- Australian Broadcasting Corp v O'Neill

The parties' submissions

NorthWest made detailed submissions in support of the application, in writing and orally; AUFM was somewhat briefer in its written submissions and much briefer in oral submissions; and AUSH made much briefer submissions.
In their written outline of submissions, Mr Young and Ms Wong submit, and I accept, that NorthWest has standing to claim the relief sought in the Interlocutory Process, as a person whose interests would be affected by the conduct. I will address Mr Jackman's submission to the contrary in respect of AUSH below. Mr Young also submits that NorthWest would be prejudiced by the Entitlement Offer and Cash Offers in a way that could not adequately be compensated by an award of damages, because those transactions would necessarily impact upon the distribution of votes at the 19 July meeting. I will return below to a difficulty with that submission, in the context of NorthWest's description of the transaction as a "trust scheme" in the information it has provided to unitholders. Mr Young also contends that difficulties would arise for investors who acted in reliance on the Entitlement Offer or Cash Offers if the Court determined they should be unwound. It does not seem to me that significant weight should be given to that submission, since there seems to me to be little or no likelihood that the Court would make orders that adversely affected innocent third parties in respect of the transactions, particularly where they are not joined as party to the proceedings, rather than leaving NorthWest to the claim for compensation which it will pursue in its foreshadowed Amended Statement of Claim.
Mr Young and Ms Wong outline, at length, the transactions to which I have referred above and the contraventions of the Act which are said to arise from those transactions, and contend that there is a serious question to be tried in relation to those matters. In oral submissions, Mr Young advanced a series of detailed criticisms of those transactions. As I noted above, AUSH entered into a Subscription Agreement by which AUFM purchased approximately $20 million of Wholesale Units in AUHPT at an issue price of $2.60 per Wholesale Unit on 9 June 2021, giving effect to the AUSH Placement. That transaction is challenged by NorthWest in the substantive proceedings, but is not the subject of an application for interlocutory relief, presumably because it was completed on that day. Mr Young nonetheless made extensive submission as to the terms of this transaction to seek to establish that there is a serious question to be tried that AUFM had an improper purpose in respect of the entry into the 9 June Transactions. In particular, Mr Young referred to the provision for immediate completion of that agreement at the time it was signed (cl 3); to a standstill provision (cl 4) which, inter alia, provided that AUSH must not acquire, purchase or sell any securities in AUHPT for a specified period, with an exclusion for the acquisition of up to 15% in the securities of AUHPT, or support or vote in favour of any Removal Resolution as defined. He refers to provision (cl 6.1) for notice of any sale by AUSH of securities in AUHPT, and a requirement that AUFM or a buyer nominated by it be allowed the opportunity to purchase those units. He also notes that those clauses cease to have effect if AUFM ceases to be the responsible entity for AUHPT. Mr Young submits, with considerable force, that these provisions have a defensive purpose. I also recognise that, where AUFM and AUSH are both wholly owned subsidiaries of AUL, it may be unlikely that AUSH would have taken the prohibited steps over AUFM's (or at least AUL's) opposition in any event. The provisions in that agreement may therefore add little to the fact that the units were issued to AUSH, an entity which was under AUL's control and was likely to act consistently with any strategy which AUL wished to adopt in respect of the affairs of AUHPT.
In oral submissions, Mr Young also submitted that the terms of the AUSH Subscription Agreement demonstrated an improper purpose of building a block of units in a related company which was a wholly owned subsidiary of AUL to entrench AUFM's position as responsible entity and make it more difficult for a third party to succeed. Mr Young also submitted (T20) that the effect of the transaction was to quarantine those units so that they were not held by third party unitholders, who were free to vote in their best interests; however, that agreement did not quarantine existing units, but involved the issue of new units which would have no impact so far as AUSH has undertaken not to vote the units that it holds, and would likely not have been entitled to do so by reason of s 253E of the Act in any event.
