Wenzel v Australian Stock Exchange Limited

The Facts 4 Mr Wenzel became a member of the Stock Exchange of Melbourne Limited in October 1977. He paid $25,000 for his membership. Between 1982 and 1985 he served as a member of the Board. Upon the incorporation of the ASX in 1987 he became a member of that body. In April 1991 he resigned his membership. He said in evidence that he had been told when he resigned that he could rejoin once he resumed stockbroking activities. On 2 May 1996 he applied for readmission. 5 Unlike Mr Wenzel, Mr Rough had never been a member of the Melbourne Stock Exchange. He applied for membership on 19 April 1996. He gave as his reason for doing so the need for him, as Managing Director of TIR Securities (Australia) Ltd ("TIR"), to be a member of the ASX in order to comply with its business rules and for TIR to obtain admission as a member organisation. 6 From the time of its incorporation in 1987 until its demutualisation in 1998 the ASX was a company limited by guarantee. Its articles of association dealt extensively with the issue of membership. On 26 October 1995 those articles were amended with effect from 5 May 1996. 7 Article 36(1) provided that, subject to art 38(7), and to payment of the membership fee under art 43, the Board "shall admit a natural person as a Member" provided various other requirements were satisfied. Article 36(2) set out some of those other requirements. It required the Board to admit "natural persons" as members where they met the requirements specified in sub-article (1) if satisfied as to their character, financial resources, efficiency and willingness to devote adequate time to the task of being a member. 8 Article 38 is of critical importance to this appeal. It relevantly provided: "(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." 9 Article 39(1) provided that the Board could not reject an application for membership unless it first afforded the applicant the opportunity to appear at a hearing, and make submissions to the Board in relation to that application. Sub-articles (2) and (5) dealt with the conduct of the hearing. Sub-article (7) required the Board to determine an application within six months of receipt. Article 40 provided that a person whose application for membership had been rejected by the Board could appeal to a committee established by the ASX under art 56. Article 41 provided that the decision of that committee was final and binding on the applicant and the Board. 10 The amendments introduced on 26 October 1995 which came into effect on 5 May 1996 substantially altered the requirements for membership of the ASX. Article 36(1)(c) was amended to require an applicant to hold an accepted tertiary qualification in a relevant discipline, to have successfully completed such subjects conducted by the Securities Institute of Australia, or its subsidiaries, as were required, and to have passed the admission examination set by the ASX to satisfy the Board as to that person's knowledge of its articles, rules, customs and usages. Article 36(1)(c), in its amended form, stipulated a new range of subjects that an applicant for membership was required to complete. The Board had the power to dispense with the requirement that an applicant hold an accepted tertiary qualification in a relevant discipline. However, it did not have the power to dispense with the requirement that an applicant complete the newly introduced range of subjects. 11 The ASX had, for some years prior to 1996, been considering a change in its corporate structure. One form of restructure under consideration was demutualisation. That entailed changing its status from a company limited by guarantee to a public company limited by shares. A change of that nature would see the issue of shares to ASX members in substitution for their entitlements in the existing company. 12 As noted earlier, Mr Rough lodged with the ASX an application for membership on 19 April 1996. Mr Wenzel, likewise, lodged an application for re-admission on 2 May 1996. Each application was accompanied by a cheque for the requisite fee, that being $25,000 in the case of Mr Rough, and $500 in the case of Mr Wenzel. The fee required of Mr Wenzel was lower than that required of Mr Rough because of Mr Wenzel's earlier payment of $25,000 in 1977. 