- Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd

Supreme Court of NSW|2020-12-02|Before: Black J

Re Go Energy Group Ltd [2019] NSWSC 558 - Re Homemaker Retail Management Ltd (2001) 40 ACSR 116 - Re Investa Listed Funds Management Ltd [2016] NSWSC 344 - Re Investa Listed Funds Management Ltd [2016] NSWSC 369 - Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194 - Re Mirvac Limited (1999) 32 ACSR 107 - Re Prime Media Group Ltd [2019] NSWSC 1888 - Re SAI Global Ltd [2016] FCA 1312 - Re Tawana Resources NL (No 2) [2018] FCA 1724 - Re Trust Company Ltd [2013] NSWSC 1946 - Re Walsh & Company Investments Limited as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II, Fort Street Real Estate Capital Fund III and Fort Street Real Estate Capital Fund IV [2020] NSWSC 1509 - Walter Rau Neusser Oel Und Fettag AG v Cross Pacific Trading Ltd [2005] FCA 955 - Weinstock v Beck (2013) 251 CLR 396; [2013] HCA 14 Category: Principal judgment Parties: Walsh & Company Investments Limited as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II, Fort Street Real Estate Capital Fund III and Fort Street Real Estate Capital Fund IV (Plaintiff) Mr W Arthur and Ms S Hathaway as trustees of Sonia Hathaway Superannuation Fund (Interested Party) Australian Securities & Investments Commission (from 13 November 2020) Representation: Counsel: J Williams SC (Plaintiff) R Scheelings (Australian Securities & Investments Commission)

Solicitors: Allens (Plaintiff) File Number(s): 2020/127441

Background

By Summons filed on 28 April 2020, the Plaintiff, Walsh & Company Investments Limited (which has now changed its name to E&P Investments Limited) ("WCIL"), as responsible entity of the Fort Street Real Estate Capital Fund I ("Fund I"), Fort Street Real Estate Capital Fund II ("Fund II"), Fort Street Real Estate Capital Fund III ("Fund III") and Fort Street Real Estate Capital Fund IV ("Fund IV") (together, "Funds") sought orders that it would be justified in convening a meeting of unitholders of each of the Funds for the purpose of their considering and, if thought fit, agreeing to a proposal ("Proposal") set out in an explanatory memorandum and that it would be justified in distributing an explanatory memorandum substantially in the form provided to the Court, to unitholders of the Funds. WCIL also sought an order, at the first hearing, that it would be justified in proceeding on the basis that the making of the proposed amendments to the constitution of each Fund contemplated by the resolutions for the relevant meetings, following approval by special resolution at each meeting, would be within the powers of alteration conferred by the constitution of each Fund and s 601GC of the Corporations Act 2001 (Cth).
I described the Proposal and the steps involved in implementing it in my judgment in Re Walsh & Company Investments Limited as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II, Fort Street Real Estate Capital Fund III and Fort Street Real Estate Capital Fund IV [2020] NSWSC 1509, there drawing upon the submissions of Mr Williams, who appears for WCIL, as follows: "First, each Fund will amend its constitution by resolutions passed by unitholders in accordance with s 601GC(1)(a) of the Corporations Act to facilitate the Proposal. Second, pursuant to the amendments to be made to the constitution of Fund IV, Fund I will acquire all the units in Fund IV from the Fund IV unitholders in consideration for the issue of units in Fund I based on an exchange ratio determined by the net tangible assets ("NTA") of both Funds at 30 June 2020 (which equates to 0.9286 Fund I units for each Fund IV unit held). Mr Williams notes that this step has the character of a conventional "trust scheme" acquisition of all the units in a registered scheme ... Third, units in Funds II and III will be consolidated to vary the number of units on issue in each Fund such that the NTA per unit of both Funds as at 30 June 2020 equals the NTA per unit of Fund I at that date. Fourth, Funds I, II and III will issue promissory notes to each other in exchange for promissory notes of equal value. Fifth, each of Funds I, II and III will make a capital distribution to unitholders of the promissory notes received from the other Remaining Funds (as defined). Sixth, WCIL will apply the relevant capital distribution (in the form of promissory notes) on behalf of each unitholder in Funds I, II and III to subscribe for units in the other of Funds I, II and III, and will then issue the units so applied for and the promissory notes will then be cancelled. Seventh, one unit in each of Funds I, II and III will be stapled to one unit in each other of those Funds to form a "stapled security" in the Stapled Fund [to be known as the "FSREC Property Fund"]. Mr Williams also points out that the proposed amendments to the Funds' constitutions also include the introduction of a "Liquidity Review" on each 5 year anniversary of the Implementation Date while the relevant Fund is not liquid and unlisted, requiring WCIL as responsible entity to convene a meeting of unitholders to consider a resolution to wind-up the merged fund; if unitholders pass the resolution, WCIL must undertake an orderly winding up of the Fund within two years of the Liquidity Review; and, if unitholders do not pass the resolution, WCIL must give unitholders an opportunity to exit the merged fund by making a withdrawal offer in accordance with the Act within 6 months of the Liquidity Review. Mr Williams also points to other amendments that are proposed to be made to the Funds' constitutions, as summarised in the Explanatory Memorandum, including an amendment to the redemption price calculation (to introduce a 3% discount to NTA) and changes to the fees payable to WCIL. Mr Williams notes that the Proposal is conditional upon the unitholders of each Fund passing the resolution to amend that Fund's constitution and related resolutions to facilitate implementation of the Proposal and, if unitholders of any Fund do not pass the applicable resolutions the Proposal will not be implemented. The Proposal is also conditional upon receipt of certain regulatory relief from ASIC and the Court giving the judicial advice to be sought at the second Court hearing."
There were significant delays in WCIL advancing the proposal, which appear to have in part reflected WCIL's need to address several issues raised by the Australian Securities and Investments Commission ("ASIC"), and the first Court hearing did not take place until 29 September 2020. ASIC did not appear and did not oppose the orders sought by WCIL at the first Court hearing. At that hearing, I made orders in the form sought by WCIL, including that it would be justified in convening the relevant extraordinary general meetings of the Funds and distributing an explanatory memorandum in a specified form, a product disclosure statement in a specified form and a notice of direction and voting forms ("Proposal Materials"). I subsequently published my reasons for making those orders ([2020] NSWSC 1509).
On 13 October 2020, WCIL's solicitors advised the Court that WCIL had "received requests from unitholders or their advisers for some additional information to be provided in relation to the portfolio and liquidity strategy of the stapled fund" to be created under the Proposal and sought orders in respect of the distribution of a supplementary explanatory memorandum ("SEM"). An affidavit dated 13 October 2020 of Ms Jaclyn Strelow, who is an executive director of WCIL, and also a director of Fort Street Real Estate Capital Pty Ltd, the investment manager and property manager for each of the Funds, stated that: "… the Plaintiff has received feedback from a number of unitholders or their advisers requesting that additional information be provided in relation to the portfolio and liquidity strategy of the Stapled Fund." That affidavit indicated that the SEM would contain a letter from the chairman of WCIL's board and information concerning the portfolio and liquidity strategy of the stapled fund and addressed the verification process for the SEM. The Court was also advised that the SEM had been made available to ASIC for review and amended as required having regard to ASIC's comments. I made an order in chambers on 13 October 2020 that WCIL would be justified in distributing the SEM in a specified form.
The resolutions put to the meetings of unitholders to give effect to the Proposal were subsequently passed by the unitholders of each Fund, with approximately 97% of votes cast in favour of each resolution in respect of Fund I; 90.5% of votes cast in favour of each resolution in respect of Fund II, in which the Proposal has potential disadvantages for some unitholders which I note below; 92.5% of votes cast in favour of each resolution in respect of Fund III; and 95% of votes cast in favour of each resolution in respect of Fund IV.
WCIL now seeks orders at the second Court hearing that it would be justified in giving effect to and implementing the Proposal and giving effect to the amendments to the several constitutions of the Funds approved at meetings of unitholders, and in doing all things necessary to effect the Proposal. Mr Wayne Arthur and Ms Sonia Hathaway as trustees of the Sonia Hathaway Superannuation Fund, a unitholder in Fund II, appeared and Mr Arthur made submissions opposing the application for advice in respect of the Proposal as presently formulated, or at least that it would be preferable that any such advice was given subject to a condition to which I return below.
After several issues had arisen at the second Court hearing on 10 November 2020, ASIC also appeared from 13 November 2020 and made submissions that, in substance, the Court should not make the orders now sought by WCIL. I granted leave to ASIC to be heard, where it has responsibility for the regulation of managed investment schemes under Ch 5C of the Corporations Act and for the regulation of financial advisers under Ch 7 of the Act. It seems to me that ASIC's functions, so far as it has the ability to initiate and conduct proceedings under the Corporations Act in the public interest, would also potentially be affected by the grant of the relief sought under s 63 of the Trustee Act 1925 (NSW), where such relief might arguably protect WCIL against liability in such proceedings.
The manner in which WCIL and its related companies have approached the implementation of these trust schemes, since the first Court hearing, has caused significant difficulties, and the outcome of these proceedings is finely balanced. I have concluded, on balance and with real hesitation, that I should make the orders sought by WCIL, but only on terms that WCIL pay or cause to be paid all costs it and the Funds have incurred in respect of these proceedings, including of and incidental to the preparation of further evidence, on and from 10 November 2020 without recourse to the assets of the Funds. WCIL has advised that it would submit to those terms.

