Westralia Property Management Ltd ACN 072 899 060 (as responsible entity of the Broadwater Busselton Property Syndicate Managed Investment Scheme (ARSN 096 588 108)) v DAVISON
[2006] WASCA 203
•10 AUGUST 2006
WESTRALIA PROPERTY MANAGEMENT LTD ACN 072 899 060 (as responsible entity of the BROADWATER BUSSELTON PROPERTY SYNDICATE MANAGED INVESTMENT SCHEME (ARSN 096 588 108)) -v- DAVISON & ORS [2006] WASCA 203
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASCA 203 | |
| THE COURT OF APPEAL (WA) | 04/10/2006 | ||
| Case No: | CACV:96/2006 | 10 AUGUST 2006 | |
| Coram: | WHEELER JA McLURE JA | 10/08/06 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | WESTRALIA PROPERTY MANAGEMENT LTD ACN 072 899 060 (as responsible entity of the BROADWATER BUSSELTON PROPERTY SYNDICATE MANAGED INVESTMENT SCHEME (ARSN 096 588 108)) MARK DAVISON HELEN DAVISON GORDON THEODORE HOTHERSALL GETLEY ALLEN WILLIAM SMYTH MAE SMYTH DAVE STEWART GLORIA STEWART LESLIE WILLIAM CURRY WAYNE VICTOR ENGLISH JOHN GEORGE GOLDIE JOHN PATRICK McAVOY MANOJ PILLAI NIGEL MARRIS SIMPSON DAVID JOHN NEWMAN ANASTASIA APOSTOLOU |
Catchwords: | Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 252D(2), s 601NC, Pt 2G.4 |
Case References: | Nil Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464 Bulfin v Bebarfald's Ltd (1938) 38 SR (NSW) 423 Cameron v Cole (1944) 68 CLR 571 Griffin Coal Mining Co Pty Ltd v Smith [2000] WASCA 366 Henderson v Bank of Ausralasia (1890) 45 Ch D 330 Lion Nathan Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583 Mott & Anor v Mount Edon Gold Mines (Aust) Ltd & Ors, unreported; SCt of WA (Owen J); Library No 940083; 17 February 1994 National Roads & Motorists' Association v Parker (1986) 6 NSWLR 517 OD Transport Pty Ltd v Western Australian Government Railways Commission (1986) 13 FCR 270 Peters' American Delicacy Co Ltd v Heath & Ors (1939) 61 CLR 457 Queensland Press Ltd v Academy Investments (No 3) Pty Ltd [1988] 2 Qd R 575 Re Stacks Managed Investments Scheme (2005) 219 ALR 532 Taylor v Taylor (1979) 143 CLR 1 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : WESTRALIA PROPERTY MANAGEMENT LTD ACN 072 899 060 (as responsible entity of the BROADWATER BUSSELTON PROPERTY SYNDICATE MANAGED INVESTMENT SCHEME (ARSN 096 588 108)) -v- DAVISON & ORS [2006] WASCA 203 CORAM : WHEELER JA
- McLURE JA
- Appellant
AND
MARK DAVISON
HELEN DAVISON
GORDON THEODORE HOTHERSALL GETLEY
ALLEN WILLIAM SMYTH
MAE SMYTH
DAVE STEWART
GLORIA STEWART
LESLIE WILLIAM CURRY
WAYNE VICTOR ENGLISH
JOHN GEORGE GOLDIE
- JOHN PATRICK McAVOY
MANOJ PILLAI
NIGEL MARRIS SIMPSON
DAVID JOHN NEWMAN
ANASTASIA APOSTOLOU
Respondents
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
File No : COR 125 of 2006
Catchwords:
Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 252D(2), s 601NC, Pt 2G.4
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr M L Bennett & Mr T O Coyle
Respondents : Mr G R Donaldson QC
Solicitors:
Appellant : Lavan Legal
Respondents : Jackson McDonald
Case(s) referred to in judgment(s):
Nil
Case(s) also cited:
Advance Bank Australia Ltd v FAI Insurances Ltd (1987) 9 NSWLR 464
Bulfin v Bebarfald's Ltd (1938) 38 SR (NSW) 423
Cameron v Cole (1944) 68 CLR 571
Griffin Coal Mining Co Pty Ltd v Smith [2000] WASCA 366
Henderson v Bank of Ausralasia (1890) 45 Ch D 330
Lion Nathan Pty Ltd v Coopers Brewery Ltd (2005) 55 ACSR 583
Mott & Anor v Mount Edon Gold Mines (Aust) Ltd & Ors, unreported; SCt of WA (Owen J); Library No 940083; 17 February 1994
National Roads & Motorists' Association v Parker (1986) 6 NSWLR 517
OD Transport Pty Ltd v Western Australian Government Railways Commission (1986) 13 FCR 270
Peters' American Delicacy Co Ltd v Heath & Ors (1939) 61 CLR 457
Queensland Press Ltd v Academy Investments (No 3) Pty Ltd [1988] 2 Qd R 575
