Mandy Knight v First State Super FSS Trustee Corporation

JUDGMENT: - 8 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION CORAM: KAVANAGH J Date : Monday 8 November 2004

IRC3666 of 2004 MANDY ELVIRA KNIGHT v FIRST STATE SUPER FSS TRUSTEE CORPORATION Application by Mandy Elvira Knight for declaratory relief under s154 of the Industrial Relations Act 1996 EX TEMPORE JUDGMENT [2004] NSWIRComm 363 1 The applicant, Mandy Elvira Knight, makes a claim for declaratory relief in the following form: 1. A declaration that the applicant is entitled to interest. 2. That the respondent be ordered to pay interest on the superannuation benefit of $53,507.62 at the Supreme Court rate of nine per cent per annum from 24 March 2003 to 12 March 2004. 3. Costs on an indemnity basis. 4. Any other orders that this honourable court deems fit. History 2 The applicant suffered injury to her back on 10 January 2000. She became totally incapacitated for work on 12 February 2000.

3 On 15 August 2002, the applicant then lodged a claim for an invalidity benefit under the First State Superannuation Scheme.

4 On 24 March 2003, the respondent declined the application on the ground that her contribution had not reached the eligible level of contribution to qualify for the benefit, which was $1000 at the date of her injury.

5 On 17 April 2003, the applicant's solicitor wrote to the respondent challenging their determination that her contribution had not exceeded $1000 at the end of 1999.

6 After no response was received from the respondent, an application was filed in the Industrial Relations Commission on 13 June 2003 seeking declaratory orders against First State Super FSS Trustee Corporation, the first respondent, The Colonial Mutual Life Assurance Society Limited, the second respondent and the Northern Rivers Area Health Service, the third respondent.

7 The appellant appealed against the respondents' decision to refuse to pay her the invalidity benefit under the First State Superannuation Scheme. The parties to that appeal were meeting a claim in the sum of $54,000 for the invalidity benefit, interest, damages and costs.

8 On 1 August 2003, the respondents' solicitor wrote to the applicant's solicitor stating they had reviewed their file and conceded the applicant's account balance had reached $1000 prior to her becoming incapacitated. They also said: On Ms Knight's behalf the Trustee will request that the case be re-assessed by the insurer, the Colonial Mutual Life Assurance Society (Colonial). We noted that this matter is listed for hearing at the Industrial Relations Commission of NSW on 28 August 2003. We expect that the Trustee will have been advised by Colonial of their decision prior to this date and we will advise you further once Colonial's review of Ms Knight's case has been completed. 9 On 7 November 2003, solicitors for the respondents to the first application wrote to the Registrar advising that the applicant's claim would continue to be disputed.

10 On 10 November 2003, the applicant's solicitor then wrote to the respondents' solicitor inquiring as to whether the claim had been declined on the merits or not.

11 On 19 November 2003, the respondents' solicitor wrote to the applicant's solicitor: The Trustee concedes your client's account balance as at the date of incapacity was in excess of $1000 and that she qualifies to make a claim for the [invalidity] benefit. However, a decision regarding her entitlement has not been made. The insurer has now considered the medical evidence, and it will report to the Trustee. The Trustee will then reconsider the claim to determine whether or not there is sufficient evidence of total and permanent disablement.

Until the claim has been reconsidered by the Trustee we are instructed to maintain the dispute. 12 As a result of the concession made in the letter of 19 November 2003, the applicant discontinued the proceedings on 18 December 2003.

13 On 19 February 2004, the applicant received a letter from First State FSS Trustee agreeing to pay out her claim for invalidity benefits.

14 On 12 March 2004, a payment of $53,507.62 was made to the applicant.

15 On 17 March 2004, the applicant's solicitor wrote to the respondent's solicitor pressing the claim for interest because of the "wrongly denied" claim.

16 On 19 March 2004, the respondent's solicitor replied to the claim for interest in the following way: With regard to your letter dated 17 March 2004, you are requested to inform us of the specific provision relied upon in respect of the claim for interest.

