AMP Life Ltd v AMP Capital Funds Management Ltd

Law of Evidence: Annotation and Commentary on the Uniform Evidence Acts (2nd ed, 2009, LexisNexis Butterworths) Category: Principal judgment Parties: 360 Capital FM Limited (Plaintiff) Asia Pacific Data Centre Limited (First Defendant) NEXTDC Limited (Second Defendant) Representation: Counsel: Dr R P Austin / Mr N Mirzai (Plaintiff) Mr S A Lawrance (First Defendant) Dr A S Bell SC / Mr E A J Hyde (Second Defendant)

Solicitors: Minter Ellison (Plaintiff) Arnold Bloch Leibler (First Defendant) Herbert Smith Freehills (Second Defendant) File Number(s): 2018/24961

Judgment

1. GLEESON J: This proceeding concerns a unit trust registered as a "managed investment scheme" under Ch 5C of the Corporations Act 2001 (Cth), known as Asia Pacific Data Centre Trust (APDC Trust).

The parties

1. The first defendant, Asia Pacific Data Centre Limited (APDC), is the responsible entity of the APDC Trust. Each unit in the APDC Trust is stapled to one share in Asia Pacific Data Centre Holdings Limited (Holdings). The APDC Trust and Holdings are together known as the Asia Pacific Data Centre Group (APDC Group), which is a real estate investment trust (also known as a REIT) listed on the Australian Stock Exchange (ASX). It has the ASX code "AJD". As the responsible entity of the APDC Trust, APDC owns a portfolio of three properties in Sydney, Melbourne and Perth that are operated as data centres.
2. The securityholders of the APDC Group comprise the plaintiff, 360 Capital FM Limited (360 Capital) holding 67.31 percent, the second defendant, NEXTDC Limited (NEXTDC) holding 29.2 percent, and other investors holding 3.49 percent.
3. 360 Capital is a wholly owned subsidiary of 360 Capital Group Limited (360 Capital Group). 360 Capital is the responsible entity of the 360 Capital Investment Trust. Each unit in that trust is stapled to one share in 360 Capital Group, and together they are known as the 360 Capital Group, an ASX listed real estate investment and funds management group.
4. NEXTDC is an ASX listed technology company which provides data centre services. NEXTDC launched the APDC Group in January 2013 when it sold the three data centre properties to APDC as responsible entity of the APDC Trust. Those properties were leased back by APDC to NEXTDC. Title to the properties is held by a custodian for the APDC Trust, The Trust Company (Australia) Limited (Trust Company). The terms of each lease confer on NEXTDC a first right of refusal if the landlord proposes to sell the leased data centres, at such price as the landlord is prepared to sell the leased data centres.

Context of the dispute

1. Following competing takeover offers by NEXTDC and 360 Capital, 360 Capital acquired control of the APDC Group in November 2017 with its holding of 67.31 percent of the stapled securities. On 23 November 2017, the directors and secretary of Holdings and APDC resigned and Mr David van Aanholt was appointed as an independent director and chair of Holdings and APDC, Mr Tony Pitt was appointed as director of Holdings and APDC and Mr John Wilson and Mr Lawrence Gibbs were appointed as independent directors of Holdings and APDC.
2. In early November 2017, 360 Capital approached Perpetual Limited (Perpetual) in relation to the proposed externalisation of the responsible entity function for the APDC Trust. An earlier proposal by 360 Capital in June 2017 that the responsible entity function of the APDC Trust be externalised to itself, did not proceed. By early December 2017 a draft notice of meeting and explanatory memorandum which sought securityholder approval to appoint a subsidiary of Perpetual, The Trust Company (RE Services) Ltd (Trust Company RE), as the responsible entity of the APDC Trust had been prepared and discussed.
3. On 14 December 2017 NEXTDC announced that it intended to convene a meeting of the members of the managed investment scheme to consider a proposed resolution to direct the responsible entity to wind up the APDC Trust for the purposes of s 601NE(1)(b) of the Corporations Act (the Resolution). Shortly after that announcement, 360 Capital approached One Investment Group Pty Ltd (OIG), a funds management business specialising in responsible entity services, concerning the possible acquisition of the responsible entity, APDC. At that time, Holdings held all of the shares in APDC.
4. On 20 December 2017, Perpetual informed 360 Capital that following its due diligence review and recent announcements, Perpetual would not be able to progress with consenting to becoming the responsible entity.
5. On 21 December 2017 NEXTDC announced that it had scheduled the meeting of scheme members for 31 January 2018 to vote on the Resolution. In early January 2018 NEXTDC commenced despatching the meeting booklet to scheme members. Two statements in the meeting booklet should be highlighted at this point.
6. First, the notice of meeting dated 20 December 2017 included a statement by NEXTDC under the heading "Eligibility to vote", that in accordance with s 1074E(2)(g)(i) of the Corporations Act, and reg 7.11.37 of the Corporations Regulations 2001 (Cth), it had determined that, for the purpose of determining entitlements to attend and vote at the meeting, units will be taken to be held by the persons who are the registered holders at 7pm (Sydney time) on Monday, 29 January 2018.

The issue

1. The essential question for determination is whether 360 Capital is entitled to exercise its voting rights on the Resolution to be submitted to the adjourned meeting of the responsible entity. That question arises given the terms of s 253E of the Corporations Act: 253E Responsible entity and associates cannot vote if interested in resolution The responsible entity of a registered scheme and its associates are not entitled to vote their interest on a resolution at a meeting of the scheme's members if they have an interest in the resolution or matter other than as a member. However, if the scheme is listed, the responsible entity and its associates are entitled to vote their interest on resolutions to remove the responsible entity and choose a new responsible entity. Note: The responsible entity and its associates may vote as proxies if their appointments specify the way they are to vote and they vote that way (see subsection 253A(2)).
2. This provision was described by Brereton J in Re AMP Capital Funds Management Limited (in its capacity as responsible entity of the AMP Capital China Growth Fund (ARSN 122 303 744)) (2016) 310 FLR 382; [2016] NSWSC 986 (AMP Life) at [36], as follows: "the prophylactic purpose of s 253E [is] to remove the potential for a conflict of interest, by precluding the responsible entity from exercising its voting power if it has an extraneous interest, so that votes will be informed only by the interests of members qua members". His Honour observed at [37] that the disqualification of a responsible entity would achieve nothing if its associates were at liberty to vote in the manner in which the responsible entity would desire, because: It is the fact of their association, not their interest, which is critical. If any one of a number of associated entities has an extraneous interest, there is potential for the others to vote by reference to the association rather than by reference to their own independent interests. … Thus, a responsible entity and its associates are regarded as potentially constituting a single voting block, the votes of which are not to be taken into account if the responsible entity or any associate has an extraneous interest in the resolution. As it seems to me, the purpose of s 253E is to preclude the risk that, if a responsible entity or any of its associates has an extraneous interest in a resolution, any of them might vote by reference to that interest regardless of which of them has it. These remarks by Brereton J were referred to by the Court of Appeal with apparent approval in AMP Life Ltd v AMP Capital Funds Management Ltd (2016) 312 FLR 391; [2016] NSWCA 176 at [13].

Interest other than as a member

1. Although not expressly admitted, no argument was advanced by 360 Capital against the proposition that APDC as the responsible entity has, in terms of s 253E, an "interest in" the proposed Resolution "other than as a member" because the effect of the Resolution, if passed, would have an adverse impact on the remuneration receivable by it as the responsible entity. Such an interest has been held to be an interest "other than as a member": AMP Life at [9] (Brereton J).

The associate reference

1. The associate reference in s 12(2) of the Corporations Act is in the following terms: (2) For the purposes of the application of the associate reference in relation to the designated body, a person (the second person) is an associate of the primary person if, and only if, one or more of the following paragraphs applies: (a) the primary person is a body corporate and the second person is: (i) a body corporate the primary person controls; or (ii) a body corporate that controls the primary person; or (iii) a body corporate that is controlled by an entity that controls the primary person; (b) the second person is a person with whom the primary person has, or proposes to enter into, a relevant agreement for the purpose of controlling or influencing the composition of the designated body's board or the conduct of the designated body's affairs; (c) the second person is a person with whom the primary person is acting, or proposing to act, in concert in relation to the designated body's affairs (emphasis in original).
2. In interpreting the "associate reference" in s 12, the modified form of s 12(2), dictated by ss 12(3) and 12(5) applies, given that the APDC Trust is a managed investment scheme. The effect of those modifications is that in s 12(2) the "designated body" is the APDC Trust, the "primary person" is APDC and the "second person" is 360 Capital.
3. The associate reference contains three tests: a control test in s 12(2)(a), a relevant agreement test in s 12(2)(b), and an acting in concert test in s 12(2)(c).

(a) Control test

1. Up until 16 January 2018, 360 Capital (the second person) was the holder of the majority of shares in Holdings and controlled APDC (the primary person), with the result that by operation of s 12(2)(a)(ii) of the Corporations Act, 360 Capital was "an associate" of APDC as the responsible entity of the APDC Trust for the purposes of s 253E. It is not in doubt that s 12(2)(a)(ii) ceased to have any application when all of the shares in APDC were sold and transferred out of the APDC Group by Holdings to OIG on 16 January 2018.

(b) Relevant agreement test

1. Section 12(2)(b) is not relied upon by NEXTDC and in any event does not apply for the reasons given in 360 Capital's written submissions in chief. There is no suggestion, nor evidence, that there is a "relevant agreement" between 360 Capital and APDC, or that those parties propose to enter into a relevant agreement for the purpose of controlling or influencing whether a particular company becomes or remains the responsible entity of the APDC Trust. Nor is there any suggestion, or evidence, of a "relevant agreement" between 360 Capital and APDC, or that those parties propose to enter into a relevant agreement for the purpose of controlling or influencing the conduct of the Trust's affairs.

(c) Acting in concert test

1. The acting in concert test directs attention to whether the second person (360 Capital) is a person with whom the primary person (APDC) is acting, or proposing to act, in concert in relation to the designated body's affairs, here, the managed investment scheme's affairs. In this context, the definition of "affairs of a body corporate" in s 53 of the Corporations Act applies for the purposes of, relevantly, s 12(2)(c): Corporations Regulations, reg 1.0.18(b). Interpreting the "affairs of a managed investment scheme" in s 12(2)(c), in its modified form, the focus is on s 53(j) which provides that the affairs of a managed investment scheme include: (j) where the body has made available interests in a managed investment scheme - any matters concerning the financial or business undertaking, scheme, common enterprise or investment contract to which the interests relate; and …
2. As will be seen the focus of inquiry in the present case is on whether 360 Capital and APDC are acting in concert in relation to the APDC Trust's affairs and therefore 360 Capital is an associate of APDC within s 12(2)(c) of the Corporations Act. If so, 360 Capital is prohibited by s 253E from voting its interest as a scheme member on the Resolution, given that it is not in dispute that APDC as the responsible entity has, in terms of s 253E, an "interest in" the proposed Resolution "other than as a member".

