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.