Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation

REASONS FOR JUDGMENT Introduction and preliminary observations 1 The applicants are members of the Takeovers Panel ("the Panel") constituted by s 184 of the Australian Securities and Investment Commission Act 2001 (Cth). Pursuant to s 659A of the Corporations Act 2001 (Cth), the applicants have referred to the Court for decision the following questions of law, as set out in the originating process of 7 September 2002 which was amended by an application handed up in Court on 27 September 2002 and subsequently filed 30 September 2002 ("the amended application"), and as framed by the Panel's legal representatives: (i) Having regard to the Constitution of the Mirvac Property Trust and the provisions of the Corporations Act, would Mirvac Funds Limited, as the responsible entity of the Mirvac Property Trust, be lawfully entitled to issue Mirvac stapled securities to unitholders in the Colonial First State Property Trust Group who accept Mirvac Group's offer to acquire all of the units in the four unit trusts comprising the Colonial First State Property Trust Group, as set out in Mirvac Group's Bidder's Statement lodged with the Australian Securities and Investments Commission on 11 September 2002 and the revised Bidder's Statement lodged with the Australian Securities and Investments Commission on 23 September 2002? (ii) Having regard to the Constitution of the Mirvac Property Trust and the provisions of the Act, would Mirvac Funds Limited, as the responsible entity of the Mirvac Property Trust, be lawfully entitled to issue options to subscribe for stapled securities in the Mirvac Property Trust to unitholders in the Colonial First State Property Trust Group who accept Mirvac Group's offer to acquire all of the units in the four unit trusts comprising the Colonial First State Property Trust Group, as set out in Mirvac Group's Bidder's Statement lodged with the Australian Securities and Investments Commission on 11 September 2002 and the revised Bidder's Statement lodged with the Australian Securities and Investments Commission on 23 September 2002? (iii) Is the offer constituted by the Replacement Bidder's Statement capable of acceptance so as to give rise to a contract binding on Mirvac Funds Limited to issue the Mirvac Securities and Mirvac Options consistently with the Constitution of the Mirvac Property Trust. (iv) On the assumption that the facts contained in Mirvac's statement of facts are correct can the directors of MFL reasonably consider that the alteration to the MPT Constitution which is set out below will not adversely affect members' rights? Amendment Notwithstanding any other provision of this Constitution to the contrary (whether express or implied), the Manager may issue Units (while they are Officially Quoted as part of a Stapled Security) and options to acquire such Units at the time and otherwise on the terms and conditions of the offers made by the Manager to acquire all of the units in The Colonial State Property Trust Group which comprises four managed investment schemes in the form of unit trusts each registered under section 601EB of the Corporations Act 2001: (a) The Colonial First State Retail Property Trust; (b) The Colonial First State Industrial Property Trust; (c) The Colonial First State Development Trust; and (d) The Colonial First State Commercial Property Trust, pursuant to a bidder's statement dated 11 September 2002 lodged by the Manager with the Australian Securities and Investments Commission (ASIC) on 11 September 2002, a Replacement Bidder's Statement dated 23 September 2002 lodged by the Manager with the ASIC on 23 September 2002 and a Notice of Variation of Offers under section 650D of the Corporations Act dated 23 September 2002 lodged by the Manager with ASIC. 2 There are no parties named in the application as respondents thereto. Involved in and affected by the answers to the questions are the responsible entities for the registered schemes comprising the property trusts and the unitholders thereof, which have been identified in the four questions, and which are hereafter referred to for simplicity as follows: (i) The Colonial First State Property Trust Group ("Colonial"), being the four target unit trusts; (ii) The Mirvac Property Trust ("Mirvac"), which in effect seeks to takeover Colonial; and (iii) The Commonwealth Property Office Fund ("CPA") and Gandel Retail Trust ("GAN"), which seek to merge their respective unit trusts with those of Colonial. Mirvac on the one side and CPA/GAN on the other side are engaged in a competitive contest for the takeover of the Colonial Trust Group. Colonial and CPA/GAN, though separately legally represented, and though having presented separate submissions to the Court, are united in their opposition to the takeover initiatives of Mirvac. Their respective submissions, though varied on occasions more in emphasis than legal principle, may generally be taken as similar in thrust and concept. Because CPA/GAN have primarily led the attack upon Mirvac's attempted takeover of Colonial, the convenient course is generally to refer to the submissions the subject of that attack as those of CPA/GAN. Except in the case of contexts where it is material to distinguish between one of the foregoing trust estates, and its responsible entity or other administratively related corporate body, I have adopted the convenient course of referring generally to "Colonial", "Mirvac" and "CPA/GAN", as the case may be, in order to avoid intricacies of expression. 