Application by Motor Trades Association of Australia Superannuation Fund Pty Ltd atf Spirit Super

[2021] NSWSC 1672

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Application by Motor Trades Association of Australia Superannuation Fund Pty Ltd atf Spirit Super [2021] NSWSC 1672

Hearing dates:

25 October 2021. Further submissions on 16 November, 14 and 16 December 2021.

Date of orders:

17 December 2021

Decision date:

17 December 2021

Jurisdiction:

Equity

Before:

Henry J

Decision:

The Plaintiff is justified in amending the Trust Deed in the manner set out in the Draft Deed of Amendment.

Catchwords:

EQUITY – Trusts and trustees – Judicial advice under s 63 of the Trustee Act 1925 (NSW) – where proposed amendments to trust deed of superannuation fund give trustee power to levy fee on members and accumulate trustee capital – where amendments sought to enable trustee to meet potential liabilities against it and its directors – where superannuation fund operates under profit-to-member structure with nominal capital – whether proposed amendments consistent with recent amendments to ss 56(2) and 57(2) of the Superannuation Industry (Supervision) Act 1993 (Cth) and duties of the trustee

Legislation Cited:

Corporations Act 2001 (Cth), ss 181, 199A, 199B

Court Suppression and Non-Publication Orders Act 2010 (NSW), ss 6, 7, 8, 11, 12

Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (NSW)

SuperannuationIndustry(Supervision)Act1993 (Cth), ss 56(2), 57(2)

Trustee Act 1925 (NSW), s 63

Cases Cited:

Application by LGSS Pty Ltd atf Local Government Super [2021] NSWSC 1613

Application by Maritime Super Pty Ltd atf Maritime Super [2021] NSWSC 1614

Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521; 138 ACSR 459

Baymill Investments Pty Ltd v Drewlock Pty Ltd [2019] VSC 827

Chamberlin v Spry [2008] VSC 562

D1 v P1 [2012] NSWCA 314

Fairfax Digital Australia and New Zealand Pty Ltd v Ibrahim (2012) 83 NSWLR 52; [2012] NSWCCA 125

Hogan v Hinch (2011) 243 CLR 506; [2011] HCA 4

Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Limited (2006) 15 VR 87; [2006] VSC 112

John Fairfax & Sons Pty Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42

Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198

Miller v Miller (1995) 16 ACSR 73

QSuper Board [2021] QSC 276

Re Application of NSW Trustee & Guardian [2014] NSWSC 423

Re Application of Perpetual Trustee Co Ltd [2003] NSWSC 1185

Re Care Super Pty Ltd [2021] VSC 805

Re Cuesuper Pty Ltd [2009] NSWSC 981

Re HEST Australia Ltd [2021] VSC 809

Re Perpetual Investment Management Ltd [2014] NSWSC 784

Re Retail Employees Superannuation Pty Ltd [2013] NSWSC 1681

Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403

Robinson v Pett (1734) 24 ER 1049

Telstra Corp Ltd v NBN Co Ltd [2014] NSWSC 940

Welker v Rinehart [2011] NSWSC 1094

Texts Cited:

Nil

Category:

Principal judgment

Parties:

Motor Trades Association of Australia Superannuation Fund Pty Limited (ACN 008 650 628) as trustee for Spirit Super (ABN 74 559 365 913) (Plaintiff)
Australian Prudential Regulation Authority (amicus curiae)

Representation:

Counsel:
H Insall SC with T Rogan (Plaintiff)
S Cooper QC with D Allen (APRA as amicus curiae)

Solicitors:
Allens (Plaintiff)

File Number(s):

2021/286583

Publication restriction:

Nil

Judgment

1. The plaintiff, Motor Trades Association of Australia Superannuation Fund Pty Ltd (Trustee), is the trustee of an industry superannuation fund known as Spirit Super (Fund) that was established by a trust deed dated 31 May 1989 which has been amended from time to time (Trust Deed).

2. By an Amended Summons filed on 28 October 2021, the Trustee seeks judicial advice under s 63 of the Trustee Act 1925 (NSW) (Trustee Act) that it would be justified in amending the Trust Deed to provide, in effect, for a remuneration power to enable the Trustee to be paid a fee for acting in the role of trustee of the Fund. In the alternative, the Trustee seeks an order under s 81 of the Trustee Act or the Court’s inherent jurisdiction that a power to pay a fee be conferred on the Trustee.

3. The Trustee’s application is brought in response to changes in the regulatory and operating environment in which the Trustee, its directors and the Fund operate, particularly changes to the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) that relate to the indemnification of trustees and directors of trustees which are to take effect on 1 January 2022. The Trustee considers that the changes will heighten its exposure to risks of insolvency and, as a consequence, the current provisions of the Trust Deed, which do not contain a power for the Trustee to charge a fee, no longer serve the best financial interests of the Fund’s members.

4. The Trustee makes the application as its proposal to amend the Trust Deed could be seen as giving rise to a potential conflict between the interests of the Trustee and its directors, and their duties to, and the interests of, the members of the Fund.

5. In support of the application, the Trustee relies on an amended statement of facts filed on 28 October 2021, which is supported by the affidavits of the Trustee’s Chief Executive Officer, Ms Leeanne Turner, dated 7 October 2021, and Mr Sean Lindsay, Senior Account Manager – Professional Risk at IFS Insurance Solutions Pty Ltd, dated 29 September 2021. The Trustee also relies on a confidential opinion from Senior Counsel and detailed written submissions.

6. Supplementary written submissions have been received from the Trustee that address its claims of confidentiality over parts of the material relied on and recent decisions of the Supreme Courts of Queensland and Victoria that deal with applications of a similar kind to the application made in these proceedings: QSuper Board [2021] QSC 276 (QSuper); Re HEST Australia Ltd [2021] VSC 809 (HESTA); Re Care Super Pty Ltd [2021] VSC 805 (Care Super). The Trustee also provided two recent decisions of Ward CJ in Eq dealing with similar applications: Application by LGSS Pty Ltd atf Local Government Super [2021] NSWSC 1613 (LGSS); Application by Maritime Super Pty Ltd atf Maritime Super [2021] NSWSC 1614 (Maritime Super).

7. The Australian Prudential Regulation Authority (APRA) was notified of the application and granted leave to appear at the hearing as amicus curiae. APRA provided the Court with written submissions that were supplemented by oral submissions at the hearing.

8. I have been greatly assisted by the submissions of the Trustee and APRA and the timely manner in which the Trustee’s supplementary submissions were provided.

9. For the reasons that follow, I have determined that the Court should provide judicial advice under s 63 of the Trustee Act to the Trustee that it would be justified in amending the Trust Deed as proposed. I have also decided that parts of the materials relied on by the Trustee in support of this application should be subject to orders made under the Court Suppression and Non-Publication Orders Act 2010 (NSW) and the Court’s inherent jurisdiction.

