Moss Super Pty Ltd & Anor v Hayne & Anor
[2008] VSC 158
•16 May 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 10068 of 2006
IN THE MATTER of an application by MOSS SUPER PTY LTD (ACN 119 798 533) pursuant to Rule 54.02 of the General Rules of Procedure for the determination of questions arising in the execution of a trust
| MOSS SUPER PTY LTD (ACN 119 798 533) and PHOTOGRAPHY MANAGEMENT SERVICES PTY LTD (ACN 005 549 342) | First Plaintiff Second Plaintiff |
| v | |
| AMANDA LOUISE HAYNE and BRUCE SUNDBERG (in his capacity as Executor of the Estate of James Rogerson Hayne (deceased)) | First Defendant Second Defendant |
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JUDGE: | BYRNE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 April 2008 | |
DATE OF JUDGMENT: | 16 May 2008 | |
CASE MAY BE CITED AS: | Moss Super Pty Ltd v Hayne | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 158 | Revised 16 May 2008 |
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SUPERANNUATION – superannuation trust deed – interpretation of deed – whether retirement benefit forms part of estate of deceased retired member – whether replacement trustee validly appointed
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Dr IJ Hardingham QC with Mr KJA Lyons | Maddocks |
| For the First Defendant | Mr BM Dennis | Richard Desmond, Solicitor |
| For the Second Defendant | Dr KP Hanscombe SC with Ms UH Stanisich | Hardham Dalton Sundberg, Solicitors |
HIS HONOUR:
This litigation concerns the Photography Management Services Pty Ltd Superannuation Fund. The fund was established by Deed dated 31 May 1985 made by Photography Management Services Pty Ltd (“PMS”) as Founder. The fund, as its name suggests, was established as a standard employer sponsored fund for the employees of PMS. The Trustee of the fund, at least until 30 May 2006, was PMS. The business of PMS was the conduct of the Photography Studies College in Melbourne.
The moving spirit behind the college and PMS was James Rogerson Hayne. Mr Hayne and his domestic partner, Julie Isabel Moss, were at all material times the only employees of the college, the only members of the fund and the only directors of PMS.
On 25 July 2005, Mr Hayne died at the age of 65 years and three months. At the time of his death, the amount standing to his credit in the fund was $710,820.85.
Two questions arise for my consideration. The first is whether this amount, or its present value, should be dealt with by the Trustee pursuant to the Deed or whether it forms part of Mr Hayne’s deceased estate. The question arises in this way. Mr Hayne left a will in which he gave his residuary estate in equal shares to his two children of an earlier dissolved marriage, to the two children of Ms Moss’s earlier dissolved marriage and to Ms Moss herself. The first defendant, Amanda Louise Hayne, as one of the children of Mr Hayne, is therefore entitled to a one-fifth share of the residue under his will. If, on the other hand, the amount is to be dealt with under the Deed, the Trustee must pay the amount to such of the beneficiaries identified in the Deed as it thinks fit. These beneficiaries include Ms Moss and the two children of Mr Hayne. The question here turns upon the construction of the Trust Deed.
The second question is whether PMS was, on 30 May 2006, replaced as Trustee by the first plaintiff, Moss Super Pty Ltd. This involves a consideration of the operation of the Deed and of the circumstances in which the replacement is said to have occurred.
The significance of the question lies in the fact that, following the death of Mr Hayne, the directors of PMS were Ms Moss and Mr Hayne’s solicitor and executor, the secondnamed defendant, Bruce Sundberg. The sole director of Moss Super is Ms Moss. The concern of Ms Hayne, who argues that the replacement was ineffective or should be set aside, appears to be that she would prefer the discretion of the Trustee as to the disposition of her late father’s superannuation to be exercised by Mr Sundberg and Ms Moss rather than by Ms Moss alone.
Is Mr Hayne’s Superannuation Benefit Part of His Estate?