3 The application made by the Panel, in its final amended form, is attached by way of schedule hereto, both for ease of reference and expedition of production of these Reasons for Judgment, and may be seen to comprise three segments as follows: (i) Facts assembled by the Panel, which are common ground to Mirvac, CPA/GAN and Colonial; (ii) Mirvac's Statement of Facts, which are additional to those the subject of (i) above; and (iii) Questions of Law submitted by the Panel to the Court for consideration pursuant to s 659A of the Corporations Act, which have been already set out in [1] above. 4 The positions adopted by the participants during the hearing of submissions to the Court upon the four questions may be summarised as follows: (i) Whilst having prepared and submitted the application, the Panel has refrained from supporting the position adopted by or on behalf of any of the Funds. (ii) CPA/GAN have purportedly confined their submissions to the circumstances set out in paras 1 to 14 of the application, and have objected to the relevance of the facts incorporated by Mirvac into paras 15-58 of the application; CPA/GAN have formally though unspecifically objected to the justiciability of the fourth question of law set out in [1] above, upon the basis that the same does not propound an issue of law. I do not think that the objection is in the circumstances sufficiently compelling, and no contention of prejudice has been advanced by CPA/GAN or Colonial. (iii) The position adopted by Colonial to the statements of fact is expressed in the unspecific terms that "[a]s to the assumption that the facts contained in Mirvac's statement of facts (that is paragraphs 15-58 of the application) are correct, [Colonial] does not accept that all of those facts are correct". I should add that Australian Securities and Investment Commission ("ASIC") though appearing at the hearing, has adopted a neutral stance in relation to the resolution of the issues arising, and in any event has made no submissions. 5 Notwithstanding the main controversy involved in relation to the circumstances the subject of the fourth question, that is to say, whether it involves wholly a question of law by reason of lack of agreement as to the facts the subject of paras 15 to 58 of the application, it appears to be implicitly accepted that the questions may be resolved in substance in any event on the basis of the facts in paragraphs 1 to 14. The respective positions adopted by the protagonists have enabled the Court to become appraised of the nature and extent of the essential issues raised, yet to recognise of course that only questions of law may be determined in conformity with s 659A of the Corporations Act, and that it must be left to the Panel to satisfy itself upon factual matters which might contentiously remain in issue, assisted hopefully by these Reasons for Judgment. 6 It is readily apparent that the exercise of the court's function in resolving the questions raised, in circumstances such as the present, must be undertaken with expedition, since as is normally the case, time is of the essence in the resolution of takeover disputation, and delay in resolving questions of law, however complex, will tend to disadvantage the takeover offeror in particular. 7 With the foregoing matters in mind, I will now proceed to address the questions of law as presented in the amended application. It may be appreciated, from what I have already observed concerning the need for early resolution, that the appropriate course is not to record in full or at length the extensive submissions, both oral and written, of the respective parties, but rather to summarise or outline the essence of the same. I acknowledge the considerable assistance I have received from the submissions of all Counsel, both written and oral. 8 Mirvac has submitted that three broad issues have been raised by the Panel's amended application to the Court as follows: (i) Mirvac's power or authority to provide the valuable consideration purportedly proffered in support of its offer by way of takeover to the unitholders of Colonial; the resolution of this issue appears to turn upon the interpretation of Mirvac's Constitution and clause 4.4 thereof in particular, in the context of s 601GA(1)(a) of the Corporations Act in particular, and in the events which have happened; Section 601GA(1)(a) reads as follows: "601GA(1) The constitution of a registered scheme must make adequate provision for: (a) the consideration that is to be paid to acquire an interest in the scheme." (ii) The nature and incidents of the options which are a component of Mirvac's offer to the Colonial unitholders, being first, whether the Mirvac options to be offered comprise interests within s 601GA(1)(a) so that "adequate provision" must be made for the consideration that is to be provided for the acquisition thereof, secondly whether Mirvac has power to issue the options, and thirdly whether Mirvac has power to issue units pursuant to exercise of the options and in satisfaction thereof; and (iii) The legitimate scope for authorised amendment of Mirvac's Constitution, if Mirvac lacks the requisite take-over power and incidents thereto in respect of the matters the subject of the first two issues. Resolution of first question formulated concerning the consideration offered by Mirvac to Colonial Unitholders 9 Set out below are clauses 4.1 and 4.4 of Mirvac's Constitution, to the extent presently material: "4.1 … a Unit must only be issued at an Application Price: (a) … while Units are Officially Quoted, equal to the weighted average Market Price of Units during the 5 Business Days immediately prior to the date on which or as at which the Application Price is to be calculated. (b) … while Units are Officially Quoted as part of a Stapled Security, in accordance with clause 4.4; … 4.4 Where clause 4.1(b) applies, a Stapled Security must only be issued at an application price for the Stapled Security equal to the weighted average Market Price of Stapled Securities during the 5 Business Days immediately prior to the date on which or as at which the application price for the Stapled Security is to be calculated. In this case the Manager must determine what part of the application price of a Stapled Security is to represent the Application Price of the Unit." The description "Stapled Security" is defined by Clause 31.1 of Mirvac's Constitution as "a Stapled Share and a Unit which are stapled together and registered in the name of the Member." 