FEDERAL COURT OF AUSTRALIA

Centuria Property Funds Limited, in the matter of Centuria Property Funds Limited [2024] FCA 202

ORDERS

THE COURT ORDERS THAT:

1.    The period of time in which the applicant was permitted to lodge its amended constitution (Amended Constitution) with ASIC pursuant to s 601GC(2) of the Corporations Act 2001 (Cth) (Act) is extended nunc pro tunc from 1 December 2020 to 16 February 2024 pursuant to s 1322(4) of the Act.

2.    By no later than 10 am on 4 March 2024, the applicant is to:

(a)    email a copy of these orders to the Australian Securities and Investments Commission at legal.document.service@asic.gov.au; and

(b)    notify unitholders of the Centuria 8 Central Avenue Fund No 2 ARSN 605 264 211 (Fund) of these orders by:

(i)    publishing a copy of the orders on its investor portal;

(ii)    sending a copy of the orders by email to those unitholders for whom the applicant holds email addresses; and

(iii)    sending a copy of these orders by express post to the address listed in the register of unitholders to those unitholders for whom the applicant does not hold email addresses.

3.    Subject to further order, order 1 above and declarations 1 to 3 below are stayed until 4 pm on 8 March 2024.

4.    Any person with a sufficient interest in these orders is granted liberty to apply to modify or discharge the orders by emailing my associate or the applicant’s solicitor on 1 business day’s notice by no later than 4 pm on 7 March 2024.

THE COURT DECLARES THAT:

1.    The Amended Constitution took effect on 1 December 2020, after a resolution to amend the constitution was passed by the unitholders of the Fund.

2.    The meeting of the Fund held on 13 December 2023 was properly convened.

3.    The applicant has continued to validly operate the Fund on the terms of the Amended Constitution.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

JACKMAN J:

1    The applicant is the responsible entity of the registered scheme known as the Centuria 8 Central Avenue Fund No 2 (Fund), which co-owns a building in Eveleigh. The applicant seeks an order pursuant to s 1322(4) of the Corporations Act 2001 (Cth) (Act) extending the time to lodge with ASIC the amendments to its constitution (Constitution), which were the subject of a special resolution of members passed on 1 December 2020, and ancillary orders pursuant to s 1322(4) effectively giving those amendments force from the time the resolution was passed.

2    The applicant in its capacity as responsible entity of the Fund is a 50% co-owner of a building located at 8 Central Avenue, Eveleigh, New South Wales (Property). Clause 20.1 of the Constitution provides that:

(a)    Subject to paragraph (b), the Trust will terminate on the date which is 5 years after the Commencement Date unless:

(i)    the Members resolve by Ordinary Resolution at a meeting of Members prior to the 3.5 year anniversary of the Commencement Date that the term of the Trust continues for a further period (or periods) of up to 2 years, expiring no later than the date which is 5.5 years after the Commencement Date;

(ii)    after the term of the Trust is extended pursuant to paragraph 20.1(a)(i), either:

A.    the Members resolve by Unanimous Resolution at a meeting of Members prior to the 5.5 year anniversary of the Commencement Date that the term of the Trust continues for a further period (or periods) of up to 2 years, expiring no later than the date which is 7.5 years after the Commencement Date; or

B.    at the meeting referred to in paragraph 20.1(a)(ii)(A) above, the Unanimous Resolution referred to is not passed but all Members who vote against the resolution are provided with an opportunity to have their Units transferred or redeemed at the prevailing Withdrawal Price. In this instance, the term of the Trust will continue for a further period (or periods) of up to 2 years, expiring no later than the date which is 7.5 years after the Commencement Date as proposed in the resolution; or

(iii)    after the term of the Trust is extended pursuant to clause 20.1(a)(ii), either:

A.    the Members resolve by Unanimous Resolution at any subsequent meeting or meetings of Members to further extend the term of the Trust by further periods each of up to 2 years; or

B.    at any meeting referred to in paragraph 20.1(a)(iii)(A) above, the Unanimous Resolution is not passed but all Members who vote against the resolution are provided with an opportunity to have their Units transferred or redeemed at the prevailing Withdrawal Price. In this instance, the term of the Trust will be extended by further periods each of up to 2 years as proposed in the relevant resolution.

