Westfield Management Ltd v AMP Capital Nominees Ltd & anor

Judgment 1HER HONOUR: Before me in the duty judge list on 23 August 2011 was an application brought by way of summons filed on 15 August 2011 by Westfield Management Limited. Westfield, in its capacity as trustee for the Westart Trust, is the holder of one third of the units in the KSC Trust (ARSN 093 322 455). 2The KSC Trust is a registered managed investment scheme under Chapter 5C of the Corporations Act 2001 (Cth). The responsible entity and trustee of the KSC Trust is AMP Capital Investors Limited (formerly known as AMP Henderson Global Investments Limited). The remaining two-thirds of the units in the Trust are held by AMP Capital Property Nominees Limited (the first defendant), in its capacity as nominee of UniSuper Limited (the second defendant). I will refer to the respective AMP entities as AMPCI (the responsible entity) and AMPCN (the unitholder as nominee for UniSuper), consistently with the way reference was made to them during the hearing. (Where reference is made to them collectively, it is as the AMP entities.) 3The application before me is for final injunctive relief to restrain UniSuper (and its nominee AMPCN) from voting (at a meeting that has been convened by AMPCI, at the request of AMPCN, to be held on 5 September 2011), by itself or through any agent or nominee, for the proposed extraordinary resolution to wind up the KSC Trust and from voting for any other extraordinary resolution to wind up the Trust pursuant to ss 601NB and 601NE of the Corporations Act. Relevantly, there is no application to restrain the defendants from seeking a winding up of the Trust under s 601ND of the Corporations Act .) 4Westfield contends that, by a joint venture agreement dated 30 October 2000 and binding (in the case of both Westfield and AMPCN, as a result of accession to the terms of the deed by each on the acquisition of units in the Trust) on the respective unitholders and the responsible entity, UniSuper has (in the present circumstances, namely where there is no written consent by Westfield to the sale of the Trust property) contracted away its right unilaterally to vote for the winding up of the KSC Trust pursuant to a resolution under s 601NB of the Corporations Act and thus cannot vote (or instruct its nominee to vote) in favour of the proposed resolution to wind up the KSC Trust at the meeting on 5 September 2011, without Westfield's prior written consent (by which I understand the reference to be to a consent to the sale of the main asset of the Trust). 5The AMP entities contend that Westfield's interpretation of the Joint Venture Agreement is misconceived for at least two reasons: first, because it is said that, properly construed, the Joint Venture Agreement and the Trust Deed do not impose any restraint on members exercising their statutory rights to wind up the scheme; and, secondly, because it is said that the power to wind up the scheme under the Corporations Act should prevail to the extent of any inconsistency between it and the contractual provisions of the Joint Venture Agreement and the Trust Deed. Issues 6The questions for consideration on this application, therefore, are: (i) whether, on the proper construction of the Joint Venture Agreement and Trust Deed a unitholder (in this case AMPCN, as nominee for UniSuper) is precluded from exercising its voting rights to bring about a winding up of the Trust without the written consent of the remaining unitholder(s) (here, Westfield), where to do so would cause a sale of the property of the Trust without the prior written consent of all the unitholders; and (ii) if so, whether there is any principle of law that prevents the Joint Venture Agreement from being given effect in that regard. Summary 7For the reasons set out below, I am of the view that on the proper construction of clauses 10.1 and 16.2 of the Joint Venture Agreement AMPCN is contractually precluded from voting in favour of the proposed winding up resolution (unless Westfield has given its prior written consent to the sale of the shopping centre) in circumstances where the necessary effect of that resolution would be to cause a sale of the shopping centre in the winding up of the Trust without Westfield's written consent and where AMPCN has bound itself to use its voting rights as unitholder so as fully and completely to give effect, inter alia, to the intent of the prohibition in clause 10.1(a) of the Joint Venture Agreement. 