Re AUSCOAL Superannuation Pty Ltd atf the Mine Superannuation Fund

[2024] NSWSC 32

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Re AUSCOAL Superannuation Pty Ltd atf the Mine Superannuation Fund; Application for Judicial Advice [2024] NSWSC 32

Hearing dates:

6, 9, 10, 13, 16 and 17 November 2023

Date of orders:

1 February 2024

Decision date:

01 February 2024

Jurisdiction:

Equity

Before:

Robb J

Decision:

See [308]

Catchwords:

EQUITY – trusts and trustees – judicial advice under s 63 of the Trustee Act 1925 (NSW) – where superannuation fund comprises members with accumulation interests and members with defined benefit interests – where trust deed of the fund contains a “single trust” clause – where the “single trust” clause provides that no part of the trust deed shall be taken as establishing a separate trust in respect of any category of members or any part of the fund – whether the trustee would be justified in administering and managing the fund on the basis that, notwithstanding the presence of the “single trust” clause, in all the circumstances the entitlements of members with defined benefit interests must be satisfied out of the net value of the assets attributed by the fund to the category or division within the category to which members with defined benefit interests belong – consideration of the construction and effect of the “single trust” clause in the context of the trust deed as a whole – whether the trustee of the fund may make certain amendments to the trust deed to empower the board of directors of the fund to retain the services of and appoint expert advisors and consultants, and to act on their advice – whether the trustee of the fund may amend the trust deed to confirm that the existing indemnity under the deed extends to circumstances where the trustee acts upon the opinion or advice of expert advisors and consultants

Legislation Cited:

Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW), ss 15C, 18, Pt 4A

Coal Industry Superannuation Regulations 2014 (WA), regs 6, 11, 12, 24, 25, 26(1), 27, 28, 29, 30, 31, 32, 33, 35, 48

Court Suppression and Non-publication Orders Act 2010 (NSW), 8(1)

Superannuation Guarantee (Administration) Act 1992 (Cth)

Superannuation Industry (Supervision) Act 1993 (Cth), ss 10, 16, 18, 29T, Pt 3, s 31, 52, Pt 8, 69A, Pt 29, ss 326, 327, 332, 334

Superannuation Industry (Supervision) Regulations 1994 (Cth), Pt 1, regs 1.03, 1.03AAA, Pt 9, Divs 9.2, 9.2A, reg 9.04B, Div 9.2B, reg 9.04G, Div 9.3, regs 9.06, 9.07, 9.08, 9.09, 9.15, 9.17, Div 9.4, regs, 9.23, 9.24, 9.25, Divs 9.6, 9.7, regs 9.43, 9.44, 9.45

Trustee Act 1925 (NSW), s 63

Uniform Civil Procedure Rules 2005 (NSW), r 42.25, Pt 55, Div 1, r 55.2

Cases Cited:

Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd [2002] VSC 576; (2002) 174 FLR 1

Application by NGS Super Pty Ltd atf NGS Super [2021] NSWSC 1694

Application by SCS Super Pty Ltd atf Australian Catholic Superannuation and Retirement Fund [2022] NSWSC 686

Energy Industries Superannuation Scheme Pty Limited as trustee of the Energy Industries Superannuation Scheme Pool A and Pool B (trading as EISS Super) [2022] NSWSC 1202

Goodwin v Phillips (1908) 7 CLR 1; [1908] HCA 55

Greylag Goose Leasing 1410 Designated Activity Co v PT Garuda Indonesia Ltd [2023] NSWCA 134; (2023) 410 ALR 371

Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42

Texts Cited:

Australian Prudential Regulation Authority, Prudential Practice Guide SPG 520 – Fit and Proper, July 2013

JD Heydon, Heydon on Contract (2019, Thomson Reuters)

JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths)

Category:

Principal judgment

Parties:

AUSCOAL Superannuation Pty Ltd atf the Mine Superannuation Fund (Plaintiff)

Representation:

Counsel:
D Hogan-Doran SC / A Ilic (Plaintiff)

Solicitors:
Mills Oakley (Plaintiff)

File Number(s):

2023/348454

Publication restriction:

Nil

JUDGMENT

1. By summons filed on 2 November 2023, the plaintiff, AUSCOAL Superannuation Pty Ltd (AUSCOAL or the Trustee), seeks the opinion, advice or direction of the Court under s 63 of the Trustee Act 1925 (NSW) on a number of questions concerning the administration and management of the Mine Superannuation Fund (Mine Super or the Fund) of which AUSCOAL is the trustee, and the interpretation of the trust deed that governs Mine Super (Trust Deed), as well as certain consequential and associated relief.

2. As a result of exchanges between the Court and senior counsel during the course of the hearing, AUSCOAL filed an amended summons in court on 16 November 2023.

3. The context in which AUSCOAL makes this application is a proposed merger between Mine Super and another superannuation fund, which I will call TWUSUPER, under a deed (SFT Deed) executed on 27 September 2023, between AUSCOAL and TWU Nominees Pty Ltd (TWU), the trustee of TWUSUPER. In short, the application arises out of concerns that, if the merged Fund or any part of it is terminated or wound up in circumstances where there is a deficit in available assets to meet the Fund’s obligations to members, the distributions to the present members of TWUSUPER will be reduced in favour of certain classes of members of Mine Super.

4. As a result of the need for expedition in the determination of the application arising out of the timetable in the SFT Deed, the application was heard in the Duty List on 6, 9, 10, 13, 16 and 17 November 2023.

5. AUSCOAL’s application has been supported by a number of affidavits made by its solicitor, Mark Albert Bland, and by a Statement of Facts filed on 2 November 2023 and a Supplementary Statement of Facts filed in court on 13 November 2023. AUSCOAL provided written submissions to the Court dated 1 November 2023, supplementary written submissions dated 16 November 2023, and further supplementary written submissions dated 17 November 2023. Counsel for AUSCOAL have provided a number of confidential opinions on the issues raised by the application.

6. Upon reflection, after the completion of the hearing, the Court posed a number of questions to AUSCOAL’s solicitors on 20 November 2023. That prompted AUSCOAL to deliver further post-hearing written submissions dated 8 December 2023, together with a folder containing documents that supported those submissions.

7. During the course of the hearing, and after its completion, the Court has made orders under the s 8(1) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) on the application of AUSCOAL, restricting the publication or disclosure of certain documents, on the basis that the information the subject of the orders consisted of the confidential opinions provided by counsel to AUSCOAL or confidential information relating to the affairs of Mine Super or TWUSUPER that was not required to be disclosed publicly for the purpose of explaining the reasons for the orders that the Court will make in these proceedings. In making those orders, I applied the principles considered in Application by NGS Super Pty Ltd atf NGS Super [2021] NSWSC 1694 (NGS Super) at [90]-[107] per Henry J; Application by SCS Super Pty Ltd atf Australian Catholic Superannuation and Retirement Fund [2022] NSWSC 686 (SCS Super) at [46]-[63] per Hallen J; and Energy Industries Superannuation Scheme Pty Ltd as trustee of the Energy Industries Superannuation Scheme Pool A and Pool B (trading as EISS Super) [2022] NSWSC 1202 (EISS Super) at [39]-[45] per Ball J.

8. The judicial advice sought by AUSCOAL in this application depends upon complex legal and factual issues that arise out of the terms of the Trust Deed and the regulatory regime that governs the operation of superannuation funds such as Mine Super and TWUSUPER, which for convenience I will call the SIS legislation.

Australian Prudential Regulation Authority

9. AUSCOAL has informed the Australian Prudential Regulation Authority (APRA) of the present application and engaged in communications with APRA during the course of and after the hearing. This led to APRA writing a letter to the solicitors for AUSCOAL dated 11 December 2023. In the letter, APRA consented to the letter being provided to this Court to assist with the current proceedings. APRA advised that it did not seek any confidentiality orders in relation to the content of the letter. APRA further advised that it did not wish to join the proceedings or assume the role of amicus curiae.

10. APRA’s 11 December 2023 letter conveyed APRA’s views on a number of important questions that have arisen during the course of the hearing. The Court is grateful for APRA’s assistance; in particular because APRA’s expressed views reinforced a number of tentative conclusions that the Court had reached concerning the effect of certain difficult aspects of the SIS legislation.

11. Furthermore, as will be explained in more detail below, Part 29 of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) contains provisions that empower APRA to modify the operation of certain provisions in the SIS Act and the Regulations made under that Act. On 18 December 2023, the Court received from the solicitors for AUSCOAL a draft modification declaration under s 332 of the SIS Act which, as the Court was advised by the solicitors, APRA “would consider making”, and which might, if made, resolve some difficulties that have arisen in the determination of AUSCOAL’s application for judicial advice. I will explain the effect of those modifications below.

12. APRA has cooperated with the Court and AUSCOAL in relation to the determination of the present application. I infer that APRA would have advised the Court if it wished to oppose any aspect of the application.

Absence of notice to members of Mine Super

13. AUSCOAL has not given notice of this application to the beneficiaries of Mine Super, and has sought the leave of the Court to prosecute its application without that leave being given.

14. I am satisfied that it will be appropriate for the Court to determine AUSCOAL's application for judicial advice without the Court requiring AUSCOAL to give notice to the beneficiaries of Mine Super or making arrangements for any beneficiaries who wish to do so to participate in the application.

15. Section 63 of the Trustee Act provides in subsection (4): "Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person". Part 55 Division 1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which deals with the giving of judicial advice by the Court, does not require AUSCOAL to give notice of the application to the beneficiaries of the Trust.

16. As will be seen, Mine Super has approximately 56,660 members. It would not be practicable for the Court to require AUSCOAL to give notice of this application to the beneficiaries of Mine Super in the expectation that there was any realistic possibility that beneficiaries could take an effective part in the proceedings. Requiring AUSCOAL to give notice of the application to beneficiaries would impose an unwarranted cost on the Fund.

17. Furthermore, as the objective of the application is for AUSCOAL to receive judicial advice from the Court so that it will be protected from actions for breach of trust if it acts upon that advice, the orders that the Court will make will not finally determine the rights of beneficiaries under the Trust Deed.

18. Although APRA is not subject to an obligation to intervene in the proceedings in the interests of beneficiaries, the fact that APRA has provided the response to the Court that has been referred to above will, in practical terms, provide some protection to the interests of beneficiaries.

19. In taking this course, the Court has acted on the same basis as has been done in NGS Super at [54]-[56]; SCS Super at [31]-[35]; and EISS Super at [39]-[45].

Applications for judicial advice

20. Relevantly, s 63 of the Trustee Act provides:

63 Advice

(1)   A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.

(2)   If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee’s own responsibility, to have discharged the trustee’s duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.

21. In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of Macedonian Orthodox Dioceses of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church case), the plurality considered the application of s 63 of the Trustee Act at [54]-[76]. Their Honours held at [55]-[57] that there are no implied limitations on the power of the Court to give advice under s 63. Further, their Honours said:

[58] Only one jurisdictional bar to s 63 relief exists: the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument…

22. In JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths), the learned editors say at [2021-34] (footnotes omitted):

The judge will not, as a general rule, give a trustee opinion or advice under this legislation on a question involving the construction of the trust instrument where the question concerns the respective rights of beneficiaries or their identity; in such a case, the proper procedure is by way of originating summons where all parties are served and have the opportunity to be heard. Even less will advice be given on matters in controversy between parties to a trust. However, where the question of construction does not involve the respective rights of beneficiaries but only the nature or extent of the trustee’s powers or duties of management or administration under the trust instrument, a summons under this legislation is an appropriate procedure, although it may be found that an application by way of originating summons would be more suitable.

