Re Care Super Pty Ltd [2021] VSC 805 (6 December 2021)

JUDICIAL ADVICE - Advice sought that shares in plaintiff trustee held by directors of plaintiff personally and not on behalf of trust - Court satisfied to a reasonable degree of satisfaction that shares held personally - Advice provided.

JUDICIAL ADVICE - Whether trustee justified in determining a fee for services including by reference to a risk that penalties may be imposed under Commonwealth legislation for which the trustee cannot be indemnified under Superannuation Industry (Supervision) Act 1993 (Cth) ss 56(2) and 57(2) - Fee so determined not in contravention of the Superannuation Industry (Supervision) Act 1993 (Cth) - Whether plaintiff established that it intended to determine fee in accordance with judicial advice - Whether court would exercise discretion to give advice when the plaintiff did not establish that it intended to determine fee in accordance with judicial advice - Advice refused.

For the Australian Prudential Regulation Authority (appearing as amicus curiae)

1 This proceeding relates to the Care Super superannuation fund (the Fund). The Fund is a regulated superannuation fund within the meaning of s 19 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). The plaintiff, which is the trustee of the Fund, seeks judicial advice from the Court on three issues.

2 First, the plaintiff seeks advice to the effect that it is justified in proceeding on the basis that the consolidated trust deed dated February 2019 (the 2019 Deed), as amended by the deed of amendment dated 24 March 2020 (the 2020 amendments, both collectively the Trust Deed), is the operative deed of the Fund. This order is sought, in particular, in light of the fact that the original trust deed could not be located prior to the hearing of this proceeding despite extensive searches by the officers of the plaintiff.

3 Second, the plaintiff seeks advice to the effect that it is justified in proceeding on the basis that the shares in the plaintiff are held by its director shareholders beneficially and are not an asset of the Fund. This clarification is sought as part of the administration of the Fund and is also relevant to the last issue on which advice is sought.

4 Third, the plaintiff seeks advice to the effect that it is justified to pay and advance out of the Fund an amount in respect of its provision of services as trustee of the Fund, on the basis that it is fair and reasonable to determine that amount by having regard to, among other relevant considerations, a risk that the plaintiff might incur a liability for:

(1) a criminal, civil or administrative penalty in relation to a contravention of a law of the Commonwealth (a penalty liability); or

(2) an amount payable under an infringement notice given under a law of the Commonwealth (an infringement liability, and collectively a statutory liability or statutory liabilities).

5 This advice is sought in light of the amendment to ss 56(2) and 57(2) of the SIS Act (the SIS amendments) which provide, in substance, that from 1 January 2022 the plaintiff and its directors cannot be indemnified for any such statutory liabilities from the Fund. The plaintiff has a right to charge fair and reasonable fees under cl 2.8(d) of the Trust Deed. To date, the plaintiff has exercised its right to charge fees for the services provided to the Fund for cost recovery, but not to derive income therefrom so as to build up a reserve from which any statutory penalty could be paid.

6 This third issue is of some importance to the plaintiff and its directors, and also to the members of the Fund. At present, the capital of the plaintiff is $60. As a result, the imposition of any statutory liability after 1 January 2022 may cause the plaintiff to be insolvent, with the result that it could no longer remain as trustee. Indeed, the amount of any statutory liabilities may be substantial. Further, the imposition of any statutory liability after 1 January 2022 might expose the directors to personal liability for which they may not be able to claim any indemnity. This may result in the resignation of one or more current directors and the inability to obtain suitably qualified replacements. Given that the SIS amendments apply from 1 January 2022, there is urgency to provision of the advice concerning the third issue.

7 Given the urgency, the plaintiff has been considering charging a fee under the remuneration clause in consultation with its advisers. As a result, on 10 November 2021, the board of the plaintiff resolved (the Board and the Board resolution):

(1) to charge a fee under the remuneration clause (the fee determination and the fee determination resolution); and

(2) that that fee be paid out of the General Reserve of the Fund into a Trustee Resilience Reserve (the Trustee Reserve), to be held by the plaintiff on its own behalf in accordance with the terms of the Trustee Resilience Policy, which was also endorsed by the Board (the Policy).

8 While the fee determination resolution was expressed to be 'subject to Judicial Advice from the Supreme Court of Victoria', the plaintiff has not sought judicial advice in respect of the fee determination but seeks the more general advice of the kind set out in [4] above.

9 For the purpose of assisting the Court in addressing in particular the third issue, the Australian Prudential Regulation Authority (APRA), an independent statutory body which relevantly supervises superannuation funds (other than self-managed funds), appeared as amicus curiae. Further, in light of the fact that none of the members of the Fund were joined as parties to the proceeding by the plaintiff, I determined to appoint Ms Wendy Harris QC as an amicus curiae (the Amicus) to critically review the material of the plaintiff in order to assist the Court in determining whether it is appropriate for the Court to give the judicial advice sought and to draw the Court's attention to any matters which might tend against giving the advice.

10 I wish to record the great assistance I have received from the material and submissions of those appearing and, in particular, APRA and the Amicus, and the timely way in which they were provided. Given the urgency in relation to the third issue, I address in these reasons the key and, in my view, determinative issues raised.

11 For the reasons that follow, I have determined that:

(1) I should provide advice to the effect that the plaintiff is justified in proceeding on the basis that the Trust Deed is the operative deed of the Fund;

(2) I should provide advice to the effect that the plaintiff is justified in proceeding on the basis that the shares in the plaintiff are held by its director shareholders beneficially and not as an asset of the Fund in light of the current provisions of the constitution of the plaintiff relating to shares and shareholder entitlements; and

(3) I decline to provide advice to the effect that the plaintiff is justified in paying out of the Fund an amount in respect of its provision of services as Trustee of the Fund, on the basis that it is fair and reasonable to determine that amount by having regard to, among other relevant considerations, a risk that the plaintiff might incur the statutory liabilities, given that I am not satisfied on the evidence before me that the fee determination has been determined on that basis.

2. EVIDENCE, CONFIDENTIALITY AND THE STRUCTURE OF THESE REASONS

12 The plaintiff relied upon the following affidavits:

(1) the affidavits of Julie Lander, the Chief Executive Officer of the plaintiff, both affirmed 25 October 2021 (the first Lander affidavit and the second Lander affidavit respectively);

(2) the affidavits of Belinda Ray, the Chief Risk Officer and Company Secretary of the plaintiff, sworn 25 October 2021, 30 November 2021 and 1 December 2021 (the first, second and third Ray affidavit respectively);

(3) five affidavits of Mark Bland, the solicitor for the plaintiff, affirmed 25 October 2021, 27 October 2021, 3 November 2021, 10 November 2021, 30 November 2021 and 2 December 2021 (the first, second, third, fourth, fifth and sixth Bland affidavit respectively); and

(4) the affidavits of Samuel Horskins, the Chief Financial Officer of the plaintiff, affirmed 26 November 2021 and 30 November 2021 (the first Horskins affidavit and the second Horskins affidavit respectively).

13 As is evident, some affidavits were filed shortly prior to, on the day of and after the hearing to address issues raised by the Court and by APRA and the Amicus in their submissions. That had the effect of limiting some of the issues in dispute.

14 Further, the plaintiff claimed that a number of the exhibits or parts thereof were confidential or commercial in confidence and sought orders that these exhibits or relevant parts thereof be kept confidential pursuant to r 28A.06 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (the Rules). The documents in respect of which confidentiality was sought related to five principal categories:

(1) legal advice provided by counsel for the plaintiffs (the confidential advice);

(2) calculations of the impact of insolvency on the Fund (the impact summary);

(3) documents recording insurance arrangements and advice in respect of insurance arrangements (the insurance documents);

(4) board papers and papers prepared by expert advisers to assist the Board in determining on 10 November 2021 to impose a fee in light of the SIS amendments (the Board papers); and

(5) correspondence with APRA and other APRA documents (the APRA documents).

15 The order which I made for the appointment of the Amicus provided for her to be given all the confidential exhibits. However, no such order was sought or made in relation to APRA prior to the hearing on 1 December 2021.

16 I raised concerns about the extent of the plaintiff's claims for confidentiality at the commencement of the hearing on 1 December 2021. This was particularly so in light of the fact that many of the substantive issues relating to the third issue were also the subject of the confidential advice and the Board papers. I was concerned that this might affect not only the nature of the oral argument but also the matters which I might properly refer to in these reasons for judgment. At that time, counsel for APRA raised the practical difficulties which counsel for APRA had faced by not having access to the confidential advice or indeed the submissions of the Amicus which sought to respond to the confidential advice.

17 After these issues were raised in argument, counsel for the plaintiff advised that she had instructions:

(1) to maintain confidentiality over the confidential advice but would not object to an order that the confidential advice be provided to APRA;

(2) to maintain confidentiality over the insurance documents, but that if an order was made that they be provided to APRA such documents could be provided to APRA on a confidential basis for the purpose of the proceeding;

(3) to maintain confidentiality in relation to the target range, the target amount and the other specific figures referred to in the Board papers; and

(4) to withdraw the claim for confidentiality in relation to the APRA documents.

18 I indicated that I would treat the impact summary in the same way as the insurance documents and counsel for the plaintiff did not oppose this course. I then made orders accordingly in order for the hearing to proceed. These reasons have been prepared having regard to those confidentiality orders.

19 As to the issues to be addressed, the plaintiff submitted that the first two issues raised in this proceeding are relevant to the third issue. As a result, I will deal with the first two issues in this proceeding before addressing the third and more substantial issue.

20 Before doing so, it is appropriate that I address three matters. The first is the nature of the powers of the Court in providing advice to trustees pursuant to r 54.02 of the Rules. The second is an overview of the Fund, its governance structure and operations. The third is an overview of the statutory provisions under the SIS Act and other relevant legislation which are of relevance to the third issue in this proceeding.

21 Rule 54.02(1) of the Rules provides that a proceeding may be brought for any relief which could be granted in an administration proceeding. Rule 54.02(2) relevantly provides that, without limiting paragraph (1), a proceeding may be brought for:

(a) the determination of any question which could be determined in an administration proceeding, including any question -

(i) arising ... in the execution of a trust;

(ii) as to the composition of any class of persons having ... a beneficial interest ... in property subject to a trust; or

(iii) as to the rights or interests of a person claiming ... to be beneficially entitled under a trust;

22 Rule 54.03(c) provides relevantly that, notwithstanding r 9.03(1) and without limiting the powers of the Court under ord 9, all persons having a beneficial interest under the trust need not be parties to the proceeding and the plaintiff may make such of those persons parties as it thinks fit.

23 In other jurisdictions, the power of a court to give judicial advice is contained in the trustee legislation, for example, s 63 of the Trustee Act 1925 (NSW). Notwithstanding the differences in the language used, the principles to be applied in providing judicial advice to a trustee are the same given that the purpose of the relevant provisions is to provide a procedure which, if adopted, will not only protect a trustee from later complaint that he or she should have acted otherwise but also to protect the trustee from personal liability for costs incurred.[1] Those principles include:

(1) there is no implied limitation on the power to give advice;

(2) the procedure is summary in character, intended to enable questions relevantly arising in the administration of a trust to be resolved cheaply and simply; and

(3) the advice is private advice to the trustee because its function is to give personal protection to the trustee in respect of the course of action which is the subject of the application.[2]

24 In making an application for judicial advice, the plaintiff must point to the existence of a question relating to the management or administration of the trust, or relating to the interpretation of the trust instrument.[3] The trustee must then place all relevant material before the court and seek judicial advice as to whether, in those circumstances, the trustee would be justified in taking a certain course. However, a trustee is not required to 'prove facts' according to 'a certain standard of proof to enable findings of fact to be made as would be the case in adversarial litigation'.[4] Indeed, it is not necessary for the court to determine the factual matters on an application for judicial advice.[5] Rather, there must be sufficient information to enable the court to be satisfied that judicial advice should be given.[6]

25 In Beck, Leeming JA adopted the comments of the primary judge to the effect that the trustee:

is entitled to put to the Court such statement of facts as he believes to be true, which he asks the Court to assume for the purposes of the advice. If the Court gives advice and the facts turn out to be different, it is [the trustee] who bears the risk of acting upon the advice that is not supported by the correct facts.[7]

26 While this passage emphasises the importance of the factual basis for the purpose of the protection afforded to the trustee, it also emphasises the importance that judicial advice is provided in a real or factual context and not in a hypothetical one. I will comment on this further below.

