Plaintiff v Plaintiff

(a) The Centro Property Trust (with CPT Manager Limited as the responsible entity) and Centro Properties Limited (collectively "CNP");

(b) Centro Retail Trust ("CRT") (with Centro MCS Manager Limited ("Centro MCS") as the responsible entity at the relevant time) and Centro Retail Limited ("CRL") (collectively "CER"); and

(c) PricewaterhouseCoopers ("PwC") and PricewaterhouseCoopers Securities Limited (collectively "the PwC entities").

3 The proceedings arose out of the alleged failure of CNP and CER (collectively "the Centro entities") to disclose to the market their respective current interest-bearing debt obligations and the material risk that they would not be able to refinance their debt by its due date, allegedly resulting in an inflated market in CNP and CER securities.[4]

4 Cross-claims were also filed in the proceedings by the Centro entities against PwC and by PwC against the Centro entities and the Centro director and officer respondents (collectively "the Centro parties").[5]

5 In 2011, the Centro entities announced a major restructure which involved the replacement of Centro MCS as the responsible entity of the CRT. The restructure was approved by CER unit holders.

6 On 1 December 2011, the Supreme Court of New South Wales approved a scheme of arrangement necessary to effect the restructure of the Centro entities.[6]

7 On 14 December 2011, the restructure of the Centro entities was implemented. Insofar as CER was concerned, this involved:

(a) CER being stapled to two further trusts, DPF Holding Trust ("DPF") and Centro Australia Wholesale Fund ("CAWF") ("the aggregating funds") to establish an ASX listed security called "Centro Retail Australia" ("CRF");

(b) CRAL being appointed as the new responsible entity of each of the aggregating funds so that CRF would have one responsible entity in respect of the three stapled trusts which would form part of its structure to replace:

(c) the issue of "Class Action True-up Securities" to unit holders of the aggregating funds (other than CER) as compensation for the fact that they would now have exposure to potential class action liabilities by virtue of the stapling to CER, it being a respondent to the proceedings.[7]

8 In February 2012, upon application by the PwC entities, leave was granted for CRAL to be joined to the proceedings and amended pleadings were filed and served by the PwC entities and the applicants to reflect the joinder of CRAL as a respondent to their respective claims.

9 The allegations made against CRAL in the proceedings are limited to the following:

(a) CRAL is and has been since 14 December 2011 the responsible entity for the CRT for the purposes of Chapter 5C of the Corporations Act 2001 (Cth) ("the Act");[8]

(b) pursuant to s 601FS of the Act, the rights, obligations and liabilities as at 14 December 2011 of Centro MCS, the former responsible entity of the CRT, prima facie became the obligations of CRAL; and

(c) any liability of Centro MCS for loss and damage which it had incurred in relation to matters occurring prior to 14 December 2011 was a liability of Centro MCS in relation to the CRT and, by reason of s 601FS of the Act, prima facie became a liability of CRAL.

10 During February and March 2012, CRAL filed and served defences and cross claims, adopting for the most part the pleadings of Centro MCS in the proceedings. In addition, CRAL alleged that:

(a) prior to 14 December 2011, Centro MCS was entitled to indemnity from the CRT only for a liability incurred by it properly performing or exercising any of its powers or duties in relation to the CRT;

(b) if Centro MCS was liable to the PwC entities and/or the applicants (which was denied), then any resulting liabilities of Centro MCS were not liabilities incurred by it in properly performing or exercising its powers or duties in relation to the CRT and it was not entitled to indemnity from the CRT; and

(c) by reason of s 601FS(2)(d) of the Act, the liabilities claimed by the PwC entities and/or the applicants did not become the liabilities of CRAL on 14 December 2011 when it replaced Centro MCS as the responsible entity of the CRT.[9]

11 The trial of the proceedings commenced before her Honour Justice Gordon in the Federal Court on 5 March 2012 and ran until the second week of May 2012 when it was announced that the parties had agreed on terms of settlement. The proceedings were adjourned to 19 June 2012 to enable applications to be made to the Federal Court for approval of the proposed settlements under s 33V of the Federal Court of Australia Act 1976 (Cth). All parties have now signed the relevant settlement deeds ("the settlement deeds"),[10] but the settlement does not have effect unless and until it is approved by the Federal Court.[11]

