Responsible Entities and other trustees – beware when distributing assets in specie

ASIC v Wellington Capital Ltd [2013] FCAFC 52

Introduction

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 [2013] 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