Ms Hayne and Mr Sundberg, in his capacity as executor of the will of Mr Hayne, contend that the superannuation benefit forms part of the estate and passes to the residuary beneficiaries. PMS and Moss Super contend that it should be dealt with under the Deed.
It is necessary that I outline the relevant provisions of the Deed. It provides for the establishment of a fund which is vested in the Trustee to be held by it “upon trust for the Beneficiaries subject to the trusts, [and] powers, … contained in this Deed”.[1] Into the fund are paid contributions of various kinds.[2] Within the fund the Trustee is to establish in respect of each member an accumulation account[3] to which are credited contributions of various kinds made in respect of that member.[4]
[1]Clause 5.
[2]Clause 6.
[3]Clause 36.1.
[4]Clause 36.2.
The Deed provides in cl 49 that the Trustee ensure that the fund is maintained solely for the purpose of providing benefits described in Part I. “Benefit” is defined as “any amount which is payable by the Trustee to a Beneficiary out of the Fund pursuant to this Deed”.[5] Benefits appear to be of four kinds: benefits upon retirement;[6] benefits on early resignation or termination of employment;[7] benefits on death;[8] and benefits on incapacity before retirement age.[9] In the case of each of these benefits, the provision in the Deed follows a similar format.
·Upon the event, the member is entitled to be paid[10] or entitled to receive[11] a benefit equal to an amount calculated in that clause.
·The member entitled to the benefit may elect to receive the benefit as a lump sum or as a pension. Where no election is made “the benefit shall be payable as a pension”.[12] These clauses also contemplate that the member may elect to take the benefit partly as a lump sum and partly as a pension.
[5]Clause 1.
[6]Clause 50.
[7]Clause 51.
[8]Clause 52.
[9]Clause 53.
[10]Clause 50.1.
[11]Clause 51, 53.
[12]Clauses 50.2, 51.2, 53.2.
In the present case, Mr Hayne attained the age of 65 years on 15 April 2005 and, thereupon, became entitled to a retirement benefit under cl 50.1. He made no election under cl 50.2. Accordingly, his benefit was payable as a pension.
The provisions of the Deed with respect to benefits payable as a pension are found in cl 54. It is convenient at this point to note two definitions which are contained in cl 1:
“Pension” means a Benefit provided by the Fund which is a pension, as described in this Deed or as deemed by the Act, and is payable by instalments out of a Pension Account maintained for and on behalf of a Pensioner, and includes without limitation an Old-Age Pension.
“Pensioner” means a Member who is in receipt of a Pension from the Fund and includes a Dependant or Reversionary Beneficiary of that Member who is in receipt of a Pension.
Clause 54 provides:
54.1 Payment of Pension
Where a Benefit is payable as a Pension the Trustee shall pay the Benefit to the Pensioner as a Pension in accordance with this clause and subject to the requirement of the Act.
54.2 Amount of Pension
The amount of any Pension payable pursuant to this clause shall be determined by the Trustee.
Clause 54.3 requires the Trustee to establish a pension account in respect of the member to whom a benefit is payable as a pension. The amount in the pension account is then applied in payment of the pension.[13] When the amount is exhausted, no further instalments of the pension are payable.[14]
[13]Clauses 54.3, 54.5.1.
[14]Clause 54.7.
I return to the question whether the retirement benefit which Mr Hayne was entitled to be paid at the date of his death forms part of his estate.
It was accepted before me that, if this benefit was payable as a lump sum, it would form part of his estate. It was also accepted that, if the benefit was payable as a pension and, further, if he were in receipt of this pension, it would not. In the latter event, Mr Hayne would fall within the definition of “pensioner” and the unpaid balance in his pension account would have to be dealt with under cl 54.8. This clause is in these terms:
54.8 Death of a Pensioner
In the event of the death of a Pensioner and at the time of death an amount is standing to the credit of the Pension Account of the Pensioner:
54.8.1.where a Reversionary Beneficiary has been nominated by the Pensioner, the Trustee shall, unless otherwise requested to the contrary by the Reversionary Beneficiary, pay to the Reversionary Beneficiary the balance of the Pension Account (either as a Pension or commuted to a lump sum) provided that such amount shall not exceed an amount calculated in accordance with the requirements of the Act; or
54.8.2.where no reversionary beneficiary has been nominated, the balance of the Pension Account shall be paid to such one or more of the Dependants of the Pensioner as the Trustee may determine or if there are no Dependants, to the legal personal representative of the Pensioner.
