD (ACN 007 519 520) SECOND RESPONDENT BAKSTOPER SERVICES PTY LTD (ACN 007 886 115) THIRD RESPONDENT MARITA BOWDEN FOURTH RESPONDENT KEITH PROSSER BOWMAN FIFTH RESPONDENT ANNE LOUISE CHESTER SIXTH RESPONDENT MARGARET ANN CORFIELD PIPER SEVENTH RESPONDENT RACHEL HANAN EIGHTH RESPONDENT LAWRENCE THOMAS HARROLD NINTH RESPONDENT JOHN COUNTER PIPER TENTH RESPONDENT FRANCIS GEOFFREY PIPER ELEVENTH RESPONDENT ROBERT WILLIAM PIPER TWELFTH RESPONDENT JOSEPHINE MARY PROSSER THIRTEENTH RESPONDENT BARRY D SCHRAPEL FOURTEENTH RESPONDENT ANDREW DAVID SHORT FIFTEENTH RESPONDENT MARGARET HEATHER THOMSON SIXTEENTH RESPONDENT PETER PRATT THOMAS SEVENTEENTH RESPONDENT JUDGES: WEINBERG, KENNY & LANDER JJ DATE: 16 OCTOBER 2006 PLACE: ADELAIDE REASONS FOR JUDGMENT KENNY J: 80 The main question in this appeal is, whether or not Art 38 of the first respondent's articles of association prohibited the first respondent's directors from registering share transfers to the first respondent as part of a buy-back conducted under the Corporations Act 2001 (Cth) ("the Corporations Act"),without first complying with the pre-emptive rights regime in the first respondent's articles. (The first respondent is hereafter referred to as "Coopers" and the first respondent's articles referred to as "Coopers' Articles".) For the reasons that follow, I conclude that compliance with the pre-emptive rights regime was not a pre-requisite. I agree with Weinberg and Lander JJ that the appeal should be dismissed. 81 The learned primary judge held that the pre-emptive rights regime did not apply to a share buy-back under the provisions of Div 2 of Pt 2J.1 of the Corporations Act. Accordingly, Art 38 did not require the directors of the first respondent to comply with the pre-emptive rights regime before registering a share transfer as part of the buy-back: see Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd(2005)223 ALR 560 ("Lion Nathan") at [85]-[102]. By way of explanation, his Honour said (at [85]-[86]) that: "The primary concern of the 'Transfer and Transmission of Shares' provisions of the Articles (which include the pre-emptive rights regime) both before and after the 1995 amendments was to contrive and regulate prospective membership of the company when shares became available because a member had died or sought to dispose of shares in the company. Insofar as concerned voluntary dispositions of shares, the articles contrived a gated hierarchy of potential purchasers of those shares (i.e. the tier of pre-emptive rights) before the transferor was able to sell them 'to any person'. If a sale to such a person eventuated, the clear intent of the Articles was that person would become a new member who in turn was bound by the same pre-emptive rights regime. Put shortly, the Articles erected impediments to the introduction of new members into the company when the possibility for a change in membership resulted from death or the voluntary transfer of shares. Far from detracting from this scheme and its purposes, the 1995 amendments enhanced it by (inter alia) extending the first tier pre-emption right to 'members' relatives'. While a share buy-back under the Corporations Act may affect the membership of a company, it has no concern with regulating and impeding the introduction of new members into the company. The company that purchases its own shares does not in any meaningful or substantial sense become a member of itself enjoying the benefits and experiencing the burdens of that membership. By the very act by which it formally becomes a member of itself, i.e. registration of the transfer of the shares bought back, that membership ceases immediately as the shares are cancelled by operation of the Corporations Act: s 257H(3)." 82 The circumstances that give rise to the appeal are compendiously set out by Lander J and the primary judge: see Lion Nathan at [10]-[53]. I am indebted to their Honours for their accounts. I refer below to these circumstances only to the extent necessary to explain my own reasons for dismissing this appeal. 83 The Court agrees on the principles for interpreting corporate constitutions. Though our reasons are separately stated, Lander J and I are in substantial agreement on the matters central to this appeal. We differ from Weinberg J, in limited degree only, with respect to one aspect of the application of these principles in this case. This difference is not material to the outcome of the appeal. PARTIES' SUBMISSIONS Appellant's position 84 The appellant's case on appeal was that, first, Coopers contravened Coopers' Articles in failing to comply with Arts 41, 46 and 49 before effecting the transfer of the shares the subject of the buy-back ("the buy-back shares"). Secondly, if Coopers contravened these articles, then Coopers breached Coopers' obligations to the appellant (hereafter referred to as "Lion Nathan") under the actual or implied terms of the Coopers Share Agreement, which Coopers and Lion Nathan made around 3 March 1995. Relying in part on cl 10.8 of the Coopers Share Agreement, Lion Nathan submitted that the appropriate remedy was for Coopers to be directed to comply with its articles as they stood in October 2003 and to offer to Lion Nathan 30,259 fully paid ordinary C class shares in Coopers. Lion Nathan submitted that the other parties had notice of the proceeding and their conduct with respect to it was a matter for them. If there had been any breach of third party rights, such a breach did not, so Lion Nathan argued, affect Lion Nathan's entitlement to its rights. 85 Lion Nathan contended that Art 38 required Coopers to comply with the pre-emptive rights provisions (which included Arts 41, 46 and 49) before the transfer of the buy-back shares could be made to Coopers. Lion Nathan submitted that Arts 38 and 39 were "plain and unambiguous". For the purposes of Art 38, Art 39 defined the word 'transfer' in broad and inclusive terms. Lion Nathan submitted that a shareholder who participated in the buy-back (hereafter referred to as a "participating member") made a transfer within Art 39 when the participating member forwarded to Coopers the form of acceptance and transfer attached to the buy-back offer documents. On its ordinary meaning, Art 38 prohibited members from accepting the buy-back without complying with Arts 40 to 53. In written submissions, Lion Nathan argued that nothing in Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ("Pacific Carriers") or Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 ("Toll") detracted from the guidance given by the High Court in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 ("ABC v APRA"). 86 Lion Nathan argued that the primary judge effectively redrafted Art 38, with the effect that it forbade a share transfer that did not comply with the pre-emptive rights regime "to any person other than Coopers". In so doing, his Honour adopted the wrong approach to construing Coopers' Articles. Referring to BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 and Buche v Box Pty Ltd (1993) 31 NSWLR 368 ("Buche") at 375, Lion Nathan argued that his Honour did not confine himself to determining the articles' objective meaning but "implied a term in article 38 in circumstances where none of the [requisite] criteria … could be met and where the term implied was in direct contradiction of the express words of article 38". 87 In written submissions filed before the hearing of the appeal, Lion Nathan submitted that: "[H]is Honour was required to find that, insofar as relevant, Coopers' intention (being that of the shareholders in general meeting on 7 March 1995) was what a reasonable person would understand by the amendments to the Coopers' articles approved on that day … . In determining what meaning the amended articles would convey to a reasonable person the learned trial judge was required to consider: (a) the text of the articles; (b) the surrounding circumstances known to Coopers; (c) the purpose and object of the articles…" Lion Nathan argued, in writing, that the pertinent circumstance as at 7 March 1995 was Coopers' decision not to exclude transfers for buy-back purposes from the operation of the pre-emptive rights regime, which, as amended, extended to Lion Nathan. Lion Nathan did not, however, actively pursue these submissions at the hearing of the appeal. 88 Indeed, Lion Nathan's written and oral submissions contended for different kinds of errors on the primary judge's part. At the appeal hearing, Lion Nathan's senior counsel argued that the primary judge erred because his Honour construed Coopers' Articles by reference to extrinsic circumstances. Evidence of extrinsic matters was inadmissible for this purpose, so senior counsel said; alternatively, such evidence was only admissible to resolve an obvious ambiguity. Referring to Egyptian Salt and Soda Co Ltd v Port Said Salt Association Ltd [1931] AC 677 ("Egyptian Salt"), Bowler v Hilda Pty Ltd (2001) 112 FCR 59 ("Bowler"), Simon v HPM Industries Pty Ltd (1989) 15 ACLR 427 ("Simon"), and Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 ("Bratton"), Lion Nathan's senior counsel contended that the principles of construction applicable to ordinary commercial contracts did not apply with the same force to the constitution of a company because a corporate constitution was a special kind of contract. 89 Senior counsel for Lion Nathan also contended that his argument did not depend on Art 39 of Coopers' Articles (set out below at [94]). He submitted that the share buy-back that Coopers conducted in 2003 involved the making of a transfer by each participating member in the ordinary sense of the word and as specified in the Corporations Act. There was no evidence, so he submitted, that a literal reading of Arts 38 and 39 would produce any hardship or inconvenience; and, in any case, evidence of this kind could not affect the application of Art 38, the meaning of which was clear. First respondent's position 90 Coopers maintained that the primary judge was correct in his conclusion, which depended on three propositions. The first was that a company's constitution should be construed according to the general principles of construction for ordinary commercial contracts. The second was that the meaning of a commercial contract was to be construed objectively by reference to what it conveyed to a reasonable person; and, thirdly, this required consideration not only of the text of the document, but also of the surrounding circumstances known to the parties. Coopers submitted that, as at 7 March 1995, the relevant circumstances were as follows: (a) Coopers was not authorised by its constitution to conduct a statutory buy-back of its shares and could not avail itself of the buy-back procedure in the Corporations Law of the time. (b) With a view to controlling membership, the pre-emptive rights regime regulated the transfer of shares from one member to another and to other persons, and not to Coopers itself. (c) In 1993, South Australian Brewing Holdings Ltd (later Southcorp Ltd) (hereafter referred to as "SABH") sold Lion Nathan an economic interest in 19.9% of the issued shares in Coopers, although it did not sell any rights relating to the registration of shares or acquisition of shares from another Coopers' shareholder, or any power to dispose of a voting share in the capital of Coopers: see Lion Nathan at [17]-[19]. (d) Coopers and SABH disputed the application of the pre-emptive rights regime to the sale by SABH of this economic interest. (e) Coopers' Articles did not include a definition of the word 'transfer' for the purposes of the pre-emptive rights regime. (f) Lion Nathan and Coopers members were informed that the amendments proposed for the extraordinary general meeting of shareholders on 7 March 1995 included a definition of "transfer" "to avoid assignments of interests, or a change in control of a shareholder, which may not be considered to be formal transfers". 91 Coopers also submitted that the Court should arrive at the same result, whether or not it had regard to the surrounding circumstances. Coopers submitted that the Court was entitled to have regard to the commercial sense and consequences of any alternative construction. Coopers argued that the construction for which Lion Nathan contended meant that any attempted buy-back by Coopers could be readily frustrated. On Lion Nathan's argument, Coopers would, so it said, effectively be denied access to the statutory buy-back procedure. 92 In the alternative, Coopers relied on Coles Myer Ltd v Commissioner of State Revenue [1998] 4 VR 728 ("Coles Myer") in support of its submission that a transfer of shares under the statutory buy-back procedure could not constitute a transfer within Art 39, because a transfer within this article was a bilateral transaction, where the subject retained its existence and identity at the completion of the transfer. A transfer of shares under the statutory buy-back procedure was no more than an administrative or procedural step taken to bring about the extinguishment or cancellation of shares. 93 Coopers contended that Lion Nathan was seeking to "leap frog" the rights of the first and second tier pre-emptive right holders. In relation to Lion Nathan's contention that it should be permitted to purchase the buy-back shares, Coopers argued that the participating members had not been, and must be, heard. Also in this connection, Coopers contended that participating members might have been willing to sell into a buy-back for taxation or other reasons applicable to the buy-back, but might not be willing to transfer their shares to Lion Nathan. CONSIDERATION 94 Lion Nathan seeks to enforce Coopers' contractual obligations to it under the Coopers Share Agreement. As Lander J and the primary judge explain, the scope of these obligations depends on the proper interpretation of Coopers' Articles, especially Arts 38 and 39. At the time of the share buy-back, Arts 38 and 39 relevantly read as follows: "38. Notwithstanding the provisions of any other Article including Article 54, the Directors must register any transfer of shares which requires registration and which is expressly permitted by Articles 40-53 or which is made in compliance with such Articles. No member may make any transfer of shares and the Directors must not register any transfers of shares without complying with Articles 40-53. 39. In Articles 38-53, 'transfer' includes:- (a) sell, assign, offer, dispose of, transfer or deal in any way with any right, title or interest in any share (whether legal or beneficial and whether for valuable consideration or not); and (b) to agree to sell, assign, offer, dispose of, transfer or deal in any way with any right, title or interest in any share (whether legal or beneficial and whether for valuable consideration or not); and (c) create, declare or allow to be created any trust over any share." Lander J and the primary judge have described in some detail the pre-emptive rights regime created by Arts 40 to 53. For my purposes, the regime is sufficiently described below. 