Unit trusts are a popular investment vehicle that allow investors to pool their funds together to invest in a diversified portfolio of assets. In a unit trust, investors purchase units that represent a share of the underlying assets held by the trust. While unit trusts are generally structured to protect the interests of all unit holders, conflicts can arise when the interests of some unit holders are unfairly disregarded or oppressed. This article explores the concept of oppression within the context of unit trusts.
What is oppression?
Oppression refers to conduct by those in control of a company or trust that unfairly prejudices the interests of some members. In the context of unit trusts, oppression can occur when the trustee or other parties in control of the trust act in a manner that unfairly disadvantages some unit holders, for example, by withholding information, breaching trust duties, or taking actions that benefit themselves at the expense of other unit holders.
The concept of oppression in unit trusts is closely related to the fiduciary duties owed by trustees to unit holders. Trustees are required to act in the best interests of all unit holders and to avoid conflicts of interest. When trustees fail to meet these obligations, they may be held accountable for oppressive conduct.
Examples of oppression in unit trusts Oppression in unit trusts can take many forms. For example, a trustee may fail to provide all unit holders with access to relevant information or may make decisions that disproportionately benefit some unit holders over others. In extreme cases, a trustee may engage in fraudulent conduct, such as misappropriating trust assets or engaging in insider trading.
Another common form of oppression in unit trusts is the misuse of voting rights. In some cases, trustees may control the voting rights associated with a significant proportion of the units in a trust, giving them disproportionate power over key decisions. If trustees misuse their voting rights to advance their own interests or those of a select group of unit holders, this can be seen as oppressive conduct.
Remedies for oppression in unit trusts
Unit holders who believe they have been oppressed by the actions of trustees or other parties in control of a trust may have several legal remedies available to them.
These include –
- Seeking an injunction to prevent oppressive conduct from continuing;
- Seeking damages for losses suffered as a result of oppressive conduct;
- Seeking a court order for the removal of trustees or other parties in control of the trust;
- Seeking a court order for the winding up of the trust; and
- Seeking an order for the purchase of units by the trustee or another party at a fair value.
The concept of oppression is an important consideration for unit holders in unit trusts. While trustees are generally expected to act in the best interests of all unit holders, conflicts can arise, and trustees may engage in oppressive conduct. Unit holders who believe they have been unfairly disadvantaged may have several legal remedies available to them, and it is important to seek legal advice as soon as possible if you believe you have been a victim of oppressive conduct.
About the author
Greg Quin is a Partner at HLB Mann Judd Insolvency WA and has been with the team for 13 years. Greg oversees the daily operations of the many insolvency appointments managed by the HLB Insolvency team and looks after the operations of the practice.
If you have any queries about insolvency matters, please feel free to contact Greg on 08 9215 7900, 0402 943 091 or via email to firstname.lastname@example.org.