12 By originating motion filed on 15 May 2012, the plaintiff CRAL, in its capacity as trustee and responsible entity of the CRT, applies for judicial advice that it is proper for CRAL to enter into and give effect to the settlement deeds including the:

Applicable legal principles to the giving of judicial advice

13 The legal principles which are applicable to the giving of judicial advice in this context have recently been identified by the High Court in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan the Bishop of Macedonian Orthodox Diocese of Australia and New Zealand.[12] In that case, the High Court considered an appeal which involved an application for judicial advice made under s 63 of the Trustee Act 1925 (NSW). Whilst there is no equivalent provision under the Trustee Act 1958 (Vic), the High Court noted that the principles relevant to applications made under s 63 apply equally to applications made under rules of court which are functionally equivalent to s 63. In particular, the High Court referred to the Rules of the Supreme Court 1883 (UK)[13] as another means by which judicial advice could be given to trustees without an administration order and noted that in Victoria the powers given by r 54.02 and r 54.03 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) are derived from these English rules.[14] For present purposes this means that the broad principles discussed by the High Court with respect to applications made under s 63 also apply with respect to applications made under r 54.02 and r 54.03.

14 In Macedonian Orthodox Community Church, Gummow A-CJ, Kirby, Hayne and Heydon JJ (with whom Kiefel J agreed) made some general points, including that there is no implied limitation on the power to give advice;[15] that there are no implied limitations on discretionary factors;[16] that the procedure is summary in character;[17] and that the advice is private because its function is to give personal protection to the trustee and operates as an exception to the court's ordinary function of deciding disputes between litigants.[18]

Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 54.02

15 The plaintiff's application is made pursuant to Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 54.02 which relevantly provides:

Relief without general administration

(1) A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.

(2) Without limiting paragraph (1), a proceeding may be brought for -

(i) approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee; or

(ii) directing any act to be done in the administration of an estate or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed under the direction of the Court.

16 In ExxonMobil Superannuation Plan Pty Ltd v Esso Australia Pty Ltd Habersberger J considered an application to approve a trustee's decision to enter into a deed of compromise.[19]

Thus, both in its inherent jurisdiction and under r 54.02(2)(c)(i) the court has the power to make an order "approving any ... compromise ... by ... [a] trustee".

Counsel for the trustee submitted, and I agree, that the authorities demonstrate that the court's role is not to consider the wisdom of the trustee's exercise of discretion but to grant the Trustee's application for an order approving the trustee's agreement to the compromise, if the court is satisfied of the propriety of the application. That involves considering whether:

(a) the trustee's decision to agree to the compromise was within power;

(b) there was any impropriety in the trustee's decision;

(c) the trustee exercised its discretion in good faith; and

(d) the trustee gave fair consideration to the relevant issues.[20]

18 Habersberger J reiterated this line of reasoning in Brown-Sarre v Waddingham,[21] and noted that it is not for the Court to tell the trustee how to exercise the discretion or whether a proposed exercise of discretion is necessarily correct.[22]

19 Senior counsel for the plaintiff submits, and I agree, that the approach taken in ExxonMobil and Brown-Sarre v Waddingham should be taken in the present application.

20 In McKinnon v Victor Samuels & Ors,[23] Eames J of this Court expressed the point as follows:

It is the trustees who have the absolute discretion to determine whether a compromise should be reached and as to what the terms of any compromise should be. The court can do no more than state whether it is proper for the trustees to exercise the powers of compromise as they intend. The terms of the compromise are solely the concern of the trustees. It is not proper for the court to approve the compromise in terms of assessing the wisdom of the terms of compromise, whether from the point of view of the trustees or those of any beneficiaries of the estate. What the court can properly be called upon to do is to advise the trustees whether it is proper for them to agree to the compromise and, if appropriate, to rule that they be at liberty to enter the agreements contained in the terms of settlement.

