Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck

[2016] NSWCA 218

Court of Appeal

Supreme Court

New South Wales

• Summary available

Medium Neutral Citation:

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

Hearing dates:

15 March 2016

Date of orders:

22 August 2016

Decision date:

22 August 2016

Before:

Bathurst CJ at [1]; Macfarlan JA at [189]; Gleeson JA at [196]

Decision:

1 Appeal allowed.
2 Set aside the order made by the primary judge and in lieu thereof order:
The proceedings be dismissed;
The first respondent pay the appellants’ costs of the appeal and in the Court below;
Order that the first respondent be granted a certificate under the Suitors Fund Act 1951 (NSW) if eligible.

Catchwords:

CONTRACT – construction – whether amendment of trust in breach of trust deed – whether early retirement benefits clause conferred accrued benefit – meaning of “accrued benefit” – whether amendment authorised by amendment power in trust deed

EQUITY – trusts – right of member of superannuation fund – whether object of discretionary power of appointment or beneficiary with contingent beneficial interest

EQUITY – trusts – trustees – duties – whether breach of duty to act in best interests of beneficiaries

STATUTORY INTERPRETATION – whether power of amendment exercised in the “best interests of the beneficiaries” under s 52(2)(c) Superannuation Industry Supervision Act 1993 (Cth)

STATUTORY INTERPRETATION – whether trust amendment in breach of reg 13.16 Superannuation Industry (Supervision) Regulations 1994 (Cth) – meaning of “accrued benefits” in reg 13.16

EQUITY – estoppel – promissory estoppel – entitlement to pension – whether representation that respondent would not be terminated early

COSTS – indemnity costs

Legislation Cited:

Suitors Fund Act 1951 (NSW)
Superannuation Industry (Supervision) Act 1993 (Cth), 52(2)(c)
Superannuation Industry (Supervision) Regulations 1994 (Cth), regs 1.03, 9.27, 9.31, 13.16

Cases Cited:

Air Jamaica Ltd v Carlton [1991] 1 WLR 1399
Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238; 36 VR 618
Asgard Capital Management Ltd v Maher [2003] FCAFC 156; 131 FCR 196
Auspine Staff Superannuation Pty Ltd v Henderson [2006] FCA 1281
Cowan v Scargill [1985] Ch 270
DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; 83 NSWLR 728
Employers First v Tolhurst Capital Limited [2005] FCA 616; 143 FCR 356
Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65; 88 CLR 492
Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254
Foran v Wight [1989] HCA 51; 168 CLR 385
Gartside v Inland Revenue Commissioners [1968] AC 553 at 617-8
Gas and Fuel Corporation of Victoria v Fitzmaurice (1991) 22 ATR 10
Hockin v Bank of British Columbia (1990) 46 BCLR (2d) 382
Hockin v Bank of British Columbia (1995) 123 DLR (4th) 538
Karger v Paul [1984] VR 161
Kennon v Spry [2008] HCA 56; 238 CLR 366
Legione v Hately [1982] HCA 11: 152 CLR 406
Lock v Westpac Banking Corporation (1991) 25 NSWLR 593
Macoun v Federal Commissioner of Taxation [2015] HCA 44; 90 ALJR 93
Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; 282 ALR 167
Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587
Saleh v Romanous [2010] NSWCA 274; 79 NSWLR 453
Schmidt v Air Products of Canada Ltd (1994) 115 DLR (4th) 631
Wilson v Metro Goldwyn Mayer (1980) 18 NSWLR 730

Category:

Principal judgment

Parties:

Commonwealth Bank Officers Superannuation Corporation Pty Limited atf Commonwealth Bank Officers’ Superannuation Fund (First Appellant)

Representation:

Counsel:
B Walker SC / S Nixon / J Hutton (Appellants)
J C Kelly SC / J Merkel / C Gregory (First Respondent)
L Whiffen (Second Respondent)

Solicitors:
Jones Day (Appellants)
Slater and Gordon (First Respondent)
Shine Lawyers (Second Respondent)

File Number(s):

2015/314271

 Decision under appeal 

Court or tribunal:

Supreme Court of New South Wales

Jurisdiction:

Equity

Citation:

[2015] NSWSC 723

Date of Decision:

6 July 2015

Before:

Slattery J

File Number(s):

2011/220432

HEADNOTE

[This headnote is not to be read as part of the judgment]

Mr Peter Beck was an actuary employed by Colonial Mutual Life Assurance Society Limited (Colonial Mutual). In 1987, Mr Beck relocated from South Africa to the Colonial Mutual offices in Melbourne. In 2000, Colonial Mutual was acquired by Commonwealth Bank of Australia (CBA), at which time Mr Beck moved to Sydney to commence employment with CBA. In 2005, Mr Beck’s employment was terminated without cause. At the time of termination, he had not yet reached the age of 55.

While Mr Beck was employed with Colonial Mutual, he contributed to that company’s superannuation fund, which was a defined benefit fund. When Mr Beck joined Colonial Mutual’s Australian fund (the Old Colonial Fund) in 1987, cl 22(b) provided for a discretionary benefit in exceptional circumstances to persons who had retired prior to the age of 55. In July 1996, the rules of the Old Colonial Fund were restated and amended. They provided for an early (55-61 years old), normal (62 years old) and late (63+ years old) retirement benefit. Anyone who ceased employment before the age of 55 was dealt with under cl A11.

Clause A11.3 stated: “In exceptional circumstances and usually only if the Member has had a long period of Service, the Trustees may with the approval of the Company pay to or in respect of the Member … a further sum of such amount as will increase the total payment to or in respect of such Member to an amount not exceeding the reserve value as determined by the Trustees after considering the advice of the Actuary held in the fund in respect of such Member as at the date the Member ceases employment with the Employer”.

The rules included an amendment provision (cl 33). Clause 33.1 enabled the trustees, with the consent of the company, to amend the deed. Clause 33.2 contained a proviso that no amendment could be made where the amendment detrimentally affected the value of the benefits accrued in respect of any member without the consent of that member. The value of benefits accrued was to be determined by the trustee after considering the advice of the actuary. Clause 33.3 stated that any amendment which the trustee considered necessary or desirable for ensuring conformity to any laws “governing or regulating the operation or maintenance of superannuation funds” was deemed not to detrimentally affect the value of any benefits accrued.

In December 1996, the deed was amended to delete cl A11.3. This amendment was made on the advice of the trustee’s in-house counsel that the provision would breach the incoming Victorian anti-discrimination legislation.

In 1998, the assets held by the trustee of the Old Colonial Fund were transferred into a new fund (the New Colonial Fund) and in 2003, the New Colonial Fund was merged with the Commonwealth Bank Officers Superannuation Fund (OSF), of which the first appellant (CBOSC) was trustee. The rules of these funds contained similar provisions to the Old Colonial Fund and did not have an equivalent provision to the repealed cl A11.3.

Mr Beck gave evidence that he accepted his offer of employment with CBA on the basis that they could protect and enhance the pension he was entitled to under his defined benefit pension scheme. An officer of CBA made representations that Mr Beck’s existing superannuation arrangements would continue to apply. It was also alleged that in 2001, officers of CBA put pressure on Mr Beck and his wife to move the family to Sydney to show commitment to the job.

The primary judge found that the amendment deleting clause A11.3 was invalid. Consequently, he declared that the OSF at all times included a provision to the effect of A11.3 and that CBOSC must give due consideration to Mr Beck’s application for a benefit under that rule. Furthermore, he declared that CBA was estopped from denying that Mr Beck was entitled to an accrued pension at the age of 55 and that CBA was obliged to provide him with this pension to the extent he did not receive a benefit as a consequence of his claim. CBOSC appealed.

The issues on appeal were:

1   Whether cl A11.3 of the Old Colonial Fund rules conferred an accrued benefit on Mr Beck within the meaning of cl 33.2 such that his consent was required for the amendment to be made;

2   Whether cl 33.3 otherwise authorised the removal of cl A11.3;

3 Whether the removal of cl A11.3 was in breach of the trustee’s duty at general law, or under s 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act), to act in the best interests of beneficiaries;

4 Whether cl A11.3 conferred an accrued benefit on Mr Beck within the meaning of reg 13.16 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations) such that the removal of cl A11.3 was in breach of that regulation.

5   Whether, if the deletion of cl A11.3 was invalid, the OSF rules were deemed to include a provision to the effect of cl A11.3;

6   Whether Mr Beck was entitled to argue that CBA was estopped from interfering with his continuing to work until the age of 55.

7   What was the appropriate costs order against Mr Beck?

The Court held (Bathurst CJ, Macfarlan JA and Gleeson JA agreeing) dismissing the appeal:

Did cl A11.3 confer an accrued benefit within the meaning of cl 33.2?

(i)   Where a trustee has a duty to distribute to those members who fall within a stipulated definition and a duty not to distribute to those who do not, the power is not discretionary. However, where the trustee has to determine not only whether the member falls within the qualifying definition but also, even where that definition is met, whether a benefit should be conferred and in what amount, the power is discretionary: [93], [96] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

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

(ii)   A person who is entitled to consideration under a discretionary benefit provision has no proprietary interest in the assets out of which the benefit is to be paid, but only a mere expectancy or hope that the power will be exercised in his or her favour: [94]-[95] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Kennon v Spry [2008] HCA 56; 238 CLR 366 applied

1. Where a member has not yet achieved the qualifying characteristic stipulated in the discretionary benefit provision (e.g. retirement at a certain age), the benefit, being either the right to be considered or the pension entitlements, has not accrued. It is, at best, an inchoate right in the process of accrual but subject to a variety of contingencies: [97]-[98], [102] (Bathurst CJ); [194]-[195] (Macfarlan JA); [196] (Gleeson JA).

Macoun v Federal Commissioner of Taxation [2015] HCA 44; 90 ALJR 93; Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65; 88 CLR 492 applied

(iv)   The fact that a beneficiary has a right to due administration of the fund does not mean that any potential benefit is an accrued benefit: [103] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

(v)   The obtaining of an actuary’s report was not a precondition to exercise of the power under cl 33.1. The requirement that an actuary’s report be obtained only arose once it was ascertained that the value of accrued benefits was detrimentally affected: [111] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Did cl 33.3 authorise the removal of cl A11.3?

(vi)   (Obiter) Where an amendment is authorised on the basis that it is considered necessary or desirable for ensuring conformity with certain laws, it must be demonstrated that the amendment is necessary because the particular provision the subject of the amendment, either in its form or in the manner in which it is required to operate, contravenes the legislation in question: [123]-[125] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

(vii)   (Obiter) Legislation “governing or regulating” the operation of superannuation funds refers to legislation that is either directed to or specifically impacts on the operation or maintenance of the fund: [124] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Trustee’s duty to act in the best interests of beneficiaries

(viii) Section 52(2)(c) of the SIS Act does not expand the general law duty of a trustee to act in the best interests of beneficiaries: [136] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

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

(ix)   The decision of a superannuation trustee is reviewable for want of properly informed consideration: [137] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254; Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238; 36 VR 618 applied

(x)   Where the trustee acted on advice that removal of the clause was necessary for compliance with legislation and where the amendment involved a possible right for a future discretionary benefit being replaced with an alternative basis for providing such a benefit, it could not be said that the trustee failed to give proper consideration to whether or not the amendment was in the best interests of beneficiaries: [138]-[140] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Meaning of ‘accrued benefit’ in reg 13.16 of the SIS Regulations

(xi) The definition of ‘accrued benefit’ in reg 9.27 of the SIS Regulations does not apply to reg 13.16. The definition in reg 9.27 is expressed only to apply to Div 9.5, which deals with the content of actuaries’ reports. In that context, where an actuary must form an opinion as to whether the amount held in the fund is sufficient to meet the value of liabilities in respect of accrued benefits, there is a reason why “accrued benefits” would extend to potential entitlements. That reason does not apply to the expression as used in reg 13.16: [107], [146] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Were the OSF rules deemed to include a provision to the effect of cl A11.3?

