Trading Trusts—Oppression Remedies: Consultation Paper (html)

4. Forms of equitable relief

Introduction

4.1 This chapter examines the different forms of equitable relief available to beneficiaries from trustees and majority unitholders. The purpose of the chapter is to consider primarily those equitable remedies that will enable beneficiaries to extricate their interests from the trust structure. As explained in Chapter 3, the remedy that achieves this objective for a company is the buyout order. The following analysis will therefore consider whether there is an equivalent form of relief in equity.

4.2 An important distinction, which underpins the analysis that follows, is that the termination of a unit trust is fundamentally different from that of a company. As explained by Justice Young:

there is a very real distinction between a corporation and a trust; in that with a corporation the property is vested in the corporation itself, but with a trust the property and the prima facie liability for the debts is vested in the trustee.^[1]

4.3 It is unclear whether it is possible to terminate a trust in the same way that a partnership is dissolved, or a company is wound up pursuant to section 461 of the Corporations Act 2001 (Cth).^[2] Rather ‘the trust simply comes to an end in certain circumstances and the property is distributed among the beneficiaries.’^[3]

4.4 An exception to this principle, where the trust is insolvent, is that ‘the creditors may have a corporate trustee wound up under the Corporations Act and a liquidator appointed. That liquidator will, in a practical sense, terminate or “wind up” the trust.’^[4]

4.5 In general terms equitable doctrine enables a trust to be terminated by:

the exercise of reserved powers of termination or revocation, by the court, and by the beneficiaries being of full age and capacity. A trust must be terminated when, according to its terms, the trust fund must be distributed amongst the ascertainable beneficiaries.^[5]

However, for reasons that will become apparent throughout this chapter, not all of these mechanisms are appropriate in the context of trading trusts. An obvious problem is that most of these mechanisms deal with the situation of terminating the trust, rather than allowing a unitholder to redeem their interest.

4.6 The Commission has identified a number of possible equitable doctrines which directly or indirectly achieve these objectives. The most important are:

• termination pursuant to the terms of the trust deed

• vesting of the trust pursuant to the rule in Saunders v Vautier

• relief under the Trustee Act 1958 (Vic)

• an order to alter the beneficial interest of unitholders

• the doctrines of quasi-partnership and fraud on power.

Each of these is considered in turn.

Termination and redemption under the trust deed

General principles

4.7 As outlined in Chapter 2, the trust deed sets out the primary rights and obligations of beneficiaries in a trading trust. The trust deed will usually contain provisions that deal with the termination of the trust. If conditions under the trust deed are met then:

the trust will be wound up under the secondary contractual provisions of the trust deed, or the trust property will be held under subsidiary trusts as contained in the deed. The court will give effect to those provisions.^[6]

4.8 The trust deed can contain terms which specify the conditions for the termination of the trust. Where the trading trust is a unit trust, the trust deed will usually specify the mechanism for the redemption of the units by the trustee or another unitholder. As was explained in Chapter 3, this is the comparable mechanism of a buyout order in equity,

and has been the impetus behind the case law to date, where unitholders have sought

an oppression remedy.

4.9 The reasons why the provisions of the trust deed leave unitholders in an unsatisfactory position are twofold. First, the parties may simply not have contemplated the problem that may arise in the event that a unitholder seeks to extricate themselves from the trust.^[7] Secondly, even where this eventuality is contemplated, the terms of the trust deed will typically provide that an offer to redeem units must be made first to existing unitholders.^[8] This may prevent a unitholder from redeeming their units for the value of the initial investment.

4.10 Another issue is that where the trust deed sets out a procedure for valuation, this itself may not lead to a result where the unitholder can redeem their interest at market value.

4.11 There is some authority which suggests that in the context of the distribution of a beneficiary’s interest, in a difficult case, a court can assist with valuation by reference to criteria external to the procedure set out in the trust deed.^[9] However, it is not clear that these principles are appropriate in the context of redemption pursuant to the terms of the trust deed.

4.12 As suggested in Chapters 2 and 3, the underlying reason why this situation might be unsatisfactory for individual unitholders is the absence of a ready market for private unit trusts. Arguably, this is a fundamental feature of private unit trusts, and it follows that if a unitholder decides to invest in a private unit trust, and the trust deed contains specific provisions regarding redemption and termination, then the unitholder is put on notice that it will be difficult to extricate themselves from the trust.

4.13 It is possible to unilaterally terminate a trust pursuant to a special power of revocation, if this power is included in the trust deed.^[10] However, because of adverse tax consequences these provisions are rarely included in trust deeds.^[11]

Question

17 Are there any circumstances in which termination under the trust deed could provide a satisfactory remedy to minority beneficiaries?

Estoppel

4.14 Even where a redemption clause is unambiguous, other equitable doctrines, in particular estoppel, may be relied upon by unitholders. Although the requirements are somewhat unclear, estoppel requires that the plaintiff demonstrate that:

(1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff’s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or otherwise. For the purposes of the second element, a defendant who has not actively induced the plaintiff to adopt an assumption or expectation will nevertheless be held to have done so if the assumption or expectation can be fulfilled only by a transfer of the defendant’s property, a diminution of his rights or an increase in his obligations and he, knowing that the plaintiff’s reliance on the assumption or expectation may cause detriment to the plaintiff if it is not fulfilled, fails to deny to the plaintiff the correctness of the assumption or expectation on which the plaintiff is conducting his affairs.^[12]

