Beck v Colonial Staff Super Pty Ltd & Ors (No. 2)

[2015] NSWSC 1360

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Beck v Colonial Staff Super Pty Ltd & Ors (No. 2) [2015] NSWSC 1360

Hearing dates:

14 September 2015

Date of orders:

28 September 2015

Decision date:

28 September 2015

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Estoppel found against both the second and third defendants. Limited stay granted in respect of the Court’s orders. The third defendant ordered to pay 40% of the plaintiff’s total solicitor-client costs on the indemnity basis and the balance of the plaintiff’s costs on the ordinary basis. Issues of interest on costs reserved for further consideration.

Catchwords:

EQUITY – equitable relief – equitable estoppel – scope of estoppel held to exist in previous judgment – orders necessary to give effect to estoppel

 

CIVIL PROCEDURE – application for stay of judgment pending appeal or expiry of period for lodging an appeal – whether balance of convenience favours stay – where no evidence as to cost of giving effect to judgment – where over 10 years had passed since termination of plaintiff’s employment – public interest in quick resolution of disputes

  COSTS – indemnity costs – common fund basis where partial function of litigation was as a construction suit – whether reasonable to reject alternative offers made in Calderbank letter – where offers made before expert evidence as to quantum served – where offers made without explanation of plaintiff’s claims in context of inherently complex and not-yet-finalised pleadings -- interest on costs – where no evidence as to timing of incurring of costs – costs of first defendant’s liquidator – where first defendant was not heard as to costs.

Legislation Cited:

Civil Procedure Act 2005, ss 56, 101(4) and (5)

Cases Cited:

Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685
Beck v Colonial Staff Super Pty Ltd & Ors [2015] NSWSC 723
Drummond v Drummond [1999] NSWSC 923
Drummond and Rosen Pty Ltd v Easey (No. 2) [2009] NSWCA 331
Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101
Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) (2005) 13 VR 435
Herning v GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375
Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344
Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2015] NSWCA 227

Texts Cited:

Ford & Lee, Principles of the Law of Trusts, [14.3380]

Category:

Costs

Parties:

Plaintiff: Peter Beck
First Defendant: Colonial Staff Super Pty Ltd (ACN 074 962 628)
Second Defendant: Commonwealth Bank Officers Superannuation Corporation Pty Limited (ACN 074 519 798) as trustee for the Commonwealth Bank Officers’ Superannuation Fund
Third Defendant: Commonwealth Bank of Australia (ACN 123 123 124)

Representation:

Counsel:
Plaintiff: J.C. Kelly SC; J. Merkel; P. Godkin
Second and Third Defendants: Scott Nixon; James Hutton

Solicitors:
Plaintiff: Angela Wong, Slater & Gordon Lawyers
Second & Third Defendants: Greta Gingell, Jones Day

File Number(s):

2011/220432

Publication restriction:

No

Judgment

1. This is the Court’s second judgment in these proceedings. In the Court’s principal judgment the plaintiff, Mr Beck, was successful in challenging the validity of a trustee’s December 1996 decision to amend the rules of a superannuation fund to remove a clause under which Mr Beck now seeks benefits: Beck v Colonial Staff Super Pty Ltd & Ors [2015] NSWSC 723. Mr Beck was also successful in an associated estoppel case and seeks relief consequent upon that success.

2. On Monday 14 September 2015 the Court heard supplementary argument about three issues arising out of the principal judgment:

1. The scope of the estoppel that the Court found in the principal judgment for which relief should be granted;

2. Whether or not any orders the Court now makes should be stayed pending the second and third defendants, CBOSC and CBA, filing a notice for leave to appeal against the result in principal judgment; and

3. Several costs issues.

3. These reasons should be read together with the Court’s principal judgment. Events, matters and things are referred to in both judgments in the same way.

4. Mr J. Kelly SC and Ms J. Merkel continue to appear for the plaintiff. Mr S. Nixon and J. Hutton continue to appear for the CBA parties, CBOSC and CBA.

5. There is a significant measure of agreement between the parties as to the orders and declarations to be made. The parties have agreed in relation to the text of orders and declarations 1 to 4, made below.

6. The parties have agreed upon the making of a declaration (declaration 1) to reflect the Court’s reasons in the principal judgment that the conduct of CSS in amending the rules of the Old Colonial Fund on or about 30 December 1996 by deleting clause A11.3 of those rules (the Early Retirement Benefits Rule) was conduct in breach of clause 33.2 of the July 1996 deed, of CSS’s duty as a trustee of the Old Colonial Fund, of s 52(2)(c) of the SIS Act and of reg 13.16 of the SIS Regulations and that such amendment was void and of no effect. The parties have also agreed upon a declaration (declaration 2) that clause CH13 of the OSF has at all times included the power of appointment to the effect of the Early Retirement Benefits Rule.