23. The questions upon which judicial advice has been sought in this case have arisen in the context of the management and administration of a large commercial superannuation scheme of which AUSCOAL is the trustee. The questions in substance do not directly concern the rights of beneficiaries. I am satisfied in principle that the subject matter of the advice sought falls within s 63(1) of the Trustee Act, as it concerns the management and administration of Mine Super, and also raises questions respecting the interpretation of the trust instrument.

24. As will be seen, AUSCOAL's application has raised many issues, the resolution of which I have often found to be difficult. I am satisfied that, in principle, the Court should exercise its discretion to give advice in response to the questions posed by the amended summons if, at the end of these reasons, it is satisfied that it is able to do so with sufficient confidence concerning the validity of its advice, and that it is in the interests of both AUSCOAL and the beneficiaries of Mine Super for the Court to do so.

Judicial advice sought by AUSCOAL

25. At the hearing, AUSCOAL withdrew its application in prayer 2 of the amended summons. The Court granted an oral application made by senior counsel for AUSCOAL to make a minor amendment to the wording of prayer 1(a) of the amended summons. The amended summons is in the following terms:

On the basis of the Statement of Facts dated 1 November 2023 and the Supplementary Statement of Facts dated 13 November 2023:

1. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether:

(a)   the Plaintiff would be justified in administering and managing the Mine Superannuation Fund (Mine Super) on the basis that, on the proper interpretation of the trust deed, clause 2.5 does not expose Beneficiaries with an accumulation interest to a risk that:

i.   in the circumstances of a defined benefit Category deficit; or

ii.   in a winding up (of a Category, or of Mine Super);

the Assets available to fund defined benefit entitlements will not be restricted to the Assets attributable to the applicable defined benefit Category;

(b)   any benefit payable to a Beneficiary with respect to their defined benefit interest in Mine Super will not be payable from the Assets of Mine Super attributable to Accumulation Member Categories (or any other Category treated by the trustees as an Accumulation Category);

(c)   the Plaintiff would be justified in amending the trust deed so as to clarify, for the avoidance of doubt, that clause 2.5 does not alter the benefit entitlements of Members and other Beneficiaries of Mine Super.

…

3. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether the Plaintiff would be justified in amending the trust deed so as to:

(a)    delete the word “and” at the end of the last line of clause 4.2(j);

(b)   replace “.” with “; and” at the end of the last line of clause 4.2(k);

(c)   insert new sub-clause 4.2(l) as follows:

“retain the services of and to appoint professional or other advisors in relation to the management, investment, administration or conduct of the Fund, to act on the advice of any person so retained and to pay the fee or remuneration for any professional or other advisors so appointed.”;

(d)   insert “(a)” at the beginning of the first line of clause 6.1; and

(e)   insert new sub-clause 6.1(b) as follows:

“For the avoidance of doubt, the indemnity in clause 6.1(a) shall extend to circumstances where the Trustee acts upon the opinion or advice of or statement of barristers or solicitors who are instructed by the Trustee or any bankers, accountants, brokers, investment advisers or other persons believed by the Trustee in good faith and upon reasonable grounds to be expert in relation to the matters upon which they are consulted.”

26. The remaining orders concern the payment of AUSCOAL’s costs of the application out of the assets of Mine Super and the making of orders to ensure the confidentiality of aspects of the evidence relied upon by AUSCOAL on the application and the opinions delivered by counsel.

Background

27. I will now set out in outline form the background to the application and the reasons why AUSCOAL has sought the judicial advice in its amended summons.

28. Mine Super is a registrable superannuation entity within the meaning of s 10 of the SIS Act. Mine Super is a standard employer-sponsored fund within the meaning of s 16 of the SIS Act, and has, since 14 September 2011, also been a public offer superannuation fund within the meaning of s 18 of the SIS Act. Mine Super is authorised under s 29T of the SIS Act to provide a ‘MySuper product’ to accumulation members. Mine Super also has ‘choice’ accumulation members, members with pension benefits and members with ‘defined benefit’ interests.

29. Mine Super is governed by the terms of a trust deed dated 31 January 1995, as amended. The terms of the original trust deed were replaced in their entirety by a deed of amendment executed on 28 June 2011, with effect from 17 June 2011 (the Replacement Deed). That deed has itself been amended many times, and the Court has been provided with a copy of that trust deed consolidated as at 22 August 2022 (which is the deed that I have called the Trust Deed).

30. The governing law of the Trust Deed is the law of New South Wales, which relevantly includes the Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW) (the Principal Act).

27. Mine Super has approximately 56,660 members across Australia. Most of those members work or have worked in the mining industry in Australia. AUSCOAL accepts as members persons from outside the mining industry. I will generally use the word "beneficiaries" to refer to the persons who have interests in Mine Super, as there are classes of persons who have interests in Mine Super but are not formally members. In some instances, it will be more appropriate to refer to persons who are strictly members.

28. The Statement of Facts contains a detailed history of Mine Super that began with the report of the Royal Commission into the mining industry delivered in 1939, which led the New South Wales Parliament to enact the Principal Act in 1941, to provide for a pension to be paid to retired or incapacitated mine workers. After a significant number of changes to the arrangements made under the law of New South Wales for the provision of benefits to mine workers, during the 2000s, a number of mergers of funds took place through a series of “successor fund transfers” within the meaning of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations). There was a merger with the Queensland Coal and Oil Shale Mining Industry Superannuation Fund in 2005, with the Western Australian Coal Industry Superannuation Fund in 2014, and with the Mines Rescue Stations Staff Superannuation Plan in 2016. The occurrence of these mergers is reflected in the structure of the present Trust Deed, because of the need to preserve the benefits to which the members of the earlier superannuation funds were entitled at the time of the succession of mergers. As will be seen below when the terms of the Trust Deed are analysed, the Trust Deed is in large measure an amalgam of the trust deeds that governed the merged trusts. The Trust Deed provides for separate Categories of members. The Categories largely represent the separate merged trusts. For the present, it is sufficient to note that there are two Categories of accumulation members, three Categories of defined benefit members and the Pension Category.

29. The members of TWUSUPER are all entitled to accumulation benefits. The proposed merger between Mine Super and TWUSUPER gives rise to potential problems concerning the entitlements of members of the latter superannuation fund after it is merged with the former fund, which has both accumulation members and defined benefit members. The Court was advised by AUSCOAL’s further supplementary submissions, at [1] to [4], that the effect of terms of the SFT Deed will be that existing members of TWUSUPER will transfer to Mine Super their superannuation interests into existing Mine Super Categories on the basis specified in Schedules 2 and 3 of the SFT Deed. Other terms of the SFT Deed require AUSCOAL to assume liability for the benefits of all transferring members and the transferred assets, to admit those members into the corresponding Category and to establish beneficiary accounts and credit balances to those accounts and make proportionate allocations of the transferred assets to the beneficiary accounts or the equivalent investment option.

30. The SFT Deed contains the following clause 4.1(b):

4   Conditions Precedent

4.1   Amendments of Trust Deeds and other matters

The obligations of the Parties under this Deed to complete the Successor Fund Transfer are subject to:

…

(b)   the effective change of the Mine Super Trust Deed or Court advice or determination to ensure that any benefits payable to members with a defined benefit interest [sic] Mine Super will not be payable from the assets of Mine Super attributable to members with a defined contribution interest;

…

35. Clause 4.1(b) distinguishes between members with a defined benefit interest and members with a defined contribution interest. I understand from the documents provided to the Court on the application that the reference to “members with a defined contribution interest” means the same as members with an accumulation interest: see, for example, the Statement of Facts at [26(c)].

Analysis of questions for judicial advice

36. It will be convenient to provide a simplified explanation of the relevant difference between superannuation interests that are accumulation interests and those that are defined benefit interests. That may be of assistance to the reader who is unfamiliar with the matters dealt with in these reasons. The explanation will be an oversimplification because each case will depend upon the terms of the relevant trust deed and the financial circumstances of the particular superannuation fund. The question is: what happens if at a particular time when a superannuation fund, or part of a fund, is terminated or wound up, there is a deficit in the assets that are available to satisfy the full entitlement of members of the fund, as recorded in the accounts for those members. If the assets must be distributed to the members pari passu in proportion to their nominal entitlements as recorded in their accounts, there is scope for unfairness that may arise as a result of differences in the way the nominal entitlements of members with different types of interest are calculated in relation to the value of the assets attributed to the satisfaction of those entitlements.

37. Broadly, members of superannuation funds with an accumulation interest are entitled to benefits that are measured by the accumulated value of the contributions and the product of their investment. In principle, the aggregate entitlement of accumulation interests should equal the aggregate value of the assets available to satisfy those interests. That is, if the value of the assets attributable to members with accumulation interests falls, their entitlements should be adjusted downwards to reflect the loss in value. All other things being equal, there should not be a deficit.

38. Defined benefit interests are different, because the entitlement is defined by a prescribed formula that results in an arbitrary relationship between the aggregate entitlement of defined benefit interests and the aggregate value of the assets available to satisfy those interests. Consequently, to deal with potential deficits, the rules governing defined benefit superannuation funds must require regular monitoring and obligatory augmentation of the available assets by additional contributions, if necessary, with the objective of eliminating the difference between the aggregate entitlement of defined benefit interests and the aggregate value of the assets available to satisfy those interests. There is a greater inherent risk that there will be a deficit in available assets in defined benefit trusts at the time of the termination or the winding up of such trusts in insolvency. Hence the risk that, in a ‘hybrid’ superannuation scheme providing for both accumulation and defined benefit interests, rules that govern distributions to members upon termination or winding up may have the result that assets attributed to the satisfaction of the accumulation interests in the accounts of the trustee may be diminished to supplement the assets available to satisfy defined benefit interests.

39. Clause 2.5 of the Trust Deed provides:

2.5   Single Trust

Nothing in this Trust Deed is to be taken as establishing a separate trust in respect of any of the Categories or any Investment Option or any part of the Fund. Where the Trustee is liable to pay amounts in respect of Beneficiaries or Employers, that liability relates to all Assets of the Fund and is not limited to the Assets attributable to any particular Category or Investment Option.

40. This clause gives rise to the possibility that AUSCOAL is obliged to apply assets attributable to Accumulation Categories to satisfy the entitlements of members of Defined Benefits Categories, whose benefits are defined in a manner that exceeds the value of the assets attributed to those Categories.

41. The Statement of Facts states that AUSCOAL manages Mine Super in a manner that accounts for the assets and liabilities of each of the Defined Benefit Categories separately. That arrangement is reflected in the manner in which the assets of each Defined Benefit Category are held in separate custodial ownership. Following the merger with TWUSUPER, members of that superannuation scheme will become members of Accumulation Categories within Mine Super, and the assets held by TWU will be transferred into the relevant Categories and accounted for and held for the benefit of those Categories.

Proposal to amend the Trust Deed

42. Clause 4.1(b) of the SFT Deed seeks to deal with this risk in two alternative ways. The first uses the words “the effective change of the Mine Super Trust Deed”, which, in practical terms means the amendment of the Trust Deed to ensure that clause 2.5 does not have the undesired effect. Clause 4.1(b) does not specify the terms of the amendment required.

