AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Limited [2015] NSWSC 216 | Case summary

Supreme Court of NSW|2015-02-19|Before: Bergin CJ

Judgment

By Summons filed on 28 November 2014 the plaintiff, AIT Investment Group Pty Limited, seeks an order that the defendant, Markham Property Fund No 2 Pty Ltd (the Trustee) as trustee for the M2 Property Trust (the Trust) produce to the plaintiff for inspection (and permit it to make a copy of) the register of Unit Holders of the M2 Property Trust (the Register) maintained by the Trustee pursuant to clause 18 of the Trust Deed.
The matter was heard on 19 February 2015 when Mr A Leopold SC leading Mr PT Russell, of counsel, appeared for the plaintiff and Mr NC Hutley SC leading Ms K Richardson, of counsel, appeared for the Trustee.

BACKGROUND

The Trust is a private trading trust and its major asset is a long term sub-lease from the Sydney Harbour Foreshore Authority over the site at Darling Harbour on which the IMAX building is situated. The sublease has an initial term expiring in 2045 with five ten-year options. The Trustee has entered into contracts with third parties in relation to the redevelopment of the IMAX site which grant certain rights in relation to the sub-lease to those third parties.
The plaintiff holds 5,233,333 units of a total 11,918,408 units in the Trust. The sole director of the plaintiff is Sarkis Nassif.
Mr Nassif is also a director of the Trustee. The other directors of the Trustee are James Markham, James Murchison, Ronald Cotton, James Philips and Geoffrey Markham.
Markham Investments Management Pty Ltd (Markham Investments) is the investment manager of the Trust. James Markham is the sole director of Markham Investments and Markham Corporation Pty Ltd (Markham Corporation) is its sole member. Mr Markham is the sole director of Markham Corporation and Silvertide Investments Pty Ltd is its sole member. Mr Markham is the sole director and sole member of Silvertide Investments Pty Ltd.
In early 2012 the plaintiff made an offer to acquire all of the units in the Trust. It is apparent that this offer was accepted by all other Unit Holders. It is also apparent that six weeks later the plaintiff withdrew the offer. This apparently resulted in the wastage of significant expenses received by the Trustee in taking legal advice and preparing documentation. On 10 February 2012 the Board of the Trustee sought and obtained an assurance from the plaintiff that it, or any related company, "will not be participating with any future bidding with the sale of the IMAX property in the future" (the February 2012 undertaking).
On 12 September 2014 Markham Investments wrote to the plaintiff referring to recent discussions regarding the potential sale of the plaintiff's units in the Trust. That letter included a proposal for the plaintiff's exit from the Trust involving a "combination of redeeming certain units and arranging for the remaining units (after such redemption) to be acquired by other parties". The plaintiff's original cash investment in 2005 had been at $1 per unit totalling $5,233,333. The return of capital to 30 June 2014 was calculated as $1,769,258 with a remaining cash value from the original investment of $3,464,075. The net tangible asset value based on a proposed calculation was $1.47 per unit amounting to a total proposed consideration of $7,692,999.51 for the plaintiff's Units.
On 22 October 2014 the plaintiff's corporate advisor, PKF Lawler (PKF), wrote to Markham Investments advising that the plaintiff rejected its proposal. PKF then proposed that the plaintiff would purchase each unit in the Trust that it did not currently own at $3.39 per unit. That proposal contained a number of conditions, including that the plaintiff achieved a unit holding of 75%; that a meeting of Unit Holders would be requisitioned by the Trustee on or before 17 November 2014 to approve the retirement of Markham Investments as manager of the Trust and the appointment of Millinium Asset Services Pty Limited as a new manager; and that the Trustee was to retire as trustee of the Trust.
On 24 October 2014 Mr Markham wrote to PKF acknowledging receipt of the 22 October 2014 letter. Mr Markham advised PKF that he had provided a copy of the letter to each of the other directors of the Trustee and had asked them to convene promptly the following week to consider it. Mr Markham's communication included the following: The proposal raises complex issues for consideration, not least the implications of such a proposal on all existing legal agreements held by the M2 Property Trust. The Trustee Board has an obligation to consider these issues and relevant implications prior to communicating the proposal to unit holders.
On 28 October 2014 PKF wrote to Mr Markham confirming the plaintiff's rejection of the conditional proposal made to it on 12 September 2014 by Markham Investments. PKF advised that the plaintiff had made further inquiries and that "in the interests of ensuring that the offer is fully clarified, the offer foreshadowed in the Letter is withdrawn and replaced entirely by the new offer annexed to this letter".
The letter included the following: We request that the trustee or manager of the Trust: ● provide AIT with a copy of the register of Unitholders or a list of the names and contact details of the Unitholders of the Trust; and ● send AIT's new offer to Unitholders on AIT's behalf. Before any action is taken, please contact the undersigned to agree how the offer letter will be sent to Unitholders and the proposed timing for delivery of the offer and the convening of the meeting of Unitholders that is contemplated in clause 7.1 of the terms and conditions of the offer. We consider that it is in the best interests of Unitholders that they receive AIT's offer as soon as possible and we look forward to hearing how the trustee and manager can help facilitate this.
The offer that was enclosed was at $3.39 per Unit and was said to be open until 5.00pm on 28 November 2014.
On 30 October 2014 Mr Markham wrote to PKF confirming receipt of the replacement proposal and advising that he expected to meet with the Trustee directors early the following week. On the same day PKF wrote to Mr Markham with the following comments: 1. Whilst I appreciate that the Trustee may want to respond or more importantly make their own recommendation on the matter, I would ask that unit holders are sent out our proposal as a matter of urgency and without delay, as we believe that the unit holders should be made aware of my client's compelling offer and to allow them to consider our offer within the specified time period; and 2. That you have not responded to my point concerning providing us with the register for us to be able to despatch (sic) the offer to each unit holder.
On 4 November 2014 the Chairman of the Board of the Trustee, Mr Cotton, wrote to PKF referring to the proposal dated 28 October 2014. That letter included the following: Whilst I appreciate that your client considers this matter as urgent, the Offer involves serious and complex issues for the legally binding agreements the Trustee currently have in place, --- and the Trustee Board has an obligation and duty to carefully and properly consider these issues (and to obtain advice on these issues) in accordance with its fiduciary obligations to act in the interests of unit holders as a whole. The Trustee is also considering its legal obligations, in particular with respect to its confidentiality and privacy obligations, in respect of your clients request for the unit register for the Trust. The decision as to how to proceed with respect to the Offer and your client's request for the unit register is not a decision for James Markham, but is a decision of the Trustee board. Due to your client's conflict as a director of the Trustee and a director of AIT, in respect of the Trustee board meeting to consider the Offer scheduled for Wednesday 5 November 2014, I trust your client will understand that he will not be invited to participate in that board meeting and other future board meetings until this matter is resolved.
Mr Cotton also referred to the February 2012 undertaking and indicated that the Board was seeking advice in relation to whether it affected the plaintiff's offer.
On 4 November 2014 PKF responded to Mr Cotton's letter advising that Mr Nassif would not attend the Board Meeting and suggested that any undertaking given in February 2012 was not a continuing undertaking. PKF said that it awaited the Trustee's response on the "issue of the register".
On 7 November 2014 Mr Cotton wrote to PKF responding to the proposal in the letter dated 28 October 2014. That letter included the following: The Proposal raises some serious legal consequences and therefore risks for the Trustee, the Trust and unit holders. Many of these risks currently cannot be adequately assessed based on the information included in the Proposal.