7. The parties have also agreed upon consequential orders. They have agreed that CBOSC should take such steps as are necessary to have the text of the Early Retirement Benefits Rule engrossed in clause CH13 of the OSF rules (Order 3). They have also agreed that CBOSC should give due consideration to the exercise of the Early Retirement Benefits Rule in Mr Beck’s favour and that such consideration should be done as at the date of the termination of his employment on 11 July 2005 (Order 4).

8. The Court has been informed that CBOSC meets on regular occasions throughout the year and that unless a special meeting is called any consideration of the exercise of the Early Retirement Benefits Rule for Mr Beck’s case in accordance with Order 4 would ordinarily take place at a regular meeting of its Board. Two meetings are scheduled for the balance of 2015: the next on 28 October 2015 and the last on 19 December 2015.

a) Scope of the Estoppel

9. The main contest between Mr Beck and the CBA parties as to the form of relief is in respect of Mr Beck’s proposed Order 5. In Mr Beck’s form of Order  5 he seeks to mould the relief so that CBA is required to provide him with a pension from age 55, or the present value of a pension, if upon the exercise of its discretion under the Early Retirement Benefits Rule CBOSC does not grant such pension to him. In contrast, CBA proposes a form of order which merely provides that CBA is not permitted to withhold its approval to any CBOSC request the CBA approve CBOSC’s exercise of the discretion in the Early Retirement Benefits Rule in Mr Beck’s favour.

10. The form of Order 5 that Mr Beck proposes is the following:

“(5)   DECLARES that the third defendant is estopped from denying that the plaintiff became and was entitled to be paid an annual pension as defined by the rules of the OSF under the provisions of Division CH, Part CH4 of the rules of the OSF on 7 February 2009 when the plaintiff attained the age of 55 (Pension at age 55) and is obliged to provide the plaintiff with a Pension at age 55 or the monetary equivalent thereof subject to such adjustments as may be necessary to do justice between the parties (Adjustments) but not so as to give rise to double compensation in the event that the plaintiff is provided with a Pension at age 55 or the monetary equivalent thereof by the second defendant.”

11. In contrast, the CBA parties’ proposed form of Order 5 is as follows:

“(5)   DECLARES that the third defendant is estopped from withholding its approval in the event that the second defendant seeks approval for the exercise of the Early Retirement Benefits Rule in favour of the plaintiff so as to increase the amount of the benefit paid to him on termination to an amount not exceeding the reserve value in respect of him as at 11 July 2005.”

12. In his submissions Mr Beck accepts that the question of whether, and if so how much, CBA should be ordered to pay him (if it does not itself provide him with the pension) should abide CBOSC’s determination of any entitlement under clause A11.3. Mr Beck submits that if CBOSC as trustee of the OSF were to exercise its discretion to pay him the pension that CBA led him to assume or expect that he would receive, then the conduct of CBA will not have caused him any loss, and there would therefore be no basis on which equitable compensation would need to be awarded against CBA for that loss.

13. But the OSF might not grant him a pension. Mr Beck submits that default relief should be granted to provide for the situation that would arise if CBSOC as trustee of the OSF does not exercise its discretion to pay Mr Beck the pension that CBA led him to assume or expect he would receive. His further submission is that default relief should be granted to provide for the possibility that CBOSC exercises its discretion in such a way that Mr Beck receives a pension or lump sum but one that is less than CBA had led him to assume or expect. In those circumstances Mr Beck submits it will be necessary for there to be a further hearing to determine issues of the quantum of the relief to be granted to him. It may in any event be necessary to consider any issues which may remain in relation to the adjustment of the amount to be awarded to Mr Beck on account of the factors identified in the principal judgment (at [379]).

14. Mr Nixon submits that CBA should not be ordered to pay a pension to Mr Beck, even if CBOSC does not exercise its discretion to pay him a pension. But Mr Nixon accepts that CBA should be required to give its consent to the payment of a pension to Mr Beck, if CBOSC were subject to CBA’s approval to exercise the Early Retirement Benefits Rule in Mr Beck’s favour.

15. The debate between Ms Kelly SC and Mr Nixon about Order 5 and the form of certain consequential orders may be cast into three sub-issues: (1) should any order to pay money be made against CBA itself, as distinct from CBOSC? (2) should CBA be required to pay a pension or merely the reserves held in Mr Beck’s name? and, (3) should CBA be required to engage the Augmentation Rule? Each of these questions will be addressed in turn.

16. (1) CBA to Pay? The CBA parties submit that CBA should not have any liability to pay money to Mr Beck. They contend that Mr Beck’s proposed orders are inconsistent with the way that his counsel advanced his own case: a case in which the CBA parties say it was accepted that the appropriate relief by way of estoppel would be an order in the form now proposed by the CBA parties. The CBA parties point out that senior counsel for the plaintiff relevantly submitted at the hearing as follows:

“if your Honour is persuaded that relief should be granted by way of a declaration, to the effect that A11.3 remains on foot, and your Honour is minded to order that the matter of the plaintiff's request be remitted for further consideration, the appropriate order so far as the estoppel is concerned would be a declaration that the defendant is precluded from withholding its approval because it has undertaken to protect his entitlements, not to exercise powers which deprive him [of these entitlements], and coupled with liberty to apply.”

