Australian Securities and Investments Commission v Australian Property Custodian Holdings Limited

1.1 The first group of contraventions 13 ASIC pleaded three groups of contraventions. The first group of contraventions are based in the allegation that, at its meeting on 22 August 2006, the Board resolved to lodge with ASIC a consolidated Constitution incorporating the Amendments so that they would become effective pursuant to s 601GC(2) ("the Lodgement Resolution"). 14 ASIC alleged that in passing the Lodgement Resolution: (a) APCHL contravened s 601FC(5) in that it breached its duty: (i) of care and diligence under s 601FC(1)(b); (ii) to act in the best interests of the members of the Trust under s 601FC(1)(c); (iii) to give priority to the interests of the members of the Trust over its own interests, under s 601FC(1)(c); and/or (iv) to comply with a duty imposed on it by the Constitution not to vary or attempt to vary it in a manner that was in favour of or resulted in any benefit to APCHL, under s 601FC(1)(m); (b) Each of the Directors contravened s 601FD(3) by voting in favour of or otherwise assenting to the Lodgement Resolution in that he breached his duty: (i) of care and diligence under s 601FD(1)(b); (ii) to act in the best interest of the members of the Trust under s 601FD(1)(c); (iii) to give priority to the interests of the members of the Trust under s 601FD(1)(c); (iv) not to make improper use of his position as an officer of the RE of the Trust to provide an advantage to APCHL, under s 601FD(1)(e); (v) not to make improper use of his position as an officer of the RE of the Trust to provide an indirect advantage to persons who would benefit from the fees paid to APCHL, under s 601FD(1)(e); (vi) not to make improper use of his position as an officer of the RE of the Trust to cause detriment to the members of the Trust, under s 601FD(1)(e); and (vii) to take all steps that a reasonable person would take to ensure that APCHL complied with the Constitution and the Act, under s 601FD(1)(f). ASIC sought declarations of contravention pursuant to s 1317E in relation to these breaches. 15 It is uncontroversial that on 23 August 2006 APCHL in fact lodged a consolidated Constitution with ASIC with the intent that the Amendments would become effective. 16 With regard to the alleged breaches of duty in passing the Lodgement Resolution, I see five factors as being of particular importance, namely: (a) the fees to be payable pursuant to the Amendments were payable to APCHL in its personal capacity (and through it to Mr Lewski) and were to come from property held on trust by APCHL for the members. APCHL was acting as a trustee: (b) consideration of the Amendments created self-evident conflicts: (i) between APCHL's interest in becoming entitled to the additional fees through the Amendments and the members' interests in having APCHL perform its services as RE for the fees in the existing Constitution; and (ii) between APCHL's interest in becoming entitled to the additional fees and its statutory duty to act in the best interests of the members and to give priority to their interests; (c) the nature of the proposed additional fees was that: (i) APCHL was given contingent rights to take multiple fees to the value of 2.5% of the gross assets of the Trust out of Trust funds. Absent the Amendments the members had the right to the services of APCHL as RE without the additional fees; (ii) the Listing Fee imposed a fee if the Trust was listed, in circumstances where under the existing Constitution the members were entitled to expect listing to occur without a fee if the Directors considered that listing was in the members' best interests (as they did); (iii) the Removal Fee imposed a fee for the exercise of the members' right to remove APCHL as RE, which the members could require without a fee under the existing Constitution; (iv) the Takeover Fee substantially increased the fee payable on a third party acquiring shares over certain thresholds; (v) the Takeover Fee could be payable on multiple occasions; and (vi) the fees could be payable notwithstanding that another of the fees had previously been paid; (d) the fees were substantial, each having a value of between about $11.25 million and $21.6 million at the time of the Amendments (which was in the order of 6.7% of the net Scheme property after borrowings were taken into account); and (e) the fees were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the members in return for them. (collectively "the Five Principal Factors"). 17 The Five Principal Factors indicated that APCHL and the Directors were required to exercise a high level of care and diligence and to be cautious in dealing with APCHL's conflicts. 18 While each Director was separately represented I usually deal with their contentions together. I do so for convenience and because, although there are some differences between the contentions advanced, they are usually small and their contentions largely followed common themes. 19 The Amendments which are central to the case were passed on 19 July 2006, but ASIC did not plead that the resolution passing the Amendments founded any contravention. It relied instead on the Lodgement Resolution of 22 August 2006. I have little doubt that the reason that ASIC took that course is that any contravention that may have occurred on 19 July 2006 was prima facie out of time when ASIC filed the proceeding on 21 August 2012. Section 1317K provides that a proceeding for a declaration of contravention may be started no later than six years after the contravention. I cannot know why ASIC did not commence its proceeding earlier, but its failure to plead the 19 July 2006 resolution passing the Amendments added an otherwise avoidable complexity to the proceeding. 20 As ASIC relied on the Lodgement Resolution rather than on the earlier resolution passing the Amendments, in large part the Directors' defences did not focus on the impact of the Amendments on the members. The first thrust of their contentions was that the Lodgement Resolution was not passed at all, and the following thrusts largely went to the types of considerations that were appropriate when passing such a resolution. 21 On the assumption that the Lodgement Resolution was passed, the Directors' defences included that: (a) ASIC did not establish that any of the Directors voted for it. This contention involved the observation that, although the minutes recorded that the resolution was passed, they did not record each individual Director's vote. Three of the five Directors contended that they had abstained from voting, and the other two contended that it had not been proved that they voted in favour; (b) the Lodgement Resolution had no effect on Deed of Variation No 7, the Constitution, the rights and interests of the members, or of APCHL and Mr Lewski, because, amongst other things, APCHL had a pre-existing obligation to lodge the Amendments which arose from the 19 July 2006 decision to amend, the signing of the Deed then, and s 601GC(2). Lodgement was not in discharge of the resolution; (c) the Lodgement Resolution was simply a procedural or administrative step to lodge amendments already made. The Directors argued that different considerations applied when deciding whether to pass the Lodgement Resolution compared to when the Amendments were passed on 19 July 2006; and (d) when considering the Lodgement Resolution there was no duty on the Directors to revisit and reconsider their 19 July 2006 decision to amend, and no reason or occasion for them to do so. 22 Each of the Director's submissions stands to be rejected. By way of broad summary, I am satisfied: (a) that the Board passed the Lodgement Resolution at its meeting on 22 August 2006; (b) that by their conduct each of the Directors voted for or otherwise assented to the resolution; (c) having deliberately been left undated, Deed of Variation No 7 did not come into effect on and from 19 July 2006; (d) there was no pre-existing obligation to lodge the Amendments, which were in fact not ready to be lodged until after the Lodgement Resolution was passed on 22 August 2006; (e) the Lodgement Resolution was important in its own right, that is, regardless of whether the Directors revisited their earlier decision to amend. It operated to authorise and direct completion of the Deed and lodgement of the Amendments. It was the final step to bringing the Amendments into effect and it was not appropriate to treat it as merely procedural or administrative; (f) the Five Principal Factors, particularly APCHL's plain conflict of interest, indicated that the Directors should exercise high standard of care and take a cautious approach; and (g) while the Lodgement Resolution was important without any requirement to revisit the earlier decision to amend, in all the circumstances a reasonable director in each Director's position would on 22 August have reflected on his inadequate consideration a month earlier of, amongst other things: (i) APCHL's conflict of interest and whether he had given priority to the members' interests; (ii) the deleterious effect of the Amendments; and (iii) the question as to whether the Board had power to pass the Amendments. 23 I have concluded that in passing the Lodgement Resolution APCHL and each of the Directors breached their duties under ss 601FC(1) and 601FD(1).

1.2 Listing 24 On 3 August 2007 the Prime Trust units were officially quoted on the ASX. It is uncontentious that over the period from 26 June 2007 to 27 June 2008 the Listing Fee of about $33 million was paid out of Scheme property to APCHL and then to entities associated with Mr Lewski. 25 The second and third groups of contraventions are based on the conduct of APCHL and the Directors on 26 June 2007, 27 July 2007, 3 August 2007, 13 March 2008, 28 April 2008 and 27 June 2008 in making the decisions to pay and in paying the Listing Fee to APCHL (and through it to Mr Lewski).

1.3 The second group of contraventions 26 In the second group of contraventions ASIC alleged that, in paying the Listing Fee to itself and to one of Mr Lewski's associated entities, APCHL contravened s 208 (as modified by Part 5C.7 of the Act) which prohibits payments to an RE or to a related party without the approval of the members. Section 208(3) provides that an RE may pay itself fees from scheme property where the Constitution provides for the fees. 27 Relevantly to these contraventions I have concluded that: (a) cl. 25.1 of the Constitution operated to prohibit APCHL from making the Amendments and they were made outside power; and (b) the statutory power of amendment in s 601GC(1)(b) was not engaged as the Board gave no consideration to the members' right to have the Scheme administered for the fees provided in the existing Constitution. The Board could not have reasonably considered that the Amendments would not adversely affect the members' rights. The Amendments were therefore invalid. I do not accept the contention that, even if not validly made, the Amendments became effective upon lodgement with ASIC and that they remain so until declared invalid. 28 It is uncontentious that in paying the Listing Fee APCHL had given a benefit to itself and to a related party, and that it did not seek the members' approval to do so. Given my conclusion that the Amendments were invalid and of no effect, the Constitution did not provide for the Listing Fee. ASIC therefore made out its claim that APCHL breached s 208. 29 ASIC also alleged that each of the Directors contravened s 209 in that he was involved in APCHL's breach of s 208. This allegation involved construing s 208 as modified in order to determine the essential elements of the contravention therein defined. I concluded that on the proper construction of s 208 it was for the Directors to prove that the Constitution provided for the Listing Fee. Because the Amendments were invalid they could not do so. The Directors' unchallenged evidence in this regard was that they honestly believed that the Constitution had been validly amended to include the Listing Fee. While I must accept that they held an honest belief, that points to whether they should be relieved from liability and also to questions of penalty.

1.4 The third group of contraventions 30 In the third group of contraventions ASIC alleged that in making the decisions to pay the Listing Fee: (a) APCHL contravened s 601FC(5) in that it breached its duty: (i) to act in the best interests of and give priority to the interests of the members of the Trust over the interests of APCHL, under s 601FC(1)(c); and (ii) to ensure that all payments out of the scheme property were made in accordance with the Constitution, under s 601FC(1)(k); and (b) each of the Directors contravened s 601FD(3) in that each of them breached his duty: (i) to act in the best interests of and give priority to the interests of the members of the Trust over the interests of APCHL, under s 601FD(1)(c); and (ii) to take all steps that a reasonable person would take to ensure that APCHL complied with the Act, under s 601FD(1)(f). 31 It is uncontentious that APCHL made the decisions to pay the Listing Fee. The Directors' argument turned on their honest belief that the Amendments were valid. They denied that there could be any breach of the duties under ss 601FC(1) and 601FD(1) in making the decisions to pay the Listing Fee when the fee was (apparently) provided for in the Constitution. I concluded that ASIC made these contraventions out too.

1.5 Relief 32 I am yet to hear whether any of the Directors should be relieved from liability for the contraventions I have found, and whether any of them should be ordered to pay a pecuniary penalty or be prohibited from the management of corporations. Those are matters for a further hearing.

THE STANDARD OF PROOF 33 Proceedings for recovery of pecuniary penalties under the Act are civil proceedings, and s 140 of the Evidence Act 1995 (Cth) ("Evidence Act") requires that I apply the civil standard of proof. In reaching a conclusion of satisfaction that a case has been proved on the balance of probabilities, s 140(2) of the Evidence Act provides: Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account: (a) the nature of the cause of action or defence; and (b) the nature of the subject-matter of the proceeding; and (c) the gravity of the matters alleged. 34 To summarise the approach that I have taken in this case I respectfully adopt the explanation of Gzell J in Australian Securities and Investments Commission v Macdonald and Others (No 11) (2009) 230 FLR 1 ("ASIC v Macdonald No 11") at [182]-[186]. His Honour cites the classic exposition of the principle in Briginshaw v Briginshaw (1938) 60 CLR 336 ("Briginshaw") at 361-362 where, although speaking on the common law position, Dixon J illuminated the type of considerations which s 140 now requires be taken into account. 35 Gzell J explains: [182] Section 140 of the Evidence Act 1995 (Cth) prescribes the standard of proof in civil proceedings as the balance of probabilities and provides that the Court may take into account in deciding whether it is so satisfied, the nature of the cause of action or defence, the nature of the subject matter of the proceedings and the gravity of the matters alleged. [183] This provision reflects Dixon J's discussion of the quality of persuasion required for this purpose in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362. In that case, the High Court held that, on a petition for divorce on the ground of adultery, the standard of proof was not that of proof beyond reasonable doubt. [184] Dixon J said that when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. In civil matters, the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal: The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. [185] To similar effect is the statement of the majority of the High Court in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 at 170-171. [186] These are civil penalty proceedings where a pecuniary penalty of up to $200,000 and an order disqualifying the individual defendants from managing corporations for such period as the Court considers appropriate, are sought. The seriousness of the nature of the cause of action and the gravity of the matters alleged must be taken into account in deciding whether facts have been proved on the balance of probabilities: Adler v Australian Securities and Investments Commission (2003) 179 FLR 1 at [146]-[148]. This means that, ordinarily, the more serious the consequences of what is contested in litigation, the more a Court will have regard to the strength and weakness of evidence before it in coming to a conclusion: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at [30]. That means that if inferences are to be drawn, ASIC has to establish that the circumstances appearing in the evidence give rise to a reasonable and definite inference and not merely to conflicting inferences of equal degrees of probability: CEPU at [38]. 36 In the case before me ASIC seeks declarations of contravention, pecuniary penalties and orders to preclude the Directors from the future management of corporations. There can be no question that the allegations are serious and may have serious consequences for each Director's livelihood as well as their personal and professional reputations. This circumstance demands the application of the Briginshaw principle as is now routine in civil penalty matters.

THE FACTS 37 In setting out the facts as I see them I occasionally draw inferences which are in part based on my assessment of the Directors' evidence. For reasons of convenience however I set out my assessment of each Director's evidence later.

3.1 The ownership of APCHL 38 APCHL was incorporated on 27 December 2000. At all material times: (a) Mr Lewski, his father David Lewski, his mother Mala Lewski, and his wife Roslyn Lewski each owned one ordinary share in APCHL. The rest of the shares in APCHL were owned at all material times by Daytree Pty Ltd ("Daytree"); (b) Mr Lewski was a director of Daytree, and the shares in Daytree were owned by another Lewski family company, Wickgold Investments Pty Ltd ("Wickgold"); (c) the directors of Wickgold were Mr Lewski, Mala Lewski and David Lewski; (d) the ownership of all of APCHL's shares could be directly or indirectly traced back to Mr Lewski or his family.

3.2 The ownership and control of other relevant companies 39 Carey Bay Pty Ltd ("Carey Bay"), Australian Property Administrators Pty Ltd ("Australian Property Administrators"), and Direct Fitness Pty Ltd ("Direct Fitness") are also relevant in the proceeding. At all material times: (a) Mr Lewski was the sole director of Carey Bay and Wickgold was the sole shareholder; (b) Carey Bay was controlled by Mr Lewski within the meaning of s 50AA because he was its sole director; (c) Carey Bay was a related party of APCHL (as that term is used in s 228 as modified by Part 5C.7) because it was controlled by Mr Lewski and he was a director of APCHL; (d) Mr Lewski and his wife Roslyn were the directors of Australian Property Administrators and Wickgold was the sole shareholder; and (e) Mr Lewski and his wife Roslyn were the directors of Direct Fitness and Wickgold was the sole shareholder.

3.3 The Board of APCHL 40 Mr Lewski started APCHL and was its driving force. He was the Managing Director at all material times from incorporation until his resignation on 27 June 2008. He and his associates owned APCHL and the evidence shows that the other Directors saw his continued involvement in the company as important to its success. It appears that Mr Lewski also had significant interests in corporations that contracted to the Trust to manage the properties it owned. 41 The periods during which each of the Directors was a member of the Board are as follows: (a) Mr Lewski commenced as a director on 27 December 2000 and continued throughout the relevant period. He resigned on 27 June 2008 which was the date that he transferred control of APCHL to one of its corporate advisors, Kidder Williams Limited, and received payment of the (at that time) unpaid balance of the Listing Fee ("the Listing Fee Balance"); (b) Mr Butler and Mr Jaques commenced as directors on 1 March 2001 and continued through the relevant period. In April 2004 Mr Jaques became a full time employee of an associated entity of Mr Lewski's, Australian Property Custodians Pty Ltd. In February 2006 Mr Butler commenced to work as a full time contractor for APCHL and continued to do so throughout the period; (c) Dr Wooldridge commenced as a director on 21 March 2006, becoming Chairman in July 2006 and continued as Chairman throughout the relevant period; and (d) Mr Clarke commenced as a director on 21 August 2006 and continued throughout the relevant period. 42 APCHL had other directors between 2001 and mid-2006 but each ceased to be a director prior to the Amendments being made. They are not defendants in the proceeding and I need not deal with them. APCHL had two further directors when the 2007-08 resolutions were passed, Neil Rodaway and Anthony Hancy. They joined the Board after the Amendments were passed and lodged with ASIC. They are not defendants and I do not deal with them either.

3.4 The Prime Trust 43 APCHL established the Trust by deed dated 27 December 2000 ("the Trust Deed"). The Trust Deed made APCHL the trustee and manager of the Prime Trust, with an obligation to hold the Trust's assets for the benefit of the unitholders, who I shall describe as "the members'. It was established as a unit trust, dedicated to the specific asset class of retirement villages and aged care facilities. 44 Madgwicks commenced acting for the Trust in January 2001 and continued throughout the relevant period. Madgwicks also acted for APCHL in its personal capacity (that is when not acting as RE), as well as for other companies associated with Mr Lewski. 45 In 2001 APCHL applied to ASIC to register the Prime Trust as a managed investment scheme under Part 5C.1 of the Act. The Trust Deed was amended to make it suitable to become the constitution for a registered scheme by Supplemental Deeds of Variation No. 1 and No. 2 dated 12 July and 20 July 2001 respectively. 46 In July 2001 APCHL lodged a consolidated Trust Deed with ASIC which contained the amendments to that point, to stand as the constitution of the Prime Trust managed investment scheme upon registration ("the Constitution"). On 23 July 2001 the Prime Trust scheme was registered with this constitution ("the Scheme"). APCHL was the RE of the registered scheme and at all material times thereafter it held the position of RE, holding the Scheme property on trust for the members. 47 Various amendments to the Constitution were made between 2001 and 2006, but it is unnecessary to go to each of them. The Constitution that applied as at the time of the Board meetings on 19 July and 22 August 2006 was the amended Constitution that came into effect on 30 May 2006 when APCHL lodged with ASIC Supplemental Deed of Variation No. 6 of the Constitution and a consolidated Constitution. I shall describe this as "the existing Constitution". 48 Between 2001 and August 2007 APCHL raised substantial capital from private investors and purchased retirement and aged care facilities from Primelife Corporation Limited ("Primelife") and other entities. APCHL's business model appears to have been to own the land and facilities, and to lease them to other operators including Primelife and companies associated with Mr Lewski. 49 Units in the Trust were not easily transferable in that period as there was no secondary market. Members seeking to sell units needed to find a private buyer. There was no facility for members to redeem their units with the Trust prior to June 2004, but the Constitution was amended at that time to introduce a redemption facility. The redemption facility was suspended in March 2006 when a large number of members requested redemptions during a time in which APCHL was making significant acquisitions and there was a decline in the take-up of units by investors. The redemption facility was not reinstated during the relevant period. One of the effects of this was that the members were to a significant degree "locked in" to the Scheme. It was difficult for them to sell their units and they could not redeem their investment. 50 In a letter to the members on 22 March 2006 APCHL explained the suspension of the redemption facility, advising that the gross assets of the Trust had a value in excess of $450 million and that the Trust had plans to acquire further assets worth $250 million. The assets of the Trust continued to increase thereafter as further acquisitions were made.

3.5 The members' understanding that listing of the Trust was contemplated 51 The Constitution always contemplated the possibility that the units of the trust might be listed on a stock exchange. From registration in 2001 cl. 1.1(uu) of the Constitution provided that the Trust would vest on the first to occur of: (a) 31 December 2007 - if the Responsible Entity had not passed a resolution on or before 31 July 2007 to seek and apply for a listing of the units of the Trust on an appropriate exchange; or (b) the last day of the perpetuity period - being 80 years from the date of the Trust Deed; or (c) subject to being within the perpetuity period, such other date as APCHL may appoint with the consent of a special majority of the members. 52 Clause 1.1(uu) of the existing Constitution (applying at the time of the Amendments) was to the same effect, although without reference to the perpetuity period. It provided: "Vesting Day" means the first to occur of the following dates, namely: (i) if the Responsible Entity has not passed a resolution on or before 31 July 2007 to seek and apply for a listing of the Units of the Trust on an appropriate exchange - 31 December 2007; or (ii) such date being earlier or later than the date specified in clause 1.1(uu)(i) as the Responsible Entity may with the consent of the Unitholders by special majority appoint. 53 APCHL informed investors of the possibility of a future public listing of the Prime Trust in the information provided to potential investors, including the first Prospectus dated 27 July 2001 ("the Prospectus"), the Product Disclosure Statements ("PDS") dated 15 August 2003 and 30 August 2005, and a supplementary PDS dated 22 August 2006 ("the Supplementary PDS") which advised of the Amendments. Each of these documents warned that an investment in the Trust was likely to be illiquid in the short term because the units would not be listed on any stock market exchange, noting however that the Constitution required the Trust to be terminated by 31 December 2007 if APCHL had not passed a resolution to list the units of the Trust on an appropriate exchange on or before 31 July 2007. This was subject to the right of APCHL to fix another vesting date with the consent of a special majority of members.

3.6 APCHL moves towards listing the Trust on the ASX 54 From early 2006 APCHL commenced to move towards listing the units in the Trust on the ASX. Mr Lewski deposed: Whilst the listing of the Prime Trust was always possible, it was not, as referred to above, a priority at the outset of the creation of the Prime Trust. By early 2006 however, it was my objective, and I believe that of the board, to investigate the possibility of listing the Prime Trust. Although the ultimate decision, as to whether to list or not, could not sensibly be made until closer to the listing date and after obtaining detailed advice from investment advisers, it was my view in or about early 2006 that listing may have been a desirable option in order to maximise the benefits and returns to unitholders. (Emphasis added.) 55 Mr Butler deposed: I had been aware since the Trust was established in 2001 that the Trust was due to come to an end by 31 December 2007 (as is stated in the Prospectus dated 27 July 2001 at CB652). I have always thought that it was critical to give investors an exit strategy to allow them to recover their investments by this date. I believed that this could only be achieved by selling the assets of the Trust or by listing APCHL on the Australian Stock Exchange… Since I first read the Prospectus in 2001 I understood the reference to the termination of the Trust to be a reference to a listing, as distinct from a sale of the Trust assets… Similarly, I understood references to the determination of the Trust in subsequent PDS (such as CB224) as referring to a listing. (Emphasis added.) 56 The minutes of the 18 April 2006 Board meeting record: ASX Listing PWC, E & Y and Kidder Williams have been consulted. Leo Iafarta has also been contacted and would seem to be the strongest to assist the Trust through to listing. Mr Iarfarta will be forwarding a report on his costs after ANZAC day. … A sub committee will be set up to handle the listing process. (Emphasis added.) 57 Importantly, on behalf of APCHL, Madgwicks formally responded to a notice from ASIC in a letter of 4 May 2006 which stated: It has also been APCHL's objective to continue to move prudently and systematically towards listing of the Trust before December 2007, which APCHL believes is also a means to maximise the benefits and returns to unitholders. The letter was signed by Mr Lewski. 58 In a letter of 10 May 2006 from Kidder Williams to Mr Lewski outlining the proposed terms for that firm's engagement, Kidder Williams wrote: We understand that you are seeking to appoint an experienced advisor to assist the Company i[n] preparing the Trust for an ASX listing in the next 12 to 15 months. In addition, some assistance with acquisitions, and capital raisings for specific projects may be required in the interim. Mr Lewski informed the board of his discussions with Kidder Williams and later executed the engagement letter on behalf of APCHL. 59 Dr Wooldridge's evidence is that he was informed by Mr Lewski in discussions prior to his joining the Board in March 2006 that listing the Trust was an option. He said that by July 2006 he understood that Mr Lewski's role in the Trust was to be increasingly focused on listing. In relation to the 19 July 2006 Board meeting he said that one of the reasons he voted to introduce the Removal Fee and the Takeover Fee was that, in the absence of those fees, APCHL could be held to ransom in advancing towards listing. 60 Mr Clarke said that at the time he joined the Board in August 2006 it was apparent to him from the meetings he attended and the discussions he had with the other Directors that there was some urgency about having the Trust listed. 61 The evidence shows that by mid-June 2006 it was likely that the Trust would be listed on the ASX in the next 12-18 months. To use the words of the 4 May letter, APCHL was moving prudently and systematically towards listing the Trust before December 2007. The likelihood that the Trust would be listed on the ASX meant that the imposition of a substantial Listing Fee through the Amendments was of real significance to the members.

3.7 The Options Advice 62 In late March 2006 Mr Lewski sought legal advice from Richard (Rick) Goldberg, a partner of Madgwicks, as to whether APCHL could issue options in the Trust to itself. Mr Goldberg was not called to give evidence but it appears from other evidence that he was the Madgwicks partner with responsibility for APCHL's legal work, and this relationship appears to have been longstanding. His Madgwicks reference number appears on the amendments to the Constitution made in July 2001. 63 Madgwicks' file notes show that Mr Lewski sought advice as to the issue of a large number of options which would be issued to APCHL and were intended to be provided to the Directors as part of their remuneration. 64 Madgwicks provided a letter of advice to APCHL dated 11 April 2006 dealing with the legality of the proposed issue of options ("the Options Advice"), which was considered at the 18 April 2006 Board meeting. Madgwicks advised that if options were to be issued some amendments to the Constitution were appropriate as there was no express power to issue them. In summary Madgwicks advised that the necessary amendments did not require the members' approval as on the existing authorities the amendments did not affect the members' rights and at most negatively affected the value of their units. The Directors relied on the Options Advice to support their understanding of the Board's power to pass amendments without obtaining the members' approval to do so.

3.8 APCHL's fee entitlements under the Constitution 65 From registration in 2001 the Constitution set out the fees that APCHL could charge against Scheme property. These remained unchanged until the Amendments that are the subject of the proceedings. Clause 24.5 of the existing Constitution provided for the following fees: (a) an Annual Management Fee - an annual fee pursuant to cl. 24.5(a), namely: (i) a fee of 0.25% of the gross asset value of the fund; and (ii) a fee of 4% of the gross income of the Trust; (b) an Exit Fee - a fee pursuant to cl. 24.5(c) to be paid based on whichever event was the earlier of: (i) the determination of the Trust - a fee of 2.5% of the gross asset value of the Trust fund calculated on the determination of the Trust ("the Vesting Fee"); or (ii) the sale of all the main assets and undertakings of the Trust was completed - a fee of 2.5% of the net sale proceeds on settlement of the sale ("Exit Sale Fee"). "Net sale proceeds" was defined in cl. 24.5(e) to mean all proceeds and receipts from the sale of assets less any costs directly associated with the sale; (c) a Sale Fee - a fee pursuant to cl. 24.5(d) of 2.5% of the net sale proceeds on completion of the sale of any main asset of the Trust, except where APCHL was entitled to receive an exit fee under cl. 24.5(c) ("Asset Sale Fee"). "Net sale proceeds" had the same definition as in relation to the Exit Sale Fee; (d) a Takeover Fee - a fee pursuant to cl. 24.5(f) of 2.5% of the gross price paid by an acquirer for the acquisition of the units in the Trust, relevantly, where the acquirer's voting power increases from: (i) .20% or below to more than 20%; or (ii) a starting point that is above 20% and below 90%; (e) a Redemption Fee (from 2004) - a fee pursuant to cl. 24.5(g) of up to 5% of the redemption price of any unit redeemed by the Trust, under cl. 9B of the Constitution.

3.9 The proposal to introduce new fees, including the Listing Fee 66 On 5 June 2006 Mr Lewski attended a meeting with Mr Clarke, Mr Butler, Mr Jaques and representatives of Kidder Williams. Mr Lewski's evidence is that he informed the meeting that APCHL was entitled to a fee of 2.5% calculated on the gross asset value of the Trust when it vested or was listed on the ASX. He deposed that Philip Powell of Kidder Williams contacted him in mid-June to inform him that he had read the Constitution and that it did not contain any fee payable on listing. Mr Lewski said he then re-read the Constitution and was surprised to discover that there was no such provision. 67 On 20 June 2006 the Board met. The minutes show that the Board discussed a letter received from Thompson Eslick, lawyers, seeking a copy of the unit register. The minutes record: We have received a letter from these lawyers asking for a copy of our Unit Registry. It appears someone will want to contact the Unitholders, we assume for the possibility of making an offer for their units in an attempt to acquire control of the Trust. It could be a number of people, including Babcock and Brown, Macquarie, Aevum, APN. We will find out when they contact us. The upside is that any offer would offset the redemption problem, as those wishing to sell would be able to accept the offer. It could be an opportunistic offer for less than $1.00, or some small premium to gain control of the units. Kidder Williams would then be asked to do a "fair value" report. We will have revaluations coming through soon and our strong record of continuing monthly income distributions should persuade investors not to sell. Also advisors could put people into the Trust to "stag" a profit. 20% of units are required to call a meeting and 75% are needed to replace the Responsible Entity. The RE's track record should also persuade unitholders not to sell. "Poison Pills:" we will review this position in order to make a takeover difficult. We may also need a "white knight", maybe DB Zwern or GE to invest in the Trust. ASX listing will also be an impediment as investors will probably want to hold on to get a possible windfall. Our financial agreements will also cause a problem for this sort of action, as they all say that removal of the RE is a fundamental breach. Our management agreements are 25 year agreements to the management group which would have to be bought back. 68 The evidence of Dr Wooldridge, Mr Butler and Mr Lewski, supported by the minutes, is that the Board was concerned that the request for the unit register was made to enable another company to make "low-ball offers" for the units to the members. They said that in light of these concerns the Board decided to look into the implementation of disincentives that might discourage such offers, which they called "poison pills". Mr Lewski said that the Board's view was that he should seek legal advice as to any steps that could legitimately be taken to make a takeover difficult. 69 Mr Lewski also claimed that he informed the Board on 20 June that there were "anomalies" in the fees payable to APCHL under the existing Constitution and that he would seek legal advice on that issue as well. Mr Butler disagreed, deposing he first heard of the suggested "anomalies" from Mr Jaques in early July 2006. Dr Wooldridge was also unable to recall Mr Lewski saying anything about such fee anomalies in the Board meeting. The minutes make no mention of his informing the Board of any such "anomaly" at the time and I prefer the minutes and the evidence of Dr Wooldridge and Mr Butler to Mr Lewski's recollection.

3.10 Mr Lewski seeks legal advice from Madgwicks 70 It is uncontentious that Mr Lewski sought legal advice from Madgwicks on 20 June 2006 in relation to amending the Constitution to provide for additional fees including the Listing Fee. 71 A file note by Wendy Shang, an employee solicitor at Madgwicks, dated 20 June 2006 shows that she had a telephone conversation that day with Mr Lewski, in which he raised the proposed Amendments. She recorded the substance of Mr Lewski's instructions in an email to Mr Goldberg that day. The email stated: Hi Rick, I just had a brief meeting with Bill and he wanted me to brief you on a new matter before you return on Tuesday. An offer has been made for the Units in the Prime Fund (you may need to clarify that it's the Prime Aged Care and Retirement Trust?) and he wants you do something similar to what you did with APN (he said you would know what that meant). Bill said he needed us to go through any poison pill issues within the various structural and document arrangements in respect of the trust. The primary issue which he would like you to consider is whether he can change the Constitution without needing to go to the Unit Holders. He would like to embellish the provisions to deal with poison pill issues and other issues without going to Unit Holders. Secondly, he also has other issues outside the Constitution which he wants to discuss with you. In particular, he wants you to think of any defensive strategies for preserving the position [of] the fund, and anything else that's relevant. If this is unclear, give me a call on [telephone number or telephone number] (or give Bill a call if you want to discuss further with him). cheers, Wendy (Emphasis added.) 72 Ms Shang's file note tends to show that Mr Lewski wanted to amend the Constitution to introduce new fees to create "poison pills" against the takeover and/or removal of APCHL as RE. It is significant that Ms Shang notes that the "primary issue" upon which Mr Lewski sought advice was whether the Constitution could be amended without obtaining the members' approval. 73 Mr Goldberg's time charging records show that there was then a 30 minute conference between Mr Lewski and Mr Goldberg on 28 June 2006. Mr Goldberg made an undated file note of a conference with Mr Lewski which was situated next to or attached to this time charging record in the Madgwicks file. Because of its content and its location in the file, I infer that it is a file note of this conference on 28 June 2006. While hand written, the file note can be read, and it records the following: gross asset value - 2 billion … 2½ % of the value of equity for takeover fee … Exit fee = 2½% of gross asset value Mid July - Board meeting Need to remove anomaly Change of RE fee not the takeover fee Listing fee - not in Constitution

• no fee if successfully list Consider issues - can it be fixed need advice mid July 4 Board meeting If can be done without UH meeting - prepare Sup Deed. 74 The file note shows that Mr Lewski sought amendments to the Constitution so that it provided for a Listing Fee and a Removal Fee. Consistently with Ms Shang's earlier file note it also shows that Mr Lewski wanted the amendments made without seeking the approval of the members. This can be seen in the fact that Madgwicks was instructed to prepare a Supplemental Deed of Variation of the Constitution only if the amendments could be made without unitholder approval. 75 Mr Lewski essentially corroborated Mr Goldberg's file note. His evidence was that the Board was concerned about a takeover which could result in APCHL being voted out and the negative effect that this would have on the Trust. He said that he told Mr Goldberg that it was anomalous that the Takeover Fee was calculated on a different basis to the Vesting Fee (which was a component of the Exit Fee), when a takeover could result in the removal of APCHL as the RE. 76 As the Constitution provided a Vesting Fee to be paid on or about 31 December 2007 he described the absence of an equivalent fee payable on the Trust listing as "odd" and "anomalous".

3.11 Mr Lewski's evidence as to confidence in unitholder approval 77 Mr Lewski accepted that at the meeting on 28 June 2006 he instructed Mr Goldberg to prepare a Supplemental Deed of Variation only if it was possible to amend the Constitution without a meeting of unitholders. But he also said that if Mr Goldberg advised him that it was necessary for the members to approve the amendments he was confident that they would have approved APCHL staying on as the RE of the Trust, notwithstanding the additional fees. 78 Mr Lewski gave several reasons for this view but as I explain at [202]-[206] I reject his evidence as self-serving, without factual foundation and implausible. Notwithstanding his asserted confidence in the members' approval, the contemporaneous documents show that Mr Lewski was concerned to avoid seeking it. I infer from his evidence, the file notes and the surrounding circumstances that Mr Lewski thought there was a real risk that the members would not approve the additional fees and he was concerned to ensure that the Amendments were made without having to ask them.

3.12 The Madgwicks file note by Ms Kovacs on 12 July 2006 79 In a file note dated 12 July 2006 Naomi Kovacs, a senior associate at Madgwicks, noted that she was requested by Mr Goldberg to assist him in providing advice to Mr Lewski. She recorded that, pursuant to Mr Lewski's instructions, Mr Goldberg asked that she undertake the following legal work : B. The Constitution currently has provision for the responsible entity to receive a fee, fee is based on equity of fund, not gross asset value of fund. Equity value is net value only. Compare gross value includes all borrowings. Client wants fee payable based on gross not net.. Can this be amended in the constitution? Does this amendment require unitholder approval? See Wendy's advice on WRF regarding amendments to constitution and commentary on adversely affecting rights. Section 601GC. New file. Rick to advise. Regarding amending Constitution. Do by Thursday. Look at: current Constitution. Madgwicks document number 239511. (Emphasis added.) 80 Again, this evidence supports the inference that it was important to Mr Lewski that the Amendments be made without any requirement for the members' approval. 81 The request that the advice be ready by the following day tends to show Mr Lewski's urgency. Mr Lewski confirmed in his evidence that he wanted the advice in time for the Board meeting then fixed for 18 July. There is no evidence that pursuing the members' interests indicated any urgent requirement that the fees be introduced or that there was a business case for APCHL as RE to seek their urgent introduction. I infer that the urgency was Mr Lewski's and that it related to his getting the Listing Fee in place before the listing process further advanced.

3.13 The prohibition on amendments in favour of APCHL 82 There was however a significant obstacle to the Amendments being achieved without the members' approval. At all relevant times the Constitution contained cll. 34.1 and 25.1 which prohibited an amendment in favour of or resulting in any benefit to APCHL. 83 Clause 34.1 provided: 34.1 No Variation This Deed shall not be capable of being revoked added to or varied otherwise than as provided in Part 25. 84 Part 25 of the Constitution contained only cl 25.1, providing: Amendment to Trust (a) Subject to clause 25.1(b), the Responsible Entity for the time being may at any time and from time to time by deed revoke add to or vary all or any of the trusts, powers, conditions or provisions contained in this Deed….provided further that any such revocation, addition or variation: (i) shall not be in favour of or result in any benefit to the Responsible Entity; (ii) insofar as they create any new beneficial interest in the Trust Fund or any part shall be for the benefit of all or one or more of the Unitholders; (5) shall not affect the beneficial entitlement to any amount set aside for any Unitholder prior to any such revocation, addition or variation; and (6) shall not infringe the rule known as the Rule against Perpetuities. (b) Any amendment of this Deed must comply with the Corporations Act. [See section 601GC for power to amend. The amendment cannot take effect until a copy of the amendment is lodged with ASIC.] (Emphasis added.) 85 It is uncontentious that the proposed Amendments were in favour of or would result in a benefit to APCHL.

3.14 The Madgwicks file note by Mr Goldberg on 12 July 2006 86 Mr Goldberg's time charging records show that there was a 20 minute conference between Mr Lewski and Mr Goldberg on 12 July 2006. Mr Goldberg made an undated file note of a conference with Mr Lewski which was situated next to or attached to this time charging record in the Madgwicks file. I infer that it is a file note of this conference on 12 July 2006. 87 While the file note is hand written, it can be read. It shows that the prohibition on amendments in favour of APCHL in cl. 25.1 was brought to Mr Lewski's attention at the time. It records: … 25.1(a) - is subject to 25.1(b) 25.1(b) - amendments must comply with Act 601GC [of the] Act says [the Constitution] can be amended by RE if RE considers doesn't affect members rights. [Symbol meaning "therefore"] can argue 601GC overrides 25.1(a). 34.1 - doesn't affect it if under 25.1 (Emphasis added.) 88 I infer that the file note related to: (a) the prohibition on amendments in cl. 25.1(a) in favour of or to the benefit of APCHL, and the operation of subcl. (b) with subcl. (a); and (b) section 601GC which provides that a scheme constitution may only be amended: (i) by a special resolution of the scheme members under s 601GC(1)(a); or (ii) by the RE, if it "reasonably considers that the change will not adversely affect members' rights" under s 601GC(1)(b). The file note tends to show that Mr Goldberg's view (and his advice to Mr Lewski) was that it could be argued that cl. 25.1(b) of the Constitution overrode cl. 25.1(a), and that s 601GC(1)(b) then operated to allow APCHL to pass the proposed amendments if it considered that the amendments would not adversely affect members' rights. 89 That night at 7:30 pm Ms Kovacs had a telephone conversation with Mr Goldberg. Her file note of the conversation recorded that Mr Goldberg told her that his suggested interpretation of cl. 25.1 was "an argument only". Ms Kovacs records: 7.30 pm Phone from Rick. 12/07/06 Clause 25(a) says this is subject to 25(b) so could argue 25(b) alone can be followed i.e. Corps Act Is an argument only. Could say 25(b) only requires compliance with Act so 25(a) can be ignored. Discuss with Bill. He'll decide if wants letter to present this alternative argument. … (Emphasis added.) The file note tends to show that Mr Goldberg's view was that it was only arguable that the prohibition on amendments in favour of or to the benefit of APCHL set out in cl. 25.1(a) was overridden by cl. 25.1(b). 90 Mr Lewski confirmed that cl. 25.1 was discussed at the 12 July conference with Mr Goldberg, but he gave evidence that Mr Goldberg advised him unequivocally: …that the way the two sub-clauses of clause 25.1 worked was that the Act overrides clause 25.1(a), so that what is required is what the Act required, that is, that amendments would be permitted if the board considered that the amendments didn't adversely affect members' rights. As I explain at [207]-[208] I do not accept Mr Lewski's evidence in this regard. I see it as implausible and inconsistent with the contemporaneous file notes, the draft advices prepared by Madgwicks in the following days, and the final advice provided on 14 July 2006.

3.15 The Madgwicks file note and draft advice of 13 July 2006 91 Mr Goldberg's time charging records show that on 13 July 2006 there was a 20 minute telephone conference between him and Mr Lewski. Mr Goldberg made an undated file note of a conversation which, for the same reason as previously stated, I infer is a note of this telephone conference. The file note recorded:

• working on advice re - fees
• preamble is most important recognised an anomaly in fee earner structure not intended to have that consequence net value at end to UH is the same trying to remedy defect
• rights are the issue …..
• only - listing fee
• removal fee if directors resolve to proceed - do Number 7. Sup 92 This file note tends to show that Mr Goldberg was instructed by Mr Lewski that the preamble of the letter of advice to be provided to the Board was important and that it should set out that the Amendments would remedy an "anomaly" in the fees allowed by the Constitution. 93 Ms Kovacs produced a draft letter of advice to Mr Lewski and APCHL on 13 July 2006 ("the 13 July Draft Advice"). It referred to the new Listing and Removal Fees at 2.5% of the gross asset value of the Trust, but did not refer to it or to the different calculation of the Takeover Fee. 94 The draft advice included the following paragraphs:

2. Amending Constitution to increase APCHL's fees You have asked us to advise whether APCHL can amend the Trust's Constitution to provide for the following new fees to be paid to APCHL without obtaining the consent of the Trust's unitholders: (a) providing an [exit] fee where APCHL is removed as Responsible Entity of the Trust to be 2.5% of the gross asset value of the Fund; and (b) providing a listing fee where APCHL is listed on the Australian Stock Exchange to be 2.5% of the gross asset value of the Fund at the time immediately before listing. …
3. What is required for APCHL to amend the Trust's Constitution? (a) Constitution's requirements for amendments Clause 25.1(a) of the Constitution allows the Responsible Entity to amend the powers, conditions or provisions of the Constitution provided, amongst other requirements that such amendment shall not be in favour of or result in any benefit to the Responsible Entity. However, clause 25.1(a) is expressed to be subject to clause 25.1(b), which allows the Constitution to be amended provided it complies with the requirements of the Corporations Act. Clause 25.1(a) could be interpreted as an enabling provision, empowering the Responsible Entity to amend the Constitution without the Unitholders approval in circumstances where it would not be so empowered under the Corporations Act. [Rick: should this paragraph go further? Should we mention it can also be interpreted as a restricting provision?] If the APCHL Board interprets this clause 25.1(a) as an empowering provision only, that is overriding (sic) by the ability to amend the Constitution in the Corporations Act, then regard should be had to the amendment powers under the Corporations Act. [Rick: you may want to work on how delicately we state the above.] … (Emphasis added.) 95 The highlighted notes written by Ms Kovacs for Mr Goldberg's input again tend to show her view that it was only arguable that the proper construction of cl. 25.1 was that cl. 25.1(b) overrode cl. 25.1(a). Other contemporaneous documents tend to show that Mr Goldberg had the same view.

3.16 The Madgwicks file note and draft advice of 14 July 2006 96 On 14 July Ms Kovacs produced another draft advice ("the 14 July Draft Advice"). This draft included advice about a change to the basis for calculation of the Takeover Fee to 2.5% of the gross asset value of the Trust. In relation to APCHL's power to make amendments in its own favour the draft advice stated: … (d) Constitution's requirements for amendments We also draw your attention to Clause 25.1(a) of the Constitution which allows the Responsible Entity to amend the powers, conditions or provisions of the Constitution provided, amongst other requirements that such amendment shall not be in favour of or result in any benefit to the Responsible Entity. However, clause 25.1(a) is expressed to be subject to clause 25.1(b), which allows the Constitution to be amended provided it complies with the requirements of the Corporations Act. Clauses 25.1(a) and (b) could potentially be interpreted in the following ways: (i) Clause 25.1(b) overrides (a) such that the RE can make any amendment under (b) that is permitted by the Act without having to follow (a); or (ii) Clause 25.1(b) qualifies (a) such that the RE can only make an amendment that satisfies both (a) and (b). If the APCHL Board interprets clause 25.1 under (i) above and determines that the Corporations Act does not require Unitholder approval, then APCHL could proceed to make the amendments to the Constitution without Unitholder approval. … (Emphasis added.) 97 The 14 July Draft Advice was again uncertain about the proper construction of cl. 25.1. The draft stated that the clause could "potentially be interpreted", first in a way which allowed the Board to make the Amendments without the members' approval and secondly, in a way which meant that it could not. The addition of the word "potentially" was a softening from the earlier draft. It tends to show that Ms Kovacs did not have an unequivocal position on the proper interpretation of cl. 25.1. 98 Mr Goldberg's time charging records for 14 July 2006 set out his work on the Amendments that day. His work included perusing the draft letter of advice, considering the legal issues under the Act, considering the legal issues with Ms Kovacs, settling the draft letter of advice and checking the draft letter of advice. The time records show that he then had a brief telephone discussion with Mr Lewski. An undated file note by Mr Goldberg of a telephone conversation between him and Mr Lewski is in evidence, and I infer, for the same reason as previously stated, that it is a file note of this telephone discussion on 14 July 2006. It records: p.in. Bill Lewski letter is OK. Proceed with Sup Deed. 99 This tends to show that Mr Goldberg briefly discussed the final version of the advice with Mr Lewski on 14 July, and Mr Lewski approved it. Mr Lewski said that he was not provided with a copy of a draft advice prior to it being finalised, and there is no evidence to the contrary. Even so, I am satisfied that Mr Lewski understood the thrust of the final advice prior to receiving it. He took a close interest in the Amendments and Mr Goldberg discussed the draft advice with him on several occasions. His close involvement is apparent from his instructions which are set out in the file notes and the preamble to the draft and final advices and also from Ms Kovacs' 12 July file note that it was for Mr Lewski to decide whether an "alternative argument" was presented to the Board.

3.17 Provision of the final Madgwicks Advice and draft Deed of Variation No 7 100 In the afternoon of 14 July Mr Goldberg instructed his assistant to finalise the letter of advice and send it to Mr Lewski. The Madgwicks Advice, addressed to Mr Lewski in his capacity as Managing Director of APCHL, and signed by both Mr Goldberg and Ms Kovacs was emailed that afternoon. Dr Wooldridge also appears to have received the advice on or about that date. Later that day Mr Goldberg emailed a draft Deed of Variation No 7 to Mr Lewski. 101 On 18 July 2006, at Mr Lewski's request, Mr Goldberg couriered to Mr Lewski three copies of the Madgwicks Advice and Deed of Variation No 7 for the pending Board meeting. 102 I will deal with the Madgwicks Advice in more detail when dealing with the Board's consideration of the advice at the 19 July meeting. For the present it suffices to note that the advice was equivocal as to the Board's power to make the Amendments. In my view it: (a) recorded Mr Lewski's instructions that the Amendments were to "clarify the anomalies" in the Constitution by providing for the new Listing Fee, new Removal Fee and the increased Takeover Fee; (b) did not clearly advise the Board as to its power to approve the Amendments under cl. 25.1; (c) provided that if the Amendments were to be passed without obtaining the members' approval the Directors were required to decide which of the two competing interpretations of cl. 25.1 proffered by Madgwicks they preferred; and (d) if they decided on the interpretation that operated to override the prohibition on amendments in favour of APCHL, then in accordance with s 601GC(1)(b) they had to decide that they "reasonably considered" that the change would not adversely affect the members' rights. 103 Mr Lewski's evidence is that after receipt of the Madgwicks Advice he telephoned Mr Goldberg asking him to clarify the advice, and that Mr Goldberg did so. He deposed: After I read the letter I telephoned Goldberg and asked him to clarify what this part of the letter meant. Goldberg said to me words to the effect that it was consistent with the substance of his previous advice and ok and that all he was doing in the letter was setting out the potential arguments and issues that had been considered and that the Constitution could be amended in these circumstances without unitholder approval. He said that he told the Board of this supplementary advice during the 19 July meeting. As I explain at [207]-[212], I do not accept Mr Lewski's evidence in this regard. 104 A draft Deed of Variation No 7 was attached to the Madgwicks Advice, and the advice stated that if the Board approved the draft Deed execution copies would be prepared. The advice stated that once the execution copies were signed it was proposed to lodge the Deed with ASIC together with a consolidated Constitution containing the Amendments.

