Ashton Millson Investments Limited v Colonial Limited
[2001] VSC 183
•18 June 2001
| SUPREME COURT OF VICTORIA | Not Restricted | |
| COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST | ||
No. 2084 of 2000
| ASHTON MILLSON INVESTMENTS LIMITED AND OTHERS | Plaintiffs |
| v | |
| COLONIAL LIMITED and COMMONWEALTH BANK OF AUSTRALIA | Defendants |
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JUDGE: | Warren J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 and 27 February 2001 |
DATE OF JUDGMENT: | 18 June 2001 |
CASE MAY BE CITED AS: | Ashton Millson Investments Ltd v Colonial Limited and Anor |
MEDIUM NEUTRAL CITATION: | [2001] VSC 183 |
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Schemes of arrangement – Refusal of registration of shares – Whether inconsistency between ordinary scheme, articles of association and ASX Listing Rules.
Amendment – Articles of association – Examination of directors' discretion to refuse transfers.
Shares – Transfer of shares – Arbitrage opportunity.
corporations law, s.175, 777, 779F, 1085, 1094.
asx listing rules, rules 8.10.1(h), 8.16, 18.6.
asx business rules – rule 4.15.
sch business rules
words and phrases – "must".
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr W.S. Martin QC with | Cornwall Stodart |
| For the Defendants | Mr G. Nettle QC with Mr P. Collinson | Freehills |
TABLE OF CONTENTS
The history of the merger of the defendants................................................................................ 2
Actions by Gothic.............................................................................................................................. 3
The Statutory Framework................................................................................................................. 8
The Issues.......................................................................................................................................... 12
The Claim for Damages.................................................................................................................. 28
Conclusion......................................................................................................................................... 32
HER HONOUR:
On 10 March 2000 the first defendant, Colonial Limited ("Colonial") and the second defendant, the Commonwealth Bank of Australia ("CBA") announced a proposal for their merger by way of schemes of arrangement under s.411 of the Corporations Law. Under the proposed schemes seven CBA shares were offered for every twenty ordinary Colonial shares; part shares in Colonial were to be rounded up to one whole CBA share. After the announcement of the merger the ninety-fifth plaintiff, Gothic Software P/L ("Gothic") became the registered holder of 120,000 shares in Colonial and executed 1,000 separate transfers of each of its 120,000 Colonial shares to various combinations of the first to ninety-first plaintiffs, companies incorporated in New Zealand and the remaining plaintiffs. The transfers were lodged but Colonial declined to register them. In this proceeding the plaintiffs seek to compel the directors of the defendant companies to effect transfers of shares under s.1094, alternatively, s.175 of the Corporations Law. The plaintiffs also claim damages arising from the refusal of registration.
The history of the merger of the defendants.
On 10 March 2000 CBA and Colonial entered into a merger implementation agreement. In that agreement CBA agreed, among other matters, to make an offer to all Colonial ordinary shareholders to acquire the ordinary shares in Colonial known as the "Colonial Ordinary Shares". As a consequence, on 12 April 2000 CBA executed a deed poll in favour of each holder of any of Colonial ordinary shares, income securities or options.
The scheme itself provided that if the scheme became effective Colonial would transfer the Colonial ordinary shares to CBA who would issue and allot the Scheme Consideration "to each person registered as the holder of Colonial ordinary shares as at the Merger Record Date". As events transpired that date came to be 8 June 2000. The "Scheme Consideration" was defined by clause 1.1 of the Scheme as meaning 0.35 of a CBA share in respect of each Colonial ordinary share together with any further fraction of a CBA share to which a Colonial ordinary shareholder was entitled. The upshot was that Colonial ordinary shareholders were offered seven new CBA shares for every twenty Colonial ordinary shares held.
Clause 5 of the scheme booklet dealt with fractions of shares. In particular, clause 5.2 of the scheme booklet provided in relation to fractions of scheme shares, as follows:
"5.2 If the number of Scheme Shares held by a Scheme Shareholder is such that the aggregate entitlement of that Scheme Shareholder to Commonwealth Bank Shares is less than one whole Commonwealth Bank Share, the entitlement of that Scheme Shareholder will be rounded up to one whole Commonwealth Bank Share."
Clause 6 of the scheme booklet set out the provisions in relation to dealings in Colonial ordinary shares including requirements with respect to registration. The clause is set out in Schedule A to these reasons.
During April-May 2000 the scheme booklet was issued and distributed for the purposes of the scheme of arrangement. The scheme booklet included a copy of the proposed ordinary scheme of arrangement and the deed poll executed by CBA.
On 31 May 2000 the relevant schemes were approved by a meeting of Colonial ordinary shareholders. On 1 June 2000 this court approved a total of three schemes of arrangement. First, a scheme of arrangement, generally referred to as "the ordinary scheme", between Colonial and the holders of ordinary shares in Colonial. Secondly, a scheme of arrangement between Colonial and the holders of certain preferences shares issued by Colonial. Thirdly, a scheme of arrangement between Colonial and the holders of certain options.
Actions by Gothic
The circumstances surrounding the acquisition of the parcel of 120,000 Colonial shares by Gothic, the subsequent transfer of those shares and the timing of the transactions are important, especially the events of May 2000. In May 2000, the sole director of Gothic, Justin Bryan Sykes, the ninety-third plaintiff, devised an arrangement of potentially enormous benefit to the participants, the plaintiffs. In the month of May 2000, Mr Sykes became aware of the scheme booklet and came to the
understanding that under the scheme one Colonial ordinary share, valued at approximately $8, would be converted to one CBA share, valued at approximately $27. He formed the view that there was an opportunity to make a handsome profit if a large number of Colonial shares were bought and split into single shares amongst combinations of unique joint holders of those particular shares. Mr Sykes regarded the profit as being by way of arbitrage if the remainder of the market did not become aware of the opportunity. Mr Sykes was a lecturer residing in London. He had engaged in previous commercial transactions with one Bradley John Maguire, the ninety‑second plaintiff, a computer programmer residing in Western Australia. On about 22 May 2000, Mr Sykes telephoned Mr Maguire and proposed that if his company, Gothic, purchased 120,000 Colonial ordinary shares then a group of companies to be incorporated in New Zealand would purchase the Colonial ordinary shares from Gothic in different combinations so that no two shares would be held in the same interest. Mr Sykes and Mr Maguire decided that there would be three joint transferees or purchasers for each combination of shareholdings. Mr Maguire had some mathematical expertise and experience such that through the application of combination theory he determined that 91 companies would be required to create 119,999 separate combinations of three entities. After the conversation between Mr Sykes and Mr Maguire on about 22 May 2000, in the following days between 23‑26 May 2000, Mr Sykes caused the first to ninety-first plaintiffs to be incorporated in New Zealand ("the New Zealand companies"). Neither Mr Maguire nor Gothic had any interest in the New Zealand companies.
