In the matter of Equity Trustees Limited as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II and Fort Street Real Estate Capital Fund III (No 2)

Category: Principal judgment

Parties: Equity Trustees Ltd as responsible entity for Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II and Fort Street Real Estate Capital Fund III (Plaintiff)

Representation: Counsel:
NM Bender (Plaintiff)
TE O’Brien (ISPT Pty Ltd)
Solicitors:
Allens (Plaintiff)
Gadens (ISPT Pty Ltd)

File Number(s): 2025/316284

JUDGMENT

Nature of the application and background

1. By Originating Process filed on 18 August 2025, Equity Trustees Ltd (“EQT”) as responsible entity for Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II and Fort Street Real Estate Capital Fund III (together, “FSREC Property Fund”) seeks the Court’s opinion, advice and direction that it would be justified in convening concurrent meetings of securityholders of the FSREC Property Fund in respect of a proposed trust scheme and other relief.

2. By way of background, EQT is an unlisted public company and is the responsible entity for each of the managed investment schemes comprising the FSREC Property Fund, which together comprise a stapled group and are each an unlisted managed investment scheme registered under Ch 5C of the Corporations Act 2001 (Cth) (“Act”). ISPT Pty Ltd (“ISPT”) as trustee for ISPT Retail Australia Property Trust No 1 (“IRAPT No 1”) presently holds approximately 97.63% of the securities in the FSREC Property Fund. Approximately 0.35% of the securities in the FSREC Property Fund are held by Fort Street Real Estate Capital Pty Ltd, which is the investment manager of the Fund (“Investment Manager”). The Investment Manager is owned by ISPT as trustee for the ISPT Retail Property Australia Property Trust No. 2 (“IRAPT No 2”), which is an associate of IRAPT No 1.

3. I made the orders sought by EQT at the first Court hearing, for the reasons set out in my judgment in Re Equity Trustees Ltd as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II and Fort Street Real Estate Capital Fund III [2025] NSWSC 982.

4. The trust scheme Meetings took place on 17 September 2025 and the scheme resolution was then approved by the requisite majority securityholders entitled to vote on the scheme resolution, where that resolution was passed by 90.63% of the total number of securities voted. Some 205 fund securityholders were entitled to vote at the scheme meetings; 70 fund securityholders attended the scheme meetings, either online, in person or by proxy; 66 of them voted in favour of the scheme resolution, three voted against the scheme resolution and 1 abstained from voting. EQT and its Associates (as that term is defined in the Act) did not cast votes in relation to the scheme resolution, including as proxy for a fund securityholder otherwise entitled to vote), and IRAPT No. 1 and its Associates (being the investment manager) also did not cast any votes in relation to the scheme resolution. Mr Bender also points out that voter turnout was approximately 34%, and this is considerably higher than levels of voter turnout that have not caused concern to Courts approving schemes under s 411 of the Act.

5. EQT now seeks orders in respect of the implementation of the scheme and reads the affidavit dated 18 September 2025 of Mr Justin Evans and the affidavit dated 19 September 2025 of Ms Kate Mathewson in support of the application. I made the orders sought by EQT at the conclusion of the second Court hearing on 19 September 2025 and these are my reasons for doing so. I have drawn on the helpful submission of Mr Bender, who appears for EQT in the application, in this judgment.

The Court’s role at the second Court hearing in a trust scheme

6. Mr Bender submits, and I accept, that the Court’s role in determining whether to grant judicial advice at the second Court hearing in a trust scheme is of a similar nature to the Court’s role in approving a scheme of arrangement under s 411(4)(b) of the Corporations Act 2001 (Cth) . An application for judicial advice that the responsible entity is justified in giving effect to and implementing the proposals approved by unitholders in a trust is appropriately brought before the Court once the wishes of unitholders, expressed through voting at the relevant meeting or meetings, is known and any unitholder who wishes to appear to oppose the application has been given an opportunity to do so: Re Mirvac Ltd (1999) 32 ACSR 107 at [48]; [1999] NSWSC 457; Re Homemaker Retail Management Ltd (2001) 40 ACSR 116 at [5]–[7]; [2001] NSWSC 1058; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194 at [10]; [2004] NSWSC 1197; Re The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 4) [2021] NSWSC 838 at [9] (“VitalHarvest”).

7. At the second court hearing, the Court will consider whether the procedural requirements for the obtaining of unitholders' approval have been satisfied: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]. In determining whether to give the advice sought, the Court then gives considerable weight to the level of support by members for the proposal, and 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]; VitalHarvest at [9].

8. I am satisfied that the scheme materials were generally despatched in accordance with the Court’s orders, although Mr Bender properly draws attention to several irregularities which would not have any outcome on the result of the scheme resolution and are not of a nature that would prevent the Court making the orders sought. I am also satisfied that, so far as there was a failure to give proper notice to the small number of affected fund securityholders, that was an accidental omission of the kind referred to in s 1322(3) of the Act that did not invalidate the scheme meetings: Australian Hydrocarbons NL v Green (1985) 10 ACLR 72 at 80–81; Khan v Khan [2015] NSWSC 638 at [84].

9. Mr Bender also addresses the conduct of the scheme meetings and the giving of notice of this hearing. Mr Bender draws attention to a complaint from one fund securityholder as to the conduct of the scheme meetings, where he had technical difficulty in attending the meeting remotely and voting, and to the likely explanation for that difficulty, apparently through no fault of EQT. I accept that the outcome of the scheme resolution would not have altered had he voted against the resolution, and it is not apparent that he had any intention of doing so.

10. Mr Bender also points out that the Investment Manager conducts quarterly valuations of the properties owned by the Fund, and, at the time of the second Court hearing, the next quarterly valuation was expected to be finalised on 30 September 2025. On 10 September 2025, the Investment Manager was provided a draft third quarter valuation which showed a $3.1 million increase in the value of the properties owned by the Fund and, if all other factors remain unchanged, the Fund's Net Tangible Assets (“NTA”) per Fund Security was expected to increase from $1.85 to $1.86. The NTA valuation was used as the starting point for the independent expert’s valuation of securities in the Fund and then adjusted for costs, and an increase in the NTA of $0.01 would therefore have resulted in a slight increase in the valuation range assessed in the independent expert report. I accept that that $0.01 increase in the draft valuation of the Fund’s NTA was not material in the circumstances, because, as Mr Bender points out, the increased valuation was not current at the time of the scheme meetings, and because the scheme consideration of $1.85 per security was in any case close to the top end of the valuation range assessed in the independent expert report, and that position would not have altered by that minimal NTA increase.

11. The conditions precedent in respect of the scheme are satisfied, subject to the Court granting the judicial advice that is sought. No notice of appearance was served on EQT by any fund securityholder wishing to be heard in opposition to the transaction and no such securityholder appeared at the second Court hearing.

Orders

12. Having regard to all of these matters, I was satisfied that judicial advice should be given that EQT is justified in implementing the proposed trust scheme and I made the orders sought by EQT at the conclusion of the second Court hearing.

**********