Hill v Zuda Pty Ltd as Trustee for the Holly Superannuation Fund & Ors

[2022] HCATrans 49

[2022] HCATrans 049

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth   No P48 of 2021

B e t w e e n -

CLAIRE ELIZABETH HILL

Appellant

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

KIEFEL CJ
GAGELER J
KEANE J
GORDON J
EDELMAN J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA AND BY VIDEO CONNECTION

ON TUESDAY, 5 APRIL 2022, AT 10.00 AM

Copyright in the High Court of Australia

____________________

MR B.W. ASHDOWN:   May it please the Court, I appear for the appellant.  (instructed by Eastwood Law)

MR M.D. CUERDEN, SC:   May it please the Court, I appear with my learned friend, MR A.P. HERSHOWITZ, for the respondents.  (instructed by Lawton Gillon)

KIEFEL CJ:   Thank you.  The record should show that Justices Edelman and Steward are sitting remotely.

Yes, Mr Ashdown.

MR ASHDOWN: Thank you, your Honour. At the centre of this appeal is the interpretation of regulation 6.17A of the Superannuation Industry (Supervision) Regulations. That is a regulation that was brought into being in conjunction with the amendments that were made with respect to the superannuation funds and their ability to bring in binding death benefit nominations.

If I can take your Honours first to the actual regulation as it was inserted.  That is found in tab 11 of the book, specifically at page 152.  Your Honours, from the inception of this regulation, subregulation (1) has expressly provided a reference that is made for the purposes of sections 31 and 32 of the Act.  What is then found as enacted ‑ and these provisions have as far as all necessary intents and purposes not changed since the inception of this regulation – is that they have then provided in subsections (2) and (3) of the regulation for conditions upon a notice by specific reference to section 59.

Now, it is accepted by the appellant that section 59 has no application to self‑managed superannuation funds.  It is important, in our submission – the distinction that is drawn by the specific reference in subregulation (1) to section 31 – and the specific reference in subregulation (2).

What is at the heart of this appeal in the question is, to the extent that section 31 applies to all regulated superannuation funds, the inclusion of that express reference in subsection (1) must have work to do.  We say, for the respondents to succeed in opposing this appeal, they must show that the entire regulation can only have application under section 59, and can have no reference back at all to section 31.

GLEESON J:   Does 6.17A (1) not provide a standard for the application of 55A(1) in the Act?

MR ASHDOWN:   That is the appellant’s case, your Honour, yes.  The importance of section 55A, I will come to in more detail, but the primary reference that we make to section 55A, on our construction, is that without regulation 6.17A there would be no work for section 55 to do.

GLEESON J:   Without section 6.17A (1).

MR ASHDOWN:   That is correct, your Honour.  When that provision was introduced, in 2017 – dating some way after this regulation – it would have had no other reference other than, we say, to the provision in subregulation (1) – otherwise it would be a choice.

What is then the difficulty with the regulation – and where all of the cases that have gone so far as to consider this matter have found against the appellant – is in subregulation (4), where as it was enacted the provision contains other than it is being subjected to regulation 6.17B – which is not of any relevance – is the following phrase where it provides that:

if the governing rules of a [super] fund permit a member of the fund to require the trustee to provide any benefits in accordance with subregulation (2) ‑ ‑ ‑

It is that reference back that is the lynchpin that the other authorities considered that makes this subregulation solely referable to section 59.

GORDON J:   Does that also not then modify 6.17A(1)?

MR ASHDOWN:   That is the case that is put against us, your Honour.  There is to be a modification somehow because of that, of subregulation (1).  In the appellant’s submission, it is, in fact, the other way around because the clear words of subregulation (1) provide, in our submission, a very clear and unambiguous reference that subregulation (4) is to be picked up and applied for the purposes of section 31.

So, if one was to look at the competition between those two provisions, in our first submission we would say, properly construed, subregulation (1), in picking up subregulation (4), essentially does not need to have reference to the phrase that I have referred to because with respect to the self‑managed superannuation funds and all regulated funds there is no need for that reference to be there because it is subregulations (2) and (3) that do the work for section 59(1A).  That work is done, we say, as the analysis was done in Retail Employees v Pain. 

We also make reference, your Honours, to the explanatory memorandum that came with this insertion.  That is, relevantly, included in the books at tab 29.  I will take your Honours to that while we are on the topic.  Specifically, if I can take your Honours to page 852, under tab 29.  This is the explanatory memorandum that came in with the introduction of regulation 6.17A.  Under item [2], there is the reference to the “New regulations”.  But, at approximately a third of the way down the page, at the first starred indent, when describing the regulation, it actually makes the point that:

Subregulation 6.17A(1) prescribes the standard set out in subregulation 6.17A(4) as an operating standard for the purposes of the –

Act.  We would say that, by reference to that, that also highlights, in our submission, the primary purpose for subregulation (1) and its primacy over subregulation (4).

In that context, we also meet the argument with respect to the heading that has been inserted with the regulation where it makes a sole reference in the heading of the regulation to section 59(1A).  Again, we say that that cannot affect the interpretation of the provision because of the fact that the clear words clearly outrank the heading as far as the interpretation provision is concerned.

STEWARD J:   Mr Ashdown, I am not sure whether you can hear me – I hope you can.

MR ASHDOWN:   I can, thank you, your Honour.

STEWARD J:   Can I ask you, what is your answer to the respondent’s point that subregulation (3) of 6.17A really makes no sense in the case of a self‑managed superannuation fund where there is identity between the trustee and the member?

MR ASHDOWN:   Your Honour, subregulations (2) and (3), we agree, are solely referable to section 59(1A) and we say that because when one looks at the distinction between a non‑self‑managed superannuation fund and the self‑managed, the obligation in a self‑managed superannuation fund is for the members to be directors and, therefore, have access to all of that information, one would assume.  Whereas, in a retail fund where the members are not directors, they would be reliant upon the trustee to provide that information.

