Resolution Life Australasia Limited v AMP Limited; Munich Reinsurance Company of Australasia Limited v AMP Limited

Catchwords

[2005] HCA 26 Bakewell v Anchorage Capital Master Offshore Ltd [2019] NSWCA 199(2019) 372 ALR 349 Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434 BHP Group Limited v Impiombato (2021) 286 FCR 625[2021] FCAFC 93Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215[1982] HCA 70 Davis v Commonwealth (1986) 61 ALJR 32[1986] HCA 66 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125[1964] HCA 69 GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32(2023) 97 ALJR 857 Henville v Walker (2001) 206 CLR 459[2001] HCA 52 HNOE Limited v Angus & Julia Stone Pty Ltd [2024] NSWCA 271 House v The King (1936) 55 CLR 499[1936] HCA 40 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109[2002] HCA 41 Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920(2008) 252 ALR 41 Impiombato v BHP Group Limited (No 2) [2020] FCA 1720 Johnson Tiles Pty Ltd v Esso Australia (No 2) (2000) 97 FCR 175[2000] FCA 12 Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) FCA 557(1991) 217 ALR 171 Marks v GIO Australia Holdings Limited (1998) 196 CLR 494

Judgment (33 paragraphs)

[1]

rage Capital Master Offshore Ltd [2019] NSWCA 199; (2019) 372 ALR 349 Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434 BHP Group Limited v Impiombato (2021) 286 FCR 625; [2021] FCAFC 93; Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215; [1987] FCA 122 Clarke v State of New South Wales [2015] NSWCA 27 Dank v Cronulla-Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70 Davis v Commonwealth (1986) 61 ALJR 32; [1986] HCA 66 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857 Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 HNOE Limited v Angus & Julia Stone Pty Ltd [2024] NSWCA 271 House v The King (1936) 55 CLR 499; [1936] HCA 40 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920; (2008) 252 ALR 41 Impiombato v BHP Group Limited (No 2) [2020] FCA 1720 Johnson Tiles Pty Ltd v Esso Australia (No 2) (2000) 97 FCR 175; [2000] FCA 12 Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) FCA 557; (1991) 217 ALR 171 Marks v GIO Australia Holdings Limited (1998) 196 CLR 494; [1998] HCA 69 McKellar v Container Terminal Management Services Ltd [1999] FCA 1101; (1999) 165 ALR 409 Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 Munich Reinsurance Company of Australasia Ltd v AMP Limited [2024] NSWSC 950 Mutual Life & Citizens' Assurance Company Ltd v Evatt (1970) 122 CLR 628 PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 Resolution Life Australasia Pty Ltd v NM Superannuation Pty Ltd [2023] NSWCA 138 Productivity Partners Pty Ltd v Australian Competition and Consumer Commission [2024] HCA 27; (2024) 98 ALJR 1021 RSD Chartered Accountants v Bolitho [2014] VSCA 186; (2014) 102 ACSR 528 Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 Shelton v NRMA Limited [2004] FCA 1393; (2004) 51 ACSR 278 Shimshon v MLC Nominees Pty Ltd (2021) 66 VR 277; [2021] VSCA 363 SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 The Owners - Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301 Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 Wardley Australia Limited v Western Australia (1992) 175 CLR 514; [1992] HCA 25 Wickstead v Browne (1992) 30 NSWLR 1; [1992] NSWCA 272 Wickstead v Browne (HCA, 30 April 1993, unreported); (1993) 10 Legal Rep SL 2 Category: Principal judgment Parties: 2024/318377

[2]

Resolution Life Australasia Limited (Appellant) AMP Limited (First respondent) AMP Services Limited (Second respondent) AWM Services Pty Ltd (Third respondent) AMP Superannuation Pty Limited (Fourth respondent) N M Superannuation Pty Ltd (Fifth respondent) Munich Reinsurance Company of Australasia Limited (Sixth respondent)

[3]

Munich Reinsurance Company of Australasia Limited (Appellant) AMP Limited (First respondent) Resolution Life Australasia Limited (Second respondent) AMP Services Limited (Third respondent) AWM Services Pty Ltd (Fourth respondent) AMP Superannuation Pty Limited (Fifth respondent) N M Superannuation Pty Ltd (Sixth respondent) Representation: 2024/318377

[4]

Counsel: J Stoljar SC / E Doyle-Markwick (Appellant) A Munro SC / K Sharma (First, Second, Third, Fourth, Fifth respondents) D L Williams SC / N Riordan (Sixth respondent)

[5]

Solicitors: Allens (Appellant) King & Wood Mallesons (First, Second, Third, Fourth, Fifth respondents) Sparke Helmore Lawyers (Sixth respondent)

[6]

Counsel: D L Williams SC / N Riordan (Appellant) A Munro SC / K Sharma (First, Third, Fourth, Fifth, Sixth respondents) J Stoljar SC / E Doyle-Markwick (Second respondent)

[7]

Solicitors: Sparke Helmore Lawyers (Appellant) King & Wood Mallesons (First, Third, Fourth, Fifth, Sixth respondents) Allens (Second respondent) File Number(s): 2024/318377; 2024/322184 Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2024] NSWSC 950 Date of Decision: 5 August 2024 Before: Ball J File Number(s): 2024/313610

[8]

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

[9]

