Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd

Do Not Send for Reporting
IN THE SUPREME COURT OF VICTORIA		Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

COMMERCIAL LIST

No. 2115 of 2001

ANSETT AUSTRALIA GROUND STAFF SUPERANNUATION PLAN PTY LTD AND ANOR	Plaintiff
v
ANSETT AUSTRALIA LIMITED (subject to a deed of company arrangement) AND ORS	Defendants

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JUDGE:	WARREN J.
WHERE HELD:	MELBOURNE
DATE OF HEARING:	16-18, 22 and 23 July, 7-9, 12-15, 19-23, 26 and 26-28 August 2002
DATE OF JUDGMENT:	20 December 2002
CASE MAY BE CITED AS:	Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Limited and Ors
MEDIUM NEUTRAL CITATION:	[2002] VSC 576	Revised 7 February 2003

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SUPERANNUATION – Benefit entitlements – Requirements under legislation – Solvency – Contribution by employer.

TRUST – Superannuation trust deed – Employee entitlements – Benefits – Redundancy – Retrenchment benefits – Declaration powers.

PRIORITIES – Employee entitlements – Superannuation contribution – Expenses in the administration of the company – the “Lundy Granite” principle – the “rent cases” – contingent liability.

ADMINISTRATION – Role of administrator – Actions of the administrator in the course of the administration – Nature of business of company after administration – Actions taken for the preservation of the assets of the company – Actions taken to continue the business of the company.

WORDS AND PHRASES – “Retrenchment” – “Redundancy” – “Properly incurred” – “Expenses”.

Occupational Superannuation Supervision Act 1987

Superannuation Guarantee Charge Act 1992

Superannuation Guarantee (Administration) Act 1992, s.10

Superannuation Industry Supervision Act 1993, ss.16, 19, 31 and 34

Superannuation Industry Supervision Regulations, Regulation 9

Occupational Superannuation Standards Regulations, Regulations 3 and 8(1A)

Corporations Act 2001, ss.553, 555, 560, 556 and 558

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.G. Santamaria Q.C. with Mr D.M. Maclean	Deacons
For the First and Second Defendants	Mr S.P. Whelan Q.C. with Mr T.J. Walker and Ms B.M. McMahon	Arnold Bloch Leibler
For the Third Defendant	Dr I.J. Hardingham Q.C. with Mr M.A. Robins	Pointon Partners
For the Fourth Defendant	Mr J.D. Merralls Q.C. with Mr C.C. Macaulay	Piper Alderman
For the ACTU (intervening)	Mr R. Brett Q.C.	Maurice Blackburn Cashman

TABLE OF CONTENTS

Introduction........................................................................................................................................ 3

PART I.................................................................................................................................................. 7

The Statutory Regime................................................................................................................... 7

The Superannuation Guarantee Legislation................................................................................ 8

The Superannuation Industry Supervision (SIS) Legislation................................................ 12

Summary of Statutory Regime...................................................................................................... 16

PART II.............................................................................................................................................. 18

The Trust Deed................................................................................................................................. 18

Authorities on relationship of Federal Legislation to Superannuation Deeds.................. 34

The Core Components of the Ground Staff Plan.................................................................... 35

The Actuarial Investigation....................................................................................................... 36

Funding and Solvency Certificates 4 and 5 (“FSC 4” and “FSC 5”).................................... 37

The Assets of the Plan................................................................................................................. 39

PART III............................................................................................................................................. 41

Summary of Evidence for the Plaintiff..................................................................................... 41

(1) Graeme Clifford Allison..................................................................................................... 41
(2) John Ian Cann.................................................................................................................... 44
(3) Kelvin Thomas Cosgriff...................................................................................................... 45
(4) Peter John Salerno.............................................................................................................. 46
(5) Iain Bruce Lang.................................................................................................................. 46
(6) Nigel Antony Fish.............................................................................................................. 48
(7) Paul Daniel Francis........................................................................................................... 49
(8) Peter Edmund Cash........................................................................................................... 51
(9) Jeanette Rachel Thomson.................................................................................................... 51
(10) Richard James Campbell................................................................................................... 51
(11) Richard Sampson Mitchell............................................................................................... 52
(12) Mark Daniel Abramovich................................................................................................ 52
(13) Sylvana Marie Karam...................................................................................................... 53

The Evidence for the Administrators....................................................................................... 54

(1) Mark Anthony Korda......................................................................................................... 54
(2) Mark Francis Xavier Mentha............................................................................................ 57
(3) Janet Belleli......................................................................................................................... 57
(4) Dominic Emmett................................................................................................................ 57
(5) Carmel Lyndsay Flynn....................................................................................................... 57
(6) Michael Thomas Robert Binetter....................................................................................... 58
(7) Andrew Proebstl................................................................................................................. 58
(8) Dominic Gerard Emmett.................................................................................................... 58
(9) Denis James Thorn............................................................................................................. 59
(10) Paul Francis Chiappi........................................................................................................ 60

The Evidence for the Third Defendant.................................................................................... 60

The Evidence for the Fourth Defendant.................................................................................. 60

The Documentary Evidence...................................................................................................... 61

PART IV............................................................................................................................................. 62

The Approach of Ansett Towards its Employees................................................................... 62

The Member Booklets................................................................................................................. 62

The Historic Treatment by Ansett of Retrenchments............................................................ 65

Conduct Involving the Actuary Pre and Post Administration................................................ 67

PART V.............................................................................................................................................. 79

The issues before the Court....................................................................................................... 79

The Relevant Questions in the Originating Motion............................................................... 80

PART VI............................................................................................................................................. 83

Interpretation of Trust Deed: Construction of “Retrenchment”............................................ 83

Authorities on proper interpretation of Pension Deeds........................................................ 83

PART VII......................................................................................................................................... 101

The Contractual Obligations of Ansett...................................................................................... 101

PART VIII........................................................................................................................................ 102

Priority Under s.556 of the Corporations Act 2001................................................................. 102

The Legislative Context of Section 556...................................................................................... 105

The History of Section 556........................................................................................................... 107

The Construction of Section 556(1) of the Corporations Act................................................. 113

The Authorities............................................................................................................................... 126

(a) The Rent Cases..................................................................................................................... 127

(b) The K.D. Morris case............................................................................................................ 133

Authorities since K.D. Morris.................................................................................................. 141

(c) The Contingent Obligation Cases..................................................................................... 147

Summary of Conclusions............................................................................................................. 154

HER HONOUR:

Introduction

Ansett Australia Limited was for many years one of the major domestic airline services in Australia. Its origins may be traced back to a single-engine, open cockpit service operated in Victoria in 1936. It advanced in 60 years to a major airline with ancillary travel services and facilities.

In the latter part of 2001 the airline fell under financial difficulty. On 12 September 2001 administrators were appointed, Peter Hedge, Greg Hall and Allan Watson (“the initial administrators”). They resolved the cessation of airline operations and stood down the majority of Ansett employees. It became necessary for the initial administrators to resign and new administrators were appointed on 17 September 2001, Mark Mentha and Mark Korda (“the administrators”). They found it necessary to stand down and terminate some staff. They recommenced airline operations on 29 September 2001. Simultaneously, the administrators embarked on efforts to sell the airline.

There were steps taken by the administrators in an endeavour to continue the airline. In that context a number of external, including legal and political events, occurred. On 14 September 2001 the Commonwealth government announced the advance of moneys for Ansett employee entitlements to the extent that such entitlements could not be met by the assets of Ansett. This was to be effected by way of a levy to be charged on air passenger tickets. The Commonwealth government established a Special Employee Entitlement Scheme for eligible companies under the Air Passenger Ticket Levy (Collection) Act 2001 (“the Levy Act”).[1] The scheme came to be known as “SEESA”. On 14 December 2001 the administrators, following approval by the Federal Court, and the Commonwealth government executed the SEESA deed and on 18 December 2001 a document described as the “SEES Administration and Loan Agreement”. Under the arrangement the Commonwealth government injected approximately $200,000,000 into the SEESA Scheme to enable former Ansett employees to be paid unpaid wages, unpaid leave, unpaid long service leave, entitlements for pay in lieu of notice and redundancy entitlements up to a period of eight weeks. There were terms of the SEESA arrangement that where Commonwealth moneys were paid to an employee the Commonwealth became subrogated to the rights of the employee and if a priority attached to that entitlement then that too became subrogated to the Commonwealth. The arrangements, including the provision for subrogation to the Commonwealth, were approved in orders made by Goldberg J in the Federal Court on 14 December 2001.[2] The subrogation requirement was described by Goldberg J in his judgment approving the SEESA Deed, as follows:

“The effect of the Commonwealth’s proposal was to give it priority for the repayments of any advances made by it to the administrators for employee entitlements as if it stood in the shoes of the employees to whom, and for whom, the payments were made. In particular, this proposal would give the Commonwealth priority for repayment over non‑employee unsecured creditors and would enable the Commonwealth to rank equally with those employees who had entitlements, such as retrenchment payments in excess of 8 weeks, which had not been paid to them under the scheme.”[3]

[1]See especially ss.7, 9 and 22.

[2]See Re Ansett Australia Limited and Ors v Mentha and Anor (2002) 48 ACSR 389.

[3]Ibid at 393.

At the same time as these events were occurring a dispute between Ansett and Air New Zealand was resolved by the New Zealand government agreeing to pay to Ansett on behalf of Air New Zealand the sum of $150,000,000. The resolution of the dispute was recorded in a memorandum of understanding between the subject parties made on 3 October 2001. The agreement resolving the dispute between Ansett and Air New Zealand was approved by Goldberg J in the Federal Court on 12 October 2001.[4] A requirement was imposed upon the administrators by the Commonwealth government that the settlement sum from Air New Zealand be applied to meet the payments to priority creditors of Ansett.
[4]See also Re Ansett Limited and Ors v Mentha and Anor (2001) 39 ACSR 355.

During the progress of the SEESA negotiations between the administrators and the Commonwealth government, the administrators embarked on a course of notifying Ansett employees of the opportunity for voluntary redundancy. Letters were dispatched on about 17 October 2001.[5] The letter informed employees of a number of matters including consultation with the Australian Council of Trade Unions and unions, the payments available under SEESA and a schedule for the calculation of entitlements. The letter advised, also, that benefits under a relevant superannuation scheme were separate from the voluntary redundancy offer. Subsequently, offers were accepted and a programme of retrenchments commenced.
[5]The form of letter appears at Annexure A to these reasons.

The administrators embarked upon revival programmes in an effort to continue the airlines service but on a massively reduced basis. They initiated “Kick-Start”. It involved the recommencement of flying a limited number of aircraft, approximately ten in number, on the major trunk routes, principally to preserve the name and good will of Ansett. The administrators devised, also, a new Ansett business called “Ansett Mark II”.

Meanwhile, on 8 November 2001 the administrators entered into an agreement with TESNA Holdings Limited (“TESNA”) to sell the airline. The agreement between Ansett and TESNA was considered by Goldberg J in the Federal Court in Re Ansett Australia and Ors v Korda and Anor.[6] However, on 28 February 2002 the agreement with TESNA was terminated. Subsequently, the administrators closed down almost all of the company’s operations and, most significantly, all flights ceased on 4 March 2002. On 2 May 2002 the administrators executed a deed of company arrangement with the creditors of the company.
[6](2002) 40 ACSR 433

In the context of these circumstances Ansett, as an employer, was party to certain superannuation trust deeds with respect to its employees. Arising from the ongoing retrenchments, terminations and redundancies effected by the administrators, the employees’ superannuation entitlements crystallised. Questions arose on the part of the trustee of the subject superannuation fund as to the entitlement of the employees of Ansett.