43. I will consider Prayer 1(c) of the Amended Summons first because it responds to the first part of clause 4.1(b) of the SFT Deed. Prayer 1(c) responds to this problem not by seeking judicial advice that AUSCOAL would be justified in amending the Trust Deed to delete clause 2.5, or to include positive provisions to ensure that the Categories are always treated as separate trusts. The prayer only contemplates an amendment that states that, for the avoidance of doubt, clause 2.5 does not alter the benefit entitlements of members and other beneficiaries of Mine Super.

44. The question asked in prayer 1(c) of the amended summons avoids the risk that clause 2.5 will have the undesirable effect of altering the benefit entitlements of the beneficiaries by assuming that effect away. It assumes that clause 2.5 does not have the effect of diminishing the assets that may be distributed to beneficiaries with accumulation interests in favour of defined benefit beneficiaries, and then asks the Court to provide judicial advice that AUSCOAL would be justified in amending clause 2.5 to make that outcome clear.

45. Two observations should be made concerning the question in prayer 1(c). First, the Court could not properly answer the question in the affirmative without satisfying itself that clause 2.5 in fact had the effect that is assumed by AUSCOAL; that is, that the clause does not have the effect of benefiting one class of beneficiary to the disadvantage of another. Secondly, if the Court formed the view that clause 2.5 did have the assumed effect, the question would become a trivial one, as it is self-evident that it is justifiable for AUSCOAL to amend a provision in the Trust Deed to make its real effect clear.

Advice concerning the proper construction of the Trust Deed

46. The second way that clause 4.1(b) seeks to deal with the risk stated above is to require judicial advice from the Court “to ensure” that the undesirable transfer of assets attributed to accumulation beneficiaries to defined benefit beneficiaries “will not be payable”.

47. The questions in prayer 1(a) and (b) of the amended summons appear to seek substantially the same judicial advice, although question 1(a) is expressed in negative terms (with an uncomfortable double negative) and question 1(b) is expressed in positive terms. There is, however, a material difference. Question 1(a) concerns whether AUSCOAL would be justified in administering and managing Mine Super on a particular basis, while question 1(b) concerns the substantive issue of how benefits payable to beneficiaries with defined benefit interests should be satisfied, having regard to the terms of the Trust Deed and the SIS legislation.

48. If the Court gives to AUSCOAL judicial advice that it has sought, the legal effect will be that AUSCOAL will not be liable for any action for breach of trust by any beneficiary in respect of the consequences of AUSCOAL acting in accordance with the judicial advice: see s 63(2) of the Trustee Act and the Macedonian Church case at [65].

Effect of clause 2.5

49. Considered in isolation, the meaning of clause 2.5 of the Trust Deed is clear. Notwithstanding the separate accounting treatment for the different Categories, and the fact that the assets attributable to the Defined Benefit Categories are held separately by a custodian, the Fund is a single fund, and the assets held separately for each of the Categories are available to meet all of the liabilities of AUSCOAL as trustee, whether those liabilities are to the members of the different Categories, are to creditors or are to AUSCOAL itself. Clause 2.5 is explicitly inconsistent with the manner in which Mine Super has grown by the merger of separate superannuation funds, as well as the structure of the Trust Deed that treats the assets held for each Category separately, in contemplation that those assets in all circumstances will be the only assets available for distribution to the beneficiaries of that Category.

50. There may, however, be circumstances that have the effect that clause 2.5 does not operate literally in accordance with its terms. I will now summarise those circumstances in the order that I consider is most convenient to their explanation (which is not the same order as their legal significance). They are:

• The meaning and effect of clause 2.5 must be determined in the context of the terms of the Trust Deed as a whole. Consequently, it is possible that the Trust Deed may contain specific terms that are inconsistent with the general effect of clause 2.5, and it may be that the proper construction of the Trust Deed as a whole has the consequence that the entitlements of beneficiaries of particular Categories can only be satisfied out of the assets that are attributed to and held in separate custody for the beneficiaries of those Categories.

• Although clause 2.5 expressly states that, where AUSCOAL is liable to pay amounts to beneficiaries, that liability relates to all assets of the Fund, it may be that the Trust Deed contains terms that give AUSCOAL a power to adjust the accounts of beneficiaries in a way that limits the benefits that they are entitled to be paid to an amount that reflects their pari passu share of the value of the assets attributed to the Category in which they are beneficiaries. If so, the aggregate amount of all of the entitlements of members of the particular Category will be limited to the value of the assets attributed to that Category. If the Trust Deed gives to AUSCOAL the power to make such adjustments, it will not ultimately matter that beneficiaries of a Category whose aggregate nominal entitlements before adjustment were greater than the assets attributed to that Category, so that notionally they could require their entitlements to be satisfied out of assets attributed to other Categories. It would not in practical terms matter how the entitlements of the beneficiaries with notional deficits were satisfied from the whole of the assets of the Fund, if AUSCOAL was able to exercise a power to adjust the aggregate entitlements of those beneficiaries downwards in response to the deficit in the value of assets attributed to their Category.

• Finally, it will be necessary to consider whether clause 2.5 does not operate in accordance with its literal terms because of the application of any legislation or regulations that have paramount effect, with the result that clause 2.5 is invalid, insofar as it purports to give beneficiaries of Categories a right to satisfaction of their notional entitlements in the accounts maintained by AUSCOAL out of assets that are attributed to other Categories.

51. As the effect of clause 2.5 must be determined in the context of the Trust Deed as a whole, it will be necessary to analyse all relevant terms to see whether they have the effect, with a sufficient degree of confidence, of counteracting what would otherwise be the effect of clause 2.5.

52. It will also be necessary to examine how the SIS legislation affects the distribution of the assets of the Fund, as the regulatory regime has a paramount effect over the terms of the Trust Deed. It may be that the regulatory regime requires that the assets of the Fund be applied in a manner that is inconsistent with the apparent effect of clause 2.5.

53. It will be conducive to the avoidance of confusion if the effect of the relevant terms of the Trust Deed is considered first and separately from the application of the SIS legislation.

54. It will be necessary to consider separately the circumstances where: (a) the Fund as a whole is terminated or wound up; (b) a particular Category is terminated or wound up; and (c) a relevant employer ceases to be a participant in the Fund.

Analysis of terms of the Trust Deed

55. An understanding of the issues that may arise in the event of a deficit existing in relation to a Category or upon the winding up of a Category or of Mine Super therefore requires a close analysis of the terms of the Trust Deed.

Significance of the Relevant Law

56. Clause 1.3 has the effect that, if the “Relevant Law” prescribes provisions that must be included in the governing rules of a regulated superannuation fund, those provisions are, to the extent relevant, deemed to appear in the Trust Deed and to override any inconsistent provisions. “Relevant Law” is defined in clause 1.1 to mean, relevantly, “the requirements set out in the SIS Act, any regulations made under the SIS Act, being primarily the Superannuation Industry (Supervision) Regulation 1994 (Cth) (the SIS Regulation), any prudential standards made by a Regulator under the SIS Act, the Coal and Oil Shale Miners (Superannuation) Act 1941 (NSW).”

57. An unusual feature of the scheme in which the Trust Deed operates is that the Fund as a whole is subject to the effect of the SIS legislation, but different Categories are also subject to certain State laws that governed the former separate superannuation funds before they were merged into Mine Super and became Categories of that fund.

Terms implied by the SIS Act

58. It will be convenient to interpose a reference to covenants that are taken to be contained in the Trust Deed, by operation of s 52(1) of the SIS Act. The covenants are contained in s 52(2), which provides:

(2)   The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:

…

(e)   to act fairly in dealing with classes of beneficiaries within the entity;

(f)    to act fairly in dealing with beneficiaries within a class;

…

59. It is reasonably arguable that it would be unfair to the beneficiaries of one Category for AUSCOAL, in the case of the relative insolvency of another Category, to apply the assets attributed to the first Category to supplement the assets attributed to the second category for the purpose of satisfying the nominal entitlements of the beneficiaries in the second category that are unable to be paid out of the assets attributed to that Category. Put shortly, that is because of the structure of the Trust Deed and the provisions contained in it, and the practices of AUSCOAL in quarantining the assets attributed to the individual Categories, even extending to cases where assets are held in separate custodial ownership. Furthermore, it is likely to be the case that the circumstances in which mergers of superannuation funds have historically occurred would cause members of the relevant Categories to understand that the satisfaction of their own entitlements depended on the value of the assets attributed to their Category, and that satisfaction of their own entitlements was not at risk by reason of the possibility that the assets attributed to their Category might be applied by AUSCOAL to supplement the satisfaction of the entitlements of members of another Category in the case of a deficit of assets attributed to that Category.

60. This argument does not in my view provide a satisfactory and complete solution to the problem created by the presence of clause 2.5 in the Trust Deed. Although the effect of s 52(1) of the SIS Act is to incorporate the covenants in s 52(2)(e) and (f) into the Trust Deed, it does not have the statutory effect of making those covenants paramount in their relationship to clause 2.5. The primary obligation of a trustee is to implement the terms of the trust instrument. In this case, that includes clause 2.5. The members of a Category that is in deficit will have a countervailing argument that they are entitled to the benefit of the application of clause 2.5 by AUSCOAL. It is not practicable on an application such as the present for the Court to resolve the tension between the two arguments. Consequently, it is necessary for the Court to examine the terms of the Trust Deed in its legislative context to determine whether there are positive reasons why AUSCOAL can administer the Trust in a manner that properly circumvents the literal application of clause 2.5.

The Fund

61. “Fund” is defined in clause 1.1 as meaning “the Mine Superannuation Fund…”

62. Clause 2 concerns “THE FUND”. Clause 2.1 provides:

2.1   Assets

The Fund comprises all Assets held by the Trustee at any time in accordance with this Trust Deed.

63. I have already set out clause 2.5 above at [39].

64. As I have explained above, the starting point is that the combined effect of clause 2.1 and clause 2.5 is that there is one Fund that comprises all of the Assets (as defined), and the Fund is not divided into separate sub-funds, so that the assets of each sub-fund are only available to meet claims in respect of the Category identified with a particular sub-fund. To the extent that AUSCOAL accounts for the assets relevant to each Category separately, and causes those assets to be held separately by a custodian, that arrangement will only take effect for accounting purposes. If that is the final position, all assets of the Fund will be legally available to meet all claims in respect of any of the Categories.

65. So long as the Fund is solvent and being operated effectively in accordance with the terms of the Trust Deed, so that assets are allocated on an accounting basis to the members of the particular Categories, and assets held separately by the custodian of the Fund’s assets to match the assets attributed to particular Categories, the business of the Fund will in fact operate as if the benefits payable to beneficiaries of particular Categories were only payable out of notional sub-funds maintained in respect of those Categories.

66. The purpose of the following analysis of the terms of the Trust Deed will be to determine whether those terms have the effect of limiting the assets that may be distributable to beneficiaries of particular Categories to the assets, or to amounts calculated by reference to the value of the assets, that have been attributed to the particular Category.

Categories of Members

67. Clause 2.3 effectively establishes membership Categories. I will insert in square brackets after each Category the number of members in that Category, as taken from the Statement of Facts.

2.3   Categories

2.3.1   The Trustee may provide membership in the following Categories:

(a)   Accumulation Category (Employer); [38,071 members]

(b)   Accumulation Category (Personal); [12,979 members]

(c)   Defined Benefit Category; [1,442 members]

(d)   Pension Category; [6,580 members]

(e)   WA Coal Industry Category; [983 members]

(f)   Mines Rescue Stations Staff Categories; [1 member]

(g)   any other Category the Trustee decides to establish in accordance with clause 2.3.3.

