Mohandoss v AMP Superannuation Limited - [2007] FCA 497 - FCA 2007 case summary — Zoe

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Mohandoss v AMP Superannuation Limited

[2007] FCA 497

Federal Court of Australia|2007-04-05|Before: Ryan J

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Source facts

Court

Federal Court of Australia

Decision date

2007-04-05

Before

Ryan J

Source

Original judgment source is linked above.

Judgment (46 paragraphs)

[1]

REASONS FOR JUDGMENT 1 This is an application by way of appeal from a determination of the Superannuation Complaints Tribunal ("the Tribunal") made on 10 June 2005 whereby the Tribunal determined to affirm the decision of the respondent ("AMP") to refuse to recredit the superannuation benefit account standing to the credit of the applicant at AMP with the sum of $145,925.69 together with interest or an accumulation thereon. 2 Section 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Act") authorises a party to appeal to this court, on a question of law, from a determination of the Tribunal. This appeal comes before the Court exercising its original rather than its appellate jurisdiction.

[2]

The background facts 3 The applicant had from February 1986 been a member of the Doveton Medical Centre Pty Ltd Superannuation Plan, an Individual Employer Superannuation Fund administered by AMP ("the Plan"). In February 1989 the Plan was closed and its assets were transferred to an AMP Master Plan No. 9/108848 ("the Fund"). In early October 1995, the applicant's financial adviser, "W", who was a trustee of the East West Superannuation Fund ("the Receiving Fund") recommended that the applicant transfer his superannuation from the Fund to the Receiving Fund. To implement that advice, the applicant signed in blank documents provided to him by "W" including a Master Deed Application for withdrawal of retirement benefit. That application contained a notation to the effect that; '… the rollover institution nominated below must be an approved superannuation arrangement. If outside the present fund please provide a letter of compliance for each fund.' 4 The following statement of relevant facts is taken from the reasons of the Tribunal; · 'A letter dated 16 October 1995 addressed "To whom it may concern" and signed by the Complainant as an authorised trustee stated that "as trustee of the abovementioned fund (the Receiving Fund), please be advised that the [Receiving] Fund has been established in accordance with the Superannuation Industry (Supervision) Act 1993 and associated Regulations and the appropriate election to become a regulated superannuation fund form has been lodged with the Insurance and Superannuation Commission. Please also be advised that we will use our best endeavours to ensure that the fund continues to comply in accordance with the Superannuation Industry (Supervision) Act 1993 and associated Regulations". · On 30 October 1995 W, on the letterhead of "The EW Group", wrote to the Fund enclosing the original Master Deed with withdrawal and a member advice. The letter requested that a cheque for the full amount of approximately $144,000 be forwarded to the Receiving Fund and advised that the funds were required for an investment by Wednesday 1 November 1995. On 31 October 1995 the Fund drew a cheque for $145,925.69 payable to the Receiving Fund and paid it into a New South Wales branch of the nominated Bank for transfer to a branch in Victoria. · On 31 October 1995, the Fund wrote to the Receiving Fund and advised them that the cheque for $145,925.69 was enclosed. It appears that a photocopy of the cheque was included and that it had been paid, because of the claimed urgency of the transaction, into the bank account as noted above. · On 1 November 1995, the Fund wrote to the Complainant advising that the sum of $145,925.69 had been forwarded as nominated and enclosed a "Statement of Termination Payment and Rollover Notification form". · On 30 June 1996, the Receiving Fund's Annual Benefit Statement to the Complainant provided an account summary which indicated receipt of the $145,925.69 as an opening balance as at 6 November 1995. Added to that were personal contributions and rollover amounts of $2,500, less Commonwealth contribution tax, administration fees and death and disability insurance of $5,432, plus 145,000 EWA shares at $100 par value, estimated value of $2 a share (unaudited). The sum of $145,000 was shown for the shares. The Annual Benefit Statement disclosed a "closing vested balance" as at 30 June 1996 in the sum of $285,493.69.' 5 It later emerged that "W" had been charged with a number of offences including embezzlement from the Receiving Fund. He subsequently pleaded guilty to several charges, including obtaining financial advantage by deception and theft and was sentenced to imprisonment on 4 August 2000. No orders were made for the restitution of moneys by "W" and it is unclear whether any were sought. Later in August 2000, a request for information was made to the Fund on behalf of the applicant and thereafter the following facts emerged, as summarised by the Tribunal; '- The Receiving Fund was established on 30 October 1995.