(b)    The Trust terminates on the earliest of:

(i)    the date specified in paragraph (a) above;

(ii)    the date specified by the Responsible Entity as the date that the Scheme is to terminate in a notice given to Members;

(iii)    when the Scheme is Registered, the date fixed by Members as the date that the Scheme is to terminate by a resolution that has been passed at a meeting on a poll by an Extraordinary Resolution; and

(iv)    the occurrence of an event requiring the winding up of the Scheme under a provision of the Corporations Act or any other applicable law.

3    “Unanimous Resolution” is defined as “a resolution which must be passed by 100% of the votes cast by Members entitled to vote on the resolution”.

4    Accordingly, cl 20.1 of the Constitution relevantly provided that the Fund would terminate five years from the Commencement Date of the Fund, being 1 July 2015, subject to certain permitted extensions. Before the amendments that are the subject of this application, cl 20.1 permitted the following maximum extensions:

(a)    by cl 20.1(a)(i), a first extension of up to 5.5 years from the Commencement Date, being to 1 January 2021;

(b)    by cl 20.1(a)(ii), a second extension of up to 7.5 years from the Commencement Date, being to 1 January 2023; and

(c)    by cl 20.1(a)(iii), a third extension of two years, being to 1 January 2025.

5    Upon termination, the applicant is required to wind up the trust in accordance with cl 20.2.

6    On 30 October 2018, the members of the Fund resolved to extend the term of the Fund to 1 January 2021, being the maximum extension permitted by cl 20.1(a)(i).

7    On 1 December 2020, the members of the Fund resolved by special resolution to amend the constitution to extend the permitted maximum for the second extension under cl 20.1(a)(ii) from 7.5 years to 8.5 years, thereby allowing an extension to 1 January 2024, and to change the reference in that provision to “2 years” to read “3 years”. A proposed resolution put to that meeting to then extend the term of the Fund up to the new maximum period for the second extension to 1 January 2024 achieved only 79.93% of the votes cast at the meeting and, therefore, was not passed as a Unanimous Resolution as required by cl 20.1(a)(ii). However, a withdrawal offer was made to all investors who voted against that resolution pursuant to cl 20.1(a)(ii)(B).

8    Unbeknownst to the members and those managing the Fund, the resolution to amend raised the issue that amendments to a managed investment scheme’s constitution take effect only once they have been lodged with ASIC: s 601GC(2) of the Act. In fact, the applicant did not lodge the amendments with ASIC until February 2024. Hence, the applicant’s reliance on the withdrawal offer mechanism under cl 20.1(a)(ii)(B) purported to exercise a right which did not yet exist in the constitution. If this application is not granted, the legal consequences of this oversight for the Fund and its members will be that the amendment to the constitution in late 2020 was not effective, with the result that the Fund terminated on 1 January 2023.

9    On 13 December 2023, proceeding on the basis that the term of the Fund had been validly extended to 1 January 2024 under cl 20.1(a)(ii), a resolution was put to members to permit a third extension to the term of the Fund to 1 January 2026 under cl 20.1(a)(iii). That resolution was required to be unanimous, but only 85.12% of votes cast were in favour. However, on or after 19 December 2023 the dissenting members were sent withdrawal offers in accordance with cl 20.1(a)(iii)(B). All but two of the dissenting members accepted the withdrawal offers.

10    The applicant recently commenced negotiations with its banker, the Commonwealth Bank of Australia, to extend the term and limit of an existing facility so that the withdrawing members could be paid in accordance with the withdrawal offers. It was only then that the applicant realised the problem it faced concerning the 2020 amendments to its constitution. It promptly instructed solicitors to make this application, which came before me as duty judge two days ago. The bank will not finalise the refinance and advance the money to pay the withdrawals unless and until this application is successful.

11    In the last 48 hours, the applicant has notified all members of the Fund of this application. The steps taken to notify members may be summarised as follows:

(a)    a notice advising of the application was uploaded onto the applicant’s online investor portal on 28 February 2024 (Notice);

(b)    members for whom the applicant holds email addresses (being 370 of the 397 members of the Fund) have been emailed a hyperlink via which they can access a copy of the Notice; and

(c)    members for whom the applicant does not hold email addresses (being 27 of the 397 members of the Fund) were mailed a copy of the Notice via Express Post sent on 28 February 2024.