As I noted above, on 9 June 2021, AUFM also entered into a Subscription Agreement with DWM to purchase approximately $180 million of Wholesale Units in AUHPT, giving effect to the DWM Placement, and AUFM and DFM entered into a Letter Deed in respect of development cooperation in connection with that transaction. That transaction is challenged by NorthWest in the substantive proceedings but is also not the subject of an application for interlocutory relief. Again, Mr Young undertook a detailed review of the Subscription Agreement between AUFM and DWM in submissions, in support of the contention that the 9 June Transactions had an improper purpose. That agreement contained a similar term as to completion to the Subscription Agreement in respect of AUSH; an anti-dilution provision in favour of DWM, with units issued to be subject to standstill arrangements set out in the Letter Deed to which I refer below; a similar provision requiring the giving of notice of sale and an option for AUFM or its nominee to purchase the sale securities; and a provision permitting a sale of DWM's units to a third party, but only on terms that third party would also be required to comply with the terms of the agreement. Mr Young also referred to a provision for a fee rebate in that agreement, which he contended reduced the effective purchase price payable by DWM beyond the nominal purchase of $2.60 per unit. However, no evidence was led to quantify the amount of that reduction, or whether it gave rise to any net benefit to DWM, having regard to the other rights and obligations of the parties to that agreement and the Letter Deed. Mr Young submitted, and I again accept, that several of these provisions arguably indicated a defensive purpose on the part of AUFM, or at least a wish to avoid the possibility that DWM might itself seek control of AUHPT. That provides some basis for the allegations of an improper purpose made by NorthWest, although it does not extend very far so far as the meeting on 19 July 2021 is concerned. In particular, if these provisions give AUFM control over DWM's investment in AUHPT, as NorthWest contends, or otherwise create an association between AUFM and DWM in the relevant sense, then DWM would be excluded from voting at that meeting under s 253E of the Act.
Mr Young also addressed the terms of the Letter Deed dated 9 June 2021 executed by DFM and addressed to AUL, by which DFM also agreed to comply with specified standstill arrangements. Mr Young also referred to the fee arrangements contained in that agreement, which he also submitted had an impact on the effective purchase price payable by DWM in respect of the units that DWM acquired, but no attempt was made to quantify that impact or establish its materiality, or to address the complexities arising from the fact that DFM and DWM are separate legal entities. Mr Young also referred to a first right of refusal in respect of Fund Control Proposals (as defined) provided to DFM, which is arguably an advantage to DFM in respect of that arrangement, and to a termination right given to DFM in respect of Fund Control Proposals and Internalisation Proposals (as defined). Mr Young also addressed the detail of the standstill arrangements contained in that Letter Deed, which again arguably have a defensive character.
Mr Young submits that the detail of the arrangements between AUFM and DWM and DFM had not been disclosed by AUFM to unitholders in AUHPT. I accept that there has been no more than a general reference to a standstill with DWM and DFM in the announcements made by AUFM which were drawn to my attention. However, I give limited weight to that matter in this application, because it is open to NorthWest to make such comments to unitholders as it wishes in respect of any implications of those arrangements and the existence of those arrangements also seems to me to provide limited support for the particular form of relief which is sought by NorthWest in this application, which is directed not to those arrangements but to the Entitlement Offer and the Cash Offers.
Mr Young also refers to the terms of the Entitlement Offer (C500) which has a record date of 4 June 2021 and contemplates the issue of units on 12 July 2021, and emphasises that the acceptance of an application is subject to the Maximum Limit, defined as an aggregated exposure to a group of Associated Investors to 15% of AUHPT's net tangible assets. The Entitlement Offer also provides that: "If you being issued Wholesale Units equal to your Entitlement would result in your or an Associated Investor exceeding the Maximum Limit your application may be rejected or only accepted for such lesser amount as determined by [AUFM] that would not result in you or an Associated Investor exceeding the Maximum Limit. You may choose to apply for a lesser amount than your Entitlement in the Rights Issue Offer Application Form." The Entitlement Offer also records the commercial rational for that limit. Plainly, that provision has potential application to NorthWest and Hume, if treated together, so far as they presently hold close to, although less than, the 15% threshold.
