Supreme Court New South Wales Medium Neutral Citation: Re Real Estate Capital Partners Managed Investments Limited as Responsible Entity of the Real Estate Capital Partners USA Property Trust [2013] NSWSC 190 Hearing dates: 27 February 2013; 1 and 4 March 2013 Decision date: 06 March 2013 Before: White J Decision: Refer to para [87] of judgment. Catchwords: EQUITY - corporations - application for judicial advice under s 63 of the Trustee Act 1925 - responsible entity of managed investment scheme - ability of responsible entity to redeem members' units - prohibition on acquisition of relevant interests in voting shares under s 606 of the Corporations Act 2001 (Cth) - definition of "relevant interest" under s 608 of the Corporations Act - time of acquisition of a relevant interest by responsible entity - effect of ASX Listing Rule 10.1 on responsible entity's ability to redeem members' units - s 604GA(4) of the Corporations Act - meaning of a "right to withdraw" - meaning of "adequate procedures" for dealing with redemption requests Legislation Cited: Corporations Act 2001 (Cth) Trustee Act 1925 Category: Principal judgment Parties: Real Estate Capital Partners Managed Investments Limited (Plaintiff) Yaselleraph Pty Ltd (Interested Party) Regal Funds Management Pty Ltd (Interested Party) Intelligent Investor Funds Pty Ltd (Interested Party) Frost Holdings Pty Ltd (Interested Party) Woolley GAL II Pty Ltd (Interested Party) Representation: Counsel: J Stoljar SC (Plaintiff) N Kidd (Yasselleraph) D Cook (Regal Funds Management and Intelligent Investor Funds - 27 Feb 2013) D R Stack (Regal Funds Management and Intelligent Investor Funds - 1 and 4 March 2013) G Sirtes SC with J Arnott (Frost Holdings and Woolley Gal II) Solicitors: King Wood & Mallesons (Australia) (Plaintiff) Arnold Bloch Liebler (Yasselleraph) Norton Rose (Regal Funds Management and Intelligent Investor Funds) Henry Davis York (Frost Holdings and Woolley GAL II) File Number(s): 2013/56484 Judgment 1HIS HONOUR: This is an application for judicial advice by the responsible entity of a listed managed investment scheme. If the advice sought is given, the responsible entity intends to redeem the units of unitholders who request redemption of their units. That course is opposed by unitholders holding approximately 43 per cent of the units. The application is urgent because a meeting of unitholders has been convened to be held on 11 March 2013 to remove the plaintiff as responsible entity. The proposed new responsible entity has indicated that it will not agree to redemption requests. Such requests have been made to date by unitholders holding over 20 per cent of the units. 2The plaintiff, Real Estate Capital Partners Managed Investments Limited ("RMIL") is the responsible entity of a registered management investment scheme known as the Real Estate Capital Partners USA Property Trust ("the Trust" or "the Scheme" or "RCU"). Units in the Trust are quoted on the Australian Stock Exchange. 3The Trust was established in 2005 for the investment in property in the United States. As at 19 February 2013 there were 3,087 unitholders with the top 20 unitholders holding 81.75 per cent of the units. Frost Holdings Pty Ltd ("Frost") and an associate, Woolley GAL II Pty Ltd ("Woolley GAL"), who are both controlled by Mr Gregory Woolley, hold approximately 33.94 per cent of the units. 4On 29 January 2013 the unitholders resolved to sell the vast majority of the trust assets to Saban Capital Group. The sale was completed on 12 February 2013. As a result, the only valuable asset of the trust is cash. At the meeting held on 29 January 2013 unitholders rejected a further resolution that all of the net assets of the trust available for distribution be distributed to unitholders. They also rejected a resolution approving of the delisting of the trust. About 610 unitholders voted on these resolutions. Approximately 77 per cent of unitholders by number approved of the resolutions, but approximately 57 per cent of unitholders by value rejected them. Frost and Woolley GAL voted in favour of the sale resolution, but against the distribution and delisting resolutions. At present the trust is essentially a "cash box". Its units are trading at a substantial discount to their net asset value. 5On 6 February 2013, Frost called a meeting of unitholders to be held on 11 March 2013 to replace RMIL as the responsible entity of the Trust and to appoint New City Australian Funds Management Pty Ltd ("New City") in its place. New City has stated that it plans to reinvest the Trust's cash, but has not committed to any particular investment policy. It has advised that unitholders should not expect any distributions to be made from the trust as it plans to reinvest the available cash. 6Three unitholders who represent other investment funds and who, between them, hold approximately 20 per cent of the units have requested that their units be redeemed. 7On 18 February 2013, the directors of RMIL unanimously resolved that: "The responsible entity intends to exercise its discretion to make a redemption available to all unitholders who submit redemption request [sic] pursuant to clause 7.11 of the Constitution subject to obtaining any necessary confirmation or waiver under the ASX Listing Rules and satisfactory judicial advice." 8The directors stated their reasons for considering that resolution to be in the best interests of unitholders as a whole. Their reasons included that following the sale to Saban Capital Group the trust had become a liquid scheme for the first time in its history with its only substantial asset being cash. RMIL did not currently have an investment proposal for the cash as it had recommended the passing of the distribution and delisting resolutions. The original purpose of the trust had been accomplished. New City's investment strategy had been stated to be the investing in private equities and public market transactions both domestically and internationally. This, it was said, was a fundamental change from the historical investment strategy of the trust. New City had stated that unitholders should not assume that distributions would be made as capital profits were likely to be reinvested. New City had also stated that in relation to the New Investment Strategy, investments were likely to be highly concentrated in a small number of investments which would be made on the basis of New City directors' assessment and not by reference to any predetermined policy that any particular proportions of the capital be invested in particular investment sectors and New City might seek to raise additional capital. The directors stated that units were currently trading thinly and at a 27 per cent discount to net cash asset backing. Units in the Trust were illiquid. In the directors' view it was impracticable and unfair to expect unitholders to dispose of units through a market sale. A unitholder (Intelligent Investor) had stated that if it were to sell its units on market, and assuming it could find a buyer for the volume of units to be sold, it would suffer a loss of about $1.5 million compared with the current estimated net tangible asset backing of the units. The directors' statement of their reasons concluded: "Having regard to the fact that the original purpose of RCU is no longer being pursued, there is a fundamental change in the principal investment policy represented by the New Investment Strategy, the assets are now primarily held in cash and the Company is likely to be replaced as the responsible entity of RCU, it is appropriate for unitholders to be given the option to remain in the trust or be redeemed as the basis upon which they invested in RCU no longer prevails." 9For the units to be quoted on the Official List of the Australian Stock Exchange, the Australian Stock Exchange was required to be satisfied that the responsible entity was not under an obligation to allow a "security holder" to withdraw from the Trust. Listing rule 1.1 provides: "1.1 For an entity ... to be admitted to the Official List, the following conditions must be met to ASX's satisfaction. ... Condition 5 If the entity is a trust, it must be a registered managed investment scheme and the responsible entity must not be under an obligation to allow a security holder to withdraw from the trust." 10Listing rule 10.1.3 provides: "10.1 An entity (in the case of a trust, the responsible entity) must ensure that neither it, nor any of its child entities, acquires a substantial asset from, or disposes of a substantial asset to, any of the following persons without the approval of holders of the entity's ordinary securities. 