Background

The Fund, the Trustee and the Trust Deed

10. The Fund is a public offer fund that is open to members from all industries. It was previously known as the MTAA Superannuation Fund (MTAA Super), having changed its name on 1 April 2021 following a successor fund transfer of industry superannuation fund Tasplan Superannuation Fund (Tasplan) into MTAA Super. Tasplan and MTAA Super have operated in Australia since 1987 and 1989 respectively.

11. The Fund offers two superannuation products and a number of legacy defined benefit sub-funds which are closed to new members.

12. As at 30 June 2021, the Fund had over 320,000 members located in each State and Territory of Australia. It consisted of assets valued at approximately $26.5 billion, was liable to pay benefits to members of approximately $25.3 billion and maintained a net asset surplus of approximately $438 million.

13. The Fund maintains three reserves for the purpose of providing a pool of funds to meet the operational, administrative and insurance costs of operating the Fund.

14. The Operational Risk Reserve is maintained in accordance with the requirements of APRA Prudential Standard SPS 114 and provides protection to the Fund members in the event that a loss is incurred from an operational risk event occurring.

15. The General Reserve holds funds necessary to meet the Fund’s general operational and administrative costs and any unexpected costs not payable out of the Operational Risk Reserve. Annual administration fees charged to each member and investment fees deducted from members’ accounts are paid into the General Reserve.

16. The Insurance Reserve is used to meet insurance premium costs, with excess funds returned to the General Reserve.

17. The Trustee is a limited liability proprietary company whose sole purpose is to be the trustee of the Fund and to do all things that its directors consider necessary or desirable for that purpose: Constitution, cl 2.

18. The board of the Trustee is made up of eleven directors. Consistent with the equal representation rules under Part 9 of the SIS Act, there are four member-representative directors, four employer-representative directors and three independent directors on the Trustee’s board.

19. Shares in the Trustee can only be held by the directors, who hold them on trust for the benefit of members of the Fund: Constitution, subcll 3.2(a) and (b). There are eleven shares on issue, with a total share capital of $11.

20. All income and property of the Fund must be applied solely towards the promotion of Trustee’s objects, including on a winding up of the Trustee. No portion may be paid or transferred by way of dividend, bonus or otherwise by way of profit or return of capital to shareholders of the Trustee (who are also its directors): Constitution, cll 3.1, 19.1 and 19.2.

21. The Trustee does not currently receive remuneration for the services it provides to the Fund as trustee. It meets all expenses that it incurs out of the Fund, including in relation to the remuneration of its directions and premiums for insuring the Trustee against certain liabilities incurred by it in discharging its duties.

22. The Trust Deed in its current form does not have an express and specific power for the Trustee to charge a fee for its services. It presently includes a general expense recovery right which entitles the Trustee to be paid its costs and expenses properly incurred in carrying out its duties and obligations under the Deed, including the remuneration of the Trustee’s directors (but only to the extent the remuneration is determined by the Trustee to be reasonable, having regard to the advice of an independent remuneration consultant) and payment for travel and other expenses properly incurred: Trust Deed, cl 11.3:

23. The general expense recovery right in cl 11.3 was included in the Trust Deed by Deed of Amendment dated 31 August 2011. That amendment followed previous amendments to the Trust Deed that provided for, amongst other things, the directors to receive remuneration. The original Trust Deed had included a provision to the effect that the Trustee shall not be entitled to any remuneration for its services as trustee other than an entitlement to recoup out-of-pocket expenses.

24. The remuneration of directors and officers of the Trustee is currently met by MTAA Superannuation Fund (Secretariat Co) Pty Ltd, an entity in which the Trustee holds all shares in its fiduciary capacity for the members of the Fund.

25. The Trustee is also empowered, in its discretion, to deduct “Fund Expenses” from Member Accounts and Pension Accounts and for this purpose, set one or more fees: Trust Deed, cl 5.3. “Fund Expenses”, which are defined to mean “all amounts or costs to be taken into account in operating the Fund” (Trust Deed, cl 1.1), are typically paid out of the General Reserve.

26. Under the Trust Deed, the Trustee and the directors of the Trustee have a right of indemnification against all liabilities and expenses in the following terms:

8.5   Indemnity

8.5.1   To the extent permitted by law, the Trustee and the directors of the Trustee will be indemnified against all liabilities and expenses incurred by them in the execution of their duties hereunder and shall have a lien on the Fund for such indemnity.

8.5.2   The costs charges and expenses incurred by the Trustee in and incidental to the administration and winding up of the Fund or otherwise in relation thereto shall be paid out of the Fund.

8.5.3   The indemnity in this clause shall not apply to the Trustee or a director of the Trustee where the Trustee or that director:

(a)   fails to act honestly in a matter concerning the Fund;

(b)   intentionally or recklessly fails to exercise, in relation to a matter affecting the Fund, the degree of care and diligence that the Trustee or director is required to exercise; or

(c)   the liability is for a monetary penalty under a civil penalty order under the Act.

27. In accordance with its profit-to-member structure and its purpose of acting as trustee of the Fund, the Trustee typically does not generate any profits and does not receive financial support from shareholders. The financial records in evidence indicate that the Trustee has “broken even” for each of the three most recent financial years and, as at 30 June 2021, had net assets of $11, reflecting the nominal personal share capital of the company.

28. The Trustee holds insurance for its own liability which provides coverage for claims against the Trustee and claims against and investigations concerning its directors and officers. The insurance coverage has some limitations, such as payable excesses, the exclusion of loss resulting from certain conduct, and the potential for delay between a liability being incurred and payment of insurance, such that the insurance may not respond fully or in a timely manner to the Trustee’s losses and liabilities.

Regulatory framework

29. The Fund is a regulated superannuation fund and registerable superannuation entity within the meaning of the SIS Act.

30. As required, the Trustee holds an Australian Financial Services Licence (ASFL) under the Corporations Act 2001 (Cth), a Registrable Superannuation Entity Licence under the SIS Act, and a MySuper authorisation. The Trustee and its directors are subject to a regulatory environment overseen in particular by APRA and the Australian Securities & Investments Commission.

31. In recent years, there have been significant changes to the regulatory environment in which the Trustee and its directors have administered the Fund, which renders the discharge of their regulatory obligations and duties more onerous. The changes are detailed in an expert report annexed to Ms Turner’s affidavit prepared by Associate Professor Vivienne Brand at Flinders University dated 29 September 2021 and a report prepared by Professor Pamela Hanrahan of the UNSW Business School, also dated 29 September 2021. The reports highlight the complexity of the financial and superannuation laws that apply to the Trustee and its directors, the expansion of the regulatory obligations of superannuation trustees, the increasing risks for trustees and directors incurring penalties for non-compliance with their obligations, and the intensified regulatory enforcement activity concerning conduct of superannuation trustees and directors. The expansion of the range of penalties to which superannuation trustees are exposed and some of the more significant legislative changes that have been introduced over the years are summarised by Kelly J in QSuper at [22]–[27].

