Employers First v Tolhurst Capital Ltd

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FEDERAL COURT OF AUSTRALIA

Employers First v Tolhurst Capital Limited [2005] FCA 616

SUPERANNUATION – review of decisions – appeal from Superannuation Complaints Tribunal – trustee did not pay to member the benefit as stated in member statement – construction of terms of governing deed – whether Tribunal decision contrary to terms of deed

SUPERANNUATION – industry regulation – reg 13.16 of Superannuation Industry (Supervisions) Regulations – construction of phrase ‘accrued benefits’ – whether accrued benefits can exceed the benefits to which a member is entitled under the governing deed

SUPERANNUATION – review of decisions – appeal from Superannuation Complaints Tribunal – whether Tribunal bound by requirements of procedural fairness – whether tribunal breached rules of procedural fairness in deciding review on question about which no party made submissions

SUPERANNUATION – industry regulation – complaints – whether complaint related to management of fund as a whole

Superannuation Industry (Supervision) Act 1993 (Cth)
Superannuation (Resolution of Complaints) Act 1993 (Cth) s 11, s 14, s 33, s 37, s 46

Superannuation Industry (Supervision) Regulations 1994 reg 9.27, reg 13.16

Asgard Capital Management Ltd v Maher (2003) 131 FCR 196 considered
Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 cited
Birdseye v Australian Securities and Investments Commission (2003) 76 ALD 321 referred to
Clements v Independent Indigenous Advisory Committee (2003) 131 FCR 28 followed
Colonial Mutual Life Assurance Society Limited v Brayley [2002] FCA 1333 considered
Goldie v Minister for Immigration and Multicultural Affairs (1999) 56 ALD 321 considered
Kioa v West (1985) 159 CLR 550 cited
Re Minister for Immigration and Multicultural Affairs; ex parte Miah (2001) 206 CLR 57 cited
Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359 cited
TNT Skypak International (Aust) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 cited

EMPLOYERS FIRST v TOLHURST CAPITAL LIMITED AND GEOFFREY EDGAR BARRATT

NSD 957 of 2003

BRANSON J
16 MAY 2005
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 957 of 2003

BETWEEN:

EMPLOYERS FIRST
APPLICANT

AND:

TOLHURST CAPITAL LIMITED
FIRST RESPONDENT

GEOFFREY EDGAR BARRATT
SECOND RESPONDENT

JUDGE:

BRANSON J

DATE OF ORDER:

16 MAY 2005

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The proceeding be stood over to Friday 27 May 2005 at 9:30 am for the purpose of the making of orders giving effect to these reasons for judgment including orders as to costs.

2.The parties provide to the Associate to Branson J by Wednesday 25 May 2005 an agreed minute of the orders to be made, including orders as to costs, and if agreement has not by then been reached, the minutes of orders for which they will respectively contend and brief outlines of submissions in support of the orders.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 957 of 2003

BETWEEN:

EMPLOYERS FIRST
APPLICANT

AND:

TOLHURST CAPITAL LIMITED
FIRST RESPONDENT

GEOFFREY EDGAR BARRATT
SECOND RESPONDENT

JUDGE:

BRANSON J

DATE:

16 MAY 2005

PLACE:

SYDNEY

REASONS FOR…

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Details
Case
[2005] FCA 616
Decision Date

CaseChat Overview and Summary

Employers First, the Principal Employer of the Employers' Federation of New South Wales Superannuation Plan, appealed a decision of the Superannuation Complaints Tribunal which found that the Trustee of the Plan had breached the Superannuation Industry (Supervision) Act 1993 by failing to pay the applicant a lump sum retirement benefit. The Tribunal had ordered the Trustee to pay the applicant an amount equal to the accumulation (net of contributions tax) of superannuation guarantee contributions in respect of the applicant up until 25 May 1998, plus interest at the Plan's crediting rates from time to time up until the date of payment. The appeal was heard in the Federal Court of Australia.

The court was required to determine whether the Tribunal erred in concluding that the Trustee had breached the SIS Act by not paying the applicant a lump sum retirement benefit and whether the Tribunal properly exercised its discretion in ordering the Trustee to make a payment to the applicant. The court also needed to consider whether the Trustee had been directed by the applicant to pay a lump sum retirement benefit calculated otherwise than pursuant to rule 4 of the Rules of the Plan.