The parties' contentions

1. In its statement of facts and contentions of law dated 1 February 2018, 360 Capital contended (par 12) that: (a) it is not an "associate" of [APDC] as that term is defined by the Corporations Act; (b) the time for determining a member's entitlement to vote at a meeting convened under Pt 2G.4 of the Corporations Act (the Relevant Time) is the time at which the Wind-Up Resolution is placed before the Meeting for decision by the members; and (c) on the basis that there are no material changes in the factual circumstances between the date of this Statement of Facts and Contentions and the Relevant Time [360 Capital]: (i) will not be an associate of [APDC] at the Relevant Time; and (ii) is entitled to vote its unitholding in respect of: (A) the election of the chair of the Meeting; and (B) the Wind-Up Resolution.
2. NEXTDC responded in its statement of facts and contentions of law dated 12 February 2018 (par 22) that: By reason of at least: (a) the terms of stapling arrangements and clause 22.5 of the APDC Trust's constitution, APDC and Holdings must co-operate in relation to the stapled securities including taking a consistent approach on investments; (b) the timing and circumstances surrounding the sale of the APDC to OIG and the immediate appointment by OIG of the APDC Subsidiary as the Manager of the APDC Trust; (c) the nature and extent of the obligations undertaken by the APDC Subsidiary as the Manager of the APDC Trust; (d) the nature and extent of the independent autonomous functions which are undertaken by the APDC without the involvement of the APDC Subsidiary; (e) the stated aspiration of the 360 Capital Group during 2017 that one of its subsidiaries be appointed as the responsible entity of the APDC Trust; and (f) the fact that the responsible entity functions of a stapled entity are not normally outsourced, NEXTDC contends that 360 Capital and APDC are associates within the provisions of section 12(2) of the Corporations Act 2001 (Cth).

Time when the associate reference is to be considered

1. There was a debate between the parties concerning the time when the existence of an associate relationship is to be determined for the purposes of s 253E. 360 Capital submitted that the relevant time is the time when it becomes necessary to determine entitlements to vote during the course of the meeting, being either at the time when an objection to a right to vote is made and determined by the chair under s 253G, or in the absence of an objection, at the time of casting votes.
2. Against this, NEXTDC submitted that the relevant time is the time when "eligibility" to vote is determined being the time specified by the responsible entity, which cannot be more than 48 hours before the time of the meeting, referring to Corporations Regulations, reg 7.11.37. In closing submissions, NEXTDC accepted that it is unlikely that the competing constructions will have any practical consequence in the present case.
3. The construction advanced by 360 Capital is to be preferred. First, it is consistent with the text of s 253E, which says that the responsible entity "and its associates are not entitled to vote their interest on a resolution at a meeting".
4. Second, it is supported by the context, relevantly; s 253E appears in Part 2G.4 Division 6, which is headed "Voting at Meetings of Members" and the surrounding provisions of Division 6 which address matters that arise in the course of the meeting.
5. Third, it is consistent with the remarks of Brereton J in AMP Life at [36] (referred to at [22] above), that the question of eligibility to vote at a meeting is a matter for the decision not of the responsible entity, but of the chair of the meeting under s 253G.
6. The difficulty with NEXTDC's construction is that it focuses on reg 7.11.37 but this regulation is concerned with a different aspect of eligibility to vote, namely, eligibility in terms of who is taken to be a holder of units in a managed investment scheme for the purposes of a meeting. Given that such determination is required to be made by the convenor of the meeting before the notice of meeting is given: reg 7.11.37(4)(b), that determination is anterior to and separate from the determination of entitlements to vote which is made at a meeting by the chairperson: s 253G. Here, the determination by NEXTDC as convenor was recorded in the notice of meeting dated 20 December 2017: see [11] above.

Legal Principles: acting in concert

1. The applicable principles are not in dispute. In Bank of Western Australia Ltd v Ocean Trawlers Pty Ltd (1995) 13 WAR 407 at 432; (1995) 16 ACSR 501 (Ocean Trawlers) at 524-525, Owen J summarised the authorities which have considered the expression "acting in concert" as follows: "Acting in concert" involves at least an understanding between the parties as to a common purpose or object … It is necessary that the understanding should be consensual and that there should be some adoption of it. However, it is not essential that the parties are committed to it or bound to support it. An arrangement or understanding can be informal as well as unenforceable and the parties may be free to withdraw from it or to act inconsistently with it notwithstanding their adoption of it … Such an understanding may be proved by inference from the circumstances surrounding the impugned transaction and from what the parties have done as well as by direct evidence. (Citations omitted)
2. Both parties referred to Perpetual Custodians Ltd (as custodian for Tamoran Pty Ltd as trustee for Michael Crivelli) v IOOF Investment Management Ltd; Murray v Perennial Investment Partners Ltd [2012] NSWSC 1318; (2012) 91 ACSR 530 (Perpetual v IOOF), where Stevenson J said (at [102]) that in order for two parties to act "in concert": (a) there must at least be an understanding between them as to their common purpose of object; a mere coincidence of separate acts is insufficient: per McPherson J in Adsteam Building Industries Pty Ltd v Queensland Cement & Lime Co Ltd [1985] 1 Qd R 127 at 132; (1984) 14 ACLR 456 at 459; (b) there must be some knowing conduct the result of communications between parties and not merely simultaneous actions occurring contemporaneously; (c) there must be an understanding between the parties as to a common purpose of [sic] object: Bank of Western Australia v Ocean Trawlers Pty Ltd (1995) 13 WAR 407 at 431-2; (1995) 16 ACSR 501 at 524-525 (Ocean Trawlers) per Owen J; (d) there must be contemporaneity and community of purpose (per French J (as his Honour then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (1992) 44 IR 264 at 272); (e) a concurrence of views about the merits of a particular resolution proposed by another person is not sufficient: Re Winepros Ltd [2002] ATP 18 at [33]; (2002) 43 ACSR 566; and, (f) the understanding between the parties as to the common purpose or object must be consensual and there must be some adoption of it: Ocean Trawlers.

Onus of proof

1. 360 Capital accepted that it is required to prove a negative proposition - that no associate relationship exists between 360 Capital and APDC - in order to obtain the declaratory relief it seeks. That is consistent with the principles stated by McLelland CJ in Eq in Massoud v NRMA Insurance Ltd (2005) 62 NSWLR 653 at 660: These decisions illustrate what I consider to be the principles by which the incidence of the onus of proof is to be determined, namely: (1) a party who seeks relief has the burden of satisfying the court of facts which (in the absence of proof of other facts) would justify the grant of that relief; (2) what those facts are depends principally upon: (a) the nature of the relief sought; and (b) the operation of any relevant presumptions; (3) in the case of relief by way of declaratory order, the precise terms of the declaration assume particular significance in that (subject to any relevant presumption) the party seeking the declaration has the burden of proof of any matter which is a necessary element of the declaration sought (even if in proceedings by that party for relief of another kind, or in proceedings by the other party, that matter would not arise unless raised (and the burden of proof consequently assumed) by the other party).
2. The above passage was approved in Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735; [1999] NSWCA 422 at [11], and in Gooley v Motasea Pty Ltd [2015] NSWCA 31 at [5] where Leeming JA (Gleeson JA and Bergin CJ in Eq agreeing) said that the onus lay upon the plaintiff to establish, on the balance of probabilities, all facts necessary to support the declaration claimed.
3. In addition to the tender of documentary evidence, 360 Capital relied upon affidavit evidence from Mr John Ballhausen, the chair of the Independent Board Committee of 360 Capital (360 Capital IBC), and oral evidence from Mr Tearle who was called to give evidence on subpoena. Both witnesses were cross-examined. NEXTDC criticised 360 Capital for failing to call other witnesses, including Mr Pitt, the managing director of 360 Capital, who was also a director of Holdings up until 14 May 2018, Mr van Aanholt, the chairman of 360 Capital and also the chairman of Holdings, Mr James Storey, 360 Capital Group's Fund Manager, and Mr Glenn Butterworth, the CFO of 360 Capital Group.
4. NEXTDC submitted that the failure by 360 Capital to adduce evidence from these witnesses is entirely unexplained and the Court should draw adverse inferences in accordance with the principles in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8, including that their evidence would not have assisted 360 Capital in its attempt to establish the negative proposition the subject of the declarations it seeks. Put at such a high level of generality, this submission does not assist in identifying the circumstances in which a Jones v Dunkel inference should be drawn.

Outline of submissions

1. Both parties provided detailed written submissions, supplemented by oral argument. It is not necessary to set out all of the submissions. However, an understanding of the associate issue is assisted by a summary of the essential arguments advanced by the parties, which were refined in closing submissions.
2. 360 Capital submitted that it is not an "associate" of APDC because the effect of the sale and transfer of all of the shares in APDC to OIG, terminated any associate relationship between 360 Capital and APDC arising out of a control relationship under s 12(2)(a)(ii). So much was accepted by NEXTDC (T213 (12-16)). As indicated, that such a control relationship existed up until 16 January 2018 when 360 Capital held 67.31 percent of the shares in Holdings, which in turn held all of the shares in APDC, is not in doubt.
3. 360 Capital advanced four reasons why it is now no longer an associate of APDC. First, the sale of APDC to OIG was a commercial transaction which was entered into after Perpetual withdrew from its negotiations with 360 Capital about becoming the responsible entity of APDC. Second, that APDC is an independent responsible entity without any association with 360 Capital. Third, the establishment of the independent board committee of 360 Capital (360 Capital IBC) fractured any potential link between 360 Capital and APDC, and that was reinforced by the establishment of the APDC IBC. Fourth, the communication protocols implemented by 360 Capital have quarantined 360 Capital from Holdings, APDC SPV and APDC.
4. In further support of absence of any associate relationship, 360 Capital pointed to the following matters: (a) since 16 January 2018, no directors of 360 Capital remain directors of APDC; (b) no directors of 360 Capital are directors of APDC SPV; (c) Mr Pitt retired as a director of Holdings on 14 May 2018, and Mr van Aanholt, who remains a director of Holdings, is a non-executive director of 360 Capital and not a member of the 360 Capital IBC; and (d) since 24 May 2018, no personnel employed by APDC or Holdings or APDC SPV operate from the same premises as 360 Capital.
5. NEXTDC submitted that 360 Capital has failed to discharge its onus of proof that it is not an associate of APDC. NEXTDC further submitted that the evidence provides a proper basis for the Court to positively conclude that such an associate relationship exists. According to the submission, 360 Capital and APDC are acting in concert and are therefore "associates" in relation to the APDC Trust's affairs on one of two bases: 1. they co-operated so as to facilitate the implementation of arrangements which enabled 360 Capital to vote at a meeting which would consider a resolution to wind-up the APDC Trust but which still permitted 360 Capital to retain effective control of the APDC Trust's affairs notwithstanding the sale of the shareholding in APDC to OIG, and this was given effect to by: (a) the sale of APDC to OIG; (b) the IMA entered into by APDC with the newly created APDC SPV with no employees and the Service Agreement entered into between the APDC SPV and Holdings, which was controlled by 360 Capital; and (c) that APDC acquiesced in the affairs of the APDC Trust and, in particular, the potential sale of the APDC Trust's assets, being conducted by Mr Pitt (the managing director of 360 Capital) with the assistance of two of 360 Capital's senior officers, Mr Storey and Mr Butterworth; 1. there is an ongoing common, commercial purpose or objective, shared by APDC and 360 Capital (through its control of APDC SPV) for 360 Capital to manage and deal with the assets of the APDC Trust.

The sale of APDC to OIG

1. The starting point is to identify the purpose (or purposes) of 360 Capital in externalising the responsible entity function of the APDC Trust by selling APDC to OIG in January 2018. To place this transaction and the related arrangements - the IMA and the Services Agreement - in context, it is first necessary to say something about the earlier proposals in the second half of 2017 to change the responsible entity of the APDC Trust.

Proposals to externalise the responsible entity function

1. In June 2017, 360 Capital Group proposed that the responsible entity function be externalised to itself, in particular, that 360 Capital should replace APDC as the responsible entity. At that time, 360 Capital held 19.9 percent of the stapled securities in the APDC Trust. The stated justification given by 360 Capital in the explanatory memorandum accompanying this proposal included that the APDC Group was not being proactively managed and was sub-scale as an internally managed REIT, and that there would be costs savings in having 360 Capital appointed as the responsible entity.
2. Ultimately, the scheme meeting convened for 28 July 2017 to consider this proposal was not held. APDC Group agreed in late July 2017 to allow 360 Capital Group to undertake due diligence in connection with its proposal to acquire all of the securities in the APDC Group. Nonetheless, 360 Capital Group foreshadowed the possibility of a further meeting of the APDC Trust to replace the responsible entity if it considered it to be necessary.

