FEDERAL COURT OF AUSTRALIA Cachia v Westpac Financial Services Ltd [2000] FCA 161 CORPORATIONS – unit trust – merger of unit trusts contrary to wishes of minority unitholder - whether amendments to trust deed were ultra vires – whether amendments to trust deed were a fraud on the power relied upon - whether letter was a "request for redemption" recognised under the Trust Deed – whether the manager had a duty to advise that the application for redemption was not in proper form - whether the merger of the unit trusts was unnecessary in the circumstances – whether there was an entitlement to immediate payment – whether "particular amendments" become "entrenched provisions" when passed at a special variation meeting – whether amendment to the trust deed can retrospectively alter unitholder's rights – power to vary limited to amendments which do not alter the substratum of the trust – "fraud on the minority" does not extend to the compulsory expropriation of units in unit trust TRADE PRACTICES – allegation that Information Memorandum distributed to unitholders was misleading and deceptive for want of full disclosure – whether manager had an interest in the merger – representations as to future matters Corporations Law ss 1366, 1069(1)(c), 1069(7), 1076A, 1076K, 1076(L)(1)(a), 1076L(1)(b), 1076L(2), 1076M(4), 1076T, 1076T(2), 1076T(3), 1076U, 1076V, 1076X, 1076Y. Bulfin v Bebarfald's Ltd (1938) 38 SR (NSW) 423 applied Fraser v NRMA Holdings Ltd (1995) 55 FCR 452 applied Gambotto v WCP Ltd (1995) 182 CLR 432 distinguished Gwyn v Neath Canal Navigation Co (1868) L.R. 3 Exch 209 cited Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 distinguished Pepe v City & Suburban Permanent Building Society [1893] 2 Ch 311 applied Gra-ham Australia Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 applied Re Dyer [1935] VR 273 cited In re Ball's Settlement Trusts, Ball v Ball [1968] 1 WLR 899 applied Re Blocksidge [1997] 1 Qd R 234 cited Kearns v Hill (1990) 21 NSWLR 107 cited Locke v Westpac Banking Corporation (1991) 25 NSWLR 593 cited Vatcher v Paull [1915] AC 372 cited Lancedale Holdings Pty Ltd v Health Group Australasia Pty Ltd [1999] NSWSC 609 cited Lancedale Holdings Pty Ltd v Health Group Australasia Pty Ltd [1999] NSWCA 460 cited Charles v Federal Commissioner of Taxation (1953-1954) 90 CLR 598 applied SALV LAURENCE CACHIA v WESTPAC FINANCIAL SERVICES LTD NG 3723 OF 1996 HELY J 25 FEBRUARY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 3723 OF 1996 BETWEEN: SALV LAURENCE CACHIA APPLICANT AND: WESTPAC FINANCIAL SERVICES LIMITED RESPONDENT JUDGE: HELY J DATE OF ORDER: 25 FEBRUARY 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application is dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 3723 OF 1996 BETWEEN: SALV LAURENCE CACHIA APPLICANT AND: WESTPAC FINANCIAL SERVICES LIMITED RESPONDENT JUDGE: HELY J DATE: 25 FEBRUARY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The Westpac Real Property Growth Trust ("the Growth Trust") was constituted by a Trust Deed dated 17 September 1984. The respondent is the manager of that Trust. As the name of the Trust suggests, the Growth Trust was formed for investors seeking capital growth through an investment in real estate over the medium to longer term. The respondent is also the manager of the Westpac Property Trust ("the Property Trust"). The investment objective of the Property Trust was both income and growth, whereas the investment objective of the Growth Trust was capital growth, with income reinvested. Notwithstanding these different investment policies, the terms of the Growth Trust were such that income could be distributed to unitholders if the manager decided that it was appropriate to do so (cl 16(2)-(3); 20(10)). The 1985 Prospectus for the Growth Trust stated that the Trust did not intend to make distribution of income to unitholders, but may do so if an income distribution was considered to be in the best interests of unitholders. 2 Between 7 January 1985 and 25 February 1985 the applicant acquired 57,397.21 units in the Growth Trust at a subscription price of $1 per unit. Those units were acquired prior to the introduction of Capital Gains Tax in September 1985. 3 During 1991, property values, and consequently the value of units in property trusts, were in decline. Many investors requested the managers of unlisted property trusts to buy back their units. The Trust Deeds constituting the Trusts generally obliged the managers to do so. However, the volume of requests was such that there was a fear that if the managers were to comply with them, they would be forced to sell the underlying properties quickly, and in an already depressed market. 4 On 23 July 1991 the Treasurer announced a range of measures which the government would be taking to restore confidence and stability in the unlisted property trust industry. As part of that approach, the government decided to legislate, with effect from the time of that announcement, for the imposition of a standard twelve month notice period for the withdrawal of funds from existing "public" unlisted property trusts. 5 The legislation which the Treasurer's announcement had foreshadowed became Division 5A of Part 7.12 of the Corporations Law which, by virtue of s 1366 of that Law, is deemed to have commenced on 23 July 1991. 6 In the second reading speech for the Corporations (Unlisted Property Trusts) Amendment Bill 1991, delivered on 7 November 1991, the Attorney-General said: "The introduction of the standard 12-month notice of withdrawal period does not of itself solve the liquidity problems of unlisted property trusts nor was it intended to. Clearly, it is necessary for many of those trusts to restructure their operations so as to provide a better match between the essentially long term nature of real property as an investment and investor demands for ready liquidity. The introduction of the 12-month notice of withdrawal period is providing management companies and trustees with breathing space in which to reach agreement with their unitholders on restructuring proposals." 7 On 3 February 1992 the respondent circulated an Information Memorandum and notice of meeting designed to give effect to the respondent's recommendations that there should be a merger between the Growth Trust and the Property Trust, and that the combined Trust should be listed on the Australian Stock Exchange ("ASX"). The recommendations were said to be consequential upon the government decision to impose a twelve month notice period on redemptions from unlisted property trusts. 8 The manager's proposal involved the making of a number of amendments to the Trust Deed of the Growth Trust. Shortly stated, the essential thrust of the proposal was that unitholders in the Growth Trust should be deemed to have requested redemption of their units in the Trust and to have accepted in full satisfaction of the amount payable on redemption, units of the Property Trust to an equivalent value. It will be necessary to return to the details of this Information Memorandum later in these reasons. 9 On 14 February 1992 the applicant wrote to the respondent expressing his opposition to the proposal, and contending that approval of the proposal would amount to a "fraud" by the majority upon the minority of unitholders in the Growth Trust. The letter included the following: "I am one of those unitholders who would lose the valuable benefit of a capital gains tax free investment if you were to proceed with your proposed restructuring of the trust. As such, I hereby put you on notice that I shall be seeking from the Manager and/or Trustee of the Trust compensation for the financial losses which I shall suffer thereby." Suggestions were made as to the availability of alternative procedures, and the letter concluded: "Should your present proposals be implemented; I hereby advise you that after my units are (compulsorily) redeemed, I do not what [sic] the money realised on my units to be invested in the Westpac Property Trust. I further advise you that I hereby require you to remit to me the money value of my redeemed units." 10 Meetings of the Growth Trust and of the Property Trust were held on 5 March 1992. At those meetings resolutions intended to bring about the merger of the two Trusts were approved. In the case of the Growth Trust votes were cast by 68.13 per cent of the units on issue, of which 97.25 per cent were for the proposal and 2.75 per cent against. The merger was also approved by an overwhelming majority of the votes cast in relation to the Property Trust. The applicant voted against approval. 11 On 5 March 1992, following the meeting, the applicant wrote to the respondent a letter which stated the following: "Upon the redemption of my units in the Trust --- forcibly because I voted 'NO' to the proposal of amalgamation with the Westpac Property Trust --- I hereby require you to remit to me the money value of the units so redeemed." 