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

Background 3The background to the judicial advice application is set out in his Honour's reasons in Re Challenger . Briefly, DSPC had made offers to unitholders in the Fund to acquire their units at a price below the unit price. It then submitted to Challenger in January 2011 some 106 (or perhaps 108) signed transfers in respect of various of the units in the Fund. Challenger did not register those transfers. It had received correspondence or enquiries from a number of unitholders, or persons acting on their behalf, which led Challenger to seek judicial advice as to whether Challenger would be justified in registering, or refusing to register, the transfer forms (executed by DSPC under powers of attorney) unless unitholders indicated to Challenger that they wished the transfer to be registered. 4In the proceedings before White J, various arguments were advanced by DSPC as to why the directions sought by Challenger should not be given, which were along the same lines as those that had been advanced by DPSC in Re Perpetual application. White J rejected those arguments for the reasons earlier set out in Re Perpetual. 5As his Honour had in similar circumstances in Re Perpetual , White J held (at [44]) in Re Challenger that Challenger was not obliged to assume that the contracts between DSPC and the accepting unitholders were enforceable. His Honour noted both the factual differences between and the factual similarities in the respective proceedings; and that the evidence as to the position of the accepting unitholders was not as extensive in the Re Challenger proceedings as had been adduced in Re Perpetual. His Honour nevertheless accepted that a significant number of unitholders had informed Challenger that they did not wish the transfers to be registered or had acted inconsistently with wishing the transfers to be registered and said that "some unitholders arguably occupy a position of special disadvantage by reason of age, health or capacity for understanding the materials provided" ([47]). 6As in Re Perpetual , his Honour considered that, whilst Challenger could not be criticised if it registered the transfers, "it would be justified in refusing to do so, thus leaving it to DSPC to enforce its contracts" (at [48]). Relevantly, his Honour went on to say (at [48]): ... The position would be different if unitholders inform Challenger that they wish it to register the transfers. If Challenger refuses to register the transfers, it should inform unitholders of its position so that those unitholders who wish to proceed with the contracts with DSPC (and thereby receive the offered price and avoid the threat of litigation) can do so. 7The advice given by his Honour, set out at [50 (a)] of his Honour's reasons, was that "subject to (b)" Challenger would be justified in refusing to register the forms of transfer of units in the Fund pursuant to the transfer documentation executed by DSPC under powers of attorney granted by currently registered unitholders (defined as the Relevant Unitholders) provided that Challenger write to the Relevant Unitholders "to ascertain whether it was their wish that the forms of transfer be registered". His Honour further advised that: (b) if unitholders indicate to [Challenger] that they wish the transfers to be registered (otherwise than by having signed an acceptance form in the form contained in ... the Statement of Facts) then [Challenger] would be justified in registering such transfers in respect of those unitholders. (c) [Challenger] would be justified in refusing to register transfers of units in [the Fund] to DSPC pursuant to such transfer documentation in respect of those unitholders who: (i) have not indicated to [Challenger] whether or not they wish the transfers to be registered (other than by having signed an acceptance form ...); or (ii) have indicated to [Challenger] that they do not wish the transfers to be registered , (my emphasis) until ordered to do so by a court of competent jurisdiction. 8What happened after his Honour's advice was that Challenger, as contemplated in paragraph (a) of the advice, wrote to the relevant unitholders on 6 April 2011 to ascertain whether they wished the transfers to be registered. Challenger included a form to be completed by unitholders, with clearly marked boxes to be ticked in order to indicate either "yes" that the unitholder wished the transfer to be registered or "no" it did not. In those letters, Challenger set a time by which it requested a response (31 May 2011). 9Therein lies the genesis of the present application by DSPC. While DSPC does not suggest that it was unreasonable for Challenger to request a response from unitholders within a particular time (nor does it suggest that nearly two months for this purpose was an unreasonable time frame), DSPC maintains that Challenger is not justified in subsequently refusing to recognise any indication received from unitholders after 31 May 2011 that they wish their units to be transferred (whether that be due to a change of mind or because they simply did not respond until after the expiry of the time period set for a response). 