Constantinides v Du Pont Superannuation Fund Pty Ltd

Federal Court of Australia|1997-05-08|Before: Sunberg J, Marshall J

REASONS FOR JUDGMENT 1 This is an appeal on questions of law arising from a determination of the Superannuation Complaints Tribunal ("the Tribunal") affirming a decision of the second respondent, Hanover Life Re of Australia Ltd ("the Insurer"). The appeal is brought pursuant to s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Act"). 2 The Insurer rejected the applicant's claim for a Total and Permanent Disablement ("TPD") benefit under the Du Pont (Australia) Ltd Super Fund ("the Fund"). The Tribunal remitted the matter to the first respondent, Du Pont Superannuation Fund Pty Ltd ("the Trustee") to determine whether the applicant's claim should be augmented under cl 22(2) of the Trust Deed as amended on 4 May 1992.

Factual background 3 The applicant was born on 25 March 1935. He began work for Du Pont (Australia) Limited as a Textile Machine Operator on 27 October 1986. He joined the Fund on 23 July 1990. The applicant was injured on 27 April 1994 while vacationing and visiting family in Cyprus. In a letter dated 3 May 1994, the applicant was notified that he would be made redundant effective from 19 May 1994. Upon returning home, the applicant was unable to resume employment after visiting a doctor on 7 May 1994. On 6 February 1995, he lodged a claim for a TPD benefit. After the Insurer had rejected the applicant's claim, the Trustee, on 26 July 1996, also rejected the applicant's claim for a TPD benefit. On 7 July 1997, the Trustee, after reviewing its decision, affirmed its rejection of the applicant's claim. The matter then went before the Tribunal. 4 Two versions of the Trust Deed were tendered in the proceeding. One is a version amended on 19 May 1994 and effective from 1 July 1992. The second is a version which pre-dated the 19 May 1994 amendment ("the pre-19 May 1994 Trust Deed"). 5 With regard to the pre-19 May 1994 Trust Deed, Rule 1 of Part A of the Rules of the Fund defines TPD with reference to the insurance policy: "'Total and Permanent Disablement' in relation to a Member has the following meaning: (a) where the Trustee has effected a current Policy to secure part or all of the benefits payable or prospectively payable to or in respect of that Member pursuant to Rule 11 the term shall, in respect of that Member have a meaning that corresponds to the cover for that risk provided under the Policy…." 6 The insurance policy defines TPD as: "(a) … (b) having been absent from work through injury or illness for an initial period of six (6) consecutive months and in our opinion being incapacitated to such an extent as to render the Insured Person unable ever to engage in or work for reward in any occupation or work which he or she is reasonably capable of performing by reason of education, training or experience." [emphasis added] 7 The Trust Deed as amended on 19 May 1994 also makes reference to the insurance policy in cl 14(1) which deals with TPD benefits: "…. Where a policy is in force to insure this benefit the Trustee shall in this matter rely for the relevant medical evidence upon the opinion of the Chief Medical Officer of the insurance company which has issued the Policy. …." 8 However, the 19 May 1994 Trust Deed amendment defines TPD separately to mean in relation to a member: "having been continuously absent from Service with the employer as a result of injury or illness and in the opinion of the Trustee after consideration of medical evidence having become incapacitated by that injury or illness to such an extent as to render the Member unlikely ever to engage in or work for reward in any occupation or work for which the Member is reasonably qualified by education or training or experience…." [emphasis added] 9 It is essential to note that both deeds give the Trustee a discretionary power to modify any benefits received by the complainant in the event the Insurer refuses to pay. The pre-19 May 1994 Trust Deed states in cl 22(2): "If the Insurance Company refuses to provide or limits insurance cover or refuses to pay, in part or in full, insurance proceeds for the Member in the event of death or disablement of the Member arising out of particular circumstances or causes … the Trustee shall vary the benefits payable in respect of a Member in such manner as the Trustee decides." 10 Clause 22(2) of the 19 May 1994 Trust Deed amendment is almost identical: "If the Insurance Company refuses to provide or limits insurance cover or refuses to pay, in part or in full, insurance proceeds for a Member in the event of death or disablement of the Member arising out of particular circumstances or causes … or otherwise, the Trustee may vary the benefits payable in respect of the Member in such manner as the Trustee decides."