12 On 6 March 1992 the respondent advised the applicant of the result of the meetings of unitholders, as a result of which the merger of the Growth Trust with the Property Trust, and the listing of the combined Trust on ASX will now proceed as quickly as possible. Two units in the Growth Trust were to be consolidated into a single unit in the merged Trust of twice the value because of a perception that consolidation of units would assist market acceptance after listing. As a result, the applicant was notified that he would receive 29,441 consolidated units in the Property Trust with a net asset value of $2.27 per unit. 13 Also on 6 March 1992 the respondent wrote to the applicant in response to his letter of 14 February 1992 rejecting the claims which had been made in that letter. 14 On 11 March 1992 the respondent and others entered into a deed described as the fourth deed amending the Trust Deed for Westpac Real Property Growth Trust. That deed recited that the unitholders in the Growth Trust at a meeting held on 5 March 1992 directed the Trustee to amend the Trust Deed in the manner contained in cl 2 thereof. Clause 2 provides: "(2) The Principal Deed is further amended by: (1) inserting the following additional Clause at the end of the Principal Deed: COMPULSORY REDEMPTION 56(1) Upon a date to be fixed by the Trustee by notice in writing to the Managers, all Unitholders shall be deemed to have requested redemption of all their respective Units in the Trust in accordance with Clause 51 and to have agreed to accept, in full satisfaction of the amount payable on redemption by virtue of such request and the ensuing redemption of their respective Units under Clause 51, Units in Westpac Property Trust to a value equal to the value of the Units in the Trust so redeemed subject to the issue to the Trustee of Westpac Property Trust of Units in the Trust equal in number to the Units so redeemed. For this purpose, 'value' shall be determined in the manner set out in the Information Memorandum forwarded to Unitholders together with the notice of the meeting at which the Unitholders direct the Trustee to enter into an Amending Deed to amend this Deed to include this Clause. (2) For the purposes of this Clause, 'Westpac Property Trust' is the Unit Trust so called constituted by Deed dated 15 July 1977 (and subsequently amended from time to time) among the Managers, the Trustee and the Guarantor. (2) inserting the following additional sub-clause at the end of Clause 51: (10) Any request to repurchase Units lodged by a Unit Holder with the Managers on or prior to the date fixed by the Trustee pursuant to Clause 56(1) and not acted upon by the Managers or the Trustee in accordance with this Clause on or prior to that date shall be deemed to be of no force or effect." 15 The evidence before me does not enable identification of the date fixed by the Trustee as envisaged by cl 56 of the Trust Deed. The Information Memorandum indicated that the date was expected to be 15 March 1992. At some stage prior to 28 May 1992, former unitholders in the Growth Trust were allotted units in the Property Trust as envisaged in the manager's letter of 6 March 1992, and the Property Trust was issued units in the Growth Trust. 16 On 28 May 1992 units in the merged Trust were listed for quotation on ASX. The annual report of the Westpac Property Trust for the year ended 15 June 1993 discloses that during the year to 15 June 1993 the units in the Westpac Property Trust have traded at between a low of $1.11 in August and a high of $1.52 shortly after listing. 17 In March 1992 the applicant was a unit holder in the Property Trust as well as in the Growth Trust. The evidence does not establish the number of units which he then held in the Property Trust in addition to the 29,441 units which were allotted to him in consequence of the implementation of the merger. However, by 19 November 1997 the applicant's holding in the Property Trust had increased to 436,480 units. As at 10 December 1999 that holding had further increased to 596,670 units in the Property Trust. The applicant continues to hold the 29,441 units originally allotted to him as a result of the merger, and has received dividends on those units in the intervening period. 18 These proceedings were instituted by an application lodged on 29 October 1996. The only relief sought in the Second Further Amended Application is damages or equitable compensation against the respondent as manager of the Growth Trust. There is no claim against the Trustee of the Growth Trust or the majority unitholders. There is no claim (nor could there be in the proceedings as presently constituted) that the redemption of the applicant's units in the Growth Trust was invalid or that the "merger" was in some way ineffective. The claim that the applicant suffered loss and damage in consequence of the "merger", for which the manager is sought to be held responsible, assumes that the merger was effective in accordance with its terms. Although that is the structure of the applicant's claims, by his reply he alleges that the respondent is not entitled to rely on cl 51(10) or 56(1) of the Trust Deed because the amendments which introduced those provisions were ultra vires and a fraud on the power relied upon, hence void and of no effect. The Trust Deed 19 The Trust Deed contains provisions to the effect of the following: - the Trustee, the manager and the unitholders are bound by the provisions of the Trust Deed (cl 46); - a meeting of unitholders has power by extraordinary resolution to assent to "any alteration addition modification or cancellation" proposed by the manager to any of the provisions of the Deed (cl 38(23)); - the Trustee may join with the managers in making by a supplemental deed "any alteration modification addition or cancellation to this deed" if it is to give effect to a direction given at a meeting of unitholders held in accordance with the provisions of the deed (cl 43(1)(b)); - the manager will arrange for repurchase or redemption of units if a unit holder delivers to the manager a written request in the form set out in the fifth schedule to the deed (or such other form as may be approved by the manager and the Trustee). Repurchase or redemption of units is to be effected within 28 days of receipt of such request and by reference to values applicable on the business day immediately preceding the date of receipt of that request (cl 51(1) and (2)). Misleading and deceptive conduct 20 In the Information Memorandum referred to above at par 7, the respondent advised or urged a particular course of action on unitholders. It was thus incumbent on the respondent to make a full disclosure of all facts within its knowledge which were material to enable unitholders to determine upon their action: Bulfin v Bebarfald's Limited (1938) 38 SR (NSW) 423, 440. The information given to unitholders was required to be such as would enable them to judge for themselves whether to attend the meeting and vote for or against the proposal, or whether to leave that issue to be determined by the majority attending and voting at the meeting: Fraser v NRMA Holdings Ltd (1995) 55 FCR 452, 466. 21 The Further Amended Statement of Claim ("FASC") alleges that, in a number of respects, there was a failure to disclose material information in the Information Memorandum which resulted in contravention of a number of applicable laws and which caused the applicant loss and damage. The omissions relied upon 22 FASC pars 4-6 particularises twelve matters which are said to have been omitted from the Information Memorandum. In broad terms the alleged omissions fall into three classes, namely a failure to disclose: - self interest on the part of the manager in recommending the proposals; - that implementation of the proposals was unnecessary inasmuch as the Growth Trust could continue to operate as it had done prior to February 1992 without adverse consequences to the unitholders; - the case against the proposals. From time to time, the applicant's submissions refer to matters other than those pleaded, eg (p 9) the position of beneficiaries who were in receipt of social services payments, (p 30) the mixing of trust funds and (p 53) negligence on the part of the manager. The case was conducted on the pleadings, which cannot be expanded by seeking to raise new matters for the first time in final submissions. Self interest 23 FASC par 4 alleges that Westpac had a financial interest in the proposals which it failed to disclose. The financial interest arises because: - redemption of units causes the capital value of the Trust to fall; - listing on ASX would ensure that the capital value of the Trust was maintained; - the respondent's fees were calculated by reference to the capital value of the Trust; - termination or winding up of the Trust would have caused the respondent the loss of a source of income. 