32. Most recently, the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (NSW) (FSR Act) has effected amendments to ss 56(2) and 57(2) of the SIS Act which are to take effect from 1 January 2022 and have prompted the Trustee’s application in these proceedings.

33. Prior to those amendments, ss 56(2) and 57(2) of the SIS Act render void provisions of a superannuation entity’s constituent documents that, amongst other things, would have the effect of exempting a trustee from, or indemnifying a trustee or director against, liability for breach of trust in failing to act honestly in a matter concerning the Fund or intentionally or recklessly failing to exercise the degree of care and diligence required to be exercised in relation to a matter affecting the Fund.

34. The amendments to ss 56(2) and 57(2) of the SIS Act that take effect on 1 January 2022 (SIS Act Amendments) impose additional restrictions on indemnification that will mean the Trustee and its directors will be personally liable for a range of obligations imposed by Commonwealth law, including obligations of strict liability.

35. In summary, the SIS Act Amendments extend the existing prohibitions on indemnification and exemption to prevent trustees and directors from using trust assets to pay any criminal, civil or administrative penalty incurred in relation to a contravention of any Commonwealth law where that liability is imposed on or after 1 January 2022. This will extend to circumstances where the Trustee or its directors have not engaged in criminal conduct, acted dishonestly or been guilty of gross negligence. These amendments will take effect in a regulatory environment that has heightened the exposure of trustees to penalties, as described by Associate Professor Brand and Professor Hanrahan.

36. The SIS Act Amendments and relevant parts of the Explanatory Memorandum to the Bill that introduced them are detailed in QSuper at [27]–[28] and in HESTA at [19]–[20], which I will not repeat here.

Rationale for and overview of proposed amendments

37. Ms Turner deposes that the Trustee has a robust approach to risk management, including extensive internal capacity to actively manage risks. She says that, as a result, the Trustee has only received a small number of nominal infringement notices for delayed lodgement incurred prior to the merger in April 2021, which were administrative in nature and in respect of which no further action was taken.

38. She also deposes that, while the Trustee has traditionally been comfortable absorbing risk without personal capital, the changes to the legal, regulatory and enforcement environment have created a state of affairs where the Trustee considers it is no longer reasonable for it to provide its services gratuitously. In particular, the SIS Act Amendments are of concern to the Trustee because once they take effect on 1 January 2022, the Trustee and its directors will have to pay penalties of any Commonwealth law, even for inadvertent breaches, from their own personal capital. The Trustee is concerned that its lack of access to personal capital means that, where insurance does not respond to a particular liability, such a liability would almost certainly cause it to become insolvent or unable to carry on its business in the ordinary course and in accordance with its duties as trustee of the Fund.

39. According to Ms Turner’s evidence, the increased risk of Trustee insolvency would, if realised, require the directors to appoint liquidators or administrators to the Trustee and likely result in trustee replacement, successor fund transfer, or trustee replacement followed by a successor fund transfer. Each of those scenarios would result in unavoidable and significant costs to members which have been modelled and are subject to claims of confidentiality.

40. In addition, Ms Turner deposes that the increased risk of Trustee insolvency would likely exacerbate the risk of personal financial detriment for directors, create risks of unduly conservative decision making, and result in difficulty for the Trustee in attracting and retaining appropriately skilled directors.

41. It is in that context that the Trustee considers that it is prudent and in the best financial interests of Fund members to amend the Trust Deed to provide for a power to charge a fee to compensate it for acting as trustee of the Fund.

37. The amendments that the Trustee proposes to make to the Trust Deed are contained in a schedule to a draft Deed of Amendment (Proposed Amendments), which is set out at the end of these reasons at Annexure A.

38. In summary, the Trustee proposes to amend the Trust Deed to empower the Trustee to impose a Trustee Fee in an amount equivalent to up to 0.105% per annum of the net assets of the Fund (Annual Limit). In addition to the Annual Limit, the proposed power to levy a Trustee Fee would be subject to a cap on the amount of personal capital which the Trustee can accumulate out of the proceeds of the Trustee Fee (Cap on Target Capital). That Cap would be set initially at an amount equal to 0.30% of the net assets of the Fund or such other maximum amount (if any) of Trustee capital as the applicable law requires or a regulator permits, recommends, requests or directs the Trustee to hold. Once the Cap on Target Capital is reached, for as long as and to the extent that the amount of Trustee capital held does not drop below that amount, the power to levy the Trustee Fee would be suspended.

39. The Annual Limit and the Cap on Target Capital have been set by reference to the Trustee’s assessment of what level of remuneration compensates it for the risks of personal liability which it assumes from providing services as trustee to the Fund, including the risk of personal liability assumed by the directors for which the Trustee provides indemnification, and enables it to recover its costs of remunerating directors and obtaining insurance coverage against liabilities incurred in the discharge of its duties as Trustees (to the extent that coverage is available).

40. The Annual Limit and Cap on Target Capital are to be subject to review every three years to assess whether they are fair and reasonable and, if necessary, would be amended by the Trustee to ensure that they remain fair and reasonable.

41. The Trustee has undertaken detailed financial modelling to determine the proposed Trustee Fee by reference to the estimated personal financial risk that it currently faces. The modelling takes into account the forecast costs of remunerating directors, recent insurance premiums and the risk of liability for penalties, and amounts payable under infringement notices that may be incurred by the Trustee, its directors and its officers in connection with contraventions of Commonwealth law (for which it cannot rely on its right of indemnity from the Fund). The modelling is based on a data set prepared by a law firm for the Australian Institute of Superannuation Trustees and adapted by the Trustee’s management, the details of which are set out in a Report on Trustee Capital and Fee.

42. The Trustee arranged for PricewaterhouseCoopers to independently review and verify the Report on Trustee Capital and Fee, who has confirmed that the risk methodology used for calculating the Trustee Fee and Cap on Target Capital is fair and reasonable and consistent with industry benchmarks.

43. In addition, the Trustee has taken advice from Senior and Junior Counsel and their solicitors, Allens, on the proposal to amend the Trust Deed in the context of the concerns raised by the SIS Act Amendments and has engaged with APRA regarding the nature of and rationale for the Proposed Amendments.

44. The Trustee proposes that the Trustee Fee be initially funded from the existing surplus that has built up in the Fund’s General Reserve from the administration fees that have been charged on an equitable basis to members to date without imposing an additional fee on members for at least five financial years. It considers it unlikely that an additional administration fee would need to be imposed on members after five financial years to fund the Trustee Fee. As a result, the Trustee considers that the Trustee Fee will have a minimal and equitable impact on members because there will be no net direct financial impact and only a minimal indirect financial impact as a result of the existing surplus in the General Reserve.