HEADNOTE [This headnote is not to be read as part of the judgment] These matters concern a pleading dispute about claims for statutory relief against the trustee of a superannuation fund under s 55(3) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). The applicants, Resolution Life Australasia Limited (RLA) and Munich Reinsurance Company of Australasia Limited (Munich), seek leave to appeal from a decision of the primary judge to strike out part of RLA's amended cross-claim which contained a claim for relief under s 55(3) of the SIS Act against NM Superannuation Pty Ltd (NM Super), the trustee of the AMP Superannuation Fund, and to refuse Munich's application for leave to file a further amended statement of claim insofar as it included the equivalent claim for relief against NM Super. Munich as reinsurer and RLA as reinsured were parties to a quota share reinsurance treaty (Treaty) which reinsured certain life insurance benefits under policies issued by RLA that were held by AMP Superannuation Pty Ltd and later, NM Super, through a series of overarching contracts known as Master policies. NM Super gave notice to RLA of its intention to terminate or cancel (or bring about the cancellation of) the insurance benefits under the Master policies, and appointed another party as the new default insurance provider. In the underlying proceedings, Munich pleaded various common law and statutory causes of action against five AMP defendants and RLA. RLA brought an amended cross-claim against NM Super alleging that certain statutory covenants and contractual covenants in the governing rules of the AMP Superannuation Fund precluded NM Super as trustee of the Fund from taking the course that it did, being to unilaterally cease paying premiums and terminate the life insurance cover for members, without their instructions. It was alleged that this conduct, which was in breach of NM Super's statutory and contractual covenants and in contravention of the SIS Act, ss 54B(1) and 54C(1), caused loss to RLA in the form of premiums that would no longer be paid to RLA under the cancelled life policies, and that this is recoverable by RLA from NM Super as loss or damage under s 55(3) of the SIS Act. Munich applied for leave to include the equivalent claim in its statement of claim for alleged losses under the Treaty. Section 55(3) is in the following terms: (3) Subject to subsection (4A), a person who suffers loss or damage as a result of conduct of another person that was engaged in in contravention of subsection 54B(1), 54B(2) or 54C(1) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. The primary judge concluded that the pleadings by RLA and Munich assert a conclusion about causation between the alleged conduct of NM Super in contravention of the trustee's covenants in the SIS Act and the losses claimed by RLA and Munich which is not arguable on the pleaded facts. The stated premise of that conclusion was that s 55(3) of the SIS Act is to be read as a compound provision which required a causal connection between the contravening conduct and the loss or damage, not simply between conduct and loss or damage where the same conduct amounted to breach of one or more of the trustee's covenants. The Court (per Gleeson JA, Bell CJ and Mitchelmore JA agreeing) granted leave to appeal and allowed the appeal in each matter, holding: As to leave:

[10]

Judgment

BELL CJ: I agree with the reasons of, and orders proposed by, Gleeson JA.
GLEESON JA: These applications concern a pleading dispute about claims for statutory relief against the trustee of a superannuation fund under s 55(3) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act).
By way of overview, s 55(3) is contained in Pt 6 of the SIS Act. The stated object of Pt 6 is to set out rules about the content of the governing rules of superannuation entities (s 51). Part 6, relevantly, specifies certain covenants by a trustee of a registrable superannuation entity (s 52(2)), deems those covenants to be included in the governing rules of a registrable superannuation entity, if the governing rules do not contain covenants to that effect (s 52(1)), imposes statutory obligations on trustees to comply with those covenants (s 54B(1)) and the governing rules generally (s 54C(1)), and provides a remedy for a person who suffers loss or damage as a result of the trustee's failure to comply with those covenants (s 55(3)).
The applicants, Resolution Life Australasia Limited (RLA) and Munich Reinsurance Company of Australasia Limited (Munich), seek leave to appeal from a judgment of Ball J delivered on 5 August 2024 in the Commercial List of the Equity Division: Munich Reinsurance Company of Australasia Ltd v AMP Limited [2024] NSWSC 950. By that judgment his Honour struck out part of RLA's amended cross-claim which contained a claim for relief under s 55(3) of the SIS Act against NM Superannuation Pty Ltd (NM Super), the trustee of the AMP Superannuation Fund, and refused Munich's application for leave to file a further amended statement of claim insofar as it included the equivalent claim for relief against NM Super. His Honour concluded that the pleadings by RLA and Munich assert a conclusion about causation between the alleged conduct of NM Super in contravention of the trustee's covenants in the SIS Act and the losses claimed by RLA and Munich which is not arguable on the pleaded facts.
Leave to appeal is required because the orders are interlocutory: Supreme Court Act 1970 (NSW), s 101(2)(e). Argument on the appeals was heard concurrently with argument on the applications for leave to appeal.
In my view, his Honour erred in striking out (and not permitting) the claims against NM Super under the SIS Act. There should be a grant of leave to appeal in each matter and the appeals should be allowed. My reasons are as follows.