Clarification of a number of matters was sought including how the proposal would deal with the change in control of the Trust and the Trustee requiring the consent of a third party under the contractual arrangements that were in place and the impact on leasing arrangements. The letter also included the following: Unit Holder's register and contact details The Trustee holds the unit register and the contact details of each unit holder on a confidential basis and in accordance with its privacy policy. It would be a breach of the Trustee's confidentiality obligations to each unit holder and its privacy obligations under its privacy policy (and applicable privacy laws) if the Trustee were to provide this information to AIT without first having obtained relevant unit holders' written consent. Further, as set out above, the Trustee has formed the view that before it sends the Proposal to unit holders, clarification of the matters listed above needs to take place so that it can fully explain the Proposal and AIT's intentions to unit holders. On this basis, the Trustee considers that providing the unit register or contact details of unit holders to your client at this time, for the purpose of your client using that information to send the Proposal to and to contact all unit holders, would not be in the best interests of the unit holders as a whole.
Mr Cotton advised PKF that the Trustee acknowledged that the plaintiff had requisitioned it to convene a meeting and that it fully intended to comply with its obligation. It was suggested that the plaintiff should extend the 20 November 2014 date to a later acceptable date.
On 11 November 2014 PKF forwarded to Mr Cotton a copy of a letter from Russells Lawyers, solicitors for the plaintiff, in respect of the matters raised in Mr Cotton's letter of 7 November 2014. That letter dealt with the various matters of control and impact on leasing arrangements and also included the following: 10. Unitholder register and contact details The Trust Deed clearly contemplates transactions between Unitholders for the sale and purchase of units. There are provisions that allow for sales and transfers of units between unit holders, rights of first refusal, drag along rights, and convening of meetings (including to remove the trustee). These types of transactions, which are expressly contemplated in the Trust Deed, envisage communications between Unitholders for these legitimates (sic) purposes. While it may be that the Register is confidential as between the Trustee and Unitholders and among Unitholders inter seg quite simply, the trust cannot work if the Trustee keeps the Register secret from the Unitholders. Hence, assuming that the Trustee does hold this information on a confidential basis (which is not at all clear), any such obligations of confidence will not be breached if the Trustee uses the Register to permit a Unitholder to communicate an offer to purchase to another Unitholder. In particular, it cannot be right that concerns regarding confidentiality prevent the Trustee from providing a copy of the unit register and unitholder contact details to an existing unitholder for the limited purpose of making an offer to acquire the units of fellow unitholders. … Quite apart from these express provisions in the Deed, even if one confines oneself to the narrow view of the beneficiary's entitlements (commonly referred to as "the Schmidt approach" qua Schmidt v Rosewood Trust), the Trustee must keep the Register. It is a constituent trust document. The Trustee must produce it to its beneficiaries.
On 14 November 2014 Mr Cotton wrote to PKF in terms that included the following: 10. Unitholder register The Trustee understands that the proposal dated 12 September 2014 (referred to in the Russells' lawyers letter at paragraph 10) was facilitated by the Manager on behalf of a third party to your client (after a meeting between them in which there was a mutual agreement for the Manager to arrange such an offer). That proposal was only in relation to your client's units and not other unit holders' units in the Trust. The assertion in the Russells' lawyers letter that the Trustee provided the unitholder register to Mr Markham for this purpose is not correct. The Trustee reiterates the position set out in my letter of 7 November 2014 on this issue.
In further correspondence on 17 November 2014 PKF suggested that the Register was a document "which all unitholders are entitled to see and should be forwarded to us without further delay". PKF advised that the plaintiff reserved its rights to seek an order from the Supreme Court for the production of the Register if it was not forwarded by close of business on 19 November 2014.
On 18 November 2014 Russells Lawyers wrote to Mr Cotton in terms that included the following: We confirm that Markham Trustee refuses to produce the Register of Unitholders for inspection by, and provide a copy to, AIT. We record that no satisfactory reason has been given for this surprising position. Without in any way endorsing the position of Markham Trustee, AIT and its professional advisors (our firm and PKF Lawler) are willing to undertake, and hereby undertake, to use the Register for the sole purpose of dispatching AIT's Offer to Unitholders, for discussing that Offer with them, and completing any contracts formed upon acceptance of such Offers. We invite Markham Trustee to reconsider its position.
On 20 November 2014 Mr Cotton advised PKF and Russells Lawyers that the Trustee's position remained unchanged.
On 27 November 2014 the Trustee circulated an Explanatory Memorandum attaching the plaintiff's offer of 28 October 2014. The Trustee identified what it regarded as the legal risks and structural issues and uncertainties in relation to the Offer. The Trustee also attached the correspondence between it and the plaintiff in respect of the requests made by the plaintiff including for the production of the Register.
In early December (1, 2 and 5 December 2014) a number of Unit Holders advised the Trustee in writing that they did not wish their details or personal information to be provided to the plaintiff.
On 3 December 2014 the plaintiff, through PKF, advised the Trustee that it had agreed to vary the terms of its offer. On 5 December 2014 the Trustee issued a Supplementary Explanatory Memorandum in respect of that variation.
On 5 December 2014 PKF provided to the Trustee a response to the Explanatory Memorandum which the Trustee then communicated to the Unit Holders. That response referred to alleged fundamental conflicts of interest of the Trustee and the Manager with an expression of concern that the Trustee may be in breach of its fiduciary duties to Unit Holders. It suggested that the Trustee was favouring its own interests and that of the Manager over the interests of all Unit Holders. It was critical of the Trustee's delay in dispatching the plaintiff's offer to the Unit Holders. It alleged that the Trustee and the Manager were "riddled with conflicts of interest and lack of independence". It took issue with the views that the Trustee had expressed in respect of the effect of legal obligations to third parties and put forward its reasons why the Unit Holders should accept its offer.
On 8 December 2014 the Trustee wrote to the Unit Holders addressing certain issues raised in PKF's response. The Trustee advised the Unit Holders that it was fully aware of its obligations to act in the best interests of the Unit Holders and was also cognisant of any conflicts. It advised that it had established a subcommittee comprised of Mr Cotton, Mr Philips and Mr Murchison (to the exclusion of both James and Geoffrey Markham) to deal with the plaintiff's proposals, requests and offer.
The meeting of Unit Holders was held on 11 December 2014. A scrutineer, Company Matters Pty Limited, attended the meeting. Company Matters was appointed by the Trustee's legal advisers to act as an independent scrutineer and to record the various processes in relation to voting at the meeting.
The three resolutions proposed by the plaintiff were put to the meeting. They were: Resolution 1: That each sale or transfer of units arising from an acceptance of the Offer is approved (for the purpose of clause 21.3(c) of the trust deed for the Trust dated 31 October 2004 (as amended) (Trust Deed)). Resolution 2: That the Trustee is directed not to exercise its power under clause 21.14 of the Trust Deed to refuse to register any transfer of units that occurs as a result of acceptance of the Offer. Resolution 3: That the Investment Term (as defined in the Trust Deed) is extended to 1 July 2050.
Mr Fayad and Mr Nassif addressed the meeting in respect of Resolution 1. It was defeated with 51.9% voting against it; 43.9% voting for it; and 4.2% abstaining.
Resolution 2 was defeated in the same percentages. Resolution 3 was defeated 56.1% against and 43.9% in favour. The Minutes of the Meeting include the following: 11 COURT MATTER 11.1 The chairperson noted that the Trustee has received a summons to appear in court on 12 December 2014 to set a date for hearing in relation to the Trustee's refusal to release the unit register for the Trust. 11.2 The chairperson confirmed that (a) the Trustee will be represented; and (b) AIT is the plaintiff. 11.3 The chairperson noted that some unit holders have requested in writing that their personal details not be released under any circumstances.
The scrutineer, Company Matters, entered into a Confidentiality Agreement with the Trustee (Ex 2) pursuant to which it agreed to return any and all information and all copies of documents that it obtained at the meeting. It also agreed to expunge all information from any computer or electronic storage facility or any other device containing the information and to confirm in writing that it had complied with this obligation.

