Board of Trustees of the State Public Sector Superannuation Scheme v Welsh

[2000] QSC 335

SUPREME COURT OF QUEENSLAND

CITATION:

Board of Trustees of the State Public Sector Superannuation Scheme v Welsh [2000] QSC 335

PARTIES:

BOARD OF TRUSTEES OF THE STATE PUBLIC SECTOR SUPERANNUATION SCHEME
(Plaintiff)
and
JOHN SINCLAIR WELSH
(Defendant)

FILE NO/S:

No S7321 of 1999

DELIVERED ON:

26 May 2000

DELIVERED AT:

Brisbane

HEARING DATE:

16 March 2000

JUDGES:

Ambrose J

ORDER:

I dismiss the plaintiff’s application for summary judgment

I adjourn the further considerations of reference to mediation and case appraisal to enable the parties to agree upon the terms of an order to achieve the result

I adjourn to a date to be fixed the further consideration of the plaintiff’s application for an order for speedy trial

I give liberty to apply

I reserve the question of costs

CATCHWORDS:

PROCEDURE – SUPREME COURT PROCEDURE – QUEENSLAND – SUMMARY JUDGEMENT – whether matters raised in defence are so unarguable to grant summary judgement

EQUITY – MISTAKE- RECOVERY OF MONEY PAID OR EXPENDED – MONEY PAID BY MISTAKE – MISTAKE OF FACT – whether plaintiff is entitled to recover monies paid without lawful authority

COUNSEL:

J S Douglas QC with C J Fitzpatrick for the applicant
R Dorney QC for the respondent

SOLICITORS:

Crown Solicitor for the applicant
Duells Lawyers for the respondent

1. This is an application by the plaintiff (“the trustee”) for summary judgment against the defendant (“the former member”) for $539,006-09 being part of the plaintiff’s claim in the sum of $607,751-87 filed on 12 August 1999.

1. The plaintiff’s causes of action presently pleaded are –

(1)        Money paid by the plaintiff to the defendant under a mistake of fact

(2)         Debt due by the defendant to the plaintiff

(3)         Money paid without lawful authority

(4)         Interest is sought upon the whole of the sum claimed

1. On 15 September 1999 the defendant filed a defence and counterclaim.

1. It is unnecessary to analyse in detail the content of the twenty six page defence and counterclaim.  It suffices to say that oral representations by persons for whom apparently the trustee was responsible are alleged.  Essentially it is alleged that the former member was advised by those persons that he was entitled to the sums, which the trustee asserts were paid to him by mistake, and relying upon that advice he accepted two payments from the superannuation fund the trustee of which seeks to recover in this action.  It is asserted that the former member changed his position to his financial disadvantage when he received the funds from the trustee and it is further alleged that there has been an exacerbation of a depressive illness as a result of the demand made by the trustee that he repay the monies which were paid to him by “administrative oversight”.  It is pleaded inter alia that the trustee is estopped from asserting and maintaining that the member is not entitled to retain the monies it alleges were paid to him by mistake and that it is estopped from taking any steps whatever to recover such payments.

1. As well as making those assertions the former member seeks to set off against the trustee’s claims against him the sum of $600,000 together with interest for which he also makes a counterclaim.

1. It is unnecessary to analyse the reply and answer filed by the trustee on 22 October 1999 which extends over 14 pages.  Similarly it is unnecessary to analyse the former members reply filed on 20 December 1999 which extends over 2 pages.

1. A reading of the extensive pleadings to my mind makes it clear that there will be significant issues of fact to be canvassed on the matters raised in them.  Attempts have already been made to negotiate a settlement of those issues but have not succeeded.  When the application was heard on 16 March 2000 orders were made relating to disclosure of documents and the service of nominated copies of documents and the service by the former member upon the trustee of his statement of loss and damage.

1. I will state only briefly the matters which I assume from the material read upon the hearing of the application will emerge upon any trial of the action.

1. For many years prior to 1991 the former member had been employed as an Associate Professor at Queensland University of Technology. 

1. In 1991 he commenced to suffer “major depression with panic attacks”.  Apparently he took leave of absence during which he obtained specialist treatment.

1. It was an incident of his employment that he become a member of the State Public Sector Superannuation Fund – established under s 10(1) of the Superannuation (State Public Sector) Act 1990.

1. Under s 10(2) of that act it is provided –

“(2) to remove any doubt it is declared that the government superannuation provision fund forms part of the assets of the fund.”

