Employers First v Tolhurst Capital Limited

Federal Court of Australia|2005-05-16|Before: Branson J, Gummow J, Stone JJ

introduction 1 This is an appeal pursuant to subs 46(1) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ('the Complaints Act') from a determination of the Superannuation Complaints Tribunal ('the Tribunal'). Subsection 46(1) of the Complaints Act empowers a party to appeal to the Federal Court, on a question of law, from a determination of the Tribunal. The appeal for which subs 46(1) provides is a proceeding that comes before the Court for hearing and determination in the exercise of its original, rather than its appellate, jurisdiction. The subject matter of the appeal is the question or questions of law on which the appeal is brought (TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 per Gummow J at 178). 2 The second further amended notice of appeal filed by the applicant identifies eight questions of law on which this appeal is said to be brought. I am inclined to doubt that all eight questions are appropriately framed as questions of law (see Birdseye v Australian Securities and Investments Commission [2003] FCAFC 232; 76 ALD 321 per Branson and Stone JJ at [9]‑[18]). However, as the real legal issues between the parties can be determined by reference to those questions that are plainly questions of law, there is no need resolve this issue. 3 The applicant, who was formerly known as The Employers' Federation of New South Wales, is the former employer of the second respondent and the principal employer under the Employers' Federation of New South Wales Superannuation Plan ('the Plan'). The first respondent, which was once known as Nelson Parkhill Financial Services Limited, was appointed as the trustee of the Plan by a deed of appointment dated 30 June 1995. Nelson Parkhill Financial Services Limited changed its name to ACSIS Limited, and then Investec Capital Limited, before adopting its present name. It remains the trustee of the Plan. The first respondent will hereafter be referred to as 'the Trustee'. The Trustee has submitted to any order of the Court other than an order as to costs. The second respondent ('Mr Barratt') is a former member of the Plan. 4 On 21 May 1999 Mr Barratt lodged a complaint with the Tribunal under subs 14(2) of the Complaints Act by which he asserted that the decision of the Trustee as to the amount of the lump sum retirement benefit to which he was entitled under the Plan was unfair or unreasonable. The Tribunal, by a determination dated 10 July 2003 ('the Determination'), upheld Mr Barratt's complaint. 5 For the following reasons I have concluded that this appeal should be upheld and the Determination set aside.

background facts 6 The Plan was established by a trust deed ('the Deed') made on 27 June 1983 between The Employers' Federation of New South Wales, described in the deed as 'the Principal Employer', and The Employers' Federation Agency Co Limited,described in the deed as 'the Trustee'. By a deed of appointment dated 30 June 1995 the Trustee was subsequently appointed as trustee of the Plan in substitution for the original trustee. 7 The recitals to the Deed record that: 'The Principal Employer has decided to establish a superannuation fund to be known as The Employers' Federation of New South Wales Superannuation Plan (called the Plan) for the purpose of providing superannuation benefits for such of its Employees and the Employees of any Associated Employers (as hereinafter defined) who being eligible participate in the Plan and/or for the Dependants of such Employees.' 8 The Rules of the Plan ('the Rules') are annexed to the Deed, which provides that the Rules are to have the same force and effect as if set out in the body of the Deed. 9 The Plan is an employer‑sponsored defined benefit fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) ('the SIS Act'). The applicant has at all times been the 'Principal Employer' for the purposes of the Plan. Mr Barratt was employed by the applicant from 16 January 1990 until his retirement on 15 January 1999. He was a member of the Plan for the entire period of his employment by the applicant. 10 The Trustee issued 'member statements' to members of the Plan annually. The member statements were intended to show the member concerned the current balance of contributions made to the Plan on his or her behalf and the estimated benefit to which he or she would be entitled upon retirement. The member statements received by Mr Barratt showing his position as at 30 June 1995, 30 June 1996 and 30 June 1997 ('the Member Statements') contained, amongst other things, an estimate of the lump sum retirement benefit to which he would be entitled at age sixty‑five. In each of the Member Statements the estimate was said to exclude superannuation guarantee contributions. The member statement received by Mr Barratt showing his position as at 30 June 1997, in contrast to the two earlier member statements received by him, showed the estimate of his retirement benefits as at 30 June 1996 and 30 June 1997 as being 'subject to employer approval'. The reason for the addition of this qualification on the estimate may be assumed to be the controversy referred to below. Each of the Member Statements received by Mr Barratt contained the following note: 'This statement should be read in conjunction with your Member Booklet. If you have any questions please contact your manager. Whilst every care has been taken in the preparation of this Statement, the Trustee reserves the right to correct any error or omission.' 11 In or about 1997 a controversy arose between the applicant and the Trustee as to whether the lump sum retirement benefits to which members were entitled under the Plan were properly calculated by adding to the amount to which the member was expressly entitled under the Deed ('the defined benefit amount') the superannuation guarantee contributions paid in respect of that member ('the SGC'). Prior to that time the Trustee had acted on the basis that the correct method of calculating members' benefits under the Plan was to add the SGC to the defined benefit amount. As mentioned below, this controversy eventually led to litigation being instituted by the applicant. 12 It appears that sometime during 1998 Mr Barratt decided to retire ahead of his sixty‑fifth birthday. By letter dated 8 August 1998 Mr Barratt sought confidential advice from the Trustee as to the estimated retirement benefit that he would receive if he retired on various alternative dates, including on 16 January 1999. The Trustee responded by letter dated 18 August 1998 advising, in effect, that Mr Barratt's retirement benefit would be calculated as required by rule 4 of the Rules and that its estimate of the retirement benefit that would be payable to him if he retired on 16 January 1999 was $119,700. By letter dated 24 August 1998 Mr Barratt queried the Trustee's estimate suggesting that the SGC should have been included in the estimate. 13 Mr Barratt retired on 15 January 1999. By a letter dated 31 March 1999 the Trustee advised Mr Barratt that the lump sum retirement benefit to which he was entitled was $119,700. This sum was calculated pursuant to rule 4 of the Rules and did not include the SGC. 14 On 21 May 1999 Mr Barratt lodged a complaint, dated 18 May 1999, with the Tribunal. The complaint alleged, in effect, that the decision of the Trustee to calculate his lump sum retirement benefit pursuant to rule 4 of the Rules was unfair or unreasonable because it was not consistent with the estimated retirement benefit of which he had been advised by the Member Statements. 15 In September 1999 the applicant commenced a proceeding in the District Court of New South Wales in which it alleged that the Trustee, in breach of trust, contract and a duty of care owed to the applicant, had miscalculated the amount of the benefits payable to members of the Plan upon retirement. No document filed in that proceeding is before this Court. The proceeding was settled in 2002 on terms set out in a Deed of Release. A copy of that Deed of Release is before the Court. The parties to the Deed of Release are the applicant, QBE Insurance Limited and 'Investec Australia Limited (formerly ASCIS Capital Pty Ltd) ACN 071 292 594'. As the Australian Company Number of the Trustee is 001 277 256, and the Trustee has at no time had either of the names 'Investec Australia Limited' or 'ACSIS Capital Pty Limited', it seems that the applicant may have instituted this proceeding against a company related to the Trustee rather than against the Trustee itself. As neither party referred to this curious aspect of the Deed of Release, I need not give it further consideration. The terms set out in the Deed of Release include a payment of compensation in respect of the alleged overpayment made from the Plan.

