Clayton v Alcoa of Australia Retirement Plan Pty Ltd

[2011] VCC 454

IN THE COUNTY COURT OF VICTORIA Revised

Not Restricted

AT WARRNAMBOOL
CIVIL DIVISION
DAMAGES LIST

MISCELLANEOUS DIVISION

Case No. CI-10-01831

MALCOLM NORMAN CLAYTON	Plaintiff
v
ALCOA OF AUSTRALIA RETIREMENT PLAN PTY LTD	Defendant
(ACN 065 702 454)

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JUDGE:	Her Honour Judge Kennedy
WHERE HELD:	Warrnambool
DATE OF HEARING:	27 April 2011
DATE OF JUDGMENT:	2 May 2011
CASE MAY BE CITED AS:	Clayton v Alcoa of Australia Retirement Plan Pty Ltd
MEDIUM NEUTRAL CITATION:	[2011] VCC 454

REASONS FOR JUDGMENT

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Catchwords: Practice and Procedure- review of a decision of a trustee rejecting a claim for total and permanent disablement -interrogatories seeking to elicit reasons where no reasons previously given - interrogatories disallowed

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr I. Fehring	Stringer Clark
For the Defendant	Mr P. Bingham	Mallesons Stephen Jaques

HER HONOUR:

1          In this proceeding, the plaintiff seeks to review a decision by the trustee of the Alcoa of Australia Retirement Plan made on about 18 February 2010 to reject his claim for total and permanent disability benefits. In his statement of claim, the plaintiff alleges that the trustee had breached its duty and/or its obligations in that it did not “act in good faith or upon real and genuine considerations, or on relevant considerations and/or in accordance with the purposes conferred upon them by the Trust Deed…”[1] The matters alleged reflect the grounds for review identified in the decision of McGarvie J in Karger v Paul in circumstances where reasons for decision are not given.[2]

[1]             Statement of Claim filed 30 April 2010 at paragraph 11

[2] [1984] VR 161 at 165

2          On 26 July 2010, Her Honour Judge Davis made an order that the parties have leave to serve interrogatories on each other by 18 March 2011 and also listed the matter for trial in the current Warrnambool circuit.

3          The plaintiff has subsequently sought to file and serve interrogatories (out of time) which are dated 19 April 2011, and seeks leave to file those interrogatories.

4          An adjournment application by the plaintiff was also before the court, but it was agreed by Counsel that if leave was not given to file and serve the interrogatories then the matter could proceed. If, alternatively, leave was so given, then the matter would need to be adjourned (particularly given the need to consult with some eight directors of the trustee).

Issues

5          In opposing the grant of leave, Counsel for the defendant cited Flegeltaub v Telstra Super Pty Ltd[3] in support of the principle that the interrogatories were impermissible because they wrongly sought the defendant’s reasons for its decision. Further, and in the alternative, the defendant made objection as to the form of many of the interrogatories and, finally, the defendant sought to rely on case management principles.

[3] [1998] VSC 144

6          In seeking leave to interrogate, Counsel for the plaintiff did not accept that the interrogatories actually sought the trustee’s reasons, as opposed to seeking information as to the process of the trustee and of its methods of informing itself. Counsel also submitted that the decision in Flegeltaub had been overtaken by the High Court decision in Finch v Telstra Super Pty Ltd [4] and further submitted that the objection on form was not sustainable.

[4] [2010] HCA 36

7          The issues therefore were as follows:

• whether the interrogatories, or any of them, sought reasons for the trustee’s decision;

• if yes, whether or not the interrogatories were permissible at law;

• if yes, whether the interrogatories, or any of them, were objectionable in any event.

Evidence

8          The plaintiff relied on an affidavit of John Cramp of 19 April 2011 and the defendant on an affidavit of Laura Therese Jane Simmons-Strempel of 20 April 2011.