TRUST DEED

The Consolidated Trust Deed (which contains the terms of the original Trust Deed of 31 October 2004 and the Deed of Variation on 30 September 2013) includes the following: 1. Defined terms & interpretation 1.1 Defined Terms … Family Entity of a Holder means a company or trust of which that Holder has Control at all times. Holder means a holder of a Unit or Units. … Meeting means a meeting of Holders. … Register means the unit register established under clause 18. … Trust means M2 Property Trust. Trust Liabilities include borrowings, unpaid costs, charges, expenses, outgoings and fees, contingent liabilities, provisions the Trustee decides to make and unpaid amounts due and payable to Holders and unpaid amounts due to the Trustee. Trust Property means all property, rights and income of the Trust. Unit means a unit in the Trust. 2. Beneficial Interest 2.1 Unit Trust The beneficial interest in the Trust is divided into units. 2.2 Benefit of the Trust The Trust is constituted for the benefit of persons who, by subscription or otherwise in accordance with this deed, become, or have become, Holders. 2.3 Trustee The Trustee is trustee of the Trust. 2.4 Deed Binding This Deed is binding upon the Holders and the Trustee. 3. Duration of Trust 3.1 Commencement The Trust commences (Commencement Date) when the first investor (Initial Unitholder) pays $100 to the Trustee to subscribe for 100 fully paid Units (Initial Units). The Trustee may issue the Initial Unitholder with the Initial Units in return for that payment. 3.2 End Subject to this deed, the Trust ends 80 years (less one day) after the Commencement Date. 4. Vesting of Trust Property The Trust Property vests in the Trustee on trust for Holders on the terms of this deed. 5. Fund 5.1 Separate fund The Trustee must hold all Trust Property as a separate fund which is not available to meet liabilities of another trust. 5.2 Trust Liabilities Trust Liabilities of the Trust must be determined as far as practicable in accordance with generally accepted accounting principles and applicable accounting standards. 6. Units 6.1 Rights of Holders A Unit confers on its Holder an undivided, but proportional, beneficial interest in the capital proceeds realised from the sale of Trust Property, subject to Trust Liabilities. A Holder has no interest in any asset or part of any asset of the Trust. A Holder is not entitled to call for or assert an interest in any part of the Trust Property. 6.2 Units Identical Subject to clause 6.3 and other provisions of this deed, the Trust may issue Units in the Trust. All Units have interests and rights, and are subject to conditions, identical to those of all other Units except as otherwise provided in this deed or by their respective terms of issue. … 6.4 No interference A Holder may neither interfere with, nor exercise rights or powers of, the Trustee in respect of any Trust Property, Trust Liability or obligation and has no right to lodge any caveat affecting the Trust Property.
The Trustee: may invite any person to subscribe for Units in a form approved by the Trustee (cl 7.1); may reject an application for Units without giving any reason (cl 7.3); may cause an item of Trust Property to be re-valued whenever it thinks fit (cl 10.3); has no obligation to redeem Units at the request of a Holder (cl 12.1); and may not compulsorily redeem Units (cl 12.2).
The Trust Deed also includes the following: 13. Trustee's powers 13.1 Powers Subject to clause 35 and other provisions of this deed, the Trustee has: (a) all the powers in relation to the Trust, Trust Property and Trust Liabilities that a natural person, trustee or corporation may legally have in Australia and overseas; (b) all the powers incidental to ownership of the Trust Property, including the power to invest in real or personal property of any nature, anywhere in the world and to borrow, raise money and incur liabilities and obligations of any kind, and as if it were the absolute and beneficial owner of all Trust Property. … 15. Trustee's discretion Subject to this deed, the Trustee may determine whether to exercise and the manner, mode and time of exercise of its powers in its absolute discretion.
The Trustee is entitled to be indemnified for any liability incurred in performing any of its duties or exercising any of its powers or omitting to act or attempting to do so (cl 16).
The Trust Deed also provides: 18. Register 18.1 Establish and maintain register The Trustee must keep a unit register in New South Wales and may change the location of the Register to a location determined by the Trustee from time to time in its absolute discretion. 18.2 Notice of trust The Trustee need not enter notice of any trust on the Register. 18.3 Registered Holder is owner The Trustee may treat the registered Holder as the absolute owner of Units registered in the Holder's name and is not bound to take notice of any trust or equity affecting a Unit. Entry on the Register is conclusive evidence of a Holder's title to units. 19. Mortgages 19.1 Recording of mortgagee in Register On a Holder's written request, the Trustee may at its absolute discretion record a mortgage (sole or joint) of Units in the Register and on the mortgagee's written request may delete that record. 19.2 Payments to mortgagees Redemption proceeds of Units, capital distributions (not representing part of Distributable Income) and distributions after termination of the Trust must be paid to the recorded mortgagee in the Register. 19.3 Transfer of mortgaged Units Any transfer of Units is subject to any existing mortgagee record so that Units in respect of which a mortgagee is recorded on the Register may only be transferred with the written consent of the Mortgagee. 19.4 Trustee not have notice of mortgage or charge The Trustee is not taken to have notice of the terms of any mortgage or charge and has no liability to a mortgagee in connection with recording of mortgages. 20. Certificates for Units Certificates must be issued for Units. The Trustee at any time may send a Holder details of Units held by, Unit transactions of, or distributions to, the Holder. 21. Transfers of Units 21.1 Permitted transfer A Holder (Transferor) may sell or transfer all or some of its Units (Transfer Units) in accordance with this clause 21. 21.2 Deed of accession A Transfer of any Units to a person that is not a Holder is void and of no effect unless and until the proposed transferee has executed, and delivered to the Trustee, a deed of accession (under which the transferee agrees to be bound by the terms of this deed) in a form acceptable to the Trustee. 21.3 Transfers to Family Entities Notwithstanding clauses 21.4 to 21.13 a Holder may sell or transfer Units to: (a) A Family Entity (provided always that if the transferee subsequently ceases to be a Family Entity of the Transferor the transferee must, within 20 Business Days of so ceasing, transfer all such shares back to the Transferor. If the transferee does not comply with this request, the remedies available to the Trustee will include the power to compulsorily redeem the Units held by the transferee for 90% of the amount per Unit derived by dividing the Net Asset Value at the relevant time by the number of Units on issue at that time. (b) another Holder; or (c) any other person if the Holders by ordinary resolution first approve the sale or transfer (which approval may be subject to conditions). 21.4 Transfer notice If a Transferor proposes to sell or transfer Units otherwise than in accordance with clause 21.3, the Transferor must give a notice (Transfer Notice) to the Trustee stating that it wishes to sell the Transfer Units and must specify in the Transfer Notice: (a) the number of Transfer Units it wishes to sell; and (b) the price at which it wishes to sell the Transfer Units (which must be a single instalment cash price) (Transfer Price). 21.5 Right of first refusal Within 5 Business Days of receipt of a Transfer Notice, the Trustee must offer the Transfer Units to all other Holders (Remaining Holders). The Trustee must make each offer in writing to each Remaining Holder specifying: (a) the number of Transfer Units; (b) the Transfer Price; and (c) the closing date of the offer (Closing Date) being the date 20 Business Days after the date of the offer.