95 Coopers' power to conduct the buy-back derived from Pt 2J.1 of Ch 2J of the Corporations Act and, in particular, s 257A. This provision enables a company to buy back its own shares if the buy-back does not materially prejudice the company's ability to pay its creditors and it follows the statutory procedure. All rights in buy-back shares are suspended once the company enters into a buy-back agreement and it cannot deal in those shares: see s 257H(1) and (2). Shares bought back are cancelled immediately after the registration of the relevant transfers to the company: see s 257H(3). 96 Coopers' Articles did not make express reference to buy-backs, although, as we have seen, they did make provision for the sale and other disposition of shares in certain circumstances. Whether the conduct of the buy-back in 2003 was controlled by this pre-emptive rights regime depends upon the proper construction of Coopers' Articles. Generally speaking, the principles for interpreting corporate constitutions are well established, although differences of opinion may sometimes arise as to the extent to which it is permissible to take into account matters extrinsic to the language of the constitutive documents. 97 A company's constitution has effect as a contract between the company and each member, the company and each director, and between a member and each other member: see s 140(1). A corporate constitution is in the nature of a commercial contract, which, as Jenkins LJ said in Holmes v Keyes [1959] Ch 199 at 215, "should be construed so as to give [it] reasonable business efficacy, where a construction tending to that result is admissible on [its] language…in preference to a result which would or might prove unworkable": see also National Roads and Motorists' Association Ltd v Parkin (2004) 60 NSWLR 224 ("Parkin") at 235-6 per Ipp JA; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 294 at 300-1 per O'Loughlin J; Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596 per Lockhart J; Norths Ltd v McCaughan Dyson Capel Cure Ltd (1988) 12 ACLR 739 ("Norths") at 746 per Young J; The Mutual Home Loans Fund of Australia (Qld) Ltd v The Commissioner for Corporate Affairs [1978] Qd R 487 at 502 per WB Campbell J; and Buche at 374 per Brownie J. Articles of association, like other commercial documents, must be read as a whole and, where appropriate, having regard to the purpose that, from an objective perspective, they were intended to serve. 98 The surrounding circumstances are normally relevant in the construction of a commercial contract. In this regard, Pacific Carriers and Toll are illustrative of the accepted approach. Pacific Carriers involved, amongst other things, a question of the construction of letters of indemnity given in connection with the shipping of cargo abroad. The High Court said (at 462): "The construction of the letters of indemnity is to be determined by what a reasonable person in the position of Pacific would have understood them to mean. That requires consideration not only of the text of the documents, but also the surrounding circumstances known to Pacific and BNP, and the purpose and object of the transaction. In Codelfa Constructions Pty Ltd v State Rail Authority of NSW [(1982) 149 CLR 337 at 350], Mason J set out with evident approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen [[1976] 1 WLR 989 at 995-006; [1976] 3 All ER 570 at 574]: 'In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.'" 99 In Toll, the High Court confirmed that this was ordinarily the correct approach to construing commercial documents. Amongst other things, it said (at [40]): "It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." (Citations omitted; emphasis added) 100 As their Honours recognized in Toll, in some cases, though not normally, it may be unnecessary to consider the attendant circumstances, because, for example, the language of the document admits of only one meaning. The majority's discussion in ABC v APRA indicates that it was such a case: see 105-7 per Barwick CJ and 114-15 per Stephen J. Normally, however, the meaning of a commercial contract will be judged by reference not only to the text but also to the relevant circumstances known to the parties. It is also clear from Pacific Carriers and Toll that, generally speaking, it is permissible to have regard to the surrounding circumstances from the outset of the process of construction. The view that once had some currency - that one must first find some ambiguity in the text of the document before looking to extrinsic circumstances – no longer holds sway. 101 In England, from which is derived much of this country's law with respect to companies and commerce, the prevailing approach to the construction of commercial contracts has also altered: see Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912-13 per Lord Hoffmann with whom Lord Goff, Lord Hope and Lord Clyde agreed. Since Pacific Carriers and Toll, the approaches in both countries are largely, if not wholly, the same. 102 The meaning of a company's constitution, like other commercial contracts, must be determined objectively. As we have seen, Lion Nathan argues that a court's consideration of surrounding circumstances is necessarily more constrained in the case of a corporate constitution than in the case of an ordinary commercial contract. Whilst, for the reasons stated below, I accept the force of this argument, I do not find any error in the judgment of the primary judge. 103 First, leaving out of account the surrounding circumstances, I would reject Lion Nathan's submission that the effect of Arts 38 and 39 was to require Coopers to comply with the pre-emptive rights regime before proceeding to buy back the buy-back shares. As already noted, Arts 38 and 39 are not to be read by themselves: compare Santos Ltd v Pettingell (1979) 4 ACLR 110 at 118 per Rath J; London Financial Association v Kelk (1884) 26 Ch D 107 at 135 per Bacon V-C; and Northsat 746 per Young J. These articlesmust be read in the context of Coopers' Articles as a whole and, in particular, by reference to the provisions to which they specifically refer, namely, Arts 40 to 53, as well as Arts 54 and 57. When read in their entirety, it is apparent that Arts 38 and 39 are part of a regime providing for the sale or disposition of shares from one member to another member or to some other person who will acquire membership (or rights to or in the nature of membership) by virtue of the acquisition of the shares (or some other dealing with shares). When read in context, it is plain enough that Arts 38 and 39 are specific to the pre-emptive rights regime. They operate by reference to that regime alone. They do not impinge on the buy-back provisions of the Corporations Act. There is no process of implication involved in reaching this conclusion. There is only a process of interpreting Coopers' Articles. 104 The terms of the articles that constitute the pre-emptive rights regime make this clear. On the giving of a transfer notice, the company becomes the transferor's agent for the sale of shares to another member (Art 40). Upon receiving the transfer notice, the directors are obliged to endeavour to find a member or member's relative willing to purchase the shares (Art 41). If such a purchaser is found within 28 days, then the proposing transferor is bound to effect the sale at the price for which the articles provide (Art 41). If there is a change in control in any member, the member is deemed to have offered to sell its shares to other members (Art 44). If the directors do not find, within the stipulated time, a member or member's relative willing to purchase, then Coopers is required to offer the shares to Australian Mutual Provident Society ("AMP") or as otherwise provided (Art 46); and, if, within 28 days, it notifies the company that it desires to purchase some or all of the shares, the proposing transferor is bound to transfer them (Art 47). If the shares are not so taken up, then they are to be offered to Lion Nathan (Art 49); and, if, within 28 days, it notifies the company that it desires to purchase some or all of the shares, the proposing transferor is bound to transfer them (Art 50). If shares are not so taken up by Lion Nathan, then the proposing transferor is at liberty at any time within three calendar months to sell the shares to any person at a price no lower and on terms no more advantageous than those previously offered (Art 52). Significantly for present purposes, the directors are at liberty to refuse to register the shares, amongst other things, "where the Directors are of the opinion that it is not desirable to admit the proposed transferee to membership" although not where the proposed transferee is already a member (Art 54). 105 The clear effect and, objectively speaking, the principal object of this pre-emptive rights regime is to control the introduction of new members. As a corollary, the regime presupposes that a share that was the subject of a transfer notice continues in existence after a sale and transfer have been effected. Articles 38 and 39 are integral to this regime since they ensure that there is no other path to company membership than through the pre-emptive rights regime. Article 38 achieves this end in its positive and negative terms. The first sentence of Art 38 creates an obligation to register where there has been compliance with the regime and the second gives rise to a prohibition on registration where there has not. The effect of Art 39 is to ensure that the need for compliance is triggered on any dealing with any share interest, thereby preventing membership or some similar status on the part of persons having an interest in shares though not registered as such. Articles 38 and 39 are to be construed in light of their part in the pre-emptive rights regime. They are not concerned with the conduct of a statutory buy-back, which is directed to a different object. 106 A buy-back conducted under the Corporations Act is concerned with a reduction in company capital and not with the introduction of new members. The notion that the company is constituted as a member's agent (as in Art 40) is foreign to the idea of the statutory buy-back. Significantly, in a buy-back under the Act, the effect of registration of a transfer of shares to the company is the cancellation of the buy-back shares. These shares can no longer confer membership status on anyone. 107 It is plain from the foregoing discussion that the pre-emptive rights regime, of which Arts 38 and 39 form part, and the buy-back provisions of the Corporations Act, are entirely different in nature and purpose. Objectively speaking, they are not designed to work together. The pre-emptive rights regime assumes the continued existence of shares and membership rights pertaining to them, whilst the buy-back procedure is directed to the ultimate cancellation of shares and the ending of rights that their acquisition by a purchaser other than the company might entail. 108 Accordingly, for these reasons, I would conclude that, in conducting the buy-back in 2003, Coopers was not required to observe the pre-emptive rights regime. Articles 38 and 39 did not have that effect. Indeed, if they were to have that effect, it is apparent that they would introduce layers of difficulty that would preclude or seriously impede the company's resort to the statutory buy-back provisions. 109 There is one other consideration that strengthens my conclusion. It derives from Coopers' Articles and the history of the buy-back legislation. The combined effect of this history and Coopers' Articles is that Coopers did not acquire the power to conduct a buy-back until 9 December 1995, i.e., after it and Lion Nathan entered into the Coopers Share Agreement. 110 A brief history of the buy-back legislation is as follows. In Australia, until the commencement of Div 3A of Pt IV of the Companies Code 1981 (Cth) ("the Companies Code") on 1 November 1989, a limited company could not lawfully acquire its own shares: see Pilmer v Duke Group Ltd (in liquidation) (2001) 207 CLR 165 at [22] per McHugh, Gummow, Hayne and Callinan JJ. Division 3A of Pt IV of the Companies Code 1981 (Cth) permitted a company to buy back ordinary shares in limited circumstances, providing its articles contained a buy-back authorisation at the relevant time: see s 133DA. Division 4B of Pt 2.4 of the Corporations Law, which came into operation on 1 January 1991, replaced the buy-back provisions in the Companies Code. Under the Corporations Law, there continued to be a number of conditions to be met before a company could buy-back shares, including that the company's articles contain a buy-back authorisation: see s 206DA. It was not until the commencement of the First Corporate Law Simplification Act 1995 (Cth) on 9 December 1995 that a company acquired the statutory power to buy back its own shares even though its articles contained no buy-back authorisation: see note 1 to s 206B. 111 Coopers' Articles did not authorise the conduct of a buy-back at any time prior to or at the time of the Coopers Share Agreement. The usual rule is that expressions in a company's constitution normally retain the meaning they had when they were introduced, although they are sometimes read as extending to new developments: see Re GIGA Investments Pty Ltd (in admin) (1995) 17 ACSR 472 and HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law, 12th ed, Butterworths, 2005 at 190 [6.080]. This general rule and the history of Coopers' Articles and the buy-back legislation support my conclusion that the articles' pre-emptive rights regime does not apply to the buy-back that Coopers conducted under statute in 2003. Furthermore, this conclusion is consistent with cl 10.7 of the Coopers Share Agreement, which made it clear that the parties did not intend their agreement to be affected by supervening legislation insofar as this might be avoided. 112 Having regard to the fact that I consider that the meaning of Coopers' Articles is plain enough when the text is read as a whole, it is, perhaps, unnecessary for me to consider further Lion Nathan's submission that the primary judge erred because his Honour impermissibly had regard to the surrounding circumstances. I consider this submission, however, because it was an important part of Lion Nathan's case. 113 In making this submission, Lion Nathan relied particularly on Egyptian Salt. The issue in that case was whether the memorandum of association of a company, which set out its objects, should be read down by reference to extrinsic circumstances. Their Lordships concluded that it should not, saying (at 682): "As regards the aid to construction to be derived from surrounding circumstances the learned judge has in their Lordships' view taken too wide a scope. It must be borne in mind that the purpose of the memorandum is to enable shareholders, creditors, and those who deal with the company to know what is its permitted range of enterprise, and for this information they are entitled to rely on the constituent documents of the company. They have not access to other sources of information such as the antecedent transactions which the learned judge invokes, and have no means of knowing, for example, 'that the intention of the promoters that the company should not export salt was known to the defendant company,' a circumstance which the learned judge adduces. The intention of the framers of the memorandum must be gathered from the language in which they have chosen to express it." 114 The rationale in Egyptian Salt for excluding recourse to extrinsic circumstances has partly fallen away with the statutory abandonment of the doctrine of ultra vires. With the introduction of ss 124 and 125 of the Corporations Act (and its statutory predecessors), the need for a company's constitution to inform those who deal with the company of the scope of the company's permitted activities is not as important as it once was, when the doctrine of ultra vires held sway. This is plain enough from the terms of the current ss 124 and 125. Under s 124, a company has the legal capacity of an individual. Section 125(1) provides that an exercise of power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company's constitution and, by virtue of s 125(2), an act of the company is not invalid merely because it is contrary to any of its objects as stated in its constitution. 