FEDERAL COURT OF AUSTRALIA
Mercer Superannuation (Australia) Limited v Billinghurst [2016] FCA 1274
File number: VID 122 of 2016 Judge: MOSHINSKY J Date of judgment: 28 October 2016 Catchwords: SUPERANNUATION – appeal from Superannuation Complaints Tribunal under s 46 of Superannuation (Resolution of Complaints) Act 1993 (Cth) – where Tribunal set aside decision of trustee and remitted the matter to the trustee for reconsideration – where Tribunal found that trustee had regard to preferences of employer as to basis for valuing pensions to be commuted to lump sums – where Tribunal found that trustee adopted valuation of Plan Actuary who had advised the employer on options for terminating plan and bases for valuing the pensions to be commuted to lump sums – whether Tribunal erred in approaching its task primarily as a form of judicial review of the trustee’s decision Legislation: Superannuation (Resolution of Complaints) Act 1993 (Cth), ss 6, 14, 37, 46
Superannuation Industry (Supervision) Act 1993 (Cth), s 52
Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (Cth)
Cases cited: Alcoa of Australia Retirement Plan Pty Ltd v Frost (2012) 36 VR 618
Attorney-General for the Commonwealth v Breckler (1999) 197 CLR 83
Board of Trustees of the State Public Sector Superannuation Scheme v Edington (2011) 119 ALD 472; [2011] FCAFC 8
Briffa v Hay (1997) 75 FCR 428
Cameron v Board of Trustees of the State Public Sector Superannuation Scheme (2003) 130 FCR 122
Citicorp Life Insurance Ltd v Smith [2005] FCAFC 102
Collins v AMP Superannuation Ltd (1997) 75 FCR 565
Colonial Mutual Life Assurance Society Limited v Brayley [2002] FCA 1333
Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck (2016) 334 ALR 692
Cowan v Scargill [1985] Ch 270
Finch v Telstra Super Pty Ltd (2010) 242 CLR 254
Karger v Paul [1984] VR 161
Lykogiannis v Retail Employees Superannuation Pty Ltd (2000) 97 FCR 361
Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd (2011) 282 ALR 167
Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24
National Mutual Life Association of Australia v Jevtovic (1997) 217 ALR 316
National Mutual Life Association of Australasia Limited v Scollary [2002] FCA 695
Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359; [2001] FCA 1330
Sherrah v Commonwealth Superannuation Corporation (2015) 147 ALD 665
Date of hearing: 22 June 2016 Date of last submissions: 7 July 2016 Registry: Victoria Division: General Division National Practice Area: Administrative and Constitutional Law and Human Rights Category: Catchwords Number of paragraphs: 124 Counsel for the Applicant: Mr D Collins QC and Mr K Loxley Solicitor for the Applicant: Lander & Rogers Counsel for the Respondent: The Respondent did not appear ORDERS
VID 122 of 2016 BETWEEN: MERCER SUPERANNUATION (AUSTRALIA) LIMITED
Applicant
AND: MICHAEL BILLINGHURST
Respondent
JUDGE:
MOSHINSKY J
DATE…
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Details
- Case
- [2016] FCA 1274
- Decision Date
CaseChat Overview and Summary
The case of Mercer Superannuation (Australia) Ltd v Billinghurst was heard by the Federal Court of Australia, where the appellant, Mercer Superannuation (Australia) Ltd, sought to appeal a decision of the Superannuation Complaints Tribunal (the Tribunal). The respondent, Mr Billinghurst, was a former member of a defined benefit division of a superannuation fund, who had retired prior to the fund's termination. Upon termination, Mercer Superannuation converted Mr Billinghurst's pension into a lump sum. Mr Billinghurst objected to the calculation method used by Mercer Superannuation, leading him to lodge a complaint with the Tribunal. The Tribunal found that the Trustee's decision was not fair and reasonable, as it had improperly considered the employer's preferences in determining the lump sum equivalent. The Tribunal set aside the decision and remitted the matter back to the Trustee for reconsideration, mandating the use of an independent actuary.
The primary legal issue before the Federal Court was whether the Tribunal had erred in its approach to the complaint, specifically by treating the matter primarily as a form of judicial review of the Trustee's decision. The court needed to determine whether the Tribunal had correctly exercised its powers under the Superannuation (Resolution of Complaints) Act 1993 (Cth). The court had to consider if the Tribunal appropriately assessed the Trustee's decision-making process and whether it was correct to set aside the decision and direct a reconsideration with specific instructions.
