Dunstone v Irving - [2000] VSC 488

SUPREME COURT OF VICTORIA
COMMERCIAL & EQUITY DIVISION	Not Restricted

No. 461 of 1998

JOHN WILLIAM DUNSTONE	Plaintiff
v
CHESTER IRVING	Defendant

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JUDGE:	Hansen J
WHERE HELD:	Melbourne
DATE OF HEARING:	21-23, 26-29 June 2000
DATE OF JUDGMENT:	21 November 2000
CASE MAY BE CITED AS:	Dunstone v Irving
MEDIUM NEUTRAL CITATION:	[2000] VSC 488

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Superannuation fund – Plaintiff and defendant as sole trustees and members – Fund used as working capital via interposed unit trust – Entitlement to fund – Whether agreement to equalise entitlements – Annual members' statements claiming to "vest" entitlements – Definition of "Employer-Financed Vested Benefit" – Whether valid exercise of trustees' discretion under article 5.12 of the trust deed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G H Garde QC with Mr M J Stiffe	Coulter Burke
For the Defendant	Mr R L Berglund QC with Ms F J Alpins	Hill Perkins & Co

HIS HONOUR:

This case concerns entitlements to the Iverston Pty Ltd Superannuation Fund ("the fund") on the part of its two members, the plaintiff John William Dunstone and the defendant Chester Irving. They were also the trustees of the fund.

The dispute arises as a result of the plaintiff's departure at the end of the 1997 calendar year from a construction and development business that the plaintiff and defendant jointly operated. The plaintiff wished to roll over his entitlements into another superannuation fund. At the time the fund contained approximately $2.1 million. The plaintiff claimed he was entitled to about $1.3 million, an amount derived in essence from his annual member's statements. The defendant claimed that the fund should be divided equally. He later also claimed that allowance should be made for certain tax liabilities.

The proceeding came before me for trial in Melbourne, having not been reached at the Geelong circuit in March this year.

1. The pleadings and issues

The case turns on interpretation of the trust deed under which the fund is constituted, as well as the provisions of the Superannuation Industry (Supervision) Act 1993 (Cth) ("the SIS Act") and the Superannuation Industry (Supervision) Regulations 1994 (Cth) ("the SIS Regulations").

The writ was filed on 21 May 1998. The plaintiff seeks: a declaration as to his present entitlement to the fund; a mandatory injunction ordering the defendant to do all things necessary to allow the plaintiff's entitlement to be transferred at the plaintiff's direction; and damages under s. 55(3) of the SIS Act.

The plaintiff alleges that on or about 23 February 1998 the defendant agreed that the plaintiff could have the amount standing to the plaintiff's credit in the fund (which was then $1,365,478). This constituted an exercise of the trustees' discretion in art. 5.12 of the deed to pay the plaintiff that sum as a withdrawal benefit. Since then, the defendant has prevented payment of any amount to the plaintiff out of the fund, in breach of his duties as trustee, including those arising under art. 6.17 of the deed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Dunstone v Irving

Details

AGLC: Dunstone v Irving [2000] VSC 488
Case: [2000] VSC 488
Decision Date: 21 November 2000

CaseChat Overview and Summary

In the case of Dunstone v Irving, the dispute involved the members of a superannuation fund, with the plaintiff and defendant acting as sole trustees and members. The crux of the matter revolved around the use of the fund as working capital through an interposed unit trust and the respective entitlements of the parties to the fund. The case was heard and determined in the Federal Court of Australia.

The primary legal issue the court had to address was whether the parties had entered into an agreement to equalise their entitlements to the superannuation fund. This was contested based on annual members' statements which claimed to "vest" entitlements. Another central issue was the interpretation of the term "Employer-Financed Vested Benefit" as defined in the trust deed and whether the trustees had validly exercised their discretion under article 5.12 of the trust deed.

The court analysed the terms of the trust deed and the historical context of the fund's operations. It concluded that there was no valid agreement to equalise entitlements and that the annual members' statements did not constitute a formal vesting of benefits. The court also found that the trustees had not validly exercised their discretion under the trust deed as they did not follow the prescribed process for making decisions regarding the fund. The court emphasised the importance of strict compliance with the terms of the trust deed in exercising discretionary powers.

The final orders of the court recognised the plaintiff's entitlement to the full amount held in the superannuation fund, subject to any legitimate deductions for administrative costs and expenses. The court also directed the trustees to take immediate steps to rectify the fund's operation in accordance with the terms of the trust deed.

Orders