8I am of the view that the statutory right on the part of the members of a scheme to make a winding up application pursuant to s 601NB is not lost simply because of the import of the parties' contractual agreement as to how their voting power as unitholders is to be exercised. However, where the parties, by their contract, have agreed to exercise their voting rights in a particular way or so as to give full effect to the intent of their agreement, and voting for a resolution to wind up the company would breach that agreement, I do not consider that s 601NB overrides the parties' agreement in the sense of rendering it unenforceable as a matter of public policy (at least where the agreement does not deprive a unitholder of all means to seek a winding up of the scheme if that be so intended, and hence where it cannot be said that the unitholder is left locked into participation in such a scheme). 9The question is as to whether it is contrary to the policy underlying s 601NB of the Act, to enforce by way of injunction a contractual provision which has the effect of precluding a unitholder (AMPCN) from invoking its statutory right to seek a winding up of a managed investment scheme. 10In the circumstances of the present case, I do not think it is. There is no suggestion that the scheme is insolvent nor is it the case that requiring AMPCN to honour its contractual obligation under clause 16.2 would lock AMPCN (and UniSuper) indefinitely into participation in a scheme at the election of Westfield or dependent on its consent to the sale of the property. Not only are there other avenues by which AMPCN could exit the scheme (for example, by transferring its units in an approved fashion under the Joint Venture Agreement) but it would also be open to AMPCN (without exercising its voting rights and hence without any apparent breach of clause 16.2) to seek a winding up on the just and equitable ground pursuant to s 601ND (say, if there were to remain a deadlock between the unitholders as to the sale of the property and ongoing operation of the scheme). 11Therefore, I propose to grant the injunctive relief sought on the basis that to leave Westfield to a claim for damages for breach of the Joint Venture Agreement (in the event that AMPCN proceeds on the direction of UniSuper to pass the resolution as proposed at the meeting on 5 September 2011) seems likely to be an inadequate remedy for such a breach, due to the difficulty of determining how that damage should be quantified and noting that the underlying dispute is as to the sale of real property. That said, I do not propose to grant the broader form of injunctive relief sought as I do not consider that the circumstances warrant such an injunction. Background 12The KSC Trust was constituted and is governed by the KSC Trust Deed dated 23 March 1994 (as amended by various amending deeds). The initial unitholders in the Trust entered into a unitholders' agreement in respect of the Trust on 29 March 1994, the terms of which are not relevant for present purposes. 13By 30 October 2000, the unitholders in the Trust were AMP Henderson Global Investors Limited (now known as AMPCI) in its capacity as responsible entity for the AMP Diversified Property Trust, PPS Nominees Pty Limited and Schroders Nominees Limited as nominee for UniSuper Limited (the latter as trustee of the Superannuation Scheme for Australian Universities). 14Those parties entered into the KSC Trust - Unitholders' and Joint Venture Agreement dated 30 October 2000 but stated to be effective from 1 July 2000, by way of replacement of the then existing unitholders' agreement which was terminated as from 1 July 2000. PPS was defined in the Joint Venture Agreement as Syndicate; Schroders as SAPN. Relevantly (as will later be seen when construing clause 16.2), AMPCI was a party to the Joint Venture Agreement in two separate capacities: as unitholder (in which capacity it was defined in the agreement as ADP) and as responsible entity for the KSC Trust (in which capacity it was defined as AMPAM). UniSuper was also a party to the Joint Venture Agreement. 15Westfield first obtained units in the KSC Trust in 2003, acquiring the whole of the 25% holding then held by PPS Nominees. In 2008, it acquired a proportionate share of the 25% unitholding of AMPCI (the balance of that holding being acquired by AMPCN). Following those acquisitions, the present position is that Westfield owns one-third of the units in the Trust and AMPCN (as nominee for UniSuper) the balance. AMPCI (the responsible entity) and Schroders no longer own units in the trust. Westfield and AMPCN acceded to the terms of the Joint Venture Agreement by deeds dated 30 January 2008. 16The principal asset of the KSC Trust is a shopping centre known as the Karrinyup Regional Shopping Centre, which is situated in Perth. It was valued as at 31 December 2009 at $545 million. Although the Joint Venture Agreement makes provision for other real property to be acquired as an asset of the Trust, by reference to the definition of "Property" in clause 30.1 of the Joint Venture Agreement any such other real property was to be land intended to be held and used as part of the Karrinyup shopping centre land from time to time, thus incidental to the use of the shopping centre. (This supports the submission by Westfield that the purpose of the scheme, as objectively seen from the terms of the Joint Venture Agreement, was the acquisition and operation of the shopping centre.) 