Standing
7 The respondents say that the applicants lack standing to bring the claim on two bases.
8 Their first complaint is that the relevant trustee(s) should be the named applicant(s), given that in the case of each applicant the policies were owned by the trustee of their superannuation funds such that the trustee is the person that paid the premiums out of the corpus of the trust funds.
9 It is said that beneficiaries do not have a general right to take proceedings with respect to trust property. As long as the trustee is ready to take the proper proceedings against a third party, the beneficiaries cannot maintain a suit against the third party. Beneficiaries may only sue in their own name with the trustee added as a respondent where there are special circumstances, such as insolvency of the trustee or where the trustee has without good cause refused to take action. There must be a failure by the trustee in the performance of its duty owed to the beneficiary to protect the trust estate or the interests of the beneficiary.
10 It is said that in the present case there are no special circumstances. There is no allegation against any trustee for want of due administration of the trust or other breach of duty. The claims levied are against strangers to the trust for alleged conduct that improperly caused a reduction in value of the corpus of the trust.
11 Let me address the second related complaint. It is said that there has been no actionable loss suffered by the beneficiaries.
12 It is said that where a member of a trust fund has not yet achieved the qualifying characteristic stipulated in the benefit provision of the trust deed, such as retirement at a certain age, the benefit has not accrued, and is at best an inchoate right in the process of accrual but subject to various contingencies. It is said that the precise form in which the inchoate right may ultimately vest depends on the terms of the trust deed and the contingency that occurs, for example, retirement, injury, death or qualifying age.
13 Now the applicants claim that they have some equitable proprietary interest in their respective superannuation funds. But it is said that their interest can rise no higher than the interest just described.
14 Further, it is said that the applicants' description of their right as vested in interest but not yet vested in possession is of dubious relevance. In any event, the distinction between a right vested in interest and a contingent right is premised on two conditions being met: first, that the beneficiary's identity be established, and second, that his right to the interest as distinguished from his right to possession must not be contingent on the occurrence of some event.
15 It is said that the applicants do not plead any circumstances that confer a beneficial interest that has accrued. Absent such a pleading it is said that I could not be satisfied that the applicants have any right beyond a beneficial interest that may mature to take a particular form depending on future events. But this is not enough to confer standing in respect of the present causes of action against the respondents.
16 In this context, reference was made to Shimshon v MLC Nominees Pty Ltd [2020] VSC 640.
17 In Shimshon, it was held that the beneficiary of a superannuation trust whose superannuation account had been diminished by reason of a trustee's breaches had not suffered actionable loss. His Honour held (at [125]):
…The plaintiff does not, and cannot, allege a present entitlement to an interest in either superannuation fund and must be treated as a member whose interest remains contingent upon the occurrence of a future event. Put another way, the plaintiff's interest has not yet vested in him…
18 His Honour observed that a fund member's interest in a superannuation fund is often described as an expectancy. He also observed (at [133] to [134]) that:
…what consistently emerges from these authorities is the emphasis on a fund member's interest being contingent upon particular events occurring in the future, such that the fund member otherwise has no present or immediate right to payment. A fund member, on the basis of the analysis preferred in the cases, cannot be said - prior to the occurrence of a contingency event - to have an interest in an identifiable portion of the superannuation fund.
A member's account is an accounting allocation of that member's entitlement to a share of the trust assets in accordance with the governing rules. It is an expression of a legitimate expectation to an interest in trust property…
19 Further, the terms of the Superannuation Industry Supervision Act 1993 (Cth) did not lead to a different conclusion. Whether in equity or under the Act, it was concluded that it was the trustee, who was the owner of the trust property that had been allegedly diminished, that had suffered actionable loss or damage.
20 Generally, the respondents say that not only is the trustee(s) the proper applicant(s) to these proceedings against the third party advisers as no special circumstances exist that allow the beneficiaries to take action, but it is also the case that the beneficiaries have suffered no actionable loss.
21 Further, it is said that the applicants' contention that they must have standing because the trustee(s) cannot pursue these specific causes of action should also be rejected. If trust property has been diminished by way of damage by third parties, the trustee(s) is empowered and indeed required as a component of the duty to get in trust property to vindicate that damage.
