Allco Funds Management Limited (Receivers and Managers Appointed) (In Liquidation) -v- Trust Company (RE Services) Limited (in its capacity as responsible entity and trustee of the Australian Wholesale Property Fund) [2014] NSWSC 1251

Supreme Court New South Wales

Medium Neutral Citation: Allco Funds Management Limited (Receivers and Managers Appointed) (In Liquidation) -v- Trust Company (RE Services) Limited (in its capacity as responsible entity and trustee of the Australian Wholesale Property Fund) [2014] NSWSC 1251 Hearing dates: 4, 5, 6, 7 & 20 August 2014 Written submissions on 3 September 2014 Decision date: 11 September 2014 Jurisdiction: Equity Division - Commercial List Before: Hammerschlag J Decision: AFML is entitled to an order, should it elect to have it, that the Loan Agreement, the Deed of Amendment and the redemption of its Funding Units are simul ac semel rescinded ab initio Catchwords: EQUITY - COMPANIES - Fiduciary duty of directors to avoid conflicts of interest - Corporations Act 2001 (Cth) ss 181, 187 and 601FD - obligation of directors to act bona fide in the best interests of the company for a proper purpose and not improperly to use their position to gain an advantage for another person - UNCONSCIONABLE CONDUCT - Australian Securities and Investments Commission 2001 (Cth) ss 12CA and 12CB - where plaintiff held units in a registered managed investment scheme - where two of its directors were also directors of the responsible entity of the scheme - where both were subsidiaries of the same holding company - where those directors committed the plaintiff to agreements with the responsible entity which converted its equity into a loan with a fixed repayment date and then committed the plaintiff to an amending agreement which removed the fixed repayment date - whether the directors acted in a situation where their duties to both entities were in conflict - whether the directors acted bona fide in the best interests of the plaintiff and for a proper purpose - whether the responsible entity has acted and continues to act unconscionably by treating the plaintiff as a bare lender rather than an equity holder - REMEDIES - plaintiff seeks rescission of the amending agreement only - HELD - the directors were in a position of conflict - the transactions were not bona fide in the best interests of the plaintiff or for a proper purpose and they improperly used their positions to gain an advantage for another person - plaintiff entitled to rescission of the amending agreement but only on condition that the original loan agreement is also rescinded - HELD - unconscionable conduct as alleged not established Legislation Cited: Corporations Act 2001 (Cth) Australian Securities and Investments Commission Act 2001 (Cth) Duties Act 1997 (NSW) Duties Act 2000 (Vic) Cases Cited: Transvaal Lands Company v New Belgium (Transvaal) Land and Development Company [1914] 2 Ch 488 Ford v Andrews (1916) 21 CLR 317 Boardman v Phipps [1967] 2 AC 46 Woolworths Limited v Kelly (1991) 22 NSWLR 189 R v Donald, Ex Parte Attorney General [1993] 2 Qd.R 680 The Queen v Byrnes (1995) 183 CLR 501 ASIC v Australian Property Custodian Holdings Ltd [2013] FCA 1342 Robbins v Incentive Dynamics (2003) 45 ACSR 244 Maurice Tarabay v Fifty Property Investments Pty Ltd [2009] NSWSC 617 Warman International Limited v Dwyer (1995) 182 CLR 554 Category: Principal judgment Parties: Allco Funds Management Limited (Receivers and Managers Appointed) (In Liquidation) - Plaintiff Trust Company (RE Services) Limited (in its capacity as responsible entity and trustee of the Australian Wholesale Property Fund) - Defendant Representation: Counsel: J.C. Sheahan SC with J.C. Hewitt and Z. Hillman - Plaintiff I.R Pike SC with C.R. Brown - Defendant Solicitors: Corrs Chambers Westgarth - Plaintiff M & K Lawyers - Defendant File Number(s): 12/228908