Re Stacks Managed Investments Scheme (2005) 219 ALR 532
Taylor v Taylor (1979) 143 CLR 1
(Page 4)
1 WHEELER JA: On 10 August, the Court dismissed an appeal from a decision of the Master made 8 August discharging certain orders which he had made on 3 August 2006. The orders discharged had restrained the respondents from purporting to hold a general meeting of the Broadwater Busselton Property Syndicate ("BBPS"), which was due to be held on 11 August 2006. We said at the time that we would give reasons in due course. These, briefly, are my reasons for dismissing that appeal.
2 The BBPS was a managed investment syndicate. Its principal asset was property associated with the Broadwater Busselton Resort. The appellant was the responsible entity of the BBPS and was also the responsible entity for the Westralia Property Trust, an entity which had a 14 per cent interest in the BBPS.
3 By letter of 20 February 2006, the appellant gave notice to ASIC and the BBPS members that it proposed to wind up the scheme on the ground that the purpose of the scheme could not be accomplished. That letter advised that members had the right, pursuant to Pt 2G.4 of the Corporations Act 2001 (Cth), to call a members' meeting to consider the proposed winding-up, and that the responsible entity was permitted to wind up the scheme unless a members' meeting was called to consider the proposed winding-up within 28 days of that notice. The letter referred to earlier advice to members that it was essential, in the appellant's view, for the ongoing existence of the scheme, that bank finance facilities be renewed, but that the scheme's banker had advised that it was not prepared to renew those facilities. It advised that it was the appellant's view that it was not feasible to raise new equity and that because of these matters, taken with the "debt position", and an issue relating to non-collection of rent guarantees, the responsible entity had determined that it was in the members' best interests for the scheme to be wound up. There was an attached memorandum explaining the proposal further.
4 It appears from an affidavit sworn by Mr Curry, the eighth respondent, that he and others had been unhappy with the appellant's management of BBPS for some time, dating back to a time before the notice of February 2006. At one point in October 2005, a group of members which included Mr Curry attempted to convene a meeting to remove the appellant as responsible entity. However, a letter was sent from the appellant's solicitors to those members, requiring them to withdraw the notice on the basis that it was invalid, and threatening to commence proceedings against them in this Court and to seek costs against them. The meeting did not proceed.
(Page 5)
5 The 28-day period referred to in the appellant's letter of 20 February 2006 expired on 20 March 2006 without any apparent attempt by any member to convene a meeting. At some time thereafter (the date is not specified, but prior to 11 July 2006) Mr Curry and some others of the respondents formed a group called the "Rescue Committee" and discussed taking action to give effect to their dissatisfaction with the appellant and to prevent the BBPS from being wound up, if possible.
6 On 13 July 2006, the respondents, who together held interests carrying at least 5 per cent of the votes capable of being cast at a general meeting, issued a notice of general meeting of members. The purpose of the meeting was expressed in the notice as being to consider and vote on three proposed extraordinary resolutions. The first was that the appellant be removed as responsible entity. The second was that Teys Property Funds Ltd be appointed as responsible entity. The third was that the responsible entity be directed "to terminate the winding-up of the [BBPS]".