10 As appears from the Stated Case of the Panel, which is incorporated within the Panel's application, the background circumstances involved in the proceedings include in particular the following: (i) Units in the four Colonial property trusts are stapled and publicly listed as stapled securities; (ii) Units in the Mirvac property trust are stapled to shares in Mirvac Limited and are publicly listed as stapled securities; and (iii) Mirvac's takeover bid for the units in each of the four Colonial property trusts has been made off-market, and has been initiated by its Bidder's Statement of 11 September 2002 and its Replacement Bidder's Statement of 23 September 2002. 11 CPA/GAN has not specifically put in issue whether clause 4.4 of Mirvac's Constitution (see [9] above) stipulates an adequate provision for the consideration that is to be provided to acquire interests in the four Colonial unit trusts. The contention of CPA/GAN is that the issue of the intended Mirvac stapled securities would occur at an unauthorised discount to those Colonial unitholders who might accept Mirvac's offer, to the extent "of some $200 million" which is intended to be written-off upon the receipt of the requisite acceptances from Colonial unitholders. That proposed course on Mirvac's part, so the submission continued, would "circumvent the proper procedure set out in clause 4.4". Mirvac's alleged intention to make those write-offs is said to be foreshadowed in para (d) of clause 5.7.2 of section 5 of Mirvac's Supplementary Bidder's Statement (No 2) of 23 September 2002, reading as follows: "The Board has undertaken a preliminary assessment of the fair value of the consideration and the fair value of the net assets to be acquired under the Offers. The Board has based its estimate of the fair value of the consideration on the CFT Unit price prior to the announcement of the Offers and a consideration of the likely impact on the price of Mirvac Securities to be issued under the Offers, having regard to discounts that have occurred on placements of similar size and after taking into account the cash component of the consideration offered under the Offers. The Board has also considered the market value of the CFT properties and based on the publicly available information disclosed by or on behalf of CFT, considers the value to be at least equal to the value disclosed in the CFT statement of financial position as at 30 June 2002. The issue price of the Mirvac Securities which are to be issued under the Offers will be equal to the weighted average market price of Mirvac Securities during the 5 Business Days immediately prior to the date on which or as at which the application price for the Mirvac Securities is to be calculated. As a consequence, goodwill amounting to approximately $211 million (100% scenario) and $105.711 million (50.1% scenario) would arise. The Board has considered that, in the context of the matters noted above, the discount evidenced on other share for share transactions and the fair value of the tangible and intangible assets being acquired, it would not be appropriate to carry the goodwill forward and the Board has therefore written off such goodwill in the forecast. However, at the time that control in CFT passes, a detailed assessment of the fair value of the consideration and of CFT's assets and liabilities which are acquired will be made. Any goodwill arising from the assessment of these fair values will, in the absence of other information, be written off or alternatively amortised over an appropriate period of time and an amount equal to the amortisation will be transferred from equity, so as not to impact distributions." 12 That Mirvac prognosis for the anticipated successful Colonial takeover outcome and the implications thereof, so CPA/GAN submitted, is not supported by any "adequate provision" in the Constitution of Mirvac, as required by s 601GA(1)(a) of the Act, but instead subverts "the proper procedure set out in clause 4.4" (ie of Mirvac's Constitution). As to that sum of "some $200 million" the subject of the CPA/GAN submission, estimated in the above passage extracted from the Supplementary Bidder's Statement to be "approximately $211 million", CPA/GAN further submitted that the latter Statement evinces thereby the recognition by the directors of Mirvac "that the $200m does not represent real additional value of the assets acquired, as they expect to write it off immediately after the acquisition". The course which should have been taken by Mirvac, so CPA/GAN further asserted, was to foreshadow in the Supplementary Bidder's Statement the expectation to write off "the full $200 million in the first year", and to make the necessary amendments to Mirvac's Constitution to permit the issue of units at a discount, being an amendment which would require Mirvac unitholders' approval. In any event, so CPA/GAN next submitted, Mirvac's Constitution would require amendment to accommodate ASIC Policy Statement 134, in order to make "adequate" provision about the consideration to be paid for the acquisition of the Colonial units, because "[a] constitution that is uncertain or incapable of being understood without reference to extrinsic material is not adequate, having regard to the fact that it takes effect as an agreement between the members and the responsible entity." 