Macquarie Investment Management Limited

[2013] NZHC 337

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-003857 [2013] NZHC 337

IN THE MATTER OF     the Securities Act 1978

AND

IN THE MATTER OF      an application under sections 37AC and

37AH Securities Act 1978

BETWEEN  MACQUARIE INVESTMENT MANAGEMENT LIMITED A.C.N. 002

867 003 AS THE RESPONSIBLE ENTITY FOR MACQUARIE GLOBAL INFRASTRUCTURE TRUST II

Applicant

Hearing:         (On the papers) Counsel:          J Long for Applicant Judgment:          27 February 2013

JUDGMENT OF VENNING J

This judgment was delivered by me on 27 February 2013 at 3.00 pm, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Lee Salmon Long, Auckland

MACQUARIE INVESTMENT MANAGEMENT LTD FOR MACQUARIE GLOBAL INFRASTRUCTURE TRUST II HC AK CIV-2012-404-003857 [27 February 2013]

[1]      The applicant investment manager is the responsible entity for the Australian registered  managed  investment  scheme  Macquarie  Global  Infrastructure Trust  II (Trust).

[2]      It seeks validation of New Zealand allotments under s 37AC or alternatively s 37AH of the Securities Act 1978.

Background

[3]      Units in the Trust were initially offered to New Zealand unit holders pursuant to an Australian product disclosure statement dated 26 July 2004 and in reliance on the Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 2003 (the Exemption Notice).

[4]      In 2009 and 2010 the Trust made further distributions to all New Zealand unit holders in the form of allotments of further units in the Trust.   The New Zealand allotments were a compulsory reinvestment of distributions otherwise payable to unit holders according to the terms of the Trust’s constitution.

[5]      As the Trust failed to provide a document containing specified statements to unit holders prior to the allocation of the New Zealand allotments the Trust failed to comply with the requirements of the Exemption Notice.  As a consequence the New Zealand allotments are deemed invalid and of no effect by s 37(4) of the Act.

[6]      The Court has power to validate the New Zealand allotments under ss 37AC

or 37AH.

[7]      The remedial purpose of the provisions was discussed by Gendall J in Re

Perpetual Investment Management Ltd as follows:1

[14]      The Court must be mindful of the purpose of the legislation.  If there are purely technical breaches such as late filing of documents and no cogent reasons given by an objector as to how his or her interests have been “materially prejudiced” by such technical contravention, then it is obvious

1      Re Perpetual Investment Management Limited HC Wellington CIV-2005-485-1565, 21 June

2006 at [14].

that the purpose of the legislation was to ensure that relief be granted.  The remedial purpose is clear from the legislative history.  ...

[8]      Previously the Court approved the form and content of a notice to be sent to unit holders explaining the Exemption Notice, the contravention of the Act, the intended application for relief and the investor’s right to object.   The form of the notice had been settled after discussion with the Financial Markets Authority.  On 11

July 2012 this Court approved the form of the Notice.

[9]      In accordance with s 37AF of the Act notice was provided to investors:

(a)      On 5 September 2012 the applicant sent a copy of the Notice to the last known address for each unit holder;

(b)On  6  September  2012  the  applicant  published  the  Notice  in  the Northern Advocate, the Herald, the Waikato Times, the Rotorua Daily Post, Hawke’s Bay Today, the Taranaki Daily News, the Manawatu Standard, the Dominion Post, the Nelson Mail, the Christchurch Press, the Otago Daily Times and the Southland Times;

(c)      On  6  September  2012  the  applicant  published  the  Notice  on  its website.

[10]     Save for an issue concerning service on the Financial Markets Authority the formal requirements of s 37AF were complied with.   Under s 37AF(1)(d)(iv) the applicant was required to serve a further copy of the Notice (which had previously been approved by the Financial Markets Authority) on the Financial Markets Authority during the five working day period specified in s 37AF(2).

[11]     By oversight of the applicant’s solicitors the further copy of the Notice was not sent to the Financial Markets Authority within the five working day period. Once the omission was discovered a further copy of the Notice was served on the Financial Markets Authority.    The Financial Markets Authority has filed a memorandum for the Court to confirm that it does not object to the mandatory relief order sought under s 37AC and submits that the requirement that it be served with a

final copy of the Notices is a requirement of form rather than substance.  It notes it is not the party granting relief.