7 The accompanying statement in support of the resolutions alleges, in relation to extraordinary resolution 1, that the appellant had not provided information about the status of BBPS and the winding-up process when asked to do so, and that the appellant, being the responsible entity of the Westralia Property Trust, might have a conflict of interest in that the winding-up might be in the best interests of investors in the Westralia Property Trust, but not necessarily in the best interests of other members. In relation to proposed resolution 2, various reasons were advanced for suggesting that Teys Property Funds Ltd would be an appropriate responsible entity. It was said that Teys Property Funds Ltd was "committed to investigating all of the possible options for the ongoing operation of the syndicate or the most advantageous winding-up if that is appropriate". In particular, it was said that Teys Property Funds Ltd would attend to certain issues, which were described. In support of extraordinary resolution 3, it was said that if that resolution was passed, then Teys Property Funds Ltd would "cease the winding-up" and "attend to the following". "The following" included investigating whether any of the BBPS assets were currently subject to contracts of sale and, if so, whether it was possible to avoid those contracts; and investigating the issues earlier described. It was said that Teys would also review arrangements with what is described as "the Income Pooling Scheme" for which the appellant also apparently acts as responsible entity.
8 Having received that notice, the appellant's solicitors wrote, on 21 July, to the respondents. The solicitors' letter asserted that the
(Page 6)
- appellant was "concerned that a number of matters in the documents you have sent to members are either invalid at law, incorrect, or misleading, such that the meeting documents do not give members a fair opportunity to consider the resolutions proposed". In summary, it was suggested that it was not legally possible for the winding-up to be terminated, that there were binding cash unconditional contracts in relation to the Broadwater development, that a loan which the statement in support of the resolution said had expired on 30 June 2006 had actually expired at the end of February 2006 and had been in default since, that the amount in dispute in litigation about rental guarantees had been misstated, and that there were matters which might indicate that Teys Property Funds Ltd would not be a suitable responsible entity. The letter advised that there were other concerns that the appellant had with the meeting documents, but that these were the main concerns, and invited the respondents to suggest a sensible proposal to "rectify the deficiencies". It was suggested that that might well require adjournment of the proposed meeting.
9 The appellant itself took no steps to advise members generally of its concerns. It did not copy that letter to members other than the respondents.
10 The preceding day - 20 July 2006 - the appellant's solicitors had written to ASIC about the notice of meeting. That letter referred to a discussion "earlier in the week" with ASIC about that issue. That letter put to ASIC in more detail the appellant's view that it was not open to the members to terminate a winding-up once it had commenced, and suggested that it would be in the interests of members of the BBPS and of managed investment schemes generally for ASIC to seek appropriate orders or directions from the Court to "clarify the law in relation to this issue". The letter mentioned also the other concerns about information in the statement in support which had been raised with the respondents.
11 On 26 July, the chairman of Teys Property Funds Ltd responded to the appellant's solicitors advising that the respondents had requested that further correspondence be directed to that entity. The letter, in effect, declined to enter into "debate" about the "actions and performance as responsible entity" of the appellant. It invited the appellant to resign as responsible entity. The appellant's solicitors responded to the chairman's letter, reiterating the appellant's position and asking whether the chairman had authority to nominate solicitors to accept service of legal proceedings on behalf of the respondents.
(Page 7)
12 On 28 July, ASIC responded to the letter to it from the appellant's solicitors. ASIC summarised the concerns raised by the appellant's solicitors in that letter, and responded in these terms:
"ASIC can see no reason why Westralia Property Management Ltd ('Westralia'), as current Responsible Entity of BBPS, cannot provide disclosure to members that would address the concerns you have raised in relation to potentially misleading statements in the Notice. In fact, it may be that Westralia has a duty as Responsible Entity to make this disclosure to members."
- For this reason, ASIC considered that there was no reason for it to become involved. Those observations appear to me, with respect, to be sensible ones.
13 In its submissions, the appellant accepted that the appellant could, if it wished, have written to all members raising with them concerns about the factual materials in the notice in support of the proposed resolutions and raising the issue of whether there was, in any event, power to bring the winding-up to an end. The appellant accepted that it had a duty to the members to ensure that they were properly informed in relation to matters which they might be required to vote on. However, it was submitted that the responsible entity had appropriately sought to "minimise costs" by bringing legal proceedings seeking and obtaining the injunction, rather than by, for example, photocopying the letter sent to ASIC and sending a copy to each of the members. It is difficult to see how it could rationally have been thought that the course undertaken by the appellant could save costs, or why the appellant apparently considered that the course it took precluded it from writing to members at the same time.