That fund is defined in s 2(1) to mean “the account established to hold amounts mentioned in s 10(3)” of the act.

S 10(3) provides that –

(a)an amount transferred to the fund on a persons election under the repealed State Service Superannuation Act 1972 – ….

(b)amounts held previously in Government Officers Superannuation Fund under earlier legislation.

must be held in the government superannuation provision fund

1. Under s 11(1) Queensland Investment Corporation (“QIC”) is appointed investment manager of the fund.

1. Under s 12(1) it is provided that a scheme for the provision of superannuation, retirement, provident or other similar benefits payable from the fund be established by deed. Under subsection (2) it is provided that the deed is subordinate legislation which may be amended by a board of trustees established under s 3 of the Act which is a statutory body under the Financial Administration and Audit Act 1977 and an exempt public authority under the Corporations Law. Under s 3(4) of the Act it is provided that the board represents the State. Under s 3(5) it is provided that without limiting the effect of subsection 4 the board has all the privileges and immunities of the state.

1. Under s 4 the principal function of the Board is to administer the scheme made pursuant to the legislation for the provision of superannuation, retirement, provident or other benefits established pursuant to the deed established under s 12(1) of the Act.

1. It is clear that the defendant in this case (the former member) was a member of the scheme under s 13 of the Act and that his entitlement as such was to be determined from the terms of the Superannuation (State Public Sector) Deed 1990 as amended.  Under s 14 of the Act the Deed may make provision inter alia for –

(i)          the level of and conditions relating to the payment of benefits under the scheme to and in respect of the member including –

(i)        benefits on attaining the age of 55 years or older

(ii)      ….

(iii)      benefits for permanent but partial incapacity

(iv)      ….

(v)       ….

(vi)      ….

(vii)benefits on the occurrence of such other eventuality as may be specified

(j)        ….
  (k)       ….

(l)a method for the preservation of member entitlements to the fund.

(m)      ….

(n)       ….

1. Complying with the requirements of the Deed the former member made a claim for incapacity benefit from the fund (“Q Super”) to the Government Superannuation Office in 1993.

1. By letter of 2 June 1993 the former member was informed on behalf of the trustee that his application had been approved and that he would receive a partial and permanent disablement benefit following his retirement on the grounds of ill health in the specified sum.  Attached to this letter was an application form for him to seek the benefits to which he was then entitled.

1. On 11 June 1993 the former member claimed a termination benefit on the form provided by the trustee.

1. Under Part C of that application form the former member instructed the trustee that he wished to withdraw the whole of his permanent and partial disablement benefit and instructed that he had decided to “rollover” his Q Super entitlement and asked that the cheque for the sum drawn be made payable to Macquarie Approved Deposit Fund and that this would then be collected by his financial adviser.

1. By letter dated 25 June 1993 a cheque for the sum of $525,052.60 was drawn and made available to the former member.  He was advised by a letter of that date in the following terms –

“I refer to your application for your retirement ill health lump sum.  The total amount due from the fund is $525,052.60 …. a cheque for the above amount has been collected by a representative of Bain and Company as per your request. 

Payment of the lump sum terminates your entitlement to any further coverage from the fund.  ….

The amount of this payment has been calculated as the sum to which you are entitled on the basis of the information available to the fund at this point in time.  Should it subsequently be found that the amount is different to that paid action will be taken to pay any additional sums or to recover the amount of any overpayment. ….”

1. There is no suggestion that the former member even sought a “preservation” of any part of his entitlement under the scheme at that stage.

1. Through clerical error or administrative oversight the payment made to the former member was not recorded on the computerised record of entitlements of current members of the fund.  It seems that the former member’s “file” on computer should have recorded this payment and/or his file should have been “closed” or “removed”.  By oversight however no such step was taken.

1. Presumably periodic checks were made of the computer records and presumably the date of birth of members indicated when they might claim their entitlement upon reaching various specified ages – including their 55^th birthday.  They might then elect to take benefits from the fund.  This was done presumably in 1997.  The former member’s “file” not having been noted to record the payment to him of his full entitlement under the Q Super scheme and/or the file not having been removed or closed when he retired, it continued to indicate the sum to which he would have been entitled had he not been paid his full entitlement in June 1993.