the plan and THE rules 16 Clause 1 of the Deed established the Plan. Clause 2 is an interpretation provision and provides, amongst other things, that the Rules and any Schedules to the Deed have the same force and effect as if set out in the body of the Deed. 17 Clause 3 of the Deed contains provisions concerning the Trustee including provisions as to the power and functions of the Trustee. Clause 3(4) and (5) provide as follows: '(4) The Trustee shall have power generally to do all acts matters and things as the Trustee may consider necessary or expedient or desirable for the administration maintenance and preservation of the Plan in their performance of their obligations under the Deed and the Rules. (5) The Trustee in the exercise of the authorities powers and discretions conferred upon it by this Deed shall have an absolute and uncontrolled discretion and may exercise or enforce all or any of its authorities powers and discretions from time to time and at any time or may refrain from exercising all or any of the same from time to time or at all.' 18 Clause 5 of the Deed gives the Trustee the usual power of investment in respect of the assets of the Plan. 19 Clause 7(1) of the Deed originally provided: '7.(1) The Trustee with the approval of the Principal Employer or the Principal Employer with the approval of the Trustee may at any time by deed or resolution alter the provisions of this Deed (including this Clause) and the Rules and may add fresh provisions thereto or delete provisions therefrom PROVIDED THAT except as provided in sub‑clause (2) of this Clause such alteration addition or deletion shall be made only if the Actuary certifies that the value of the rights of each Member and his Dependants secured by contributions paid up to the time of making such alteration addition or deletion is not reduced thereby or if all the Members the value of whose benefits are reduced as aforesaid give their consent in writing thereto.' 20 The Deed has been amended on a number of occasions, including by a deed executed on 28 June 1995. By that deed clause 7(1) was amended by deleting the words 'The Trustee with the approval of the Principal Employer or the Principal Employer with the approval of the Trustee' and substituting the words 'The Principal Employer (with the consent of the Trustee where such consent is required under Superannuation Law)'. By the same deed a new clause 21 was added to the Deed in the following terms: 'The Principal Employer may give any direction to the Trustee, other than a direction prohibited by Superannuation Law, and if the Principal Employer does give such a direction to the Trustee, the Trustee shall comply with it.' 21 The Rules control the admission of members to the Plan, the contributions to be made by members and the retirement and other benefits to be received by, or in respect of, members of the Plan. 22 Rule 1 had been amended by a deed dated 20 October 1994 which inserted into the rule the following definition of 'Superannuation Law': '"Superannuation Law" means requirements in any of the Superannuation Industry (Supervision) Act 1993, the Superannuation (Resolution of Complaints) Act 1993, the Superannuation Entities (Taxation) Act 1993, the Income Tax Assessment Act 1936, the Superannuation Guarantee Charge Acts and Regulations made under those Acts and all other requirements, whether legislative or otherwise including: (a) any administrative guidelines issued by a Superannuation Authority; or (b) statements by Government advising changes and proposed changes to relevant law, in each case with which the Plan must comply (or which, in the reasonable opinion of the Trustee the Plan ought comply) in order to be a Complying Superannuation Fund;' 23 Rule 3 is concerned with contributions. It provides for members to contribute to the Plan at the rate of 5% of his or her salary and for each employer to contribute to the Plan in respect of members such amounts or rates as were last advised to the Trustee by the Actuary. It is convenient to set out the terms of rules 3(3), (6) and (7): '(3) The Principal Employer may with the consent of the Trustee reduce or waive for such period as it thinks fit the contributions which would otherwise be payable by a Member pursuant to these Rules and the Trustee shall with the agreement of the Principal Employer make such adjustment to the benefits payable to or in respect of such Member as they may decide and advise to the Member. … (6) Any Member and/or Employer (subject in either case to the agreement of the Trustee and the Principal Employer) may pay an additional contribution in respect of any particular Member to provide such benefits additional to those payable under these Rules as the Trustee with the advice of the Actuary and with the agreement of the Employer may decide and advise to the Member. (7) Subject to Rule 11 an Employer with the agreement of the Trustee and the Principal Employer may otherwise vary the benefits and other provisions under these Rules in any particular case (which variation shall be agreed with the Member) and the contributions otherwise payable shall with the advice of the Actuary be adjusted appropriately.' 24 Rule 4(1), which is concerned with retirement benefits, relevantly provides: '(1) Upon the retirement of a Member from service on his Normal Retirement Date … there shall be paid to him from the Plan a lump sum retirement benefit equal to the total of a. … b. … c. … d. 17‑1/2% of his Final Average Salary times his period of Plan Membership … e. … … (4) Notwithstanding any other provision of these rules the benefit payable in accordance with any of clauses 4(1), 5(1), 6(1) or 7 shall not be less than the sum of: (a) the aggregate of all contributions made by the Member and all accretions thereto; and (b) an amount equal to the contributions required to be made from time to time by the Employer in respect of the member in order to avoid the imposition of the superannuation guarantee charge under the Superannuation Guarantee (Administration) Act together with interest thereon calculated at such time and at such rates of interest as the Actuary may determine; provided that the requirements of any applicable law as to preservation of the benefit is observed.' 25 Rule 5, which is concerned with death benefits, and rule 6, which is concerned with total disablement benefits, are similarly drafted to provide that 'there shall be payable from the Plan' amounts calculated in specified ways.