November 2017 - 360 Capital approaches Perpetual

1. In early November 2017, 360 Capital approached Perpetual in relation to the proposed externalisation of the responsible entity function for the APDC Trust. In an email to the directors of 360 Capital on 9 November 2017, Mr Pitt described the proposal as one that would enable 360 Capital "flexibility in voting and provide further independence".
2. NEXTDC submitted that the shift away from having 360 Capital installed as the responsible entity of the APDC Trust in June 2017 is entirely unexplained. I do not agree. In a memorandum to the Board of 360 Capital dated 15 November 2017. Mr Pitt expressed the view that: The current structure of ADJ is appropriate when ADJ has scale and is widely held. Unfortunately, with the shareholder base going forward and the motivation of NEXTDC, we believe it is more appropriate to appoint an independent responsible entity.
3. The memorandum also noted that the proposal to restructure the APDC Group included that Perpetual as the new responsible entity would enter into an investment management agreement with APDC, and APDC would enter into a sub-investment management agreement, it seems with 360 Capital.
4. Due diligence was undertaken by Perpetual in November and December 2017. On 22 November 2017, Perpetual provided 360 Capital with a draft investment management agreement for a listed fund (for the provision of services of a Manager to Trust Company RE), if Trust Company RE, a subsidiary of Perpetual, was appointed the responsible entity. Among other things, the draft investment management agreement provided differential termination rights by the responsible entity (cls 10.2 and 10.5) and the Manager (cl 10.3).
5. On 23 November 2017, Mr Pitt updated a meeting of the directors of Holdings and APDC on discussions that had begun with Perpetual. Also on 23 November 2017, Mr Pitt signed, on behalf of APDC, an updated offer letter from Perpetual accepting the terms of Perpetual's proposal. The fees proposed by Perpetual included establishment and legal fees totalling $40,000 and a sliding scale of annual fees as responsible entity of 8 basis points for a gross asset value (GAV) of the fund up to $250 million, reducing to 7 basis points for a GAV of the fund between $250 million and $500 million, and 6 basis points for a GAV in excess of $500 million, plus a minimum annual fee of $120,000, together with fees calculated at hourly rates for additional administrative services.

NEXTDC announcement on 14 December 2017

1. On 14 December 2017, Mr Pitt sent an email (at 9:52 am) to Mr van Aanholt, Mr Gibbs and Mr Wilson, copied to Mr Andrew Moffat, Mr Graham Lenzner and Mr Ballhausen, enclosing the NEXTDC announcement of the winding-up proposal, and stated: We will talk later if we can. We have Perpetual ready to go but this has got in front of us.
2. As indicated, Perpetual informed 360 Capital on 20 December 2017 that following the due diligence review and recent announcements, Perpetual would not be able to progress consenting to becoming the responsible entity.

Independent board committees established

1. As at December 2017, there was a commonality of directors of 360 Capital, Holdings and APDC following the change of control of the APDC Group to the 360 Capital Group in November 2017. Mr van Aanholt, Mr Pitt, Mr Gibbs and Mr Wilson were directors of Holdings and APDC; and Mr van Aanholt, Mr Pitt, Mr Ballhausen, Mr Moffat and Mr Lenzner were directors of the 360 Capital. Steps were taken in December to establish independent board committees for both APDC and also 360 Capital.
2. On 18 December 2017, the APDC IBC was established for Holdings and APDC (comprising Mr Wilson and Mr Gibbs). The role of the APDC IBC was to consider NEXTDC's winding-up proposal, whether the responsible entity services to APDC Trust should be outsourced and any matter where 360 Capital Group had a material interest over and above that of any other member.
3. On 22 December 2017, the 360 Capital IBC was established at the recommendation of Mr Pitt, comprising Mr Ballhausen as chairperson and Mr Moffat and Mr Lenzner. Mr Ballhausen deposed (affidavit, 23/1/18, par 31) that the 360 Capital IBC was established to: (a) consider: (i) the investment by 360 Capital Group in [APDC Group]; (ii) the meeting booklet circulated by the Second Defendant; (iii) any ASX announcement and other correspondence that 360 Capital Group may make in relation to the investment in [APDC Group]; and (iv) any ASX announcement and any other communications by [APDC Group], NEXTDC and any other person that may be relevant to the investment in [APDC Group]; and (b) instruct any advisers that the 360 Capital IBC may retain in relation to the above, to ensure that the interests of securityholders of 360 Capital Group are independently promoted and considered.
4. On 29 December 2017, Mr Ballhausen sent an email to Mr Pitt requesting that he ensure that management of the 360 Capital Group direct all communications regarding APDC Group to him as chairperson of the 360 Capital IBC (the communication protocols). On the same day, Mr Ballhausen informed the directors of Holdings (Mr Wilson, Mr Gibbs, Mr Pitt and Mr van Aanholt) of the establishment of the 360 Capital IBC and requested that they direct all communications from APDC Group to 360 Capital Group to him as chairperson of the 360 Capital IBC. On 31 January 2018, Mr Butterworth sent an email to Mr Ballhausen confirming that staff of 360 Capital Group had been notified of the establishment of the 360 Capital IBC and of the communication protocols and that no exceptions to the protocols had been identified to date. Mr Ballhausen deposed (affidavit 3/5/18, par 28 and affidavit 5/6/18, par 26) that so far as he was aware, the communication protocols had been complied with and that Mr Pitt and Mr van Aanholt had not engaged in any matters relating to APDC Group in their capacity as directors of 360 Capital Group or 360 Capital.

360 Capital approaches OIG

1. Following the winding-up announcement on 14 December 2017, Mr Matthew Anderson, a partner at Clayton Utz, attempted to speak by telephone with Mr Tearle of OIG. It seems that Mr Tearle was unavailable. They spoke by telephone the following day. Mr Anderson asked Mr Tearle whether OIG might be interested in acquiring a responsible entity where there was a dispute, in particular, they had looked at changing the responsible entity through the normal course of holding a meeting of unitholders, but that was going to take too long and whether OIG was open to the proposition of "buying the responsible entity". Mr Tearle responded affirmatively indicating that OIG had done it before in similar situations in a listed structure (T87 (28-40)). Mr Tearle gave evidence that Mr Anderson did not give any details of who he was acting for or his role (T129 (2-3)).
2. Mr Anderson telephoned Mr Tearle sometime in the middle of the following week and told him that the matter involved "APDC" (T 87 (37-40)). According to Mr Tearle, Mr Anderson mentioned that he expected that a motion for an extraordinary general meeting to wind-up the trust was imminent, and that if OIG were to acquire the responsible entity that may facilitate the 360 Group voting in respect of the Resolution. Mr Anderson told Mr Tearle that it would remove one of the arguments that was currently being raised. Mr Tearle agreed in cross-examination that it was made clear to him at the outset that this was the main reason that the sale of the responsible entity was proposed and that OIG had been approached (T129 (18-31)).
3. Mr Tearle gave evidence that he was called to a meeting at Clayton Utz on about 19 December 2017 to meet Mr Anderson and a couple of people from 360 Capital (T96 (7-12)). Mr Gibbs and Mr Pitt attended that meeting. Mr Tearle attended a second meeting at Clayton Utz on 19 December 2017, attended by Mr Gibbs and Mr Wilson (T96 (16-21)). Mr Tearle was asked to provide an indicative proposal and fees that OIG had in mind if it acquired APDC, and the information required for due diligence. Mr Tearle sent an email to Mr Anderson on 19 December 2017: In respect of the transaction and the fees, we were thinking: • Purchase price - $10 • Upfront DD fee - $35k, refundable if we choose not to proceed, DD completed within a week if DD provided asap • RE fees: • Minimum transaction fee - $200k (excluding the DD fee) • Annual RE fee (with external custody) - 0.07% of GAV, subject to a minimum fee of $7k per month • Annual RE fee (with custody) - 0.9% of GAV, subject to a minimum fee of $9k per month • Regulatory capital - $1.1m left in the RE, OIG agrees to repay within 12 months, limited recourse to the assets of the RE • Key persons/RMs - need to remain until we can replace them.

APDC IBC engages Wexted Advisors

1. Around the same time as the approach to OIG, the APDC IBC approached Mr Joe Hayes of Wexted Advisors to provide advice. On 21 December 2017, Mr Hayes sent the final version of an engagement letter by email to Mr Gibbs and Mr Wilson. The scope of the engagement was to provide advice to the APDC IBC in respect of a number of matters, including the Resolution, to review the responsible entity services provided by APDC to the APDC Trust, including the range of potential values that could be ascribed to those services in the event those services were outsourced to an appropriate third party provider, a recommendation in respect of the delivery of those services and advice on the terms of any such outsourcing and the method of implementation.
2. Also on 21 December 2017, OIG sent an engagement letter by email to Holdings. It was in similar terms to the proposal in its 19 December 2017 email referred to above. Mr Wilson emailed a copy of the OIG engagement letter to Mr Hayes (copied to Mr Gibbs) on 21 December 2017 and stated that this was a matter he would like Mr Hayes to inspect and guide and added: Keen to ensure you recommend this as the right approach. The reference by Mr Wilson to "this", is plainly a reference to outsourcing the responsible entity function by selling APDC to OIG.
3. On 22 December 2017, Mr Tearle attended on short notice a meeting with the APDC IBC (Mr Gibbs and Mr Wilson) and also Mr Anderson and Mr Hayes. Mr Tearle gave a presentation explaining who OIG was and the services that it could provide. Mr Tearle gave evidence that he explained to the APDC IBC: … in particular, I guess, circumstances similar to these in the present case and where we'd taken over in similar circumstances. (T 88 (45-46))
4. The minutes of the APDC IBC meeting on 22 December 2017 record that OIG had expressed interest in being appointed responsible entity of the APDC Trust or acquiring the shares in APDC, and that the committee and Mr Hayes discussed their meeting with Mr Tearle. Mr Tearle gave evidence, which I accept, that OIG was only ever asked whether it would consider acquiring the shares in APDC (T89 (4-5)).
5. The minutes noted that the APDC IBC considered the OIG proposal and resolved that a further proposal be provided by OIG in respect of the provision of administrative services. The APDC IBC resolved to expedite its consideration of outsourcing of the responsible entity functions of APDC Trust and requested Wexted Advisors to settle its opinion on an urgent basis. The APDC IBC also resolved to appoint Wexted Advisors to review the governance/outsourcing of the responsible entity arrangements and the financial implications of the Resolution independent of each other.

