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

Hearing dates: 22 August 2025

Date of orders: 22 August 2025

Decision date: 28 August 2025

Jurisdiction: Equity - Corporations List

Before: Black J

Decision: Judicial advice given that responsible entity is justified in propounding resolutions to implement the proposed trust scheme and proceeding on the basis that constitutional amendments to implement the trust scheme is within the constitutional powers of alteration conferred and s 601GC of the Corporations Act 2001 (Cth).

Catchwords: CORPORATIONS — managed investments — application for judicial advice by responsible entity under s 63 of the Trustee Act 1925 (NSW) — whether responsible entity would be justified in propounding resolutions to implement the proposed trust scheme — whether proposed amendments are within the constitutional powers of alteration and s 601GC of the Corporations Act 2001 (Cth)

Legislation Cited: - Corporations Act 2001 (Cth), ss 411, Ch 5C, 601GC(1)
- Trustee Act 1925 (NSW), s 63

Cases Cited: - Re APN News & Media Ltd (2007) 62 ACSR 400; [2007] FCA 770
- Re Australian Leisure and Entertainment Management Ltd [2021] NSWSC 1421
- Re DUET Finance Ltd [2017] NSWSC 415
- Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484; [2008] NSWSC 745
- Re Magellan Asset Management Ltd (as responsible entity of Magellan Global Fund) (2020) 150 ACSR 23; [2020] NSWSC 1535
- Re Mirvac Funds Management Ltd in its capacity as responsible entity of Mirvac Industrial Trust [2014] NSWSC 1569
- Re Mirvac Ltd (1999) 32 ACSR 107; [1999] NSWSC 457
- Re SFE Corporation Ltd (2006) 59 ACSR 82; [2006] FCA 670
- Re Simavita Holdings Ltd [2013] FCA 1274
- Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257; [2021] NSWSC 1385
- Re Sydney Airport Holdings Ltd [2013] NSWSC 1665

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. Mr Bender, who appears for EQT, also points out that the constitutions of each of the managed investment schemes making up the FSREC Property Fund do not require EQT to redeem securities in the FSREC Property Fund or otherwise provide liquidity to holders of those securities. Such holders may achieve liquidity through sales on the secondary market, but it appears that there are limited buyers such that liquidity is not guaranteed.

3. On 6 August 2025, the Investment Manager to the FSREC Property Fund, published an announcement on its website that EQT had entered into a Scheme Implementation Deed (“SID”) with ISPT as trustee for the IRAPT No 1 which provided for the IRAPT No 1 to acquire all of the securities in the FSREC Property Fund that it does not own by means of the proposed trust schemes, for a cash consideration of A$1.85 per security. The proposed transaction also contemplates that, in addition to the scheme consideration, EQT will declare and determine to pay securityholders as at the Scheme Record Date (as defined) an Implementation Distribution (as defined) for each security held by the securityholder, referable to accrued distributions in the period up to the Implementation Date by reference to an equation that is disclosed in the proposed Explanatory Memorandum.

4. The transaction contemplates that the constitution of each of the funds would be amended to give EQL the power to implement the proposed transaction, subject to approval by securityholders of the three funds constituting the FSREC Property Fund by special resolution under s 601GC(1) of the Act at three concurrent meetings of securityholders in the funds. The stated intent of the trust schemes, if approved and implemented, is to permit securityholders in the FSREC Property Fund to realise value for their investment in the FSREC Property Fund; and allow IRAPT No 1, if it becomes the sole holder of securities in the FSREC Property Fund, to cause the schemes of which the FSREC Property Fund is comprised to be deregistered as managed investment schemes and to maintain its indirect ownership of the assets owned by the FSREC Property Fund in a more cost-efficient basis.

5. I made the orders sought by EQT at the conclusion of the hearing on 22 August 2025. These are my reasons for doing so and I have drawn on Mr Bender’s helpful submissions in this judgment.

Affidavit evidence

6. EQT reads the affidavit dated 18 August 2025 of Mr Vijay Cugati, who is a solicitor acting for EQT in the proceedings, which outlines the structure of the transaction, to which I have referred above.

7. EQT also reads the affidavit dated 20 August 2025 of Mr Russell Beasley, who is a director of EQT, who describes the business of the FSREC Property Fund, the proposed transaction and its background. He refers, in that respect, to limited liquidity for unitholders in the FSREC Property Fund and to limited growth potential for the FSREC Property Fund, since it has not acquired any assets since January 2018 and it is not expected that it will continue to grow its asset base. Mr Beasley outlines the proposed steps in the transaction, refers to the proposed distribution to securityholders as at the record date of the scheme and outlines the scheme consideration. He refers to an independent expert report obtained by EQT which indicates that the scheme consideration is at the upper end of the expert’s assessed valuation range for securities in the FSREC Property Fund; the manner in which the scheme consideration would be provided by IRAPT; the proposed conduct of the scheme meetings; and the consent of the proposed chair and alternate chair of those scheme meetings. Mr Beasley also addresses the provision of an advanced draft of the explanatory memorandum to the Australian Securities and Investments Commission (“ASIC”) which has indicated that it does not have any comments on that explanatory memorandum; the steps taken for verification of that explanatory memorandum which are in conventional form; and EQT’s board approval for the explanatory memorandum. Mr Beasley also outlines the manner in which the explanatory memorandum will be dispatched, also in conventional form. Mr Beasley also notes that the SID does not contain any break fees or exclusivity fees; refers to conditions precedent to the proposed trust scheme; and refers to proposed inbound information lines and outbound calls to securityholders, although EQT does not seek the Court’s approval for those calls, consistent with current scheme practice. Mr Beasley also indicates that the investment manager proposes to publish an announcement as to the second Court hearing on its website.

