the trustee's appeal
45 It was submitted by Mr Hanks QC, who appeared for the trustee, that the tribunal's determinations involved various errors of law. First, he submitted that it was an error for the tribunal to have held that the version of the deed and rules under which the complainant's entitlement should have been assessed was that which existed in May 1999, when the complainant last worked. Mr Hanks submitted that the trustee was obliged to operate by reference to the version of the deed and rules which was current when the complainant submitted his TPD claim on 26 June 2001. By then, the deed and rules had been amended in November 1999. Mr Bingham, who appeared for the complainant, submitted that, when the complainant retired from service on the ground of permanent disablement - which he said, and the trustee accepted, occurred in May 1999 - he was thereupon entitled to the benefit of the operation of r 4.3 of the rules as existed at that time. It was immaterial, he submitted, that the request for that benefit was made some time later. Mr Hanks responded with a submission in the alternative, based on Recital F of the amending deed of 26 November 1999. He submitted that, even if the date at which the complainant's entitlement was to be determined was May 1999, the amendments to the deed operated retrospectively from 1 July 1996, with the result that it was the amended deed which defined that entitlement. Mr Bingham rejoined with a reference to reg 13.16(1) of the Superannuation Industry (Supervision) Regulations 1994, which made it a standard of regulated superannuation funds that a beneficiary's right or claim to accrued benefits, and the amount of those benefits, must not be altered adversely to the beneficiary by amendments of the governing rules of the fund. On both of these aspects, I accept Mr Bingham's submission. Assuming for the purposes of argument that the complainant did retire on 19 May 1999 on the ground of permanent disablement, I consider that r 4.3 in its amended form gave rise to an immediate entitlement to be paid the TPD benefit for which the rules then made provision. Likewise, by the operation of reg 13.16, if the complainant in fact had such an immediate entitlement when he retired, no subsequent amendment of the deed could retrospectively affect that entitlement detrimentally to the complainant. I do not believe that this aspect of the tribunal's decision involved any error of law.
46 Mr Hanks next submitted that r 4.3 in its unamended form was not sufficient to deliver to the complainant the benefit of the insurance policy because, even if it be accepted that the complainant retired on the ground of permanent disablement, there were no proceeds of the insurance policy which could be applied for the complainant's benefit in accordance with the provisions of Sch 7 and Sch 10 to which I have referred in par 6 above. That proposition appears to be sound, and to have been recognised as such by the tribunal, since the tribunal found it necessary to exercise the trustee's power under r 4.7 of the rules to determine that there be a discretionary payment made to the complainant in an amount equal to that which he would have received had he been totally and permanently disabled within the meaning of the policy. At this level, according to the submission of Mr Hanks, it was no longer possible to treat the unamended version of the deed and rules as applicable, since r 4.7 (unlike r 4.3) did not speak as at the date of the complainant's retirement from service: it invested the trustee with a discretion to make an exceptional payment and, necessarily, spoke as at the date when that discretion came to be exercised. That date was well after the amendments to the deed and rules in November 1999. Neither r 4.7, nor anything closely approximating that rule, survived those amendments. Mr Hanks submitted that it was an error of law for the tribunal to have proceeded on the basis that r 4.7 was available to the trustee in June 2001 when the complainant lodged his application, or at any time thereabouts. For his part, Mr Bingham submitted that r 4.7 was expressed to be an overriding provision, and that the trustee had an absolute discretion under that rule.
47 Under s 37(1)(a) of the Complaints Act, the tribunal had all the powers, obligations and discretions that were conferred on the trustee. I am prepared to read this provision in the sense of conferring on the tribunal the powers etc that the trustee had at the time of its own decision under the rules of the fund. As I have indicated, the tribunal decided that the trustee, having found (as it should have) that the complainant was totally and permanently disabled, and having noted (as it did) that r 4.3 would not deliver to the complainant the proceeds of any insurance policy, should then have concluded that the unfairness of such an outcome could and should be rectified under r 4.7. In other words, in the tribunal's thinking, r 4.7 should have been brought into play when the trustee made its own decision as to the complainant's entitlement. This could not have been earlier than the date upon which the insurer advised the trustee that it had denied the claim under the policy. This was much later than 26 November 1999, when r 4.7 was, by amendment, removed from the deed and the rules. At the time when, according to the tribunal, the trustee should have acted under r 4.7, the rule was gone. Regulation 13.16(1) is of no benefit to the complainant in this respect, as on no view could the possibility that the trustee might make a discretionary payment to him in excess of his entitlement be regarded as an 'accrued benefit'. For these reasons, I consider that the tribunal's determination that it was unfair and unreasonable for the trustee not to have resorted to r 4.7 to make a payment to the complainant equivalent to that which he would have received under the policy was erroneous. The error involved was one of law.