Wexted Report

1. Mr Hayes sent a draft of his report to Mr Gibbs and Mr Wilson and Clayton Utz on 31 December 2017. Mr Hayes provided further drafts of his report in early January 2017, including for meetings with the APDC IBC on 8 and 10 January 2018 and a final version on 16 January 2018.
2. The minutes of the APDC IBC held on 10 January 2018 record that the IBC discussed the draft Wexted Report, including the benefits and disadvantages of outsourcing the responsible entity function of the APDC Trust and the terms of the draft IMA, and noted the need to establish an SPV for the purposes of acting as investment Manager should the outsourcing proposal proceed.
3. NEXTDC submitted that the Wexted Report received considerable input from Clayton Utz who acted for, among others, the APDC IBC and the APDC Group. That may be accepted, but it does not negate the independence of Wexted Advisors.
4. NEXTDC further submitted that the obtaining of the Wexted Report was predicated on a predetermined answer, namely, that the responsible entity function be outsourced to an external party, OIG, while the asset management functions were retained within the APDC Group. That conflates the terms of reference in par 2.8.1 of the Wexted Report with the advice given. Wexted Advisors was asked if it formed the view that outsourcing the responsible entity services was in the best interests of securityholders, to consider and opine on whether (a) the sale of the responsible entity as soon as possible, on the terms set out in the proposal received by OIG and reflected in the draft Share Sale Agreement, and (b) the retention of the residual asset management functions of APDC on terms consistent with the draft IMA, was in the best interests of securityholders.
5. The final Wexted Report expressed the opinion that it would be in the best interests of the APDC Group and its securityholders: (a) for the responsible entity functions to be outsourced whether the outsourcing is effected by the sale of the responsible entity or change of responsible entity by resolution; (b) for the Share Sale Agreement between OIG and Holdings to be executed; and, (c) for APDC to execute the IMA.
6. The report noted that APDC had no full-time staff and insufficient resources and that there was a real risk that it would not be able to meet its statutory obligations. The report outlined the options available to APDC were to undertake the responsible entity functions internally, by recruiting additional resources, or to outsource critical responsible entity functions to a qualified provider of those services.

16 January 2018 transactions

1. The minutes of the meeting of the APDC IBC on 16 January 2018 record that Mr Gibbs and Mr Wilson considered the sale of shares in APDC and the entry into the IMA by APDC SPV; discussed the Wexted Report; considered the advantages and disadvantages of the proposed transactions; noted various matters including the benefits of outsourcing the responsible entity, that the outsourcing of the responsible entity function could be effected through a sale of the shares in APDC or by replacing APDC as responsible entity by unitholder resolution, and that a sale of the responsible entity offered certainty of timing and certainty of implementation; and discussed the Sale Agreement and the IMA and their terms.
2. The minutes also record that the benefits of outsourcing the responsible entity noted by the APDC IBC included: (a) costs savings; (b) the absence of sufficient resources to ensure APDC adequately performed the responsible entity function on a continuing basis would be immediately addressed; (c) there would be no need to recruit additional resources to fulfil the responsible entity functions; (d) allowing APDC to focus on its core business and management of the assets, rather than compliance; (e) improvement in governance arrangements; and (f) certainty of compliance.
3. The APDC IBC resolved that it is in the best interests of Holdings, its shareholders and APDC securityholders to, and recommended to the Board of Holdings that it (subject to the IMA being executed) sell the shares in APDC on the terms contained in the Sale Agreement and that the APDC SPV enter into the IMA.
4. The APDC IBC also considered the IMA and resolved that it was in the best interests of APDC securityholders to recommend to the Board of APDC that it enter into the IMA.
5. A sequence of further meetings followed on 16 January 2018. First, Mr Gibbs and Mr Wilson, as directors of Holdings, resolved to enter into the Sale Agreement with OIG, and the Services Agreement with APDC SPV. Then as directors of APDC SPV, Mr Gibbs and Mr Wilson, after noting various matters, including that the company currently did not have the resources adequately to perform the proposed services under the IMA, the proposed Services Agreement with Holdings, the resources currently available to Holdings, and the ongoing search by Holdings for executive management, and the recommendation of the APDC IBC that the IMA is in the best interests of APDC securityholders and for the Board to enter into the IMA, resolved to enter into the IMA (with APDC) and the Services Agreement (with Holdings). Finally, as directors of APDC, Mr Gibbs and Mr Wilson resolved to enter into the IMA with APDC SPV.

Process of decision-making by APDC post-16 January 2018

1. Mr Tearle gave evidence that since becoming a director of the responsible entity APDC he had made about a dozen decisions (T107 (15-17)). He said that decisions were made through discussion by the directors, sometimes with or without recommendation from the Manager (T107 (11-13)), but he did not feel bound by the recommendation from the Manager (T108 (1)). I accept that evidence.
2. Mr Tearle explained that the process of receiving recommendations from the Manager typically involved receiving an email or a message from the Manager that it wanted to do something and then informing the Manager that the responsible entity needed a recommendation and that the Manager go back and prepare a recommendation (T108 (46-50)). He described this process as one imposed by APDC on the Manager. Typical matters requiring a recommendation from the Manager included anything to do with new leases or construction works (T109 (12-21)) and authorising proposed ASX announcements (T110 (5-14)). Other decisions by APDC included approving the response by APDC Group to a request by ASIC for further information concerning the valuation of the Group's assets held for sale for the half year ended 31 December 2017 (Ex 6, pp 161 and 175).
3. While Mr Tearle agreed that APDC had not instructed the Manager to vary any decision of the Manager with respect to the performance of its services (T113 (36-46)), it was not put to him that he disagreed with any of the Manager's decisions. Nor is there any material which suggests that Mr Tearle disagreed with any of the Manager's decisions.
4. With respect to ASX announcements, Mr Tearle explained the authorisation process as follows: he would expect to receive a draft announcement with a recommendation and that there was usually some discussion about the terms of the announcement before it was released (T110 (5-7)).
5. The minutes of meeting of directors of APDC held on 27 February 2018 (attended by Mr Tearle and Mr Epstein) record that APDC SPV, as the investment manager, had provided an appropriate recommendation relating to the approval of the Financial Report of APDC, as included in the APDC Group's half-year ended 31 December 2017 financial report. In addition, in support of the Directors' Declaration made in the Financial Report, APDC Group had provided, among others, an appropriate recommendation by the Audit, Risk and Compliance Committee to the Board of Holdings and APDC. The directors of APDC resolved to approve and adopt the valuation of the assets as included in the Financial Report (re-valued to $280 million), and also resolved to approve the Financial Report. Those half-year results were announced to the ASX on that day.

Other operational arrangements

1. On 27 April 2018, APDC notified ASIC of the change to the responsible Managers for APDC in relation to its Australian Financial Services licence; relevantly, the appointment of Ms Wiesner, Mr Hooke Robert, Mr Anthony Keating and Mr Stephen Marsh, as responsible Manager, and the cessation of Mr Pitt and Mr Butterworth as responsible Manager. ASIC notified APDC by letter dated 10 May 2018 that it had not yet formed a view whether the responsible Managers provided the organisational competence required by Corporations Act, s 912A(1)(e).
2. On 14 May 2018, APDC Group announced the appointment of Mr Vishant Narayan as chief executive officer of Holdings, that Holdings had changed its registered address to Level 13, 135 King Street, Sydney (the King Street office), that Mr Pitt had resigned as a non-executive director of Holdings, and that Holdings had the following staff: Mr Narayan, CEO, Ms Jeannine Clark, Company Secretary, and Mr Stephen Kurniawan, Finance Manager. Ms Clark had been appointed Company Secretary of both Holdings and APDC SPV on 14 February 2018.
3. Mr Ballhausen gave evidence, which I accept, that since 16 May 2018 Mr Storey no longer provides any management assistance or any other services to the APDC Group, Holdings or APDC SPV, and similarly, Mr Butterworth no longer provides any accounting or finance assistance or any other services to the APDC Group, Holdings or APDC SPV. That is consistent with email communications between Mr Butterworth to Mr Wilson on 18 May 2018, in which Mr Butterworth confirmed that he was no longer assisting APDC and he had forwarded Mr Wilson's email of that date (concerning payments to APDC SPV directors) to Mr Kurniawan at Holdings for his attention. Mr Butterworth also resigned as public officer of Holdings and APDC SPV effective from 16 May 2018.
4. Mr Ballhausen also gave evidence, which I accept, that since 24 May 2018 staff of Holdings, including Ms Clark and Mr Kurniawan, are no longer based in the Pitt Street office of 360 Capital and had returned to the King Street office. The King Street offices are serviced offices. Mr Ballhausen said that this provided governance (T68 (40)). He disagreed with the proposition that the move was temporary (T66 (39-45)). He said that the APDC Group had returned to the offices it had previously occupied. That evidence, which I accept, is consistent with the ASIC search for APDC which records that the King Street office was its principal place of business from 28 October 2014 to 22 November 2017.

Submissions

1. NEXTDC accepted that it was not necessarily or invariably illegitimate to change the ownership of the responsible entity through the sale of shares in the responsible entity (T212 (15-21)). That may be accepted. Nonetheless, the submission continued that the purpose of the sale of APDC to OIG was to enable 360 Capital to vote on the Resolution. According to the submission, there was no commercial rationale in changing the strategy from appointing Perpetual as responsible entity to selling APDC to OIG.
2. While NEXTDC did not go so far as to contend that the sale of APDC to OIG was not a genuine transaction (T213 (27-32)), it characterised the transaction as having a number of "peculiar features", including its timing and the haste at which it was entered into. The submission continued that the strategy had to be implemented quickly so as to thwart NEXTDC and the Resolution. NEXTDC also pointed to the un-negotiated price paid to OIG, the duration of its anticipated appointment as the responsible entity, the fact that there was to be a simultaneous execution of the IMA and the Services Agreement and the asymmetric termination provisions in the IMA.
3. 360 Capital says that the sale of the shares in APDC to OIG was the effectuation of an established commercial purpose of 360 Capital and Holdings, which predated the announcement of the Resolution, to externalise the responsible entity function in the interests of the unitholders of the APDC Trust as a whole. 360 Capital says that an associate relationship is not to be inferred from the timing and circumstances of the sale of APDC to OIG because it cannot be said that the purpose of externalising the role of responsible entity was solely to allow 360 Capital to vote on the Resolution.
4. Alternatively, even if 360 Capital had been pursuing a purpose of establishing its right to vote on the Resolution, it was submitted that the position after 16 January 2018 is that the responsible entity APDC did not share any such purpose. This submission relied principally upon the contention that APDC is an independent entity without any association with 360 Capital.
5. 360 Capital also submitted that, contrary to NEXTDC's contention, OIG taking over the role of responsible entity did not "still [permit] 360 [Capital] to retain effective control of the APDC Trust's affairs, notwithstanding the sale of APDC RE to OIG."

360 Capital's purpose(s)

1. In my view, the evidence establishes that 360 Capital had multiple purposes in proposing the sale of the responsible entity to OIG. Those purposes were connected. One purpose, which plainly had a commercial basis, was externalising the role of APDC as an independent responsible entity. That such purpose could be achieved by different methods does not detract from 360 Capital having that purpose. Another purpose was to eliminate an impediment to 360 Capital voting on the Resolution. That impediment arose from the control relationship that existed between 360 Capital and APDC (via 360 Capital's 67.31 percent interest in Holdings): Corporations Act, s 12(2)(a)(ii).
2. I accept that the commercial basis for externalising the role of the responsible entity pre-dated the announcement of the Resolution. Contrary to the submissions of NEXTDC, the justifications given by 360 Capital for the original proposal in June 2017 in terms of the advantages of external management and costs savings are not at odds with the subsequent proposal in November 2017 to have Perpetual appointed as the responsible entity. The circumstances existing in November 2017 were different. By that time, 360 Capital had obtained control of the APDC Group. There is no reason for doubting that there was a commercial basis for this proposal in terms of providing APDC with independence and savings in administrative costs, as noted in the draft explanatory memorandum prepared on about 6 December 2017.
3. It was not suggested by NEXTDC that the steps taken by 360 Capital to appoint Perpetual as responsible entity were uncommercial or in any way artificial (T226 (39), T227 (5-30)). That this proposal did not proceed in December 2017 is readily explained by the circumstances affecting the APDC Trust following NEXTDC's announcement of the Resolution on 14 December 2017. Perpetual withdrew its interest shortly thereafter, in light of that changed circumstance.
4. Notwithstanding the withdrawal of Perpetual from assuming the role of responsible entity, the commercial rationale for externalising the role of the responsible entity remained. What changed was the method by which that outcome was implemented, and the reasons why a different method was chosen by 360 Capital.
5. Rather than changing the responsible entity at a meeting of unitholders, 360 Capital approached OIG almost immediately after the winding-up announcement to ascertain its interest in assuming the role of responsible entity by selling APDC to OIG. I accept that the adoption of a different method to implement that proposal did not negate the commercial basis for externalising the responsible entity function.