14 In any event, on 1 August, the solicitors for the appellant sent by post letters to all of the respondents advising them that there had been filed that day in this Court a process seeking relief which included an injunction restraining the holding of the meeting. It advised that, due to the "exigency of the situation", the application would be made ex parte. It is not apparent from the appellant's materials when and how the letter was posted, so that it is not clear when it would have been received by the respondents. A letter annexed to one of the affidavits filed on behalf of the appellant suggests that one respondent at least received it on 5 August. On 2 August, a solicitor employed by the appellant's solicitors telephoned some of the respondents from 3.30 pm onwards, advising them that the injunction application would be heard at 9.15 the following morning.
(Page 8)
15 On 3 August, the Master granted the injunction sought by the appellant. There is no transcript of that proceeding in the materials before us, and no written record of the Master's reasons. The respondents, in applications which seem to have been filed on 7 and 8 August, applied for orders that those of the Master's orders which restrained the holding of the meeting be set aside.
16 There is a file note prepared by one of the solicitors acting for the appellant, recording the gist of the Master's reasons, as announced on 8 August, for discharging those orders. Its accuracy is not disputed, and I set out the relevant portion in full:
"This is the application by defendants to set aside injunction granted to restrain meeting of members of Broadwater Busselton Property Syndicate managed investment scheme. The resolutions relate to removal of the plaintiff as responsible entity, and termination of the winding up.
In my view, the meeting should properly go ahead.
The provisions of the Corporations Act in relation to managed investment schemes have at their heart the interests of members. The scheme is to ensure that it is responsive to interests of members. A key is a right to remove responsible entity at any point in time.
This scheme has been wound up, the process has started. It is not clear how it could be terminated. The real question here is whether there is anything in the explanatory memorandum which is misleading. In my view, there is nothing particularly objectionable, it falls short of the requirements.
It could be that removal and replacement would be against interests of members, for example, there is a fee to be paid under the constitution to the outgoing manager, and NAB could appoint a receiver.
But this is no reason to have a paternalistic attitude towards members. At the meeting resolutions will be put and passed or not.
I have no doubt that resolutions 1 and 2 should be put to the meeting.
(Page 9)
- As to resolution 3, this is directed to termination of winding up. I have doubts as to whether that can happen. There would have to be a very clever device for this to happen. But the resolution is couched as a direction. I doubt whether it can bind the responsible entity. The responsible entity must act according to law.
Postponement of the winding up may be in interests of members or not, but is to be considered by members.
I conclude there is no basis to injunct the meeting to consider resolution number 3. Therefore, I am not satisfied that the notice is bad or there is any other basis for the injunction to remain.
Balance of convenience strongly favours holding the meeting. This does give the members a chance to consider matters. The Court should not stand in the way of the members considering these matters at a meeting."
17 In broad terms, I am of the view that the Master was right for the reasons given by him. It is necessary to deal only briefly with some additional submissions made on behalf of the appellant, which are not reflected in that brief note of the Master's reasons.
18 The appellant submits that it is not open as a matter of law to terminate a winding-up, once it is begun. It is submitted that all three resolutions are dependent upon the proposition that the winding-up is to be terminated and that each of them is directed, therefore, at an end which cannot be achieved. I accept that there is a live issue about whether it is possible to terminate a winding-up. The appellant submitted that the winding-up here is "well advanced and almost at an end", but quite what that entailed was not canvassed before us. In some circumstances - if, for example, no more had been done than the giving of the notice - it is not clear to me why it would not be possible to reverse a decision to wind up a scheme.
19 In the present case, the appellant submitted that, because the purpose of the scheme could not be accomplished, the appellant - or any other responsible entity in its position - would be required by the BBPS constitution to wind it up. However, that proposition depends upon a conclusion that the purpose of the scheme cannot be accomplished, which conclusion is based in part upon matters of fact, and in part upon a commercial assessment of the effect of those matters of fact, about which
(Page 10)
- reasonable minds may perhaps differ. It is not possible for us to form a view one way or the other in relation to that proposition.
