Unit Trust - replication of statutory company take-over provisions in Trust deed - listing on stock exchange - listing rules - prohibition upon sanctions enforcing takeover provisions - acquisition of majority of units by nominees of non-party - discretion reposed in manager to register transfers - whether manager and unitholders possess standing - Corporations Law s.1073(1A) - whether Trust Deed constitutes a contract between unitholders - construction of alleged contractual terms.

Corporations Law - breach of an "approved deed" - whether unitholders have standing - Corporations Law s.1073(1A) - statutory prohibition

Trade Practices - misleading and deceptive conduct - acquisition of units in unit trust - alleged failure by nominal unit purchasers to disclose to manager and unit vendors identity of acquirer - whether "representation by silence" - whether reliance

Federal Court of Australia Act 1976 (Cth) Part IVA

Trade Practices Act 1974 (Cth) s.52

Trustee Act 1925 (NSW) s.63

Allen v Gold Reefs of West Africa Ltd (1901) Ch 656

Bloomenthal v Ford (1897) AC 156

Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31

Gra-Ham Australia Pty v Perpetual Trustees W A Limited (1989) 1 WAR 65

Hayim v Citibank NA (1987) 1 AC 730

Meldrum v Scorer (1887) 56 LT 471

Onus v Alcoa of Australia Ltd [1981] HCA 50; (1981) 149 CLR 27

Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457

Sharpe v San Paulo Railway Company (1873) LR 8 Ch App 597

Smith v Anderson (1880) 15 Ch D 247

Young v Murphy (unreported, Supreme Court of Victoria, Appeal Division, 27

Counsel for the applicants: Mr R Merkel QC with Mr J Beach

Counsel for the first to Mr A Myers QC with Mr N O'Bryan

Solicitor for the first to Atanaskovic Hartnell fifty-fourth respondents:

Counsel for the fifty-fifth Mr B Coles QC with

Solicitor for the fifty-fifth Church and Grace respondent:

1. The application be dismissed with costs, including reseerved costs.

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

HEEREY J The Grosvenor Trust (the Trust) is a unit trust. Since 31 March 1993 units in the Trust have been listed on the Australian Stock Exchange (ASX). By late March 1994 interests associated with the Bankers Trust Group (BT) held just under 20 per cent of the units. On 29 and 30 March brokers acting for BT purchased sufficient units to bring the holding to 51 per cent.

2. The second applicant Heine Management Limited (Heine) is the manager of the Trust. It has brought these proceedings together with the first applicant A F and M E Pty Ltd which sues on its own behalf and as representing some 92 per cent of the remaining unitholders pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth).

3. The applicants say that certain provisions of the trust deed have the effect that acquisitions of units are restricted in the same way as Chapter 6 of the Companies Law regulates the acquisition of shares in corporations. The applicants say that BT cannot lawfully go beyond 20 per cent without offering the same price to all unitholders. They seek various remedies including orders that BT offer to purchase all remaining units or divest itself of the units already acquired.

4. BT denies that the trust deed has the operation which the applicants claim. It says that the deed itself provides that restrictions on acquisition do not apply so long as the units are listed on the ASX. In any event, BT says that this was specifically stated to be the situation by Heine on a number of occasions, including in a prospectus issued in late 1993.

5. The commercial setting in which this litigation takes place is that BT would like to become manager of the Trust. Heine opposes that course. BT has organised the requisition of a general meeting of unitholders to be held on 22 August to consider resolutions that it replace Heine as manager. If BT's acquisition of a majority of units is lawful, or if in the exercise of the Court's discretion no order is made, then it is likely BT will achieve its objective.

6. I shall now proceed to record the history disclosed by the evidence in a little more detail.

7. The Trust, originally known as "Aust-Wide Grosvenor Place Trust", was established by a deed of trust made on 20 June 1988 between Aust-Wide Management Limited as original manager of the Trust, Permanent Trustee Australia Limited (Permanent) as trustee, and Permanent Trustee Company Limited as Permanent's guarantor. The original deed of trust has been amended from time to time by some nine supplemental deeds of trust.

8. The Trust was originally established to acquire and hold a 30 per cent leasehold interest in a building at 225 George Street Sydney known as Grosvenor Place. On 30 December 1992, as a consequence of Permanent removing Aust-Wide Management Limited and calling for tenders for appointment, Heine became manager of the Trust. Part of Heine's stated strategy in seeking the managership was to seek unitholder approval for listing of units by the ASX.

Listing on ASX 9. After some discussions between Heine's solicitors and the ASX, a meeting of unitholders was convened for 16 February 1993 to consider three special resolutions for various amendments to the trust deed to facilitate ASX listing of units.

10. The meeting of unitholders was adjourned to 25 February when the special resolutions were passed. In the course of its application to the ASX, Heine provided a copy of a proposed "information memorandum" for investors who might seek to acquire units in the Trust upon listing. The information memorandum included under the hearing "Additional Information" the following:

"SUBSTANTIAL UNIT HOLDINGS AND LIMITATIONS OF ACQUISITION OF

UNITS

29. The Trust Deed contains provisions in relation to

substantial Unit holdings and limitations on acquisition of

Units. However, provisions of the Trust Deed dealing with

enforcement of these provisions do not apply to a Unit that is

quoted if the Listing Rules of the ASX do not permit any

sanctions or penalties in the Trust Deed which entitle the

Manager to enforce any provisions in the Trust Deed relating

to takeover offers or substantial Unit holdings (unless the

ASX agrees to waive such Listing Rules). At present the

Listing Rules do not permit any such sanctions or penalties

and no waiver has been obtained. Accordingly, subject to a

change being made to the Listing Rules, those provisions

dealing with enforcement of the substantial Unit holding

provisions will not apply whilst Units are quoted."

11. This particular passage, to which I shall hereafter refer as "the takeover provisions statement", was also included in the unitholder meeting notices. After some further discussions with the ASX, and consequential execution of the sixth and seventh supplemental deeds of trust, the Trust was admitted to the Official List of the ASX on 31 March. Official quotation of 73,920,000 fully paid ordinary units with an attributed par value of $2.00 each commenced on 8 April.

12. In about September 1993 Heine became aware of an opportunity to acquire the office building at 120 Collins Street Melbourne. Heine recommended to Permanent that this building be bought by the Trust for a purchase price of approximately $286m, to be funded through an underwritten institutional placement of $72m worth of ordinary units, an underwritten rights issue of $153m in ordinary units and a bank loan of approximately $83m.

13. The underwriter to the placement, SBC Dominguez Barry Limited (SBC), presented to various potential institutional investors a confidential information memorandum dated 11 October 1993 in relation to the proposed capital raising. The confidential information memorandum included the takeover provisions statement.

14. On 21 October Permanent, as trustee of a specially formed Grosvenor subsidiary property trust, entered into a conditional contract to purchase 120 Collins Street. On the same day Heine forwarded to unitholders a notice of a meeting to be held on 18 November to approve the purchase and placement already referred to and also consequential amendments to the trust deed.

15. On 16 November Heine registered a prospectus for a rights issue by which the Trust was to raise approximately $153.2m to assist in the acquisition of 120 Collins Street. Under the heading "Additional Information" the prospectus included information which it said "... summarises a number of the most significant provisions of the Trust Deed and provisions of the Corporations Law relevant to the Trust". That information included the takeover provisions statement.

16. At the meeting on 18 November unitholders voted in favour of the resolutions.

17. As part of the institutional placement Heine received applications for units in the Trust from interests associated with BT. Those entities (the original BT holders) were BT Custodians Ltd, Bankers Trust Life Ltd, Pendal Nominees Pty Ltd and Permanent Trustee Company Ltd. (The last mentioned company was the trustee of a number of BT managed funds.) In January 1994 all the original BT holders accepted the one for one renounceable rights issue and by late March they held just under 20 per cent of units.

18. The ultimate holding company of the BT Group is a United States corporation, Bankers Trust New York Corporation. Through a chain of Australian subsidiaries it holds all the shares in BT Australia Ltd (BTAL). BTAL, through further subsidiaries, manages a number of unit trusts including BTA Property Trust.

19. In early February 1994 Mr Clement Salwin, a Vice President of BTAL with responsibility for investment in real estate based assets, formed the view that BT managed funds should increase investment in CBD office real estate. In particular he thought that BT's existing investment in the Grosvenor Trust should be increased. He discussed the proposal with his portfolio manager Mr David Dixon. The two men read and discussed with each other Heine's information memorandum and prospectus. Mr Dixon noted by coloured markings a number of paragraphs in the prospectus including the takeover provisions statement, to which he added the note "? Look's (sic) OK". Mr Salwin noted in colour a number of clauses in the prospectus including cl.61(11)(a). Messrs Salwin and Dixon having made a commercial decision to go further, Mr Dixon on 22 February asked the first respondent Mr Anthony Aveling, an executive vice president of BT engaged in corporate advisory services, to assist with advice in the acquiring of "a substantial stake" in the Trust.

