Plaintiff v Defendant

CORPORATIONS - Winding up - Whether plaintiff a contingent creditor - Whether leave to apply ought to be granted to windup on insolvency ground - Whether plaintiff established prima facie case to wind up on just and equitable ground - ss459P(2) and 462 of Corporations Act 2001.

PRACTICE AND PROCEDURE - Application under r 2.14(3) of the Supreme Court (Corporations) Rules 2003 for leave to make submissions - Whether submissions limited to issues between the parties.

For Thiess Infrastructure Nominees Pty Ltd and John Holland Infrastructure Pty Ltd (the Deferred Equity Participants)

For Macquarie Capital Advisers Ltd and Macquarie Financial Holdings Ltd

For Australian Securities and Investment Commission

ASIC v International Unity Insurance Pty Ltd [2004] FCA 1059; (2004) 22 ACLC 1416

Brooks v Heritage Hotel Adelaide Pty Ltd (1996) 20 ACSR 61

Community Development Pty Ltd v Engwirda Construction Company [1969] HCA 47; (1969) 120 CLR 455

Demagogue v Ramensky [1992] FCA 557; (1992) 39 FCR 31

Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd [2004] VSC 157; (2004) 9 VR 549

Dowling v Colonial Mutual Life Assurance Society Ltd [1915] HCA 56; (1915) 20 CLR 509

Environmental and Earth Sciences Pty Ltd v Vouris [2006] FCA 679; (2006) 152 FCR 510

Expile Pty Ltd v Jabb's Excavations Pty Ltd [2004] NSWSC 284; (2004) 22 ACLC 667

FCT v Gosstray [1986] VicRp 84; [1986] VR 876

Fisher v Madden [2002] NSWCA 28; (2001) 54 NSWLR 179

Humes Ltd v Unity APA Ltd [1987] VicRp 42; [1987] VR 467

IOC Australia Pty Ltd v Mobil Oil Australia Ltd [1905] HCA 28; (1975) 11 ALR 417

McDonald v FCT [2005] NSWSC 2; (2005) 58 ATR 418

Melbase Corporation Pty Ltd v Segenhoe Ltd [1995] FCA 1225; (1995) 17 ACSR 187

Mills v Mills [1938] HCA 4; (1938) 60 CLR 150

MTM Funds Management Ltd v Cavalane Holdings Ltd [2000] NSWSC 922; (2000) 35 ACSR 440

National Bank of Australasia Ltd v Mason [1975] HCA 56; (1975) 133 CLR 191

Ngurli Ltd v McCann [1953] HCA 39; (1953) 90 CLR 425

NRMA v Parkin [2004] NSWSC 296; (2004) 49 ACSR 386

NRMA Ltd v Scandrett (2002) 17 FLR 232

RE Pasminco Limited [2002] FCA 231; (2002) ACLC 782; 41 ACSR 256

Swansson v R A Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313

Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509

Winterton Constructions Pty Ltd v Hambros Australia Ltd [1992] FCA 582; (1992) 39 FCR 97

1 BrisConnections Management Company Ltd (as responsible entity for the BrisConnections Investment Trust and the BrisConnections Holding Trust) (BMC) seeks against Australian Style Investments Pty Ltd (ASI) a declaration that requests dated 12 February 2009 and 20 February 2009 made by ASI to BMC to convene meetings of unit holders of the trusts are not requests lawfully made for the purpose of Part 2G.4 of the Corporations Act 2001 and that BMC not be required to call a meeting of members of BrisConnections Investment Trust (BIT) and BrisConnections Holding Trust (BHT) pursuant to s 252B(1) of the Corporations Act 2001 in response to the requests of ASI. [1]

2 The trusts constitute a managed investment scheme registered under the Corporations Act 2001 that are listed on the ASX. The members of the trusts are the beneficial owners of assets associated with the "Concession" to the Brisbane Airport Link Project. BMC is the responsible entity. The first requisition of 12 February 2009 by ASI sought a meeting of members of the trusts to consider and vote on a proposed special resolution that the trusts commence to be wound up on the next business day following the date the resolution is passed. The second requisition of 20 February 2009 sought a series of cascading resolutions to amend the constitutions of the trusts and to remove BMC as the responsible entity. The first requisition (numbered 2 in recognition of the fact that resolution 1 is the resolution to wind up the trusts) is premised "in the event that the first resolution to wind up the trusts is not passed".

3 In response to the first requisition BMC called a meeting of members to be held on 9 April 2009. BMC failed to call a meeting in response to the second requisition. On 20 March 2009, ASI called a meeting of members to be held on 14 April 2009 to consider the resolutions proposed in the second requisition.

4 BMC alleges that ASI engaged in misleading or deceptive conduct in the notice to unit holders that accompanied the first requisition notice. In particular, BMC alleges that on 12 February 2009, ASI issued a requisition notice to BMC and included an accompanying statement which stated, amongst other things, that:

(i) ASI considers that it is not clear that it is in the unit holders' best interests to contribute a further $2 of equity per unit to the project.

(ii) There is a material risk that further equity contributed will diminish by a value greater than that in the event of a wind-up. Hence, it is not commercial from a unit holders' perspective, to continue BCMCL as a going concern.

(iii) ASI believes it is in the best interests of all unit holders to wind up the trusts now and distribute any net salvageable value, if any, of the assets of the trusts (including work in progress) back to unit holders.

5 BMC alleges that the first requisition notice and its accompanying statement contain no reference to:

(a) Article 4.5(a) of the constitutions of BHT and BIT, which state that the manager must give members holding partly paid units that are officially quoted at least 30 business days notice (but not more than 40 business days notice) of the time and date each instalment is due to be paid;

(b) Article 4.6(b) of the constitutions of BHT and BIT, which state that subject to the listing rules, if the listing rules apply, instalments shall be deemed to be due on the date determined by the manager;

(c) Article 4.7(a) of the constitutions of BHT and BIT, which state that, among other things, "If a member does not pay an instalment by its due time for payment then interest is payable by the member on the unpaid amount"; and

(d) The Brisconnections product disclosure statement dated 24 June 2008, which stated that:

(i) Unit holders who are registered as the holders of the stapled units on the second instalment record date will be required to pay the second instalment by the second instalment payment date (cl 2.6).

(ii) Unit holders who are registered as the holders of the stapled units on the final instalment date will be required to pay the final instalment by the final instalment payment date (cl 2.7).

6 BMC alleges that by reason of the constitutions of BHT and BIT, the winding up of the Brisconnections Unit Trusts does not remove the obligation on members, subject to notice of instalment having been lawfully given by the manger and the payment not having been lawfully revoked or postponed by it, to pay each of the two instalments of $1 upon being called to do so by BMC.

7 BMC alleges the fact that the winding up of the BrisConnections Unit Trusts would not necessarily eliminate their outstanding instalment liabilities is a consideration material to whether it would be in the best interests of members to wind up BHT and BIT (as stated by ASI in the first requisition notice). BMC alleges that in those circumstances, ASI did not have reasonable grounds for making the representations.

8 BMC alleges that by making the representations without having reasonable grounds for doing so, ASI engaged in conduct which was:

(a) misleading within the meaning of s 769C of the Corporations Act 2001;

(b) misleading or deceptive or likely to mislead or deceive contrary to s 1041H(1) of the Corporations Act 2001.

9 BMC alleges that in the circumstances the first requisition notice was invalid for the purpose of requiring BMC to call a meeting of members such that it constituted procedural irregularity within the meaning of s 1322 of the Corporations Act 2001; which might cause substantial injustice that could not be remedied by order of the Court to the members of the trusts and BMC.

10 BMC alleges that the second requisition notice incorporated the accompanying statement to the first requisition notice and, for the reasons previously stated, ASI did not have reasonable grounds for making the representations forming part of the second requisition notice.

11 BMC alleges that by doing so ASI engaged in conduct which was misleading or deceptive or likely to mislead or deceive and that by that reason the notice was invalid and also constituted a procedural irregularity within the meaning of s 1322 of the Corporations Act 2001 which might cause substantial injustice to the members of the trusts and BMC.

12 BMC alleges that neither meeting has been called for a proper purpose. BMC alleges that ASI called the first meeting to release unit holders from their obligation to pay instalments when such an objective can not be achieved.

13 As mentioned above, since these proceedings commenced, ASI has purported to exercise its power to convene a meeting due to the failure of BMC to do so in response to the second requisition.

14 BMC alleges that the resolutions put forward in the second requisition for a meeting and the resolutions put forwarded in the meeting convened by ASI are invalid.

15 In separate proceedings, BMC applies for an order that ASI be wound up on the ground of insolvency or, alternatively, on the ground that it is just and equitable for the Court to do so.[2]

16 BMC claims standing to bring the winding up application on the basis that it is a contingent or prospective creditor within the meaning of s 459P(2)(a) of the Corporations Act 2001. Such an application requires the leave of the Court and the Court may give leave if satisfied that there is a prima facie case that BMC is insolvent, but not otherwise.[3] On 5 March 2009, the Court granted special leave to BMC to bring the hearing of the application before a judge.

17 Under s 462(4), the Court must not hear an application by a person being a contingent or prospective creditor of a company for an order to wind up the company on the just and equitable ground unless and until:

(a) Such security for costs has been given as the Court thinks reasonable;

(b) A prima facie case for winding up has been established to the Court's satisfaction.

18 The parties agreed that BMC provide security for ASI's costs in the sum of $10,000 pursuant to s 462(4) of the Corporations Act 2001.

19 Accordingly, the Court is not entitled to hear the winding up application on either ground unless and until a prima facie case has been established to the Court's satisfaction.

20 Several parties associated with the Airport Link Project have sought leave to be heard in the meeting proceedings under Rule 2.13 of the Supreme Court (Corporations) Rules 2003.

(a) Has ASI engaged in misleading or deceptive conduct in its statement accompanying the meeting requisitions?

(b) If so, should that conduct invalidate the requisition of the meetings?

(c) Has ASI exercised its power in the first and second requisitions to requisition meetings of unit holders for an improper purpose?

(d) Has ASI exercised its power in the first requisition for a purpose that can not be achieved?

(e) Which, if any, of the resolutions put forward in the first and second requisitions and in the meeting convened by ASI are invalid?

(f) If any of the resolutions are invalid, what affect does the invalidity have on the requisition and the meeting?

(g) Has ASI properly convened the meeting for 14 April 2009?

(h) Which, if any, of the associated parties should be given leave to be heard?

(i) Should BMC be given leave to seek to wind up ASI on the insolvency ground and/or the just and equitable ground?

(j) May the Court hear the application to wind up ASI on the just and equitable ground?

(k) If so, should ASI be wound up on either or both grounds?

22 Before dealing with these questions it is necessary to consider the Airport Link Project and the role of BMC.

23 BrisConnections, which describes BMC, BHT, BIT and a range of other associated trusts and companies,[4] 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.[5]

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.

As indicated above, 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 Chapter 5C of the Corporations Act 2001. Under Chapter 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.

28 Before dealing with the contentions of the parties, it is convenient to deal with the applications by several non parties for leave to make submissions.

DEUTSCHE BANK SUBMISSION ON OBLIGATION OF UNIT HOLDERS IN A WINDING UP

29 Deutsche Bank AG (DB) is an underwriter to the issue of the securities. It seeks leave pursuant to rule 2.13 of the Supreme Court (Corporations) Rules 2003 to be heard on one issue in matter number 5119 - the meeting proceedings.

30 ASI is alleged to have engaged in misleading or deceptive conduct by omitting from the notice accompanying the request for meetings of the unit holders that winding up of the trusts will not remove the obligation to pay the outstanding $2 on each of their units.

31 DB submits that BMC has stated in a press release of 20 February 2009 and in documents accompanying the notice of meeting sent to unit holders that winding up would not excuse or remove the obligation on unit holders to pay the outstanding instalments of $2 on their units and BMC would pursue them to recover those amounts as debts.[6] DB submits that its liability follows the liability of the members, such as it may be, in respect to the outstanding instalment. DB says it is directly interested in what is due from a unit holder but not paid.

32 DB submits that BMC has since qualified its absolute proposition that the unit holders remain liable. The first qualification imposed by BMC on its representation is that the winding up does not remove the obligation on members subject to notice of the instalment having been lawfully given by the manager. The second qualification imposed by BMC is that the obligation remains, the payment not having been lawfully revoked or postponed by it.

33 DB submits that, legally, notice of the instalment need not have been given to members as cl 14.6(e) of the constitution provides that "An instalment, by which the terms of issue becomes payable at a date fixed by or in accordance with the terms of issue, is deemed to be an instalment of which a call notice has been given."

34 DB submits the second qualification appears to be a reference to cl 4.6(a) of the constitution, which provides that the manager may revoke or postpone the payment of an instalment.

35 DB submits that an even more important and relevant provision perhaps is cl 4.6(d), which provides that "The manager may extinguish, in full or in part, any liability of members in respect of any moneys unpaid on Members' Partly Paid Units and such extinguishment will reduce the total amount unpaid in respect of the Stapled Units by the same amount."

36 Thus, DB submits that these two provisions of the constitution contemplate that although both an amount of an instalment and the date for payment of that instalment may have been fixed by the terms of issue, the existence in whole or in part of that liability can be eliminated by a decision of the manager and the date upon which liability must be satisfied can be altered.

37 DB submits that in a winding up, the manager must bear in mind its fiduciary obligation to have regard to the best interests of the members. DB submits that if it were to be the case in a winding up that no advantage would accrue to members by reason of an instalment liability being satisfied by a payment, then the manager would be bound to exercise its powers (perhaps to revoke, perhaps to extinguish, perhaps in whole or perhaps in part, or merely just to postpone) in a way to serve the best interests of members, rather than the interests of other persons or entities.

38 DB refers to the balance sheet. It concedes that the figures there may not be reliable or safe to act upon, but nevertheless they suggested that the liabilities of BMC might be sufficient to be satisfied by the second instalment payable in April 2009. DB submits that, in those circumstances, one could not rule out the possibility that the power to relieve unit holders, in part or whole, may be exercised. This submission is made on the assumption that the other assets of the trusts are valueless. DB submits that BMC's statement to the members that there is no scenario in which any of the $2 liability can or will be displaced is misleading to members if unqualified. DB points out that, under the deferred equity commitment deed (DECD), equity subscriptions by the unit holders go downstream to the project entities as equity, but only after the satisfaction of its liabilities under the IPO Equity Bridge Facility (the Bridge Facility) DB contends the DECD does not impose on BMMC any obligation to obtain subscription monies but merely to apply them if and when received. DB submits it could not be in the interests of holders of units for BMC to call for and collect further subscription instalment monies than were required to satisfy its liabilities under the Bridge Facility and its own hedging commitments, at least to the extent that the amount of the excess subscription moneys collected was not reflected in an increase in the value of the units of the trusts to the same or a greater amount. Thus DB contends that BMC would be bound, in any event, to act in the best interests of the unit holders and thus to exercise its powers under the constitutions of the trusts to revoke the third instalment and extinguish in part the second instalment.