2.3.2   The particular Rules relating to the Categories referred to in clauses 2.3.1(a), (b), (c), (d), (e) and (f) respectively, appear in Schedules A, B, C, D, F and G respectively. Those rules only apply to the Category to which the Schedule relates.

2.3.3   The Trustee may establish a new Category at any time. If it does so, the Trustee will establish rules relating to that Category by amending this Trust Deed under clause 22 to include a new Schedule.

2.3.4   The Trustee may close a Category at any time subject to the Relevant Law.

2.3.5   The Trustee may establish divisions within any Category and set specifications that apply to any such divisions. Any such specifications must be consistent with this Trust Deed. A division within a Category may, for example, relate to a particular membership class.

68. Thus, each Category is governed by a separate set of rules contained in the relevant Schedule. This reflects the growth of Mine Super through historical mergers and the need to retain the rules that governed the pre-existing superannuation trusts to ensure that the rights of beneficiaries were not adversely affected by the merger.

69. The Schedules that contain the rules that govern the Categories do not match the paragraphs of clause 2.3.1, as Schedule E deals with the fees that may be imposed in relation to the Fund.

70. It is to be noted that rule 2.3.4 gives AUSCOAL a discretion to close a Category at any time, subject to the Relevant Law. However, rule 2.3.4 does not give AUSCOAL power to determine how the assets attributed to the Category should be distributed to beneficiaries in the event of a deficit in the value of those assets relative to the aggregate entitlement of the beneficiaries of the Category.

71. The Court received confidential information concerning the one remaining member of Category G, the Mines Rescue Stations Staff (MRSS) Category. All that should be said is that the single member in that Category has already reached retirement age. That member may take steps that will lead to AUSCOAL terminating the Category in circumstances where there is expected to be a surplus after the provision of the member’s entitlement. However, as matters stand, AUSCOAL’s application must be decided on the basis that the MRSS Category is open with a single member.

72. Attachment B to AUSCOAL's post-hearing submissions dated 8 December 2023 is a spreadsheet entitled: "Treatment of different classes of Mine Super member on Fund wind-up if the whole Fund is considered a defined benefit fund." I have referred above to the separate Categories of beneficiaries established by the Trust Deed. Attachment B arises out of clause 2.3.5 of the Trust Deed, which empowers AUSCOAL to establish divisions within any Category. Attachment B does not analyse the relevant circumstances in terms of the six Categories, but does so in terms of 13 divisions within Categories. Without being exhaustive, within a particular Category there may be separate divisions according to whether an employer is obliged to contribute funds to the Category for the benefit of members, and where that is so, there may be different classes of obligation imposed upon the employers.

73. Attachment B provides an outline description of how the assets allocated to a particular division may be relevant to what is called the "Solvency Requirement calculation" in regulation 9.15 of the SIS Regulations. This is a conceptually complicated matter to which brief reference will be made below. Attachment B also makes reference to the nature of the minimum entitlement of particular classes of member in the case of the winding up of Mine Super. Attachment B then sets out a schedule containing an outline of the nature of the benefit entitlement of members within a particular division, the consequences of employer default, where that is relevant, the consequences of the termination of the Category, the termination of Mine Super and its winding up, and the winding up of Mine Super under the relevant SIS Regulations in the case of a deficit.

74. I have found Attachment B to be a useful document as a cross-check, for the purposes of these reasons, with my analysis of the effect of the Trust Deed and the SIS Regulations. Having completed that exercise, it is my judgment that, generally, it will be adequate for the Court to analyse relevant circumstances at the Category level, without descending to the different circumstances of the individual divisions within some of the Categories. An analysis at the division level would probably involve the Court in introducing a level of complexity and opacity in the expression of these reasons that is not warranted for the purpose of the Court providing a proper response to the questions upon which the Court's advice is sought in prayer 1 of the amended summons.

Management of Fund by AUSCOAL

75. It will be necessary to refer to a number of clauses in the Trust Deed that govern relevant aspects of the management of the Fund by AUSCOAL, as a precursor to considering the operation of the clauses that govern the entitlement of beneficiaries to be paid benefits in relevant circumstances. For the sake of brevity, I will paraphrase the clauses where convenient.

76. Clause 4.1 gives AUSCOAL a general power to do anything whatsoever necessary or desirable for the purpose of operating the Fund, subject to the Relevant Law. This general power is not so extensive as to authorise AUSCOAL to vary the entitlements of beneficiaries, including in circumstances where there is a deficiency of assets available to satisfy the entitlements of members. The provision has the effect that any power apparently specifically granted to AUSCOAL, on the proper construction of other clauses in the Trust Deed, will be subject to the Relevant Law permitting AUSCOAL to exercise that power. Clause 4.3 elaborates the qualification in clause 4.1, by authorising AUSCOAL to do anything that it considers necessary or desirable to comply with the Relevant Law or to do what the Relevant Law permits, or to refrain from actions in order to comply with the Relevant Law.

77. Clause 4.2 contains examples of the powers vested in AUSCOAL. Relevantly, for present purposes, AUSCOAL is empowered by clause 4.2(b) to attribute assets and fund expenses to beneficiaries’ accounts and Categories and to change the attribution as it considers appropriate. “Beneficiaries’ Accounts” is defined in clause 1.1 as follows:

“Beneficiary’s Account” means an Account established and maintained in respect of a particular Beneficiary (as distinct from an Account relating to interests of a class or group of Members or an aspect of the Fund’s general operations)…

78. “Beneficiary” includes any Member, Spouse Member or Non-Member Spouse. In essence, the term relates to the classes of person who may have a right to a benefit under the Trust Deed.

79. Thus, as an accounting matter, AUSCOAL has power to attribute the assets and liabilities of the Fund to the accounts of the Categories and to the accounts of the individual beneficiaries. Given the wording of clause 2.5, those attributions to individual accounts will not create separate trusts over the property attributable to any Categories or beneficiary’s account. The conclusion that attributions are notional is supported by the wording of clause 9.7.6, which provides that when a member changes Category, as is permitted by clause 9.7, AUSCOAL “will adjust the notional attribution of Assets between Categories…as it considers appropriate” [Emphasis added]. Clause 9.10.1 provides that no beneficiary has any interest in any particular asset of the Fund. That reinforces the conclusion that the effect of clause 2.5 of the Trust Deed is that all of the assets of the Fund are legally available to satisfy all of the Fund’s liabilities.

80. In effect, clause 4.4 gives AUSCOAL an absolute and uncontrolled discretion in exercising its powers under the Trust Deed. That discretion is necessarily subject to any restrictions contained in other clauses.

81. Clause 4.6 deals with the remuneration of AUSCOAL and its directors. Relevantly, clause 4.6.1 provides:

4.6.1   The Trustee may deduct from the assets of the Fund an amount sufficient to remunerate itself in respect of work done or services provided in the performance of its obligations as Trustee of the Fund.

82. The authorisation given to AUSCOAL to deduct its remuneration from the Fund does not specifically deal with the distribution of the liability to meet the remuneration as between the assets of the Fund that are attributed for accounting purposes to the separate Categories. However, as explained above, clause 4.2(b) authorises AUSCOAL to determine how its remuneration should be borne as between the separate Categories.

83. Clause 6.1 provides for the usual trustee’s indemnity in favour of AUSCOAL, and clause 6.2 permits AUSCOAL, subject to the Relevant Law, to recover from the Fund amounts necessary to meet its indemnity and to meet all other liabilities that it incurs as trustee of the Fund. These provisions are relevant to the consideration of prayer 3 of the amended summons.

Relationship of Members to the Fund

84. Clause 9.6 provides:

9.6   Trust Deed

Each person admitted as a Member and each Beneficiary is deemed to have approved of, and becomes bound by, the Trust Deed.

85. Members and beneficiaries are not parties to the Trust Deed, and there is no provision that makes them parties when they are accepted as such. Clause 9.6 has the effect that they are bound by the Trust Deed. As beneficiaries of a trust, they will have rights in equity governed by the terms of the Trust Deed to enforce it to protect their equitable interest in the Fund. It does not follow that they will have standing to enforce every term of the Trust Deed as if they were parties to it. As they are not parties, it is not obligatory that they be made parties to these proceedings, although the fact that they have beneficial interests in relation to the Fund is a matter that is relevant to the right of AUSCOAL to make the present application without having joined all of the beneficiaries.

Accounts

86. Clause 9.11 deals with accounts. Relevantly, it provides:

9.11 Accounts

9.11.1   The Trustee will establish and maintain for each Beneficiary each Account that is required to be kept in relation to a beneficiary (that is, a Beneficiary’s Account) in accordance with the Rules.

…

9.11.3    A Beneficiary’s Account Balance is found by aggregating the amounts standing to the credit to all of that Beneficiary’s Accounts at any given time.

87. Clause 9.11.4 sets out verbal formulae for determining the amounts that should be credited and debited to each account in respect of the beneficiary.

88. Clause 12 deals with benefits, and relevantly provides:

12.1 Schedules

Particulars regarding the calculation of benefits and the circumstances in which they are payable are stated in the Schedules relevant to each Category.

12.2 Information and Conditions

…

12.2.3   No benefit will be payable unless the Trustee is satisfied that the benefit is properly payable in accordance with the Trust Deed and the Relevant Law.

12.2.4   No Beneficiary or other person claiming on behalf of a Beneficiary or claiming as a Dependent or Legal Personal Representative of a Beneficiary will be entitled to require any payment from the Fund except to the extent that the Deed expressly provides.

89. Thus, the entitlements of beneficiaries within each Category are to be calculated in accordance with the Schedule relevant to that Category. Beneficiaries are only entitled to require payment from the Fund to the extent that the Trust Deed expressly provides for the payment. This provision gives rise to the possibility that, notwithstanding the terms of clause 2.5, AUSCOAL may only be empowered by the terms of the Schedules governing each Category to pay beneficiaries out of the assets attributed to that Category as an accounting matter, or in amounts calculated by reference to the value of those assets. Alternatively, as AUSCOAL must be satisfied that a particular benefit is payable to the beneficiary, and as beneficiaries are not entitled to require any payment from the Fund except to the extent that the Trust Deed expressly provides, it may be that beneficiaries' entitlements are limited by the exercise of powers available to AUSCOAL, which will limit the effect of clause 2.5 of the Trust Deed.

Termination of Fund

90. Clause 21 of the Trust Deed deals with the termination of the Fund, rather than the termination of individual Categories. By clause 21.1, the Fund will be terminated if the Trustee’s office becomes vacant and no new Trustee is appointed within 60 days, or AUSCOAL resolves to terminate the Fund. In either event, clause 21.4 deals with the application of the Fund’s assets. It relevantly provides:

21.4 Application of Assets

Assets of the Fund will be applied in the following order on termination:

(a)    to provide for all Liabilities relating to the Fund, except for those relating to benefit payments;

(b)    to provide for benefits that became payable on or before the Closure Date;

(c)    to provide for the following benefits:

(i)    in the case of Accumulation Members and Members with an Account-Based Pension an amount equal to the Member’s Account Balance; or

(ii)    in the case of Defined Benefit Members and WA Coal Industry Category (Category A) Members, subject to the Relevant Law, an amount determined by the Trustee based on any priority as between different groups of Members that it determines equitable after considering any advice from the Actuary and having regard to the value of Assets and Liabilities attributable to the Defined Benefit Category and WA Coal Industry Category (Category A) Members respectively.

