Julie Anne Barrow Charitable Trust (ABN 91 975 681 079) v Brisconnections Management Company Ltd

INTRODUCTION 1 This is another instalment in the recent controversy surrounding BrisConnections Management Company Ltd, as responsible entity for the BrisConnections Investment Trust ("BIT") and the BrisConnections Holding Trust ("BHT") (collectively "BMC"). 2 In In the matter of Australian Style Investments Pty Ltd (ACN 109 510 198), BrisConnections Management Company Ltd v Australian Style Investments Pty Ltd [2009] VSC 128, Robson J of the Supreme Court of Victoria considered an application for declaration by BMC against Australian Style Investments Pty Ltd ("ASI") that requests dated 12 and 30 February 2009 made by ASI to BMC to convene meetings of unit holders of the trusts were not requests lawfully made for the purpose of Pt 2G.4 of the Corporations Act 2001 (Cth) ("the Act") and that BMC was not required to call a meeting of members of the BIT and BHT pursuant to s 252B(1) of the Act in response to ASI's requests. 3 In the course of his reasons for decision, Robson J described BMC, the history of what was described as the "Concession", the funding of the Airport Link Project in Queensland and the role of the stapled securities in that funding in the following terms: [23] BrisConnections, which describes BMC, BHT, BIT and a range of other associated trusts and companies, has been awarded the Concession to design, construct, operate, maintain and finance Airport Link in Brisbane, Queensland. BrisConnections will receive toll revenue under the Concession, with tolls escalating in line with Brisbane CPI. Airport Link will be approximately 6.7 kilometres in length, with approximately 5.7 kilometres of this comprising tunnel and will be the largest toll road project, in terms of design and construction costs, undertaken in Australia to date. Upon completion, it will be the first free-flow motorway linking Brisbane's CBD to the northern suburbs and Brisbane Airport, and is expected to become a key distribution road connecting some of Brisbane's major destinations, such as Brisbane Airport, the CBD, the northern suburbs, Royal Brisbane Hospital, Australian Trade Coast and Chermside Shopping Centre. [24] The funding for the project is estimated to be $4,889,000,000, of which $3,055,000,000 will be bank debt and the rest equity. Of the equity, $1,226,000,000 was to be raised by reason of the issue of the Stapled Units in BIT and BHT. [25] The offer to investors consisted of approximately 408.67 million Stapled Units at the issue price of $3 per Stapled Unit. The issue price per Stapled Unit was payable in three equal instalments: · The initial instalment of $1 per Stapled Unit was to be paid on application for Stapled Units; · The second instalment of $1 per Stapled Unit was to be payable nine months after allotment date; and · The final instalment of $1 per Stapled Unit would be payable 18 months after allotment date. … The second instalment is due for payment on 29 April 2009. The third instalment is due in January 2010. [26] The Stapled Units offered in a managed investment scheme are governed by Ch 5C of the Corporations Act 2001. Under Ch 5C, a management investment scheme must have a constitution. The constitutions of BHT and BIT are, for all practical purposes, identical. Under cl 3.1, the beneficial interest in the trust is divided into units. Under cl 3.11, provision is made for units to be transferred and for the transfers to be registered. A member of the trust is defined to mean the person registered as the holder of a unit. [27] Clauses 4.7 to 4.13 deal with the consequence of a member failing to pay an instalment. The provisions provide for disposal of the Defaulted Unit. Under cl 4.10, the holder of the Defaulted Unit which had been sold ceases to be a member but remains liable to pay BMC all moneys which, at the date of sale, were payable by the former member to BMC in respect of the sold units. (Footnotes omitted). 4 By an Application dated 17 April 2009, a party described as "The Julie Anne Barrow Charitable Trust" ("the named Applicant") sought by way of interlocutory and final relief what was said to be an "order of equitable injunction that the Last day for [BMC] accepting off-market transfers of partly paid stapled securities (ASX Code: BCSCA) not be the current Last day of Wednesday, 22 April 2009". 5 The Application contended that the relief sought by the named Applicant against BMC arose out of contraventions by BMC of s 173(3) of the Act. The Application was accompanied by a Statement of Claim and, subsequently, an Amended Statement of Claim filed on 20 April 2009 which alleged not only a breach by BMC of s 173(3) of the Act but also breach by BMC of an alleged but unspecified duty of good faith said to be owed by BMC to the named Applicant. 6 The application for interlocutory relief came on for hearing at 9:30 am on 21 April 2009. BMC was represented by Counsel. Mr Strong sought leave to be heard on behalf of Deutsche Bank AG ("DB"), an underwriter to the securities described by Robson J. No party opposed DB making submissions and I granted leave to DB to do so. The named Applicant was represented by a Mr David Barrow who described himself as the sole director of Super Choice Now Pty Ltd (ABN 83 122 134 703), identified at the foot of the Amended Statement of Claim as the corporate trustee of the named Applicant. Both Counsel for BMC and DB informed the Court that they opposed the named Applicant's application for interlocutory relief and outlined the various bases for their opposition. 