48 Mr Bingham submitted that, if cl 4.7 of the original rules was not available at the time the trustee made its decision, a similar result was achievable by recourse to the trustee's powers under cl 11.4 of the amended deed, to the relevant provisions of which I have referred in par 11 above. If this was so, it would not affect that conclusion I have reached above which was concerned with what the tribunal actually did, rather than with what it might have done. However, Mr Bingham submitted that, if I were of the view that the trustee had made an error of law in relying upon cl 4.7, I should remit the matter to the tribunal for consideration of the question whether a like result might have been achieved under cl 11.4 of the amended deed. I could take that course only if I was of the view that the payment of a sum equivalent to the permanent disablement benefit under the original rules would have been a regular and lawful exercise of the trustee's powers under cl 11.4 of the amended deed. I do not believe that it would. Paragraphs (a) and (b) of cl 11.4 are, in my opinion, empowering rather than entitling; that is to say, they give the trustee the usual range of functional powers to do various things in furtherance of its responsibilities under the deed. Although the trustee would have power under cl 11.4, for example, to compromise a claim, that power, in my view, would not make it lawful for the trustee to pay to a member of the fund a sum to which the member was not entitled, or to pay out of the fund, in its discretion, a sum which was not referable to a member's entitlement, or at least lying along the axis of a potential entitlement. On the facts of this case, I do not believe it would be consistent with the amended deed for the trustee to purport to exercise its power under cl 11.4 thereof because the sum to which the complainant was entitled as at May 1999 under the original rules fell short of what the trustee considered, in its discretion, to be a fair and reasonable payment in the circumstances. If follows that, under s 37(5) of the Complaints Act, it would not have been within the power of the tribunal to have had recourse to cl 11.4 of the amended deed for that purpose.
49 Mr Hanks next argued that, if recourse to cl 4.7 of the original rules had been available to the trustee as a matter of timing in the present case, it would have constituted a breach of trust for the trustee to have made the payment thereunder that the tribunal held to constitute a fair and reasonable outcome in the circumstances of the complainant. Mr Hanks' proposition was that all moneys held in the fund, whether they represented member contributions, employer contributions or profit, had to be allocated to members of the fund. He submitted that, for the trustee to have made a payment to the complainant under cl 4.7 (being a payment to which he was, by definition, not otherwise entitled and which, also by definition, went beyond the moneys that had been allocated to him) would necessarily have required the trustee to draw upon moneys in the fund which had been allocated to other members. In an accumulation superannuation fund which complies with the requirements of the SIS Act, these propositions sound as though they ought to be correct, but, on analysis, they involve a number of assumptions of fact in relation to matters which were not dealt with by the tribunal, and not thoroughly explored in the evidence before the court. There was no provision of the original rules which, in terms, directly required the trustee to allocate every incoming dollar to the account of one or other of the members. It is true that the provisions of Sch 7 to the rules required the accumulated contributions made by a particular member, and by the employer with respect to that member, to be available for that member should an occasion arise when the 'accrued benefit' became payable to him or her. However, Sch 7 did not, at least explicitly, require the trustee to build up the account of each member according only to the investment earnings of the accumulated amount of the contributions which had been made in relation to him or her. Rather, the trustee was required to add to each member's account an amount representing a share of the profit for the financial year to date. The rules left much unexplained as to how the 'profit' would be derived in a particular case. The rules otherwise made provision for the trustee to meet expenses from time to time (presumably including, as Mr Bingham pointed out, the costs of conducting litigation such as this), and those expenses would have had to have come from somewhere. Likewise, the trustee was empowered to make such provision as it thought fit for 'any particularly adverse or favourable circumstances known to the trustee'. I do not believe that these and other questions have been sufficiently investigated, either in point of fact or in point of law, for me to hold that recourse to r 4.7 in the way proposed by the tribunal would necessarily have been a breach of trust for the trustee. Since I have decided that cl 4.7 was not, in any event, available in the particular circumstances of the complainant, for me to decide the breach of trust point would be to go beyond what was necessary to resolve the matter before the court and that consideration, together with the others referred to in this paragraph, leads me to the conclusion that I should not attempt to make a finding on this aspect of Mr Hanks' submissions.