10.1.1 A related party. ... 10.1.3 A substantial holder, if the person and the person's associates have a relevant interest, or had a relevant interest at any time in six months before the transaction, in at least ten per cent of the total votes attached to the voting securities. 10.1.4 An associate of a person referred to in rules 10.1.1 to 10.1.3 ..." 11On 22 February 2013 RMIL announced that: "A number of unitholders holding approximately 20 per cent of the units in RCU, have requested in writing the redemption of their units. The Responsible Entity has given careful consideration to these requests, its power to permit redemptions and its obligations to act in the best interests of unitholders. The Responsible Entity has resolved that it intends to exercise its discretion to accept these requests and also to offer all of RCU's unitholders the opportunity to submit redemption requests subject to obtaining a waiver under ASX Listing rule 10.1 (described below) and satisfactory judicial advice (also described below)." 12On the same day RMIL commenced these proceedings for judicial advice. Notice was given to at least Frost and Woolley GAL, and to Yasselleraph Pty Ltd which holds approximately ten per cent of the units. Those parties made submissions through counsel opposing the advice sought by RMIL. Two of the trustees of funds who have sought redemption of units (Intelligent Investor Funds Pty Ltd and Regal Funds Management Pty Ltd) appeared by counsel to support the trustee's position. 13The relief sought by RMIL that was ultimately pressed was as follows: "1 Under section 63 of the Trustee Act 1925 (NSW), the opinion, advice or direction of the Court as to: (a) whether the plaintiff presently has the power under the Constitution of the Real Estate Capital Partners USA Property Trust ('RCU') and the Corporations Act 2001 (Cth) to redeem units the subject of discretionary redemption requests under clause 7.11 of the Constitution of RCU if it wishes to exercise its discretion to do so; (b) if the answer to 1(a) above is no: (i) whether the plaintiff is under a duty to amend or would be justified in amending the Constitution of RCU under section 601GC(1)(b) of the Corporations Act 2001 (Cth) and clause 22.1(b) of the Constitution of RCU on or before 13 March 2013 or at any time to provide additional procedures that are to apply to making and dealing with discretionary redemption requests under clause 7.11 of the Constitution of RCU; and (ii) if so, what additional procedures are required; (c) if the ASX grants a waiver permitting the plaintiff to do so, whether the plaintiff would be justified, having regard to its legal and equitable obligations, including the Trustee Act 1925 (NSW), Corporations Act 2001 (Cth) and the Constitution of RCU, in exercising its discretion to redeem units the subject of discretionary redemption requests under clause 7.11 of the Constitution of RCU (under the existing Constitution or the Constitution as amended by inclusion of the additional procedures referred to in (b)(ii) above) on or before 13 March 2013." 14On 26 February 2013 the ASX granted RMIL the requested waiver from listing rule 10.1 subject to the following conditions: "1.1 The RE extends the Redemption Facility to all unitholders lawfully entitled to request redemption. 1.2 The RE will accept the redemption requests of every unitholder lawfully entitled to request redemption for all the units submitted by each unitholder into the Redemption Facility; or, if it is necessary to scale back acceptances of requests for redemption, the RE must scale back acceptances of requests for redemption on a pro rata basis amongst unitholders who requested redemption. 1.3 The RE receives satisfactory judicial advice in relation to making the Redemption Facility available. 1.4 The terms of the waiver are released to the market immediately." 15The ASX gave the following reasons for its decision: "3. The Trust (through the RE) is proposing to implement a redemption facility to allow unit holders to withdraw from the Trust. Under the Trust's constitution, the RE has the power to redeem members' units on a discretionary basis. This power does not offend listing rule 1.1 condition 5 because the power to withdraw units from the Trust does not impose an obligation on the RE; rather it is entirely within the RE's discretion to withdraw the units. 4. While not being under any obligation to act upon the requests unit holders make to redeem their units, the RE intends to inform all unit holders of its decision to consider redemptions so that all unit holders have an equal and reasonable opportunity to request redemption. The redemption facility will also be subject to the RE receiving certain orders from the Supreme Court of New South Wales. 5. The procedure to apply for the redemption of units, and the formula used to determine the price per unit of redemption, is outlined in the Trust's constitution, and applies to all applicants equally. Therefore, there is no scope for related parties, substantial shareholders, or their associates to benefit over and above other unit holders by their participation in the Redemption Facility." 16On 27 February 2013 RMIL posted on the ASX announcement platform a template letter it said would be posted to all unitholders. In the letter RMIL advised that it had obtained a waiver from ASX Listing rule 10.1 and listed the conditions of the waiver including that it accept redemption requests of every unitholder lawfully entitled to request redemption for all the units submitted by each unitholder into the redemption facility. 17On 27 February 2013 Frost filed a statement of claim against RMIL seeking damages for alleged false and misleading statements that it alleges induced it to acquire units in the trust. It pleaded that it currently estimates its loss to be in the range of between approximately $4 million to $5.35 million. 18The hearing of the plaintiff's summons commenced on 27 February 2013. Evidence was led and submissions made for RMIL and the unitholders supporting it. The proceedings were stood over to 1 March 2013 to permit the opposing parties to make submissions and to adduce any evidence on which they wished to rely. 19On 1 March 2013 RMIL published an announcement on the ASX attaching a redemption form and letter that it said was being sent to unitholders on that day. Relevantly, the redemption form included the following declaration to be made by unitholders seeking redemption: "I/We declare that: 1. If I/we sell any of my/our units in RCU before 7.00 pm on the day business before the redemption date ("Relevant Date"), and as a result I/we hold at the Relevant Date fewer units then [sic] specified for redemption above, I/we will be deemed to have requested the redemption of the units I/we actually hold at the Relevant Date. ... 5. I/We acknowledge and agree that this application cannot be withdrawn or varied without the consent of the responsible entity." 20The redemption form provided that unitholders could request redemption of all of their units in RCU or a particular number of their units as might be specified. The covering letter advised unitholders that the redemption price would be calculated in accordance with clause 6 of the Trust's constitution being, in effect, the net asset value per unit calculated as at the day prior to the date upon which redemption occurs. The letter to unitholders advised that the form could be delivered by post, by hand, or by facsimile to specified addressees. The letter set out what RMIL described as key considerations for unitholders. The Constitution 21Under the Constitution RMIL is described as the Manager. Clauses 2.1 and 3.1 to 3.3 provide: "2.1 Trust The Manager declares that it will hold the Assets upon Trust for the Members and act in the interests of the Members on and subject to the terms and conditions of this constitution. ... 3.1 Nature of Units The beneficial interest in the Trust is divided into Units. 3.2 Interest in Assets Subject to any rights, obligations or restrictions attaching to any particular Unit, each Fully Paid Unit confers an equal undivided interest and, unless this constitution states otherwise, a Partly Paid Unit confers an interest of the same nature less the amount remaining to be paid up on the Unit. 3.3 Rights attaching to Units Subject to the rights, obligations or restrictions attaching to any particular Unit, a Unit confers an interest in the Assets as a whole, subject to the Liabilities. It does not confer an interest in a particular Asset." 