Cullen v Galloway Cattle Society Inc [2010] NSWSC 1035 | Case summary

1 By summons filed on 3 September 2009, The Trust Company (RE Services) Limited makes an application under s 63 of the Trustee Act 1925 for the opinion, advice or direction of the court. It does so in its capacity as the responsible entity of the Asciano Finance Trust, a registered managed investment scheme under the Corporations Act 2001 (Cth). 2 The application relates to a proposal under which stapled securities of Asciano Ltd will be reorganised. As things currently stand, a holder of Asciano stapled securities holds shares in the capital of Asciano Ltd and a corresponding number of units of the Asciano Finance Trust. Under provisions of both the company's constitution and the constitution of the managed investment scheme, the shares and the units are transferable and tradeable only as components of the stapled securities. 3 The proposal to which the present application relates involves breaking of the link between the shares in the company and the units of the managed investment scheme, the acquisition by Asciano Ltd of the severed units and the issue as consideration for that acquisition of further shares in Asciano Ltd on the basis of one new share for each acquired unit. The final step, it is proposed, will be a consolidation of the share capital of Asciano Ltd on a one for two basis so that, in the final result, a particular security holder holds a number of Asciano shares corresponding with the pre-existing number of Asciano Ltd stapled securities. 4 The application to the court under s 63 of the Trustee Act is made in accordance with a procedure which is based on and has become well established since the decision of Austin J in Re Mirvac Limited [1999] NSWSC 457; (1999) 32 ACSR 107. The procedure is, in some ways a surrogate for or derivative of, the scheme of arrangement procedure under Part 5.1 of the Corporations Act - undertaken, however, by a trustee (as the responsible entity of a registered managed investment scheme is: s 601FC(2)) in circumstances where the decision of the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Peter the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 strongly indicates that it is prudent for a trustee to approach the court for advice. 5 The application with which I have dealt this morning is an application for judicial advice to the effect that the plaintiff, as responsible entity, is justified in convening a meeting of the members of the managed investment scheme with a view to their considering and, if thought fit, passing a special resolution under s 601GC(1)(a) of the Corporations Act amending the scheme's constitution as a step in a wider plan of reorganisation intended to produce the results to which I have referred. 6 The plaintiff's intention is that, if the special resolution amending the constitution is passed and special resolution of the members of Asciano Ltd is also passed to amend the company's constitution and if, in addition other necessary events happen, the plaintiff will return to the court seeking further judicial advice to the effect it is justified in taking the final steps to implement the proposal. All being well, the court will at that point have before it evidence that all desirable and necessary investor protection steps have been taken. 7 Two matters have arisen on the present application about which it is desirable that some observation be made. Neither of them is, in the context, of particular moment but I nevertheless comment on them. 8 The proposal involves, as I have said, a special resolution of the members of the managed investment scheme under s 601GC(1)(a) amending the constitution of the scheme and special resolution of the members of the company under s 136 amending the company's constitution. 9 It is proposed that there be one meeting and that the two resolutions be debated and voted upon at that single meeting. There are in the decided cases expressions of disquiet about the combining of meetings. I refer, in particular, to comments of Young J in Cullen v Galloway Cattle Society Inc (1998) 27 ACSR 648 and of McLelland CJ in Eq in Re Australian Consolidated Press Ltd (1994) 14 ACSR 639. The concern is that the voting constituency should be able to consult together without extraneous influences and accordingly that only those entitled to attend and vote should participate in discussion and deliberation. 10 This case, of course, is quite special. There is only one constituency. Every person who holds Asciano Ltd shares also hold units of the managed investment scheme. It is, as things now stand, impossible, as a practical matter, for anyone to hold one form of security to the exclusion of the other since the two go together to make up the stapled security which is the tradeable commodity. 11 In those circumstances, the possibility that untoward influences might intrude through the presence of non-members of the constituency simply does not arise. The two groups of persons precisely coincide and there is no difficulty with the consent of a single meeting of the same group, as it were, in two capacities. 12 The other matter I wish to mention concerns the plaintiff's proposal to return to the court in due course if and when the resolutions have been passed and other necessary elements have been achieved. 13 Among the orders now sought, and which I have indicated I will make, is an order fixing a time for the application for further judicial advice to come before the court. I have also indicated that I will make an order fixing a time by which any holder of trust units (effectively, that is, any holder of stapled securities) who wishes to be heard on the renewed application must give notice of his or her intention to appear. 14 It was pointed out by Mr Oakes SC that such a process is provided for in the Supreme Court (Corporation) Rules with respect to Part 5.1 schemes: see rule 3.4 and Form 6. It was submitted, therefore, that there is no intrinsic difficulty with adopting a similar approach in a case such as the present where procedure is modelled, to a large extent, on the Part 5.1 procedure. 15 In the absence of any corresponding rule, I expressed some reservation about fixing such a time limit. Mr Oakes has, however, pointed out to me that the matter is dealt with by s 63 of the Trustee Act itself. Section 63(10) contemplates either prescription by rules of court or fixing by the court itself in a particular case of a time within which a beneficiary affected by a trustee's judicial advice application may make a separate application to the court. Section 63(10) goes on to say that, during the time so fixed and while the beneficiary's application is pending, the trustee must abstain from acting on the judicial advice (in the context, I regard the reference to "making the conveyance or distribution" as a reference, in substance, to acting in accordance with the advice). Section 63(11) then creates an appropriate exception for s 63(10) cases from its general rule to the effect that a beneficiary appropriately notified is bound by the judicial advice given to the trustee. 16 In order that any concerns of beneficiaries may be brought forward in a timely way and the trustee (or, rather, responsible entity) may achieve certainty of outcome, it is desirable that a time limit be fixed under s 63(10). It will then be known, when the responsible entity makes its further judicial advice application (assuming that it does so), whether there is any prospect that one or more beneficiaries may not come to be bound under s 63(11). 17 Section 63(10), I am satisfied, provides a sufficient basis for imposing the time limit the plaintiff wishes to see imposed in this case. 18 As I have indicated, I will make the orders in the short minutes of order that have been handed up.

Cullen v Galloway Cattle Society Inc

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Judgment (10 paragraphs)

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