In the present case, Mr Hayne did not fall into either category. He was not entitled to be paid a lump sum because he had not so elected; he was not a pensioner because he had not received any pension payment. Indeed, prior to his death none of the steps preliminary to the payment of the pension had been taken by the Trustee: the amount of a pension had not been determined, no pension account had been opened and no assets had been set apart for the payment of the pension.
It may be that there is implicit in the Deed a provision giving the Trustee a reasonable time to attend to these matters after the entitlement to a retirement benefit arises, but it was not contended before me that such a provision, if it exists, will be of assistance in this case where some months had elapsed between the date Mr Hayne’s benefit vested and the date of his death. Nor is there in this case a provision conferring upon the retiree the right to defer receipt of the benefit, as was the case in Barfund Pty Ltd v McNab.[15]
[15][1999] VSC 493
I approach the question of construction of the Trust Deed in a practical and purposive way. The interpretation which I give to the Deed in the circumstances of this case must accommodate other circumstances which may arise. Such a circumstance which was canvassed in argument was that a member, who attains the age of 65 years, and is then entitled to a retirement benefit, might be content to continue working after that age, receiving a salary as before. This member might then be content to defer the payment of the benefit whether as a lump sum or as a pension for some time until retirement became attractive. Indeed, this appears to have been the case of Mr Hayne who continued to work and to receive a salary after the age of 65 years in what was effectively his own business. Mr Hayne did not call for or submit a claim for payment of his retirement benefit and the Trustee, whose directors were himself and his partner, would, I suppose, not be minded to force upon him a pension which he was not minded to receive. It may be that his employer, PMS, continued to make contributions to his account in the superannuation fund.
The first position taken by the Trustee was that Mr Hayne’s benefit should be dealt with as a death benefit under cl 52. The entitlement to such a benefit is contained in cl 52.1:
52.1 Entitlement
Upon the death of a Member the Trustee shall pay a death benefit equal to:
52.1.1.the amount standing to the credit of that Member’s Accumulation Account as at the date upon which payment is made; and
52.1.2.the proceeds of any Policy of Insurance effected on behalf of the Member under this Deed.
It was put, as was the fact, that at the date of his death the amount standing to Mr Hayne’s credit was held in the accumulation account. Accordingly, the amount fell to be applied by the Trustee under cl 52.3:
52.3 Persons to Receive Death Benefits
Where a death benefit is payable pursuant to this clause, the Trustee may pay or apply the death benefit to or for the benefit of:
52.3.1.a person nominated in writing by the former Member, or
52.3.2.such one or more of the Dependants of the former Member;
52.3.3.the legal personal representatives of the former Member;
in such proportions between all or any of the above persons or categories of persons as the Trustee shall determine in its discretion.
No person had been nominated by Mr Hayne so that sub-clause 52.3.1 has no application. “Dependant” is defined in wide terms in cl 1. It includes Ms Moss as the domestic partner of Mr Hayne as well as any of his children and any other person falling within the definition of dependant in the Deed.[16]
[16]Including those persons who might be included in this expression by the application of s. 10 of the Superannuation Industry (Supervision) Act 1993
The alternative position presented on behalf of the Trustee was that, at the date of his death, Mr Hayne should be treated as a pensioner so that his entitlement passed under cl 54.8.[17] It was said that such an interpretation produced a result which was practical and consistent with the evident purpose of the Deed.
