Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd and Ors [2002] VSC 576

Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd and Ors [2002] VSC 576 - VSC 2002 case summary — Zoe

[92]

(1) Subject to Rule 1.4 and in so far as the Act allows each Member shall (except while entitled to the payment of a benefit in terms of Rule 1.11) in respect of each Review Period contribute to the Plan at the rate of five per cent of the Member's Annual Salary. The Trustee may with the Employer's consent waive part or all of the Member's contributions under this Rule 1.3(1). In that event, the Employer will pay such additional amounts as may be required to avoid a shortfall in contributions. Any such contributions will be deemed to have been made by the Member.

(1A) (a) Subject to Rule 1.3(1A)(c) the Member may elect with effect on a Review Date (or any other date approved by the Trustee) to make contributions to the Plan additional to those referred to in Rule 1.3(1) at a particular rate, or to contribute such other amounts as may be agreed between the Member and the Trustee (having regard to the requirements of the Act).

(b) Subject to Rule 1.3(1A)(c) a Member who has elected to make contributions under Rule 1.3(1A)(a) may subsequently elect with effect on a Review Date (or any other date approved by the Trustee) to cease to pay, or to vary, such contributions as agreed between the Member and the Trustee, subject to the requirements of the Act;

(c) The contributions made by the Member under Rule 1.3(1A)(a) shall in so far as the Act allows commence on the Review Date (or such other date approved by the Trustee) as the Member elects to make those contributions and shall cease on the date the Member ceases to be in the Service of the Employer or to be a Member (whichever is the earlier) or in such other circumstances as comply with the relevant requirements of the Act.

(2) The contributions by the Member pursuant to Rule 1.3(1) shall in so far as the Act allows commence on the date he or she becomes a Member under this Defined Benefit Section of the Plan and shall cease on the Member's Normal Retirement Date or on ceasing prior to that date to be in the Service of the Employer or to be a Member whichever is the earlier or in such other circumstances as comply with the relevant requirements of the Act PROVIDED THAT in any case the contributions by the Member shall cease when the Member completes forty years of his or her Years of Membership.

(3) The Employer shall in so far as the Act allows in respect of each Review Period contribute to the Plan at a rate agreed upon with the Trustee being the rate or a rate within the range of rates contained in the report of the Actuary as provided for in Rule 1.3(4).

(3A) Subject to the Act, the Employer may make contributions additional to those referred to in Rule 1.3(3) on behalf of a Member of such amount as the Employer determines from time to time.

(4) (a) The Trustee shall arrange for an actuarial investigation and valuation of the Plan to be made by the Actuary at consecutive three yearly intervals (or at such other regular intervals not exceeding three years as may be approved by the Principal Employer).

(b) The Trustee shall supply the Actuary with information as may be required for the purpose of investigation and valuation.

(c) The Actuary shall provide a report in writing to the Principal Employer and to the Trustee upon the results of this investigation. Such report shall include details of the rate of contribution calculated as being required in respect of the funding of benefits under the Plan and, where there is more than one rate of contribution that will adequately fund benefits under the Plan, shall include details of such various rates of contribution."

[117]

(1) Subject to Rule 1.12(2), if the Member prior to his or her Normal Retirement Date ceases (other than by reasons of his or her death or the circumstances set out in Rule 1.6, 1.10 or 1.13) to be in the Service of the Employer the benefit payable to the Member shall subject to Rule 1.4 be the sum of the value of the Member's Member Voluntary Account, Employer Account and Roll-over Account and an amount determined as follows:

(a) in the case of a Member being at least thirty-five years of age and so long as the Member's Years of Participation are at least four years - an amount equal to the sum of:

(i) ten per cent of the Member's Final Average Salary multiplied by that part (measured in years and days) of the Member's Years of Participation falling prior to the first day of January 1987;

(ii) a percentage (as set out in Appendix `A' to this Deed), determined according to the Member's age (last birthday) at the date the Member joined the Plan (or in the event that the Member participated in the Former Plan immediately prior to the Date of Commencement the date the Member joined the Former Plan) and the Member's age (last birthday) at the date of ceasing to be in the Employer's Service, of the Member's Final Average Salary multiplied by that part (measured in years and days) of his Years of Participation falling on or after the first day of January 1987; and

(iii) three per cent of the Member's Final Average Salary multiplied by that part (measured in years and days) of the Member's Years of Participation falling after the first day of January 1987 PROVIDED THAT a higher percentage of the Member's Final Average Salary may apply to any period of the said part of the Member's Years of Participation PROVIDED FURTHER THAT any such percentage and the period to which it is applicable shall be as determined by the Employer and advised to the Trustee.