The court found that the Tribunal had erred in concluding that the Trustee had breached the SIS Act. The court held that the Trustee had not been directed by the applicant to pay a lump sum retirement benefit calculated otherwise than pursuant to rule 4 of the Rules of the Plan. The court found that the Tribunal had not properly exercised its discretion in ordering the Trustee to make a payment to the applicant. The court set aside the Decision Record and remitted the matter to the Tribunal for reconsideration.

The court ordered that the proceeding be stood over for the purpose of making orders giving effect to these reasons for judgment, including orders as to costs. The parties were required to provide an agreed minute of the orders to be made, including orders as to costs, or if agreement had not been reached, the minutes of orders for which they would respectively contend and brief outlines of submissions in support of the orders.

Orders

Orders of the court

1. The proceeding be stood over to Friday 27 May 2005 at 9:30 am for the purpose of the making of orders giving effect to these reasons for judgment including orders as to costs.

2. The parties provide to the Associate to Branson J by Wednesday 25 May 2005 an agreed minute of the orders to be made, including orders as to costs, and if agreement has not by then been reached, the minutes of orders for which they will respectively contend and brief outlines of submissions in support of the orders.

Background

Background to the litigation

For the following reasons I have concluded that this appeal should be upheld and the Determination set aside. BACKGROUND FACTS The Plan was established by a trust deed (‘the Deed’) made on 27 June 1983 between The Employers’ Federation of New South Wales, described in the deed as ‘the Principal Employer’, and The Employers’ Federation Agency Co Limited, described in the deed as ‘the Trustee’. By a deed of appointment dated 30 June 1995 the Trustee was subsequently appointed as trustee of the Plan in substitution for the original trustee. The recitals to the Deed record that:‘The Principal Employer has decided to establish a superannuation fund to be known as The Employers’ Federation of New South Wales Superannuation Plan (called the Plan) for the purpose of providing superannuation benefits for such of its Employees and the Employees of any Associated Employers (as hereinafter defined) who being eligible participate in the Plan and/or for the Dependants of such Employees.’ The Rules of the Plan (‘the Rules’) are annexed to the Deed, which provides that the Rules are to have the same force and effect as if set out in the body of the Deed. The Plan is an employer‑sponsored defined benefit fund within the meaning of the Superannuation Industry (Supervision) Act 1993 (Cth) (‘the SIS Act’). The applicant has at all times been the ‘Principal Employer’ for the purposes of the Plan. Mr Barratt was employed by the applicant from 16 January 1990 until his retirement on 15 January 1999. He was a member of the Plan for the entire period of his employment by the applicant. The Trustee issued ‘member statements’ to members of the Plan annually. The member statements were intended to show the member concerned the current balance of contributions made to the Plan on his or her behalf and the estimated benefit to which he or she would be entitled upon retirement. The member statements received by Mr Barratt showing his position as at 30 June 1995, 30 June 1996 and 30 June 1997 (‘the Member Statements’) contained, amongst other things, an estimate of the lump sum retirement benefit to which he would be entitled at age sixty‑five. In each of the Member Statements the estimate was said to exclude superannuation guarantee contributions. The member statement received by Mr Barratt showing his position as at 30 June 1997, in contrast to the two earlier member statements received by him, showed the estimate of his retirement benefits as at 30 June 1996 and 30 June 1997 as being ‘subject to employer approval’. The reason for the addition of this qualification on the estimate may be assumed to be the controversy referred to below. Each of the Member Statements received by Mr Barratt contained the following note:‘This statement should be read in conjunction with your Member Booklet. If you have any questions please contact your manager. Whilst every care has been taken in the preparation of this Statement, the Trustee reserves the right to correct any error or omission.’