4.15 In Accurate Financial Consultants v Koko Black (‘Koko Black’)^[13] the majority unitholder Mr Hills, who was a director in the corporate trustee Koko Black Pty Ltd, attempted to rely on a power under clause 7.2 of the trust deed, which allowed for the compulsory acquisition of units. Justice of Appeal Dodds-Streeton however found that Hills had made a representation:

that investors would be entitled to retain their investment until either successful expansion on a substantial scale was achieved, substantial capital gain secured and the routine reinvestment of all profit was no longer required, or at least, until there had been a reasonable opportunity to achieve these goals. The compulsory redemption of the investors’ interests while the reinvestment policy continued and the business was on the verge of a new phase of significant growth is inconsistent with that meaning, which clearly accords with the understanding to which Messrs Jackson and West deposed.^[14]

Furthermore, she found that Hills had:

in order to implement his business plans, induced the appellants to invest funds and otherwise to participate in the conduct and management of the business and to forgo any return or benefit from its successful operation and growth. The appellants’ investment of funds and other contributions were induced by, inter alia, Mr Hills’ repeated, although relatively imprecise representations that their investment would be for ‘the long term’, in order to facilitate significant expansion, and, implicitly, consequent capital growth.^[15]

Moreover, it was clear on the facts that the minority unitholders had acted in

reliance on the representations of a long-term venture to their detriment by investing in the business.^[16]

4.16 On the facts, the estoppel claim was made out, which prevented Hills from compulsorily acquiring the units of the minority despite a clear power in the trust deed. However, the requirements for an estoppel claim^[17] suggest that the action will generally only be appropriate in circumstances where the trust structure resembles a partnership or joint venture. Indeed, the representations arose in Koko Black because the unitholders had negotiated the future course of the business and the terms of the trust deed. Thus, where unitholders seek to merely invest funds without taking part in the management of the business, it is less likely that estoppel will be relevant.

4.17 It should be noted that since the decision in Vigliaroni, if similar facts arose to those in Koko Black, arguably, the minority unitholders could have sought an oppression remedy on the basis that the representations made by Hills gave rise to a legitimate expectation that the business venture was to be conducted over the long term.

4.18 As shown in Chapter 3, it is probably not necessary under Australian law to demonstrate a lack of good faith or unconscionability in order to obtain an oppression remedy.

If an oppression remedy is available under section 232 of the Corporations Act this

would arguably reduce the need to rely upon the doctrine of estoppel, since the

remedies available under section 233 can be tailor made in response to the conduct constituting oppression.

Question

18 Can the doctrine of estoppel assist a unitholder in redeeming their interest on more favourable terms than provided for in the trust deed?

The rule in Saunders v Vautier

4.19 According to the authors of Law of Trusts and Trustees, the rule in Saunders v Vautier^[18] says that ‘if the beneficiaries are adults under no disability and entitled between them to the whole beneficial interest they can terminate the trust and divide the trust property

between them.’^[19]

4.20 The rule has been rationalised on the basis that the:

beneficiaries are the ultimate owners of the trust property, and if competent, should be able to decide what is to be done with it. If there is a sole capacitated beneficiary, and the beneficial interest has vested in him so that either he or his heirs must inevitably be entitled to the property free of the trustee’s control the time has come to dispense with the trustee. To the objection that the settlor apparently intended that the trustee remain in place, it can be replied that if the settlor has made an absolute gift of the beneficial interest in property, the settlor’s primary intention is simply to make the gift. Once vesting has occurred, there is no reason to retain the paraphernalia of the trust.^[20]

4.21 It is important to note that the rule also applies to the beneficiaries of a discretionary trust.^[21]

4.22 The rule therefore only applies when the beneficiaries possess an absolute vested beneficial interest in the trust estate. In practice, however, the rule from Saunders v Vautier can be easily circumvented through the trustees’ right of indemnity from the trust property and a personal right from the beneficiaries.^[22] Moreover, the application of the rule also depends upon the precise terms of the trust deed.^[23]

4.23 As outlined in Chapter 2, the traditional view of an express trust is of a gratuitous transfer of property by the settlor. Moreover, the intention to transfer the trust property is ordinarily manifested in the trust deed.^[24] Thus, the rule in Saunders v Vautier is essentially an exception to the principle that the trust property vests in accordance with the terms of the trust deed.^[25] It follows that ‘the court will act cautiously in ordering any vesting where the issue is in dispute between the beneficiaries.’^[26] Indeed, the rule from Saunders v Vautier has no application in such a case.

4.24 The importance of the trust deed reveals the limitations of applying Saunders v Vautier to trading trusts. First, if the trust deed includes a limitation upon the beneficiary’s interest or a trustee’s right of indemnity then the principle will not apply. However, perhaps more fundamentally, the rule is not practically suited to the function of trading trusts, especially where the beneficiaries have invested at arm’s length. In such a case it is less likely that the beneficiaries would reach an agreement to terminate the trust. The rule is therefore

of no assistance to a minority unitholder who is either being oppressed by the majority,

or simply wishes to sell their minority unitholding.

4.25 Sin has argued that, in any case, the rule from Saunders v Vautier is conceptually inappropriate to unit trusts, since the rule is fundamentally ‘about the wish of a donor and the right of the donee.’^[27] As discussed in Chapter 2, Sin has a different view of the unit trust, based on contract. The unit trust is created by a trust deed, which comprises a series of contractual relationships between trustee-manager and unitholder.^[28] In this case, the only appropriate mechanism to terminate a unit trust is by the consent of all contracting parties, including the trustee and manager.^[29] It is unclear, however, whether Sin’s analysis is appropriate to private unit trusts, which usually do not have a manager separate to the position of trustee.

4.26 Nonetheless, Sin’s argument can be supported on policy grounds since it has been suggested that the rule from Saunders v Vautier can be understood in terms of a:

basic paradox at the heart of a property system operating within the tenets of liberalism: where a donor of an interest tries to restrict a donee’s freedom to dispose of that interest, then the legal system must choose between competing freedom[s], that of the donor or that of the donee.^[30]

Since the beneficial interest under a unit trust is not obtained by gift, it is unclear whether the rule from Saunders v Vautier can be justified on policy grounds in that context.