115 In support of the proposition that Egyptian Salt still represents a correct statement of the law, however, Lion Nathan particularly relied on Bowler, Simon, Bratton and Parkin. In Bowler, the purchasers of a home unit lease brought an action for damages against a real estate agent for false representations concerning the use to which a unit could be put. The Full Court held that it was not permissible to refer to material extrinsic to a registered units plan in construing a statement of planning purposes in the lease: see [9] per Drummond J with whom Dowsett and Gyles JJ agreed. The Court's decision depended very largely on the fact that the lease was issued under the leasehold regime in the Australian Capital Territory. It is therefore of limited guidance in the present very different context, although Bowler does illustrate that, where contractual documents have a significance beyond that of a private bargain, the public dimension of the contract may limit the matters to which a court may properly have regard in construing it. 116 In Simon, in accordance with accepted authority, Hodgson J refused the plaintiff's application to rectify the defendant's articles of association: see also Scott v Frank F Scott (London) Ltd [1940] Ch 794. In so doing, his Honour referred (at 435-7) to the proposition that the rectification of articles of association for mistake or for any other purpose is not available because the articles constitute a statutory contract upon which third parties have relied. Simon therefore supports the proposition that, in some respects at least, the attributes of a company's constitution differ from the general range of commercial contracts because of its public dimension, just as Lion Nathan maintains. 117 In Simon, Hodgson J also apparently accepted the submission that, for the purposes of construction, a court could have regard to evidence of surrounding circumstances only if there was an ambiguity on the face of the contract: see Simon at 433-4. As noted already, prior to Pacific Carriers and Toll (and at the time Simon was decided) there was uncertainty as to whether ambiguity had first to be found before resort could be had to the surrounding circumstances. Hodgson J's brief statement of principle must be understood in this light. Simon is thus consistent with the proposition that, broadly speaking and subject to the considerations specific to company constitutions, the principles of contractual construction governing resort to extrinsic matters can apply to the construction of company constitutions. 118 Lion Nathan relied heavily on Bratton, where the English Court of Appeal held that articles of association constituted a statutory contract with distinctive features and it was impermissible to imply into articles of association terms imposing additional financial obligations on members from the extrinsic surrounding circumstances. Lord Steyn stated the proposition broadly (at 698-9) thus: "Just as the company or an individual member cannot seek to defeat the statutory contract by reason of special circumstances such as misrepresentation, mistake, undue influence and duress and is furthermore not permitted to seek a rectification, neither the company nor any member can seek to add to or to subtract from the terms of the articles by way of implying a term derived from extrinsic surrounding circumstances. If it were permitted in this case, it would be equally permissible over the spectrum of company law cases. The consequence would be prejudicial to third parties, namely potential shareholders who are entitled to look to and rely on the articles of association as registered." Sir Christopher Slade was, however, more qualified and placed particular emphasis on the nature of the supposed implied term, saying (at 699): "I accept that, in construing the articles of association of a company, evidence of surrounding circumstances may be admissible for the limited purpose of identifying persons, places or other subject matter referred to therein. Mr Asprey, however, has not invoked extrinsic evidence of surrounding circumstances in the present case for that limited purpose. He has sought to invoke it for the purpose of imposing additional financial obligations on the members far beyond those which the language of the articles of association of the company, read fairly on its own, would impose on them, because, he says, such an implication is required to give the articles business efficacy. No authority has been cited to us which begins to support the proposition that extrinsic evidence is admissible for that wide purpose in construing the statutory contract created by the articles of association of a company. In my judgment, the admission of such evidence for such purpose would be quite contrary to the principles governing this type of statutory contract." Dillon LJ also referred (at 696) to the fact that what was at issue was "an extra burden of contribution on a member". 119 Bratton is not authority for the proposition that the courts cannot engage in any process of implication of terms into corporate constitutions. They can and do: see, for example, Equitable Life Assurance Society v Hyman [2002] 1 AC 408 at 458-9 per Lord Steyn and Bratton at 699 per Sir Christopher Slade (in the above quoted passage). Further, when carefully read, Bratton is not authority for the proposition that it is impermissible to take account of extrinsic circumstances in construing a company's constitution. First, Bratton did not concern the construction of articles. Bratton concerned the process of implying terms in particular circumstances. Secondly, the case turned on the nature of the term sought to be implied from the broad 'factual matrix' that had attended the company's incorporation. This is not what is at stake in the present case. Although Bratton contains helpful guidance on the nature of corporate constitutions, it does not provide a definitive response to the issue that Lion Nathan has raised. 120 Lion Nathan also relied on Parkin whereIpp JA, with whom Santow and Bryson JJA agreed, purported to follow Egyptian Salt and Bratton, holding (at 236-8) that, in considering whether or not the meaning of a provision in a company constitution is capable of determination, the courts are generally not permitted to take into account extrinsic circumstances. Again, as Santow JA made clear (at 226), the Court in that case was not engaged in the process of construing the company's constitution. 121 Indeed, Santow JA left open the question about the extent to which it was permissible to refer to evidence of extrinsic matters in resolving ambiguity, although he noted "the general reluctance of courts to admit extrinsic evidence as to the meaning of a corporate constitution". He observed (at 226): "While the doctrine of ultra vires has been abolished, there is … still the possibility of claims for injunctions or oppression arising out of alleged contravention of the terms of the corporate constitution. Third parties still have some interest in what is recorded in the company's constitution." In saying this, his Honour exposed the fact that care needs to be taken in construing articles of association by reference to extrinsic circumstances and that regard must be had as to what I have referred to as their public dimension. Since Parkin, like Simon, was decided prior to Pacific Carriers and Toll, his Honour's reference to ambiguity must be seen in the same light as Hodgson J's acceptance of a similar proposition in Simon. 122 From this brief survey, I conclude that the authorities to which Lion Nathan referred the Court do not lead inexorably to the conclusion that the primary judge erred when he had regard to extrinsic matters in construing Coopers' Articles. The authorities decided prior to Pacific Carriers and Toll contemplated that limited resort might be had to extrinsic evidence where there was patent ambiguity. Thus, in Buche, a case of ambiguity on the face of the company's constitution, Brownie J considered the factual circumstances known at the time of incorporation: see Buche at 374 applying the principles in Codelfa. As previously noted, Pacific Carriers and Toll make it plain that, generally, in construing commercial documents one does not need to find ambiguity within the text before referring to the surrounding circumstances. We have not been referred to any authority to the effect that the High Court's clarification of this aspect of the law does not apply in the construction of corporate constitutions. 123 Lion Nathan has not persuaded me that the principles for construction as stated in Pacific Carriers and Toll have no application to corporate constitutions. It is true that the constitution of a company is a commercial contract, with special characteristics. A corporate constitution has what I have called a public dimension. It serves a public purpose and third parties will rely on it from time to time. It is not merely a private record of a private bargain; rather, a corporate constitution has statutory force: compare Re Blue Arrow plc [1987] BCLC 585 at 590 per Vinelott J. Whilst these considerations cannot be disregarded, they do not, it seems to me, provide a sufficient justification to remove corporate constitutions entirely from the range of commercial documents governed by the principles for construction outlined in Pacific Carriers and Toll. 124 A court can and should take account of the special characteristics of a company's constitution, both generally and specifically, in the manner in which it applies these general principles. That is to say, it may be proper to place greater store by the constitutive text in construing a company's constitution as opposed to a private contract: compare Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87 at 91 per Young J. Further, in accordance with these general principles, reference is properly made to the surrounding circumstances, although the range of these circumstances may be more limited in this context than as regards some other commercial documents. In particular, the special or public dimension of a corporate constitution may sometimes constrain the ambit of the matters to which a court has regard. 125 In the present case, the primary judge specifically limited the extrinsic material to which he had resort (beyond the memorandum and articles current as at the date of the buy-back) to the former articles and the material provided to the 7 March 1995 extraordinary meeting: see Lion Nathan at [92]. Coopers' former articles had themselves once had statutory force. They were therefore essentially public documents. Considering the special characteristics of corporate constitutions, it is not impermissible to have regard to former articles in construing the current ones. I agree with the primary judge that the contents and structure of Coopers' former articles showed that they too were directed to regulating company membership, particularly the introduction of new members. 126 Nor in my view was it impermissible in the particular circumstances of Coopers for the primary judge to have regard to the explanatory document given by Coopers' directors to Coopers' members for the purposes of the extraordinary meeting on 7 March 1995. I respectfully differ from Weinberg J on this point. The primary judge held that Coopers had a "small and in quite some degree closely held and relatively static membership" and that the 1995 amendments had a "particular and publicized provenance": see Lion Nathan at [91]. For the reasons Weinberg and Lander JJ give, I agree that it was open to the primary judge to have regard to the former fact. It was, in my view, also open to the primary judge to have regard to the latter fact, if so satisfied on the evidence before him. Together, these two facts provided a proper basis for his Honour to have regard to the explanatory document in construing Coopers' Articles. The nature of a company's membership is, so it seems to me, a relevant factor in deciding what circumstances should or should not be taken into account in construing a company's constitution: compare McNeil v McNeil's Sheepfarming Co Ltd [1955] NZLR 15 at 23, where Fair J considered the fact a company was family-owned to be a relevant consideration in the process of construing the company's articles of association. 127 At the meeting of 7 March 1995, Coopers' members resolved to amend the articles, with the result that they substantially assumed the form current at the time of the buy-back. As the primary judge said, the explanatory document that Coopers' directors provided at the time made it clear that Arts 38 and 39 were directed to strengthening Coopers' control over its membership through the pre-emptive rights regime: see Lion Nathan at [94]. 128 In circumscribing the extrinsic circumstances to which he had regard as he did, the primary judge properly took account of the special characteristics of a corporate constitution, both generally and specifically. I can discern no error in his Honour's approach. These circumstances fortify the conclusion that I would reach upon an examination of the text of the articles - that, in conducting the buy-back in 2003, Coopers was not required to observe the pre-emptive rights regime. It follows that I would dismiss the appeal. 129 As I have already said, Coopers also relied on Coles Myer in support of its submission that a "transfer" of shares under the statutory buy-back procedure could not constitute a transfer within Art 39. Coles Myer was primarily concerned with the question whether an executed share transfer delivered by a member to the company under a buy-back under Div 4B of Pt 2.4 of the Corporations Law constituted a "transfer of marketable securities" within the meaning of the Stamps Act 1958 (Vic) ("the Stamps Act"). The majority of the Victorian Court of Appeal held that, upon a consideration of the real nature and substance of the instrument, it did not: see Ormiston JA at 744-5 with whom Winneke P agreed. The case concerned the construction of an expression in Heading IV(A) to the Third Schedule of the Stamps Actand considerations particular to that Act. It is distinguishable from the present case. I have derived no particular assistance from it in this case and it is unnecessary to discuss it further. No considerations of the kind referred to by the High Court in Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 112 ALR 627 at 629 arise with respect to this case and Coles Myer. 130 Further, at the hearing of the appeal, Coopers moved for various orders, including for an extension of time in which to file and serve its notice of contention raising the Coles Myer issue and for leave to rely upon a letter from Lion Nathan dated 14 July 2005, which was admitted as exhibit "C" at the hearing before the primary judge. According to a supporting affidavit, it had been omitted from the appeal book by mistake. I would make the orders sought, which, in any case, were not strenuously opposed. 