13 The applications lodged by the appellants met all of the requirements set out in the articles, but were not immediately processed. On 29 May 1996 the ASX Board of Directors resolved to submit to a special general meeting, scheduled for 5 July 1996, a proposal to amend the articles by the introduction of a new art 35A which would set out the entitlements of members to receive shares by virtue of their membership in the ASX. The Board also resolved to adopt a general policy of deferring consideration of all applications for membership until the outcome of that meeting was known. There was to be an exception to this general policy for what were described as "compelling cases". 14 On 31 May 1996 the Board issued a circular to members informing them of the resolutions referred to above. That circular, which was headed "Applications for Membership While Governance Review in Progress" was 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." 15 On 4 June 1996 the ASX notified each applicant, whose application for membership was pending, of its general policy of deferral. A copy of the circular to members was provided to each such applicant. 16 Between 4 and 11 June 1996, Mr Wenzel, Mr Rough, and TIR, made "compelling case" submissions. On 17 June 1996 those submissions were rejected by the Membership Issues Committee ("the MIC"). On 19 June 1996 further "compelling case" submissions were lodged on behalf of the same three parties. On the following day, Mr Rough attended a meeting of the MIC and pressed his submission. On 21 June 1996 the MIC confirmed its decision to defer the applications lodged by Mr Wenzel and Mr Rough, but accepted TIR's application for membership under its "compelling case" policy. 17 On 5 July 1996, at the special general meeting, the articles were amended to include the new art 35A to which we have referred above. That article provided: "(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." 18 On 8 July 1996 each person whose application for membership was pending was informed of the adoption of art 35A. They were also informed that if they still wished to have their deferred application for membership considered they should complete and return an attached written acknowledgment, pursuant to art 35A(4). 19 Both Mr Wenzel and Mr Rough completed and returned that acknowledgment. In doing so, they accepted that if admitted to membership their "rights as a Member [would] be affected by Article 35A". 20 That article was applied to Mr Wenzel, and to Mr Rough, with the consequence that, although they became members of the ASX, they were not allocated shares once it had become publicly listed. 21 On 18 October 1996 the articles were further amended by the introduction of arts 83 and 84. Article 83(2) relevantly provided that the Board would seek to obtain the enactment by the Commonwealth Parliament of legislation which would convert the ASX to a company limited by shares, abolish the undertaking of each member to contribute to its assets as provided in its Memorandum of Association, cause all "Persons Entitled" to become the holders of shares in its capital on the basis of equality among those persons, and extinguish the membership of each "post-entitlement Member" at what was described as "the Conversion Time". 22 The expression "Conversion Time" was defined as the time when the ASX was converted from a company limited by guarantee to a company limited by shares. The expression "post-entitlement Member" was defined in art 35A as meaning a person who became a member after the adoption of that article. The expression "Person Entitled" was defined as a person (not being a "post-entitlement Member") who was a member at the Conversion Time. 23 As noted at [6] above, on 13 October 1998 the ASX ceased to be a company limited by guarantee, and became a company limited by shares, and indeed a listed public company. Those members of the ASX whose applications had not been deferred under the deferral policy adopted on 29 May 1996 were each allocated a parcel of 166,000 shares, an extremely valuable entitlement. The appellants being "post-entitlement Members" were denied an allocation of shares. By reason of other, subsequent, amendments to the articles, they were also denied voting rights and other benefits which were available to members who were not "post-entitlement Members". Needless to say, they were deeply aggrieved by what occurred.

