Re the Queensland Coal & Oil Shale Mining Industry Ltd

[1998] QSC 129

IN THE SUPREME COURT

OF QUEENSLAND

No.5200  of 1998
Brisbane

[Re The Queensland Coal & Oil Shale Mining Industry Ltd]

IN THE MATTER of The Trust Act 1973

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IN THE MATTER of  THE QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY (SUPERANNUATION) FUND (“the Fund”)

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IN THE MATTER an application by QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY (SUPERANNUATION) LTD as TRUSTEE of the FUND.

JUDGMENT - WILLIAMS J

Delivered the 29 day of June 1998

Queensland Coal and Oil Shale Mining Industry (Superannuation) Ltd., the applicant, is an unlisted public company which is the corporate trustee for the Queensland Coal and Oil Shale Mining Industry (Superannuation) Fund (“the Fund”).  The applicant was incorporated for the sole purpose of being the trustee of the Fund as a consequence of an industrial agreement to introduce award-based superannuation for employees in the Queensland Coal Mining Industry.  The Fund was established in 1988 and has grown to the extent that it now has a value of approximately $690M.

The Fund was established by a Deed of Trust dated 18 May 1988.  When the applicant was incorporated, in accordance with the arrangements entered into, there were 6 directors; 3 being member representatives and 3 being employer representatives.  The member representatives were in effect appointed by the unions active in the coal mining industry.  The Trust Deed contained no provision for the remuneration of the trustee or its directors.

Over the years there have been substantial changes in the superannuation environment and the administration of the trust fund, particularly given its size, is quite complex.  There is also increased competition in the superannuation area, and it is important for its members that this fund continue to develop policies which provide the best return to members, and benefits which are comparable with those available from other sources.

A subsidiary services company (with identical directorship) has been formed and there is an investment sub-committee which undertook a major review of the Funds’s investment strategy and continues to monitor it.

Currently the Fund is establishing business and marketing plans for its continued survival under “choice of fund” legislation.

The Fund has now grown into a major business and that has imposed major obligations and pressures on directors.  Employers and unions are now under financial pressure and their ability to support the applicant through the provision of highly qualified and experienced senior officers as directors has come under review.  The combination of business expansion and reduced industry support has meant that the applicant has had to consider remuneration for its directors to ensure a highly competent and experienced team of individuals forming the board of directors.    The articles of the applicant are silent as to remuneration of directors.  In all the circumstances the applicant and its directors, are desirous of altering the articles of the applicant and the Trust Deed to enable directors to be appropriately remunerated for their services.  Following a special resolution carried at a general meeting of the applicant held on 19 May 1998 amendments were effected to its Articles of Association.  It is sufficient to refer to Articles 69A (1) and 69B as then approved;  those paragraphs provide respectively:

“The Directors (other than the Managing Director or an Executive Director) may be paid as remuneration for their services the aggregate maximum sum from time to time determined by the Company in general meeting.”

“The remuneration of a Managing Director or of an Executive Director may from time to time be fixed by the Directors”.

That resolution was passed “subject to the Supreme Court of Queensland making an order approving of remuneration to the Company as trustee of the” Fund.  Hence this application.

As already noted the Trust Deed contains no power for the Fund to reimburse the applicant for any fees paid to its directors.  No assistance can be gained from the provisions of the Superannuation Industry (Supervision) Act 1993. In consequence the Trust Deed must be amended if provision for appropriate remuneration is to be made. Whilst the trustee is empowered by the Deed to vary its terms in some respects, it could not do so in this instance because of the conflict of interest.

This application is made pursuant to s.94 of the Trusts Act 1973, and reference is also made to s.101 of that Act. Section 94, so far as is relevant, provides:

“94.(1)  Where in the opinion of the court any ... other disposition ... is expedient in the management or administration of any property vested in a trustee, or would be in the best interests of the persons ... beneficially interested under the trust, but ... it ... cannot be effected by reason of the absence of any power for that purpose vested in the trustee by the trust instruments (if any) or by law, the court may by order confer upon the trustee, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions (if any) as the court may think fit ...”.

Section 101(1) is in these terms:

“The court may, in any case in which the circumstances appear to it so to justify, authorise any person to charge such remuneration for the person’s services as trustee as the court may think fit.”

The mere presence of s.101 in the legislation indicates that it is appropriate in many instances for the trustee to receive remuneration for carrying out his obligations.

Historically equity regarded trusteeship as an honorary position, and in the absence of any special provision for remuneration the services of the trustee were to be provided gratuitously; Robinson v Pett (1734) 3 P. Wms 249; 24 E.R. 1049 is generally cited as the authority for that proposition. But times have changed and it is now clearly accepted that a court of equity has inherent jurisdiction to authorise remuneration of a trustee even where no such power exists in the trust instrument (In re  Duke of Norfolk’s Settlement Trusts [1982] Ch. 61 at 78). The general rules that equity forbids a trustee to make a profit out of the trust and that a trustee is not entitled to remuneration for services rendered to the trust are still recognised (see Guinness PLC v Saunders [1990] 2 A.C. 663 at 692 and 701) but will not prevent the court from authorising remuneration where it considers such a course to be necessary for the proper administration of the trust. That is clearly established by the decision of Walton J at first instance in Duke of Norfolk’s Settlement Trusts [1979] Ch. 37 and by Fox L.J. on appeal. The latter said at 78-9:

“When the court authorises payment of remuneration to a trustee under its inherent jurisdiction it is, I think, exercising its ancient jurisdiction to secure the competent administration of the trust property just as it has done when it appoints or removes a trustee under its inherent jurisdiction. ... As to principle, it seems to me that if the court has jurisdiction, as it has, upon the appointment of a trustee to authorise remuneration though no such power exists in the trust instrument, there is no logical reason why the court should not have power to increase the remuneration given by the instrument. ... Further, the law has not stopped short at authorising remuneration to a trustee only if he seeks the authority at the time when he accepts the trust. ... I appreciate that the ambit of the court’s inherent jurisdiction in any sphere may, for historical reasons, be irrational and that logical extensions are not necessarily permissible.  But I think that it is the basis of the jurisdiction that one has to consider.  The basis, in my view, in relation to a trustee’s remuneration is the good administration of trust.  The fact that in earlier times, with more stable currencies and with a plentitude of persons with the leisure and resources to take on unremunerated trusteeships, the particular problem of increasing remuneration may not have arisen, does not, in my view, prevent us from concluding that a logical extension of admitted law and which is wholly consistent with the apparent purpose of the jurisdiction is permissible.  If the increase of remuneration be beneficial to the trust administration, I do not see any objection to that in principle.”

There are no decisions which extensively consider the scope of s.101. Byrne J referred to it in Re Postle & Hodsdon’s Application [1991] 1 Qd R 160, but ultimately the decision was based more on the general law. In my view s.101 should not be regarded as in any way limiting the inherent jurisdiction of this court nor the general power conferred by s.94. It clearly empowers the court to make an order remunerating a trustee and to that extent it indicates that there is no reason in principle why the court cannot make such an order in appropriate circumstances. Whether the court is considering the matter under s.101 or under its inherent jurisdiction it will generally require specific evidence that the administration of the trust has required some particular exertion on the part of the trustee which justifies remuneration.

In my view an order such as that sought here can be made under s.94. If payment to a trustee is necessary or expedient for the proper management and administration of the trust, and the trust instrument does not permit of that, then the court can remedy that omission if it considers that it is proper and expedient to confer that absent power on the trustee. Such orders have historically more regularly been made where there has been an omission with respect to investment powers, but there is no reason why s.94 should be limited to that particular situation.

Insofar as the section requires the court to be of opinion that it is “expedient” to make the order in question there is, in my view, no problem here.  The term “expedient” is of wide and flexible import.  Dealing with a comparable provision in an English statute Farwell J said in Re Craven’s Estate [1937] Ch. 431 at 436: “the word “expedient” there quite clearly must mean expedient for the trust as a whole.” That was taken up by Buckley L J in Re Earl of Strafford [1980] Ch. 28 at 45 where he said:

“Expedient for the trust as a whole must mean, it seems to me, the same as “expedient in the interests of all the beneficiaries under the trust”, provided that it be kept in mind that in considering the interests of the beneficiaries collectively, trustees must take into account the effect of what is proposed upon the several individual interests of the beneficiaries and hold the scale fairly between them.”

Those remarks come close to the expression “the good administration of trusts” used by Fox L J in the quote above.

In all the circumstances I am satisfied that either in exercise of the inherent jurisdiction of this court or by way of application of ss. 94 and 101 of the Trusts Act an order for the remuneration of the trustee in this case should be made.  It is clear that a high degree of expertise is required if this particular trust is to continue to operate as effectively as possible for the benefit of all its members.  That expertise can, in all the circumstances, only be acquired at a price.  The task of administering this trust is now beyond the capacity of the people who were originally envisaged as being appropriate directors of the trustee.

Initially the applicant asked that a clause be inserted into the trust instrument in the following terms:

“Any Trustee by resolution of its Board of Directors or by any person appointed under Clause 8.1.3 may from time to time charge and be paid out of the income derived from the Assets of the Fund such remuneration as the Trustee in its absolute discretion shall consider reasonable And Provided That any Trustee may charge and be paid any other such level of remuneration approved by a majority of shareholders of the Fund eligible to vote in General Meeting”.

During argument I raised concern that such wording entitled the trustee in its absolute discretion to determine what was reasonable.  Counsel for the applicant accepted that observation, and then pointed to material indicating what was considered by an independent expert to be a reasonable level of remuneration at the present time.  Counsel pointed out that provided there was a provision for indexation to the consumer price index specific amounts could be provided for by the order.

In those circumstances I am prepared to order the insertion into the Deed of Trust of a

new sub-clause 8.8 to read as follows:

“Remuneration of Trustee

Any Trustee by resolution of its Board of Directors or by any person appointed under Clause 8.1.3, may from time to time charge and be paid out of such of the income derived from the Assets of the Fund remuneration to be applied as follows:

(a)for the Chairman of the Board of Directors $10,000 per year;

(b)for ordinary Directors $5,000 per year;

(c)for the Chairman and one member of the Investment and Finance Committee respectively $25,000 per year and $20,000 per year (where applicable in addition to the basic Chairman’s and Directors’ fees);

(d)the said remuneration in the amounts referred to, be indexed to the consumer price index each year;

(e)Provided That the Board of Directors may review the levels of remuneration every 2 years but that no additional increases in remuneration (other than by indexation) or any other extraordinary remuneration shall be paid otherwise than following approval of the said increase for payment by a majority of share holders of the Fund eligible to vote in General Meeting.”

I will therefore make an order in terms of the draft submitted and initialled by me.