Reported Decision : 52 ACSR 194 New South Wales Supreme Court CITATION : Macquarie Goodman Funds Management Ltd [2004] NSWSC 1197 HEARING DATE(S) : 02/12/04 JUDGMENT DATE : 2 December 2004 JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Judicial advice given CATCHWORDS : CORPORATIONS - registered managed investment scheme - alteration of constitution by special resolution - alteration "cannot take effect until" lodgment with ASIC - whether resolution may be subject to condition to be satisfied after lodgment LEGISLATION CITED : Corporations Act 2001 (Cth), s.601GC Re Adelaide Unley & Mitcham Tramway Co Ltd [1907] SALR 35 Re Australian Estates and Mortgage Co Ltd [1910] 1 Ch 414 Re Hills Motorway Ltd (2002) 43 ACSR 101 CASES CITED : Re Homemaker Retail Management Ltd (2002) 40 ACSR 116 re Mirvac Limited (1999) 32 ACSR 107 Re Mirvac Ltd (1999) 32 ACSR 118 Re Westfield Holdings Ltd (2004) 49 ACSR 734 Re Westfield Holdings Limited (2004) 49 ACSR 741 PARTIES : Macquarie Goodman Funds Management Limited as responsible entity of Macquarie Goodman Industrial Trust - Plaintiff FILE NUMBER(S) : SC 6481/04 COUNSEL : Mr I.M. Jackman SC - Plaintiff SOLICITORS : Allens Arthur Robinson - Plaintiff IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY 2 DECEMBER 2004 6481/04 - MACQUARIE GOODMAN FUNDS MANAGEMENT LIMITED AS RESPONSIBLE ENTITY OF MACQUARIE GOODMAN INDUSTRIAL TRUST JUDGMENT 1 The plaintiff is the responsible entity of a registered managed investment scheme known as the Macquarie Goodman Industrial Trust ("MGI"). In that capacity, it seeks the opinion advice and direction of the court under s.63 of the Trustee Act 1925 on matters relevant to a proposal under which units of MGI will become components of stapled securities together with shares in Macquarie Goodman Management Limited ("MGM"). A scheme of arrangement under Part 5.1 of the Corporations Act 2001 (Cth) between MGM and its members is proposed as part of the overall stapling plan. The Court has been asked to make, and will shortly make, orders in connection with the convening of a meeting for the purpose of considering such a scheme of arrangement. 2 In accordance with what has become common practice in matters of this kind (see Re Mirvac Ltd (1999) 32 ACSR 118, Re Homemaker Retail Management Ltd (2002) 40 ACSR 116, Re Hills Motorway Ltd (2002) 43 ACSR 101, Re Westfield Holdings Ltd (2004) 49 ACSR 734), the plaintiff, as the responsible entity of MGI, seeks judicial advice to the effect that it will be justified in pursuing the overall stapling plan up to and including the point at which holders of units of MGI are given an opportunity to vote on the proposal at a meeting of unit holders convened for the purpose. The resolution to be considered at the meeting of unit holders is a resolution to adopt a new constitution of MGI. The provisions of the new constitution are designed to interact with the terms of the proposed scheme of arrangement between MGM and its members and certain contractual arrangements in such a way as to effect the stapling of the securities. 3 One of the matters that has been debated in connection with the application for judicial advice centres upon the means by which the constitution of a managed investment scheme may be altered. MGI adopted a constitution in 2000 at the time of its transition to a registered managed investment scheme. That appears to have been done by a supplemental deed poll of 27 April 2000, no doubt in accordance with transitional provisions of the legislation and the scheme of the pre-existing unit trust deed. 4 Once the relevant provisions attained the status of the constitution of a registered managed investment scheme, the matter of its amendment and replacement came to be governed by s.601GC of the Corporations Law as it then was; now, of course, the corresponding provision of the Corporations Act. 5 Section 601GC(1) says that the constitution of a registered scheme may be modified, or repealed and replaced with a new constitution, in one of two ways. The one presently relevant is "by special resolution of the members of the scheme": s.601GC(1)(a). Section 601GC(2) requires the responsible entity to lodge with ASIC a copy of the modification or the new constitution and says that the modification, or repeal and replacement, "cannot take effect until the copy has been lodged". 6 The existing constitution to which I have referred also contains a provision about its alteration. Clause 22.1 says: "Subject to the Law, Goodman Hardie may amend this Constitution by deed." (Goodman Hardie appears to be a former name of the responsible entity.) 7 There therefore exists in this case a potential tension of the kind to which Austin J referred at para 44 of his judgment in re Mirvac Limited (1999) 32 ACSR 107, in that both the legislation and the constitution itself prescribe a manner of alteration of the constitution. Although clause 22.1 of the constitution does not refer to repeal and replacement (as s.601GC does), the concept of amendment embodied in the clause should be regarded as sufficient to allow replacement of all existing provisions: Re Adelaide Unley & Mitcham Tramway Co Ltd [1907] SALR 35. 8 However, the potential tension to which I have referred is mitigated in this case because the operative words of the proposed special resolution are; "… the constitution of Macquarie Goodman Industrial Trust is amended in accordance with the provisions of the deed poll [as described]. 