Mr Young also addressed the terms of the First Cash Offer dated 9 June 2021 (Ex R2.1) which noted that, following the AUSH Placement, AUSH had an interest in AUHPT of approximately 1.91%, and that it may acquire an additional 3.34% of units in AUHPT if the maximum amount of $80 million of units is acquired under the First Cash Offer.
In oral submissions, Mr Young vigorously criticised the description of the DWM Placement, in the announcements made by AUFM and AUL concerning the 9 June Transactions as being at a 16% premium, on the basis that the arrangements with DWM (and DFM) contemplated that future fees and rebates would be payable to DWM (and DFM), which would reduce the economic cost of the investment to DWM. That submission did not take NorthWest very far, because it made no attempt to calculate the present value of either those fees and rebates or the income and costs arising from the rights and obligations between AUFM and DWM (or DFM) under the arrangements, so the question whether those fees, rebates and rights and obligations have any material impact on the amount in fact paid to acquire the units by DWM is wholly speculative. Mr Young also submits that AUFM has relied on the price paid by DWM and AUSH to make statements to unitholders that the price offered by NorthWest represents only a small premium to that price, and does not reflect a change of control portfolio value (Ex R1.1, E703). It has not been shown that there is a seriously arguable case that that proposition is incorrect so far as the face price of those transactions is concerned, or that it is incorrect in substance where NorthWest made no attempt to value any other elements of the transactions, in respect of either DWM or DFM.
Mr Young and Ms Wong also contended that a conflict of interest arises between AUFM's interest in continuing to earn management fees and the interests of unitholders in respect of the transactions. I bear in mind that that conflict of interest will ordinarily arise in respect of a third party offer to acquire all of the units in a unit trust, and will need to be managed, and the evidence led by the parties in this application does not extend to the steps which had or had not been taken by AUFM to manage that conflict. NorthWest also contends that AUFM has been "demonstrably belligerent" in its response to NorthWest's proposals, but I bear in mind that AUFM's response should be understood in the context that it contends that the offer does not appropriately value a controlling interest in AUHPT and that aspects of the structure of the transaction could potentially give rise to legitimate concerns on the part of a responsible entity of an unlisted unit trust, particularly where NorthWest has promoted the transaction to unitholders as being a "trust scheme". NorthWest has brought separate proceedings seeking judicial advice as to the steps that it should take if the resolution is passed at the 19 July meeting, having regard to those matters.
Mr Young also contends that the evidence indicates a prima facie contravention by AUFM of the duty in s 601FC(1)(d) of the Act to treat members equally, but that submission seems to me to be based on a speculation, arguably contrary to Mr Mead's evidence, as to how AUFM will treat NorthWest, Hume and the holders of units over which NorthWest holds option rights in respect of the Entitlement Offer, if NorthWest, Hume or those unitholders seeks to participate in that offer, which they have not yet given any indication that they wish to do.
Mr Young and Ms Wong advanced both a narrower proposition as to "frustrating conduct" and a wider proposition as to improper purpose in respect of unit issues to AUSH and DWM and the other 9 June Transactions in its submissions, with its written submissions arguably giving greater weight to the former and Mr Young's oral submissions plainly giving greater weight to the latter. There seems to me to be a real question as to whether Northwest's reliance on the principle of "frustrating conduct" is apt where NorthWest's proposal is not a takeover offer under Ch 6 of the Corporations Act, because AUHPT is not a listed unit trust; NorthWest does not seek to rely on an exemption from the requirement to make a takeover offer under s 611, item 7 of the Corporations Act and may not comply with the principles set out in ASIC Regulatory Guide 74, Acquisitions approved by members, in respect of an acquisition relying on that exemption; and it is presently unclear whether NorthWest accepts that its votes and votes of its associates should be disregarded at the 19 July meeting, as would be required for trust schemes (at least in respect of listed unit trusts) under paragraph 26 of the Takeover Panel's Guidance Note 15 - Trust scheme mergers.