50 Mr Hanks' next submission was that, even if r 4.7 was otherwise available, and if recourse to it would not have amounted to a breach of trust, the way the tribunal in fact used the rule in the circumstances before it did not constitute a bona fide exercise of the tribunal's discretion in that regard. He submitted that, in point of fact, there were no funds available for a payment to be made under r 4.7, because all funds had been allocated to the accounts of various members. As will be apparent, this is a variation of the submission with which I have most recently dealt, and one which required consideration of facts and circumstances which were not before the tribunal. As such, the point could not reveal an error of law, a circumstance which Mr Hanks accepted. He submitted, however, that the reason that the necessary facts were not before the tribunal was that the tribunal had given no indication that it might resolve the matter before it by reference to r 4.7 (and the complainant had not based his complaint upon that rule). This took Mr Hanks to another point which he developed later, namely, that the trustee had been denied natural justice by the tribunal. That is a matter to which I shall turn, but it is clear that the particular point to which the present submission relates cannot, of itself, be regarded as demonstrating an error of law on the part of the tribunal.
51 Mr Hanks next pointed to the proviso in the definition of 'total and permanent disablement' in the original rules. He submitted that the trustee had effected a policy in relation to the complainant, and had determined that the meaning of TPD was identical to the circumstances in which an amount was payable under the policy. If sound, this submission would mean that, instead of the definition of TPD set out in par 7 above, the rules would, in effect, be deemed to contain the definition of TPD set out in the policy (see par 14 above) and, therefore, that there could never be the kind of discrepancy between the outcomes under the two different definitions which the tribunal held to have arisen in the present case. A similar submission was made to the tribunal, and it decided the matter as follows:
"The next issue is whether or not the Trustee made a determination to modify the Trust Deed definition to make it identical with the definition contained in the Insurance Policy. The Tribunal notes the wording of the definition requires the Trustee to make a decision "in respect of the Member". This indicates that an individual decision would need to be made with respect to each member to whom the Trustee determined the modification would apply. The definition does not contemplate the adoption of an overall policy approach to enable the Trustee to make the modification in respect of all members. In any event, the mere adoption of a policy to apply the modification does not amount to such a determination. The wording relied on by the Trustee in the Booklet (quoted earlier) does not establish notification to members that the Trustee has reached any such determination. It merely recites the requirements of the Insurer in its assessment of claims under the definition in the Insurance Policy."
The tribunal held that the definition of TPD in the rules had not been modified.
52 To the extent that the tribunal held that the power of modification contained in the proviso to the definition of TPD in the original rules could be exercised only with respect to each member individually, and not across the population of members of the fund as a whole, I am inclined to think that too narrow a view of that power was taken. It is, however, undesirable that I say anything further on that subject, since the tribunal's alternative basis for rejecting the trustee's submission, as set out in the passage quoted above, was purely factual, and was sufficient, of itself, to justify that rejection. It was clearly open to the tribunal to find, as a matter of fact, that the terms of the member booklet did not constitute a determination under the proviso to the definition of TPD. In these circumstances, I would hold that the tribunal's decision that the definition was not modified was not affected by any relevant error of law.
