Some Legal Principles
112 The plaintiff placed reliance upon the covenant by each Trustee taken to be included in the governing rules by virtue of ss 52(1) and 52(2)(b) of the Superannuation Industry (Supervision) Act 1993, namely:
"(b) to exercise in relation to all matters affecting the entity, the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with the property of another for whom the person felt morally bound to provide."
113 While I appreciate the value of an express statutory covenant in the terms quoted, the obligation in it was debated, and is debatable, namely, whether it imposes a higher duty than the law would impose on a trustee. In my opinion it probably goes a little further in that the ordinary prudent person in the situation envisaged would probably disclose, in dealing with property of another, to the person for whom he felt morally bound to provide, facts adverse to the interests of that person. That would be part of exercising the requisite degree of care, skill and diligence.
114 I would note this expression of opinion of Lord Wilberforce in McPhail & Ors v Doulton & Ors [1971] AC 424 at 452:
"I prefer not to suppose that the great masters of equity, if faced with the modern trust for employees, would have failed to adapt their creation to its practical and commercial character."
115 Lord Reid and Viscount Dilhome agreed with Lord Wilberforce. As Lord Wilberforce stated at 447, that appeal was concerned with the validity of a trust deed by which the deceased established a fund for the benefit, broadly, of the staff of the respondent company. It is dealing with a situation which differs from the one arising in the present case.
116 In Vidovic v Email Superannuation Pty Ltd (3 March 1995), BC9504297 at [11] Bryson J remarked:
"It is a marked anomaly to use mechanisms drawn from fields of law remote from employment and relating to trusts for bounty or charity to administer important entitlements in an employment relationship. I find it difficult to understand why the entrenchment of such important rights against review is so usual, and why this kind of an arrangement is so commonly found acceptable to employees in view of the economic significance of such decisions and the economic function of superannuation, not well represented in terms of the documents, as a contracted employment benefit for which value is given. These anomalies appear particularly clearly where, as in this case, the fund out of which benefits are paid is contributory and an employee claiming benefits is claiming to be paid, at least in part, in his own coin. In an arrangement with a contractual character in which value is given in the expectation that a benefit will be available in stated circumstances, a construction in which one party has an entire and unreviewable power to determine whether that party will pay a sum of money to the other or retain it in its own funds has an element of absurdity …"
117 In Sayseng v Kellog Superannuation Pty Ltd & Anor [2003] NSWSC 945 at [59] Bryson J reiterated his view of the importance of the context of the employment relationship.
118 Senior counsel for the plaintiff submitted that the trustee was bound to apply the rules of natural justice. This was putting the plaintiff's case at its highest. Senior counsel recognised that there was a considerable body of authority against such a proposition, but he pointed to the remarks of Ormiston JA in Telstra v Flegeltaub [2000] 2 VR 276 at [4] and the absence of decisions of appellate courts. On the law, as it presently stands, I do not apply the rules of natural justice.
119 In Flegeltaub v Telstra Super Pty Ltd (3 April 2000), BC 2000 01407, Byrne J said:
"It is clear that the trustee is not bound by the rules of natural justice, but the circumstances of the case may demand, as a matter of fairness, that, on a particular matter, the position of the applicant be sought so that a proper decision can be made on that matter. This may arise because there is an apparently adverse matter of fact which is peculiarly within the knowledge of the applicant or for which the applicant may reasonably be expected to have an explanation. It may involve a disclosure to the applicant or to her representative of the adverse material …"
120 On appeal, at [30], Callaway JA pointed out:
"… One cannot ordinarily decide a question of fact in good faith and give it real and genuine consideration without conducting some investigation and in some cases that will entail making an inquiry of a person who is willing to provide information and is in the best position to do so. It is not a matter of natural justice but bona fide inquiry and genuine decision making."
121 Fairness required that the plaintiff be acquainted with the thrust of the matters put against him by Dr Kenner in his September 1999 report. I accept that the plaintiff could not be told that he was to be the subject of surveillance. Further, the statements of Mr J Williams in the Notification of Disablement Claim were not disclosed to the plaintiff. Many of the important statements in that were in dispute, but an assumption appears to have been made that such statements were correct and reliance appears to have been placed upon them. The source of Mr William's knowledge is, as mentioned, not stated.
122 I am of the opinion that the real ground of the decision of 15 November 1999 of the BRC was that the plaintiff resigned to accept a VRS package. Further, the failure to tell the plaintiff of the substance of Mr Williams' statements or the substance of Dr Kenner's report (excluding the surveillance recommendation) and to give him and his advisors an opportunity to respond meant that there was no bona fide inquiry and no genuine decision making. These latter reasons and conclusions also affect the BRC's decision of March 2000.
123 As to the decision of February 2001 of the BRC, the plaintiff had not been told of the surveillance material and of the thrust of the report of Dr Kenner of August 20000 and the strong adverse conclusions he drew. It is true that the BRC had the earlier reports of doctors from whom the plaintiff had sought opinions, but the plaintiff was given no opportunity to deal with the surveillance material and point to the alleged errors in Dr Kenner's conclusions and the validity of his approach in his latter report.
124 I have not overlooked the principles propounded by McGarvie J in Karger v Paul 1984 VR 161 and this oft-quoted summary by McLelland J in Rapa v Patience (Unreported, NSWSC, 4 April 1985 - BC 8500 888)
"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 Trusts 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."
125 In Flegeltaub the VCA was able to dispose of the case on the basis of these principles and the failures there identified. It did not have to embark upon a fundamental re-examination of the applicable principles. Ormison JA, at 4, pointed out that the disputes now being presented for decision had arisen out of circumstances quite different from those which were raised in earlier authorities, and that one particular problem is the extent to which courts will examine the exercise of a discretionary power by a trustee where the trustee is a company set up by an employer for the purpose of a pension or superannuation fund. That judge thought that further discussion and analyses were required in relation to pension and superannuation funds and he queried the applicability of the older principles to pension and superannuation funds.
126 Both Callaway JA and Batt JA made clear that a decision of a superannuation fund trustee is different in kind from, and arises in a context different from that of, the exercise of a discretion by a trustee of a trust for bounty or charity.
127 At [6] Orimiston JA remarks that it seems to have been assumed since the decision by McLelland J in Rapa v Patience that similar restrictions to those discussed in Karger v Paul should also apply to the formation of more arguably "discretionary" opinions under superannuation deeds.
128 This area of the law is in urgent need of Law Reform. Superannuation provided by a fund is one of the incidents of employment. The employer appoints the Trustee and, in the present case, the Trustee delegated its decisions to a Committee which met on BHP premises and apparently accepted the accuracy of the employer's records. It is absurd that such a committee has a power which is substantially unreviewable in contested cases. It acts as both investigator and judge. Principles as to the exercise of the powers of a trustee borrowed from earlier days are inappropriate. What is required is a review of the merits and not the application of a system of trustee principles taken from bygone eras and different circumstances. The matter is far too important to employees and workers to be left in its present state. Their future and those of the families are at issue. The unfairness of the present system is highlighted by adverse decisions being made by the BRC without the employee being told of all the material adverse to his application.