[12]     There were only three responses received from investors to the Notice.  Mr and Mrs Carryer and Mr and Mrs Moody initially gave notice of formal objection through the offices of Aegis Investment Administration but subsequently both sets of objectors confirmed in writing they withdrew their objections.

[13]     The  applicant  also  received  a  letter  dated  13  September  2012  from  an investor D L Parnell.  In that letter the investor Mr Parnell expressed his frustration regarding the operation of the Trust and suggested that he might take steps to realise his investment. The letter concluded:

Unless I receive either payment or a binding commitment from Macquarie within 7 days, I will be taking the route by which I can at least realize a small amount of my investment afforded me by your transgression of NZ law.

[14]   I take from the papers in support of the application that no further correspondence has been received from Mr Parnell and no further steps have been taken by him.

Decision

[15]     As noted the applicant seeks relief primarily under s 37AC.   That section provides:

37AC   Court must make relief order in certain circumstances

(1)       The Court must make a relief order in respect of the application of section 37 to the allotment of the security if the application for that order is made by—

(a)      the subscriber; or

(b)      the security holder; or

(c)      the issuer, if the subscriber consents in writing to the making of the relief order; or

(d)      the issuer, if the security holder consents in writing to the making of the relief order; or

(e)      the issuer, if—

[[(i)      the  contravention  of  section  37  was  caused  by  a failure to comply with a condition of an exemption granted under  section  5(5)  (as in force before its repeal) or under section 70B or of an exemption provided under section 5(3A) or 5A; and]]

(ii)      the issuer has given notice of that contravention to the subscriber in accordance with sections 37AE and

37AF; and

(iii)      the subscriber has not objected to the Court making a relief order by—

(A)      notifying  the  issuer  in  writing  within  30 working days after the day on which the notice is given that the subscriber objects to the making of the relief order; and

(B)     including in the subscriber's objection a description as to how the contravention has materially prejudiced the interests of the subscriber.

(2)       An order may be made under this section regardless of whether the contravention of section 37 occurred before or after this section comes into force.

(3)       An application under this section may be made in conjunction with an application under section 37AH or section 37AI.]

[16]     Provided the conditions of s 37AC(1)(e) are met then the Court must make a relief order.

[17]     In light of the affidavit evidence of Rebekah Victoria McEwin Hunter sworn

4  July 2012  and  the  affidavit  evidence  of  Venketeswaran  Rajendram  sworn  31

January 2013 I accept that the contravention of s 37 was caused by a failure to comply with the condition of the Exemption Notice.  The affidavit evidence of Sarah Marshall Yallop sworn on 21 January 2013 satisfies the Court that the issuer has given notice of the contravention to the investors in accordance with ss 37AE and

37AF.

[18]     While two investors formally objected those objections have been withdrawn. While Mr Parnell wrote a letter of complaint and threatened action the letter is not an objection in terms of s 37AC(e)(iii).   First, Mr Parnell’s letter was a conditional

objection but more importantly Mr Parnell’s letter failed to set out or describe how the contravention of the exemption notice had “materially prejudiced” his interests.

[19]     I conclude that s 37AC(e)(iii) has been satisfied and that no subscriber has objected to the Court in the form and manner required by the section.

[20]     That leaves the issue of the failure to serve the Financial Markets Authority with the further copy of the Notice.   I note that is not a strict requirement under s 37AC(e) itself and also note the position of the Financial Markets Authority in relation to it.   In Goldman Sachs JBWere Managed Funds Limited v Coulthard & Ors2   an  error  in  the  notice  posted  on  the  issuer’s  website  (which  specified  an incorrect deadline for objections) was held not to invalidate the total notification process and not to disqualify the applicant from mandatory relief under s 37AC.  I consider the breach in this case to be less significant than that breach.

Result

[21]     The  applicant  is  entitled  to  the  order  it  seeks  under  s 37AC.    In  the circumstances  it  is  unnecessary  to  consider  the  alternative  relief  sought  under s 37AH but, as that is discretionary relief, given the issues canvassed above, if necessary, orders would have been made under s 37AH.

[22]     I make an order under s 37AC in terms of the draft filed as amended to delete the alternative relief under s 37AH.

Venning J

2      Goldman Sachs JBWere Managed Funds Limited v Coulthard & Ors HC Wellington CIV-2007-

485-2472, 31 March 2009.