Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand

Supreme Court of NSW|2011-03-09|Before: White J

Judgment 1HIS HONOUR : The plaintiff ("Perpetual") is the responsible entity of two registered managed investment schemes called Perpetual's Monthly Income Fund ("MIF") and Perpetual's Wholesale Monthly Income Fund ("WMIF"). Each of the funds is an express trust of which Perpetual is the trustee. It seeks advice under s 63 of the Trustee Act 1925 on the following questions: " a. Whether the Plaintiff would be justified in registering transfers of units in Perpetual's Monthly Income Fund (MIF) and Perpetual's Wholesale Monthly Income Fund (WMIF) to Direct Share Purchase Corporation Pty Limited (DSPC) pursuant to transfer documentation executed by DSPC under powers of attorney granted by currently registered unitholders (Relevant Unitholders). b. Whether the Plaintiff would be justified in refusing to register transfers of units in the MIF and the WMIF to DSPC pursuant to transfer documentation executed by DSPC under powers of attorney granted by Relevant Unitholders. c. In respect of the Relevant Unitholders, whether the Plaintiff would be justified in: i. distributing each Relevant Unitholder's proportionate share of income to each Relevant Unitholder; or ii. distributing each Relevant Unitholder's proportionate share of income to DSPC. d. In respect of requests for redemption received from Relevant Unitholders after receipt by Perpetual of transfer documentation executed by DSPC under powers of attorney relating to the same units, whether the Plaintiff would be justified in: i. redeeming the units and paying the redemption amounts to each Relevant Unitholder; or ii. declining to redeem the units. e. Whether the Plaintiff's costs and expenses incurred in connection with these proceedings should be paid out of the assets of Perpetual's Monthly Income Fund and/or Perpetual's Wholesale Monthly Income Fund on an indemnity basis. " 2Section 63 relevantly provides: " 63 Advice (1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. (2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction. ... (4) Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person, or to adduce evidence by affidavit or otherwise in support of the application. ... (8) Where the question is who are the beneficiaries or what are their rights as between themselves, the trustee before conveying or distributing any property in accordance with the opinion advice or direction shall, unless the Court otherwise directs, give notice to any person whose rights as beneficiary may be prejudiced by the conveyance or distribution. ... (10) Any person who claims that the person's rights as beneficiary will be prejudiced by the conveyance or distribution may within such time as may be prescribed by rules of court, or as may be fixed by the Court, apply to the Court for such order or directions as the circumstances may require, and during such time and while the application is pending, the trustee shall abstain from making the conveyance or distribution. (11) Subject to subsection (10), and subject to any appeal, any person on whom notice of any application under this section is served, or to whom notice is given in accordance with subsection (8), shall be bound by any opinion advice direction or order given or made under this section as if the opinion advice direction or order had been given or made in proceedings to which the person was a party. " 3In accordance with usual practice, the application for advice was accompanied by a Statement of Facts (s 63(3)). On 1 March 2011, I directed service of the amended summons, the Statement of Facts, and a supporting affidavit, on Direct Share Purchasing Corporation Pty Limited ("DSPC") and on the unitholders in each of the funds affected by the application. On the return of the amended summons, counsel for DSPC appeared, as did one of the affected unitholders, a Mrs Angela Robson.

The constitutions of the MIF and the WMIF 4The MIF is a unit trust with approximately 12,000 unitholders. The value of the assets of the MIF is approximately $373 million. Clause 8 of the Constitution of the MIF provides that units are to be issued at $1 each. Provided the fund is liquid, units may be redeemed at a price of $1 per unit, less any withdrawal charge. On a full withdrawal, adjustment will be made for undistributed income (clause 14.2). If the fund is not liquid, redemptions are to be made in accordance with the terms of any current withdrawal offer made by the responsible entity in accordance with the provisions of the Corporations Act 2001 (Cth). 5Clause 16.1 of the Constitution of the MIF provides: " Distributable Income is notionally allocated to each Unit Holder on a daily basis in proportion to Units held. Unit Holders are presently entitled to their share of the Distributable Income of the Fund for each month as so calculated. " 6" Unit Holder " means a person registered in the Register as the holder of a Unit. 7Clause 18 provides: " Transfers Unit Holders will be entitled to transfer Units in such form as the Responsible Entity determines. " 8The Constitution of the MIF is otherwise silent as to the obligation of the responsible entity to register a transfer of units. 9The WMIF has approximately 1,653 investors. The unit price for the fund is not fixed. According to the Statement of Facts it generally remains around $1 per unit. The average unit price in November and December 2010 was $1.0193. As at 22 February 2011 it was $1.0194. The Constitution of the WMIF provides that: " 10.3 ... (b) Members on the register at midnight on each Distribution Date have an absolute, vested and indefeasible interest in the Income Entitlement for the Distribution Period ending on that Distribution Date. " 10A " Distribution Date " is the last day of each Financial Year and any other day that the Responsible Entity nominates and notifies to Members. A " Member " is defined as a person listed on the Register as a member of the Trust. 11By clause 8.1(a) a Member is entitled to request a redemption by giving a redemption notice. A redemption may be by redemption out of assets or by purchase and buy back. Clauses 8 and 8A of the Constitution of the WMIF contain detailed provisions in relation to the redemption of units when the fund is liquid and when it is not. It is not necessary to set these out. 12Clause 16.1 of the Constitution of the WMIF provides: " Members may transfer Units by completing a transfer form as prescribed by the Responsible Entity and paying any relevant costs and Taxes. The Responsible Entity may refuse to register a transfer and need not provide any reasons. Where the Responsible Entity refuses to register a transfer, it may compulsorily redeem those Units in accordance with clause 8 as if a Redemption notice had been lodged in respect of them. " 13The average age of investors in the MIF is about 70 years. The average age of investors in the WMIF is about 73 years.