(d)    other than in the case of the WA Coal Industry Category, subject to the Relevant Law, to pay an Employer any amounts from the Reserve Account attributable to that Employer on a basis agreed between the Trustee and Employer; and

…

[Emphasis added].

91. It is not necessary to set out clause 21.4(e) and (f), which deal with the case where surpluses are available for payment on termination of the Fund.

92. Clause 21.4 does not deal with the distribution of assets attributable to members in the MRSS Category. It deals with members of the Pension Category if they have an Account-Based Pension. If there are members who are entitled to other types of pension referred to in rule D1.2, they are not specifically dealt with.

93. Clause 21.4(c)(i) would require AUSCOAL on the termination of the Fund to pay to Accumulation Members and members with an Account-Based Pension an amount equal to the Member’s Account Balance. However, the Member’s Account Balance will be determined in accordance with clause 9.11.4, which provides for how the amount standing to the credit of any beneficiary’s account will be determined. That process includes crediting “positive investment returns” and debiting “negative investment returns, fees, amounts on account of actual or anticipated Liabilities”. The result of this process should be that the aggregate of the amounts payable by AUSCOAL to Accumulation Members should be no more than the net value of the assets notionally attributed by AUSCOAL to the Accumulation Member Categories.

94. The information provided to the Court does not address the possibility that there may be a deficit of assets attributed to an Accumulation Category upon the termination of the Fund, or the Category. As explained above, ordinarily, the aggregate value of the accumulation interests in a Category should approximate, if not equal, the value of the assets attributed to the Category. There may still be scope for deficits as a result of the prices achieved on the sale of the assets and the costs of the termination process. It is not clear whether AUSCOAL, in administering the Trust Deed in relation to an Accumulation Category, would make a final adjustment so that the aggregate of the members' benefits equals the net proceeds of the sale of the attributed assets.

95. In the case of Defined Benefit Members and Category A members of the WA Coal Industry Category (who have defined benefit interests), clause 21.4(c)(ii) will apply. AUSCOAL would be required to provide benefits in amounts determined by AUSCOAL based upon any priority as between different groups of members that AUSCOAL determines is equitable having regard to the advice from the Actuary and to the value of Assets and Liabilities attributable to the Defined Benefit Category and WA Coal Industry Category (Category A) Members respectively.

96. Clause 21.4(c)(ii), as well as a number of other provisions applicable under the Trust Deed, give powers to AUSCOAL to determine "priority" on the termination of the Fund or a Category. That raises the question of what is meant by a power to determine priorities. Priority is generally relevant where there is a deficit and the value of the available assets is not sufficient to satisfy the claims of all persons entitled to share in the assets. Normally, the concept of priority arises where there are different classes of claimant, and there are reasons why it is necessary to determine the order in which the claims of the different classes should be satisfied out of the available assets. So, in the winding up of a corporation, secured creditors, particular types of employees, and unsecured creditors will have different priorities in the distribution of the available assets of the corporation. Generally, a class of claimant with a higher priority is entitled to be paid the whole of its claims before anything is paid to the class with the next priority. As between members of a class, their claims are usually required to be met pari passu on some fair basis. An entitlement to determine the priority of classes or individual claimants would not usually include a right to make adjustments to the nominal amount of the individual claims. The individual claims would be satisfied in full or in part pari passu with the other claimants within a class depending upon their priority.

91. It is therefore significant that the power granted to AUSCOAL by clause 21.4(c)(ii) of the Trust Deed arises in the context of the termination of the whole Fund, and applies to two classes of beneficiaries with defined benefit interests. The power to determine priority is "as between different groups of Members" of the Fund as a whole – not the priority of members of a particular Category. AUSCOAL is required to consider the advice of the Actuary, "having regard to the value of the Assets and Liabilities attributable to" the relevant Category.

92. Consequently, clause 21.4(c)(ii) gives AUSCOAL a power on the termination of the Fund, if there is a deficit in the value of the assets attributable to the Defined Benefit Category, or Category A of the WA Coal Industry Category, to decide that those members have priority in relation to the net value of the assets attributed to those Categories, and not any priority in relation to the assets attributed to any other Category. That power may be exercised by AUSCOAL without the need to make any adjustment to the amounts in individual beneficiaries' accounts in response to the deficit in the value of the assets attributed to the Categories.

93. The result is that, on the termination of the Fund, if AUSCOAL makes an appropriate determination under clause 21.4(c)(ii), the beneficiaries of those Categories will only be entitled to benefits measured by reference to the net value of the assets attributed to those Categories. This result will not be inconsistent with the operation of clause 2.5, because even though the beneficiaries may have a right to be paid their entitlements out of the assets of any Category, the amount they receive will be limited by AUSCOAL's priority determination. In cases where AUSCOAL manages the termination of the Fund, it can choose how to satisfy the entitlements of the beneficiaries of the Categories. By the realisation of the assets attributed to those categories, rather than the assets attributed to other Categories, clause 2.5 will have no practical effect.

Termination of Accumulation Categories

100. I will now consider the provisions in the Trust Deed that govern the termination of separate Categories. I will consider the termination of the Accumulation Categories, as the question in prayer 1(c) of the amended summons is expressed in general terms that extend to the benefit entitlements of beneficiaries of the Accumulation Categories.

101. Clause 19 of the Trust Deed deals with the termination of an Accumulation Category by AUSCOAL. The effect of the definition of “Accumulation Category” in clause 1.1 is that it is a Category governed by the rules in Schedule A or Schedule B. Clause 19 provides:

19.1   The Trustee may resolve to terminate an Accumulation Category at any time.

19.2    If the Trustee resolves to terminate an Accumulation Category: it will make any arrangements it considers appropriate (for example relating to contributions, pending benefit payments, valuation of Assets attributable to the Category and provisioning for expenses, and any fair and equitable adjustments to [the] Beneficiary’s Account Balances).

19.3    Following termination of an Accumulation Category, the Trustee may transfer the relevant Beneficiaries’ Account Balances referred to in clause 19.2 to one or more other Categories in accordance with clause 9.7.2 or deal with them in any other way permitted by Relevant Law.

[Emphasis added].

102. If AUSCOAL determines to terminate either of the Accumulation Categories, in circumstances where there is a deficit between the value of the assets attributed to the Category and the aggregate entitlements of members, clause 19.2 specifically empowers AUSCOAL to make fair and equitable adjustments to the relevant Beneficiary's Account Balances.

103. If there is a deficit in an Accumulation Category when it is terminated by AUSCOAL, clause 2.5 would operate to entitle beneficiaries to claim the shortfall in satisfaction of their entitlements in their Beneficiaries' Account Balances from the assets attributed to other Categories, subject to the fact that clause 19.2 gives AUSCOAL the power to make equitable adjustments to the beneficiaries' entitlements so that, in aggregate, they do not exceed the net value of the assets attributed to the Category to which the beneficiaries belong. In this case, AUSCOAL must exercise a power given to it to counteract the effect of clause 2.5 of the Trust Deed.

Termination of Defined Benefit Category

104. Clause 20 of the Trust Deed deals with the termination of the Defined Benefit Category. It provides:

20.1    Subject to the Relevant Law, the Defined Benefit Category will be terminated if:

(a)    legislation is enacted to discontinue or wind the Category up; or

(b)    there are no Members or other Beneficiaries in the Category and in the opinion of the Trustee, all benefits which could become payable from the Category have been paid; or

(c)    an event occurs which in the opinion of the Trustee makes the discontinuance of the Category necessary or appropriate.

20.2    If the Defined Benefit Category is terminated in accordance with clause 20.1 or the Trustee otherwise determines that it is appropriate to do so, the Trustee will determine the priority of claims for payment from the Category of pensions, lump sum benefits, refunds of contributions and any other benefits required or authorised to be paid under the New South Wales Act and the Trust Deed.

20.3    After determining the priority of claims for payment from the Defined Benefit Category in accordance with clause 20.2, the Trustee must:

(a)    if the Trustee decides that it is necessary or appropriate to do so, realise the Assets of the Category;

(b)    obtain advice from the Actuary as to the amount properly payable to each Member and other Beneficiary of the Category having regard to the amount of assets in the Category; and

(c)    after payment of the Fund Expenses properly payable from the Category, allocate the proceeds of the Category in accordance with the priority determined under clause 20.2 and the Actuary’s advice obtained for that purpose.

…

[Emphasis added].

105. Two aspects of this rule must be noted. First, it deals with the priority of claims, and secondly, it deals with how the entitlements of members must be paid from the available assets. Where clause 2.2 and the chapeau to clause 20.3 refer to the determination of "the priority of claims for payment", the priority referred to will be as between the beneficiaries of the Category, and not the class of members of different Categories, as was the case for the termination of the whole Fund. The reference in clause 20.2 to "pensions, lump sum benefits, refunds of contributions and any other benefits" suggests that "priority" has its usual meaning in insolvency, as going to the relative entitlements of different classes of claimant.

106. However, in this case, the rule deals specifically with how beneficiaries' entitlements are to be paid.

107. Clause 20.3(a) permits AUSCOAL to “realise the assets of the Category”. If that happens, the assets that are realised will be only the assets that have been attributed to the Category in AUSCOAL’s accounts. Clause 20.3(b) will lead to the determination of the amount payable to each beneficiary “having regard to the amount of assets in the Category”. The expenses attributable to the Category will then be paid out of the amount realised. It is implicit in clause 20.3(c) that AUSCOAL is required to pay whatever beneficiaries' entitlements can be paid out of the proceeds of the Category out of those proceeds. That, in my view, is a specific requirement that, in the case of a deficit of net assets attributed to the Defined Benefit Category upon the determination of that Category, beneficiaries are only entitled to be paid out of the net proceeds of the realisation of the assets attributed to the Category.

108. That conclusion suggests that clause 20.3 of the Trust Deed is inconsistent with clause 2.5. To the extent that that is so, on the proper construction of the Trust Deed as a whole, in my view, the provision dealing with the specific circumstances of the termination of the Defined Benefit Category should prevail over the general provision in clause 2.5: see the explanation in JD Heydon, Heydon on Contract (2019, Thomson Reuters) at [8.770], where the learned author explained the effect of the Latin maxim that means “that special words derogate from general words.” The Learned author added: “The significance of the [maxim] is that where a contract contains general and specific provisions on the same subject matter which are inconsistent, the specific provisions will prevail over the general provisions." Reference was made to the observation of O’Connor J in the context of statutory construction in Goodwin v Phillips (1908) 7 CLR 1; [1908] HCA 55 at 14, where his Honour said:

Where there is a general provision which, if applied in its entirety, would neutralise a special provision dealing with the same subject matter, the special provision must be read as a proviso to the general provision, and the general provision, in so far as it is inconsistent with the special provision, must be deemed not to apply.

109. That construction is supported by the scheme of the Trust Deed as a whole, which generally exhibits an intention that the entitlements of beneficiaries in Categories should be satisfied out of the assets attributed to those Categories. Clause 2.5 would still have some residual work to do, because it would empower AUSCOAL to satisfy the limited entitlements of beneficiaries of the Defined Benefit Scheme, if that were convenient, from the sale of assets attributed to other Categories, even though it would then be required to make good those assets by exercising its power in clause 4.2(b) by attributing assets formally attributed to the Defined Benefit Category to the other Category: see Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd [2002] VSC 576; (2002) 174 FLR 1 at [215]-[216] per Warren J (as her Honour then was) and the authorities there cited for a discussion of the principles that generally apply to the construction of superannuation and similar trust deeds.