20. In the next few days Mr Salwin, Mr Aveling and other BT personnel discussed the proposed acquisition. Mr Aveling read the prospectus and trust deed. He also marked the takeover provisions statement.

21. Mr Aveling then sought legal advice from Mr Anthony Hartnell of Atanaskovic Hartnell. On 3 March he met Mr Hartnell and gave him a copy of the trust deed and the prospectus. Later that day Mr Hartnell reported back to advise that he had spoken with a senior official of the ASX as to the operation of listing rule 3J(31)(a). Mr Hartnell told Mr Aveling that the ASX officer understood that Parliament had decided that listed unit trusts were not to be subject to the takeover principles as embodied in the Corporations Law and therefore that the market with respect to units in listed trusts "was intended to be open". The official, according to Mr Hartnell, "strongly believed" that the ASX would not waive rule 3J(31)(a) and would not impose an alternative regime. Mr Hartnell also told Mr Aveling that the official had told him that the draft of a proposed listing rule which would have imposed a takeover regime for unit trusts had been expressly rejected by the Ministerial Council as contrary to government policy.

22. On 9 March Atanaskovic Hartnell provided to BT a letter of advice to the effect that cl.61 of the Trust deed did not impose any constraints on acquisition in excess of 50 per cent of the units. On 18 March Mr Aveling advised Mr Salwin that in his opinion the proposal to acquire control of the Trust could proceed. Mr Aveling swore that he formed that opinion on the basis of the advice provided by Atanaskovic Hartnell, the representations contained in the takeover provisions statement in the prospectus, and the substance of the telephone conversation which Mr Hartnell had reported with the ASX official. I accept that evidence. I find that one of the factors which influenced BT to acquire further units in the Trust was the takeover provisions statement in the Heine prospectus.

23. Counsel for the applicants contended that the takeover provisions statement in the prospectus ceased to be operative because it was superseded by Messrs Aveling and Salwin's interpretation of the trust deed itself and Mr Hartnell's advice. I think this argument lacks realism. The takeover provisions statement was not just another opinion; it came from Heine as the promoter of the prospectus and the current manager of the Trust. The takeover provisions statement was important as being, in Mr Aveling's words, "the manager's interpretation". It would reasonably be taken, and was in fact taken by BT, as representing Heine's own view that takeovers were not restricted and, as a necessary consequence, an indication that Heine would act consistently with the view it had publicly expressed.

24. On the morning of 29 March Mr Aveling, Mr Salwin and two other BT personnel met with representatives of brokers Ord Minnett and SBC. The brokers were told that BT was seeking 55.7 million units in the Trust (20 per cent) with a minimum acquisition of 20 million units at a price of $1.37. The brokers were to approach various institutional holders whom the BT representatives identified. The brokers were instructed not to disclose BT's identity as purchaser.

25. The brokers proceeded to carry out their instructions. The response was good. Late in the afternoon of 29 March Mr Salwin made a decision to increase the target to 51 per cent.

26. During the course of business on 29 March Mr Michael Heine, a director of Heine, became aware that a substantial number of units in the Trust had been traded on the ASX. The following day he made an announcement to the effect that Heine was aware that a total of 61.6 million units in the Trust were sold at prices between $1.24 and $1.35, that Heine believed that a substantial proportion of those units may have been acquired by a single party but had not yet been informed of the identity of this party and that it considered it important that the identity of the party and its intentions in relation to the Trust be disclosed to the market as soon as possible.

27. Later that day Mr Heine was telephoned by Mr Aveling. After referring to the Heine announcement Mr Aveling said that BT had acquired 51 per cent of the units in the Trust and wished to have discussions with Heine and the trustee regarding the ongoing management of the Trust. Late in the afternoon on the same day a meeting was held at BT's Sydney office. Mr Aveling, Mr Salwin and Mr Ross Finley attended on behalf of BT. Mr Heine was accompanied by Mr Neil Bryson on behalf of Heine.

28. Mr Aveling produced a copy of an ASX announcement made that day by BT. It was in these terms:

"Bankers Trust Australia Limited announces that it and its

related companies (collectively `BT') have recently acquired

on behalf of various unit trusts approximately 142.1 million

units (representing approximately 51% of the units in issue)

in GTT.

The units are acquired for the account of the BTA Property

Trust (a vehicle for the pooling of property investments of

Australian superannuants) and various other Unit Trusts of

which members of the BT Group act as Managers. BT will

shortly be seeking discussions with the Manager and Trustee of

GTT in relation to the ongoing administration of GTT."

29. Mr Aveling said that BT wished to take on the management of the Trust. Mr Heine asked Mr Aveling whether BT intended to make some payment to Heine in respect of the proposed change of management. Mr Aveling said that BT did not. There was a dispute in the evidence as to whether Mr Heine raised this issue, but I accept the evidence of Mr Aveling and Mr Salwin to the effect that he did. Notwithstanding the criticism of counsel for the respondents, I do not see anything discreditable or improper in a request or suggestion for payment in return for yielding up the management rights. If managing a unit trust is a lawful activity, the buying and selling of the right to carry on such activity seems unexceptionable. However Mr Heine's denial of having raised the matter - a topic which occurred at an important meeting held only a few months ago - cannot be reconciled on the basis of mistake or misunderstanding. The denial must be taken as reflecting adversely on Mr Heine's credibility as a witness.

30. Mr Aveling said that BT had instructed its brokers to offer to purchase units held by Heine itself in the trust and while BT was not looking to acquire further units, perhaps something could be done if Heine wished to sell. Mr Heine raised the question whether BT was entitled to acquire the units. Mr Aveling said that according to the recent Heine prospectus for the trust, BT was entitled to acquire the units which it had acquired. He also mentioned ASX listing rule 3J(31). Mr Heine said that in his opinion that rule went to enforcement only. He said that in his opinion the trust deed constituted a contract between unit holders. There was some discussion about the future of property managers recently employed by Heine for 120 Collins Street. The meeting concluded on the basis that each side would consider the matter further and have discussions early in the following week.

31. The total monies outlaid in the acquisitions on 29 and 30 March were some $116m. The acquisitions were, in Mr Salwin's words, "made for the benefit of the BTA Property Trust".

32. BT directed its brokers that registrations of transfers of units acquired on 29 and 30 March should be made in the name of Beaglemoat Nominees Pty Ltd (a wholly owned subsidiary of Ord Minnett) and Fonscan Pty Ltd (a BT company). In addition 100 units were to be registered in the names of each of 50 natural persons.

33. Mr John Atanaskovic, Mr Hartnell's partner, had advised Mr Salwin to register the units in the name of brokers' nominee companies, but Mr Salwin did not follow that advice in the case of SBC because that firm had become, Mr Salwin believed, "uncomfortable" due to some commercial connection with Heine.

34. The settlement and registration process involved the intervention of the brokers' FAST companies. FAST is an acronym for "Flexible Accelerated Security Transfer". It is a system established by the ASX to facilitate and accelerate the security transfer process. The detailed workings of this entrepot kind of system are described in the affidavit of Mr Jeffrey Stewart, an associate director of SBC. In the present case Ord Minnett and SBC used their respective FAST companies TJT Nominees Pty Ltd (TJT) and SBCA Fast Nominees Pty Ltd (SBCA). FAST companies cannot, under the ASX Listing Rules, be used for custodial purposes. In the case of each transaction there was a transfer from the vendor holder to one of the two FAST companies and a transfer from the FAST company to Beaglemoat, Fonscan or one of the 50 individuals.

35. As manager of the Trust, Heine had the function of registering transfers of units. Transfer forms in respect of the units acquired by BT on 29 and 30 March were lodged with Heine in early April, accompanied by requests for registration. This would appear to have been the case with most of the transfers, although some were not lodged until as late as 18 April.

36. On 6 April Heine sent to the original BT holders notices under cl.61(11)(h) of the trust deed requesting the recipients to furnish within two business days a statement "setting out such information or evidence (required by the Manager to be on oath) as the Manager may consider likely to be of assistance in determining whether or not you are eligible to remain a unit holder". On 7 April Heine sent to the same unitholders notices under cl.61(12)(a) requesting particulars of the recipient's "relevant interests" in units and of any other person who had a relevant interest. On and between 11 and 14 April the original BT holders responded giving information as to their unit holdings.

37. The next step taken by Heine was to send cl.61(11)(h) notices to the transferees of the units acquired on 29 and 30 March, viz SBCA, TJT, Fonscan, Beaglemoat and the fifty individuals. On 18 April Heine sent further letters pointing out that the two days fixed by the notices had passed and asserting that "... failure to respond to Notices issued pursuant to the Trust Deed may amount to a contravention of the Trust Deed and therefore, the Corporations Law". On the same day Heine sent letters to the March transferees seeking certain information. These letters quoted the BT announcement to the ASX on 30 March, alleged that the acquisitions "may ... constitute a breach of the terms of the Trust Deed, and as such, may amount to a contravention of the Corporations Law", and sought information about persons connected with the recipient's acquisition.