45. In anticipation of this application, the Trustee amended the Constitution with effect from 28 September 2021 in order to strengthen and add to the existing protections in relation to the Trustee, such as those referred to at [20] above. The amendments are intended to ensure that the capital accumulated by levying the proposed Trustee Fee, once held by the Trustee in its personal capacity, will be used for constrained purposes that ultimately support the members’ best interests. They include provisions that make clear that the Trustee’s personal capital may be applied to the Fund if the directors so determine, that payments can be made out of the Trustee’s personal capital to cover payment of penalties and insurance premiums, and that the Trustee has the power to indemnify directors under the Constitution to the full extent permitted by the Corporations Act or otherwise by law: Constitution, cll 19.1(b)(ii), 19.1(b)(iv)-(vi), 19.1(b)(vii), 19.3 and 21.1.

46. At a meeting held on 28 September 2021, the board of the Trustee considered the amendments and unanimously resolved to support the application to the Court, having approved in principle the proposal which is the subject of this application. While it has formed the view that making the proposed amendments to the Trust Deed is in members’ best interests, the Trustee and its directors resolved to seek judicial advice as they recognise the apparent conflict arising from the Trustee’s self interest in acquiring a financial benefit via the fee (and thereby reducing the Trustee’s personal liability and enabling it to indemnify its directors for personal liabilities) at some indirect cost to members.

Application under s 63 of Trustee Act

52. The Trustee seeks advice under section 63 of the Trustee Act, which relevantly provides:

63   Advice

(1)   A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust    property, or respecting the interpretation of the trust instrument.

(2)   If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.

…

(4)   Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person, or to adduce evidence by affidavit or otherwise in support of the application.

53. As the Trustee submits, the only jurisdictional bar to relief under s 63 is the existence of a question respecting the management or administration of the trust property, or the interpretation of the trust instrument: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church) at [58]; Baymill Investments Pty Ltd v Drewlock Pty Ltd [2019] VSC 827 (Baymill) at [76]. I am satisfied that the advice sought by the Trustee relates to the management or administration of the Fund and that the Trustee’s application engages s 63 of the Trustee Act.

54. The Trustee did not serve its application for judicial advice on the Fund’s members and contended that this approach was consistent with s 63(4) of the Trustee Act. The Trustee submitted, and I accepted, that service of the application on the members was unnecessary and the application could be dealt with in their absence and without joinder of any other party.

55. The large number of members of the Fund made it impractical to serve them all in advance of the application. It may also be taken that representatives of members were aware of the application through directors on the board of the Trustee who were nominated by organisations representing members’ interests and who had knowledge of and supported the application. Prior to making its application, the Trustee had also engaged with APRA regarding the nature of and rationale for the proposed amendments. As already noted, APRA appeared at the hearing, provided submissions and did not object to the Trustee’s application.

56. The Trustee’s approach in this regard is also similar to the approach accepted in this and other courts in similar applications: see, for example, QSuper at [17] (Kelly J), LGSS at [55]–[56], Maritime Super at [82]–[84], Re Cuesuper Pty Ltd [2009] NSWSC 981 (Cuesuper) at [10] and Re Retail Employees Superannuation Pty Ltd [2013] NSWSC 1681 (Retail Employees) at [13].

Approach to judicial advice

57. In exercising the jurisdiction to give judicial advice, the Court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate: Macedonian Church at [104], quoting Marley v Mutual Security Merchant Bank & Trust Co Ltd [1991] 3 All ER 198 at 201G. It is not the Court’s function to take over the exercise of the Trustee’s discretion, assess the commercial wisdom of the Trustee’s decision, or tell the Trustee what to do. An order giving judicial advice is permissive and usually in the form that the trustee “is justified’ in acting in a particular way: Re Application of NSW Trustee & Guardian [2014] NSWSC 423 at [24]–[25], cited in Baymill at [80].

58. Thus, the central question on this application is whether, on the material before it, the Court is satisfied that the Trustee’s proposed course of action or exercise of power is proper and lawful: Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Limited (2006) 15 VR 87; [2006] VSC 112 (Invensys) at [36]; Chamberlin v Spry [2008] VSC 562 at [14].

Consideration and determination of application

59. The Trustee submits that it would be justified in amending the Trust Deed in the manner set out in the Draft Deed of Amendment for essentially three reasons.

60. First, it says that it has an express power to amend the Trust Deed in the manner contemplated and that the Proposed Amendments do not engage any of the express restrictions on the Trustee’s power to amend the Trust Deed. I accept that submission.

61. Under cl 17.1, the Trustee has express power to amend the Trust Deed by a deed executed by the Trustee.

62. Clause 17.3.1 contains express limitations on the power of amendment, namely, that except in certain limited circumstances, the Trustee’s power of amendment cannot be exercised in any manner which has the effect of:

1. reducing any Benefits which have accrued to any Member;

2. affecting the basis for calculating the amount of retirement benefits of any Member in a way that reduces that amount with respect to the period of membership prior to the date of the Amendment; or

3. changing cl 17 of the Trust Deed (which confers and constrains the Trustee’s power of amendment).

63. Clause 17.5.1 also contains express limitations on the power of amendment that no addition to, cancellation, amendment, alteration or deletion to the Deed can be made:

1. which would have the effect of permitting a natural person to be appointed as a Trustee of the Fund;

2. where the SIS Act or associated regulations requires any approval or consent from any person or persons before an amendment may be made to the governing rules of a superannuation fund, that approval or consent in the form required by the SIS Act or associated regulations is first obtained; or

3. if, in the opinion of the Trustee, to do so would cause the Trust, this Deed, or the Trustee to contravene the SIS Act unless the Regulator or the person or persons (if any) specified for that purpose under the SIS Act consents to it in writing.

64. As the Trustee submits, the Proposed Amendments do not engage any of the express restrictions referred to above. The evidence indicates that the Trustee has formed the view that making the proposed amendments to the Trust Deed are in the members’ best interests. There is also evidence that the approach taken to the Trustee Fee (as referred to at [49] above and explained in further detail in the Report on Trustee Capital and Fee) will not reduce any benefits that have accrued to any member or affect the basis for calculating the amount of retirement benefits in a way that reduces that amount for the period of membership prior to the date of the Proposed Amendments.

65. Second, the Trustee submits that its power of amendment is proposed to be exercised in good faith, upon a real and actual consideration, and that the power will be exercised in accordance with the purposes for which it was conferred and in a way which appears to it to be fair and equitable in the circumstances: Invensys at [62]. While accepting that equity has historically expected trustees to act gratuitously (see e.g. Robinson v Pett (1734) 24 ER 1049), the Trustee says this is a manifestation of the “no conflict” rule that would be mitigated by the provision of judicial advice, referring to the approach of Palmer J in Cuesuper at [21]–[22] and Darke J in Retail Employees at [16].

