The Trustee for Host Plus Superannuation Fund trading as Host-Plus Pty Limited v Maritime Super Pty Limited trading as Maritime Super Pty Limited

Supreme Court of NSW|2023-06-20|Before: Stevenson J

Solicitors: Holding Redlich (Plaintiff) Allens (Defendants) Australian Prudential Regulation Authority (Intervener) File Number(s): 2023/148442

JUDGMENT

The plaintiff, Host-Plus Pty Ltd ("Host-Plus"), seeks an order pursuant to s 249E of the Crimes Act 1900 (NSW) for consent to the offering, giving, receipt or solicitation of benefits under or in connection with what is, in effect, a merger between a trust of which Host-Plus is trustee and a trust of which the first defendant, Maritime Super Pty Ltd ("Maritime"), is trustee. The proposed merger is to be effected by a successor fund transfer between the relevant funds. The parties referred to this as the "Proposed Transfer".
A question arises, however, as to whether the offence provision in s 249E of the Crimes Act applies to a superannuation fund merger utilising a successor fund transfer mechanism.
Maritime contends that it does not, as does the prudential regulator, the Australian Prudential Regulation Authority ("APRA"). With the consent of Host-Plus and Maritime, and with my leave, APRA has intervened in the proceedings to make a submission to that effect.
The Attorney-General for New South Wales is aware of these proceedings but has informed the parties that he does not wish to intervene or otherwise be heard.
My conclusion is that the Proposed Transfer does not engage s 249E of the Crimes Act because it does not involve the "appointment" of a trustee. Accordingly, I decline to give the consent sought by Host-Plus.

Background [1]

Host-Plus is a non-profit organisation, whose shareholders are the United Workers Union and the Australian Hotels Association. Host-Plus is the trustee of two superannuation funds, the Hostplus Superannuation Fund ("the Hostplus Fund") and the Hostplus Pooled Superannuation Trust. As a superannuation trustee, Host-Plus holds an Australian financial services licence, and is also regulated by APRA as a Registrable Superannuation Entity under the Superannuation Industry (Supervision) Act 1993 (Cth).
The Hostplus Fund is a non-profit superannuation fund which operates for the benefit of members and provides retirement benefits to its members. It is regulated by APRA and is governed by a superannuation fund trust deed. It had in excess of 1.6 million members as at 30 June 2022. The primary investment of the Hostplus Fund is in the Hostplus Pooled Superannuation Trust, which holds a range of financial instruments.
Maritime is the trustee of the Maritime Super Fund ("the Maritime Fund"). The Maritime Fund is the largest industry superannuation fund for the maritime industry in Australia. It is also a non-profit superannuation fund which operates for the benefit of its members. It also holds an Australian financial services licence and is regulated by APRA as a Registrable Superannuation Entity. As at 30 June 2022, it had 22,629 members. The second defendant, Maritime Financial Services Pty Ltd, is a wholly owned subsidiary of Maritime and acts as the administrator of the Maritime Fund.
Since 30 April 2021, the assets of Maritime have been invested in the Hostplus Pooled Superannuation Trust, in exchange for holding units in that trust.

The Proposed Transfer

On 15 February 2022, Host-Plus and Maritime entered a Memorandum of Understanding. On 30 November 2022, to give effect to the understanding contained in that document, Host-Plus and Maritime entered a Successor Fund Transfer Deed and an Administration Transition Agreement. [2]
The events leading to the execution of these documents were summarised in Host-Plus's submissions as follows: [3] "From around late 2021 to early 2022, Maritime undertook a competitive assessment of potential merger partners. Following that process, Host-Plus and Maritime entered into merger discussions, which were formalised in a Memorandum of Understanding. The merger was pursued by Host-Plus as part of a set of strategic objectives which aim to build scale and realise scale benefits, to achieve the overarching goal of optimising member outcomes for retirement. This would benefit both the existing Host-Plus members and the members of Maritime, whose assets would be transferred to Host-Plus as part of the merger. The parties ultimately agreed to merge, pursuant to a 'successor fund transfer' whereby all the members and corresponding assets of Maritime will be transferred to the Hostplus Fund and the Hostplus Pooled Superannuation Trust. … Host-Plus's board considered whether the transaction is in the best interests of members of the Hostplus Fund and the Hostplus Pooled Superannuation Trust, and decided that the merger is consistent with Host-Plus's strategic objective and will help to optimise outcomes for the members. Maritime's board also decided that the transfer was in the best financial interests of its members, having regard to factors including administration fees and costs, investment arrangements, product arrangements, financial sustainability, fund scale and market position. The parties worked closely to ensure that the transferring members' rights in respect of the benefits in the successor fund are equivalent to their rights in respect of the benefits in the Maritime Fund, in satisfaction of regulation 1.03(1)." (References omitted.)