The Trust Deed contains provision for the acceptance and conditional acceptance of the offers for transfer and the manner of completion of the transfers (cll 21.6 - 21.10). The Transferor is not permitted to withdraw a Transfer Notice (cl 21.12). If the Remaining Holders do not purchase the Transfer Units, the Transferor is then entitled to transfer the Transfer Units to a third party on terms and conditions which are no less favourable to the transferor than the terms and conditions set out in the Transfer Notice at any time before the expiry of six months after the date of the Transfer Notice (cl 21.13). The Trust Deed also provides: 21.11 Default If a Transferor defaults in transferring Units in accordance with clause 21.10, the Trustee must on written direction from a Remaining Holder: (a) receive the Transfer Price for the Transfer Units from the Remaining Holder on behalf of the Transferor; (b) give to the Remaining Holder a valid receipt of the Transfer Price for the Transfer Units on behalf of the Transferor; (c) authorise on behalf of the Transferor a person to execute transfers of the Transfer units in favour of the Remaining Holder; (d) register the Remaining Holder as the holder of the Transfer Units; and (e) take all further action necessary to complete the transfer of the Transfer Units. … 21.14 Trustee may refuse to register The Trustee may refuse to register a transfer of Units without giving a reason. 22. Drag along rights 22.1 Third party offer If at any time holders with 75% of (sic) more of all Units (Majority Holders) receive an offer from a bona fide buyer of Units, at arm's length to such Holders, proposing to acquire not less than 75% of all Units (Offeror), those Holders may serve notice on behalf of the Offeror (Offer Notice) on all other Holders and the Trustee. 22.2 Offer Notice An Offer Notice must specify: (a) the proposed purchase price for the Units (Price); (b) the proposed settlement date (Settlement Date); (c) the name of the Offeror; and (d) any conditions attaching to the offer. 22.3 Drag Along rights If the Majority Holders decide to accept the offer contained in the Offer Notice (Accepting Holders), they must direct the Company to give a notice (Drag Along Notice) to each of the other Holders: (a) stating the wish of the Accepting Holders to sell all of their Units to the Offeror on the terms contained in the Offer Notice; and (b) requiring those Holders to sell all of their Units to the Offeror on the terms contained in the Offer Notice at the same time as the Accepting Holders sell all of their Units to the Offeror.
The Trustee may terminate the Trust by not less than four weeks prior written notice to the Holders (cl 24.1). On termination the Trustee must realise all Trust Property; pay, discharge or provide for all Trust Liabilities; and distribute the net proceeds among Holders pro rata to the number of Units held (cl 24.2).
The Trust Deed also provides: 27. Outgoings All costs, charges, expenses and outgoings reasonably and properly incurred by the Trustee in connection with the following matters or of the following nature in relation to the Trust are payable or reimbursable out of Trust Property: … (i) establishing and maintaining the Register, the Trust accounting system and records and the investment register (including, without limitation, operation and development of computer facilities, both software and hardware, salaries and on costs); … 29. Distributions 29.1 Distribution of Distributable Income Within three months after the end of each Year, the Trustee must distribute any undistributed share of Distributable Income to which any Holder is entitled. 29.2 Holders' interest in Distributable Income Each Holder is presently entitled as at the end of each Year to a share of Distributable Income for the Year, if any, which has not previously been distributed, in the proportion of the number of Units held to the aggregate of all Units then on issue in the Trust. Each Holder has a vested and indefeasible interest in all amounts of Distributable Income to which the Holder becomes entitled in accordance with the operation of this clause. ... 29.4 Cash distributions If cash which is Trust Property is distributed, the Trustee may at any time elect that any amount (capital or income) be distributed to Holders pro rata to the number of Units held in the Trust as at a time determined by the Trustee. … 33. Access to Information (a) The Trustee must, within 90 days of the end of each fiscal year of the Trust, provide to each Holder copies of the following financial reports in respect of the Trust: (i) unaudited six monthly management accounts; and (i)(sic) audited financial statements (including profit and loss account, balance sheet and cash flow statement) for the preceding financial year. (b) The Trustee must, within a reasonable period of receiving a request from a Holder, provide to the Holder copies of the financial reports referred to in clause 33(a) in respect of each previous fiscal year of the Trust specified in the request from the Holder.
Under cl 36.3, an ordinary resolution is passed if a simple majority of votes is cast in favour. A resolution is decided on a show of hands unless a poll is demanded. The chairperson's declaration of the validity of any vote and the result of voting is conclusive. A resolution duly passed binds all the Holders whether or not they are present at the meeting (cl 36.3).
The Trust Deed also includes the following: 40 Notices and other communications 40.1 Service of notices A notice, demand, consent, approval or communication under this deed (Notice) must be: (a) in writing, in English and signed by a person duly authorised by the sender; and (b) hand delivered or sent by prepaid post or facsimile to the recipient's address for Notices specified in the Details, as varied by any Notice given by the recipient to the sender. 40.2 Effective on receipt A Notice given in accordance with clause 40.1 takes effect when taken to be received (or at a later time specified in it), and is taken to be received: (a) if hand delivered, on delivery; (b) if sent by prepaid post, on the second Business Day after the date of posting (or on the seventh Business Day after the date of posting if posted to or from a place outside Australia); (c) if sent by facsimile, when the sender's facsimile system generates a message confirming successful transmission of the entire Notice unless, within eight Business Hours after the transmission, the recipient informs the sender that it has not received the entire Notice, but if the delivery, receipt or transmission is not on a Business Day or is after 5.00pm on a Business Day, the Notice is taken to be received at 9.00am on the next Business Day.

