Tonkin v Western Mining Corporation Limited & Anor (Supreme Court of Western Australia, Scott J, 31 May 1996, unreported)

Rapa v Patience (Supreme Court of NSW, McLelland J, 14 April 1985, unreported)

Vidovic v Email Superannuation Pty Limited (Supreme Court of NSW, Bryson J, 3 March 1995, unreported)

Dillon v Burns Philp Finance Ltd (Supreme Court of New South Wales, Bryson J, 20 July 1988, unreported)

1. Declaration that the plaintiff is entitled to a Total and Permanent Disablement benefit under the terms of the Trust Deed and the Rules of the AGL Gas Companies' Employees' Superannuation Fund.

2. That the defendant pay the plaintiff's costs of these proceedings.

1. The plaintiff claims an entitlement to the Total and Permanent Disablement (TPD) Benefit under the AGL Gas Companies Superannuation Fund Deed made 15 June 1993 (the Deed). The Deed was amended on 14 October 1994.

2. The defendant is the Trustee of the Fund constituted by that Deed.

3. On 22 February 1996 the plaintiff's claim for the TPD Benefit was rejected on the ground that the plaintiff did not satisfy the TPD definition. This decision was confirmed by a resolution of the Board of the Defendant (as Trustee) on 6 March 1996.

4. The Trust Deed incorporated Rules which were stated to be effective as part of the Deed: see Clause 1(a) of the amended Deed. Rule 6.1 provided, relevantly, as follows,

"6.1 Before Normal Retirement Date_. Subject to Rule 13, upon the retirement of a Member from the employment of the Employer before his normal Retirement Date as a result of his Total and Permanent Disablement there shall be payable from the Fund in the manner specified in Rule 7.3 a lump sum benefit determined as follows ..."_

5. Rule 13 is not presently applicable. It relates to the Trustee's obligations to make a payment by reference to the Trustee's position in respect of its insurer. The Rule applies, however, only to Members who joined on or after 1 January 1993. The plaintiff joined before this date.

6. There is no dispute that at all material times the plaintiff was a "Member". As he was born on 18 September 1944, his "Normal Retirement Date" was 18 September 2009. His retirement, on 29 April 1994, was clearly before that.

7. The plaintiff commenced with AGL in Sydney as a serviceman on 2 February 1982. On 25 May 1984 he was transferred to Canberra as a serviceman and subsequently promoted to foreman. His services were terminated on 16 November 1992. He was reinstated on 13 December 1992 but demoted from foreman to serviceman following complaints of aggressive behaviour towards customers. On 1 March 1994 the plaintiff was advised that he was to be removed from his serviceman position and given a position in the office. He subsequently went off sick sometime after 1 March 1994. On 7 March 1994 he produced to AGL a certificate from Dr P Jones, a general practitioner, listing a number of conditions which, in Dr Jones' opinion, rendered him permanently unfit for work. On 11 March 1994 AGL received a certificate from another general practitioner, Dr Eather, (a company doctor used by AGL Canberra) to the effect that the plaintiff was fit for limited clerical duties. I shall deal with the medical evidence later.

8. The significant event, so far as the plaintiff is concerned, is that the Manager, Personnel Administration of AGL made contact with the Directors of the defendant individually and they were unanimous that, in their opinion, the plaintiff did not satisfy the definition of totally and permanently disabled. The Manager, Personnel Administration informed the Directors of the defendant accordingly by office memorandum dated 26 February 1996. At the meeting of the Directors of the defendant on 6 March 1996, the Minutes were recorded in the following terms,

"4/96

CONFIRMATION OF PROPOSAL AGREED TO BETWEEN MEETINGS_:_

A proposal put between meetings that a claim for a Total and Permanent Disablement Benefit submitted by Mr J P Minehan be denied, was confirmed and signed as a true record."

9. Before the meeting on 6 March 1996 the Manager, Personnel Administration, describing himself as "Secretary to Trustee", sent a letter to the plaintiff dated 22 February 1996, the relevant part of which reads as follows,

"I have to advise that after taking all factors into consideration the Directors do not believe that you satisfy the definition of Totally and Permanently Disabled and as a consequence your claim for a Total and Permanent Disablement Benefit is denied."

""Total and Permanent Disablement" means disablement of a Member resulting from bodily injury or disease such that the Member is permanently and continuously unable to engage in any remunerative work for which he is or may become reasonably fitted by education training or experience and "Totally and Permanently Disabled" shall have a corresponding meaning."