(b) in the case of any other Member the sum of:

(i) an amount equal to a percentage .as set out below (depending on the Member's Years of Participation) of the Member's Final Average Salary multiplied by the Member's Years of Participation:

[286]

"As requested I have reviewed the position of the Plan's retrenchment benefits. The retrenchment benefit is defined in the Trust Deed in Rule 1.13. This letter has been produced for the purposes of the Creditors' Meeting and a more detailed response to the Trustee on this matter will be provided. June 2000 Coverage The retrenchment benefit entitlement for all members at 30 June 2000 was calculated by the then administrator and advised to me for the purposes of the 1 July 2000 Actuarial review. At that time, the Plan's assets covered benefits payable on the retirement (including early retirement) and resignation of all members. However, as the Trustee Board was aware, there was a shortfall of assets (which totalled $598.9M) to the total retrenchment benefit for all members (which totalled $683.3M) of $84.4 Million. Recommended contributions did not include any allowance for funding of any shortfall against the Plan's retrenchment benefits. Had there been any basis, at the time that the 2000 actuarial valuation was undertaken, to expect that retrenchment benefits were going `to become payable for the absolute majority of the Plan's members then the contributions recommended in my 2000 Actuarial report would have been higher. The contributions recommended would have been higher to the degree required to cover any expected excess of benefit payments over normal resignation/retirement benefits. Subsequent Experience I have made estimates of the level of retrenchment benefits at June 2001, based on data currently available to me. The estimate made should be regarded as approximate, s.271A pending clarification of various queries about member data, and further clarification on the position of investment markets. I estimate that the Plan's investments (which were about $573.3 Million) at June 2001. However, allowing for a subsequent reduction in assets values following market falls during July, August and September of 10%, I estimate the reduced value of investments to be $ 516.0 Million. The total retrenchment benefits at June 2001 are estimated to be $632.8 Million. This results is a shortfall of $116.8 Million. Immediate funding of this shortfall would require an employer contribution of some $137.4 Million after allowance for contribution tax of 15%. I emphasise that this shortfall is contingent on all members leaving the Plan due to retrenchment as defined in the Deed."

[297]