SUBMISSIONS TO THE TRIBUNAL 26 Each of the parties to this appeal made written submissions to the Tribunal. 27 The submissions for the Trustee made it plain that Mr Barratt's lump sum retirement benefit had been calculated under rule 4(1) of the Rules. The submission of the Trustee contained the following concession concerning the Member Statements issued to Mr Barratt: 'For the periods ending 30 June 1995, 1996 and 1997, the Trustee mistakenly overstated the Complainant's estimated retirement benefit as at those dates (see 4th line down under the heading "Leaving Service Benefits") in his member statements, although noting that the 1997 statement includes a note that the estimate is "subject to employer approval". The Complainant's estimated retirement benefits as at 30 June 1995, 1996 and 1997 should have been the amount of the defined benefit calculated in accordance with Rule 4(1) of the Trust Deed. Instead the estimate was calculated by adding the defined benefit amount to the amount of the Superannuation Guarantee Contribution amounts ("SGC"). Further, for the periods ending 30 June 1995, 1996 and 1997, the Complainant's projected estimated retirement benefit as at age 65 (see the last line under the heading "Leaving Service Benefits") was shown in the member statements as the defined benefit only but included a note that the estimate "exclude(d) Superannuation Guarantee Contributions".' 28 The Trustee submitted to the Tribunal that the decision concerning which Mr Barratt had complained to the Tribunal was one that did not involve the discretion of the Trustee as the Trustee was obliged to pay Mr Barratt a lump sum retirement benefit calculated in accordance with rule 4(1) of the Rules. 29 The Trustee further submitted: 'A non‑discretionary decision is taken to be unfair or unreasonable if it was contrary to law which includes not in accordance with the governing rules of the fund. The Tribunal may not however vary, set aside or substitute its own decision in relation to a non‑discretionary decision where that decision is a necessary consequence of the application in the particular case of the governing rules of the fund concerned (per Colonial Mutual Life Assurance Society Limited v Brayley [2002] FCA 1333). In this case not only was the decision entirely in accordance with the law, the Trustee has no power, authority or discretion under the Trust Deed or Rules to make any other decision. Rule 4(1) of the Trust Deed provides that upon the retirement of a member there shall be paid to him the lump sum retirement benefit as defined. There is a power to vary a benefit amount under the Trust Deed but this is that of the Employer. Rule 3(7) of the Trust Deed Rules provides that an Employer with the agreement of the Trustee and the Principal Employer may otherwise vary the benefits and other provisions under the Rules and the contributions otherwise payable shall with the advice of the Actuary be adjusted appropriately. The Employer in this case is also the Principal Employer.' 30 Significantly, for present purposes, the Trustee did not contend in its submissions that it had received any relevant direction from the applicant under clause 21 of the Deed. The closest it came to making such a contention was in a paragraph under the heading 'History'. In this paragraph the Trustee stated that by letter dated 25 September 1998 it had advised Mr Barratt of various things, including - 'that member statements have always reflected an estimated entitlement to SGC in addition to the defined benefit amount based upon their interpretation of the Trust Deed, rules and specific instructions from the Employer.' 31 The written submissions of the applicant also contended that the overstatement of Mr Barratt's benefit in the Member Statements and in other contemporaneous correspondence from the Trustee was a mistake. They also contained the assertions that Mr Barratt had been made aware of that mistake 'on many occasions' from the end of 1997 until the date of his retirement and that over the same period correspondence between Mr Barratt and the Trustee reflected uncertainty as to the correct amount of the retirement benefit to which Mr Barratt would be entitled. The applicant submitted that there was no evidence that Mr Barratt had relied to his detriment on the overstatements in the Member Statements. It further expressed its agreement with the submissions of the Trustee that the Trustee's decision to pay Mr Barratt a lump sum retirement benefit calculated pursuant to rule 4(1) of the Rules should be affirmed by the Tribunal. 32 The applicant's written submissions concluded with the following paragraphs: 'Employers First submits that there is no discretion in the trust deed of the Plan that would allow the Trustee to unilaterally augment the benefit of any member beyond that benefit set out in Rule 4 of the schedule to the trust deed. To the extent that Rule 3(7) of the schedule to the trust deed may allow the Trustee to augment the benefit of a member with Employers First's consent, Employers First submits that it has not and will not consent to the augmentation of any benefit beyond the benefit payable in accordance with Rule 4 of the schedule to the trust deed. It is submitted that the rules of the Plan do not permit a payment of the kind sought by Mr Barratt and for the Tribunal to make an order for payment from the Plan would be contrary to s 37(5) of the Superannuation (Resolution of Complaints) Act 1993. Alternatively, to the extent that such a payment may be made under the rules of the Plan, it is submitted that such payment could not be made without the consent of Employers First and such consent will not be granted.' 33 Mr Barratt made written submissions to the Tribunal in response to the written submissions filed by the applicant and the Trustee respectively. By his written submissions Mr Barratt appeared to accept that the Member Statements included overstatements of his entitlement upon retirement. However, he submitted that it was reasonable for him to accept the accuracy of the Member Statements. He also submitted that many employees of the applicant had received benefits under the Plan in accordance with the alleged mistake. He asserted his belief that the Trustee was honour bound to pay him a benefit in accordance with the Member Statements. 34 The applicant filed a supplementary written submission in response to Mr Barratt's written submissions. Amongst other things the supplementary written submission asserted that each of the employees who was accidentally overpaid on retirement was paid before March 1997 when the mistake was first suspected. 35 None of the written submissions placed before the Tribunal by the parties referred to clause 21 of the Deed or suggested that additional contributions had been made in respect of Mr Barratt under rule 3(6) of the Rules. Mr Barratt's submissions referred to a letter dated 7 March 2000 from the Trustee to the Tribunal (see [38] below). This letter contains an assertion that the applicant gave a direction to the Trustee under clause 21 of the Deed. However, the gravamen of Mr Barratt's submissions was that he was entitled to receive a lump sum retirement benefit that was consistent with the information in the Member Statements. 36 The Tribunal did not invite the parties, or any of them, to place submissions before it touching on clause 21 of the Deed. Nor did it alert the parties to the possibility that it might conclude that the applicant had given the Trustee a relevant direction under clause 21 of the Deed. The Tribunal did not invite the parties, or any of them, to place submissions before it on the question of whether any additional contribution had been paid in respect of Mr Barratt under rule 3(6) of the Rules. Nor did it alert the parties to the possibility that it might conclude that the applicant had paid additional contributions in respect of Mr Barratt under rule 3(6) of the Rules.