131 Exhibit C, which was a letter circulated to the respondent shareholders who sold Coopers shares in the buy-back, referred to the reinstatement of their shares as a possible outcome of the proceedings in which, of course, they had been named as respondents. The letter served to emphasize Coopers' point that these respondents were not on proper notice that Lion Nathan's claim for relief had extended beyond this – to a claim to be registered as the owner of the buy-back shares. None of these other respondents appeared at the hearing before the primary judge or on the appeal. In this regard, I agree with Lander J that, before the Court could entertain any claim for relief of this latter kind, the respondent shareholders and AMP were entitled to be given such notice. Having regard to the conclusion I have reached on the hearing of this appeal, it is, however, unnecessary to say anything further about this. 132 For the reasons already stated, I would make the orders sought on the first respondent's motion and dismiss the appeal, with costs. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. Associate: Dated: 16 October 2006 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 352 OF 2005 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LION NATHAN AUSTRALIA PTY LTD (ACN 008 596 370) APPELLANT AND: COOPERS BREWERY LIMITED (ACN 007 871 409) FIRST RESPONDENT ARGO INVESTMENTS LTD (ACN 007 519 520) SECOND RESPONDENT BAKSTOPER SERVICES PTY LTD (ACN 007 886 115) THIRD RESPONDENT MARITA BOWDEN FOURTH RESPONDENT KEITH PROSSER BOWMAN FIFTH RESPONDENT ANNE LOUISE CHESTER SIXTH RESPONDENT MARGARET ANN CORFIELD PIPER SEVENTH RESPONDENT RACHEL HANAN EIGHTH RESPONDENT LAWRENCE THOMAS HARROLD NINTH RESPONDENT JOHN COUNTER PIPER TENTH RESPONDENT FRANCIS GEOFFREY PIPER ELEVENTH RESPONDENT ROBERT WILLIAM PIPER TWELFTH RESPONDENT JOSEPHINE MARY PROSSER THIRTEENTH RESPONDENT BARRY D SCHRAPEL FOURTEENTH RESPONDENT ANDREW DAVID SHORT FIFTEENTH RESPONDENT MARGARET HEATHER THOMSON SIXTEENTH RESPONDENT PETER PRATT THOMSON SEVENTEENTH RESPONDENT JUDGES: WEINBERG, KENNY and LANDER JJ DATE: 16 OCTOBER 2006 PLACE: ADELAIDE REASONS FOR JUDGMENT LANDER J 133 The appellant, who was the applicant in the court below, sought declarations, injunctive relief, damages and compensation for contraventions by the first respondent of various sections of the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"), the Corporations Act 2001 (Cth) ("the Corporations Act") and the Trade Practices Act 1974 (Cth) ("the Trade Practices Act"), and for breach of contract, estoppel and breach of fiduciary duty. 134 The application was dismissed by Finn J. The appellant appeals against that order and against the whole of the judgment of Finn J. 135 The proceeding was brought against the first respondent and 16 other respondents. Only the first respondent appeared in the trial and the first respondent is the only respondent on this appeal. 136 The first respondent ("Coopers") is a public unlisted company and has carried on the business as a brewer of ale and stout since 1862. It markets its beer, ale and stout under the "Coopers" brand. 137 The appellant, Lion Nathan Australia Pty Ltd ("Lion Nathan"), is a public listed company which also carries on the business of a brewer. 138 In 1962 South Australia Brewing Holdings Ltd ("SABH") (which is not a party to these proceedings) owned all of the issued shares in the South Australian Brewing Company Limited ("SABC"). SABC, as its name suggests, also carried on the business of a brewer and in competition with Coopers. 139 In 1962 SABH acquired approximately 25 per cent of the issued shares in Coopers by acquiring 87,751 "D" class shares and 372,003 "C" class shares. 140 At that time and at all relevant times thereafter, the Coopers share structure consisted of four classes of shares "A", "B", "C" and "D". The number of shares of each class; the class of shareholders and the rights attaching to the shares were: Class of Shares Number of Shares Issued Description of Shareholder Other Rights A 15,953 Members of the Coopers family Power to elect two directors B 15,953 Members of the Coopers family Power to elect two directors C 1,635,313 Members of the Coopers family, Southcorp Holdings Limited and the balance (less than 5%) held by a miscellaneous group of shareholders No rights to elect directors D 87,751 Southcorp Holdings Limited Power to elect one director 141 In 1993 SABH resolved to sell its brewing business which included SABC and it employed a merchant banker to obtain expressions of interest from potential purchasers. In July 1993 Lion Nathan purchased SABH's brewing division which included SABH's shares in SABC. Contemporaneously with the acquisition of SABH's brewing division, the applicant purchased from SABH the beneficial interest in 19.9 per cent of the issued shares in Coopers from SABH. It did so in a transaction evidenced in a deed dated 1 August 1993 entitled the "Coopers Deed". Lion Nathan purchased 87,751 "D" class shares and 263,242 "C" class shares (the "Coopers Shares"). 142 At the time of this transaction there were five relevant articles in Coopers' Articles of Association: " 8. The funds of the Company shall not be applied in the purchase of or be lent upon the security of its own shares. The Board may however in their discretion accept a surrender by way of compromise of any question as to whether or not the same have been validly issued or in any other case where a surrender is within the power of the Company. Any shares so surrendered may be sold or reissued in the same manner as forfeited shares. … 11. No person shall be recognised by the Company as holding any share upon any trust and the Company shall not be bound by or recognise any equitable, contingent, future or partial interest in any share or any interest in any fractional part of a share or (except only as by these presents otherwise expressly provided) any other right in respect of any share except an absolute right to the entirety thereof in the registered holder. … 40. No notice of any trust, expressed, implied or constructive shall be entered in the register. … 45. No share shall save as provided by Articles 46 to 51 inclusive or Article 53 be transferred to any person. 46. Except where the transfer is made pursuant to Article 53 the person proposing to transfer any share (hereinafter called 'the proposing Transferor') shall give notice in writing (hereinafter called 'the Transfer notice') to the Company that he desires to transfer the same. Such Transfer notice shall specify the sum he fixes as the fair value and shall constitute the Company his agent for the sale of the share to any member of the Company or nominee of the holders of D shares as hereinafter provided at the price so fixed or at the option of the Purchaser at the fair value to be fixed by the Auditor in accordance with these Articles. A Transfer of notice may include several shares and in such case shall operate as if it were a seperate (sic) notice in respect of each. A Transfer notice shall not be revocable except with the sanction of the Directors." 143 Articles 47 to 53 inclusive provided for a regime whereby the directors were obliged to find a member of the respective classes of shares willing to purchase any shares being offered by a shareholder holding shares of the same class. An existing shareholder was not entitled to transfer or deal with any share except in accordance with that pre-emptive regime. If there was no shareholder holding an "A", "B" or "C" share willing to purchase the shares being offered, then the directors were obliged to offer the shares to the holders of the "D" shares which, of course, was, for all relevant purposes, SABH. 144 Apart from the pre-emptive regime, two other matters may be observed. First, Art 8 prevented Coopers from buying shares in itself. At the time of this transaction and until December 1995, so also did the law unless the company's Articles contained a buy-back authorisation. Secondly, the Articles of Association only recognised the legal interest in any shares and not the beneficial or equitable interest in any shares. 145 SABH and Lion Nathan attempted to construct their transaction in the Coopers Deed so as to avoid the consequences of Art 46 and the pre-emptive provisions in the Articles and, at the same time, not fall foul of Arts 11 and 40. 146 Thus, the Coopers Deed provided: "4.1 (a) The parties agree to the sale and purchase of an interest in the Coopers Shares on the terms and subject to the conditions of this deed. (b) LNA acknowledges that the Articles of Association of Coopers give to each member of Coopers rights of pre-emption in relation to any transfer of shares in Coopers. No provision of this deed will entitle LNA to require SABH to give a Transfer Notice in relation to the Coopers Shares or entitle SABH to give a Transfer Notice in relation to the Coopers Shares. 4.2 At and from Completion all right, title and interest in the Coopers Shares will be sold by SABH to LNA and will be purchased by LNA from SABH free and clear of all Encumbrances and with all rights attached or accruing to them, including all Rights. Notwithstanding the foregoing no right, title and interest in the Coopers Shares is sold that relates to: (a) the right or entitlement to seek registration of a transfer of legal title of the Coopers Shares on the register of members of Coopers or that would require the giving of a Transfer Notice; (b) the right of SABH as a member of Coopers to acquire shares in the capital of Coopers following the giving of a Transfer Notice by another member of Coopers; or (c) any power or control to dispose of a voting share in the capital of Coopers (other than a Coopers Share) including, but not limited to, any rights relating to the sale of such shares." 147 Clearly, the purpose of cl 4.2 of the Coopers Deed was to avoid the pre-emptive provisions in Arts 47 to 53 of Coopers' Articles. If there had been a simple sale and purchase of the Coopers Shares, Art 46 would have operated and so also would have Arts 47 to 53 so as to entitle the holders of "C" class shares to be offered Coopers Shares owned by the SABH which, pursuant to the terms of the Coopers Deed, were to be sold to Lion Nathan. 148 In addition to the provisions mentioned above, cl 5.1 of the Coopers Deed provided that the Coopers Shares were to be held by SABH on trust for Lion Nathan. 149 Clause 7(b) of the Coopers Deed provided: "Notwithstanding any other provision of this deed: … (b) the provisions of this deed do not constitute a transfer or agreement to transfer a Coopers Share for the purposes of article 46 of the Articles of Association of Coopers". 150 Quite clearly, therefore, the transaction evidenced in the Coopers Deed was constructed so as to avoid the pre-emptive rights provisions of Coopers' Articles. 151 In October 1993 Mr Bill Cooper, the managing director of Coopers, telephoned Mr Philip Smith, a director of Lion Nathan, informing Mr Smith that Coopers would be challenging the Coopers Deed. Thereafter, Coopers, in correspondence exchanged with Lion Nathan, asserted that the transaction evidenced in the Coopers Deed either contravened or triggered the pre-emptive rights provisions in Art 46 of Coopers' Articles of Association. 152 At or about the same time as the Coopers Deed was executed, a dispute arose between Coopers, Lion Nathan, SABH and Adelaide Bottle Co Pty Ltd ("Adelaide Bottle") as to Coopers' rights to bottles manufactured and produced by Adelaide Bottle. In August 1993 Coopers commenced proceedings in this Court against Adelaide Bottle, SABC and officers of those companies. 153 The parties entered into negotiations to settle both disputes. Coopers sought a settlement excluding Lion Nathan from holding any interest of any kind in its shares, including the Coopers Shares the subject of the Coopers Deed. It also sought to have Lion Nathan supply bottles to Coopers at reasonable prices. 154 The various parties came to an agreement which, in broad terms, required SABH to repurchase the interest in the Coopers' shares which had been transferred to Lion Nathan by virtue of the Coopers Deed. It was a term of the settlement that Coopers' Articles and Memorandum would be amended so that any transaction of the kind which was evidenced in the Coopers Deed would trigger the pre-emptive rights in the Articles. It was also a term that Lion Nathan would become entitled to benefit from the pre-emptive rights to Coopers' shares. 155 Mr Michael Smith who was, at the relevant time, the executive director of Lion Nathan has described the elements of the settlement between Lion Nathan, Coopers and SABH in paragraph 14 of his affidavit: "14 The main elements of the settlement reached between LNA, Coopers and SABH pursuant to the negotiations referred to in paragraph 10 above were that: (a) LNA would relinquish its interest in the shares in Coopers held by Southcorp (formerly SABH) by selling that interest back to Southcorp at $7 per share, and the Coopers Deed would be terminated; (b) in return, Coopers would confer on LNA a third tier pre-emptive right in relation to shares in Coopers available for transfer (which meant, in summary, that any shares in Coopers available for transfer would be first offered to existing members, with any surplus shares then to be offered to Coopers' superannuation fund, and any remaining shares then to be offered to LNA), and would preclude any competitor of Coopers other than LNA from being a member of Coopers. This was to be achieved by entrenched amendments to the Memorandum and Articles of Coopers; (c) an exemption would be obtained from the Australian Securities Commission to allow a transfer of shares in Coopers under the pre-emptive rights provisions in Coopers' Articles at any time to LNA without triggering a compulsory take-over for Coopers; (d) if Southcorp offered to sell its shares in Coopers within 3 months, LNA would purchase all of the shares which might be offered to LNA pursuant to the pre-emptive rights provisions of Coopers at $7 per share plus interest; (e) the proceeding in relation to the Bottle Dispute would be discontinued, and Coopers would have access to a type of bottle; (f) LNA and Coopers would have good faith discussions about distribution arrangements if Coopers at any time in the future contemplated changing its existing distribution and sale arrangements." 