Decision of the primary judge 24 The primary judge accepted the submission advanced on behalf of each appellant that the admission agreements had been established. His Honour found that the application form completed by each appellant constituted more than an "invitation to treat but gave rise to obligations on the part of the ASX". 25 The primary judge referred to art 38, and its requirement that each applicant for membership execute and deliver to the ASX an application in the form determined from time to time by the Board. He noted that cl 13 of that application form 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."

26 His Honour also noted that cl 14 of the application form 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 [sic] 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." 27 As noted above, the primary judge concluded that the lodging of an application form was not a mere invitation to treat, but gave rise to obligations on the part of the ASX. His Honour referred to the well known statement of principle in Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424, at 457: "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], 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"." 28 This passage was cited by Tadgell J in Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106 at 169, and applied in his Honour's reasoning. 29 The primary judge observed that the reference in Australian Woollen Mills to Freeman v Cooke was to the principle that courts apply an objective test to whether an offer made by one party has been accepted by another. He stated (at [24]): "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 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 the receipt of the form and accompanying documents and cheque." 30 His Honour then considered a submission, on behalf of the ASX, that the appellants had provided no consideration for the admission agreements. It was said that the cheques accompanying each application were the consideration for membership of the ASX and not the consideration for any admission agreement. This, it was said, was demonstrated by the fact that when Mr Madden withdrew his application his fee was refunded. 31 The primary judge did not accept this submission. His Honour said that he was "inclined to think that this analysis proceeds upon too narrow an understanding of the concept of consideration". It was true that the money paid was the price of membership. However, paying it was nevertheless a detriment suffered by the payer in relation to the application for membership. Accordingly, it was "good consideration" for the admission agreements pleaded, and not just consideration for membership of the ASX. 32 His Honour continued (at [25]): "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." 33 His Honour noted that the ASX sought to distinguish Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151, and its analysis of consideration. It was said that Hughes' act in involving itself in the procurement process was of clear benefit to Airservices, whereas an application for membership was of no advantage to the ASX. However, his Honour observed that although Hughes Aircraft looked only to a benefit derived by Airservices, consideration could consist of either a benefit to the promisor, or a detriment to the promisee. In the present case, there was the detriment to the appellants which he had identified, and a benefit to the ASX as well. 34 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 on its part 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": Australian Woollen Mills at 456 and 461. 35 His Honour rejected that submission. He noted that in Australian 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. He distinguished that case from the present. Here the case put by the appellants was 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 did 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. 36 The ASX submitted that pre-award contracts of the type considered in Hughes Aircraft were quite different from the admission agreements. His Honour accepted that submission. However, he considered that the principle applied in Hughes Aircraft 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". In other words, the principle adopted in Hughes Aircraft was of general application, and not confined to intended procurement cases. 37 The ASX submitted that the admission agreements had the status of nothing more than "a contract to enter into a contract". His Honour rejected that submission, stating (at [29]): "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." 38 Having accepted the appellants' submissions regarding offer and acceptance, and consideration, and having therefore found that the admission agreements pleaded had been proved, his Honour then dealt with the issue of their terms, and whether there was any breach of those terms. It was on this issue that the appellants failed. His Honour rejected their submissions that the adoption by the ASX of the deferral policy, and the amendment to its articles by the introduction of art 35A, constituted a breach. He concluded (at [36]) that: "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." 39 He continued (at [37]): "[The adoption of] 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." 40 Having concluded that there was no breach of the express terms of the admission agreements, his Honour went on to consider whether there was a breach of a number of implied terms within those agreements. It was contended that those implied terms were that 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, and without giving effect to any ulterior purpose. 41 It was further contended that it was an implied term of the admission agreements that 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. 42 The primary judge noted that the ASX did not directly contest the appropriateness of implying these terms, though it did refer to the observations of Gummow J in Service Station Association Ltd v Berg Bennett & Associates Pty Ltd (1993) 45 FCR 84 at 92-94 and 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 they had not been breached, a course which was also adopted by the parties when this issue was recently before the High Court in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 301. 43 In relation to the unfair dealing term, which his Honour considered in detail, he stated (at [42]) that: "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." 44 His Honour continued (at [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." 45 It should be noted that much time was spent in cross-examination and argument about each appellants' motivation to be a member of the ASX. Counsel for the appellants asserted that the motivation of their clients was only relevant to their unfair dealing argument in its expanded sense (bad faith, irrelevant considerations and ulterior purpose). They submitted that the unfair dealing lay in the application of the deferral policy to the appellants based purely on "conjecture as to their motivation". It was accepted that this contention would fail if his Honour were to conclude that each appellant 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. 46 The primary judge noted that since he had concluded that the deferral policy was directed to the attainment of a legitimate purpose, it was not unfair to the appellants in any relevant sense, even though it may have disadvantaged them. It followed that it was not necessary that his Honour examine their motivation. However, he said that in case he was wrong about that, he would have concluded that each appellants' "principal reason for applying for membership was to obtain whatever benefits might be derived by members on a restructuring of the ASX". 47 His Honour stated (at [48]): "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." 48 His Honour was less impressed with the candour of Mr Rough. He concluded (at [55]): "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." 49 He went on to say: "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." 50 The primary judge then dealt with the issue of waiver, a matter that he was not, strictly speaking, bound to consider having regard to his earlier conclusion that there had been no breach of the admission agreements. However, he noted that by signing the acknowledgements with respect to the effect of art 35A, both Mr Wenzel and Mr Rough had waived any rights that may have accrued to them. 51 Finally, his Honour dealt with a series of other causes of action upon which the appellants had sought to rely. These included what he described as "administrative law grounds", misleading and deceptive conduct, promissory estoppel, oppression, s 777 of the Corporations Law (now Corporations Act 2001 (Cth)), unconscionable conduct, mistake, and various equitable doctrines. Each of these claims was considered, and rejected. We shall refer to his Honour's reasons for rejecting these claims later in this judgment. For present purposes it is sufficient to say that these other causes of action appear not to have been pursued with any great vigour in the proceedings below, and were barely pressed on this appeal.

