Hill and Zuda Pty Ltd (ACN 008 968 232) as trustee for the HOLLY Superannuation Fund & Anor

[2021] HCATrans 199

[2021] HCATrans 199

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P17 of 2021

B e t w e e n -

CLAIRE ELIZABETH HILL

Applicant

and

ZUDA PTY LTD (ACN 008 968 232) AS TRUSTEE FOR THE HOLLY SUPERANNUATION FUND

First Respondent

JENNIFER PATRICIA MURRAY AS EXECUTOR OF THE ESTATE OF ALEC SODHY

Second Respondent

JENNIFER PATRICIA MURRAY

Third Respondent

Application for special leave to appeal

GAGELER J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO SYDNEY AND BRISBANE

ON FRIDAY, 12 NOVEMBER 2021, AT 3.00 PM

Copyright in the High Court of Australia

____________________

GAGELER J:   In accordance with the protocol for remote hearings, I will announce the appearances of the parties.

MR B.W. ASHDOWN appears for the applicant.  (instructed by Eastwood Law)

MR A.P. HERSHOWITZ appears for the respondents.  (instructed by Lawton Gillon)

GAGELER J:   Mr Ashdown.

MR ASHDOWN:   Thank you, your Honours.  Your Honours, this application for special leave has at its core one essential issue and that is whether sub‑regulation 6.17A(1) is required to be essentially paid attention to and not ignored when construing the application of sub‑regulations (4) through (7) to the provisions of the SIS Act, which would then make it applicable to a self‑managed superannuation fund.  As matters presently stand, the courts below have considered the application of regulation 6.17A to be not applicable to a self‑managed superannuation fund based solely on a construction that draws on section 59 of the SIS Act. 

It is accepted by the applicant that section 59 does not apply to a self‑managed superannuation fund.  However, what we say the decisions below have not considered in any way is that the regulation is made applicable by section 55A and 31 which prescribe, relevantly, operating standards that apply to a self‑managed superannuation fund. 

So, specifically on the state of authorities that was given comity to by the Court of Appeal, we say that that omission gives rise to a question of statutory construction that should have been explored by the Court of Appeal of Western Australia.  That comes about, in our submission, because when one looks at the express words of sub‑regulation (1), to not say that that has any work to do, we say offends the statutory construction principles because the only way ‑ ‑ ‑ 

EDELMAN J:   Mr Ashdown, even accepting that sub‑regulation (1) has work to do, why could it not be said that sub‑regulation (1) has work to do in relation to sub‑regulation (3), but that sub‑regulation (4) is concerned, as it expressly says, with sub‑regulation (2), which is enacted under subsection 59(1A)? 

MR ASHDOWN:   Your Honour Justice Edelman, the reason we say that that is not the proper construction is firstly, that sub‑regulation (1) contains an express reference to sub‑regulation (4) and does not mention sub‑regulations (2) and (3).  We also say that sub‑regulation (2) naturally identifies section 59(1A), and it does so because when one looks at those sub‑regulations (2) and (3), the purpose, we say, behind giving the information to a member of a super fund logically applies to a retail fund because the member will not be a trustee and will not be in possession, necessarily, of information such as the size of the member benefits and the like, whereas, with a self‑managed super fund, the pre‑existing requirements of the SIS Act all have the member as either a trustee or a director of the trustee company.

So, we say it is logical that sub‑regulations (2) and (3) apply to a retail fund.  It is understandable why they do not apply to a self‑managed superannuation fund.  But to then say that we ignore, because of the reference in sub‑regulation (4) back to sub‑regulation (2), any application of those provisions has the effect not only of removing any consideration as to the text that has been deliberately placed in sub‑regulation (1), but also what it would do is leave there being – contrary to section 55A – essentially no prescribed standard for the payment of a death benefit, and we say that based upon the reasoning in Retail Employees v Pain, where Justice Blue in that decision analysing the provisions, came to, we say, the correct conclusion that sub‑regulations (4) through (7) are apt to be described as payment standards, whereas regulation 6.22 merely limits the scope of the class of people to whom moneys can be applied at the end of the day. 

If that reasoning is correct, what it also does is it says that there is then actually no payment standard as a standard that would be referable to sections 31 or 55A in the legislation.  So that analysis, we say, reinforces why a proper construction of regulation 6.17A requires that the language in sub‑regulation (1) be seen to do some work and it not be wholly ignored.

