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Cite as: December 2011 85(12) LIJ, p.61

Construction of managed investment scheme

National Nominees Limited & Anor v Agora Asset Management Pty Ltd [2011] VSCA 327 (unreported, 28 October 2011, No S APCI 2011 0133, Warren CJ, Mandie JA and Judd AJA).

This case illustrates the importance of careful consideration of notices given pursuant to a commercial agreement, in this case a managed investment scheme, where the effect of the notice may be to vary the terms of the original agreement.

In the terms of an Information Memorandum (IM) given by the respondent to the appellants at the time the appellants invested funds with the respondent, there appeared the following:

Can the fees change?

Yes, all fees can change. Reasons might include changing economic conditions and changes in regulation. The Trust Deed for the Fund sets the maximum amount we can charge for all fees. If we wished to raise fees or performance fees above the amounts allowed for in the Fund’s Trust Deed, we would need the approval of investors. We will give you 30 days’ written notice of any proposed change to these fees.

At the time of the investment of the funds there was no fee on withdrawal of funds. The trust fund for the scheme provided that any fees on withdrawal would be limited to no more than 5 per cent of withdrawal requests.

By a letter dated 24 November 2010 from the respondent to the appellants, the respondent Agora enclosed an updated version of the IM for the fund dated 24 December 2010 and stated that:

“The IM also provides for increases in fees charged by Agora, which are within the fee amounts permitted to be charged under the Fund’s Trust Deeds”.

The appellants did not notice the change. They gave notice of redemption to the respondent. The respondent imposed an exit fee of 5 per cent. Could the respondent impose that fee?

The principal judgment was given by Mandie JA who said:

“Accordingly, if Agora [the respondent] wished to make any change to fees, Agora was required by para 8.3 of the Information Memorandum to give the unitholders 30 days’ written notice of the proposed change. Agora purported to do so. The relevant change so notified was in effect that, whereas there had been no exit fee until then, Agora would, after 30 days, impose such exit fee (if any) as was determined by it in accordance with a formulation that mirrored (and complied with) cl 4.5 of the Constitution (trust deed). I consider that the words ‘any proposed change’ to a fee or fees are properly and naturally to be construed as extending not only to the setting of a specific monetary fee or to the fixing of a specific rate but also to establishing a range (subject to constitutional limits) within which a fee would be determined. What Agora proposed was in substance no different to providing that the exit fee would be 5 per cent of the value of the redemption proceeds subject to a discretion to reduce or eliminate that fee in any particular case. This interpretation is supported in a context in which the Constitution contemplates that an exit fee may be determined at the time of a particular withdrawal request, that an exit fee might be negotiated at the outset or later, and that an exit fee may be varied from investor to investor.

I would add that the appellants had the opportunity during that period of 30 days, knowing what the maximum fee could be, to withdraw their funds without incurring any exit fee at all. The purpose of the notice provision was thus satisfied and the construction urged by the appellants is not necessary to achieve any commercial purpose”. [20]-[21]

The appeal was dismissed.

In the October LIJ at page 71 I wrote of the decision of the Court of Appeal in IMC Aviation Solutions Pty Ltd v Altain Khuder LLC [2011] VSCA 248 (unreported, 22 August 2011, No S APCI 2011 0017, Warren CJ, Hansen JA and Kyrou AJA).

My note of that decision overlooks an important difference of approach between the judgment of Warren CJ and the joint judgment of Hansen JA and Kyrou AJA. Readers will recall that Warren CJ, in relation to the recognition of foreign awards provisions in s8 of the International Arbitration Act 1974 (Cth), said that the party seeking to enforce an award under the Act has the legal onus of satisfying the Court that the award debtor is party to the arbitration agreement. I stated that this was in fact the view of the Court.

In fact, Hansen JA and Kyrou AJA, unlike the Chief Justice, held that there was no legal onus imposed on the party seeking to enforce the award to establish that the award debtor was party to the agreement. They considered a number of overseas cases which suggested otherwise and declined to follow them. Once it became apparent that there was an argument that the appellant was not party to the agreement, then notice ought to have been given to it so that there might be an inquiry on the evidence as to whether prima facie it was in fact a party or not. Their Honours were not satisfied that the trial judge could not have been satisfied, on a prima facie basis, that the appellant was party to the arbitration agreement. [234]

Their Honours agreed with the Chief Justice, therefore, that the appeal should be allowed and enforcement against the appellant set aside.

My apologies for this oversight.

PROFESSOR GREG REINHARDT is executive director of the Australasian Institute of Judicial Administration and a member of the Faculty of Law at Monash University, ph 9600 1311, email The numbers in square brackets in the text refer to the paragraph numbers in the judgment. The full version of this judgment can be found at


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