"This letter has been produced for the purposes of the Creditors' Meeting and a more detailed response to the Trustee on this matter will be provided. June 2000 Coverage The retrenchment benefit entitlement for all members at 30 June 2000 was calculated by the then administrator and advised to me for the purposes of the 1 July 2000 Actuarial review. At that time, the Plan's assets covered benefits payable on the retirement (including early retirement) and resignation of all members. However, as the Trustee Board was aware, there was a shortfall of assets (which totalled $598.9M) to the total retrenchment benefit for all members (which totalled $683.3M) of $84.4 Million. Recommended contributions did not include any allowance for funding of any shortfall against the Plan's retrenchment benefits. Had there been any basis, at the time that the 2000 actuarial valuation was undertaken, to expect that retrenchment benefits were going `to become payable for the absolute majority of the Plan's members then the contributions recommended in my 2000 Actuarial report would have been higher. The contributions recommended would have been higher to the degree required to cover any expected excess of benefit payments over normal resignation/retirement benefits. Subsequent Experience I have made estimates of the level of retrenchment benefits at June 2001, based on data currently available to me. The estimate made should be regarded as approximate, 6.271A pending clarification of various queries about member data, and further clarification on the position of investment markets. I estimate that the Plan's investments (which were about $573.3 Million) at June 2001. However, allowing for a subsequent reduction in assets values following market falls during July, August and September of 10%, I estimate the reduced value of investments to be $516.0 Million. The total retrenchment benefits at June 2001 are estimated to be $632.8 Million. This results in a shortfall of $116.8 Million. Immediate funding of this shortfall would require an employer contribution of some $137.4 Million after allowance for contribution tax of 15%. I emphasise that this shortfall is contingent on all members leaving the Plan due to retrenchment as defined in the Deed. Possible Future Contribution requirements The Plan's contribution requirements for the future will depend on a number of matters. A significant factor is the question of whether departing members are eligible for a retrenchment benefit. The contributions detailed in my Funding and Solvency Certificate of April 2002 are designed to seek additional contributions for any retrenched member, that contribution being the excess of the retrenchment benefit over the Vested Benefit for the member (i.e. the resignation or early retirement benefit). As the Plan assets have at times fallen short of coverage of Vested Benefits, even if members are not paid retrenchment benefits, but do receive their Vested benefit, it is probable that additional contributions will be required. The process for identifying the additional contribution requirement would be that either the current FSC would be withdrawn by me when I considered that action desirable, or a Notifiable Event under that Certificate would occur (in particular when coverage of Vested Benefits is identified as being less than 99%). The level of additional contributions needed would depend on the circumstances of the Plan at the time, but would likely be additional lump sum contributions required from the employer to ensure coverage of vested benefits at a suitable date, or over an agreed time period (recognising that some members may continue in employment for some time yet). I estimate that, at 13 September 2001, assets fell short of Vested Benefits by some $76M. The shortfall (if any) at a later date will be influenced by a number of factors, some of which remain open for further decisions (such as whether accruals after 13 September should be on an accumulations basis), so estimation of coverage is problematic. Benefit Estimate at 13 September 2001 - Retrenchment Benefits Counsel has asked a question about coverage at the date of appointment of the company administrator, which I understand was 13 September 2001. The question relates to a possible interpretation of Section 556(1)(e). Establishing asset values at that date has problems, as quotation of values had been suspended in a number of investment markets following the attack on the World Trade Center on September 11. I have estimated an asset value by taking the values at 30 September as cited by the Plan's custodian, and reducing that value by 1% (to reflect the estimated differences in asset values at 30 September and 13 September). More precise information may need to be obtained from the Plan's investment managers to determine the asset value as close to 13 September as possible. The approach above is likely to be adequate as an indicator of the financial position of the Plan at that date. I have also reflected subsequent transactions (contributions due prior, received after, and transfer payment due to the Ansett Management fund). I have made estimates of benefit liabilities and net asset values, based on data currently available to me. While final numbers may vary, I am satisfied that the estimates made and detailed below are reasonable indicators of the Plan's financial position for current Trustee considerations. I have also included an allowance in the asset value of a net contribution amount (member and employer) for the period to 13 September, paid after that date, of just over $11 million. I have deducted a sum of $4.2 million being the transfer value due to the Pilots/Management Plan. Benefit liabilities are estimated as at 13 September 2001. I have not allowed in these calculations for any share of the projected special costs involved in the subsequent administration after 13 September or in any ultimate wind-up of the Plan. My estimate of Plan liabilities is as follows: Estimated Vested Benefits: $606 million Estimated Retrenchment Benefits: $700 million Estimated Net Assets: $530 million Accordingly, the shortfall of assets to retrenchment benefits is estimated as $170M, and the shortfall to Vested Benefits is estimated to be $76M. Benefit Accrued at 13 September - Paid Later In preparing the values above, I have used estimates of the relevant factors affecting the benefit as at 13 September. Different interpretations of the meaning of some of the wording in the Corporations Act may result in a slightly different approach. For example, while the relevant benefit multiple at (or member contributions to) 13 September may be readily identifiable, there may be different views on what Final Average Salary is relevant (at 13 September or at date of cessation of service), and what interest is due (to 13 September or to payment date). For the purposes of the estimates made, I have relied on an interpretation of Section 558 of the Act, which refers to treating an employee under section 556 as if "... his or her services with the company had been terminated by the company on the relevant date. " Accordingly, all benefits have been calculated using relevant factors as at 13 September 2001 (as estimated where necessary). Final and more accurate calculations can be made via NSP Buck's administration records when required. Coverage at 30 June 2002 The coverage of benefits at this date will depend on a number of factors, including what date members ceased employment. Allowing for estimated investment returns to the end of June 2002, I estimate that the shortfall of assets to retrenchment benefit liabilities is of the order of $150M to $200M."