(xii)   (Obiter) The transfer of funds from one fund to another, with the members of the old fund having the rights and benefits conferred by the new fund is not an amalgamation of trusts. The fact that the new fund does not confer equivalent benefits, where there is a provision providing that it does, may give rise to a claim against the trustee, but it does not deem the new fund to contain provisions which it does not in fact have: [155] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

(xiii)   (Obiter) The right to future consideration is not a species of property that travels with the fund, but even if it were, the trustee of the new fund must take with notice of that obligation in order for it to pass with the property: [157] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Estoppel

(xiv)   Mr Beck could not rely on an estoppel claim which departed from the way in which it was advanced below and where the submissions relied upon were advanced in support of an alternative claim: [191] (Macfarlan JA); [197]-[199] (Gleeson JA).

(xv)   (Per Bathurst CJ) The manner in which the estoppel case was conducted in the court below provided a sufficient basis for Mr Beck to argue that CBA was estopped from asserting an entitlement to terminate his employment prior to him attaining the age of 55 years: [176] (Bathurst CJ).

(xvi)   Where the pleaded representation was neither asked for nor stated, it was not sufficiently clear to ground a promissory estoppel: [178]-[180], [182] (Bathurst CJ); [200] (Gleeson JA).

Legione v Hately [1982] HCA 11: 152 CLR 406; Foran v Wight [1989] HCA 51; 168 CLR 385 applied

Costs

(xvii)   Where the legal challenge pertained to a trust deed amendment occurring 20 years ago and there was no evidence of any other members who were affected, it was not appropriate that CBOSC bear any part of Mr Beck’s costs: [187] (Bathurst CJ); [189] (Macfarlan); [196] (Gleeson JA).

Judgment

1. BATHURST CJ: This is an appeal against declarations and orders made by the primary judge relating to what broadly may be described as the entitlement of the first respondent (Mr Beck) to discretionary pension benefits out of the Commonwealth Bank Officers Superannuation Fund (OSF) administered by the first appellant (CBOSC).

Background

2. There was little dispute about the primary facts, which are set out exhaustively in the primary judgment.

3. Mr Beck was born in South Africa and qualified as an actuary. In 1981, he commenced employment in South Africa with Colonial Mutual Life Assurance Society Limited (Colonial Mutual). He commenced contributing to that company’s South African superannuation fund.

4. In February 1987, Mr Beck migrated from South Africa, relocating his employment to the Melbourne office of Colonial Mutual, and became a member of that company’s Australian superannuation fund (the Old Colonial Fund). That fund was a defined benefit fund, contributors being entitled to pension payments calculated generally by reference to a formula in the rules based on salary and years of service and irrespective of the value of the fund at any given time. The contributor was thus insulated from market movements which would affect the value of the fund.

5. The Old Colonial Fund, which was constituted by deed dated 30 June 1978, provided for pension benefits to be paid at retiring age, namely 62, and benefits on death or total and permanent disablement of contributors. In addition, the deed provided for certain payments to be made to a contributor who had attained the age of 55 years on retirement but not reached the retiring age. By deed dated 28 August 1985, the Old Colonial Fund deed was amended to provide for a discretionary benefit in what were described as exceptional circumstances to persons who had retired prior to reaching the age of 55: cl 22(b) of the Old Colonial Fund deed

6. On 2 July 1996, the rules of the Old Colonial Fund were restated and amended (the July 1996 deed). Division 1 of the amended deed contained some general provisions relating to the fund, including a power to amend the deed. The amendment provision, cl 33, was in the following terms:

“33.   AMENDMENT

33.1   Subject to Clause 33.2, and to the Relevant Requirements, the Trustees may, with the consent of the Company, by supplemental deed or resolution, amend, add to, delete or replace (together ‘amend’) all or any of the provisions of the Deed including this Clause with effect from such date (whether before, on or after the date on which the supplemental deed is executed or the making of such resolution) as may be specified in that deed or that resolution. In the absence of express specification, the date of the execution of the deed or the making of the resolution shall be deemed to be specified. Each such amendment is binding on each Employer, each Member and any other person claiming under or bound by the Deed. Any amendment made by resolution shall be confirmed by supplemental deed as soon as practicable after it has been made.

33.2   Subject to Clause 33.3, no amendment shall be made whereby the value of the benefits accrued in respect of any Member prior to the effective date of the amendment is detrimentally affected without the written consent of that Member (the value of the benefits accrued being such amount as the Trustees, after considering the advice of the Actuary, determine has accrued).

33.3   Any amendment which the Trustees consider necessary or desirable for better securing taxation concessions or for ensuring conformity to the Relevant Requirements or any other present or future State or Commonwealth laws governing or regulating the operation or maintenance of superannuation funds shall be deemed not detrimentally to affect the value of the benefits accrued in respect of any Member prior to the effective date of such amendment, and may be given effect without the consent of that Member.

33.4   Unless the Relevant Requirements permit, no amendment shall be made which will permit a Trustee or Trustees to be appointed other than:

(a)   a Constitutional Corporation; or

(b)   individual Trustees where the primary object of the Fund continues to be the provision of old age pensions.”

7. There are a number of other matters which should be noted about the general provisions. Clause 31 required the trustee to appoint an actuary who was required to meet “Relevant Requirements”. Relevant requirements were defined as follows:

“‘Relevant Requirements’ means the standards, covenants or other requirements set out in:

(a) the Superannuation Industry (Supervision) Act 1993; and

(b) the Income Tax Assessment Act 1936; and

(c)   the Superannuation Entities Taxation Act 1987; and

(d) the Superannuation (Resolution of Complaints) Act 1993; and

(e)   any regulations made under any of those Acts; and

(f)   any other law which the Trustees and the Company agree is a Relevant Requirement for the purposes of the Deed.”

8. Clause 31.2 of the general provisions required the trustee to cause the actuary to conduct an actuarial investigation of the fund at intervals of not more than three years and report on matters stipulated by the relevant requirements, including recommendations on the level of contribution to be made by employers. Clause 32 provided that any surplus disclosed by the actuarial investigation could be used to increase benefits payable out of the fund or reduce contributions payable to it. Clause 32.2 contained the proviso that no contribution or any part thereof was to revert to, or become charged in favour of, an employer.

9. Divisions 2 and 3 of the deed contained the rules of the fund. Clause A1.1 of Div 3 provided for members’ contributions at the rate of either 3% or 5% of members’ salaries. Clause A1.2 provided for a member to make voluntary contributions, whilst cl A1.5 obliged the employers participating in the fund to pay such amount of contributions as were agreed between the trustee and the employer, having regard to the recommendations of the actuary under cl 31 of the general provisions.

10. The trustee was obliged by cl 7 of Div 2 to record certain matters in what was described as a “Voluntary Contribution Account”. The provision was in the following terms:

“7.   ACCUMULATION ACCOUNTS

7.1   The Trustees shall record for a Member:

(a)   in a Voluntary Contribution Account, additional Member and Employer Contributions paid under Rule A1.1(b), A1.2 or A1.6 or otherwise; and

(b)   in a Transfer Account, amounts transferred to the Fund in respect of a Member which the Trustees decide to credit to this Account.

7.2   The Trustees must also record in the relevant Accumulation Account:

(a)   insurance premiums (if any) which the Trustees decide to debit to the Account:

(b)   amounts debited (if any) to the Account for Tax;

(c)   amounts paid as benefits or transferred to an Approved Benefit Arrangement from the Account;

(d)   amounts credited or debited from time to time to the Account, being allocations of earnings at the appropriate Fund Crediting Rate;

(e)   such part (if any) of the costs and expenses incurred in the management and administration of the Fund as the Trustees consider appropriate to debit to the Account under Rule 8.4; and

(f)   any other amounts determined by the Trustees having regard to the provisions of the Deed.”

11. It is to be noted that there was no requirement to record in that account any reserve or notional reserves held against future liability to pay members’ benefits in respect of the fund.

12. Clauses A2.1 to A4.1 of Div 3 provided for what were described as “Normal Retirement Benefits”, “Early Retirement Benefits” and “Late Retirement Benefits”. They are in the following terms:

“A2   NORMAL RETIREMENT BENEFITS

A2.1   If a Member ceases employment with an Employer at his or her Entitlement Age, there shall be payable to the Member out of the Fund an annual pension of an amount equal to the sum of:

(a)   1/60th of the Member’s Annual Salary at the date of ceasing employment multiplied by the number of years (and pro-rata for any part of a year) of Membership of the Fund while contributing 5% of Salary; and

(b)   1/100th of the Member’s Annual Salary at the date of ceasing employment multiplied by the number of years (and pro-rata for any part of a year) of Membership of the Fund while contributing 3% of Salary.

However, for the purpose of calculating benefits under this Rule, no more than 40 years Membership of the Fund shall be counted.

A2.2   In addition to the retirement pension referred to in Rule A2.1, there shall be payable to or in respect of the Member a lump sum equal to the balance in the Member’s Accumulation Accounts.

A3   EARLY RETIREMENT BENEFITS

A3.1   If a Member ceases employment with an Employer before his or her Entitlement Age but after attaining age 55 and in circumstances where no benefit is payable under Rule A6 or A7, there shall be payable out of the Fund an annual pension equivalent to the pension calculated under Rule A2.1 but based on Annual Salary at the date of ceasing employment and Membership of the Fund up to the date of ceasing employment (subject to a maximum of 40 years) multiplied by the following adjustment factors based on the Member’s age at the date of ceasing employment (with a pro rata adjustment factor applying if the Member does not cease employment on a birthday):

Age at Retirement	Adjustment Factor
55	0.79
56	0.82
57	0.85
58	0.88
59	0.91
60	0.94
61	0.97
62	1.00

A3.2   In addition to the retirement pension referred to in Rule A3.1, there shall be payable to or in respect of the Member a lump sum equal to the balance in the Member’s Accumulation Accounts.

A4.   LATE RETIREMENT BENEFITS

A4.1   If a Member ceases employment with an Employer after his or her Entitlement Age:

(a)   at or before age 65, there shall be payable out of the Fund an annual pension equivalent to the greater of:

(i)   pension which would have been paid under Rule A2.1 had the Member retired at his or her Entitlement Age but based on Annual Salary at the date of ceasing employment multiplied by the following adjustment factors based on age at the date of ceasing employment (with a pro rata adjustment factor applying if the Member does not cease employment on a birthday:

Age at Retirement	Adjustment Factor
62	1.00
63	1.03
64	1.06
65	1.09

and

(ii)   the pension which would have been paid under Rule A2.1 had the Member retired at his or her Entitlement Age adjusted on such basis as the Trustees having regard to the advice of the Actuary determine to be appropriate; and

(b)   after age 65, there shall be payable out of the Fund an annual pension equivalent to the greater of:

(i)   the pension which would have been paid under Rule A4.1(a) if the Member had retired at age 65 adjusted as the Trustees having regard to the advice of the Actuary determine to be appropriate; and

(ii)   the pension which would have been paid under Rule A2.1 had the Member retired at his or her Entitlement Age adjusted on such basis as the Trustees having regard to the advice of the Actuary determine to be appropriate.

A4.2   In addition to the retirement pension referred to in Rule A4.1, there shall be payable to or in respect of the Member a lump sum equal to the balance in the Member’s Accumulation Accounts.”

13. It can be seen that to obtain a benefit under any of the provisions set out above, it was necessary to attain at least the age of 55 years. Members who ceased employment with the employer prior to attaining that age were dealt with under cl A11. As originally inserted into the July 1996 deed, the clause provided as follows:

“A11.   LEAVING SERVICE BENEFITS

A11.1   If a Member ceases employment with an Employer and a benefit is not payable under any other provision of the Deed or the Rules, there shall be payable from the Fund an amount equal to the sum of the following Parts:

Part A:      an amount equal to 5% of the Member's Basic Amount for each year of Membership of the Fund and a proportionate amount for any part of such a year during which he or she contributed at the rate of 5% of Salary plus 3% of the Member's Basic Amount for each year of Membership of the Fund and a proportionate amount for any part of such a year during which he or she contributed at the rate of 3% of Salary,

Part B:      an additional amount equal to 8% of the Part A benefit for each year of Membership of the Fund subject to a minimum Part B benefit of 40% of the Part A benefit. However, in the determination of a Part B benefit the maximum number of years of Membership of the Fund which shall be counted shall be 40 for Members who joined the Fund prior to 1 February 1995 and 30 for Members who joined the Fund on or after that date, and

Part C:      an amount equal to the balance in the Member's Accumulation Accounts.