DSPC's offers 14On 14 October 2010, following a request made by DSPC's solicitors, Perpetual provided DSPC's solicitors with a CD-Rom containing the register of unitholders for the MIF and the WMIF. Some unitholders have subsequently complained about this, but the step was mandated by s 173 of the Corporations Act . 15On 22 October 2010 DSPC sent to Perpetual a copy of an offer which it said had been sent to unitholders of the MIF. The offer took the form of a pro forma draft and stated that DSPC was offering to buy the unitholders' units at 75 cents per unit. However, it appears that shortly after that date DSPC made offers to unitholders of the MIF unitholders of 50 cents per unit, (although the offer to at least one unitholder was at a price of 43 cents). DSPC also offered unitholders in the WMIF 50 cents for each unit. 16From 3 November 2010 DSPC has provided to Perpetual documents apparently completed and signed by 56 unitholders in the MIF and five unitholders in the WMIF (treating a joint holding as a single holding) containing acceptances of offers made by DSPC to purchase those unitholders' units. Pursuant to the form of acceptance the unitholders have appointed DSPC as their attorney to exercise all rights attaching to the units and to execute any document necessary or desirable to effect a transfer of the units. DSPC has submitted forms of transfer for the units signed by a Mr David Tweed who is the sole director and secretary of DSPC. Mr Tweed has signed for DSPC both in DSPC's capacity as transferee and in its capacity as attorney for the transferor. 17The offers of DSPC to purchase units in each fund were regulated by Division 5A of Part 7.9 of the Corporations Act . Section 1019I(2)(c) required that the offer document contain a fair estimate of the value of the units as at the date of offer and an explanation of the basis on which that estimate was made. 18The offers sent by DSPC to MIF unitholders were in a standard form. DSPC's name appeared at the top of the form together with its address and a heading containing its initials. The document stated: " Use this form to accept the Offer by Direct Share Purchasing Corporation Pty Ltd (DSPC) to buy your [number inserted] units (or such lesser number of units as are registered in your name at the date of transfer of your units) in Perpetual's Monthly Income Fund ("the fund"). You should read the offer document dated 28 October 2010 and consult your financial or other adviser. " 19The offer document then contained the name and address of the unitholder and in a prominent box stated " Amount payable to you (based on your holding on 12 October 2010) ". A figure, being the price payable if the offer was accepted, was then prominently displayed. 20In the middle of the form in large type was the statement: " Acceptance Form Perpetual's Monthly Income Fund ." 21There was then provision for the unitholder to sign to accept DSPC's offer to buy the units and to appoint DSPC as the unitholder's attorney. The attached offer document stated in capital letters " This is an important document and should be read in its entirety. Please consult your financial or other professional adviser. Offer to buy your units in Perpetual's Monthly Income Fund for 50 cents each ." 22There was then set out prominently in a box a statement containing headings " Fair Estimate of Value of a Fund Unit ", " Number of Fund Units Held by You ", " Fair Estimate of Total Value of Your Units ", and " Total Offer Price ". The estimated fair value of the units was stated to be $1. The total offer price was half the stated fair estimate of total value of the units. 23The offer document described the fair estimate of value as follows: " The Product Disclosure Statement (PDS) for the Fund states that the entry and exit prices of units in the Fund are normally $1.00 except where provisions are made against possible future realization of loss. The Perpetual website states that the entry and exit price for a unit in the Fund on 1 July 2010 was $1.00. In the absence of more recent information on the website and in reliance on the statement in the PDS, DSPC considers that a fair estimate of the value of a unit in the Fund at the date of the Offer is $1.00. " 24The offer document provided that ownership of the units passed to DSPC upon acceptance of the offer. It provided that if the unitholder accepted the offer before the date of any payment on the units, the payment belonged to DSPC. It was also stated that DSPC made no recommendation or representation as to the fairness or merits of the offer or as to its suitability for the unitholder. 25The transfer forms submitted by DSPC to Perpetual described the name of the seller and buyer, the fund in which the units were held, the account number and client number, and the number of units being transferred. The form stated the company name being Perpetual Investment Management Limited. It did not state the jurisdiction in which Perpetual is taken to be registered.

Availability of redemptions 26It would be a mistake to assume that the unitholders could have immediately redeemed their units in full had they sought to do so, rather than agreeing to sell their units to DSPC. Perpetual's letter to investors in the MIF for October 2010 reported that withdrawals were paid quarterly based on available cash in the fund and that if withdrawal requests exceeded the fund's available cash, all investors who had submitted a request for that quarter would receive a pro rata amount. Perpetual advised that investors who had submitted full withdrawal requests each quarter since December 2008 had by October 2010 received over 99 per cent of their investment. For the September 2010 quarter, Perpetual had been able to pay 52 per cent of each investor's withdrawal request. There were special provisions for investors suffering financial hardship which might accelerate an investor's withdrawal. 27In the case of the WMIF, Perpetual reported in October 2010 that investors who had submitted full withdrawal requests each quarter since December 2008 had by then received 85 per cent of their investment. For the September 2010 quarter, Perpetual was able to pay 19 per cent of each investor's withdrawal request. Again, there were special provisions in relation to investors facing financial hardship.