On 26 May 2000, Mr Maguire telephoned Mr Sykes and informed him that he had settled upon a purchase price of $9.50 per share. He told Mr Sykes, also, that there would be a further offer representing a joint interest of one Nathan Hondros, the ninety‑fourth plaintiff, and Mr Maguire for a single share. Mr Sykes resolved to authorise Mr Maguire to make offers and enter into contracts for the sale of the 120,000 Colonial shares held by Gothic. The authority included the completion and lodging of the transfers, the payment of stamp duty and the affixing of the signature by Mr Maguire so as to bind Gothic as if the document were executed by Gothic under seal. The offers to purchase, acceptance and transfer of the relevant shares was initiated by a telephone conversation on 26 May 2000 between Mr Sykes and Mr Maguire. In the conversation Mr Maguire made oral offers on behalf of Gothic to Mr Sykes who on that occasion acted on behalf of a group the New Zealand companies. The verbal offer was confirmed later on 26 May 2000 by an e‑mail transmission attaching offers to the New Zealand companies from Mr Maguire on behalf of Gothic to Mr Sykes on behalf of the New Zealand companies. On 26 May 2000, after the offers had been received from Mr Maguire, directors' resolutions were passed by each of the New Zealand companies noting that the offers to purchase had been received, resolving to accept the offers and resolving that authority be given to Mr Maguire to effect the purchase of the Colonial shares on behalf of the New Zealand companies in accordance with the offers made by Gothic. At this stage Mr Maguire was wearing the hat of Gothic pursuant to an authority given by Mr Sykes. At the same time he had been authorised by the New Zealand companies to effect the purchase of the Colonial shares on their behalf. At this stage, also, Mr Sykes was wearing the hat of the New Zealand companies but at the same time ensuring that those companies authorised Mr Maguire to effect the purchase of the Colonial shares from Gothic. Furthermore, at the same time, Mr Sykes remained the sole director and shareholder of Gothic notwithstanding that he had authorised Mr Maguire to act on its behalf in relation to the transaction with the New Zealand companies.
On 28 May 2000, Mr Maguire, then acting on behalf of Gothic, telephoned Mr Sykes to ascertain whether the offers by Gothic had been accepted by the New Zealand companies. Mr Sykes informed Mr Maguire that the New Zealand companies had approved the transactions and appointed Mr Maguire to act on their behalf. During the day of 28 May 2000 a series of e-mail transmissions were exchanged between Mr Sykes and Mr Maguire confirming their telephone conversation of the same day, forwarding acceptances on behalf of the New Zealand companies of the offer from Gothic and forwarding the resolutions of the New Zealand companies made on 26 May. It transpired that there was an oversight in the e-mail transmission sent in relation to one of the New Zealand companies being an offer relating to the ninety-first plaintiff, Technotronics Pty Ltd. As a result, a supplementary offer was made and accepted by way of e-mail transmissions between 29 and 31 May 2000. As may be apparent, the course of e-mail transmissions included an e-mail transmission from Mr Maguire on behalf of Gothic to himself in his personal capacity. An offer was sent and accepted and an instrument of transfer from Mr Maguire on behalf of Gothic to himself, Mr Sykes and Mr Hondros as joint tenants was effected.
Arising from these transactions a total of 119,999 separate offers to sell one Colonial ordinary share were made by Gothic to the New Zealand companies and accepted by those companies. A single offer was made by Gothic to the joint transferees being Mr Maguire, Mr Hondros and Mr Sykes. In total, therefore, 120,000 separate offers were made by Gothic and accepted by the plaintiffs equivalent to the 120,000 Colonial ordinary shares held by Gothic.
Following a suggestion made to Mr Maguire by a representative of the Victorian State Revenue Office to the effect that 120,000 separate instruments of transfer was unnecessary and that a schedule could be attached to the instruments of transfer, Mr Maguire and Mr Sykes agreed upon the preparation of master transfer documents. Each document contained a schedule recording 1,000 separate transfers thereby reducing the number of transfer documents from 120,000 to 120. Execution of the documents would have required the affixing of 360,000 signatures on behalf of the various transferees on the transfer document. As a result, Mr Maguire was authorised by the New Zealand companies and a power-of-attorney to affix his signature in digital facsimile form upon the 120 transfer documents. The transfer documents were prepared by Mr Maguire who signed on behalf of Gothic as transferor and also on behalf of the New Zealand companies and himself as transferees. On 31 May 2000, Mr Maguire lodged the 120 instruments of transfer for stamping at the Victorian State Revenue Office. In a standard form statement dated 31 May 2000 issued by Colonial it was disclosed that Gothic held 120,000 ordinary shares in Colonial.
Subsequently, on 31 May 2000 the ordinary scheme of arrangement was approved by the meeting of Colonial ordinary shareholders, the schemes of arrangement were approved by the court on 1 June 2000 and on the same day the order of this court approving such schemes was lodged with the Australian Securities and Investments Commission. On 1 June 2000, Mr Maguire lodged the 120 stamped transfers from Gothic to the transferees with Computershare the share registry for Colonial. On 2 June 2000 Colonial ordinary shares were suspended from quotation on the Australian Stock Exchange ("ASX"). After an exchange of correspondence, on 8 June 2000, Colonial informed Gothic that the directors of Colonial declined to register the transfers in reliance on Article 5.6 and ASX Listing Rule 8.10.1(h). Colonial informed Gothic that the board of directors declined to register the transfers " … on the basis that they will create 120,000 new holdings each of one share which, at the time of lodgement, are each less than a marketable parcel".
These events and transactions were not disputed by the defendants. The ambit of the dispute between the plaintiffs and the defendants was the effect of the transactions between the New Zealand companies and Gothic and Messrs Sykes, Maguire and Hondros and Gothic. However, none of Messrs Sykes, Maguire or Hondros in the course of their evidence‑in‑chief[1] disclosed the manner in which the transactions were to be financed. Furthermore, there was no disclosure of the distribution of the interests and benefits between the plaintiffs. These matters ultimately came to light in the course of cross‑examination of Messrs Sykes, Maguire and Hondros.
[1]Filed in the form of witness statements pursuant to Commercial List practice and directions and subsequently adopted by each witness during the trial.