156 On 3 March 1995 Coopers and Lion Nathan entered into the "Coopers Shares Agreement". By that agreement, Coopers agreed to use its best endeavours to ensure that its Memorandum and Articles of Association were amended in accordance with the schedule to the Coopers Shares Agreement. The Coopers Shares Agreement also provided for future bottle arrangements. 157 Lion Nathan, for its part, agreed that if Coopers' shareholders resolved to amend Coopers' Memorandum and Articles of Association in accordance with the schedule to the Coopers Shares Agreement, it would enter into two further agreements; a "Release Agreement" to which Lion Nathan, Coopers, SABC and Adelaide Bottle would be parties and a "Termination Agreement" to which Lion Nathan and SABH would be parties. 158 The Release Agreement was intended to bring to an end the dispute and the legal proceedings relating to the use by Coopers of the bottles manufactured and produced by Adelaide Bottle. The Termination Agreement provided for SABH repurchasing the interests held by Lion Nathan in the Coopers' shares which had been the subject of the Coopers Shares Agreement. 159 Lion Nathan and Coopers had recognised that the settlement which was to be evidenced by the Coopers Shares Agreement necessitated Coopers obtaining permission from the Australian Securities Commission ("ASC") under s 633(c) of the Corporations Law (Cth) ("the Corporations Law") that s 615 of the Corporations Law not apply to any acquisition of shares in Coopers which would occur by way of deeming in consequence of the transaction proposed in the Coopers Shares Agreement. The settlement terms included amendments to Coopers' Articles of Association by which pre-emptive rights were given in relation to the transfer of shares. Coopers' solicitors provided Lion Nathan's solicitors with a draft of the proposed amendments prior to sending them to the ASC for approval. The draft letter to the ASC was in the following terms: "It is proposed that amendments be made to the Memorandum of Association and Articles of Association which deal with the pre-emptive rights of shareholders in Coopers. In effect these amendments provide as follows: (a) They extend the definition of "transfer" to avoid assignment of interests, or a change in control of a shareholder which may not be considered to be a formal transfer(proposed Articles 45A, 50A and 50B). (b) In essence the existing Articles 46 to 50 inclusive are retained although the rights are extended to relatives of members. This is consistent with shareholding in Coopers being substantially held by Coopers' family members. (c) Additional pre-emptive rights are triggered if no A, B, C or D shareholder or a member's relative seeks to purchase the shares the subject of the transfer notice. In particular the shares are then offered to: (i) the Australian Mutual Provident Society Limited or some other trustee of a superannuation fund for employees of Coopers (proposed Articles 51, 51A and 51B); (ii) thereafter the shares are offered to Lion Nathan Australia Limited (proposed Articles 51C, 51D and 51B); and (iii) thereafter they are offered to the public (proposed Article 52). (d) A consequential amendment has been made to Article 141." 160 The Articles of Association also had existing pre-emptive rights which were described in the same draft letter of 31 October 1994 to the ASC as follows: "(a) A proposing transferor delivers a transfer notice to Coopers specifying the shares and the sum the shareholder fixes as fair value for those shares (Article 46). (b) If the shares the subject of the transfer notice are A, B or C shares, the directors are required to endeavour to find a member holding A, B or C shares and willing to purchase them (Article 47(a)). (c) If any A, B or C shareholder is willing to purchase those shares and notice of which is given to the proposed transferor within 28 days, the proposed transferor is bound to sell on those terms (Article 47(a)). (d) If no A, B or C Class shareholder is found, the said shares are to be offered to a D Class shareholder (Article 47(b)). (e) If the shares are D Class shares they are to be first offered to A, B and C Class shareholders in the manner outlined above (Article 48). (f) If no existing shareholder can be found then the shares may be sold to any other person and at any price (Article 51)." 161 On 10 February 1995, prior to the execution of the Coopers Shares Agreement but no doubt in anticipation of its execution, Coopers gave notice to its shareholders of an extraordinary general meeting to alter its Memorandum and Articles in accordance with the schedule to the later executed Coopers Shares Agreement. 162 Explanatory notes were sent with the Notice of Meeting. The shareholders were advised of the two disputes and the manner in which they had been resolved. The Notes continued: "As part of the settlement, it has been proposed that the Articles and Memorandum of the Company be altered so as to: 1.1 Strengthen the pre-emptive rights provisions to ensure that any future assignments of the nature of the Southcorp Holdings Limited and Lion Nathan Australia Pty Ltd transaction trigger the pre-emptive rights in the Articles; 1.2 To provide for an expansion of the persons who benefit from pre-emptive rights to the shares of the Company. Under this revised procedure, shares which are offered for sale are to be first offered: 1.2.1 to existing members; and if any shares thereafter remain: 1.2.2 to relatives of existing members (including their related companies); and if any shares thereafter remain: 1.2.3 to Australian Mutual Provident Society and to any other trustee of a superannuation fund in which more than 10% of the employees of the Company are members at that time; and if any shares thereafter remain: 1.2.4 to Lion Nathan Australia Pty Ltd. 1.3 Amend Article 141. Article 141 currently provides that members cannot be involved in businesses which compete with the Company. However, the South Australian Brewing Company Pty Limited is excluded. It is proposed to amend Article 141 so as to provide that in addition to the South Australian Brewing Company Pty Ltd being excluded from the terms of Article 141, that Lion Nathan Australia Pty Ltd and any related body corporate of Lion Nathan Australia Pty Ltd shall be deemed not to be carrying on business in competition with the Company. 1.4 Amend the Memorandum of Association so as to require that the new Articles concerning pre-emptive rights and Article 141 cannot be amended without the consent of Lion Nathan Australia Pty Ltd. This requirement to obtain the consent of Lion Nathan Australia Pty Ltd will cease if there is a change in control of Lion Nathan Australia Pty Ltd or if Lion Nathan Australia Pty Ltd and its related bodies corporate cease to be substantial brewers of beer." 163 On 7 March 1995 the shareholders resolved to alter Coopers' Memorandum and Articles of Association as recommended by the directors and in accordance with the schedule to the Coopers Shares Agreement. 164 As a result of those resolutions, the following provisions were adopted in Coopers' Memorandum of Association: "6 A special resolution:- (a) altering or omitting Articles 45 to 54 (inclusive) or 141 of the Articles of Association of the Company; or (b) purporting to amend or delete an existing article or insert a new article, which is inconsistent with the rights granted to Lion Nathan Australia Pty Limited (ACN 008 596 370); does not have any effect unless and until the consent of Lion Nathan Australia Pty Limited (ACN 008 596 370) is obtained. 7 A special resolution altering or omitting regulation 6 of the memorandum of association of the Company, does not have any effect unless and until the consent of Lion Nathan Australia Pty Limited (ACN 008 596 370) is obtained. 8 Regulations 6 and 7 of this memorandum of association will cease to have effect on a Change in Control (as that term is defined in Article 50A of the Articles of Association as at the date of adoption of this regulation) of Lion Nathan Australia Pty Limited (ACN 008 596 370) or if Lion Nathan Australia Pty Limited (ACN 008 596 370) and its related bodies corporate cease to be substantial brewers of beer." 165 Clause 6 of the Memorandum of Association entitled Lion Nathan to a right of veto in relation to any special resolution altering or omitting Arts 45 to 54. Clause 7 entrenched cl 6. Clause 8 provided that Lion Nathan's right of veto and its entrenchment would cease to have effect if there were a change of control of Lion Nathan or Lion Nathan ceased to be a substantial brewer of beer. 166 The Articles of Association were amended to include references to and definitions of "members' relatives" because, as the Explanatory Note showed, it was intended to amend the pre-emptive rights regime operating under the Articles of Association to include a requirement that shares be offered to relatives of existing members. 167 At the same time, Art 45 was deleted and a new Art 45 and Art 45A were included. The Articles have since been renumbered. I shall continue to refer to the Articles by the numbers given them at the time they were amended. Article 45 (now 38) provided: "45 Notwithstanding the provision of any other Article including Article 54, the Directors must register any transfer of shares which requires registration and which is expressly permitted by Articles 46-52D or which is made in compliance with such Articles. No member may make any transfer of shares and the Directors must not register any transfers of shares without complying with articles 46-52D. 45A In Articles 45-52D, "transfer" includes:- (a) sell, assign, offer, dispose of, transfer or deal in any way with any right, title or interest in any share (whether legal or beneficial and whether for valuable consideration or not); and (b) to agree to sell, assign, offer, dispose of, transfer or deal in any way with any right, title or interest in any share (whether legal or beneficial and whether for valuable consideration or not); and (c) create, declare or allow to be created any trust over any share. A member shall be entitled to mortgage, charge or otherwise encumber its shares provided that if the person taking the mortgage, charge or encumbrance seeks to become or have some other person become the registered holder of the shares the member will then be deemed to have offered to sell those shares to the other members. In such event that member irrevocably authorised and empowers the Directors and for such purposes appoints the Directors as its agent and attorney to sign a Transfer notice under Article 46 with respect to those shares. The price of those shares will be the value as certified by the Auditor under Article 49." 168 Article 45A was clearly designed to prevent a transaction of the kind in relation to the Coopers Shares in the Coopers Deed which sought to avoid the pre-emptive rights provisions of the Articles. 169 A new Art 50A was included: "50A If there is a Change in Control in any member, that member is deemed to have offered to sell all of its shares to the other members. In such event that member irrevocably authorises and empowers the Directors and for such purposes appoints the Directors as its agent and attorney to serve a Transfer Notice under Article 46 with respect to the shares held by such a member. The price of the shares will be the value as certified by the auditor under Article 49. For the purpose of this Article, 'Change to Control' means any transfer of any shares or other equity interest in a member or in any entity that directly or indirectly controls or influences the member or any reconstruction, amalgamation or reorganisation of a member or any entity that directly or indirectly controls or influences the member if, after such transaction, there would be a change in the person having the power to direct its management and policies, or if no one person has such power, a change in the majority of such persons who, acting together, have such power or, without limiting the generality of the foregoing, if any person acquires a relevant interest (as that term is defined in the Corporations Law) in 40% or more of the voting shares of the member. For the purposes of this Article no Change of Control will occur where the person or persons having the power or interest referred to above following the relevant transactions are persons who would be permitted transferees in terms of Article 53 of the person or persons who previously had that power or interest, if such person or persons who previously had that power or interest had been a member or members of the Company." 170 Articles 47A, 47B and 48 were amended to extend to a member's relative in accordance with cl 1.2.2 of the Explanatory Notes. 171 Article 50A was included to provide the circumstances in which a change of control would be deemed to have occurred and deeming a member which has been subject to a change of control to have offered to sell all of its shares to the other members. 172 Also included were Arts 51, 51A, 51B, 51C, 51D, 51E and 52: "51 If the Company and the Directors do not find a member or a Member's relative willing to purchase all or any of the shares referred to in the Transfer Notice within:- (a) the 56 day period set out in Article 47; and/or (b) the 28 day period set out in Article 48; the Company must offer the remaining shares to Australian Mutual Provident Society (ARBN 008 387 371) and to any other trustee of a superannuation fund (of a kind referred to in Regulation 7.12.06 of the Corporations Regulations) in which more than 10% of the employees of the Company are members at that time (the "Institutions") at a price equal to the price at which the shares were offered to the members under Articles 46-50. Such purchase by the Institutions may be made either in their own capacity or as Trustee of the superannuation fund. 51A Within 28 days after notification under Article 51, the Institutions must notify the Company of the number of shares (if any) which it or a wholly owned subsidiary of the Institution desires to purchase. The Company shall give notice thereof to the proposing transferor, and he shall be bound upon payment of the price fixed by the Transfer Notice or the fair value as the case may require to transfer the shares to the Institutions or its wholly owned subsidiary. 51B A failure by the Institutions to notify within 28 days is deemed to be notice of an election not to purchase any shares. 51C If the Institutions or a wholly owned subsidiary of the Institution have not purchased all or any of the shares referred to in the Transfer Notice within the 28 day period referred to in Article 51, the Company must offer the remaining shares to Lion Nathan Australia Pty Limited (ACN 008 596 370) at a price equal to the price at which the shares were offered to the members under Article 46-50. 51D Within 28 days after notification under Article 51C, Lion Nathan Australia Pty Limited (ACN 008 596 370) must notify the Company of the number of shares (if any) which it desires to purchase. The Company shall give notice thereof to the proposing transferor and he shall be bound upon payment of the price fixed by the Transfer Notice or the fair value as the case may require to transfer the shares to Lion Nathan Australia Pty Limited (ACN 008 596 370). 