22Clauses 7.1, 7.11 and 7.18 provide: "7 Redemption procedures 7.1 Officially Quoted While Units are Officially Quoted, none of the provisions of this clause 7 apply except this clause and clauses 7.11, 7.15, 7.18 and 7.19. ... 7.11 Discretionary redemption or repurchase Subject to the Corporations Act and the Listing Rules, if the Manager is not obliged to give effect to a redemption request, it may redeem or repurchase some or all of the Units which are the subject of the request. If the Trust is a Registered Scheme the discretion conferred on the Manager by this clause may only be exercised while the Trust is Liquid. ... 7.15 Sums owed to Manager The Manager may deduct from the proceeds of redemption or money paid pursuant to a withdrawal offer any money due to it by the Member. This clause applies whether or not the Trust is Liquid. While the Trust is Liquid, the Manager may redeem without a redemption request some or all of the Units held by a member to satisfy any amounts of money due to it by the member. ... 7.18 On-market buy backs While the Units are Officially Quoted the Manager may, subject to the Corporations Act and the Listing Rules, purchase Units on the ASX and cause the Units to be cancelled. No Redemption Price is payable upon cancellation of the Units. 7.19 Withdrawal offers while Listed While the Units are Officially Quoted the Manager may, subject to the Corporations Act and the Listing Rules, make a withdrawal offer under clause 7.12, in which case clauses 7.12 to 7.14 apply in relation to the withdrawal offer." 23Clause 7.17 does not apply where units are Officially Quoted (as here). The clause is said to be relevant to a determination as to when a redemption occurs. Clause 7.17 provides: "7.17 When Units are Redeemed Units redeemed under this clause 7 are taken to be redeemed at the time as at which the applicable Redemption Price is calculated, and from that time until payment, the former holder of the redeemed Units ceases to be a Member in respect of those Units and is a creditor of the Trust in respect of the redemption proceeds." 24Other provisions of clause 17 apply if the units are not officially quoted. They provide for redemption procedures that vary according to whether the trust is liquid or not liquid. Those terms are defined by reference to Part 5C.6 of the Corporations Act 2001 (Cth). 25Clause 14 provides for the mode of giving of notices to the Manager. 26Clause 6 states how the redemption price is to be calculated. It provides: "6.1 Redemption Price A Unit must only be redeemed at a Redemption Price calculated as: Net Asset Value - Transaction Costs Number of Fully Paid Units in issue + Paid-up Proportion Less any amount called but unpaid on the Unit. 6.2 Time for calculation Each of the variables in clause 6.1 must be determined: (a) while the Trust is a Registered Scheme and is Liquid, and at all times when the Trust is not a Registered Scheme, as at the close of business on the day before the payment of the Redemption Price; or (b) while the Trust is a Registered Scheme and is not Liquid, at the time the withdrawal offer closes." 27"Assets" is defined as follows: "Assets: all the property, rights and income of the Trust, but not application money or property in respect of which Units have not yet been issued, proceeds of redemption which have not yet been paid, any amount in the Distribution Account or uncalled amounts on Partly Paid Units." 28A "Member" of the Trust is defined as being "a person Registered as the holder of a unit that has not been redeemed ...". 29The Net Asset Value is the value of the Assets calculated in accordance with clause 8, less Liabilities. Clause 8 provides that the Manager may determine Net Asset Value any time, including more than once on each day. By clause 8.3 the Manager may determine valuation methods and policies for each category of Asset and change them from time to time. 30"Liabilities" means all present liabilities of the Trust (sic) including any provision taken into account in determining the liabilities of the Trust, but excluding, amongst others, liabilities to members arising by virtue of the right of members to request redemption of their units. Arguments against provision of the judicial advice sought 31There was no issue about the jurisdiction to give judicial advice pursuant to s 63 of the Trustee Act 1925. Nor was there any dispute that it was appropriate to give judicial advice in respect of most of the issues that were raised. The principal challenges to RMIL's proposal and application for advice are based on legal arguments concerning the operation of the Corporations Act and the construction of the Trust deed. It was not submitted that the directors of RMIL had not reached their resolution of 18 February 2013 in good faith and upon real and genuine consideration of the interests of unitholders in accordance with the purpose for which the power in clause 7.11 was conferred. Nor was it submitted that the directors would not approach a future exercise of the discretion under clause 7.11 in good faith and upon real and genuine considerations in accordance with the purpose for which the power was conferred. Counsel did submit that the directors had improperly bound themselves to exercise their discretion in favour of acceding to requests for redemption and that the directors were seeking to achieve by "back door" methods, something that had been rejected by the unitholders at the meeting of 29 January 2013. But it was not submitted that the reasons given by the directors for their resolutions of 18 February 2013 reflected matters that they could not properly take into account. 32Mr Sirtes SC, who appeared with Mr Arnott for Frost and Woolley GAL, submitted that: 1. The "general redemption offer" was prohibited because it contravened s 606 of the Corporations Act. This was because redemptions would cause Frost and Woolley GAL's voting power, which is already over 20 per cent, to increase. 2. The "redemption offer" does not fall within clause 7.11 of the trust deed and RMIL has no power to make or proceed with it. This was because the conditions of the ASX waiver obliged RMIL to accede to any redemption requests whereas its only power to effect redemptions was through clause 7.11 by which it was required to retain a discretion to be exercised in relation to each application. 3. Having put a resolution to a meeting of unitholders that the net assets following the sale to Saban Capital Group should be distributed, and that resolution having been defeated, it is improper for RMIL to seek to achieve the same result by a "back door" method. 4. Notwithstanding the discretionary power conferred on the Manager by clause 7.11, the clause confers on unitholders a right to withdraw from the scheme, albeit that the right is contingent on a favourable exercise of discretion. Section 601GA(4) of the Corporations Act requires the Constitution to set out adequate procedures for making and dealing with withdrawal requests which must be fair to all members. The Constitution does not do this. Accordingly, the Constitution must be amended, but it does not follow that the amendment should be rushed through prior to 11 March 2013. Either there is no power to redeem until the necessary amendments are made, or, judicial advice should not be given to facilitate a redemption pursuant to provisions which contravene the Corporations Act. Because of the lack of adequate procedures, unitholders, or in any event some unitholders, have not been afforded sufficient time to consider the pros and cons of the redemption offer. Particularly is that so for overseas unitholders. Moreover, the price to be paid will be affected by RMIL's assessment of the claim filed by Frost on 27 February. If proper assessment of the claim cannot be made within the compressed timeframe, an error could be made in the calculation of the price. For these reasons the judicial advice sought should be refused. 