3.18 The 19 July 2006 meeting - the resolution to approve the Amendments 105 I deal with this meeting in detail at [189]-[324]. For the present it suffices to note that the Board met on 19 July 2006, and all of the then Directors attended. It was the first Board meeting in which Dr Wooldridge acted as Chairman. Mr Clarke was not a Director at that time. 106 The minutes of the meeting relevantly record: "POISON PILLS" AND RE PROTECTION Bill Lewski is investigating this when looking at the transition to listing. The issue of partly paid units with voting rights is under serious consideration. Under the non-ASIC regime we can issue partly paid units in the Trust only prior to listing. The terms for issue are set as per the issue options. They will need to be fully paid within 3-5 years of their issue. They can be issued at $0.0001 per unit. They can only be issued prior to the receipt of any offer. At the required change of [the] Constitution, we can also change the fee to the RE at a take-over from a fee based on Net Asset Value to one based on Gross Asset value. We could also include into the Constitution a fee for the RE as part of the fees for listing. Bill Lewski moved that the Board approve the variations to the Constitution to reflect the above changes, and this was seconded by Kim Jaques. Michael Wooldridge suggested that there be an amendment that the units be partly paid for no more than 5 years, with the RE having the right to make calls on the PP units as it sees fit during that time, but in any event for not less than 99.99 cents per unit, and the units will cease to exist, if not called upon, at the end of 5 years. The motion was passed unanimously. Mark Butler moved that we issue 80 million partly paid units. Seconded by Kim Jaques, and passed unanimously. The above process will be reviewed by the Trust's corporate Advisors to the proposed listing on the ASX. The review should be done as expeditiously as possible because of the proposed new PDS. (Emphasis added.) 107 Listing was in the offing and that is confirmed by the statement that the "process" (which I infer included the Amendments and the issue of the options) was to be reviewed by Kidder Williams. 108 Although the minutes do not record this, Dr Wooldridge said that Deed of Variation No 7 which contained the Amendments was also discussed. I accept his evidence in this regard. It is uncontentious that the Amendments were passed at this meeting. 109 Mr Lewski said that, notwithstanding that he remained in the meeting and participated in the deliberations, he abstained from voting on the Amendments because of his personal interest in the additional fees. Mr Jaques said that he too abstained from voting because of Mr Lewski's personal interest. As I explain at [218]-[228] I reject this evidence as implausible and inconsistent with contemporaneous documents. 110 It is important to understand that the Amendments were intended to have the effect that on the occurrence of specified events, the following additional fees would be payable to APCHL in its personal capacity from Trust funds.

3.18.1 The Listing Fee 111 A Listing Fee calculated at 2.5% of the gross asset value of the Trust payable in the event that the units in the Trust were listed for quotation on the ASX. This was a new fee as the existing Constitution did not provide for any fee payable to APCHL upon listing. The members had an entitlement to expect APCHL to proceed to listing if that was in the members' best interests (as the Directors said it was).

3.18.2 The Removal Fee 112 A Removal Fee calculated at 2.5% of the gross asset value of the Trust payable in the event that APCHL was removed as RE at the instigation of the members or ASIC, provided it was not for proven fraud, wilful negligence or cancellation of APCHL's financial services licence. This was a new fee as the existing Constitution provided that a special majority of the unit holders could remove the RE without cause and without a fee.

3.18.3 The Takeover Fee 113 A Takeover Fee calculated at 2.5% of the gross asset value of the Trust. This was a substantial increase on the Takeover Fee in the existing Constitution which was calculated by reference to the price of the units acquired rather than by reference to the gross asset value of the Trust. As I set out at [65] the fee was payable not on an acquirer obtaining control, but upon any acquisition of units above certain thresholds. The difficulty associated with this fee arose in the existing Constitution but its potentially deleterious effect on Trust funds was much lower. 114 The size of the change can be seen in a hypothetical (but not unrealistic) example in which the Trust had a gross asset value of $600 million and (after taking account of the Trust's significant borrowings) the net unitholders' funds were $300 million. Before the Amendments if an acquirer that already held 20% of the units purchased a further 1% interest in the Trust at market value it would result in a fee to APCHL of $75,000 and after the Amendments the fee would be about $15 million.

3.18.4 Multiple fees were possible 115 Under cl 24.5 APCHL could be entitled to be paid the Takeover Fee on multiple occasions if an investor acquired batches of shares over the threshold set, doing so at different times. 116 APCHL could also be entitled to payment of payment of more than one of the Listing Fee, Removal Fee, Takeover Fee, Asset Sale Fee or Exit Sale Fee. Of course, if removed as RE then APCHL would no longer have an entitlement to any further fee, and the Removal Fee was not payable if a Takeover Fee had been paid within the preceding six months, but apart from those examples payment of one fee did not preclude payment of another fee. For example, the Removal Fee could become payable even after the Listing Fee was paid as the Heads of Agreement later contemplated.

3.18.5 The additional fees were substantial 117 Each of the additional fees was to be calculated at 2.5% of the gross asset value of the Trust. 118 As I said at [50], in March 2006 APCHL advised members by letter that the gross assets of the Trust were in excess of $450 million and that it had well advanced plans to acquire more assets worth $250 million. On the basis of that valuation of the assets of the Trust each of the additional fees had a value of between about $11.25 and about $17.5 million, depending on when the foreshadowed acquisitions were finalised. 119 It is not clear to me exactly what the gross asset value of the Trust was at 19 July 2006. Part 2 of the 12 July 2006 PDS disclosed gross assets of $485.145 million as at 31 December 2005 (2.5% of which is $12.128 million) and forecast "unaudited post-acquisition" gross assets of $643.280 million (2.5% of which is $16.082 million). The APCHL accounts for the financial year ending 30 June 2006 disclosed gross assets of $568 million (2.5% of which is $14.2 million). 120 I note also that Dr Wooldridge's evidence is that the Board was informed at the 19 July meeting that 2.5% of the gross asset value was about $21.6 million. 121 Because the fees were to be calculated on gross asset value and took no account of the Trust's substantial borrowings, imposition of any of the fees would mean a greater reduction than 2.5% in the net value of Scheme property. Mr Bick, Senior Counsel for Mr Lewski, conceded that, based on a gross asset figure of $568 million, 2.5% of the gross asset value of the Trust would equal 6.7% of the net value of the unitholders' fund. 122 It is unnecessary to decide which of these assessments of the gross asset value of the Trust and APCHL's resultant fee entitlement is the most accurate. What is important is that the Directors must have understood that the additional fees to be paid from Trust funds to APCHL were substantial. I will describe APCHL's contingent entitlement to each of the additional fees as having a value between about $11.25 million and $21.6 million. 123 Following listing of the units on the ASX in August 2007 the Listing Fee in fact paid to APCHL was $33 million.

3.18.6 The additional fees were gratuitous 124 No, or no equivalent, consideration or benefit was provided to the members and there was no corresponding increase in the scope of APCHL's obligations.

3.19 The signature of Deed of Variation No 7 125 Dr Wooldridge said, and I accept, that at the conclusion of the 19 July meeting Deed of Variation No 7 was placed on the Boardroom table, probably by a Madgwicks solicitor, and he signed it. He said that, at his request, Mr Butler signed the Deed at that time and Mr Butler confirmed that. They did not date the Deed. 126 Dr Wooldridge said that he was asked to leave the Deed undated, probably by a Madgwicks solicitor, so that an appropriate date could be inserted later. Importantly, he said that he was asked at that time to leave the Deed undated because it needed to be lodged with a supplementary PDS which was not then ready. 127 The Deed carries the date 22 August 2006. The evidence shows that it remained undated until it was given that date following the 22 August 2006 Board meeting. At that meeting the Supplementary PDS was approved and (as I have found) the Lodgement Resolution was passed.

3.20 The 31 July 2006 meeting 128 In something of a postscript to the 19 July meeting, a Board meeting was held on 31 July 2006 by telephone hook-up. The minutes record: (a) a resolution to issue APCHL with 80 million partly paid $1 units. The initial capital contribution in respect of each unit was to be $0.001 and each unit had full voting rights. The evidence tends to show that the issue of these units was part of the package of measures created to insulate APCHL against removal as RE. (b) a resolution to offer Mr Clarke appointment as a director. 129 Both of these issues had already been dealt with by the resolutions of the 19 July meeting. Although in relation to the issue of units, the language of the 31 July minutes is clearer I do not understand the necessity for the later resolutions. It may be inferred that the Directors were not satisfied that they had properly dealt with these two issues at the 19 July meeting, but nothing turns on this. The 31 July minutes do not include any resolution in relation to the Amendments. I reject ASIC's submissions that I should infer that the Directors were not satisfied that they had passed the Amendments on 19 July.

3.21 The 22 August 2006 meeting - the Lodgement Resolution 130 I deal with this meeting in detail at [325]-[402] when dealing with whether the Board passed the Lodgement Resolution. For the present it suffices to note that the Board met on 22 August 2006 and all of the Directors attended. By then Mr Clarke was a Director. 131 On 18 August in the lead up to this meeting Mr Goldberg sent an email to Mr Lewski ("the 18 August email") which was forwarded by Mr Lewski's assistant to the other Directors on 21 August. The draft Supplementary PDS was attached to it which had been updated to include information about the additional fees to be introduced through the Amendments. The email related to four matters: (a) an agreement APCHL had entered into with APCH Administrators Pty Ltd for the provision of management and administration services to the Trust ("the Management Agreement"). The proposed Management Agreement was attached to the email for approval by the Board and for execution on 22 August 2006 if it was approved; (b) the Amendments passed on 19 July but yet to be brought into effect through lodgement with ASIC; (c) compliance consultancy agreements that APCH Administrators had entered into with external consultants Rees Partners Pty Ltd, and with Burke Bond Securities Pty Ltd for the provision of compliance consultancy services to the Trust ("Compliance Consultancy Agreements"). These agreements were intended to be signed that day by Rees Partners and Burke Bond Securities. APCHL was not a party to the agreements but Mr Goldberg requested that the Board acknowledge them; and (d) approval of a draft Supplementary PDS advising of the Management Agreement, the new compliance arrangements and the Amendments. 132 Relevantly to the Amendments, the 18 August email stated: Constitution Amendment No 7 - I confirm that the Supplemental Deed of Variation (No. 7) of the Constitution (copy attached) was approved at the last Board meeting and executed. It will take effect upon the date of its lodgement with ASIC. I propose that the deed be dated 22 August and lodged with ASIC on that date together with a Consolidated Constitution incorporating the amendments made by the Supplemental Deed of Variation. This will then coincide with the issue of the new Supplementary PDS. (Emphasis added.) 133 There are two sets of minutes for the 22 August 2006 meeting. Mr Jaques said, and I accept, that the first set are minutes that he prepared from notes he took in the meeting ("the Jaques Minutes"). The second set are minutes which were pre-prepared by Madgwicks to deal with four legally related matters which Mr Goldberg advised should be dealt with at the meeting ("the Madgwicks Minutes"). Both minutes are signed by Dr Wooldridge as correct and both are produced from the APCHL minute books. 134 The Madgwicks Minutes relate to the four legally related matters referred to in the 18 August email, and include the following resolution: Deed of Variation (No 7) At the last Board meeting, the Directors approved Deed of Variation (No. 7) to the Constitution which had not yet taken effect as it had not been lodged with ASIC because a Supplementary PDS had not yet been prepared. As a Supplementary PDS has now been prepared, the Directors resolved that the Consolidated Constitution incorporating Deed of Variation (No. 7) be lodged with ASIC to become effective. (Emphasis added.) This is the resolution which I have described as the "Lodgement Resolution". 135 The Jaques Minutes do not include the Lodgement Resolution or a like resolution. The Directors denied that such a resolution was put or approved at the 22 August meeting. As I explain, I am satisfied that the Lodgement Resolution was passed at the meeting. 136 On the assumption that the Lodgement Resolution was passed, and notwithstanding the fact that they remained in the meeting and participated in all deliberations, Mr Lewski and Mr Jaques said that they would have abstained from voting because of Mr Lewski's personal interest in the Amendments. Mr Clarke said that he did not express a view on the resolution and only participated passively in the meeting. Each of the Directors contended that ASIC had failed to establish that he voted for the resolution. As I explain at [493]-[518] while I accept that they remained silent when the resolution was passed I consider that in all the circumstances their silence amounted to or conveyed assent to it. 137 It is uncontroversial that on 23 August a consolidated Constitution containing the amendments in Deed of Variation No 7 was lodged with ASIC. It was lodged under cover of a Form 5101 ("Notification of Change to a Registered Scheme's Constitution") dated 22 August 2006 and signed by Mr Goldberg. The form stated that the amendment was authorised on 22 August 2006. ASIC recorded its receipt of the form and the consolidated Constitution as 23 August 2006. Section 601GC(2) provides that a "modification" to a trust constitution cannot take effect until lodged with ASIC.

3.22 Announcement of intention to list 138 On 23 January 2007 Kidder Williams wrote to the ASX on behalf of APCHL advising, amongst other things, that it was the intention of APCHL in its capacity as RE of the Trust to formally apply in 2007 for listing of the units of the Trust on the ASX. 139 On 20 March 2007 the Board met. The minutes of this meeting tend to show that the listing process had begun as Kidder Williams were documenting an explanatory memorandum for the members, and working on the PDS that would apply after listing.

3.23 The 26 June 2007 meeting - the resolution to pay the Listing Fee in tranches 140 At a meeting attended by all Directors on 26 June 2007 the Board formally resolved to list Prime Trust on the ASX. 141 At the same meeting the Directors passed a resolution in the following terms, dealing with the manner and timing of payment of the Listing Fee to APCHL: The Responsible Entity is entitled under clause 24.5(h) of the Constitution to a listing fee of 2.5% of the gross asset value of the Trust in the event that the units of the Trust are listed for quotation on the ASX ("Listing Fee"). IT WAS RESOLVED that the Listing Fee be taken by the Responsible Entity as Units in the Trust of which approximately ten percent is to be issued to the Responsible Entity at the time of allotment and official quotation of Prime Trust's units on ASX. The balance of the listing fee will be deferred and payable in tranches to the Responsible Entity upon achievement of performance hurdles over the next three years, being FY08, FY09 and FY10 ("Deferral Period"). The 3 performance hurdles will require the Trust to achieve a minimum cash yield of 8.5% p.a. and net asset growth of 4% each year. The deferred fee in each year will be paid 50% in cash and 50% as units issued at the 5 day weighted average price prior to the issue of the units in that year. In the event of removal of the Responsible Entity prior to the end of the Deferral Period, the unpaid balance of any outstanding fees will become payable in cash to the Responsible Entity. In the event that a performance hurdle is not achieved for any given year, the Listing Fee payable for that year will be waived by the Responsible Entity. (Emphasis added.) 142 Pursuant to this resolution, instead of a single cash payment the Listing Fee was to be paid to APCHL (and through it to Mr Lewski) as follows: (a) 10% as units in Prime Trust to be paid on listing; (b) the balance to be deferred and payable in tranches of 30%, upon APCHL achieving the performance hurdles of a minimum cash yield of 8.5% and net asset growth of 4% per annum, to be paid in each of the following three financial years ending 30 June 2008, 2009 and 2010 ("the Deferral Period") payable as 50% in cash and 50% in units; (c) if the performance hurdles were not achieved in a particular year the tranche payable for that year would be lost; and (d) if APCHL were removed as the RE prior to the end of the Deferral Period, the unpaid balance of any outstanding fees would become payable in cash. 143 Mr Lewski said that the decision to take 10% of the Listing Fee at the time of listing with the balance on a deferred basis came about through discussions he had with Kidder Williams. He said, and I accept, that he was advised that the attractiveness of the units on the ASX would be enhanced if investors perceived that APCHL's entitlement to further fees was linked to defined performance hurdles. He said that he was happy to agree to this so long as the balance of the Listing Fee became payable in the event that APCHL was removed as RE or taken over. 144 At this meeting the Board also resolved to issue a large number of options (of different classes) to APCHL in its personal capacity. 145 It is uncontentious that the minutes of the 26 June 2007 meeting were pre-prepared by Madgwicks. Mr Lewski again said that he abstained from voting on the resolution because of his personal interest. Mr Jaques could not recall whether he abstained or not although he reiterated that it was his usual practice to abstain where Mr Lewski had a personal interest. As I explain at [736]-[737] I do not accept their evidence. 146 A PDS approved by the Directors on 26 June 2007 ("the Listing PDS") advised potential investors of the additional fees and estimated the Listing Fee at approximately $33 million. The Listing PDS set out a broader basis for APCHL's entitlement to the deferred component of the Listing Fee than that provided by the Board resolution passed that day. Importantly, it provided that APCHL was entitled to the Listing Fee if there was a restructure of APCHL which meant that Mr Lewski was no longer in control.

3.24 The 27 July 2007 meeting - the resolution that APCHL take the Listing Fee partially as units in the Trust 147 The Board met on 27 July 2007 and all Directors attended, although some did so by telephone. The Board resolved to take the first tranche of the Listing Fee in units. The resolution stated: Payment of Listing Fee as units Under clause 24.5(h) of the Constitution, APCH in its personal capacity, under its role as Responsible Entity, is entitled to receive a listing fee upon allotment and official quotation of the units on the ASX ("Listing Fee"). APCH is entitled to receive all or part of its Listing Fee as units. The ASX has given its approval for the Trust to be listed on the ASX. Pitcher Partners have provided a statement that based on the pro-forma accounts the estimated gross value of assets prior to listing is $1,317,597,886. Accordingly, at 2.5% the total Listing Fee is $32,939,947. As resolved by the Board on 26 June 2007, ten percent of the Listing Fee ($3,293,994) is to be issued to APCH at the time of allotment and official quotation of Prime Trust's units on the ASX ("Tranche 1"). The balance of the Listing Fee will be deferred and payable in three tranches to APCH as follows: (a) $9,881,984 will be paid in 2008 ("Tranche 2"); (b) $9,881,984 will be paid in 2009 ("Tranche 3"); and (c) $9,881,985 will be paid in 2010 ("Tranche 4"); Tranche 2, Tranche 3 and Tranche 4 will be paid 50% in cash and 50% as units. Payment of these Tranches will be conditional upon achievement of performance hurdles over the next three financial years, being FY08, FY09 and FY10, as resolved by the Board on 26 June 2007 and disclosed in the Product Disclosure Statement dated 26 June 2007. The board resolved to take Tranche 1 of the Listing Fee as units, and RESOLVED that 3,293,994 units be issued to APCH in its personal capacity… (Emphasis added.) This minute confirms the amount of the Listing Fee at $33 million. 148 On or about 26 July 2007 APCHL, acting in its personal capacity, issued a tax invoice to APCHL in its capacity as RE of the Trust for $3,293,994 representing 10% of the Listing Fee, plus GST of $329,399. On or about 3 August 2007 3,293,994 ordinary units were issued to APCHL with a value of $3,293,994 and on 13 March 2008 APCHL was paid an additional $329,399 from Trust funds to cover the GST. 149 It is uncontentious that the minutes for the 27 July 2007 meeting were pre-prepared by Madgwicks. Mr Lewski again said that, notwithstanding that he remained in the meeting and participated in its deliberations, he abstained from voting on the resolution, doing so by remaining silent when it was passed. As I explain at [738] I do not accept his evidence.

3.25 The 3 August 2007 meeting - the resolution to grant options to the Directors 150 On 3 August 2007 Prime Trust units were officially listed on the ASX. 151 On that day the Board met. It resolved to distribute 27.5 million options in APCHL between the Directors and officers of APCHL and the wholesale distributors of the units as part of the remuneration for their services. There are two sets of minutes for this meeting. Mr Lewski said, and I accept, that the set of minutes recording some formal resolutions of the Board were pre-prepared by Madgwicks.

3.26 The variation to Mr Butler's Service Agreement 152 Mr Butler became a Director in 2001 and received a director's fee of $5000 per annum until 2006. On 1 February 2006 Property Consultants Australia Pty Ltd, which he controlled, entered a service agreement with Australian Property Custodians Pty Ltd, one of Mr Lewski's companies. Under this agreement Mr Butler became a full-time contractor marketing and selling units in the retirement villages, and being paid an annual service fee of $140,000 ("the Service Agreement"). He ceased to receive a director's fee at that time. 153 On 17 August 2007 the Service Agreement was varied and the service fee was increased to $220,000 per annum. The varied agreement provided for Mr Butler to be paid a bonus of $750,000, in three instalments of $250,000 over three years, if APCHL was paid the balance of the Listing Fee. Mr Lewski executed the varied agreement on behalf of APCHL. 154 Mr Butler accepted that after August 2007 he had a personal interest in the payment of the the Listing Fee Balance to APCHL. I see his personal interest as material.

3.27 The proposal to restructure and sell Mr Lewski's interests in APCHL 155 Mr Lewski's evidence was that from early 2007 Kidder Williams had been investigating a possible merger between Prime Trust and other parties. He said that at a Board strategy meeting held in November 2007, attended by Kidder Williams, it was considered that the Trust needed to grow or merge, or it risked being taken over by a larger fund. Within APCHL the various opportunities for growth or merger were given the name "Project Butterfly". 156 Mr Lewski said that, as advised by Kidder Williams, the Board's view was that to acquire another trust or to expand by acquiring additional assets the Trust needed to be able to raise money from institutional investors. He deposed that he was told by David Williams of Kidder Williams that, while he continued to have a large interest in APCHL, institutional investors would be unlikely to take a significant stake in the Trust. 157 He said that Mr Williams suggested to him that Kidder Williams acquire his interest in APCHL, that he provide vendor finance for the transaction, and that other APCHL arrangements be restructured, including the property acquisition agreement between APCHL and Australian Property Custodians. 158 The evidence shows that Mr Lewski agreed to restructure APCHL and to sell the interests in APCHL held by him and his associates to Kidder Williams.

3.28 The 7 April 2008 meeting - the advice that Mr Lewski had agreed to a restructure and sale of his interests in APCHL 159 In March 2008 Mr Lewski became aware of the disconformity between the resolution of the 26 June 2007 meeting and the Listing PDS to which I have referred at [146]. He then telephoned Mr Goldberg. Mr Goldberg then provided a letter of advice to Mr Lewski on 28 March 2008 which recorded Mr Lewski's instructions that the minutes of the 26 June 2007 meeting should be "rectified" because they erroneously omitted a reference to APCHL's entitlement to the Listing Fee Balance if there was a restructure of APCHL. Mr Goldberg then provided a draft resolution to APCHL to address the disconformity. 160 On 7 April 2008 the Board met. The minutes record that Mr Lewski reported that there was an error in the minutes of 26 June 2007 in that it did not accurately reflect the statement in the PDS. The Board resolved to amend the terms of the 26 June 2007 resolution by deleting the sentence which said: "In the event of the removal of the Responsible Entity prior to the end of the Deferral Period, the unpaid balance of any outstanding fees will become payable in cash to the Responsible Entity." and replacing it with the following words picked up from the Listing PDS: The Responsible Entity has resolved that only 10% of this fee will be paid at the time of listing, and the balance will be deferred and paid over three years (namely FY08, FY09 and FY10) based on achievement of certain hurdles…..In the event of the removal of the Responsible Entity or if there is a restructure of the Responsible Entity such that interests associated with Bill Lewski cease to control the Responsible Entity (for example, by way of a stapling arrangement) prior to the end of the Deferral Period the unpaid balance will become immediately payable in cash to the Responsible Entity. (Emphasis added.) 161 At the same meeting Kidder Williams provided a written handout and a Power Point presentation titled "Project Butterfly: Update" ("the Update"). This showed that Mr Lewski had already reached an in principle agreement with Kidder Williams for the restructure and sale of APCHL. The Project Butterfly: Update stated, amongst other things: Ownership: KWL [Kidder Williams] and BL [Bill Lewski] have agreed in principle for KWL to acquire APCH and lead industry aggregation. Subject to finalising: KWL will immediately acquire a 51% voting interest in APCH shares KWL will acquire all shares in APCH in July 2008 (Emphasis added.) 162 The Update also stated that Mr Lewski would receive the Listing Fee Balance upon the restructure and sale. It stated: ASX Listing fee: • $29.645m becomes payable due to the restructure - cash and units ($5m) • APCH Board will need confirmatory (sic) legal advice. (Emphasis added.) 163 A Kidder Williams memorandum to the Board for the 21 April meeting tends to show that a Heads of Agreement to restructure and sell APCHL was already finalised. It stated "As discussed at the last meeting, a binding Heads of Agreement between Bill Lewski and Kidder Williams has been finalised." On 11 April 2008 Mr Goldberg wrote to Mr Lewski stating that "APCHL proposes to enter into a Heads of Agreement substantially in the form of the draft dated 11 April 2008 to restructure APCHL (HOA)." I infer that the agreement for Mr Lewski to sell his interests in APCHL as part of a restructure (and to crystallise his entitlement to the Listing Fee Balance) was either finalised or very close to finalised as at 7 April 2008. 164 In a letter of 11 April 2008 Mr Goldberg advised Mr Lewski: I confirm it is our opinion that, as contemplated in clause 18(a) of the draft HOA, on the occurrence of the Formal Documentation Execution Date as defined in the HOA you will cease to control APCHL, and that event would entitle you to receive the unpaid balance of the Listing Fee on that date.

3.29 Blake Dawson provides legal advice 165 Dr Wooldridge said, and I accept, that on 16 April 2008 he arranged for solicitors, Blake Dawson, to provide advice to the independent directors as to the matters that they should consider in relation to the proposed restructure, including whether it was adverse to members. He arranged for Mr Powell of Kidder Williams to meet with Blake Dawson on 17 April 2008. Blake Dawson prepared a detailed letter of advice of 18 April 2008 for the independent Directors ("the Blake Dawson Advice"). 166 Dr Wooldridge said that he gave careful consideration to the Blake Dawson Advice, including by reviewing the advice, speaking to a partner at Blake Dawson and raising some queries. He then forwarded the advice to the other independent directors, Mr Rodaway and Mr Hancy, and had discussions with them. 167 Dr Wooldridge said that Blake Dawson did not raise any concern as to the effectiveness of the Amendments in introducing the Listing Fee or the other fees. While he was correct in saying so, there is little in the point. Blake Dawson was not requested to advise whether the Amendments were effective and were not provided with the Madgwicks Advice. The advice apparently proceeds on the assumption that APCHL was entitled to the Listing Fee.

3.30 The 21 April 2008 meeting - the resolution to authorise execution of the Heads of Agreement 168 On 16 April 2008 Mahanthran Krishnan, the Chief Financial Officer of the Trust and by this time the Company Secretary, emailed the Directors an agenda for an extraordinary Board Meeting to be held on 21 April 2008. The Agenda listed the following items: Heads of Agreement a Status; terms now agreed - confirmation of no negative impact on PTN - to note the CP in respect of financiers approvals and the proposed process to handle a Resolution to sign Stapling - Resolution to commit to put a proposal by 30 June 2010 Madgwicks Listing fee advice Amended KWL consulting agreement Approve ASX Press Release; Butterfly Bidder Statement … 169 The contemporaneous documents show that at this meeting the Board considered: (a) the Kidder Williams memorandum of 21 April 2008 in relation to the proposed transaction and the Blake Dawson Advice; (b) the Heads of Agreement; (c) the Blake Dawson Advice; and (d) the Madgwicks letter of advice of 28 March 2008 mentioned above dealing with the disconformity between the 26 June 2007 minutes and the Listing PDS. 170 The Kidder Williams memorandum put forward a formal resolution to authorise APCHL to execute the Heads of Agreement. As the minutes of the 21 April 2008 meeting record, the Directors instead sought some limited further advice from Madgwicks. The evidence shows that Dr Wooldridge requested that the other Directors read the Blake Dawson Advice and then provide their position on the Heads of Agreement. Any resolution on the issue was to be passed by 23 April 2008. 171 On 23 April 2008 Mr Krishnan sent an email to the Directors except Mr Lewski. The independent directors Mr Rodaway and Mr Hancy were included. The email states: Dear All, Please find attached the documents with all changes/amendments as discussed in the Board meeting on Monday. … Please endorse your acceptance as described in the Resolution attached. 172 While there was no resolution attached, by return emails on 23 and 24 April each of Mr Jaques, Mr Butler, Dr Wooldridge and Mr Clarke indicated their approval to the execution of the Heads of Agreement by stating: (a) Mr Jaques - "I support the resolution attached"; (b) Mr Clarke - "Approved and endorsed"; (c) Dr Wooldridge - "I endorse the resolution as presented"; and (d) Mr Butler - "I agree to the resolution". No other resolution was passed to approve the execution of the binding Heads of Agreement. 173 Mr Lewski was not requested to endorse his acceptance of the resolution and he said he did not do so. On 24 April 2008 he emailed Mr Powell asking him to send the Heads of Agreement to him so that he could get them to Dr Wooldridge and then back to Madgwicks. 174 The Heads of Agreement were executed on 28 April by Dr Wooldridge and Mr Krishnan on behalf of APCHL, by Mr Lewski and Mr Krishnan for APCH Administrators and Glendale RV Syndication Pty Ltd, by Mr and Mrs Lewski for Daytree, by Mr Lewski for various other Lewski interests and by Mr Williams and Mr Powell for the Kidder Williams interests.

3.31 The 27 June 2008 meeting - the resolution to execute the Deed of Acknowledgement 175 At a Board meeting on 27 June 2008 attended by only Mr Lewski, Mr Jaques and Mr Clarke the Directors present gave effect to the Heads of Agreement by resolving, amongst other things, to: (a) issue a single K Class share to Kidder Communities Pty Ltd for the sum of $1.00, thereby giving it 51% voting control of APCHL in accordance with the restructure announced to the ASX on 29 April; and (b) execute a Deed of Acknowledgement of Listing Fee Payment ("Deed of Acknowledgement"). The minutes of the meeting recorded that Mr Lewski provided a letter of resignation from his positions as Director, Managing Director and Chief Executive Officer of APCHL with effect from midnight that evening. The Board resolved to appoint Mr Powell as a director, Managing Director and Chief Executive Officer with effect from Mr Lewski's resignation. 176 The Deed of Acknowledgement was executed on 27 June 2008 and its parties were APCHL in its capacity as RE of the Trust, APCHL in its personal capacity, Carey Bay and Australian Property Administrators (both companies associated with Mr Lewski), and Mr Lewski. It recorded the parties' agreement that a restructure of APCHL had occurred which had resulted in a change of control of APCHL, and that as a consequence the balance of the Listing Fee ("Listing Fee Balance") was required to be paid in full to APCHL. 177 The Deed of Acknowledgement provided that the Listing Fee Balance was to be paid by $24,645,953 in cash and $5,000,000 in units in the Trust, which was 9,020,386 units ("the Scrip Component"). APCHL directed the Trust to pay the Listing Fee Balance directly to Australian Property Administrators. Australian Property Administrators directed the Trust to issue the Scrip Component directly to Carey Bay. 178 The Deed of Acknowledgement was executed by Mr Jaques and Mr Lewski for APCHL in its personal capacity, as well as by Mr Lewski on behalf of Carey Bay and Mr and Mrs Lewski on behalf of Australian Property Administrators and, purportedly on the other side of the transaction, by Mr Jaques and Mr Lewski for APCHL in its capacity as RE of the Trust. I consider that in executing the Deed of Acknowledgement Mr Lewski participated in the decision to pay the Listing Fee Balance.

3.32 The payment of the Listing Fee Balance 179 Following execution of the Deed of Acknowledgement: (a) On 30 June 2008 APCHL paid itself $27,610,548.30 from Scheme property funds in accordance with an invoice it raised on 27 June 2008; (b) On 27 June 2008 APCHL issued 9,020,386 units in the Trust to Carey Bay. On 30 June Mr Lewski drew a cheque for $27,610,548.30 on the APCHL account to the account of his associated company, Direct Fitness.

3.33 Events after payment of the Listing Fee 180 With the payment of the Listing Fee Balance the conduct upon which ASIC relies in the proceeding was at an end. Mr Lewski ceased to be a Director on 27 June 2008, Mr Butler ceased on 7 December 2008, Mr Clark ceased on 2 August 2010, and Dr Wooldridge ceased on 6 July 2011. 181 The evidence indicates that units in the Trust were floated on the ASX in August 2007 commencing at $1.00 each. On the day of listing their value increased to $1.06, but from then on they did not close at a price higher than $1.00 for the life of the Trust. 182 It appears (although the evidence on this is incomplete) that from about October 2009 complaints were made by members to APCHL and to ASIC about the Amendments and the payment of the Listing Fee. 183 APCHL was placed into voluntary liquidation on 18 October 2010, and on 23 November 2011 a resolution of the creditors to wind up the company was passed. On the collapse of APCHL the members, including at least some of the Directors, suffered serious financial losses. 184 In May 2012 the liquidators commenced the Compensation Proceeding, and on 21 August 2012 ASIC commenced this proceeding.

THE AGREED ISSUES IN THE PROCEEDING 185 The parties have agreed that the following issues require determination and my decision will largely follow this structure, although I have slightly changed the order and the numbering. It is also necessary that I deal with the 19 July 2006 meeting because it is an essential part of the context in which the Lodgement Resolution was passed, and because it informs my assessment of some of the Director's evidence. Issue A1: Did the Directors resolve on 22 August 2006 that the consolidated Constitution incorporating Deed of Variation No 7 be lodged with ASIC to become effective? Issue A2(a): What was the effect of the Lodgement Resolution on: (i) Deed of Variation No 7; (ii) the Constitution of the Trust; (iii) the rights and interests of the members of the Trust; and (iv) the interests of APCHL? Issue A2(b): Having regard to the conclusions on issue 2(a) above: (i) was the Lodgement Resolution in the best interests of the members of Trust? (ii) did the Lodgement Resolution involve any conflict between the interests of the Trust and the interests of APCHL? Issue A2(d): Did any of: (i) Lewski; (ii) Wooldridge; (iii) Jaques; (iv) Butler; (v) Clarke; vote in favour of or otherwise assent to the Lodgement Resolution? Issue A2(e): If a Director did vote in favour of, or otherwise assent to, the Lodgement Resolution, in the circumstances in which that occurred did he contravene s 601FD(3)? Issue A2(c): Did the Lodgement Resolution constitute a breach by APCHL of s 601FC(5)? Issue B3: Did the Constitution of the Trust at any time between 22 August 2006 and 30 June 2008 authorise APCHL to pay itself the Listing Fee? Issue B4: Did APCHL contravene s 208 (as modified by Part 5C.7): (i) on or about 27 July 2007; (ii) on or about 3 August 2007; (iii) on 13 March 2008; (iv) on 28 April 2008; or (v) on 27 June 2008, in relation to the payment of the Listing Fee or any part thereof? Issue C5: If the answer to Issue B4 is 'yes', were any of: (i) Lewski; (ii) Wooldridge; (iii) Jaques; (iv) Butler; (v) Clarke; knowingly concerned in any such contravention by APCHL of s 208 (as modified by Part 5C.7)? Issue D6: What matters were considered and not considered by the Directors of APCHL who were involved in deciding that APCHL should: (i) pay itself the Listing Fee; (ii) execute the Heads of Agreement; (iii) execute the Deed of Acknowledgement? Issue D7: Insofar as they were involved in deciding, did any of: (i) Lewski; (ii) Wooldridge; (iii) Jaques; (iv) Butler; (v) Clarke; contravene s 601FC(3) on any one or more of: (a) 26 June 2007; (b) 27 July 2007; (c) 3 August 2007; (d) 13 March 2008; (e) 28 April 2008; or (f) 27 June 2008.

MY ASSESSMENT OF THE DIRECTORS' EVIDENCE 186 I do not accept that any of the Directors have a good recall of either the 19 July or 22 August meetings. This is understandable when they were giving evidence in May 2013 about meetings which occurred up to about seven years earlier. Although I have a different view as to the quality of each Director's recall of events and the reliability of their evidence, broadly it seemed that much of their evidence was reconstructed from the minutes and other contemporaneous documents. I will set out my view of each of the Director's evidence in detail when dealing with the 19 July and 22 August 2006 meetings. For the present I note that: (a) Mr Lewski claimed a good memory of the two meetings and other relevant events and he gave a detailed account. I do not accept that he has the good recall that he claimed and I largely reject his account. On some central issues his evidence was implausible, inconsistent with contemporaneous records and/or contrary to the evidence of other Directors whose evidence I prefer. I also found his evidence on central issues to be self-serving and designed to assist his defence. I reached an unfavourable view of his credibility and I consider his evidence to be quite unreliable. My rejection of his testimony is broad and I do not accept his evidence on any contentious matter unless confirmed by contemporaneous documents or by the evidence of another Director whose evidence I accept. (b) Mr Butler also had a poor memory of the two meetings. An ASIC examination revealed that he recollected very little of the 19 July meeting. His evidence in chief as to both meetings was general and incomplete even though he said that he did his best to set out everything that he could recall in his affidavit. I see his evidence about both meetings as unreliable, although I do not conclude that he was being deliberately untruthful. (c) Mr Jaques had a very limited recollection of the 19 July meeting and no recollection of the 22 August meeting. His evidence about the meetings is unreliable. My view about the unreliability of his evidence was confirmed by the fact that he sometimes crafted his answers to suit his defence. (d) Dr Wooldridge gave the most reliable evidence of the Directors but I do not accept that he has a good recall of the 19 July or 22 August meetings. In particular I do not accept that the Board's consideration of the Amendments and the Madgwicks Advice at the 19 July meeting was as careful as he said. That testimony was implausible and inconsistent with his own evidence as to the time taken for the deliberations, with the Board's obvious lack of care in dealing with important issues at the meeting, and with other evidence. I do not though consider that he was deliberately untruthful. In my view he endeavoured to give a truthful account. (e) Mr Clarke was not a Director and was not present at the relevant part of the 19 July meeting when the Amendments were passed. He said nothing relevant in his evidence about that meeting. He was a Director on 22 August and attended that meeting but his memory of the period surrounding the meeting and the meeting itself was particularly poor and unreliable. I also found his evidence sometimes implausible and inconsistent with the contemporaneous documents and/or with the evidence of other Directors whose evidence I prefer. I reached an unfavourable view of his credibility and reliability as a witness. 187 Mr Butler said that on 19 July he saw the resolution to pass the Amendments and the Madgwicks Advice as involving major issues, which were therefore more likely to be remembered, but I do not accept that any of the Directors did. This evidence was implausible given the way the Board dealt with the issues before the meeting. Dr Wooldridge said, and I accept, that the Board's discussion about the Amendments and the Madgwicks Advice on the 19 July meeting only took about 10 to 15 minutes. It was impossible in about 10 to 15 minutes to properly consider the important issues surrounding APCHL's conflicts, the deleterious effects of the Amendments, the Board's constitutional power to make the Amendments, the Board's statutory power to make the Amendments including whether they adversely affected members' rights. The evidence shows that they did not deal with these issues properly or with reasonable care. I infer that if the issues had been seen as major they would not have been dealt with in this way. 188 Although each of the Directors denied that the Lodgement Resolution was before the 22 August meeting at all, each of them characterised lodgement of the Amendments with ASIC as a straight-forward administrative step that did not require a resolution anyway. I infer that they were unlikely to have treated such a resolution as significant and it was unlikely to have become fixed in their memory. As I explain when dealing with that resolution, I consider that the evidence of each of the Directors has little probative value.

THE 19 JULY 2006 MEETING 189 There are some significant disputes as to what took place at the 19 July 2006 Board meeting, and I now set out my view on the evidence. Although this meeting is not a foundational element to the pleaded contraventions it remains an important part of the background against which the contravening conduct is to be seen.

6.1 Mr Jaques' minute-taking practices 190 It is uncontroversial that Mr Jaques took the minutes of the Board meetings from 2004 until September 2006, and was the minute-taker at the 19 July 2006 meeting. 191 Mr Jaques said that his practice was to take notes in longhand in a notebook during the meeting. He said that after the meeting he typed the notes up, usually within a day or two and usually completing that task in one sitting. He accepted that some detail of the meeting may have been lost by virtue of the fact that he did not type up the minutes straight away. However, he said that any significant discussion would be recorded and that errors would be picked up and corrected when the minutes were approved by the Board. I accept his evidence as to his practice. 192 Mr Jaques said that he would record if a Director dissented from a resolution, but not any abstention from voting. Accordingly he said that he recorded the resolution to pass the Amendments on 19 July as unanimous, although (on their evidence) he and Mr Lewski abstained from voting. 193 It is uncontentious that the usual practice with minutes taken at a meeting was to circulate them to the Directors prior to the next meeting. They were tabled at that meeting for approval by the Board. After any necessary corrections had been made, the minutes were approved. The evidence is that Dr Wooldridge would sign the minutes as correct once they were approved and the minutes would then be promptly given to Mr Lewski's assistant to be placed into APCHL's minute book. 194 The minutes of the 19 July meeting were approved as correct by the Board at the 22 August meeting, and signed by Dr Wooldridge. I infer that they were then promptly placed into the minute book.

6.2 Dr Wooldridge's practices in putting resolutions to the Board 195 Dr Wooldridge gave evidence as to his usual practice in putting resolutions to the Board. He said that his practice was to ask the Directors present "those in favour" and "those against". He said that this was not just to satisfy himself that there was a consensus, but also to satisfy himself whether anyone was in disagreement. If disagreement emerged his practice was to call for the issue to be debated further. He said that it was not his practice to simply count to a majority and call the resolution passed. 196 I accept this evidence and conclude that he sought to understand the position of each Director present at the meeting on the resolution before them. 197 Mr Jaques basically agreed with Dr Wooldridge's account of his practice as did Mr Butler. Mr Lewski gave some examples where he said Dr Wooldridge did not fully follow his practice, but I prefer the evidence of the other Directors and I do not accept his account. 198 Mr Clarke disagreed with Dr Wooldridge's evidence. He deposed that at his first Board meeting as a Director on 22 August 2006 he asked Dr Wooldridge about the Board's practices. Mr Clarke's evidence was that Dr Wooldridge said that the Chairman would informally wrap up a discussion by determining whether, based on what had been said, a majority view had emerged. He said that he understood that if a majority of the Directors supported a particular position then that would be the outcome and no vote would be taken. He described Dr Wooldridge's practice as running the meetings in a collegiate way in which the Directors would come to a landing that the Directors agreed to. 199 Dr Wooldridge denied that such a conversation occurred, and said that it would have been unnecessary because Mr Clarke had already attended a number of meetings (albeit as a consultant) at that point. I prefer Dr Wooldridge's evidence as to the Board's practice because Mr Clarke's memory of the meeting and that period is particularly poor, and because: (a) Dr Wooldridge's evidence as to the Board's practice is confirmed by Mr Jaques and Mr Butler; (b) I see it as implausible that Mr Clarke asked Dr Wooldridge to explain the Board's process to him when Mr Clarke had the opportunity to observe Board practice when he sat through at least part of a number of Board meetings previously; and (c) Mr Clarke's evidence that resolutions were not moved and seconded or formally put is inconsistent with contemporaneous minutes and Mr Jaques' evidence that sometimes he or Mr Lewski moved and seconded resolutions to keep a meeting moving. As an example, the minutes of the 19 July meeting recorded that the Amendments were moved by Mr Lewski and seconded by Mr Jaques, and also recorded a resolution about the issue of options was moved by Mr Butler and seconded by Mr Jaques.

6.3 The Directors' evidence in relation to the 19 July meeting

6.3.1 Mr Lewski's evidence 200 As I have said, although Mr Lewski purported to give a detailed account of the 19 July meeting I do not accept that he had a good memory of it. On various issues of significance I found his evidence implausible, inconsistent with contemporaneous records, or contrary to the evidence of other Directors whose evidence I prefer. It was also sometimes self-serving, and designed to assist his defence. I see his purported recollection as in part a reconstruction and in part a fabrication and I treat his evidence as unreliable. 201 I now set out some examples of his unreliable evidence about this meeting which are significant in my rejection of his account.

Mr Lewski's stated confidence in the members' approval of the additional fees 202 Notwithstanding his admitted concern that the Amendments not be put to the members for their approval, he maintained that he was confident that they would have approved the additional fees. He said that the reason he did not seek the members' approval was just so as to save time and cost. 203 I do not accept this evidence. First, he did not know how lengthy or costly it would be to hold a meeting of the members because no such meeting of the Trust's members had ever been called. Further, there were only about 1000 members at the time and the cost or time could not have been significant. The cost certainly could not have been material if measured against the quantum of the additional fees that he was seeking to introduce. 204 Second, his evidence as to what the members would have done had he sought their approval is mere speculation. I see it as self-serving and implausible testimony given in 2013 by an interested person as to what a large and diverse group of members would have done in 2006 had they been properly informed. 205 In any event, the proper question is not, as Mr Lewski put it, whether the members would have approved APCHL staying on as RE had it imposed the new fees. Instead, it is whether the members would have approved amendments to introduce the additional fees if given the opportunity to consider that question. 206 I infer that he thought there was a real risk that the members would not approve the additional fees, or at least not approve them in the substantial quantum which he sought.

Mr Lewski's evidence that he received unequivocal advice on 12 July 2006 207 Mr Lewski's evidence is that in conference on 12 July Mr Goldberg provided him with unequivocal advice that the Board had power to amend the Constitution to make the Amendments. I see this evidence as implausible and inconsistent with the contemporaneous file notes and draft advices set out at [79]-[81] and [86]-[99] and with the equivocal Madgwicks Advice Mr Goldberg and Ms Kovacs provided just two days later. For example: (a) Mr Goldberg noted in his file note of the conference with Mr Lewski on 12 July, only that APCHL "can argue" that s 601GC overrides 25.1(a). (b) Ms Kovacs recorded in her file note of her telephone conversation with Mr Goldberg at 7:30 pm on 12 July that Mr Goldberg told her that: (i) his suggested interpretation of cl. 25.1 is "an argument only"; (ii) the advice to be prepared "could say" that cl. 25.1(b) only requires compliance with the Act; and (iii) the suggested interpretation is an "alternative argument"; (c) the Madgwicks Advice offered two mutually exclusive interpretations of cl. 25.1 and invited the Board to choose the one it preferred. 208 It is implausible that Mr Goldberg would have provided this unequivocal advice in conference with Mr Lewski yet been quite uncertain in his view about the operation of cl. 25.1 in his communications with colleagues, in his private file notes, and in the written advice he delivered to Mr Lewski two days later. I infer that Mr Lewski was not given unequivocal advice as to the Board's power to pass the Amendments.

Mr Lewski's evidence that he received unequivocal clarifying advice on 14 July and that he informed the Board of this 209 Mr Lewski said that after receiving the Madgwicks Advice on 14 July he telephoned Mr Goldberg seeking clarification of the advice. He said that Mr Goldberg unequivocally advised the Board had power to pass the Amendments. Mr Lewski said that he advised the other Directors of this supplementary advice in the course of the 19 July meeting. As to the meeting Mr Lewski said: I spoke about the proposed change to the Constitution and I referred to the Madgwicks advice and to [Deed of Variation (No. 7)]. I said words to the effect that Madgwicks had said that it was permissible for the Constitution to be amended in this way. The board had only recently considered what steps were required to amend the Constitution, when they had considered the 11 April letter of advice and each of them had received the 14 July 2006 letter of advice. I told the board that Goldberg and I had discussed the 14 July 2006 letter of advice and he had told me that the proposal didn't require unitholder approval. (Emphasis added.) 210 I do not accept this evidence. It is again implausible and inconsistent with the contemporaneous file notes, the draft advices and the Madgwicks Advice itself. Having drafted the advice together with Ms Kovacs over a number of days and come up with a somewhat tortured interpretation of cl 25.1, it is implausible that Mr Goldberg would abandon his equivocal position in one telephone call. 211 Mr Lewski's evidence is inconsistent too with the minutes of the 19 July meeting which do not refer to any clarifying advice from Mr Goldberg. None of the other Directors gave evidence that Mr Lewski informed the meeting of having received supplementary advice. While Dr Wooldridge annotated his copy of the Madgwicks Advice during the meeting he made no note of any supplementary advice. It is likely that, had Mr Lewski informed the meeting that the uncertain Madgwicks Advice had been clarified, it would have been mentioned in the minutes, in Dr Wooldridge's notes, or one of the other Directors would have recalled it. 212 I am fortified in this view by an email dated 13 October 2010 from Mr Goldberg to, then director, Mr Rodaway, sent well before any proceedings commenced, in which he said: I confirm that I do not have any file notes and do not recall discussing with any APCH director the Madgwicks advice of 14 July 2006 after sending that advice to Bill. Mr Lewski could have called Mr Goldberg had he wished.

Mr Lewski's evidence that he did not move the resolution to pass the Amendments 213 Dr Wooldridge said, and I accept, that after the Board's consideration of the Madgwicks Advice was finished, he told the Board that he had come to the view that it was in the interests of the members that the Amendments be made. His evidence was that the resolution was then put to the meeting. Although he said that he cannot now recall the process by which the resolution to amend the Constitution was proposed to the Directors and passed, he recalled that none of the Directors dissented. It is uncontroversial that Dr Wooldridge and Mr Butler voted in favour of the resolution, but Mr Lewski and Mr Jaques said that they abstained from voting by remaining silent. 214 The minutes record and Mr Jaques confirmed that Mr Lewski moved the resolution to pass the Amendments, but Mr Lewski denied moving the resolution and also denied that Mr Jaques seconded it. 215 The minutes of the 19 July meeting were approved as correct by the Board at the 22 August meeting and signed as correct by Dr Wooldridge. They are admissible as business records under s 69 of the Evidence Act and are evidence of the truth of the matters recorded. They are therefore evidence of the fact that Mr Lewski moved the relevant resolution and that Mr Jaques seconded it: Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 ("ASIC v Hellicar") at [7] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. 216 I reject Mr Lewski's contention that the minutes were false in recording that he moved the resolution. I am satisfied that he did so because: (a) the minutes are a formal record of the meeting made close to the time of its occurrence, accepted as correct by the Directors close to the time of the events in question, and signed as correct by the Chairman; (b) there is no evidence that Mr Lewski raised any objection to the accuracy of the minutes when they were approved at the 22 August meeting. The absence of any objection by Mr Lewski is inconsistent with his argument that the minutes are inaccurate: see ASIC v Hellicar at [136]; (c) I give little weight to Mr Lewski's self-serving account which I see as implausible. I prefer the contemporaneous minutes and Mr Jaques' account which involved an admission, against his own interests, that he seconded the resolution; and (d) I see it as implausible that Mr Lewski took a careful or principled approach in not moving the resolution when he remained in the meeting and he participated in the deliberations even though the Act required that he not do so because of his material personal interest. 217 I consider that Mr Lewski's evidence was little more than an attempt to distance himself from the later resolution to lodge the Amendments.