We say that that is a condition that is imposed upon a trustee and, therefore, it is a condition that matches the wording of section 59(1A) where it speaks of the rules of a retail fund being permitted to contain a binding death benefit notice on the condition that the trustee meets what is prescribed by the regulations and we agree that subregulations (2) and (3) are solely referable to the condition.  To that extent, the regulation has a duality about it because it makes that reference.

But we say that the balance of the regulation is referable to a payment and operating standard which is relevant to all funds, and we say that it is referable to all funds because it would then produce the curious result if one was to look at a retail fund having a binding death benefit notice that expires in three years, for example, whereas a self‑managed fund could, in essence, prescribe any length of time, or even a notice that never expired.

GLEESON J:   What is the purpose of having that time limitation on the life of a nomination form?

MR ASHDOWN:   There have been several suggestions, your Honour.  I understand that the main reason for putting a three‑year time limitation on it was so that one did not, essentially, prepare a notice, provide it, and it be forgotten about, and circumstances change without it being reconsidered, such that years down the track it did not meet the then‑needs of the person, so it required a regular review.

GLEESON J:   So why would that purpose be relevant for a self‑managed super fund?

MR ASHDOWN:   The conditions would change in a self‑managed superannuation fund in any event.  The member circumstances would be open to change, just as a member of a retail fund would be open to life change, whether it be through divorce, remarriage, children, even age of the children, whether they are in need of support, all of the factors, we say, that would go to a change in circumstances would justify, as Parliament has saw fit, to limit the notice to three years, would be equally applicable to a self‑managed superannuation fund.

GORDON J:   It really drives, does it not, the question about the role of a self‑managed super fund and what it does and how it stands very distinct from a retail fund, both as to membership, control, ability to amend the deed and otherwise subject, of course, to the minimum requirements for a fund.

MR ASHDOWN:   There are some stark differences to a retail fund, your Honour, that is correct.

GORDON J:   They drive, do they not, really, to the heart of this idea that there is some purpose needed for those kinds of funds by reference to these provisions?

MR ASHDOWN:   Your Honour, it is a relevant consideration, certainly, as to why one would want them in a retail fund, but we would submit, in respect of a self‑managed superannuation fund, they are equally applicable, because the counter‑position would be that there is no regulation of a self‑managed superannuation fund, which would then enable, as is put by the respondents, for people to put terms in deeds, to change the circumstances in which notices can and cannot be given to the point where one could use them as a free tool to come up with any – whether it be a State planning scheme, or whether it be any other conditions that one wants to impose, and one would not imagine that one would leave self‑managed superannuation funds totally free.

GORDON J:   But are they totally free?  I had understood that there were other regulations that were directed and governed both payment and cashing‑out of member benefits post‑death.

MR ASHDOWN:   The regulation that applies to all superannuation funds for the cashing of benefits post‑death is regulation 6.22, and that limits the class of eligible recipients upon death, and that is essentially a class which is either the legal personal representative of the deceased member, the deceased member’s spouse, children of the deceased, and/or somebody who was in a financial dependency relationship.  And that is a limited class to who can succeed to those benefits, but it does not then impose any conditions as to how that class can be further closed without there being any regulation, we say, on binding death benefit notices for self‑managed superannuation funds at all.  One can ‑ ‑ ‑ 

EDELMAN J:   Mr Ashdown, it does tend to suggest, however, that there is less need to regulate the manner in which notices and so forth is given within that class.

MR ASHDOWN:   It does suggest in some way, your Honour, that there is not the heightened need that there is in a retail fund; I do accept that.  However, there is still a need for it to be regulated, in my submission, so that we can still have notices that are given with due consideration of formality and it is not, in my submission, a reason why there would be no regulation.  But I do accept that obviously there is a heightened relevance to the notice provisions for the retail fund sector.

GAGELER J:   Mr Ashdown, how do you deal with those troublesome words in subregulation (4)?  Do you just ignore them?

MR ASHDOWN:   Your Honour, there is a direct conflict between subregulation (1) and (4), and we would say subregulation (1) as to its position garners primacy, which would mean that with the additional words that are inserted in subregulation (4) they are essentially, if one looks at the language of subregulation (1), we say picked mutatis mutandis almost, so that one looks at it as the wording being if the governing rules permit a fund it is essentially saying if subregulation (2) is applicable, therefore what we are looking at is in an interpretation of those words that conditioning that is put in that phrase should be interpreted as if it is to the extent that subregulations (2) and (3) are applicable those conditions have been met.

GAGELER J:   Thank you.

MR ASHDOWN:   Your Honours, where the submissions then take the matter is that in looking at, in further answer to your Honour Justice Gageler’s question, the reason we say that the regulation should be interpreted in that fashion with the subregulation having some primacy is essentially for the reasons that were discussed in the case of Retail Employees v Pain, which is at tab 23 of the book.  I have set out in the oral outline the primary points and I was intending to simply address those without taking your Honours through the relevant sections of the judgment.

But as it was identified in that case and as we have just had the exchange, the text, context and purpose, we say, of subregulation 7.1A favours subregulations (1) and (4) through (7) to actually apply for section 31, firstly because of those express words of subregulation (1) but also, as was set out in that decision, the nature of the notice provisions. 

GAGELER J:   It is a very long decision.  Is there a purple passage?

MR ASHDOWN:   The relevant passages, your Honour, in the analysis commences on page 695 of the book with paragraph [495] at the foot.  After the introduction of the first couple of paragraphs, the reasons are set out essentially by Justice Blue from paragraph [498] following from page 696.  In [498] his Honour  makes reference to the text, context and purpose passage.  The following factors that are also identified are the explicit distinction in the subregulations (2) and (3) being expressly made for section 59(1A) in its opening, in distinction to subregulation (1) making a specific reference to section 31. 