39 DB also submits a second argument to support its contention that the unqualified statement that the unit holders will be obliged to meet both the second and third instalments is misleading. DB submits that once winding up commences, the manager is not capable of making an instalment call. DB submits that, as the project in the event of a winding up would no longer be progressing, that circumstance would bring to an end the capability of the manager to make an instalment call.

40 DB submits the consequence of the manager being unable to make an instalment call is also contemplated and provided for in the constitutions. DB submits cl 21 of the constitutions provides for the procedure in a winding up and provides that the manager must "call in and realise the Assets of the Trust." DB points out that the definition of "Assets" in cl 32.1 does not include instalments and expressly excludes application moneys. Further, DB submits that the formula in cl 21.4 dealing with the distribution following termination and, in particular, the distribution of net proceeds to members, includes as part of the numerator the aggregate of the amounts remaining unpaid on all Partly Paid Units. DB submits the formula would not work and would be a nonsense if amounts unpaid or partly unpaid were to be got in and were to form part of the assets.

41 DB submits that the constitutions of the trusts do provide for a winding up by members and refers to the definition of "Winding-Up Commencement Date" as it appears in cl 32.1 of the constitutions and submits that accordingly, s 601NA, which deals with winding up required by a schemes' constitutions, applies in this instance. DB concludes that it is not the case that inevitably members will have to pay the full $2. DB submits that the members need be told what their position is.

42 DB submits that there is another route by which some liability could emerge in unit holders. DB submits that, under cl 18.1 of the constitution, a member need not indemnify the manager if there is a deficiency in the assets to meet the claim of any creditor of the manager in respect of the trusts. On the other hand, cl 18.1(a) provides that the liability of a member is limited to the amount, if any, which remains unpaid in relation to the member's subscription for their units. DB submits this liability exists on unit holders not by virtue of the liability to pay instalments, but by virtue of a discrete liability to indemnify the manager. DB submits that, by reason of all these matters, one cannot predicate in advance that there is only one possible answer in a winding up as the manager currently asserts.

43 DB also rejects the submission on behalf of the deferred equity subscribers that there is some liability in the manager that extends beyond the bridge facility.

44 DB also took issue with the submission of Macquarie and Leighton that the fiduciary duty to extinguish the instalment liability is displaced by clause 11.3(b) of the constitutions, because that clause says that the manager is not obliged to perform an obligation under the constitution if it would result in a breach of obligation under the Transaction Documents. DB contends that as a matter of principle, the fiduciary obligation would never be dislodged by the consequences of non-compliance of a bare contractual obligation undertaken by the manager. It says that position is preserved here because clause 11.3 is expressed to be subject to the Corporations Act 2001 and s 601FC(1)(c) of the Act imposes, without exception, an obligation on the responsible entity to act in the best interests of members.

46 Macquarie Capital Advisers Ltd and Macquarie Financial Holdings Ltd (Macquarie) seek to make submissions in matter 5119 of 2009 pursuant to rule 2.13 of the Supreme Court (Corporations) Rules 2003. Initially, Macquarie sought to be added as a party but withdrew that application.

47 The Macquarie parties and Deutsche Bank share 50/50 of the underwriting obligations. In addition, however, Macquarie is the lender to BMC under the IPO Bridge Facility.

48 Mr Sackar QC for Macquarie confirmed that it was no part of his client's submissions, nor should it be the part of anybody else who seeks to make submissions under rule 2.13, to invite the Court to determine issues which may be of interest or relevance to them, but will not assist the Court in determining the issues between the parties to the proceeding.

49 Nevertheless, Macquarie did wish to make submissions on some of the statements made by Mr Archibald QC for Deutsche Bank with which Macquarie disagreed.

50 Macquarie contends that under both the bridge facility arrangements and the underwriting agreement there are binding contractual promises made by the manager that the terms of the calls will not be varied, that there will be no deferring or extension of the call payments and that the underlying documents, including those agreements, but also the relevant constitutions of both trusts, would not be altered essentially without Macquarie's consent or, alternatively, clearly in a way that would not prejudice those settled arrangements.

51 Further, Macquarie contends that resolution four in the second requisition purports to postpone the payment for the second instalment from 29 April 2009 until 29 January 2010.

52 Macquarie took issue with DB's contention that on a winding up assets do not include unpaid instalments. In particular, Macquarie contends that the exclusion from the definition of assets in clause 21.1(a) of the constitutions of the trusts is only moneys in respect of units which have not been issued.

53 Despite making these and other submissions on whether instalments form part of the assets of the trusts in a winding up, Macquarie contends that the determination of what the manager may or may not do in the event of a winding up is not central to this case. Rather, the Court should be driven entirely by the pleaded issues before it.

54 Macquarie raises an issue as to the validity of the resolutions sought to be considered by the second requisition of ASI. In substance, Macquarie contends that under s 252B of the Act the power to call a meeting is limited to passing either a special or extraordinary resolution. It submits there is no power to call a meeting to pass an "ordinary" resolution as was sought by ASI in its second requisition. Macquarie therefore contends that the notice was not a notice that complied with the Act and was therefore invalid. It is unnecessary for me to traverse this submission in any more detail as during the hearing BMC amended its points of claim to raise in substance the same issues which I will deal with below.

56 Mr Anastassiou SC sought leave to make a submission under rule 2.13 of the Corporations Rules on behalf of Thiess Infrastructure Nominees Pty Ltd (as trustee of the Thiess Infrastructure Trust) and John Holland Infrastructure Nominees Pty Ltd (as trustee of the John Holland Infrastructure Trust) together, the deferred equity participants) which he later referred to as the Leighton interests. He submits that the Court should not determine the scope of the manager's liabilities in connection with its down stream obligations or seek to construe the contractual obligations between the many parties. Leighton submits that the contractual relationships incurred under the Airport link Project are unified and interdependent and can only be properly construed in the context of the entire structure.[7] In particular, it submits the project depends on the application of the equity funding through the unit trusts and the debt provided initially under the IPO Bridge Facility and subsequently by the senior lenders through BrisConnections Finance Pty Ltd. Leighton submits that the submissions made by DG would make a mockery of this structure.[8]

57 To that end, Leighton submits it is not necessary for the Court to consider the submissions of DB on the issue of whether or not the instalments must be met if the trusts are wound up and the Court should not do so.

58 Leighton submits that DB's submissions were only made to counter the suggestion that ASI had engaged in misleading or deceptive conduct. Leighton contends that it is not necessary for the Court to decide whether or not ASI's conduct was misleading or deceptive as alleged by BMC. In particular, Leighton submits that representations by BMC in convening the meeting alleged by ASI in paragraph 35.4 of its points of defence are not relevant to whether or not BMC is bringing this proceeding to improperly inflict commercial pressure on AIS. Accordingly, it is not necessary for the Court to decide the alleged misleading or deceptive against BMC.

59 In relation to the misleading or deceptive conduct alleged by BMC against ASI, Leighton submits that the conduct is one of omission rather than commission. Leighton submits that the Court must first be satisfied that, objectively, it would be expected that the member requisitioning the meeting would inform members that members remain liable for the unpaid instalments even if the trusts are wound up, before one addresses the question of whether the omission of that statement was misleading or deceptive conduct.[9]

60 Leighton refers to clause 11.3 of the constitutions of the trusts. It contends that it subjects the manager's fiduciary duties to its contractual obligations under the project scheme.

61 Leighton takes issue with DB's submission that in a winding up the administrator would only seek to discharge the liabilities of BMC. Leighton says the manager may also need to draw on the instalments to enhance the value for the members by continuing the project in order that it could be sold or somehow dealt with as a going concern.[10] In other words, in order to preserve and protect the assets of the trust it may be necessary or desirable for the manager to apply funds downstream and to do so to rely on the outstanding instalments.

62 Leighton further took issue with a contention of DB in a letter of 10 March 2009 from DB's solicitors to BMC's solicitors that there is no obligation on BMC to fund the project unless equity funds are received and there is no obligation to get those funds in, save, perhaps, to meet liabilities of BMC.[11] Leighton contends that this proposition is untenable and undermines the entire predicate of the project. In my view, this submission supports Leighton's contention that the Court should avoid if it can rule on the contractual obligations of the parties where the issues between the parties do not require these contested issues to be resolved.

63 I grant leave to the deferred equity participants to make submissions.

64 The State of Queensland seeks leave under r 2.13 of the Corporations Rules to make a submission in the meeting proceedings. It supports the claim by BMC for the declaratory relief it seeks for the following reasons.

65 The State of Queensland submits that the conduct of the members in winding up the trusts or removing BMC as manager would cause an event of default of the Project Deed dated 2 June 2008 and constitute a tortious interference with the contractual relations of the State. The State submits that it would be entitled to enjoin the winding up and/or removal of BMC as the responsible entity because damages would not be an adequate remedy for the State. The State contends that the consequences of the commission of the tort would be that the Airport Link, Northern Busway and Airport Roundabout Upgrade Projects would be at least delayed for a considerable period of time (given the unavailability of debt in the current market for projects of this size.)

66 The State submits that it follows that the passage of the relevant resolutions could also be enjoined and so too, therefore, the calling and arranging of the meeting for the vote on those resolutions. On that basis, the State submits that the declaratory relief sought by BMC should be granted.

67 The State submits that the Court should find that the conduct of the members constitutes a tortious interference with the State's contract as set out above. In my view, the Court is not obliged nor entitled to make such a finding. The State of Queensland is not a party to the proceeding. The matters it raises are not issues in the proceedings. The members are not represented or parties to the proceedings. The responsible entity has fiduciary and other duties to the members. I am not satisfied, however, that BMC is obliged to or entitled to act for the unit holders in a proceeding which seeks to find that they would be committing a tort if they resolve to wind up the trusts or replace the responsible entity.

68 The State does not seek to make any submissions on the issues before the Court as set out in the points of claim or points of defence between the parties, save to support the relief sought by BMC.

69 That raises the issue of whether the State of Queensland should be given leave to make submissions to the Court under r 2.13 of the Corporations Rules. It is unnecessary for me to rule on the circumstances in which a Court may grant leave. It is sufficient to note that the granting of leave is a discretionary matter. For the reasons set out above, I grant the State's application to make submissions but not those alleging a tort on the part of the members if they pass any or all of the resolutions proposed.

70 I turn now to the grounds upon which BMC attacks the requisition by ASI for BMC to convene a meeting of members of the trusts to consider a resolution to wind up the trusts.

71 BMC contends that ASI exercised the power it had to request the administrator to convene a meeting for an improper or collateral purpose. BMC contends that a power may only be exercised for the purpose for which it is given. In this case, BMC contends that the power of a unit holder with more than five per cent of the units to requisition a meeting of unit holders to consider a resolution that the trusts be wound up may only be exercised for that purpose.

72 BMC relies on Humes Ltd v Unity APA Ltd[12] where Humes Ltd sought to have declared invalid a minority shareholder's attempt to convene a general meeting of shareholders. Beach J held that the right given to a shareholder to requisition a general meeting of company is a right which must be exercised bona fide and for the purposes for which it was conferred. Beach J held the High Court decisions in Mills v Mills[13] and Ngurli Ltd v McCann[14] established these propositions. Beach J distinguished between a shareholder exercising the power to requisition a meeting and the power to convene the meeting if the board fails to do so on a requisition. In the former case he held the shareholder is "entitled to act in furtherance of its own interests, provided however that its requisition for the meeting is bona fide, in that its objective is to have the resolutions passed and not simply to harass the company and its directors."[15] In the case of a member convening a meeting, Beach J held that the power to convene is exercised by the member as an officer of the company and is accordingly subject to the same supervision by the Court as the power given to a director to summon meetings.[16]

73 On the other hand, Beach J held that the Court should be reluctant to interfere with a minority shareholder's statutory right to requisition a general meeting. He said:

I consider it should only do so when it is clear that the purpose for calling the meeting is something other than the passing of the resolutions contained in the requisition.[17]

He went on to find that Hume Ltd had not satisfied him that the minority shareholder motive in calling the meeting is other than to have passed the resolutions it proposes to place before the meeting.[18]

74 BMC also relies on NRMA v Parkin,[19] a decision of Campbell J of the Supreme Court of New South Wales. There, the NRMA was negotiating with MRMA patrol officers on the terms of their employment. A group of patrol officers requisitioned a general meeting of NRMA's members to amend NRMA's constitution to include terms which would require NRMA to ensure certain matters about the patrol officer's remuneration. NRMA applied for a declaration that the purported requisition of a general meeting under the Corporations Act 2001 was void because the resolutions, if passed, would be invalid. They also sought declarations that the directors were not required to call and hold the meeting, and that the holding of a meeting to consider the resolutions would not be held for a proper purpose. Campbell J held that the power to requisition could not be used for an ulterior purpose. Campbell J said the way in which the test is to be applied was exemplified in the decision of Beach J in Humes Ltd v Unity APA Ltd[20] and in particular the passage quoted above from p 471 of the judgment.[21] Campbell J , however, also cited with approval the observations of Palmer J in NRMA Ltd v Scandrett[22] where Palmer J of the Supreme Court of New South Wales said:

For the sake of completeness, I should deal with Mr Einfield's submission that if a requisitionist has more than one purpose in exercising the requisition power under s 249D(1), one proper and the other improper, then the power is invalidly exercised.

In my opinion, this submission confuses the purpose for which a requisition is made with the motive of the requisitionist in making it. If the purpose for which the requisition is made is truly to have a meeting of members convened in order to consider and, if thought fit, to pass the resolution, then it does not matter that the requisitionist is motivated to pursue that purpose by ill-will or self interest.

The rationale underlying the law in this regard is the same as that which applies in the law relating to abuse of process. In Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509; 107 ALR 635, the majority said (at CLR 526; ALR 650) that an abuse of process occurs when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or for some collateral advantage beyond what the law offers.

However, if a litigant institutes proceedings to invoke a remedy for which the law provides in such proceedings, then there will not be an abuse of process 'even if the [plaintiff] is spurred on by intense personal animosity, even malice, against the defendant: it is not the law that only a plaintiff who feels goodwill towards a defendant is entitled to sue': Swansson v RA Pratt Properties Pty Ltd [2002] NSWSC 583; (2002) 42 ACSR 313 at 321; Dowling v Colonial Mutual Life Assurance Society Ltd [1915] HCA 56; (1915) 20 CLR 509 at 521-2; [1915] HCA 56; 21 ALR 425 at 435-6; IOC Australia Pty Ltd v Mobil Oil Australia Ltd [1905] HCA 28; (1975) 11 ALR 417 at 426-7; 2 ACLR 122 at 131.