decision of the tribunal 37 The Tribunal provided to the parties a written record of the Determination and the reasons for the Determination ('the Decision Record'). Under the heading 'TRIBUNAL'S DELIBERATIONS' the Decision Record notes that the Tribunal gave particular consideration to two letters; first, the letter dated 7 March 2000 referred to above which is described in the Decision Record as a letter from the former trustee to the Tribunal and secondly, a letter dated 5 August 1996 described in the Decision Record as a letter from the former trustee to the Chief Executive of the applicant. In each case the reference to 'the former trustee' is in error. Each of the letters was from the Trustee albeit that it was written prior to the Trustee assuming its present name. 38 The Decision Record notes that the letter dated 7 March 2000 provided the following answers to queries from the Tribunal: '(a) The benefits payable under the Trust Deed include the SG benefit (excluding any employer directed benefit under Clause 21 of the Deed); (b) The employer under clause 21 of the Trust Deed directed that the SG be an additional benefit; (c) That direction was revoked by the employer on 25 May 1998 in a letter from the employer's solicitors …' 39 The Decision Record notes that the letter dated 5 August 1996 stated, amongst other things: 'Superannuation guarantee contributions have been credited to member's accounts since introduction of this legislation effective 1 July 1992. However, as the Federal Government intends to increase the superannuation guarantee contributions to 9% by the year 2000, this will have a significant effect on the duration of the surplus if contributions of these levels are credited to member's accounts. The use of minimum requisite benefits will mean that part of the employer's funding within the withdrawal benefit is considered as part of the superannuation guarantee provisions. Given that this practice differs from that we currently undertake and would result in lower withdrawal benefits for some members, we ask that the Employer considers this matter carefully and advises the Trustee as to whether the current practice of crediting member's accounts with the superannuation guarantee contributions should be continued or whether the minimum requisite benefit should be paid on withdrawal. Until this is clarified we will continue our current practice of crediting member's accounts with the superannuation guarantee contributions. The actuary has undertaken the valuation based on our current practice …' 40 The Decision Record then records the following: 'From these two letters, and other supporting evidence in the file, such as the Benefit Statements for the years ending 30 June 1995, 1996 and 1997 and the correspondence in late 1998 between the Complainant and the Trustee, the Tribunal concluded that: ▪ From 1 July 1992 the Trustee credited the Complainant's member account with superannuation guarantee contributions, in addition to his defined retirement benefit, in accordance with a direction from the Employer under Clause 21 9 [sic] (and perhaps in relation to the period before 28 June 1995, in accordance with Rule 3(6)). ▪ From at least 5 August 1996 the Employer was aware that the "Trustee's practice" of crediting members' accounts with the superannuation guarantee contributions would be continued while, with underlining added "the manner of funding future superannuation guarantee contributions is under review". ▪ From 25 May 1998 the Employer revoked its direction under Clause 21.' Regulation 13.16 of the SIS Act provides that: For the purpose of subsection 31(1) of the Act, it is a standard applicable to the operation of regulated superannuation funds that, subject to subregulation (2), a beneficiary's right or claim to accrued benefits, and the amount of those accrued benefits, must not be altered adversely to the beneficiary by the amendment of the governing rules or by any act carried out, or consented to, by the trustee of the fund. The purpose of Regulation 13.16 is to protect members' interests by not allowing a trustee to reduce the amount of accrued benefits without approval from members and without adequate time to consider any proposed alteration. In the Complainant's case the relevant accrued benefits are his defined benefit entitlement and the accumulation (net of contributions tax) of superannuation guarantee contributions in respect of him up until 25 May 1998 plus interest. The Tribunal also considered that it was relevant that the Complainant was absent on extended annual holidays in mid 1998 during which time, it seems, the Chief Executive of the Employer held a staff meeting to which all staff members were requested to attend. The Chief Executive's Statutory Declaration states that during this meeting he explained: (a) the history behind a deed amendment on 25 July 1993 that inserted rule 4(4) of the deed so that rule 4 said that the retirement benefit was the greater of the "minimum benefits" and the defined benefit formula. By "minimum benefit" I meant the minimum benefit inserted in rule 4(4) of the deed when superannuation guarantee took effect; (b) that the benefit in the member statements for 1994/1995, 1995/1996 and 1996/1997 were incorrect (they were overstating the benefit by implying the superannuation guarantee amount was to be added to the defined benefit formula); and (c) [the Employer] was working with the Trustee to ensure the statements were corrected and that, in the meantime, the statements should be treated as incorrect and not relied upon. The Statutory Declarations of the Employer's Chief Executive and the Financial Controller both refer to numerous meetings, discussions and conversations about the "over statements" with the Complainant and two other members who were approaching the normal retirement age (age 65). The Complainant disputed some of these and there is uncertainty about exactly what was discussed. In the evidence before the Tribunal, the first unqualified written formal advice that members received from the Trustee (who, under the SIS Act is the responsible entity) was the Plan's 1998 Annual Report to Members. This report appears to have been issued at least two and a half months after the Complainant retired on 15 January 1999. Neither this report nor the verbal advice from the Employer, if given, allow the Trustee to retrospectively reduce the Complainant's accrued entitlement up to the date of the decision to "change the basis on which the benefit had previously been calculated" . For the various reasons explained above, the Tribunal therefore considered that the Trustee's decision about the disputed benefit amount was not fair and reasonable to the Complainant in the circumstances.' 41 I observe incidentally that in reaching the conclusion that the Trustee had acted in accordance with a direction of the applicant under clause 21 of the Deed the Tribunal apparently placed no weight on any of the following matters:

(a) that the letter dated 7 March 2000 was, as material on the Tribunal's file showed, written on the advice of the Trustee's solicitors at a time when the applicant had legal proceedings on foot in which it sought compensation from the Trustee in respect of alleged overpayments of retirement benefits made to members of the Plan in breach of the trusts established by the Deed;

(b) that the legal proceedings instituted by the applicant against the Trustee were eventually settled on terms that involved the payment of compensation in respect of the alleged overpayments of retirement benefits to members of the Plan;

(c) that when asked by the Tribunal to provide a copy of the direction under clause 21 the Trustee, by a letter from its lawyers dated 15 November 2000, responded that the direction was oral but it did not identify either the person who gave the oral direction or the date upon which the oral direction was claimed to have been given; (d) that neither the letter dated 5 August 1996, nor any other correspondence on the Tribunal's file dated earlier than the institution of the legal proceeding by the applicant against the Trustee, makes any reference to a direction under clause 21 of the Deed; (e) that no party before the Tribunal had submitted to the Tribunal that the applicant had given a direction under clause 21 of the Deed; and

(f) that no party before the Tribunal had submitted to the Tribunal that additional contributions had been paid in respect of Mr Barratt under rule 3(6) of the Rules.

42 The Decision Record records the Determination as follows: 'In accordance with the requirements of sub‑ss.37(3), (4) and (5) of the Complaints Act, the Tribunal determines to set aside the decision of the Trustee and substitutes its own decision that the Complainant is now entitled to a further payment from the Plan equal to the accumulation (net of contributions tax) of superannuation guarantee contributions in respect of him up until 25 May 1998, plus interest at the Plan's crediting rates from time‑to‑time up until the date of payment.'

Proper Construction of Clause 21 43 The second further amended notice of appeal identifies, amongst other questions of law, the following question: 'whether on the proper construction of clause 21 of the Deed, the Principal Employer may give a direction to the Trustee to pay a member on the member's retirement a lump sum retirement benefit calculated otherwise than pursuant to rule 4 of the rules; ….' 44 Mr Barratt by his written submissions submitted that the above question, properly understood, does not raise a point of law. Counsel for Mr Barratt at the hearing, who was not the author of the written submissions, did not submit that a question as to the proper construction of a clause of a deed is not a question of law within the meaning of s 46 of the Complaints Act. Rather he submitted that, having regard to the factual findings made by the Tribunal, no issue arose before the Tribunal as to the proper construction of clause 21 of the Deed. I reject this submission for reasons that are set out below. 45 The intended meaning of clause 21 of the Deed is to be ascertained objectively from the language used by the parties to the Deed. As Gibbs J observed in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109: '…the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonised one with another.'

In the present case this means that the intended meaning of clause 21 is to be ascertained by considering the words of the clause in the context provided by the Deed as a whole and by the Rules. The Rules are to be considered as part of the relevant context because, as mentioned above, clause 2(1) of the Deed provides that the Rules shall be read and construed and have the same force and effect as if set out in the body of the Deed.

46 Examination of the Deed and the Rules reveals that they together vest various powers and functions in the Trustee for the purpose of the administration of the Plan. The provisions that vest these powers and functions in the Trustee can be seen to fall into three broad categories. The first category is provisions that are enabling in their operation. So, for example, clause 3(7) provides that the Trustee may enter into and execute contracts which it deems expedient for the purpose of securing the benefits to be provided by or from the Plan. Clause 3(8) authorises the Trustee to open and operate such bank accounts as it thinks desirable. Clause 3(10) authorises the Trustee to appoint a Secretary of the Plan. Clause 3(12) authorises the Trustee to delegate to any company or person on such terms as the Trustee thinks fit any of the powers, duties or discretions conferred on the Trustee by the Deed. Clause 5(1) authorises the Trustee to invest the assets of the Plan in certain kinds of investments. Rule 2(6)(a) authorises the Trustee to admit to the Plan an employee who is unable, for example, to pass a prescribed medical test. 47 By contrast, other provisions of the Deed and Rules require the Trustee to do various things. So, for example, clause 3(9) provides that the Trustee 'shall' appoint as Actuary to the Plan a person or firm holding certain qualifications. Clause 3(11) provides that the trustee 'shall' keep or cause to be kept proper books of record and accounts necessary for the proper administration of the Plan. Clause 3(18) provides that the Trustee 'shall' pay out of the Plan the expenses of the management and administration of the Plan or arrange for the payment of such expenses by the employers. Rule 2(9) provides that the Trustee 'shall' ensure that each person who becomes a member is notified of the person's rights and the rights of the person's dependants and legal representatives to receive benefits from the Plan. 48 By way of further contrast certain provisions of the Rules, of which rule 4 is an example, provide simply that something 'shall' happen. That is, these provisions do not in terms mandate that the Trustee do something; they simply require that the thing be done. Nonetheless, it is to the Trustee of the Plan that a person entitled to the benefit of the thing mandated to be done would be entitled to look for relief should the thing not be done. The portion of rule 4 that is relevant to the proceeding is set out in [24] above. Another example of a provision that mandates an outcome is rule 6(1), which relevantly provides: 'Upon the retirement of a Member from Service before his Normal Retirement Date as a result of his Total and Permanent Disablement there shall be payable from the Plan to or in respect of him an amount determined in the manner set out in sub‑rule (1) of Rule 5 as if he had died on the date on which he was last at work.' 49 As mentioned above, clause 7(1) of the Deed authorises the Principal Employer (with the consent of the Trustee where such consent is required under Superannuation Law) to alter the provisions of the Deed by deed or resolution provided that, except in the case of alterations authorised by clause 7(2), the Actuary gives the certificate required by the clause. If clause 21 of the Deed were understood to authorise the Principal Employer to give a direction to the Trustee the effect of which was to compel the Trustee to act other than as required by the terms of the Deed and Rules, the clause would constitute an alternative means by which the Principal Employer could alter the provisions of the Deed - and a means unhampered by the requirement to obtain a certificate from the Actuary. 50 Moreover, rules 3(3), (6) and (7) of the Rules, which are set out in [23] above, explicitly provide means whereby the benefits payable to a particular member under the Plan may be varied. Only rules 3(6) and (7) authorise an increase in the benefits payable to a particular member. The means provided by rules 3(6) and (7) each require the involvement of the Actuary. If clause 21 of the Deed were understood to authorise the Principal Employer to give a direction to the Trustee the effect of which was to compel the Trustee to pay to a particular member benefits additional to those provided for by rule 4, the clause would constitute an alternative means by which the benefits payable to a particular member under the Plan could be varied - a means unhampered by the requirement to involve the Actuary. 51 In my view, it cannot reasonably be inferred that clause 21 was intended to authorise the Principal Employer to override express provisions of the Deed and the Rules in the ways identified above. If the clause were understood to so authorise the Principal Employer, the capacity of the Trustee to manage the Plan so as to ensure its financial viability would be undermined. Additionally, the prudential role of the Actuary would be weakened. The above conclusion does not deprive clause 21 of content. The Principal Employer can still rely on clause 21 to give a direction, not prohibited by Superannuation Law as defined in the Rules, to the Trustee in respect of the exercise by the Trustee of the enabling or discretionary powers vested in the Trustee by the Deed and Rules (see [46] above). 52 I conclude that, on the proper construction of clause 21 of the Deed, the Principal Employer may not give a direction under that clause to the Trustee the effect of which is to require the Trustee to pay a member on the member's retirement a lump sum retirement benefit calculated otherwise than pursuant to the Rules. 53 I further conclude that, on the proper construction of clause 21 of the Deed, the Principal Employer may not give a direction under that clause to the Trustee the effect of which is to authorise the payment of additional contributions in respect of a particular member for the purpose of giving that member an entitlement to benefits additional to those otherwise payable under the Rules. The payment of additional contributions for the purpose of providing benefits additional to those otherwise payable under the Rules is governed by rule 3(6), and possibly rule 3(7), of the Rules.