11. Before the directors made their decision, a period of two years elapsed in which the plaintiff was medically examined. Reports of those examinations were furnished to the defendant. The plaintiff was pressing his claim and the defendant was postponing its decision. The course of events was as follows. By letter dated 8 March 1994 to the defendant, the plaintiff gave notice that he was seeking a TPD benefit and supported the claim with a certificate from Dr Paul F Jones, general practitioner. In that report Dr Jones expressed the opinion that the plaintiff was suffering from medical conditions which rendered him permanently unfit to work. The conditions listed were, diabetes, hypertension, ischaemic heart disease (angina), chronic bronchitis, glaucoma, cataract, degenerative disease of cervical spine, left carpal tunnel syndrome, actinic chelitis. Dr Jones said in his certificate that he had advised the plaintiff to seek retirement on the grounds of invalidity.

12. By certificate dated 11 March 1994, Dr J F Eather, general practitioner, certified that the plaintiff was fit "for limited clerical duties". He certified that the plaintiff was "not fit for prolonged keyboarding or heavy lifting".

13. Dr Jones then arranged for the plaintiff to be examined by Dr Stephen G Nogrady, consultant thoracic physician, who provided a report dated 7 April 1994 in which he concluded as follows,

"I don't believe he requires any specific therapy at this time and while his chronic bronchitis and lung disease alone is insufficient to warrant his retirement on medical grounds, it should be taken in context with the totality of all his other medical diagnoses which, together, may well preclude him working in the long term."

14. The report was accompanied by a report of x-rays in the following terms,

"There is a generalised coarsening of the lung markings consistent with chronic bronchitis. The heart is enlarged and there has been previous cardiac surgery. No other abnormality seen."

15. Next, the defendant received verbal advice from the Manager, AGL Canberra that the plaintiff had resigned "effective 29/4/94". The Secretary to the defendant made the following note,

"I understand he will pursue his TPD claim. However to date he has not received medical reports stating he is TPD."

16. By letter dated 22 June 1994 the Secretary to the defendant informed the plaintiff of what steps were necessary for him to pursue his TPD claim including a requirement that the plaintiff provide at least two certificates stating that he was "permanently and continuously unable to engage in any remunerative work" and preferably one of those certificates should be from a specialist.

17. The plaintiff responded by letter dated 3 August 1994 with which he furnished a medical report dated 20 July 1994 from Dr Jones in similar terms to the report referred to above and a report from Dr John Corry, rehabilitation specialist, dated 25 July 1994. The latter is a long report setting out the history, the examination and the conclusion, parts of which are in the following terms,

"There is no doubt that Mr Minehan has severe health problems and has multiple high risk factors for coronary arterial disease. ...

The reality is that he is at high risk and unless he can make some major changes to his lifestyle; to lose weight, to cease smoking, etc. then it is fairly inevitable that he will have further cardiac problems. I believe that he requires a lot of assistance to help him come to terms with these difficulties and to develop appropriate strategies for management. I do not think, given all these circumstances, that he has any significant work capacity at this time. Indeed, I think to push him into work, will divert what limited resource he has from more urgent preventive health activity.

I believe the best course of action for Mr Minehan is to be pensioned out. However, I would also like to see him involved in an ongoing cardiac rehabilitation programme. If as part of his lifestyle changes, he decides to move north, it would be important to try and create structures there that would support him appropriately."

18. By letter dated 5 August 1994, the Secretary to the defendant informed the plaintiff that the reports which accompanied the plaintiff's letter would be forwarded to the Company Medical Officer, Dr Roman Simson for his opinion.

19. By letter dated 23 August 1994, the Secretary to the defendant informed the plaintiff that the medical reports had been submitted to Dr Simson who had stated that in his opinion the plaintiff was no longer fit for the duties for which he was initially employed but he should be able to manage restricted/limited clerical duties. The letter concludes,

"In the light of these comments plus the report from Dr Corry I do not believe you satisfy the definition of Totally and Permanently Disabled."

20. The plaintiff then engaged his present solicitors who wrote to the defendant on 4 November 1994 seeking a review of the defendant's attitude to the claim. The Secretary to the defendant responded by letter of 11 November 1994 to the effect that,

"The Fund has carefully considered all factors surrounding Mr Minehan's resignation and all medical reports received to date. The Fund is however not satisfied that Mr Minehan was at the date of his resignation, "Totally and Permanently Disabled".

