No Exit: What Carr v Ritossa Means for Unit Trust Investors Without a Unitholders' Agreement

May 8
5 min read

When two parties hold property through a jointly held unit trust and the relationship between them breaks down, neither party has a general right to walk away from the arrangement. That position should concern anyone holding property through a unit trust with a co-investor, and anyone advising on such structures.

The New South Wales Court of Appeal confirmed the position in David & Ros Carr Holdings Pty Ltd v Ritossa [2025] NSWCA 108, refusing to extend partnership winding-up principles, corporate oppression remedies, or the equitable jurisdiction to appoint a receiver to allow a unitholder to exit a deadlocked unit trust. The decision reinforces a commercial reality: without a unitholders' agreement in place at the outset, the underlying asset value of a unit trust interest may be substantial yet practically impossible to realise.

The courts will not provide an exit

A trust is not a partnership, and the equitable principles that allow a court to wind up a partnership or a company on just and equitable grounds, established for companies in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, do not extend to trusts. A court will not terminate a trust or appoint a receiver over trust assets simply because the unitholders no longer wish to continue the arrangement. The relief available to a deadlocked shareholder or partner under those principles is not available to a unitholder facing the same commercial position.

The corporate oppression remedy under sections 232 and 233 of the Corporations Act 2001 (Cth) is, in principle, available where the trustee's management of the trust falls within "the affairs of the company", but it has a structural limitation. Standing under section 234 requires the applicant to be a member of the trustee company itself. The remedy is therefore available where the unitholders also hold shares in the corporate trustee, as is typical in genuine joint-venture trust structures, but it provides no assistance where the trustee is the wholly owned vehicle of one side. Even where standing is made out, deadlock between the unitholders is not, on its own, oppressive conduct. The deadlock must lead to further conduct that, on an objective view, is commercially unfair, such as a trustee withholding distributions from one unitholder in bad faith, or using its powers to entrench the position of one side at the expense of the other. Difficult board meetings and intractable disagreements over management will not, without more, give a unitholder a way out.

A "present entitlement" clause in the trust deed, drafted to satisfy the fixed trust definition in the Land Tax Management Act 1956 (NSW), does not give an individual unitholder a right to force a distribution or compel an exit. The Court of Appeal held that such a clause refers to the unitholders collectively and operates only at the level of the trust as a whole. It is included in unit trust deeds as a tax drafting device, and provides no individual exit right whatever the relationship between the unitholders becomes.

What happened in Carr v Ritossa

The case concerned two families, the Carrs and the Ritossas, who together acquired rural property near Gundagai in New South Wales through the Darbalara Property Trust between 2010 and 2016. The two properties were purchased for a combined $13.2 million, and each family held 50 per cent of the units.

Both the solicitor who prepared the trust deed and the parties' accountants specifically advised the families to execute a unitholders' agreement, and the accountants described the need for a "very strong" agreement to deal with all issues in the event of a dispute. A questionnaire was circulated to gather instructions for the agreement. Neither family completed it, and no unitholders' agreement was ever signed.

By 2019, disagreements over the management of the farming operations had brought the relationship to a breakdown. The Carrs wished to exit; the Ritossas wished to continue the investment. With no exit mechanism in the trust deed, the Carrs ran four legal arguments across two courts, relying in turn on agreement or estoppel, trust deed construction, corporate oppression, and the equitable jurisdiction to appoint a receiver. Each argument failed at first instance (David & Ros Carr Holdings Pty Ltd v Ritossa [2024] NSWSC 1125) and again on appeal.

The parties were sophisticated investors with sophisticated advisers. The Carr and Ritossa principals were senior investment bankers, and they had retained experienced legal and accounting advisers on the structure. The gap in their structure resulted from inaction on advice that was given and not followed, rather than from any failure to identify the issue.

Why this matters commercially

The commercial consequences of the Carr v Ritossa decision are relevant to anyone with capital tied up in a co-owned unit trust. A 50 per cent unitholding in a property trust may represent millions of dollars in underlying asset value; however, without a unitholders' agreement, that interest is effectively illiquid. The unitholder cannot sell at a price reflecting net asset value, because no arm's length buyer will pay full value for a minority interest in a trust they cannot control or exit, and the unitholder cannot compel a distribution or force a winding up of the trust. Whatever the underlying property is worth on paper, the investment is locked in.

A unitholders' agreement is the trust-law equivalent of a shareholders' agreement in a corporate joint venture. The agreement deals with deadlock, exit, and valuation for a jointly held trust in the same way a shareholders' agreement deals with those issues for a jointly held company, and covers ground the trust deed itself was not drafted to address. At a minimum, a unitholders' agreement should deal with:

Buyout rights, including who can trigger a buyout and at what price.
Drag-along and tag-along provisions, so that a sale by one party does not leave the other stranded.
A valuation methodology agreed in advance, whether by independent valuer or by formula.
Dispute resolution procedures, including mediation or expert determination before litigation.
What happens on the death, insolvency, or incapacity of a unitholder.

This pattern is common in practice. A unit trust is recommended for tax or asset protection reasons, the parties focus on getting the structure established, and the unitholders' agreement is deferred to a later date that often never arrives. Carr v Ritossa is a reminder that, once the relationship breaks down, the courts will not fill the gap that has been left.

Addressing the gap before it matters

If you hold property through a unit trust with another party and do not have a unitholders' agreement in place, the right time to address that is now, while the relationship is still functional and the parties can negotiate in good faith. Retrofitting exit protections after a dispute has emerged is much harder, and far more expensive, than putting them in place at the outset.

If you are structuring a unit trust or reviewing an existing arrangement, contact Opportuna Legal to discuss exit protections and unitholders' agreements.

Contact: reception@opportunalegal.com.au | +61 8 6110 3748

Anthony Jarvis | Director, Opportuna Legal

Anthony Jarvis is the Director of Opportuna Legal, a corporate and commercial law firm based in Perth, Australia. Anthony advises private companies, founders, and boards on M&A, capital markets, corporate governance, and commercial contracts. Anthony advises business owners and family groups on trust structuring, succession planning, and corporate governance.

This article is general information only and does not constitute legal advice. Readers should obtain professional advice specific to their circumstances before acting on any of the information contained in this article.