Qantas Superannuation Limited v McAulay

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FEDERAL COURT OF AUSTRALIA

Qantas Superannuation Limited v McAulay [2019] FCA 109

Appeal from: D17-18\119
File number: NSD 317 of 2018
Judge: PERRY J
Date of judgment: 13 February 2019
Catchwords:

SUPERANNUATION – where trustee of regulated superannuation fund offset estimated future disability support pension (DSP) payments against the Total and Permanent Disablement (TPD) benefit payable to the member – where effect of offsetting DSP was to reduce the TPD payable to nil but member paid withdrawal benefit – where appeal on a question of law from decision of the Superannuation Complaints Tribunal setting aside the trustee’s decision as unfair and unreasonable – consideration of what is meant by unfair and unreasonable in s 37 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) – consideration of principles governing construction of superannuation trusts – whether DSP is “income” for the purposes of the Superannuation Plan – consideration of the different purposes of the provision of a disability benefit and a TPD benefit under the Superannuation Plan – whether the trustee’s construction of the offsetting provision means that the member loses the benefit of membership contrary to the prescribed statutory purposes of the regulated superannuation fund – whether Tribunal erred in reading down the offsetting provision in the Superannuation Plan by reference to the ejusdem generis principle – appeal allowed

PRACTICE AND PROCEDURE – application under rule 33.29 of the Federal Court Rules 2011 (Cth) to rely upon further evidence on the appeal – where further evidence sought to be relied upon as evidence of circumstances surrounding the amendment of the relevant rule in the Superannuation Plan – where documents evidence only the trustee’s subjective intention – application dismissed

Legislation:

Superannuation (Resolution of Complaints) Act 1993 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth) Federal Court Rules 2011 (Cth)
Cases cited:

AIA Australia Ltd v Lancaster [2017] FCA 962

Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253

Cherry v Steele-Park [2017] NSWCA 295

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Commissioners of Inland Revenue v Raphael [1935] AC 96

Commonwealth Superannuation Scheme Board of Trustees v Kitching [2004] FCAFC 299; (2004) 139 FCR 272

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640

Federal Commissioner of Taxation v WE Fuller Proprietary Limited (1959) 101 CLR 403

Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254

Hannover Life Re of Australasia Ltd v Dargan [2013] NSWCA 57; (2013) 83 NSWLR 246

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104

PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; (2012) 247 CLR 240

Re Golden Key Ltd (in receivership) [2009] EWCA Civ 636

Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330

Stevens v Bell [2002] EWCA Civ 672

The National Grid Company Plc v Laws [1997] PLR 157

Trustees Executors & Agency Co Ltd v…

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Details
Case
[2019] FCA 109
Decision Date

CaseChat Overview and Summary

In the case of Qantas Superannuation Limited v McAulay, the trustee of a regulated superannuation fund, Qantas Superannuation Limited, offset estimated future Disability Support Pension (DSP) payments against the Total and Permanent Disablement (TPD) benefit payable to Mr McAulay. This resulted in the TPD benefit being reduced to nil, and Mr McAulay being paid a withdrawal benefit instead. Mr McAulay lodged a complaint with the trustee and subsequently with the Superannuation Complaints Tribunal, which found the trustee's decision to be unfair and unreasonable, leading to the appeal in the Federal Court of Australia.

The primary legal issues in the appeal were whether the Tribunal erred in its interpretation of certain clauses of the Superannuation Plan, specifically whether these clauses applied to income or lump sum social security payments in relation to Mr McAulay's disability. The trustee argued that the DSP payments qualified as income from any source in respect of or arising from Mr McAulay's disability and should be offset against the TPD benefit.

The court found that the Tribunal had indeed erred in its interpretation of the Superannuation Plan, particularly in its application of the ejusdem generis principle. The court held that the DSP payments did qualify as income from any source in respect of or arising from Mr McAulay's disability, and thus the trustee was justified in offsetting these payments against the TPD benefit. The appeal was allowed, and the decision of the Tribunal was set aside.

Further, the court dismissed the trustee's application to rely on further evidence regarding the circumstances surrounding the amendment of the relevant rule in the Superannuation Plan, as the proposed evidence only concerned the trustee's subjective intention and did not relate to the surrounding circumstances of the amendment. Finally, the court ordered that the question of costs for the interlocutory application should be reserved for the parties to consider and potentially make submissions on.

Orders

Orders of the court

1. The applicant’s interlocutory application filed on 21 September 2018 to lead further evidence on the appeal is dismissed.

2. On or before 4pm on Friday 22 February 2019, the parties are to file and serve proposed consent orders as to the costs of and incidental to the interlocutory application or, if not agreed, proposed minutes of order setting a timetable for the filing of short written submissions with the question of costs of the interlocutory application to be determined on the papers.

