Plaintiff v First Defendant

TRUST - Alleged invalidity of original issue where units issued at below $1.00 - remedial action taken by responsible entity - Adjustment of units - No consideration provided.

TRUST - Alleged breach of trust - Whether issue of units to third party at below $1.00 per unit was in breach of trust - liability of responsible entity - no liability on part of innocent third party - Adjustment set aside.

1 Between 26 May 2005 and 12 October 2008, MacarthurCook Fund Management Limited ("MCFM") was the responsible entity of the Macarthur Cook Office Property Trust ("The Trust"). On 12 October 2008, MacarthurCook Real Estate Funds Limited ("MCREF") became the responsible entity of the Trust. In July 2009, the Macarthur Cook Group was acquired by AIMS Financial Group Pty Limited ("AIMS").

2 On 9 November 2007, APN Funds Management Limited (in its capacity as the responsible entity for the APN Property for Income Fund No. 2) ("APN"), MCFM and its holding company, MacarthurCook Limited ("MCL") (now known as Australian Property Investment Strategic Pty Ltd), entered into a Unit Subscription and Put Option Deed ("The Deed") whereby APN was issued 5,873,759.26 Wholesale Units in the Trust at a price of $0.87678 per unit.

3 The Deed also contained a Put Option whereby APN was entitled to put to MCL the units it had acquired in the Trust and MCL was obliged to purchase those units subject to the requirements of the Deed. APN exercised the Put Option in 2010 and it is the exercise of the Put Option that gives rise to the present dispute.

4 The principal dispute between the parties relates to the construction of the terms of the Deed regarding the date on which completion of the Unit Sale and Purchase agreement, arising out of APN's exercise of the Put Option, was to occur. A further issue in dispute is whether APN was required to tender unit certificates at completion.

5 An ancillary issue relates to the issuing of Wholesale Units in the Trust at the price of $0.87678 per unit. It is alleged by MCL, that the issue of units at this price was 'invalid' as the Constitution required units to be issued at a price of $1.00 per unit. Accordingly, MCL contends that the number of units held by APN should be reduced. Based on legal advice MCREF has purported to reduce the units accordingly. APN contends that this purported reduction is invalid and MCREF is in breach of its duties under the Corporations Act 2002 (Cth) ("the Corporations Act").

6 The Trust was established by a deed poll ('the Constitution') dated 20 April 2005 and registered by ASIC as a managed investment scheme under Chapter 5C of the Corporations Act on 26 May 2005.

a) the Responsible Entity would hold the Fund upon trust for the unit holders on and subject to the constitution;[1]

b) the beneficial interest in the Fund is divided into 6 separate classes of Units as follows:

c) a Wholesale Unit confers on its registered holder rights and entitlements including:

i. the right to receive distributions from the fund ranking equally with holders of Retail Units;

ii. Wholesale Units have no special rights to distributions from the Fund either during the term of the Trust or in a winding up;

iii. Wholesale Unit holders will have the same rights as Retail Unit holders including the right to redeem Wholesale Units; [3]

d) a Unit confers on its registered holder in the Register an equal undivided interest in the Fund and Assets as a whole;[4]

e) an applicant must complete an application and pay the Issue Price for the Units by way of subscription to the Responsible Entity;[5]

f) units may be issued at a price individually negotiated and agreed between the Responsible Entity and a person who is a Wholesale Client, being a price that differs from the consideration otherwise provided for in this constitution;[6]

g) no certificates will be provided for Units and the Responsible Entity may send Unit Holders a Deposit Advice which is evidence of title of Units only to the extent that it is consistent with entries in the Register;[7]

h) the Responsible Entity has an absolute discretion as to the manner, mode and time of exercise of the powers, authorities and duties conferred on it under this constitution or the Corporations Act;[8]

i) a Retail Unit and a Wholesale Unit must only be redeemed at a Redemption Price calculated as follows: Redemption Price = Current Unit Value, as applicable to a Class of Units - Transaction Costs;[9]

j) the Responsible Entity may retire, subject to the Corporations Act, at any time;[10]

k) the Responsible Entity is released from all obligations in relation to the Trust arising after it ceases to act in that capacity whether because it retires or is removed;[11]

l) the Responsible Entity must maintain and keep or cause to be maintained and kept a register;[12] and

m) the constitution is executed for the benefit of the Unit Holders and is legally enforceable between the Unit Holders and the Responsible Entity.[13]

8 The relevant definitions contained in clause 29.1 of the Constitution provided that:

'First Product Disclosure Statement means the first product disclosure statement issued by the Responsible Entity relating to the raising of capital from the public for the purposes of enabling the Responsible Entity to acquire the Initial Portfolio to form part of the Fund.'