[337]

"I propose first to advert to a number of points of a general nature. The first is as to the legal effect of the various announcements that were made to employees, the explanations given to them at meetings and the 1973 and 1978 booklets. In the early stages of the hearing it appeared that I might have to hear argument about that, and in particular an argument by Mr Inglis-Jones on behalf of Mr Idwal Evans based on equitable estoppel. In the event that became unnecessary because Mr Nugee on behalf of Mettoy accepted that, whether by reason of an equitable estoppel or otherwise, the provisions of the 1973 booklet were binding on all parties, Mettoy, the trustees, and the members of the scheme from 6 April 1973 to 6 April 1978, and that, likewise, the provisions eventually embodied in the 1978 booklet were binding on all parties from 6 April 1978 onwards. Secondly, as was submitted to me by Mr Walker and conceded by Mr Mann in his reply, the court's approach to the construction of judgment of Millett J in In re Courage Group's Pension Schemes,[50] where he said that, whilst there were no special rules of construction applicable to a pension scheme, `nevertheless, its provisions should wherever possible be construed to give reasonable and; practical effect to the scheme.' That is in my judgment particularly so where, as here, the documents governing the scheme include not only documents such as the 1973 and 1978 booklets but also documents such as the memoranda of 1973 and 1976 and the deed of 1978, which were intended to have legal effect but were couched in very general terms. Thirdly, although there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed-their "matrix of fact" to use the modern phrase coined by Lord Wilberforce-include four special factors. The first factor is that, as the Court of Appeal pointed out in two unreported cases of which I have been provided with Lexis transcripts, namely Kerr v British Leyland (Staff) Trustees Ltd[51] and Mihlenstedt v Barclays Bank International Ltd,[52] the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions. Secondly, as was common ground, pension scheme documents have to be construed in the light of the requirements of the Inland Revenue Commissioners from time to time for their approval of a scheme and also of the statutory requirements from time to time in force for the issue of contracting out certificates. About the former there are before me a `Guide to the Approval of Superannuation Funds' issued by the Life Offices' Association and the Associated Scottish Life Offices in September 1968, (which all counsel accepted as accurate), and a document referred to as `IR12' issued by the Inland Revenue in 1979 which contains `Notes on the approval of Occupational Pension Schemes' under the Finance Act 1970 as amended by the Finance Act 1971. Thirdly it was also common ground that the relevant background facts or surrounding circumstances included common practice from time to time in the field of pension schemes generally, as evinced in particular by the evidence of the actuaries and by textbooks written by practitioners in that field. Fourthly, temporary and imprecise documents of the kind exemplified by the memoranda of 1973 and 1976 and by the deed of 1978 are brought into existence as a result of the practice of the Inland Revenue and of the Occupational Pensions Board which is to recognise and give effect to such documents for statutory purposes, albeit to a limited extent. It would be inappropriate and indeed perverse to construe such documents so strictly as to undermine their effectiveness or their effectiveness for their purpose. I do not think that, in saying that, I am saying anything different from what was said by Lord Upjohn when in In re Gulbenkian's Settlements,[53] he referred, in the context of a private settlement, to `the duty of the court by the exercise of its judicial knowledge and experience in the relevant matter, innate common sense and desire to make sense of the settlor's or parties' expressed intentions, however obscure and ambiguous the language that may have been used, to give a reasonable meaning to that language it if can do so without doing complete violence to it.' What the court has to do here is to perform that duty in the comparatively novel and different context of pension scheme trusts."[54]

[339]

"The interpretation of pension schemes There have been several reported cases about the interpretation of provisions of pension schemes in recent years. There are no special rules of construction but pension schemes have certain characteristics which tend to differentiate them from other analogous instruments. I mention some of those characteristics in the following paragraphs. First, members of a scheme are not volunteers: the benefits which they receive under the scheme are part of the remuneration for their services and this is so whether the scheme is contributory or non-contributory. This means that they are in a different position in some respects from beneficiaries of a private trust. Moreover, the relationship of members to the employer must be seen as running in parallel with their employment relationship. This factor, too, can in appropriate circumstances have an effect on the interpretation of the scheme. Second, a pension scheme should be construed so to give a reasonable and practical effect to the scheme. The administration of a pension fund is a complex matter and it seems to me that it would be crying for the moon to expect the draftsman to have legislated exhaustively for every eventuality. As Millett J said in Re Courage Group's Pension Schemes [1987] 1 WLR 495 at 505: `[its] provisions should wherever possible be construed so as to give reasonable and practical effect to the scheme, bearing in mind that it has to be operated against a constantly changing commercial background. It is important to avoid unduly fettering the power to amend the provisions of the scheme, thereby preventing the parties from making those changes which may be required by the exigencies of commercial life.' In other words, it is necessary to test competing permissible constructions of a pension scheme against the consequences they produce in practice. Technicality is to be avoided. If the consequences are impractical or over-restrictive or technical in practice, that is an indication that some other interpretation is the appropriate one. Thus in the National Grid case, to which I refer below, where there was a choice of possible constructions, Lord Hoffmann held that the correct choice depended `upon the language of the scheme and the practical consequences of choosing one construction rather than the other.' (see [2001] UKHL 20; [2001] 1 WLR 864 at 887, paragraph 53)."