At paragraphs [500] and [501], what is identified there is essentially again the point that subregulation (4) is apposite to an operating standard on how things are to be done within a superannuation fund, that being an operating standard directly referable to the purpose of section 31 and not that of section 59.  At paragraphs [502] through [504], Justice Blue identifies there again the nature of the condition that needs to be complied with by the trustee and section 59(1A) speaking specifically in terms in its words of a condition that the trustee must satisfy in order for a retail fund to accept a notice.

What is of interest – and the important distinction we would adopt that was drawn in those passages – Justice Blue makes a reference to subregulation (7) and specifically the time limit in the expiry of a notice and importantly draws a distinction there, we would submit, that correctly subregulation (7), in putting a time limit, would be a matter that is beyond section 59(1A), and it is a matter again solely that could only be made under section 31 as an operating standard. 

GLEESON J:   Do you say that regulation 6.22 was a standard for the purposes of section 31?

MR ASHDOWN:   Your Honour, our primary submission is no, it is not an operating standard.  It is a regulation which defines the class of beneficiaries, and therefore is not a matter that would naturally sit as an operating standard and therefore we follow the acceptance of the Asgard decision that was actually adopted by the court in Re Narumon, that regulation 6.22 is not an operating standard, and that is the basis also upon which we submit that section 55A would have no work to do.  If the Court is against us on that construction of regulation 6.22, we do accept that it would then fall within the ambit of section 55A but, in our submission, again it would be a curious result for section 55A to be inserted. 

GLEESON J:   I am not sure what you mean by section 55A not having any work to do.  The rule – 55A sets a prohibition.  So, I mean it always has work to do; it prohibits the cashing of benefits otherwise in accordance with the standards, does it not?

MR ASHDOWN:   Your Honour, if I can take you to the actual wording of section 55A, it is in tab 3 of the book at page 63.  The critical aspect of section 55A and why we make our submission is that the condition is that the governing rules:

must not permit a fund member’s benefits to be cashed after the member’s death otherwise than in accordance with standards prescribed for the purposes of section 31.

It is that reference back to section 31 that we would submit if regulation 6.17A is the only regulation that can apply after death as a standard under section 31, if it is held that that does not actually sit under section 31, there would be no work to do because other than regulation 6.22 there is no other regulation addressing the payment of benefits after death.

GLEESON J:   If there was no standard then the rules would not permit the benefits to be cashed.  That would be the work that 55A would do, is it not?

MR ASHDOWN:   If there was no standard under section 31, then what section 55A would do would be to prohibit the payment of benefits after death ‑ you are right – which would be a very curious result – in fact actually totally prohibiting the payment of any benefit, and we say that would be another indicator that there needs to be found a regulation which sits under section 31 and, in our submission, that is regulation 6.17A(1).

GLEESON J:   Correct, yes. 

MR ASHDOWN:   The other point that is put against us, your Honours, is with respect to the wording of section 59(1A), where there is a reference within that section to the giving of a “notice” and that notice being in accordance with regulations.  Now, in our submission, the proper way to construe those words in section 59(1A), is that they can be regulations governing the giving of a notice that are found ‑ made pursuant to another section and we say that is the regulations made under section 31, and that is subregulation (1) and (4) through (7). 

So, our interpretation that we put on the regulations falling within section 31 does not do an injustice to the words in subsection 59(1A) because those words there – making reference to the notice, we say – are a reference to a notice as made in accordance with the section 31 regulations where there is no reason why that subsection of itself should drive, as we say, the respondents submit, that everything must fall under a regulation within subsection 59(1A). 

We also submit that the authority of Re Narumon that is relied upon by the respondents and as was adopted by the Court of Appeal does not actually provide an answer to the question that we are asking, and in that case, that arises because the case was originally put on the basis that regulation 6.17A applied, but that position was changed in that case, as we have set out in our submissions, and the parties in that case adopted the decision of Munro and then changed the argument to suggest that the express words in the relevant superannuation deed incorporated, effectively, the same scheme.

Where the regulation was considered, whilst being obiter, we still say that the inconsistency that arises by regulation 6.17A not being an operating standard under section 31, and the import of section 55A was simply not addressed, the decision also, again, did not take account of the actual express words in subregulation (1) and did not engage in any way with the analysis of Justice Blue in Retail Employees v Pain.

Your Honours, the other point that is put by the respondents is that by these amendments to the deed in this case, and specifically clause 5 that was inserted, that somehow the deed does not constitute a notice.  The consequence of that is said to be that there is no non‑compliance with subregulation (4) in any event, and accordingly, no non‑compliance with section 31.

In our submission, the provision, if it stood in such a construction, would actually be still inconsistent with section 55A, as we have just discussed, and further, when one actually construes this deed one sees that the member signatures on the deed conform with clause 6, which is the expression of a wish that clause 5 be a binding death benefit notice, but also what we say is important in the context of this deed is that the members’ signatures are not required to amend the deed.

The power of amendment in this superannuation deed is contained in clause 10, and if I can simply refer your Honours to the clause without taking you to that, the clause provides for the power of amendment to sit solely with the trustees.  So, in our submission, all that would have been required to amend the deed was for the company, Zuda Proprietary Limited, to execute the deed of amendment.  It would leave the power to therefore create a scheme which bound a member’s benefits in death solely in the hands of the trustee.

Whilst in a large number of self‑managed superannuation funds that may simply be the members by another name, it is still possible, within self‑managed superannuation funds, for a third‑party trustee to be involved, because it is not a requirement that there be no other person.  There is a permission in certain circumstances for a second trustee in a single‑member fund not to be the member, but again, it would be an unusual result for the power of amendment to control the member death benefits, and in that context we say, again, without those signatures being necessary for amendment, the signatures on the deed of the members, it being witnessed, and the context in which both clause 5 and 6 sit, it should be properly construed as a notice in any event.