'Initial Equity means the amount sought to be raised by the Responsible Entity through the issue of Retail Units and Wholesale Units (and specifically excluding the issue of Underwriter Units) under the First Product Disclosure Statement (and disclosed in the First Product Disclosure Statement) to enable the Responsible Entity to acquire the Initial Portfolio to form part of the Fund.'

'Initial Portfolio means the initial portfolio of Real Property identified for acquisition by the Responsible Entity to form part of the Fund and which is specified in the First Product Disclosure Statement.'

'Issue Price means the issue price for each Unit being:

a) In respect of a Retail Unit and a Wholesale Unit:

1. At the commencement date of the Trust and until the Initial Equity has been raised, an amount of $1.00; and
2. At all other times, the Current Unit Value plus any Transaction Costs.'

9 The First PDS, dated September 2005, provided that the initial portfolio was to comprise of 'two prominently located office properties with a value in excess of $70 million' located in Miller Street, North Sydney and Leichhardt Street, Spring Hill, Brisbane. The Initial Equity to be raised was $32.72 million.

10 The Second PDS was issued on 26 September 2006 and applied to a number of funds managed by MCL. The PDS stated that, in relation to the Trust:

'Pricing will remain at $1.00 per Unit until initial equity has been raised. Thereafter, Unit Prices will be calculated daily'.

'The unit price will remain at $1.00 per unit until the full initial capital of $32.7 million has been raised from Retail and Wholesale Units. As at the date of this PDS $18.3 million is invested in Retail and Wholesale Units. Once the initial capital has been raised the unit prices will operate in a similar fashion to the 'Other Funds' below.'

12 The Supplementary PDS to the Second PDS was issued on 4 June 2007. Section 2 of the Supplementary PDS recorded that the property in Miller Street, North Sydney had been sold on 26 April 2007 for a price of $69.6 million. It further stated that as at 4 June 2007, only $18.3 million of the $32.7 million Initial Equity had been raised.

3.7 Unit Pricing

'Following the Sale of the North Sydney Property, the unit pricing methodology of the Office Property Trust in respect of retail units and Wholesale Units will change, with the unit price to be calculated on a daily basis...'

14 On 8 November 2007, RBC Dexia Investor Services Australia Nominees Pty Limited ('RBC') on behalf of APN, applied for $5,150,000 worth of Wholesale Units in the Trust by completing the prescribed application form.

15 On 9 November 2007, APN, MCL and MCFM entered into the Deed pursuant to which, APN agreed and paid to MCFM the sum of $5,150,000. MCFM subsequently issued 5,873,759.26 Wholesale Units in the Trust to APN. MCFM determined the issue price to be $0.87678 per unit.

16 Relevantly, the terms 'Unit' and 'Subscription Price' are defined in the definitions provisions contained in clause 1.1 of the Deed. The definitions state:

'Unit means those units in the Trust issued to APN FM in exchange for payment of the Subscription Price with the number of Units to be issued to APN FM to be calculated by dividing the Subscription Price by the issue price of the Units to wholesale investors on the Completion Date for Subscription....'

'Subscription Price is $5,150,000.'

17 MCFM subsequently provided RBC, on behalf of APN, with a Statement entitled 'Holding Statement - Initial allotment' which stated that an initial allotment of 5,873,759.26 Wholesale Units had been issued to APN on 9 November 2007 at a price of $0.87678 per unit.

18 On 9 November 2007, APN was registered as the holder of 5,873,759.26 Wholesale Units in the Trust.

19 The Deed also included a Put Option granted by MCL, whereby MCL was required to purchase from APN, for the Exercise Price and in consideration for payment to MCFM of the $5,150,000 million, the units issued to APN by MCFM.

20 Pursuant to the Deed, APN could exercise the Put Option at any time between 9 November 2008 and February 2009.[14]

21 On 25 July 2008, APN, MCL and MCFM entered into the Deed of Amendment and Restatement ('the First Amendment'), whereby the parties extended the time within which APN was entitled to exercise the Put Option to the period of 1 July 2009 to 30 September 2009.[15]