7 After hearing an outline of the various grounds of opposition to the application from BMC and DB, I stood the matter down to enable Mr Barrow time to consider those grounds. Those grounds included that it was apparent that the named Applicant was not a proper party. I also asked Mr Barrow to address the question of appropriate representation for any action commenced by a corporate trustee on behalf of a trust. 8 The matter came on again for hearing at 2:15pm on 21 April 2009. At that time, Mr Barrow informed me that he had sought to address each of the matters raised earlier that day by Counsel for BMC, Counsel for DB and the Court. Mr Barrow made application for leave to appear on behalf of the named Applicant. But no evidence was adduced by him in support of that particular application or more generally in support of the substantive application for interlocutory relief. For the following reasons, I refused Mr Barrow leave to appear. 9 First, at the outset, the named Applicant is not a proper party. The trustee of the trust should be the applicant: see eg Union Bank of Australia v Harrison, Jones and Devlin Ltd (1910) 11 CLR 492; Re Cooper, Cooper v Vesey (1882) 20 Ch D 611. Secondly, as has been said on a number of occasions, a trust is not a legal entity capable of entering into a legal relationship: see eg Gerbauer Nominees Pty Ltd v Cole [2006] WASCA 169 at [17]. 10 Although Mr Barrow informed me from the bar table that the trustee of the named Applicant is in fact Super Choice Now Pty Ltd (ABN 83 122 134 703), and that he was the sole director of that company, there was no evidence to establish these facts. However, even if the facts are as he alleged them to be, he must satisfy O 4 r 14 of the Federal Court Rules ("the Rules"). That rule provides that: (1) Subject to subrule (2) and to Order 43 (which relates to disability), any person may proceed in the Court by a solicitor or in person. (2) Except as provided by or under any Act, a corporation may not, without the leave of the Court, commence or carry on any proceeding otherwise than by a solicitor. In short, Mr Barrow cannot without leave of the Court commence or carry on the proceeding for the corporate trustee. 11 The principles which govern the exercise of the Court's discretion to grant leave under O 4 r 14(2) were summarised by French J (as he was) in Simto Resources Ltd v Normandy Capital Ltd (1993) 10 ACSR 776 at 783. His Honour adopted the approach of Smithers J in Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 at 74 that "[t]he discretion being reposed in the court, it [was] inevitable that it be exercised in favour of a company where there is sufficient reason." 12 What constitutes "sufficient reason" will, of course, vary from case to case. It may include such factors as actual financial incapacity, the financial difficulties created by diversion to paying legal expenses of funds which might be necessary to meet wider commitments of a company, the class of company involved, the nature of its undertaking, its financial structure, its ability to retain and pay its staff, the identity of its shareholders and the spread of the shareholding and the fact that a company is the alter ego of a single person who has advantageous educational and technical qualifications: Simto Resources Ltd at 783. 13 In the circumstances of this case, I concluded that leave should not be granted for Mr Barrow to appear on behalf of a corporate trustee. First, the issues of fact and law raised in the Amended Statement of Claim are of a kind that are not suited to presentation and examination by a lay representative. I will return to address that issue later in these reasons for decision. Secondly, it was made plain that Mr Barrow was to be the principal witness in the proceeding. He informed the Court that he intended to seek to adduce evidence from the bar table or to go into the witness box. Thirdly, no reason has been proffered by Mr Barrow or the corporate trustee why it is that a charitable trust registered as a deductible gift recipient under the Income Tax Assessment Act 1997 (Cth) in relation to stapled securities, which on one view at least, have a potential liability for payments in the millions of dollars, cannot itself now secure legal representation to prosecute what is said to be an urgent application for interlocutory relief. 14 In refusing Mr Barrow leave to appear, I should say two things. Mr Barrow submitted from the bar table that refusing leave would constitute a denial of natural justice. That is not the position. There is nothing to prevent the corporate trustee of the named Applicant consistent with O 4 r 14 of the Rules and the principles espoused by French J in Simto instituting and conducting proceedings by a solicitor on the record and in sufficient time to enable any Court to consider a properly formulated application. In addition, it is apparent from the matters raised in the hearings on 21 April 2009 that even if I were to grant Mr Barrow leave to appear on behalf the corporate trustee, the application faces significant obstacles which would need to be overcome before any substantive application could be heard. 