Chapmans Ltd v Australian Stock Exchange Ltd
[1995] FCA 471
•27 JUNE 1995
CATCHWORDS
CORPORATIONS - Stock Exchange - Coporation's securities quoted on Stock Exchange - decision to suspend quotation of securities - whether applicant provided with reasonable opportunity to be heard in relation to foreshadowed decision to suspend quotation - whether power to suspend or remove from the list subject to implication - whether applicant was entitled to a proper opportunity to be heard in relation to any decision to suspend - whether duty to give reasons - whether the rules of natural justice import an obligation to
act in a way which is "merely" reasonable
Fitzgerald v Masters (1956) 95 CLR 420
Forbes v New South Wales Trotting Club Limited (1979) 143 CLR 242
Public Service Board of New South Wales v Osmond (1986) 159 CLR 656
R v Civil Service Appeal Board ex parte Cunningham (1991) 4 All ER 310
R v The Secretary of State for the Home Department ex parte Doody (1994) 1 AC 531
R v Lambeth London Borough Council ex parte Walters The Times Law Reports, 6 October 1993, 483
Meehan v Jones (1982) 149 CLR 571
Brolga Minerals Ltd v Stock Exchange of Perth Ltd (1973) ASLR 85,164
Designbuild Australia Pty Limited v Endeavour Resources Limited (1980) 5 ACLR 610
Amman Aviation Pty Limited v The Commonwealth of Australia (1990) 22 FCR 527
The Commonwealth fo Australia v Amman Aviation Pty Limited (1991) 174 CLR 64
Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91
CHAPMANS LIMITED v AUSTRALIAN STOCK EXCHANGE LIMITED
No. NG 20 of 1994
BEAUMONT J
SYDNEY
27 JUNE 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 20 of 1994
)
GENERAL DIVISION )
BETWEEN:CHAPMANS LIMITED
Applicant
ANDAUSTRALIAN STOCK EXCHANGE LIMITED
Respondent
CORAM: Beaumont J.
DATE: 27 June 1995
MINUTES OF ORDER
THE COURT ORDERS that the reserved questions be answered as follows:
1)
Q."What were the terms of the contract between the parties?"
A."The terms of the contract between the parties do not include an implied term or condition in the terms pleaded in paragraph 9 of the further amended statement of claim."
2)
Q."Was the applicant provided with a reasonable opportunity to be heard in relation to the decision to suspend the quotation of the securities?"
A."Yes."
3)
Q."Whether, in deciding to suspend or remove, the respondent was bound to act in a way which is "merely" reasonable?"
A."No, but the respondent was bound to act fairly."
Note: Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 20 of 1994
)
GENERAL DIVISION )
BETWEEN:CHAPMANS LIMITED
Applicant
ANDAUSTRALIAN STOCK EXCHANGE LIMITED
Respondent
CORAM: Beaumont J.
DATE: 27 June 1995
REASONS FOR JUDGMENT (No. 3)
The second separate question now to be dealt with is concerned with the terms of the contract between the parties. There are two terms of an implied character alleged in the statement of claim which are in contention. It will be convenient to deal with them separately.
Paragraph 9 of the further amended statement of claim is as follows:
"9. Further, and in the alternative, it was or became an implied term or condition of the agreement referred to in paragraph 4. hereof or, alternatively, such a term or condition became part of the agreement by operation of law, that the respondent would suspend the Applicant's securities from official quotation and/or remove the Applicant from the Official List only if the Applicant failed to comply or sufficiently comply with the Listing Rules.
PARTICULARS
The terms or condition arose from the nature and powers and functions of the Respondent and the statutory framework (as described above) within
which the Respondent's powers and functions are and were at all material times performed. Further the purpose of the functions and powers of the Respondent in the said statutory framework and context generally was to ensure a market for securities regulated in accordance with its Listing Rules."
It follows from my findings on 26 June 1995 on the first separate question, that there are a number of express terms in the contract documents which deal with the respondent's power to suspend securities from quotation and with its power to remove a corporation from the Official List as follows. (It will be convenient to refer to these express provisions before considering whether there were also implied terms of the kind alleged by the applicant.)
In the application signed on 15 April 1950 the company agreed that it "shall remain on the Official List subject to the pleasure of the Committee of the Stock Exchange".
Further, in the document dated 18 April 1950, in consideration of the Official Listing, the applicant agreed with the Committee of the Exchange that the applicant would remain on the List "subject to the pleasure of the Committee" and agreed "as follows". There were set out a number of obligations, on the part of the applicant, including that provided for in para 24, to the effect that the applicant would comply within a reasonable time with such further
requirements as may be promulgated by the Exchange as general Requirements.