38. On 19 April Atanaskovic Hartnell wrote a letter on behalf of BT to Heine. Amongst other things the letter noted that transfers of 51,967,800 units to Beaglemoat and 33,727,000 units to Fonscan were lodged with Heine for registration at the beginning of the previous week and under ASX rules should have been registered by the date of the letter. The solicitors stated

"We note that your company's powers pursuant to para.61(11)(a)

to decline to register any transfer of a unit by reason of the

provisions of cl.61 of the trust deed are inoperative by

reason of the Grosvenor Trust being admitted to the official

list of the ASX and the existence of ASX listing rule

3J(31)(a). Will you therefore please let us know by what

authority or power your company would decline to register the

transfer of shares referred to in the remaining letters."

39. On 21 April Mr Hartnell attended at Heine's Melbourne office and sought to inspect the register of unitholders on behalf of his clients Beaglemoat and Fonscan. Mr Hartnell swore as follows:

40. "Mr Heine said that it was impossible to inspect the register

because it was computerised and the only way to do so would be

to sit in front of a screen and enter investor numbers into

the computer. He said he could let me sit in front of a

screen but it seemed pointless since he could inform me that

neither Beaglemoat nor Fonscan had been registered as

Unitholders. I said to him 'Why not? The time period

prescribed by the ASX for registering transfers has expired

and you are required by the Listing Rules to register the

transfers'. He said to me that he would not answer the

question `why not' because that was a matter for legal advice.

I asked him whether he intended to register the transfers. He

said `No'.

I said that in those circumstances my clients would be taking

legal proceedings to force the registration of the transfers.

He asked me when the proceedings would commence. I said `Very

soon. As soon as I can get the papers together and brief

counsel'. He said: `Will the litigation be in Melbourne?'.

I said that it would be in Sydney and that he would enjoy a

short visit to sunny Sydney. I said that I anticipated

proceedings would be commenced in the Federal Court.

At this stage Mr Heine said that he would like a discussion

`off the record'. I did not object to such a course of

action. Mr Heine said `What possible basis could Bankers

Trust have to argue the validity of these transactions?'. He

said: `They are plainly without doubt a breach of the Trust

Deed' (he may have mentioned clause 61) `and therefore

illegal'. He said that his legal advice was that the

acquisitions were a contravention of the Corporations Law and

would be set aside. I said that was not my view of the law.

I asked how could he make that statement in light of the

representations made to the contrary in his recent

prospectus."

41. (I interpolate the comment that Mr Hartnell's account of his spontaneous reference to the Heine prospectus - as to which he was not challenged - confirms that the takeover provisions statement in the prospectus remained at the forefront of the minds of those in the BT camp.)

42. Mr Heine in his evidence denied that he expressed any intention to refuse to register the transfers - only that he needed to discuss the matter further with his solicitors. However he conceded there was discussion about Mr Hartnell commencing legal proceedings and whether they would be brought in Melbourne or Sydney. He did not deny Mr Hartnell saying the proceedings would commence "as soon as he could put papers together and brief counsel". He did not deny that Mr Hartnell said the period prescribed by the ASX for registration had expired. (That was in fact the case; Mr Heine in his affidavit swore that transfer forms were received "during early April" and transfers in evidence were stamped 7 or 8 April.)

43. I accept Mr Hartnell on this issue. I thought his evidence was more persuasive. Moreover, once it is accepted (or at least not denied by Mr Heine) that the transfers were overdue for registration, and that Mr Hartnell said that he would commence litigation virtually immediately, it seems inherently more likely that Mr Heine had indicated an intention not to register the transfers.

44. On the following day, 22 April, Mr Heine forwarded to the ASX a proposed announcement in these terms:

"Heine Management Limited, as manager of the Grosvenor Trust

(`the Trust'), announced on market on 30 March 1994 that it

had been made aware that on 29 March 1994 a total of 61.6

million units in the Trust were sold at prices between $1.24

and $1.35 and that it was concerned that a substantial number

of those units may have been purchased by a single party.

On 30 March 1994 Bankers Trust Australia Limited announced on

behalf of itself and its related companies that it and its

related companies had acquired approximately 51% of units on

issue in the Trust on behalf of various unit trusts.

In the discharge of its functions as manager, Heine Management

Limited has sought information from various parties in respect

of the circumstances of the acquisition in order to enable it

to determine whether or not registration should occur. As

part of that process, Heine Management Limited has issued a

number of Notices under the Trust Deed to unit holders and

transferees requiring them to provide relevant information.

The information sought has not been provided.

Until such information is made available to the Manager, the

Manager is unable to determine whether or not registration

should occur.

The transferees have now threatened to issue legal proceedings

against the Manager on the grounds that the relevant transfers

have not yet been registered.

The Manager will continue to seek the information necessary to

enable it to determine whether the transferees are entitled to

be registered as unit holders in accordance with the Trust

Deed and the law."

45. Mr Shaw of the ASX telephoned Mr Heine and said that the announcement had not been released. He said that if Heine required it to be released the ASX would suspend the trading of units in the Trust. Later that day Mr Heine and his then solicitor Mr Michael Schoenberg of Arthur Robinson and Hedderwicks attended a meeting with Mr Shaw. There was an inconclusive discussion. Mr Shaw said that under the ASX Listing Rules Heine had to either register or reject the transfers and in the absence of compliance the units would be suspended.

46. On the same day Arthur Robinson & Hedderwicks sent to Mr Hartnell a letter which among other things stated that Heine "wishes to make it clear that it is not refusing to register the transfer of units" to Mr Hartnell's clients and that it was "unable to discharge that obligation (to ensure that persons registered as unitholders are entitled to be so registered) until it has further information". The letter concluded with an invitation to "provide the information sought by and on behalf of the manager over the last three weeks". It was said that once all the relevant information was to hand the manager would be able to determine whether the transfer of units to the transferees should be registered.

47. I do not take this self-serving letter as detracting from the conclusion that Mr Heine told Mr Hartnell on 21 April that he did not intend to register the transfers. The letter protests too much. I think it is consistent with Mr Heine having second thoughts as to whether it was wise to tell Mr Hartnell of his intention not to register. The letter was an attempt to salvage the situation.

48. Mr Heine swore in his affidavit that he sought further legal advice and then "determined that Heine would register the transfers ... to avoid the Trust being suspended by the ASX from Official Quotation". The transfers were in fact registered on 26 April.

49. Heine asked Permanent, as trustee of the Trust, to commence proceedings to determine the lawfulness of the BT acquisitions. Permanent's solicitors, Messrs. Church and Grace, responded by letter of 4 May. They stated in substance that they did not agree with Heine's assertion that the BT acquisitions were in breach of the trust deed and that their advice from Senior Counsel was that the trustee "is not presently justified in commencing proceedings". Messrs Arnold Bloch Leibler responded on behalf of Heine by letter dated 5 May arguing in detail a case that the acquisitions were unlawful and citing advice to that effect received from Senior Counsel.

50. In the meantime, BT wrote to Heine on 4 May defending the lawfulness of the acquisitions and asserting that "both the Australian Parliament and the ASX have excluded unit trusts from takeover provisions" and that this "is well known in the business community". BT's view that Heine should retire as manager was reiterated.

51. Permanent made an application to the NSW Supreme Court for a judicial opinion under s.63 of the Trustee Act 1925 (NSW). Young J heard argument from Senior Counsel on behalf of Permanent and Heine. In delivering judgment on 13 May his Honour, having remarked that cl.61 was "not particularly clear", said:

"The trustee has been advised that it should not commence

proceedings at this stage. I think the Court should do what

it usually does in situations where it can see that the

trustee has been adequately advised by competent lawyers and

commercial advisers, and by order advise the trustee that it

would be justified in following the advice that it has

received. Thus the advice is that the plaintiff need not

commence proceedings at this stage in respect of the matters

raised by the manager."

52. On 2 June Heine and Permanent each received more than 50 requisitions calling for a meeting of unitholders to consider the removal of Heine as manager of the Trust. Heine has convened a meeting to be held in Melbourne on 22 August.

53. Relevantly for present purposes cl.61 provides:

"LIMITATION OF UNIT HOLDINGS NOTIFICATION OF SUBSTANTIAL UNIT

HOLDINGS AND DISCLOSURE OF INTERESTS

61. (1) (a) ...

(b) ...

(c) ...

(d) ...

(e) ...

(f) The provisions of this Clause 61 shall not

apply prior to the office Quotation of the

Units.

(2) Except as provided by this Clause 61 a person

shall not, either alone or together with another

person or other persons, acquire or be eligible to

acquire Units in the Trust if:

(a) any person who is not entitled to any Units in

the Trust or is entitled to less than 20% of

the Units in the Trust would, immediately

after the acquisition, be entitled to more

than 20% of the Units in the Trust; or

(b) any person (in this paragraph referred to as

a `relevant person') who is entitled to not

less than 20%, but less than 90% of the Units

in the Trust would, immediately after the

acquisition, be entitled to a greater

percentage of the number of Units in the Trust

than the percentage to which that relevant

person was entitled immediately before the

acquisition.