8. EQT also reads the affidavit dated 20 August 2025 of Ms Kate Mathewson, who is a fund manager with ISPT as trustee for IRAPT No 1 and also refers to the structure of the proposed scheme and the verification process undertaken by ISPT in respect of information concerning it contained in the explanatory booklet and to ISPT’s entry into a deed poll in favour of securityholders in the funds.

9. EQT also tenders a proposed access letter to be provided to unitholders which will provide a link to attend the proposed meeting online; a proposed proxy form; and two exemptions provided by ASIC in respect of the proposed trust scheme.

Applicable principles

10. Mr Bender rightly submits that it is commonplace for a responsible entity of a registered managed investment scheme to seek judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) (“Trustee Act”) in connection with a trust scheme. He also rightly points out that, in giving such advice, the Court will proceed by analogy with the approach governing the exercise of its discretion under s 411(1) of the Act: Re Mirvac Ltd (1999) 32 ACSR 107; [1999] NSWSC 457 at [47]; Re Macquarie Capital Alliance Ltd (2008) 67 ACSR 484 at [19]; [2008] NSWSC 745; Re Sydney Airport Holdings Ltd [2013] NSWSC 1665 at [2], [6], [19]; Re Magellan Asset Management Ltd (as responsible entity of Magellan Global Fund) (2020) 150 ACSR 23; [2020] NSWSC 1535 at [17] (“Magellan”); Re Spark Infrastructure RE Ltd (2021) 156 ACSR 257; [2021] NSWSC 1385 at [26] (“Spark”).

11. Mr Bender also refers to my summary of the manner in which the Court's discretion will be exercised in Re DUET Finance Ltd [2017] NSWSC 415 at [16] (“DUET”) as follows:

“…[I]t is now common practice in a trust scheme for the responsible entity to seek judicial advice in a two-stage process by analogy with schemes of arrangement under Part 5.1 of the Corporations Act: Re Mirvac Ltd [1999] NSWSC 457; (1999) 32 ACSR 107; Re Macquarie Capital Alliance Ltd [2008] WSWSC 745; [2008] NSWSC 745; (2008) 67 ACSR 484; Re Macquarie Communications Infrastructure Group [2009] NSWSC 487; Re DUET Management Company 1 Ltd [2013] NSWSC 817; (2013) 95 ACSR 34. A responsible entity may seek judicial advice at the first hearing that it is justified in propounding resolutions to implement the trust scheme and proceeding on the basis that the amendments to be made to the constitution of the registered managed investment scheme to implement the trust scheme would be within the powers of alteration conferred by that document and s 601GC of the Corporations Act: Re Mirvac Ltd above at [47]; Re Macquarie Capital Alliance Ltd above at [19]. That judicial advice, and the right of any unitholder in the managed investment scheme to appear at the second court hearing and object, is disclosed in the explanatory statement sent to unitholders for a meeting of unitholders to consider the resolutions to implement the trust scheme; and further judicial advice is sought at the second hearing that the responsible entity is justified in implementing the trust scheme: Re Mirvac Ltd above at [48].”

12. Mr Bender also rightly points out that, in considering whether to grant judicial advice at the first hearing, the Court applies by analogy the principles that have developed with respect to schemes under s 411 of the Act and refers to my summary of those principles in DUET at [14] as follows:

“It is, of course, well-established that the Court will generally approve the convening of a meeting of shareholders to consider a proposed scheme if it seems fit for consideration by a meeting of members and a commercial proposition that, if passed by the requisite majorities, is likely to be approved by the Court on an uncontested application… [T]he Court's approach at the first hearing is that it “will not ordinarily summon a meeting unless the scheme is of such a nature and cast in such terms that, if it receives the statutory majority at the … meeting the court would be likely to approve it on the hearing of a petition which is unopposed”: FT Eastment & Sons Pty Ltd v Metal Roof Decking Supplies Pty Ltd (1997) 3 ACLR 69 at 72; Australian Securities Commission v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485 at 504. … [A]t the first hearing, the Court exercises a “supervisory jurisdiction” to review the scheme and raise any queries with the plaintiff, and the Court will intervene at the first hearing if it has any concerns, since the market will have regard to the orders made by the Court at the first hearing… The Court does not substitute its commercial judgment for that of the members to whom the scheme is directed, but considers whether the scheme is one that sensible businesspeople might conclude is of benefit to members: Re Prime Infrastructure Holdings Ltd [2010] NSWSC 1104; (2010) 80 ACSR 193 at [13]; Re AXA Asia Pacific Holdings Ltd [2011] VSC 4 at [13]; Re Aspen Group Ltd [2015] NSWSC 1718 at [11].”