The Fund is prepared to consider any further medical evidence produced in support of this application."

21. It is apparent that the defendant was not satisfied that the plaintiff was totally and permanently disabled at the date of that letter but it is also apparent that no final decision had been made about the plaintiff's entitlement at that stage.

22. Dr Corry then furnished another report of 16 November 1994 to the Secretary to the defendant in which he said,

"Although correct to state that Mr Minehan has the intellectual and physical capacities to do clerical work as indicated, his reactive psychological disabilities preclude him from such work."

23. Dr Corry then listed a number of conditions from which the plaintiff was suffering namely,

- chronic bronchitis with respiratory insufficiency

"His major disabilities relate to ischaemic heart disease, chronic bronchitis and depression. I believe that Mr Minehan is totally and permanently disabled from working at an occupation for which he is reasonably qualified by way of education, training and experience because of these disabilities."

25. The Secretary to the defendant then caused the medical reports to be examined by Dr Simson and requested him to discuss Dr Corry's latest report with Dr Corry. The Secretary made a note, apparently having discussed the matter with Dr Simson, that Dr Corry's opinion about the plaintiff's health status should be confirmed by psychiatric opinion as Dr Corry's specialty is essentially rehabilitation medicine.

26. By letter dated 24 November 1994, the Secretary to the defendant informed the plaintiff of Dr Simson's opinion and suggested that if the plaintiff required further consideration to be given to his TPD claim he should obtain a report from a specialist psychiatrist and forward it to the defendant.

27. The plaintiff did precisely that and, under cover of a letter from his solicitors dated 23 March 1995, forwarded to the defendant a report from Dr Hugh V Veness, consultant psychiatrist, dated 8 March 1995. It is a long report and it is worth setting out Dr Veness' summary and conclusions.

"SUMMARY AND CONCLUSIONS

Dr Corry was quite right when he stated that he "found he was chronically depressed and deeply disturbed about his health status" (25/7/94). This man has lost his former health, lost his capacity to work at a cherished job, lost his status and standing as a worker, let alone as an inspector and has been become acutely aware of the loss of his children. He has a reactive depression. His fears about his health and limited life span have a basis in reality for he has suffered from major heart disease and now has chronic obstructive airways disease both of which are life threatening. His diabetes will also tend to shorten his life span. The degenerative disease of the spine makes his life uncomfortable and limits his activities.

Although this man is quite seriously depressed, it is not the kind of depression which responds to anti-depressant drugs. He would need to have psychotherapy for two or three years on a fortnightly basis and even then the prognosis would be doubtful. He himself has had the good sense to see that nothing will replace his losses and he must make the best of what he has now and develop hobbies and pursuits. He does try to do this for he told me about fiddling with electronic things and a personal computer but these pursuits are interrupted by depressed periods when he feels hopeless and helpless. Any further pressure on this man would deepen the depression with the probable induction of suicidal ideation.

Thus it is that he has disease affecting the nervous system (depression), the cardio-vascular system (ischaemic heart disease), the respiratory system (chronic obstructive air-ways disease), the skeletal system (degenerative joint disease of the spine), the ophthalmic system (glaucoma) and the metabolic system (diabetes). Taken together, he is certainly unfit for any gainful employment. His current psychiatric illness (reactive depression) alone renders him unfit for remunerative employment. The other chronic diseases reinforce the depression. The depression prevents him from making life style changes which may improve, to a limited extent, his physical health. To embark upon any kind of rehabilitation or return to work program in this patient would be disastrous. I believe his mental and physical health is deteriorating all the time and currently, the stress of the unresolved matter of his superannuation entitlements is having an adverse impact on his mental health. When this is resolved finally he may have some opportunity to institute some lifestyle changes which could help him to live longer but I cannot see what lifestyle changes or what treatment is going to render him fit again for gainful employment."

28. Instead of then making a decision on the material available, the Secretary to the defendant referred the matter to its insurance company, Prudential Corporation Australia Limited (Prudential), by letter dated 12 May 1995. The Secretary enclosed a statement of claim form completed by the plaintiff, an employers statement and copies of medical certificates from Doctors Simson, Veness, Corry, Jones, Smith, Nogrady, Eather, Richards and Jones. The Secretary itemised the calculation for the plaintiff's TPD benefit as totalling $85,872.42 net. The Secretary finished the letter with the following sentence,

"Would you please inform me when the claim has been assessed so that the Trustees can finalise this benefit."

