Briffa, John v Hay, Ronald Joseph
[1997] FCA 544
•20 JUNE 1997
CATCHWORDS
SUPERANNUATION - appeal from determination of Superannuation Complaints Tribunal (“the Tribunal”) - complaint with respect to decision by trustee as to the entitlement of a member of a trust fund - construction of ss14(1) and 37 of the Superannuation (Resolution of Complaints) Act 1993 (“the Complaints Act”) - whether a determination by the Tribunal as to non-discretionary entitlements is an exercise of judicial power - whether review of a decision by the Tribunal on grounds of unfairness or unreasonableness creates new rights and obligations - whether the Tribunal exercises administrative power in relation to the decisions reviewed by it under the Complaints Act - whether the jurisdiction of the Tribunal under the Complaints Act applies to the exercise of discretionary and non-discretionary powers by the trustee of a regulated fund.
SUPERANNUATION - appeal from determination of Tribunal - retrospectivity - construction of ss14(1) and 37 of the Complaints Act - whether the jurisdiction and power conferred on the Tribunal under the Complaints Act only to be exercised in relation to matters which have arisen since a fund became a regulated fund - whether the jurisdiction and power conferred on the Tribunal under the Complaints Act only to be exercised in relation to decisions which have been made since a fund became a regulated fund.
SUPERANNUATION - appeal from determination of Tribunal - whether the Tribunal’s determination contrary to the governing rules of the trust fund - whether the jurisdiction and power conferred on the Tribunal under the Complaints Act can be exercised in a manner which requires a trustee to make payments to member of a fund or engage in any other conduct in relation to the member which is not provided for or authorised under the terms of a trust deed.
Superannuation (Resolution of Complaints) Act 1993 ss4, 14, 37 and 41(3)
Pope v Lawler (1996) 41 ALD 127
National Mutual Life Association of Australia Ltd v Jevtovic (Sundberg J, unreported 8 May 1997)
Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245
Re Chapman; Freeman v Parker (1895) 72 LT 66
Ex parte Brown; In re Smith (1886) 17 QBD 488
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 141 ALR 618
Precision Data Holdings Ltd v Wills (1991) 173 CLR 167
Incarus (Hertford) Ltd v Driscoll (1990) 1 PLR 1
JOHN BRIFFA, WILLIAM JOHN GRANGER, PETER DUNN and LEWIS HARVEY (as trustees of the Regal Life Australia Superannuation Fund) v RONALD JOSEPH HAY
VG 129/96
MERKEL J
MELBOURNE
20 JUNE 1997
IN THE FEDERAL COURT OF VICTORIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VG No. 129 of 1996
On appeal from the SUPERANNUATION COMPLAINTS
TRIBUNAL constituted by Neil Wilkinson, Paul Bingham
and Marita Wall
BETWEEN:
JOHN BRIFFA, WILLIAM JOHN GRANGER, PETER DUNN
and LEWIS HARVEY (as trustees of the Regal Life
Australia Superannuation Fund)
Appellants
and
RONALD JOSEPH HAY
Respondent
COURT:MERKEL J
PLACE:MELBOURNE
DATE: 20 JUNE 1997
MINUTES OF ORDERS
Leave is granted to the appellants to rely upon ground (m) in the amended notice of appeal filed in Court on 29 May 1997.
The appeal be allowed.
The determination of the Superannuation Complaints Tribunal be set aside.
The matter is remitted to the Superannuation Complaints Tribunal for further consideration in accordance with law.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF VICTORIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION VG No. 129 of 1996
On appeal from the SUPERANNUATION COMPLAINTS
TRIBUNAL constituted by Neil Wilkinson, Paul Bingham
and Marita Wall
BETWEEN:
JOHN BRIFFA, WILLIAM JOHN GRANGER, PETER DUNN
and LEWIS HARVEY (as trustees of the Regal Life
Australia Superannuation Fund)
Appellants
and
RONALD JOSEPH HAY
Respondent
COURT:MERKEL J
PLACE:MELBOURNE
DATE: 20 JUNE 1997
REASONS FOR JUDGMENT
Introduction
A Trust Deed dated 15 September 1988 (“the Trust Deed” or “the Deed”) established the Royal Life Australia Staff Superannuation Fund (“the Fund”) for the benefit of employees of the Regal Life Insurance Australia Limited. As a result of a later change of the company name to Regal Life Insurance Australia Limited (“Regal”) the Fund became known as the Regal Life Australia Staff Superannuation Fund. The Fund provided defined benefits to its members who were employees of Regal.
The appellants ("the trustees") are the trustees of the Fund which became a regulated fund under the Superannuation Industry (Supervision) Act 1993 (Cth) ("the Supervision Act"). The respondent ("Hay") is a member of the Fund. Prior to the Fund becoming a regulated fund Hay had been paid the defined benefits to which he was entitled as a member of the Fund consequent upon his retrenchment in March 1991 as an employee of Regal.
On 16 September 1994 Hay lodged a notice of complaint with the trustees. His complaint was that on 1 October 1990 the Fund was converted from a defined benefits fund to an accumulated benefits fund and, as a consequence, he was entitled to the increased benefits promised to him and a share of the Fund surplus which had not been paid to him by the trustees. On 25 November 1994 the trustees rejected Hay's claim and informed him that if he was dissatisfied with the decision he was entitled to lodge a complaint with the Superannuation Complaints Tribunal (“the Tribunal”). The primary ground for rejecting the complaint was that the Trust Deed did not authorise payment by the trustees of the amounts claimed by Hay.