A11.2   The Basic Amount in respect of a Member for the purpose of this Rule A11 shall be determined as follows:

(a)   Where the Member was employed by an Employer for 12 months or longer, the Basic Amount shall be the annualised averaged Salary payable to the Member within the period of 12 months immediately preceding the date on which he or she ceased to be so employed; and

(b)   Where the Member was employed by an Employer for less than 12 months, the Basic Amount shall be the annualised averaged Salary which would have been payable to the Member had he or she been employed for 12 months calculated on the assumption that the Member's Salary continued unaltered for the balance of the 12 month period.

A11.3   In exceptional circumstances and usually only if the Member has had a long period of Service, the Trustees may with the approval of the Company pay to or in respect of the Member referred to in Rule 11.1 a further sum of such amount as will increase the total payment to or in in respect of such Member to an amount not exceeding the reserve value as determined by the Trustees after considering the advice of the Actuary held in the Fund in respect of such Member as at the date the Member ceases employment with the Employer.”

The expression “reserve value” was not defined in the deed.

14. By deed dated 30 December 1996 (the December 1996 deed), the deed constituting the fund was amended by the deletion of cl A11.3. Its deletion formed the principal basis of Mr Beck’s complaint in the proceedings. It was contended by Mr Beck that the amendment deleting cl A11.3 was not authorised by cl 33 of the deed and constituted a contravention by the trustee of s 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) and reg 13.16 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations).

15. I have set out these provisions later in this judgment. The primary judge accepted this contention.

16. It should be noted that Part B of cl A11.1 was also amended to provide as follows:

“Part B      an additional amount equal to 8% of the Part A benefit for each year of Membership of the Fund subject to a minimum Part B benefit of 40% of the Part A benefit and a maximum calculated such that the sum of Part A, Part B and Part C do not exceed the reserve value determined by the Trustees (after considering the advice of the Actuary) held in the Fund in respect of such Member as at the date the Member ceases employment with the Employer”.

Also relevant to the proceedings is cl 10.1 of Div 1 of the July 1996 deed (the so-called augmentation rule). It provides as follows:

“10.   AUGMENTATION OF BENEFITS

10.1   At the direction of the Company and subject to Clause 35 and Rule 10.2, the Trustees shall augment the amount of any benefit entitlement of any Member or other beneficiary under the Deed or rescind or discontinue all or any part of such augmentation (as the case may be) as they consider appropriate. However, before augmenting any such entitlement, the Trustees may require an undertaking from an Employer to contribute to the Fund such additional amounts or rates of contribution (if any) as the Trustees shall determine after seeking the advice of the Actuary.”

17. The primary judge accepted that the deletion of A11.3 was a result of the trustee’s in-house lawyer informing it that the benefit structure of the deed “was likely to offend the provisions of the Victorian Age Discrimination legislation which effectively comes into force on 1 July 1997”. However, as will appear, the primary judge concluded that this did not justify the amendments.

18. In July 1998, following the diversification of the business of Colonial Mutual, the board of that company resolved to merge different superannuation arrangements for different parts of its business into a single superannuation fund. As a result, the assets held by the trustee of the Old Colonial Fund were transferred into a new fund, the Colonial Group Staff Superannuation Scheme (the New Colonial Fund). The deed constituting this fund did not contain an equivalent provision to the repealed cl A11.3.

19. The New Colonial Fund had a defined benefit plan, effectively providing the same benefits as the Old Colonial Fund (excluding cl A11.3), or an accumulation plan, in which a contributor bore, at least in part, the risk of market fluctuations and had the potential to gain from those fluctuations. Mr Beck was offered the opportunity to transfer to the accumulation plan. He declined. The primary judge concluded that one of the reasons was that he believed he was already entitled under the plan to a pre-aged 55 discretionary benefit equal to what he regarded as the reserve value of his pension.

20. In July 2000, Colonial Mutual was acquired by the second appellant (CBA). Mr Beck had discussions with officers of CBA concerning the continuation of his employment with that company. These included conversations with Mr John Mulcahy and Mr Les Cupper, which gave rise to Mr Beck’s claim that the trustee and CBA were estopped from contending that he was not entitled to the retirement benefit which he sought. Mr Beck, who was not cross-examined, gave the following evidence of the conversation and the effect which it had on him:

“[32]   Between 15 June 2000 and 26 June 2000 I attended a number of meetings with John Mulcahy and Les Cupper separately at CBA’s Head Office in Martin Place Sydney. During the course of these meetings I said to Mr Mulcahy and Mr Cupper words to the effect:

‘I won’t be accepting this offer as there is insufficient financial incentive to justify disrupting my family by moving from Melbourne to Sydney or even commuting from Melbourne to Sydney.’

Mr Mulcahy and Mr Cupper offered me an enhanced short term incentive or bonus potential of 70% of base pay however I declined this offer as well and said words to the effect:

‘I will only accept the position if you enhance my base remuneration because what’s important to me is my accrued retirement benefits which only accrue on salary and not on bonuses. I want the CBA to confirm that I will continue to receive the superannuation benefits that I would have received had I continued to be an employee of Colonial.’

I further said:

‘I won’t come to the CBA unless I can protect and enhance my pension that I am entitled to under my defined benefit pension scheme. I have been a member of that scheme for many years, including my time in South Africa and I have a significant accrued pension in the fund.’

[33]   By saying the statements in 32 above, I believed that I was conveying to Mr Mulcahy and Mr Cupper that:

a.   my Accrued Pension had vested; and

b.   I was entitled to the Reserve held on my behalf in the New Colonial Fund because of my long period of contributory service; and

c.   I wanted to preserve that Reserve in respect of my Accrued Pension in my subsequent employment with the CBA.

[34]   Mr Mulcahy said to me words to the effect:

‘Whatever your pension rights were under the Colonial Fund, we undertake to protect those going forward.’

[35]   By saying the statements in 34 above, I believed that Mr Mulcahy meant that the CBA would protect my Accrued Pension and pay me the Reserve that was held on my behalf in the New Colonial Fund. Further, provided I did not resign my employment with the CBA, I would be paid my Accrued Pension or the Reserve in respect of my Accrued Pension that had accumulated and would continue to accumulate on my behalf during my employment with Colonial and the CBA.

…

[38]   In accepting these terms of employment, I believed that my future entitlements to my Accrued Pension or the Reserve in respect of my Accrued Pension held on my behalf in the New Colonial Fund and the further Accrued Pension or Reserve that would accumulate during my employment with the CBA were sufficiently valuable to justify taking the job in Sydney even though it was not a group executive position.”

21. Mr Mulcahy subsequently sent a letter to Mr Beck on 26 June 2000, which stated that his [Mr Beck’s] existing superannuation arrangements would continue to apply.

22. Mr Beck’s contract of employment with CBA provided for termination by either party on six months’ notice.

23. Following commencement of his employment with CBA, Mr Beck was required to move to Sydney to carry out his duties, while his wife and children remained in Melbourne, each sharing the commuting on weekends.

24. In mid-2001, Mr Beck and his wife attended a dinner at Aria Restaurant with Mr Mulcahy, Mr Cupper and their respective spouses. Mr Beck’s evidence concerning this meeting and its aftermath was accepted by the primary judge. It was in the following terms:

“[42]   In or around the period April to June 2001, my wife Ann and I were invited by the CBA to attend a dinner at Aria Restaurant in Circular Quay, Sydney. There were six persons present at the dinner: John Mulcahy, Les Cupper and I and our respective partners. I sat between the partners of Mr Mulcahy and Mr Cupper at the dinner and we chatted about general social matters. My wife Ann sat between Mr Mulcahy and Mr Cupper.

[43]   On the way home from the dinner referred in 42 above, Ann said to me words to the following effect:

‘The CBA is putting a lot of pressure on me. They asked me when I was moving to Sydney. They said that it doesn’t look good for the family to remain in Melbourne while you’re in Sydney, it shows a lack of commitment to the CBA.’

[44]   The comments by John Mulcahy and Les Cupper at this moment made me realise that the CBA intended to plan a career for me and wanted me to make a long term commitment to the role by moving my family to Sydney. After the dinner and my subsequent conversation with Ann, I held the expectation that I was going to continue working for the CBA until early retirement at a minimum.”

25. Mrs Beck’s evidence of this conversation was as follows:

“8   The Bank flew me up to Sydney to dinner at Aria Restaurant. I recall there were six of us at the dinner: Peter and I, Les Cupper, John Mulcahy and their respective partners. It was the first time I had met either Mr Cupper or Mr Mulcahy. I was seated between the two of them. Peter was seated between the partners of Mr Cupper and Mr Mulcahy.

9   At one point during the course of the dinner, Mr Cupper, Mr Mulcahy and I had a conversation to the following effect:

Either Mr Cupper or Mr Mulcahy said: ‘When does your contract finish and how long will you and the children stay in Melbourne?’

I said: ‘I recently signed a contract for a year but since the project is running late, I have just been asked to sign another one.’

Either Mr Cupper or Mr Mulcahy said: ‘When will you and the family move to Sydney? It doesn’t show commitment to the Bank if you are living apart.’

I do not recall what I said in response.

10   In the taxi going home from the dinner, I said to Peter words to the effect:

‘They are putting pressure on me and the children to move to Sydney, as they say that staying in Melbourne does not show commitment to the Bank. It’s not good for your career.’’’

26. Following this conversation, after Mr Beck’s daughter had completed her year 12 schooling, Mr Beck and his family relocated to Sydney.

27. On 3 October 2003, the administration of the New Colonial Fund was merged with the OSF, of which CBOSC was the trustee. Division CH of the rules of that fund contained similar provisions to those in the New Colonial Fund. In particular, provisions to which I have referred above (excluding cl A11.3) were incorporated into Div CH.

26. In 2002, Mr Beck was appointed Chief Executive Officer of CBA’s insurance arm, Comminsure. In August 2004, he was informed he was to be replaced. In negotiations concerning his future, he was informed that his request for a pre-age 55 discretionary benefit had been denied.

27. On 11 May 2005, he became aware for the first time that cl A11.3, which dealt with the pre-age 55 discretionary benefit, had been deleted by the amending deed and not carried over into the successor funds.

28. On 11 July 2005, Mr Beck’s employment with CBA was terminated. The proceedings giving rise to this appeal were commenced on 7 July 2011.

The relevant legislation

31. Section 52 of the SIS Act provides that the governing rules of the fund are taken to contain certain covenants. Relevantly, it is in the following terms:

“52   Covenants to be included in governing rules – registrable superannuation entities

Governing rules taken to contain certain covenants

(1)   If the governing rules of a registrable superannuation entity do not contain covenants to the effect of the covenants set out in this section, those governing rules are taken to contain covenants to that effect.

General covenants

(2)   The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:

…

(b)   to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments;

(c)   to perform the trustee’s duties and exercise the trustee’s powers in the best interests of the beneficiaries.”

32. Section 55 provides for the consequences of a contravention of the covenants in s 52. Relevantly, it is in the following terms:

“55   Consequences of contravention of covenant

Covenants must be complied with

(1)   A person must not contravene a covenant contained, or taken to be contained, in the governing rules of a superannuation entity.

Breach of covenant not an offence and does not result in invalidity

(2)   A contravention of subsection (1) is not an offence and a contravention of that subsection does not result in the invalidity of a transaction.

Breach of covenant may result in action to recover loss or damage

(3)   Subject to subsection (4A), a person who suffers loss or damage as a result of conduct of another person that was engaged in in contravention of subsection (1) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

(4)   Unless an action under subsection (3) is of a kind dealt with in subsections (4A) to (4D), it may be begun at any time within 6 years after the day on which the cause of action arose.”