The evidence of Mr Lewski and Mr Jaques that they abstained from voting on the Amendments by remaining silent 218 Mr Lewski stated that by remaining silent when the resolution to pass the Amendments was put, he abstained from voting on it. He said that he took this approach because it would have been inappropriate to do otherwise given that the Amendments were to his family's benefit. He described this as his "usual practice" which Mr Jaques confirmed. Mr Jaques said that because he was directly employed by Mr Lewski his practice was also to abstain from voting when resolutions were put in which Mr Lewski had a personal interest. In stating that he followed this practice Mr Jaques seemed to concede that he stood to personally benefit if Mr Lewski benefited, I will proceed on that assumption although it is not clear to me how he would benefit. 219 Importantly, neither Mr Lewski nor Mr Jaques gave evidence that they informed the other Directors before or during the 19 July meeting that their silence meant that they were in fact abstaining from voting. The thrust of their evidence was that it was unnecessary for them to do so because the other Directors were well aware of Mr Lewski's personal interest in the Amendments. Mr Lewski deposed: …I said nothing, and nor, to my recollection, did Jaques at that point. Nor did I nod. Nor did Wooldridge look at me and ask me for my support of the amendment resolution. It was not appropriate for me to say anything when Wooldridge looked to the board members for their approval of the proposal. That is why I did not do so. The proposed changes, if adopted, were changes which were to my family's benefit... I did not remind the board at the 19 July meeting again of my family's interest in APCHL receiving a listing fee. I believe they were already well aware of the interest and obviously knew that my family stood to gain a benefit by the exit fee in the event the Prime Trust vested at the end of December 2007 and a potential benefit in the event of a removal of the RE, or in the event that the takeover fee entitlement arose. I had told them at the time when I sought each of them out to join the board of my family's interests in the RE and it was recorded in the various documents. … It seemed obvious to me that the payment of a listing fee or a removal fee (and making the takeover fee calculation equivalent to the exit fee) involved the conferring of a benefit to my personal advantage, just like the payment of the exit fee would. Because the existence of the interest was so obvious and already well known, I did not formally declare my interest in it and I did not consider it was necessary for me to leave the room for the discussion of these matters. 220 Mr Jaques conceded that he seconded the resolution to pass the Amendments but said that this did not indicate his assent to the resolution, just being part of the process of moving the meeting along. 221 I am satisfied that Mr Lewski and Mr Jaques in fact voted to pass the Amendments. I do not accept their evidence which I see as implausible and inconsistent with the minutes. The minutes record that the resolution approving the Amendments was passed unanimously. They are admissible as evidence of the truth of the matters that they represent. While I should be careful to not too closely read a set of minutes, if "unanimously" is given its ordinary meaning the minutes record that the resolution was supported by all of the Directors present and not just two out of the four. 222 The minutes must also be seen in the light that the resolution to pass the Amendments was important and would likely result in a fee of between $11.25 million and $21.6 million being paid from Trust funds to Mr Lewski's benefit. I see it as unlikely that if only two of four Directors voted in favour of this resolution Mr Jaques would have recorded the resolution as having been passed unanimously, when he was one of the Directors who purportedly abstained. 223 There is no evidence that any Director raised any objection to the accuracy of the minutes when they were approved. The absence of any objection, particularly by Mr Lewski and Mr Jaques, is inconsistent with the argument that the minutes are inaccurate: ASIC v Hellicar at [136]. 224 I note too that s 195(1) makes it is an offence (except in certain circumstances not presently relevant) for a director of a public company to be present while the board considers a matter in which he or she has a material personal interest, or to vote on the matter. Section 195(1) does not apply if the director does not need to disclose his or her interest pursuant to s 191, but neither Mr Lewski (nor Mr Jaques) said that he complied with the requirements of the Act in that regard. 225 Section 195(1) requires the director to leave the boardroom before the meeting begins to consider the matter and, a fortiori, it is not permissible for an interested director to be present for the vote: see Australian Securities and Investments Commission v Rich (2009) 236 FLR 1; [2009] NSWSC 1229 ("ASIC v Rich") at [4547]-[4549]. In McGellin v Mount King Mining (1998) 144 FLR 288 at 304 Murray J held that a director's participation in a meeting where a matter in which he had a material personal interest was considered was a breach of the director's fiduciary duty. 226 Mr Lewski said that he did not formally declare his interest in the resolution because it was obvious to all, and did not consider it necessary to leave the Boardroom. In closing submissions Mr Lewski effectively conceded that he had a material personal interest in the Amendments, that he was not allowed to vote and that he should have absented himself from the Boardroom when the issue was discussed. Whether Mr Jaques' interests would fall within s 195(1) is not as clear, but I proceed on the basis that he admitted to having a conflict of interest that precluded him from voting and that he should not have remained present when matters in which he was interested were considered. 227 Prima facie it appears that both men should have left the meeting prior to the discussions about the Amendments, neither should have spoken to the Amendments, and neither should have been present when the vote on the Amendments was taken. Mr Lewski's and also Mr Jaques' participation in a meeting dealing with matters in which they viewed themselves as having a personal interest reinforces my conclusion that they did not abstain from voting by remaining silent. It is implausible that Mr Lewski took a careful approach as to whether or not to vote on the Amendments given his failure to comply with proper corporate governance. 228 When one stands back from their conduct, Mr Lewski's and Mr Jaques' evidence has an air of unreality when: (a) both were in favour of the resolution to pass the Amendments; (b) neither voiced any opposition to the resolution; (c) neither advised Dr Wooldridge that he had a material personal interest in the matter; (d) neither left the Boardroom when the resolution was discussed; (e) Mr Lewski spoke in support of the resolution; (f) Mr Lewski moved the resolution; (g) Mr Jaques seconded the resolution; and (h) the minutes record the resolution as being passed unanimously. I do not accept their evidence.

His evidence that Mr Clarke was present when the Amendments were passed and possibly voted for them 229 Mr Lewski stated that Mr Clarke attended the whole of the 19 July meeting, and may even have actively participated in the passage of the Amendments by nodding his assent at the relevant time. Mr Clarke had not been appointed a director at the time, and the evidence is that he attended the meeting only to provide a report. He said that he waited outside the meeting until he was called to present his report and denied that he was present at the meeting when the Amendments were considered. His evidence was confirmed by Dr Wooldridge and Mr Jaques. I prefer the evidence of these Directors to that of Mr Lewski, and I reject his evidence as a self-serving attempt to shift blame onto other Directors for the passage of the Amendments.

6.3.2 Mr Butler's evidence 230 Mr Butler displayed a poor recollection of the 19 July meeting and the consideration of the Madgwicks Advice. In evidence in chief he said only that: The letter referred to an anomaly in the Constitution of the Trust. From my reading of the letter I understood that the anomaly was that there was no provision for the payment of a listing fee on the listing of the Trust. As I had always understood that the payment of a listing fee had to be made on the listing of the trust as per the Prospectus and PDS as I deposed earlier, I thought it was appropriate to address this anomaly. As the letter of advice did not say that APCHL was not permitted to amend the Constitution to address the anomaly which had been identified, and as it did not say that the board must obtain the approval of unit holders to the amendment, I thought that the board was entitled to sign the Supplemental Deed (No. 7) attached to the letter in order to fix the anomaly. I thought Madgwicks would only have attached the Supplemental Deed to the letter if it was appropriate for the board to sign it. 231 His evidence was expressed at a high level of generality and his recollection of the consideration of the advice was well short of complete. He dealt only with the suggested anomaly regarding the absence of a Listing Fee as the basis for the additional fees. He did not give evidence as to any consideration of the new Removal Fee or the increased Takeover Fee, or the other grounds for new fees which other Directors said they discussed at the 20 June 2006 meeting. 232 All he said in evidence in chief in relation to the 19 July meeting was: I refer to the minutes of the meeting of the board held on 19 July 2006. The Madgwicks' letter of 14 July 2006 was tabled at the board meeting of 19 July 2006. The letter was discussed at the meeting. I voted for the amendment based on my consideration of Madgwicks' advice. He accepted that when he made his affidavit he made an effort to make it full, recounting as best he could what he could remember of the relevant events. He also accepted that his affidavit represented what he could remember about his consideration of the Madgwicks Advice. His evidence only went to quite basic details of the meeting and the consideration of the advice. This tells against a conclusion that he has a good recall. 233 More importantly, the hearing before me was not the first time Mr Butler had been examined about these matters. On 14 May 2012 he was summoned to attend an examination by ASIC and he was required to answer questions in the examination. Some of his answers, in which he revealed almost no recall of the events surrounding the 19 July meeting, were put to him before me. 234 Mr Butler's testimony before me was that he specifically remembered considering the Madgwicks Advice prior to the 19 July meeting because of the "fairly major" issues it raised, and that he remembered going back to the Constitution and rereading it after reading the advice. However, in the ASIC examination he was asked "Did the board obtain legal advice, to your knowledge, about its ability to amend the Constitution to include the listing fee?" and that he answered "I can't remember". He was shown a copy of the Madgwicks Advice and asked "Have you seen that letter at all before?" and he answered "I can't remember." 235 Mr Butler's evidence before me was that he specifically remembered the 19 July 2006 meeting, seeing it as important because of the issues discussed. Inconsistently with this evidence, he accepted that in the ASIC examination he was shown a copy of the minutes of the 19 July meeting and when the examiner asked "Do you have any recollection of this meeting at all?" he answered "No". In answer to the follow-up question "At all?" he accepted that he said "Well, I can't remember the exact meeting." 236 Mr Butler's evidence before me was that he remembered signing Deed of Variation No 7, doing so immediately after the meeting on 19 July. He said that he remembered this because it was unusual for Dr Wooldridge to ask him to sign any document and because it was an unusual document compared to the invoices and shorter documents that he was asked to approve on other occasions. However, in the ASIC examination he was asked "Do you recall if there was a draft deed of variation to the Constitution considered at that meeting on 19 July 2006?" and he answered "I can't remember." He was shown Deed of Variation No 7 which he had signed and was asked "Do you recall when and where you signed that document?" and he answered "No." 237 In an attempt to explain away his lack of recall when he was examined by ASIC Mr Butler said that there were deficiencies in his preparation for the examination. He said that, as he had reviewed documents and consulted with his lawyers in preparation for this proceeding, and the proceeding brought by APCHL, his memory of the events had become clearer. I found his evidence as to his inadequate preparation to be implausible and unreliable. At one point he conceded that he took a lot of care to prepare for the examination, then at another he said he did not review the Board minutes. When pressed at another point, he said that he could not remember the exact actions he took in preparation. He admitted that he saw being summoned for the ASIC examination as a very serious matter and that he took a lot of care to prepare for it. He engaged Senior Counsel to protect his interests at the examination. I infer that he gave thought and effort to his preparation. I do not accept his explanation of the poor recall that he exhibited nor that his memory before me was significantly better. 238 I consider that Mr Butler has little memory of the 19 July meeting and the consideration of the Madgwicks Advice. I see his answers in the ASIC examination as less tutored and more reliable than his testimony before me. While I do not consider that he was being deliberately untruthful I see his evidence as largely a reconstruction from the minutes and the Madgwicks Advice. I do not accept his evidence on contentious questions unless it is confirmed by contemporaneous documents or by the evidence of another Director whose evidence I accept. His evidence as to the meeting has little probative value.

6.3.3 Mr Jaques' evidence 239 Mr Jaques had a very limited independent recollection of the 19 July 2006 meeting. He said in evidence in chief: [35]….The meeting occurred over six years ago. Without the minute I would not recall where it occurred. I have no independent recollection of the events at the meeting except the following: (a) I have a vague recollection of seeing the letter of advice from Madgwicks dated 14 July 2006 (CB 285-290) at or about the time it is dated. I have a vague recollection of reading the letter but I have no specific recollection of my thoughts on reading the letter. Based on this letter, or this letter in combination with further discussion - most likely discussion that occurred at the 19 July 2006 meeting - I formed the view that APCHL had the power to make the contemplated amendments to the constitution. If I had doubted that APCHL had this power, I would not have proceeded. I do not remember having any doubt. … Mr Jaques deposed that he recalled thinking that the Amendments were in the interests of the members, and he set out three general reasons for doing so. However, he said that because of the passage of years he could not remember if he expressed those opinions to the other Directors either at the meeting or in other discussions. 240 His poor memory of the events around the 19 July meeting was apparent from the fact that: (a) in cross-examination he said he was "struggling to remember" the practice adopted on that day for the passing of resolutions; (b) although, based on discussions and the Madgwicks Advice he said he vaguely recalled that the Board had the power to amend the Constitution, he cannot remember who he spoke to or the contents of the discussions; (c) he admitted that he had no independent recollection of forming a view about the power of the Board to amend the Constitution; (d) he could not recall whether the Board acted on one of the interpretations of the Constitution provided in the Madgwicks Advice; (e) other than the few factors he listed, he could not remember what factors that Board took into account in deciding that it had the power to amend the Constitution; (f) he could not recall whether he had considered Deed of Variation No 7 in enough detail to notice that the Amendments allowed the new and increased fees to be charged on more than one occasion; and (g) he could not recall whether he took into account that APCHL was in a position of conflict in relation to the members; 241 His evidence as to the 19 July meeting and the consideration of the Madgwicks Advice is unreliable because of the poor quality of his memory. My view as to this unreliability is buttressed by my view that he also sometimes crafted his evidence to assist his defence. I give his evidence about the meeting little weight unless confirmed by contemporaneous documents or the evidence of other Directors whose evidence I accept on that issue.

6.3.4 Dr Wooldridge's evidence 242 Dr Wooldridge gave the most reliable evidence of the Directors. However, I do not accept that he has a strong recall of the relevant meetings. In particular, I do not accept his evidence that the Board's consideration of the serious issues involved in the Amendments and the Madgwicks Advice was as careful and detailed as he said. As I explain the evidence strongly points to the inference that the issues wrapped up in the Amendments to introduce the substantial additional fees were not given careful consideration. It was, in fact, impossible to carefully consider and discuss those issues in the 10 to 15 minutes which he said it took. 243 I do not though conclude that Dr Wooldridge was being untruthful. The 19 July meeting was held almost 7 years before he gave his evidence, and I see his account of the Board's consideration of the Madgwicks Advice as having been largely reconstructed from re-reading the Madgwicks Advice, his annotations on it, and the minutes.

6.3.5 Mr Clarke's evidence 244 I accept that Mr Clarke was not present at the meeting when the Amendments were passed. I note too that even if he had been present at the relevant time little would turn on that. He was not a Director then and was not required to pay close attention to the business of the meeting. Mr Clarke said nothing relevant about the passage of the Amendments nor the consideration of the advice.

6.4 Should Mr Lewski and Mr Jaques be treated as having voted in favour of the resolution to pass the Amendments 245 As I have said, the minutes record that the resolution to pass the Amendments was passed unanimously and I consider that each of the Directors voted in favour of it. But even if I assume that Mr Lewski and Mr Jaques in fact remained silent when the resolution was put before the meeting I am satisfied that they should be seen to have voted in favour or otherwise assented to it, as the minutes record. 246 In ASIC v Hellicar the High Court considered whether two directors of James Hardie Industries Ltd ("JHL"), Mr Gillfillan and Mr Koffel, should have been found to have approved a resolution at a board meeting, even though they remained silent when it was carried. The two directors attended the meeting by telephone and the primary judge found (contrary to their evidence) that the board approved a draft ASX announcement at the meeting. Neither of the directors had a copy of the draft announcement before him, neither asked for a copy and the draft announcement was not read out. The approval of the draft announcement only came from discussion at the meeting. The two directors remained silent during the discussion that was found to have occurred and did not formally indicate that they abstained from voting by doing so. There was no resolution or statement that silence counted as an affirmative vote, but the board's practice was that the Chairman would summarise a position after a discussion and the directors either indicated their approval or remained silent. Silence then was taken as approval of the resolution: see Morley v Australian Securities and Investments Commission (2010) 274 ALR 205 ("Morley v ASIC") at [854] per Spigelman CJ, Beazley and Giles JJA: ASIC v Hellicar at [307] per Heydon J. 247 The primary judge found that by their silence Mr Gillfillan and Mr Koffel voted in favour of the resolution to approve the draft announcement: ASIC v Macdonald No 11 at [234]; Australian Securities and Investments Commission v Macdonald and Others (No 12) (2009) 259 ALR 116 ("ASIC v Macdonald No 12") at [125] and [127]. This finding was not interfered with on appeal: Morley v ASIC at [855]; ASIC v Hellicar at [171]. 248 In Morley v ASIC at [855]-[856] the New South Wales Court of Appeal held: [855]… Messrs Gillfillan and Koffel participated in the meeting, albeit by telephone, and the principal business of the meeting was the establishment of the Foundation and all it entailed. On the assumption that the Draft ASX Announcement Resolution was passed, it cannot sensibly be concluded that they did not vote, even if by silence, in favour of establishment of the Foundation, for which also there were no draft resolutions. On the same assumption, there is no sound reason to regard announcement of the establishment of the Foundation as outside their concurrence by silence. [856] On the assumption of consideration and approval of the draft news release, Messrs Gillfillan and Koffel understood that JHIL proposed to issue an announcement, including on the contentious matter of funding, if the separation was approved. On the same assumption, the discussion would have disclosed that the other directors had a document they did not have. At the least they would have heard an extensive discussion, and a time would have come when, according to the practice, Mr McGregor summarised the position. By remaining silent, they joined in the informal resolution. [857] It may be added that, still on the assumption we have made, the minutes of the February meeting were relevantly a correct record, adopted by Messrs Gillfillan and Koffel amongst others. The minutes did not record abstention from the Draft ASX Announcement Resolution. (Emphasis added.) 249 In a later chapter of the same litigation the New South Wales Court of Appeal in Gillfillan v Australian Securities and Investments Commission (2012) 92 ACSR 460 ("Gillfillan v ASIC") discussed proper company procedure regarding Board decision-making. At [4]-[11] Barrett JA, with whom Beazley JA agreed at [3], said: [4] I wish to make some observations about two matters of company procedure emphasised by the circumstances of this case. [5] The first concerns the way in which decision-making by a board of directors should be undertaken. [6] Section 248G of the Corporations Act 2001 (Cth) enacts replaceable rules that a resolution of the directors of a company must be passed by a majority of the votes cast by directors entitled to vote on the resolution and that the chair has a casting vote, if necessary, in addition to any deliberative vote to which he or she is entitled as a director. Experience suggests that, where articles within the company's constitution operate to the exclusion of these replaceable rules, the constitution will very likely make substantially similar provision. [7] Under a regime of this kind, the required method of decision-making is the passing of a resolution of the body of persons; and the passing of a resolution depends on the casting of individual votes. It follows that procedures actually adopted must be such that each member of the body who is entitled to vote and wishes to do so may communicate his or her vote and have it taken into account. [8] Value is often attached to collegiate conduct leading to consensual decision-making, with a chair saying, after discussion of a particular proposal, "I think we are all agreed on that", intending thereby to indicate that the proposal has been approved by the votes of all present. [9] Such practices are dangerous unless supplemented by appropriate formality. [10] The aim is not to consult together with a view to reaching some consensus, although it may well be, as a practical matter, that such consultation facilitates the making of the decision that is ultimately required. The aim is rather that the members of the board should consult together so that individual views may be formed and the individual will of each member may be made known in a clearly communicated way. [11] The culmination of the process must be such that it possible to see (and to record) that each member, by a process of voting, actively supports the proposition before the meeting or actively opposes that proposition; or that the member refrains from both support and opposition. And it is the responsibility of an individual member to take steps to ensure that his or her will is expressed in one of those ways. (Emphasis added.) 250 I respectfully agree with Barrett JA. If Mr Lewski and Mr Jaques wanted to abstain from voting, it was their responsibility to ensure that they did so clearly so that their abstention was seen and recorded as such. I do not accept that it was enough for them to simply remain silent without announcing their abstention. It is significant that none of the other Directors gave evidence that they understood that Mr Lewski and Mr Jaques meant to abstain from voting by their silence. I do not see Mr Lewski's and Mr Jaques' evidence as to the other Directors' understanding of their position as reliable. 251 There are good policy reasons for directors shouldering the responsibility to clearly indicate whether they are supporting, opposing or abstaining from voting on a resolution, and to ensure that their position is recorded in the minutes. The present case where none of the five Directors now admits to voting for the Lodgement Resolution illustrates some of the difficulties that can arise if that is not the case. 252 Mr Jaques expressed this difficulty in the following exchange during cross examination: Did anybody ever announce an intention to abstain from a vote? --- It was usual and it was my usual practice that I would not vote on matters where Lewski was going to benefit, and he wouldn't either. How would your intention not to vote be made clear? --- It wouldn't be made clear, I guess. I just knew I wasn't voting. And later: And how were you to determine who was voting and who wasn't? ---They'd nod or lift their hand or something. I'm sorry, it was fairly relaxed. Yes. But you've just told me that, in the case of you yourself, if you intended to indicate an absence of dissent, you wouldn't necessarily have given any indication and if you intended not to vote, you would have done the same thing. So how were you supposed to make that determination? ---Well, I knew if I was voting or not. For the remainder of the board members? ---I'm sorry, I didn't think about that. 253 Mr Jaques accepted that his (and Mr Lewski's) silence when a resolution was put did not amount to a clear expression of their position. He accepted that the other Directors may not have understood they were not voting. Again, I note that the other Directors did not give evidence that they understood that Mr Lewski's and Mr Jaques' silence meant they were abstaining from voting. 254 The importance of each Director ensuring that his will was properly recorded is amplified by the fact that the resolution to pass the Amendments was important. The Five Principal Factors required that the Directors exercise a high level of care and caution. The Board was in receipt of uncertain legal advice as to its power to pass the Amendments and this too should have alerted Mr Lewski and Mr Jaques that this was an occasion to be careful to ensure that their will was properly recorded. 255 I infer that Dr Wooldridge followed his usual practice in putting the resolution. Mr Lewski's and Mr Jaques' silence in response should be viewed in light of their conduct as summarised at [228]. 256 I infer that they intended by their conduct to convey approval of the Amendments, and I consider that their conduct conveyed or amounted to approval of the Amendments. A reasonable observer would have concluded from their silence that they were doing so: As Heydon J explained in ASIC v Hellicar at [309] that: If the question whether a director's silence indicates a favourable vote depends on the director's intention, the circumstances permitted an inference that each of Mr Gillfillan and Mr Koffel intended to approve the announcement discussed. If, on the other hand, the question whether a director's silence indicates a favourable vote depends on what a reasonable observer would think, taking account of what each of Mr Gillfillan and Mr Koffel must have heard of the consideration and approval given to an announcement, that observer would have taken them to be voting for approval. And at [311]: Mr Gillfillan and Mr Koffel appreciated that a significant announcement was to be made on the controversial subject of whether funding could be assured. The onus was on them to be cautious when voting on the making of the announcement - either by seeking further information or by explicitly abstaining… (Emphasis added.)

6.5 The Madgwicks Advice 257 The evidence shows that the Madgwicks Advice was provided to each of the Directors (other than Mr Clarke) prior to the meeting.

6.5.1 The preamble to the advice 258 The preamble to the relevant section of the Madgwicks Advice set out that Madgwicks were instructed that the additional fees were necessary to address some "unintended anomalies". These instructions must have been provided by Mr Lewski. The advice stated: 2. Amendments to the Constitution (a) Your instructions and proposed amendments You have instructed us that APCHL has recognized an anomaly in the fee arrangements for the RE. The constitution includes provision for, amongst other things, the following fees to the RE: • A "exit" fee on the earlier of the termination of the Trust (2.5% of the gross asset value) or the sale of all the main assets of the Trust (2.5% of the net sale proceeds - which is defined to mean total proceeds of sale less direct selling costs). That is, in both cases, the fee is based on the total value or sale proceeds of the assets, rather than the net equity in those assets. • A "takeover" fee if there is a takeover of units under chapter 6. The fee is 2.5% of the gross price paid for the units. This fee would be based on the unit value which is the net equity and doesn't include the debt. You have instructed us that the unintended anomalies are as follows: • There is no express provision for a RE fee on a successful listing of the Trust, the effect of which would extend the life of the Trust beyond 2007 without involving either a termination of the Trust or sale of all its assets that would otherwise trigger an "exit" fee. • There is no express provision for a RE fee upon the RE being removed as RE either on a takeover of Units or otherwise by Unitholders. • The takeover fee is based on the net equity of the Trust rather than the gross asset value, and it is the gross asset value which is the basis of calculating both the "exit" fee in 24.5(c) and the management fee in 24.5(a). You have instructed us that APCHL wishes to amend the Trust's Constitution to clarify the anomalies by expressly providing for the following new RE fees: • providing for a listing fee where APCHL is listed on the Australian Stock Exchange to be 2.5% of the gross asset value of the Fund at the time immediately before listing. • providing for a removal fee where the RE is removed as Responsible Entity of the Trust (other than by reason of proven fraud, misconduct or by ASIC), which fee is to be 2.5% of the gross asset value of the Fund; and • amending the takeover fee to be based on the gross asset value of the Trust. 259 Unstated was the fact that the new Listing Fee was to be introduced at a time when APCHL was systematically moving towards listing. 260 In my opinion Mr Lewski's instruction that the Amendments were necessary to address "unintended anomalies" was somewhat misleading. That instruction painted the Constitution as it stood at 19 July as somehow deficient when the true position was that the Amendments amounted to a large increase in the consideration payable by the members for APCHL's services, and a significant impairment of members' rights. As Dr Wooldridge accepted, the members had the right to have the Trust proceed to listing if that was in their best interests without paying a fee. The members also had a right to remove APCHL as RE without suffering a fee if they decided that was appropriate. If the Trust listed and APCHL did not receive the Vesting Fee it was still entitled to the Exit Sale Fee and the Asset Sale Fee. Further, the reasoning that the absence of a Listing Fee was anomalous given the existence of a Vesting Fee could not apply to the new Removal Fee or the increased Takeover Fee.

6.5.2 The advice regarding the power to amend under the Act 261 Section 2 (c) of the advice provided: Corporations Law requirements for amendment Section 601GC(1)(b) of the Corporations Act provides that an amendment to the Constitution of a registered scheme must be approved by a resolution of the members unless the responsible entity reasonably considers that the change "will not adversely affect members' rights". Recent case law in respect of the section indicates that the proposed amendments to the Trust's Constitution under the draft Deed will not adversely affect Unitholders' rights for the purposes of section 601GC(1)(b). At most, the amendment may affect the value of the units held by the Unitholders. Case law indicates that an amendment that may change the value of the units does not, of itself, affect Unitholders' rights and provided that the amendment does not adversely affect the Unitholders' rights (which the cases refer to, as examples, being, right to distribution, voting rights and rights to receive information), the consent of the Unitholders is not required. Section 601GC(1)(b) of the Corporations Act makes it clear that the test is a subjective one, which requires APCHL as RE to determine whether it considers that the amendment will adversely affect the Unitholders' rights having regarding to the case law and commentary that distinguishes between "rights" and "value", APCHL will not be required to seek Unitholder approval. This provides support for APCHL to rely on its own assessment of the amendments, and without the need to seek any form of ruling from ASIC. (Citations omitted.) 262 This section of the advice provided that the Directors could reasonably take the view that the Amendments could be passed under s 601GC(1)(b), without approval by the members, because it was open to them to conclude that the Amendments would not adversely affect members' rights. As I explain, the next section qualified that advice.

6.5.3 The advice regarding the power to amend under the Constitution 263 Section 2(d) of the Madgwicks Advice dealt with the prohibition on amendments in favour of or resulting in any benefit to APCHL, provided in cl. 25.1 of the Constitution. It stated: (d) Constitution's requirements for amendments We also draw your attention to Clause 25.1(a) of the Constitution which allows the Responsible Entity to amend the powers, conditions or provisions of the Constitution provided, amongst other requirements that such amendment shall not be in favour of or result in any benefit to the Responsible Entity. However, clause 25.1(a) is expressed to be subject to clause 25.1(b), which allows the Constitution to be amended provided it complies with the requirements of the Corporations Act. Clauses 25.1(a) and (b) could potentially be interpreted in the following ways: (i) Clause 25.1(b) overrides (a) such that the RE can make any amendment under (b) that is permitted by the Act, without having to follow (a); or (ii) Clause 25.1(b) qualifies (a) such that the RE can only make an amendment that satisfies both (a) and (b). If the APCHL Board interprets clause 25.1 under (i) above and determines that the Corporations Act does not require Unitholder approval, then APCHL could proceed to make the amendments to the Constitution without Unitholder approval. (Emphasis added.) 264 I have set out cl. 25.1 at [84]. On its face, cl. 25.1(a) prohibited the Amendments, and the Madgwicks Advice did not clearly provide that the Board had power to pass them. Madgwicks advised the Directors, notwithstanding that none were legally qualified, to themselves construe the interrelationship of subcl. 25.1(a) and (b) of the Constitution. 265 The effect of the advice was that, if the Amendments were to be passed without obtaining the members' approval, the Directors were required: (a) to decide that the potentially available interpretation of cl. 25.1 - that cl. 25.1(b) overrode cl. 25.1(a) - was to be preferred to the interpretation that the Board had no power to pass the Amendments; and if they reached that decision; (b) to decide in accordance with s 601GC(1)(b) that they reasonably considered that the change would not adversely affect the members' rights. Importantly, the advice made it clear that on one construction, the Directors had no power to pass the Amendments. 266 The requirement for the Directors to themselves interpret cl. 25.1 is shown, first, when the advice provided "Clauses 25.1(a) and (b) could potentially be interpreted in the following ways", and set out two mutually exclusive interpretations as to the Board's power. 267 It is shown too when the advice stated: If the APCHL Board interprets clause 25.1 under (i) above and determines that the Corporations Act does not require Unitholder approval, then APCHL could proceed to make the amendments to the Constitution without Unitholder approval. (Emphasis added.) 268 The advice does not even inform which of the two competing interpretations Madgwicks preferred, instead inviting the Directors to choose one or the other. 269 Section 2(d) of the advice qualified the advice in section 2(c) regarding the power to amend under s 601GC(1)(b). Although not clearly expressed, it provided that the Board could only pass the Amendments without approval by the members if it interpreted cl. 25.1 as providing it with the power to do so. In effect the interpretation of cl. 25.1 was advised to be the gateway to the statutory power of amendment, which was treated as potentially qualified by the limitation in cl. 25.1(a). 270 At section 3(c) of the advice under the heading "Conclusion", Madgwicks confirmed that it was for the Directors to decide which interpretation they preferred. It stated: We have prepared the draft Supplemental Deed of Variation (No.7) of Constitution and a Minute (sic) of APCHL Board Minute approving the amendments contained in the Deed on the basis that APCHL does determine after considering the above issues that member approval is not required and will not be sought for these amendments. (Emphasis added.)

6.6 The Directors' consideration of the Madgwicks Advice and the Amendments 271 Each of the Directors (other than Mr Clarke) said that he gave consideration to the Madgwicks Advice prior to the passage of the Amendments. Dr Wooldridge said that prior to the meeting he annotated his copy of the advice so as to focus his thinking and to identify matters on which he would lead discussion. He said that each Director had a copy of the advice and that he led the Board discussion around it, which to the best of his recollection took approximately 10 to 15 minutes. He also said that during the meeting the Board was informed that 2.5% of the gross asset value of the Trust was about $21.6 million. He noted that information on his copy of the advice. I accept Dr Wooldridge's evidence in this regard. 272 None of the Directors said that they voiced any opposition to the passage of the Amendments. 273 Each of the Directors present gave an account of his consideration of the resolution to pass the Amendments and the Madgwicks Advice. I have set out my view (at [200]-[244]) that the probative value of each Director's evidence as to this meeting is minimal. Although I accept some of Dr Wooldridge's evidence I do not accept his testimony that the Board gave careful consideration to the Amendments and the Madgwicks Advice.

6.6.1 The failure of the minutes to record discussion of various important matters 274 At the 19 July meeting the Directors were required to consider a number of important matters in relation to the Amendments and the Madgwicks Advice. These included: (a) the conflict between APCHL's interest in receiving the additional fees and the members' interests in having APCHL's services for the existing fees; (b) the conflict between APCHL's interest in receiving the additional fees and its duty to give priority to the members' interests in the event of a conflict; (c) the fact that the additional fees were gratuitous in the sense that no, or no equivalent, countervailing benefit was to be provided to the members; (d) the nature of the additional fees in that: (i) the Listing Fee imposed a fee if the Trust was listed when the members were presently entitled to expect listing to occur without a fee; (ii) the Removal Fee imposed a fee for the exercise of the right to remove APCHL as RE, which right the members could presently exercise without a fee; (iii) the Takeover Fee substantially increased the fee payable on the acquisition of units over certain thresholds, which could be payable on multiple occasions; and (iv) the Amendments gave APCHL rights to take multiple fees of 2.5% of gross assets out of Scheme property; (e) which of the potentially available interpretations of the Board's power to amend under cl. 25.1 should be preferred; (f) the uncertain nature of the Madgwicks Advice in regard to the power to pass the Amendments under the Constitution; (g) the power to pass the Amendments under the Act, and whether the Amendments adversely affected members' rights; and (h) leaving aside any question of power, whether it was appropriate for APCHL to impose the additional fees. 275 It was impossible for the Board to properly consider these matters in the 10 to 15 minutes that Dr Wooldridge said that it took. 276 The minutes contain no record that any of these matters were discussed. I do not accept that Mr Jaques' minute taking was as careful as he contended before me, but I expect in the circumstances that if these matters were discussed the minutes would contain some note of it. While only Dr Wooldridge expressly said so, the upshot of the Directors' testimony that they discussed some of these matters must be that the minutes are deficient. Given the Five Principal Factors, Mr Jaques in preparing the minutes and the Directors in approving them, were obligated to exercise a high standard of care. The absence of any record of any discussion of these important matters tends to show that they were not, or at best scantly, discussed.

6.6.2 Consideration of the Listing Fee and the failure to properly consider APCHL's conflicts 277 The evidence given by the Directors points in the same direction. 278 Mr Lewski said that he always understood that the Constitution provided a fee payable on listing until he was informed in mid June 2006 that it did not. He said he saw the absence of a Listing Fee as anomalous because APCHL was entitled to the Vesting Fee. He described that the absence of a Listing Fee as an "inbuilt commercial disincentive" for APCHL (and I infer, him) to work towards listing given that the work both before and after listing was likely to be significant. He conceded that he saw the absence of a Listing Fee as a disincentive for APCHL and him in relation to joining in the proposal to list. On his evidence, had the Amendments to provide the Listing Fee not been made he would have been placed in a position of conflict as he would not have been able to make decisions in regard to listing without being accused of actively undermining the listing process. 279 This can be seen when, under cross examination by Mr Martindale, Senior Counsel for ASIC, Mr Lewski gave the following answers: You say, and this is in paragraph 74 of your affidavit, Mr Lewski, that you saw the absence of a listing fee as an inbuilt disincentive for the responsible entity to work towards listing with Prime Trust? ---Yes. By "inbuilt disincentive", do you mean it was a disincentive for you personally, Mr Lewski, to promote or join in a proposal for listing? ---I believe in both cases it applied. Did you consider, back in July 2006, that, without your active support, the responsible entity would not proceed to list by 31 December 2007? ---No, I would say that, given that irregularity that came to mind, it put me in the position of inevitable conflict that to me was bound at some point to mean a divergence between my position to carry on and that of the RE potentially. 280 Dr Wooldridge's evidence had a similar flavour. In evidence-in-chief he said that in considering the Madgwicks Advice he acted on the hypothesis that: The listing fee would not adversely affect unitholders' rights and would be appropriate as it would remove the incentive for APCHL's controllers to act, either overtly or covertly, in favour of vesting or listing. A skewed incentive, one way or another, would be potentially adverse to unitholders and could influence the hundreds of small decisions to be made by APCHL during the forthcoming year as to whether to list or to vest. 281 Under cross examination by Mr Strong, counsel for ASIC, Dr Wooldridge gave the following answers in relation to the "skewed incentives" to which he had referred: So the skewing, as you talk about, of the structure of these fees was something which could be potentially adverse to unitholders, that was the view you had at the time? ---It was. And the reason that it could be adverse to unitholders is because it could sway the responsible entity and those who controlled it away from acting in the best interests of the unitholders? ---Yes. How was it, in your view, that it could come about that the responsible entity, APCHL, would be so swayed? ---Practically or morally? Practically? ---There were a variety of mechanisms, there were a variety of consents required. Listing was a complex process, it could have been delayed in any number of ways. 282 Dr Wooldridge said that he was worried about the risk that Mr Lewski's interest in the Vesting Fee would cause him to favour that course over listing. Although not doing so readily, he conceded under cross examination that in analysing the conflict of interests, the interests of Mr Lewski in receiving the Vesting Fee could conflict with the interests of the members in proceeding to listing without a Listing Fee. However, he argued that the conflict of interests presented by the differences in the fees payable on vesting and listing was resolved by the introduction of the Listing Fee. He said that it was appropriate to allow the Listing Fee because it would mean that the fees payable to APCHL were the same regardless of whether the Trust listed or vested. 283 Mr Jaques said in evidence in chief: [35]…I recall the issue of amending the Constitution so that APCHL would be entitled to a 2.5% fee on the Prime Trust listing or removal. I recall thinking that such an amendment was in the interests of the unitholders of the Trust (of which I was one) for the following reasons: (i) In my opinion Lewski was the architect of, and the principal reason for, the (then) outstanding success of the Trust. I considered that Lewski's continuing participation was essential to the continuing success of the Trust. The Trust ultimately failed after Lewski was no longer in control of the Trust. (ii) I understood APCHL had an entitlement to receive a payment of 2.5% of the sale of the assets of the Trust or any individual asset of the Trust. As the value of the Trust was increasing significantly I considered that it was in the interests of the unitholders that APCHL should be paid a fee reflecting that entitlement at the time the Trust listed, as it was my understanding, this would discharge the Trust's obligations to pay APCHL its "2.5%" at the current value of the trust assets. I considered that a listing fee would draw a line under APCHL's entitlement at current values. If this fee was not discharged on listing, it seemed to me possible that after listing, an asset sale could generate fees for APCHL that were even larger. I understood that effect of the proposed amendment was that APCHL would not have an entitlement to more than one fee. (iii) I considered that APCHL's entitlement to 2.5% of the capital of the Trust on vesting was effectively Lewski's reward for his role in the establishment of the Trust. I also considered that if the Board were to try to deprive Lewski of that entitlement by listing the Trust again Lewski's preferences (if that were even possible) rather than allowing it to vest, Lewski might consider that the Board was engaging in sharp practice and his continued participation in the Trust could be in doubt. As indicated, I considered Lewski's continued participation as essential to success. 284 While explicit in his concern that if the Constitution was not amended to provide a Listing Fee Mr Lewski might leave the Trust, Mr Jaques was evasive in cross examination. At first he said that the Listing Fee was appropriate to maintain what he called a "level playing field", and then under cross examination by Mr Maiden for ASIC he gave the following answers: When you say that you were concerned to give Mr Lewski a "level playing field", what you mean is by increasing the fee payable on listing from nothing to a fee equal to the large amount that he would have been paid on vesting, you would have removed that factor from his consideration if the question of listing or vesting came up? ---That wasn't the way I saw it, but that's what you're putting. What else do you mean by levelling the playing field? ---I wanted it to be that Lewski stayed with the trust. The way the company was growing at the time was down to his management and his ideas and I wanted to make sure that he stayed and the trust had the benefit of those ideas and management moving forward, and I believed that this was an anomaly that needed to be corrected when it was put to us. 285 Mr Butler did not seek to justify the Listing Fee on the same basis. He said only that he always understood that APCHL was entitled to receive a Listing Fee. It is uncontentious that he was mistaken in this belief, and he accepted in cross examination that his mistaken belief was not a proper basis for the Amendments providing that fee. 286 It is not controversial that APCHL, and through it, Mr Lewski stood to receive substantial monies payable from Scheme property if the Listing Fee was allowed. Notwithstanding this, neither the minutes nor the Directors' evidence reveals any proper consideration of: (a) the conflict between APCHL's and Mr Lewski's interest in receiving the Listing Fee and the members' interests in proceeding to listing, if listing was in their interests, without the imposition of such a fee; and/or (b) the conflict between APCHL's and Mr Lewski's interest in receiving the Listing Fee and their duty to act in the members' best interests, which in the event of a conflict of interests included the obligation to give priority to the members' interests. 287 At the time APCHL was moving "prudently and systematically" towards listing. It must be that APCHL and the Directors considered that listing was in the members' best interests as that was the course that they chose. They did not argue otherwise. Given that it was in the members' best interests, APCHL and each of the Directors was duty bound to pursue listing without regard to their own personal interests. 288 In referring to "APCHL's controllers" Dr Wooldridge can only have been referring to Mr Lewski and his associates. The gist of his stated concern was that if the Amendments to provide the Listing Fee was not passed Mr Lewski might oppose listing either openly or in secret, even if listing was in the members' best interests. The essence of his evidence was that the introduction of the Listing Fee was appropriate and in the members' best interests because it would remove the incentive for Mr Lewski to influence APCHL in favour of vesting. He considered that the conflict of interests was removed if the fee was allowed. 289 In my view in referring to a "level playing field" Mr Jaques was referring to: (a) the playing field from Mr Lewski's viewpoint; and (b) the same size fee being payable to APCHL and Mr Lewski on listing or vesting. Similarly, Mr Jaques expressed doubt that it would be possible to list the Trust if Mr Lewski opposed listing. He considered that Mr Lewski was entitled to the "reward" of the Vesting Fee. He thought that if the Amendments were not allowed so as to provide the Listing Fee Mr Lewski might become unhappy and leave the Trust. 290 Mr Lewski described the issue differently but the obvious conflict between his interests and the members' interests was at the heart of the difficulty as he painted it. His statement that the Listing Fee was an "economic equivalent" of the existing Vesting Fee missed the point. While the two fees would be in the same quantum, the Listing Fee was a new fee payable from Scheme property upon the occurrence of an event which was already in planning, for which the existing Constitution provided no fee. 291 His assertion that the listing process would involve a large amount of work both prior to and after the listing which justified the Listing Fee was also not to the point. If the Directors decided that it was in the members' best interests to list the Trust (as they did) then that work was required to be performed. In any event the evidence does not support a conclusion that the level of work involved might justify a payment to Mr Lewski of a fee of between $11.25 million and $21.6 million. 292 Although it is of no great significance to my decision, I note that the difference in the fees payable to APCHL (and through it to Mr Lewski) between vesting and listing is not as stark as he sought to make out. Even if the Trust proceeded to listing and APCHL did not receive the Vesting Fee, it was still entitled to the Asset Sale Fee on the sale of any main asset of the Trust or the Exit Sale Fee on the sale of all the main assets and undertakings of the Trust. 293 The Directors' stated concerns about the "inbuilt commercial disincentive", the "skewed incentives" and the need for a "level playing field" revealed a lack of proper consideration of the existence of the conflict of interests. More importantly, the evidence revealed a complete failure to give priority to the members' interests in regard to the conflicts. 294 In deciding any question to do with listing that might arise, as a director of an RE Mr Lewski was required to put aside his personal interests and to act in the best interests of the members including in relation to any conflict of interest. If listing was in the members' interests he was duty bound not to oppose listing because of his interest in receiving the Vesting Fee. The Directors gave no consideration to the fact that it was a breach of their duty to act in the members' best interests to organise the provision of substantial additional fees from Trust funds to APCHL in its personal capacity, so as to incentivise Mr Lewski to act in the way that his pre-existing duties already required. 295 It must also be said that the concerns of Dr Wooldridge, and to a lesser extent Mr Jaques, that Mr Lewski might derail the listing process do not withstand close scrutiny. If the Amendments were not passed and Mr Lewski did not act in accordance with his legal obligations to put the members' interests first, he could not have successfully opposed listing. First, because of his interest in the Vesting Fee Mr Lewski would likely have been prohibited by s 195(1) from participating in or voting on any of the decisions that needed to be made in relation to listing. Second, the other Directors were in the majority. Assuming that listing remained in the members' interests the Directors were required to use their votes to ensure that listing proceeded over his objection. Third, if Mr Lewski acted improperly in opposing listing the other Directors had mechanisms available to them through ASIC and the Courts. 296 Mr Lewski's and Mr Jaques' silence at the meeting about their own conflict of interests, the absence of any minute recording a discussion of APCHL's conflicts, and the absence of cogent testimony by any of the Directors that APCHL's conflicts were properly considered, leads me to conclude that the Board did not consider the conflicts at all. If it did consider the conflict at all, in my view the Board merely "rubber stamped" the issue. 297 There is also no cogent evidence that any of the Directors considered whether by passing the Amendments, and in particular by allowing the Listing Fee, the Board was capitulating to the conflict rather than resolving it in the interests of the members. In my view the Board plainly gave in to the conflict. The Directors resolved it in favour of APCHL and Mr Lewski by deciding to allow APCHL and Mr Lewski the Listing Fee so as to incentivise Mr Lewski to stay with the Trust and work in support of listing.

6.6.3 Consideration of the Removal Fee 298 None of the Directors said much about the Board's consideration of the Removal Fee at the meeting. The minutes do not mention the proposed introduction of this fee at all. 299 In his evidence Mr Lewski pointed to two matters that he said he gave consideration to in relation to this fee. First, he said that he always thought the Constitution contained a Removal Fee and that its omission was an anomaly. Of course, his mistaken belief was not a proper basis for the Amendments providing APCHL and him a substantial new fee payable from Trust funds. That matter reveals no proper consideration of the issues around whether to allow the fee. 300 Second, he said that the Removal Fee was part of the package of poison pill measures to discourage opportunistic or hostile third parties that might seek to take advantage of the Trust's vulnerabilities. Dr Wooldridge also related the introduction of the Removal Fee to the poison pill measures and said that it and the Takeover Fee discouraged attempts to take advantage of the APCHL's vulnerabilities through "low-ball" offers for the units. He said that the Trust's vulnerabilities were amplified at the time because it was negotiating to buy property worth $200 million, and it could have been held to ransom in advancing towards listing. 301 Mr Butler argued that the introduction of the Removal Fee was in aid of stable management of the Trust and therefore in the members' interests. Mr Jaques' evidence had a similar flavour as he referred to Mr Lewski's importance to the success of the Trust. 302 Neither the minutes nor the Directors' evidence reveals any consideration of the conflict between APCHL's and Mr Lewski's interest in receiving the Removal Fee in the event APCHL was removed as RE, and the members' interests in being able to remove it without paying a fee should they so desire. I infer that there was no consideration of APCHL's conflict in this regard. 303 Further, I do not accept that there was a real threat of an opportunistic takeover attempt which might have led to APCHL's removal as RE. The only evidence of a threat to APCHL remaining as RE was the letter from Thompson Eslick described at [67]. There is no evidence that the unit register was even supplied as requested, and no evidence that any lowball offer was ever made. No Director said that any attempt to take over APCHL or remove it as RE by any method was made prior to or during the relevant period. Even if some threat can be shown to have existed the evidence does not support the conclusion that it was at a level that would justify the substantial new Removal Fee or the greatly increased Takeover Fee. 304 A further indication of the absence of any real consideration of the basis for the Removal Fee is the fact that it provided little protection for the members against low-ball takeover offers over and above that which already existed. If a low-ball offer was made under the 20% voting power threshold, the members obtained no protection from predatory share purchasers through the introduction of this fee. Further, the Constitution precluded APCHL from receiving a Removal Fee if it had received a Takeover Fee within the preceding 6 months. If an hostile company managed to acquire a large number of units through low-ball offers and APCHL was removed as RE, then APCHL was entitled to the Takeover Fee and no Removal Fee was payable. 305 Nor is there any cogent evidence that any Director gave consideration to the fact that the members' right to remove APCHL as RE was important and that the imposition of a substantial fee for its exercise significantly impaired that right. There are numerous sound reasons why members of a scheme might wish to remove an RE. For example, they might consider that they were being overcharged or might have received a better offer from another RE to manage the scheme. Absent the Amendments the members had the right to remove APCHL as RE by special resolution. Upon introduction of the Amendments the members were unable to remove it as RE without substantially reducing the Trust's funds and the Amendments would likely entrench APCHL as RE whether the members wanted that or not.

6.6.4 Consideration of the Takeover Fee 306 The Directors gave essentially the same reasons for the increased Takeover Fee as they did for the Removal Fee. Their consideration was similarly inadequate. Mr Lewski said, and Mr Jaques agreed, that the increased Takeover Fee addressed an anomaly in the fee structure and also acted to discourage a takeover. Dr Wooldridge and Mr Butler said that the increased Takeover Fee was a measure designed to stop takeovers made through low-ball or opportunistic offers. 307 I can readily accept that discouraging low-ball takeover offers was in the members' interests. But, given the illiquidity of the units a reasonable offer for control of the Trust was one of the few ways in which a member could crystallise his or her investment prior to listing or vesting. A reasonable offer to purchase the units was likely to be in the members' interests. As Dr Wooldridge and Mr Butler conceded, the increased Takeover Fee discouraged not only low-ball takeover offers but also reasonable offers. This would have been plain to the Directors had they properly considered the Amendments. 308 A similar lack of consideration can be seen in the fact that the increased Takeover Fee was payable more than once if an acquirer purchased units above the thresholds set on more than one occasion. Under cl. 24.5 the fee was payable to APCHL not upon an acquirer obtaining control of the Trust but at any time an acquirer purchased units that increased its voting power from: (a) 20% or below to more than 20%; or (b) a starting point above 20% to a final point of below 90%. If a party held 20% or more of the units then the acquisition of as few as 1% of the units would trigger a Takeover Fee. A later acquisition of as few as another 1% of the units would trigger it again.

6.6.5 Failure to consider the effects of the Amendments 309 It is axiomatic that a reasonable director would have been diligent to read and understand the effect of the Amendments before passing them. The evidence tends to show that the Directors did not do so. This may be seen in the fact that none of the Directors apparently understood: (a) that the Takeover Fee could be charged on multiple occasions. While this difficulty arose under the existing Constitution, the increased Takeover Fee meant that Trust funds could be seriously depleted if an acquirer purchased batches of shares above the threshold. The Directors' failure to apprehend this tends to show that no Director reviewed the Constitution properly before allowing the amendments; (b) that the increased Takeover Fee or the Removal Fee could be payable notwithstanding that the Listing Fee had previously been paid. Mr Jaques and Mr Butler both expressed the view (wrongly) that the Constitution only provided for payment of one of the fees. Mr Jaques said that one of the reasons he approved the Listing Fee was because it would finalise any obligation to pay a fee of 2.5% of the Trust's gross asset value to APCHL, doing so at then current values. This again tends to show that they did not review the Constitution properly before allowing the Amendments. Dr Wooldridge conceded that he did not look at the Constitution when approving the Amendments; (c) that the Removal Fee provided little protection for the members against low-ball offers for their units over and above that which already existed; (d) that the increased Takeover Fee would operate to discourage not just low-ball offers for the units but also reasonable offers; and (e) the significant impairment of the members' right to remove APCHL as RE which would result from introduction of the Removal Fee. 310 A reasonable director would also have been diligent to ensure that the effects of the Amendments were properly discussed by the Board and understood by the other Directors. In the present case, if this had occurred, then each of these serious misunderstandings would have been apparent to the other Directors. No Director gave evidence that he was aware that another Director suffered from any of these misunderstandings and I infer that the effects of the Amendments were not considered and understood by the Directors acting as a Board.