Essentially, three issues arose. First, whether the retrenched employees of Ansett were entitled to benefits under the subject trust deed and, if so, to which categories of benefits. Secondly, if the entitlements give rise to a deficiency in the fund, is Ansett obliged to make further contributions to enable payment of those benefits? Third, if so, what priority ranking the obligation upon Ansett attracts under s.556(1) of the Corporations Act 2001.

Arising from these circumstances the plaintiff, as trustee of the Ansett Australia Ground Staff Superannuation Plan (“the Plan”) issued these proceedings seeking answers to questions they postulated in the nature of the three questions identified.

The first defendant was the company, Ansett. The second defendants were the administrators. The third defendant was one Russell Thomas Booth. He was a representative party representing those employees of Ansett who have been retrenched. The fourth defendant, one Steven Clarke, was a representative party representing those persons who remain in the employ of Ansett. Originally, the fourth defendant was one James Herbert Hennessy. However, during the trial Mr Hennessey ceased to be employed by Ansett and, as a consequence, Mr Clarke was substituted as the defendant representing persons remaining in the employ of Ansett. The Australian Council of Trade Unions (“the ACTU”) intervened and made oral and written submissions. The position of the ACTU essentially supported that of the administrators.

PART I
The Statutory Regime

There was no issue over the history of the statutory regime. The plaintiffs provided a thorough overview of the applicable legislation.

Up until the mid 1980s the only Federal legislation relating to superannuation was contained in the Income Tax Assessment Act 1936. In particular, s.23F exempted the income of certain superannuation funds from income tax..[7] The Commissioner of Taxation prescribed in an ad hoc fashion various standards that had to be met for a private sector superannuation fund to be eligible for that tax concession.
[7]Introduced in 1964

Access to superannuation benefits was a matter entirely within the discretion of the employer. Access to superannuation benefits was largely the privilege of government employees and the employees of major corporations. There was also the question of the limitations of the power of the Commonwealth Parliament. Moreover, it was generally considered that s.51(xxxv) of the Constitution did not confer power on the Parliament, in making laws in relation to the conciliation and arbitration of interstate industrial disputes, or to make laws with respect to matters thought to arise outside and beyond the termination of the contract of employment.

However, in Re The Manufacturing Grocers’ Employees Federation of Australia and Anor (1986) 160 CLR 341, the High Court held that the Conciliation and Arbitration Commission had power to make awards that contained provisions not only for wages and conditions but also for superannuation. Furthermore, in the National Wage Case of June 1986, the Industrial Relations Commission[8] made express provision for superannuation and described the principles that would govern its preparedness to certify agreements that provided for superannuation and as to when it would include provisions for superannuation in awards. Thereafter, the superannuation plans of various employers were increasingly used as the vehicle whereby the employer satisfied award obligations in relation to superannuation.
[8]which had succeeded the Conciliation and Arbitration Commission.

In 1987, the Commonwealth enacted the Occupational Superannuation Supervision Act 1987 (Cth) (“OSSA”). It was the first piece of legislation to specifically regulate superannuation funds. OSSA was intended to codify and rationalise the superannuation laws which until then had been contained in income tax legislation. Under OSSA, general supervision was conferred on the Insurance and Superannuation Commission (“the ISC”).[9]
[9]See the explanatory memorandum to the Occupational Superannuation Standards Bill 1987 and the second reading speech to the Bill, Hansard, Senate, 6 Oct 1987, p.728ff.

The Superannuation Guarantee Legislation

The next change to superannuation legislation occurred in 1992.

In 1992 the Commonwealth Government introduced a “superannuation guarantee”. The concept was that employers would be compelled to contribute a specified (escalating over a number of years) percentage of employees’ salaries to superannuation. The means by which this was achieved was the introduction of a charge, the liability for which could be eliminated by the making of superannuation contributions for employees pursuant to the legislation.

The Commonwealth enacted two Acts globally referred to as the “Superannuation Guarantee Legislation” consisting of Superannuation Guarantee Charge Act 1992 and the Superannuation Guarantee (Administration) Act 1992.

The Second Reading Speech of the Treasurer contained the following statements:

“The superannuation guarantee levy represents another major step forward in the development of retirement incomes policy. It will lay the foundation for income security and higher standards of living in retirement for future generations of retirees. The superannuation guarantee levy provides:
·a major extension of superannuation coverage;
·an efficient method of encouraging employers to comply with their award obligations; and
·an orderly mechanism by which employer superannuation support can be increased over time, consistent with the economy’s capacity to pay.

…
Where employers provide less than the minimum level of superannuation support, they will be liable for a superannuation charge. The superannuation guarantee charge – which will not be a deductible expense for employers – will be used to meet the superannuation contribution entitlements of the relevant employee and will be used … to fund administration costs.
…
… this mechanism is not intended to be the principal vehicle for the funding of employee’s superannuation contribution entitlements. It is intended, instead, to be an incentive for employers to meet their own obligations, and to be a support mechanism for employees where those obligations are not met.
…
Superannuation support must be provided through a complying superannuation fund in order to be counted towards the minimum level of superannuation support. The fund can be either a defined contribution fund or a defined benefit fund. In the case of a defined benefit fund, the employer will be required to obtain an actuarial certificate specifying the level of employer superannuation support implicit in the benefits available to employees in the fund. For all other funds, the employer’s level of support will be based on the actual contributions made to the fund.”[10]

[10]See Hansard 2 April 1992 at 1763-1765.

The effect of the legislation was that the Superannuation Guarantee Charge Act imposed a charge based on any shortfall in superannuation contributions for employees. The charge was calculated by reference to the Superannuation Guarantee (Administration) Act. The two Acts were regarded as “a package of measures” that required reading together.[11] The rationale underlying the legislation was to encourage employers to provide minimum superannuation for employees.[12] The inducement was that if employers provided less than the minimal level of superannuation they would be liable for a superannuation guarantee charge that would not constitute a deductable expense for taxation purposes for such employers.
[11]See second reading speech, Hansard (House of Representatives), 2 April 1992, p.1763.
[12]Ibid, p.1764.

The combined operation of the two enactments presents an employer with a choice. Either the employer must provide sufficient “superannuation support” or pay the “superannuation guarantee charge”.[13]
[13]It is to be noted that subsequent amending legislation, the Occupational Superannuation Standards Regulations Application Act 1992, was enacted to overcome apparent legal difficulties in relation to OSSA and the regulations thereunder.

Further, defined benefits funds employer contributions are not fixed, so that liability for the charge is related to a “notional employer contribution rate”. This “notional employer contribution rate” is established by an actuary and is set out in a document called a “benefit certificate”.

Section 10 of the Superannuation Guarantee (Administration) Act provides:

“(1)A benefit certificate is a certificate by an actuary relating to one or more specified defined benefit superannuation schemes and specifying the rate, expressed as a percentage, that is, in the opinion of the actuary, the notional employer contribution rate, in relation to a specified class of employees (being members of the scheme or schemes, as the case may be), of an employer who is a contributor under the scheme or schemes (as the case may be) for the benefit of an employee in that class.
(2)The notional employer contribution rate, in relation to a class of employees specified in a benefit certificate relating to one or more defined benefit superannuation schemes, is the contribution rate required to meet the expected long-term cost, to an employer who contributes to the scheme or schemes for the benefit of employees in the class, of the minimum benefits accruing in respect of all employees in the class from the date of effect of the benefit certificate onwards.
...”

The section does not define “minimum benefits”, but s.10(6) provides that regulations may make provision regarding the way in which minimum benefits are to be calculated. “Minimum requisite benefit” is defined in Regulation 2 of the SGA Regulations as having “the same meaning as in the Occupational Superannuation Standards Regulations”. Regulation 3 of the Occupational Superannuation Standards Regulations (“OSS Regulations”) defines “minimum requisite benefit” to mean:

“the minimum benefit required to be vested in the member by the superannuation fund conditions.”

Regulation 6 of the SGA Regulations provides that “MB” is calculated using the formula: “MRB – PAV” where “MRB” means the minimum requisite benefit in respect of a person and “PAV” means the part of that benefit that accrued to the person before 1 July 1992 calculated in accordance with sub-regulation (6). Thus, the meaning of minimum benefits in s.10 is the “minimum requisite benefit” stripped of its pre 1 July 1992 component.

The minimum benefit “required to be vested in the member by the superannuation fund conditions” is provided for in regulation 8 of the OSS Regulations.[14] Regulation 8(1A) provides:

“Any benefits, other than death or disability benefits, vest in the member on the day on which the benefits accrue, if the benefits arise directly or indirectly from contributions made in respect of a member of a superannuation fund:
(a)by an employer in amounts that do not exceed the minimum amounts required by the Guarantee Act so that superannuation guarantee charge is not payable by the employer; or
(b)as payment of the shortfall component in relation to the member; or
(c)in accordance with a prescribed agreement or award.”

[14]See definition of “superannuation fund conditions” and ss. 5 and 7 of the Occupational Superannuation Standards Act 1987 (“OSS Act”) is now known as the Superannuation (Self Managed Superannuation Funds) Taxation Act 1987. Despite their repeal, ss.5 & 7 of the OSS Act still apply by virtue of s.16(3)(a)&(b) of the Occupational Standards Amendment Act 1993. The Regulations under OSS Act are still in operation.

The charge has increased over the years. It began at about three per cent. In the financial year 2000/2001 it was at eight per cent. It is at eight per cent for the present year. The charge will rise to nine per cent in 2002/2003. In effect, an employer is now compelled by law either to pay the charge or to avoid the charge by making superannuation contributions to a regulated superannuation fund. In the case of its employees who are members of the Ground Staff Plan, Ansett has used that plan as the vehicle to satisfy its obligations under the Superannuation Guarantee Legislation.

Hence, the mutual rights and obligations of employer, trustee and members are no longer governed solely by the provisions of a trust deed. There came to pass from 1992 onwards arising from the Superannuation Guarantee Legislation that there was also a “legislative overlay” governing the superannuation obligations of Ansett.

The Superannuation Industry Supervision (SIS) Legislation

The legislative overlay was not static. It was subject to ongoing change. In 1993, the Commonwealth enacted the Superannuation Industry (Supervision) Act 1993 (“the SIS Act”). The SIS Act provided for the comprehensive regulation and supervision of superannuation funds. The SIS Act enabled the Superannuation Industry (Supervision) Regulations (“the SIS Regulations”). The explanatory statement[15] to the SIS Regulations provided a useful explanation of the interaction between the superannuation guarantee system.[16] In particular, the explanatory statement noted:[17]
[15]See explanatory statement to Statutory Rules 1994 No. 57, Superannuation Industry (Supervision) Regulations, p.42ff.
[16]Constituted by the Superannuation Guarantee Charge Act and the Superannuation Guarantee (Administration) Act.
[17]Ibid, p.57.