66. Third, the Trustee submits that, in exercising its power of amendment, it will comply with its obligations under law, including relevant superannuation legislation and, in particular, the covenants in subss 52(2)(c) and (d) of the SIS Act.

67. The Trustee also made submissions that the circumstances and approach of courts in the recent cases referred to at [6] are analogous to the present application and the findings in those cases support the grant of relief in this case.

68. APRA’s submissions focussed on identifying the legal principles and discretionary considerations which, in APRA’s view, bear upon the Court’s decision about whether to grant the relief sought. They addressed the Trustee’s duties and obligations under general law and the SIS Act, particularly by reference to the covenants under subss 52(2)(b)–(f) (being the covenants relating to the Trustee’s care, skill and diligence, members’ best financial interests, management of conflicts and acting fairly in dealing with beneficiaries) and the matters that the Court would take into account in assessing whether the Trustee ‘s proposal was consistent with those covenants, the key aspects of which are referred to below.

69. APRA does not object to the Trustee’s proposal, although it did raise a concern that the initial proposal may have had the effect of removing an existing protection for beneficiaries in the event that directors’ remuneration ceased to be paid out of Trustee capital. That concern was addressed by the Trustee amending cl 11.6.5 of the schedule to the Deed of Amendment to provide, expressly, for the Trustee to have regard to the advice of an appropriately qualified independent consultant in relation to the review of the remuneration of directors.

Proposed Amendments are not inconsistent with SIS Act Amendments

70. APRA’s submissions also addressed the question of whether the SIS Act Amendments prohibit the outcome sought to be achieved by the Trustee’s Proposed Amendments. It submitted that, while “arguably an uncomfortable conclusion”, the Proposed Amendments would not contravene the SIS Act Amendments. In reply submissions, the Trustee adopted APRA’s submissions on this issue.

71. The proposed amendments would contravene the provisions of ss 56(2) and 57(2) of the SIS Act that take effect on 1 January 2022 if the changes to the Trust Deed have the effect of giving an exemption or granting an indemnity against liability in a manner that is prohibited by the specific language of those sections. The language of the statutory preclusions is directed to provisions in the governing rules of a superannuation entity that would provide a blanket exemption from and indemnification against an identified liability in a similar but narrower way than that provided by s 199A of the Corporations Act.

72. “Exemption” and “indemnification” are concepts that have specific legal meaning. As APRA submits, the earning of a fee does not involve a release from the obligations associated with an existing liability, so as to amount to an exemption in form or in substance: Miller v Miller (1995) 16 ACSR 73 at 88.

73. The concept of an indemnity involves a promise or obligation to hold another party harmless against a particular loss or liability. The nature and extent of a right of indemnity is a function of and reflects the nature and extent of the ultimate loss or liability suffered or incurred by the promise. While the proposed amendment will facilitate the accumulation of financial resources which may be deployed to meet a liability against which the Trustee cannot be indemnified from the Fund after the SIS Act Amendments come into effect, the proposed amendment is not tied to any identified liability, which would otherwise be characteristic of indemnification.

74. In this case, what is proposed is the grant of a power to the Trustee to charge a fee for its services referable to the risk of liability which the Trustee incurs by undertaking to act as trustee of the Fund. The quantum of the Trustee Fee and the Cap on Target Capital were calculated on a basis that excluded a number of potential risks and presupposed the effective functioning of the Trustee’s risk management and compliance frameworks which, if they were to fail, could give rise to penalties that would exceed the liabilities around which those figures were based. Thus, the Fee charged and the amount of the capital which the Trustee can accumulate may be insufficient to meet the liabilities it incurs in the course of its duties and do not operate either in form or in substance as an indemnity: see QSuper at [32].

75. Further, and as observed by Button J in HESTA at [93]–[95] and Lyons J in Care Super at [179], the inclusion of a power to charge a fee does not involve the Trustee exercising a right of recoupment or exoneration against trust assets by way of indemnification. Rather, it allows a trustee to build a fund to be held personally. If and when the fund is used to meet the costs of a penalty incurred by the trustee, the economic burden will fall on the trustee as the liable party and not on the trust assets. Once a fee that is charged by a trustee according to a remuneration clause in the trust deed ceases to be a trust asset, the fee becomes the property of the trustee in its own right to do with as it sees fit and in accordance with other obligations imposed on it in carrying out its duties.

76. The SIS Act Amendments might disclose a legislative intention that trustees of superannuation funds are to bear in their personal capacity the financial cost of the expanded range of liabilities to which they may become subject. However, they do not preclude a trustee from meeting liabilities using its own capital. Relevantly, the SIS Act recognises that the earning of an administration fee that goes beyond cost recovery by superannuation trustee is permissible: SIS Act, s 29V(1).

77. For the same reasons, the Proposed Amendments are not inconsistent with the SIS Act Amendments that relate to the indemnification of directors, although there is an additional consideration which supports that conclusion. That consideration is that the use of Trustee capital by the board to indemnify, exempt or insure directors against liabilities will be subject to limits on the scope of indemnities given and insurance paid for by companies in respect of liabilities incurred as a company officer and the general law and statutory duties on directors to act in good faith in the best interests of the Trustee: Corporations Act, ss 181(1), 199A, 199B.

Trustee is otherwise justified in making the Proposed Amendments

78. As the power exists for the Trustee to make the Proposed Amendments and they are not inconsistent with the SIS Act Amendments, the remaining issue concerns the propriety of the exercise of the Trustee’s power and whether it is consistent with the discharge of the Trustee’s legal duties, including under the SIS Act. Based on the material before the Court and the submissions made, I am satisfied that the Trustee would be justified in exercising the power of amendment to make the Proposed Amendments.

78. It is apparent that changes to the regulatory and enforcement environment have led to a material increase in the liabilities and financial risks facing the Trustee and, as a consequence, to the Fund’s members. As Kelly J noted in QSuper, prior to the SIS Act Amendments, ss 56(2) and 57(2) were understood to allow superannuation fund trustees and directors of trustees to indemnify themselves for liabilities they incurred by acting as trustee or director, even those incurred in breach of trust (except for those attributable to dishonest, intentional or reckless conduct) or a liability with respect to a statutory penalty: at [29]. When the SIS Act Amendments take effect, there will be a wide range of potential liabilities for which the Trustee and its directors will be prohibited from being indemnified from the Fund.

79. I accept the Trustee’s submission that it proposes to exercise its power to amend the Trust Deed in good faith and for a proper purpose upon a real and actual consideration of its position. The purpose of the Proposed Amendments, in the sense of the substantial object forming the real ground of the amendments, is to enable the Trustee to continue functioning in the context of heightened risks of insolvency and to secure the competent administration of the Fund. Absent payment of the Trustee Fee, the Fund is exposed to the risk of loss of the Trustee, with concomitant financial detriment. As the Trustee submits, it is likely that any replacement Trustee would require payment of a similar fee in any event.