4.27 Sin’s argument can also be extended to justify an absence of oppression remedies for unitholders on the basis that the rationale underpinning a unit trust lies in contract. If so, it arguably follows that if the trust deed provides a mechanism for the termination of the trust, or the redemption and valuation of units, the court should give effect to these provisions.

Variation of trusts

Variation of trusts under the Trustee Act 1958 (Vic)

4.28 The Trustee Act 1958 (Vic) confers a broad jurisdiction upon the Supreme Court to administer trusts. According to Principles of the Law of Trusts:

the legislation applies where property is held upon trusts arising under any instrument, other than trusts affecting property settled by Act of Parliament.^[31]

A court has a wide array of powers including the ability to vest the trust property and appoint new trustees.^[32] A court also has the ability to hear an application by a trustee for an ‘opinion, advice, or direction on any question regarding the management or administration of trust property or interpretation of the trust deed, or to seek an opinion of the court in relation to advantageous dealings.’^[33] Moreover, section 63 allows the court to authorise a trustee, upon application, to deal with trust property beyond the terms of the trust deed.

4.29 However, as outlined in Chapter 1, the application of oppression remedies and an examination of equivalent equitable relief suggests a more limited inquiry. If the trust deed provides that a unitholder has a certain number of units, then a variation by court order would be a potential mechanism to obtain a redemption other than through the terms of the trust deed.

4.30 Section 63A gives the court the power to vary beneficial interests under a trust:

(1) Where property, whether real or personal, is held on trusts arising, whether before or after the commencement of this Act, under any will settlement or other disposition, the Court may if it thinks fit by order approve on behalf of—

(a) any person having, directly or indirectly, an interest, whether vested or contingent, under the trusts who by reason of minority or other incapacity is incapable of assenting; or

(b) any person (whether ascertained or not) who may become entitled, directly or indirectly, to an interest under the trusts as being at a future date or on the happening of a future event a person of any specified description or a member of any specified class of persons, so however that this paragraph shall not include any person who would be of that description, or a member of that class (as the case may be) if the said date had fallen or the said event had happened at the date of the application to the Court; or

(c) any person unborn; or

(d) any person in respect of any discretionary interest of his under protective trusts where the interest of the principal beneficiary has not failed or determined—

any arrangement (by whomsoever proposed and whether or not there is any other person beneficially interested who is capable of assenting thereto) varying or revoking all or any of the trusts, or enlarging the powers of the trustees or managing or administering any of the property subject to the trusts:

Provided that except by virtue of paragraph (d) of this subsection the Court shall not approve an arrangement on behalf of any person unless the carrying out thereof would be for the benefit of that person.

(2) In the foregoing subsection ‘protective trusts’ means trusts specified in paragraphs (a) and (b) of subsection (1) of section thirty-nine of this Act or any like trusts, the principal beneficiary has the same meaning as in the said subsection (1) and ‘discretionary interest’ means an interest arising under the trust specified in paragraph (b) of the said subsection (1) or any like trust.

(3) Notice of an application to the Court for an order pursuant to subsection (1) of this section shall be given to such persons as the Court may direct.

(4) Nothing in the foregoing provisions of this section shall apply to trusts affecting property settled by Act of Parliament.

(5) Nothing in this section shall limit the powers conferred by section sixty-three of this Act section sixty-four of the Settled Land Act 1958 or section one hundred and seventy-one of the Property Law Act 1958.

4.31 It is unlikely that the power under section 63A enables a court to vary the

beneficial interests of unitholders analogously to a court-ordered buyout under the Corporations Act.

4.32 Indeed, according to Principles of the Law of Trusts:

a principal object [of the legislation] is to enable the court to approve an arrangement for the variation of a trust on behalf of persons unable to give approval themselves,

that is beneficiaries who cannot vary or terminate the trust under the rule in

Saunders v Vautier.^[34]

This is clearly reflected by the four categories of beneficiaries specified under

section 63A.^[35]

4.33 This illustrates an obvious difficulty for unitholders since as discussed above, it is

difficult to envisage a situation when a unitholder would be able to avail themselves of the rule in Saunders v Vautier generally.

Question

19 How much does the rule in Saunders v Vautier underpin the provisions of the Trustee Act 1958 (Vic)?

4.34 Section 63 of the Trustee Act 1958 (Vic) arguably provides a broader power than section 63A. Section 63 provides that:

(1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release or other disposition, or any purchase, investment, acquisition, expenditure or other transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the trust instrument (if any) or by law, the Court may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose on such terms and subject to such provisions and conditions (if any) as the Court thinks fit and may direct in what manner any money authorized to be expended, and the costs of any transaction are to be paid or borne as between capital and income.

(2) The Court may from time to time rescind or vary any order made under this section, or may make any new or further order.

(3) An application to the Court under this section may be made by the trustees, or by any of them, or by any person beneficially interested under the trust.

4.35 There is some uncertainty regarding the breadth of the court’s discretion under sections 63 and 63A. As discussed below, the reasoning of Justice Einstein in Westfield v Lend Lease (‘Westfield’)^[36], which concerned applications under both the Victorian and New South Wales Trustee Acts, suggests a court does not have jurisdiction under section 63 of the Victorian legislation to alter beneficial interests. This issue will be explored further in the context of the analogous New South Wales provision.