The Trustee contends that it is bound by what has been described as a "Website Disclosure Privacy Statement" (Privacy Policy). The Privacy Policy includes the following: 3. WHAT ENTITIES DOES THIS PRIVACY POLICY APPLY TO This Privacy Policy applies to Markham Corporation Pty Limited, its related entities and any funds managed by Markham Corporation Pty Limited or its related entities. … 5. WHAT IS PERSONAL INFORMATION? Personal information is any information or an opinion, whether true or not, about you that identifies you, or by which your identity can be reasonably ascertained. This includes information such as name, date of birth, gender, contact information, credit/debit card information, credit file information, information about your business or investment and business or investment track record. … 13. TO WHOM IS MY PERSONAL INFORMATION USUALLY DISCLOSED? In carrying out our business, we may need to disclose your personal information to others, as follows: ● Related entities: to related entities of Markham; ● Your financial adviser or your service providers: to your nominated financial adviser or service providers, with your permission; ● Service providers under contract: who help with our financial services business operations included archival, auditing, legal, business consulting, banking, payment, delivery, data storage, data processing, data analysis, mailing, marketing, research, investigation, insurance, brokerage, maintenance, website and technology services - where we engage such services providers, our contracts provide that they may only use your personal information in connection with the services they perform for us; ● Law enforcement, government agencies or other third parties as required by law: when we need to comply with law or credit card rules, or when we believe that the disclosure of personal information is necessary to prevent harm or financial loss, to report suspected illegal activity or to investigate contraventions of our loan arrangements; and ● Credit bureaus, credit reporting agencies and collection agencies: to verify your identity by e-verification and to obtain information about your credit history (in each case, with your consent) and to report account information; 14. WHERE IS MY PERSONAL INFORMATION STORED? Your personal information will be stored on a password protected electronic database, which may be a Markham database, a database maintained by a cloud hosting service provider or other third party database storage or server provider. All such personal information is maintained with in the effective control of Markham. We have arrangements which require third party service providers to maintain the security of the information and we take reasonable steps to protect the privacy and security of that information, however, we are not liable for any unauthorised access or use of that information. Your personal information will stay on the database indefinitely until you advise you would like it removed, unless we de-identify it or destroy it earlier in accordance with privacy law requirements. 15. ACCESS TO YOUR PERSONAL INFORMATION Markham will, upon your request, and subject to applicable privacy laws, provide you with access to your personal information that is held by us. However, we request that you identify, as clearly as possible, the type/s of information requested. We will deal with your request to provide access to your personal information within 30 days and you agree we may charge you our reasonable costs incurred in supplying you with access to this information.

ISSUES FOR DETERMINATION

The issues for determination as they emerged from the parties' submissions are: 1. Whether on the proper construction of the Trust Deed the plaintiff is entitled to have access to the Register. 2. Whether the Register is a "trust document" access to which the plaintiff is entitled as of right, subject to any duty of confidentiality that the Trustee may have in respect of the Register. 3. Whether the Trustee has a discretion to refuse access to the Register and if so whether it was justified in doing so in the circumstances of this case.