[5]

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

[34]

(A) whether the breach by the respondent of Regulation 5.01 of the Superannuation Industry (Supervision) Regulations 1994 found by the Tribunal (in that the respondent paid or purported to pay $145,925.69 from the superannuation benefit account of the applicant with the respondent as a regulated superannuation fund to an entity which was not a regulated superannuation fund) was contrary to law; (B) whether the payment or purported payment by the respondent of $145,925.69 by way of transfer from the superannuation benefit account of the applicant with the respondent as a regulated superannuation fund to a third party without the consent of the Committee and without: (1) that third party being an Approved Arrangement; (2) the Committee having informed the respondent as Trustee that the rights of the applicant as Member to receive the benefits arising from the benefits transferred were fully secured; (3) the Committee having informed the respondent as Trustee that the third party as Approved Arrangement was required to preserve the benefit transferred in accordance with the Relevant Requirements; or (4) the Committee having informed the respondent as Trustee that the transfer was made to comply with clause 6.5 of the Trust Deed was contrary to the governing rules of the Fund; (C) whether if the breach by way of payment or purported payment referred to in subparagraph (A) was contrary to law or the payment or purported payment referred to in subparagraph (B) above was contrary to the governing rules of the fund, the Tribunal was prohibited by subsection 37(5) of the Superannuation (Resolution of Complaints) Act 1993 from affirming the decision; (D) whether, if the breach by way of payment or purported payment referred to in subparagraph (A) was contrary to law or the payment or purported payment referred to in subparagraph (B) above was contrary to the governing rules of the fund, the Tribunal was required by subsection 35(7) of the Superannuation (Resolution of Complaints) Act 1993 to substitute a decision as set out in paragraph 3(C) below. 3. ORDERS SOUGHT: A. An Order quashing or setting aside the determination. B. An Order that the appeal be allowed C. An Order substituting for the decision of the respondent referred to in paragraph 1 above a decision that the respondent recredit the superannuation benefit account with the sum of $145,925.69 together with an amount representing an accumulation or interest thereon. D. Costs E. Such further orders as the Court deems fit. 4. GROUNDS: (A) The Tribunal determined that even though there had been a breach by the respondent of Regulation 5.01 of the Superannuation Industry (Supervision) Regulations 1994 (in that the respondent paid or purported to pay $145,925.69 from the superannuation benefit account of the applicant with the respondent as a regulated superannuation fund to an entity which was not a regulated superannuation fund), nevertheless the Tribunal had no power to decide whether the said payment or purported payment was contrary to law, and that the Tribunal could only decide whether or not the decision was fair or reasonable in the circumstances without addressing the question of whether the said payment or purported payment was contrary to law. On its proper construction, 37(5) of the Superannuation (Resolution of Complaints) Act 1993 required the Tribunal to decide whether or not the said payment or purported payment was contrary to law, not to affirm the decision pursuant to s. 37(3)(a) Superannuation (Resolution of Complaints) Act 1993, and to substitute a decision as set out in paragraph 3(C) above. (B) The Tribunal determined that it could not decide whether or not the governing rules of the Fund had been breached as referred to in paragraph 2B above and the Tribunal could only decide whether or not the decision was fair or reasonable in the circumstances without addressing the question whether or not the governing rules of the Fund had been breached as referred to in paragraph 2B above. On its proper construction, 37(5) of the Superannuation (Resolution of Complaints) Act 1993required the Tribunal to decide whether the governing rules of the Fund had been breached as referred to in paragraph 2B above, not to affirm the decision pursuant to s.37(3)(a) of the Superannuation (Resolution of Complaints) Act 1993, and to substitute a decision as set out in paragraph 3(C) above.' 13 On 15 March 2006 the applicant filed a proposed amended notice of appeal in which he sought, in paragraphs 2(C), 2(D), 4(A) and 4(B) of the amended notice, to rely on s 14AA(2), in addition to s 37(5) of the Act. The filing of the amended notice of appeal was opposed by AMP. The application for leave to amend is considered later in these reasons, at [35]-[37] below.

[35]