29. Prudential then requested the plaintiff to undergo medical examination by Dr R Adler on 19 June 1995. The plaintiff subjected himself to medical examination by Dr Adler. He supplied reports to Prudential and Prudential responded to the plaintiff's claim in a letter to the Secretary to the defendant dated 27 July 1995, inter alia, in the following terms,

"After a thorough investigation of all the evidence supplied, the claim for multiple illnesses has been denied."

30. Prudential attached a report outlining the reasons for its decision. A copy of that report is annexed to these reasons. There is a notation at the foot of the letter of 27 July 1995 from Prudential in the following terms,

"Telecon with Amanda Tober 8/8/95. Prudential is denying the claim but is going to arrange an appointment with a Canberra psychiatrist today. She will fax the details over today so I can let John Minehan know."

31. Accordingly, an examination was arranged with Dr W Glaser, consultant psychiatrist of Canberra Medico-Legal Consultants, for 14 August 1995 and three reports by Dr Glaser were in evidence.

32. In his first report of 11 September 1995 Dr Glaser reported as his opinion, inter alia,

"At this stage it would not be unreasonable to hypothesise that the total combination of psychological and physical symptoms resulted in his having to cease work. This persisting range of problems, although individually minor in extent, has been sufficient to prevent him from returning to any duties for which he might be reasonably suited by reason of his training and experience.

Nevertheless, I think it is wise to emphasise that this is a provisional opinion and it would be highly desirable to obtain some assessments of his work performance at the time that he actually ceased work (ie late 1993 and early 1994)."

33. Prudential then asked the defendant to supply the information requested by Dr Glaser. On 30 October 1995 the Secretary to the defendant wrote to the plaintiff in the following terms,

"Re: Total and Permanent Disablement Claim

I understand that you phoned this office on 24 October 1995 regarding the status of your claim for a TPD Benefit.

On 23 October 1995, we received a letter from our insurers, Prudential, following their receipt of a report from Dr Glaser who you saw on 14 August 1995. We have been following up on a regular basis however, Dr Glaser has requested further information on your work history prior to ceasing work.

At this stage we do not believe you satisfy the definition of Totally and Permanently Disabled however, we will provide Dr Glaser with the information requested and hopefully receive a definitive decision."

34. By letter dated 30 October 1995 the defendant provided Prudential with the information requested by Dr Glaser. It appears that the further material was considered by Dr Glaser who made another report dated 13 October 1995 to Prudential, at the conclusion of which he states,

"However, on the basis of my general medical experience as well as my experience as a consultant psychiatrist, I think there may be a case for postulating the existence of total and permanent incapacity based on the presence of a large number of chronic and debilitating physical and psychological difficulties as described in my recent report.

It is again stressed that this opinion is a provisional one and it would be most helpful to try and ascertain the specific reasons for this gentleman changing the nature of his duties so radically at the end of 1993 and eventually having to cease work early in 1994."

35. Finally, Dr Glaser provided another report dated 27 November 1995 in which he referred to the most recent information which indicated that the plaintiff's behaviour and mood changed sometime before March 1994. The history apparently was that the plaintiff became aggressive and rude towards customers and need [sic] to be demoted to a serviceman position and eventually given an office job. The doctor concludes,

"This information appears to confirm the impression set out in my previous reports. To summarise: Mr Minehan's psychiatric problems appear to have made a small but appreciable contribution to his incapacity for work. In and of itself his depression would not result in total incapacity but, if considered in combination with his many physical problems, the ultimate degree of incapacity might be considerable."

36. All that material caused Prudential to inform the defendant in the following terms by letter dated 5 December 1995,

"As it has been established that his physical problems are not of sufficient severity to render him totally disabled, either in isolation or combined, this conclusion does not show sufficient evidence that Mr Minehan is Totally & Permanently Disabled. We therefore advise that our decision to deny liability remains unchanged."

37. It was in those circumstances and with the decision of its insurance company, Prudential, that the directors of the defendant made the decision referred to in paragraphs 8 and 9 above.