[11]

Nature of the case

In the underlying proceedings, Munich brought claims against AMP Limited, AMP Services Ltd, AMP Services Pty Ltd, AMP Superannuation Pty Ltd (AMP Super) and NM Super (together, the AMP defendants) and RLA arising from a Quota Share Reinsurance Treaty (Treaty) between Munich, as reinsurer, and RLA, as reinsured, entered into on 27 October 2016 and amended in November 2016 and April 2017. The Treaty reinsured certain life insurance benefits under policies issued by RLA that were held by AMP Super and later, NM Super, through a series of overarching contracts known as Master policies. Up until about 15 May 2020, AMP Super was the trustee of the AMP Superannuation Savings Trust. On about 15 May 2020, there was a successor fund transfer of members of the AMP Superannuation Savings Trust and the assets supporting their benefits, by AMP Super to NM Super as trustee of the Super Directions Fund, which is now known as the AMP Superannuation Fund.
The Treaty required a significant upfront payment by Munich. Commencing on 1 November 2016, Munich paid sums to RLA totalling $551 million for the business reinsured. In November 2017, when the Treaty was amended to increase the level of reinsurance that the business covered from a quota share of 50 per cent to 60 per cent, Munich paid RLA a further upfront commission of $145 million. Munich alleges that the payment of upfront commission reflected its expectation as to the longevity of the relationship, but that did not occur. Rather, between 2018 and June 2022, AMP Limited divested itself of its interest in RLA, which was known as AMP Life Limited until 18 November 2022.
In August 2022 NM Super commenced a process of tendering the business falling under the Master policies and reinsured by the Treaty, by inviting life insurers to provide proposals for insurance of members of the AMP Superannuation Fund. RLA was unsuccessful in separate proceedings at first instance and on appeal in seeking to restrain NM Super from terminating the Master policies, or from procuring the replacement of RLA as insurer: Resolution Life Australasia Ltd v NM Superannuation Pty Ltd [2023] NSWCA 138.
In January 2024 NM Super gave notice to RLA of its intention to terminate or cancel (or bring about the cancellation of) the insurance benefits under the Master policies. NM Super also gave notice that TAL Life Limited (TAL) was the successful tenderer and stated in a public announcement that "AMP appoints TAL as new default insurance provider". RLA has since accepted the alleged repudiation of the Master policies and it is common ground that they have been terminated.

[12]

The motions

Munich applied by motion for leave to file a further amended statement of claim to relevantly include a s 55(3) claim against NM Super. Munich relied on the amendment power, relevantly, in s 64(1)(b) of the Civil Procedure Act 2005 (NSW), which provides that the Court may order that leave be granted to a party to amend any document in the proceedings, at any stage of the proceedings.
The power of the Court to grant or refuse leave to amend a pleading must be exercised in the way that best promotes the Court's overarching purpose to facilitate the just, quick and cheap resolution of the real issues in the proceedings, as efficiently as possible, and in accordance with the dictates of justice: Civil Procedure Act, ss 64(2), 58(1)(ii)(a). As summarised at [s.64.10] of Ritchie's Uniform Civil Procedure 2005 (NSW), the proposed amendment must be proper both as to substance and form, and not liable to be struck out if it appeared in an original pleading: Alamdo Holdings Pty Ltd v Australian Window Furnishings (NSW) Pty Ltd [2006] NSWSC 1073 at [10]-[11] (Barrett J).
The AMP defendants applied by motion to summarily dismiss or strike out that part of RLA's amended cross-claim against NM Super which sought relief under s 55(3) of the SIS Act, and opposed Munich's application for leave to file a further amended statement of claim insofar as it included a claim for the equivalent statutory relief against NM Super (together the "SIS Act claims").
The AMP defendants relied on r 13.4(1)(b) or r 14.28(1)(a) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Rule 13.4(1)(b) provides that, where no reasonable cause of action is disclosed, the Court may order that the proceedings generally or in relation to any claim in the proceedings be dismissed. The power to strike out a proceeding is an extreme one and will only be exercised in rare circumstances where the Court is satisfied that the plaintiff's case clearly has no real prospects of success: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130 (Barwick CJ); [1964] HCA 69.
Rule 14.28(1)(a) provides that, where a pleading discloses no reasonable cause of action, the Court may order that it be struck out. The power to strike out a pleading or part of a pleading should only be exercised in a "plain and obvious case": Davis v Commonwealth (1986) 61 ALJR 32 at 35 (Gibbs CJ); [1986] HCA 66.

[13]

The statutory regime

The covenants specified in s 52(2) of the SIS Act to be included in the governing rules of a registrable superannuation entity, relevantly, include: 52 Covenants to be included in governing rules - registrable superannuation entities … General covenants (2) The covenants referred to in subsection (1) include the following covenants by each trustee of 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; (c) to perform the trustee's duties and exercise the trustee's powers in the best financial interests of the beneficiaries; … (e) to act fairly in dealing with classes of beneficiaries within the entity; (f) to act fairly in dealing with beneficiaries within a class; …
The statutory obligations of a trustee to comply with those covenants and the governing rules of a superannuation entity are contained in ss 54B(1) and 54C(1), which provide: 54B Civil and criminal consequences for contravening sections 52 and 52A covenants Section 52 covenants (1) A person must not contravene a covenant that: (a) is to the effect of a covenant set out in section 52; and (b) is contained, or taken to be contained, in the governing rules of a superannuation entity. … 54C Other covenants must not be contravened (1) A person must not contravene any other covenant contained, or taken to be contained, in the governing rules of a superannuation entity. …
Section 55(3) provides: 55 Recovering loss or damage for contravention of covenant Breach of covenant may result in action to recover loss or damage (3) Subject to subsection (4A), a person who suffers loss or damage as a result of conduct of another person that was engaged in in contravention of subsection 54B(1), 54B(2) or 54C(1) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. …
It is not in issue that the purpose of the trustee's covenants is to provide protection to the members of a superannuation fund. That is plain from (i) the stated object of Pt 6 of the SIS Act (s 51), (ii) the effect of s 52(1) which ensures that where the governing rules of a superannuation entity do not contain covenants to the effect set out in s 52(2), the governing rules are taken to contain covenants to that effect, and (iii) the effect of s 55(3) which enables members to sue for loss or damage in certain circumstances where a covenant has been breached: see Explanatory Memorandum to the Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Bill 2012, par 1.140.