22 On 2 April 2009, APN, MCL and MCFM entered into the Second Deed of Amendment ('the Second Amendment').

23 Relevantly, the Deed (as amended) provided that:

a) APN agreed to sell to MCL and MCL agreed to purchase units from APN to the value of $200,000 on each of the following dates:

b) APN could exercise the Put Option at any time between 1 October 2010 and 31 December 2010 (the Exercise Period) by delivering an Exercise Notice to MCL.[17]

c) The Exercise Notice was to be in a form substantially similar to the notice in Annexure A to the Deed.[18]

d) APN was required to identify in the Exercise Notice, the number and class of units which it was putting pursuant to the option.[19]

e) When APN validly exercised the Exercise Notice, MCL agreed to purchase and APN agreed to sell and transfer the units to MCL on the terms and conditions set out in the Deed.[20]

f) On the date of the valid exercise of the Put Option MCL and APN would for all purposes be deemed to have entered into a binding and enforceable agreement for the sale and purchase of the Units which must be completed on the Completion Date for Exercise.[21]

g) Completion will take place at the registered office of MCL on the Completion Date for Exercise at 10:00 am or any other time or place agreed in writing by MCL and APN.[22]

h) The Completion date for Exercise means the date that is 10 Business Days after the date on which the Put Option is validly exercised or any other date that the parties agree in writing.[23]

ii. signed instruments of transfer in favour of MCL in registrable form;

iii. any other document that MCL requires to obtain good title to the Units and to enable MCL to have the Units registered in MCL's name; and

b. do all other acts and execute all documents that are necessary to transfer the Units to MCL.[24]

ii. do all other acts and execute all documents that are necessary to transfer the Units to MCL.[25]

k) The Exercise Price was to be calculated in accordance with the methodology in Schedule 1 to the Deed.[26]

24 A principal issue in dispute in this proceeding involves the construction of clauses 16.1 and 16.2 of the Deed. The clauses are in the following terms:

16 Notices

16.1 General

'Unless this deed expressly states otherwise, a notice, consent, approval, waiver or other communication (notice) in connection with this deed must be in writing and signed by the sender or a person authorised by the sender. A notice may be given by hand delivery, prepaid post or facsimile to the recipient's current address for service for notices as set out in this deed or as amended by notice from time to time.'

16.2 When effective

'A notice given under clause 16.1 will be deemed to be received:

a) if hand delivered, at the time of delivery;

1. if sent by pre-paid post, three Business Days after the date of posting or Seven Business Days after the date of posting if posted to or from a place outside Australia;

25 On 18 October 2010, APN sent an Exercise Notice to MCL by pre-paid and registered post. MCL received the Exercise Notice on 19 October 2010 and on 20 October 2010, Mr Miltiadis of MCL confirmed to APN that the Exercise Notice had been received.

26 The Exercise Notice was in a form substantially similar to Annexure A as required under the Deed and stated that 4,733,248 Units in the Trust were to be put to MCL. The fact that the Put Option was validly exercised by APN is not in dispute.

27 On 4 November 2010, Mr Miltiadis sent an email to Mr Morrissey of APN stating that there would be no benefit in APN attending MCL's offices the next day to complete the sale of units.

28 On 5 November 2010 at 10 am, APN's solicitor attended the registered office of MCL with a signed instrument of transfer to complete the sale of units. APN's solicitor was sent away and told that completion would not occur.

29 Following the acquisition of the Macarthur Cook Group by AIMS, an investigation identified that, in the period prior to July 2009, Wholesale and Retail Units had been issued at a sale price below $1.00 per unit.

30 The Macarthur Cook Group sought legal advice from Blake Dawson on 18 December 2009. Blake Dawson advised that on a proper construction of the Constitution, Retail and Wholesale Units should have been issued at a price of $1.00 per unit and that remedial action should be undertaken to ensure unit holders were put in the position they would have been in had the pricing issue not occurred.

31 On 18 June 2010, MCREF obtained accounting advice from Deloitte Touche Tohmatsu ('Deloitte') who advised that APN's unit holding needed to be reduced by 723,759 units for the units to have been issued at $1.00 per unit.

32 MCREF subsequently requested that its insurer, Chubb Insurance Company of Australia Limited ('Chubb') make available to it the payments that Deloitte recommended be made to the Trust and affected unit holders. The Macarthur Cook Group subsequently notified ASIC of the investigation and advice obtained.

33 In late October 2010, MCREF (the new responsible entity) decided to adjust the unit holdings of the affected unit holders in the Trust, effective from 1 November 2010, in accordance with the recommendations of Deloitte.

34 By letter dated 4 November 2010, MCREF informed its unit holders, including APN, that the Responsible Entity of the Trust had been investigating alleged breaches of the Trust's Constitution and the Corporations Act.

35 The letter stated that one of the alleged breaches was the issuing of Retail and Wholesale Units after 27 April 2007 at a price below $1.00 per unit as required under the Constitution. MCREF outlined that the unit pricing error would be remedied by adjusting the unit holdings to those that would have been applied if the relevant units had been issued at $1.00 per unit. MCREF stated that 27 Unit holders were to be affected and would be written to separately.

