Premium Income Fund Action Group Incorporated v Wellington Capital Limited [2011] FCA 698

Premium Income Fund Action Group Incorporated v Wellington Capital Limited [2011] FCA 698

The modifications made to the Premium Income Fund Scheme Constitution via the 9 May and 16 May deed polls, which changed the method for determining the issue price of units, constituted a modification of members' contractual rights under the constitution and adversely affected those rights. The responsible entity failed to reasonably consider all relevant rights in making the modifications, thus the changes were contrary to s 601GC(1)(b) of the Corporations Act 2001 (Cth). Relief restraining the issue of units under the Rights Issue was appropriate, but not regarding units already issued under the Placement due to third party intervention.

Parties
First Plaintiff: Premium Income Fund Action Group Incorporated (NSW Incorporated Association No. 9894759); Second Plaintiffs: Mark Robert Hodges and Charles Robert Hodges as custodian for Premium Income Fund Action Group Incorporated (NSW Incorporated Association No. 9894759); First Defendant: Wellington Capital Limited (ACN 114 248 458); Second Defendant: Sydney Robert Pitt; Third Defendant: Jennifer Joan Hutson; Fourth Defendant: Mary Anne Greaves; Amicus Curiae: Australian Securities and Investments Commission
Jurisdiction
Australia
Judgment Date
20 June 2011
Procedural Posture
Civil / Final Judgment
Outcome
declarations and injunction granted in respect of the Rights Issue; costs awarded to plaintiffs; no relief regarding already issued Placement units
Legal Topics
Managed Investment Schemes, Modification of Constitution, Members' Rights, Corporations Act 2001 (cth) S 601 Gc(1)(b)
Corporations Law Managed Investment Schemes Modification of Constitution Members' Rights Corporations Act 2001 (cth) S 601 Gc(1)(b)

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Parties

Premium Income Fund Action Group Incorporated (NSW Incorporated Association No. 9894759)

First Plaintiff

Mark Robert Hodges and Charles Robert Hodges as custodian for Premium Income Fund Action Group Incorporated (NSW Incorporated Association No. 9894759)

Second Plaintiffs

Wellington Capital Limited (ACN 114 248 458)

First Defendant

Sydney Robert Pitt

Second Defendant

Jennifer Joan Hutson

Third Defendant

Mary Anne Greaves

Fourth Defendant

Australian Securities and Investments Commission

Amicus Curiae

Procedural Posture

Civil / Final Judgment

Legal Issues

  1. 1 Whether modifications to the PIF Scheme Constitution by deed poll dated 9 May 2011 and 16 May 2011 were contrary to s 601GC(1)(b) of the Corporations Act 2001 (Cth)
  2. 2 Whether the responsible entity reasonably considered that the change would not adversely affect members' rights
  3. 3 Whether relief should be granted to restrain the issue or allotment of units pursuant to the Rights Issue

Ratio Decidendi

The modifications made to the Premium Income Fund Scheme Constitution via the 9 May and 16 May deed polls, which changed the method for determining the issue price of units, constituted a modification of members' contractual rights under the constitution and adversely affected those rights. The responsible entity failed to reasonably consider all relevant rights in making the modifications, thus the changes were contrary to s 601GC(1)(b) of the Corporations Act 2001 (Cth). Relief restraining the issue of units under the Rights Issue was appropriate, but not regarding units already issued under the Placement due to third party intervention.

Court Disposition

declarations and injunction granted in respect of the Rights Issue; costs awarded to plaintiffs; no relief regarding already issued Placement units

Orders

  • Declaration that modification of PIF Scheme Constitution by deed poll dated 9 May 2011 was and is contrary to s 601GC(1)(b) in relation to the Rights Issue
  • Declaration that modification of PIF Scheme Constitution by deed poll dated 16 May 2011 was and is contrary to s 601GC(1)(b) in relation to the Rights Issue