80. The matters referred to at [37] to [51] above demonstrate that the Trustee has endeavoured to give genuine consideration to the issues raised by the Proposed Amendments, has acted responsibility in preparing its proposal, and has identified sound reasons for the Proposed Amendments. In particular, the evidence demonstrates that it is not in the best financial interests of members of the Fund for the Trustee to not be in a position to be able to access personal capital, leading to a risk of insolvency, qualified persons possibly being unwilling to serve as directors, and the potential for distorted decision making at the board level: HESTA at [71].

81. In that regard, a relatively broad and practical approach should be adopted when assessing whether the Proposed Amendments are in the best financial interests of the members of the Fund for the purposes of s 52(2)(c) of the SIS Act. Regard should be had to the interests of both present and future members and the commercial and practical realities of the superannuation industry generally: QSuper at [36], citing Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521; 138 ACSR 459 (APRA v Kelaher) at [61]–[65] and Invensys at [110]–[120]. The question for the Court is not what is in the best financial interest of members, but whether the decision of the trustee to consent to the proposed amendment is reasonably justifiable on that basis: APRA v Kelaher at [64]; QSuper at [36].

82. The Trustee’s inability to satisfy potential future liabilities exposes its members to possible financial detriment. That detriment would be realised in the event that the Trustee was to become insolvent by reason of an inability to meet even a modest civil or administrative penalty for which it could not be indemnified from trust assets by reason of the SIS Act Amendments. It is consistent with the best financial interests of members for the Trustee to take steps to ensure the due and proper administration of the Fund and its Trustee, one aspect of which is protection against the risk of the Trustee becoming insolvent: QSuper at [38].

83. I am also satisfied that the Trustee’s design and adoption of the Proposed Amendments has been undertaken in a manner consistent with its duties to act with care, skill and diligence under s 52(2)(b) of the SIS Act. The evidence indicates that the quantum of the Trustee Fee and Cap on Target Capital is consistent with industry benchmarking and fees proposed to be charged by trustees of similarly sized superannuation funds. The range and extent of liabilities against which the Trustee Fee is quantified are weighted to take account of the effective functioning of the Trustee’s risk framework, controls and advice of its risk managers. The Trustee Fee and Cap on Target Capital are also subject to periodic review according to a mechanism that limits the amount of the Trustee Fee to what the Trustee considers to be fair and reasonable.

84. Consistent with its duties, the Trustee has explored reasonably available alternative means of establishing sufficient financial resilience or otherwise mitigating relevant risks before imposing a fee upon members, such as the ability to generate its own financial resources, the availability of shareholder support and insurance arrangements.

85. I accept that the Proposed Amendments do not give rise to an impermissible conflict contrary to s 52(2)(d) and are consistent with the duty to act fairly in dealing with members and classes of members of the fund in subss 52(2)(e) and (f) of the SIS Act. While the “profit-to-member” structure of the Fund and the fact that Trustee has previously acted gratuitously are factors to which regard should be had, I accept the Trustee’s submission that the regulatory context in which the Fund is now administered, interacting with the scale of the Fund’s assets and membership, renders the Trustee not receiving any remuneration anomalous.

86. While trustees have a duty to administer a trust with as little expense and as much profit as possible, the SIS Act recognises that a corporate trustee of a superannuation fund ordinarily conducts a business for reward and will be entitled to payment for its services, such that the charging of a fee is not, in and of itself, preferring the trustee’s interests over that of a beneficiary.

87. As APRA’s submissions identify, where a trustee has a personal interest in a matter and obtains a benefit of some kind as a result of the conduct in question, a trustee may comply with its obligation to avoid conflicts if the conduct in question is shown to be in the best financial interests of beneficiaries. Any benefits conferred on the Trustee and its directors by mitigating against the risk of insolvency and moderating the directors’ exposure to personal indemnity are incidental to the benefits to the Fund’s administration and its ongoing stability. As a matter of substance, the proposed amendments do not confer any personal advantage upon the Trustee or its directors. Further, and in any event, any perceived conflict may be mitigated by an application for judicial advice: see also HESTA at [6].

88. The evidence also indicates that the Trustee has given due and proper consideration to the impact of the Trustee Fee on different members of the Fund. As outlined at [49] above, it considers that the fee will be fair as between different groups of members by deducting its remuneration from the Fund’s general reserve rather than immediately increasing the administration fee charged to member accounts. This will reduce the initial impact on current and future members.

Conclusion

90. For these reasons, I am satisfied that there are good and sufficient reasons for consenting to the proposed amendments in this case and will grant the relief sought under s 63 of the Trustee Act.

91. As I have concluded that advice will be given under s 63 of the Trustee Act, the alternative application for relief under the inherent jurisdiction or under s 81 of the Trustee Act does not arise.

Confidentiality orders

92. The Trustee seeks confidentiality orders in relation to material relied on in support of its application pursuant to both the Court’s inherent jurisdiction and s 7 of the Court Suppression and Non-Publication Orders Act 2010 (NSW) (Court Suppression Act).

93. On 28 October 2021, the Court made orders preserving the confidentiality of some of the materials relied on by the Trustee in support of its application. At the request of the Court, the Trustee filed supplementary submissions on confidentiality. It has also served an additional affidavit from Mr Geoffrey Sanders affirmed on 16 November 2021 and draft orders which revise the Trustee’s claims for confidentiality to the material identified in Annexure A to Mr Sanders’ affidavit (Revised List). APRA has provided supplementary submissions on confidentiality.

94. Mr Sanders’ affidavit identifies the nature of the confidential information referred to in the Revised List and the basis upon which orders preserving the confidentiality of the material are sought. The information falls into three categories.

95. The first category is information confidential to the Trustee on the grounds of commercial sensitivity, which comprises the following:

1. Information regarding the Trustee’s insurance arrangements, such as information regarding the premiums paid by the Trustee, coverage limits, payable excesses, a Financial Lines renewal report, and insurance policy terms: Revised List, items 8, 9, 11, 12 and 14. This information is generally available only to the Trustee, its insurers and insurance broker, and to a limited number of external services providers on a confidential basis, and has been shared with APRA on this application. It is commercially sensitive as it reflects the outcomes of commercial negotiations between the Trustee and its insurers, and its disclosure may place the Trustee at a commercial disadvantage in future commercial negotiations and thus cause financial harm to the Trustee (and its members).

2. Information about modelling performed by the Trustee in relation to the various potential insolvency scenarios, including the costs that the Trustee estimates it would incur: Revised List, items 1, 3, 6, 15 and 20. This information is generally available only to the Trustee and its external advisors engaged for the purposes of this application, has been shared with APRA on this application, and is otherwise not public. It comprises details about the Trustee’s financial and taxation matters, the disclosure of which to the Trustee’s competitors, service providers and potential merger partners may place the Trustee at a commercial disadvantage in the market, commercial negotiations and mergers, and thus cause financial harm to the Trustee (and its members).

