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City Pacific Ltd v Bacon (No 2)

City Pacific Ltd v Bacon (No 2)

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Case Copied 20 July 2009 44 min read

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FEDERAL COURT OF AUSTRALIA
City Pacific Limited, in the matter of; City Pacific Limited ACN 079 453 955 v Bacon (No 2) [2009] FCA 772
CORPORATIONS – challenge to the effectiveness of a purported change of responsible entity pursuant to s 601FM of the Corporations Act 2001 (Cth) (the “Act”) – proper construction of s 601FM – whether s 601FM requires one resolution or two separate resolutions – whether the purported removal and replacement of the responsible entity under s 601FM is invalid, ineffective or void having regard to s 601FJ, Division 2 and the Act as a whole – whether adoption of resolutions at a meeting is a procedural irregularity for the purposes of ss 1322(1) & (2) of the Act – whether failure to conduct two separate votes pursuant to s 601FM was a procedural irregularity – whether invalidity cured by s 1322(2) – whether an order should be made under s 1332(4) validating any invalidity
Corporations Act 2001 (Cth) Division 2 of Part 5C.2, ss 249D, 249L, 252L, 253E, 436A, 601FA, 601FJ, 601FK, 601FM, 601NB, 601NE, 601NF, 1322
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 discussed
MTM Funds Management Ltd v Cavalane Holdings Pty Ltd (2000) 158 FLR 121 considered
re Barber (1886) 17 QBD 259 discussed
Latitude Fisheries Pty Ltd v Minister for Primary Industries & Energy (1993) 41 FCR 536 discussed
Walker v Wilson (1991) 172 CLR 195 discussed
David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 distinguished
BP Australia Ltd v Brown (2003) 58 NSWLR 322 distinguished
Re Westpac Banking Corporation (2004) 53 ACSR 288 considered
Howard v Mechtler (1999) 30 ACSR 434 cited
Cordiant Communications Australia Pty Ltd v The Communications Group Holdings Pty Ltd (2005) 55 ACSR 185 followed
Wagner v International Health Promotions (1994) 15 ACSR 419 distinguished
Mamouney v Soliman (1992) 9 ACSR 63 approved
Peters’ American Delicacy Co Ltd v Heath (1938-1939) 61 CLR 457 followed
Shorter Oxford Dictionary (4th ed, Oxford University Press, 1993)
The Macquarie Dictionary (4th ed, The Macquarie Library, 2005)
CITY PACIFIC LIMITED ACN 079 453 955 AS THE RESPONSIBLE ENTITY FOR THE CITY PACIFIC FIRST MORTGAGE FUND ARSN 088 139 477 and CITY PACIFIC LIMITED ACN 079 453 955 AS THE RESPONSIBLE ENTITY FOR THE CITY PACIFIC INCOME FUND v RODGER BACON (AS AGENT FOR THE "REQUISITIONING MEMBERS", TRILOGY FUNDS MANAGEMENT LIMITED ACN 080 383 679, BALMAIN NB CORPORATION LIMITED ACN 107 505 760, THOSE PARTIES JOINED IN THESE PROCEEDINGS PURSUANT TO PARAGRAPH 3 OF THE ORDER OF DOWSETT J MADE ON 23 JUNE 2009, BALMAIN TRILOGY INVESTMENT MANAGEMENT PTY LTD ACN 136 832 945 and TOM W POWERS
QUD 142 of 2009
DOWSETT J
20 JULY 2009
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

QUD 142 of 2009

IN THE MATTER OF CITY PACIFIC LIMITED ACN 079 453 955 AS THE RESPONSIBLE ENTITY FOR THE CITY PACIFIC FIRST MORTGAGE FUND ARSN 088 139 477

BETWEEN:
CITY PACIFIC…

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: [2009] FCA 772
Decision Date: 20 July 2009

CaseChat Overview and Summary

The case of City Pacific Ltd v Bacon (No 2) dealt with a challenge to the validity of a resolution adopted by members of a registered managed investment scheme, which purported to remove City Pacific Limited as the responsible entity and replace it with Trilogy Funds Management Limited. City Pacific, in its capacity as the responsible entity, sought a declaration that the resolution was ineffective and that the subsequent alteration of the records of the Australian Securities and Investment Commission (ASIC) giving effect to it was invalid. The key legal issues before the court were the proper construction of section 601FM of the Corporations Act 2001, whether the resolution was invalid for non-compliance with that section, and whether any such invalidity could be cured by section 1322 of the Act.

The Court held that section 601FM did not require two separate votes to be held in order to remove the existing responsible entity and appoint a replacement, but rather that both matters could be addressed by one vote. The court found that the resolution was not invalid for this reason, and further determined that even if section 601FM did require separate votes, the failure to hold them would not render the resolution ineffective, as there was no clear intention that strict compliance with this requirement was necessary to validate the resolution. The Court also held that the failure to conduct two separate votes was a procedural irregularity that could be remedied pursuant to section 1322(2) of the Act. However, the plaintiffs had failed to establish that substantial injustice had been caused or may be caused by this irregularity, and therefore the court declined to invalidate the resolution under section 1322(2).

Finally, the Court considered whether it should make an order validating the resolution pursuant to section 1322(4) of the Act. The Court found that it was just and equitable to make such an order, as no substantial injustice had been caused or would be likely to be caused to any person if the resolution were validated. The court also held that the plaintiffs' arguments concerning the possibility of a different outcome if the issues had been voted upon separately were speculative and did not establish a basis for refusing to validate the resolution.

In light of these findings, the Court dismissed the proceedings brought by City Pacific Limited, but reserved the matter for further submissions as to the appropriate form of order and costs.

Orders