In fact we are here concerned with two rights which vested in Mr Hayne, but at different times. Upon his attaining 65 years he had the right to receive a retirement benefit; upon his failure to elect to receive this benefit as a lump sum he had the right to receive it as a pension. Corresponding with this right is the obligation of the Trustee to pay the benefit as a pension in accordance with cl 54.1. The Trustee had no right to refuse to comply with this provision – no right to defer payment of the pension even if the member requested this. The fact that, in this case, the Trustee failed to comply with this obligation and failed to put in hand the steps required by cll 54.2, 54.3 and 54.4 to be performed for the payment of the pension out of the pension account, should not operate to deprive the rightful recipients of their due entitlement. Put another way, the argument was that the Trustee should be taken to have complied with the terms of its trust.
[17]See para [13] above.
The submission of those contending that the benefit passed to the estate rejected both of these submissions. Counsel pointed out that the scheme of cl 50 necessarily means that there must be an interval between the member attaining 65 years and the member becoming a pensioner. First, there is the time for the member to make an election that the benefit be payable as a pension or, if no election be made, a time for that election to be made. Second, there are the steps required to be taken by the Trustee under cl 54. These are not all merely mechanical or administrative steps: the Trustee has to determine the amount of the pension payable. It is only then that a payment might be made and the member becomes a pensioner. It was then put that, if a question arose during this interval as to the entitlement of the member to the benefit, it should be resolved in favour of the member. And so, upon his attaining 65 years, Mr Hayne had a present right to the amount standing to his credit, which amount would be payable to him by instalments in the future in accordance with cl 54. This, it was argued, was consistent with the approach of O’Loughlin J in Re Coram.[18]
[18]Re Coram; Official Trustee in Bankruptcy v Inglis (1992) 36 FCR 250 at 255.
The difficulty with this contention is that it is not possible to say that Mr Hayne, at any time after his benefit vested, might have called upon the Trustee to pay him the amount to his credit. It was payable as a pension and he may never receive the full amount, depending upon his life expectancy. Nor, for the same reason, could it be said that he had a present right to call for any specified part of this amount. The Deed in cl 54.10 provides that a pensioner might request the Trustee to commute all or part of a pension and the Trustee is obliged to comply. But, the problem remains that this may be done only by a person who satisfies the definition of pensioner.
A further practical difficulty with the submission advanced by the estate is that the equitable title to the amount standing to the credit of Mr Hayne in the Fund, whether in his accumulation account or his pension account, must shift the moment he receives his first instalment of pension. Prior to that date it is his property; thereafter, it is not. This may not be insuperable but it removes much of the significance of the last sentence of cl 50.2 which provides that the benefit should be payable as a pension and the corresponding obligation of the Trustee under cl 54.1 to which I have referred which draws no such distinction.
It was put, also, on behalf of the estate that the death benefit provisions of cl 52 have no application. In the present case, the benefit of Mr Hayne had vested on his 65th birthday. The election process was complete at the date of his death. His entitlement, pursuant to cl 50.2, to have his retirement benefit paid as a pension in accordance with cl 54 is altogether inconsistent with the discretion which is conferred upon the Trustee under cl 52.3. I agree with this submission. Mr Hayne’s benefit cannot be dealt with as a death benefit.
I should mention one further matter at this stage. When he made his will on 21 April 2004, Mr Hayne signed a document referred to as a Memorandum of Wishes. In this document he expressed the wish that his superannuation entitlements be dealt with as accretions to his estate. I derive no assistance from this. My present task is to construe the Trust Deed of 31 May 1985. The stated wish of Mr Hayne is not admissible as an aid to construction of this document. If it is intended to be a statement of his understanding as to the meaning of the Deed, it is irrelevant. If it is intended to amount to a variation of the Deed, it is ineffective.