Turning now to Mr Young's wider submission as to improper unit issues and improper purpose in the 9 June Transactions, he contends that it may be inferred that AUFM's capital raising activities and involvement in unit redemption offers have been directed to maintaining itself as responsible entity of AUHPL, to giving control of units to the Australian Unity Group and to diluting "NorthWest's control" and impacting the vote on NorthWest's bid at the upcoming unitholders meetings. Mr Young refers to case law in respect of corporate shares issues, including the Privy Council's decision in Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821 at 832, which related to a takeover offer and to steps taken to deprive a party of control, which NorthWest does not presently have, and to Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 289; [1987] HCA 11 and Darvall v North Sydney Brick & Tile Co (1989) 16 NSWLR 260.
I bear in mind that, in Howard Smith Ltd v Ampol Petroleum Ltd above, Lord Wilberforce (delivering the opinion of the Privy Council) observed that: "… it must be unconstitutional for directors to use their fiduciary powers over the shares in the company purely for the purpose of destroying an existing majority, or creating a new majority which did not previously exist. To do so is to interfere with that element of the company's constitution which is separate from and set against their powers."
In Whitehouse v Carlton Hotel Pty Ltd above, the majority of the High Court noted that the authorities suggested that an allotment of shares would be invalid if an impermissible purpose or combination of impermissible purposes was dominant. The majority also noted that the cases did not establish whether it was sufficient to invalidate an allotment of shares where the impermissible purpose was one of a number of purposes of the allotment, and observed that: "As a matter of logic and principle, the preferable view would seem to be that, regardless of whether the impermissible purpose was the dominant one or but one of a number of significantly contributing causes, the allotment will be invalidated if the impermissible purpose was causative in the sense that, but for its presence, `the power would not have been exercised'" … The Court there noted that it was not necessary in that case to express a concluded view as to whether the "substantial purpose" or the "but for" test was correct. In Darvall v North Sydney Brick & Tile Co Ltd above, Hodgson J relied upon the majority's observations in Whitehouse v Carlton Hotel Pty Ltd above as authority that an allotment of shares would be invalidated if the impermissible purpose of the allotment was such that it would not have been made in the absence of that purpose.
Mr Young submits that the powers of a trustee and responsible entity of a trust scheme, as with powers of company directors, cannot ordinarily be used to defeat or dilute the voting power of existing unitholders or specifically to prevent or frustrate an offer to take over the trust. I broadly accept that proposition, but note that its application is less straightforward in respect of a transaction which is not a regulated takeover and which may not deliver the objectives of a takeover as specified in s 602 of the Act, including that holders have a "reasonable and equal opportunity" to participate in benefits arising from the proposal and that "an appropriate procedure" is followed as a preliminary to compulsory acquisition. Mr Young also submits, and I broadly accept, that the powers of a trustee and responsible entity cannot be used for the dominant purpose of maintaining the trustee as responsible entity or retaining control of units in the trust in the hands of the trustee or its associates. Mr Young also addresses, and I have regard to, the circumstances in which an improper purpose will be treated as causative of the exercise of a particular power, addressed in the case law to which I have referred above.
Mr Young submits that NorthWest has established a prima facie case of improper purpose, having regard to the timing of the 9 June Transactions, the effect of the measures on voting rights, in a submission which assumes that the votes of NorthWest and its associates would be taken into account in determining the result of the 19 July meeting, notwithstanding the description of the transaction as a "trust scheme"; that the measures favour the Australian Unity entities, again on the assumption that NorthWest would be excluded from the opportunity to participate in the Entitlement Offer; that AUFM has disclosed to unitholders that the equity raising initiatives breach a "no adverse event" condition of NorthWest's proposal; that the impact of NorthWest's proposal would be that AUFM would lose its management role in AUHPT; and that the correspondence between the solicitors does not indicate whether AUFM has implemented measures to manage its conflicts of interest in respect of the proposal.