[14]

The pleaded claims

For the purpose of the motions before his Honour and the proposed appeals to this Court, the material facts relied upon by Munich and RLA are to be taken to be established.
RLA: In summary, the amended cross-claim alleges that: 1. the product disclosure statements (PDS) and insurance fact sheets (IFS) issued to members of what is now known as the AMP Superannuation Fund set out the terms of the cover provided to members and did not provide for NM Super to cancel unilaterally a member's insurance cover: to the contrary, the PDS and IFS contained covenants by the trustee to the effect that insurance cover would be provided under a policy issued by RLA (the Insurer Covenant), that premiums for that insurance would be deducted from the member's account (the Premium Payment Covenant), and the insurance would continue until (relevantly) the member cancelled it (the Cover Covenant) (pars 28-31); 2. these contractual covenants are part of the governing rules of the AMP Superannuation Fund (par 32); 3. the relevant conduct of NM Super was, in broad terms, (i) issuing notices to RLA which purported to terminate or otherwise cease coverage under (including by way of the cessation of premium payments) the life policies issued by RLA, with the effect of cancelling insurance cover for members of the Fund en masse, without those members' instructions, and (ii) appointing TAL to replace RLA as the member's life insurer, without the relevant members' instructions (pars 69, 73-75, 77, 79-80); 4. that conduct breached the statutory covenants prescribed by the SIS Act in s 52(2), relevantly, the skill and care covenant, the best financial interests covenant, and the fairness covenants (pars 76, 78, 81), and/or one or more of the contractual covenants otherwise forming part of the governing rules of the AMP Superannuation Fund (par 69), and was in contravention of ss 54B(1) and/or 54C(1) of the SIS Act (pars 70, 81); 5. by reason of the matters alleged in par 70 (being the pleaded conduct of NM Super in contravention of the contractual covenants), RLA has suffered loss defined as the "RLA Loss" (see [24(7)] below) "as a result of" the conduct of NM Super in contravention of s 54C(1) of the SIS Act (par 84); 6. by reason of the matters alleged in pars 76, 78 and 81 (being the pleaded conduct of NM Super in contravention of the statutory covenants), RLA has suffered the RLA Loss "as a result of" the conduct of NM Super in contravention of s 54B(1) of the SIS Act (par 85); and 7. the "RLA Loss" is particularised under par 82 as: … the net present value of net premium income (gross premium income less claims paid and claims expenses) from 1 April 2024 in respect of the AMP Super Fund Retail Members and De-Linked Members, whose cover with RLA was wrongfully ceased, insured by TAL rather than RLA; …

[15]

The argument below on the motions

The essential issue debated on the motions was the objection by the AMP defendants that RLA and Munich lacked standing to seek relief under s 55(3) of the SIS Act for two interrelated reasons. These were: (1) the words "a person" in s 55(3) should be read down not to include third parties, such as Munich and RLA, because they did not have the benefit of the trustee's covenants the subject of ss 54B(1) and 54C(1) of the SIS Act, and (2) causation of loss could not be established because Munich and RLA were not a person who had "the benefit of those covenants".
For the purpose of the motions, the AMP defendants accepted that Munich and RLA "will be able to show a factual connection between the alleged loss and the conduct said to contravene the trustee covenants", but submitted that NM Super's conduct could not be a legal cause of the alleged losses because: 45. … under s 55(3) of the SIS Act, relief is available where someone who has the benefit of a covenant (usually a beneficiary) suffers loss and damage as a result of a breach of the covenant. Even assuming that all the material facts pleaded in support of the claim are established, Munich and RLA cannot be said to have suffered loss as a result of such a breach.
In oral argument, senior counsel for the AMP defendants put this causation argument as follows: … whilst it might be the case that the loss that's alleged to have been suffered by MRA or RLA is in some way factually linked to the factual matters that were the subject of the contravention, it's not the contravention itself that caused the loss. It's not now, it's not ever going to be the case, because the contravention only relates to a breach of the obligations that are [owed] pursuant to the covenants, owed to the beneficiaries, and they're not obligations owed to MRA or RLA. … … We say that in order to obtain relief, the person must be capable of suffering loss by reason of a contravention of the covenant, being something they stood to benefit from. Otherwise the relief is divorced from the contravention itself, which we say on the proper construction, particularly when one is looking at statutory causation, is the wrong approach. (Emphasis added)
Both Munich and RLA accepted before his Honour that s 55(3) contains a causal requirement:

[16]

Munich 43. … The adoption of the words "a person" in s 55(3) are sufficiently broad to encompass claimants to whom no covenant was directly owed, provided they can establish that they have suffered loss or damage as a result of the contravention of those covenants. (Emphasis added.)

[17]

RLA 28. … Thus, the standing created is not for the public at large, but for a person whose loss has some rational and logical connection to the breach of covenant. That requirement will naturally restrict the class of persons who may potentially be a claimant. In a superannuation context, such a group will likely be self-selecting and proximate to the trustee/beneficiary relationship. In many cases, the persons in question will be the beneficiaries. … 32. RLA is no stranger to the trustee/beneficiary relationship in this case; rather, RLA was the insurer of the members pursuant to policies which RLA had issued to the trustee, NM Super. It does not offend the "commonsense" approach to causation to allow that RLA, in those circumstances, could sue for loss it has suffered by reason of the trustee's misconduct. (Citations omitted; emphasis added.)