Issue 1 - The Trust Deed

This is a private unit trust and is not subject to Chapter 2C of the Corporations Act 2001 (Cth) (Registers) (the Act), notwithstanding that the companies in the corporate structure administering and managing the Trust are so subject. Companies, and units trusts that are registered management schemes, are required to keep registers that are accessible by any person (s 167A; s 168; s 173 of the Act). However there are limitations upon the use to which the information that is accessed from the registers can be put. It is not permissible to utilise the information to solicit a donation from a member of a company; to gather information about the personal wealth of a member of a company; or to make an unsolicited offer to purchase a financial product (s 173 and s 177 of the Act; reg 2C.1.03 of the Corporations Regulations 2001 (Cth)).
A unit trust "does not have a constant, fixed normative meaning": CPT Custodian Pty Limited v Commissioner of State Revenue (Vic) (2005) 224 CLR 98; [2005] HCA 53 at 109-110 [15]. It is constituted by a deed of trust. Although there has been debate as to whether unit holders in unit trusts have a proprietary interest in trust property that, for instance, entitles them to lodge a caveat, it is the "exact terms" of the trust deed to which reference must be made to decide the nature of the interests of the unit holders in the trust property: Costa & Duppe Properties Pty Ltd v Duppe & Ors [1986] VR 90; Schmidt v 28 Myola Street Pty Ltd (2006) 14 VR 447 at 454 [24] and [26]; DKL Raphael, Caveats and unit trusts (2007) 81 ALJ 881; Young, Croft, Smith, On Equity at 432 [6.600].
The Trustee is required "to keep" the Register in New South Wales (cl 18.1). However the Trustee has an "absolute discretion" as to its particular location (cl 18.1). An entry on the Register is "conclusive evidence" of a Holder's title to the Units (cl 18.3). The Trustee is not obliged to take notice of any trust or equity affecting the Units and may treat the entity or person named on the Register as the Holder of the Units as the "absolute owner" of the Units (cl 18.3). The Trustee's costs, charges and outgoings in respect of "establishing and maintaining the Register" are "payable or reimbursable out of the Trust Property" (cl 27(i)).
The Trustee may in its "absolute discretion" decide to record in and/or delete from the Register a recording in relation to a mortgage of Units (cl 19.1). However if a mortgage is recorded in the Register by the Trustee, redemption proceeds of Units, capital distributions and distributions after termination of the Trust must be paid to the mortgagee recorded in the Register (cl 19.2). Any transfer of Units in respect of which a mortgagee is recorded on the Register may only be transferred with the written consent of that mortgagee (cl 19.3). Notwithstanding these provisions of the Trust Deed, the Trustee has no liability to a mortgagee in connection with the recording of mortgages on the Register (cl 19.4).
Clause 20 of the Trust Deed is important. It provides: Certificates must be issued for Units. The Trustee at any time may send a Holder details of Units held by, Unit transactions of, or distributions to, the Holder.
Accordingly the Trustee is expressly authorised to provide a particular Unit Holder "at any time" with the "details" of the Units held by it, its Unit transactions and/or distributions. The Trustee is not expressly authorised to provide a Unit Holder's details to any other Unit Holder.
In addition to the Unit Holders' entitlements to have access to their own "details" pursuant to clause 20 of the Trust Deed, all Unit Holders are entitled to receive from the Trustee within 90 days of the end of each fiscal year, copies of unaudited six monthly management accounts and audited financial statements "in respect of the Trust" (cl 33(a)). The Unit Holders are also entitled (on request) to receive copies of the financial reports in respect of the Trust for each previous fiscal year of the Trust (cl 33(b)).
There is no express requirement or authorisation of the Trustee to make the Register available to the Unit Holders for inspection. Nor is there any express entitlement in the Unit Holders to make a request for access to or to make copies of the Register. In the context of the express provisions of clauses 20 and 33, these absences provide support for the contention that the Unit Holders are not entitled to have access to the Register. However it is necessary to consider a number of other aspects of the Trust Deed.
Clause 21.3 of the Trust Deed deals with the sale of Units to a Family Entity (as defined), another Unit Holder or another person (with approval). If a Unit Holder proposes to sell or transfer Units otherwise than to those persons, then it must give a Transfer Notice to the Trustee. Within 5 business days of receipt of the Transfer Notice, the Trustee must offer the Transfer Units to the other Unit Holders (cl 21.5). The regime for the offer and acceptance (or rejection) of the Transfer Units is controlled by the Trustee (cll 21.4 - 21.9). If there is default by the Transferor in transferring the Transfer Units pursuant to an accepted offer, then "on the written direction" of the purchaser (referred to as the "Remaining Holder") the Trustee must take the necessary action to transfer the Units and "register the Remaining Holder as the holder of the Transfer Units" (cl 21.11).
It is the Trustee that acts as the conduit in relation to communications with the other Unit Holders in respect of the first right of refusal under clause 21. There is no provision in the Trust Deed giving the selling or buying Unit Holder access to the Register or the Unit Holder's details in order to communicate with other Unit Holders directly about the first right of refusal.
Clause 22 deals with an acquisition of not less than 75% of all the Units in the Unit Trust. The regime envisages: ● the receipt by "Holders with 75% [or] more of all the Units" (the Majority Holders) of an offer from a bona fide purchaser "at arm's length to" the Majority Holders (the Offeror) (cl 22.1); ● the service of an Offer Notice (specifying the Price, Settlement Date, name of the Offeror and any conditions) by the Majority Holders, on behalf of the Offeror, "on all other Holders and the Trustee" (cll 22.1 -22.2); ● if the Majority Holders accept the offer (then referred to as "Accepting Holders"), the service of a "Drag Along Notice" on the other Holders requiring them to sell their Units to the Offeror at the same time as the Accepting Holders sell their Units to the Offeror (cl 22.3); and ● completion of the sale to the Offeror including the Trustee receiving "on behalf of all Holders the aggregate purchase price from the Offeror" (cl 22.4).
There is controversy about the identity of the person who is to serve the Drag Along Notice on the other Holders. Clause 22.3 requires the Accepting Holders to "direct the Company" to serve it. "Company" is not a defined term. The plaintiff submitted that the word "Company" should be read as "Offeror". If that is correct then clause 22.3 envisages an "Offeror" giving a Drag Along Notice to each of the other Unit Holders, without notice to the Trustee, directly "requiring" them to sell all of their units to it on the terms contained in the Offer Notice. The plaintiff submitted that if the word "Company" is read as "Offeror" it would be support for its contention that the Offeror would need to know the identity of the other Holders to serve the Drag Along Notice. The plaintiff does not, as I understand its submissions, delineate between a Unit Holder who makes the Offer and a third party Offeror who is not a Unit Holder at the time an offer is made.
In the context of the Trust Deed as a whole and in particular having regard to the involvement of the Trustee in the process under clause 21 and in the completion of the sale to the Offeror under clause 22 (cl 22.4(b)(ii)), it is probable that the word "Company" was intended to be "Trustee". This conclusion is reinforced by the use of the word "Offeror" in cl 22.3(a) and (b). If the word "Company" in the preamble was intended to be "Offeror" one would expect that the word "Offeror" would not have been used in sub-paragraphs (a) and (b). Rather the word "it" would have been appropriate. Additionally having regard to the structure of the Trust Deed and the broad powers of the Trustee over the Trust Property, it would be expected that the Trustee would give the Drag Along Notice to the other Unit Holders requiring them to sell their units to the Offeror, rather than the possibility of some third party (possibly not a Unit Holder) intervening and requiring Unit Holders to take certain steps.
Be that as it may, clause 22.1 is important. The clear intent of the Trust Deed is that the Majority Holders serve the Offer Notice on the "other Holders" as well as on the Trustee. There is no doubt that this Notice is important, the service of which combined with the Drag Along Notice (if the Majority Holders decide to accept the Offer) may result in the requirement for the minority Holders to sell their Units (dragged along by the majority decision). The manner of service of any Notice under the Trust Deed is either by hand delivery, by prepaid post or by facsimile (cl 40). It would not be possible for service to be effected if the identity and/or address and/or facsimile number of the "other Holders" were not known to the Majority Holders.
Additionally, there must be some mechanism for either the purchasing Unit Holder or some other person (who is the Offeror) to know (or find out) who the Majority Shareholders are, otherwise the Majority Shareholders could not "receive" the offer to purchase "not less than 75% of all units".
The irresistible conclusion from the provisions of clause 22.1 is that the Offeror (when making the Offer to the Majority Shareholders) and the Majority Shareholders (when serving the Offer Notice on the Offeror's behalf) will need to have the relevant information (the identity and/or address and/or facsimile number of the Holders) so that the offer may be made and an Offer Notice may be served.
This does not equate to a Unit Holder's entitlement to have access to the Register. The Register may include information that is confidential to the various Unit Holders, including details of their financial circumstances such as the existence of mortgages over their Units. However, the Trustee has an obligation to ensure that the regime for sale and purchase of Units in the Trust is not frustrated by a lack of information a selling or purchasing party may need so as to comply with the provisions of the Trust Deed. It will be on a case by case basis for the Trustee as to how it deals with any requests that may arise in circumstances pertinent to the regime under clause 22 of the Trust Deed.
I am satisfied that on a reasonable reading of the Trust Deed the plaintiff is not entitled to have access to the Register.

