IT WAS RESOLVED that having reviewed all of the medical evidence and other information in relation to the TPD claim, the Trustee maintains its decision that Mr Sayseng is not TPD as defined in the Fund's Trust Deed and the Policy of Insurance.
54 The matter for the opinion of the Trustee in Subrule 10(1) - "… a member becomes totally and permanently disabled while in service prior to the Normal Retirement Date …" - when understood in its context but without the definition of the almost identical expression "Total & Permanent Disablement" in the Policy, is a rather stringent test. It cannot be understood however without considering the question - disabled for what? The narrow context of Rule 10 and the wider context of the whole deed give the answer that it refers to being disabled for employment, including employment in the work the member was doing in the service of the employer, and other employment for which he is qualified by capacity training or experience. Physical ability to perform work which the member does not know how to do or could not be trained to do, or to perform work which is not available, could not be relevant to the application of Rule 10, which is directed to the realities affecting the member under consideration. It is not about theory. The requirement that the member be totally disabled is stringent and excludes disability from doing part-time work, again with reference to part-time work which the member can do.
55 In Rapa v. Patience (McLelland J) (4 April 1985 unreported) his Honour dealt with entitlement to benefit for early retirement on the basis of total and permanent disablement under a Trust Deed regulating a fund for the purpose of providing individual personal benefits, pensions or retiring allowances for employees of a group of companies. McLelland J said:
The grounds on which the performance by trustees of functions such as these may be successfully challenged are those applicable generally to the exercise by trustees of discretionary powers, helpfully discussed by McGarvie J in Karger v. Paul (1984) VR 161. As encapsulated by his Honour in that case there are three such grounds and in some circumstances a fourth. They are, first, that the discretion was not exercised by the trustees in good faith, second, that the discretion was not exercised upon real and genuine consideration (which includes consideration of the wrong question - see Scott on Trust 3rd ed. Vol.3 para.187.3) third, that the discretion was not exercised in accordance with the purposes for which it was conferred, and fourth, where the trustees have disclosed (otherwise than in the course of the proceedings in which the discretion is challenged) the reasons for the exercise of their discretion, that those reasons are not sound.
56 McLelland J treated the grounds upon which discretionary decisions of superannuation trustees may be challenged as the same as the grounds upon which discretionary decisions of trustees generally may be challenged, as to which see also Parkes Management Ltd v. Perpetual Trustee Co. Ltd (1977) 3 ACLR 303 at 311 (Hope JA). McLelland J's statement has been approved and followed by courts many times.
57 To a similar effect is the following statement in Tonkin v. Western Mining Corporation Ltd [1998] 10 ANZ Ins Cas in the judgment of Franklyn J with whom Malcolm CJ and Pidgeon J concurred:-
In my view, having regard to the terms of the Deed and the relevant definition, there is no obligation on the Trustee, on an application for the TPD Benefit supported by evidence inadequate to give rise to the necessary opinion, to seek out, on its own initiative, evidence for its consideration and so strain to obtain evidence relevant to the formation of the necessary opinion, thereby attempting to bring within the definition a member not otherwise within its terms. It may, however, in the exercise of its fiduciary duty and as a matter of discretion, if it considers it appropriate, seek and obtain additional medical evidence. It may also, as a matter of discretion, require medical evidence to be submitted to it for the purposes of its consideration. As trustee, it is not an adversary either for or against an applicant for the benefit. Relevantly, it has a duty only to act in accordance with the trust. If it fails to perform the same, the court will compel it to do so or do so for it. It is not bound by any rules as to how it exercises a discretion conferred on it, save such as it is obliged to comply with by the terms of the Deed, provided always that it must act honestly and in good faith, on an informed view of whether or not to exercise its discretion, and exercise the power with due consideration for the purpose for which it was conferred and for no ulterior purpose. In the case of powers conferred on it and as to whether it should do or refrain from doing something, it must exercise its judgment actively and honestly and act accordingly. The court will not control a trustee in the exercise of its purely discretionary powers unless it is acting mala fide or has misconceived the nature of its discretion and acted upon that misconception. When appointed to exercise a trust according to discretion, a trustee is not bound to state reasons for any conclusion at which it may have arrived and on which it has acted, but again the discretion must be exercised with an absence of indirect motive with honesty of intention and on a fair consideration of the issues. The duty of the court generally is to see that the discretion of the Trustee has been exercised in this manner and not to deal with the accuracy of the conclusion at which it may have arrived. See Jacobs' Law of Trusts in Australia, 5th Ed, p372-p379.