Perpetual's response to DSPC's actions 28Perpetual was concerned by the application made to it by DSPC for its registers. In its October distribution statements to investors in the MIF and the WMIF it stated that: " Recent media reports have stated that certain parties are planning to make opportunistic offers to purchase investments from mortgage fund clients at a discount to the current value of their investment. We have recently been approached to provide our register of unitholders, which we believe may be used for this purpose. ... If you receive such an offer we urge you to consider it very carefully, and to obtain independent professional advice. Accepting such an offer may not be in your best interests, particularly as you are able to participate in our quarterly withdrawal process. " 29In November 2010 Perpetual gave more strident warnings against accepting the offers from DSPC. In relation to the WMIF, Perpetual advised that past payouts were not indicative of future payouts of withdrawal requests. Investors were warned that DSPC was offering unitholders only half of the current value of their investment. 30Between 22 November and 3 December 2010, DSPC provided Perpetual with transfer forms for the units of 56 unitholders in the MIF. On 3 December 2010 it provided Perpetual with transfer forms for the units of five unitholders in the WMIF. 31On 17 December 2010 Perpetual filed an originating process seeking advice as to whether it would be justified in refusing to register the transfers. On 20 January 2011 it advised DSPC that it had been informed by at least 43 unitholders in the MIF or the WMIF that they did not wish to proceed with the transfers of units to DSPC. It advised that it had commenced an application for judicial advice returnable on 4 February 2011. Perpetual stated: " If Perpetual obtains judicial advice to the effect that it should register the transfers to DSPC, it will do so. Alternatively, if Perpetual obtains judicial advice to the effect that it should not register the transfers to DSPC, it will not do so. Having regard to the above, Perpetual gives notice pursuant to section 1071E of the Corporations Act 2001 (Cth) that Perpetual is refusing to register the transfers to DSPC, pending the determination of Perpetual's application for judicial advice. " 32On 9 February 2011 Perpetual sent a circular letter to all of the unitholders in respect of whom DSPC had sought to register transfers of units. Perpetual wrote: " We are writing to you because Direct Share Purchasing Corporation Pty Ltd has sent to us a power of attorney apparently signed by you. The power of attorney appears to permit Direct Share Purchasing Corporation Pty Ltd to execute any document necessary or desirable to ensure the transfer of your units to Direct Share Purchasing Corporation Pty Ltd. Direct Share Purchasing Corporation Pty Ltd has also provided us with a transfer from executed by it providing for the transfer of all of your units to Direct Share Purchasing Corporation Pty Ltd. The documents show that Direct Share Purchasing Corporation Pty Ltd proposes to pay you an amount less than the value of your units. Perpetual has not registered the transfer of your units and it has informed Direct Share Purchasing Corporation Pty Ltd that it does not intend to do so unless and until it obtains advice from the Supreme Court under s 63 of the Trustee Act 1925 (NSW) that it should do so. In some circumstances, the Court has power to set aside a power of attorney and transfer form. Perpetual would like to be able to provide evidence to the Court about the circumstances in which you signed the power of attorney, whether you understood it and whether you, in fact, wish to transfer your units to Direct Share Purchasing Corporation Pty Ltd. For that purpose, we would be grateful if you would answer the following questions by ticking the relevant boxes (and providing additional information where indicated) and returning the document to Perpetual in the enclosed express paid envelope. ... We will let you know the outcome of the Court proceedings. Until the Court gives Perpetual advice about whether it should transfer your units to Direct Share Purchasing Corporation Pty Ltd, Perpetual will keep the power of attorney signed by you and the transfer signed by Direct Share Purchasing Corporation Pty Ltd. Please let us know if you would like copies of those documents. Important : If you do not wish to proceed with the transfer of your units to Direct Share Purchasing Corporation Pty Ltd, we encourage you to seek your own legal advice. The advice Perpetual is seeking from the Court relates to the question of whether it should register the transfer of your units, and the units of other unitholders who have signed powers of attorney, on the basis of the documentation it has received and the information provided to Perpetual. There may be additional steps that you could take to oppose or prevent registration of the unit transfer. If you do not wish to proceed with the transfer of your units to Direct Share Purchasing Corporation Pty Ltd, you should not deposit any cheques that may be forwarded to you by Direct Share Purchasing Corporation Pty Ltd if those cheques are for payment, or partial payment, of your units. ... " 33The attached questionnaire included questions as to whether the unitholders wished to proceed with the transfer of their units to DSPC, whether they remembered signing a power of attorney in favour of DSPC, whether they understood that they would be transferring all of their units to DSPC, whether they understood that they would be receiving an amount less than the value of their units, whether they had a physical or mental disability, and if so, of what kind, whether they received legal or financial advice, and whether they had any other comments to make. 34Perpetual sent out its circular letter and questionnaire to 52 of the unitholders in the MIF and to the six unitholders in the WMIF (two of whom held units jointly). It did not send out the circular to one unitholder for reasons only described as reasons of "sensitivity". Three of the unitholders who purportedly accepted DSPC's offer had previously withdrawn their units. Perpetual received replies from 40 unitholders in the MIF. Thirty-eight unitholders stated that they did not wish to proceed with the transfer of their units to DSPC. Two of the unitholders stated that they did wish to proceed. It received replies from or on behalf of four unitholders in the WMIF. Each of the four unitholders stated that he or she did not wish to proceed. Twelve unitholders in the MIF and two unitholders in the WMIF did not respond.