Section 5 of the Articles of Colonial and ASX Listing Rule 8 were important. The provisions set the framework for the transfer of shares. Section 5 of the Articles deals with the transfer of shares, including the procedure to effect registration. Clause 5.3 provides that once the registration procedures are followed Colonial must register the transferee as a shareholder subject to the powers vested in the directors of Colonial by the Articles. Article 5.6 set out the directors' powers to decline to register any transfer of shares. It provided that the directors of Colonial may request the ASX clearing facility to apply a "holding lock" to prevent a transfer of shares or decline to register any transfer of shares if the Listing Rules permitted Colonial to do so. Section 5 of the Articles is set out in Schedule B to these reasons. Rule 8.10.1(h) of the ASX Listing Rules permitted an entity, such as Colonial, to apply to the ASX clearing facility to refuse to register a paper-based transfer where registration would create a new holding which, at the time the transfer is lodged, was less than a marketable parcel. ASX Listing Rule 8.10 is set out in Schedule C to these reasons.
On 5 July 2000 Colonial requested that the ASX de-list Colonial at the close of business on 5 July 2000. The exchange notified Colonial that it would be removed from the official list of the ASX at the close of trading on 6 July 2000 and de-listing occurred on that day.
Against this background the plaintiffs seek relief under s.1094, alternatively, s.175 of the Corporations Law. Section 1094(1) provides that where a company refuses to register a transfer of shares the company may apply to the court for an order for registration under the section. Section 1094(2) empowers the court to order the registration of the transfer of shares where it is satisfied that the refusal or failure was without just cause. Under s.175 of the Corporations Law a person aggrieved may apply to the court to have a register kept by a company corrected. Section 175(2) empowers the court to order the correction of a register and, also, to order compensation for loss or damage suffered.
The Statutory Framework
There is a statutory framework consisting of a number of aspects that applies to share transfers. First of all, companies that are listed for quotation on the ASX are bound by the ASX Business Rules and Listing Rules as a matter of contract. Section 777 of the Corporations Law provides statutory recognition of the application of that contractual principle by providing that where a person is under an obligation to comply with or enforce the ASX Business Rules or Listing Rules and fails to comply the court may order it to do so. The section provides:
"777(1) Where a person who is under an obligation to comply with or enforce the business rules or listing rules of a securities exchange fails to comply with or enforce any of those business rules or listing rules, as the case may be, the Court may, on the application of the Commission, the securities exchange or a person aggrieved by the failure and after giving to the person aggrieved by the failure and the person against whom the order is sought an opportunity of being heard, make an order giving directions concerning compliance with, or enforcement of, those business rules or listing rules to:
(a) that last-mentioned person; and
(b)if that person is a body corporate – the directors of that body corporate.
777(2) For the purposes of subsection (1), a body corporate that is, with its agreement, consent or acquiescence, included in the official list of a securities exchange, or an associate of such a body corporate, shall be deemed to be under an obligation to comply with the listing rules of that securities exchange to the extent to which those rules purport to apply in relation to the body corporate or associate, as the case may be.
777(3) For the purposes of subsection (1), if a disclosing entity that is an undertaking to which interests in a registered scheme relate is, with the responsible entity's agreement, consent or acquiescence, included in the official list of a securities exchange, the responsible entity, or an associate of the responsible entity, is taken to be under an obligation to comply with the listing rules of that securities exchange to the extent to which those rules apply to the responsible entity or associate.
777(4) For the purposes of subsection (1), if a body corporate fails to comply with or enforce provisions of the business rules or listing rules of a securities exchange, a person who holds securities of the body corporate that are quoted on a stock market of the securities exchange is taken to be a person aggrieved by the failure.
777(5) Subsection (4) does not limit the circumstances in which a person may be aggrieved by a failure for the purposes of subsection (1)."
The second aspect of the statutory framework is that ASX listing rule 18.6 provides that on admission to the official list the entity must comply with the listing rules and that the requirement to comply continues to operate even if the quotation is deferred or suspended or subject to a trading halt. The rule provides:
"Obligations in relation to the listing rules
Complying with the listing rules
18.6On admission to the official list, an entity must comply with the listing rules. This applies even if quotation of the entity's securities is deferred, suspended or subject to a trading halt."
The third aspect arises under Chapter 8 of the ASX listing rules. The explanatory note to the listing rules provides that Chapter 8 sets out the requirements that must be met for satisfactory transfer and registration procedures to operate. The requirements need to be read in conjunction with the Securities Clearing House ("SCH") business rules. Hence, the listing rules and the SCH business rules work together to regulate listed entities where the securities of those entities are Clearing House Electronic Subregister System ("CHESS") approved securities.
The fourth aspect is that rule 8.1 of the ASX listing rules provide that an entity must comply with the SCH business rules if any of its securities are CHESS approved securities. Rule 8.1 provides:
"CHESS
Obligations in relation to CHESS
Complying with SCH Business Rules
8.1An entity must comply with the SCH Business Rules if any of its securities are CHESS approved securities."
The fifth aspect of the statutory framework is that ASX listing rule 8.10 provides that an entity must not prevent the registration of a transfer but that it may apply or ask SCH to apply a holding lock to prevent a proper SCH transfer or refuse to enter a paper based transfer in certain circumstances including, if the transfer is paper based, registration would create a new holding which at the time it is lodged is less than a marketable parcel. It is important to note that s.779F of the Corporations Law gives statutory force to the SCH business rules by providing that those rules have effect by force of the section as a contract under seal between SCH and its issuer and SCH and its participant. Hence, there is a statutory recognition and regulation of the consequential contractual obligations. Section 779F(1) provides:
" 779F(1) The SCH business rules have effect, by force of this section, as a contract under seal:
(a) between the SCH and each issuer; and
(b) between the SCH and each SCH participant; and
(c) between each issuer and each SCH participant; and
(d)between an SCH participant and each other SCH participant;
under which each of the persons mentioned in paragraphs (a)-(d) agrees to observe and perform the provisions of the SCH business rules as in force for the time being to the extent, and in the manner, provided by the SCH business rules."
The next matter is that s.1085 of the Corporations Law gives paramountcy to the method of transfer provided by the SCH business rules over and above any other regime where the ASX business rules and the SCH business rules apply. The section provides:
"1085(1) A share or other interest of a member in a company:
(a) is personal property;
(b)is transferable or transmissible as provided by the company's constitution, or, if they are applicable, the SCH business rules; and
(c)subject to the company's constitution (if any) and any replaceable rules that apply to the company, and, if they are applicable, the SCH business rules, is capable of devolution by will or by operation of law."
Hence, in s.1085(1) there is provision that a share or other interest in companies is transferable or transmissible as provided by the constitution of the company or, if applicable, the SCH business rules. Thus, there is paramountcy or at least application with effective paramountcy as a result of s.1085 of the Law so long as the relevant securities remain quoted securities even if that quotation is the subject of suspension. The next matter arises under SCH business rule 5.7.1. It imposes a prohibition on a participant which is a broker initiating a transfer of securities of such transfer would create a holding of less than a marketable parcel.
