Ansett Australia Flight Engineers Superannuation Plan Pty Ltd v Ansett... [2004] VSC 18 | Case summary

Supreme Court of Victoria|2004-02-20|Before: Byrne J

PRACTICE AND PROCEDURE - Compromise - Trusts - Approval where conflict of interest in Trustee - Approval where representative order.

The Ansett Flight Engineers Superannuation Plan was established in the 1940s. The early trust documents are not now available and it is agreed by the parties to this litigation that their rights are presently governed by a Trust Deed dated 21 June 1979 amended twice in 1990 and further amended in 1992 and 1994, and by rules made in 1990 effective from 1 January 1987. Following the collapse of Ansett Australia Limited ("Ansett") in September 2001 and its entry into a Deed of Company Arrangement) dated 2 May 2002, the employment of its employees was terminated and it is desired to wind up the Plan and to distribute the funds to those entitled. The amount of the fund after payment of outstanding liabilities including the costs of the litigation is estimated at approximately $1.7M. Doubts and difficulties have arisen as to the entitlements to this fund and the Trustee, Ansett Australia Flight Engineers Superannuation Pty Ltd ("the Trustee") has commenced proceeding No. 2025 of 2003 (F.5538) to determine these matters. Those with a possible claim to the fund have been joined as defendants to this proceeding:

* Ansett as principal employer for the Plan and a party to the Trust Deeds is the firstnamed defendant.

* Mark Francis Xavier Mentha and Mark Anthony Korda as former administrators of Ansett and the administrators of the Deed of Company Arrangement are the secondnamed defendant.

* Peter G. Boersen, Michael J. Horneman, James M. Hall, Clement J. Stewart, Robert L. Douglass and Louis Kovacs were employees of Ansett at the time of its collapse and are defined benefit members of the Plan. They are the third, fourth, fifth, sixth, seventh and eleventhnamed defendants respectively.

* Graham A. McCluskey, who was no longer employed by Ansett at the date of its collapse but remains a defined benefit member of the Plan, is the eighthnamed defendant.

* The ninthnamed defendant Alan Eric Gaggin was joined as a representative party pursuant to order 16. He represents himself and all other former members of the Plan whose benefits under the Plan have been paid in full. In fact the class that is represented by Mr Gaggin falls into two sub-classes of former members who have been paid in full: those who were paid out prior to the surplus date, that is, the date on which there was an accumulation of surplus in the fund; and those paid out after the surplus date. The surplus date is 1 July 1996.

* The State of Victoria was joined as the tenthnamed defendant on the basis that it might be held that the fund was bona vacantia.

The 1979 Trust Deed provides in cl 20 for a distribution of any funds in the Plan upon the discontinuance of the Plan. There has been controversy between the parties to proceeding No. 2025 of 2003 as to whether this clause has come into play, as to their entitlement to distribution assuming discontinuance and as to their entitlement to the fund if there has been no discontinuance. The parties to that proceeding are or represent all persons who might conceivably have an entitlement upon either event.

In proceeding No. 2030 of 2003 (F.5544) Ansett seeks in effect declarations and orders which would permit it to invite its employees or former employees other than flight engineers to become members of the Plan and to receive a share in the distribution of the surplus in fund.

On 10 December 2003 the parties achieved a settlement of these disputes and differences and on 18 December they reduced this settlement to writing which all have executed. The effect of this settlement is for the fund to be distributed in agreed shares between all the defendants to proceeding No. 2025 of 2003 other than the State of Victoria. The distribution to Mr Gaggin in his representative capacity is for those persons who are members of the Plan after the surplus date. Those former members who were not members after the surplus date do not take a share. Furthermore, Mr Boersen, Mr Horneman, Mr Hall, Mr Stewart, Mr Douglass, Mr McCluskey and Mr Kovacs who take a share in their own right, do not also take a share as persons represented by Mr Gaggin. It is also agreed that the Trustee will have its costs and expenses of the litigation out of the fund in the usual way and that it will pay out of the fund the reasonable legal costs of all parties.