EDELMAN J:   Why cannot the language in sub‑regulation (1) apply – as it is itself expressed – to the operation of regulated superannuation funds generally and picking up the standard in sub‑regulation (4)?

MR ASHDOWN:   It does apply to regulated superannuation funds generally, your Honour, and we say that that does not conflict with our construction.  A self‑managed superannuation fund is but one subset of a regulated superannuation fund and what it would then do is it would make these provisions as to binding death benefit nominations apply, essentially, to all superannuation funds. 

We would say there is nothing harmful to a construction of that outcome because to do otherwise would essentially leave regulations in place that apply to a retail fund, but it would then leave self‑managed superannuation funds with no regulation as to how they create binding death benefit nominations.  We say that that would be an anomalous position.

If sub‑regulation (1) in picking‑up sub‑regulation (4), applying to all regulated superannuation funds is a perfectly logical application to make that as a uniform standard and it also, in our submission, supports why sub‑regulations (2) and (3) are applicable only to retail funds because of the lack of the member making the binding death benefit nomination being in possession of all information they should otherwise have to make an informed decision. 

Whilst I accept sub‑regulation (4) is not happily worded with its reference back in the third line as we have repeated to sub‑regulation (2), but as a matter of construction, it is doing less offence to the text of that sub‑regulation, we say, in reading sub‑regulation (1) as requiring some form of application to come out of sub‑regulation (4), and that can be done rather than ignoring the entirety of the provision.

GAGELER J:   Mr Ashdown, as I understand it, this is an argument that you say was not grappled with in the Court of Appeal.  Is that right?

MR ASHDOWN:   That is correct, your Honour Justice Gageler.  The decisions below that predate the Full Court of the South Australian Supreme Court decision all focused on section 59, and none of them considered the application of sections 31 or 55A, and none of them considered the sub‑regulation (1). 

What then happened in the Full Court of South Australia was in a very short passage, which the Court of Appeal set out, the court essentially adopted her Honour Justice Mullins’ view at that point in time as to the fact that section 59 meant it was wholly inapplicable, but they themselves did not explore the matter but, as set out in paragraph 32 of that judgment, which the Court of Appeal cited, it was in fact not actually a matter that was of relevance to the decision there.

That case turned upon an argument as to whether the express terms of the deed imported the law.  In our submission, the Court of Appeal of Western Australia should not have simply followed that decision as an application of the principle of comity, and the reason it should not have done that is that, on its face, it was self‑evident that none of the decisions there had in fact analysed or grappled with the argument that we put forward now.

It was also the case that the decision of Justice Blue in Retail Employee Superannuation Pty Ltd v Pain was not cited in any of those decisions, and we only get to the decision of Re Narumon after the Full Court of South Australia, where there is some small attempt at looking at the decisions in the context of a potential application of sections 31 and 55A, but again there is no analysis there and no consideration, particularly as to the test of sub‑regulation (1).

We say, as a matter of statutory interpretation, to arrive at a construction that simply ignores sub‑regulation (1), which we say Re Narumon did, is to demonstrate that either the decision is plainly wrong, as we would submit primarily, but also to show that there has not been a satisfactory analysis of that argument so as to constitute a requirement that the principle of comity called for an application of the outcome without itself grappling with the interplay of sections 31, 55A and sub‑regulation (1).  That is why we say the Court of Appeal misapplied the principle of comity.

GAGELER J:   Mr Ashdown, is it correct to understand the decision of the Court of Appeal, although on an appeal from a summary – a decision given on a summary judgment application as, in effect, final?

MR ASHDOWN:   Yes, it is, your Honour.  The proceedings below were an application by the respondent for summary judgment dismissing the claim that was granted by the learned Master.  On appeal - there were two appeal grounds.  One raised a substantive question.  The second was simply whether the matter should have been the subject of a summary judgment application, and to the accepted standards.

In argument it was accepted by all parties that if the substantive question was determined it would result in the dismissal of the proceedings and that decision was upheld by the Court of Appeal from the Master.  So, we say that this is a final decision on the point.  The proceedings below stand dismissed and that is the end of the action as it currently stands.

GAGELER J:   Yes, thank you. 

