Can a unit trust be wound up by the oppression remedies

The Corporations Act 2001 (Cth) (Corps Act) grants the Courts the power to award remedies under section 233, specifically designed to address situations of oppression within corporate entities under section 232.  These remedies, also known as the “Oppression Remedies”, aim to resolve situations where a company’s conduct unfairly prejudices its members or shareholders.  While primarily focused on companies, the Court may, in certain circumstances, extend the scope of the Oppression Remedies to include trusts by virtue of section 53 of the Corps Act.

Extension of scope of the oppression remedy

Section 53 of the Corps Act extends the scope of what constitutes the ‘examinable affairs of a company’ allowing the Court to consider not only the company’s internal operations but also certain external transactions and relationships that may impact its governance or financial position. 

53 meaning of affairs – body corporate other than a CCIV

“For the purposes of the definition of examinable affairs in section 9, section 53AA, 232, 233 or 234, paragraph 461(1)(e), section 487, subsection 1307(1) or section 1309, or of a prescribed provision of this Act, the affairs of a body corporate (other than a CCIV) include:

(a) the promotion, formation, membership, control, business, trading, transactions and dealings (whether alone or jointly with any other person or persons and including transactions and dealings as agent, bailee or trustee), property (whether held alone or jointly with any other person or persons and including property held as agent, bailee or trustee), liabilities (including liabilities owed jointly with any other person or persons and liabilities as trustee), profits and other income, receipts, losses, outgoings and expenditure of the body; and…”

[Bold is our emphasis]

Section 53 of the Corps Act, on its own, has no direct impact on how the Courts interact with companies, other than broadening the power of investigation into their affairs.  However, an application of this provision arises when the Courts consider a case that involves a corporate trustee, an Oppression Remedy and section 53.

This application of section 53 was explored by Davies J of the Supreme Court of Victoria in the case of Vigliaroni v CPS Investment (2009) 74 ACSR 282 (Vigliaroni).  After considering the wording of section 233 and the effect of section 53, Davies J adopted the following position:

• “In my view, s 53 puts beyond any doubt that the Court’s jurisdiction and powers under the statutory oppression provisions are not circumscribed in respect of a trustee company…”
• “The only limitation imposed on the Court on the kind of order that it can make under s 233 is the requirement for the order to be one that that the Court considers appropriate “in relation to the company”. The phrase “in relation to” requires a rational and discernible link between the remedy and the company in which the oppression has occurred.  In other words, any remedy granted under s 233 must not be extraneous to achieving the object of relieving the oppression and must be appropriate to putting an end to the causes of oppression, including where the company acts as trustee and the oppression relates to the affairs of the trust.”
• [Bold is our emphasis]

This judgment clarifies that the only limitation on the Court’s power to grant a remedy under section 233, once the elements of section 232 are established, is that the remedy must be deemed appropriate “in relation to the company.”

By utilising section 53 of the Corps Act to expand the scope of examinable company affairs, it becomes theoretically possible for the Court to apply oppression remedies – such as the winding up of a trust – where a clear connection between the oppression and the trust’s affairs is established.

Can a trust be wound up by the oppression remedies?

The case of Vigliaroni has established that the remedies found in section 233 can be applied to a trust via section 53 of the Corps Act, provided that remedy is deemed appropriate in relation to the company in its capacity as trustee of a trust.  Notwithstanding this, the Court will only consider granting a section 233 remedy to a trust if it believes that:

• the remedy is not extraneous;
• it will achieve the objective of relieving the oppression; and
• it is an appropriate way to put an end to the cause of the oppression.

Thus, since the remedies under section 233 can be applied to a trust via section 53, and since section 233(a) includes the authority to wind up a company, a trust can similarly be wound up through the Oppression Remedies outlined in the Act, as long as it meets the specified requirements and relates to a company in its capacity as trustee.

While there are conflicting perspectives as to the application of section 233 in relation to unit trusts, there is widespread support for the interpretation in Vigliaroni.

Links and further references

Legislation

Corporations Act 2001 (Cth)

Cases

Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606

Vigliaroni v CPS Investment (2009) 74 ACSR 282

Further information about shareholder oppression

If you need advice on shareholder oppression involving a unit trust, contact us for a confidential and obligation free and discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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