10Meanwhile, DSPC also corresponded with unitholders in the period from 6 April to 31 May 2011, putting them on notice (in what might fairly be described as increasingly forthright terms), that if they did not respond affirmatively to Challenger's request for an indication of their wishes, then they faced the risk of legal proceedings by DSPC seeking to enforce the contracts. (In that regard, while DSPC was clearly seeking to persuade unitholders to provide an affirmative response to Challenger, it seems to me not improper for DSPC to wish unitholders to be under no misapprehension as to its intentions in relation to or the possibility of the commencement of legal proceedings to enforce the rights DSPC claims it has under the contracts concluded by acceptance of its initial offers.) 11There was also correspondence between the respective solicitors in which the opposing contentions were put as to whether Challenger would be entitled to refuse to register post-31 May acceptances and as to whether DSPC was acting improperly in continuing to correspond with unitholders. Issue was also taken as to whether the transfer forms could or should be retained by Challenger (the upshot of this being that Challenger returned to DSPC the executed forms that it had refused to register and indicated that it regarded the position in relation to those transfers as being at an end unless and until a court order was made in relation to the contracts in question). 12By Notice of Motion dated 23 June 2011, DSPC sought clarification in respect of White J's 29 March 2011 advice in the following respect: whether Challenger would be justified in refusing to register transfers of units in CHMF (the Fund) to DSPC in respect of unitholders who fall within paragraph 1(c) of the advice if, after 31 May 2011, the unitholders "indicate to the plaintiff that they wish the transfers to be registered (otherwise than by having signed an acceptance form in the form contained in tab 3 of exhibit SOF-1 of the Statement of Facts)" within the meaning of paragraph 1(b) of the advice. 13Put in a practical context, there were 108 unitholders to whom Challenger had written on 6 May 2011 in accordance with White J's advice, in order to ascertain their wishes. Of those, in the period up to 31 May 2011, 34 responded that they did want to transfer their units (and all those transfers have been effected by Challenger); 57 responded that they did not wish to do so and there was no response at all from 17. (In relation to the 34, this number includes six who gave conflicting instructions within the period up to 31 May 2011 but whom Challenger has treated as having given an indication for the purposes of paragraph 50(b) of his Honour's advice). The present application therefore relates in effect to the position of the remaining 74 unitholders (there being no suggestion that there are other unitholders from whom acceptance or transfer forms had not yet been received, unlike the position when I came to consider the application for clarification of the judicial advice in Re Perpetual ). 14The manner in which the unitholders were requested to indicate their wish for the transfer of their units to be (or not to be) registered, was by ticking the "Yes" or "No" box on the form that Challenger had sent to them, and then signing and returning the form to Challenger. No certification of that expression of assent was provided, nor does it seem Challenger required any such certification at that stage. 15DSPC wishes to continue to seek to persuade unitholders to proceed with the contracts constituted by the original acceptance of its offer. DSPC maintains that there is no textual justification for reading White J's advice as precluding recognition by Challenger of a "change of mind" by a unitholder. It is submitted that the introductory words of (a) (namely that it be "subject to (b)") indicate that Challenger is justified in not registering transfers only until it receives an indication from a unitholder that it wishes the transfer to be registered (so as to bring the position of that unitholder within paragraph (b)) of his Honour's advice, such that if Challenger receives conflicting responses from a unitholder then it is the positive response that takes precedence. (DSPC further submits that there is nothing to indicate that a unitholder that has not responded by 31 May 2011 has formed any view, one way or the other, and hence a late positive indication would not necessarily be a change of mind" in any event.) 16Counsel for DSPC (Mr Kerr) submits that the critical factual findings and reasoning of White J include that a unitholder who wishes to transfer his or her units to DSPC is entitled to do so (at [44]) and that, although there are factors which suggest that unitholders may be able to defend proceedings brought by DSPC to enforce contracts with unitholders, the judicial advice proceedings are not the occasion for considering the strength of those defences (at [48]). 17Mr Kerr submits that a refusal to register transfers to unitholders who change their mind after (or who simply do not respond until) 31 May 2011 would be to expose those unitholders to the prospect of proceedings by DSPC against them under s 1071F of the Corporations Act 2001 (Cth). 