Retail Employees Superannuation Pty Ltd v Pain - [2016] SASC 121

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
RETAIL EMPLOYEES SUPERANNUATION PTY LTD v PAIN
[2016] SASC 121
Judgment of The Honourable Justice Blue
8 August 2016
SUPERANNUATION - INDUSTRY SUPERVISION
SUPERANNUATION - PRIVATE SECTOR FUNDS - AMENDMENT OF TRUST DEED
SUPERANNUATION - PRIVATE SECTOR FUNDS - TRUSTEES - POWERS AND DUTIES
STATUTES - ACTS OF PARLIAMENT - INTERPRETATION
Application under section 59C of the Trustee Act 1936 to vary terms of a trust.
The plaintiff is the trustee of the Retail Employees Superannuation Trust, which was established in 1987. The defendant is a beneficiary of the Trust appointed to represent the interests of actual and potential beneficiaries. The Australian Prudential Regulation Authority was joined as an intervener at the request of the Court.
Clause 19 of the Trust Deed empowers the trustee to amend the Trust Deed, but the power of amendment is subject to limitations. Since 1988, the trustee has amended the Trust Deed on 40 occasions. Its terms are now very different to the terms of the original Trust Deed. As originally constituted, membership of the Trust was open only to employees of participating employers, the trust fund was solely an accumulation fund, the investments attributed to all members were pooled, and there was a single product and single division.
In 1997, the Trust Deed was amended to constitute the Trust as a public offer entity. The Trust was divided into Division I (employer-sponsored members) and Division II (members of the public).
In 1998, the Trust Deed was amended to empower the trustee to establish and maintain separate investment options. The principal investment option continued to be the Core Strategy, but the trustee also created 12 additional investment options.
In 2002, the Trust Deed was amended to create Division III (REST Pension) for members who applied for or elected to receive a pension benefit and Division IV (Acumen) for members whose employers negotiated special terms. The trustee subsequently created sub-plans in Division IV, of which 5 subplans remain, including sub-plans that provided defined benefits.
In 2013, the Trust Deed was amended to create a MySuper class of beneficial interest. It was also amended to allow the trustee to admit members of the public to Division I and to transfer member’s products between products and divisions without the consent of members in certain circumstances. The trustee created two separate products, REST Super and REST Corporate, within Division I.
The plaintiff is concerned that some of the amendments made over the years may arguably not have complied with clause 19. The plaintiff seeks an order varying the Trust Deed to validate all previous amendments with prospective effect. The plaintiff also seeks variation of the Trust Deed to substitute a new clause 19 and to amend some of the substantive provisions of the Trust Deed.
Held (granting the application to vary the Trust Deed):
1.       The Court has jurisdiction to vary the Trust notwithstanding that the proper law of the Trust Deed is that of New South Wales. The Court should exercise its discretion to entertain the application, there being a real and substantial connection with South Australia (at [180] to [182]).
2. The condition in section 59C(2) that the interests of all actual and potential beneficiaries of the Trust be represented is satisfied by the appointment of the defendant to represent such beneficiaries in the action (at [165]).
3.       The application is not motivated by a desire to avoid or reduce the incidence of tax (at [166]).
4. Observations concerning the prerequisites under section 59C(3) for making an order and exercise of the discretion (at [157] to [192]).
5.       Subject to the inclusion of additional provisions requiring the trustee to allocate costs and charge fees in a fair and equitable manner, review allocations annually and publish on its website information about investment options, it is appropriate that the Trust Deed be varied to provide for the creation of investment options (at [206] to [227]).
6.       Subject to the inclusion of conditions, it is appropriate that the Trust Deed be varied to empower the trustee, on closure of an investment option, to transfer members’ interests to another investment option with their consent (at [233] to [236]).
7.       Subject to the inclusion of provisions requiring the trustee to allocate costs and charge fees in a fair and equitable manner, review allocations and product differentiation annually and entitling members to transfer to a different product if eligible for the different product, it is appropriate that the Trust Deed be varied to provide for the creation of Division II (REST Select) and Division III (REST Pension) and REST Corporate and REST Super (at [245] to [246], [256] to [258], [374] to [375]).
8.       Observations concerning the nature of and statutory requirements for a MySuper product (at [279] to [307]).
9.       Subject to the inclusion of provisions requiring the trustee to allocate costs and charge fees in a fair and equitable manner, review allocations annually and recasting of the provisions relating to the creation of MySuper, it is appropriate that the Trust Deed be varied to create the MySuper product (at [309] to [320]).
10.     Subject to the inclusion of provisions requiring the trustee to allocate costs and charge fees in a fair and equitable manner, review allocations and product differentiation annually, segregate accounts for defined benefit members from accumulation members and accounts for defined benefits members between defined benefits and accumulation benefits, it is appropriate that the Trust Deed be varied to create Division IV (at [352] to [359]).
11.     Subject to the inclusion of limitations and conditions, it is appropriate that the Trust Deed be varied to provide for the transfer of members’ benefits between products or divisions without members’ consent (at [268] to [270], [327] to [330], [363] to [369], [383] to [389]).
12.     Subject to the inclusion of limitations and conditions, it is appropriate that the Trust Deed be varied to empower the trustee to transfer the benefits of members to a successor fund without members’ consent (at [408] to [410]).
13.     It is appropriate that the Trust Deed be varied to expand the trustee’s investment powers and give to the trustee power to grant options and to grant indemnities (at [416] to [420]).
14.     Subject to limitations and conditions, it is appropriate that the Trust Deed be varied to give to the trustee power to pay for financial product advice (at [421] to [424]).
15.     It is not appropriate that the Trust Deed be varied to give to the trustee power as against members to determine conclusively the interpretation and effect of the Trust Deed (at [430] to [433]).
16.     It is appropriate that the Trust Deed be varied to expand the trustee’s powers of valuation and unitisation of investments, to delay calculation of member accounts and to create an additional reserve account (at [441], [443], [446]).
17.     It is appropriate that the Trust Deed be varied in respect of the interest of members who left the industry (at [454]).
18.     It is appropriate that the Trust Deed be varied to provide for the trustee to debit costs and fees to member accounts, subject to the trustee being required to allocate costs and fix fees in a fair and equitable manner, (at [458] to [459]).
19.     It is appropriate that the Trust Deed be varied in respect of the definition of dependant, date of calculation of benefit and to empower the trustee to delay payments on death or total and permanent disability (at [464] to [465], [467], [469]).
20. Observations on uncertainties and ambiguities contained in sections 58 and 59 of the Superannuation Industry (Supervision) Act 1993 and regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 (at [487] to [515]).
21.     Subject to various alterations, it is appropriate that the Trust Deed be varied to provide for members to nominate their beneficiaries on death by way of binding nominations, post-commencement pension nominations and pre-commencement pension nominations (at [519] to [538], [544] to [560], [563] to [567]).
22.     Subject to the inclusion of provisions requiring the trustee to review annually insurance policies, it is appropriate that the Trust Deed be varied to provide for insurance benefits to be paid by the Trust only on receipt of insurance proceeds from the insurer (at [577] to [581]).
23.     Subject to variations, it is appropriate that the Trust Deed be varied in respect of forfeiture of benefits (at [594] to [597], [604] to [606]).
24.     Subject to variations, it is appropriate that clause 19 of the Trust Deed be varied (at [641] to [707]).
25.     It is appropriate to exercise the discretion in favour of varying the Trust Deed (at [725]).
Trustee Act 1936 (SA) s 24, s 59C; Superannuation Industry (Supervision) Act 1993 (Cth) s3, s10, s10A, s16, s18, s19, s20B, s29D, s29J, s29L, s29R, s29SAA, s29T, s29TA, s29TB, s29TC, s29V, s29VA, s29VB, s29VD, s29VE, s29VN, s29W, s29WA, s29X, s29XA, s31, s34, s52, s55A, s58, s59, s60, s60A, s62, s68AA, s117, s120, s126K, s133, s134, s152, s350, s353, s387; Superannuation Industry (Supervision) Regulations 1994 (Cth) s 1.03, s 1.03A, s 3.04A, s 4.02, s 4.02A, s 5.02, s 5.03, s 5.04, s 6.17A, s 6.22, s 6.22B, s 6.29, s 6.33, s 6.34, s 7A.13, s 7A.17, s 7A.18, s 9.47, s 11.08, s 13.16; Corporations Act 2001 (Cth) s 761A, s 761G, s 761GA, s 764A, s 766A, s 766C, s 911A, s 947D, s 963A, s 963K, s 1011B, s 1012B, s 1012I, s 1016A, s 1017B, s 1017BA, s 1021NA; Corporations Regulations 2001 (Cth); Superannuation Guarantee (Administration) Act 1992 s 32C; Income Tax Assessment Act 1936 (Cth) s 23F; Occupational Superannuation Standards Act 1987 (Cth); Occupational Superannuation Standards Regulations 1987 (Cth); Variation of Trusts Act 1995 (UK) s 1; Superannuation (Unclaimed Money and Lost Members) Act 1999 (Cth) s 12, s 14, s 17, s 22, s 24B, s 24E, s 24G; Family Law Act 1975 (Cth); Superannuation (Resolution of Complaints) Act 1993 (Cth); Legislation Act 2003 (Cth) s 15J, referred to.
Asgard Capital Management Ltd v Maher (2003) 131 FCR 196; Auspine Staff Superannuation Pty Ltd v Henderson (2006) 14 ANZ Ins Cas 90-127; Beck v Colonial Staff Super Pty Ltd [2015] NSWSC 723; Ex parte McLean (1930) 43 CLR 472; Finch v Telstra Super Pty Ltd (2010) 242 CLR 254; In re Druce’s Settlement Trusts [1962] 1 WLR 363; In re Van Gruisen’s Will Trusts; Bagger v Dean [1964] 1 WLR 449; LGSS Pty Ltd v Egan [2002] NSWSC 1171; Lock v Westpac Banking Corporation (1991) 25 NSWLR 593; Mettoy Pension Trustees Limited v Evans [1990] 1 WLR 1587; Vision Super Pty Ltd v Poulter (2006) 154 FLR 185, discussed.
Air Jamaica Ltd v Charlton [1999] 1 WLR 1399; Benzija v Adriatic Fisheries Pty Ltd (1984) 37 SASR 545; Buckby v Speed; Ex parte Speed [1959] Qd R 30; Faye v Faye [1973] WAR 66; In re Courage Group’s Pension Schemes [1987] 1 WLR 495; In re Ker’s Settlement Trust [1963] 1 Ch 553; In re Paget’s Settlement [1965] 1 WLR 1046; Kilbee v Sneyd (1828) 2 Mol 186; Re Bellamy and Metropolitan Board of Works (1883) 24 Ch D 387; Re Reevie and Montreal Trust Co of Canada [1984] 46 OR (2d) 667; Salkeld v Salkeld (No 2) [2000] SASC 296; Thomas Hare Investments Limited v Hare (2012) 34 VR 656, considered.