Campbell J went on to say that he adopted that statement as the appropriate test, as in his view, it was completely consistent with what Beach J said, and with the common law's limitation on the exercise of power.[23] He turned to the facts and held that he did not find that the persons requisitioning the meeting had submitted the resolution without really wanting it to be put and passed.

75 Accordingly, to make out the claim that ASI has abused its power to requisition a meeting to consider the resolution to wind up the trusts BMC must satisfy me that in effect Mr Nicholas Bolton, the guiding mind of ASI, submitted the resolution without really wanting it to be put and passed.

76 BMC contends that ASI's intention on 12 February 20009 when it requisitioned the meeting was to have BMC pay a distribution that it had previously announced it would but cancelled in November 2008. BMC contends that ASI also wished to convince BMC to defer payment of the instalment that was otherwise due in April 2009. BMC contends that the resolution was put forward to strengthen ASI's negotiating position with BMC and other interested parties such as the underwriters and the Queensland Government. BMC contends that ASI did not wish to wind up the trusts and did not intend to vote for such a resolution. I now turn to the evidence. The following description of ASI and Mr Bolton's intentions are primarily taken from his affidavit.

77 The Australian Group of Companies (Australian Style Group) carries on business providing information technology licensing, data centre delivery, telecommunications carriage and infrastructure and software services. The Australian Style Group offers email, web hosting and domain name licensing to approximately 120,000 customers world wide. It manages a large proportion of Australia's domain names.

78 Mr Nicholas Bolton is the sole director of ASI. He is twenty six years old. After commencing a combined Commerce/Engineering degree at the University of Melbourne he established an information technology business. Without finishing his courses he left university to focus on that business. His business developed rapidly into a commercial and financial success. He has been active as a sophisticated financial market investor for some time.

79 ASI is a member of the Australian Style Group and carries on two activities. It acts as trustee of the Australian Style Investment Unit Trust (ASIUT) and as a share trader in its own name. Over the past four to five years, through ASIUT, ASI has actively traded in securities and derivatives. Over the last four to five years, the portfolio of securities and derivatives held by ASIUT has typically been worth $5 million to $10 million. ASIUT currently holds approximately $3 million in securities and derivatives. ASIUT has a fixed portfolio loan with the Commonwealth Bank of Australia Limited of just under $3 million. ASI is subject to a fixed and floating charge registered in favour of the CBA. The maximum prospective liability under the charge is $10 million. ASI also has a margin lending facility with the Australian and New Zealand Banking Group Limited up to a maximum of $1 million.

80 ASI uses two broking services for its securities and derivatives trading, Commonwealth Private Limited and an on-line broking facility through Westpac Banking Group Limited.

81 Over the past two years, and particularly since the global financial crisis, Mr Bolton has been on the look-out for opportunities to acquire businesses, including listed companies. To advance this end, Mr Bolton has contemplated a range of strategies, including the on market acquisition of up to 19.9 per cent of the securities of a potential target and then launching a takeover bid using debt facilities offered by Westpac and "other senior lenders" to the Australian Style Group.

82 In about November 2008, he became aware through newspaper articles of a woman named Fang He, who had purchased a significant number of units in BrisConnections and that she paid only $32,000 for the units and, as a result, gained a substantial holding. After making inquiries about BrisConnections and the Airport Link Project, Mr Bolton formed the view that he could purchase a material stake in the unit trusts and could immediately affect influence over the trusts through his ownership stake.

83 Mr Bolton obtained a copy of the product disclosure statement (PDS) for the project. He noted that the PDS stated that there was an obligation to pay further instalments of $1 per Stapled Unit in April 2009 and a further $1 per Stapled Unit in January 2010 and was curious about this and wondered how this obligation might arise (and whether it was enforceable).

84 Mr Bolton calculated the date at which the second instalment would be due. He formed the view that if he held units at any time prior to the record date, he could always trade out of the unit holdings and would therefore not be liable to pay the instalment.

85 He reviewed the financial analysis and information contained in the PDS. He says he could not rely on financing or cash flow information from the PDS because he could not find it. He was not able to properly deduce value based on what the future cash flows would be. The only financial metrics that he could readily ascertain from the PDS were the reliance on distributions back to unit holders as the basis for their investments.

86 Mr Bolton reviewed past announcements made by BMC to the ASX. He noted in its quarterly report on 31 October 2008 that BMC had total cash reserves of approximately $155 million. He also looked at the trading history and noted that by November 2008, units were selling for as low as 0.1 cent and that the institutional bankers and financiers, including Macquarie, had sold down their holdings. As a result of this sell-down, Mr Bolton felt the trading value of units at 0.1 cent likely undervalued the actual value of the units.

87 Mr Bolton noted that on 3 September 2008, BMC had confirmed its commitment to declare a first distribution dividend of 5.95 cents per Stapled Security on 19 December 2008. In the announcement, BMC confirmed that "There is cash funding in reserve accounts available to meet this distribution."

88 Mr Bolton noted that by way of a distribution update released on 30 October 2009, BMC announced that it had resolved to defer payment of the 5.95 cents distribution for the period ended 31 December 2008 to a date after the payment of the second $1 instalment payable on the units on 29 April 2009 and to reduce that payment to 0.05 cents per stapled unit. In view of the previous statements made by BMC confirming its commitment to pay the first distribution as promised in the PDS; the fact that on 24 October 2008, only one week before the distribution update; BMC had gone to the market to indicate that it was well placed despite the current volatility in global financial markets; that it acknowledged the change in the trading price of the units and that the quarterly report dated 31 October 2008 disclosed that BMC had total cash reserves of approximately $155 million, Mr Bolton formed the view that BMC could afford to pay the first distribution as originally promised. He also formed the view that the deferment of and reduction in the first distribution was not in the best interests of the current unit holders, that BMC was not acting in the best interests of the current holders and that there was an opportunity for him to take a significant interest in BMC and to pursue a strategy to unlock the value held in the trusts and return that value to the unit holders.

89 Mr Bolton calculated that he could actually take control of the trusts and their assets and restructure the contracts, finance and equity in a different way favourable to unit holders. He took account of the fact that the trusts had $155 million in the bank and minimal drawn debt at that point. Also he noted that there was a significant disparity between the net tangible assets of the trusts and the price at which the units were trading. He observed that if one took a snapshot of the balance sheet at that point in time, the trusts had $155 million in cash and, he believed, $235 million goodwill payments for getting the project to that point.

90 He considered that the future instalments on the units were both an asset and a liability. He viewed that they balanced each other out. He noted the trusts had $155 million cash, the instalments would raise another $780 million (if not by the unit holders, then by the underwriters) and the units would then hold effectively $935 million in cash and tangible assets or $2.40 per unit. He believed that there would be a net liquidation value, and also, if he had control, he was of the view that he could secure funds to meet those instalment obligations.

91 Mr Bolton then started planning how to put his strategy into effect. He decided the first step would be to engage in the initial purchase of units and to reach a holding of 19.9 per cent in a timely and cost-effective manner. He considered the next step would be to launch a bid to reach the 60 per cent control in the trusts, at which point he would be able to restructure the finances and underwriting contracts to reduce the additional equity required from unit holders. He considered the timeframe for the second instalment. He knew that he may not be able to put in place his entire strategy by the time that the second instalment was due. However, he also anticipated that if he took a strategic stake in the trusts (even up to 19.9 per cent) early enough, he could negotiate with BMC to defer the second instalment date (which he believed could quite easily be done without causing any delay to the project). Alternatively, he considered he would have the ability to call an extraordinary general meeting to put a resolution to the unit holders to defer the second instalment date or possibly even to wind up the trusts.

92 He also says he recognised at this time that if he were to purchase a substantial number of units but subsequently wanted to sell those units (particularly before the due date for the second instalment), and the market for the units was illiquid at the time, he may have trouble selling the units on market in a timely manner. He then says he made an arrangement with John Howard Williams, a friend of his father's, to enter into a put option agreement with him for up to 19.9 per cent of any units that he purchased through ASI. It will be necessary for me to address this alleged agreement later, but it supposedly took place on 18 November 2008.

93 Mr Bolton says that on or about 19 November 2008, he set about acquiring 19.9 per cent of the units. Andrew Hudson of Commonwealth Private refused to purchase that percentage of units on behalf of ASI. Mr Bolton then set about acquiring them through the Westpac on-line broking account of ASI. As Westpac had a limit of $50,000 per day, he was only able to acquire some 12.2 per cent of the issued units on 19 November 2008.

94 On 25 November 2008, he caused to be lodged with the ASX a substantial holder notice for the purchase of those units on 19 November 2008. The notices drew a significant amount of inquiries from the media. These caused him to pause before acquiring further units to take his holding up to 19.9 per cent. At this point he was not fully prepared for the takeover and therefore decided to hold off from purchasing more units, although he was still intending to increase the interests of ASI to 19.9 per cent in the near future.

95 Shortly after purchasing the initial tranche of units, on 2 December 2008, Mr Bolton obtained copies of two analyst's reports prepared by Macquarie Bank on BrisConnections. The September report valued the units at $2.95 after payment of the second and third instalments (hence fully paid). The October report valued the units substantially less at $1.35 fully paid. Mr Bolton was surprised and concerned about the significant reduction in value over what was effectively a two month period. The suggested reduction in value influenced his decision-making and strategic objectives about the trusts. Mr Bolton began to consider that perhaps the best outcome for the unit holders would be for the trusts to be wound up, rather than continuing as a going concern.

96 On the next day, on 3 December 2008, ASI sent an email to Paul Dracos at Ernst & Young attaching a document which he headed "Introductory document on Australian Style Investments intentions for BrisConnections." He asked Mr Dracos to ascertain if there was a conflict that might prevent Ernst & Young acting for him to provide ASI with corporate advice to achieve its strategic objectives. The attached paper has been treated as a confidential exhibit. Nevertheless, I take into account fully its contents and am able to say the following about it. Mr Bolton said that ASI's position as largest unit holder was to be leveraged into operational changes within BMC, which "eventually may lead to a controlling takeover bid for" BMC.

(1) Reinstate payment of [the December 2008] distribution, which was suspended on October 30 2008 by [BMC].

(2) Restructure BrisConnections to enable ASI to complete a takeover controlling vote of units.

These objectives are non-dependent on each other.

98 Under the heading of ASI's intentions, he stated that the first was to reinstate the first distribution. Mr Bolton then set out the reasons why he thought it was in the best interests of unit holders to do so and why it should not impact on BMC's ability to deliver the project. He stated that he was confident that ASI would be able to obtain support of over 50.1 per cent of unit holders on the motion to pay the first distribution. He acknowledged that this majority vote would only be used to force the replacement of the responsible entity with a willing entity. He said, however, that in all likelihood matters would not come to this as he expected BMC would agree to his suggestion. He did say that, if required, he could request an extraordinary general meeting for BMC's removal with a high probability of success.

99 When exploring options with underwriters, he expressed the view that, even after paying the two instalments of $1 each, the units would have a market value of significantly less than $1. He described a negotiating position by which the underwriters would withdraw and ASI would end up in control of the unit trusts.

100 He then asked for Ernst & Young's services with respect to liaising and negotiating with BMC in the reinstatement of the first distribution and secondly, liaising with BMC concerning the withdrawal of the underwriters and the taking over control by ASI. There is no mention in the document of a strategy of winding up the unit trusts.

101 On the next day 4 December 2009, Mr Bolton sent Deloitte a similar paper seeking its assistance with strategies regarding BrisConnections. Later on 19 December 2009, Mr Bolton also sent a similar email and briefing paper to the corporate and advisory team at ANZ and to other advisers.

102 On 9 December 2008, ASI, as a unit holder, received a letter from BMC updating it as to the progress of the project and attaching a second instalment fact sheet. Mr Bolton noted from the fact sheet that the dates for the payment of instalments were subject to change, which indicated to him that BMC accepted that the dates, including the second instalment date, may be varied and, in particular, postponed. He says that he recognised that BMC was unlikely to do this of its own volition and that the issue may need to go to the unit holders to decide at an extraordinary general meeting. He says that that information strengthened his resolve to call a meeting of unit holders to raise issues such as whether it might be in the interests of the unit holders to defer the second instalment; to review BMC's decision to defer the distribution and whether it might be preferable to wind the trusts up entirely. He says it was at about this time (9 December 2008) that he commenced preparations to requisition BMC to call an extraordinary general meeting of unit holders.

103 He says that on or about 6 January 2009, he received a letter from Mr Rod Marshall, who identified himself as a BrisConnections unit holder. This contact led ASI to acquiring a significant number of further units in the trusts through off market transactions. This was achieved by using deeds of gift. He received a draft of one deed from Mr Marshall dated 26 January 2009. The off market transactions occurred during February and March 2009. Under these transactions, ASI was to receive an administration fee of $1,305 per market transaction. It has not received those at this stage.

104 Mr Bolton says that his strategy, which was to ultimately take over the trusts and effect a recapitalisation of the BrisConnections Airport Link Project, shifted over the course of December 2008. He determined that it was not prudent to launch a takeover bid at that time. Over December and January 2008, he adjusted his strategy to focus on how ASI might otherwise achieve a recapitalisation of BrisConnections and the Airport Link Project.

105 Mr Bolton outlined his current strategies (as of March 2009) in a document which he claims is confidential and commercially sensitive. Without disclosing the commercially confidential aspects of Mr Bolton's current recapitalisation strategy, it involves the unit holders retaining an interest in the units for their initial $1 payment and avoids the need to contribute further equity as prescribed by the current instalment plan. Again, his strategy involves dealing with underwriters and ASI being able to arrange further finance. Essential to the recapitalisation plan is, however, the deferral of the second instalment.

106 The recapitalisation plan makes no reference to an alternate strategy of winding up the unit trusts. Mr Bolton states, however, in his affidavit that an alternative to his recapitalisation strategy would be for the unit holders to resolve to wind up the trusts and distribute the assets of the trusts. He says on the basis of the most recent financial accounts available to him; it is his view that the trusts currently hold sufficient cash assets to cover liabilities. He says it is questionable whether BMC itself has any direct obligation to fund the project or any other BrisConnections entities involved in the construction. He is of the view that if the trusts were wound up it would be unnecessary for BMC to seek to recover the second and third instalments from unit holders. In coming to this view, Mr Bolton relies upon the half yearly report for the BrisConnections trusts for the period 31 May 2008 to 31 December 2008 and the financial report for the period ended 31 December 2008 for the trusts. He says these reports were released to the market on 3 February 2008 and they disclosed the trusts' net assets of $887 million.[24]

107 Mr Bolton says that even under the alternative "wind-up" option, the current unit holders will be better off than under the publicly disclosed plans of the current management of BMC. He says that if the trusts are wound up, the unit holders stand to benefit by receiving a reasonable return of their capital (rather than having to contribute further capital by way of the second and third instalments). He says that he has calculated the unit holders may have around $263 million returned to them. He says this is approximately 67 cents on each partly paid unit without the second and third instalments being paid.