EDELMAN J:   Mr Ashdown, which ground of appeal does this submission relate to?

MR ASHDOWN:   Your Honour, this submission actually relates to the point that is put in opposition to the appeal by the respondents and it also is the submission upon which the respondents seek a revocation of special leave.  The further matter that we would say why ‑ ‑ ‑

STEWARD J:   Just before you move on, Mr Ashdown, based on that submission you just made – and looking at subregulation (4) – is it the rule that permits a member of the fund to require the trustee to provide any benefits?  In your view, is the rule for this deed simply the rule to amend the deed or is there another rule which you would identify in the trust deed?

MR ASHDOWN:   I am sorry, your Honour, perhaps I do not quite understand the question.  Is your Honour referring to the amendment power in the deed?

STEWARD J:   I am just trying to understand, based on your case, and looking at subregulation (4), which says:

if the governing rules of a fund permit a member of the fund to require the trustee to provide ‑

et cetera, which is the rule in this trust deed which gives that permission?

MR ASHDOWN:   The permission is contained within clause 5 of the trust deed, your Honour.  The trust deed ‑ ‑ ‑

GORDON J:   Do you mean clause 5 of the trust deed or the amending deed?

MR ASHDOWN:   Sorry, the amending deed, your Honour.  The 2011 amendment.  A full copy of the 2011 deed is contained in the appellant’s book of further materials ‑ ‑ ‑

GLEESON J:   I thought it was 5.2 of the rules.

MR ASHDOWN:   Your Honour, the curious part about this trust deed is that the member death benefit provisions are a set of provisions that are contained, as your Honour said, in clause 5.2 on page 11 of the further book.  However, the covering deed to those rules – which is contained on page 5 – contains a set of operative provisions numbered to clause 1 but then there are six clauses thereunder.  Clause 5 is the relevant term in this case, which provides that:

Despite anything else in the trust deed or Rules, if either of Alec Kumar Sodhy or Jennifer Patricia Murray dies, then the Trustee must distribute the whole of the deceased Member’s Account Balance to the other Member ‑

Clause 6 then follows by a statement of:

Clause 5 is a Binding Death Benefit Nomination for the purpose of the Rules.

So, it is those provisions ‑ ‑ ‑

STEWARD J:   But is clause 6 right?  If one looks at clause 5.2 and what follows, there is a mechanism whereby a notice can be given, that does not seem to have happened here.  What has instead happened is that the deed itself has been amended and then there is a binding provision in new clause 5 as to what is to happen if either of the two nominated individuals passes away.  Is that not what has happened here?

MR ASHDOWN:   That is the clause on its face, your Honour, but the difficulty with the clause operating in that fashion is, with respect to our further submissions as to the other prohibitions that exist within the Superannuation Industry (Supervision) Act.  At all times previously, the position has been put that that constitutes a notice and, in our submission, that is correct – in its primary position – because of the way in which the deed is signed on clause 6 where it is signed by the members in the presence of witnesses and because of it then matching the clauses 5.2 and following about the giving of a binding death benefit notice, but if it is to be understood and construed as not being a notice within the provisions, then in addition to that term not being permissible we say under section 55A because there would be no ability to deal with the member’s benefits after death in accordance with a standard under section 31.

What is also applicable in this case, we say, is section 52B(2)(e).  Your Honours, that provision is contained within tab 3 of the first volume of the book, at page 61. 

EDELMAN J:   Mr Ashdown, these are all issues that you – or the respondent – would agitate, on any remitter, if your appeal was successful.

MR ASHDOWN:   That, I understand, to be the correct position, your Honour, yes.  If the appeal was successful, then the deed would be invalid, we say, in clause 5 and these further issues would not arise.  But in answer to the argument that is put against us that it does not constitute a notice and, therefore, it is outside the prohibitions, we point to section 52B(2)(e) as a reason why – even if we are wrong on our first submissions – the clause in the deed would be impermissible.  That is because of the prohibition that exists there that applies to all superannuation funds with respect to – this section, itself, means superannuation funds specifically because it would be effectively a contract – or the doing of something – that prevents the trustee, or hinders the trustee, from properly performing or exercising the trustee’s functions and powers.

We say it does that because, absent the clause, the only restriction is the class restriction in regulation 6.22 and the trustee would then have a discretion as to which of those members would be entitled to a distribution and by binding themselves in this deed in advance the trustee is fettering that discretion.  It is in that context, we say, that it is of importance why the binding death benefit provisions that are brought in by regulation 6.17A(1) again provide for a mechanism whereby this prohibition does not attach.

Your Honours, that was the submissions I intended to make addressing ground 1 of the appeal.  We have included within the appeal grounds 2 and 3 which address the issue of comity.  We do accept that if this Court finds in favour of us on the first ground, then the second and third grounds would, essentially, have no further work to do because your Honours will have found in our favour on that basis.

GAGELER J:   If we were to find for you on grounds 2 and 3, that does not help you much unless we also find for you on ground 1, does it?

MR ASHDOWN:   Exactly, your Honour.  If you found against us on ground 1, grounds 2 and 3 would be very cold comfort.

EDELMAN J:   But, by definition, grounds 2 and 3 are always going to be matters in this Court which are seriously considered obiter dicta.

MR ASHDOWN:   Yes.  Any decision of this Court would fall within that phrase, your Honour.  The issue that was sought to be agitated by grounds 2 and 3 was with reference to the Court of Appeal’s adoption of the Cantor decision without engagement in any analysis.  We would say that that was called for in circumstances where, very clearly on its face, none of the other decisions had engaged with the context of section 31, 55A and regulation 6.17A, specifically subregulation (1).

