FEDERAL COURT OF AUSTRALIA Wenzel v Australian Stock Exchange Ltd [2002] FCA 95 CONTRACTS ‑ Offer and acceptance ‑ Whether application for admission to Australian Stock Exchange (ASX) gave rise to an agreement by ASX to process application in accordance with its Articles ‑ Consideration ‑ Whether implied term that application would be processed with reasonable promptness, in a bona fide manner, consistently with duty of fair dealing, without taking into account irrelevant considerations, and without giving effect to ulterior purposes. COMPANY LAW ‑ Applicant applies to join ASX ‑ Consideration of membership applications deferred pending decision relating to demutualisation of ASX ‑ Demutualisation ‑ Pre‑demutualisation members entitled to shares in demutualised ASX ‑ Deferred applicants admitted to membership with no entitlement to shares ‑ Whether applicant entitled to full membership and distribution of shares ‑ Whether applicant oppressed. TRADE PRACTICES ‑ Misleading and deceptive conduct ‑ Silence as conduct ‑ Unconscionable conduct. EQUITY ‑ Equity looks on that as done which ought to be done ‑ Contract ‑ Application of maxim dependent on specific enforceability. Corporations Law Part 71A Corporations Act 2001 s 232 Trade Practices Act 1974 ss 51AA, 52 Vroom BV v Fosters Brewing Group Ltd [1994] 2 VR 32 cited Woodford v Smith [1970] 1 WLR 806 considered Baker v Liberal Party of Australia (SA Division) (1997) 68 SASR 366 considered Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 applied Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 considered Freeman v Cooke (1848) 2 Ex 654 cited Von Hatzfeldt‑Wildenburg v Alexander [1912] 1 Ch 284 cited Campbell v Rofe (1932) 48 CLR 258 considered Strong v J Brough & Son (Strathfield) Pty Ltd (1991) 5 ACSR 296 cited Re Interchase Corporation (1992) 111 ALR 561 cited Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 cited Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41‑703 applied Metropolitan Life Insurance Co v RJR Nabisco Inc (1989) 716 F Supp 1504 cited Burger King Corp v Hungry Jack's Pty Ltd (unreported, NSWCA 21 June 2001) cited Re RAC Motoring Services Ltd [2001] 1 BCLC 307 considered Re NRMA Ltd (2000) 33 ACSR 595 considered Spargos Mining NL (1990) 8 ACLC 1,218 distinguished Wayde v New South Wales Rugby League (1985) 180 CLR 459 applied Australian Competition and Consumer Commission v Simply No‑Knead (Franchising) Pty Ltd (2000) 104 FCR 253 cited Commercial Bank of Australia Ltd v Amadio (1982) 151 CLR 447 cited Stern v McArthur (1988) 165 CLR 489 cited Re Anstis (1886) 31 Ch D 596 cited De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 cited Frederick v Frederick (1721) 1 Str 455; 93 ER 632 cited PETER BRUCE WENZEL v AUSTRALIAN STOCK EXCHANGE LTD VG 545 OF 1998 GRAEME VINCENT ROUGH v AUSTRALIAN STOCK EXCHANGE LTD VG 546 OF 1998 BRYAN FRANCIS MADDEN v AUSTRALIAN STOCK EXCHANGE LTD VG 551 OF 1998 SUNDBERG J 15 FEBRUARY 2002 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 545 OF 1998 BETWEEN: PETER BRUCE WENZEL APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 546 OF 1998 BETWEEN: GRAEME VINCENT ROUGH APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 551 OF 1998 BETWEEN: BRYAN FRANCIS MADDEN APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT JUDGE: SUNDBERG J DATE OF ORDER: 15 FEBRUARY 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: VG 545 of 1998 1. The application be dismissed. 2. The applicant pay the respondent's costs of the application including any reserved costs. VG 546 of 1998 1. The application be dismissed. 2. The applicant pay the respondent's costs of the application including any reserved costs. VG 551 of 1998 1. The application be dismissed. 2. The applicant pay the respondent's costs of the application including any reserved costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 545 OF 1998 BETWEEN: PETER BRUCE WENZEL APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 546 OF 1998 BETWEEN: GRAEME VINCENT ROUGH APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 551 OF 1998 BETWEEN: BRYAN FRANCIS MADDEN APPLICANT AND: AUSTRALIAN STOCK EXCHANGE LTD (ACN 008 624 691) RESPONDENT JUDGE: SUNDBERG J DATE: 15 FEBRUARY 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT MEMBERSHIP OF ASX Pre‑5 May 1996 Articles 1 Until 13 October 1998 the respondent ("the ASX") was a company limited by guarantee. Article 35(1) of its Articles provided: "Members of the Exchange shall be such persons who are deemed to be Members under the Australian Stock Exchange and National Guarantee Fund Act 1987 and as from time to time thereafter become and remain Members in accordance with these Articles." Only Members of the ASX were entitled so to describe themselves: art 35(2). Until its amendment in October 1995, art 36(1) was in part as follows: "Subject to Article 38(7) and to payment of the membership fee under Article 43, the Board shall admit a natural person as a Member provided the requirements specified in sub‑article (2) are satisfied and provided the applicant ‑ … (c) (i) is an associate of the Securities Institute of Australia; (ii) has completed successfully either the Diploma course or the Certificate course conducted by the Securities Institute of Australia or a course considered by the Board to be substantially equivalent; or (iii) holds an accepted tertiary qualification in commerce, economics, law, accountancy, business administration, banking, secretarial practice or any other qualification considered by the Board to be substantially equivalent and has also successfully completed such subjects conducted by the Securities Institute of Australia as are required by the Rules; … (e) applies for membership in accordance with Article 38." 2 Article 36(2) provided that the Board "shall admit a natural person as a Member where the applicant meets the requirements specified in sub‑article (1)" if it is satisfied as to the character, financial resources and efficiency of the applicant, and that the applicant intends to devote the substantial part of the working week to the business of a member organisation. Article 36(3) conferred a discretion on the Board to admit a person as a Member notwithstanding that each of the conditions in sub‑art (1)(b), (1)(c) and (2)(d) was not satisfied. Article 38 was in part as follows: "(1) Each applicant for membership shall execute and deliver to the Exchange an application in the form determined from time to time by the Board. (2) An applicant for membership shall provide in writing and, if required by the Board, by statutory declaration, such other information in addition to that contained in the application as the Board requires. (3) Notice in writing of an application for membership shall be issued to Members at least 10 days before the date on which the Board considers the application. The notice shall include the names of all the proposed directors of the applicant. A Member who wishes to make a submission to the Board relating to an application must lodge the submission in writing before the date on which the Board considers the application. … (7) Admission as a Member shall be conditional upon the applicant obtaining, within 3 months after admission, a dealer's licence or a dealer's representative licence under the Securities Industry Act 1980 or the corresponding law of a participating State or Territory which entitles the applicant to engage in the business of stockbroking as a Member of the Exchange." 3 Article 39(1) provided: "The Board shall not reject an application for membership unless it first affords the applicant the opportunity to appear at a hearing before the Board and make submissions to the Board in relation to the application for membership." Sub‑articles (2) and (5) dealt with the conduct of a hearing. Sub‑article (7) required the Board to determine an application within six months of receipt. Article 40 provided "A person whose application for membership has been rejected by the Board may appeal to an Appeal Committee established by the Exchange under Article 56. Notice of appeal setting out the grounds of appeal must be lodged with the secretary within 30 days after the reasons in writing for rejection of the application for membership by the Board are received … by the person." Article 41 provided that the decision of the Appeal Committee was final and binding on the applicant and the Board. 5 May 1996 Amendments 4 On 26 October 1995 the Articles were amended with effect from 5 May 1996. Article 36(1)(c) was amended so as to replace the requirements set out in par 1 with the requirements that an applicant: "(i) holds an accepted tertiary qualification in commerce, economics, law, accountancy, business administration, banking, secretarial practice or any other qualification considered by the Board to [be] substantially equivalent; and (ii) has successfully completed such subjects conducted by the Securities Institute of Australia or its subsidiaries as are required by the Rules; and (iii) has, within 3 months prior to lodging with the Exchange an application for admission as a Member of the Exchange, obtained a pass mark as determined by the Board from time to time for the admission examination set by the Exchange to satisfy the Board as to the applicant's knowledge of the Articles and Rules and the customs and usages of the Exchange." By sub‑art (3) the Board was empowered to admit a person as a Member notwithstanding that a condition in sub‑art (1)(c)(i) was not satisfied. ASX Rule 5.1.2 was also amended with effect from 5 May 1996. It specified a new range of subjects a candidate had successfully to complete. 31 May 1996 circular 5 In 1995 and 1996 the ASX was considering its corporate structure and a Governance Review was undertaken. One form of restructure under consideration was changing the ASX's status from a company limited by guarantee to a public company limited by shares pursuant to a demutualisation scheme. This change would see the issue of shares to ASX members in substitution for their entitlements in the existing company. On 29 May 1996 the Board resolved firstly, to submit to a special general meeting on 5 July 1996 a proposal to introduce a new art 35A and secondly, to adopt a general policy of deferring consideration of all applications for membership until the outcome of this meeting was known. There was to be an exception to this general policy for "compelling cases". On 31 May the Board issued a Circular to Members informing them of the resolution passed at its 29 May meeting. The Circular, which is headed "Applications for Membership While Governance Review in Progress", is in part as follows: "On 29 May 1996, the Board considered the issue of new Membership applications being made while the current Governance Review is progressing. There has been conjecture that applications for membership may be prompted simply by the prospect of sharing in any financial benefits which may be derived from any future restructuring of ASX. … A new Article will be proposed. If you vote to accept that Article, it would say, if and when a demutualisation scheme having certain defined characteristics is implemented, Members admitted after the introduction of the new Article (in July) will not be entitled to participate in any benefits which may flow to Members by such a scheme. … There may be concerns about a potential influx of applications prior to the proposed new Article coming into operation. Accordingly the Board directed on 29 May 1996 that: 1. a general policy be adopted to defer the consideration of all applications for membership, including those already delivered to the Exchange, until 5 July 1996 (the date of the General Meeting); and 2. this general policy will not prevent admission prior to 5 July 1996 of applicants who comply with Article 36 or Article 37 and show a compelling case for admission." New Article 35A 6 On 5 July 1996 the Articles were amended to include a new art 35A: "(1) In this Article 35A: 'demutualisation scheme' means any compromise, arrangement, scheme or contract under which: (a) the Exchange is to have a share capital or a controlling interest in the Exchange is to accrue to a corporation having a share capital; and (b) persons who are Members are to receive, by virtue of their membership of the Exchange, shares in the capital of the Exchange or of that corporation; and 'post‑entitlement Member' means a person who becomes a Member after the adoption of this Article 35A. (2) Any demutualisation scheme must be formulated in such a way that the persons who are to receive shares by virtue of their membership in the Exchange do not include post‑entitlement Members. (3) A post‑entitlement Member has no right: (a) to receive shares pursuant to any demutualisation scheme; or (b) to be considered as potential beneficiaries of any demutualisation scheme; or (c) to redress of any kind by reason of exclusion from the benefits to other Members arising from the demutualisation scheme. (4) An applicant for membership whose application has not been disposed of by the Board before the adoption of this Article may be required by the Board to furnish to the Exchange a written acknowledgement, in such form as the Board specifies, that the rights of the applicant, if admitted to membership, will be affected by this Article 35A." Demutualisation 7 On 18 October 1996 the ASX's Articles were amended by the insertion of arts 83 and 84. It is sufficient to set out part of art 83(2): "The Board will seek to obtain the enactment by the Parliament of the Commonwealth of legislation which: (a) converts the Exchange to a company limited by shares and having a share capital as specified in the document which becomes the constitution of the Exchange as mentioned in Article 83(2)(e); (b) abolishes the undertaking of each Member to contribute to the assets of the Exchange as provided in clause 3 of the Exchange's Memorandum of Association; (c) causes all Persons Entitled to become the holders of shares in the capital of the Exchange on the basis of equality among those persons and so that each of them is the holder of that number of shares which is specified in the document which becomes the Exchange's constitution as mentioned in Article 83(2)(e) as the original shareholding of each Person Entitled; (d) extinguishes the membership of each post‑entitlement Member as at the Conversion Time …." The expression "Conversion Time" was defined as the time when the Exchange is converted as mentioned in art 83(2)(a). The expression "post‑entitlement Member" had the meaning given by art 35A. The expression "Person Entitled" was defined as a person (not being a post‑entitlement Member) who was a member at the Conversion Time. Corporations Law Part 7.1A 8 The ASX Board procured the enactment of the legislation contemplated by art 83(2). It was contained in Part 7.1A of the Corporations Law (ss 766A to 766I), which came into operation