4.36 The view of Justice Einstein in Westfield, was implicitly adopted by Justice Robson in

Re Estate of Barns (‘Re Barns’)^[37] who said that:

I find s 63 does not permit the court to vary the powers of a trustee to allow the beneficial interests in the estate to be altered inter se. I find that s 63A permits the court to agree on behalf of a beneficiary, otherwise not able to agree, to an arrangement between beneficiaries to vary the terms of a trust. That power does not, however, permit the Court to give effect to an arrangement to vary the beneficial interests of

the beneficiaries that otherwise does not have the agreement of all the beneficiaries of the estate.^[38]

This reasoning suggests that the power of the court under section 63A is limited by the application of the rule in Saunders v Vautier,^[39] and moreover, at least under section 63, is to give the trustee power which is not provided for under the trust deed.^[40] The distinction between a grant of power and an alteration of interests can sometimes be a fine one. However, Justice Robson appears to acknowledge that the former may involve an incidental alteration of the beneficial interest.^[41] Although the boundaries are unclear, it appears that a scheme which is designed to alter the beneficial interests of unitholders cannot be approved under sections 63 and 63A.

4.37 It should be noted that some of the statutory equivalents of section 63A and section 63 in other Australian jurisdictions are of broader application. On its face, section 59C of the Trustee Act 1936 (SA) enables a trustee to approach the court for a variation on behalf of any beneficiary. Ford et al have suggested that underpinning section 59C is the requirement that:

the exercise of the powers given should be in the interests of beneficiaries of the trust and should not result in one class of beneficiaries being unfairly advantaged to the prejudice of some other class.^[42]

4.38 The wording of this section bears a resemblance to the drafting of the oppression remedy under section 232 of the Corporations Act. However, in Benjiza v Adriatic Fisheries Pty Ltd the court refused to wind up a trust under section 59C on the basis that the court did not have the power to do so.^[43]

4.39 Section 81 of the Trustee Act 1925 (NSW) is also of wider operation than section 63 of the Victorian legislation. Section 81(1)(a) provides that the court’s power extends to making an ‘adjustment of the respective rights of the beneficiaries, as the Court may think fit.’ Like the South Australian legislation, section 81 does not limit beneficiaries to a particular type or class. However, the section does not clearly include buyouts analogous to relief under section 233 of the Corporations Act.

4.40 The case of Arakella v Paton (‘Arakella’)^[44] provides a useful example of these issues. In that case, a trustee of a trading trust sought advice under section 81 to transfer all the units under the trading trust to a company called New Co. Consequently, the unitholders would receive shares in the new corporate entity. There were several difficulties with this arrangement, which was similar to a scheme of arrangement under section 411 of the Corporations Act. The most important of these was that the proposed redemption did not follow the valuation mechanism under the trust deed, and the agreement from the unitholders for such an arrangement had to be unanimous.

4.41 Justice Austin found that section 81 permitted the court to make an order reflecting the proposed arrangement. The general approach for considering section 81 is to adopt:

a construction which reflects the breadth of the Court’s jurisdiction. The Court should not construe the sections as subject to any fetters or limitations beyond what is clearly imported by the statutory language. One approaches the central question in the case, namely whether the court is capable of forming the opinion that the proposed transaction is expedient in the management or administration of any property vested in the trustees, in that light.^[45]

4.42 After finding that the power under section 81 is a broad one, Justice Austin suggested that it could be exercised if two conditions were met. The first was whether the proposed variation extended to the substratum of the trust, in which case it would be invalid.^[46] This issue relates to the equitable doctrine of fraud on power and will be considered later in this chapter. The second condition was whether the order of the court ‘is the implementation of the Trustee’s proposal’,^[47] which on the facts was clearly satisfied.

4.43 Since Arakella concerned the restructuring of a unit trust, it is not clear whether the section could be used in a similar way to a buyout under the Corporations Act.^[48] Justice Austin however suggested that the wording of section 81(1) seems to contemplate a power of ‘alteration of the trusts and therefore the interests of the beneficiaries.’^[49] However he added that:

the wording of the New South Wales provision does not purport to authorise the Court to make orders varying beneficial interests at large, but only in the management or administration of trust property. It cannot be suggested that the section is a substitute for variation of trusts legislation.^[50]

It is not clear what constitutes management of the trust, since in Arakella, the trustees were managing the trust in a way contrary to the terms of the trust deed. It is possible, however, that under the reasoning of Justice Austin a unitholder may be able to obtain a buyout of their units under section 81, analogously to an oppression remedy.

4.44 A different approach to Justice Austin in Arakella was expressed by Justice Einstein in Westfield. He suggested that the approach in Arakella should be restricted to effecting a ‘fundamental reorganisation of the trust’, rather than a termination.^[51] Indeed, in Westfield the order sought would have wound up the trust. However Justice Einstein also suggests that the purpose of the power under section 81:

is not to permit the substantive alteration of the trust or its termination, but to give the trustees power to administer the trust in a more satisfactory and effective way.^[52]

According to Justice Einstein, any adjustment of the beneficiary’s rights, which is sought under section 81, must be ‘incidental or consequential.’^[53] Bergman points out, however, that whether one adopts the view from Arakella or Westfield is of little help to unitholders since:

In most oppression cases, it is provisions of the trust deeds themselves that facilitate the ‘oppressive conduct,’ and in such circumstances, the Trustee Acts are incapable of coming to the aid of unitholders.^[54]

Question

20 Can relief under the Trustee Act 1958 (Vic) provide an effective alternative remedy for oppression of minority shareholders?

Variation of trusts under the inherent jurisdiction of the court

4.45 An alternative to a trustee seeking an order under the Trustee Act is to seek an order pursuant to an inherent power of the court to alter beneficial interests.