Termination of other Categories

110. The Trust Deed does not deal separately with the termination of any Category other than the two Accumulation Categories and the Defined Benefit Category.

111. It will now be appropriate to analyse the rules in the Schedules relevant to each of the Categories to ascertain their effect.

Accumulation Category (Employer) Rules

112. Schedule A, which contains the Accumulation Category (Employer) Rules, contains rules governing the contributions of members and employers.

113. In relation to contributions, clause A4.6.2 provides:

A4.6.2   If the Actuary advises the Trustee that the actual and expected assets of the Accumulation Category (Employer) are inadequate to provide for the actual and expected liabilities of the Accumulation Category (Employer), then the Trustee, after obtaining advice from the Actuary, may adjust any benefit payable to any Member as the Trustee considers appropriate and equitable provided the adjustment does not result in an increase to the amount of the Member’s benefit or to the rate at which it accrues.

[Emphasis added].

114. This provision has the result that, in the manner described, AUSCOAL may adjust the benefits payable to any member in cases where AUSCOAL is advised by the Actuary that the assets of the Accumulation Category (Employer) are inadequate to provide for the actual and expected liabilities of the Category, so that the aggregate entitlement of beneficiaries in that Category will match the available assets. There is thus inherent flexibility in the operation of the Trust Deed in relation to this Accumulation Category, such that the obligation of AUSCOAL to pay benefits to those beneficiaries should not be greater in aggregate than the value of the assets of that Category.

115. Clause A6 governs the benefits payable to beneficiaries in the Category. Clause A6.1.1 specifies the circumstances in which benefits are payable, and then clause A6.1.2 provides:

A6.1.2   Where rule A.6.1.1 applies, the benefit payable will be the value of the Member’s Account Balance…

116. The combined effect of Rules A4.6.2 and A6.1.2 is that, provided that AUSCOAL performs the necessary adjustments, beneficiaries within this Category will only be entitled to be paid their Member’s Account Balance, and the aggregate of those balances will equal the total value of the assets that are notionally available to that Category in the accounts maintained by AUSCOAL.

117. Thus, even though clause 2.5 has the literal effect that AUSCOAL can pay beneficiaries of Category A out of any assets of the Fund, the amount of that payment is limited to the relevant Member’s Account Balance, which is able to be adjusted from time to time to match the beneficiary’s share of the value of all of the assets in the Category. The consequence is that, at least for all beneficiaries of this Category, the application of clause 2.5 of the Trust Deed will only be nominal, in the sense that, whatever assets are actually used to pay the entitlements of all beneficiaries in the Category, the total amount payable will equal the value of the assets attributed to the Category. This is a case where AUSCOAL must exercise a power to adjust benefits to avoid clause 2.5 having an effect on beneficiaries' entitlements.

Accumulation Category (Personal) Rules

118. Schedule B contains the Accumulation Category (Personal) Rules. It is not as elaborate as Schedule A. Clause B5.1 provides for the Trustee to establish and maintain such accounts as it considers convenient and appropriate for members in this Category. The Schedule does not contain a term comparable to clause A4.6.2, but it does contain in clause B6.1.2 a term that is the same as clause A6.1.2; that is, “the benefit payable will be the value of the Member’s Account Balance”, subject to a qualification that is not presently relevant. Clause B4 governs contributions to the Member’s Account.

119. Schedule B therefore does not deal specifically with the possibility that a Member’s Account Balance may exceed the member’s share of the assets attributable to Category B, so that in aggregate, there is a deficiency of assets attributed to this Category to satisfy the entitlements of all beneficiaries in this Category. It is not therefore clear from Schedule B whether AUSCOAL has the same power to make adjustments to the benefits payable to Category B members on the basis of actuarial advice that the actual and expected assets of the Category are inadequate to provide for the actual and expected liabilities.

120. However, as has been seen above, the absence of an equivalent in Schedule B to clause A4.6.2 does not matter, because clause 19 of the Trust Deed contains a general provision governing the termination of an Accumulation Category, and clause 19.2 has an equivalent effect for Category B as does rule A4.6.2 for Category A.

Defined Benefit Category Rules

121. The rules governing the Defined Benefit Category are the most complicated for the purposes of these reasons. That is because rules in Schedule C govern the Category. But those rules indicate that the rules in Part 3 of the trust deed that governed the superannuation scheme that merged into Mine Super also apply to the Category. The matter is further complicated, because Part 3 makes it clear that any other provisions in any other part of the earlier trust deed that may affect benefits under Part 3 are also to apply. This possibility introduces doubt, as it requires a judgment about whether a particular provision that is not included in Part 3 is required to be applied. Finally, the provisions of the Principal Act continue to have force in relation to the Defined Benefit Category.

122. It will be convenient to deal with these four sources of rules governing the Defined Benefit Category in the order that I have listed them, even though it is the Principal Act that has paramount force.

123. The Defined Benefit Category Rules are contained in Schedule C. That Schedule relevantly provides:

C1    Eligibility

C1.1   A person is eligible to join in the Defined Benefit Category if the Trustee agrees and Relevant Law permits.

C1.2 A person who had entitlements under Part 3 of the Previous Trust Deed immediately prior to the Effective Date has corresponding entitlements under the Defined Benefit Category as at the Effective Date. To avoid doubt a reference to entitlements under Part 3 of the Previous Trust Deed is to be interpreted taking into account any provisions of the Previous Trust Deed that did not appear in Part 3 but which nonetheless affected the entitlements of persons with entitlements under that Part.

C2   Definitions and Interpretation

C2.1   For the purposes of Schedule C:

“Amending Deed” means the deed amending the trust deed of the Fund with effect from the Effective Date.

“Owners” has the same meaning as that term is defined under Part 3 of the Previous Trust Deed.

C2.2 Rules 3.1, 3.2 and 3.3 of Part 3 of the Previous Trust Deed shall apply to Schedule C as if they had not been replaced (along with other provisions) by the Amending Deed.

C3   Application of the Previous Trust Deed

C3.1   The Trustee:

(a)   will establish and maintain Accounts;

(b)   will pay any pension or lump sum benefit to or in respect of a Member or former Member to whom Schedule C applies; and

(c)   will perform all duties and may otherwise exercise any power or discretion,

as provided under, or in accordance with, the provisions of Part 3 of the Previous Trust Deed as if those provisions (along with other provisions) had not been replaced by the Amending Deed.

C3.2   The rights, obligations and entitlements of Members and Owners for the purposes of Schedule C shall be determined in accordance with Part 3 of the Previous Trust Deed as if that Part (along with other provisions) had not been replaced by the Amending Deed.

C3.3   Without limiting the application of clauses 1.3 and 1.4 of the Trust Deed, any provision in Part 3 of the Previous Trust Deed which was deemed to apply to, or appear in, the trust deed of the Fund in order to comply with the NSW Act as at the Effective Date, shall be deemed to apply to, or appear in Schedule C, from the Effective Date, notwithstanding any changes made by the Amending Deed. (To avoid doubt any such provisions may be amended after the Effective Date in the same way that they were able to be amended under the terms of the Previous Trust Deed immediately prior to the Effective Date).

C3.4   To avoid doubt a reference in this Rule C3 to provisions in Part 3 of the Previous Trust Deed is to be taken as including provisions that appeared in other parts of the Previous Trust Deed but which nonetheless affected the entitlements of persons with entitlements under that Part.

[Emphasis added].

124. “Effective Date” is defined in clause 1.1 of the Trust Deed as meaning 17 June 2011. “Previous Trust Deed” is defined in clause 1.1 as meaning the trust deed of the Fund dated 31 January 1995, as amended and in force immediately prior to the Effective Date. Schedule C has the effect that the rights, obligations and entitlements of members shall be determined in accordance with Part 3 of the Previous Trust Deed, as if that Part had not been replaced by the Replacement Deed. These provisions have the effect that the Defined Benefit Category Rules are as set out in Part 3 of the deed of trust that governed the Fund dated 31 January 1995, as amended and in force immediately prior to 17 June 2011 (which was the date of the making of the Replacement Deed). However, rule C1.2 and rule C3.4 have the effect that, as well as the provisions in Part 3 of the Previous Trust Deed, effect must also be given to provisions that appeared in other parts of the Previous Trust Deed that affected the entitlements of persons with entitlements under that Part.

Response to question in prayer 1(a) of the amended summons

264. For convenience, I will restate this question, as follows:

1. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether:

(a)   the Plaintiff would be justified in administering and managing the Mine Superannuation Fund (Mine Super) on the basis that, on the proper interpretation of the trust deed, clause 2.5 does not expose Beneficiaries with an accumulation interest to a risk that:

i.   in the circumstances of a defined benefit Category deficit; or

ii.   in a winding up (of a Category, or of Mine Super);

the Assets available to fund defined benefit entitlements will not be restricted to the Assets attributable to the applicable defined benefit Category …

265. I make the following initial observations about this question. First, as observed above, in a sense, it is formulated in terms of a double negative, as a result of the use of the expressions "does not expose" and "will not be restricted". Put affirmatively, the question is whether AUSCOAL would be justified in administering and managing Mine Super on the basis that, notwithstanding the presence of clause 2.5 in the Trust deed, in all circumstances the entitlements of beneficiaries with defined benefit interests must be satisfied out of the net value of the assets attributed by AUSCOAL to the Category or division within a Category to which the beneficiaries with defined benefit interests belong. I propose to give the Court's advice in response to the question framed positively.

266. Secondly, the question is framed in terms of whether clause 2.5 exposes beneficiaries with an accumulation interest to a risk. Clause 2.5 in its express terms will have that effect unless (a) the provision is invalid in a particular context; (b) some other paramount term of the Trust Deed negates that risk by limiting the assets available to fund defined benefit entitlements; or (c) some term of the Trust Deed gives AUSCOAL a power to limit the assets available to pay defined benefit entitlements, or to adjust those entitlements so that the ultimate result is the same as if the assets available to pay those entitlements had been limited to the assets attributed to the defined benefit Category. In a strict sense, clause 2.5 will create the risk in cases where AUSCOAL must exercise some power in the trust deed to avoid clause 2.5 having the undesired effect. There will be a risk because AUSCOAL will have to act to avoid the undesirable consequence. However, that may be an artificial distinction because AUSCOAL can be expected to exercise the power to avoid the risk.

267. It will be convenient to deal first with the situation of a winding up under the SIS Regulations. As explained above, it may be on the proper interpretation of the SIS Regulations that Mine Super is a single fund, without taking into account the effect of clause 2.5. Clause 2.5 makes it clear, however, that Mine Super is a single fund. Consequently, the risk of clause 2.5 having the undesired effect can only be avoided if APRA makes the proposed modifications to the operation of the Regulations in relation to Mine Super.

268. Therefore, the judicial advice sought by the question in prayer 1(a) can only be given in the affirmative on the proviso that APRA makes the proposed modifications.

269. It is then necessary to consider the judicial advice that should be given on the basis that the Fund, or a Category, is terminated and wound up under the terms of the Trust Deed.