27 As made plain in Macedonian Orthodox Community Church, obtaining judicial advice resolves doubt about whether it is 'proper' for a trustee to pursue a course of conduct.[8] In Morris, the Victorian Court of Appeal emphasised the importance of considering the propriety of the trustee's course of conduct as opposed to the wisdom of that course which remains a matter for the trustee.[9] Thus, the court is concerned with whether the proposed course is within power and whether the exercise of the power will not be improper in the sense that it is not exercised in good faith, it is not exercised with real and genuine consideration to the exercise of the power, it is not exercised in accordance with the purpose for which it was conferred, or it is exercised for an ulterior purpose.[10]

28 It is important to note that the jurisdiction under r 54.02 is discretionary. While there is no limitation on discretionary factors which the court may consider, ultimately, the court is concerned with determining what ought to be done in the best interests of the trust.

29 However, there are two things to note. First, consistent with the comments in [25]-[27] above, the court will not give advice about hypothetical matters. Further and relatedly, it is implicit in judicial advice applications that the trustee intends to act in a way that the application identifies, assuming fav[11]rable advice is given.11 In my view, the court would not exercise its discretion to provide advice unless the evidence disclosed that the trustee had resolved to, or intends to, act in accordance with that advice. Otherwise the judicial advice would have no utility and/or would provide no protection to the trustee.

30 Second, generally advice has not been given on matters which determine substantive issues, on the rights of beneficiaries or on matters in controversy between parties to a trust.[12] However, as noted by Austin J in MTM Funds Management Ltd v Cavalane Holdings Pty Ltd,[13] in the exercise of its discretion, the court may provide judicial advice even in controversial circumstances, for example, if confined to an issue of law.[14] Further, his Honour considered that there are occasions where, in the exercise of the court's discretion, the court may provide advice even though the advice affects the rights of persons who are not represented at the hearing of the application or their enjoyment:[15]

In many cases, the crucial issue for the court will be whether the giving of advice might operate unfairly as regards a person not before it. That, in turn, requires an assessment of whether the court might fail to take into account some relevant submission in the absence of representation by the affected person. But these matters fall within the ambit of the court's discretion, and the absence of representation of an affected party is not a jurisdictional bar.[16]

31 In that case, the trustee was the responsible entity of a managed investment fund. It sought advice as to whether unitholders were entitled to exercise their contractual rights under the constitution to remove the responsible entity by ordinary resolution and to requisition a meeting for that purpose. One of the unitholders who opposed the application was joined as a defendant. ASIC appeared as amicus curiae. Austin J determined to give judicial advice given that:

(1) all issues had been ventilated, with the result that he was confident that his decision would not be affected even if he were to hear submissions from another interested person; and

(2) the advice would clarify the position before the relevant meeting which would serve the interests of the unitholders.[17]

32 With respect, I endorse these comments of Austin J which I consider are consistent with the comments of the plurality of the High Court in Macedonian Orthodox Community Church.

33 Further, these comments of Austin J are of particular relevance to the determination of this proceeding given that the plaintiff determined not to join any member of the Fund as a party to this proceeding and limited information was provided to Employer Organisations and Fund Member Organisations named in the constitution of the plaintiff in respect of the third application.[18] As noted above, it was in these circumstances that I determined to appoint Ms Harris QC as amicus curiae in this proceeding.

4. OVERVIEW OF THE FUND, ITS GOVERNANCE AND OPERATIONS

34 The Fund has approximately 221,500 members. It is the largest industry fund for people in professional, managerial, administrative and service occupations. It is the only industry fund which focuses on people working in these occupations.

(1) the net assets available for member benefits were $19,291,972,000;

(2) the liabilities were $1,772,342,000; and

(3) the general reserve in the Fund was $166,253,000.

36 The Fund was established by a deed dated 18 December 1986 (the Original Deed) with effect from 1 January 1987. As I set out below, despite extensive searches from about 2012, the officers of the plaintiff were unable to produce the original or a copy of the Original Deed at the time this proceeding was issued. The plaintiff has proceeded on the basis that the current form of the instrument of trust governing the Fund is contained in the Trust Deed, being the 2019 Deed as amended by the 2020 amendments. This is the subject of the first issue in this proceeding which I will address further below.

37 The plaintiff was incorporated as a proprietary company limited by shares on 25 November 1986. As I set out below, there have been a number of name changes since that time. The plaintiff is currently the holder of a Registrable Superannuation Entity licence (RSE licence) pursuant to s 29D of the SIS Act and is also a holder of an Australian Financial Services Licence (AFSL) under the Corporations Act 2001 (Cth) (the Corporations Act).

38 The plaintiff is governed by a constitution with the current form contained in a consolidated constitution dated 12 October 2021 (the Constitution). Under the terms of the Constitution, a director of the plaintiff must be appointed as either an Employer Director, a Member Director or an Independent Director.

39 The Board meets the requirements of the SIS Act concerning equal representation among the directors of member representatives and employer representatives. The Board is currently comprised of five Employer Directors (Terence Wetherall, Michelle Gardiner, Jeremy Johnson, Merran Kelsall and Katherine Sampson) and five Member Directors (Linda Scott, Anthony Cavanagh, Keith Harvey, Robert Potter and Vanessa Seagrove).

40 As at 30 June 2021, the share capital of the plaintiff comprised 60 shares (30 A class shares and 30 B class shares) issued at $1 each, which are held in equal proportions by each of the directors of the plaintiff. There is some uncertainty about whether these shares are held by the directors of the plaintiff personally or on behalf of the Fund. This is the subject of the second issue in this proceeding which I will address further below.

41 The Board has established a number of committees to assist it in carrying out its responsibilities in supervising and monitoring the management of the Fund, namely a Compliance, Audit and Risk Management Committee, a Governance and Remuneration Committee, an Investment Committee, an Insurance and Claims Committee, and a Member and Employer Services Committee. Each committee has its own charter and is comprised of directors determined by the Board to be appropriate for the purpose or purposes of the committee.

42 The plaintiff directly employs approximately 144 staff, including seven senior executives. Each of the seven senior executives and the 10 directors of the plaintiff are 'responsible persons' of the plaintiff, subject to the fitness and proprietary standards of APRA's prudential standard SPS 520 Fit and Proper. In addition, the plaintiff engages external service providers to provide skills and expertise to the operation and management of the Fund.

43 The plaintiff maintains a Risk Management Framework, which includes a Risk Management Strategy, Risk Appetite Statement, Risk Register and other policies to identify, monitor and mitigate risk. The Risk Management Framework is reviewed annually to ensure that the risks are effectively identified and responded to including, where appropriate, by enhancing the underlying risk management policies and procedures. The Risk Management Framework was last updated in October 2020.

44 Clause 2.8(d) of the Trust Deed provides that the trustee and its directors may be 'remunerated for the bona fide provision of services to the Fund on such basis as the Trustee determines to be fair and reasonable' (the remuneration clause). According to Ms Lander's evidence, to date, the plaintiff has exercised its rights to charge fees under the remuneration clause for cost recovery, but not to derive income from fees. The audited financial statements for the period ending 30 June 2021 record that the plaintiff received fees totalling $1,919,874 and paid expenses totalling $1,919,874. It reported a total equity of $60. The plaintiff's ability to charge a fee, determined in light of the risk of any statutory liability as a consequence of the SIS amendments, is the subject of the third issue in this proceeding.

45 Superannuation funds are regulated by Commonwealth legislation. Most significantly, they are regulated by the SIS Act. As s 3 of the SIS Act makes plain, the main object of the SIS Act is to make provision for the prudent management of certain superannuation funds and for their supervision by APRA, ASIC and the Commissioner of Taxation. As noted above, the Fund is a regulated superannuation fund within the meaning of s 19 of the SIS Act. Further, the plaintiff is a registrable superannuation entity or RSE within the meaning of s 10 of the SIS Act.

46 Parts 2A and 2B of the SIS Act provide for the licensing of trustees of certain superannuation trusts and RSEs. Relevantly, pt 2B provides that an RSE licensee must ensure that the RSE meets a number of ongoing requirements. Those requirements include the prudential standards imposed by APRA pursuant to pt 3A. Part 6 of the SIS Act, which I will address in more detail below, contains provisions relating to the content of the governing rules of superannuation entities.

47 In addition, since the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) (the Hayne Commission Act), the Australian Financial Services (AFS) providers licensing requirements contained in pt 7.6 of the Corporations Act and the financial product disclosure requirements in pt 7.9 of the Corporations Act apply to trustees providing a 'superannuation trustee service'.

5.2 Part 6 of the SIS Act

48 Part 6 of the SIS Act sets out rules about the content of the 'governing rules of superannuation entities'.[19] Section 10 defines governing rules as '(a) any rules contained in a trust instrument, other document or legislation, or combination of them; or (b) any unwritten rules; governing the establishment or operation of the fund, scheme or trust'.

49 Section 52 contains covenants which are deemed to be contained in the governing rules of an RSE such as the plaintiff (the s 52 covenants). Section 52(2) sets out the following general covenants by each trustee:

(a) to act honestly in all matters concerning the entity;

(b) to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments;[20]

(c) to perform the trustee's duties and exercise the trustee's powers in the best financial interests of the beneficiaries;[21]

(d) where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee:

(i) to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and

(ii) to ensure that the duties to the beneficiaries are met despite the conflict; and

(iii) to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and

(iv) to comply with the prudential standards in relation to conflicts;

(e) to act fairly in dealing with classes of beneficiaries within the entity;

(f) to act fairly in dealing with beneficiaries within a class;

(g) to keep the money and other assets of the entity separate from any money and assets, respectively:

(i) that are held by the trustee personally; or

(ii) that are money or assets, as the case may be, of a standard employer-sponsor, or an associate of a standard employer-sponsor, of the entity;

(h) not to enter into any contract, or do anything else, that would prevent the trustee from, or hinder the trustee in, properly performing or exercising the trustee's functions and powers;

(i) if there are any reserves of the entity‑to formulate, review regularly and give effect to a strategy for their prudential management, consistent with the entity's investment strategies and its capacity to discharge its liabilities (whether actual or contingent) as and when they fall due;

(j) to allow a beneficiary of the entity access to any prescribed information or any prescribed documents.

50 Section 52(6) sets out covenants regarding investment. Section 52(7) sets out covenants regarding insurance. Section 52(8) sets out the following covenants relating to risk by each trustee:

(a) to formulate, review regularly and give effect to a risk management strategy that relates to:

(i) the activities, or proposed activities, of the trustee, to the extent that they are relevant to the exercise of the trustee's powers, or the performance of the trustee's duties and functions, as trustee of the entity; and

(ii) the risks that arise in operating the entity;

(b) to maintain and manage in accordance with the prudential standards financial resources (whether capital of the trustee, a reserve of the entity or both) to cover the operational risk that relates to the entity.

51 Section 52A contains a subset of the covenants in s 52 by each director of a corporate trustee which is an RSE. Relevantly, s 52A(2)(a)-(f) contain similar covenants to those contained in s 52(2)(a)-(f) (the s 52A covenants). For convenience I will refer to the s 52 covenants and the s 52A covenants collectively as the SIS covenants.

52 Further, pt 6 of the SIS Act provides for the consequences of contravention of these covenants imposed by the SIS Act or contained in the governing rules of a superannuation entity. Section 54B of the SIS Act relevantly provides that a person who contravenes a covenant to the effect of a covenant in s 52 or s 52A, or a covenant that is contained in the governing rules of a superannuation entity, is liable to a civil penalty which has the civil and criminal consequences for contravention set out in pt 21 of the SIS Act. I note that s 54B of the SIS Act was introduced in 2019 pursuant to the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation No 1) Act 2019 (Cth).

53 Pursuant to pt 3A of the SIS Act, APRA has issued three prudential standards relevant to this proceeding. First, Prudential Standard SPS 220 Risk Management requires RSE licensees to have systems for identifying, assessing, managing, mitigating and monitoring material risks that may affect its ability to meet its obligations to beneficiaries. These systems, together with the structures, policies, processes and people supporting them comprise the licensee's risk management framework. Under this prudential standard, the board of an RSE is ultimately responsible for the risk management framework.

54 Second, Prudential Standard SPS 114 Operational Risk Financial Requirement imposes an obligation on an RSE licensee to maintain adequate financial resources to address losses arising from operational risks that may affect RSEs within its business operations. Under this prudential standard, the board of the RSE is ultimately responsible for ensuring that it holds, and has unfettered access to, financial resources in the form of an operational risk reserve, and operational risk trustee capital or a combination thereof to meet the target amount of financial resources that the RSE licensee determines is necessary to respond to these losses (ORFR target amount).