13 It may be seen in my opinion that the foregoing submissions of CPA/GAN, concerning the implications of what I have just extracted in [11] above from Mirvac's Supplementary Bidder's Statement (No 2) of 23 September 2002, overstate what was thereby foreshadowed or anticipated, which is the circumstance of a conceivable accretion in value in Mirvac's assets in the context of the takeover, and that only in that event and to that extent would the writing-off of in effect Mirvac's net unit values occur. In any event, as Senior Counsel for Mirvac further submitted, in my opinion rightly, the CPA/GAN contention makes the mistaken assumption that the application price for units in Mirvac would be calculated at the time of the Mirvac takeover offer, whereas clause 4.4 of Mirvac's Constitution looks forward to "… the date on which or as at which the application price… is to be calculated", in conformity with clause 4.1 thereof (see again the extracts in [9] above). All that is therefore required, so the submission continued, would be that at the time of issue of Mirvac units to the accepting Colonial unitholders, the application price recorded by Mirvac for the traded Colonial units would need to be equated to the variable weighted average price of the stapled securities. Furthermore in that context, Senior Counsel for Mirvac contended, in my opinion with some apparent measure of justification, that Colonial's assertion (in support of the CPA/GAN thesis) that prices of units could change at any time was highly artificial and uncommercial, against the context of a market with an extant unconditional offer on Mirvac's part, and a fortiori where there would be present the competing offers of CPA/GAN. 14 Moreover as Mirvac further pointed out in support of what I have already recorded, clause 4.4 of the Mirvac Constitution should be read with clause 5.3 thereof, which so far as is material to the submission, reads as follows: "5.3 Payment in respect of an application in a form acceptable to the Manager, or a transfer of property of a kind acceptable to the Manager and able to be vested in the Manager or a custodian appointed by it… must: (a) accompany the application …" That provision was said to support the contention of Mirvac that payment for Mirvac units may be made in kind, such as in the present circumstances, by the exchange of "property" by way of Mirvac stapled securities for Colonial Units. In that situation, so the Mirvac contention continued, clause 4.4 should be construed as relating to the manner in which "the application price" for stapled securities is recorded in the books of Mirvac at the 5 day weighted price would be calculated. Of course, the property to be so transferred must be of a kind "acceptable to the Manager" of Mirvac, as required by its Constitution. 15 I am of the opinion that Mirvac is correct in its contention that the Mirvac Constitution does make adequate provision for the stated consideration for acquisition of an interest in the Mirvac Property Trust, in the circumstances of the present attempted takeover of the subject Colonial unit trusts, and for the purpose of fulfilment of the requirements of s 601GA(1) of the Act. Given that the Mirvac corporate manager has formed the view that the non-cash consideration for acquisition of the Colonial units is acceptable, I would accept Mirvac's primary submission that units in Mirvac would be issued at an application price in accordance with the scheme of clause 4.4 of the Mirvac Property Trust. Accordingly I am of the opinion that the first question of law, being that set out in [1(i)] above, should be answered in the affirmative in favour of Mirvac. It is therefore unnecessary for me to consider any of the implications of the ASIC Relief which had been previously granted to Mirvac on 17 September 2001 to modify the operation of s 601GA(1)(a) of the Act. 16 Mirvac supplemented its main response to the first question to the effect that the issue tendered by CPA/GAN, and which I have resolved in any event in Mirvac's favour, necessarily assumes the satisfaction of the requirements of s 601GA(1)(a) by the inclusion within the Mirvac Constitution of clause 4.4 thereof, but then poses the question whether or not the Mirvac offer in fact constitutes "adequate provision". It follows in those circumstances, so this supplementary Mirvac submission continued, that what CPA/GAN has raised is in any event a fundamentally factual question, namely whether the Mirvac Offer represents fair value for the CPT units or whether it in fact represents an offer discounted to the value of $200 million. Even if that question does justifiably arise, the present Mirvac submission continued, the factual claim so advanced by CPA/GAN is fundamentally misconceived, for the reason that there exists no fair or factual basis for CPA/GAN's contention in its written submissions that "… the Board estimat[es] that the fair value of the consideration to be acquired is some $200 million less than that value…," that is to say, the aggregate value of Mirvac units if issued at the five day weighted