Shao v One Funds Management Limited - [2023] VSC 251

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2023 00414

BETWEEN:

JIANQIANG SHAO & ORS (according to the attached Schedule)	Plaintiffs
v
ONE FUNDS MANAGEMENT LIMITED (ACN 117 797 403) (IN ITS CAPACITY AS TRUSTEE OF THE IPROSPERITY JY HOTEL FUND) & ORS (according to the attached Schedule)	Defendants

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JUDGE:	Derham AsJ
WHERE HELD:	Melbourne
DATE OF HEARING:	5 May 2023
DATE OF JUDGMENT:	18 May 2023
CASE MAY BE CITED AS:	Shao & Ors v One Funds Management Limited & Ors
MEDIUM NEUTRAL CITATION:	[2023] VSC 251

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MANAGED INVESTMENTS – Trusts – Priorities between classes of units issued in trust – Orders and costs consequent upon Shao & Ors v One Funds Management Limited & Ors [2023] VSC 192 – ING Funds Management Ltd v ANZ Nominees Ltd [2009] NSWSC 404; Re Buckton [1907] 2 Ch 406; Warton v Yeo [2015] NSWCA 115, referred to.

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APPEARANCES:	Counsel	Solicitors
For the ‘A’ class unit holders	Mr J Evans KC one of his Majesty’s counsel with him Ms B Slocum of counsel	Magwicks
For the First Defendant	Ms C Ernst of counsel	Allens
For the ‘C’ Class unit holders	Mr C Moller SC	Resolve Litigation

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Background......................................................................................................................................... 1

Class A submissions - orders........................................................................................................... 5

Class C submissions – orders.......................................................................................................... 8

OFM submissions – order.............................................................................................................. 11

Costs - Class C submission............................................................................................................ 14

Costs – Class A submission............................................................................................................ 16

Costs - OFM submission................................................................................................................. 17

Consideration - Class C Unitholders trust.................................................................................. 17

Costs - background.......................................................................................................................... 18

Costs - consideration....................................................................................................................... 21

Appropriate orders........................................................................................................................... 24

Conclusion......................................................................................................................................... 28

HIS HONOUR:

Introduction

These reasons arise from reasons for judgment delivered on 17 April 2023 in this proceeding: Shao & Ors v One Funds Management Limited & Ors [2023] VSC 192 (‘Primary Reasons’). The Primary Reasons dealt with the preliminary or separate trial of relief claimed by the plaintiffs, ordered by Garde J pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’).

The proceeding, commenced by originating motion on 3 February 2023, sought orders pursuant to r 54.02 of the Rules requiring the first defendant (‘OFM’), as trustee of the iProsperity JY Hotel Fund (‘JY Hotel Fund’ or ‘Fund’) take steps to wind up the Fund with the effect that the Class A Unitholders’ claims on the remaining assets of the Fund have priority over the claims of the Class C Unitholders, and other relief.

In broad summary, in the Reasons I rejected the plaintiffs’ arguments, including about the construction of trust documents, whether the Fund should be wound up, and that the assets should be paid to the Class A unitholders in priority to the Class C unitholders. Some of the relief the subject of the order of Garde J, which I formulated as questions, were unnecessary to answer because the parties agreed that the Court need not determine them.

After I answered the questions, as…

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: [2023] VSC 251
Decision Date: 18 May 2023

CaseChat Overview and Summary

The case of Shao v One Funds Management Limited involved the plaintiffs, Shao and others, challenging the defendant, One Funds Management Limited, over the priorities between various classes of units issued in trust. The matter was heard and determined by the Supreme Court of Victoria. The plaintiffs sought to establish the legal framework governing the priority of different classes of units within a managed investment trust, and to determine their entitlements relative to other unitholders.

The primary legal issue before the court was to ascertain the correct legal principles applicable to the determination of priorities between different classes of units issued in trust. This involved interpreting the relevant trust deeds and determining how they should be applied to resolve the dispute between the parties. The court was tasked with deciding whether the plaintiffs were entitled to a particular priority over other unitholders and, if so, the extent of their entitlement.

In reaching its decision, the court examined the relevant trust deeds and considered precedents such as ING Funds Management Ltd v ANZ Nominees Ltd and Re Buckton, as well as Warton v Yeo. The court held that the priority of units issued in a managed investment trust is determined by the terms of the trust deed. The court found that the plaintiffs' claims were not supported by the terms of the trust deed or relevant statutory provisions, and accordingly dismissed the claims. The court further determined that the plaintiffs were not entitled to the priority they sought and that the other unitholders held superior rights under the trust deed.

The final orders of the court included dismissing the plaintiffs' claims with costs to be paid by the plaintiffs to the defendants. This outcome was based on the court's determination that the plaintiffs' claims were unfounded and that the defendants were entitled to costs.

Orders