Australia: Macquarie Capital Advisers Ltd v BrisConnections Management Co Ltd

Macquarie Capital Advisers Ltd v BrisConnections Management Co Ltd
[2009] QSC 82

Many readers will be familiar with the controversial attempt by Australian Style Investments Pty Ltd (ASI) to wind up the BrisConnections Management Trust and BrisConnections Investment Trust (together theBCS). However, many may not be aware of the injunctive proceedings brought by Macquarie Capital Advisers Ltd and Macquarie Bank Limited (together Macquarie) against BrisConnections Management Co Ltd (BMC), the responsible entity of BCS, in the Supreme Court of Queensland earlier this month.¹ This case confirmed the superior rights of unitholders under the Corporations Act 2001 (Cth) to call meetings, and propose and vote on resolutions despite the effect such resolutions may have on the contractual rights of a third party.

Background

BSC was awarded a concession to finance, build and maintain the Airport Link toll road in Brisbane. The Airport Link project is reputed to be the single biggest infrastructure project presently underway in Australia. Australian Style Investments Pty Ltd (ASI), a company operated by Nicholas Bolton, acquired just under 20% of BCS by purchasing stapled units in BSC. The units are partly paid and subject to two calls of $1 per unit (the first call being due on 29 April 2009).

The $1 calls are to be used to pay down bridging finance that has been acquired by BCS from Macquarie and others to finance the project. It is a term of the financing agreement between the parties that BMC must not vary the constitutions of BCS or permit them to be varied without the prior written consent of Macquarie, in particular in respect of the calls on the unpaid units.

ASI used its holdings to requisition a meeting of members to consider a number of resolutions including one to wind up BCS, and another to amend the constitutions of BCS to allow unitholders to vote to postpone the $1 calls. Mr Bolton's view was that by delaying the calls and taking control of BCS through ASI, he could refinance and better realise the discount between the unit price and the net tangible asset value of BCS.²

Arguments and findings on the Macquarie injunction proceedings

Macquarie argued that the statutory power contained in s 601GC of the Corporations Act to amend the constitutions of the trusts by special resolution did not apply where the amendments would result in BMC breaching its contractual obligations to Macquarie.

Macquarie sought an injunction against ASI, to prevent it from interfering with BMC's contractual arrangements with Macquarie (the Tortious Interference argument).

Dutney J found that BMC has a statutory obligation to call the meeting and to permit the special and extraordinary resolutions to be put and voted on. Accordingly, an injunction did not lie to restrain BMC from allowing unitholders to vote on those resolutions.

For the same reason, specific performance of the negative covenant not to amend the constitution without consent was refused.

In dealing with the Tortious Interference argument, Dutney J stated that what was required to justify conduct that would otherwise be tortious interference with another's contractual right is the protection of a superior right. ASI was held to have the superior right as afforded by ss 252B and 252L of the Corporations Act which allows the exercise of control over the actions of the BMC as responsible entity by resort to the members in general meeting. Dutney J concluded that this right was superior to Macquarie's "quasi-proprietary rights", and as a consequence an injunction did not lie at the suit of Macquarie to prevent ASI's conduct.

Current status of the matter

In a move which received substantial media coverage, ASI sold its voting rights for $4.5 million to Theiss-John Holland (one of the companies involved in the construction of the Airport Link), which resulted in ASI's voting rights being used to defeat its own resolutions. This resulted in BMC avoiding any breach of its contractual arrangements to Macquarie and achieved the same outcome as injunctive relief.

Interestingly, another substantial unitholder, Brisbane Toll Road Link Pty Ltd, gave notice to BMC late last week to requisition a meeting of unitholders of BCS to, amongst other resolutions, consider postponing the call for the second instalment.

It will be interesting to see how Macquarie approaches this further attempt to bring about a breach of its financing arrangements with BCM.

Footnotes

1 Macquarie Capital Advisers Ltd v Brisconnections Management Co Ltd [2009] QSC 82

2 Brisconnections Management Co Ltd v Australian Style Investments Pty Ltd [2009] VSC 128 at paras 88–90

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