3. The appeal is allowed.

4. The determination of the Superannuation Complaints Tribunal dated 29 January 2018 is set aside.

5. Subject to order 2, there will 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

For the reasons set out below, the appeal must be allowed and the decision of the Tribunal set aside. 2. BACKGROUND2.1 The trustee’s decision The Superannuation Plan was established by a declaration of trust and administered by regulations which came into effect on 1 June 1939. The regulations were replaced by rules from 21 September 1989 which have been amended from time to time by deeds of amendment. Mr McAulay is now 54 years of age and joined the Superannuation Plan on 24 May 2001. It is not in issue that Mr McAulay is a Division 3 member of the Superannuation Plan within the meaning of rule 20.1. Mr McAulay last physically worked on 12 September 2012 and ceased employment with Qantas Airways Limited (the Principal Company) on 13 January 2015. Mr McAulay lodged a total and permanent disablement (TPD) claim with the trustee on 28 August 2015. That claim was admitted by the trustee and Mr McAulay was notified of that decision by letter dated 7 December 2015. In that letter, the trustee informed Mr McAulay that the TPD benefit ($308,987.66) was to be offset by social security benefits actually received by him for the period from 1 June 2015 to 20 October 2015 in the sum of $11,994.48. The trustee also advised that estimated future social security benefits expected to be received by the member to the age of 67 and calculated by the fund’s actuary to be $332,882.57, must also be offset against the TPD benefit. The social security benefit apparently used by the Trustee’s actuaries in calculating the present day value of the future payment stream for this purpose was the Disability Support Pension (the DSP). The trustee further advised that:(1)the net amount payable on account of the TPD benefit was reduced to zero once the estimated future social security benefits expected to be received were factored into the calculations; and, as a consequence, (2)the member was entitled instead to his minimum withdrawal benefit in the amount of $179,292.27 (i.e. $180,647.49 less $1,354.22 being the amount of an overpayment of his temporary disability payments). The trustee paid to Mr McAulay the withdrawal benefit in the sum of $178,427.65 on 29 September 2017 (see the affidavit of Emma Brodie at EB-6). I note the discrepancy between this amount and the amount advised by the trustee in the letter dated 7 December 2015 which was not explained by the evidence. However no issue arose in relation to this discrepancy. On 16 December 2015, Mr McAulay lodged a complaint and request for review by the trustee of the trustee’s decision pursuant to s 101 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) and s 19 of the SRC Act.On 17 February 2016, the trustee advised Mr McAulay’s solicitors that the original decision had been upheld.2.2 The Tribunal’s decision Mr McAulay lodged a complaint under s 14 of the SRC Act against the decision by the trustee on 4 April 2016 with the Superannuation Complaints Tribunal. Agreement was not able to be reached at the conciliation conference ordered by the Tribunal and held on 5 July 2017. The parties made submissions in writing to the Tribunal pursuant to a request by the Tribunal and the Tribunal conducted the review meeting based on the material contained in the papers provided to it (Tribunal reasons at [11]).

Evidence

Evidence Before The Court

On 5 September 2018 the applicant filed an interlocutory application seeking leave pursuant to rule 33.29 of the Federal Court Rules 2011 (Cth) (FCR) to file and rely upon the affidavit of Mr Neil Simpson sworn on 28 August 2018, together with exhibit NS1, (the further evidence) in support of its construction of rule 23.10. That affidavit was annexed to the affidavit of Ms Yu, solicitor, affirmed on 31 August 2018 and filed in support of the interlocutory application. Rule 33.29 of the FCR appears in Division 33.2 dealing with so-called “appeals” from decisions of the Administrative Appeals Tribunal and provides that a party may apply to the Court to receive further evidence on an appeal supported by an affidavit. Rule 33.34 in Division 33.3 provides that Division 33.2 applies to an appeal, as here, under s 46 of the SRC Act. While described as an appeal, in either case the application is in the nature of an application for judicial review and therefore in the original jurisdiction of the Court. Notwithstanding the application to lead further evidence, the trustee’s primary submission was that the present case belongs to the category of ordinary cases where the process of construction is possible by reference to the Superannuation Plan alone (citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 (Mount Bruce) at [48]-[49] (French CJ, Nettle and Gordon JJ)). For the reasons I have earlier given, I agree with the trustee’s primary stance. In the event, however, that the Court considered that the meaning of the relevant provisions of the Superannuation Plan was ambiguous, the trustee submitted that the Court could have regard to the further evidence as evidence of the surrounding circumstances in which relevant amendments to the Superannuation Plan were made. The conclusion which I have reached as to the construction of the Superannuation Plan does not render it unnecessary to rule upon the interlocutory application. Quite apart from the possibility that a different view might be taken if the matter is the subject of an appeal, there is some force in the view expressed by Leeming JA that “ambiguity” in the context of the legal principles governing the construction of a contract (and by analogy, a trust deed) is a conclusion, rather than a precondition to the admissibility of evidence of surrounding circumstances: Cherry v Steele-Park [2017] NSWCA 295 (Cherry) at [79] (Leeming JA (with whose reasons Gleeson JA at [1] agreed)). The further evidence comprised documents which were located only after the proceedings were commenced as a result of a search undertaken following the filing of the applicant’s submissions on 27 July 2018 in order to identify historical documents relating to the introduction of Division 3 into the Superannuation Plan. The historical documents in question comprised a Deed of Amendment dated 23 August 1995, minutes of meetings of the Board of Directors of the trustee preceding the 1995 Deed of Amendment, minutes and an agenda item of the board papers of a meeting of the Board of Directors held on 15 August 2000, and a letter of advice from solicitors to the Board of Directors in 1995.