24 The first two of these matters were disclosed under the headings "Weakness of the unlisted trust structure" and "Listing on the ASX" on pp 12 and 13 of the Information Memorandum. Under the headings "Increased size" and "Management Fee and Reimbursable Expenses" on p 9 of the Information Memorandum the following was disclosed: - on merger, the combined Property Trust would have assets in excess of $371 million; - the respondent was entitled to a fee of 1.5 per cent per annum of the gross tangible assets of the Growth Trust; - should the merger proceed, the respondent would not claim its entitlement to that fee; - the respondent was entitled to a fee of 1 per cent of the net tangible assets of the Property Trust, subject to a proposal to change that fee to 1 per cent of the gross tangible assets of the Trust; - if the merger proceeds, there would be a considerable reduction in management fees to unitholders in the Growth Trust. The Information Memorandum included an independent expert's report prepared by Arthur Andersen & Co. It included the following: "As a result of merging the two Trusts and approving the amending deed, the management fee will be expressed as 1 per cent of gross tangible assets. We note that some press discussion surrounding the calculations of management fees of property trusts which have been listed recently suggests that the proposed level of fees may be high. The 1 per cent fee is consistent with management fees paid by other unlisted property trusts which are in the process of listing. In addition, for the WRPGT this fee represents a reduction from the 1.5 per cent management fee currently being paid." 25 The basic facts in relation to the structure of the Trust, and the manager's income, were disclosed in the Information Memorandum. It is true that there is no express statement that if the value of the assets of the Trust diminishes in consequence of redemptions, or if the Trust were wound up, this would have an impact upon the level of the respondent's remuneration. But, having regard to the information which was given to unitholders, this would be obvious. A failure to state the obvious is not misleading and deceptive conduct. There is no evidentiary foundation for a conclusion that it was self interest on the part of the manager which caused it to put forward the proposals. In fact, the fees to which the manager was entitled under the old structure – for both trusts – totalled $4,395,131.49. Under the post merger arrangement the fee entitlement reduced to $3,991,278.07 (T p 270). Implementation of the proposals was unnecessary 26 FASC par 5 alleges a failure to inform unitholders: (a) that the Trust had liquid funds to fulfil requests to redeem units it had received and which were still unfulfilled, (b) that there would have been minimal selling of property, if any, to fulfil redemption requests, (c) that the Trust had the capacity to borrow money to fulfil redemption requests if that were necessary, (d) that the stockmarket selling prices of other listed property trusts were much below their net tangible asset value and that it was to be expected that the selling price of units of the Westpac Property Trust would fall much below their net tangible asset value, (e) that at the then current valuation of the Trust properties the unitholders would have received a much higher distribution on a winding up of the Trust than they were likely to receive from selling the units they were allotted in the Westpac Property Trust on the stockmarket, (f) that the Trust could continue to operate as it had done prior to February 1992, without adverse consequences to the unitholders, (g) that the respondent was associated with bodies holding an interest in the Trust, and that the vote on the said proposal stood to be effected thereby. 27 (a), (b) and (c) can be considered together. The applicant did not call any specific evidence directed towards establishing the propositions for which he contends. The report of Deloitte Ross Tohmatsu (Information Memorandum p 40) discloses that as at 31 December 1991 the Growth Trust had cash at bank of $1,385,714, total current assets of $3,702,181 and total current liabilities of $18,837,869. The bulk of the current liabilities consisted of bank bills. The Information Memorandum (p 14) discloses that outstanding redemption requests at 16 January 1992 amounted to "less than 4.5 %" of units outstanding. The total number of outstanding units at 31 December 1991 was 75,438,310 at $1.16 per unit (p 41). If it be assumed that outstanding redemption requests amounted to something between 4 per cent and 4.5 per cent of units outstanding, then the amount necessary to fund those redemptions would be of the order of $3.5 million to $3.9 million. The figures which I have quoted do not establish that, in early 1992, the Trust had liquid funds to fulfil outstanding requests for redemption, and there is no other evidence called to support that proposition. Exhibit 50, a document prepared by Mr Cachia, is not consistent with the information contained on pp 40 and 41 of the Information Memorandum. It is wrong to say that the liquidity of the Trust was "greater than 15%". General assertions, such as that contained in Exhibit 11 (Seventh Annual Report for year ended 5 June 1991) that "The Manager is of the opinion that in the normal course of business the Trust has sufficient liquidity to meet such requests" (ie "redemption requests") do not detract from the specific and more recent financial information contained in the Information Memorandum. 28 The Information Memorandum did discuss, as a possible alternative to the merger, remaining as an unlisted property trust with a twelve month redemption period (p 16). In the manager's view if that course were adopted, there remained the possibility of the manager being forced to sell property into a depressed property market. At the same time, it would cause the manager to take a short term, rather than the required long term approach to property investment management. None of these views is shown to be without foundation. The Growth Trust had five commercial properties in its portfolio at values of between $14 million and $30 million. The proposition that there would have been minimal, if any, selling of property to fulfil redemption requests is simply not made out. 29 The applicant called no specific evidence as to the capacity of the Growth Trust to borrow money at the time, nor as to the likely level of redemption requests had the merger proposal not been propounded. At 31 December 1991 total unitholders' equity stood at $87,885,062 (Information Memorandum p 40), but in the 209 days to 31 December 1991 the Growth Trust lost $27,084,670, apparently by reason of asset revaluations of $28,616,763 (Information Memorandum p 38). I do not think that I would be justified in concluding on the basis of these raw figures that the Trust had the capacity to meet redemptions through loans, still less that loan funds would have been available or that the Trustee would have wished to raise them on whatever terms may then have been on offer. 30 The complaint (par (d)) that there was a failure to inform unitholders that it was to be expected that the selling price of units of the merged Trust would fall much below their net tangible asset value simply does not sit with the facts. At p 13 of the Information Memorandum the following appears: "The Manager is aware that the yield of the combined Westpac Property Trust is below that currently required by the stockmarket, and that offered by competitor listed property trusts. Consequently, on listing the stockmarket is likely to adjust downwards the value of Units in the Westpac Property Trust to a level below that of its net tangible asset backing so as to produce the required level of yield." On p 19 the question "How will listing affect the price of Units?" is addressed: "The Manager expects the stockmarket will price Units in the Westpac Property Trust at a discount to the net tangible asset backing of Units. It is not possible to predict with certainty the price at which Units will trade on listing." On p 36, in the Arthur Andersen report, the following appears: "In recent times, when unlisted property trusts have listed, the price of units generally has been at some discount to NTA. It is not possible to quantify this with accuracy and the Manager has not attempted to do so. However, Unitholders should consider this matter when assessing the advantages and disadvantages of voting in favour of the resolution." Accordingly, there is no substance in this complaint. 