(3) (a) The restrictions contained in sub-clause (2)

shall not apply to or in relation to:

(i) an acquisition of Units which is

analogous to a kind that would be

permitted under any of the provisions

of:

(aa) sub-sections (12(a) to (e) both

inclusive and (f) to (m) both

inclusive;

(bb) sub-sections 13(3) and (4);

(cc) section 14; and

(dd) section 15

of the Takeovers Code if the Trust

were a company to which the Takeovers

Code applied and the Units were shares

in that company; or

(ii) an acquisition of Units where all the

Unitholders have consented in writing

to the provisions of this Clause 61

not applying to or with respect to the

acquisition;

(iii) an acquisition of Units to which the

Manager has given its prior written

consent.

(4) ...

(5) For the purposes of this Clause 61 a person shall

be taken to acquire Units in the Trust (in this

sub-clause (5) referred to as the `Units

concerned') if, and only if:

(a) he acquires a relevant interest in the Units

concerned as a direct or indirect result of a

transaction entered into by him or on his

behalf in relation to those Units or in

relation to the securities of any body

corporate; or

(b) he acquires any legal or equitable interest in

Units of the Trust or in securities (as

defined in the Code) of any body corporate

and, as a direct or indirect result of the

acquisition, another person acquires a

relevant interest in the Units concerned.

(6) ...

(7) For the purposes of this Clause 61 the Units in

the Trust to which a person (in this sub-clause

(7) and sub-clause (8) referred to as the `person

concerned') is entitled include:

(a) Units in which the person concerned has a

relevant interest; and

(b) except where the person concerned is a nominee

corporation respect of which a certificate by

the NCSC is in force under section 7(8) of the

Takeovers Code, units in which a person who is

an associate of the person concerned has a

relevant interest.

(8) (a) A reference in paragraph (b) of sub-clause (7)

to a person who is an associate of the person

concerned shall be construed as a reference

to:

(i) if the person is a corporation -

(aa) a director or secretary of the

corporation;

(bb) a corporation that is related to

the person concerned; or

(cc) a director or secretary of such

a related corporation;

(ii) a person with whom the person

concerned has, or proposes to enter

into, an agreement, arrangement,

understanding or undertaking, whether

formal or informal and whether express

or implied -

(aa) by reason of which the

first-mentioned person, or the person

concerned, may exercise,

directly or indirectly control

the exercise of, or may

substantially influence the

exercise of, any voting power

attached to Units in the Trust;

(bb) under which the first-mentioned

person may acquire from the

person concerned, or the person

concerned may acquire from the

first-mentioned person, Units in

the Trust; or

(cc) under which the first-mentioned

person, or the person concerned,

may be required to dispose of

Units in the Trust in accordance

with the directions of the

person concerned, or of the

first-mentioned person, as the

case may be;

(iii) a person in concert with whom the

person concerned is acting, or

proposes to act, in relation to the

acquisition or proposed acquisition of

Units in the Trust;

(iv) a person with whom the person

concerned is, or proposes to become,

associated, whether formally or

informally with a view to controlling

or influencing the composition of the

board of directors of the Manager, or

the conduct of affairs of the Trust;

(v) a person with whom the person

concerned is, or proposes to become,

associated, whether formally or

informally, in any other way in

relation to Units in the Trust; or

(vi) if the person concerned has entered

into, or proposes to enter into, a

transaction, or has done, or proposes

to do, any other act or thing, with a

view to becoming associated with

another person as mentioned in

sub-paragraphs (ii), (iii), (iv) or (v)

above that other person.

(b) ...

(c) ...

(9) (a) Subject to this sub-clause (9), a person has

a relevant interest in a Unit in the Trust for

the purposes of this Clause 61 if that person

has power -

(i) to exercise, or control the exercise

of, the right to vote attached to that

Unit; or

(ii) to dispose of, or to exercise control

over the disposal of, that Unit.

(b) ...

(c) ...

(d) ...

(e) ...

(f) ...

(g) ...

(h) A relevant interest in a Unit shall be

disregarded -

(i) ...

(ii) ...

(iii) if the Unit is subject to a trust, the

relevant interest is that of a trustee

and -

(aa) ...

(bb) the trustee is a bare trustee;

(iv) ...

(v) ...

(i) For the purposes of sub-sub-paragraph

(h)(iii)(bb) above, a trustee shall not be

taken not to be a bare trustee by reason only

of the fact that the trustee is entitled in

his capacity as a trustee to be remunerated

out of the income or property of the trust.

(j) ...

(10) ...

(11) (a) The Manager may, in its absolute discretion,

decline to allot or to register any transfer

or transmission of a Unit if in the Manager's

opinion, the allotment or registration thereof

would or might result in or have the effect of

causing an infringement or contravention of

sub-clause (2) PROVIDED THAT this clause shall

not apply during any period that the Trust is

admitted to the Official List of the Stock

Exchange if the Listing Rules do not permit

any sanctions or penalties in this Deed which

entitle the Manager to enforce any provisions

in this Deed relating to takeover offers or

substantial unit holdings (unless the Stock

Exchange agrees to waive such Listing Rules).

(b) Where the Manager is satisfied that:

(i) a person has acquired units in the

Trust in such circumstances as might

or would in the opinion of the Manager

result in or have the effect of

causing an infringement or

contravention of sub-clause (2), the

Manager may, by notice in writing to

such person, require him to dispose of

the Units so acquired, or any part

thereof, (in this sub-clause (11)

referred to as the `specified Units')

within such time as is specified in

the notice, PROVIDED THAT in the

absence of any such requirement by the

Manager, the person concerned shall

not be entitled in any way to set

aside or cancel the transaction

whereby he acquired the specified

Units, nor to claim any refund or to

otherwise recover any money paid in

respect thereof; or

(ii) a substantial Unitholder in the Trust

has failed to comply with the

obligations imposed on him by

paragraph of sub-clause (10), the

Manager may, by notice in writing to

such substantial Unitholder, require

him to dispose of the Units in the

Trust to which he is entitled, or any

part thereof, (in this sub-clause (11)

referred to as the `specified Units')

within such time as is specified in

the notice, provided that in the

absence of any such requirement by the

Manager, the substantial Unitholder

concerned shall not be entitled in any

way to set aside or cancel any

transaction whereby he acquired a

relevant interest in any Units, nor to

claim any refund or to otherwise

recover any money paid in respect

thereof PROVIDED FURTHER THAT this

paragraph (b) shall not apply during

every period that the Trust is

admitted to the Official List of the

Stock Exchange if the Listing Rules do

not permit any sanctions or penalties

in this Deed which entitle the Manager

to enforce any provision sin this Deed

relating to takeover offers or

substantial unit holdings (unless the

Stock Exchange agrees to waive such

Listing Rules).

In so acting, the Manager shall consult with

the Trustee and shall have regard to, without

being bound by, the recommendations of that

person.

(c) If the requirements of any such notice are not

complied with by the person to whom the notice

is addressed within the time specified in the

notice, the Manager with the approval of the

Trustee may cause the specified Units to be

sold on any Stock Exchange on which they are

quoted or, if they are not so quoted, in such

other manner as the Manager with the approval

of the Trustee may determine PROVIDED THAT

this clause shall not apply during every

period that the Trust is admitted to the

Official List of the Stock Exchange if the

Listing Rules do not permit any sanctions or

penalties in this Deed which entitle the

Manager to enforce any provisions in this Deed

relating to takeover offers or substantial

unit holdings (unless the Stock Exchange

agrees to waive such Listing Rules).

(d) ...

(e) The Manager may:

(i) appoint a person to execute as

transferor a transfer in respect of

any Units sold in accordance with the

provisions of paragraph (c) above and

to receive and give good discharge of

the purchase money therefor; and

(ii) register the transfer

notwithstanding that the

Certificate for such Units may

not have been delivered to the

Manager and issue a new

Certificate to the transferee, in

which event the previous

Certificate shall be deemed to

have been cancelled.

(f) ...

(g) Nothing in this sub-clause (11) shall render

the Manager liable or responsible by reason of

any person acquiring Units in the Trust in

contravention of sub-clause (2) or failing to

comply with the obligations imposed by

paragraph (c) of sub-clause (10).

(h) The Manager, before or at any time after

allotting any Units, or approving or rejecting

any transfer or transmission of Units, or at

any other time and from time to time, may, by

notice in writing to the applicant, allottee,

transferee, transmittee or Unitholder, require

him (or, where such person is a corporation,

a competent officer thereof) to furnish to the

Manager such information or evidence (on oath

or otherwise verified if the Manager should so

require) as the Manager may consider likely to

be of assistance in determining whether or not

such person is eligible to become or to remain

a Unitholder.