RETAIL EMPLOYEES SUPERANNUATION PTY LTD v PAIN
[2016] SASC 121
Civil
BLUE J
PART A: BACKGROUND........................................................................................... 5
Superannuation regulatory regime.......................................................................... 5
General law.................................................................................................................... 5
Superannuation Industry and Corporations Acts........................................................... 7
Financial products......................................................................................................... 8
Covenants and operating standards............................................................................... 8
Responsibility to act personally.................................................................................... 10
Choice of fund............................................................................................................. 11
Disclosure concerning financial products.................................................................... 12
Investment options........................................................................................................ 13
MySuper....................................................................................................................... 13
Fairness between beneficiaries.................................................................................... 16
Payment of benefits after death.................................................................................... 16
The evidence................................................................................................................ 17
The Trust...................................................................................................................... 18
Creation....................................................................................................................... 18
Original trust deed....................................................................................................... 18
Amendments to Trust Deed........................................................................................... 20
Becoming a member of the Trust................................................................................... 23
Structure of the Trust................................................................................................... 24
Asset sectors.............................................................................................................. 24
Investment options...................................................................................................... 25
Divisions and products................................................................................................. 25
Classes....................................................................................................................... 28
Accumulation v defined benefits................................................................................... 29
Ordinary v insurance benefits....................................................................................... 29
Fee and cost structure................................................................................................. 31

Death benefit nomination practice............................................................................... 32
PART B: CRITERIA TO APPROVE VARIATION............................................... 32
Power............................................................................................................................ 32
Standing....................................................................................................................... 34
Representation of beneficiaries.................................................................................... 34
Absence of tax related motivation................................................................................. 35
Reason justifying exercise of power............................................................................. 35
In interests of beneficiaries.......................................................................................... 36
Unfair advantage/prejudice between beneficiary classes............................................ 36
Accord with spirit of the trust....................................................................................... 37
Minimise disturbance of the trusts................................................................................ 37
Discretion.................................................................................................................... 37
Entertain application.................................................................................................... 37
Order variation............................................................................................................ 38
PART C: SUBSTANTIVE VARIATIONS................................................................ 40
Appointment of trustee.............................................................................................. 41
Multiple investment options.................................................................................... 42
Creation and maintenance of investment options......................................................... 42
Transfer between investment options............................................................................ 48
Divisions I and II, REST Super, Corporate, Select, MySuper........................... 50
Creation of REST Select............................................................................................... 50
Creation of REST Corporate and REST Super............................................................. 52
Transfer....................................................................................................................... 54
MySuper....................................................................................................................... 58
Trustee’s approach to MySuper................................................................................... 60
Statutory approach to MySuper.................................................................................... 60
Trust Deed provisions.................................................................................................. 69

Transfer MySuper........................................................................................................ 72
Transfer between MySuper and other products............................................................. 72
Transfer from MySuper to another complying fund........................................................ 74

Division IV: Acumen.................................................................................................. 75
Creation....................................................................................................................... 75
Accumulation subplans................................................................................................ 76
Defined benefit subplans.............................................................................................. 76
Costs and fees............................................................................................................ 78
Conclusion.................................................................................................................. 79

Transfer....................................................................................................................... 79
Transfer out of Acumen subplan.................................................................................. 79
Transfer into Acumen subplan..................................................................................... 81

Division III: REST Pension...................................................................................... 82
Creation....................................................................................................................... 82
Transfer....................................................................................................................... 83

Transfer into REST Pension........................................................................................ 84
Transfer out of REST Pension..................................................................................... 85

Transfer to a successor fund..................................................................................... 87
Transfer without member consent................................................................................. 87
Trustee powers............................................................................................................ 91
Investment powers........................................................................................................ 91
Power to grant options over Plan................................................................................. 92
Power to grant indemnities........................................................................................... 92
Power to pay for financial product advice................................................................... 92
Power to interpret deed................................................................................................ 94
Member accounts and reserves............................................................................... 95
Valuation of investments and unitisation...................................................................... 95
Delays and errors in calculation of member accounts.................................................. 95
Creation of ORFR reserve account.............................................................................. 96
Interest of members who Left the Industry.................................................................... 96
Calculation and allocation of costs and fees................................................................ 98
Payment of benefits on death or TPD..................................................................... 98
Definition of dependant............................................................................................... 98
Date of calculation of benefit....................................................................................... 99
Delaying payments on death or TPD.......................................................................... 100
Form of benefit when pensioner dies.......................................................................... 100
Nomination of beneficiaries on death.................................................................. 100
Statutory constraints.................................................................................................. 104
Section 55A and regulation 6.22................................................................................. 105
Sections 58 and 59..................................................................................................... 105
Regulation 6.17A....................................................................................................... 109
Legislative reform..................................................................................................... 114

Types of nominations.................................................................................................. 115
Binding nominations................................................................................................... 115
Non-lapsing pension nominations.............................................................................. 120
Post-commencement pension nominations................................................................... 121
Pre-commencement pension nominations.................................................................... 126
Growth pension reversionary nominations.................................................................... 128

Insurance benefits.................................................................................................... 129
Forfeiture of benefits.............................................................................................. 130
After death................................................................................................................. 130
General...................................................................................................................... 133
Drafting matters....................................................................................................... 134
Conclusion................................................................................................................. 135
PART D: AMENDMENT POWER VARIATION................................................ 135
Uncertainties arising from wording of clause 19.4.......................................... 138
Uncertainties under paragraph (a)............................................................................ 139
Uncertainties under paragraph (b)(i) and (iii)........................................................... 139
Uncertainties under paragraph (b)(ii)........................................................................ 140
Uncertainties under paragraph (d)............................................................................ 141
Uncertainties as to insurance benefits........................................................................ 142
Desirability of increased certainty...................................................................... 142
Prima facie power to amend.................................................................................. 143
Limitation on amendment affecting participating employers....................... 143
Limitations on amendment affecting members................................................. 144
Defined benefit members............................................................................................ 145
Accumulation members............................................................................................... 146
Insurance benefits...................................................................................................... 147
Payments to an employer............................................................................................ 148
Rights and entitlements of members generally............................................................ 148
Provisos to limitations on power of amendment.............................................. 149
Consent to amendment................................................................................................ 149
Relief from taxation.................................................................................................... 150
Conformance to law................................................................................................... 150
Provide option because of change in law................................................................... 150
Other constraints..................................................................................................... 151
Regulation 13.16........................................................................................................ 151
Appointment of individual as trustee.......................................................................... 152
Notice of amendments............................................................................................. 152
Other provisions relating to amendment........................................................... 153
Power of application to amend or override trust deed............................................... 153
Power to vary benefits and contributions................................................................... 154
Drafting matters....................................................................................................... 154
Conclusion................................................................................................................. 155
PART E: DISCRETION........................................................................................... 155
Validity of past amendments under clause 19.................................................... 155
Power of trustee to amend clause 19................................................................... 156
Compliance with regulation 13.16 in making past amendments................... 156
Conclusion................................................................................................................. 158
PART F: CONCLUSION......................................................................................... 158
BLUE J:

The plaintiff Retail Employees Superannuation Pty Ltd seeks an order under section 59C of the Trustee Act 1936 (SA) varying the terms of the Retail Employees Superannuation Trust (the Trust) contained in its trust deed (the Trust Deed).
The defendant Evelyn Pain has been a member of the Trust since 1995. She agreed to be appointed to represent the interests of beneficiaries and potential beneficiaries of the Trust in the action pursuant to subsection 59C(2) of the Act.[1] The Australian Prudential Regulation Authority (APRA) agreed to be joined as an intervenor to assist the Court.
[1] An order was made on 11 August 2015 under rule 83 of the Supreme Court Civil Rules 2006 (SA) that Ms Pain represent the interests of all members of the Trust. An order was made on 27 January 2016 that Ms Pain also represent the interests of all dependants and legal personal representatives of deceased members where the members’ benefits and insurance benefits have not been paid.
The plaintiff seeks variation of the Trust Deed in three ways. First, variation of the power of amendment of the Trust Deed. Secondly, variation of substantive provisions of the Trust Deed to reflect past amendments whose validity has recently been doubted. Thirdly, new proposed variations of substantive provisions of the Trust Deed.
PART A: BACKGROUND
Superannuation regulatory regime
It is necessary to understand the regulation of the Trust under the general law and statute because it provides a context for, explains and constrains many provisions of the Trust Deed.
General law
Superannuation funds are governed by the general law. Although universally structured as trusts, a contributing member has a direct financial and commercial interest in the fund which would be contractual but for the trust structure. Such a member has a beneficial interest in the trust and in any separate fund within the trust, albeit not in any individual asset of the trust.
In Mettoy Pension Trustees Limited v Evans,[2] Warner J said:
… the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions.[3]
[2] [1990] 1 WLR 1587.
[3] At 1610.
In Lock v Westpac Banking Corporation,[4] Waddell CJ in Eq said:
… pension plans are different in nature from traditional trusts. They are based upon a contract between the employer, the trustee, and employees pursuant to which both the employer and the employees contribute to the fund for the purpose of providing defined benefits in defined circumstances to employees. The usual form of trusts involve the creation of a benefit by the settlor for which the beneficiary gives no consideration. Pension schemes are created in the context of the employer/employee relationship and are part of the terms of engagement.[5]
[4] (1991) 25 NSWLR 593.
[5] At 601-602.
In Finch v Telstra Super Pty Ltd,[6] French CJ, Gummow, Heydon, Crennan and Bell JJ said:
The Trustee was trustee of a trust. It had a duty to distribute to those who fell within the definition of "Total and Permanent Invalidity" and a duty not to distribute to those who did not. … That duty was owed to the Members, including the applicant. The applicant was not the object of a discretionary power of appointment. He was the beneficiary of a trust, and although the precise form and quantum of his beneficial interest was contingent on particular events, he did have a beneficial interest…
Different criteria might be thought to apply to the operation of a superannuation fund from those which apply to discretionary decisions made by a trustee holding a power of appointment under a non-superannuation trust. Employer superannuation is part of the remuneration of employees. … Superannuation is not a matter of mere bounty, or potential enjoyment of another's benefaction. It is something for which, in large measure, employees have exchanged value – their work and their contributions.[7]
[6] [2010] HCA 36, (2010) 242 CLR 254.
[7] At [30], [33]. (Citations omitted. Emphasis added).
The Trust Deed provides that individual members do not have a right or interest in any particular asset of the Trust, but this does not negate their having a beneficial interest in the Trust as a whole or a separate fund within the Trust.
The Trustee owes to the members fiduciary duties including to act in the interest of the members and not in its own interest.
It is likely that there is a contractual relationship between the Trustee and participating employers. Subclause 13.3 provides that the terms and conditions contained in the employer’s application are binding on the employer. The Trust Deed imposes obligations on employers that would be ineffective unless they were parties to a contract with the Trustee.
It is likely that there is a contractual relationship between the Trustee and members. Rule 2.2 provides that applicants for enlisted membership[8] are to submit an application to be accepted or rejected by the Trustee. Subclause 13.3 provides that employers are to submit an application to be accepted or rejected by the Trustee and that the terms and conditions contained therein are binding on the employees of the employer.[9] Rule 2.9 provides that each member agrees to be bound by the Trust Deed.
[8] I define the term “enlisted member” at [99] below to mean an individual who completes an application to the Trustee for admission as a member after receiving or downloading a product disclosure statement containing the application, who is accepted by the Trustee as a member and from whom the Trustee receives a contribution.
[9] Such employees are employer-sponsored members: see [97] below. Whether the employee becomes a party to such a contract will depend on whether the employer is acting within the scope of actual or ostensible agency in purportedly entering into the contract on behalf of its employees.
Superannuation Industry and Corporations Acts
The Trust is extensively regulated by Commonwealth legislation. The Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations) apply to the Trust. Parts 7.6 and 7.9 of the Corporations Act 2001 (Cth) (the Corporations Act) and corresponding provisions of the Corporations Regulations 2001 (Cth) (the Corporations Regulations) apply to the issue of beneficial interests in the Trust.
The main object of the SIS Act is expressed by section 3 to be to make provision for the prudent management of certain superannuation funds in respect of which the Commonwealth has constitutional power under the corporations and pensions powers and for their supervision by APRA, the Australian Securities and Investments Commission (ASIC) and the Commissioner of Taxation. The evident purpose of most provisions is the protection of members’ rights and benefits.
Part 7.9 of the Corporations Act addresses financial product disclosure and issue, sale and purchase of financial products. Part 7.6 addresses licensing of financial services providers. The evident purpose of Parts 7.9 and 7.6 insofar as they apply to superannuation interests is the protection of the interests of members and potential members of superannuation entities.
Section 10 of the SIS Act defines a "superannuation fund" to include an indefinitely continuing superannuation fund. Section 19 enables a trustee of a superannuation fund whose governing rules require its trustee to be a corporation, by notice given to APRA, to elect that the Act apply to the fund and thereby for the fund to become a “regulated superannuation fund”. A regulated superannuation fund is a “superannuation entity” and, if not a self-managed superannuation fund, is also a “registrable superannuation entity” within the meaning of section 10 of the SIS Act. The Trust is a superannuation fund, a regulated superannuation fund, a superannuation entity and a registrable superannuation entity.
Section 29J of the SIS Act requires a trustee of a registrable superannuation entity to hold an RSE licence enabling it to be the trustee of the entity. Section 152 requires a trustee of a public offer entity to hold an RSE licence. The Trust is a public offer superannuation fund within the meaning of section 18 and a public offer entity within the meaning of section 10 of the SIS Act. The plaintiff holds an RSE licence under section 29D authorising it to be the trustee of a public offer entity.
Sections 766A(1)(b) and 766C(1)(b) of the Corporations Act define a “financial service” to include issuing a financial product. Section 761A defines a "financial services business" to mean a business of providing financial services. Section 911A requires a person who carries on a financial services business in Australia to hold an Australian financial services licence covering the provision of the financial services. The Trustee issues financial products and thereby carries on a financial services business. The plaintiff holds an Australian financial services licence issued by ASIC.
Financial products
The concept of a financial product is the central concept and principal subject matter of Part 7.9 of the Corporations Act. The same concept is picked up by and used in the SIS Act.
Section 10 of the SIS Act defines a “financial product” to have the same meaning as in the Corporations Act. Section 764A(1)(g) of the Corporations Act defines a “financial product” to include a “superannuation interest” within the meaning of the SIS Act. Section 10 of the SIS Act defines a "superannuation interest" to mean a beneficial interest in a superannuation entity.
Sections 761A and 764A(1)(g) of the Corporations Act define a “superannuation product” to be a “superannuation interest” within the meaning of the SIS Act.
The interest of a member of the Trust is a beneficial interest in a superannuation entity and thereby a superannuation interest, a superannuation product and a financial product.
Covenants and operating standards
Section 52 of the SIS Act deems specified covenants to be included in the governing rules of a registrable superannuation entity (deemed covenants). As the Trust is a registrable superannuation entity, the Trust Deed is taken to include the deemed covenants contained in subsections 52(2), (6), (7) and (8).
The deemed covenants include covenants by the trustee:
·    to act honestly in all matters concerning the entity;[10]
·    to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as a prudent superannuation trustee would exercise in relation to an entity of which it is trustee and on behalf of the beneficiaries of which it makes investments;[11]
·    to perform the trustee’s duties and exercise the trustee’s powers in the best interests of the beneficiaries;[12]
·    to act fairly in dealing with classes of beneficiaries within the entity;[13]
·    to act fairly in dealing with beneficiaries within a class;[14]
·    to formulate, review regularly and give effect to an investment strategy for the whole of the entity, and for each investment option offered by the trustee in the entity, having regard to [specified matters];[15]
·    to exercise due diligence in developing, offering and reviewing regularly each investment option;[16]
·    to formulate, review regularly and give effect to an insurance strategy for the benefit of beneficiaries of the entity that includes provisions addressing [specified matters].[17]
[10] Section 52(2)(a).
[11] Section 52(2)(b).
[12] Section 52(2)(c).
[13] Section 52(2)(e).
[14] Section 52(2)(f).
[15] Section 52(6)(a).
[16] Section 52(6)(b).
[17] Section 52(7)(a).