31 As earlier indicated, the Information Memorandum made it plain that units in the merged Trust were likely to trade on market at a sum less than net tangible asset value. The net value of each unit in the Growth Trust at 31 December 1991 is recorded as being $1.164992 (p 41). In fact, a figure less than this would probably have been realised in the event of an immediate wind-up of the Growth Trust as properties would be required to be disposed of at "fire sale" prices. A possible alternative of a controlled wind-up of the Trust over several years was discussed at p 17 of the Information Memorandum. There is simply no warrant for a conclusion that unitholders would have received a much higher distribution on a winding-up of the Growth Trust than they were likely to receive from a sale of the units in the merged Trust on the stockmarket. It cannot be concluded that a failure to disclose that matter amounted to misleading and deceptive conduct. Par (e) is not made out. 32 The contention that the Trust could have continued to operate as it had done prior to February 1992, without adverse consequences to the unitholders as alleged in par (f), is not made out. The whole thrust of the reasoning underlying the proposals was that it was no longer practical for the Growth Trust to continue to operate as it had done in the past having regard to the decline in the property market and the weaknesses in the structure of unlisted property trusts. The Treasurer's announcement is sensible only upon the basis that economic circumstances were such that consideration had to be given to the restructuring of unlisted property trusts in general. There is no basis in the evidence for a conclusion that the particular position of the Growth Trust was different from that of the general run of public property trusts at the time. Par (f) is not made out. 33 There is no evidence that any associated company of the respondent voted on the resolution to approve the proposal or that there was any intention that they should do so. Section 1076T(3) prevented an associate of the respondent from voting at the meeting on 5 March 1992. The applicant's submissions refer to the annual report of the merged Trust for the year ended 15 June 1993 showing that bodies which included the word Westpac as part of their corporate name held 28.74 per cent of the units on issue in the merged Trust. That does not establish that those companies were members of the Growth Trust, nor that they voted or intended to vote at the meeting, assuming them to be associates of the respondent. I would not be justified in drawing an inference that associated companies voted in favour of the resolution from the non production of documents relating to this question upon discovery or pursuant to a notice to produce. For all that I know, there may be no such documents. Par (g) is not made out. 34 The result is that none of the alleged non disclosures falling under this heading have been made out. The no case 35 Starting at p 16 of the Information Memorandum a number of possible alternatives to the proposed merger are discussed, including: - listing the Growth Trust by itself; - remaining an unlisted property trust with a twelve month redemption period; - converting the Trust to a redeemable listed Trust; - controlled wind-up of the Trust over several years. A number of negative factors inherent in acceptance of the manager's recommendation were also exposed. There was disclosed: - that outstanding redemptions would be treated as void, and this may not be considered in the best interests of the unitholders who had sought a redemption (p 35); - on listing, the units in the merged Trust would probably trade on ASX for less than their net tangible asset backing (pp 13, 19 and 36); - the Capital Gains Tax free status of unitholders whose units had been acquired before 20 September 1985 would be lost (p 36). 36 The Information Memorandum was circulated on 3 February 1992. The applicant first communicated his disagreement with the proposal on 14 February 1992, and there is no foundation in the evidence for a conclusion that at the time of dispatch of the Information Memorandum any unitholders had expressed opposition to the proposal, or that there was then a dissenting view which ought to have been exposed to unitholders for their consideration. The applicant submits (p 6) that other options were available but that their availability was not considered or disclosed to unitholders, including: - retain the existing structure of the Trust; - raise loans if necessary with which to meet redemptions; - attract new investors to the Trust so as to meet redemptions out of new investment; - arrange loans to Trust shareholders on the collateral of their shareholding in lieu of redemption if necessary; - offer the shareholdings of members desiring redemption (if necessary) to other Trust members for purchase; - list the Trust on the Stock Exchange but do not merge it with the Westpac Property Trust; - arrange to meet the small number of redemption requests out of the liquid reserves and income of the Trust. Retention of the existing structure of the Trust and listing the Growth Trust on ASX in its own right were, in fact, amongst the options which were put to unitholders. Remaining an unlisted property trust with a twelve month redemption period was included amongst the possible alternatives discussed on pp 16 and 17 of the Information Memorandum. It may be accepted that the other "options" referred to above were not put to unitholders. But the applicant has not established that these "options" were any more than theoretical possibilities; there is simply no evidentiary foundation for a conclusion that they were viable alternatives which ought to have been put to unitholders for their consideration. 37 The applicant has, or claims to have, a different view of the economic condition of the Growth Trust in 1992 from that of the manager, and of the vast majority (97.5 per cent) of unitholders who expressed their view by voting at the meeting. The applicant contends that at all relevant times the Growth Trust was in a good and sound economic state, and that there was simply no occasion for any change or restructuring of the Trust. No specific evidence, beyond the published documents of the Trust, was called in support of that contention. It is not established that there was any, or sufficient, substance in this view to render an Information Memorandum that did not advocate it, misleading and deceptive. Causation 38 The applicant does not assert that he himself was misled or deceived by anything which the respondent said to unitholders in the Information Memorandum. He attended the meeting, and voted against the proposal. Nor is any evidence called which could establish that other unitholders would have voted differently should the disclosures for which the applicant contends, have been made. Still less is there any evidentiary basis for a finding that had those disclosures been made, the resolution of the meeting of unitholders of the Growth Trust on 5 March 1992, would not have been carried. Conclusion 39 The respondent did not engage in conduct that is misleading or deceptive or that is likely to mislead or deceive in any of the respects alleged in pars 4-6 of FASC. Even if it were established that one or more of the pleaded matters ought to have been disclosed, the applicant has not established that had there been disclosure of the omitted matter, the outcome of the unitholders' meeting of 5 March 1992 would have been different. The claim based upon misleading and deceptive conduct fails. It is not necessary for me to decide whether, if the respondent had been guilty of misleading and deceptive conduct, that would have resulted in a contravention of all of the statutory provisions alleged in FASC par 22. Negligence 40 Par 23 of FASC alleges breach of a duty of care not to engage in misleading and deceptive conduct in respect of the information provided to unitholders. As the applicant has failed to establish that the respondent engaged in misleading and deceptive conduct in relation to the Information Memorandum, this claim also fails. Misleading and deceptive conduct in relation to the 1985 Prospectus 41 FASC par 10 alleges that by virtue of the amendments made to the Trust Deed of the Growth Trust in March 1992, the respondent "breached the declarations it had made in the Prospectus of the Trust in about January 1985" namely: (i) that the main objective of the Trust was to acquire real estate for the purpose of long term capital appreciation, and (ii) that the respondent was committed on request to converting units to cash, and (iii) that the Trust would pay no dividends, and (iv) that the income of the Trust would be reinvested in the Trust, and "revealed and exposed the said declarations to have been false, misleading and deceiving". 