“The regulations to be prescribed in relation to the financial management and solvency of superannuation funds are essentially new regulatory/supervisory functions. The necessity for regulation in these areas has emerged with the introduction of compulsory employer-financed superannuation via the Superannuation Guarantee (Administration) Act 1992. It is the government’s objective to ensure the security of the member’s entitlement to those benefits attributable to compulsory Superannuation Guarantee (SG) contributions.
The regulations framed under the Occupational Superannuation Standards Regulations were considered inappropriate in a number of respects:
·     the imposts on defined benefit funds (DBF) were more onerous than those on non-defined benefit funds;
·     the solvency measures for DBFs were prescribed such as to have retrospective effect – limited transitional provision was made for funds unable to satisfy the standards at outset;
·     the nature of the solvency test for DBFs – requiring non-conditional guarantee as to the continuous solvency of the fund over a five year future period – was, given the probabilistic nature of superannuation, impossible to provide.

The necessity for financial management and solvency standards has emerged under the new superannuation regulatory regime, the measures should not be excessively prescriptive nor onerous. The objective is:
· to protect the interests of fund members, in the long term, against intentional mismanagement of their retirement savings; and
· to provide a mechanism for early identification of mismanagement (preventative measures) and to initiate corrective actions where mismanagement occurs.”

As a matter of practice, it is the regulations made under each of the Acts constituting the superannuation legislation that operate to permit an employer to reduce each of its superannuation guarantee shortfalls to nil.

Part 9 of the SIS Regulations (of which Division 9.3 is a part) is made pursuant to s. 31 of the SIS Act. Section 31 provides:

“(1)The regulations may prescribe standards applicable to the operation of regulated superannuation funds (funds).
(2)The standards that may be prescribed include, but are not limited to, standards relating to the following matters:
...
(t)the funding and solvency of funds;”

...”

Regulated superannuation funds are funds with certain characteristics where the trustee elects that the SIS Act is to apply: s.19 SIS Act. The obligation to comply with the standards prescribed by regulation is solely and exclusively placed upon the Trustee. The matter is dealt with in s.34 of the SIS Act under the heading “Prescribed operating standards must be complied with” in these terms:

“(1)The trustee of a superannuation entity must ensure that the prescribed standards applicable to the operation of the entity are complied with at all times.”

Division 9.3 of the SIS Regulations regulates the “funding and solvency of defined benefit funds”. Regulation 9.07 provides that for the purposes of s.31 (1) of the SIS Act the standards in Regulations 9.08, 9.09 and 9.17 are prescribed for the operation of defined benefit funds. Regulation 9.08 of the SIS Regulations provides:

“(1)In respect of each year of income of a defined benefit fund to which this Division applies, an employer-sponsor of the fund must pay contributions to the fund in accordance with this regulation.
(2)The contributions paid must be not less than the certified minimum contributions relating to the fund”
… “

“Employer-sponsor” is defined in s. 16 of the SIS Act to mean:

“(1)An employer-sponsor of a regulated superannuation fund is an employer who:
(a)contributes to the fund; or
(b)would, apart from a temporary cessation of contributions, contribute to the fund;
for the benefit of:

(c)a member of the fund who is an employee of:
(i)the employer; or
(ii)an associate of the employer; or

(d)the dependants of such a member in the event of the death of the member.”

“Certified minimum contributions” is defined in Regulation 9.06 for the purposes of the Division, to mean:

“... the minimum contributions certified, in accordance with sub-regulation 9.10(1) or 9.18(9), in a funding and solvency certificate.”

The Trustee must obtain a Funding and Solvency Certificate from an actuary under Regulation 9.09. Regulation 9.10, which deals with the contents of the Funding and Solvency Certificate, provides:

“(1)Subject to regulation 9.18 (relating to periods of technical insolvency), in the funding and solvency certificate required under regulation 9.09 in relation to a defined benefit fund, an actuary must:
...

(f)certify the minimum contributions reasonably expected by the actuary to be required in respect of any member or class of member to secure the solvency of the fund on the expiry date of the certificate.”

Regulation 9.06(2) of the SIS Regulations provides that, in Division 9.3, “a reference to the solvency of a fund is to be read as a reference to the minimum benefit index of the fund being certified in accordance with this Division as not less than 1.” The “minimum benefit index” is an index calculated in accordance with Regulation 9.15.

Regulation 9.15 provides:

“(1)The minimum benefit index in respect of a defined benefit fund is the index calculated in accordance with the following formula:
NRV – BEF
FMRB”

The various elements of the formula are defined in Regulation 9.15(2). “NRV” is defined to mean “the net realisable value of the assets of the fund” and “BEF” is defined to mean “the value of the benefit entitlements of former members of the fund”. These definitions are further defined in the subsection. “FMRB” is defined to mean “the funded minimum requisite benefit,” that is, “the amount that is the sum of:

(a)the value of the pre-initial date component of the MRB multiplied by the adjusted minimum benefit index; and
(b)the value of the post-initial date component of the MRB”.

“MRB” is defined to mean “the total amount of the minimum requisite benefits of all current members of the fund.” “Minimum requisite benefit” is “the benefit certified by an actuary in a relevant benefit certificate as the minimum benefit in respect of the member”: see Regulation 1.03. “Benefit certificate” is defined in Regulation 1.03 as, having “the meaning given by s. 10” of the Superannuation Guarantee (Administration) Act 1992.

SIS Regulation 9.08(1) and (2) are cast in mandatory terms. The employer “must” make contributions to the fund. Regulation 9.08(1) recites the obligation imposed on the employer and regulation 9.08(2) states the measure of the obligation, namely, that the contributions “must not be less than the certified minimum contributions”. The latter, “certified minimum contributions”, are defined in regulation 9.06(1) as meaning “the minimum contributions certified … in a funding and solvency certificate”. SIS regulation 9.09 requires the trustee to obtain a funding and solvency certificate from an actuary.

Summary of Statutory Regime

In summary, the legislation provides that an employer may make contributions to certain superannuation funds as a means of reducing each of its superannuation guarantee shortfalls to nil. In the case of an accumulation fund, this is relatively simple. The employer simply shows that it has contributed an amount precisely equal to the amount of the charge. In the case of a defined benefit fund, the process is complex. In particular, the process must take into account that the fund provides for the payment of fund or defined benefits as well as providing for minimum requisite benefits which are asset levels in the fund notionally appropriated for individuals for various purposes in order that the fund can pay benefits equating to the level of support required by the superannuation charge legislation. Accordingly, provisions exist that have a twofold effect. First, the provisions qualify the fund as one which will be permitted to reduce the superannuation guarantee shortfall to nil. This is achieved by an actuary identifying the implicit or notional rate of the employer’s contribution expressed as a percentage of a member’s salary represented by the minimum benefit available in the fund for that member so as to determine whether the charge obligation is met in whole or in part in respect of that particular member. Secondly, the provisions ensure that the fund has sufficient assets such that it will always be in a position to pay to employees the benefits equivalent to benefits to which they are entitled as a result of the superannuation guarantee legislation.

The qualification of the fund is produced by the making of a “benefit certificate” pursuant to s.10 of the Superannuation Guarantee (Administration) Act 1992. The production of that certificate is governed by the regulations made under that Act, namely the Superannuation Guarantee (Administration) Regulations 1993. The funding of sufficient assets is produced by the making of relevant funding standards pursuant to the SIS Act. The relevant funding standards are contained in the SIS Regulations. In particular, the relevant funding standards provide that an actuary must embark on two steps. First, to certify that a defined benefit fund is able to meet minimum requisite benefits as at the date of the certificate. Secondly, to certify minimum contributions reasonably expected by the actuary to be required in respect of any member to ensure that the fund is able to meet minimum requisite benefits at the expiry date of the certificate. In the relevant funding standard, the ability of a defined benefit fund to meet minimum requisite benefits at either of these dates is described as its “solvency”. However, the relevant funding standard is not designed to ensure constant solvency at every point of time between those two dates. Furthermore, there is a distinction between satisfying the obligation in a defined benefit fund and satisfying it in a defined contribution fund. In the former, a certificate of “superannuation support implicit in the benefits available” is required. In a defined contribution fund, satisfaction is a function of “actual contributions”. Under the legislative regime, therefore, it is the SIS Act that imposes a solvency requirement.

After the enactment of the SIS Regulations the trust deed in the present Plan was amended on 27 October 1994 to specifically include the application of those regulations to the deed.[18]

PART II

[18]As approved by the High Court in Attorney-General (Cth) v Breckler (1999) 197 CLR 83

The Trust Deed

The subject trust deed is the “Ansett Australia Ground Staff Superannuation Plan 1999 Consolidated Trust Deed” (“the trust deed”). The parties to the trust deed were Ansett as the employer and the first plaintiff, as trustee. It was dated 17 August 1999. The trust deed contemplated two different forms of benefit: first of all, the form of benefit known as the defined benefit plan; secondly, the form of benefit known as the accumulation plan. Broadly speaking, a defined benefits plan is a superannuation plan where payment is made upon a designated event such as termination. An accumulation plan is a superannuation plan where the employer and the employee contribute defined amounts and the employee is paid a specified share of corpus and income.

There were in fact five superannuation funds that were applicable to Ansett employees: the Ground Staff Plan; the Pilot Management Plan; the Ansett Australia Flight Attendants Benefit Plan; the Ansett Australia Pilots Accumulation Plan; and the Ansett Australia Flight Engineers Superannuation Plan. The Ground Staff Plan and the Pilot Management Plan both included a defined benefit and an accumulation section and provided for a retrenchment benefit under the defined benefit section. The other plans differed in that they included defined and accumulation sections but did not provide full retrenchment,[19] or were confined to an accumulation fund with no provision for retrenchment benefits.[20] The funds, other than the Ground Staff Plan, were not represented in the proceeding.
[19]The Flight Attendants Benefits Plan and the Engineers Superannuation Plan.
[20]The Pilots Accumulation Plan.

The trust deed was first made on 18 March 1988 and amended on subsequent occasions[21] culminating in a consolidating amendment effected on 17 August 1999. There was a more recent amendment made on 30 April 2002. The amendments were generally prompted by changes to the legislative regime governing superannuation funds.
[21]On 5 December 1990, 9 October 1992, 25 July 1994, 27 October 1994, 25 July 1995, 23 May 1995, 21 May 1996 and 30 April 2002.

The trust deed consists of three parts. The deed itself was constituted by clauses 1 to 32. Next, the first schedule being the rules of the management of the defined benefit section was constituted by rules 1.1 to 1.17. Lastly, the second schedule, being the rules for the management of the accumulation section. Only the trust deed itself and the first schedule (“the rules”) are relevant for present purposes. The Rules identified the following matters:

(a)the measure of the obligation to contribute;
(b)the various forms of benefit;
(c)the conditions that must be satisfied for the payment of a particular benefit;
(d)formulas which are applied in order to calculate the amount of a particular benefit.

Clause 2 of the trust deed requires the employer, Ansett, to pay contributions with respect to employees:

“2. CONTRIBUTIONS
Each Employer separately covenants to pay in each Review Period to the Trustee or as directed by it, and within such period, (if any) as is required by the Act:
(a)the contributions which each Member has or is deemed to have requested the Employer to deduct from his or her Salary in accordance with the Rules and which the Employer has so deducted; and
(b)out of the Employer’s own money the Employer’s contributions in accordance with the Rules,

PROVIDED THAT the Employer may pay to the Trustee such additional sums (if any) as the Employer may from time to time determine and PROVIDED FURTHER THAT such sums do not contravene the Act. Those sums shall be applied by the Trustee as the Employer shall in writing direct PROVIDED THAT any Employer may on giving one month’s notice to the Trustee of its intention so to do terminate reduce or suspend the payment by that Employer of all or any of its contributions.
(2)Upon expiration of the one month’s notice given by the Employer in accordance with sub-clause (1) of this Clause, the liability of that Employer to make those payments shall cease; wholly, to the

extent, for the period, or in the circumstances mentioned in the notice.
(3)Subject to the Act, any Employer that is a Related Body Corporate (as defined in Division 6 of Part 1.2 of the Corporations Law) of another Employer may pay contributions on behalf of Members in the Service of that other Employer.
(4)The Trustee may receive a shortfall component, within the meaning of the Superannuation Guarantee (Administration) Act 1992, in respect of a Member and any such amount will be treated as a contribution by the Employer in respect of the Member.”