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

BRANSON J
The Tribunal did not invite the parties, or any of them, to place submissions before it touching on clause 21 of the Deed. Nor did it alert the parties to the possibility that it might conclude that the applicant had given the Trustee a relevant direction under clause 21 of the Deed. The Tribunal did not invite the parties, or any of them, to place submissions before it on the question of whether any additional contribution had been paid in respect of Mr Barratt under rule 3(6) of the Rules. Nor did it alert the parties to the possibility that it might conclude that the applicant had paid additional contributions in respect of Mr Barratt under rule 3(6) of the Rules.DECISION OF THE TRIBUNAL The Tribunal provided to the parties a written record of the Determination and the reasons for the Determination (‘the Decision Record’). Under the heading ‘TRIBUNAL’S DELIBERATIONS’ the Decision Record notes that the Tribunal gave particular consideration to two letters; first, the letter dated 7 March 2000 referred to above which is described in the Decision Record as a letter from the former trustee to the Tribunal and secondly, a letter dated 5 August 1996 described in the Decision Record as a letter from the former trustee to the Chief Executive of the applicant. In each case the reference to ‘the former trustee’ is in error. Each of the letters was from the Trustee albeit that it was written prior to the Trustee assuming its present name. The Decision Record notes that the letter dated 7 March 2000 provided the following answers to queries from the Tribunal:‘(a)The benefits payable under the Trust Deed include the SG benefit (excluding any employer directed benefit under Clause 21 of the Deed);(b)The employer under clause 21 of the Trust Deed directed that the SG be an additional benefit;(c)That direction was revoked by the employer on 25 May 1998 in a letter from the employer’s solicitors …’ The Decision Record notes that the letter dated 5 August 1996 stated, amongst other things:‘Superannuation guarantee contributions have been credited to member’s accounts since introduction of this legislation effective 1 July 1992. However, as the Federal Government intends to increase the superannuation guarantee contributions to 9% by the year 2000, this will have a significant effect on the duration of the surplus if contributions of these levels are credited to member’s accounts. The use of minimum requisite benefits will mean that part of the employer’s funding within the withdrawal benefit is considered as part of the superannuation guarantee provisions.Given that this practice differs from that we currently undertake and would result in lower withdrawal benefits for some members, we ask that the Employer considers this matter carefully and advises the Trustee as to whether the current practice of crediting member’s accounts with the superannuation guarantee contributions should be continued or whether the minimum requisite benefit should be paid on withdrawal. Until this is clarified we will continue our current practice of crediting member’s accounts with the superannuation guarantee contributions. The actuary has undertaken the valuation based on our current practice …’

Ratio Decidendi

Legal Principle Established

Established by: BRANSON J

The Decision Record records the Determination as follows:‘In accordance with the requirements of sub‑ss.37(3), (4) and (5) of the Complaints Act, the Tribunal determines to set aside the decision of the Trustee and substitutes its own decision that the Complainant is now entitled to a further payment from the Plan equal to the accumulation (net of contributions tax) of superannuation guarantee contributions in respect of him up until 25 May 1998, plus interest at the Plan’s crediting rates from time‑to‑time up until the date of payment.’CONSIDERATION OF QUESTIONS OF LAWProper Construction of Clause 21 The second further amended notice of appeal identifies, amongst other questions of law, the following question:‘whether on the proper construction of clause 21 of the Deed, the Principal Employer may give a direction to the Trustee to pay a member on the member’s retirement a lump sum retirement benefit calculated otherwise than pursuant to rule 4 of the rules; ….’ Mr Barratt by his written submissions submitted that the above question, properly understood, does not raise a point of law. Counsel for Mr Barratt at the hearing, who was not the author of the written submissions, did not submit that a question as to the proper construction of a clause of a deed is not a question of law within the meaning of s 46 of the Complaints Act. Rather he submitted that, having regard to the factual findings made by the Tribunal, no issue arose before the Tribunal as to the proper construction of clause 21 of the Deed. I reject this submission for reasons that are set out below. The intended meaning of clause 21 of the Deed is to be ascertained objectively from the language used by the parties to the Deed. As Gibbs J observed in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109:‘…the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonised one with another.’In the present case this means that the intended meaning of clause 21 is to be ascertained by considering the words of the clause in the context provided by the Deed as a whole and by the Rules. The Rules are to be considered as part of the relevant context because, as mentioned above, clause 2(1) of the Deed provides that the Rules shall be read and construed and have the same force and effect as if set out in the body of the Deed. Examination of the Deed and the Rules reveals that they together vest various powers and functions in the Trustee for the purpose of the administration of the Plan. The provisions that vest these powers and functions in the Trustee can be seen to fall into three broad categories. The first category is provisions that are enabling in their operation. So, for example, clause 3(7) provides that the Trustee may enter into and execute contracts which it deems expedient for the purpose of securing the benefits to be provided by or from the Plan. Clause 3(8) authorises the Trustee to open and operate such bank accounts as it thinks desirable. Clause 3(10) authorises the Trustee to appoint a Secretary of the Plan. Clause 3(12) authorises the Trustee to delegate to any company or person on such terms as the Trustee thinks fit any of the powers, duties or discretions conferred on the Trustee by the Deed. Clause 5(1) authorises the Trustee to invest the assets of the Plan in certain kinds of investments. Rule 2(6)(a) authorises the Trustee to admit to the Plan an employee who is unable, for example, to pass a prescribed medical test.