38. Being dissatisfied with the defendant's decision, the plaintiff instituted these proceedings by writ of summons issued on 20 March 1996. The relief claimed in the statement of claim which accompanied the writ was,

(a) a declaration that he is totally and permanently disabled for the purposes of the Fund;

?b? an order that the Total and Permanent Disablement Benefit calculated in accordance with the Rules of the Fund be paid to him by the defendant;

39. The action came on for hearing on 24 February 1998. In the course of the hearing the plaintiff's counsel contended that,

(1) the decision of the Directors of the defendant was unsound;

?2? the final decision was delegated by the defendant to Prudential Insurance Company; and

?3? the relevant material was not considered by the Directors of the defendant.

40. Counsel for the defendant raised the point that none of those matters had to that point been pleaded.

41. The matter was adjourned for further hearing to a date to be fixed. The date fixed was 31 August 1998 but because of my absence the matter did not come back on for hearing until 12 October 1998. In the meantime the plaintiff had filed and served a reply, the substance of which was to state that the plaintiff had resigned from his employment with his then employer in April 1994 due to total and permanent disability as defined in the Trust Deed and further,

(a) the defendant made no decision regarding the reason for the plaintiff leaving his employment;

?b? leaving his employment because of total and permanent disablement was not a pre-condition to payment of benefit;

(c) in the exercise of discretion, the defendant failed to give real and genuine consideration to the exercise of the discretion.

42. On the resumed hearing of the action the defendant, by leave, re-opened its case and called as a witness Mr Leslie Matthews who was at all material times a Director of the defendant and had played a role in the decision to deny the plaintiff's entitlement to the TPD benefit.

43. Mr Matthews was a Members' representative on the Board of the defendant. As such, he participated in the decision of the defendant to refuse the TPD benefit to the plaintiff. He received a bundle of papers in respect of the application along with the other directors of the defendant in mid-January 1996 and, having considered all that material, the defendant rejected the plaintiff's claim.

44. In the course of his evidence-in-chief he was alerted to an assertion that the defendant acted as some sort of rubber stamp for Prudential, its insurance company. Mr Matthews rejected any such assertion and repeated that the directors of the defendant had reached their decision on the material before them.

45. In cross-examination Mr Matthews was referred to the medical reports which had been part of the bundle considered by the directors of the defendant. He reiterated that, notwithstanding the opinions favourable to the plaintiff's case expressed in those reports, the directors were not convinced. It was put to Mr Matthews that he was "looking for a complete basket case" to which he replied "Yes", but then quickly retracted that answer. The gravamen of his evidence as elicited in cross-examination was that he and the other directors thought that the plaintiff might be a chance to make out a case of total and permanent disablement but, not being able to make up their own minds, they referred the matter to their insurance company intending to defer to the insurance company's decision. He said, "We thought if they pay it, fair enough, we'll go along with them". He reiterated that the directors of the defendant were undecided on the medical evidence so they handed the matter over to the insurance company.

"I think a few of us were starting to get the idea that he may be as crook ... we were saying but we still weren't convinced."

47. In spite of rehabilitation specialists and a psychiatrist and a general practitioner all saying that "this bloke is just unemployable", the directors thought he still could have done some sort of work for remuneration.

48. It was also clearly established in cross-examination, and from the documents themselves, that the assessment from Prudential which was acted upon by the directors of the defendant did not fairly reflect the medical evidence which had been provided by the plaintiff and gathered by the defendant and Prudential. Yet the defendant acted on that erroneous assessment.

49. It is clear, in my view, that the defendant did not exercise its independent judgment about the real issue that its directors were called upon to decide.

50. Before turning to the issues in the case, it is necessary to refer to clause 27A of the Deed. It is an important provision and reads as follows,

"27A. Trustee Discretion to Decide Reasons for Employee Leaving Service

The Trustee shall have an absolute and uncontrolled discretion to decide the reasons for an Employee leaving the service of his Employer."

51. Counsel for the defendant contended that what the defendant was essentially required to decide was whether the plaintiff's retirement was as a result of his "total and permanent disablement" and in deciding that question, the defendant was exercising "an absolute and uncontrolled discretion" within the meaning of clause 27A of the Deed.

52. Next, counsel contended that the issue for this Court to decide is whether the discretion miscarried; not whether the plaintiff fulfilled the TPD definition. Secondly, the Court is confined to an examination of those materials that were before the defendant when it exercised the discretion (Heitman v Guardian Assurance Company Limited & Anor (1992) 7 ANZ Ins Cas 61-107 at pp77,486-77,487, and 77,490-77,492 and Tonkin v Western Mining Corporation Limited & Anor (Supreme Court of Western Australia, Scott J, 31 May 1996, unreported) at pp12-14).