[340]

"Third, in pension schemes, difficulties can arise where different provisions have been amended at different points in time. The effect is that the version of the scheme in issue may represent a "patchwork" of provisions: see per Robert Walker J in the National Grid case. Pension schemes are often subject to considerable amendment over time. The general principle is that each new provision should be considered against the circumstances prevailing at the date when it was adopted rather than as at the date of the original trust deed: see per Millett J in Re Courage Group's Pension Schemes, above, at 505 - 506. Likewise, the meaning of a clause in the scheme must be ascertained by examining the deed as it stood at the time the clause was first introduced. Thus, for instance, at the time clause 11 was introduced, neither clause 24 nor its predecessor formed part of the APS Trust Deed, so that clause is not to be taken into account in the interpretation of clause 11. (1 should add that the appellants have recently made a complaint to the Pensions Omsbudsman about the introduction of clause 24. We are not concerned with that complaint.) Fourth, as with any other instrument, a provision of a trust deed must be interpreted in the light of the factual situation at the time it was created. This includes the practice and requirements of the Inland Revenue at that time, and may include common practice among practitioners in the field as evidenced by the works of practitioners at that time. It has been submitted to us that the factual background is only relevant if the document is ambiguous. I do not accept this submission, which is inconsistent with the approach laid down by Lord Hoffmann in Investors Compensation Scheme v West Bromwich Building Society [1997] UKHL 28; [1998] 1 WLR 896. In Lord Hoffmann's words `[i]nterpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background that would reasonably have been available to the parties in the situation in which they were at the time of the contract' (912H). Lord Hoffmann also distinguished the meaning of the words to be found in dictionaries from the meaning of documents: `(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19; [1997] A.C. 749.' Fifth, at the end of the day, however, the function of the court is to construe the document without any predisposition as to the correct philosophical approach. Both sides urged on us their respective philosophical approaches. Mr Inglis-Jones submitted that the overall approach of the APS Trust Deed was favourable to the members. BA submitted that it should be remembered that this was a balance of cost scheme and so the fact that there was a surplus meant that the employer had paid too much. As Brooke LJ, giving the judgment of this Court (Nourse, Schiemann, Brooke LJJ), said in the National Grid case [2000] ICR 174, 193 `The solution to the [problem of construction in that case] lies within the terms of the scheme itself, and not within a world populated by competing philosophies as to the true nature and ownership of an actuarial surplus.' In the same case, in the House of Lords, the beneficiaries of the scheme argued that the surplus represented their contributions or their deferred remuneration. Lord Hoffmann rejected this approach. He expressed the view that, once it was established that the employer could exercise powers conferred by a scheme in its own interests, "I do not see the relevance of the way in which the surplus was funded" (page 869G). I discuss the National Grid case in detail below. Sixth, a pension scheme should be interpreted as a whole. The meaning of a particular clause should be considered in conjunction with other relevant clauses. To borrow John Donne's famous phrase, no clause `is an Island entire of itself'."