22 Now the applicants take issue with these points.
23 The applicants say that they have suffered loss even if the excess premiums were paid by a superannuation fund in which they were a member. It is said that their loss in terms of excess premiums paid from their superannuation funds is an injury to their beneficial interest in the trust.
24 They also say that the loss is claimable even where the precise form and quantum of the beneficial interest may be contingent on a prescribed event. They say that a member of a superannuation fund has an equitable proprietary interest in the fund notwithstanding that it did not carry with it an immediate right to payment. It is said that the beneficiary holds a present and certain right to enjoy payment of their superannuation benefit in the future. This right may be described as vested in interest but not yet vested in possession. But the beneficiary's interest is not a contingent interest or a mere expectancy.
25 The applicants say that Shimshon was wrongly decided. It was said that there was error in finding that a member's interest is a mere contingency. Further, it was said that there was an error in finding that prior to becoming eligible to a benefit in accordance with the governing rules of a regulated superannuation fund, a member has no proprietary interest in the assets out of which the benefit is to be paid. I should say now that I do not need to decide any of this for the moment.
26 Further, the applicants take issue with the relevance of various authorities cited by the respondents for the proposition that where a member of a trust fund has not yet achieved the qualifying characteristic stipulated in the benefit provision of the trust deed, the benefit has not accrued, and is at best an inchoate right in the process of accrual but subject to a variety of contingencies. I agree with the applicants that none of these cases support the respondents in the present context.
27 First, Macoun v Federal Commissioner of Taxation (2015) 257 CLR 519 was not about a trust fund. Irrelevantly to my context it was a case about a pension, and whether an office-holder's right to a pension was a "vested right" during the period he held office.
28 Second, Commonwealth Bank Officers Superannuation Corp Pty Ltd v Beck (2016) 334 ALR 692 held that a person who was entitled to consideration by a trustee under a discretionary benefits scheme did not have an accrued benefit. But again that is not my context. I am not dealing with a discretionary scenario.
29 Third, Finch v Telstra Super Pty Ltd (2010) 242 CLR 254 rather supports the applicants than the respondents. At [30], the Court stated:
The Trustee was trustee of a trust. It had a duty to distribute to those who fell within the definition of "Total and Permanent Invalidity" and a duty not to distribute to those who did not. That affected its role in relation to the forming of its opinion under limb (b). Forming that opinion was not a matter of discretionary power to think one thing or the other; it was an ingredient in the performance of a trust duty. That duty was owed to the Members, including the applicant. The applicant was not the object of a discretionary power of appointment. He was the beneficiary of a trust, and although the precise form and quantum of his beneficial interest was contingent on particular events, he did have a beneficial interest.
30 Fourth, in Walsh Bay Developments Pty Ltd v Federal Commissioner of Taxation (1995) 130 ALR 415 Jenkinson, Beaumont and Sackville JJ stated at 427 that a vested interest is one where the holder has an immediate fixed right of present or future enjoyment. The Court went on to say:
…In relation to land, an estate is vested in possession where there is a right of present enjoyment, as where A has a life estate or fee simple estate in the land. An estate is vested in interest where there is a present right of future enjoyment. Thus where T holds in trust for A for life and then in trust for B in fee simple, B's equitable fee simple estate is vested in interest during A's lifetime. The estate will vest in possession on A's death.
(citations omitted)
31 But there is no suggestion that these principles are limited to interests in land. Moreover, the Court was just explaining one instance were the concepts of "vested in interest" and "vested in possession" apply.
32 But the applicants also have another answer. The applicants claim an account of profits. It is said that it is not necessary to suffer loss in order to claim an account of profits. The purpose of an account of profits is to prevent the unjust enrichment of the respondent instead of compensating the applicant for loss. In my view there is considerable force in that point. In my view the applicants may be able to focus on an account of profits, whether in terms of the statutory claims or the fiduciary claims, thereby getting around the indirectness of their asserted loss, being the diminution in value of their superannuation fund(s) flowing from their trustee(s) paying the excess premium.