On 6 December 1994 Hay lodged a complaint with the Tribunal pursuant to s14(2) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Complaints Act"). On 16 February 1996 the Tribunal made a written determination, under s37(3) of the Complaints Act, setting aside the trustee's decision and substituting its decision that Hay be paid:
· the amount included in the newsletter and attachment of 17 September 1990, less amounts already paid and adjusted for interest and charges; and
· an equitable share in the surplus remaining after all benefits promised to members in the 17 September 1990 newsletter have been paid.
The Tribunal accepted Hay's claim that he was entitled to increased benefits and a share of the Fund surplus on the ground that, as against Hay, the trustees were estopped from denying the entitlements promised to members in the 17 September 1990 newsletter which was sent by the trustees to members of the Fund.
On 15 March 1996 the trustees appealed from the determination of the Tribunal to the Court on questions of law pursuant to s46 of the Complaints Act. The appeal raises a number of issues relating to the jurisdiction and powers of the Tribunal under the Complaints Act. Before turning to those issues it is necessary to outline the more important provisions of the Deed and the background facts which gave rise to the determination.
The Trust Deed
Clause 1 provides that “unless the context otherwise requires”:
"MEMBER" means a person admitted to membership of the Fund in accordance with the Rules and includes Pensioners.
"THE FUND" means The Royal Life Australia Staff Superannuation Fund constituted by this Deed and the Rules and includes all moneys from time to time held by or on account of the Trustees on behalf of the Fund and the investments or policies for the time being representing the same.
Clause 3 provides:
THE RULES:
The Rules set out in the Schedule to this Trust Deed shall until altered as hereinafter provided be the Rules for the management of the Fund and the Rules with any alterations or amendments thereof which may be made as hereinafter provided shall be construed with this Trust Deed.
Clause 4(1) provides for the trustees to have the general control, management and administration of the Fund. Clause 4(7)(a) confers an “absolute and uncontrolled discretion” on the trustees. The sub-clause provides:
The Trustees in the exercise of the authorities, powers and discretions hereby vested in the Trustees shall have an absolute and uncontrolled discretion and may exercise or enforce all or any such authorities, powers and discretions from time to time and at any time or may refrain from exercising or enforcing all or any such authorities, powers and discretions for the time being or at all.
Clause 4(8) provides:
The Trustees shall be indemnified against all liabilities incurred by them in the execution of the trusts hereof and the management and administration of the Fund and shall have a lien on the Fund for such indemnity and no Trustee shall be liable for anything whatever other than a breach of the trust knowingly and wilfully committed.
Clause 8 provides:
AMENDMENT:
The Trustees and the Principal Company shall jointly have power by Deed to alter, modify or add to all or any of the provisions of this Deed or the Rules provided that no such alteration, modification or addition:
(1)(a) shall operate so as to affect in any way prejudicially the rights or interests of any person already a Member or Pensioner or any person receiving benefit by virtue of the membership of any deceased Member or Pensioner insofar as it concerns benefits secured in respect of service with the Company prior to the date of such alteration, modification or addition PROVIDED ALWAYS that no such rights or interests shall be deemed to be prejudiced if the sole or principal purpose of such alteration, modification or addition is to ensure -
(i)that the Fund shall as far as possible comply with the Act and the Income Tax Assessment Act,
(ii)that contributions made by the employer to the Fund shall be deductible for income tax purposes or shall be deductible to an extent greater than that existing prior to such alteration, modification or addition.
(b)shall cause the main purpose of the Fund to cease to be the provision of benefits for employees of the Company on their retirement at a specified age and the provision of benefits for the dependants of deceased employees or Pensioners.
(c)shall unless otherwise permitted by the Responsible Authority or the Act or Income Tax Assessment Act result in the payment of any part of the Fund to the Company.
(2)Where the provisions of this Trust Deed are altered, modified or added to the Trustees shall give to each Member as soon as practicable thereafter a written statement explaining the nature, the purpose and the effects (if any) on the entitlements of the Member of the alteration, modification or addition.
Clause 13 provides for the winding up of the Fund. In so far as is relevant, the clause provides:
(a)The Fund shall be wound up if
....
(3)The Trustees are of the opinion that the objects for which the Fund was established no longer exist or the administration thereof cannot conveniently be carried on, or
....
(b)Upon the determination of the trusts hereunder, the Trustees shall dispose of the balance of the assets of the Fund remaining after payment of any costs, charges and expenses then owing
(1)(i) By handing the same to the trustees of any fund having amongst its objects the provision of similar benefits to those provided by the Fund to the persons who would if the Fund had continued have been beneficiaries under the Fund and being a fund approved under the Act, or
....
Rule 3 of the Rules for the Management of the Fund (“the Rules”) provides, inter alia, that every employee who becomes a member:
...shall on admission to membership be bound by the Trust Deed and these Rules including any amendments properly made thereto...
Although the Trust Deed provided for defined benefits the benefits were able to be increased under Rule 9 which provides:
The Trustees may, subject to the approval of the Board, increase any benefits payable out of the Fund by such amount as the Board shall think appropriate to compensate in whole or in part for any rise in the general cost of living or for any other reason.
Being a member of the Fund, Hay was bound by the Trust Deed and Rules. The trustees’ duty was to adhere to the terms of the trust established by the Deed: see Jacobs’ Law of Trusts in Australia Sixth edition (1997) para 1704. Accordingly, Hay’s entitlement as a member of the Fund was to be ascertained by reference to the Trust Deed and Rules as altered, modified or amended from time to time in accordance with clause 8 of the Deed.
Background Facts
In September 1990 the Fund's sole asset consisted of a bond, which had a face value of approximately $3.64m, in Regal's No. 2 Statutory Fund. The accrued benefit liabilities of the Fund were calculated at approximately $2.29m.