108 Mr Bolton says that it is his view that if the further $2 worth of instalments were paid, and the unit trusts continue as going concerns, the units would trade at 32 cents to 61 cents. This would imply that from the next $2 paid up from equity holders, unit holders could expect to immediately lose approximately $1.40 to $1.70.

109 Mr Bolton points out that BMC itself has acknowledged a likely price drop after the next instalment. BMC refers to the average fully paid target price of three reports from brokers at $1.28. This is after paying the next $2 in instalments.

110 Mr Bolton says that in forming his view on the merits of requisitioning a meeting to consider winding up the trusts, he compares his perceived liquidation value of 67 cents partly paid to the upper end of his going concern value of a partly paid unit of (negative) minus $1.40. In other words, he says that unit holders may be $2.07 better off per unit by winding up the trusts and continuing as a going concern. He says he considered this substantial difference in value as something that should be considered at a meeting of members.[25]

111 He does not say whether he made these calculations prior to calling a meeting on 12 December or after. It should be noted, however, that in giving his opinion that if the $2 worth of instalments were paid the units would be traded at $0.32 to $0.61, he has referred to a peer review of what he says is similar toll road trusts, including River City, ConnectEast and Transurban, which was published in March 2009.

112 As mentioned above, on 12 February 2008, ASI requisitioned a meeting of the unit holders to consider a resolution to wind up the trusts. The requisition notice attached a statement to accompany the proposed special resolution. The statement is as follows:

ASI also considers that it is not clear that it is in the unit holders' best interests to contribute a further $2 of equity per unit to the project given:

(a) the uncertain nature of the economic climate;

(b) that it is clear that the future value of the completed project is materially lower than first anticipated at issue;

(c) there is suitable concern as to the future of [BMC] post the second instalment date, when in all likelihood there will be a change of control (possibly to the underwriters), as a majority of unit holders may default on paying that instalment;

(d) even after the second dollar instalment is paid in April, it is possible that the units will continue to trade at less than one dollar, resulting in an immediate loss of investment value and a continuation of limited opportunities for unit holders to trade or exit their position, if desired;

(e) there is a material risk that further equity contributed will diminish by a value greater than that in the event of wind-up. Hence it is not commercial from a unit holder's perspective, to continue [the BrisConnections trusts] as a going concern.

As a result, ASI believe it to be in the best interest of all unit holders to wind up the Trusts now and distribute any net salvageable value, if any, of the assets of the Trusts (including work in progress) back to unit holders.

113 On the next day, Friday 13 February 2009, Mr Trevor Rowe, the Chairman of BMC, telephoned Mr Bolton. In that conversation, Mr Rowe asked Mr Bolton whether he would consider deferring the meeting if he arranged a meeting between Mr Bolton and the underwriters. Mr Bolton said that he would consider doing that. Mr Bolton also asked Mr Rowe to set up a high level meeting with the Queensland State Government. Mr Bolton informed Mr Rowe that if no arrangements were made with the underwriters that were satisfactory to Mr Bolton, that BMC had to proceed with the notice and the meeting, and asked BMC to cover the costs.[26]

114 On Sunday 15 February 2009, Mr Bolton drafted a letter to Ernst & Young to retain their services. At this stage, Mr Bolton was still in discussions with Ernst & Young (who had initially declined to act because of potential conflict) about whether the conflict could be resolved through the use of Chinese walls. The letter was amended by Mr Bolton again on Wednesday 18 February 2009.

115 The document of 15 February 2009 is headed "Engagement to Advise in relation to BrisConnections." The letter refers to the requisition to convene a meeting of unit holders and to consider the resolution to wind up the trusts. The letter states that ASI would like to engage Ernst & Young to advise and assist in moving forward towards the requested meeting of members and in resolving the situation in the interests of all parties.[27] At this stage, BMC had not advised whether it was going to comply with ASI's request to convene a meeting. Thus, the letter was seeking to engage Ernst & Young to advise and assist in holding the meeting and in resolving the situation in the interests of all parties. That draft was not sent to Earnst & Young.

116 On 18 February 2009, Mr Bolton amended the draft letter to Ernst & Young by adding the following:

ASI is of the view that winding up the trusts may not be in the best interests of all concerned parties, including unit holders, government, underwriters, management company, and contractors.

ASI would like to engage [insert correct name of E & Y] to advise and assist it in establishing alternate capital structures for [BMC] that may better appease all concerned parties than by its motion to wind-up the trusts.

The draft deleted the words "moving forward towards the requested meeting of members and in resolving the situation in the interests of all parties." Thus, the request for Ernst & Young's assistance had been changed from them assisting in holding a meeting and procuring the passing of the motion to advising and assisting on establishing alternate capital structures, rather than winding up the trusts. The major event that had occurred between requisitioning the meeting and 18 February had been the discussions with Mr Rowe.

117 On the next day, 19 February 2009, Mr Bolton met with the underwriters, Macquarie Bank and Deutsche Bank. On the next day, 20 February 2009, Mr Bolton, at 2.08am in the morning, emailed Anthony Sormann at the SLM Group attaching a Macquarie report on the project and the letter that ASI had prepared for ANZ back in December which was in a similar form to that sent to Ernst & Young on 3 December 2008.

118 Mr Bolton claims that the contents of the email are confidential. Suffice to say, it proposed a means of refinancing the project, enabling it to go forward and if that were done it envisaged ASI could withdraw its notice for wind-up and be able to fully fund the project to completion. Further, it envisaged that no unit holders would be liable for any further equity.

119 The outcome envisaged by the proposal was that ASI would receive equity, either 19.9 per cent or 100 per cent depending on strategy. Further, that this would be fully paid equity in a project that now carried $3.8 billion in senior debt and $1 billion in equity and would have a forecast equity value of $150 million. The outcome also envisaged that there would be sufficient basis to receive $24 million capital return/distribution, even in the event that the project failed.

"That's the premise; we're in a pretty strong negotiating position, and believe this is an amicable solution for the QLD Government, Unit Holders, Underwriters & Leightons, i.e. all parties.

We'll see you tomorrow,"

121 There is no reference in the email to Mr Sormann of an alternate strategy of winding up the trusts other than, if the strategy was achieved, the winding up notice could be withdrawn.

122 Later that day, on 20 February 2009, BMC called a meeting of unit holders in response to the first requisition - the meeting was initially scheduled for 30 March 2009. Also on 20 February 2009, ASI issued a second requisition notice to BMC requesting BMC hold a meeting of unit holders to consider a cascading series of resolutions in the event that the winding up resolution is not passed. The first resolution proposed on the second requisition related to the amendment of the constitution of the trusts to, in effect, allow the proposed distribution announced in October 2008 of 5.95 cents to be paid. The resolution commenced "In the event that the first resolution to wind up the trusts is not passed, that the Constitutions of the [BHT] and [BIT] be amended."

123 On 23 February 2009, BMC issued a letter to unit holders that said "Airport Link has substantial long-term value" and also "It is highly unlikely that ... there would be any excess cash or assets to distribute to the unit holders on a winding up."

124 On or about 26 February 2009, ASI sent a letter to BMC about whether there would be surplus assets to distribute to the unit holders, and disputing the announcement by the Chairman of BMC that it was unlikely that there would be any cash or assets to distribute to unit holders on a winding up. In that letter, ASI suggested it would be in the interests of unit holders for BMC to engage an independent expert valuer to prepare a valuation for presentation to unit holders at the meeting. ASI asked for confirmation that BMC would be prepared to obtain the valuation as set out in the letter. BMC did not respond.

125 On 5 March 2009, BMC issued a notice of meeting in relation to ASI's first requisition proposing a resolution to wind up the trusts. The notice did not include the proposed resolution set out in the second requisition notice dated 20 February 2009.

126 BMC submits that Mr Bolton was an unsatisfactory witness. BMC contends it is unsafe to accept his viva voce evidence unless that evidence is corroborated by a document contemporaneous with the events and purposes referred to. BMC points to many matters where Mr Bolton's evidence contrasted with the version of events given by Mr Williams concerning the put option.

127 I found Mr Bolton to be an unsatisfactory witness in many respects. He tended to avoid answering questions unless pressed. He was extremely reluctant to concede any point that may weigh against him. He was evasive and less than frank. On the other hand I would not be prepared to find that he deliberately lied whilst giving evidence as opposed to "gilding the lily." I do not think, however, on the critical issue of what he really wanted when he made his first requisition that I have to resort to decide between competing versions or events as will become apparent when I address this issue. On the issue of the put option, I have reservations about his evidence which I discuss below when dealing with the winding up applications.

128 BMC submits the requisition is invalid as the winding up of the trusts was inconsistent with Mr Bolton achieving his objective of refinancing the project, avoiding the instalment payments and leaving ASI with a substantial equity in the project. That is obviously the case. Mr Bolton's objectives in this regard required the trusts to continue as going concerns. On the other hand, if Mr Bolton's primary objectives could not be achieved, then a winding up may well have been more beneficial to ASI than paying the further two instalments or, even if he managed to avoid doing so, loosing his investment and the time, expense and effort he had put into his strategies.

129 The balance sheet of the trusts did suggest there may be equity in the units if the trusts were wound up. The unit holders are the beneficial owners of whatever it is that trusts' assets are and it is not inconceivable that they own a valuable asset. The unit holders have already contributed $1 equity for each of the stapled units and it does not seem inconceivable that each unit may have some value to reflect that investment. The accounts of the trusts published by BMC suggest as much.

130 I find that Mr Bolton's primary objective was to extract some value from his significant holding. I accept that some value may have been extracted by strong "negotiating position" which included being able to call a meeting of unit holders many of whom were disgruntled. I accept that his aims may have been likened to a "green mailer" who is able to extract some value for his equity through his position to impeded or frustrate management's intentions.

131 On the other hand, the resolution to wind up was a rational objective if Mr Bolton's initial objectives could not be reached. He acknowledged that as at 18 February, some six days after his first requisition, his view was that winding up the trusts may not be in the interests of all concerned parties, including unit holders, Government, underwriters, management and the contractors. However, this view was held along with another view that an alternate capital structure may better appease all concerned parties than by winding up the trusts. In particular, ASI would probably achieve a better return under an alternative capital structure than in a winding up.

132 I do not accept, however, that if the alternative capital restructuring could not be achieved, which would involve the abandonment of the second instalment, then ASI did not really want the trusts to be wound up.

133 The authorities establish that those who claim that the power to requisition a meeting has been done so for an improper purpose must establish that the requisistionist does not really want the resolution passed at the meeting. This raises the question of whether that test is satisfied if ASI does in fact want the resolution passed if it has in the meantime failed to organise a recapitalisation of the project but would not want it to be passed if it had organised a recapitalisation of the project prior to the meeting.

134 In Swansson v R A Pratt Properties Pty Ltd[28] Palmer J of the Supreme Court of New South Wales considered whether an applicant had in good faith sought leave to bring a derivative action on behalf of a company. Palmer J considered several examples. He said:

For example, a creditor may happen to be a former shareholder of the company and may seek, by the derivative action, to place the company in a financial position to repay the debt. There would be no abuse of process in commencing and maintaining the derivative action itself in that the action is commenced and maintained in order to achieve the purpose for which it is designed, namely , to recover property for the company.[29]

135 Palmer J cites other cases supporting this principle: Dowling v Colonial Mutual Life Assurance Society Ltd[30] and IOC Australia Pty Ltd v Mobil Oil Australia Ltd.[31] Also in NRMA Ltd v Scandrett[32], referred to above, Palmer J cited his decision in Swansson v R A Pratt Properties Pty Ltd[33] as authority for his finding the resolution had not been proposed for an improper purpose.

136 In Williams v Spautz[34] Mason CJ, Dawson, Toohey and McHugh JJ in considering the boundaries of abuse of process, said as follows:

The observations of the Privy Council in King v Henderson[35] and those of Isaacs J in Dowling[36], to which we referred earlier, represent an attempt to achieve a formulation which keeps the concept of abuse of process within reasonable bounds. To say that a purpose of a litigant in bringing proceedings which is not within the scope of the proceedings constitutes, without more, an abuse of process might unduly expand the concept. The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event.

Thus, to take an example mentioned in argument, an alderman prosecutes another alderman who is a political opponent for failure to disclose a relevant pecuniary interest when voting to approve a contract, intending to secure the opponent's conviction so that he or she will then be disqualified from office as an alderman by reason of that conviction, pursuant to local government legislation regulating the holding of such offices. The ultimate purpose of bringing about disqualification is not within the scope of the criminal process instituted by the prosecutor. But the immediate purpose of the prosecutor is within that scope. And the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor's favour.

It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed[37] or some collateral advantage beyond what the law offers[38]. So, in Dowling[39] Isaacs J pointed out that 'If, for instance, it had been shown that the Society had simply threatened Dowling that unless he did what they had no right to demand from him, namely, give up certain names, they would proceed to sequestration, and they had proceeded accordingly, there would have been in law an abuse of the process'. However, because the Society wished to use the process for the very purpose for which it was designed, there was no abuse of process.

137 Applying these principles, its seems to me the appropriate question to ask is, has the resolution been proposed in order to achieve the purpose for which it is designed: that is, the winding up of the trusts. In my view it has. The fact that the resolution may not be pursued if some other event intervenes (such as a refinancing) does not mean the resolution was not intended to achieve the purpose for which it was designed, that is the winding up of the trusts. For example, in litigation the intention to sue may be made with the intention of carrying the action through to completion unless a satisfactory offer in settlement is achieved. That does not mean the power to sue has been improperly used.

138 Further, in this case, the fact that the resolution may enable ASI to improve its bargaining power with BMC, the underwriters or the Queensland Government does not invalidate the legitimacy of the requisition so long as the resolution has been genuinely put by ASI to achieve the purpose for which it is intended, that is to wind up the trusts.

139 In this case, the intention of ASI is to achieve the winding up of the trusts unless in the meantime a satisfactory refinancing is achieved. In other words, the resolution was proposed to achieve the purpose for which it was designed. If for example, the resolution was put to achieve bargaining power but ASI did not intend it to achieve the purpose for which was designed, that is a winding up, the position would be different. The power to requisition a meeting would have been abused. As Mr Santamaria submits, it would have been a fraud on the power.