The successor fund transfer documentation

The transfer contemplated by the Successor Fund Transfer Deed and the Administration Transition Agreement is scheduled to occur on 1 September 2023.
By 31 July 2023, Host-Plus proposes to issue a significant event notice in respect of the transaction, as required by s 1017B of the Corporations Act 2001 (Cth).
Under the Successor Fund Transfer Deed and the Administration Transition Agreement: 1. all assets of Maritime will be transferred to the Hostplus Fund; [4] 2. all the benefits of the members of Maritime will be transferred to the Hostplus Fund; [5] 3. transferring members will cease to be members of Maritime and will become members of Host-Plus; [6] 4. Host-Plus will assume the liability for all benefits of the transferring members; [7] and 5. Host-Plus will indemnify Maritime against any Maritime liabilities. [8]
It is a condition precedent under the Successor Fund Transfer Deed that Court consent under s 249E of the Crimes Act, and its interstate analogues, be obtained in the event that either party takes the view that such consent should be sought. [9]
Host-Plus formed the view that Court consent under s 249E should be sought and, for that reason, has brought these proceedings. However, before me, Host-Plus adopted a neutral position on the question of the applicability of s 249E. By its Summons, it sought consent under s 249E(2) but did not, before me, advocate that s 249E(2) was applicable and that consent was, for that reason, necessary. In its submissions, Host-Plus stated that "if the Court accepts that s 249E does not apply, then Host-Plus supports Maritime's application for a declaration to that effect". In fact, Maritime did not seek such a declaration. It was agreed during argument that if my conclusion was that s 249E does not apply, then Host-Plus's application for consent should be dismissed.

Section 249E(2) of the Crimes Act

Section 249E(2) of the Crimes Act provides: "(2) Any person who offers or gives a benefit to a person entrusted with property, and any person entrusted with property who receives or solicits a benefit for anyone, without the consent - (a) of each person beneficially entitled to the property, or (b) of the Supreme Court, as an inducement or reward for the appointment of any person to be a person entrusted with the property, are each liable to imprisonment for 7 years."
A "person entrusted with property" is defined in s 249E(1) to include a trustee. "Benefit" is defined in s 249A to include "money and any contingent benefit".

Successor Fund Transfers

Generally, a member's funds in a superannuation fund cannot be transferred to another fund.
An exception to this is if the member consents to the transfer. [10] Another is where a transfer is to a "successor fund". [11]
A "successor fund" is one which confers on the member "equivalent rights" to the rights the member had in the original fund. [12]
Here, what is proposed is to transfer all assets of the Maritime Fund to the Hostplus Fund and to cause members of the Maritime Fund to become members of the Hostplus Fund where, it appears to be common ground, they will have "equivalent rights" to those they enjoyed as members of the Maritime Fund.
On the face of it, it is hard to see how, for the purpose of s 249E of the Crimes Act, this could involve any "appointment" of "any person" (Host-Plus being the only candidate) to be the "person entrusted with" the property to which the present members of the Maritime Fund are currently beneficially entitled.