53 Mr Hanks next submitted that, when properly understood, the tribunal's decision discloses that the real element of unfairness and unreasonableness upon which it made its determination did not relate to the decision of the trustee at all, but related to quite different facts and circumstances, and, therefore, that the tribunal had gone outside its mandate under s 37 of the Complaints Act. Mr Hanks pointed to the tribunal's conclusion that the decision of the trustee that the complainant was not entitled to a TPD benefit was unfair and unreasonable. That decision, he submitted, was the only one which the trustee made in relation to the complainant. Had it made what the tribunal regarded as the only fair and reasonable decision in the circumstances, it would have held that the complainant was entitled to a TPD benefit. Mr Hanks submitted that such a decision would have left the complainant in precisely the same situation as that in which he in fact found himself, namely, a situation in which he was ostensibly paid a TPD benefit, but one which lacked the component constituted by the proceeds of the policy. Mr Hanks pointed out that, in order to secure an outcome which would deliver to the complainant a benefit equivalent to that which he would have received had he been TPD under the policy, the tribunal was obliged to rely upon certain other acts and omissions of the trustee which had nothing to do with the decision the subject of the complaint. Those acts and omissions were the trustee's failure to modify the definition in the rules to accord with that found in the policy, the trustee's failure to explain the limitations of the policy requirements applicable to TPD claims, and the trustee's failure to draw to the attention of the complainant the discrepancy between the two definitions of TPD. According to Mr Hanks, these were not elements of the trustee's decision at all, and in seeking to put them to rights, the tribunal had gone beyond the minimum necessary to place the complainant as nearly as practicable in a position in which the unfairness and unreasonableness determined to exist 'in relation to the trustee's decision', as required by s 37(4) of the Complaints Act, no longer existed.
54 Mr Bingham responded to this submission by pointing out that the essence of the tribunal's reasoning was that the trustee ought to have appreciated that the receipt of a TPD benefit which did not include any element referable to the proceeds of the policy was manifestly unfair and unreasonable. Once it was accepted that the conclusion that the complainant was not totally and permanently disabled was unfair and unreasonable, it likewise followed, according to Mr Bingham, that for the complainant to receive anything less than was contemplated by the rules in the case of a member who was totally and permanently disabled would necessarily also be unfair and unreasonable. He submitted that this is precisely what the tribunal held, and that the holding involved no error of law.
55 I consider that the first part of Mr Hanks' submission is sound. The complainant's complaint related only to the decision of the trustee communicated by letter dated 2 August 2002. The tribunal held that it was unfair and unreasonable for the trustee to have decided that the complainant did not come within the definition of TPD in the rules. It substituted its own decision that that the complainant was entitled to be paid the TPD benefit by the trustee. However, in the circumstances of the complainant, that benefit had no component constituted by the proceeds of the policy. That result was brought about by the terms of the policy, not by any decision of the trustee. It is the result which would have been ordained by the rules had the trustee decided, as the tribunal considered would have been fair and reasonable, that the complainant was entitled to the TPD benefit.
56 However, I do not consider that the second part of Mr Hanks' submission is sound. It proceeds from a misunderstanding of the tribunal's decision. It is true that the tribunal referred to other acts and omissions of the trustee - its failure to modify the definition in the rules to accord with that found in the policy, its failure to explain the limitations of the policy requirements applicable to TPD claims, and its failure to draw to the attention of the complainant the discrepancy between the two definitions of TPD - and held that there was a "resulting unfairness and unreasonableness" which needed to be "rectified". But it was not the unfairness and unreasonableness of these other acts and omissions, of themselves, that the tribunal addressed under s 37(4): it was the unfairness and unreasonableness of the trustee's failure, as part of its decision notified on 2 August 2002, to effect such a rectification by recourse to r 4.7 of the original rules. I do not, therefore, consider that the tribunal's decision can be validly criticized on the ground that the tribunal sought to apply the remedial terms of s 37(4) to some act or omission other than the decision about which the complaint had been made.
57 Mr Hanks next submitted that the trustee had been denied procedural fairness by the tribunal, in that r 4.7 had not been relied on by the complainant, and the tribunal had said nothing to alert the trustee to the possibility that the matter before it might be resolved by recourse to r 4.7. Mr Hanks relied upon the following words of the Full court, spoken with reference to the Administrative Appeals Tribunal, in Goldie v Minster for Immigration and Multicultural Affairs (1999) 56 ALD 31, [35]:
"It is well-established that before the Tribunal is entitled to make a decision against a party on a basis entirely different than that relied on by the other party, it must give the person affected notice that it is considering whether to make a determination adverse to him on that particular basis and a reasonable opportunity to deal with the case the Tribunal is contemplating."