The Extent of Mr Barratt's Accrued Benefits 54 The second further amended notice of appeal also identifies as a question of law the proper construction of the phrase 'accrued benefits' in Regulation 13.16 of the Superannuation Industry (Supervision) Regulations 1994 ('the SIS Regulations'). 55 Regulation 13.16 of the SIS Regulations relevantly provides: '… it is a standard applicable to the operation of regulated superannuation funds that … a beneficiary's right or claim to accrued benefits, and the amount of those accrued benefits, must not be altered adversely to the beneficiary by amendment of the governing rules or by any other act carried out, or consented to, by the trustee of the fund.' 56 As noted above, the Decision Record sets out the terms of regulation 13.16 of the SIS Regulations and then records the Tribunal's view that: '[i]n the Complainant's case the relevant accrued benefits are his defined benefit entitlement and the accumulation (net of contributions tax) of superannuation guarantee contributions in respect of him up until 25 May 1998 plus interest.' 57 Neither the SIS Act nor the SIS Regulations contains a definition of 'accrued benefit' for the purpose of regulation 13.16. In Asgard Capital Management Ltd v Maher [2003] FCAFC 156; 131 FCR 196 ('Maher') the Full Court of this Court gave consideration to Division 6.3 of the SIS Regulations, which is concerned with the cashing of benefits. At [9] the Full Court equated accrued benefits with benefits in which the beneficiary has an absolute interest. It did so in a context in which the time fixed by the terms of the trust for the distribution of trust property had arrived (see [7]). The definition of 'accrued benefits' contained in regulation 9.27 of the SIS Regulations for the purpose of Division 9.5 of those regulations is as follows: 'accrued benefits, in relation to a member of a defined benefits fund, means the benefits to which the member has an absolute or potential entitlement at the valuation date on account of the length of time the member has been a member of the fund at that date.' 58 It is not necessary on this appeal for me to reach a concluded view on the precise meaning to be attributed to the phrase 'accrued benefits' in regulation 13.16 of the SIS Regulations. However, in my view, a member's 'accrued benefits' for the purpose of that regulation cannot exceed the benefits to which the member has an absolute or potential entitlement at the relevant date on account of the length of time that the member has been a member of the fund. 59 The Decision Record does not explain the process of reasoning by which the Tribunal reached the conclusion that Mr Barratt's accrued benefits as at 25 May 1998 were his defined benefit entitlement and the accumulation (net of contributions tax) of SGC until 25 May 1998 plus interest. It must, I think, be assumed that the Tribunal proceeded on the basis that the issue to Mr Barratt of the Member Statements gave rise to an entitlement in Mr Barratt to receive at a future date the retirement benefits estimated in those statements. To so assume was to assume an answer to an issue at the heart of the complaint that the Tribunal was required to determine. 60 The Member Statements were prepared in a form calculated to assist members of the Plan to understand the amount of money that they might expect to receive under the Plan as a benefit on retirement. The 'account' of which details were provided in the Member Statements was an artifice; it was a notional account. In reality no separate accounts in respect of individual Plan members are maintained by the Trustee. The retirement benefits to which members of the Plan are entitled under the Plan are the retirement benefits for which the Rules provide. The Rules do not provide for retirement benefits to be calculated by reference to the balance held in accounts notionally maintained in respect of individual members of the Plan. 61 I conclude that as at 25 May 1998 Mr Barratt's accrued benefits, within the meaning of regulation 13.16 of the SIS Regulations, did not exceed the benefits to which, because of the length of time that he had been a member of the Plan, he would have had an entitlement under the Rules had he retired on that day.