Evidence led by WCIL prior to the commencement of the second Court hearing on 10 November 2020

Because of the difficulties which have arisen, WCIL has led more extensive evidence at the second Court hearing than would ordinarily be led in an application of this kind. I will first turn to the evidence on which WCIL relied before those difficulties had fully emerged. By an affidavit dated 3 November 2020, Mr Stuart Nisbett, who is the independent chairman of the board of WCIL, addressed the conduct of meetings of unitholders of each of the Funds and addressed the results of the polls at each of the relevant meetings. As I noted above, each of the resolutions was passed by a substantial majority of unitholders, although the voting participation of unitholders was not particularly high, at least when compared with the participation which might ordinarily be expected in respect of listed companies.
By two affidavits dated 8 November 2020 and 10 November 2020, Ms Strelow noted that there were 3,898 unique unitholders across the four Funds, with a significant number of those unitholders holding units in more than one Fund. Ms Strelow addressed several minor amendments to the Proposal Materials as despatched, which do not give rise to any concern. Ms Strelow also addressed the process adopted for the despatch of the Proposal Materials and the SEM to unitholders in the Funds. Ms Strelow had previously set out the process to be adopted in her affidavit dated 27 September 2020 read at the first Court hearing, where she had observed (in paragraph 35) that: "Some unitholders have nominated, as the address for the purposes of receiving communications from [WCIL] … the email address or postal address of their financial adviser. In some cases, the adviser is employed by a subsidiary of Evans Dixon Limited, the ultimate parent company of [WCIL]. It is therefore expected that such unitholders will receive the Proposal Materials through their financial adviser, consistent with their election when nominating an address for receiving communications from [WCIL] about the relevant fund." [emphasis added]
Ms Strelow's evidence at the first Court hearing did not make apparent the potential significance of this matter, which only emerged from Ms Strelow's further affidavits at the second Court hearing. In fact, some 3,668 unitholders ("ED Unitholders") were active clients of the Wealth Advice division of Evans Dixon Limited (which is the parent company of WCIL and has now changed its name to E & P Financial Group Ltd) ("Evans Dixon") and only 230 unitholders were not active clients of that division, so that (subject to the mitigation noted below) only a small minority of unitholders would have received the Proposal Materials and SEM directly rather than through Evans Dixon. As will emerge below, the Proposal Materials were also often sent to unitholders by Evans Dixon together with other material, which had not been drawn to the Court's attention at the first hearing or made available to ASIC for review in accordance with the requirements of Ch 2E of the Corporations Act, as applied to managed investments funds under Pt 5C.7 of the Act. I return to those issues below.
Ms Strelow's evidence also indicated that the explanatory memorandum ("EM") for the Proposal and product disclosure statement ("PDS") were uploaded to the website of the Funds on 29 September 2020, with additional material including the notices of meetings, and that an email was sent to some 3,915 unique unitholder addresses on 30 September 2020, providing a direct link for those unitholders to access those documents ("30 September Email"). Ms Strelow's evidence is that 3,866 of those addresses appeared to be email addresses other than for a financial adviser employed by a subsidiary of Evans Dixon and 49 of those email addresses were email addresses for such an adviser, where the unitholder had nominated that address to receive email communications. The SEM was similarly made available to unitholders in that manner on 14 October 2020. I have given significant weight to this matter as a direct distribution of the materials approved by the Court to unitholders, which does not involve any intervention or additional commentary by related parties of WCIL.
That affidavit also addressed the position as to conditions precedent for the schemes and the voting participation rates at the meetings, to which I referred above, and referred to further communications with two unitholders, including Ms Hathaway and Mr Arthur as the trustees of the Sonia Hathaway Superannuation Fund. As I noted above, Mr Arthur appeared at the hearing and made submissions in opposition to the Proposal in its present form.
Ms Strelow's further affidavit dated 10 November 2020 provided further information in relation to the 30 September Email, and noted that 3,448 of the 3,668 ED Unitholders were sent that email, constituting approximately 94% of those clients. Ms Strelow also noted that the 30 September Email had been sent to 3,323 of 3,523 ED unitholders who had recorded a postal address or email address for receiving communications in the registers for the Funds, and 3,269 of them had an email address which did not appear to be associated with Evans Dixon or a subsidiary. I will again return to the significance of that matter below.
WCIL also relied on an affidavit dated 8 November 2020 of James Morrow, who is an executive director with the Evans Dixon Wealth Advice division, which provides financial advice through Dixon Advisory and Superannuation Services Ltd and Evans & Partners Pty Ltd. Mr Morrow refers to the role of Evans Dixon as receiving communications from the Funds on behalf of the clients, which was the process adopted in this matter, and to the provision of the Proposal Materials by WCIL to the Evans Dixon Wealth Advice division as intermediary for those unitholders who were its clients. Mr Morrow also refers to steps taken by the Investment Committee of the Evans Dixon Wealth Advice division, between 29 September 2020 and 15 October 2020 to consider the Proposal Materials and SEM and prepare a further email ("Evans Dixon Email") to ED Unitholders which provided links to the Proposal Materials and SEM, explained the Investment Committee's view in relation to the Proposal and recommended that those unitholders vote in favour of the resolutions to be considered at the relevant meetings. The Evans Dixon Email was sent to 3,666 unitholders on 15 and 16 October 2020. While that email was sent less than the 21 days required for notice of a unitholders meeting under s 252F of the Corporations Act, I have pointed above to the earlier despatch of the 30 September Email containing links to the Proposal Materials to the vast majority of unitholders including ED Unitholders. Regrettably, Evans Dixon's intention to adopt that process was not disclosed at the first Court hearing and the Evans Dixon Email was not made available for review by the Court before it was despatched by a related party of WCIL to ED Unitholders.
WCIL also read the affidavit dated 9 November 2020 of Mr Geoffrey Noonan who is a client services manager at Boardroom Pty Ltd ("Boardroom") and dealt with the despatch of the Proposal Materials to unitholders who were not present clients of the Evans Dixon Wealth Advice division who were, as it emerged at the second Court hearing, a small minority of unitholders in the Funds. Mr Noonan also addressed voting at the meetings, which were held virtually using the "Meeting Manager" system managed by Lumi Technologies Pty Ltd ("Lumi"). WCIL also read the affidavit dated 3 November 2020 of Mr Gavin Reed, who is the General Manager for Lumi, which addressed the process adopted for the electronic conduct of the virtual meetings of the Funds. Mr Reed's evidence indicated that a small number of unitholders attended the virtual meetings, although a larger number of unitholders voted on the relevant resolutions, and he addressed the conduct of the poll on the resolution.
WCIL also relied, at the second Court hearing, on its statement of facts dated 28 September 2020 which had been tendered at the first Court hearing (Ex SOF 1) and on a supplementary statement of facts dated 9 November 2020 (Ex SSOF 2).
When the second Court hearing commenced on 10 November 2020, several issues arose from the evidence to which I have referred above and that hearing was adjourned. These issues included the fact of substantive communications with unitholders by related parties of WCIL, which had not been drawn to the Court's attention or received the Court's approval before they were sent, and had the capacity to distract attention from the Proposal Materials and SEM that had been drawn to the Court's attention; the question whether those communications amounted to advocacy of the Proposal, rather than providing a fair and balanced account of it; and the potential conflicts of interest which may have arisen from the provision of advice about the Proposal by the Evans Dixon Wealth Advice division.
On 10 November 2020, the solicitors for WCIL advised ASIC of some of the issues that had arisen from this evidence as follows: "(1) The provision of the proposal materials to Evans Dixon clients by service on Evans Dixon's Wealth Advice Division and the subsequent forwarding to clients on 15 and 16 October, being less than 21 days prior to the meeting. (2) The fact that the materials were provided by the Wealth Advice Division of Evans Dixon to its clients under cover of an email containing investment advice from the investment committee of Evans Dixon. (3) Disclosure by the Wealth Advice Division of Evans Dixon to its clients of its relationship with the responsible entity."
ASIC then appeared at the next listing of the matter on 13 November 2020 and has been heard at the second Court hearing.