In oral submissions, Mr Young put NorthWest's position as to an improper purpose by reference to the "package of measures" announced on 9 June 2021 and submitted that "the way in which they inter-relate to each other were actuated by improper purposes and represented a breach of relevant duties" (T10). Mr Young submitted that the relevant improper purposes were to maintain AUFM as the responsible entity of AUHPT and maintain the Australian Unity Group's control over AUHPT; to reshape and manipulate the voting power of the body of unitholders which would otherwise have been exercised at the upcoming meeting convened by NorthWest as unitholder, by diluting NorthWest's voting power and increasing the voting power of entities tied to and bound to vote in the interests of the Australian Unity Group (T10). The former submission again appears to assume that NorthWest's vote would be taken into account in determining whether the resolution had passed, notwithstanding it appears to have promoted the proposal as a "trust scheme", and the latter appears to assume that entities that were associates of AUFM would not be disqualified from voting at that meeting by s 253E of the Act. In oral submissions, Mr Young submitted that those improper purposes emerged from the transaction documents (T13), and I have referred above to his analysis of those documents.
Mr Young also emphasised, in oral submissions, that it was no part of the function of directors or a trustee or responsible entity to favour one unitholder or group of unitholders by allotting units to alter what would otherwise be the distribution of voting power (T14). As I noted in the course of oral submissions, that submission again appears to assume that the issue of units to associates of AUFM could have that effect, notwithstanding that AUFM and those associates would arguably be disqualified from voting by s 253E of the Act, and that NorthWest's and its associates' votes would arguably be disregarded in determining the outcome of a "trust scheme", and there was a degree of oddity about a transaction that sought to alter the distribution of voting rights between persons whose votes would not be counted and other persons who would be disqualified from voting. Mr Young fairly acknowledged that difficulty, but then shifted ground to emphasise the suggested further effect of AUSH's acquisition of units in AUHPT in taking units that would otherwise be capable of being voted "out of action" (T14-15). In oral submissions, Mr Young also submitted that AUL, AUSH and AUFM were alter egos, and that there was no real need for a significant injection of capital into AUHPT on the objective materials (T17). It is not necessary to express any view as to those issues in order to determine this application.
In oral submissions, Mr Young also emphasised the totality of the 9 June Transactions and their potential impact on unitholders' voting behaviour, even if NorthWest and its associates would not be entitled to vote at the 19 July meeting, or its vote would not be taken into account to allow it to approve the transaction over the opposition of unaffiliated unitholders, and summarised that submission (T40) as follows: "The allotment of units on the terms and conditions they were allotted to AUSH and Dexus is going to impact voting at the meeting, and those terms and conditions do reveal that those transactions were improper. And those transactions are going to feed into both the entitlement offer, and they infect the premium cash offers. Because they're all directed, effectively, at building a block of units that were not available to be voted at the meeting, units that would otherwise be held by unit-holders who would be free to vote as they saw fit. And that aspect is unaffected by the proposition your Honour put to me about an assumption that we would be able to vote our own shares, and our associates would be able to vote, just as it's unaffected by the proffering of an undertaking by AUSH and AUL not to vote their units. That's the hollow proposition, because the likelihood is, given [s] 253E [of the Corporations Act], they can't vote. But the real vice is that those units, that they now control through these transactions, are taken out of the picture. And their argument is that your Honour should allow that situation to be perpetuated notwithstanding all of the indications of improper transactions that we've identified."
