Magellan Asset Management Limited as responsible entity of Magellan Global Fund; Magellan Asset Management Limited as responsible entity of the Magellan Global Equities Fund; Magellan Asset Management Limited as...

[2020] NSWSC 1789

Supreme Court

New South Wales

Medium Neutral Citation:

Magellan Asset Management Limited as responsible entity of Magellan Global Fund; Magellan Asset Management Limited as responsible entity of the Magellan Global Equities Fund; Magellan Asset Management Limited as responsible entity of the Magellan Global Trust [2020] NSWSC 1789

Hearing dates:

26 November 2020

Date of orders:

26 November 2020

Decision date:

11 December 2020

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Plaintiffs would be justified in giving effect to and implementing proposals and giving effect to consequential constitutional amendments.

Catchwords:

CORPORATIONS – Arrangements and reconstructions – Application under s 63 of the Trustee Act 1925 (NSW) for judicial advice with respect to the implementation of trust scheme

Legislation Cited:

- Corporations Act 2001 (Cth), s 601GC

- Trustee Act 1925 (NSW), s 63

Cases Cited:

- Re Commonwealth Managed Investments Ltd [2014] NSWSC 244

- Re Cromwell Property Securities Ltd [2006] NSWSC 1449

- Re Homemaker Retail Management Ltd (2001) 40 ACSR 116

- Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194

- Re Mirvac Limited (1999) 32 ACSR 107

- Re Magellan Asset Management Limited as responsible entity of Magellan Global Fund [2020] NSWSC 1535

Category:

Principal judgment

Parties:

Proceedings 2020/262387
Magellan Asset Management Limited as responsible entity of Magellan Global Fund (Plaintiff)
Magellan Asset Management Limited as responsible entity of Magellan Global Equities Fund (First Defendant)
Magellan Asset Management Limited as responsible entity of Magellan Global Trust (Second Defendant)

Proceedings 2020/269312
Magellan Asset Management Limited as responsible entity of the Magellan Global Equities Fund (First Plaintiff)
Magellan Asset Management Limited as responsible entity of the Magellan Global Trust (Second Plaintiff)

Representation:

Counsel:
Proceedings 2020/262387
Mr I Jackman SC (Plaintiffs)
Proceedings 2020/269312
Mr D Thomas SC (Plaintiffs)

Solicitors:
Proceedings 2020/262387
Allens (Plaintiffs)
Proceedings 2020/269312
MinterEllison (Plaintiffs)

File Number(s):

2020/262387
2020/269312

Judgment

Background

1. By Summons filed on 11 September 2020, Magellan Asset Management Limited (“MAML”) as responsible entity of the Magellan Global Fund (“MGF”) sought the Court’s opinion, advice and direction under s 63 of the Trustee Act 1925 (NSW) that it would be justified in convening a meeting of unitholders of MGF to consider a proposed restructure (“Restructure”) as defined in an explanatory memorandum; in distributing that explanatory memorandum to unitholders of MGF; and in proceeding on the basis the proposed amendments to MGF’s constitution would be within the powers of alteration conferred by that constitution and s 601GC of the Corporations Act 2001 (Cth). MAML in its capacity as responsible entity of Magellan Global Equities Fund (“MGE”) and in its capacity as responsible entity of the Magellan Global Trust (“MGG”) also sought corresponding directions in respect of meetings of unitholders of MGE and MGG and proposed amendments to the constitutions of MGE and MGG respectively. I made orders the orders sought at the first Court hearing on 20 October 2020, for the reasons set out in my judgment delivered on 2 November 2020 (Re Magellan Asset Management Limited as responsible entity of Magellan Global Fund [2020] NSWSC 1535)

2. At the second Court hearing, MAML in its capacity as responsible entity of MGF is again represented by separate solicitors and counsel (Mr Jackman) from the solicitors and counsel (Mr Thomas) representing MAML in its capacities as responsible entity of each of MGE and MGG. I will refer to MGF, MGE and MGG together as the Funds. MAML now seeks advice that it would be justified in giving effect to the Restructure and the amendments to the Funds’ constitutions.