140 Accordingly, I do not accept BMC's contention that the first requisition was invalid as it was made for an improper purpose.

WAS THE FIRST MEETING CALLED FOR A PURPOSE THAT COULD NOT BE ACHIEVED?

141 BMC submits that the resolution to wind up the schemes has been proposed on the basis that if adopted it will relieve the unit holders from the obligation to pay the next two instalments. BMC submits that as unit holders will inevitably be called upon to meet the next two instalments payments, the avowed purposes of ASI in calling the meeting to wind up the schemes cannot be achieved. BMC submits that in those circumstances, the meeting will be otiose and BMC should not be compelled to convene the meeting and put the resolution to unit holders.

142 ASI's accompanying statement to the first requisition provides that:

ASI also [considers] that it is not clear that it is in the unit holders' best interests to contribute a further $2 of equity per unit to the project given:

(a) the uncertain nature of the economic climate;

(b) that it is clear that the future value of the contemplated project is materially lower than first anticipated at issue; and

(c) there is suitable concern as to the future of BCMCL, post the second instalment date, where in all likelihood there will be a change of control (possibly to the underwriters), as a majority of unit holders may default on paying that instalment;

(d) even after the second $1 instalment is paid in April, it is possible that the units will continue to trade at less than $1, resulting in an immediate loss of investment value and a continuation of limited opportunities for unit holders to trade or exit their position, if desired;

(e) there is a material risk that further equity contributed will diminish by a value greater than that in the event of windup. Hence it is not commercial from a unit holders' perspective to continue BCMCL as a going concern.

As a result, ASI believes it to be in the best interest of all unit holders to wind up the Trusts now and distribute any net salvageable value, if any, of the assets of the Trusts (including work in progress) back to unit holders.

143 In my opinion, the statement represents that unit holders may be better off winding up the schemes and thereby terminating their involvement in the Airport Link Project rather than allowing the schemes to continue. The statement represents that it is not clear that it is in the unit holders' best interests to contribute a further $2 of equity per unit. The statement suggests there is a material risk that a loss will be suffered on contributing further equity of $2 per unit, where there is a no wind up, which would be greater than the loss suffered if the trusts were wound up.

144 BMC did not lead any financial evidence to establish that this was not possible. It is not necessary for me to make any findings whether it is possible or not. BMC asserts that the instalments would remain payable whether or not the schemes are wound up and that Macquarie has a Power of Attorney under its security for the bridging loans to require payment of the instalments if the manager fails to do so.

145 As indicated above, DB argues that in the event of a winding up it may not be necessary to call up the second instalment and perhaps part of the first. It also argues that it is doubtful that the instalments will be payable in the event of a winding up of the schemes in any event.

146 Mr Anastassiou SC for Leighton submits that the proper construction of the project documents requires their consideration as a whole. I think there is merit in what Mr Anastassiou submits. In any event, in my opinion, it is not necessary to decide these issues in these proceedings.

147 I am not satisfied that BMC has established that unit holders could not possibly be better off in a winding up of schemes than in allowing them to continue. In those circumstances, I am not satisfied that the first requisition has been called for a purpose which cannot be achieved.

148 I do not accept the submission that the meeting the subject of the first requisition has been called for a purpose that cannot be achieved.

HAS ASI ENGAGED IN MISLEADING AND DECEPTIVE CONDUCT IN ITS FIRST REQUISITION?

149 BMC submits that in its accompanying statement, ASI stated that it "believes it is in the best interests of all unit holders to wind up the trusts now and distribute any net salvageable value, if any, of the assets of the trusts (including work in progress) back to unit holders." BMC submits that ASI did not state that the winding up of the trusts would not necessarily eliminate unit holders' outstanding instalment liabilities of $2 per unit. BMC submits that if the resolution to wind up the trusts is carried at the meeting of unit holders on 9 April 2009, the next instalment of $1 will still be payable.

150 BMC submits that the representation made by ASI contain a material omission. It says, the statement was therefore misleading or deceptive within the meaning of s 1041H(1) of the Corporations Act 2001. Section 1041H(1) provides:

A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive.

151 BMC also alleges in its second further amended points claim alleges that the first requisition notice and its accompanying statement contain no reference to article 4.5(a) of the constitutions of the trusts, article 4.6(b) of the constitutions, article 4.7(a) of the constitutions and that the PDS which stated that:

(i) Unit holders who are registered as the holders of the Stapled Units on the second instalment record date will be required to pay the second instalment by the second instalment payment date (cl 2.6);

(ii) Unit holders who are registered as the holders of the Stapled Units on the final instalment record date will be required to pay the final instalment by the final instalment payment date (cl 2.7).

152 BMC further alleges that by reason of the constitutions of the trusts, the winding up of the trusts does not remove the obligation on members, subject to notice of the instalment having been lawfully given by the manager and the payment not having been lawfully revoked or postponed by it, to pay each of the two outstanding instalments of $1, upon being called to do so by BMA (Outstanding Instalment Liabilities).

153 BMC alleges that a consideration material to whether it would be in the best interests of members to wind up the trusts (as stated by ASI in its first requisition notice), is the fact that the winding up of the BrisConnections unit trusts would not necessarily eliminate their Outstanding Instalment Liabilities.

154 BMC alleges that in the circumstances, ASI did not have reasonable grounds for making the representations.

155 BMC alleges that by making the representations without having reasonable grounds for doing so, ASI engaged in conduct which was:

(a) misleading within the meaning of s 769C of the Corporations Act 2001;

(b) misleading or deceptive or likely to mislead or deceive contrary to s 1041H(1) of the Corporations Act 2001.

156 BMC alleges that in the circumstances, the first requisition notice was invalid for the purpose of requiring BMC to call a meeting of members pursuant to s 252B(1) of the Corporations Act 2001; such that it constituted a procedural irregularity within the meaning of s 1322 of the Corporations Act 2001; which might cause substantial injustice that could not be remedied by order of the Court.

157 It can be seen, therefore, that the points of claim alleges misleading and deceptive conduct by ASI through making representations without having reasonable grounds. The basis for alleging the making of representations without reasonable grounds is that a representation conveys that the maker has in fact reasonable grounds for putting forward the represented forecast or belief. In this case, it would be that in representing that unit holders may be better off that ASI represented it had reasonable grounds for expressing such a view.

158 On the other hand, in BMC's final submissions, BMC alleges that the representations made by ASI were misleading and deceptive as they contained material omissions. Where the circumstances are such that a person is entitled to believe that a relevant matter affecting him would, if it existed, be communicated, the failure to communicate those relevant matters may constitute conduct which is misleading or deceptive.[40]

159 As indicated above, in my opinion, BMC has failed to establish that ASI did not have reasonable grounds for submitting that it may be in the best interests of members to wind up the unit trusts, rather than to allow them to continue as a going concern and contribute the further $2 instalments.

160 Further, in my opinion, in the circumstances where the statement from ASI was accompanied by many statements by BMC that asserted without qualification that members would remain liable for the two instalments, a person reading the statement by ASI would not be entitled to believe that that information would be communicated to him or her or it by ASI in view of the fact that the document they received otherwise carried the relevant information.

161 I am not satisfied that BMC has established that the statement of ASI was misleading or deceptive on either the ground of omission or lack or reasonable grounds. In any event, if I am wrong about the misleading and deceptive conduct allegations, under s 1322(4) I would be prepared to order and declare that the alleged misleading and deceptive conduct of ASI does not invalidate the first and second requisitions.

162 I do not accept this ground of objection to the requisitions.

IS THE SECOND REQUISITION INCONSISTENT WITH CHAPTER 5C.1 OF THE CORPORATIONS ACT 2001?

163 I turn now to further attacks on the second requisition notice of 20 February 2009. BMC submits that the second requisition notice was not given for a proper purpose. The second requisition notice states as follows:

As a special resolution:

2 In the event that the first resolution to wind up the Trusts is not passed, that the constitutions of the BrisConnections Holding Trust and BrisConnections Investment Trust be amended by:

(a) adding the words 'Subject to article 9.4A' at the commencement of article 9.4; and

(b) inserting a new article 9.4A as follows:

'9.4A. During the Fixed Distribution Period (as that term is defined in the Product Disclosure Statement for the Airport Link Project issued by the Manager and released on 3 July 2008 ('PDS'), the semi-annual Distributions (as defined in the PDS) to members will be calculated and paid as intended in the PDS, and as specifically set out in Table 9.3 of the PDS, unless the Manger forms the reasonable view that the financial circumstances of the Trust has substantially deteriorated and that view, having been put to a meeting of members by the Manger, is ratified by a Resolution agreeing to that change. Any decision of the Manger to the contrary made or issued prior to the date this article is introduced into this constitution will be immediately revoked or cancelled by the Manager. For the avoidance of doubt, this will include revocation of the announcement made by the Manager on 30 October 2008 and reinstatement and immediate payment of the Fixed Distribution of 5.95 cents per Stapled Security originally announced by the Manager on 3 September 2008.'

As a special resolution:

3 In the event that the resolution to commence winding up the Trusts is not passed, that article 4.6(a) of the constitutions of the BrisConnections Holding Trust and BrisConnections Investment Trust be amended by adding at the end of that article the words 'and will do so on the Resolution of members.'

As a resolution:

4 In the event that the previous resolution to change article 4.6(a) of the Trusts is passed, that the members resolve to postpone the payment date for the instalment due by members on 29 April 2009 until 29 January 2010.

As a special resolution:

5 In the event that the previous resolution is passed, that article 11.3 of the Trusts be amended by deleting in its entirety the sentence beginning 'Subject to the Corporations Act'.

As a resolution:

6 In the event that the previous resolution is put to the meeting but not passed, that the Manager be removed as the responsible entity.

As a resolution:

7 In the event that the previous resolution is put to the meeting and passed, that a replacement responsible entity be appointed immediately after the meeting at which that this resolution is passed and if a replacement is not then available or capable of appointment at that time then an application will be made to the court in accordance with the Corporations Act to appoint a temporary responsible entity.

164 BMC alleges that the second requisition notice seeks the passage of resolutions 2 to 5 which would impermissibly interfere with the powers and discretions of BMC as the responsible entity of the unit trusts. It contends that paragraph 2 of the second requisition notice would require BMC to make distributions to members, even if BMC was not in a financial position to do so, and even if the payment placed BMC in breach of its contractual obligations and the directors of BMC in breach of their legal obligations.

165 BMC also alleges that paragraphs 2 to 5 are inconsistent with the scheme of Chapter 5C of the Corporations Act 2001 which contemplates that the responsible entity from time to time will operate the managed investment scheme and will be a public company that holds an Australian Financial Services licence authorising it to operate a managed investment scheme. BMC alleges that the resolutions would erect a form of operation or administration of a registered scheme inconsistent with that mandated by Part 5C of the Act.

166 In substance, this submission is based on the argument that the resolutions would be inconsistent with the existing compliance plan of the trusts. In particular, it relies upon clauses 16 and 17 of the compliance plan. Clause 17 provides that BMC is responsible for determining whether or not a distribution of property should be made to unit holders. BMC argues that to amend the constitutions to conflict with the compliance plan would be contrary to s 601FC(1)(g) of the Corporations Act 2001. Section 601FC(1)(g) and (h) relevantly provides as follows:

In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must:

...

(g) ensure that the scheme's compliance plan meets the requirements of s 601HA; and

(h) comply with the scheme's compliance plan;

..."

167 Under s 601HA(1), provision is made for the contents of the compliance plan. Section 601HA(1) provides:

Part 5C.4** - The compliance plan**

601HA Contents of the compliance plan

(1) The compliance plan of a registered scheme must set out adequate measures that the responsible entity is to apply in operating the scheme to ensure compliance with this Act and the scheme's constitution, including the arrangements for:

(a) ensuring that all scheme property is clearly identified as scheme property and held separately from property of the responsible entity and property of any other scheme (see paragraph 601FC(1)(i)); and

(b) if the scheme is required to have a compliance committee (see section 601JA) - ensuring that the compliance committee functions properly, including adequate arrangements relating to:

(i) the membership of the committee; and

(ii) how often committee meetings are to be held; and

(iii) the committee's reports and recommendations to the responsible entity; and

(iv) the committee's access to the scheme's accounting records and to the auditor of the scheme's financial statements; and

(v) the committee's access to information that is relevant to the responsible entity's compliance with this Act; and

(c) ensuring that the scheme property is valued at regular intervals appropriate to the nature of the property; and

(d) ensuring that compliance with the plan is audited as required by section 601HG; and

(e) ensuring adequate records of the scheme's operations are kept; and

(f) any other matter prescribed by the regulations.

168 ASI submits, however, that the constitution takes precedence over the compliance plan and not the other way around. First of all, ASI points to s 601HA(1) which provides that the compliance plan must comply with the Act and the scheme's constitution. Further, ASI refers to s 601HE(1), which provides:

The responsible entity of a registered scheme may modify the scheme's compliance plan or repeal it and replace it with a new compliance plan.

169 ASI submits that if the constitution is amended in such a way that the compliance plan is no longer consistent with it, then it is incumbent on the responsible entity to modify the scheme's compliance plan to ensure compliance with the scheme's amended constitution.

170 BMC relies on an extract from Ford's Principles of Corporations Law where the authors state at paragraph [22.502]:

... these duties do not appear to be subject to the constitution, which therefore cannot extinguish or attenuate them ... It must ensure that the scheme's constitution and compliance plan meet the requirements of Ch 5C. Importantly, it must comply with the scheme's compliance plan - the effect of this provision (in s 601FC(1)(h)) is that the responsible entity has a duty, apparently unqualified, to comply with whatever the compliance plan requires it to do.

171 BMC also relies upon s 601FB(1), which provides:

The responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme's constitution and this Act.

172 In my opinion, the scheme envisaged by the Act is that the constitution of a registered managed investment scheme must comply with the Act and that the compliance plan should comply with both the Act and the constitution. Section 601HA(1) provides as much.

173 BMC contends that resolution two would require it to make an immediate distribution of 5.95 cents per Stapled Unit irrespective of whether the financial position of the trusts justifies such a distribution, irrespective of whether the payment is consistent with the duties of directors to ensure that BMC is able to pay its debts as and when they fall due, and irrespective of whether, by reason of the making of the payment, BMC would be unable to perform its contractual and other obligations and/or is in breach thereof.

174 It says the force of the resolution can be seen in its own phrasing. BMC says it contemplates that, notwithstanding the formation by the manager of "the reasonable view that the financial circumstances of the trust has substantially deteriorated", the manager is compelled to make distribution. It submits the manager is only exonerated from this obligation if a general meeting ratifies its view. It submits that, absent ratification, the manager must proceed with the distribution.