4.46 Justice Austin in Arakella stated that:

The Court’s power under s 81 cannot be used to subvert the beneficial disposition in the trust instrument, but if an order is made in the management or administration of trust property, it is permissible under the section to accommodate the beneficial interests to the new situation created by the order. In my opinion that position is indistinguishable from the approach taken by Myers AJ in the Ku-ring-gai Council case. It is unnecessary to debate whether it is different from the position under the UK provision, as explained by the English Court of Appeal in the Chapman case.^[55]

4.47 According to Principles of the Law of Trusts, it seems implicit in this reasoning that the New South Wales Supreme Court has no inherent power to alter the beneficial interests of trusts. Moreover, there are five reasons why no inherent jurisdiction exists.

4.48 First, Arakella should be taken as persuasive authority.^[56] Second, if such a jurisdiction were recognised it would invariably undermine the intention of the settlor and could potentially deprive some beneficiaries of their entitlements.^[57] Third, the legislation is based upon English statutes, which were a response to the specific context of high inheritance taxes.^[58] Fourth, if an alteration is sought because the deed does not reflect the intentions of the settlor, alternative remedies are available.^[59] Finally, where a beneficiary has unjustly been deprived of a beneficial interest, statutory relief already exists to rectify the injustice in certain cases.^[60] Ford et al conclude:

there is no justification for the retention in Australia of any of the existing variation of trusts legislation because they mimic English legislation that had as its context the imposition of crippling inheritance taxes on life tenants and remainderman. In Australia today there are no inheritance taxes and hardly any life tenants.^[61]

4.49 While these criticisms certainly have merit for traditional trusts, such as those discussed in Chapter 2, it is not clear whether they are appropriate to trading trusts, particularly unit trusts, which may have no settlor.

Question

21 Could seeking an order under the inherent jurisdiction of the court provide an alternative remedy for minority shareholders?

Quasi-partnerships

4.50 It is well established that the beneficiaries of a unit trust are not formally partners.^[62] However, a partnership may be implied if the beneficiaries are granted ‘powers sufficient to enable them as a practical matter to control the trustees’ conduct of the business.’^[63]

4.51 According to Justice Hayton writing extra-judicially:

It is not exactly clear what degree of involvement in the activities of the trustee-manager will suffice as carrying on a business in common. However it is clear that the fact that, under the rule in Saunders v Vautier, the beneficiaries, if together absolutely entitled and of full capacity, can terminate the trust and require the assets to be transferred to them does not mean that they are participants in the conduct of the business. Until they take advantage of the rule they have no right to give directions or be consulted—unless given such right by the trust instrument.^[64]

It follows that an examination of the trust deed is required in order to determine whether a relationship of partnership exists.

4.52 However, counsel in a line of Australian cases^[65] have sought to rely upon the decision of Ebrahimi v Westbourne Galleries Ltd (‘Ebrahimi’)^[66] to suggest that beneficiaries of a trading trust can stand in a relationship of quasi-partnership. That is, the relationship lacks the formal characteristics of a partnership but still possesses certain fundamental equitable characteristics.^[67]

4.53 Indeed as Bergman argues:

a quasi-partnership refers to the concept that joint participants in a business venture may have legitimate partnership-type expectations of each other notwithstanding the fact that the vehicle in which the business is conducted is not formally a legal partnership and the purported legitimate expectations may not have been formally contracted.^[68]

4.54 In Ebrahimi, Mr Ebrahimi and Mr Nazar had been formal partners in a carpet business. However, a company was formed with both holding a 50 per cent shareholding, and acting as directors. Later the son of Mr Nazar entered the business, and was transferred 100 shares from Ebrahimi and Nazar. However, Nazar and his son used their greater voting power to remove Ebrahimi from the board.

4.55 Lord Wilberforce held that in a small proprietary company, such as this, the members of the company were:

in substance partners, or quasi-partners, and that a winding up order may be ordered if such facts are shown as could justify a dissolution of partnership between them.^[69]

Furthermore, Lord Wilberforce responded to counsel’s submission that even a small proprietary company was fundamentally different from a partnership by suggesting that both entities are based on equitable considerations.^[70] His Lordship stated:

a company, however small, however domestic, is a company not a partnership or even a quasi-partnership and it is through the just and equitable clause that obligations, common to partnership relations, may come in.^[71]

4.56 Lord Wilberforce appears to have relied upon equitable considerations, some of which are closely related to fiduciary principles. According to Lord Wilberforce the application of equitable principles will be appropriate when:

(i) an association formed or continued on the basis of personal relationship, involving mutual confidence – this element will often be found where a pre-existing relationship has been converted into a limited company; (ii) an agreement, or understanding, that all, or some (for there may be ‘sleeping members’), of the shareholders shall participate in the conduct of the business; (iii) restriction upon the transfer of the members’ interest in the company – so if confidence is lost, or one member is removed from management, he cannot take out his stake and go elsewhere.^[72]

4.57 A difficulty, however, with the reasoning from Ebrahimi is that even where these elements are established the case arguably only stands for the proposition that a winding up order can be granted. As discussed in Chapter 3, a winding up order is an exceptional remedy to alleviate oppression, and is often inappropriate in the context of trading trusts. Indeed, where a buyout of a minority unitholder is sought, it is not clear whether the principles from Ebrahimi are applicable.^[73]

4.58 In Koko Black, at trial, Justice Hargrave held that the plaintiff could not rely on the reasoning from Ebrahimi in order to obtain an injunction preventing Hills from compulsorily acquiring the units of the minority unit holders.^[74] This reasoning was endorsed by Justice of Appeal Dodds-Streeton on appeal suggesting that the reasoning from Ebrahimi is limited to a winding up order.^[75]

4.59 A contrary view however has been expressed by Justice Cooke who said that:

if it is found that the company falls into this quasi-partnership category, the court is more likely to conclude that it is unfair to fail to give effect to, or bring to an end arrangements which have been made on an informal basis, even though they do not give rise to legal entitlements, or to exclude a participator from the management or conduct of the company’s business, if it was part of the arrangement that he should take part in it. Furthermore, the most commonly sought remedy in unfair prejudice petitions is an order that the petitioner’s shares should be bought out by one or more of the respondents, and the establishment of a quasi partnership is normally a precondition for the court to find that such a buyout should be made without a minority discount.^[76]

In contrast to Koko Black, a corollary of this reasoning is that a buyout order is available in the case of a quasi-partnership. However, since Justice Cooke goes further suggesting that a quasi-partnership is a precondition for a buyout order, the application of this reasoning is doubtful in Australia, since a buyout order is an established remedy when oppression is found.