In a newsletter dated 17 September 1990 the Trustees announced a proposal to members of the Fund to amend the Trust Deed to improve member's benefits by converting the Fund to an accumulation fund as from 1 October 1990. The proposal, if implemented, would have:
· allowed a surplus in the Fund, estimated to be about $1.5m, to be returned to Regal;
· required Regal to make increased superannuation contributions for the benefit of its employees;
· removed the requirement for members' contributions;
· allowed members to share in the accumulated benefits derived from investment earnings;
· increased Hay's minimum guaranteed resignation benefits, as at 1 October 1990, from $144,163 to $191,666.
Members agreeing to the proposal were required to return a Member Authority Form which approved the proposal and included the following clause:
I authorize the Trustees to amend the Trust Deed and Rules to permit the introduction of the new accumulation section, the transfer of my accrued entitlements, and for the recovery of excess assets by the Company, the amount of which will be determined by the Trustees after taking the advice of the Actuary.
Hay, and other Members, executed and returned the Member Authority Form to Regal. The form was consistent with clause 8 which empowered the trustees and Regal to “jointly have power by Deed” to amend the Trust Deed and Rules.
On 1 October 1990 Hay, and other members, were informed that the trustees had accepted the amendments to the Trust Deed and that the amendments:
have been effected from 1 October 1990.
In fact, the amendments were never made to the Deed and the proposal to convert the Fund to an accumulation fund was not implemented.
On 1 October 1990 there was an aborted sale of Regal. The sale led to the appointment of a Judicial Manager to Regal pursuant to ss59 and 60 of the Life Insurance Act 1945 (Cth) and the freezing of Regal's assets, including the bond. There was considerable uncertainty for several years as to whether members would receive their entitlements. In due course the Judicial Manager released the funds necessary to pay the defined benefits payable under the Deed to retrenched members. Finally, in August 1994 the Fund’s asset, being $1.765m, was repaid to the trustees by the Judicial Manager.
The trustees had requested the Judicial Manager to execute a Deed of Amendment to the Trust Deed, which provided for the proposed increase in member’s benefits, but he declined to do so. He also declined to participate in or authorize the judicial determination of whether Regal was obliged to execute the Deed of Amendment.
On 18 December 1992 the trustees resolved to wind up the Fund pursuant to clause 13(a)(3) of the Deed. Prior to that date all but 17 members of the Fund had been retrenched. As the retrenched members, including Hay, had received the defined benefits payable to them under the unamended Deed they were thereafter regarded by the trustees as no longer having any beneficial entitlement in the Fund.
Legal advice was given to the trustees that since 18 December 1992 only the remaining 17 members were entitled to share in the assets of the Fund, including the surplus. The entitlement to the surplus could fairly be described as a windfall gain. However, if Hay and other former employees of Regal receive entitlements in terms of the Tribunal's determination they will receive increased benefits and a share of the surplus at the expense of the entitlements of the remaining 17 members under the unamended Deed.
The Tribunal's determination
The Tribunal decided that:
· Hay was induced by the trustees to adopt an assumption that, as from 1 October 1990, he was entitled to increased benefits as set out in the trustee’s newsletter of 17 September 1990;
· until 20 February 1992 Hay assumed that he was entitled to his increased benefits notwithstanding doubts as to the financial status of the Fund. As a result, Hay did not work as hard as he would have worked if he knew that his increased benefits would not be paid; accordingly Hay relied on the assumption to his detriment;
· it was unconscionable for the trustees to deny Hay his increased benefits once the Fund’s assets had been replenished by the Judicial Manager.
The two conclusions which led to the Tribunal's determination were expressed by it as follows:
CONCLUSION REGARDING INCREASED BENEFITS
In our view it would be unconscionable for the Trustees to refuse to fulfil the Complainant's assumption about his increased benefits, and the Trustees are estopped from denying that the Deed was amended to make this possible.
The Tribunal is of the opinion that it was unfair and unreasonable of the Trustees to deny the Complainant his increased benefit once the Fund was replenished. Not only were clear promises made to the Complainant, but he relied on those promises and there is nothing in the Trust Deed or otherwise which prevented the Trustees from completing their undertaking by paying those increased amounts.
SURPLUS
The question of the Complainant's entitlement to participate in a distribution of the surplus depends on whether the Agreement [ie by Regal and the trustees to implement the proposal in the newsletter of 17 September 1990] means that the Complainant was entitled to further payment from the Fund. As has already been indicated, the decision to wind up the Fund did not, in the Tribunal's view, automatically preclude the Trustees from paying the complainant a share of the surplus.
As the Complainant was, in the Tribunal's view, still a beneficiary at the time that the Trustees decided to wind up the Fund, he is clearly entitled to participate in the distribution of the Fund's surplus, in accordance with the terms of the Trust Deed.
The two payments required to be made under the determination were not defined benefits or entitlements arising under any of the terms of the unamended Trust Deed or Rules. The reasoning of the Tribunal in overcoming that hurdle was as follows:
it was unconscionable for the trustees to rely upon the fact that the Trust Deed was not amended and they were estopped from so doing: see Commonwealth v Verwayen (1990) 170 CLR 394 and Incarus (Hertford) Ltd v Driscoll (1990) 1 PLR 1 at 4 per Aldous J;
Rule 9 of the Rules enabled the payments, the subject of the determination, to be made;
consequently, the payments determined by the Tribunal to be appropriate were not contrary to law or to the Trust Deed or the Rules.
The issues
The main issues raised by the trustees’ appeal were:
(a)Is the jurisdiction of the Tribunal under the Complaints Act only to apply to the exercise of discretionary powers by the trustees of a regulated fund?
