Wenzel v Australian Stock Exchange Ltd

Wenzel v Australian Stock Exchange Ltd - [2002] FCA 95 - FCA 2001 case summary — Zoe

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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.

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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):

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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

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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:

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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:

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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):

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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.

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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.

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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:

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Cases Cited (12)

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