Further evidence led by WCIL from 13 November 2020

After further issues have been raised at the hearings on 10 and 13 November 2020, WCIL filed, and relies on, the affidavit dated 27 November 2020 of Mr Francis Araullo, who is the executive director and head of compliance of Evans Dixon. Mr Araullo there referred to the role of the Funds Management division of Evans Dixon, which originates, manages and operates investment funds across a number of asset classes, and to the Wealth Advice division which provides financial and investment advice services to clients, operating through Dixon Advisory and Superannuation Services Ltd and Evans and Partners Pty Ltd. He notes that staff within each division may be aware of different types of confidential information, with Funds Management staff being aware of non-public price-sensitive fund information, and Wealth Advice staff aware of client private information. He refers to the maintenance of information barriers between the funds management division and the Wealth Advice division of Evans Dixon and between the public and private sides of the operations of the Evans Dixon Group. He refers to the steps taken to implement information barriers, which are characteristic of the steps usually taken by financial intermediaries to maintain such barriers.
Mr Araullo also refers to the role of the Evans Dixon Investment Committee within the Wealth Advice division of Evans Dixon, which provides guidance on investment opportunities for clients of that division, supplementing advice which may be provided to clients by individual financial advisers (Araullo 27.11.20 [32]). He notes that Investment Committee comprises an independent chairman, Mr Farrell, and five other members. He also discloses steps taken to "wall cross" Mr Farrell, and subsequently other employees within the Wealth Advice division of Evans Dixon, in the course of developing the Proposal, and to steps that were taken to "wall cross" remaining members of the Investment Committee on 29 September 2020.
By a further affidavit dated 27 November 2020, Ms Strelow also refers to the functional separation of the Funds Management division of Evans Dixon from the Wealth Advice entities within the group, and to the maintenance of an information barrier within the group to prevent disclosure of material non-public information between the Funds Management division and the Wealth Advice entities. She also refers to the requests made for the crossing of certain individuals from the Wealth Advice division in respect of the proposal.
Ms Strelow explains that, at the time of affirming her first affidavit and the first Court hearing, she did not expect the Investment Committee of Evans Dixon's Wealth Advice division to have formally considered the Proposal and was not aware of any recommendation that the Investment Committee might ultimately make to clients of the Wealth Advice entities about the Proposal. However, she also acknowledges that, based on her previous experience and the nature of the Proposal, she expected that some form of recommendation would be made but did not know whether such recommendation would be positive or negative, and notes a past instance of a negative recommendation (Strelow 27.11.20 [20]). Her evidence is that she had no involvement in the process by which the Investment Committee determined the recommendation that it might make to clients, because of the functional separation between the Funds Management and the Wealth Advice business (Strelow 27.11.20 [21]). Her evidence is that she first saw the Evans Dixon Email on 15 and 16 October 2020 and that she did not appreciate the fact that it was likely that the communication would be sent to clients of the Wealth Advice entities in relation to the Proposal and the fact that any communication would likely include a recommendation from the Investment Committee were matters that would be appropriately brought to the Court's attention at the time of the first Court hearing.
Ms Strelow also recognises that, having regard to Mr Noonan's affidavit dated 9 November 2020, one of the unitholders not associated with Evans Dixon, holding 15,800 units in Fund I, was not sent the Proposal Materials or the SEM and she refers to an email sent to that unitholder on 26 November 2020, to which no response has been received.
Ms Strelow also refers to the uploading of additional materials to a website in respect of the Proposal, including a pre-recorded video by the independent chairman of WCIL and Investments Director of the investment manager providing an overview of the Proposal, and a presentation used by them as part of that video. That communication was also not drawn to the Court's attention, or reviewed by it, either at the first Court hearing or prior to it taking place. The script for that video and a copy of the presentation are in evidence (Strelow 27.11.20, Ex JAS-6, tabs 3-4). The script for that presentation expressly encouraged unitholders to read the documents in respect of the Proposal, including the EM and PDS and to seek independent financial advice, and referred to the information that was provided on the Funds' website concerning the Proposal. The presentation explained the "financial and strategic benefits" of the Proposal for unitholders, and stated that: "Finally, the proposal will provide an opportunity to improve the liquidity framework of Funds I, Fund III and Fund IV. If the proposal is approved, investors in the FSREC Property Fund will be provided the opportunity to vote to wind up the Stapled Fund at a liquidity review event in October 2023, and every subsequent five years. If the vote is against a wind up, investors will be offered a withdrawal opportunity, the size of which will be determined with regards to investor demand and available liquid assets at the time."
A powerpoint in turn provided an overview of the merger, a description of the rationale of the merger, a description of a profile of the stapled fund, reference to the impact of COVID-19 on the portfolio, and a conclusion which highlighted the advantages rather than disadvantages of the proposal. It is unfortunate that this presentation did not also draw attention to matters which might tend against voting in favour of the Proposal, as the Court has long required as a matter of fair disclosure in respect of company and trust schemes. In particular, that presentation did not draw attention to the disadvantage of the Proposal for some unitholders, so far as it would potentially delay the opportunity for them to realise their investments in the funds. However, I bear in mind that matter is squarely disclosed in the Proposal Materials, which had already been sent to unitholders, the Evans Dixon Email and another presentation to which I refer below, and I am not persuaded that the absence of a further reference to it in that presentation could realistically have negatived or obscured the disclosure of it that was previously made.
Ms Strelow also refers to a unitholder briefing provided on 16 October 2020, based on the SEM, by two representatives of the investment manager. A script for that briefing and a series of questions and proposed answers is in evidence (Strelow 27.11.20; Ex JAS-6, Tabs 5 and 6) and a recording of the presentation was made and a transcript of that presentation is also in evidence (Ex JAS-6, Tab 7). That presentation also refers to "a number of financial and strategic benefits for unitholders" of the Proposal and refers to the slides from the SEM issued to investors. The transcript of the presentation indicates that fair disclosure was made of the fact that the merger proposal would defer the realisation of Fund II which was currently scheduled to commence in May 2021, with a period of up to three years to realise the asset sales out of that Fund.
By a further affidavit dated 1 December 2020, Mr James Morrow, who is the executive director, Wealth Advice within the Evans Dixon group, noted that the Evans Dixon Email had been sent to 3,666 ED Unitholders directly by a central email system used to communicate with clients, or to the ED Unitholder's financial adviser, so that the adviser could send it to the relevant ED Unitholder with any "bespoke communication" or "personal advice" that the adviser wished to provide, but that two of the 3,668 ED Unitholders had not received that email.
Mr Morrow also refers to the circumstances in which, for some 430 ED Unitholders, the Evans Dixon Email was sent to the relevant financial adviser, either because the adviser made an election to receive it or because, for one category of clients, all communications were sent to the adviser rather than directly to the client. In summary, Mr Morrow notes that 3,223 ED Unitholders were sent the Evans Dixon Email directly by the central email system; and that email or a link to access it was sent to advisers for 430 "Family Wealth Management" and "Retail Wealth Management" and 13 "Private Wealth Management" clients. Mr Morrow refers to searches which have been undertaken to identify communications with those clients, which have identified communications to 256 unitholders out of the 443 ED Unitholders to which communications were sent to the advisers. Mr Morrow's inquiries indicate some 253 ED Unitholders were sent the Evans Dixon Email or that email with modifications by their advisers, some with additional commentary; three ED Unitholders, who were Private Wealth Management clients, were sent a customised email by their financial adviser; three unitholders were not sent that email, but other entities controlled by them had received the email; 19 ED Unitholders were sent the Evans Dixon Email (some with Proposal Materials and SEM) in hard copy form, because that was their preference; 16 ED Unitholders were only advised of the Proposal in a telephone call or in an in person discussion, because of a judgment made by the adviser because of the client's preference or their personal circumstances; and one communication was sent onto the new external financial adviser for a client.
Mr Morrow concludes that 148 of the 443 ED Unitholders did not appear to have been provided with the Evans Dixon Email by their financial adviser or communicated to them in some other form and addresses several circumstances in which that occurred. It appears that, in the case of 133 of those 148 ED Unitholders, they had received the Proposal Materials and SEM directly by the 30 September and 14 October emails and in any event. It appears that seven ED Unitholders ultimately did not receive the Proposal Materials and the SEM either by those emails or by the despatch of hard copy materials. I return to the orders which WCIL seeks to address that matter below.
Mr Morrow in turn notes that, of the 253 ED Unitholders who were provided with the Evans Dixon Email or a variation of it by their financial adviser,128 received the Evans Dixon Email with no material alteration, and 125 emails involved additional commentary or modifications. In 27 cases, the Evans Dixon Email was provided in its entirety, but a financial adviser provided a favourable assessment including comments such as "I would be in favour" or "I think it is favourable relative to the status quo". Mr Williams took me to these emails in submissions and I am satisfied Mr Morrow has fairly described their content. If matters were not already complex enough, in 76 cases, the Evans Dixon Email as sent to unitholders omitted part of the disclosure of the disadvantages and risks or fees and costs, associations and important disclosure sections, and seven unitholders received information which omitted both that material and the Investment Committee recommendation, apparently as a result of a "technical error". I am satisfied this was inadvertent where the email as sent is cut off mid-sentence. In some cases, advisers realised that the email had been sent in incomplete form and then provided the missing material.

Evidence led by ASIC

ASIC intervened in the proceedings at the hearing on 13 November 2020 and relied on an affidavit dated 20 November 2020 of Mr Grantly Brown, who is a senior specialist in the team within ASIC with responsibility for the supervision of investment managers. Mr Brown refers to a relief application made by WCIL on 9 April 2020 under ss 601QA and 1020F of the Corporations Act and to ASIC's understanding that WCIL would not proceed with the first hearing of its application for judicial advice until that relief was granted. Mr Brown refers to information requested by ASIC from WCIL's solicitors in respect of the relief application, and to ASIC's concern as to issues relating to conflicts of interest in assessing the relief application.
Mr Brown also refers to the fact that WCIL had not, before the first hearing of the application, or between the date of that hearing and the date the Court made orders with respect of the SEM, or following that date and prior to the relevant meetings of unitholders, provided ASIC with a copy of the Evans Dixon Email, which was not made available to ASIC until 7 November 2020.
Mr Brown there identifies several concerns held by ASIC, having regard to the material relied on by WCIL in support of the application, the material provided by the Sonia Hathaway Superannuation Fund and the documents contained in the exhibit to Mr Brown's affidavit, namely a concern that WCIL had not complied with s 218 of the Corporations Act, as modified by s 601LC of the Act; a concern that ASIC was not told the communications it had approved would be sent to a majority of unitholders under cover of a recommendation from the Wealth Advice division of the Evans Dixon group that unitholders vote in favour of the Proposal; that the Court was not informed of that matter prior to the first Court hearing or prior to the despatch of the notices of meetings; and that personal advice was given to the unitholders in at least one case, and may have been given in other cases, by individual financial advisers employed by the Wealth Advice division of the Evans Dixon Group in relation to the transaction.