18In the time between the filing of DSPC's Notice of Motion and the hearing before me on 7 July 2011 of its application for clarification of White J's advice (having regard to the 31 May 2011 'cut off' that had been imposed by Challenger), I had cause to consider (in the context of the judicial advice that had earlier been given to Perpetual and on which reasoning White J's Challenger advice was also based) what was meant by an 'indication' by unitholders that they wished (or did not wish) transfers to be registered for the purposes of the practical operation of the advice contained in paragraph [82(c)] of his Honour's judgment in Re Perpetual . 19In that case ( In the matter of Perpetual Investment Management Limited as responsible entity for Perpetual's Monthly Income Fund and Perpetual's Wholesale Monthly Income Fund [2011] NSWSC 592, to which I will refer as Re Perpetual (No 2) ), there had been further transfers of units since his Honour's judgment and directions had been submitted to Perpetual relating both to transfers of units which were the subject of non-complying transfers lodged prior to the judicial advice application and to transfers of units which had not before been the subject of transfers lodged with Perpetual. The directions and transfers in question had been provided to Perpetual directly by DSPC (and this was a matter that had caused Perpetual concern when considering whether it should accept those directions as an indication of unitholder wishes). Here, as I understand it, the completed unitholder forms were sent direct by unitholders to Challenger, in which case the same concern would not necessarily have arisen. Whether or not that is the case, however, it seems to me that the relevant issue is the same. 20It was (and remains) my view that the "indication" or "confirmation" of unitholder wishes to which his Honour had referred in his reasons (and which must have been what was contemplated in the orders his Honour had made) in Re Perpetual was an indication that made it clear to the trustee (acting reasonably) what the unitholders' wishes were (and thus that gave rise to a situation where the trustee would no longer be justified in not assuming that there was a binding contract). I considered that the trustee would have a duty not to form an opinion as to that issue capriciously or unreasonably (see para [68] Re Perpetual (No 2) .) 21I was further of the view (as noted at [71] in Re Perpetual (No 2) ) that the expression "indicated to the plaintiff that they wish the transfers to be registered" must mean that the unitholders had conveyed that wish "in such a fashion and in such circumstances" that it was clear to the trustee (acting reasonably), or that the trustee (again acting reasonably), was satisfied that unitholders wished their transfers to be registered. At [72] of that judgment, I said (and I think this is equally apposite in the current case): [The trustee] might potentially be satisfied of this in a number of ways. ... The question is whether the circumstances in which a direction is received by [the trustee] make it sufficiently clear to [the trustee] (acting reasonably) that the unitholder in question did intend to transfer its units (and had formed that intention in circumstances which it could be assumed did not give rise to a potential claim for the contract so entered into to be avoided). 22I noted that, to some extent, the formulation of the questions posed by way of clarification of the judicial orders in Re Perpetual might be said to beg the question as to what would reasonably satisfy the trustee of unitholders' wishes in any given future situation and expressed the view that it would be in the interests of unitholders as a whole for consideration to be given as to how the trustee might be able to satisfy itself that it was acting in accordance with his Honour's judgment without the need for ongoing costs in clarifying the advice by reference to future permutations of the facts relating to particular unitholders or classes of unitholders. I note that this was said in the context of a concern by me (bearing in mind that there were some 12,000 unitholders in the Perpetual Funds and it was anticipated that further transfers would be received from time to time) that there might otherwise be a succession of applications in order to clarify doubts as to whether the trustee might properly act (or refuse to act) on unitholder communications in relation to the transfers), I said at [83] Re Perpetual (No 2) : At the very least, however, I think it is incumbent on [the trustee] to advise DSPC what form of direction it would regard as conveying a clear indication of unitholders' wishes so that in future the scope for uncertainty in particular unitholder situations will be reduced noting that I considered the question posed by the judicial advice already given to be what would make it clear to the trustee, acting reasonably, that a unitholder wished to transfer its units to DSPC. 23I indicated, solely by way of example and without intending to be prescriptive, circumstances in which I thought the trustee might reasonably regard a satisfactory indication of the unitholder's wishes as having been given to it. 24Mr Kerr relied upon the reasoning in [68] - [72] in Re Perpetual (No 2) as consistent with the proposition that the relevant indication from unitholders is not confined to a single communication (at least, I would interpose, where that communication was in the negative - since Mr Kerr also submits that once a positive indication is received the trustee is bound to register the transfer since it would no longer be justified, in accordance with the judicial advice, in refusing to register the transfer). 