17. Moreover, the CBA parties also submit that Mr Beck’s proposed orders are inconsistent with the written submissions advanced on his behalf on August 2014, which stated (at [84]):

“The primary remedy…Plaintiff asks the Court to grant – is an order remitting the matter of the Plaintiff’s entitlement to the Second Defendant for further consideration according to the law.”

18. In submitting that Mr Beck is not entitled to relief in the form of Order 5, Mr Nixon also relies upon the limited way which relief for estoppel was said to have been claimed in prayer for relief [7] of the third Further Amended Statement of Claim. Paragraph [7] of the prayers for relief provides as follows:

“A declaration that the third defendant by reason of promises it made to the plaintiff in or about 2000 or 2002 concerning his superannuation arrangements in connection with his contract of employment with it is estopped by those promises and must:

(a)   take all steps necessary and within is power to have the rules rectified as mentioned in paragraph 5, and;

(b)   do all things necessary and within its power to endure the rules as rectified be applied in such manner as to give effect to the representations made to the plaintiff in 2000 and 2002.

(c)   In the event that the Trustee seeks the approval of the exercise of the power of appointment mentioned in paragraphs 4 and 5 grant such approval.”

19. But Mr Kelly SC’s answer to these submissions is persuasive. He points to prayer for relief 9, which provides as follows:

“Further or in the alternative, an order that the first defendant and/or the second defendant and or the third defendant pay equitable compensation to the plaintiff.”

20. The case was conducted by Mr Beck on the basis that prayer for relief 9 may need to be deployed to provide complete relief. References to other relief being “the primary remedy” is consistent with this position and indeed such “primary” relief has been granted. But that does not foreclose equitable compensation. The relief sought is wide enough to encompass ordering the third defendant to pay equitable compensation to the plaintiff based upon the equitable estoppel that the Court has found.

21. (2) Pension or Reserve? Mr Nixon next submits that any order against CBA must be quantified by reference to and limited to the reserves held in respect of Mr Beck in the OSF, and that CBA should not be required to pay a pension to Mr Beck at all. This submission is based upon both the way the CBA parties claim that Mr Beck conducted his case and the Court’s conclusions about that case.

22. As to Mr Beck’s conduct of the case Mr Nixon submits that in his closing address Mr Kelly SC handed up to the Court a “Note on the Estoppel” which relevantly provided as follows:

“refusing to do everything in its power to be done to cause the plaintiff to receive the reserves held in respect of him in the [OSF] or such amount determined in accordance with the provisions and rules of the Deeds constituting (the fund in the hands of [CBOSC]) as can pay to the plaintiff the benefits that could be paid pursuant to [the Early Retirement Benefits Rule], when [CBA] terminated his employment in 2015 on notice and without cause”

23. Mr Nixon also submits that the orders the CBA parties now propose give effect to Mr Beck’s original submissions to the Court but Mr Beck’s proposed orders do not.

24. Moreover, as to the Court’s conclusions, Mr Nixon submits that Mr Beck’s proposal does not give effect to the estoppel found to have been established in the principal judgment. Mr Nixon relies upon a finding in the principal judgment (at [346]) is the following:

“[346]   But the words used did lead to Mr Beck holding a closely related assumption or expectation. He says he also assumed that if he were to be employed by CBA and did not resign then he would be paid his pension (when he became entitled to it at age 55), or the reserve in respect of his pension that had accumulated. In my view Mr Beck reasonably took away from his conversations with Mr Mulcahy that CBA would not interfere with Mr Beck protecting and enhancing his pension rights by continuing to work on as an employee of CBA up to the age of 55. This inevitably brought with it the legal effect that CBA would not exercise its right under the employment agreement to terminate Mr Beck’s employment other than for cause before that date.”

25. Mr Nixon submits that the orders that the CBA parties propose better give effect to this finding.

26. In my view the CBA parties’ submissions misread the effect of paragraph [346] of the principal judgment. The second sentence of that paragraph, is a record of Mr Beck’s pleaded case. But the third sentence reflects the Court’s findings as to what Mr Beck actually assumed or “took away” from his conversations with the CBA executives in question. What Mr Beck assumed was not found by the Court to contain the idea that Mr Beck could be paid the reserve rather than receive a pension at CBOSC’s or CBA’s option. This was consistent with the case Mr Beck conducted at the trial.

