Re Kirkland, John Sloane

[1997] FCA 684

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - property divisible among creditors - Preserved Withdrawl Benefit under superannuation fund

Superannuation Industry (Supervision) Act 1993 (Cth)

Income Tax Assessment Act 1936 (Cth).

Saunders v Vautier (1841) Cr & Ph 240, 49 ER 292

RE:  JOHN SLOANE KIRKLAND EX PARTE OFFICIAL TRUSTEE IN BANKRUPTCY
No. TB 419 OF 1993

JUDGE:    HEEREY J
PLACE:    25 JULY 1997
DATE:     HOBART

IN THE FEDERAL COURT OF AUSTRALIA )
  )
BANKRUPTCY DISTRICT OF           )    TB 419 of 1993
  )
THE STATE OF TASMANIA            )

RE:  JOHN SLOANE KIRKLAND

A Bankrupt

EX PARTE: OFFICIAL TRUSTEE IN
  BANKRUPTCY

Applicant

AND:     JOHN SLOANE KIRKLAND

First Respondent

AND:     TNT SUPERANNUATION FUND
   PTY LTD

Second Respondent

JUDGE:    HEEREY J
DATE:     25 JULY 1997
PLACE:    HOBART

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application be dismissed with costs, including reserved costs.

NOTE:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA )
  )
BANKRUPTCY DISTRICT OF           )    TB 419 of 1993
  )
THE STATE OF TASMANIA            )

RE:  JOHN SLOANE KIRKLAND

A Bankrupt

EX PARTE: OFFICIAL TRUSTEE IN
  BANKRUPTCY

Applicant

AND:     JOHN SLOANE KIRKLAND

First Respondent

AND:     TNT SUPERANNUATION FUND
       PTY LTD

Second Respondent

JUDGE:    HEEREY J
DATE:     25 JULY 1997
PLACE:    HOBART

REASONS FOR JUDGMENT

The Official Trustee in Bankruptcy, as trustee of the bankrupt estate of John Sloane Kirkland (the bankrupt), seeks payment of a benefit to which the bankrupt is entitled under the TNT Group Retirement Fund (the Fund).  In essence the Official Trustee contends that the amount in question, although payable at a future date, has unconditionally vested in the bankrupt and that he can call for immediate payment under the Rule in Saunders v Vautier (1841) Cr & Ph 240, 49 ER 282. Accordingly the Official Trustee, standing in the shoes of the bankrupt, makes the same claim.

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The bankrupt was born on 31 March 1939.  In 1967 he commenced employment with the TNT Group and on about 1 March 1969 he became a member of the Fund.  He resigned his employment with the Group on 1 July 1988.  On that date he became entitled to receive a Withdrawal Benefit, made up of a Cash Withdrawal Benefit of $59,539.31 and a Preserved Withdrawal Benefit of an equal amount.  The Cash Withdrawal Benefit was paid to him about two weeks later. 

On 31 August 1993 a sequestration order was made against the estate of the bankrupt and the Official Trustee was appointed trustee of the estate. 

The Trust Deed establishing the Fund is dated 11 April 1969.  The second respondent TNT Superannuation Fund Pty Ltd is the trustee.  Under cl C of the Deed the trustee is to administer the Fund according to the Rules.  By cl A "the Rules" means “the Rules set forth in the Articles hereto as amended from time to time as therein provided”. 

As at the date of the bankrupt’s resignation (1 July 1988) the Rules provided for six different categories of benefit:  Normal Retirement (retirement from service at age 65: Article 3.1), Late Retirement (where service is extended beyond age 65:  Article 3.2), Total Disablement
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Benefit (retirement on the grounds of total disablement before age 65:  Article 3.3), Early Retirement (retirement at 60, or between 55 and 60 with the consent of the company, or before age 55 because of “serious ill-health or pressing domestic necessity”, in either case with the consent of the company: Article 3.4), Death Benefit (where the member dies in service:  Article 3.5).  Article 3.6 provides for a Withdrawal Benefit.  It is in these terms:

A Member whose Service ceases for any other reason and who is not entitled to a Normal Retirement Benefit, a Late Retirement Benefit, a Total Disablement Benefit or an Early Retirement Benefit shall be entitled to receive a Withdrawal Benefit part of which, the Cash Withdrawal Benefit, will be paid as at the date his Service ceases and the balance, the Preserved Withdrawal Benefit, will be paid together with Credited Interest as at the date he attains age 55 or as at the date of his death if occurring earlier or at such earlier date as the trustee may in its absolute discretion decide.

Article 10.22 provides:

10.22Notwithstanding the provisions of these Rules, in carrying out its powers and duties under the Rules the Trustee shall comply with the prescribed operating standards for superannuation funds provided by the Occupational Superannuation Standards Act 1987 and without limiting the generality of the foregoing these Rules shall be construed as if such standards that are from time to time in force are deemed to be included in these Rules and any Rule that is inconsistent with a standard shall to the extent of such inconsistency be of no effect.