Having considered the terms of the Deed as a whole, I am satisfied that the word “pensioner” in cl 54.8 should be construed to include a member whose benefit was payable as a pension notwithstanding that no payment has yet been made. “Pension” is defined to mean “a Benefit … which is a pension … and is payable by instalments out of a Pension Account”. A pension is not limited to payments actually made. It is consistent with this that in ordinary English a pensioner be a member of the Fund who is entitled to such a benefit. This is consistent with the structure of Part I of the Deed which specifies the two ways in which a member might receive the stipulated benefits, making no provision for a different entitlement of the member pending payment of a pension. It also avoids the difficulty that the rights of the member and those entitled under cl 54.8 to receive the pension notwithstanding the demands of the member’s creditors are not jeopardised by an inefficiency or breach of trust of the Trustee in making the first pension payment late or not at all. It gives meaning to the clear and unqualified trust obligation imposed upon the Trustee by cl 54.1 to pay the pension. It fixes the amount in the accumulation account in the name of the member with this trust so that it does not form part of the member’s property. Furthermore, this is the meaning given to the word “pensioner” in cl 54.4.1.
I conclude, therefore, that the retirement benefit of Mr Hayne should be dealt with upon his death pursuant to cl 54.8. The answer to the first question must be in the negative. In the events which have happened, the superannuation entitlements of Mr Hayne under the superannuation trust do not form part of his deceased estate.
The Replacement of the Trustee
The second question presents less difficulty. Under the Deed, considerable powers are entrusted to the Founder. The person appointed to that office under the Deed is PMS. PMS is also the Trustee named in the Deed. The Deed draws a distinction between individual trustees of whom there must be at least two, on the one hand, and a corporate trustee, on the other.[19] PMS is, of course, a corporate trustee: there is no individual trustee. Among the powers of the Founder are those to remove a person from the office of an individual trustee and to remove a person as director of the corporate trustee.[20] No power is conferred upon the Founder or any other person to remove from that office the company holding the office of corporate trustee. The Deed does, however, make provision for a corporate trustee ceasing to hold that office[21] in certain circumstances which are essentially unconnected with any decision of the Founder and which are of no present relevance. When the office of Trustee falls vacant, the Founder is obliged to appoint a person or company to fill that office forthwith.[22]
[19]Clause 8.1.
[20]Clause 8.5.
[21]See clause 8.7.
[22]Clause 8.8. See also clause 8.5.
The facts underlying the replacement of PMS as Trustee are not in controversy. Following the death of Mr Hayne, probate of his will was on 24 February 2006 granted to Ms Moss and Mr Sundberg. Under the constitution of PMS two directors were required and Mr Sundberg was, on a date unknown to me, appointed as second director in place of the late Mr Hayne. He and Ms Moss remained directors of PMS to at least May 2007. PMS was also, at all material times, the trustee of the James Rogerson Hayne Family Trust.
Mr Sundberg said of the removal of PMS very little. Some time after his appointment as a director of PMS he formed the view that the law did not permit him, as a non-member of the fund, to be a director of its corporate trustee. He now acknowledges that this view was incorrect. In any event, being of that mind, he saw as his options that he should resign his directorship of PMS or replace PMS as Trustee with another Trustee. He and Ms Moss determined to follow the latter course so that he might continue to take a role in the management of the Hayne Family Trust of which PMS remained Trustee. His evidence as to this and as to the reasons was not contradicted by any witness.
I pause in this narrative to observe that the various persons whom I have mentioned as well as PMS have a number of different roles in all of this and it is important to identify what role each is playing at any given moment. Roles of PMS included those of Trustee of the fund, Founder of the fund under the Deed, and trustee of the Hayne Family Trust. Those of Ms Moss included sole member of the fund, a potential beneficiary in respect of Mr Hayne’s retirement benefit, an executor of his will and trustee of his estate, a director of PMS and the sole director of Moss Super. If parties have, no doubt for good reason, established a complicated legal structure such as this, they must respect it. And where they have, as here, multiple roles to play they must respect the conflicts which may arise.
Following the decision to replace the Trustee, three documents were prepared and executed, all dated 30 May 2006.
The first is under the heading PMS. It is in the form of a letter addressed to the fund. It is in these terms, omitting formal parts:
I hereby tender the resignation as trustee of Photography Management Service Pty Ltd Superannuation Fund effective 30th May 2006.