Procedural Fairness 62 The second further amended notice of appeal identifies the following question: 'whether the Tribunal failed to afford procedural fairness to the Applicant, in failing to give the Applicant a proper opportunity to know of and address the proposed findings that: (i) the Applicant gave a direction to the First Respondent under clause 21 of the trust deed to credit the Second Respondent's superannuation guarantee contributions in addition to his defined benefit entitlement, and (ii) that there were, or may have been, additional contributions made under rule 3(6) of the trust deed ….' 63 There has been some division of opinion on this Court as to whether, for the purposes of an appeal 'on a question of law', a question raising the issue of whether a party was denied procedural fairness is a question of law (see Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143; 131 FCR 28 per Gray ACJ and North J at [3]‑[8] and per Gyles J at [58]‑[67] and the cases there reviewed). I proceed on the basis that I am bound on this appeal to accept the majority view expressed in Clements v Independent Indigenous Advisory Committee at [8] that an appeal on the ground of a denial of procedural fairness is an appeal on 'a question of law'. No party submitted to the contrary. 64 In Kioa v West (1985) 159 CLR 550 at 584 Mason J observed: 'The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to a clear manifestation of a contrary statutory intention.' 65 It may be that the present preferred approach is to regard the duty to act fairly in the exercise of a statutory power as a duty ordinarily to be found by implication within the statute itself (see, for example, Re Minister for Immigration and Multicultural Affairs; ex parte Miah [2001] HCA 22; 206 CLR 57 per Gleeson CJ and Hayne J at [29]‑[31]). No party to this appeal contended that a duty to act fairly, in the sense of according procedural fairness, was not imposed on the Tribunal by the Complaints Act. Consideration of the provisions of the Complaints Act confirms the appropriateness of the approach adopted by the parties. 66 Section 11 of the Complaints Act requires the Tribunal to pursue the objective of providing mechanisms for exercising its dispute resolution functions that are 'fair, economical, informed and quick'. Notwithstanding the tension inherent in the requirement to provide a mechanism that satisfies each of these criterion, the requirement to pursue the objective of providing a fair mechanism of review suggests against a statutory intention to authorise the Tribunal to adopt a review procedure that is unfair to a party. 67 Part 6 of the Complaints Act provides for the Tribunal to reach a determination on a complaint under s 14 of that Act after it has conducted a review meeting which, unless the Tribunal orders to the contrary, is conducted without oral submissions from the parties. For this reason, the entitlement given to a party to a review meeting by s 33 of the Complaints Act to make written submissions to the Tribunal for the purpose of the review meeting is of critical importance in ensuring that the review meeting mechanism is fair. The fairness of the review meeting mechanism would be significantly undermined if the Tribunal were entitled to base its determination on factors outside those addressed by the parties in their respective written submissions and of which the parties did not have proper notice. 68 In Goldie v Minister for Immigration and Multicultural Affairs [1999] FCA 1277; 56 ALD 321 at [35] the Full Court of this Court observed in respect of the Administrative Appeals Tribunal: '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. See R v Lewis (1988) 165 CLR 12 at 16 - 17 and Fairmount Investments Ltd v Secretary of State for the Environment [1976] 1 WLR 1255 at 1265 - 1266. As was pointed out by this Court in Fletcher v Commissioner of Taxation (1988) 19 FCR 442 at 456, the question whether procedural fairness has been denied does not depend upon denial to a litigant of the opportunity to produce evidence that might tell against the basis upon which the Tribunal decided the case: the opportunity of making relevant submissions is also an important ingredient of a fair trial.' 69 In my view, the above observations of the Full Court are equally applicable to the Tribunal when conducting a review under the Complaints Act. The obligation on the Tribunal to afford procedural fairness to the parties to a review means that it may not make a determination adverse to the interests of a party to that review without giving that party a reasonable opportunity to make written submissions to the Tribunal on the approach that the Tribunal is contemplating. 70 As mentioned above, the approach adopted by the Tribunal in making the Determination was not an approach urged on the Tribunal by any party. The mere reference in Mr Barratt's submissions to the letter dated 7 March 2000 from the Trustee to the Tribunal did not put the applicant on notice that it was contended by any party, or that the Tribunal was contemplating concluding, that the Trustee had credited Mr Barratt's member account with superannuation guarantee contributions 'in accordance with a direction from the Employer under Clause 21 … (and perhaps in relation to the period before 28 June 1995, in accordance with Rule 3(6))'. As mentioned above, for the purposes of the review meeting the Trustee had acknowledged that it had 'mistakenly' overstated Mr Barratt's estimated retirement benefit in the Member Statements. 71 I conclude that the Tribunal reached the Determination by a process that denied the applicant procedural fairness.

The Proper Construction of Subsection 14(6) of the Complaints Act 72 The second amended notice of appeal also identifies the following question: 'whether on its proper construction section 14(6) of the [Complaints] Act prohibited the Tribunal from dealing with the complaint.' 73 It is accepted that Mr Barratt's complaint to the Tribunal was made under s 14 of the Complaints Act. Subsection 14(6) of the Complaints Act provides: 'The Tribunal cannot deal with a complaint under this section that relates to the management of a fund as a whole.' 74 It appears that there is no judicial authority on the proper interpretation of subs 14(6) of the Complaints Act. It seems clear, however, that the subsection is concerned with the nature of the complaint made under the section, rather than with the nature of the determination reached by the Tribunal on that complaint. A clear example of a complaint that relates to the management of a fund as a whole would be a complaint concerning the investment policy being adopted by the trustee of the fund. 75 In this case Mr Barratt complained about the amount of the lump sum retirement benefit to which the Trustee had decided that he was entitled on his retirement. Mr Barratt founded his complaint upon the Member Statements. The Member Statements were concerned with his particular entitlement under the Plan. 76 I conclude that, on its proper construction, subs 14(6) of the Complaints Act did not prohibit the Tribunal from dealing with Mr Barratt's complaint. It is not necessary for me to hazard a comprehensive definition of a complaint that relates to the management of a fund as a whole within the meaning of subs 14(6) of the Complaints Act.