Rule 1.3 of the rules referred to the contribution obligations of the member, the employee:

“1.3 CONTRIBUTIONS
(1)Subject to Rule 1.4 and in so far as the Act allows each Member shall (except while entitled to the payment of a benefit in terms of Rule 1.11) in respect of each Review Period contribute to the Plan at the rate of five per cent of the Member’s Annual Salary. The Trustee may with the Employer’s consent waive part or all of the Member’s contributions under this Rule 1.3(1). In that event, the Employer will pay such additional amounts as may be required to avoid a shortfall in contributions. Any such contributions will be deemed to have been made by the Member.
(1A)(a) Subject to Rule 1.3(1A)(c) the Member may elect with effect on a Review Date (or any other date approved by the Trustee) to make contributions to the Plan additional to those referred to in Rule 1.3(1) at a particular rate, or to contribute such other amounts as may be agreed between the Member and the Trustee (having regard to the requirements of the Act).
(b)Subject to Rule 1.3(1A)(c) a Member who has elected to make contributions under Rule 1.3(1A)(a) may subsequently elect with effect on a Review Date (or any other date approved by the Trustee) to cease to pay, or to vary, such contributions as agreed between the Member and the Trustee, subject to the requirements of the Act;
(c)The contributions made by the Member under Rule 1.3(1A)(a) shall in so far as the Act allows commence on the Review Date (or such other date approved by the Trustee) as the Member elects to make those contributions and shall cease on the date the Member ceases to be in the Service of the Employer or to be a Member (whichever is the earlier) or in such other circumstances as comply with the relevant requirements of the Act.

(2)The contributions by the Member pursuant to Rule 1.3(1) shall in so far as the Act allows commence on the date he or she becomes a Member under this Defined Benefit Section of the Plan and shall cease on the Member’s Normal Retirement Date or on ceasing prior to that date to be in the Service of the Employer or to be a Member whichever is the earlier or in such other circumstances as comply with the relevant requirements of the Act PROVIDED THAT in any case the contributions by the Member shall cease when the Member completes forty years of his or her Years of Membership.
(3)The Employer shall in so far as the Act allows in respect of each Review Period contribute to the Plan at a rate agreed upon with the Trustee being the rate or a rate within the range of rates contained in the report of the Actuary as provided for in Rule 1.3(4).
(3A)Subject to the Act, the Employer may make contributions additional to those referred to in Rule 1.3(3) on behalf of a Member of such amount as the Employer determines from time to time.
(4)(a) The Trustee shall arrange for an actuarial investigation and valuation of the Plan to be made by the Actuary at consecutive three yearly intervals (or at such other regular intervals not exceeding three years as may be approved by the Principal Employer).
(b)The Trustee shall supply the Actuary with information as may be required for the purpose of investigation and valuation.
(c)The Actuary shall provide a report in writing to the Principal Employer and to the Trustee upon the results of this investigation. Such report shall include details of the rate of contribution calculated as being required in respect of the funding of benefits under the Plan and, where there is more than one rate of contribution that will adequately fund benefits under the Plan, shall include details of such various rates of contribution.”

Hence, by virtue of clause 2 of the trust deed Ansett covenanted to pay the employer’s contribution in accordance with the rules. Under rule 1.3(3) the employer, Ansett, was required to contribute at “… a rate agreed upon with the trustee being the rate … contained in the report of the Actuary … “. Under rule 1.3(4) the trustee was required to arrange for an actuarial investigation and valuation to be conducted at three year intervals.

Thus, the moneys that were contributed to the fund were first of all the members’ contributions of five per cent of salary and, secondly, the amount payable by the employer as agreed with the trustee.

The next important aspect of the trust deed was the requirement imposed on the trust deed to pay benefits to members upon certain events. Clause 3 of the trust deed provided:

“APPLICATION OF CONTRIBUTIONS
(1)All amounts forming part of the Plan and the contributions by and in respect of the Members shall after payment of any taxes or duties be held in trust by the Trustee and applied to provide the benefits referred to in this Deed and the Rules for or in respect of the Members.
(2)The Trustee shall arrange for benefits to be funded in whole or in part by means of the investments authorised by this Deed and in whole or in part by means of a Policy of such form as is from time to time agreed upon by the Trustee, the Administrator and the Insurer (as the case may be) and the Trustee shall from the monies in its hands available for this purpose pay to the Insurer or the Administrator (as the case may be) the premiums under the Policy.
(3)Payments made with the concurrence of the Trustee by the Employer to either the Administrator or the Insurer in connection with the Plan shall be deemed to have been paid by the Employer to the Trustee and by the Trustee to either the Administrator or the Insurer (as the case maybe).
(4)When for any reason a benefit becomes payable (whether in a lump sum or otherwise) to or in respect of a Member in accordance with this Deed and the Rules the Trustee shall subject to the terms and conditions of any Policy receive from either the Administrator or the insurer (as the case maybe) the amount so payable.
(5)If in respect of the funding of any benefits under the Plan amounts are invested other than in payment of premiums under a Policy, the investments and the proceeds from them shall to the extent, if any, that the benefits funded by means of the Policy may be equal to or less than the benefits required to be funded under the Plan, be held upon the same trusts as those relating to the benefits funded by means of the Policy and the provisions of this Deed and the Rules shall in the same way apply to those investments and proceeds.”

In essence, therefore, the trustee was to provide benefits to members as required by the deed and the rules. There was a suite of benefits subject to an overarching obligation to pay that which was termed a minimum benefit as provided in rule 1.16:

“1.16 MINIMUM BENEFIT
(1)Notwithstanding any other provisions in this Deed and the Rules no benefit payable under these Rules shall be less than the minimum benefit as required by the Act.
(2)The Trustee will treat amounts held in the Plan in respect of a Member as minimum benefits except where the Act otherwise permits.”

In rule 1.16 the reference to “the Act” was a reference to the Commonwealth superannuation regime already described. This aspect was addressed in the context of the applicable legislative regime.

Subject to that overarching requirement there were several core types of benefit. First, the normal retirement benefit at 65 years of age set out in rule 1.5:

“1.5 BENEFITS ON OR AFTER THE NORMAL RETIREMENT DATE (AGE 65)
(1)If the Member retires on his or her Normal Retirement Date the benefit payable shall, subject to Rule 1.4 and Rule 1.5(4) be the value of the Member’s Member Voluntary Account, Roll-over Account and Employer Account and in addition an amount equal to:
(a)in the case of a Member who has completed at least four complete Years of Participation, the sum of:
(i)sixteen and two-thirds per cent of the Member’s Final Average Salary multiplied by that part of the Member’s Years of Membership (measured in years and days) falling prior to the first day of July 1978; and

(ii) eighteen per cent of the Member’s Final Average Salary multiplied by that part of the Member’s Years of Membership (measured in years and days) falling on or after the first day of July 1978 to the Member’s Normal Retirement Date,

PROVIDED THAT if the Member was classified as a Shift Worker under the Staff Plan as at the first day of July 1981 the date referred to in this Rule 1.5(1)(a) (i) and (ii) shall be read as the first day of July 1981; or
(b)in the case of a Member who has completed less than four complete Years of Participation an amount calculated in accordance with Rule 1.12(1)(b).

(2)If the Member continues on or after the Normal Retirement Date to be in the Service of the Employer the Member shall with effect from the Normal Retirement Date cease to be a Member of the Defined Benefit Section and become a Member of the Accumulation Section.
(3)The benefit calculated under this Rule 1.5 will be adjusted for interest at the Net Earning Rate under the Capital Stable Investment Option, calculated from the date the Member ceases to be in the Service of the Employer to the date of payment.
(4)Where the benefit calculated in this Rule 1.5 is less than the benefit available pursuant to Rule 1.12, the benefit payable will be an amount not less than the amount available under Rule 1.12.”

Second, the early retirement benefit on or after 55 years of age set out in rule 1.6:

“1.6 BENEFITS ON RETIREMENT PRIOR TO THE NORMAL RETIREMENT DATE
(1)If the Member retires within 10 years prior to his or her Normal Retirement Date, the benefit payable shall subject to Rule 1.4 and Rule 1.6(3) be the sum of:
(a)the value of the Member’s Member Voluntary Account, Employer Account and Roll-over Accounts; and
(b)an amount calculated in the manner set out in Rule 1.5(1)(a) as if the Member had retired on his or her Normal Retirement Date but reduced by 18% of the Member’s Final Average Salary for each year in the period (measured in years and days, expressed as years and fractions of a year) from the Member’s actual retirement date to the Member’s Normal Retirement Date PROVIDED THAT in the case of a Member who has completed less than four complete Years of Participation this benefit shall be an amount equal to an amount calculated in accordance with Rule 1.12(1)(b).

(2)Benefits under this Rule 1.6 will be adjusted for interest at the Net Earning Rate under the Capital Stable Investment Option, calculated from the date the Member ceases to be in the Service of the Employer to the date of payment.
(3)Where the benefit calculated in this Rule 1.6 is less than the benefit available pursuant to Rule 1.12, the benefit payable will be an amount not less than the amount available under Rule 1.12.”

Third, the death benefit contained in rule 1.8:

“1.8 BENEFITS ON DEATH
(1)If the Member dies prior to his or her Normal Retirement Date the benefit payable shall, subject to Rule 1.4, be the amount determined in the manner specified in Rule 1.5(1) as if (for the purposes of determining that part of the benefit referred to in Rule, 1.5(l)(a) and (b)) the Member had continued in the Service of the Employer until, and had retired on, the Normal Retirement Date and for this purpose the Member’s Annual Salary at the date of the Member’s death shall be deemed to have continued to be the Member’s Annual Salary up to his or her Normal Retirement Date PROVIDED THAT if the Member participated in the Staff Plan immediately prior to the Date of Commencement the benefit payable in terms of this Rule 1.8(1) shall not be less than the benefit which would have been payable in respect of the Member under the Staff Plan had the Member died immediately prior to that date.
(2)The benefit under this Rule 1.8 calculated as described above will be adjusted for interest at the Net Earning Rate under the Capital Stable Investment Option calculated from the date of death to the date of payment.”

