Tuftevski v Total Risks Management Pty Ltd as Trustee of the BHP Billiton Superannuation Fund

Tuftevski v Total Risks Management Pty Ltd as Trustee of the BHP Billiton Superannuation Fund - [2009] NSWSC 1021 - NSWSC 2009 case summary — Zoe

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1026/07 - Peter Tuftevski v Total Risks Management Pty Ltd as Trustee of the BHP Billiton Superannuation Fund (No 2) JUDGMENT 1 On 27 April 2009 I published a judgment dealing with the plaintiff's claim to be paid a disablement benefit out of an Employee Superannuation Fund. On 19 May 2009 I made these declarations and this Order: "1. Declare that the decisions of the Benefits Review Committee established by Haematite Pty Limited as Trustee of the BHP Billiton Superannuation Fund rejecting the Plaintiff's claim for disablement benefits on 15 November 1999, 14 March 2000 and 20 February 2001 did not involve genuine decision making and were void and of no effect. 2. Declare that as a consequence of the matters in the preceding declaration, the decision of Total Risk Management Pty Ltd as Trustee of the BHP Billiton Superannuation Fund refusing to further consider the plaintiff's claim for disablement benefit on 24 February 2006 was void and of no effect. … 7. Order that the Court execute the BHP Billion Superannuation Fund with respect to the Plaintiff's claim for a disablement benefit by substituting its own discretion for that of the trustee of the Fund." 2 This judgment should be read with the earlier judgment and the relief granted. Total Risks Management Pty Ltd succeeded Haematite Pty Ltd as Trustee of the Fund. 3 I also gave directions as to the future conduct of the matter, that is, the service of evidence. I directed that the matter be listed for hearing on 21 September 2009 with the 22 and 23 September also being set aside. It was planned that I would hear the evidence and execute the Trust. This involved determining whether about November 1998 the plaintiff was disabled within the terms of the Fund Rules. The costs of the proceedings were reserved. 4 On 4 September 2009 I was advised by the solicitors for the Trustee that, following the receipt of additional medical evidence, the Trustee was "satisfied that the plaintiff satisfies the definition of Disablement in accordance with the rules of the BHP Billiton Superannuation Fund and consents to a declaration to that effect." The Court was advised that the parties were endeavouring to agree on the precise terms of the relief to be granted and that a three-day hearing would no longer be necessary. 5 On 21 September 2009 the plaintiff read an affidavit of 9 August 2009 of Dr Ian Gotis-Graham, a Rheumatologist and Consultant Physician, annexing copies of his reports of 30 May 2005 and 30 June 2009. The defendant tendered a copy of a report of 17 July 2009 prepared by Dr AK Lethlean obtained by it. Both reports, albeit in different terms, concluded that, as at November 1998 or shortly thereafter, the plaintiff was suffering from a disability which rendered him permanently incapable of continuing on in suitable employment having regard to his qualifications, training and experience. 6 The differences in their reports did not affect the plaintiff's entitlement to the lump sum benefit which he sought. 7 On the whole of the evidence, and particularly on the reports of Dr Gotis-Graham and Dr Lethlean, the plaintiff is entitled to be paid a lump sum benefit by reason of his Disablement pursuant to the rules of the BHP Billiton Superannuation Fund. A declaration will be made. 8 As the Court was executing the Trust the plaintiff sought an order that the defendant pay him that sum. He also sought interest on the lump sum benefit, in descending order, namely:

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See Southern Cross Commodities Pty Limited v Ewing (1987) 11 ACLR 818 at 843 and Hagan v Waterhouse (1991) 34 NSWLR 308 at 393. 12 The plaintiff relied on the leg of "serious misconduct" based on the findings in the earlier judgment. I do not think those findings amount to serious misconduct. They represent a misunderstanding of the correct procedure to be followed where the Trustee has material adverse to the member's claim which the member may be able to meet or explain. 13 As to the claim for interest at commercial rates, the plaintiff contended that his claim was in the nature of a commercial claim. It was akin to a claim for wages or a claim for money in an industrial context. The plaintiff pointed out that he had contributed to the Fund and provided his labour and that the Superannuation Fund was one of the benefits of his employment. 14 I am of the opinion that interest should not be awarded at commercial rates. I do not regard a claim for a disablement benefit from a Superannuation Fund as akin to a claim for wages or as a commercial matter. Further, the plaintiff was in receipt of an invalid pension (or its equivalent). I would not award interest at the commercial rate in the circumstances of the present case. While there was a difference between the commercial rate and the trustee rate in the late 1990s and early 2000s, the difference has evened out over the last few years. 15 The claim for interest at the trustee rate was based on the plaintiff's contention that the defendant had committed a breach of its fiduciary duty. Reliance was placed on the findings made in the earlier judgment as to the failures of the Trustee. It was submitted that, as the three decisions made by the Trustee in November 1999, March 2000 and February 2001 had all been declared void, the result was that the plaintiff's application for a disablement benefit had never been validly determined and that it was not until July - August 2009 that the Trustee advised that it accepted that the plaintiff met the definition of Disablement. 16 The defendant submitted that the Court did not find that the Trustee had committed a breach of trust or a breach of a fiduciary obligation but found that the decision making process followed by the Trustee in exercising a discretionary power under the Fund Rules was invalid. In my opinion bona fide enquiry and genuine decision making where these are required constitute an integral part of performing a fiduciary obligation. The obligation is to determine, in the exercise of its discretion, whether the applicant for a Disablement benefit meets the definition of Disablement. There is a further obligation to pay a Disablement benefit where the Fund Rules so provide. The process followed by the Trustee to ascertain and determine in the exercise of its absolute discretion whether the applicant, a former contributory employee, meets the criteria for payment of the Disablement benefit constitutes part of the duty of the Trustee. The process followed must involve deciding a question of fact in good faith and giving it real and genuine consideration. This often cannot be done without conducting some investigation and making relevant inquiries. In some instances, and particularly where it has received material adverse to the applicant's claim, it may well involve telling the applicant of the effect of the adverse material in sufficient detail and inquiring what materials the applicant would like to provide to meet it, including the provision of explanatory material and giving the applicant the opportunity to provide such material. In the present case, that would probably have resulted in the plaintiff offering an explanation and adducing further medical material. 17 The defendant emphasised that, in its earlier judgment, the Court did not find that the Trustee breached the Trust by failing to pay the disablement benefit to the plaintiff. 18 The defendant attached some weight to the position which would have arisen had the Court followed what was described as the "usual course" of remitting the matter to the Trustee. The Trustee looked to the "usual remedies" in support of its submission that there had been no breach of a fiduciary obligation. I do not follow that approach. 19 The defendant submitted that:

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a) the Court is standing in the shoes of the Trustee under the Fund Rules; b) the re-consideration of the plaintiff's application is required to be in accordance with the Fund Rules; and c) the Fund Rules do not empower the Trustee (or the Court standing in the shoes of the Trustee) to pay interest to the plaintiff in the circumstances of this case despite addressing the topic of interest (for example, Rule A11.11.7). 20 I did not find the example given in sub-paragraph (c) persuasive. 21 Clause B1.8 of the Fund Rules states that the lump sum benefit payable to a member prior to his normal retiring age by reason of his Disablement subject to Rule B1.8(b) shall be the amount obtained by a specified calculation. There is no mention of interest. Rule B1.8(b) does not arise in these proceedings. As might be expected, the Fund Rules contain extensive provisions as to the management of the Fund and investment of the monies of the Fund. 22 The affidavit of 18 September 2009 of Mr AC Miller, the actuary to the Fund, reveals that, as at 15 September 2009, he calculated that the total interest earned by the Fund on $260,049.81 for the period 15 November 1999 to 15 September 2009 was approximately $204,514.44. Interest at the Trustee rate of 8% per annum for the period 15 November 1999 to 21 September 2009 was said to be $204,905.00. There is little difference between the two amounts. 23 In my opinion the Court is not precluded from awarding equitable compensation to the plaintiff from 15 November 1999. That compensation would be interest at the Trustee rate of 8%. 24 In O'Halloran v RT Thomas & Family Pty Ltd 45 NSWLR 262 at 272, Spigelman CJ said: "The object of equitable compensation is to restore persons who have suffered loss to the position in which they would have been if there had been no breach of the equitable obligation." (citations omitted) 25 At 272 - 273 the Chief Justice cited passages from the speech of Lord Browne-Wilkinson in Target Holdings Ltd v Redferns [1996] 1 AC 421 at 432 E - H: "At common law there are two principles fundamental to the award of damages. First, that the defendant's wrongful act must cause the damage complained of. Second, that the plaintiff is to be put 'in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation' Livingston v Rawyards Coal Co (1880) 5 App Cas 25 at 39, per Lord Blackburn. Although, as will appear, in many ways equity approaches liability for making good a breach of trust from a different starting point, in my judgment those two principles are applicable as much in equity as at common law. Under both systems liability is fault-based: the defendant is only liable for the consequences of the legal wrong he has done to the plaintiff and to make good the damage caused by such wrong. He is not responsible for damage not caused by his wrong or to pay by way of compensation more than the loss suffered from such wrong. The detailed rules of equity as to causation and the quantification of loss differ, at least ostensibly, from those applicable at common law. But the principles underlying both systems are the same."