That, we say, would have called for the Court of Appeal not to simply adopt the course that it did but to have to engage with that question and make its own decision.  That is the point that we were seeking to make – the principle of comity and, particularly, comity between intermediate courts of appeal.  But, as Justice Gageler has said, I do accept the fact that, without finding in our favour on ground 1, there is little benefit to be received from grounds 2 and 3.  So, we will not be making any further submissions as to those grounds.

Your Honours, in conclusion, in our submission, it is clear from regulation 6.17A(1) that the regulations that are provided with respect to the notices to be given by any death benefits are notices that fall within the ambit of operating standards under section 31, and are applicable to all superannuation funds, and that is a problem and a question which, in our submission, the respondents have not provided an answer for, and there is no answer for, because the only other way to address that regulation is to simply ignore its existence.  Unless I can be of any further assistance to the Court, those are the appellant’s submissions.

KIEFEL CJ:   Yes, thank you.  Mr Cuerden.

MR CUERDEN:   May it please the Court.  May I start by addressing, only briefly, the issue of revocation?  We raised it really because it seemed there is a disconformity between the language of regulation 6.17A, which refers and expressly contemplates a notice being given by a member of the fund as permitted by the terms of the trust deed, and the provision with which we are here concerned, described as clause 5, strictly clause 1.5, we have adopted the nomenclature that has been used below, and in our view it was appropriate that we raise the issue rather than leave it unstated.

I accept completely my friend’s point that the distinction was not adverted to below.  It would be an overstatement to say that my client’s case was run below on the basis that it was a notice, it would be a more accurate characterisation to simply say that the point was not taken and the distinction not adverted to, but it seemed to us to be appropriate to raise it, draw it to this Court’s attention.  We do say that it means that everything my learned friend has said, if it were accepted – which we say it should not – but if it is accepted, and it leads to the conclusion that regulation 6.17A applies to, in respect of a self‑managed superannuation fund, in respect of a notice given within the terms contemplated by 6.17A, it makes no difference.  As your Honour Justice Edelman ‑ ‑ ‑ 

GAGELER J:   Can I just take you up on that?

MR CUERDEN:   Sorry, your Honour.  Yes.

GAGELER J:   Are you putting it as a reason why special leave should be revoked, or are you putting it as a notice of contention, why, on the appeal, the result should be the same?  At the moment you are saying both, but you have only written one.

MR CUERDEN:   I am sorry.  I did not mean to say both.  We put it on the former basis, I do not put it on the basis of a notice of contention.

GAGELER J:   So why is this not an appropriate vehicle to determine whether this regulation applies to a self‑managed super fund?  That is the big question.

MR CUERDEN:   Because if the answer was determined in favour of the appellant, it would not make a difference here, because the ‑ ‑ ‑ 

GAGELER J:   But you are not putting it on the appeal as a notice of contention point, so it does make a difference.

EDELMAN J:   If you have got that point, and it is open to you to raise it, you can raise it on the remitter.

MR CUERDEN:   With respect to Justice Edelman’s proposition, I accept that.  We wanted to raise it because the distinction was there.  I understand what your Honour Justice Gageler has put to me, that there is no notice of contention.  I am not going to start advancing an unpleaded notice of contention.

GORDON J:   I would be interested to hear your argument on the construction.

MR CUERDEN:   Yes, thank you, your Honour.  Now, I start by going to the terms of regulation 6.17A.  There is no issue that, from our side, that 6.17A prescribes an operating standard under, relevantly, section 31 and section 32.  It also serves the function of prescribing the conditions for the purposes of section 59(1A), compliance with which allow the governing rules of a superannuation entity to permit a member to give a notice – or notice of a binding death benefit nomination in accordance with the requirements of 6.17A.

What is, in our submission, important to emphasise is that regulation 6.17A does not prohibit anything, that is, by any superannuation entity, whether a self‑managed superannuation fund or not.  It serves the function of, as I say, prescribing the conditions contemplated by section 59(1A) and in certain circumstances it requires the trustee of a fund to do certain things, namely, to make the payment.

But if the conditions in 6.17A are not met, in the case of an industry fund it means the conditions for the permission or the ability to give a notice contemplated by 59(1A) do not arise and it means that no obligation on the trustee will arise to make a payment, but there is no prohibition in regulation 6.17A.  The prohibition insofar as it applies to an industry fund is found in sections 59(1) and (2). 

Sections 59(1) and (2) of the Act impose the prohibition on a fund other than a self‑managed fund from, in effect, making a payment pursuant to a death benefit nomination by the member.  Section 59(1A) is the carve‑out of the exception to the prohibition, the conditions to which are to be prescribed by regulation and are prescribed in regulation 6.17A, but the prohibition is found in section 59 and of course, as is common ground, prohibition relates only to an industry fund or anything other than a self‑managed fund.  So regulation 6.17A is simply not directed to questions of prohibition.  May I say this ‑ ‑ ‑

GLEESON J:   Is it not directed to the question of prohibition in 55A?  And it supplies a standard by 6.17A(1).

MR CUERDON:   In my submission, no.  That is for these reasons.  As my friends indicated, section 55A was introduced after regulation 6.17A was introduced.  So regulation 6.17A was introduced in 1999, simultaneously, with a gap of nine days, with the amendments to section 59(1A).  I will take your Honours in a moment to the explanatory materials, but those make clear that regulation 6.17A was introduced for the purpose of regulating – prescribing by regulations the conditions contemplated by section 59(1A).