Evidence led by the trustees of the Sonia Hathaway Superannuation Fund

I have referred above to the position taken by Mr Wayne Arthur as one of the trustees of the Sonia Hathaway Superannuation Fund at the hearing. Mr Arthur relied on an affidavit of Ms Sonia Hathaway dated 27 October 2020, which noted that she was the only member of the Sonia Hathaway Superannuation Fund and that her fund held 10,000 units in Fund II. Ms Hathaway referred to the circumstances in which she had invested in that Fund and to the receipt of communications in respect of the Proposal.
Ms Hathaway's affidavit also annexed an email that she had sent to her adviser at Dixon Advisory and Superannuation Services Limited on 20 October 2020 where she raised a concern, also reflected in Mr Arthur's submissions, that her initial investment term for Fund II was up to 10 years but that Fund was to commence the asset realisation process on the seventh anniversary of the Fund, unless the trustee determined to bring forward or defer realisations with the approval of unitholders by ordinary resolution. She noted that that meant that, in June 2021, the fund manager was required (I interpolate, subject to the relevant determination with unitholder approval) to start selling down the properties held in Fund II and presumably returning capital to unitholders, so she could soon expect a return of her capital. She observed that, if the Proposal were implemented, then the FSREC Property Fund would have no end date and she referred to the disclosure in the EM that the FSREC Property Fund did not have a defined investment term, and observed that the Proposal would result in the investment term of Funds II and III extending beyond their expected investment terms of 7 and 10 years respectively. Ms Hathaway identified the disadvantages of the proposal to her, which I do not set out in order to preserve her privacy, and also sought advice as to how to go about selling her units. I pause to note that Ms Hathaway had plainly fully understood aspects of the Proposal which were, in fact, likely to be adverse to her in her circumstances.
Ms Hathaway's adviser at Evans Dixon Wealth Advice division responded that: "At present [Fund] II is not able to be sold and I am not aware of any buyers of the Fund. Part of the proposed merger is to provide a liquidity solution to investors. I was very disappointed with the announcement as there was no concrete short term liquidity mechanism or requirement to provide liquidity to investors. No other options have been presented and it is either this merger or stay with the status quo. On balance the merger is marginally better."
Mr Scheelings, who appears for ASIC, submits that the advice provided to Ms Hathaway was incorrect in her particular circumstances. I am not persuaded that the view expressed in that advice was incorrect, where there was in fact no assurance that a sale of assets in Fund II would proceed or that Ms Hathaway could realise her investment in Fund II in the short term as matters stand. Mr Scheelings also submitted that the Court can infer that it is unlikely that other personal advice that may have been provided to ED Unitholders by advisers within the Evans Dixon Wealth Advice division would have contradicted the general advice sent to unitholders in the Evans Dixon Email. It is not necessary to speculate as to that matter, since the communications from advisers to other unitholders are now in evidence and I note them below.
Ms Hathaway also noted her age in her affidavit, pointed to certain requirements arising from her age and circumstances and noted that she was concerned that, if the Proposal was approved, part of her superannuation monies would be moved into an investment that was inappropriate for her, because it was a long term investment with no defined investment term; there was no apparent way to sell units in the new fund; and there was uncertainty as to how any executor could promptly and efficiently deal with her estate. These were, in my view, legitimate concerns, which were ably emphasised by Mr Arthur in his initial submissions for the second Court hearing on 10 November 2020.

The issues arising at a second Court hearing in respect of a trust scheme

WCIL here invokes the Court's jurisdiction under s 63 of the Trustee Act 1925 (NSW), albeit in the particular setting of a trust scheme. Generally, that section authorises the Court to give an "opinion advice or direction on any question respecting the management or administration of the trust property" and permits relief aimed at resolving legitimate doubts held by a trustee as to the proper course of action and protecting the trust and those entitled to it. In Re Australian Pipeline Ltd (2006) 60 ACSR 625; [2006] NSWSC 1316 at [17] , Barrett J noted the role of such advice in providing guidance for the future and referred to Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201 where Lord Oliver of Aylmerton observed that: "A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court."
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 at [56] -[59] , the majority of the High Court observed that there were no implied limitations on the power to give advice or on the discretionary factors relevant to the giving of advice, and the power is confined only by the subject matter, scope and purpose of the legislation, and may be exercised whenever a question arises as to "the management or administration of the trust property" or "the interpretation of the trust instrument". The majority also noted (at [64]) that the procedure operates as "an exception to the Court's ordinary function of deciding disputes between competing litigants" and affords a facility for providing "private advice" to trustees although the Court is not bound to give such advice. The function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust: Macedonian Orthodox Community Church St Petka Inc above; Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [45] .
In Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) v Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) (No 4) [2017] FCA 1133 at [7] , Jagot J summarised the applicable principles as including, inter alia, that (1) the jurisdiction or power to give judicial advice is not constrained by any implications or limitations not found in the express words of the section; (2) the Court's discretion is confined only by the subject matter, scope and purpose of the legislation, and there are no implied limitations on the discretionary factors that may arise or rules governing the relative importance of such factors; (3) the judicial advice procedure is intended to be summary in character; (4) a judicial advice application is in the nature of 'private advice' and a departure from usual Court proceedings in which there are multiple, adversarial parties and a person served with documents in respect of a judicial advice application is not thereby a 'party' to the application; (5) the right to obtain judicial advice protects the trustee, but it thereby also protects the interests of the trust, by enabling the trustee to act in the interests of the trust without fear of being personally liable for costs; (6) the function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust; and (7) the usual form of order is that the trustee "would be justified" in taking the relevant course of action. I have drawn on my judgment in Re Go Energy Group Ltd [2019] NSWSC 558 at [18] ff for this summary of these principles.
The judicial advice given by the Court in the particular context of a second hearing in respect of a trust scheme is in turn typically directed to the question whether a responsible entity is justified in giving effect to and implementing a proposal approved by unitholders: Re Mirvac Limited (1999) 32 ACSR 107 at [48]; Re Homemaker Retail Management Ltd (2001) 40 ACSR 116 at [5]-[7]; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194 at [10]. In order to give such advice at a second Court hearing in a trust scheme, the Court will need to be satisfied that the procedural requirements to obtain unitholders' approval have been satisfied: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]. In determining whether to give such advice, the Court will also give considerable weight to the level of support by members of the proposal and also to whether any person appears at the second Court hearing to express any opposition to it: Re Commonwealth Managed Investments Ltd [2014] NSWSC 244 at [3].
I should address a further question, for completeness, as to whether the judicial advice sought by WCIL is necessary to the implementation of the Proposal, so far as it involves constitutional amendments passed at meetings of unitholders. In supplementary submissions dated 25 November 2020, Mr Scheelings submits that a responsible entity is not obliged, under s 601GC(2) of the Act, to lodge constitutional amendments that are invalidly made with ASIC and that section does not confer validity upon an amendment that is invalidly made: Australian Securities and Investments Commission v Lewski (2018) 266 CLR 173. Mr Scheelings also submits that, before the resolutions would take effect, WCIL must lodge the constitutions modified by the resolutions with ASIC and that function would be performed by it in its capacity as responsible entity of the relevant Funds: Wellington Capital Ltd v Australian Securities and Investments Commission (2014) 254 CLR 288. Mr Scheelings accepted that, subject to those matters, a responsible entity may implement an amendment, following relevant resolutions of members, without applying for judicial advice.
However, Ms Scheelings rightly pointed out that the ultimate answer to the issue raised by the Court was that, in this case, the notices of meeting specified that the Proposal was conditional on satisfaction of all relevant conditions precedent, and the conditions precedent specified in the EM include the giving of judicial advice at the second Court hearing. Mr Scheelings noted that, in those circumstances, the absence of judicial advice would have the consequence that a condition precedent that WCIL had stipulated to its implementing the Proposal would not be satisfied. Mr Williams accepted, in response to ASIC's submission, that judicial advice was necessary in this case, and WCIL would not be free to implement the Proposal without that advice, because that advice is a condition of the Proposal as put to, and approved by, unitholders in the Funds.

Several uncontroversial matters

A number of aspects of the implementation of the Proposal cause no difficulty, and others will require fuller analysis. Mr Williams submits and I accept that Proposal Materials and the SEM despatched to the unitholders of the Funds were substantially in the form of the documents put before the Court (Strelow 8.11.20, [12]-[15]: Noonan 9.11.20, [25]-[36]). I also accept that no issues arise in respect of the receipt of direct voting and proxy forms, the collation of proxies, the preparation of a proxy report and the registration, voting and poll procedures at the meetings on 30 October 2020 or the conduct of those meetings (Noonan 9.11.20, [40]-[60]; Reed 3.11.20, [10]-[41]; Nisbett 3.11.20, [9]-[56]). WCIL published a notice of the second Court hearing for judicial advice in The Australian newspaper on 28 October 2020 (McCulloch 9.11.20, [13]-[16]) and subsequently notified unitholders when that hearing was twice adjourned at its request. Mr Williams points out that all of the relevant conditions precedent to the Proposal have been satisfied, other than the condition relating to the provision of judicial advice.