21 In Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd,[24] Goldberg J applied McKinnon and stated that the court can direct that it is proper for a trustee to enter into terms of settlement, although the precise terms of the compromise are solely the concern of the trustee and will not be examined closely by the court.

22 Before turning to the evidence, I note that the plaintiff has already entered into the settlement deeds. I was informed that the plaintiff sought to make the settlement conditional upon obtaining judicial advice that it was proper for the trustee to enter into the settlement deeds, but in the face of strong opposition did not press this request. The question arises whether this precludes the giving of the judicial advice sought. In my opinion it does not.

23 First, this matter involves settlement of class actions. Although the settlement terms and conditions have been agreed between the parties, the settlement does not have effect unless it is approved by the Federal Court. The application for approval of the compromise is yet to be heard.

24 Secondly, this Court has held that judicial advice might be given concerning the settlement of disputes involving trustees even though the parties to the underlying litigation had resolved their differences. These cases include Re Ansett Australia Flight Engineers Superannuation Plan[25] and McKinnon,[26] which was followed in Ansett Australian Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd.[27]

25 Thirdly, the question for consideration concerns the propriety of the trustee's actions; whether those actions occur before or after judicial advice has been sought and obtained is not, at least in this case, material to that question. Further r 54.02(2)(c)(i), upon which the plaintiff relies, enables a proceeding to be brought for an order "approving any sale, purchase, compromise or other transaction by... [a] trustee".[28] It is evident to me that the rule is not confined to prospective conduct but is expressed in terms which are consistent with a sale, purchase, compromise or other transaction having already occurred.

26 I am satisfied of the propriety of the plaintiff entering into, and subject to obtaining approval of the Federal Court, giving effect to the compromise of the proceedings on the terms set out in the settlement deeds, including the payment of $85,000,000, for the following reasons.

27 First, I am satisfied that the trustee's decision to agree to the terms of settlement was within power. Under the CRT constitution the trustee has wide general powers which enable it to act as though it were the absolute owner of the trust assets; including the power to dispose of or otherwise deal with trust property and an absolute discretion to decide how and when to exercise its powers.[29]

28 Secondly, CRAL was joined to the class actions at a late stage in February 2012, shortly before the trial was due to commence. Upon being instructed to act for CRAL, the plaintiff's solicitors Lander & Rogers Lawyers were provided with documents prepared for the Centro entities by CNP, CER and their respective legal advisors.

29 These documents included extensive litigation briefing papers for the boards of CNP (the property trust) and CER (the retail trust) and written advice and papers for a board presentation in January 2012.

30 Reference to the evidence in the affidavits filed in support of the application including the contents of the briefing papers,[30] must necessarily be oblique because much of the material relates to settlement discussions and is subject to without prejudice privilege which belongs not just to the plaintiff but to numerous other parties. Other evidence is subject to common interest privilege or is confidential to the plaintiff.

31 It is sufficient to say that the litigation briefing papers exhibited to the affidavit of Jeevanie Radhika Mendis, solicitor for the plaintiff, contain a detailed consideration of the claims of the respective parties including issues of risk, causation, reliance, loss and damage, apportionment, the capacity of participants in the litigation to contribute to any settlement, expert evidence, the amount of legal costs and the amount of interest if the proceedings went to judgment and the claimants succeeded.

32 I am satisfied after reading the affidavit of Dimitrios Constantinos Kiriacoulacos, the group general counsel of the plaintiff, that the CRAL board was provided with an overview and update on the class action litigation at board meetings on 20 January 2012, 19 April 2012 and 10 May 2012; that in those meetings the board considered the matters in the briefing papers; that the consideration occurred without any apparent haste; that the consideration involved an analysis of material which had been prepared and was supplemented over many months; and that the decision by the CRAL board took into account the advice of legal and other advisors including the recommendation of CRAL's external solicitors, senior and junior counsel and CRAL's group general counsel.

33 In the circumstances, I discern nothing improper in the trustee's decision. It appears to me that the trustee exercised its discretion in good faith and gave fair consideration to the relevant issues.