55 Third, Prudential Standard SPS 520 Fit and Proper sets out minimum requirements for APRA regulated institutions to determine the fitness and propriety of individuals to hold positions of responsibility, such as board members. The objective is to ensure that the institution prudently manages the risk that persons acting in responsible person positions are not fit and proper.

56 In light of this factual and statutory context, I will now proceed to deal with the first two issues.

57 The first issue is whether the plaintiff is justified in proceeding on the basis that the Trust Deed is the operative deed of the fund. I have formed the clear view that this issue relates to the administration of the trust. As a result, I am satisfied that the Court has the power to give judicial advice.

58 On the evidence before me, the Fund was established by the Original Deed dated 18 December 1986 with effect from 1 January 1987. Despite extensive searches from about 2012, at the time this proceeding had been issued, the officers of the plaintiff had been unable to produce the original or a copy of the Original Deed.

59 The nature and extent of the original searches to locate the original or a copy of the Original Deed are set out in [9] to [24] of the first Ray affidavit. They include:

(1) physical searches of the offices of premises occupied by the plaintiff since 2005, of the safe currently located in the plaintiff's current office, and of the plaintiff's archived records and documents from offsite storage;

(2) conducting reviews of the plaintiff's 'safe list', which records certain details of documents kept in the plaintiff's safe up until March 2019 when it was transferred to an electronic record, and the 'red book', a handwritten log of executed documents requiring the application of the plaintiff's company seal;

(3) conducting a review of the plaintiff's electronic log of archived documents;

(4) conducting numerous searches of the plaintiff's electronic document management systems;

(5) making enquiries of individuals in the employ of the previous law firms who acted for the plaintiff as trustee, including:

(a) King & Wood Mallesons, formerly Mallesons Stephen Jacques, who acted for the plaintiff between 1986 and 1987;

(b) IFS Legal, formerly IFS Fairley, who acted for the plaintiff in respect of the terms of the trust in around February 2003 and again in around February 2013;

(c) DLA Piper, which was engaged by the plaintiff in relation to the terms of the trust in about March 2012; and

(d) Hall & Wilcox, which was engaged by the plaintiff in relation to the terms of the trust in around February 2019.

60 Prior to the hearing of this proceeding, I arranged an email to be sent to the solicitors for the plaintiff suggesting that it may be of assistance for providing judicial advice on the first issue if I had further evidence in relation to, among other things, the nature of the enquiries made of law firms previously engaged by the plaintiff as to the Original Deed and the results of those enquiries.

61 The further enquires made, and the results of them, are contained in the third and fourth Ray affidavits and the fifth and sixth Bland affidavits. Most relevantly, a copy of the Original Deed was located. That has very much limited the issues and assisted in the determination of the first issue. Indeed, the majority of the legal submissions related to the principles to be applied relating to the execution and contents of a lost trust deed. Those principles are no longer relevant in light of the production of the Original Deed.

62 However, the principles relating to the presumption of regularity and validity have continuing relevance. In McLean Bros & Rigg Ltd v Grice, the High Court held that a record of a resolution signed by the chairman of a meeting at which it was passed, a copy of which was sent to the Registrar-General and published in the Government Gazette, was prima facie evidence that all that took place at the meeting was done lawfully.[22] In this context Griffith CJ stated that 'where an act is done which can be done legally only after the performance of some prior act, proof of the later carries with it a presumption of the due performance of the prior act'.[23] Further, his Honour noted that there is 'high authority for saying that this presumption is applicable to the proceedings of corporations'.[24]

63 Before dealing with the Original Deed, there are other contemporaneous documents relating to the establishment of the plaintiff and the Fund.

64 First, there is the certificate of incorporation of the plaintiff, then called Zavanica Pty Ltd (Zavanica), dated 25 November 1986 and the memorandum and articles of association of Zavanica of the same date. Second, there is an application for the reservation of the name Zavanica dated 7 November 1986 which records that the nature of the business intended to be carried on was 'to act as Trustee and acquire and deal in securities'. Third, there is a certificate of a change in the name from Zavanica to Clerical Administrative & Retail Employees Superannuation Pty Ltd on 16 January 1987. This is confirmed by the ASIC historical extract of the plaintiff which also records that the name of the plaintiff was subsequently changed to Clerical Administrative and Related Employees Superannuation Pty Ltd on 16 June 1992.[25]

65 Fourth, there are the annual returns of the plaintiff dated 30 June 1987, 30 June 1988 and 30 June 1989, each of which record that its principal activity was 'trustee for superannuation fund' and that it has a 'RIGHT OF INDEMNITY - NO$ BUT LIABILITY COVERED UNDER TRUST DEED' under the heading 'KEY FINANCIAL DATA'.

CLERICAL ADMINISTRATIVE AND RETAIL EMPLOYEES

SUPERANNUATION PLAN

TRUST DEED

C.A.R.E.

67 The Original Deed consists of 30 pages and contains 33 clauses. The Original Deed records the parties and recital in the following terms:

THIS TRUST DEED is made the EIGHTEENTH day of DECEMBER 1986 BY ZAVANICA PTY LTD (TO BE RENAMED CLERICAL ADMINSTRATIVE & RETAIL EMPLOYEES SUPERANNUATION PTY LTD) who registered office is situated at 500 BOURKE STREET, MELBOURNE in the State of Victoria (called the "Trustee", which expression shall include the present Trustee or other the Trustee appointed under this Deed).

WHEREAS:

1. the Trustee has decided by this Deed to establish a superannuation plan to be known as the CLERICAL ADMINISTRATIVE AND RETAIL EMPLOYEES SUPERANNUATION PLAN (called the "Plan") in order to provide benefits for certain of the Employees of those Employers who are admitted as participants in the Plan and for the Dependants of those Employees;

B. the terms and conditions governing the Plan are as set out in this Deed;

68 The Original Deed attaches the Rules relating to membership of the Fund and the benefits to be provided pursuant to it. The Rules are 19 pages and contain 16 rules. The Rules note that the date of commencement is 1 January 1987, 'being the date on which the Plan is deemed to have commenced.' The Original Deed has been executed by the secretary and director of Zavanica. The execution clause records that the seal of Zavanica was affixed by authority of the resolution of its Board.

69 The next version of the trust deed in evidence is a document entitled 'Deed of Consolidation' dated 26 May 1998 (the 1998 Deed). The 1998 Deed is entitled:

CLERICAL ADMINISTRATIVE AND RELATED EMPLOYEES SUPERANNUATION PLAN

(Incorporating amendments up to and including Deed of Variation No 10).

70 Further, the 1998 Deed appears to record the parties to and recital of the Original Deed in the following terms:

THIS TRUST DEED is made the 18th day of December 1986

BY CLERICAL ADMINISTRATIVE & RETAIL EMPLOYEES SUPERANNUATION PTY LTD (to be called CLERICAL ADMINISTRATIVE AND RELATED EMPLOYEES SUPERANNUATION PTY LTD) [ACN 006 670 060] whose registered office is situate at Level 2, 53 Queen Street, Melbourne, Victoria (called the "Trustee", which expression shall include the present Trustee or other Trustee appointed under this Deed)

RECITALS

26.05.98

1. The Trustee has decided by this Deed to establish a superannuation plan to be known as the CLERICAL ADMINISTRATIVE AND RELATED EMPLOYEES SUPERANNUATION PLAN (called the "Plan") in order to provide benefits for Members in the Plan and for the Dependants of those Members.
2. The terms and conditions governing the Plan are as set out in this Deed.

71 The searches disclose that the next version of the trust deed in time after the 1998 Deed is the consolidated trust deed dated 25 February 2003 (the 2003 Deed). There is a substantial difference between the form of the 1998 Deed and the 2003 Deed, including changes to the recital and a re-organisation of the substantive clauses. By way of example, the 1998 deed contained 35 clauses while the 2003 Deed contains only eight clauses.

72 However, it would appear that a number of the clauses from the 1998 Deed were grouped together in the 2003 Deed with no substantial change to the content of those clauses. For example, cls 2 to 7 of the 1998 Deed related to the appointment and removal of the trustee, its meetings, its committees, its liabilities and indemnities, and its discretions and powers. By contrast, cls 2.1 to 2.8 of the 2003 Deed contained almost identical provisions relating to the appointment and removal of the trustee, its meetings, its committees, its liabilities and indemnities, and its discretions and powers. Thus, notwithstanding the re-organisation of these clauses, for the most part the terms remained the same. I will address the terms of these deeds further below.

73 The 2003 Deed defines the 'Date of Commencement' as 'the 1st day on January 1987 being the date on which the Fund is deemed to have commenced'. Thus, it would appear that, by 2003, the Original Deed may not have been able to be located. However, the fifth Bland affidavit records that the solicitor who drafted the 2003 Deed had access to the Original Deed, or a copy of it. I note this definition of the date of commencement was included in all subsequent consolidated deeds.

74 The plaintiff has produced all the amending deeds and consolidated trust deeds relating to the Fund after the 2003 Deed. These comprise:

(1) a deed of amendment dated March 2009;

(2) a consolidated trust deed dated 3 March 2009 (the 2009 Deed);

(3) deeds of amendment dated 13 March 2012 and 28 August 2012;

(4) MySuper amendments dated 5 February 2013 and 9 April 2013;

(5) a consolidated trust deed dated May 2013 (the 2013 Deed);

(6) a deed of amendment dated 12 February 2019;

(7) the 2019 Deed; and

(8) the 2020 amendments.

75 I note that the 2019 Deed contains a note on its first substantive page as follows:

*Establishment of Fund

An indefinitely continuing superannuation fund known as CARE Super (formerly known as the "Clerical Administrative & Related Employees Superannuation Plan") is:

• established with effect from 1 January 1987;
• governed by the terms of this Deed; and
• subject to the Relevant Law.

76 As a result of the searches outlined at [59] above, Ms Ray deposed that she believes that the 2019 Deed and the 2020 amendments reflect the current form of the instrument of trust governing the Fund.

77 Further, I note that the 3 March 2009, 5 February 2013, 9 April 2013 and 24 March 2020 deeds of amendment record that the Fund was established by deed dated 1 January 1987. By contrast, the March 2012 and August 2012 deeds of amendment record that the Fund was established by a trust deed dated 18 December 1986.

78 As to the terms of the Trust Deed, the plaintiff submitted that, for the most part, all versions of the trust deed have equivalent powers of amendment, of a right of remuneration to the trustee and a power for the trustee to pay fund expenses.

79 As to the power of amendment, substantially similar clauses are contained in cl 19.1(a)-(d) of the Original Deed, cls 19.1 to 19.5 of the 1998 Deed and cl 7.7(a)-(f) of the 2003 Deed, the 2009 Deed, the 2013 Deed and the 2019 Deed.

80 As to the trustee's right of remuneration, the Original Deed contained no such clause. However, substantially similar remuneration clauses are contained in cl 7.4 of the 1998 Deed and cl 2.8(d) of the 2003 Deed, the 2009 Deed, the 2013 Deed and the 2019 Deed. The term in the Trust Deed provides:

the Trustee, any person on the Board of Directors of the Trustee and any member of a Committee appointed pursuant to sub-clause 2.5 hereof may be remunerated for the bona fide provision of services to the Fund on such basis as the Trustee determines to be fair and reasonable.

81 As to the power of the trustee to pay fund expenses, such a clause was contained in cl 25 of the Original Deed. Substantially similar clauses are contained in cl 24 of the 1998 Deed and cl 7.10 of the 2003 Deed, the 2009 Deed, the 2013 Deed and the 2019 Deed. The term in cl 7.10 of the Trust Deed provides:

The Trustee shall, except and to the extent that this Deed otherwise provides, pay out of the Fund all expenses of and incidental to the formation, management and administration of the Fund.

82 In addition, cl 2.8(a)(xvi) of the 2003 Deed contained a power of the trustee to pay out of the fund all costs, expenses and outgoings of and incidental to the management and administration of the fund. Clause 2.8(a)(xvi) of the Trust Deed provides:

(a) Specific powers

Without prejudice to the powers vested in the Trustee by this Deed or otherwise the Trustee shall have the following powers:

...