The despatch of the Proposal Materials and SEM

I now return to WCIL's procedures in relation to the despatch of the Proposal Materials and the SEM to unitholders, and several failures in aspects of them, which have caused significant difficulties in this application. I have referred to the evidence as to those matters above. Mr Williams points out that, as at 28 September 2020, the number of unitholders on the register of unitholders of each Fund was 2,243 unitholders for Fund I; 2,037 unitholders for Fund II; 2,189 unitholders for Fund III; and 1,673 unitholders for Fund IV, and there were 3,898 unique unitholders across the four Funds, adjusting for the fact that some unitholders hold units in more than one Fund.
Importantly, the investment manager for the Funds sent the 30 September Email with a link to the Proposal Materials to all unitholders for whom Boardroom or the investment manager held an email address, being approximately 96%-97% of unitholders in each Fund, and also sent a similar email on 14 October 2020 with a link to the SEM. As I have noted above, Boardroom also despatched the Proposal Materials and the SEM either in hard copy or by email containing a link to a website to 229 of the 230 unitholders who were not active clients of the Evans Dixon Wealth Advice division. Mr Williams submits and I accept that, where a unitholder had provided an electronic address that was recorded on the registers maintained by Boardroom, and even if it had not nominated the address for the purpose of receiving communications from WCIL such as notices of meeting, paragraph 5(1)(f) of the Corporations (Coronavirus Economic Response) Determination (No. 3) 2020 (Cth) permits the provision of notice using the unitholder's email address.
Mr Williams also points out that, as I have also noted above, the Proposal Materials and SEM were despatched through the Evans Dixon Wealth Advice division to the 3,668 ED Unitholders. Mr Williams points to a practice by which the Evans Dixon Wealth Advice division receives communications from companies, investment funds and other entities as intermediary for its clients and provides financial advice in relation to those communications to its clients, and to the fact that unitholders which are clients generally record an Evans Dixon address in the registers for the Funds, being either a postal address which is a post office box or business address associated with Evans Dixon or an email address which is the address of the client's financial adviser in the Evans Dixon Wealth Advice division. I have also referred to the evidence as to the despatch of those communications above. It seems to me that the issues in that respect are largely displaced by the fact that a link to the Proposal Material was sent to 3,915 unique unitholder addresses by the 30 September Email and a link to the SEM by the subsequent email on 14 October 2020.
Mr Scheelings submits that the approach adopted by WCIL had the consequence that unitholders have had different periods of notice of meetings, so far as some of them have received notice from individual financial advisers, and he submits that process impacts upon the power to call and conduct the relevant meetings under cl 17 of, for example, the constitution of Fund II. Mr Scheelings also submits that the evidence that at least one unitholder (and, as events have subsequently developed, several unitholders) did not receive notice of the meeting is arguably more than a mere procedural irregularity and that, depending upon the circumstances, lack of notice to unitholders of a meeting may be more than a procedural irregularity, even if the presence of the unitholder would not have changed the outcome of any vote. He recognises that, in the case of a substantive irregularity, s 1322(4) is available to regularise the irregularity, provided it has not caused substantial injustice: Weinstock v Beck (2013) 251 CLR 396; [2013] HCA 14.
However, it seems to me that Mr Williams is right to note that the vast majority of unitholders received the Proposal Materials and the SEM by the 30 September and 14 October Emails. Most of the difficulties to which I have referred above arose in respect of further communications by the Evans Dixon Wealth Advice division which were, at best, not necessary to giving proper notice of the Proposal to unitholders. Ultimately, it appears that only seven unitholders did not receive the relevant documents by some means, and I am satisfied that the Proposal put by WCIL for further notification to them addresses that issue.
I am also satisfied that, in any event, any issue as to the timing of the notice of the meetings given to unitholders did not invalidate the unitholder meetings by reason of s 1322(2) of the Act. That subsection relevantly provides that a proceeding under the Act is not invalidated because of any procedural irregularity, unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. A defect of notice or time in respect of a meeting is a "procedural irregularity" for the purposes of s 1322(2) because it is expressly defined as such in s 1322(1)(b)(ii). There is no suggestion that the timing of the notice here caused or may cause substantial injustice. I am also satisfied that the accidental failure to give notice to a small number of unitholders of the meetings would not invalidate the meetings by reasons of s 1322(3) of the Act.
In ASIC's initial written submissions and in oral submissions (T37), Mr Scheelings also developed a submission that the Proposal gives rise to possible contraventions of the constitutions of the Funds or of s 601GC of the Act, so far as the transactions may contravene s 601FC of the Act, which imposes duties upon the responsible entity of a registered scheme. It was not entirely clear whether Mr Scheelings' submission in this respect went further than a criticism of the extent of notice of the meetings that had been given to unitholders, where some unitholders received notices directly and others through financial advisers within the Evans Dixon Wealth Advice division, although that criticism is undermined by the direct communications with unitholders made by the 30 September Email to which I have referred above. To the extent that there was any wider criticism of the transaction as involving any breach of any other duty imposed by s 601FC of the Act, that breach has not been established by the evidence. It does not seem to me that the Court could proceed on the basis that it would withhold judicial advice in respect of a trust scheme, where the possibility of breach of duty by a responsible entity is merely raised but not established.

Issues as to disclosure at the first Court hearing and to ASIC

Mr Scheelings points to concerns that I had raised at the second Court hearing about the adequacy of disclosure at the first Court hearing, including the reference at the first Court hearing to information being provided by financial advisers to clients, without disclosure of the fact that over 90% of unitholders were clients of related party financial advisers; the absence of disclosure at the first hearing of the likelihood that the Evans Dixon Email would be sent to unitholders, accompanying the material which was approved by the Court; and the absence of disclosure that those communications would be further supplemented by communications from individual financial advisers, of which the Court would have no oversight. Mr Scheelings draws attention to an applicant's duty of disclosure to the Court in an ex parte hearing, as summarised by Allsop J (as his Honour then was) in Walter Rau Neusser Oel Und Fettag AG v Cross Pacific Trading Ltd [2005] FCA 955 at [38] and subsequent case law including Lakis v Lardis (No 4) [2018] NSWSC 1566 at [20]-[21]. Mr Scheelings also submitted that the Court would almost invariably discharge or set aside previous orders if an applicant in ex parte proceedings has breached its duty of disclosure: Cross Pacific Trading Ltd above at [50] Garrard (t/as Arthur Andersen & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662 at 678.
Mr Scheelings submits that WCIL knew, or at least knew that it was likely that, the Wealth Advice division of Evans Dixon would eventually send a communication to unitholders in a form such as the Evans Dixon Email. That submission is supported by the evidence subsequently led as to Ms Strelow's expectations as to such a communication and by Mr Morrow's evidence of WCIL's practice of providing unitholder communications directly to Evans Dixon for distribution to ED Unitholders (as defined) and the practice of providing those communications to clients "together with any financial advice relevant to the communication" (Morrow 8.11.20 [11]). Mr Scheelings also points to the connections which exist between Dixon Advisory and WCIL, as wholly owned subsidiaries of Evans Dixon. Mr Scheelings also refers to internal communications within WCIL which at least recognise input received from advisers as to liquidity concerns in respect of the Funds and the possibility that the Investment Committee of the Wealth Advice division should be "briefed on the deal". Mr Scheelings points out that the Evans Dixon Email itself indicates a degree of coordination between WCIL and the Wealth Advice division in respect of the Proposal, where that email states that: "A key focus of the [Investment] Committee since its formation has been increasing liquidity within client portfolios and the Committee has actively engaged with the Responsible Entity to encourage the implementation of an enhanced liquidity framework for the FSREC Fund series. While acknowledging there is no immediate liquidity event generated by the proposed merger of the individual FSREC Funds, the Committee believes the proposed structure of a merged Fund offers the potential for improved liquidity in future due to the larger scale."
I do not consider it necessary or appropriate in a judicial advice application to reach contested findings of fact as to this question, and it is preferable that I now address the consequences of the incomplete disclosure that occurred at the first hearing for the advice that is now sought by WCIL, which do not depend on how it came about.
Mr Williams responds to ASIC's submission concerning ex parte disclosure that principles applicable to ex parte interlocutory applications are not applicable in this context. I am not persuaded that those principles are not applicable in ex parte applications in respect of company schemes and, by extension, in respect of applications for judicial advice in trust schemes. Mr Williams rightly points out that s 63(2) of the Trustee Act provides that, where the Court is not provided with all material facts to the exercise of its discretion and the factors specified in that subsection are satisfied, then the obtaining of judicial advice will not protect the responsible entity in respect of the conduct undertaken. In oral submissions, Mr Williams again emphasised the difference between the jurisdiction being exercised by the Court in a trust scheme and an adversarial ex parte application and emphasised that the relevant material was now before the Court, and could be addressed at this hearing (T43-44).
There is force in ASIC's criticisms of the conduct of the first Court hearing by WCIL. The submissions made by WCIL at the first Court hearing did not fairly draw the Court's attention to the significant role which Evans Dixon's Wealth Advice division was likely to take, and did take, in communications with unitholders and the extent to which it proposed to communicate with unitholders, potentially rendering the Court's review of the Proposal Materials and SEM superfluous. I should note that I make no criticism of Counsel or solicitors for WCIL in this respect, since I am conscious that their ability to make disclosure would plainly be constrained by the information which WCIL provided to them as to its related companies' intentions. However, I am not persuaded that I should set aside the orders made at the first Court hearing. First, as Mr Williams points out, this is an application for judicial advice and not an ex parte application for substantive relief, and s 63 of the Trustee Act itself deals with the effect of non-disclosure. Second, as Mr Williams also points out, where the Court sets aside ex parte orders for non-disclosure, the applicant can ordinarily renew the application with full disclosure. The Court now has full disclosure in this application and there would be real disadvantage to unitholders in putting them to the costs of repeating this process, rather than dealing with the present position on its merits.
In oral submissions on 2 December 2020, Mr Scheelings also advanced criticisms of the extent of disclosure made by WCIL to ASIC in respect of the relief application associated with the Proposal and, in particular, WCIL's failure to provide information as to the corporate structure of Wealth Advice companies within the Evans Dixon group in response to a request by ASIC. Mr Williams responded, in oral submissions, by pointing to the relatively uncontroversial character of the relief sought by WCIL in respect of the trust scheme (T46-47) and submitted that WCIL, by its solicitors, had fairly responded to ASIC's request for specific information in respect of the waiver application. The relief that was sought by WCIL was a waiver of a kind that seems to be commonplace in trust schemes and it is by no means clear that WCIL did not provide the information which ASIC had requested, although it may be that the information that ASIC requested was not sufficient for ASIC's purposes. In any event, it does not seem to me that this issue is material to this application. If ASIC considers that the relief it provided was induced by incomplete or incorrect information, then it would presumably be open to it to revoke that relief. Mr Scheelings was not instructed that it had done so.