36 On 5 November 2010, MCREF issued to APN a Periodic Statement - Transaction History which stated that APN held 4,733,248.31 Units in the Trust.

37 By letter dated 10 November 2010, MCREF informed APN that it had reduced the total number of units in the Trust registered to APN by 723,759 Wholesale Units to 4,009,489.05 Wholesale Units effective from 1 November 2010.

38 On 23 November 2010, MCREF instructed Perpetual Trustee Company Limited ('Perpetual'), the custodian of the Trust, via email, to adjust the unit holdings of 26 of the 27 of the affected unit holders.

39 On 27 January 2011, Perpetual issued a Periodic Statement to APN which recorded that on 1 November 2010, the total number of units registered in the Trust to APN was reduced by 723,759 Wholesale units to 4,009,489.05 Wholesale Units.

40 The issues to be determined in this proceeding are as follows:

a) The first issue is whether the parties were obliged to complete the Unit Sale and Purchase Agreement on 5 November 2010. The date is more than 10 business days after the acknowledged receipt of the notice exercising the put option but within the period that the notice was deemed to have been received.

b) The second issue is whether APN was required to tender the Unit Certificate at Completion. There was no specific document called 'unit certificate' and the Constitution says that no certificates would be provided. The second issue is only relevant if APN is successful on the first issue.

c) The first and second issues are matters relating to completion of the Unit Sale and Purchase Agreement.

d) The third issue concerns the validity of the reduction of units with effect from 1 November 2010.

D. Completion of the Unit Sale and Purchase Agreement

41 The relevant provisions of the Deed provide that APN could exercise the Put Option by delivering the Exercise Notice to MCL between 1 October 2010 and 31 December 2010 and that completion of the sale of units would occur on the Completion Date for Exercise. Completion Date for Exercise is defined in clause 1.1 as:

Completion Date for Exercise means the date that is 10 Business Days after the date on which the Put Option is validly exercised or any other date that the parties agree in writing.

5.2 Exercise

(a) APN FM may exercise the Put Option at any time during the Exercise Period by delivering an Exercise Notice to MCL.

(b) ....

5.4 Procedure for exercising the Put Option

To be effective and validly exercised, the Put Option must be exercised by service on MCL of an Exercise Notice duly exercised by APN FM.

44 It is not in dispute that the Exercise Notice was delivered to MCL on 19 October 2010 and that both APN and MCL knew that the Exercise Notice had been received on that date. The email from Mr Miltiadis of MCL to Mr Morrissey of APN on 20 October 2010 confirms that the Exercise Notice had been received. Moreover, Mr Morrissey received a Delivery Confirmation-Advice receipt from Australia Post which stated that the Exercise Notice had been delivered to MCL on 19 October 2010.

45 The principal issue in dispute between the parties is the date on which the Exercise Notice was validly exercised, that is presumably the date on which APN served the Exercise Notice on MCL and consequently, time began to run for the purpose of calculating the Completion Date.

46 Senior Counsel for APN contended that pursuant to clause 16.2 of the Deed, set out above at [24], notices are deemed to be received by MCL three business days after they had been sent by registered post. Consequently, APN submitted that the Exercise Notice was deemed to have been received by MCL on the 21 October 2010 and thus, completion was to occur on 5 November 2010. APN claims that MCL wrongfully repudiated the contract by refusing to complete the sale on that date. Accordingly, APN seeks specific performance of the Unit Sale and Purchase agreement.

47 Senior Counsel for APN contended further that clauses 5.4 and 16 should be read together as the Exercise Notice is a 'a notice in connection with this Deed'. It was further submitted that clause 5.4 did not direct itself to a method or place of service and as such clause 16 was to apply and that a reasonable person in the position of the parties would have no doubt that clauses 5.4 and 16 were to be read together.

48 Senior Counsel for MCL contended that clause 16.2 of the Deed is a generic notice provision which did not apply to the specific circumstances of the Exercise Notice. It was submitted that in order for clause 16 to apply, the Court would need to accept that the clear language of the clauses relating to the Put Option, including the procedure for validly exercising the Put Option and the calculation of the completion date, was overridden by clause 16. Accordingly, MCL submitted that it actually received and was therefore served with, the Exercise Notice on the 19 October 2010 and consequently, the date for Completion was 3 November 2010. MCL argued that APN was out of time when it purported to complete the sale on 5 November 2010. Senior Counsel for MCL submitted further that the Deed came to an end on the Completion Date for Exercise pursuant to clause 15.1(b) of the Deed.

