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Australian Prudential Regulation Authority v Kelaher

Australian Prudential Regulation Authority v Kelaher

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FEDERAL COURT OF AUSTRALIA
Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521

File number: NSD 2274 of 2018

Judge: JAGOT J

Date of judgment: 20 September 2019

Catchwords: SUPERANNUATION – whether two entities and their directors contravened s 52 and s 52A of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) – trustee’s duties – duties of trustee directors – alleged contraventions of statutory covenants – care, skill and diligence – best interests of the beneficiaries – conflicts of interest – whether the governing rules of the trusts exclude liability for the alleged contraventions – prudent person and prudent superannuation trustee standards of care – inadequate proof of contraventions – application dismissed

Legislation:
Corporations Act2001 (Cth) s 601FB(2), Pt 2D.1

Evidence Act 1995 (Cth) s 140

Explanatory Memorandum, Superannuation Legislation Amendment Trustee Obligations and Prudential Standards) Bill 2012 (Cth)

Superannuation (prudential standard) determination No. 1 of 2012 (Operational Risk Financial Requirement SPS 114)

Superannuation (prudential standard) determination No. 7 of 2012 (Prudential Standard SPS 521) cll 8, 10, 11, 16

Superannuation Industry (Supervision) Act 1993 (Cth) ss 3, 7, 10(1), 51, 51A, 52, 52(a), 52(b), 52(2)(b), 52(2)(c), 52(2)(d), 52(d)(i), 52(2)(d)(iv), 52(4), 52(8), 52(8)(a), 52A, 52A(d)(i), 52A(2)(b), 52A(2)(c), 52A(2)(d), 52A(2)(f), 52A(3), 54B(1), 54B(2), 55, 55(1), 55(3), 56, 56(1), 56(1)(a), 56(2), 56(2)(a)(1), 56(2)(a)(ii), 56(2A), 57, 57(2), 60A, 115

Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (Cth)

Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 (Cth)

Cases cited:
Apostolovski v Total Risk Management [2010] NSWSC 1451; (2010) 79 NSWLR 432

Australian Securities Commission v AS Nominees (1995) 62 FCR 504

Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75

Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291

Australian Securities and Investment Commission v Letten (No 17) [2011] FCA 1420; (2011) 286 ALR 346

Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336

Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck & Anor [2016] NSWCA 218

Cowan v Scargill [1985] 1 Ch 270

Daniels v Anderson (1995) 37 NSWLR 438

Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317

Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426

Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254

HIH Insurance Limited (in prov liq) v Adler [2002] NSWSC 171; (2002) 41 ACSR 72

In re Chapman [1896] 2 Ch 763

Karger v Paul [1984] VR 161

Manglicmont v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2010] NSWSC 363; (2010) 239 FLR 159

Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; (2011) 282 ALR 167

Mercer Superannuation (Australia) Limited v Billinghurst [2017] FCAFC 201; (2017) 255 FCR 144

Morley v ASIC [2010] NSWCA 331; (2010) 81 ACSR 285

Nestle v National Westminster Bank [1993] 1 WLR 1260

Saker…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2019] FCA 1521
Decision Date: 20 September 2019

CaseChat Overview and Summary

In the case of Australian Prudential Regulation Authority v Kelaher, the Australian Prudential Regulation Authority (APRA) sought to hold two entities and their directors accountable for alleged breaches of the Superannuation Industry (Supervision) Act 1993 (Cth). The case was heard and determined by the Federal Court of Australia, with Justice Bromberg presiding. APRA alleged that the respondents had contravened various provisions of the Act, specifically sections 52 and 52A, which pertain to trustee duties, care, skill and diligence, and best interests of beneficiaries. These allegations centred around the respondents' handling of statutory covenants, their adherence to the prudent person and prudent superannuation trustee standards, and potential conflicts of interest.