27. (3) Augmentation Rule or Not? CBA finally submits on the scope of the estoppel that Orders 1 to 4, which are now agreed and which reflect the relief sought, require the CBA parties to take steps to insert a rule equivalent to the Early Retirement Benefits Rule into the OSF rules and to give due consideration to its exercise in relation to Mr Beck. The CBA parties submit that if an additional order were now to be made, as Mr Beck is submitting, about CBA being required to direct CBOSC to use the Augmentation Rule, the other orders will be superseded. If the Court requires CBA to direct the exercise by CBOSC of the Augmentation Rule, so as to secure Mr Beck’s pension that he would have been entitled to at the age 55, the CBA parties submit that CBOSC and CBA will come under conflicting obligations. CBOSC will have to exercise its Early Retirement Benefits Rule discretion and respond to CBA’s Augmentation Rule direction. CBA says this is unprincipled and inefficient.

28. This aspect of Mr Nixon’s submissions is persuasive at two levels. First, neither the circumstances of the case nor the mechanisms of the 1996 Deed require CBOSC to exercise both its Early Retirement Benefits Rule discretion and the Augmentation Rule at the same time. The requirements and relevant considerations for each rule are different. The discretions should be separately exercised and in an orderly way.

29. Secondly, CBA is obliged to pay a pension to Mr Beck, if CBOSC does not do so after the exercise of its Early Retirement Benefits Rule discretion. It will therefore not be necessary for the Court to require CBA to engage the Augmentation Rule. If CBA decides to engage the Augmentation Rule after CBOSC decides not to pay a pension under the Early Retirement Benefits Rule and to direct CBOSC to augment Mr Beck’s entitlements then it can do so. And if CBA does so and it also pays to CBOSC any amount that CBOSC requests as a condition of fully augmenting Mr Beck’s benefits, then there will be no occasion for CBA to itself pay a pension to Mr Beck. But if CBA does not choose to engage the Augmentation Rule then it will take the financial consequences of not doing so, by being obliged to pay the pension (or its present market value) itself.

30. Given the combination of relief that the Court has granted I see no basis therefore for requiring CBA to engage the Augmentation Rule.

b) Stay of the Court’s Orders

31. The CBA parties propose that the order requiring engrossment of the trust deed (Order 3) and the order for CBOSC’s consideration of its discretion for Mr Beck under the Early Retirement Benefits Rule (Order 4) be stayed pending expiry of the period for lodging an appeal or the determination of any appeal.

32. The CBA parties submit that the stay of the order requiring engrossment of the trust deed (Order 3) does not affect Mr Beck and such a stay will save CBSOC from the process of engrossing the rule in circumstances where, consequent upon a possible appeal, the rule may need later to be varied or removed. A stay it is said will avoid wasted expenditure by CBSOC and potential issues about who should bear the costs of wasted expenditure.

33. The trust deed need not be engrossed. The balance of convenience clearly lies in granting the stay on Order 3. The Court will make the declarations sought in proposed Orders 1 and 2 which will be binding as between Mr Beck and the CBA parties. It is less important between these parties whether the OSF rules are engrossed or not.

34. The CBA parties’ second submission, is that there should be a stay upon the requirement to make a determination under the Early Retirement Benefit’s Rule pending expiry of the period for lodging an appeal. This submission is less persuasive.

31. The principles governing a stay of a judgment pending appeal are well established. The applicant must demonstrate that there is a reason for the grant of a stay or that a matter is an appropriate case in the exercise of the Court’s discretion: Alexander v Cambridge Credit Corporation (1985) 2 NSWLR 685 (“Cambridge Credit”) at 694. It is not necessary for the applicant for the stay to establish special or exceptional circumstances: Cambridge Credit at 694. The stay is likely to be granted if the appeal would otherwise be rendered nugatory. The Court considering the grant of a stay is not required to determine the merits of the appeal but usually considers whether the applicant has at least an arguable case; and the Court may impose conditions on the grant of a stay including that the applicant pay a sum of money into Court or otherwise secure the payment of the disputed sum: Cambridge Credit at 694-5. The central determinant as to whether a stay would be granted, and if so upon what terms, if any, is the Court’s assessment as to what is a fair balance of the rights of the parties, given that an appeal does not of itself operate as a stay and the party who has succeeded at trial is entitled to the fruits of its victory: Cambridge Credit and see also Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd [2015] NSWCA 227 (“Woodlawn”) at [7]-[9].

32. It can be accepted in application of the principles stated in Cambridge Credit and Woodlawn that if the CBA parties wish to re-argue the issues the subject of the principal judgment in the Court of Appeal they will at least have an arguable case. The nature and complexity of the issues makes a submission to the contrary difficult.

33. But the balance of convenience is more complicated. The CBA parties submit that it is undesirable that CBOSC be compelled to exercise its discretion under the Early Retirement Benefits Rule in circumstances where the findings may be superseded by orders of the Court of Appeal. It is said that the CBA parties will incur costs (including actuarial and accounting costs) in exercising either the Early Retirement Benefits Rule or the Augmentation Rule which costs would potentially be thrown away if an appeal is successful. Then it is said a question would arise as to who should bear those costs.

