In the matter of The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 4) [2021] NSWSC 838

1. I summarised the circumstances of the earlier adjournments in my judgments in Re The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 2) [2021] NSWSC 397 and Re The Trust Company (RE Services) Limited as responsible entity of the VitalHarvest Freehold Trust (No 3) [2021] NSWSC 479, and I made orders on 18 June 2021 that VTH RE would be justified in fixing the time of the postponed meeting on 28 June 2021.
2. The applicable resolutions were passed by unitholders at a general meeting of VTH unitholders held on that date. At the second Court hearing on 1 July 2021, VTH RE then sought the Court's opinion, advice and direction that it would be justified in implementing the trust scheme, giving effect to the amendments to the constitution of VTH and doing all things necessary to effect the trust scheme. I gave the judicial advice sought at the conclusion of that hearing, and these are my reasons for doing so.

Affidavit evidence

1. By her affidavit dated 29 June 2021, Ms Rebecca Maslen-Stannage, who is a partner in the solicitors acting for VTH RE and was the chair of the scheme meeting, outlined the manner in which that meeting was conducted over a virtual platform; referred to the questions submitted by means of that virtual platform and to the share registry prior to the meeting; and referred to the outcome of voting at that meeting, by which the proposed scheme was approved by 98.79% of votes cast and by 92.87% of holders; and by 98.69% of non-associated holders by votes cast and 92.86% of non-associated unitholders by number. The reference to votes by non-associated unitholders is to unitholders not associated with the manager of VTH, Primewest Management Limited as responsible entity for Primewest Property Fund ("Primewest") which had received a facilitation fee, and that vote satisfied a voting condition in a Facilitation Deed between the acquirer and the manager. A further resolution for the acquisition of units in VTH for the purposes of item 7 of s 611 of the Corporations Act was approved by approximately 98.42% of VTH unitholders. Ms Maslen-Stannage also referred to the provision of the scheme booklet to the Australian Securities and Investments Commission ("ASIC"); the advertisement of the Court hearing; and the fact that no unitholder had given notice of an intention to appear at this Court hearing to oppose the scheme. No unitholder sought to appear at the hearing to oppose the application.
2. By her affidavit dated 29 June 2021, Ms Maria Dzopalic, who is a senior relationship manager employed by Computershare Investor Services Pty Ltd, referred to Computershare's role in maintaining the register of unitholdings, the dispatch of scheme documents to unitholders by electronic means and post; the dispatch of supplementary materials, over the course of the several increases in the price offered by the acquirer under the scheme and a competing acquirer; the receipt of proxies for the scheme meeting, the registration of attendees at the scheme meeting, and voting at the scheme meeting and a poll report. Ms Dzopalic confirms the position as to voting at the scheme meeting, as set out in Ms Maslen-Stannage's affidavit, and points to a relatively healthy voting participation rate of nearly 62% of units at that meeting. By an affidavit dated 30 June 2021, Ms Alison Cranney, who is a solicitor in the firm acting for VTH RE in relation to the scheme, makes minor corrections to Ms Dzopalic's affidavit, on information and belief, where Ms Dzopalic was not able to swear a supplementary affidavit by reason of the COVID-19 lockdown in New South Wales.
3. By an affidavit dated 29 June 2021, Mr Oliver Bampfield, who is the managing director for Lumi Technologies Pty Ltd in New South Wales, refers to the engagement of that company to provide services in respect of the conduct of the virtual scheme meeting, and deals with the conduct of that meeting and the conduct of the poll at that meeting.