49 The principles that guide the court in the interpretation of commercial contracts in Australia are well established. Commercial contracts are to be determined objectively without having regard to the subjective intentions of the parties.[28] In Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales[29] Mason J at 352 stated that:

"The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not permissible to contradict the language of the contract when it has a plain meaning. Generally speaking, facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although as we have seen if the facts are notorious knowledge of them will be presumed."

50 In Toll (FGCT) Pty Limited v Alphapharm Pty Limited and Others,[30] the High Court stated that:

"...It is not the subjective beliefs or understandings of the parties about the rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed the agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."[31]

51 The requirements for exercising the Put Option as set out in clauses 5.2(a) and 5.4 of the Deed are clearly articulated. The Exercise Notice, which was required to be in a form similar to Annexure A to the Deed, needed to be delivered to MCL (clause 5.2(a)). The Put Option would be effective and validly exercised by service on MCL (clause 5.4). Delivery (clause 5.2(a)) and service (clause 5.4) appear to be used interchangeably. Whether delivery or service includes receipt in the sense of coming to the knowledge of MCL, a distinction that has caused some concern in many cases,[32] is not relevant in this case. The Exercise Notice came to the attention of MCL on 19 October 2010. Consequently, it is clear that delivery or service (and indeed receipt) was completed on the 19 October 2012 at the latest.

52 When considering the Deed (as amended) as a whole, it is clear that Clause 16 will become relevant where the Deed is silent on when a notice is received, or where there is dispute or uncertainty regarding when a notice was received. Of particular relevance is the fact that Clause 16.1 is prefaced with the words 'unless this Deed expressly states otherwise..' These introductory words indicate that in the event that the service of particular notices are specifically provided for in other clauses of the Deed, clause 16.2 will not apply.

53 The deeming provision in clause 16.2 refers only to 'a notice given under clause 16.1..' This indicates clause 16.2 is not to be invoked for notices that are specifically provided for in other clauses of the Deed. Further, clause 16.2 deals with deemed receipt of a notice under clause 16.1. Clause 5 deals with a particular notice, namely an Exercise Notice and refers to delivery and service of such notice.

54 When considering the entire Deed, it is apparent that the procedure for exercising the Put Option under clause 5.4 is specific, self contained and proscriptive. Other clauses which require notice to be given under the Deed, for example clause 15.2 and 15.3 regarding MCL and APN's right to terminate before Completion of Subscription, are articulated in broad terms by comparison. Clauses 15.2 and 15.3 simply require that written notice be given to the other party to the Deed. In such circumstances, one would need to look to clause 16 for further guidance. This is the case because the Deed 'does not expressly state otherwise..'. In fact, the clause is silent on what is required to be included in the notice and how the notice is to be given. Clause 16 assists by requiring that that notice be in writing and signed by the sender or a person authorised by the sender, and that the notice may be given by hand delivery, prepaid post or facsimile. Clause 16.2 then outlines when notices given clause 16 will be deemed to have been received.

55 The terms relating to the Put Option are clear and unambiguous. Accordingly, evidence of the surrounding circumstances is not relevant or necessary. The provisions relating to the Put Option are self contained and it cannot be said that the objective intention of the parties was that Clause 16 was to apply when the procedure for exercising the Put Option and the calculation of the Completion date are so clearly defined elsewhere in the Deed. Clause 5 provides clarity and certainty in relation to a critical part of the agreement between the parties. It would, in my view be artificial to ignore the words and have recourse to the more general and residual provisions of clause 16.

56 In Tyco Fire and Security and Anor v Norfolk Mechanical and Ors,[33] the court was required to determine whether a contractual deeming provision dealing with receipt applied to a provision in the same contract dealing with delivery. The relevant clauses in the Share Sale Agreement provided that a response to a dispute notice was to be delivered to the other party within 10 days of the disputing party having delivered it. Another clause in the contract provided for the deemed receipt of communications in certain circumstances, that is, by hand delivery, post or facsimile. Accordingly, these clauses were similar to the relevant clauses in the current proceeding.

57 After considering the case law on the principles of 'delivery' and 'receipt'[34] and a careful analysis of the contract as a whole, McDougall J, held that the parties did not intend that 'delivery' could be interchangeable with 'receipt'. Accordingly, when evidence of delivery, including the date and time of delivery was required, it was open to the party making delivery to adopt a means of delivery that facilitated precise proof.

"I conclude that when the parties referred to delivery in clause 7.7(b), they meant precisely that; and they did not intend to conflate it with receipt. It follows, in my view that the facultative or deeming provisions of clause 24.1, relevant to receipt, do not apply to the concept of delivery that is utilised in clause 7.7(b)."

