Alsop Wilkinson v Neary

Judgment 1I am dealing with two applications concerning approaches that should appropriately be taken to pending litigation. One is an application by a liquidator in a voluntary winding up for directions ( Corporations Act 2001 (Cth), s 511(1)(b) and s 479(3)), the other an application by a trustee for judicial advice ( Trustee Act 1925, s 63). 2The company of which the applicant under the Corporations Act is liquidator is the plaintiff in the pending proceedings. The trustee by which application is made under the Trustee Act (a superannuation fund trustee) is the defendant in those proceedings. 3The proceedings were commenced by the plaintiff company, at the instigation of its liquidator, against the defendant trustee by a statement of claim filed on 7 June 2010. The relief the plaintiff seeks is a declaration that the defendant "has been unjustly enriched at the plaintiff's expense with respect to each of" certain payments; and an order that "restitution be made by the defendant to the plaintiff" of an amount equivalent to the total of" those payments. There is also a claim for interest and costs. 4The substance of the restitutionary claim is, in concept, that part of the trust fund indisputably held by the defendant as a trustee is held not for the acknowledged beneficiaries (the superannuation fund members) but subject to an obligation to account to the plaintiff alone. 5The circumstances said by the plaintiff to justify the grant of this relief may be shortly stated. The plaintiff, before cessation of its operations, carried on a labour hire business in the course of which it made available to other business proprietors the services of persons employed by the plaintiff. As an employer, the plaintiff was liable under Commonwealth legislation to superannuation guarantee charge (plus interest and an administration fee) in respect of its employees but, in accordance with the statutory scheme, the imposition of that charge could be avoided or forestalled by the plaintiff's making contributions to a superannuation fund in relation to the employees by a given date. 6A particular feature of the statutory scheme with respect to superannuation guarantee charge is that, if a liability to superannuation guarantee charge, interest and administration fee arises and is satisfied, the moneys received by the Commissioner of Taxation are paid into a superannuation fund for the benefit of the relevant employees, after deduction of the administration fee. 7An employer's statutory liability for superannuation guarantee charge arises, in relation to an employee, if the employer has not made relevant superannuation contribution by a particular date. 8Following the commencement of the winding up of the plaintiff, the Commissioner of Taxation proved in the winding up for a substantial amount of superannuation guarantee charge (plus interest and administration fee) on the footing that the plaintiff had failed to make superannuation contributions for employees by applicable deadlines in the years 2004 to 2007. The plaintiff's liquidator admitted the proof of debt and paid some $1.8 million to the Commissioner accordingly. The Commissioner, in turn, passed these moneys (less the administration charge) to the defendant, as trustee of the superannuation fund of which the plaintiff's employees were members. 9The plaintiff alleges, however, that it had already made corresponding payments to the defendant, as trustee of the superannuation fund, for the benefit of those same employees, albeit after the deadlines necessary to be observed to forestall the imposition of superannuation guarantee charge. The superannuation contributions were, it is said, made by the plaintiff by means of payments to the defendant in circumstances where the plaintiff believed that the making of the contributions would forestall the imposition of superannuation guarantee charge, whereas the true position was that the liability to the statutory charge had already arisen and was not offset or eliminated by the making of the contributions. The plaintiff claims that it made the contributions under a mistake. 10Thus, to take a hypothetical example (and I emphasise that it is hypothetical), the plaintiff, in order to avoid the imposition of superannuation guarantee charge in respect of Employer A for a particular period, had to pay $100 into a superannuation fund for the benefit of Employee A by 30 June 2006; the plaintiff did not make any such superannuation contribution on or before 30 June 2006 but did make the contribution by means of a payment to the defendant as trustee on 31 July 2006 (believing, wrongly, that the imposition of superannuation guarantee charge would thereby be avoided); the Commissioner, on the basis of the missed 30 June 2006 deadline, levied superannuation guarantee charge of $100 together with interest and administration fee; the Commissioner proved in the plaintiff's winding up for the charge, interest and fee so levied and received 100 cents in the dollar; and the Commissioner thereafter paid $100 plus the interest component to the defendant as trustee of the relevant superannuation fund for the benefit of Employee. 