Section 31 of the SIS Act empowers the making of regulations prescribing standards applicable to the operation of regulated superannuation funds (operating standards). Subsection 34(1) requires a trustee of a superannuation entity to ensure that operating standards are complied with at all times. Under subsection 34(3), non-compliance does not render a transaction void. Operating standards are not incorporated into the governing rules of a superannuation entity unless the Act or Regulations so provide (for example section 55A). However, subsection 34(2) renders it an offence for a trustee intentionally or recklessly to contravene an operating standard.
Regulation 13.16 creates an operating standard applicable to regulated superannuation funds. Subregulation 13.16(1) provides that, subject to subregulation (2), a beneficiary's right or claim to accrued benefits, and the amount of a beneficiary's accrued benefits, must not be altered adversely to the beneficiary by amendment of the governing rules or by any other act carried out or consented to by the trustee. Subregulation 13.16(2) creates exceptions including that:
1the alteration is necessary to ensure compliance with, amongst others, the SIS Act or Regulations, or
2the alteration:
(a)     has been approved by two-thirds of the affected beneficiaries or, where the fund complies with the basic equal representation rules, by two-thirds of the directors of the corporate trustee;
(b)    has received APRA’s consent in writing; and
(c)    does not relate to minimum benefits within the meaning of Part 5.[18]
[18] Subregulation 5.04(2) provides that, in the case of an accumulation fund, a member's minimum benefits are all of the member's benefits in the fund. An adverse alteration to a member's right or claim to accrued benefits, or the amount of a beneficiary's accrued benefits, will usually (if not always) relate to the member's benefits in the fund.
Responsibility to act personally
Subsection 58(1) of the SIS Act prohibits the governing rules of a superannuation entity permitting a trustee to be subject, in the exercise of any of its powers under the governing rules, to direction by any other person. Subsection 58(3) renders inconsistent governing rules invalid to the extent of the inconsistency.
Subsection 58(2) creates several exceptions to the prohibition. One exception is a direction by a beneficiary relating to benefits payable to that beneficiary (paragraph (c)). Another exception is a beneficiary choosing an investment option in a registrable superannuation entity in circumstances prescribed by the Regulations (paragraph (d)). Regulation 4.02 prescribes such circumstances, including that the beneficiary is fully informed about the investment options available, the investment objectives of each option, the range of directions available and the circumstances in which they can be changed.
Subsection 59(1) prohibits the governing rules of a superannuation entity permitting a discretion under the governing rules exercisable by a person other than the trustee to be exercised unless the rules require the trustee’s consent to the exercise of the discretion. Subsection 59(2) renders inconsistent governing rules invalid to the extent of the inconsistency.
Subsection 59(1A) creates an exception to the prohibition by allowing governing rules, subject to the trustee complying with any conditions contained in the Regulations, to permit a member, by notice given to the trustee in accordance with the Regulations, to require the trustee to provide any benefits in respect of the member after death to his or her legal personal representative and/or dependants mentioned in the notice. Subregulations 6.17A(2) and (3) provide that, for subsection 59(1A), governing rules may permit a member to require the trustee to provide any benefits in respect of the member after death to his or her legal personal representative or dependants if the trustee gives to the member information that the trustee reasonably believes the member reasonably needs to understand the right to require the trustee to provide the benefits.
Subregulations 6.17A(1) and (4) to (7) provide that it is an operating standard applicable to regulated superannuation funds that, if the governing rules permit a member to require the trustee to provide benefits in accordance with subregulation (2), the trustee must pay a benefit in respect of the member on or after the death of the member to the persons mentioned in a notice given to the trustee by the member if:
1each person mentioned in the notice is the legal personal representative or a dependant;
2the proportion of the benefit to be paid to each such person is certain or readily ascertainable from the notice;
3the notice is in writing, signed and dated by the member in the presence of two independent witnesses over 18 and contains a declaration by the witnesses that it was signed in their presence;
4the notice has not been revoked by a notice complying with the requirements in 3; and
5the notice was given not more than three years, or such shorter period as may be fixed by the governing rules, before the member’s death.
Choice of fund
Part 3A of the Superannuation Guarantee (Administration) Act 1992 (the SG Act) applies to superannuation contributions (mandatory contributions) made by employers who are required to pay the superannuation charge if they do not make prescribed contributions on behalf of their employees to an eligible superannuation fund (SG employers). Part 3A effectively gives to employees of an SG employer a right to choose their own eligible superannuation fund. In default of exercise of that right, Part 3A allows an SG employer to choose its own eligible superannuation fund for its employees. This choice of fund regime is subject to the provisions of certain awards, enterprise agreements and suchlike.
Regulations 6.33 and 6.34 of the SIS Regulations require the trustee of a regulated superannuation fund, on request by a member in the required form, to rollover or transfer a member's withdrawal benefit from the fund to another regulated superannuation fund.
Regulation 6.29 of the SIS Regulations prohibits, subject to narrow exceptions, a member's benefits in a fund being transferred from the fund unless the member has consented (or is reasonably believed by the trustee to have consented) or the transfer is to a “successor fund” (a successor fund). A successor fund is defined by regulation 1.03 to mean a fund that confers equivalent rights to the member’s rights under the original fund in respect of the benefits transferred and which the transferor and transferee trustees have agreed will confer such equivalent rights. Regulation 11.08 creates an operating standard requiring a trustee to give notice in writing to APRA of a decision to transfer a member's benefits from the fund without the member's consent as soon as practicable after making the transfer decision.
Disclosure concerning financial products
Section 1011B of the Corporations Act defines a “regulated person” to include the issuer of a financial product. Subsection 1012B(3) requires a regulated person, upon or before offering to issue or issuing a financial product to a retail client, to give a Product Disclosure Statement (product disclosure statement) for the financial product to the retail client. A “retail client” is effectively defined by sections 761G and 761GA to include a person to whom a superannuation product is issued.
Subsections 1012B(4A) and (4B) inserted by the Corporations Regulations defer the obligation of the trustee of a public offer superannuation fund (that is not a successor fund in relation to the financial product issued to the client) to provide a product disclosure statement to standard employer-sponsored members of the fund until as soon as reasonably practical, but in any event within three months, after the product is issued to the client. A standard employer-sponsor is defined by section 16 of the SIS Act to mean an employer who contributes to a regulated superannuation fund for the benefit of an employee or his or her dependants on his or her death pursuant to an arrangement between the employer and the fund trustee.
The Trustee is required by section 1012B to issue to a prospective member a product disclosure statement before issuing a product in the Trust except when the person becomes a member only as a result of a contribution by his or her employer in which case it must be provided as soon as reasonably practical after issuing the product.
Section 1012I of the Corporations Act requires an issuer of superannuation products to give a product disclosure statement to an applicant upon its becoming a standard employer-sponsor in respect of its employees.
Section 1016A of the Corporations Act prohibits, subject to limited exceptions, an issuer issuing an interest in a public offer superannuation entity other than pursuant to an application by the recipient or by a standard employer-sponsor of the entity on the recipient's behalf.
Subsections 1017B(1) and (1A)(a) of the Corporations Act require the issuer of a financial product offered or applied for in Australia and acquired by a retail client, unless excluded by regulation, to notify (a significant event notice) the holder of any material change to, or significant event that affects, a matter that would have been required to be specified in a product disclosure statement for the financial product if it had been prepared on the day before the change or event (a significant event). Subsection 1017B(4) requires a significant event notice to contain information reasonably necessary for the holder to understand the nature and effect of the significant event.
Subsections 1017B(5) and (6) require a significant event notice to be given 30 days before the significant event if it is an increase in fees or charges (subsection 1017B(5) item 2) and otherwise:
(a)before the significant event or as soon as practicable after, but within three months after, the significant event (subsection 1017B(5) item 1); or
(b)within 12 months after the significant event if the issuer reasonably believes that it is not adverse to the holder's interests and the holder would not be expected to be concerned about the delay in receiving the information (subsection 1017B(6)).
Subsection 1017B(5E), inserted by the Corporations Regulations, provides that, for subsections (5) and (6), a reference to an “event” includes in relation to a superannuation product the transfer of a member to a different category of membership or to a different fund.
Subsection 1017B(5A), inserted by the Corporations Regulations, requires, if a holder would reasonably be expected to be informed of a decision of the issuer before it occurs, the issuer of a superannuation product to give to the holder information about the event as soon as practicable after it becomes reasonable for the issuer to expect that the event will happen (but not more than three months before the expected date of the event).
Investment options
The SIS Act and Corporations Act refer to “investment options” in contradistinction to “products”. Although not defined, an investment option is one of alternative bundles of investments varying in identity and typically also in nature and level of risk/potential return. Products referred to as “choice products” offer multiple investment options. For example, subsection 1017BA(3) of the Corporations Act and section 58(2)(da) of the SIS Act refer to an “investment option” within a “choice product”.
Section 52(6)(a) of the SIS Act inserts a deemed covenant into the governing rules of a registrable superannuation entity requiring the trustee amongst other things to exercise due diligence in developing, offering and reviewing regularly each investment option.
MySuper
Part 2C of the SIS Act creates a regime for a simple homogenous comparable “MySuper” product. Section 10 defines a MySuper product as follows:
A class of beneficial interest in a regulated superannuation fund is a MySuper product if an RSE licensee is authorised under section 29T to offer that class of beneficial interest in the fund as a MySuper product.
The object of Part 2C, as expressed by section 29R, is that all MySuper products be simple products sharing common characteristics and that a class of beneficial interest in a regulated superannuation fund not be offered as a MySuper product unless it has those characteristics.
Section 32C of the SG Act requires mandatory contributions by an SG employer to be made to a fund containing a MySuper product in default of exercise of choice by employees.
Section 29T of the SIS Act empowers and requires APRA to authorise an RSE licensee (a MySuper authorised licensee) to offer a class of beneficial interest in a regulated superannuation fund as a MySuper product if defined conditions are met including that under the governing rules the class has the requisite characteristics under section 29TC (the mandatory MySuper characteristics). The Trustee holds such an authority. Section 29W prohibits a person representing that a class of beneficial interest in a regulated superannuation fund is a MySuper product unless an RSE licensee for the fund holds an authority to offer that class of beneficial interest as a MySuper product.
Section 29T(1)(f)(i) provides that ordinarily an RSE licensee can only be authorised to offer a single MySuper product. An additional MySuper product (a MySuper large employer product) can be authorised under section 29TB for any group of at least 500 employees of a single employer or related employer group. An additional MySuper product (a MySuper heritage product) can be authorised under section 29TA for members of a predecessor fund holding a product in which there is material goodwill that will otherwise be lost.
Section 29TC defines the mandatory MySuper characteristics which include that the fund’s governing rules:
1provide for a single diversified investment strategy for the MySuper product;
2provide that all members holding the MySuper product are entitled to access the same options, benefits and facilities (except risk insurance);
3provide for gains and losses to be streamed to all members holding the MySuper product[19] and for amounts to be attributed to all members holding the MySuper product by the same process;[20]
4do not limit the source or kind of contributions made by or on behalf of members;[21]
5do not provide for transfers without the member’s consent to another class of beneficial interest in the fund or (unless permitted or required under a Commonwealth law) to a different superannuation fund;
6do not provide for payment of a pension (except out of insurance proceeds); and
7do not preclude a member holding the MySuper product also holding another class of beneficial interest in the fund or preclude a person holding the MySuper product because she or he holds another class of beneficial interest in the fund.
[19] Subject only to streaming gains and losses from different classes of asset to different subclasses of MySuper members on the basis of age and other prescribed factors: see subsection (2). Prescribed factors under regulation 9.47 are account balance, contribution rate, current salary, gender and time to retirement.
[20] Subject only to employer fee subsidisation: see s 29TC(1)(d) and (e).
[21] Subject only to general law or prescribed limitations. Prescribed limitations under regulation 9.48 are non-monetary contributions, contributions by non-associated employers and transfers from foreign superannuation funds.
Section 68AA requires a trustee of a regulated superannuation fund to ensure that the fund provides insured death and permanent incapacity benefits to each MySuper member (other than a defined benefit member) on an opt-out basis.
The MySuper product is the default option for contributions by all members (other than defined benefit members) of a regulated superannuation fund to the extent that they have not exercised choice of investment option. Subsection 29WA(2) requires a trustee to pay a contribution, to the extent not covered by a direction that it is to be invested under a specified investment option (an investment option direction), into a MySuper product of the fund.
Sections 29SAA and 387 of the SIS Act impose an obligation on a MySuper authorised licensee (by deeming the licensee to have made an election to so act) to deal with each “accrued default amount”:
1for a member eligible to hold a MySuper product unless the member directs otherwise ¾ by attributing it to a MySuper product;
2for a member ineligible to hold a MySuper product ¾ by taking action required under prudential standards prescribed by APRA,
within 90 days of being authorised or by 1 July 2017, whichever is later.
An “accrued default amount” is defined by section 20B to be the amount attributed to a member (other than a defined benefit member or to the extent that a member is receiving a pension) in respect of which:
1the member has not given an investment option direction in respect of the assets attributed to the member; or
2the investment option under which the assets attributed to the member are invested is the investment option applicable to a new member if no investment option direction were given;
to the extent that the amount is not already attributed to the member in relation to a MySuper product.
Section 29V limits the fees chargeable in respect of MySuper products to:
·an investment fee;
·an administration fee,
·an activity-based fee (buy-sell spread, switching fees, exit fee or activity fee);
·an insurance fee; and
·an advice fee.
Section 29VA imposes charging rules requiring, subject to defined exceptions, all MySuper members to be charged the same flat and/or account balance percentage investment and administration fees and (when charged) activity-based fees. Section 29VC requires insurance and advice fees to be charged on a cost recovery basis. Section 99C requires buy-sell spreads, switching fees and exit fees to be charged on a cost recovery basis.
Section 29VN requires a trustee of a regulated superannuation fund that includes a MySuper product to promote the financial interests of the beneficiaries of the fund who hold the MySuper product, including in particular returns to those beneficiaries (after deduction of fees, costs and taxes).
Fairness between beneficiaries
The deemed covenants contained in subsection 52(2) of the SIS Act include covenants by the Trustee to perform its duties and exercise its powers in the best interests of the beneficiaries and to act fairly in dealing with classes of beneficiaries within the entity and in dealing with beneficiaries within a class.
Subregulations 5.03(2) and 5.02(3) require a trustee of a regulated superannuation fund to ensure that investment returns and costs are distributed in a fair and reasonable manner as between members.
Payment of benefits after death
Subsection 55A(1) of the SIS Act prohibits the governing rules of a regulated superannuation fund permitting a member's benefits to be cashed after the member's death otherwise than in accordance with operating standards. Subsection 55A(2) renders inconsistent governing rules invalid to the extent of the inconsistency.
Subregulations 6.22(1) and (2) provide that, subject to exceptions, a member's benefits in a regulated superannuation fund must not be cashed in favour of a person other than the member or the member's legal personal representative unless the member has died and the benefits are cashed in favour of the member’s legal personal representative and/or one or more “dependants” (collectively eligible beneficiaries).
The term “dependants” is defined by section 10 of the SIS Act in an inclusive manner to include a member’s “spouse” or “child”, each of which is defined in an inclusive manner by section 10, and a person in an “interdependency relationship”, which is defined by section 10A.