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In my opinion this also represents the law in Australia." 26 I follow these statements of principle. 27 The defendant submitted that there was no basis for ordering equitable compensation. The defendant, in addition to referring to O'Halloran, also relied on Harrison v Schipp [2001] NSWCA 13 at [129] - [130]. 28 The defendant submitted that the defendant's breach of equitable obligation (if found) had not deprived the plaintiff of money so that it was not entitled to equitable compensation. 29 I think that the defendant's breach of its equitable obligation had the effect of depriving the plaintiff of money. If, as I think probable, the plaintiff had offered an explanation of the adverse material, and he had a good explanation, and he had adduced material and the Trustee had given full and genuine consideration to the explanation and to the further medical and other material, the plaintiff's claim to a disablement benefit should have been allowed. 30 The defendant further submitted that in cases where the claim concerns non payment by a trustee to a beneficiary of a money entitlement there must have been an unjustified withholding of the funds in question in order to justify an order for the payment of interest. 31 I think that there was an unjustified withholding of funds in this case. This resulted, at least in part, from the Trustee not telling the plaintiff in sufficient detail (or at all) of the thrust of the adverse material against him and thereby not giving the plaintiff the opportunity to give the good explanation which he had and adduce further medical and other material. 32 Too much was made in the submissions of the defendant of my not making an order for the payment of the Disablement benefit in or consequent upon my earlier judgment. These proceedings were conducted in two stages. At an early stage of the proceedings the plaintiff made plain that I was being asked to declare the decisions of the Trustee void and that thereafter I was going to be asked to execute the Trust. That was the basis on which the proceedings were conducted. If I decided to execute the Trust that involved subsequently hearing all the evidence and deciding whether the plaintiff met the criteria for a disablement benefit. It would have been erroneous to make the latter determination without first hearing all the evidence. That was why the three days of 21 - 23 September 2009 were set aside. I anticipated that it was likely to involve considering the surveillance material at length. 33 Before considering the further submissions of the parties, I turn to the reports of Dr Gotis-Graham and Dr AK Lethlean. In his report of 30 June 2009, Dr Gotis-Graham wrote: " [The plaintiff] has chronic lumbar spine pain due to the lumbar spine injury in 1985. He also had arachnoiditis …

