Lewski v Australian Securities & Investments Commission (No 2) [2017] FCAFC 171

Lewski v Australian Securities & Investments Commission (No 2) [2017] FCAFC 171

The Full Court held that once amendments to a managed investment scheme constitution are lodged with ASIC, they are effective until set aside, reflecting both statutory intent and commercial certainty. Accordingly, the responsible entity (APCHL) and its directors could not be held in breach of statutory duties for acting consistently with the apparent constitution as lodged, absent fraud or knowledge of invalidity. As the acts (including payments and resolutions) alleged against APCHL were taken in accordance with the constitution as it then appeared, and as the directors were exonerated on similar factual grounds, the penalty and declaration orders against APCHL were to be set aside.

Jurisdiction
Australia
Judgment Date
01 November 2017
Procedural Posture
Appeal / Full Court: Appeals by Directors and Cross Appeals by ASIC From Penalty and Declaration Orders After Trial
Outcome
Appeals allowed; cross-appeals dismissed; declarations and orders against APCHL set aside; trial judgment replaced with dismissal of ASIC's originating claim against appellants; costs orders made in favour of appellants.
Legal Topics
['responsible Entity Duties' 'managed Investment Schemes' 'modification of Trust Constitutions' "directors' Duties of Care and Diligence" "members' Rights Under Schemes" 'related Party Transactions' 'amendments to Managed Investment Scheme Constitutions' 'statutory Interpretation (corporations Act 2001)' 'validity of Deed Execution and Lodgment' 'strict Liability Under S 601 Fc']
['corporations Law'] ['responsible Entity Duties' 'managed Investment Schemes' 'modification of Trust Constitutions' "directors' Duties of Care and Diligence" "members' Rights Under Schemes" 'related Party Transactions' 'amendments to Managed Investment Scheme Constitutions' 'statutory Interpretation (corporations Act 2001)' 'validity of Deed Execution and Lodgment' 'strict Liability Under S 601 Fc']

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Procedural Posture

Appeal / Full Court: Appeals by Directors and Cross Appeals by ASIC From Penalty and Declaration Orders After Trial

Legal Issues

  1. 1 ['Whether APCHL (the responsible entity) breached duties under s 601FC by effecting amendments to a scheme constitution in its own favour without proper consideration and by making payments not provided for under the constitution;' "Whether directors' alleged breaches exculpate or implicate APCHL itself given parallel conduct;" 'If amending a constitution in breach of an internal limitation but in compliance with the Corporations Act is effective until set aside;' 'Whether payments to a responsible entity not provided by the constitution contravene s 601FC(1)(k);' 'Whether, at law, a deed executed undated but later dated is effective from execution or dating;' "If the statutory regime confers 'interim validity' on amendments to scheme constitutions once lodged with ASIC, even if those amendments are internally unauthorised or later set aside."]

Ratio Decidendi

The Full Court held that once amendments to a managed investment scheme constitution are lodged with ASIC, they are effective until set aside, reflecting both statutory intent and commercial certainty. Accordingly, the responsible entity (APCHL) and its directors could not be held in breach of statutory duties for acting consistently with the apparent constitution as lodged, absent fraud or knowledge of invalidity. As the acts (including payments and resolutions) alleged against APCHL were taken in accordance with the constitution as it then appeared, and as the directors were exonerated on similar factual grounds, the penalty and declaration orders against APCHL were to be set aside.

Court Disposition

Appeals allowed; cross-appeals dismissed; declarations and orders against APCHL set aside; trial judgment replaced with dismissal of ASIC's originating claim against appellants; costs orders made in favour of appellants.

Orders

  • ['Australian Property Custodian Holdings Ltd joined as respondent to appeal.' 'Appeal(s) allowed.' 'Cross-appeal(s) dismissed.' "Orders and declarations made by trial judge on 2 December 2014 set aside; plaintiff's claim by originating process dismissed." 'First respondent to pay costs of defendants in the trial...