Communications with unitholders without the Court's approval

I have referred above to several communications by Evans Dixon's Wealth Advice division to unitholders which had not been exposed to the Court for review. Mr Scheelings drew attention to the Court's approach in company schemes, in disapproving communications with shareholders made without the Court's approval: Coates Hire Ltd (No 2) [2007] FCA 2105; Re Centro Retail Ltd [2011] NSWSC 1321 at [10]. In supplementary submissions, Mr Scheelings also draws attention to a statement in the Evans Dixon Email as to the date on which votes were required to be lodged with the registry, and submits that is a further reason why ASIC is concerned about the sending of that email. I am not satisfied that statement was materially misleading.
Mr Williams responds that the communication of advice from the Evans Dixon Wealth Advice division to its clients on 15 and 16 October 2020 should be seen, not as part of the notice given by WCIL to unitholders, but as a private communication between a financial adviser and client under contractual arrangements between those parties. Mr Williams accepted, in submissions dated 27 November 2020, that the evidence led at the first Court hearing did not give any indication of the number and relative proportion of unitholders who were likely to receive the Proposal Materials by their being sent to the email or postal address of their financial adviser, or of the fact that over 90% of unitholders were clients of the Wealth Advice division of Evans Dixon and would receive the proposal materials in that manner. Mr Williams also accepted that the evidence led at the first Court hearing also did not disclose the likelihood that the Wealth Advice division of Evans Dixon would make a recommendation to its clients in relation to the Proposal, and that that communication was not drawn to the Court's attention after the first Court hearing and prior to the unitholder meetings. Mr Williams rightly acknowledges that it would have been appropriate for WCIL to have disclosed those matters at the first Court hearing, and that it would also have been appropriate to have done so (if that had not previously occurred) after the Wealth Advice division of Evans Dixon had determined to communicate the Investment Committee's recommendation to its clients.
Mr Williams fairly points out that there are differences in the legal basis for the Court's supervisory role in a trust scheme from a company scheme, although trust schemes have proceeded by analogy with schemes of arrangement under Pt 5.1 of the Corporations Act at least since Re Mirvac Ltd (1999) 32 ACSR 107. He points out that the Court does not convene the unitholder meeting, does not approve the notice of meeting and does not give directions for the conduct of the meeting in a trust scheme, and that the principle that the Court should maintain oversight and control over communications with members or creditors in a company scheme has its genesis in the Court's role as convenor of the meeting. It seems to me that the Court's interests in that matter has a wider basis, in the Court's interest in ensuring fair and proper disclosure to shareholders or unitholders in respect of a scheme or trust scheme. This case also well demonstrates the practical difficulties which arise where the Court has been asked to give advice as to the conduct of a responsible entity in respect of scheme meetings, but is provided with access to only some of the communications that will be made in respect of those scheme meetings.
Mr Williams also points out that, although WCIL and the Wealth Advice division of Evans Dixon are part of the same listed corporate group, they are said to be functionally separate and to be on opposite sides of an information barrier. There are difficulties both of fact and principle with that proposition. First, the information barrier was substantially eroded by the number of representatives of the Wealth Advice division who were crossed, in the course of preparing the Proposal and, second, the Court was deprived of the opportunity to consider this issue, and the extent to which reliance could properly be placed on the suggested functional separation through that information barrier at the first Court hearing, because it was not disclosed.
Mr Williams also points to the existence of an independent chair of the Investment Committee of the Wealth Advice division of Evans Dixon, and I have regard to that matter, although less weight can be placed on it when the majority of members of that committee are not independent. Mr Williams also submits that it was not possible for WCIL to have put the proposed terms of the communication by the Wealth Advice division and its clients before the Court at the first Court hearing, because the recommendation of the Wealth Advice division had not then been formulated and that would have been a "breach" of the suggested functional separation between the Funds Management and Wealth Advice divisions. The obvious answer to that proposition is that the likelihood of such a recommendation could have been disclosed, and its content could also have been disclosed by relisting the matter before it was made.
The Courts have repeatedly emphasised, in the analogous context of schemes of arrangement that, if the Court has ordered the convening of a scheme meeting and approved an explanatory statement, its approval should be sought before additional explanatory material is despatched: Re Centro Retail Ltd above at [11]; Re Trust Company Ltd [2013] NSWSC 1946 at [6]-[8]; Re Investa Listed Funds Management Ltd [2016] NSWSC 344 at [4]; Re Investa Listed Funds Management Ltd [2016] NSWSC 369 at [1]; Re Billabong International Ltd (No 2) [2018] FCA 496 ; Re Tawana Resources NL (No 2) [2018] FCA 1724 at [18]; Re Prime Media Group Ltd [2019] NSWSC 1888. There is no suggestion that WCIL was obliged to scrutinise communications between third party investment advisers and unitholders. However, the Evans Dixon Wealth Advice division was not a third party adviser, but a related company of WCIL. Once WCIL had sought to invoke the process of obtaining judicial advice in a mechanism that parallels the process for a company scheme, then it was at least at risk that a failure to seek the Court's approval for communications between its related entities and unitholders would potentially have the result that the Court was not satisfied that it should give the judicial advice that it seeks. I do not accept any suggestion, if it is put, that that principle extends only to WCIL and not to its holding company or its related entities. Perhaps the proposition should be put more precisely by noting that, while the Court likely has no jurisdiction to prevent communications by a holding company or related party of a scheme proponent, that scheme proponent should not be surprised if the Court were to decline to approve a scheme, or provide judicial advice in respect of a trust scheme, if its holding company or related party undertook communications with the scheme participants which the Court would not have approved had they been proposed by the scheme proponent.
However, Mr Williams also submitted, and I accept, that the ultimate question is whether the manner in which the Proposal Materials and other documents were despatched had compromised the integrity of the voting process. Mr Williams submitted, and I also accept, that the summary of the Proposal and recommendation provided by Evans Dixon Email to its unitholder clients was a balanced communication which fairly described the Proposal and its benefits and risks as disclosed in the Proposal Materials, and it seems to me that it would have been approved by the Court had WCIL sought approval for it. Mr Williams submits, and I also accept, that that communication reflected the disclosure in the EM, in describing the benefits of the Proposal and its liquidity impacts; advised clients to read the Proposal Materials in full and provided electronic links to encourage them to do so; that the view attributed to the Evans Dixon Investment Committee in the Evans Dixon Email was a measured one; and that the communication prominently disclosed the disadvantages and risk of the Proposal, again reflecting the risk disclosures in the EM. I also recognise that that communication also disclosed the corporate relationships between WCIL, the investment manager of the Funds and the Evans Dixon Wealth Advice division, so that unitholders could make an assessment whether the advice given by the Evans Dixon Wealth Advice division might be affected by conflict of interest. I am also not persuaded that the other communications by the Evans Dixon Wealth Advice division and advisers, which I have set out above, ultimately compromised the adequacy of disclosure provided in the Proposal Materials, the independent expert reports and the SEM, or the integrity of voting at the meetings of unitholders.
In oral submissions, Mr Williams submitted that the combination of the disclosure made by WCIL, by the Proposal Materials and the SEM, and the additional comments made by the Wealth Advice division of Evans Dixon, were not such that the Court could conclude that the outcome of the meeting lacked integrity or that unitholders were deprived of the opportunity to make a decision in respect of an informed decision as to the Proposal (T45). Mr Williams rightly put substantial weight, in that respect, on the fact that the EM and the SEM had been sent by WCIL to approximately 95% of the members of the Funds and that any further advice by the Wealth Advice division of Evans Dixon was given in the context of the disclosure made by those documents (T45-46).
I also raised with Mr Williams, in the course of oral submissions, whether the intervention of related parties of WCIL in the transaction had introduced a level of advocacy into the process for its consideration by unitholders which was inconsistent with the requirements for balanced disclosure in respect of company and trust schemes (T43), irrespective of any question of inaccuracy in the relevant disclosures. I have ultimately concluded that the communications by the Wealth Advice division of Evans Dixon, and individual financial advisers, are not likely to have had have that result as a matter of fact. As I have noted above, those conclusions largely drew upon disclosure in the EM and SEM, although they often did so in a summary way; I have concluded above that the Evans Dixon Email provided a fair summary of the Proposal; individual advisers generally appear to have made limited comments and the evidence does not support a finding that the limited additional comments they made did not provide a fair comment on the Proposal, particularly when they were generally accompanied by electronic links to the disclosure made in the Proposal Materials and the SEM.
On balance, these matters are not sufficient reason not to give the advice sought, although it still seems to me that it was highly undesirable that these communications were not first disclosed to the Court, and I do not accept that the need for such disclosure did not arise because the communications were made by a related party of WCIL rather than by WCIL itself.
For completeness, I note that I requested further submissions at the hearing on 2 December 2020 as to whether, if I were not prepared to make orders in the form proposed WCIL, would the Plaintiff then seek, and should the Court then make, an order in the form made by Farrell J in Re Boart Longyear Ltd (2019) 134 ACSR 591; (2019) FCA 62 for supplementary disclosure to unitholders in each of the funds, and for further virtual meetings of unitholders to consider whether they wish to ratify the results of the earlier meetings with such further disclosure; what would be the timing of such further disclosure and such further meetings; and what would be the form of orders necessary to give effect to that approach. I am satisfied that approach would not have utility. The issues which I have addressed above largely involve further advice to ED Unitholders given by the Evans Dixon Wealth Advice division which I have not found to be misleading. I have addressed the consequences of that further advice above and it seems to me that any issues arising from it could not cured by now seeking to overlay it with further communications with unitholders and further unitholder meetings. The Court must either give the judicial advice which is sought, or withhold it with the consequence that the Proposal does not proceed and any liquidity benefits from it are not realised unless WCIL undertakes a further transaction.