In 1980, 1981 and 1982 the applicant executed several forms of application for the Official Quotation of additional securities. In those applications, the applicant agreed that, in respect of those securities and all other securities then quoted, retention of the applicant on the Official List and retention of Official Quotation for those securities -
"... will be at the absolute discretion (without qualification whatsoever) of the aforesaid Exchanges and that in particular (but without restricting the generality of the foregoing) removal from those Official Lists or withdrawal of Official Quotation may, at the absolute discretion of the Exchanges, take place if the company becomes unable or unwilling or in any respect fails to comply with the Listing Requirements of the Australian Associated Stock Exchanges for the time being in force, or if the Exchanges, in their absolute discretion think fit."
In the Forward to the Listing Rules it was stated that the rules "impose strict requirements on companies which, if not complied with, render them liable to removal from the Official List and the securities to lose Official Quotation".
It was there further stated that the exchange had an "absolute discretion in administering the Listing Rules and in so doing looked to the companies to comply with the spirit as well as the letter of those Listing Rules.".
On behalf of the applicant reference is made to two provisions in the Listing Rules which deal with the power to suspend from "or remove from the list." Section 3J [General] para 15 is in the following terms:
"15.When a company's securities have been suspended from trading and the Exchange has made requisitions upon the company and the requisitions have not been answered satisfactorily, the Exchange may advise the company that if the requisitions are not met to the satisfaction of the Exchange within a further period of 3 months, the company may be removed from the Official List."
Reference has also been made by the applicant in argument to para 8(c)(i). It dealt with "procedures" and makes the following provision where a company fails to pay the annual fee:
"(8)(c)(i) Where a company fails to pay the Annual Fee required by Listing Rule 4C by 31st July each year, the following procedure shall apply -
On or before the 10th Reminder letter to business day after deadline company.
Prior to commencement of Securities of company
trading on 16th business suspended from
day after deadline Official Quotation.
Last Friday in August Final date for receipt
of cleared funds in
payment or Company
removed from the
Official List for non-payment of Annual Listing Fees."
In my opinion, the express powers given to the Exchange to deal with either suspension or removal were
intended to be cumulative. It follows that they would not be the subject of any implication which would limit their operation in the way suggested in the implied term alleged in para 9 of the further amended statement of claim. In particular, I am of the view that the express reservation by the respondent of the power to suspend or remove in its absolute discretion should not be read down in the way suggested. This is clear, I think, not only as a matter of language, but for good reasons of policy; those reasons being the obvious need for the respondent to have the capacity to act in the public interest on an emergency basis, to take one example, where no failure to comply with the Listing Rules is suggested. Other possible contexts for the exercise of the absolute discretionary power could be suggested but, unless that emergency power can be in some way read out of the contract documentation, there is simply no scope or room for the implied term suggested on behalf of the applicant.
It is true that, in an appropriate case, a court may read down, or read out, a provision which on its face is inconsistent with the spirit and intent of the other provisions of a contract. As Dixon CJ and Fullagher J pointed out in Fitzgerald v Masters (1956) 95 CLR 420, at [426-7]:
"Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency".
But, in my view, there is no such absurdity or inconsistency in the present context.
For those reasons, I hold that the terms of the contract between the parties do not include an implied term or condition in the terms pleaded in para 9 of the further amended statement of claim.
I turn next to the breach alleged in para 17(a)(i) of the further amended statement of claim which, relevantly, picks up the implied terms and conditions of the agreement alleged in para 10 of the further amended statement of claim. Paragraph 17(a)(i) of the statement of claim as amended during the course of the hearing is in the following terms:
"17.Further and alternatively, the said decisions were made in breach of the terms and conditions of the agreement referred to in paragraph 4. hereof.
PARTICULARS
The Respondent acted unfairly in that it failed:
(a) to give the Applicant a proper opportunity to be heard in relation to any decision to suspend the Applicant's securities or remove the Applicant from the Official List in that, inter alia, it failed to:
(i) give the Applicant notice of its intention to decide to suspend the Applicant's securities or to remove the applicant from the Official List".
I have heard argument on one aspect of the breach alleged and that is whether the applicant was given a proper opportunity to be heard in relation to the decision to suspend the applicant's securities.
In this context the material facts are not in dispute as they consist of an exchange of correspondence between the parties.
That correspondence commenced with a facsimile letter written by the respondent dated 8 July 1992, annexed to these reasons. As will be seen, the letter made inquiries of the applicant in respect of material published in the applicant's Annual Report. It is fair to say, as was submitted on behalf of the applicant, that the inquiries were quite complex. It will be noted that, in the first instance, the letter called for a response by 17 July 1992. The letter also, in its penultimate paragraphs, raised some other matters under Listing Rule 3J(9) and, in that connection, required notice to be given to shareholders within 15 business days.