Unitholders' responses to questionnaire 35Many of the unitholders in question are elderly. One is over 90, seventeen are in their 80s, and seventeen are in their 70s. A common theme of the responses to Perpetual's circular and questionnaire is that the unitholder asserts that he or she thought the offer came from Perpetual. Some unitholders stated that they thought Perpetual and DSPC were the same company. Some simply stated that they were under the impression that they were dealing with Perpetual. A number of unitholders stated that they had been dealing with Perpetual to enquire about redeeming or selling their shares and for that reason, thought that they were dealing with Perpetual. Almost all stated that they did not understand that they would be receiving an amount less than the value of their units. A number stated that they suffered from an illness. The doctor of the 92 year-old unitholder stated that his patient had a number of serious medical problems and in the doctor's view would not have been in a fit state of mind to understand his actions. One unitholder simply commented, " We thought we were doing the wright [sic] thing. " A small number of unitholders stated that they took the form to their bank and were advised by counter staff at the bank to complete the form. 36On the other hand, one unitholder stated that he had received financial advice and understood that he would be receiving an amount less than the value of the units but accepted the offer because of what he considered to be the low and declining income from his units. He nonetheless did not wish to proceed with the transfer. 37Of the two persons who stated that they did wish to proceed with the transfer, one stated that she understood what she was signing and understood that she would receive an amount less than the value of the units and had obtained financial advice. The other said that whilst he appreciated Perpetual's efforts to delay or undo the offer process, the matter had caused him no end of stress and he wished to accept the offer from DSPC, regardless that he knew he might be being " ripped off ". He wished to put the matter behind him. 38In relation to the unitholders who responded and who have stated that they do not wish the transfers to proceed, a question arises as between them and DSPC as to whether each contract arising from the acceptance of DSPC's offer and the accompanying grant of a power of attorney is liable to be rescinded ab initio . That question may also arise in relation to the unitholders who have not responded to Perpetual's circular and questionnaire.

Withdrawal requests by accepting unitholders 39Since receiving the transfer forms and powers of attorney from DSPC, Perpetual received withdrawal requests from 25 unitholders in the MIF and three unitholders in the WMIF, being unitholders in respect of whom Perpetual had previously received transfer forms and powers of attorney. Perpetual has redeemed, either wholly or partly, the units for those unitholders who have submitted withdrawal requests. It has invested the redemption amount for each unitholder in another cash fund managed by it called PACCF. The unit price of the PACCF is fixed at one dollar per unit. The units are recorded in the names of the relevant unitholders. The Statement of Facts states that the units will remain invested in the PACCF by Perpetual pending the outcome of Perpetual's application for judicial advice.

Monthly Income Distribution 40The February 2011 income distribution is due to be made on or about 10 March 2011.

DSPC's contentions 41DSPC submits that the court has no power to give directions under s 63 because the advice sought does not concern the management or administration of the trust property or the interpretation of the trust instrument. 42Secondly, DSPC submits that Perpetual has already refused to register the transfers and that as a result there is no subject matter upon which the court could give opinion advice or direction, and that to do so would be to prejudge proceedings under s 1017F of the Corporations Act which are adversarial proceedings. 43Thirdly, DSPC submits that it is otherwise inappropriate for the court to give judicial advice because the unitholders cannot be properly treated as a group; the true issues are adversarial in nature and should be left to the individual unitholders to pursue. 44DSPC also submits that if the court is prepared to give judicial advice it should advise that there was no proper justification for Perpetual's refusing to act upon the relevant powers of attorney to register the transfers where no unitholder had applied to set aside the powers of attorney or to challenge the underlying contracts, and where no explanation has been provided as to when and how any controversy concerning those matters will be determined. Underlying the last submission is the proposition that by advising Perpetual that it would be justified in refusing to register the transfers the court would in effect be giving the unitholders the benefit of an interlocutory injunction without their having commenced proceedings, without their having established a prima facie case, and without their having given an undertaking as to damages. Counsel for DSPC submitted that a trustee in the position of Perpetual has no obligation to scrutinise the enforceability of apparently valid documents presented to it, that it is properly a matter for the individual unitholder to pursue such rights as he or she has in the ordinary way, and that registration of the transfers would not preclude the exercise of such rights.

