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Shao v One Funds Management Limited

Shao v One Funds Management Limited

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Case Copied 17 April 2023 78 min read

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IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST

S ECI 2023 00414

BETWEEN:

JIANQIANG SHAO & ORS	Plaintiffs
v
ONE FUND 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 & 6 April 2023
DATE OF JUDGMENT:	17 April 2023
CASE MAY BE CITED AS:	Shao & Ors v One Funds Management Limited & Ors
MEDIUM NEUTRAL CITATION:	[2023] VSC 192

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MANAGED INVESTMENTS – Trusts – Trial of preliminary questions pursuant to r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) – Priorities between classes of units issued in trust – Construction of Constitution – Whether Information Memorandum a part of the ‘context’ for the purpose of the construction of the Constitution – Scope of r 54.02 of the Rules – Rule 54.02 of the Rules – ING Funds Management Ltd v ANZ Nominees Ltd [2009] NSWSC 404, followed; MSP Nominees Pty Limited v Commissioner of Stamps (South Australia) (1999) 198 CLR 494; Re Gaydon [2001] NSWSC 473; Westfield Queensland No 1 Pty Ltd v Lend Lease Real Estate Investments Ltd (2008) 1 ASTLR 525; [2008] NSWSC 516, referred to.

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

TABLE OF CONTENTS

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

The Questions..................................................................................................................................... 2

The Parties........................................................................................................................................... 4

The need for answers to the Questions......................................................................................... 5

Agreed facts and tender bundle...................................................................................................... 6

The JY Hotel Fund............................................................................................................................. 6

Constitution................................................................................................................................... 6
Information memorandum........................................................................................................ 10
Class A Units Terms of Issue..................................................................................................... 14
Class C Units Terms of Issue..................................................................................................... 17
Further relevant facts.................................................................................................................. 19

Jurisdiction under r 54.02 of the Rules......................................................................................... 23

Construction principles.................................................................................................................. 26

Class A Submissions....................................................................................................................... 29

Have the Class C Units been redeemed?................................................................................. 31
Has there been an appropriation of Assets to make Class C redemptions?....................... 32
Priority if no termination of the Fund before the Class A Redemption Date.................... 35
Priority termination of Fund occurs before the Class A Redemption Date....................... 36
Termination of the Fund before the Class A Redemption Date........................................... 36

Class C Submissions....................................................................................................................... 38

Construction of Class Terms..................................................................................................... 38
Have the Class C Units been redeemed?................................................................................. 40
Priority if no termination of the Fund before the Class A Redemption Date.................... 42
Termination of the Fund before the Class A Redemption Date........................................... 43

Consideration.................................................................................................................................... 46

Question 1 – Termination of the Fund..................................................................................... 46

Question 4 – Priority if the Fund is not terminated.................................................................. 50

Have the Class C Units been redeemed?................................................................................. 50
Does the decision in ING v ANZ apply to the Class C redemption?................................... 51
Priority if no termination of the Fund before the Class A Redemption Date.................... 57

Conclusion......................................................................................................................................... 60

HIS…

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 192
Decision Date: 17 April 2023

CaseChat Overview and Summary

In Shao v One Funds Management Limited, the Supreme Court of Victoria was asked to determine the rights of various unit holders in a managed investment scheme. The central issue was the interpretation of the trust deed and the order of priority between different classes of units issued in the trust. The dispute arose from the winding-up of One Funds Management Limited, the trustee of a managed investment scheme, and the competing claims of the unit holders.

The primary legal issue before the Court was the interpretation of the trust deed and the relevant context for its construction. Specifically, the Court needed to decide whether the Information Memorandum was part of the 'context' for the purpose of interpreting the trust deed, and whether the scope of Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) extended to include documents such as the Information Memorandum. The Court also had to consider the relative priorities of different classes of units.

The Court held that the Information Memorandum was not part of the 'context' for the purpose of interpreting the trust deed. In reaching this decision, the Court followed the reasoning in ING Funds Management Ltd v ANZ Nominees Ltd and cited several other authorities. The Court concluded that the Information Memorandum was not a document of the trust and, therefore, could not be considered part of the context for interpreting the trust deed. The Court also considered the relative priorities of different classes of units, but the precise outcome on this point was not detailed in the extract.

The Court made orders determining the scope of Rule 54.02 and the interpretation of the trust deed, but the specific final orders were not included in the extract. The decision provides guidance on the interpretation of trust deeds and the context in which they should be construed, particularly in the context of managed investment schemes.

Orders