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At 1 July 1988 the Occupational Superannuation Standard Regulations 1987 (Cth), SR 322 of 1987, by regs 10 and 11 provided in effect that preserved benefits were required to be retained in the fund and not be paid until the member had retired from the workforce and attained age 55.  Such benefits would only become payable if the member retired from the workforce before 55 on the ground of permanent incapacity or invalidity, died, departed permanently from Australia or there were such other circumstances (if any) as the Insurance and Superannuation Commission approved.

As at the date of sequestration (31 August 1993) the Deed and the Regulations were in the same form. 

By a deed of amendment dated 25 July 1994, Article 10.22 referred to above was replaced with a provision to the effect that the standards prescribed in the "Statutory Requirements" were deemed to be included in the Rules. That term was defined as meaning, inter alia, any provision as may from time to time apply under the Superannuation Industry (Supervision) Act 1993 (Cth) with which the Fund must comply in order to be a complying superannuation fund for the purposes of Part IX of the Income Tax Assessment Act 1936 (Cth).

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As from 11 March 1994 the provisions with which the Fund had to comply included the Superannuation Industry (Supervision) Regulations 1994 (Cth),(SR 57 of 1994). Regulation 6.17(2)(a)(i) of those regulations provides that a member's benefit in a regulated superannuation fund (which the Fund is) may only be paid by being cashed in accordance with Division 6.3. Regulation 6.18(1) in Division 6.3 provides that a member's preserved benefits in a regulated superannuation fund may be cashed on or after the satisfaction by the member of a condition of release specified in sch 1. Part 1 of sch 1 (which is applicable to regulated superannuation funds) states that cashing restrictions on a preserved benefit are nil. The conditions of release are as follows:

(a)On retirement.  By reg 6.01(7), the retirement of a person, for the purposes of sch 1, is taken to have occurred, in the case of a person who has attained age 55 if gainful employment has terminated and the trustee is reasonably satisfied that that person has no intention of subsequently becoming gainfully employed, either on a full-time or a part-time basis.

(b)The member has died.

(c)The member has become permanently incapacitated. 

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(d)The member has permanently departed from Australia.

(e)The member has suffered severe financial hardship.

(f)The member has attained age 65.

(g)Termination of employment with a particular employer has occurred and the benefit is paid as a non-commutable pension for life or an annuity for life.

(h)Termination of employment with an employer has occurred and the benefit is paid as a non-commutable pension for life or an annuity for life.

(i)The member is suffering from temporary incapacity.

(j)A condition has occurred for which there is an approval under s 62(1)(b)(v) of the Superannuation Industry (Supervision) Act.

By deed of amendment made on 27 November 1995 the Deed was further amended.  A new Article 3.7 replaced Article 3.6.  The new clause was in the same terms up to the expression “will be paid together with Credited Interest”.  The new Article 3.7 provided:

... will be paid together with interest at the Fund Earning Rate at the time the Trustee is satisfied

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that the relevant Statutory Requirement regarding preservation of a benefit has been met. 

“Statutory Requirements” was defined by cl 1.33 to mean:

Any provision as may from time to time apply under the Act [Superannuation Industry (Supervision) Act 1993], the Income Tax Act or any other law including:

(a)Any administrative guidelines issued by the Responsible Authority [the Insurance and Superannuation Commissioner, the Commissioner of Taxation, or any other Federal Government Authority responsible for administering the laws, regulations, or any other rules applying to the operation of superannuation or similar funds]; or

(b)statements by Government advising changes to the Statutory Requirements, which govern the operation of the Fund,

with which the Fund must comply in order to be a Complying Superannuation Fund, or with which the Trustee must comply.

The 1994 regulations discussed above are "Statutory Requirements" for these purposes. 

The applicant did not seek to make out a case that the bankrupt satisfied the requirements for early retirement under either the 1987 or 1994 regulations.  In particular there was no suggestion the bankrupt had retired from the workforce. 

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I conclude that at the date of the bankrupt’s resignation, the date of sequestration, and the present time, the bankrupt was and is not entitled to payment of the Preserved Withdrawal Benefit.  The rule in Saunders v Vautier does not apply.   Because superannuation funds in Australia enjoy substantial tax benefits there is a complex statutory regime which restricts the access members may have to benefits.  Speaking very generally, the object of superannuation is to make provision for death, disablement or retirement at normal retiring age, or earlier if there are exceptional circumstances.  It would conflict with that objective if members of funds could treat their entitlements as though they were funds on deposit, available at call. 

The bankrupt could not on resignation or at the date of sequestration, and cannot at the present time, obtain payment of those benefits.  The applicant can be in no better position than the bankrupt.

The application will be dismissed with costs, including reserved costs.

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I certify that this and the
preceding eight (8) pages
are a true copy of the
Reasons for judgment herein
of the Honourable Justice
Heerey

Associate:

Dated 25 July 1997

Counsel for the
Applicant:             Mr M J Galvin

Solicitor for the
Applicant:             J M Smith & Emmerton

Counsel for the
Respondents:           Mr P M Roach

Solicitor for the
Respondents:           Clayton Utz

Date of Hearing:       26 June 1997

Date of Judgment:      25 July 1997