Agreed statement of issues 52 Pursuant to directions given, the parties submitted an agreed statement of the issues arising on the appeals. They were as follows.

Did the appellants enter into admission agreements with the ASX? 53 The primary case presented at trial was that each appellant entered into an enforceable contract with the ASX whereby, in consideration of the appellant applying for membership and paying the membership fee, the ASX agreed to receive, process, consider and determine the application in accordance with its memorandum, articles and rules as then in force. The submission of a completed application form accompanied by a cheque for the membership fee was an offer by each appellant which was accepted by the ASX when it received the form and banked the cheque, or when it commenced the process of assessing the application. 54 An alternative version was that the ASX made a standing offer of membership to persons such as the appellants which offer was accepted by the appellants when they lodged their application forms and fees. This would be a case of acceptance by performance on the doctrine of Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256. 55 His Honour (at [23]) upheld the primary contention of the appellants. He considered that cl 13 of the application form incorporated the provisions of the memorandum, articles and rules of the ASX as part of a contract between the parties. The articles contained mandatory directions, including directions to applicants themselves, as to the criteria for membership and the way in which the admission process was to be conducted. His Honour referred in particular to arts 36(1) and (2), 38(1) and (2), 39(1),(2) and (5), 40 and 41. It was not possible, in his Honour's view, to read those provisions as directed only to existing members of the ASX. His Honour said: "It is true that read in isolation cl 13 is somewhat unclear. It might be directed to the articles etc insofar as they regulate acquired membership. But that ignores the content of the articles etc. It is preferable to read cl 13 as dealing with an application for admission to membership, and as incorporating the articles to the extent that they deal with that topic." 56 As noted earlier, his Honour (at [24]) held that the lodging of an application form was not a mere invitation to treat, but gave rise to obligations on the part of the ASX. He found (at [25]) that payment of the application fee, even though it was the price of membership, was nevertheless a detriment and thus good consideration for the pre-admission contract, as was the submission of the application and the required statutory declaration and the provision of private and confidential information about assets, liabilities and business background. This was relevantly a detriment to each appellant. He considered that he should apply the decision in Hughes Aircraft and the principle stated by Gallen J in Pratt Contractors Ltd v Palmerston North City Council [1995] 1 NZLR 469. His Honour (at [29]) agreed that an admission agreement may lead to a contract of membership. When it did, the former would merge in the latter. However, their subject matter was not the same. The former was concerned with the processes by which membership may be brought about, the latter was 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 did not deny it a separate existence until that event occurred. 57 Where a person applies to become a member of a company, club or other organisation, the usual contractual analysis is that the application is an offer which the organisation may accept. Upon communication of acceptance a contract is constituted. By that contract the applicant becomes a member of the organisation and is contractually bound by its constitution. An early, and clear, example is In re National Savings Bank Association; Hebb's Case (1867) LR 4 Eq 9. Mr Hebb applied in writing for ten shares in a company. The directors allotted him the shares but before that was communicated to Mr Hebb he withdrew his application. Lord Romilly MR said (at 11-12): "These applications for and allotments of shares must be treated upon the same principles as ordinary contracts between individuals. If A writes to B a letter offering to buy land of B for a certain sum of money, and B accepts the offer, and sends his servant with a letter containing his acceptance, I apprehend that until A receives the letter, A may withdraw his offer and B may stop his servant on the road and alter the terms of acceptance or withdraw it altogether; he is not bound by communicating the acceptance to his own agent." 58 The same proposition has been expressed on many subsequent occasions: In re Imperial Land Company of Marseilles (Harris' Case) (1872) LR 7 Ch App 587; In re Florence Land and Public Works Company (Nicol's Case) (1885) 29 Ch D 421 at 426; National Westminster Bank plc v Inland Revenue Commission [1995] 1 AC 119 at 126. See generally G H Treitel, The Law of Contract, (9th ed, 1995) at p 15. 59 We did not understand the appellants to dispute this proposition. The issue in the present case is whether, irrespective of the outcome of the determination of the application for membership of the ASX, there was a separate and anterior contract (the admission agreement), the subject matter of which was the processing of the application. 60 In our opinion, there was no such contract. 