33. As there was no claim for damages for contravention of s 52(2)(c) in these proceedings, the limitation period referred to in s 55(4) has no relevance.

34. Section 31 of the SIS Act provides that the SIS Regulations may prescribe standards including, relevantly, for the preservation of benefits. Regulation 13.16, made pursuant to this provision, relevantly provides as follows:

“13.16   Accrued benefits – restriction on alteration

(1)   For the purposes of subsection 31(1) of the Act, it is a standard applicable to the operation of regulated superannuation funds that, subject to subregulation (2), a beneficiary's right or claim to accrued benefits, and the amount of those accrued benefits, must not be altered adversely to the beneficiary by amendment of the governing rules or by any other act carried out, or consented to, by the trustee of the fund.”

35. The definition of accrued benefit is contained in reg 9.27. So far as is relevant, at the time of the December 1996 deed, it was in the following terms:

“9.27.   In this Division:

‘accrued benefits’, in relation to a member of a defined benefit fund, means the benefits to which the member has a potential entitlement at the valuation date on account of the length of time the member has been a member of the fund at that date.”

36. The relevant division in which this definition applied related to defined benefit funds (reg 9.26). Regulation 13.16 did not fall within that division.

37. The definition of “successor fund” contained in reg 1.03 is also of relevance. It is in the following terms:

“‘successor fund’, in relation to a transfer of benefits of a member from a fund (called the ‘original fund’), means a fund which satisfies the following conditions:

(a)   the fund confers on the member equivalent rights to the rights that the member had under the original fund in respect of the benefits;

(b)   before the transfer, the trustee of the fund has agreed with the trustee of the original fund that the fund will confer on the member equivalent rights to the rights that the member had under the original fund in respect of the benefits.”

38. It should be noted that cl 13 of Div 2 of the July 1996 deed entitled the trustee, with the consent or at the request of the company, to transfer the members’ entitlements together with money and other assets of the fund to a successor fund (the equivalent rights provision). “Successor Fund” was defined in the deed to have the same meaning as contained in the regulations.

The primary judgment

39. After setting out the facts which I have summarised above, the primary judge stated that the actuarial evidence gave meaning to the technical terms used in cll 33 and A11.3 of the July 1996 deed. He said that this evidence dealt with three matters:

(i)   What is the “reserve value” of a defined benefit fund such as the OSF;

(ii)   If Mr Beck were paid at termination the full amount of the reserve value held in respect of him as a member, what would that value be; and,

(iii)   What would be the estimated cost of Mr Beck purchasing, in the marketplace, the pension which would have been available to him through the OSF, were a pre-age 55 discretionary benefit granted to him.

However, he emphasised that the Court’s construction of the provision in question was guided by traditional principles of interpretation.

40. The primary judge referred to the evidence of Mr Furlan, the appointed actuary of the OSF and the evidence of Mr Newman, the actuary called by Mr Beck. He accepted the evidence of both actuaries that defined benefits funds do not maintain a reserve value in respect of each individual member, rather, they were individually calculated as part of a periodic investigation. He accepted evidence that it was not necessary to review individual member’s projections, but that if a current projection was required for an individual member, it could be provided.

41. The primary judge referred to the evidence of Mr Newman concerning the actuary’s involvement in considering the exercise of discretion to grant a pre-age 55 discretionary benefit. Mr Newman stated, also relying on the evidence of Mr Furlan, that the reserve would be calculated using a computer program “Topact”. The primary judge then referred to Mr Furlan’s evidence that no part of the reserve included provision for the possibility of a discretionary uplift in a defined benefit payment. His Honour stated that what that answer meant was important. He said he understood Mr Furlan to be saying that reserves do not cover a discretionary payment that exceeded what had been calculated as the present value of future payments of a member’s benefit. He said, however, that this contradicted the words of cl A11.3, which limited the discretionary payment to a maximum not exceeding the reserve value in respect of such a member.

42. The primary judge referred to the evidence of Mr Newman that any surplus in the OSF is a net balance remaining after calculation of all members’ reserves, including Mr Beck’s. However, he referred to the evidence of Mr Furlan that if a member retired early and received a pre-age 55 discretionary benefit that was less than the member’s aggregate reserve as calculated by the actuary, then the unused share would return to and become part of the surplus.

43. The primary judge then referred to the evidence of Mr Furlan that the “concept of a reserve is trying to set aside enough money to pay benefits as they fall due” and is really an accounting concept being a prudential “financial provision”. He pointed out the OSF had always been in surplus.

44. In dealing with the construction of cl A11.3 and its predecessor, cl 22(b), the primary judge pointed out that the matrix of fact was that the superannuation deed formed part of the employer/employee relationship and should be construed in a practical and purposive manner to give reasonable and practical effect to the scheme.

45. The primary judge described the critical question of construction as whether the value of the benefits accrued in respect of any member prior to the amendment deleting cl A11.3 encompassed such rights as a member had under that clause.

46. The primary judge stated that the actuarial evidence shows that cl A11.3 does something “slightly artificial” for a defined benefits fund because it proceeds on the assumption that there is a reserve value. However, he said that it was true to say that reserves are held in respect of a member because they can be defined, in an accounting sense, as “amounts representing the actuarial probability that such member’s contingent entitlements will become vested entitlements over the course of time”. He stated that cl A11.3 “treats this accounting reserve value as notionally representing a part of the Fund securing a member’s future entitlements … and in the short term before the member can call for those entitlements, as the available resource for the exercise of the clause A 11.3 discretion”.

47. His Honour then concluded that it was not difficult to describe the benefit conferred by cl A11.3 as a benefit accrued in respect of any member and something which accrues in an accounting sense as “the member’s service changes”. He stated that nothing which appeared elsewhere in the deed was inconsistent with that conclusion. His Honour concluded that the amendment to Part B of cl A11.1 (to which I referred above at [16]) did not provide an equivalent benefit to that provided by the former cl A11.3. He also considered that the augmentation rule (see above at [16]) did not provide an equivalent benefit as a trustee could only act under that rule at the direction of an employer.

48. His Honour concluded that the deletion of cl A11.3 disadvantaged members in three respects. First, before the December 1996 amendments, the Old Colonial Fund contained both cl A11.3 and the augmentation rule; the trustee would exercise its discretion under cl A11.3 on the basis it was additional to the augmentation rule. Second, under cl A11.3 the trustee was required to give consideration to a member’s request for a benefit. He stated that this was better for a member as the company may not decide to give a direction under the augmentation rule and the company could act in its own interest in deciding whether or not to give a direction. Third, the trustee would never have to seek funds from the company because any payment would always be covered by the reserves “held in the Fund in respect of such member”.

49. The primary judge concluded that, in those circumstances, the power of amendment contained in cl 33 of the Old Colonial Fund could not be used to delete cl A11.3. His Honour concluded that the words in parenthesis in cl 33.2, “the value of the benefits accrued being such amount as the Trustees, after considering the advice of the Actuary, determine has accrued”, show that the trustee was required to obtain the advice of the appointed actuary before deciding whether or not the amendment would detrimentally affect those benefits. He said that such an investigation would have revealed that there were members, such as Mr Beck, who had accrued benefits “in the form of reserves held in the Fund on account of the probability that they would in due course obtain vested entitlements to pensions”. In those circumstances, his Honour concluded that the cl 33.2 power could not be exercised without an actuarial opinion and that the discretion miscarried.

50. The primary judge held that cl 33.3 did not apply as the anti-discrimination legislation referred to by the solicitor for the trustee (see above at [17]) was not a law “governing or regulating the operation or maintenance of superannuation funds”.

51. In dealing with the question of whether the trustee contravened s 52(2)(c) of the SIS Act in resolving to make the amendment, the primary judge noted that it was common ground that the s 52(2)(c) covenant did not expand the general law. The primary judge concluded that removal of cl A11.3 was not in the best interests of the beneficiaries as it took away rights, which Mr Beck and other members had, to consideration for discretionary benefits.

52. The primary judge also concluded that the deletion of cl A11.3 from the Old Colonial Fund rules contravened reg 13.16(1) of the SIS Regulations. He pointed to the fact that the regulation declares that what must not be adversely affected is a beneficiary’s right or claim to accrued benefits and the amount of those benefits. He said that a right to accrued benefits encompasses a presently vested right in possession. He stated, however, the addition of the word “claim” in reg 13.16(1) “weakens any limitation on the accrued benefits to the present time”. Referring to the expression “the amount of benefits”, he said that even if the right to make future claims is not impaired, the amount of such claims must also not be impaired. He said the “amount”, in the sense of their “quantity or extent” and in the sense of their “full effect, value or import”, includes that a characteristic of the benefits is that the accounting accrual that represents them may, in certain circumstances, be able to be engaged before the age of 55.

53. The primary judge also placed reliance on the definition of “accrued benefits” in reg 9.27 of the SIS Regulations. He stated that “Division 9.5 provides a regime for the actuarial reporting upon defined benefits funds that can be assumed when reg 13.16 is being applied”. His Honour presumably was referring to the fact that reg 13.16 could apply to defined benefit funds. He referred to the requirement in Div 9.5 that the actuary consider the position of the fund as at valuation date and the likely position of the fund in the next three years. He stated, referring to the definition of “accrued benefit” in reg 9.27, that the value of liabilities of a defined benefit scheme include all benefits that may become payable in the future but which, as yet, have not yet become payable. He stated they would include future potential benefit entitlements. He stated that if “accrued benefit” did not have the same meaning in reg 13.16(1), the odd consequence would follow that the trustee could amend the governing rules so as to adversely affect the amount of a beneficiary’s potential entitlements even though the purpose of the report was to ensure the solvency of the fund on the basis of those entitlements. He said, in those circumstances, “accrued benefits” in reg 13.16 should be construed so as to prohibit adverse alteration of potential entitlements claims or adverse alteration of the amounts of such claims.

54. His Honour distinguished the authorities cited by CBA in support of the contrary conclusion. He stated that in Auspine Staff Superannuation Pty Ltd v Henderson [2006] FCA 1281 (Auspine), there was no argument about the interplay of reg 9.27 and reg 13.16 as the discretionary provision in Auspine was unconfined and not limited to the amount of the members’ reserves which, the primary judge concluded, was the case in respect of cl A11.3. He stated that Asgard Capital Management Ltd v Maher [2003] FCAFC 156; 131 FCR 196 (Asgard) was not concerned with a trustee’s discretion to make payments to beneficiaries, but with the construction of reg 6.22 of the SIS Regulations, which prohibits members’ benefits in a regulated superannuation fund being cashed in favour of a person other than a member. He stated that what was said by Branson J in Employers First v Tolhurst Capital Limited [2005] FCA 616; 143 FCR 356 at [56]-[58] supported his construction.

55. In dealing with the effect of the contravention of the deed and the legislative provisions, the primary judge found that compliance with cl 33.2 and the relevant requirements were conditions precedent to the power to amend. In those circumstances, he concluded that the amendment was invalid. He stated that Mr Beck was entitled to declaratory relief to this effect and that, subject to the estoppel case, Mr Beck’s request for a cl A11.3 benefit should be remitted to CBOSC for further consideration. He stated that CBOSC could take into account his findings on the estoppel case in determining whether or not to grant a benefit.

56. In relation to estoppel, the primary judge noted that Mr Beck’s contention was that CBA was estopped from denying its approval to CBOSC’s exercise of discretion under cl A11.3 and that Mr Beck was entitled to a pension.

57. The primary judge noted that Mr Beck’s case was that, as a result of the statements made to him by Mr Mulcahy and Mr Cupper, to which I have referred above at [20], he assumed or expected CBA would pay the reserve which was held on his behalf if he called for it in the future. His Honour held that this assumption or expectation could not be inferred from the words used by either Mr Mulcahy or Mr Cupper.

58. However, his Honour concluded that the words led Mr Beck to hold a closely related assumption or expectation. His Honour expressed the assumption in the following terms (J346):

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

59. The primary judge stated that what occurred during the restaurant conversation in 2001 strengthened the assumption or expectation. He said Mr Mulcahy and Mr Cupper asked for a commitment in respect to Mr Beck’s relationship with the bank. He concluded that, although it was not expressly stated, CBA was offering an equivalent commitment. He said it was repugnant to that request that CBA could give six months’ notice, if and when it suited them.

