This article is from the Australian Property Journal archive
DISGRUNTLED investors have launched an urgent injunction against Jenny Hutson’s Wellington Capital to cancel units in the Premium Income Fund issued via a recent capital raising and to reverse changes to the constitution.
The injunction application also seeks to restrain Wellington from counting votes from any new unitholders at upcoming meeting as well as restrain Wellington Capital and its directors from issuing units pursuant to a rights issue.
PIFAG vice president Charles Hodges said the capital raising was clearly not in the interest of existing unitholders and that as such, could be declared invalid under the Corporations Act. The rights issue was also seen as against unitholders interests as it effectively forced them to take up the issue if they did not wish to have their unitholding diluted.
“Wellington Capital was contacted by Castlereagh Capital a number of times before the capital raising was announced. This has led many investors to question whether the raising was a deliberate strategy to reduce the voting power of PIFAG, which at the time, represented 27 percent of investors.
“Our legal representatives, DLA Piper, wrote to ASIC to advise that the raising was not considered to be in unitholder interest and it breached the constitution as it was issuing units at a discount,” he added.
Hodges said Wellington then changed the constitution to issue units at a discount, without investor consent, after having been notified of the investors opposing the capital raising.
Under the previous constitution, units could only be issued at NTA. The placement price of the units was at ten cents, which represents a discount of 74 percent from the current value of the net tangible assets within the Fund. Under the Corporations Act, the Responsible Entity of a managed fund can only amend a constitution without unitholder approval if it is not adverse to members’ rights and if it is in the investors’ best interests.
“Wellington still hasn’t explained why, and to whom, the placement issue was made and why in April 2011 they distributed $7.55 million and then only one month later raised $7.5 million from unknown third parties.
“The changes to the PIF constitution are clearly not in the interests of unitholders – but rather – those of Wellington Capital,” he continued.
Meanhile Hodges said the ongoing action to remove Wellington as manager and responsible entity of the Premium Income Fund was progressing well, with firm support received from unitholders, but that participation in the vote on 16 June was crucial for the action to be successful.
“We are urging all unitholders to vote using the yellow proxy form sent to them by PIF Action Group. Wellington also issued a pink proxy form, which it had advised should be returned to Armstrong Registry. As Armstrong is a company beneficially owned by Jenny Hutson (the chairwoman and managing director of Wellington), Mary-Anne Greaves (a director of Wellington) and Rachel Weeks (director of McLean Legal, who is the solicitor acting on behalf of Wellington in relation to the meeting), we believed returning proxies to Armstrong creates a significant conflict of interest.
“Armstrong’s annualised costs for registry services is $500,000. Castlereagh has received a quote from an independent registry operator to perform the same service for approximately $100,000,” he concluded.
Australian Property Journal