Fourth, the total and permanent disablement benefit set out in rule 1.10:

“1.10 BENEFITS ON TOTAL AND PERMANENT DISABLEMENT
(1)If the Member becomes Totally and Permanently Disabled prior to attaining the age of sixty-five years the benefit payable shall, subject to Rule 1.4, be calculated including interest at the Net Earning Rate under the Capital Stable Investment Option to the date of payment in the manner described under Rule 1.8 as if the Member had died on the Member’s Date of Disablement.
(2)If the Member becomes Totally and Permanently Disabled as aforesaid the Trustee shall pay or apply the benefit payable in accordance with this Deed and the Rules to or for the benefit of the Member or (if permitted by the Act) any one or more of the Member’s Dependants in such shares and proportions and in such manner as the Trustee shall in its absolute discretion determine PROVIDED HOWEVER THAT while the Member is still in the Service of the Employer payment shall not (unless otherwise allowed under the relevant requirements of the Act) be made in terms of this Rule 1.10 except (if permitted by the Act) for the maintenance or support of the Member or the Member’s Dependants and for the purpose of relieving hardship or otherwise in accordance with the Act PROVIDED FURTHER THAT if the Member dies before the whole of the benefit payable in respect of the Member has been paid or applied in accordance with this Rule 1.10 the Total and Permanent Disablement benefit payable or the balance thereof (as the case may be) shall be paid to the persons and in the manner referred to in Rule 1.9.”

Fifth, the temporary total disablement benefit contained in rule 1.11:

“1.11 BENEFITS ON TEMPORARY TOTAL DISABLEMENT
(1)While the Member is Temporarily Totally Disabled the Trustee shall pay to the Member a monthly income benefit (in this Rule 1.11 called the “income benefit”) the amount of which (subject to Rule 1.4 and except as provided below) is equal to one-twelfth of twelve and one-half per cent of.
(a)the amount which would have been payable under Rule 1.10 as if the Member had become Totally and Permanently Disabled on the Member’s Date of Disablement; LESS
(b)the sum of the value of the Member’s Member Voluntary Account, Employer Account and Roll-over Account.”

Sixth, the resignation benefit contained in rule 1.12:

“1.12 BENEFITS ON CEASING TO BE IN THE EMPLOYER’S SERVICE
(1)Subject to Rule 1.12(2), if the Member prior to his or her Normal Retirement Date ceases (other than by reasons of his or her death or the circumstances set out in Rule 1.6, 1.10 or 1.13) to be in the Service of the Employer the benefit payable to the Member shall subject to Rule 1.4 be the sum of the value of the Member’s Member Voluntary Account, Employer Account and Roll-over Account and an amount determined as follows:

(a)in the case of a Member being at least thirty-five years of age and so long as the Member’s Years of Participation are at least four years - an amount equal to the sum of:
(i)ten per cent of the Member’s Final Average Salary multiplied by that part (measured in years and days) of the Member’s Years of Participation falling prior to the first day of January 1987;
(ii)a percentage (as set out in Appendix ‘A’ to this Deed), determined according to the Member’s age (last birthday) at the date the Member joined the Plan (or in the event that the Member participated in the Former Plan immediately prior to the Date of Commencement the date the Member joined the Former Plan) and the Member’s age (last birthday) at the date of ceasing to be in the Employer’s Service, of the Member’s Final Average Salary multiplied by that part (measured in years and days) of his Years of Participation falling on or after the first day of January 1987; and
(iii)three per cent of the Member’s Final Average Salary multiplied by that part (measured in years and days) of the Member’s Years of Participation falling after the first day of January 1987 PROVIDED THAT a higher percentage of the Member’s Final Average Salary may apply to any period of the said part of the Member’s Years of Participation PROVIDED FURTHER THAT any such percentage and the period to which it is applicable shall be as determined by the Employer and advised to the Trustee.

(b)in the case of any other Member the sum of:
(i)an amount equal to a percentage .as set out below (depending on the Member’s Years of Participation) of the Member’s Final Average Salary multiplied by the Member’s Years of Participation:

Years of Participation (years) Percentage of Final Average Salary

Less than 1 6

1 but less than 2 7 1/3

2 but less than 3 8 2/3

3 or more 10

and
(ii)three per cent of the Member’s Final Average Salary multiplied by that part (measured in years and days) of the Member’s Years of Participation falling after the first day of January 1987 PROVIDED THAT a higher percentage of the Member’s Final Average Salary may apply to any period of the said part of the Member’s Years of Participation PROVIDED FURTHER THAT any such percentage and the period to which it is applicable shall be as determined by the Employer and advised to the Trustee.

(2)The amount determined in terms of either Rule 1.12(1)(a) or (b) (whichever is applicable) shall not be less than the sum of:
(a)an amount equal to the Member’s contributions or deemed contributions to the Plan and the Former Plan (if any) together with compound interest in terms of Rule 1.12(3) (the ‘Basic Amount’);
(b)an amount equal to a percentage (as set out in the table hereunder according to the Member’s Years of Participation) of the Basic Amount specified in Rule 1.12(2)(a) above;

Complete Years of Participation

(years)

7 or less

Percentage Increase

%

Nil

8 30

9 40

10 50

11 60

12 70

13 80

14 90

15 100

16 110

17 120

18 130

19 140

20 150

21 160

22 170

23 180

24 190

25 or more 200

and
(c)three per cent of the Member’s Final Average Salary multiplied by that part (measured in years and days) of the Member’s Years of Participation falling after the first day of January 1987 PROVIDED THAT a higher percentage of the Member’s Final Average Salary may apply to any period of the said part of the Member’s Years of Participation PROVIDED FURTHER THAT any such percentage and the period to which it is applicable shall be as determined by the Employer and advised to the Trustee.

(3)For the purposes of Rule 1.12(2) compound interest additions shall be calculated and added yearly on each Review Date and on the date on which the Member ceases to be in the Employer’s Service from the date the Member joins the Plan (or in the event the Member participated in the Staff Plan immediately prior to the Date of Commencement the date the Member joined the Former Plan) up to the date on which the Member ceases to be in the Employer’s Service at the rate of five per cent per annum (or at such other rate (being not less than two and one half per cent per annum) as is from time to time determined by
the Principal Employer in accordance with the relevant requirements of the Act and after considering the advice of the Actuary with the Trustee’s consent, if required by the Act) on the assumption that contributions paid by the Member during any Review Period were paid mid-way through that period.
(4)For the purposes of this Rule 1.12 a Member is deemed to have contributed to the Plan at the rate of five per cent per annum of his Annual Salary during any period of Temporary Total Disablement under Rule 1.11.
(5)Benefits under this Rule 1.12 will be adjusted for interest at the Net Earning Rate under the Capital Stable Investment Option, calculated from the date the Member ceases to be in the Service of the Employer to the date of payment.”

Importantly, therefore, under Rule 1.12(2) a member who qualified for aged retirement under Rule 1.5 or earlier retirement under Rule 1.6 but also qualified under Rule 1.12 was to be paid an amount not less than the amount payable under Rule 1.12.

Over and above the six categories of benefits there was one further benefit being the retrenchment benefit contained in Rule 1.13:

“1.13 BENEFITS ON RETRENCHMENT
Subject to Rule 1.4 if the Member prior to his or her Normal Retirement Date ceases to be in the Service of the Employer on account of Retrenchment the benefit payable shall be equal to the greater of:
(a)the benefit determined under Rule 1.12; or the sum of.
(b)the sum of:
(i)the value of the Member’s Member Voluntary Account, Employer Account and Roll-over Account;
(ii)the greater of:
(A)an amount equal to three times the Member’s contributions to the Plan and (if the Member participated in the Staff Plan immediately prior to the Date of Commencement) the Former Plan together with compound interest thereon (in terms of Rule 1.12(3)); and
(B)(if the Member has completed at least twenty five Years of Participation but is not within ten years prior to the Normal Retirement Date) a percentage (as set out in Appendix ‘A’ to this Deed), determined as if the Member’s age at the date the Member Joined the Plan (or in the event that the Member participated in the Former Plan immediately prior to the Date of Commencement the date the Member joined the Former Plan) was thirty-two years or less and according to the Member’s age (last birthday) at the date of the Member’s ceasing to be in the Employer’s Service, of the Member’s Final Average Salary multiplied by the Member’s Years of Participation; and

(iii)three per cent of the Member’s Final Average Salary multiplied by that part (measured in years and days) of the Member’s Years of Participation falling after the first day of January 1987 PROVIDED THAT a higher percentage of the Member’s Final Average Salary may apply to any period of the said part of the Member’s Years of Participation PROVIDED FURTHER THAT any such percentage and the period to which it is applicable shall be as determined by the Employer and advised to the Trustee,

PROVIDED THAT if the Member is within ten years prior to his or her Normal Retirement Date, the total benefit payable shall be not less than the amount calculated in terms of Rule 1.6.
(2)For the purposes of this Rule 1.13, a Member is deemed to have contributed to the Plan at the rate of five per cent per annum of his Annual Salary during any period of Temporary Total Disablement under Rule 1.11.
(3)Benefits under this Rule 1.13 will be adjusted for interest at the Net Earning Rate under the Capital Stable Investment Option, calculated from the date the Member ceases to be in the Service of the Employer to the date of payment.”

The retrenchment benefit and its consequences lay at the heart of the proceeding for the simple reason that it derived a larger benefit than a resignation benefit for affected members. Nonetheless, the retrenchment benefit in Rule 1.13 is subject to the overarching benefit set out in Rule 1.16. On its face, Rule 1.13, concerned as it is with retrenchment, appears to arise in two respects. Initially, in the context of the employment contract between the member and Ansett but also in the context of the benefits regime set out in the trust deed.

For the purposes of considering the retrenchment benefit the definition provisions of the Rules are relevant. Rule 1.1 defines “retrenchment” as meaning “a reduction of staff declared by the employer for the purposes of these Rules”. It is this definition that underlies the questions asked of the Court in the proceeding by the trustee, that is to say, what does the definition of “retrenchment” in the Rules mean?

There are remaining incidental aspects of the trust deed. Clause 20(1) is concerned with the termination of contributions by the employer. It provides:

“20. DISCONTINUANCE OF THE PLAN
If all of the Employers terminate their contributions to the Plan, the Plan shall be closed to new entrants from the effective date of termination of contributions and no further contributions shall be accepted from Members. The Trustee shall cause a valuation to be made of the assets of the Plan (after the payment of all expenses incurred as a result of winding up the Plan) and allocate the amount as ascertained by the valuation among the Members in such shares and proportions and in such manner as it shall determine to be fair and equitable after considering the advice of the Actuary. The amounts so allocated shall be held in trust and invested by the Trustee as authorised by this Deed and the amounts so allocated to a Member shall, subject to the other provisions of this Deed and the Rules, become payable upon the Member ceasing to be in the Service of the Employer (or as otherwise permitted under the relevant requirements of the Act) or in the event of the Member’s death.”

Thus, Ansett is vested with power to terminate its contributions to the Plan. It has not exercised that power.

The next relevant matter that arises under the Rules is the auditing of accounts. Clause 25(a) requires an annual audit of accounts. Next, there is the matter of actuarial investigation.

The trust deed is subject to the statutory regime. The Rules refer in various ways to the “Act”. Rule 1.1 defines “Act” –

“‘Act’ means (as the context requires) the Income Tax Assessment Act 1936, Income Tax Assessment Act 1997 and the Superannuation Industry (Supervision) Act 1993 and the Regulations under those Acts as amended from time to time, any re-enactment of those Acts for the time being in force and any other Act, Regulations, operational standards, guidelines or rules with which the Plan must comply in order to secure concessions or advantages or avoid penalties, detriments or disadvantages as described in Clause 1(1)(b) of the Deed.”