average price. It does not follow however as a factual given, Mirvac's further submission continued, that because of a proposed accounting treatment, Mirvac would be thereby paying in excess of fair value, let alone in the order of $200 million. Mirvac has pointed out in that context that at all times since 4 September 2002, "the implied value" of the Mirvac offers for Colonial units has always been less than or equal to the closing market price of Colonial units as disclosed in Mirvac's Case Stated to the Takeovers Panel, with the single exceptions of 5 and 6 September 2002, when the implied value of the Scrip Alternative was one cent more than the closing price for Colonial units. Moreover at all times since 13 September 2002, so Mirvac continued, the implied value of the CPA/GAN proposal was greater than the implied value of the Mirvac offers, based on closing prices, and on the assumption that in accordance with the disclosure in clauses 4.18 and 6.12(f) of the Mirvac Replacement Bidder's Statement, each Mirvac option had a value of 10.9 cents. The only exception to the foregoing circumstances was said by Mirvac to have occurred on 24 September 2002, when the implied values of both the Mirvac Offers and the CPA/GAN Proposal were the same. Upon those bases, which doubtless the Panel could readily verify, Mirvac submitted that if what CPA/GAN contended was correct, and in that regard neither Colonial nor CPA/GAN raised any demur, it follows that CPA/GAN is proposing to pay "above value" for Colonial scrip, that is to say, even to a greater extent than Mirvac. 17 Furthermore, so Mirvac's submissions continued, there are significant benefits to Mirvac "outstripping" the supposed $200 million overpayment figure, the most significant whereof being management rights in relation to Colonial, and in that regard, Mirvac submitted that it may readily be inferred from the facts stated in the CPA/GAN offer that those rights were valued by the responsible entities of CPA/GAN at no less than $156 million, before enhancement of the bid under the subsequent CPA/GAN competing proposal of 26 September 2002, which added $20 million to the implied value of the management rights relating to Colonial. Perhaps it was therefore not surprising, so Mirvac's submission continued, that at the opening of the present proceedings on the second day, Senior counsel for CPA/GAN made the objection to evidence recorded in [4(ii)] above. In the light of that objection, I do not think that I need take account of that additional material in relation to the present issue. 18 In my opinion, there is considerable substance in these supplementary submissions of Mirvac, which however, in the light of my conclusion already reached in [15] above, need not be finally resolved in the context of the present proceedings, in the light of apparent controversy as to whether the entire factual basis for those submissions is mutually agreed or otherwise established. Resolution of the issue concerning the power of Mirvac to issue options to acquire Mirvac stapled securities as part of the consideration of a takeover of another publicly listed unit trust 19 The second question of law arising concerns the existence or otherwise of power or authority for Mirvac to issue options to subscribe for stapled securities in the Mirvac Property Trust in favour of unitholders in Colonial in the circumstances outlined in that question. This is of course the question of law formulated in [1(ii)] above. The essence of the submissions of CPA/GAN on this question, generally speaking supported by Colonial, may be summarised as follows: (i) The Mirvac Constitution makes no provision regarding options to acquire units, or the rights of option holders, or the consideration that is to be paid to acquire an option, in any such circumstances, but provides only for the issue of units and stapled securities, and the rights of members, who are defined as registered holders of units. Thus there are no provisions in the Constitution regarding the consideration that is to be provided to acquire the grant of an option, or with the setting of the exercise price of an option to take up units in Mirvac; those shortcomings are said to be compared with the application price determination provisions of clause 4.4 of the Mirvac Constitution relating to the issue of stapled securities (set out in [9] above); (ii) Clause 10 of the Mirvac Constitution, containing as it does, in particular, sub-clauses 10.1 and 10.2 thereof in widely expressed terms reading as follows: "10.1 Subject to this constitution, the Manager has all the powers in respect of the Trust that it is possible under the law to confer on a trustee and as though it were the absolute owner of the Assets and acting in its personal capacity. 10.2 Without limiting clause 10.1 but subject to clause 10.3, the Manager in its capacity as trustee of the Trust has power to borrow and raise money (whether or not on security) and to incur all types of obligations and liabilities." cannot be construed, in the context of Mirvac's Constitution as a whole, as extending to authorising the issue of options by Mirvac for instance to acquire units in Colonial; (iii) Clause 4.8 of the Mirvac Constitution does not provide an answer in favour of Mirvac, being related to the placement of units and stapled securities, and not otherwise; that clause, not previously extracted, reads as follows: "4.8 While Units or Stapled Securities are Officially Quoted, the Manager may at any time issue Units or Stapled Securities to any person, whether by way of a placement or otherwise, at a price and on terms