Did the notice of appeal identify questions of law? 14 Counsel for AMP, Ms Alpins, made various submissions outlining perceived defects in the applicant's notice of appeal. First, she argued that an appeal under s 46(1) is confined to questions of law and that the power of the Court is limited to prescribing consequences of a demonstrated error of law; Howitt-Steven v Unisuper Ltd (2002) 193 ALR 207, at [120]; Barghouthi v ING Custodians Pty Ltd [2003] FCA 1272, at [20]. It was further submitted that it is not open to the Court, in an appeal under s 46, to make findings of fact; Barghouthi at [140] and [144]. 15 Ms Alpins also contended that the applicant's notice of appeal does not identify any question of law properly so called, as required by O 53 r 3 and O 53B r 3 of the Rules of this Court. It was submitted that the questions posed in paras 2(A) and 2(B) of the notice of appeal were each questions which the Tribunal had declined to determine. It was said to follow that an answer to those questions which was favourable to the applicant would not disclose any error affecting the decision of the Tribunal and so would not support the orders sought; Birdseye v Australian Securities Investments Commission [2003] FCAFC 232, at [27]((2003) 76 ALD 321; (2003) 38 AAR 550). 16 A related objection raised on behalf of AMP was that the questions raised by the notice of appeal were not pure questions of law but purported to require the Court to make certain findings of fact which the Tribunal had declined to make and which had not been necessary for the performance of its functions under s 37 of the Act. 17 Although AMP's criticisms of the form of the notice of appeal have some force, I do not regard them as fatal to the present application. In my opinion, the notice of appeal sufficiently identifies the central issue for determination in this matter which is whether the Tribunal correctly understood the extent of its powers when it came to review the decision of the Trustee that had been the subject of the complaint under s 14 of the Act. 18 As Branson J stated in Colonial Mutual Life Assurance Society Limited v Brayley [2002] FCA 1333, at [3]; 'It is sufficient to note that the Tribunal is established by s 6 of the Act and has the functions specified by s 12 of the Act. Section 14 of the Act relevantly allows a person authorised by s 15 to make a complaint to the Tribunal that a decision of the trustee of a fund is or was unfair or unreasonable. The powers of the Tribunal when reviewing a decision of a trustee of a fund are specified by s 37 of the Act. The proper construction of s 37, and thus the identification of the true extent of the powers of the Tribunal when reviewing a decision of a trustee of a fund, is plainly a question of law.'

[36]

The Tribunal's powers 19 Counsel for AMP acknowledged that s 37(5) of the Act clearly precludes the Tribunal from making a determination under s 37(3) that would be contrary to law or, relevantly, the governing rules of the fund concerned. However, it was submitted that s 37(5) did not, by corollary, preclude the Tribunal from affirming the decision of the trustee where the trustee has engaged in conduct which was contrary to law or to the governing rules of the Fund. 20 On the other hand, Mr Bingham of Counsel for the applicant contended that s 37(5), on its proper construction, required the Tribunal to decide whether the payment was contrary to law. Once the Tribunal so decided, s 37(3)(a) prohibited it from affirming the decision of the trustee and required it to direct, instead, pursuant to s 37(3)(d) that the applicant be recouped for the amount lost as a result of the unlawful payment. In other words, it was necessary to have regard to the decision made by the trustee and to determine whether that decision was contrary to law and, in that sense, no distinction was to be drawn between a determination of the Tribunal sounding in the future and its characterisation of the past determination of the trustee. 21 Counsel for the applicant further claimed, that the Tribunal had erred when it declined to resolve questions of law, observing that "there is no power in the Tribunal to decide those issues put on behalf of the Complainant which should more appropriately be put to a court of law, for example, questions of whether there has been a breach of trust law …". That was said to misstate the Tribunal's powers, the nature and extent of which had been explained by Merkel J in Briffa v Hay (1997) 75 FCR 428, where his Honour pointed out, at 437; 'Obviously, in arriving at a determination the Tribunal might form its own views on the legal obligation of the trustee in relation to the decision or refer questions of law to the Court: see s39. However, the view of the Tribunal or of the Court, in respect of those obligations, is not determinative of the issue of unfairness or unreasonableness which the Tribunal is to determine or of the compensatory relief the Tribunal might grant'. 22 That passage, I accept, does not preclude the Tribunal from forming a view about a question of law on its way to arriving at a determination under s 37 of the Act. However, no expression by the Tribunal of a view of that kind can define once and for all the legal rights and obligations of the parties; see Collins v AMP Superannuation Ltd (1997) 75 FCR 565, at 579; (1997) 147 ALR 243,at 255; Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 at [15]-[16], 48 ATR 359; Colonial Mutual Life Assurance Society Ltd v Brayley [2002] FCA 1333, at [39]. The clear intention of s 37(5) as well as ss 37(1)(a) and 41(3) is to place the Tribunal in the shoes of the trustee when making a determination in respect of a complaint; Briffa v Hay 75 FCR at 443; National Mutual Life Association of Australasia Ltd v Campbell (2000) 99 FCR 562, at 570 [32]. 23 Particularly by s 37(1)(b) and s 37(6), the Tribunal is entrusted with determining the fairness and reasonableness of the decision under review; National Mutual Life Association of Australia Ltd v Jevtovic (1997) 217 ALR 316, at 322; Collins v AMP Superannuation Ltd 75 FCR at 578, 147 ALR at 254 and Cullinane v Mercer Benefits Nominees Limited [2005] FCA 1470, at [22]. If the Tribunal is satisfied that the trustee's decision was fair and reasonable, it must affirm the decision pursuant to s 37(6). Whether the decision, or its operation in relation to a person, is fair and reasonable in the circumstances involves a value judgment, the making of which is committed to the Tribunal; National Mutual Life Association of Australasia Ltd v Campbell 99 FCR, at 571 [33]. 24 In the present case, having regard to the terms of s 37(6), I consider that the Tribunal correctly identified the ultimate question which it had to answer. That was, whether AMP's decision to deny repayment of the sum transferred (with interest claimed) was fair and reasonable in its operation to the applicant in the circumstances. In my view, this conclusion is not denied by the observations of Allsop J in Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330, at [31]- [32], which were relied on by Counsel for the applicant in imputing an error of law to the Tribunal. His Honour there said; '31 The Tribunal's task is not to engage in ascertaining generally the rights of the parties, nor is it to engage in some form of judicial review of the decision of the trustee or insurer. Rather it is to form a view, from the perspective of the trustee or insurer, as to whether the decision of either was (recognising the overriding framework given by the governing rules and policy terms, respectively) unfair or unreasonable.