Jurisdiction 45In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, the plurality (Gummow ACJ, Kirby, Hayne and Heydon JJ) said (at [58]) that only one jurisdictional bar to s 63 relief exists, namely the existence of a question respecting the management or administration of the trust property, or a question respecting the interpretation of the trust instrument. In that case both questions were engaged. There was no occasion to consider the width or narrowness of the jurisdictional requirement. However, it is clear from the High Court's discussion of the history of the adoption of s 63 and its similarity to the procedure adopted in England for the giving of judicial advice on an originating summons without the need for an administration order that the jurisdiction is not narrowly confined. The plurality judgment refers with evident approval to descriptions of the New South Wales and English provisions as being "functionally equivalent" (at [43] and [48]). The English provision (RSC 1883, o.55, r 3(e)-(g) allowed a determination of " any question arising in the administration of the estate or trust ") (r 3(g)). 46Section 63 is beneficial legislation for the protection of trustees and should not be narrowly construed. Subsection 63(8) assumes that questions as to who are the beneficiaries and what are their rights as between themselves will be questions in respect of which the court has jurisdiction to give an opinion, advice or direction under subs 63(1). It is true that questions as to the identity and rights of beneficiaries may arise because of doubt as to the meaning of the words used in the trust instrument. But that is not the only circumstance in which the court would have jurisdiction under s 63 to give advice and directions about such questions. All such questions would be in respect of the administration of trust property. 47The word "respecting" is wide. In State Government Insurance Office (Qld) v Rees (1979) 144 CLR 549, Mason J said (at 561) that: " The expression 'in respect of' denotes a relationship or connection between two things. In State Government Insurance Office (Queensland) v Crittenden (1966) 117 CLR 412 at 416; [1967] ALR 237 at 239, Taylor J quoted, with evident approval, the remarks of Mann CJ in Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111; [1941] ALR 105 at 106: 'The words "in respect of" are difficult of definition, but they have the widest possible meaning of any expression intended to convey some connection or relation between the two subject-matters to which the words refer.' The same view was taken later in Club Motor Insurance Agency Pty Ltd v Sargent (1969) 118 CLR 658; [1969] ALR 670. But, as with other words and expressions, the meaning to be ascribed to 'in respect of' depends very much on the context in which it is found. " 48The word "respecting" is of equal width. There is nothing in the context of s 63 to warrant limiting the width of the word. 49"Management" and "administration" of trust property are not synonyms, although there be an overlap in the subject matters covered. Administration of trust property extends beyond decisions as to how the trust funds will be invested and how the investments will be managed. Questions of for whose benefit a trustee is to administer trust property and to whom capital or income should be applied, are questions respecting the administration of trust property. 50There is a clear connection between advice to Perpetual as to whether to register the transfers and its administration of the trust property. If the transfers are registered, Perpetual will be obliged to administer the trust property in the interests, inter alia , of DSPC. It will be required to distribute trust income to DSPC. That is an aspect of administration of the trust property. Likewise, advice as to the distribution of trust income, the processing of requests for redemption and the distribution of trust property on the redemption of units, are connected with the administration of trust property. 51There is jurisdiction to give the advice sought.

