Flegeltaub v Telstra Super Pty Ltd [1998] VSC 144

[1998] VSC 144

Supreme Court of Victoria|1998-11-20|Before: BEACH, J.

At a glance

AI case summary

Result

appellant. Appeal allowed. Orders of Master Wheeler set aside. Plaintiff's summons dismissed. Plaintiff to pay defendant's costs of the application to the Master and of the appeal. Certificate pursuant to...

Key principles

A trustee exercising an unfettered discretionary power is not bound to disclose to beneficiaries the reasons actuating its decision, and cannot be compelled to do so through...
A corporation has no mind and cannot be interrogated concerning its state of mind or mental processes; such interrogatories are unreal and impermissible: Tooth & Co. Ltd. v. Lane...

Issues before the court

Whether a trustee can be compelled by interrogatories to disclose reasons for its discretionary decision when it has chosen not to give reasons
Whether a corporation can be interrogated as to its state of mind

Cited legislation

No linked legislation citations have been extracted yet.

Plain English Summary

The Supreme Court of Victoria held that a superannuation fund trustee (Telstra Super) could not be forced by court interrogatories to explain why it rejected a member's invalidity benefit claim, because (1) trustees exercising discretionary powers don't have to give reasons unless they choose to, and (2) as a corporation, the trustee has no 'mind' that can be interrogated about its decision-making process. The court rejected arguments based on English authority (Scott v National Trust) that suggested trustees could be compelled to disclose reasons in legal proceedings.

AI-generated legal information, not legal advice. Zoe can make mistakes — check the cited source, and for advice about your situation consult a qualified Australian lawyer.

Catchwords

COURTS PRACTICE AND PROCEDURE - Decision of trustee - Interrogatories as to reasons for decision - State of mind of corporation

Judgment (37 paragraphs)

[1]

This is an appeal by the defendant from the order of Master Wheeler made 13 October 1998 whereby the Master ordered that the defendant file and serve further and better answers to the plaintiff's interrogatories delivered for its examination, numbered 1(b) and (c) and 3(b) and (c) respectively.

[18]

"It is an established general principle that unless trustees choose to give reasons for the exercise of a discretion, their exercise of the discretion can not be examined or reviewed by a court so long as they act in good faith and without an ulterior purpose: Re Beloved Wilkes' Charity [1851] EngR 375; [1851] 3 Mac & G 440; 42 ER 330; Duke of Portland v. Topham [1864] EngR 339; (1864) 11 HLC 31; 11 ER 1242. For reasons given above, I would add the further requirement, so obvious that it is often not mentioned, that they act upon real and genuine consideration. In the context, it was in that sense that Lord Truro, LC used the expression 'with a fair consideration' in Re Beloved Wilkes' Charity, at (42 ER) p.333. In the case of an absolute and unrestricted discretion such as the discretion in the present case, the general principle is given unqualified operation: Gisborne v. Gisborne (1877) 2 App.Cas. 300, at p.305, per Lord Cairns, LC; Tabor v. Brooks (1878) 10 Ch.D. 273; Craig v. National Trustees Executors and Agency Company of Australia Ltd. [1920] VicLawRp 101; [1920] VLR 569. The operation of the principle is discussed in Jacobs' Law of Trusts in Australia, 4th ed., pp.300-2. The policy which underlies the principle was discussed by Lord Truro, LC in Re Beloved Wilkes' Charity. In Re Londonderry's Settlement [1965] Ch. 918, at pp.928-9; [1964] EWCA Civ 6; [1964] 3 All ER 855, at p.857, Harman, LJ. explained the principle as follows: '... trustees exercising a discretionary power are not bound to disclose to their beneficiaries the reasons actuating them in coming to a decision. This is a long-standing principle and rests largely, I think, on the view that nobody could be called upon to accept a trusteeship involving the exercise of a discretion unless, in the absence of bad faith, he was not liable to have his motives or his reasons called in question either by the beneficiaries or by the court. To this there is added a rider, namely, that if trustees do give reasons, their soundness can be considered by the court.' In the same case Salmon, LJ. said, at ([1965] Ch.) pp.936-7; ([1964] 3 All ER) p.862:

[35]

"19. Interrogatory 19 is in the following terms: 'What factors did the defendant take into account in defining the local area in respect of which the said local rate was paid and levied?' This interrogatory proceeds from the allegations in the statement of claim, upon which issue is taken in the statement of defence, charging that the defendant took into account inadmissible considerations and failed to take into account relevant considerations in connexion with the passing of the resolution mentioned in para.5 of the statement of claim. I am of the view that the interrogatory should not be allowed. It is directed in its terms to ascertaining what may have been a particular mental process on the part of the defendant. The defendant, being a municipal corporation, has itself no mind. There are, of course, many occasions on which it is necessary to attribute to a municipal corporation attitudes of mind such as purpose, opinion, intention, and the like. These attitudes of mind are, however, fictional, in that they proceed upon the assumption which is made in each instance that a municipal corporation has a mind. Where a suit raises as a relevant issue the state of mind of an individual, then a properly framed interrogatory directed to the ascertainment of ingredients in that state of mind would no doubt be allowed. Where, however, the suit concerns the act of a municipal corporation it appears to me to be unreal to direct to that corporation an interrogatory upon what matters were present to its mind in relation to a particular event. The inferences drawn and conclusions reached by courts upon purpose, intention or opinion on the part of municipal corporations are drawn and reached as a result of evidence of objective facts. But the fact that in those cases decisions are made that a municipal corporation had a particular mental state does not travel to the extent of raising the fiction that the corporation has in truth a mind, the processes of which can be examined through medium of interrogatories, as is the case with a personal party."