The letter is signed by Ms Moss and Mr Sundberg in each case describing themselves as director.
The second is a minute of a meeting of the members of the fund held on the same date. Shown as the only person present was Ms Moss, who was the only member of the fund. She signed the minute as a true and correct record. The minute records two resolutions of the members in the following terms:
Change of Trustee
IT WAS RESOLVED to remove Photography Management Services Pty Ltd as trustee of the Photography Management Service Pty Ltd Superannuation Fund.
IT WAS RESOLVED to appointment Moss Super Pty Ltd as trustee of the Photography Management Service Pty Ltd Superannuation Fund.
The third document is a letter under the heading of Moss Super in the form of a letter to the fund. Omitting formal parts, it is in the following terms and is signed by Ms Moss in her capacity as director of Moss Super:
I consent to the appointment of trustee of Photography Management Service Pty Ltd Superannuation Fund effective 30th May 2006.
These documents, it was put on behalf of Moss Super and Mr Sundberg, were effective to achieve a valid appointment of Moss Super as Trustee. Against this, it was, first, put that they did not comply with the procedures prescribed in the Deed. Second, it was put, for various reasons, that PMS was acting in breach of cl 12 of the Deed and in breach of its fiduciary obligations in removing itself from the office of Trustee and, presumably, in the consequential appointment of Moss Super.
I will consider the second submission first because I can do so shortly. There is no substance in it. Clause 12.3 requires the Trustee to ensure that its powers and duties are performed and exercised in the best interests of the beneficiaries. In a case such as this trust, such obligation must respect the fact that the Trustee is given discretions to deal differently as between beneficiaries. What appears to be suggested here is that the passing of the office of Trustee to a company solely controlled by Ms Moss will not be in the best interests of the beneficiaries – that is, the interests not of any one of them; but the interests of all of them. There is nothing to support such a conclusion that this was the intent of PMS on 30 May 2006 when it resigned or that this was the likely consequence of its acts on that date. PMS, of course, was not involved in the appointment of Moss Super as new Trustee. Likewise, there is here no breach of any fiduciary duty.
I return, then, to the first contention. It was accepted by all parties that it was open to PMS to resign the office of Trustee. This it did in the first document of 30 May 2006. This has two consequences. Since there is no Trustee, any removal of PMS from that office if superfluous. Second, PMS, as Founder, is obliged to appoint a new Trustee.
The second document is ineffective to achieve either of the matters which is mentioned in it. It did not remove PMS as Trustee for the reason mentioned and for the further reason that the members of the fund have no power under the deed to do this. No other power was suggested. It did not appoint Moss Super to the office of Trustee because this is not a power given to the members. It was, perhaps faintly, suggested that, since Mr Sundberg and Ms Moss, as directors of PMS in its role as Founder, agreed to this it should be taken as an act of PMS as Founder under cl 8.8. But the evidence does not go so far. The nearest is Mr Sundberg’s statement in paragraph 10 of his affidavit of 29 May 2007:
Julie Moss and I initially determined that I should resign as a Director of PMS. However I realised that PMS was also the Trustee of the Hayne Family Trust. Therefore I thought, and Julie Moss agreed, that the only appropriate course was to effect a change of Trustee of the Super Fund and Mr Harrison was instructed by PMS to put that into effect.
No document of PMS records its appointment of Moss Super to the office of Trustee.
The third document, which appears to be a consent given pursuant to cl 8.10, takes the matter no further.
The position, then, is that the office of Trustee remained and remains vacant and this will be the case until PMS as Founder acts under cl 8.8 or until a Trustee is otherwise appointed by law or court order.
It follows from this that the resignation of PMS from the office of Trustee is effective but not the appointment of Moss Super. The answer to the second question is that Moss Super was not validly appointed as the Trustee of the Photography Management Services Pty Ltd Superannuation Fund Trust on or about 30 May 2006.
Conclusion
I will hear counsel further as to the orders which should be made to give effect to the conclusions which I have reached and as to costs.
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