33Mr Kidd SC who appeared for Yaselleraph Pty Ltd supported these submissions and made additional submissions as to why s 601GA(4) has not been complied with. Prohibited acquisition of relevant interests in voting units 34Mr Sirtes SC and Mr Arnott relied on s 606(1) of the Corporations Act in support of their submission that what they called the "redemption offer", or alternatively the giving effect to redemption requests, will contravene the takeover laws. Section 606(1) provides: "606 Prohibition on certain acquisitions of relevant interests in voting shares Acquisition of relevant interests in voting shares through transaction entered into by or on behalf of person acquiring relevant interest (1) A person must not acquire a relevant interest in issued voting shares in a company if: (a) the company is: (i) a listed company; or (ii) an unlisted company with more than 50 members; and (b) the person acquiring the interest does so through a transaction in relation to securities entered into by or on behalf of the person; and (c) because of the transaction, that person's or someone else's voting power in the company increases: (i) from 20% or below to more than 20%; or (ii) from a starting point that is above 20% and below 90%. Note 1: Section 9 defines company as meaning a company registered under this Act. Note 2: Section 607 deals with the effect of a contravention of this section on transactions. Sections 608 and 609 deal with the meaning of relevant interest. Section 610 deals with the calculation of a person's voting power in a company. Note 3: If the acquisition of relevant interests in an unlisted company with 50 or fewer members leads to the acquisition of a relevant interest in another company that is an unlisted company with more than 50 members, or a listed company, the acquisition is caught by this section because of its effect on that other company." 35The application of s 606 to the acquisition of interests in a registered managed investment scheme occurs through ss 603 and 604. Those sections provide: "603 Chapter extends to some listed bodies that are not companies This Chapter applies to the acquisition of relevant interests in the securities of listed bodies that are not companies but are incorporated or formed in Australia in the same way as it applies to the acquisition of relevant interests in the securities of companies. Note: Section 9 defines company and listed. 604 Chapter extends to listed managed investment schemes (1) This Chapter applies to the acquisition of relevant interests in the interests in a registered scheme that is also listed as if: (a) the scheme were a listed company; and (b) interests in the scheme were shares in the company; and (c) voting interests in the scheme were voting shares in the company; and (d) a meeting of the members of the scheme were a general meeting of the company; and (e) the obligations and powers that are imposed or conferred on the company were imposed or conferred on the responsible entity; and (f) the directors of the responsible entity were the directors of the company; and (g) the appointment of a responsible entity for the scheme were the election of a director of the company; and (h) the scheme's constitution were the company's constitution. Note 1: Paragraph (g): See subsection 610(2). Note 2: Section 9 defines voting interest in a managed investment scheme. (2) The regulations may modify the operation of this Chapter as it applies in relation to the acquisition of interests in listed managed investment schemes." 36It was not suggested that there is any relevant regulation modifying the operation of Chapter 6 as it applies in relation to the acquisition of interests in listed managed investment schemes. 37Counsel relied on s 608(1)(c) for their contention that RMIL would acquire a relevant interest in voting units of the scheme that would trigger a contravention of s 606(1). 38Section 608(1) relevantly provides: "608 Relevant interests in securities Basic rule-relevant interest is holding, or controlling voting or disposal of, securities (1) A person has a relevant interest in securities if they: (a) are the holder of the securities; or (b) have power to exercise, or control the exercise of, a right to vote attached to the securities; or (c) have power to dispose of, or control the exercise of a power to dispose of, the securities. It does not matter how remote the relevant interest is or how it arises. If 2 or more people can jointly exercise one of these powers, each of them is taken to have that power. Extension to control exercisable through a trust, agreement or practice." 39Also relevant is the definition of "dispose" in s 9. It provides: "dispose has a meaning affected by the following paragraphs: ... (b) for the purposes of Chapter 6, a person who has a relevant interest in securities disposes of the securities if, and only if, they cease to have a relevant interest in the securities." 40Section 608(8) and (9) provide: "(8) If at a particular time all the following conditions are satisfied: (a) a person has a relevant interest in issued securities; (b) the person (whether before or after acquiring the relevant interest): (i) has entered or enters into an agreement with another person with respect to the securities; or (ii) has given or gives another person an enforceable right, or has been or is given an enforceable right by another person, in relation to the securities (whether the right is enforceable presently or in the future and whether or not on the fulfilment of a condition); or (iii) has granted or grants an option to, or has been or is granted an option by, another person with respect to the securities; (c) the other person would have a relevant interest in the securities if the agreement were performed, the right enforced or the option exercised; the other person is taken to already have a relevant interest in the securities. Note: Subsections 609(6) and (7) deal with specific situations in which the agreement will not give rise to a relevant interest. Body corporate may have relevant interest in its own securities (9) This section may result in a body corporate having a relevant interest in its own securities." 41What is a "transaction" for the purposes of s 606 is affected by s 64. It provides: "64 Entering into a transaction in relation to shares or securities A reference in Chapter 6 to entering into a transaction in relation to shares or securities includes a reference to: (a) entering into, or becoming a party to, a relevant agreement in relation to the shares or securities; and (b) exercising an option to have the shares or securities allotted." 42A "relevant agreement" is defined in s 9 as follows: "relevant agreement means an agreement, arrangement or understanding (a) whether formal or informal or partly formal and partly informal; and (b) whether written or oral or partly written and partly oral; an (c) whether or not having legal or equitable force and whether or not based on legal or equitable rights." 43Also relevant are ss 609(4) and 611. Section 609(4) provides: "609 Situations not giving rise to relevant interests ... Shares covered by buy backs (4) A person does not have a relevant interest in a company's shares if the relevant interest would arise merely because the company has entered into an agreement to buy back the shares." 44Section 611 provides: "611 Exceptions to the prohibition The following table sets out: (a) acquisitions of relevant interests in a company's voting shares that are exempt from the prohibition in subsection 606(1); ..." 45Item 19 of the table to s 611 provides: "Buy back 19. An acquisition that results from a buy back authorised by section 257A." 46Section 257A provides that a company may buy back its own shares if the buyback does not materially prejudice the company's ability to pay its creditors and the company follows the procedures laid down in Div 2 of Pt 2J.1. 47The first way it was argued that there would be a contravention of s 606 was that RMIL had made an offer to unit holders that it would redeem their units if a request was made for it to do so and that a unitholder who accepted the offer by making the request would be bound not to dispose of his or her units before the redemption was effected. Counsel submitted that RMIL would be entitled to seek an injunction to restrain a unitholder from disposing of his or her units whilst the redemption request was being dealt with because the unitholder would have accepted RMIL's "redemption offer" and become contractually bound to redeem the units. Accordingly, so it was submitted, the unitholder could be restrained from dealing with its units in any other way. Counsel submitted that this gave RMIL a relevant interest in the units because it had the power to control the exercise of the unitholder's power to dispose of the units. Hence, it acquired a relevant interest in the unitholder's units upon a unitholder accepting the redemption offer by making a request for redemption. RMIL would acquire that interest through a transaction it entered into in relation to the units. Because of the transaction, and upon redemption of the units, the voting power of Frost and its associate, Woolley GAL, would increase from a starting point that is above 20 per cent. 48I do not accept this submission. RMIL did not make an offer to unitholders that was capable of acceptance merely by the unitholders requesting the redemption. In its announcements to the ASX, RMIL announced how it intended to exercise its discretion, namely by accepting requests and that it had resolved also to offer all of the unitholders the opportunity to submit redemption requests. However, it made it clear that it would not redeem any units unless it received satisfactory judicial advice. In its announcement of 22 February 2013, it said that it would be sending to unitholders shortly a letter that detailed the manner in which redemption requests could be submitted. Its announcements to the ASX could not have given rise to contractual obligations between it and a unitholder. 