on 16 December 1997. Sections 766B and 766C dealt with the mechanics of the ASX's change from a company limited by guarantee to a public company limited by shares. The change took place at the beginning of the day notified in the Government Gazette: s 766C(2). The notifed day was 16 December 1997. Section 766D dealt with the effect of the change. The change did not create a new legal entity or affect the ASX's existing property, rights or obligations, except as provided in sub‑s (2): sub‑s (1). Sub‑section (2) provided: "On the change of type, the following things happen: (a) the liability of each member and past member as a guarantor on the winding up of the Exchange is extinguished; (b) the members cease to be members of the Exchange; (c) shares are taken to be issued equally among all persons who satisfy the criteria set out in Articles 83 and 84 of the Exchange that were added by the 18 October 1996 special resolutions dealing with the change of type, and each of those persons becomes a member of the Exchange and is taken to have consented to be a member of the Exchange; (d) the proposed amendments of the constitution, business rules and listing rules of the Exchange take effect." Sub‑section (3) provided: "If shares are issued according to this section, a court is not to make an order reversing the issue of the shares." THE APPLICANTS APPLY FOR MEMBERSHIP 9 Between 19 April and 2 May 1996 each applicant lodged with the ASX an application for membership accompanied by a cheque for the required fee. Item 3 in the "Instructions for Completion" of the ASX's standard application form stated: "The Applicant in due course will be required to be examined on his/her knowledge of the Articles and Rules of Australian Stock Exchange Limited and The Corporation Law." Paragraph 10(d) of the application form asked: "Do you believe you have a working knowledge of the Articles of Association and Rules of Australian Stock Exchange Limited and those aspects of the Corporations Law as they relate to Dealers and Dealers' Representatives." Paragraph 13 stated: "I acknowledge that this application is for admission to Australian Stock Exchange Limited upon the terms of and under and subject in all respects to its Memorandum and Articles of Association and Rules which now are or hereafter may be for the time being in force." Paragraph 14 stated: "I have read the Memorandum and Articles of Association and Rules of Australian Stock Exchange Limited as at this date and I have a working knowledge of the provisions of the Corporation Law. I acknowledge that any wilful omission or mis‑statement upon a material point in or in connection with this application may lead to rejection of the application or, if the application is approved, subsequent expulsion from membership." 10 At the time of lodging his application the applicant Rough held the degree of Bachelor of Commerce from the University of Melbourne, had completed the Securities Institute of Australia Diploma course, was an associate of the Institute, and had many years experience in the securities and stockbroking industry. He thus satisfied the requirements in art 36(1)(c)(i), (ii) and the first part of (iii). Because the articles at this time only required that he satisfy one of the requirements in par (c), it was not necessary that he complete any subjects specified in the Rules. At the time of lodging his application the applicant Madden held the degrees of Master of Business Administration and Bachelor of Economics, and had many years experience in the securities and stockbroking industry. He thus satisfied the requirement in the first part of par (c)(iii). Because he did not satisfy the requirements in (i) or (ii), it was necessary that he complete the subjects specified in the Rules. When an ASX officer, Mr Parkinson, asked whether he was prepared to sit an exam, Mr Madden says he replied that "given my experience I did not believe it would be necessary to sit an exam and would prefer not to". Mr Parkinson's account was that Mr Madden refused to sit the exam. The applicant Wenzel became a member of the Stock Exchange of Melbourne Limited in 1977, and on the incorporation of the ASX in 1987 became a member of the ASX and remained a member until 1991 when he resigned. He was a member of the Board of the Stock Exchange of Melbourne Limited between 1982 and 1985. At the time of lodging his application he held the degree of Bachelor of Commerce. He thus satisfied the requirement in the first part of (c)(iii). Because he did not satisfy the requirements in (i) or (ii), it was necessary that he complete the subjects specified in the Rules, which he did. 11 For some time before the applicants submitted their applications the ASX had been considering changing its status in the manner described in par 5. On 29 May 1996, before the applicants' applications had been dealt with, the ASX introduced the policy described in par 5. On 4 June 1996 the ASX notified each applicant of that policy and provided him with a copy of the 31 May circular (see par 5.). Between 4 and 11 June Messrs Wenzel, Madden and Rough, and TIR Securities (Australia) Ltd ("TIR"), of which Mr Rough was a director, made compelling case submissions. These submissions were rejected by the Membership Issues Committee ("the MIC") on 17 June, and those who made the submission were so advised. On 19 June further compelling case submissions were received from Messrs Wenzel and Rough and TIR. On 20 June Mr Rough made a compelling case submission at a meeting of the MIC. On 21 June the MIC confirmed its decision to defer Messrs Wenzel's and Rough's applications, but accepted TIR as a compelling case. 12 On 8 July each applicant was informed by the ASX that at the general meeting on 5 July 1996 art 35A had been adopted. A copy of the article was provided. Each was informed that if he wished his deferred application for membership to be considered, he should complete and return the attached acknowledgment pursuant to art 35A(4). Messrs Wenzel and Rough completed and returned the acknowledgment. They thereby acknowledged that if admitted to membership "my rights as a Member will be affected by Article 35A." Mr Madden did not sign the acknowledgment, withdrew his application for membership and requested that his membership fee be returned with interest. The fee was refunded but without interest. 13 Article 35A was applied to Messrs Wenzel and Rough with the consequence that although they became members of the ASX, they were not allocated shares once it had become publicly listed. On 13 October 1998 those whose applications had not been deferred were each allocated a parcel of 166,000 shares. THE PLEADED CASES ‑ ADMISSION/READMISSION AGREEMENTS 14 I will take Mr Wenzel as the example, and then point out any differences between his case and those of Messrs Rough and Madden. Mr Wenzel became a member of the Melbourne Stock Exchange in 1977 until the incorporation of the ASX, and thereafter was a member of the ASX until 30 April 1991 when he resigned his membership. On or about 2 May 1996 Mr Wenzel delivered to the ASX an application for readmission to membership of the ASX in the form determined by the Board of the ASX, provided the required statutory declaration, and paid the prescribed membership fee of $500. In May 1996 he sat for and passed an examination at the request of and conducted by the ASX for admission as a member. It is then pleaded that these facts gave rise to an agreement made on or about 2 May 1996 between Mr Wenzel and the ASX whereby, in consideration of Mr Wenzel applying for membership, paying the readmission fee, and sitting and passing the examination, the ASX agreed to process his application in accordance with the following terms of that agreement: · the ASX would process the application in accordance with the ASX Memorandum and Articles and Rules as then in force or as in force from time to time: · insofar as the same related to the making of applications for membership of the ASX and · insofar as the same did not change the subject matter of the agreement by providing for a new class of membership which carried with it rights, privileges and benefits different from those enjoyed by all other natural person members of the ASX · the application would be dealt with in a bona fide manner, and consistently with the duty of fair dealing · if he was readmitted as a member, his membership would carry with it all the rights, privileges and benefits enjoyed by, and on an equal footing with, all other natural person members of the ASX at the time of the re‑admission. This agreement is called the "admission agreement", and is said to be wholly in writing, alternatively partly in writing and partly to be implied. Insofar as it was in writing it was constituted by the Memorandum and Articles of the ASX, the application for membership, the statutory declaration and the cheque for the $500 membership fee. Insofar as it was to be implied, the following conduct on the part of the ASX is said to give rise to the implication: · receiving the application and statutory declaration · banking the cheque for the membership fee and crediting the amount to its account · not returning the above documents and cheque · purporting to consider and deal with the application. Reliance is also placed on · the terms of the ASX Memorandum and Articles as they stood at the time of the application, which treated the rights, privileges and benefits enjoyed by natural person members on an equal footing, without any distinction referable to different classes of membership · the fact that at the time of the application the ASX was a company limited by guarantee and that a change of type could only be effected by the passing of special legislation · the fact that in the event of the ASX being wound up, its Memorandum provided that all members would be liable on an equal footing to contribute to its assets. Finally, it is claimed that the pleaded terms of the agreement were to be implied in order to give the agreement business efficacy. 15 It is then pleaded that in breach of the admission agreement the ASX · failed to deal with the application in accordance with the Articles and Rules in that it applied a policy directive to the application, namely that, in the absence of a compelling case, the consideration of applications be deferred until 5 July 1996 (the date of a proposed General Meeting at which amendments to the Articles were to be put to members) ("the policy directive") · determined the application in accordance with the amended art 35A, which provided for a new class of membership, namely a post‑entitlement member, which carried with it rights, privileges and benefits different from those enjoyed by all other natural person members · dealt with the application in a way that was not bona fide and was in breach of the duty of fair dealing · refused to grant readmission to membership which carried with it the rights, privileges and benefits enjoyed by other natural person members · required Mr Wenzel to sign an acknowledgment pursuant to new art 35A(4). Mr Wenzel claims to have suffered loss and damage as a result of the breaches. 16 Save that Mr Rough applied for admission to membership of the ASX rather than readmission, that he did not need to sit for and pass an examination, and that the fee he paid for admission was $25,000, his case is pleaded in the same form as Mr Wenzel's. Save that it is not alleged that Mr Madden sat for and passed an examination, and that it is alleged that he treated the ASX's breach of the admission agreement as a repudiation which he accepted, his case is substantially the same as Mr Rough's. WAS THERE AN ADMISSION/READMISSION AGREEMENT? 17 The applicants' case was that by making application to the ASX for membership they entered into an enforceable contract with the ASX. The primary way in which this was put was that the submission of the application form accompanied by the cheque for the membership fee was an offer by each applicant that was accepted by the ASX when it received the form and cheque and banked the cheque. The contract that came into being was that in consideration of the applicant applying for membership and paying the fee, the ASX agreed to receive, process, consider and determine the application in accordance with its Memorandum, Articles and Rules as then in force. In the alternative it was submitted that the ASX made a standing offer of membership to persons such as the applicants that was accepted by the applicants when they lodged their application forms and fees. In either case the contract was actual rather than inferential. Alternatively, it was to be inferred from all the circumstances. Reference was made in this connection to the observations of Ormiston J in Vroom BV v Fosters Brewing Group Ltd [1994] 2 VR 32 at 80. 18 In support of their case the applicants placed substantial reliance upon the detailed specification in the Articles of the conditions for membership and the procedure for dealing with applications: the obligation to give a hearing and receive submissions before rejecting an application (art 39(1)), the procedural steps in the conduct of a hearing (art 39(2)‑(4)), the obligation to give reasons for rejection (art 39(6)) and to determine an application within six months (art 39(7)). It was pointed out that art 36(1) was couched in imperative terms: the Board was required to admit a person provided various requirements were satisfied. It was said that these obligations would be imperfect if they were not enforceable by an applicant. Reference was also made to other provisions in the Articles which, if they did not become terms of a preliminary contract, would be unenforceable. Thus art 39(8) required an applicant to meet his own expenses and costs in connection with an application. Article 41 made the decision of the Appeal Committee final and binding on the parties. Paragraph 13 of the application form bound the applicant by the Articles and Rules, and par 14 ensured the effectiveness of that acknowledgment by requiring the applicant to state that he had read the Articles and Rules. It was submitted that these provisions were clearly intended to be contractual. 