(xvi) to pay and advance out of the Fund all costs, expenses and outgoings (including Taxation) of and incidental to the management and administration of the Fund and to pay an advance out of the Fund the professional fees (if any) in respect of the provision of its services as Trustee of the Fund.

83 Prior to the hearing, the Amicus also submitted that further enquiries should be made. However, at the hearing, in light of the discovery of the Original Deed, the Amicus did not oppose the judicial advice on the first issue. Further, the Amicus submitted that the presumption of regularity may have some relevance in this case given that the plaintiff has been unable to identify each deed of amendment since the Fund was established. The Amicus submitted that, in the documents produced, there is no evidence of irregularity in the deeds of amendment which the consolidated deeds seek to incorporate with the result that the Court may rely upon the presumption of regularity in these circumstances.

84 In my view, in order to provide the judicial advice sought, in the circumstances set out above, the Court must be satisfied to a reasonable degree of satisfaction of the existence of the trust deed and that the terms of the Trust Deed which the trustee seeks to rely upon are consistent with the contents of the trust deed as amended from time to time. In short, I am so satisfied in light of the evidence set out in section 6.1.

85 First, in light of the factual matters set out in section 6.1.1, I am satisfied that the Original Deed was executed on about 18 December 1986 with effect from 1 January 1987.

86 Second, in light of the factual matters set out in section 6.1.2, I am satisfied that the 1998 Deed contains the terms of the Original Deed as varied from time to time to 1998. This is particularly so in light of the title page to the 1998 Deed and the recitals to that deed. In this regard, I rely also upon the presumption of regularity as submitted by the Amicus.

87 Third, in light of the factual matters set out in section 6.1.3, I am satisfied that the 2003 Deed contains the terms of the Original Deed as varied from time to time from the 1998 Deed. In this regard it is significant that the terms of the 1998 Deed were substantially the same as the terms of the 2003 Deed, notwithstanding the re-organisation of the clauses in the 2003 Deed and changes by reason of amendments between 1998 and 2003. My conclusion is confirmed by an examination of the clauses, particularly those relevant to the determination of this proceeding, namely, the power of amendment, the power of the trustee to seek payment of costs from the Fund and the right of the trustee to remuneration. I rely also upon the presumption of regularity as submitted by the Amicus.

88 Fourth, in light of the factual matters set out in section 6.1.4, there is a clear chain of amendments from the 2003 Deed until the 2020 amendments.

89 Finally, I am satisfied that the plaintiff and its officers have undertaken all reasonable searches to locate the amending deeds which have not been produced. As a consequence of these conclusions, I have determined that I should exercise the Court's discretion to provide the judicial advice sought, which I consider is in the best interests of the trust.

90 The second issue is whether the Court should give judicial advice that the plaintiff is justified in proceeding on the basis that the shares in the plaintiff are held by the director shareholders beneficially and are not an asset of the Fund.

91 The plaintiff has submitted that the determination of this question may be of relevance to the third issue in this proceeding. In any event, it submitted that, given one of the primary obligations of a trustee is to identify and then get in and protect the trust property, it is an issue which relates to the administration of the Fund and a suitable issue for judicial advice. I am of the view that the second issue does relate to the administration of the Fund, with the result that the Court has the power to give judicial advice.

92 In order to provide such advice, I consider that the Court must be satisfied to a reasonable degree of satisfaction that the shares in the plaintiff are held by the director shareholders beneficially and are not an asset of the Fund. In this context, I will turn to the relevant facts.

93 The second issue arises in the context that there is some uncertainty as to whether the shares are held by the director shareholders beneficially or non-beneficially.

94 Prior to the hearing, I arranged for an email to be sent to the solicitors for the plaintiff suggesting that the right to issue further shares in the plaintiff and the rights attaching to issued shares (including the right to transfer them) may be of relevance to the second issue. I suggested further enquiries might be made in this regard. Further, in written submissions, the Amicus submitted that it might reasonably have been expected that the plaintiff would attempt to contact past directors and shareholders to ask whether they were aware of any person having held or holding a beneficial interest in the shares. As a result, the plaintiff filed the second Ray affidavit.

(1) the Fund was established by the Original Deed dated 18 December 1986 with effect from 1 January 1987;

(2) the plaintiff was established as a proprietary company limited by shares on 25 November 1986;

(3) as at 30 June 2021, the share capital of the plaintiff comprised 60 shares (30 A class shares and 30 B class shares) issued at $1.00 each;

(4) the A class shares are held in equal proportions by each of the Member Directors; and

(5) the B class shares are held in equal proportions by each of the Employer Directors.

7.1.1 The share searches and other evidence

96 The ASIC search of the plaintiff dated 1 September 2021 records that all the current shares of the plaintiff are held non-beneficially. By contrast, Ms Lander deposed that upon her review of the memorandum and articles of association registered on 25 November 1986, the annual return of the plaintiff for the year ended 30 June 1987 and the ASIC historical extract, at some point in time, some of the shares in the plaintiff were recorded as being held beneficially.

97 Ms Lander deposed to a number of enquiries and searches she made to address this apparent inconsistency. First, she deposed that she has not found any documentation indicating that any person other than the current shareholders holds a beneficial interest in the shares. Further, the plaintiff's original secretary, Mr Gabriel Szondy, confirmed that when the shares were first issued in the plaintiff, he was not aware of and does not believe that any other person held a beneficial interest in those shares.

98 Second, Ms Lander deposed that Mr Horskins, the Chief Financial Officer of the plaintiff, has recently reviewed a copy of all the investment assets of the Fund as at 30 June 2021 provided by the custodian of the Fund and the register of fixed assets in the Fund as at August 2021 provided by the administrator of the Fund, and that there is no reference in either of those documents to any holding of a beneficial interest in the shares of the plaintiff as an asset of the Fund.

99 Third, Ms Lander deposed to the enquiries made of the current shareholders who are all directors of the plaintiff. Each of them has confirmed that:

(1) they have not identified any information or documentation which would evidence that they hold their share in the plaintiff non-beneficially; and

(2) each of them believes that no other person or entity holds a beneficial interest in the share which each of them holds in the plaintiff.

100 Fourth, Ms Lander deposed that Ms Ray has informed her that the forms lodged with ASIC relating to the ownership of shares continued an existing practice, which included a statement to the effect that the shares were not held beneficially without any investigation into the truth of that statement. Further, Ms Ray informed Ms Lander that, having considered the matter further, Ms Ray does not believe any other person holds a beneficial interest in the shares held by the shareholders.

101 In the second Ray affidavit, Ms Ray deposed that:

(1) most of the original directors are deceased and the plaintiff does not have contact details for the remaining original directors in order to make enquiries relevant to the second issue;

(2) the plaintiff has contacted the Nominating Organisations and asked if they believe they have an interest in the shares in the plaintiff. The Nominating Organisations were unable to produce any evidence to demonstrate such ownership or interest; and

(3) Ms Lander informed Ms Ray that she believed, and Ms Ray also believes, that there was an administrative error or misunderstanding that led to the shares being classified as being held non-beneficially in the ASIC records.

102 The share register of the plaintiff in evidence is dated 30 June 2021. It contains a list of the current shareholders of all the issued A and B class shares. It does not indicate whether the shares are held beneficially or not. However, I note that s 169(5A) of the Corporations Act relevantly provides that, if a company has share capital and is not a listed company, then the register must indicate any shares that a member does not hold beneficially. Further s 176 provides that, in the absence of evidence to the contrary, a register kept under Chapter 2C is proof of the matters shown in the register under that chapter.

103 The annual returns of the plaintiff for the years ended 30 June 1987, 1988 and 1989 reveal that during these years there were 24 issued shares. In 1987 and 1988 there were 6 A class shares, 6 B class shares and 12 C class shares. In 1989 there were 6 A class shares, 6 B class shares, 6 C class shares and 6 D class shares. The annual returns also record that, during this period, the shares were held by James Maher, Joseph De Bruin, Terrance Sullivan, John Maynes, Richard Smith and Athol Flynn.

104 The ASIC historical extract records the shareholders from, at the latest, 1990 to the present. It lists approximately 54 shareholders over that period. It records the existence of A class, B class, C class and D class shares up until about 1998. After that time, it only records the existence of A class and B class shares. However, for the most part, the ASIC historical extract lists that these shares were not beneficially held by the relevant shareholder. Indeed, it records that only two of the shareholders held the shares beneficially, namely three B class shares formerly held by Terence Sullivan and four C class shares formerly held by Anthony Quintner. By contrast, it records that the shares held by James Maher, Joseph De Bruin, and John Maynes were not held beneficially.

7.1.2 S****hares and rights attaching to them

105 As noted above, there are currently two kinds of ordinary shares in the plaintiff: A class shares held by the Member Directors and B class shares held by the Employer Directors. In my view, it is necessary to consider the rights attaching to those shares (including the right to transfer them) and the right to issue further shares in the plaintiff. The rights are currently governed by the Constitution adopted on 12 October 2021. However, I wish to first address the nature of the shares and the rights attaching to those shares before that time.

106 The original articles of association of the plaintiff which contained provisions relating to the issue and transfer of shares is dated 18 November 1986. By special resolution made on 18 December 1986 (when the Original Deed was executed), the plaintiff as trustee adopted new articles (the December 1986 articles). The December 1986 articles provided for separate classes of shares, being A class, B class, C class and D class shares. I note that on 15 December 1986, the plaintiff lodged a document with the NCSC noting that the shares in the plaintiff had been divided into classes, namely six A class shares, six B class shares and six C class shares, each with a nominal value of $1.

107 I have reviewed arts 5, 10 to 15 and 18 to 23 of the December 1986 articles. The effect of these provisions is that there were limits not only on the number of shares that could be issued, but also on a shareholder's ability to transfer those shares. Most relevantly, a shareholder was limited to transferring his or her shares to a member holding shares of the same class or to a person with the consent of all the shareholders. This was subject to the right of the directors, in their discretion, to decline to register any transfer of shares. Further, art 13(1) provided that, except as required by law, the Company shall not recognise a person as holding a share upon any trust.

108 The evidence records that in 2003, 2007, 2008, 2012, 2013, 2015, 2016, 2017 and 2018 there were changes to the articles of the plaintiff, then called the constitution. Ms Ray has prepared a summary of the amendments, which is Annexure A to the second Ray affidavit. It records that there were some changes to the provisions relating to the shares set out in the December 1998 articles.

109 As a result, I have reviewed cls 4, 5, 8, 10 and 11 of the Constitution adopted on 12 October 2021. The effect of these provisions is that there continue to be limits on the number of shares that can be issued and a shareholder's ability to transfer those shares. Most relevantly, in my view, on the proper construction of cl 10 in the context of the Constitution and the SIS Act (and, in particular, the Board membership requirements in the SIS Act referred to above), it is clear that the shares in the plaintiff:

(1) will only be held by a Member Director or Employer Director, or a Nominating Organisation or that organisation's representative who is accepted by the Board as a representative thereof; and

(2) can only be transferred to a person from the same class for a nominal price, being $1.

110 In addition, cl 34 provides that, on winding up or insolvency, any surplus assets after payment of all debts and liabilities must be paid to the Fund and the shareholders have no right to any such assets.

111 The plaintiff submitted that, on the basis of the evidence set out in section 7.1 above, the Court can be satisfied that it should provide judicial advice to the effect that the plaintiff is justified in proceeding on the basis that the shares of the plaintiff are beneficially held by the current director shareholders and are not an asset of the Fund.

112 At the hearing, the Amicus submitted that, in light of the second Ray affidavit, the Court could be satisfied with the evidential foundation to give the judicial advice sought in relation to the second issue.

113 In short, on the basis of the evidence set out in section 7.1, I am satisfied to a reasonable degree of satisfaction that the shares in the plaintiff are beneficially held by the current director shareholders and are not an asset of the Fund.