It is to be observed, also, that the ASX business rules provide mirror provisions to the SCH business rules. Rule 4.15.1 of the ASX business rules provides that those rules impose the same prohibition against the initiation of a transfer that would result in a certified holding of less than a marketable share being a holding of less than $500,000 in value. Rule 4.15.1 is set out in Schedule D to these reasons.
As a consequence, under the SCH business rules there is a prohibition on a broker initiating a CHESS transaction, that is, an electronic transfer which could result in less than a marketable parcel. On the other side, under rule 4.15.1(4) of the ASX business rules there is a prohibition on a broker lodging a paper transfer of less than a marketable parcel. From this point it is appropriate to move to rule 8.10 of the ASX listing rules. It provides that a company may apply for a holding lock which electronically would prevent the CHESS transfer proceeding or, alternatively, if the broker in contravention of rule 4.15(4) of the ASX business rules were to initiate a paper based transfer that would result in less than a marketable parcel the company may refuse to register that paper based transfer under rule 8.10.1(h) of the ASX business rules.
Against this framework I turn to consider the issues in this proceeding.
The Issues
On their face, each of the Gothic transfers involved the transfer of a single share which was less than a marketable parcel of securities. It was the position of Colonial that it was entitled to refuse to register the Gothic transfers under Articles 5.6 or Listing Rule 8.10.1(h). However, the plaintiffs contended that this was not so as there was an inconsistency between Article 5.6 and the provisions of the scheme. The inconsistency it was said must be resolved in favour of the scheme. Mr W.S. Martin QC who appeared with Mr A. Monichino for the plaintiffs submitted that under clause 5.2 of the ordinary scheme a scheme shareholder holding a single Colonial ordinary share was entitled to one CBA share. Furthermore, it was argued that by virtue of the application of clause 6.1(b) of the ordinary scheme dealings in Colonial ordinary shares would only be recognised if registrable transfers in respect of those dealings were received on or before the merger record date.
The plaintiffs put forward six points in support of their claim. They were, as follows:
(1)that upon a proper construction of each of the ordinary scheme, the Articles of Colonial and ASX Listing Rule 8. 10. 1 (h), Clause 6.2 of the ordinary scheme is inconsistent with Article 5.6 and Listing Rule 8.10.1(h);
(2)that as a matter of law, the ordinary scheme overrides Colonial's Articles and the Listing Rules wherever there is any inconsistency;
(3)that as a matter of law, Clause 6.2 of the ordinary scheme by use of the expression "must" removed the discretion conferred upon Colonial pursuant to Article 5.6 and Listing Rule 8.10.1(h) to refuse to register a paper‑based transfer in registrable form;
(4)alternatively, that upon a proper construction of the ordinary scheme and Colonial's Articles, Colonial was required to exercise the discretion contained in Article 5.6 in a manner consistent with Clause 6.2 of the Ordinary Scheme;
(5)alternatively, that upon approval of the ordinary scheme by the Court on 1 June 2000, alternatively as from 2 June 2000 being the due date for application to be made to terminate the official quotation of Colonial ordinary shares on the ASX, the Listing Rules, alternatively Listing Rule 8.10 and the exceptions thereto, ceased to apply to Colonial or to Colonial' shares;
(6)alternatively, if Listing Rule 8. 10 continued to apply to Colonial or to Colonial's shares following 2 June 2000, Colonial failed to comply with or has contravened Listing Rule 8. 10.
In summary, therefore, the plaintiffs asserted inconsistency between the ordinary scheme and the Articles of Colonial and/or the ASX Listing Rule 8.10.1(h) and urged a particular construction of clauses 6.1 and 6.2 of the ordinary scheme.
Mr Martin contended for the plaintiffs that the scheme was intended to be an exclusive code for dealings in the shares of Colonial between the date of approval of the scheme, that is, 1 June 2000 and the merger record and implementation dates. He submitted that the code as such was intended to operate only for a period of five to six days. He submitted, further, that pursuant to clause 6.5 of the scheme all holdings ceased to have effect from the merger record date and thereafter rights converted to an entitlement to CBA shares. Mr Martin urged that the general effect of the scheme was that those shown on the register as at the merger record date ceased to be shareholders in Colonial and automatically became shareholders in CBA.
Mr Martin submitted, also, that clause 7 of the scheme was relevant because it recorded that suspension of trading would occur from a specified date. He urged that clauses 7.1 and 7.2 of the scheme combined so that there was no intention that trading would ever resume in relation to Colonial. Thus, it was argued, trading could occur only under clause 6.1(b) of the scheme, that is, by lodgment of registrable transfers within the relatively short period then available of 5-6 days.
Mr Martin contended on behalf of the plaintiffs, also, that the deed poll was a unilateral contract or an irrevocable offer capable of acceptance by any person. He argued that the deed poll remained in force until the CBA performed all its obligations under the deed poll.
In addition, Mr Martin submitted that the scheme booklet provided in clause 10.9 that any dealing in Colonial ordinary shares or income securities on or before the merger implementation date would be recognised. He emphasised that clause 10.9 provided that any dealing would be recognised first of all if it was by CHESS or, in all other cases, if a registrable transfer was delivered before the merger record date at the place where the register was kept. It was contended that the scheme effectively declares as much to the shareholders. Mr Martin emphasised that there is no reference anywhere in the scheme booklet that there is a discretion on the part of Colonial to refuse to register shares that are otherwise registrable.
But at the heart of the case of the plaintiffs lay the construction of the expression "must" in clause 6.2(b) of the scheme.
Much emphasis was placed by Mr Martin upon the words in clause 6.2 of the ordinary scheme, in particular the use of the word "must". The clause provided that Colonial " … must register registrable … transfers of the kind referred to in clause 6.1(b) by the Merger Record Date". As a consequence, it was submitted that the use of the word "must" in clause 6.2 imposed a mandatory obligation upon Colonial that is inconsistent with the discretion to refuse to register marketable parcels conferred by Article 5.6 and Listing Rule 8.10.1(h). It was submitted that such inconsistency should be resolved in favour of the provisions of the ordinary scheme and that, as a consequence, Colonial was obliged to register the Gothic transfers.
