In the matter of Irongate Funds Management Limited as responsible entity for Irongate Property Fund I and Irongate Property Fund II (No 2) [2022] NSWSC 959
On 19 May 2022, for the reasons set out in my judgment in Re Irongate Funds Management Limited as responsible entity for Irongate Property Fund I and Irongate Property Fund II [2022] NSWSC 723, I made a direction under s 63 of the Trustee Act 1925 (NSW) that Irongate Funds Management Ltd ("IAP RE") as responsible entity for Irongate Property Fund I ("IPF I") and Irongate Property Fund II ("IPF II") would be justified in convening meetings of IPF I and IPF II unitholders to consider a proposed constitutional amendment to give effect to the trust scheme and circulating an explanatory statement to unitholders in the two funds prior to that meeting.
In the matter of Irongate Funds Management Limited as responsible entity for... [2022] NSWSC 959 | Case summary | Zoe
As I noted in that judgment, IAP RE is an unlisted Australian public company limited by shares and is the responsible entity of IPF I and IPF II, which are both registered managed investment schemes under Ch 5C of the Corporations Act 2001 (Cth). Units in IPF I and IPF II are stapled to each other, so that an IAP security comprises one IPF I unit stapled to one IPF II unit, and the stapled group is listed on the Australian Securities Exchange ("ASX") and on the stock exchange operated by JSE Limited ("JSE") in South Africa. The register of IAP securityholders is maintained in accordance with the Corporations Act and the listing requirements of the JSE, as modified by express waivers or dispensation letters provided by JSE, and incorporates both an Australian sub-register and a South African sub-register. On 30 March 2022, IAP RE entered into a Scheme Implementation Agreement ("SIA") with Charter Hall Wholesale Management Ltd as trustee of two funds, by which the Irongate entities were to be acquired by Charter Hall PGGM Industrial Partnership No 2 by a trust scheme.
The trust scheme meetings, in respect of IPF I and IPF II, took place concurrently on 29 June 2022. At those meetings, each of the six relevant resolutions were passed by the requisite majorities of IAP securityholders. IAP RE now seeks orders, in effect, that it will be justified in implementing the proposed scheme. I made those orders at the conclusion of the second Court hearing on 5 July 2022. These are my reasons for doing so, and I have drawn on the helpful submissions of Mr Jackman, who appeared for IAP RE, in these submissions.
[3]
The Court's rule in giving judicial advice at a second Court hearing in a trust scheme
Mr Jackman submits, and I accept, that the Court's role in giving judicial advice at the second Court hearing in a trust scheme is similar nature its role in approving a scheme of arrangement under section 411(4)(b) of the Corporations Act. An application for judicial advice that the responsible entity is justified in giving effect to and implementing a proposal approved by unitholders, which seeks a direction as to whether the course of conduct to be embarked upon is justified, 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 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]; Re The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 4) [2021] NSWSC 838 at [9]. Mr Jackman recognises that, at the second Court hearing, the Court will wish to be satisfied that the procedural requirements for the obtaining of unitholders' approval have been satisfied: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]. The Court will then 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]; Re The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 4) above at [9].
[4]
The evidence led at the second Court hearing
As Mr Jackman points out, the evidence led by IAP RE at the second Court hearing establishes that the scheme booklet despatched to IAP securityholders was substantially in the form of the document approved by the Court for despatch, and included additional information concerning currency conversion, to which reference was made at the first Court hearing and which was brought to the Court's attention by email from IAP RE's solicitors following the first Court hearing. The scheme booklet was provided to the Australian Securities & Investments Commission ("ASIC") on 19 May 2022. JSE issued its formal approval letter in respect of the scheme booklet once the signed independent expert's report had been submitted to it, after the first Court hearing, and that formal approval letter was received by IAP RE's Australian legal advisers on 20 May 2022.
The steps taken in relation to the finalisation and despatch of the scheme booklet and proxy forms to IAP securityholders are set out in the affidavits of Mr Daniel Natale sworn 4 July 2022, Ms Maria Dzopolic (in respect of IAP securityholders on the Australian register) sworn 4 July 2022 and Mr Anzline Geswindt sworn 1 July 2022 (in respect of IAP securityholders appearing on the South African register) read at the second Court hearing. The procedures adopted in relation to the receipt of proxy forms, the collation of proxies, the preparation of a proxy report and the registration, voting and poll procedures at the trust scheme meetings are set out in the affidavits of Mr Geswindt (at [40]-[48]) and Ms Dzopalic (at [48]-[76]) and the conduct of the meeting is outlined in the Ms Sally Herman's affidavit dated 4 July 2022 also read at the second Court hearing. A letter from Computershare, which provides registry services to IAP RE, setting out the results of the polls on the relevant resolutions is annexed to Ms Herman's affidavit, after making a minor correction of an error noted in Ms Dzopalic's affidavit, which was not material to the outcome of the meeting.
The necessary resolutions were passed by IAP securityholders at the trust scheme meetings by substantial majorities, in each case by more than 99% of the votes of IAP securityholders, excluding any votes cast by persons who were excluded from voting on those resolutions as set out in the notice of meeting. Computershare also monitored whether any votes were cast by 360 Capital (as defined in the scheme booklet) (Dzopalic [73]) and, even if the votes cast by 360 Capital were disregarded (as they were in respect of voting on two resolutions, as to which 360 Capital was excluded from voting), the resolutions put to the trust scheme meetings passed with substantial majorities (Dzopalic [76]).
As required by the orders made at the first Court hearing on 19 May 2022, IAP RE caused a notice of the second Court hearing to be published in a national newspaper on 24 June 2022. No notice was given to IAP RE's solicitors by any person intending to appear at the second Court hearing to oppose the giving of the judicial advice sought by IAP RE and no securityholder appeared at the second Court hearing to oppose the application. Certificates evidencing the satisfaction or waiver of the several conditions precedent to the trust scheme (other than the condition relating to the granting of the Second Judicial Advice as defined in the SIA) were tendered at the second Court hearing. As was foreshadowed at the first Court hearing, Computershare has also opened a trust account with an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth) for the purpose of receiving the Scheme Consideration (as defined in the scheme booklet) (Dzopalic [47]).
[5]
Determination
Mr Jackman points out that the Independent Expert (as defined in the scheme booklet) has concluded that the trust scheme is in the best interests of IAP securityholders, in the absence of a superior proposal, and that (as I noted above) IAP securityholders have agreed to the trust scheme by the requisite majorities. He submits and I accept that IAP RE has made out a case for the giving of judicial advice to the effect that it is justified in implementing the transaction contemplated by the resolutions passed at the trust scheme meetings, in giving effect to the amended constitutions of IPF I and IPF II, and in taking all steps and doing all things necessary to implement the transaction contemplated by those resolutions.
For these reasons, I made the orders sought by IAP RE at the conclusion of the second Court hearing.
[6]
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Decision last updated: 31 July 2022