6.6.6 Consideration of the fact that the additional fees were gratuitous 311 The evidence does not reveal any consideration by the Directors of the fact that there was no increase in the scope of APCHL's obligations or services in return for the introduction of the substantial additional fees.

6.6.7 Consideration of the power to amend under the Constitution 312 On its face cl. 25.1(a) of the Constitution prohibited an amendment in favour of or resulting in any benefit to APCHL, such as the Amendments. The Madgwicks Advice provided that the Directors should choose between two mutually exclusive potentially available interpretations of the power under the Constitution to pass the Amendments. 313 The Madgwicks Advice was quite unusual in that it: (a) advised the unqualified directors of a corporate trustee to interpret the Trust's constitution rather than providing clear legal advice as to its correct construction; and (b) did not even advise which of the two mutually exclusive interpretations of cl. 25.1 that it proffered was to be preferred. Each of the Directors accepted that on one of the two interpretations proffered by Madgwicks the Board had no power to pass the Amendments. Contrary to the Directors' contentions, it is unarguable that the advice was equivocal as to whether the Board had power to pass the Amendments. As far as the advice went, the Board's power depended on which of the proffered interpretations the Directors chose. The advice did not make any recommendation. 314 In my view a reasonable director would not have accepted the Madgwicks Advice as advice that the Board had power to pass the Amendments conformably with the Act and the Constitution. The advice identified the possibility that the Constitution might not allow the Amendments, and did not clearly provide that the Constitution should not be interpreted that way. 315 The evidence of each of the Directors, other than Mr Lewski, as to his consideration of the Board's power under the Constitution to pass the Amendments was at a high level of generality and I do not accept that any of the Directors gave proper consideration to this question. Mr Butler's evidence is an instructive example. He said that because draft Deed of Variation No 7 was attached to the Madgwicks Advice, Madgwicks had implicitly advised that the Board had power to pass the Amendments. I do not treat his evidence as reliable, but if I were to accept his testimony, it reveals his completely inadequate consideration. The advice stated, in terms, that it was for him to construe the Constitution and on one of the proffered interpretations the Board had no power to make the Amendments. No reasonable director in his position would have taken the approach that he did. 316 Nor do I accept Mr Lewski's account of his consideration of the Board's power. He said that he did not see the interpretation as a legal question requiring a lawyer to answer it because the Madgwicks Advice indicated the task could be performed by the Board. I see it as quite implausible that he did not see construction of the Constitution as a legal question when: (a) he was the main driver in obtaining legal advice from Madgwicks on that question; (b) he discussed the legal position with Madgwicks; and (c) he accepted in cross examination that the Madgwicks Advice went to the lawful power of the Board to amend the Constitution. Even if I accept his evidence, his consideration reveals a real lack of care and prudence. 317 Given the Five Principal Factors, and particularly APCHL's manifest conflicts of interest, a reasonable director of a corporate trustee in all the circumstances would have been cautious. A reasonable director in each Director's position presented with the unusual and uncertain Madgwicks Advice would have been disquieted by Madgwicks' failure to make any clear recommendation as to the Board's power, even though that was the point of the advice. The alarm bells would have rung. Before passing the Amendments a reasonable director would have seen it as necessary, to obtain unequivocal advice from Madgwicks or another lawyer, seek a judicial direction, or at least would have sought the members' approval of the Amendments. 318 In all the circumstances, the approach of each of the Directors (except for Mr Clarke) in their consideration of the constitutional power to pass the Amendments was well short of careful, cautious or prudent.

6.6.8 Consideration of the power to amend under the Act 319 The Madgwicks Advice provided that, having satisfied cl. 25.1, the Directors needed also to comply with s 601GC(1)(b). It provided that case law in respect of s 601GC(1)(b) indicated that passage of the Amendments would not adversely affect members' rights (drawing on a distinction in the authorities between members' rights and members' interests). Both Mr Lewski and Dr Wooldridge said that the advice raised the same distinction between members' rights and interests as in the earlier Options Advice from Madgwicks which was before the 18 April 2006 meeting. In general terms I accept that it did. 320 It must though be remembered that the Madgwicks Advice provided that the Board's interpretation of cl. 25.1 was a gateway that it had to pass through before deciding whether the statutory power to amend was engaged. 321 As I have said, given the Five Principal Factors a reasonable director in each Director's position would have been cautious. Having been presented with unusual and equivocal legal advice on a central point of the Madgwicks Advice, a reasonable director would have been on enquiry. A reasonable director would not have accepted advice that he should interpret the Constitution and choose one of two proffered mutually exclusive interpretations, when one of the proffered interpretations meant that the Board had no power to pass the Amendments. A reasonable director would have sought unequivocal legal advice, a judicial direction, or at least sought the members' approval of the Amendments. 322 It is significant that none of the Directors gave evidence that the Board considered and discussed whether or not the members had a right to have the scheme managed according to the terms of the existing Constitution. I infer that they did not.

6.6.9 Consideration of whether the fees were gratuitous 323 The Madgwicks Advice went only to the Board's power to amend the Constitution, that is, whether the Amendments could be made, rather than whether they should be made or their propriety. 324 In my view the additional fees provided little, if any, benefit for the members and they were largely in the interests of APCHL and Mr Lewski. If there was any benefit for the members it was at the edges and was greatly outweighed by the size of the fees. The additional fees were gratuitous in the sense that no, or no equivalent, countervailing benefit was provided to the members and the evidence shows that none of the Directors gave any proper consideration to this question.

ISSUE A1: DID THE DIRECTORS RESOLVE ON 22 AUGUST 2006 THAT THE CONSOLIDATED CONSTITUTION INCORPORATING DEED OF VARIATION NO 7 BE LODGED WITH ASIC TO BECOME EFFECTIVE?

7.1 The Madgwicks Minutes and the Jaques Minutes 325 It is uncontentious that the Board met on 22 August 2006 and that all Directors attended. There are two sets of minutes for the meeting both of which are signed as correct by Dr Wooldridge as Chairman, and both of which are produced from the APCHL minute books. 326 The Madgwicks Minutes contain the Lodgement Resolution but the Jaques Minutes do not. The Directors disputed the accuracy of the Madgwicks Minutes and denied that the Lodgement Resolution was passed at the 22 August meeting. 327 On 18 August 2006, prior to the 22 August meeting, Mr Goldberg sent an email to Mr Lewski, which was forwarded to the other Directors ("the 18 August email"). This email set out Mr Goldberg's understanding of part of the business of the pending meeting and stated: I understand that you are meeting together this morning to finalise the Board papers for the Board meeting on 22 August. Following my meeting with Bill yesterday I confirm the following.

1. Supplementary PDS (Part 1) - Attached is the proposed Supplementary PDS to be approved by the Board. It deals with the following things that are additional to the Sup PDS dated 22 July 2006: (a) the appointment of Peter Clarke; (b) the updating of the fees table to include the listing fee and RE removal fee (which was implemented by the recent amendment to the Constitution see below); (c) the updating of the compliance arrangements for the Compliance Committee; and (d) the Management Agreement with APCH Administrators.
2. Management Agreement - Attached is the proposed Management Agreement between the RE and APCH Administrators. If approved by the Board, it can be executed on 22 August.
3. Constitution Amendment No. 7 - I confirm that the Supplemental Deed of Variation (No. 7) of the Constitution (copy attached) was approved at the last Board meeting and executed. It will take effect upon the date of its lodgement with ASIC. I propose that the Deed be dated 22 August and lodged with ASIC on that date together with a Consolidated Constitution incorporating the amendments made by the Supplemental Deed of Variation. This will then coincide with the issue of the new Supplementary PDS.
4. Compliance Consultancy Arrangements - I confirm that we have finalised a form of Compliance Committee Service Agreement between APCH Administrators and Rees Partners under which the Manager appoints Rees Partners to provide the services of Michael Davey and Paul Webb as Compliance Committee Members. Attached is a copy of that Agreement. There is also an agreement between APCH Administrators and Burke Bond Securities and Ian Bond to provide for the provision of Ian Bond's services as Compliance Officer and also as a member of the Compliance Committee. Attached is a copy of that Agreement. I understand that these Agreements will be signed by Rees Partners, Burke Bond and Ian Bond today. It acceptable they should also be acknowledged by the Board as an agreement entered into by the Manager. APCHL is not a party to these agreements. Please let me know if you have any queries in relation to the above documents. If all approved at the 22 August Board meeting, we will need to then complete the lodgement at ASIC together with an ASIC In-Use Notice for the Supplementary PDS. … (Emphasis added.) 328 The email confirms that as at 22 August, Deed of Variation No 7 remained undated. In substance, the 18 August email advised the Directors that the Amendments should be brought into effect taking the following approach: (a) the new Supplementary PDS advising members of the additional fees and other matters should be approved by the Board at the 22 August meeting and issued; (b) the undated Deed should be dated 22 August 2006; and (c) upon being dated 22 August 2006 the Deed should be lodged with ASIC that day, together with a Consolidated Constitution incorporating the Amendments made by the Deed. 329 It is common ground that the Jaques Minutes were typed up from longhand notes taken by Mr Jaques in the meeting. They purport to be a full record of the meeting and they record the following relevant items of business: (a) Under the heading "Supplementary Product Disclosure Statement" that "[t]he Board adopted the new supplementary PDS, effective from 22nd of August 2006." (b) Under the heading "Premises" that "[a] new entity, APCH Administrators has been formed and appointed as manager for the RE, it will remove certain liabilities from the Responsible Entity. This entity will employ Mahan Krishnan and will lease the new office premises. The RE is therefore quarantined against all risks other than licence issues. The new premises that we take over mid-September are at level 2, 613 St Kilda Road, Melbourne 3004." (c) Under the heading "Poison Pills" that "[t]he "Poison pills" are in place, but some will be removed prior to listing." (d) Under the heading "Compliance" that "We have completely reviewed and overhauled our compliance structure and appointed a new Compliance Committee as of 22 August 2006. Ian Bond is the Compliance Officer and a new member, Paul Webb has been appointed to the Committee. Bill Lewski is retiring as the Internal Compliance Officer with all matters in order." (e) Under the heading "New Product Disclosure (Part 1)" that "[t]he new PDS is finished now and will be given to ASIC for their consideration and approval." It is uncontentious that the Jaques Minutes record a discussion on each of the four items of business raised in the 18 August email, and there is no mention of any resolution to lodge the consolidated Constitution. 330 I am satisfied that Madgwicks pre-prepared the draft Madgwicks Minutes for the 22 August meeting. Ms Shang said that she was asked from time to time by Mr Goldberg to prepare draft minutes for forthcoming APCHL Board meetings. Both Ms Kovacs and Ms Shang identified the Madgwicks Minutes as having been prepared by Madgwicks. I also rely on indicia on the minutes including the font, the language of the resolutions and the presence of a unique Madgwicks reference number. This number is identical in form to reference numbers found on other documents prepared by Madgwicks and recognised by both Ms Shang and Ms Kovacs as being unique to Madgwicks' computer system. The subject matter of the resolutions coincides with the items of business specified in the 18 August email. Mr Goldberg's time charging records for 22 August 2006 indicate that he instructed Ms Shang to prepare an APCHL resolution that day and that he settled it. 331 I infer that the Madgwicks Minutes were prepared under Mr Goldberg's supervision on the morning of the 22 August meeting to deal with four matters which he considered should be dealt with at that meeting. 332 The Madgwicks Minutes were not drafted to be a full record of the pending meeting and they set out only the four items of business raised in the 18 August email. They state:
   1. MANAGEMENT AGREEMENT William Lewski tabled and the Board considered and approved a Management Agreement to be entered into by the Responsible Entity and APCH Administrators Pty Ltd ("Manager") for the provision of management and administration services for the Trust.
   2. COMPLIANCE CONSULTANCY AGREEMENTS William Lewski tabled and the Board acknowledged that the Manager would be entering a Compliance Consultancy Service Agreement with Burke Bond Securities Limited and Ian Bond and a Compliance Committee Service Agreement with Rees Partners Pty Ltd for the provision of compliance consultancy services for the Trust.[NB no resolution]
   3. DEED OF VARIATION (NO. 7) At the last Board meeting, the Directors approved Deed of Variation (No. 7) to the Constitution which had not yet taken effect as it had not been lodged with ASIC because a Supplementary PDS had not yet been prepared. As a Supplementary PDS has now been prepared, the Directors resolved that the Consolidated Constitution incorporating Deed of Variation (No. 7) be lodged with ASIC to become effective.
   4. SUPPLEMENTARY PDS In light of the Management Agreement, new compliance arrangements, and Constitution variation, William Lewski tabled the Prime Retirement and Aged Care Property Trust - Supplementary Product Disclosure Statement dated 22 August 2006 for considered by the Board. Accordingly, the Board RESOLVED to adopt and issue the Supplementary Product Disclosure Statement dated 22 August 2006 as tabled at the meeting and ASIC Form FS53 (PDS in-use notice). The Board also RESOLVED that Madgwicks be instructed to lodged ASIC Form FS53 (PDS in-use notice) which is to be signed by Mr Lewski." Signed as a correct record: The Hon Dr Michael Wooldridge - Chairman (Emphasis added.)

7.2 The application of s 251A to the minutes 333 Section 251A creates a statutory presumption in relation to some company minutes. It relevantly provides: (1) A company must keep minute books in which it records within one month: … (b) proceedings and resolutions of directors' meetings (including meetings of a committee of directors); … (2) The company must ensure that minutes of a meeting are signed within a reasonable time after the meeting by 1 of the following: (a) the chair of the meeting; (b) the chair of the next meeting. … (5) A company must keep its minute books at: (a) its registered office; or (b) its principal place of business in this jurisdiction; or (c) another place in this jurisdiction approved by ASIC. … (6) A minute that is so recorded and signed is evidence of the proceeding, resolution or declaration to which it relates, unless the contrary is proved. (Emphasis added.) 334 APCHL's minute books were kept at its registered office at Level 2, 613 St Kilda Rd, Melbourne and the minutes in evidence were produced from it. The evidence shows that the Madgwicks Minutes were: (a) signed as correct by Dr Wooldridge immediately after the meeting; (b) left at Madgwicks' offices (where the Board meeting was held); and (c) mailed back to APCHL by Madgwicks under cover of a letter dated 25 August 2006 to be placed into APCHL's records. I infer that the minutes were placed into APCHL's minute book within about one week. 335 ASIC contended, and I accept, that in relying on the Madgwicks Minutes it was entitled to the benefit of the statutory presumption in s 251A(6). The Directors did not argue to the contrary. 336 Although I have had not had the benefit of submissions on the application of s 251A(6) to the Jaques Minutes, in my view the statutory presumption does not apply to them. They were not approved until the 29 September 2006 meeting. I infer that they were signed at that time by Dr Wooldridge and then placed into the minute book. By that date more than one month had elapsed from the 22 August meeting. 337 I respectfully agree with the approach taken by Gzell J in ASIC v Macdonald No 11 at [54]-[71]. His Honour approved the remarks of Wilcox J in Claremont Petroleum NL v Cummings and Another (1992) 110 ALR 239 at 258 where, in dealing with a predecessor provision, his Honour observed: The condition that a minute be entered within one month, if it is to be regarded as prima facie evidence of the proceedings at a meeting, should be strictly applied. A minute prepared and signed soon after a meeting is likely to be more reliable than one prepared long afterwards when memories had dimmed and, perhaps, other interests intruded. Wilcox J's remarks were also endorsed by Perry J in Galladin Pty Ltd v Aimnorth Pty Ltd (in liq) and Others (1993) 11 ACSR 23 at 44. 338 As Gzell J explained at [71]: As a matter of construction, only documents recorded in a minute book within one month of a meeting are accorded the evidentiary value specified in Section 251A(6). This is apparent from the use of the words "so recorded and signed" in the sub-section. They refer back to the earlier provisions of the section. A minute is "so signed" if it is signed in accordance with Section 251A(2), Section 251A(3) or Section 251A(4) as they are the only provisions within the section that require a signature. Likewise, a minute is "so recorded" if it is recorded in a minute book within a month of the meeting as provided in Section 251A(1) for that is the only provision within the section that requires recording. 339 Gzell J's approach to s 251A was not reconsidered in the appeals to the New South Wales Court of Appeal or to the High Court: see Morley v ASIC; ASIC v Hellicar at [67]-[68].

7.3 The Directors' contentions 340 By operation of s 251A(6) the Madgwicks Minutes are evidence that the Lodgement Resolution was passed, unless the contrary is proved. That is the starting point for my consideration of the evidence. Against this I must consider the evidence which conflicts with or casts doubt on accuracy of the Madgwicks Minutes. 341 The Directors contended that, when considered against the contrary evidence, ASIC has not established to the Briginshaw standard that the Madgwicks Minutes are correct and the Jaques Minutes are not. They submitted that ASIC only established that there is evidence from which conflicting inferences can be drawn both of equal degrees of probability: Australian Securities and Investments Commission v Fortesque Metals Group Ltd and Another (No 5) (2009) 264 ALR 201 at [82]. 342 As was stated by the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 at 5, per Dixon, Williams, Webb, Fullagar and Kitto JJ, where a plaintiff's case rests on inferences from primary facts, it is not enough for the circumstances to give rise to conflicting inferences of equal degrees of probability. Their Honours said: Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence while the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort where direct proof is not available it is enough in the circumstances appearing in the evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture… But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise. (Citations omitted.) See also Luxton v Vines (1952) 85 CLR 352, at 358 per Dixon, Fullagar and Kitto JJ; Nominal Defendant v Owens (1978) 22 ALR 128 at 132-133 per Muirhead J (with whom St John J agreed); Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 141, per Tadgell JA and cases cited there; Australian Competition and Consumer Commission v Amcor Printing Papers Group Ltd and Others (2000) 169 ALR 344 at [79] per Sackville J; and more recently in Australian Securities and Investments Commission v Healey and Others (2011) 196 FCR 291 ("ASIC v Healey") at [103] per Middleton J. 343 As the Full Court observed in Weeden v Rambaldi (2013) 92 ACSR 661 at [95] per Gray, Middleton and Dodds-Streeton JJ: In our opinion, Hellicar does not preclude, but rather requires, in a case such as the present, the qualitative weighing up of all the evidence, including that in conflict with the minutes... the High Court reaffirmed and amplified the established proposition that prima facie evidence will, unless rebutted by other evidence, be determinative, and is not on a footing with mere inference drawn from circumstance. Hellicar does not, however, in a case where there is additional conflicting evidence, require the attribution of greater weight to evidence merely because it is of a prima facie character. I respectfully agree. 344 I have not attributed greater weight to the Madgwicks Minutes as a result of s 251A(6). I have approached the task of qualitatively weighing the evidence on the basis that, while the Jaques Minutes do not attract the operation of s 251A(6), they are a formal record of the meeting made close to the time of its occurrence, approved at the next Board meeting, and admitted into evidence as a business record. As a business record they are evidence of the truth of what took place at the 22 August meeting, and they do not record the Lodgement Resolution. 345 In contending that the Madgwicks Minutes are not an accurate record of the meeting and that the Lodgement Resolution was not passed the Directors relied on: (a) alleged insufficiencies in the evidence as to Dr Wooldridge's usual practice and other matters; (b) the Jaques Minutes themselves as the more reliable record; (c) their memory as to what occurred at the 22 August meeting; (d) inferences to be drawn from differences between the two sets of minutes; and (e) inferences to be drawn from inaccuracies in the Madgwicks Minutes; I will now deal with these contentions.

7.3.1 Dr Wooldridge's usual practice with regard to pre-prepared minutes 346 Dr Wooldridge's evidence was that where the Board was given draft minutes for a meeting pre-prepared by Madgwicks, his practice was to put the resolutions contained in the draft minutes to the Board. If the Board passed the resolutions he would sign the minutes as correct on the spot, rather than waiting for them to be approved by the Board at the next meeting as with minutes taken at a meeting. He said that his predecessor as Chairman followed the same process. His evidence was that he would not knowingly sign pre-prepared minutes as correct unless the resolutions therein were passed. I accept his evidence. 347 Mr Bick, Senior Counsel for Mr Lewski, contended that Dr Wooldridge's evidence as to his usual practice had little probative value in regard to whether the Madgwicks Minutes are accurate in recording that the Lodgement Resolution was in fact passed by the Board. Senior Counsel took me to authorities which, in general terms, indicated that evidence of a "usual practice" should be treated with caution. 348 In Armstrong v Commonwealth Bank of Australia [1999] NSWSC 588 at [17] Hamilton J explained that while every day experience and reasoning indicate that acts done as a habit or practice tend to show the doing of the act on a specific occasion, evidence as to a practice or custom which is not undertaken with sufficient regularity may be rejected. That is, in a given instance the court may conclude that the evidence does not make it probable that the practice would be carried out in every or even most instances. Similarly, in Connor v Blacktown District Hospital [1971] 1 NSWLR 713 at 721 Asprey JA, with Mason JA agreeing at 722, observed that the Court may not be persuaded by evidence that an act is habitually done if the habit is not sufficiently regular or uniform, involving a sufficient number of occasions over a sufficient period. Young J said in Garcia v National Australia Bank Ltd (1993) 5 BPR 11,966 that he saw evidence as to usual practice as unreliable because a person may depart from their usual practice for a multitude of reasons and then forget that they did so. 349 Mr Bick argued that the 22 August meeting was the first occasion on which there were two sets of minutes for an APCHL meeting that Dr Wooldridge had chaired. It was only his third meeting as Chairman and the two earlier meetings did not involve pre-prepared minutes. He argued that Dr Wooldridge's evidence as to his usual practice therefore has little probative value because it did not relate to similar acts, occurring on a sufficient number of occasions over a sufficient period of time, and because his practice did not predate the 22 August meeting. 350 Although I accept that Dr Wooldridge's evidence about his usual practice must be treated with some caution, I have accorded it weight because: (a) in my view Dr Wooldridge gave credible evidence as to his practice and he said that he would not have knowingly signed the minutes as correct unless the resolutions therein were passed; (b) he understood the importance of the Madgwicks Minutes to ASIC's case against him and his evidence as to his usual practice was against his own interests; (c) Dr Wooldridge's evidence as to his usual practice was confirmed by Mr Lewski's evidence that he saw Dr Wooldridge sign the Madgwicks Minutes at the end of the meeting. I expect Mr Lewski would have objected if Dr Wooldridge signed minutes which recorded a resolution that had not been passed; (d) Mr Lewski's evidence was that he saw the signed Madgwicks Minutes when they were mailed to APCHL by Madgwicks on or about 25 August, and he clearly understood that they were to be placed into the minute book. I expect Mr Lewski would have objected to these minutes being placed into the minute book if they were inaccurate or if Dr Wooldridge had departed from accepted practice in signing them; (e) Dr Wooldridge's usual practice had a practical utility. Unlike minutes prepared from notes taken at a meeting and then typed up, the minutes pre-prepared by Madgwicks and put to the meeting had already been considered by the Directors in their final form and did not require to be tabled again so as to be corrected; (f) Dr Wooldridge's evidence as to the practice with the pre-prepared minutes did not just relate to his own practice. He was a director before he was appointed Chairman and his evidence is that the former Chairman followed the same practice. He joined the Board on 18 April 2006, and at his first meeting pre-prepared minutes were approved and signed as correct by the former Chairman. The same occurred at the next meeting on 16 May 2006. I infer that on each occasion they were used, the pre-prepared minutes were signed as correct at the meeting. After he became Chairman, on 22 August 2006, pre-prepared minutes were again used; and (g) I do not accept that in reaching a view as to the probative value of Dr Wooldridge's evidence, I should only consider his practice prior to 22 August. The evidence indicates that the practice in question was in place before Dr Wooldridge started as Chairman and that he continued it, as can be seen in the minutes of the 3 August 2007 meeting. 351 I am buttressed in my view by the fact that, if Dr Wooldridge did not follow his usual practice, then no plausible explanation was offered as to how his signature came to be on the Madgwicks Minutes and how those minutes came to be in the minute book. The signed minutes were returned to APCHL by Madgwicks on 25 August. They could not have been signed by Dr Wooldridge as at that date unless they were signed at or immediately after the 22 August meeting.

7.3.2 The Directors' evidence that the Lodgement Resolution was not passed 352 In arguing that the Lodgement Resolution was not passed, the Directors sought to rely on their memories as to the meeting, including that: (a) Mr Lewski said that the business of the 22 August meeting was as set out in the Jaques Minutes; (b) Dr Wooldridge was unable to recollect whether or not he put each of the resolutions contained in the Madgwicks Minutes to the Board; (c) Dr Wooldridge said that he was irritated at the 22 August meeting that Deed of Variation No 7 had not already been lodged with ASIC; (d) none of the directors gave evidence of having any memory of the Lodgement Resolution being passed; (e) Mr Jaques said that he would have noted the Lodgement Resolution in the Jaques Minutes had it occurred; (f) Mr Butler said that the Jaques Minutes recorded the topics he remembered being discussed; and (g) Mr Clarke said that he did not remember any discussion of the Amendments, and only recalled that it was discussed that the Supplementary PDS had been completed and was ready to be lodged. 353 As I have said, it is not surprising given the passage of time that none of the Directors had a good memory of the 22 August 2006 meeting. Further to this, a feature of their submissions was that lodgement of the Amendments was just an administrative or procedural step. I infer from this that they had no good reason to recall the Lodgement Resolution. As I explain below, the evidence of the Directors that was adduced to show that the Lodgement Resolution was not passed had little or no probative value.

Mr Lewski 354 Mr Lewski deposed that he had no recollection of the Lodgement Resolution being put to the 22 August meeting and he said that the Jaques Minutes recorded the substance of the meeting. He showed a poor memory of the meeting and I do not accept that he has a good memory of whether the Lodgement Resolution was passed or not. For example, he displayed little recollection of the passage of three of the four matters dealt with in the Madgwicks Minutes, even though they are common to both sets of minutes. I see his evidence as unreliable. 355 He said that he saw Dr Wooldridge sign the Madgwicks Minutes as correct after the meeting, and that the signed minutes were left at Madgwicks' reception to be given to Mr Goldberg. He said he then received a letter from Madgwicks of 25 August 2006. It enclosed an original and a copy of the signed Madgwicks Minutes of the 22 August meeting. In fact, they could not have been the Jaques Minutes because Mr Jaques did not have a practice of giving his draft minutes to Madgwicks and his minutes could not at that point have been signed. Mr Lewski said that his assistant placed the Madgwicks Minutes into the minute book. Relying, if necessary, on the presumption of regularity I infer that Mr Lewski's assistant placed the minutes into the minute book within a few days of the 25 August letter. 356 Mr Lewski's evidence points to the implausibility of his contention that the Lodgement Resolution was not passed. It is implausible that Mr Lewski neither objected to: (a) the Madgwicks Minutes being signed as correct by Dr Wooldridge; nor (b) the signed minutes being placed into the minute book a few days later; if he believed that the minutes were inaccurate in recording the passage of the Lodgement Resolution. I infer that he thought the Madgwicks Minutes were accurate. 357 Mr Lewski did not directly state that the Lodgement Resolution was not passed, only that he had no recollection of it. His evidence on the question has little or no probative value.

Mr Butler 358 In evidence in chief Mr Butler said that he believed the Jaques Minutes to be the "actual record of what happened at the [22 August] meeting because it records the topics I remember being discussed, although I don't remember the detail of the discussions." But, his memory of the meeting was very limited. He said that he did his best to include what he could recall of the 22 August meeting in his affidavit and his poor recall was shown by the general and high level account that he gave. His poor memory of what was discussed at the meeting was also apparent in cross-examination. He conceded that because it was so long ago he had difficulty remembering the meeting unassisted by the minutes. 359 I also see it as implausible that he remembers the Jaques Minutes as an accurate record of the 22 August meeting when his answers in the ASIC examination reveal that he had no recall of the 19 July meeting, the Madgwicks Advice and Deed of Variation No 7 which involved what he described as "fairly major" issues. I consider that his evidence about the meeting is little more than a reconstruction from the Jaques Minutes. 360 He too did not directly state that the Lodgement Resolution was not passed, only that he did not recall it. His evidence is of little probative value on this question.

Mr Jaques 361 Mr Jaques conceded that he did not have an independent recollection of the 22 August meeting. In evidence in chief he said only that (having been given a copy of the Jaques Minutes): I recognise this as a document prepared by me. By reference to these minutes I say that, as the meeting of 22 August 2006, there was no resolution relating to the lodgement of the amended constitution. I do not have an independent recollection of the meeting but, if there had been such a resolution, I would have noted it in the minutes." 362 This evidence was not given from any memory. It is merely a conclusion that his minutes of the 22 August meeting captured every aspect of that meeting. I do not accept this conclusion as reliable because, as I explain, he conceded that he would not always record matters which had been set out in the pre-prepared minutes and because his minute-taking was not as careful and complete as he maintained. 363 Mr Jaques also said: I have been shown another set of minutes, which purport to be of the meeting of [the] Board on 22 August 2006. I have no recollection of seeing these minutes before I saw them as part of this litigation. I do not recall there being two sets of minutes for this meeting and that is a matter I would recall if it occurred. 364 Again, this evidence was not given from any memory he had of the 22 August meeting. In effect his evidence was only that having two sets of minutes for a meeting was a sufficiently unusual occurrence that, had it occurred, he would have remembered. That is not so. The evidence shows that the use of pre-prepared minutes of resolutions was relatively commonplace. Minutes of resolutions were pre-prepared by Madgwicks and passed by the Board at meetings held on 18 April 2006, 16 May 2006, 12 July 2006, 26 June 2007, 27 July 2007, 3 August 2007 and 27 June 2008. 365 On a number of these occasions the pre-prepared resolutions were passed at a meeting at which Mr Jaques or another minute taker also took notes and prepared minutes. As a result, the existence of one set of pre-prepared minutes that set out formal resolutions and another set of minutes taken at the meeting was not particularly unusual. Examples of occasions, other than the 22 August 2006 meeting itself, where there are one set of minutes taken at the meeting and another set which were pre-prepared to record formal resolutions include the minutes of 18 April 2006, 16 May 2006, and 3 August 2007. 366 On a generous view for him, Mr Jaques' evidence showed his poor memory as to the practices of the Board. I do not see it that way. I see this evidence on a central issue in the proceeding as an attempt to craft his evidence so as persuade me that the Lodgement Resolution was not passed. It reflects poorly on his credibility as a witness. His evidence in regard to whether the Lodgement Resolution was passed has little or no probative value.

Dr Wooldridge 367 Dr Wooldridge could not remember whether or not the Lodgement Resolution was passed. He said that he could not remember putting the resolutions contained in the Madgwicks Minutes to the Board but was concerned not to be taken as saying that he did not do so. Importantly, he said that he would not knowingly have signed pre-prepared minutes as correct unless the resolutions were passed. He said that he was not 100% sure that he signed the minutes at the 22 August meeting but, as I note at [350]-[351], I am satisfied that he did. 368 I do not see Dr Wooldridge's evidence as contrary to the accuracy of the Madgwicks Minutes. His inability to remember a straight-forward resolution passed at a meeting almost seven years earlier is unsurprising. His evidence is of little probative value in relation to whether the Lodgement Resolution was passed.

Mr Clarke 369 Mr Clarke's memory of the 22 August 2006 meeting was particularly poor and quite unreliable. Although it was his first meeting as a Director he was unable to provide a good account of its business. He could not even remember the Board discussing the three items of business which are common to both sets of minutes. 370 The unreliability of his evidence was confirmed by other aspects of his testimony. It is uncontentious that the Board papers for the meeting were emailed to Mr Clarke at 9.28 am on 21 August. He said that he did not have an opportunity to read the papers before the Board meeting at midday the following day. In evidence in chief he said that he was at the Trust's offices in Brighton on the morning of 21 August and did not have access to his emails. Following being at the Trust's offices he said: I went to the city and prepared for a meeting of the Melbourne City Council which commenced at 5.00 pm that evening. I was a councillor of the Melbourne City Council at that time and further, I was co-chairman of the Docklands Co-ordination Committee. The principal focus of the Council meeting at 5.00 pm that day related to the work of the Docklands Co-ordination Committee. After the meeting I had dinner with my Council colleagues…. 371 On his evidence it was unlikely that he got home before 10 pm that night, so he did not have a chance to read the Board papers. He said too that his practice was not to read lengthy documents such as the 115 page Board papers on a computer screen, and he had no capacity to print off the papers at home or at his office in the CBD. He doubted that he read the papers at all before the Board meeting at midday on 22 August. 372 I see Mr Clarke's evidence that he had no capacity to print the Board papers at his home or his office in the CBD as implausible. He was a successful planning consultant with a city office at the time and it is hard to conceive that his business could operate without the capacity to print such papers. He admitted that in preparing for this case he found the papers for the 22 August meeting in his records which indicates that he printed them at some stage. I see his evidence that he had not read the Board papers as just an attempt to distance himself from the Board's consideration of the Lodgement Resolution. 373 There were also serious shortcomings in his evidence about his attendance at the Council meeting on the evening of 21 August, which was offered as an explanation for his lack of preparation for the Board meeting. He gave confident testimony as to his central involvement as a councillor in a particular item of business at the meeting and his attending a dinner afterwards with other councillors. In cross examination, confronted by Council minutes that said he was an apology for the meeting, he accepted that he had not attended the meeting at all. 374 Up to that point, on a generous view for Mr Clarke, his evidence showed a poor recall of the events of that period and a misplaced confidence in his memory. But, Mr Clarke then tried to suggest that although he did not attend the meeting itself he may nevertheless have been at the Council offices that evening. He suggested that he may not have attended the meeting because he wanted to avoid being "railroaded" into agreeing to certain matters. I see this as merely speculation in response to the difficulty he found himself in when being cross-examined. It reflected badly on his credibility. 375 Mr Clarke did not give evidence that the Lodgement Resolution was not passed. He merely tried to throw doubt on the possibility that there could be two sets of minutes of the same meeting. He said: I do not believe that I have ever been involved in a meeting where two different sets of minutes have been adopted as a record of the same meeting. I also do not believe that I have ever been at a meeting where minutes of the meeting have been prepared in advance and adopted at the meeting. I am confident that if that had occurred on 22 August 2006 I would remember it… He was incorrect in saying so. The evidence shows that he attended the 3 August 2007 meeting for which there are two sets of minutes. 376 Mr Clarke's evidence is of no probative value as to whether the Lodgement Resolution was passed.

7.3.3 The comparison of the two minutes 377 The Directors argued that the Madgwicks Minutes: (a) were not prepared by a person who attended the meeting; (b) do not purport to be a complete record of what occurred at the meeting; (c) were prepared prior to the meeting; (d) were prepared by lawyers apparently to meet some compliance requirement; (e) contain a number of inaccuracies; (f) were not tabled and approved at the next Board meeting; and (g) are inconsistent with the Jaques Minutes, prepared by an attendee at the meeting. 378 They sought to unfavourably compare them to the Jaques Minutes which they argued: (a) were prepared by a person who attended the meeting; (b) were prepared shortly following the meeting; (c) were intended to be the Board's record of its deliberations; (d) recorded all of the matters identified in the Madgwicks Minutes save for the Lodgement Resolution; (e) were approved as a correct record at the meeting; and (f) were signed by Dr Wooldridge as correct following their approval. 379 I do not quarrel with the Directors' recitation of these facts but I do not accept that they give rise to conflicting inferences of equal degrees of probability in relation to the two sets of minutes. 380 First, the Madgwicks Minutes were typed draft minutes pre-prepared by APCHL's lawyers to record some formal resolutions and were signed as correct by the Chairman immediately after being considered by the Board after which they were placed in the minute book. I do not see that as making them less likely to be accurate than the Jaques Minutes as the Directors contended. 381 Second, Mr Jaques conceded that when pre-prepared minutes were used and a resolution in those minutes was passed it was unnecessary for him to include it in the minutes he prepared. In cross-examination Mr Jaques made the following concession in an exchange with ASIC's counsel: Had there been a minute containing a list of formal resolutions that the board was required to pass, prepared and available for the meeting at the time the meeting occurred, and had those resolutions been put to the meeting and approved so that that pre-prepared meeting was an accurate statement of the resolutions that were passed in that way, there would have been no need for you to include them in your minute, would there? ---I see your point. You agree with the proposition? ---Yes. 382 Other evidence shows that in preparing the minutes Mr Jaques would sometimes include reference to a pre-prepared minute of a resolution and other times he would not. For example he included a reference to a pre-prepared minute in the 18 April 2006 minutes, while in the 16 May 2006 minutes he did not record the important pre-prepared resolution to issue 16 million options. 383 Third, the evidence indicates that minutes taken by Mr Jaques were not as complete and without error as the Directors sought to argue. The possibility that Mr Jaques may have inadvertently omitted to note the Lodgement Resolution must be accepted. For example, the two sets of minutes for the 16 May 2006 meeting show that Mr Jaques did not record in his minutes every resolution contained in a pre-prepared minute which was passed at the meeting. The minutes of the 19 July meeting that he prepared do not record some important matters which the Directors said were before the meeting, amongst other things: (a) the amendment to introduce the Removal Fee; (b) the Madgwicks Advice tabled and discussed at the meeting; (c) the discussion as to whether the Amendments adversely affected members' interests which the Directors said took place; and (d) Deed of Variation No 7. The failure to record these matters also indicates that the other Directors were not careful to correct his mistakes when approving the minutes. 384 In my view the Directors' contention that the Madgwicks Minutes are inaccurate is based, in part, on a false assumption that the two sets of minutes cannot be read together. In my view they can be. The two minutes complement each other because the Madgwicks Minutes record a resolution not recorded in the Jaques Minutes, most likely because Mr Jaques did not see it as necessary (or alternatively through inadvertence). The better approach is that the two minutes be read together as a complete record of what occurred on 22 August 2006. Had the Jaques Minutes contained a resolution not to lodge the Amendments then the two sets of minutes would be mutually exclusive but that is not the case. 385 Fourth, the fact that the Madgwicks Minutes were pre-prepared and contained some errors does not necessarily imply that the Lodgement Resolution was not passed. Somewhat similar circumstances arose for consideration in ASIC v Hellicar. The minutes in that case were prepared before the meeting and they contained various inaccuracies in the form of both omissions and mistakes. The defendants argued that the inaccuracies and the fact that the minutes were prepared prior to the meeting cast real doubt on their probative value. The High Court rejected this approach. 386 At [118]-[119] the plurality explained: Although the Court of Appeal regarded the "reliability" of the minutes of the February meeting as "very much open to question", the fact that some parts of the minutes were inaccurate does not necessarily imply that other parts of the minutes (in particular the minute that recorded the tabling and approval of a draft ASX announcement) were inaccurate. And similarly, the fact that the minutes were drafted before the meeting does not necessarily imply that they did not accurately record what happened at the meeting. I respectfully agree with this approach. 387 In ASIC v Hellicar the relevant minutes were approved at the next Board meeting whereas the Madgwicks Minutes were not but I do not see this as of great significance. Dr Wooldridge's usual practice in signing such pre-prepared minutes at the meeting meant that a further approval process was not strictly necessary. The fact that Mr Lewski did not object to the Madgwicks Minutes being signed as correct, nor to them being placed into the minute book is also evidence that they did not require further approval. 388 Fifth, the Directors sought to rely on the fact that the six preceding constitutional amendments made by APCHL had not involved a resolution to lodge with ASIC and instead were lodged administratively. However the evidence shows that on this occasion APCHL's lawyers drafted the Lodgement Resolution for the Board to consider. The question is whether I am reasonably satisfied that it was passed. The fact that APCHL had previously lodged amendments by a different method is of little significance.

7.4 The surrounding circumstances 389 Contrary to the Directors' contentions, I do not consider that the circumstances give rise to conflicting inferences of equal degrees of probability. In my view the surrounding circumstances and other matters tend to confirm the accuracy of the Madgwicks Minutes in recording that the Lodgement Resolution was passed. 390 First, as I explain, Deed of Variation No 7 was deliberately left undated and the Board did not intend it to come into effect on and from 19 July. It was necessary for APCHL to wait until after the 22 August meeting before lodging the Amendments. In those circumstances the Lodgement Resolution was appropriate to direct completion of the Deed and lodgement of the consolidated Constitution. 391 In my view the approach that Mr Goldberg advised in his 18 August email was the proper course. The Constitution was required to be amended because it had to specify the additional fees if APCHL was to be entitled to be paid them: s 601GA(2)(a). A supplementary PDS had to be prepared, approved by the Board and issued at the same time because: (a) interests in a managed investment scheme are "financial products" as defined in the Act and a Product Disclosure Statement is required to be given on the recommendation, issue and sale of a financial product: see ss 764A(1)(b), 1012A, 1012B and 1012C. The units in the Scheme were marketed to investors through a network of financial advisers and the PDS was important information for them; (b) the PDS was required to inform investors of APCHL's fees, and the fee information was required to be up to date and accurate: see ss 1013D(1)(d)(iii), 1012J; and (c) a supplementary PDS can be prepared to update the information in a PDS: ss 1014A and 1014D. 392 In order for the PDS to be accurate it was necessary for APCHL to issue the Supplementary PDS disclosing the additional fees at the same time as bringing the fees into effect by lodging the Amendments with ASIC. The evidence shows that Dr Wooldridge, Mr Lewski and Mr Jaques understood this requirement, and I infer that Mr Clarke and Mr Butler understood it too. The Supplementary PDS which would operate to inform investors of the additional fees had to be prepared prior to the Amendments being brought into effect. 393 One can readily imagine circumstances in which a Board might pass a resolution to introduce additional fees having already prepared a supplementary PDS for issue. But that was not the case here. Had the consolidated Constitution been lodged with ASIC and the Amendments brought into effect without the Supplementary PDS having been approved by the Board and issued, APCHL and the Directors would have been in breach of important statutory obligations. 394 Second, the Madgwicks Minutes were prepared by APCHL's lawyers. In providing the draft minutes to the Board, Madgwicks advised that the Lodgement Resolution be passed. No Director advanced cogent evidence as to why he would have refused or failed to follow that advice. 395 Third, I infer that the Madgwicks Minutes were signed as correct by Dr Wooldridge at the 22 August meeting, after the resolutions in the minutes had been passed. That was his usual practice and he would not knowingly have done otherwise. I see it as quite unlikely that he made an error in doing so when Mr Lewski saw him sign the minutes and yet did not object. 396 Fourth, Mr Lewski did not object when he saw Dr Wooldridge sign the Madgwicks Minutes as accurate at the meeting and did not object to the minutes being placed into the APCHL minute book shortly after 25 August. I infer that he saw the minutes as accurate. 397 Fifth, in the minutes which he prepared Mr Jaques would not always record a resolution covered by a Madgwicks pre-prepared minute, as it was unnecessary to do so. The Madgwicks Minutes and the Jaques Minutes should be read as complementary. 398 Sixth, the minutes prepared by Mr Jaques were not as careful and complete as he said. His minutes in evidence had some significant omissions. The possibility that Mr Jaques inadvertently failed to note the Lodgement Resolution must be accepted. 399 Seventh, the testimony of each of the Directors that the Jaques Minutes are to be preferred and that he had no recollection of the Lodgement Resolution being passed had little or no probative value. 400 Eighth, the allegation that the Madgwicks Minutes are false must be assessed in light of s 251A which requires the keeping of minute books, and in light of provisions such as ss 1308(2) and (4). Section 1308(2) makes it an offence to make a statement in a document required by or for the purposes of the Act which is false or misleading in a material particular. Company minutes are such documents. Section 1308(4) makes it an offence for the Directors not to take all reasonable steps to ensure that a statement in such a document is not false or misleading. In those circumstances I should not lightly conclude that the Directors failed to take reasonable steps to ensure that APCHL's minute books did not contain false and misleading information: ASIC v Hellicar at [71]. When the two sets of minutes are read as complementary and a full record of the meeting of the 22 August 2006 then this does not arise. 401 Finally, I note that there does not appear to have been controversy at the time that the Board resolved to lodge the Amendments. In October 2006 the Board approved the Annual Financial Report of the Trust for the year ending 30 June 2006. In the annual report under the heading "Events Subsequent to Reporting Date" the following appeared: On 22 August 2006 Australian Property Custodian Holdings Limited as the Responsible Entity of Prime Retirement & Aged Care Property Trust exercised its right to amend the original constitution to account for the following entitlements to fees in specific circumstances, where: The Responsible Entity shall be entitled to be paid a listing fee in the event of the units of Prime Retirement and Aged Care Property Trust being listed on the Australian Stock Exchange to the value of 2.5% of the Gross Asset Value of the Trust calculated at the date the Trust lists. The Responsible Entity shall be entitled to be paid a removal fee if removed as the registered responsible entity of the Prime Retirement and Aged Care Property Trust at the instigation of the Unitholders or ASIC to the value of 2.5% of the Gross Asset Value of the Trust calculated at the date of removal….

7.5 Conclusion 402 Having regard to the nature of ASIC's claims and the Directors' defences, the nature of subject matter of the proceeding, and the gravity of the allegations, I am satisfied to the requisite standard that the Madgwicks Minutes are an accurate record of the relevant parts of the 22 August 2006 meeting and that the Lodgement Resolution was passed.

ISSUE A2(A): WHAT WAS THE EFFECT OF THE LODGEMENT RESOLUTION ON DEED OF VARIATION NO 7, THE CONSTITUTION OF THE TRUST, THE RIGHTS AND INTERESTS OF THE MEMBERS OF THE TRUST, AND THE INTERESTS OF APCHL?

8.1 The requirement for lodgement of the Amendments 403 Section 601GC provides a power to amend the constitution of a registered scheme and provides that an amendment is not effective until lodged with ASIC. It states: Changing the constitution (1) The constitution of a registered scheme may be modified, or repealed and replaced with a new constitution: (a) by special resolution of the members of the scheme; or (b) by the responsible entity if the responsible entity reasonably considers the change will not adversely affect members' rights. (2) The responsible entity must lodge with ASIC a copy of the modification or the new constitution. The modification, or repeal and replacement, cannot take effect until the copy has been lodged. …

8.2.1 The Directors' contentions 404 ASIC contended that by passing the Lodgement Resolution the Directors authorised and directed completion of the Deed and lodgement of the consolidated Constitution, which operated to bring the Amendments into effect. 405 Against this, on the assumption that the Lodgement Resolution was passed, the Directors contended that the resolution had no effect on the Deed. They argued that if a constitution is amended it must be lodged with ASIC and upon the Deed being signed on 19 July it was instantly effective in imposing a positive and mandatory obligation to lodge the Deed with ASIC, pursuant to s 601GC(2). 406 The Directors contended that APCHL had no discretion to let the Amendments "lay on the table", it had to lodge them with ASIC. They pointed to the observation of Barrett J in Re Macquarie Goodman Funds Management Ltd (as responsible entity for Macquarie Goodman Industrial Trust) (2004) 52 ACSR 194 at [13] where his Honour said: …s 601GC(2) does not specify the actual point at which a modification, or repeal and replacement, takes effect. It merely identifies a point before which it is incapable of taking effect. 407 They also argued that s 601FD(1)(f) created a positive duty to lodge the amended Constitution pursuant to s 601GC(2). This section provides: (1) An officer of the responsible entity of a registered scheme must: … (f) take all steps that a responsible person would take, if they were in the officer's position, to ensure that the responsible entity complies with: (i) this Act; … (iii) the scheme's constitution… 408 Next, they relied on clause 4 of Deed of Variation No 7 which provides: CONSOLIDATED CONSTITUTION TO ASIC (a) In accordance with s 601GC(2) of [the Act] the Responsible Entity will as soon as practicable after signing this Deed lodge with ASIC a copy of this Deed and a consolidated constitution containing the consolidated governing provisions of the Original Constitution as amended by Amendments in Schedule 1 of this Deed ("Consolidated Constitution"). (b) The Consolidated Constitution will take effect as the governing constitution of the Trust on and from the date and time that the Responsible Entity lodges a copy of this Deed and/or the Consolidated Constitution with ASIC. (Emphasis added.) 409 On the Directors' contention, unless there was some intervening instrument revoking the Deed or otherwise relieving APCHL of the obligation to lodge it, had the Amendments not been lodged, they would have been in breach of their positive duty under s 601FD(1)(f) and cl. 4 of the Deed. They argued that the Lodgement Resolution did not serve or discharge this pre-existing obligation. 410 They also argued that if the Amendments contravened the duties in ss 601FC and 601FD then those were the relevant contraventions, and any such contravention was outside the time limit in s 1317K.