Issues as to Chapter 2E of the Corporations Act

Mr Scheelings also submitted that WCIL had not complied with the requirements for notice to ASIC in respect of unitholder approval of related party transactions which arise in aspects of this Proposal. Mr Scheelings points out that WCIL accepts, and advised unitholders, that s 208 of the Corporations Act applies to the transactions, so far as they concern Funds II, III and IV. Mr Scheelings pointed out that s 218(1)(d)(iii) (as modified by s 601LC of the Act) requires a responsible entity to lodge any communication with ASIC that an "associate" proposes to put to unitholders in connection with a resolution to approve a related party transaction, if that communication could reasonably be expected to be material to the unitholder in deciding how to vote on the proposed resolution. Mr Scheelings points out that the term "associate", as defined in s 11 of the Act, includes a "related body corporate" and that each of Dixon Advisory and Superannuation Services Ltd and Evans & Partners Pty Ltd are related bodies corporate and associates of WCIL for that purpose. Mr Scheelings also submits that the recommendations made by those entities could reasonably be expected to be material to a unitholder in deciding how to vote on the proposed resolutions. Mr Scheelings submits that a failure to comply with ss 208 and 218 in that respect is not a mere procedural irregularity, given the significance of ASIC's protective function in respect of Ch 2E of the Act. Mr Scheeling also points to a possible contravention of s 221(e) of the Act, in respect of documents sent to unitholders in respect of the relevant transactions, so far as they included documents other than those which had been approved by ASIC. In oral submissions, Mr Scheelings adds that ASIC does not seek to prove a contravention of Ch 2E of the Act in this application and does not ask the Court to find that such a contravention has occurred, but submits that there is a real risk that such a contravention had occurred and a real risk of invalidity of the relevant transaction. However, as will emerge below, the structure of Ch 2E of the Act is such that a contravention would not invalidate the relevant transactions.
Mr Williams responds that s 218 of the Act is concerned only with document provided to members of a scheme as members, and not with documents provided to members in a different capacity, and does not require a responsible entity to lodge with ASIC documents to be provided by a related financial advice entity to some unitholders who happen to be clients of the financial advice entity. I do not accept that submission, which seems to me to find no support in the terms of the section. While Mr Williams is correct that the obligation in s 218 is imposed on the responsible entity, it extends to the lodgment of communications from associates of the responsible entity, and it is a matter for the responsible entity to have arrangements in place to comply with that obligation. I also do not accept Mr Williams' submission that the Evans Dixon Email was not material to the related party benefit resolution, where its support for the Proposal as a whole would plainly induce members to vote in support of that aspect of the Proposal which involved the related party transactions.
I note, however, that s 209 of the Act has the consequence that a contravention of these provisions would not invalidate any contract or transaction connected with the giving of a related party benefit in respect of the Proposal: see Mutual Holdings Pty Ltd v Shepard in His Capacity as Administrator of Quest Minerals Ltd (2015) 303 FLR 205; (2015) 110 ACSR 88; [2015] WASC 412. That section plainly reflects a legislative intention to preserve the validity of such transactions, while reserving the possibility of claims against persons who may be involved in the relevant contraventions. It seems to me that I should not withhold the advice sought on the basis of the suggested contraventions of ss 208 and 221 of the Act. It seems to me that to withhold that advice on that basis, with the result that the Proposal does not proceed, would be disproportionate where those communications have been open to review in this hearing; would not give effect to the resolutions passed by substantial majority votes of unitholders; and is not necessary to support the legislative policy underlying Ch 2E, where any actions by ASIC against persons involved in any contravention are not affected by the relief sought. I also note, for completeness, that WCIL ultimately did not press an application under s 1322(4) of the Corporations Act for an order that the resolutions passed by unitholders of Funds II, III and IV approving the Proposal for the purposes of Chapter 2E of the Corporations Act are not invalid by reason of any failure to comply with ss 218 and/or 221 of the Act (T48). It seems to me that such an order was not necessary having regard to s 209 of the Act.

Issues raised by the trustees of the Sonia Hathaway Superannuation Fund

Mr Arthur in turn submits, on behalf of the Sonia Hathaway Superannuation Fund, that the implementation of the Proposal will result in an investment that is inappropriate for Ms Hathaway, given her age and circumstances. Mr Arthur submits that the implementation of the Proposal will result in her having an investment with a longer term in the FSREC Property Fund, being the fund formed by the merger of the other Funds, rather than investment in Fund II, the assets of which would shortly have been realised. Mr Arthur also drew attention in his submissions to the chronology of the investment by the Sonia Hathaway Superannuation Fund in Fund II and submitted that Fund II was due to commence selling down investments in May 2021 and would presumably then return capital to its unitholders. I will note potential qualifications to that proposition below. Mr Arthur submitted that the rights of the Sonia Hathaway Superannuation Fund were adversely affected by the Proposal because it would be locked into a long term, illiquid investment. Mr Arthur also pointed to the disclosures of the long term character of the investment in the FSREC Property Fund in the EM, a matter to which I will refer below. Mr Arthur also pointed out that the first opportunity to exit the FSREC Property Fund, in about March or April 2024 is "heavily qualified" and that the Proposal does not offer an ongoing redemption facility.
Mr Williams fairly accepts that Ms Hathaway's concerns are understandable and they seem to me to raise significant issues for Ms Hathaway personally. Nonetheless, the Proposal Materials squarely disclosed the effect of the Proposal on the duration of and the forthcoming liquidity event in Fund II as a matter which might lead unitholders in that Fund to vote against the Proposal, and it is notable that a lesser percentage of unitholders in Fund II voted in favour of the Proposal than of unitholder in the other Funds. The extent and adequacy of that disclosure was evident from Mr Arthur's helpful submissions, since he took the Court to the various references in the EM and independent expert's report to the effect of the Proposal upon the duration and liquidity of Fund II, and it is apparent from Ms Hathaway's affidavit that she had fully understood the significance of this issue. Despite the disclosure of that matter, a significant majority of unitholders in Fund II, exceeding 90% of the votes cast, voted in favour of the amendments to Fund II's constitution to implement the Proposal. Mr Williams also points out, and I accept, that there was an existing risk in Fund II that the realisation of the Fund's assets would be deferred. Although the Fund had a 10 year term, and it contemplated the commencement of a process of realising its assets from May 2021, the original product disclosure statement for that Fund had disclosed the possibility that that term might be extended by a vote of members.
Second, as Mr Williams points out, the rights of members in a registered managed investment scheme are liable to amendment by special resolution of members in accordance with the statutory amendment procedure. Clause 24.1 of Fund II's constitution provides for such an amendment by resolution of unitholders subject to the Corporations Act, which allows such an amendment under s 601GC of the Act. That amendment mechanism has been implemented here, after disclosure of the relevant advantages and disadvantages to members, and Mr Arthur rightly did not submit that the amendment that was made constituted a fraud on the amendment power. It seems to me that that amendment here was within power, and effective, notwithstanding that its effect was potentially adverse to Ms Hathaway and any other elderly members of Fund II who are in a similar position to Ms Hathaway: Gra-ham Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65; Cachia v Westpac Financial Services Ltd (2000) 33 ACSR 572 at [14]; [63]-[66]; ING Funds Management Ltd v ANZ Nominees Ltd (2009) 228 FLR 444; [2009] NSWSC 234 at [149].
I also recognise, although it may be of limited comfort to Ms Hathaway, that the Proposal provides for Liquidity Review Event for the FSREC Property Fund in October 2023, where unitholders would be able to vote to wind up the Fund and, if they do not do so, the responsibility entity will make a withdrawal offer within six months in accordance with s 601KB of the Act. Mr Arthur rightly recognised that those provisions do not guarantee Ms Hathaway the opportunity to redeem the investment of the Sonia Hathaway Superannuation Fund in the FSREC Property Fund at that time.
Mr Arthur also submitted that unitholders' funds had been diminished by the deduction of costs of the Proposal in the financial year ended 30 June 2020, and Mr Arthur observed that WCIL had incurred $1.4 million of transaction costs associated with the Proposal in the year to 30 June 2020, which had reduced net tangible assets as at 30 June 2020. Mr Arthur submits that that occurred prior to the making of orders by the Court on 29 September 2020 relating to the costs of the first Court hearing. I did not understand Mr Arthur ultimately to contend that those expenses were improperly or unlawfully incurred. I accept that, as Mr Williams submits, WCIL was entitled to rely on its right to indemnity from trust assets under clauses 21.4 and 21.6 of the constitution of Fund II, where those costs (as distinct from the wasted costs of aspects of these proceedings) were properly incurred in the performance of its duties as responsible entity of the Fund. The implementation costs of the Proposal are also of a different character to the costs of the proceedings which were the subject of the Court's order at the first Court hearing and will also be addressed at this hearing.
In his oral submissions, Mr Arthur raised the possibility that the Court might give the advice sought by WCIL, subject to a condition that there be an earlier redemption offer to unitholders generally or possibly unitholders in Fund II. I am not able to impose that condition, either as a matter of principle or as a matter of evidence. In principle, the Court's role in an application of this kind is to consider the proposal that is put before it, not to determine whether there is a better proposal that might have been put, and it is not open to the Court to impose a condition, which, in effect, would put WCIL to an election whether to adopt a different proposal that the Court might think preferable or abandon the restructuring of the funds: Re Centrebet International Ltd [2011] FCA 870 at [29]; Re SAI Global Ltd [2016] FCA 1312 at [18]; Re BIS Finance Pty Ltd [2017] NSWSC 1713 at [22]; Re Amcor Limited (No 2) [2019] FCA 842 at [11]. When I raised that issue with Mr Arthur, in the course of oral submissions, he fairly did not press this submission. The evidence also does not permit any assessment of the feasibility of WCIL making an earlier redemption offer in respect of the FSREC Property Fund, or the extent to which the possible need for the sale of properties to implement it would be adverse to unitholders' interests.
In his initial written and oral submissions, Mr Arthur also drew attention to a responsible entity's obligations in respect of conflicts of interest and referred to the consideration of that issue at first instance in Australian Securities and Investments Commission v Australian Property Custodian Holdings Ltd (recs and mgrs apptd) (in liq) (controllers apptd) (No 3) [2013] FCA 1342 at [543]; that decision was the subject of an appeal to the High Court of Australia in Australian Securities and Investments Commission v Lewski (2018) 362 ALR 286; [2018] HCA 63. I accept that the relationships between WCIL and the Evans Dixon Group, to which I have referred above, raise an obvious and significant risk of conflict of interest, although I also recognise that those relationships were disclosed in the documents provided to unitholders.
Mr Arthur submits that, in summary, if the Proposal is approved, the Sonia Hathaway Superannuation Fund would lose the possibility of a return of monies from Fund II in 2021, its ability to access such monies from the new fund in 2024 was not guaranteed, and the effect would be to force the Sonia Hathaway Superannuation Fund into an inappropriate investment. Regrettably, it seems to me that there is force in that submission, and that the implementation of the Proposal will have an adverse impact, and possibly a substantially adverse impact, on the Sonia Hathaway Superannuation Fund. It does not seem to me, however, that the Court can decline the advice sought by WCIL in respect of Fund II or generally on that basis, where the Proposal has been approved by a substantial majority of the unitholders of Fund II and the other Funds as I noted above.
Mr Arthur, in supplementary submissions for the Sonia Hathaway Superannuation Fund, contends that WCIL did not adequately address conflicts of interest affecting the implementation of the Proposal and, in particular, submits that the design of the proposal so as to merge Funds II, III and IV into Fund l, which has no end date, has the consequence of providing a long-term continuing income stream for the fund manager. Mr Arthur submits that these matters were not adequately addressed at board meetings of the responsible entity. The relatively limited evidence led in an application of this kind would not support findings of conflict of interest in respect of the design of the Proposal, although nothing in this decision would prevent a claim brought by unitholders or ASIC against persons involved in such a contravention, with the possible exception of WCIL, if it were established at a substantive hearing. It also seems to me that this submission is to some extent another way of putting the submission that a different proposal to that which unitholders have approved would be preferable, and I have indicated above why the Court cannot take that approach.