Mr Young also submits that the balance of convenience favours an injunction, because the inconvenience to AUFM and AUSH of granting injunctive relief would not be "very great" and because the harm to NorthWest if the interlocutory injunction is withheld is potentially irremediable. Mr Young also refers to the risk to third parties who have taken advantage of the relevant offers. As will emerge below, it seems to me that the interlocutory relief which is sought will adversely affect unitholders in AUHPT who are not party to this application, and who would not practically be compensated by any undertaking as to damages offered by NorthWest. NorthWest submits that it is exposed to the risk that it will "lose a real opportunity and interest to have a proposal carry at the unitholders meeting that is to its benefit", but that proposition seems to me either to assume that it should be entitled to pass the resolution by the exercise of its and associates' votes at the meeting, or to depend upon speculation as to the effect of the transactions on unitholders not associated with NorthWest or AUFM. NorthWest submits also that it has acted promptly in seeking interlocutory relief; AUFM contends to the contrary, but it does not seem to me to be necessary to address that question given the conclusions that I have reached on other grounds.
Mr Crutchfield, with whom Mr Rudd appears for AUFM, contends in their written outline of submissions that the evidence does not disclose a prima facie case that AUFM's conduct with respect to the 9 June Transactions and the Second Cash Offer was contrary to its duties as responsible entity of AUHPT or otherwise improper. He refers to the commercial context of the relevant transactions, and I have had regard to his submissions in that respect. He also submits that, while the transactions: "might have frustrated NorthWest, in the sense that such conduct precluded NorthWest from stifling legitimate commercial activity which would submit its acquisition proposal to legitimate competitive tension, that is not a sufficient basis on which to found the grant of interlocutory relief in this case." It seems to me that there is some force in the submission that the transactions which NorthWest challenges offer legitimate alternatives to unitholders to the acceptance of NorthWest's proposal.
Mr Crutchfield submits that the evidence does not disclose a prima facie case that conduct of AUFM with respect to the 9 June Transactions or the Second Cash Offer was contrary to AUFM's duties as responsible entity and trustee of AUHPT and that those measures, including the Entitlement Offer and the Cash Offers, were for the purposes of raising capital of up to $320 million to fund AUHPT's pipeline of development projects and offer existing members the opportunity to liquidate, up to a total of $80 million, some or all of their unitholdings. I accept that those measures had that result, but it seems to me that the detail of the relevant documents, to which Mr Young referred and which I have addressed above, raises at least a seriously arguable case that they also had a defensive purpose, and arguably an improper purpose of entrenching AUFM's management of AUHPT.
Mr Crutchfield also submits that AUFM was "up front" with NorthWest that it would conduct the affairs of AUHPT in the best interests of its members, after NorthWest's approach, but it is again arguable that the specific provisions of those arrangements have a defensive benefit for AUFM in its capacity as responsible entity of AUHPT, which is not directed to the interests of unitholders generally. Mr Crutchfield submits, and I accept, that limited weight can be placed on the timing of the relevant arrangements, where AUFM's response that NorthWest's unsolicited acquisition proposal heightened investment interest from third parties is at least plausible. Mr Crutchfield advances several further submissions as to whether a serious question to be tried is established, and I have had regard to those submissions although it is not necessary to summarise them, given the conclusions that I have reached on other grounds.
Mr Crutchfield submits, in respect of the balance of convenience, that interlocutory relief to restrain the further progress of the Entitlement Offer would expose members of AUHPT who have acted on the faith of that offer since it opened on 9 June 2021 to prejudice which outweighs any prejudice to NorthWest in respect of the Entitlement Offer. Mr Crutchfield refers to Mr Mead's evidence that the Entitlement Offer would have to be cancelled if the injunction is granted; there is force in Mr Young's response in oral submissions that the relevant provisions of the Corporations Act would not require its cancellation (T41ff), although it would likely be delayed by a potentially significant period. That, of course, is a significant matter for those unitholders who have accepted or plan to accept that offer, whose ability to receive payment under that offer would then be delayed. That significance is exacerbated where at least some members of the public are facing financial difficulty as a result of the COVID-19 pandemic, and NorthWest has made no attempt to join affected unitholders so that they could be heard in respect of that injunctive relief, and I will find below that its offer of an undertaking as to damages would provide little practical compensation for any financial loss or hardship that unitholders suffer as a result of the grant of that relief. Mr Crutchfield also submits that any loss which NorthWest suffers, at least in respect of any increased cost of the acquisition of units in AUHPT can be addressed by a claim in damages.