19 It was submitted that the decided cases show that an application for membership of a voluntary association is capable of giving rise to a contract, though whether it does so depends on the facts of the particular case. In Woodford v Smith [1970] 1 WLR 806 Megarry J held, on the particular rules of a ratepayers association, that a person who submitted an application form and paid the required subscription thereupon became a member of the association. His Lordship rejected the contention that it was impossible for membership to be a wholly automatic matter. He said (at 816): "In my judgment, subject to one qualification, the rules do not confer on the committee any power to reject or suspend any application for membership, and the committee cannot confer any power on the secretary or anyone else to postpone an application until the committee can consider it. The qualification is that if there are sufficient grounds for believing that an application is not in accordance with the rules, as where it does not appear to have been in fact made by the proposed applicant, or he cannot fairly be said to be in agreement with the objects of the association, then the committee may refuse to treat the applicant as a member, at all events until the doubts are resolved. … In the motion before me, no grounds have been established which would justify the rejection or suspension of the applications … as the defendants have not, despite the lapse of time, put forward any detailed objection to any of their applications, I think they all became members as soon as their membership forms and subscriptions were received by or on behalf of the association." I do not derive much assistance from this case. The question here is not whether the applicants became members of the ASX when they submitted their forms and cheques. It is whether upon the occurrence of those events a preliminary contract came into existence that their applications would be dealt with in accordance with the relevant Articles and Rules. 20 In Baker v Liberal Party of Australia (SA Division) (1997) 68 SASR 366 the constitution of the Liberal Party made eligible for membership any person over 16 who supported the objectives of the Division and agreed to be bound by the constitution. Clause 5.3 stated that membership was to commence one month after receipt of an application unless in the meantime the State Executive declined to admit the applicant to membership. The plaintiff applied to join the Party by completing an application form and paying the membership fee. Before the end of the one month period the Executive rejected her application. The plaintiff's case was put in a number of ways. They included the following (at 373): "By clause 5.3 of the defendant's Constitution, an applicant for membership of the party automatically becomes a member upon the expiration of one month after submission of the application unless within that time the application is validly rejected by the State Executive. Since the plaintiff maintains that the purported rejection of her application was invalid, it follows that on 20 July 1996, she became, and remains a member of the defendant. She seeks a declaration to that effect which is a declaration of her existing rights under a contract to which she is a party. By submitting her application on 22 June 1996, the plaintiff entered into a unilateral contract with the defendant, by performing the terms of a standing offer. Clauses 5.1 and 5.3 of the Constitution constitute a standing offer by the defendant to the world that anyone who submits a completed prescribed application form and tenders payment of the prescribed fee will, after one month, be entitled to exercise all the rights conferred on members of the party, unless in the meantime the State Executive has exercised its power to deprive that person of those rights, in accordance with the terms of the Constitution." Bollen J rejected these contentions. His Honour said (at 374): "All that has happened is that the plaintiff has sought membership of an incorporated body which happens to be a political party and had her application declined. No question of contract [or] of unilateral contract … arises. The defendant acted according to its Constitution. No relationship known to the law was ever established between plaintiff and defendant, of one with the other. The plaintiff had no 'special interest' entitling her to any order from the Court. She was merely, along with many others, a disappointed applicant." Baker, like Woodford, involved a claim that membership came about automatically. In neither case was it contended that a preliminary agreement, such as that asserted by the applicants, came into existence as a result of lodging an application and paying a membership fee, under which the applicants were entitled to have their applications processed in accordance with the rules of the association. 21 More assistance is provided by cases dealing with pre‑award or tender process contracts. Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 is a recent example. The facts of the case were complicated, but for present purposes can be summarised as follows. The Civil Aviation Authority invited Hughes and another interested party, Thomson Radar Australia Corporation Ltd, to participate in a tender competition. The Authority gave Hughes and Thomson a draft letter that specified the evaluation criteria and their priorities, defined the evaluation methodology, and said an independent auditor would be appointed and strict confidentiality would be observed. Comments on the process were invited and the recipients were asked to agree to the contents of the letter. Hughes and Thomson signed the letter. Subsequently the Authority issued a Request for Tender to Hughes and Thomson that was in much the same terms as the letter. Hughes submitted its best and final offer. Thomson submitted a price reduction. Thomson was selected as the contractor. Hughes claimed that procedures set out in the letter and the Request for Tender had not been complied with, and an issue arose as to the status of those documents. Were they merely an invitation to treat or did they have contractual force. Finn J held that the letter was not a mere invitation to treat, but was a binding statement of the procedures to be followed and of the criteria to be applied in the awarding of the contract, and constituted a pre‑award contract. The consideration moving from Hughes was its participation in the tender process. His Honour went on to hold that when Hughes lodged its best and final offer, the terms of the Request for Tender acquired contractual force and governed the procurement process to the exclusion of the terms of the letter. At 185 Finn J said: "I have been taken by counsel to case law both in this country and in other common law jurisdictions where courts, variously, have found and rejected pre‑award contracts in tender cases. They are helpfully collected and analysed in N Seddon, Government Contracts (1995), p 206ff …. The general issue in these cases, and for me, was put squarely by Gallen J in Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469 at 478‑479: 'Authority makes it clear that the starting point is that a simple uncomplicated request for bids will generally be no more than an invitation to treat, not giving rise to contractual obligations, although it may give rise to obligations to act fairly. On the other hand, it is obviously open to persons to enter into a preliminary contract with the expectation that it will lead in defined circumstances to a second or principal contract …. Whether or not the particular case falls into one category or the other will depend upon a consideration of the circumstances and the obligations expressly or impliedly accepted.'" (Emphasis added by Finn J.) In concluding that in the distinctive circumstances of the case contractual obligations were accepted, Finn J referred to the mandatory language by which the letter set out the procedures and criteria to be used. This, he said, was consistent with the imposition of binding obligations. 22 It was submitted that the lodging of the applications and payment of the membership fees constituted sufficient consideration to support the admission agreement. Adopting the approach identified by Gallen J and approved in Hughes, the applicants submitted that each of them had entered into a preliminary agreement with the ASX that it would deal with their applications for membership in accordance with the provisions of the Articles as they stood at the time of the application, and any other terms and conditions in the application form. The application form, incorporating as it did the Articles, stood in the same position as the letter in Hughes. On this view each admission agreement was wholly in writing, and was constituted by an application, a statutory declaration, the Memorandum and Articles of the ASX as they stood at the date of the application, and the membership fee cheque. This approach made it unnecessary to imply terms about the manner in which the applications were to be dealt with. 23 The first contractual analysis propounded in par 17 is in my view sound. It was attacked in various ways by the ASX. First, it was said that the application form was merely an invitation to treat, with a view to entering into a binding contractual relationship upon each applicant's admission to membership of the ASX. It is true that the form is not described as an offer but as a "Membership Application". However when clause 13 in the form and the memorandum, articles and rules of the ASX referred to therein are read together, the clause does incorporate their provisions as part of a contract between the parties. I do not accept the ASX's contention that the articles etc merely set out the terms and conditions as between the existing members and the ASX upon which membership would be granted to new applicants. Certainly they do that. But they also contain directions to applicants themselves as to the way in which membership is to be attained. Thus an applicant must execute and deliver to the ASX an application in the form determined by the Board: art 38(1). He must provide in writing, and if required by the Board by statutory declaration, such other information in addition to that contained in the application as the Board requires: art 38(2). The Board must afford an applicant the opportunity to appear at a hearing before the Board and make submissions before it rejects an application: art 39(1), and the procedures for the conduct of the hearing are set out: arts 39(2) and (5). An unsuccessful applicant may appeal to an Appeal Committee, whose decision is final and binding on the applicant and the Board: arts 40 and 41. The Articles also set out the academic/professional requirements for membership: art 36(1), and require the Board to be satisfied as to an applicant's character and financial soundness: art 36(2). These two elements are expressed in mandatory language. Thus art 36(1) provides that the Board "shall admit" an applicant as a member provided the requirements in sub‑art (2) are satisfied and provided the educational requirements are satisfied. Sub‑article (2) reinforces the entitlement to membership of a person who satisfies its requirements ‑ the Board "shall admit" a person who qualifies under sub‑art (1) if it is satisfied as to his character and financial resources. It is not possible to read these provisions as directed only to existing members of the ASX. Because they contain provisions that entitle qualified applicants to membership, they must be seen as directed to applicants as well as members. Hence the statement in clause 14 of the form that the applicant has read the memorandum, articles and rules of the ASX. It is true that read in isolation clause 13 is somewhat unclear. It might be directed to the articles etc in so far as they regulate acquired membership. But that ignores the content of the articles etc. It is preferable to read clause 13 as dealing with an application for admission to membership, and as incorporating the articles to the extent that they deal with that topic. 24 The provisions I have set out have led me to the conclusion that the lodging of an application form is not a mere invitation to treat, but gives rise to obligations on the part of the ASX. In Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424 at 457 the High Court referred to "a principle which is fundamental to any conception of contract. It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. In such cases as the present, therefore, in order that a contract may be created by offer and acceptance, it is necessary that what is alleged to be an offer should have been intended to give rise, on the doing of the act, to an obligation. The intention must, of course, be judged in the light of the principle laid down in Freeman v Cooke (1848) 2 Ex 654 at 663 [154 ER 652 at 656], but, in the absence of such an intention, actual or imputed, the alleged 'offer' cannot lead to a contract: there is, indeed, in such a case no true 'offer'." The reference to Freeman v Cooke is to the principle that courts apply an objective test to whether an offer made by one party has been accepted by another. If the parties have to all outward appearances agreed in the same terms upon the same subject matter, neither can generally deny that he intended to agree. In the present case, given that the ASX drew attention to its articles etc in clause 13 of its application form, and by clause 14 sought an assurance by an applicant that they had been read, an external observer would treat the lodging of an application as intended to give rise to the obligation on ASX's part to process it in accordance with the articles. The "act" referred to in Woollen Mills being in this case the receipt of the form and accompanying documents and cheque. 25 The ASX also argued that the applicants provided no consideration for the admission agreement. It was said that the cheque accompanying an application was the consideration for membership of the ASX and not the consideration for any admission contract. This, it was said, was demonstrated by the fact that when Madden withdrew his application his fee was refunded. I am inclined to think that this analysis proceeds upon too narrow an understanding of the concept of consideration. It is true that the money paid was the price of membership. But paying it was nevertheless a detriment suffered by the payer in relation to the application for membership. I think it was good consideration for the admission contract. But in any event, the submission of the application and the required statutory declaration was consideration for the ASX's promise to process the application in accordance with the articles. The statutory declaration contained private, confidential information about an applicant's assets, liabilities and business background. The application form was accompanied by confidential references. Providing this information to the ASX was relevantly a detriment to each applicant. It was also a benefit to the ASX, because it enabled the ASX to come to a view as to the suitability of an applicant for membership. See the financial and character matters the subject of art 36(2). 