114 This is for a number of reasons. First, other than the details contained in the ASIC historical extract, there is no evidence that the shares held by the past or current director shareholders of the plaintiff were/are held on behalf of another person or entity such as the Fund. On the evidence before me, the shares were and are treated as being owned by each of the director shareholders in their own right. I refer in particular to:

(1) the 1987, 1988 and 1989 annual returns, in which there is no evidence that the original shares in the plaintiff were held by the shareholders on behalf of any other person or entity;

(2) the evidence of Mr Szondy, the original Company Secretary of the plaintiff, that, when the shares were first issued, he was not aware of and did not believe that any other person held a beneficial interest in the shares;

(3) the evidence of Mr Horskins, the Chief Financial Officer of the plaintiff, that there is no reference in the record of the investment assets of the Fund or the register of fixed assets in the Fund to any holding of a beneficial interest in the shares as an asset of the Fund;

(4) the enquiries undertaken by Ms Lander which have not revealed any documentation indicating that any person other than the shareholder holds a beneficial interest in the shares held by the current shareholders;

(5) the further enquiries undertaken by Ms Ray, as set out in the second Ray affidavit, which have not revealed any documentation indicating that any person other than the shareholder holds a beneficial interest in the shares held by the current shareholders, in particular, the enquiries made of the Nominating Organisations;

(6) the statements of each of the current shareholders to the effect that none of them has identified any information or document which would evidence that a person or entity other than him or her holds a beneficial interest in the shares, and that each of them believes that no other person or entity holds such an interest in the shares; and

(7) the share register of the plaintiff dated 30 June 2021 which does not record that the shares are held non-beneficially, and from which, when read together with ss 169(5A) and 176 of the Corporations Act, I consider the Court may infer that the shares in the plaintiff are not held on behalf of any other person or entity.

115 As to the only contrary evidence, which is contained in the ASIC historical extract, I accept the evidence to the effect that the documents prepared by the plaintiff which form the basis of the ASIC historical extract were prepared without any investigation into the truth of that statement.

116 In light of these conclusions, it is necessary to consider whether I should exercise the Court's discretion to provide judicial advice in relation to the second issue. In this regard, I am conscious that the effect of giving such advice would be that the plaintiff and its directors will proceed on the basis that the shares in the plaintiff are not an asset of the Fund. To the extent that those shares have any value, the practical effect would be that the Fund would be deprived of the value of that asset. This is in circumstances where no member of the Fund is a party to this proceeding or has been heard on this application.

117 However, notwithstanding these matters, I consider that I should provide the advice sought. This is for three reasons. First, the evidence is, in my view, overwhelming that the shares held by the directors are not held on behalf of any other person or entity. Second, I have had the assistance of the independent and critical review of the plaintiff's material and submissions by the Amicus in deciding whether to provide judicial advice on the second issue and the submissions made by the Amicus at trial referred to above.

118 Third, as is evident from section 7.1 above, there have been from the establishment of the Fund, and remain, limits imposed upon the number of shares in the plaintiff and on the rights of a shareholder to hold or transfer shares in the plaintiff. Relevantly, as set out above, I am satisfied that the shares are of limited value and that, even if the directors hold the shares beneficially, they are not free to deal with those shares in any way he or she likes. In short, I consider that the intention and effect of the Constitution is that the directors hold any shares in the plaintiff only for so long as they remain directors of the plaintiff, and those shares must then be transferred to a person of the same class for a nominal value.

119 In all these circumstances, I am satisfied that it is in the interests of the Fund that I provide judicial advice. However, I consider it appropriate to qualify this advice so that it is based upon the current provisions of the Constitution relating to share capital (cls 4 to 6), variation of class rights (cl 8), transfer and transmission of shares (cls 10 and 11) and winding up (cl 34).

120 The third issue relates to whether the plaintiff is justified, pursuant to the remuneration clause, in determining a fee for services by reference to, among other considerations, a risk of a statutory liability in light of the SIS amendments. For convenience, I will refer to the process of determining a fee under the remuneration clause, including by reference to a risk of a statutory liability in light of the SIS amendments, as the fee proposal.

121 This issue arises because the plaintiff has been advised that the SIS amendments will have the effect from 1 January 2022 of rendering void any provision in the Trust Deed that would permit, among other things, indemnification from the Fund of the plaintiff or a director of the plaintiff against a statutory liability. This advice was given in the context that:

(1) the plaintiff has no other liquid assets to meet the amount of any such liability where it is unable to be indemnified from the Fund;

(2) any insurance cover available may be inadequate and, in any event, would be subject to a significant deductible or excess; and

(3) the imposition of a statutory liability may result in the insolvency of the plaintiff (the insolvency risk) and/or the unwillingness of persons to serve as directors of the trustee of the Fund.

122 The following summary of the submissions of the parties is of necessity short in light of the urgency relating to the implementation of the SIS amendments. It addresses only the key issues raised. I am conscious that the summary does not do justice to the detailed consideration of the issues and industry reflected in the submissions made.

123 In summary, the plaintiff submitted that the Court should give the judicial advice sought because the fee proposal did not have the effect of contravening the SIS amendments or any other provisions of the Trust Deed. The plaintiff submitted that a fee to build a reserve, which could be drawn on in the event that the plaintiff became exposed to non-indemnified liabilities, is conceptually distinct from a provision that would have the effect of exempting or indemnifying the plaintiff against such liabilities. In doing so, it relied upon the decision in Re QSuper Board ('QSuper')[26] in which Kelly J held that a clause to charge a fee, including by reference to a risk of a statutory liability in light of the SIS amendments, did not contravene the SIS amendments.

124 The plaintiff submitted that its exercise of the right to charge a fee in this case (i.e. the fee determination) was proper having regard to the best financial interests of the members of the Fund given the insolvency risk and other risks. They relied upon the process leading up to, and the decision reflected in, the Board resolution and the Policy. However, as noted above, they did not seek judicial advice in respect of the Board resolution, the Policy or the fee determination.

125 It is significant that APRA did not submit that the fee proposal contravened the SIS amendments. However, APRA submitted that, in deciding whether to provide judicial advice, the Court must be satisfied that the manner in which the trustee proposes to exercise its remuneration power is consistent with the best financial interests covenant and the diligence covenant to ensure that the proposed solution was 'proportionate and appropriately tailored'. While APRA originally raised concerns about the way in which the Policy and the fee determination were reached in light of these covenants, the further evidence filed by the plaintiff addressed many of APRA's concerns.

126 In summary, the Amicus submitted that the Court should not grant the judicial advice sought. This is notwithstanding that the Amicus accepted that the Court could be satisfied that the plaintiff faces an imminent and significant risk of insolvency if a statutory liability is imposed, and that it is not in the financial interests of the members of the Fund for the plaintiff to become insolvent by reason of its inability to meet even a modest statutory penalty. In short, the Amicus submitted that the plaintiff could use its power under the remuneration clause to determine a proposed fee to ensure it builds financial resilience in these circumstances, but that it was not appropriate to give the judicial advice sought in light of the fee determination.

127 First, the Amicus submitted that the fee proposal was incompatible with the constraints on trustee indemnification in the SIS amendments and under cl 2.6 of the Trust Deed. This is because the singular purpose of the fee proposal was to enable the plaintiff to access existing trust assets to create a reserve to pay statutory penalties.

128 Second, the Amicus submitted that the fee determination was made solely having regard to the risk of a statutory liability and not including by reference to that risk. As a result, the Amicus submitted that the fee determination was beyond the power conferred by the remuneration clause, not being 'fair and reasonable' and/or referable to the 'bona fide provision of services' as required by that clause. Further, the Amicus submitted that the fee determination did not relate to the administration or operation of the Fund as required by the remuneration clause and/or s 29V of the SIS Act (which regulates the kinds of fees that may be charged by a RSE licensee offering a MySuper product).[27] In this context, the Amicus submitted that the fee determination seemed at odds with the judicial advice sought.[28]

129 Finally, the Amicus submitted that, if the fee determination was within power, the Court should have significant reservations about whether the fee determination is in the best financial interests of members and otherwise 'proper' for the purpose of providing judicial advice. This is because there was relatively little evidence before the Court for the conclusion that a fee of this magnitude (well in excess of current administration costs) was in the best financial interests of the Fund members. This is in light of, among other things, the limited evidence about the potential indemnity claims against insurers or of indemnities from third party service providers in relation to any statutory liabilities imposed, the fact that the fee determination was not limited to the gap between insurance/indemnities and any statutory liabilities, and the limited evidence as to why it is in the members' best interests for the plaintiff to be provided with sufficient funds for non-indemnified liabilities incurred by the directors.

130 In reply, the plaintiff submitted that the fee determination was fair and reasonable and made having regard to the substantial services provided by the plaintiff.

131 The plaintiff emphasised the purpose of the fee determination, namely to permit the plaintiff to continue to function as trustee in the face of the insolvency risk and ultimately to secure the competent administration of the fund. The plaintiff submitted that, based on the evidence, the purpose of the fee determination is to manage government risk, legal and regulatory risk, insurance risk, fit and proper risk and solvency risk so as to act in the best financial interests of members.

132 The plaintiff submitted that maintaining resilience is fundamental to protecting the financial interests of the members of the Fund and that trustee capital is an element of this. This is in a context where APRA requires that RSE licensees must be financially resilient to operate in the best interests of members of the fund. It submitted that it was implicit in the Board resolution and associated papers that the fee determination covered all services involved in operating and administering the Fund, which has grown increasingly onerous, including the high degree of responsibility under its AFS and RSE licences.

133 In order to address the third issue, I will first set out the relevant terms of the Trust Deed and the terms of the SIS amendments. I will then address the evidence relevant to the third issue.

134 The Trust Deed contains eight principal clauses relating to the trustee, the Fund, its membership and administration, member and employer contributions and member benefits. The relevant clauses are cls 2 and 7.

135 Clause 2 is headed 'Trustee'. Clause 2.6 is headed 'Liability and Indemnity'. It relevantly provides:

a) Liability of Trustees, Directors and Officers

Neither the Trustee nor any of its directors or Officers shall be liable for anything done or omitted to be done in relation to or in connection with any act or omission concerning the Fund except if that person:

i. fails to act honestly; or

1. intentionally or recklessly fails to exercise the degree of care and diligence that the person is required to exercise; or

2. incurs a monetary penalty in respect of a civil penalty order under the Relevant Law.[29]

...

d) Indemnity and Lien

The Trustee and where applicable its directors and Officers shall be indemnified out of the Fund against all liabilities incurred by it or them in the exercise or purported exercise or attempted exercise of the trusts, powers, authorities and discretions vested in it or them under this Deed or at law except if that person:

1. fails to act honestly; or

2. intentionally or recklessly fails to exercise the degree of care and diligence that the person is required to exercise; or

3. incurs a monetary penalty in respect of a civil penalty order under the Relevant Law,

and the Trustee shall have a lien on and may use the moneys representing the assets of the Fund for the purposes of this indemnity.

...

h) Agents and Servants of Trustee

This indemnity shall extend to the circumstances where an agent or servant employed in good faith by the Trustee becomes insolvent or commits an act of bankruptcy or any fraudulent or negligent act.

i) Limitation of Indemnity

The indemnity provided under this clause in respect of the Trustee or any directors, Officers, agents or servants of the Trustee shall not apply to the extent that the provision of such an indemnity would be limited by or inoperative under the Relevant Law.

136 Clause 2.8 is headed 'Powers'. Clause 2.8(a) sets out specific powers of the Trustee. It relevantly provides:

Without prejudice to the powers vested in the Trustee by this Deed or otherwise the Trustee shall have the following powers:

...

1. to act on the advice or opinion of any accountant, actuary, barrister, solicitor or medical practitioner or other professional person or expert (whether or not such advice or opinion was obtained by the Trustee) in relation to any relevant matter or question without being liable to any person in respect of anything done or omitted to be done by the Trustee in good faith based on such advice or opinion;

...

1. generally to do all acts and things as the Trustee may consider necessary or expedient for the administration, maintenance and preservation of the Fund and in the performance of its obligations under this Deed;

...

1. to pay and advance out of the Fund all costs, expenses and outgoings (including Taxation) of and incidental to the management and administration of the Fund and to pay and advance out of the Fund the professional fees (if any) in respect of the provision of its services as Trustee of the Fund;

137 Clause 2.8(b) is headed 'Trustee Indemnity Insurance'. It provides:

The Trustee shall have the power to insure and keep insured as it sees fit any liability of the Trustee or any director or Officer of the Trustee and/or the liability of the Fund to indemnify or reimburse the Trustee or any director or Officer of the Trustee pursuant to sub-clause 2.6(b) hereof and for the purposes of the Deed any such costs shall be an expense of the Fund.

138 The remuneration clause (cl 2.8(d)) is headed 'Remuneration of Trustee and Directors'. It provides:

The Trustee, any person on the Board of Directors of the Trustee and any member of a Committee appointed pursuant to sub-clause 2.5 hereof may be remunerated for the bona fide provision of services to the Fund on such basis as the Trustee determines to be fair and reasonable.