Registration of transfers 52Subdivision 2A of Part 7.11 of the Corporations Act applies to interests in a registered scheme as if references to a company were references to the responsible entity of the scheme (s 1071A). The effect of s 1071B(2), when read with s 1071A, is that a responsible entity must only register a transfer of interests in a registered scheme if a proper instrument of transfer has been delivered to the responsible entity. A "proper instrument of transfer" must show details specified in the regulations in relation to the responsible entity concerned (s 1071B(3)). Regulation 7.11.22 of the Corporations Regulations prescribes the State or Territory in the jurisdiction in which the responsible entity is taken to be registered as a detail to be included in a transfer of unquoted securities. The units are unquoted securities within the meaning of that regulation. Accordingly, so far as the transfers of units referred to in the Statement of Facts are concerned, the question raised in paras 1(a) and (b) of the amended summons should be answered no and yes respectively, that is to say, Perpetual should be advised that it would not be justified in registering those transfers, and would be justified in refusing to register those transfers. 53However, the transfers can be corrected by DSPC's adding the prescribed detail and resubmitting the transfers for registration. A substantive question on which Perpetual seeks advice is whether it would then be justified in refusing to register transfers that complied with s 1071B. DSPC says that such advice should not be given because to do so would be to determine the rights of adversarial parties rather than determining what is best in the interests of the trust estate ( Marley v Mutual Security Merchant Bank [1991] 3 All ER 198 at 201). In the Macedonian Church case, Gummow ACJ, Kirby, Hayne and Heydon JJ said (at [59], [105], [106] and [107]): " [59] No implied limitations on discretionary factors. Thirdly, there are no express words in s 63, and no implications from the express words which are used in s 63, making some discretionary factors always more significant or controlling than others. In particular, s 63 does not provide that the adversarial nature of the proceedings about which the advice is sought, the tendency of the advice to foreclose an issue in those proceedings, or the fact that the trustees seeking the advice are being sued for breach of trust are of special significance. Hence the discretion is confined only by the subject-matter, scope and purpose of the legislation. ... ... [105] While accepting that it was not beyond power to give judicial advice that determined substantive rights in contested proceedings, the Court of Appeal appeared to think that it was so powerful a discretionary factor that generally this should not be done, and that this was decisive in the present case. The Attorney-General argued that the Privy Council in Marley's case was not establishing a dichotomy, as the Court of Appeal appears to have thought, between ascertaining the best interests of the trust on the one hand and not determining adversarial rights on the other, the former function being permissible and the latter not. Rather the Privy Council was concerned to make the point that the court's sole purpose in giving judicial advice is to determine what ought to be done in the best interests of the trust estate, and that while it was not the court's purpose to determine the rights of adversaries, that could be done as a necessary incident of determining what course ought to be followed in the best interests of the trust estate. [106] In the present context, that conclusion would appear to be supported by s 63(3)-(4) of the Act, which contemplate the use of evidence in some cases, by the notice procedures in s 63(4) and (8)-(10), and by the possibility of appeal contemplated by s 63(11) - all steps which could be material if there were a risk that the judicial advice given might affect the rights of adversaries. ... [107] Further, some forms of advice about adversarial cases may be in the best interests of the trust estate. An approach that treats an adversarial character as being always, or at least very often, fatal to the success of a judicial advice application, contradicts what the Privy Council saw as the sole function of the court. ... " 54Giving judicial advice on the question of whether the trustee would be justified in registering or refusing to register the transfers would not affect, let alone foreclose, any issue arising between DSPC and the unitholders who accepted DSPC's offer. DSPC's contention is that the advice would foreclose an issue that arises between it and Perpetual resulting from Perpetual's refusal of 20 January 2011 to register the transfers pending the determination of the application for judicial advice. 55However, as the High Court decided in the Macedonian Church case, the discretion of the court to consider applications brought under s 63 " should not be yoked to a general first principle that, where there is a contest or where there are adversaries, it is not appropriate to give advice. " (at [60]). The question is whether it is in the interests of the trust estate that advice be given. 56Section 1071F of the Corporations Act provides: " 1071F Remedy for refusal to register transfer or transmission (1) If a relevant authority in relation to a company: (a) refuses or fails to register; or (b) refuses or fails to give its consent or approval to the registration of; a transfer or transmission of securities of the company, the transferee or transmittee may apply to the Court for an order under this section. (2) If the Court is satisfied on the application that the refusal or failure was without just cause, the Court may: (a) order that the transfer or transmission be registered; or (b) make such other order as it thinks just and reasonable, including: (i) in the case of a transfer or transmission of shares-an order providing for the purchase of the shares by a specified member of the company or by the company; and (ii) in the case of a purchase by the company-an order providing for the reduction accordingly of the capital of the company. (3) In this section: relevant authority, in relation to a company, means: (a) a person who has, 2 or more persons who together have, or a body that has, authority to register a transfer or transmission of securities of the company; or (b) a person, 2 or more persons, or a body, whose consent or approval is required before a transfer or transmission of securities of the company is registered. " 57DSPC argued that if judicial advice were given that Perpetual was justified in refusing to register the transfers, that advice would "prejudge" proceedings taken under that section. 58So far as the facts stated on this application reveal, DSPC has not commenced proceedings under s 1071F. Were it to do so naming only Perpetual as a defendant, there would be force to the submission of counsel for DSPC that judicial advice that Perpetual was justified in refusing to register a transfer, or judicial advice that Perpetual was not justified in refusing to register a transfer, would be likely to be determinative of such a proceeding. If having received judicial advice that it was not justified in refusing to register a transfer Perpetual nonetheless refused to register such transfer, (a highly unlikely scenario), DSPC would be on strong ground in contending that a continued refusal or failure to register the transfer was without just cause. On the other hand, if Perpetual were given judicial advice that it was justified in refusing to register the transfer, unless that advice was tailored to deal with a case where DSPC sought a remedy under s 1071F, then Perpetual would have strong ground for saying that it had just cause for refusing to register the transfer, namely that it had judicial advice that it was justified in not doing so. 59However, this submission elides the true issue. The real controversy is not between DSPC and Perpetual, but between DSPC and the unitholders who have accepted DSPC's offer and who have not indicated to Perpetual that they wish the transfers to be registered. If DSPC were to institute proceedings to compel registration of the transfer of the units for which it received acceptances of its offers, the accepting unitholders would be proper and necessary parties to the proceedings. Perpetual could be expected to make a submitting appearance to proceedings so constituted. It is inappropriate to express any view as to whether such proceedings would be properly brought under s 1071F. It is sufficient to say that the giving of judicial advice to Perpetual would not affect the resolution of the issues between DSPC and those unitholders. 60Insofar as the giving of judicial advice would affect the resolution of proceedings that might be brought by DSPC against Perpetual alone, whilst that is a factor to be considered in deciding whether or not judicial advice should be given, it is not determinative of that question, for the reasons given by the High Court in the Macedonian Church case. 61I do not accept that no judicial advice should be given because Perpetual, by its letter of 20 January 2011, has already refused to register the transfers and thus enlivened s 1071F. Perpetual's "refusal" was not absolute, but was expressed to be made only until it received judicial advice. Plainly there remains a matter on which advice can be given. 62It has often been said that a trustee in genuine doubt as to what course it is proper to take in the administration of the trust is entitled to protect its position by taking judicial advice (e.g. Marley v Mutual Security Merchant Bank and Trust Co Ltd at 201; Re Atkinson (dec'd) [1971] VR 612 at 615). It is in the interests of the trust estate that in proper cases the trustee should have such protection. No interest of the trust estate (considering the position of the funds as a whole) would be adversely affected by the court's advising Perpetual whether it would be justified in taking one or other of the courses proposed. In my view, Perpetual is entitled to the protection that judicial advice will afford it if it has made full disclosure of material facts.