determined by it, provided that the Manager complies with the Listing Rules applicable to the issue and the terms of any applicable ASIC relief and provided that while Stapling applies, the same persons are contemporaneously offered an identical numbers of Stapled Shares and Stapled Units which will be Stapled to the Units offered." (iv) Any purported issue by Mirvac of options to take up units would be ultra vires and of no force or effect, and being thus beyond power, would constitute a breach by Mirvac of its duty to members of the Mirvac Property Trust; (v) Alternatively (as I would understand the submission), the holders of options to take up units in a managed investment scheme would become members of the scheme, because they would hold an interest in a managed investment scheme in the nature of a prospective and contingent right to benefits produced by the scheme; CPA/GAN referred in that context to s 9 of the Corporations Act, which reads as follows: "interest in a managed investment scheme means a right to benefits produced by the scheme (whether the right is actual, prospective or contingent and whether it is enforceable or not)." Moreover, in support of the proposition that an option holder has an "interest" in a registered scheme, the Court's attention was drawn to Regulation 5C.11.03 of the Corporations Regulations 2001; (vi) The Mirvac Constitution would therefore not be a legally enforceable document as between holders of disputed options and Mirvac, as required by s 601GB of the Corporations Act, which reads as follows: "The constitution of a registered scheme must be contained in a document that is legally enforceable as between the members and the responsible entity." (vii) Moreover if the proposed options are to be issued by Mirvac, the Mirvac Constitution would have to contain adequate provision for the consideration that is to be paid to acquire an option, which it does not; (viii) Section 601GA(1)(a) of the Corporations Act, as amended by the Relief previously granted by ASIC on 17 September 2001 to Mirvac, to modify the operation of s 601GA(1)(a), was expressed to apply to options to acquire only stapled securities, and does not extend to options to take up units; and (ix) If the disputed options were to be issued, the Mirvac Constitution would have to also contain adequate provision for the consideration that is to be furnished upon exercise of the options; in that regard, CPA/GAN referred for comparison to Clause 4.8 of the Constitution, which is extracted at [19(iii)] above. 20 In summary, the submission of CPA/GAN, as to the absence of power under the Mirvac Constitution to issue options to acquire Mirvac units is that the Corporations Act requires the Constitution to make adequate provision for the consideration to be paid for options, if options are able to be issued, and since no provision is in fact made under the Constitution, whether in terms of the ASIC Relief or otherwise, the issue of options to take up units in Mirvac, in the context of the Colonial takeover is not authorised by the Mirvac Constitution. 21 I observe that the abovementioned s 601GA(1) of the Corporations Act speaks of the acquisition of "an interest in the scheme". By s 9 of the Corporations Act, "interest" is defined as extracted above at [19(v)]. The expression "member" is defined by s 9, so far as is presently material, as follows: "member: (a) in relation to a managed investment scheme - means a person who holds an interest in the scheme…" 22 I turn now to the contentions of Mirvac on the options issue. Mirvac primarily submitted that an essential aspect of the contentions of CPA/GAN (and of Colonial) in relation to the options issue is that the options would constitute interests in the registered scheme comprising Mirvac Property Trust for the purposes of the Corporations Act, and that accordingly, options are subjected to the requirements of s 601GA(1) of the Corporations Act that Mirvac's Constitution make adequate provision for the consideration that is to be provided by the Colonial unitholders to acquire the options. Related to those CPA/GAN contentions is the further CPA/GAN contention that because option holders would not be members of Mirvac under the Mirvac Constitution, but are nevertheless to be members of Mirvac for the purposes of the Corporations Act by virtue of "holding an interest in a scheme", there exists non-compliance on Mirvac's part with ss 601GA(1) and also 601GC of the Corporations Act. Section 601GC of the Corporations Act, so far as is material, provides as follows: "601GC The Constitution of a registered scheme may be modified, or repealed or replaced, with a new constitution: (a) by special resolution of the members of the scheme; or (b) by the responsible entity if the responsible entity reasonably considers the change will not adversely affect members' rights." 23 Mirvac's response is that the Mirvac options do not and cannot give to the holders thereof an "interest" in the Mirvac Property Trust "scheme", and therefore the holders of Mirvac options cannot be a "member" of the Mirvac Property Trust for the purposes of the Corporations Act. In that regard, the s 9 definition of "member… in relation to a managed investment scheme - means a person who holds an interest in the scheme". Traditionally in the area of corporate governance, the notion of "holder" in the context of the definition of a shareholder has carried the meaning of "registered holder" : see for example Dalgety Downs Pastoral Co Pty Ltd v Federal Commissioner of Taxation (1952) 86 CLR 335 at 341 and Santos Ltd v Pettingell (1979) 4 ACLR 110 at 119. Mirvac's submission is that the notion carries into the Corporations Act's definition of "member", both in relation to a managed investment scheme as well as a company. The threshold difficulty with that submission is that s 601GA(1)(a) addresses "the consideration that is to be paid to acquire an interest in the scheme" (my emphasis), and "interest" carries the comprehensive s 9 definition of "a right to benefit produced by the scheme (whether the right is actual, prospective or contingent)". 