Issue 2 - Trust Document

The plaintiff submitted that there are "two streams of authority" pursuant to which the Court may grant the orders it seeks. The first derives from Londonderry's Settlement; Peat v Walsh [1965] Ch 918 (the Londonderry approach). It is contended that pursuant to the Londonderry approach the person seeking inspection must establish that: (a) they are a beneficiary of a trust and not merely a discretionary beneficiary or object; (b) the relevant documents are trust documents, that is, documents related to the administration of the trust; and (c) certain recognised exceptions, such as confidentiality inuring in the documents, are inapplicable. Subject to those exceptions the claim for inspection is said to be a claim as of right involving no discretion on the part of the court.
The plaintiff submitted that it is clearly a beneficiary with a fixed interest in the Trust. Secondly it was also submitted that there is no question that the Register is a document related to the administration of the Trust, or a document that the Trustee could be expected to pass to its successor should it cease to be Trustee: Rouse v IOOF Australia Trustees Ltd (1999) 73 SASR 484 at [86]; Hartigan Nominees Pty Ltd v Rydge at 433C-E. It is submitted that the Register (the establishment and maintenance of which is paid for out of the Trust Property) is a quintessential example of a document which is the "property of the trust" and not the personal property of the Trustee. Thirdly it is submitted that there is no relevant exception to the right to inspection because the information within it was not given to the Trustee upon the basis that it would be treated as confidential.
In O'Rourke v Darbishire [1920] AC 581 Lord Wrenbury said at 626-627: The beneficiary is entitled to see all trust documents because they are trust documents and because he is a beneficiary. They are in a sense his own. Action or no action, he is entitled to access to them. … The proprietary right is a right to access to documents which are your own.
In Londonderry's Settlement [1965] Ch 918 Salmon LJ said at 938: The category of trust documents has never been comprehensively defined. Nor could it be - certainly not by me. Trust documents do, however, have these characteristics in common: (1) they are documents in the possession of the trustees as trustees; (2) they contain information about the trust which the beneficiaries are entitled to know; (3) the beneficiaries have a proprietary interest in the documents and, accordingly, are entitled to see them.
In Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405 Kirby P, in dissent, referred to this description of "trust documents" by Salmon LJ and said at 413: These were defined, with an unmistakable element of circulatory, as being the documents in the possession of the trustees, as trustees, containing information about the trust "which the beneficiaries are entitled to know" and in which they thus have a proprietary interest: see Ibid (at 938). This rather unilluminating circularity has been quoted and requoted in many cases since as if it provided a solution to the definition of the documents to which beneficiaries are entitled, and not entitled, to have access. Of course, it does not. It states, rather than solves, the problem of the documents to which access might be had by beneficiaries, as of right, against reluctant trustees.
Similarly in Silkman v Shakespeare Haney Securities Limited [2011] NSWSC 148 Hammerschlag J identified the "jurisprudential difficulties" in adopting the Londonderry approach, one of which was ascribing a workable and principled definition of the term "trust documents" (at [27]).
There has been debate in this case as to whether Hartigan Nominees Pty Ltd v Rydge requires a single judge of this Court to follow the decision in Londonderry's Settlement. The plaintiffs submitted that it does. In this regard the judgments of the majority (Mahoney and Sheller JJA) were analysed. After analysing the relevant cases (at 431-432) Mahoney JA said that he would "accept for the purposes of this appeal" that the plaintiff was possessed "in general" of a right of access to trust property and the provision of an accounting in respect of the administration of the Trust (at 432). His Honour said at 435: The Londonderry case raised "a novel question on which there is no authority exactly in point" (at 928F). It should be followed by this Court. It is both correct in principle and in accordance with commonsense. The right of a beneficiary to disclosure is ordinarily based upon the beneficiary's proprietary interest in the documents in question: but, by virtue of the fiduciary nature of the obligations of a trustee, it extends, I think to information of a non-documentary kind.
Sheller JA identified the difficulty in respect of "trust documents" this way at 442-443: The difficulty is to state a satisfactory test for determining into which class a particular document falls. One approach has been to classify documents as trust documents and say that they must be disclosed whereas documents which are not trust documents need not be disclosed. However, an attempt to state the characteristics of trust documents led Salmon LJ in Re Londonderry's Settlement (at 938E) to include as a characteristic that the documents contain information about the trust which the beneficiaries are entitled to know. Such a definition assumes the answer to the question it is directed to solve and is accordingly, with the greatest of respect, of no assistance: compare per Harman LJ (at 933A) and Danckwerts LJ (at 935C). The expression "trust document" can have little more precise meaning than a document relating to the trust or its administration.
I am conscious of Bryson AJ's opinion in McDonald v Ellis (2007) 72 NSWLR 605 at 617 [46] that judges at first instance should treat the majority judgments in Hartigan Nominees Pty Ltd v Rydge as "authoritative". However Bryson AJ also recognised there were certainly some matters stemming from the Londonderry approach that were still "susceptible of doubt" (at 617 [46]). I am not convinced that a single judge of this Division is bound to follow Londonderry's Settlement.
However even if that approach were to be adopted in this case I am not satisfied that the Unit Holders have a "proprietary interest" in the Register such as to enable them "as of right" to have access it.
The Trust Property vested in the Trustee "on trust for Holders on terms" of the Trust Deed (cl 4). The Units confer on the Holders the "undivided, but proportional, beneficial interest in the capital proceeds realised from the sale of the Trust Property", being "all property, rights and income of the trust", but "subject to Trust Liabilities" (cl 1.1; cl 6.1). The Trust Deed also provides that a Unit Holder has "no interest in any asset or part of any asset of the Trust" and is "not entitled to call for or assert an interest in any part of the Trust Property" (cl 6.1).
The trust deeds in the cases referred to earlier in which unit holders have been held to have a proprietary (and caveatable) interest in trust property are slightly different from the Trust Deed in the present case. I appreciate there is a difference between having a caveatable interest in the property and a provision that prohibits the lodging of a caveat. However in the present case the Trust Deed provides that the Unit Holders have "no right" to lodge a caveat affecting the Trust Property (cl 6.4). In Costa & Duppe Properties Pty Ltd v Duppe & Ors the trust deed provided that the beneficial interest in the trust fund vested in the unit holders (at 92). It also provided that the units entitled the unit holders to the beneficial interest in the trust fund "as an entirety" but not to any particular security or investment of the trust fund. It also provided that the unit holders were not entitled to the transfer of any property in the trust fund other than in accordance with the trust deed (at 92). There were similar provisions in the trust deeds in Schmidt v 28 Myola Street Pty Ltd (at 457 [36]-[39]). The trust deeds in those cases are expressed in the more positive language of the unit holders' entitlements. There is no provision as there is in the Trust Deed in the present case stating that the Unit Holders have "no interest" in any asset or part of any asset.
Clause 6 of the Trust Deed provides that a Unit Holder is not entitled to call for or assert an interest in any part of the Trust Property. Even if one accepts that the Trust Property includes the Register, the irresistible inference is that there is no proprietary interest in the Register such as to entitle a Unit Holder as of right to have access to the Register.
There is the additional question of whether the exception of confidentiality applies to the Register.
Mr Cotton, as Chairman of the Board of Directors of the Trustee, gave affidavit evidence (to which objection was taken) that Markham Corporation (the sole shareholder in Markham Investments) implemented a Privacy Policy on 11 December 2011 and that "on and from that date it has been the privacy policy applying to the activities of the defendant as trustee of the trust" (par 7).
Mr Cotton has been the Chairman of the Board of the Trustee since 2012. The plaintiff submitted that he was not in a position to give evidence of what Markham Corporation had done in 2011. It was submitted that it was hearsay and no source was identified in his affidavit evidence. I agree with that aspect of the plaintiff's submissions. However as Chairman of the Trustee, irrespective of what Markham Corporation had done, Mr Cotton was able to give evidence of what the Trustee had done and is doing. I accept Mr Cotton's evidence that the Trustee's Policy is as described in the Privacy Policy.
The Unit Holders have requested the Trustee not to disclose their personal details to third parties including the plaintiff. The evidence establishes that the Trustee has protected that information. For instance the scrutineers at the meeting on 11 December 2014 were required to sign confidentiality undertakings and once their role had been completed to destroy the material they gathered at the meeting including the identity of the Unit Holders and their proxies.
It has been suggested in some cases that once a person either parts with possession of title deeds to a mortgagee or shares as a beneficiary in an estate, they suffer the "inconveniences" of their positions including that their personal information may be disclosed to others with interests in the trust property: Gough v Offley (1852) 5 De G & Sm 653; 64 ER 1285 and McDonald v Ellis (2008) 72 NSWLR 605. In the case of a mortgage, the mortgagor would have understood that the mortgagee was entitled to utilise the information provided to it in circumstances of the title deeds being security for the advancement of the financial facility. In an estate, the beneficiaries would have an interest in knowing the proportionate entitlements granted by the deceased. However in the present case all Units have been issued at the same value. The fact that the investors have chosen to become Unit Holders in a private trust (as opposed to a public trust where a register is accessible by any person) is also a relevant matter for consideration. Having regard to all these matters and to the provisions of the Privacy Policy, on balance, I am satisfied that the exclusion of confidentiality would apply.
There is a difference between a claim "as of right" to have access to the Register and a Unit Holder's entitlement to be provided with information by the Trustee to enable it to comply with its obligations under the Trust Deed, for instance, in respect of the regime under clause 22 to serve an Offer Notice. The former does not exist in this case. The latter is a matter to be dealt with by the Trustee if and when such requests are made.
The other stream of authority referred to by the plaintiff derives from Schmidt v Rosewood Trust [2003] 2 AC 709, a decision of the Privy Council on appeal from the High Court of the Isle of Man (the Schmidt approach). It involves the following propositions: (a) the object of a discretion, including a mere power, may apply to the Court for access, as well as beneficiaries with a "fixed" interest; (b) the power to order disclosure is "one aspect of the court's inherent jurisdiction to supervise, and if necessary to intervene in, the administration of trusts"; (c) the power to order inspection is discretionary; and (d) the Court may have to "balance" the competing interests of different beneficiaries, the trustees and third parties, with disclosure being limited and safeguards being put in place.
The plaintiff submitted that it is a beneficiary with a fixed interest in the Trust being the largest holder of Units issued in the Trust. It reiterated its submission that the Register is a document related to the administration of the Trust or a document that the defendant could be expected to pass to its successor, should it cease to be Trustee. It was submitted that in no sense is the Register the personal property of the Trustee.
The Register is clearly an important document which records the persons or entities who are owners of Units in the Trust. Indeed the evidence of Mr Cotton was that he looked at the Register before the meeting on 11 December 2014 for the purpose of identifying the Unit Holders who would be coming to the meeting and their overall constitution (tr 47). In that respect it is clearly a document to which the Trustee has regard for the purpose of the administration of the Trust. It is clearly a document that the Trustee would be expected to pass on to any successor.
The fact that the Trust Deed does not provide any "entitlement" or "right" for Unit Holders to have access to the Register is a matter to be taken into account in any balancing exercise. The Trustee submitted that a Register is outside any category of information to which courts have given a beneficiary access and is not information which affects the value of the Unit Holder's right or financial information about the administration of the Trust. It was submitted that the Register in this case is not a document pertaining to the financial position or assets of the Trust. The recording of the identity of the Unit Holders and even the recording of mortgages does not pertain to the financial position of the Trust. It may relate to the financial position of the Unit Holders. The Trustee's submissions have force.
If the Trustee has recorded Unit Holders and their details in the Register that is conclusive evidence of the ownership of the Units. The Trustee is not obliged to record any mortgage but may have in its absolute discretion done so. It is obliged to register Transfer Units in the name of the Remaining Holder pursuant to the regime under clause 21.11(d) of the Trust Deed. However it is also to be recalled that the Trustee may refuse to register a transfer of Units without giving any reasons (cl 21.14). The Register may therefore have a mixture of recordings, some mandatory and some discretionary. There may also be some absences pursuant to the Trustee's exercise of discretion.
I am satisfied that it is appropriate to apply the Schmidt approach in this matter. In doing so it is necessary to consider the third issue identified above as to whether the Trustee had a discretion to refuse access to the Register and whether in the circumstances it was justified in doing so.