legislation 11 Section 14(2) of the Act provides that a person may make a complaint to the Tribunal that the decision of a trustee with regard to a member of a regulated superannuation fund is or was unfair or unreasonable. 12 Section 37 of the Act then sets forth the Tribunal's powers in reviewing a decision which is the subject of a complaint under s 14: "(1) For the purpose of reviewing a decision of the trustee of a fund that is the subject of a complaint under section 14: (a) the Tribunal has all the powers, obligations and discretions that are conferred on the trustee; and (b) subject to subsection (6), must make a determination in accordance with subsection (3). (2) … (3) On reviewing the decision of a trustee, insurer or other decision-maker that is the subject of, or relevant to, a complaint under section 14, the Tribunal must make a determination in writing: (a) affirming the decision; or (b) remitting the matter to which the decision relates to the trustee, insurer or other decision-maker for reconsideration in accordance with the directions of the Tribunal; or (c) varying the decision; or (d) setting aside the decision and substituting a decision for the decision so set aside. (4) The Tribunal may only exercise its determination-making power under subsection (3) for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness, unreasonableness, or both, that the Tribunal has determined to exist in relation to the trustee's decision that is the subject of the complaint no longer exists. (5) … (6) The Tribunal must affirm a decision referred to under subsection (3) if it is satisfied that the decision, in its operation in relation to: (a) the complainant; and (b) so far as concerns a complaint regarding the payment of a death benefit - any person (other than the complainant, a trustee, insurer or decision-maker) who: (i) has become a party to the complaint; and (ii) has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death benefit; was fair and reasonable in the circumstances."

tribunal's decision 13 After setting out the relevant background to the complaint, the Tribunal discussed which Trust Deed was the applicable one. The Tribunal decided that the 19 May 1994 Trust Deed amendment was not applicable because "rule 10 of the pre-19 May 1994 Trust Deed states that the question of whether a member is TPD under the Trust Deed is to be determined prior to the date on which a Member ceases employment (ie "while in Service")". The Tribunal said that "(e)ven though the 19 May 1994 Trust Deed amendment was retrospective, a retrospective deed variation will not apply if a benefit has already crystallised before the amendment was made." The Tribunal then referred to Rule 1 of the pre-19 May 1994 Trust Deed which defines TPD by reference to the insurance policy. 14 In a section entitled "Tribunal's Deliberations", the Tribunal examined the medical evidence before the Trustee and Insurer. As part of its review, the Tribunal then decided to take into account further medical reports submitted by the complainant. In discussing whether the Trustee had sufficient evidence before it, the Tribunal stated: "The onus is on the trustee to ensure that it has adequate and sufficient material to be satisfied it has taken into account all relevant considerations. The Tribunal considers that the operation of the decisions of the Trustee were fair and reasonable in the full circumstances of this complaint." 15 The Tribunal later noted that even though certain evidence post-dated the Trustee's last review of its decision, it was relevant for the Tribunal to take it into account, at least for the purpose of retrospectively portraying information as of the date of the decision. 16 The Tribunal observed that the definition of TPD under the insurance policy required an "inability" to ever engage in work which the member is reasonably capable of performing by reason of his education, training or experience. The Tribunal concluded that this definition imposed a higher threshold than a definition that referred only to an "unlikelihood" of ever engaging in work and explained: "The former definition is more absolute in its terms than is the latter. The Tribunal therefore concludes that particularly in view of this inability test and the medical evidence described above it was fair and reasonable in the circumstances for the Trustee and the Insurer to decline the TPD claim." 17 After declaring such, the Tribunal affirmed the decision of the Insurer that the applicant was not entitled to a TPD benefit and remitted the matter to the Trustee in order to determine whether to augment the applicant's benefit under the cl 22(2) discretionary power of the Trust Deed.

Competing Definitions of TPD 18 The applicant contended that the Tribunal adopted an incorrect definition of TPD and, in so doing, misdirected itself. It was submitted that the definition given in the 19 May 1994 Trust Deed amendment, which uses the word "unlikely" with regard to the member's chances of engaging in work again, was the correct definition. Additional submissions were made concerning which Trust Deed was relevant as of the last date of applicant's service. It is unnecessary to immediately discuss this in detail for reasons that will soon become clear. 19 The respondents defended the Tribunal's use of the insurance policy definition and claimed that use of the word "unable" was, in fact, correct. Moreover, which Trust Deed is applicable is irrelevant, it was argued, because the applicant had an "enforceable entitlement" only with regards to the insurance policy. The respondents further argued that the Trust Deed definition referred to by the applicant does not lead to an entitlement but merely lays the foundation for an exercise of discretion by the Trustee under cl 22(2).