12    As at the present time, only one member has responded to the Notice, requesting instructions on how they may observe the hearing. The applicant has provided those details.

13    The applicant has also notified ASIC of the application and the steps taken to notify ASIC are set out in the affidavit of Ms Sherman affirmed 29 February 2024. ASIC has indicated that it will provide a substantive response in due course.

14    The application is principally advanced under s 1322(4)(d) of the Act, which relevantly permits the Court to extend the period of time for doing any act under the Act and then make consequential or ancillary orders. Before the discretion is enlivened, the Court must be satisfied that no substantial injustice has been or is likely to be caused to any person by reason of the irregularity in failing to comply with s 601GC(2): see s 1322(6)(c). I am satisfied of that matter, especially because the only investors who currently hold units in the Fund are those who decided as recently as December 2023 that they wanted their investment to continue. Indeed, unless the s 1322 order is made, substantial injustice to members will arise because:

(a)    the will of the majority of the members who voted at the meetings of members held on 1 December 2020 and 13 December 2023 will not have been given effect by reason of an oversight in failing to lodge the amendments and the amended constitution;

(b)    investors who voted to extend the term of the Fund will instead have their investment crystallised with potential capital gains tax consequences; and

(c)    the Fund would need to sell its asset (being its 50% co-ownership of the Property), despite the evidence before me suggesting that it is not currently an opportune time to sell office buildings.

15    The only real issue with the application of s 1322(4)(d) is that, whereas the sub-paragraph relates to extending the time to do particular acts, no time is specified in s 601GC(2) with respect to the lodging of amendments with ASIC. However, in Re Centuria Property Funds Ltd [2022] NSWSC 1056; (2022) 162 ACSR 699 at [43], Richmond J made a s 1322(4)(d) order concerning s 601GC(2). His Honour’s conclusion was consistent with other authorities (to which his Honour referred at [42(c)]) where the power under s 1322(4)(d) has been exercised in respect of provisions that do not in terms impose an obligation to take a step within a particular timeframe, but instead make compliance with that timeframe a condition for the validity of some other matter: Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418 at [30] (French J); Re Order of AHEPA NSW Inc [2018] NSWSC 458 at [31] (Black J); Re Murray River Organics Ltd [2019] FCA 931; (2019) 139 ACSR 365 at [32] (Anderson J).

16    I accept the applicant’s submission that the absence of an express timeframe does not matter. Where a statute requires something to be done without specifying a time, the statute is ordinarily construed as requiring that the thing be done within a reasonable time: Lau v Calwell (1949) 80 CLR 533 at 573–4 (Dixon J), 590 (Williams J, with whom Rich J agreed); Plaintiff S297/2013 v Minister for Immigration and Border Protection [2014] HCA 24; (2014) 255 CLR 179 at [37] (Crennan, Bell, Gageler and Keane JJ). Once a reasonable time has expired, as it has in the present case, the s 1322(4)(d) order will operate to extend the period of time allowed for the doing of an act.

17    I also need to be satisfied of at least one of the three criteria in s 1322(6)(a) in order for the discretion in s 1322(4)(a) to be enlivened. I am satisfied that all three criteria are satisfied on the evidence before me, in that:

(a)    the failure to lodge with ASIC was procedural in nature;

(b)    on the basis of Mr Hoskins’ evidence, the applicant acted honestly in respect of the failure; and

(c)    it is just and equitable for the order to be made, given the prejudice that would occur to members as referred to above if the order is not made.

18    In my view, it is appropriate to make ancillary orders to the effect that the modifications to the constitution take effect, and have taken effect, from the time they were passed on 1 December 2020: see Re Centuria Property Funds Ltd (2022) 162 ACSR 699 at [42(d)] and the cases cited therein. Similarly, the Court should make an ancillary order validating the operation of the Fund: see ibid at [44]–[47].

Associate:

Dated:    6 March 2024