25Challenger (having considered the matters raised in Re Perpetual (No 2) ) indicated, when the matter came before me on 7 July 2011, that it would be seeking to bring its own application to clarify his Honour's judicial advice and had prepared a Supplementary Statement of Facts in that regard. 26Mr Dick SC, appearing for Challenger, informed me that Challenger did not wish to force unitholders into litigation with DSPC and that it was no longer maintaining the position it had taken in relation to what I will refer (without intending to be pejorative) as the 31 May 2011 cut-off date. Rather, its position was that if a unitholder now indicated a wish for a transfer of units to DSPC to be registered, and that statement of intention were to be accompanied by some evidence or advice from an independent lawyer, financial adviser or accountant, then Challenger would act on that communicated wish (and thus the clarification sought by DSPC of his Honour's advice was not necessary). Mr Dick nevertheless confirmed that Challenger's primary position was that, having regard to White J's advice, it would be justified (where there had been a negative indication or no response received from a unitholder by 31 May 2011) in waiting for a Court of competent jurisdiction to order it to register the transfer. 27In those circumstances, Challenger wished to obtain judicial advice (as set out in para 38 of its Supplementary Statement of Facts) by way of clarification of the advice given to it on 29 March 2011 in the following respect: (a) whether the plaintiff would be justified in refusing to register transfers of units in the CHMF to DSPC in respect of unitholders who fall within paragraph 1(c) of the advice until ordered to do so by a court of competent jurisdiction, unless such a unitholder both: (i) indicates to the plaintiff that they wish the transfers to registered by an instrument made on or after the date of this order; and (ii) provides written confirmation from a legal practitioner, financial adviser or accountant who is independent of DSPC that the legal practitioner, financial adviser or accountant acts for and has advised the unitholder in relation to the transfer of units and that the unitholder wishes the transfers to be registered. 28In view of Challenger's position that it does not now press the 31 May 2011 date, it was not necessary to consider DSPC's application for judicial advice (although that does not suggest that such an application was not reasonably brought at the time). As Mr Kerr indicated that DSPC was in a position to address instanter the matters raised by Challenger in its Supplementary Statement of Facts, I then proceeded to hear submissions in relation that application. 29At the outset, I note that (unlike the position which was before me in Re Perpetual (No 2) ) I consider Challenger's present application not strictly to be a question of clarification of his Honour's orders. Those orders dealt with the question whether Challenger would be justified in refusing to register transfers that it had received from the 100 or so unitholders in question. What is now being sought is advice as to whether Challenger is justified in refusing to register transfers in respect of which it receives a positive indication from unitholders unless there is also a certificate from an independent professional. Mr Dick informed me that, in arriving at that formulation, regard had been had to what I had said at [83] in Re Perpetual (No 2) , where I had suggested that the trustee might regard further directions received from unitholders as satisfactory indication of their wishes if they were accompanied by some form of independent certification or (and I accept that this may have been inelegantly phrased) independent witnessing of the unitholder's consent. 30As I understand it, the reason that independent confirmation is now seen by Challenger to be warranted in relation to the remaining 74 unitholders (who have either given a "no" response or not responded by 31 May 2011), notwithstanding that for the 34 positive responses received prior to 31 May 2011, transfers were registered without any such confirmation (even including the 6 where there were contradictory responses), is that any acceptances after 31 May 2011 must necessarily follow the receipt by unitholders of a series of communications in which DSPC has adverted to the possibility/likelihood of litigation. 31I accept that this gives rise to the possibility that unitholders (or at least any that are suffering from disadvantages of the kind that White J considered at least some of the unitholders may have) who sign the Yes/No Confirmation forms for the first time after 31 May 2011 or who amend instructions earlier given, under the threat of litigation, may have done so without an informed appreciation of their rights and obligations or under the (possibly mistaken) belief that they had no choice but to do so. 32Therefore, I accept that the fact that Challenger accepted the 34 positive responses (without certification) does not mean that it is acting unreasonably in now asking for some form of independent confirmation to assure itself as to the unitholders' wishes. 