139 It is cl 2.8(d) that the plaintiff relies upon to charge a fee for its provision of services to the Fund by reference to the risk of a penalty liability or an infringement liability. I will address this in more detail further below.

140 As to clause 7, the relevant provision is cl 7.10 which is headed 'Expenses of the Fund'. It provides:

The Trustee shall, except and to the extent that this Deed otherwise provides, pay out of the Fund all expenses of and incidental to the formation, management and administration of the Fund.

141 Sections 56 and 57 of the SIS Act provide for, and restrictions on, indemnification of trustees and their directors from the assets of the trust. The Hayne Commission Act amended these sections of the SIS Act with effect from 1 January 2022 as shown in mark-up below:

Section 56:

(1) Subject to subsections (2) and (2A), a provision in the governing rules of a superannuation entity is void if:

(a) it purports to preclude a trustee of the entity from being indemnified out of the assets of the entity in respect of any liability incurred while acting as trustee of the entity; or

(b) it limits the amount of such an indemnity.

(2) A provision in the governing rules of a superannuation entity is void in so far as it would have the effect of exempting a trustee of the entity from, or indemnifying a trustee of the entity against:

(a) liability for breach of trust if the trustee:

(i) fails to act honestly in a matter concerning the entity; or

(ii) intentionally or recklessly fails to exercise, in relation to a matter affecting the entity, the degree of care and diligence that the trustee was required to exercise; or

(b) liability for a monetary penalty under a civil penalty order an amount of a criminal, civil or administrative penalty incurred by the trustee of the entity in relation to a contravention of a law of the Commonwealth (including this Act); or

(c) the payment of any amount payable under an infringement notice (however described) given under a law of the Commonwealth (including this Act); or

(d) liability for the costs of undertaking a course of education in compliance with an education direction (within the meaning of this Act).; or

(e) liability for an administrative penalty imposed by section 166.

Section 57:

(1) Subject to subsection (2), the governing rules of a superannuation entity may provide for a director of the trustee to be indemnified out of the assets of the entity in respect of a liability incurred while acting as a director of the trustee.

(2) A provision of the governing rules of a superannuation entity is void in so far as it would have the effect of indemnifying a director of the trustee against:

(a) a liability that arises because the director:

(i) fails to act honestly in a matter concerning the entity; or

(ii) intentionally or recklessly fails to exercise, in relation to a matter affecting the entity, the degree of care and diligence that the director is required to exercise; or

(b) liability for a monetary penalty under a civil penalty order an amount of a criminal, civil or administrative penalty incurred by the director in relation to a contravention of a law of the Commonwealth (including this Act); or

(c) the payment of any amount payable under an infringement notice (however described) given under a law of the Commonwealth (including this Act); or

(d) liability for the costs of undertaking a course of education in compliance with an education direction (within the meaning of this Act).; or

(e) liability for an administrative penalty imposed by section 166.

142 'Governing rules', in relation to a fund, scheme or trust, is defined in the SIS Act as:

(a) any rules contained in a trust instrument, other document or legislation, or combination of them; or

(b) any unwritten rules;

governing the establishment or operation of the fund, scheme or trust.

143 The solicitor for the plaintiff, Mr Bland, has deposed to the possible statutory liabilities which may be imposed on the plaintiff. These include civil penalties of up to:

(1) $11.1 million under the Corporations Act;

(2) 10,000 penalty units (currently $22.2 million) under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the Anti-Money Laundering Legislation); and

(3) 2,400 penalty units (currently $532,800) under the SIS Act including for any serious breach of the covenants deemed to apply under s 52 of the SIS Act.

144 Some of the civil penalties which may be imposed have only recently been introduced. First, as is evident from section 5.2 above, contravention of the s 52 covenants is subject to a civil penalty under the SIS Act.[30] Such a civil penalty may include a monetary penalty under pt 21 div 2 of the SIS Act or a compensation order under pt 21 div 5 of the SIS Act. In the case of a dishonest contravention, it may also give rise to a criminal offence under pt 21 div 3 of the SIS Act. Further, any person who is involved in the contravention of the statutory covenant may be taken to have contravened that covenant pursuant to s 194 of the SIS Act.

145 Second, since the Hayne Commission Act, the plaintiff is exposed to civil penalties for any contravention of the obligations imposed upon AFS licensees in pt 7.6 div 3 of the Corporations Act. This is because, by the Hayne Commission Act, the provision of services by a trustee of a RSE now falls within the definition of providing a financial service for the purpose of pt 7.6 of the Corporations Act. As a consequence, such a trustee must hold an AFSL for such services with the result that, among other things, such a trustee is subject to the obligations set out in pt 7.6 div 3 of the Corporations Act in respect of its trustee services. These include the obligations in s 912A(1)(a) to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly. Pursuant to s 912A(5A), a contravention of s 912A(1)(a) is subject to a civil penalty provision as set out in s 1317E.

146 As a consequence of these amendments, the trustee of a RSE, such as the plaintiff, is exposed to the risk of civil penalties under the Corporations Act including pecuniary penalties and compensation orders if they contravene any of their statutory obligations as AFS licensees. Directors and officers of such a trustee may be exposed to those risks if they are involved in the contravention of the trustee's duties as licensee pursuant to s 1317E(4). Further, the Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) broadened the scope of the civil penalties regime and increased the severity of penalties for civil penalty provisions and criminal offences.

147 Mr Bland has deposed that, by reason of these amendments and recent statements by APRA and ASIC of their willingness to enforce their prudential powers, there is an increased risk of enforcement by APRA and ASIC for licensees such as the plaintiff. Further, Mr Bland has referred to recent court decisions imposing civil penalties for contravention of the Corporations Act in the sum of $3 million and $7.5 million,[31] and civil penalties for contravention of the Australian Securities and Investments Commission Act 2001 (Cth) and the Corporations Act in the sum of $20 million for misleading communications to members.[32]

148 In all the circumstances, Mr Bland deposed that he considered that there was an increased penalty risk and insolvency risk for the plaintiff. I accept this evidence.

149 These problems faced as a result of the risk of any statutory liability must be considered in the particular circumstances of the plaintiff. The plaintiff does not operate a bank account. The $60 capital is held in cash and kept in a safe at the plaintiff's head office. Apart from this cash, the plaintiff has no other liquid assets to meet a liability for an amount which it is unable to be indemnified from the Fund. Although the plaintiff has obtained insurance cover, it must first pay a deductible or excess and there are other reasons which mean that insurance could be an inadequate resource to meet such liabilities.

(1) the current capital of the plaintiff would be insufficient to pay any statutory liability incurred after 1 January 2022;

(2) this creates a significant risk that the plaintiff could become insolvent or unable to carry on its business in the ordinary course and in accordance with its duties as trustee of the Fund; and

(3) if there is a risk that the plaintiff will be unable to adequately indemnify its directors or otherwise will expose them to personal risk, then there is a real risk that the plaintiff will be unable to retain its directors or appoint other directors who meet the fit and proper requirements and the equal representation rules.

151 Further, Ms Lander also deposed that each of the directors of the plaintiff have confirmed they do not agree to contribute any additional capital or provide an indemnity to the trustee.

152 In submissions, counsel for the plaintiff submitted that, should the plaintiff experience an insolvency event by reason of the imposition of a statutory liability, the due and proper administration and management of the Fund would be severely curtailed. In this regard, in the first Horskins affidavit, Mr Horskins estimated the financial impact of insolvency of the plaintiff on the Fund, which estimate exceeded the amount of the fee determination. For completeness, I accept the evidence of Ms Lander and Mr Horskins set out in this section.

153 In order to address the concerns by the SIS amendments, the plaintiff has taken advice from senior and junior counsel, their solicitors Mills Oakley, PriceWaterhouseCoopers Australia (PwC) and Deloitte Australia (Deloitte), the plaintiff's tax advisers.

154 Relevantly, between March and September 2021, the plaintiff has taken a number of steps to investigate and mitigate the risk of a statutory liability for which it cannot be indemnified from the Fund (the penalty risk) and the consequential risk of the insolvency of the plaintiff (the insolvency risk). These steps have included:

(1) engaging with the Australian Institute of Superannuation Trustees (AIST) and considering a framework for trustee capital requirements prepared by Mills Oakley and PwC for the benefit of trustee members of the AIST;

(2) engaging with APRA to identify and address areas of regulatory concern;

(3) reviewing the plaintiff's current compliance arrangements and risk management systems for penalty-related risks;

(4) engaging PwC to undertake a targeted assessment of the plaintiff's needs in order to determine a range of potential capital that would reasonably be required to manage the penalty risk;

(5) reviewing the adequacy of the plaintiff's existing liability insurance and seeking to arrange increased cover for the penalty risk;

(6) reviewing the plaintiff's analysis of comparable superannuation trustee fee structures and amounts completed for the member outcomes report;

(7) obtaining advice from Deloitte; and

(8) developing a strategy for communication with Fund members.

155 Most relevantly, PwC prepared a Trustee Capital Framework dated September 2021 (the PwC Framework), which determined the capital that may be required to meet the statutory liabilities which may be imposed in light of the SIS amendments. In order to do so, PwC (together with other advisers) reviewed a range of potential penalties, including those referred to above, and used stochastic modelling to arrive at a range of penalties that may be imposed, and thus a range of capital required based upon a percentage of the value of the Fund. That assessment excluded any legal costs or insurance payments which would be used to replenish the capital fund in due course. As a result, PwC recommended a target range of capital required to meet its assessment based upon the value of the Fund.

156 The evidence disclosed that the management and advisers of the plaintiff were all very much involved in this process. Further, they were involved in taking steps to reduce the risk of such liabilities being imposed. In this regard, the second Horskins affidavit records that the plaintiff had considered the availability, effectiveness and costs of insurance and the availability of indemnities from service providers in order to reduce any statutory liabilities imposed.

157 As a result of this process, Ms Lander deposed in [57] and [66] of the first Lander affidavit that the plaintiff has formed a view that:

(1) there is a risk the plaintiff may incur statutory liabilities for which it is not permitted to be indemnified from the assets of the Fund (the non-indemnified statutory liabilities);

(2) it has the power under the remuneration clause to determine a basis for charging fees from time to time that is fair and reasonable in all the circumstances which includes the risk of non-indemnified statutory liabilities;

(3) it would be in the best financial interests of the members of the Fund to exercise the power under the remuneration clause to charge fees in accordance with (2) above from 1 January 2022 (i.e. the proposed fee); and

(4) having regard to the risk to the plaintiff of incurring non-indemnified statutory liabilities, it is appropriate to establish the Trustee Reserve into which such fees would be paid to meet the non-indemnified statutory liabilities and to maintain such a reserve in the event it is depleted.

158 In fact, the decision of the plaintiff is contained in the Board resolution made on 10 November 2021. The papers before the Board included a draft of the Policy, which included Appendix 1 entitled 'Basis for Calculation of Trustee Resilience Reserve and Trustee fee', and a document entitled 'Management Recommendation: Basis for Calculation of Trustee Resilience Reserve and Trustee Fee - establishment' (the Management Recommendation). The Management Recommendation sets out the basis of calculating the fee determination.

159 Pursuant to the Board resolution, the Board first resolved to adopt the Policy and that it would be in the best financial interests of members of the Fund to:

(1) maintain the Trustee Reserve;

(2) set the target range for the Trustee Reserve at a range based on a percentile range of the capital adequacy required (based on and in line with the PwC Framework); and

(3) fund the Trustee Reserve with a fee that is fair and reasonable for the provision of services provided by the plaintiff to the Fund.

(1) to set a 'target range' and a 'target amount' for the capital amount required for the Trustee Reserve (based on and in line with the PwC Framework); and

(2) '[s]ubject to Judicial Advice of the Supreme Court of Victoria, there would be a fair and reasonable basis for the Trustee to charge a fee for the current financial year of an amount of ... [being the target amount plus an amount for company tax and GST] based on Fund Assets as at 30 September 2021' (i.e. the fee determination) and to pay the fee determination from the General Reserve (i.e. the fee determination resolution).

161 It is significant that the target range and the target amount were determined by reference to the capital requirements to meet the risk of statutory liabilities in light of the SIS amendments based on the PwC Framework. However, the Board adopted a target range at the lower end of the range referred to in the PwC Framework, and the target amount was the mid-point in the target range determined by the Board. That target amount (plus company tax and GST payable on the target amount) became the fee determination, namely the fee for services charged by the plaintiff under the remuneration clause.