The exceptions include payment to an individual if the trustee has not, after making reasonable enquiries, found a legal personal representative or a dependant.[22]
[22] Regulation 6.22(3). See [591] below for more detail concerning the exceptions.
The evidence
John Edstein is a director, Paul Howard is general counsel, Allan Bowles is a senior product manager and Jamie Hwang is acting general manager investments of the Trustee. Three affidavits by Mr Edstein, four affidavits by Mr Howard and one affidavit by each of Mr Bowles and Mr Hwang were tendered by the plaintiff. They included numerous exhibits. Mr Edstein also gave oral evidence. These witnesses gave evidence about the current and historical structure and operation of the Trust, amendments to the Trust Deed and terms of trust deeds of other large superannuation funds.
Louise Campbell is an independent actuary. Her expert report was tendered by the plaintiff. Noel Davis is an independent barrister specialising in superannuation law. An affidavit by Mr Davis was tendered by the plaintiff.
Benjamin Carruthers is a senior manager in APRA’s legal team. An affidavit by Mr Carruthers was tendered by APRA. He deposed to and exhibited a legal review undertaken by APRA of the terms of the proposed Trust Deed as if a fresh application had been made by the plaintiff under section 29L of the SIS Act for registration of the Trust. The review concluded that it complied with the relevant parts of Part 6 of the SIS Act (provisions relating to the governing rules of superannuation entities). The review related to the proposed Trust Deed as it was at the outset of the application. That version was revised in the course of the hearings.
The Trust
Creation
In 1986, the Conciliation and Arbitration Commission announced that it would approve industrial agreements providing for employer contributions to approved superannuation funds of up to three per cent of wages and salaries.
In 1987, the Retail Traders’ Associations of New South Wales, Victoria, South Australia and Tasmania, the Retailers Association of Queensland Limited and the Pharmacy Guild of Australia as Sponsors agreed to create a superannuation fund in the form of a trust to provide superannuation benefits to employees of retail industry employers admitted to participate in the Trust. The plaintiff was incorporated to act as trustee of the proposed trust. The directors and shareholders were nominees of the Sponsors.
On 2 December 1987, the Trust was created by execution by the plaintiff of the Trust Deed. The Trust Deed provided that the plaintiff was the trustee (the Trustee) of the trust created by the Trust Deed.
On 1 January 1988, the Trust commenced.
Original trust deed
The Trust Deed empowered the Trustee to permit an employer engaged in an appropriate business on application to become an “Employer” (participating employer) by executing a deed of adoption whereupon it became bound by the Trust Deed. It empowered the Trustee to admit an employee of a participating employer on application as a member (member), whereupon the employee became bound by the Trust Deed. It provided for a fund (the Fund) comprising all monies received by the Trustee, investments, policies of insurance and other assets in which the monies were invested.
The Trust Deed provided for a Member’s Retirement Account (member account) in respect of each member to be established in the books of the Trust. Credits and debits to a member’s account were to comprise:
1a portion of contributions made by or on behalf of the member;
2positive or negative distributions by reference to capital accretions or attritions of the Fund;
3transfers of the member’s entitlements from or to another superannuation fund;
4benefits paid to or for the member;
5the purchase price of any annuity for the member;
6administration charges incurred when contributions were not payable by the member;
7other credits or debits considered by the Trustee to be appropriate and equitable.
The Trust Deed provided for Administration and Reserve Accounts (collectively the reserve account)[23] to be established in the books of the Trust. Credits and debits to the reserve account were to comprise:
[23] The Trust Deed contained separate provisions for credits and debits to the Administration and Reserve Accounts and transfers between them. These Accounts were later merged into a single Reserve Account, which remains today. I combine the summary of their provisions here.
1a portion of contributions made by or on behalf of the members;
2positive or negative distributions by reference to capital accretions or attritions of the Fund;
3benefits, bonuses and rebates received from and premiums paid to life insurers;
4unclaimed benefits;
5excessive benefits under section 23F(2)(h) of the Income Tax Assessment Act 1936 (Cth) or losses suffered by the Trust because of a member’s membership of another superannuation fund;
6amounts deducted from a member’s account for charges incurred when contributions are not payable, an employer is wound up or the member leaves the industry,
7administration charges;
8amounts not credited or debited to a member’s account;
9other credits or debits considered by the Trustee to be appropriate and equitable.
The Trustee was empowered to transfer amounts between member accounts and the reserve account.
The Trustee was required at least annually to determine on actuarial or other expert advice the net variation in value arising from investment of the Fund. The Trustee was to distribute the net variation as between member accounts and the reserve account in such portions as considered appropriate. The Trustee was empowered to credit or debit a member’s account when necessary by reference to its estimate on actuarial or other expert advice of accretions or attritions of the Fund arising from investment between valuations.
Benefits were payable to members upon retirement at age 55 or more or death or permanent incapacity. A member could elect to receive a cash sum or a pension by way of purchased annuity. A member could transfer all or part of the balance of her or his member account to another superannuation fund.
Upon death, the Trustee had a discretion to pay a benefit to any one or more Dependants or the Legal Personal Representative of the member.
The Trust Deed contained a clause empowering the Trustee to amend the Trust Deed, including the amending clause itself, which clause has itself been amended in minor ways since 1988 (clause 19).[24] Clause 19 contains limitations on the power of amendment addressed below. The Trustee was required to notify members and employers of amendments as soon as practicable.
[24] This was rule 31 in the original version of the Trust Deed but was renumbered as clause 19 in the second amending deed. For ease of reference, I refer to the clause simply as “clause 19”.
Amendments to Trust Deed
The Trust Deed has been amended extensively by 40 amending deeds between 1998 and 2013.[25] I refer to the Trust Deed as amended from time to time as “the Trust Deed”. I summarise below some of the amendments.
[25] There are questions about the validity of some of these amendments which have in part prompted the plaintiff’s application. These are addressed in more detail below.
By the second amending deed made on 13 December 1988, the Trust Deed was amended to substitute a new set of provisions[26] with retrospective effect from 1 January 1988. Many of the amendments were made to ensure compliance with the Occupational Superannuation Standards Act 1987 (Cth) and Occupational Superannuation Standards Regulations 1987 (Cth) that had recently come into operation. An Insured Benefit was introduced as an option whereby members could elect on application to join the Trust to pay $1 or $2 per week and receive an Insured Benefit on death or total and permanent disablement (TPD).
[26] That this was the intent was confirmed by the fourth amending deed.
By the 16th amending deed made on 19 December 1997, the Trust Deed was amended to constitute the Trust as a public offer entity and create Division I (“Employer-sponsored Members”) and Division II (members of the public). Members of Division I who ceased to be employer-sponsored members were required to be transferred from Division I to Division II.
On 3 March 1998, the Trust became a public offer entity and the Trustee commenced offering interests in the Trust in Division II to members of the public. The Trustee commenced marketing interests in Division II under the name “REST Personal” as distinct from interests in Division I which were marketed under the name “REST Industry”.
By the 17th amending deed made on 19 June 1998, the Trust Deed was amended to empower the Trustee to establish and maintain separate “Investment Choices” (investment options). The default investment option was Core Strategy, to which all existing investments in the Trust were assigned. There were five structured investment options introduced ranging from Cash Plus to High Growth. There were member-tailored options introduced enabling members to construct a portfolio from one or more of Cash, Bond and Shares pools and/or Core Strategy and/or the structured investment options. Different Crediting Rates (crediting rates) applied to different investment options. Fund Expenses could, in the Trustee’s discretion, be allocated between investment options or deducted from member accounts or met from the reserve account. Member accounts were to be adjusted on a daily basis by using the most recent applicable crediting rate.
By the 21st amending deed made on 15 April 2002, new clause 17 was inserted into the Trust Deed to create Division III. Division III members were defined to be members who applied for or elected to receive a pension benefit. The pension was an Allocated Pension. The amount and frequency of pension payments could be selected by the member within defined limits. The pension would continue until the capital value of the member’s account was reduced to nil. The member could elect to commute all or part of the pension back to a lump sum benefit. On the death of a member in receipt of a pension, the Trustee had a discretion to pay the balance of the capital value as a death benefit to dependants and/or the legal personal representative or to pay it as a continuing pension to one or more dependants determined by the Trustee.
By the 22nd amending deed made on 15 April 2002, new clauses 18 to 20 were inserted into the Trust Deed to create Division IV to contain subplans each involving employees of an employer or employer group. Division IV members were members whose employers negotiated special terms. Members of Part A subplans have accumulated benefits like Division I, II and III members. Members of Part B subplans have defined benefits and their employer was required to make contributions to ensure that there were sufficient funds to pay them. Members of Part C subplans have a hybrid of accumulated benefits and defined benefits. The rights and duties of members and employers in Division IV were governed by the terms set out in the employer’s application and the Trust Deed.
By the 24th amending deed made on 30 September 2004, Growth Pensions (growth pensions) were introduced.
By the 27th amending deed made on 6 April 2006, the Trust Deed was amended to empower the Trustee to divide investment options into notional units and values expressed as unit prices and to determine a crediting rate or unit price for each investment option. It was amended to provide that a member of Division I who ceased to be employed by a participating employer would remain in Division I unless transferred to Division II at the discretion of the Trustee.
By the 28th amending deed effective from 1 July 2007, rule 17 was amended to end the future issue of allocated and growth pensions and provide for the future issue of Account Based Pensions.
By the 37th amending deed made on 20 December 2012, the Trust Deed was amended to substitute a new set of provisions. In substance it involved specific amendments to the pre-existing provisions. The Trustee was empowered to transfer all or part of a lump sum benefit payable under another Division to purchase a pension under Division III when certain conditions were satisfied including that the member had not directed otherwise. The Trustee was empowered without the approval of members to close an investment option and transfer the assets allocated thereto and associated member accounts to a different investment option.
In November 2012, the SIS Act was amended to introduce MySuper with effect on 1 July 2013. The Trustee was authorised by APRA to offer a MySuper product with effect on 1 July 2013.
At the end of 2012, the Trustee decided to create REST Super and REST Corporate as products. Existing members of Division I (REST Industry) would be treated as holding the REST Super product. New members of Division I would be allocated to REST Super or REST Corporate depending on whether they were employed and if so by whom and for how many hours per week. Employers were eligible to join REST Corporate if they employed at least ten permanent employees or fixed term contractors (collectively employees) working at least 15 hours per week for whom they wished to make superannuation contributions (larger participating employers). Such employees would become members of REST Corporate upon their employer making contributions for them. Employers other than larger participating employers would be treated as REST Super employers and their employees would be treated as members of REST Super, as would employees of larger participating employers working less than 15 hours per week. Any member of the public could apply to join as a member of REST Super or REST Select. The only members of REST Select would be those who applied to join as members of REST Select. REST Select was synonymous with Division II, while REST Super and REST Corporate were subdivisions of Division I.
By the 38th amending deed made on 18 February 2013, the Trust Deed was amended to insert new rules 2.3A and 2.3B to create a MySuper class of beneficial interest in the Trust with characteristics set out in rule 2.3B. Rule 2.3A also created a defined benefit class of beneficial interest and a “choice” class of beneficial interest. A sentence was added to the definitions of the Divisions to record that the products known as REST Super and REST Corporate were offered in Division I and the product known as REST Select was offered in Division II. The Trust Deed did not define or govern the new products, but merely acknowledged their existence.
By the 39th amending deed made on 11 June 2013, the Trust Deed was amended to substitute a new set of provisions. In substance it involved specific amendments to the pre-existing provisions. The definition of Division I was amended to add any other persons admitted as members of Division I from whom the Trustee had accepted a valid member application. The definitions of each of the Divisions were amended to add persons transferred from other divisions pursuant to rule 2.5.3. New rule 2.5.3 was inserted to empower the Trustee to transfer a member’s benefits from one product to another in Division I, or from one division to another, with the member’s consent or without the member’s consent subject to conditions similar to those contained in the amendment power or to comply with a requirement of the SIS Act or Regulations or Corporations Act or Regulations.
From 1 July 2013, the Trustee offered MySuper and REST Corporate as well as REST Super, REST Select, REST Pension and Acumen.
There are now three Sponsors of the Trust, being the Australian Retailers Association (ARA), the National Retail Association Ltd (NRA) and the Shop Distributive and Allied Employees’ Association (SDA). IRA and NRA are Employer Sponsors and SDA is the Member Sponsor.
Becoming a member of the Trust
An individual may become a member of the Trust in one of three ways.
First, an employee of a participating employer becomes a member on the Trustee accepting a contribution from her or his employer in respect of her or him (an employer-sponsored member). Secondly, a former member of another superannuation fund whose trustee has entered into a successor fund agreement with the Trustee becomes a member on the Trustee accepting a contribution from the former trustee in respect of the person (a predecessor fund-sponsored member). In both cases, no application by the member is necessary. However, the member should under section 1012B of the Corporations Act receive a product disclosure statement from the Trustee as soon as reasonably practical, and in any event within three months, after the relevant financial product is issued to the member.
Thirdly, an individual may complete an application to the Trustee for admission as a member after receiving or downloading a product disclosure statement containing the application. Such an individual becomes a member (an enlisted member) after the Trustee accepts the application and upon receipt of the first contribution.
Structure of the Trust
As at December 2015, the Trust had 2.2 million[27] members and funds under management of $38 billion.
[27] All numbers and dollar figures are rounded to two significant figures unless otherwise shown.
The current structure of the Trust is complex. This is the result of its historical evolution. Originally there was a homogenous structure in which all members had the same accumulation interest in the same investments and the same insurance benefits. The structure now encompasses seven dimensions known as asset sectors; investment options; divisions; products; classes; a sixth dimension involving accumulation v defined benefits; and a seventh dimension involving ordinary v insurance benefits.
By way of overview, most members of the Trust are MySuper employer-sponsored members whose employer selects the Trust as the default superannuation fund, have the Core Strategy investment option, have default insurance cover and generally do not change these features over time. Other members actively select the Trust as their superannuation fund but also have their investment in the Core Strategy investment option, have default insurance cover and generally do not change these features of their superannuation over time.
A minority of members actively manage their superannuation, selecting and changing over time investment options and levels of insurance.
A very small minority of members have defined benefits.
It is important to bear in mind the different interests of members belonging to these three broad classes when considering whether the proposed variations may result in one class of beneficiaries being unfairly advantaged to the prejudice of another class.
Asset sectors
The first dimension comprises asset sectors.[28] The Trust’s investments have always fallen into different asset sectors. Asset sectors are investments of different types. There are currently nine asset sectors:
[28] Also known as asset classes.
1Basic Cash;[29]
2Cash;[30]
3Bonds;
4Defensive Alternatives;
5Property;
6Infrastructure;
7Australian Shares;
8Overseas Shares;
9Growth Alternatives.
Investment options
[29] Short term bank bills, negotiable certificates of deposit, Australian government backed securities.
[30] Bank deposits, bank bills, commercial paper, floating rate notes, residential mortgage backed securities.
The second dimension comprises investment options. The default investment option in the absence of a member making a choice (encompassing MySuper members) is Core Strategy. As at December 2015, there were 1.8 million members with investments allocated to Core Strategy and its total value was $34 billion.