Section 55A was introduced into the Act some time later and 55A is not unique in this respect as it is a provision in the Act surrounded by some lack of clarity.  Section 55A refers to this concept of a benefit being “cashed”.  The Act does not say what that means and, accepting that of course the Act cannot be construed by the regulations, nevertheless the regulations reveal an understanding that the concept of cashing simply means a particular form of payment of a benefit, and more particularly a payment of a benefit other than by it being rolled over or something of that nature.

GORDON J:   Rollover is sufficient though, is it not?

MR CUERDEN:   In my submission, if one has regard to the regulations they draw, and particularly ‑ ‑ ‑ 

GORDON J:   It may not matter, but I had understood that the permitted rollover is a form of cashing. 

MR CUERDEN:   I do not believe that is found in the Act.

GORDON J:   No, it is not in the Act; it is in regulations.  And I do not think that it matters for the purposes of your argument. 

MR CUERDEN:   No.  But could I address your Honour Justice Gordon’s point by taking your Honours to regulation 6.17 as opposed 6.17A.  So, subsection (1) is the prescription of standards, which does not in its terms refer to 55A, but then subsection (2) provides, as your Honours will see, subsection (2)(a) that:

A member’s benefits in a fund –

Might be paid in one of those three ways.  And so, to pick up your Honour Justice Gordon’s question, I think rolling over is certainly permitted, but the regulations contemplate that it is something other than cashing, although ‑ ‑ ‑ 

GORDON J:   Sorry, I think I put it badly.  It is taken to be equivalent for the purposes of complying with the provision which is set out in regulation 6.21 ‑ ‑ ‑ 

MR CUERDEN:  Yes.

GORDON J:   Subregulation (3).

MR CUERDEN:  Yes.  The difficulty, perhaps, is that section 55A uses this term “cashing”.  And I accept that what the author of the regulations contemplated does not necessarily govern that.  But 6.17 is the prescription – subsection (2) is the prescription – by reference to subregulation (2)(a)(i) by the reference to Division 6.3, which is found in a set of regulations running from 6.18 through to 6.27A.  So, they are the regulations which set out the prescribed standards, which, for the purpose of section 55A, govern the circumstances in which a member’s benefit might be cashed.  And in particular, 6.22 – the standard that is prescribed is simply directed to identifying the categories of persons to whom the benefit might be paid by way of being cashed, rather than something else.

And, as was said in the written outline, there is no issue that the deceased’s former de facto wife, who is the third respondent and a member of the scheme, is a person who falls within that category of persons.  So, can I say, at this point we certainly disagree, with respect, with my friend when he says that regulation 6.22 is not a prescribed standard.  It is, with respect, plainly a prescribed standard when one has regard to regulation 6.17(1) and (2), which pick it up.  And subsection (1) says it is a standard that is set out for the purposes of subsections 31(1) and 32(1).

There is another issue – perhaps just to complete the answer to your Honour Justice Gleeson’s question – section 55A provides that it is a prohibition on what the governing rules of the fund might permit, and the:

governing rules of a regulated superannuation fund must not permit a fund member’s benefits to be cashed after the member’s death otherwise than in accordance with standards prescribed for the purposes of section 31.

So, those standards, in our submission, are found at 6.17 – it is, relevantly, 6.22.  But I understand my friend seeks to bring regulation 6.17A into the fold of section 55.  But that requires one to first identify whether, in fact, 6.17A is engaged in these circumstances.  If – and I am touching now on the language of 6.17A, which I will come to in a moment, very shortly – but if 6.17A(4) is premised upon a notice being given as permitted by the rules in accordance with subregulation (2), if that is not the territory within which we are engaged then, in my submission, 6.17A is just not a regulation that is contemplated by section 55A.

I emphasise – perhaps, at the risk of repetition – that 6.17A predates it, section 55 came in later and then specific regulations were enacted to deal with that issue of cashing.  Before I do move to the text of 6.17A, can I just say something briefly about the decision of Justice Blue, to which my learned friend has spent some time both in writing and on his feet.  I do not propose, of course, to read to this Court slabs of obiter from a single judge of the Supreme Court.  I mention it because my friend places some weight on it.  Can I make these points?

Firstly, what Justice Blue – the way Justice Blue treats section – I should say this, first of all – that the decision that I will call “Pain” – Retail Employees Superannuation Pty Ltd v Pain – arose in a situation that, factually, bears no resemblance to the present.  It did not even concern a self‑managed superannuation fund.  It concerned an industry fund where amendments had been made to the trust deed over the years. At a certain point in time, the trustee became concerned that, in fact, some of the amendments might not have been permitted by the terms of the trust deed and applied, under the relevant provision of the South Australian Trustees’ Act to the Court to amend the deed to, effectively, bring it into line with what had been done over the years.

It was in the course of considering whether to make those amendments that Justice Blue surveyed relevant sections of the Act and the regulations, not for the purpose of reaching a final resolution of any issues of construction – in fact, his Honour recognised that he could not do that in the circumstances of the case before him – but to inform the exercise of that discretion.  His Honour mentioned section 55A at various points – I might just give your Honours the paragraph references without taking your Honours to them because his Honour did not engage in any sort of discussion of the type with which this Court is currently engaged – but there was no suggestion that section 6.17A was a standard prescribe for the purposes of section 55A.  So, those paragraphs are [464], [480] and [591].

With respect to his Honour’s discussion of regulation 6.17A and section 59, my friend invited your Honours to start I think at [498].  We would, for the sake of completeness, invite your Honours to start at [482].  There is a discussion at paragraph [496] in which his Honour makes observations consistent with the basic construction that I have advanced that regulation 6.17A is concerned not with prohibition but with the dual functions of prescribing standards for the purposes of section 59(1A) and for the purpose of imposing an obligation on the trustee to make payment if the requirements of subregulation 6.17A(4) are met, but not for the purpose of prohibiting payment.