20 Even accepting for present purposes, however, that it may be that it is not possible as a matter of law to terminate the winding-up process (either generally, or in this particular case), the three resolutions are not so interdependent that no useful purpose could be accomplished by holding the meeting. It appears from the proposed resolutions and from the notice in support that there are issues which the members may wish to canvass, and that they may wish to replace the appellant even if the winding-up is to continue. There is nothing in the materials to suggest that any new responsible entity would not make appropriate inquiries, take appropriate legal advice, and consider for itself the question whether as a matter of law it is possible and/or as a matter of fact is desirable, to terminate the winding-up process.
21 So far as the alleged misleading information, or inadequacy, in the notice and supporting document is concerned, the appellant submits that the members owe fiduciary duties to their fellow members, in the same way that directors proposing a resolution to a meeting of shareholders, or a responsible entity calling a meeting of a managed investment scheme, would owe a duty to make full and fair disclosure of all matters which would enable those shareholders or members to make a properly informed judgment. The existence of the duty, so far as directors and responsible entities are concerned, is not in doubt. However, the only reason why it is submitted that members owe such a duty to each other is that s 252D(2) of the Corporations Act 2001, dealing with the calling of a meeting by members of a scheme, provides:
"The meeting must be called in the same way - so far as is possible - in which meetings of the scheme's members may be called by the responsible entity."
22 It is very difficult to view that subsection as intended to impose on members a fiduciary duty which would not arise otherwise, rather than simply being directed to matters of procedure, such as the timing and form of a notice. No reason of principle was advanced as to why members might owe each other such a duty. One can see practical reasons why such a duty should not be imposed, however. For example, and relevantly for present purposes, members generally could hardly be expected to have access to all of the information available to directors or to a responsible entity, and the majority of members would be most unlikely to have that
(Page 11)
- detailed familiarity which comes from day-to-day involvement in the affairs of the entity. I do not think that the duty contended for exists.
23 Even if a fiduciary duty of some kind exists, it seems to me that the matters pointed to by the appellant do not render the notice and the statement in support misleading in a way which would require the intervention of the Court. It is suggested that the replacement of the appellant at the present stage would lead to an increase in costs, and that the statement in support should have drawn that to the attention of the members. In part, the submission is founded upon the constitution of the BBPS, and I would not accept the proposition that the members of a management investment scheme would be unaware of the provisions of its constitution. In part, it is said that certain contracts which a new responsible entity might take steps to attempt to avoid are binding and not able to be avoided, so that consideration of those matters would lead to additional costs. However, one would expect costs to be small if the contractual situation is as clear on its face as the appellant submits. In part, it was submitted that passage of the resolutions might lead the major creditor, the National Australia Bank, to bring to an end its agreement to forbear from enforcing its rights. However, a late affidavit provided to us on behalf of the appellant demonstrates that the forbearance has now ceased in any event. Finally, it is suggested that, for a variety of reasons, Teys Property Funds Ltd would not be a suitable responsible entity. That, it appears to me, is a matter which can properly be debated at the meeting.
24 Finally, it was submitted that, even if it were appropriate for these matters to be debated at a meeting, an important practical consideration was that by the date of the hearing of this appeal there had been a very substantial number of proxies received from members, so that those members who had provided proxies would not be able to be present at the meeting and would not be able to cast their votes informed by any debate which might take place. That is, the appellant relied upon its own failure to take any steps to advise members other than the respondents of its concerns, in order to assert that, since the members were uninformed of those concerns, it would be necessary to adjourn the meeting.
25 However, statutory provision is made for proxies. Votes are commonly cast by proxy at meetings of this kind. Any member who chooses to cast a vote by proxy rather than by personally attending a meeting takes the risk that, during the time between the sending in of the proxy and of the meeting, events will occur which, if the member had known of them, might have led the member to take a different course. Similarly, members who choose to vote by proxy take the risk that there
(Page 12)
- will be information disclosed or argument advanced at a meeting which, had the member been present, might have led the member to vote in a different way.
26 McLURE JA: I agree with the reasons given by Wheeler JA.
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