Century Funds Management Limited v Opus Capital Limited [2011] FCA 78 (10 February 2011)

Last Updated: 10 February 2011

FEDERAL COURT OF AUSTRALIA

Century Funds Management Limited v Opus Capital Limited [2011] FCA 78

Citation:		Century Funds Management v Opus Capital Limited [2011] FCA 78
Parties:		CENTURY FUNDS MANAGEMENT LIMITED v OPUS CAPITAL LIMITED
File number(s):		NSD 46 of 2011
Judge:		JACOBSON J
Date of judgment:		10 February 2011
Catchwords:		PRACTICE AND PROCEDURE – application for interlocutory injunction – managed investment scheme – meeting of members – alleged misleading and deceptive statements to members – application to restrain comments by responsible entity – application refused on balance of convenience
Legislation:		Trade Practices Act 1974 (Cth) s 52
Cases cited:		Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 applied Beecham Group v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 cited City Pacific Limited v Bacon (2009) 70 ACSR 418 followed Fraser v NRMA Holdings Limited (1995) 55 FCR 452 referred to Lachlan Reit Limited v Garnaut [2010] VSC 399 followed
Date of hearing:	7 February 2011
Date of last submissions:	7 February 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	34
Counsel for the Applicant:	Mr G Lucarelli
Solicitor for the Applicant:	Johnson Winter & Slattery
Counsel for the Respondent:	Mr D Savage SC with Ms J Chapple
Solicitor for the Respondent:	McMahon Clarke Legal

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 46 of 2011

BETWEEN:	CENTURY FUNDS MANAGEMENT LIMITED Applicant
AND:	OPUS CAPITAL LIMITED Respondent

JUDGE:	JACOBSON J
DATE OF ORDER:	10 FEBRUARY 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The Applicant’s Notice of Motion be dismissed.
2. The Applicant pay the Respondent’s costs of the motion.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 46 of 2011

BETWEEN:	CENTURY FUNDS MANAGEMENT LIMITED Applicant
AND:	OPUS CAPITAL LIMITED Respondent

JUDGE:	JACOBSON J
DATE:	10 FEBRUARY 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

Introduction and Overview

1. The applicant (“Century”) is the responsible entity for a number of managed investment schemes. Part of Century’s business strategy appears to be to take over the management of funds that are managed by other responsible entities.
2. By notice dated 13 January 2011, Century, through two members of a fund known as the Opus Income and Capital Fund No 21 (“the Fund”) called a meeting to remove the respondent (“Opus”) as the responsible entity for the Fund and to appoint Century in its place. The meeting is due to be held on 28 February 2011.
3. On 28 January 2011, Opus consented to interlocutory orders made by Perram J relating to the publication or further dissemination of a memo dated 10 January 2011 which contained a number of statements made by Opus as to the suitability of Century to continue to be the responsible entity for the Fund.
4. The memo of 10 January 2011 had been provided by Century to some large unit holders in the Fund or to their investment advisers.
5. Century now seeks further interlocutory relief against Opus in relation to statements made in a brochure which expresses opinions by Opus as to the desirability of the appointment of Century as responsible entity of the Fund.
6. The brochure was published by Opus after 28 January 2011 but Century does not allege contempt of the orders made by Perram J. Rather, Century contends that the brochure, although using different wording, repeats some of the statements that were the subject of the earlier complaints.
7. Century contends that those statements, as well as several further statements in the brochure are misleading. It seeks relief in very wide terms to restrain Opus from distributing or publishing to any unit holder of the Fund (or any financial adviser for such unit holder) any information with respect to the forthcoming meeting of unit holders without the prior leave of the court or the consent of Century.
8. The relief claimed by Century is set out in its Notice of Motion filed in Court on 7 February 2011. The relief includes a claim for Opus to publish what are said to be corrections of the allegedly misleading statements made in the brochure.

