Australian Securities & Investments Commission v Lewski & Anor; Wooldridge & Anor; Butler & Anor; Jaques & Anor; Clarke & Anor

[2018] HCATrans 214

[2018] HCATrans 214

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne  No M79 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Appellant

and

WILLIAM LIONEL LEWSKI

First Respondent

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

Second Respondent

Office of the Registry

Melbourne  No M80 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Appellant

and

MICHAEL RICHARD LEWIS WOOLDRIDGE

First Respondent

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

Second Respondent

Office of the Registry

Melbourne  No M81 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Appellant

and

MARK FREDERICK BUTLER

First Respondent

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

Second Respondent

Office of the Registry

Melbourne  No M82 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Appellant

and

KIM SAMUEL JAQUES

First Respondent

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

Second Respondent

Office of the Registry

Melbourne  No M83 of 2018

B e t w e e n -

AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION

Appellant

and

PETER CLARKE

First Respondent

AUSTRALIAN PROPERTY CUSTODIAN HOLDINGS LIMITED ACN 095 474 436 (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (CONTROLLERS APPOINTED)

Second Respondent

KIEFEL CJ
BELL J
GAGELER J
KEANE J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 18 OCTOBER 2018, AT 9.30 AM

(Continued from 17/10/18)

Copyright in the High Court of Australia

____________________

KIEFEL CJ:   Yes, Mr Hutley.

MR HUTLEY:   Thank you, your Honour.  Your Honour, ASIC has arranged for your Honours to have the form of the constitution, and particularly clause 24, in the form it was before the amendments.  Your Honours, as I said yesterday, can deduce that from comparing the amendment deed and the constitution in its amendment form but has arranged that your Honour have it in the pre‑changed form.  Your Honour, I have spoken to my learned friends, we will comfortably make it before lunch time, your Honour.

KIEFEL CJ:   Thank you.

MR HUTLEY:   Now, I had taken your Honours at the end of yesterday to the judgment in the Full Court and trial and how they approached it.  Can we now turn shortly, if we could, to section 601GC which your Honours will find at 106 in the first volume of the authorities.  As your Honours appreciate, our argument is that the provisions of the supplemental deed do not change or impinge upon any right or confer any right upon the unit holders – “change and impinge upon” being the language of her Honour Justice Gordon in the Premium Income Case.

Now, 601GC, as your Honours appreciate, (1)(b) is with what we are concerned, that is, the amendment has to:

if the responsible entity reasonably considers the change will not adversely affect members’ rights.

Your Honours will see in (2):

The responsible entity [is obliged to] lodge with ASIC a copy of the modification or the new constitution.

So if a modification has been affected by a valid decision for the purposes of 601GB, there is an obligation to lodge it.  And secondly:

The modification . . . cannot take effect until the copy has been lodged.

So no modification of the constitution is immediately operative.  There will always be ‑ no matter what course is followed under 601GC, it will not take effect until lodged. 

Now, our argument is that when properly analysed, all the changes here were changes which conferred rights solely upon the RE and they neither change nor impinge upon rights of the members.  Now, to succeed in relation to that point, we have to persuade your Honours that the approach of the Court of Appeal in 360 Capital v Watts, which found favour with the Full Court, was wrong. 

Now, it is undoubtedly the case that it is a fundamental right of each member to have the managed investment scheme administered according to the constitution of the scheme, and that comes, if nothing else from ‑ and we have given your Honours Target Holdings Ltd v Redferns in the House of Lords in [1996] AC 421. The relevant passage is in the speech of Lord Browne‑Wilkinson at 434, where he speaks:

The basic right of a beneficiary –

this is at about letter ‑ just below A:

is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law. 

That right is really obviously, in aspect, the logical entailment of what this Court said in Youyang v Minter Ellison (2003) 212 CLR 484 at paragraph 32 when the Court said that:

Perhaps the [trustees] most important duty . . . is to obey the terms of the trust.

We say, however, it is not a fundamental right of members to have a management investment scheme administered according to the constitution of the scheme in its particular state at any point of time in the future.  So, in other words, the right is not a right to have the trust administered in accordance with the trust in its existing state. 

A proper understanding of the right of a member to have the management investment scheme managed in accordance with the constitution is that it is the constitution as it may exist from time to time.  Put that in concrete terms, the amendment with which we are concerned in one aspect was concerned with an entitlement of the responsible entity to be paid a fee in the event that the trust was listed, an event which clearly had not occurred at the time of the amendment on 19 July and at that point might never occur.  We submit, immediately before that amendment, the unit holders did not have a right that upon any listing, the RE would not be entitled to a fee for the simple reason that one could not know the state of the constitution at that time and it would depend upon whether any such term appeared in the constitution.

What the unit holders had at the time of the amendment was a right that the administration of the scheme then occurring be in accordance with the trust which is no more than saying that if there was a departure from the terms of the trust or, for that matter, a threatened departure from the terms of the trust, unit holders would be entitled to relief, whether by way of damages or by injunction – compensation or restoration or injunction – and the general right to have the scheme conducted in accordance with the scheme as it stood from time to time.

The importance of that point lay at the heart of the observation by Justice Barrett in ING Funds Management v ANZ Nominees which is in the authorities, at volume 2 at page 584, where his Honour observed, at paragraph 98 that:

It is possible to argue that “members’ rights” include a right to have the managed investment scheme operated –

in accordance with:

the constitution as it stands.

And, he merely observed that it was arguable.  Whilst we say it was arguable ‑ ‑ ‑

EDELMAN J:   Sorry, what page was that?

MR HUTLEY:   I do apologise, your Honour, paragraph 98 at 584.

EDELMAN J:   Thank you.

MR HUTLEY:   We submit it would be wrong to conclude that was a right.  The right to have the trust conducted according to the terms of the constitution is necessarily ambulatory and, therefore, no amendment to the terms of the trust not being an attempt to amend that fundamental right could adversely change or adversely affect or impinge upon that right.

GAGELER J:   These are all different ways of saying what you said in paragraph 7 of your outline.

MR HUTLEY:   Yes, your Honour, that is the fundamental question.  As we observe, what the section is concerned with is the affecting of rights and as Justice Gordon observed in Premium Income – and if I could take your Honours shortly to that ‑ ‑ ‑

KIEFEL CJ:   Does section 601GC(1) have a protective purpose?

MR HUTLEY:   Essentially, it is a permissive purpose.  It means that no constitution cannot be amended in all its aspects.

KIEFEL CJ:   That is certainly the approach Justice Barrett took, that it is a permissive purpose and arguably does not consider it to have a protective purpose at all, because it is not mentioned.

MR HUTLEY:   Quite.  Section 601GC(1) is wholly permissive – (1)(a) – and (1)(b) is permissive but limits the extent of the permission.  In other words, you cannot in a constitution of a managed investment scheme preclude amendment.

BELL J:   Would one read 601GC(1) in light of GA(2) with the requirement, if the responsible entity is to have any rights to be paid fees out of the scheme property for that to be specified in the constitution?

MR HUTLEY:   Yes, it does.  I accept that.

BELL J:   I suppose I am coming back to the concept of why one would not read GC(1)(b), the notion of members’ rights, as at least embracing a correlative right, if you like, against GA(2).

MR HUTLEY:   In our respectful submission – and I will come to them - the correlative rights argument is wholly novel.  No one has ever, basically until this appeal, suggested that there is a correlative right in every trust instrument, as it were, assuring to the members the existing state of the trust.  When I come to my learned friend’s formulation of the correlative rights it is quite interesting - and if your Honours go to their outline, my learned friend’s outline in this regard – your Honours, the outline formulates at paragraph 1 the so‑called correlative rights and it says:

one of the “members’ rights” is the right to receive the services of the responsible entity (RE) for the fees stipulated in the existing constitution and no more –

In our respectful submission, to get fees they have to be in the constitution.  There is no doubt about that.  Your Honours…..to CA(2), but that does not carry with it any correlative right.  All that says is if you are to have fees they must get into the constitution.  It does not speak as to what one’s rights are.  One can put any rights in there and it does not speak in any way to their continuity.

BELL J:   It might be difficult to discern the legislative policy in reading GC(1)(b) in that way against a provision like GA(2) since it would largely neuter GA(2).

MR HUTLEY:   With respect, GA(2) may well have a different policy aim to GC(1)(b).  Section GA(2) is to ensure that there are not deals done for the benefit of the relevant entity outside the constitution.  That is its aim.  Of course, one of the problems which can exist with corporations is the directors have not been above, as it were, getting their fees through other means not reflected in the constitution.  In other words, it is not speaking to any form of “correlative” right because no “correlative” right is necessary.

The only necessity for this correlative right and its only significance and its only existence can be justified by constraining GC(1)(b).  It has never been referred to in any other cases.  The only right of the members is the general right, which I have taken your Honours to and I have explained that we say that that is ambulatory.  So, if one, in effect, elevates every covenant in a trust instrument, every term in a constitution into having – as my learned friend, in effect, said in answer to one of your Honour Justice Edelman’s observations ‑ every covenant has this “correlative” right.

EDELMAN J:   Mr Hutley, do you accept that if one were to read “right” as, in effect, meaning “interest” that your submission could not succeed?

MR HUTLEY:   If one reads “right” as “interest”, exactly.

EDELMAN J:   Given that for four centuries there have been thousands of different interpretations and approaches to rights, why should rights be read as narrowly as you would submit, rather than as broadly as an interest?

MR HUTLEY:   Your Honour, no one to date has analysed it – in fact, all of the authorities I will take you to, your Honour will see it says it is an interest, it is not just affecting the interest, it has got to be something different.  That is why Justice Gordon expressed it as “changed or impugned the right”.  That was accepted by the Full Court in 360 Capital.  That was accepted by the Full Court here.

That has been common ground until your Honours – but if it is changed to “interest” and “right” is just converted into the interests, and that is any economic interest, any commercial interest, anything, then of course, any argument disappears because this would affect the interests of unit holders because it involves the payment out of a significant amount of money ‑ mind you, out of a very vast trust but a significant amount of money, I accept that, and if one immediately after the payment had distributed the trust the notion of people who the distribution would have been lower than it would have been immediately before the payment.  I accept that.  But that is not – no one has argued that right is other than what one would normally understand that to mean.  I accept that is a chose in action of some variety being a chose in action of a member.

KIEFEL CJ:   Does one read section 601GC(1)(b) in light of the replacement section 208?

MR HUTLEY:   Well, there they actually ‑ ‑ ‑

KIEFEL CJ:   Does that throw any light on what might be intended?

MR HUTLEY:   No, in fact, with respect, 208, your Honour ‑ if I can go to that shortly ‑ if one comes to that, the replacement section, your Honour sees that one has to go back to 208 itself and 208 uses the words “benefits” in the broadest of all possible senses and my learned ‑ ‑ ‑

KIEFEL CJ:   Which would include fees.

MR HUTLEY:   Any economic benefit, there would be no doubt about that, but that 208 is of course dealing with a different question to this and, in our respectful submission, its consideration with benefits is not a rights‑oriented consideration.  I will not take your Honour back over the definitions which ‑ ‑ ‑

KIEFEL CJ:   If it does not directly address the question of rights, it might address the question of the limit, the extent of the power that the responsible entity is able to take when it is acting reasonably, taking into consideration the interests of members, but I accept that might be ‑ ‑ ‑

MR HUTLEY:   Well, that would be a different way of dealing with it.  That comes to a point; there may have been other ways of addressing a concern about this fee.  One could have applied, for example, to set aside the decision but the way the case has been run is solely one of power. That is why it is void or not void, setting aside the provisional.  In equity, for example ‑ ‑ ‑

KIEFEL CJ:   Yes, I understand, Mr Walker is dealing with the pleading point.

MR HUTLEY:   Yes, I am dealing solely with the way they dealt with it, it was a pure power question, not a question of perhaps enable to impugn the decision of the directors, on a range of other grounds.  It was purely said that it did not fall within the power and that is all we are concerned with.

KEANE J:   Mr Hutley, just before you go on, in relation to 601GA(2), why would one not understand that provision as being predicated upon the ordinary rules relating to trusts that, absent express provision to the contrary, the beneficiaries have a right to have the trustee maintain the trust fund and to act gratuitously?

MR HUTLEY:   Your Honour, the power to amend the trust would not – if your Honour is saying that there is a common law right, equitable right, to have no fee, to act gratuitously, that this constitution abrogated that and made clear that the trustee was to have fees.

KEANE J:   It made provision intruding upon what would otherwise be the right so it is a limited ‑ it is a carve‑out but a limited carve‑out of that right.

MR HUTLEY:   Well, your Honour, if one is now dealing with an equitable entitlement to the performance of one’s function without fee, that is really an aspect of the no‑conflict principle that you cannot benefit from your conduct of the trust.  It is not, and with respect, a relevant right which this fee is impugning, in my respectful submission.  It has never been put that way by anyone that, in effect, the entitlement of a beneficiary to the conduct of the trust by the trustee for nothing has never been put as an aspect of the case against us.  What has always been said is either the correlative rights being of this contractual variety, which my learned friend has just raised, or the general right.  In fact, until the High Court, it has been run on the fact of the general right.

KEANE J:   Well, that is understandable on the basis that a number of intermediate courts have been wrestling with the question and, no doubt, doing so respectfully of opinions that have been expressed by courts of co‑ordinate jurisdiction. 

MR HUTLEY:   I am not being critical.  All I am saying, your Honour, is that if raised, it has never been put in the way before your Honour.  In our respectful submission, it has not been put in that way because that is not a right.

The nature of the entitlement to the conduct of the trust without expense, whilst called a right historically, is effectively in force, I think, when there is a departure of taking a benefit, of seeking to recover it by way of breach of trust for dealing with the funds of the company without an entitlement to it.  And that can then be expressed in terms of a broad variety such as a right to freedom but, in our respectful submission, not strictly a right.  It is really a reflection of just a statement of an absence of power. 

KEANE J:   Well, looking at Target Holdings v Redferns at page 434 that you gave us, in the paragraph after the one you read, the paragraph beginning C, his Lordship says:

The equitable rules of compensation for breach of trust have been largely developed in relation to such traditional trusts, where the only way in which all the beneficiaries’ rights can be protected is to restore to the trust fund what ought to be there. 

MR HUTLEY:   Quite, because when there is a departure, namely, without power, you have breached the, what I have described as “ambulatory right” to the trustee, of the beneficiary to have the trust duly administered in accordance with the provisions of the instrument.  If there is no provision which confers a benefit on the RE at that time, you have acted other than in accordance with the right.  That is why I would say the right of the trustee of the beneficiaries, as your Honours expected, not to renumerate the trustees, but an aspect of this, as it were, what I have called “ambulatory right”, with respect to due administration.  In other words, it is spoken to in respect of actual or threatened departures from it.  And, in this context where a trust is fundamentally variable, this right is not harmed by variation. 

KEANE J:   Can I just ask you one further question to make sure I understand your submission.  Is your submission that “rights” in 601GC(1)(b), that the – what that provision is concerned with is, in effect, someone blue pencilling or being able to be seen to be blue pencilling a right that is in the constitution?

MR HUTLEY:   Well, I do not know if it is necessarily blue pencilling, your Honour.  It is a question of construing the constitution ‑ ‑ ‑

KEANE J:   Well, removing ‑ ‑ ‑

MR HUTLEY:   Construing the constitution and take into account the common law, because it is not just a right ‑ may be a right which exists as a matter of principle beyond the trust and identifying that right.  Having identified that right, asking whether this change either alters it or, to use the language of Justice Gordon, impugns it. 

KEANE J:   Carefully avoiding the actual language of the statute about adversely affecting it.

MR HUTLEY:   That is how it has been expressed in the cases and we say that is a proper capture of “adversely affecting” – not merely changing the value of it.

KEANE J:   If it is as simple and clean as that – that is to say, being able to see the right in the constitution and the question being whether that right has been altered – why is what is required of the responsible entity that it reasonably considers the change will not “adversely affect”?  Why would the provision operate by reference to a “reasonable consideration” because if it is as clean and simple as you are submitting it will always be abundantly apparent, objectively.

MR HUTLEY:   But they have to reasonably consider – people may take different views of particular rights.  Take the example – for example, assume one has a right to get reports from the board every two weeks, in a trust, and a trustee found that was expensive, time‑consuming and formed the view that if we alter it to a month, every month – that will not adversely affect the rights of the members.  That would be a judgment call.  People might take different views.  It might depend upon the nature of the business – how liquid the instrument was, what is the economic environment?  So, there could well be evaluative judgments about whether they are reasonably likely to adverse ‑ ‑ ‑

KEANE J:   So it is an economic test?

MR HUTLEY:   No, no – adversely affect the rights – “the rights” is the right to the information.  If you adversely affect that right by changing it by a short day, have you adversely affected that right?  You have changed it, and the question is, is it adversely affected but there has to be a change or impugning of the right.

KEANE J:   But from the example you gave us, the only way you can answer the question is by looking at the economic effect of it.

MR HUTLEY:   You have to look at, in effect, the effect of the right and is it adverse, yes.

GAGELER J:   But, Mr Hutley, on your submission – taking that example of a right to a periodic report – why is that not inherently variable because the constitution can always be changed.

MR HUTLEY:   It certainly is.  But it is a right today you have.  Our point is you only have a right to the due administration of the trust and being the trust and the state it is at the time that the question arises.  I do not have a right now to the due administration of the trust in accordance with the trust instrument today - two years from now.

GAGELER J:   So my right today depends on the constitution as it exists today, in every case?

MR HUTLEY:   Yes, if you have a right on it.  But your right is to the due administration of the trust.  That is the right.  Due administration of the trust is administration as and when it arises – this right.  You have other rights – like the right as a beneficiary to be paid at the end.  That is a right which you have.  But your right to due administration is necessarily ambulatory because it directs itself to the administration.

EDELMAN J:   For a submission that is so heavily concentrated on rights, you are actually slipping between rights and powers because what you are calling the right of due administration is actually, in Hohfeldian terms, a power to have the Court assess whether or not the trust has been duly administered.

MR HUTLEY:   I am using the terminology which the House of Lords has used and 360 Capital has used, your Honour.  I accept it will – on one view, there is a duty to duly administer the trust as and when that administration is called for.  So there is certainly a Hohfeldian right, but there is an element in that right as there are often, of powers, namely the power to approach the Court to have a remedy.  But it is still a Hohfeldian right, with respect.

KIEFEL CJ:   Mr Hutley, does your submission, though, come down to saying this:  that so far as unit holders are concerned their rights are going to be whatever the responsible entity says they are?

MR HUTLEY:   With respect, no.  The responsible entity – under this constitution, I referred your Honour, there are many rights in these beneficiaries.  There are rights to distribution at the end.  There are dozens of them.  Those rights cannot be changed in accordance with the law, unless the responsible entity reasonably considered that those rights will not be adversely affected, changed or, to use the words, “impinged upon”.

KIEFEL CJ:   I should have limited it - your rights to the value inherent in the trust estate – the equivalent of a trust estate is whatever we say it is from time to time, because we can alter the value of it by resolution.

MR HUTLEY:   Your Honour, the RE is given the power to alter the value of the trust estate constantly by running the business.  That is one. 

KIEFEL CJ:   But not by taking it to itself.

MR HUTLEY:   Your Honour, the particular circumstance is ‑ many other variations which, on the analysis which has so far attracted the Court, would not involve taking benefits to the trustee, to the RE, would similarly be precluded from being the subject of amendment without going to the meetings.  In fact, it is almost impossible to concede of many resolutions which would not have to go to the meeting if the approach which is currently finding favour with the courts is correct.  If the rights are changed or impugned upon they go to the meeting because you have to reasonably adversely affect those rights.  You have to go to the meeting.

KIEFEL CJ:   Just putting the question of the rights of the unit holders to one side for a moment, do you accept that the various provisions of the Corporations Act to which we have been taken by analogy with trusts place the responsible entity under the duty that a trustee would have to maintain the trust estate?

MR HUTLEY:   Yes, in the sense of – if the trustee distributes trust property contrary to the terms of the trust they will have to restore it or give equitable compensation for it.  I accept that, but they have given power ‑ ‑ ‑

KIEFEL CJ:   Trustees are not usually given a power of variation of the trust.  That is the distinction, though.  They would have to go to the court to obtain that.

MR HUTLEY:   The courts have held there was very limited inherent power to alter trusts, which is basically limited to extraordinary circumstances associated with children.  That led to a position where the trusts brought in powers of amendment.  The legislations obviously now instantiate that as an absolute right for the trust to be the subject of amendment by the members, and in the way described by the responsible entity.  That, in our respectful submission, reflects the change of circumstance which has occurred.  But I should get on; I do not want to overstay ‑ ‑ ‑

KIEFEL CJ:   Yes.

MR HUTLEY:   Could I just take your Honours shortly to the cases?  They start with Justice Barrett’s judgment but you can pick up the relevant parts of Justice Barrett’s judgment in the judgment of Justice Gordon, which your Honours will find behind tab 18 in the second volume of authorities.  Your Honours have been taken to these but there is a point to be made.  Her Honour’s approach to the exercise called for is set out in [33] and [34] at page 607 where her Honour says:

The approach to be adopted in the present case may be summarised as follows.  The task of Wellington (as the responsible entity) when approaching s 601GC(1)(b), was first to ascertain the rights of members created by the PIF Scheme Constitution as they existed immediately before the proposed modification.  Wellington then had to decide whether those rights – as distinct from the enjoyment of them or their value – would be changed, or impinged upon, by the modification.

Your Honour, that formulation came from – your Honours will see, at page 605 in the judgment of Justice Barrett in paragraph [96] which was taken from a statement by Justice Young in Smith v Permanent - and ASIC on this appeal has submitted that this is the correct approach and we, with respect, agree.  Then, returning to her Honour’s judgment at [33], therefore, the question is has it been changed or impinged upon:

Only if that question was answered in the affirmative, was Wellington then required to undertake a process of comparison –

So, firstly, one had to identify a right; secondly, find is that right impinged upon or changed.  If so, then you have to:

undertake a process of comparison and assessment in order to decide whether the impact would not “adversely affect” members’ rights. 

Then, her Honour embarked upon that exercise in the way indicated.  We say her Honour clearly was following the approach of Justice Barrett and was not dissenting from Justice Barrett’s observation in paragraph [98] which my learned friend attacked for different reasons to our difficulty.  If one could go to the judgment of the Full Court of the Court of Appeal in 360 Capital v Watts.

GAGELER J:   Mr Hutley, can I just ask what do the words “impinged upon” mean?

MR HUTLEY:   “Impinged upon”, as we understand it, is of this variety.  Assume there is a right in the constitution - right A - and one changed the constitution in a way that set out, for example, a precondition to exercising right A without strictly modifying right A, you would have something which might impinge upon right A, as we understand it.  It is not purely altering its value.  It is, in effect, in substance altering its operation without specifically changing it.

Can I then take you to 360 Capital, if I could?  The central provision in 360 Capital is set out at paragraph 4 in the judgment.  It is tab 6, I think I told your Honours.  It says, therefore:

The trustee could not grant options unless the trust was listed.

. . . new units were required to be issued at a price determined in accordance with –

the clause et cetera.  Now, the analysis undertaken, at first instance, was one purely of analysis of whether that amended certain rights and that can be seen from paragraphs 25 and following.  But, the important analysis, from the point of view of the case, is between 40 and 46.  The important point is at 40.  The Court said:

With respect, there are several problems . . . To begin with, the right of a member to have a managed investment scheme administered according to the constitution of the scheme is fundamentally the most important right of membership.  Without it, all other rights of membership ‑ ‑ ‑

et cetera, and then they go on dealing with it.  Then they, with respect, refer to Justice Gordon’s reasoning.  But, one comes to 45, which is really the end point.  It says:

As to the second, the distinction between something which affects members’ rights as such and something which merely affects the value or enjoyment of members’ rights, although plainly a valid distinction, is essentially beside the point.  Given that a member has a right to have the scheme conducted according to the scheme’s constitution, a change to the constitution must inevitably change the nature and quality of that right –

That is, the right to have the scheme conducted in accordance with the constitution:

as such, as opposed to the value and enjoyment of the right.

Et cetera.  So, in other words, the court, in our respectful submission, says that any alteration to the constitution must impact upon the right to have the constitution – the trust – conducted in accordance with the constitution – managed in accordance with the constitution.  We say that is wrong.  It does not impact upon that right at all.  That right is, of its nature, an ambulatory right and, therefore, is not affected merely by any change to the constitution.

GAGELER J:   If you take the ex ante ex post approach that you say is correctly stated by Justice Gordon in Premium Income and you look ex ante, the content of the ambulatory right is one thing.  Ex post, the content of the ambulatory right is something else, is it not?  Perhaps, we are just going back to the fundamental point.

MR HUTLEY:   Exactly, your Honour.  If one says that any change changes the content of that right, then so be it ‑ ‑ ‑

GAGELER J:   Going back to your ambulatory right, would not a more accurate statement of it be that it is a right to have the scheme managed in accordance with the constitution as it may be amended from time to time in accordance with section 601GC?

MR HUTLEY:   One can express it in those terms, your Honour.  The right is as it finds itself from time to time.  But the question then is, as long as the right is the right as it finds itself from time to time, we say that that is a right that cannot be adversely affected. 

If one puts in 601GC, one then has to immediately then ask the question, is to what point of time are you looking.  And then one brings in necessarily, in our respectful submission, the error which we say lies at the heart of 360 of really then saying that you have a right for the indefinite future to the conduct of the trust in the form it is today. 

And that is not the right, and it is never, in our respectful submission, it cannot be the right because then every amendment, every amendment must affect that right.  And one immediately starts – so the power is not a power – it is an odd choice of construction of (1)(b), because really in effect what you have to say is, is rights simply become the right and it becomes interests, because any change which affects the interests will be adverse in that analysis, because ‑ ‑ ‑

EDELMAN J:   I take it, from the lack of any reference in the authorities or in submissions, that there is nothing in the extrinsic materials that assists in any way. 

MR HUTLEY:   Nothing, your Honour. 

KIEFEL CJ:   If one reads the notion of rights in accordance with 360 Capital at the paragraph you have taken us to, 45, is one then driven back to the question otherwise raised in section 601GC(1)(b), namely, whether or not that change or alteration is to the right, is one which is reasonably considered adversely affect or not adversely affect?

MR HUTLEY:   Yes, your Honour, I accept that.  If you accept that there is a ‑ ‑ ‑

KIEFEL CJ:   It seems quite workable then. 

MR HUTLEY:   Pardon?

KIEFEL CJ:   It seems quite workable.

MR HUTLEY:   Yes.  Well, then every change you have to make an adverse decision about ‑ ‑ ‑

KIEFEL CJ:   Yes.  That would actually give some work to the responsible entity considering the effect of the change. 

MR HUTLEY:   With respect, no.  It would merely mean that the use of the word “right” was utterly superfluous because it is always “a right”.  The right which is always that ‑ ‑ ‑

KIEFEL CJ:   No, it would mean it is a very low threshold for them to consider whether there is any adverse effect. 

MR HUTLEY:   Really, what one would have to say is there any adverse effect of any change.  Not to rights because rights simply become superfluous. 

EDELMAN J:   On the members and then (a) and (b) read very comfortably as a scheme which is about protecting members.  It is about the interests of the members, (a) is designed to have a special resolution of the members if the constitution is going to be changed, and (b) is designed if the members are going to be adversely affected. 

KIEFEL CJ:   If you are really worried, you could go to the court and ask for a direction.

MR HUTLEY:   Your Honour, I think I have made the submission. 

KIEFEL CJ:   Perhaps we should let you get on with the balance of it. 

MR HUTLEY:   There is a certain point where – now, this analysis ‑ I have to deal with something shortly with what our learned friend raises about the existence of correlatives. 

In our respectful submission, there simply are not correlatives of that variety.  They are not the correlatives of the Hohfeldian variety, right, duty, power, liability, et cetera.  These are constructs which are only constructed for the purposes of engaging GC(2)(b) because they have no other legal significance.  Because the right to the due administration deals with everything and they are pure, they have simply no juridical significance other than to engage GC(2).  Because if one has ever breached one’s obligation, that is failed to act in accordance with the trust, one is liable.  If one acts in accordance with the trust, one is all right.  If one is threatening to, one can be injuncted. 

These correlative rights are nothing more than constructs for the purposes of this exercise and it is noteworthy that your Honours will find no reference to that in any case law and your Honours have been taken to none that every provision of a trust instruments has a sort of a meta companion of the variety our learned friends submit.

So, in our respectful submission, those take one nowhere and the formulations in our learned friends’ speaking notes merely are in effect truncated versions of the right to due administration but seeking to avoid the difficulty of the right to due administration which we have dealt with, and the perception of its ambulatory variety and that is why the first

formulations have the word “existing” in it, thus, in effect, answering the question, in our respectful submission.  Those are our submissions on that point, your Honour.

KIEFEL CJ:   Mr Hutley, did you mean to deal with ground 3 or had you done so?

MR HUTLEY:   I thought having regard to the order, your Honour wanted me ‑ ‑ ‑

KIEFEL CJ:   I see, you were going to come back to that.

MR HUTLEY:   Yes ‑ ‑ ‑

KIEFEL CJ:   Yes.  Yes, Mr Walker.

MR WALKER:   If it please the Court.  Your Honours, as you know, we have sought leave as well to file a contention so as to take such advantage as we may from any happy outcome for Mr Hutley’s argument just completed.

KIEFEL CJ:   Is there any opposition.  You have that leave.

MR WALKER:   If it please the Court.  Otherwise I adopt, with respect, what my friend has said about that without adding anything and in anticipation the same will be true of the argument concerning section 208, ground 3.  We urge our written submissions generally and now I proceed to address some matters that ASIC has particularly put in address in the order that you will have seen from our outline of oral argument.

It starts with what we call the idiosyncratic litigation.  What do I mean by that?  I mean that it was on 21 August in the relevant year that the proceedings commenced.  It was six years after the relevant 22 August and it was thus, of course, more than six years after the relevant 19 July.  That has led to a number of what might be called manoeuvres and, yes, there is some denigration in my use of that word, because there is a high degree of artificiality seen in pleadings and particulars which, as you have been told and as you will have read, went through a deal of evolution under pressure of objection and pressure, of course, of an inflexible limitation period.

In particular, reliance on a contravention of 19 July was at the heart of the artificiality of the way in which ASIC put the case.  The topics that factually were, or query, normatively should have been, considered at the meeting of 22 August, the lodgement motion day, was at the heart of the argument concerning artificiality.

What is critical is what was both not pleaded or argued and what has been in relation to it unequivocally accepted in the arguments below and here about ASIC’s case, what did it say and what did it not say.  In particular, there was no allegation of conscious impropriety, that is, knowing that something was done either on 19 July or on 22 August and it follows during the intervening period as well that informed the way in which the duties fell to be performed on 22 August. 

It was not alleged that any of the directors had actual subjective knowledge of what might be assumed for the purposes of my argument today to be a failing on 19 July.  I should have said that at the outset.  Your Honours appreciate that my argument is, of course, entirely premised on a failure of the notice of contention and that is that there had not been an amendment in accordance with the law.  It is premised on that.  It is a fallback, I suppose.

In particular neither was it alleged, and thus was not the subject of forensic contest in which our clients, the directors, had allegations to respond to, it was not alleged that there were circumstances that objectively meant if they did not know, which was accepted, then they should have. 

Your Honours have seen in the record and heard in the address from ASIC the various permutations in which it is accepted that ASIC framed its case accordingly.  You see it put by a different choice of words in the way ASIC addresses the matter in their written reply in this Court.  Could I take your Honours. please, to its closing paragraphs 34 and 35 on this point and by this stage reference has been made to the listing fee payments.  Of course, they were made later than the so‑called lodgement resolution but it makes my point a fortiori, of course, because time had elapsed. 

There was more time, in other words, for matters to be brought to their attention that might have put them on notice of a prior defect.  But in 34, consistently entirely with the way in which the matter had been conducted below and here, ASIC makes it clear that they accept that the payments were made in the belief by the directors that the process of amendment had been completed, that the payments were authorised by the constitution and then they add as their argument, but that was wrong and that is why in the next sentence the word “mistake” is used.  The issue of mistake arises starkly. 

In our submission, it is clear that this is a case that needs to be addressed on the basis that the contraventions found at first instance, set aside on the first appeal, against the directors were contraventions alleged or found that have to accommodate the notion that it was by reason of conduct by persons without any dishonesty or conscious impropriety mistakenly believing a state of affairs to be true which would have justified their conduct.

Then, in paragraph 35, with respect, as a fair paraphrase of the course of events below, our friends write that the case on the particular duty under section 601FD(1)(f) did not, they say:

assert strict liability:  it alleged, and the trial judge found, that the directors should have obtained clear legal advice or direction from the Court that the Amendments had been effective.

I say that is a fair paraphrase.  I ought to supply you chapter and verse of that.  That is what we understand from what you will see in the book of materials, starting first at page 267.  You have been shown some of this by my friend Mr Gleeson.  Paragraph 28, which is a pleading of contravention with respect to the voting in favour of the lodgement resolution, has, as the first iteration - I should not say “first iteration” – has as that iteration which you see on page 267 under the heading “Particulars” - you will see the reference in (ii) and (E) over the page that the case particularised was that there had been a vote without the directors first having considered:

legal advice that the August amendments if made without member approval . . . or judicial advice –

et cetera.  That was then, I think, elaborated in the manner my friend Mr Gleeson explained yesterday in the document that starts at page 285, the so‑called replacement particulars.  One finds in relation to it, again, for example, at the top of page 286, a reference to:

(iii)     failing to be satisfied that the board had considered:

(A)     legal advice . . . 

(B)     judicial advice -

and that is a rather elaborate way of saying that they did not get legal advice, did not get judicial advice.  But as noted by the Full Court in their analysis of the pleading, which has not been contradicted and could not be, there was no pleading and is no case that something had happened within the limitation period to put, as it were, the matter as a matter for further or better inquiry by the board.  When I say “the matter” I mean the modification which was accomplished, in the sense I am going to explain from the statute – the modification which was accomplished on 19 July. 

The Full Court has held and there really is no possible contradiction of this, that the case to be considered is a case where all we have is the ex hypothesi unlawful purported modification on 19 July, which cannot be sued on, and the so‑called lodgement resolution on 22 August with nothing intervening and no fact pleaded, except this assertion, which is not a fact but rather what I will call a normative alternative state of affairs, what should have been but was not, namely, how shall I put it, better legal advice than they had had or even clearer legal advice than they had had or even, one might cynically say advice rather than as the Madgwicks letter, as you know, says in effect, “Well, you asked me a question and here are the two possibilities and you are going to have to pick one”.

All of that had been on 19 July and so contravention on 19 July because ex hypothesi and for the sake of argument that could not allow reasonable consideration to be shown, all of that, being unavailable by reason of the limitation period, is artificially revived simply by the assertion that when the time came to consider lodgement - and I am going to come back to what it means to consider lodgement - then lo and behold there should have been, for no other reason than the earlier defect, legal advice or judicial advice. 

It is in that context that we then move to the two ways in which really the same point is sought to be made by us in the argument but in our outline for argument is grouped as first grounds 1 and 2 interim validity, and second, at ground 2, scope of duties, et cetera.  They are not really separate.  They are different aspects of the same proposition. 

They boil down to this, that for the purposes of considering the alleged contraventions one starts with the observation made by my learned friend Mr Gleeson that apart from the explicit references to what I am going to call state of mind, cogitation or actual mental consideration of something in those provisions, as my friend puts it, perhaps implicitly all of them by reason no doubt of their subject matter and their context, have that character.  We respectfully accept that that is a fair description in summary form of a relevant character of those provisions.

At the risk of taking your Honours back where you have been time and time again, I take you to those provisions.  Section 601FD, of course, I am not sure I think it is a convenient place, it is many places, 102 of the authorities bundle.  Without distinguishing between paragraphs (a) to (f) as enacted and those selected from that list for our case – the difference does not matter, my argument does not depend upon the particular paragraphs relied upon.  My argument is about a proper understanding of 601FD so for which purpose we go to the whole.  In all of them, one can see that there is an attempt to control by imposing a standard, both positive and negative, in the different ways expressed for that conduct of directors which requires them to think about things, that is, it is their decision making, usually by voting, obviously, at a board meeting and otherwise acting as director when the officer in question is a director, that is the subject matter of 601FD(1).

One sees, in particular, that there is with respect to a fundamental, to use an expression of my friends, a fundamental obligation, see subparagraph 601FD(1)(f)(iii), that is to ensure that the RE complies with the scheme’s constitution, that the matter is expressed thus that there is a requirement to take all steps that a reasonable person would take if they were in the officer’s position to ensure that, et cetera.  Those are words which have, we say, these elements in them.

The first is an evident legislative acceptance that there may not be perfection.  So, it is “take all steps that a reasonable person would take in that officer’s position to ensure that”, et cetera.  To take an obvious example, if you are a dissenting director, you will not have ensured that the RE complied if the majority voted for something which was not compliance, but if you have raised the point and done those things which a reasonable person in that position would do and voted against, then of course you would not have contravened (f) simply because the RE has not complied with the constitution.

So, as the Full Court correctly did, it fell to be asked in this case, concerning 22 August, given what was not alleged and what was positively accepted by ASIC concerning the state of mind of the directors on that day, what was on the agenda that called relevantly, for this particularised allegation from ASIC, namely, for more legal advice or strikingly, judicial advice. 

One could go to court and say, “I am not aware of any problem, I am not aware of any problem, can I have a tick for what I am about to do that I do not regard as problematic” and it is not surprising the Full Court said, but in the absence of any case exciting a suspicion or concern, and in the absence of any case that their state of mind already included a niggling doubt about the propriety of what they had done, how could it be said that on 22 August, anything was occurring other than that which the law required.

Now, at that point, it is necessary obviously to go to what the law required with respect to modifying the constitution in order to make good what we have argued in writing and what I wish to elaborate slightly in address, concerning what the Full Court called “this interim validity notion” because to repeat, we accept as a premise of this fallback argument that there had been the unlawful attempt to modify.  It had not worked for all the reasons my learned friend has identified as being, in effect, the way in which the Full Court found that matter. 

Now, that means we start of course with 601GA.  It does not provide merely context for understanding section 601GC.  It is the starting point of the statutory scheme in question and as your Honours have already observed for other purposes in relation to the notice of contention argument, the stipulation in paragraph 601GA(2)(a) is at the heart of matters. 

It concerns, I hesitate to use the word, rights, that is, you will find that it is about the rights of a responsible entity to be paid fees.  It is the familiar necessary stipulation in private law in a trust deed in this version of public regulation in the deed which is both a trust deed and a statutory instrument, to get money, being an entity that at general law would not be entitled to any money.

Now, leave aside at the moment the general law concerning a trustee’s right of indemnity.  That does not arise relevantly for the purpose of any of this argument.  What matters is that in relation to what are called fees, but importantly fees out of scheme property, so not fees directly from members, fees out of scheme property, or indemnity again out of scheme property - so one can see that this is manifestly protective of what I will call the estate, in old‑fashioned language, the scheme funds in which there are interests represented by so‑called units for the members who are exactly analogous to beneficiaries in that regard of a trust.  I accept all of that.

And, it is said in relation to those rights, as they are called, that they must be specified in the scheme’s constitution.  Your Honours will be familiar with the argument that, alas, we lawyers can have, and genuinely, about whether forms of words in instruments like a constitution really do meet the requirement that they specify something.  There are levels of generality or there are needs to eliminate possible choices or alternatives or to avoid inappropriate vagueness captured by the semantic content of the word “specified” in many leisurely contexts, including this one, which could lead to argument.  But, what is necessary is that what is in the scheme’s constitution, these must be specified. 

Furthermore, it is said that they must be available only in relation to the proper performance of those duties which, of course, calls to mind some of the terms that, I think, in particular, my learned friend, Mr Hutley, took you to, but Mr Gleeson has also done it, where one’s eyebrows are raised by some of the terms in the constitution in its original unamended form.  I am not saying there have been amendments, but there are parts of this constitution to be found on the ASIC register which do not sit well with positive, inflexible, non‑optional requirements imposed by the statute.

One can imagine, then, that it is not an unrealistic thing to be regulated by paragraph 601GA(2)(b) that there will be attempts to cut back the exposure of an RE which to, for example, loss of a fee or loss of an indemnity, which will need to be disciplined, as it were, by being measured against the plain words – but arguable concepts – of must be available only in relation to the proper performance of those duties, et cetera. 

One sees an understanding, commercially realistic, alas, and entirely consistent with an appropriate parliamentary understanding of human nature, that there may be agreements or arrangements to different effect.  They are dealt with by being deprived of any effect.  The same thing is to be said about other stipulations in section 601GA such as, for example, subsection (4), concerning the very important right to withdraw from a scheme.  Again, the right must be specified with the argument that might aroused by that.  And, then, it also must set out what are called “adequate procedures”.  Again, the possibility of argument there is manifest.  That one, in particular, stipulates that these provisions concerning right to withdraw, quote, “must be fair to all members”, unquote.  And, the argument involved ‑ in the double concept of fair and to all members – is, again, manifest. 

Section 601GB has its problems, on any view, because, bearing in mind the possibilities of slipping – totally innocent slipping – that is, just not getting right whether this really is a specification or whether the withdrawal right is truly fair to all members, et cetera, or whether procedures are adequate – nonetheless, 601GB says that:

The constitution . . . must be contained in a document –

And that is the first of our answers to this idea that Mr Gleeson has challenged us with that we have no text in the statute to support what the Full Court calls “interim validity” – an expression I am stuck with and will continue to use.  But, it has, as it were, a heavy asterisk on it.  It rather depends what you mean by “interim validity”.  And, we have tried to explain those matters in our written submissions, upon which we rely, and I am going to deal with that as I proceed now.  But with respect to 601GB, it has to be a document and that document, I suppose, always originally in paper becomes, as you know, electronic because of the registration procedures of ASIC. 

Now, the document is said to be one that is legally enforceable.  That is curious language.  Documents are not legally enforceable.  Juridical relations recorded by the words in them or created by the words used in them, are legally enforceable but the meaning is plain beyond any doubt. 

What it does not mean is that if there is a slip in parts of the constitution, you do not have a constitution.  Instead it is, if you like, the Bed of Procrustes.  Those things which are outside the framework that the law imposes by statute for the constitution of the scheme are properly ignored in the document. 

It does mean that 601GB has been breached, as it were, independently because, of course, 601GB speaks always, that is from the first constitution, through any iterations involving modifications.  And then we come to modifications which are addressed in 601GC together with the allied concept of replacement with a new constitution. 

The evident concern of 601GC with the different position when considering a change that may adversely affect members’ rights, and when one is not considering such a change, it is to provide responsibility or sole capacity to the special majority of the members for a case where there is such a change and to give it to the responsible entity in any other case.

Now, I do not mean exclusively to the responsible entity.  A responsible entity may well, prudently or simply for the sake of good order and involvement, have all changes, all modifications, carried out by special resolution.  But as to that class of change, that subclass, that is that may adversely affect members’ rights, then we know that only the special majority of members can make that modification. 

Now, I am not going to address, as I say, on the notice of contention point, but one sees very importantly this mental state, this thinking about a matter, positively required by paragraph 601GC(1)(b).  And it is that which we accept as a premise for this fallback argument.  It is that which we accept did not exist, either because there is no consideration or it could not be regarded as reasonable.  I stress, it does not mean that they need to be correct in the conclusion that they come to in a case where they have considered the matter and proceeded on the basis that the change would not adversely affect members’ rights. 

The word “reasonably” surely leaves open that the possibility that, for example, a state of the art of legal reviews about what the law requires or what the law means with respect to what is a change that adversely affects members’ rights, may well mean that obtaining what appears to be reputable and careful legal advice, that this is not a change which would adversely affect members’ rights, would comfortably show that there has been reasonable consideration.

With respect to the legal art involved in understanding 601GC, as it may be affecting the conduct of people who are not lawyers, and directors do not have to be lawyers, then, in our submission, factually as a matter of policy and the evident purpose of that choice of words at 601GC(1)(b), is that you can be regarded as reasonably considered – as having reasonably considered the change would not adversely affect members’ rights, notwithstanding that in truth it was such a change. 

Now, what that means is that Parliament has accepted that there will be the possibility after a modification has apparently been effected, of revisiting it to see whether it has been effected correctly.  And under subsection (2), one then notes that the way Parliament proceeds is, notwithstanding that possibility, notwithstanding that there is plainly the possibility of dispute, argument, doubt, requiring perhaps an ultimate upheld tribunal to determine the point, raised by 601GA, therefore involved necessarily in 601GC, notwithstanding all of that, something which is called a copy of the modification ‑ a copy of the modifications as a document.  It must be lodged with ASIC and that could not possibly be construed as meaning that that is the end point of a process which may involve a spiral of getting legal advice, getting judicial advice, beating the bushes for any contradictors, et cetera, et cetera. 

Rather, Parliament has simply provided that when there has been a modification by the responsible entity then the responsible entity must lodge a copy of the modification, a document.  In order to ensure what I am going to call “timeliness” rather than impose a time limit, what might be called in the case certainly of modifications such as in this case, self‑interest is relied upon, far more reliable source of impetus to timely conduct.  The modification cannot take effect until the copy has been lodged.  Again, we are talking about dealings with a document.

Now, the lodgement of the document which is then to be thereafter available on what might be called “reasonable prompt terms” ‑ see subsection (4) of section 601GC ‑ the importance of the document – it can be seen, of course, from the way in which registered documents are dealt with generally by the Act.

We have referred to this in our written submissions.  Your Honours will be familiar with the fact that under section 1274, the compulsory registers to be kept by ASIC include what might be called a kind of gatekeeping function, but as we have noted in our written submissions, certainly not a requirement that ASIC scrutinise or second guess everything that involves the potentially arguable matters of opinion to which I have drawn attention will arise under 601GA and 601GC.

act in the best interests of the members –

and to resolve conflicts in their favour, not the RE’s favour.  Again, the difference between the parties is ASIC treats this as a trust law notion where thought and mental states can be relevant but, ultimately, actions are what matter.  If you do not act in the best interests of the members or if you prefer their interests to your interest, you are in breach.  It does not matter that you come along and say, but I was honest or, I did not realise there was a problem.  Mr Walker seeks to build in multiple elements of honesty and subjectivity into that duty.  Our answer to that is those matters arise not under the duty but they arise at the stage of any claim for relief.

Your Honours, in relation to Mr Hutley’s submissions on the notice of contention, we would urge you when you reread Justice Gordon’s decision to conclude that Mr Hutley cannot win unless he gets that decision overturned as well.  He has commended that as a good decision and said that it is only 360 Capital that is the problem.  What is ignored is that in the intervening case, which is Centro, of Justice Barrett, Justice Barrett came back, looked directly at Justice Gordon’s decision and said she got it wrong, particularly her paragraph [34] was wrong and that is why Centro, which is on the same essential facts as Premium Income comes to the exact opposite decision.  Premium Income and 360 stand together as cases which Mr Hutley must overturn.

Your Honours, there are two final aspects on the notice of contention.  If I could ask you to go back to the further materials and go to the trustee at Part 24 which commences on page 194 which, of course, includes the relevant clause 24.5 in its post‑amendment form.  It is a fair reading of the rights created by this part of the deed consistent with certain questions the Court has put yesterday and today that Part 24 is an exhaustive statement of the entire authority of the RE to make payments out of the fund which are expenses where the payments to itself or otherwise of the character of expenses and the beneficiaries have a right as part of due administration to ensure that the RE not make payments outside Part 24 and if the RE wants to make a change to increase a payment to itself that is an adverse effect on a member’s right.

Your Honours, the other aspect of the deed was clause 22.4, which is “Removal”.  I have made the submission that even within Mr Hutley’s test that right is impinged upon by the amendment because after the amendment it can only be exercised at considerable financial pain.  Could your Honours note also clause 22.5, which sits with it.

Prior to the amendment the effect is that when the RE is removed it must transfer and vest the whole trust fund into the new RE.  Post the amendment what the RE does is first pocket a large sum of money itself and transfer a smaller balance to the new RE.  It is hard to think of a clearer effect on members’ rights.

Your Honours, in the bundle that the associates were given this morning, if I could ask you to go to that, you have the deed or an extract of it in the form immediately prior to the amendment.  It is useful, as Mr Hutley says, to see what 24.5 looked like beforehand.  It is useful for one other purpose of illustration. 

If your Honours work through the pages, at 1175 we see supplemental variation deed No 6, the immediately preceding one.  On 1179, at clause  3.1(b) the RE asserted that it had formed the necessary opinion to make the amendment without going to members.  You will see the amendment on 1183, which is essentially giving a new power to invest in derivatives.

We would go to this as a good example of how the approach in 360 is correct and works effectively and purposefully under the statute.  If you are investing in a scheme which has limited investment options and the RE wants to expand the categories of investment, such as into derivatives, that, potentially at least, could affect your rights because you will now have your money committed to a different set of risks. 

However, it is a case which the RE may well be able, under paragraph (b), to say there is no adverse effect in my reasonable opinion because either they are safe or they are sufficiently consistent with the investments you have already authorised me to do.  So that is an example of how the approach that we commend will apply not only to the very clear case like the present, where the trustee or the RE is benefitting itself, but to some of these other provisions of the deed.

Your Honours, there are only two final matters.  The first is, in the book of further materials, could I ask you to go to page 263, to the particulars of this part of the case, only to note that not only is everything that we have put to the Court so far within the case that was run at trial but the case run at trial, in fact quite correctly, brought together the basic trust principle that you can only have the fees that are provided for, together with the very specific adverse effects including removal of the RE with an extra fee and, finally in paragraph (d), tied that back to the more general right to have the trust administered according to the constitution.  So the case has always, contra Mr Hutley, embraced the specific and the general.

Your Honours, the final matter, your Honour Justice Bell put to Mr Walker a question which related back to a submission I made about the shocking size of the fee that was taken out.  I do not resile from the submission that it was a shocking fee in size.  The submission that I gave you, of course, the half to the two‑thirds, was the half to the two‑thirds of the money raised on the listing fee, not the entire fund.  It does not detract from the fact that that matter was a very large red flag for the directors when it came to pay the money away.  May it please the Court.

KIEFEL CJ:   The Court reserves its decision in this matter and adjourns to 9.30 am tomorrow in Canberra and in Sydney.

AT 12.42 PM THE MATTER WAS ADJOURNED