Re Banksia Mortgages Limited - [2013] VSC 451

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL COURT

Corporations List

No. S CI 2013 03871

IN THE MATTER OF BANKSIA MORTGAGES LIMITED (ACN 087 342 238)
BANKSIA MORTGAGES LIMITED IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE BANKSIA MORTGAGE FUND (ACN 087 342 238)	Plaintiff

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 August 2013
DATE OF JUDGMENT:	30 August 2013
CASE MAY BE CITED AS:	Re Banksia Mortgages Limited
MEDIUM NEUTRAL CITATION:	[2013] VSC 451

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CORPORATIONS – Managed Investment Scheme – Winding up – Where managed investment scheme not viable – Where purpose of scheme cannot be accomplished – Whether just and equitable to wind up scheme – Corporations Act 2001 (Cth) s 601ND.

MANAGED INVESTMENTS – Application for judicial advice and directions – Whether responsible entity justified in amending constitution of managed investment scheme under s 601GC(1)(b) of the Corporations Act 2001 (Cth) – Amendment to permit portfolio sale of loans – Whether rights of members would be adversely affected by amendment.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	WA Harris SC and M D Rush	Allens Linklaters
For Banksia Securities Limited (Receivers and Managers Appointed)	P D Crutchfield SC and Dr O Bigos	Ashurst

HIS HONOUR:

A. Introduction

The plaintiff (‘BML’) is the Responsible Entity of the Banksia Mortgage Fund (‘BMF’), a registered managed investment scheme (‘the scheme’). BML seeks an order directing it to wind up BMF on the ground that it is just and equitable to do so pursuant to s 601ND(1)(a) of the Corporations Act 2001 (Cth) (‘the Act’).

The foundation for the order is that, following the collapse of a related entity upon which BML depends for funding and vital infrastructure support, it is not viable for BMF to continue as contemplated by its constituent documents, and its purpose cannot be achieved.

A further order is sought, in the nature of judicial advice, to the effect that BML is justified in amending the BMF constitution on the terms contained in a proposed deed poll in accordance with s 601GC(1)(b) of the Act and/or cl 13.3 of the BMF constitution, on the basis that BML, as the responsible entity of BMF, reasonably considers that such amendment will not adversely affect the rights of BMF members.

The amendment is designed to give BML the option (which it does not have at present) to explore a portfolio sale of the loans comprising the interests in the scheme, as referred to more fully hereunder, as a means of winding up BMF in the best interests of scheme members.

The Court’s power to make these orders is conferred by s 601ND of the Act and r 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) (‘the Rules’). As responsible entity of BMF, BML holds scheme property, including the

;
[1]Section 601FC(2) of the Act.

loans referred to, on trust for members of the scheme.[1]

BML has filed eight affidavits in support…

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: [2013] VSC 451
Decision Date: 30 August 2013

CaseChat Overview and Summary

Banksia Mortgages Limited applied to the court seeking judicial advice and directions concerning the winding up of a managed investment scheme. The scheme had become unviable, and its purpose could not be achieved. The court had to determine whether it was just and equitable to wind up the scheme under section 601ND of the Corporations Act 2001 (Cth). Additionally, the court needed to decide if the responsible entity was justified in amending the scheme's constitution under section 601GC(1)(b) of the Corporations Act 2001 (Cth) to permit the portfolio sale of loans. This amendment was proposed to mitigate the adverse effects on members' rights.

The court examined the viability of the scheme and its inability to achieve its purpose. It also assessed the potential impact of the proposed amendment on the rights of the members. The court found that the scheme was not viable and that its purpose could not be accomplished. It was concluded that winding up the scheme was just and equitable. Furthermore, the court determined that the responsible entity was justified in amending the constitution to permit the sale of loans, as this action would not adversely affect the members' rights.

The court's reasoning was based on the unsustainability of the scheme and the inability to achieve its purpose. The court found that the proposed amendment to the scheme's constitution would not negatively impact the members' rights, thus justifying the amendment. The court concluded that winding up the scheme was the appropriate course of action.

The court ordered the winding up of the managed investment scheme and authorised the responsible entity to amend the scheme's constitution to permit the sale of loans.

Orders