In the absence of a contractual term, a statutory obligation or court order, we do not agree that your client has a right to interest as claimed.

17 To summarise therefore the applicant claimed an invalidity benefit on 15 August 2002. It was incorrectly rejected. The applicant then appealed the decision. It was reviewed and an error was admitted and the applicant was paid the benefit. The applicant's original appeal was for the benefit, interest and costs. The benefit and costs were paid. Interest has not been paid. The solicitor in this case appears for the Trustee. However, the system in place under the Trust Deed requires the Trustee to get approval for some payments from the insurer. Most correspondence to the applicant's solicitor was from the Trustee but some was from the solicitor who appears also to represent the insurer.

The Instant Case 18 The applicant's claim for interest was filed on 23 June 2004 and amended on 8 July 2004. The claim is in the form of declaratory relief and is solely against First State Super FSS Trustee Corporation.

19 The applicant asserts the Commission has the power to grant the relief under s372 of the Industrial Relations Act 1996 and relies especially on s372(2). Section 372 (1)-(4) states: s372 Order for interest (1) An industrial court may order that there is to be included, in an amount ordered to be paid under this Part (except under section 368), interest at the prescribed rate on the whole or any part of that amount for the whole or any part of the period from when the amount became due to the date of the order. (2) If, in relation to proceedings for such an order, the whole of the amount of money due (or any part of it) is paid before or without the order being made, the industrial court may order that interest is to be paid at the prescribed rate on the amount so paid for the whole or any part of the period from when the amount became due to the date of the payment. (3) This section does not: (a) authorise the charging of interest on interest, or (b) authorise the charging of interest otherwise than by consent on any amount for the payment of which an order is made by consent. (4) In this section, prescribed rate means the rate of interest prescribed for the time being for the purposes of section 95 (1) of the Supreme Court Act 1970 .

20 The respondent denies it is liable to pay interest to the applicant, with reliance placed upon the terms of the Trust Deed and its obligations therein. As to interest clause 15.2 of the Trust Deed states: The Trustee may, when paying a Benefit under this Trust Deed and these Rules, pay interest at such rates, for such periods and in such circumstances as in its absolute discretion it thinks appropriate.

21 The respondent also relies on clause 19.1 of the Trust Deed: Notwithstanding any other provision of this Trust Deed, a Member shall not be entitled to be paid a Benefit until:

(a) in the case of clause 16.2, the Trustee has determined to pay a Benefit; or

(b) in any other case, the Trustee has received a claim from a Member or any person claiming a Benefit payable in respect of a Member, together with such other information as the Trustee may require and: (i) has determined to pay the Benefit; or

(ii) where any Insured Benefit is payable by an insurer under clause 15.1(a), the insurer under the relevant insurance policy has accepted and paid the claim.

22 Further reliance is placed upon clause 20.2 of the Trust Deed: Any Insured Benefit shall be subject to the terms of any insurance policy under which it is provided and, notwithstanding any other provisions of this Trust Deed, no payment shall be required to be made in respect of a Member in satisfaction of any Insured Benefit of any amount greater than the amount received by the Trustee under the insurance policy less any deductions for Taxes the Trustee is entitled to make under this Trust Deed.

23 The respondent relies on the affidavit of Carl Joseph Michels, solicitor for the applicant at [12]: As a result of this concession, the Applicant agreed to discontinue with the proceedings on the basis that the Respondent and insurer pay the Applicant's costs as agreed. The respondent submits when the matter was discontinued, all claims were finalised on the payment of the invalidity benefit.

24 The respondent submits in accordance with the relevant provisions as recited above, the trustee has the absolute discretion to grant or refuse interest and as there has been no evidence as to the misuse of that discretion in its refusal to pay, the court would not grant relief in the form of interest.

25 Further, the respondent submits, in the alternative, in accordance with clauses 19.1 and 20.2 any determination to pay a benefit was not made by the insurance company until 3 February 2004 and therefore such claim for interest could not arise until that determination under the policy.