Whether there is a prima facie case

9. The statements that are said to be misleading are set out in an affidavit sworn by Mr Paul Reidy on 4 February 2011. Mr Reidy is a partner in the firm of Johnson Winter & Slattery, the solicitors for Century. Mr Reidy swears to the falsity or inaccuracy of the statements made on a hearsay basis.
10. This evidence was not objected to by Senior Counsel for Opus but he pointed to the unsatisfactory nature of the evidence as a matter which goes to the question of whether there is a triable issue.
11. There are six statements which are said to be misleading. The question of whether the statements raise a triable issue turns upon whether Century has established a sufficient likelihood of success to justify in the circumstances of the case the preservation of the “status quo” pending a trial: Australian Broadcasting Corporation v O’Neill [2006] HCA 46; (2006) 227 CLR 57 at [65] (“ABC v O’Neill”).
12. The necessary degree of probability of success is dependant upon the nature of the rights Century seeks to assert and the practical consequences likely to flow from the orders that are sought: ABC v O’Neill at [65] citing Beecham Group v Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR 618 at 622.
13. What is to be borne in mind in the present case is that Century seeks to place an embargo upon the right of Opus to communicate information to unit holders about the suitability of Century to manage the fund. That is a matter which affects the question of balance of convenience to which I will refer later.
14. However, in considering each of the statements referred to by Century in its evidence, it seems to me to follow from the observations of the High Court that, at very least, I would need to be satisfied that there is a very strong likelihood of success at a final hearing on the question of whether the statements are misleading.
15. In my opinion, Century has not established a triable issue in that sense, in respect of any of the questions.
16. Given the urgency of the application and the need for me to publish reasons as quickly as possible, I do not propose to set out the detail of each of the statements in the brochure. They are conveniently reproduced in the written submissions of Mr Savage SC and Ms Chapple who appeared for Opus.
17. Whilst I accept the force of much of what is said by counsel in those submissions, it seems to me that there is room for debate in relation to each of the statements as to whether what is said in the brochure might be misleading in light of the material that is omitted from the brochure as asserted in the evidence of Mr Reidy.
18. Nevertheless, that does not satisfy the test stated by the High Court in ABC v O’Neill. The fact that there might be room for debate is not to the point in establishing the necessary degree of likelihood of success at a final hearing.
19. Moreover, as a Full Court said in Fraser v NRMA Holdings Limited (1995) 55 FCR 452 at 467-468, where a contravention of s 52 of the Trade Practices Act 1974 (Cth) (or its analogues) is alleged upon the basis of a failure to make full and fair disclosure of information, the applicant carries the onus of establishing how that which was not said had the potential to mislead. The applicant must establish materiality and this will be difficult where the statement involves questions of commercial judgment and matters of degree about which there is room for a range of honestly and reasonably held opinions.
20. That is the position in the present case.

Balance of Convenience

21. Ultimately, the question which is raised by the present application turns upon a consideration of the balance of convenience, informed by the context in which the complaints are made by Century and the relief it seeks.
22. This question has been considered in two authorities which in my view amply explain the reasons why interlocutory relief ought not to be granted. It is true that in each of those authorities the moving party sought to restrain the holding of the meeting or the proposal of the impugned resolution. However, in my opinion, the considerations which were applied in those cases are equally apt in the present.
23. In City Pacific Limited v Bacon (2009) 70 ACSR 418, Dowsett J observed at [13] that it may be difficult to apply the notion of misleading conduct to the conduct of a member in requisitioning a meeting to remove a responsible entity. His Honour said at [13]–[14]:

[13] It may be difficult to apply the notion of misleading and deceptive conduct to the conduct of a member in requisitioning a meeting of this kind. There will often be significant disagreement among members as to facts which are said to justify a proposed resolution. A function of the meeting of members will be to allow them an opportunity to hear different points of view and decide how each can best protect his or her own interests. Members would not resolve any disagreement as to relevant facts as a court would.

[14] Members who disagree with statements made in support of a proposed resolution cannot simply resort to the court in order to determine whether or not those facts are true. Such procedure, if it were available, would presumably also be applied to statements made at a meeting. The practical difficulties are obvious. It would be an abuse of the judicial process and would undermine the proper function of the meeting of members. Even if there is an arguable case for remedying misleading conduct by intervening in the conduct of a meeting, the court would normally be careful not to do so in areas where the dispute may be more a difference of opinion than a case of truly misleading or deceptive conduct.

24. In Lachlan Reit Limited v Garnaut [2010] VSC 399 at [30], Judd J agreed with the observations of Dowsett J set out above.
25. Judd J said at [28] that he shared the doubts expressed by Dowsett J as to the difficulty in applying the notion of misleading conduct to statements made in the debate leading to a meeting of members. He went on to say that the difficulty is apparent when the concept of misleading conduct is applied to an ongoing debate involving expressions of opinion and prediction in the course of advocating for a particular outcome. The ground will inevitably shift as parties adjust their platform to respond to opposing arguments.
26. As Judd J went on to say at [28]:

It is an inherently dynamic process, incapable of a useful analysis, if one is to be undertaken, as to the accuracy of statements until its conclusion. The intervention of a court during that process, to adjudicate on statements and advocacy, would be premature, and a significant intrusion upon the member’s rights to call for and participate in the meeting process.

27. Counsel for Century, Mr Lucarelli, relied on a passage from Judd J’s judgment to support the proposition that Opus is acting in breach of its duties in adopting a position other than a neutral one by advocating the rejection of Century.
28. It is true that Judd J pointed out at [38] that a responsible entity seeking to urge unit holders to vote against a resolution for its removal is in a position of conflict of duty and interest and “should maintain a neutral position in the meeting process”.
29. But I do not think it follows from this that a party in the position of Opus should refrain from making any statements at all.
30. This is because, as Judd J said at [40], in the end it is the interest of the investors that is paramount. They have an interest in receiving correct information and in not being misled, but they also have an interest in the convening of the meeting so as to be able to vote on the resolutions.
31. Whilst Century does not seek to restrain the vote, the outcome of the matter will ultimately depend upon the unit holders’ evaluation of all of the material put before them, including what may be said in the course of the meeting.
32. Century is well able to respond to matters stated by Opus. It is for Century to take this course rather than to seek to use the Court as a filter for what may or may not be said to unit holders prior to the meeting.
33. In my view, that is sufficient to dispose of Century’s motion for interlocutory relief.
34. The orders to be made are that the motion be dismissed with costs.
    

I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

Associate:

Dated: 10 February 2011