26 ASX sought to distinguish Hughes Aircraft in this respect. It was said that Hughes' act in involving itself in the procurement process was of clear benefit to Air Services, whereas an application for membership was of no advantage to ASX. Hughes looked only to a benefit derived by Air Services. But consideration can consist of either a benefit to the promisor or a detriment to the promisee. See Chitty on Contracts 28th ed (1999) pars 3‑004 to 3‑006. In the present case there was the detriment to the applicants I have identified. It is not necessary that there be a benefit to the ASX as well. But, as I have said above, there was a benefit. Even though it may not have been as valuable to the ASX as was Hughes' participation in the procurement process to Air Services, it must be remembered that courts do not concern themselves with the adequacy of consideration as long as some value has been given. Examples are given by Chitty of acts or omissions of very slight value that have been accepted as consideration: op cit, pars 3‑014 to 3‑016. 27 Finally, on the issue of consideration, the ASX submitted that because the act of applying for membership and the payment of the fee were done to secure membership of the ASX, and not for any promise of the ASX to process the application in accordance with the articles, there was not the required quid pro quo between the application and payment and the promise. Reliance was placed on observations in Woollen Mills at 456, where the High Court said: "In cases of this class it is necessary, in order that a contract may be established, that it should be made to appear that the statement or announcement which is relied on as a promise was really offered as consideration for the doing of the act, and that the act was really done in consideration of a potential promise inherent in the statement or announcement. Between the statement or announcement, which is put forward as an offer capable of acceptance by the doing of an act, and the act which is put forward as the executed consideration for the alleged promise, there must subsist, so to speak, the relation of a quid pro quo." In that case it was alleged that the Commonwealth had promised that if the plaintiff purchased wool for domestic consumption in Australia it would pay a subsidy. The plaintiff purchased wool in pursuance of the alleged agreement, and sued to recover the subsidy. After examining the documents relied on to constitute the Commonwealth's promise, the Court said (at 461): "it is not, in our opinion, possible to construe [the documents] as containing a standing offer, a standing offer capable of acceptance by the purchase of wool. It is impossible to find anywhere anything in the nature of a request or invitation to purchase wool, or anything which suggests that the payment of subsidy was put forward in order to induce any manufacturer to purchase wool, or which suggests that the payment of subsidy and the purchase of wool were regarded as related in such a way that the one was a consideration for the other. Whichever of the possibly legitimate tests is applied, the answer is the same. If we ask (what we think is the real and ultimate question) whether there is a promise offered in consideration of the doing of an act, as a price which is to be paid for the doing of an act, we cannot find such a promise. No relation of quid pro quo between the promise and an act can be inferred." When the Court spoke (at 456) of "cases of this class", it was referring to contracts constituted by an offer of a promise for an act, the offer being accepted by the doing of the act. In Woollen Mills the alleged offer was the Commonwealth's promise to pay a subsidy if the company purchased wool, and the alleged acceptance was the company's purchase of the wool. That is not this case. Here the case put by the applicants is that they were the offerors/promisees. But in any event, although the lodging of an application and the membership fee was done in order to secure membership, it does not follow that it was not also the quid pro quo for the ASX's promise to process the application in accordance with the articles. There was a sufficient relationship between the acts done by the applicants and the ASX's promise, because under the articles an application could not be considered by the ASX unless an application was lodged and the fee paid. 28 The ASX submitted that pre‑award contracts of the type considered in Hughes Aircraft are quite different from the admission agreement. That is true. But the principle applied in Hughes was that "it is obviously open to persons to enter into a preliminary contract with the expectation that it will lead in defined circumstances to a second or principal contract" (at 185, quoting from Pratt Contractors). Although the earlier cases considered by Finn J were intended procurement cases (they are collected at 180‑181), the principle applied by Gallen J in Pratt and adopted by Finn J is of general application and there is no reason why it must be confined to such cases. 29 The ASX sought to distinguish Hughes Aircraft on the ground that the pre‑award contract there had a different subject matter from the contract that was to follow the tender process. Here on the other hand "the admission contract purports to share the same, or much of the same, subject matter as the actual contract of membership". It was said that the alleged contract purported to determine the terms upon which membership would be granted, and was thus a contract to enter into a contract. I do not agree. True it is that the admission contract may lead to the contract of membership, and that when it does the former will merge in the latter. But, as the ASX's submission concedes, their subject matter is not the same. The former is concerned with the processes by which membership may be brought about. The latter is concerned with the obligations and entitlements of membership. The fact that the former may be consigned to irrelevance on the coming into existence of the latter does not deny it a separate existence until that event occurs. There is here no contract to enter into a contract in the sense of which Parker J spoke in Von Hatzfeldt‑Wildenburg v Alexander [1912] 1 Ch 284 at 288‑289. Rather there is one contract, which may merge with another depending on the outcome of the first. TERMS OF THE ADMISSION AGREEMENT 30 The applicants' contention was that the ASX agreed to process their applications in accordance with the articles and rules then in force. The ASX disputed this, relying on clause 13 of the application form. It was said it was a term of the agreement that it would be subject to and under the terms of the articles as amended from time to time. I have commented on the meaning of clause 13 in par 23, and have concluded that it is not limited in its operation to changes in the rules that affect existing members, but applies as well to changes affecting applicants for admission as members. Accordingly I accept the ASX's submission that it was a term of the agreement that it could be affected by amendments to the articles etc. In answer, the applicants contended that if this were so, the amendments authorised by clause 13 did not extend to amendments that would change the subject matter of the agreement, that subject matter including a term that membership would be on the same basis as that of existing members. I accept the ASX's submission that this contention is circular in that it assumes the subject matter of the agreement and then confines the scope of the acknowledgment by reference thereto. Given that clause 13 forms part of the admission agreement, as the applicants accept, it cannot be moulded so as to conform to their view of the agreement. Rather, its meaning forms part of the process of constructing the terms of the agreement. On its natural meaning it provides for each membership application to be subject to the articles as they exist from time to time. I reject the submission that the suggested subject‑matter limitation is to be read into the clause. 31 The applicants also submitted that clause 13 only contemplates possible changes to the memorandum, articles and rules of the ASX, and does not encompass changes effected by other means, such as the adoption of a policy by which the processing of applications is deferred. On its face the clause is so limited and does not subject an application to the risk of affection by the ASX's adoption of procedures other than those expressly covered by it. The ASX did not seem to contest this, but relied, in relation to the policy, on art 2 which provided: "Subject to the Corporations Law and to any other applicable law and any other provisions of these Articles: (a) the business of the Exchange shall be managed by the Board; and (b) the Board may exercise each and every right, power or capacity of the Exchange to the exclusion of the Exchange in general meeting and the members." The ASX also submitted that art 39(7) gave it a six month period in which to determine an application for membership. It was submitted that the general management power together with art 39(7) empowered the Board to regulate the timing of the consideration of membership applications within the six months specified by art 39(7). I will return later to the merits of this submission. In the meantime all that need be said is that arts 2 and 39(7) undoubtedly formed part of the terms of the admission agreements. Precisely what part depends on their meaning and application. BREACH OF THE ADMISSION AGREEMENT 32 The applicants contended that the ASX breached the admission agreements by adopting and applying the deferral policy and by applying the amended articles to them and their applications. The deferral policy 33 For the applicants it was submitted that the policy did a number of things that were not countenanced by the articles and were in conflict with the established procedures and criteria for admission set out therein. It was said that art 36 was not followed in that the deferral of consideration of the applications was to be implemented on grounds unrelated to a proper consideration of the applications, and a "compelling case" impediment was introduced which prevented the orderly consideration of applications in accordance with the terms of the article. 34 Campbell v Rofe (1932) 48 CLR 258 concerned the ambit of a general management power (art 117) in the following terms: "The management of the business of the Company shall be vested in the directors who in addition to the powers and authorities by these presents or otherwise expressly conferred upon them may exercise all such powers and do all such acts and things as may be exercised or done by the Company and are not hereby or by statute expressly directed or required to be exercised or done by the Company in general meeting but subject nevertheless to the provisions of the statutes and of these presents and regulations from time to time made by the Company in general meeting." One question was whether this power authorised the Board to issue a new class of shares, namely preference shares. Whilst the Privy Council found in another article (art 10) an express power to issue preference shares, it said (at 265) that had that article not existed, the power would have derived from art 117 which: "clearly delegated to the directors power to do everything that the Company could do except where the authority of a general meeting of the Company is expressly prescribed, and that such delegation would include power to issue preference shares." Their Lordships disagreed with the High Court's conclusion that the words of art 117 ‑ "the management of the business of the Company" ‑ concerned only the business of the company and not the relations of members of the company inter se. In view of par (b) of art 2, nothing turns on that difference of opinion. See also Strong v J Brough & Son (Strathfield) Pty Ltd (1991) 5 ACSR 296 and Re Interchase Corporation (1992) 111 ALR 561. 35 The ASX submitted that the Board was empowered by art 2 to regulate the consideration of membership applications, where appropriate to defer consideration of applications where to do so was in the best interests of the existing members, and to offer membership on terms that differed from those of existing members. The power in art 2 is expressed to be "Subject to … any other provision of these Articles". But that qualification must be read in the light of the positive aspect of the article. The other articles cut down the power conferred by art 2 only where they provide that the business of the ASX is to be managed by someone other than the Board or where a particular right, power or capacity of the ASX is conferred on the ASX in general meeting. Article 36 does neither of those things. 36 The deferral policy was adopted because of a concern, based on evidence, that people were applying for membership in the hope of deriving a windfall from demutualisation. To allow this to occur was unfair to existing members, and it was thus in their interest to adopt the deferral policy. The Board was obligated to exercise its powers in the interests of members, and the fact that the policy might disadvantage some who were not members (though they wanted to be) could not impugn it. The compelling case exception is not susceptible to independent attack. It was a qualification of the policy and merely served to make the policy itself more reasonable and supportable as an exercise of power under art 2. Article 35A 37 Article 35A was not a breach of the admission agreement. The applicants acknowledged that their application was liable to be affected by a future exercise of power to amend the articles: par 13 of the application form. THE ALLEGED IMPLIED TERMS 38 As an alternative to their principal contention that the Articles themselves protected them from what had occurred, the applicants alleged that each admission agreement contained a number of implied terms: · the applications would be processed · with reasonable promptness · in a bona fide manner · consistently with the duty of fair dealing · without taking into account irrelevant considerations · without giving effect to any ulterior purpose · if the ASX determined to admit an applicant to membership, that membership would carry with it all the rights, privileges and benefits enjoyed by other members. Had the applicants been successful in their primary claim (that the ASX agreed as part of the admission agreement to process their applications in accordance with the articles as they stood at the date of the applications), the applicants said they would not have needed to pursue their implied terms case. While I have upheld their claim that an admission agreement was made, the crucial element of the alleged agreement (namely that the applications would be processed in accordance with the articles in the form they took at the date of the applications) has not been sustained. It is therefore necessary to deal with the alternative implied terms argument. The ASX did not directly contest the appropriateness of implying these terms, though they did refer to the observations of Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at 92, 93‑94, 96‑97 about the difficulties in implying a fair duty/good faith term in Australia. Rather, the ASX assumed the existence of these terms and contended that it had not breached them. (a) reasonable promptness 39 Given the provision in art 39(7) that the Board must determine an application within six months of receipt, I do not consider there is any justification for implying the term contended for. In any event, as the argument developed, it became clear that rather than any indeterminate delay, it was really the application of the policy of deferral that caused the applicants not to be admitted before the cut‑off date. I have dealt with that argument in pars 33 to 36. (b) unfair dealing 40 Although the implication of a fair dealing term was the subject of detailed argument, in the course of closing submissions it was, without further explanation, expanded to cover an obligation to act in good faith, not to take into account irrelevant considerations, and not to give effect to an ulterior purpose. It was not clear whether these were but instances of what was required by fair dealing or (as pleaded) self‑standing terms. I propose to deal with them under the fair dealing heading. If a breach of that implied term is established it will be unnecessary to deal with the other terms. If no such breach is established, there will be no breach of the other terms, assuming they exist. 