CORPORATIONS - managed investments - stapled securities - proposal to further staple one stapled security to another stapled security - procedure - whether Gambotto principle relevant - TRUSTS - judicial advice to trustees - managed investment scheme - unit in unit trust stapled to company share - proposal to call meetings of unit holders to consider further stapling of stapled security to another stapled security - advice concerning calling of meetings of unit holders, and powers of amendment of trust deeds
IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST
CAMPBELL J
MONDAY 12 DECEMBER 2005
6186/05 ABACUS FUNDS MANAGEMENT LTD
JUDGMENT – Ex Tempore
1 HIS HONOUR: This is an application for judicial advice under section 63(1) of the Trustee Act 1925. It is made by a company which is the responsible entity of two managed investment schemes.
2 Each of those management investment schemes involve property being held on the terms of a unit trust. Each of the units in those unit trusts is stapled to a share in a corporation. The units in one of the unit trusts are stapled to shares in one corporation, the units in the other unit trust are stapled to shares in a different corporation. The stapled security formed by one of the units, and the share to which it is stapled, is listed on the Australian Stock Exchange, with the stapled securities known as Abacus Property Group. The other stapled security, known as the Abacus Diversified Income Fund, is not listed.
3 A proposal has been formulated, which would have the effect of a further stapling taking place, between the components of the listed stapled security, and the components of the unlisted stapled security.
4 The way in which it is proposed that that will happen is by there being, first, a consolidation of the unlisted stapled securities, under which, for each existing stapled security, the holder receives 0.78 restructured stapled securities, which staple together the same two securities as now make up the unlisted stapled security.
5 After that, it is proposed that the trust which is part of each of the respective stapled securities will make a distribution to its respective unit holders, and that the amounts so distributed to each of the unit…
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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AGLC
Re Abacus Funds Management Ltd [2005] NSWSC 1309
Case
[2005] NSWSC 1309
Decision Date
CaseChat Overview and Summary
In the case before the Court, Abacus Funds Management Limited sought judicial advice regarding the proposal to further staple a stapled security to another stapled security. The court was asked to determine whether the principles derived from Gambotto v WCP Ltd were applicable in this context, as well as to provide guidance on the procedure for calling meetings of unit holders and the powers of amendment of trust deeds. The case involved a managed investment scheme where a unit in a unit trust was stapled to a company share, and the potential further stapling of these securities was at issue.
The legal issues before the Court centred on the applicability of the Gambotto principle in the context of stapling securities within a managed investment scheme. The principle, which allows dissenting shareholders to require a company to buy out their shares if a scheme of company reconstruction is implemented without their consent, was a point of contention. The Court also needed to advise on the procedure for calling meetings of unit holders and the extent to which trust deeds could be amended to facilitate the stapling of securities.
In its reasoning, the Court found that the Gambotto principle was not directly applicable to the stapling of securities within a managed investment scheme. The Court determined that the procedure for calling meetings of unit holders should follow the provisions set out in the trust deed, and that the unit holders had the power to amend the trust deed to facilitate the further stapling of the securities. The Court emphasised the importance of transparency and the need for unit holders to be properly informed about the proposal and its implications.
The Court provided comprehensive advice to the trustees, outlining the necessary steps for calling meetings of unit holders and the process for amending the trust deed. The final orders included directions for the trustees to convene meetings of unit holders to consider the proposal and to ensure that all unit holders were adequately informed of the implications of the proposed stapling. The Court also confirmed that the trustees had the power to amend the trust deed to implement the stapling, subject to the approval of the unit holders.