VTH RE's submissions and determination

1. Mr Williams points out that the role of the Court in granting judicial advice at a second Court hearing in respect of a trust scheme is of a similar nature to the Court's role in approving a scheme of arrangement under section 411(4)(b) of the Corporations Act. He submits that an application for judicial advice that the responsible entity is justified in giving effect to and implementing the proposals approved by unitholders, which amounts to a broad judicial commendation of the course of conduct to be embarked upon, 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; [1999] NSWSC 457 at [48]; Re Homemaker Retail Management Ltd (2001) 40 ACSR 116; [2001] NSWSC 1058 at [5]-[7]; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194; [2004] NSWSC 1197 at [10]. He also points out that the Court must be satisfied, at a second Court hearing in respect of a trust scheme, that the procedural requirements for obtaining unitholders' approval have been satisfied: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]. The Court then gives 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].
2. I summarised the applicable principles in an application under s 63 of the Trustee Act in respect of a proposed trust scheme in Re Walsh & Company Investments Limited as responsible entity of Fort Street Real Estate Capital Fund I, Fort Street Real Estate Capital Fund II, Fort Street Real Estate Capital Fund III and Fort Street Real Estate Capital Fund IV [2020] NSWSC 1746 at [41]ff, where I observed that: "[The applicant] here invokes the Court's jurisdiction under s 63 of the Trustee Act 1925 (NSW), albeit in the particular setting of a trust scheme. Generally, that section authorises the Court to give an "opinion advice or direction on any question respecting the management or administration of the trust property" and permits relief aimed at resolving legitimate doubts held by a trustee as to the proper course of action and protecting the trust and those entitled to it. In Re Australian Pipeline Ltd (2006) 60 ACSR 625; [2006] NSWSC 1316 at [17] , Barrett J noted the role of such advice in providing guidance for the future and referred to Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at 201 where Lord Oliver of Aylmerton observed that: "A trustee who is in genuine doubt about the propriety of any contemplated course of action in the exercise of his fiduciary duties and discretions is always entitled to seek proper professional advice and, if so advised, to protect his position by seeking the guidance of the court." In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 at [56] -[59] , the majority of the High Court observed that there were no implied limitations on the power to give advice or on the discretionary factors relevant to the giving of advice, and the power is confined only by the subject matter, scope and purpose of the legislation, and may be exercised whenever a question arises as to "the management or administration of the trust property" or "the interpretation of the trust instrument". The majority also noted (at [64]) that the procedure operates as "an exception to the Court's ordinary function of deciding disputes between competing litigants" and affords a facility for providing "private advice" to trustees although the Court is not bound to give such advice. The function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust: Macedonian Orthodox Community Church St Petka Inc above; Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844 at [45] . In Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) v Equititrust Ltd (in liq) (rec apptd) (recs and mgrs apptd) (No 4) [2017] FCA 1133 at [7] , Jagot J summarised the applicable principles as including, inter alia, that (1) the jurisdiction or power to give judicial advice is not constrained by any implications or limitations not found in the express words of the section; (2) the Court's discretion is confined only by the subject matter, scope and purpose of the legislation, and there are no implied limitations on the discretionary factors that may arise or rules governing the relative importance of such factors; (3) the judicial advice procedure is intended to be summary in character; (4) a judicial advice application is in the nature of 'private advice' and a departure from usual Court proceedings in which there are multiple, adversarial parties and a person served with documents in respect of a judicial advice application is not thereby a 'party' to the application; (5) the right to obtain judicial advice protects the trustee, but it thereby also protects the interests of the trust, by enabling the trustee to act in the interests of the trust without fear of being personally liable for costs; (6) the function of the Court in a judicial advice application is to determine what should be done in the best interests of the trust; and (7) the usual form of order is that the trustee "would be justified" in taking the relevant course of action. I have drawn on my judgment in Re Go Energy Group Ltd [2019] NSWSC 558 at [18] ff for this summary of these principles. The judicial advice given by the Court in the particular context of a second hearing in respect of a trust scheme is in turn typically directed to the question whether a responsible entity is justified in giving effect to and implementing a proposal approved by unitholders: 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]. In order to give such advice at a second Court hearing in a trust scheme, the Court will need to be satisfied that the procedural requirements to obtain unitholders' approval have been satisfied: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]. In determining whether to give such advice, the Court will also 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]."
3. Mr Williams points to the evidence, which I have noted above, that the scheme booklet dispatched to VTH unitholders on 10 February 2021 was substantially in the form of the document approved by the Court for dispatch and that scheme booklet was provided to ASIC on 10 February 2021 and supplementary documents were dispatched as contemplated by the further orders to which I have referred above. I have also had regard to the evidence as to 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 meeting on 28 June 2021, the conduct of the virtual meeting, and the system in place to tag any votes of MAFML2 and Primewest in relation to the amendment resolution.
4. As I noted above, the Facilitation Deed with Primewest is conditional on the scheme being implemented and satisfaction of the Non-Associated Vote Condition, which required that at least 50% of VTH Unitholders present and voting (and eligible to vote) and who are not associated with Primewest voted in favour of the Amendment Resolution and the latter condition was satisfied. The implementation of the Trust Scheme is also conditional on several other conditions precedent being satisfied or waived. At the hearing of this application, VTH tendered a certificate stating that all of the relevant conditions precedent have been satisfied or waived, other than the condition relating to the granting of the Second Judicial Advice (as defined), which I gave at the second Court hearing.
5. Mr Williams points out that the independent expert has concluded that the Trust Scheme is fair and reasonable, and in the best interests of, VTH unitholders. As I noted above, the scheme resolutions were also passed by VTH unitholders by the necessary majorities, being at least 75% of the votes cast by VTH unitholders entitled to vote for the amendment of the VTH Constitution under s 601GC(1) of the Corporations Act and more than 50% of the votes cast by VTH Unitholders entitled to vote for the acquisition of VTH units in accordance with item 7 of s 611 of the Corporations Act. As I noted above, approximately 98.79% of votes cast by VTH Unitholders were in favour of the amendment resolution, and approximately 98.42% of votes cast by VTH unitholders were in favour of the acquisition resolution. As the scheme resolutions were passed by the requisite majorities of VTH Unitholders, the asset sale resolution was not put to a vote at that meeting.

Orders

1. For these reasons, I was satisfied that the Court should give the judicial advice that was sought with respect to the implementation of the Trust Scheme and I made the orders sought by VTH RE as the responsible entity of VTH at the conclusion of the second Court hearing on 1 July 2021.

Amendments 15 July 2021 - Correction made to representation. 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: 15 July 2021