(b)Is the jurisdiction and power conferred on the Tribunal under the Complaints Act only to be exercised in relation to matters which have arisen since the Fund became a regulated fund?
(c)Can the jurisdiction and power conferred on the Tribunal under the Complaints Act be exercised in a manner which requires the trustees to make payments to members of the Fund or engage in any other conduct in relation to members which is not provided for or authorised under the terms of the Trust Deed?
(d)Did the Tribunal, in arriving at its determination, address the question of whether the trustees’ decision was wrong in law rather than unfair or unreasonable and thereby fail to consider the real question which it was its duty to consider? See Sinclair v Mining Wardenat Maryborough (1975) 132 CLR 473, 480, 483.
The Supervision Act and the Complaints Act
The two Acts were enacted in 1993 and amended in 1995 as part of a coordinated Commonwealth statutory scheme to provide for the prudent management and supervision of, inter alia, certain superannuation funds. Both Acts received the Royal Assent on 30 November 1993. Parts of the Supervision Act came into operation at different times between 21 October 1992 and 1 July 1994. The Fund became a regulated fund, under s19 of the Supervision Act, on 2 September 1994. That section came into operation on 30 November 1993: see s2(1) of the Supervision Act.
It was common ground between the parties that the Complaints Act, as amended in 1995, governed the determination of Hay’s complaint by the Tribunal. The Complaints Act provided for the making and resolution of complaints by members or beneficiaries in relation to decisions of trustees of regulated funds. The Act came into operation on 1 July 1994. Accordingly, decisions which might be the subject of a complaint under the Complaints Act may have been made by trustees of a regulated fund after 30 November 1993, being the commencement date for s19 of the Supervision Act, but prior to 1 July 1994. An objective of the Complaints Act was to provide, via the Tribunal, a “fair, economical, informal and quick” mechanism for the conciliation and, if necessary, review of the decisions or conduct of trustees which are the subject of complaints: see ss11, 12 and 36 of the Complaints Act.
Section 14 of the Complaints Act provides, in so far as is relevant:
(1)This section applies if the trustee of a fund has made a decision (whether before or after the commencement of this Act) in relation to:
(a)a particular member or a particular former member of a regulated superannuation fund; or
(b)a particular beneficiary or a particular former beneficiary of any approved deposit fund.
.....
(2).....a person may make a complaint (other than an excluded complaint) to the Tribunal, that the decision is or was unfair or unreasonable.
.....
(5)The Tribunal cannot deal with a complaint under this section to the extent that it relates to excluded subject matter.
(6)The Tribunal cannot deal with a complaint under this section that relates to the management of a fund as a whole.
Hay’s complaint, which was not an excluded complaint, was made under s14(2). It was required to be reviewed by the Tribunal under s37 which provides:
(1)For the purpose of reviewing a decision of the trustee of a fund that is the subject of a complaint under section 14:
(a)the Tribunal has all the powers, obligations and discretions that are conferred on the trustee; and
(b)subject to subsection (6), must make a determination in accordance with subsection (3).
.....
(3)On reviewing the decision of a trustee, insurer or other decision-maker that is the subject of, or relevant to, a complaint under section 14, the Tribunal must make a determination in writing:
(a)affirming the decision; or
(b)remitting the matter to which the decision relates to the trustee, insurer or other decision-maker for reconsideration in accordance with the directions of the Tribunal; or
(c)varying the decision; or
(d)setting aside the decision and substituting a decision for the decision so set aside.
(4)The Tribunal may only exercise its determination-making power under subsection (3) for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness, unreasonableness, or both, that the Tribunal has determined to exist in relation to the trustee’s decision that is the subject of the complaint no longer exists.
(5)The Tribunal must not do anything under subsection (3) that would be contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract.
(6)The Tribunal must affirm a decision referred to under subsection (3) if it is satisfied that the decision, in its operation in relation to:
(a)the complainant;
.....
was fair and reasonable in the circumstances.
In Pope v Lawler (1996) 41 ALD 127 at 135 Nicholson J adopted the New Shorter Oxford Dictionary 4th ed (1993) definitions of ”fair” and “reasonable” for the purposes of ss14 and 37. His Honour said “fair” meant “just, unbiased, equitable, impartial”; and “reasonable” meant “within the limits of reason; not greatly less or more than might be thought likely or appropriate”. See also National Mutual Life Association of Australia Ltd v Jevtovic (Sundberg J, unreported 8 May 1997) at 9-10.
The Complaints Act creates significant new procedural and substantive rights in favour of members of regulated superannuation funds. Procedurally, the Act is intended to provide a low cost and quick dispute resolution mechanism for members of those funds. The new substantive right that is granted to members of a regulated fund is the right to challenge certain decisions of trustees, which were otherwise valid and intra vires, on the ground that they were unfair or unreasonable. The Complaints Act confers wide powers on the Tribunal, including the power to stand in the “shoes” of the trustee of a regulated fund and to itself make a decision which is fair or reasonable in substitution for the decision of the trustee: see s37(3) and (4). In general, prior to the Complaints Act, under the general law a decision of a trustee was not open to challenge on the ground that it was “unfair” or “unreasonable” as those terms have been defined for the purposes of ss14 and 37 of the Complaints Act: see Jacobs’ Law of Trusts in Australia para 1616, Karger v Paul [1984] VR 161 and Fiduciary Obligations PD Finn (1977) at 75-6.
However, the new ground of challenge and the consequential relief available, if the ground is made out, are preconditioned upon and governed by the criteria of “unfairness” or “unreasonableness”. As was pointed out by Sundberg J in Jevtovic at 10-11, the question for the Tribunal under the Complaints Act is not whether it is of the opinion that the trustee’s decision was correct as a matter of law or fact. Rather, it is whether the Tribunal is satisfied that the trustee’s decision in relation to a member or former member is unfair or unreasonable (see ss14(1), 14(2), 37(3) and 37(4)). See also Pope v Lawler at 135-137 in respect of the Complaints Act prior to the 1995 amendments.
