3. February 2011 09:16
The decision concerned an application by unit-holders in a trust fund for declarations regarding the interpretation of the trust deed. The fund was a registered managed investment scheme and was therefore regulated by the Corporations Act 2001 (Cth). The relevant clauses dealt with redemption of units.
Section 601GA of the Act provides, inter alia, that if members are to have the right to withdraw from the fund when it is illiquid, the mechanisms for doing so must be specified in the Constitution (that is, the trust deed). No such mechanism was set out in the trust deed. Therefore, the rights to withdraw that were specified in the trust deed could only be exercised when the trust was liquid (s 601GA(4)).
The plaintiffs argued that s 601KA(3) merely suspended the right to redeem until the fund was liquid. The Court disagreed, stating that the trust deed did not allow for redemption of units other than on the dates specified in the relevant clause (clause 20.4; see -). Further on this point, s 601KA(4) provides that a registered scheme is liquid if its liquid assets account for at least 80% of the value of the scheme property. However, it would be impractical to calculate this on a daily basis without a daily valuation of the entirety of the scheme property. It would not, therefore, be possible to know on what day redemption should occur aside from the dates specified in the trust deed.
In obiter the Court stated that while it was not necessary to determine in this case, it appeared that as a matter of principle the constitution of a managed investment scheme should be interpreted in accordance with the general principles of construction of articles of association of a company though the surrounding circumstances might be more limited than in the case of commercial contracts: -. Nonetheless, comments throughout the later part of the judgment show consideration of this interpretative method but note that no different result would occur: for example,  and .
Relevant paragraphs of Ford