61 The terms of the application form are to be as determined from time to time by the Board: art 38(1). The language of the application form is consistent only with it being, as it is described on the cover, a "membership application". The term "application" or "application for membership" is used throughout the form, and most importantly in cl 13 which is set out at [25] above. 62 The undertaking contained in cl 13 is the fundamental contractual promise which must inevitably be required of any person seeking to become a member of any organisation. Nowhere else in the evidence is there any other document which would fulfil this purpose. We cannot read the plain language of cl 13 as being an offer to enter into a contract limited to the processing of the application. Nowhere does the application form say "I offer to enter into a contract for the processing of my application", or words to that effect. On the appellants' case the one document, the application form, has to serve as the offer for two distinct contracts. Hypothetically this could no doubt be done, but one would expect clear language to that effect and a statement as to how, and on the happening of what events, the two (or more) contracts were to come into being. 63 The application form of Mr Rough was formally acknowledged by letter dated 22 April 1996 signed by an ASX officer with the title "Executive Assistant, Membership (Melbourne)". The letter stated: "Thank you for your letter of 19 April 1996 enclosing you [sic] application for Natural Person Membership. The matter is currently being considered and we shall respond shortly." 64 No such letter appears in the evidence in relation to the application of Mr Wenzel, but if there was a letter to him it may be safely inferred that it was in similar terms. 65 The letter to Mr Rough does not look like the acceptance of an offer. Rather it is a routine confirmation to assure the applicant that his application to become a member, together with the accompanying cheque, has safely reached the ASX and is being considered. 66 The next problem for the appellants' case is the amount, $500 in the case of Mr Wenzel and $25,000 in the case of Mr Rough, which is described in the applications as the "Membership Fee". This answers the description of art 43(1)(a) which provides: "Each member shall pay to the Exchange a Membership Fee of such amount as is determined in accordance with the Articles and Rules (a) in the case of new members - on or before admission." 67 The Membership Fee is plainly intended to be the consideration for the benefits of membership. Neither the fee itself nor any part thereof is allocated as compensation for the ASX for its time and trouble in processing the membership application. It would have been open to the Board, when determining the contents of the application form (see art 38(1)), to provide that the Membership Fee was payable on admission. 68 If the appellants' contention were correct, there would be a binding contract as soon as the cheque for the Membership Fee was banked and/or when the assessment process commenced. What then happens if an applicant wishes to withdraw his or her application? On the appellants' version this would depend on the grace and favour of the ASX in returning the amount of the fee. An alternative rationale advanced in argument was that the ASX would then not be satisfied either that the applicant would carry out his or her obligations as a member efficiently, honestly and fairly (art 36(2)(b)) or that he or she had the required financial resources to meet obligations as a member (art 36(2)(d)). But an applicant could withdraw an application for an infinite variety of reasons which had nothing to do with ability or financial solvency. 69 The simple answer is that until the acceptance of the application for membership there is, as was held in Hebb's Case, no contract. The applicant would have an unanswerable claim for the return of the Membership Fee as money had and received: Chillingworth v Esche [1924] 1 Ch 97 at 108, 112, 114 and George v Roach (1942) 67 CLR 253. 70 The fact that many of the articles of the ASX dealing with the membership application process are expressed in mandatory form does not in our view support the contention that there were admission agreements of the kind for which the appellants contend. Such articles can fulfil a useful function notwithstanding that they are not contractually enforceable by an applicant for membership. In the first place, existing members have an interest in seeing that the Board and management comply with the detailed criteria and procedures relating to the admission of new members. Existing members would have contractual rights to enforce performance. Secondly, at the time with which this case was concerned, s 777(1) of the Corporations Law empowered the Court to make an order directing compliance with the "business rules" of the ASX. "Business rules" would include the articles of association insofar as they dealt with training and experience and other qualifications for membership and exclusion from membership: ss 761 and 769(2). Such an order could be made on the application of the Australian Securities Commission (as it was then known) or a "person aggrieved", which would presumably include a disappointed applicant for membership. 