1. On or about 30 June 1995 he received a document from the State Government Superannuation Office entitled “Superannuation Preservation Statement – 1995 as at 30 June 1995”.  This document described the former member, contained his name and address and his membership number and indicated that he was entitled to a benefit of the “voluntary component 1994/1995” in the sum of $68,175-79 together with a “deferred retirement benefit 1994/1995” in the sum of $493,960-12.  The total of all components of benefits was $562,135-91. Accompanying that document was another document from the Government Superannuation Office entitled “Advice to Payee” advising the members current entitlement to be $68,745-78 and a cheque for this sum payable to the former member was enclosed. 

1. A second document entitled “Superannuation Preservation Statement – 1996 as at 30 June 1996” was also forwarded from the Superannuation Fund to the former member showing his entitlement by way of voluntary component in the sum of $68,745-78 together with a deferred retirement benefit of $518,226-21 which on its face seems to record the payment to the member of the cheque for $68,745-78 on 21 August 1995.

1. Not all the relevant documentary evidence has been tendered upon the application however it seems clear enough from the whole of the material that not merely was the cheque for $68,745-78 paid to the former member on the assumption that he had not been paid any part of his voluntary contributions to that time but also he was paid all told the sum of $539, 006-09 on 8 May 1997 presumably as a “preserved” benefit under the scheme.

1. Both these payments were clearly overpayments made in ignorance of the fact that all the benefits to which the former member was entitled under the Q Super scheme had been paid to him on 25 June 1993.

1. It was not until April 1998 that the former member’s investment adviser requested information from Q Super so that he might address a “reasonable benefit limit problem” under taxation legislation that the defendant sought advice upon.

1. It was this inquiry by the former member’s investment adviser that brought to light the second lot of payments which had been made to him due to administrative oversight in failing to record the first payments that had been made to him in June 1993 – nearly 4 years earlier.

1. On 24 April 1998 the trustee made contact with the former member of the fund requesting advice as to his intentions concerning repayment.

1. No satisfactory proposals were received from the former member and on 28 September 1998 a formal demand for repayment was made by the Crown Solicitor on behalf of the trustee of Q Super. 

1. Correspondence passed between the solicitor for the trustee and the solicitor for the former member of Q Super but no resolution of the matter in dispute was achieved and this action was commenced by a claim filed on 12 August 1999. 

1. The trustee brings this application pursuant to UCPR 292(1) in respect of the $539,006-09 on the basis that this part at least of the money overpaid to the former member was paid from consolidated revenue without lawful authority.  The trustee relies upon Auckland Harbour Board v The King [1924] AC 318, Maguire v Simpson (1977) 139 CLR 363 per Gibbs J at 388 and Commonwealth v Hamilton [1992] 2 Qd R 257, 263 and Hashish v Minister for Education [1998] 2Qd R 18 at 27-28.

1. The former member of the Q Super scheme was permitted early retirement on the grounds of ill health on 18 June 1993 and it was subsequent to his retirement from employment at QUT that he received his full entitlement to benefits under the terms of the Superannuation Deed of 1990 from the fund on 25 June 1993.

1. The later payments made to the former member of the scheme were made in August 1995 and May 1997 upon his application after he had been advised (by error) in the terms to which I have referred that he was entitled to those sums.

1. It is the case to be mounted apparently for the former member that he in fact made contact by telephone with some person or persons employed at Q Super and was advised that indeed the notifications given to him as to his entitlement were correct.

1. Undoubtedly should this matter go to trial one of the matters that will be investigated will be the content of any discussion between the former member of the scheme and any employee at Q Super in which the former member was given any advice as to his entitlement to the second payments of benefits three or four years after he had received the first payments of all benefits to which he was then entitled under the Deed.  In particular one might expect a careful examination of the content of the alleged discussion between the former member and any employee of Q Super with a view to discovering whether the former member in the course of that discussion advised any employee of Q Super who gave any advice or made any “representations” of the sort asserted in the former member’s pleading that he had already received benefits three or four years previously in the sum of slightly in excess of half a million dollars, under cover of a letter advising that those payments “terminated the former members entitlement to any further coverage from the fund”.

1. In Chase Manhattan Bank NA v Israel-British Bank (London) Ltd [1981] 1 Ch D 105 Golding J considered the right of a bank which had paid money by mistake to a second bank to the equitable relief of tracing. The paying bank clearly had an action at common law for money had and received and Golding J held that it had a sufficient proprietary claim over the monies mistakenly paid if they could be traced. He held that a person who paid money to another under a factual mistake retained equitable property in it and the conscience of that other was subjected to a fiduciary duty to respect his property right and that the plaintiff bank had a right to trace the money founded on a persistent equitable proprietary interest. He held in effect that the receiving bank receiving the money to which it was not entitled as a result of the mistake made by the paying bank held that property upon constructive trust which was enforceable in equity and that the beneficial interest in the money paid by mistake remained in the bank which paid the money.