51E A failure to Lion Nathan Australia Pty Limited (ACN 008 596 370) to notify the Company within 28 days is deemed to be notice of an election not to purchase any shares. The provision of Articles 49 and 50 apply to Articles 51C to 51E and for the purposes of Articles 49 and 50, "purchasing member" means the Institutions (or its wholly owned subsidiary) or Lion Nathan Australia Pty Limited (ACN 008 596 370) (as the case may be). 52 If the Company shall not within the times set forth in Articles 47, 48, 51A and 51D as the case may require find a person willing to purchase the shares and give notice in the manner aforesaid the proposing transferor shall at any time within three calendar months afterwards be at liberty subject to Article 54 to sell and transfer the shares (or those not placed) to any person at a price no lower and on terms no more advantageous than those offered under Articles 46-51E." 173 Article 141 was included which had the effect of deeming Lion Nathan not to be a concern carrying on business in competition with Coopers. 174 There were other amendments to the Articles which are not relevant. 175 On 7 March 1995 the respective parties executed the Release Agreement and the Termination Agreement. 176 As at 7 March 1995, s 206CA of the Corporations Law of South Australia permitted a company to purchase shares in itself provided that its constitution so authorised the company: s 206DA(1) of the Corporations Law. 177 The effect of the amendments to the Articles as at 7 March 1995 meant that if a member wished to sell shares in Coopers the member must give notice in writing (called the "Transfer Notice") to Coopers indicating the member's desire to transfer shares and specifying the sum that the member fixed as the fair value: Art 46. In doing so, the member constituted Coopers as the member's agent for the sale of the share to any member of Coopers at the price fixed in the Transfer Notice or, if the purchaser opted, at the price fixed by the auditor in accordance with the Articles: Art 46. 178 Where the member wished to transfer "A", "B" or "C" shares, the directors had an obligation to offer those shares to any other member holding an "A", "B" or "C" share within 28 days of being served with the Transfer Notice: Art 47(a). 179 If there was no member holding "A", "B" or "C" shares interested in purchasing the member's shares in the Transfer Notice, then the directors had to offer the shares to the holders of "D" class shares: Art 47(b). If the shares offered for sale in the Transfer Notice were "D" class shares, then the directors had to endeavour to find a member holding "A", "B" or "C" shares willing to purchase the shares within the same period: Art 48. When the Articles were amended the only member holding "D" class shares was SABH. 180 If within 56 days in the case of "A", "B" or "C" shares, or 28 days in the case of "D" class shares, the directors were not able to find a member or member's relative willing to purchase the shares, then the shares had to be offered to Australian Mutual Provident Society ("AMP") or any other trustee of a superannuation fund of the kind referred to in Art 51: Art 51. 181 If AMP did not notify the directors within 28 days that it desired to purchase the shares, then the company was obliged to offer the shares to Lion Nathan who had 28 days in which to purchase the shares: Art 51C. 182 Lastly, if Lion Nathan did not notify the company that it desired to purchase the shares, the member could, for a period of three calendar months, sell the shares to any person but at a price no lower and on terms no more advantageous than those under the previous Articles: Art 52. 183 On 21 March 1995 SABH served a Transfer Notice in respect of all of the shares which it held in Coopers. The shares were offered to Coopers members who held "A", "B" and "C" shares in accordance with Art 47 and 48 of Coopers' Articles. The "D" shares and 650 "C" shares were acquired by Coopers' shareholders. The remaining shares were then offered to AMP in accordance with Art 51 of Coopers' Articles but AMP rejected the offer of the shares. 184 As a result, SABH remained the owner of 371,353 "C" shares. In accordance with an agreement which was entered into between SABH, Coopers and Lion Nathan, Lion Nathan consented to Coopers not complying with the pre-emptive rights provisions of the Articles in respect of SABH's shareholding in Coopers by offering the shares to Lion Nathan. Instead, Coopers reduced its capital and the SABH holding in Coopers was cancelled by order of this Court made on 14 September 1995. Southcorp was paid the sum of $2,656,265.73. 185 Thereafter, neither SABH nor Lion Nathan held any shares in Coopers. 186 On 5 September 2003 the Chairman of Coopers, Mr Glenn Cooper, wrote to Coopers' shareholders advising that the directors had decided to implement a buy-back of up to 10 per cent of the issued capital of the company at a buy-back price of $45.01 per share. 187 The letter stated that an acceptance form accompanied the document and advised shareholders that if they wished to accept the offer they must ensure their acceptance form was signed and received by the company no later than 5.00pm on 3 October 2003. 188 Full details of the buy-back scheme were contained in a document which was entitled: "OFFER by COOPERS BREWERY LIMITED (ACN 007 871 409) (Coopers) To buy-back 10% of the ordinary Shares in Coopers For $45.01 per share" 189 The offer document explained the tax implications and how individual members might be affected. It addressed the effect of the buy-back on the issued capital of Coopers. It advised the members how they might accept the offer. Clause 5.4 of the document provided: "5.4 How to Accept To accept the Buy Back Offer you must complete and sign the enclosed Acceptance Form in accordance with the instructions appearing on the Acceptance Form and return it together with the relevant Share Certificate(s) and all other documents (if any) that may be required by those instructions so that they are received by Coopers before the end of the Offer Period at the following address: Attention: Mr H Duffield Coopers Brewery Limited 461 South Road REGENCY PARK SA 5010 You can use the enclosed reply paid envelope if you are posting within Australia. If the Share Certificate(s) enclosed by you relate to more Shares than the Buy Back Offer relates to, Coopers will issue you with a new Share Certificate(s) for the balance of your Shares." 190 It also addressed the effect of the return of the acceptance form. Clause 5.6 relevantly provided: "(a) agreed that Coopers will buy back from you on the Buy Back Date the number of Shares determined under section 5.2; (b) agreed to transfer the Acceptance Shares to the Company on the Buy Back Date (subject to Coopers not having received a notice of withdrawal of your acceptance prior to the close of the Offer Period)." 191 Other details were included in the documents which indicated how the acceptance form should be completed. 192 In fact, only 16 members accepted the offer. Those 16 members are the second to seventeenth respondents in this proceeding. On 27 October 2003 the company registered the transfer to it of the shares which were the subject of the buy-back from the members who accepted the offer. 193 At no time did Coopers comply with the pre-emptive regime in its Articles. 194 The appellant's case, in the Court below and on appeal, was that Coopers was in breach of its own Articles because the buy-back triggered the pre-emptive regime in Coopers' Articles. Its case was that Coopers was under an obligation to comply with its own Articles and therefore should have offered the shares, which it registered as transferred to itself; first, to existing members and, secondly, to the AMP and, thirdly, to Lion Nathan. In its statement of claim which accompanied its application, it also complained that Coopers' actions were in breach of the Coopers Shares Agreement which was executed on 3 March 1995 by becoming registered pursuant to the buy-back of shares which it had not offered to members, AMP and Lion Nathan in accordance with the Articles. The appellant pleaded that it was an express term of the Coopers Shares Agreement that Coopers would comply with and enforce the Coopers Share Transfer Regulations. In the alternative, it was pleaded, that there was an implied term which was implied to give effect to the presumed intentions of the parties. Alternatively, the term was implied by operation of law. Further, it was put that Coopers was estopped from acting contrary to an assumed state of affairs which was to the effect that Coopers would enforce its "Share Transfer Regulations". Lion Nathan also claimed that Coopers had been guilty of unconscionable conduct in contravention of s 51AA of the Trade Practices Act or, alternatively, s 12CA of the ASICAct, and/or misleading and deceptive conduct in contravention of s 12DA of the ASIC Act and s 1041H(1) of the Corporations Act. Lastly, it claimed that Coopers had a fiduciary duty to Lion Nathan with respect to the performance and enforcement of the Coopers Share Transfer Regulations, and acted in breach of that fiduciary duty. 195 In its application, Lion Nathan sought declarations and orders. The declarations sought are unimportant but the orders sought are instructive: "8 an order declaring the whole of any contract made between Coopers and each Participating Shareholder for the transfer of the Buy-back Shares to have been void ab initio; 9 an injunction directing Coopers to take all necessary steps forthwith to: (a) issue to each Participating Shareholder listed in column A of the Annexure to this Application the corresponding number of Shares for that shareholder as listed in column C of the Annexure ("the Re-Issued Shares"); (b) correct Coopers' Register of Members to reflect the issue of shares pursuant to paragraph 9(a) above in the following manner: (i) to the extent that a Participating Shareholder transferred all of the Shares owned by them to Coopers pursuant to the Buy-back Offer: A reinstate that Participating Shareholder's Shareholder Details in the Coopers' Share Register; and B record in the Coopers' Share Register as the total number of shares owned by that Participating Shareholder the number of shares listed in column E of the Annexure for that Participating Shareholder; (ii) to the extent that a Participating Shareholder transferred some but not all of their Shares to Coopers pursuant to the Buy-back Offer, record in the Coopers' Share Register as the total number of shares owned by that Participating Shareholder the number listed in column E of the Annexure for that Participating Shareholder. 10 an injunction directing Coopers to comply with and enforce the Coopers Share Transfer Regulations, including by offering shares to LNA in accordance with the LNA Pre-Emptive Right." 196 The effect of paragraph 9 of the application, if granted, would be to have Coopers transfer the shares back to each of the members who had accepted the Coopers buy-back offer. The order sought did not require the relevant members to refund the money paid by Coopers pursuant to the buy-back. AMP was not made a party to the proceeding and, having regard to the relief sought in the application, it did not need to be a party. If the appellant were granted the relief sought, AMP's interests would not be affected because the shares would revert to the shareholders who accepted the buy-back offer. If after they reacquired their shares they still wished to sell their shares and Coopers and the directors complied with the pre-emptive regime in the Articles, AMP would be entitled to be offered the shares if no member with "A", "B" or "C" shares wished to acquire them. So AMP's interests could not be adversely affected if the relief sought on the application were granted. 197 However, at trial, Lion Nathan sought quite different relief to which, in my opinion, as the proceedings are presently constituted, it could never have been entitled. 198 On the second day of trial Lion Nathan contended that it was willing to purchase all of the buy-back shares which had been registered as transferred to Coopers. It contended that the buy-back acceptances which had been executed by the second to seventeenth respondents should be treated as Transfer Notices and that the two other categories of purchasers with priority, namely members with "A", "B" or "C" shares or AMP, should be treated as having received and rejected Transfer Notice offers. It was submitted that, as a consequence, Lion Nathan was entitled to be offered the shares and, because it was desirous of accepting the shares, it should become entitled to the shares at the buy-back offer price. It contended that the register should be rectified to reflect the fact that Lion Nathan was entitled to be registered as the transferee of all of the buy-back shares acquired by Coopers in 2003. 199 On this appeal it was put by senior counsel for the appellant that a declaration ought to be made that Lion Nathan is entitled to be registered as the owner of the 2003 buy-back shares. That declaration cannot be made, in my opinion, whilst AMP is not a party and whilst there is nobody representing the body of shareholders who hold "A", "B" and "C" shares who would be entitled to be offered the buy-back shares in priority to AMP and, of course, in priority to Lion Nathan. 200 It was submitted that there was no evidence that the shares had not been offered to the members or to AMP and that Coopers had it in its power to prove or disprove that fact. Certainly, Coopers could have adduced evidence to establish that it had not complied with any aspect of the pre-emptive regime and that it had not offered the shares to any of its members in accordance with Art 47(a) or AMP in accordance with Art 51. 201 But whether Coopers had the ability to prove that fact is not to the point. A declaration of the kind sought by the appellant on the second day of the hearing would adversely affect the interests of the members entitled to be offered the shares pursuant to Art 47(a) and AMP. Those parties are entitled to be parties to the proceedings if a party is seeking a declaration that will adversely affect their interests. 202 In my opinion, if the appellant wished to seek the relief that the appellant referred to orally on the second day, the appellant was bound to seek to join a representative of the members who would be entitled to be offered the shares pursuant to Art 47(a) and the AMP. 203 However, in any event, the appellant could never be entitled to the declaration that was sought at trial or an order that the shares vest in the appellant. 204 It was clearly assumed on both sides that Coopers had not complied with the pre-emptive regime. It may be inferred, therefore, that the shares have never been offered to the members who are entitled to receive an offer if the pre-emptive regime applied pursuant to Art 47(a) or the AMP. It may be inferred, therefore, that they have not failed to respond within the time prescribed by the Articles. 