APDC's purpose(s)

1. In the absence of direct evidence, the purpose(s) of Mr Gibbs and Mr Wilson as the APDC IBC in approving the sale of APDC to OIG are to be gleaned from the documentary evidence and Mr Tearle's evidence of his discussions with them. The documentary evidence includes:

• Mr Wilson's email to Mr Hayes (copied to Mr Gibbs) on 21 December 2017, describing selling the responsible entity to OIG as the "right approach";
• Mr Gibbs' email to Mr Wilson on 4 January 2018 recording that Mr Butterworth had informed him that APDC is establishing an SPV to function as an asset manager, and Mr Wilson and Mr Gibbs would be asked to be directors of the SPV; and
• the observation in the Wexted Report (par 4.1.4) that the sale of OIG will mean that 360 Capital is no longer an associate of APDC and will be able to vote on the Resolution.

1. I find that Mr Gibbs and Mr Wilson each understood that: (a) 360 Capital wanted to vote on the Resolution; (b) externalising the responsible entity function by the sale of the shares in the responsible entity was unusual, while providing advantages for 360 Capital in terms of timing and certainty of outcome; (c) the change in approach had been suggested by 360 Capital; and (d) terminating the existing control relationship between 360 Capital and APDC (through Holdings) would facilitate 360 Capital voting on the Resolution.
2. As to the absence of evidence from Mr Gibbs and Mr Wilson, the three conditions for drawing a Jones v Dunkel inference as described by Glass JA in Payne v Parker at 201, are fulfilled here. First, although appointed as independent directors of Holdings and APDC, Mr Gibbs and Mr Wilson would be expected to be called by 360 Capital rather than NEXTDC. Plainly, they are not in the camp of NEXTDC. Second, their evidence could be expected to elucidate the facts concerning the reasons why the APDC IBC implemented the sale transaction with OIG. Third, their absence is unexplained. Although not critical to my decision, the inference to be drawn from the absence of evidence from Mr Gibbs and Mr Wilson is that their evidence would not have assisted 360 Capital.
3. Accepting that the APDC IBC considered that externalising the responsible entity function by selling APDC to OIG was in the best interests of securityholders, I find that an inference should be drawn that Mr Gibbs and Mr Wilson also shared a common purpose or objective with 360 Capital of facilitating 360 Capital voting on the Resolution. I further find that the sale of APDC to OIG on 16 January 2018 would not have proceeded without the simultaneous entry into the other transactions, relevantly in the case of APDC, the IMA. By that conduct, APDC adopted the common purpose or objective of facilitating 360 Capital voting on the Resolution.

Significance of 360 Capital having more than one purpose

1. As indicated, 360 Capital submitted as a fall-back argument that it was not acting in concert with APDC in relation to the APDC Trust's affairs because it cannot be said that the purpose of externalising the responsible entity function was solely to allow 360 Capital to vote on the Resolution. That there was more than one purpose, including a commercial basis for externalising the responsible entity function, may be accepted. But the premise of this argument is unsound.
2. Parties may act in concert in relation to the affairs of a managed investment scheme by implementing a shared common purpose or objective, while at the same time having other purposes or objectives for acting in a particular manner, some or all of which may or may not be shared between them. That 360 Capital and the APDC IBC each had a rational commercial basis for externalising the responsible entity function is not inconsistent with those parties also having, as I have found, a shared common purpose or objective that selling APDC to OIG would facilitate 360 Capital voting on the Resolution.
3. The conclusion that 360 Capital and APDC were acting in concert in relation to the APDC Trust's affairs to facilitate 360 Capital voting on the Resolution, does not necessarily mean that the associate relationship continued after 16 January 2018. Insofar as 360 Capital and APDC shared a common purpose or objective to facilitate 360 Capital voting on the Resolution, the circumstances giving rise to that associate relationship ceased to exist when the sale of APDC to OIG was implemented on 16 January 2018: Endresz v Whitehouse at 223-224.
4. That APDC adopted such common purpose or objective by entering into the IMA simultaneously with the sale of APDC to OIG, does not mean that the IMA itself reflected a consensual understanding between APDC and 360 Capital that 360 Capital retain effective control of the APDC Trust's affairs. That is a separate question to which I now turn as part of the consideration of whether there was an ongoing purpose or objective shared by 360 Capital and APDC that notwithstanding the sale of APDC to OIG, 360 Capital retain effective control of the APDC Trust's affairs.

Whether ongoing shared common purpose or objective to facilitate 360 Capital retaining effective control of APDC Trust's affairs after 16 January 2018?

1. 360 Capital submitted that there was no associate relationship with APDC after 16 January 2018, given the following matters: 1. APDC is an independent responsible entity controlled by OIG. It emphasised that the previous directors of APDC, appointed by 360 Capital, had resigned and had been replaced by directors appointed by OIG; 2. since the establishment of the 360 Capital IBC on 22 December 2017 to address any potential association which might arise from common directors between 360 Capital and Holdings, all decisions made by 360 Capital concerning its investment in APDC Group had been made by the 360 Capital IBC; 3. communication protocols have been established within 360 Capital to ensure that the affairs of the 360 Capital IBC, relevantly decisions made concerning the investment in APDC Group, have been quarantined from the balance of the affairs dealt with by 360 Capital. It was submitted that there have been no breaches of the established communication protocols; 4. there is no commonality of directorship between 360 Capital and Holdings, APDC or APDC SPV, apart from Mr van Aanholt who is a non-executive director of both 360 Capital and Holdings; 5. employees of 360 Capital or 360 Capital Group who previously provided services or assistance to the APDC Group or APDC SPV no longer do so since 16 May 2018. And, since 24 May 2018, no personnel employed by APDC, Holdings or APDC SPV operate from the same premises as 360 Capital.
2. NEXTDC submitted that an association between 360 Capital and APDC can be inferred from a structural commercial relationship between them in respect of a common objective (relevantly, the management of APDC's financial or business undertakings), which is created by three circumstances: the IMA; the stapling arrangements established by cl 22.5 of APDC Trusts' Constitution; and the operational arrangements and collaborative conduct between the parties.
3. NEXTDC further submitted that the existence of a structural commercial relationship between the parties is supported by a number of indicia of association arising from current and past structural links and operational arrangements and collaborative conduct between APDC, Holdings, 360 Capital and APDC SPV.
4. It is convenient first to consider whether APDC gave effect to the alleged common purpose or objective that 360 Capital retain effective control of the APDC Trust's affairs by entering into the IMA, in circumstances where APDC SPV did not have any employees, and simultaneously APDC SPV entered into the Services Agreement with Holdings.

The IMA

1. Under the IMA, APDC appointed APDC SPV the investment Manager of the APDC Trust with the responsibilities set out in cl 3.2. This included to review the investment strategy and recommend changes as the Manager considers appropriate and to manage and make recommendations in relation to the sale or acquisition of any assets.
2. Clause 3.4 provided that in providing the services, the Manager may use its personnel (which can include a related body corporate) as it reasonably considers to provide the services. Clause 3.5 provided that the Manager may delegate the performance of the services with the prior written consent of the responsible entity, such consent not to be unreasonably withheld. Clause 3.7 provided that the Manager may engage agents, contractors, advisers and other external service providers, including lawyers, without the prior written consent of the responsible entity. Clause 3.10 provided that APDC, as the responsible entity, may, at any time, instruct the Manager or vary any decision of the Manager in the performance of the Services from that time.
3. Clause 4.1 dealt with limitations on the powers of the Manager and provided relevantly that in performing the services the Manager must not do anything which is prohibited by a number of specified matters, including the Relevant Law (as defined), the responsible entity's AFSL or the Constitution of the APDC Trust.
4. The term of the IMA was a period of five years or the date of termination in accordance with cl 10 (cl 10.1). Under cl 10.2, APDC was given power to terminate the agreement immediately in specified circumstances relating to the status or performance by the Manager of its duties, and also if it ceased to be the responsible entity, or the holders of more than 50 percent of the units on issue direct the responsible entity to terminate the appointment of the Manager. The Manager was given power to terminate the agreement by three months' notice in writing, or immediately if APDC ceases to be the responsible entity, or a specified event occurs in respect of APDC (cl 10.3).

Services Agreement

1. Under the Services Agreement, Holdings agreed to provide to APDC SPV certain services, staff and equipment (cl 3.1). The identified Services in Sch 1 included property management accounting, financial accounting, taxation, responsible Manager, company secretary, legal, compliance management, investor relations services and clerical services as may be requested by the Principal (APDC SPV) from time to time.
2. Clause 4.1 provided that Holdings must provide APDC SPV with the Staff required by APDC SPV, including professional and support personnel. The expression "Staff" was defined to mean the staff or independent contractor provided by Holdings to APDC SPV (cl 1).
3. Under cl 6.1, Holdings granted APDC SPV access to designated business premises of Holdings (Level 8, 56 Pitt Street, Sydney), or such other offices or premises as the parties agree and which are consistent with the obligations of Holdings under cl 3.1 for the purpose of carrying on the business operated by APDC SPV from those premises. Recital B identified the business of APDC SPV as providing management services in respect of a property trust listed on the ASX.
4. Under cl 7.1, APDC SPV agreed to pay to Holdings fees for the provision of services, staff and equipment at the rates to be agreed between the parties from time to time, such fees not to exceed the cost price incurred by Holdings, subject to the addition of the applicable GST.
5. Clause 10.1 dealt with the termination of the Service Agreement. The agreement will terminate immediately if APDC SPV ceases to carry on the business (cl 10.1) or on the occurrence of specified insolvency events in relation to Holdings (cl 10.2). In addition, either APDC SPV or Holdings may give a minimum of three months' written notice to the other party terminating the agreement upon expiration of the period specified in the notice (cl 10.3).

Appointment of the Manager

1. The following preliminary observations should be made. First, Mr Tearle gave unchallenged evidence that it is usual in the case of an external responsible entity to appoint a manager of the responsible entity (T104 (1-10)). His evidence, which I accept, is consistent with the proposed arrangements with Perpetual in late 2017, which also envisaged the appointment of Manager, relevantly, APDC.
2. Second, a common feature of the proposals involving Perpetual and OIG is that the proposed Manager would in turn engage a third party service provider, given that in each case the proposed manager lacked the internal executive resources to enable it to properly manage the APDC Trust and its assets and pursue available opportunities in the market.
3. Third, the Services Agreement is in substantially similar terms to the arrangements which were previously in place between APDC and Holdings since 3 December 2012.
4. Fourth, there is no challenge to the opinion expressed in the Wexted Report (par 3.9.1) that OIG's due diligence fee of $35,000 is an appropriate fee, and that the fee structure proposed by OIG is consistent with market.
5. Fifth, Mr Tearle gave unchallenged evidence, which I accept, that (a) that the responsible entity function undertaken by OIG in respect of APDC involved significant statutory responsibilities (T115 (3-23)); and (b) OIG's fee as responsible entity was less than that proposed by Perpetual when one compared the establishment fees (Perpetual totalling $40,000; OIG $35,000), the GAV fees and the hourly rates charged by Perpetual for additional administrative services which OIG did not charge for (T114 (9-47)).
6. Given the above matters, I reject NEXTDC's submission that the wide range of services that Holdings provides to APDC SPV under the Services Agreement means that OIG is receiving a significant fee for not having to undertake any substantial role in the management of the APDC Trust. I also reject the implication inherent in this submission that APDC, since its acquisition by OIG, is an acquiescent responsible entity receiving a large fee for allowing 360 Capital to retain effective control of the APDC Trust's affairs.
7. Further, that APDC SPV as the Manager now carries out the asset management functions previously performed by APDC and can also engage the services of a related body corporate (relevantly, Holdings), and APDC is reliant upon the management infrastructure provided by the Manager, does not negate the independence and decision-making functions of APDC as responsible entity. NEXTDC's submission to the contrary conflates the provision of services to APDC by the Manager (assisted by Holdings) and the relinquishment of decision-making by APDC as the responsible entity.