175 BMC submits that the Corporations Act 2001 carefully delineates the role of the responsible entity and the members. It submits that the Act provides, inter alia, that the responsible entity is to "operate the scheme".

176 BMA refers to ss 601FA, 601FB and 601FC. The relevant provisions include:

Part 5C.2** - The responsible entity**

Division 1** - Responsibilities and powers**

601FA Responsible entity to be public company and hold Australian financial services licence

The responsible entity of a registered scheme must be a public company that holds an Australian financial services licence authorising it to operate a managed investment scheme.

601FB Responsible entity to operate scheme

(1) The responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme's constitution and this Act.

.....

601FC Duties of responsible entity

(1) In exercising its powers and carrying out its duties, the responsible entity of a registered scheme must:

(a) act honestly; and

(b) exercise the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position; and

(c) act in the best interests of the members and, if there is a conflict between the members' interests and its own interests, give priority to the members' interests; and

(d) treat the members who hold interests of the same class equally and members who hold interests of different classes fairly; and

(e) not make use of information acquired through being the responsible entity in order to:

(i) gain an improper advantage for itself or another person; or

(ii) cause detriment to the members of the scheme; and

(f) ensure that the scheme's constitution meets the requirements of sections 601GA and 601GB; and

(g) ensure that the scheme's compliance plan meets the requirements of section 601HA; and

(h) comply with the scheme's compliance plan; and

(i) ensure that scheme property is:

(i) clearly identified as scheme property; and

(ii) held separately from property of the responsible entity and property of any other scheme; and

(j) ensure that the scheme property is valued at regular intervals appropriate to the nature of the property; and

(k) ensure that all payments out of the scheme property are made in accordance with the scheme's constitution and this Act; and

(l) report to ASIC any breach of this Act that:

(i) relates to the scheme; and

(ii) has had, or is likely to have, a materially adverse effect on the interests of members;

as soon as practicable after it becomes aware of the breach; and

(m) carry out or comply with any other duty, not inconsistent with this Act, that is conferred on the responsible entity by the scheme's constitution.

(2) The responsible entity holds scheme property on trust for scheme members.

Note: Under subsection 601FB(2), the responsible entity may appoint an agent to hold scheme property separately from other property.

(3) A duty of the responsible entity under subsection (1) or (2) overrides any conflicting duty an officer or employee of the responsible entity has under Part 2D.1.

....

177 BMA submits that the responsible entity holds the scheme property on trust for scheme members: s 601FC(2). It submits this must include decisions relating to distributions: s 601FB(1). BMC submits that s 601FC(1) lists a number of mandatory duties imposed upon the responsible entity. BMC also contends the Act provides that the responsible entity must "ensure that all payments out of the scheme property are made in accordance with the scheme's constitution and this Act": s 601FC(1)(k).

178 BMC alleges that, if passed, the resolution would move the financial administration of the managed investment scheme from the responsible entity to the members in meeting. It says that if passed, the resolution would also compel distributions even if such a distribution was otherwise unlawful and it refers, for example, to the Corporations Act 2001, Part 5.7B, especially Division 3 "Directors Duty to Prevent Insolvent Trading".

179 BMC submits that resolutions three to five all suffer from the same defect of seeking impermissibly to interfere with BMC's right and obligation to operate the managed investment scheme in accordance with Chapter 5C of the Corporations Act 2001.

180 In my opinion, if the constitution of the responsible entity provides that the decision as to distributions is to be made by the unit holders, then such a provision is not inconsistent with the Act. Section 601FC(1)(k) expressly acknowledges that the responsible entity must ensure that all payments out of the scheme property are made in accordance with the scheme's constitution and the Act.

181 As to the submission that the resolution could compel distributions to be made that are otherwise unlawful, for example compelling directors to trade whilst insolvent, it is unnecessary for me to decide this point in this case. Without deciding the point, I would have thought that the trustee's entitlement to indemnify itself out of the assets of the trusts for liabilities incurred on behalf of the trusts may mean that the trustee would be able to retain such moneys as it was entitled, to ensure that it would be able to do so, and that the resolution to distribute moneys would only apply to moneys which were free to be distributed. I am not satisfied that the changes to the constitution are inconsistent with the duties of directors to ensure that BMC is able to pay its debts as and when they fall due and prevent BMC from performing its contractual and other obligations.

182 Unlike a company, there does not appear to be any provision in the Corporations Act 2001 relating to managed investment schemes providing that "dividends" may only be paid out of profits and proscribing capital reductions. The nature of a trust is that the trust property is held on trust for the unit holders and if the constitution of the trust makes provision for payment to the beneficiaries' of their property, then, in my opinion, there is nothing improper or unlawful in such a provision, save to the extent that the trustee's right of indemnity should be protected and preserved or that with the authority of the constitution the trustee has already pledged, charged or otherwise alienated the property. In this case the PSD anticipated distributions would be made to members before any profits were made. ASI contends that these forecast distributions were one of the selling features of the PSD.

183 BMC also contends that resolutions 2 to 5 in the second requisition notice are proposed for the purpose of ASI seeking to extract personal benefit from BMC. These pleadings were not addressed in final submissions. Nevertheless, assuming that they are still made by BMC, I do not accept them. The Act and the constitution of the responsible entity make provisions for the distributing of property to the unit holders. I can see nothing improper in a unit holder seeking to take advantage of such provisions.

In the event that the previous resolution is passed, that article 11.3 of the trust be amended by deleting in its entirety the sentence beginning 'Subject to the Corporations Act'.

Clause 11 of the constitutions provide, in part, as follows:

Powers of the Manager

11.1 General powers

(a) Subject to this constitution, the Manager has all the powers in respect of the Trust that it is possible under the law to confer on a trustee and as though it were the absolute owner of the Assets and acting in its personal capacity.

(b) The Manager must exercise its powers under this constitution in accordance with the Principal Investment Policy.

(c) For the avoidance of doubt, the manager must not exercise its powers under this constitution if to do so would offend the Principal Investment Policy.

11.2 Contracting powers

Without limiting any of the powers in article 11.1, the Manager, in its capacity as responsible entity of the Trust has power to enter into (and be a member of trust that enter into) the Transaction Documents and furthermore, the power to perform all of its obligations under Transaction Documents. Subject to the Corporations Act, the Manager shall not be obliged to perform any obligation under this constitution if it would result in:

(a) a representation or warranty made by the Manager in any of the Transaction Documents being untrue;

(b) a breach by the Manager of an obligation under any of the Transaction Documents; or

(c) the occurrence of an event of default under any of the Transaction Documents.

185 Resolution five seeks to delete the sentence beginning "Subject to the Corporations Act". BMC contends that resolution five is invalid as it operates to remove the fundamental protection for the manager that it abide by the law, including abiding by undertakings lawfully made under the transaction documents. This ground was not included in the points of claim, nor was it elaborated on in the oral final submissions.

186 The resolution would require the responsible entity, BMC, to comply with the constitution of the trusts. On the arguments put before me, I do not see why the unit holders cannot require the responsible entity to comply with the constitution, so long as the constitution also complies with the Corporations Act 2001.

187 I have only heard limited argument on this issue but if I am required to rule on this issue I am not prepared to find that the second requisition notice is invalid due to the presence of resolution 5. Nor am I prepared to find that the following resolutions, that is, 6 and 7, should not be put or are invalid due to the presence of resolution 5.

IS RESOLUTION SIX SEEKING TO REMOVE BMC AS THE RESPONSIBLE ENTITY INVALID?

188 BMC contends resolution 6 is invalid as it contravenes s 601FM of the Corporations Act 2001. BMC submits it requires that there must be two resolutions: (a) one for removal; and (b) one for replacement of the responsible entity to validly remove the responsible entity.

189 Section 601FM provides:

Removal of responsible entity by members

(1) If members of a registered scheme want to remove the responsible entity, they may take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider and vote on a resolution that the current responsible entity should be removed and a resolution choosing a company to be the new responsible entity. The resolutions must be extraordinary resolutions if the scheme is not listed.

(2) If the members vote to remove the responsible entity and, at the same meeting, choose a company to be the new responsible entity that consents, in writing, to becoming the scheme's responsible entity:

(a) as soon as practicable and in any event within 2 business days after the resolution is passed, the current responsible entity must lodge a notice with ASIC asking it to alter the record of the scheme's registration to name the chosen company as the scheme's responsible entity; and

(b) if the current responsible entity does not lodge the notice required by paragraph (a), the company chosen by the members to be the new responsible entity may lodge that notice; and

(c) ASIC must comply with the notice when it is lodged.

(3) A person must not lodge a notice under subsection (2) unless the consent referred to in that subsection has been given before the notice is lodged.

Note: If the members vote to remove the responsible entity but do not, at the same meeting, choose a company to be the new responsible entity, or the company they choose does not consent to becoming the scheme's responsible entity, the scheme must be wound up (see section 601NE).

1"> 190 Section 601NE(1) provides:

The winding up of the scheme

(1) The responsible entity of a registered scheme must ensure that the scheme is wound up in accordance with its constitution and any orders under subsection 601NF(2) if:

(a) the scheme's constitution provides that the scheme is to be wound up at a specified time, in specified circumstances or on the happening of a specified event and that time is reached, those circumstances occur or that event occurs; or

(b) the members pass an extraordinary resolution directing the responsible entity to wind up the scheme; or

(c) the Court makes an order directing the responsible entity to wind up the scheme; or

(d) the members pass a resolution removing the responsible entity but do not, at the same meeting, pass a resolution choosing a company to be the new responsible entity that consents to becoming the scheme's responsible entity.

191 Section 252L provides:

Division 3** - Members' rights to put resolutions etc. at meetings of members**

252L Members' resolutions

(1) The following members of a registered scheme may give the responsible entity notice of a resolution that they propose to move at a meeting of the scheme's members:

(a) members with at least 5per cent of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at a meeting of the scheme's members.

(1A) The regulations may prescribe a different number of members for the purposes of the application of paragraph (1)(b) to:

(a) a particular scheme; or

(b) a particular class of scheme.

Without limiting this, the regulations may specify the number as a percentage of the total number of members of the scheme.

(1B) The resolution must be:

(a) a special resolution; or

(b) an extraordinary resolution; or

(c) a resolution to remove the responsible entity of a scheme that is listed and choose a new responsible entity.

192 BMC submits that a resolution to remove the responsible entity will not work without also a resolution to appoint a new responsible entity. ASI submits that s 601NE(1)(d) recognises that resolution 6 can be passed without being put forward with another resolution to appoint a new entity.

193 BMC submits that s 601NE(1)(d) does not recognise that resolution 6 can be validly proposed and passed by itself. BMC submits that s 601NE is dealing with a situation where both a resolution to remove and a resolution to appoint a new responsible entity are both proposed at the same meeting and that only the resolution to remove passes. BMC submits that in that event s 601NE is then activated.

194 BMC contends that s 601FN is not authority for the proposition that a resolution to remove a responsible authority can be proposed without also a resolution to appoint a new responsible entity. Section 601FN is only activated if the scheme does not have a responsible entity "that meets the requirements of section 601FA."

195 The responsible entity must ensure the scheme is wound up where the members pass a resolution removing the responsible entity but do not at the same meeting pass a resolution choosing a company to be the new responsible entity: s 691NE(d).

196 I will assume for the purposes of considering BMC's contentions that the Act requires that the resolution to remove a responsible entity should be followed at the same meeting by a resolution choosing a new responsible entity. Either resolution may in this case be an ordinary resolution. Section 601FM provides that the resolution must be an extraordinary resolution if the scheme is not listed. In MTM Funds Management Ltd v Cavalane Holdings Ltd,[41] Austin J of the Supreme Court of New South Wales held that the power to remove a responsible entity is (except where the scheme is not listed) a power to do so by ordinary resolution. Accordingly, I find that the removal of the responsible entity is by ordinary resolution as the scheme is listed.

197 At the same meeting as the resolution to remove the responsible entity is passed, the members could by ordinary resolution choose a new responsible authority and thereby avoid the scheme having to be wound up by the responsible authority. Accordingly, I do not accept the submission that resolution six as proposed is invalid.

HAS THE RESOLUTION TO REMOVE BMC AS THE RESPONSIBLE ENTITY BEEN PROPOSED FOR AN IMPROPER PURPOSE?

198 BMC also pleads that resolutions 6 and 7 are not proposed for a genuine or proper purpose, but rather as a means of exerting pressure on BMC to agree to ASI's "strategies" and purposes of seeking an immediate payment of 5.95 cents per Stapled Unit and/or postponing the payment of the Second Instalment. Resolutions 6 and 7 are only put if all the previous resolutions do not pass. In other words, the resolutions seeking to wind up the schemes and to reinstate the distribution have not been passed. In my opinion, BMC has not established that in those circumstances ASI does not really want BMC replaced.

DOES PROPOSED RESOLUTION FOUR INVALIDATE THE SECOND REQUISITION?

199 BMC submits that the second requisition is invalid as there is no obligation on the responsible entity of a registered scheme to call and arrange to hold a meeting of the scheme's members to consider and vote on an ordinary resolution (as opposed to a special or extraordinary resolution). BMC contends that the presence of proposed resolution four in the second requisition invalidates the whole notice.[42]

200 BMC rely on the definition of extraordinary resolutions and extraordinary resolutions and ss 252B, 252J and 252L in putting this argument. They provide as follows:

extraordinary resolution, in relation to a registered scheme, means a resolution:

(a) of which notice as set out in paragraph 252J(c) has been given; and

(b) that has been passed by at least 50per cent of the total votes that may be cast by members entitled to vote on the resolution (including members who are not present in person or by proxy).

special resolution means:

(a) in relation to a company, a resolution:

(i) of which notice as set out in paragraph 249L(c) has been given; and

(ii) that has been passed by at least 75per cent of the votes cast by members entitled to vote on the resolution; or

(b) in relation to a registered scheme, a resolution:

(i) of which notice as set out in paragraph 252J(c) has been given; and

(ii) that has been passed by at least 75per cent of the votes cast by members entitled to vote on the resolution.

Part 2G.4** - Meetings of members of registered managed investment schemes**

Division 1** - Who may call meetings of members**

...

252B Calling of meetings of members by responsible entity when requested by members

(1) The responsible entity of a registered scheme must call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special or extraordinary resolution on the request of:

(a) members with at least 5per cent of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote on the resolution.

(1A) The regulations may prescribe a different number of members for the purposes of the application of paragraph (1)(b) to:

(a) a particular scheme; or

(b) a particular class of scheme.

Without limiting this, the regulations may specify the number as a percentage of the total number of members of the scheme.