[18]

The primary judge's reasons

His Honour rejected both limbs of the submission that Munich and RLA did not fit the standing requirement to seek relief under s 55(3) of the SIS Act. He found that it is at least reasonably arguable that s 55(3) should be construed broadly so that the reference to "a person" is read as a reference to any person, and that is not limited to a person who is entitled to the benefit of the covenants in s 52 of the SIS Act: at [26].
Nevertheless, his Honour concluded that it was appropriate to strike out (or not permit) the relevant paragraphs pleading the SIS Act claims on the ground in UCPR, r 14.28(1)(b) that the pleading of those claims has a tendency to cause prejudice, embarrassment or delay in the proceedings: at [34].
His Honour's reasoning involved two steps: first, a determination of the nature of the causal requirement in s 55(3) of the SIS Act; and second, whether the SIS Act claims contained pleaded facts that could arguably provide the required causal connection.
Causal requirement: His Honour found that s 55(3) is to be read as a compound provision which required a causal connection between the contravening conduct and the loss or damage, giving the following reasons: [27] However, in order to make out a claim under s 55(3) it is necessary for MRA and RLA to prove that they suffered loss relevantly as a result of conduct of NM Super that contravened one or more covenants to the effect of those set out in s 52 or were otherwise contained in or taken to be contained in the governing rules. That requirement is not satisfied simply by proving that (1) they suffered loss as a consequence of NM Super's conduct, and (2) that same conduct amounted to a breach of one or more of those covenants. Rather, what must be proved is a causal connection between the loss and damage and the contravention itself. [28] To put the point slightly differently, the words "conduct of another person that was engaged in in contravention of subsection 54B(1)" in s 55(3) must be read as a compound expression so that the required causal connection must be between not simply the conduct but conduct having a particular quality (that is, conduct that breaches the identified subsections). Any other interpretation seems to me to be untenable. It would mean that a person would be entitled to claim damages that were unconnected with the relevant contravention. In my view, it is plain that that is not what the legislature intended. The whole purpose of s 55(3) and its natural meaning is to give persons who have suffered a loss as a consequence of a breach of one or more of the covenants identified in s 55(3) by reference to ss 54B(1), 54B(2) and 54C(1) a right to recover that loss from a person who breached that covenant or those covenants. (Emphasis added)

[19]

Applications for leave to appeal

The orders by his Honour involve a decision on a matter of practice and procedure which requires appellate restraint: Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 at 177; [1981] HCA 39; PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 at [3]-[6] (Bell P and Simpson AJA). The AMP defendants oppose a grant of leave, primarily on this basis. They argue that as the decision involves the exercise of a discretion, the principle of restraint in House v The King (1936) 55 CLR 499 at 504-505; [1936] HCA 40 should also be applied.
This Court has frequently stated that it is generally only appropriate to grant leave to appeal concerning matters that involve issues of principle, questions of general public importance, or a reasonably clear injustice going beyond something that is merely arguable: see, for example, Secretary, Department of Family and Community Services v Smith (2017) 95 NSWLR 597; [2017] NSWCA 206 at [28].
Ultimately, the standard of appellate review does not impact upon my conclusion. Although this is a pleading dispute, it is an important one in proceedings involving existing claims for very substantial damages and the questions concerning the exercise of the strike out and amendment powers raise issues which may result in substantial injustice to Munich and RLA in depriving them of the opportunity of a trial at which their s 55(3) claims can be litigated. Contrary to the submission of the AMP defendants, it is no answer to the injustice caused by the decision to point to Munich and RLA not having made a further application for leave to amend their pleadings. That ignores the constraint on any such application given his Honour's decision. There should be a grant of leave in each matter.

[20]

Nature of the appeal

The parties diverged as to the standard of appellate review. Munich and RLA said that as the decision involves the proper construction of a statute, the "correctness" standard should be applied. Reference was made to The Owners - Strata Plan No 84674 v Pafburn Pty Ltd (2023) 113 NSWLR 105; [2023] NSWCA 301 at [22] (Basten AJA, Ward P and Adamson JA agreeing). As indicated, the AMP defendants said that, as the decision is discretionary, the constrained standard in House v The King applied. That standard requires that it be demonstrated that the decision maker: (a) made an error of legal principle, (b) made a material error of fact, (c) took into account some irrelevant matter, (d) failed to take into account, or gave insufficient weight to, some relevant matter, or (e) arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning. (See: Micallef v ICI Australia Operations Pty Ltd [2001] NSWCA 274 at [45].)
The standard of appellate review directs attention to the nature of the decision the subject of the appeal. In Pafburn, Basten AJA observed that in accordance with the reasoning of the High Court in GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857, the constrained standard in House v The King only applies where there is a range of answers which can be provided, rather than a binary outcome, as to which the "correctness" standard applies. And, even where there is a binary choice and the binary choice involves an evaluative judgment, the correctness standard applies: GLJ at [16] (Kiefel CJ, Gageler and Jagot JJ).
Pafburn involved a challenge to a decision dismissing an application to strike out a defence which depended on the relevant statutory provisions in the Design and Building Practitioners Act 2020 (NSW). In finding that the correctness standard applied, Basten AJA had regard to the nature of the decision, being the proper construction of a statute for which there is only one correct answer, explaining (at [23]): This was not a case involving a discretion with a possible range of outcomes: either the defence was struck out or it was not. It was also not a case involving an evaluative judgment: the question whether to strike out the defence depended on the proper construction of the relevant statutory provisions. Accordingly, there can be no doubt that the correctness standard applies.