41 The factors upon which the applicants relied to justify the implication of a "fair dealing" term (either as a matter of law or ad hoc) were elaborated in detail. In substance they were: · The ASC effectively held a monopoly in share trading in Australia. · Article 37 prescribed that in order to be admitted to practice as a member corporation of the ASX at least 25% of its directors had to be natural person members, and if the corporation had fewer than four directors, at least two had to be natural person members. This meant that natural person membership may well have been critical to the capacity to practise one's profession as a stockbroker. · By reason of the foregoing, the processing of applications for membership assumed importance for individual applicants because it had or could have a direct bearing on their capacity to earn a livelihood as a stockbroker. · The articles themselves point to fair treatment of applicants for membership: arts 39(1) and (5), 39(6) and 39(7). · The ASX was a public body entrusted with the important function of regulating and supervising share trading activity in Australia, including the supervision of broking. 42 It is important to define the content of a duty to act fairly. The duty does not require a contracting party to subvert its own legitimate interests for those of the other party for fear it might harm the other. The implication merely enjoins capricious behaviour, and thus seeks to enforce the true bargain between the parties. In Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd (1999) ATPR 41‑703 at 43,014 Finkelstein J expressed the view that "a term of a contract that requires a party to act in good faith and fairly imposes an obligation upon that party not to act capriciously. It would not operate so as to restrict actions designed to promote the legitimate interests of that party. That is to say, provided the party exercising the power acts reasonably in all the circumstances, the duty to act fairly and in good faith will ordinarily be satisfied." See also Metropolitan Life Insurance Co v RJR Nabisco Inc (1989) 716 F Supp 1504 at 1517 and Burger King Corp v Hungry Jack's Pty Ltd (unreported, NSWCA 21 June 2001 pars 172‑173). The unfairness and lack of good faith were alleged to lie in the manner in which the deferral policy was introduced so as to apply to the applicants. 43 The ASX Board had an obligation to safeguard the interests of its members as a whole. Between November 1995 and November 1996 David Shortland was Manager of the ASX Governance Project. In that role he had primary management responsibility for the work of the Governance Task Force which was considering proposals for a change in the relationship between the ASX and its members. One possible restructure involved the release of considerable value to members. During March and April 1996 Mr Shortland became aware of significant concern among members of the ASX about the potential for opportunistic membership applications, that is to say, applications made with a view to sharing in any distribution of value that might flow from a change in the governance arrangements of the ASX. The concern was well‑based. Of the fifteen applications received in June 1996, six were withdrawn after 5 July. In the circumstances, the adoption of a cut‑off date was inevitable, and in order to make the selected date workable, the policy of deferring the processing of applications until it was discovered whether art 35A had been passed was adopted. Not only was the course adopted "legitimate", it was a decision of the type required of the Board having regard to its obligations to its membership as a whole. 44 In Re RAC Motoring Services Ltd [2000] 1 BCLC 307 Neuberger J was asked to approve schemes of arrangement in relation to the Royal Automobile Club Ltd (RACL) and RAC Motoring Services Ltd (RACMS), both companies limited by guarantee. RACL operated the Royal Automobile Club (the Club). The Club was an unincorporated association the assets of which were owned by RACL. The Club had various classes of members but only full members and life members were members of RACL. RACMS was a subsidiary of RACL. The articles of RACMS provided that its income and property were to be devoted exclusively to its objects and no portion could be paid to its members. If any surplus remained on a winding up it was to be paid to RACL for its general purposes. RACL's objects stated that if any surplus assets remained on a winding up, they were not to be distributed to members but were to be given to a museum or an institution connected with engineering or as determined by the directors. Cendant Corporation proposed to acquire RACMS from RACL. RACL's Board thereupon resolved not to elect any new members to RACL after 27 March 1998 (a short time after Cendant's offer) so as to avoid diluting the interests of existing members. The schemes had the effect of enabling the business of RACMS to be sold and the proceeds distributed to full members of RACL, namely those who were full or life members of the Club. Various challenges were made to one of the schemes on the ground of unfairness to those who did not qualify for a share of the distribution but could have qualified had they been aware of the proposal before the cut‑off date. For example, lapsed members may not have let their memberships lapse, lapsed members may have renewed their memberships, full members may not have become overseas members, and overseas members may have applied to become full members. It was contended by these classes of people that had the board given more notice of the proposal, they would have been able to share in benefits worth well over Ł30,000 per member. Neuberger J said (at 322): "Of course, it is true that anomalies can be produced. Thus, a person who was a full member of the Club for 25 years, but very recently was posted abroad and became an overseas member, might nine months ago have proposed for membership a friend who lives in England and who became a full member. Having been a member for only a short time, he will be able to benefit from the proposed sale, whereas his proposer will not. Any contract, set of rules, set of articles which sets out preconditions for rights to be enjoyed can frequently result in some anomalies. It is the same with any time limit or other prescribed requirement. If it is the effect of the rules and the articles then, in the absence of any special facts or applicable principles, one simply has to accept that is an unfortunate point which either was overlooked or was appreciated but thought to be inappropriate to deal with." 45 The fact that the deferral policy may have disabled the applicants from qualifying as members was not a breach of any requirement of fair dealing in the sense described in par 42. The decision taken on 29 May 1996 to defer consideration of membership applications was made in the interests of existing members and was entirely fair. As I have said, the Board's clear primary obligation was its members and the policy and the related cut‑off were for their protection. 46 In Re NRMA Ltd (2000) 33 ACSR 595 Santow J was asked to convene meetings to consider a scheme of arrangement whereby NRMA Ltd (NRMA) and NRMA Insurance Ltd (NRMAI), both mutual companies, would be demutualised, members of NRMA who were not already members of NRMAI would become members, and membership rights in NRMAI would be extinguished in return for the allocation of share in a new parent company, NIGL. In opposition to the application, complaint was made about the membership cut‑off date of 25 February 1999 adopted "in order to protect the underlying interests of current members of the company while the reconstruction proposed is developed". Santow J rejected the complaint (at 624‑625): "Here the exercise of discretion to close off membership pending consideration of the scheme is readily justified on the basis that otherwise, new members could flock to join solely or predominantly for the perceived scheme benefits, once their possibility was sufficiently known. That in turn would dilute those benefits for membership of longer standing and could be seen to be unfair. … The institution of a cut‑off date for membership during a period of corporate restructuring is both customary and necessary in the interests of members. It was, furthermore, modified quite reasonably, by setting up a Disputes and Review Panel to deal with anomalous or hard cases." The last sentence is an apt description of the compelling case qualification in the present case. See also Re RAC Motoring Services Ltd at 322. APPLICANTS' MOTIVATION 47 Much time was spent in cross‑examination and argument about each applicant's motivation to be a member of ASX. Counsel for the applicants asserted that motivation was only relevant to their unfair dealing argument in its expanded sense (bad faith, irrelevant considerations and ulterior purpose). Counsel submitted that the unfair dealing lay in the application of the policy directive to the applicants based purely on conjecture as to their motivation. It was indicated that this contention would fail if I were to conclude that each applicant was motivated solely by reason of expected gains as a result of demutualisation. All other points of claim were said to be unaffected by their motivation. Since I have concluded (par 45) that because the deferral policy was directed to the attainment of a legitimate purpose, it was not unfair to the applicants in any relevant sense, even though it may have disadvantaged them, it is not necessary for me to examine their motivation. However, in case I am wrong about this, I would have concluded that each applicant's principal reason for applying for membership was to obtain whatever benefits might be derived by members on a restructuring of the ASX. 48 Mr Wenzel applied for membership on 2 May 1996. In the course of cross‑examination this exchange occurred: "The reason that you, the true reason, that you applied to become a member at this time was so that you could share in the benefits of demutualisation wasn't it? --- No, not solely. One of the benefits, certainly." He was then taken to a letter he had written to the Chairman of the ASX on 19 June in which he set out his case for being permitted to participate in any demutualisation benefits. He wrote: "I wish to strongly reiterate my case for admission prior to 5 July, which effectively allows participation in any demutualisation benefits ‑ the crux of this timing of admission issue." He went on to say that he had been a member for fourteen years, had been asked to resign and was told he could rejoin once he resumed stockbroking activities, and had served as a committee member. The letter went on: "I have contributed in a significant manner over a sufficiently long period of time to entitle me to participate in any demutualisation benefits. … I am writing to request that my compelling case be reconsidered prior to 5 July or alternatively, that the Board gives me an assurance that, if demutualisation benefits are forthcoming, I will receive such benefits as are appropriate for a Member who has had 14 years membership and 17 years in the Industry." The cross‑examination continued: "… in the letter of 19 June it wasn't that you needed to become a member prior to 5 July, because you indicated … it's either that you wanted your compelling case reconsidered prior to 5 July, alternatively that you received an assurance that if demutualisation benefits were forthcoming you would receive such benefits as were appropriate. So membership wasn't really critical, was it? You just wanted to be included in the share if there was to be a share of ---? --- Yes, I did." Having heard and seen Mr Wenzel give his evidence I am satisfied that his oral evidence discloses the true position, and that the reasons given in his affidavit, namely that his business plan required him to become a member and that the major shareholder in Johnson Taylor expected him to re‑obtain membership, do not reflect the real reason he applied. I am satisfied that when it came to giving evidence in Court, Mr Wenzel gave truthful evidence. I find that his predominant reason for applying for membership was to share in any benefits of demutualisation. 49 In his affidavit the reason Mr Madden gave for applying for membership was that his employer, ANZ McCaughan Securities Ltd had suffered a large departure of senior employees and no longer had any directors who were natural person members of the ASX. It was an ASX requirement that at least 25 per cent of the directors of a member organisation were themselves members of the ASX. It was clearly implicit in what Mr Madden said that the company was in breach of this requirement. Similarly, in cross‑examination Mr Madden assented to a suggestion that his primary reason for applying was because of the requirements relating to the minimum number of member directors. Again the implication was that the company did not comply with the requirement. However, it later became apparent that the company did comply. It follows that there was no need for Mr Madden to apply, at least not for the reason he gave. Mr Madden's employer "used" non‑management directors to comply with the ASX requirement, a device with which the ASX apparently had no problem. As Mr Madden said in cross‑examination: "if they're happy with the tokenism that we were evidencing with our requirement to meet … the two member directors from non‑management people, so be it." He later repeated this. In his letter to the ASX of 23 July, in which he withdrew his application, Mr Madden said his firm "now have the farcical situation in which we have member directors who are not involved in any aspect of the running or management of the firm, continuing as directors due to the ASX requirement that 25% of directors be natural members of the Exchange. The ASX must obviously be satisfied with the 'tokenism' given the way in which two new applications for memberships from this firm have been treated." 