71 Senior counsel for the appellants placed heavy reliance on the decision of Finn J in Hughes Aircraft, a case concerned with a tender process. The contractual principles concerning tenders are complex, and are comprehensively discussed in G H Treitel, op cit, at pp 14-15, and in Cheshire and Fifoot's, Law of Contract, (7th Aust ed, 1997) at pp 106-111. In Hughes Aircraft, Finn J referred to the New Zealand case of Pratt Contractors in which Gallen J reviewed the earlier law and particularly a line of Canadian cases. In a summation adopted by Finn J in Hughes Aircraft (at 185), Gallen J said (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, along the lines of the analysis in the Canadian cases…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." 72 It is not surprising that the circumstances of Hughes Aircraft were considered by Finn J (at 184) to be "redolent of a contractual intent on the part of the parties concerned". The subject matter of the tenders were highly complex systems for air traffic control. After an initial tendering process and much controversy there was an independent report and a proposal for further tendering. After that report the Civil Aviation Authority invited Hughes Aircraft and the other tenderer (Thomson) to participate in a fresh tender competition. Following meetings and correspondence the Authority sent to each of Hughes Aircraft and Thomson a draft of a letter specifying new evaluation criteria and a revised tender process. Hughes Aircraft and Thomson both signed the letter. The circumstances were, in his Honour's view, such that it could properly be said that the parties had, by agreement, used contract to protect "the integrity of the bidding system" (at 184). 73 The present case is far removed from tender cases like Hughes Aircraft. In particular, there is nothing remotely like the tripartite negotiation between the works proprietor and the two bidders which formed the basis of the conclusion in that case. Nor are there features present in most tender situations (even the simple uncomplicated ones referred to by Gallen J which do not result in contract in any event). Very often tenderers will have incurred substantial expense in costing and tender preparation. And the works proprietor gets the benefit of the competitive process. 74 Before leaving the tender cases we would note that in two of the Canadian cases referred to by Gallen J in Pratt Contractors it was the works proprietor, and not the unsuccessful tenderer, who recovered under what was held to be a preliminary contract. In R in right of Ontario v Ron Engineering & Construction Eastern Ltd (1981) 119 DLR (3d) 267 a tenderer discovered errors in its tender documents and wished to withdraw before tenders were considered. In the tender documentation it was stated that if the tender was withdrawn the deposit might be retained. It was held by the Supreme Court of Canada that the works proprietor was entitled to retain the tenderer's deposit because in the particular circumstances of the case a contract came into being when the tender was submitted. Similarly in Calgary v Northern Construction Co Division of Morrison-Knudsen Co Inc [1986] 2 WWR 426 when tenders were opened the defendant's tender proved to be the lowest but before selection by the plaintiff the defendant discovered a clerical error had resulted in an underestimate of $181,000. The defendant refused to execute the contract, which the plaintiff then awarded to the second lowest bidder. The Alberta Court of Appeal held the plaintiff was entitled to recover the difference between the two bids. These authorities highlight the difficulties for the appellants' analysis. If there was a pre-admission contract, it bound both parties. There is no satisfactory basis to accommodate the return of the Membership Fee to an applicant who wishes to withdraw. 75 In the present case senior counsel argued, as his Honour held, that there was sufficient consideration provided for the admission agreements in the form of the appellants making available confidential personal information to the ASX. Viewed in isolation, that may be so. Detriment to the offeror can of course constitute consideration. However, the more fundamental problem for the appellants is that there was in our view neither offer and acceptance, nor an intention to create legal relations of the kind asserted. If these indicia of contract are not satisfied, the question of consideration does not arise. 76 Senior counsel for the appellants did not press an argument that if the doctrine in Hughes Aircraft could not be invoked, there might, as an alternative, have been a unilateral contract of the kind held to exist in Carlill v Carbolic Smoke Ball Co. That concession on the part of the appellants seems correct. It would be unrealistic to treat a body like the ASX as making an offer to the world, at large, which might be accepted by anyone who happened to get hold of an application form. 77 It follows that we uphold the ASX's notice of contention. Most of the appellants' remaining argument was predicated on the assumption that his Honour's finding as to the existence of the admission agreements would be upheld. In relation to those matters we agree generally with his Honour, for the reasons he gave, that the appellants' contentions should not be accepted. We now comment briefly on those matters, and on other issues which might possibly call for separate consideration.