8.2.2 When did the Deed come into effect? 411 In determining the effect of the Lodgement Resolution on Deed of Variation No 7 it is first necessary to decide when the Deed came into effect. If there was a pre-existing obligation to lodge the Amendments as the Directors contended, it arose from the Deed. If the Deed did not come into effect when it was signed on 19 July then the obligation under cl. 4 to lodge it as soon as practicable did not arise. 412 I have concluded that the Deed was signed on 19 July but deliberately left undated on legal advice, and that it was dated 22 August 2006 following the passage of the Lodgement Resolution at the 22 August meeting. Given these findings, the question is when should the Deed be taken to have come into effect? 413 First, where a controversy arises as to the day upon which a deed comes into effect, there is a rebuttable presumption that the date of the deed is the day from which it takes effect: Stone v Grubbam (1614) 1 Roll Rep 3; Norton R, A Treatise on Deeds (2nd ed Sweet and Maxwell Ltd 1928, reprinted Wm. W. Gaunt & Sons Inc 1981) at 189. Deed of Variation No 7 provides that it "is made on 22 August 2006 by Australian Property Custodian Holdings Ltd" which points away from the contention that it took effect on 19 July. In my view the Directors failed to rebut this presumption. 414 Second, it is settled that a deed is not made effective solely by it being signed or fixed with a seal. If it is not the intention of the relevant parties to be immediately bound by it then the deed is not then effective. In an often quoted dictum in Xenos v Wickham (1866) LR 2 HL 296 at 312, Blackburn J explained: …no particular technical form of words or acts is necessary to render an instrument the deed of the party sealing it. The mere affixing the seal does not render it a deed; but as soon as there are acts or words sufficient to show that it is intended by the party to be executed as his deed presently binding on him, it is sufficient. The most apt and expressive mode of indicating such an intention is to hand it over, saying: "I deliver this as my deed;" but any other words or acts that sufficiently shew that it was intended to be finally executed will do as well. 415 Encapsulating the principle in The Construction of Deeds (2nd ed Sweet and Maxwell Ltd 1946 p. 6) the learned author Sir Charles Odgers states: Any act of the party which shows he intended to deliver the deed as an instrument binding on him is enough. He must make it his deed and recognise it as presently binding on him. 416 Where, as here, there is doubt as to the intention of the party making the deed, regard may be had to the surrounding circumstances in order to determine what the party's intention was at the time of signing or sealing the document: Poole and Another v Neely and Others [1976] 1 NZLR 529 at 541; Monarch Petroleum NL v Citco Australia Petroleum Ltd [1986] WAR 310 at 356. This consideration may include conduct that occurred after the date the deed was purportedly made where, in the words of Buckly LJ, that conduct "throws a measure of retrospective light on the [party's] intention…": Kingtson and Another v Ambrian Investments Co Ltd [1973] 1 All ER 120 at 128. In the case of a deed that has been left undated, parol evidence is admissible to show when the deed was written and from what date it was intended to operate: Morrell v Studd and Millington [1913] 2 Ch 648 at 658. 417 As I now explain, the surrounding circumstances also indicate that the Deed was not intended to be binding on and from 19 July.

8.2.3 APCHL's intention by reference to the statutory framework and other matters 418 APCHL's intention as to the completion of the Deed can be discerned in part from consideration of the statutory framework within which it had to act, and by reference to the outstanding matters that had to be dealt with after the 19 July meeting. 419 As I note at [106]-[107], the first matter that required to be attended to before the Deed was brought into effect was that Kidder Williams, the Trust's corporate advisors on the listing, were to review the "process" relating to the Amendments and the issue of options. This was appropriate because there could be little question that the new Listing Fee and the issue of options might affect the planned listing. The Listing Fee would reduce net Scheme property by about 6.7% thereby reducing the value of the units on the listing. 420 Other important matters that had to be attended to before the Deed could be brought into effect were the preparation, approval by the Board (where necessary) and execution of a new Management Agreement and new Compliance Consultancy Service Agreements. These matters were unrelated to the Amendments but they were required to be disclosed to investors and if they were not dealt with in the Supplementary PDS then another PDS would have been necessary a short time later. The evidence indicates that APCHL intended that the same Supplementary PDS include all the planned changes. 421 The most important matter that required to be attended to before the Deed could be brought into effect was the preparation and approval of the Supplementary PDS. As I explain at [391]-[393], the Directors understood that the additional fees could only be brought into effect after the Supplementary PDS was issued. 422 In summary, as at 19 July 2006, the date upon which the Deed might be brought into effect and the Amendments lodged with ASIC depended upon: (a) whether Kidder Williams approved the Amendments and the proposed issue of options, and how long it took them to do so; (b) how long it took to prepare and execute the Management Agreement between APCHL and APCH Administrators for the provision of management and administration services for the Trust, and whether the Board approved it; (c) how long it took to prepare and execute the Compliance Consultancy Service Agreements between APCH Administrators and Burke Bond Securities Ltd and Ian Bond, and between APCH Pty Ltd and Rees Partners Pty Ltd, for the provision of compliance consultancy services to the Trust; and (d) how long it took to prepare the Supplementary PDS advising of these matters, of the Amendments, and whether the Board approved it. 423 I infer that APCHL and the Directors intended that the matters in (a)-(c) above be dealt with in an orderly way and also intended to act in accordance with their obligations under the Act. I see the contention that the Directors intended that the Deed be immediately binding as quite implausible. If APCHL had lodged the Deed with ASIC at that time, as the Directors argued it was required to do, the Constitution would have provided for substantial fees payable from Scheme property which were not disclosed in the PDS. APCHL and the Directors may have been liable for breaches of the Act arising from a failure to ensure that the PDS correctly set out the fees payable. The decision not to date the Deed when it was signed on 19 July and to leave it incomplete was prudent and consistent with best practice. 424 Nor is there anything in the Directors' contention that s 601GC itself required lodgement of the Amendments as soon as practicable after 19 July. First, as I have said, APCHL did not intend the Amendments to come into effect from that date. Second, it would be absurd to construe s 601GC(2) as requiring an RE to lodge Amendments with ASIC in circumstances where lodgement would cause the RE to breach of the Act.

8.2.4 APCHL's intention by reference to other evidence 425 Mr Lewski said, and I accept, that he was able to direct lodgement of the Amendments with ASIC. Some Directors sought to argue that Mr Lewski impliedly instructed Madgwicks to lodge the Deed by leaving it with their receptionist. I do not accept this somewhat desperate contention. There is no evidence that Mr Lewski either expressly or impliedly instructed that lodgement occur prior to the 22 August meeting. I expect that the Deed would have been lodged had Mr Lewski provided instructions to do so and I infer that he chose not to instruct that it occur. I am reinforced in this inference by the fact that if he had instructed that the Deed be lodged APCHL would have been in breach of its statutory obligations. 426 APCHL's intention that the Deed not come into effect on 19 July, and that it have no set commencement date, can be seen in that: (a) the Deed was deliberately left undated on Madgwicks' advice; (b) Kidder Williams was to conduct a review; (c) there were several other important matters that were required to be finalised, included in the Supplementary PDS, and approved by the Board; (d) the Supplementary PDS disclosing the additional fees and the other matters had to be prepared and approved by the Board before the Amendments could be lodged; (e) Mr Lewski did not instruct Madgwicks or a member of APCHL's staff to lodge the Deed after it was signed on 19 July, and there was no instruction to lodge it until after the 22 August meeting; (f) contrary to the Directors' contention that they had a positive and mandatory duty to immediately lodge the Deed once it was signed, it was not in fact lodged for over a month. In fact they let the Deed "lie on the table" and did not lodge it until after the Lodgement Resolution was passed and the Deed was completed; and (g) Mr Goldberg advised in his 18 August email that the Deed would come into effect when it was dated and lodged on 22 August and it does not appear that any of the Directors took issue with that advice at the time. 427 Of course, the signing of a deed will often, perhaps usually, evince an intention to make it presently binding. However, in the present case the Deed was deliberately left undated, intended to be incomplete, and was not intended to be presently binding.

8.2.5 Were the Directors required to revisit their earlier decision to amend 428 The Directors again contended that ASIC's real case was that, when the Board was considering the Lodgement Resolution, the Directors had to revisit their earlier decision to pass the Amendments and revoke Deed of Variation No 7 or otherwise formally relieve themselves of the obligation to lodge the Amendments. They again argued that there was no such duty to doubt and review earlier decisions, and there was no occasion for them to revisit their earlier decision to amend. 429 However, that was not ASIC's case. Its case, which I accept, is that the Deed had not come into effect in the first place. I reject the Directors' contention. 430 The Directors also contended that the Lodgement Resolution was unnecessary because lodgement could be performed administratively without the need for a resolution. Whether that is so is not really to the point. The Lodgement Resolution made it clear that lodgement was a matter for the Board. It provided that lodgement would occur in service of the Board's decision to lodge. It authorised and directed that the Deed be completed and the Amendments be lodged. 431 I see the Lodgement Resolution as an important resolution, regardless of whether the Directors revisited or reconsidered their earlier decision to amend. Lodgement was the final step in the process of amendment and by operation of s 601GC(2) the Amendments had no effect until lodged. There could be no contravention of the Act arising from the Amendments unless they were brought into effect, and they were to come into effect as a result of the Lodgement Resolution. Put another way, the 22 August meeting was the Directors' last opportunity to decide whether to complete the process of amendment that they started on 19 July and it was their last chance to ensure that when creating the additional fees their statutory duties were satisfied. 432 While it is unnecessary to deal with this argument in the present context, I note in passing that I do not accept the contention that where the Board of an RE has passed a resolution and it later considers a related matter, the directors can be under no statutory obligation to reflect upon and perhaps reconsider the earlier decision. In my view the surrounding circumstances will dictate whether in exercising their powers they are required by their statutory duties to reflect upon an earlier decision and perhaps reconsider it. I will deal with this question at [567] and following.

8.3 The effect of the resolution on the Constitution 433 The Directors submitted that the Lodgement Resolution had no effect on the Constitution, arguing that the acts that effected the change to the Constitution were: (a) the 19 July resolution to pass the Amendments; (b) the signature of Deed of Variation No 7 on 19 July; and (c) lodgement of the consolidated Constitution on 23 August which gave the Amendments effect under s 601GC(2). 434 They argued that the Lodgement Resolution was surplus to APCHL's requirements to comply with the Act, and not a step which was required to make the Amendments effective, because, amongst other things: (a) Mr Lewski had authority to instruct Madgwicks to lodge the Deed; (b) Mr Lewski impliedly instructed Madgwicks to lodge the Deed, and Mr Lewski assumed Madgwicks would lodge the Deed as soon as the Supplementary PDS reflected the relevant changes; and (c) the 22 August meeting was not an occasion to ratify the Amendments as the Deed was already executed, and APCHL was bound to lodge it. 435 I do not agree. As I have said, the Deed did not come into effect on and from 19 July and there was no obligation to lodge it. Mr Lewski neither expressly nor impliedly instructed Madgwicks to lodge it. In fact it was incomplete and not ready to be lodged until after the Lodgement Resolution was passed and it was completed. 436 That the Lodgement Resolution had an effect on the Constitution is plain from its terms. It provided: …the Directors resolved that the Consolidated Constitution incorporating Deed of Variation (No. 7) be lodged with ASIC to become effective. The resolution directed and authorised lodgement so that the Amendments became effective. Putting to one side my view that the Amendments were invalid, their effect on the Constitution is plain. 437 The Lodgement Resolution authorised and directed satisfaction of the final legal requirement necessary to make the Amendments effective as part of the Constitution.

8.3.1 The arguments based on the construction of s 601GC 438 Some Directors made another argument based on the words of s 601GC, and on the fact that APCHL lodged the consolidated Constitution rather than Deed of Variation No 7. Mr Williams, Senior Counsel for Mr Clarke, contended that: (a) the Lodgement Resolution had no impact on Deed of Variation No 7 which took effect by its own force upon its lodgement, in accordance with s 601GC(2); (b) the resolution addressed a different matter, namely lodgement of a consolidated Constitution incorporating the Amendments, as addressed by s 601GC(3); and (c) lodgement of the consolidated Constitution had no effect on the Constitution because it did not meet the requirements of s 601GC(2), which required lodgement of the Amendments themselves. 439 Section 601GC (set out at [403]) is headed "Changing the constitution": (a) subs (1) provides two methods by which constitutional change can occur, the first being that the existing constitution can be "modified" and the second being that the existing constitution can "be repealed and replaced with a new constitution"; (b) subs (2) requires lodgement of a "copy of the modification or the new constitution"; (c) subs (3) provides that an RE must lodge with ASIC a "consolidated copy of the scheme's constitution" if ASIC directs it to do so; and (d) subs (4) requires an RE to provide a copy of the constitution to a member on a written request and on payment of any fee. 440 Mr Williams contended that where a constitution has been "modified' (as in the present case) what s 601GC(2) requires is lodgement of the "modification", which in the present case meant lodgement of Deed of Variation No 7 rather than lodgement of the consolidated Constitution incorporating the Amendments. He submitted that the step which would bring the Amendments into effect was lodgement of a copy of the Deed itself, and that the lodgement of the consolidated Constitution did not. 441 I do not agree. First, this argument is circular on the facts of the present case. If accepted it would leave the Directors facing the same contraventions, although particularised differently. If lodgement of the consolidated Constitution did not bring the Amendments into effect then the Constitution was never amended to provide for the additional fees. In an attempt to avoid this circularity Mr Williams argued that I should accept that the Deed had in fact been lodged, although not in service of the Lodgement Resolution. However, he pointed to no cogent evidence in support of such a conclusion. 442 Contrary to Mr Williams' contention I am satisfied that the Deed was never lodged with ASIC. I infer this from the following: (a) the Lodgement Resolution provided for lodgement of the consolidated Constitution and not the Deed; (b) APCHL lodged only the consolidated Constitution incorporating the Amendments on 23 August 2006. The Deed was not part of that lodgement; (c) the ASIC company extract relating to the Trust does not record lodgement of the Deed at any other time; and (d) there was no evidence put forward by any party to show that the Deed was ever lodged. 443 Dr Hanscombe, Senior Counsel for Mr Butler, supported the same construction of s 601GC(2), but did so in the context of a contention that APCHL chose to modify the Constitution by way of the Deed and there was no evidence that the Deed was in fact lodged. Senior Counsel argued that the absence of such evidence meant that I could not be satisfied that an essential element of the alleged contravention had been established. 444 In my view s 601GC(2) should not be construed narrowly so that lodgement of a consolidated constitution containing the amendments - as distinct from lodgement of the Deed as a separate document - does not constitute compliance. The plain words of subs (2) provide for lodgement of "a copy of the modification or the new constitution". On the plain words lodgement of a consolidated Constitution containing the Amendments will suffice. Although there is some merit in the Directors' argument that consistency indicates that the reference to "modify" in subs. (1) corresponds with the reference in subs (2), I consider that subs (2) should not be read narrowly. 445 Further, the section must be construed having regard to context and purpose and I see its purpose as being to ensure that: (a) there is certainty as to the contents of scheme constitutions; (b) ASIC holds the current constitution of each scheme in its records in order to satisfy itself that the constitution is compliant with the Act, and/or deal with enquiries or complaints in regard to compliance; and (c) the members can have ready access to the scheme's constitution and be certain that it is current. The section promotes transparency and accountability by an RE in relation to the primary legal instrument of the scheme. It is intended to protect the members' interests and promotes the efficient regulation of managed investment schemes. 446 Transparency and accountability are served as long as the RE lodges with ASIC either: (a) a consolidated constitution containing the amendments; or (b) the relevant amendments as a separate document. The context and purpose indicate that an amendment will become effective if lodged either separately or as part of a consolidated version. 447 Subsection (3) is properly to be construed as empowering ASIC to demand that a consolidated constitution be lodged where only the amendments themselves had earlier been lodged, rather than justifying a narrow construction of subs (2). The practical purpose of the subs. (3) is obvious. For example, when ASIC considers that the effect of numerous or lengthy amendments makes a constitution unwieldy and hard to understand unless incorporated into a consolidated document, ASIC may require that a consolidated version be lodged.

8.4 The effect of the resolution on the rights and interests of the members, the interests of APCHL and Mr Lewski's interests 448 The Directors' contentions in relation to this issue are again based on the premise that the Lodgement Resolution was unnecessary and ineffective. They argued that the resolution merely confirmed that APCHL would abide by its pre-existing obligation to lodge the Deed, it had no impact on the rights and interests of the members or the interests of APCHL, or on the interests of Mr Lewski which were the same as APCHL itself. They reiterated their contention that ASIC's true case was that the issues the Directors considered at the 19 July meeting were required to be revisited and considered afresh on 22 August. I have previously rejected these contentions and I will not address them again. 449 I am satisfied that the passage of the Lodgement Resolution affected the rights and interests of the members, the interests of APCHL and the interests of Mr Lewski insofar as: (a) in relation to the effect on members' rights, as I explain in detail at [656] and following, in passing the Lodgement Resolution the Directors authorised and directed lodgement of the Amendments which brought them into effect. This adversely affected the members' right to have the Scheme administered in accordance with the existing constitution: see 360 Capital Re Ltd v Watts and Another (2012) 91 ACSR 328 ("360 Capital") at [40] per Warren CJ, Buchanan and Nettle JJ; Premium Income Fund Action Group Incorporated and Another v Wellington Capital Limited and Others (2011) 84 ACSR 600 ("Premium Income") at [40]-[42] per Gordon J; Cf. ING Funds Management Ltd v ANZ Nominees Ltd and Others (2009) 228 FLR 444 ("ING Funds Management") at [98] per Barrett J; Re Centro Retail (2011) 255 FLR 28 ("Re Centro Retail") at [27] per Barrett J; (b) in relation to the members' interests I summarise the effect of the additional fees on the members' interests at [111] - [124] and I summarise my view that lodgement of the Amendments was not in the members' best interests at [491]. It is unnecessary to do so again; and (c) the effect of the Lodgement Resolution on the interests of APCHL and Mr Lewski is obvious. As a result of the resolution, APCHL and through it Mr Lewski became entitled to substantial additional fees.

ISSUE A2(B): (I) WAS THE LODGEMENT RESOLUTION IN THE BEST INTERESTS OF THE MEMBERS OF THE TRUST? (II) DID THE LODGEMENT RESOLUTION INVOLVE ANY CONFLICT BETWEEN THE INTERESTS OF THE TRUST AND THE INTERESTS OF APCHL?

9.1 The Directors' submissions 450 Although there were some small differences the central thrust of the Directors' submissions on these questions was largely the same. Amongst other things they contended that: (a) the Lodgement Resolution was unnecessary and ineffective and had no substantive effect on the interests of the members; (b) the resolution was only to ensure that APCHL complied with its pre-existing legal obligation to lodge the Amendments as soon as practicable; (c) the resolution did not involve any conflict between the interests of the Trust and APCHL's interests as it was merely to ensure that APCHL complied with its pre-existing obligation to lodge. On this argument it conferred no benefit on APCHL, and any conflict between the interests of APCHL and the members arose and had been resolved on 19 July; (d) the resolution did not involve any conflict of interests because it involved a merely procedural or operational question - namely whether APCHL was ready to lodge the Amendments as required by the Act; (e) the Directors had earlier been provided with the Madgwicks Advice which advised that they could amend the Constitution to provide the additional fees, and there was no occasion to question the advice because, amongst other things: (i) the advice was consistent with earlier advices obtained in relation to amendments of the Constitution, and in particular the Options Advice provided in April 2006; (ii) Ms Kovacs' evidence was that the advice reflected her view of the law at the time; and (iii) the authorities on members' rights under the Act as at 2006 would have given Madgwicks no reason to doubt that position; (f) in the absence of any changed circumstances, there was no duty that required the Directors on 22 August to revisit their decision of 19 July to pass the Amendments. It was argued that the imposition of a general duty on directors to revisit earlier decisions would cripple the proper management of an RE which could not be in the best interests of members; and (g) the Directors, other than Mr Lewski, did not stand to receive any payment as a result of approval of the resolution. 451 Some Directors pointed to a modest advancement of the interests of the members in that the resolution: (a) represented a gesture of compliance by APCHL with its obligation under s 601FC(1) and by the Directors under s 601FD(1)(f) to see that an amended Constitution was lodged; and (b) made available a single document in which the entire Constitution was recorded, meeting either an actual or potential request by ASIC under s 601GC(3) for that step to be taken. 452 Based on his construction of s 601GC(2), Mr Williams again argued that the section required lodgement of the Amendments themselves rather than the consolidated Constitution containing the Amendments. On his construction of the section, lodgement of the consolidated Constitution did not make the Amendments effective. 453 Mr Riordan, Senior Counsel for Mr Jaques, argued that if the Lodgement Resolution is accepted as having had a substantive effect, it is impossible on the evidence to determine whether it was in the best interests of the members. He argued that determination of that question would require consideration of what would have happened if the Amendments had not been made, and an assessment as to whether one commercial decision was of greater benefit than another, which the Court should not attempt.

9.2 The legislative framework 454 In my opinion, the Board's approval of the Lodgement Resolution was not in the best interests of the members of the Trust. In explaining my view it is first necessary to understand the scope of the duty. 455 The meaning of the phrase "best interests of the members" in ss 601FC(1) and 601FD(1) has not previously been the subject of judicial consideration and accordingly I have given it careful attention. 456 The requirement that an RE of a registered managed investment scheme and its officers act only in the best interests of the members ("the best interests duty") was introduced into the Act by the Managed Investments Act 1998 (Cth) ("Managed Investments Act"). 457 Section 601FC(1)(c) provides that: In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: … (c) act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, give priority to the members' interests. 458 Section 601FD(1)(c) imposes the same duty on the directors of an RE. It provides: An officer of the responsible entity of a registered scheme must: … (c) act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, give priority to the members' interests. 459 The RE of a scheme holds the scheme property on trust for the members: s 601FC(2). The RE's duties are to further and fulfil the purposes of the trust and the powers conferred on the RE are conferred to enable it to advance or meet those duties. These powers and duties arise under both the scheme constitution and by operation of law. The powers and duties referred to in the chapeau to s 601FC(1)(c) must be a reference to such powers and duties. 460 It is the scheme constitution that governs the trustee in the exercise of the powers and duties, subject to relevant equitable principles and statutory provisions. Where, as here, the trust deed forms part of a contractual agreement it is all the more sacrosanct because the force of the law of contract is added to the law of trusts: HAJ Ford and WA Lee, Principles of the Law of Trusts (Lawbook Co as at 25 September 2013) Volume 1 at [9.2110] ("Ford and Lee")). It is the essence of a trust that the trustee undertakes to observe the wishes of those creating the trust, as articulated in the trust deed. 461 The "best interests of the members" relates to the members' interests in the particular context in which that trust operates, and by reference to the terms of the constitution, the general law and statute.

9.2.1 The meaning by reference to ss 601FC(1)(c) and 601FD(1)(c) 462 To understand the meaning of the expression I first look to the text of ss 601FC(1)(c) and 601FD(1)(c) in their context. The use of the superlative "best" in each of the provisions may be seen to require a comparison between different courses of action available to an RE, and the requirement to choose between them, including a choice between taking action and inaction. The word "best" may also be seen to set a requirement not only in relation to what must be done by an RE but also in relation to how it is done, thereby imposing standards of conduct on the RE. 463 It is difficult to discern the outer boundaries of the best interests duty from the text of the provisions alone. For example, the expression may be argued to indicate a requirement that the RE meet the "highest" standard rather than just a high standard. It may also be argued to set a requirement for the RE to obtain an objectively determined "best" outcome rather than requiring the best efforts of the RE. I am disinclined to such a view because such meanings may cause real difficulties for a trustee in performing his or her role. It is not clear to me how in many common circumstances the "highest" standard is to be determined let alone met, or how any requirement to achieve an objectively determined "best" outcome sits with the general law obligation on a trustee to act with care, competence and caution. The language of the statute alone does not make clear where the boundary lies and it is appropriate to consider the meaning of the term under general law.

9.2.2 The meaning under general law 464 There is a presumption that where words used in a statute have already acquired a legal meaning, unless the contrary intention clearly appears from the context, prima facie the legislature is taken to have intended to use them with that meaning: Attorney-General of NSW v Brewery Employees Union of NSW (1908) 6 CLR 469 at 531 per O'Connor J. 465 There can be no question that the heritage of the best interests duty is equitable. In an often quoted dictum in Cowan v Scargill [1985] Ch 270 at 295 Sir Robert Megarry V-C said: The starting point is the duty of trustee to exercise their powers in the best interests of the present and future beneficiaries of the trust, holding the scales impartially between different classes of beneficiaries. This duty … is paramount. They must, of course, obey the law; but subject to that, they must put the interest of their beneficiaries first. When the purpose of the trust is to provide financial benefits for the beneficiaries…the best interests of the beneficiaries are normally their best financial interests. and later: Trustees must do the best they can for the benefit of their beneficiaries and not merely avoid harming them. 466 In a later article the Vice Chancellor said that his judgment showed no "bold novelty of approach": Megarry, Sir Robert, Investing Pension Funds: The Mineworkers Case, Equity, Fiduciaries and Trusts (T G Youdan (ed), Carswell, 1989) at 149-159. 467 Megarry V-C's dictum has been affirmed on numerous occasions, although sometimes expressed as a separate duty and other times linked to other well established duties: see Martin v The City of Edinburgh District Council [1989] PENS. L. R. 9; Harries and Others v The Church Commissioners for England and Another [1993] 1 WLR 1241 at 1248; Edge v Pensions Ombudsman [2000] Ch 602; The Registrar of the Accident Compensation Tribunal v Commissioner of Taxation of the Commonwealth of Australia (1993) 178 CLR 145 at 182; Knudsen v Kara Kar Holdings Pty Ltd [2000] NSWSC 715 ("Knudsen v Kara Kar") at [57]. In ASEA Brown Boveri Superannuation Fund No 1 Pty Ltd v ASEA Brown Boveri Pty Ltd [1999] 1 VR 144 at [58] and [65] its relationship to the duty of loyalty was emphasised. In Gra-Ham v Perpetual Trustees (1989)1 WAR 65 at 92 Pigeon J linked the best interests duty to the duty imposed on trustees to act fairly and in good faith. In Knudsen v Kara Kar at [60] the duty was linked to the duty to act for a proper purpose. 468 Under general law the best interests duty is a reference to a trustee's duty to give undivided loyalty to the beneficiaries, which includes the duty to act in the interest of the beneficiaries, to avoid any conflict between the interests of the trustee and the interest of the beneficiaries, and to adhere to the terms of the trust. These are well established principles of the law of trusts: see Keech v Sandford (1726) 25 ER 223; Re Whitely (1886) 33 Ch D 347; Bray v Ford [1896] AC 44; Boardman v Phipps [1967] 2 AC 46; Target Holdings Ltd v Redferns [1996] 1 AC 421 at 43-4343; Raby v Ridehalgh (1855) 44 ER 41 at 43. 469 Numerous learned commentators have taken the view that Megarry V-C's dictum was a reference to a combination of established trustee's duties. Writing in 1995, before his appointment to this Court, JRF Lehane said: It seems reasonably clear from what follows that Sir Robert Megarry, in speaking of a duty to act in the best interests of beneficiaries, had in mind a combination of the established duties (a) to have regard, in exercising fiduciary powers, to the interests of the beneficiaries and not to extraneous considerations, and (b) to act with reasonable care and prudence. : Lehane JRF, "Delegation of Trustees' Powers and Current Developments in Investment Funds Management" (1995) 7 Bond L Rev 36 at 38. 470 Writing extra-curially in 2007, Justice Stone described the best interests duty as no more than a description of the duty of undivided loyalty, requiring trustees to act in their beneficiaries' interests and avoid conflicts of interest. Her Honour was unconvinced the word "best" had much if anything to add in that context, and considered that it may create confusion by inviting focus on the outcomes of a trustee's decision rather than on the making of such a decision: Stone M, "The Superannuation Trustee: Are Fiduciary Obligations and Standards Appropriate?" (2006-2007) 1 J Eq 167 at 172. 471 The duty of undivided loyalty is the fundamental duty of a trustee requiring it to solely pursue the members' interests, to eschew conflicts of interest between the members' interests and its own, and in the event of a conflict of interests to put the members' interests first. 472 The duty of undivided loyalty also requires a trustee to "perform and adhere to the terms of the trust": Ford and Lee, Vol 1 at [9.250]. This must be so. It could not be in the best interests of the beneficiaries for a trust to be managed or administered other than in accordance with its terms. As RP Meagher and WM Gummow explain in Jacobs Law of Trusts in Australia: The rule that the trustee must strictly conform to and carry out the terms of the trust modifies all other rules because these other rules are applied subject to any provisions contained in the trust instrument itself. : RP Meagher and WM Gummow Jacobs' Law of Trusts in Australia (6th ed, Butterworths, 1997) at [1704] ("Jacobs"). 473 In Scott and Ascher on Trusts the authors describe the trustee's duty of undivided loyalty as "the most fundamental duty of a trustee": Scott, Fratcher and Ascher, Scott and Ascher on Trusts, (5th ed, Wolters Kluwer Law & Business, 2007) at 1077 ("Scott and Ascher on Trusts"). The learned authors go on to note (at 1079) that: The duty of loyalty is, then, the fruit of the courts' efforts to regulate the behaviour of trustees when their duties as trustees require them to act in ways that may or do conflict with their own personal interests. In a nutshell, the duty of loyalty ordinarily requires trustees to avoid all transactions that involve self-dealing, as well as those that involve or might create a conflict between the trustee's fiduciary and personal interests. 474 The best interests duty is also linked to a trustee's duty to pursue only the trust's purposes. As Lord Nicholls explained: To decide whether a proposed course is in the best interest of the beneficiaries it is necessary to decide first what is the purpose of the trust, and what benefits were intended to be received by the beneficiaries. Thus to define the trustee's obligation in terms of acting in the best interest of the beneficiaries is to do nothing more than formulate in different words, a trustee's obligation to promote the purpose for which the trust was created. : Lord Nicholls of Birkenhead, "Trustees and their Broader Community: Where Duty, Morality and Ethics Converge" (1996) 70 ALJ 205 at 211. 475 In 2008 Professor G Thomas described the duty to act in the best interests of beneficiaries as a compendium of the individual specific and well recognised duties of a trustee, and as "foundational" duty that underpins or an "umbrella" duty that shelters, these specific duties. He wrote: So, by way of summary, what can one say about the 'best interests duty'? … • The duty demands of the trustees their best efforts in pursuit of the best possible end, outcome or result. There are the two elements of best outcomes and best efforts, of ends and means (or standards) - although, in judging both effort and outcome, what matters is the reasonableness of the trustee's judgement at the time and in the then prevailing circumstances, and not what turns out to be the better outcome in retrospect. • It is essentially an 'umbrella' duty - one which embraces a large number of individual, well-recognised duties. A breach of the 'best interests duty' in relation to a trust (or company), once particularised, necessarily involves breach of one or more of these individual duties. … • For most practical purposes, the duty is indeed short-hand for the combination of the duty to act for the 'benefit' of the beneficiaries and the 'proper purpose' rule, but it is not always so. A trustee's duties to act in good faith, to pursue a proper purpose only and to avoid conflicts of interest are generally distinguished from the 'best interests duty'. There is an additional element here. True, it is difficult to pin down; but it seems to involve not just the pursuit of the best possible authorised end or outcome (as the trustee rationally conceives the matter) for the trust as a whole but also the observance of proper procedures and processes in decision making. … :see Thomas, Professor GT, "The Duty of Trustees to Act in the "Best Interests" of their Beneficiaries" (2008) 2 J Eq 177 at 202-203; See also Donald MS, "'Best' interests?" (2008) 2 J Eq 245 at 248; Mendoza-Jones D, "Superannuation Trustees: Governance, Best Interests, Conflicts of Interest and the Proposed Reforms" (2012) 30 C&SLJ 297 at 301. 476 Ford and Lee describe it as a duty which "marshalls" the trustee's duty of loyalty to the service of the economic well-being of the trust fund, and as a general duty that complements the more specific obligations to act honestly and to exercise care, diligence and skill.

9.2.3 The meaning in other materials 477 Further assistance as to the content of the best interests duty may be obtained from the report of the Australian Law Reform Commission and the Companies and Securities Advisory Committee Collective Investments - Other People's Money: Report No 65 (1993) ("ALRC 65"). The Managed Investments Act which introduced Part 5C into the Act was the Commonwealth Government's response to ALRC 65: see Explanatory Memorandum, Managed Investments Bill 1997 (Cth) ("the Explanatory Memorandum") at [1.1]. 478 Paragraph 10.8 of ALRC 65 states: Duty to act in the interests of investors. Investors in collective investment schemes rely heavily on the operator to act in their best interests. Nevertheless, there will often be a potential for conflict between their interests and those of the operator. This may arise over the fees and charges payable to the operator or the use of scheme property for dealings with parties related to the operator. DP 53 proposed that the law should impose on operators a duty to avoid conflicts of interest. A number of submissions argued that this proposal was neither realistic nor desirable. Conflicts of interest between scheme operators and investors are inevitable. The Review has concluded that the appropriate formulation of the test is that operators must prefer the interests of investors over their own interests where any conflicts arise. The Review recommends that the Corporations Law should impose an obligation on the operator of a collective investment scheme to exercise its powers and perform its duties as operator in the best interests of investors rather than in its own, or anyone else's, interest, if that interest is not identical to the interests of the scheme investors. This duty should be complemented by specific rules for related party transactions. (Citations omitted and emphasis added.) 479 This indicates that the provisions are directed at requiring compliance by an RE with the duty of undivided loyalty. Because the members rely heavily on the RE, and because there is a potential for conflict between the RE's personal interests and those of the members (particularly in relation to the fees the RE may charge), the RE is expressly required to prefer the members' interests over its own. Consistently with the Commission's recommendation, the statutory duty is expressed without qualification and it mirrors the general law position.

9.2.4 The meaning in a similar statutory provision 480 Some assistance in construing the provisions may also be obtained from the expression of an analogous duty in another statute. Section 52 of the Superannuation Industry (Supervision) Act 1993 (Cth) ("SIS Act") uses the same formulation of words in a trust context. It provides: (1) If the governing rules of a registrable superannuation entity do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect. General covenants (2) The covenants referred to in subsection (1) are the following covenants by each trustee of the entity: … (c) to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries; (Emphasis added.) 481 The SIS Act was introduced following the publication of the Australian Law Reform Commission's Collective Investments: Superannuation, Report No 59 (1992). Paragraph 9.22 describes the best interests duty as one of the essential duties of an RE and states: Ford & Lee describe this duty as the duty which 'marshalls' the trustee's duty of loyalty to the service of the economic wellbeing of the trust fund and of the personal welfare of the beneficiaries. This is a general duty that complements the more specific obligations to act honestly and to exercise care, diligence and skill. Underlying s 52(2)(c) of the SIS Act is a general duty to give undivided loyalty to the service of the economic wellbeing of the members, complementing other more specific obligations. 482 In Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd and Others (2006) 15 VR 87 at [107] Byrne J considered the best interests duty in an earlier version of s 52(2)(c) of the SIS Act. His Honour described the duty as: … an amalgam of two distinct obligations said to be imposed by law upon trustees of a superannuation fund. The first, which is sometimes referred to as the duty of loyalty or the duty of fidelity to the trust, is that to act in the interests of the beneficiaries; that their interests are paramount and must certainly be placed ahead of the trustee's own interests. Nor may the trustee have regard to considerations which are extraneous to the trust. The second is to pursue to the utmost with appropriate diligence and prudence the interests of the beneficiaries. (Citations omitted.) Byrne J treated the best interests duty as a combination of well-established more specific duties and did not suggest that it extended beyond any duty arising under general law. I respectfully agree with his Honour's approach. 483 In Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd (2011) 282 ALR 167 at [121] in dealing with s 52(2)(c) of the SIS Act the New South Wales Court of Appeal per Giles JA, with whom Young and Whealey JJA agreed at [164]-[165], concluded that s 52(2)(c) did not materially extend the general law duty to act in the best interests of members. Jacobs Law of Trust in Australia also provides that s 52(2)(c) of the SIS Act corresponds with the general law: JD Heydon and MJ Leeming Jacobs' Law of Trusts in Australia (7th ed, Butterworths, 2006), [2922].

9.2.5 Conclusion 484 I conclude that the imposition of a duty to act in the best interests of the members in ss 601FC(1)(c) and 601FD(1)(c) does not extend its content beyond previously understood general law boundaries. I see the best interest duty as foundational and operating in combination with other duties. It encompasses the fundamental duty of undivided loyalty which in the present case required APCHL and the Directors to use their best efforts to pursue solely the members' interests, to act honestly and to exercise care, competence and prudence in doing so, and to eschew any conflict of interests between the members' interests and its own. If any conflict of interests arose they were required to prefer the interests of the members to APCHL's own interests. The duty also required APCHL to adhere to the terms of the Constitution.

9.3 Is the enquiry subjective or objective 485 ASIC contended, and I accept, that the enquiry as to whether APCHL and the Directors have acted in the best interests of the members is an objective one. 486 In Hillsdown Holdings Plc v Pensions Ombudsman [1997] 1 All ER 862 ("Hillsdown Holdings") Knox J accepted that the trustee had acted "perfectly honestly" in what it thought was the best interests of the members. His Honour disregarded this subjective evidence of best intention because he was satisfied that the trustee had intrinsically breached the trust and damaged the interests of members. I respectfully agree with his Honour's approach. 487 In considering s 52(2)(c) of the SIS Act (and former reg 7.12.15(f)(i) of the Corporations Regulations on which s 52(2)(c) was based) Lehane concluded that a requirement to act in members' best interests was not an obligation to act in a way which the trustee honestly considered to be in their interests, but an obligation to act in what are objectively their interests: Lehane at 37. The same view is taken by other commentators: see Donald at 253-4; Stone at 180; Mendoza-Jones at 301. 488 I do not though wish to be seen as accepting the proposition that to act in the members' best interests a trustee must actually achieve the best outcome. A trustee is not required to be prescient: Re Chapman [1896] 2 Ch 763 at 778; De Bruyne v Equitable Life Assurance Society of the US 920 F.2d 457 (7th Cir. 1990) at 465; Nestle v National Westminster Bank Plc [1994] 1 WLR 1260 at 1282.

9.4 The test for breach of s 601FC(1)(c) 489 ASIC submitted, and I accept, that the test under the first limb of s 601FC(1)(c) for determining whether the passage of the Lodgement Resolution was in the best interests of the members is to ask: Was APCHL as RE of the Trust acting with undivided loyalty solely in the interests of the members? 490 ASIC also submitted, and I accept, that the test for determining whether APCHL satisfied the second limb of s 601FC(1)(c) is to ask: Was there a conflict between the interests of APCHL in being paid the additional fees and the interests of the members in paying only the existing fees? If so, has APCHL as RE of the Trust preferred the interests of the members to its own interests?

9.5 Was the Lodgement Resolution in the best interests of the members? 491 In discharge of the Lodgement Resolution APCHL lodged the consolidated Constitution with ASIC to bring the Amendments into effect. I consider that the Amendments were not in the members' best interests, and it follows that the Lodgement Resolution to bring them into effect was not either. In summary this is because: (a) the existing Constitution did not allow APCHL to charge a Listing Fee or a Removal Fee and allowed a Takeover Fee only in a substantially lower amount; (b) collectively the Amendments created rights in APCHL (and through it Mr Lewski) that would likely result in it being paid substantial additional fees out of Trust funds; (c) the members had a right under the Constitution to have the Scheme property held on trust for them without the deduction of these additional fees; (d) the additional fees were substantial with each having a value at the time of between about $11.25 million to $26.1 million; (e) the Listing Fee imposed a fee if the Trust was listed, when the members were entitled to expect listing to occur without a fee, and listing was already in planning; (f) the Removal Fee imposed a fee on the members for the exercise of their right to remove APCHL where no fee existed before. It impaired the members' right to remove APCHL as the RE and operated to entrench it as the RE; (g) the increased Takeover Fee could be payable on multiple occasions and operated to discourage even a reasonable takeover offer; (h) the additional fees could be payable on multiple occasions; (i) the additional fees were gratuitous in the sense that there was no corresponding consideration nor benefit provided to the members or any corresponding increase in the scope of APCHL's obligations; (j) the new and increased fees largely served the interests of APCHL and Mr Lewski rather than the members. The Listing Fee was largely designed to incentivise Mr Lewski to proceed with listing when he was duty bound to support listing anyway. The Removal and Takeover Fees were largely designed to entrench APCHL as the RE and to reduce the risk that it might be removed before it received the Listing Fee; and (k) it is not to the point that only Mr Lewski stood to gain a personal benefit. The duties in ss 601FC(1)(c) and 601FD(1)(c) relate to any conflict between the RE's interests and the interests of the members and do not require that a director have a personal conflict of interest.

9.6 Did a conflict of interests exist? 492 The conflicts between the members' interests and those of APCHL are self-evident. The members had an interest in receiving APCHL's services as RE for the fees provided in the existing Constitution. Against that, APCHL, and behind it Mr Lewski, had an interest in receiving the additional fees. This is seen in the fact that, amongst other things: (a) if listing was in their interests (as the Directors said it was) the members had an interest in having APCHL take the steps to achieve listing without having to pay the Listing Fee. Against that, APCHL and Mr Lewski had an interest in gaining a substantial fee for taking steps they were bound to take anyway; (b) the members had an interest in continuing to have an unfettered right to remove APCHL as RE without the imposition of a fee. Against that, APCHL had an interest in both receiving a substantial fee if removed and in creating a barrier to its removal as RE through the Removal Fee because removal would deprive it of a substantial fee on listing or vesting; and (c) the members had an interest in receiving reasonable takeover offers. Against that, APCHL had an interest in receiving a substantial fee if an acquirer was to acquire units over the specified thresholds, and in discouraging such offers creating a barrier to its removal as RE through the increased Takeover Fee, again because removal would deprive it of a substantial fee on listing or vesting.

ISSUE A2(D): DID ANY OF LEWSKI, WOOLDRIDGE, JAQUES, BUTLER, CLARKE; VOTE IN FAVOUR OF OR OTHERWISE ASSENT TO THE LODGEMENT RESOLUTION? 493 On the primary case put by each of the Directors, the Lodgement Resolution was never before the Board. On that case none of them could have voted in favour of it. But, on the assumption that the Lodgement Resolution was passed at the 22 August meeting (as I have found) each of the Directors argued that ASIC had failed to establish that he voted for or otherwise assented to it. In summary: (a) Mr Lewski and Mr Jaques contended that they would have abstained from voting by remaining silent in accordance with what they said was their usual practice when a resolution related to Mr Lewski's personal interests; (b) Mr Clarke said that he remained silent throughout the meeting, describing himself as a passive participant. He said that he understood from Dr Wooldridge that there was no requirement for him to express a position if it was apparent that a resolution enjoyed majority support. In effect he said that he abstained from voting; and (c) Dr Wooldridge and Mr Butler said nothing as to whether they would have abstained from voting or voted on the resolution had it been before the meeting; 494 I do not accept this contention. As I now explain, having regard to the nature of ASIC's claims and the Directors' defences, the nature of the subject matter of the proceeding and the gravity of the matters which ASIC alleges, I am satisfied that it established to the requisite standard that each Director's conduct amounted to a vote in favour of the Lodgement Resolution.

10.1 The minutes of the meeting 495 First, the Madgwicks Minutes (set out at [332]) record that the Lodgement Resolution was passed by "the Directors". Although the minutes do not indicate which of the Directors supported the resolution, by referring to the Directors in plural they record that the resolution was supported by more than one. 496 Importantly, the minutes do not record that any Director abstained from voting on the resolution, that is, the minutes do not support the contentions of Mr Lewski, Mr Jaques and Mr Clarke that they abstained. Each of the Directors was required to either actively support the resolution, actively oppose it or expressly abstain from supporting or opposing it, and it was his responsibility to ensure that his will was expressed and recorded in one of those ways: Gillfillan v ASIC at [4]-[11]. The minutes are to be treated as an accurate record of the meeting unless the contrary is proved. 497 In this case the minutes were pre-prepared and the author could not have known whether any Director would abstain from voting, but I infer that if a Director in fact abstained or voted against the resolution, that before he signed the minutes as correct Dr Wooldridge would have made any necessary alteration. I infer that the conduct of Mr Lewski, Mr Jaques and Mr Clarke did not convey or amount to an abstention from voting. 498 Mr Lewski and Mr Jaques argued that their unchallenged evidence was that they did not vote on the resolution and that the Court must find that they did not do so. I do not agree. Their evidence was not that they, in fact, abstained from voting on the resolution, but that they would have remained silent and abstained from voting on it if it was before the meeting. I see their self-serving evidence as to what they would have done as implausible in light of their conduct at the 19 July and 22 August meetings. I do not accept their evidence. In particular, given his earlier conduct, I do not accept that Mr Lewski would have taken a careful approach and acted so that his silence did not convey a vote in favour of the resolution. 499 Senior Counsel for Mr Lewski contended that ASIC made a forensic choice not to explore with the other Directors whether Mr Lewski voted for the resolution or not, and argued that I cannot be satisfied to the requisite standard that he did so. I do not agree. I am not satisfied that ASIC made such a forensic choice. There was no point in ASIC cross-examining any of the Directors as to whether the others had voted in favour of the resolution when each of them gave evidence denying that the resolution was even before the meeting. If ASIC had asked the question no Director could have provided an answer that Mr Lewski or another Director in fact voted on it. While I have no difficulty with the approach of Redlich and Bongiorno JJA and Hansen AJA in Curwen & Ors v Vanbreck Pty Ltd (2009) 26 VR 335 at [27]-[29], upon which Senior Counsel relied, I do not accept that it requires the finding for which he contended.

10.2 Whether Mr Lewski's and Mr Jaques' conduct conveyed or amounted to a vote in favour of the resolution 500 Even if I accept Mr Lewski's and Mr Jaques' evidence that they remained silent when the Lodgement Resolution was passed, the thrust of ASIC's case was that in all the circumstances their silence conveyed or amounted to approval of the Lodgement Resolution. I am satisfied that it did, for essentially the same reasons as I give in relation to the 19 July meeting at [245]-[256]. 501 Mr Lewski and Mr Jaques were responsible for ensuring that their will on the Lodgement Resolution was clearly expressed and accurately recorded in the minutes. If they wanted to ensure that their silence connoted abstention from voting that was easily achieved. Their practice of remaining silent, but not advising the other Directors that in doing so they intended to abstain from voting, cannot be seen as a clear expression of their will. 502 The requirement that the Directors be cautious to ensure that their will was properly recorded in the minutes was amplified by the fact that the Lodgement Resolution was not an everyday resolution. It was the final step in bringing into effect substantial additional fees, payable from Scheme property to the corporate trustee in its personal capacity, and through it to one of the Directors. The Five Principal Factors, particularly the conflict of interests and the conflict of interest and duty, would have put a reasonable director on notice of the need for a high standard of caution in expressing his or her will clearly and in ensuring that it was accurately recorded. 503 In all the circumstances the evidence strongly indicates that Mr Lewski and Mr Jaques should be seen to have voted in favour or otherwise assented to the Lodgement Resolution. I start with the inference that Dr Wooldridge followed his usual practice in putting the Lodgement Resolution before the Board, and that he asked "those in favour" and "those against". The assumed silence by Mr Lewski and Mr Jaques when asked whether they were in favour or against the resolution must be seen in light of their conduct at the 19 July meeting a month earlier where: (a) both were in favour of passing the Amendments and voiced no opposition to the resolution; (b) neither of them informed the other Directors that he had a personal interest in the Amendments; (c) neither of them left the Boardroom when the Amendments were discussed, when at least Mr Lewski was required to do so by law; (d) Mr Lewski spoke in support of the Amendments; (e) Mr Lewski moved the resolution; and (f) Mr Jaques seconded the resolution. As I have said, their conduct at that meeting conveyed and amounted to approval of the resolution to pass the Amendments. 504 When the Board considered the Lodgement Resolution, assuming (in accordance with Mr Lewski's and Mr Jaques' evidence) that they remained silent, their silence must be viewed in the light that: (a) there is no evidence that either of them informed the Board that their silence meant they were abstaining from voting; (b) no other Director gave evidence of an understanding that their silence meant they were abstaining from voting; (c) Mr Jaques accepted that the other Directors may not have understood that they were abstaining from voting; (d) both Mr Lewski and Mr Jaques were in favour of bringing the Amendments into effect through lodgement with ASIC; (e) the resolution was part of a package of resolutions recommended by Madgwicks in pre-prepared draft minutes; (f) neither of them gave cogent evidence of any reason to reject or not follow Madgwicks recommendation to pass the resolution; (g) neither of them said that they would have or did advise the other Directors that they had a personal interest in the resolution; and (h) neither of them said they would have left, or did leave, the Boardroom when the resolution was discussed, as Mr Lewski (and perhaps Mr Jaques) was required to do so by law. 505 Again, it was their obligation to be cautious. On the assumption that they remained silent, I consider that Mr Lewski's and Mr Jaques' silence amounted or conveyed approval of the Lodgement Resolution. In my view a reasonable observer of the 19 July and 22 August meetings would have concluded from such silence that they were voting to approve the resolution: see ASIC v Hellicar at [309]. 506 In a final contention Senior Counsel for Mr Lewski argued that I should treat Mr Lewski's support for passing and then lodging the Amendments at the 19 July and 22 August meetings as support which he offered in his personal capacity as a representative of the shareholders in APCHL rather than in his capacity as a Director. I reject this contention as completely without foundation. There is no evidence that Mr Lewski's support for the Amendments was given in a personal capacity rather than as a Director, no evidence that he informed the other Directors that his support was in such a capacity, and the support he provided was given in the course of two Board meetings which he participated in as a Director. His conduct was in his capacity as a director.