Mr Crutchfield similarly points out that unitholders would suffer loss by being kept out of funds to which they would be entitled under the Cash Offers, while any interlocutory injunctive relief was in place, and again points to the lack of a practical remedy for the loss which they would suffer from an undertaking as to damages. Mr Crutchfield also emphasises, and I have had regard to, the fact that NorthWest seeks to prevent the Cash Offers by AUSH in respect of units in AUHPT at the time it proceeds with its own cash offer in respect of those units, which has the additional and striking feature that any unitholder who accepts NorthWest's offer in respect of any part of its units is required to surrender all of its voting rights in respect of all of its units to NorthWest. Mr Crutchfield also advances a submission as to delay, which I do not need to address given the findings which I reach on other grounds.
In summary, Mr Crutchfield submits, and I will accept below, that the balance of convenience leans against the grant of the interlocutory injunctive relief sought by NorthWest, in respect of both the Entitlement Offer and the Cash Offers, because that would prejudice AUHPT's unitholders and that prejudice would be practically irremediable by an undertaking as to damages. Mr Crutchfield also submits that AUFM would also suffer prejudice, but I do not consider it necessary to address that submission having regard to the conclusions which I have reached on other grounds below.
Mr Jackman, who appears for AUSH and AUL, contends that NorthWest does not have standing to bring an application enjoining the AUSH's Cash Offers where AUSH has undertaken not to vote any units that it acquires on NorthWest's proposal at the 19 July 2021 meeting. Mr Jackman contends, and I accept, that standing requires that NorthWest's interests have been, are or would be affected by the conduct, and contends that the Cash Offers have no adverse effect on NorthWest where AUSH will not vote the units which it acquires. There is force in that submission, but I preferred to assume, without deciding, that NorthWest has such standing, at least on the basis that there is a possibility that a unitholder's acceptance of the Cash Offers, at least for all as distinct from part of its units, would have the result that it is less likely to vote at the 19 July meeting, and it is possible that those who sell into the Cash Offers might otherwise have voted in favour of NorthWest's proposal so as to realise an opportunity to sell their shares to NorthWest.
Mr Jackman submits that, in order to establish a serious question to be tried against AUSH, NorthWest must first show a serious question to be tried as to its improper purpose case against AUFM and I have addressed the matters on which NorthWest relies to do so above. Mr Jackman submits that NorthWest must also establish a serious question to be tried as to AUSH's involvement under s 79 of the Corporations Act or as to accessorial liability at general law. Mr Jackman rightly points to a lack of specificity in respect of NorthWest's pleaded allegations of accessorial liability against AUL and AUSH. Mr Jackman also submits, in oral submissions, that Mr Young's reliance on the proposition that AUSH is a wholly owned subsidiary of AUL and the alter ego of AUL does not establish that AUSH is the alter ego of AUFM, and that must be approached in the context that AUFM is a trustee company and is under obligations under s 601FC of the Act to act in the best interests of unitholders, rather than in its own interests, and to prefer the interests of unitholders where those interests conflict with its own interests (T61). However, it seems to me at least arguable that the fact that there were several common directors between AUFM, AUL and AUSH had the consequence that, at least as a matter of fact, each of them knew the matters on which NorthWest seeks to rely in respect of the relevant transactions, and there is force in Mr Young's submission that the structure of the relevant transactions indicates, not surprisingly, a degree of coordination between AUFM's, AUL's and AUSH's conduct in that respect. It seems to me that, if a seriously arguable case was established against AUFM, a seriously arguable case for accessorial liability or knowing involvement would likely also be established against AUL and AUSH.