Summary and Determination

This is an application in which many difficulties have arisen. In summary, the vast majority of unitholders received the Proposal Materials and the SEM by emailed links from WCIL; and, while there were many difficulties with the communications between the Wealth Advice division of Evans Dixon and unitholders, it appears that only seven unitholders did not receive the relevant documents by some means, and I am satisfied that the Proposal put by WCIL for further notification to them addresses that issue; and issues as to timing of notice do not invalidate the unitholder meetings by reason of s 1322 of the Act.
I have found that the issues as to inadequacy of disclosure which had arisen at the first Court hearing have now been addressed where relevant issues have emerged, and it would not be in the interest of unitholders to set aside the orders previously made and force the process to failure, or to begin again at additional costs, without a determination on the merits. I have set out my concerns above as to communications by the Wealth Advice division of Evans Dixon to unitholders, which were not disclosed to the Court before they were made. I am not persuaded that I should refuse the advice sought for that reason, where I am not persuaded that they compromised the adequacy of disclosure provided in the Proposal Materials, the independent expert reports and the SEM, or the integrity of voting at the meetings of unitholders. However, I will impose terms as to costs on WCIL, where there is no reason that the Funds rather than WCIL or its related companies should bear the additional costs that have arisen from these issues.
I accept ASIC's submission that there may have been contraventions of ss 208 and 221 of the Act in respect of the failure to provide communications to unitholders to ASIC for review prior to their despatch to unitholders, but I do not withhold the advice sought on that basis. As I noted above, it seems to me that to do so, with the result that the Proposal did not proceed, would be disproportionate where those communications are in evidence and I have reviewed them; and to do so would not give effect to the resolutions passed by substantial majority votes of unitholders and is not necessary to support the legislative policy underlying Ch 2E, for the reasons noted above.
I accept Mr Arthur's submission that the implementation of the Proposal will have an adverse impact, and possibly a substantially adverse impact, on the Sonia Hathaway Superannuation Fund. It does not seem to me, however, that the Court should decline the advice sought by WCIL in respect of Fund II or generally on that basis, where the Proposal has been approved by a substantial majority of the unitholders of Fund II and the other Funds as I noted above. I cannot withhold advice in order to seek to require WCIL to develop an alternative proposal, quite apart from the uncertainty whether any feasible alternative exists. While there is plainly significant potential for conflicts of interest in the development of the Proposal, the evidence does not support any finding in that respect that would support withholding the advice sought.
For these reasons, and giving weight to the disclosure of the advantages and disadvantages of the Proposal in the Proposal Material, the views put in the independent expert's reports and the vote of substantial majorities of unitholders in each of the Funds, I will give the advice sought, on the terms set out below. I do so, however, with considerable hesitation.

Costs

Mr Scheelings points to the order made by the Court at the first hearing that the costs arising out of or incidental to WCIL's Summons be paid out of the assets of the Funds, in proportion to the net tangible assets of each Fund as at 31 December 2019. Mr Scheelings identifies the prospect that that order may need to be revisited, if the application or judicial advice is now refused, and indicates that ASIC seeks to be heard on that matter. No occasion to vary that order has arisen in respect of the costs of the first Court hearing. However, as I noted above, the manner in which WCIL and its related companies have approached the implementation of these trust schemes since the first Court hearing has caused significant difficulties and significant waste of costs. I would only have granted the judicial advice sought by WCIL on terms that WCIL pay or cause to be paid all costs incurred in respect of these proceedings, including of and incidental to the preparation of further evidence, on and from 10 November 2020 without recourse to the assets of the Funds. As indicated above, WCIL has advised that it would submit to those terms.

Orders

I therefore make the following orders: 1. Subject to the Plaintiffs' compliance with the terms specified in order 2, pursuant to its power under section 63 of the Trustee Act 1925 (NSW), the Court orders that the Plaintiff, in its capacity as responsible entity of: (a) Fort Street Real Estate Capital Fund I (ARSN 163 688 346) (Fund I); (b) Fort Street Real Estate Capital Fund II (ARSN 169 190 498) (Fund II); (c) Fort Street Real Estate Capital Fund III (ARSN 605 335 957) (Fund III); and (d) Fort Street Real Estate Capital Fund IV (ARSN 623 196 298) (Fund IV) (together, the Funds), would be justified in giving effect to and implementing the 'Proposal' (as defined in the Summons filed on 28 April 2020) (the "Proposal"), in giving effect to the amendments to the constitutions of the Funds as set out at paragraph 1(c) of the Summons, and in doing all things necessary to effect the Proposal. 2. Notwithstanding any previous costs orders made by the Court in these proceedings, the Plaintiff pay or cause to be paid all its and the Funds' costs incurred in respect of the conduct of these proceedings, including costs of and incidental to the preparation of further evidence, on and from 10 November 2020 without recourse to the assets of the Funds. 3. Direct the Plaintiff, by 8 December 2020, to notify the 7 unitholders referred to in paragraph 48 of the affidavit of James Anthony David Morrow affirmed 1 December 2020, at the email addresses held by Evans Dixon Limited for those unitholders, of the application for advice made in this proceeding. 4. Any unitholder referred to in Order 3 who contends that their rights will be prejudiced by the amendments to the constitution of the relevant Fund contemplated in the resolutions passed at the relevant Meeting, or by the Plaintiff implementing the proposed transaction, may apply by 4pm 21 December 2020 for such orders or directions as the circumstances may require, that application to be returnable at 9.15am on 22 December 2020 before the Corporations duty Judge. 5. Order that, unless a unitholder referred to in Order 3 above applies to the Court by 4pm on 21 December 2020, the advice in Order 1 take effect from noon on 22 December 2020. 6. The exhibits be returned, and retained by the party to whom they are returned pending any appeal. 7. These orders be entered forthwith.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 December 2020

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