MR ASHDOWN:   Your Honours, that is the nub of the question that we press on special leave.  It is a matter that we say, as the Court of Appeal has recognised, comes really to the point of, unless there is a reconsideration by the High Court, the law now stands settled that there is no regulation of

self‑managed superannuation funds in applying death benefit nominations.  For those reasons we say this is also of a significant enough importance that the Court should revisit the prior decisions in this matter and pronounce on the law as it stands.

GAGELER J:   Thank you, Mr Ashdown.  Mr Hershowitz.

MR HERSHOWITZ:   May it please your Honours.  Your Honours, we say this is not a case which raises any matter appropriate for the Court’s attention concerning the construction of the regulations.  An orthodox approach was adopted by the Court of Appeal following the intermediary Court of Appeal decision in Cantor Management and based on the principle in Farah Constructions ‑ ‑ ‑

EDELMAN J:   But, Mr Hershowitz, the Court of Appeal does not directly address the construction of 6.17A(1) that the applicant puts.

MR HERSHOWITZ:   No.

EDELMAN J:   Why do you say that 6.17A(1) should not be read according to its terms?

MR HERSHOWITZ:   The construction proffered by the respondent, which was found by the Court of Appeal to be reasonable to the argument – the Court of Appeal directly considered the impact of regulation 6.17A(4) and how it relates to sub‑regulation (2), which we say supports that construction as identified by your Honour Justice Edelman.

Yes, there was not a strict analysis of sections 31 and 55 of the Act, but on a proper construction, we would say, of 6.17A in its entirety – which had regard to all the relevant subsections – the construction which the Court of Appeal did follow, we say, is the more appropriate construction.  That was referred to, I think, at paragraph 45 of the decision of the Court of Appeal citing the decision of Re Narumon and how ‑ ‑ ‑

EDELMAN J:   Mr Hershowitz, how do you read down subsection (1) then?

MR HERSHOWITZ:   Subsection (1) should be read down, we say, as applying only in respect of regulated superannuation funds that are not self‑managed super funds and are referable to those parts of the – the balance of the regulation, your Honour.  For example, if one has regard to subsection (3) in 6.17A, that is clearly a regulation that could not have any relevance to a self-managed super fund because your Honours would know that the ordinary position with self-managed super funds is that it is the same persons who are the administrators of the trust and the beneficiaries of the trust.

For that construction to be preferred, then you would have to read subsection (1) as applying to 31(1), somehow also applying to subsection (3) which we say it would not be able to be read in that way, your Honour.  So, it must be ‑ ‑ ‑

EDELMAN J:   Except it only picks up sub‑regulation (4).  Is there anything in sub‑regulation (4) that is inconsistent with the application of those standards to a self‑managed super fund,, or is there any reason why an implication would be drawn from subsection (1) that excluded self‑managed superfunds?

MR HERSHOWITZ:   No, your Honour, but it is certainly the position, we would say – when I say no, if I may restate that.  Subsection (1) we say can be read as applying to the sections independent of subsection (4) because subsection (4) specifically is referable back to sub‑regulation (2) and that concerns section 59(1A), which does not deal with self‑managed super funds.  It is on that basis we say subsection (4) can be said to be read as if it is a standalone section and not applicable for the purposes of section 31(1) of the Act.

GAGELER J:   Mr Hershowitz, can I ask a question of methodology?

MR HERSHOWITZ:   Yes, your Honour.

GAGELER J:   At paragraph 37 of its judgment the Court of Appeal set out a passage from the judgment of Chief Justice Kourakis in Cantor Management.  Do I understand that the Court of Appeal then, in paragraph 41, characterised what was there said as seriously considered dicta and then went on to treat itself as bound to follow Cantor Management, unless convinced that it was plainly wrong.  Is that the structure of the reasoning?

MR HERSHOWITZ:   As I understand the reasoning, your Honour Justice Gageler, what the Court of Appeal was doing there was responding to the submission made by the appellant that Cantor Management was not binding and what they said is they consider it was by reference to a notice given to the trustee but in any event, regardless of whether it was part of the right ratio, they seriously considered the dicta to which considerable weight must be given and on that basis the Court of Appeal said they would follow Cantor Management.  That is how I apprehend the reasons, your Honour.