270. If the Principal Act has the effect that clause 2.5 is invalid in respect of the Defined Benefit Category, the risk referred to in the question will not arise in respect of beneficiaries with interests in the Defined Benefit Category. However, as explained above, the problem is that the legislation is obscure, and it is not sufficiently clear to the Court that the Defined Benefit Category is in fact and law a successor to the separate funds created by the Principal Act, with the result that the entitlements to beneficiaries of the Defined Benefit Category can only be paid out of the assets that are attributed to that separate fund.

271. As it happens, this element of uncertainty in relation to how the Principal Act operates does not appear to matter, because on the termination by AUSCOAL of the Defined Benefits Category and the termination of the Fund, the entitlements of beneficiaries in the Defined Benefit Category can be confined to the assets attributed to that Category: see [193] and [194] above. But that is not by direct operation of the Trust Deed. It depends upon AUSCOAL exercising a power that is given to it in those situations that will have that result. Because the question in prayer 1(a) is formulated in terms of whether AUSCOAL will be justified in administering and managing Mine Super on a particular basis, the question can still be answered in the affirmative. That is because the desired result can be obtained by AUSCOAL exercising a particular power of management. Put another way, AUSCOAL can exercise its power to override the general effect of clause 2.5. If that is so, it will not be critical whether or not the Principal Act invalidates clause 2.5 insofar as it applies to the Defined Benefit Category.

272. In the case of beneficiaries with defined benefit entitlements of Category A within the WA Coal Industry Category, upon the termination by AUSCOAL of the whole Fund, the result will be the same as for the Defined Benefit Category: see [195] above. Upon the termination of the Category, AUSCOAL must pay benefits out of the assets of the Category, which will discharge the beneficiaries entitlements. There may be scope for difference of opinion as to how this outcome should be categorised, because it will be a result of the way that AUSCOAL realises the assets and pays the beneficiaries' entitlements, but the practical result will be the same as for the termination of the whole Fund.

273. In relation to the MRSS Category, the position is more obscure. Upon the termination of this Category, AUSCOAL has a power to allocate the assets of the Category in the manner that it considers fair and equitable in its absolute discretion, which gives AUSCOAL a power to limit the way that the beneficiaries' entitlements are to be paid. This also allows an affirmative answer to the question, albeit that the avoidance of the risk created by clause 2.1 probably depends upon how AUSCOAL manages the Fund.

274. The result is that the Court can answer the question in prayer 1(a) of the amended summons in the affirmative, but on the proviso that APRA modifies the application of the SIS Regulations to Mine Super, and that, to the extent necessary, AUSCOAL exercises its powers in the Trust Deed to neutralise the risk created by clause 2.5.

Response to question in prayer 1(b) of the amended summons

275. The question in prayer 1(b) of the amended summons is:

1. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether:

…

(b)   any benefit payable to a Beneficiary with respect to their defined benefit interest in Mine Super will not be payable from the Assets of Mine Super attributable to Accumulation Member Categories (or any other Category treated by the trustees as an Accumulation Category)…

276. The question in prayer 1(b) is formulated in terms of the effect of the Trust Deed, rather than in terms of whether AUSCOAL can manage and administer Mine Super in a way that neutralises the risk created by clause 2.5.

277. Strictly, that has the result that the question can only be answered affirmatively without qualification in cases where it is the direct effect of the terms of the Trust Deed that the payment of the benefits payable to beneficiaries with defined benefit interests cannot be made out of assets attributed to Accumulation Member Categories or any other Category treated as an Accumulation Category. Where it is necessary for AUSCOAL to exercise a power in the Trust Deed to achieve the same result, the question cannot be answered in the affirmative because the result depends upon AUSCOAL exercising the power to achieve the same result. That may be an artificial difference, as it may be assumed that AUSCOAL will exercise the power in that way.

278. The judicial advice given in response to question 1(b) requires the same proviso concerning the modification of the application of the SIS Regulations to Mine Super by APRA, because in the absence of those modifications, the answer to question 1(b) would have to be in the negative. The affirmative answer to the question will also require the proviso that AUSCOAL must exercise its powers in the Trust Deed to confine the payment of benefits payable to beneficiaries with respect to their defined benefit interests to the assets attributed to the Category in which those beneficiaries belong.

Response to question in prayer 1(c) of the amended summons

279. The question in prayer 1(c) of the Amended Summons is:

1. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether:

…

(c)   the Plaintiff would be justified in amending the trust deed so as to clarify, for the avoidance of doubt, that clause 2.5 does not alter the benefit entitlements of Members and other Beneficiaries of Mine Super.

280. As explained above, the question in prayer 1(c) is general and raises the issue of whether clause 2.5 alters the benefit entitlements of beneficiaries, which will mean beneficiaries with all of the types of interests that can exist in Mine Super. That will include beneficiaries in Accumulation Categories.

281. The question can only be answered in the affirmative if clause 2.5 will not in any situation of its own force alter the entitlements of beneficiaries.

282. It will do so in the case where there is a winding up under the SIS Regulations.

283. It will not alter the benefit entitlements of beneficiaries in the case of a deficit in the assets attributable to Categories with defined benefit interests for the reasons explained in relation to question 1(a).

284. If it is possible to have deficits in assets attributable to Categories with beneficiaries who have accumulation interests, the position may be different. Even if, on the termination of the Fund, AUSCOAL had to pay beneficiaries of Accumulation Categories the full amount of their Member's Account Balances, AUSCOAL could terminate the Accumulation Categories first, and then make fair and equitable adjustments to the entitlements of the beneficiaries of those Categories so that their aggregate entitlements were equal to the value of the assets attributed to the Accumulation Categories: see [198] and [199] above.

285. In that case, clause 2.5 itself would alter the benefit entitlements of beneficiaries, but AUSCOAL could counteract that alteration by exercising its power to make appropriate adjustments to the beneficiaries' entitlements.

286. The result is that the Court cannot give judicial advice that is an affirmative answer to question 1(c).

287. The Court has not been asked to provide judicial advice as to whether AUSCOAL would be justified in amending the Trust Deed to delete clause 2.5. It follows from many of the observations that have been made above, that the introduction of clause 2.5 as part of the Replacement Deed probably changed the rights of existing beneficiaries in a way that may not have been appreciated, and is inconsistent with the fundamental structure of Mine Super, being that the satisfaction of the entitlements of beneficiaries in particular Categories should be paid out of the assets attributed to those Categories. There may, however, be an issue as to whether, clause 2.5 having been inserted in the Trust Deed, the deletion of the clause would affect existing rights of beneficiaries of Mine Super in an impermissible manner. That issue is a complex one that has not been dealt with on this application.

Amendment to Trust Deed to permit reliance upon expert advice

288. For convenience, I will set out prayer 3 of the amended summons again. It provides:

3. Pursuant to section 63 of the Trustee Act 1925 (NSW) and rule 55.2 of the Uniform Civil Procedure Rules 2005 (NSW), an order giving the Court’s opinion, advice or direction whether the Plaintiff would be justified in amending the trust deed so as to:

(a)    delete the word “and” at the end of the last line of clause 4.2(j);

(b)   replace “.” with “; and” at the end of the last line of clause 4.2(k);

(c)   insert new sub-clause 4.2(l) as follows:

“retain the services of and to appoint professional or other advisors in relation to the management, investment, administration or conduct of the Fund, to act on the advice of any person so retained and to pay the fee or remuneration for any professional or other advisors so appointed.”;

(d)   insert “(a)” at the beginning of the first line of clause 6.1; and

(e)   insert new sub-clause 6.1(b) as follows:

“For the avoidance of doubt, the indemnity in clause 6.1(a) shall extend to circumstances where the Trustee acts upon the opinion or advice of or statement of barristers or solicitors who are instructed by the Trustee or any bankers, accountants, brokers, investment advisers or other persons believed by the Trustee in good faith and upon reasonable grounds to be expert in relation to the matters upon which they are consulted.”

289. In SCS Super, Hallen J, following the decision of Henry J in NGS Super, said in relation to the application of s 63 of the Trustee Act, in the case where the approval of the Court was sought to an amendment to a trust deed:

[137] As Henry J wrote in NGS at [59]–[61]:

“In exercising the jurisdiction to give judicial advice, the Court should proceed on the basis that interests of the trust estate are paramount: Macedonian Church at [104]–[105], [107], [125] (Gummow ACJ, Kirby, Hayne and Heydon JJ), [196]–[197] (Kiefel J).

It is not the Court’s function to take over the exercise of the Trustee’s discretion, assess the commercial wisdom of the Trustee’s decision, or tell the Trustee what to do. An order giving judicial advice is permissive and usually in the form that the trustee “is justified’ in doing something on the basis of a specified state of affairs or assumption: Re Application of NSW Trustee & Guardian [2014] NSWSC 423 at [24]–[25], cited in Baymill Investments Pty Ltd v Drewlock Pty Ltd [2019] VSC 827 at [80].

The central question on this application is whether, on the material before it, the Court is satisfied that the Trustee’s proposed course of action or exercise of power to amend and make the Proposed Amendment is proper and lawful: Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd (2006) 15 VR 87; [2006] VSC 112 (Invensys) at [36]. The Court is concerned with whether the proposed course is within power and whether the exercise of power will not be improper in the sense that it is not exercised in good faith, with real and genuine consideration or in accordance with the purpose for which it was conferred, or it is exercised for an ulterior purpose: Care Super at [27], citing Longboat Holdings Groupno3 v Zacole Pty Ltd [2021] VSC 280 at [58]-[60].”

[138] Essentially the Court’s sole purpose in giving judicial advice is to determine what ought to be done in the best interests of the trust estate. Even so, it “may provide judicial advice in cases of perceived or actual conflict between the trustee’s duty as trustee and its personal interest, including when exercising a power of amendment”: LGSS at [79] (Ward CJ in Eq).

290. AUSCOAL proposes to amend clauses 4.2 and 6.1 of the Trust Deed. Clause 4 is concerned with trustee powers, discretions and duties. Clause 6 contains an indemnity for AUSCOAL in certain circumstances. If the Trust Deed is amended in the manner proposed, those provisions relevantly will read (putting aside the immaterial changes in punctuation):

4.2   Examples of Powers

Without limiting clause 4.1 and in addition to any powers described elsewhere in this Trust Deed, the Trustee has the power to:

…

(l)   retain the services of and to appoint professional or other advisors in relation to the management, investment, administration or conduct of the Fund, to act on the advice of any person so retained and to pay the fee or remuneration for any professional or other advisors so appointed.

…

6.1   Indemnity

(a)   The Trustee and its directors and officers are entitled, to the maximum extent permitted by the Relevant Law, to be indemnified from the Fund against all liabilities incurred by each of them in connection with execution, attempted execution, or in respect of the non-execution of the Trustee’s powers and discretions under this Trust Deed.

(b)   For the avoidance of doubt, the indemnity in clause 6.1(a) shall extend to circumstances where the Trustee acts upon the opinion or advice of or statement of barristers or solicitors who are instructed by the Trustee or any bankers, accountants, brokers, investment advisers or other persons believed by the Trustee in good faith and upon reasonable grounds to be expert in relation to the matters upon which they are consulted.

291. The TWUSUPER Trust Deed that is current as at 4 October 2023 contains in clauses 14(b)(vii) and 16(c) provisions that are materially identical to the provisions that AUSCOAL proposes to insert into the Trust Deed. The purpose of the proposal is to provide to AUSCOAL the benefit of those provisions, but also to cause the Trust Deed to conform in a material respect with terms of the TWUSUPER Trust Deed.