The applicant responded to this letter by a facsimile letter dated 10 July 1992, also annexed. It will be seen that, in the light of the circumstance that two executive directors were then overseas, an extension of time was sought.
By facsimile letter dated 22 July 1992, also annexed, the respondent granted an extension of time until 29 July 1992 in certain respects, but repeated its requirement,
in respect of Listing Rule 3J(9), that the notices be dispatched within 15 business days of 8 July 1992.
By facsimile letter dated 29 July 1992 [annexed] the applicant informed the respondent that it had prepared a draft of a notice to shareholders regarding the required spread of shareholdings, which was enclosed. The applicant went on to indicate that it required a further extension until 5 August 1992.
By facsimile letter dated 29 July 1992, also annexed, The Exchange granted an extension until 5 August 1992. By facsimile letter dated 7 August 1992 the applicant informed The Exchange, in the terms of the document annexed, that in essence it required more time to respond and that it did not believe that the deadline of 10 August 1992 was reasonable. The applicant also stated that the market in its securities was "perfectly well informed".
By facsimile letter dated 11 August 1992, also annexed, The Exchange informed the applicant that it would reluctantly be prepared to permit the applicant until 5 pm on Friday, 14 August 1992 to respond to its inquiries and that no further extensions would be permitted. It was further indicated that the notices under Listing Rule 3J(9) should be dispatched by that date.
The applicant responded by facsimile letter dated 14 August 1992 also annexed, again maintaining that the market was fully informed and not accepting that the applicant was in breach of Listing Rule 3J(9). By facsimile letter dated 17 August 1992 the applicant informed The Exchange, in terms of the document annexed, that it had sent a notice to shareholders, which was enclosed, dealing with the spread of shareholdings.
By facsimile letter dated 21 August 1992, the Exchange pointed out to the applicant that it had not paid an annual listing fee in respect of the year commencing 1 July 1992 and that fee, it was said, was payable by 31 July of that year.
It was there foreshadowed that if the fees were not paid by the close of trading on 16 September 1992 the company would be removed from the Official List for non payment of annual listing fees. Although this letter is part of the history of the documentation that passed between the parties I do not think it is material for present purposes.
By facsimile letter dated 25 August 1992, which is now annexed, the Exchange informed the applicant that in the light of the history of the matter the securities were suspended from official quotation from that date.
The question for present purposes is whether the applicant was provided with a reasonable opportunity to be heard in relation to the foreshadowed decision to suspend the securities.
As has been seen, a period of approximately six weeks was allowed for this purpose. It is true that, as has been said, the subject matter of the inquiries was quite complicated and could not reasonably have been expected to be dealt with instantly, or anything like instantly. On the other hand, it was made clear to the applicant, at several points of the correspondence, that the matter was not only important, but urgent and that the Exchange was pressing for an early reply for reasons which, on their face, appeared to be justified.
It is not, of course, necessary for me, in the present context, to consider the underlying merits of that aspect. The only question for decision at this point of time is whether, as a matter of fact, the time allowed, namely six weeks, was an adequate period of time in which the applicant might prepare and forward a proper response to the inquiry. I take into account, in this connection, the absence overseas, during part of this time, of several of the Board members of the applicant. I further take into account the perceived need to retain professional advice in some areas. Nonetheless, giving full weight to those considerations, I have come to the
conclusion that in the circumstances the time allowed was reasonable.
I therefore hold that there was no denial of natural justice and no unfair treatment of the applicant in that respect.
By paragraph 10 of the statement of claim in its amended form the following is alleged:
"10.Further and alternatively, it was or became an implied term or condition of the agreement referred to in paragraph 4. hereof, alternatively such a term or condition became part of the agreement of law, that the Respondent would (1) give to the Applicant a proper opportunity to be heard in relation to any decision to suspend the securities of the Applicant from official quotation and/or to remove the Applicant from the Official List, and, in that connection, to give to the Applicant a statement of the Respondent's reasons for any such decision, more particularly in relation to any such decision involving Listing Rules [3]J(9), J(13) and J(14); and (2) would apply good faith and reasonableness in the interpretation and application thereof."
It will be seen that there are three ingredients by way of implied term or perhaps by operation of law that are asserted. It will be convenient to deal with them separately.
As to the first claim, namely, that the applicant was entitled to a proper opportunity to be heard in relation to any decision to suspend or remove, there is no real dispute between the parties with respect to the legal principles to be
applied. It is accepted on behalf of the respondent, correctly, that because the applicant's proprietary interests may be adversely affected by these decisions, then prima facie at least, procedural fairness should be accorded, and that this would usually include an obligation to provide the applicant with a proper opportunity to be heard in that connection [see, for instance, Forbes v New South Wales Trotting Club Limited (1979) 143 CLR 242 at 264].
