Voiding scheme contracts in an unregistered managed investment scheme

The Victorian Supreme Court has considered whether an investor in an unregistered managed investment scheme could void scheme contracts under section 601MB of the Corporations Act.

In Re Willmott Forests Limited (in liq) and Willmott Finance Pty Ltd (in liq) [2011] VSC 348, an investor sought to use a s601MB notice to void the scheme contracts, with the effect being that the managed investment scheme would be unable to pursue its claims against the investor for the repayment of the loan funds.

Under s601MB(4), the offeror of the scheme had 21 days to apply to the court for an order declaring the notice to have had no effect. Accordingly, Willmott Forests sought a declaration that the notice was invalid or alternatively that the notice was of no effect and subsequently sought an order for summary judgment against the investor.

The court found that an investor in an unregistered managed investment scheme could not establish the necessary foundation for a valid notice under s601MB(1) and granted summary judgment for Willmott Forests. This case indicates that an investor in a managed investment scheme must satisfy all the elements of s 601MB(1) of the Corporations Act if they are to successfully set aside their obligations in respect of the relevant scheme.