E&P Investments Ltd v Keybridge Capital Ltd [2026] VSCA 5

What the court decided

E&P Investments Ltd, the responsible entity of the US Masters Residential Property Fund, converted all priority units in the Fund into ordinary units on 3 January 2023, including those held by Keybridge Capital Ltd [2]. E&P served a statutory demand on Keybridge for $253,151.87, a costs judgment debt arising from Keybridge's failed attempt to convene a meeting of investors [1], [3].

Keybridge applied under sections 459G and 459J of the Corporations Act 2001 (Cth) to set the demand aside [4]. It relied on an offsetting claim within section 459H(1)(b) [23]. Its managing director deposed to a claim for breach of E&P's duty under section 601FC in converting the priority units rather than redeeming them or winding up the Fund, with damages of $1,364,000 [11], [21]. Keybridge's submissions put the claim under section 601FC(1)(d), the duty to treat members of different classes fairly [8].

Associate Justice Efthim held that the evidence was more than mere assertion and met the low threshold, and ordered that the demand be set aside [4], [26]–[27]. His Honour also said that E&P needed to address whether a duty may have been breached [28].

Niall CJ, McLeish and Kenny JJA, in joint reasons, applied the test in TR Administration Pty Ltd v Frank Marchetti & Sons Pty Ltd (2008) 66 ACSR 67: the claim needed sufficient objective existence, prima facie plausibility and factual particularity, but need not be fully evidenced [49]. The parties did not dispute the nature of the duty, and for present purposes the Court accepted that it was of a fiduciary type [53]. In this case, the Court said, the duty meant that E&P could not favour one class at the expense of the other [53].

The Court held that Keybridge's loss was not enough on its own to show unfairness, and that there had to be further evidence that the loss arose because E&P favoured one class at the expense of another [54].

The Court said that evidence of the scheme's constitution may be significant and that, depending perhaps on the circumstances, conduct by E&P that the constitution authorises may be difficult to characterise as unfair [56].

The product disclosure statement for the priority units would have shown the rights their holders can be taken to have known they had on acquiring them [57]. If it contemplated conversion in circumstances of this kind, the Court said, a plausible claim of the kind Keybridge asserted was difficult to see, but a contrary effect might well have supported the claim [57].

Neither the constitution nor any relevant product disclosure statement was in evidence before the associate judge [58]. Before the conversion, E&P had stated publicly that the proposed conversion accorded with the terms set out in those documents, and Keybridge did not allege those statements were false [59]. In the absence of any evidence or allegation to the contrary, the Court said, it may be inferred that the conversion was consistent with both documents and that priority unit holders had always been on notice that their units could be converted into ordinary units [59].

Beyond the loss Keybridge and other priority unit holders sustained as an alleged consequence of the conversion, there was no evidence of how the conversion or its alternatives affected each class [60]. Nor was there other evidence giving rise to a plausible claim that E&P favoured the ordinary unit holders [61]. The Court concluded that the offsetting claim was mere assertion [62].

The Court found it unnecessary to decide E&P's second ground, but said it would reject the proposition that, in this case, E&P had to address whether a duty may have been breached or file evidence in opposition, because it was for Keybridge to show a plausible offsetting claim [63].

The Court granted leave to appeal on ground 1 and allowed the appeal [64].

Why it matters

The Court called the threshold "admittedly low" [63]. What failed was the evidence: loss alone did not give rise to a plausible claim that the loss arose from favouring one class over the other [54], [61].

In my view, solicitors acting for a unit holder in that position need to deal in evidence with the terms of the scheme constitution and the relevant product disclosure statement, and with the effect on each class of the conduct and the alternatives to it. The Court's statement that E&P did not have to answer the claim with evidence was made without deciding the point, and rested on Keybridge having to show a plausible offsetting claim [63].

The case concerns the Commonwealth Act, and readers should check the current text of the provisions.

Numbers in square brackets are paragraph numbers of the judgment. This note summarises a decided case for education and is not legal advice. See how the notes are written.