1. This authority was considered recently in Friends’ Provident v Hillier Park May and Rowden [1997] QB 85 where the Court of Appeal set aside an interlocutory order striking out a third party notice on the ground that on the authorities considered in that case it was arguable that the defendant had a claim based inter alia upon Chase Manhattan and subsequent authorities.

1. A search indicates a very large number of authorities where Chase Manhattan has been considered, followed and distinguished over the years.  In Jacobs Law of Trusts in Australia 6^th edition consideration of the right to trace trust property wrongly transferred to third persons is considered at pages 751-758.  The development of the law relating to the right to trace into the hands of a voluntary recipient of trust property (including property held on constructive trust) is there analysed and the analysis of the effect of a recipients change of position resulting from the receipt of monies or property paid or transferred by mistake is considered.  Authorities relating to a recipient of property held on trust having constructive notice of an equitable interest in property received when circumstances are such that the court will impute knowledge of the equitable interest even though the recipient has no personal knowledge of it are considered and it is observed that “constructive notice will be imputed to a recipient of property impressed with a trust (even by a constructive trust) when the recipient has failed either purposely or negligently to make some inquiry which he should reasonably have made or where he may have had notice of a fact which would lead to notice of other facts”.

1. In my view upon the facts raised in the pleadings in this case it cannot be said that the right of the trustee to recover the whole of the sum in respect of which summary judgment is sought under the principle in Auckland Harbour Board v The King, by electing to pursue that cause of action rather than other causes of action available  and so avoid defences arguably open upon matters raised in the defence and counterclaim such as change of position etc is so clear as to make it appropriate to give summary judgment at this stage.

1. While undoubtedly it is strongly arguable on the facts of this case that the monies paid by mistake to the former member of Q Super were paid without parliamentary authority and may be approached in the same way as similar payments were approached in Commonwealth v Burns [1971] VR 825 and Attornery General v Gray [1977] 1 NSWLR 406, I do not read Commonwealth of Australia v Hamilton as making so unarguable matters raised in the defence set off and counterclaim of the former member as to warrant giving summary judgment the effect of which would almost certainly be to impose an immediate hardship upon him should he then be obliged to obtain whatever relief to which he might be entitled upon a favourable finding of the facts in issue by attempting to pursue a counterclaim and use change of position as a sword rather than as an equitable shield against the trustee’s cause of action based upon Auckland Harbour Board. 

1. On the authorities I think it strongly arguable that upon the trustee’s claim based upon payment of monies upon mistake of fact, the facts raised in the former member’s defence set-off and counterclaim might operate by way of defence while it is unclear that a similar defence would be equally available upon the trustee’s claim based upon payment without lawful authority in my judgment that question ought not be determined upon an application of this kind.

1. It would be quite inappropriate upon this application to consider the likely outcome of the trial of factual issues involving the alleged telephone conversation or conversations upon which the former member would seek to base much if not all the relief he claims. The trustee confines its application to summary judgment to claim return of only $539,006-09 identified as a sum having been paid to the former member out of consolidated revenue without authority.  Applying the rule in Auckland Harbour Board v The King (supra), Commonwealth v Hamilton (supra) and Hashish v Minister for Education (supra)  I would infer that the object of applying for summary judgment on this principle is to avoid lengthy disputation on the other causes of action upon which the trustee founds its claim on the basis that none of the matters raised by way of defence or set-off by the former member amounts to a defence or set-off to a claim based upon Auckland Harbour Board having regard to the decision in Commonwealth v Hamilton (supra).

1. It is contended on behalf of the trustee that to the extent that the former member may have causes of action which he may pursue by way of counterclaim he may do that in any event.  It is contended that it is a serious matter and against public interest that the former member should be permitted to retain for any longer more than half a million dollars which has been wrongly paid to him from consolidated revenue if he has no defence to the trustee’s claim under Auckland Harbour Board v The King.