49The only contractual obligations that could arise would be from the letter dispatched on 1 March 2013. Counsel for Frost and Woolley GAL emphasised the term of the declaration that a unitholder requesting redemption was required to make: that the unitholder acknowledged and agreed that the application for redemption could not be withdrawn or varied without the consent of RMIL. Counsel submitted that this gave RMIL the right to control the unitholder's exercise of power to dispose of the units. However, clause 1 of the declaration expressly reserved the right of the unitholders to deal with their units before the redemption date. Contrary to the submissions made on behalf of Frost and Woolley GAL, RMIL would not be entitled to restrain a unitholder from selling or otherwise dealing with his or her units before the redemption date. If a unitholder requested redemption and that request was agreed to, but the unitholder sold units that were still registered in his or her name at the redemption date, the unitholder would presumably be in breach of contract of the party with whom he or she dealt. But RMIL would not be entitled to restrain a dealing with the units prior to the redemption. 50The second way in which counsel submitted that s 606 was engaged did not depend on its being shown that there was any antecedent agreement by which RMIL acquired the right to control the exercise of the unitholders' power to deal with units. Counsel submitted that once a redemption request was made, RMIL had the power under clause 7.11 to agree to or to refuse the request. This, it was said, was a power to dispose of the units that were the subject of the request. If the request was agreed to and redemption was effected, then the unitholder would dispose of his or her relevant interest in the units within the meaning of paragraph (b) of the definition of "dispose" in s 9 by ceasing to have a relevant interest in the securities. By having the power to decide whether or not to redeem the units, RMIL would have the power on the request being made to dispose of the units. 51If s 606 applies, and if RMIL does not already have a relevant interest in the units, I would accept the submission that it would acquire a relevant interest on a request for redemption being made to it because it would then have the power to dispose of the units in the way indicated above. 52It would not be the acquisition of the power to dispose of the units that would cause an increase in the voting power of Frost and Woolley GAL. The increase in voting power would only arise on redemption being effected. The question is in terms of s 606 whether RMIL would acquire its interest through a "transaction in relation to securities" and because of "the transaction" the voting power of Frost and Woolley GAL would increase. In other words, the question is whether there is a "transaction" which encompasses both the acquisition of the relevant interest and the increase in voting power. I accept the submission for Frost and Woolley GAL that both the consideration of a request for redemption and the effecting of a redemption would occur through the same transaction. I think that a unitholder who requested redemption following the announcements of RMIL and the dispatch of its letter dated 1 March 2013 would be a party to an understanding with RMIL that it is RMIL's present intention that the request would be approved and given effect to. The "transaction" would encompass the totality of the dealings between the unitholder and RMIL being the announcement made to the unitholder, the dispatch of the letter of 1 March 2013 and the enclosed redemption form, the making of the redemption request by the unitholder, the consideration of that request by RMIL and the calculation of the redemption price and effecting of the redemption. It would be artificial to segregate the actual redemption from the events which preceded it in determining whether there was one or more transactions. 53Accordingly, so far as it goes, I accept the submissions made for Frost and Woolley GAL on this issue. However, this assumes that s 606 applies to the redemptions by the responsible entity of a managed investment scheme. It also assumes that the relevant interest would only be acquired by RMIL on the receipt of the redemption request. 54Mr Stoljar SC who appeared for RMIL submitted that s 608(8) had the effect of accelerating the time at which RMIL acquired a relevant interest in the units to the time the units were issued, in other words, that RMIL has always held a relevant interest in all of the units of the trust. I accept that submission. Section 608(8) is engaged for the following reasons. First, each unitholder has a relevant interest in the units issued to that holder. That person has been given an enforceable right by another person, namely, the Manager, in relation to the securities, namely, the right to have the Manager give due consideration to a redemption request under clause 7.11. That right is conferred by the Constitution. The Constitution is a deed poll declared by the Manager to be the Constitution of the Trust (clause 1.1). The words "in relation to" are wide. The right to have a redemption request considered is a right "in relation to" the units sought to be redeemed. Hence, paragraph (b) is satisfied. If the right is enforced, that is, if the unitholder obliges the Manager to give due consideration to the request, the Manager would acquire a relevant interest in the units for the reasons previously given because it would then be within its power to dispose of the units by agreeing to the request and effecting the redemption. The effect of s 608(8) is to accelerate the time at which RMIL is taken to have a relevant interest in the units. All of the conditions of s 608(8) would be satisfied from the time the units were issued pursuant to the Constitution. RMIL would have a relevant interest in all of the units. It would not acquire a relevant interest on receipt of the requests. 55Having regard to this conclusion, it is not necessary to decide whether s 606 has any application at all to the redemption of units by the responsible entity of a registered managed investment scheme. There are reasons to think that the legislation does not apply to redemptions. Chapter 6 applies to the acquisition of relevant interests in the registered managed investment scheme in the same way as it applies to the acquisition of relevant interests in the securities of companies (s 603). Chapter 6 applies as if the powers conferred on the company (which the scheme is taken to be) were imposed on the responsible entity (s 604(1)(e)) and as if the scheme's Constitution were the company's Constitution (s 604(1)(h)), but not as if all of the powers of the responsible entity were powers of the company. If the responsible entity were a company and the units were shares in the company, whatever the terms of the Constitution, it would not be open to the company to redeem the shares otherwise than in compliance with Chapter 2J of the Corporations Act. Section 265B only permits a company to reduce its share capital in a way that is not otherwise authorised if the reduction is approved by shareholders under s 265C. A company could not simply reduce its capital by acceding to a request by a shareholder for the cancellation of the share in return for a proportionate share of the company's capital. The company could buy back shares in accordance with the procedures in Div 2 of Pt 2J.1. 