Your Honours will see that in particular at paragraph [496] in the ACSR reports found at page 90, page 696 of the bundle of authorities.  At [496] his Honour summarises the plaintiff’s argument, at [497] he summarises APRA’s argument and at [498] says that he, without having to decide the point, prefers the plaintiff’s argument.  At [500] he makes the same point and then there is a passage at [505] on page 697 of the book where his Honour said this:

On the construction advanced by the plaintiff and defendant –

as opposed to APRA:

reg 6.17A operates in a rational manner.

Without taking your Honours through the whole of the paragraph, he concludes in the last sentence by saying:

Outside the mandatory regime imposed by reg 6.17A, the governing rules may provide for the trustee to be bound to act in accordance with a notice in additional circumstances:  this is a matter for the governing rules.

So that is the point that 6.l7A is not about prohibiting but mandating in certain circumstances.  As I say, I simply refer to what Justice Blue has said because it does not, for one thing, support the appellant’s submissions and, secondly, although a single instance decision of a judge of the Supreme Court, the reasoning is logical and, in my respectful submission, correct. 

Before one has regard to regulation 6.17A it is appropriate, in our submission, to have regard to section 59 of the Act.  Might I add that, although unfortunately it is not a section that has been included in the papers for the Court, section 58 is relevant to bear in mind.  Section 58 provides that, relevantly, the governing rules of a superannuation entity other than a fund with no more than six members, which by definition will include a self‑managed superannuation fund, which has a maximum of six members – the exercise of any of the trustee’s – the fund must not permit a trustee to be subject in the exercise of any of the trustee’s powers under those rules to direction by any other person.

Then section 59 deals with the related but slightly different concept of not a trustee being dictated to in the exercise of discretions or powers, but is concerned with the issue of a person other than the trustee being entitled to directly exercise a discretion in respect of the fund.  That is section 59(1) which expressly does not apply to a self‑managed superannuation fund, and my friends accepts that subsection (1A), which provides the exception to that prohibition, is directed only to funds of a type that fall within the prohibition itself; that is, funds other than self‑managed funds.

Now, subsection 59(1A) is drafted on the presumption, or the premise, that a notice of the type that is referred to therein – which I might just for convenience just call a binding death benefit nomination, but recognising that is not the language of 59(1A) – proceeds on the assumption that such a notice would otherwise be caught by section 59(1).  Nowhere is there ever an express prohibition in the Act on making a binding death benefit nomination, but 59(1A) proceeds on the premise that that is ‑ that would fall within the scope of the prohibition in section 59(1), which prohibition relates only to a non‑self‑managed fund, and then by virtue of section 59(2), the rules would be valid to the extent of any inconsistency with that prohibition.

What one will also see from the terms of section 59(1A) is that it expressly contemplates that regulations will be given.  Of course, if regulations were not given, then there would be no circumstances in which a member of an industry fund, a non‑self‑managed fund, could give a binding death benefit nomination on the assumption that the premise that such a nomination would fall within section 59(1) is correct, but the operation of that permission by 59(1A) contemplated that it would go hand in hand with the introduction of regulations to permit it.

As I mentioned earlier, those regulations – that regulation, regulation 6.17A, was introduced nine days after the amendment to section 59 by the introduction of subsection (1A).  Section 59(1A) does not, in its terms, refer to the source of the power to make a regulation.  I will just mention again, regrettably, not in the papers for your Honours, but there is a general regulation‑making power found in the Act at section 353, and it is in terms which are not unsurprising.  I mention also that his Honour Justice Blue referred to section 353 in the Pain decision at paragraph [502].  So that is the context in which, in my respectful submission, one then comes to consider regulation 6.17A, introduced nine days after the amendment to 59.

My learned friend took your Honours to the explanatory statement with respect to the introduction of regulation 6.17A, it is tab 29 of the book of documents, starting at page 850.  Insofar as one has regard to the explanatory statement as an indication of the purpose of the regulations, one sees that on page 850 of the book, your Honours will see about halfway down the page it says:

The purpose of the regulations is to make various miscellaneous amendments to the Principal Regulations which are consequential to the Superannuation Legislation Amendment Act 1999 –

I pause there to say that is the Act that introduced subsection (1A) to section 59:

including amendment to –

And then your Honours will see the second asterisk is to:

put in place administrative controls governing the acceptance of binding death benefit notices including –

the two points that are then mentioned, the first is:

the disclosure requirements in the Principal Regulations to require trustees of relevant funds to notify members of their death benefit notices –

Et cetera.  I pause there to say that was introduced, but that provision is no longer there, and secondly, to amend:

the Principal Regulations to automatically invalidate a death benefit notice after three years.

So, what that illustrates, in my submission, is the point perhaps otherwise obvious given the temporal connection between the two, these regulations were concerned with subsection 59(1A).  And then if one turns to page 852 of the bundle, your Honours will see about an inch or so down from the top:

Item [2] ‑ New regulations 6.17A . . . and 6.17B ‑

The first two paragraphs under that heading again make clear the connection between regulation 6.17A and the introduction of section 59(1A).  I say this conscious of the limitations – perhaps is an understatement – in construing regulations by reference to a document such as this, but given that my friend has mentioned the first asterisked point, my friend said that:

Subregulation 6.17A(1) prescribes the standard set out in subregulation 6.17A(4) ‑

We say that is absolutely correct.  The standard that is prescribed by subregulation (1) is the standard set out in subregulation (4).  No more, no less. 

STEWARD J:   Mr Cuerden, do you also rely upon the explanatory memorandum for the Superannuation Legislation Amendment Act, which introduced section 59(1A) which refers to the burden on trustees in exercising their discretion as to who to make payments to, and then says, because of that:

significant compliance costs on superannuation entities ‑

there would be a new provision (1A), and there would also be an ability to make standards to be prescribed in the SIS regulations addressing that issue.