Clause 1(1)(b) and (2) of the trust deed clarify the reference to the legislation:-

“l. INTERPRETATION
(1)(a) …..
(b)A reference to the relevant requirements of the Actor to what the Act permits or allows shall be construed to include a reference to the requirements of the standards or other provisions contained in, or prescribed under, the Act, being standards or other provisions which must be complied with to:
(i)secure or better secure any concession or advantage whatsoever for the Plan, an Employer, a Member or any other person who is or may be entitled under the Plan, including any concessions or advantages in respect of tax or other governmental imposts which is or may become payable in connection with the Plan or anything done or to be done pursuant to the Deed and Rules; or
(ii)avoid what the Trustee may consider to be a relevant penalty, detriment or disadvantage to the Plan, a Member, Employer or the Trustee.

The terms ‘concession or advantage’ and ‘penalty, detriment or disadvantage’ are to be construed in the widest possible sense. In particular, the application of these terms is not limited to taxation or financial matters.
(2)Any requirement of the Act which the Act requires to appear in the governing rules of a regulated superannuation fund within the meaning of the Act is deemed to be incorporated in this Deed and to prevail over any provisions of the Deed or Rules which are inconsistent with those requirements.”

The cross-references to the legislation are woven through the trust deed but most importantly for present purposes in clause 4(4). It provides:-

“4. CONTRIBUTIONS, BENEFIT ACCRUALS AND SOLVENCY
(1)…..
(2)…..
(3)…..
(4)Contributions by the Employer in respect of the Defined Benefit Section of the Plan will not be less than is required by the solvency requirements under the Act.”

Thus, pursuant to clause 4(4) the employer is obliged to make contributions not less than the solvency requirements under the Act. It is necessary to return to the topic of solvency requirements but initially some general observations are required.

The solvency requirements of the trust deed and the legislation were highly important in the proceeding. Clause 32 of the trust deed addressed the matters of actuarial investigation and solvency:-

“32. ACTUARIAL CERTIFICATION AND INVESTIGATION
If required by the Act, the Trustee will arrange for:
(1)an actuarial investigation of the Plan;
(2)the submission by the Actuary of a report relating to that investigation; and
(3)the preparation by the Actuary of a funding and solvency certificate and its distribution to the Employers,

in accordance with the requirements of the Act.”

There is a dialectic that occurs between the trust deed and the statutory regime. In effect, the definition of “Act” in Rule 1.1 and the inclusion by incorporation of the current statute means that the current statute is the Act that governs the trust deed.

Authorities on relationship of Federal Legislation to Superannuation Deeds

Here, the trust deed had been amended in 1989 and 1994 as a result of which it had purported to incorporate the provisions of the SIS Act and the SIS Regulations. Relevant parts of the SIS Regulations required a trustee to comply with an order or determination of the Superannuation Complaints Tribunal which had been established under the Superannuation (Resolution of Complaints) Act 1993 (Cth) (“the Complaints Act”). Under the Complaints Act, the Tribunal had all the powers, obligations and discretions that were conferred on a trustee. Another provision of that Act provided that a decision of a trustee as varied by the Tribunal or a decision made by the Tribunal in substitution for a decision of a trustee was taken to be a decision of a trustee. The principal Australian authority on the relationship of Federal legislation to superannuation plans is Attorney-General (Cth) v Breckler.[22] Breckler was a member of a superannuation plan constituted by a trust deed. In that case, the validity of part of the Complaints Act was challenged on the ground that it purported to confer the judicial power of the Commonwealth on a tribunal and was, therefore, inconsistent with Chapter 3 of the Commonwealth Constitution. A Full Court of the Federal Court held that part of the Act invalid. The High Court allowed an appeal from the decision of the Federal Court.
[22](1999) 197 CLR 83

In its decision, the majority of the Court considered the relationship of the SIS Act and SIS Regulations to a private trust deed. In that case (as in practically every case including the present case), the Plan or Fund was a “regulated superannuation fund” within the meaning of the Income Tax Assessment Act 1936. To qualify as a regulated superannuation fund, it was necessary to comply with the requirements of the SIS Act. The majority in Breckler considered the effect of the amendments to the Trust Deed which satisfied the requirements of the SIS Act. According to the majority[23]

“In the case of the Plan, the amendments made on 22 August 1994, which had the effect of varying the changes made on 14 December 1989 so as to oblige the trustees to act or refrain from acting in order to comply with requirements of the Supervision Act and the Supervision Regulations, were expressly made in order that the Plan remain a continuously complying superannuation fund as defined in Pt. IX.
Further, the effect of these amendments was to treat the requirements of the Supervision Act and the Supervision Regulations as part of the trust deed itself and therefore as elements in the charter of rights, duties and powers of the trustees and also of those with interests in the Plan.”

[23](1999) 197 CLR 83 at 101-102

Further, the majority in Breckler dealt with the interaction between the provisions of the Trust Deed and the legislation. They said:[24]

“[44])…The application of the provisions of the Complaints Act was possible only because the plan had the status of a regulated superannuation fund. The attainment of that status was the product of the exercise of an election provided to the trustees by the Supervision Act. Given the importance of attracting the operation of Pt IX of the Income Tax Act, cases may readily be imagined where it would be a breach of trust not to exercise the election so as to obtain the revenue benefits which follow, albeit at the concomitant price of attracting the regulatory regime of which the Tribunal is a component … “.
[24](1999) 197 CLR 87 at 111

The Core Components of the Ground Staff Plan

There are two core components to the Plan, constituting as it does under the legislation, a regulated superannuation fund. The first is the benefit certificate. The second is the funding and solvency certificate.

The relevant benefit certificate is for the period 1 July 1997 to 30 June 2002, a five year period. Ansett used the Plan to meet its obligations and, also, gain the derivative benefits, under the superannuation legislative regime.

The trust deed placed obligations on Ansett to contribute. There is an obligation arising from clause 32 that the fund is solvent as assessed by the actuarial report. There is then the obligation under clause 4.4 of the trust deed to ensure that the fund is solvent. Solvency under the legislation is manifested by the funding and solvency certificate.

Regulation 9.15 of the SIS Regulations specifies the means of conducting the calculations in order to determine solvency. At the heart of the calculation is the identification of the minimum requisite benefits of each member of the fund in order to calculate the total minimum requisite benefits of the fund. The next step is the determination of the minimum benefit index. Once that is known solvency can be determined. Once solvency is known the minimum contributions to achieve solvency upon the expiry date of the certificate can be determined. In effect, reverting back to the requirements of the legislation, the notional employer contribution rate is defined in terms of the minimum requisite benefits and minimum benefits is defined in terms of the notional employer contribution rate. The purpose and effect of the benefit certificate is to release the employer from an obligation to pay a superannuation charge. In order to achieve certainty as to the amount or assets of the subject fund a funding and solvency certificate is required under the legislation.

The Actuarial Investigation

The funding and solvency certificate does not stand in isolation. The certificate is solely concerned with solvency. There is, in addition, the requirement of actuarial investigation where the actuary is concerned with the calculation of accrued benefits. SIS regulation 9.27 defined accrued benefits:

[194][1986] VR 876, at 878-879

More recently, a question of whether a claim is a “contingent” debtor claim within s.553 of the Corporations Law was considered by the New South Wales Court of Appeal in Fisher v Madden.[195] There the court was concerned with whether a claim for redundancy payments before the Industrial Relations Commission by an employee of a company in receivership was a liability entitled to priority. The New South Wales Court of Appeal held it was not. Meagher JA, after citing FCT v Gosstray considered the at the subject claim was not accurately described as “contingent” because it was no more than a bear right to make a claim without knowledge of success or not, the amount or any terms or conditions.[196] Sheller JA, with whom Beazley JA agreed, after considering Re William Hockley Limited[197] and Community Development Pty Ltd v Engwirda Construction Co[198] held[199] that the subject company was under no existing obligation to pay money by way of a retrenchment payment to the employee immediately or on a future event, rather, the employee only had a right to take proceedings.
[195](2002) 41 ACSR 1
[196]Ibid at p.5
[197][1962] 1WLR 555 at 558
[198](1969) 120 CLR 455 at 459 and 462
[199]Ibid at p.13

It seems that most assistance in consideration of contingent liabilities is found in the opinion of Lord Hoffmann in In re Toshoku Finance UK plc.[200] In the crux of the opinion of Lord Hoffmann he said:[201]

“Thus debts arising out of pre liquidation contracts such as leases, whether they accrue before or after the liquidation, can and prima facie should be proved in the liquidation. In this respect they are crucially different from normal liquidation expenses which are incurred after the liquidation date and cannot be proved for. In the Lundy Granite Co case LR 6 Ch App 462 the court was therefore exercising the discretion conferred by section 87 of the 1862 Act to decide that, contrary to the normal pari passu rule, a creditor who had a debt which was capable of proof at the date of liquidation should be paid in priority to other creditors. What was the justification for the exercise of such a discretion?”

[200][2002] 1 WLR 671

[201]Ibid at p.679

His Lordship also considered the judgment in In re Oak Pits Colliery Co,[202] In re ABC Coupler and Engineering Co Limited (No. 3),[203] and then his Lordship stated the principle in the following terms:[204]

“The principle evolved from Exhall Coal Mining Co Ltd De GJ & S 377 and Lundy Granite Co LR 6 Ch App 462 is thus one which permits, on equitable grounds, the concept of a liability incurred as an expense of the liquidation to be expanded to include liabilities incurred before the liquidation in respect of property afterwards retained by the liquidator for the benefit of the insolvent estate. Although it was originally based upon a statutory discretion to allow a distress or execution against the company’s assets, the courts quickly recognised that its effect could be to promote a creditor from merely having a claim in the liquidation to having a prior right to payment in full. As in the case of other equitable doctrines, the discretion hardened into principle. By the end of the 19^th century, the scope of the Lundy Granite Co principle was well settled.
It was not, however, a general test for deciding what counted as an expense of the liquidation. Expenses incurred after the liquidation date need no further equitable reason why they should be paid. Of course it will generally be true that such expenses will have been incurred by the liquidator for the purposes of the liquidation. It is not the business of the liquidator to incur expenses for any other purpose. But this is not at all the same thing as saying that the expenses will necessarily be for the benefit of estate. They may simply be liabilities which, as liquidator, he has to pay. For example, there will be the fees payable to fund the Insolvency Service, ranjing as paragraph (c) in rule 4.218(I), where the benefit to the estate may seem somewhat remote. There would be little point in a statute which specifically imposed liabilities upon a company in liquidation if they were payable only in the rare case in which it emerged with all other creditors having been paid.
The difference between the treatment of pre-liquidation debts under the Lundy Granite Co principle and the treatment of post-liquidation liabilities emerges clearly from the 19^th century cases on rates. In In re Watson Kipling & Co (1883) 23 Ch D 500, which concerned an assessment for rates made after the liquidation upon property occupied by the company, Kay J rejected the submission of counsel for the rating authority, at p 506, that ‘where a liability is incurred during the winding up, that liability ought to be paid in full, and therefore these rates ought to be paid in full because they were made during the winding up’.”

[202](1882) 21 Ch D 322

[203][1970] 1 WLR 702

[204]at p.680

In Toshoku their Lordships Lord Woolf CJ, Lord Hutton and Lord Rodger of Earlsferry agreed with the reasons of Lord Hoffmann. Lord Hobhouse of Woodborough concurred with the order their Lordships proposed. Two principles emerge from Toshoku. First, a liability that is not provable in the winding up and is imposed on a company in liquidation is an expense of the winding up; it may be an expense of getting in or realising the company’s assets or it may be a “necessary disbursement” of the liquidator. Secondly, a liability that is provable in the liquidation is not an expense of the winding up unless it falls within the Lundy Granite principle. In light of the history of the amendments made to s.556(1) it is unlikely that the liabilities with the sub‑section are any broader than those under the equivalent English legislation.