Existing paragraph (c) of clause 19.4 prohibits an amendment that would have the effect of imposing a liability on a member to contribute a greater amount to the Trust. It is proposed that this be replaced by new paragraph (d) prohibiting an amendment that would authorise the Trustee to require a member to contribute to the Trust. The proposed wording provides greater protection to members because it refers to any contribution.
It is proposed that a new paragraph (e) of clause 19.2 be inserted prohibiting an amendment that would authorise the Trustee to extinguish any person's beneficial interest in the Trust except in circumstances permitted by the SIS Act. The Trustee identifies the purpose of this addition as to protect the interest of a dependant who has become entitled to a death benefit. It is difficult to envisage how an amendment to extinguish an interest would not already be prohibited by the other proposed provisions of clause 19.2. At most, the additional provision is otiose but there is no reason in the interest of the members not to include it.
Proposed clause 19.2 prohibits amendments by reference to their quantitative effect on a member’s account, defined benefits and insurance benefits. An amendment might be made that has an adverse qualitative effect on a member’s rights and entitlements or an indirect effect that ultimately reduces the amount of benefits that will be paid to a member.
Examples of rights of members that might not be protected by proposed clause 19.2 are identified by the defendant in her submissions. They comprise rights that are currently unqualified or currently qualified only to a limited extent. They include rights to choose and switch between investment options, products, insurance policies and insurance cover where eligible for them; not to be transferred to a different product, investment option, insurance policy or level of cover without the member’s consent; the right to insurance cover through the Trust; the right to make personal contributions, have employer contributions made in accordance with their own choice and have third party contributions made on their behalf; the right to rollover amounts from or to other superannuation funds; the right to request repayment of a mistaken contribution; the right to payment of benefits on attaining retirement age, on death or TPD; the right to receive a pension if eligible; rights on termination of the Trust; and dispute resolution rights.
Existing paragraph (b)(ii) referring to an amendment having a detrimental effect on members’ vested and contingent rights imposes a constraint on amendments having a qualitative or indirect quantitative effect. However, the vague and uncertain manner in which it is expressed makes it an unsuitable vehicle to impose limitations on the amendment power by reference to their qualitative or indirect quantitative effects.
It is difficult to fashion a suitable limitation on the amendment power to address the qualitative or indirect quantitative effects of amendments, particularly in circumstances in which there needs to be a relatively broad amendment power given the long term life and dynamic nature of the Trust.
It is appropriate to impose a limitation by reference to the criteria contained in section 59C(3)(b) of the Trustee Act but expressed by reference to the Trustee’s reasonable opinion rather than in absolute terms. There should be an additional limitation that the Trustee may not amend the Trust Deed unless, in the reasonable opinion of the Trustee, the amendment would be in the interest of members and would not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class.
Provisos to limitations on power of amendment
Consent to amendment
The limitations in the existing version of clause 19.4 on the Trustee’s power of amendment are subject to separate consent exceptions in each paragraph. The limitations are expressed to be subject to the consent of the member(s) affected in paragraphs (a) to (c), the person affected in paragraph (d), and the employer affected in paragraph (e).
Proposed clause 19.3(a) recasts these exceptions as a single exception if the only people or entities likely to be adversely affected by the variation have consented to the amendment. Subject to an issue of drafting, there is no change in substance and the drafting is more economical.
Proposed clause 19.3(a) refers to persons “likely” to be adversely affected. This might suggest consent is only required from those persons in respect of whom there is a probability greater than 50 per cent that they will be adversely affected. The word “likely” should be replaced by “liable”.
Relief from taxation
The limitations in the existing version of clause 19.4 on the Trustee’s power of amendment are subject to a proviso in the case of an amendment which the Trustee considers necessary or desirable for securing or better securing relief from taxation in respect of the income of the Trust or any Benefits.
Proposed clause 19.3(c)(i)(B) reiterates the proviso in the same terms but expresses it in objective terms rather than depending on the Trustee’s belief as to what is necessary or desirable. An additional qualification is added by proposed clause 19.3(c)(ii) that the scope of the amendment not exceed what is necessary or desirable for the qualifying purpose. Both proposed changes provide additional protection to members.
Conformance to law
The limitations in the existing version of clause 19.4 on the Trustee’s power of amendment are subject to a proviso in the case of an amendment which the Trustee considers necessary or desirable for ensuring or better ensuring that the Trust Deed conforms to any Law or the Applicable Requirements.
Proposed clause 19.3(c)(i)(A) re-expresses the proviso in more economical terms to similar effect. It expresses it in objective terms rather than depending on the Trustee’s belief as to what is necessary or desirable. An additional qualification is added that the scope of the amendment not exceed what is necessary or desirable for the qualifying purpose. Both proposed changes provide additional protection to members.
Provide option because of change in law
The plaintiff proposes an additional proviso by new clause 19.3(b) when the amendment is necessary or desirable for the Trustee to provide an option, benefit or facility to members because of a change in law.
The Trustee would have power under the additional proviso to amend the Trust Deed notwithstanding that the amendment would otherwise be prohibited by clause 19.2 if:
(i)the amendment is necessary or desirable for the Trustee to provide an option, benefit or facility to one or more beneficiaries because of a change in law or a reasonably anticipated change in law; and
(ii)the scope of the amendment does not exceed what is necessary or desirable for the Trustee to provide the option, benefit or facility; and
(iii)the Trustee, having taken into account appropriate advice, forms the view that the advantages of making the amendment for the beneficiaries who would be affected by the amendment outweigh any disadvantages to those beneficiaries;
The plaintiff gives as an example of a case in which consideration might be given to utilisation of this proviso the enactment of future legislation permitting trustees to pay a pension automatically, without member consent, on a member reaching age 60 on the assumption that receipt of a pension is advantageous to a member for tax and social security purposes.
It is not in the interest of members that this proviso be incorporated in the Trust Deed. It is significant that, ex hypothesis, the amendment would otherwise reduce a member’s account, defined benefit or insurance benefit etc, such that clause 19.2 would otherwise prohibit the amendment. The concept of an option, benefit or facility to beneficiaries is extremely vague and broad, as is the concept of what is desirable for that purpose.
It will always be foreseeable that there will be circumstances when the Trustee seeks to make an amendment prohibited by clause 19 in which the Trustee will need to apply for an order of the Court under section 59C of the Trustee Act. While such an application involves time and cost, it can be made if the circumstances contemplated by proposed clause 19.3(b) occur.
Other constraints
Regulation 13.16
Existing clause 19.1 provides that the Trustee’s power of amendment is subject to any restriction on the powers of amendment of a Complying Superannuation Fund pursuant to the Applicable Requirements. The only relevant Applicable Requirement identified by the parties in this respect is regulation 13.16 of the SIS Regulations.
Existing clause 19.8 provides that, where regulation 13.16 applies to the amendment and requires the consent of the members and/or the Regulator, the consent of the members and/or the Regulator shall be obtained in accordance with the requirements of that regulation.
The Trustee proposes that these limitations be replaced by a single provision being new clause 19.5 as follows:
19.5The Trustee must not make any amendment to the Deed that would cause the Trustee to be in breach of regulation 13.16 of the SIS Regulations.
In substance the restriction by reference to regulation 13.16 is retained. There is no reason why the additional restriction contained in existing clause 19.1 should be retained.
Appointment of individual as trustee
Subsection 60(2) of the SIS Act provides that the governing rules of a regulated superannuation fund, other than one whose sole or primary purpose is the provision of old-age pensions, must not permit those rules to be amended such that a person other than a constitutional corporation would be eligible to be appointed as Trustee. Subsection 60(3) renders invalid governing rules inconsistent with this provision. This provision is motivated by constitutional limits on the power of the Commonwealth Parliament.