24 Mirvac submitted nevertheless that the Corporations Act makes a clear distinction between holders of interests and option holders, despite the width of the s 9 definition of "interest". I was referred for instance to s 169(1) of the Corporations Act relating to information which must be contained in the register of members about "each member", and to s 169(6A), which provides as follows: "169(6A) The register of a registered scheme must also show: (a) the date on which every issue of interests takes place; and (b) the number of interests in each issue; and (c) the interests held by each member; and (d) the class of interests; and (e) the amount paid, or agreed to be considered as paid, on the interests. Section 169(6A) of the Corporations Act appears in Chapter 2C, headed "Registers", which purports by s 167A(1) thereof to cover "all companies" and "all registered schemes". Moreover subs 168(1) stipulates as follows: "168(1) A company or registered scheme must set up and maintain: (a) a register of members (see section 169); (b) if the company or scheme grants options over unissued shares or interests - a register of option holders and copies of options documents (see section 170); and (c) if the company issues debentures - a register of debenture holders…" 25 Mirvac next contended that to treat option holders as "members" for the purposes of the Corporations Act would be productive of "great uncertainty" which cannot have been intended or desired by the legislature; I was referred in that context again to s 601GB and its reference to "legally enforceable as between the members of the responsible entity". There would also be uncertainty as to whether provision would have to be made for instance for "the method by which complaints made by members in relation to the scheme are to be dealt with" (s 601GA(1)(c)), and about the scope of s 601FC(1)(c), which reads as follows: "601FC(1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must: … (c) act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests;" 26 Upon the basis of those submissions, Mirvac submitted that the holder of a Mirvac option does not have an interest in the Mirvac Property Trust, and was not a member thereof within the contemplation of the Act, and further that as a consequence, s 601GA(1)(a) does not require the Mirvac Constitution to make provision for the consideration to be paid to acquire the Mirvac Options. But once again, the ultimate focus for present purposes must be upon the notion of acquiring an interest, and the consideration therefor, rather than membership. 27 Mirvac additionally referred to the circumstance that clause 4.8 of the Mirvac Constitution, extracted in [19(iii)] above, conferred the power to issue units or stapled securities upon exercise of an option, in the light of the expression included therein "or otherwise". The issue of an option was plainly not an "or otherwise" transaction, and is not affected by any ASIC modification, as was observed by senior counsel for CPA/GAN. It was further submitted that clause 4.8 should be given effect according to its terms, that it does not provide a broad license to permit the circumvention of protections afforded by the Act, and should not be read down as inapplicable in the circumstances of the present case; it was further submitted that clause 4.8 requires compliance with the Listing Rules, which impose restrictions on the number of units of securities that may be offered in a given period as well as limitations as to the persons to whom they may be issued; finally it was said that clause 4.8 is also subject to s 601FC(1)(c) of the Corporations Act. 28 There is some merit in these submissions, from a variety of practical perspectives, but I an unable to discern how the same can provide a sufficient basis for circumvention of or qualification to the emphatic language of s 601GA(1)(a), such as to enable the submissions of Mirvac's legal representatives on the point to be upheld. Amendment of the Mirvac Constitution 29 CPA/GAN have advanced the alternative contention that if, contrary to Mirvac's submissions summarised in the previous segment, the Mirvac Constitution does not provide the appropriate authority to Mirvac Funds Limited, as the responsible entity of the Mirvac Property Trust, to issue the options the subject of the proceedings, it would not be open to Mirvac Funds Limited to amend the Mirvac Constitution in order to remedy that absence of authority, and that the necessary authority would be required in a constitutional sense to be provided by the current holders of MPT units before the Mirvac bid for Colonial units could proceed. 30 Mirvac submitted that as the Responsible Entity in respect of the Mirvac Unit Trust, Mirvac Funds Limited has power to implement such modifications to the Mirvac Constitution as may be required to facilitate the bid in accordance with s 601GC(1)(b) of the Corporations Act, which reads as follows: "The constitution of a registered scheme may be modified, or repealed and replaced with a new constitution: … (b) by the responsible authority if the responsible entity reasonably considers the change will not adversely affect members' rights." 