In the matter of Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust

[2018] NSWSC 1391

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust [2018] NSWSC 1391
Hearing dates:	5 September 2018
Decision date:	05 September 2018
Jurisdiction:	Equity - Corporations List
Before:	Black J
Decision:	Direct that the Plaintiff is justified in adjourning a meeting of unitholders to a date to be determined.
Catchwords:	CORPORATIONS – managed investments – judicial advice sought under s 63 of the Trustee Act 1925 (NSW) by responsible entity – where responsible entity sought judicial advice that it would be justified in adjourning meeting of unitholders – whether advice sought should be given.
Legislation Cited:	- Corporations Act 2001 (Cth) s 1319 - Trustee Act 1925 (NSW) s 63
Cases Cited:	- Re Envestra Ltd (No 2) [2014] FCA 483 - In the matter of Re1 Limited and Re2 Limited as responsible entities for Westfield Retail Trust 1 and Westfield Retail Trust 2 (No 3) [2014] NSWSC 762 - Re Asciano Ltd (No 2) [2015] NSWSC 1651 - Re Investa Funds Management Ltd [2016] NSWSC 369 - Re Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust [2018] NSWSC 1369 - St George Bank Ltd v The Rangers Club of NSW Inc (1995) 18 ACSR 370 - Young v Cotter [1996] NSWCA 573
Category:	Procedural and other rulings
Parties:	Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust (Plaintiff)
Representation:	Counsel: N M Bender (Plaintiff) J Stoljar SC (Investa Wholesale Funds Management Limited in its capacity as responsible entity of the Investor Commercial Property Fund and ICPF Holdings Limited) M Oakes SC (Quartz Bidco Pty Ltd and Quartz Sub TC Pty Ltd)   Solicitors: Allens (Plaintiff) Gilbert & Tobin (Investa Wholesale Funds Management Limited in its capacity as responsible entity of the Investor Commercial Property Fund and ICPF Holdings Limited) Clayton Utz (Quartz Bidco Pty Ltd and Quartz Sub TC Pty Ltd)
File Number(s):	2018/223255

Judgment – ex tempore (revised 6 september 2018)

Nature of the application

1. The Plaintiff, Investa Listed Funds Management Limited ("ILFM") as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust (together, “IOF Fund”), seeks, relevantly, the opinion, advice and direction of the Court under s 63 of the Trustee Act 1925 (NSW) that the chairman of ILFM, in those capacities, would be justified in adjourning a meeting of unitholders to consider a proposal for acquisition of units in the trusts to a date to be determined. That meeting is the subject of orders previously made in these proceedings on 28 August 2018 and is presently proposed to take place on 6 September 2018, that is, tomorrow. The Plaintiff also seeks an order that a second court hearing on 7 September 2018 be vacated, and that certain associated orders be vacated, and its proceedings for judicial advice concerning a trust scheme now be adjourned for further directions or hearing at 2pm on 17 September 2018. I delivered short oral reasons for making the order sought and this judgment somewhat expands those reasons. I have drawn on the helpful written submissions of Mr Bender, who appears for ILFM, in doing so.

Background

2. This application arises in circumstances that an offer (“Blackstone offer”) to acquire the units in the trusts has been made by two entities associated with the Blackstone Group, Quartz Bidco Pty Limited and Quartz Sub TC Pty Limited.

3. Subsequent to the Blackstone offer, OMERS Administration Corporation, an entity associated with Oxford Properties Group (“Oxford”), agreed to purchase, on a conditional basis, approximately 9.99% of the IOF units on issue from Investa Wholesale Funds Management Ltd (“IWFM”) as responsible entity of the Investa Commercial Property Fund (“ICPF”). On 20 August 2018, IWFM as responsible entity of ICPF informed ILFM that it had entered into that transaction, by a Securities Sale Deed under which it had agreed to sell approximately 9.99% of the issued units of IOF to Oxford for $5.25 per unit. Clause 2 of the Securities Sale Deed provides that completion is conditional on the Scheme Resolutions either being voted down by IOF Unitholders; or not being voted on by 18 September 2018. By clause 7 of the Securities Sale Deed, if the schemes which implement the Blackstone offer are implemented in accordance with their terms or any improved terms, IWFM as responsible entity for ICPF must make a specified payment to Oxford.

4. On 28 August 2018, I made orders under s 63 of the Trustee Act that IWFM would be justified in distributing a second supplementary explanatory memorandum and adjourning the meeting of unitholders until 6 September 2018, for the reasons set out in an earlier judgment ([2018] NSWSC 1369). The second supplementary explanatory memorandum was then despatched to unitholders.