Clause 2.1(a) of the Trust Deed provides that only a constitutional corporation is eligible to be Trustee.
Clause 19.7 precludes an amendment to permit the appointment of an individual as Trustee unless the Trust Deed provides that the sole or primary purpose of the Trust is the provision of old-age pensions. Clause 19.9 precludes an amendment to the Trust Deed permitting a natural person to be Trustee while the Trust is a Public Offer Fund.
The plaintiff proposes that clauses 19.7 and 19.9 be omitted. There is no inherent reason, leaving aside section 60 of the SIS Act, why a corporate trustee is superior to individual trustees from the perspective of protection of the interest of members. Given that section 60 of the SIS Act has its own force, there is no reason to retain existing clauses 19.7 and 19.9.
Notice of amendments
Existing clause 19.6 requires the Trustee as soon as practicable after amending the Trust Deed to give to each member a written statement explaining the nature, purpose and effect of the alteration on the entitlements of members.
Section 1017B of the Corporations Act generally requires the Trustee to notify members of significant events that would have been required to be specified in a product disclosure statement for the financial product if it had been prepared on the day before the event. Subsection 1017B(5) item 1 generally requires the notice to be given before the event or as soon as practicable after, but not more than three months after, the event. Subsection 1017B(6) allows the notice to be given within 12 months after the event occurs if the Trustee reasonably believes that it is not adverse to a member’s interests and the member would not be expected to be concerned about the delay in receiving the information.
The plaintiff proposes that clause 19.6 be omitted and that the question of notice of amendments to the Trust Deed be governed exclusively by section 1017B of the Corporations Act and by a new clause 28.2 that would require the Trustee to notify a member of any exercise of power (not just an amendment of the Trust Deed) which affects or would affect the member's benefits in a material way as soon as possible after determining to exercise the power. New clause 28.2 further provides that the Trustee may, where it is not cost effective to provide notice by other means, give the notice electronically, including by email or other electronic or digital messaging service or by publishing it on the Trust’s website.
It is not in the interest of members to remove from the Trust Deed the requirement for notification of amendments. It is possible that in future the Commonwealth will relax or remove the requirement for notice of significant events under section 1017B of the Corporations Act. Proposed clause 28.2 would allow the Trustee to give notice of an amendment, where it is not cost effective to provide notice by other means, merely by publishing it on the Trust’s website.
Some historical amendments to the Trust Deed have been minor and not material to the interests of the members. It is appropriate that the timing of the obligation in clause 19.6 to give notice of amendments depend on the nature and consequences of the amendment. Notice should be required to be given:
1if an amendment might reasonably be expected to affect steps taken or not taken by members – on the Trust’s website within seven days of the amendment and to individual members as soon as practicable and in any event within 30 days;
2if not – on the Trust’s website within seven days of the amendment and to individual members in the next annual report after the amendment.
Notice should be permitted by email when the member has given to the Trustee an email address for the purpose of communications from the Trustee and the notice is also placed on the Trust’s website.
Other provisions relating to amendment
Power of application to amend or override trust deed
Clause 13.3(c) of the Trust Deed provides:
13.3The Application by the employer for admission to the Plan shall, on being accepted as referred to in clause 13.2 and until amended as hereinafter provided: …
(c) operate as an amendment to the Plan.
Clause 1.1(h) provides:
1.1 In this Deed and in the Rules: …
(h) to the extent of any inconsistency, the Application by an Employer to participate in the Plan overrides this Deed and the Rules. However, nothing in the application shall prevent the Employer taking advantage of any election or waiver conferred upon the Employer elsewhere in this Deed or the Rules.
The plaintiff proposes to delete clause 13.3(c). If that clause is to be deleted, clause 1.1(h) should also be deleted. Clause 1.1(h) appears in any event to be otiose given the modern structure of the Trust Deed.[130] On its face, it would permit the Trustee and an employer to override important member protections contained in the substantive provisions of the Trust Deed (such as rule 17A).
[130] Note that rules 18.1, 19.9 and 20.4 provide that an application by an Acumen employer that establishes a subplan can override the provisions of rules 18, 19 or 20 respectively. See [328] above.
Power to vary benefits and contributions
By the second amending deed made in 1988, rule 5.4 was inserted to empower a participating employer, with the consent of the Trustee and by notice to an employee at about the time of joining, to vary the member’s benefits and contributions from what they would otherwise be under the terms of the Trust Deed. This power was subject to the proviso that the variation not be to the detriment of the accrued benefits of other beneficiaries.
The purpose and effect of rule 5.4 are unclear. Insofar as it concerns contributions by an employer, the amount of contributions by a participating employer are in any event under the Trust Deed a matter for determination by the employer or by agreement between the employer and the Trustee. Insofar as it concerns benefits, it might be construed as permitting the employer and the Trustee to agree to a member receiving benefits less than the member would otherwise receive under the terms of the Trust Deed. It is to be noted that preceding rules 5.1 to 5.3 also introduced by the second amending deed have since been deleted. It is likely that rule 5.4 is obsolete.
Rule 5.4 should be deleted for the same reasons as clause 1.1(h).
Drafting matters
The defendant submits that the word “may” should be substituted for “must” in clause 19.2. Clause 19.1 uses the word “may” and use of the word “must” in contradistinction in clause 19.2 might be taken to suggest that clause 19.2 imposes a duty on the Trustee as opposed to a limitation on the amendment power. This risk is small but should be avoided. I accept the defendant’s submission.
The defendant submits that the phrase “Member Account” should be substituted for “Member’s Retirement Account” in clause 19.2(a) (and implicitly elsewhere in clause 19). The terms “Member Account” and “Retirement Account” are both defined by rule 1 and both are used interchangeably in substantive provisions throughout the Trust Deed. The Trust Deed should be reviewed generally to confirm that a single term (“Member Account”) can be used. If not, the definitions should be modified to define the difference between them and the Trust Deed should be reviewed generally to ensure that the correct term is used on each occasion. In any event, I accept the defendant’s submission that the term Member Account should be used throughout clause 19 because it has the broader meaning if there is to be any difference.
The defendant submits that the word “Plan” should be substituted for the word “Fund” in clause 19.2(e), with which the plaintiff agrees. The same change should be made in clause 19.2(d).
Conclusion
Having considered all of the proposed amendments to clause 19, subject to the further amendments identified above being made, I am satisfied that:
1there is good reason to vary the Trust to make the proposed amendments;
2the proposed amendments are in the interest of beneficiaries of the Trust;
3the proposed amendments do not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class;
4the proposed amendments accord as far as reasonably practicable with the spirit of the Trust and do not disturb the Trust beyond what is necessary to give effect to the reasons justifying the exercise of the power to vary the terms of the Trust Deed.
PART E: DISCRETION
Subject to the further amendments identified being made, all of the criteria are met empowering the Court to make the order sought by the Trustee. The final question is whether the discretion should be exercised to make that order.
Validity of past amendments under clause 19
Insofar as the plaintiff seeks an order varying the substantive provisions of the Trust Deed to reflect past amendments, such an order would be unnecessary and there would be reason not to exercise the discretion to make an order if past amendments were of undoubted validity.
Due to the ambiguities and uncertainties as to the construction and effect of existing clause 19, in many instances it cannot be concluded that past amendments are of undoubted validity for the reasons given above. Because the Trust Deed has been amended on 40 occasions and numerous amendments are cumulative upon earlier ones, it would be a Herculean task to disentangle valid from invalid amendments if any amendments have been invalid.
It is appropriate to exercise the discretion to make an order varying the Trust effectively to put the validity of past amendments beyond doubt and at the same time improve the provisions of the Trust Deed in several respects in the interests of the members.
Power of trustee to amend clause 19
Insofar as the Trustee seeks an order varying clause 19 of the Trust Deed, such an order would be unnecessary and there would be reason not to exercise the discretion to make such an order if the Trustee could itself amend clause 19 to the same effect.