4.60 However, the above passage was recently endorsed in the Drapac case, although the precise emphasis is uncertain.^[77] Justice Ferguson appears to have accepted the proposition that the facts of the case led to the conclusion that Wain, Murchie and Drapac were in a quasi-partnership analogous to Ebrahimi due to a breakdown in trust and confidence.^[78] However, this reasoning is conducted in relation to an analysis of sections 232 and 233 of the Corporations Act. Arguably, Justice Ferguson is thus doing no more than suggesting that the reasoning from Ebrahimi can inform the criteria for an oppression remedy. Bergman, however, points out that Justice Ferguson does not challenge the submission that a buyout is available in a case of quasi-partnership, which suggests that this interpretation is still open.^[79]

4.61 Regardless of which view is adopted, it is important to remember that the reasoning from Ebrahimi is only applicable to those trading trusts that resemble partnerships. For a quasi-partnership to be found, a unitholder would almost certainly have to both own shares in the corporate trustee, and actively contribute to the management of the enterprise.

Question

22 In your view, can the ‘quasi-partnership’ approach adopted in Ebrahimi apply to trading trusts? If so, can a beneficiary obtain a remedy other than the winding up of the trust?

Fraud on the power

4.62 In Cachia v Westpac Financial Services (‘Cachia’)^[80] Justice Hely stated that:

the equitable doctrine of ‘fraud on the power’ requires that a power, including an amendment power, reserved in a trust must not be exercised for a purpose, or with an intention beyond the scope of or not justified by the instrument creating the power: Vatcher v Paull [1915] AC 372, 378. The same principle applies to the exercise of a statutory power. In each case, the power has to be exercised bona fide, for the purpose for which it is given.^[81]

4.63 The doctrine as stated by Justice Hely has several elements. The first proposition is a rule of interpretation. Thus, a power must not be exercised beyond the scope contemplated by the trust deed. It arguably follows that the trust deed can be drafted in a way allowing for the exercise of a particular power, which would otherwise constitute equitable fraud.^[82] This gives rise to the second element, that power must be exercised in good faith and for a proper purpose.

4.64 However, even the good faith requirement may arguably be limited by the terms of the trust deed. It has been suggested that in order to establish fraud on power, a unitholder would have to show that the ‘trustee’s actions have eroded the “substratum” of the UT [unit trust].’^[83] An exclusion clause could be inserted into the trust deed, providing the trustee with an unfettered discretion,^[84] so long as the substratum remained unaltered.

It is not clear whether the substratum refers to the fundamental purpose of the trust,^[85]

or to the ‘irreducible core’ of trusteeship.^[86] The former appears to be the preferred approach in Cachia.^[87]

4.65 Indeed, in Cachia Justice Hely held that the doctrine was not made out in circumstances where the trustee had amended, by a special meeting, the redemption clause of the trust deed so that units could be compulsorily redeemed through the issue of units in a new trust.^[88] Although this meant that unitholders were unable to redeem their units for market value, this did not constitute a lack of good faith, since the ‘provisions introduced by the amendments were not directed against only some of the unitholders. They affected all unitholders equally, and in the same way.’^[89]

4.66 There were two important aspects of the reasoning. First, the trust deed did not preclude the type of amendment on the facts.^[90] Secondly, a reorganisation of the trust did not necessarily entail an alteration of the substratum of the trust.^[91]

4.67 According to Bergman, both the ‘substratum’ and ‘irreducible core’ tests provide limited protection to unitholders where the trust deed contains an exclusion clause indemnifying the trustee for conduct, which would otherwise constitute fraud on power.^[92]

4.68 Since fraud on power can potentially involve an amendment to a trust deed to allow for a compulsory acquisition of a minority unitholding, it has been suggested that the principles from Gambotto v WCP Ltd,^[93] which related to the compulsory acquisition of shares, are relevant. However, the authorities in this respect are uncertain.^[94] In this context, fraud on power is sometimes referred to as a fraud on the minority. However, in this instance the doctrine usually refers to shareholders rather than unitholders.^[95]

4.69 A problem, however, with the application of the fraud on power doctrine is the limited remedial options. Although the conduct that potentially falls within the doctrine is expansive, this is not clearly mirrored by equivalent powers available to a court in a response to oppression under section 233.^[96] Although in Cachia, the unitholders sought equitable compensation,^[97] as shown in Chapter 3, this will not be a satisfactory remedy in many cases of oppression.

4.70 In Koko Black, the unitholders sought an injunction preventing Hill from compulsorily acquiring their units.^[98] It is not clear whether a mandatory injunction enforcing a buyout order, beyond the terms of the trust deed, is an available remedy in response to fraud

on power.

Question

23 Are there circumstances in which the doctrine of fraud on power could provide a useful remedy to minority beneficiaries?

1. Horwath Corporation Pty Ltd v Huie (1999) 32 ACSR 413, 415 [14].

   ↑

2. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 502; Also see the conclusions from Corporations and Markets Advisory Committee, ‘Managed Investment Schemes’ (Report, July 2012) 57 cited in Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 80.

   ↑

3. Corporations and Markets Advisory Committee, ‘Managed Investment Schemes’, (Report, July 2012) 57; cited in Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 80.

   ↑

4. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 502.