5. The Blackstone offer, which was to be implemented by a trust scheme, was to be put to unitholders for consideration tomorrow and the time for lodging proxies closed at 10am on 4 September 2018. After that time, Oxford made an indicative and non-binding proposal to acquire the relevant units, also by a trust scheme, for a somewhat higher price of $5.50 cash per IOF unit, subject to satisfactory completion of confirmatory due diligence, and to other conditions precedent. A letter sent on that date to the chair of ILFM, stated, inter alia, that:

“Oxford is committed to prompt execution, enabling IOF Unitholders to receive cash consideration at the earliest possible opportunity. As such, Oxford anticipates that it will be able to enter into a binding implementation agreement within four weeks of receiving access to and commencing confirmatory due diligence.”

6. That letter referred to the conditionality of Oxford’s proposal and stated that:

“The Proposal is subject to the following limited conditions:

-   Completion of confirmatory due diligence by Oxford to its satisfaction;

-   Receipt of final approval of the Proposal being given by the OMERS Investment Committee, which will be undertaken in parallel with confirmatory due diligence;

-   Execution of a Scheme Implementation Agreement for the Proposal on terms that are consistent with the Blackstone Scheme Implementation Agreement;

-   Confirmation of third party financing prior to signing a binding implementation agreement. Although Oxford has sufficient equity available to it to fully fund the Proposal, it intends to fund the Proposal in part by the utilization of third party financing;

-   FIRB approval, which will be required for implementation of the Proposal. Oxford does not anticipate any regulatory impediments or delay to the Proposal. Oxford will immediately submit a FIRB application for the Proposal upon IOF providing Oxford with access to due diligence; and

-   The recommendation of the Directors of [the Plaintiff].”

7. That letter also stated that:

“In order to address any concerns about Oxford acquiring 9.9999% of IOF’s securities from ICPF pursuant to the Securities Sale Deed dated 20 August 2018 before an adjourned unitholder meeting to consider the Blackstone proposal, Oxford is prepared to agree with ICPF to amend the End Date in the Securities Sale Deed such that ICPF will retain voting rights over the 9.9999% stake at any adjourned meeting to consider the Blackstone proposal. ICPF will need to agree to such amendment.”

That letter did not further identify the “concerns” or possible “concerns” to which it referred.

8. On 4 September 2018, ILFM released an announcement to Australian Securities Exchange Limited (“ASX”) which attached Oxford’s letter and stated:

“[ILFM] as responsible entity of the Investa Office Fund (IOF) announces that it has received the attached, unsolicited, non-binding, indicative and conditional proposal from Oxford Properties Group to acquire 100% of IOF for a cash price of $5.50 per unit (less any distributions declared or paid on or after today) (Oxford Proposal).

[ILFM] recommends that unitholders take no action at this point. The [ILFM] Directors continue to unanimously recommend the Blackstone proposal in the absence of a superior proposal.

The Board of [ILFM] is considering the Oxford Proposal and will update unitholders in due course.”

9. While there is currently no competing offer to the Blackstone offer, at least in a form that is capable of acceptance, to acquire the units in the trusts, there is a prospect that a higher offer may eventuate, if that indicative and non-binding proposal becomes effective in accordance with its terms, after due diligence and after other conditions precedent are satisfied. As is implicit from the timing to which I referred above, this prospect emerged after proxies had been lodged in respect of the scheme meeting scheduled for 6 September 2018.

10. On 4 September 2018, the solicitors for ILFM sent a copy of IOF’s ASX announcement noted above to the Australian Securities & Investments Commission (“ASIC”) and advised it that ILFM expected to make this application today. ASIC has not expressed a view as to the application and did not appear at the hearing.

Disposition

11. Mr Bender submits and I accept that, although the power to adjourn the meetings of unitholders is conferred upon the chair of ILFM under cl 17.1 and item 4 of Sch 2 of the constitution of each fund, it may be appropriate for judicial advice to be given to the responsible entity that an adjournment is justified, for example where supplementary material is to be sent to security holders: Re Investa Funds Management Ltd [2016] NSWSC 369 at [8]; Re Investa Listed Funds Management Limited as responsible entity for the Armstrong Jones Office Fund and the Prime Credit Property Trust [2018] NSWSC 1369.

12. Mr Bender submits that, in this case, a competing proposal has emerged but on terms that are as yet non-binding and subject to due diligence, and this matter was necessarily announced by ILFM after proxies were due at 10am on 4 September 2018. He points out that any supplementary disclosure as to the new proposal will obviously take time to prepare and circulate and submits that, in those circumstances, a decision by the chair to adjourn the meetings to permit further commercial developments and the circulation of supplementary material would be justified.