Unable v Unlikely 20 Alternatively, the applicant argued that even if the correct definition had been used, the Tribunal had incorrectly determined that a definition using the word "unable" set a more difficult threshold than one using the word "unlikely". The applicant claimed that the definition, in substance, determines the ability or capacity of the member to work and that the test constructed by each word is the same. It was submitted on behalf of the applicant that "(t)he word 'unable' cannot mean utterly unable because so read it would so restrict the numbers of people who were eligible for benefits as to make a nonsense of it." 21 In answer, the respondents referred to Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515, to support the view that the meaning given to a plain English word, is a question of fact. Thus, it was well within the Tribunal's power to interpret the word "unable" as being more stringent than "unlikely".

Review of Evidence 22 The applicant further submitted that the Tribunal placed an impermissible limitation upon the fresh evidence that was brought to its attention. In doing so, the Tribunal limited the de novo aspect of its proceeding such that it did not encompass all the evidence before the Tribunal. In effect, it was argued, the Tribunal's review was useful only to the extent that it retrospectively portrayed information at the date of the trustee's review. 23 The respondents claimed that the later development of some condition after the employment has ceased should not be taken into account. Reference was also made to Rule 10 of the pre-19 May 1994 Trust Deed and Rule 14 of the 19 May 1994 Trust Deed amendment, both of which state that a total and permanent disablement must occur while in the service of the employer.

Conclusion of Tribunal 24 The applicant submitted that the Tribunal ought to have considered for itself whether the applicant was totally and permanently disabled and failed to do so. The applicant argued that the Tribunal could not decide whether a decision, in its effect on the complainant, was fair and reasonable without also deciding whether the complainant is totally and permanently disabled. 25 The respondents replied that it is not for the Tribunal to ask whether it would have reached the same conclusion on the evidence. It is for the Tribunal to simply ask whether the decision was fair and reasonable in the circumstances.