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The question to be answered by the Tribunal as determined in Section 37(6) of the Complainants Act, is whether in its operation in relation to the Complainant in the circumstances, the Trustee's decision is fair and reasonable. The question is not whether the Tribunal might on the evidence before it, substitute a different decision to that of the Trustee. The Tribunal is satisfied that the video surveillance throws sufficient doubt as to the extent to which the Complainant's back condition affects his mobility and hence his ability to work so that given the conflicting medical evidence the Trustee's decision could not be said to be unfair or unreasonable in its operation to the Complainant in all the circumstances. That being the conclusion of the Tribunal, the decision under review must be affirmed." 39 The Tribunal affirmed the decision of the Trustee, i.e., no disablement benefit was payable. 40 The plaintiff contended that the Tribunal had addressed the wrong question. He pointed to s 37(1) of the Superannuation (Resolution of Complaints) Act 1993 which provides that for the purpose of reviewing a decision of the Trustee of a fund the Tribunal has all the powers, obligations and discretions that are conferred on the Trustee. Under s 37(6) the Tribunal must affirm the decision of the Trustee if satisfied that the decision in its operation in relation to the complainant was fair and reasonable in the circumstances. 41 Fairly read the whole of the reasons are not open to the criticism that the Tribunal proceeded to affirm the Trustee's decision because there was some evidence supporting it. 42 The Tribunal considered the whole of the materials, noted the conflicting medical opinions and attached weight to the surveillance materials and made the determination mentioned. 43 The materials before the Tribunal included not only the report of Dr S Ng of 6 November 2001 but the radiology report of 1 November 2001 by Dr Blumgart. 44 The plaintiff did not seek to challenge the Tribunal's decision in the Federal Court. He may not have had the resources to do so. He was in receipt of an invalid pension. 45 While I thought that the defendant's submission that it would have been in breach of its obligations to other fund members if it had paid the benefit to the plaintiff at any time prior to receipt of the 2009 medical reports was probably putting the position at too high a level, a Trustee would have been entitled to be wary about paying the benefit to the plaintiff after the Tribunal's decision of 30 September 2002 in the absence of further evidence. It appears that the Tribunal, as reconstituted with a medical member (p 1 of its Review Determination and Reasons), and, although supplied with a copy of the radiology report of 1 November 2001 and referring to its terms at p 9 of its Reasons, including the reference to "suggesting underlying archnoiditis (sic)", did not develop that aspect. The reports of Dr Gotis-Graham and Dr AK Lethlean indicate that is a matter of importance. 46 The Trustee cannot be fairly criticised for not appreciating the significance of that reference in the radiology report, when it was not developed and the radiology report appeared to be a subsidiary one. 47 The defendant relied on the delay of the plaintiff in prosecuting his claim. It pointed out that all the relevant adverse material had been provided to the plaintiff by 5 March 2001. It may have been a few days later. The Tribunal proceedings were not reactivated by the plaintiff until about 13 May 2002. The Tribunal decision was notified about 1 October 2002. No court action was taken until about 8 January 2007. The earlier report of Dr Gotis-Graham bears date 30 May 2005. The request by the plaintiff for further consideration by the Trustee was made in February 2006 when the plaintiff submitted a further complaint and attached the report (or a copy) of 30 May 2005 of Dr Gotis-Graham. The contents of that report and my comments as to it sufficiently appear from the earlier judgment. 48 The reliance by the Trustee on the plaintiff's delay loses most of its force as the Fund has retained the principal and the return on investing it equates to almost the same amount as interest at the Trustee rate of 8% per annum. The difference is minimal. 49 I propose to allow interest for the period 15 November 1999 to 30 September 2009 as follows:

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(a) the principles applied by Brownie J in the last paragraph of his judgment in Armstrong v East West Airlines (Operations) Ltd , 3 February 1994, 3303 of 1990 - BC 9402253 at 21. The plaintiff accepted that the facts of that case differed markedly from those of the present case. Armstrong's case does not provide a sufficient basis for indemnity costs in the present case. (b) the unreasonable conduct of the defendant. This included, particularly, the non-acceptance of the offer contained in the letter of 26 August 2008 of the plaintiff's then solicitors to settle the plaintiff's claim for $375,000 plus costs. The offer was stated to remain open for 14 days and to lapse at 5 pm on 9 September 2008 and to be made pursuant to the principles enunciated in Calderbank v Calderbank. 51 There had been previous offers by the defendant's solicitors. By its facsimile of 13 September 2007, the defendant's solicitors advised that they were instructed to settle the matter for $5,000 inclusive of costs and that the offer remained open until 12 pm on 19 September 2007. By letter of 28 February 2008 the defendant's solicitors advised that the defendant offered $2,500 inclusive of costs and interest in full and final settlement of the plaintiff's claim. The offer was stated to remain open until 12 pm on 7 March 2008. By letter of 12 August 2008 the defendant's solicitors advised that the defendant offered $2,500 inclusive of costs and interest in full and final settlement of the plaintiff's claim. The offer was stated to remain open for 14 days and to lapse at 5 pm on 26 August 2008. 52 I have omitted the statements contained in each facsimile and letter as to why that offer should be accepted. 53 As at August 2008 $375,000 was appreciably less than the plaintiff would recover by way of principal of about $260,000 and interest thereon at the Trustee rate of 8% per annum. 54 I was referred to the judgment by Powell JA (with whom Priestely JA and Sheppard AJA agreed) in Nobrega v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney No 2 [1999] NSWCA 133 - BC 9902730 at [21] which adopted the view that there was no authority supporting the proposition that the mere writing of "a Calderbank letter" would justify an order for costs in favour of a successful party being taxed on a solicitor and client or an indemnity basis. Powell JA said: "The ordinary rule is that costs when ordered in adversary litigation are to be recovered on the party and party basis. Any attempt to disturb that situation needs to be carefully considered. It should only be departed from where the conduct of the party against whom the order is sought is plainly unreasonable." 55 I have also been referred to the paper delivered by Justice MJ Beazley of March 2008 on Calderbank offers. At [18] she stated: "It is important to recognise that a Calderbank offer does not automatically result in the court making a favourable costs order … Rather the question that the court has to determine, in deciding whether to do so is: '… whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure …'"