(i) (Deleted)

(12) (a) The Trustee or the Manager may at any time by

notice in writing require a Unitholder within

two (2) business days after service of the

notice, to furnish to the Trustee and the

Manager -

(i) a statement in writing setting out -

(aa) full particulars of his relevant

interest in the Units in the

Trust and of the circumstances

by reason of which he has that

interest; and

(bb) so far as it lies within his

knowledge -

(A) full particulars of the

name and address of every

other person (if any) who

has a relevant interest in

any of such Units;

(B) full particulars of each

such interest and of the

circumstances by reason of

which the other person has

that interest; and

(C) full particulars of the

name and address of each

person (if any) who has

given to the Unitholder

instructions in relation

to any matter concerning

the Units and of those

instructions, and the date

or dates on which those

instructions were given;

and

(ii) a true copy of every letter,

agreement, declaration of trust, deed

and without limitation document in his

possession or within his control

creating, evidencing or referring to

the interest of every other person (if

any) who has a relevant interest in

any of the Units in the Trust held by

him.

(b) Where the Trustee or the Manager received,

pursuant to a notice under paragraph (a) above

given to a unit holder or pursuant to a notice

under this paragraph (b) information that -

(i) another person has a relevant interest

in any of the Unit; or

(ii) another person has given instructions

in relation to any matter concerning

the Units;

the Trustee or the Manager may by notice in

writing require that other person within two

(2) business days after service of the notice,

to furnish to the Trustee and the Manager -

(iii) a statement in writing setting out -

(aa) full particulars of any relevant

interest that the person has in

any of the Units and of the

circumstances by reason of which

he has that interest; and

(bb) so far as it lies within his

knowledge -

(A) full particulars of the

name and address of every

other person (if any) who

has a relevant interest in

any of such Units;

(B) full particulars of each

such interest and of the

circumstances by reason of

which the other person has

that interest; and

(C) full particulars of the

name and address of each

person (if any) who has

given to the person to

whom the notice is

addressed instructions in

relation to any matter

concerning the Units and

of those instructions, and

the date or dates on which

those instructions were

given; and

(iv) a true copy of every letter,

agreement, declaration of trust, deed

and without limitation document in his

possession or within his control

creating, evidencing or referring to

the interest of every other person (if

any) who has a relevant interest in

any of such Units.

(c) If the requirements of any notice referred to

in paragraphs (a) or (b) above are not

complied with within the time so specified,

the Trustee or the Manager with the approval

of the Trustee may:-

(i) refuse to register a transfer of such

Units;

(ii) prohibit the exercise of any voting or

other rights attached to such Units

and in the event of an exercise or

purported exercise of such rights the

same shall, should the Trustee have so

resolved, be disregarded for all

purposes;

(iii) suspend payment of any dividends or

other moneys payable on or in respect

of such Units;

(iv) suspend the issue of any bonus or

other Units that would or otherwise

may be issued directly or indirectly

by reason of a person holding such

Units; or

(v) cause such Units to be sold upon any

member exchange of the Australian

Stock Exchanges or at a time when

Units are not or are no longer

Officially Quoted at such place as the

Trustee determines and at a price as

calculated for a Unit issued in

accordance with this deed.

(d) In the event of any Units being sold pursuant

to paragraph (c) above, the Trustee or the

manager may:-

(i) if the Units so sold are registered on

a branch register, cause such Units to

be transmitted to the principal

register without any request or

consent of the Unitholder;

(ii) appoint a person to execute on behalf

of a Unitholder the transfer of such

Units and to receive and to give a

good discharge for the purchase money;

(iii) register the transfer notwithstanding

that the Certificate for the Units may

not have been delivered to the Trustee

or the manager, and issue a new

certificate to the transferee, in

which event the previous certificate

shall be deemed to have been

cancelled.

(e) The purchase money in respect of the Units so

sold less the expenses of sale shall be paid

to the person in whose name the Units were

registered immediately prior to the sale

thereof. After the purchaser's name has been

entered into the Register in respect of such

Units, the title of the purchaser to such

Units shall not be called into question on any

legal ground."

54. The following definitions are given in cl.1 for some of the expressions contained in cl.61:

"Official quotation" means Official Quotation by Australian

Stock Exchange Limited in respect of the Units.

"Takeovers Code" means the Companies (Acquisition of Shares)

(New South Wales) Code and any amendment thereof or

substitution thereof or the corresponding Act or Ordinance of

any other State or Territory of the Commonwealth of Australia

as the case may be.

(The applicable provisions are now in Chapter 6 of the

Corporations Law)

"Unit" means that interest or part in the Fund as is provided

for in this Deed and except where the context otherwise

requires includes Ordinary Units, Special Units, Fully Paid

Units and Partly Paid Units.

55. Other relevant provisions of the deed are as follows:

"COMPLIANCE WITH STATUTORY COVENANTS

1A. Notwithstanding any other provision of this Deed

(including any provision of this Deed which purports to

apply notwithstanding other provisions of the Deed) the

Manager and the Trustee covenant with one another

respectively and the Unitholders covenant with the

Trustee, with effect throughout the duration of the Trust

to comply with the covenants from time to time required

by Section 1069 of the Corporations Law ("the Law") to be

contained in the Deed and further covenant to comply with

the requirements of Division 5 of Part 7.12 of the Law as

applicable in relation to the Deed subject to any relief

granted by the Australian Securities Commission under

Section 1084 of the Law.

UNITHOLDERS BOUND BY DEED

58. All Unitholders shall be entitled to the benefit of and

shall be bound by the terms and conditions of this Deed

and any deed executed under clause 55.

(SECOND SCHEDULE)

General Conditions Applying to Units

Registration of Holdings

6. Whenever the Manager is required to register a person as

a Unitholder or Optionholder it shall cause such person

to be entered on the Register and following registration

there shall be issued by the Manager to such person a

certificate or certificate in or to the effect of the

form set out in the Fourth Schedule to this Deed subject

to such notification as the Manager may with the consent

of the Trustee prescribe evidencing the title of such

person to the Units. Any Unitholder or Optionholder

shall if he so requests be issued with certificates in

reasonable denominations in respect of his Units or

Options.

Transfer of Units and Options

14. (1) All transfers of Units and Options shall be

effected by transfer in writing on the Australia

Associated Stock Exchange common form of transfer

or in such other form as the Manager may from time

to time decide and which is approved by the

Trustee.

(2) Every instrument of transfer shall be executed by

the transferor and delivered to the Manager and

the transferor shall be deemed to remain the

proprietor of the Units or Options until the name

of the transferee is entered in the Register in

respect thereof.

(3) (i) The Manager may decline to recognise any

instrument or transfer unless the instrument

or transfer is duly stamped and is

accompanied by the relevant Certificate or

Certificates and such other evidence as the

Manager may reasonably require to show the

right of the transferor to make the

transfer.

(ii) Upon the making of an entry of a transfer

the Certificate which accompanies the

relevant instrument of transfer shall be

cancelled by the Manger and a new

Certificate for the Units or Options

transferred shall be issued by the Manager.

If any of the Units or Options comprised in

the first mentioned Certificate have not

been transferred a new Certificate for the

balance of the Units or Options comprised

therein and not transferred shall be issued

to the transferor.

(4) Upon being satisfied that the foregoing provisions

of this paragraph have been complied with as

regards any transfer the Manager shall make the

appropriate entry of the transfer in the Register

PROVIDED ALWAYS that the Manager may decline to

register any transfer when the Register is closed

for any purpose.

(5) Subject as aforesaid there shall be no restriction

on the transfer of Units or Options.

(6) Prior to Units being Officially quoted or at any

time after Units have ceased to be so quoted the

Manager may decline to register any transfer of a

Partly Paid Unit to any transferee of whom the

Manager does not approve.

(7) While Units are Officially quoted the Manager may

in its absolute discretion require any transfer of

Partly Paid Units to be accompanied by a statutory

declaration by the intended transferee (or, if the

intended transferee is a company, by an authorised

officer of the transferee) acceptable to the

manager stating that the intended transferee is

financially able to pay the balance of the Issue

Price payable on those Partly Paid Units and may

require the intended transferee to produce

evidence acceptable to the Manager to confirm that

statutory declaration. The Manager may decline to

register any transfer of Partly Paid Units in

relation to which any such requirements by the

Manager are not met."

56. The ASX Listing Rules by rule 3J(31)(a) provide:

"(31) (a) A Unit Trust shall not include any sanctions or

penalties in its Trust Deed which entitle the

management company, the trustee or any other

party to enforce any provisions in the Trust

Deed relating to takeover offers or substantial

unit holdings."

57. This issue has to be considered in the light of the case pleaded in the applicants' statement of claim in its further amended form. The following is a brief summary.