Assuming the existence of the admission agreements, what were their terms? 78 The appellants' contention, rejected by the primary judge, was that the appellants would be entitled to membership of the one class of ASX membership available at the time of the application. Because there was only the one class of membership for natural persons, the appellants' application had to be dealt with in relation to that class. They could not be affected by the subsequent adoption on 5 July 1996 of art 35A which introduced the category of "post-entitlement Member". 79 We do not accept this argument. The ordinary meaning of cl 13 of the application form, is that upon acceptance of the application the appellants would become bound by the memorandum, articles and rules of the ASX as they then existed and as subsequently amended from time to time. The contract between members of an organisation usually involves a term that the constitution of the organisation may be amended from time to time and when it is, subject to compliance with internal procedures, it is binding on all members. The appellants' argument would put them in a better position than existing members in that the terms of membership for which they applied were to be frozen as at the time of their application.

Did the admission agreements contain an implied term of fair dealing, and if so what was the content of that term? 80 A contract usually imposes an implied obligation on each party to do all that is reasonably necessary to secure performance of the contract: Secured Income Real Estate (Australia) Ltd v St Martins Investment Pty Ltd (1979) 144 CLR 596 at 607-608. This obligation extends only to the performance of the express terms of the agreement and is not to be used as a springboard for other implied terms: Service Station Association Ltd v Berg Bennett & Associates Pty Ltd at 92-93 citing United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 800 per McLelland J. See also "The Rise (and Fall?) of Implied Duties of Good Faith in Contractual Performance in Australia", Tyrone M Carlin (2002) 25(1) UNSWLJ 99 which persuasively argues that there is no such generally applicable implied term under Australian law, and "Interpretation, Good Faith and the 'True Meaning' of Contracts: The Royal Botanic Decision", J W Carter and A Stewart, (2002) 18 Journal of Contract Law 182 at pp 190-195. 81 A particular difficulty is that the implication of a term in such vague and uncertain terms would be unnecessary since the articles contain detailed substantive criteria for membership and procedural safeguards, including a right of appeal to an Appeal Tribunal: arts 36, 38, 39, 40, 41 and 56. In any event, the question whether such a duty exists remains to be determined by the High Court: Royal Botanic Gardens at 301.

What is the proper construction of cl 13 of the ASX Membership Application form? 82 This has already been dealt with above.

Was the ASX Board entitled by art 2 to apply the "deferral policy" to the appellants? 83 The application of the deferral policy was authorised by the articles as being either an exercise of the general management power (art 2), or the specific power to determine applications within six months. As his Honour held (at [35]), although the power in art 2 is expressed to be "[s]ubject to … any other provision of these Articles", the other articles only cut down the power conferred by art 2 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 is conferred on the ASX in general meeting. Article 36 does neither of these things. 84 Moreover, the deferral policy was adopted because of an understandable concern 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 therefore in their interest to adopt the deferral policy.

Whether the ASX breached any admission agreement by (a) application of the deferral policy to the appellants or (b) the introduction of art 35A on 5 July 1996 and enforcement of it against the appellants? 85 Assuming the existence of the admission agreements, they were, for the reasons already mentioned, subject to the articles and the valid power of management conferred by those articles in implementing the deferral policy. Moreover, as already mentioned, any membership contract was subject to the articles as amended from time to time. The present case is different from those where a special contract is concluded with a company on the basis of its articles but with the intention that the terms of the contract are not to be varied by an alteration to the articles. Such a contract will not confine the statutory power of a company (see Corporations Law s 176) to alter its articles but the company in acting upon the basis of an alteration may be acting in breach of contract: Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 411. The present case is not one involving such a "special contract"; rather it involves an ordinary membership contract where the member is bound by the constitution of the company as altered from time to time.