I was told by counsel for all parties represented before me that this settlement represented an equitable commercial resolution of what threatened to be expensive litigation with an uncertain outcome for the claimants to the fund. I was told that the proposed distribution was proper having regard to the prospects of success of each of the claimants. Having heard what was put to me and having considered the papers I am satisfied that this is so.

The terms of settlement are expressed to be conditional upon the Court approving the terms insofar as they concern the distribution. The parties, therefore, join in seeking this approval. In the case of the persons represented by Mr Gaggin, approval of the Court is also sought pursuant to r 16.01(4). Since no party presented argument against approval I have reserved my decision to consider whether it was proper for me to give each of these approvals.

I turn first to the approval which is sought under r 16.01(4). The persons who are represented by Mr Gaggin are not all ascertained. Indeed, since they include persons who were members of the Plan at any time since its inception in the 1940s and those who might have a claim through those persons if they be deceased, it is likely that they cannot be ascertained. Moreover, it is said that some of them may not be sui juris. Mr Gaggin, as a representative party appointed by the Court under r 16.01(2), assents to the settlement. In these circumstances I may approve the settlement if I am satisfied that the settlement is for the benefit of those claimants.

I am satisfied that the settlement is for the benefit of those persons represented by Mr Gaggin who were members after the surplus date. Their entitlement to the proposed distribution reflects the risk that they might be entirely unsuccessful. With respect to those former members whom he represents who will receive nothing under the settlement, I am also satisfied that the settlement is for their benefit. In this context "benefit" is not limited to financial benefit[1]. From a reading of the material it appears that these claimants have little prospect of success so there is no benefit to them for the litigation to go forward. To the extent that they are aware of the litigation or may become aware of it, they will be spared the anxiety of a trial and a possible risk that part of their own costs might call upon them. I am, of course, aware that these are remote prospects in the present case, but the removal of even such a risk is a benefit for them. I will therefore give my approval to the distribution pursuant to r 16.01(4).

With respect to the other approval sought, I have been troubled as to whether the Court can give its approval to a settlement of claims upon the Trust Fund when all potential claimants being sui juris have consented to the settlement. It may be said that an agreement between such persons, even with respect to the distribution of trust money, is of no concern to the Court.

The Trustee, however, seeks the approval of the Court in order to protect itself as Trustee.

It was pointed out that, under s 19(1)(f) of the Trustee Act 1958 (Vic) the Trustee, if it thinks fit, may compromise or settle any claim relating to the Trust. My attention has been drawn to the observations of Sir Robert Megarry V-C[2] to the effect that the English equivalent of this provision does not authorise a trustee to compromise internal disputes, that is, where one beneficiary under a trust is in dispute with another beneficiary. There is, however, authority to the contrary[3]. In these circumstances, it is proper for the Trustee to approach the Court for its opinion and assistance.

In any event, there is in this case a further consideration which would warrant the Trustee seeking the approval of the Court. Two of the four directors of the Trustee are also claimants who are to receive a benefit under the settlement. These are Mr Boersen and Mr Douglass. These directors have a conflict of interest in voting for the Trustee to enter into the settlement.

It is then necessary for me to determine whether the distribution under the settlement is desirable and fair as regards the beneficiaries and is in their interests. For reasons which I have mentioned already, I am satisfied that it is.

[1] In re Earl of Strafford Deceased [1980] 1 Ch 28 at 33, per Megarry V-C.

[2] In re Earl of Strafford Deceased [1980] 1 Ch 28 at 32-33.

[3] Chapman v Chapman [1954] UKHL 1; [1954] AC 429 at 457 and 459, per Lord Morton; Re Irismay Holdings Pty Ltd [1996] 1 Qd R 172 at 177, per Lee J.

Ansett Australia Flight Engineers Superannuation Plan Pty Ltd v Ansett Australia Limited [2004] VSC 18

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