[21]

Issues on appeal

The challenge by Munich and RLA to the primary judgment focussed on two issues: 1. the nature of the causal requirement in s 55(3) of the SIS Act; and 2. whether on the facts, as pleaded (or proposed) by RLA and Munich, there is an arguable causal connection between the conduct alleged to be in contravention of the SIS Act and the losses claimed by RLA and Munich.
Insofar as Munich separately challenged the adequacy of the reasons (ground 4), this complaint is misconceived. Plainly, his Honour's reasons stated the essential grounds on which the decision rested concerning the causal requirement in s 55(3) and his assessment of the sufficiency of the pleading of the causal connection in the SIS Act claims. The challenge based on the asserted inadequacy of the reasons must fail.
It is convenient next to address the alternative argument advanced by Munich and RLA concerning the pleadings, as in my view it is dispositive on the appeals.

[22]

Whether the pleadings contain an arguable causal connection

Munich and RLA said that, even assuming that s 55(3) requires a causal connection between the contravening conduct and the loss or damage, as his Honour found, the decision to strike out (or not permit) the pleading of the SIS Act claims is erroneous. They contend that the pleading of the SIS Act claims contains sufficient material facts establishing an arguable causal connection between the contravening conduct and the loss or damage: Munich, ground 1, and RLA, grounds 1(a) and 2.

[23]

The requirements for pleadings

The underlying proceedings were commenced by Munich by statement of claim filed in the Common Law Division, and subsequently transferred to the Commercial List of the Equity Division on 21 September 2023. Notwithstanding that Practice Note SC Eq - 3 applies to proceedings in the Commercial List, and pars 8, 9 and 12 of the Practice Note specify a nontraditional form of pleading, the Commercial List judge gave a direction on 29 September 2023 that the proceedings are to continue on pleadings.
The purpose of pleadings is to furnish a statement of the case sufficiently to allow the other party a fair opportunity to meet it, and to define the issues for decision in the litigation and thereby enable the relevant admissibility of evidence to be determined at the trial; thus ensuring procedural fairness in the conduct of the proceeding: Dare v Pulham (1982) 148 CLR 658 at 664; [1982] HCA 70.
Part 14 of the UCPR relates to pleadings. Without being exhaustive, a pleading must contain a summary statement of the material facts relied upon, must be as brief as the nature of the case allows, and must plead specifically any matter that, if not pleaded specifically, may take the other party by surprise (rr 14.7, 14.8 and 14.14). Under r 14.28(1)(b), the court may order at any stage of the proceedings that the whole or any part of a pleading be struck out where the pleading has a tendency to cause prejudice, embarrassment or delay in the proceedings.
A pleading may be embarrassing where it is susceptible to various meanings, or contains inconsistent allegations, or in which alternatives are confusingly intermixed, or in which irrelevant allegations are made that tend to increase expense: Shelton v NRMA Limited [2004] FCA 1393; (2004) 51 ACSR 278 at [18] (Tamberlin J). But this is not an exhaustive list.
A pleading may also be embarrassing if the pleading simply pleads a conclusion: Shelton v NRMA at [18], citing Bartlett v Swan Television & Radio Broadcasters Pty Ltd (1995) ATPR 41-434 (Carr J). Thus, a pleading of a conclusion drawn from unstated facts will be struck out. As Weinberg J said in McKellar v Container Terminal Management Services Ltd [1999] FCA 1101; (1999) 165 ALR 409 at [23]: A number of authorities support the proposition that a statement of claim must contain material facts, being the facts necessary for the purpose of formulating a complete cause of action, and that it is not sufficient simply to plead a conclusion drawn from unstated facts: see for example Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114-15 per Fisher J; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181; (1979) 40 FLR 242 at 246-7 per Northrop J; Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd [1999] FCA 142 at [7] per Kenny J. A statement of claim which simply repeats the language of a provision of the Act, and then baldly asserts a contravention of that provision, without more, will be struck out.

[24]

The pleaded causal connection

Accepting that loss or damage suffered as a result of contravening conduct is an element of the cause of action under s 55(3) of the SIS Act, the material facts establishing the necessary causal link should be pleaded.
In this case, pars 14.23 and 14.24 of Munich's proposed further amended statement of claim, and pars 84 and 85 of RLA's amended cross-claim, each plead a conclusion (see [24], [25] above), however, those paragraphs also plead material facts by incorporation of preceding paragraphs of the SIS Act claim.
In Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 222; [1987] FCA 122, French J said of the necessary material facts to establish the causal relationship between contravention and loss which is necessary to the cause of action under s 82 of the Trade Practices Act 1974 (Cth), that the pleaded "facts and circumstances should be set out leading to a reasonable inference that the conduct and the damage stood to each other in the relation of cause and effect".
And in Kernel Holdings Pty Ltd v Rothmans of Pall Mall (Australia) Pty Ltd (1991) FCA 557 at [7]; (1991) 217 ALR 171 at 173, French J said: I do not accept that the pleading of something which can be described as a conclusion cannot also be a pleading of a material fact. The real issue in a case where such an objection is raised is whether the facts are pleaded at too great a level of generality. …
These statements of French J direct attention to whether the SIS Act claims plead a conclusion drawn from unstated facts or are pleaded at too great a level of generality. That assessment needs to be undertaken in the context of the whole of the material facts pleaded by Munich and RLA. As the AMP defendants acknowledged before his Honour and in this Court, the pleaded material facts include: (a) the contractual covenants formed part of the governing rules of the AMP Superannuation Fund; (b) the trustee had breached the contractual covenants and the statutory covenants by issuing notices which purported to terminate or otherwise cease coverage under (including by way of the cessation of premium payments) the life policies issued by RLA, and appointing TAL to replace RLA as the member's insurer, resulting in contraventions of ss 54C(1) and/or 54B(1) of the SIS Act; and (c) Munich and RLA "will be able to show a factual connection between the alleged loss and the conduct said to contravene the trustee covenants".