3. Three opinions and reports prepared by the Trustee and its external advisors for the purposes of this application, namely the Report on Trustee Capital and Fee, the report prepared by PricewaterhouseCoopers, and a legal opinion prepared by Allens: Revised List, items 22, 23, and 24. These documents are generally available only to the Trustee and its external advisors engaged for the purposes of this application, have been shared with APRA on this application on a confidential basis, and are otherwise not publicly available. They contain detailed information about the Trustee’s internal commercial matters relating to its financial position, taxation arrangements, legal advice and approach to compliance, the disclosure of which to the Trustee’s competitors may place it at a commercial disadvantage and thus cause financial harm to the Trustee (and its members).

4. Board documents: Revised List, items 18, 19 and 21. These documents include minutes and draft minutes of meetings of the Board that refer, amongst other matters, to information relating to this application that is also referred to in the categories outlined above. These documents are generally available only to the Trustee and its external advisors engaged for the purposes of this application, have been shared with APRA on this application on a confidential basis, and are otherwise not publicly available. They are commercially sensitive as they record strategic discussions and deliberations in relation to the Trustee’s commercial matters, the disclosure of which to the Trustee’s competitors may place it at a commercial disadvantage and thus cause financial harm to the Trustee (and its members).

5. An email chain between the Trustee and APRA: Revised List, item 25. This email has not been made publicly available, is commercially sensitive as it contains information regarding private matters discussed with APRA in relation to the Trustee’s business which are unrelated to this application, and its disclosure to the Trustee’s competitors may place it at a commercial disadvantage and thus cause financial harm to the Trustee (and its members).

96. The second category is information subject to a claim of legal professional privilege and comprises an opinion of counsel prepared for the Trustee for the purposes of the application, as well as the legal advice provided to the Trustee by Allens: Revised List, items 5 and 24.

97. The third category is information that is confidential and commercially sensitive to the Trustee’s insurance broker, IFS Insurance Solutions, regarding a recently introduced product that is novel to the market: Revised List, items 10 and 13. IFS Insurance Solutions considers this information to be confidential as it is generally available only to IFS Insurance Solutions, its clients and a limited number of non-clients (subject to a confidentiality deed), has been shared with APRA for the purposes of this application, and is otherwise not publicly available. It is commercially sensitive to IFS Insurance Solutions as its disclosure would allow IFS Insurance Solutions’ competitors to make use of its intellectual property in relation to the novel product offering, thereby placing IFS Insurance Solutions at a commercial disadvantage and causing it financial harm.

98. The Trustee submits that the Court has power to make orders protecting this confidential information as part of its inherent jurisdiction to regulate the conduct of proceedings before it: John Fairfax & Sons Pty Ltd v Police Tribunal of New South Wales (1986) 5 NSWLR 465 at 476. It refers to the exercise of the power to preserve confidential information in an application for judicial advice in this Court in Re Perpetual Investment Management Ltd [2014] NSWSC 784 at [5].

99. Under s 7(b) of the Court Suppression Act, the Court has power to prohibit or restrict the publication or other disclosure of information that comprises evidence, or information about evidence, given in proceedings before it.

100. The grounds for making an order under s 7 relevant to this case require the Court to be satisfied that a suppression or non-publication order is necessary to prevent prejudice to the proper administration of justice: Court Suppression Act, s 8(1)(a).

101. What is “necessary” for the purposes of s 8(1) of the Court Suppression Act depends on the particular ground relied on, the nature of the order sought, and the factual circumstances said to give rise to the order: Fairfax Digital Australia and New Zealand Pty Ltd v Ibrahim (2012) 83 NSWLR 52; [2012] NSWCCA 125 at [8] (Bathurst CJ), [46] (Basten JA); D1 v P1 [2012] NSWCA 314 at [48].

102. In deciding whether to make a suppression or non-publication order, the Court must take into account that a primary objective of the administration of justice is to safeguard the public interest in open justice: Court Suppression Act, s 6.

103. As APRA submitted, open justice requires that proceedings be fully exposed to public and professional scrutiny and criticism to maintain public confidence in the integrity and independence of the courts. However, the principle is not absolute: Hogan v Hinch (2011) 243 CLR 506; [2011] HCA 4 at [20].

104. The weight to be given to the public interest in open justice may vary depending on the nature of the proceedings. It will be relevant to consider whether the proceedings are criminal or civil in nature, whether they involve questions of public or private law, and whether they involve disputes that impact on the public or only the parties. The proper conduct of trustees is a matter that warrants public scrutiny: Welker v Rinehart [2011] NSWSC 1094 at [17]; Rinehart v Welker (2011) 93 NSWLR 311; [2011] NSWCA 403 at [52].

105. Applying the principles set out at [98]–[104] above, I accept the Trustee’s submissions that confidentiality orders should be made in respect of the items identified in the Revised List.

106. As to the counsel opinion at item 5, the opinion is plainly privileged and confidential. I accept the Trustee’s submission that a confidentiality order in the Court’s inherent jurisdiction is appropriate given it is not clear whether it is “evidence” or “information about evidence” to which s 7(b) of the Court Suppression Act could apply.

107. Based on the evidence from Mr Sanders, I am satisfied that the information referred to at [95] and [97] is confidential to the Trustee and IFS Insurance Solutions.

108. I am also satisfied that it is necessary to prevent prejudice to the proper administration of justice for the Trustee and IFS Insurance Solutions to gain some protection for the confidential information it put forward in support of an application in the interest of members. The information was relevant evidence at the hearing, went beyond what the Trustee is obliged to disclose publicly pursuant to its statutory and general law obligations, and could cause prejudice and be adverse to members’ interests if no suppression order is made. A suppression order may be necessary in that sense as the proper administration of justice requires the Court to be informed on all relevant aspects of a party’s dealings, including its confidential information and, absent a suppression order, the party would be exposed to the very real risk that its confidential information would become public and be exploited by competitors: Telstra Corp Ltd v NBN Co Ltd [2014] NSWSC 940 at [91]–[93].

109. While an application for judicial advice is not exempt from the operation of the Court Suppression Act and such applications are heard and determined in open court, the jurisdiction under s 63 of the Trustee Act is in the nature of giving private advice that functions to provide personal protection to a trustee rather than to determine a dispute between competing litigants: Macedonian Church at [64]. As the Trustee submits, by its very nature, judicial advice often requires the disclosure of privileged, confidential and commercially sensitive material to the Court: Re Application of Perpetual Trustee Co Ltd [2003] NSWSC 1185 at [14].

110. Further, the confidential information is only a subset of the material relied on. Parts of the evidence over which no suppression order is sought are referred to in these reasons.