13. I am satisfied that, here, the proposed trust schemes are fit for consideration by meetings of securityholders and reflect a commercial proposition that, if passed by the requisite majorities, is likely to be approved by the Court. The proposed trust schemes have received the support of the board of EQT in the absence of a superior proposal and subject to the independent expert continuing to conclude that the proposal is fair and reasonable to, and therefore in the best interests of, securityholders. KPMG Corporate Finance, the independent expert retained by EQT to consider the trust schemes, has concluded that they are fair and reasonable to, and therefore in the best interests of, securityholders in the absence of a superior proposal. In reaching that view, the independent expert also expressed the view that a security in the FSREC Property Fund has a market value in the range of $1.61 to $1.86 (on an ex-dividend basis), which suggests that the scheme consideration of $1.85 is at the upper end of the valuation range. The independent expert also expressed the view that the trust schemes are reasonable on the basis that, if approved and implemented, they would provide immediate liquidity to securityholders who have certainty of liquidity in the short-to-medium-term and that the scheme consideration of $1.85 is superior to the price of previous withdrawal offers and close to the top end of the independent expert’s valuation range, which includes a control premium although the securityholders not associated with IRAPT No 1 only hold 2.36% of the securities in the FSREC Property Fund.

14. There is no reason to doubt that the proposed trust schemes have been accurately and fairly described in the proposed explanatory memorandum, which has been the subject of a verification process in common form.

15. I will deal with several other matters below. I am otherwise satisfied that EQT, as responsible entity of the relevant trusts, would be justified in proceeding on the basis that the making of the proposed amendments to the trusts’ constitutions in connection with the trust scheme, following the requisite approval by unitholders, would be within its powers, including the power of alteration conferred by the trusts’ constitutions and s 601GC of the Act.

Particular matters

16. Mr Bender also draws attention to several matters which are commonly considered prior to exercising the discretion conferred by s 411(1) of the Act and, by analogy, s 63 of the Trustee Act.

17. First, Mr Bender notes that the Court will typically have regard to performance risk, being the risk that a bidder will not comply with its primary obligation to pay the scheme consideration to scheme members: Re SFE Corporation Ltd (2006) 59 ACSR 82 at [4]; [2006] FCA 670; Spark at [29]. Mr Bender points out that, here, cl 36.6 of the proposed amended FSREC Fund I constitution has the effect that the transfer of the relevant securities is to occur subject to IRAPT No 1 having paid the scheme consideration into a trust account nominated by EQT; those securities will only be transferred if that obligation is performed and cl 36.6 of the proposed amended FSREC Fund II and FSREC Fund III constitutions is to the same effect. Second, ISPT for IRAPT No 1 has executed a Deed Poll in favour of each registered holder of securities as at the record date which obliges IRAPT No 1 to observe and perform all obligations contemplated of it under the trust schemes including the relevant obligations relating to the payment of the scheme consideration in accordance with the terms of the Trust Schemes. I accept that the Court has recognised that this is a means of managing performance risk and similar arrangements have been accepted in previous trust schemes: Re Simavita Holdings Ltd [2013] FCA 1274 at [43]; Re Mirvac Funds Management Ltd in its capacity as responsible entity of Mirvac Industrial Trust [2014] NSWSC 1569 at [7]; Re Australian Leisure and Entertainment Management Ltd [2021] NSWSC 1421 at [28]. Third, Mr Bender points out, and I recognise, that IRAPT No 1 already holds approximately 97.63% of the securities in the FSREC Property Fund and also owns a substantial property portfolio. It is not a special purpose bidding vehicle with minimal assets of the kind referred to in [28(b)] of Practice Note SC Eq 4, and there is no reason to doubt its ability to fund the cash consideration of $10.81 million from its cash reserves.

18. Second, Mr Burnett points out that there are no exclusivity provisions in or break fee payable under the SID.

19. Third, Mr Burnett notes that cl 36.10 of the supplemental deeds poll in respect of FSREC Fund I, FSREC Fund II and FSREC Fund III contain a deemed warranty, by which each participant in the trust schemes warrants that all their units to be transferred under the Trust Schemes will, as at the date of transfer, be fully paid and free from all encumbrances, that they have full power and capacity to transfer their units together with any rights and entitlements attaching to those units, and that they have full power and capacity to sell and to transfer their securities to ISPT as trustee for IRAPT No 1 pursuant to the Trust Schemes, without need for any further act. I accept that clauses in these terms are permissible and now common-place and the existence of the deemed warranties is appropriately disclosed in the explanatory memorandum: Re APN News & Media Ltd (2007) 62 ACSR 400 at [62]; [2007] FCA 770; Magellan at [22].

Orders

20. For these reasons, I was satisfied that judicial advice should be given that EQT is justified in propounding resolutions to implement the proposed trust scheme and proceeding on the basis that the constitutional amendments to implement the trust scheme would be within the constitutional powers of alteration and s 601GC of the Act. For these reasons I made the orders sought by EQT at the conclusion of the first hearing.

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