58. After identifying the parties and setting out the history of the acquisitions and transfers of 29 and 30 March and the registration of those transfers, the statement of claim then pleads that various of the BT parties had a "relevant interest" in units and were "associated with" other parties and were "entitled to" units within the meaning of cl.61. It is then pleaded by par.14 that "(b)y the terms of the trust deed there were express covenants or terms to the effect, inter alia, that ..." There then follow (a) a term expressed in the language of cl.61(2) and (b) a term that "all unitholders of the trust were and are as such unitholders bound by the terms of the trust deed." It is further pleaded in par.15 as follows:

"15. Further, by the terms of the Trust Deed there were

implied covenants or terms to the effect that:

(a) a person would not be entitled or be eligible to:

(i) acquire any units or any legal or equitable

interest in any units, where such acquisition

infringed, contravened or would result in or

have the effect of causing an infringement or

contravention of Clause 61(2);

(ii) be registered or remain registered as the

holder of any units where the acquisition by

that person of any legal or equitable interest

in the units infringed, contravened or would

result in or have the effect of causing an

infringement or contravention of Clause 61(2);

(b) (i) a unitholder would not dispose of or transfer

his units to a person (whether another

unitholder or not) where the acquisition

infringed, contravened or would result in or

have the effect of causing an infringement or

contravention of Clause 61(2) or where the

person so acquiring the same was not eligible

to acquire or become the registered holder of

such units; alternatively

(ii) a unitholder would not dispose of or transfer

his units to a person (whether another

unitholder or not) where he knew or ought to

have known that the acquisition would infringe,

contravene or would result in or have the

effect of causing an infringement or

contravention of Clause 62(2) or where the

person so acquiring the same was not eligible

to acquire or become the registered holder of

such units;

(c) (i) a unitholder or a person otherwise bound by the

terms of the Trust Deed would not be a party to

a transaction or become associated with another

person where the purpose or effect or result of

the transaction or such association would cause

an infringement or contravention or would

result in or have the effect of causing an

infringement or contravention of Clause 61(2);

alternatively

(ii) a unitholder or a person otherwise bound by the

terms of the Trust Deed would not be a party to

a transaction or become associated with another

person where the purpose or effect or result of

the transaction or association would be to

cause an infringement or contravention or would

result in or have the effect of causing an

infringement or contravention of Clause 61(2),

and where such unitholder or person so bound by

the terms of the Trust Deed knew or ought to

have known of such purpose, effect or result."

59. The statement of claim pleads by paras.16 and 17 that the various acquisitions on 29 and 30 March "were not made as provided for in cl.61" and, by par.19, that each of the BT entities are not entitled to continue to hold any legal or equitable interest in the acquired units or to be registered as holders of those units. Similar allegations are made in respect of SPCA and TJT. It is further alleged by par.20 that each of the BT entities' rights in relation to the acquired units, including their entitlement to remain registered, were subject to cl.61(2) and that each of the BT entities was bound to observe and were subject to the terms of the trust deed. It is then said by par.21 that "(w)rongfully and in breach of the terms of the trust deed" each of the BT entities "acquired the units and procured themselves to be registered as holders of the units and continued to hold the units". By par.22 it is alleged in the alternative that "wrongfully and in breach of the terms of the trust deed" each of the BT entities by acquiring the units and continuing to remain registered as holders have "infringed or contravened cl.61(2) and engaged in conduct which infringes or contravenes cl.61(2) where each entity knew or ought to have known of such result or effect". Paragraphs 23 and 24 make similar allegations against SPCA and TJT.

60. Under the heading "Consequences of Breaches of the Trust Deed and/or Ineligibility of the BT Entities, SPCA and TJT to Hold the Relevant Units" par.25 alleges that the BT entities are under an obligation to make an offer in accordance with cl.61(3) to all unitholders to purchase the unitholding at the highest price paid for the acquired units. By par.26 it is alleged that the BT entities, SPCA and TJT are not entitled to be registered or continue to be registered and accordingly the transfers and registrations were void or voidable and the BT entities are not entitled to any rights other than that they are to dispose of the acquired units in accordance with Court orders. Par.27 is a plea that the Court should order that the transfers and registrations should be avoided. Par.28 alleges breach of the trust deed by the vendor entities and par.29 by the original BT holders.

61. Under the heading "Corporations Law Breaches" par.30 alleges that the covenants or terms of the trust deed referred to in par. 14 and 15 constituted "covenants" within the meaning of s.1073(1A) of the Corporations Law in respect of an "approved deed". Par.31 alleges that the various breaches by the BT entities, SPCA and TJT, the vendor entities and the original BT holders constitute a breach of s.1073 of the Corporations Law. Par.32 alleges that each of the BT entities aided, abetted etc., induced or attempted to induce etc. was directly and indirectly knowingly concerned in and conspired with each other and thereby became "a person involved in the contraventions" and subject to the jurisdiction of the Court under ss.1324 and 1325 of the Corporations Law. Paragraph 33 makes similar allegations against SPCA and TJT. Paragraph 34 alleges that BT entities threaten to exercise all the rights attaching to the acquired units, unless restrained by the Court.

62. Under the heading "Procuring Breach of Trust Deed" pars.35 and 36 alleged that the BT entities, SPCA and TJT knew of the terms and conditions of the trust deed pleaded in pars.14 and 15 and knowingly and wrongfully procured and induced breaches of the deed as alleged.

63. Paragraphs 37 to 42 are under the heading "Misleading and Deceptive Conduct of the BT Entities" and paras.43 to 46 are under the heading "Misleading and Deceptive Conduct of SPCA and/or TJT". These paragraphs make allegations of breaches of s.52 of the Trade Practices Act 1974 (Cth) and equivalent State legislation in the inducement of Heine to make the registrations.

64. Paragraph 47 alleges that the applicants have suffered damage as a result of the various breaches of the trust deed, the Corporations Law, the Trade Practices Act and the equivalent State legislation. Under the heading "The Manager" paras.48 to 50 allege that the BT entities threaten to requisition and vote at a general meeting of unitholders for the removal of Heine as manager of the Trust. It is said the trustee has determined it will not bring these proceedings as trustee of the Trust and that in the premises the manager has determined that it is in the interests of the unitholders of the Trust other than the BT entities that these proceedings be brought. Under the heading "The Trustee" par.51 alleges that the trustee ought to have instituted a proceeding but has neglected, failed or refused to do so, that the trustee is a vendor entity, a current unitholder of the trustee and a related body corporate to one of the original BT holders and accordingly the trustee has an interest in the outcome of these proceedings and the relief sought and the different capacities, each of which conflict with each other. Par.54 alleges that Heine has brought these proceedings given the failure of the trustee to bring proceedings in his own name, given the conflict of duty and its interest in the outcome of these proceedings. The concluding pars 55 and 56 deal with a claim for relief as set out in the application and invocation of the cross-vesting legislation.

65. Counsel for the respondents relied on the well established general principles that the trustee is the appropriate plaintiff to sue in respect of damage to the trust property or to enforce a contract on behalf of the trust; the beneficiary can only sue a third party in exceptional circumstances and it is not sufficient for the beneficiary in order to be able to sue in his own name, to show merely that the trustee refused to sue. See Sharpe v San Paulo Railway Company (1873) LR 8 Ch App 597 at 609-610, Meldrum v Scorer (1887) 56 LT 471 at 473, Hayim v Citibank NA (1987) 1 AC 730 at 747-8, Young v Murphy (unreported, Supreme Court of Victoria, Appeal Division, 27 June 1994).

66. I do not think those principles are determinative of the question whether the present applicants have standing to sue. The issue of standing should not be confused with the merits of the claim sought to be made. In the present case, as the summary of the statement of claim shows, the applicants' claim is primarily a contractual one. The objection that the deed of trust does not constitute a contract on which the applicants can sue is a matter going to the merits of their claim, but not a reason for denying standing to sue. Moreover, the case of the applicants includes an allegation that the covenants and terms of the trustees are "covenants" within the meaning of s.1073(1A) of the Corporations Law. If this be correct - and again that is a matter going to the merits of the claim - then there is a statutory prohibition of breach of such a term and the applicants would have standing to sue in respect of that breach of law: Onus v Alcoa of Australia Ltd [1981] HCA 50; (1981) 149 CLR 27.

67. Finally, I think there is also a standing to sue on the general exception applicable where the trustee has declined to sue and has a conflict of interest as alleged in pars.51 to 54.

68. A long standing feature of companies legislation is that the memorandum and articles of a company have the effect of a contract under seal between the company and each member, and between each member and each other member, under which each agrees to observe and perform the provisions of the memorandum and articles as in force for the time being so far as those provisions are applicable to that person. The current provision will be found in s.180 of the Corporations Law.

69. It is essential for the applicants' contractual case that the position be the same under the Trust and that the trust deed forms a contract between unitholders.

70. Some clauses of the trust deed, cll.1A and 58, were relied on by the applicants. But cl.1A is confined to the specific covenants required by s.1069 and a covenant to comply with Division 5 of Part 7.12 of the Corporations Law. Moreover, it specifies covenants between manager and trustee and between unitholders and trustee - but not between unitholder and unitholder. Clause 58 does not in terms suggest there is a contract as between unitholders.