The court found that the Tribunal had not erred in its approach. It was appropriate for the Tribunal to review the Trustee's decision to ensure it complied with the relevant statutory and regulatory requirements. The court determined that the Tribunal correctly identified that the Trustee had improperly considered the employer's directions in calculating the lump sum equivalent. The court upheld the Tribunal's decision, affirming that it was within the Tribunal's jurisdiction to set aside the Trustee's decision and to direct a reconsideration with the specified conditions to ensure an independent and fair calculation process. This reasoning underscored the importance of adherence to the Trustee's prudential obligations and the need for decisions to be in the best interests of the beneficiaries.
In conclusion, the Federal Court dismissed the appeal by Mercer Superannuation (Australia) Ltd, affirming the Tribunal's decision. The court held that the Tribunal had correctly exercised its powers and had not erred in its approach. The decision was set aside, and the matter was remitted to the Trustee for reconsideration under the conditions specified by the Tribunal, ensuring an independent assessment of the lump sum equivalent calculation. The orders of the court included the dismissal of the appeal and no order as to costs.
The primary legal issue before the Federal Court was whether the Tribunal had erred in its approach to the complaint, specifically by treating the matter primarily as a form of judicial review of the Trustee's decision. The court needed to determine whether the Tribunal had correctly exercised its powers under the Superannuation (Resolution of Complaints) Act 1993 (Cth). The court had to consider if the Tribunal appropriately assessed the Trustee's decision-making process and whether it was correct to set aside the decision and direct a reconsideration with specific instructions.
The court found that the Tribunal had not erred in its approach. It was appropriate for the Tribunal to review the Trustee's decision to ensure it complied with the relevant statutory and regulatory requirements. The court determined that the Tribunal correctly identified that the Trustee had improperly considered the employer's directions in calculating the lump sum equivalent. The court upheld the Tribunal's decision, affirming that it was within the Tribunal's jurisdiction to set aside the Trustee's decision and to direct a reconsideration with the specified conditions to ensure an independent and fair calculation process. This reasoning underscored the importance of adherence to the Trustee's prudential obligations and the need for decisions to be in the best interests of the beneficiaries.
In conclusion, the Federal Court dismissed the appeal by Mercer Superannuation (Australia) Ltd, affirming the Tribunal's decision. The court held that the Tribunal had correctly exercised its powers and had not erred in its approach. The decision was set aside, and the matter was remitted to the Trustee for reconsideration under the conditions specified by the Tribunal, ensuring an independent assessment of the lump sum equivalent calculation. The orders of the court included the dismissal of the appeal and no order as to costs.
Orders
Orders of the court
1. The appeal be dismissed.
2. There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
It follows that the appeal is to be dismissed.Background facts The following background facts are drawn from the Reasons, supplemented by the documents provided to the Court in the Appeal Book for the appeal (which documents were before the Tribunal). On 1 October 2000, Mr Billinghurst, on his retirement from his employment with Grosvenor International Australia Pty Ltd, commenced receiving a pension from the Former Fund. On 2 May 2006, the assets and members of the Former Fund (including Mr Billinghurst) were transferred from the Former Fund to the Fund by way of a successor fund transfer. On 3 May 2006, the Trustee and the Employer entered into a participation agreement to establish the Plan in the Fund with effect from 2 May 2006 (the Participation Agreement). I note that the Trustee was then named Mercer Investment Nominees Limited. It has since changed its name to Mercer Superannuation (Australia) Limited. It is convenient at this point to set out some relevant provisions of the Participation Agreement and the Designated Rules of the Plan. The Participation Agreement included the following recitals:A.The Trustee is the trustee of the superannuation fund now known as the Mercer Super Trust (“MST”) which was constituted by a trust deed dated 28 June 1995, as amended (“Master Deed”).B.The Participant wishes to establish a plan in the Corporate Superannuation Division (“Division”) of the MST to provide retirement and other benefits to its employees and to the employees of associated companies.C.The Trustee and the Participant wish to record the terms and conditions of participation of the Participant in the MST.D.The Trustee and the Participant wish to agree on the form of the Schedule for the proposed plan for the purposes of the Designated Rules of the Division. Clause 1.1 of the Participation Agreement provided that (unless the contrary intention appeared):“Designated Rules” means the Designated Rules adopted on 28 June 1995, as amended, for the Division.“Governing Rules” in relation to the Plan means the Master Deed, the Designated Rules and this Agreement.