Wellington Capital Limited v Australian Securities and Investments Commission [2014] HCA 43
Wednesday 5 November 2014 @ 1.43 p.m. | Corporate & Regulatory
The High Court has unanimously dismissed the appeal in the case of Wellington Capital Limited v Australian Securities and Investments Commission [2014] HCA 43. In an appeal case from the Full Federal Court, the High Court held that the responsible entity of a managed investment scheme, being Wellington, was not authorised by the scheme constitution to distribute scheme property in specie to unit holders.
Facts
Wellington had appointed Perpetual Nominees Ltd as its agent to hold scheme property on its behalf. On 4 September 2012, Wellington sold scheme assets to Asset Resolution Ltd (ARL) in exchange for the issue of some 830 million shares in ARL to Perpetual. The disposed scheme asset represented 41% of the value of assets comprising the scheme property and netted a public value of $90.75 million. On the same day, Wellington instructed Perpetual to transfer the ARL shares held by Perpetual to the unit holders in the scheme in proportion to the number of units held by each unit holder. That transfer was effected on the following day.
ASIC Challenge
The Australian Securities and Investments Commission brought the matter before the Federal Court to challenge the validity of Wellington’s distribution. The matter was originally dismissed but was subsequently brought before the Full Federal Court where it was held that the in specie distribution was beyond the power of Wellington under the scheme constitution. Consequently, the distribution was found to have contravened s601FB(1) of the Corporations Act. Section 601FB(1) required Wellington to operate the scheme and perform the functions conferred on it by the scheme's constitution and by the Corporations Act.
High Court Decision
The High Court dismissed the appeal from the Full Federal Court. It held that when properly construed, the scheme constitution confined the return of the capital to specified circumstances and did not authorise Wellington to make in specie distribution of scheme property to unit holders.
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