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That was taken from the judgment of Giles JA at [37] in SMEC Testing Service Pty Ltd v Campbelltown City Council [2000] NSWCA 323 . The passage as quoted involves a slight distortion in language. 56 This was a difficult matter to decide. The limitation points raised complex and difficult issues. It was not unreasonable for the defendant to take the limitation points. Initially, there appeared to be some disparity between the physical injury and the complaints of pain. It was not unreasonable for surveillance to be undertaken. The surveillance material appeared to raise issues requiring careful evaluation. It was not unreasonable for the defendant to raise these points in its defence. The Review Determination and Reasons of the Superannuation Complaints Tribunal of 30 September 2002 held that the Trustee's decision could not be said to be unfair or unreasonable in its operation to the plaintiff and affirmed the decision of the Trustee. 57 There was substantial delay on the part of the plaintiff. In late February 2006 the Trustee was supplied with the report of 30 May 2005 of Dr Gotis-Graham. While it raised the additional matter of arachnoiditis, it was not clear whether that was present in 1998 and impacted upon the plaintiff at that stage. 58 When the position became clear with the further report of 30 June 2009 of Dr Gotis-Graham and the report of Dr AK Lethlean of July 2009 the Trustee no longer disputed liability. 59 While I adhere to the view expressed in [181] of the earlier judgment that in this Court the Trustee conducted a vigorous and determined case against the plaintiff, this was a case in which the Trustee was entitled to do so: The Public Trustee & Anor v Cooper & Ors 2001 WTLR 901 at pp 11 - 12, where Hart J quoted from an earlier judgment of Robert Walker J. 60 I am not satisfied that the conduct of the defendant was unreasonable. In the whole of the circumstances, I propose to award the plaintiff costs of the proceedings on an ordinary basis but not on an indemnity basis. 61 I make the following declarations and orders: 1. a declaration that the plaintiff is entitled to be paid by the defendant as Trustee of the BHP Billiton Superannuation Fund and out of that Fund a lump sum benefit of $260,049.81, pursuant to Rule 1.8 Section B of that Fund's Rules, by reason of his Disablement; 2. a declaration that the plaintiff is additionally entitled to be paid by the defendant as Trustee of the BHP Billiton Superannuation Fund and out of that Fund as equitable compensation simple interest at the Trustee rate of eight (8) per centum per annum on the principal sum of $260,049.81 from 15 November 1999 to 30 September 2009, namely $205,371.00; 3. order that the defendant pay to the plaintiff out of the Fund $465,420.00 ($260,049.00 and $205,371.00). Interest is not payable on the amount of the order if the amount is paid in full within 28 days of 30 September 2009. If the amount is not paid in full within 28 days of 30 September 2009 interest is payable at the rate prescribed under the UCP Rules on so much of that amount as for the time being remains unpaid; 4. order the defendant to pay the plaintiff's costs of the proceedings out of the Fund on the ordinary basis; and 5. liberty to both parties to apply on 2 days' notice within seven days to correct any arithmetical error of more than $200.00.

At a glance

Court

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Before

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Judgment (48 paragraphs)

Parties

Cases Cited (4)

Cited By (1)