“Plan” means the Grosvenor Australia Properties Pension Plan (Client code MT309) in the Division. Clause 2 of the Participation Agreement provided as follows:2. Participant in the MST2.1The Participant hereby:(a)applies for establishment of the Plan and admission as a Participant in the Division with effect on and from the Commencement Date and in accordance with the terms and conditions of the Governing Rules;(b)agrees to be bound by the terms and conditions of the Governing Rules;(c)agrees to the Trustee acting as trustee of the MST;(d)acknowledges that neither the Trustee nor any of its related companies guarantees the repayment of capital or the investment performance of the Plan;(e)agrees to pay to the Trustee, as trustee of the MST, from time to time the fees, taxes, expenses and insurance premiums (if any) which the Participant has agreed to pay on behalf of Members; and(f)authorises the Trustee to accept the signatures of any two of the persons nominated by the Participant in writing from time to time for the purpose of nominating new employees to the Plan, authorising requests for payment of benefits, or for any other purpose relating to the administration of the Plan.2.2The Trustee hereby accepts the application by the Participant for establishment of the Plan with effect on and from the Commencement Date.2.3The Trustee and the Participant agree that the provisions contained in the Annexure will form part of the Schedule for the Plan.2.4The Trustee agrees to:(a)admit the Participant as a Participant in the Division;(b)comply with all applicable requirements of Superannuation Law in relation to the MST; and(c)continue to do all things necessary to hold all regulatory licenses required to operate the MST.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
On 29 December 2015, the Tribunal made its determination and signed the Reasons. The Reasons state that a review meeting of the Tribunal was conducted under the provisions of the Complaints Act on 26 October 2015. The Reasons then state as follows in [2]-[9]:DECISION UNDER REVIEW2.The Complainant was a member of a defined benefit division (the Plan) of the Fund, the members of which were employees and retired employees of the Employer. The Employer ceased to carry on business on 31 December 2011 and ceased contributing to the Fund on that date. Consequently, the Trustee resolved to terminate the Plan in the Fund.3.The Complainant had retired from the Employer’s employment well before the termination of the Plan and, at the date of termination, he was being paid a pension from the Plan in accordance with the rules that applied to the Plan.4.The Trustee advised the Complainant that, as a result of the termination of the Plan, it would be converting his pension to a lump sum amount to be paid to him and the Trustee advised him of its calculation of the lump sum equivalent of his pension. In making its calculation, the Trustee relied on calculations performed by the actuary for the Plan (the Plan Actuary). The same actuary also advised the Employer in relation to ceasing its participation in the Plan and in relation to options available to the Employer. Subsequent to the Plan Actuary’s advice to the Employer, the Employer gave directions to the Trustee as to how the lump sum equivalents of pensions should be calculated, including that no account should be taken of potential future pension increases.5.The Complainant objected to the Trustee’s calculation of the lump sum equivalent of his pension and the Trustee considered the Complainant’s complaint but decided to maintain its original decision as to the amount of the lump sum payable to the Complainant.6.The Complainant complained to the Tribunal in relation to the Trustee’s decision and it is the Trustee’s decision in relation to the calculation of the lump sum payable to him which is the decision under review by the Tribunal.DETERMINATION OF THE TRIBUNAL7.Under s 37(6) of the Complaints Act, the Tribunal is required to affirm the decision of the Trustee if the Tribunal is satisfied that the Trustee’s decision, in its operation in relation to the Complainant, was fair and reasonable in the circumstances.8.At the review meeting, the Tribunal determined that it was not satisfied that the Trustee’s decision in relation to the calculation of the amount of the lump sum payable to the Complainant was fair and reasonable, in the circumstances, in its operation in relation to the Complainant. The Trustee’s decision is not, therefore, affirmed.9.In accordance with the provisions of the Complaints Act, the Trustee’s decision is set aside and the Complainant’s complaint is remitted to the Trustee for reconsideration by obtaining advice from an actuary, who does not have a conflict of interest, as to what the proper calculation is of the lump sum equivalent, or commutation value, of the Complainant’s pension under Designated Rules 16.5 and 16.6. The Trustee is to then calculate the lump sum payable to the Complainant, without acting on any directions or request by the Employer and by applying its prudential obligations and the covenants in s 52(2) of the Superannuation Industry (Supervision) Act 1993 (Cth), including by making a determination that is in the best interests of the beneficiaries, including the Complainant, and in accordance with this determination of the Tribunal. In making the calculation, the Trustee will need to determine whether it is appropriate to make any allowance for future expenses.
Ratio Decidendi
Legal Principle Established
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