60. His Honour stated the representations were sufficiently clear to ground an estoppel “in the context of the high level of expertise that Mr Beck and Mr Mulcahy were dealing with one another about Mr Beck’s superannuation future”. He stated that the circumstances strongly suggested that CBA induced Mr Beck to adopt the assumption or expectation he referred to and that Mr Beck relied upon it in taking employment with CBA and not exploring other options.

61. The primary judge found that CBA intended that Mr Beck would rely on the assumption or representation induced by its conduct, noting that Mr Mulcahy described Mr Beck as “a key keep” and stating that it was consistent with Mr Mulcahy and Mr Cupper’s conduct in 2001.

62. His Honour stated that the relevant detriment which made the estoppel enforceable was that which the party asserting the estoppel would suffer as a result of his or her original change of position. He described the relevant detriment as one that the parties’ action or inaction will bring about if the assumption is not fulfilled. He said the detriment in the present case was Mr Beck’s reliance on the promise in not making any arrangement for his pension future other than committing himself to CBA.

59. In the circumstances, the primary judge made orders effectively declaring that at all times Div CH of the OSF included a power of appointment to the effect of cl A11.3 and ordering that CBOSC give due consideration to Mr Beck’s application for a benefit under that rule. He further declared that CBA was estopped from denying that Mr Beck was entitled to an accrued pension when he attained the age of 55. On this basis, CBA was obliged to provide him with an age 55 pension, to the extent he did not receive a benefit in that amount as a consequence of his claim under cl A11.3.

60. In relation to costs, the primary judge concluded that Mr Beck’s claim, so far as it related to the proper construction of cl 33 and the application of the SIS Act and SIS Regulation, was in the nature of a construction suit. In the circumstances he ordered that CBA pay 40% of Mr Beck’s costs on an indemnity basis and the balance on the ordinary basis.

The appeal

65. The appellants challenge each of the conclusions of the primary judge to which I have referred above. It is convenient to deal with them separately.

Did cl A11.3 of the Old Colonial Fund rules confer an accrued benefit on Mr Beck within the meaning of cl 33 of those rules (Notice of Appeal Ground 1)

Submissions

(i)   The appellants

66. The appellants emphasised three features of the early retirement benefits rule contained in cl A11.3. First, there were three conditions to its exercise, namely that it only applied to persons who were not entitled to any other benefit from the fund, that exceptional circumstances must exist and that usually, the member must have had a long period of service. Second, even if the pre-conditions were satisfied, there was no entitlement to the benefit, rather, it was a matter for the trustee’s discretion. Third, it could not be exercised by the trustee unilaterally, but only with the approval of the company.

67. The appellants submitted that in those circumstances, the finding that Mr Beck, at the time of the amendment, had a right to consideration for an early retirement benefit was plainly wrong as he remained in the employ of the company and no occasion to give consideration to that question had arisen.

68. Further, it was submitted that the primary judge erred in concluding that any benefit was an accrued benefit. The appellants submitted that accrual was equivalent to vesting in ordinary trust law. They submitted that a person who may qualify in the future to be the object of a general discretion to make a payment in an undefined amount does not have an accrued benefit, rather, their position can be no better than having a right to be considered or a mere expectancy.

69. The appellants submitted that this conclusion was consistent with Auspine where the Court, in dealing with reg 13.16(1), stated at [47] that on no view could a possibility that the trustee might make a discretionary payment in favour of a member in excess of his entitlement be regarded as an accrued benefit.

70. The appellants submitted the primary judge’s conclusion was also inconsistent with Asgard, where the Full Court held that an accrued benefit for the purpose of cl 13.16 was a benefit in which the beneficiary has an absolute interest.

71. The appellants also submitted that their submissions were supported by cases dealing with distributions of surplus, namely, Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 (Lock), Hockin v Bank of British Columbia (1990) 46 BCLR (2d) 382 (Hockin) and the decision of Hedigan J in Gas and Fuel Corporation of Victoria v Fitzmaurice (1991) 22 ATR 10 (Fitzmaurice).

72. The appellants submitted that its contentions were supported by the fact that cl 33.2 spoke of “the value of benefits accrued” and the trustee being able to “determine” the “amount” of such benefits. They submitted the language of “value” and “amount” is inconsistent with the conclusion of the primary judge that a discretionary right to be considered was an accrued benefit.

73. The appellants submitted that the primary judge erred in concluding that the benefit could properly be described as an accrued benefit because, in an accounting sense, it does accrue as the funds available to meet the benefit enlarge. They submitted that that construction was inconsistent with the principles and authorities on which they relied. The appellants submitted the reliance by the primary judge on Wilson v Metro Goldwyn Mayer (1980) 18 NSWLR 730 was misplaced. That case concerned an amendment power that had a proviso that it could not be exercised if it prejudiced “any benefit secured by contributions”. They pointed out that the words “accrue” and “accrued” did not appear in the relevant provision.

74. The appellants also contended that the primary judge erred in his conclusion that the obtaining of an actuary’s report was a necessary precondition to the exercise of discretion under cl 33. They submitted that the finding was inconsistent with the language of cl 33.2, which does not refer to obtaining the advice of the designated actuary to determine whether accrued benefits were detrimentally affected but rather, to determine the value of such benefits. They submitted the general amendment power in cl 33.1 should not be read as subject to such a proviso. They submitted it would not be a sensible construction of cl 33.1 and cl 33.2, nor a sensible use of trust funds, for the trustee to be compelled to seek actuarial advice even when the amendments were not capable of affecting accrued benefits.

75. The appellants submitted that it was not correct to say that, in light of the decision in Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254 (Finch), cl A11.3 was not properly to be regarded as a discretionary power. They pointed to the difference between that clause and the total and permanent disablement provision under consideration in Finch. In particular, it was pointed out that, unlike the discretionary power in cl A11.3, the trustee in Finch had a duty to distribute to those members who qualified as totally and permanently disabled. They pointed out, in addition, that unlike the rule in Finch, cl A11.3 did not give a right to a defined benefit and a duty to pay it on a specified event occurring. Senior counsel for the appellants pointed out that even if the trustee had formed the view that there were exceptional circumstances for the purposes of cl A11.3, it did not follow that a benefit or a benefit in a particular amount need be paid.

76. Senior counsel for the appellants submitted that neither a person in employment aged less than 55, nor one in employment beyond that age, was entitled to be considered for a benefit under cl A11.3. He submitted that that could not be overcome by calling the benefit “contingent”. He submitted that there could be no accrued right until the person in question left employment.

77. Senior counsel for the appellant, referring to Kennon v Spry [2008] HCA 56; 238 CLR 366 at [161], submitted that Mr Beck was in no better a position than being the object of a bare power of appointment.

(ii)   Mr Beck

78. Mr Beck submitted that, having regard to the reasoning in Finch, the right to due administration of the early retirement benefit rule was a benefit which had accrued to him at the time the rule was removed. The respondent submitted that Finch was of particular importance in that it indicated the true nature of the right of a member of a superannuation fund to the grant of a benefit defined in terms which involved a discretion in the trustee. He submitted that the critical concept which emerged from Finch was that even though the grant of a benefit was couched in the language of discretion, such provisions do not constitute discretionary powers in relation to which members are to be regarded as mere objects of the power. He submitted that the existence of the duty in the trustee has the consequence that the members have a beneficial interest, albeit subject to contingencies. He submitted that that interest is something which is valuable and which can be enforced.

79. In those circumstances, Mr Beck submitted that a benefit had accrued in his favour, notwithstanding that the precise form and quantum of his beneficial interest is contingent on an event which has not happened.

80. Mr Beck submitted that in Finch, the Court emphasised the fact that benefits under employees’ superannuation schemes are part of the remuneration of employees and, in those circumstances, the legitimate expectation of beneficiaries that decisions will be soundly taken are high.

81. Mr Beck stated that, in considering whether the right to consideration for an early retirement benefit had accrued, the question is whether the right to consideration is itself a benefit. He said the fact that at the time of the amendment no occasion for consideration of whether he should be given a benefit had arisen was irrelevant because all members of the fund had the right to due consideration.

82. Mr Beck submitted the concept of accrual is not related to the concept of vesting but relates to accumulation and is apt to describe a beneficial interest which is contingent as well as one which has become absolute or vested. He submitted that the authorities on which the appellant relied were either distinguishable or no longer good law in light of Finch.

83. In relation to Auspine, Mr Beck adopted the primary judge’s reasoning to which I have referred above at [54] and submitted that the Court did not turn its mind to the definition of accrued benefit in reg 13.16(1) or a proviso equivalent to cl 33.2. Alternatively, he submitted that the decision was inconsistent with Finch and should not be followed.

84. So far as Asgard was concerned, Mr Beck submitted that the meaning of the word “accrued” was not in issue and the Full Court was unlikely to have opined on the important question of its meaning within the confines of one sentence.

85. Mr Beck submitted that neither Lock nor Hockin supported the proposition that amendments which affect the discretionary distribution of surplus assets to beneficiaries did not alter accrued benefits. He pointed out that Hockin was disapproved by the Supreme Court of Canada in Schmidt v Air Products of Canada Ltd (1994) 115 DLR (4th) 631 (Schmidt) and subsequently overruled by the British Columbia Court of Appeal Hockin v Bank of British Columbia (1995) 123 DLR (4th) 538. Mr Beck also pointed out that in Lock, there was no claim that the beneficiaries had an accrued right to the surplus in the fund the subject of the proceedings. Similarly, he submitted that the word “accrued” in the context of a provision such as cl 33.2 was not considered in Fitzmaurice.

86. Mr Beck submitted that the word “accrued” should be given its ordinary and natural meaning. He submitted his Honour’s construction (see above at [47]) was correct and consistent with authority. He also submitted the primary judge was correct in concluding that the failure to obtain the advice of an actuary on the question of the value of the benefit accrued is independently fatal to the amendment.

87. Senior counsel for Mr Beck submitted that regardless of whether the deletion of cl A11.3 had a detrimental effect on the value of benefits accrued, the failure to obtain an actuary’s opinion was a separate failure. He submitted that what was relevant was “the affected population” as at the date of the amendment and that it was necessary for the actuary to inform the board of the trustee who was affected and how such persons were affected.

88. Notwithstanding, senior counsel for Mr Beck acknowledged that the threshold point in the appeal was whether every member of the fund who had not reached the age of 55 had an accrued benefit under cl A11.3. He submitted that a benefit was a right or parcel of rights which either confers an absolute or conditional entitlement to be paid money potentially on satisfaction of any conditions which need to be satisfied. He submitted that a member of a fund has a right to due administration from the day he or she joins the fund.

Consideration

89. It is well accepted that superannuation funds are different in nature from traditional trusts. As Waddell CJ in Eq pointed out in Lock at 601-602, they are based upon a contract between the employer, the trustee and employees pursuant to which both the employer and the employees contribute to the fund to provide defined benefits. He further noted, citing Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1610, that the construction of the documents constituting the fund should be practical and purposive.

90. In Air Jamaica Ltd v Carlton [1991] 1 WLR 1399, the Privy Council described the nature of the rights of a member of a superannuation scheme in the following terms (at 1407):

“This is not to say that the trust is like a traditional family trust under which a settlor voluntarily settles property for the benefit of the object of his bounty. The employee members of an occupational pension scheme are not voluntary settlors. As has been repeatedly observed, their rights are derived from their contracts of employment as well as from the trust instrument. Their pensions are earned by their services under their contracts of employment as well as by their contributions. They are often not inappropriately described as deferred pay. This does not mean, however, that they have contractual rights to their pensions. It means only that, in construing the trust instrument, regard must be had to the nature of an occupational pension and the employment relationship that forms its genesis.”

91. The particular nature of such arrangements was emphasised by the High Court in Finch. The Court explained that superannuation is not a matter of mere bounty as, in large measure, employees have exchanged value for the benefits conferred by the deed and that furthermore, superannuation is a matter of public significance: at [33]-[34]. In that context, the Court concluded that the decisions of superannuation trustees are not likely to be largely immune from judicial control without clear contrary language: at [36].