If the Tribunal is satisfied that, in the circumstances, the decision was fair and reasonable in its operation in relation to the complainant it must affirm the decision: see s37(2) and (6) and Pope v Lawler at 136-6. If the Tribunal is satisfied that the decision of the trustee was unfair or unreasonable it may “as nearly as practicable” place the complainant in a position in relation to the decision which eliminates the unfairness or unreasonableness: see s37(4).
Obviously, in arriving at a determination the Tribunal might form its own views on the legal obligations of the trustee in relation to the decision or refer questions of law to the Court: see s39. However, the view of the Tribunal or of the Court, in respect of those obligations, is not determinative of the issue of unfairness or unreasonableness which the Tribunal is to determine or of the compensatory relief the Tribunal might grant. Accordingly, although the Complaints Act provides important new rights it is not the panacea for righting all wrongs that may be complained of by fund members. In particular, the Tribunal may not always be an entirely satisfactory vehicle for determining a dispute over a fund member’s actual entitlements. That may have been implicitly recognised by the legislature which provided for the review of a complaint to be suspended if there is a proceeding in a court about the subject matter of the complaint: see s20.
Irrespective of these limitations the Complaints Act is nevertheless beneficial legislation which is clearly intended to operate for the benefit of members and beneficiaries of regulated funds. Accordingly, the Act should not be given a narrow or restrictive construction.
Is the jurisdiction of the Tribunal limited to discretionary decisions?
The first jurisdictional submission on behalf of the trustees is that s14 is only to apply to decisions involving the exercise of discretionary power or authority by the trustees rather than decisions which relate to the non-discretionary entitlements of members. The trustees submitted that:
· the exercise of a power “unfairly” or “unreasonably” connotes a decision involving a discretion rather than one which determines a legal entitlement;
· the interpretation contended for was consistent with s37(5) which provides that the Tribunal must not do anything that would be contrary to law or to the governing rules of the fund;
· accordingly, the review of complaints under s37 is limited to discretionary decisions.
The trustees also submitted that the legislative history of s14 supported that conclusion. Section 14(2) of the Complaints Act, when originally enacted, contained three grounds of review:
· the decision was in excess of the powers of the trustee;
· the decision was an improper exercise of the powers of the trustee;
· the decision is unfair or unreasonable.
The 1995 amendments, contained in s5 and Schedule 5 item 28 of the Superannuation Industry (Supervision) Legislation Amendment Act 1995, deleted the first two grounds leaving only the third ground. The first two grounds were removed “to ensure that the powers conferred on the Tribunal cannot be construed as judicial in character”: see para 171 of the Explanatory Memorandum to the Superannuation Industry (Supervision) Legislation Amendment Bill 1995. The amendment was made in response to the decision of the High Court in Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 that legislation which conferred judicial power on the Commission, being a non-judicial tribunal, was contrary to Ch III of the Constitution and therefore invalid. The view adopted by the legislature appears to have been that the hearing and determination of a complaint made under s14 on the two deleted grounds, being acting in excess of power and the improper exercise of power, but not the third and remaining ground, involved a determination and enforcement of existing rights and obligations and therefore the exercise of judicial power. Accordingly, the Complaints Act was amended to delete the two grounds to ensure that it did not confer judicial power on a non-judicial tribunal.
The trustees’ submission requires that the reference to a “decision” in ss14 and 37 be read down to mean a “discretionary decision”.
The starting point for considering the submission is s4 of the Complaints Act which provides:
For the purposes of this Act, a trustee, an insurer or another decision-maker, makes a decision if:
(a)the trustee, insurer or other decision-maker, or a person acting for the trustee, insurer or other decision-maker, makes, or fails to make, a decision; or
(b)the trustee, insurer or other decision-maker, or a person acting for the trustee, insurer or other decision-maker, engages in any conduct, or fails to engage in any conduct, in relation to making a decision.
When read together, ss4 and 14 provide three preconditions for a review, under s37, of a decision by a trustee of a regulated fund. They are:
the trustee has made or failed to make a decision or has engaged in conduct or failed to engage in conduct in relation to making a decision (“the decision”): see s4;
the decision is in relation to a current or former member or beneficiary of a regulated fund: see s14(1);
a person has made a complaint to the Tribunal that the decision is, or was, unfair or unreasonable: see ss14(2) and 15.
There is no textual or contextual reason for construing ss4 and 14 as requiring a fourth pre-condition that the decision complained of be a discretionary decision. Further, there is no reason to conclude that only decisions, as defined in s4, which are discretionary are capable of being determined to be unfair or unreasonable. A failure by a trustee who is obliged, at some point of time, to make a decision as to a non-discretionary entitlement of a member might be unfair or unreasonable. Likewise, a decision by a trustee as to a non-discretionary entitlement of a member might be unreasonable and possibly unfair. An obvious example is where the view taken by the trustee of its legal obligations in relation to a decision is not reasonably open to the trustee as a matter of fact or law.
Instances of a trustee unreasonably disputing a beneficiary’s rights in the face of known facts have come before the courts. In ReChapman; Freeman v Parker (1895) 72 LT 66 and Ex parte Brown; In re Smith (1886) 17 QBD 488 beneficiaries obtained relief under the general law with respect to non-discretionary decisions of trustees who were ordered to personally pay the costs of the applications on the ground that the trustee’s conduct, although not dishonest, was unreasonable.