56The exceptions to the prohibition in s 606 include exceptions in the case of share buybacks. I accept the submission of counsel for Frost and Woolley GAL that the redemption of units is distinct from the repurchase of units. That distinction is acknowledged in clause 7.11. But there is no relevant difference as to the effect on the voting power of remaining unitholders whether units are redeemed or bought back. If the units were bought back, they would form part of the assets of the trust which would be held for the remaining unitholders. As Mr Stack of counsel, who appeared for Intelligent Investor Funds Pty Ltd and Regal Funds Management Pty Ltd, submitted, the term "redemption" in respect of a unit trust can refer to the process by which the trust buys back the units from investors (Butterworths Australian Legal Dictionary). Whilst the notions are conceptually distinct, there seems no good reason that the legislature would provide exceptions in the case of buybacks, but not in the case of redemptions, except for the fact that Chapter 6 only applies to the acquisition of relevant interests in a registered managed investment scheme as if the scheme were a notional company with the powers of a company, which powers could not extend to redemptions of shares in the same way as units can be redeemed. 57As Mr Stack also submitted the Constitution of a registered scheme can make provision for members to withdraw from the scheme at any time while the scheme is liquid (s 601KA(1)). If a member had a right of withdrawal, the responsible entity would be obliged to give effect to that right. But if s 606 applied (and s 608(8) did not apply) it could thereby be placed in contravention of that section, although it had no choice but to comply with the terms of its Constitution. 58Were it necessary to decide the question, I would favour the view that s 606 is not engaged by ss 603 and 604 in respect of things a responsible entity of a managed investment scheme can lawfully do if those things would be beyond the powers of the notional listed company that the scheme is taken to be for the purposes of Chapter 6. 59For these reasons I reject the first of the arguments for Frost and Woolley GAL that the trustee's proposal would contravene s 606 of the Corporations Act. Redemptions beyond power 60Nor do I accept the submission of counsel for Frost and Woolley GAL that the conditions of the ASX waiver oblige RMIL to accede to any redemption requests and that RMIL is proposing to act beyond the powers conferred by clause 7.11. RMIL has not surrendered the discretion it has under clause 7.11 by indicating in advance how it proposes to exercise that discretion. It has said how it proposes to exercise its discretion for the reasons which it has given. No doubt it will exercise its discretion in that way unless there is a material change of circumstances that suggests it should do otherwise. But that still involves an exercise of its discretion. 61The condition imposed by the ASX could not be, and is not, a qualification to the trustee's power under clause 7.11. It is no more than the condition of a waiver of listing rule 10.1. No doubt if RMIL were minded to reject a redemption request by any one unitholder, it could not then acquire the units from or dispose of a substantial asset to a person having a relevant interest in at least ten per cent of the units. That would not prevent it from dealing with redemption requests that would not engage listing rule 10.1. But even if all such requests would be engaged by the rule (a question on which submissions were not made), the fact that the ASX has imposed a mandatory condition on the waiver of a listing rule does not mean that RMIL would be acting beyond the powers conferred by clause 7.11 in giving effect to a redemption request. It would be acting under that clause having previously decided that it would be appropriate to give effect to such requests. There is nothing in clause 7.11 which precludes the directors from coming to the resolution which they reached on 18 February 2013. Prior resolution of unitholders 62Nor do I accept the submission that the directors could not properly reach the decision they made on 18 February and could not properly act pursuant to that resolution because a majority of unitholders by value had previously rejected a resolution for distribution of net assets. I was not referred to any provision of the Constitution which would oblige the trustee to act in accordance with the resolution of unitholders. A trustee is not required to act in accordance with the views of a majority of beneficiaries, or even the views of all of the beneficiaries, except if the beneficiaries are entitled to call for a transfer of the trust property thereby terminating the trust and make that demand. The directors of RMIL have reached a decision as to what they consider to be in the best interests of unitholders considered as a whole, and have done so for what appear to be cogent reasons. The trustee's powers are not regulated by the vote of the unitholders on 29 January 2013. Corporations Act, s 601GA(4) 63The next submission advanced for Frost and Woolley GAL and also for Yasselleraph Pty Ltd was based on s 601GA(4) of the Corporations Act. That subsection provides: "601GA Contents of the constitution ... (4) If members are to have a right to withdraw from the scheme, the scheme's constitution must: (a) specify the right; and (b) if the right may be exercised while the scheme is liquid (as defined in section 601KA)-set out adequate procedures for making and dealing with withdrawal requests; and (c) if the right may be exercised while the scheme is not liquid (as defined in section 601KA)-provide for the right to be exercised in accordance with Part 5C.6 and set out any other adequate procedures (consistent with that Part) that are to apply to making and dealing with withdrawal requests. The right to withdraw, and any provisions in the constitution setting out procedures for making and dealing with withdrawal requests, must be fair to all members." 64Mr Stoljar SC for RMIL submitted that clause 7.11 did not give members a "right to withdraw from the scheme" and therefore s 601GA was not engaged. This was because the Manager was not obliged to give effect to a redemption request. It had a power to do so which might or might not be exercised in the member's favour and therefore the member had no right to withdraw, but only a right to have its request for withdrawal duly considered. 65RMIL submitted that redemption is effective as at the time of the passing of the resolution to redeem the units provided that the redemption price has been calculated by that time. In support of that submission it referred to clause 27.1 of the Constitution of the Trust which defined a "member" as "a person Registered as the holder of a Unit that has not been redeemed (including persons jointly registered)". This indicated that the act of registration is separate from and subsequent to the redemption being effective. Furthermore, RMIL referred to clause 7.17 of the Constitution of the Trust which provides that units redeemed under clause 7 are deemed to be redeemed at the time at which the redemption price is calculated. Clause 7.17 is not currently operative, but RMIL submitted that in construing the Constitution as a whole, the time specified by clause 7.17 should still be taken to be the time of effective redemption as it was unlikely that the framers of the document intended a different redemption time to result depending on whether or not the units were officially quoted. No party took serious issue with these submissions. Indeed, I understood it to be common ground that the redemption would be effective under clause 7.11 once two conditions were satisfied, namely, the decision had been made to redeem the units, and the redemption price had been calculated. 66Mr Sirtes SC and Mr Arnott, and Mr Kidd SC submitted that even so, the members had a contingent right to withdraw from the scheme, the right being contingent upon the favourable exercise of a discretion. A "right", so it was submitted, can include a prospective or contingent right. The definition of a "managed investment scheme" in s 9 includes that the scheme has a feature that people contribute money or money's worth as consideration for acquiring rights to benefits produced by the scheme, whether the rights are actual, prospective or contingent, and whether they are enforceable or not. Hence, it was submitted that a right of withdrawal contingent upon the favourable exercise of a discretion was nonetheless a right. 67The difficulty with this argument is that the contingency is of such a nature that it changes the character of a thing being considered. In my view, clause 7.11 does not confer on a member a right to withdraw, but only a right to have a request for withdrawal duly considered, and they are different things. 