In the matter of Magellan Asset Management Limited as responsible entity of the Magellan Global Fund [2024] NSWSC 858

Supreme Court of NSW|2024-07-10|Before: Black J, Gleeson JA

Solicitors: Allens (Plaintiff) File Number(s): 2024/160399

Judgment

On 20 May 2024, for the reasons set out in Re Magellan Asset Management Ltd as responsible entity of the Magellan Global Fund [2024] NSWSC 603, Gleeson JA made orders providing judicial advice in respect of a proposed meeting of unitholders in the Magellan Global Fund ("MGF"), directed to a conversion of closed class units in MGF to open class units in MGF. His Honour there held that Magellan Asset Management Ltd ("MAML") as the responsible entity of MGF would be justified in convening a meeting of all unitholders of MGF to consider a resolution to modify the Constitution of MGF in accordance with the provisions of a Supplemental Deed Poll annexed to the Notice of Meeting ("Fund Resolution"); and a meeting of holders of the closed class units to consider resolutions to approve the variation or cancellation of class rights of the closed class units as a result of the modifications to the Constitution ("Closed Class Unitholder Resolution 1"); and approve the removal of MGF from the official list of ASX ("Closed Class Unitholder Resolution 2"). The Fund Resolution and the Closed Class Unitholder Resolutions were conditional on the passage of one another.
MAML as responsible entity of MGF now applies for orders, at the second Court hearing, that, pursuant to s 63 of the Trustee Act 1925 (NSW), it would be justified in giving effect to and implementing the conversion of the closed class units in MGF to open class units in MGF quoted on the Australian Securities Exchange under the AQUA rules ("Conversion Proposal"); giving effect to the amendments to MGF's Constitution, as set out in the Supplemental Deed Poll at Annexure A to the unitholder booklet; and doing all things necessary to effect the Conversion Proposal.

Affidavit evidence

MAML read the affidavit dated 8 July 2024 of its Deputy Chief Legal Officer, Ms Kolaroski. Her affidavit addressed the distribution of the unitholder booklet and associated materials to unitholders in MGF, the receipt and recording of the votes at the unitholder meeting, and the fact that MAML did not conduct an "outbound unitholder outreach campaign" as contemplated in its evidence led at the first Court hearing, although it contacted several operators of wrap platforms to confirm whether those platforms would be voting or assisting their clients to vote, and whether those operators had any questions in respect of the proposed transaction.
MAML also read the affidavit dated 8 July 2024 of Mr Robert Fraser, who is chair of its board of directors, who referred to the conduct of a meeting of all MGF unitholders (comprising holders of both open class units and closed class units) in respect of proposed amendments to MGF's constitution in connection with the Conversion Proposal and then, separately, the meeting of closed class unitholders in respect of the variation or cancellation of class rights of closed class units, both held on 26 June 2024. He outlined the manner in which those meetings were conducted and set out the results of the poll conducted at each of those meetings. Each of the resolutions was passed by substantial majorities, which I address below. Mr Fraser also addressed voter turnout at the meeting, to which I return below. MAML also relied on a supplementary statement of facts at this hearing.

The Court's rule in giving judicial advice at a second Court hearing in a trust scheme

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 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 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 Ltd (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 Trust Company (RE Services) Ltd as responsible entity of the VitalHarvest Freehold Trust (No 4) [2021] NSWSC 838 ("Vitalharvest") at [9]; Re Irongate Funds Management Ltd as responsible entity for Irongate Property Fund I and Irongate Property Fund II (No 2) [2022] NSWSC 959 at [4]. 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]; VitalHarvest at [9].

Submissions and determination

Mr Williams, with whom Mr Atkin appears for MAML, points out that, on 20 May 2024, Gleeson JA gave advice that MAML would be justified in distributing the unitholder booklet to unitholders of the Fund, accompanied by a Product Disclosure Statement ("PDS") (together, "Unitholder Materials"). The Unitholder Materials were distributed from 27 May 2024 in accordance with that advice (Kolaroski 8.7.24 [6]-[9]).
Mr Williams also refers to the significant level of unitholder support for the resolutions and the Conversion Proposal. He points out that, at the meeting of the unitholders of MGF, the Fund Resolution was passed by a vote of 99.68% of votes cast (Fraser 8.7.24 [9]-[16].) At the subsequent meeting of the closed class unitholders, Closed Class Unitholder Resolution 1 passed by 99.78% of votes cast and Closed Class Unitholder Resolution 2 passed by 99.68% of votes cast (Fraser 8.7.24 [17]-[25]). MAML, its related entities and their associates did not cast votes in relation to the three resolutions (whether on their own behalf or as proxy) (Fraser 8.7.24 [30]).
Mr Williams also points out that the total votes cast on the Fund Resolution represented approximately 25.92% of the units in the MGF, cast by approximately 4.37% of unitholders. The total votes cast on the Close Class Unitholder Resolutions represented approximately 26.99% of the closed class units, cast by approximately 5.23% of closed class unitholders (Fraser 8.7.24 [26]-[28]). I recognise that that represented a large value of units, in absolute terms; and, although it was not a large attendance by number of unitholders, that attendance was comparable with the attendance achieved in trust schemes in which associated entities of MAML have previously been involved (Fraser 8.7.24 [29]). Mr Williams also notes that, as I noted above, apart from the distribution of the Unitholder Materials, MAML did not conduct a widespread outbound communications campaign.
On 26 June 2024, MAML published an announcement to ASX giving notice of its intention to make the present application at this Court hearing, and providing information as to the ability of unitholders to appear to be heard on the application (Ex RDF-7). No notice of appearance has been served on MAML by anyone wishing to be heard on the present application (Kolaroski [17]) and no unitholder appeared at the hearing to oppose the application.
Mr Williams also notes that the implementation of the Conversion Proposal is conditional upon receipt of formal approval by ASX to remove MGF from the Official List of ASX: Supplementary Statement of Facts [10]. ASX has given advice to MAML that it will agree to remove the MGF from the Official List of ASX upon receipt of a formal delisting application from MAML subject to all other necessary conditions to implement the Conversion Proposal being satisfied. MAML intends that, on the effective date for the Conversion Proposal (11 July 2024), it will request that ASX remove MGF from the Official List of ASX with effect from close of business on the implementation date of the Conversion Proposal (22 July 2024): Supplementary Statement of Facts [12].
MGF unitholders have passed the necessary resolutions to implement the Conversion Proposal by the requisite, and by substantial, majorities. I accept that MAML has made out a case for the giving of judicial advice to the effect that it is justified in taking the necessary steps to implement the Conversion Proposal, as contemplated by the orders. For these reasons, I made the orders sought by MAML at the conclusion of the second Court hearing.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 July 2024

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