59 In my opinion, clause 16.2 of the Deed is a general provision. It is not attracted in the specific circumstances of the Exercise Notice and further, the parties did not intend that the deeming provision relating to receipt was to apply to the 'delivery' or 'service' of an Exercise Notice. This analysis and construction is not affected by the fact that clause 5 does not provide for a method or manner of service.

60 It is apparent from the evidence that both parties knew that the exercise notice had been delivered to MCL or served on MCL, or indeed received by MCL[35] on 19 October 2010. As such, time started to run from 19 October 2010 and completion was to occur 10 business days from this date, being 3 November 2010.

61 APN was consequently out of time when it purported to complete the sale on 5 November 2010. The consequences are harsh and severe. Under clause 15.1(b),[36] the agreement came to an end and neither party was obliged to perform any further. Any accrued right to complete was subject to the specific terms relating to completion.

62 Having found that APN was out of time on 5 November 2010 when it purported to complete the sale of units, it is strictly not necessary to deal with the issue of the Unit Certificate. However, as the matter was argued and as the matter may go further, I will briefly state my reasons for holding that production of the Unit Certificate at settlement was not required.

63 Senior Counsel for MCL submitted that in the event that the Court found that Completion was to occur on 5 November 2010, APN could not effect the transfer because it failed to deliver a Unit Certificate for the Units to MCL in accordance with the requirements of the Deed.

64 Senior Counsel for APN submitted that as there was no document called 'unit certificate', there was nothing to produce at completion. It was submitted further that, on previous occasions, no unit certificates had been provided and accordingly, MCL was estopped from asserting that a unit certificate was required at completion.

65 It is clear that there was no document specifically called a unit certificate and further, the Constitution provided that unit certificates would not be issued. Further, as emphatically stated by Mr Dunstan, the Managing Director of MCL and MCFM during the period between 2003 and 2009, Unit Certificates were not issued for the Trust.

66 However, Senior Counsel for MCL submitted that the Holding Statement, issued to APN when it subscribed for units, was in effect, the Unit Certificate required to be provided at completion.

67 The basis on which MCL contented that the Holding Statement was in effect a unit certificate was as follows:

a) The words of the Holding Statement, including the phrases 'please retain this statement in a safe place..' and 'if you have any questions concerning your Unit Certificate, please call MacarthurCook...'

b) The clear words of the Deed (as amended) which called for the unit certificate upon subscription and upon completion of the Put Option, are clear and unambiguous.

c) The Holding Statement was delivered by the former responsible entity pursuant to the obligations under clause 3.2(b) of the original Deed.

68 In my opinion, the estoppel claim is made out. It is clear that APN assumed that a Unit Certificate was not required to be provided at completion. MCL clearly played a part in that assumption by not insisting on strict compliance with the clause dealing with the production of the Unit Certificates on no less than five previous occasions when MCL purchased units from APN (see paragraph 23 (a), above). APN has clearly acted, to its detriment, in reliance on that assumption and it would be unconscionable for MCL to now depart from that assumption and require strict compliance with the Deed.[37]

69 Further, in my opinion and apart from the estoppel claim, the Holding Statement cannot be regarded as a Unit Certificate. To the extent that the Holding Statement is to be regarded as a Unit Certificate and a form of evidence of ownership of the units, and therefore of some importance, it is relevant to note that, other than being of historical relevance, it did not refer to the correct ownership position at the time of completion or indeed at the time of each of the five purchases referred to. Accordingly, there was no point providing an inaccurate and irrelevant document at completion.

70 Having found that APN was out of time when it purported to complete the sale of units, it is necessary to determine how many units APN holds in the Trust.

71 MCL argued that MCFM was required, pursuant to the Constitution, to issue the units at a price of $1.00 per unit. It was submitted that the issue of units at a lower price per unit was not valid. Accordingly, an adjustment of 729,759 units was necessary in the interests of members of the trust. MCREF relied on legal advice obtained from Blake Dawson on 18 December 2009 and unilaterally reduced APN's units in the Trust by 729,759 Units.

72 APN argued that MCREF was in breach of its duty under s 601FC of the Corporations Act 2001 (Cth) ('the Corporations Act') to act honestly and exercise care, skill and diligence in carrying out its role and seeks a declaration that MCREF contravened Part 5C.2 of the Corporations Act, or alternatively, its fiduciary duties to APN. APN also seeks an order under s 175 of the Corporations Act correcting the register.

73 The Application Form submitted on behalf of APN is not dated. However it appears to have been received on 8 November 2007. This accords with the evidence. Although reference is made to the 'PDS dated 26 September 2006', it is clear that as at the time of receiving the Application Form, the Supplementary PDS had been issued. It is this document, which is dated 4 June 2007 that varied the unit pricing methodology. The Application Form at the end of this document refers to the very same 'PDS dated 26 September 2006', despite the unit pricing variation.