53. In Rapa v Patience (Supreme Court of NSW, McLelland J, 14 April 1985, unreported) consideration was given by McLelland J to the circumstances in which the exercise by a trustee of a discretion not to pay a TPD benefit could be challenged. The definition of "Total and Permanent Disablement" (set out on p7) depended, in part, on the formation of an opinion by the trustees that the relevant illness or injury was sufficiently serious so as to render the member unlikely to resume work or attend to any gainful profession or occupation from which he was reasonably fitted or could be reasonably fitted by education, training or experience. The discretion was stated to be "absolute and uncontrolled". His Honour said (at p11) that,

"The grounds on which the performance by trustees of functions such as these may be successfully challenged are those applicable generally to the exercise by trustees of discretionary powers, helpfully discussed by McGarvie J in Karger v Paul [1984] VicRp 13; [1984] VR 161. As encapsulated by his Honour in that case there are three such grounds and in some circumstances a fourth. They are, first, that the discretion was not exercised by the trustees in good faith, second, that the discretion was not exercised upon real and genuine consideration (which includes consideration of the wrong question - see Scott on Trusts 3rd Ed. Vol III paragraph 187.3), third, that the discretion was an exercise in accordance with the purposes for which it was conferred and, fourth, where the trustees have disclosed (otherwise than in the course of the proceedings in which the discretion is challenged) the reasons for the exercise of their discretion and that those reasons are not sound."

54. In Rapa (supra), the trustee had given a reason for rejecting the claim which reflected a misconception of the question that the trustee was required to consider. Accordingly, there was no effective exercise of the function and the provision (clause 37) providing for the trustee's discretion to be absolute and uncontrolled was of no avail (see p14.1).

55. In Vidovic v Email Superannuation Pty Limited (Supreme Court of NSW, Bryson J, 3 March 1995, unreported) Bryson J made some very pertinent comments about superannuation deeds. I find myself in agreement with his observations namely, it is very common for superannuation entitlements to be regulated by Trust Deeds in which significant decisions are left to be determined not according to the objective facts but according to discretionary decisions of Trustees which are open to review only in a limited way and often, as in the present case, are further shielded by provisions declaring that the exercise of the discretion is absolute and uncontrolled. Like Bryson J, I find it difficult to understand why the entrenchment of such important rights against review is so usual, and why this kind of arrangement is so commonly found acceptable to employees in view of the economic significance of such decisions and the economic function of superannuation, not well represented in the terms of the documents, as a contracted employment benefit for which value is given. These anomalies appear particularly clear where, as in this case, the fund out of which benefits are paid is contributory and an employee claiming benefits is claiming to be paid, at least in part, in his own coin. In an arrangement with a contractual character in which value is given in the expectation that a benefit will be available in stated circumstances, a construction in which one party has an entire and unreviewable power to determine whether that party will pay a sum of money to the other or retain it in its own funds has an element of absurdity. Language which appears to produce such a result serves to demonstrate the strength of the expectation of all concerned that the exercise of the power will be honest and reasonable. It is only on that expectation that the transaction could, as a practical matter, be expected to take place at all, and there would have to be an entirely explicit exclusion of such an expectation before language literally capable of excluding it should be given that construction. The context of the employment relationship has an influence which it is impossible to exclude from judicial scrutiny and perceptions of reasonableness of decisions under superannuation deeds.

56. The basic purpose of the superannuation fund in this case, and of all the powers of the trustee under it, is that the funds will be used to pay entitlements where they exist, and will not be paid out except where entitlements do exist.

57. The formation by the trustee of an opinion or decision is not analogous to a judicial or arbitral decision of a disputed question. There is no legal obligation to adopt a fair procedure, although conceivably the procedure adopted might have a place in consideration whether a power was executed in good faith.

58. Returning to the issue which the defendant was essentially required to decide, I accept the submission on behalf of the defendant that the issue was whether the plaintiff's retirement was a result of his total and permanent disablement. However, I reject counsel's submission that that is, in effect, what the defendant decided through its directors. They decided to accept the opinion of Prudential that the plaintiff was not, in 1996, nearly two years after he had resigned his employment, totally and permanently disabled. In doing so, they virtually abrogated their function to their insurance company.

59. Applying the grounds on which the performance by trustees of functions such as those exercised by the defendant may be successfully challenged as enumerated by McLelland J in Rapa, I would not be prepared to conclude that the discretion was not exercised by the trustees in good faith. However, the discretion was not exercised upon a real and genuine consideration of all the evidence.

