Lego Australia Pty Ltd v Paraggio

SYDNEY FUTURES EXCHANGE LIMITED v. AUSTRALIAN STOCK EXCHANGE LIMITED
No. NG3432 of 1994
FED No. 798/94
Number of pages - 25
Corporations Law
(1994) 53 FCR 532

COURT

FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
SACKVILLE J

CATCHWORDS

Corporations Law - "futures contract" - whether a Low Exercise Price Option (LEPO) is a futures contract within s.72(1) Corporations Law - "commodity" - "commodity agreement" - "Chapter 8 obligation" - whether securities underlying LEPO can constitute a "commodity" - whether underlying securities are capable of delivery in relevant sense - whether security transfer form is an instrument creating or evidencing a thing in action - whether economic imperative arising out of LEPO constitutes a Chapter 8 obligation.

Corporations Law - securities - "option contracts" - whether securities options are securities for the purposes of s.92(1) Corporations Law.

Corporations Law, s.9, s.72(1), s.92(1)

Shoreline Currencies (Aust) Pty Ltd v Corporate Affairs Commission (1986) 11 NSWLR 22.
Carragreen Currencies Corporation Pty Ltd v Corporate Affairs Commission of New South Wales (1986) 7 NSWLR 705.
Laybutt v Amoco Australia Pty Ltd (1974) 132 CLR 57.

HEARING

SYDNEY, 13 and 14 October 1994
#DATE 2:11:1994

Mr P.G. Hely QC and Mr M. Speakman instructed by Corrs Chambers Westgarth, Solicitors, appeared for the applicant.

Mr A.R. Emmett QC and Mr R. Weber instructed by Minter Ellison Morris Fletcher, Solicitors, appeared for the respondent.

Mr R.B.S. Macfarlan QC and Mr F. Kunc instructed by Mr P. Stepek of the Australian Securities Commission, appeared on behalf of the Australian Securities Commission as intervener.

ORDER

THE COURT:

1. ORDERS THAT the application be dismissed.

2. DECLARES that a financial instrument to be known as and designated by the Respondent as a Low Exercise Price Option, being an instrument to be regulated in accordance with the Business Rules of the Respondent, in the form of the document referred to as DJW5 in the affidavit of David John White sworn 10 October 1994, is a security within the meaning of section 92(1) of the Corporations Law.

3. ORDERS that the applicant pay the costs of the respondent.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Introduction
SACKVILLE J This case involves "LEPOs", creatures of the age of acronyms. The term "LEPO" is short for Low Exercise Price Option. The respondent, the Australian Stock Exchange Ltd ("the ASX"), announced, on 17 July 1994, its intention to list LEPOs for trading on the Australian Options Market. On 22 July 1994, the board of the Australian Stock Exchange Derivatives (known, naturally enough, as "the ASXD") made amendments to the business rules of the ASX to facilitate trading in LEPOs. The ASXD is a committee to which the board of the ASX has delegated the power to make and amend the rules of the ASX relating to derivatives (that is, markets derived from underlying commodities or securities). Certain of the amended business rules have been submitted to the Australian Securities…