Mr Jackman submits that NorthWest does not suffer any relevant prejudice, for the purposes of an assessment of the balance of convenience, where AUSH has undertaken not to vote the relevant shares. Mr Jackman also emphasises that the First Cash Offer opened on 22 June 2021 and will close on 23 July 2021, and payment by AUSH to investors would not be made until mid-August 2021 (Ex A2, D1647) and that AUFM would not acquire any units under that offer until that date. The Second Cash Offer (D1645), at a higher price, opened on 22 June 2021 and will not close until 23 July 2021 and AUFM again expects to facilitate payment from AUSH to accepting unitholders by 13 August 2021. Mr Jackman submits that the acquisition of those units would have no effect (or, I interpolate, at least no direct effect) upon voting rights at the meeting on 19 July. In oral submissions (T60), Mr Jackman emphasised that unitholders would likely accept the Second Cash Offer at a higher price rather than the First Cash Offer; there could not be any transfers of units under the Cash Offers before the 19 July 2021 meeting, and also submitted that it was unlikely that there would be a significant number of acceptances under those offers by the time of the meeting, where they did not close until 23 July 2021. There is force in that submission, and it emphasises the element of speculation involved in whether acceptances of the Second Cash Offer will have any effect on the level of third party unit participation at the 19 July 2021 meeting.
As I have noted above, Mr Young submits that unitholders who have accepted either of the Cash Offers would be less likely to vote at that meeting. As I also noted above, Mr Young submitted that the Cash Offers would affect how unitholders would vote at the relevant meeting and noted the possibility that unitholders who might otherwise have voted for NorthWest's offer, in order to realise a sale opportunity for their shares, will now accept the Cash Offers and not vote at the meeting. While Mr Jackman recognises the possibility that any shares that AUSH acquires from participants in the Cash Offers would be "taken out of play" by reason of AUSH's undertaking, he points to the possibility that some of those votes that would have come from unitholders intending to vote in favour of the proposal, others from unitholders intending to vote against the proposal, and that is possible. It is also, of course, possible that some of those votes would have come from unitholders, particularly retail unitholders, who would not have voted at the 19 July meeting in any event. While Mr Young's submission has a degree of intuitive plausibility where a unitholder has sold all of its units, it neglects the fact that the Cash Offers may be accepted for a portion of a unitholder's units, and a unitholder who takes that course may well still vote at a meeting, and the uncertainty as to how and whether retail unitholders would have voted at the meeting in any event. Ultimately, it seems to me that the impact of the Cash Offers, where they do not close until after the meeting, on third party unitholder participation rates at the meeting, is too speculative to be given any significant weight.
Mr Jackman submits that the grant of interlocutory relief would cause prejudice to AUSH in locking it out of an investment opportunity for an unspecified amount of time. He submits that there may be adverse reputational impacts to AUSH from being unable to complete Cash Offers in favour of unitholders who have already accepted them and it seems to me that that risk is real. Mr Jackman also points to the adverse effect on third party rights and the potential harm to third party unitholders who had already applied or intended to apply under the Cash Offers and would be deprived of the financial benefit of accepting those offers. I have addressed that question above. Mr Jackman also points out that the availability of NorthWest's cash offer is not a substitute for the Cash Offers for those unitholders, where that offer is conditional on their surrendering their voting rights for all of their shares if they accept that offer even in part, and Mr Jackman also points to the adverse impact of depriving unitholders of a meaningful choice between competing offers.
Mr Jackman also submits, and I accept, that NorthWest's undertaking as to damages is not a realistic alternative to a retail unitholder to participation in the Cash Offers, given the complexity of quantifying loss and the costs involved in enforcing that undertaking. In oral submissions, Mr Jackman also emphasises the delay which would affect third party unitholders if the injunctions in respect of the cash offers are granted, and that NorthWest's undertaking as to damages would be "cold comfort" to third party investors who would face difficulties in quantifying consequential losses and may not have the time or money to enforce an undertaking as to damages (T61). Mr Jackman also submitted that the alternative form of relief put by Mr Young would not address the position of unitholders who are presently planning to accept the second cash offer, but have deferred doing so until closer to its closing date on 23 July 2021 (T61)

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Judgment (7 paragraphs)

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