71. There is a more fundamental reason why the applicants fail on this ground. That reason is explained by Professor H A J Ford and Mr W A Lee in Principles of the Law of Trusts (2nd Edition, 1990, at p.48) as follows:

"Trust distinguished from an association

A trust under which several persons are beneficiaries is not

of itself an association. For an association to be

significant in law a court must be able to see that the

members have mutual rights and obligations. If persons share

the common characteristic of being beneficiaries under a

particular trust but are not linked by mutual rights and

obligations, they are not an association: if a testator

creates a trust for her or his nephews and nieces that does

not require that there should be any mutual rights and

obligations between them. That proposition is important in

relation to the form of common fund investment trust such as

that known as a unit trust under which investments are held by

a trustee upon trust for persons who have subscribed money for

investment, either privately or in response to public

solicitation. The framers of a unit trust have to steer clear

of the provision in companies legislation that an association

of more than a prescribed number of members which is formed

with the object of the acquisition of gain by the association

or the individual members thereof must be registered as a

company (Corporations Law s.112). A trust will not be an

association within that provision if mutual rights and

obligations do not exist between the beneficiaries.

In Smith v Anderson (1880) 15 Ch D 247 shares in

submarine telegraph companies were held upon trust for

certificate-holders who had subscribed funds for

investment. A certificate-holder's attempt to have the

trust terminated on the basis that it was an illegal

association because the certificate-holders numbered more

than the limit prescribed by the Companies Act 1862

(Eng) for an unregistered association, failed because

there was no contractual link between the

certificate-holders.

If the trust deed had provided that the trustee was also the

agent of the certificate-holders and if that agency had

included power to invite further persons to join the existing

certificate-holders in a mutual enterprise, the

certificate-holders would have been an association."

72. In Smith v Anderson (1880) 15 Ch D 247 James LJ, speaking of the position of two certificate-holders in the trust there under consideration, said (at 274):

"The first man knows nothing of the second, and the second

knows nothing of the first; they have never come into any

arrangement whatever as between themselves. There never has

been anything creating any mutual rights or obligations

between those persons. They are from the first entire

strangers who have entered into no contract whatever with each

other, nor has either of them entered into any contract with

the trustees or any trustee on behalf of the other, there

being nothing in the deed pointing to any mandate or

delegation of authority to anybody to act for the certificate

holders as between themselves, and nothing, as it appears to

me, by which any liability could ever be cast upon the

certificate holders either as between themselves or as between

themselves and anybody else. Therefore, I cannot arrive at

the conclusion that the certificate holders form an

association within the meaning of this Act of Parliament, any

more than the persons who subscribe for debentures in a

railway, or the Bolivian Bondholders (whose case was before us

in Wilson v Church 13 Ch D 1), or the creditors in Cox v

Hickman [1860] EngR 1068; 8 HLC 268. Persons who have no mutual rights and

obligations do not, according to my view, constitute an

association because they happen to have a common interest or

several interests in something which is to be divided between

them." (Emphasis added)

73. The applicants relied on Gra-Ham Australia Pty v Perpetual Trustees W A Limited (1989) 1 WAR 65. That case involved a unit trust very like the one with which the present case is concerned. The trust deed provided for redemption of units based on the value of the fund as at the end of the previous month. This could operate so that the purchase price was calculated as at a date some time before the request. The stock market crash of October 1987 greatly diminished the value of the trust's assets. Certain unitholders gave notice of redemption and under the terms of the trust deed as it stood would have been entitled to redemption at a value calculated as at the end of September, i.e. before the crash. A meeting of unitholders approved a supplemental deed which had the effect of reversing that position.

74. The proceedings in the Supreme Court of Western Australia were brought not by unitholders but by the trustee who by originating summons sought determination of a question as to whether the resolution for variation and the supplemental deed were valid. Objecting unitholders were joined as respondents. The trial judge (Kennedy J) and the Full Court all held that the provisions of the trust deed relating to amendment were governed by the same principles that applied to the amendment of the articles of association of companies, the leading cases being Allen v Gold Reefs of West Africa Ltd (1901) Ch 656 and Peters' American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457. Malcolm CJ cited (at 77-78) the following passage from the judgment of Kennedy J at first instance which, very helpfully for present purposes, compares companies and unit trusts. Kennedy J said:

"... there are of course both similarities and differences

between companies and unit trusts. The modern company,

however, finds its ancestry in a particular kind of deed of

settlement unincorporated companies - see H Pettit, Equity

and the Law of Trusts, (5th ed, 1984) p 13 - and in Peters'

American Delicacy Co Ltd v Heath [1939] HCA 2; (1939) 61 CLR 457 at 502,

Dixon J observed that `the power of altering articles of

association now conferred by statute had its analogue, if not

its source, in clauses found in deeds of settlement by which

a specific majority of the members of companies constituted or

registered by such instruments were empowered to alter or add

to their provisions.' Furthermore, as Gower has pointed out,

unit trusts offer to the public an investment practically

indistinguishable from shares in a limited company - L C R

Gower, The Principles of Modern Company Law, (4th ed, 1979) p

266. No doubt it is due to this similarity that Units

constitute prescribed interests within the meaning of the

Companies (Western Australia) Code, so as to attract the

application of Div 6 of Pt IV - see, in particular, s 166.

But, unlike the position as between shareholders in a company

- as to which, see s.78(1) of the Code - there exist no mutual

rights and obligations between unitholders, and unitholders

generally have a proprietary interest in the fund - see cl

4(6) - in contrast to the position of shareholders in relation

to the assets of a company - see Charles v Federal

Commissioner of Taxation [1954] HCA 16; (1954) 90 CLR 598, and, in

particular, (at 609). Finally as already noted, the power to

amend the article of a company is a statutory power - see now,

s 76 of the Code." (Emphasis added)

75. The passage relied on by the applicants in the present case is in Malcolm CJ's judgment (at 81). His Honour has just cited a number of propositions by Latham CJ in Peters' at 479-482 which included

"(ii) The contract between members of the company and between

the company and its members which is constituted by the

articles must be regarded as containing amongst its

terms a provision that articles may be altered in the

manner provided by the Act."

"These propositions were accepted by the House of Lords in

Southern Foundaries Ltd (1926) v Shirlaw (1940) AC 701. In my

opinion all of the propositions, apart from the first which

relates to the statutory power, apply equally to a trust deed

for a unit trust as they did to a deed of settlement of the

kind under which limited companies were once established. In

the present case the contract between the unitholders

themselves and between the manager and the unitholders contain

provisions for alterations of existing or accrued rights.

Even if the alteration constituted a breach of an existing

contract between the manager and any individual unitholder,

such a breach would not invalidate the amendment."

77. I do not think his Honour was intending to gainsay the principle established by Smith v Anderson. His Honour's implicit approval of the passage from Kennedy J's judgment is quite inconsistent with any such conclusion. In any case, Gra-Ham did not raise any question of contract as between unitholders. The proceeding was brought by the trustee who sought a determination of the construction of the trust deed. The only relevant legal issue was whether the principles established in relation to the amendment of companies' articles of association were applicable by way of analogy to the amendment of the deed of trust of a unit trust.

78. In my opinion the central basis of the applicants' claim, viz that the trust deed constitute a contract between the unitholders, is bad in law. Does the Trust Deed Contain the Contractual Terms Alleged?

79. If the foregoing conclusion is wrong, the applicants would still have to show that, as a matter of construction, the trust deed contains the contractual terms alleged, and in particular, those pleaded in pars.14 and 15 of the statement of claim.

80. Since the trust deed is not a legislative instrument, the prohibition in cl.61(2) ("... a person shall not ... acquire or be eligible to acquire units ...") cannot be a command directed to all the world. Rather, it must be read as a statement of particular "restrictions" (cl. 61(3)(a)) which will operate to prevent persons becoming unitholders. It is a statement of criteria of ineligibility.

81. The restrictions are intended to operate at or after allotment or registration. The manager is given by cl.61(11)(a) wide power to decline allotment or registration to avoid an "infringement or contravention" of cl.61(2) and, by cl.61(11)(b), a power to direct disposal after registration. This power can be exercised in the manager's "absolute discretion" if it thinks the allotment or registration "would or might" (emphasis added) have the proscribed effect. This power is in marked contrast to the general provisions for registration (Second Schedule, cl.14) which only give the manager power to decline registration if the transfer is not duly stamped, accompanied by the certificates of registration and "such other evidence as the manager may reasonably require to show the right of the transferor to make the transfer" (cl.14(3)(i)).

82. Thus cl.61(11)(a) makes the manager the gatekeeper. The trust deed confers an armoury of sanctions and penalties in aid of that function. As I have noted, the manager can by cl.61(11)(b)(i) compel disposal of units where the manager is satisfied that they have been acquired "in such circumstances as might or would in the opinion of the manager result in or have the effect of causing an infringement or contravention of" cl.61(2). The first step in this compulsory disposal process is the giving of a notice. In default of compliance the manager can sell the units concerned on the Stock Exchange: cl.61(11)(c). But, importantly, this last-mentioned term is subject to a proviso in substantially the same terms as the proviso to cl.61(11)(a).