74 The Application Form did not request a certain number of units but rather, the number of units equal to $5,150,000. Initially, on 9 November 2007, APN was issued with 5,813,754.98 Units at a unit price of $0.88583. On 21 December 2007 (but with effect from 9 November 2007) the number was changed to 5,873,759.29 units at a price of $0.87678. From the explanation given, it is apparent that someone within the responsible entity's office gave due and proper consideration to the issue price. As a result of such consideration, an additional 60,004.31 units were issued to APN and an amended Holding Statement was provided. Rightly or wrongly, it is clear that the responsible entity at the time set the price for Wholesale Units as at 9 November 2007. The price was $0.8768. This consideration and decision had nothing to do with APN.

75 The critical point is whether and, if so, to what extent APN is affected by the issue as to whether the units should have been issued at $1.00 and not $0.87678. APN received units at a price of $0.87678 per unit after careful consideration by the responsible entity at the time. The evidence does not establish that it was aware, or ought to have been aware that the units could only be issued at $1.00 per unit, if indeed that was the case. In fact, the contrary is clearly the position.

76 As pointed out, the Supplementary PDS to the Second PDS was issued on 4 June 2007. After recording the sale of the Miller Street Property for $69.6 million (see paragraph 12 hererof), the Supplementary PDS specifically stated that the unit pricing methodology would change and that "the unit price [was] to be calculated on a daily basis..." (clause 3.7 of Supplementary PDS). This was well before the prescribed application form was executed on behalf of APN.

77 Another significant factor is that Mr Dunstan, the Managing Director of MCFM, specifically authorised the change, that is, the methodology in relation to unit pricing and emphatically denied that the units were not validly issued or that there was any breach of trust.

78 Accordingly, so far as APN was concerned, as at the date of subscription, the unit pricing policy had changed as specifically represented by MCFM in the Supplementary PDS and as endorsed by its Managing Director. On this basis, APN subscribed for units.

79 To require APN, given the above, to engage in a detailed legal consideration as to whether, given the various definitions and matters referred to in the Constitution, the move to unit pricing on a daily basis was permitted and justified would be to require it to intrude into the internal workings of the responsible entity, something that it is clearly not required, or indeed able, to be done. APN no doubt assumed the validity of the transaction and in particular, the ability on the part of MCFM to issue units at the lower price.

80 Further, not only was APN entitled to take this approach, it was entitled to rely on significant warranties and representations to the effect that MCFM had the power to issue the units and that by doing so - at the price of below $1.00 - it was not in breach of trust and that the Unit Subscription Deed created valid, legal and binding obligations that did not conflict with any constituent documents. [38]

81 MCREF contends the issue of units at below $1.00 was not valid. The only valid issue was units at $1.00 and accordingly the unilateral action was merely undertaken to regularise an obvious mistake. The word or concept of mistake is not used or pleaded, nor is any breach of trust admitted. There are a number of difficulties with this submission and I do not accept it.

82 Although it is alleged that the issue of units at a lower price was not valid, the units were issued at such price after careful consideration and a revised Holding Statement recording the price per unit was provided. It is this action that needs to be considered. Invalidity is too general and imprecise a basis on which relief can be based in this context.

83 It is important to identify the precise legal basis of the defence. The approach taken by MCREF focuses entirely on its own position and the interests of unit holders, which indeed it must, but not in isolation and to the exclusion of a proper consideration of the precise legal relationship between the responsible entity and APN.

84 Ultimately, it is a contractual relationship. Accordingly, it is necessary to assess how the law of contract deals with the matter given the undisputed facts set out above.

85 The contract is valid and performance has taken place. Everyone has acted for many years on the basis that APN acquired the units at the lower price. On what basis then can the subject matter of the contract - the units - be adjusted or varied. The only suggested basis is invalidity. Although this may be the explanation and accord with an internal analysis, it is not sufficient as a basis for vitiating or amending a partly performed contract. It may be that the true basis is that the issue of units at less than $1 per unit was a mistake. As pointed out, this has not been pleaded and, in any event, a defence based on mistake has a number of difficulties.

86 It is not contended that the issue of units at below $1 was illegal or without power in the traditional sense. There was clearly power to issue units at the lower price. In fact this was specifically contemplated if circumstances permitted. If the responsible entity (MCFM) was wrong about whether the circumstances had occurred, certain consequences may follow but it is not as if there were no units to issue because they were unavailable. This is not a case where a subscriber subscribes for D class shares in a company and there are no D class shares and the subscriber is purportedly issued with non existent D class shares.