50 I was not impressed with Mr Madden's initial attempt to cause the Court to conclude that he applied for membership to remedy a default on his employer's part in complying with the ASX requirement that there be natural person directors who were members, or at least that this was his principal reason for applying. Other aspects of his evidence were unsatisfactory. He avoided answering questions directly. When he sensed a direct answer would not help his case, he prevaricated. Initially he was adamant that the prospect of benefiting financially from demutualisation was not a factor behind his application. Eventually he conceded that it was, though it was "not a high priority". Other factors "ranked well above the financial motivation". I do not accept his account of his motivation. The following matters emerged from his cross‑examination: · it was false to say or suggest that his principal reason for applying was to remedy a non‑compliance with an ASX requirement · he was well aware at the time of applying that the ASX was considering demutualisation · he was aware of media speculation in the months preceding the making of his application that the benefits of demutualisation might be substantial · he was aware that if he did not become a member before 5 May (under the old education requirements) he could not become one without doing more study · accordingly the only way for him to share in the benefits of demutualisation was to become a member before 5 May. 51 One would have expected a person whose principal reason for applying for membership was to satisfy the ASX's director/member requirements to give an unequivocal "yes" to question 6(a) in the application form: "is the Applicant applying to satisfy the requirements for directorship of a Member Corporation?". Instead Mr Madden answered: "Not at present but although will be useful in this regard". 52 I do not accept the gratuitous protestations appearing in Mr Madden's correspondence with the ASX that "We trust it is clear to the Board that these applications are not prompted by the prospect of sharing in any financial benefits which may be arrived from any future restructuring of the Exchange" (11 June 1996), and in the letter withdrawing his application ‑ "Despite what some may conclude, it is not the lack of financial gain which motives this withdrawal …" (23 July 1996). That, however, is my conclusion ‑ namely that financial gain was his reason for applying, or at least the predominant reason. One can protest too much. 53 In his affidavits Mr Rough gave as his reason for applying for membership the need for him, as managing director of TIR, to be a member in order to comply with the ASX's business rules and for TIR to obtain admission as a member organisation. Shortly after he was advised of the deferral of his application (4 June 1996), he made a compelling case submission to the ASX (7 June 1996) in which he repeated his contention that he needed to be a natural person member in order that TIR comply with the rules and articles of the ASX. It was therefore "compelling that I be considered for admission immediately to allow TIR's compelling application to be also considered immediately." He then set out TIR's case for immediate consideration. On 19 June he wrote on behalf of TIR setting out its case in more detail, and repeating his earlier claim that his application was made to facilitate TIR's application. 54 More or less contemporaneously with this correspondence Mr Rough was writing to Hans Tiedemann (5 June 1996) about the need for an urgent response now that the ASX had changed the rule ‑ "They are attempting to freeze new members out of any potential capital gain through demutualisation, or an IPO [initial public offering] of the Australian Stock Exchange." On 1 July he wrote to congratulate the "Australian Working Party" on the admission of TIR as a member. He enclosed an article from the Australian newspaper, and noted that it "conveys the point of how important it was to be admitted prior to the 5th of July" when members voted to exclude those admitted after that date from any benefits of demutualisation. On 2 August 1996 Mr Rough wrote to Jarret Lillian at TIR in Hong Kong enclosing another article about the proposed demutualisation, observing that it demonstrated the value of membership over and above the mere ability to trade. He said it may make Hans Tiedemann happier about the investment, and explain why he (Rough) pushed so hard for TIR to become a member before the cut‑off date after which members did not participate in the benefits of demutualisation. 55 These explanations for pushing hard, and the importance of the 5 July cut‑off are quite inconsistent with contemporaneous explanations, for example in the 19 June letter and the oral submissions Mr Rough made at the 20 June MIC meetings, about the need for TIR and himself to become members. He was understandably defensive when this correspondence was put to him in cross‑examination, and retreated from his stand that participation in the benefits of demutualisation was not a factor in his decision‑making process. When it was put to him that the Tiedmann letter of 5 June showed that the reason for urgency was to avoid missing out on any potential capital gain, he responded that this was "not the only reason for urgency". He accepted, grudgingly, that at the time of making the application he was aware of media speculation about the possibility of demutualisation and that there had been discussion about it over the past few years. He was generally aware that there was a prospect that the ASX would change its structure so as to release value to members. In my view Mr Rough had a much better appreciation of the likelihood of demutualisation and the value it might bring to him and TIR than he was prepared to admit. Much light is thrown on the veracity of his affidavit and some of his oral evidence about his motivation by the post‑July correspondence. It is not, as counsel submitted, to be put aside as irrelevant to his motivation at the time of making applications because it took place after the 5 July announcement. The point is that it reflects, in terms, his thoughts and reasons for acting before that date. My conclusion is that, as with Messrs Wenzel and Madden, Mr Rough's real or at least predominant reason for his aggressive pursuit of his and TIR's applications for membership was to secure whatever benefits might flow from demutualisation. He may have dressed up the application in more attractive apparel but all the while he had his own mercenary reason that ultimately, as the correspondence revealed, he was unable to keep to himself. 56 Each applicant claimed that the change in the education requirements which came into effect on 5 May 1996 (par 4) was the reason for applying before that date. That may well be so, but it does not affect my conclusion that the motivation for seeking membership, as opposed to the explanation for the timing, was as I have found. The change was simply a barrier between the applicants and securing benefits from demutualisation, which they attempted to avoid by applying before 5 May 1996. WAIVER 57 Messrs Wenzel and Rough signed acknowledgments with respect to the effect of art 35A. I accept the ASX's submission that they thereby waived any rights that may have accrued to them as a result of any breach of the admission contracts. As I have said, however, there was in my view no such breach. The applicants contended that there was no evidence that the Board had resolved that applicants in the position of Messrs Wenzel and Rough must sign an acknowledgment such as that they in fact signed. Article 35A(4) provided that such an applicant "may be required by the Board to furnish … a written acknowledgement, in such form as the Board specifies". Article 35A(4) thus contemplated an acknowledgment such as that in fact created by the Board, and the form was clearly authorised by the general management power in art 2. See the discussion in pars 34 to 36. OTHER CAUSES OF ACTION Administrative law grounds The implied terms propounded by the applicants included terms that the applications would be processed without taking irrelevant considerations into account or giving effect to any ulterior purpose. It may be that these terms are simply more specific variants of the obligation to deal fairly and in good faith with the applications, in the sense that taking into account irrelevant considerations or acting for an ulterior purpose would constitute unfair dealing. I very much doubt that these administrative law grounds of review are apt contractual terms. They are amongst the grounds on which courts supervise administrative action. Courts do not have a supervisory jurisdiction over non‑statutory bodies. See Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 832 and Wayde v New South Wales Rugby League Ltd (1985) 180 CLR 459 at 469. Even if there were such implied terms, it follows from what I have said in the preceding paragraphs that neither was breached. Misleading and deceptive conduct 58 Each applicant's case under s 52 of the Trade Practices Act 1974 is that immediately prior to his application being submitted the ASX represented to him that it would be dealt with reasonably promptly, in a bona fide manner, and consistently with the duty of fair dealing, and that if he were admitted to membership, his rights would be the same as those of other members. It was said that the representations were contained in, or to be implied from, the articles, the application form, the statutory declaration, and the ASX's silence in not bringing the terms of the proposed art 35A to the applicant's attention when he made his application. 59 The ASX submitted that its conduct in considering membership applications did not take place in trade and commerce. At the relevant time the ASX was a company limited by guarantee which could not make distributions to its members. It was neither a trading nor a commercial concern. Reference was made to Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 602‑604. In the view I take of this cause of action I need not decide this issue and will proceed on the basis that the relevant conduct was in trade and commerce. 60 The positive representations relied on are not made out. There is simply nothing in the evidence to support them. With regard to the alleged representation by silence, it must be remembered that the applications were made between 19 April and 2 May 1996 and, as at that time, the ASX had made no decision about demutualisation and no decision to introduce any deferral policy or art 35A. In 1996 Martin Kinsky was National Manager Membership of the ASX. On 20 May Mr Kinsky received from the Melbourne office a draft agenda paper that was being prepared for consideration by the Board. The purpose of the document was "To consider the likelihood of an influx of natural person members who are motivated by a desire to participate in any governance restructuring proposal, to assess whether the position has changed since this issue was last considered by the Board and if so, to decide what action to take." The document disclosed that the issue had last been considered by the Board in October 1995. The draft canvassed three ways in which the influx problem could be addressed. Draft resolutions for consideration by the Board included the following: "5. The Board resolved to submit to the general meeting of Members … a separate special resolution that the Articles … be amended in the manner set out in Attachment A …. 6. The Board directed that: (a) a general policy be adopted to defer consideration of applicants for natural person membership from the time of announcement of the Special General Meeting until the outcome of the Special General Meeting in relation to the Article amendments set out in Attachment A to this agenda paper was known (the 'Window Period'); and (b) this general policy should not prevent admission in the Window Period of persons who comply with Article 36 and show a compelling case for admission." Mr Kinsky reviewed the document and provided Mr Nottle, who had overall management responsibility for the Membership Division, with his comments. 61 At a Membership Managers Meeting on 23 May Mr Nottle informed the State Membership Management that the governance project team was preparing a Board paper on the subject of natural person membership applications, and outlined the recommendations that were proposed to be put to the Board. On 29 May the Board resolved to submit to a special general meeting on 5 July a proposal to introduce a new art 35A and to adopt the deferral policy. The circular (set out in par 5 above) was distributed two days later. In addition to the paragraphs there set out in, the circular contained this paragraph, in bold print: "I emphasise [the proposal to introduce a new article] in no way ought to be interpreted that the Governance Task Force advising the Board, or the Board itself has made a decision to put to Members a 'demutualisation option' at the Special General Meeting canvassed for September of this year. The Article change included in the Notice of Meeting for 5 July 1999 is put to Members given the Board's proper concerns about the interests of existing Members." The circular also stated that the task force would continue to work with its external consultants with a view to putting a governance proposal to the Board at its meeting on 26 July 1996. 62 Michael Shepherd, Vice‑Chairman of the ASX, who was Chairman of the MIC in 1996, was cross‑examined about the time at which he first saw the draft agenda paper. He said he had not seen the document before 20 May. The other members of the MIC, Mr Egan and Mr Parncutt, were not asked about this topic. Mr Nottle said he did not become aware of the draft agenda paper until mid‑May 1996. He was not cross‑examined. 63 Accordingly, when the applicants made their applications the Board had not yet considered whether to adopt art 35A and the deferral policy and the draft agenda paper had not yet been published. On those facts there was no obligation to bring art 35A or the deferral policy to the applicants' attention because at that time there was nothing to disclose. 