205 It was put, however, that the time for offering the shares to the members entitled and the AMP had passed and therefore their rights had been extinguished. It was put that Lion Nathan, therefore, had an entitlement to the shares. 206 That argument cannot be accepted. If the directors or Coopers have failed in their obligations in respect to the pre-emptive regime as a result of which the members entitled under Art 47(a) and AMP have had their rights extinguished, so also, it would follow, have Lion Nathan's. Lion Nathan also had to respond within a certain time which has well passed. If the parties in priority to Lion Nathan have lost their rights, so also have Lion Nathan. It must be remembered that if Lion Nathan did not desire to purchase shares if offered, under Art 51E a member who is desirous of selling is entitled to sell and transfer the shares to any person. If the appellant's argument is right, it must follow that the second to seventeenth respondents were at some point of time entitled to sell to any person in accordance with Art 52. However, even that entitlement would have now passed. The right to sell to any person willing to purchase had to be exercised within three months after Lion Nathan had either rejected the offer to purchase or failed to notify Coopers that it wished to purchase the shares: Art 51E and 52. It would follow that the right to sell the shares at all has expired. 207 For those reasons, the appeal must fail. 208 However, for reasons which follow, in my opinion, the 2003 buy-back did not trigger the pre-emptive regime. 209 At trial there was an issue as to the proper construction of s 125(1) of the Corporations Act. On appeal neither party sought to argue that his Honour's construction of s 125 was wrong. It does not need to be further addressed. 210 On appeal many of the claims made by the appellant in its statement of claim were not pressed. The appellant's case as presented was one of construction of the Articles of Association and, in particular, the construction of Art 45 (now 38). 211 The history of what his Honour described as "the evolution of buy-back powers in Australia's corporations legislation" is relevant in a consideration of the issues raised on the appeal. The law developed so that a company was not entitled to reduce its capital "except in the manner and with the safeguards provided by statute": in Re Exchange Banking Company; Flitcroft's Case [1882] 21 Ch D 519 per Jessel MR at 533. Thus it was that a company was not entitled to purchase its own shares because to do so would be to reduce its capital: Pilmer v Duke Group Ltd (in liquidation) (2001) 207 CLR 165 at [22]. 212 In 1989 the Companies Code (Cth) ("the Companies Code") was amended to allow companies to purchase shares in itself by cancelling issued shares through buy-back arrangements: s 133BC of the Companies Code. It was a condition of a buy-back arrangement that the company's articles permitted a company to buy shares in itself: s 133DA(1) of the Companies Code. 213 As already noticed, Art 8 of Coopers' Articles prohibited Coopers from buying shares in itself. That Article was removed in 1993. However, no article was ever inserted permitting Coopers to buy-back shares in itself. 214 The Corporations Law came into effect on 1 January 1991. It also allowed a company to purchase shares in itself provided that the company's articles contained a buy-back authorisation. 215 Subdivision C of Div 4 of Pt 2.4 of the Corporations Law provided for a buy-back regime. Section 206CA of the Act allowed a company to buy-back ordinary shares "if, and only if, the conditions prescribed by this Division are satisfied". Section 206DA(1) provided: "The first condition is that the company's articles contain a buy-back authorisation at the relevant time." 216 Because Coopers' Articles have never contained a buy-back authorisation, Coopers could never have bought back shares under the Corporations Law as it stood at the time that Coopers amended its Articles on 3 March 1995. 217 On 9 December 1995 the First Corporate Law Simplification Act 1995 (Cth) was passed which permitted a company to buy-back shares in itself without there being any need for the company to have a buy-back authorisation in its constitution: Corporations Law, s 206B Note 1. 218 Therefore, on 9 December 1995, Coopers, without taking any steps to alter its own constitution, acquired the right to buy-back shares in itself by force of the statute. 219 The important point to notice is that at the time Coopers' Articles were amended, Coopers could not buy back its own shares. That must be an important consideration in determining the purpose and, therefore, the meaning of Art 46. 220 The appellant contended, on appeal, that the ordinary meaning of the words of Art 46 (now 38) "prohibited the transfers of the buy-back shares being made to Coopers without the pre-emptive right provisions first being complied with, including that the shares be offered to LNA [Lion Nathan] if not first purchased by Coopers members or AMP". 221 His Honour below approached the question of construction in the following way (at [5]): "The construction of Art 38 necessarily involves a close consideration of the text of the article in the setting of Coopers' constitution. However, its resolution also requires a like consideration of "the surrounding circumstances known to [Coopers and its members] and to the purpose and object of [Art 38]": cf Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; 208 ALR 213; [2004] HCA 35 at [22] (Pacific Carriers)." 222 The appellant's claim on this appeal was that in that second respect he had erred. 223 Finn J found that Coopers' pre-emptive rights regime was neither intended to apply nor does apply to a share buy-back under the provisions of the Corporations Act. He held (at [99]): "…a transfer does not fall within the new Art 38 because in this setting "any transfer of shares" means "any transfer of shares to any other person other than Coopers". I should add that in so reading Art 38, I am not implying words into the article. Rather I am simply indicating "in express, and therefore more readily observable form the true construction of the words actually used" in the article: compare Spigelman, "The poet's rich resource: Issues in statutory interpretation" (2001) 21 Aust Bar Rev 224 at 233." 224 Section 140 of the Corporations Act provides: "140(1) A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract: (a) between the company and each member; and (b) between the company and each director and company secretary; and (c) between a member and each other member; under which each person agrees to observe and perform the constitution and rules so far as they apply to that person." 225 A company's constitution is a contract of an unusual kind. In particular, the contract can be altered without the agreement of all of the contracting parties. The constitution cannot be rectified even if it does not accord with the concurrent intention of the signing parties at the time they signed. Further, the contracting parties vary from time to time as shareholders come and go, so the contract binds the owners of shares for the time being: Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 ("Bailey v NSW Medical Defence Union") at 435-6. 226 However, his Honour was right, in my opinion, to accept the submission made by counsel that the rules of construction that apply in relation to contracts were applied with caution to the construction of a corporate constitution. 227 Lion Nathan is not a member of Coopers so is not a party to the "contract" between Coopers and its members. No doubt it was for this reason that Lion Nathan sought to rely upon the terms of the Coopers Shares Agreement and its pleas of the various contraventions of the legislation controlling corporations affairs. 228 In Cotman v Brougham [1918] AC 514 ("Cotman v Brougham"), Lord Wrenbury said (at 522), when talking of a company's memorandum: "that it must delimit and identify the objects in such plain and unambiguous manner as that the reader can identify the field of industry within which the corporate activities are to be confined. The purpose, I apprehend, is twofold. The first is that the intending corporator who contemplates the investment of his capital shall know within what field it is to be put at risk. The second is that any one who shall deal with the company shall know without reasonable doubt whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects." 229 The dicta in Cotman v Brougham no longer has the relevance that it did in 1918. First, as I have already mentioned, a company's constitution now has the effect as a contract between the company and each member; and the company and each director and company secretary; and between a member and each other member; and provides the rules which each member, director, secretary and other member agree to observe. 230 A company's constitution no longer inhibits a company in the exercise of the company's power or in its relationship with parties outside the members, directors and secretary. Section 124 of the Corporations Act gives a company, in addition to all of the powers of a body corporate, the legal capacity and power of an individual. Section 125 permits a company to restrict or prohibit the company in the exercise of any of its powers, but s 125(1) specifically provides: "The exercise of a power by the company is not invalid merely because it is contrary to an express restriction or prohibition in the company's constitution." 231 A party dealing with a company can no longer rely upon the memorandum as limiting the powers which may be exercised by the company in relation to parties outside the members, directors and secretary. Because of the provisions of s 125(1), a person dealing with a company cannot know without reasonable doubt whether the contractual relation into which he contemplates entering is one within the company's objects. However, a person may assume that company's constitution has been complied with: s 129(1). The effect of those sections in relation to Lord Wrenbury's dicta was recognised by the Court of Appeal in New South Wales in National Roads and Motorists Association Ltd v Parkin (2004) 60 NSWLR 224 ("Parkin") where Ipp JA said: "51. The idea that the constitution should inform the public with absolute precision of the field in which the company is to undertake its activities (Lord Wrenbury's first purpose) is no longer of significance. This is the consequence of s 124 and s 125 of the Corporations Act (Cth). Section 124 provides that a company has the legal capacity of an individual. By s 125(2) an act of a company is not invalid merely because it is contrary to any of the objects in the constitution. 52. It follows, also, from s 124 and s 125, that, nowadays, a company is able to embark on new fields of endeavour untrammelled by objects clauses. Accordingly, the second of the purposes mentioned by Lord Wrenbury (that anyone who deals with the company should know without reasonable doubt whether the contract contemplated is within the company's corporate objects) has fallen away." 232 The constitution should be construed so as to give the document business efficacy. A construction which would make the constitution unworkable should be avoided if possible: Rayfield v Hands [1960] 1 Ch 1. In Holmes v Keys [1959] 1 Ch 199, Jenkins LJ said (at 215): "I think that the articles of association of the company should be regarded as a business document and should be construed so as to give them reasonable business efficacy, where a construction tending to that result is admissible on the language of the articles, in preference to a result which would or might prove unworkable." 233 That decision has been followed in Australia in Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 10 ACSR 615 at 621 per O'Loughlin J; Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596 per Lockhart J and Parkin at 236 per Ipp JA 234 In Egyptian Salt and Soda Co Ltd v Port Said Salt Association Ltd [1931] AC 677, Lord MacMillan said (at 682): "If by this he meant merely that the memorandum must be construed in accordance with the accepted principles applicable to the interpretation of all legal documents no exception need be taken to his statement, but if he meant that a specially rigid canon of construction is to be applied to the memoranda of association of limited companies their Lordships do not agree. A memorandum of association like any other document must be read fairly and its import derived from a reasonable interpretation of the language which it employs." 235 In HAJ Ford, RP Austin and IM Ramsay, Ford's Principles of Corporations Law, 12th ed, Butterworths, 2005, the learned authors write (at 190): "Because courts have considered the constitution to be a contract they have been construed according to the rules of construction of terms applicable to contracts generally. In the interpretation of constitution courts approached them as business documents. They sought to give them business efficacy: Rayfield v Hands [1960] Ch 1. Where provisions were ambiguous a construction which produced reasonable business efficacy was preferred over one which produced an unreasonable result: Holmes v Keyes [1959] Ch 199 at 215; Stillwell Trucks Pty Ltd v Nectar Brook Investments Pty Ltd (1993) 115 ALR 294; Norths Ltd v McCaughan Dyson Capel Court Cure Ltd (1988) 12 ACLR 739 at 746; Tosich v Tosich Construction Pty Ltd (1993) 10 ACSR 590 at 596." 236 Whilst the courts have treated a company's constitution as a contract, the courts have been cautious in applying all of the canons of construction applicable to commercial and business documents: Simon v HPM Industries (1989) 15 ACLR 427. In that case, Hodgson J was addressed on the question of construction of the Articles of Association of a company. He said at 434 he accepted the defendant's submissions which he relevantly recorded (at 433): "Mr Palmer QC for the second defendant submitted that the rules of construction applied in relation to contracts were applied with great caution to the articles of association of a company; and that the literal meaning of the words should be applied. He referred me to the 4th edition of Gower, Modern Company Law at p 21, and to Grundt v Great Boulder Proprietary Mines Ltd [1948] Ch 145 at 148 and 159-60. Mr Palmer submitted that the reason why even greater strictness was adopted in relation to articles of association than in relation to a contract was that the articles of association were not purely consensual, but rather an instrument required by a statute to be registered so that third parties can rely on it. Next, Mr Palmer submitted that the court could not look to previous negotiations or discussions or the like, except where there was ambiguity or in relation to rectification; and he referred me to Volume 1 of the 25th edition of Chitty on Contracts, para 782. Next, Mr Palmer submitted that if words are unambiguous on their face, the court cannot have recourse to external circumstances or extrinsic evidence so as to produce ambiguity or absurdity: such recourse is available only if ambiguity appears on the face of the documents. Furthermore, where an error is made, such as can be corrected by construction rather than by rectification, the error must appear on the face of the document, and cannot merely consist in inconvenience or even absurdity suggested by external circumstances. Mr Palmer referred me to Pearce on Statutory Interpretation, 2nd ed, p 16, and to Burns Philp Hardware Ltd v Howard Chia Pty Ltd (1987) 8 NSWLR 642 at 655-57." 