33 Further and in any event, perhaps they could reformulate their loss thesis as detriment flowing to them in giving a direction to their trustee(s) to pay the excess premium which direction they would not otherwise have given but for the respondents' conduct. So, funds in which they had a beneficial interest were given away so to speak.
34 Further, I agree with the applicants that the trustees do not have a right to the pleaded causes of action. The claims advanced in this proceeding depend on either the giving of personal advice to a retail client in the context of the statutory claims or otherwise the breach of a fiduciary duty that arose by virtue of an undertaking to give advice and the receipt of advice. So, it is the recipient of the advice who holds those claims. The trustee(s) of the superannuation fund(s) do not have these causes of action. Let me elaborate.
35 As to the claims based on ss 961B, 961J and 961L of the Corporations Act 2001 (Cth), the trustee(s) is not "the client", to use that statutory term, and so has no cause of action. The trustee(s) did not receive advice. Rather, the applicants and group members received advice which included advice to use their superannuation funds as the vehicle to pay premiums. The obligation in s 961B(1) is that "[t]he provider must act in the best interests of the client in relation to the advice". As such, the obligation in s 961B only extends to the client, who is the person who receives the advice. The trustee is generally not the person who received the advice.
36 Further, I note that the relief provision of s 961M, which I will return to later, refers in s 961M(1) to the client suffering loss or damage and having standing under s 961M(3)(c).
37 As to the claims based on breach of fiduciary duty, any trustee who did not receive advice has no cause of action for breach of fiduciary duty because there is no undertaking to give advice and no advice was provided to the trustee. Further, there is no suggestion that any individual sought advice as agent for their trustee.
38 In my view all of these points are reasonably arguable to say the least.
39 Now the respondents' arguments slide over the point that the trustee has no actionable claim against the respondents. Of course it may be accepted that equity will permit a beneficiary who can establish special circumstances to sue on a cause of action against a third party which belongs to the trustee, if the trustee fails to sue to protect the trust property. But this is only in respect of a cause of action which the trustee has. But in the present case the trustee(s) has no cause of action. Moreover, the reason for the usual restriction is the avoidance of the vexation of the third party by multiple suits. But there is little risk in the present case that any trustee could or would commence a parallel action.
40 Further, it is arguable that principles of reflective loss are inapposite in the context of a trust relationship. Now when a company suffers loss caused by a breach of duty owed to the company, no action lies at the suit of a shareholder to make good a diminution of the value of the shareholder's shareholding where that loss merely reflects the loss suffered by the company. But it is arguable that such a principle does not apply in the context of the relationship of trustee / beneficiary. But in any event such a principle does not prevent the shareholder suing for a loss suffered from a breach of duty owed to him where the loss is separate and distinct from the loss suffered by the company. It is arguable that this is the case here by analogy. Anyway, I do not need to further develop these points.
41 Now the respondents' arguments on the question of standing are not completely devoid of merit. And indeed at one stage I gave consideration as to whether I should deal with the matter within a more formal summary dismissal framework under s 31A of the Federal Court of Australia Act 1976 (Cth). But in my view there is a better practical solution rather than making a definitive ruling now one way or the other.
42 First, I will direct that the applicants apply to join a third applicant who has the relevant claims and paid the excess premium(s) personally rather than through a trustee of a superannuation fund. This direction has several advantages. For the moment it will not matter if the present applicants are later said not to have standing. Further, leaving the present applicants in place allows me to form any necessary sub-group under s 33Q with one or both of them as the head(s) of such a sub-group to deal with the points raised.
43 Now I had considered whether to proceed by way of substitution rather than addition, and indeed to invoke s 33T. But that would require me to finally decide the point now which I do not need to do.
44 Further, my solution avoids the need to linger on s 33D in terms of having or not losing standing.
45 Second, I will not require the named applicants to join the trustees of their superannuation funds. But instead I will require them to undertake that if they receive any money award referable to the excess premiums paid by their trustees that they will disgorge any such amount to their trustees to restore the fund(s). Of course I could achieve this by a more direct order after trial in any event.