58 Franklyn J went to make observations on circumstances in which renewed consideration is required after submission of further material. In the present case the Trustee gave consideration to further material when requested on behalf of Mr Sayseng to do so; I see no reason to doubt that the Trustee was entitled to reopen its consideration if it chose to do so. Conceivably there may in the future be circumstances in which the Trustee would be obliged or entitled to reopen consideration again.
59 It should be recognised, in my view, that the context of the employment relationship has some influence on the application of grounds identified in Rapa v. Patience when exercise of discretionary powers by superannuation trustees is challenged. The context in which it may be supposed that discretionary trusts first existed was a context of bounty in the management of family property, and of settlements created by deeds or wills in which a benefactor substituted decisions to be made in the future by trustees for exercises of bounty which, had his life or control long continued, he would have made himself. Perhaps in their origin discretionary trusts in superannuation schemes were perceived as having a similar function as exercises of bounty, but if this was once so it has for a long time not accorded with the realities of the employment relationship, in which employees contribute their own funds, sometimes over many years, and bargain for employer contributions which have the economic function of being part of the reward for employee services. Notwithstanding the incorporation of discretionary tests, the shared expectation that benefits will actually be available as contemplated is extremely strong, and reasonably so. These circumstances must have some influence on the responsibilities of trustees and on the approaches of courts to the tests (to which McLelland J referred to Rapa v. Patience) of good faith in the exercise of powers, real and genuine consideration, compliance with the purposes for which power was conferred and soundness of reasons when reasons are given. In the context of the employment relationship, and of the importance of retirement benefits, including benefits for total and permanent disablement, the responsibility of trustees is high and scrutiny of their decisions is only to be expected and is appropriate.
60 A discretionary trust is not a satisfactory vehicle to secure entitlement to superannuation or retirement benefits. Discretionary superannuation trusts are not well suited to the expectations of those involved in employment relationships and the actual functioning of those relationships. The persistence of this kind of scheme, rather than some scheme in which entitlements are more open to objective ascertainment, is remarkable. I regard this mechanism as unsatisfactory because decision is not appropriately exposed to the scrutiny available where a court or other person not in any way involved in the controversy can hear the evidence of the medical witnesses, can hear evidence about available employment and the extent of disability, and can reach a conclusion on the basis of full exploration of the facts and of testing of the value of opinions and assertions of fact by cross-examination. These controversies cannot be addressed, and cannot be decided in a fair way, without making concrete a group of generalisations about employment which the employee has ability to undertake - what the duties of the jobs are, who are the prospective employers, where the jobs are, what physical operations the employee would perform, for how long in each working day and each working week he was to perform them. As far as possible these matters have to be reduced to the concrete and they cannot be addressed properly if they are left undefined and abstract. Decision of what may be complex controversies in which the attitudes, personal reliability and physical condition of the claimant are involved, as they typically are in cases about bad backs, and not over small amounts but over retirement allowances on which the claimant is to leave the work-force, seems to me to be too important to be left wholly to trustees and insurers to resolve from examination of files. This mechanism does not achieve decisions in which claimants can be expected to place much confidence, and it does not achieve the economic objectives of employers, who can be taken to intend to hold out entitlement to retirement benefits as an inducement to employees to enter and continue in their employment, an inducement which is blunted to the extent that actual fulfilment is uncertain.
61 The fourth matter to which McLelland J referred in Rapa v Patience turns on the well established immunity of trustees from being compelled to give reasons for discretionary decisions. If they give reasons the reasons are open to examination, but they may not be compelled to give reasons. To give their exemption from compulsion reality, trustees may not be exposed to adverse inferences and findings based on their not having given reasons at the time of their decisions, or their not having given evidence in litigation so as to explain their reasons; if they were so exposed, they would not in truth have any exemption. In the present case the Trustee did not give reasons, and all that can be known about the reasons are the very slight matters that may be inferred from evidence about the material which was circulated to the directors and from the terms of their resolutions. Their not having gone further in evidence is not a basis for any inference relating to whether they exercised the discretion in good faith, or upon real and genuine consideration, or upon the right question, or for any adverse inference at all. Observations to this effect by the plaintiff's counsel were not well directed.
62 The plaintiff can rely only on a much broader approach, to the effect that a reasonable person deciding whether to form the opinion of the Trustee required by Subrule 10(1) could not have reached the decisions the directors of the Trustee did reach, so that there must have been some failure of good faith, or of the application of real and genuine consideration, or of exercise of powers for purposes for which they were conferred. The matter was put this way in Maciejewski v. Telstra Super Pty Ltd [1999] NSWSC 341 at [13] by Windeyer J:
What the plaintiff must establish to make out her claim for relief is that the decision of the trustee to reject her claim was a decision that no reasonable person could come to on the evidence available to it. It is not the function of the Court to decide whether a particular decision might or might not have been more reasonable in its view than the decision to which the Trustee have come.