[364]

Strictly speaking, it might be unnecessary to consider conduct and surrounding circumstances in construing a trust deed, although Mettoy and Stevens suggest the contrary. However, here there was complete evidence of a modus operandi implemented by Ansett where a formal declaration was never made or required to be made. The administrators submitted that extraneous material, in particular plan booklets, which may be relevant to issues such as estoppel, cannot be relied upon when construing the trust deed itself.[72] It was submitted that booklets are "... merely the employer's or trustee's attempt to summarise the meaning and effect of the Scheme and its Rules ..."[73] "... being highly abbreviated and generalized précis of the rules are unlikely to be a precise and accurate reflection of those rules ..."[74] and ought not to be relied upon when to do so "... would amount to allowing the booklet rather than the deed to govern the scheme ...".[75] It seems to me that the submissions of the administrators with respect to extraneous material do not accord with the principles expressed by the English authorities, in particular the observations of Warner J in Mettoy Pension Trustees Limited v Evans.[76] It is repeated throughout the authorities that the approach of the court on construction should be practical and purposive. The general extraneous circumstances surrounding the operation of the trust deed by the trustees and the employer, Ansett, makes the position abundantly plain. The conduct of the employer at all times was a practice at an administrative level of treating persons as having been retrenched. This is borne out by the course of correspondence and the various documents produced by the trustees with respect to the operations of Ansett. It is supported, also, by the matters contained in the member booklets. The administrators urged caution in the application of the fourth principle listed by Arden LJ in Stevens & Ors v Bell & Ors.[77] Because of the principles stated by the High Court in Codelfa Construction Pty Ltd v State Rail Authority of NSW[78] and Royal Botanic Gardens and Domain Trust v South Sydney City Council.[79] Nevertheless, the factual matrix of the relationship between Ansett and its employees with respect to the superannuation legislative regime, the trust deed, the roles of the trustee and the actuary, the funding and solvency certificates and the administrative role of Ansett in communicating the fact of terminations to the trustee cannot be ignored.

[430]

(1) Where a contract of employment with a company being wound up was subsisting immediately before the relevant date, the employee under the contract is, whether or not he or she is a person referred to in subsection (2), entitled to payment under section 556 as if his or her services with the company had been terminated by the company on the relevant date.

(2) Where, for the purposes of the winding up of a company, a liquidator employs a person whose services with the company had been terminated by reason of the winding up, that person is, for the purpose of calculating any entitlement to payment for leave of absence, or any entitlement to a retrenchment amount in respect of employment, taken, while the liquidator employs him or her for those purposes, to be employed by the company.

(3) Subject to subsection (4), where, after the relevant date, an amount in respect of long service leave or extended leave, or a retrenchment amount, becomes payable to a person referred to in subsection (2) in respect of the employment so referred to, the amount is a cost of the winding up.

(4) Where, at the relevant date, the length of qualifying service of a person employed by a company that is being wound up is insufficient to entitle him or her to any amount in respect of long service leave or extended leave, or to any retrenchment amount in respect of employment by the company, but, by the operation of subsection (2) he or she becomes entitled to such an amount after that date, that amount:

(a) is a cost of the winding up to the extent of an amount that bears to that amount the same proportion as the length of his or her qualifying service after that relevant date bears to the total length of his or her qualifying service; and

(b) is, to the extent of the balance of that amount, taken, for the purposes of section 556, to be an amount referred to in paragraph 556(1)(g), or a retrenchment payment payable to the person, as the case may be.

(5) In this section, retrenchment amount, in relation to employment of a person, means an amount payable to the person, by virtue of an industrial instrument, in respect of termination of the employment."

[479]

The administrators submitted that the rationale of s.556(1)(a) and (dd) is to give priority to expenses incurred by the relevant authority which are a necessary incident of the process of undertaking the administrators' functions. The proposition is supported by Just Juice.[121] The administrators submitted that the position in relation to certain types of expenses has always been clear. It was said that these expenses are "incurred" in the ordinary sense by the liquidator in the course of the winding up. Reliance was placed in support of the proposition upon the cases where liquidators incurred litigation expenses.[122] In Deputy Commissioner of Taxation v Tideturn Pty Ltd,[123] Santow J held that the failure by the subject company to remit group tax deductions gave rise to a post-liquidation debt payable, but not provable, in the liquidation as a priority payment under s.556(1)(a). His Honour held that such post-liquidation debt was an expense properly incurred by the liquidator in carrying on the company's business. Santow J held that the group tax deduction was an amount that the subject company was required to deduct and remit to the Commissioner from employees' salaries and wages who were employed in the course of carrying on the business.[124] The facts in Tideturn were that the liquidator permitted the company to trade on but eventually there were insufficient funds to pay the company's debts. During the trading on period wages were paid to employees but no group tax deductions were remitted to the Deputy Commission. In the circumstances Santow J held that the group tax deductions was an expense properly incurred in carrying on the company's business. The observation can be made that in Tideturn the liquidator appeared to require the employees of the company to work on for the purposes of enabling the company to trade and thereby incurred the group tax deductions. By contrast, in the present case, when the administrators resolved to continue the business of the airline it was a different business in terms of scale and services from that which operated before 12 September 2001. Furthermore, the retrenchment of employees did not form part of the continuation of the business of Ansett.