Returning to the essential question as to priority,[205] it was submitted for the trustee that if I accepted the interpretation of K.D. Morris urged by the administrators I am required to determine the source of the liability or obligation in order to determine whether it should be accorded priority. It was submitted that the source of the liability is FSC 5. It was also submitted that I must determine whether the claimed debt was incurred by the administrators in the course of and for the purposes of the administration whether it was an obligation incurred prior to the winding up as a result of transactions entered into. The trustee urged that the contributions for Group 3 as recited in FSC 5 arose from the decision of the administrators not to discontinue the plan, the retrenchment they affected after determining to continue the plan and the ability of the actuary to issue FSC 4 and later FSC 5 and, also, the absence of any objection to FSC 4.
[205]Set out at para 280 of these reasons.

Indeed, both the trustee and the third defendant submitted that on the facts of the present case, the proposition that the liability incurred by the administrators to pay superannuation contributions pursuant to FSC4 and FSC5 may be supported on the basis that it is a liability incurred pursuant to an obligation first arising after the relevant date. For this purpose the FSC is the source of the obligation to make the superannuation contributions. The FSC operating at the date of winding up imposed no obligation to pay Group 3 contributions. An obligation of a contingent kind first arose to pay a Group 3 contribution upon the issue of FSC4. A liability to pay such a contribution was first incurred when the certificate was issued only because retrenchments of the kind referred to had already occurred. Accordingly, the liability is one which falls within the first of the two meanings of “incurred”.

Reliance was placed by the trustee and the representative defendants upon the acknowledgment by the administrators that the recurrent Group 1 contributions, that is, the nine per cent contributions, fall within s.556(1)(a). The obligation to pay the nine per cent contribution is properly categorised as a recurrent outgoing analogous with rent. I accept the submission by the administrators that this provides the proper foundation and explanation for the acknowledgment by the administrators that the nine per cent contribution falls within paragraph (a).

Consideration of all the circumstances, both before and after 12 September 2001, causes me to be satisfied that the liability to make further contributions, under the trust deed and the legislative regime and, also, under contract, were incurred by Ansett in transactions entered into before that date. Analysis of the authorities, particularly, Crest Insurance, Hawkins and Standard Chartered assist me in forming this view. As at 12 September 2001 there was an existing obligation and from such obligation arose a liability to pay an amount that would arise upon a future event. The authorities, Community Development v Engwirda and Federal Commissioner of Taxation v Gosstray support that view.

In adopting these views I am satisfied that the obligations were incurred by Ansett pursuant to the superannuation legislative regime. The obligation existed pursuant to SIS Regulation 9.08 of the subject funding and solvency certificate from 1994 when the Ground Staff Plan became a regulated superannuation fund. It would appear that from that time the quantification of the obligation was contingent upon the funding and solvency certificates that were issued. Likewise, the obligations under the trust deed existed since July 1994 being the date when clause 4(4) came into effect. So far as obligations arose under individual employment contracts they existed in each and every case as at 12 September 2001 although the obligations had arisen and accumulated over a number of years beforehand. Nonetheless, the obligation was contingent in the sense that liability to pay would arise in the event that the funds were insufficient to meet a defined benefit. It follows, therefore, that I accept the submissions of the administrators as supported by the ACTU that the liability contended for by the trustee and the representative defendants was not “incurred by” the administrators in the course of conducting the administration, rather, the liability already existed by that time. Further, the obligation was and remains a provable contingent debt upon the application of the principles espoused in the authorities. One further observation is called for. It might be said that the acts of the administrators precipitated the quantification of the liability, or, at least, the occasion of a quantified sum falling due. In my view, such approach is flawed as the acts of the administrators constituted the culmination or maturation of obligations created or undertaken prior to administration.

A remaining matter was the submission by the trustee that the contributions under FSC 5 relating to membership Group 3 are expenses imposed by statute and, therefore, entitled to priority. The reference is to the obligations arising by virtue of Regulation 9.08 of the SIS Regulations. I was referred to a number of authorities[206] and, in particular, In re Toshoku Finance.[207] Each of the authorities, including Toshoku, turned upon the particular nature of the statutory obligation. For example, in Toshoku, the subject legislation provided that the company was chargeable and that the liquidator was the chargeable person. By contrast, the SIS Legislation does not contain an equivalent provision. Further, as considered in Re Mesco Properties Limited the further contributions incurred under FSC 5, for the reasons already stated, did not and will not assist the administrators in carrying on the business or preserving the assets of the company. In any event, the obligation to make further contribution arising from FSC 5 is not in the nature of a licence fee as arose in some of the authorities but more appropriately categorised as a capital contribution to the fund.
[206]See Re Beni-Felki Mining Co (1934) Ch 406; In re Mesco Properties Limited (1979) 1 WLR 558; (1980) 1 WLR 96; In re National Arms and Ammunition Co (1885) 28 Ch D 474; In re Blazer Fire Lighter Limited (1895) 1 Ch 402; In re Mineral Resources Limited (1999) 1 All ER 746.
[207](2002) 1 WLR 671

There was some discussion during submissions as to the assistance provided by Toshoku. It was submitted for the trustee that the contribution liability should be treated as an expense of the administration because it is a statutory liability under the superannuation legislative regime and thereby equivalent to a tax. However, Toshoku decided that because certain liabilities, including certain taxes, rates and statutory charges were liabilities that were imposed upon the liquidator after the liquidation commenced, the liquidator was required to pay those taxes, rates and charges and they were, therefore, “necessary disbursements”.

Finally, the administrators contended that if the liability is incurred by the administrators and not Ansett before the commencement of the administration then the liability is not to be afforded priority under s.556(1)(a) or (dd) as the plan was continued for the mutual benefit of the trustees and the members of the plan as well as for the convenience of the winding up. In light of my findings it is not necessary to consider the matter of mutual benefit.

Summary of Conclusions

This proceeding is in the nature of the trustee seeking advice from the court as to the construction of the trust deed and the associated issues.[208]
[208]See In re Atkinson [1971] VR 612, 615; Re Walker (1901) 1 SR(NSW) Eq 237; and, also, In re Toshoku Finance UK plc, ibid; Stevens and Ors v Bell and Ors, ibid; s.36, Supreme Court Act 1986 (Vic); Rules of Supreme Court 1986, Chapter I, rule 54.02, 54.03.

In summary, therefore, I make the following core findings.

1.Pursuant to the trust deed, members of the plan who have been made redundant by the administrators since 12 September 2001 are entitled to retrenchment benefits under Rule 1.13.
2.Pursuant to the superannuation statutory regime and the Trust Deed, Ansett is obliged to make contributions in accordance with the Funding and Solvency Certificate known as “FSC 5”.
3.The said obligation arises, also, from the contract of employment between Ansett and its employees who were members of the Ground Staff Plan.
4.The Funding and Solvency Certificate known as FSC 5 is valid and a shortfall has arisen that is required to be met pursuant to the obligations upon Ansett.
5.The obligation does not attract priority under s.556(1) of the Corporations Act 2001 and constitutes a debt provable in the administration of Ansett.

I direct the trustee to prepare answers to the questions asked in the proceeding as informed by these reasons.

“ANNEXURE A”

Dear <NAME>,
OPPORTUNITY TO APPLY FOR REDUNDANCY

I refer to the appointment of Mark Korda and myself as Administrators of Ansett Australia Ltd (Administrators Appointed) on 17th September 2001.
As Administrators of the Ansett group, it is our job to maximise the chances of the Ansett business remaining in existence. If that is not possible, it is our job to maximise the return to the company’s creditors. Subject to the rights of any secured creditors, employees are the largest and highest ranked creditor group of Ansett.
It is also in the interests of all creditors, including Ansett employees, to establish a commercially viable new Ansett business. However, the on-going business will be very different to that which operated before 14^th September 2001. Its services will be reduced, and less employees will be required for operations.
We are also aware, and regret, that uncertainty about the future of Ansett has caused and continues to cause employees and their families hardship and concern. There are now some Ansett employees who have indicated a preference to exit Ansett and access part of their entitlements as soon as possible.
We are therefore providing you and other employees the opportunity to apply for redundancy.
We have consulted with the ACTU and unions on applications for redundancy and we have their support for implementing this process. The following table gives you an indication of the steps and estimated timeframes for the application process:

Step Minimum Timeframe

1. Employees to apply for redundancy by submitting the By Friday 26^th

attached form October, 2001

2. Ansett to advise employees whether applications have By Friday 9^th

been accepted or rejected via letter, including calculation November, 2001

of entitlements for accepted applications

3. If application is accepted, employees to return company ASAP after receiving

property as indicated in their redundancy letter Redundancy letter

4. Payment of pay in lieu of notice by the Administrators (4- ASAP after return of

5. weeks calculated on base rates ) company property

5. Payment funded under the Federal Government SEESA ASAP after return of

provisions (not the Administrators) comprising unpaid company property

wages, z-days, TIL, annual leave, long service leave, any

pay in lieu of notice in excess of 4-5 weeks and up to 8

weeks severance.

Step Minimum Timeframe

6. Payment by the Administrators of final settlement of When and if funds

Outstanding entitlements (the difference between the 8 become available

Weeks paid through SEESA and your Ansett package) either pursuant to the

terms of a deed of

company

arrangement

“DOCA” or dividend.

When considering whether to apply for redundancy, it is important to keep a number of things in mind:
a) Early access to part of the entitlements by Ansett employees will be limited to the following:
• The Administrators will provide payment in lieu of notice as soon as possible. For most employees this will be equivalent to ‘4 weeks pay. Employees over 45 years of age and with more than 5 years of service will receive 5 weeks
pay in lieu of notice. Managers who are entitled to receive more than 4 or 5 weeks pay in lieu of notice will receive an additional payment from the Federal Government’s Special Employee Entitlement Scheme for Ansett Group Employees (SEESA);
• The Federal Government’s SEESA scheme will provide employees with:
i.All unpaid wages, including z-days and time-in-lieu;
ii.All unpaid annual leave;
iii.All unpaid long service on a pro-rata basis after 12 months service;
iv.All entitlements for pay in lieu of notice not already paid by the administrator; and
v.Unpaid redundancy up to the community standard of 8 weeks as a portion of the Ansett redundancy entitlement.

b)    Upon the recapitalisation of Ansett or future realisation of Ansett assets and pursuant to a DOCA or the declaration of a dividend, any additional entitlements such as redundancy pay in excess of 8 weeks may be paid by the Administrator. More details concerning redundancy entitlements are included in the Redundancy Schedule attachment. Of course, the employee entitlements must be paid prior to any distributions to ordinary unsecured creditors pursuant to a DOCA or by dividend.
c)    If you decide to apply for redundancy and your application is accepted, you will receive a letter and an estimation of entitlements by Friday 9^thNovember. It is assumed that your redundancy will be actioned as soon as possible.
d)    Given Ansett’s services will be smaller and require less employees, we hope that most applications for redundancy will be approved. However, the operational needs of the new business also need to be considered so there will be some instances where applications for redundancy may not be granted. In this way, the company can retain employees with the skills and experience to develop a safe and viable airline.

e)    There will also be some areas of the old Ansett business which may close. Therefore, employees in these areas may not be required and unfortunately
some employees will be made redundant regardless of whether they have submitted an application for redundancy. We expect that these decisions will be made shortly. We regret the hardship that this may cause.
f)     It is not possible now to provide you with an estimate of entitlements for the purpose of considering whether to apply for redundancy. However, a schedule of packages is attached which may give some guidance as to your likely severance package. You can also access a calculator on the website or call the staff enquiry hotline for further assistance.
g)    Your benefits under the relevant superannuation scheme are separate to these proposed arrangements. If your application for redundancy is accepted, your fund will supply you with details of your superannuation entitlements.
Attached to this letter is a form that you may submit to apply for redundancy. If you are interested, you should return this form as soon as possible and by no later than Friday 26”’ October, 2001 in one of the following ways:
·HR Shared Services at PO Box 362F Melbourne 3000 VIC;
·HR Shared Services by fax to (03) 9623 2520 or (03) 9623 3987;
·through your union; or
·placed in the box located in the foyer of Ansett, 501 Swanston St, Melbourne.