92. In the present case, Mr Beck submitted that the effect of the decision in Finch was that the power to give the additional benefit in cl A11.3 could not be described as discretionary. He relied in particular on the following passages from the judgment:

“[29] A discretionary decision? In Dwyer v Calco Timbers Pty Ltd the Court emphasised that while the term ‘discretion’ is used in the description or characterisation of varied acts or omissions in the law, the term may be an inadequate description of an inquiry which requires the identification and evaluation of factual matters. The present is not a case involving a ‘discretion’. The Trustee had to consider whether to reach two opinions. One was whether a Member had ceased to be an Employee. That is scarcely a discretionary decision. It is no more discretionary than the decision of a judge in conventional litigation about whether a contract of employment has come to an end. The second opinion was whether the Member was unlikely ever to engage in ‘gainful Work’. In the forming of an opinion on that subject there are no doubt factors to be examined which are difficult to weigh, impressions to be formed, and judgments to be made, but the field is quite different from fields in which the competing claims of potential candidates for bounty are compared.

[30] The Trustee was trustee of a trust. It had a duty to distribute to those who fell within the definition of ‘Total and Permanent Invalidity’ and a duty not to distribute to those who did not. That affected its role in relation to the forming of its opinion under limb (b). Forming that opinion 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. That duty was owed to the Members, including the applicant. The applicant was not the object of a discretionary power of appointment. He was the beneficiary of a trust, and although the precise form and quantum of his beneficial interest was contingent on particular events, he did have a beneficial interest.”

93. However, the nature of the benefit under consideration in Finch must be contrasted with the nature of the benefit said to be conferred by cl A11.3. As was pointed out in Finch, the trustee in that case had a duty to distribute to those who fell within the definition of total and permanent disablement and not to distribute to those who did not fall within the definition. By contrast, under cl A11.3, the trustee had to determine whether the service of the person in question was exceptional and, if so, whether a benefit should be conferred and in what amount. Even then, the benefit could not be given without the consent of the company.

94. Whilst it may be correct that a person who retired before attaining the age of 55 years may be entitled to consideration for such a benefit, he or she has no proprietary interest in the assets out of which the benefit is to be paid, but only a mere expectancy or hope that the power will be exercised in his or her favour: see Kennon v Spry at [160].

95. The primary judge seemed to suggest that for some reason, the reserves held in respect of a member form part of his or her entitlement to the fund. As was stated in the evidence, the reserves are a prudential financial provision. The members have no proprietary interest in such reserves either under cl A11.3 or otherwise. Their right is to receive the benefit provided for under the deed, which may be greater or less than the provision made by the trustee for its contingent liability.

96. In the case of cl A11.3, any benefit is at the discretion of the trustee and the company and whilst the quantum of such a benefit is capped at the level of reserves, any benefit given may be less than that amount. The position in that context may be contrasted with cl A11.1 which gives a member retiring prior to the age of 55 years a right to receive a specific amount.

97. Further, in the case of Mr Beck, the benefit had not accrued. Mr Beck had not retired at the time of the amendment and had no right at that point of time to be considered for an early retirement benefit. In considering the position of a member of a superannuation fund prior to retirement, the High Court in Macoun v Federal Commissioner of Taxation [2015] HCA 44; 90 ALJR 93 (Macoun) made the following remarks (citing Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65; 88 CLR 492 at 507-508):

“[55]   Contrary to Mr Macoun's submissions, his right to receive the pension was not a vested right which existed when he was an office holder. During his time as an officer of the IBRD, Mr Macoun's right to the pension was not an accrued obligation; it was ‘at best an inchoate [right] in process of accrual but subject to a variety of contingencies’. The right to the pension did not arise until Mr Macoun ceased to hold office and ceased to be a participant in the SRP. Indeed, when he ceased to hold an office, the inchoate right could mature into one of a number of different forms, payable to different people. Those forms included a disability pension, a death benefit as a pension payable to a surviving spouse or in a lump sum, or a withdrawal benefit.”

98. In my opinion, what was said in that passage is apposite to the present case. It is not necessary to determine whether or not a person who has become entitled to a defined benefit contingent only upon retirement (such as an employee who has attained the age of 55 years) has an accrued benefit within the meaning of cl 33. However, in my opinion, an employee in the position of Mr Beck did not have such an accrued benefit at that time.

99. In written submissions filed at the direction of the Court after the hearing, Mr Beck, again referring to Finch, contended that the reasoning in Macoun demonstrates that accrued benefit in reg 13.16 should be properly construed to include “inchoate rights in the process of accrual”. He submitted that once it is appreciated that the relevant right is in the process of accrual, the word “accrued” in reg 13.16(1) and in cl 33.3 of the rules of the Old Colonial Fund could only be taken to mean rights which are growing or building up as distinct from rights finally formed or vested.

136. In Finch, the Court left open the application of Karger v Paul principles to superannuation funds: at [64]. However, it emphasised that so far as they may apply, the decision may be reviewable for want of properly informed consideration: at [66]. The importance of this matter in the context of superannuation funds was explained by Nettle JA in Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238; 36 VR 618 at [59] in the following terms (Redlich JA and Davies AJA agreeing):

“With respect, I entirely agree with his Honour. As the decision in Finch has enabled us better to understand, trustees of superannuation funds are no longer to be conceived of in the same way as custodians of charitable or family settlements through the exercise of whose absolute discretion settlors have chosen to channel their beneficence. The economic, industrial and ultimately social imperatives which inform the advent of the superannuation industry, not to mention that beneficiaries of the kind with which we are concerned in one way or the other invariably purchase their entitlements, are productive of legitimate expectations which the law will enforce. Superannuation fund trustees are bound to give properly informed consideration to applications for entitlements and, if that necessitates further inquiries, then they must make them.”

138. In the present case, the trustee exercised the power of amendment on legal advice that the amendment had no effect on accrued benefits and that it was necessary to comply with the provisions of the Victorian anti-discrimination legislation. The explanation for the removal of cl A11.3 was given in that context.

139. In those circumstances, I do not think that it has been shown that the trustee failed to give proper consideration to whether or not the amendment was in the best interests of the beneficiaries. The fact that it may have taken away a possible right to confer a discretionary benefit on some members in the future does not, in my view, alter the position, particularly as the augmentation rule in cl 10.1 of the deed provided an alternative basis for providing such a benefit and in light of the explanation given for the change, namely the amendment to Part B of cl A11.1.

140. In reaching this conclusion, I am conscious of the fact that it has been commonly stated that the best interests of beneficiaries in a superannuation fund are normally their best financial interests: Cowan v Scargill [1985] Ch 270 at 287. Whether the amendment in the present case had any material effect on members’ financial interests is doubtful. However, it seems to me that the trustee gave proper consideration to the issue. There was no suggestion that it did not act in good faith and, in those circumstances, it seems to me that there was no contravention of either s 52(2)(c) or the general law. The trial judge, in my respectful submission, erred in finding such a contravention.

Did the removal of cl A11.3 contravene reg 13.16 of the SIS Regulations (Notice of Appeal Grounds 4 and 5)

Submissions

141. The appellants submitted that the primary judge erred in relying on reg 9.27, which was expressly provided to be applicable to Div 9.5 of the SIS Regulations.

142. The appellants submitted that even if the definition of “accrued benefits” in reg 9.27 was read into reg 13.16, removal of cl A11.3 did not affect the potential entitlement on account of the length of time the member has been a member of the fund on that date. They submitted a potential entitlement was one that a member has by length of service, subject to a particular contingency. They submitted that in the case of cl A11.3, termination of a member’s employment would not give rise to a potential entitlement but only to the exercise of a discretion that might be unfavourable and if favourable, would be for an indeterminate amount.

143. The appellants also submitted there was no relevant distinction between the present case and Auspine. They submitted the fact that the discretionary payment in the present case was capped, whilst in Auspine it was not, was a distinction without a difference.

144. The appellants also pointed out that cl 13.16 speaks of a “right” or “claim” to a benefit. They submitted that at the time of the amendment, Mr Beck did not have any such right or claim.

145. Mr Beck relied on his submissions on the first issue in respect of these grounds of appeal.

Consideration

146. Above at [107], I indicated why I was of the view that reg 9.27 has no bearing on the meaning of the expression “accrued benefit” in reg 13.16. In my opinion, the expression has the same meaning as contained in cl 33.2 of the July 1996 deed. For the reasons given, the early retirement benefit was not an accrued benefit either for the purpose of the deed or reg 13.16. The primary judged erred in concluding to the contrary.

If the deletion of cl A11.3 was found to have been an invalid amendment, was Div CH of the OSF rules deemed to include a provision to the effect of cl A11.3 (Notice of Appeal Ground 6)

Submissions

147. The appellants submitted that the effect of the equivalent rights provision in the July 1996 deed (see above at [37]-[38]), read with the relevant regulation, was that the Old Colonial Fund and the rights of its members could be transferred to a fund that conferred equivalent rights. They submitted that this operated as a restriction on the trustee and did not deem the new fund to contain such rights. They pointed out that Mr Beck disclaimed reliance on any breach of the equivalent rights provision.

148. The appellants submitted, contrary to what was contended by Mr Beck, that this submission was made in the Court below. It also submitted that the respondent’s submission that CBOSC breached its obligation to confer equivalent benefits should be rejected as Mr Beck did not contend below that there was any breach of that requirement. They further submitted that OSF did confer equivalent rights to the New Colonial Fund, pointing out that the benefit in cl A11.3 never formed part of the rules of the New Colonial Fund.

149. Senior counsel for the appellants submitted that the primary judge did not explain how, what he described as, “successor liability” operated to impose on the trust the term removed by an amendment by another trustee or without involvement of the present trustee and without account being taken of intervening interests.

150. Mr Beck submitted that, in advancing this proposition, CBOSC was seeking to rely on its own default to acquire the reserves of Mr Beck. He submitted the proposition was not put below and that, had it been put, the circumstances surrounding the transfers between successor trustees would have required investigation. He submitted that amalgamation does not terminate a trust if the parties contemplate a change of trustee. He also contended that the submission had no merit as equity regards as done that which ought to have been done and will not permit CBOSC to retain the fund other than on trust for members, including Mr Beck.

151. Senior counsel for Mr Beck described the right conferred by cl A11.3 as a right in rem, submitting “the obligation is annexed to the property and the obligation travels with the property”.

Consideration

152. Contrary to Mr Beck’s submission, it seems to me that this issue was raised below. Paragraph 75 of the appellant’s opening submissions were in the following terms:

“Second, even if the removal of the rule in December 1996 was ineffective, that does not determine the position under the terms of a different fund/trust (the OSF as opposed to the Old Colonial Fund) with a different trustee. The Plaintiff has not explained how it says a different action involving different actors (the constitution of the OSF and the CBOSC as trustee) is affected by what occurred in December 1996. There is no scope for rectification (that is to say, amending the written document to reflect the true terms of the bargain) to apply.”

It was also referred to in the submissions at the hearing, albeit in the context of a submission that the OSF trust deed could not be rectified to include cl A11.3.

153. I have set out the definition of “successor fund” in the July 1996 deed and the SIS Regulations above at [37]-[38]. A successor fund must satisfy two requirements: first, the fund must confer equivalent rights and second, the trustee of the new fund must have agreed that the new fund will confer equivalent rights.

154. There is some force in Mr Beck’s contention that the matter was only faintly argued and no investigation of the circumstances of the transfer took place. However, the claim by Mr Beck in the Third Further Amended Statement of Claim to have the New Colonial Fund deed and the OSF deed rectified by the addition of a clause equivalent to cl A11.3 was denied.