The expression "must" has been attributed a mandatory meaning on occasion by the courts: see Posner v Collector for Inter-State Destitute Persons (Victoria) (1947) 74 CLR 461, 490; Kosovich v Mancini (1982) 31 SASR 272, 275-276. By contrast, in Halwood Corporation Limited v Roads Corporation (1998) 2 VR 439 Tadgell JA with whom Brooking and Ormiston JJA agreed considered the use of the expressions "must" and "must not" in a planning statute. In the course of his reasons the learned judge observed (at 445-446) that " … The use of 'must' as a modal auxiliary may often appropriately express an obligation, … In truth, 'must' is a ticklish auxiliary: though useful in its proper place it deserves careful handling." The learned judge continued (at 446) citing with approval earlier authority of a single judge of this court:
"In Brygel v Stewart-Thornton [1992] 2 VR 387, at 397-9, J.D. Phillips J declined to treat 'must' in s.56(2) of the Magistrates' Court Act 1989 as imposing an imperative or mandatory obligation, where the context indicated that mere non-performance of an obligation that it sought to impose was not intended by the Parliament to render an order for committal null and void. The decision illustrates the limited measure of utility, if not the futility, of an attempt by bureaucratic edict to fix an ordinary English word with an unalterable function."
In Brygel v Stewart-Thornton, supra, J.D. Phillips J expressed the view (at 397-398) that it was appropriate to turn and consider the intention of Parliament in construing the use of the words "must" in the relevant statute. It seems to me that I should adopt a similar approach in the present circumstances and consider the true intention of the propounders of the scheme when drawing clause 6, in particular clause 6.1(b).
The argument contended for the plaintiffs calls for a consideration of the meaning of "must" in clause 6.2 of the Scheme. To begin with, the argument reads too much into the use of the expression "must" in Clause 6.2. There is no inconsistency between Clause 6.2 and Colonial's Articles or the Listing Rules. Clause 6.2 is directed to the point in time up to which registrable dealings must be recognised. This is apparent if attention is paid to the context in which Clause 6.2 appears. The purpose of the preceding provision, Clause 6.1, is to establish a cut‑off date beyond which registrable dealings in Colonial ordinary shares will not be recognised. In the case of registrable dealings using CHESS the transferee must be registered in the Register as the holder of Colonial ordinary shares by the merger record date. In other cases the registrable transmission application or transfer must be received at the place where the Register is kept on or before the merger record date. For emphasis Clause 6.3 expressly prohibits Colonial from accepting for registration or recognising for any purpose any transmission application or transfer of Colonial ordinary shares received after the merger record date.
These provisions assume particular significance in the context of the definition of scheme shareholder:
"'Scheme Shareholder' means each person who is registered in the Register as the holder of Scheme Shares as at the Merger Record Date."
To a like effect Clause 3.1 of the Deed Poll states:
"3.1 Offer to Acquire Colonial Ordinary Shares
Subject to clause 2, Commonwealth Bank offers to acquire all Colonial Ordinary Shares on issue as at the Merger Record Date, in accordance with the provisions of the Ordinary Scheme. "
It follows from these provisions that eligibility for participation in the benefits conferred by the ordinary scheme requires more than that the relevant transmission application or transfer be received at the place where Colonial's register is kept by the merger record date. Registration must in fact have occurred. Without more a person who lodged a transmission application or transfer on, say, the merger record date would not qualify as a scheme shareholder if, through oversight or delay, Colonial failed to register the transmission application or transfer on that day. Furthermore, clause 6.2 was included in the ordinary scheme in order to avoid unfortunate consequences of this kind for persons dealing in Colonial ordinary shares shortly prior to the merger record date. So long as the conditions prescribed by Clause 6.1 are satisfied, Colonial was required to register the relevant transmission applications or transfers by, that is, no later than, the merger record date.
Leaving aside clause 6.2 the registration of such instruments would occur in the ordinary way pursuant to the Articles of Colonial. Clause 6.2 performs the additional work of directing Colonial to do that which would ordinarily occur in any event by a nominated date. There is no need to read into the language of the clause a further intention to override the usual provisions of the Articles or the Listing Rules in respect of the registrability of the transfer or transmission of shares.
In this regard the provisions of the Articles of Colonial are of importance. Article 5.3 deals with registration procedures. At the same time Article 5.6 overlaps with Clause 6.2 of the ordinary scheme insofar as both provisions compel Colonial to register registrable transfers. However, an element missing from Article 5.3 is any requirement that the act of registration be achieved within a particular period of time. This lacuna, vital to the effective operation of the ordinary scheme but much less relevant in the day to day operations of Colonial's share register, is addressed by clause 6.2 of the ordinary scheme. Such construction of clause 6.2 finds a parallel in the drafting of Article 5.5 of Colonial's Articles. The article states:
"5.5 The Company must register all registrable transfer forms, split certificates, renunciations and transfers, issue certificates and transmission receipts and mark or note transfer forms without charge except where the issue of a certificate is to replace a lost or destroyed certificate."
The article adopts the same operative language as Clause 6.2 viz " ... must register all registrable transfer forms". As in Clause 6.2, the article does not raise any inconsistency with the criterion of registrability imposed or implied by Article 5.6. Rather, it is directed to the different object of ensuring that Colonial registers all registrable transfer forms, split certificates, and the like without charge except in certain circumstances.
Similarly, the construction advanced by the plaintiffs derives no assistance from the provisions of Clause 5.2. The clause should be construed as merely an adjunct to Clause 5. 1 because it deals with the fractions which are likely to arise in relation to a seven for twenty offer. Among other things, the clause provides that a fractional entitlement less than 0.5 is rounded down to the nearest whole number of CBA shares. Leaving aside Clause 5.2, the application of clause 5.1 would mean that a Colonial ordinary shareholder holding one ordinary share would not receive any CBA shares pursuant to the ordinary scheme. In my view, a scheme which had this effect would be commercially unfair and in all likelihood would not have been accepted by shareholders or, moreso, approved by the Court. Clause 5.2 was introduced therefore to ameliorate the harsh consequences which might otherwise follow from the terms of the preceding clause and so as to present a fair and equitable solution approach to the question of fractional entitlements. In this context it is relevant to observe that in the course of trading a number of single shareholdings built up on the Register for Colonial in the period prior to the approval of the schemes.
Furthermore, the construction advanced by the plaintiffs would mean that the ordinary scheme had effected an amendment to the Articles of Colonial by mere implication. However, a scheme of arrangement will not be approved where there is a specific procedure in the Corporations Law for bringing about the desired change: see Australian Securities Commission v Marlborough Gold Mines Ltd (1993) 177 CLR 485 at 501‑502; Re Theatre Freeholds Ltd (1996) 132 FLR 235 at 243; Re Glendale Land Development Ltd (In Liq) [1992] NSWLR 563. As provision is made in s. 136(2) of the Corporations Law for a company to modify or repeal its constitution by special resolution, any amendment to the Articles of Colonial ought to have followed this procedure. In fact, no such special resolution was proposed or passed at the meetings to consider the schemes. Accordingly, it is my view that the court ought to favour a construction of the ordinary scheme which assumes that no amendments to the Articles of Colonial were intended.