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5. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119) [16.000].

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6. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 503; citing Re Gaydon [2001] NSWSC 473 (8 June 2001) [29].

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7. See the facts of Wain v Drapac [2012] VSC 156 (26 April 2012) discussed in Chapter 3 at pages 30–33.

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8. For example see the facts of Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325.

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9. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119), [16.210]; citing Hyman v Permanent Trustee Co of NSW Ltd (1914) 14 SR (NSW) 348; Carr v Carr (1987) 8 NSWLR 492; Re White [2001] Ch 392.

   ↑

10. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 502.

    ↑

11. Ibid 502–3.

    ↑

12. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428–9 (Brennan J); cited in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325, 342 [125] (Dodds-Streeton JA).

    ↑

13. (2008) 66 ACSR 325.

    ↑

14. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325, 352 [181].

    ↑

15. Ibid 352 [184].

    ↑

16. Ibid 352–3 [185]–[187].

    ↑

17. Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428–9 (Brennan J); cited in Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325, 342 [125] (Dodds-Streeton JA).

    ↑

18. (1841) 4 Beav 115.

    ↑

19. Underhill and Hayton, Law of Trusts and Trustees (LexisNexis Butterworths, 16th ed, 2003) 27; cited in Scottish Law Commission, Report on Variation and Termination of Trusts, Report No 206 (2007) 7.

    ↑

20. Law Reform Commission of Saskatchewan, The Rule in Saunders v Vautier and the Variation of Trusts, Consultation Paper (1994) 6.

    ↑

21. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119) [16.090]; citing Re Smith [1928] Ch 915.

    ↑

22. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 501; citing CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98.

    ↑

23. P Young, C Croft and M Smith, On Equity (Lawbook Co, 2009) 501; According to Sin, a contractual right owed under the trust deed will also preclude the operation of the rule; See Kim Fam Sin, The Legal Nature of the Unit Trust (Clarendon Press, 1997) 117–8.

    ↑

24. Byrnes v Kendle (2011) 243 CLR 253, 286–7 (Heydon and Crennan JJ).

    ↑

25. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 79.

    ↑

26. Ibid.

    ↑

27. Kim Fam Sin, The Legal Nature of the Unit Trust (Clarendon Press, 1997) 117.

    ↑

28. Ibid 117–8.

    ↑

29. Ibid.

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30. Graham Moffat, ‘Trusts Law: A Song Without End?’ (Review Article) (1992) 55 Modern Law Review 123, 129; cited in Kim Fam Sin,

    The Legal Nature of the Unit Trust (Clarendon Press, 1997) 119.

    ↑

31. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119) [15.070].

    ↑

32. Trustee Act 1958 (Vic) pt IV, divs 1–2.

    ↑

33. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 64, citing Trustee Act 1958 (Vic), s 63(1).

    ↑

34. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119) [15.090]; also see George v Kollias [2007] VSC 46 (5 March 2007).

    ↑

35. However a contrary view of the policy underpinning the UK Variation of the Trusts Act 1958 (Vic) was explored by analysing the decision of Goulding v James [1997] 2 All ER 239, 246 in P Luxton, ‘Variation of Trusts: Settlors’ Intentions and the Consent Principle in Saunders v Vautier’ (1997) 60(5) Modern Law Review 719.

    ↑

36. [2008] NSWSC 516 (29 May 2008) [62].

    ↑

37. [2011] VSC 314 (5 July 2011).

    ↑

38. Ibid [7].

    ↑

39. In the case, his Honour held that it followed from this reasoning that the court did not have the power to make an order pursuant to s 63A to vary the terms of a trust deed unless all the beneficiaries consented. On appeal, Williams AJA (Buchanan JA and Bongiorno JA agreeing) held that the power of the court was not so limited: see Perpetual Trustee Victoria Limited v Barns [2012] VSCA 77 (2 May 2012) [35]. This was because the Attorney General, who did not formally consent to the variation, was a party before the court and did not object to the making of an order under s 63A: [42]–[43].

    ↑

40. Re Estate of Barns [2011] VSC 314 (5 July 2011) [44]–[45].

    ↑

41. Ibid [51].

    ↑

42. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119), [15.230]; citing s 59C(3)(b).

    ↑

43. (1984) 37 SASR 545; cited in H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119) [15.230].

    ↑

44. Arakella v Paton (2004) 60 NSWLR 334.

    ↑

45. Ibid 352 [80] (Austin J).

    ↑

46. Ibid 353 [84] (Austin J); citing Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65 (Hely J).

    ↑

47. Ibid.

    ↑

48. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 64.

    ↑

49. Arakella v Paton (2004) 60 NSWLR 334, 357 [101] (Austin J).

    ↑

50. Ibid 357 [102] (Austin J).

    ↑

51. Westfield Qld No 1 Pty Ltd v Lend Lease Real Estate Investments Ltd [2008] NSWSC 516 (29 May 2008) [62].

    ↑

52. Ibid [53]; citing Re Shipwrecked Fisherman and Mariners Royal Benevolent Society Charity [1959] Ch 220, 228.

    ↑

53. Westfield Qld No 1 Pty Ltd v Lend Lease Real Estate Investments Ltd [2008] NSWSC 516 (29 May 2008) [55].

    ↑

54. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 65.

    ↑

55. Arakella v Paton (2004) 60 NSWLR 334, 360 [112] (Austin J); citied in H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119), [15.270].

    ↑

56. H A J Ford, W A Lee and P M McDermott, LBC Information Services, Principles of the Law of Trusts, vol 3 (at 119), [15.270].