The second ingredient alleged is that the respondent was bound to provide a statement of reasons for its decision. This is a more contentious area.
It is settled law in this country that there is no general, or abstract, duty to give reasons [see Public Service Board of New South Wales v Osmond (1986) 159 CLR 657 at 662]. However, as Deane J indicated in Osmond (at 676), the particular circumstances of the case may, as a matter of procedural fair play, demand that a decision-maker provide reasons.
As an aspect of the notion of fairness, the approach taken by Deane J has also commended itself to the English courts, [see R v Civil Service Appeal Board; Ex parte Cunningham (1991) 4 All ER 310; R v The Secretary of State for the Home Department; Ex parte Doody (1994) 1 AC 531 at 564; R v Lambeth London Borough Council, ex parte Walters The
Times Law Reports, 6 October 1993, 483 at 484; Wade on Administrative Law, 7th ed., at 541-545 and Public Law (1994) Note "The duty to give reasons in Administrative Law" (at 184-101)).
I would therefore hold, for present purposes, that although there is no general duty to give reasons, such a duty may be imported in the particular circumstances of the case, if fairness so requires.
The third ingredient alleged is that the respondent, as decision-maker, was bound to apply first good faith and, secondly reasonableness in the interpretation and application of the listing rule.
On behalf of the respondent it is accepted, again correctly, that there is inherent in the power to suspend, or remove, an assumption that the decision-maker will act honestly [see, for instance, Meehan v Jones (1982) 149 CLR 571 at 581, 597; Kwikasair, above, at 30,708; see also Brolga Minerals Ltd v Stock Exchange of Perth Ltd (1973) ASLR 85,164 at 85,172].
As I have said, so much is not, in truth, in contention. However, although the respondent would not appear to contest the proposition that it was bound to act with fairness, there is seriously in issue the question whether
some notion of "reasonableness" should be imported. Whilst, in my opinion, the application of the rules of natural justice in the present context import an obligation on the decision- maker to act fairly, it does not necessarily follow that it was bound to act "reasonably".
In Brolga Minerals, above, Virtue SPJ said (at 85,172) that there was a duty imposed on the Exchange by contract to give "fair and honest consideration" to an application for listing. In my view, similar reasoning should be applied to the power to suspend or remove.
In Kwikasair above, Street J said (at 3o,708) that although the powers of the Exchange were to be exercised honestly they were also "arbitrary; they [were] intended to be exercised summarily and fearlessly in protecting the public interest". Moreover, in Designbuild Australia Pty Limited v Endeavour Resources Limited (1980) 5 ACLR 610, Powell J (at 635) referred to the Exchange's power to suspend, or de-list a company, "as an unexaminable discretion".
There is, as the discussion in Meehan above discloses, a clear distinction to be drawn between a duty to act honestly, on the one hand, and a duty to act "reasonably", on the other. If the observations in Kwikasair and Designbuild are directed to this distinction then, with respect, I would agree with that approach. However, it does appear that there is an intermediate position along the lines articulated by Virtue SPJ in Brolga Minerals; that is, that the exchange is bound to act not only honestly, but also fairly [see also, generally, the paper presented by Justice Cole at the 28th Australian Legal Convention, September 1993; "The concept of reasonableness in construction contracts"].
As Justice Cole points out, the New South Wales Court of Appeal has, in the context of construction contracts, held that a notion of "reasonableness" should be imported in connection with the exercise of the power of a principal to call upon a contractor to show cause why the contract should not be cancelled [see also Amman Aviation Pty Limited v The Commonwealth of Australia (1990) 22 FCR 527 at 532, 542 and 544; The Commonwealth of Australia v Amman Aviation Pty Limited (1991) 174 CLR 64 at 78; Hughes Bros Pty Ltd v Trustees of the Roman Catholic Church for the Archdiocese of Sydney (1993) 31 NSWLR 91 at 93 and 99].
Again, it seems to me that a distinction should be drawn between something which may be said to be "merely" unreasonable, on the one hand, and something which may be said to be entirely unreasonable, in the sense that no reasonable person could possibly come to such a decision, that is to say, a perverse decision, on the other.
In the latter situation it would be accurate to
characterise the conduct of such a decision-maker as unfair, in the sense described by Virtue J in Brolga Minerals. I would not, however, accept that the rules of natural justice import an obligation to act in a way which is "merely" reasonable.I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.
Associate
Dated: 27 June 1995
Counsel and Solicitors Mr E Strasser instructed by
for Applicant: Rummery Glynn Chaffey
Counsel and Solicitors Mr J Hilton SC with Mr T Castle
for Respondent: instructed by Allen Allen & Hemsley
Date of hearing: 27 June 1995
Date Judgment delivered: 27 June 1995
0
10
0