13. Mr Bender also draws attention to two cases which have raised similar issues, albeit in the analogous context of corporate schemes. In Re Envestra Ltd (No 2) [2014] FCA 483, Yates J was prepared, in somewhat similar circumstances, to make an order under s 1319 of the Corporations Act 2001 (Cth) adjourning the scheme meeting for a corporate scheme. In Re Asciano Ltd (No 2) [2015] NSWSC 1651, Brereton J similarly postponed the date of a scheme meeting. That case has elements in common with the present case, albeit the timing in this case is even more abbreviated than that which arose in that case.

14. Here, as in that case, unitholders intending to vote by proxy, had already completed and lodged their proxies, unaware of the developments that were announced yesterday. It is plain that there would be difficulty in making substantive disclosure of these developments, beyond what was already announced to the market yesterday, particularly where these developments are inchoate. Little more may be able to be said as to the prospect of a higher offer emerging, until the position is clearer in respect of the result of Oxford’s due diligence and whether conditions precedent to its proposal are satisfied. Equally, it is presently unknown what position Quartz Bidco Pty Ltd and Quartz Sub TC Pty Ltd may ultimately take in respect of these developments. All of those matters are plainly material to unitholders in voting at a meeting to consider the trust scheme. Those who have lodged proxies would be unable to take those matters into account and those who attend the meeting in person would likely also find it difficult to assess them, at least in the time presently available.

15. In this case, as in Re Asciano Ltd (No 2) above, the difficulty in adequately informing members as to these matters may also impact upon whether the Court could give advice that the trustee was justified in implementing the trust scheme, if it was approved by unitholders at a meeting where these difficulties as to disclosure existed. As in Re Asciano Ltd (No 2) above, the position here is fluid, where one offer is presently capable of implementation; another, possibly more favourable offer, is foreshadowed but may not come to pass, and reaction of the initial offeror to that proposed offer remains to be seen. As Brereton J pointed out in Re Asciano Ltd (No 2) above, unitholders in that position have a significant interest in receiving the highest possible price for their units, and the potential for benefit from a higher offer, if it comes to pass, or the possibility of competing bids for their units. There is no obvious detriment to unitholders in adjourning that meeting, at least for a short period, where the conditions for the bid by Quartz Bidco Pty Ltd and Quartz Sub TC Pty Ltd to proceed presently appear to have been satisfied. As in Re Asciano Ltd (No 2) above, a postponement for the scheme meeting, at least for a short period, should preserve the current proposal, while allowing the possibility that others mature.

16. I recognise that the Securities Sale Deed between IWFM and Oxford introduces some further complexities to this analysis, since it could bring about a sale of IWFM’s units in IOF to OMERS Administration Corporation after the “End Date”, as defined. However, a decision by the chair of ILFM to adjourn the meeting to a date to be determined will not necessarily impact upon those arrangements, either because the date that he or she determines may be before the End Date, or alternatively because the End Date may be extended, as contemplated by the proposal made by Oxford.

17. Mr Bender also points out that item 4 of Sch 2 of the constitutions of the relevant funds permits the chair to adjourn a meeting “for any reason to any time and place”. He submits, and I accept, that an adjournment of the meetings sine die is within that power: St George Bank Ltd v. The Rangers Club of NSW Inc (1995) 18 ACSR 370 at 379-380 (aff’d on appeal in Young v Cotter [1996] NSWCA 573); In the matter of Re1 Limited and Re2 Limited as responsible entities for Westfield Retail Trust 1 and Westfield Retail Trust 2 (No 3) [2014] NSWSC 762 at [8] and [11].

18. Mr Bender submits that, in these circumstances, the chair of ILFM would be justified in adjourning the scheme meetings scheduled for 6 September 2018 to a date to be determined. It seems to me that the chair of ILFM would be justified in taking that course as he has indicated he proposes to do, absent a superior offer and I will therefore make the direction sought. Of course, in giving that direction, the Court does not make that decision for the chair, but satisfies itself that that the proposed course can justifiably be taken, and its direction gives protection to ILFM when it takes that course on the basis of that direction.

19. For these reasons, I give the opinion, advice and direction set out in paragraph 1 of the Short Minutes of Order and amending that paragraph by inserting, after the reference to the "Trustee Act", the words "the Court advises and directs that". I make orders in accordance with paragraphs 2 and 3 of the Short Minutes of Order. I make an order in accordance with paragraph 4, amended to read "be adjourned for further directions or hearing at 2pm on 17 September 2018". I make an order in accordance with paragraph 5, adding the words "specifying the relief sought".

**********

Decision last updated: 14 September 2018