[488]

The trustee and the representative defendants pressed that paragraph (a) of s.556(1) encompassed superannuation contributions where, as asserted in this case the contributions were made or required in order to or, as a consequence of, carrying on the business of the company. If the proposition is correct it would remain curious that wages and superannuation contributions were specifically covered and allocated at a lower order of priority under paragraph (e). If the argument was valid it would involve the re-characterisation of superannuation contributions into something inherently different, namely, an expense incurred in the carrying on of business. As an approach to statutory interpretation, the parliament may be assumed to have comprehended that superannuation contributions required specific priority under s.556(1). At the time that superannuation contributions were inserted in paragraph (e) the parliament could have elevated superannuation contributions to a higher priority perhaps by specific insertion in paragraph (a). It did not in that paragraph. Furthermore, it was open to the parliament to not include superannuation contributions in paragraph (e) at all rather to treat such expense, at least in part, as one encompassed by paragraph (a) in the event. It did not. The parliament specifically determined to include superannuation contributions in paragraph (e) and to confine the priority to obligations incurred before the relevant date. The words of the paragraph are clear and the meaning is plain. The priority of superannuation contributions must fall under paragraph (e) or not at all and not paragraph (a). Indeed, this is borne out by the views of the Harmer Report as to the social policy underlying the priority allocated to employees' entitlements.[134] The Harmer Report provided part of the foundation for the regime of priorities set out in s.556(1), including the treatment of superannuation. The parliament, for whatever reason, did not include superannuation obligations incurred after the relevant date.

[531]

"At the time of the presentation of the petition there was in existence what is called a commercial bill (acceptance) facility granted by the plaintiff bank to the defendant with a limit of $1,000,000 for five years. To enable the funds to be raised in the short term money market the bills were limited in term to 190 days to maturity (later 180 days). They were drawn by the defendant on the plaintiff which accepted them and were payable to Tricontinental Corporation Ltd which bought them at a discount for sale in the market. The funds received by the defendant and which it was free to use in its business were the proceeds of the first issues less Tricontinental's discount. At maturity the bank as acceptor paid out the bills. In order that it might be in funds to do so the arrangement between the parties provided that 14 days before the maturity date the defendant should prepare a set of replacement bills, discount them, and pay the discounted proceeds together with at least the short fall resulting from the discounting to the bank. Tricontinental agreed to provide the discount facility for five years. The Bank of course made charges for the acceptance facility and the net result of the arrangement was that the defendant was contingently liable to the plaintiff bank for the sum of $1,000,000 when the term of the facility should come to an end. At that time the bank of course would accept no further bills in replacement and part of the arrangement was an authority given by the defendant to the bank to debit the defendant's account with the bank with any amount the bank might be called upon to pay in connection with the bills together with interest, costs, charges and expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [a]t the date of the appointment of the provisional liquidators there were in existence two series of bills for a total of $1,000,000 which were due to mature on 3 February and 6 March 1975 respectively. This posed a problem to the bank of finding $1,000,000 if the company, now in the hands of the provisional liquidators, failed to roll the bills over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [t]he Bank was very much in favour of the bills being rolled over at maturity. It therefore offered to continue the facility and the provisional liquidators for their part were willing to have the line of credit continue. Their reason lay in a belief that the true value of the land was such that when the market recovered it would realize sufficient not only to pay out the bank but to provide a surplus for the unsecured creditors."