Execution of IMA by previous APDC directors

1. Mr Tearle explained in his evidence that the IMA is a key document which he expected to be in place from the day OIG acquired the responsible entity (T164 (35-37)). While he was expecting that the incoming officers of the responsible entity would sign the IMA, Mr Tearle was overseas on 16 January 2018. He gave evidence that he was content (when the sale of the responsible entity to OIG completed) that there was an IMA in place where responsibilities had been delegated (T164 (39-43)). He was involved in negotiating the terms of the IMA and gave unchallenged evidence, which I accept, that he was comfortable with the position, describing the IMA as "a fairly pro-forma document" (T165 (4-15)). In the circumstances, that the IMA was executed by the previous directors of APDC (Mr Gibbs and Mr Wilson) immediately prior to the sale of APDC to OIG, rather than the new directors appointed by OIG to APDC, is unexceptional.

Significance of termination provisions

1. As to the significance of the termination clauses in the IMA which NEXTDC described as "very curious and asymmetric", NEXTDC's submission that these provisions are unusual is not supported by the evidence.
2. First, Mr Tearle disagreed with the proposition that the termination provisions in the IMA were unusual, insofar as they gave the Manager the right to terminate on three months' notice (cl 10.4, IMA) (T130 (13-23)). I accept this evidence, which was not contradicted by any material.
3. Second, Mr Tearle also disagreed with the proposition that it was unusual for the Manager to have different termination rights to the responsible entity. He said that in a situation involving an external responsible entity, the termination rights would "absolutely be different." (T130 (25-28)) Again, I accept this evidence, which was not contradicted by any other material.
4. Third, the IMA proposed by Perpetual also contained different termination rights for the responsible entity and the Manager. Subject to certain exceptions, the Manager could terminate on six months' notice (later reduced to three months in cl 10.3 of the draft IMA attached to the draft explanatory memorandum prepared on or about 6 December 2017), whereas the responsible entity could terminate the Manager immediately in specified circumstances (cl 10.2), and otherwise the right to terminate the agreement or the Manager was subject to the Manager's consent or approval of securityholders of a special resolution (cl 10.5). In this regard, cls 10.2, 10.3 and 10.5 of the IMA proposed by Perpetual are broadly similar to cls 10.2, 10.3 and 10.4 of the IMA between APDC and APDC SPV.
5. NEXTDC made a related submission that APDC's ability to terminate the IMA or remove the existing Manager and appoint a new Manager is constrained (unlike the Manager which can terminate the IMA on three months' notice). The submission continued that, except for the limited circumstances under cl 10.4, APDC requires the consent or approval of the Manager or 360 Capital (as the holder of more than 50 percent of the units) to terminate the IMA. This submission is based on an erroneous construction of the relationship between cls 10.2 and 10.4 of the IMA.
6. The termination rights of APDC under cl 10.4 are expressed to be subject to cl 10.2. Clause 10.2(a)(i) provides APDC with the right to terminate the IMA "at any time" which is "to take effect immediately", if the Manager, among other things, breaches or fails to observe or perform any duty, obligation, or undertaking that adversely affects the rights of members, and fails to rectify the breach or failure in a reasonable period specified by the responsible entity in a notice to do so. As mentioned, cls 10.2 and 10.4 of the IMA are in broadly similar terms to cls 10.2 and 10.5 of the IMA proposed by Perpetual.

Significance of duration of role

1. As to the significance of the likely duration of OIG's role, Mr Tearle was frank in his evidence when he said that it was not clear whether it would be a long-term role given he was told very clearly by Mr Anderson in December 2017 that, "[t]his might be a role where you're on in there for three months and then you're out because, you don't, either you're replaced or the resolution to wind-up the Trust proceeds" (T98 (38-42)). I accept Mr Tearle's evidence that he was not sure how long the role would last (T101 (12-13)), but that if he literally thought that it would be a three-month role OIG would have charged a lot more (T171 (43-44)).
2. Further and importantly, it does not follow from Mr Tearle's understanding that the role of OIG as provider of responsible entity services for APDC might not be long-term, that Mr Tearle or the other new directors of APDC had a shared purpose or objective of facilitating 360 Capital retaining effective control of the APDC Trust's affairs.

Differences between IMA and Perpetual proposal

1. NEXTDC also pointed to certain differences in the terms of the IMA and that proposed with Perpetual. Three differences were mentioned in closing submissions. The first concerned the extent of express limitations on the Manager's power, the second concerned the Manager's ability to delegate, and the third concerned the "notification, information and assistance" duties imposed on the Manager under the respective IMAs. Again, the submission seemed to be directed to the independence of APDC as the responsible entity.
2. Only the first matter was raised with Mr Tearle in cross-examination. He agreed that the IMA gives broad powers to the Manager, subject to the caveats contained in the relevant provision (cl 3.5). He explained that the intention was that the Manager have the day-to-day operation of the Trust and its assets (T163 (27-33)). I accept Mr Tearle's evidence that the appointment of a Manager with wide powers is not unusual for an externally controlled responsible entity. Nor does it follow that because the Manager is given wide powers under the IMA and the Manager (who is without employees) obtains services from Holdings, that APDC and 360 Capital shared a common purpose or objective that 360 Capital retain effective control over the APDC Trust's affairs. As indicated, Mr Tearle described the IMA as a pro-forma document, he was involved in negotiating its terms and he was content with the IMA that was put in place.
3. The second and third matters may be put aside as it was not put to Mr Tearle in cross-examination that these provisions were either unusual, or if so, why that would be significant. In any event, accepting that there are differences in the Manager's power of delegation, it should be observed that the IMA proposed by Perpetual permitted delegation with Perpetual's consent, and also contemplated that the Manager would obtain services from a third party provider, relevantly, 360 Capital. While the IMA proposed by Perpetual provided some greater specificity in the "notification, information and assistance" provisions compared to the IMA entered into with APDC SPV, that is not an indicator of a shared common purpose or objective of APDC and 360 Capital that the latter retain effective control of the APDC Trust's affairs.
4. In my view, the evidence establishes that the arrangements the subject of the IMA and the Services Agreement were not unusual for an externally controlled responsible entity. Those arrangements are not to be taken as giving effect to a shared common purpose or objective of 360 Capital and APDC that 360 Capital retain effective control of APDC, notwithstanding the sale of APDC to OIG.

Whether the stapling arrangements in relation to APDC Group give rise to a shared common purpose or objective?

1. In its opening written submissions NEXTDC contended that despite its sale to OIG, APDC also remains bound by the stapling arrangements in relation to the APDC Group. That was a reference to cl 22.5 of the APDC Trust's Constitution which provides that APDC and Holdings must co-operate in everything relating to the stapled securities, including taking a consistent approach to investments. The argument seemed to be that this provision meant that 360 Capital (through its subsidiary Holdings) was acting in concert with APDC in relation to the affairs of the APDC Trust. The matter was not expanded upon in oral argument.
2. The argument should be rejected, essentially for the reasons given by 360 Capital in its written submissions. It is sufficient to mention two matters.
3. First, the parties to the Constitution of the APDC Trust are the settlor, Mr Timothy Reid and APDC. Neither 360 Capital nor Holdings is a party; the obligations created by cl 22.5 are imposed only on APDC.
4. Second, cl 22.5 is directed to "Conduct of Stapled Entities" being APDC and Holdings (see: definition of "Stapled Entities" in cl 1.1 of the Constitution). Clause 22.5 requires APDC to co-operate with the other Stapled Entity and to do everything in its power to ensure that the APDC Trust and the other Stapled Entity comply with a list of matters including, regulatory requirements and the adoption of various matters, such as consistent accounting and valuation policies. The co-operation spoken of in cl 22.5 is between the Stapled Entities. It does not give rise to a present consensual understanding between 360 Capital and APDC as to a shared common purpose or objective with respect to the APDC Trust's affairs.

Whether APDC acquiesced in the potential sale of the APDC Trust's assets?

1. NEXTDC contended that APDC acquiesced in the potential sale of the APDC Trust's assets by persons from 360 Capital. An understanding of this contention is assisted by an outline of the process involving the expression of interest (EOI) campaign for the sale of the three data centres owned by APDC, and the related dispute with NEXTDC concerning access to those premises by a valuer engaged by APDC.

EOI process for sale of data centres

1. Prior to OIG acquiring the responsible entity on 16 January 2018, APDC Group had made several announcements in late December 2017 concerning the EOI campaign for the sale of the three data centres. According to those announcements the process was expected to be completed by mid-February 2018. It was also stated that the discussions with selling agents had re-affirmed that APDC's portfolio could command a yield in the proximity of 4.73 percent, which would equate to a value of approximately $300 million.
2. On 28 December 2017, APDC Group announced that APDC had issued a first right of refusal notice to NEXTDC to purchase the entire portfolio of APDC's data centres for $300 million, and that NEXTDC had 20 business days in which to exercise its first right of refusal and if it chose not to exercise this right, then the portfolio would be sold for $300 million or more. NEXTDC responded on the same day with an announcement that it intended to formally reject each of the offers under the first right of refusal notices on the grounds of unjustifiable value promoted by the "360 Capital-appointed" Board of APDC.
3. On 17 January 2018, APDC Group announced that the first round of the EOI campaign had closed with the Trust's properties attracting strong interest from domestic and offshore institutional investors and data centre operators and several parties had been shortlisted for physical inspections of the properties.
4. It seems that the final round of the EOI campaign concluded on 9 February 2018, with the highest offer received of $280 million (Ex 6, pp 178, 183).
5. Between mid-February 2018 and mid-April 2018, APDC Group and NEXTDC each made several ASX announcements concerning the sale process. On 14 February 2018, APDC Group announced that APDC had agreed terms and exchanged non-binding letters with a preferred purchaser for the sale of the three data centres at an agreed price of $280 million, following a recommendation from APDC SPV as investment Manager to enter into a 21-day exclusive due diligence period with a preferred purchaser. This announcement also stated that the APDC Trust would issue NEXTDC with a first right of refusal notice to purchase the entire portfolio of APDC data centres for $280 million as soon as possible. On the following day, 15 February 2018, NEXTDC announced that it was not currently prepared to acquire the APDC Trust's assets at a $280 million price.