consideration 26 In my opinion, the definition of TPD under the insurance policy is the appropriate definition. Rule 1 of Part A of the Rules of the Fund of the pre-19 May 1994 Trust Deed states that the definition of TPD will have a definition that corresponds to the definition under the current insurance policy. While the 19 May 1994 Trust Deed Amendment includes its own definition of TPD, it still defers to the insurance policy in cl 14(1). Regardless of which deed one turns to, it is the insurance policy that takes precedence. The Trust Deed itself guarantees the member no entitlement; rather, it provides a way in which the Trustee may vary the benefit received in a situation where a member's claim under the insurance policy has been rejected. 27 I see no need to decide which Trust Deed was applicable for the purposes of determining which definition of TPD should be applied because it is the insurance policy definition which must be satisfied in order for the applicant to receive a benefit from such policy. As to the position of an insurer within the scheme provided by the Act, see National Mutual Life Association of Australia Ltd v Campbell [2000] FCA 852, [13], (2000) 99 FCR 562 at 566. 28 I find no compelling argument for the applicant's claim that the Tribunal committed an error in determining that a definition containing the word "unable" sets a more difficult threshold than one containing the word "unlikely". In Davis v Rio Tinto Staff Superannuation Fund Pty Ltd [2002] FCA 376, Heerey J adopted the reasoning of Commissioner Roberts-Smith QC, sitting as a Commissioner of the District Court of Western Australia, when he determined that the word "unlikely" in the definition of total and permanent disability set a much lower test "than would be posed if an insured had to establish that he was incapable of following his usual or any other occupation." (citing Ivkovic v Australian Casualty & Life Ltd (1994) 10 SR (WA) 325). I find this analysis consistent with the decision of the Tribunal. 29 The applicant's third and fourth contentions are intertwined, and I will deal with them together in discussing the extent of the Tribunal's power of review. 30 The Tribunal is not to act as an objective, impartial observer but rather, in the words of the Full Court in Campbell, stands in the "shoes" of the trustee or insurer; see also Briffa v Hay (1997) 75 FCR 428 at 443 and Seafarers' Retirement Fund Pty Ltd v Oppenhuis (1999) 94 FCR 594 at 598. In doing such, the Tribunal engages in limited administrative review. In Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 (20 September 2001), Allsop J observed that: "The Tribunal's task is not to engage in ascertaining generally the rights of the parties, nor is it to engage in some form of judicial review of the decision of the trustee or insurer. Rather it is to form a view, from the perspective of the trustee or insurer, as to whether the decision of either was (recognising the overriding framework given by the governing rules and policy terms, respectively) unfair or unreasonable." This point is further elucidated by Pamela McAlister, "The Demise of the Superannuation Complaints Tribunal: The Decisions in Wilkinson v Care and Breckler v Leshem" (1998) 22 Melbourne University Law Review 281, 287 where the following was said: "The Tribunal can only exercise its determination-making power under s 37 for the purpose of eliminating any unfairness or unreasonableness or both. It must affirm the trustee's decision if it is satisfied that it is fair and reasonable in its operation in relation to the complainant in the circumstances. In practice this means that the Tribunal conducts what might be termed a 'limited merits review'. The Tribunal 'steps into the shoes' of the trustee and addresses the actual trustee decision de novo, based on all of the information before it. In awarding a remedy, however, it does not ask itself whether the trustee's decision was the correct or preferable decision, but rather asks whether the trustee's decision was within a range of decisions which were fair and reasonable." 31 The Tribunal's role is not to decide whether or not the complainant is entitled to a TPD benefit. The Tribunal makes a decision about the actions and conclusions of the trustee and insurer only. In Alcoa of Australia Retirement Plan Pty Ltd v Thompson [2002] FCA 256 at [49] to [51], Nicholson J held that the Tribunal had erred when it limited itself to an extensive review of medical evidence, formed its own view on that evidence and based its decision on that view. The Tribunal did not ask itself whether the decisions complained of were fair or reasonable in the circumstances but whether in its opinion the respondent was totally and permanently disabled. Also, Sundberg J held in National Mutual Life Association of Australia Ltd v Jevtovic (Unreported, Federal Court of Australia, Sundberg J, 8 May 1997), that the s 37(6) inquiry,"is not whether the Tribunal is of the opinion that the respondent is totally and permanently disabled, but whether it is satisfied that the trustee's and the insurer's decisions that he was not so disabled were fair and reasonable in the circumstances." His Honour also held that the Tribunal erred when it believed its task was to decide whether the correct decision had been made; see also Haematite Pty Ltd v Ristevski [2002] FCA 408. 32 Thus, I find it unnecessary to consider the applicant's submission that the Tribunal improperly limited the evidence. The Tribunal need not have considered further evidence that was not before the Trustee and Insurer for the sole purpose of deciding whether or not the applicant was entitled to a TPD benefit. This was not its role under s 37(6) of the Act. 33 Although strictly unnecessary to do so, I now turn to the question of the meaning of "in service" in reference to the issue of what evidence is relevant to the Tribunal and at what point the decision of the Trustee should be reviewed. Clause 14 of the Trust Deed states that a member of the fund may receive a TPD benefit if he has been disabled "while in Service before the Member's Normal Retirement Date". Deciding when a member was "in service" is important because once that member is no longer in service, determination of whether or not he is entitled to a TPD benefit ceases. Thus, the phrase "in service" must be read sensibly to include an employment relationship which may no longer be active but which has not been terminated. Assessment, then, of the member's disability is as of 19 May 1994, being the applicant's last day of service, inactive though that service was. The Tribunal then reviews the decision of the Insurer and Trustee as of the final date of the said decision, being in this case 3 July 1997, the date the Trustee affirmed its decision after having reconsidered the claim in June 1995, in February 1996, and in July 1996. Heerey J in Davis has applied this understanding of the time frame for the Tribunal's review, and I respectfully agree with his Honour's analysis. 34 In light of the above consideration, I see no error in the Tribunal's treatment of the evidence or in its conclusion. The Tribunal acted within its limited administrative review capacity and was not required to decide for itself whether the applicant was entitled to a TPD benefit. Moreover, it did not err in applying the insurance policy definition of TPD or in deciding that such definition was stricter than that provided by the Deed. I am satisfied that the Tribunal fulfilled its duty under s 37 of the Act. The appeal, therefore, will be dismissed with costs, including reserved costs to be taxed in default of agreement. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall.

Counsel for the Applicant: M O'Loghlan QC and M Stiffe

Solicitor for the Applicant: Arnold Thomas & Becker

Solicitor for the Respondents: Blake Dawson Waldron

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