Role of the Court in granting judicial advice at the second Court hearing

3. Mr Jackman and Mr Thomas submit, uncontroversially, that the role of the Court in granting judicial advice at the second court hearing is of a similar nature to that in schemes under Part 5.1 of the Corporations Act 2001 (Cth). They submit that an application for judicial advice that the responsible entity is justified in giving effect to and implementing the Restructure approved by unitholders is appropriately brought before the Court once the wishes of unitholders, expressed through voting at the relevant meeting or meetings, is known and any unitholder who wishes to appear to oppose the application is given an opportunity to do so: Re Mirvac Limited (1999) 32 ACSR 107 at [48]; Re Homemaker Retail Management Ltd (2001) 40 ACSR 116 at [5]-[7]; Re Macquarie Goodman Funds Management Ltd (2004) 52 ACSR 194 at [10].

4. They submit that, at the second hearing, the Court must be satisfied that the procedural requirements for the obtaining of the unitholders' approval have been satisfied, and the Court then gives considerable weight to the level of support for the proposed transaction, and to whether any person appears at the second Court hearing to express any opposition to it: Re Cromwell Property Securities Ltd [2006] NSWSC 1449 at [23]; Re Commonwealth Managed Investments Ltd [2014] NSWSC 244 at [3].

Despatch of restructure materials and result of unitholder meetings

5. Mr Jackman and Mr Thomas point out that each explanatory memorandum (as amended in accordance with paragraph 7(a) of Mr Donnan’s affidavit dated 20 October 2020) (“Amended Explanatory Memoranda”) and the applicable notice of meeting and applicable proxy voting forms for each Fund (“Restructure Materials”) were despatched to the unitholders of each Fund on 22 October 2020. Unitholders in each of the Funds who had nominated an electronic address (or in the case of MGG unitholders, had an email recorded on the Register) for the purpose of receiving communications from the Plaintiff were provided with access to the Restructure Materials by the relevant registry service provider and/or external mail house provider, by sending an email to that address containing a link to a website at which the Amended Explanatory Memoranda and notice of meeting could be accessed, and a link to a website at which proxies could be submitted electronically; or otherwise by sending a physical letter by ordinary post (including a reply paid envelope addressed to the relevant registry service provider) which set out the details of the relevant meeting and options for accessing the applicable Amended Explanatory Memoranda and notice of meeting electronically, and enclosed a physical copy of the proxy form to other unitholders.

6. Mr Jackman and Mr Thomas also point to an error in the Amended Explanatory Memoranda. Section 4.10 of the Amended MGE Explanatory Memorandum and Section 4.10 of the Amended MGG Explanatory Memorandum deal with the treatment of ineligible foreign MGE and MGG unitholders respectively. Section 4.10(c)(i) of the Amended Explanatory Memoranda indicated that MGE units and MGG units of ineligible foreign MGE and MGG unitholders will be first transferred to the Sale Nominee. Mr Jackman and Mr Thomas point out that this description of the process with respect to the units of ineligible foreign is incorrect, since the MGE Implementation Deed and MGG Implementation Deed provide that the sale facility process will involve the transfer of the ineligible foreign MGE and MGG units directly to MAML in its capacity as responsible entity of MGF RE in consideration for the issue of new Open Class Units and Closed Class Units (respectively) to the Sale Nominee, who will operate the sale facility for the benefit of ineligible foreign unitholders as otherwise disclosed in the relevant Amended Explanatory Memorandum. Mr Jackman and Mr Thomas submit that the error is not material where it relates only to the mechanism for the transfer of the ineligible foreign units and the end outcome of the sale facility for ineligible foreign unitholders remains the same. MAML advised, in the course of the second hearing, that it would advise ineligible foreign unitholders of the error and the process to be adopted. I am satisfied that this matter does not provide reason not to give the advice sought.