15 Without attempting to provide an exhaustive list of the obstacles the current application appears to face, they include that the named Applicant (whether through Mr Barrow or otherwise) has not filed and did not seek to adduce any evidence in support of its application despite the serious consequence of the order sought and the fact that the application was opposed. 16 Secondly, although a person has a statutory right under s 173 of the Act to obtain a copy of the register of members upon payment of a fee (see AXA Asia Pacific Holdings Limited v Direct Share Purchasing Corporation Pty Ltd (2009) 69 ACSR 19), there is a real issue as to whether a failure of a company to provide a copy of the register (in the absence of some other compelling reason or reasons), would give rise to the grant of an injunction of the kind sought by the named Applicant. Especially is that so when there is no evidence identifying what, if any, interest the named Applicant has in the register of members or the units held by those members. 17 Thirdly, to the extent that Mr Barrow's complaint was that although a DVD copy of the register of members was in fact provided it was provided late and not in the form prescribed by him, it is at least arguable that these allegations do not demonstrate a relevant breach of the Act: see s 173(3) of the Act. 18 Fourthly, the other basis on which Mr Barrow alleged that the named Applicant was entitled to the interlocutory relief sought was that BMC owed the named Applicant some duty of good faith. That duty was neither explained nor particularised. Mr Barrow's reference during the hearing to Renard Constructions (ME) Pty Ltd v Minister for Public Works (1992) 26 NSWLR 234 does not assist. I know of no such duty as that described in the Amended Statement of Claim, where, as here, the principal allegation is one of breach of a statutory duty. 19 Even if these matters were put to one side, and even if the issue of whether or not there was a serious question to be tried which would attract interlocutory relief (see Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 esp at [11], [13], [18], [20], [167] - [168]) was also to put to one side, there were other obstacles which it would be necessary to address. The proposed order sought by the named Applicant was, at best, vague and uncertainly expressed (see eg Nexus Mortgage Securities Pty Ltd v Ecto Pty Ltd [1998] 4 VR 220 and Maritime Union of Australia, Kirner and McMullan v Patrick Stevedores Operations Pty Ltd [1998] 4 VR 143) and was an order that on its face was final in nature (see eg Woodford v Smith [1970] 1 All ER 1091). On the face of the Application and Amended Statement of Claim, the relief sought by the named Applicant was unconnected to the matters complained of by the named Applicant. In substance, the relief sought appeared to be an extension of the period of time within which off market transfers of securities may be lodged for registration. Such an extension would require assessment of, and detailed consideration of, the relevant ASX listing rules and the way in which the register of members was to be dealt with if such an order was to be made as well as a wide range of other considerations affecting whether such an order should be made in respect of market traded securities. 20 In addition, it would seem likely that a number of other considerations would require close examination, including what may be stated in summary form as follows: 1. explaining why damages was not an adequate remedy; 2. explaining the named Applicant's delay (again, whether through Mr Barrow or not) - specifically, why the named Applicant waited until 8 April 2009 to seek to obtain a copy of the register of members, why the named Applicant waited until 17 April to make application to the Court and why the named Applicant did not serve the proceedings on BMC until 20 April 2009; 3. what Mr Barrow or the named Applicant intended to do with the register of members and whether that use complied with s 177 of the Act. In particular, whether the proposed conduct of Mr Barrow and / or the named Applicant would contravene s 1019D of the Act; and 4. whether the named Applicant (or whatever party would replace the named Applicant) would proffer an undertaking as to damages and, if an undertaking was offered, how the value of any such undertaking would be assessed. 21 After delivering ex tempore reasons for refusing Mr Barrow's application for leave to appear on behalf of the named Applicant or the corporate trustee, BMC sought an order that the proceedings be dismissed and that Mr Barrow pay BMC's costs of the proceeding. For the reasons outlined above, it is appropriate that the proceeding be dismissed. In its present form, it is not maintainable by the named Applicant. It was not shown that substitution of the corporate trustee as applicant in the application as currently framed would require or permit any different conclusion. I also refused to make a costs order against Mr Barrow and ordered the named Applicant to pay both BMC and DB's costs of the proceeding. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon.