Avanteos Investments Ltd - [2008] NSWSC 370

CITATION: Avanteos Investments Ltd [2008] NSWSC 370

HEARING DATE(S): 18/04/08

JUDGMENT DATE :
24 April 2008

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Barrett J

DECISION: Judicial advice to be given

CATCHWORDS: TRUSTS AND TRUSTEES - Judicial advice - three classes of beneficiaries with potentially different interests - another party proposes litigation to establish rights of the respective classes - trustee proposes to consent to be representative defendant for one class only

LEGISLATION CITED: Trustee Act 1925, s 63

CATEGORY: Principal judgment

CASES CITED: Arakella Pty Ltd v Paton [2004] NSWSC 13; (2004) 60 NSWLR 334
His Eminence Metropolitan Petar v The Macedonian Community Church St Petka Inc [2007] NSWCA 150
Re Charteris [1917] 2 Ch 379

TEXTS CITED: Jacobs’ Laws of Trusts in Australia, seventh edition (2006)

PARTIES: Avanteos Investments Limited - Plaintiff

FILE NUMBER(S): SC 2177/08

COUNSEL: Mr A G Bell SC/Mr T M Thawley - Plaintiff

SOLICITORS: Henry Davis York - Plaintiff

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIOINS LIST

BARRETT J

THURSDAY, 24 APRIL 2008

2177/08 AVANTEOS INVESTMENTS LIMITED

JUDGMENT

1 This is an application under s 63 of the Trustee Act 1925 for the opinion, advice or direction of the court. The applicant is Avanteos Investments Limited (which I shall call “Avanteos”), the trustee of several superannuation, retirement and other investment funds.

2 The assets of these funds administered by Avanteos are under the immediate control of a custodian, Australian Market Automated Quotation (AUSMAQ) System Limited. That company, in turn, has appointed Permanent Trustee Australia Limited (“Permanent”) its sub-custodian, so that fund assets such as shares, debentures and units of managed investment schemes held on registers are registered in the name of Permanent.

3 Among the assets held in this way are units of managed investment schemes known as the Basis Yield Fund and the Basis Aust-Rim Fund. I shall call these the “Basis funds”. These units are held by Avanteos for the benefit of various investors, even though registered in the name of Permanent. The responsible entity and trustee of the two managed investment schemes is Basis Capital Funds Management Limited (“BCFM”).

4 On 16 July 2007, BCFM notified unitholders of the Basis funds that it had suspended applications and redemptions in respect of both funds because it was unable to make a fair calculation of the net asset value of the funds. According to BCFM, it was not until 28 September 2007 that it could calculate net asset value as at 30 June 2007. That calculation was relevant to unsatisfied applications for units received in June 2007. Some of the persons by whom those applications were made (“Applicants”) have sought to withdraw the applications.

5 The funds work on a quarterly redemption cycle. A redemption date occurred on 2 July 2007 and a number of unitholders (“Redeemers”) applied to redeem or withdraw as at that date. None of those persons has been paid.

6 BCFM has stated that if the Applicants are not entitled to withdraw their applications,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2008] NSWSC 370
Decision Date: 24 April 2008

CaseChat Overview and Summary

The plaintiff, Avanteos Investments Ltd, sought guidance from the court regarding the management of a trust, which had three distinct classes of beneficiaries, each with potentially differing interests. Another party, who was not a beneficiary, proposed to initiate litigation to ascertain the rights of each beneficiary class. In response, the trustee of the trust sought the court's advice to determine whether it could consent to act as a representative defendant for one class of beneficiaries only. The court was tasked with deciding whether the trustee could selectively represent one class of beneficiaries in the proposed litigation.

The court considered the unique circumstances of the trust, where the beneficiaries had potentially conflicting interests. It examined the statutory framework governing trusts and trustees and assessed whether the trustee's proposed action complied with the legal obligations. The court also evaluated the implications of the trustee's selective representation on the interests of the other classes of beneficiaries. Ultimately, the court determined that the trustee could consent to be a representative defendant for one class of beneficiaries, provided that it acted in the best interests of all beneficiaries and did not prejudice the rights of the other classes.

The court concluded that the trustee could proceed with the proposed litigation as a representative defendant for one class of beneficiaries, subject to certain conditions. These included ensuring that the trustee acted in the best interests of all beneficiaries and that the other classes of beneficiaries had adequate legal representation. The court emphasised the importance of maintaining fairness and transparency in the management of the trust and the proposed litigation. The final orders of the court outlined the conditions under which the trustee could proceed as a representative defendant and the measures to be taken to protect the interests of all beneficiaries.

Orders