9 The circumstance requiring discussion is that the proposed special resolution is expressed to be conditional. The form of resolution begins with the words: "That subject to the Supreme Court of New South Wales approving the proposed scheme of arrangement between Macquarie Goodman Management Limited and its ordinary shareholders...". There then follow the operative words I have already quoted. 10 I have been informed that in this case, as in Re Westfield Holdings Limited (2004) 49 ACSR 741, the responsible entity will, assuming all relevant resolutions have been duly passed by all relevant constituencies, return to the Court to seek further judicial advice as to implementation of the overall proposal; and that, at that stage, a procedure will be adopted which sees the substantive matters and all relevant evidence put before the court with a view to its being shown that the further judicial advice should be given and with the court being requested to defer the making of the order approving the scheme of arrangement until the lodgment under s.601GC(2) in respect of the MGI constitution has been made at ASIC. 11 Under that sequence of events there will be lodgment of the replacement constitution but its amendment will be a matter dealt with by a special resolution which has been passed in terms making the amendment it affects subject to the making of the Court order in respect of the scheme of arrangement which, as at the date of lodgment of the replacement constitution, will still lie in the future. 12 Section 601GC(1)(a) identifies a special resolution as the means by which the constitution of a registered scheme may be either "modified" or "repealed and replaced with a new constitution". Leaving aside the case dealt with by s.601GC(1)(b), the Act does not contemplate or make available any other method. Section 601GC(2), by saying that the modification, or repeal and replacement, "cannot take effect until" a copy of the modification or new constitution "has been lodged", identifies lodgement as the earliest point at which the modification or replacement is capable of being effective. This provision may be contrasted with s.137(a) which, dealing with modification or repeal of the constitution of a company "by special resolution" identifies the precise day (or "date") "on" which the modification or repeal "takes effect". Section 601GC(2) is also to be contrasted with provisions such as s.21(3) of the now repealed Companies Act 1961 which, dealing with alteration of a company's memorandum of association, required lodgment of the relevant resolution or court order and registration thereof and then said that "on such registration and not before, the alteration of the memorandum shall take effect". 13 Unlike those other provisions, s.601GC(2) does not specify the actual point at which a modification, or repeal and replacement, takes effect. It merely identifies a point before which it is incapable of taking effect. This different approach must be assumed to have been deliberate. The "cannot take effect until" specification, coupled with the recognition in s.601GC(1)(a) of a special resolution as the means of effecting the modification (or repeal and alteration) must, it seems to me, allow the special resolution itself to deal with the matter of the operative time provided, of course, that it does not attempt to make the change effective before the time of lodgment under s.601GC(2), since, in terms of that section, it "cannot take effect until" that time. 14 It is relevant to refer, in this connection, to the decision in Re Australian Estates and Mortgage Co Ltd [1910] 1 Ch 414. That case concerned a resolution to alter terms of issue of shares conferring preferential rights which Neville J described as "regulated by a special resolution which would have the effect of an original article". The resolution in question had been passed immediately after a separate resolution for reduction of capital. It began: "That upon the said reduction of capital being sanctioned by the Court the preferential rights attaching to the preference stock and preference shares be extinguished …" Neville J said of this resolution: "I see no reason why a resolution of this kind should not be made dependent upon the confirmation by the Court of the reduction of capital previously resolved upon. I think the result is that, if and when the confirmation of the Court is obtained, that resolution becomes binding; and if the Court refused its sanction, that resolution would fall to the ground. I know of no limitation in the powers of a company which prevents them passing a resolution in a conditional form of that kind." 15 The same observation is apposite here. Section 601GC(2) merely says that a modification (or repeal and replacement) "cannot take effect until" the specified event of lodgment but, subject to that, neither that section nor any other statutory provision qualifies the power that s.601GC(1)(a) makes exercisable "by special resolution of the members of the scheme". This, it seems to me, allows for a special resolution effecting a modification (or repeal and replacement) "subject to" the happening of some specified event that has not happened at the time "until" which the modification (or repeal and replacement) "cannot take effect". 16 I make orders in accordance with the short minutes of order which I initial and date. The orders may be taken out forthwith. ********** Last Modified: 12/15/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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