Appointment

As Maritime and APRA have pointed out, the term "appointment" is familiar in trust law. [13]
The process by which a person becomes trustee of an express trust is usually described as being by "appointment". A person may become a trustee either by being specifically "appointed" by the instrument creating the trust, in which case that party is said to be an "original trustee", or by being appointed as a "new trustee" either pursuant to a power contained in the trust instrument or pursuant to a statutory power exercisable by some person or by the Court. [14]
The terminology of "appointment" is used in trust legislation in each jurisdiction of Australia to provide for a designated person to fulfil the position of trustee, including by the Court, and for the consequences of appointments, such as vesting of property. [15]
Where the words which have acquired a legal meaning are used in a statute, "it will be taken, prima facie, that the legislature has intended to use them with that meaning unless a contrary intention clearly appears from the context". [16]
In those circumstances, I think APRA is correct to submit that the term "appointment" where used in s 249E of the Crimes Act of "any person to be a person to be entrusted with" trust property, which includes a trustee of the property, [17] should be understood, conformably with the natural and ordinary meaning of that word, as meaning the placing or designation of a person in the office of trustee in respect of an existing trust over property.
That was the conclusion to which Kelly J came in H.E.S.T. Australia Ltd v Attorney-General (Qld) & Anor; Mercy Super Pty Ltd v Attorney-General (Qld) [18] in relation to the Queensland equivalent of s 249E of the Crimes Act: s 442F of the Criminal Code Act 1899 (Qld). As in this case, his Honour was dealing with a successor fund transfer between two superannuation funds.
Thus, his Honour concluded: [19] "In my consideration, the term 'appointment' has an established meaning within the law of trusts. The adoption of the term 'appointment' in the Offence Provisions [20] should be construed, consistent with the principle in pari materia, [21] as having been intended to convey the same meaning as that term has when used in the trust legislation in each respective jurisdiction. That established meaning of 'appointment … as trustee' is the placing or designation of a person in the office of trustee. That also reflects the natural meaning of the term. I find that the Offence Provisions should be read as having as their subject the designation of a person to office rather than the effect of a dealing with assets. The Offence Provisions are directed towards 'appointment', both 'as trustee' and 'instead of' the original trustee."
Accordingly, his Honour held that the successor fund transfer in question "was not a substituted appointment" for the purposes of s 442F of the Criminal Code Act.
Section 442F of the Criminal Code Act [22] is in a different form to s 249E of the Crimes Act, and provides: [23] "Any person who offers or gives any valuable consideration to a trustee, or any trustee who receives or solicits any valuable consideration for himself or herself or for any other person, without the assent of the persons beneficially entitled to the estate or of a judge of the Supreme Court, as an inducement or reward for appointing or having appointed, or for joining or having joined with another in appointing, or for authorising or having authorised, or for joining or having joined with another in authorising, any person to be appointed in the person's stead or instead of the person and any other person as trustee, commits a crime." (Emphasis added.)
Thus, whereas s 249E of the Crimes Act refers to an inducement or reward "for the appointment of any person to be a person entrusted with the property", s 442F of the Criminal Code Act [24] refers to an inducement or reward "for appointing … any person to be appointed in the person's stead or instead of the person … as trustee".
However, as was pointed out on behalf of Maritime, while the words are different, the "key focus" of both provisions is the same.
Further, as Maritime and APRA pointed out, s 249E of the Crimes Act is the successor to s 7 of the Secret Commissions Prohibition Act 1919 (NSW), which was in the same terms as s 442F of the Criminal Code Act. [25]
In replacing the provision in s 7 of the Secret Commissions Prohibition Act with the provision in s 249E of the Crimes Act, it is clear that the legislature was not seeking to change the substance of the relevant prohibition.
Thus, in the Second Reading Speech it was said that the 1987 legislative changes were designed to: "update the existing laws to enable effective prosecution of these offences and to ensure adequate penalties exist for the punishment of the worst examples of these crimes. … The offences [then] existing [were] all to be re-enacted in a form similar to that which they [then had], although some effort [had] been taken to simplify and clarify them." [26]
In relation to s 249E itself, the relevant Explanatory Note confirmed that the existing offence provisions under the former s 7 was to be "re-stated". [27]
For these reasons, I conclude, as did Kelly J in H.E.S.T. Australia, [28] that the established usage of the term "appointment" in s 249E directs attention to conduct referable to designating a person in the office of trustee of a trust.

"Property"