87 Rather, in this case, the issue of units was valid, the units existed and there was power to issue them. If the price was wrong, and the units could not be issued at less than $1.00 at the relevant time, there was, in my opinion, a failure by MCFM to adhere strictly to the terms of the Trust in carrying out its duties. This failure constitutes a breach of trust. MCFM should not have issued the units at this price. By using the word invalid, MCFM has elided the real issue, namely that it was in breach of trust. [39]

88 Unless APN was aware of the breach of trust or participated in it (which the evidence does not establish if indeed there was a breach), it is not liable and is entitled, as an innocent third party, to insist on the bargain that it struck. It stands outside and is unaffected by any breach of trust.

89 If indeed there was a breach of trust[40] as the Blake Dawson advice suggests, such breach does need to be remedied. However the remedy does not involve unilaterally reducing[41] the units of an innocent third party without its knowledge or involvement. Usually a trustee is required to make good any breach, not an innocent third party.[42]

90 I reject the submission that APN was not the true legal or beneficial owner of the excess or additional units. APN was, and remains the beneficial owner. They were validly acquired and indeed, were supported by warranties and representations to such effect.

91 Accordingly, for the reasons given, the register of the Trust should be amended to record the correct number of units held by APN.

92 I will hear from the parties as to the precise form of order and costs.

[14] Cl 4.2(a) and 1.1 definition of 'Exercise Period'.

[15] Definition of 'Exercise Period' in the Deed of Amendment and Restatement Unit subscription and Put Option deed.

[28] Pacific Carriers Ltd v BNP Paribas [2004] 218 415 at [22]; Toll (FGCT) Pty Limited v Alphapharm Pty Limited and Others [2004] HCA 52; (2004) 219 CLR 165 at [40].

[29] [1982] HCA 24; (1982) 149 CLR 337.

[30] [2004] HCA 52; (2004) 219 CLR 165.

[31] Ibid per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ at [40].

[32] Eaglehill Ltd v J. Needham Builders Ltd [1973] AC 992; Curtice v London City and Midland Bank, Limited [1908] 1 K.B. 293; Lolly Pops (Harbouside) Pty Ltd v Werncog Pty Ltd [1998] NSWSC 304; (1998) 9 BPR 16,361.

[33] [2007] NSWSC 585.

[34] N.V. Stoomv Maats "de Maas" v Nippon Yusen Kaisha (The "Pendrecht") [1980] 2 Lloyd's Rep 56; Eaglehill Ltd v J. Needham Builders Ltd [1973] AC 992; Curtice v London City and Midland Bank, Limited [1908] 1 K.B. 293; Lolly Pops (Harbouside) Pty Ltd v Werncog Pty Ltd [1998] NSWSC 304; (1998) 9 BPR 16,361.

[35] The precise distinctions are not relevant in this case. Whatever word is used and whatever notion that word embraces, MCL knew on 19 October 2010 that the option had been exercised. The time for completion follows from this date.

[36] It should also be noted that time was of the essence in relation to performance of the agreement.

[37] Waltons Stores (Interstate) Ltd v Maher [1988] HCA 7; (1988) 164 CLR 387 per Brennan J at pp 428-429; Downward Bricklaying Pty Ltd v Goulburn-Murray Rural Water Authority [2002] VSC 121 per Williams J at [152] - [170].

[38] Clauses 7.1(d), 7.3(c) and 7.3(e) of each of the Put Option and the First Amendment. Clauses 8.1(d), 8.3(c) and 8.3 (e) of the Second Amendment.

[39] In its letter to Unitholders dated 4 November 2010, MCREF refers to alleged breaches of trust. Given the purported remedial action taken, the word 'alleged' is meaningless. Further, the Blake Dawson advice also refers to a breach of trust.

[40] I have proceeded on the basis most favourable to MCL and MCREF, namely that the units should not have been issued at the lower price. It is not necessary or desirable to assess the matter any further or deal with the accuracy of the Blake Dawson advice. For the reasons given, any breach of trust or failure to comply with the constitution does not affect APN.

[41] I have not dealt with the decision and approach to the implementation of the reduction in units held by APN and generally. There was not inconsiderable argument directed to the approach and methodology. It is neither necessary nor desirable to deal with these matters and I do not propose to do so. However, I very much doubt that clauses 6.2.2 and 6.6 of the Constitution authorises the unilateral reduction in the circumstances of this case.

[42] Re Dawson [1996] 2 NSWR 211; Bartlett v Barclays Bank Trust Co Ltd [1980] 1 Ch 515; Target Holdings v Redfern [1995] UKHL 10; [1996] 1 AC 421.