Access proceedings

1. The dispute between APDC and NEXTDC concerning access to the data centres by independent valuers and prospective purchasers culminated in APDC Group announcing on 19 April 2018 that it had commenced proceedings in the Supreme Court to seek specific performance under each of the leases to allow inspections by independent valuers and prospective purchasers of the three data centres (the access proceedings). The plaintiffs in those proceedings were Trust Company (the custodian) and APDC. The solicitors acting for them were HFW Australia.
2. On 26 April 2018, APDC Group announced an update on the access proceedings.
3. Each of the announcements by APDC Group on 5 March 2018 and 6, 19 and 26 April 2018 included the contact details for further information of Mr van Aanholt as chairperson of Holdings and Mr Tearle as executive director of APDC.
4. On 27 April 2018, NEXTDC made an announcement which noted that the global sales process conducted by APDC had not secured a buyer, even at the latest pre-emptive offer price of $265 million, and that NEXTDC would continue to resist the ongoing disruptive access to three data centres in accordance with its rights under the respective property leases. That was a reference to the access proceedings.
5. On 23 May 2018, an application by the Trust Company and APDC for a mandatory interlocutory injunction to permit access to the leased properties by valuers appointed by APDC was dismissed: The Trust Company (Australia) Ltd v NEXTDC [2018] NSWSC 736. An affidavit sworn by Mr Tearle dated 8 May 2018 was read on that application in which he deposed (Ex 3, par 59) that on 20 March 2018, HFW Australia sent three letters by courier to NEXTDC issuing NEXTDC with first right of refusal notices for each of the properties in the total amount of $265 million. Copies of those letters were exhibited to Mr Tearle's affidavit filed in the access proceedings.
6. It is convenient at this point to address the evidentiary objection by 360 Capital to the tender by NEXTDC of the 20 March 2018 letters and Mr Tearle's affidavit of 8 May 2018. It is not in dispute that Mr Tearle's affidavit was read in the access proceedings.

Whether a limiting order should be made under the Evidence Act, s 136 restricting the use of Exhibits 2 and 3?

1. In written closing submissions, 360 Capital reiterated its oral submissions that a limiting order should be made pursuant to s 136 of the Evidence Act 1995 (NSW), restricting the use of Exhibit 2 (the offer letters) to challenging the credibility of Mr Tearle as a witness. The same submission was made in respect of the paragraphs of Mr Tearle's affidavit in the access proceedings that were tendered in evidence by NEXTDC (Ex 3, pars 1-5, 56 and 59).
2. Section 136 of the Evidence Act provides: 136 - General discretion to limit use of evidence The court may limit the use to be made of evidence if there is a danger that a particular use of the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing.
3. Although s 136 is not limited to the amelioration of risks inherent in hearsay evidence, it has been said that is the primary focus of its operation: Fulham Partners LLC v National Australia Bank Ltd [2013] NSWCA 296 at [65] (Basten JA); (2013) 17 BPR 32,709, referring to Anderson, Williams and Clegg, The New Law of Evidence: Annotation and Commentary on the Uniform Evidence Acts (2nd ed, 2009, LexisNexis Butterworths) at [136.1].
4. That s 136 is not concerned with the risk of prejudice, but unfair prejudice, was emphasised by Basten JA in Fulham Partners LLC v National Australia Bank Ltd. His Honour remarked at [70]-[71]: [70] …, as noted in Ordukaya v Hicks [2000] NSWCA 180 by Sheller JA (Meagher JA agreeing), the admission of a document having probative value against the interests of one party, could be described as "prejudicial" to that party: at [33]. He continued: However it is not prejudice, but unfair prejudice, which must be weighed against the probative value of the representation. [71] Sheller JA also referred (at [37]) to the remarks of the Australian Law Reform Commission, in its Interim Report No 26 on Evidence, at [644] to the following effect: By risk of unfair prejudice is meant the danger that the fact-finder may use the evidence to make a decision on an improper, perhaps emotional, basis, ie on a basis logically unconnected with the issues in the case. … Similarly, on hearing the evidence the fact-finder may be satisfied with a lower degree of probability than would otherwise be required.

Mr Tearle's evidence

1. When shown the three offer letters in cross-examination, Mr Tearle initially said that that he had not seen the letters, before immediately qualifying his answer, "I don't think so" (T141 (41-48)). After his attention was drawn to the offer in those letters being expressed as capable of acceptance in writing giving rise to a binding contract, Mr Tearle answered: "I don't believe I've seen these letters before, and I don't believe that we authorised their provision to NEXTDC" (T142 (28-29)).
2. Mr Tearle was then taken to his affidavit of 8 May 2018 in the access proceedings, in particular the reference in par 59 to the first right of refusal notices exhibited to that affidavit, and asked whether he had authorised the sending of those letters offering the APDC Trust's assets for sale. Mr Tearle responded: "… I don't remember doing it. I may have done, but I don't know sitting here" (T143 (41-42)). A little later, Mr Tearle gave evidence that he did not appreciate until he read the letters in the witness box that the third last paragraph "triggered a binding agreement" (T144 (42-45)).
3. In response to the cross-examiner's suggestion that he was content to allow the Manager to offer the assets of the APDC Trust for sale without either providing a recommendation to the responsible entity or authorising the offer, Mr Tearle repeated his earlier answer that he did not recall authorising the letters. He said that he looked after 200 trusts and that it was very hard to know every minute detail of everything he signed in a day and he did not recall authorising the sale of the Trust's assets (T145 (29-48)). Mr Tearle also said: As I mentioned, I - I don't recall the letters being dispatched or approved. You know, our position was that commercially, we've got trusts with essentially a 30% unit holder, and one with a 66% unit holder The 30% unit holder wants to wind up the trust, which is essentially sell the assets. The 67% unit holder wants to sell the assets. Commercially, in my simple view, that is the same outcome, so we were happy to go with that process, and our view was we had an agreement in place with a manager, with an independent board, and how they determined to resource themselves was a matter for them. (T146 (20-27))
4. Later, after repeating that he did not appreciate the binding nature of the arrangement that would result from an acceptance of the letters, Mr Tearle said: I think commercially, what was intended was to essentially put a line in the sand to allow the Manager to know, well, okay, NEXTDC has got an opportunity to buy these assets at 265, whatever the number was. And if we can find a better price, then then that's great, everyone should be happy with the result (T147 (3-7)).

Submissons

1. NEXTDC submitted that APDC played an utterly supine role in respect of the affairs of the APDC Trust, in particular that it acquiesced in the potential sale of the Trust's assets, given that it received and required no recommendation from the Manager in relation to the offers made by Trust Company to NEXTDC on 20 March 2018.
2. The submission continued that the Court should find that the Trust's assets were offered for sale, to the knowledge of APDC, without any recommendation in respect of their sale having been received or required, and without APDC having considered either the wisdom of the sale or the price at which the APDC Trust's assets were offered for sale. NEXTDC characterised this conduct as entirely consistent with an acquiescent responsible entity that is content to allow individuals employed by 360 Capital to deal with the assets of the APDC Trust as they pleased.
3. NEXTDC further submitted that there is a glaring disjunction between Mr Tearle's evidence of his understanding of the responsibilities of a responsible entity, and his evidence in relation to the commencement of the access proceedings.
4. Assuming its submissions regarding the limitation of Exhibits 2 and 3 was rejected (as it has been), 360 Capital submitted that the asserted shortcomings in the evidence of Mr Tearle do not demonstrate that 360 Capital and APDC have acted in concert in any event. The submission continued that even if it was found that Mr Tearle's conduct was in some respects unsatisfactory (which was disputed by 360 Capital), the evidence may show negligence of Mr Tearle, but it does not go further than that.

Consideration

1. Given the attack by NEXTDC on Mr Tearle's credit, it is necessary to carefully evaluate the suggested difficulties with his evidence. The first concerns the three offer letters dated 20 March 2018. The second concerns the access proceedings.

Offer letters

1. Contrary to the contention of NEXTDC, I do not agree that Mr Tearle feigned ignorance of these offer letters when first shown to him in the witness box separately from his affidavit in the access proceedings. Mr Tearle seemed to me to be doing his best to give honest evidence as to whether he recollected seeing the letters before, in advance of his attention being drawn to his affidavit in the access proceedings, to which the letters were exhibited. Plainly, he was uncertain as to whether he had seen the letters before when first shown the letters in the witness box.
2. I accept Mr Tearle's evidence in re-examination that he had forgotten that the letters were exhibited to his affidavit in the access proceedings. Two matters support an acceptance of his evidence. First, it is apparent from the cross-examination of Mr Tearle that the exhibit to his affidavit in the access proceedings comprised no less than 454 pages, and that the three letters comprised six pages of the exhibited documents. Second, Mr Tearle gave evidence, which I accept, that he relied upon the solicitors who prepared his affidavit in the access proceedings. He only checked his affidavit and the exhibits before swearing the affidavit in a perfunctory way. I accept that he did not carefully read his affidavit and the exhibits before swearing the affidavit.
3. Mr Tearle may be criticised for not carefully reading all the exhibits before swearing his affidavit. He also may be criticised for not taking sufficient care when swearing his affidavit (par 4), to distinguish between matters within his own knowledge and belief, and matters based on information and instructions provided to him which he believed to be true. While those failures by Mr Tearle reflect upon his credit, and I have taken them into account in assessing his evidence, they do not cause me to doubt his evidence that he was uncertain as to whether he had seen the offer letters.
4. Further, I accept Mr Tearle's evidence that he did not appreciate until he read the offer letters in the witness box that the third last paragraph triggered a binding agreement (if the offers were accepted). In my assessment, Mr Tearle was genuinely surprised when his attention was drawn in cross-examination to this paragraph of the offer letters.
5. I find that Mr Tearle understood that the first right of refusal notices for each of the three properties in the total amount of $265 million were issued to NEXTDC, but he did not appreciate the binding nature of the arrangement that would result if the offers in those notices were accepted. I further find that Mr Tearle had an imperfect understanding in late March 2018 that the issue of the first right of refusal notices would allow the Manager to "put a line in the sand", in the sense that if the offers in those notices were rejected, APDC could sell the assets at or above a price of $265 million. That is consistent with the announcement by APDC Group on 6 April 2018 issued under the names of Mr van Aanholt and Mr Tearle as the contact persons for further information. That announcement stated that APDC was now free to sell the portfolio at or above $265 million at any time over the next 180 days and this put APDC in the position of being able to pursue a variety of options without requiring NEXTDC's consent.

Access proceedings

1. NEXTDC pointed to the absence of a resolution of the Board of APDC in relation to the commencement of the access proceedings. That may be accepted. While Mr Tearle did not recall the circumstances in which the access proceedings were commenced, and said that APDC did not authorise the commencement of the proceedings, he also gave evidence that he recalled at some point giving a proper instruction to the custodian Trust Company that would have required a recommendation from the Manager (T124 (49-50)-T125 (1-12)), and that recommendation may have come from Mr Storey, although he was unsure who would have made the recommendation.
2. Given that the custodian Trust Company required "a Proper Instruction, in the usual format, from the Trustee/Responsible Entity" in relation to common property administrative matters, such as signing the Annual Fire Safety Statement in relation to the three properties in April 2018 (Ex 6, p 155), it is most unlikely that Trust Company would commence legal proceedings relating to the APDC Trust without a proper instruction from APDC. Mr Tearle's recollection of matters of detail concerning the affairs of each of the Trusts controlled by OIG was somewhat hazy. It seems to me more likely that the proper instruction which Mr Tearle recalled giving to Trust Company "at some point" was an instruction relating to the commencement of the access proceedings, and Mr Tearle was in error in saying that APDC did not authorise the commencement of those proceedings.
3. Let it be assumed, however, that APDC did not authorise the commencement of the access proceedings. That is to be viewed in the context that Mr Tearle gave two affidavits in those proceedings; and his affidavit of 8 May 2018 was sworn in support of the claims for relief in the plaintiffs' notice of motion filed on the same day (Ex 3, par 7). By making that affidavit Mr Tearle is to be taken as having, at least, impliedly authorised the solicitors acting for APDC to make that application for interlocutory relief.
4. Although Mr Tearle had difficulty recalling the circumstances in which the access proceedings were commenced, I find that he was aware of the proceedings and their purpose being to obtain access by APDC's valuer to the properties leased to NEXTDC. That Mr Tearle left it to Mr Storey to give instructions to APDC's lawyers in respect of those proceedings is not, in my view, a relinquishment of decision-making by APDC. A dispute with about access by APDC's valuer to the leased properties is the type of matter which the Manager had responsibility under the IMA.

Whether structural relationship, operational arrangements and collaborative conduct between the parties?