MR CUERDEN:   With respect, your Honour, yes, we do.  Those particular – or that particular explanatory memorandum is primarily directed of course to the reasons for the introduction of the amendment to section 59.  I have not mentioned that orally because there is no issue that section 59(1A) is not directed to self‑managed funds, but your Honour’s point perhaps goes beyond that and, with respect, reflects an acceptance on the behalf of the Parliament as to what the point of the regulations might be.

STEWARD J:   It is just that there is an express reference to the need to prescribe standards.  So, you are trying to create a link between…..and regulation 6.17A, and that may be a link of some kind. 

MR CUERDEN:   I adopt that, with respect.  So, if one then turns to the text of regulation 6.17A.  Part of the text is the reference in the heading.  I do not want to overstate this, but it is not something to be ignored, in my submission, the reference in the heading itself to section 59(1A).  My learned friend has cited authorities in which members of this Court have rejected attempts to cut down the clear meaning of language by reference to a heading. 

That is something different from what we are saying; we are saying the heading, in fact, is consistent with the plain language of the section.  But the highest, in my submission, that could be against us, is that regulation 6.17A is ambiguous.  We say it is not ambiguous, but if it is put against us that it is ambiguous, then the heading is not irrelevant.  If one then moves to the text of regulation 6.17A, subsection (1) is the prescription of the standard, and as the explanatory note correctly said, the standard that is prescribed is, to use the language of subsection (1), the standard set out in subregulation (4), no more, no less. 

One then turns to subregulation (4).  It provides subject to the provisions mentioned:

if the governing rules of a fund permit a member of the fund to require the trustee to provide any benefits in accordance with subregulation (2) ‑

I will come back to that in a moment, if I may:

the trustee must pay a benefit in respect of the member, on or after the death of the member, to the person or persons mentioned in a notice given to the trustee by the member if ‑

those four requirements are met.  Now, I pause there to say that if this applies to us and the terms of the deed are set to be a notice within subsection (4), then we accept that they are non‑compliant.

EDELMAN J:   Mr Cuerden, your submission on subsection (1) and subsection (4), does it come down to anything more than saying that by the words “set out in subregulation (4)”, there is an implication contained drawing from subregulation (4) that the words:

operation of regulated superannuation funds ‑

mean operation of regulated superannuation funds other than self‑managed superannuation funds?

MR CUERDEN:   Yes, save that I would respectfully put it at higher than an implication and say it is just inherent in the reference in subsection (4) back to subsection (2).

EDELMAN J:   That is what an implication is.

MR CUERDEN:   Yes.

GORDON J:   Does it rise any higher that one has to read (1), (2) and (4) together and when we read the three provisions together – or the three regulations – then it does not apply to self‑managed superannuation funds?

MR CUERDEN:   That is the proposition, one reads them together.  And (4) takes you back to (2) – (2) expressly refers to 59(1A), and the condition in subsection (2) is the giving of the information under (3), which, as we say in our written submissions, is something that is inherently incongruous

in the context of a self‑managed fund.  It is simply – as your Honour Justice Gordon, with respect, rightly says – it is simply a matter of reading the subsection (1) in the context of the whole of the regulation.

GORDON J:   It is a bit more than that, is it not?  One has to start with 59(1A) ‑ ‑ ‑

MR CUERDEN:   Yes.

GORDON J:   ‑ ‑ ‑ or 59, or you would say 58, 59, 59(1A).

MR CUERDEN:   Sorry, I put that badly.  One reads subregulation (1) in the context of the whole of the regulation and in the context of section 59.  So, it is not a case, as we say in the written submissions, of reading down subsection (1), it is just a case of giving effect to subsection (1) having regard to what it, by its terms, prescribes, and what it prescribes is set out in subregulation (4), which picks up subregulation (2) and inherently it is directed to funds other than self‑managed funds.

There are other textual and contextual considerations which, we say, support that construction.  I do not propose to say more than what is said in the written submissions about them, but they all reinforce, in my respectful submission, the conclusion that regulation 6.17A is not directed to anything other than industry funds – or more correctly not directed to self‑managed funds.  Other than that, we simply rely on the written submissions that we have filed with respect to ground 1.

In respect of grounds 2 and 3, with respect, we would agree what has fallen from Justice Gageler in the exchange with my friend that the grounds 2 and 3 do not assist.  If the appellant loses on ground 1, they do not help.  If the appellant wins on ground 1, they are unnecessary.  As they were the subject of the grant of special leave, we have tried to provide such assistance as we are able to but I do not propose to say anything unless I can assist in any way beyond what was said in writing about the comity point.  May it please the Court.

KIEFEL CJ:   Yes, thank you.  Anything in reply, Mr Ashdown?

MR ASHDOWN:   One point, very briefly, if I may, your Honour.  The learned senior counsel made a reference to subregulation (1) – pointing to subregulation (4) – and meaning that no more or no less.  In my submission, if that is taken to be the approach, then that construction which was relied upon by the respondents effectively says that subregulation (1) does nothing more than say that it is a regulation under section 59(1A) because the construction that is offered by that analogy is that subregulation (1) does no more than prescribe a standard that is for retail funds only because of

section 59.  If that was the case, then regulation (1) either would be unnecessary or, in itself, have referred directly to section 59. 

The attempt to get around the express words in subregulation (1) by such a construction we say is not the correct route to the construction of that subregulation.  It is clearly a regulation that points to section 31, and section 31 by its express terms applies to all superannuation funds, including self‑managed funds.  So, the attempt at the construction in that method we say is an impermissible path and should not be followed.  May it please the Court.

KIEFEL CJ:   Thank you.  The Court reserves its decision in this matter and adjourns to 10.00 am tomorrow.

AT 11:21 AM THE MATTER WAS ADJOURNED