42 Representations (i), (ii) and (iv) appear in the Prospectus. Representation (iii) does not. The Prospectus contained a statement that the Trust did not intend to make distributions of income to unitholders, but may do so if an income distribution was considered to be in the best interests of unitholders (p 5). The Trust Deed of the Growth Trust contained provisions which empowered the making of distributions of income (cl 16(2)-(3); 20(10)). 43 The representations are, in essence, representations made in 1985 as to future matters. There is no evidence that the representations were false, or without foundation when they were made. The main objective of the Growth Trust was as is specified in representation (i). Circumstances changed between 1985 and March 1992. The mere fact that a representation as to the future does not come to pass does not mean that it was false or without foundation when made. For that reason, this claim is misconceived, and doomed to failure. Failure to buy back the units 44 FASC pars 18, 20 and 21 allege that the applicant's letters of 14 February 1992 and 5 March 1992 enlivened the buy back obligations of the manager under cl 51 of the Trust Deed, and in breach of those obligations, the respondent failed to convert the applicant's units into cash at values applicable at the time of receipt of the request. 45 FASC par 19 pleads in the alternative that if the letters were not effective to engage the buy back obligations, it was the respondent's duty to advise the applicant that he should complete an application in proper form, which he would have done, whereupon the units should have been converted into cash by the respondent before the Fixed Date established by cl 56(1). 46 This aspect of the applicant's claim generates the following issues: - was there a request such as to enliven cl 51(1); - if not, is the respondent precluded from relying on any formal deficiencies in the request by reason of its failure to alert the applicant to those deficiencies, and to afford him the opportunity of remedying them; - what is the impact of Division 5A on the buy back obligation, including the effect of Provision 5(1) of s 1076K; - what is the impact of the amendments effected by the Fourth Deed amending Trust Deed of 11 March 1992, and in particular could they have retrospective operation so as to rob an antecedent request for redemption of what would otherwise be its effect; - were the amendments made within the scope of the amendment power contained in the Trust Deed; - if not, does Division 5A provide an independent source of power; - whether the amendments, insofar as they provided for the compulsory expropriation of the applicant's units are invalid having regard to the principles established in Gambotto v WCP Ltd (1995) 182 CLR 432. Section 1069(1)(c) of the Corporations Law requires the Trust Deed to include a "buy-back covenant". If the Deed does not contain such a covenant, a covenant to the same effect is deemed, "so far as is practicable", to be contained in the Deed: s 1069(7). Cl 51(1) of the Deed is a "buy-back" covenant. 47 Clause 51(1) of the Trust Deed obliges the respondent as manager to arrange for the redemption, or to repurchase units within twenty eight days of receipt of a written request in the form set out in the Fifth Schedule, or in such other form as might from time to time be approved by the manager and the Trustee. The repurchase/redemption price is to be calculated by reference to values at the time of receipt of the request. 48 The Fifth Schedule is as follows: "FIFTH SCHEDULE (Clause 51) REQUEST FOR REPURCHASE OR REDEMPTION To: The Managers, Westpac Financial Services Limited, The Wales House, 66 Pitt Street, SYDNEY. NSW. 2000 I/We ................................................................................................................. .................................................................................................................. of ................................................................................................................. being the Registered Holder(s) or mortgagee(s) of ............... Units in the Westpac Real Property Growth Trust hereby request you to repurchase or redeem at your discretion (*THE WHOLE OF) (** ........ OF) the said Units, * and issue to me (us) a new Confirmation for the balance of the said Units. DATED this .......................... day of ............................. 19 ......... WITNESS ...............................) .................................................... ) Signature of Registered Holder ADDRESS .............................) or mortgagee WITNESS .............................) ................................................... Signature of Registered Holder ADDRESS ............................) or mortgagee WITNESS ...........................) ................................................... Signature of Registered Holder ADDRESS ..........................) or mortgagee NOTES: All Joint Holders or joint mortgagees must sign. DECLARATION IF REQUEST FOR REPURCHASE OR REDEMPTION NOTICE IS SIGNED BY ATTORNEY UNDER POWER I/We declare that the Power of Attorney under the authority of which this Request for Repurchase or Redemption notice is signed is dated .................... and that I/we have not received any notice of revocation thereof. SIGNED at .................. this ........... day of .................... 19 ....... SIGNATURE OF ATTORNEY ............................... WITNESS ..................................... * Delete if not applicable ** Complete if necessary" Division 5A of Part 7.12 49 The Growth Trust was in existence at 4.50 pm AEST on 23 July 1991. At that time, and until its listing in May 1992, it was a property trust which was not included in an official list of a securities exchange and its trust deed was an approved deed for the purposes of Division 5 of Part 7.12 of the Corporations Law. It was thus a "Subdivision C Trust" as defined in s 1076A, and all of the operative provisions of Division 5A applied to the Growth Trust. 50 Division 5A introduced the notion of "entrenched provisions" of a trust deed, which have effect despite anything else in the deed (s 1076L(2)). The entrenched provisions, in the case of the trust deed of the Growth Trust, are the provisions taken by s 1076K to be included in the deed (s 1076(L)(1)(a)). Section 1076K effectively deems the trust deed of the Growth Trust to include provisions that: - the management company must not buy back units pursuant to a request made after 23 July 1991 until the end of a period of twelve months from the receipt of the request (Provision 2); - the Trustee must not redeem units pursuant to a request made after 23 July 1991 until the end of a period of twelve months from the receipt of the request (Provision 3); - the above restrictions will not apply where a withdrawal request is made on the grounds of financial hardship. If that ground is made out, the management company must buy back the units as soon as practicable (Provision 5); - for the purpose of calculating the price at which units are to be bought back or redeemed, the request is to be taken to have been made, immediately before the buy back or redemption (Provision 7). Thus the buy back covenant which s1069(1)(c) required to be included in the Deed is overridden by the entrenched provisions of Division 5A, which have paramount force: s 1076L(2). 51 The entrenched provisions of a trust deed may be revoked or amended if a "special variation proposal" has been passed at a special variation meeting (s 1076T) and the other conditions in s 1076U are complied with. A "special variation proposal" means a proposal: - to revoke all the entrenched provisions of the trust deed without substituting new provisions for them; or - to make particular amendments of the entrenched provisions of the trust deed, (s 1076A). 52 Amendments to the entrenched provisions of the trust deed in accordance with a special variation proposal do not apply to the buying back or redemption of units pursuant to a withdrawal request received by the trust before the proposal was passed, except so far as the contrary intention is expressed in the proposal (s 1076Y). 53 As earlier indicated, the deed was amended by the insertion of cl 51(10): "Any request to repurchase Units lodged by a Unit Holder with the Managers on or prior to the date fixed by the Trustee pursuant to Clause 56(1) and not acted upon by the Managers or the Trustee in accordance with this Clause on or prior to that date shall be deemed to be of no force or effect." A withdrawal request? 