[38]

25 The sentence which I have emphasised in the passage just quoted makes clear that, if the Tribunal identifies a contravention by the trustee of a provision of the governing rules or the policy, that may readily lead to a conclusion that unfairness or unreasonableness exists in relation to the trustee's decision. That is because a trustee would normally be expected to perform and observe the terms of the instrument creating the trust. However, as Allsop J was at pains to point out, the identification of a contravention of the governing rules or the policy will not, necessarily, entail unfairness or unreasonableness on the part of the trustee. For example, the trustee's contravention might have been insignificant or have been to the advantage of the complainant, so that, in the circumstances, it worked no unfairness or unreasonableness. Similarly, it may be open to the Tribunal to find no unfairness or unreasonableness in circumstances where the complainant had procured or acquiesced in the contravention. 26 In the present case, the Tribunal did not overlook the fact that there had been a contravention, which it described as "technical", of the Superannuation Industry (Supervision) Regulations ("the SIS Regulations"). That is clear from its statement in the passage reproduced at the foot of p 7 of these reasons that it "accept[ed] on the face of the facts that there was a technical breach of Regulation 5.01 of the SIS Regulations as the fund to which the money was transferred was not a regulated fund on 31 October 1995 when the transfer was made". It was common ground that in that passage, the Tribunal erroneously referred to a breach of reg 5.01, whereas it is evident from the context that it meant to refer to reg 5.08 of the SIS Regulations, which provided, so far as is relevant; '… it is a standard applicable to the operation of regulated superannuation funds and approved deposit funds that the trustee of a fund must ensure that a member's minimum benefits in the fund are maintained in the fund until the benefits are:

[41]

(b) Causation 31 It was also argued on behalf of the applicant that the effective cause of his loss was the transfer of his funds to the Receiving Fund on 31 October 1995. Whether such a loss would have been sustained if the transfer had occurred on or after 16 November 1995 was said to be "mere speculation". 32 In any event, Mr Bingham argued, notions of causation have no application to this case because "the obligation of a defaulting trustee is essentially one of effecting a restitution to the estate"; Re Dawson (Dec'd) Union Fidelity Trustee Co Ltd (1966) 84 WN (Pt 1) NSW 399 per Street J, at 404. However, as the authorities relied on by his Honour in what follows that statement make clear, that obligation arises from negligence or breach of trust on the part of the trustee. 33 In the present context, the Tribunal was not called upon to determine directly whether the trustee had been negligent or in breach of trust. Rather, it was required to "stand in the shoes of the trustee" and determine whether a decision taken by the trustee was fair and reasonable in the circumstances. As Kirby J analysed it in Attorney-General (Cth) v Breckler (1999) 197 CLR 83, at 129 [89]; '… The new decision, which might have retrospective operation, will speak from the time specified in the determination. What is involved is not a determination that the trustees misapplied the law to the facts. Nor that they mistook their powers and obligations under the governing rules of the fund. Rather it is a determination by the Tribunal of its own opinion that the trustees' decision is, or was, unfair, unreasonable or both. It is the reaching of that opinion which authorises the Tribunal, conforming with s 37(5) of the Complaints Act, to exercise its own determination-making power and to substitute a fresh decision. The object of the determination is to effect the purpose of removing the unfairness and unreasonableness which the Tribunal has determined to exist (Superannuation (Resolution of Complaints) Act 1993, s 37(4)).' 34 As already explained, the decision, for which a "fresh" decision was potentially capable of being substituted in that way, was AMP's refusal to reimburse the applicant for the amount which had been paid to the Receiving Fund. It was open to the Tribunal in assessing the fairness and reasonableness of that refusal to consider whether, and to what extent, the alleged breach of the SIS Regulations or the governing rules of the Fund had been an effective cause of the loss.