It may be added that it is of the essence of a scheme of arrangement that its terms should be clear and its effect fully explained to shareholders in the explanatory statement: see Re Dorman Long & Co [1934] Ch 635 at 665‑6; Re Metropolitan Fuel Pty Ltd [1962] VR 675; Re National Bank Ltd [1966] 1 All ER 1006; Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 at 466. There is no mention in the explanatory statement for the schemes under consideration that clause 6 of the ordinary scheme was intended to deny to directors of Colonial the usual discretion to refuse to register transfers pursuant to Article 5.6.
In addition, if Clause 6.2 of the ordinary scheme had removed the discretion conferred upon the directors of Colonial pursuant to Article 5.6, it would also have removed the same discretion independently conferred upon Colonial by Listing Rule 8.10. 1 (h). Yet, it becomes apparent that Colonial had not been removed from the official list when the scheme was approved by the Court on 1 June 2000. By virtue of Listing Rule 18.6 and s.777(2) of the Corporations Law Colonial was bound therefore to comply with the Listing Rules at all material times. In my view, it follows that a court ought to avoid a construction of a scheme which has the incidental effect of altering the application of the Listing Rules.
Mr Martin submitted for the plaintiffs that the provisions of clause 6 of the Articles constituted a code that eschewed the CHESS or SCH regime or the ASX business rules. However, paragraph 6.1(a) of the scheme clearly contemplated and expressly provided that if securities were to be transferred by CHESS they were to be registered in accordance with that regime. Furthermore, the observation is prompted that it is not at all apparent that the propounders of the scheme assumed that there would be no application of the ASX business rules to the shares that were the subject of the scheme. On the contrary, in my view it was contemplated that if a transfer was to be lodged through CHESS it had to comply with CHESS in order to count for the purposes of the merger record date. Whilst clause 6.4 of the scheme imposed upon the company an obligation to maintain the register in accordance with specified provisions up until the merger record date those provisions included rather than excluded the provisions of paragraph 6.1(a) of the scheme. Hence, in my view paragraph 6.1(a) imposed upon the company an obligation to maintain CHESS transferred securities registrations in accordance with CHESS up until the merger record date.
Obviously, if the transfers that are the subject of the present proceeding had been lodged by CHESS the plaintiffs would not allege that there had been failure on the part of Colonial to comply with the obligations of paragraph 6.4 in failing to recognise an attempted transfer through CHESS that did not proceed. For example, the plaintiffs would be unable to seek relief from the court if a holding lock had been sought.
The analysis prompts the question: does paragraph 6.1(b) of the scheme provide for registration regardless of the ASX business rules and the SCH business rules so long as the company is listed or is it providing consistently with paragraph 6.1(a) on the basis that the ASX listing rules and business rules and the SCH business rules will continue to apply? In my view it is apparent that there is an underlying assumption in paragraph 6.1(b) of the scheme that so long as the ASX business rules and listing rules and the SCH business rules apply they must be complied with. In any event, otherwise could not be assumed so long as the company remained listed because it was bound as a matter of contract by the ASX rules and as a matter of statute by virtue of ss.777 and 1085 of the Corporations Law to keep its register only in accordance with those rules.
Furthermore, Article 5.6 of the Articles of Association is an article intended for a company with listed securities because it provides consistently with ASX listing rule 8.10. It does so by providing that the directors may request a holding lock for a CHESS transfer or disapprove a paper transfer if it would result in less than a marketable holding. In my view it is incorrect to say that the scheme excluded the ASX business rules and the SCH business rules. On the contrary, in my view, the scheme expressly incorporated the rules at least so long as the securities of the company remained registered. This is apparent from clause 6 of the scheme.
It was submitted by Mr Martin that the terms of the scheme disclosed that the propounders contemplated that the securities would cease to be listed at some time before the merger record date. Whilst that assertion is correct it was further provided that the company would apply for termination of its quotation after the effective date so that at some time before the merger record date there was at least a possibility that the shares or the quotation of the shares would have been terminated. Furthermore, in clause 7 of the scheme an expectation is apparent that there would be suspension and an application for termination. Nevertheless, the suspension achieved nothing because it did not render the listing rule inapplicable. On the contrary, rule 8.16 of the ASX listing rules provided that the rules would continue to apply notwithstanding suspension. It was submitted by Mr Martin that, on the other hand, the possibility of termination made a difference because there may have come a point if the company had moved with sufficient alacrity under clause 7.2 of the scheme at which termination operated and at which point the ASX listing rules would cease to apply. However, the shares remained listed for quotation albeit suspended at all relevant times up until July 2001. Further, the time which is important for determining whether a transfer qualifies for registration is the time of lodgment of the transfer. Rule 8.10.1(h) of the ASX listing rules and the other provisions of those rules provide for prohibitions against transfers which at the time of lodgment would result in less than a marketable security.
As I observed already, the transfer regime contemplates an assessment as to whether a transfer qualifies for recognition under CHESS or under the paper based transfer system provided for in the business rules at the time of lodgment and not at any other time. As a consequence, therefore, if and for so long as the business rules applied and transfers were lodged the question of whether they were to be registered or refused for creation of less than a marketable parcel was to be judged by reference to the position under the rules as they stood at the time of lodgment. This view is borne out by the statutory regime that applies by virtue of ss.777 and 1085 of the Corporations Law. It is to be recalled that those sections are tantamount to an express direction that the rules are to have effect as a binding contract which a court will enforce on proper application so long as they are applicable.
In essence, the submissions by the plaintiffs in this respect were to the effect that clause 6.4 of the scheme imposed an absolute obligation that was not qualified by clause 8.10 of the Listing Rules or by the Articles (which allow the refusal of registration of a transfer resulting in less than a marketable parcel). In effect, it was said that because clause 6.4 has that exclusive operation it is necessarily inconsistent with the Articles, in particular Article 5.6 and thus the scheme overrides the Articles.
In an appropriate case it may be that a scheme is so inconsistent with the articles of association of a corporation that it is to be construed as overriding those articles. Such cases would arise, for example, where express provision is made in a scheme for the means by which proxies are to be lodged or the means by which resolutions are to be passed that may differ from those contained in articles of association of the subject company. In such cases it is readily envisaged that where the court has approved a scheme and thereby an express mechanism that is inconsistent with the mechanism contained in the articles, the court in effect has overridden the articles. However, unless the overriding is abundantly clear and where no necessary inconsistency as between the terms of the scheme and the article arises, then, the articles are intended to continue to operate. In the present case clause 6.1 of the scheme expressly contemplated the continued operation of CHESS requirements and thus by necessary implication contemplated the continued operation of Article 5.6 of the articles.