64 The applicants attached importance to a memorandum dated 19 September 1995 from Mr Kinsky to the Secretary to the Board which contained this passage: "I have now given Kate a number of comments on the draft documentation she has prepared which is designed to give warning to new applicants for membership that in the event of any restructuring arising out of the governance proposal, their rights to receive benefits may not be the same as existing Members." It was said that this showed a consciousness of the need to warn potential applicants. 65 The draft documentation referred to in the memorandum was prepared as a result of a resolution passed by the Board on 5 September 1995 that "from the date of this resolution any applicant for natural person or corporate membership of the exchange should expect not to be entitled to participate in any benefits that might arise to members out of any possible restructure of the exchange and be informed accordingly." In cross‑examination Mr Shepherd agreed with the suggestion that one purpose of the warning contemplated by the resolution was to prevent potential applicants being misled about the nature of their application and what they could expect from a restructure. It was contended that there was or should have been a recognition on the part of the Board of the need to give an appropriate warning to prospective applicants that their entitlements of membership, if granted, might not be the same as those of existing members. The applicants relied on the observations of Lockhart J in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 95: "silence may be relied on in order to show a breach of s 52 when the circumstances give rise to an obligation to disclose relevant facts." In the light of the matters set out in pars 60 to 63, there was no duty on the part of the ASX to disclose to the applicants in April and early May 1996 that consideration was being given to putting to the Board the policy of deferral and the introduction of art 35A. In Re RAC Motoring Services Ltd, discussed in par 44, Neuberger J considered a contention that the committee of the Club or the board of RACL was obliged to inform members as to the possibility or contemplation of the sale of the motoring services business. The submission was rejected. His Lordship said (at 323): "As to the general obligation to keep members informed of what is going on, that must involve questions of fact and degree. Members of the Club and members of RACL would not want to be bombarded with documents on a daily basis telling them of every thought in the committee's mind. Nor would they appreciate their money being spent in that way. On the other hand, I quite accept that there are occasions where the court would be prepared to hold that no reasonable board or committee could do other than inform members promptly of what is going on. It is a matter of fact and degree. However, it is not right that the court should step in and hold that a committee of a club or the board of a company should have informed members of what was going on, save where it is satisfied on clear evidence that no reasonable board or no reasonable committee could have done other than inform its members. On the evidence I have seen it appears to me that far from that being established, the board of the RACL, the committee of the Club, should not have informed members of what was going on and could not reasonably be expected to have informed members of what was going on, either until it had reached a fairly clear decision in principle to sell off the motoring services business or until it had been approached with a clear and potentially attractive proposition to do so. On the evidence I have seen that is precisely how the board/committee acted …." Those observations are applicable to the present case. Indeed the present case is the more clear for two reasons. First, Neuberger Js observations apply a fortiori to non members. Second, unlike the position in RAC Motoring, the issue of deferral and art 35A had not reached the decision‑making body, the Board of the ASX. The earlier decision to warn was made only after the Board had resolved in the manner set out in par 64. That resolution was rescinded in October on legal advice. Thereafter, until the adoption of art 35A, there was nothing to warn applicants about. When the Board next decided along the lines of the 5 September resolution (namely the introduction of art 35A) it gave appropriate notification by circular two days later (31 May 1996). It would be extraordinary if there were an obligation on ASX's part to disclose to non‑members thoughts being assembled by mid‑level functionaries that were proposed to be put to the Board in the future. No duty of the type contemplated by Henjo existed in this case. Promissory estoppel 66 The applicants pleaded that by reason of the representations set out in par 58, and their reliance on them to their detriment, the ASX was estopped from denying that there was an admission agreement as alleged. In view of what I have said under the preceding heading it is obvious that this claim must fail. The ASX did not make the representations relied on. Oppression 67 Section 232 of the Corporations Act 2001 ("the Act") provides in part: "The Court may make an order under section 233 if: (a) the conduct of a company's affairs; or (b) an actual or proposed act or omission by or on behalf of a company; or (c) a resolution, or a proposed resolution, of members or of a class of members of a company; is either: (d) contrary to the interests of the members as a whole; or (e) oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity." Section 233 empowers the Court to make any order it considers appropriate in relation to the company, and sets out particular orders that can be made. Section 234 provides that an application for an order under s 233 may be made by: "(a) a member of the company, even if the application relates to an act or omission that is against: (i) the member in a capacity other than as a member; … (c) a person who has ceased to be a member of the company if the application relates to the circumstances in which they ceased to be a member …." 68 A person who is a member of the company at the time of the application has standing to apply under s 232, even though the conduct complained of occurred before he became a member: s 234(a) and Spargos Mining NL (1990) 8 ACLC 1,218. Mr Wenzel and Mr Rough can thus rely on s 232. Two acts of oppression are alleged. The first is the introduction of art 35A. However this was not oppressive to any members. It could affect only persons who were not members. The present cases are unlike Spargos, where the plaintiff was accorded standing even though he was not a member when most of the impugned conduct occurred, because he was complaining about conduct that affected other persons who were members when it occurred. See especially at 1,222‑1223. 69 The second act of oppression alleged is the application of art 35A to Messrs Wenzel and Rough. In Wayde v New South Wales Rugby League (1985) 180 CLR 459 art 76 of the articles of the League empowered it to "conduct such competitions between teams representing all or any of the Clubs … as the Board of Directors may from time to time determine". The board decided to reduce the number of teams in the 1985 competition from thirteen to twelve. The decision was based on a report that gave reasons for a reduction. The board refused one club's application to enter the 1985 competition. It was held that art 76 authorised the board's action, and that the club had not established oppression within s 320(2) of the Companies (New South Wales) Code, which was in substantially the same form as s 232 of the Act. Mason ACJ, Wilson, Deane and Dawson JJ said (at 466‑467): "It is a point of great importance that the decisions were made in the exercise of a power that is expressly conferred on the Board, a power to determine the nature and extent of the competition that was to take place in 1985 and the clubs that were to be permitted to participate in it. It is not a case where the directors of a company, in the exercise of the general powers of management of the company, might bona fide adopt a policy or decide upon a course of action which is alleged to be unfairly prejudicial to a minority of the members of the company. In that kind of case it may well be appropriate for the court, on an application for relief under s 320, to examine the policy which has been pursued or the proposed course of action in order to determine the fairness or unfairness of the course that has been taken by those in control of the company." Their Honours went on to say that the board was confronted with a conflict of immediate interest between the club and the League as a whole, and the exercise of the power conferred by art 76 must necessarily be prejudicial to one or the other. 70 Brennan J adopted the same approach (at 471‑472): "Here, the appellants seek to restrain the exercise of a power of such a nature that its exercise is apt to discriminate among the clubs whose representatives are members of the League and to prejudice any club which is excluded from the Premiership Competition …. Where the directors of a company are empowered to discriminate among its members and to prejudice the interests of one of them, the adoption of a resolution which has that effect and which is made in good faith and for a purpose within the power is not, without more, 'oppressive or unfairly prejudicial to, or unfairly discriminatory against, a member'. Section 320 requires proof of oppression or proof of unfairness: proof of mere prejudice to or discrimination against a member is insufficient to attract the court's jurisdiction to intervene. In the case of some discretionary powers, any prejudice to a member or any discrimination against him may be a badge of unfairness in the exercise of the power, but not when the discretionary power contemplates the effecting of prejudice or discrimination." 71 The only "power" or "discretion" conferred on the Board by art 35A is that in sub‑art (4), to require a written acknowledgment. It was not oppressive or unfair to Mr Wenzel or Mr Rough to require them to do precisely what that sub‑article contemplated. By the terms of the Article itself, and not by any exercise of power by the Board, they could not participate in the benefits of demutualisation. It could not be unfair or oppressive to them to require them to acknowledge that. The present case is thus stronger than Wayde, where an exercise of power on the part of the League was involved. 72 Messrs Wenzel and Rough voluntarily signed the acknowledgment and sought membership on the basis of art 35A. They were aware of what they were doing. They are astute, educated members of the commercial world. They could have sought legal advice, but chose not to do so. There would have been little point, for the effect of art 35A was well‑known to them, and the two line acknowledgment was in plain and unambiguous language. 73 The application of a cut off during the period of restructuring was necessary in the interests of existing members. It was qualified by the compelling case exception. The application of the policy as a whole was neither oppressive nor unfair to Messrs Wenzel and Rough. I refer to what I have said in par 46 with reference to NRMA. Section 777 74 When the applicants opened their cases no relief had been sought under s 777 of the Act, though counsel foreshadowed an amendment to rely on it. The section provides in part: "Where a person who is under an obligation to comply with or enforce the business rules or listing rules of a securities exchange fails to comply with or enforce any of those business rules or listing rules, as the case may be, the Court may, on the application of ASIC, the securities exchange or a person aggrieved by the failure and after giving to the person aggrieved by the failure and the person against whom the order is sought an opportunity of being heard, make an order giving directions concerning compliance with, or enforcement of, those business rules or listing rules to: (a) that last‑mentioned person; and (b) if that person is a body corporate ‑ the directors of that body corporate." By s 761 "listing rules" include the constitution of the ASX. 75 When Messrs Wenzel and Rough's statements of claim were amended to include the s 777 claim, the amendment was to the "oppressive conduct" paragraphs, the heading of which was amended so as to add to "Oppressive Conduct" the words "and Relief under sections 233 and 777 Corporations Act 2001". Only one paragraph was amended so as to refer to s 777: "As a present member of the ASX, [the applicant] has standing to bring these proceedings against the ASX pursuant to section 246AA 234 and 777 Corporations Law Act 2001." Particulars were added to allege the applicant's standing to bring the proceedings under s 233 as a present member of ASX and under s 777 as a person aggrieved. The next paragraph, as amended, is as follows: "By reason of the matters aforesaid, [the applicant] is entitled to the relief claimed in the Application pursuant to section 246AA 233 Corporations Law Act 2001." It appears therefore that s 777 is employed, not as a cause of action in its own right, but as a source of standing for the making of oppression orders under s 233. Messrs Wenzel and Rough have standing under s 232. They do not need s 777. If I have misunderstood the role s 777 is intended to play, I simply add that for reasons given elsewhere, the applicants have not established a failure on the part of the ASX to comply with its articles. Mr Madden's statement of claim was amended to claim that as a person aggrieved he has standing to bring proceedings under s 777 and is entitled to relief pursuant thereto. This claim must fail for the same reason. Unconscionable conduct 76 Section 51AA(1) of the Trade Practices Act provides: "A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories." "Unwritten law" unconscionability is what is unconscionable in equity: Australian Competition and Consumer Commission v Simply No‑Knead (Franchising) Pty Ltd (2000) 104 FCR 253. The applicants' case is that a membership agreement containing art 35A as one of its terms is not enforceable and is liable to be set aside because the ASX procured the agreement by unconscionable conduct within s 51AA and in equity. The unconscionability was said to be derived from these facts: · the ASX's monopoly position · the necessity for the applicants to become members of the ASX in order for them to engage in their business as stockbrokers · the absence of any reasonable degree of equality between the applicants and the ASX in relation to the entry into the agreement · the ASX's conduct in breach of the admission agreement · the unjust enrichment of the other members of the ASX resulting from the application of art 35A to the applicants. 