[25]

Whether the losses would have occurred whether or not the conduct amounted to a breach of the covenants

Given the above conclusion, RLA's ground 2 does not strictly arise. However, I will indicate my views.
RLA contends that his Honour erred in finding that RLA's losses would have been sustained whether or not the trustee's conduct contravened the relevant provisions of the SIS Act, when there was no allegation or evidence of that fact. This ground is directed to his Honour's statement that "those losses would have occurred whether or not the conduct amounted to a breach of those provisions": at [31]. Munich advanced a similar submission in oral argument.
The parties diverged as to what his Honour meant by this statement. RLA said that if the "conduct" his Honour is referring to is the cancelling of insurance cover under Master policies issued by RLA to NM Super in respect of members, the factual basis for the statement is unstated and unclear. The AMP defendants respond that RLA's submission mischaracterised his Honour's statement. The AMP defendants said that his Honour found that the same loss would have ensued even if the trustee's conduct were not "characterised as a contravention of those obligations", and that there was no error in this analysis. I disagree.
First, it is difficult to conceive that, in making the statement, his Honour had in mind conduct of NM Super other than the cancelling of insurance cover under the Master policies.
Second, if the statement is to be understood, as the AMP defendants suggest, then it posed the wrong question, and his Honour erred in taking into account an irrelevant matter because if the same loss would have been suffered if the trustee's conduct was not "characterised as a contravention of those obligations", the pleaded SIS Act claims could not succeed for that reason. But that is not the basis on which the motions were to be approached: see [23] above. Rather, as the AMP defendants acknowledged for the purpose of the motions, the conduct of NM Super in cancelling the insurance cover for members under policies issued by RLA, without their instructions, is taken to be contravening conduct (see [61(b)] above).
Third, the characterisation of his Honour's statement suggested by the AMP defendants also suffers from the difficulty that it is not the counterfactual for the SIS Act claims which Munich and RLA seek to make.

[26]

The causal requirement in s 55(3) of the SIS Act

Given the above conclusions, the challenge to his Honour's finding on the construction question does not strictly arise. Nevertheless, as the matter has been argued, I will indicate my views.
In writing, Munich and RLA said of the causal requirement in s 55(3):

[27]

Munich 18. … The causal nexus must therefore exist between the conduct and the loss or damage suffered, rather than (as the primary judge held) between the contravention and the alleged loss or damage. Put another way, the causal element fixes upon the conduct of the person that has a particular character, i.e. amounting to a contravention of the statutory provisions. … 25. The primary judge ought to have concluded that it is at least arguable that the causative link to be established by a plaintiff is that between conduct of a particular character (i.e. engaged in in contravention of covenants) and the loss or damage. (Emphasis added.)

[28]

RLA 18. However the causation requirement in s 55(3) is satisfied by proving conduct which constitutes a breach of ss 54B(1) or 54C(1) and which causes a person loss: that is what the section provides. There is no reason to read an additional requirement into the plain words of s 55(3). The SIS Act is beneficial legislation and should be construed broadly. (Citation omitted, emphasis added.) but challenged his Honour's formulation of the causal requirement in s 55(3) on the basis that it involved an unnecessary additional requirement.

[29]

Whether loss or damage caused by the "contravention itself" is necessary under s 55(3)

Munich and RLA contend that his Honour departed from the language of s 55(3) because he discerned an "additional" requirement that the loss or damage be caused by "the contravention itself" (at [27]): Munich, ground 2, and RLA, ground 1(b). These grounds are directed to his Honour's statement (at [27]): … Rather, what must be proved is a causal connection between the loss and damage and the contravention itself. (Emphasis added.)
It is said that his Honour seems to be intending to draw a distinction between (a) conduct constituting a contravention, and (b) the "contravention itself", and if there be a distinction, the former is a fact or event, and the latter is a legal conclusion characterising that event. It is also said that if this distinction was intended, it is erroneous because a legal conclusion is incapable of causing loss.
This submission proceeds on a misreading of his Honour's reasons. The submission reads the reference to the "contravention itself" (at [27]) in isolation from the way in which his Honour expressed the causal requirement (at [28]). His Honour is not to be taken as suggesting an "additional" requirement in s 55(3). On a fair reading, the reference to the "contravention itself" is a shorthand expression referring to conduct constituting a contravention; here, conduct of NM Super which breaches ss 54B(1) and/or 54C(1) of the SIS Act. That is clear from his Honour's finding (at [28]) that the causal connection in s 55(3) must be between not simply the conduct and the alleged loss or damage, but rather a connection is required between conduct having the particular quality of breaching ss 54B(1) and/or 54C(1) and the alleged loss or damage.
The submission also ignores that his Honour's use of the expression "contravention" to describe conduct which contravenes a statutory norm is not unusual. The expression "contravention" has been often used that way by Courts: see, for example, Bond Corporation at 222 (French J); Marks v GIO Australia Holdings Limited (1998) 196 CLR 494; [1998] HCA 69 at [95] (Gummow J); Henville v Walker at [13] (Gleeson CJ); I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 at [57] (Gaudron, Gummow and Hayne JJ). The word "contravention" has also been used that way in legislation providing a remedy for breach of a statutory norm: see, for example, s 1317H of the Corporations Act 2001 (Cth), where reference is made to the requirement that "(b) the damage resulted from the contravention".