It is a general principle of construction of constitutions such as trust deeds that the trustee cannot utilise its power of amendment of the trust deed to remove restrictions on its power of amendment.[131] A trust deed could provide that the trustee is empowered to amend the power of amendment by removing existing restrictions, but this would require express provision as it would contradict the existence of the restrictions on the power of amendment and it would be inconsistent with the existence of the restrictions to imply a power to remove them.
[131] Re Reevie and Montréal Trust Co of Canada [1984] 46 OR (2d) 667 at 673 per O’Brien J; In re Courage Group’s Pension Schemes [1987] 1 WLR 495 at 505 per Millett J; Air Jamaica Ltd v Charlton [1999] 1 WLR 1399 at 1411 per the Privy Council.
The Trustee lacks power to remove or relax existing restrictions on its power of amendment in existing clause 19, and this will remain under proposed replacement clause 19, although there is no impediment to the Trustee strengthening or adding to existing restrictions.
Compliance with regulation 13.16 in making past amendments
Subregulation 13.16(1) of the SIS Regulations creates an operating standard for regulated superannuation funds for the purpose of subsection 31(1) of the SIS Act that, subject to exceptions contained in subregulation (2):
a beneficiary's right or claim to accrued benefits, and the amount of those accrued benefits, must not be altered adversely to the beneficiary by amendment of the governing rules or by any other act carried out, or consented to, by the trustee of the fund.
As noted above, under subsection 34(3) of the SIS Act, non-compliance with an operating standard generally does not affect the validity of what is done. It follows that, if a past amendment to the Trust Deed was made in contravention of subregulation 13.16(1), it did not ipso facto render the amendment invalid but it exposed the Trustee to criminal proceedings if it was intentional or reckless.
In Ex parte McLean,[132] Dixon J (with whom Rich J agreed) said:
When the Parliament of the Commonwealth and the Parliament of a State each legislate upon the same subject and prescribe what the rule of conduct shall be, they make laws which are inconsistent, notwithstanding that the rule of conduct is identical which each prescribes, and sec. 109 applies. … But the reason is that, by prescribing the rule to be observed, the Federal statute shows an intention to cover the subject matter and provide what the law upon it shall be. If it appeared that the Federal law was intended to be supplementary to or cumulative upon State law, then no inconsistency would be exhibited in imposing the same duties or in inflicting different penalties. The inconsistency does not lie in the mere coexistence of two laws which are susceptible of simultaneous obedience. It depends upon the intention of the paramount Legislature to express by its enactment, completely, exhaustively, or exclusively, what shall be the law governing the particular conduct or matter to which its attention is directed.[133]
[132] (1930) 43 CLR 472.
[133] At 483.
Taking into account the fact that subsection 34(3) of the SIS Act provides that non-compliance with an operating standard does not render a transaction invalid and regulation 13.16 is subordinate legislation, this Court’s power to vary the Trust Deed is not constrained by regulation 13.16. This conclusion is fortified by section 350 of the SIS Act, which provides that it is the intention of the Parliament that the SIS Act is not to apply to the exclusion of a law of a State or Territory to the extent that that law is capable of operating concurrently with the Act.
APRA accepts that this Court’s power to vary the Trust is not constrained by regulation 13.16. However, APRA submits that, in the exercise of the Court’s discretion, the Court would be hesitant to authorise a variation that, if it had been affected by the trustee, would have contravened regulation 13.16.
Regulation 13.16 has applied to the Trust since it became a regulated superannuation fund in 1994. Regulation 13.16 applies to an amendment that has two characteristics. First, it alters a beneficiary's right or claim to accrued benefits or the amount thereof. Secondly, the alteration is adverse to a beneficiary.
As to the first characteristic, in its application to an accumulation fund, it might be that the reference to a beneficiary’s “right or claim to accrued benefits” is confined to a member’s right or claim to benefits that become payable because a member reaches retirement age, dies or becomes totally and permanently disabled or becomes entitled to payment under an insurance policy, and the reference to the amount of accrued benefits applies to the balance in a member’s account at that time. Alternatively, if it is not so confined, it might potentially encompass all rights or claims of a member under the governing rules. Regulation 13.16 gives rise to difficult issues of construction and application in its application to an accumulation fund and its wording is not well suited to its evident purpose in the case of such a fund.
In its application to a defined benefit fund, regulation 13.16 gives rise to issues of construction and application as exemplified at [630] above. For the reasons given at [617] to [634] above, any formula to limit amendments in the interests of beneficiaries that is apt for an accumulation fund is not apt for a defined benefit fund and vice versa. It is desirable that regulation 13.16 be reviewed and recast by the Commonwealth.[134]
[134] There are other difficulties occasioned by the structure and drafting of regulation 13.16. Regulation 13.16(2)(a) creates an exception to the prohibition if APRA consents to the alteration after it has been approved by a two third majority of affected beneficiaries (or of the trustee’s board of directors if the fund complies with the equal representation rules). However, this only applies if the alteration does not relate to “minimum benefits” within the meaning of Part 5. Subregulation 5.04(2) provides that, in the case of an accumulation fund, a member's “minimum benefits” are all of the member's benefits in the fund. An adverse alteration to a member's right or claim to accrued benefits, or the amount of a beneficiary's accrued benefits, will usually (if not always) relate to the member's benefits in the fund. The exception is therefore very limited in the case of an accumulation fund, which appears to be contrary to the intent of regulation 13.16(2)(a).
As to the second characteristic, subject to certain further amendments being made thereto, the past amendments to the Trust Deed are in the interest of members and do not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class. This makes it less likely that the amendments are adverse to a member’s rights or claims to accrued benefits but this is not conclusive because the tests are different. No specific amendment has been identified which it is suggested is in breach of regulation 13.16 and it would be a Herculean task to assess each and every amendment against that criterion. There is no suggestion that the Trustee has not made past amendments in good faith in the belief that it was not acting in contravention of regulation 13.16.
Conclusion
In the circumstances, I am satisfied that I should exercise my discretion to vary the Trust as sought by the Trustee subject to the various qualifications identified above.
PART F: CONCLUSION
I will hear the parties as to the final form of the varied Trust Deed to be the subject of the variation order in light of my reasons for judgment.
The variation order will be in similar terms to the 39th amending deed which provided that the pre-existing clauses were deleted and replaced by clauses in terms of the varied Trust Deed. It will include an operative date for the variation. The operative date may need to be expressed in different terms for changes to the definition of dependants, binding death nominations and perhaps other changes. There may need to be transitional provisions in the order (in addition to any transitional provisions in rule 9 of the varied Trust Deed) in respect of these or other changes.
The variation order will require the Trustee to give notice of the variation to members, given the importance of the changes and the fact that they might reasonably be expected to affect steps taken or not taken by members.