Company Share v Trust Unit

In Wang v Yu [2023] NSWSC 1182 (5 October 2023), Meek J charted the important distinction in character between, on the one hand, a share in a proprietary company, and, on the other hand, a unit in a unit trust:

[34]  I pause to note that various parts of the evidence and submissions in these proceedings contained references to unitholders possessing “legal title” to, or “legal interest” or “legal estate” in, units of the Trust: see, eg, CB 176, 499, 561, 578; T 10, 12, 513, 528, 529. Such references are misconceived. It is true that units in a unit trust are often compared to or spoken in terms that emphasise their resemblance to shares in a functional or commercial sense: Charles v FCT (1954) 90 CLR 598; [1954] HCA 16 at 608 –609 per Dixon CJ, Kitto and Taylor JJ; Cachia v Westpac Financial Services Ltd [2000] FCA 161; (2000) 170 ALR 65 at [87] per Hely J; JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis) at [3–12]; Nuncio D’Angelo, Commercial Trusts (2014, LexisNexis) at [1.40]. Both shares and units entitle their holder to certain rights, which may include rights with respect to voting, payment of funds (by way of dividend (shares) or distribution (units)) and may be organised into different types of “class”.

[35]  Doctrinally speaking, however, shares and units differ in significant respects. A share is a legal chose in action: Re Investa Properties Ltd [2007] FCA 1104; (2007) 25 ACLC 1186 at [26] per Lindgren J; De Lorenzo v De Lorenzo [2020] NSWCA 351 at [20] per Leeming JA Both legal and equitable title to shares may be enjoyed where, eg, one person holds shares on trust for another person. On the other hand, a unit in a unit trust, like the interests enjoyed by beneficiaries of other types of trust, is necessarily an equitable chose in action: Aust-Wide Management Ltd (rec apptd) v Chief Cmr of Stamp Duties (1996) 33 ATR 384 at 386 per Handley JA (Beazley JA — as her Excellency then was — agreeing); Elkington v Moore Business Systems Australia Ltd (1994) 13 ACSR 342 at 350 per Bryson J (as his Honour then was). A unit constitutes an undivided share in the beneficial estate in the property held subject to the unit trust, with the trustee holding the legal title to that property (although the extent to which it can be said a unitholder has a proprietary interest in particular items of property forming the subject matter of the trust will necessarily vary depending on the terms of the trust deed: Jonsue Investments Pty Ltd v Balweb Pty Ltd [2013] NSWSC 325 at [20] per White J (as his Honour then was)).

[36]  A unit in a unit trust, like other equitable interests, may be assigned to a third party or held on sub trust (see, eg, Chief Cmr of State Revenue v Centro (CPL) Ltd (2011) 81 NSWLR 462; [2011] NSWCA 325 at [46] ) but it is wrong to say that a unitholder can possess legal title to units: Reef & Rainforest Travel Pty Ltd v Cmr of Stamp Duties [2002] 1 Qd R 683; [2001] QCA 249 at [11] per McPherson JA (Thomas JA and Muir J agreeing). The fact that there may be a “register” of unitholders does not convert what is an equitable chose in action (the unit) into legal property.