162 Further, the Board resolution notes that management and fund advisers had been 'reviewing the latest industry-based information and other relevant developments in assessing its proposed initial Trustee fee'. This included the fees proposed to be charged by Hostplus, another industry super fund, and a suggestion of the fees that other 'non-mega' funds (in apparent response to the SIS amendments) are looking to charge. It also refers to the comments of Kelly J in QSuper about the exercise of a broad fee charging power in the future which might not satisfy some of the s 52 covenants. In this regard, the Board resolution referred to the provisions of the Policy regarding annual reviews of the Trustee Reserve.

163 It is appropriate that I say something briefly about the Policy. The Policy sets out how the Trustee Reserve is to be calculated and funded, how the Trustee Reserve is to operate and how the Trustee Reserve is to be applied.

164 The Policy provides that the fee determination would be payable from the General Reserve of the Fund, currently in the order of $118 million. Funds in the Trustee Reserve will be held beneficially for the plaintiff and not for the Fund. The Policy provides that the Trustee Reserve is 'held by the [plaintiff] beneficially to ensure funds are available for unforeseen contingencies that may require payments by the [plaintiff], including any amount required to meet a liability for which the [plaintiff] is not permitted to be indemnified from the Fund'. The Policy provides that the Trustee Reserve may be applied for the following purposes:

(1) for the payment of statutory liabilities;

(2) for the payment of 'approved operating expenditure' (which appears to include expenses of the plaintiff as trustee or the Fund);

(3) for the payment of premiums for the plaintiff's insurance;

(4) for projects or system developments including where the benefit extends beyond the current period; and

(5) for taxation liabilities (including GST) of the plaintiff relating to the fee in its hands.

165 The Policy also sets out the principles to be applied to determine the amounts necessary for the purposes of calculating an appropriate Trustee Reserve both now and in the future. In summary, the Policy provides that, in determining the fee to be charged pursuant to the remuneration clause in order to build up the Trustee Reserve, the plaintiff is bound by the 'Guiding Principles', which include that the Trustee Reserve is 'established and maintained in the best financial interests of beneficiaries'.

166 The Policy then provides that, in order to establish the Trustee Reserve, the plaintiff has set an initial target range of capital and determined a fee by reference to:

(1) the statutory liabilities which may be imposed on the plaintiff, together with an assessment of the probability of incurring such penalties having regard to, among other things, the Risk Management Framework, risk practices and resources and controls;

(2) establishing parameters of loss as a percentage of the maximum loss, on the expectation that the plaintiff would be unlikely to incur a statutory liability at the maximum level;

(3) assessing the risks of such a statutory liability having regard to the laws most applicable to its business, the impact of the maximum liability and the likelihood of operational breaches;

(4) evaluating capital needs based on expected loss and on a more complex stochastic approach; and

(5) taking into account the considerations in Appendix 1.[33]

167 Appendix 1 then contained seven sections addressing the basis of the calculation of the Trustee Reserve as follows:

(1) the current circumstances leading to the imposition of the target range and the target amount i.e. the risk arising from the SIS amendments;

(2) the duties on the plaintiff in determining its remuneration pursuant to cl 2.8(d) including to act honestly in all matters concerning the Fund and to perform the trustee's duties in the best financial interests of the members;

(3) the risks to the trustee by reason of the SIS amendments;

(4) the potential conflict between the interests of the plaintiff and its directors on the one hand and the interests of Fund members in minimising fees and other costs;

(5) the relevant factors for the assessment of the target range and the target amount based on the SIS amendments and their consequences in the context of the Fund;

(6) the taxation considerations in relation to the fee and the Trustee Reserve; and

(7) the financial impact of insolvency of the plaintiff on the Fund.

168 The Management Recommendation first contained recommendations relating to the Trustee Reserve, the Policy, the target range, the target amount and the fee determination, which for the most part formed the Board resolution. Once again, the target range and the target amount were determined by reference to the capital requirements to meet the risk of statutory liabilities in light of the SIS amendments and based on the PwC Framework. The balance of the Management Recommendation contained the seven sections of Appendix 1 (addressing the basis of the calculation of the Trustee Reserve) with no further analysis. The Management Recommendation did not address or mention the nature or value of the services provided by the plaintiff. Nor on its face does the Management Recommendation address any other factor relevant to determining the fee determination other than the target amount required for the Trustee Reserve (plus tax and GST payable on that target amount in the hands of the plaintiff) and the consequential risk of insolvency of the plaintiff. Consistent with the Management Recommendation, the Board resolution was made on 10 November 2021.

169 As to the monitoring and review of the Trustee Reserve and its target range, the Policy provides that:

(1) there will be an ongoing monitoring of the Trustee Reserve with monthly reports to be provided by the investments team to the finance team;[34]

(2) in the event the Trustee Reserve is or appears to be outside the target range, the Board will review the fee by reference to the relevant considerations in Appendix 1;

(3) the Policy will be reviewed annually or sooner if required;[35]

(4) the appropriateness of the target range must be reviewed following any material change to the operational risks identified in the Risk Management Framework for the Fund; and

(5) changes to relevant industry standards or guidance from APRA or ASIC, or material changes to the operational structure or risk profile of the plaintiff or the Fund, may trigger review of the Policy.[36]

170 In light of the summary of the submissions of the plaintiff, APRA and the Amicus and the factual matters set out above, I will now consider whether the judicial advice sought by the plaintiff should be given. Given the outcome I have reached and the imminent effect of the SIS amendments, my reasons are of necessity brief.

171 First, I am satisfied that the issue of whether the plaintiff is able to charge a fee pursuant to the remuneration clause is an issue that relates to the administration of the Fund, with the result that the Court has jurisdiction to give judicial advice. However, the issue in this case is whether, in the exercise of its discretion, the Court should give the judicial advice, in particular, in light of the evidence and the submissions raised by the Amicus.

172 I am conscious that this application is of some significance both for the plaintiff and for other trustees of superannuation funds who will be affected by the SIS amendments. As a result, I propose to deal first with the issue of whether the fee proposal is in contravention of the SIS amendments and cl 2.6 of the Trust Deed. I will then deal with whether the plaintiff has the power to make the fee determination. This raises the issue of the alleged disconformity, as submitted by the Amicus, between the form of the judicial advice sought and the fee determination in fact made by the plaintiff.

8.7.1 The proposed fee does not contravene the SIS amendments

173 First, I have concluded that the power to charge fees to build up a reserve which could be drawn on in the event that a trustee becomes exposed to a non-indemnified statutory liability (i.e. the fee proposal) is not inconsistent with the SIS amendments. In summary, this is because:

(1) consistent with the submissions of APRA, the language in the SIS amendments directs attention to a 'provision' of the governing rules that would have the 'effect' of exempting a trustee from, or indemnifying a trustee or director against, the statutory liabilities. It is not directed to a provision that may, depending upon the purpose for which the power under that provision is exercised, have that effect; and

(2) if the Court were to construe the SIS amendments having regard to the purpose for which a power to charge fees was exercised, that would have an inconvenient or improbable consequence not intended by the SIS amendments.

174 In my view, consistent with the submissions of APRA, the relevant words in the SIS amendments focus on the 'effect' of the relevant 'provision' of the governing rules by itself without regard to the purpose for which, or circumstances in which, any power pursuant to that provision might be exercised.

175 I accept the submission of the plaintiff and APRA that any construction of the SIS amendments which requires the Court to have regard to the purpose for which the power in the provision has been exercised is both impractical and improbable. In my view, if Parliament had intended the exercise of a power of such a provision to be reviewed in order to determine whether it is void, then Parliament would have said so.

176 In this regard, I note the narrow scope of the SIS amendments which apply only to the provisions of the governing rules. This is to be compared with the equivalent provision of the Corporations Act, s 199A, which relevantly provides_:_

Exemptions not allowed

(1) A company or a related body corporate must not exempt a person (whether directly or through an interposed entity) from a liability to the company incurred as an officer or auditor of the company.

When indemnity for liability (other than for legal costs) not allowed

(2) A company or a related body corporate must not indemnify a person (whether by agreement or by making a payment and whether directly or through an interposed entity) against any of the following liabilities incurred as an officer or auditor of the company:

(a) a liability owed to the company or a related body corporate;

(b) a liability for a pecuniary penalty order under section 1317G or a compensation order under section 961M, 1317H, 1317HA, 1317HB, 1317HC or 1317HE;

(c) a liability that is owed to someone other than the company or a related body corporate and did not arise out of conduct in good faith.

This subsection does not apply to liability for legal costs.

177 For completeness, I do not consider that the cases relied upon by the Amicus in relation to s 109 of the Commonwealth Constitution are of assistance in the proper construction of the SIS amendments. Section 109 provides that, when a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail and the former shall 'to the extent of the inconsistency, be invalid'. The cases have held that the word 'invalid' in the context of s 109 means 'inoperative' to the extent of, and for so long as, there is a relevant inconsistency.[37] However, the words and context of s 109 of the Commonwealth Constitution are very different to the words and context of the SIS amendments.

178 Further, I do not consider Re UEB Industries Ltd Pension Plan,[38] a cased relied upon by the Amicus, is of assistance. As I indicated in argument, in that case, it was the words in a new provision, not any power exercised under the new provision, that had the effect of contravening the relevant restriction on the power of amendment.

179 Finally, although it is not necessary to decide, I agree with the submission of APRA (and contrary to the submission of the Amicus), that the charging of fees to build up a reserve is conceptually distinct from a provision that would have the effect of exempting or indemnifying a trustee against such liabilities. In my view, this is the substance of what Kelly J was addressing in QSuper at [32]. When the trust deed contains a remuneration clause, a trustee is entitled to charge such a fee subject to the conditions in the relevant clause and the other obligations imposed on the trustee in relation to the fee to be charged. Once such a fee ceases to be a trust asset, the property is property of the trustee in its own right to do with as the trustee sees fit.

180 I have not found of assistance the cases relied upon by the Amicus for the proposition that indemnification may be effected through the establishment of a fund prior to a relevant liability being imposed.[39] The Amicus relied in particular on the dicta of Fletcher Moulton LJ in In Re Richardson that '[y]ou could in certain cases have a fund set aside in order that you might be indemnified, to avoid the necessity of your having to pay and then to sue for the money you had paid, which perhaps would not repair your loss and credit even if it discharged the debt.'[40]

181 In Re Richardson involved a dispute relating to a landlord and a lessee who held the lease on trust for his wife. As a result of that trust, the lessee had a right of indemnity in equity against his wife (the surety) for any amount owing to the landlord. The landlord sued the wife in its own name and, with the leave of the Court, in the name of the bankrupt lessee for outstanding rent at the expiration of the lease. The question was whether any monies recovered from the surety under the lessee's right of indemnity would be paid to the lessee's bankrupt estate or to the landlord. The Court of Appeal held that the landlord was entitled to retain the money on account of his debt.

182 The judgment of Cozens-Hardy MR (with whom Fletcher Moulton LJ agreed) noted that, in seeking to enforce an equitable right of indemnity, a Court of Chancery might order a fund to be set apart by the surety/indemnifier to meet the liability of the principal debtor 'as and when it arose ... [s]o that ... it was not necessary for the person entitled to the indemnity to be ruined by having to pay the full amount in the first instance'.[41] However, the fund set apart was never the property of the person entitled to be indemnified at least until the relevant liability arose. Fletcher Moulton LJ agreed, emphasising that equity did not ever compel 'a surety to pay money to the person to whom he was surety [what I have called the principal debtor] before the latter had actually paid'.[42]

183 In Rankin, the plaintiff (who was the agent of the defendant, an undisclosed principal) received money from third parties and paid the money on to the defendant/principal. However, the money was paid on a consideration that failed. The third parties called upon the plaintiff to repay the money. The plaintiff then called upon the right of indemnity as against the defendant principal. By that time the plaintiff was bankrupt. The right of indemnity was not in dispute. The question was whether money should be paid by the defendant/principal to the bankrupt plaintiff or to the third parties directly. The High Court held that the plaintiff in these circumstances was not entitled to an order that the defendant principal should pay the money to him. In doing so, Griffith CJ approved the dicta of Fletcher Moulton LJ in In Re Richardson.

184 The situation in which equity might intervene to set up a fund in support of an indemnity, as discussed in In Re Richardson, is very different from the facts before me. In this case, the plaintiff intends to charge a fee to build the Trustee Reserve to meet statutory liabilities for which it cannot be indemnified. Upon payment of the fee, the amount of the fee ceases to be an asset of the Fund and becomes the property of the plaintiff. In my view, that is conceptually different from an indemnity and the circumstances in which equity might intervene in support of the indemnity to set apart a fund, as discussed in In Re Richardson.