155. As I indicated, the matter was raised in opening. Further, irrespective of any agreement between the trustees of the Old Colonial Fund and that of the New Colonial Fund, the fact is that the provision was not included in either the New Colonial Fund deed or the OSF deed. Mr Beck, apart from submitting that the point was not taken below and that the circumstances surrounding the transfer would need to be investigated, submitted first, that amalgamation does not terminate a trust where the parties contemplate a change of trustee. However, it does not seem to me in the present case there was an amalgamation of trusts, rather, the funds in the Old Colonial Fund were transferred to the New Colonial Fund with the members of the Old Colonial Fund having the rights and benefits conferred by the new fund. The fact that the new fund did not confer equivalent benefits may give rise to a claim against the trustee but it does not deem the new fund to contain provisions which it does not in fact have.

156. The second submission made by Mr Beck was that equity regards as done that which ought to have been done. Senior counsel, in elaborating that submission, submitted that the right to consideration was a right in rem attached to the property and travelling with the property.

157. There are two difficulties with this submission. First, it is difficult to see how a future right to be considered for a benefit can be described as a species of property. Further, even assuming in some way the Old Colonial Fund was impressed with an obligation to consider prospective pre-55 retirees for a benefit, there is nothing to suggest that the trustee of the New Colonial Fund, much less CBOSC, took with notice of that obligation. It follows that there was no basis for imposing on the trustees of those funds an obligation in the terms of cl A11.3. Indeed, in providing such a benefit contrary to the terms of the trust administered by them, they would be acting in breach of those trusts.

158. It follows this ground of appeal is made out.

Estoppel (Notice of Appeal Grounds 7 and 8)

Submissions

(i)   The appellants’ submissions

159. The appellants submitted that, as pleaded, the alleged representations were first, that if Mr Beck joined CBA, he would retain his pension entitlements as they then existed under the New Colonial Fund and second, that if his employment was terminated before he attained the age of 55, he would be paid the reserve held in respect of him. The appellants submitted that the primary judge was correct in rejecting this claim.

160. The appellants submitted that an estoppel based on an assumption on the part of Mr Beck that CBA would not interfere with Mr Beck continuing to work until he reached the age of 55 (the no termination assumption) was neither pleaded nor argued. They submitted that the outcome was that, by representations that Mr Beck’s superannuation entitlement would continue to apply and that he would be better off accepting employment with CBA rather than taking redundancy at that time, CBA is estopped from denying that Mr Beck was entitled to be paid a pension when he attained the age of 55 and CBA was obliged to provide him with a pension based on him attaining that age, even though he did not work until that age and his contract did not give him that right.

161. The appellants submitted it was never part of Mr Beck’s case at trial that he had adopted the no termination assumption or relied on it in agreeing to join CBA in 2000. They submitted that in closing, Mr Beck indicated that the burden of the estoppel was that CBA was prevented from withholding its approval to a favourable exercise of the early retirement benefits rule in the event of termination before the age of 55.

162. The appellants submitted that if Mr Beck had advanced an estoppel case based on the no termination assumption, there would have been cross-examination to the effect that first, it was contrary to Mr Beck’s pleaded case in which he accepted that his employment could be terminated before he attained the age of 55 and second, that the no termination assumption was contrary to the terms and conditions of his employment.

163. So far as it was contended that par [96] of the Third Further Amended Statement of Claim raised the issue, the appellants submitted that par [96] formed no part of the estoppel claim but was pleaded in support of a separate unconscionability claim. They also submitted that the estoppel claim as pleaded was to the opposite effect to the claim now advanced and that the expectation pleaded in par [96] was not pleaded to have arisen from the undertaking but from different representations.

164. The appellants submitted that Mr Beck did not point to any written or oral submissions made in support of the no termination assumption.

165. The appellants also submitted that, irrespective of the failure to take the point in the Court below, the conclusion of the primary judge was not open as a matter of substance. They submitted there was no evidence that CBA encouraged Mr Beck to hold the no termination assumption. They submitted the general assurances given by Mr Mulcahy could not be said to amount to a representation sufficient to found the assumption. They pointed to Mr Beck’s evidence on this issue to which I have referred above at [20]. They submitted the effect of that evidence was that Mr Beck would get an accrued pension if he attained the age of 55 and would be paid his reserve if his employment was terminated before that time.

166. Senior counsel for the appellants submitted there was no evidence to suggest that any one from CBA was authorised to commit the bank to a particular person being free of the bank’s reorganisation of its staff from time to time. He referred also to the difficulty of maintaining an estoppel in the face of clear contractual terms to the contrary.

(ii)   Mr Beck’s submissions

167. Mr Beck contended the estoppel case found by the primary judge was expressly pleaded in par [96] and also made clear in particular (i) to par [83] of the Third Further Amended Statement of Claim. He also contended that it was incorrect to say that the estoppel case was not argued. He submitted the primary judge indicated this was the case. He referred to the remarks of the primary judge to the following effect:

“[337] Mr Beck’s estoppel case is also based on the conduct of CBA employees. Mr Beck says that he assumed or expected the legal relationship of employer and employee, with specific reference to his employee superannuation entitlements benefits, would continue, so that Mr Beck would not lose his rights in relation to the reserves held in respect of him in the New Colonial Fund: 3 FASC [83]. A number of statements CBA personnel made to Mr Beck are said to have induced this assumption or expectation.”

168. Mr Beck submitted that the only point taken by the appellants at the trial was that the representations were not sufficiently clear to found an estoppel. He submitted the primary judge was correct in finding the representations were clear enough to ground the estoppel in light of the high level of expertise with which Mr Mulcahy and Mr Beck were dealing with each other (see above at [60]). He submitted that a representation that a right to terminate would not be exercised is not inconsistent with the existence of that right but is rather a necessary precondition to the making of such a representation.

169. In contending that the point was raised, senior counsel for Mr Beck pointed to pars [94]-[95] of Mr Beck’s opening written submissions in the Court below.

Consideration

170. In considering this issue, it is important to have regard to the case pleaded. The estoppel case pleaded was contained in pars [78]-[87] of the Third Further Amended Statement of Claim. These paragraphs were in the following form:

“78.   The plaintiff became an employee of CBA under a contract of employment offered by CBA and accepted by the plaintiff.

79.   It was a condition of the contract of employment between the plaintiff and CBA that his existing superannuation arrangements would continue.

80.   Further or in the alternative CBA represented to the plaintiff that his existing superannuation arrangements would continue.

Particulars

(a)   Letter dated 26 June 2000 from Mr Mulcahy for CBA to the plaintiff, ‘your existing superannuation arrangements will continue to apply’.

81.   The representation mentioned in paragraph [80] carried with it a representation that the plaintiff’s rights to the reserves held by the New Colonial Fund in respect to him were unchanged and that provided he did not resign from his employment those reserves or such amount determined in accordance with the provisions and rules of the Deeds constituting the Colonial Fund, and/or the New Colonial Fund and/or the Officers Superannuation Fund as can pay to the plaintiff the benefits that could be paid pursuant to Clause 22(b) of the August 1985 Deed, alternatively that clause as substantially replicated in the July 1996 Deed would be paid to him on the termination of his membership of the fund.

82.   The plaintiff was induced to accept employment with CBA by the said contractual term and representation and at all material times believed that the existing superannuation arrangements included the provision for the Early Retirement Benefits Rule as understood and applied by Colonial.

83.   The plaintiff communicated to CBA and the second defendant that he assumed that if he agreed to become an employee of CBA he would not lose his rights in relation to the reserves held in respect of him in the New Colonial Fund.

Particulars

(a)   The plaintiff negotiated his CBA contract with Mr Mulcahy and Mr Cupper sometimes acted as an intermediary in these negotiations;

(b)   He was offered a base pay of $360,000 with a bonus potential of 70% or $250,000;

(c)   The plaintiff rejected the offer pleaded in the previous sub paragraph and communicated that he would agree to take employment for a greater base pay for the purpose of improving his accrued retirement benefits;

(d)   The plaintiff informed Mr Mulcahy that the salary offered was insufficient and requested confirmation that he would also receive and continue to receive the superannuation benefits that he would have received had he continued to be an employee of Colonial;

(e)   The plaintiff said to Mr Mulcahy, ‘I would prefer to receive salary rather than bonuses in my salary package because superannuation accrues on salary and does not accrue on bonuses’;

(f)   The plaintiff said to Mr Mulcahy words to the effect, ‘I won’t come to CBA unless I can protect and enhance my pension’;

(g)   By the words in the preceding sub-paragraph the plaintiff believed that he was communicating that he believed he was then absolutely entitled to the reserve held in respect of him in the New Colonial Fund;

(h)   Mr Mulcahy said to the plaintiff words to the effect, ‘Whatever your rights were under the Colonial Fund we undertake to protect those going forward’;

(i)   By the words in the preceding sub-paragraph the plaintiff believed that Mr Mulcahy was representing that the second and third defendants had the future intention to pay the plaintiff the reserves that were held in respect of him in the New Colonial Fund and provided he did not resign from his employment from the third defendant, would pay him the reserves that accumulated in respect of him during his employment with Colonial and CBA; and

(j)   The plaintiff accepted employment on a base pay of $500,000 and a reduced bonus potential of 50% and thereby communicated that he believed that his future entitlements to the reserves held in respect of him in the New Colonial Fund and the further reserves that would accumulate during his employment with the third defendant were more valuable than a bonus potential of 70%.

84.   By reason of the representation mentioned in paragraphs [80], [81] and [83] and by silence in response to [83] (f) the third defendant represented to the plaintiff that in the event of the termination of his employment more than 5 years before his normal retirement age for any reason other than his resignation he would be paid the reserves held in respect of him in the New Colonial Fund or such amount determined in accordance with the provisions and rules of the Deeds constituting the Colonial Fund, and/or the New Colonial Fund and/or the Officers Superannuation Fund as can pay to the plaintiff the benefits that could be paid pursuant to Clause 22(b) of the August 1985 Deed, alternatively that clause as substantially replicated in the July 1996 Deed.

85.   In or about 2000 if the plaintiff had not accepted employment with the third defendant his membership of the New Colonial Fund would have terminated and the then trustee would have taken such steps as were within its power to cause him to receive the reserves held in the fund in respect of him or to receive such amount determined in accordance with the provisions and rules of the Deeds constituting the New Colonial Fund as can pay to the plaintiff the benefits that could be paid pursuant to Clause 22(b) of the August 1985 Deed, alternatively that clause as substantially replicated in the July 1996 Deed.

86.   In the premises the plaintiff was induced by the representations and conduct of CBA to accept employment with CBA rather than take his then superannuation benefits from the New Colonial Fund including the reserves held in respect of him and seek equally or more remunerative employment with other potential employers.

87.   By reason of the matters mentioned in paragraphs [78] and [86] CBA was estopped from refusing to do everything in its power to be done to cause the plaintiff to receive the reserves held in respect of him in the Officers Superannuation Fund or such amount determined in accordance with the provisions and rules of the Deeds constituting the Colonial Fund, and/or the New Colonial Fund and/or the Officers Superannuation Fund as can pay to the plaintiff the benefits that could be paid pursuant to Clause 22(b) of the August 1985 Deed, alternatively that clause as substantially replicated in the July 1996 Deed when it terminated his employment in 2005 on notice and without cause.”

171. Under the heading “The termination” in the Third Further Amended Statement of Claim, a number of alternative claims were made. Of particular relevance are pars [96] and [97]:

“96.   Further or in the alternative in or about 2003 the third defendant induced the plaintiff to believe that he would not be terminated before he attained the age of 55:

Particulars

(a)   By representations made by its officer and employees the plaintiff and his wife were induced to believe that his career would benefit if his wife ceased to live at their former home in Melbourne and made their home in Sydney;

(b)   The plaintiff and his wife sold their properties in Melbourne and made their home in Sydney in 2003;

(c)   The third defendant appointed the plaintiff the chief executive of Comminsure; and

(d)   By the matters mentioned in paragraphs (a) to (c) the plaintiff believed, and the third defendant intended the plaintiff to believe, that the third defendant intended to retain him as a long term employee for a period of 10 to 15 years or at least until early retirement today.