(2) The request must:

(a) be in writing; and

(b) state any resolution to be proposed at the meeting; and

(c) be signed by the members proposing to move the resolution.

(3) The request may be accompanied by a statement about the proposed resolution provided by the members making the request.

(4) Separate copies of a document setting out the request and statement (if any) may be used for signing by members if the wording of the request and statement (if any) is identical in each copy.

(5) The percentage of the votes that members have is to be worked out as at the midnight before the request is given to the responsible entity.

(6) The responsible entity must call the meeting within 21 days after the request is given to it. The meeting is to be held not later than 2 months after the request is given to the responsible entity.

(7) The responsible entity must give to each of the members a copy of the proposed resolution and statement (if any) at the same time, or as soon as practicable afterwards, as it gives notice of the meeting. The responsible entity must distribute the copies in the same way in which it gives notice of the meeting.

(8) The responsible entity does not have to distribute a copy of the resolution or statement if either is more than 1,000 words long or defamatory.

(9) The responsible entity is responsible for the expenses of calling and holding the meeting and making the distribution. The responsible entity may meet those expenses from the scheme's assets.

252C Failure of responsible entity to call meeting of the scheme's members

(1) Members with more than 50per cent of the votes carried by interests held by the members who make a request under section 252B may call and arrange to hold a meeting of the scheme's members and distribute the statement (if any) if the responsible entity does not do so within 21 days after the request is given to the responsible entity.

(2) The meeting must be called and the statement is to be distributed in the same way - so far as is possible - in which meetings of the scheme's members may be called by the responsible entity and information is distributed to members by the responsible entity. The meeting must be held not later than 3 months after the request is given to the responsible entity.

(3) To call the meeting the members requesting the meeting may ask the responsible entity under section 173 for a copy of the register of members. Despite paragraph 173(3)(b), the responsible entity must give the members requesting the meeting the copy of the register without charge.

(4) The responsible entity must pay the reasonable expenses the members incurred because the responsible entity failed to call and arrange to hold the meeting and to make the distribution (if any). The responsible entity must not pay those expenses from the scheme's assets.

(5) An offence based on subsection (3) or (4) is an offence of strict liability.

Note: For strict liability, see section 6.1 of the Criminal Code.

252D Calling of meetings of members by members

(1) Members of a registered scheme who hold interests carrying at least 5per cent of the votes that may be cast at a meeting of the scheme's members may call and arrange to hold a meeting of the scheme's members to consider and vote on a proposed special resolution or a proposed extraordinary resolution. The members calling the meeting must pay the expenses of calling and holding the meeting.

(2) The meeting must be called in the same way - so far as is possible - in which meetings of the scheme's members may be called by the responsible entity.

(3) The percentage of the votes carried by interests that members hold is to be worked out as at the midnight before the meeting is called.

252E Calling of meetings of members by the Court

(1) The Court may order a meeting of a registered scheme's members to be called to consider and vote on a proposed special or extraordinary resolution if it is impracticable to call the meeting in any other way.

(2) The Court may make the order on application by:

(a) the responsible entity; or

(b) any member of the scheme who would be entitled to vote at the meeting.

Note: For the directions the Court may give for calling, holding or conducting a meeting it has ordered be called, see section 1319.

Division 2** - How to call meetings of members**

...

252J Contents of notice of meetings of members

A notice of a meeting of a registered scheme's members must:

(a) set out the place, date and time for the meeting (and, if the meeting is to be held in 2 or more places, the technology that will be used to facilitate this); and

(b) state the general nature of the meeting's business; and

(c) if a special or extraordinary resolution is to be proposed at the meeting - set out an intention to propose the special or extraordinary resolution and state the resolution; and

(d) contain a statement setting out the following information:

(i) that the member has a right to appoint a proxy;

(ii) that the proxy does not need to be a member of the registered scheme;

(iii) that if the member appoints 2 proxies the member may specify the proportion or number of votes the proxy is appointed to exercise.

Note: There may be other requirements for disclosure to members.

...

Division 3** - Members' rights to put resolutions etc. at meetings of members**

252L Members' resolutions

(1) The following members of a registered scheme may give the responsible entity notice of a resolution that they propose to move at a meeting of the scheme's members:

(a) members with at least 5per cent of the votes that may be cast on the resolution; or

(b) at least 100 members who are entitled to vote at a meeting of the scheme's members.

(1A) The regulations may prescribe a different number of members for the purposes of the application of paragraph (1)(b) to:

(a) a particular scheme; or

(b) a particular class of scheme.

Without limiting this, the regulations may specify the number as a percentage of the total number of members of the scheme.

(1B) The resolution must be:

(a) a special resolution; or

(b) an extraordinary resolution; or

(c) a resolution to remove the responsible entity of a scheme that is listed and choose a new responsible entity.

(2) The notice must:

(a) be in writing; and

(b) set out the wording of the proposed resolution; and

(c) be signed by the members giving the notice.

(3) Separate copies of a document setting out the notice may be used for signing by members if the wording of the notice is identical in each copy.

(4) The percentage of the votes that members have is to be worked out as at the midnight before the members give the notice.

201 BMC contends that s 252B(1) provides that a member may only request the responsible entity to call and arrange a meeting of the scheme's members to consider and vote on a proposed special or extraordinary resolution. In other words, a member may not request a responsible entity to call a meeting to consider and vote on an ordinary resolution. BMC contends that s 252J(c) provides that the contents of the notice of meeting must, if a special or extraordinary resolution is proposed at the meeting, set out an intention to propose the special or extraordinary resolution and state the resolution. BMC also submits s 252L(1B) is relevant. Section 252L permits certain members to give the responsible entity notice of a resolution they propose to move at a meeting of the scheme's members. Section 252L(1B) provides the resolution must be:

(a) a special resolution; or

(b) an extraordinary resolution; or

(c) a resolution to remove the responsible entity of a scheme that is listed and choose a new responsible entity.

202 I agree that s 252B is triggered where an eligible member requests a meeting of scheme members to consider and vote on a proposed special or extraordinary resolution. The second requisition included special resolutions in resolutions 2, 3 and 5. The issue is whether the proposing of resolution 4 which was not proposed as a special or ordinary resolution invalidates the request. Section 601FM and s 252L(1B) suggest that ordinary resolutions may be considered and passed by members. As discussed above, the resolution to remove and replace a responsible entity is an ordinary resolution in the case of listed schemes. Under s 252L an eligible member may give the responsible entity notice of a resolution they propose to move at a meeting of the scheme's members. I see no reason why this should not apply to all meetings convened under ss 252A, 252B, 252C, 252D or 252E. In my view the provision applies to any such meeting. I do not see any reason why the Act should be construed in a way to limit the right of members to consider resolutions at meetings.

203 In my view, the presence of an ordinary resolution along with special resolutions under s 252B does not invalidate the requisition. The obligation was activated by the presence of the special resolution. It was not invalidated by such a request also including an ordinary resolution.

ARE THE "CASCADING" NATURE OF THE RESOLUTIONS VOID?

204 BMC submits that the first resolution in the second requisition which is number 2 as the resolution was intended to follow the resolution in the first requisition. It submits both resolutions 2 and 3 refer to the resolution the subject of the first requisition: the resolution to wind-up the trusts. It submits that in the event that the first requisition is invalid and should be set aside, the basis for resolution 2 and resolution 3 will have been removed as both those resolutions assume that resolution 1 is "not passed", i.e. that it has been put to the meeting and has failed as a special resolution.

205 BMC also submits that resolutions 4, 5 and 6 are bad for similar reasons. It submits that each is predicated upon an earlier resolution. It says resolution 4 requires that resolution 3 is passed; resolution 5 requires that resolution 4 is passed; resolution 6 requires that resolution 5 is put to the meeting and not passed. It submits that, accordingly, if resolution 1 is bad, the premise of all the other resolutions cannot obtain.

206 As it is, I have not found that any of the resolutions are invalid and, in those circumstances, the submissions of BMC are not applicable on the issue of cascading.

HAS ASI VALIDLY CALLED THE MEETING FOR 14 APRIL 2009?

207 BMC contends that ASI was not entitled to convene a meeting for 14 April 2009 as s 252C was not triggered. BMC argue that BMC was not obliged to comply with the request of 20 February 2009 and therefore s 252C was not available to ASI.

208 I have held the second requisition was valid. Accordingly, ASI was entitled to call a meeting to consider the resolutions it proposed in the second requisition.

209 BMC alleges that ASI has invalidly called the second meeting as the resolutions to be put to the meeting are not the resolutions the subject of the second resolution. They are the same resolutions but the nature of resolution four has altered from an ordinary resolution to a special resolution. In my opinion, the alteration of the nature of the resolution is a procedural irregularity within the meaning of s 1322. Section 1322(2) provides that a proceeding under the Act (such, I find, as the convening of a meeting under s 252C) is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid. In my opinion no injustice will be caused by the change in the description of the type of resolution that is proposed from ordinary to special.

HAS BMC ESTABLISHED A PRIMA FACIE CASE FOR WINDING UP ASI?

210 BMC claims it is a contingent or prospective creditor of ASI and has the right to apply to the Court for ASI to be wound up in insolvency under s 459A of the Corporations Act 2001: s 459P(s). BMC contends that ASI is not able to pay its debts as and when they fall due. BMC contends that for the purposes of an application for winding up under s 459P, the Court may have regard to a company's contingent and prospective liabilities.

211 A unit holder in the trusts will become liable to BMC for the second instalment of $1 per unit if it is a registered unit holder on 29 April 2009. The obligation will be to pay $1 per unit on 29 April 2009. As at 6 March 2009, ASI was the registered holder of 73,100,993 Stapled Units and if events remain as they currently stand and ASI remains the registered unit holder on 29 April 2009, and BMC does not alter or revoke the instalment obligation, it will become liable for $73,100,993 on 29 April 2009.

212 On the definition of prospective and contingent creditors, BMC refers to paragraph 27.080 of Ford's Principles of Corporation Law, which states that:

(a) Prospective liability: "[W]here the duty to perform the obligation is to arise on a future date or an event certain to happen, the performance is said to be prospective";

(b) Contingent liability: "[W]here performance is to occur upon an event which may or may not happen, the performance is said to be contingent".

213 BMC contends that the significance of contingent and prospective liabilities "depends on the degree of likelihood that they will crystallise into actual, present liabilities, falling due in the short term future": Brooks v Heritage Hotel Adelaide Pty Ltd.[43] Under these definitions, BMC is not a prospective creditor of ASI. It is not certain ASI will be registered as a unit holder for its current holding on 29 April 2009.

214 Some assistance to construing the meaning of a contingent liability can be gained from s 553(1), which provides:

Subject to this Division and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company.

It should be noted "that the circumstances giving rise to which" must occur before the relevant date.

215 In Expile Pty Ltd v Jabb's Excavations Pty Ltd,[44] Palmer J of the Supreme Court of New South Wales summarised the authorities on what constitutes a contingent liability. He said:

... the critical integer to be identified in a contingent claim is that there be an existing obligation and that out of that obligation there will arise a liability of the company to pay a sum of money on the happening of an event that may not necessarily occur ...[45]

A future claim is distinguishable from a contingent claim in that, while both are founded on an obligation existing as at the commencement of the winding up or the deed of company arrangement, a future claim will arise at some time thereafter while a contingent claim may arise. A typical example of a future claim is a claim for rent which will become due in the future under a lease which is in existence at the commencement of the winding up.[46]

217 In Community Development Pty Ltd v Engwirda Construction Company[47] Kitto J cited with approval Pennycuick J, who defined a contingent creditor as "A person towards whom, under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date."[48] In FCT v Gosstray,[49] Tadgell J of the Supreme Court of Victoria said:

An attempt to formulate a universally applicable definition of a contingent debt or of a contingent creditor is difficult, and probably not very useful having regard to the variety of contingent claims that may properly be the subject of proof. A contingent creditor, like an elephant, is rather easier to recognise than to define.[50]

218 Tadgell J cited with approval the definition of Pennycuick J quoted above by Kitto J. Tadgell J confirmed the principle that a contingent debt must be founded on an existing obligation.[51] He held:

If, however, a claim were made not founded on an obligation of the bankrupt existing at the date of the bankruptcy which could ripen into a debt upon a contingency, the proper conclusion, in my view, would be not that the provable claim should be assessed at nil but that there was no claim on the bankrupt estate at all.[52]

219 In National Bank of Australasia Ltd v Mason[53] the High Court considered whether a guarantee given by the customer Mason on behalf of a company in respect of moneys which may be owing to the bank whether contingently or otherwise, covered a potential liability to the bank by Mason and the company for payments that might be made by the bank to payees of cheques improperly banked in the company's account by Mason. Barwick CJ said:

In my opinion, the possibility that the company will have to pay to the [bank] the amount paid by it to the payees of the cheques cannot be regarded as moneys "owing contingently". Nor, in may opinion, can that amount be properly described as a contingent liability of the company. That description is not satisfied by the fact that money may become owing upon the occurrence of some event. There must be some present obligation to pay out of which the money may become due. The stress is upon the word "owing" which imports some existing obligation though it may be imperfect until an event within its purview occurs.[54]

220 In McDonald v FCT [55] Barrett J said:

The essential feature of a contingent debt or claim is its source in some existing obligation or state of affairs that may or may not mature into a present debt.[56]

221 And further in dealing with whether a costs order made after the relevant date for determining the existence of a contingent liability was a contingent liability at the relevant date he said:

Where some act or omission of a company occurring before the winding up carries within it the seeds of the substantive relief in proceedings in which an adverse costs order is likely if the claim against the company is made out, the eventual liability under such a costs order may be seen to have its genesis in the original act or omission. [57]

222 In Fisher v Madden,[58] the New South Wales Court of Appeal considered the question of the meaning of a contingent debt or claim within the meaning of s 553(1) of the Corporations Act. Sheller JA, with whom Beazley JA agreed, asked whether the alleged debtor was under an existing obligation to pay a sum of money. He said:

...at the relevant date Dataflow was under no existing obligation to pay a sum of money by way of a retrenchment payment to Ms Fisher immediately or on a future event. Ms Fisher had only a right to take proceedings in the Industrial Relations Commission to vary the contract to that end...

However, Ms Fisher's right under s 106 of the Industrial Relations Act be categorised, her right to invoke the jurisdiction of the Industrial Relations Commission did not until such time as an order was made create any obligation on Dataflow to make a retrenchment payment to her.[59]

223 In Environmental and Earth Sciences Pty Ltd v Vouris,[60] Graham J of the Federal Court of Australia summarised the authorities on contingent liabilities at length.[61] His analysis confirmed the necessity that there be a present obligation owed by the debtor to the creditor which on the happening of a future event may ripen into a sum certain.

