I have been looking into just what it means for ASX to state that it has absolute discretion over the listing rules and what recourse ISX as a listed company has under that claim. As with other posts, I am sharing my findings and have done my best to ensure the post contains the relevant links to the resources so that readers can come to their own conclusions. The attached article was written in 1995 and I am unaware of any changes that may have been made to the Corporations Act that are relevant to this argument.I am happy for people, ISX supporters and/or non-supporters to respond with relevant input/corrections to this post. I am here to learn. Irrelevant and/or abusive posts will be ignored.
It is clear to me from the article that ASX has broad rights regarding the creating and enforcing of the listing and business rules, but that there is a duty to ensure that rules are consistent with their Articles of Association and with agreements with a listed entity. Additionally, it maintains that the rules are subject to judicial review by an “aggrieved person”(ie ISX).
This, in part, appears to explain why we see that ISX, in the statement of claim, tends to stay away from arguments about “absolute discretion” and ASX’s rights (or lack thereof) regarding the listing rules and focuses instead on the statutory position indicated by the Corporations Act.
I have picked out parts of this article that I have found relevant to this post, but it is worth reading the entire document.
The article,
Legal Enforcement of Stock Exchange Rules by PaulLatimer -
http://www.austlii.edu.au/au/journals/BondLawRw/1995/9.pdf, supports the view that stock exchange decisions under rules are subject to judicial review under Commonwealth administrative law because of their statutory significance, and that decisions under the rules import a duty to give reasons if required by fairness.ISX would be, according to the article, an “aggrieved person” with the right to request judicial review of ASX decisions.
The document states that “The Australian Stock Exchange Ltd (hereafter "stock exchange"), which is incorporated as a company limited by guarantee and operates in the context of regulation passed by theCommonwealth. ... Under its articles of association, the directors of disallowed are authorised to make "Rules not inconsistent with these Articles for the order and good government of the Members or MemberOrganisations of the Exchange and its affairs" The AustralianStock Exchange is different to other stock exchanges as it is a "stock exchange" by definition in Corporations Law section 9. As such, it does not have to fulfill the following rule requirements... (My comment: the following rule requirements are, as I understand it, the listing and business rules.So it seems, ASX does not have to comply with the listing rules?Love to have validation or correction on this!)
The Australian Securities Commission is not authorised to draft rules, and instead, rules are drafted by disallowed itself often in consultation with the industry and the commission. The role of the Minister (the Commonwealth Attorney-General) is effectively that of licensor through his or her statutory power of approval: approval as a securities exchange by the Minister through the Commission under CorporationsLaw sections 769 and 770 requires inter alia evidence of satisfactory business rules and listing rules. After approval, the Commission retains the power of disallowance of rule changes, as under Corporations Law section 774 it is to be notified of amendments to rules by way of rescission, alteration oraddition.14
14The Report of the House of Representatives Standing Committee on legal and Constitutional Affairs, Corporate Practices and the Rights ofShareholders, (the Lavarch Report), Canberra, AGPS (1991) recommended in itsRecommendation 13 that the Attorney-General disallow alterations to the ListingRules under section 774 which are not expressed in a language and style whichboth facilitates clear interpretation and increases the ability to enforce theRules in court.My comment:I would question whether the listing rules do have a clear interpretation at all!In fact, I seem to remember an ASX document that said that the listing rules were complex and could only really be interpreted by ASX. (I so need to note that I haven’t been able to find this comment again.)
It goes on to state: "For a listed company, there is a contractualobligation - the "listing agreement" - to comply with the rules,independent of section 777, which is derived from acceptance of listing by thestock exchange and terms may be implied into this including those relevant fromthe Memorandum and Articles. This is a "highly unusual contract"26which gives disallowed power to change the rules and suspend trading solong as it is "within the contemplation of the parties when the contractwas made, having regard to the nature and circumstances of the contract".27By way of enforcement of this contract, the court may grant an injunction to a shareholder in the exercise of its ordinary equitable jurisdiction to restrain a threatened breach of contract. 28Mycomment: The contract between ISX and ASX was signed again post Otis Energypurchase in 2014, so I would think that the any changes since 2014 such as thechanges made by ASX in December 2019 in listing rule 18.8 give ISXlatitude to argue that ISX would not have contemplated this rule at the time ofsigning its contract with ASX.Again – input?
26 Spender P, 'The legal relationship between the Australian Stock Exchangeand listed companies' (1995) 13 C & SLJ 240 at 241. 27Hole v Garnsey [1930] AC 472 at 500, cited in New Zealand Stock Exchangev Listed Companies Association Inc [1984] 1 NZLR 699 at 704.
28Zytan Nominees Pty Ltd v Laverton Gold NL (1989) 7 ACLC 153 at 156per Malcolm CJ, noted (1989) 7 C & SLJ 211. The argument based on Repco Ltdv Bartdon Pty Ltd, see below n 31 and Designbuild Australia Pty Ltd v EndeavourResources Ltd, see n 32 that a direction under section 42 (now section 777) canonly be given to a person under an obligation to observe the rules was rejectedin FAI Insurances Ltd v Pioneer Concrete Services Ltd,