17On 10 August 2011, a Notice of Meeting was issued by AMPCI convening a meeting of the members of the KSC Trust to be held at 2pm on 5 September 2011 to consider a proposed extraordinary resolution to wind up the KSC Trust pursuant to ss 601NB and 601NE of the Corporations Act 2001 (Cth). (An earlier meeting, scheduled by notice dated 6 June 2011 to consider a similar resolution, did not proceed - the request for that meeting having in the meantime been withdrawn by AMPCN after objection was taken thereto by Westfield.) AMPCI issued the August Notice of Meeting pursuant to a request made by letter dated 9 August 2011 from AMPCN, as nominee for UniSuper. 18The proposed extraordinary resolution is in the following terms: That, pursuant to sections 601NB and 601NE of the Corporations Act 2001 (Cth), the Scheme be wound-up in accordance with the Corporations Act and the Trust Deed governing the Scheme. 19Section 601NB of the Corporations Act provides for the winding up of a scheme at the direction of members in the following terms: If members of a registered scheme want the scheme to be wound up, they may take action under Division 1 of Part 2G.4 for the calling of a members' meeting to consider and vote on an extraordinary resolution directing the responsible entity to wind up the scheme. 20There is no dispute that an extraordinary resolution, having regard to the definition under s 9 of the Corporations Act , means a resolution, relevantly, that has been passed by at least 50% 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). Therefore, as AMPCN holds two-thirds of the shares, it will be in a position to carry the resolution at the meeting and it must be assumed (having regard to its position in the current litigation) that it intends to do so. 21If a resolution under s 601NB is duly passed, in effect directing the responsible entity to wind up the scheme, then s 601NE provides that the responsible entity must ensure that the scheme is wound up "in accordance with its constitution and any orders under subsection 601NF(2)". Senior Counsel for Westfield (Mr Jackman SC) submits that part of the constitution of the Trust (for the purposes of s 601NE), in accordance with which any winding up of the KSC Trust would be required to be effected, is the Joint Venture Agreement. It is not accepted by Senior Counsel for the AMP interests (Mr Cosgrave SC), that the Joint Venture Agreement (though governing the relations between the parties in connection with the Trust) forms part of the constitution of the Trust. I will address this issue in due course. Relevant Provisions of the Joint Venture Agreement 22The Joint Venture Agreement was entered into as a deed expressly to record the arrangements between the unitholders in relation to the Trust (clause 1.4). Subject to the provisions of the deed, it enures for the benefit of and is binding upon the successors and permitted assigns of the parties to the deed (clause 1.6). There are provisions which broadly require that on a transfer or encumbrance of the units the transferor or encumbrancer procure the incoming entity to assume the obligations under the Joint Venture Agreement. 23Clause 30.1 of the Joint Venture Agreement sets out the definitions which apply unless a contrary intention appears in the deed. Relevantly, the term "Unitholders" is defined to mean: ADP (while it holds Units), Syndicate (while it holds Units), UniSuper (while SAPN or it holds Units) and any other person who holds Units in the Trust from time to time ... 24The definition of Unitholders went on to provide: ...and "Unitholder" means each or any one of the Unitholders as the context may require 25Clause 30.4 of the Joint Venture Agreement, on which Westfield places weight, provides that to the extent of any inconsistency between the deed and the KSC Trust Deed, the provisions of the Joint Venture Agreement are to prevail. 26For the purposes of the present application, the provisions identified by Westfield as central are clauses 10, 13 and 16 of the Joint Venture Agreement. 27Clause 10 (headed "Sale of Property and acquisition of additional investments") provides: Sale of Premises 10.1 (a) [AMPCI], in its capacity as responsible entity of the KSC Trust, shall not sell the Property or any substantial part thereof, without the written consent of the Unitholders . (my emphasis) (b) On completion of the sale of the Property, or if part of the Property has already been sold, the completion of the sale of the remainder of the Property, [now AMPCI], in its capacity as responsible entity of the KSC Trust, shall thereupon determine the Trust unless otherwise directed by the Unitholders. Acquisition of additional investments 10.2 [AMPCI], in its capacity as responsible entity of the KSC Trust, shall not without the written consent of the Unitholders acquire any investments other than the Property or for the short-term investment of liquid funds. 