54 Clearly enough, neither of the letters relied upon as constituting a request for repurchase of the applicant's units were in the form specified in the Fifth Schedule, nor was the signature on either letter witnessed. It seems to me that, as a matter of substance, the applicant was not requesting by either of those letters that his units be repurchased pursuant to any obligations in that behalf, contained in the Deed. The applicant was not seeking repayment in twelve months time in accordance with the entrenched provisions, nor was he seeking to receive units in the Property Trust. His claim was for immediate payment of the value of his units in the event that the merger proposals were implemented. But, from and after 23 July 1991, the manager's obligation under cl 51 to buy back units within twenty eight days of receipt of a withdrawal request, was displaced by the entrenched provisions (which would continue to apply if the March 1992 amendments were ineffective) or by cl 56, if those amendments were effective. 55 Thus, in my view, the premise on which the applicant's claim is based, namely that he requested repurchase of his units in accordance with the provisions of the Deed, is not made out either as a matter of substance, or as a matter of form. At the time when repurchase was sought, the applicant did not invoke Provision 5. In any event, there is no evidentiary foundation for a conclusion that he was then suffering financial hardship. To the extent to which the evidence deals with the matter, it suggests he was not. An entitlement to immediate payment? 56 The Deed of 11 March 1992, in par 1, inserted an additional cl 55 at the end of the Deed as follows: "CORPORATIONS LAW 55(1) Notwithstanding anything contained in this Deed, the parties to this Deed, including, without limitation, all Registered Holders, covenant to comply with the covenants required by sub-section 1069(1) of the Corporations Law to be contained in this Deed ... Nothing in this Deed shall derogate from or affect the operation of or limit the interpretation of this covenant." 57 There is an apparent tension between the opening and concluding words of the new subcl 55(1) on the one hand, and the provisions of cl 56(1) and 51(10) on the other. The applicant submits that the effect of cl 55(1) is that the buy back provisions contained in cl 51(1) of the Deed operate in accordance with their terms, and that such operation is not affected by cl 56(1) and 51(10). The Information Memorandum does not support this construction; the Information Memorandum makes it plain that it was intended to restructure the Growth Trust such that unitholders in the Growth Trust would have their units in that Trust compulsorily redeemed and be entitled to receive, in full satisfaction of the amount payable on redemption, units of an equivalent value in the Property Trust. 58 Cl 56(1) and 51(10) were incorporated into the Deed at the direction of unitholders. Cl 55(1) was incorporated into the Deed at the same time by the Trustee and the manager pursuant to cl 43 of the Deed, on the basis that the rights of unitholders would not be adversely affected by its incorporation. 59 In those circumstances, one would not construe cl 55(1) as derogating from the mechanism for compulsory acquisition of units in the Growth Trust in return for units in the Property Trust which cl 56(1) and 51(10) were intended to give effect to. If necessary, cl 55(1) could be rejected as repugnant to the intentions of the unitholders clearly expressed in cl 56(1) and 51(10): Gwyn v Neath Canal Navigation Co (1868) L.R. 3 Exch 209, 215. 60 The entrenched provisions in s 1076K, particularly provisions 2, 3 and 7, cannot operate consistently with cl 51(10) and 56. Clause 51(10) and 56 provide a different regime for redemption/repurchase of units from the entrenched provisions. 61 The proposal for the adoption of cl 51(10) and 56 is a proposal to make "particular amendments" of the entrenched provisions because they are a substitute (cf "amendments" – s 1076A) for entrenched provisions dealing with the same subject matter. A particular amendment is an addition, omission or substitution of the entrenched provisions other than a revocation of all of the entrenched provisions without substituting new provisions for them. If new provisions are substituted for the entrenched provisions there will (by implication) be a "particular amendment" to the entrenched provisions, even though the substituted provision does not specifically refer to the entrenched provision. On that basis, clauses 51(10) and 56 are themselves entrenched provisions (1076L(1)(b)) which have effect despite anything else in the Deed (s 1076L(2)). It should be noted that the requirements of s 1076T were satisfied: see Exhibit R1. 62 Accordingly, I reject the submission that the effect of the Fourth Amending Trust Deed of 11 March 1992 was to reinstate the former regime whereby the manager was bound to repurchase/redeem units within twenty-eight days of a request to that effect. Retrospectivity 63 If, prior to 11 March 1992, the applicant had effectively requested the repurchase of his units, then cl 51(10) had the effect of bringing to an end whatever rights the applicant possessed in consequence of that request. The applicant submits, on the basis of Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399, that an alteration to the terms of the Trust Deed would be ineffective to vary the terms of any contract previously made between the applicant and the manager on the basis of the Trust Deed in its unaltered form. 64 Bailey's case was concerned with a special contract outside the articles of association of the company in question. Bailey's case decides that a company cannot unilaterally vary its contracts by altering its articles unless that is the basis on which the contract was made. But Bailey (at p 411) considered Pepe v City & Suburban Permanent Building Society [1893] 2 Ch 311. In that case a member of a building society, who had given notice of withdrawal and who, under the rules as they then stood, became entitled to a sum of money, was held to be deprived of his right to that sum by an alteration to the rules before he ceased to be a member. That was because Pepe did not involve any special contract between the member and the company, and the validity of the alteration to the articles properly fell to be determined by reference to general principles applicable to all powers conferred on majorities enabling them to bind minorities. 65 Pepe's case was applied by the Full Court of the Supreme Court of Western Australia in Gra-ham Australia Pty Ltd v Perpetual Trustees WA Ltd (1989) 1 WAR 65 in a fact situation analogous to the present. That case concerned a unit trust in which amendments made to a Trust Deed at a resolution of unitholders had the effect of altering the rights of certain unitholders who had sought repurchase of their units prior to the introduction of the amendments. It was held that although rights had accrued to unitholders who had requested the repurchase of units, those rights were defeasible and liable to be prejudicially affected by the amendment of the terms of the deed whilst the units holders remained as such. 66 Those authorities lead to the conclusion that the amendment of the Trust Deed so as to include cl 51(10) is not invalidated by reason of the fact that the amendment might defeat what would otherwise have been the entitlement of a unit holder who had requested redemption/repurchase of his units prior to the operative date. Further, if I am correct in my conclusion that the proposal for amendments to the Trust Deed amounted to a "special variation proposal" within the meaning of Division 5A, then the effect of s 1076Y is that a special variation proposal which manifests an intention that it should apply to the buying back or redemption of units pursuant to a withdrawal request received by the Trust before the proposal was passed, will be effective to achieve that end. The scope of the amendment power 67 Clause 38(22) provides that resolutions passed at a meeting of unitholders held in accordance with the deed shall be binding on all the unitholders. Clause 38(23) insofar as is currently relevant, provides as follows: "... a meeting of Unit Holders shall have the power by extraordinary resolution to sanction or assent to any alteration addition modification or cancellation proposed by the Managers of or to any of the covenants or provisions of this Deed (other than a covenant or provision required by any relevant law from time to time) ..." 68 The power of variation conferred by this clause is apparently unconfined. There are, however, some authorities which suggest that a power to vary a trust deed may be held not to extend to a variation which would alter the substratum of the trust: see, eg, Re Dyer [1935] VR 273; In re Ball's Settlement Trusts, Ball v Ball [1968] 1 WLR 899; Re Blocksidge [1997] 1 Qd R 234; Kearns v Hill (1990) 21 NSWLR 107; Locke v Westpac Banking Corporation (1991) 25 NSWLR 593 at p 602. This may be no more than an application of the equitable doctrine of fraud on the power, referred to in par 74 of these reasons. 