The word "property" is used four times in s 249E(2); twice in the chapeau, once in subs (2)(a) and once in the chasseur. The ordinary and natural reading of s 249E(2) is that the same "property" is being referred to on each occasion, namely, the property the subject of the trust. Here, that is the property the subject of the Maritime Trust.
That suggests that s 249E(2) is directed to events occurring within one trust and in particular, the "appointment" as a person as trustee of that trust.
That also suggests, as APRA has submitted, that the section is not directed to a circumstance where the assets of members of one trust are transferred to another, such as is involved in a successor fund transfer.
That conclusion is consistent with the reference in s 249E(2)(a) to the possibility that the persons "beneficially entitled to the property" could consent to the relevant "appointment"; a circumstance hard to reconcile with the section having application to a transfer of members' assets from one trust to another trust.
Where, as here, the two relevant parties are trustees, and are thus both "a person entrusted with property", the question is whether Host-Plus is offering or giving a "benefit" [29] to Maritime as an inducement or reward for Host-Plus being appointed as trustee of that property.
That is not what is proposed to happen here.
It is no part of the Proposed Transfer that Host-Plus will be the trustee of the assets of the Maritime Fund. Host-Plus will remain trustee of the Hostplus Fund. The assets of the Maritime Fund are to be transferred to the Hostplus Fund. Once the transfer takes effect, those assets will cease to be impressed with the trusts governing the Maritime Fund, and will become impressed with the trusts governing the Hostplus Fund.
Maritime will remain trustee of the Maritime Fund for the purpose of winding up the Maritime Fund. Thus, under the Administration Transition Agreement, Maritime will provide "modified services" which will include the winding up of the Maritime Fund, and of Maritime itself, "as soon as possible after the Transfer Time". [30]
The two trusts, the Hostplus Trust and the Maritime Trust, will remain as separate trusts, albeit with the latter transferring its assets to the former and, shortly after 1 September 2023, being wound up.
In no sense will the effect of the Proposed Transfer be an "appointment" of Host-Plus, or any other party, of the kind contemplated by s 249E of the Crimes Act.
It is for those reasons that my conclusion is that s 249E is not engaged by the Proposed Transfer.
The position here is different to the one I considered in Application of MLC Investments Limited. [31] That case did not concern a successor fund transfer but, rather, the retirement of one trustee of a management investment scheme and the appointment of a new trustee in that role.
In BT Funds Management Ltd, [32] Ball J dealt with an application by BT Funds Management Ltd, as trustee for the Retirement Wrap Superannuation Fund, for consent under s 249E(2) in relation to a prospective successor fund transfer. It appears from his Honour's reasons that the application was made ex parte and in circumstances where it was assumed by BT Funds Management that s 249E(2) was applicable to the proposed successor fund transfer.
It appears that no submission was made on behalf of BT Funds Management that s 249E did not apply, or indeed as to whether s 249E applied.
Thus, his Honour observed: [33] "… it is unnecessary to explore the precise limits of the prohibition contained in the Provisions. It seems clear that the Provisions are broad enough to catch the payments or benefits which are in contemplation. Taking s 249E as an example, BTFM holds the assets of the Plan as trustee for the members. It is contemplating appointing another trustee to hold those assets on trust for the members in its place."
It appears that his Honour did not have the benefit of the submissions that have been made before me, both by Maritime and by APRA.
For the reasons I have set out, I have come to a conclusion inconsistent with the assumption on which it appears his Honour was invited to proceed in BT Funds Management.

Conclusion

Section 249E(2) has no application to the circumstance of a successor fund transfer and is not engaged in the circumstances of this case.
It is therefore neither necessary nor desirable to express any view about whether the Proposed Transfer involves Host-Plus offering any "inducement or reward" to Maritime.
Nor is it necessary or appropriate that I express any view as to whether consent should be granted under s 249E(2), assuming that it was applicable.
Host-Plus also sought orders as to confidentiality and as to costs that are, as I understand it, not controversial.
The parties should bring in short minutes to give effect to these reasons.

Endnotes

Much of the material under this heading is drawn, with gratitude, from the written submissions of the parties.
The second defendant, Maritime Financial Services Pty Ltd, is also a party to the Administration Transition Agreement.
I have changed some internal references to accord with the abbreviations I have adopted.
Clauses 4.1(a) and 4.2(a)(ii) of the Successor Fund Transfer Deed.
Ibid cl 4.2(a)(i).
Ibid cl 4.1(e) and 4.3(a).
Ibid cl 4.3(d).
Ibid cl 10.1(a).
Ibid cl 3.1(h).
Superannuation Industry (Supervision) Regulations 1994 (Cth), r 6.29(1)(a).
Ibid r 6.29(1)(c).
Ibid r 1.03.
P Finn, Fiduciary Obligations (2016, The Federation Press) at 300.
J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) at [15-01].
See for example, ss 6, 7 and 70 of the Trustee Act 1925 (NSW).
The Attorney-General for the State of New South Wales v The Brewery Employés Union of New South Wales (1908) 6 CLR 469 at 531; [1908] HCA 94 (O'Connor J); and see generally D C Pearce, Statutory Interpretation in Australia, (9th edition, 2019, LexisNexis) at [4.13].
Crimes Act, s 249E(1)(a).
[2022] QSC 221.
At [29].
Which his Honour had defined to mean s 442F of the Criminal Code Act and the nearly identical provision in s 180 of the Crimes Act 1958 (Vic).
P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [8.280], [8.290].
And s 180 of the Crimes Act 1958 (Vic).
There are some very minor linguistic differences of no significance.
And in the analogous provision in s 180 of the Crimes Act 1958 (Vic).
And thus also of s 180 of the Crimes Act 1958 (Vic); this legislative history is discussed briefly by Ball J in BT Funds Management Limited (ACN 002 916 458) as trustee for the Retirement Wrap Superannuation Fund [2022] NSWSC 401 at [12]. I will return to BT Funds Management later in these reasons.
New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 26 May 1987, at 12407.
Explanatory Note, Crimes (Secret Commissions) Amendment Bill 1987 (NSW).
Supra.
Such as the indemnities and assumptions of liability contemplated by the transaction documents.
1 September 2023.
[2022] NSWSC 1541.
Supra.
At [13]. 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: 28 June 2023

Secret Commissions Prohibition Act 1919(NSW)

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