Many decisions, as defined in s4, in relation to entitlements of members or beneficiaries are capable of being unfair or unreasonable. To exclude the instances to which I have referred from the purview of the Act would be inconsistent with the statutory scheme of providing a low cost and swift mechanism for resolving disputes in relation to unfairness or unreasonableness as between trustees and members of regulated funds. In my view it would defeat, rather than give effect to, the purpose of the Complaints Act to construe it so as to require that disputes over non-discretionary matters be resolved in the courts under the general law and not the Tribunal. Indeed, given the objects of the Complaints Act it would be a capricious result to construe the Act so as to require that beneficiaries incur the high costs and slower mechanisms of the courts to resolve superannuation disputes which relate to the entitlements of the beneficiaries or other non-discretionary matters. That result would be particularly anomalous given that one would expect, as has occurred in the present case, many of the complaints to be resolved by the Tribunal will be disputes by individual members or beneficiaries in relation to their superannuation entitlements. The authorities do not support an approach to construction that leads to capricious or anomalous outcomes or which is inconsistent with the object of the Act: see CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 141 ALR 618 at 635 per Brennan CJ, Dawson, Toohey and Gummow JJ.
Other provisions of the Complaints Act provide no support for the trustees’ submission. Section 14 excludes certain matters from review: see s14(5) and (6). If the legislature had intended to also exclude complaints in relation to non-discretionary decisions it would have been a very simple matter for that additional exclusion to have been expressly stated.
Section 37(1) provides that, for the purposes of reviewing a decision, the trustee has “all the powers obligations and discretions that are conferred on the trustee” (emphasis added). If the Complaints Act is limited to discretionary decisions it would be sufficient to confer the powers and discretions of the trustee on the Tribunal. Prima facie, the imposition on the Tribunal of the obligations of the trustee suggests that the Tribunal might also be exercising power in non-discretionary matters. Section 37(5), which requires that the Tribunal is not to do anything contrary to law or to the governing rules of a fund, is also consistent with a legislative intent to confer power on the Tribunal in respect of certain decisions, whether discretionary or non-discretionary.
In my view ss14 and 37 are intended to operate in respect of discretionary and non-discretionary decisions of a trustee unless the legislative history of s14 compels a different conclusion. In that regard the substantive aspect of the argument in favour of the limitation contended for by the trustees is that:
the Tribunal exercises executive or administrative, rather than judicial, power when reviewing a complaint under s37;
determining and enforcing non-discretionary matters is an exercise of judicial power: see Brandy;
accordingly, the Tribunal’s functions are to be construed as limited to making determinations in respect of discretionary decisions which is an exercise of administrative, and not judicial, power.
If it be correct that the Tribunal would be exercising judicial power if its jurisdiction extended to non-discretionary matters then the trustees’ argument might attract the operation of s15A of the Acts Interpretation Act 1901 (Cth) and have some substance. Accordingly, a careful analysis of the jurisdiction conferred on the Tribunal is required.
In Precision Data Holdings Ltd v Wills (1991) 173 CLR 157 the High Court concluded that the exercise of power by the Corporations and Securities Panel to declare conduct in relation to a take-over as “unacceptable”, and to make consequential orders upon such a declaration being made, was not the exercise of judicial power. The relevant principles were stated in the joint judgment at 188-89:
True it is that the making of binding declarations of right by way of adjudication of disputes about rights and obligations arising from the operation of the law upon past events or conduct is a classical instance of the exercise of judicial power. But the declarations for which s.733 provides are not binding declarations of right in the sense in which that term is used, more particularly in the context of the exercise of judicial power. That is because the adjudication which the Panel under s.733 is called upon to make is not an adjudication of a dispute about rights and obligations arising solely from the operation of the law on past events or conduct.
The acknowledged difficulty, if not impossibility, of framing a definition of judicial power that is at once exclusive and exhaustive arises from the circumstance that many positive features which are essential to the exercise of the power are not by themselves conclusive of it. Thus, although the finding of facts and the making of value judgements, even the formation of an opinion as to the legal rights and obligations of parties, are common ingredients in the exercise of judicial power, they may also be elements in the exercise of administrative and legislative power. Again, functions which are ordinary ingredients in the exercise of administrative or legislative power can, in some circumstances, be elements in the exercise of what is truly judicial power.
It follows that functions may be classified as either judicial or administrative according to the way in which they are to be exercised. So, if the ultimate decision may be determined not merely by considerations of policy also, then the determination does not proceed from an exercise of judicial power. That is not to suggest that considerations of policy do not play a role, sometimes a decisive role, in the shaping of legal principles.
Furthermore, if the object of the adjudication is not to resolve a dispute about the existing rights and obligations of the parties by determining what those rights and obligations are but to determine what legal rights and obligations should be created, then the function stands outside the realm of judicial power. (Emphasis added and footnotes omitted)
At 191 the Court also observed that as the Panel’s declarations and orders were subject to judicial review, they were not binding in the same sense that a judicial determination would be binding.
The decision of the High Court in Precision Data may be contrasted with that in Brandy. In Brandy the Human Rights and Equal Opportunity Commission was held to be exercising judicial power when determining complaints that a person had done an act that was unlawful under the Racial Discrimination Act 1975 (Cth). At 259 Mason CJ, Brennan and Toohey JJ said:
The determination involves an exercise of [judicial] power not simply because it is made by a court but because the determination is made by reference to the application of principles and standards “supposed already to exist”. And the determination is binding and authoritative in the sense that there is what has been described as an immediately enforceable liability of B to pay A the sum in question. Consequently, even if the determination in such a case were to be made by an administrative tribunal and not by a court, the determination would constitute an exercise of judicial power, although not one in conformity with Ch III of the Constitution. (footnotes omitted).
