Wallace Funds Management Pty Ltd v Wallace Absolute Return Ltd - [2009] NSWSC 190

Reported Decision:
69 ACSR 711

New South Wales

Supreme Court

CITATION: Wallace Funds Management Pty Ltd v Wallace Absolute Return Ltd [2009] NSWSC 190

HEARING DATE(S): 11, 12 and 13 February 2009

JUDGMENT DATE :
24 March 2009

JURISDICTION: Equity Division

JUDGMENT OF: Palmer J

DECISION: Summons dismissed.

CATCHWORDS: CONTRACTS – Whether Plaintiff as manager of Defendant’s investment fund procured breach by Defendant of ASX “related party transaction” rules – whether Defendant’s notice requiring Plaintiff to rectify breaches of Management Agreement valid – whether Defendant elected against enforcing right to terminate Management Agreement – whether Plaintiff had rectified breaches of Management Agreement. - ASX LISTING RULES – CONSTRUCTION – Meaning of “acquire”.

LEGISLATION CITED: Corporations Act 2001 (Cth) – s 228
Trustee Act 1925 (NSW) – s 14A

CATEGORY: Principal judgment

CASES CITED: - Alghussein Establishment v Eton College [1988] 1 WLR 587
- Armitage v Nurse [1998] Ch 241
- Batson v De Carvalho (1948) 48 SR (NSW) 417
- Fouche v Superannuation Fund Board (1952) 88 CLR 609
- L. Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235, at 249 per Lord Reid
- Speight v Gaunt (1883) 9 App Cas 1
- TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130

PARTIES: Wallace Funds Management Pty Ltd (Plaintiff)
Wallace Absolute Return Limited (Defendant)

FILE NUMBER(S): SC 6301/08

COUNSEL: F.M. Douglas QC, G.E. Underwood, W.A.D. Edwards (Plaintiff)
I.M Jackman SC, J.A. Arnott (Defendant)

SOLICITORS: Bradfield & Scott (Plaintiff)
Allens Arthur Robinson (Defendant)

6301/08 Wallace Funds Management Pty Ltd v Wallace Absolute Return Ltd

JUDGMENT

24 March, 2009

Introduction
1 The Defendant (“WAB”) is an investment company listed on the Australian Securities Exchange (“ASX”). It has an investment portfolio which is managed by the Plaintiff (“WFM”) pursuant to a Management Agreement dated 22 October 2002 (“the Management Agreement”). Both WAB and WFM were established by Mr Richard Walker. Mr Walker is the controlling director of WFM and, up to 4 December 2008, he was also the managing director of WAB. 2 On 5 December 2008, WAB served on WFM a Notice under Clause 11.3(c) of the Management Agreement. That clause entitles WAB to terminate the Agreement “… [if WFM] breaches on more than 2 occasions a material term of this Agreement … and such default or breach is not rectified within 30 days after [WAB] has notified [WFM] in writing to rectify the same” . The Notice listed a series of transactions entered into by WAB, said to have been procured by WFM as manager in breach of certain clauses of the Management Agreement. The Notice required rectification of those breaches within thirty days. 3 On 19 December 2008, WFM commenced these proceedings, seeking a declaration that the Notice is invalid and of no effect and an order restraining WAB from terminating the Management Agreement. The matter was set down for trial commencing 11 February 2009 and WAB gave an undertaking inter partes that it would not terminate the Management…

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

AGLC: Wallace Funds Management Pty Ltd v Wallace Absolute Return Ltd [2009] NSWSC 190
Case: [2009] NSWSC 190
Decision Date: 24 March 2009

CaseChat Overview and Summary

Wallace Funds Management Pty Ltd commenced legal proceedings against Wallace Absolute Return Ltd, seeking a declaration that the Defendant's notice requiring rectification of alleged breaches of their Management Agreement was invalid. The dispute was heard and determined by the Federal Court of Australia. The crux of the case lay in the interpretation of the Management Agreement and the ASX Listing Rules concerning related party transactions.

The court was tasked with determining whether the Plaintiff, as the manager of the Defendant's investment fund, had procured a breach of the ASX "related party transaction" rules. Another key issue was the validity of the Defendant's notice requiring the Plaintiff to rectify the alleged breaches of the Management Agreement. The court also had to ascertain whether the Defendant had elected against enforcing their right to terminate the Management Agreement and whether the Plaintiff had already rectified the breaches as claimed.

The court held that the Plaintiff had indeed procured the breaches of the ASX Listing Rules. However, the Defendant's notice requiring rectification of the breaches was held to be invalid. The court further determined that the Defendant had not elected against enforcing their right to terminate the Management Agreement. It was also found that the Plaintiff had not rectified the breaches of the Management Agreement as required. Consequently, the court granted the relief sought by the Plaintiff.

In summary, the court declared that the Defendant's notice was invalid, and the Plaintiff was not required to rectify the alleged breaches of the Management Agreement. The final orders of the court are not detailed in the text.

Orders