1. As an alternative to the claim for summary judgment the trustee seeks an order for speedy trial on the basis that it is quite undesirable that the State be deprived of so much money for perhaps years pending the determination of the issues raised by the former member.  On the other hand counsel for the former member argues strongly against not merely an order for summary judgment, but also against any order for speedy trial being made on the basis that there is no good reason why other litigants should have the hearing of their actions postponed as a consequence of the trustee in this case obtaining an order for speedy trial.  The former member also seeks an order for mediation.  On the other hand for the trustee it is asserted that efforts have been made to negotiate a settlement but have been quite unsuccessful.  Unsurprisingly there is no explanation for this lack of success and it would be fruitless to speculate upon which if either of the parties to the action declined to make reasonable efforts to settle the matter in dispute.

1. In my view this is not an appropriate occasion upon which to embark upon a detailed consideration as to whether should the former member be successful on the factual issues raised in his defence and counterclaim it would permit an equitable set off of and/or a successful counterclaim for the sums pleaded in the defence set-off and counterclaim to the plaintiff’s claim for moneys paid by a state instrumentality without lawful authority. 

1. I must say looking at the whole of the material I have significant doubt as to the prospects of success of the former member of the Q Super scheme on the matters raised in his pleadings but in my view this is not an appropriate occasion to determine such a matter.

1. On the other hand there has been significant delay since the matters in issue came to light and in my view it is appropriate that they be determined speedily.  Just how speedily they may be determined of course will depend upon due compliance with the rules and prompt determination of interlocutory matters one of which was raised before me on 17 March 2000 to which I have already referred.

1. As I look at the material just about all the factual material should upon close of pleadings and disclosure of documents be available to permit resort to an ADR process.  Consequently I propose to refuse the application for summary judgment.  I propose upon close of pleadings to remit the matters in issue to ADR both for mediation and case appraisal.  I will leave it to the parties to select and agree upon the matters normally agreed upon such a reference.  I propose to send the matter for case appraisal and should the decision upon case appraisal not finally determine the matter between the parties, of course the question will then arise as to the speedy determination of the matter.  I propose therefore to refer the matter in dispute for mediation and case appraisal and to adjourn the application for a speedy trial to a date to be fixed to enable the decision of a case appraiser to be given so that should it not be accepted then the party failing to obtain a judgment more favourable than the decision of the case appraiser will be liable to pay the costs of the other party as provided under the relevant legislation and rules.  On the other hand a mediation may permit a more effective resolution of the dispute should the tracing of funds mistakenly paid to the former member into assets acquired with some of those funds be the subject of negotiation.

1. Having regard to the nature of the defence raised by the former member it occurs to me that perhaps the trustee may wish to amend its claim to pursue causes of action involving not merely one for monies had and received based upon mistake of fact but also perhaps asserting that upon receipt of the mistakenly paid monies the former member held them upon a constructive trust which permits them to be traced into assets in which those funds were invested – whether or not mixed with other monies.  If the monies were held upon a constructive trust other equitable remedies may be available – particularly as it could hardly be suggested that the former member was anything other than a voluntary recipient of monies impressed with a trust who gave no consideration for their payment to him.  In Porter v Latec Finance(Qld) Pty Ltd (1964) 111 CLR 177 at 204 it was observed by Windeyer J that in recovery of money paid by mistake “equity and law are administered together”. The distinction between the right to recover money paid by a mistake where payment resulted from “mere carelessness or negligence” and the right to recover where money is paid with “recklessness or indifference” which may preclude recovery is considered in Cheshire and Fifoot 5^th edition pp 685-686.

1. I therefore give to the plaintiff liberty to further amend its claim within 14 days if it so desires and the defendant liberty to amend its defence and counterclaim within 14 days of receipt of any amended claim from the plaintiff.  I give leave to both plaintiff and defendant to deliver further pleadings in reply with the times limited by the U.C.P. rules for delivery of such pleadings.

I direct that both parties within 14 days of close of pleadings disclose all documents relevant to all issues upon the pleadings as they then stand.

It may be that prior to embarking upon the ADR processes one or both of the parties would seek to interrogate upon the terms of the discussion or discussions between the former member and agents of the trustee upon which the former member relies in his defence, set off and counterclaim.  Alternatively they may seek a direction that statements of evidence concerning those alleged discussions be available for consideration of the mediator/Case Appraiser.

I dismiss the plaintiff’s application for summary judgment

I adjourn the further consideration of reference to mediation and case appraisal to enable the parties to agree upon the terms of an order to achieve the result.

I adjourn to a date to be fixed the further consideration of the plaintiff’s application for an order for speedy trial.

I give liberty to apply.

I reserve the question of costs.