The primary legal issues before the court involved whether the respondents had indeed breached the SIS Act, and if so, whether the governing rules of the trusts in question excluded liability for those breaches. APRA argued that the respondents failed to exercise the requisite care, skill and diligence, and did not act in the best interests of the beneficiaries. The respondents contended that the allegations were unsubstantiated and that the governing rules of the trusts shielded them from liability. The court had to determine whether APRA had provided sufficient evidence to prove the alleged contraventions and if the governing rules effectively exempted the respondents from liability.

Justice Bromberg held that APRA had not proven any of the contraventions alleged against the respondents. The court found that the evidence presented by APRA was inadequate to establish the breaches of the SIS Act. Additionally, the court concluded that the governing rules of the trusts did not exclude liability for the alleged contraventions. As a result, APRA's application was dismissed in its entirety. The court ordered that the amended originating application be dismissed and that APRA pay the respondents' costs as agreed or taxed.

Orders

Orders of the court

1. The amended originating application be dismissed.

2. The applicant pay the respondents’ costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

APRA’s case on the alleged Optus breaches must be rejected in its entirety. 18.CONCLUSION For the reasons given, APRA has failed to prove any of the contraventions of the SIS Act alleged against the respondents. It follows that APRA’s application should be dismissed with costs.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

File number:	NSD 2274 of 2018
Judge:	JAGOT J
Date of judgment:	20 September 2019
Catchwords:	SUPERANNUATION – whether two entities and their directors contravened s 52 and s 52A of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) – trustee’s duties – duties of trustee directors – alleged contraventions of statutory covenants – care, skill and diligence – best interests of the beneficiaries – conflicts of interest – whether the governing rules of the trusts exclude liability for the alleged contraventions – prudent person and prudent superannuation trustee standards of care – inadequate proof of contraventions – application dismissed
Legislation:	Corporations Act2001 (Cth) s 601FB(2), Pt 2D.1 Evidence Act 1995 (Cth) s 140 Explanatory Memorandum, Superannuation Legislation Amendment Trustee Obligations and Prudential Standards) Bill 2012 (Cth) Superannuation (prudential standard) determination No. 1 of 2012 (Operational Risk Financial Requirement SPS 114) Superannuation (prudential standard) determination No. 7 of 2012 (Prudential Standard SPS 521) cll 8, 10, 11, 16 Superannuation Industry (Supervision) Act 1993 (Cth) ss 3, 7, 10(1), 51, 51A, 52, 52(a), 52(b), 52(2)(b), 52(2)(c), 52(2)(d), 52(d)(i), 52(2)(d)(iv), 52(4), 52(8), 52(8)(a), 52A, 52A(d)(i), 52A(2)(b), 52A(2)(c), 52A(2)(d), 52A(2)(f), 52A(3), 54B(1), 54B(2), 55, 55(1), 55(3), 56, 56(1), 56(1)(a), 56(2), 56(2)(a)(1), 56(2)(a)(ii), 56(2A), 57, 57(2), 60A, 115 Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (Cth) Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 (Cth)
Cases cited:	Apostolovski v Total Risk Management [2010] NSWSC 1451; (2010) 79 NSWLR 432 Australian Securities Commission v AS Nominees (1995) 62 FCR 504 Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291 Australian Securities and Investment Commission v Letten (No 17) [2011] FCA 1420; (2011) 286 ALR 346 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck & Anor [2016] NSWCA 218 Cowan v Scargill [1985] 1 Ch 270 Daniels v Anderson (1995) 37 NSWLR 438 Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426 Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254 HIH Insurance Limited (in prov liq) v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 In re Chapman [1896] 2 Ch 763 Karger v Paul [1984] VR 161 Manglicmont v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2010] NSWSC 363; (2010) 239 FLR 159 Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; (2011) 282 ALR 167 Mercer Superannuation (Australia) Limited v Billinghurst [2017] FCAFC 201; (2017) 255 FCR 144 Morley v ASIC [2010] NSWCA 331; (2010) 81 ACSR 285 Nestle v National Westminster Bank [1993] 1 WLR 1260 Saker…