BTI Rural Pty Ltd v Rural & Agricultural Management Ltd
[1997] FCA 221
•20 May 1997
NOT FOR GENERAL DISTRIBUTION
NO QUESTION OF PRINCIPLE
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No NG 369 of 1997
)
GENERAL DIVISION )
BETWEEN: BTI RURAL PTY LIMITED
Applicant
AND: RURAL AND AGRICULTURAL MANAGEMENT LIMITED
First Respondent
GUARDIAN TRUST AUSTRALIA LIMITED
Second Respondent
CORAM:LINDGREN J
PLACE:SYDNEY
DATE: 20 May 1997
REASONS FOR JUDGMENT
(ex tempore)
INTRODUCTION
The present proceeding relates to a unit trust known as the Rural Property Trust (“the Trust”). The applicant (“BTI Rural”) holds units in the Trust. The first respondent (“RAM”) is the manager of the Trust. The second respondent (“Guardian”) is the trustee of the Trust. The Trust is established pursuant to a Trust Deed dated 15 December 1982, as subsequently amended. BTI Rural filed its application on 15 May 1997. It was made returnable yesterday, the time for service having been abridged.
The proceeding relates to a meeting of unitholders proposed to be held on 3 June 1997. BTI Rural alleges that RAM has engaged in misleading and deceptive conduct directed to unitholders in respect of the convening of a the meeting. The conduct relates, in particular, to a “Notice of Meeting” and an “Information Memorandum”, both of which have been distributed to unitholders.
What BTI Rural seeks is a timetable directed to securing a final hearing of the proceeding prior to 3 June. Thus, the only question which was before the Court on the return of the application yesterday, was whether the final hearing should be expedited and a timetable fixed which would enable that hearing to take place by 3 June.
BACKGROUND
BTI Rural holds 464,000 units in the Trust. It holds them as nominee for Bankers Trust International PLC (”BTI”) and acts on the instructions of BTI in relation to the units. BTI is also the beneficial owner of a further 32,281,953 units in the Trust which are held in the name of ANZ Nominees Ltd (“ANZN”). It is proposed that ANZN become a second applicant. BTI’s total beneficial holding of 32,745,953 units represents 19.6% of the units in the Trust.
BTI Rural and certain other unitholders requisitioned on 17 March 1997 the convening of a meeting of unitholders. Pursuant to the requisition, RAM despatched the Notice of Meeting on 3 April 1997. Although the supply of an “Information Memorandum” was foreshadowed in the Notice, none accompanied it. The Notice of Meeting indicated that seven resolutions were proposed to be put to the meeting. These fall into three categories: first, a resolution designed to effect what has been called a "Corporatisation Proposal”; secondly, a resolution directed to payment of compensation to RAM arising from its loss of office as manager of the Trust and from termination of a certain Farm Management Agreement to which I will refer; and, thirdly, a group of resolutions directed to removal or retirement of RAM as manager of the Trust.
The Corporatisation Proposal was to be effected pursuant to “Resolution 2” in the Notice (the first proposed resolution related to election of a chairman). The Corporatisation Proposal proposed the acquisition of all units in the Trust by Australian Food and Fibre Limited (“AFF”), a company which has not traded to date, has no assets or liabilities, and is associated with RAM. The proposal is that AFF will offer the present unitholders a choice between shares in AFF and cash, in exchange for their units in the Trust. AFF will be listed on the Australian Stock Exchange (“ASX”) and the Trust will cease to be so listed.
RAM holds 9.28% of the units in the Trust. If the Corporatisation Proposal is approved, RAM will elect to take shares in AFF in exchange for its units in the Trust. Under the Corporatisation Proposal, RAM will retire as Manager of the Trust. RAM has stated to unitholders in the Notice of Meeting that “[I]f the Corporatisation Proposal is passed, the objective of the requisitionists will be achieved”. According to the Notice of Meeting, RAM was working on the Corporatisation Proposal at the time when the requisitions directed to securing the removal or retirement of RAM were received by it. In the Notice of Meeting, RAM recommends that unitholders vote in favour of the Corporatisation Proposal.
The resolution that compensation be paid to RAM is “Resolution 3” in the Notice of Meeting. The material in the Notice of Meeting relating specifically to Resolution 3 is as follows:
“Resolution 3 - Compensation to RAM
To consider the payment of compensation for the retirement of RAM from the office of manager and termination of the farm management agreement.
One consequence of the Corporatisation Proposal is that RAM will give up its management rights under the Trust Deed and, subject to the agreement of RAM, the termination of the Farm Management Agreement dated 18 October 1996 (whereby RAM manages the farming operations of RPT).