68In exercising its discretion the responsible entity must comply with s 601FC. That is, it must exercise its power honestly and with reasonable care and diligence and in the best interest of members and by treating the members of the same class equally (s 601FC(1)(a), (b), (c), and (d)). But the fact that the discretion is not unconstrained and must be exercised properly does not mean that a unitholder has a right to withdraw, only that the unitholder has a right to have a request for withdrawal properly considered. 69However, Mr Kidd was correct in submitting that under the Constitution the member would have a right to withdraw if the Manager exercised its power under clause 7.11 to agree to a redemption request and there was a lapse of time between the Manager's exercising its discretion favourably under clause 7.11 and redemption taking effect. Clause 6.2 requires the Redemption Price to be calculated as at the close of business on the day before the payment of the Redemption Price. Mr Kidd submitted that the determination to accept the redemption request could take place before the time for calculation of the redemption price and from that time there would be a right of a member to withdraw. At that point the member would not have ceased to be a member and would not have become a creditor because the price would not have been calculated. At that time there would be no proceeds of redemption which have not yet been paid (which are excluded from the Assets held on trust for members). 70I was told that in the present case it is proposed that the price will be calculated before the Manager makes a decision under clause 7.11. If that is so, I accept that redemption would be effected at the same time as the decision is made to give effect to the redemption, because from that time there will be unpaid redemption proceeds which will be due to the redeeming members as creditors. Nonetheless, I accept Mr Kidd's submission that "one tests the character of the clause, 7.11, by reference to what it permits, not by reference to what ... might arise from it if performed in one particular way." I accept that depending upon timing, a member has a right to withdraw from the scheme within the meaning of s 601GA(4) and therefore the Constitution must specify that right and set out adequate procedures for making and dealing with withdrawal requests which are fair to all members. 71The question as to whether the procedures specified in the Constitution in the present case are adequate and fair is not to be answered by asking whether they could be improved. Counsel suggested a wide range of matters that it was submitted were required for the procedures to be adequate, some of which might be regarded as improvements on the present provisions, in particular, a provision that specified the time by which a redemption price would be calculated following approval of a redemption request (if the calculation did follow such approval). But in assessing whether the procedures specified are adequate, it is necessary to keep in mind that the right to withdraw will only have arisen as a result of a favourable exercise of the discretion. The more detailed and specific might be the stipulated procedures for withdrawal, the less flexibility there would be for the favourable exercise of a discretion. For example, if to be an adequate procedure a constitution was required to specify that the redemption price would be calculated no later than a certain period after a redemption request was approved, such a provision might be inimical to a favourable or conditional exercise of discretion for the redemption of units where, for example, the responsible entity might reasonably agree to a redemption request that would be fair to all members for a price to be calculated and paid dependent upon the occurrence of a future event such as the sale of assets for a sufficient price. 72I was referred to ASIC's Regulatory Guide 134 which sets out ASIC's policy as to how it will assess a scheme's constitution in deciding whether or not it meets the requirements of s 601GA when registration is sought. ASIC's current regulatory guide states that: "We consider that if there are provisions for a right of withdrawal, the constitution applies if it sets out fair provisions about: a. how members can withdraw; and b. what exit price will apply. If there is provision for withdrawal, the constitution must include a method for calculating the exit price in a way which is fair to all members and independently verifiable. Fairness will normally require that the price depend on appropriate, and reasonably current, valuations of scheme property. Generally if the withdrawal provisions meet these requirements, we will treat them as complying with the Law unless they: a. unreasonably disadvantage one group of members; or b. are otherwise inconsistent with the Law." 73I do not consider that ASIC's policy guide has any greater weight in determining whether the procedures in the Constitution are or are not adequate than would be given to a party's submission. The same is true of a consultation paper 188 to which I was also referred. The consultation paper set out ASIC's proposals for updating its guidance in regulatory guide 134 and sought feedback in relation to its proposals. The consultation paper proposed (H4) that for a constitution to have adequate procedures for making and dealing with withdrawal requests, it should address four key areas, namely: (a) the method and criteria for exercising a right to withdraw; (b) the nature of the consideration to be given to members to satisfy withdrawal requests; (c) any restrictions on satisfying withdrawal requests; and (d) when a member ceases to be a member in respect of the interests the subject of the withdrawal request. 74Mr Kidd submitted that for adequate procedures to be specified, the constitution should provide for the sort of matters that are dealt with in the clause in the constitution relating to compulsory redemption requests. He referred to clause 7.3 which provides that, "A member may not withdraw a redemption request unless the Manager agrees." That is to say, he submitted that adequate provision should cover whether a redemption request could be withdrawn. He submitted that adequate provision would need to specify the time by which the trustee was required to determine the redemption price and the time by which the price was to be paid. (The constitution does specify the time by which the price is to be paid by reference to the time of calculation.) In the case of a compulsory redemption if units are not officially quoted, the present constitution requires payment to be made within 60 days of receipt of the request or such longer period as may be required to realise sufficient assets to satisfy the request. There is no such provision for redemptions pursuant to clause 7.11. 75Mr Kidd submitted that adequate procedures should specify what would happen if the Trust ceased to be liquid after a decision allowing redemption was made. He also submitted that an adequate procedure would need to include "some limits or some thresholds at which all unitholders should, in effect, have a right to know what is going on and to decide whether to participate or not." He pointed out that redemption requests that could be made under the procedures set out in the Constitution without other unitholders knowing that they were happening with the consequence that remaining unitholders might be left with an undercapitalised trust. He submitted that adequate procedures would require a clause that the Manager could not act on an application for a material redemption of units without first giving notice to all unitholders that the application had been made, providing them with information about the consequences of the application and inviting other unitholders to make their own applications with the provision of information about the consequences of a decision to participate or not to participate in the capital reduction. 76Counsel for Frost and Woolley GAL submitted that adequate procedures ought to deal with the following issues: "32. The provision for an off-market redemption ought deal with the following issues: 32.1. whether it operates as a buyback and then a redemption or a straight redemption; 32.2. the form of the redemption request (i.e. written such as in s 601KB(4)); 32.3. who initiates the withdrawal requests; 32.4. how it is to be made - see Clause 7.13; 32.5. the offer period - see s 601KB(3)(a); 32.6. how many offers can be open at one time - see s 601KC; 32.7. how joint offers are to be dealt with - see s 601KB(4); 32.8. to whom an offer can be made and whether the offer must be made for all unitholders - see s 601GA(4); 32.9. treatment of non-complying requests or acceptances; 32.10. when payments are to be made - see s 601KD; 32.11. cancellation of offers - see s 601KE; 32.12. minimum redemption parcels - see Clauses 7.7, 7.9 and 7.10; 32.13. the point in time when the Responsible Entity is to be liquid - see Austin J in Basis Capital at [16]; and 32.14. when a redemption is effected." 