237 By accepting that submission, Hodgson J accepted that the rules of construction applicable to contracts were applied with great caution. More importantly, for the purpose of this matter, he accepted that the Court could look to previous negotiations or discussions "where there was ambiguity or in relation to rectification" but only if there is an ambiguity. 238 For the reasons which follow, I do not think that second submission correctly represents the law in relation to the construction of a company's constitution in two respects. The need for an ambiguity before recourse can be had to previous negotiations is no longer the law: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 ("Pacific Carriers"); Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 ("Toll"). Rectification of a company's constitution is not available even if the constitution does not accord with the intention of all the signatories at the moment of signature: Scott v Frank F Scott (London) Ltd [1940] Ch 794 ("Scott v Frank F Scott (London) Ltd"); Bratton Seymour Service Co Ltd v Oxborough [1992] BCLC 693 ("Bratton Seymour"); Bailey v New South Wales Medical Defence Union. 239 The Courts have been slow to imply terms into a company's constitution. In Bratton Seymour, the Court of Appeal was asked to imply a term which it said was necessary to give business efficacy to the articles of association of a company. After referring to Scott v Frank F Scott (London) Ltd, in which the Court decided that it has no jurisdiction to rectify the articles of association of a company even if they did not accord with the proved concurrent intention of the signatories to the articles, the Court of Appeal said (at 697), in those circumstances, the Court could not imply a term into the articles "which arises from the surrounding circumstances not apparent from the articles themselves or from the memorandum". 240 In Greenhalgh v Arderne Cinemas, Ltd [1946] 1 All ER 512, a shareholder brought an action challenging the validity of two resolutions of the company which subdivided part of the issued capital of the company and increased the capital by the issue of further ordinary shares. The effect of the resolutions would have been to swamp the voting power of the appellant before the resolutions had enjoyed voting control. The appellant had signed an agreement with the company at the time that he first became associated with the company. He said that a term ought to be implied into that contract to the effect that voting control would not be altered. The Court of Appeal refused to imply such a term into the contract because such a term could not be implied unless the case was very exceptional and absolutely clear. The Court also dealt with the construction of the articles. It held that the company's constitution as a whole should be considered. I do not read the case as authority for the proposition that the Court could not look to surrounding circumstances in the construction of the article. The case is authority for the proposition that such evidence may not be admissible to prove an implied term in an agreement. 241 In Stanham v The National Trust of Australia (New South Wales) (1989) 15 ACLR 87, the plaintiffs, who were members of the defendant, applied to the Court for a declaration that they were entitled to put motions to an extraordinary general meeting of the defendant which had been called by its council. Young J said (at 90) when speaking of the submission that a term ought to be implied into the articles: "I am asked to imply such a right because were it otherwise, there would be no sanction at all for non-compliance with rule 53. Although one does regard articles as a contract and applies the general law as to implying terms into them, in my view one must be very careful before implying matters into articles of association or the like for three main reasons." 242 He gave as those reasons at 91: "First, it is far more difficult to imply a term in a case where parties have purportedly spelt out their rights and obligations in an extensive set of articles than it is where there is only a very summarised version of such rights and obligations. Secondly, it is customary in corporations to place very great store on the actual wording of each of the articles and very often parties govern themselves on the exact grammatical construction of each individual article. Thirdly, there is always power with articles of association or documents such as the rules of this corporation to amend them by special resolution. Thus if there is a defect in the rules rather than imply a term the court may very well leave the parties to have the majority pass the appropriate resolution." 243 That is not to say that a term cannot be implied in a company's constitution where the true construction requires the implication of a term. The Courts, however, proceed warily before implying a term. 244 Because the principle of construction relating to commercial and business documents applies, subject to the limitations above, to the construction of a company's constitution, the constitution should not be construed narrowly or pedantically: Upper Hunter Country District Council v Australian Chilling and Freezing Co Ltd (1967) 118 CLR 429. The constitution should be considered as an enduring and flexible document: Re Giga Investments Pty Ltd (In Administration) (1995) 17 ACSR 472. 245 Article 46 and the pre-emptive regime do not apply to a buy-back scheme of the kind that Coopers offered in 2005. 246 The buy-back scheme was an offer by Coopers to purchase up to 10 per cent of its own capital. The members accepted the offer by signing a form of acceptance. The form of acceptance was not a Transfer Notice within the meaning of Art 46. 247 The pre-emptive regime included in Coopers' constitution, on the ordinary construction of the words, only applies when a member wishes to transfer shares. It only applies when the member advises that the member wishes to sell their shares. 248 It would be an extraordinary reading, in my opinion, of the pre-emptive regime that it applied when Coopers made an offer to all members to purchase 10 per cent of Coopers' capital. If it applied in those circumstances, the following would occur. First, Coopers would initiate the buy-back by offering to acquire a portion of its capital and all of, or a portion of, each member's shares. If the member accepted that offer then, on the appellant's argument, Coopers or its directors would become the member's agent and be obliged to ascertain whether there are any members with "A", "B" or "C" shares desirous of purchasing the shares which Coopers had offered to purchase from the member. If there was no member of that or those classes who desired to purchase the shares, then Coopers would have to first offer the shares to AMP or some other trustee and next offer the shares to Lion Nathan. If neither the AMP nor Lion Nathan desire to purchase the shares, then the member could sell to any other person presumably including Coopers. It would follow, therefore, that the only way a reduction in capital could occur is if all of the members who held "A", "B" or "C" shares and AMP and Lion Nathan did not desire to purchase the shares which Coopers had first offered to purchase. 249 In my opinion, on an ordinary reading of the Articles, they do not apply to a buy-back arrangement. 250 Finn J had regard to surrounding circumstances. In particular, Finn J had regard to the "old" Articles and the materials provided to the 7 March 1993 extraordinary meeting. He concluded that having regard to the decisions of the High Court in Pacific Carriers and Toll following upon Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337 at 352, that it is permissible to have regard to the surrounding circumstances known to the parties and the purpose and object of the transaction in construing a corporation's constitution. 251 It is now clear and settled law that the meaning of commercial contracts and documents is to be determined objectively. To determine the objective intention of the parties regard must be had, of course, to the words in the document themselves, but regard should also be had to all of the surrounding circumstances which were known to the contracting parties at the time the document was created including the underlying purpose and object of the commercial transaction: Pacific Carriers per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [22]. 252 In Toll, Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said (at [40]): "This Court, in Pacific Carriers Ltd v BNP Paribas, has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction." (Footnotes omitted) 253 Finn J applied the principles in Pacific Carriers, which he said (at [79]) "provide the appropriate approach that ought to be adopted in the construction of the pre-emptive rights regime of Coopers' Articles". 254 In my opinion, Finn J was right to have regard to the surrounding circumstances to which he referred in aid of his construction of the Articles. There is support for that proposition in Buche v Box Pty Ltd (1993) 31 NSWLR 368, where Brownie J held (at 374) that he was entitled to have regard to "the circumstances, to the factual background known to the corporators, and to the "genesis" and the objective "aim" of the transaction for the purpose of resolving the ambiguity". In that regard, he relied on Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 347-52. 255 The surrounding circumstances that may be considered when construing a corporate constitution will depend upon a variety of circumstances. 256 Finn J took into account the text of the old Articles of Association to interpret the Articles as amended. As I have already said, in my opinion, he was right to do so. The old articles are easily ascertainable by members and other interested parties. They are clearly relevant in determining why the amendments were proposed. Where it is appropriate to have regard to surrounding circumstances, any previous versions of the constitution is likely to be a relevant consideration. They provide the background to the new Articles. A comparison of the old Articles and the new Articles allows the Court to understand the textual development of the constitution. 257 It is unlikely that it will be permissible to resort to an explanatory memorandum explaining changes to the articles of association of a company when interpreting every company constitution. However, this company has special features which made it permissible for Finn J to have resort to the explanatory memorandum. 258 Coopers is a very tightly held company. For the reasons already given, it is difficult to become a member of the company. That is known to all the members. The pre-emptive rights scheme has seriously limited the persons who may become shareholders. That, of course, is the intention of the scheme. It is intended to keep Coopers' shareholding tightly held. The dispute which led to the Coopers share agreement and the amendments to the articles were well known to both the current members of the company and those parties who held rights under the pre-emptive rights scheme. The information contained within the explanatory memorandum was known to current shareholders and easily ascertainable by the parties who could become members under the pre-emptive rights scheme, including Lion Nathan. This was a case in which the information contained within the explanatory memorandum was well known to the parties whose interests may be affected. Therefore, Finn J was justified in considering the explanatory memorandum when determining the underlying purpose of the pre-emptive rights scheme in order to decide the meaning of "transfer" in Art 38. 259 Finn J said (at [79]) "that a tight rein may well need to be kept on what should count as surrounding circumstances when construing at least aspects of a company's constitution". Again, I agree with Finn J. That is consistent with the cautious approach which has been taken in relation to the implication of terms in a corporation's constitution. The Court should adopt the same caution in regard to surrounding circumstances in construing a corporation's constitution. 260 In my opinion, when the members voted to introduce the current Articles, the parties, including Coopers and the members, did not intend (objectively) those Articles to apply to a buy-back arrangement. Their subjective intention is, of course, irrelevant. It is the intention viewed objectively which is relevant. The purpose of the transaction was to regulate the way in which existing members would deal with their shares if the member wished to sell those shares so as to ensure that all existing members, AMP, the trustee of the superannuation trust and Lion Nathan were entitled to acquire a member's shares before any other person not presently a member of Coopers. At the time that these Articles were introduced Coopers could not, because of an absence of an article authorising it to do so, purchase shares in itself. That is further evidence, in my opinion, that the parties would not have understood the transaction to refer to a buy-back arrangement. 261 A buy-back arrangement is quite different to the arrangement contemplated in the Articles under consideration. The purpose of a buy-back arrangement is to further consolidate the holdings of the existing members in the same hands as existed before the buy-back. It does not contemplate that shares will pass between members or between members and strangers. In my opinion, these Articles were not intended to apply to a buy-back arrangement. 262 The respondent filed a Notice of Alternative Contention in which it submitted that Finn J's orders could be upheld for reasons apart from those which appealed to him. It was contended that, in accordance with the reasoning of the majority of the Court of Appeal in Coles Myer Ltd v Commissioner of State Revenue (1998) 4 VR 728, a share buy-back under the share buy-back provisions is not capable of amounting to a transfer of shares at all. Finn J rejected that argument at trial. Because I agree that he was right about the construction he put upon the Articles, it is not necessary to address this contention but, in case the matter goes further, I should say that I agree with his Honour's rejection of the argument in the notice of contention for the reasons his Honour gave. 263 In my opinion, the appeal should be dismissed. I certify that the preceding one hundred and thirty one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander . Associate: Dated: 16 October 2005 Counsel for the Appellant: Mr AJ Myers QC with Mr MD Wyles Solicitors for the Appellant: Mallesons Stephen Jacques Counsel for the First Respondent: Mr RJ Whitington QC with Mr DJ Blight Solicitors for the First Respondent: Piper Alderman Date of Hearing: 1 May 2006 Date of Judgment: 16 October 2006