83. In order to investigate possible infringement or contravention of cl.61(2) the manager may by notice require the furnishing of "information ... as the manager may consider likely to be of assistance" by (amongst others) transferees or unitholders: cl.61(11)(h). More specific information may be sought of unitholders under cl.61(12)(a). The sanction for non-compliance with the latter notice includes refusal to register, prohibition or suspension of voting and dividend rights and disposal of the units: cl.61(12)(c).

84. For the purposes of the present proceedings, two conclusions are to be drawn.

85. First, the trust deed the gatekeeping function is imposed on the manager. If a person becomes registered as a unitholder by way of "infringement or contravention" of cl.61(2) that result can only come about by the act of the manager. If anyone is to be sued, the manager would be the most obvious target. (Much of the complexity of this case is due to attempts to overcome the fact that while registration is complained of, it is the applicant Heine itself which performed that registration.) But cl.61(11)(g) provides:

"Nothing in this sub-clause (11) shall render the manager

liable or responsible by reason of any person acquiring units

in the Trust in contravention of sub-clause (c) or failing to

comply with the obligations imposed by paragraph (c) of

sub-clause (10)."

86. I find it impossible to spell out of the trust deed any contractual obligation on anybody other than the manager not to cause or permit an infringement or contravention of cl.61(2). Certainly there is no such express obligation - once it is accepted that cl.61(2) itself is not a command but a "restriction" or a statement of disqualifying criteria. Nor do I see how such a term could be implied. Such a term would fail a number of the BP (Westernport) tests ((1979) [1977] HCA 40; 52 ALJR 20 at 26). It would not be necessary to give business efficacy to the contract; for the reasons shortly to be stated the contract can work quite well without such a term. It would not be so obvious that it "goes without saying". It would be inconsistent with the express terms of the contract which have conferred wide powers on the manager designed to prevent infringement and contravention of cl.61(2) but at the same time absolved the manager from any liability or responsibility for the exercise (or non-exercise) of that function.

87. Counsel for the respondents argued that cl.61 included a self-contained code for its own enforcement by the manager. I would however prefer an analysis in the following terms. Clause 61 provides a mechanism for preventing would-be infringers or contraveners of cl.61(2) from becoming registered as unitholders and removing them from the register when they do. But that mechanism is not constructed by the imposition of contractual obligations. Power is given to the manager (and nobody else) to achieve those objects. But that power does not involve contractual obligation on the manager (see cl.61(11)(g)), still less on anybody else.

88. Heine has not sought to exercise those powers in the present case (other than by the giving of notices under cl.61(11)(h) and (12)(a)). There is no basis on which the Court should, or can, intervene.

89. For the same reasons, s.1073(1A) of the Corporations Law has no application. Relevantly there is no "covenant", which I take to mean a contractual promise, by any of the respondents - or even by Heine itself.

90. The second conclusion is that the provisos to cl.61(11)(a) and (c) have the effect that the critical power to refuse registration (cl.61(11)(a)) and compel disposal (cl.61(11)(b)(i) and (iii) are simply not available. This is because the Trust is currently listed on the ASX and the Listing Rules currently do not permit sanctions or penalties of that kind to be enforced: rule 3J (31)(a). The condition contained in the trust deed itself has been satisfied.

91. The Listing Rules may be amended and the ASX may "in its absolute discretion waive compliance" with any Rule or part of a Rule: see Foreword to the Listing Rules. In effect the Listing Rules have required unit trusts to hand over to the ASX the power to decide whether takeover restrictions analogous to those in Chapter 6 of the Corporations Law are to apply.

92. Listed trust units and listed company shares are, as a matter of commercial reality, closely analogous to one another notwithstanding their conceptual legal differences. There may be room for argument as to why they should be treated differently in respect of takeovers. Some witnesses in the present case with very substantial commercial and legal corporate experience were unable to suggest any obvious policy reason.

93. However, the legislature has accepted that unit trusts and shares should be treated differently in this regard. It was not suggested that Chapter 6 of the Corporations Law or any other legislation applied by its own terms to unit trusts, listed or unlisted, so as to restrict takeovers. And the fact remains that the ASX required the trust deeds of the Trust to be amended to include the provisos. This requirement was accepted by Heine. Had it not been accepted, Heine's objective in obtaining listing, and the benefits which flow from listing, would not have been achieved.

94. The applicants sought to overcome any obstacle to relief which might arise from the fact of registration by contending that such registration was induced by misleading and deceptive conduct in contravention of s.52 of the Trade Practices Act 1974 (Cth) and equivalent State legislation.

95. This was put in two ways. First, Heine was induced to register the transfers by the BT entities (Beaglemoat, Fonscan and the fifty individuals) lodging the transfers for registration and "failing to disclose facts and circumstances which if disclosed would have caused the manager not to register the BT entities". Secondly, it was said the BT entities failed to "disclose to the vendor entities their disentitlement" which ultimately led to the BT entities being able to acquire their units.

96. There are a number of answers to the first contention. The BT entities did not in my opinion mislead or deceive Heine in any way. On 30 March it was made clear to Heine, and to the public, that BTAL and its related companies had acquired on behalf of various unit trusts 51 per cent of the units in the Trust. That was undoubtedly true. It is not suggested that any further incorrect information was provided to Heine between then and 26 April when the transfers were registered. Silence can be an element in conduct which, in the particular circumstances, is misleading and deceptive: Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 32, 40-41. But insofar as Heine sought further information from BT after 30 March there was nothing misleading or deceptive in BT's conduct. Rightly or wrongly, BT may not have provided some of that information to Heine. However the non-provision of that information did not make any information BT had provided untrue, or a half-truth.

97. Further, Heine did not rely on any conduct by Heine. The reality in my view is that by 21 April Mr Heine was determined to avoid registering the transfers if he could find an excuse. He indicated that intention to Mr Hartnell. Heine registered the transfers because of the ultimatum presented by the ASX: register or refuse to register - or be suspended. Heine's choice had nothing to do with any conduct of BT.

98. As to the second contention, there is no basis for finding that vendors of the units were misled or deceived. None of them was called as a witness. The only conclusion to be drawn on the evidence is that they sold because they were offered a good price by brokers acting for undisclosed principals.

99. I have thus far concluded that the trust deed does not form a contract between the unitholders, but that even if it does, such contract does not create any contractual obligations for the enforcement of cl.61(2). I have further held that the provisos have the effect that even if such obligations do exist they do not apply because of the listing rule 3J(31)(a).

100. If I am wrong in all these conclusions, the question then arises whether the acquisitions which occurred on 29 and 30 March infringed or contravened cl.61(2). Substantial argument was advanced on this issue. It raises complex questions of the construction of the takeover provisions in the light of the rather complicated transactions which occurred and the relationship between the various parties. None of this, however, raises any dispute of primary fact. I do not think it is appropriate to embark on a consideration of this issue. It is not necessary for the resolution of the application and would delay delivery of a judgment which is already under severe time constraints.

101. I should note also that this consideration did not in fact form any part of BT's thinking. All of BT's internal considerations and legal advice prior to the acquisition have been opened up. There is no hint of any opinion that if, contrary to BT's belief, the takeover provisions did apply, then the structure being adopted would nevertheless not result in a breach of those provisions. The argument that there was no breach arises entirely after the event. Moreover, if the argument is correct it would mean that BT could acquire 51 per cent of a company's shares simply by adopting the same structures. BT would have stumbled by chance on a corporate philospher's stone.

102. In any case, were the applicants' case otherwise made out I would exercise a discretion against granting any of the relief sought. Such relief should not, in my view, be granted to Heine because the takeover provisions statement was, as I have found, relied on by BT. I think there is an estoppel on the basis established in Bloomenthal v Ford (1897) AC 156, 160-1, 166-7.

103. Turning to the other applicant, AF and ME Pty Ltd and the unit holders which it represents, it might at first be thought that they stand on a better footing. However, no evidence has been called on behalf of any of those unitholders to suggest that they had any belief or expectation that the takeover provisions would have applied. Those that acquired units after the issue of the prospectus or the information memorandum would have been hard put to maintain such a position. Even those who acquired units at an earlier time could not have done so on any expectation that the statutory control of takeovers applied to unit trusts. As pointed out by Green and Dahr (Takeovers of Public Unit Trusts (1991) Australian Business Law Review 19) there was, and still is, a "regulatory void".

104. It may be safely inferred that the unit holders who sold to BT obtained a price that was higher than that generally available: Heine sold units itself in February at $1.24. To that extent those vendors have received a premium for control not available to other unitholders. But any present holder of units in the trust could only have understood from the terms of the trust deed and the legislation that units in trusts do not carry the benefit of protection in takeovers conferred by legislation on shares in companies. Units must be taken to have been acquired for a value which takes that disadvantage into account. In other words, they would be cheaper to buy than a share in a company with the same net assets. There does not seem to be any good reason why holders of such units should be awarded a windfall by an order of the Court giving them a valuable extra right which they could not reasonably expect.

105. The application will be dismissed with costs, including reserved costs.