34. CBA accepts in its argument that Mr Beck should have the benefit of any appreciation in the value of the funds to which he is already entitled in the OSF. The principal judgment makes clear that Mr Beck has left his leaving service benefit in the OSF since 2005. This benefit has now appreciated to a sum of over $2 million. The CBA parties submit that Mr Beck will be compensated in effect for not having the use of those funds pending an appeal by the continuation of the investment advantage to him of the funds remaining in the OSF, a course which apparently has been acceptable to him in the past.

35. Finally, the CBA parties submit that the proceedings have been on foot since 2011 and that Mr Beck’s own successive amendments to the pleadings are one substantial reason why the proceedings did not reach hearing until 2014. And they submit that Mr Beck has not advanced any evidence to show that any further period of delay before he is paid the pension will cause him particular hardship.

36. A stay will not be granted. The question of costs thrown away by CBOSC’s consideration of Mr Beck’s claim under the Early Retirement Benefits Rule is not demonstrated to be significant. There is no evidence before the Court as to the costs of CBOSC’s future consideration of Mr Beck’s circumstances. But it can be inferred from the principal judgment and information given to the Court on this application that CBOSC has the benefit of the services of established actuaries, who can undertake all the necessary actuarial calculations it requires for it to consider in an orderly way its discretions in respect of beneficiaries several times a year. There seems to be no good reason why consideration of Mr Beck’s claim cannot be fitted efficiently into this program. No evidence is advanced to say that it cannot be so accommodated without undue expense.

37. But who should bear the administrative costs if the CBA parties are successful? It is at least implicit in Mr Beck’s resistance of a stay in the face of this submission from the CBA parties that he well understands that if he is unsuccessful on appeal that he will be at risk of having to bear such costs himself. And there are said to be substantial funds in excess of $2 million standing to his credit from which such expenses could readily be paid.

38. The idea that Mr Beck should accept the continuing appreciation of the invested funds, to which he is already entitled, as a substitute for being temporarily deprived of additional funds to which the Court has now also found him entitled, has little persuasive appeal. Nor has the argument that some of the amendments to the pleadings in these 2011 proceedings have been occasioned by Mr Beck.

39. There is yet another weighty answer to the CBA parties’ submissions on this issue. Mr Beck’s employment ceased 10 years ago, in July 2005. There is a public interest in the resolution of a dispute which has subsisted as long as this one. If earlier resolution comes at the possible expense of some duplication in administrative expenses then it is a risk in my view which is outweighed by the Court’s overriding duty to expeditiously quell this dispute and to “facilitate the just, quick and cheap resolution of the real issues in the proceedings”: Civil Procedure Act 2005, s 56.

c) Costs Issues

44. There are three costs issues. Mr Beck seeks: (1) an order for indemnity costs; (2) an order pursuant to Civil Procedure Act 2005, s 101(4) and (5) for interest on costs; and (3) an order that the CBA parties pay the costs of the first defendant, CSS, including the remuneration of its liquidator.

45. Indemnity Costs. Mr Beck claims indemnity costs on two bases: (1) on the common fund basis because the circumstances are said to be analogous to a construction suit; and in the alternative, (2) on the basis of an unaccepted Calderbank offer.

46. Mr Beck submits that his claim is analogous to a construction suit. The principle is well established that the costs of all necessary parties to a suit for the construction of a trust instrument would ordinarily be paid out of the trust estate on a common fund basis. Mr Kelly SC submits that the substance of his client’s application attracts the operation of this rule.

47. The CBA parties disagree. Mr Nixon submits these proceedings involved considerably more than a construction suit. He submits that the claims against CBOSC and the estoppel suit against CBA were less in the nature of a construction suit than a contest about the legal effect of statements made to Mr Beck by CBA employees. And Mr Nixon points out that there was an unsuccessful estoppel claim and a contested but unsuccessful unconscionable conduct claim against CBOSC, and that a claim against CBOSC that it held monies on trust for Mr Beck was also unsuccessful. These were submitted to be claims that a normal litigant would bring in adversarial proceedings to seek money and were unsuccessful.

48. In truth this litigation was a mixture of a construction suit and adversarial litigation. A construction suit would generally assist a trustee and all beneficiaries to a trust by clarifying the meaning and operation of the terms of the trust instrument. That has certainly occurred in this case. The principal judgment has assisted CBOSC in assessing the validity of the December 1996 amendments, in construing and understanding the operation of clause A11.3, in construing and understanding the operation of clause 33, in ascertaining the relevant legal effect of SIS Act, s 52C and SIS Regulations, reg 13.16(1) upon amendments made under the trust deed. The Court’s reasoning on all these matters should be of assistance not only to CBOSC as the trustee of the OSF, but to many other OSF beneficiaries who come within CH 13.