What advice should be given? 63Perpetual is under no statutory obligation to register a transfer of the units, on DSPC submitting transfers that comply with s 1071B. Section 1071E required Perpetual to give notice of its refusal to register a transfer of the units. Nothing in subdivision 2A of Part 7.11 imposes an obligation on Perpetual to register a transfer. A party seeking a transfer can apply under s 1071F for an order requiring a company (or responsible entity) to register a transfer, and a court may order registration of a transfer if it is satisfied that a refusal or failure to register the transfer was without just cause. I have already expressed the view that the real controversy is between DSPC and the unitholders with whom it contracted. Be that as it may, the potential remedy under s 1071F does not mean that Perpetual has a statutory obligation to register a transfer. 64Under the constitutions of each fund a unitholder has a right to transfer his or her units. Where it is clear to Perpetual that a unitholder wishes the transfer to be registered, then Perpetual should act accordingly by registering the transfer. But the circumstances in which DSPC has procured the grant of powers of attorney to it, that is, by obtaining acceptances of its offers to acquire units at a substantial discount to DSPC's estimate of fair value, do not indicate that the unitholders wish the transfers to be registered. The overwhelming majority of unitholders who have responded to Perpetual's inquiries have indicated that that is not their wish. 65It may be held that the accepting unitholders are bound by the documents they signed. On the other hand, in many cases, there would be powerful arguments to the contrary. In cases to which the Contracts Review Act 1980 applies, in many instances there would be a prima facie case that the contracts were unjust in the circumstances in which they were entered into, and should be declared void. The prima facie case would arise from the disparity between the price offered and the value of the units, particularly if coupled with an inability of unitholders properly to comprehend the nature of the documents they were invited to sign. 66In cases to which that Act does not apply, there would be a serious question to be tried as to whether or not DSPC took unconscientious advantage of positions of special disadvantage under which offerees who accepted DSPC's offer suffered, such that contracts entered into were liable to be rescinded ab initio in equity. Whilst inadequacy of consideration is not a sufficient ground for avoiding a business transaction on the ground of unconscionability ( Wilton v Farnworth [1948] HCA 20; (1948) 76 CLR 646), it is arguable that what Perpetual has labelled as "opportunistic" offers were designed to exploit persons who suffered from an inability properly to assess the merits of DSPC's offer, even though the particular circumstances of individuals were presumably unknown to DSPC. 67The gross disparity between the offered price and DSPC's own stated estimate of fair value of the units indicates the potential for such claims. It is true that it appears that contracts have been entered into. It does not appear that any unitholder is likely to be able to maintain a claim or defence of non est factum . However, if a contract is liable to be avoided in equity, or pursuant to a statutory power, the rescission would operate ab initio . If the contracts are liable to be rescinded, the grant of the powers of attorney is also liable to be rescinded as the grant of the powers of attorney are part of the terms of the contracts for sale of the units. That would be so whether or not there are independent grounds for setting aside the powers of attorney, e.g. pursuant to s 36 of the Powers of Attorney Act 2003 (NSW). In the circumstances in which DSPC has procured acceptances, Perpetual would be justified in acting on the basis that there is no presumption that the contracts are binding. 68Counsel for DSPC submitted that a transferee of a share has a prima facie right against the company to be registered, subject to any restrictions in the company constitution and that a similar principle should apply to securities in a registered scheme, such as units in the MIF and the WMIF. Counsel cited Wood v W & G Dean Pty Ltd [1929] HCA 44; (1929) 43 CLR 77. That case concerned the position of an assignee in insolvency of a shareholder. No question arose as to the validity of the assignment. The position is otherwise in the present case. 69Counsel for Perpetual submitted that an appropriate course may be for advice to be given to Perpetual that it would be justified in not registering the transfers for a particular period that would allow unitholders further time to commence proceedings to restrain a registration of the transfers. I do not see why it should be incumbent upon the unitholders to commence such proceedings. It is DSPC who wishes to register the transfers. It has no contractual or statutory right to compel Perpetual to register the transfers. It would have an equitable right to register the transfers if, but only if, the contracts it has entered into are enforceable. That is a question that cannot be decided on this application. Perpetual is not required to assume any answer to that question, except in the case of unitholders who confirm that they wish to proceed with the transfer of the units. 70The position of Perpetual in relation to those unitholders who did not respond to its circular and questionnaire requires separate consideration. It cannot be concluded from the absence of response that those unitholders wish their transfers to be registered. The absence of response might be due to any number of reasons, including that the unitholder is absent from his or her usual address and has not received the correspondence, or is unable or unwilling to deal with the questions Perpetual raised. Because Perpetual would be justified in not assuming that the contracts entered into as a result of the acceptances of DSPC's offer are binding, it would be justified in not registering the transfers of those unitholders who have not responded to its circular and questionnaire, unless and until a unitholder confirms that he or she wishes the transfer to be registered. 71It is not appropriate to treat this application as if it were an application by affected unitholders for an interlocutory injunction to restrain registration of the transfers, that should be dismissed because it is not in fact brought by the unitholders, who have led no evidence and proffered no undertaking as to damages. That is not the application. The argument assumes that DSPC is prima facie entitled to have the transfers registered. Perpetual is not required to act on such a presumption. No doubt, if Perpetual were advised that it should register the transfer, the affected unitholders who opposed that course would have to seek an interlocutory injunction and offer an undertaking as to damages. But the present question is anterior to that. The argument assumes what it sets out to prove, namely that Perpetual should register the transfers. 72I accept the submission of counsel for DSPC that a trustee in the position of Perpetual is not obliged to scrutinise the enforceability of documents apparently valid on their face. Had Perpetual registered the transfers, I doubt that the accepting unitholders could have criticised it. However, it does not follow, as counsel for DSPC submitted, that it is therefore a matter for individual unitholders to pursue rights against DSPC to restrain it from seeking registration of the transfers, and to restrain Perpetual from registering the transfers. That course would be open to unitholders. It is equally open to DSPC to bring proceedings against the unitholders, joining Perpetual, to compel registration of the transfers. As it is DSPC that is seeking to enforce the contracts, there is no reason that it should not be the party to commence such proceedings. 73Accordingly, if DSPC delivers to Perpetual transfers that comply with s 1071B of the Corporations Act , except in respect of transfers where the transferring unitholder has confirmed to Perpetual that he or she wishes Perpetual to register the transfer, Perpetual would be justified in not registering transfers of units in the MIF and the WMIF to DSPC pursuant to transfer documentation executed by DSPC under powers of attorney granted by currently registered unitholders, until so ordered by a court of competent jurisdiction.

