In the matter of Asia Pacific Data Centre Limited [2018] NSWSC 817

Supreme Court New South Wales

Medium Neutral Citation: In the matter of Asia Pacific Data Centre Limited [2018] NSWSC 817 Hearing dates: 19 February 2018 Date of orders: 19 February 2018 Decision date: 19 February 2018 Jurisdiction: Equity - Corporations List Before: Brereton J Decision: The plaintiff would be justified in submitting to the orders of the Court, save as to costs, on the question of final relief in proceeding 2018/24961. The Court further orders that the plaintiff be indemnified for its costs of this application out of the assets of the Asia Pacific Data Centre Trust. Catchwords: EQUITY — Trusts and trustees — Judicial advice – Whether a trustee is justified in submitting to orders of the Court (save as to costs) on final relief in related proceedings – where the related proceedings is a dispute between beneficiaries – where the intervention of the trustee as an active party is likely to add little to the proceedings Legislation Cited: (CTH) Corporations Act 2001 s 252S and 253E Category: Principal judgment Parties: Asia Pacific Data Centre Limited ACN 159 624 585 (Plaintiff) Representation: Counsel: S Lawrance (Plaintiff)

Solicitors: Arnold Bloch Leibler (Plaintiff) File Number(s): 2018/ 52873

Judgment (ex tempore) 1. The plaintiff Asia Pacific Data Centre Limited ("APDC"), is the trustee of the Asia Pacific Data Centre Trust. It is the first defendant in proceedings 24961 of 2018 in this list, in which the plaintiff is 360 Capital FM Limited and the second defendant is Next DC Limited. In those proceedings, 360 Capital seeks declaratory relief to the effect that it is, for the purposes of (CTH) Corporations Act 2001, s 252S and 253E, entitled to vote its interest on any resolution or in respect of any election regarding the identity of the Chair of a General Meeting of the Managed Investment Scheme known as Asia Pacific Data Centre Trust, of which 360 Capital is a member and the present plaintiff APDC is the trustee and responsible entity. A further declaration is sought in those proceedings that 360 Capital is, for the purposes of Corporations Act, s 253E, entitled to vote its interests at that meeting in respect of a proposed the resolution that the trust be wound up. 2. As I have said, the second defendant in those proceedings is Next DC Limited. Whereas 360 Capital holds 67% of the units in the trust and of the stapled securities in the scheme, Next DC holds 30%, the remaining 3% being held by members of the public. The scheme meeting in question was convened by Next DC with the intention of resolving to direct the responsible entity to wind up the scheme. In the explanatory memorandum that accompanied the notice of meeting, Next DC asserted that the responsible entity and its associates were not entitled to vote their interests, as they had an interest in the resolution other than as a member of the trust, in that 360 Capital, as a holder of the majority of the shares in the parent company of the responsible entity was an associate of the responsible entity, and the responsible entity, had an interest in the resolution other than as a member – apparently because if the scheme were wound up, it would lose its remuneration for acting as responsible entity, and effectively, its ráison d'être. 3. In the present proceedings, the responsible entity, as trustee, seeks the opinion, advice and the direction of the Court as to whether it is justified in submitting to the orders of the Court, save as to costs, on the final relief claimed in the substantive proceeding. It does so in circumstances where the argument that there is no relevant association will be fully advanced by 360 Capital and fully resisted by Next DC; where the contest is really one between beneficiaries; and where the intervention of the trustee as an active party is likely to add little to the proceedings, save to increase the costs visited on the trust fund. 4. The application is supported, in accordance with proper practice, by the opinion of counsel who has concluded that the trustee would be justified in submitting to the orders of the Court on the question of final relief save as to costs. After observing that the trustee's duty to exercise reasonable care and diligence extends to defending litigation that ought properly be defended, and includes protecting the assets of the trust if they are under attack, it is also observed that a trustee should not act unreasonably, nor incur unnecessary expense in defending litigation, by taking a partisan stance in a dispute between beneficiaries. 5. As counsel says, "the final relief sought by 360 ... does not threaten the assets of the trust". 6. While it appears likely that the outcome of those proceedings will determine whether the resolution is passed – and, therefore, whether the trustee is directed to wind up the trust – if such a direction is ultimately given, then that will be as a result of unit holders exercising their entitlements to vote under s 253C of the Corporations Act. In the case of 360, the outcome in proceeding 2018/24961 will determine whether that entitlement is excluded by s 253E. Nor is it necessary for the trustee to take an active role in the proceeding 2018/24961 in order to protect the rights of unit holders, the relief sought by 360 will not affect the entitlement of other unit holders to vote on the resolution, and in so far as other unit holders will be affected by whether or not 360 is disqualified from voting, the Court has before it an effective contradictor in the form of Next DC. Similarly, while the trustee would be a proper party to seek declaratory relief of the type being sought by 360, it is unnecessary for the trustee to do so in circumstances where there is an active contradictor, and the trustee is of the view that it would be unlikely to add to the arguments raised by 360 and Next DC. The dispute the subject of proceeding 2018/24961 is, in substance, a dispute between two unit holders in the trust. 7. In substance, I agree with what counsel has said. In addition, it may be observed that although the notice has been short, notice of the making of the present application has been provided to 360 Capital and to Next DC, including that the hearing was proceeding today. There has been no response to those email notifications, but the Court is informed that representatives of each of those parties are in the back of the Court today. 8. The one matter which has caused me some reservation is that the allegation advanced in the substantive proceedings – that 360 Capital is an associate of the responsible entity – is advanced, at least in part, on the footing that 360 Capital is said to be acting in concert with the responsible entity. I wondered whether, in those circumstances, the responsible entity's submission to the orders of the Court might found an inference that it did not resist the proposal that there was an association of that kind, and whether the responsible entity might be able to adduce evidence that would assist the Court on that question. 9. However, the real question is whether 360 Capital is associated with the responsible entity, and although it might be a fine point, that means that what Next DC must effectively establish, or 360 Capital must negative, is that there was an association between it and the responsible entity of the relevant kind. For that purpose, 360 can adduce evidence from officers of the trustee if it wishes to do so. The trustee itself has no interest in asserting or disputing whether there is a relevant association. 10. In all those circumstances, including the absence of any apparent contention by either of the major beneficial interests that the trustee should take an active role, the trustee's proper disinterest in the outcome of the contest between the beneficiaries, and the costs which would be incurred by its intervention in the substantive proceedings, the course it proposes to take is, in my judgment, a reasonable one. 11. The Court therefore orders and advises that: 1. The plaintiff would be justified in submitting to the orders of the Court, save as to costs, on the question of final relief in proceeding 2018/24961. 2. The Court further orders that the plaintiff be indemnified for its costs of this application out of the assets of the Asia Pacific Data Centre Trust.