49. But this construction suit element was only one aspect of the litigation. Much of the litigation dealt with the adversarial issues that Mr Nixon identifies, which resulted in the Court’s estoppel findings on which Mr Beck was partially successful in and partially unsuccessful.

50. The appropriate course in these circumstances is to acknowledge the partial function of this litigation as a construction suit. The way to do that in my view is to award indemnity costs against CBOSC for part of Mr Beck’s costs. Thus, irrespective of the outcome of the contest about the Calderbank offer, dealt with below the Court will order that CBOSC pay 40 per cent of Mr Beck’s costs on the indemnity basis.

51. Mr Beck also claims indemnity costs on the basis of a solicitor’s Calderbank letter sent on 8 November 2012. The orders sought are that CBA pay Mr Beck’s costs on the ordinary basis up to 8 November 2012 and on an indemnity basis after 8 November 2012. The CBA parties resist payment of indemnity costs on the basis of this letter, arguing that it was reasonable for them to refuse to accept the offers in this letter. The letter provides as follows:

“We refer to your without prejudice letter dated 28 September 2012.

We are instructed to reject the offer contained therein.

We are instructed to make the following counter-offers - each of which is an alternative to the other - in full and final settlement of the proceedings;

Option 1

A. The second and third defendants pay to the plaintiff the amount of $2,000,000 plus costs to be assessed or agreed; and

B. The proceedings are otherwise dismissed.

Option 2

A.   The second and third defendants pay to the plaintiff the amount of $2,100,000; and

B.   The proceedings are dismissed with no order as to costs;

Option 3

A. The parties agree that the following final declarations and orders shall be made in the proceedings by consent:

i.   A declaration that at all material times the second defendant held and

continues to hold funds in excess of the amounts it is required by law or statute to hold, to pay benefits to the members of the Commonwealth Bank Officers' Superannuation Fund (the surplus);

ii.   A declaration that the surplus includes an amount that was reserved in respect of the plaintiff until he ceased employment with the third defendant;

iii.   An order that the second defendant determine the amount that is the reserve in respect of the plaintiff.

iv.   A declaration that the plaintiff is entitled to an Early Retirement Benefit in the terms defined the plaintiff's claim in these proceedings under which the trustee may in its absolute discretion and with the approval of the Board of the third defendant, pay to the plaintiff a further amount as will increase the total payment to the plaintiff to an amount that does not exceed the reserve value held in the fund in respect of the plaintiff as at the date that the plaintiff ceased employment with the third defendant;

v.   An order that the matter be remitted to the second and third defendants in order for them to give due consideration to the exercise of the power referred to in iv above;

vi.   An order that the second and third defendants pay to the plaintiff such sum as is found to be payable by way of Early Retirement Benefit, upon a proper exercise of discretion;

vii.   All of the plaintiff's rights are reserved in relation any review of the discretion referred to in v & vi above.

B. An order that the proceedings are otherwise be dismissed with no order as to costs.

This offer is open for acceptance until 4pm on 6 December 2012.

This offer is made pursuant to the principles in Calderbank v Calderbank. If your clients do not acceptance this offer and the plaintiff achieves a result equivalent to or better than the terms of options 1, 2 or 3 herein, this letter will be produced to the Court in support of an application that your clients pay our client's costs on an indemnity basis.”

52. Indemnity costs may be ordered where a Calderbank letter is a genuine offer of compromise and its refusal in light of the judgment is held to be unreasonable: Herning v GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375; Miwa Pty Ltd v Siantan Properties Pte Ltd (No. 2) [2011] NSWCA 344 at [7]-[9]. Mr Kelly SC submits that CBOSC’s failure to consent to the orders opposed in Option 3 in the 8 November 2012 letter was unreasonable in this case.

53. The CBA parties contend that the rejection of the 8 November 2012 offer was not unreasonable. They emphasise that reasonableness must be assessed at the time the offer was made and not with the benefit of hindsight and that the relevant considerations are the stage in which the offer was received, the extent of the compromise offered, the offeree’s prospects of success assessed at the date of the offer and the clarity with which the terms of the offer were expressed: Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298; 13 VR 435. The CBA parties submit with some force that when these relevant considerations are taken into account in this case the rejection of the offer was not unreasonable.

54. The CBA parties’ argument is persuasive for the following reasons. First, the money amounts in the first two options in the offer (of $2 million plus costs, or $2.1 million inclusive of costs) bear no relationship to the amounts ultimately determined by the parties’ experts and no expert evidence had been served as at 8 November 2012. I accept that in the absence of expert evidence being served on either side it was not reasonably practicable for the offerree, the CBA parties, to ascertain whether the figures mentioned in Options 1 or 2 should be accepted.