97.   By reason of the matters pleaded in paragraphs [43] to [96] the conduct of the second defendant and CBA in refusing to pay the plaintiff the reserve value or to pay such amount determined in accordance with the provisions and rules of the Deeds constituting the Colonial Fund, and/or the New Colonial Fund and/or Officers Superannuation Fund as can pay to the plaintiff the benefits that could be paid pursuant to Clause 22(b) of the August 1985 Deed, alternatively that clause as substantially replicated in the July 1996 Deed and formerly held in the Colonial Fund in respect of him was unconscionable.”

172. In his note on estoppel provided to the primary judge at the hearing, counsel for Mr Beck identified the estoppel as that pleaded in par [87] of the Third Further Amended Statement of Claim and the basis for it in pars [78]-[86]. The note continued:

“3.   In short, the plaintiff contends that he was encouraged to expect that his existing superannuation arrangements would be protected if he were to join the bank, with the intention that he would receive all of the benefits that would have been available to him had he remained in employment with Colonial Limited (to the pensionable age of 55 or retirement at age 62), including due consideration for an Early Retirement Benefit (under 22(b) or its equivalent, A11.3) provided, of course, that he did not cause those rights to be lost by resigning early or by having his employment terminated for cause.”

173. However, in his opening submissions, Mr Beck’s estoppel case was put somewhat more widely:

“94.   In addition, the Plaintiff contends that the Third Defendant is estopped – in short – from denying the Plaintiff an Early Retirement Benefit. The estoppel arises in a number of different ways – which do not need to be addressed in detail in these submissions. The evidence will be that the Plaintiff accepted the Third Defendant’s offer of employment after it took over the Colonial Ltd on the basis of assurances and an expectation that his superannuation entitlements would include an Early Retirement Benefit as per the Colonial Fund and, if he remained in service until age 55 or was terminated before that age without cause or ill-health, he would be entitled to a pension (under Rule 19(a)) or the equivalent by way of an Early Retirement Benefit (to the limit of the Reserve).

95.   Relevantly, the Plaintiff’s expectation that he would remain in employment at least until age 55 and become entitled to that pension arose out of his employment by Colonial; carried on as a common assumption between employer and employee over may years of service (during which the Plaintiff was encouraged to make significant changes in his personal life to accommodate his employer’s wishes); and continued by the Third Defendant at the time of takeover. In all the circumstances, it is unconscionable for the Third Defendant to depart from that assumption and cruel the Plaintiff’s expectation by denying him a pension under Clause 22(b) (or equivalent) upon termination without cause.”

174. The primary judge rejected an estoppel based on an expectation that CBA would pay the reserves held on his behalf in the New Colonial Fund if he called for it in the future or if his employment was terminated prior to him attaining the age of 55. That was the basis of the estoppel pleaded in par [87] of the Third Further Amended Statement of Claim.

175. The ultimate conclusion reached by the primary judge finds some expression, however, in par [96] of the Third Further Amended Statement of Claim, particularly par [96(d)].

176. I am of the view, albeit with some hesitation, that the manner in which the case was conducted in the court below provided a sufficient basis for Mr Beck to argue that CBA was estopped from asserting an entitlement to terminate his employment prior to him attaining the age of 55 years as found by the primary judge: see above at [58]. However, I do not think his Honour was correct in reaching his conclusion.

177. In concluding that the conduct of the relevant bank officers, Mr Mulcahy and Mr Cupper, induced Mr Beck to adopt the assumption that he would not be terminated until he attained the age of 55, his Honour relied on the conversation which took place prior to Mr Beck accepting employment with CBA. The difficulty with that finding is that Mr Beck neither asked for, nor was told, that to protect his pension he would not be terminated until age 55. Such a statement would, of course, be quite inconsistent with the employment agreement entered into subsequently and, for that matter, the estoppel pleaded in par [87].

178. It is well established that to ground a promissory estoppel, the representation said to give rise to it must be clear and reasonably understood by the person to whom it is addressed: Legione v Hately [1982] HCA 11: 152 CLR 406 at 435-436; Foran v Wight [1989] HCA 51; 168 CLR 385 at 411, 435-436. In the present case, neither Mr Mulcahy nor Mr Cupper made the representation contended for but rather, said that CBA would protect his pension rights going forward. Mr Beck contended he understood that to mean that CBA would pay him the reserve that was held on his behalf in the New Colonial Fund and that he would be paid his accrued pension or the reserve if he resigned. This is consistent with the particulars to par [83] of the Statement of Claim and what is pleaded in par [84]. There is no suggestion of the representation or assumption found by the primary judge.

179. It does not seem to me that what the primary judge described as a high level of expertise with which Mr Beck and Mr Mulcahy were dealing with each other about Mr Beck’s superannuation future assists. It is not entirely clear, with respect, what his Honour meant by the remarks, although he did add, somewhat obscurely, that the words “protect”, “enhance” and “pension” would have a precise meaning in a conversation with an actuary, the fact remains that all that was said by Mr Mulcahy was that he intended to protect whatever rights Mr Beck had. It did not amount to an undertaking to employ him until further rights accrued.

180. The primary judge also relied on the 2003 conversation as strengthening the representation. The statement by Mr Cupper or Mr Mulcahy, as recorded by Ms Beck, could not, in my opinion, be construed as a representation that the bank would not exercise its contractual right to terminate his employment if it considered it appropriate to do so.

181. I accept that Mr Beck laboured under the misapprehension that the New Colonial Fund rules contained an equivalent provision to cl A11.3. However, there is nothing to suggest that Mr Mulcahy knew that Mr Beck laboured under that belief or did anything to induce it.

182. In my opinion, the primary judge erred in concluding that CBA was estopped from denying that it would not exercise its rights to terminate Mr Beck’s contract of employment prior to him attaining the age of 55.

183. In these circumstances, it is not necessary to deal with the question which remains controversial, namely, whether the doctrine can operate to impose positive obligations rather than having a preclusionary effect: Saleh v Romanous [2010] NSWCA 274; 79 NSWLR 453 at [73]-[74]; DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; 83 NSWLR 728 at [93]-[94].

Indemnity Costs (Notice of Appeal Ground 9)

Parties’ Submissions

184. The appellants submitted that the principle which led the primary judge to order indemnity costs had no application where Mr Beck was seeking to advance the construction argument only to advance his personal financial position and not acting in a representative capacity, and where he advanced a number of other grounds.

185. Mr Beck submitted that the order was appropriate. He submitted the question raised regarding the invalidity of the amendment was important in the administration of the trust and it may never have been squarely raised but for the proceedings.

Consideration

186. Although this ground of appeal does not arise in light of my earlier conclusions, it is necessary to consider the appropriate costs order which should be made in circumstances where Mr Beck’s claim was unsuccessful.

187. Mr Beck sought to challenge an amendment to a trust deed made in 1996. There was nothing to suggest there were other former members who claimed to be affected in the manner in which he contended. In the circumstances, the proceedings, in my opinion, could not on any view be described as representative proceedings so as to make it appropriate that the former trustee, much less CBOSC, bear any part of the costs incurred by Mr Beck.

Conclusion

188. In the result I would make the following orders:

1. Appeal allowed.

2. Set aside the order made by the primary judge and in lieu thereof order:

1. The proceedings be dismissed;

2. The first respondent pay the appellants’ costs of the appeal and in the Court below;

3. Order that the first respondent be granted a certificate under the Suitors Fund Act 1951 (NSW) if eligible.

189. MACFARLAN JA: I agree with the orders proposed by Bathurst CJ and, subject to one matter, with his Honour’s reasons for judgment.

190. My qualification relates to the question of whether, in light of the manner in which Mr Beck’s case was conducted at first instance, it was open to the primary judge to find an estoppel on the basis that he did (Judgment [346] quoted in [58] above) and for Mr Beck to seek to support that finding on appeal.

191. On that issue, I agree with Gleeson JA that the finding was inconsistent with Mr Beck’s submissions to the primary judge. Whilst the finding reflected the allegations contained in para [96] of the Third Further Amended Statement of Claim (quoted in [171] above), that paragraph comprised part of Mr Beck’s unconscionability claim and, notably, was not relied upon by him in final address as relevant to his estoppel claim. His estoppel claim was expressly put upon the different basis pleaded elsewhere in the Third Further Amended Statement of Claim. Given that reliance by Mr Beck on an estoppel of the type found by the primary judge may have affected the course of evidence, particularly the nature and extent of cross-examination of Mr Beck, he should not be permitted to rely on it on appeal.

192. I add the following observations in relation to Bathurst CJ’s reasoning, with which I agree, in relation to Ground 1 of the appeal.

193. Clause 33.2 of the “Old Colonial Fund” trust deed proscribed an amendment to it “whereby the value of the benefits accrued in respect of any Member prior to the effective date of the amendment is detrimentally affected” (emphasis added). The prohibition was subject to certain exceptions. The primary judge found that “Mr Beck’s right to consideration for a pre-55 discretionary benefit […] under clause A11.3 was itself a ‘benefit accrued in respect of’ him as [a] member within clause 33.2 of the Old Colonial Fund” (Judgment [217]). The appellants challenged this finding by Ground 1 of their appeal.

194. As Bathurst CJ points out ([97]), the High Court decision in Macoun v Federal Commissioner of Taxation indicates that Mr Beck did not at any time have any accrued right to a benefit under Clause A11.3. Just as the appellant in that case had “at best an inchoate rather than accrued right to a pension”, here Mr Beck did not have any accrued right to a benefit under cl A11.3, the word “benefits” in cl 33.2 clearly being a reference to entitlements afforded to members pursuant to the provisions of the Fund trust deed.

195. Description of Mr Beck’s right as one “to consideration for a pre-55 discretionary benefit […] under Clause A11.3” (Judgment [217]) does not advance his case. It may be accepted that by reason of his membership of the Fund, Mr Beck had “a right to be considered as a potential recipient” of a pre-55 discretionary benefit under cl A11.3 “and a right to have his interest protected by a court of equity” (Gartside v Inland Revenue Commissioners [1968] AC 553 at 617-8 per Lord Wilberforce; see also Kennon v Spry [2008] HCA 56; 238 CLR 366 at [161]). However, while a right of this type may in some circumstances have value, Mr Beck’s right, at its highest, merely enabled him to compel the due administration of the Fund by, for example, requiring the trustees to exercise their discretion properly. It was not a right to any “benefits” of the type to which cl 33.2 referred and its abrogation was not therefore prohibited by this clause.

196. GLEESON JA: I agree with the orders proposed by Bathurst CJ for the reasons given by his Honour save in relation to whether Mr Beck was entitled to rely upon the estoppel case, accepted by the primary judge.

197. The history of the pleadings and Mr Beck’s submissions with respect to the estoppel case are set out at [170]-[175] of the reasons of Bathurst CJ. In this Court, Mr Beck contended that the estoppel case found by the primary judge was expressly pleaded in par [96] and referred to in Particular (i) to par [83] of the third further amended statement of claim. The estoppel case pleaded in par [83] was rejected by the primary judge (at J [345]) and there is no notice of contention in this regard. Further, the appellants correctly pointed out that par [96] formed no part of the estoppel claim, but was pleaded in support of a separate unconscionability claim which was rejected by the primary judge.

198. That Mr Beck did not rely upon par [96] as part of the estoppel claim was made clear in Mr Beck’s closing submissions where it was stated in a summary note on the estoppel claim that the basis for the estoppel was pleaded in par [78]-[86] of the third further amended statement of claim. Nor did the oral closing submissions of Mr Beck seek to rely upon the no termination assumption pleaded in par [96] as part of the estoppel case. Senior counsel for Mr Beck confirmed before the primary judge that the summary note and the oral closing submissions encapsulated the way in which the estoppel case was advanced by Mr Beck.

199. In my view, Mr Beck cannot seek to support the primary judge’s finding in relation to the estoppel claim in a manner which departs from the way in which he advanced his case in closing submissions.

200. In any event, if (contrary to my view) Mr Beck was entitled to rely upon the no termination assumption as part of his estoppel case, I agree with Bathurst CJ, that the primary judge erred in concluding that the second appellant (CBA) was estopped from denying that it would not exercise its rights to terminate Mr Beck’s contract of employment prior to him attaining the age of 55.

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Decision last updated: 22 August 2016