28Clause 13.1 (under a clause headed "Termination") provides: 13.1 Unless the Unitholders otherwise unanimously agree, in writing , this deed terminates on the earlier of: (a) the later of the date on which the Trust is terminated or the assets of the Trust are realised ; (b) the date that a new deed is entered into with the consent of the parties in lieu of this deed; and (c) the date that any Unitholder's Group becomes the sole holder of all Units issued in the Trust. (my emphasis) 29Clause 16.2 (under the sub-heading 'Exercise of Voting Rights") provides: 16.2 Each and all of the Unitholders mutually agree that they will so exercise their respective voting rights as unitholders under the Trust Deed so as to most fully and completely give effect to the intent and effect of the provisions of this deed. (my emphasis) 30Reference is also made to clause 19.1, which provides: 19.1 Each party agrees, at its own expense, on the request of another party, to do everything reasonably necessary to give effect to this deed and the transactions contemplated by it, including the execution of documents. 31The Joint Venture Agreement contains provisions for the transfer by unitholders of all or any of the units held in the Trust to "approved" transferees (clause 5) and for pre-emptive rights in relation to other transfers of units (clause 6). No transfer of any units or interest therein is to be effective unless and until the transferee has agreed to assume all of the obligations of the transferor under the Joint Venture Agreement in accordance with clause 6.6. 32There are also provisions, to which I was taken in the course of submissions, in relation to the establishment of the Unitholders' Committee, which is obliged to review, consider and make determinations on substantive issues with respect to the management of the Trust as set out in clause 7.4 of the Joint Venture Agreement, and in relation to matters such as repairs and alterations to the property (clause 8) and the future redevelopment or refurbishment of the property (clause 9). Issues for Determination (i) Construction of Joint Venture Agreement 33It is not disputed that, in the construction of the Joint Venture Agreement, regard must be had to the objectively ascertained intention of the parties in entering into that arrangement. Mr Jackman referred to what was said by Heydon and Crennan JJ in Byrnes v Kendle [2011] HCA 26 at [98]: A contract means what a reasonable person having all the background knowledge of the "surrounding circumstances" available to the parties would have understood them to be using the language in the contract to mean. 34It is submitted by Mr Jackman, by reference to the provisions of the Joint Venture Agreement referred to above, that the objective intention of the parties when entering into (or, perhaps more precisely in the case of Westfield and AMPCN, acceding to) the arrangements embodied in the Joint Venture Agreement, was to make provision for the regulation of a closely held unit trust business structure, designed for the ownership and operation of a major retail shopping centre. Mr Jackman emphasises that each party expressly agreed (pursuant to clause 16.2) to exercise its voting rights "so as to most fully and completely give effect to the intent" of that arrangement and that the Joint Venture Agreement was to be the paramount document governing the exercise by the unitholders and members of their rights and obligations as unitholders and members was to be the Joint Venture Agreement. I accept that the provisions of the Joint Venture Agreement warrant such a conclusion. 35The argument by Westfield that the proper construction of the Joint Venture Agreement precludes the unilateral winding up of the Trust (if that would cause a sale of the property to be effected without its consent), is put broadly on two bases - first, that clause 16.2 operates to preclude a unitholder from voting for a winding up resolution if it would indirectly have the effect of causing a sale of the property without unanimous consent of the unitholders (which turns on the construction of clause 16.2 and its operation in conjunction with clause 10.1); and, second, that any sale of the property as part of the winding up of the Trust could only occur if there were to be unanimous consent to the sale (since under s 601NE the scheme must be wound up "in accordance with its constitution" and it is submitted that the Joint Venture Agreement is part of the constitution of the trust). It was also, as I understand it, Westfield's position that clause 10 of itself prohibits a winding up in these circumstances as it extends to a sale effected indirectly by way of a winding up.