8.7.2 The proposed fee does not contravene cl 2.6 of the Trust Deed

185 The second issue is whether the exercise of the power under the remuneration clause to charge a fee is inconsistent with cl 2.6(a)(iii) and cl 2.6(d)(iii) of the Trust Deed.

186 I have set out those clauses above. Most relevantly, cl 2.6(d)(iii) provides that the trustee, its directors and officers shall not be indemnified out of the Fund for any money penalty in respect of a civil penalty order under the Relevant Law. Based upon my conclusion that charging a fee to build up a reserve is conceptually different from an indemnity as set out in [179]-[184] above, I do not consider that charging the proposed fee under the remuneration clause is inconsistent with cl 2.6(d)(iii). This is because, once the fee is paid, it ceases to be an asset of the Fund and becomes the property of the plaintiff to do with as the plaintiff sees fit.

187 Clause 2.6(a)(iii) does not impose any restriction on the plaintiff's right of indemnity. It relevantly provides that the trustee, its directors and officers shall not be liable for any act or omission except if that person incurs a monetary penalty in respect of a civil penalty order under the Relevant Law. In my view, the language of that clause does not operate to prevent the charging of the fee to build up a reserve to meet any such liability in circumstances where the fee, once paid, becomes the property of the plaintiff. As a consequence, I do not consider the proposed fee is in any way inconsistent with this clause.

188 As noted above, the Amicus submitted that the amount of the fee determination was made solely having regard to the risk of a statutory liability and not including by reference to that risk. As a result, the Amicus submitted that the fee determination was beyond the power conferred by the remuneration clause, not being fair and reasonable and/or referable to any services provided to the Fund or the administration or operation of the Fund as required by the remuneration clause and/or s 29V of the SIS Act.

189 As to the meaning of 'fair and reasonable', the Amicus relied upon the confidential advice of senior counsel for the plaintiff dated 10 May 2021, and to decisions under legislation allowing the trustee of a deceased estate to take a percentage commission which is 'just and reasonable'[43] and for the 'fair and reasonable' remuneration of an administrator and provisional liquidator under the Corporations Law.[44]

190 As set out above, the Amicus also raised concerns about the propriety of the fee determination and, in particular, whether the plaintiff had complied with the best financial interests covenant and the diligence covenant. This was quite separate from the submissions of the Amicus that the sole purpose of the fee proposal and fee determination was to obtain an indemnity for any statutory penalty which might be imposed.

191 Based on the review of the evidence of the plaintiff set out in section 8.6 above, it appears that the assessment of the amount of the fee determination was made having regard only to the risk of a statutory liability and not having regard to other matters. This is because the fee determination was based upon the PwC Framework, which assessed the potential target amount and range of capital that may be required to meet the statutory liabilities which may be imposed in light of the SIS amendments. As noted above, in the Management Recommendation which the Board adopted on 10 November 2021:

(1) the target range and the target amount were calculated by reference to the capital requirements to meet the risk of statutory liabilities in light of the SIS amendments based on the PwC Framework; and

(2) there is no mention of any other factor relevant to determining the fee determination other than the target amount required for the Trustee Reserve (plus tax and GST payable on that target amount in the hands of the plaintiff) and the consequential risk of insolvency of the plaintiff.

192 However, the Board resolution did refer to, it would seem as a comparator, the fees proposed to be charged by Hostplus and the possible fees to be charged by other RSEs in an apparent response to the SIS amendments.

193 In light of this evidence, it would appear that there is a real basis for the concerns of the Amicus as to the power of the plaintiff to make the fee determination and its propriety in doing so. This is notwithstanding the submission of the plaintiff that it was implicit in the Board resolution and associated Board papers that the fee determination covered all services involved in operating and administering the Fund, which has grown increasingly onerous, including the high degree of responsibility under its AFS and RSE licences.

194 Nevertheless, it is unnecessary for me to reach any conclusions in relation to these matters. This is because, in my view, the evidence as to the basis upon which the fee determination was reached is relevant to another issue, namely whether in the exercise of my discretion I should provide the judicial advice sought.

195 As noted in section 3 above, in my view, the Court will not exercise its discretion to provide advice unless the evidence disclosed that the trustee had resolved to, or intends to, act in accordance with that advice. Otherwise the judicial advice would have no utility and/or would provide no relevant protection to the trustee.

196 In this case, on the evidence before me set out in section 8.6, I am not satisfied to the requisite degree of satisfaction that the fee determination has been determined by the plaintiff by reference to, among other things, the risk that the plaintiff might incur a statutory liability. Rather, consistent with my conclusion in [191], it appears that the assessment of the amount of the fee determination was made having regard only to the risk of a statutory liability and not having regard to other matters. This is based for the most part on the Board resolution and associated Board papers. Thus, on the evidence before me, the plaintiff has not satisfied me that it has acted or intends to act in accordance with the judicial advice sought.

197 I have given much thought as to whether I should decline, in the exercise of my discretion, to give the judicial advice sought on this basis. This is in light of the importance of the SIS amendments to trustees such as the plaintiff and the urgency as a result of their implementation on 1 January 2022.

198 As the parties will be aware, at the commencement of the oral argument in relation to the third issue, I indicated to counsel that I considered that the judicial advice sought was appropriate but that I was concerned that the plaintiff's evidence, in particular the Board resolution, appeared inconsistent with the judicial advice sought. This was in the context where, at the first mention in this proceeding before me on 16 November 2021, I referred to the fee determination resolution, which was expressed to be 'subject to Judicial Advice from the Supreme Court of Victoria'. I was informed by counsel that, notwithstanding the express terms of the fee determination resolution, the plaintiff did not intend to amend the nature of the judicial advice sought.

199 At the time, senior counsel for the plaintiff suggested that the form of the fee determination resolution may have been a result of an oversight in the drafting. Counsel referred me to the paragraphs of the first Lander affidavit summarised at [157] above which was affirmed before the Board resolution. I am unable to determine if the fee determination resolution was a result of an oversight in the drafting. Regardless, I refer to my finding in [196] above to the effect that I am not satisfied to the requisite degree of satisfaction that the fee determination has been determined by the plaintiff by reference to, among other things, the risk that the plaintiff might incur statutory liabilities in light of the Board resolution and associated Board papers.

200 In these circumstances, it has not been adequately explained to me in the course of the hearings as to the reason for the disconformity between the judicial advice sought and the evidence concerning the way in which the fee determination was reached as evidenced by the Board resolution and associated Board papers. Moreover, it has not been explained to me what utility there would be in giving the advice sought in light of the Board resolution and, in particular, the fee determination resolution.[45] Of course, I accept that my reasons for judgment might assist the plaintiff. In this regard, I have attempted to provide some assistance on the legal issues set out in sections 8.7.1 and 8.7.2 above in light of the issues canvassed before me. However, that does not mean that it is appropriate to give the judicial advice sought.

201 I am very conscious of the practical effects of not giving the advice sought. This is in a context where I accept the risks to which the plaintiff is exposed by reason of the SIS amendments set out in section 8.4 above and the consequential problems faced by the plaintiff set out in section 8.5 above.

202 Nevertheless, in light of the disconformity between the judicial advice sought and the evidence before me in this application in relation to the fee determination, I decline to exercise my discretion to provide the judicial advice sought. In my view, providing the advice sought would have no utility in light of the Board resolution and would provide no protection to the plaintiff.

203 Further, I do not think it is necessary or appropriate to address further the matters which the plaintiff should take into account in exercising its power to charge a fee under the remuneration clause. It suffices to say that I consider the written and oral submissions of APRA and the Amicus will very much assist the plaintiff and its advisers in this regard.

204 In light of these reasons, I will hear from the parties as to the form of order to be made and in relation to the costs of this proceeding.

[1] Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, 86 [45] ('Macedonian Orthodox Community Church').

[2] Re Centro Retail Australia Ltd (2012) 35 VR 512, [13]-[14].

[3] Macedonian Orthodox Community Church (n 1) 89-90 [58]. See, also, Morris v Smoel [2013] VSCA 11, [22] (Maxwell P, Whelan JA agreeing) ('Morris').

[4] Crnjanin v Loos [2010] NSWSC 750, [28] (Lindgren AJ), adopted by Lindsay J in Re Estate Late Chow Cho-Poon [2013] NSWSC 844, [40].

[5] Beck v Henley [2014] NSWCA 201, [90] (Leeming JA, Beazley P and Sackville AJA agreeing) ('Beck').

[6] See, for example, Longboat Holdings Groupno3 v Zacole Pty Ltd [2021] VSC 280, [76] c.f. Re AGW Funds Management Limited [2017] VSC 124, [24] (Sifris J).

[7] Beck (n 5) [90] (Beazley P and Sackville AJA agreeing).

[8] Macedonian Orthodox Community Church (n 1) 94 [71] (Gummow A-CJ, Kirby, Hayne and Heydon JJ).

[10] Longboat Holdings Groupno3 v Zacole Pty Ltd [2021] VSC 280, [58]-[60].

[11] See, for example, In the application of NSW Trustee & Guardian [2014] NSWSC 423, [26] (Kunc J).

[12] See, for example, Re Butler; Kenny v Butler [2021] VSC 350, [10].

[13] [2000] NSWSC 922; (2000) 158 FLR 121.

[18] Australian Services Union, Business NSW (formerly New South Wales Business Chamber), Unions NSW and the Victorian Chamber of Commerce and Industry (formerly the Victoria Employers' Chamber of Commerce and Industry), each of whom has previously exercised a power to nominate a director to the Board of the plaintiff.

[20] In these reasons, I will refer to this covenant as the diligence covenant.

[21] In these reasons, I will refer to this covenant as the best financial interests covenant.

[22] [1906] HCA 1; (1906) 4 CLR 835 ('McLean').

[24] Ibid. See also Dawson v Westpac Banking Corporation [1991] HCA 52; (1991) 104 ALR 295, 99-100 where the majority of the High Court relied upon Mclean to apply the presumption to find that a registration of change of name, which was based on the efficacy of a special resolution, justified a finding that a board meeting was held and that the resolution was passed.

[25] The ASIC historical search also records that the name of the plaintiff was subsequently changed to Care Super Pty Ltd on 13 March 2003. I note in passing that the ASIC historical extract records the details of the 'Subclass' of the plaintiff as a 'Superannuation Trustee Proprietary Company'.

[26] [2021] QSC 276.

[27] Relevantly s 29V(2) of the SIS Act defines an administration fee which can be charged as a fee that 'relates to the administration or operation of a superannuation entity'.

[28] APRA did address these issues of 'power'.

[29] The Relevant Law is defined in cl 1.2 of the Trust Deed to include the SIS Act, the Superannuation Industry (Supervision) Regulations 1994 (Cth), the Corporations Act and Corporations Regulations 2001 (Cth), the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) and other Commonwealth statutes under which civil penalties and fines may be imposed.

[30] I note that pursuant to s 220A(1) of the SIS Act it is presumed that the trustee did not perform the trustee's duties and exercise the trustee's power in the best financial interests of the beneficiaries unless the trustee adduces evidence to the contrary.

[31] Australian Securities and Investments Commission v Westpac Securities Administration Ltd [2021] FCA 1008.

[32] Australian Securities and Investments Commission v Colonial First State Investments Ltd [2021] FCA 1268.

[37] Momcilovic v The Queen (2011) 245 CLR 1, 82 [141] relying upon Butler v Attorney-General (Vic) [1961] HCA 32; (1961) 106 CLR 268.

[38] [1992] 1 NZLR 294.

[39] In Re Richardson [1911] UKLawRpKQB 85; (1911) 2 KB 705 ('In Re Richardson') and Rankin v Palmer [1912] HCA 95; (1912) 16 CLR 285 (Griffith CJ, Barton and Isaacs JJ agreeing) ('Rankin').

[40] In re Richardson (n 39) 713, quoted with approval in Rankin (n 39) 290-1 (Griffith CJ, Barton and Isaacs JJ agreeing).

[43] Re White: Tweedie v Attorney-General [2003] VSC 433; (2003) 7 VR 219.

[44] Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96.

[45] I note that counsel for APRA suggested during the hearing possible amendments to the judicial advice sought in light of my concerns but no amendments were sought by the plaintiff.