outcome of appeal 77 The complaint made by Mr Barratt to the Tribunal was a complaint under subs 14(2) of the Complaints Act. That is, it was a complaint that the decision of the Trustee was unfair or unreasonable. The Determination, which was made on review of the decision of the Trustee, was made under subs 37(3) of the Complaints Act. In making the Determination the Tribunal was constrained by subs 37(5) of the Complaints Act, which provides: 'The Tribunal must not do anything under subsection (3) that would be contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract.' 78 In Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330; 48 ATR 359 at [28] Allsop J observed: 'The question as to whether a decision was unfair or unreasonable cannot be judged otherwise than by having regard to the conformity of the decision with the governing rules of the fund and the terms of the policy. The conformity of the decision with those matters is therefore a relevant consideration in the sense discussed in Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 at 39-40 and see Telstra Corporation Ltd v Seven Cable Television Pty Ltd (2000) 102 FCR 517 (special leave refused on 20 August 2001). If conformity with the governing rules or the terms of the policy required the very decision, which was made, to be made, the strictures of subs 37(5), the universe of possible conduct under subs 37(3) and the balance of the [Complaints] Act,including subs 37(6), would require a conclusion of the Tribunal that the decision was not unfair or unreasonable. It could not be otherwise, as it would, on this hypothesis, be the only decision capable of being reached by the Trustee or the Insurer in the light of the governing rules or terms of the policy; or, put another way, any determination under paras 37(3)(b),(c) or (d) would involve the Tribunal doing an act contrary to the governing rules or the terms of the policy.' 79 A consequence of the strictures imposed on the Tribunal by subs 37(5) of the Complaints Act is, as I pointed out in Colonial Mutual Life Assurance Society Limited v Brayley [2002] FCA 1333 ('Brayley') at [34], that: '… although all complaints made to the Tribunal under s 14 of the Act are, in a formal sense, complaints that a decision is unfair or unreasonable (s 14(2)), the Tribunal is not empowered to remedy all unfairness or unreasonableness that it may perceive. In particular, the Tribunal lacks power to remedy any perceived unfairness or unreasonableness that is a necessary consequence of the application in the particular case of the governing rules of the fund concerned or the terms of a contract of insurance between an insurer and the trustee.' 80 The limitations placed on the powers of the Tribunal by subs 37(5) and other provisions of the Complaints Act reflect the Tribunal's character as an administrative, rather than a judicial, body. In Brayley at [27] I observed that the Tribunal lacks the capacity to make determinations of legal rights that are binding and authoritative in the sense that judgments of courts are binding and authoritative. Persons affected by a decision varied or made by the Tribunal have the same legal and equitable rights in respect of the decision, other than the right to make a complaint under the Complaints Act, as they would have had had the Tribunal not reviewed the decision (see Retail Employees Superannuation Pty Ltd v Crocker at [15]-[16]). 81 However, I reject the submission of counsel for Mr Barratt that, because the Tribunal is not empowered to resolve all legal issues that may arise between the parties, it need not form a view as to the proper construction of a provision of the governing rules of a fund upon which its determination depends. The limitation placed on the powers of the Tribunal by subs 37(5) of the Complaints Act necessitates that the Tribunal give consideration to whether a determination that it is proposing to make is 'contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and the trustee is involved, to the terms of the contract' (see Brayley at [30]). 82 The Tribunal did not give explicit consideration to the proper construction of clause 21 of the Deed before concluding that the applicant had given the Trustee a direction under that clause. However, it was implicit in the Tribunal's conclusion that the applicant had given the Trustee a direction under clause 21 of the Deed that clause 21, properly construed, authorised that direction. As mentioned above, the proper construction of clause 21 of the Deed is a question of law. As I observed in Brayley at [36], the Tribunal of its own initiative, or at the request of a party, can refer a question of law to the Court for decision under s 39 of the Complaints Act. The Tribunal did not in this case do so. Consequently it was required to form a view itself (necessarily not conclusive) as to whether the clause, on its proper construction, authorised the applicant to give to the Trustee the direction upon which the Determination depended. 83 The direction which the Tribunal found that the applicant had given to the Trustee was a direction that the Trustee credit Mr Barratt's member account with SGC in addition to his defined retirement benefit. A number of problems attend this finding. First, as noted above, Mr Barratt's member account was a notional, not an actual account. SGC could not in reality be credited to Mr Barratt's member account. Secondly, neither the Deed nor the Rules provide for the benefits payable in respect of a member to be calculated by reference to that member's 'member account'. Thirdly, the Tribunal's reference to rule 3(6) suggests that the Tribunal had in mind the entitlement of a member or employer under that rule to pay an additional contribution in respect of that member. However, rule 3(6) provides that where an additional contribution is paid in respect of a particular member, that additional contribution is 'to provide such benefits additional to those payable under these Rules as the Trustee with the advice of the Actuary and with the agreement of the Employer may decide and advise the Member'. The finding of the Tribunal seeks, in effect, to use the notion of 'accrued benefits' to overcome the import of the words from rule 3(6) emphasised above. 84 I conclude that the answers to the questions of law to which I have given consideration above lead necessarily to the conclusion that this appeal must be allowed and the Determination set aside. First, the review process pursuant to which the Determination was made denied the applicant procedural fairness. Secondly, on its proper construction clause 21 of the Deed does not authorise a direction the effect of which is to require the Trustee to pay to a member of the Plan a lump sum retirement benefit calculated otherwise than as required by the Rules. Thirdly, the reliance placed by the Tribunal on regulation 13.16 of the SIS Regulations was misplaced. Mr Barratt's accrued benefits for the purpose of regulation 13.16 did not, at any relevant point of time, exceed the benefits to which, because of the length of time that he had been a member of the Plan, he would have had an entitlement under the Rules had he ceased to be a member of the Plan on that day. 85 It will be necessary for orders to be made allowing the appeal to this Court and setting aside the determination of the Tribunal. However, I propose to defer making final orders until the parties have had time to consider whether, having regard to these reasons for judgment, it is appropriate for the matter to be remitted to the Tribunal for hearing and determination according to law. 86 The proceeding will therefore be stood over to Friday 27 May 2005 at 9:30 am for the purpose of the making of orders giving effect to these reasons for judgment including orders as to costs. The parties are to provide to the Associate to Branson J by Wednesday 25 May 2005 an agreed minute of the orders to be made (including the order to be made as to costs) and if agreement has not by then been reached, the minutes of the orders for which they will respectively contend and brief outlines of submissions in support of the orders. I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Associate: Dated: 16 May 2005 Counsel for the Applicant: L McCallum

Solicitor for the Applicant: Mallesons Stephen Jaques

Solicitor for the Second Respondent: Maurice Blackburn Cashman

Date of Hearing: 25 February 2005

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