10.3 Whether Mr Clarke's conduct conveyed or amounted to a vote in favour of the resolution 507 Mr Clarke said he remained silent throughout the 22 August meeting, describing himself as a passive participant. As I detail at [198], he said that Dr Wooldridge informed him that if a majority of the Directors supported a particular position then that would be the outcome and there was therefore no need for him to indicate his position on a resolution or expressly abstain from voting. He said that he did not express a position on any resolution at the 22 August meeting because: (a) no report or issue arose at the meeting about which he had unique experience or information; (b) it was his first meeting as a director of APCHL; (c) he was a consultant to the Trust and his expertise related to planning and development issues; (d) he had a limited understanding of the Trust at that time, including but not limited to the fact that he had not read the Board papers for the meeting; and (e) the Lodgement Resolution was for the purpose of giving effect to a previous decision of the Board made at a time when he was not a Director. 508 Senior Counsel for Mr Clarke contended that it was not put to him in cross-examination that he affirmatively assented to the Lodgement Resolution, and that his silence is not in issue. Mr Williams denied that Mr Clarke's silence connoted assent to the resolution arguing that Dr Wooldridge's practice when putting a resolution of asking "those for" and "those against" was designed to ascertain whether there was dissent not whether there was unanimity. He argued that this process left it open for a Director to abstain by remaining silent, and he noted that Dr Wooldridge was not asked whether a director who intended to abstain from voting needed to announce that fact in some way. 509 As I set out at [199], I do not accept Mr Clarke's evidence as to his conversation with Dr Wooldridge or his understanding of the Board's practice in regard to resolutions before it. I prefer Dr Wooldridge's evidence, confirmed by Mr Jaques and Mr Butler as to the practice of the Board. While, as a matter of semantics, it can be argued that Dr Wooldridge's practice left open the possibility of a Director abstaining by remaining silent, I do not see that result was at all likely. The Board was only small, Dr Wooldridge was an experienced director, and I infer from his practice that he sought to understand the position of each Director on the resolutions before the meeting. 510 Mr Clarke's silence when the Lodgement resolution was put by Dr Wooldridge must be seen in the following light: (a) I reject his evidence as to his conversation with Dr Wooldridge regarding Dr Wooldridge's practice in putting resolutions; (b) no other Director gave evidence of an understanding that his silence meant he was abstaining from voting; (c) he was in favour of bringing the Amendments into effect through lodgement with ASIC; (d) the resolution was part of a package of resolutions recommended by Madgwicks in pre-prepared draft minutes; and (e) he did not give evidence of any reason to reject or not follow Madgwicks' recommendation to pass the resolution. 511 His evidence was that he sat passively in the meeting and said nothing. In my view his conduct conveyed or amounted to a vote in favour of the resolution. A reasonable observer would have concluded in all the circumstances that his silence indicated approval. It was his obligation to be cautious to express his will clearly and to ensure that it was so recorded.

10.4 Whether Dr Wooldridge and Mr Butler voted in favour of the resolution 512 Neither Dr Wooldridge nor Mr Butler gave evidence that he abstained from voting on the Lodgement Resolution nor that he voted against it. On the assumption that it was before the meeting neither even said whether they would have abstained or voted on it. However, each contended that the evidence did not enable me to conclude to the requisite standard that he voted in favour of it. 513 I do not agree. The minutes record that the resolution was passed and no abstentions or votes against it were recorded. The minutes are to be treated as an accurate record of the meeting unless the contrary is proved. Neither Dr Wooldridge nor Mr Butler offered any evidence to the contrary. It was their responsibility to ensure that their vote was recorded if they sought to abstain or to vote against the resolution. The evidence shows that: (a) they were in favour of bringing the Amendments into effect through lodgement with ASIC; (b) the resolution was part of a package of resolutions recommended by Madgwicks in pre-prepared draft minutes; and (c) they did not give evidence of any reason to reject or not follow Madgwicks' recommendation to pass the resolution. I infer in all the circumstances that they voted in favour of the resolution.

10.5 The approach in ASIC v Hellicar 514 In ASIC v Macdonald No 11 at [234] and ASIC v Macdonald No 12 at [125] and [127], Gzell J held that two directors of JHL, Mr Gillfillan and Mr Koffel, had approved the resolution in question even though they remained silent at the board meeting when it was discussed and carried. His Honour's finding was confirmed in each of the subsequent appeals: see Morley v ASIC at [854]-[855]; ASIC v Hellicar at [307]-[309]. While I have relied on the decision in ASIC v Hellicar in support of my finding that the conduct of Mr Lewski and Mr Jaques conveyed or amounted to a vote in favour of the Lodgement Resolution, I accept there are differences between that case and the present case. The practice of the JHL board was that the Chairman would wrap up a discussion by saying, words to the effect of, "we all agree on that", and any following silence was taken to mean assent. The practice of the APCHL Board was not the same. 515 Further to that difference, Senior Counsel for Mr Lewski argued that the declarations of contravention made in ASIC v Hellicar were made in respect of the directors' failure to "abstain from voting, in favour of the resolution to approve the Draft ASX Announcement and authorise its execution on sending it to the ASX". He contended that this was a wider case than that made by ASIC before me. That may be so but it makes little difference to its application in the present case. 516 Senior Counsel also contended that there was some significance in the fact that the JHL directors attended the board meeting by telephone, whereas in the present case Mr Lewski and Mr Jaques attended in person. I do not see this as a material difference. On the assumption that the Lodgement Resolution was passed their evidence is simply that they remained silent. In that regard their position is not relevantly different from that of the two JHL directors. 517 Senior Counsel also sought to distinguish ASIC v Hellicar on the basis that the silence of the two JHL directors conveyed a vote in favour of the resolution because they were expected to vote on it. He sought to contrast this with Mr Lewski's position in that he was required not to vote by s 195, indeed he should not even have remained present in the Boardroom on 22 August when the Lodgement Resolution was discussed. Given Mr Lewski's previous disregard for the requirements of s 195 this submission must be rejected. While I make no finding of contravention in this regard, Mr Lewski's conduct at the 19 July meeting in: (a) failing to advise the other Directors that he had a material personal interest when the Board was considering the Amendments; (b) failing to leave the Boardroom when the Amendments were discussed; (c) speaking in favour of the Amendments; and (d) moving the resolution to pass them; shows his non-compliance with the requirements of s 195. 518 Mr Lewski's conduct at the 19 July meeting, and the conduct of the other Directors in allowing him to participate in that meeting, is completely inconsistent with his contention that he was not expected to vote on the Lodgement Resolution. At the 22 August meeting the evidence again points to his non-compliance with s 195. He remained in the Boardroom throughout the meeting notwithstanding his material personal interest in lodgement of the Amendments.

ISSUE A2(E): IF A DIRECTOR DID VOTE IN FAVOUR OF, OR OTHERWISE ASSENT TO, THE LODGEMENT RESOLUTION, IN THE CIRCUMSTANCES IN WHICH THAT OCCURRED DID HE CONTRAVENE S 601FD(3)?

11.1 The legislation 519 Section 601FD sets out the duties of the officers of an RE. It provides: Duties of officers of responsible entity (1) An officer of the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the officer's position; and (c) act in the best interests of the members and, if there is a conflict between the members' interests and the interests of the responsible entity, give priority to the members' interests; and (d) not make use of information acquired through being an officer of the responsible entity in order to: (i) gain an improper advantage for the officer or another person; or (ii) cause detriment to the members of the scheme; and (e) not make improper use of their position as an officer to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme; and (f) take all steps that a reasonable person would take, if they were in the officer's position, to ensure that the responsible entity complies with: (i) this Act; and (ii) any conditions imposed on the responsible entity's Australian financial services licence; and (iii) the scheme's constitution; and (iv) the scheme's compliance plan. (2) A duty of an officer of the responsible entity under subsection (1) overrides any conflicting duty the officer has under Part 2D.1. (3) A person who contravenes, or is involved in a contravention of, subsection (1) contravenes this subsection. Note 1: Section 79 defines involved. Note 2: Subsection (3) is a civil penalty provision (see section 1317E). (4) A person must not intentionally or recklessly contravene, or be involved in a contravention of, subsection (1).

11.2 Relevant principles regarding the duties under s 601FD(1) 520 As an RE must be a public company, the duties imposed by s 601FD(1) overlay the duties imposed on officers of the company qua company officers by Part 2D.1 of the Act. Section 601FD(2) provides that a duty imposed by s 601FD(1) overrides any conflicting duty imposed by Part 2D.1. 521 There are some differences between the duties imposed by Part 2D.1 and Part 5C.2, the principal one being that the duties of an officer pursuant to Part 2D.1 are owed to the company itself whereas the duties imposed by s 601FD(1) are owed to scheme members. 522 ALRC 65, in response to which Part 5C.2 was introduced, relevantly states: [10.15] Proposal and Submissions. The Review has recommended that all scheme operators should be companies incorporated under the Corporations Law. The directors of an operator will, therefore, owe duties to the company. DP 53 proposed that the law should require each director of an incorporated operator to owe to scheme investors the same general duties that the Review proposed should be owed by the operator itself. This proposal was designed to overcome a gap in the existing regulatory framework for collective investment schemes. … [10.16] Imposing duties on officers. Officers of a scheme operator should pay close attention to the interests of the investors in the schemes operated by that company. They should prefer the company's interests to their own and prefer the investors' interests to the company's. Under the general law, the directors of a company owe fiduciary obligations to the company as a whole. The Review considers that investors should have obligations owed to them by the officers of the operator. Investors should be able to take action against officers to enforce these rights directly, without first proceeding against the company. The nature of the rights should be modelled on the Corporations Law s 232. The precise form of the recommendations follows the provisions in the Corporations Law s 232, so that officers will not face additional kinds of liability under the proposal. 10.17 Conflict between duties to the operator and duties to investors. Officers of scheme operators will continue to owe to the operator the duties set out in the Corporations Law s 232. They will, consequently, owe duties both to the operator and to investors. Where any conflict arises, the latter duty should prevail. The Review recommends that this should be expressly provided for in the Corporations Law, and that officers should be given statutory protection from claims by the operator or its shareholders arising from any loss they suffered in consequence of officers complying with their paramount duties to investors. (Emphasis added.) 523 Consistently with ALRC 65, the text of the Part and its context indicate that the duties it refers to are owed to scheme members rather than to the RE. This is apparent as: (a) the RE must be a public company and its officers owe the RE separate duties under Part 2D.1 that are analogous to most of the duties in s 601FD; (b) if the s 601FD duties were complementary to the Part 2D.1 duties rather than being separate duties owed to different obligees the conflicts of duty that are the subject of s 601FD(2) would not arise; (c) members and members' interests are implicitly or explicitly the subject of many of the s 601FD duties; and (d) members may seek orders under s 1325(2) in relation to contraventions of Part 5C.2. 524 The second principal difference between the Part 2D.1 and Part 5C.2 duties is that the latter duties are owed by a trustee to members who are beneficiaries, and may therefore be seen to be more demanding. In Alpha Wealth Financial Services Pty Ltd and Ors v Frankland River Olive Company Ltd [2005] WASC 189 ("Alpha Wealth Financial Services") at [33] Hasluck J described the duties imposed by s 601FD(1) as "essentially fiduciary" and Associate Professor Pamela Hanrahan in Managed Investments Law (Centre for Corporate Law and Securities Regulations - The University of Melbourne and CCH Australia, 1998) at 102 ("Hanrahan") calls the duties in s 601FD(1)(a) to (e) "fiduciary-type" obligations. 525 In Australian Securities Commission v AS Nominees Limited (1995) 62 FCR 504 ("ASC v AS Nominees") at 517 Finn J observed, and I respectfully agree, that: …the duties of trusteeship of the company can give form and direction to the common law and statutory duties of care and diligence imposed on directors, where the directors themselves have caused their company's breach of trust. 526 The scope of the s 601FD duties must be considered in light of the vulnerabilities inherent in the position of the members as beneficiaries of a trust and (as will often be the case) the fact that the RE holds itself out to the public and is paid as a professional trustee. 527 ASIC contended that another difference between the Part 2D.1 duties and the Part 5C.2 duties is that the latter duties do not attract the operation of the business judgement rule in ss 180(2) and (3). The Directors disagreed. In this regard they pointed to the observations of Austin J in ASIC v Rich at [7248]-[7253]. 528 In my opinion the statutory business judgement rule does not apply in relation to s 601FD. I say this because: (a) there is no equivalent of ss 180(2) and (3) in s 601FD; (b) the note to s 180(2) states that the statutory business judgement rule operates in relation to equivalent duties under general law but does not operate in relation to duties under any other provision of the Act; and (c) s 180(2)(d) provides that to obtain the protection of the rule a director must establish that he or she rationally believed that the relevant judgement was in the best interests of the company. This conflicts with the requirement in s 601FD(1)(c) that a director act in the best interests of the members and give priority to their interests, and a director's duty under s 601FD(1) overrides any conflicting duty the officer has under Part 2D.1: see s 601FD(2). 529 Even so, the wide range of practical business and management considerations that a director is often required to take into account in deciding where the corporation's interests lie and how they are to be served are relevant to understanding the appropriate standard of care. I should be careful not to merely substitute my opinion for the opinion of the Directors on management decisions, and I do not. But, it is important to remember that the business judgement rule relates to decisions made in the corporation's interests. I do not see how the fact that a director of an RE has made a 'business judgement' in the corporation's interests offers any protection to the director in relation to a failure to act in the members' best interests as required by s 601FD(1)(c), especially where the director fails to prioritise the members' interests in the event of a conflict of interest. 530 Even if the business judgment rule has some application, it is of little significance on the facts of the present case. Amongst other things: (a) the relevant decisions were not "business judgements" made in respect of the business operations of APCHL. I do not accept the evidence of those Directors who suggested that a business case existed for the new and increased fees. As I have said, the Listing Fee was introduced largely to serve the interests of APCHL in its personal capacity and Mr Lewski so as to incentivise him to pursue listing rather than proceed to vesting. The Removal Fee and the increased Takeover Fee were introduced largely so as to entrench APCHL as RE so that it did not miss out on the Listing Fee through being removed; (b) Mr Lewski had a material personal interest in the relevant decisions and Mr Jaques seemed to concede that he did too; and (c) the Directors had a statutory obligation to put the members' interests first in dealing with the conflict between APCHL's interests and the members' interests rather than an obligation to make a decision in the corporation's interests.

11.3 Breach of the duty to exercise reasonable care and diligence - s 601FD(1)(b). 531 ASIC alleged that in passing the Lodgement Resolution each of the Directors breached their duty to exercise reasonable care and diligence under s 601FD(1)(b).

11.3.1 Relevant principles 532 It is common ground that the authorities on the duty of a director to exercise care and diligence under s 180(1) (and predecessor provisions) of the Act are apposite to the duty under s 601FD(1)(b). They establish that the duty is akin to the common law duty of care and it reflects, and to some extent refines, corresponding obligations under the general law: ASIC v Vines at [1070]-[1077]; Vines v ASIC at [142]; Australian Securities and Investments Commission v Maxwell and Others (2006) 59 ACSR 373 ("ASIC v Maxwell") at [99] per Brereton J; ASIC v Rich at [7192] per Austin J. 533 The following principles as to the standard of care expected of company officers are relevant in the present case: (a) The Court is to consider what an ordinary person with the knowledge and experience of the defendant might be expected to have done in the circumstances if he or she were acting on his or her own behalf: Permanent Building Society (in Liq) v Wheeler and Others (1994) 11 WAR 187 at 234 ("Permanent Building Society") per Ipp J with Malcolm CJ and Seaman J agreeing; Australian Securities Commission v Gallagher (1993) 10 ACSR 43 at 53; Australian Securities and Investments Commission v Adler and Others (2002) 168 FLR 253 ("ASIC v Adler") at [372(4)] per Santow J. (b) In determining whether a director has exercised reasonable care and diligence the court will have regard to the company's circumstances and the director's position and responsibilities within the company. These circumstances include the type of company, the provisions of its constitution, the size and nature of the company's business, the composition of the Board, the director's position and responsibilities within the company, the particular function the director is performing, the experience or skills of the particular director, the terms on which he or she has undertaken to act as a director, the manner in which responsibility is distributed between its directors and its employees, and the circumstances of the specific case: ASIC v Adler at [372]; ASIC v Maxwell at [100]; ASIC v Healey at [165]. (c) Directors are not required to exhibit a greater degree of skill in the performance of their duties than may reasonably be expected from persons of commensurate knowledge and experience, in the relevant circumstances. While directors are required to take reasonable steps to place themselves in a position to guide and monitor the management of the company, they are entitled to rely upon others, except where they know, or by the exercise of ordinary care should know, facts that would deny reliance: ASIC v Maxwell at [100]. (d) Directors are entitled to rely upon specialist advice but not at the expense of their own non delegable duties to take reasonable care. Whether reliance on advice is justified will depend on the circumstances: ASIC v Healey at [162]. (e) A director's reliance on advice or information provided by others will be unreasonable where the director knows, or by the exercise of ordinary care should have known, any fact that would deny reliance on others: Daniels and Others (Formerly Practicing as Deloitte Haskins & Sells) v Anderson and Others (1995) 37 NSWLR 438 ("Daniels v Anderson") at 502 to 504 per Clarke and Sheller JJA; ASIC v Healey at [167]. The reasonableness of the reliance must be determined in each case but, as set out in ASIC v Adler at [372(11)], the following relevant matters may be important in determining reasonableness: (i) the risk involved in a transaction and the nature of the transaction: Permanent Building Society at 239 to 241; (ii) the extent to which the director is put on inquiry or, given the facts of a case should have been put on inquiry: Re Property Force Consultants Pty Ltd (1995) 13 ACLC 1051 ("Property Force Consultants") at 1059 to 1061 per Derrington J; and (iii) whether the position of the director is executive or non-executive: Permanent Building Society at 240. (f) A director appointed to a company because of a special expertise in an area of the company's business is not relieved of the duty to pay attention to the company's affairs which might reasonably be expected to attract inquiry, even outside the area of their expertise: Property Force Consultants at 1061; ASIC v Adler at [372(9)]. 534 The application of these principles means that the standard of care and diligence expected of a director is flexible and must have regard to the surrounding circumstances. As Isaacs and Rich JJ said in Gould v The Mount Oxide Mines Ltd (In Liq) and Others (1916) 22 CLR 490 at 531: No rule of universal application can be formulated as to a director's obligation in all circumstances. The extent of his duty must depend on the particular function he is performing, the circumstances of the specific case, and the terms on which he has undertaken to act as director. 535 In ASIC v Healey (at [191]) Middleton J held that the duty of care and diligence in s 601FD(1)(b) corresponds with the duty in s 180(1). I respectfully agree. But this does not mean that the standard of care expected will always be the same because that standard must be set having regard to the particular corporation's circumstances. The s 601FD(1)(b) standard will usually be set in the circumstance that the corporation is a professional trustee, while the s 180(1) standard is applied in relation to corporations in general. 536 I consider that the standard of care applicable where a corporation is a professional trustee, holding itself out to the public and being paid as such, will often be more exacting. The requirement that a professional trustee exercise a higher standard of care and take a cautious approach was discussed by Finn J in ASC v AS Nominees at 516 to 517 where his Honour usefully set out and considered the relevant authorities: see Speight v Gaunt (1883) 9 App Cas 1; King v Talbot (1869) 40 NY 76; In Re Whiteley; Whiteley v Learoyd (1886) 33 Ch D 347 at 355 per Lindley LJ; Scott, The Law of Trusts (4th ed, Little Brown & Company, 1988) at 432. 537 As Finn J explained at 517-518: The standard of trustee care and caution of which I have been speaking so far does not differentiate between types of trustee. It is of general application. That standard, moreover, was settled a century ago and during a period when trust corporations were not used for the trading and investment purposes that are the commonplace in this country today. There is, in my view, a substantial question now to be answered as to whether a higher standard is not to be exacted from at least corporate or professional trustees (a) which hold themselves out as having a special or particular knowledge, skill and experience, and (b) which, directly or indirectly, invite reliance upon themselves by members of the public in virtue of the knowledge, etc, they appear so to have. In Bartlett v Barclays Trust Co Ltd (No 1) [1980] Ch 515 at 534 Brightman J was prepared to impose such a higher duty of care on a trust corporation: "a professional corporate trustee is liable for breach of trust if loss is caused to the fund because it neglects to exercise the special care and skill which it professes to have." This decision has been cited with apparent approval, though not in terms relied upon, by Gleeson CJ in Gill v Eagle Star Nominees Ltd (unreported, Sup Ct, NSW Gleeson CJ, 22 September 1993). It is, in its own way, consistent with observations of the Privy Council in the Australian appeal National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 at 381, when refusing to excuse a trust company from a breach of trust. There is extensive United States case-law affirming such a higher standard. It is conveniently explained and exemplified in Scott on Trusts, par 174.1; see also Fales v Canada Permanent Trust Co [1977] 2 SCR 302 where the question is recognised but not answered by the Supreme Court of Canada; and see G G Bogert, Law of Trusts and Trustees (2nd revd ed 1977), par 541. If it were in fact necessary for me so to do (which it is not), I would be prepared to apply to the trustee companies in these proceedings a standard of care higher than that of the ordinary prudent businessperson. (Emphasis added.): see also Wilkinson and Others v Feldworth Financial Services Pty Ltd and Others (1998) 29 ACSR 642 at 693 per Rolfe J; ASIC v Adler at [372(6)]. I respectfully agree with Finn J. 538 The same was recognised in Australian Securities and Investments Commission, In the Matter of QLS Superannuation Pty Ltd v Parker (2003) 21 ACLC 888 at [114] (which concerned s 232(4) of the former Corporations Law). Drummond J said: The content of the obligation imposed by this provision to exercise care and diligence is, as the section indicates, governed by the particular corporation's circumstances and how a reasonable person in the defendant's position in the particular corporation would conduct himself. I have described the nature of QLSS trustee business. QLSS was bound to comply with the statutory covenants in s 52(2) the Superannuation Industry (Supervision) Act in conducting its business as trustee of the LES Fund; Parker was bound by s 52(8) to exercise a reasonable degree of care and diligence for the purpose of ensuring that QLSS itself satisfied these statutory covenants. In consequence, the content of the fiduciary duties on Parker as a director required of him a higher standard of care and diligence in performing his duties, including his duty to bring loan proposals suitable for consideration by the Board before it, than is the nature of the fiduciary duty on a director of an ordinary trading company. (Emphasis added.) 539 Scott and Ascher on Trusts (at 1210) describes the standard required of corporate or professional trustees in the following terms: A trustee who has greater skill or better facilities [than the person of ordinary prudence] is under a duty to use them. Moreover, a trustee who procures appointment by claiming to have a higher degree of skill or better facilities may incur liability for failing to use them. These principals apply, as well, to corporate fiduciaries. Thus the standard of care and skill applicable to a corporate or other professional trustee may well differ from that which applies in the case of an individual, non-professional trustee… When the question is whether a corporate trustee has exercised proper care and skill, it may be important to consider the corporation's internal organization, and whether that organization has functioned properly. Thus, when beneficiaries seek to surcharge a corporate trustee it is important, in proving that it acted prudently, for the trustee to be able to show that it gave careful consideration to the decision at hand, in accordance with its own internal procedures. It is crucial, therefore, for a corporate trustee to keep detailed records of all aspects of the administration of each of its trusts… (Citations omitted.) I agree with the learned authors. 540 In Daniels v Anderson Clarke and Sheller JJA at 494 described the different expectations on a trustee in the following terms: While the duty of a trustee is to exercise a degree of restraint and conservatism in investment judgements the duty of a director may be to display entrepreneurial flair and accept commercial risks to produce a sufficient return on the capital invested. 541 The standard of care and caution expected of a corporate trustee must flow through to its directors. As Finn J said in ASC v AS Nominees at 517 : Where the trustee is itself a company the requirements of care and caution are in no way diminished. And here, unlike with companies in general, these requirements have a flow-on effect into the duties and liabilities of the directors of such a company. It was established early…that at least when, and to the extent that, directors of a trustee company are themselves "concerned in" the breaches of trust of their company, they are liable to the company according to the same standard of care and caution as is expected of the company itself. (Citations omitted.) I respectfully agree. 542 A related basis for expecting a higher standard of care and diligence from directors of a trustee company may be seen in the observation of Santow J in ASIC v Adler. His Honour said at [372.14]: Where there is a transaction involving the potential for conflict between interest and duty… the duty of care and diligence falls to be exercised in a context requiring special vigilance, calling for scrupulous concern on the part of those officers who become aware of that transaction to ensure that any necessary corporate approvals are obtained and safeguards put in place. I respectfully take the same view. Where, as in the present case, the directors of a corporate trustee owe a statutory duty to act in the members' best interests, they must exercise a high level of care and caution when a conflict of interests or a conflict of interest and duty arises. 543 The result is that, while the duty of care under s 601FD(1)(b) and s 180(1) correspond, the standard of care under s 601FD(1)(b) will often be higher. This is so because: (a) the relevant director will be the director of an RE acting as a trustee, (and usually holding itself out and being paid as a professional trustee); and (b) the scheme members will be vulnerable to: (i) conflicts of interest between the RE's interests in obtaining fees and the interests of the members, and/or (ii) conflicts between the RE's interest in obtaining fees and its duty to act in the members' best interests and give their interests priority. These factors, common in managed investment schemes under Part 5C, will often require that the directors of such an RE exercise heightened care and caution and be scrupulous in dealing with any conflict of interests and conflict of interest and duty. However, this high standard is of no great significance in the result. On the facts of the present case, the standard of care and caution exercised by each of the Directors fell below even the standard of the ordinary prudent business person in the Director's position.

11.3.2 The alleged failure to exercise reasonable care and diligence 544 ASIC alleged that the Directors failed to exercise reasonable care and diligence as required by s 601FD(1)(b). It particularised its allegation in the following terms: (i) each Director failed to: (A) consider and understand; and (B) be satisfied that the directors of APCHL acting as a Board had considered and understood; the effect of Deed of Variation No 7; (ii) each Director failed to consider whether, and be satisfied that, there was a legitimate reason for APCHL to make the Amendments; (iii) each Director failed to be satisfied that the Board had considered: (A) legal advice that the Amendments if made without the approval of members would comply with the Act and the Constitution of the Trust; or (B) judicial advice that APCHL would be justified in making the Amendments without member approval; (iv) each Director failed to consider and be satisfied that the Board had considered whether the Amendments if made without the approval of the members would comply with the Act and the Constitution of the Trust; (v) each Director failed to consider and be satisfied that the Board had considered the effect of the Amendments on the rights and interests of the members of the Trust; (vi) each Director other than Mr Lewski failed to consider the effect of the Amendments on the interests of APCHL; (vii) each Director other than Mr Lewski failed to consider the effect of the Amendments on the interests of Mr Lewski and his associates; (viii) each Director failed to be satisfied that the Board had considered the matters referred to in paragraphs (vi) and (vii) above; and (ix) each Director failed to consider and be satisfied that the Board had considered how, if at all, the conflict of interests could be resolved in favour of members; when the Amendments purported to create rights in APCHL that, if exercised, would result in a diminution of the assets of the Trust without providing any, or any equivalent, benefit to its members. 545 In dealing with this allegation I will first consider the pleading and the particulars as a whole The function of particulars is not to divide ASIC's allegation of a failure to exercise reasonable care and diligence into several distinct issues, each requiring a separate finding. : Doonan v Beacham (1953) 87 CLR 346 at 351-352 per Williams ACJ and 352 per Kitto J.

11.3.3 The Directors' contentions 546 Each of the Directors denied that he breached his duty under s 601FD(1)(b). Their contentions largely followed common themes and I will deal with them together, except for some submissions by Mr Clarke which relate to his particular position. 547 Central to the Directors' contentions is the proposition that the considerations relevant to their decision to pass the Amendments on 19 July 2006 were different from those that were relevant when they considered the Lodgement Resolution on 22 August. Except for Mr Clarke (who was not a Director and was not present when the Madgwicks Advice was considered) the Directors pointed to that advice as outlining the types of considerations which they said that they addressed at the 19 July meeting. However, when the Lodgement Resolution was considered (on the assumption that it was) they argued that the circumstances indicated quite different considerations. 548 At the time the Lodgement Resolution was considered, the Directors said that their main consideration was APCHL's obligations under s 601GC to lodge the Amendments with ASIC. They argued that the Board had a positive obligation to lodge the Amendments as soon as practicable, and that a reasonable director would have either voted for the Lodgement Resolution or would have abstained. They contended that, irrespective of whether their honest belief in the effectiveness of the Amendments might now be considered misguided or unfounded, they had an obligation to effect the lodgement of the seemingly effective Amendments. On this argument a vote against the Lodgement Resolution would have been contrary to their duty under s 601FD(1)(f) to ensure that APCHL complied with the Act and the Constitution (and as a consequence a breach of the duty of care under s 601FD(1)(b)). 549 The Directors again contended that the 22 August meeting was not an occasion to revisit whether the Board had power to make the Amendments and they were under no obligation to reconsider their earlier decision to amend. They argued that a finding that such a duty existed would be at odds with the authorities and would increase the duties imposed on directors beyond anything previously known. 550 On the Directors' argument their conduct on 22 August must be viewed in light of the following circumstances: (a) they had been advised prior to and at the 19 July 2006 meeting by APCHL's solicitor (by the Madgwicks Advice and because Mr Lewski's evidence is that he passed on supplementary oral advice given him by Mr Goldberg) that the Board had power to amend the Constitution to provide for the additional fees; (b) APCHL was already party to Deed of Variation No 7 executed on 19 July 2006; (c) clause 4 of the Deed required that it be lodged with ASIC as soon as practicable; (d) lodgement of the Deed was not conditional nor dependent on contingencies put in place at the time it was executed in July 2006; (e) the Deed had been given in its executed form to Madgwicks on 19 July after the Board meeting, which conveyed an implied instruction to Madgwicks to lodge the Deed; (f) the Board had a duty under s 601FD(1)(f) to lodge the Deed with ASIC pursuant to s 601GC(2); (g) on 18 August Mr Lewski, and on 21 August the other Directors, received the 18 August email that confirmed that the Deed had been approved and executed; and (h) by 22 August 2006 each Director held an honest belief that the Deed was effective to vary the Constitution. 551 In a variation on these arguments Mr Solomon, Senior Counsel for Dr Wooldridge, argued that the reason for the delay in lodging the amended Constitution was only that the Supplementary PDS was not complete. Counsel contended that the Deed had been completed a month earlier on 19 July and once the new Supplementary PDS was complete the only extant issue was that of timing. He said that good governance required that the amended Constitution and the Supplementary PDS proceed together to ASIC and into public disclosure. Senior Counsel argued that therefore the only question before the Board on 22 August was a procedural or operational question, namely, was APCHL ready to lodge the Amendments as required by the Act? 552 The Directors rejected ASIC's claim that they failed to consider whether APCHL had a legal power to amend the Constitution at the 22 August meeting. In essence (except for Mr Clarke who was not present) they contended that the Madgwicks Advice which they considered at the 19 July meeting did not make it so clear that there was no power to amend that the Court can infer that, a month later on 22 August, they proceeded blindly in passing the Lodgement Resolution. They pointed to the 18 August 2006 email as making it clear that Madgwicks thought that the Amendments had been validly made and would take effect on lodgement. 553 The Directors argued that the Madgwicks Advice did not in terms state that APCHL could not amend the Constitution without the members' approval, and did not even suggest caution. Some of the Directors argued that in its tone and substance the advice encouraged the view that there was a power to amend which was reinforced by its reference to the Deed. They said that even if a reasonable person in their position at the 19 July meeting would have perceived the shortcoming in the Madgwicks Advice (which they denied), the 18 August email provided assurance that everything was in order. 554 Senior Counsel for Mr Jaques submitted that it was appropriate for the Directors to accept the Madgwicks Advice which provided that, if the statutory power to amend was to be lawfully invoked, the Board would have to hold a specific belief as to whether the members' interests would be adversely affected. Senior Counsel argued that it was then a short step for a Director to accept Madgwicks' advice that the Board must form a belief as to the interpretation of the Constitution in exercising its power to amend. He contended that while an experienced lawyer could appreciate the distinction between those issues, the distinction was not obvious to non-lawyers like the Directors. 555 In an alternative argument, some Directors argued that the Lodgement Resolution itself did not create any reasonably foreseeable risk of harm, and that ASIC did not establish to the requisite standard what would have happened had the resolution not been passed. On this argument, the Court should infer that the amended Constitution was likely to have been lodged regardless of whether the Lodgement Resolution was passed or not. They argued that this inference can be drawn from, amongst other things, the obligation to lodge imposed by s 601GC(2), the lack of any prior practice of passing resolutions to lodge constitutional amendments, the Madgwicks Advice which stated that the Deed would be lodged following a resolution approving it, and from Mr Lewski's evidence that he would have instructed Madgwicks to lodge the amended Constitution without needing a resolution to do so.

11.3.4 Consideration as to reasonable care and diligence

The surrounding circumstances 556 I do not accept that the surrounding circumstances are as the Directors contended. 557 First, I see the Five Principal Factors as central to the circumstances surrounding the Directors' consideration of the Lodgement Resolution. The Directors had to decide whether to pass a resolution which would bring the Amendments into effect, in circumstances where: (a) the Amendments provided for additional fees to be payable from Trust funds to APCHL in its personal capacity (and through it to one of the Directors); (b) consideration of the Amendments revealed APCHL's plain conflict of interest and conflict of interest and duty; (c) the nature of the Amendments was to impose additional fees for services that members had the right to expect without incurring a fee, to impair the members' right to have the Scheme managed for the fees set out in the existing Constitution, and to entrench APCHL as RE; (d) the fees could be payable on multiple occasions; (e) the additional fees were substantial, amounting to 6.7% of net Scheme property; and (f) the fees were gratuitous in the sense that there was no corresponding increase in the scope of APCHL's obligations or any countervailing benefit to the members. 558 Second, as I set out at [404]-[432], I do not accept that APCHL had a pre-existing obligation to lodge the Deed prior to the 22 August meeting. The Deed was incomplete and it was brought into effect by the Lodgement Resolution. It follows that I reject the contention that the Directors were bound to vote for or abstain from the Lodgement Resolution because of a pre-existing obligation to lodge the Amendments. There was no such obligation. At the 22 August meeting it was open (and in my view appropriate) for each of them to vote not to lodge the Amendments with ASIC. 559 Third, as I explain at [424], I do not accept that ss 601GC(2) and 601FD(1)(f) imposed a positive duty on the Directors to lodge the Amendments as soon as practicable after the 19 July meeting. An RE acting in accordance with its obligations would not have acted to lodge the Amendments until after the Deed had been fully executed and after preparation and adoption of an up to date PDS. 560 Fourth, as I said at [425], I do not accept that APCHL or Mr Lewski expressly or impliedly instructed Madgwicks to lodge the signed but undated Deed with ASIC prior to the passage of the Lodgement Resolution. 561 Fifth, the Lodgement Resolution was important in its own right as it would bring substantial additional fees into effect. It provided in terms: (a) "[a]t the last Board meeting, the Directors approved Deed of Variation (No. 7) to the Constitution which had not yet taken effect as it had not been lodged with ASIC"; and that (b) "the Consolidated Constitution incorporating Deed of Variation (No. 7) be lodged with ASIC to become effective." The Directors knew from the 18 August email that the Deed had not been completed. On its face, the Lodgement Resolution would operate to authorise and direct the completion of the Deed and lodgement of the Amendments with ASIC, so that the Amendments would come into effect. 562 Sixth, while the Directors decided the content of the Amendments at the 19 July meeting I have concluded that they did not intend for the Amendments to come into effect from that date. The Directors knew that the Amendments had no effect until lodged as that was clear from s 601GC(2), the note to cl. 25.1 of the Constitution, the 18 August email, the text of the Lodgement Resolution itself, and from earlier constitutional amendments. The resolution was therefore the Directors' last opportunity to decide whether to complete the process of amendment that they started on 19 July. Put another way, it was their last chance to ensure that in creating the additional fees they satisfied their duties under s 601FD(1). 563 Seventh, each of the Directors except for Mr Clarke had received the Madgwicks Advice. That advice was unusual, and uncertain on a central question asked by APCHL of its lawyers. As I explain (at [261]-[270] and [312]-[322]) I do not accept that the Madgwicks Advice clearly advised the Directors that they had power to pass the Amendments at the 19 July meeting or that the Directors gave that question proper consideration. I do not accept that Mr Lewski received or communicated any clarifying advice to the Board at its 19 July meeting (as I said at [209] to [212]). A reasonable director in each Director's position (except for Mr Clarke) would not have accepted the advice as satisfying him as to the power to pass the Amendments. 564 These circumstances indicated that on 22 August each of the Directors was required to exercise a high standard of care. APCHL's conflict of interest and conflict of interest and duty were self-evident and the Directors were required to be scrupulous in regard to the conflicts and in giving priority to the members' interests. 565 There is little substance to the contention that it was open to APCHL to lodge the Amendments administratively. The Board was the organ of the company chosen to direct lodgement of the Amendments and the Lodgement Resolution was the step the Board took to give effect to the Amendments. The Board exercised its power in passing the resolution and in doing so the Directors were required to comply with their duty to exercise reasonable care and diligence under s 601FD(1)(b). A reasonable director in each Director's position would not have treated it as merely administrative or procedural. 566 Taken in general there is no evidence that any of the Directors exercised reasonable care and diligence when passing the Lodgement Resolution. They denied that it was even before the 22 August meeting, but it was. The essence of their case was that it could have been performed administratively and that any resolution to lodge was only procedural. However the resolution had a substantive effect. They argued that it did not require the types of considerations particularised by ASIC, but it did. No Director gave cogent evidence that he gave proper consideration to the matters particularised in the pleading and I am satisfied that they did not. ASIC made out its claim that the Directors failed to exercise reasonable care and diligence.

The obligation to reflect on the earlier decision to amend 567 As I have said, the Lodgement Resolution was important and required careful consideration in its own right, that is, without any requirement for the Directors to revisit their 19 July decision to amend. 568 Having said that, the circumstances of the present case are such that a reasonable director in each Director's position (except for Mr Clarke) would have known that his consideration of the Amendments just one month earlier was quite inadequate. As I explain at [271]-[324], at the 19 July meeting the Directors gave no proper consideration to, amongst other things: (a) the fact that it was wrong to provide a Listing Fee payable from Scheme property to APCHL, and through it to Mr Lewski, so as to incentivise him to support listing when he was already obligated to do so; (b) the conflict between APCHL's interest in receiving the Listing Fee and the members' interest in having listing occur without the imposition of a fee, (at [277]-[297]); (c) the fact that the Board had capitulated to APCHL's conflict of interest in relation to the Listing Fee rather than giving priority to the members' interests; (d) the conflict between APCHL's interest in receiving the Removal Fee in the event APCHL was removed as RE, and the members' interests in being able to remove it as RE without paying a fee, (at [298]-[305]); (e) the deleterious effects of the Amendments, (at [309]-[310]); (f) the fact that the additional fees provided no corresponding benefit for the members, (at [323]-[324]); (g) whether the Board had power to pass the Amendments (at [312]-[322]). In particular, they gave no proper consideration to the fact that the Madgwicks Advice was unusual in advising that the Directors construe the Constitution, and uncertain in that it did not provide clear advice on a central question asked by APCHL of its lawyers; and (h) the effect of the Amendments on the members' rights to have the Scheme administered under the existing Constitution. The Madgwicks Advice dealt with the question of APCHL's power to pass the Amendments rather than whether the Amendments should be made. 569 A reasonable director in each Director's position would have understood that in failing to properly consider these matters he had failed to exercise reasonable care and caution. On 22 August a reasonable director would have been concerned to properly address these matters before passing the Lodgement Resolution. A reasonable director would have understood that the 22 August meeting was the point of no return in relation to the Amendments. 570 The Directors strenuously contended that to expect that, when considering the Lodgement Resolution, they should have revisited and reconsidered their deliberations of 19 July is unrealistic and a counsel of perfection. They argued that to impose such a standard would extend the directors' duty of care and diligence well beyond previous authority and make the role untenable. 571 I do not accept this. It is not a counsel of perfection to expect that before bringing amendments into effect that would provide substantial additional fees, payable to a trustee from trust funds, that the directors of a professional corporate trustee functioning as an RE would: (a) recognise the trustee's obvious conflict of interest and conflict of interest and duty; (b) give careful consideration to those conflicts and scrupulously prioritise the members' interests; (c) recognise that unusual and equivocal legal advice was not advice that should be relied upon in deciding to allow the fees; (d) identify and carefully consider the deleterious effects of the additional fees upon the members; (e) identify and carefully consider the fact that no corresponding benefit was provided to the members in return for the additional fees; and (f) look past the question as to the power to make the amendments and instead carefully consider whether the additional fees should be imposed. 572 The fact that these matters, particularly the conflicts, required careful consideration is obvious. While Mr Clarke never saw the Madgwicks Advice, the main issue that he and the other Directors missed on 22 August was APCHL's conflicts. "Blind Freddy" would have recognised these conflicts, and it was not a matter on which legal advice was necessary. 573 Nor, given that the Directors gave no proper consideration to these matters on 19 July, is it unrealistic to expect them to do so when the Amendments were back before them one month later. A reasonable director who attended the 19 July meeting would understand that he had failed to carefully consider and deal with these matters, and on 22 August would have been concerned to properly address them. This is particularly so when the two meetings were part of the same course of conduct and only one month apart. 574 Such an approach does not impose a general duty on directors to revisit and reconsider earlier decisions. Whether a director is to be expected to reflect on an earlier decision will depend on the circumstances.

11.3.5 Mr Clarke's position 575 I accept that Mr Clarke's position in relation to the Lodgement Resolution is somewhat different to that of the other Directors. Amongst other things: (a) he was not present at the 19 July meeting when the Amendments were passed; (b) he had not seen or considered the Madgwicks Advice or the Constitution at the time the Lodgement Resolution was before the Board; (c) Deed of Variation No 7 had been signed (although left incomplete) before he became a Director; and (d) the 22 August meeting was his first meeting as a Director, and he was officially appointed the day before. 576 Mr Clarke argued that another difference between his position and that of the other Directors is that he had not read the Board papers for the 22 August meeting, having received them on the previous day and (he said) not having had a chance to consider them. In relation to his duty to exercise reasonable care I do not see this as a relevant difference. As I explain at [370]-[375], he had ample opportunity to read the Board papers before the meeting. A reasonable director in his position would have done so. 577 Mr Clarke argued that another difference is that his expertise lay only in development and planning issues. I do not accept this as a relevant difference either. Even if he was appointed for this expertise only (which he did not establish) this did not relieve him of his obligation to exercise care and diligence when exercising his powers as a Director outside those areas of expertise: Property Force Consultants at 1061; ASIC v Adler at [372(9)]. Mr Jaques also contended that his conduct must be assessed in the light of the fact that he had been appointed to the Board principally because of his operational expertise. I reject this contention for the same reasons. 578 Senior Counsel for Mr Clarke contended that a reasonable director in Mr Clarke's position was not required to satisfy himself that a decision to amend the Constitution, made prior to his appointment as a director, was properly made. He contended that such a requirement would impose a duty on newly appointed directors to investigate and consider the propriety of decisions made prior to their appointment and to refuse to participate in proceedings of the Board involving the implementation of those prior decisions unless the Board first (in his presence) fully reconsidered each of those decisions ab initio. 579 Again, whether a director should be expected to reconsider a decision made prior to his or her appointment will depend upon the circumstances. One can readily imagine circumstances where an earlier decision is so plainly wrong or improper that when the issue comes back before the Board, for whatever reason, it should be expected that the directors, those newly appointed and others, would notice the error or impropriety and propose a different decision. The decision to pass the Amendments was clearly wrong because the Directors failed to recognise the conflict of interests and failed to give priority to the members' interests. A reasonable director in Mr Clarke's position would have seen this. 580 There is some merit in Mr Clarke's contention that it is unrealistic to expect that he would have satisfied himself about the Board's power to pass the Amendments at the 22 August meeting. Contrary to ASIC's contention, I do not see it as realistic to expect Mr Clarke to have called for the Madgwicks Advice when the Lodgement Resolution was before him on 22 August. However, he should have engaged with the issue of the Board's power and participated meaningfully in the meeting. His evidence is that he did nothing. 581 It must be the case that in considering the Lodgement Resolution a reasonable director in Mr Clarke's position would have been careful to read and understand the resolution itself. On the face of the resolution it was to have a substantive effect and bring substantial additional fees into effect. It must also be the case that a reasonable director of a professional corporate trustee in all the circumstances would be careful to read and understand the Amendments that were to be brought into effect by the resolution. 582 Against this: (a) Mr Clarke did not read the Board papers, even though he had ample time to do so; (b) he did not give evidence that he carefully considered the resolution. I infer that he did not; (c) there is no evidence that he carefully read and considered the Amendments to which the resolution referred. I infer that he did not; (d) he said that he was a passive participant in the meeting. I infer that he did not reach a view on the Lodgement Resolution or on the Amendments; and (e) he did not give evidence that he asked questions of the other Directors about the resolution or the Amendments. I infer that he did not. 583 The essence of Mr Clarke's case is that he should be found to have exercised reasonable care and diligence in passing the Lodgement Resolution, notwithstanding that he attended and participated in the Board meeting without reading the Board papers, without properly understanding the business of the meeting, and without contributing more than mere attendance and uninformed approval of the Lodgement Resolution. He took his role to be simply passive which was a serious failure. 584 There is no evidence that Mr Clarke gave the Lodgement Resolution or the Amendments any consideration at all. Leaving aside any question as to the Board's power to make the Amendments, had he properly considered them he would (or should) have understood, amongst other things: (a) APCHL's plain conflict of interest; (b) the deleterious effect of the Amendments; and (c) the fact there was no countervailing benefit to the members for the imposition of substantial additional fees. A reasonable director in his position would have questioned the Board's approach and voted against the resolution, or failing that made it clear that he abstained because he could not carry out his duties as a Director.

11.3.6 Dealing with the contraventions by reference to the particulars alleged 585 I have dealt with the thrust of the Directors' contentions but I will now briefly deal with them by reference to the particulars alleged.

(i) Each Director failed to: (A) consider and understand; and (B) be satisfied that the directors of APCHL acting as a Board had considered and understood - the effect of Deed of Variation No 7. 586 As I have said, a reasonable director in each Director's position, with the knowledge that APCHL was a trustee and of the nature of the Amendments would have exercised care and been diligent to read and understand the effects of the Amendments before passing them on 19 July, and been careful to ensure that the Board also considered and understood the effects. The same must be true on 22 August. A reasonable director in each Director's position on that date would have been careful to read and understand the effects of the Amendments before resolving to lodge them. 587 As I have said (at [277]-[310]), on 19 July the Directors failed to consider and understand the effects of the Amendments, and each of them failed to satisfy himself that the Directors acting as a Board had considered and understood those effects. 588 There is no evidence that any of the Directors considered the effects of the Amendments at the 22 August meeting. Some of the Directors' evidence revealed serious misunderstandings of the effects of the Amendments which would have been obvious to the other Directors had the Board properly considered them. 589 I infer that none of the Directors gave any consideration to the effects of the Amendments, nor were they careful to be satisfied that the Directors acting as a Board had considered and understood the effects of the Amendments.

(ii) Each Director failed to consider whether, and be satisfied that, there was a legitimate reason for APCHL to make the Amendments. 590 As I have said, the additional fees were not in the best interests of the members. I summarise my reasons for that view at [491] and it is unnecessary to do so again. 591 In relation to the 19 July meeting each of the Directors (other than Mr Clarke) offered a view as to why the additional fees were in the interests of the members. But as I have said their reasons do not withstand examination. Boiled down, the Board's reason for introducing the Listing Fee was largely to incentivise Mr Lewski to pursue listing, when he was already obligated to do so. The Removal Fee and increased Takeover Fee were largely to ensure that APCHL and Mr Lewski did not miss out on the Listing Fee through being removed. A reasonable director in each Director's position would not have seen these as legitimate reasons for the Amendments. 592 There is no evidence that on 22 August any of the Directors considered whether, and were satisfied that, there was a legitimate reason for the Amendments. I infer that no Director did so. A reasonable director in each Director's position would have given consideration to and been satisfied that there was a legitimate reason to make the Amendments. They were required to give the effects of the Amendments serious and focussed consideration and not simply go through the motions: ASIC v Healey at [174]. In failing to be so satisfied each Director failed to exercise reasonable care and diligence.

(iii) Each Director failed to be satisfied that the Board had considered: (a) legal advice that the Amendments if made without the approval of members would comply with the Act and the Constitution of the Trust; or (b) judicial advice that APCHL would be justified in making the Amendments without member approval.

(iv) Each Director failed to consider and be satisfied that the Board had considered whether the Amendments if made without the approval of the members would comply with the Act and the Constitution of the Trust. 593 I have previously set out the Madgwicks Advice as to the Board's power to pass the Amendments at [257]-[270] and the Directors' consideration of that power at the 19 July meeting at [312]-[322]. As I have said, Madgwicks did not clearly advise that the Board had power to pass the Amendments, and the Board's consideration of its power was quite inadequate. The Madgwicks Advice would have given a reasonable director in each Director's position cause for suspicion because: (a) the advice was unusual in providing that (notwithstanding their lack of legal qualifications) they should interpret the Constitution, rather than Madgwicks providing advice as to it; and (b) the advice was equivocal in that it proffered two mutually exclusive interpretations of cl. 25.1, on one of which there was no power to pass the Amendments, and that was the central point upon which advice had been sought. It did not advise which of the interpretations was to be preferred and the Directors each conceded that they understood that. While the Directors were entitled to rely on specialist legal advice, such reliance could not be at the expense of their non-delegable duty of care: ASIC v Healey at [162]. If they had exercised ordinary care they would have known that the advice should not to be relied on: Daniels v Anderson at 502 to 504. Had they exercised reasonable care the advice would have set them on a train of inquiry in relation to the question, and led to them seeking proper legal advice or perhaps a judicial direction: Property Force Consultants at 1059 to 1061; ASIC v Adler at [372(12)]. A reasonable director would not have relied upon the Madgwicks Advice in passing the Amendments, and would have considered it necessary to obtain unequivocal legal advice, to seek a judicial direction, or at least to seek the members' approval. 594 As I have said at [556]-[564], the circumstances on 22 August indicated that the Directors should exercise a high standard of care and caution. For those Directors who participated in the 19 July meeting and who had read the Madgwicks Advice their failure to exercise reasonable care is obvious. That advice had been before them only a month earlier and a reasonable director in each of their positions would have considered the question of the Board's power in light of the advice's plain shortcomings. They had taken no steps to pursue the necessary enquiries in the meantime. The thrust of their case was that lodgement could be performed administratively, that the decision was only procedural, and that this type of consideration was not called for, and that approach led the Directors into error. No Director gave evidence that on 22 August he gave any consideration to the Board's power to make the Amendments or the need for proper legal advice or a judicial direction. I infer that none did. 595 For Mr Clarke the situation is different. Nevertheless, on 22 August a reasonable director in his position would have given consideration to the Board's power to make the Amendments before deciding to bring them into effect. Mr Clarke's case was that he passively participated in the meeting. He did not engage with the question of the Board's power at all yet he approved the resolution. He failed to exercise reasonable care and diligence in my opinion.

