The High Court has unanimously allowed an appeal against the decision of the NSW Court of Appeal on the circumstances in which a member of a managed investment scheme can ‘withdraw from’ that scheme under pt 5C.6 of the Corporations Act 2001 (Cth). The second respondent, RFML, and the appellant, MacarthurCook, both held shares in a registered management investment scheme. (MacarthurCook asserts that TFML Ltd is the new responsibile entity of the scheme.) Under the redemption clause, the trustee was obliged to repay the amount subscribed to within six months. RFML later made a guarantee to purchase MacarthurCook’s units at the end of their subscription periods. Instead of going ahead with those purchases, RFML (by now the trustee), exercised its power to suspend withdrawals that were ‘not in the best interests of Unitholders’. All withdrawals, including those MacarthurCook was set to make, were suspended until further notice, which continued until after the end of the relevant subscription period for the next withdrawal. Unanimously allowing the appeal against the trial judge’s decision, the NSWCA held that MacarthurCook could not enforce its claims against TFML for RFML’s liabilities, and that RFML was not in breach of the redemption agreement. RFML was, however, liable for breach of the guarantee.

Allowing the appeal, the High Court held that a ‘right to withdraw’ is not limited to a right requiring a correlative obligation and that it requires an act of volition on the part of the member. Rather, ‘a member withdraws from a registered scheme if the member acts so as to result in the responsible entity returning the whole or some part of the member’s contribution’, and redemption without volition on the part of a member is not a withdrawal by the member: [29]. That volition is not found merely in the choice to subscribe for units on the terms of issue, or the member’s decision to sue or not sue to enforce those terms. RFML’s redemption of the subscription units in performing its obligations imposed on it by the units’ terms of issue did not constitute withdrawal by MacarthurCook.