77 In Commercial Bank of Australia Ltd v Amadio (1982) 151 CLR 447 at 461 Mason J said: "Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest." In Stern v McArthur (1988) 165 CLR 489 at 526 Deane and Dawson JJ said that fraud, mistake, accident or surprise do not exhaust the scope of unconscionable or unconscientious behaviour, and continued (at 526‑527): "The general underlying notion is that which has long been identified as underlying much of equity's traditional jurisdiction to grant relief against unconscientious conduct, namely that a person should not be permitted to use or insist upon his legal rights to take advantage of another's special vulnerability or misadventure for the unjust enrichment of himself." 78 There is nothing in the facts to bring the applicants within these concepts. The ASX did not take advantage of them. They were free to choose whether to enter into the membership agreements. That they did so was not because they were unable to make a worthwhile judgment as to what was in their best interest. They had no special vulnerability or misadventure. And the ASX was not unjustly enriched by any conduct on its part. As I have said elsewhere, the applicants were experienced and astute operators, well accustomed to making commercial judgments, acutely aware of their own interests and how to advance them. In addition, the ASX was not acting for its own personal advantage. The genesis of the impugned transaction lay in its proper concern, a concern it was legally bound to act upon, to protect the interests of its members. That the effect of discharging that duty was to disadvantage the applicants does not establish unconscionability. True it is that as a result of art 35A existing members derived greater benefits than they would have if new members had been able to join on the same basis as existing members. But again, that was the result of a proper concern on ASX's part to protect its members. And, contrary to the applicants' assertion, it derived no benefit itself. It was not enriched, let alone unjustly enriched. It addition to the foregoing, I refer to what I have said in pars 43 to 46. Mistake 79 It was contended that Messrs Wenzel and Rough signed the form of acknowledgment under a mistake, namely that they had no entitlement at law or in equity to be deemed to be admitted prior to 5 July 1996, which was not the case. It will be apparent from what I have said elsewhere in these reasons that this claim is dependent on contentions that are not made out. Equitable doctrine 80 The applicants rely on the maxim "equity looks on that as done which ought to be done". Reference was made to Re Anstis (1886) 31 Ch D 596, De Beers Consolidated Mines Ltd v British South Africa Co [1912] AC 52 at 65‑66, Frederick v Frederick (1721) 1 Str 455; 93 ER 632 and the discussion in Snell's Equity 30th ed (2000), 40‑41. I need not examine these or other authorities, for it is apparent that resort is had to the maxim in reliance on assumptions I have already rejected. Thus it was contended that the applicants were entitled to have their applications dealt with in accordance with the admission agreements free of the deferral policy, and that the ASX's reliance on the policy was a breach of this agreement. Given that Messrs Wenzel and Rough were admitted to membership without having attained any further qualifications, it was submitted that it is clear that had the ASX dealt with their applications free of the policy, they would have been admitted to membership prior to 5 July 1996 and the acknowledgments would have had no application to them since they would have been ordinary and not post‑entitlement members at the relevant date. In closing submissions this contention was applied to Mr Madden as well, though he withdrew his application and did not sign an acknowledgment. It is apparent from this recitation of the argument that it assumes, contrary to my findings, that reliance on the policy was a breach of the admission agreement. 81 Quite apart from the false starting point of the submission, I would not have granted relief in reliance on this maxim. The ability of the maxim to deliver the result the applicants desire (ie full membership) requires them to establish that the admission agreement is specifically enforceable. They have not shown that damages would not be an adequate remedy for ASX's assumed breach of the agreement. None of them required membership in order that he personally carry on business as a stockbroker. They were employed by member organisations, and there is nothing to suggest that any organisation was concerned to ensure that an applicant obtain full membership, as opposed to membership that enabled it to satisfy the two member directors requirement in the ASX's articles, or perhaps to enhance the capacity of the organisation to attract custom. Those objectives were capable of being fulfilled notwithstanding the application of art 35A. 82 On the evidence, Mr Madden would not have become a member at all. There was a dispute as to whether, when Mr Parkinson (who at the time was the ASX's Assistant Manager Membership) questioned Mr Madden as to his attitude to sitting the examination referred to in art 36(1)(c)(iii), Mr Madden said merely that he preferred not to sit it (as he alleged), or refused to sit it (as Mr Parkinson alleged). I have no doubt that, whatever the precise words uttered by Mr Madden, he intended to convey to Mr Parkinson that he was not going to sit the exam. I find that Mr Parkinson correctly passed on to others in the admission department that Mr Madden had told him he would not be sitting the exam. I do not accept that he responded to Mr Parkinson's request for information in the manner he asserted, namely that his preference was not to sit the exam. On 29 April 1996 the two spoke about Mr Madden's intentions as to the three hour SIA exam. Mr Madden said that because of his experience and level of responsibility as Managing Director of ANZ McCaughan, he should not be required to sit the exam. Mr Parkinson's file note to that effect was not challenged. Later Mr Kinsky, then National Membership Manager, asked Mr Parkinson to follow up on Mr Madden's intentions as to the exam. Mr Parkinson's file note recording his later conversation with Mr Madden on 7 May 1996 supports his oral account of the latter's response, namely that he had no intention of sitting the exam. I accept Mr Parkinson's account of what transpired. It is highly unlikely that, having been commissioned by Mr Kinsky to in effect nail the matter down, Mr Parkinson would have been happy with a non‑responsive, inconclusive answer to the enquiry which would not have advanced the matter beyond Mr Madden's initial response of 29 April that it should not be necessary for him to be required to sit the exam. It was the inconclusive nature of that response that Mr Kinsky asked Mr Parkinson to clear up one way or the other. It is inconceivable that Mr Parkinson would have come away from a conversation designed to do that with yet another response that amounted to neither yes nor no. I do not accept that he did, and I find that, whatever the precise words used by Mr Madden, he conveyed to Mr Parkinson that he did not intend to sit the exam. In those circumstances the equitable maxim will not apply to deem Mr Madden to have become a member at some point before 5 July 1996. 83 The trial commenced on 17 October 2001. On 22 October, after Mr Parkinson had been cross‑examined, counsel for the applicants sought his recall for further cross‑examination based on an affidavit of Sharon Pyke sworn that day in which she deposed that at a dinner party at Mr Madden's house on 1 October 2001 the progress of present cases was discussed. Ms Pyke heard Mr Parkinson say he had "told a porky" in his affidavit, but it was just a technicality and had to do with the date on which he prepared a memorandum. On 23 October Mr Madden swore a supporting affidavit in which he claimed that Mr Parkinson said at dinner that one of the file notes attached to his affidavit had been written two years after the event, and that the reference to that file note in the affidavit had been worded carefully because of this. The context shows that the file note in question was that of 7 May 1996 (inaccurately dated 7 May 1995). Mr Parkinson was accompanied to the dinner by Doris Pettinella. She swore an affidavit in which she denied that Mr Parkinson had said any of the things asserted by Ms Pyke and Mr Madden. She said Mr Parkinson did not mention his affidavit at all. 84 I granted leave to reopen Mr Madden's case and he, Ms Pyke and Ms Pettinella were cross‑examined on their recent affidavits. Mr Parkinson gave evidence denying that he had said anything about his affidavit. He said his file note of 7 May 1996 was prepared on or soon after that date. He left the ASX in January 1997 and thereafter worked for ANZ Securities. He did not prepare the file note while working for ANZ. 85 The probabilities favour Mr Parkinson's account. The applicants were unable to explain why he would sign a false file note at a time when he was employed by ANZ Securities. It is quite extraordinary, in the light of other evidence, that it should be asserted that the file note was prepared two years after the date of the conversation, that is to say about 7 May 1998. A copy of the note was attached to the Madden paper presented to the MIC on 20 May 1996 which Mr Kinsky approved shortly before the MIC meeting. Management recommended against admitting Mr Madden because "he has indicated that he is not prepared to sit the exam". The recommendation referred to the file note in support of this statement. The file note also formed part of the papers prepared by Gregory Yanco, then Secretary of the MIC, for submission to its 17 June 1996 meeting. Mr Yanco's evidence was that the draft resolution prepared in respect of Mr Madden's application was that he should not be admitted, even if he established a compelling case, because he did not meet the educational requirements in art 36 "and had refused to sit the three hour SIA examination". At the relevant time Graeme Faulkner was Executive Director of the Melbourne office of the ASX and Manager Membership, Melbourne and Hobart. His evidence was that in May 1996 Mr Madden's application "had some notoriety with my membership department because he refused to sit the three‑hour exam". 86 In the light of that evidence it is impossible to accept the bizarre suggestion that Mr Parkinson said he had prepared the file note two years after the date of the conversation recorded in it. I accept his evidence and reject that of Mr Madden and Ms Pyke. Mr Parkinson had no reason to prepare a false note. Mr Madden had an interest in discrediting the note. His evidence was unsatisfactory. On 16 October he told his counsel the conversation with Mr Parkinson occurred over a lunch at a restaurant, Luciano's, when only the two of them were present. Later he informed his solicitor that this was wrong, and that it happened at a dinner at his place on 1 October. Mr Parkinson's account of the date of the note accords with the objective facts set out above. DEMUTUALISATION LEGISLATION 87 Apart from damages and compensation, the applicants seek orders directing that the ASX comply with its articles as they stood on 4 May 1996 and admit them as members as if they had been so admitted prior to 5 July 1996. When the ASX received the applicants' membership applications in April/May 1996 it was a company limited by guarantee and its articles precluded any distribution to its members. This position was not altered on 29 May 1996 when the Board resolved to submit to a special general meeting a proposal to introduce art 35A. Nor did it change when the article was introduced on 5 July 1996. When Messrs Wenzel and Rough became members on 22 July 1996 they had the same rights and obligations as all other members. Still no member had a right to receive shares. The ASX remained a company limited by shares and unable to distribute assets to its members. Article 35A did not take away a right that had already accrued to members or give some members a right they had not theretofore had. Articles 83 and 84 (see par 7) did not change the position. All they did was authorise the Board to seek legislation that would convert the ASX into a company limited by shares, remove the non‑distribution article, and authorise the issue of shares to members other than post‑entitlement members. 88 The central provisions of Part 7.1A of the Corporations Law are set out in par 8. These provisions converted the ASX into a company limited by shares, and set out who would be entitled to receive shares upon conversion: s 766D(2). By reason of that section the ASX was not permitted to issue shares to Mr Madden, who was not a member, or to Messrs Wenzel and Rough, who were post‑entitlement members. It is this legislation, and not the historical scene setting activities of the ASX, that determined who would and who would not receive shares on demutualisation. Putting aside any other obstacles to the success of the various causes of action propounded by the applicants: · the admission agreement, under which the applicants are alleged to be entitled to receive shares just like other members, is inconsistent with s 766D since Messrs Rough and Wenzel were admitted after 5 July 1996 and Mr Madden never became a member · orders (under the Trade Practices Act) that the applicants be admitted with the same rights as other members and that the ASX not enforce art 35A would be inconsistent with s 766D since the applicants either are or would be post‑entitlement members · the estoppel relied on cannot prevent the operation of s 766D · the equitable maxim cannot prevent the application of s 766D · an order under s 777 of the Act that the ASX apply its articles as they stood at 4 May 1996 cannot result in the allotment of shares by the ASX. Under s 766D(2)(c), on the conversion date shares were taken to be issued among all persons who satisfied the criteria in arts 83 and 84 · what the applicants allege is oppressive conduct is sanctioned by the legislation and cannot be oppressive so as to entitle them to relief under s 232 of the Act. Thus, even if there were no other obstacle, the legislation is an impediment to the applicants' claims that they be admitted as pre‑entitlement members. The applicants' submission that it was the ASX's conduct and not the legislation that was the operative cause of their not becoming members and obtaining shares, even if accepted, does not prevent s 766D applying in accordance with its terms or enable the ASX to proceed in defiance of it. CONCLUSION 89 The applications must be dismissed. I certify that the preceding eighty-nine (89) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Sundberg. Associate: Dated: 15 February 2002 Counsel for the Applicants: P Vickery QC and W Alstergren Solicitors for the Applicants: Home Wilkinson & Lowrie Counsel for the Respondent: P Almond QC and S H Steward Solicitors for the Respondent: Mallesons Stephen Jaques Date of Hearing: 17-19 and 22-25 October 2001 Date of Judgment: 15 February 2002