69 In Re Ball Settlement Trusts at p 905, McGarry J said: "If an arrangement changes the whole substratum of the trust, then it may well be that it cannot be regarded merely as varying that trust. But if an arrangement, while leaving the substratum, effectuates the purpose of the original trust by other means, it may still be possible to regard that arrangement as merely varying the original trust, even though the means employed are wholly different and even though the form is completely changed." The identification of some unexpressed "substratum" in the case of a public unit trust such as the present may not be without its problems. Clause 10 of the Growth Trust Deed specifies its investment policy as being primarily: "the purchase of, development and investment in real estate and property associated therewith and in shares in Property Companies with a view to maximising and preserving capital appreciation over a term of years." Although, as earlier indicated, both the Trust Deed of the Growth Trust and the Prospectus contemplated that distributions of income could be made to unitholders, if it was thought to be in their best interests. 70 The proposals outlined in the Information Memorandum were designed to bring about a fundamental reorganisation of the Trust, including the "merger" of the Growth Trust and the Property Trust, to be effected by placing the Growth Trust underneath the Property Trust, and the issuing of units in the Property Trust to persons who formerly held units in the Growth Trust. 71 But the rationale for the reorganisation was a change in external circumstances, and a desire to effectuate the original purpose of the Trust insofar as was practicable having regard to the change in circumstances. Both before and after the alteration the Trust was a property trust and the unitholders continued to have an interest in the properties held by the Growth Trust, although that interest was diluted by the interest which unitholders in the Property Trust acquired in those investments. That dilution was compensated for by the fact that, as members of the Property Trust, former unitholders in the Growth Trust acquired an interest in the properties held by the Property Trust. 72 Even if there is some principle that a power of variation does not extend to an arrangement which changes the whole substratum of the Trust, a fundamental reorganisation of the Trust does not of itself necessarily involve destruction of the substratum of the Trust. If there is a substratum underlying this Trust it is that of a property trust in which units are issued to the public. That substratum was not destroyed by the amendments in question. If there is a principle of the type to which I have referred, the Fourth Amending Trust Deed does not fall foul of it. 73 The entrenched provisions are inserted into the Trust Deed by force of the statute and they have effect in spite of anything else contained in the Deed. Section 1076M(4) provides that the entrenched provisions may be amended under s 1076U or 1076X, but not otherwise. Section 1076U provides for amendment of the entrenched provisions under a special variation proposal passed at a special variation meeting in accordance with s 1076T(2) which is not disallowed under s 1076V. Thus, Division 5A both introduces the entrenched provisions into the Trust Deed and provides for the way in which they may be revoked or amended. Accordingly, the source of the variation power insofar as entrenched provisions are concerned is Division 5A itself, rather than the terms of the Trust Deed. It has not been contended that there was any failure to comply with the provisions of Division 5A in this respect. Hence even if it were the case that the variation power contained in the Trust Deed was subject to an implied limitation of the kind to which I have referred, that would not have any relevant operation if the source of the variation power was the statute, and if what was done was done in conformity with the statute. 74 The equitable doctrine of "fraud on the power" requires that a power, including an amendment power, reserved in a trust must not be exercised for a purpose, or with an intention beyond the scope of or not justified by the instrument creating the power: Vatcher v Paull [1915] AC 372,378. The same principle applies to the exercise of a statutory power. In each case, the power has to be exercised bona fide, for the purpose for which it is given: Lancedale Holdings Pty Ltd v Health Group Australasia Pty Ltd [1999] NSWSC 609 (per Bryson J); 1999 NSWCA 460 (on appeal). It may be that an amendment to a trust deed enabling the majority unitholders to expropriate the minority's units for the sole purpose of aggrandising the majority might fail for want of good faith, or because it would be beyond the scope of the enabling power. 75 That is, however, not the case here. There is no expropriation of any property of the minority by the majority, to the aggrandisement of the majority. Rather, the majority voted in favour of a merger of the two property trusts such that the interests of all unitholders in the Growth Trust were redeemed by the issue of units in the Property Trust. The provisions introduced by the amendments were not directed against only some of the unitholders. They affected all unitholders equally, and in the same way. 76 There is no want of bona fides associated with the making of the amendments. Even though the amendments effected a fundamental restructuring of the unitholders' rights, for the reasons already given, I do not think that the power to amend was exercised for a purpose or with an intention beyond the scope of the power. A duty to alert the applicant to deficiencies as to form? 77 Subject to Gambotto (to be considered next), the applicant has not established that the amendments to the Trust Deed were beyond power. In my view these amendments operated in relation to any request which might have been earlier made by the applicant for repurchase of its units. It follows that even if the applicant had made a request in the form of the Fifth Schedule, cl 51(10) would have operated in relation to that request. 78 Accordingly, it is not strictly necessary to decide whether, as is pleaded in FASC 19, the respondent was obliged to alert the applicant to the formal deficiencies in his letters if they were intended to invoke the buy back provisions of the Deed. However, I should express my view even though, as I have indicated, it seems to me that neither in substance nor in form, were the applicant's letters requests for redemption under the terms of the Deed. They were demands for payment of the money value of redeemed units if the proposals were implemented. The respondent as manager of the Trust owed fiduciary obligations to all of the unitholders, including the applicant. The real issue is as to the scope of the fiduciary duty owed to a single unit holder. There could not be a fiduciary obligation to act so as to promote the interests of one unit holder over the interests of unitholders generally. In my view the manager's fiduciary obligation was to adhere to the terms of the Trust as varied by the Corporations Law. That means that the manager was not entitled to give effect to the applicant's request for payment of the monetary value of his units if the merger proceeded. There is no warrant for the implication of an obligation to advise the applicant as to how he might possibly put himself in a position different from that which, in the manager's assessment, was in the interests of unitholders generally. Gambotto 79 The applicant contends that the amendments to the trust deed brought about an unfair expropriation of his units in the Growth Trust. Those amendments were both procured and put into effect by the manager. The amendments are said to be invalid having regard to the decision of the High Court in Gambotto v WCP Ltd (1995) 182 CLR 432. The amendments were not made for a proper purpose. The applicant submits that the manager's purpose in proposing the amendments was self-interest – "greed in securing for itself continuing management of the Trust and hence its derivation of millions of dollars per year in management fees". The applicant was compelled to become a member of a different trust than the trust which he had agreed to join. The units in the Property Trust issued to the applicant had a market value after listing of $1.11, whereas the units in the Growth Trust had a net asset value of $2.27 (after consolidation) immediately prior to the merger. The applicant's units in the Growth Trust were not subject to capital gains tax. That was not the case with the units issued to the applicant in the Property Trust. For all of those reasons, the compensation the applicant was forcibly allotted was not fair compensation for the units expropriated from him. 80 In part, the applicant's complaint is of dishonest conduct on the part of the manager: in the Information Memorandum, the manager pretended to be addressing the interests of unitholders, whereas in truth, it was motivated by a concern for its own fees. 81 I reject the applicant's contentions in this respect. There is no evidentiary foundation for a conclusion that the manager's motivation for making the recommendations which it did was other than as stated in the Information Memorandum. Nor is there any evidentiary foundation for a conclusion that the manager's purpose in recommending as it did was self-interest or greed. 