For those who work with managed investment schemes
(MIS) or, indeed, trading trusts structured as
unit trusts, the decision of the Full Court of the Federal Court in
ASIC v Wellington Capital Ltd  FCAFC 52 (28 May
2013) is troubling. The Court held that, despite the presence in a
MIS constitution of a universal or plenary powers clause of the
type commonly seen in the Australian market, a responsible entity
did not have power to distribute trust assets in specie to
the unit holders. In overturning an ex tempore decision of
Jagot J at first instance1 the Court took a narrow
interpretation of the terms of the universal powers clause.
However, beyond the interpretation question, the Court appeared to
conflate trustees' powers with the duties incumbent upon them
in exercising their powers. There is also some puzzling analysis,
at first instance and in argument in the appeal, of the
relationship between universal powers clauses in an MIS
constitution and s124(1) of the Corporations Act 2001 (the
Act), which gives companies the legal capacity and
powers of an individual.
The decision means that parties should review their
constitutions to ensure they contain an express power to distribute
assets in specie, but responsible entities may also need
to approach the court for forgiveness in relation to past
distributions in specie where there was no such express
power2. The case also raises the broader question of the
operational scope and effect of universal powers clauses generally;
if distributions in specie are not included, what else is not?
Should parties now consider enumerating in detail all of the things
they wish to empower a responsible entity or trustee to do,
mimicking the pre-s124 situation with companies and their long-form
memoranda of association?
In this article it is argued that universal powers clauses mean
what they say and should, as a matter of commercial construction,
be given the widest possible scope of operation, consistent with
market expectations. Investors are protected not by a restricted
interpretation of their meaning but by the inbuilt control imposed
on all trustees, ie an obligation to discharge their fiduciary
burden, at the core of which is the duty to act in the best
interests of the beneficiaries.
A company known as Wellington Capital Ltd was the responsible
entity of a managed investment scheme structured as a unit trust
known as the Premium Income Fund (the Fund).
Following certain transactions by which some of the Fund's
assets were transferred to a company in exchange for shares in that
company, those shares were distributed in specie to the
unit holders of the Fund in proportion to their unit holdings. The
units were not redeemed and so unit holders ended up with both the
shares and their original units (the value of which was diminished
The Fund's constitution contained a universal powers clause,
clause 13.1, in the following terms:
The Responsible Entity shall have all
the powers in respect of the Scheme that is legally possible for a
natural person or corporation to have and as though it where [sic]
the absolute owner of the Scheme Property and acting in its
The constitution also contained in clause 13.2 the usual
follow-on provision setting out certain express powers, which are
stated not to limit the plenary power. These did not include an
express power to make distributions in specie but, in
clause 13.2.5, did include the power to:
dispose of ... or otherwise deal with
Scheme Property as if the Responsible Entity were the absolute and
Finally, there was a power to make distributions of income or
capital in clause 16, but only in cash. The interpretation question
turned in part on whether the reference to cash in clause 16
limited the otherwise broad powers in clauses 13.1 and 13.2 when it
came to making distributions.
The Court at first instance held that the responsible entity did
have sufficient power to make the distributions. On appeal this was
overturned by the Full Court.
1ASIC v Wellington Capital Ltd 
FCA 1140. 2Section 85 of the Trustee Act 1925 (NSW)
provides that 'Where a trustee is or may be personally liable
for any breach of trust, the Court may relieve the trustee either
wholly or partly from personal liability for the breach', but
'[t]he relief may not be given unless it appears to the Court
that the trustee has acted honestly and reasonably, and ought
fairly to be excused for the breach of trust and for omitting to
obtain the direction of the Court in the matter in which the
trustee committed the breach': see equivalents in s67 of the
Trustee Act 1958 (Vic); s76 of the Trusts Act
1973 (Qld); s75 of the Trustees Act 1962 (WA); s56 of the
Trustee Act 1936 (SA); s50 of the Trustee Act 1898 (Tas);
s49A of the Trustee Act (NT); s85 of the Trustee Act
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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