RAM is seeking compensation for giving up these rights. The Corporatisation Proposal is not dependent on the passing of this resolution and this resolution will have no effect if the Corporatisation Proposal does not proceed.
The amount sought by RAM will be based on an independent valuation conducted by Grant Samuel & Associates Pty Ltd (Grant Samuel). The instructions to Grant Samuel have been provided by the trustee of RPT, Guardian Trust Australia Limited (Guardian). A copy of Grant Samuel’s full report will be included in the Information Memorandum. RAM is proposing the amount to be paid to it be paid by the issue of shares in AFF to preserve the cash reserves of RPT. RAM believes the payment of compensation to it independently calculated is fair and reasonable in the circumstances.”
As will appear, BTI Rural contends that the passage quoted above is misleading and deceptive. It contends that if RAM is removed or retires pursuant to the passing of the resolutions next to be noted, RAM will be obliged to desist acting under the Farm Management Agreement, so that no question of payment of compensation to it will arise.
Resolutions 4 to 7 relate to the removal or retirement of RAM as manager of the Trust. In the Notice of Meeting, RAM refers to these resolutions as the resolutions called for by the requisitions. It refers to criticisms that have been levelled at RAM and puts to recipients, that is, unitholders, matters in rebuttal. RAM recommends that unitholders vote against Resolutions 4-7.
I will say something briefly about two further documents, before turning to the Information Memorandum. One is the Trust Deed. Clause 48 of the Trust Deed provides that the Manager (currently RAM) “will desist from all activities relating to the Trust if the Unitholders by Ordinary Resolution remove the Manager and that it will retire from the management of the Trust if and when requested to do so by the Trustee in any of” certain specified events. One of those events is that the unitholders, by ordinary resolution, require the manager to “retire”. No doubt, clause 48 is the source of the reference in Resolutions 4-7 to both “removal” and “retirement”.
The other document to which I referred is the Farm Management Agreement dated 18 October 1996 between Guardian and RAM. By that document, Guardian appoints RAM to manage and supervise the farming business, feedlotting and other operations on the lands of the Trust and the marketing and sale of any livestock, crops, fruit and other produce of those properties. The term of the Farm Management Agreement is expressed to continue, subject to its provisions, until it expires on 30 June 2001. Of course the Farm Management Agreement provides for payment of remuneration to RAM.
BTI Rural and RAM are in dispute over whether the expression "all activities relating to the Trust" in clause 48 of the Trust Deed embraces the activities in which RAM is entitled to engage, and does engage, for reward to itself pursuant to the Farm Management Agreement. RAM has expressed the view that it does not and that it (RAM) would be entitled to insist upon payment of compensation as a condition of its giving up the benefit of the Farm Management Agreement, notwithstanding its removal or retirement pursuant to a resolution of unitholders for the purposes of clause 48 of the Trust deed. BTI Rural takes the opposing view.
The Information Memorandum forwarded by RAM to unitholders does refer to the opposing views on this issue. It is put for BTI Rural that if unitholders have the impression, which BTI Rural asserts will prove to be erroneous, that the Trust would remain liable to pay compensation to RAM notwithstanding the passing of an effective resolution under clause 48 of the Trust Deed, unitholders may be dissuaded from voting in favour of such a resolution. In effect, BTI Rural would wish the position to be clarified by the holding of a final hearing of this proceeding and delivery of judgment in it prior to the holding of the meeting on 3 June.
RAM opposes the holding of a final hearing prior to 3 June on several grounds. In the first place, it says that it is impracticable for a final hearing to be held at such an early time. Apparently RAM will wish to seek rectification of the Trust Deed as an alternative remedy in the event that it fails on the construction issue. This will involve the leading of evidence as to the genesis of clause 48. Secondly, RAM submits that no irreparable harm will be done in the event that the meeting is held. Thirdly, it submits that there has been delay and acquiescence on the part of BTI Rural. In this respect, RAM refers to a course of conduct by BTI Rural extending over a period from October 1996 to March 1997 when the requisition for the holding of the meeting was lodged. It is perhaps worth noting at this stage that while there are some 4,400 holders of units in the Trust, the major ones are:
West Merchant Bank Limited, 20%;
Elliott and Associates, 20%;
BTI, 19.6%.
Fourthly, RAM contends that the declarations sought by BTI Rural in its application are hypothetical, and further that it lacks standing.