The submissions on behalf of the plaintiffs with respect to inconsistency are tantamount to an assertion that, upon a proper construction, clause 6.4 of the scheme must be taken to provide an exclusive code that eschews other operative provisions contained within the SCH business rules, the ASX business rules and listing rules. There are particular factors that militate against such assertion. First, the contemplation by the scheme that the business rules and listing rules will continue to apply. Second, the fact that there is no reason why the company would wish or intend that the business and listing rules would cease to apply. Third, the fact that the Corporations Law recognises that the business and listing rules operate as a binding contract. Fourth, on a proper construction clause 6.4 of the Articles provides for no more than that the company is to diligently maintain the register in accordance with the applicable ASX rules and the Articles.
In support of the proposition that a scheme of arrangement will override the articles of a company where there is an inconsistency, the plaintiffs relied upon the judgment of McLelland J in Re Glendale Land Development Limited (in liq) (1982) 2 NSWLR 563. There His Honour was concerned with an application by a company for an order that meetings of its creditors and its members be convened in relation to a proposed scheme of arrangement. An issue arose as to whether the proposed scheme would provide for a mode of altering the Articles of the company. McLelland J held it could not and (at 568) said:
"Alteration of articles of association:
The proposed scheme, as originally propounded, purported to empower the scheme administrators by resolution in writing to effect changes to the memorandum and articles of association of the company for certain specified purposes. In view of the provisions of s.72(1) of the code the plaintiff does not now seek to include any mode of altering the memorandum in this provision, but does seek to maintain it in respect of altering the articles of association. I accept that s.315 embraces arrangements which may over-ride or be inconsistent with the articles of association of the company (see eg Melbourne Permanent Building Society v Burston (1895) 21 VLR 531; Re Palace Hotel Ltd [1912] 2 Ch 438; Re Schweppes Ltd [1914] 1 Ch 322; Re J A Nordberg Ltd [1915] 2 Ch 439; Re Odhams Press Ltd [1925] WN 10; Re A W Allen Ltd [1930] VLR 251 and Srimati Premila Devi v Peoples Bank of Northern India Ltd (In Liq) [1938] 4 All ER 337), but no such arrangements could effectively make provision for a mode of alteration of the articles of association which is inconsistent with the code.
I incline to the view that s.76(1) of the code should, on its true construction, be understood as impliedly prohibiting any other mode of alteration of the articles of association than by special resolution, with the attendant requirements of lodgment with the commission pursuant to s.251 and consequential public record. But even if this were wrong it would be highly undesirable for the court to contemplate approving some other, informal, mode of alteration of the articles of association without the most compelling reasons, and no such reasons have been shown to exist in this case."
Hence, it seems that Glendale is authority for two principles. First, that there can be arrangements contemplated by a scheme that are inconsistent with the articles of a company. Second, it is undesirable that there should exist a means of altering articles other than by the means proscribed by the Corporations statute. Even if I was satisfied that the terms of clause 6.5 of the scheme were inconsistent with the Articles the statement of principles in Glendale do not assist the plaintiffs.
It was submitted on behalf of the plaintiff that even if there is power within the Articles that enable the directors to refuse registration, nevertheless, the grounds for refusal may be reviewed by the court and, if appropriate, the decision of the court as to the proper exercise of power may be supplanted for that of the directors. In this respect the plaintiffs relied upon s.1094 of the Corporations Law. The section provides that where the directors refuse to register then those affected may apply to the court for an order and the court may make such order as it thinks just and reasonable.
The general law position was stated by Gibbs J (with whom Stephen, Mason, Aickin and Wilson JJ agreed) in Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337, 347. There Gibbs J held that directors must exercise their discretion bona fides in the best interests of the company and save for that obligation the discretion is absolute and uncontrolled. His Honour held, further, that the onus of proving that directors did not act in good faith in refusing registration lies on those who challenge the decision. In that case Gibbs J observed (at 355) that the articles of the subject company were in a common form and that there was no evidence of adoption as a sham for ulterior purpose.
In Roberts v Coussens and Anor (1991) 25 NSWLR 171 Rolfe J considered the history and legislative intent underlying s.1094 of the Corporations Law. His Honour was of the view that the section should be considered against a background of the general law (including as held in Ascot Investments) and observed (at 187-8):
"The section must be construed against the background of the general law, which gave directors the powers, if the appropriate article existed, to refuse registration or consent or approval to registration without assigning a reason. In my opinion the intendment of the section is to give effect to the prima facie right of the owner of the share to transfer that share and, if the court is of the opinion that the refusal 'was without just cause' to make the appropriate order. If this be correct, then I do not consider that the legislative intent was to circumscribe the power of the court in determining whether there was 'just cause' by reference to the prima facie unexaminable reasons of the directors for so refusing. If the legislature had intended to leave the general law provisions in place, it is difficult to see any reason why it was necessary to enact s.186 and s.1094. Once it is established, as is undoubtedly the position in the present case, that there has been a relevant refusal, the question to determine is whether that was 'without just cause'. That is a matter of which the court must be satisfied and, it would seem, that the onus probably rests upon the applicant for registration to show an absence of 'just cause'. However, this may well be one of those cases where, on a proper construction of the legislation the onus is discharged, at least prima facie, by showing that viewed objectively there is no such cause. Whilst the onus may then remain with the applicant to show just cause, having established a prima facie case, the onus would shift to the directors to displace it.
On the other hand, it may be that the words 'without just cause' place an onus upon the person asserting the existence of just cause, that is, if there is no presumption that the directors have acted bona fide in the exercise of their powers, which would be part of the common law swept aside by s.1094, then they could bear the onus of showing that the refusal was with just cause."
Ultimately, the circumstances in Roberts v Coussens are different from those before this court. There, Rolfe J was concerned with the issue of whether to override an exercise of discretion by directors to refuse registration of shares in a private company where the directors were empowered to refuse registration without cause or without stating a cause. Of course, under the common law and, indeed, the articles of many private companies, directors are allowed to refuse registration without reason. In the present case Colonial was a public company subject to the ASX Listing Rules, the ASX Business Rules and the SCH Business Rules. As a consequence, the right to refuse registration was circumscribed by the framework of those rules. The directors of Colonial could only refuse to register under the rules. The question faced by Rolfe J in Roberts was whether the court should go behind the refusal without cause and determine if there was just cause. In contrast, in this matter the question is whether a refusal to register that is expressly provided for in the rules and that has statutory recognition can be regarded as being just cause within the meaning of s.1094 of the Corporations Law. In this context, therefore, I am satisfied that upon the refusal by the directors of Colonial complying with all the rules and, necessarily, the Articles, the refusal was for just cause.