26 As to the effect of s372(2) of the Industrial Relations Act 1996, the respondent submits the Trustee's provisions override the Act.

Consideration 27 From the facts it is clear that this invalidity benefit was not paid when first claimed on 15 August 2002 due to an error made by First State Super Trustee Corporation as to when the applicant qualified to enjoy the benefits of the Fund.

28 I am satisfied the Notice of Discontinuance was filed by the applicant's solicitors when the respondents to the first appeal were in negotiations with the applicant to allow the parties to reconsider the decision made as to the refusal to allow the benefit to be paid to the applicant, in circumstances where it was conceded she had made the qualifying contribution.

29 I am therefore satisfied that the Notice of Discontinuance was not, and was never intended to be, a notice indicating there had been a full and final settlement of all claims made in the first filed appeal. The Notice of Discontinuance was filed in a spirit of compromise. The affidavit of the applicant's solicitor is merely a statement of fact not intent. Undoubtedly, had the benefit been refused by the respondent then the applicant would have had a further opportunity to re-litigate the full claim within any time limits.

30 The applicant's right to the benefit was conceded and by letter of 19 February 2004, the respondent notified the applicant: . . . Our insurer has approved your claim and we now await your payment instruction. The applicant was paid on 12 March 2004.

31 The claim before me is for the payment of interest given the wrongful denial by the respondent of the invalidity claim on 24 March 2003. The claim is particularised from the date of denial 24 March 2003 to when the applicant received her payment on 12 March 2004.

32 Clause 15.2 of the Trust Deed gives the Trustees the power to make a grant of interest. The power is held in its absolute discretion but the discretion to grant interest is available if the Trustee thinks it appropriate. The Trustee therefore must give consideration to the circumstances to determine what is "appropriate". At hearing the Court questioned whether the words in the solicitor's letter of 11 March 2004: In the absence of a contractual term, a statutory obligation or court order, we do not agree that your client has a right to interest as claimed was in fact a denial of the claim for interest. The solicitor appearing stated the claim was refused. The Trust Deed puts an obligation on the Trustee to determine if the claim for interest is "appropriate". There is no letter from the Trustee as to such a decision. There has been argument before me as to the powers of the court, the power of the insurer and the powers held by the trustee but no reasoning has been placed before me as to why the payment of interest is not "appropriate" in the circumstance. I have no evidence that the Trustee determined at all that such a payment is inappropriate and I hear no argument as to why a payment of interest is not appropriate.

33 In the circumstances, I do not believe it appropriate to deny this claim for interest. The only reason the benefit was not paid earlier was because of an error of the Trustee and/or others, that is, the insurer. In such a circumstance, it is appropriate for interest to be paid to the applicant.

34 Reliance is placed by the respondent to limit the claim by the effect of clause 19.1 of the Trust Deed which states: A member is not entitled to be paid a benefit until the insurer under the relevant insurance policy has accepted and paid the claim.

If one accepted this proposition then the claim would lie from 3 February 2004 when the insurer determined the Trustee could pay the claim to 12 March 2004 when the money was paid by the Trustee to the applicant. If the applicant was entitled to interest I believe it should accrue from the date of her entitlement. She makes her claim from the date of the denial of the benefit.

35 I am persuaded that s372(2) of the Act gives this court the power to provide the relief sought given that the provision directs itself to exactly the circumstance before me, that is, that after a claim is made, payment is conceded.

36 I have carefully considered the terms of clause 19.1. It directs itself to the payment of a benefit. I am not persuaded the terms of clause 19.1 constrain the court in any way as to an order for the payment of interest accrued when a benefit was incorrectly refused. Further, the Trust Deed gives the power to consider an interest payment to the Trustee.

37 Accordingly, I order that interest be paid on the amount of $53,507.62 at the Supreme Court rate of 9% per annum from 24 March 2003 to 12 March 2004 in the agreed amount of $4,630.50.

38 The respondent shall pay the applicant's costs as agreed or assessed.

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