Deane, Dawson, Gaudron and McHugh JJ said at 269:
Turning to the present case, it is apparent that the Commission’s functions point in many respects to the exercise of judicial power. It decides controversies between parties and does so by the determination of rights and duties based upon existing facts and the law as set out in Part II of the Racial Discrimination Act. Indeed, the relevant function of the Commission is essentially to determine whether the provisions of ss9 and 15, which prohibit certain kinds of racial discrimination, have been contravened. That is clearly indicative of the exercise of judicial power, for, as Starke J said in Victorian Chamber of Manufactures v The Commonwealth (Industrial Lighting Regulations)
“The Constitution remits to the judicial power of the Commonwealth the jurisdiction and authority to determine whether a subject has or has not contravened a law or regulation of the Commonwealth.”
Moreover, the remedies which the Commission may award include damages as well as declaratory or injunctive relief and, according to whether they may be viewed as punitive or otherwise, make its functions closely analogous to those of a court in deciding criminal or civil cases. And as Isaacs J remarked in Federal Commissioner of Taxation v Munro the punishment of crime or the trial of actions for breach of contract or for civil wrongs is “appropriate exclusively to judicial action”. (Footnotes omitted)
It was of significance that determinations of the Commission were enforceable, as an order of the Court, after registration.
For the reasons outlined above a determination of the Tribunal:
· creates new rights and obligations as between the trustee and the beneficiaries;
· does not determine rights and duties based on existing facts and the law.
The object of a determination of the Tribunal under the Complaints Act:
is not to resolve a dispute about existing rights and obligations of the parties by determining what those rights and obligations are but to determine what legal rights and obligations should be created ...
See Precision Data at 189.
Furthermore, the very nature of the decision made by the Tribunal is clearly administrative. The Tribunal does not make or enforce orders as such. By its determination it can affirm or vary a decision of the trustee, make a decision in substitution for that of the trustee in exercise of the trustee’s powers or remit the matter back to the trustee with directions: see s37(3). A determination made under s37 creates new rights and obligations which are enforceable as a decision of the trustee by reason of the statute but not as a court order or in a manner analogous to a judicial determination: see ss41 and 65. In particular, a varied or substituted decision of the Tribunal is deemed to be a decision of the trustee: see s41(3).
In my view the Tribunal exercises administrative, rather than judicial, power in relation to the decisions reviewed by it. The features which led to an invalid conferral of judicial power in Brandy are absent in the present case. There is no substance in the argument that the Complaints Act would confer judicial power if it was construed as conferring power to review non-discretionary decisions.
Accordingly, I am of the view that the Tribunal had jurisdiction to review the complaint made by Hay in relation to the non-discretionary entitlements claimed by him.
Is the jurisdiction of the Tribunal retrospective?
The second jurisdictional submission made by the trustees is that the Tribunal’s jurisdiction and power can only be exercised in relation to matters which have arisen after a fund becomes a regulated fund under s19 of the Supervision Act. At the hearing I deferred over the question of whether leave should be granted to argue this ground. As the ground involves a question of law and issues of fact which were determined by the Tribunal it is appropriate to grant the leave sought.
The trustees contended that any other view of the Complaints Act would lead to the new rights created by that Act operating retrospectively in respect of any decision made prior to a fund becoming a regulated fund. The primary difficulty confronting the submission is that s14(1) specifically provides for the Complaints Act to apply to decisions made both “before or after” the commencement of that Act. That is not surprising as, although both the Supervision Act and the Complaints Act were enacted together and received the Royal Assent on the same day, parts of the Supervision Act were to come into operation prior to the Complaints Act. In particular, funds were able to become regulated funds as from 30 November 1993 but the Complaints Act was only to come into operation from 1 July 1994. As a consequence the legislature expressly enabled, by s14(1), a decision made by a trustee of a regulated fund after 1 November 1993 but before 1 July 1994, to be capable of being reviewed.
The language employed in s14 indicates that it is to apply to a decision made by a trustee of a regulated fund and is not to apply to a decision made by a trustee of an unregulated fund notwithstanding that, at a later point of time, the fund has become a regulated fund. That construction is supported by the requirement that a complaint under s14 can only be made in respect of a decision in relation to a member or a former member of a regulated fund.
In the present case:
· the Fund became a regulated fund on 2 September 1993;
· the Complaints Act commenced on 1 July 1994;
· the trustees made the decision, the subject of the complaint, on 25 November 1994;
· Hay lodged his complaint under s14 of the Act on 6 December 1994.
Accordingly, the Tribunal had jurisdiction to review and determine the complaint under s37 of the Complaints Act. In my view it is not relevant to the issue of jurisdiction that the circumstances, or events relied upon by the complainant, to demonstrate that the trustees’ decision is unfair or unreasonable, may have occurred before the fund was a regulated fund if the decision complained of was made after the fund became a regulated fund.
Was the determination contrary to the governing rules of the Fund?
Under the Complaints Act:
the Tribunal has all the powers, obligations and discretions conferred on the trustee: see s37(1)(a);
the Tribunal must not make a determination that would be contrary to law or to the governing rules of the fund: see s37(5);
the decision of the Tribunal is to have effect as the decision of the trustee: see s41(3).
In my view the clear intention of these provisions, and of the scheme for the resolution of complaints under the Complaints Act generally, is to place the Tribunal in the “shoes” of the trustee when making a determination in respect of a complaint. It is an essential part of that scheme that, in so far as a determination under s37(3) varies or becomes a substituted decision of the trustee, the varied or substituted decision must be one which is authorised by the governing rules of the fund. Likewise, a remittal with directions must also result in a decision which is authorised by those rules.