In the undisputed evidence of the plaintiffs, especially that of Mr Sykes and Mr Maguire, there was no attempt to obscure or hide the artificiality of the transactions between the plaintiffs. Indeed, Mr Sykes in his evidence‑in‑chief acknowledged that the whole arrangement presented an opportunity for arbitrage. In so far as it is necessary for me to do so I find that the transactions were wholly artificial in nature. I find, also, that they were entirely opportunistic in purpose. In addition, I find that it is inconceivable that the propounders of the scheme would have contemplated that parties such as the plaintiffs would have been presented with the opportunity they purported to take up through the artificial vehicle of their transfers. In considering the arguments contended for the plaintiffs it is appropriate, also, to consider the exercise of the discretion where an artificial arrangement has been entered into or where an aura of artificiality surrounds the relevant arrangement.
In Peninsula Gold Pty Ltd and Ors v Sunbeam Victa Holdings Limited (1996) 20 ACSR 553, Bryson J was concerned with circumstances where the plaintiffs, who were shareholders in a company the subject of a Part A statement, executed multiple transfers of parcels of their shares. The directors of the company applied to the ASX for a dispensation from the Listing Rules to permit them to refuse registration on the grounds of the split holdings. The ASX refused. The transfers were registered after the commencement of the proceedings. The issue in dispute before Bryson J was whether the registration of the transfers should be backdated and, if needs be, the register be rectified. In the circumstances it was submitted that because the directors had taken time to apply for waiver and had not registered the transfer until it became clear that the waiver would not be given by the ASX there was just cause to order the backdating of the transfers under s.1094 of the Corporations Law. The proceeding was dismissed. Bryson J held (at 559):
"In my opinion the same Listing Rules which require registration within five days and notification of grounds of refusal also confer an opportunity to seek waiver which it was altogether legitimate of Sunbeam to exercise, subject always to the obligation to comply if waiver should not be granted. Sunbeam exercised, fully, its right to seek waiver, and then proceeded forthwith to comply when waiver was not available. Sunbeam was confronted with very strange behaviour by Peninsula and its numerous combinations of transferees and, while to many minds it would seem that it was not useful to resist this behaviour, it was fully within the range of reasonable consideration to decide to seek a waiver from acting on it. If some practical advantage which the court ought to protect flows to the plaintiffs from the course which they have taken it has not been revealed. If some practical disadvantage has been imposed on the plaintiffs by the delay in registration that too has not been revealed. The relief sought is discretionary, yet I am asked to grant it without being told any substantial reason why the grant of it would improve the positions of the plaintiffs. Any real grievances of the plaintiffs disappeared in substance with the decision of the Stock Exchange National Listing Committee, which appears to have taken place on or about the day on which the summons was issued, and with registration of the transfers on the following day. From that time there was no practical advantage to be gained from the continuation of the proceedings."
(a)The entity has a lien on the securities under rule 6.13.
(b)The entity is served with a court order that restricts the holder's capacity to transfer the securities.
(c)Registration of the transfer may break an Australian law, and ASX has agreed in writing to the application of a holding lock or that the entity may refuse to register a transfer. The application of the holding lock must not breach an SCH Business Rule.
(d)Introduced 1/7/96. Deleted 1/9/99.
(e)If the transfer is paper-based, the entity is allowed to refuse to register it under rules 8.4 or 8.12.
(f)If the transfer is paper-based, a law related to stamp duty prohibits the entity from registering it.
(g)The transfer does not comply with the terms of an employee incentive scheme.
(h)If the transfer is paper-based, registration of the transfer will create a new holding which at the time the transfer is lodged is less than a marketable parcel.
8.10.2If the entity refuses to register a paper-based transfer under this rule, it must tell the lodging party in writing of the refusal and the reason for it. The entity must do so within 5 business days after the date on which the transfer was lodged
8.10.3If the entity applies, or asks SCH to apply, a holding lock under this rule, the entity must tell the holder of the securities in writing of the holding lock and the reason for it. It must do so within 5 business days after the date on which it asked for the holding lock.
SCHEDULE D
ASX Business Rule 4.15
4.15 DOCUMENTS – REGISTRATION
4.15.1 TRANSFERS – RENUNCIATIONS
(1) For the purposes of this Rule:
'transfers' or 'renunciations' are in relation to non CHESS Approved Securities and shall include 'split transfers' and 'split renunciations'.
(2)Except where transfers or renunciations require the transferee's signature:
(i)The buying Broker shall forward Security or Brokers Transfers to the issuer for registration within three Business Days of receipt of documents from the selling Broker, PROVIDED THAT when the books of an Issuer close for any purpose all transfers in its possession must be lodged with the Issuer before the registers close, unless the transfers are in respect of a transaction settled on an 'ex entitlement' basis.
(ii)When the buying Broker is not able to complete the transfers with the buyer's full name and address pursuant to Rule 4.15.1(2)(i), it shall nominee the Securities.
(iii)(a) Except where a Broker purchases Securities pursuant to Rule 4.15.1(2)(iii)(d), it shall obtain the buyer's details from its principal to enable it to comply with Rule 4.15.1(2)(i) and shall not forward transfers or renunciations to any person who is not an Affiliate or Participating Organisation unless:
(A)authorised to do so by the Exchange and subject to the conditions laid down by the Exchange; or
(B)the person is the Settlement Agent appointed by the Participating Broker;
(b)Pursuant to the provisions of Rule 4.15(2)(iii)(a) the Exchange has authorised the release of transfers or renunciations to a party which is any one of the following:
(i)an ADI;
(ii)a member of the Trustee Companies Association;
(iii)a person acting in a fiduciary capacity who requests transfers or renunciations to be delivered to him;
and the party has entered into a Transfer Lodgement Performance Agreement with the Exchange in the form prescribed in Appendix 6.2 provided that the buying Broker:
(aa)completes part 2 of such transfers or renunciations with respect to the transferee's details; and
(bb)attaches the advice of lodgement for registration required by Rule 4.15.2;
(c)Deleted.
(d)When a Broker purchases Securities for or on behalf of a member of The London Stock Exchange for settlement through the TALISMAN system, the Broker may forward the Transfer(s) and/or Renunciation(s) to the local office/agency of The London Stock Exchange, without completion of the buyer's details.
(3)Deleted.
(4)Unless permitted by an Issuer's constitution, a Broker shall not in respect of a purchase of Securities, lodge a transfer of Securities which, if registered, would result in a buying client holding less than a Marketable Parcel of those Securities.
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