63 In a case like the present where the evidence allows the information placed before the Trustee to be identified, if the Trustee came to a conclusion which no reasonable person could have come to one of the first three grounds of challenge referred in Rapa v. Patience must be available; an unreasonable conclusion cannot be reached without either a failure to exercise power in good faith, or a failure to exercise the power upon real and genuine consideration, or a failure to exercise the power in accordance with the purposes for which it was conferred. See Maciejewski at [21]. Necessarily the consideration of the challenge to these opinions is restricted to consideration of material which was available for the Trustee and the insurer to consider: Tonkin v. Western Mining Corporation Ltd [1998] 10 ANZ Ins Cas 61-397.
64 The directors of the Trustee had before them, on each of the three occasions when they considered the matter, a number of reports from people with medical qualifications in several fields, and from a Physiotherapist, which bore on whether Mr Sayseng had incurred total and permanent disablement. Much of the material under consideration was not well directed to Mr Sayseng's state of disability while in the employer's service, which is what must be considered under Subrule 10(1). Nor was it all well directed to consideration of whether he was totally disabled from employment, which would require an address to his ability to perform available part-time work or light duties. The directors also had, at various times, advices from Mercer, and appraisals from different sources of the significance of the observations of the private inquiry agent and of the video. They did not act precipitately, they gave time to their considerations and they twice referred for further medical opinion. On the material before them there could be no doubt that Mr Sayseng had incurred disability which adversely affected his working capacity; but various sources differed as to the impact of the disability on Mr Sayseng, on the kind of work he could undertake, and on the influence of his own response and attitude on the outcome.
65 Many criticisms were offered by the plaintiff's counsel of the course of consideration and of particular aspects of reports which were before the directors. I will review these criticisms, but the plaintiff's claim does not raise for my decision what conclusion I would reach on the body of material and on the criticisms of particular passages in it. What is raised for decision is whether the Trustee, as a reasonable person confronted with this body of material, could reach the decision it did without failing in one of the respects indicated in Rapa v. Patience. Certainly there was much in the material before the directors which could have supported a decision favourable to Mr Sayseng, but there was also much which clearly favoured the decisions which the directors made. The influence which various parts of this material should have was a matter for the Trustee's own consideration; reaching one outcome or the other was, in my opinion, well within the range of outcomes available without falling within any of the grounds of challenge. Testing the relative weight of observations and conclusions in the body of material before them was something for the directors of the Trustees to consider. Unless some ground or reasoning can be pointed to which puts one conclusion or the other out of consideration in the minds of reasonable people, the decision cannot be set aside; and in my view no such ground or reasoning has been put forward.
66 Even if the Trustee had reached a conclusion favourable to Mr Sayseng, or were to do so on further consideration under direction of the Court, Mr Sayseng would not have an entitlement to benefit unless insurance were available. The grounds upon which an opinion of an insurer upon which entitlement to insurance arises may be challenged are different to the grounds upon which discretionary decisions of trustees may be challenged.
67 The attacks made upon the Trustee and its decisions in the Amended Statement of Claim ranged widely. However observations by plaintiff's counsel were even wider. In particulars (a) and (b) of para.11 of the Amended Statement of Claim there was a complaint to the effect that by entering into an insurance policy in which the insurer's opinion was an element for the availability of insurance the Trustee purportedly abrogated all its discretion in relation to the plaintiff's claim for Total and Permanent Disablement benefit. In my view this cannot succeed because the trust deed in terms authorises the Trustee to enter into a policy, and Rule 10 in the schedule of the trust deed makes the availability of insurance under a policy, where there is a policy, part of the conditions for the payment of benefit. Insurance policies in which an insurer's opinion is an element in the conditions for the availability of insurance are a very long established part of the insurance market and there is no evidence which would tend to show that the Trustee acted in other than an ordinary and reasonable manner in obtaining insurance on such terms; for example there is no evidence that insurance on terms not involving the insurer's opinion was available. It should not in my opinion be found that the Trustee acted in breach of trust in this respect. Particular (c) appears to be a development or restatement of Particulars (a) and (b).
68 Particular (d) is:
By entering into the insurance policy in the form that it did, the trustee entered into an agreement that hindered or tended to hinder the first defendant as trustee properly performing or exercising the trustee's functions and powers.