    ↑

57. Ibid.

    ↑

58. Ibid.

    ↑

59. Ibid.

    ↑

60. Ibid.

    ↑

61. Ibid [15.275].

    ↑

62. Smith v Anderson (1880) 15 Ch D 247 (James LJ).

    ↑

63. D Hayton, ‘Trading Trusts, Trustees’ Liabilities and Creditors’, in The International Trust (Jordans Publishing Ltd, 3rd ed, 2011) [7.2].

    ↑

64. Ibid.

    ↑

65. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 (23 August 2007); Wain v Drapac [2012] VSC 156 (26 April 2012).

    ↑

66. [1973] AC 360.

    ↑

67. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 78.

    ↑

68. Ibid 76.

    ↑

69. Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, 375.

    ↑

70. Ibid 379.

    ↑

71. Ibid 380.

    ↑

72. Ibid 379.

    ↑

73. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 (23 August 2007) [117].

    ↑

74. Ibid.

    ↑

75. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd (2008) 66 ACSR 325, 341 [122] (Dodds-Streeton JA).

    ↑

76. Croly v Good [2010] EWHC 1 Ch, [18]; cited in Wain v Drapac [2012] VSC 156 (26 April 2012) [274] (Ferguson J).

    ↑

77. Wain v Drapac [2012] VSC 156 (26 April 2012) [274] (Ferguson J).

    ↑

78. Ibid [277].

    ↑

79. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 108.

    ↑

80. (2000) 170 ALR 65.

    ↑

81. Ibid 83 [74]; citing Lancedale Holdings Pty Ltd v Health Group Australasia Pty Ltd [1999] NSWSC 609 (Bryson J).

    ↑

82. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 83 [74]–[76]; also see Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 (23 August 2007) [103] (Hargrave J); Jacometti Pty Ltd v Boomaroo Nurseries & Wholesale Supplies Pty Ltd [2011] VSC 612 (1 December 2011) [48] (Habersberger J).

    ↑

83. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 90.

    ↑

84. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 (23 August 2007) [103] (Hargrave J).

    ↑

85. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 82 [68] (Hely J).

    ↑

86. Armitage v Nurse [1998] Ch 241.

    ↑

87. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 82 [68], 83 [72] (Hely J).

    ↑

88. Ibid.

    ↑

89. Ibid 83 [75] (Hely J). Arguably, the approach adopted by Hely J is different to the test for oppression under s 232. Although conduct which applies to all shareholders equally is unlikely to be oppressive, see Catto v Hampton Australia Ltd (in liq) (No 3) (2004) 89 SASR 234, a finding of oppression is still possible; see John J Starr (Real Estate) Pty Ltd v Robert R Andrew (A’asia) Pty Ltd (1991) 9 ACLC 1372, 1375–6 (Young J).

    ↑

90. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 83 [74]–[76] (Hely J).

    ↑

91. Ibid 83 [72] (Hely J).

    ↑

92. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 94.

    ↑

93. (1995) 182 CLR 432.

    ↑

94. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 86–86 [85]–[90] (Hely J); Arakella v Paton (2004) 60 NSWLR 334, 364 [127].

    ↑

95. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 106.

    ↑

96. Ibid 103.

    ↑

97. Cachia v Westpac Financial Services Ltd (2000) 170 ALR 65, 340 [18] (Hely J).

    ↑

98. Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2007] VSC 40 (23 August 2007).

    ↑

99. See Vigliaroni v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282; Wain v Drapac [2012] VSC 156 (26 April 2012).

    ↑

100. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 196.

     ↑

101. See I M Ramsay, ‘An Empirical Study of the Use of the Oppression Remedy’ (1999) 27 Australian Business Law Review 23, 26; P Almond, ‘Members Rights & Remedies for Oppressive or Unfiar Conduct under Part 2F.1 of the Corporations Act’ (Paper presented at Continuing Legal Education Seminar, Melbourne, 2005); G Magner, Small Business Shareholder: Breaking Up is Hard to Do: Departing Shareholders and Resorting to Court Orders – Oppression Actions Under the Corporations Act (Hall & Wilcox Lawyers, January 2011); all cited by Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 194.

     ↑

102. Ari Bergman, Unitholder Rights Compared to Shareholder Rights in the Context of Oppression (SJD Thesis, Monash University, forthcoming) 194.

     ↑

103. Ibid.

     ↑

104. Ibid.

     ↑

105. Corporations (Commonwealth Powers) Act 2001 (Vic) s 4(1)(a).

     ↑

106. NSW v Commonwealth (‘Incorporation case’) (1990) 169 CLR 482.

     ↑

107. Re Wakim; Ex parte McNally (1999) 198 CLR 511.

     ↑

108. For a discussion, and summary of the following principles see Loo v DPP (Vic) (2005) 12 VR 665.

     ↑

109. Corporations Act 2001 (Cth) s 5E.

     ↑

110. Ibid s 5F.

     ↑

111. Ibid s 5G.

     ↑

112. P v P (1984) 181 CLR 583.

     ↑

113. Momcilovic v The Queen (2011) 245 CLR 1, 74 (French CJ), 134 (Gummow J), 142 (Hayne J, dissenting on the broader inconsistency point), 238-39 (Crennan and Kiefel JJ).

     ↑

114. This being a species of s 109 inconsistency often called “operational inconsistency”. See generally, P v P (1984) 181 CLR 583, 602-3.

     ↑

115. The Australian Law Reform Commission and the Companies and Securities Advisory Committee in 1993 released a report into collective investment schemes. The Commission and the Advisory Committee recommended that investors should be able to avail themselves of oppression remedies based upon the current statutory provisions of the Corporations Act: see Australian Law Reform Commission and Companies and Securities Advisory Committee, Collective Investments: Other People’s Money, ALRC Report No 65 (1993) [11.33]. The submissions made to the Commission appear to have suggested that the proposed amendments be closely modelled on the statutory relief available to shareholders: see proposed section 260AQ at 152–4 of the report.

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