On 5 November 2014 in Wellington Capital Limited v Australian Securities & Investments Commission  HCA 43 the High Court considered the powers of a responsible entity of a managed investment scheme. The Court examined key provisions of Chapter 5C of the Corporations Act 2001 (Cth) as well as the relevant scheme constitution which was in a common form.1
In dismissing an appeal from a judgment of the Full Court of the Federal Court, the High Court confirmed that the responsible entity (Wellington Capital Limited) acted beyond power in giving an instruction to the scheme custodian to distribute certain scheme property (namely shares acquired by the scheme in an unlisted public company) to the unit holders in specie.
In what is becoming a common theme on the current bench, Gageler J published his own reasons, however his Honour was in agreement with the joint judgment of French CJ, Crennan, Kiefel & Bell JJ.
The joint judgment held:
The Scheme Constitution, properly construed in the light of the relevant provisions of the Corporations Act, confined the return of capital to the winding up process and to cash payments annexed to the periodic distribution of income.2
The High Court was not in complete agreement with the Full Court of the Federal Court, holding that the latter’s finding that “absent the consent of all beneficiaries it is not open to a trustee simply to transfer the trust property to the beneficiaries” was “too broad in the context of this case” and adding that “It is not necessary to explore the matter further as the outcome of the present appeal is to be determined by reference to the Scheme Constitution construed in its statutory setting. 3
It is clear that those advising responsible entities can and should approach the task of interpreting the provisions of a scheme constitution “through the prism of trust law,” remembering however, that “the extent to which general principles of the law relating to trusts apply to a responsible entity’s functions under a scheme constitution depends upon the purpose of the statutory trust, other provisions of the Corporations Act and the terms of the scheme constitution.” 4