Further information is available on the our website at or through the Staff Enquiry Hotline on 1800 151 604.
Thank you for your patience and support. The employees contribution and commitment to Ansett is extraordinary and has played a key role in enabling us to “kickstart” flying operations and pursue Ansett Mark II.
Yours faithfully
Mark Mentha
Administrator
Ansett Australia Limited (Administrators Appointed)

REDUNDANCY SCHEDULE

If your application for redundancy is approved, you will be eligible for the following entitlements:
Payment in Lieu of Notice to be paid by the Administrator
The notice period paid will be 4 weeks. Those over 45 years of age with more than 5 years continuous service will receive 5 weeks. ManagersWll receive the balance of any pay in lieu of notice under the Federal Government SEESA scheme.
Leave Payments Available under SEESA
(to be funded by the Federal Government)
Leave payments are based on entitlements at exit date, and do not accrue during the stand down period.
Annual Leave: Outstanding leave entitlements will be paid at base rate of pay plus loading or loading equivalent as applicable. For managers, leave is paid at the Fixed Annual Reward (FAR). Long Service: Accrues at a rate of 1.3 weeks per year and will be paid at the base rate for a pro-rata amount for service in excess of 12 months.
Unpaid wages, Outstanding hours accrued will be paid to employees at

Z-Days/Time in Lieu: base rate.
Severance Payment
The portion available under the Federal Government SEESA scheme will up to 8 weeks as a portion of your entitlements under the available Ansett packages. Travel benefits will not be offered. Total severance payments due may be calculated in line with the following:
Award Staff

Award employees are covered by the Business Recovery Package (BRP) or the Previous BRP / CR Package. Packages are pro-rated to years and months of service and capped at $175,000.
BRP Package

Years of Service Redundancy Payment

0-5 years 2 weeks base a per year of service.

5-15 years 2 weeks base pay per year up to 5 years, then 4 weeks base

a per year thereafter.

15+ years 2 weeks base pay per year up to 5 years, then 4 weeks base

pay per year for 5-15 years, then 6 weeks base pay per year

thereafter.
This package is capped at 104 weeks.
Previous BRP / CR Package
If you are less than 55 years old:

Years of Service Redundancy payment

0-5 years 3 weeks base a per year service.

5+ years
3 weeks base pay per year for first 5 years, then 4 weeks base

a per year thereafter.

If you are older than 55:

Years of Service Redundancy payment

0-10 years 10% of final average salary (last 12 months) for each year to

age 65.

10+ years 18% of final average salary (last 12 months) for each year to

age 65.
The greater of the BRP and Previous BRP / CR packages will be your severance entitlement. Any amount in excess of 8 weeks as paid out by the SEESA scheme will be paid pursuant to a DOCA or as a dividend and in priority to all ordinary unsecured creditors.
Management Staff
Management staff are covered by the current company policy as issued in September 2000. The policy includes any payment in lieu of notice and is payable on base salary plus car allowance. Managers without a copy of this policy may ring the staff enquiry hotline for further information regarding severance payments.
Any amount in excess of your notice period and up to 8 weeks -averance will be paid pursuant to a DOCA or as a dividend and in priority to all ordinary unsecured creditors.
Please return this form to Ansett Australia HR Shared Services at PO Box 362F Melbourne 3000 VIC or Fax (03) 9623 2520 or (03) 9623 3987, or by placing in the box located in the foyer of Ansett, 501 Swanston St, Melbourne by Friday 26^th October, 2001.

APPLICATION FOR REDUNDANCY

I wish to apply for a redundancy from Ansett’
Last Name: ________________________________________________________________
Given Names: ______________________________________________________________
Employee Number: __________________________________________________________
Home Address: _____________________________________________________________

State:

Post Code:

_____________________________________________________________

Phone: ____________________________________________________________________
Personal email: _____________________________________________________________
Division: ___________________________________________________________________
Department: ________________________________________________________________
Location: ___________________________________________________________________
Position / Job: _______________________________________________________________
By completing and placing my signature on this Application Form, I confirm that I have received and understood the letter dated 17^th October, 2001 and I understand among other things the following:
· Completion of this application form does not mean that I will automatically be exiting from Ansett*. I understand that this will be decided by the Ansett Administrators.
· Completion of this application form means that if I am accepted for a redundancy I will be exiting from Ansett*.

Signature: ___________________________ Date: _____________________

*Ansett being Ansett Australia Limited (Administrators Appointed) and all related companies under Administration.”

“ANNEXURE B”

Dear «First_Name»
NOTICE OF REDUNDANCY
As Administrators of the Ansett group, it is our job to maximise the chances of the Ansett business remaining in existence. If that is not possible, it is our job to maximise the return to the company’s creditors.
It is also in the interests of all creditors, including Ansett employees, to establish a commercially viable new Ansett business. However, the on-going business will be very different to that which operated before 14 ‘^hSeptember 2001. Its services will be reduced, and less employees will be required for operations.
I regret to advise that following the collapse of Ansett your position no longer remains open. Accordingly, your employment will conclude, by reason of redundancy, effective «SevDate».
Pre-Administration Entitlements

After the appointment of the initial Administrators on 12 September 2001, your employment with Ansett continued, although in accordance with orders inserted into the applicable certified agreement by Australian Industrial Relations Commission, since midnight on 14 September 2001 you may have been stood down. During that time, the Administrators have assessed the Ansett business and its viability as an ongoing operation. I confirm that during this period:
1 Ansett remained as your employer; and
2The Administrators did not adopt your contract of employment and/or personal liability in relation to your employment prior to the Administrators’ appointment.

Immediate Part Payment by Administrators and SEESA
Subject to the rights of any secured creditors, employees are the largest and highest ranked creditor group of Ansett. Early access to part of the entitlements by Ansett employees will be limited to the following:
•The Administrators will provide payment in lieu of notice as soon as possible. For most employees this will be equivalent to 4 weeks pay. Employees over 45 years of age and with more than 5 years of service will receive 5 weeks pay in lieu of notice. Managers who are entitled to receive more than 4 or 5 weeks pay in lieu of notice will receive an additional payment from the Federal Government’s Special Employee Entitlement Scheme for Ansett Group Employees (SEESA);
•The Federal Government’s SEESA will provide employees with:
i.All unpaid wages, including z-days and time-in-lieu;
ii.All unpaid annual leave;
iii.All unpaid long service on a pro-rata basis after 12 months service;
iv.All entitlements for pay in lieu of notice not already paid by the administrator; and
v.Unpaid redundancy up to the community standard of 8 weeks as a portion of the Ansett redundancy entitlement.

Payment of Balance

Upon the recapitalisation of Ansett or future realisation of Ansett assets and pursuant to a Deed of Company Arrangement (DOCA) or the declaration of a dividend, any additional entitlements such as redundancy pay in excess of 8 weeks may be paid by the Administrator. More details concerning your redundancy entitlements are included in the Redundancy Estimate Schedule attachment. I stress the employee entitlements must be paid prior to any distributions to ordinary unsecured creditors pursuant to a DOCA or by dividend.
Superannuation & Other Benefits
Your benefits under the relevant superannuation scheme are separate to these proposed arrangements and your fund will supply you with details of your superannuation entitlements.
Unfortunately, given the restructured nature of Ansett’s operations, the Administrators are unable to provide the travel benefits to which employees dismissed by reason of redundancy are otherwise entitled to receive. Outplacement benefits previously made available are also unable to be provided.
Schedule of Entitlements
A schedule estimating your entitlements is enclosed. It is my intention that pay in lieu of notice will be deposited into your designated bank account as soon as possible. Payment of your Federal Government SEESA entitlement will then follow to your designated bank account. In respect of any additional redundancy pay, you will be notified by the Administrators in due course whether such payment is available and if so, arrangements for its payment. Payment will depend on the outcome of the Administration and as a creditor you will receive notice of the outcome.
In order for your payment in lieu of notice to be made, I require you to complete the enclosed Redundancy Exit Checklist and to return it, along with any relevant Ansett property in your possession.
Further information or calculation can be obtained from the Staff Enquiry Hotline on 1800 151 604 or the Ansett website at it is with great regret that your former position could not remain. On behalf of Ansett, I wish to thank you for your service and your support and cooperation during very difficult times. I also wish you future success.
Yours faithfully
Mark Mentha
Administrator
Ansett Australia Limited (Administrators Appointed)
Enclosures:
Redundancy Estimate Schedule
Certificate of Service
Redundancy Checklist Frequently Asked Questions
---

Years of Participation (years)	Percentage of Final Average Salary
Less than 1	6
1 but less than 2	7 1/3
2 but less than 3	8 2/3
3 or more	10

Complete Years of Participation (years) 7 or less	Percentage Increase % Nil
8	30
9	40
10	50
11	60
12	70
13	80
14	90
15	100
16	110
17	120
18	130
19	140
20	150
21	160
22	170
23	180
24	190
25 or more	200

Step		Minimum Timeframe
1.	Employees to apply for redundancy by submitting the	By Friday 26^th
attached form	October, 2001
2.	Ansett to advise employees whether applications have	By Friday 9^th
been accepted or rejected via letter, including calculation	November, 2001
of entitlements for accepted applications
3.	If application is accepted, employees to return company	ASAP after receiving
property as indicated in their redundancy letter	Redundancy letter
4.	Payment of pay in lieu of notice by the Administrators (4-	ASAP after return of
5. weeks calculated on base rates )	company property
5.	Payment funded under the Federal Government SEESA	ASAP after return of
provisions (not the Administrators) comprising unpaid	company property
wages, z-days, TIL, annual leave, long service leave, any
pay in lieu of notice in excess of 4-5 weeks and up to 8
weeks severance.
Step		Minimum Timeframe
6. Payment by the Administrators of final settlement of		When and if funds
Outstanding entitlements (the difference between the 8		become available
Weeks paid through SEESA and your Ansett package)		either pursuant to the
terms of a deed of
company
arrangement
“DOCA” or dividend.

Years of Service	Redundancy Payment
0-5 years	2 weeks base a per year of service.
5-15 years	2 weeks base pay per year up to 5 years, then 4 weeks base
a per year thereafter.
15+ years	2 weeks base pay per year up to 5 years, then 4 weeks base
pay per year for 5-15 years, then 6 weeks base pay per year
thereafter.

Years of Service	Redundancy payment
0-10 years	10% of final average salary (last 12 months) for each year to
age 65.
10+ years	18% of final average salary (last 12 months) for each year to
age 65.

[2002] VSC 576

20 December 2002