60. I conclude that the directors of the defendant, being uncertain of the employability of the plaintiff, relied to a substantial degree, if not totally, upon the opinion of Prudential which opinion was based upon a misunderstanding or, at least, an inadequate consideration of all the medical evidence.

61. In this sense, the defendant's discretion was not exercised upon the right question namely, the question identified above in the submissions of counsel for the defendant.

62. Furthermore, the evidence discloses that the reasons for the exercise of the discretion, as given by Mr Matthews, do not bear examination and therefore are not sound. The preponderance of medical evidence was in favour of a finding of total and permanent disability. So even if the directors had applied their minds to the right question, they should have found that the plaintiff's retirement was as a result of his total and permanent disablement and accordingly he was entitled to the TPD benefit.

63. I have also come to the conclusion that because the directors of the defendant decided the wrong question they cannot rely upon the infallibility provision contained in clause 27A. They did not decide whether the plaintiff's retirement from the employment before his normal retirement date was as a result of his total and permanent disablement within the meaning of Rule 6.1 of the Rules. Counsel for the defendant contended otherwise namely, that the only way one can sensibly read the resolution is that the defendant, through its directors, was not satisfied on the material it had before it that the plaintiff had left his employment as a result of total and permanent disablement. As I have previously said, I do not agree. The terms of the resolution are quite different and, on the whole of the evidence, the exercise was directed to the plaintiff's current employability in 1996 and not to the reason that he left his employment in 1994.

64. There remains the question of how to dispose of the matter. Counsel for the plaintiff urged the Court to execute the trust itself if satisfied that the trustees had miscarried in their analysis and approach to the plaintiff's claim.

65. In Rapa, at pp14 and 15, McLelland J addressed the question in these terms,

"I accept that, in the Case of at least some kinds of discretionary trust powers, the Court may in a proper case execute the trust by substituting its own discretion for that of trustees (see McPhail v Doulton [1970] UKHL 1; (1971) AC 424 at p451 and cases there cited and also at p457). In one sense it may be inapt to describe as a discretionary trust power a duty to consider and form an opinion as to whether a particular state of facts exist, but I see no reason why similar relief should not, again in a proper case, be available where there has been a breach of such a duty. What then is a proper case for the granting of relief of this nature? In my opinion it can only be right to take such a course where at the very least it is established that the existing trustees are unlikely to fulfil the relevant duty in a proper manner. It must be remembered that the relevant functions are conferred by the trust instrument not on the Court but on the trustees, and the Court can have no authority to usurp the functions so conferred on the trustees except where such a course is shown to be necessary in order to give effect to the intention evidenced by the terms of the trust instrument."

66. That passage was cited by Bryson J in Vidovic v Email Superannuation Pty Limited. His Honour said in that case,

"Except in a case where there is only one conclusion to which a reasonable person exercising the powers could come I find it difficult to see how in principle the Court could do other than return the matter to trustees for their decision, unless perhaps it were appropriate to remove trustees and appoint others."

67. In that case Bryson J remitted to the trustee for determination in accordance with the Trust Deed and Rules the question whether the plaintiff was entitled to total and permanent disablement benefit. Nevertheless, in the later case of Dillon v Burns Philp Finance Ltd (Supreme Court of New South Wales, Bryson J, 20 July 1988, unreported) Bryson J chose to intervene and substitute his own decision for that of the trustees having regard to the succession of opportunities which had been put before the trustees to come to a correct decision.

68. In this case, the defendant has had a succession of opportunities to come to a correct decision about the reason why the plaintiff retired from his employment in 1994 and failed to decide the correct question. In the circumstances, I think it is proper for the Court to execute the trust itself by substituting its own decision for that of the defendant.

69. In my opinion, the plaintiff is entitled to payment of the TPD benefit. The orders I make are,

(1) Declaration that in the events that have happened the plaintiff is entitled to a TPD benefit under the terms of the Trust Deed and the Rules of the AGL Gas Companies' Employees' Superannuation Fund;

(2) Order that the defendant pay the plaintiff's costs of these proceedings.

70. I give liberty to the parties to apply if the orders I have made are not adequate in all the circumstances.

I certify that this and the eighteen (18) preceding pages are a true copy of the Reasons for Judgment herein of his Honour, A/Chief Justice Gallop,