77A number of the matters listed in that paragraph of counsel's submissions are not apt, for example, the specification of an "offer period", how many "offers" can be open at one time, how joint offers are to be dealt with and to whom an offer can be made and whether to all unitholders. The question in the present case is not the procedures by which a responsible entity might offer members an opportunity to withdraw, but what procedures are required for them to be adequate where a member has a right to withdraw. Clause 7.11 leaves open the question of whether units the subject of a redemption request are to be redeemed or repurchased. That would be a matter for agreement. It does not need to be specified for the procedures to be adequate. I do not see why the form of a redemption requests needs to be specifically prescribed. No doubt the form of notice is to be in writing so that there is no doubt about what is requested, but whether the form used by a member is adequate for the Manager's purposes or not can be a matter for the Manager, particularly bearing in mind that the right to withdraw would only arise in any event once the application has been made and has been acceded to. 78It is clear that the withdrawal request is to be made by the member. There is no need to specify how it is to be made because it must be made to the Manager and, again, the right of withdrawal would only have arisen if the Manager has agreed to the request. Because the decision whether to agree to a request or not is in the discretion of the Manager, the Manager in exercising that discretion can deal with questions such as whether there is to be a minimum redemption parcel and also the time by which the redemption price is to be calculated. 79Whilst some of the matters advanced by Mr Kidd might be desirable, I do not think their absence makes the very general procedures specified in the Constitution less than adequate. The effect of clause 6.2 is that the redemption price will be paid the day after the calculation is made under clause 6.1 (assuming the scheme is liquid which it must be for clause 7.11 to be engaged). For the reasons previously given, I do not consider that the absence of a specification as to the time by which the price is to be calculated and the redemption is thereby to take effect makes the procedures less than adequate because they preserve the flexibility which is desirable in what is initially a discretionary exercise. No challenge was made to the adequacy of the provisions for determining the redemption price. 80Nor does the absence of provisions requiring notice to members, or requiring all members to be given the opportunity to redeem, mean that the procedures are not adequate or fair. The discretion under clause 7.11 must be exercised in a way that complies with s 601FC(1). That is, the Manager must act in the best interests of members as a whole and treat members of a class equally. In the circumstances of this case, that has led RMIL to give notice to all members of the opportunity to redeem. It has provided information relevant to the exercise of that right. Procedures need not specify what the Corporations Act in any event requires, and to specify in advance in a detailed way, how the power should be exercised would be inimical to the discretionary nature of the power concerned. 81In my view, the procedures specified in the Constitution are adequate to the extent that clause 7.11 gives members a right to withdraw from the scheme. 82If I had concluded that the Constitution did not comply with s 601GA(4), it would not have followed that clause 7.11 was ineffective. To the contrary, s 601GB requires the Constitution of a registered scheme be contained in a document that is legally enforceable as between the members and the responsible entity. Even if the Constitution is deficient in setting out procedures for making and dealing with withdrawal requests, it is still legally enforceable as between the members and the responsible entity. Prima facie, the stipulation in s 601GA as to what a constitution must provide is directed to ASIC's determination as to whether the constitution should be registered. Section 601EB provides that ASIC must register the scheme within 14 days of lodgement of the application for registration, unless it appears to ASIC that, amongst other things, the scheme's constitution does not meet the requirements of s 601GA. There is nothing in s 601GA that deprives any provision of a constitution of force if the constitution fails to make the provision called for by that section. 83Nor would there be any sound discretionary reason for withholding judicial advice until any necessary amendments to the Constitution were made. Mr Sirtes SC drew attention to the fact that unitholders, particularly overseas unitholders, might not have adequate time with which to consider RMIL's invitation for them to make redemption requests. He did not suggest that his client would agree to an adjournment of the meeting convened for 11 March 2013 to afford unitholders that further time. The possibility that some unitholders might be disadvantaged by the speed with which matters have unfolded is not a reason for withholding the judicial advice that is a prerequisite for the trustee acting in the way it reasonably considers to be in the interests of unitholders generally. Estimate of liabilities 84I do not accept the submission made for Frost and Woolley GAL that the filing of a statement of claim by Frost on 27 February 2013 might preclude proper assessment of the liabilities to be taken into account in the calculation of the redemption price and that this is a reason for refusing judicial advice. This contention was not dwelt on in the course of oral submissions. Counsel accepted that it would be a matter for RMIL to assess the "present liabilities of the Trust including any provision taken into account in determining the liabilities of the Trust" in assessing the Net Asset Value. The concern of unitholders who do not seek redemption would be that the trustee might make an inadequate allowance for the liabilities asserted by Frost, and that RMIL would be entitled to indemnity from the trust assets in respect of the liability asserted against it. Mr Sirtes SC made no submissions as to whether the claim of misleading and deceptive conduct made against RMIL, if established, would give rise to a liability for which it would be entitled to be indemnified out of scheme property. It is unfortunate that Frost should have waited until 27 February 2013 before filing the statement of claim, given that its claim relates to damages said to have been incurred as the result of its acquiring units between 7 March 2011 and 24 October 2011. However, there is no reason to conclude that RMIL would not be able to make a just estimate of the value, if any, of the asserted liability. Nor was any submission made to the contrary. Conclusion 85For these reasons I consider that the judicial advice sought by the plaintiff should be given. 86The plaintiff is entitled to its costs of these proceedings on the indemnity basis as they are expenses properly incurred by it in the execution of the Trust. If any other party seeks an order for costs, I will deal with that application. 87I make the following orders: 1. Order under s 63 of the Trustee Act 1925 (NSW) that the plaintiff be advised that it presently has the power under the Constitution of the Real Estate Capital Partners USA Property Trust ("RCU") and the Corporations Act 2001 (Cth) to redeem units the subject of discretionary redemption requests under clause 7.11 of the Constitution of RCU if it wishes to exercise its discretion to do so. 2. Order under s 63 of the Trustee Act that the plaintiff be advised that it would be justified in exercising its discretion to redeem units the subject of redemption requests under clause 7.11 of the Constitution of RCU on or before 11 March 2013 for so long as it is the responsible entity of RCU. 3. Order that the costs and expenses incurred by the plaintiff in its capacity as the responsible entity of RCU in relation to these proceedings be payable on the indemnity basis out of the assets of RCU. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 13 March 2013