Trading Trusts—Oppression Remedies: Report (html)
Preface
In Australia, trading trusts are often used as an alternative to companies as a way to structure businesses. These businesses, both large and small, form a significant part of the Australian economy.
Sections 232 to 234 of the Corporations Act 2001 (Cth) provide a range of remedies for shareholders subject to oppressive conduct by a corporation. Whether these remedies already apply to beneficiaries of trading trusts is unclear. A line of cases has held that beneficiaries are limited to the conventional forms of equitable relief under trust law.[1] It is clear from an examination of these cases that such forms of relief are not equivalent to the Corporations Act oppression remedy in either scope or effectiveness.
An alternate line of cases has held that the court’s power under section 232 is not limited to an action against the company, and extends more broadly to the affairs of a company, including trading trusts.[2] This leaves the current law in a state of uncertainty.
Even if the latter line of decisions represents the law in Victoria, the existing Corporations Act remedy alone will not be sufficient to protect all beneficiaries of trading trusts, because a beneficiary seeking to access the remedy must also be a shareholder in the corporate trustee.[3]
In its review pursuant to the reference made to it by the Victorian Attorney-General the Hon. Robert Clark in October 2013, the Victorian Law Reform Commission (the Commission) has concluded that, in the interests of clarity, simplicity and fairness, there should be a statutory oppression remedy for beneficiaries of trading trusts. This should be effected by amendment of the Trustee Act 1958 (Vic).
The Commission has reached this conclusion after extensive research and consultation with judges, legal practitioners, professional associations, academics and others with knowledge and experience of trusts and corporations law. I thank those who contributed their time and insights.
I would like to thank my fellow Commissioners who worked on this reference. Dr Ian Hardingham QC, Eamonn Moran PSM QC and Alison O’Brien constituted the reference Division, which I chaired. They brought to the reference a wide range of perspectives and a rich knowledge of the law.
Finally, I acknowledge and warmly thank the research team, Dr Anthony Bendall and Jesse Jager, for their valuable work on the reference.
I commend the report to you.
The Hon. Philip Cummins AM
Chair, Victorian Law Reform Commission
January 2015
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Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606; Re Polyresins Pty Ltd (1998) 28 ACSR 671; McEwen v Combined Coast Cranes Pty Ltd (2002) 44 ACSR 244; Trust Company Ltd v Noosa Venture 1 Pty Ltd (2010) 80 ACSR 485.
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Vigliaroni & Ors v CPS Investment Holdings Pty Ltd (2009) 74 ACSR 282; Wain & Ors v Drapac & Ors [2012] VSC 156 (26 April 2012);
Arhanghelschi v Richard Milne Ussher & Ors (2013) 94 ACSR 86.
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Ibid.
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