Submissions

1. NEXTDC submitted that the evidence establishes structural links, operational arrangements and collaborative conduct between APDC, Holdings and APDC SPV. According to the submission, 360 Capital is actively involved in running the APDC Trust's financial and business affairs, and is acting in concert with APDC in respect of the Trust's affairs. There are a number of strands of this argument.
2. First, that the establishment of the 360 Capital IBC and the communication protocols have not had the effect of quarantining 360 Capital from Holdings, APDC SPV and APDC. These arrangements were described by NEXTDC as porous in nature. Second, that senior officers of 360 Capital have been involved in acting for and/or providing services to APDC. Third, that the responsible entity APDC lacks independence and has relinquished decision-making to the Manager APDC SPV.
3. 360 Capital submitted that NEXTDC had misinterpreted the communication protocols established by the 360 Capital IBC. It was further submitted that there is no evidence that any of the decision-making of APDC has, at any time since OIG acquired ownership of it, been outsourced to APDC SPV, or any third party.
4. 360 Capital submitted that a clear distinction needs to be made between the provision of services by APDC SPV to APDC, and the relinquishment of decision-making by APDC. The distinction, according to the submission, had been ignored by NEXTDC in its characterisation of the services provided by senior officers of 360 Capital via the Manager to APDC, as APDC relinquishing decision-making to 360 Capital.

(1) IBC's and communication protocols

1. As indicated, 360 Capital established an IBC in December 2017 following the announcement of the Resolution. The purpose of the IBC is set out at [77] above.
2. The purpose of the communication protocols established by the 360 Capital IBC was to ensure that management of 360 Capital directed all communications regarding the APDC Group to Mr Ballhausen as chairperson of the IBC. Contrary to NEXTDC's submissions, the communication protocols did not limit those persons with certain expertise from assisting APDC SPV in the provision of services as Manager of the APDC Trust.
3. The communication protocols served the purpose of restricting the persons who could make decisions and communicate those decisions from 360 Capital in respect of its investment in the APDC Trust. That was appropriate given that Mr Pitt and Mr van Aanholt were in a position of conflict as directors of 360 Capital and also Holdings (Mr Pitt up until 14 May 2018) and APDC (Mr Pitt and Mr van Aanholt up until 16 January 2018).
4. NEXTDC criticised the communication protocols submitting that they lacked clarity, and that their application is open to selective avoidance by the affected persons from 360 Capital changing "hats". In this regard, NEXTDC pointed to the selective buyback proposal made by the APDC IBC to NEXTDC in a letter dated 18 April 2018, which Mr Pitt emailed to Mr Craig Scroggie of NEXTDC on that date. According to the submission, Mr Pitt was bound to refer this letter to the 360 Capital IBC, but did not do so.
5. Mr Ballhausen accepted in his evidence that the buy-back proposal had not been referred to him by Mr Pitt, and acknowledged that as chairperson of the 360 Capital IBC, he was unaware of the proposal (T56 (6-20)). He disagreed with the cross-examiner's proposition that this was a breach of the communication protocols, explaining (when shown Mr Pitt's email communication) that Mr Pitt was acting as a director of Holdings in sending the 18 April 2018 letter by email to Mr Scroggie (T57 (37-47)). That may be accepted.
6. First, Mr Pitt's email to Mr Scroggie was signed off (albeit somewhat inaccurately) as "APDC Director" and was sent from his "asiapacific.com" email address. I infer that Mr Pitt sent this email as a director of Holdings.
7. Second, the relevant communication concerning the buyback proposal was between the APDC IBC and NEXTDC. At that point in time the APDC IBC was only speaking on behalf of Holdings. While the buy-back proposal, if implemented, would have affected 360 Capital's investment in the APDC Group, the communication from the APDC IBC was not directed to 360 Capital.

(2) Involvement of senior 360 Capital officers in provision of services by the Manager to APDC

1. NEXTDC made a number of submissions directed to the proposition that APDC had relinquished its decision-making to persons from 360 Capital Group or 360 Capital because senior officers of those companies were involved in the provision of services by the Manager to APDC. The argument ran that those persons were involved in the decision-making by APDC, so as to cause APDC, through their influence, to act in concert with 360 Capital. I do not agree.
2. First, it is not in dispute that senior officers of 360 Capital Group or 360 Capital, in particular, Mr Storey and Mr Butterworth up until 16 May 2018, have been involved in providing services to APDC pursuant to the arrangements contained in the IMA and the Services Agreement. The services provided by Mr Storey related to asset management. The services provided by Mr Butterworth related to financial and accounting matters.
3. Consistently with Mr Ballhausen's evidence, the provision of such services by Mr Storey and Mr Butterworth was not in breach of the communication protocols established by the 360 Capital IBC (T63 (21-23)). NEXTDC's submission to the contrary conflated the nature of the services provided by Holdings to the APDC SPV, with decisions and communication of decisions from 360 Capital in respect of its investment in the APDC Trust. I accept Mr Ballhausen's evidence that the communication protocols did not apply to officers of 360 Capital when providing services on behalf of Holdings to the APDC SPV in respect of the APDC Trust (T64 (1-5)). There is nothing artificial in this distinction.
4. Nor is the provision of such services by Mr Storey and Mr Butterworth up until 16 May 2018 inconsistent with APDC retaining its decision-making functions as responsible entity. Further and in any event, I accept that the evidence establishes that Mr Storey and Mr Butterworth have no longer provided such services to APDC SPV since 16 May 2018.
5. Second, that Mr Kurniawan the financial controller of Holdings has been involved in providing accounting services to APDC SPV in respect of the APDC Group accounts does not mean that APDC has relinquished decision-making to 360 Capital, because Holdings is a subsidiary of 360 Capital. To take one example, the decision by APDC to revalue the assets of the APDC Trust in the Financial Report as at 31 December 2017, was made by Mr Tearle and Mr Epstein as directors of APDC, following the recommendation made by the audit and risk committee of APDC Group in late February 2018.

(3) Independence of APDC

1. NEXTDC made a number of related submissions to the effect that the responsible entity has not been sufficiently proactive in performing its role in the best interests of securityholders. Again, the submission seemed to be that APDC had relinquished decision-making to 360 Capital. I do not agree.
2. First, it was submitted that there had only been one Board meeting of APDC (on 27 February 2018) since OIG acquired the responsible entity on 16 January 2018, and that the last written communication with the other directors of APDC (Mr Epstein and Ms Reddy) regarding the APDC Trust was 20 April 2018. Although Mr Tearle accepted these matters as being correct when put to him in cross-examination, his attention was not drawn to minutes of other meetings of directors of APDC held on 21 March and 27 March 2018 appointing a new company auditor and approving a revised risk management framework for, among others, APDC (Ex 6, pp 133-137).
3. Second, Mr Tearle acknowledged that APDC has adopted each of the recommendations made by the Manager, APDC SPV (T156 (41-46)). However, that is not inconsistent with APDC conducting itself since 16 January 2018 as an independent responsible entity. There is no evidence that Mr Tearle did not consider any recommendation by the Manager not to be in the best interests of the securityholders, but nonetheless agreed to the recommendation. A concurrence of views about the merits of a particular proposal is not sufficient to demonstrate that APDC and 360 Capital are acting in concert.
4. Third, I reject NEXTDC's submission that Mr Tearle was "happy to go with the process of the 67 percent unitholder". This over simplifies his evidence. It also fails to take into account the role of the responsible entity where a Manager has been appointed as in this case pursuant to an IMA.
5. Mr Tearle gave evidence that the responsible entity did not need to be concerned with the EOI process unless and until there was a "willing, abled purchaser who is prepared to sign a legal contract" (T127 (8-13)). I accept that Mr Tearle genuinely held this view. That was a view reasonably open to a director of the responsible entity in the position of Mr Tearle. The EOI process concluded in February 2018. The preferred purchaser withdrew from negotiations in early March 2018. While Mr Tearle was aware that in a "soft" sense, potential purchasers were contacting APDC and trying to gauge where the sale process was at, and where the dispute with NEXTDC was at, he considered that this proceeding and other events similar to it were distracting potential purchasers (T167 (12-37)). That may be accepted.

Conclusion - whether an associate relationship presently exists?

1. In my view, 360 Capital has established that there is no ongoing shared commercial purpose or objective between 360 Capital and APDC since 16 January 2018 that 360 Capital retain effective control of the APDC Trust's affairs, notwithstanding the sale of the responsible entity to OIG. 360 Capital and APDC are not acting in concert and they are not associates within the Corporations Act, s 12

Whether appropriate to grant declaratory relief in advance of the meeting?

1. In light of the above conclusion, it remains to consider whether it is appropriate to grant declaratory relief in advance of the adjourned scheme meeting.
2. In AMP Life, Brereton J referred (at [19]) to two considerations. One is that the orthodox course for a party is to approach the Court after the meeting, to challenge the chair's exercise of the power under s 253G in preventing (or not preventing) a member from voting: cf Australian Olives Ltd v Livadaras (2008) 172 FCR 34; [2008] FCA 1407; C&C Fisher Pty Ltd v Livadaras [2010] 265 ALR 301. The other is that an entitlement to vote at the meeting is first and foremost a matter for the chair, to be decided on the factual situation prevailing, and it might be premature to determine if a scheme member should be prevented from voting on resolutions proposed at the meeting, because to do so would usurp the role of the chair of the meeting and the factual situation might change in the meantime.
3. Despite these considerations, Brereton J was satisfied in AMP Life in the circumstances of that case that it was appropriate to grant declaratory relief prior to the holding of the meeting, taking into account the following matters (at [20]-[24]): (a) the grant of declaratory relief would quell in advance an impending legal dispute turning on the construction of s 253E, in respect of which there were conflicting first instance decisions; (b) the Court should give the chair as much assistance as possible in advance of the meeting, given that in the absence of a determination by the Court, the issue would need to be resolved by the chair of the meeting with considerably less assistance than had been provided to the Court; (c) the Court would not be usurping or pre-empting the role of the chair as it would not be ruling on a challenge to a right to vote at a meeting; (d) the Court had been asked to resolve what was essentially a legal controversy as to the construction of s 253E; (e) the declaratory relief could be granted on agreed facts, and if those facts were to change, the chair could take the changes into account; and (f) the declaratory relief would clarify the position in advance of the meeting and provide commercial convenience and certainty.
4. As both parties acknowledged, the present case is distinguishable from AMP Life in a number of respects. In particular, in AMP Life there were no disputed facts and the essential question was one of law as to the construction of s 253E, whereas here, there are contested issues of fact regarding whether 360 Capital is acting in concert with APDC in relation to APDC Trust's affairs and there is no dispute as to the construction of s 253E.

Conclusion and Orders

1. My conclusions may be summarised as follows. I am satisfied that 360 Capital is not an associate of the responsible entity APDC and accordingly is entitled to vote on the Resolution. There is utility in granting declaratory relief in advance of the adjourned meeting, given the legal controversy as to whether 360 Capital is acting in concert with APDC in relation to the APDC Trust's affairs.
2. There is no reason why NEXTDC should not pay 360 Capital's costs of the proceeding: Uniform Civil Procedure Rules 2005 (NSW), r 42.1.
3. Accordingly, the Court makes the following declaration and order: 1. Declare that for the purposes of Corporations Act 2001 (Cth), s 253E, and in the events which have happened up to and including 14 June 2018, 360 Capital FM Limited is entitled to vote its interests on the proposed resolutions at the extraordinary general meeting of unitholders of the Asia Pacific Data Centre Trust the subject of a notice of meeting dated 20 December 2017 to be held on the adjourned date as determined by the chairperson of the meeting originally convened on 31 January 2018. 2. The second defendant to pay the plaintiff's costs.

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