[581]

"In s419(1) it is not sufficient to support a conclusion that an agent incurred a debt in the course of the receivership that the debt became due for payment while he was a receiver, nor is it necessarily sufficient that some of the acts or events constituting entitlement to the debt, whether or not they were the final precipitating acts or events, were acts of or were caused by the receiver. For both long service leave liabilities and redundancy liabilities, the company was, by 8 March 1995, in a position where, with the exception of relatively rare events which the company did not control such as misconduct of employees, it was inevitable that a liability would fall in at some time with the maturity of a chain of events which had already been in course for a period of some years, and in view of the company's financial difficulty that could well happen soon. Liability for long service leave would fall in with the grant of leave or termination of employment, and liability for redundancy payment could be expected to fall in ordinary circumstances, on the termination of employment; and while the exact times at which these events would happen were to a considerable extent under the influence of whoever was in control of the company's affairs, it was fair certainty that they would fall in at some time, and quite likely that that would be soon if the company could not avoid default. They would fall in if the company closed down or sold its business, but if the company did not close down or sell its business, it could be expected with a high probability that they would fall in at some time. Mr Whitton was in control as agent for the mortgagee for the last fifty days before the termination of employment, and the sale of the company's business by him as agent for mortgagee was itself the result of a chain of events which were largely the acts of others, including the original financing, granting the mortgage and the circumstances which led to default. Although the final and precipitating events were his acts as agent for the mortgagee, it should not, in my finding, be found that the long service leave liabilities and redundancy liabilities were incurred by him. Mr Whitton took a relatively small part in the whole array of acts and conduct which brought about their payability, and, with fair certainty, the company was committed to their becoming payable at some time whether or not Mr Whitton had ever been appointed or had ever done anything."

[597]

"The principle evolved from Exhall Coal Mining Co Ltd De GJ & S 377 and Lundy Granite Co LR 6 Ch App 462 is thus one which permits, on equitable grounds, the concept of a liability incurred as an expense of the liquidation to be expanded to include liabilities incurred before the liquidation in respect of property afterwards retained by the liquidator for the benefit of the insolvent estate. Although it was originally based upon a statutory discretion to allow a distress or execution against the company's assets, the courts quickly recognised that its effect could be to promote a creditor from merely having a claim in the liquidation to having a prior right to payment in full. As in the case of other equitable doctrines, the discretion hardened into principle. By the end of the 19th century, the scope of the Lundy Granite Co principle was well settled. It was not, however, a general test for deciding what counted as an expense of the liquidation. Expenses incurred after the liquidation date need no further equitable reason why they should be paid. Of course it will generally be true that such expenses will have been incurred by the liquidator for the purposes of the liquidation. It is not the business of the liquidator to incur expenses for any other purpose. But this is not at all the same thing as saying that the expenses will necessarily be for the benefit of estate. They may simply be liabilities which, as liquidator, he has to pay. For example, there will be the fees payable to fund the Insolvency Service, ranjing as paragraph (c) in rule 4.218(I), where the benefit to the estate may seem somewhat remote. There would be little point in a statute which specifically imposed liabilities upon a company in liquidation if they were payable only in the rare case in which it emerged with all other creditors having been paid. The difference between the treatment of pre-liquidation debts under the Lundy Granite Co principle and the treatment of post-liquidation liabilities emerges clearly from the 19th century cases on rates. In In re Watson Kipling & Co (1883) 23 Ch D 500, which concerned an assessment for rates made after the liquidation upon property occupied by the company, Kay J rejected the submission of counsel for the rating authority, at p 506, that `where a liability is incurred during the winding up, that liability ought to be paid in full, and therefore these rates ought to be paid in full because they were made during the winding up'."

Parties

Applicant/Plaintiff:

# Ansett Australia Ground Staff Superannuation Plan Pty Ltd

Respondent/Defendant:

Ansett Australia Ltd and Ors \[2002\] VSC 576

Legislation Cited (80)

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Guarantee (Administration) Act 1992

Guarantee (Administration) Regulations 1993

Tax Assessment Act 1936

Tax Assessment Act 1997

Industry (Supervision) Act 1993

Finance Act 1970

Finance Act 1971

Companies Act 1980

Statutory Rules 1994

Court Act 1986

Cases Cited (19)

(1986) 160 CLR 341

(1992) 37 FCR 445

(1970) 16 FLR 402

(1999) 197 CLR 83

(1999) 197 CLR 87

(1991) 25 NSWLR 593

(1982) 149 CLR 337

At a glance

Court

Decision date

Before

Source

Judgment (843 paragraphs)

Parties

Legislation Cited (80)

Cases Cited (19)