9          The Court was not provided with a copy of the trust deed but the parties accepted that it stated that “total and permanent disablement” meant the following: [5]

having in the opinion of the Trustees after consideration of medical evidence, become incapacitated by reason of any physical or mental sickness, injury or infirmity to such an extent as to render the member unlikely ever to engage or work for reward in any occupation or work for which the member is reasonably suited by education, training or experience.[6]

[5]             There being no insurance policy

[6]             Statement of Claim at paragraph 7 which is admitted in the Defence dated 18 August 2010 at paragraph 8 (emphasis added)

10        Further, the defendant relied on clause 1.5.4[7] which was not challenged by the plaintiff as follows:

The Trustee in the exercise of the powers, authorities and discretions vested in it by the Deed shall have an absolute and uncontrolled discretion and may exercise or enforce all or any of these powers, authorities and discretions at any time and from time to time or may refrain from exercising all or any of them from time to time or at all.

[7]             Defence at paragraph 12

11        Neither party adduced any specific clause which required delivery of reasons for decision by the trustee. It was further accepted by the plaintiff that no reasons had in fact been delivered (which was in my view, a proper concession to make on the evidence before the court.[8])

Character of interrogatories

[8]             See exhibit LTJSS3 to the affidavit of Ms Simmons-Strempel

12        Having taken the opportunity to examine the interrogatories, I am of the view that they are in fact seeking the trustee’s reasons for its decision and not merely information as to the process of the trustee and of its methods of informing itself. Thus, each of them seeks to elicit information as to the considerations motivating the trustee and/or details of the trustee’s opinions, knowledge, and determinations.

Whether the plaintiff can interrogate to obtain reasons

13        In Flegeltaub, Beach J determined that the defendant was not permitted to seek reasons for a trustee’s decision through the delivery of interrogatories. In so doing His Honour cited various authorities including McGarvie J in Karger v Paul.[9] His Honour also cited a decision of Street J in Tooth & Co Ltd v Lane Cove Municipal Council (No 4)[10] for the proposition that the defendant, as a corporation, has no mind and therefore cannot be interrogated about its state of mind.[11]

[9] [1998] VSC 144 at [15]-[22]

[10] (1968) 2 NSWR 17

[11] [1998] VSC 144 at [23]

14        The plaintiff was unable to point to any authority wherein, contrary to Flegeltaub, a trustee had been compelled to disclose reasons through an order for interrogatories. Instead, as indicated already, the plaintiff submitted that Finch had effectively overtaken the decision in Flegeltaub, particularly as to the reliance on the principles in Karger v Paul.

15        In Finch, the High Court (French CJ, Gummow, Heydon, Crennan and Bell JJ) set aside a decision of the Court of Appeal which allowed an appeal from orders of Byrne J in favour of an applicant seeking the review of a trustee’s decision. In so doing, the Court stated that the formation of an opinion by a trustee (in similar circumstances to that pertaining here) was “not a matter of discretionary power to think one thing or the other; it was an ingredient in the performance of a trust duty.”[12] The joint judgment also suggests that it was wrong to approach the principles in the Karger v Paul case as if they were applicable “without any qualification.”[13]

[12] [2010] HCA 36 at [30]

[13] [2010] HCA 36 at [37]

16        Importantly, however:

• Unlike the present case, the trustee in Finch had in fact provided reasons. Moreover, there was no suggestion that any prior decisions concerned with an absence of reasons should be revisited. To the contrary, the Court appeared to acknowledge there were obstacles in such a case by explicitly stating that “[t]he problems that arise in cases where trustees do not give reasons for a conclusion to which they have come are not present here.” [14]

• The Court in Finch in fact upheld the decision of Byrne J as “sound” in circumstances where Byrne J had actually applied the test in Karger v Paul (in finding that the trustee had failed to give the matter genuine consideration by conducting insufficient inquiries).[15]

• The only qualification enunciated in Finch was that there was a high duty on the trustee to make enquiries which duty was in a “more intense form” than exists under Karger principles.[16] This qualification does not suggest that a trustee might now be compelled to divulge reasons through interrogatories (as opposed to being obliged to engage in a “properly informed consideration”).

[14] [2010] HCA 36 at [39]

[15] [2010] HCA 36 at [65].