111. These matters are, in my view, factors relevant to the balancing exercise and the assessment of what is required by the Court Suppression Act and supports the conclusion that the public interest in open justice should not dictate the disclosure of all the evidence in this case.

112. Sections 11 and 12 of the Court Suppression Act require that an order specify the place where it applies and the duration of the order.

113. The Trustee submits, and I accept, that the order to be made under the Court Suppression Act should apply anywhere in the Commonwealth as the Fund operates and has members throughout Australia, it competes in an Australia-wide industry and it would suffer prejudice from disclosure anywhere throughout Australia.

114. As to the duration of orders sought, the Trustee submits that the Court should make suppression orders which apply unless and until the Trust Deed terminates. It seeks such orders on the basis that the adverse consequences arising from disclosure of the commercially sensitive materials would not diminish over this period, noting its existing onerous disclosure obligations under statute and general law. I am satisfied that such an approach is appropriate in this case, noting that it was also the approach adopted by Ward CJ in Eq in LGSS and Maritime Super.

Costs and orders

115. For these reasons I make the following orders:

1. The opinion, advice and direction of the Court under section 63 of the Trustee Act 1925 (NSW) is that the Plaintiff would be justified in amending the trust deed of Spirit Super (the Fund) in the manner set out in the Draft Deed of Amendment annexed to the Amended Statement of Facts dated 27 October 2021.

1. The costs arising out of and incidental to the Plaintiff’s Amended Summons be paid out of the assets of the Fund on a trustee basis pursuant to s 93 of the Trustee Act 1925 (NSW).

2. Revoke Orders 2, 3 and 4 of the Orders made on 28 October 2021, with the intent that they are replaced with Orders 4 to 9 below.

3. In the Court's inherent jurisdiction, the document identified in item 5 of Annexure A to the affidavit of Geoffrey Hans Sanders affirmed 16 November 2021 (Sanders Affidavit) is not to be disclosed by publication or otherwise, is not to be accessed by any non-party and is to be kept confidential and stored on the court file in a sealed and appropriately marked envelope.

4. Pursuant to s 7 of the Court Suppression and Non-publication Orders Act 2010 (NSW) (Act), and on the grounds referred to in s 8(1)(a), a suppression order is made prohibiting the disclosure by publication or otherwise of the Plaintiff's Confidential Information (except the document referred to in Order 4 above).

5. Pursuant to s 12 of the Act, the suppression order in Order 5 above operates until the termination of the Trust Deed dated 31 May 1989 constituting the Fund.

6. Pursuant to s 11 of the Act, the suppression order in Order 5 above applies throughout the Commonwealth.

7. The Plaintiff have leave to file copies of the Plaintiff's Statement of Facts, Amended Statement of Facts, Outline of Submissions and affidavits with the Plaintiff's Confidential Information redacted.

8. Applicants for non-party access may be given access to the redacted materials filed in accordance with Order 8.

Plaintiff's Confidential Information means any Documents or copies of Documents which have been filed with or provided to the Court in these proceedings and/or which have been provided to the Australian Prudential Regulation Authority in these proceedings.

Documents means documents or parts of documents which are identified in items 1, 3, 5, 6, 8 to 15, and 18 to 25 (and excluding items 2, 4, 7, 16, 17 and 26) of the materials identified in Annexure A to the Sanders Affidavit.

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Annexure A – Schedule to Draft Deed of Amendment

1   Insert the following definitions in Clause 1.1:

Review Period has the meaning ascribed to that phrase in Clause 11.6.

Trustee Capital has the meaning ascribed to that phrase in Clause 11.6.

Trustee Fee has the meaning ascribed to that phrase in Clause 11.6.

2   Substitute paragraph (b) in the definition of 'Fund Expenses' in Clause 1.1 with the following:

administration costs, charges or expenses (including, without limitation, any Trustee Fee payable under this Deed);

3   Insert the following after Clause 11.5:

11.6    Trustee Fee

11.6.1   For each financial year of the Fund, a Trustee Fee is payable out of the Fund to the Trustee for acting as Trustee in an amount equal to 0.105% per annum of the net assets of the Fund calculated as at the end of the previous financial year.

11.6.2   The Trustee Fee is to be paid in such periodic instalments and in such manner as determined by the Trustee from time to time.

11.6.3   Despite anything in this Clause 11.6:

(a)   the Trustee may not pay any proportion of the Trustee Fee where the Trustee determines that, in the event of such proportion being paid, the Trustee Capital would exceed the greater of:

(i)   0.30% of the net assets of the Fund as at the payment date; and

(ii)   such maximum amount (if any) of Trustee Capital (by whatever name known) as the Relevant Law requires or as a Regulator permits, recommends, requests or directs the Trustee to hold; and

(b)   the Trustee may otherwise determine in its absolute discretion to reduce, waive, suspend or postpone the Trustee Fee (or any part of it) and, subject to Clause 11.6.3(a), to cease such reduction, waiver, suspension or postponement.

11.6.4 The Trustee must, as soon as practicable after the end of each Review Period (and in any event not later than six months after the end of the Review Period):

(a)   consider whether the Trustee Fee payable under Clause 11.6.1 and/or by reason of the operation of Clause 11.6.3(a)(i) remains fair and reasonable; and

(b)   in the event that the Trustee considers pursuant to Clause 11.6.4(a) that the Trustee Fee payable under Clause 11.6.1 and/or by reason of the operation of Clause 11.6.3(a)(i) is no longer fair and reasonable:

(i)   determine what amount would, in its opinion, be fair and reasonable (whether that amount is higher or lower than the existing Trustee Fee payable under Clause 11.6.1 and/or by reason of the operation of Clause 11.6.3(a)(i)); and

(ii)   amend this Deed by adjusting the figures in Clause 11.6.1 and/or 11.6.3(a)(i) to accord with the determination in Clause 11.6.4(b)(ii).

11.6.5 For the purposes of the Trustee's determination in Clause 11.6.4(b)(ii), the Trustee:

(a)   must have regard to the advice of an appropriately qualified independent consultant, including in relation to the remuneration of the Trustee's directors; and

(b)   may (without limitation) have regard to the amount which the Trustee reasonably considers necessary to appropriately compensate the Trustee for acting as trustee of the Fund and/or the amount which the Trustee reasonably considers to appropriately compensate it for the personal financial risk it might incur in connection with its role as trustee of the Fund.

11.6.6 For the purpose of this Clause 11.6, a reference to:

(a)   Review Period is to each successive period of three financial years with the first Review Period being the period of three financial years commencing on 1 July 2021;

(b)   Trustee Fee is to a fee payable under this Clause 11.6;

(c)   Trustee Capital is to the total value of net tangible assets of the Trustee in its personal capacity as calculated in accordance with Australian accounting standards.

Amendments

20 December 2021 - Case name amended.

Decision last updated: 20 December 2021