33I accept that this is an appropriate case for judicial advice to be given, having regard to the authorities referred to in Re Perpetual by White J. The proper purpose for seeking judicial advice includes relief aimed at resolving legitimate doubts genuinely held by a trustee as to the proper course of action and protecting the trust and those entitled to it (see Palmer J in Application of Macedonian Orthodox Community Church St Petka Inc (No 2) [2005] NSWSC 558 at [23] and the High Court's comments in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66). 34That said, the formulation of the judicial advice as sought by Challenger in paragraph 38 of its Supplementary Statement of Facts seems to me to be unduly prescriptive. I am by no means satisfied that independent certification (if I may in a shorthand way describe the suggested procedure) is the only way that the trustee, acting reasonably, could be satisfied that it had received a sufficient indication of the unitholder's wishes for the transfer to be registered (nor was that what I had intended when I made the observation in my judgment in Perpetual on which I accept the proposed order put forward by Challenger is based). 35White J's advice proceeded on the basis of an indication that made clear to the trustee what the unitholder's wishes were. How such an indication might be conveyed or what it might comprise may differ from case to case (and it may well be that in some cases, the expense of independent certification would not be necessary - say, for example, (and this is only intended as an example) if a family minister or priest, or a doctor, were able to confirm that the unitholder was not suffering from an apparent disability and appeared to have understood the effect of the direction, then the trustee might be prepared to accept that as sufficient). It is impossible (and not in my view appropriate) to provide guidelines for all possible factual scenarios that might arise. Different considerations may apply where the trustee is on notice of a disability or of circumstances that give rise to enquiry (such as where inconsistent communications have been received or where enquiries of the kind referred to by White J in his judicial advice have been received following the giving of a direction or signing of a transfer) and instances where it is not. 36Accordingly, I indicated at the conclusion of the hearing that, for the reasons that I would shortly publish (and which I am now publishing) the judicial advice I considered appropriate on this question was along the lines that Challenger would be justified in regarding the following as a sufficient indication of a unitholder's wish to register the transfer of that unitholder's units: a written direction from the unitholder for the transfer of the unitholder's units, accompanied by written confirmation from a legal practitioner, financial adviser or accountant who is independent of DSPC that the legal practitioner, financial adviser or accountant acts for and has advised the unitholder in relation to the transfer of units, that the unitholder has confirmed that the unitholder wishes the transfer to be registered, and that the unitholder appeared to understand the nature and effect of such a direction. 37I formulated some draft orders to encompass my thinking on that issue and gave the parties an opportunity to comment on the wording of those orders (in order to pre-empt any uncertainty arising as to their operation or effect, which might lead to further costs). 38The only suggestion for amendment to the substantive advice was Mr Kerr's submission that the order conveying the advice encompass the qualification that I had accepted during the course of argument, namely, that the method by which Challenger might be satisfied as to unitholders' wishes was not the only means by which it might, acting reasonably, be so satisfied. Challenger did not see the need for such amendment, considering it to be implicit in use of the words "sufficient indication". While I consider that the provision of advice in the positive ("would be justified ....as sufficient indication"), rather than the negative ("would not be justified unless...") leaves open the scenario that the trustee might otherwise be so satisfied than simply by means of the independent certification procedure, I think that in circumstances where there has been doubt as between the parties to the present application as to what was required in order for the trustee to be justified in continuing to refuse to register transfers, I should add a notation to the advice in order that it be clear that the advice is not in terms prescriptive or exhaustive of the situations in which the trustee would be so justified lest there be any doubt as to that aspect of the advice. 39As to costs, Challenger seeks its costs on an indemnity basis out of the Fund. 40At [62] of his Honour's reasons for judgment on the initial judicial advice application in Re Perpetual , White J noted that where a trustee is in genuine doubt as to what course it is proper to take in the administration of the trust, it is entitled to protect its position by taking judicial advice (referring to Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198 at [201] ; Re Atkinson (dec'd) [1971] VR 612 at [615]) and that it is in the interests of the trust estate that in proper cases the trustee should have such protection. 