Was the application of the deferral policy "legitimate" having regard to the interests of the membership of the ASX as a whole? 86 We are not at all clear as to what content is to be given to the term "legitimate". Senior counsel did not elaborate on this. In any event we think the deferral policy was a proper exercise of the power of management, for the reasons mentioned above.

What was the motivation of the appellants in seeking membership of the ASX and what is the relevance of that motivation? 87 As already mentioned, his Honour made firm findings of fact to the effect that both appellants were motivated to a substantial degree by the prospects of sharing in the benefits of demutualisation. His Honour relied on a number of factors, including the demeanour of the appellants as witnesses and the existence of contemporaneous documents inconsistent with their assertion that their applications were predominantly motivated by other reasons. These were findings plainly open to his Honour on the evidence, and findings in relation to which no appealable error has been shown. 88 In any case, it may be doubted whether the individual motivation of the appellants was in truth relevant to the issues in this case. The Board of the ASX adopted the deferral policy not because of any conjecture as to the motivation of the appellants individually but on the basis of a general belief that, human nature being what it is, opportunistic applications for membership were quite likely, given the inevitable delay before the demutualisation process could be concluded. Obviously some unforseen anomalies, and cases of unfairness, could arise. In dealing with the demutualisation of the Royal Automobile Club in England in Re RAC Motoring Services Ltd [2000] 1 BCLC 307 Neuberger J said (at 322): "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 proscribed [sic] 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." 89 In the present case, the Board of the ASX specifically made provision for the unexpected anomaly or hardship by allowing for the compelling case exception. Both appellants sought such exception but were unsuccessful. At least in the case of Mr Wenzel, it might be thought that the application had some substance, given that he had been previously a member of the ASX for 13 years and had served on its committee for three years. Nevertheless, the merits of the decision on the compelling case application were a matter for the ASX. It is not open to this Court, on this appeal, to review that decision.

What was the effect of the art 35A(4) acknowledgement and the application of art 35A to the appellants having regard to: (a) whether the art 35A(4) acknowledgement had been validly required pursuant to the ASX Articles; (b) whether the maxim "Equity deems to be done, that which ought to be done" ought to apply; (c) whether there was a representation on the part of the ASX by silence, giving rise to relief pursuant to ss 52 and 87 of the Trade Practices Act 1974; (d) whether there was oppressive, unfairly prejudicial or unfairly discriminatory conduct on the part of the ASX giving rise to relief pursuant to s 233 of the Corporations Law; (e) whether there are grounds giving rise to relief pursuant to s 777 of the Corporations Law requiring the ASX to comply with its Articles; (f) whether the ASX was guilty of unconscionable conduct pursuant to s 51AA(1) of theTrade Practices Act giving rise to relief; (g) the effect of s 766D of the Corporations Law; and (h) whether the appellants waived their rights? 90 These questions can be compendiously answered by reference to both the reasoning of the primary judge, with which we agree, and the terms of the letter of 8 July 1996 sent to the appellants. On its face this letter asserted that the MIC, as delegate of the Board, had deferred the consideration of the appellants' application and requested, in terms of art 35A, that the members sign the attached acknowledgement expressly acknowledging that their rights would be affected by that article. The appellants were experienced businessmen who could have taken legal advice if they wished. In any event, any competent legal advice would have been to the effect that they had a choice either to accept membership, on the basis of art 35A, or withdraw their application. We fail to see that there is any basis whatsoever for oppression, unconscionability or unfairness.

Orders 91 The appeals will be dismissed with costs. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Heerey, Whitlam & Weinberg.

Associate: Dated: 6 December 2002 Counsel for the Appellants: P N Vickery QC and W E Alstergren

Solicitors for the Appellants: Home Wilkinson & Lowry

Counsel for the Respondent: P W Almond QC and S H Steward

Solicitors for the Respondent: Mallesons Stephen Jaques

Dates of Hearing: 7 and 8 November 2002