The statutory scheme which I have outlined is consistent with the nature of regulated funds. Such funds are, in the usual course, established by an employer for the benefit of employees. The employer, employees and the trustees are all bound by, and entitled to the benefits conferred under, the trust deed. In the usual course trust deeds contain provisions for alteration or amendment which protect existing entitlements and the required tax status of the fund. In these circumstances, it would be an extraordinary step for the legislature to empower a Tribunal to make a decision under the Complaints Act which a trustee could not have made under a trust deed. The practical effect of such a decision would be to treat a deed as if it were amended without the need to amend it. It would also be questionable whether the Commonwealth legislature had the legislative power to empower a Tribunal to alter existing entitlements under a Trust Deed if the effect was to create new entitlements in favour of one group of beneficiaries at the expense of another group: see s51(xxxi) of the Constitution. Absent a specific provision in the Complaints Act clearly conferring such a power on the Tribunal I would not imply the power.
The present case is a good demonstration of why such an implication can produce extraordinary consequences. Under the Trust Deed, at all times since 18 December 1992, the 17 remaining members enjoyed beneficial entitlements in respect of the Fund. All other members, who had been retrenched prior to that date, had been paid the defined benefits to which they were entitled under the unamended Deed and ceased to have any remaining beneficial entitlements to the assets of the Fund under the Deed. If the former employees were to receive an entitlement to the increased benefits proposed in the newsletter of 17 September 1990 it was necessary to amend the Trust Deed, as was originally intended: see clause 13 of the Deed. A 48 page Deed of Amendment was drawn but never executed.
There was only one other possible vehicle for a member’s entitlement, under the Trust Deed, to be increased. Rule 9 provided for an increase in benefits, subject to the approval of the Board of Regal, but only
to compensate in whole or in part for any rise in the general cost of living or for any other reason. (emphasis added)
It is unnecessary to consider the ambit of the operation of Rule 9 in the present case as it was common ground that no decision was made by the trustees or the Board of Regal under Rule 9. Obviously, if such a decision was now sought by Hay on the grounds upon which he successfully relied before the Tribunal, questions would arise as to:
whether the liquidator of Regal, rather than the Board which no longer exists, could give the required approval;
whether the amount Hay was claiming was “compensation” and fell within “any other reason” for the purposes of Rule 9.
An alternative approach might involve a determination of the Tribunal directing the trustees to take appropriate steps:
(a)to enforce the rights (if any) the trustee might have to compel the liquidator of Regal to amend the Deed, or
(b)to increase benefits under Rule 9 if the required pre-conditions are satisfied.
Before the Tribunal could give any such direction it would have to be satisfied that the jurisdictional preconditions, to which I have referred earlier in these reasons, were satisfied. I express no view on that matter. It is sufficient for present purposes that I have concluded that there was no power under the Trust Deed for the trustees, and therefore the Tribunal, to make the determination made by the Tribunal in the present case. The determination was not provided for under the terms of the Trust Deed, was contrary to law and was not authorised by the Complaints Act. Indeed Hay’s counsel accepted that the award of an “equitable share in the surplus” could not be justified and sought a reformulation of that part of the determination.
Incarus was relied upon by the Tribunal as an example of an estoppel by convention operating to entitle beneficiaries to rights under a trust deed notwithstanding that the deed did not provide for those rights. However, the rationale for the conclusion in Incarus was that all parties to the deed were bound by the estoppel by convention. As Aldous J said in Incarus at 4:
All the parties to the scheme, namely the plaintiff, the Prudential and the members, have since 1978 proceeded on the basis that the rate of accrual was 1/270th and they cannot now go back on it. Further I believe it would not be unjust or unfair to hold them to that. In fact it would be odd for me to decide the rate of 1/60th or 1/80th when all the parties had accepted and worked on the basis that it was 1/270th.
In the Incarus situation, in substance, the deed is treated as if it was amended to accord with the assumption binding on all parties or equity could require amendment of the deed to accord with the assumption. Either way the analogy of estoppel by convention does not assist Hay in his case of an equitable estoppel which operates only as between himself and the trustees. That is a quite different situation to the estoppel by convention upheld in Incarus. The estoppel found by the Tribunal in the present case can only operate as between Hay and the trustees and, of itself, does not give rise to a right as against all parties to the Trust Deed to treat it as if it was amended or to require that it be amended, to accord with the assumption giving rise to the estoppel.
Conclusion
For these reasons I am satisfied that the Tribunal had jurisdiction to review the complaint made by Hay under s14 of the Complaints Act but did not have the power to make a determination conferring increased benefits on Hay which exceeded the benefits to which he was entitled under the Trust Deed.
In view of the conclusions I have reached it has not been necessary to deal with the numerous other grounds of appeal relied upon by the trustees and, in particular, whether the Tribunal erred in law in determining the complaint on the basis of the legal obligations of the trustees to Hay rather than on the basis of whether the trustees’ decision was unfair or unreasonable. It is sufficient, for present purposes, to say that there were substantial legal and factual difficulties in the course adopted by the Tribunal of conferring on Hay the benefits of a complex proposal which involved the taking of steps by the trustees, Regal and all members, which were never taken.
In these circumstances the appeal is to be allowed, the determination of the Tribunal is to be set aside and the matter remitted to the Tribunal to be determined in accordance with law.
I certify that this and the preceding 28 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel.
Associate:
Date:
Heard: 29 May 1997
Place: Melbourne
Judgment: 20 June 1997
Appearances: Mr D M Maclean instructed by I F S Fairley, Solicitors for the applicants.
Mr C M Caleo instructed by Blake Dawson Waldron, Solicitors for the respondent.
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