41Mr Dick submits that Challenger has acted reasonably, having considered the issues raised by DSPC and in Re Perpetual (No 2) (which was not handed down until after DSPC's application and to which proceeding Challenger was not a party), in now seeking judicial advice in an attempt to ascertain at what point it does not have to enquire into the circumstances of consent. As noted above, it seems to me that the question is not so much whether the trustee has an obligation to enquire further into the circumstances of consent in particular cases. In that regard, White J has already indicated his opinion that the trustee could not have been criticised for registering a transfer it had received in the circumstances of this case. The question is whether Challenger would be justified in refusing to register a particular transfer or transfers having regard to the circumstances set out in his Honour's judgment. That turned on whether Challenger would be justified in not assuming (on the facts before it) that there was any enforceable contract. It seems to me the question for the trustee going forward is whether, acting reasonably, what it receives from a unitholder removes the doubt or concern it may previously have had as to the circumstances or enforceability of the contract. 42That said, I accept that Challenger was acting reasonably in seeking (once the application had been brought by DSPC) to resolve its doubts as to whether the independent certification procedure would be sufficient (or would be the only sufficient) means of reasonably satisfying itself as to the unitholders' wishes. I therefore consider it appropriate for the costs order to be as sought by Challenger. 43As for DSPC, Mr Kerr submits that Challenger should pay its costs of the application having regard to the stance Challenger had adopted in relation to the 31 May 2011 deadline and the fact that the trustee had declined to respond to the invitation by DSPC's solicitors to indicate what it would regard as necessary for it to be satisfied there was fully and informed consent. The position of the trustee up to the hearing before me seems to have been that the proper construction of White J's orders was that, once a negative response (or if no response) was received by 31 May 2011, then it was necessary for there to be a court order to justify registration of the transfer. (Although it does not fall for me to consider that argument, I must confess that I do not read White J's advice as having that effect, not least because his Honour made no reference to any time by which Challenger should be so satisfied and because it would seem to be open to a shareholder at any future time to determine that it wished to proceed with the transfer of its units to DSPC even if had it not responded to Challenger's request for confirmation.) 44I raised, in the course of argument on this point, the relevance of the fact that DSPC has, in substance, obtained the relief it sought when it commenced the application for clarification of his Honour's advice, albeit by reason of the change in Challenger's position rather than a determination by the Court. Mr Dick submits that, in truth, what precipitated the resolution of DSPC's application were the observations made in Re Perpetual (No 2) and notes that Challenger had regarded the DSPC process of writing to unitholders after 31 May 2011 (seeking to persuade them to change their minds) as being inconsistent with his Honour's orders. 45I do not criticise the reasoning that has led Challenger to alter its position in relation to the 31 May 2011 cut-off date and, as noted above, DSPC does not suggest that it was unreasonable for such a date to be set by Challenger for unitholder responses. Nevertheless, I consider that DSPC has in essence achieved the outcome it sought on its motion by reason of the acceptance by Challenger that it will deal with (and if satisfied register transfers the subject of) indications or directions received from unitholders after the 31 May 2011 date and there is nothing to suggest that this would have been achieved but for DSPC raising the matter by way of its motion. 46In the circumstances, I consider that DSPC should have its costs of the motion. Challenger has submitted that these should be out of the Fund having regard to the principles to which I referred in my costs judgment in Re Perpetual Investment Management Ltd as responsible entity for Perpetual's Monthly Income Fund and Perpetual's Wholesale Monthly Income Fund [2011] NSWSC 615 . I consider that to be appropriate. (As a formal matter, I note that DSPC's motion was not pressed on the hearing before me and should be regarded as now withdrawn.) 47Accordingly, on the application made by Challenger in Court on 7 July 2011, I provide judicial advice pursuant to s 63 of the Trustee Act 1925 (NSW) as follows:

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Judgment (3 paragraphs)

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Cases Cited (7)