55. Secondly, the offer made contains no explanation of the bases on which Mr Beck ultimately succeeded, nor any attempt to articulate Mr Beck’s claims. On its own this would not be a very persuasive consideration. Ordinarily an offeree would be entitled to look at the pleadings to understand a plaintiff’s claim and the defences available to it. But here the pleadings were not in their final form, a form which contained inherent complexity and which changed in significant ways up until the last version of the pleadings, the third Further Amended Statement of Claim.

56. Thirdly, a letter of offer was sent at the same time as the plaintiff’s evidence but the CBA parties had little capacity to measure the offer made against the case ultimately run at trial because of the undeveloped nature of the pleadings and the lack of expert evidence.

57. Fourthly, when the offer in Option 3 of the 8 November 2012 letter is considered more closely, the declaration in (i) was not made, the declaration in (ii) was not made, the declaration in (iii) was not made, and the declaration described in (iv) was also not made. In the result the Court has found that Mr Beck was entitled to an early retirement benefit but only in the alternative to CBOSC giving due consideration to the operation of clause A11.3.

58. Finally, this was a case the nuances of which would have been very difficult for any party to fully appreciate, until written submissions were received from both sides in addition to the pleadings. The complexity of the argument even based upon the final version of the pleadings was such as would not have readily been understood at the stage at which this offer of compromise was dispatched.

59. Costs Against CBOSC. The CBA parties submit that there is no basis for a costs order against CBOSC, let alone on a solicitor/client basis. The CBA parties make clear that CBA itself is offering to pay the whole of Mr Beck’s costs on the ordinary basis. There is no issue of sufficiency of funds to meet such an order.

60. The CBA parties submit that no findings were made against CBOSC save that it wrongly understood that it did not have a discretion in the form of the Early Retirement Benefits Rule. It is to be accepted that a trustee in the absence of delinquency is entitled to be indemnified for legal costs incurred in defence of a claim with respect to trust property. But the claimant is not also thereby entitled to costs on the solicitor/client basis: Ford & Lee, Principles of the Law of Trusts at [14.3380] and Drummond v Drummond (1999) NSWSC 923 at [41]-[51]. And the CBA parties submit that the Drummond principle is not applicable here because the litigation did not arise from the conduct of the present trustee, CBOSC, but a past trustee, CSS.

61. There can be no possible question of CBA’s capacity to meet a costs order. This debate seems to the Court to have little point. The CBA should pay Mr Beck’s costs on the ordinary basis.

62. Interest on Costs. Mr Beck claims interest on costs pursuant to Civil Procedure Act, ss 101(4) and (5). Mr Beck submits that he has been put to considerable expense in funding a hard fought action over a period of many years and special circumstances are not required before interest on costs may be awarded under Civil Procedure Act, s 104(4): Peter Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101.

63. The CBA parties resist an order for interest on costs. They contend that no s 101(4) order was sought in the third Further Amended Statement of Claim and there has been no inter partes correspondence concerning the timing of the incurring of costs and nor is there any entry basis for such an order. These are the pre-conditions for the making of a s 101(4) order: Drummond and Rosen Pty Ltd vEasey (No. 2) [2009] NSWCA 331 at [49]. Moreover, the CBA parties submit that a substantial reason for delay in the proceedings between 2011 and 2014 was the several amendments that took place to the Statement of Claim.

64. The absence of a pleaded claim for interest on costs is not an obstacle to Mr Beck’s success on this issue. The Third Further Amended Statement of Claim can be further amended to add this form of relief, should that be required. The CBA parties did not point to any prejudice that might arise from such an amendment at this stage. Their better argument was the lack of an evidentiary platform for seeking such relief.

65. But an order for interest on costs under s 101(4) cannot be made on the existing evidence before the Court. As the proceedings must be adjourned to allow CBOSC to consider the exercise of discretions in respect of Mr Beck, the parties will be given an opportunity to serve any further evidence they propose on the issue of interest on costs, so it can be further addressed in submissions.

66. The Court will reserve this issue for further consideration. The parties will have liberty to put on further evidence in accordance with directions upon which they should agree.

67. CSS’s Costs. The first defendant, CSS, has not sought an order for recovery of its own costs. Mr Kelly SC and Ms Merkel submit that because the CBA parties have actively conducted a defence on CSS’s behalf that the CBA parties should now bear CSS’s costs.

68. Mr Nixon submits that it would be unfair for the costs of CSS’s liquidator in relation to the proceedings to be recovered from the CBA parties.

69. In response Mr Kelly SC submitted that he was concerned that CSS did not seek to recover any costs against his client and that is principally why the costs order was sought.

70. But the Court has not heard from CSS. The question of CSS’s costs is best approached in the first instance by the parties making contact with the liquidator of CSS and ascertaining whether it wishes to make an application against any party for recovery of its costs. It may turn out, for example, that CSS is content to bear its own costs to date rather than take the risk of incurring more costs that may be irrecoverable.

