Oppression remedies for unit trusts

It is an unfortunate fact of life that running a business will not always go smoothly, and occasionally disputes will arise between business owners and business investors. A unit trust is a popular structure for conducting a business, but it has traditionally presented business owners and investors with some difficulty when seeking to resolve their disputes. 

It is now the case that Victorian law will allow disputes involving a unit trust to be resolved using some of the mechanisms and remedies available under the Corporations Act 2001. The availability of these mechanisms and remedies is unique to Victoria, and access to them is not available in other States.

The Victorian Supreme Court has held that oppression remedies available under section 232 and 233 of the Corporations Act 2001 can be applied to provide relief to the beneficiaries of a trust in circumstances where the trustee is a company.

Prior to 2009, it was established law that oppression remedies were only available to shareholders in a company. However, in Vigliaroni, Davies J of the Victorian Supreme Court criticised the failure of previous authorities to take into account the effect of section 53 of the Corporations Act. In broad terms, Her Honour interpreted the definition of a company’s affairs in section 53 to include the dealings of a company in its capacity as trustee. As a result, the reference to a company’s affairs in section 232 means the scope of oppression remedies will be available to remedy oppressive conduct of a company in its capacity as a corporate trustee. Her Honour also relied upon the comments of the High Court in Campbell v Back Office Investments that sections 232 and 233 were to be construed broadly and any limitation imposed on their scope by case law was to be approached with caution.

The reasoning in Vigliaroni was approved by Ferguson J in her decision in Wain v Drapac, and it should be noted that when this decision was appealed, the notice of appeal specifically raised Ferguson J’s reliance on Vigliaroni as a grounds for appeal. While the Vigliaroni decision was not expressly considered by the Court of Appeal in its assessment of the Drapac v Wain appeal, the Court of Appeal was nevertheless given the opportunity to overturn the reasoning in Vigliaroni, and it did not do so. It also upheld the judgment of Ferguson J at trial.

While this reasoning remains authoritative in Victoria, it sits uncomfortably with conflicting authority in New South Wales, which maintains that the oppression remedies are only applicable to provide relief to shareholders. On 6 May 2015, the Victorian Law Reform Commission (VLRC) tabled a report on oppression remedies in trading trusts, which specifically noted the Commercial Bar Association of Victoria’s submission that the authority in Vigliaroni is correct. The report acknowledged the difficulty of conflicting authority in New South Wales and Victoria, and proposed amendments to the Trustee Act 1958 to clarify the remedies available to beneficiaries.

For more information, or for advice on company or trust disputes, please contact:

Ali Erskine
Principal
T 03 5226 8524
E aerskine@ha.legal