(v) Each Director failed to consider and be satisfied that the Board had considered the effect of the Amendments on the rights and interests of the members of the Trust 596 As I set out when dealing with the 19 July meeting, the Directors present at that meeting identified various reasons for passing the Amendments, but did not mention the deleterious effects of the Amendments on the members' rights and interests. As I explain at [491] the negative effects of the Amendments are obvious. No Director present at that meeting gave cogent testimony that he had properly considered the effects of the Amendments on the members' rights and interests, or that he was careful to ensure that, acting as a Board, they properly considered those effects. 597 On 19 July the Directors' consideration of the members' rights and interests largely began and ended with the advice by Madgwicks that it was open for the Directors to conclude that the Amendments would affect the members' interests but not their rights. But, the Madgwicks Advice went only to the question of the power to amend the Constitution and it did not go to the question of whether it was appropriate to do so. 598 As I have said, this remained the case on 22 August. The Lodgement Resolution was important in its own right and the circumstances, including the Five Principal Factors, called for a careful and cautious approach. It is axiomatic that, before passing that resolution, a reasonable director in each Director's position (including that of Mr Clarke) would have considered and understood the effect of the Amendments on the members' rights and interests, and been satisfied that the Board had done so. However, the evidence shows that none of the Directors did so. The failure of the Directors was not the type of excusable mistake or mere error of judgement that may sometimes arise in detailed Board activities: ASIC v Rich at [7239]-[7242]. In passively participating in the meeting Mr Clarke gave the Amendments no consideration at all.

(vi) Each Director other than Mr Lewski failed to consider the effect of the Amendments on the interests of APCHL;

(vii) Each Director other than Mr Lewski failed to consider the effect of the Amendments on the interests of Mr Lewski and his related and associated entities; and

(viii) Each Director failed to be satisfied that the Board had considered the matters referred to in paragraphs (vi) and (vii) above. 599 Mr Lewski conceded that, at the 19 July meeting, he considered the benefits that the Amendments would provide to him via APCHL. The evidence shows that Dr Wooldridge, Mr Jaques and Mr Butler also understood that the Amendments provided for substantial additional fees payable to APCHL (and through it to Mr Lewski) from Trust property. The evidence of Mr Lewski, Dr Wooldridge and Mr Jaques as to the "inbuilt commercial disincentive", the "skewed incentives" and the need for a "level playing field" shows that on 19 July the Listing Fee was passed largely to incentivise Mr Lewski to pursue listing rather than proceed to vesting. I infer that Mr Butler understood this as well. 600 What the Directors failed to do on 19 July was to give any proper consideration to the conflict of interests that the fees created. A reasonable director in the position of each of the Directors present would have turned his or her mind to these matters and would have ensured that those matters were discussed and considered by the Directors acting as a Board. This was the Directors' most obvious failure and it speaks to a real lack of care and caution. Because of APCHL's conflicts each Director's duty of care and diligence fell to be exercised in a context calling for special vigilance and scrupulous concern by each of the Directors who were aware of it: ASIC v Adler [372(14)]. 601 This remained the case on 22 August. APCHL's and Mr Lewski's conflicts of interest were plain and the circumstances required a careful and cautious approach. A reasonable director in each of their positions would have been careful to consider and understand the effect of the Amendments on APCHL's and Mr Lewski's interests and would have understood these conflicts. Mr Clarke passively participated in the 22 August meeting and gave this question no consideration at all. None of the other Directors did either.

(ix) Each Director failed to consider and be satisfied that the Board had considered how, if at all, the conflict of interests could be resolved in favour of members 602 On 19 July a reasonable director in each Director's position would have considered and been satisfied that the Board had considered how, if at all, APCHL's conflict of interest could be resolved in favour of the members. 603 As I set out in dealing with that meeting, each of the Directors then present gave their reasons for approving the Listing and Removal Fees. The minutes of that meeting do not record any discussion of APCHL's conflicts of interest. As I said at [286]-[297] in relation to the Listing Fee, and at [302] in relation to the Removal Fee, no Director gave cogent evidence that on 19 July the Board identified, discussed or addressed APCHL's conflicts. I infer that the Board did not do so. 604 On 22 August, although APCHL's conflicts remained manifest the requirement to identify, discuss and address the conflicts remained unsatisfied. When considering the Lodgement Resolution a reasonable director in the position of each of the Directors would have: (a) identified APCHL's conflicts of interest; (b) raised the conflict at the meeting; (c) ensured that Mr Lewski (and perhaps Mr Jaques) did not participate in the deliberations because of his proximity to the conflicts; (d) determined that there was no way the conflicts could be resolved in favour of the members when bringing the Amendments into effect; and (e) voted against the resolution. 605 None of the Directors did so. As a passive participant in the meeting Mr Clarke gave this issue no consideration. Each of the Directors argued that the 22 August meeting was not an occasion for this type of consideration. I do not agree. Identification of this conflict and its resolution in favour of the members was at the heart of their fundamental obligation to give priority to the members' interests. The Directors' duty to exercise reasonable care and diligence required that the conflict be addressed with scrupulous concern, and it was not.

11.4 Breach of the duty to act in the best interests of members - s 601FD(1)(c). 11.4.1 ASIC's allegations 606 ASIC alleged that each of the Directors breached his duty to act in the best interests of the members of the Trust, and to give priority to the members' interests where there was a conflict of interests. In particular it alleged that: (i) each of the Directors failed to give consideration to whether making the Amendments was in the best interests of the members of the Trust; (ii) the Amendments were not in fact in the best interests of the members; and (iii) further or in the alternative to (ii), a director of APCHL in each of the Director's positions could not in the circumstances have reasonably believed that the Amendments were in the members' best interests. 11.4.2 Relevant principles 607 The duty of the RE's officer under s 601FD(1)(c) is expressed in identical terms to the RE's duty under s 601FC(1)(c) and it has the same meaning in both provisions. Clause 8.18 of the Explanatory Memorandum provides that the duties of officers of an RE reflect the best interests duty owed by the RE. 608 As I said at [484], the requirement to act in the "best interests of the members" encompasses the fundamental duty of undivided loyalty. Section 601FD(1)(c) required the Directors to solely pursue the members' interests, and it required that, where a conflict between the members' interests and the RE's interests existed each Director was bound to prefer the interests of the members. 609 The question to be answered in relation to the first limb of the provision is: Did each Director act with undivided loyalty, solely in the interests of the members? I see this as a straightforward factual question in the present case. 610 I do not accept the Directors' contention that the duty under s 601FD(1)(c) is analogous to the duty under s 181(1)(a) which requires that directors exercise their powers "in good faith in the best interests of the corporation." On this argument the first limb of s 601FD(1)(c) is only contravened where a director deliberately engages in conduct knowing that it is not in the members' best interest. In making this contention the Directors relied on Marchesi v Barnes and Keogh [1970] VR 434 at 437. 611 In that case Gowans J held that a breach of a predecessor provision to s 181(1)(a) required a consciousness on the part of the director that what was being done was not in the interests of the company. This approach was adopted in ASIC v Maxwell at [109] where Brereton J said: While the words "act honestly" have not been retained in the current section, the historical origins of the duty, as explained by Gowans J, which led his Honour to equate "acting honestly" with acting "bona fide in the interests of the company" are equally applicable to the current section. In this context, absence of good faith requires much more than negligence. In my opinion, s 181 is contravened only where a director engages deliberately in conduct, knowing that it is not in the interests of the company. (Emphasis added). See also ASIC v Macdonald No 11 at [663]. 612 I did not find these authorities of any great assistance in understanding the duty under s 601FD(1)(c) because: (a) the s 181(1)(a) duty may be distinguished because it contains a subjective element of good faith whereas the s 601FD(1)(c) duty does not. Brereton J's observation should be understood in that context; (b) the best interests of the company under s 181(1)(a) is now considered to be a matter of objective fact rather than a matter of the director's subjective state of mind. As the learned authors Austin and Ramsay say "…s 181(1) clearly applies where a director exercises powers for a purpose which the director thinks is proper but which the court judges to be improper": Austin RP and Ramsay IM, Ford's Principals of Corporations Law (14th ed, Butterworths, 2010) at 8.065; and (c) the s 601FD(1)(c) duty is derived from well-established equitable duties and has been described as being "essentially fiduciary" and a "fiduciary-type" obligation: Alpha Wealth Financial Services at [33]; Hanrahan at 102. 613 As I said at [485]-[488] the enquiry as to whether an RE has acted in the best interests of the members is objective, and it follows that the enquiry as to whether the directors of an RE have done so is also objective. That is, the requirement is not an obligation to act in a way the Directors honestly believed to be in the members' interests, but an obligation to act in what are objectively their interests. 614 Some Directors criticise this as judging the question on the basis of outcomes or hindsight, but on the facts of the present case no such difficulty arises. I do not accept that any of the Directors making his best effort solely in pursuit of the members' interests, acting honestly and with competence and care in all the circumstances could have reached the decision that it was in the members' best interests to pass the Lodgement Resolution. 11.4.3 Consideration 615 I have set out the Directors' contentions regarding whether the Lodgement Resolution was in the best interests of the members (at [450]-[453]), and I do not accept them. In my opinion when the Directors were considering the Lodgement Resolution: (a) the Five Principal Factors, and particularly APCHL's plain conflicts of interest, required that they take a careful and cautious approach to the resolution; (b) on its face the resolution was to have a substantive effect, and it required to be treated accordingly rather than being treated as merely administrative or procedural. This was so without any requirement to revisit their earlier decision to amend; (c) the Madgwicks Advice relied upon was both unusual and uncertain. It should have given rise to disquiet on the part of the Directors present at the 19 July meeting and they should have understood the necessity for unequivocal legal advice or a judicial direction before passing the resolution; and (d) the fact that of the Directors only Mr Lewski had a personal stake in the resolution is not to the point. The duty under s 601FD(1)(c) relates to conflicts of interest between the interests of the RE and the members' interests. 616 No Director gave evidence that he gave any consideration to whether the Lodgement Resolution was in the best interests of the members. Had they given consideration to that matter they would have been alive to the matters I summarised at [491] and they were not. I infer that none of the Directors gave the best interests of the members any consideration. Again, as above, Mr Clarke gave no consideration to this issue. 617 The resolution was plainly not in the members' interests as I describe at [491]. No reasonable director in the position of each of the Directors would have seen it as in the members' interests to lodge the Amendments so as to make them effective. None of the Directors could have reasonably believed that it was in the best interests of the members to bring the Amendments into effect through the resolution. ASIC made out its claim. 618 In dealing with the second limb of s 601FD(1)(c), there was a plain conflict between: (a) the interests of APCHL in being paid the additional fees and the interests of the members in paying only the fees under the existing Constitution; and (b) the interests of APCHL in being paid the additional fees and its duties to act in the members' best interests. The question is whether, in voting for or otherwise assenting to the Lodgement Resolution, did each of the Directors prefer the interests of the members to those of APCHL? 619 It is clear that the Directors did not prefer the members' interests. To prioritise the members' interests over APCHL's interests the Directors were required to have voted against the Lodgement Resolution. Its rejection would have meant that the Scheme's principal and income held on trust for the members would be applied only to the payment of APCHL's fees as specified in the existing Constitution, rather than the additional fees intended to be brought into effect. No Director took that course and each of them, therefore, breached his duty to prefer the members' interests. 620 ASIC has made out its claim.

11.5 Breach of the duty not to make improper use of position to: (i) advantage APCHL; (ii) advantage those who would benefit from the fees payable pursuant to the Amendments; or (iii) cause detriment to Trust members;

• as provided in s 601FD(1)(e). 11.5.1 ASIC's allegation 621 Section s 601FD(1)(e) provides that an officer of an RE must: not make improper use of their position as an officer to gain, directly or indirectly, an advantage for themselves or for any other person or to cause detriment to the members of the scheme. 622 ASIC alleged that in passing the Lodgement Resolution each of the Directors breached his duty in order to provide an advantage to APCHL. The allegation is particularised as follows: (a) the advantage to APCHL was that the Amendments purported to create rights in APCHL that would, if exercised, benefit it; (b) by voting in favour of or alternatively assenting to the resolution, each Director used his position intending to cause the Amendments to become effective; (c) each Directors' use of his position was improper because a person properly exercising the powers of a director of a trustee in the circumstances would have recognised that: (i) the Amendments conferred benefits on APCHL, on Mr Lewski and his associates; and (ii) were detrimental to the interests of the members of the Trust; and would have refused to use his position to permit the Amendments to become effective; (d) insofar as Mr Lewski is concerned the use of his position was also improper because: (i) the Amendments were Mr Lewski's idea and he wanted to amend the Constitution without seeking unitholder approval; and (ii) Mr Lewski sought and obtained advice from Madgwicks on the Amendments and further instructed Madgwicks that the purpose of the Amendments was to clarify anomalies in APCHL's fee arrangements. ASIC did not contend that the Directors' purpose was to cause detriment to the members. 11.5.2 Relevant principles 623 Section 601FD(1)(e) is in substantially similar terms to s 182(1). It is common ground that the authorities under s 182(1) are apposite to my consideration of this allegation of contravention, and they indicate that the provision is to be construed in the following way.

"To gain" an advantage or "to cause" a detriment 624 In Chew v The Queen (1992) 173 CLR 626 at 633 ("Chew") (which dealt with a predecessor provision to s 182(1)) the High Court explained, per Mason CJ and Brennan, Gaudron and McHugh JJ, that a purposive approach is to be taken to the words "to gain" and "to cause". In other words "to" is to be read as "in order to". Their Honours said: Once, as a matter of interpretation, the conclusion is reached that "to" means "in order to" s 229(4) expressly declares purpose to be an element of the offence and purpose, in the context of that sub-section, is the equivalent of a specific intention. And at 633-4: In the course of argument, it was suggested that it was not necessary to establish that an accused person perceived that the alleged advantage or detriment was an advantage or detriment. We do not read the provision in that way. Once one concludes that there is a purposive element in the offence, it is necessary to establish not merely that the accused intended that a result should ensue, but also that the accused believed that the intended result would be an advantage for himself or herself or for some other person or a detriment to the corporation. (Emphasis added.) 625 Proof that the effect of the change is the gaining an advantage or causing detriment is not sufficient, and in order to establish proof of purpose it must be shown that the defendant intended that the advantage or detriment would result and also believed that it would. It is unnecessary to show that both the advantage and the detriment were intended, as either is sufficient.

Improper use 626 The meaning of "improper use" in s 182(1) has been considered on several occasions. Impropriety is to be judged objectively. That is, an officer may act improperly without any intent and in the absence of bad faith. As the High Court explained in R v Byrnes (1995) 183 CLR 501 at 514 to 515 ("Byrnes") per Brennan, Deane, Toohey and Gaudron JJ: Impropriety does not depend on an alleged offender's consciousness of impropriety. Impropriety consists in a breach of the standards of conduct that would be expected of a person in the position of the alleged offender by reasonable persons with knowledge of the duties, powers and authority of the position and the circumstances of the case. When impropriety is said to consist in an abuse of power, the state of mind of the alleged offender is important: the alleged offender's knowledge or means of knowledge of the circumstances in which the power is exercised and his purpose or intention in exercising the power are important factors in determining the question whether power has been abused. But impropriety is not restricted to abuse of power. (Emphasis added.) It is unnecessary to establish a dishonest intent or consciousness by a director of a breach of their duties: Robins and Others v Incentive Dynamics Pty Ltd (in liq) and Another (2003) 175 FLR 286 at 297 per Mason P. 627 In Chew at 634 the High Court held that conduct may be improper even if the person concerned believed it to be in the interests of the company. Applying this to the words of s 601FD(1)(e), it follows that conduct may be improper even if the director concerned believed the conduct to be in the interests of the members. 11.5.3 Consideration 628 It is plain that in approving the Lodgement Resolution each of the Directors was acting as a director of APCHL and therefore as an officer of the RE within the meaning of s 9. The right to vote on the resolution involved the exercise of power of each of the Directors qua directors which constituted a "use" of "his position" for the purposes of s 601FD(1)(e). 629 The Directors again made the same or similar contentions. It suffices to briefly set them out again together with my rejection. The Directors contended that: (a) the Lodgement Resolution did not itself result in any gain, directly or indirectly to APCHL or to any other person. Any gain by any person was argued to have occurred upon signing Deed of Variation No 7. I do not agree. This is just a variation on the theme that the resolution was unnecessary and ineffective because s 601GC(2) and Deed of Variation No 7 created a pre-existing obligation to lodge the Amendments. As I have said, the Deed was not intended to, and had not, come into effect and it was the resolution that authorised and directed completion of the Deed and lodgement of the consolidated Constitution so that the Amendments came into effect; (b) none of them had the purpose of gaining an advantage for APCHL when they passed the Lodgement Resolution. They were doing so in circumstances where the Board had already taken all of the steps required of it to effect the Amendments and the resolution itself had no effect on that course of events. I do not agree. The resolution had the substantive effect to which I have referred; (c) when they were considering the resolution there was no duty to revisit and reconsider the resolution to pass the Amendments at the 19 July meeting. As I have said, the Lodgement Resolution was important without any requirement for the Directors to revisit their earlier decision. Further, the circumstances indicated that those Directors present on 19 July should have reflected on their earlier inadequate consideration of the members' interests; (d) other than Mr Lewski, none of them held shares in APCHL, none stood to gain from the payment of the additional fees, and none had an improper or colourable motive. This is not to the point. It was unnecessary for ASIC to establish that any of the Directors acted with dishonesty, intent or bad faith, and its case was not that they used their position to advantage themselves but rather that that they did so to advantage APCHL; and (e) apart from Mr Clarke, their evidence is that on 19 July they considered that the Amendments would not adversely affect members' rights and that it was in the members' interests to pass the Amendments to introduce the additional fees. They argued that such evidence excluded the possibility that the Directors' purpose in passing the Amendments was "in order to" gain an advantage for APCHL. I do not agree. I do not accept that the evidence shows that the Directors present on 19 July acted in the best interests of the members. On my view of the evidence their purpose : (i) in passing the Listing Fee was largely to provide an advantage to APCHL so as to incentivise Mr Lewski to pursue listing; and (ii) in passing the Removal Fee and the increased Takeover Fee was largely to provide an advantage to APCHL by ensuring that it did not miss out on the Listing Fee by being removed before listing occurred. 630 I see the Directors' purpose in passing the Lodgement Resolution as the same as the purpose for the decision to amend. The resolution authorised and directed completion of the Deed and lodgement of the consolidated Constitution so as to bring the Amendments into effect. No Director present at the 19 July meeting gave evidence of having any different purpose on 22 August. Even the most rudimentary examination of the terms of the resolution and the text of the Amendments would have revealed to Mr Clarke that they provided an advantage to APCHL by giving it additional fees. I infer that this was his purpose in assenting to the resolution. 631 Dealing now with the question of whether the Directors' use of their positions was improper I must apply the standard for impropriety set out in Byrnes and Chew. The standard of conduct expected of the Directors is that which would be expected of a reasonable person in the same position, with knowledge of the Directors' duties, powers and authority in all the circumstances of the case. Having regard to the Five Principal Factors and in the circumstances I have previously set out, I do not accept that a reasonable person in each of the Director's positions could have considered it proper to pass the Lodgement Resolution. 632 Mr Lewski's impropriety on this test is an even more straightforward matter. His conduct in passing the Lodgement Resolution occurred against the following backdrop: (a) he actively pursued the Amendments primarily to give himself a substantial Listing Fee; (b) he did so even though listing was already in planning; (c) he pursued the fees on an urgent basis when the only urgency was personal rather than their being a business case for it; (d) he misleadingly described the absence of a Listing Fee as "anomalous" to Madgwicks and to the Board; (e) he instructed Madgwicks that the additional fees were to be achieved without seeking the approval of the members; (f) he was concerned to avoid the members having the opportunity of rejecting the additional fees; (g) he participated in passing the Amendments on 19 July even though he should have left the meeting in accordance with the Act; and (h) he participated in passing the Lodgement Resolution on 22 August even though he should have left that meeting too. In saying this I do not point to his conduct before 22 August as founding this contravention, but rather as a backdrop against which his breach of s 601FD(1)(e) occurred. I see his conduct in passing the Lodgement Resolution as falling well below the standard expected of a reasonable person in his position in all the circumstances of the case. 633 ASIC contended that, for some purposes, the test in Charterbridge Corporation Limited v Lloyds Bank Limited and Another [1970] 1 Ch 62 at 74 should be applied. That test is "whether an intelligent and honest man [or woman] in the position of a director of the company concerned, could in the whole of the existing circumstances have reasonably believed that the transactions were for the benefit of the company?" If that approach is applied to the members' interests rather than the corporations I have little difficulty in finding that no intelligent and honest director in each Director's position could have reasonably believed it was in the interests of the members to bring the Amendments into effect through the Lodgement Resolution. 634 ASIC made out this contravention against each of the Directors.

11.6 Breach of the duty to take all reasonable steps to ensure compliance with the Constitution - s 601FD(1)(f). 11.6.1 ASIC's allegation 635 ASIC alleges that each of the Directors breached his duty under s 601FD(1)(f) in that he did not take all steps that a reasonable person would take if that person was in the Director's position to ensure that APCHL complied with the Act and the Constitution. 636 ASIC particularised its claim by alleging that: (a) by reason of the prohibition in cl. 25.1 of the Constitution, APCHL did not comply with the Constitution in purporting to make the Amendments; (b) in passing the Lodgement Resolution, APCHL did not comply with s 601FC(1)(m) which provides that an RE must carry out or comply with any other duty, not inconsistent with this Act, that is conferred on the RE by the scheme's constitution; (c) each of the Directors voted in favour, of or alternatively assented to, the Lodgement Resolution; (i) intending to make the Amendments effective; (ii) without being satisfied that the Board had considered legal advice that in making the Amendments, without the approval of the members, APCHL would comply with the Act and the Constitution; and (iii) without taking any steps to cause APCHL to obtain judicial advice as to whether APCHL was empowered and justified in making the Amendments without member approval. 11.6.2 Consideration 637 The Directors again made essentially the same arguments, including: (a) that at the time they were considering the Lodgement Resolution they had received the 18 August email confirming that Deed of Variation No 7 had been approved and executed on 19 July and would take effect on lodgement. They contended that no occasion arose to revisit their earlier decision to amend and that no reasonable person in each Director's position would have thought it necessary to seek further legal advice or judicial advice before approving what they describe as a procedural or administrative resolution to lodge the Amendments; (b) the Board having resolved on 19 July to amend the Constitution, compliance with the Act and the Constitution was achieved by instructing Madgwicks to lodge the Supplementary PDS, the consolidated Constitution and the Deed with ASIC; and (c) Mr Clarke contended that his duty under s 601FD(1)(f) took primacy over the other duties in s 601FD(1) such that a reasonable director in his position on 22 August would have regarded APCHL as obligated to comply with s 601GC(2) and to lodge the Amendments which APCHL had made on 19 July. That being so a reasonable director in his position would not have regarded it is appropriate to vote against the Lodgement Resolution. Having previously rejected the thrust of these contentions it is unnecessary to do so again. My view can be seen in my approach to the earlier contraventions. 638 It is unarguable that the Constitution forms a contract between APCHL and the members, and that the Scheme's constitution is enforceable under both the law of trusts and contract. It is the essence of a trust that the trustee undertakes to observe the wishes of those creating the trust as articulated in the trust deed. It is uncontentious that the term "members' rights" in s 601GC(1)(b) includes the members' contractual rights provided in the constitution: Smith v Permanent Trustee Australia Ltd (1992) 10 ACLC 906 ("Smith") per Young J at 913-914; ING Funds Management at [94]; Premium Income at [34]. 639 As I explain at [649]-[653] I consider that cll. 34.1 and 25.1 of the Constitution operated to prohibit APCHL from making an amendment to the Constitution in its own favour or resulting in any benefit to it. I consider APCHL was bound by this clause not to vary, or attempt to vary, the Constitution so as to give itself a benefit without member approval. It is uncontentious that in providing substantial additional fees payable to APCHL the Amendments were in its favour. 640 A question that arises in this context is whether the power conferred on an RE to amend a scheme constitution by s 601GC(1)(b) can be qualified by the terms of a scheme constitution. As I explain at [674]-[683], cl. 25.1 operated to prohibit APCHL from making certain types of amendment, and s 601FC(1)(m) required APCHL to carry out or comply with any other duty, not inconsistent with the Act that was imposed on the RE by the Constitution. I consider that the prohibition on amendments in favour of or resulting in any benefit to APCHL is properly to be seen as complementing rather than being inconsistent with s 601GC(1)(b). 641 Putting to one side my view that the Amendments were invalid, I consider that in passing the Lodgement Resolution so as to complete the Deed and bring the Amendments into effect the Directors gave APCHL a benefit in breach of the Constitution. I have previously described the approach that a reasonable director in each Director's position would have taken when presented with the resolution, and I need not reiterate those views. The Directors did not take all reasonable steps to ensure that APCHL complied with the Constitution, and each Director breached s 601FD(1)(f).

ISSUE A2(C): DID THE LODGEMENT RESOLUTION CONSTITUTE A BREACH BY APCHL OF S 601FC(5)?

12.1 The legislation 642 Section 601FC sets out the duties of the responsible entity of a registered scheme. It provides: Duties of responsible entity (1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: (a) act honestly; and (b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position; and (c) act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests; and (d) treat the members who hold interests of the same class equally and members who hold interests of different classes fairly; and (e) not make use of information acquired through being the responsible entity in order to: (i) gain an improper advantage for itself or another person; or (ii) cause detriment to the members of the scheme; and (f) ensure that the scheme's constitution meets the requirements of sections 601GA and 601GB; and (g) ensure that the scheme's compliance plan meets the requirements of section 601HA; and (h) comply with the scheme's compliance plan; and (i) ensure that scheme property is: (i) clearly identified as scheme property; and (ii) held separately from property of the responsible entity and property of any other scheme; and (j) ensure that the scheme property is valued at regular intervals appropriate to the nature of the property; and (k) ensure that all payments out of the scheme property are made in accordance with the scheme's constitution and this Act; and (l) report to ASIC any breach of this Act that: (i) relates to the scheme; and (ii) has had, or is likely to have, a materially adverse effect on the interests of members; as soon as practicable after it becomes aware of the breach; and (m) carry out or comply with any other duty, not inconsistent with this Act, that is conferred on the responsible entity by the scheme's constitution. (2) The responsible entity holds scheme property on trust for scheme members. Note: Under subsection 601FB(2), the responsible entity may appoint an agent to hold scheme property separately from other property. (3) A duty of the responsible entity under subsection (1) or (2) overrides any conflicting duty an officer or employee of the responsible entity has under Part 2D.1. (5) A responsible entity who contravenes subsection (1), and any person who is involved in a responsible entity's contravention of that subsection, contravenes this subsection. Note 1: Section 79 defines involved . Note 2: Subsection (5) is a civil penalty provision (see section 1317E). 643 The Explanatory Memorandum (at para 8.8) indicates that these duties are intended to reflect the fundamental duties of a fiduciary and the special nature of the relationship between an RE and the members of a scheme. The duties exist largely for the protection of the members.

12.2 ASIC's allegation 644 ASIC contended that in passing the Lodgement Resolution, APCHL contravened four of the duties created in s 601FC(1), in that it breached: (a) the duty of care and diligence in s 601FC(1)(b) by: (i) causing the Amendments to take effect when the Amendments purported to create rights in APCHL that would result in a diminution of the assets of the Trust without any, or any equivalent, countervailing benefit to the members; or in the alternative; (ii) failing to make enquiries as to the reason for, the effect of, and the propriety of the Amendments sufficient to have enabled it to reasonably consider that the Amendments should be made; (iii) failing to consider the conflicts of interest and how those conflicts could be resolved in favour of the members; and (iv) failing to obtain legal or judicial advice as to whether the Amendments could be made without member approval; (b) the duty to act in the members' best interests in s 601FC(1)(c) by: (i) failing to give consideration to whether making the Amendments was in the members' best interests when the Amendments were in fact not in the members' best interests; and or in the alternative; (ii) making the Amendments when an RE in the position of APCHL could not have reasonably believed that the Amendments were in the members' best interests; (c) the duty to give priority to the members' interests over those of APCHL in s 601FC(1)(c) by resolving to lodge the amended Constitution in circumstances where the Amendments: (i) would have been in favour of or resulted in a benefit to APCHL; (ii) would have disadvantaged the members of the Trust; and (iii) would not have been in the interests of the members of the Trust. (d) the duty to comply with the duties imposed by the Constitution under s 601FC(1)(m) by attempting to vary the Constitution in a manner that was in favour of, or resulted, in any benefit to APCHL. 645 The determination of APCHL's liability centres on the conduct of the Directors acting as a Board. I have already comprehensively analysed that behaviour in relation to the Directors' individual breaches and there is no need to again go over that material. It follows from my findings that in passing the Lodgement Resolution the Directors breached their duty: (a) to exercise care and diligence; (b) to act in the members' best interests; (c) to give priority to the members' interests over APCHL's interests; and (d) to comply with the Constitution; that APCHL did too. 646 In summary: (a) I dealt with the duty of care and diligence at [532] to [543] in relation to the Directors' conduct, and the same principles apply in relation to the alleged breaches of s 601FC(1)(b) by APCHL. For the same reasons as I gave in relation to the Directors' breaches at [556] and following, I consider that APCHL failed to exercise reasonable care in passing the Lodgement Resolution. It brought the Amendments into effect which created rights in APCHL that would result in a diminution of the Trust property without any, or any equivalent, countervailing benefit to the members. Having found in ASIC's favour on its primary allegation I need not consider its alternative allegations. (b) I dealt with whether the Lodgement Resolution was in the members' best interests at [450] to [492], and summarised my reasons as to why it was not at [491]. I concluded that the Directors failed to comply with their duty to act in the members' best interests at [606]-[619]. For the same reasons I am satisfied that APCHL failed to act in the members' best interests and failed prioritise the interests of the members over those of APCHL. (c) I dealt with whether, in passing the Lodgement Resolution, the Directors took all reasonable steps to comply with the Constitution at [635]-[641], concluding that they did not. For the same reasons I am satisfied that APCHL failed to comply with the Constitution by amending the Constitution in a manner that was in favour of or resulted in a benefit to APCHL .

ISSUE B3: DID THE CONSTITUTION OF THE TRUST AT ANY TIME BETWEEN 22 AUGUST 2006 AND 30 JUNE 2008 AUTHORISE APCHL TO PAY ITSELF THE LISTING FEE? 647 It is common ground that the two potential sources of power for APCHL to make the Amendments were the Constitution and s 601GC(1)(b). In summary, ASIC submitted that neither the Constitution nor s 601GC(1)(b) authorised the Amendments and that they are therefore invalid. It contended that the Constitution did not authorise APCHL to pay itself the Listing Fee at any time from 22 August 2006. 648 The Directors argued that APCHL validly amended the Constitution pursuant to s 601GC(1)(b). They contend too that even if the Amendments were not validly made by operation of s 601GC(2), the Amendments became prima facie effective when lodged with ASIC on 23 August 2006. On this argument the Amendments remain effective until there is a declaration or order that they were invalid. 13.1 The Constitution 649 Dealing first with the power to amend contained in the Constitution, I have set out cll. 34.1 and 25.1 of the Constitution at [83]-[84]. These clauses prohibited APCHL from amending the Constitution in its own favour or in a way resulting in any benefit to it. Clause 25.1(a) expressly creates a wide power of amendment subject to the specific qualifications set out in subclauses (i) to (iv). The qualifications set out in subclauses (i) to (iii) protect the members' interests in relation to any amendment, including in relation to amendments in favour of or resulting in any benefit to APCHL. 650 It may be remembered that one of the two interpretations that Madgwicks proffered to the Directors was that cl. 25.1(b) enlarged the scope of the amendment power in cl. 25.1(a). The Madgwicks Advice stated: Clauses 25.1(a) and (b) could potentially be interpreted in the following ways: (i) Clause 25.1(b) overrides (a) such that the RE can make any amendment under (b) that is permitted by the Act, without having to follow (a); or (ii) Clause 25.1(b) qualifies (a) such that the RE can only make an amendment that satisfies both (a) and (b). If the APCHL Board interprets clause 25.1 under (i) above and determines that the Corporations Act does not require Unitholder approval, then APCHL could proceed to make the amendments to the Constitution without Unitholder approval. 651 Although the Directors, other than Mr Clarke, said that on 19 July they relied on the Madgwicks Advice for their view that the Board had power to pass the Amendments, this construction of cl. 25.1 was not advanced by the Directors before me. That is, the Directors did not argue for the construction that cl. 25.1(b) overrides cl. 25.1(a). I do not construe cl. 25.1 in that way. Nor do I construe it as enlarging the power to amend in the Constitution by reference to the amendment power in the Act, or as creating a separate power of amendment. 652 Clause 25.1(b) is framed as a qualification that assumes the existence of a pre-existing power to amend. I construe it as qualifying cl. 25.1(a) in providing the requirement that an amendment which is authorised by cl. 25.1(a) must also comply with the Act. I say this because: (a) the first words of cl. 25.1(a) are "subject to clause 25.1(b)" which indicate that cl. 25(1)(a) is to be read as being qualified; (b) the words "any amendment of this Deed" in cl. 25.1(b) point back at the amendments that could be made under cl. 25.1(a); (c) Clause. 25.1(a) contains a wide power of amendment subject to four qualifications, at least three of which are aimed at protecting the members' interests. It would be a strange result if the draftsperson intended in cl. 25.1(b) to provide a separate power of amendment which was not subject to these qualifications, thereby negating the protection; (d) the note to cl. 25.1 refers to s 601GC simply as a pointer directing attention to the provisions of the Act; and (e) the requirement that an amendment to a scheme constitution must also comply with the Act is not unusual: see ss 601GA(1), 601GA(3), 601GA(4) and 601GB. 653 I consider that because the Amendments were in favour of or resulting in a benefit to APCHL they were made outside the constitutional power to amend. 13.2 The Act 654 It is common ground between the parties that s 601GC(1)(b) provides a concurrent power of amendment for an RE if the RE "reasonably considers the change will not adversely affect members' rights." For the purposes of this consideration I shall assume that this power is not qualified by cl. 25.1(a) of the Constitution. 655 The Directors contended that they reasonably considered that the Amendments would not adversely affect the members' rights, and argued that APCHL was therefore authorised to pay itself the Listing Fee. I do not accept this contention. 656 It is uncontroversial that the term "members' rights" in s 601GC(1)(b) includes the members' contractual and equitable rights provided in the constitution: Smith at 913-914; ING Funds Management per Barrett J at [94]; Premium Income per Gordon J at [34]. 657 In Premium Income the scheme constitution authorised the RE to issue units and cl. 3.2 of the constitution provided how the issue price of units should be determined. The RE purported to amend cl. 3.2 to alter how the issue price was determined, doing so under s 601GC(1)(b) as it "reasonably considered" that the amendment would not adversely affect the members' rights. Gordon J held that the amendment was invalid on the basis that the right to have the issue price determined in the manner provided in the existing constitution was a members' right within the meaning of s 601GC(1)(b) and that right had not been considered. I respectfully agree with her Honour's approach. 658 In 360 Capital the RE purported to amend the scheme constitution to provide for the issue of convertible notes, again doing so under s 601GC(1)(b). The RE had received legal advice to the effect that members did not have a right to have the scheme administered in accordance with the existing constitution, that the amendment only affected the value of the members' interests in the fund, and that those interests were not members' rights within s 601GC(1)(b). The Victorian Court of Appeal per Warren CJ, Buchanan and Nettle JJA at [26] rejected this approach and agreed with the reasoning of Gordon J. The Court held that the right to have a scheme managed and administered in accordance with the existing scheme constitution is a "members' right" within the meaning of s 601GC(1)(b). 659 As the Court explained (at [40]): … the right of a member to have a managed investment scheme administered according to the constitution of the scheme is fundamentally the most important right of membership. Without it, all other rights of membership, as well as the continuance, success and security of the scheme, would be at the whim of the responsible entity. I respectfully agree. 660 In the present case, the Directors were required as a first step to ascertain the rights of members created by the existing Constitution. Next, they were required to decide whether those rights, as distinct from the enjoyment of them or their value, would be changed or impinged upon by the Amendments. If they were changed or impinged upon, then the Directors were required as a third step to undertake a process of comparison and assessment in order to decide whether the impact would adversely affect members' rights: see Premium Income at [33] 661 When the Amendments were before them on 19 July 2006, the Directors had been provided with the Madgwicks Advice which advised as follows: Recent case law in respect of the section indicates that the proposed amendments to the Trust's Constitution under the draft Deed will not adversely affect Unitholders' rights for the purposes of section 601GC(1)(b). At most, the amendment may affect the value of the units held by the Unitholders. Case law indicates that an amendment that may change the value of the units does not, of itself, affect Unitholders' rights and provided that the amendment does not adversely affect the Unitholders' rights (which the cases refer to, as examples, being, right to distribution, voting rights and rights to receive information), the consent of the Unitholders is not required. In effect, the Directors were advised that they did not need to consider the members' entitlement to APCHL's services as RE for the fees provided in the existing Constitution, as these were not members' rights under s 601GC(1)(b). 662 On 19 July 2010 ASIC wrote to APCHL in relation to a complaint from a member of the Scheme regarding the Amendments and the payment of the Listing Fee, and made the following request: To assist with our enquiries into the complaint, we request recorded evidence in the form of minutes to meetings and other available documents that evidence the Responsible Entity provided due consideration to the rights of members before the modification of the constitution was made on 22 August 2006 and formed the view the amendments would not adversely affect members' rights. 663 By letter dated 26 July 2010 APCHL responded and said: The Board considered that the Amendment was in the nature of a corporate management decision in the context of preparing for the listing of units of the Trust on ASX. Consequently, when the Board considered the effect of the Amendment on members' rights the Board considered that the Amendment did not affect, change or otherwise contemplate the rights of members at all and therefore logically could not 'adversely' affect those rights. The Amendment may have had some effect on members' overall interests (insofar as it affected the operating of the Trust), but section 601GC(1)(b) does not provide for a process to consider the effect of an amendment on members' interests. Case law (including the cases you mentioned in your letter) has been quite clear that only the legal rights of members are relevant for the purposes of section 601GC(1)(b). Accordingly, any consideration required under 601GC(1)(b) was necessarily limited as there were simply no relevant members' rights to be considered before and after the Amendment. 664 APCHL's response tends to show that the Board acted on the Madgwicks Advice and took the view that it did not need to have regard to the members' right to have the Scheme administered according to the existing Constitution, as that was not a relevant members' right under the Act. 665 The Directors' evidence pointed to the same conclusion: (a) Mr Lewski deposed that he considered that the changes did not adversely affect members' rights for the reasons set out in the Madgwicks Advice, which distinguished between matters affecting the value of the units and the rights per se; (b) Mr Butler deposed that he voted for the Amendments based on his consideration of the Madgwicks Advice; (c) Mr Jaques deposed that based on the Madgwicks Advice, or on the advice and further discussions he had, he formed the view that APCHL had the power to make the Amendments; (d) Dr Wooldridge's evidence is that he considered and annotated the Madgwicks Advice. In cross-examination he conceded that the members had a right to have the Trust managed for the fees set out in the existing Constitution. He said that he found the distinction drawn between members' rights and interests "strange" which indicates that he noticed that distinction in the advice. I infer that his view that the Amendments did not adversely affect members' rights was based on the limited scope of "members' rights" advised by Madgwicks; (e) Mr Clarke was not a Director at the time the Amendments were passed and he gave no evidence on this subject; and (f) No Director gave evidence that on 19 July when the Amendments were passed he considered the members' right to have APCHL provide its services as an RE for the fees provided in the existing Constitution. I infer that having received advice that the Amendments would not affect any relevant members' right, each of the Directors other than Mr Clarke did not consider the members' right to have the Scheme administered according to its existing terms. 666 Further, no Director gave evidence that, on 22 August when the Board passed the Lodgement Resolution, he considered this members' right. As a passive participant in the meeting I infer that Mr Clarke gave the question no consideration. I infer that none of the other Directors did either. 667 It is plain that the Amendments in fact adversely affected the members' right to the services of APCHL as RE for the fees provided in the existing Constitution. Amongst other things: (a) the Listing Fee was a substantial new fee payable upon listing, in circumstances where listing was already in planning and the members were entitled under the existing Constitution to APCHL's services in that regard without any fee; and (b) the Removal Fee was a substantial new fee payable for the exercise of the right to remove APCHL as RE when the members were entitled under the existing Constitution to do so without any fee. 668 The Directors contended that 360 Capital was wrongly decided and that "members' rights" for the purpose of s 601GC(1)(b) did not include any right of the members to have the Scheme administered according to the existing constitution. The authorities they rely on are ING Funds Management at [98] per Barrett J, Re Centro Retail at [27] per Barrett J, and Smith at 913-914 per Young J. With great respect, I prefer the reasoning in Premium Income and 360 Capital. 669 The Directors argued that the approach taken to the meaning of members' rights in the Madgwicks Advice was consistent with the prevailing case law at the time, and that they honestly believed that the Amendments did not adversely affect members' rights. This may be so but it does little more than highlight their error. 670 An analogous situation arose in 360 Capital and at [50] the Court of Appeal explained: Other things being equal, it is reasonable for a board to act on the basis of legal advice on questions of law and, in this case, it may be accepted that it was not unreasonable for the board to conclude, as they were advised, that the proposed changes would not affect members' rights. It does not follow from that, however, that the board ought be taken to have considered that the proposed changes did not adversely affect members' rights. As the judge in effect held, no more follows from it than that, because the board were incorrectly advised that the proposed changes would not affect members' rights, they did not turn their consideration to the question of whether the effect of the proposed changes would be adverse to members' rights. (Emphasis added.) The same may be said in the present case. The Directors did not consider it necessary to turn their attention to the relevant members' right because they had received advice that they need not do so. Their failure to consider this right was a mistake and s 601GC(1)(b) was left unsatisfied. 671 Senior Counsel for Mr Jaques made a further argument in which he sought to draw a distinction between ASIC's argument: (a) on the one hand, that the Removal Fee and the Takeover Fee were invalid because they operate so as to fetter the previously unfettered right of the members to have takeovers and removals occur without a fee or without an increased fee; and (b) on the other hand, that the members had a right to the Trust listing without the imposition of the Listing Fee. 672 Senior Counsel argued that there is a distinction between the two because the members did not have any "right" under the Constitution to have the Trust listed, as the Trust was intended to vest within seven years of commencement: see cl.1.1(uu) of the Constitution. I do not accept that this is a valid distinction. While the Constitution did not expressly provide a right to have the Trust listed, the members had an entitlement to have APCHL pursue listing of the Trust if it was in their best interests. The Constitution did not set out a fee for that to occur. In any event this argument only goes to the Listing Fee and does not provide an answer in relation to the Amendments generally. 673 The Amendments were not authorised by the Constitution nor by the Act at any time from 22 August 2006. Having been made outside power, the Amendments were never effective: Premium Income at [42]; 360 Capital at [46]-[48]. I do not accept the contention that although made outside power the Amendments became effective by operation of s 601GC(2) when they were lodged with ASIC. 13.3 Does the Constitution qualify the power to amend in s 601GC(1)(b)? 674 Having reached the conclusion that the statutory power of amendment was not available to the Directors (even on the assumption that this power was not qualified by cl. 25.1(a)) it is unnecessary in this context to decide the correctness of the Directors' contention that the amendment power in s 601GC(1)(b) cannot be qualified by a scheme constitution. 675 It is however necessary in another context. At [635]-[641] and at [646(c)] I set out my view that in passing the Lodgement Resolution each of the Directors and APCHL contravened the prohibition in the Constitution on making amendments in favour of APCHL. My finding of those contraventions turns upon my view that the constitutional prohibition of amendments in favour of the RE was binding on APCHL, and was not (in effect) overridden by s 601GC(1)(b) as the Directors contend. I now deal with that question. 676 I do not accept the Directors contention. I consider that cl. 25.1 prohibited APCHL from making amendments in favour of APCHL and operated to qualify the statutory power of amendment. That is, s 601GC(1)(b) did not allow APCHL to amend the Constitution in its own favour effectively ignoring the constitutional restriction. 677 This is not straight-forward and I accept, as the Directors' contend: (a) that no constitutional provision can override the clear terms of s 601GC(1)(b). However, that observation does not mean that a complementary provision may not operate to qualify the section. (b) that the Explanatory Memorandum states at [9.6] that "[a] scheme's constitution may only be amended, modified or replaced with an approval by special resolution passed at a meeting of members….unless the responsible entity considers the change will not adversely affect members' rights." This passage seems to suggest that the statutory power is self-contained. However, the word "only" does not appear in the words of the statute and its presence should not be given too much weight. Extrinsic materials cannot be relied upon to displace the clear meaning of the statutory text: see Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 231 CLR 27 ("Alcan") at 47. (c) I also accept that s 601GC provides no express textual support for a conclusion that its requirements can be modified by the words of a scheme constitution. The Directors argued that the words "unless otherwise provided for in the scheme constitution" could easily have been introduced at the commencement of s 601GC(1) if that had been Parliament's intention. As against this, words such as "notwithstanding the provisions of any scheme constitution, the following applies" could easily have been introduced if it was Parliament's intention that a constitution could not modify the requirements of the section. 678 Having regard to the context and purpose of s 601GC(1), it is important that s 601GB provides that "the constitution of a registered scheme must be contained in a document that is legally enforceable as between the members and the responsible entity." Parliament clearly intended that a scheme's constitution should be enforceable as a contract. 679 Support is found for this in the Explanatory Memorandum which states (at [9.1] to [9.2]) in relation to ss 601GA and 601GB: …the legal form of a scheme's constitution will not be prescribed. However, whatever the form of the constitution, it must be legally binding as between the responsible entity and the members of the scheme (proposed section 601GB). The constitution will be required to make adequate provision for a limited number of matters (proposed section 601GA). A scheme's constitution will be able to include any other matters that are not inconsistent with the statutory requirements... (Emphasis added.) 680 If the Directors are correct in their contention, s 601GC(1)(b) operates so that a legally enforceable constitution is in reality not binding on an RE at all. On their argument s 601GC(1)(b) operates to allow APCHL to alter the contractual terms by passing an amendment in its own favour notwithstanding its agreement to an express contractual prohibition on it doing so. 681 I do not construe s 601GC(1)(b) in a way which produces this absurd result. The fact that the scheme constitution is legally enforceable by the members is an important element of the protection of members' rights and interests in Chapter 5C. Paragraph 10.14 of ALRC 65 states: ….The recommendations in this report are directed largely at reducing to an acceptable level the risk that an operator will not comply with the law or the constitution of its collective investment scheme. The operator, by establishing and marketing a scheme with a particular constitution, in effect promises investors that it will adhere to the constitution's requirements…. Including in the law the obligation to observe the scheme constitution is not necessary to enable investors to enforce the constitution. Investors will be able to enforce the constitution at general law. The ASC will also be able to enforce a scheme constitution either by representative action or by seeking a compliance order from the court… 682 In my opinion where a scheme's constitution provides a power to amend which is not inconsistent with the statutory power it should be treated as complementary. This approach accords with s 601FC(1)(m) which requires that an RE must carry out or comply with any other duty not inconsistent with the Act which is conferred on the RE by the Constitution. It is also in accord with the general purpose of protecting the members' interests and rights seen in s 601GC(1) and throughout Part 5C: Alcan at 47. 683 I can see no reason in principle why the members should not be able to include in their contractual arrangements with an RE more stringent - but complementary - limitations on the power to amend provided in the Act. The language of s 601GC(1)(b) is permissive insofar as it states that the constitution of a registered scheme may be modified" by an RE where it reasonably considers the change will not adversely affect members' rights, but there is little persuasive textual basis for concluding that this is intended to override any complementary limitations on the power to amend set out in the constitution. In fact s 601FC(1)(m) points the other way.