REASONING
I have reached the conclusion that expedition should not be ordered on the basis that a final hearing is to take place prior to 3 June. A major consideration is the practical difficulty in achieving BTI Rural’s objective of certainty for unitholders by that date. The steps which will or may have to be taken by or on behalf of RAM are deposed to in paras 34-40 of an affidavit of Mark Russell Clifton, solicitor, of Freehill Hollingdale and Page, the solicitors for RAM, sworn 19 May 1997. I need not set them out here. It seems to be difficult in the extreme for RAM to be ready for a final hearing in time to allow for conclusion of the hearing and delivery of judgment by 3 June. It may be, as has been submitted on behalf of BTI Rural, that RAM's foreshadowed claim for rectification does not have substance, but RAM would have to prepare for a hearing on that issue. Moreover, even to reach that conclusion would occupy not insignificant hearing time. Even to address the claim would involve an investigation of the sequence of amendments to the Trust Deed. The hearing might well come to occupy two or three days, and after the conclusion of the hearing a judgment would have to be delivered by 3 June.
It is difficult in the extreme without cancelling other fixtures, to find Judge time which would be required for a final hearing, particularly if the claim for rectification proceeds. This is not to say that it would be impossible for time to be found, since other fixtures could be cancelled and other litigants told, in effect, that they must give up longstanding fixtures to make way for this case. But to support such a course, the case on irreparability of harm would have to be strong indeed.
A further consideration is that even if no more than a question of construction should prove to be involved, an appeal by the unsuccessful party would eliminate the certainty sought to be achieved prior to 3 June.
In addition to the matters already mentioned, apparently Guardian, which would also wish a final hearing to take place by 3 June, proposes to join a representative party of other unitholders. Of course it is not known what stance the other unitholders will take, or what evidence, if any, they will wish to lead.
It is not shown that irreparable harm will occur if the final hearing does not take place by 3 June. The major unitholders are well aware of the issues that divide the parties and of the arguments on both sides. They can put their case to other unitholders. It will be possible for BTI Rural to apply for urgent interlocutory relief immediately following the meeting with a view to the maintenance of the status quo ante, if it is dissatisfied with the course of events. Surely, it must be not uncommon for meetings to occur and resolutions to be voted upon, in the face of rival contentions as to what the legal position is in some respect and without the benefit the certainty that comes from an unappealable ultimate judicial decision.
I need not express a view finally on the other grounds advanced by RAM. There does seem, at first blush, to be some force in RAM’s submission relating to delay or acquiescence on the part of BTI Rural. Apparently the requisition for the meeting had been prepared as long ago as October 1996 and there was a course of consultation between RAM and BTI Rural over the intervening period. RAM submits that BTI Rural waited to assess its ultimate commercial position before filing the present application. The evidence in this respect is, however, not entirely satisfactory. It has been put, correctly, on the part of BTI Rural that it did not obtain the Information Memorandum itself until 13 May, and it says that it was unaware until that date of the entirety of the information intended to be placed before unitholders. There is no question that it has moved quickly since 13 May. In any event, if unitholders generally faced irreparable harm, it is not obvious that the delay and acquiescence of one should delay a final hearing.
In the result, however, by reference to the practical difficulties of ensuring that a final judgment not susceptible to appeal would be available by 3 June, associated with the view that I have formed that there will be no irreparable harm if this is not achieved, the directions now to be made should not include the fixing of the proceeding for hearing prior to 3 June.
It was suggested by counsel for RAM that the proceeding should be stood over to a date after 3 June but I will hear the legal representatives for the parties on the question of the appropriate directions now to be made.
[There followed submissions as to the directions to be made.]
I make the following directions:
DIRECT the first respondent to make requests for particulars and to notify the applicant of any objections to the statement of claim by 23 May 1997.
GRANT leave to the applicant to add ANZ Nominees Ltd as second applicant, and to file and serve any amended application and any amended statement of claim by 27 May 1997.
DIRECT the third respondent to file and serve any notice of motion in relation to the joinder of a representative unitholder, returnable on 28 May 1997 at 9.30 am.
GRANT liberty to any party to apply on 24 hours’ notice.
STAND the proceeding over to 28 May 1997 at 9.30 am for further directions.
I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated:28 May 1997
Heard: 19 May 1997
Place: Sydney
Decision: 20 May 1997
Appearances: Mr R W White of counsel instructed by Atanaskovic Hartnell appeared for the applicant.
Mr J T Gleeson of counsel instructed by Freehill, Hollingdale & Page appeared for the respondent.
Mr D G Healey, of Mallesons, Stephen Jaques appeared for the second respondent.
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