Decision

Reasons for decision

In my view, the documents the subject of the interlocutory application are not relevant and leave to file the further affidavit of Mr Simpson should therefore be refused. While the submission suffers potentially from a number of difficulties, the short point is that, despite the ingenuity of counsel’s arguments, the proposed evidence cannot be characterised as evidence of surrounding circumstances. The documents concern prior deliberations by the trustee charged with amending the Superannuation Plan, including the legal advices which informed those deliberations. As such, they evidence only the trustee’s subjective intention in relation to that amendment. Applying the authorities earlier cited, evidence of subjective intention is not relevant. As Lord Wright explained in Commissioners of Inland Revenue v Raphael [1935] AC 96 at 142-143 speaking of a failed attempt to settle property on trust (in a passage cited with approval by Heydon and Crennan JJ in Byrnes v Kendle at [106]):… the principle of the common law has been to adopt an objective standard of construction and to exclude general evidence of actual intention of the parties; the reason for this has been that otherwise all certainty would be taken from the words in which the parties have recorded their agreement or their dispositions of property.6. CONCLUSION For these reasons, the appeal should be allowed and the decision of the Tribunal set aside. As earlier explained, the parties were agreed that in this event, no order was necessary in the circumstances remitting the matter to the Tribunal. The trustee also stated in its written submissions in reply that in the event that it succeeds, it will not seek an order for costs of the appeal against the member. However, I consider that the question of the costs of the interlocutory application should be reserved in order to afford the parties an opportunity to consider their position with respect to these costs and, if not agreed, to make submissions. Subject only to this caveat, there will be no order as to costs. Finally, the Court expresses its appreciation to counsel for the respondent who appeared pro bono, having accepted the referral pursuant to the certificate issued under rule 4.12 of the Federal Court Rules 2011.

Ratio Decidendi

Legal Principle Established

Finally, sub-rule 23.10(e) provides that:(e) Where the Trustee determines that a future income or lump sum benefit may become payable from a source what [sic] would otherwise require it to be treated as an Offsetting Amount in terms of paragraph (a) or paragraph (c) above, the Trustee may ignore that potential benefit subject to the Member providing an undertaking acceptable to the Trustee that the Member will reimburse the Trustee if such future benefit does in fact become payable. 4. CONSIDERATION4.1 The issues The questions of law raised on the appeal by the trustee are whether the Tribunal erred by:a.construing clause 23.10(c)(iv) of the Trust Deed as not applying to any income or lump sum social security payments in respect of or arising out of the Respondent’s disability; andb.construing clause 23.10(c)(v) of the Trust Deed as not applying to any income or lump sum payments which the Applicant considers may become payable under clause 23.10(c)(iv) at a future date, in relation to the condition that resulted in the Respondent being eligible for the TPD Benefit. As such, the trustee submits that the DSP payments which it calculated the member can be expected to receive until he is 67, qualify as “… income… from any source which the Trustee determines to be in respect of or arising from the disability…” within the meaning of sub-rule 23.10(c)(iv). As a result, the trustee submits that the present day value of that future payment stream may be calculated in accordance with sub-rule 23.10(d) and treated as an amount to be offset against the TPD Benefit under rule 23.10(c), contrary to the Tribunal’s decision. It is helpful at this point to set out certain matters which were not in dispute in relation to the questions of law the subject of the appeal. First, it was common ground that the construction of the Superannuation Plan is a question of law for the purposes of s 46 of the SRC Act. In this regard, Allsop J (as his Honour then was) explained in Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 the task of the Tribunal under s 37 of the SRC Act as follows:27. The task of the Tribunal and the meaning of the phrase “unfair or unreasonable” are inextricably intertwined and both are governed by the Act, and, especially, by s 37. It is the decision of the Trustee, recognising its obligation to act in conformity with the governing rules of the fund, and the decision of the Insurer, recognising its obligation (and entitlement) to act in conformity with the terms of the relevant policy, which must be reviewed for unfairness or unreasonableness. The unfairness or unreasonableness must be of the decision (as expanded by s 4) under, and in conformity with, the governing rules or the terms of the policy. It is not some other perceived (rightly or wrongly) unfairness or unreasonableness in and about the conduct of the fund.28. The question as to whether a decision was unfair or unreasonable cannot be judged otherwise than by having regard to the conformity of the decision with the governing rules of the fund and the terms of the policy. The conformity of the decision with those matters is therefore a relevant consideration in the sense discussed in Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 at 39-40 and see Telstra Corporation Ltd v Seven Cable Television Pty Ltd (2000) 178 ALR 707 (special leave refused on 20 August 2001). If conformity with the governing rules or the terms of the policy required the very decision, which was made, to be made, the strictures of subs 37(5), the universe of possible conduct under subs 37(3) and the balance of the Act, including subs 37(6), would require a conclusion of the Tribunal that the decision was not unfair or unreasonable.