ISSUE B4: DID APCHL CONTRAVENE S 208 (AS MODIFIED BY PART 5C.7) ON OR ABOUT 27 JULY 2007, 3 AUGUST 2007, 13 MARCH 2008, 28 APRIL 2008, OR 27 JUNE 2008, IN RELATION TO THE PAYMENT OF THE LISTING FEE OR ANY PART THEREOF? 684 ASIC alleged that in paying itself the Listing Fee (and through it Mr Lewski) APCHL breached s 208 (as modified by s 601LC) regulating related party transactions. 685 It may be recalled that on 26 June 2007 the Board resolved to apply to list the units in the Trust on the ASX. At the same meeting the Directors resolved that the Listing Fee would be taken by APCHL not by way of a single cash payment but instead as follows: (a) 10% of the value of the fee to be taken as units at the time of quotation on the ASX; (b) the balance deferred and payable half in cash and half in units upon certain performance hurdles being met in the three financial years ended on 30 June in 2008, 2009 and 2010 ("Deferral Period"); (c) if the performance hurdles in a particular year were not met, that tranche of the Listing Fee was waived; and (d) if APCHL was removed as RE of the Trust prior to the end of the Deferral Period, the unpaid balance of the Listing Fee was payable in cash. 686 On the same date the Listing PDS was approved by the Directors and issued. The Listing Fee was estimated at approximately $33 million. The Board resolution provided, and the Listing PDS advised, that APCHL would receive immediate payment of the unpaid balance of the Listing Fee if it was removed as RE. The Listing PDS also advised that the unpaid balance would be payable if APCHL was restructured and interests asssociated with Mr Lewski ceased to control it. In that regard it was not in conformity with the resolution. 687 The events relevant to this allegation are detailed at [147]-[179], but I will briefly recap them as follows: (a) on 27 July 2007 the Board resolved to issue to APCHL in its personal capacity, 3,293,994 units to a value of about $3,293,994 as the first 10% tranche of the Listing Fee; (b) on 3 August 2007 the Board resolved to distribute 27.5 million options in APCHL to Directors and officers of APCHL and to the wholesale distributors of the units as part of their remuneration; (c) on 13 March 2008 APCHL paid itself an additional $329,399 representing the GST payable on the first tranche of the Listing Fee; (d) some time prior to 28 March 2008 Mr Lewski instructed Madgwicks that the Board resolution of 26 June 2007 was in error because it did not include a requirement to immediately pay the balance of the Listing Fee on a restructure of APCHL; (e) on 28 March 2008, in accordance with Mr Lewski's instructions, Madgwicks advised APCHL to amend the terms of the 26 June 2007 resolution so as to include a requirement to pay the Listing Fee immediately if APCHL was restructured and interests asssociated with Mr Lewski ceased to control it; (f) on 7 April 2008 the Board resolved to amend the terms of the 26 June 2007 resolution in accordance with the advice provided by Madgwicks. The Listing Fee became payable immediately upon a restructure of APCHL. At the same meeting the Board considered a restructure of APCHL which Mr Lewski was negotiating; (g) on 11 April 2008 Madgwicks advised Mr Lewski on the effect of the draft Heads of Agreement to restructure APCHL. Madgwicks advised him that upon execution of the formal documents he would lose control of APCHL and would be entitled to immediately receive the balance of the Listing Fee; (h) on 21 April 2008 APCHL met and considered the draft Heads of Agreement, the Blake Dawson Advice, Madgwicks advice about amending the 26 June 2007 resolution, and a memo from Kidder Williams proposing a formal resolution to authorise execution of the Heads of Agreement by APCHL; (i) on 23 April 2008 Mr Krishnan sent the Directors (other than Mr Lewski) an email asking them to endorse their acceptance of the resolution to authorise execution of the Heads of Agreement by APCHL. By separate emails on 23 and 24 April 2008 each of the Directors (other than Mr Lewski) endorsed their approval of the resolution; (j) on 28 April 2008 APCHL executed the binding Heads of Agreement which provided that the balance of the Listing Fee would become payable; (k) on 27 June 2008, in a meeting attended only by Mr Lewski, Mr Jaques and Mr Clarke, the Board resolved to execute the Deed of Acknowledgement of Listing Fee Payment and to issue one K class share to Kidder Communities, giving that entity 51% of voting control at APCHL general meetings; (l) on 27 June 2008 Mr Lewski and Mr Jaques executed the Deed of Acknowledgment on behalf of APCHL (in its personal capacity) and on behalf of APCHL (in its capacity as RE). Mr Lewski also executed the Deed of Acknowledgement on behalf of APA and Carey Bay; and (m) on the following dates the balance of the Listing Fee was paid as follows: (i) in accordance with an invoice dated 27 June 2008 APCHL paid to itself (in its personal capacity) $27,610,548.30 from Scheme property; (ii) by cheque dated 27 June 2008 Mr Lewski withdrew $27,610,548.30 from the APCHL account and deposited it in an account of his associated company, Direct Fitness; and (iii) on 27 June 2008 APCHL issued 9,020,386 units in the Trust, valued at $5 million to Carey Bay. 688 ASIC alleged that APCHL contravened s 208: (a) on 27 July 2007 when the Board resolved to take the first tranche of the Listing Fee, and further, or alternatively, on 27 July 2007 when the first tranche of units were issued and on 13 March 2008 when the GST component was paid; and (b) on 27 June 2008 the Board resolved to do everything necessary to give effect to the Deed of Acknowledgement and further, or alternatively, when on that day the Listing Fee Balance was paid to APCHL by cheque and by the issue of 9,020,386 units to Carey Bay.

14.1 The legislative framework 689 Section 601LA modifies the operation of the related party transaction provisions in Chapter 2E of the Act in relation to registered schemes. It provides: Chapter 2E applies with modifications Chapter 2E applies to a registered scheme with the modifications set out in sections 601LB to 601LE and as if: (a) references to a public company were instead references to the responsible entity of the scheme; and (b) references to a benefit being given to or received by a related party of a public company were instead references to a benefit being given to or received by the responsible entity or a related party; and (c) references to a resolution of a public company were instead references to a resolution of the members of the scheme; and (d) references to a general meeting were instead references to a members' meeting of the scheme; and (e) references to members of a public company were instead references to members of the scheme; and (f) references to the company's best interests were instead references to the best interests of the scheme's members. 690 Section 601LB creates a modified s 207 relating to managed investment schemes, which I shall describe simply as "s 207". It describes the purpose of the related party provisions in relation to registered schemes in the following terms: Purpose The rules in this Chapter, as they apply to a registered scheme, are designed to protect the interests of the scheme's members as a whole, by requiring member approval for giving financial benefits to the responsible entity or its related parties that come out of scheme property or that could endanger those interests. (Emphasis added.) 691 Section 601LC creates a modified s 208 relating to managed investment schemes, which I shall describe simply as "s 208". It provides: 208 Need for member approval for financial benefit (1) If all the following conditions are satisfied in relation to a financial benefit: (a) the benefit is given by: (i) the responsible entity of a registered scheme; or (ii) an entity that the responsible entity controls; or (iii) an agent of, or person engaged by, the responsible entity (b) the benefit either: (i) is given out of the scheme property; or (ii) could endanger the scheme property (c) the benefit is given to: (i) the person or a related party; or (ii) another person referred to in paragraph (a) or a related party of that person; then, for the person referred to in paragraph (a) to give the benefit, either: (d) the person referred to in paragraph (a) must: (i) obtain the approval of the scheme's members in the way set out in sections 217 to 227; and (ii) give the benefit within 15 months after the approval; or (e) the giving of the benefit must fall within an exception set out in sections 210 to 216. Note: Section 228 defines related party, section 191 defines entity, section 191 defines control and section 229 affects the meaning of giving a financial benefit . (2) If: (a) the giving of the benefit is required by a contract; and (b) the making of the contract was approved in accordance with subparagraph (1)(d)(i) as a financial benefit given to the entity or related party; and (c) the contract was made: (i) within 15 months after that approval; or (ii) before that approval, if the contract was conditional on the approval being obtained; member approval for the giving of the benefit is taken to have been given and the benefit need not be given within the 15 months. (3) Subsection (1) does not prevent the responsible entity from paying itself fees, and exercising rights to an indemnity, as provided for in the scheme's constitution under subsection 601GA(2).

14.2 The breach of s 208(1)(a)-(d) 692 APCHL did not defend the proceeding and the argument that I should not be satisfied that APCHL breached s 208, so far as it goes, is put by the Directors. 693 Mr Lewski, Dr Wooldridge and Mr Clarke each conceded that ASIC proved the elements of the contravention in s 208(1)(a)-(d), and while they do not clearly do so Mr Jaques and Mr Butler appeared to make the same concession. Whether or not it is conceded, I am satisfied that: (a) payment of the Listing Fee was "a financial benefit" within s 208(1), consistent with s 229(1); (b) the Listing Fee was given by APCHL as the RE, which meets the element of the contravention in s 208(1)(a); (c) the Listing Fee was given out of Scheme property, which meets the element of the contravention in s 208(1)(b); (d) the Listing Fee was given partly to APCHL itself, and partly (by way of units) to Carey Bay which is a related party, which meets the element of the contravention in s 208(1)(c); and (e) APCHL did not obtain the members' approval for these payments, which meets the element of the contravention in s 208(1)(d). 694 It was not contended by the Directors that any of the exceptions in ss 210, 211, 212, 215 or 216 apply. Sections 213 and 214 are omitted from modified Ch 2E by operation of s 601LD.

14.3 Whether s 208(3) qualifies the prohibition in s 208(1) 695 The Directors submitted that s 208(3) operates to confine or qualify the definition of a related party transaction that requires member approval in s 208(1), in that an RE is allowed to pay itself those fees provided for in the Constitution. In substance they argued that APCHL did not breach s 208 in paying itself the Listing Fee because at the relevant time it was provided for by the Constitution. 696 Mr Lewski, Dr Wooldridge and Mr Clarke conceded that if the Amendments lodged with ASIC were ineffective to amend the Constitution (as I have found) then APCHL breached s 208. This is so because, if the Amendments were invalid, there was no provision in the Constitution that allowed APCHL to pay itself the Listing Fee. 697 Senior Counsel for Mr Jaques took a different approach and argued that the references to the scheme constitution in ss 208(3) and 601GA(2) are references to the document filed with ASIC upon registration of the scheme, or to any amendment to a scheme's constitution or consolidated constitution lodged with ASIC pursuant to s 601GC(2). He argued that the consolidated Constitution lodged with ASIC on 23 August 2006 provided for the Listing Fee and contended that payment of that fee to APCHL was therefore permitted. It followed, Senior Counsel submitted, that there was no breach of s 208 by APCHL. 698 I do not accept this contention because: (a) as I said at [649]-[673], the Amendments were made outside power as they were not authorised by the Constitution or by the Act. They were invalid and ineffective to amend the Constitution; and (b) as I said at [673], I do not accept the contention that, although invalid, the Amendments became effective by operation of s 601GC(2) when they were lodged with ASIC. 699 I also note that s 207 provides that the purpose of the related party provisions is the protection of the "interests of the scheme's members as a whole, by requiring member approval for giving financial benefits to the related entity or its related parties..." To construe s 208(3) as Senior Counsel contended would make a mockery of the requirement for member approval of related party transactions. Its effect would be that an RE could avoid the important protections provided to the members simply by making, and then lodging, amendments allowing it to pay itself new fees. Such amendments would be effective even though made outside power. I do not read s 208(3) as operating in this way. 700 I am satisfied that APCHL contravened s 208 as ASIC alleges.

ISSUE C5: IF THE ANSWER TO ISSUE B4 IS 'YES', WERE ANY OF LEWSKI, WOOLDRIDGE, JAQUES, BUTLER, OR CLARKE KNOWINGLY CONCERNED IN ANY SUCH CONTRAVENTION BY APCHL OF S 208 (AS MODIFIED BY PART 5C.7)? 701 ASIC alleged that each of the Directors were knowingly involved in APCHL's contravention of s 208, and liable as accessories.

15.1 The statutory framework 702 Section 209 sets out the consequences of a breach of s 208 and extends liability to accessories to that breach. It provides Consequences of breach (1) If the public company or entity contravenes section 208: (a) the contravention does not affect the validity of any contract or transaction connected with the giving of the benefit; and (b) the public company or entity is not guilty of an offence. Note: A Court may order an injunction to stop the company or entity giving the benefit to the related party (see section 1324). (2) A person contravenes this subsection if they are involved in a contravention of section 208 by a public company or entity. Note 1: This subsection is a civil penalty provision. Note 2: Section 79 defines involved. (3) A person commits an offence if they are involved in a contravention of section 208 by a public company or entity and the involvement is dishonest. (Emphasis added.) 703 Section 79 defines 'involvement', and relevantly provides: Involvement in contravention A person is involved in a contravention if, and only if, the person: … (c) has been in any way, by act or omission, directly or indirectly, knowingly concerned in, or party to, the contravention… … 704 The words used in s 79 are employed in many Commonwealth statutes to import traditional criminal law accessorial liability concepts. It is uncontroversial that before any of the Directors can be found to be involved in APCHL's contravention of s 208, ASIC must prove that he was intentionally involved in the contravention and had knowledge of all the essential elements of the contravention: Yorke v Lucas (1985) 158 CLR 661 at 667, 669-670.

15.2 The main argument 705 Each of the Directors expressly or impliedly conceded that ASIC has proven that each of them had actual knowledge of the facts referred to in s 208(1)(a) to (d), namely that the Listing Fee is a financial benefit given: (a) by APCHL as the RE - (s 208(1)(a)); (b) out of Scheme property - (s 208(1)(b)); (c) to itself and to a related party - (s 208(1)(c)); and (d) without APCHL obtaining the approval of the members before doing so - (s 208(1)(d)). Whether or not it is conceded, I am satisfied that ASIC proved that each of the Directors had actual knowledge of these matters. 706 I am satisfied that each of the Directors: (a) participated in the meeting of 26 June 2007 and in the resolution regarding listing and payment of the Listing Fee; (b) participated in the meeting of 27 July 2007 and in the resolution to take the first tranche of the Listing Fee as units; (c) participated in the meeting of 7 April 2008 and in the resolution to amend the 26 June 2007 resolution; and (d) participated in the extraordinary meeting on 21 April 2008 after which each of the Directors approved the execution of the Heads of Agreement. The Directors other than Mr Lewski approved its execution by email in response to Mr Krishnan's request. Mr Lewski participated in the execution of the Heads of Agreement by executing that document on behalf of various personal interests. His actions were sufficient to show that he was joined in purpose with the other Directors in this decision. Mr Lewski, Mr Jaques and Mr Clarke participated in the meeting of 27 June 2008 and in the resolutions then passed, after which Mr Lewski and Mr Jaques executed the Deed of Acknowledgement of Listing Fee Payment. 707 These matters were known to each of the Directors and it must have been evident to them: (a) in July 2007, that the first tranche of the Listing Fee was to be given to APCHL (in its personal capacity) out of Scheme property, and was in fact paid in July 2007 and in March 2008 when the GST component was paid; (b) in June 2008, that the purpose and effect of the Heads of Agreement was the transfer of control of APCHL from Mr Lewski and his associates to Kidder Williams, such that APCHL (in its personal capacity), and through it Mr Lewski, was to be given the Listing Fee Balance out of Scheme property; (c) in June 2008, that the Deed of Acknowledgement was directed to the same result as the Heads of Agreement; (d) in June 2008, that the Listing Fee Balance was in fact paid to APCHL; and (e) in June 2008, that the units issued to Carey Bay were being given to a related party. Mr Lewski knew that he was the sole director of Carey Bay, and I infer that the other Directors knew that Carey Bay was a related party. The Heads of Agreement described Carey Bay as part of the "Lewski Interests". The transaction was about the payment of the balance of the Listing Fee Balance to Mr Lewski and his associates and the provision of the units must have been understood by the other Directors in that context. None of the other Directors gave evidence to the contrary. 708 The Directors contended that on its proper construction, knowledge of the matter in s 208(3) forms an essential element of the contravention of s 209. In making this contention the Directors variously described s 208(3) as: (a) a condition precedent to the obligations in s 208(1) being invoked; (b) a proviso to the section and an essential element of the contravention; (c) a provision that confines the operation of s 208(1) such that s 208(1) is not engaged if the fees are provided for in the scheme constitution; and (d) a necessary element of the contravention rather than an exception to the prohibition. 709 On this basis they contended that, to establish that they were "involved" in APCHL's breach of s 208 ASIC was required to prove that each of them had knowledge of the facts giving rise to a conclusion that the Listing Fee was not provided for in the Constitution, and the fact that the Listing Fee was not provided for in the Constitution. It is common ground that ASIC did not do so. 710 ASIC's position was that s 208(3) is not an essential element of the contravention of s 208. It argued that it did not need to prove that the Directors had actual knowledge that the Amendments were ineffective in order to make out its allegation that the Directors were involved in APCHL's contravention. 711 The question is whether on its proper construction, s 208(3) is an element of a contravention of s 208, knowledge of which must be proved by ASIC, or whether s 208(3) creates an exception to a general rule constituted by s 208(1)(a) to (d) knowledge of which is to be proved by the Directors.

15.3 The authorities 712 In Vines v Djordjevitch (1951) 91 CLR 512 ("Vines v Djordevitch") at 519-520 per Dixon CJ, McTiernan, Webb, Fullagar and Kitto JJ the High Court explained some of the considerations relevant to statutory construction in this context. As the High Court said: There is a technical distinction between a proviso and an exception, which is well understood. All the cases say, that if there be an exception in the enacting clause, it must be negatived: but if there be a separate proviso, it need not" - per Abbott J in Steel v Smith, at 99. The distinction has perhaps come to be applied in a less technical manner, and now depends not so much upon form as upon substantial considerations. In the end, of course, it is a matter of the intention that ought, in the case of a particular enactment, to be ascribed to the legislature and therefore the manner in which the legislature has expressed its will must remain of importance. But whether the form is that of a proviso or of an exception, the intrinsic character of the provision that the proviso makes and its real effect cannot be put out of consideration in determining where the burden of proof lies. When an enactment is stating the grounds of some liability that it is imposing or the conditions giving rise to some right that it is creating, it is possible that in defining the elements forming the title to the right or the basis of the liability the provision may rely upon qualifications exceptions or provisos and it may employ negative as well as positive expressions. Yet it may be sufficiently clear that the whole amounts to a statement of the complete factual situation which must be found to exist before anybody obtains a right or incurs a liability under the provision. In other words it may embody the principle which the legislature seeks to apply generally. On the other hand it may be the purpose of the enactment to lay down some principle of liability which it means to apply generally and then to provide for some special grounds of excuse, justification or exculpation depending upon new or additional facts. In the same way where conditions of general application giving rise to a right are laid down, additional facts of a special nature may be made a ground for defeating or excluding the right. For such a purpose the use of a proviso is natural. But in whatever form the enactment is cast, if it expresses an exculpation, justification, excuse, ground of defeasance or exclusion which assumes the existence of the general or primary grounds from which the liability or right arises but denies the right or liability in a particular case by reason of additional or special facts, then it is evident that such an enactment supplies considerations of substance for placing the burden of proof on the party seeking to rely upon the additional or special matter. (Citations omitted.) 713 In Avel Proprietary Limited v Multicoin Amusements Proprietary Limited and Another (1990) 171 CLR 88 ("Avel v Multicoin") at 119 McHugh J usefully summarised the principles and observed: When a statute imposes an obligation which is the subject of a qualification, exception or proviso, the burden of proof concerning that qualification, exception or proviso depends on whether it is part of the total statement of the obligation. If it is, the onus rests on the party alleging a breach of the obligation. If, however, the qualification, exception or proviso provides an excuse or justification for not complying with the obligation, the onus of proof lies on the party alleging that he falls within the qualification, excuse or proviso: Vines v Djordjevitch (1955) 91 CLR 512, 519. Whatever form the statute takes, the question has to be determined as one of substance: Vines v Djordjevitch at 519; Banque Commerciale S.A., en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 285. (Emphasis added.) 714 In Waters and Others v Mercedes Holdings Pty Ltd and Others (2012) 203 FCR 218 ("Waters") per Jacobson, Flick and Foster JJ, the Full Court considered the essential elements of a contravention of s 208, as modified by Part 5C.7. Their Honours applied Avel v Multicoin and held that s 208(1)(a) to (d) constitutes a complete statement of the general rule in s 208, or to use another expression, was a "total statement" of the prohibition. The Full Court rejected the argument that s 208(1)(e) was an element of the contravention which was required to be proven by the plaintiff and held that it was for the defendants to prove that their case fell within that subsection. 715 In dealing with Vines v Djordjevitch and Avel v Multicoin their Honours said at [16]: What is clear from both of these decisions is that the question of statutory construction is to be resolved as a matter of substance rather than as a matter of form… 716 The Full Court construed s 208 and explained at [36] to [38]: [36] Notwithstanding accepted difficulties in the construction of s 208(1) (as modified), it is considered that the legislative intent is discernible. So much, it is considered follows from: • the legislative statement of purpose in s 207 (as modified by s 601LB); • the terms employed in s 208(1) (as modified), including the heading to s 208 and the other headings used in Pt 5C.7 and Ch 2E (these headings are part of the Corporations Act: see s 13 of the Acts Interpretation Act 1901 (Cth)); • the terms employed in s 208(1)(e) (as modified) and, in particular, the use of the term "exception"; and • the manner in which the remaining exceptions to s 208 (as modified) are expressed, being ss 210 to 216 but not ss 213 and 214 which are excluded in the context of a registered scheme by s 601LD. [37] The statement of purpose as the protection of "the interests of the scheme's members as a whole, by requiring member approval" assists considerably in arriving at the correct construction of s 208(1) (as modified). When regard is had to the purpose of Pt 2E.1 as it relates to registered schemes specified in s 207 (as modified), it is considered that s 208(1)(a) to (d) constitutes a complete statement of the general rule. To use the language of McHugh J in Avel Pty Ltd "the total statement of the obligation" is to be found within s 208(1)(a) to (d). That conclusion is reinforced by the language of s 208(1)(e) which expressly recognises that there may be an "exception" to what is otherwise a "total statement of the obligation". The use of the disjunctive "or" immediately after para (d)(ii) of s 208(1) (as modified) also marginally assists in reaching the same conclusion: namely, that, in the absence of member approval a financial benefit cannot be provided out of scheme property unless one or more of the available exceptions can be invoked. Again, to use the language of McHugh J in Avel Pty Ltd, s 208(1)(e) (as modified) provides "an excuse or justification for not complying with the obligation". That an available "exception" embraced by this subsection is truly "an excuse or justification for not complying with the obligation" is further reinforced by the introductory words to each of the exceptions that remain applicable, namely "[m]ember approval is not needed to give a financial benefit". Each exception begins with the premise that, if the benefit to be given to the related party is to be lawful, the approval of the scheme members is required. [38] So construed, s 208(1) (as modified) creates a prohibition upon the giving of a financial benefit to a related party of the responsible entity without first obtaining the approval of the scheme's members unless the circumstances of giving the benefit falls within an "exception". Differently expressed, unless one of the exceptions mentioned in s 208(1)(e) (as modified) applies, a benefit which falls within s 208(1)(a) to (c) (as modified) which has not been approved by the scheme members cannot be given to a related party. Section 208(1)(a) to (d) (as modified) is therefore a "total statement" of the prohibition and the onus rests upon those alleging that one or more of the exceptions apply in the circumstances of the particular case to plead and to prove the necessary facts, matters and circumstances that engage the exception or exceptions relied upon. Proof of the inapplicability of the exceptions described in s 208(1)(e) (as modified) is not a condition precedent to the imposition of the prohibition on giving the relevant benefit. (Emphasis added.)

15.4 Consideration 717 The Directors' contended that the reasoning in Waters is inapplicable, and that, properly construed, s 208(3) is not an exception. It must be accepted that there are relevant differences between s 208(1)(e) which was considered in detail in that case and s 208(3). These include that: (a) the words of s 208(3) are "[s]ubsection (1) does not prevent…" which can be contrasted with the language of s 208(1)(e) which states that a matter "must fall within an exception" to describe its ambit; (b) the "exceptions" falling within s 208(1)(e) are those set out in ss 210 to 216 and each of these sections commences with the introductory words "[m]ember approval is not needed to give a financial benefit." At the Full Court noted this language reinforces the proposition that s 208(1)(e) is an excuse or justification for not complying with s 208(1)(a) to (d) and similar language is not used in s 208(3); and (c) in a minor way the use of the disjunctive "or" at the end of s 208(1)(d)(ii) points to s 208(1)(e) being an exception, and this is not present in s 208(3). 718 The Directors argued that: (a) as a matter of substance s 208(3) does not sit alongside the sections referred to in s 208(1)(e) as an exception to the general liability to comply with s 208(1)(a) to (d); (b) if s 208(3) was intended to be understood as an exception, its terms would have been included either within a sub-section of s 208(1) or as a separate exception provided under s 208(1)(e); (c) the fact that s 208(3) was not inserted into s 208(1) shows that s 208(1) is inapposite to situations where financial benefits are provided for in a scheme constitution; (d) s 208(3) is not an exception but a provision that creates a right in the RE to be paid from scheme property where the payment is permitted by the scheme constitution; (e) by application of the rules of statutory construction, s 208(1) begins with a premise that the Constitution does not permit the payment of the fees; (f) the words in s 208(3) do not purport to create an exception to the operation of s 208(1) but instead create a preliminary consideration; (g) if Parliament had intended that s 208(3) operate as an exception it could have expressly used the language of exception as in s 208(1)(e); and (h) the language in s 208(3) makes it plain that s 208(1) does not prevent, stop or apply to payments made in conformity with the constitution. 719 There is force to some of these contentions and the proper construction of s 208 in this context is a difficult question. There was no express requirement for the Full Court in Waters to consider s 208(3) and their Honours did not refer to it. 720 I have reached the view that on the proper construction of s 208, s 208(3) is not an essential element of the contravention. It is therefore unnecessary for ASIC to prove that the Directors had knowledge that the Amendments were invalid to establish their liability as accessories to APCHL's breach under s 209. It was for the Directors to plead and prove the facts upon which they relied to bring the case within the "exception" in s 208(3). 721 I have reached this view, first, in following Waters. I do not accept the contention that its reasoning is inapplicable to the present case. The Full Court carefully considered the construction of s 208 in its modified and unmodified forms in the context of Ch 2E of the Act and, while their Honours did not refer to s 208(3) I cannot accept that they did not turn their mind to it in construing s 208 overall. Their Honours considered it a matter of general importance to settle the correct construction of the section. The question was treated as one of importance and the Court considered it afresh because of difficulties with some of the earlier authorities: Waters at [35], [50]. Having done so, their Honours explained in clear words that s 208(1)(a) to (d) constitutes a complete statement of the general rule in s 208, and the total statement of the prohibition in s 208. 722 There can be no question that in describing s 208(1)(a) to (d) in those terms the Full Court was defining the essential elements of the contravention. It is significant that their Honours made no mention of s 208(3) in doing so. 723 Second, as a matter of construction s 208(3) provides that subs (1) "does not prevent" an RE from paying itself fees that are provided for in the scheme constitution. This indicates a requirement for proof of the fact that the fees are provided in the constitution which, if established, takes a fee payment outside the ambit of the prohibition on related party transactions in s 208(1). The burden of proving that fact properly falls on the party asserting its existence. 724 The authorities relating to the onus of proof are important in this context. As Giles JA (with whom the other two judges of the Court agreed) said in Adler v Australian Securities and Investments Commission (2003) 46 ACSR 504 at [413]: Onus of proof is more than a question of practice and procedure and what governs a substantive question is the principle thoroughly established in Yorke v Lucas. If the burden of proving that the giving of financial assistance does not materially prejudice the interests of the company lies upon the company, upon proof of giving financial assistance and with no evidence at all on that subject, the contravention is made out. Facts showing no material prejudice are not essential facts constituting the contravention and there can be intentional participation in the contravention if there is knowledge of the giving of financial assistance without proof that the alleged participants did not know of facts negativing material prejudice. 725 In Waters at [19] the Full Court said: Where "the form or structure of the legislation does not give definite guidance on the question of burden of proof", one commentator has said that "the courts will have regard to considerations of policy and convenience": CR Williams, "Burdens and Standards in Civil Litigation" (2003) 25 Sydney Law Review 165 at 179. The author there went on to observe that "[t]he fact that a matter is 'peculiarly within the knowledge of one party', or that it will be easier for that party to prove the matter than her or his opponent, may be significant". 726 Adopting this approach, I consider that it is easier for an RE or its directors to prove that a particular constitutional amendment was made validly rather than ASIC or a member. Some of the matters relevant to that proof will often be peculiarly within a director's knowledge. For example, it is only the directors who can give evidence as to whether they "reasonably considered" that members' rights would not be adversely affected, and in doing so it is only the directors who know which "members' rights" they considered. 727 Third, the purpose of Chapter 2E as it applies to registered schemes (set out in s 207) is to protect the members' interests by requiring that the members approve any related party transactions. This purpose is important to understanding the proper construction of s 208(3). As ALRC Report 65 states (at 92, 97), investors in a scheme require protection against the obvious conflict between the members' interests and those of the RE in relation to fees payable to an RE from scheme property. If an RE claims that the giving of a benefit from scheme property to itself or a related party without member approval is allowed by the Constitution, the purpose of the Act indicates that the RE or its officers should be required to show that. 728 The Directors also argued that: (a) s 208(3) creates a "right" in the RE to be paid fees prescribed in the constitution that is lodged with ASIC. I do not agree. Section 208(1) creates a prohibition in relation to related party dealings by an RE and does not relate to rights. I see s 208(3) as setting out a justification for the payment of a fee and I do not consider that it precedes the operation of s 208(1). Further, any "right" to payment of a fee based on the Amendments could only come into existence if the amendment was validly made; (b) a construction of s 208(3) that places the onus on the defendant is not harmonious with s 208(1)(d) in circumstances where the policy underpinnings of s 208(1)(d) and s 208(3) cannot be relevantly distinguished. I do not agree. I consider they serve different aspects of the same purpose; and (c) the fact that s 208(3) is inserted into the modified s 208 and that its unmodified version contains no similar provision, suggests that s 208(3) modifies the circumstances in which s 208 is invoked. I do not agree. The unmodified s 208 deals with related party transactions in a quite different context. 729 Finally, Senior Counsel for Dr Wooldridge argued that, even if the onus of proving that the Listing Fee was not included in the Constitution is found to lie on APCHL as the principal, it is nevertheless an essential element of the accessory liability claim that ASIC prove that the Directors knew that the payment of the fees was not so provided for. Senior Counsel based this contention on authorities regarding ss 51A and 75B of the former Trade Practices Act 1974 (Cth) ("TPA"). He relied on various authorities regarding s 51A and its equivalent in s 12BB of the Australian Securities and Investments Commission Act 2001 (Cth) as it stood before 1 January 2011: see Quinlivan v Australian Competition & Consumer Commission (2004) 160 FCR 1 ("Quinlivan") at [10]-[11] per Heerey, Sundberg and Dowsett JJ, as well as King v GIO Australia Holdings Ltd (2001) 184 ALR 98; Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439 at [303]; and Hatt v Magro (2007) 34 WAR 256 at [39]-[42] per Steytler P. 730 The cases to which Senior Counsel referred illustrate that in proceedings against an accessory for involvement in misleading and deceptive conduct by a corporation in breach of s 52 of the former TPA where the conduct is constituted by a representation about a future matter, the reversal of the onus in s 51A (and its counterparts) does not apply against the accessory. To establish that the accessory had knowledge of the essential facts constituting the contravention the plaintiff was required to show that the alleged accessory knew that the representation was made and that it was either misleading or the corporation had no reasonable grounds for making it. Senior Counsel cited the observations of the Full Court in Quinlivan and argued that there is no basis in principle for distinguishing between an alleged accessory to a breach of s 51A of the TPA and an alleged accessory to a breach of s 208. 731 I do not agree. I found these authorities of little assistance in determining the essential elements of a contravention of s 208 because: (a) s 51A was a deeming provision which did not itself create a cause of action nor define a norm of conduct, whereas s 208 defines the elements of a contravention. The controversy in Quinlivan related to the application of the deeming provision and the definition of the essential elements of the contravention were not in issue; and (b) the conclusion in Quinlivan at [11] was, to a large degree, based on the fact that as the principal was no longer a party to the proceeding, if the onus reversal applied to accessories there would be an irrebuttable presumption so far as the accessory was concerned. The reversed onus of proof in that case could only be discharged by evidence adduced by the principal and the alleged accessory could not themselves adduce the evidence. That is not the case here. There was no barrier to the Directors adducing evidence that the Amendments were validly provided in the Constitution at the relevant time, and they put on evidence and submissions on that issue.

15.5 Conclusion 732 I am satisfied that s 208(1)(a) to (d) constitutes the essential elements of the contravention. The involvement of each of the Directors in the issue of units on 27 July 2007 and 27 June 2008 and in the cash payments on 13 March 2008 and 27 June 2008 is plain. Each of the Directors had knowledge of each element of the contravention. 733 Section 208(1) prohibits an RE from giving a financial benefit to itself or a related party without first obtaining the members' approval, unless the circumstances fall within one of the exceptions, including s 208(3). It was for the Directors to prove under s 208(3) that the fees were allowed under the Constitution. They did not do so. In fact proof of that fact was not possible because the Amendments were made outside power and were invalid. 734 ASIC made out its claim that each of the Directors contravened s 209 by being involved in APCHL's breach of s 208.

ISSUE D6: WHAT MATTERS WERE CONSIDERED AND NOT CONSIDERED BY THE DIRECTORS OF APCHL WHO WERE INVOLVED IN DECIDING THAT APCHL SHOULD: (A) PAY ITSELF THE LISTING FEE; (B) EXECUTE THE HEADS OF AGREEMENT; (C) EXECUTE THE DEED OF ACKNOWLEDGEMENT?

ISSUE D7: INSOFAR AS THEY WERE INVOLVED IN DECIDING, DID ANY OF LEWSKI, WOOLDRIDGE, JAQUES, BUTLER, CLARKE, CONTRAVENE S 601FD(3) ON ANY ONE OR MORE OF 26 JUNE 2007, 27 JULY 2007, 3 AUGUST 2007, 13 MARCH 2008, 28 APRIL 2008, OR 27 JUNE 2008? 735 ASIC contended, and I accept, that the Board made the decisions to pay APCHL the Listing Fee: (a) by passing resolutions at the meetings on 26 June and 27 July 2007 attended by all of the Directors; (b) by Mr Butler, Mr Jaques, Dr Wooldridge and Mr Clarke approving the execution of the Heads of Agreement on 23 and 24 April 2008, and by Dr Wooldridge executing the Heads of Agreement on 28 April 2008; and (c) by Mr Lewski, Mr Jaques and Mr Clarke resolving to execute the Deed of Acknowledgement on 27 June 2008. 736 The minutes for the 26 June 2007 meeting were pre-prepared by Madgwicks. Mr Lewski said that there was "a general murmur of assent" to each resolution but that he said nothing to amount to a "yes" vote, in accordance with his usual practice where he had a personal interest in a resolution. He did not state that he advised the other Directors that his silence meant that he was abstaining. Mr Jaques was unable to recollect whether he voted for this resolution or not but he reiterated that his usual practice was to remain silent on any matter involving Mr Lewski's personal interests. 737 Against this, Dr Wooldridge's evidence is that he ascertained the agreement of all Directors present at the meeting to the resolutions. I prefer Dr Wooldridge's account of the 26 June 2006 meeting to that of Mr Lewski. I infer that Dr Wooldridge followed his usual practice of asking the Directors "those in favour" and "those against" so as to satisfy himself where each Director stood. I accept his account that Mr Lewski and Mr Jaques were in agreement that the resolutions to pay the Listing Fee be passed. Whether or not they in fact remained silent, I infer that their conduct amounted to or conveyed assent to the resolutions. 738 The minutes for the 27 July 2007 meeting were also pre-prepared by Madgwicks. Mr Lewski said that he was present in the Boardroom for this meeting. All the Directors were present, some by telephone although it is not clear who. Mr Lewski again said that he abstained from voting on these resolutions by remaining silent, but again he did not advise the other Directors that he was doing so. Against this, Dr Wooldridge's evidence is that he ascertained the agreement of all the Directors present to the resolutions. I prefer Dr Wooldridge's account of this meeting to that of Mr Lewski. Whether or not Mr Lewski and Mr Jaques in fact remained silent, I infer that their conduct amounted to or conveyed assent to the resolutions to pay the Listing Fee. 739 Each of the Directors other than Mr Lewski approved the execution of the Heads of Agreement. Mr Lewski did not approve the execution of the Heads of Agreement by email like the other Directors. However, he was aware that the Heads of Agreement was a crucial part of the mechanism by which the Listing Fee would be paid to APCHL and through it to his associated entities. He executed the Heads of Agreement on behalf of his personal interests and in doing so he subordinated the interests of the members to those of APCHL and himself. Notwithstanding his attempt to distance himself from the formality of APCHL's execution of that agreement, without his actions the agreement would have been incomplete. 740 ASIC alleged that by his participation in the decisions to pay the Listing Fee on 26 June and 27 July 2007, 23 and 24 April 2008 and 27 June 2008 each of the Directors breached: (a) his duty to act in the best interests of the members of the Trust and to give priority to the members' interests over APCHL's interests, as required by s 601FD(1)(c); and (b) his duty to take all steps that a reasonable person would take if that person was in his position to ensure that APCHL complied with the Act, as required by s 601FD(1)(f). 16.1 Breach of the duty to act in the best interests of the members and to give priority to the members interests over those of the RE 16.1.1 ASIC's contentions 741 ASIC particularised the breach of the duty to act in the best interests of the members in the following terms: (a) each of the Directors did not give any consideration to whether making payment of the Listing Fee was in the members' best interests; (b) payment of the Listing Fee was not, in fact, in the best interests of the members because the Listing Fee was never a part of the Constitution, the payment was to be made out of Scheme property and the members were never given the opportunity to vote on it; and (c) further or in the alternative to (b), a director of APCHL in his position could not in the circumstances have reasonably believed that payment of the Listing Fee was in the members' best interests.

16.1.2 The Directors' contentions 742 Each of the Directors said, in essence, that: (a) at all relevant times he believed that the Amendments were validly made and that they had taken effect on lodgement; (b) following lodgement of the Amendments he had no reason to doubt that they were valid, and all indications were that the Amendments were effective; and (c) he believed that APCHL was legally obliged to pay the fee. 743 As I have said, the Directors' unchallenged evidence was that they honestly believed that the Amendments were valid and that the Listing Fee was required to be paid. They pointed to the following matters in support of their belief: (a) the Madgwicks Advice informed them that the Board had power to pass the Amendments, and the Board had done so on 19 July 2006; (b) the 18 August email said that Deed of Variation No 7 would take effect on lodgement with ASIC; (c) the pre-prepared Madgwicks Minute for the 22 August 2006 meeting said that the Deed would take effect on lodgement; (d) lodgement of the consolidated Constitution containing the Amendments occurred on 23 August 2006; (e) at a meeting between APCHL, its lawyers and ASIC in March 2007, albeit relating to other matters, ASIC advised that it had no further issues in relation to the RE or the Trust; (f) the minutes pre-prepared by Madgwicks for the Board meetings on 26 June and 27 July 2007 recorded APCHL's entitlement to be paid the Listing Fee in the event that the Trust was listed; (g) the Listing PDS approved by the Board on 26 June 2007 disclosed to potential investors APCHL's entitlement to the Listing Fee, and was not the subject of adverse comment by ASIC; (h) Madgwicks' letter of 11 April 2008 to Mr Lewski (provided to the Board) stated that upon the restructure of APCHL he would be entitled to the unpaid balance of the Listing Fee; (i) the Blake Dawson Advice of 18 April 2008 referred to the existence of an obligation to pay the Listing Fee; and (j) neither the independent compliance committee nor the compliance scheme auditor made any suggestion that the validity of the Listing Fee should be doubted. 744 The gist of the Directors' case was that in these circumstances there was no requirement for them to give consideration to whether making payment of the Listing Fee was in the members' best interests. As each Director operated on the basis that the Board had a legal obligation to pay the Listing Fee, the decision to pay it did not give rise to any requirement to consider whether its payment was in the members' best interests. 745 Further, although no Director said that he gave the members' best interests any consideration at the time, the Directors contended that it must have been in the members' best interests for the Board to decide to pay the Listing Fee when the Constitution (apparently) provided for payment. Some Directors went further and argued that, in the circumstance that the Constitution provided for payment of the fee and there was an (apparent) legal obligation to pay it, any failure to do so would have been a contravention of s 601FD(1)(f)(i). 746 The Directors argued that a finding that they had breached their duties in making the decisions in 2007 and 2008 to pay the Listing Fee by giving effect to, what they honestly believed to be, a legal obligation would go further than a counsel of perfection and would, in substance, impose a requirement that directors constantly second guess previous decisions. It was argued that such an approach would make the position of directors generally untenable.

16.1.3 Consideration 747 I have previously detailed, at [455] and following, the content of the duty to act in the best interests of the members and I will not do so again. The duty has two limbs and the two questions to be determined are: (a) whether in participating in the decisions to pay the Listing Fee, did each Director act with undivided loyalty solely in the interests of the members?; and (b) was there a conflict between the interests of APCHL in being paid the Listing Fee and the interests of the members in avoiding that fee, and if so, in participating in the decisions, did the Directors prefer the members' interests to APCHL's interests? 748 In my view, in making the decisions to pay the Listing Fee each of the Directors failed to act with undivided loyalty solely in the interests of the members, and given APCHL's conflicts of interest, each of them failed to give priority to the members' interests. 749 I say this first, because (as I said at [472] and following) the duty to act in the best interests of the members includes a requirement that the trustee strictly adhere to the terms of the trust. In making the decisions to pay the Listing Fee the Directors were acting outside the Constitution because the Amendments were invalid and there was no provision for payment of that fee. 750 Because the Constitution did not provide for the Listing Fee, each time a decision was made to pay the fee to APCHL the interests of APCHL in receiving it were in conflict with the interests of the members in having the terms of the Trust adhered to and not suffering the fee. That conflict was required to be resolved by preferring the members' interests and it was not. 751 Because the Amendments were invalid, the decisions to pay the Listing Fee were plainly against the members' interests because payment of the fee would result in a substantial dilution of the value of the members' units, and a substantially diminished value in the Scheme property. 752 Second, as I said at [485]-[488], the test for determining whether or not each of the Directors acted in the members' best interests is objective. While I must accept that the Directors honestly believed that the Amendments were valid, their duty to act in the members' best interests is not satisfied by proof that they held an honest belief in that regard: Hillsdown Holdings Plc v Pensions Ombudsman. 753 At one level the Directors' contentions that their belief in the validity of the Amendments meant that they were acting in the members' interests is based in the suggestion that the passage of time since the Amendments were approved and lodged somehow operated to wash away their earlier failures to comply with their statutory duties. I do not accept this. Each Director's belief that the Constitution provided for the Listing Fee was the product of his failure when passing the Amendments and/or when passing the Lodgement Resolution to, amongst other things: (a) act in the best interests of the members including by prioritising the members' interests over APCHL's interests; (b) properly consider whether the Board had power to make the Amendments; (c) properly consider the members' right to have the Scheme administered for the fees set out in the existing Constitution; and (d) exercise reasonable care and diligence. 754 It is difficult to see how it can be in the members' best interests for the Directors to decide to pay the Listing Fee because the Constitution apparently provided for it when: (a) the Amendments were invalid as a matter of law; and (b) the fee only appeared in the Constitution because the Directors failed to comply with their statutory duties. 755 Third, although I must accept the Directors' unchallenged evidence of their honest belief as to the validity of the Amendments when they decided to pay the Listing Fee, I do not accept that any of the Directors were acting with competence and care solely in pursuit of the members' interests. The surrounding circumstances at that time were: (a) the Five Principal Factors indicated that a cautious approach was required; (b) Mr Lewski had instigated the introduction of the Listing Fee, and he had proposed and voted in favour of the Amendments; (c) the fee was substantial (and at the time of the 26 June and 27 July 2007 resolutions was between about one third and two thirds of the $50 to $100 million expected to be raised on listing); (d) the Directors (other than Mr Clarke) in passing the Amendments at the 19 July 2006 meeting, and the Directors (including Mr Clarke) in passing the Lodgement Resolution at the 22 August 2006 meeting: (i) gave no consideration to APCHL's obvious conflict of interest nor prioritised the members interests; (ii) gave no consideration to the deleterious effects of the Amendments; (iii) acted outside the express prohibition in cl. 25.1 of the Constitution in relation to amendments in favour of or to the benefit of APCHL; and (iv) acted outside the statutory power of amendment as they gave no consideration to whether the Amendments would adversely affect the members' right to have the Scheme administered for the fees in the existing Constitution. 756 I note too that the participation of two (and perhaps three) of the Directors in the decisions to pay the Listing Fee was prima facie in breach of s 195(1). Mr Lewski conceded his material personal interest but he participated in each of the meetings including by approving the resolutions on 26 June and 27 July 2007 and on 27 June 2008. He should not have done so and the other Directors should not have allowed this to occur. From August 2007 Mr Butler stood to receive a bonus of $750,000 if APCHL received the Listing Fee. From that date he had a material personal interest in the payment of the fee and he should not have participated in the approval of the Heads of Agreement on 24 April 2008. Given Mr Jaques' concession that he had a conflict where Mr Lewski had a personal interest, it may be that he should not have participated either. The Board's approach in this regard is another sign that the Directors did not act prudently or carefully. It cannot be prudent for the directors of an RE to make decisions to pay substantial monies to the trustee in its personal capacity when several of the directors participating in the decisions had a material personal interest in the outcome. 757 Despite these circumstances the evidence shows that none of the Directors: (a) reflected on his earlier failure at the 19 July and/or 22 August 2006 meetings to properly consider: (i) APCHL's conflict of interest and his failure to give priority to the members' interests; (ii) the deleterious effects of the Amendments; (iii) the Board's power to make the Amendments; or (b) reflected on whether there was any doubt as to the validity of the Amendments. 758 A reasonable director in each Director's position would have been alive to, at least, APCHL's conflict of interest and conflict of interest and duty. Notwithstanding that these conflicts were plain, the evidence shows that the Directors gave them no proper attention on 19 July or 22 August 2006, or when making the decisions to pay the Listing Fee. A reasonable director in each Director's position would have considered and sought to resolve these conflicts in favour of the members before making the decisions to pay $33 million from Trust funds to APCHL, and through it to one of the Directors. 759 Dr Wooldridge conceded that APCHL's conflict of interest did not "cross his radar" when he was making the decisions to pay the Listing Fee. Mr Butler made a similar concession. No Director gave evidence that when deciding to pay the fee he considered whether there was any conflicts of interest. I infer that none of them did so. I do not see this approach as consistent with acting in the members' best interests. Had the Directors given APCHL's conflicts even a rudimentary consideration on these occasions their earlier failures to properly deal with the issue should have become apparent to them. 760 Nor do I accept that this approach lacks any sense of reality or imposes a counsel of perfection as they contended. The main matter which each of the Directors missed when deciding to pay the Listing Fee was APCHL's conflict of interest. Of course, as the Directors contended, at those points they believed that the Constitution provided for the fee. But they knew how the Amendments were made and each of them knew (or should have known) that he had given no proper consideration to APCHL's conflicts. The expectation that each of the Directors would notice the self-evident conflicts, and then resolve them by giving priority to the members' interests does not demand perfection. 761 The Directors' argument that there was no cause for them to doubt the validity of the Amendments because APCHL's professional advisors and ASIC did not alert them also lacked substance. I say this, first, because a reasonable director in each of their positions would have questioned whether the Listing Fee should be paid. For a reasonable director in the position of each Director other than Mr Clarke, the equivocal Madgwicks Advice would have caused alarm bells and that should not have been forgotten. Second, other than Madgwicks, none of APCHL's other professional advisors were ever asked to consider the validity of the Amendments. The Blake Dawson Advice was provided in relation to the Heads of Agreement and that firm was not asked to advise on the validity of the Amendments, nor given a copy of the Madgwicks Advice. The Blake Dawson Advice proceeded on the assumption that the Amendments were valid. Third, the absence of a complaint by ASIC cannot support the Directors' argument. There is no evidence that ASIC was alive at the relevant time to any concern about the validity of the Listing Fee. In any event, a director's failure to act in accordance with his or her statutory duties is not to be excused on the basis that he or she was not alerted to the breach by ASIC. The duty is the Directors. 762 ASIC made out the contravention.

16.2 The duty to take all steps that a reasonable person would take, if they were in the officer's position, to ensure that the responsible entity complies with the Act 763 ASIC alleged that in making the decisions to pay the Listing Fee each of the Directors breached his duty under s 601FD(1)(f)(i) to take all steps that a reasonable person would take if they were in the Director's position to ensure that APCHL complied with the Act. 764 The Directors make essentially the same arguments as they made in relation to the breach of duty to act in the best interests of the members. I do not accept their contentions for the same reasons as I have already expressed. 765 I have concluded that APCHL breached: (a) the prohibition on related party transactions in s 208; and (b) its duty to act in the best interests of the members and to prioritise the members' interests over its own, pursuant to s 601FC(1)(c). I am also satisfied that APCHL paid the Listing Fee to itself notwithstanding that, as a matter of law, it was not provided for in the Constitution. 766 For the reasons I have previously traversed, I consider that a reasonable director in each Director's position would have taken steps to ensure that these contraventions did not occur. Again, I do not accept that this is a counsel of perfection. Amongst other things, a reasonable director in each Director's position would not have made the decisions to pay the Listing Fee without obtaining: (a) clear legal advice or a judicial direction that the Amendments had been effective, that APCHL had a right to be paid the fee under the Constitution and the Act, and that payment of the fee would not contravene s 208 (as amended by s 601LC); or (b) the approval of the members for payment of the fee to be made. None of the Directors took any steps towards obtaining further legal advice or a judicial direction as to the Amendments or towards obtaining the members' approval. I am satisfied that ASIC made out this allegation.

THE NO CASE SUBMISSION 767 The Directors made a no case submission at the close of ASIC's evidence. I rejected that submission. I did so taking the broad approach set out in Oakley v Insurance Manufacturers of Australia Pty Ltd [2008] VSC 68 at [3] per Kaye J. See also ASIC v Healey at [535]-[536]. 768 The Court has a discretion not to put the party making a no case submission to its election; see ASIC v Healey at [538] and the cases there cited. Before me ASIC did not seek that the Directors be put to their election. I was satisfied that it was in the interests of justice that the Directors be permitted to make a no case submission without being put to their election.

CONCLUSION 769 I have found that: (a) in passing the Lodgement Resolution on 22 August 2006: (i) APCHL breached its duties under s 601FC(1) as alleged and therefore contravened s 601FC(5); and (ii) each of the Directors breached his duties under s 601FD(1) as alleged and therefore contravened s 601FD(3); (b) in giving the benefit of the Listing Fee to APCHL without obtaining the members' approval to do so: (i) APCHL contravened s 208 (as modified by Part 5C.7) as alleged; and (ii) each of the Directors contravened s 209(2) (as modified by Part 5C.7) in that he was involved in APCHL's contravention of s 208; and (c) in making the decisions to pay the Listing Fee: (i) APCHL breached its duties under s 601FC(1) as alleged and therefore contravened s 601FC(5); and (ii) each of the Directors breached his duties under s 601FD(1) as alleged and therefore contravened s 601FD(3). 770 Being satisfied that the defendants have contravened the above provisions the Court must make declarations of contravention, except in relation to the breach in s 208: s 1317E. Section 1317E(2) provides that the matters that a declaration must specify are: (a) the Court that made the declaration; (b) the civil penalty provision that was contravened; (c) the person who contravened the provision; (d) the conduct that constituted the contravention; and (e) if the contravention is of a corporation/scheme civil penalty provision - the corporation or registered scheme to which the conduct related. 771 I have ordered the parties to confer and consider appropriate declarations to accord with my findings and in light of the relief sought. I will adjourn the proceeding so as to allow the parties to confer within seven days and: (a) propose dates for the hearing of any application for relief from liability and/or in relation to penalty; and (b) prepare draft minutes for the timetabling of any hearing for relief from liability and/or in relation to penalty, together with draft minutes of declarations to be made, to be filed by 31 January 2014. I certify that the preceding seven hundred and seventy-one (771) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.