Wellington Capital Ltd v Australian Securities and Investments Commission

The High Court of Australia considered an appeal by Wellington Capital Ltd (Wellington) against a decision of the Full Court of the Federal Court of Australia concerning Wellington's role as the responsible entity for a managed investment scheme. The dispute arose from Wellington's decision to make an in specie distribution of scheme property, specifically Australian Rugby League (ARL) shares, to unit holders. Wellington contended that the scheme constitution granted it broad powers to manage scheme property, including the power to make such a distribution.

The central legal issues before the High Court were whether Wellington, as the responsible entity, had the power under the scheme constitution to distribute scheme property to unit holders, and whether the general principles of trust law applied to Wellington's functions under the constitution. The Court also considered whether the Federal Court erred in exercising its discretion to make a declaration regarding Wellington's powers, particularly given that the unit holders were not represented in the appeal.

The High Court affirmed the Full Court's reasoning, holding that Wellington's powers as a responsible entity were constrained by its statutory capacity as a trustee of the scheme property. The Court emphasised that clause 13.1 of the scheme constitution, which granted Wellington powers analogous to those of a company under section 124 of the Corporations Act 2001 (Cth), was a saving provision for dealings with scheme property and did not confer a power to distribute that property to unit holders without their consent. The Court found that such a distribution, absent beneficiary consent, was impermissible under general trust law principles. Furthermore, the Court determined that section 124 itself referred to distributions of company property to company members, not to members of a managed investment scheme.

The High Court dismissed Wellington's appeal with costs, upholding the Federal Court's declaration that Wellington lacked the power under the scheme constitution to distribute the ARL shares to the unit holders. The Court concluded that the distribution amounted to a partial retirement from office or a partial winding up of the scheme, which were not authorised by the constitution.