Shao v One Funds Management Ltd

Shao, an investor in a managed investment scheme, sued One Funds Management Ltd, the trustee of the scheme, over how it handled the redemption of units held by various classes of unitholders. The primary contention was whether the trustee correctly segregated assets for the redemption of 'Class C' unitholders before addressing the claims of 'Class A' unitholders, and whether the redemption process was correctly deemed automatic. The High Court of Australia was tasked with determining these issues.

The legal issues before the court involved the interpretation of the terms of issue and the management of the scheme’s assets during the redemption process. Specifically, the court had to ascertain whether the assets were properly segregated for 'Class C' unitholders upon the specified redemption date, and whether the redemption was automatic as per the terms. Additionally, the court needed to clarify the rights of 'Class A' unitholders based on the information memorandum they received, which was not provided to other classes.

The court found that there was no error in the lower court's decision that assets were segregated for 'Class C' unitholders at the specified redemption date. It further clarified that no finding of automatic redemption was made. Regarding 'Class A' unitholders, the court held that the information memorandum did not confer any priority over other classes as the terms of issue explicitly allowed for the subordination of 'Class A' rights. The reliance on non-constituent documents was discouraged, and the terms of issue were given precedence.

The court did not make any further orders beyond clarifying the points of law regarding the redemption process and the rights of unitholders. The decision reinforced the importance of adhering to the terms of issue and avoiding reliance on external documents when interpreting the rights and obligations within a managed investment scheme.