7. An issue also arose in respect of the despatch of the Restructure Materials. The October Orders contemplated that the despatch of those materials would be made to registered unitholders of MGF as at 7.00pm (Sydney time) on 14 October 2020. The evidence is that, in error, the despatch of the Restructure Materials was made to registered unitholders of MGE and MGG as at 7.00pm (Sydney time) on 15 October 2020 and 16 October 2020 respectively. The number of unitholders on the register of unitholders of each Fund at the applicable time was 10,811 unitholders for MGF; 26,737 unitholders for MGE; and 37,916 unitholders for MGG. In the case of MGE, the error affected 19 persons who were unitholders on the MGE Register as at 7.00pm (Sydney time) on 14 October 2020 and were not unitholders as at 7.00pm (Sydney time) on 15 October 2020 because they had sold their units; and those 19 unitholders, as at 14 October 2020, collectively held 277,168 units being approximately 0.063% of the total units of MGE. In the case of MGG, the error affected 54 persons who were unitholders on the MGG Register as at 7.00pm (Sydney time) on 14 October 2020 and were not unitholders as at 7.00pm (Sydney time) on 16 October 2020 and those 54 persons, as at 14 October 2020, collectively held 889,265 units being approximately 0.072% of the total units of MGG. The error did not prevent the receipt of the Restructure Materials by any current unitholders of the Funds. Mr Jackman and Mr Thomas submit, and I accept, that these errors did not cause a substantial injustice and are not such as to invalidate the meetings by virtue of s 1322(2) of the Act and would not otherwise cause the Court to decline to provide the judicial advice sought.

8. The Restructure Materials were also sent to new unitholders coming on to the registers of unitholders substantially in accordance with the processes described above, except that, in respect of MGF and MGG, mail packs were sent to all new unitholders; and, in respect of MGE, for one MGE email notification that could not be delivered to a new MGE unitholder, a mail pack was not sent by post to that unitholder.

9. The affidavit evidence addresses the procedures adopted in relation to the receipt of proxy forms, the collation of proxies, the preparation of a proxy report and the registration, voting and poll procedures at the meetings on 25 November 2020. The conduct of the virtual meetings is outlined in the affidavit affirmed 25 November 2020 of Robert Fraser ([9]-[44]). In respect of MGF, 1,095,868,892 votes were cast in favour of the constitutional amendment resolution and 1,095,604,395 votes in favour of a resolution to approve a related party transaction, in each case being about 99.85% of all votes cast; in respect of MGE, 29,132,379 votes were cast in favour of the amendment resolution and 29,037,410 votes in favour of a resolution to approve a related party transaction, being in excess of 99.4% of all votes cast of votes cast; and in respect of MGG, 155,784,149 of votes were cast in favour of the MGG acquisition resolution, 155,733,050 votes in favour of the amendment resolution and 155,411,647 votes in favour of a resolution to approve a related party transaction, being in excess of 99% of all votes cast. The resolutions were therefore supported by very substantial majorities of the unitholders voting at the meetings, although a relatively low percentage of unitholders voted at the meetings.

10. MAML published a notice of the second Court hearing in The Australian newspaper on 12 November 2020 and ASIC has confirmed that it does not intend to appear at the hearing of this application. All of the relevant conditions precedent to the schemes have been satisfied, other than the condition relating to the provision of judicial advice.

Determination

11. Mr Jackman and Mr Thomas point out that the independent expert’s report concluded that the Restructure was fair and reasonable and in the best interests of unitholders of MGE and MGG in the absence of a superior proposal; and the Restructure is in the best interests of unitholders of MGF in the absence of a superior proposal. They submit, and I accept, that MAML has made out a case for the provision of judicial advice to the effect that it is justified in implementing the Restructure in accordance with the resolutions passed by the unitholders of each Fund at the meetings. For these reasons, I made orders in accordance with those proposed by MAML on 26 November 2020.

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Decision last updated: 29 December 2020