34 Accordingly, I am satisfied of the propriety of the application.

(1) It is proper for the plaintiff to enter into and give effect to the Deeds of Settlement executed by the parties, execution copies of which are part of exhibit "JRM-7" to the affidavit of Jeevanie Radhika Mendis sworn on 17 May 2012 at pages 545 to 585 ("Vlachos Deed") and pages 685 to 729 ("Kirby Deed").

(2) The Vlachos Deed and the Kirby Deed be treated as confidential and that copies be placed on the Court file in a sealed envelope marked "Confidential" which is not to be opened except by order of a Judge.

(3) The advice from Counsel to the Board of CRAL dated 10 May 2012 be removed from the court file and returned to the plaintiff upon these orders being made.

(4) The plaintiff's costs of and incidental to the proceeding be paid out of the Centro Retail Trust

[2] VID 366 of 2008 and VID 1041 of 2010.

[4] Affidavit of Jeevanie Radhika Mendis sworn 17 May 2012, [2] and [3].

[5] Affidavit of Jeevanie Radhika Mendis sworn 17 May 2012, [4] and [5]. There are further related proceedings and Supreme Court of New South Wales proceeding No 201200 115213.

[6] In the matter of Centro Properties Ltd and CPT Manager Ltd in its capacity as responsible entity of Centro Property Trust [2011] NSWSC 1465.

[7] Affidavit of Jeevanie Radhika Mendis sworn 17 May 2012, [8], [11].

[8] Corporations Act 2001 (Cth) Chapter 5C.

[9] Affidavit of Jeevanie Radhika Mendis sworn 17 May 2012, [14]-[16].

[10] Affidavit of Jeevanie Radhika Mendis sworn 17 May 2012, [17], [23], [27], [29].

[11] Section 33V(1) of the Federal Court of Australia Act 1976 (Cth) provides that a representative proceeding may not be settled or discontinued without the approval of the Court.

[12] [2008] HCA 42; (2008) 237 CLR 66 ("Macedonian Orthodox Community Church").

[14] Macedonian Orthodox Community Church [2008] HCA 42; (2008) 237 CLR 66, 84-85 [41]-[42] and footnote 48. Equivalent rules were developed in New South Wales and now appear in Uniform Civil Procedure Rules 2005 (NSW) Pt 54.

[15] Macedonian Orthodox Community Church [2008] HCA 42; (2008) 237 CLR 66, 89 [56].

[18] Ibid 91 [64]. Eight general points are set out in full in the judgment of the plurality at 89-94 [54]-[76].

[19] [2010] VSC 357 ("ExxonMobil").

[20] Ibid 375 [86-87] (citations omitted).

[21] [2012] VSC 116, 7-9 [23]-[24].

[22] Brown-Sarre v Waddingham [2012] VSC 116, 9 [24] citing IOOF Australia Trustees Ltd & the Trustee Act 1936 [1999] SASC 461, 2. I note that Brown-Sarre v Waddingham concerned actions of an administrator and IOOF Australia Trustees Ltd & the Trustee Act 1936 concerned the actions of a trustee.

[23] [2000] VSC 393, 3-4 [14]-[16] "McKinnon_"_; referring to IOOF Australian Trustees Ltd & the Trustee Act 1936 [1999] SASC 461.

[24] [2004] FCA 130; (2004) 49 ACSR 1, 13-14 [50].

[25] [2004] VSC 18, 4 [9]-[10].

[26] [2000] VSC 393.

[27] [2004] FCA 130; (2004) 49 ACSR 1.

[28] Supreme Court (General Civil Procedure) Rules 2005 (Vic) 54.02(2)(c)(i).

[29] Central Retail Trust Constitution dated 19 December 2011 lodged with the Australian Securities and Investments Commission. See clauses 6.1(a), 6.3, 6.5 and 7.4.

[30] The affidavit of Jeevanie Radhika Mendis sworn 17 May 2012 and the affidavit of Dimitrios Constantinos Kiriacoulacos sworn 4 June 2012