11In the result, therefore, Employee A's account with the superannuation fund of which the defendant is trustee came to reflect not only the $100 contribution by his or her employer in July 2006 but also the $100 plus interest subsequently received from the Commissioner out of the moneys received by the Commissioner in consequence of proving in the winding up of the plaintiff. 12On the case the plaintiff company seeks to make, the defendant (that is, the superannuation trustee) has been unjustly enriched by what is, in broad concept, double payment by the plaintiff of a single contribution of $100 in respect of Employee A. 13This characterisation of the situation as one of "unjust enrichment" of the defendant is, however, somewhat artificial. The defendant, as trustee, does not care whether it is $100 or $200 that ought properly have been contributed to the fund for the benefit of Employee A. The trustee plays no part in deciding what should be paid into the fund that it holds entirely for the benefit of others, subject only to its right of recoupment for proper outgoings, remuneration and the like. Nor does the trustee have any way of knowing whether circumstances affecting the plaintiff and its employees required or contemplated the contribution of one sum rather than another to the fund. Many employers no doubt contribute the minimum necessary to avoid the imposition of superannuation guarantee charge. Other employers may, for a variety of reasons not known to the trustee and in which it has no interest, choose to contribute more than that minimum. It is even conceivable, I suppose, that an employer who has become liable to superannuation guarantee charge will decide to make contributions after the statutory liability for superannuation guarantee has crystallised. The trustee knows nothing of these matters and is not expected to have knowledge of them. 14The dispute - if indeed there is to be a dispute - is one between the plaintiff and the relevant fund members, that is, those employees of the plaintiff in relation to whom what might loosely be called "double contributions" came into the trustee's hands. The plaintiff says, in effect, that it ought to have back the contributions it made after the liability to superannuation guarantee charge ultimately paid by the liquidator had arisen. If that claim succeeds, each relevant employee member of the fund will suffer a reduction in his or her account balance within the fund and therefore a reduction in the superannuation benefit ultimately received. 15In terms of the categories of trust dispute identified in Alsop Wilkinson v Neary [1996] 1 WLR 1222, the present case should, I think, be regarded as a "trust dispute" that is "hostile", since the essence of the plaintiff's claim is that, although it is not a beneficiary, part of the trust fund ought to be transferred to it rather than being held upon the trusts benefiting the plaintiff's employees as members of the superannuation fund. This classification would attract the observation (at 1225) that "the duty of the trustee is to remain neutral . . .[and] . . . offer to submit to the court's directions, leaving it to the rivals to fight their battles". 16This case is not one in which the trustee alone can satisfactorily represent the interests of the beneficiaries. They, as persons whose claims upon the trust fund will be diminished if the plaintiff succeeds in the suit, are entitled to an opportunity to contest the grant of the relief the plaintiff seeks. The position is the same as in Personalised Transport Services Pty Ltd v AMP Superannuation Pty Ltd [2005] NSWSC 396 and, as in that case, the proceedings should not go to trial with the trustee alone as defendant. 17As far as the particular applications before the court are concerned, the defendant, as trustee, will be advised by the court that it is justified in neither consenting to nor opposing the grant of the relief the plaintiff seeks in the proceedings and that the appropriate course will be to enter a submitting appearance except as to costs; while, so far as the liquidator of the plaintiff is concerned, there will be a direction, first, that the liquidator is not justified in allowing the proceedings to be constituted in such a way that none of the relevant employees is a party (and the sole defendant is the trustee) and, second, that the liquidator will be justified in taking steps to have the plaintiff seek an order for the joinder of a representative employee as a defendant. 18An alternative to this second aspect would be, of course, for the liquidator to join all the employees as defendants. I would, however, prefer not to consider a direction to that effect at this stage, given the likelihood that it would involve very substantial expense which might possibly outweigh the value of the proceedings in any event. This possibility can be examined, if necessary, after the outcome of any application for joinder of a representative employee is known. 19I direct that short minutes giving effect to this decision be filed by delivery to my associate within seven days. 20I will hear the parties on costs at a time to be fixed, assuming that there is no agreement on costs.