31 That power was said by Mirvac to be exercisable, because any determination by the Mirvac directors "will not adversely affect members' rights", to adopt the language of s 601GC(1)(b) above. If that be correct, Mirvac would suffer of course the delay involved in obtaining a favourable resolution of the members of the Mirvac unitholders, and the commercial disadvantage flowing from that delay. 32 In support of a liberal construction in Mirvac's favour of the ambit of s 601GC(1)(b), senior counsel for Mirvac referred to the following passage in Smith v Permanent Trustee Australia Ltd (1992) 10 ACLC 906 (Young J) at [913-914], in the context of his Honour's consideration of an issue there arising as to the meaning of by the expression "rights of the unitholders" or "rights of a class of unitholders": "There are a series of cases in the reports dealing with what are the rights attached to a class of shares... These cases hold that where the shareholder is personally affected in a commercial sense by a scheme, such as a watering down of the value of shares in a particular class by increasing the number of shares of that class or reducing capital, etcetera, one cannot say that the rights attached to the shares are affected." 33 Senior Counsel for Mirvac referred to Smith in the context of his Memorandum of Advice of 10 September 2002 containing advice to Mirvac's instructing solicitors in the present proceedings, which was in evidence before me. He accepted that Smith was not clear authority for the proposition that a commercial impact is not caught by the s 601GC(1)(b) expression "adversely affect the rights" in the context of "a holding of securities" (to adopt Counsel's description), though he considered Smith to constitute the better view of the statutory expression "adversely affect members' rights". 34 The Court was also referred to Eagle Star Trustees Ltd v Heine Management Ltd (1990) 3 ACSR 232, where an amendment was sought to a trust deed for 3 unlisted unit trusts, in circumstances where the deed required consultation with the unitholders, and where in the opinion of the corporate trustee, the rights of the unitholders "may be" adversely affected (though not "are" or "would be" so affected). Phillip J at 241 observed as follows: "But the agreed facts serves to confirm that what the trustee addressed in this case was not whether the effect on rights might be adverse, but whether it was adverse (or would be adverse) and, as I have said, I think that that was the wrong question. Properly instructed on the meaning and operation of cl 32.2, I think that the only opinion reasonably open to the trustee was that the effect on the rights of unitholders might well be adverse." The rights of unitholders in that case was to have their units repurchased. 35 Subsequently in Re Homemaker Retail Management Ltd (2002) 40 ACSR 116, Barrett J was required to consider a trust deed variation power containing the words "does not adversely affect the rights of the Security holders", words reflected of course in s 601GC(1)(b) of the Corporations Act. That litigation involved a proposed variation to a scheme of arrangement. At [13], his Honour observed as follows: "But the cl 7.6 proposed in this case would have gone far beyond any "slip rule". It would have had a very broad operation, accommodating any variation whatsoever which fell within the specification defined by the words "does not adversely affect the rights of Securityholders". This specification is modelled on s 601GC(1)(b) of the Corporations Act concerning alteration of the constitution of a managed investment scheme. It was submitted that decided cases on that form of words might provide a useful measure of certainty, although when one looks at the two cases mentioned - Eagle Star Trustees Ltd v Heine Management Ltd (1990) 3 ACSR 232 and Smith v Permanent Trustee Australia Ltd (1992) 10 ACLC 906 - it is by no means possible to conclude that the words have a settled meaning and operation." 36 In the present circumstances, I would prefer in principle the traditional approach adopted by the United Kingdom authorities which Young J identified in the passage cited in [32] above from Smith. At least in some if not most contexts, the incidents or character of a legal right is to be distinguished from the value of that right in any monetary sense. As implied by Barrett J in Homemaker, it is inappropriate to express any definitive conclusion as to the scope of meaning of the kind of language, reflected for instance in s 601GC(1)(b), for all occasions. In the present context, I think that Mirvac is correct in its contention that in the context of the Mirvac Property Trust Constitution, an adverse affectation of Mirvac members' rights, correctly understood, would not occur as a consequence of an amendment to the effect which Mirvac would require as a consequence of my resolution of Question 2. In reaching that conclusion, I would not dismiss as entirely irrelevant that the present proceedings comprise in substance a contest between two corporate takeover competitors, and not for instance an oppression suit on the part of a unitholder or group of unitholders. More importantly, there is no circumstance that I can identify from the evidence before me that would suggest that the amendment required by Mirvac to its Constitution would inherently or intrinsically affect adversely the value of Mirvac Property Trust units. 37 I would therefore answer the fourth question arising in the affirmative. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.