Watershed Decision Restricting Responsible Entity's Power to Amend Constitution
The Prime Trust Action Group welcomes the recent decision of the Federal Court of Australia (Premium Income Fund Action Group Incorporated v Wellington Capital Ltd) which clarifies the circumstances in which a Responsible Entity may amend a Trust's Constitution without unitholder approval. Section 601GC(1)(b) of the Corporations Act enables a Responsible Entity to unilaterally amend the Constitution where the change does not adversely affect members' rights.
In the above decision, Justice Gordon found that members' rights are the contractual and equitable rights conferred on members by the Constitution and therefore effectively encompass all powers, rights and obligations contained in the Constitution.
In relation to Prime Trust, the Action Group believes that unitholders had the right for APCH, as Responsible Entity, to be remunerated as per the fees stipulated in the original Constitution. When APCH unilaterally changed the Constitution in order that it could receive a new fee, a listing fee of $33 million, we believe that this was clearly adverse to members' rights and that such a change could only be implemented after seeking and obtaining unitholder approval. The Action Group also notes that a Constitution is a contract between the Responsible Entity and unitholders and defines how the Trust is to be operated and therefore any material change sought by one party obviously requires the consent of the other party.
The Action Group continues to believe that the listing fee of $33 million must be immediately returned to the Trust together with interest at commercial rates. The Prime Trust Action Group believes that the case against APCH over payment of the $33 million listing fee was already strong and is only strengthened further by the above Federal Court decision. The Action Group also believes that the payment of the listing fee breached several other important sections of the Corporations Act. Further information about the recent Federal Court decision is provided HERE
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