71. The proceedings are now being adjourned a short period for other reasons. The adjournment will afford an opportunity to the parties to make contact with CSS and to ascertain its position on costs.

Conclusions and Orders

72. The Court has now resolved most of the issues raised in the supplementary hearing on 14 September. The Court will make the orders and directions below and has included liberty to apply in case any issue arises as to the interpretation or implementation of the orders.

72. The Court declares and orders as follows:

1. DECLARES that the conduct of the first defendant in amending the rules of the Old Colonial Fund on or around 30 December 1996 by deleting clause A11.3 of those rules (Early Retirement Benefits Rule) was done in breach of:

1. clause 33.2 of the July 1996 Deed;

2. the first defendant's duty as the trustee of the Old Colonial Fund;

3. section 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth); and

4. regulation 13.16 of the Superannuation Industry (Supervision) Regulations 1994 (Cth);

and that such amendment was void and of no effect.

2. DECLARES that Division CH, Part CH13 of the rules of the Commonwealth Bank Officers' Superannuation Fund (OSF) has at all times included a power of appointment to the effect of the Early Retirement Benefits Rule in the following terms:

“Where a Member ceases to be in Service and a benefit is not payable under any other provision of the Deed (save for the benefit payable under rule CH13.1), in exceptional circumstances, and usually only if the Member has had a long period of Service, the Trustee may with the approval of the Employer pay to or in respect of the Member a further sum of such amount as will increase the total payment to or in respect of such Member to an amount not exceeding the reserve value as determined by the Trustee (after considering the advice of the Actuary) held in the Fund in respect of such Member as at the date the Member ceases to be in Service.”

3. ORDERS the second defendant to take such steps as are necessary to have the text of the Early Retirement Benefits Rule set out in order 2 above engrossed in Division CH, Part CH13 of the rules of the OSF.

4. ORDERS the second defendant give due consideration to the exercise of the Early Retirement Benefits Rule set out in order 2 in favour of the plaintiff as at the date of termination of his employment, being 11 July 2005.

5. DECLARES that the third defendant is estopped from denying that the plaintiff became and was entitled to be paid an annual pension as defined by the rules of the OSF under the provisions of Division CH, Part CH4 of the rules of the OSF on 7 February 2009 when the plaintiff attained the age of 55 (Pension at age 55) and is obliged to provide the plaintiff with a Pension at age 55 or the monetary equivalent thereof subject to such adjustments as may be necessary to do justice between the parties (Adjustments) but not so as to give rise to double compensation in the event that the plaintiff is provided with a Pension at age 55 or the monetary equivalent thereof by the second defendant.

6. ORDER that within 60 days of the date of these orders or such further or other time as the Court may order the second defendant give notice in writing to the plaintiff and the third defendant of the outcome of its consideration of the exercise of the Early Retirement Benefits Rule pursuant to order 2 together with its method of calculation of any entitlement of the plaintiff and any Adjustments.

7. DIRECT the parties to confer with a view to agreeing any question of quantum which remains outstanding, and any Adjustment, within 28 days after notice is given pursuant to order 7, and if any question of quantum or Adjustment cannot be agreed, identifying the issues which remain to be determined in order to give effect to the judgment delivered on 6 July 2015 (Judgment).

8. STAND OVER the proceedings to a date to be fixed by arrangement with the Associate to the Honourable Justice Michael Slattery for the determination of any issue which remains to be determined in order to give effect to the Judgment, including any issue which has arisen in relation to any Adjustment.

9. GRANT liberty to restore on 7 days’ notice.

10. ORDER that the third defendant pay the plaintiff's costs of the proceedings, with such costs to be assessed on the basis that the third defendant pay 40% of the Plaintiff’s total solicitor-client costs on the indemnity basis and the balance on the ordinary basis.

11. Reserve for further consideration the question of whether an order should be made pursuant to sections 101 (4) and (5) of the Civil Procedure Act (2005) for interest on costs.

12. Reserve for further consideration the question of the payment of the costs of the first defendant and whether such costs shall include the remuneration of its liquidator.

13. Stay Order (3) until further order.

Definitions:

In these orders:

July 1996 Deed means the Deed made on 2 July 1996 by Colonial Staff Super Pty Ltd as trustee of the Old Colonial Fund referred to in paragraph 26 of the Judgment.

Old Colonial Fund means the fund variously named the “Colonial Mutual Australian Administrative Staff Superannuation Fund” and “Colonial Group Staff Superannuation Fund” referred to in paragraph 13 of the Judgment.

OSF means the fund named the Officer’s Superannuation Fund referred to in paragraph 3 of the Judgment.

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Amendments

11 December 2015 - 13 October 2015 , Amended by kkatsa0:

Paragraph [40], final sentence, change “to stay” to “to say”.

13 October 2015 - Paragraph [40], final sentence, change “to stay” to “to say”.

Decision last updated: 11 December 2015