Distribution of income 74Paragraph 1(c) of the amended summons seeks judicial advice as to whether Perpetual would be justified in distributing each Relevant Unitholder's proportionate share of income to that unitholder, or to DSPC. 75Perpetual's obligation under the constitution of both the MIF and the WMIF is to distribute income to the registered unitholder. DSPC is not entitled under the constitution of either fund to receive such income until the transfers to it have been registered. The fact that it may have a contractual entitlement against the unitholders to such income, (and will have such an entitlement if the contracts are enforceable), does not affect the obligation of Perpetual to distribute income in accordance with the terms of the constitutions of each fund. If the income is distributed to unitholders, then, in respect of those contracts between unitholders and DSPC that are binding, the unitholders will be required to account to DSPC for the income paid to them. That is a question between DSPC and the Relevant Unitholders. It does not affect the obligation of Perpetual. 76Accordingly I advise that Perpetual would be justified in distributing a Relevant Unitholder's proportionate share of income to each Relevant Unitholder if that unitholder is registered as a unitholder at the relevant date for determining a unitholder's entitlement to the distribution of income.

Redemptions 77Question 1(d) of the amended summons concerns the position of unitholders who sought to redeem their units, having previously accepted DSPC's offer to acquire their units. To the extent redemptions have already been effected, it would not be appropriate to answer the question. Perpetual has wholly or partially redeemed the units for which redemption requests were made. 78There are two respects in which Perpetual is entitled to receive judicial advice. One is as to whether it would be justified in paying the redemption amounts that have been applied in purchasing units in the PACCF fund in the name of the Relevant Unitholders to those unitholders. The other is as to whether it would be justified in continuing to process withdrawal requests where redemption has been only partially effected. 79As with the distribution of income, these questions depend upon the terms of the constitution of the MIF and the WMIF. The right to redeem if the fund is liquid, and the right to the proceeds of a whole or partial redemption, are vested in the registered unitholder. The redemption amounts invested in the PACCF fund should be paid to the Relevant Unitholders in whose name the units were registered. For so long as those unitholders remain the registered unitholders, Perpetual would be justified in continuing to process a withdrawal request and in paying amounts withdrawn to those unitholders. 80If the contracts between DSPC and those unitholders are binding on those unitholders, they will be required to account to DSPC for the amounts withdrawn. However, that does not affect Perpetual's obligations under the constitution of each fund.

Indemnity for the costs of the application 81This application is properly brought. Perpetual acted properly in gathering information from unitholders relevant to the advice sought. Perpetual is entitled to be paid its costs and expenses in connection with the application out of the assets of both funds on an indemnity basis.

Advice 82For these reasons I advise the plaintiff as follows: a) the plaintiff would be justified in refusing to register the forms of transfer of units in Perpetual's Monthly Income Fund (MIF) and Perpetual's Wholesale Monthly Income Fund (WMIF) to Direct Share Purchasing Corporation Pty Limited (DSPC) pursuant to the transfer documentation executed by DSPC under powers of attorney granted by currently registered unitholders (Relevant Unitholders) that is contained in tabs 17-22 of the Bundle accompanying the Statement of Facts, exhibit A; b) if, but only if, the plaintiff receives transfers of units in the MIF or the WMIF to DSPC pursuant to transfer documentation executed by DSPC under powers of attorney granted by Relevant Unitholders that comply with s 1071B of the Corporations Act 2001, it would be justified in registering such transfers in respect of those unitholders who have indicated to the plaintiff that they wish the transfers to be registered; c) the plaintiff would be justified in refusing to register transfers of units in the MIF and the WMIF to DSPC pursuant to such transfer documentation in respect of those unitholders who: i) have not indicated to the plaintiff whether or not they wish the transfers to be registered; or ii) have indicated to the plaintiff that they do not wish the transfers to be registered, until ordered to do so by a court of competent jurisdiction. d) the plaintiff would be justified in distributing each Relevant Unitholder's proportionate share of income to such of the Relevant Unitholder or DSPC as is registered as the unitholder at the time when, according to the constitution of the MIF or the WMIF, a unitholder's distribution of income is to be determined; e) the plaintiff would be justified in paying the redemption amounts that have been realised in respect of requests for redemption received from Relevant Unitholders after receipt by the plaintiff of transfer documentation executed by DSPC under powers of attorney relating to the same units, to the Relevant Unitholders who made such requests and, until otherwise ordered by a court of competent jurisdiction, would be justified in continuing to process withdrawal requests made by such unitholders where requests have been only partially redeemed, for so long as those unitholders remain registered unitholders; and f) the plaintiff would be justified in paying its costs and expenses incurred in connection with these proceedings out of the assets of the MIF and the WMIF on the indemnity basis. 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: 10 March 2011

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