Re Centro Retail

In the matter of Re Centro Retail, the case was heard before the Federal Court of Australia. The dispute involved the management of a managed investment scheme, specifically the modification of its constitution. The primary issue was whether the responsible entity could modify the constitution under a particular section of the law and whether such modification would affect the members' rights. The responsible entity sought to alter the scheme's constitution to allow new units to be issued at a different price than specified in the original constitution.

The court had to determine the scope of "members' rights" under the law and whether these rights encompassed a guarantee that the scheme would be administered strictly according to the existing constitution. The court examined the concept of "members' rights" by drawing analogies with company law and considered the responsible entity's duty to act in the best interests of the beneficiaries. The court also needed to assess whether the proposed modification would dilute existing members' rights, which would be a critical factor in deciding the benefit to the beneficiaries.

In its reasoning, the court concluded that "members' rights" did not include a right for the scheme to be administered strictly according to the existing constitution unless modified by a special resolution of the members. The court held that the responsible entity, acting as a trustee, must consider the potential dilution of existing members' rights when assessing the benefits to beneficiaries. Ultimately, the court allowed the modification of the scheme's constitution, finding that it was in the best interests of the beneficiaries.