Application Money and Redemption Proceeds in Managed Investment Schemes
📖 What the law says
The responsible entity of a registered scheme must act honestly, exercise due care and diligence, prioritize the interests of the members over its own, treat members equally and fairly, avoid using scheme information for personal gain or causing harm to members, ensure the scheme's constitution and compliance plan meet legal requirements, keep scheme property separate and properly valued, and make payments according to the scheme's constitution.
Plain-English explanation — does not replace advice from a legal practitioner.
📖 Technical summary
The court ruled on the entitlements of applicants and redeemers in managed investment schemes during market disruptions.
📚 Full judgment
The summary, holding and questions above are VadeLab’s own material. The official decision itself is published by the court, and we do not reproduce it on this page.
📄 Read the full judgment⚖️ View on the official court website ↗
⚖️ What tends to weigh in cases like this
✅ Tends to be accepted
- The court found that new units were not issued to the applicants on July 2, 2007, or earlier, because no additional steps were taken on that day to issue them.
- The processing of applications and sending of confirmation letters did not count as issuing new units.
- Units could not be considered issued without calculations revealing the number of units to be credited to an applicant's account.
- The application form and confirmation letter created a binding contract for the manager to issue units, giving applicants a prospective right to benefits.
- Application money is excluded from the fund's assets until units are actually issued.
- The law requires application money to be held in trust for the benefit of the person who paid it until the product is issued or the money is returned.
- The manager must return the money or issue the product within one month, unless it is not reasonably practicable to do either.
❌ Tends to be rejected
- The argument that new units were issued on July 2, 2007, failed because no action by the manager on that day constituted issuing units.
- The argument that applicants acquired an undivided beneficial interest in the funds on July 2, 2007, was rejected as it lacked analytical support.
- The argument that the manager could retain application money for a longer period if it was not reasonably practicable to issue the product, even if it was practicable to return the money, was rejected.
Patterns observed in similar cases in this collection — every case is unique.
❓ Frequently asked questions
What was the dispute about?
The dispute was about whether applicants were entitled to the return of their application money and whether redeemers were entitled to be paid the value of their units based on the net asset value as of a specific date.
What was the argument that mattered most?
The argument that mattered most was the proper construction of the scheme constitutions and the effect of the Corporations Act 2001 (Cth) sections.
Was the decision for or against the person who brought the case?
The decision was for the person who brought the case, as the court ruled in favour of the manager's obligations under the Corporations Act 2001 (Cth).
What does this mean for someone in a similar situation?
Someone in a similar situation should ensure that their managed investment scheme complies with the relevant provisions of the Corporations Act 2001 (Cth) regarding application money and redemption proceeds.
What evidence or documents mattered?
The judgment does not specify the exact evidence or documents that mattered.