GAGELER J:   It may involve a conflation of a couple of ideas that were expressed distinctly in Farah Constructions about the relationship between an intermediate appellate court and the High Court on the one hand and the relationship between an intermediate appellate court and another intermediate appellate court on the other hand.  It is just possible that those two ideas have been run together.

MR HERSHOWITZ:   Yes, your Honour.  It is interesting the Court of Appeal’s observation that the construction of the applicant in this application is “reasonably arguable” – that is all it said.  But it still maintained that, on the basis of Farah Constructions, it was bound to follow Cantor Management because it could not be demonstrated to be manifestly wrong.  So, “reasonably arguable” but, by the same token, made findings that the respondent’s construction was a reasonable argument to make and it was bound, accordingly to follow, on the authority of Farah Construction, Cantor Management.

So, your Honours, we say that the Court of Appeal in doing so then entertained the different competing arguments on the construction and, without directly engaging section 31, of course, of the Act, did analyse in a significant way, the construction proffered by the respondent and referenced Re Narumon as supporting that particular construction and, on that basis, said that it was bound to follow Cantor Management.  Hence, we say, that there is uniformity in the decisions and there is no reason why the High Court would interfere unless they considered the ‑ ‑ ‑

EDELMAN J:   There may be a very large question about whether intermediate appellate courts are bound to follow obiter dicta of other intermediate appellate courts unless they consider that obiter dicta to be plainly wrong.

MR HERSHOWITZ:   Indeed, but here the Court, also, in paragraph 41, was suggesting, we say quite strongly, that that was the ratio of Cantor and was not simply an obiter dicta, your Honour, if one has regard to paragraph 41 of the reasons for decision.  Having acknowledged there was some debate about the ratio of Cantor Management, they say, arguably – this is the Court of Appeal – that they do form part of the ratio – that is the application of regulation 6.17A but said, in any event, it seriously considered dicta. 

So, the Court of Appeal was not simply applying its construction and analysis of the situation based on what it thought was an obiter dicta and followed Cantor Management and in so doing, we say, accepted that it was obliged to do so on the basis of a ratio in another intermediate court. 

The construction proffered by the respondent is well set out by the Court of Appeal - it is not worth me having to repeat that.  What I could say, your Honours, is that the Commissioner of Taxation, although that is in

no way binding on anything, has always applied the position, as has been applied in Cantor Management and by the Court of Appeal, and we say the significance of any, or the consequences of any change in position would have a significant impact on self‑managed super funds and on persons associated.

GAGELER J:   Do you accept what is said in the reply in paragraph 6 about the different position taken by APRA?

MR HERSHOWITZ:   Yes, your Honour.

GAGELER J:   Thank you.

MR HERSHOWITZ:   Thank you, your Honour.  Unless there is anything else I can assist your Honours with, those are the submissions.

GAGELER J:   Thank you very much, Mr Hershowitz.  Mr Ashdown, do you have anything to say in reply?

MR ASHDOWN:   Nothing further in reply, your Honour.  I would only be repeating our primary submissions.

GAGELER J:   Thank you very much.  We will adjourn for a moment to discuss the course we will take.

AT 3.24 PM SHORT ADJOURNMENT

UPON RESUMING AT 3.25 PM:

GAGELER J:   Mr Hershowitz, we have lost vision of you.  Can you hear us?

MR HERSHOWITZ:   I can.  Can your Honour hear me?

GAGELER J:   Yes, I can.  There will be a grant of special leave to appeal in this matter.  Would half a day be sufficient, Mr Ashdown?

MR ASHDOWN:   Yes, it certainly will, your Honour.  The argument I do not anticipate taking more than two and a half hours. 

GAGELER J:   Mr Hershowitz?

MR HERSHOWITZ:   Yes, I would concur with that, your Honour.

GAGELER J:   Well, is that two and a half hours total between the two of you?

MR ASHDOWN:   Yes, that was my intention of expressing a total time, your Honour Justice Gageler.

GAGELER J:   Yes, thank you.  And yours as well, Mr Hershowitz?

MR HERSHOWITZ:   Yes, no more than ‑ ‑ ‑

GAGELER J:   Yes.

MR HERSHOWITZ:   It would not go beyond that, thank you.

GAGELER J:   Very good, thank you both.  The Court will now adjourn until Tuesday 30 November at 10.00 am.

AT 3.28 PM THE MATTER WAS CONCLUDED