292. As is explained above, on 28 June 2011, a new deed was executed to govern Mine Super that replaced the trust deed that had been executed on 31 January 1995, as amended up until that time. The deed that was replaced empowered AUSCOAL in clause 1.6.3(g) to act on the advice or opinion of any Qualified Adviser, without being liable to any person in respect of actions done in good faith based upon the advice or opinion. “Qualified Adviser” was defined in clause 1.1 in a broad way equivalent to the advisers listed in proposed clause 6.1(b). Clause 1.8 extended the indemnity to which AUSCOAL was entitled in a manner materially equivalent to the proposed clause 6.1(b). The provisions in the previous version of the Trust Deed referred to above had substantially the same effect as the provisions that are now proposed to be inserted in the Trust Deed. It is not clear why, in the process of reconstituting Mine Super that was involved in the Replacement Deed executed on 28 June 2011, the earlier provisions empowering AUSCOAL in relation to reliance upon expert advice and the extension of the indemnity were excluded. The proposed amendments therefore will not only conform the Trust Deed to the trust deed that governs TWUSUPER, but they will return the trust deed that governs Mine Super to what is, in substance, its former terms.

293. AUSCOAL specifically acknowledged in its submissions in support of an affirmative answer to the question posed to the Court by prayer 3 of the amended summons that it has a conflict between its personal interests and its trustee duties and its obligations under s 52(2)(d) of the SIS Act, which materially provides that the covenants taken by s 52(1) to be contained in the Trust Deed include:

(2)   The covenants referred to in subsection (1) include the following covenants by each trustee of the entity:

…

(d)   where there is a conflict between the duties of the trustee to the beneficiaries, or the interests of the beneficiaries, and the duties of the trustee to any other person or the interests of the trustee or an associate of the trustee:

(i)   to give priority to the duties to and interests of the beneficiaries over the duties to and interests of other persons; and

(ii)   to ensure that the duties to the beneficiaries are met despite the conflict; and

(iii)   to ensure that the interests of the beneficiaries are not adversely affected by the conflict; and

(iv)   to comply with the prudential standards in relation to conflicts;

294. This covenant recognises the practical reality that conflicts of interest will, from time to time, arise in the administration of superannuation funds as between the trustee and the beneficiaries, and lays down a regime for dealing with those conflicts. The trustee must give priority to the duties to and interests of the beneficiaries; it must ensure that the duties to the beneficiaries are met despite the conflict; and ensure that the interests of the beneficiaries are not adversely affected by the conflict.

295. It is plain that, in the management of AUSCOAL as the trustee of a registrable superannuation entity under the SIS Act, the board of directors of the company will be responsible for making decisions on an extremely wide range of issues that will require expertise in many different fields. The directors individually and collectively cannot be expected to have the necessary expertise in all fields. That reality is recognised by APRA Prudential Practice Guide SPG 520 at [13], which includes "… each director is not generally expected to have all the competencies that the Board collectively needs if other directors have those competencies or they are obtained from external consultants or experts and the Board does not unquestionably [unquestioningly?] rely on their advice". It is self-evident that, in a wide range of situations in the proper management of AUSCOAL, the board of directors will be required to rely upon the advice of external expert consultants, subject to the caveat that they do not rely upon that advice unquestioningly.

296. Proposed clause 4.2(l) of the Trust Deed recognises and acknowledges the reality that the board of directors of AUSCOAL must, from time to time, appoint expert advisors and consultants and act on the advice given.

297. In the absence of such a power, the board of directors of AUSCOAL would have to rely upon their collective expertise, and, as that expertise could not possibly be sufficient to deal with all contingencies, the board of directors would be required to establish in-house expertise so that AUSCOAL would have the capacity to administer and manage Mine Super properly in all circumstances without the ability to rely upon the advice of external expert consultants. That is an impracticable and uneconomic proposition.

298. Proposed clause 6.1(a) is present in the current wording of the Trust Deed, as clause 6.1. It is proposed that clause 6.1(b) be added to confirm that the indemnity shall extend to the circumstances where AUSCOAL acts upon the opinion or advice of the expert consultants referred to where AUSCOAL believes in good faith and upon reasonable grounds that those persons are experts in relation to the matters upon which they are consulted.

299. As a practical matter, absent such an indemnity, AUSCOAL, its directors and officers would be put in the position where their potential legal liability for acting on the opinion or advice of the external expert consultants would be unclear. The natural consequence of that lack of clarity would be to cause AUSCOAL, in its own interests, to create in-house expertise that would enable it to minimise the risk of its own liability by having the expertise that would be necessary to assess the reliability of the opinions or advice given by external expert consultants. That would plainly be a costly and wasteful course that would not be in the interests of the beneficiaries of Mine Super.

300. The most practical and economical result is that the Trust Deed authorise AUSCOAL to rely upon the opinion or advice of relevant external expert consultants who are believed in good faith and upon reasonable grounds to have relevant expertise, and that AUSCOAL be indemnified in respect of the consequences of its acting upon the opinions or advice that it is given.

301. The result will be that the interests of the beneficiaries of Mine Super will be protected by the remedies that may be available in the law against external expert consultants, if the opinions or advice given to AUSCOAL causes Mine Super to suffer loss. It will obviate the need for AUSCOAL to duplicate necessary fields of expertise in-house.

302. The power at to amend the Trust Deed is found in clause 22.1, which relevantly provides:

22   AMENDMENTS

22.1   Power to Amend

The Trustee by deed or by oral or written resolution may amend, add to, delete or replace all or any of the provisions of the Deed, including this Clause… as the Trustee sees fit and any such amendment, addition, deletion or replacement (“amendment”) shall take effect on the date the deed or resolution is executed or made or such earlier or later date as may be specified therein for that purpose PROVIDED THAT:

(a)   no amendment shall be made other than in accordance with Relevant Law; and

…

(c)   no amendment shall take effect in respect of a Member or Beneficiary in any way which restricts or removes a right that:

[certain existing Defined Benefit or Pending Members or persons entitled to pensions under Categories C or D]

had before the amendment PROVIDED THAT nothing shall prevent an amendment to confer additional rights on such a defined Benefit Member, Pending Member, Dependent or person; and

(d)   no amendment shall take effect in respect of a Queensland Member or their Beneficiary unless;

[certain stated requirements are satisfied, including];

(iii)   in the opinion of the Trustee will enable the Fund to be more conveniently, advantageously, profitably or economically administered or managed; or…

(e)   no amendment shall take effect in respect of a Member or Beneficiary unless:

(i)   the Actuary determines that such amendment will not reduce the amount of the benefits presently or prospectively payable in respect of the Member or Beneficiary to the extent that such benefits have accrued or have or shall become payable in respect of the period up to the date the deed is executed or the resolution is made; or

(ii)   such amendment is approved by the Regulator in writing or is required by Relevant Law; or

(iii)   such amendment is approved by that Member or Beneficiary in writing.

303. Nothing in this clause precludes AUSCOAL from making the proposed amendment to the Trust Deed.

304. On the basis of the considerations set out above, I am satisfied that the interests of the beneficiaries of Mine Super will be served by the making of the proposed amendment, and that the interests of the beneficiaries are not adversely affected by the technical conflict of interest in AUSCOAL in proposing the amendment. In essence, the board of directors of AUSCOAL must conduct its affairs by retaining and relying upon the opinion or advice of external expert consultants in many situations that are essential for the proper administration and management of Mine Super. The board of directors will follow that course, whether or not the proposed amendment is made, because they have no realistic choice. It is not in the interests of the beneficiaries of Mine Super that the board of directors be tempted to rely upon their own expertise, or to partially duplicate in-house the expertise that would be necessary to protect AUSCOAL if it did not have the proposed indemnity.

305. Consequently, the Court will respond to the question in prayer 3 of the amended summons by providing advice in the form of an affirmative answer to the question.

Costs

306. AUSCOAL is entitled, as trustee of Mine Super to an order that its costs of the proceedings be paid out of the Fund on the indemnity basis. That entitlement arises in equity and under clause 6 of the Trust Deed; it is also consistent with ss 59(4) and 93 of the Trustee Act and UCPR r 42.25: see NGS Super at [108]; SCS Super at [155] and EISS Super at [46].

307. From the Court's perspective, this application has required very substantial forensic effort, but I am clearly satisfied that, having regard to the commercial context and the complexity of the issues that have arisen, the forensic effort that has been devoted to the application has been reasonable and well-warranted.

Orders

308. The orders of the Court are:

1. Subject to order 3, order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court's opinion and advice that the plaintiff would be justified in administering and managing the Mine Superannuation Fund (Mine Super) on the basis that, on the proper construction of the trust deed, and notwithstanding the presence of clause 2.5:

1. in the circumstances of a defined benefit Category deficit; or 

2. in a winding up (of a Category, or Mine Super);

the assets available to fund defined benefit entitlements will be restricted to the assets attributed to the applicable defined benefit Category.

2. Subject to order 3, order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court's opinion and advice that any benefits payable to a Beneficiary with respect to their defined benefit interest in Mine Super will not be payable from the Assets of Mine Super attributed to Accumulation Member Categories (or any other Category treated by the trustees as an Accumulation Category).

3. The opinion and advice given by the Court by orders 1 and 2 is subject to:

1. the plaintiff administering and managing Mine Super by exercising all of the powers available to it as explained in the Court’s reasons for judgment to ensure that the assets available to fund defined benefit entitlements will be restricted to the assets attributed to the applicable defined benefit Category, or the aggregate defined benefit entitlements are adjusted so that they do not exceed in value the net value of realisation of the assets attributed to the applicable defined benefit Category; and

2. the Australian Prudential Regulation Authority exercising its power under s 332 of the Superannuation Industry (Supervision) Act 1993 (Cth) to modify the application of certain regulations in the Superannuation Industry (Supervision) Regulations 1994 (Cth) to Mine Super in the manner set out at [230] and [232] of the Court’s reasons for judgment.

4. Order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court’s opinion and advice that the plaintiff would not be justified in amending the trust deed so as to clarify, for the avoidance of doubt, that clause 2.5 does not alter the benefit entitlements of Members and other Beneficiaries of Mine Super.

5. Order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court’s opinion and advice that the plaintiff would be justified in amending the trust deed so as to:

1. delete the word “and” at the end of the last line of clause 4.2(j);

2. replace “.” with “; and” at the end of the last line of clause 4.2(k);

3. insert new sub-clause 4.2(l) as follows:

“retain the services of and to appoint professional or other advisors in relation to the management, investment, administration or conduct of the Fund, to act on the advice of any person so retained and to pay the fee or remuneration for any professional or other advisors so appointed.”;

4. insert “(a)” at the beginning of the first line of clause 6.1; and

5. insert new sub-clause 6.1(b) as follows:

“For the avoidance of doubt, the indemnity in clause 6.1(a) shall extend to circumstances where the Trustee acts upon the opinion or advice of or statement of barristers or solicitors who are instructed by the Trustee or any bankers, accountants, brokers, investment advisers or other persons believed by the Trustee in good faith and upon reasonable grounds to be expert in relation to the matters upon which they are consulted.”

6. Order that the plaintiff’s costs of these proceedings be paid out of the assets of Mine Super on the indemnity basis.

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Amendments

17 February 2024 - Correction to order numbering in paragraph 308

Decision last updated: 17 February 2024