Issue 3 - Discretion

The Court's discretion under the Schmidt approach requires consideration of the interests of all Unit Holders and the proper administration of the Trust. The Trustee's task is to ensure the proper administration of the Trust. The correspondence between the Trustee and the plaintiff makes clear that the Trustee at all times has communicated the plaintiff's requests and offers (as clarified) to the Unit Holders. Each of the Unit Holders has not only had access to the offer made by the plaintiff but also the complaints made by the plaintiff in respect of the Trustee's administration of the Trust.
The background to the relationship between the plaintiff, the Trustee and the Unit Holders included the plaintiff's rather unsatisfactory offer and withdrawal process in February 2012. It is not suggested that the February 2012 undertaking applied to the plaintiff's position in these proceedings. Rather that evidence is to be taken into account with all the other circumstances of the matters that presented themselves to the Trustee when it was asked to produce the Register to the plaintiff. The Unit Holders chose specifically to be investors in a private trading trust as opposed to a public trading trust. The Trustee carries on the trading activities. One of its main characteristics of the Trust is that the Trust Property is used in the conduct of the business.
The commercial relationship between the Trustee and the third party developer and the lessor will no doubt require commercial decisions to be made free from interference by the Unit Holders. The Trust Deed makes it very clear that the Trustee should not be impeded in the operation of the business of the Trust by any interference, such as the lodging of caveats on the Trust Property.
A Trustee who manages a business in a private trading trust is operating in circumstances where it may owe commercial obligations to third parties whilst owing separate duties to Unit Holders. The detail of the commercial contractual relationships that are on foot are matters exquisitely within the knowledge of the Trustee (albeit that aspects of those agreements have been made available to the plaintiff with the consent of the third parties). The Trustee must achieve a delicate balance between the operation of the trading trust's business and the administration of the Trust, including for instance the calling of Unit Holder meetings and responses to Unit Holders' requests.
The circumstances of this case do not engage the regime under clause 22 of the Trust Deed.
I am satisfied that the Trustee had a discretion to refuse the plaintiff access to the Register. I am also satisfied that it was justified in doing so. There is no basis for the Court's intervention.

Conclusion

The plaintiff is not entitled to an order requiring the defendant to produce the register to it for inspection.
The plaintiff's Summons is dismissed. The plaintiff is to pay the defendant's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 March 2015

AIT Investment Group Pty Ltd v Markham Property Fund No 2 Pty Limited

At a glance

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