[16] [2010] HCA 36 at [66].

17        In my view, therefore, there is nothing in Finch to suggest that the decision in Flegeltaub was incorrect. More particularly, there is nothing in Finch to suggest that reasons should be compelled through interrogatories in circumstances where the plaintiff himself relies on Karger v Paul principles and where no obligation to provide reasons is identified in the relevant trust deed.

18        Moreover, as indicated already, the decision in Flegeltaub is also supported by the decision of Tooth and Co Limited v Lane Cove Municipal Council (No.4)[17] where Street J stated:

“Where, however, the suit concerns the act of a municipal corporation it appears to me to be unreal to direct to that corporation an interrogatory upon what matters were present to its mind in relation to a particular event. The inferences drawn and conclusions reached by courts upon purpose, intention or opinion on the part of municipal corporations are drawn and reached as a result of evidence of objective facts.”

[17] [1968] 2 NSWR 17 at pp19 -20

19        There was some disapproval of this principle in the decision of Langley v The Age Co Ltd.[18] However, this occurred in a very different context wherein a newspaper had actually put corporate state of mind in issue in a defamation pleading and the court was satisfied that the state of mind of a single authorised officer could be attributed to the corporation.[19] In the present case, there were some eight individual directors who may have adopted different reasoning and opinions and may now have different recollections as to what occurred at the relevant meeting which occurred more than one year ago.

[18] [2001] VSC 370 at [68]

[19] [2001] VSC 370 at [86]

20        Moreover, the Lane Cove principle has been recently approved in the decision of O’Brien v Little in a more comparable fact situation wherein breaches of duty were alleged against a Shire Council.[20]

[20] [2007] NSWSC 64 at [20]-[23]

21        In my view, the rationale expounded by Street J (and relied on in Flegeltaub) has application in the current context. Thus, the question as to whether, as alleged, the trustee has acted in good faith and/or upon real and genuine considerations and/or for a proper purpose is best tested by evidence of objective facts rather than the artificial ascertainment of the state of mind of a corporation some considerable period after the making of the relevant decision.

22        Following the decision in Flegeltaub, the interrogatories should therefore be disallowed.

Whether objection is sustainable in an event

23        In the light of the above finding, it is unnecessary to consider whether the interrogatories were otherwise objectionable on relevance/oppressive grounds and having regard to case management principles. I will therefore only briefly record my views.

24        A number of the interrogatories were objectionable as they do not relate to any question between the parties, having regard to the precise terms of the trust deed:

a)	Int 1(b) addresses an irrelevant question, namely, ability to work, (rather than unlikelihood);
b)	Int 1(c) addresses an irrelevant question, namely unlikelihood to “resume work in or attend to any occupation or work;”
c)	Int 2 addresses an irrelevant question, namely what occupation or work the plaintiff could be (rather than was) reasonably qualified for;
d)	Int 3 is too wide, as it addresses not only the time of the rejection, but any other time (including for example, now);
e)	Int 4 is too wide, as it addresses not only the time of the rejection, but any other time;
f)	Int 9 addresses an irrelevant question, namely capacity for work rather than unlikelihood.

25 Although this would leave some interrogatories, I would have been inclined to disallow the interrogatories as unduly oppressive, having regard to case management principles,[21] and given the potential to derail the imminent trial. Although I would be concerned about any prejudice to the plaintiff, information sought as to the process of the trustee and of its methods of informing itself should be ascertainable in more expeditious ways, such as by the disclosure of the trustee’s file. As I indicated to Counsel, I would also readily consider making an order for such disclosure should it be necessary.

[21] And see generally s47 of the Civil Procedure Act 2010 (Vic) which states that the court may make orders for the purposes of ensuring that a civil proceeding is managed and conducted in accordance with the “overarching purpose;” being to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute (s7)

26        However, it is unnecessary to say more on this matter given my earlier findings.

Conclusion

27        Leave to interrogate is refused. It follows that the plaintiff’s interrogatories dated 19 April 2011 should be set aside.