82 My findings in this respect are supported by the evidence of an independent expert, Mr Prothero. In his opinion, the Information Memorandum appropriately canvassed the various possible courses of action which were realistically open to unitholders at the time. In his opinion, had the merger proposal been rejected, then it is likely that the Growth Trust would have been wound up. Had the Growth Trust been wound up then the likelihood is that the applicant would have received for his units $53,954 (best case) or $47,813 (alternative case) as opposed to value of $48,886 in consequence of the merger. 83 Mr Prothero said: "In my opinion therefore on a purely monetary comparative basis, taking into account the level of risk associated with the value of the WRP6T units had the proposal been rejected, the proposal put forward by Westpac was in the best interests of the unitholders." 84 The applicant attacked Mr Prothero's evidence upon the basis that it was not properly researched and on the basis that it was not the product of an independent mind. The applicant did not take up my invitation to support those charges by reference to the evidence. I accept Mr Prothero's evidence and reject the criticisms of inadequate research and of bias which the applicant levied against him. 85 Gambotto was concerned with expropriation by a majority, of the minority's shares in a company. The Court held that a company's articles of association could not be amended to confer such a power simply for the purpose of aggrandising the majority. Such a power can be taken only if: - it is exercisable for a proper purpose; - its exercise will not operate oppressively in relation to minority shareholders. 86 Whilst in a commercial sense, ownership of units in a trust may be similar to ownership of shares in a company, in a legal sense there is a fundamental difference between a unit held under a trust deed such as the present and a share in a company: Charles v Federal Commissioner of Taxation (1953-1954) 90 CLR 598, 609. 87 Gambotto was a case concerning company law, and company law principles, particularly oppression and fraud on the minority, although there was some exposition of the general principles as to fraud on a power. The present is a trust case in which company law principles such as fraud on the minority play no part (see Jacobs' Law of Trusts in Australia [6th Edn] at par 316). The rights and obligations of the trustee, the manager and unitholders are not to be determined by reference to company law principles, but rather by the terms of the trust deed, and the law of trusts. 88 The law of trusts includes the equitable doctrine of fraud on the power and I have already held that the restructuring of the unit trust, by the adoption of provisions applicable to all unitholders in response to external circumstances, was not outside the scope of the enabling powers, nor was it a fraud on the power. As earlier indicated, there was no expropriation by the majority of the minority's units. 89 In those circumstances, it seems to me that Gambotto has nothing further to say on the issue of the validity of the amendments to the Trust Deed. 90 If I were wrong in that conclusion, the respondent would bear the onus of proving that the merger and its incidents were fair. In Gambotto at p 446-447 the Court said: "As noted in the preceding paragraphs, an alteration to the company's articles permitting the expropriation of shares will not be valid simply because it was made for a proper purpose; it must also be fair in the circumstances. Fairness in this context has both procedural and substantive elements. The first element, that the process used to expropriate must be fair, requires the majority shareholders to disclose all relevant information leading up to the alteration and it presumably requires the shares to be valued by an independent expert. Whether it also requires the majority shareholders to refrain from voting on the proposed amendment is a question that is best left open at this stage. The second element, that the terms of the expropriation itself must be fair, is largely concerned with the price offered for the shares. Thus, an expropriation at less than market value is prima facie unfair, and it would be unusual for a court to be satisfied that a price substantially above market value was not a fair value. That said, it is important to emphasize that a shareholder's interest cannot be valued solely by the current market value of the shares. Whether the price offered is fair depends on a variety of factors, including assets, market value, dividends, and the nature of the corporation and its likely future." 91 I accept that the merger was proposed for the reasons stated in the Information Memorandum. I accept that if the merger was not implemented, the probability was that the Growth Trust would have been wound up. I accept that the Information Memorandum fairly put the position before unitholders and adequately canvassed the alternatives which were realistically available. The procedural element of fairness was thus satisfied. (The inapplicability of Gambotto to the circumstances of the present case is highlighted by the Court's reservation in relation to the issue of voting: it could not seriously be suggested here that those in favour of the merger were thereby disqualified from voting upon it, and no other circumstance unified the majority.) 92 The Information Memorandum included a report by an independent expert which concluded: "The merging and subsequent listing of the Trust as proposed in the resolution is in the best interests of WRP6T Unitholders" (p 36). That conclusion is supported by the evidence of Mr Prothero. 93 The figures quoted by the applicant cannot reasonably be compared in assessing fairness, if only because they are struck at different dates. ($2.27 NTA at 6 March 1992 – Exhibit 17; $1.11 11 September 1992 – see Cachia affidavit 29 October 1996 par 17.) The manager forecast (but did not quantify) that there would be a decline in the market value of units below NTA in consequence of the listing of the Trust on 25 May 1992. Whether the NTA of the Trust could have been realised if the merger did not proceed is another question. 94 The loss of capital gains tax free status of units in the Growth Trust was an arguably relevant factor, which was disclosed in the Information Memorandum. There was, however, an available view that it was not of much significance if the alternatives realistically available were merger or liquidation, and if the probabilities were that a capital loss would be sustained on liquidation. 95 My acceptance of Mr Prothero's evidence, and a consideration of the Information Memorandum, leads to the conclusion that if there is some onus on Westpac to demonstrate that the merger proposal was fair, then Westpac has discharged that onus. The fact that 97.25 per cent of the unitholders who voted on the merger proposal were in favour of its implementation reinforces that conclusion. 96 As the applicant fails on what was referred to in the hearing as "the Gambotto point", it is not necessary for me to consider the respondent's submissions that it was impermissible for the applicant to set up that point by way of reply, or in an action in which neither the trustee, nor a representative of unitholders has been joined as a party. Nor is it necessary for me to come to grips with the proposition that if the merger was ineffective because of the Gambotto point, then its purported implementation could not have caused the applicant loss. Conclusion 97 The application is dismissed with costs. I certify that the preceding ninety-seven (97) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely. Associate: Dated: 25 February 2000 Applicant: The applicant appeared in person Counsel for the Respondent: S Rares SC, R Weber, N Perram Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 14, 15, 16, 17 December 1999 9 February 2000 Date of Judgment: 25 February 2000