[30]

Whether s 55(3) should be read as a compound expression

In oral argument, Munich and RLA (which adopted Munich's submissions) went further and challenged his Honour's finding that s 55(3) "must" be read as a compound expression so that the causal requirement is between the contravening conduct and the loss or damage. It is said that his Honour erred in finding that any other interpretation is "untenable", because it is at least arguable that the text of s 55(3) should be read literally.
According to the submission, if the two matters identified by his Honour at [27] are proven, namely, (1) Munich and RLA suffered loss as a consequence of NM Super's conduct, and (2) that same conduct amounted to a breach of one or more of the trustee's covenants, there is at least an arguable case for causation under s 55(3). Although this literal construction of s 55(3) does not seem to have been raised in argument before his Honour, the AMP defendants did not object to the point being raised on appeal.
The causal requirement in s 55(3) raises a constructional choice. This directs attention to the text of the statute, whilst at the same time, having regard to its context and purpose: SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; [2017] HCA 34 at [14]. Further, where the norm is a statutory one, as in the present case, "notions of 'cause' … are to be understood by reference to the statutory subject, scope and purpose": Allianz Australia Insurance Limited v GSF Australia Pty Limited (2005) 221 CLR 568; [2005] HCA 26 at [99] (Gummow, Hayne and Heydon JJ). Gleeson CJ spoke to similar effect in Travel Compensation Fund v Tambree (2005) 224 CLR 627; [2005] HCA 69 at [30].
It has been said that a strike-out application which seeks to have the Court determine, at a preliminary stage, and without a full factual context, a complex and novel question of statutory construction, such as whether the losses claimed to have been suffered are within the contemplation of the relevant statutory provisions, faces a substantial hurdle: Impiombato v BHP Group Limited (No 2) [2020] FCA 1720 at [139]-[143], [149] (Moshinsky J), affirmed on appeal: BHP Group Limited v Impiombato (2021) 286 FCR 625 at [97]-[104]; [2021] FCAFC 93. I agree with that statement.
There is a further consideration in the present case. As Kirby P observed in Wickstead v Browne (1992) 30 NSWLR 1 at 5-6; [1992] NSWCA 272, common experience teaches that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are reduced and the suggested action can be judged with the full understanding of all the relevant evidence. And, as noted by Bell P (Macfarlan and White JJA agreeing) in Bakewell v Anchorage Capital Master Offshore Ltd [2019] NSWCA 199; (2019) 372 ALR 349 at [37], the observations of Kirby P were endorsed on appeal to the High Court by Deane, Toohey and Gaudron JJ in Wickstead v Browne (HCA, Deane, Toohey and Gaudron JJ, 30 April 1993, unreported); (1993) 10 Legal Rep SL 2.

[31]

Re-exercise of discretion

Rather than remit the strike-out and amendment applications, this Court should re-exercise the discretion. No different or further arguments were advanced by the AMP defendants on the appeal, other than the complaint that the SIS Act claims do not plead the counterfactual identified by the AMP defendants. As explained above that complaint is mistaken.
As to RLA's amended cross-claim against NM Super, the appropriate order is to set aside orders (1) and (2) made on 5 August 2024.
As to the amendments to Munich's further amended statement of claim, the appropriate order is to set aside order (3) made on 5 August 2024. Leave should be given to Munich to file a further amended statement of claim in substantially the form of Annexure A to Munich's notice of motion filed on 5 July 2024.
Costs: Order (4) made on 5 August 2024 was in the usual form with respect to the costs of an amendment to a pleading. It should remain in place. Order (5) made on 5 August 2024 should be set aside. The costs of the motions before his Honour should follow the event, taking into account the different outcome on the appeals.
There is no reason why the costs in this Court should not follow the event: UCPR, r 42.1.

[32]

Orders

I propose the following orders in each appeal (2024/318377; 2024/322184): 1. Grant leave to appeal. 2. Direct the appellant to file a notice of appeal within seven days in the form of the draft notice of appeal in the White Book and dispense with service. 3. Appeal allowed. 4. Set aside orders (1), (2), (3) and (5) made by the primary judge on 5 August 2024 and, in lieu, make the following orders: 1. leave be granted to the plaintiff to file a further amended statement of claim in substantially the form of Annexure A to the plaintiff's notice of motion filed on 5 July 2024; 2. the first, third, fourth, fifth and sixth defendants to pay the plaintiff's costs of its notice of motion filed on 5 July 2024; 3. dismiss the first, third, fourth, fifth and sixth defendant's notice of motion filed 5 July 2024; 4. the first, third, fourth, fifth and sixth defendants to pay the cross-claimant's costs of their notice of motion filed on 5 July 2024. 1. The first to fifth respondents to pay the appellant's (RLA) costs in this Court (2024/318377). 2. The first, third, fourth, fifth and sixth respondents to pay the appellant's (Munich) costs in this Court (2024/322184).
MITCHELMORE JA: I agree with Gleeson JA.

[33]

Amendments 27 February 2025 - Parties / Representation DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2025

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (33 paragraphs)

Legislation Cited (9)

Cases Cited (66)