224 Turning to the facts of this case, is there a present obligation on ASI to pay an instalment which may become payable on the happening of some future event? The obligation to pay an instalment is only imposed on those unit holders identified as being registered on 29 April 2009. No obligation arises out of being a unit holder as such. The obligation only arises if the person is a unit holder on a certain day. Being a unit holder does not by itself give rise to any contingent liability to pay any instalment. The liability is not sourced from the fact that some months earlier before the instalment date the person held units. The liability is solely sourced from the person being a unit holder on the instalment day.

225 The present case can be contrasted to those where an action has been won before the relevant date and a costs order is made after the relevant date. One can see that the obligation to pay costs was sourced or had its genesis in the success in the action before the relevant date. The obligation for costs arises from the loss of the action: see Re Pasminco Limited .[62]

226 One can test it another way. Could a proof of debt be lodged by BMC if the relevant date occurred before 29 April 2009? The circumstances giving rise to the debt would not have not occurred before 29 April 2009. A proof of debt could not be lodged.

227 I do not accept that BMC is a currently a contingent creditor of ASI.

228 ASI submits that if, contrary to its earlier submissions, BMC is a contingent creditor of ASI, the Court's discretion under s 459P(3) of the Act should be exercised against BMC. ASI refers to Melbase Corporation Pty Ltd v Segenhoe Ltd[63] where Lindgren J of the Federal Court of Australia referred to factors relevant to the exercise of discretion under s 459P(3). Relevantly he said that it is not in the public interest that an insolvent company should continue trading.

229 In this case, there is no evidence that ASI is otherwise insolvent, save for the claim that BMC asserts. Further, there appears to be grounds to suggest that BMC might be seeking to wind up ASI for reasons collateral to a desire to wind up an insolvent company on behalf of all creditors. If ASI were a contingent debtor of BMC I would not exercise my discretion to allow BMC to apply to wind up ASI. I believe it is just and equitable to wait and see if ASI is affixed with liability to pay the instalment due on 29 April 2009 before considering such an application.

230 Accordingly, in my opinion, BMC has not established a prima facie case that ASI is insolvent and accordingly I refuse leave to BMC to apply for the winding up in insolvency of ASI.

HAS BMC ESTALISHED A PRIMA FACIE FOR WINDING UP ASI UNDER THE JUST AND EQUITABLE GROUND?

231 As indicated above, I do not find that BMC is contingent creditor of ASI. It therefore has no standing to apply to wind up ASI under the just and equitable grounds: s 462(2).

232 If I BMC is a contingent creditor of ASI, then BMC relies upon the following circumstances to justify winding up ASI on the just and equitable ground:

(a) BMC contends ASI is a company of which the sole director and secretary are Mr Nicholas Bolton. Its issued capital is owned entirely by Australian Style Holdings Pty Ltd (ASH). ASI holds no legal interest in any real property in Australia, does not hold a registered Australian business number, and has given a fixed and floating charge, with a maximum prospective liability of $10 million, to the Commonwealth Bank of Australia Limited.

(b) BMC contends ASH in turn holds no legal interest in any real property in Australia, does not hold a registered Australian business number, its sole director and secretary is Mr Bolton and it has an issued share capital of $100 comprising of 100 fully paid shares, with those shares being held as to one share to Mr Bolton and 99 shares by a Georgia Hernden Bolton.

(c) BMC contends that in all the circumstances, the Court is entitled to infer that ASI has no ability to meet its current prospective or alternate contingent, liability to BMC of $73,150,993 when and if that amount falls due for payment on 29 April 2009.

(d) BMC contends there is a public interest in the privilege of incorporation not being abused by the entering into of obligations which a company is not in a position to meet.

(e) BMC contends ASI has engaged in a scheme pursuant to which it is providing a facility by which members may transfer Stapled Units to ASI pursuant to a "deed of gift of shares" in return for an administration fee of $1,305. The scheme enables the outstanding instalment liabilities to be passed to ASI in circumstances in which ASI will not be able to meet those liabilities.

(f) BMC alleges Bolton has given false evidence that ASI entered into a put option with Mr William on 18 November 2008.

(g) BMC alleges Bolton has admitted that ASI will not be able to meet the liability.

(h) BMC contends that ASI did not tell transferors ("donors") that it has in turn entered into the put option agreement with Mr John Howard Williams.

(i) BMC alleges the activities being carried out by ASI do not constitute a legitimate business.

(j) BMC contends by purporting to have entered into the put option agreement with Mr John Howard Williams, ASI is seeking to place itself in the position of avoiding its liability for the second instalment through the divestment of the Stapled Units presently held by ASI, and seeking to pass that liability on to an individual who admittedly is not in a position to pay a liability exceeding $100 million.

(k) BMC contends ASI has failed to make the relevant disclosure in the manner required by s 671B and s 672B of the Corporations Act 2001 and has falsely represented that Mr Williams had a relevant interest in 19.9per cent of the Units on 4 March 2009, thereby committing a criminal offence under s 672B(1).

(l) BMC contends ASI, through Bolton, has engaged in, at least misleading and deceptive conduct and has abused the power to requisition a meeting by requisitioning for the winding up of the Trusts and the removal of the responsibility when those were not ASI's true purposes. BMC submits the evidence is clear that ASI gave notice of such requisitions for an ulterior purpose, that being to seek to negotiate a financial benefit for ASI under the false threat of the Trusts otherwise being wound up, or the responsibility being removed.

(m) BMC alleges at the same time, ASI has entered into a sham transaction with Mr Williams to avoid ASI's liabilities in the event that ASI's threats were unsuccessful.

(n) ASI and other companies in the "ASI Group" have, for reasons that are unexplained, failed to lodge tax returns.

(o) BMC alleges there is at least an analogy to be drawn with s 172 of the Property Law Act 1958 (Victoria). BMC says it is arguable that ASI's activities fall within that section. It submits that for present purposes it is unnecessary to resolve that question. It alleges ASI's activities offend the public policy that underpins that legislation. It says ASI is carrying on business for profit which involves defeating BMC's ability to recover the outstanding instalment liabilities.

233 As to the grounds which go to ASI's insolvency, I do not accept those for the reasons referred to above.

234 As to the suggestion that ASI has engaged in some sort of improper scheme by having units transferred to it by a deed of gift, I do not accept that submission. I see nothing improper in a unit holder transferring its units as alleged. The project imposes liability on persons who are unit holders on a certain date. On the basis of the submissions before me, I find there is no impropriety per se involved in a person taking steps to ensure that he, she or it is not a unit holder on the instalment date. It appears that a great many unit holders disposed of their units in October and November of 2008. It may have been the case that they did so to avoid the payment of the instalments. In any event, it is not necessary for me to make any findings about those matters.

235 I accept the submission that the put option is a sham. I find that neither ASI nor Mr Williams had any intention of carrying out the agreement. The idea that Mr Williams intended to pay $70,000 odd to ASI for the privilege of incurring a liability of some $150 million is fanciful. Mr Williams said that he was advised that it was extremely unlikely that the option would be exercised.[64] In my opinion, he entered into the option with the belief and intention that it would not be exercised and it was never his intention to perform it. So, too, for ASI. It has not paid the put premium. It is inconceivable that ASI, through Mr Bolton, believed that Mr Williams would pay $70,000 odd to take a transfer of the units and thereby expose Mr Williams to a possible liability of $150 million. I find that ASI had not intention to exercise the option.

236 Nevertheless, I find that the entering into the option agreement does not, by itself or in combination with the other matters which I will come to, constitute sufficient grounds for a just and equitable winding up.

237 I do not accept the submission about the misleading and deceptive conduct in (l).

238 I do not accept the suggestion that the transactions and the put option are analogous to s 172 of the Property Law Act 1958 (Victoria). BMC invokes the common law principles that underlie s 172 of the Property Law Act 1958. BMC alleges that ASI is seeking to divest itself of potential liabilities to avoid meeting them and by a means that ensures that the liabilities will not be met. I do not see any unconscionable or impropriety in such conduct. If it is the case, as it is suggested, that the units will not be valued in the market for an amount equal to or more than the second instalment on and after 29 April 2009 when the second instalment will be paid by the unit holders or the underwriters, then it is in the commercial interest of a current unit holder to avoid by legal means, if it can, becoming liable to pay the instalment.

239 The BrisConnections Project relies on many parties making rational commercial decisions in their own interests to make a profit. It does not rely on any person undertaking any publicly spirited actions of charity. The project is a commercial venture. It may not be in the commercial interests of current unit holders to remain unit holders on 29 April 2009, I do not see anything improper in unit holders taking legal steps to ensure they are not registered unit holders on 29 April 2009.

240 BMC relies on principles of equity, which themselves rely on unconscionability. Why is it unconscionable for a unit holder, whose investment in the project is currently valueless, takings steps to avoid wasting more money on the project, if that be the case? Perhaps it might be said that others have relied on the current unit holder paying the instalments and have altered their position to their advantage on such reliance. None of the existing unit holders have represented, however, that they will remain unit holders on 29 April 2009 or that they will ensure the second payment is made. The other contracting parties in the BrisConnections Project took the risk that the project may not be successful, if that be the case, and that existing unit holders may seek to cease being unit holders on 29 April 2009. The evidence establishes that institutions who held substantial numbers of units in the unit trusts disposed of these units some time ago and that the current unit holders include many who were not aware of the liability attached to the units when they acquired them. On the limited submissions that were made, I do not find any matter in s 172 of the Property Law Act 1958 that is relevant to the just and equitable claim.

241 I accept the relevant legal principles relating to winding up on the just and equitable ground as referred to in the submissions of BMC. I accept that where a company engages in illegal or improper conduct, it may be just and equitable to wind up a company in the public interest: ASIC v International Unity Insurance Pty Ltd.[65]

242 In summary, therefore, ASI entered into a put option which is a sham. It may have been a party therefore to an inaccurate substantial holding notice being given. It may be slow in lodging its tax returns. It may have for its own benefit allowed previous unit holders to transfer their units. Mr Bolton may have been an unsatisfactory witness. Taking these all together they fall well short of the conduct necessary to take the extreme step of winding up an otherwise profitable company.

243 In my opinion, BMC has not established it is a contingent creditor nor that has it satisfied me that is has a prima facie case, if it were a contingent creditor. Accordingly, I must not hear the application to wind up ASI on the just and equitable ground: s 462(4).

244 I dismiss the application of BMC to wind up ASI.

245 I dismiss the application of BMC for declarations and relief concerning the meetings.

247 After I delivered my findings on 2 April 2009 and before I delivered these written reasons, ASIC intervened under s 1330 of the Corporations Act 2001 and thereby became a party to both proceedings. ASIC made submissions about communications BMC had had with members about the meeting to consider the resolution to wind up the trusts. ASIC was given the opportunity to make such application as it may be advised in the event that it wished the Court to make any findings or make any orders relating to information to be given to members for the purposes of considering the resolution. It has now done so. None of the matters ASIC alleges relate to the issues canvassed above save on the alleged misleading and deceptive conduct by ASI. Even if the allegations of ASIC are made out, they would not alter my reasons above. I do not see any reason to withhold delivering these reasons.

248 Wonate One Pty Ltd a member of the unit trusts issued an interlocutory process seeking orders that it represent all unit holders other than ASI, that an inquiry be ordered into the trusts and result circulated to members for the meetings of members to be held this month and the Court order a meeting of members. On 2 April 2009, Mr Sifris QC for Wonate informed the Court his client did not wish to proceed. On 3 April 2009 the proceeding was dismissed by consent with no order as to costs.

[3] S 459P(2) and (3) Corporations Act 2001.

[4] See Product Disclosure Statement glossary

[6] Further, on 29 February 2009, BMC put out a statement to Unit holders which said, in part, "Winding up the trusts will not remove the obligation on unit holders to pay the outstanding amounts on their units (a total amount of $2 per unit) including the second instalment payable on 29 April 2009."

[9] See Demagogue v Ramensky [1992] FCA 557; (1992) 39 FCR 31.

[12] [1987] VicRp 42; [1987] VR 467.

[13] [1938] HCA 4; (1938) 60 CLR 150.

[14] [1953] HCA 39; (1953) 90 CLR 425.

[15] [1987] VicRp 42; [1987] VR 467 at 471 per Beach J.

[19] [2004] NSWSC 296; (2004) 49 ACSR 386.

[20] [1987] VicRp 42; [1987] VR 467.

[21] [2004] NSWSC 296; (2004) 49 ACSR 386at 397.

[22] (2002) 17 FLR 232 at 243; [2002] NSWSC 1123; 43 ACSR 401 at 411.

[23] [2004] NSWSC 296; (2004) 49 ACSR 386 at 398.

[28] [2002] NSWSC 583; (2002) 42 ACSR 313.

[30] [1915] HCA 56; (1915) 20 CLR 509 at 521-522.

[31] [1905] HCA 28; (1975) 11 ALR 417 at 426-427; 2 ACLR 122 at 131.

[32] (2002) 17 FLR 232 at 243; [2002] NSWSC 1123; (2002) 43 ACSR 401 at 411.

[33] [2002] NSWSC 583; (2002) 42 ACSR 313.

[34] [1992] HCA 34; (1992) 174 CLR 509 at 526-527.

[37] In re Majory [1955] Ch 600 at 623-624.

[38] Goldsmith v Sperrings Ltd [1977] 1 WLR at 498-499; [1977] 2 All ER at 581-582; see also Varawa (1911) 13 CLR at 91.

[40] Winterton Constructions Pty Ltd v Hambros Australia Ltd [1992] FCA 582; (1992) 39 FCR 97 at 114 per Hill J.

[41] [2000] NSWSC 922; (2000) 35 ACSR 440.

[43] (1996) 20 ACSR 61 at 65.

[44] [2004] NSWSC 284; (2004) 22 ACLC 667.

[47] [1969] HCA 47; (1969) 120 CLR 455 at 459.

[48] In Re William Hockley Ltd (1962) 1 WLR 555 at 558.

[49] [1986] VicRp 84; [1986] VR 876.

[55] [2005] NSWSC 2; (2005) 58 ATR 418.

[58] [2002] NSWCA 28; (2001) 54 NSWLR 179.

[59] [2002] NSWCA 28; (2001) 54 NSWLR 179 at 193.

[60] [2006] FCA 679; (2006) 152 FCR 510.

[62] [2002] FCA 231; (2002) ACLC 782; 41 ACSR 256.

[63] [1995] FCA 1225; (1995) 17 ACSR 187.

[65] [2004] FCA 1059; (2004) 22 ACLC 1416 per Lander J; see also Deputy Commissioner of Taxation v Casualife Furniture International Pty Ltd [2004] VSC 157; (2004) 9 VR 549 per Hansen J.