Southwell v Equity Trustees Limited

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FEDERAL COURT OF AUSTRALIA

Southwell v Equity Trustees Limited [2015] FCA 536

Citation: Southwell v Equity Trustees Limited [2015] FCA 536
Appeal from: D13-14\100 [2013] SCTA 178
Parties:

RAYMOND JOHN SOUTHWELL v EQUITY TRUSTEES LIMITED

JANETTE ANNE SOUTHWELL v EQUITY TRUSTEES LIMITED
File numbers: NSD 228 of 2014
NSD 418 of 2014
Judge: FARRELL J
Date of judgment: 29 May 2015
Catchwords: SUPERANNUATION – appeal from determination of Superannuation Complaints Tribunal under s 46 of Superannuation (Resolution of Complaints) Act 1993 (Cth) (“Complaints Act”) – superannuation fund offered two investment options to fund members – fund members gave written instructions to switch investment options – whether fund member gave oral instruction to fund administrator to remain in option – whether fund member gave husband authority to act on her behalf – whether decision of superannuation trustee fair and reasonable – power of Tribunal to set aside and substitute decision for trustee’s decision under s 37(3)(d) of the Complaints Act – whether Tribunal denied procedural fairness by not allowing an oral hearing under s 34 of the Complaints Act – whether procedural fairness required the Tribunal to put applicant on notice of impact of delay in complaining to trustee on its substituted decision under s 37(3)(d) of the Complaints Act – whether Tribunal failed to take into account relevant considerations with respect to reasons for delay – whether Tribunal made findings of fact necessary to support decision – whether Tribunal failed to address issue raised – whether Tribunal erred in not finding trustee’s decision vitiated by failure to comply with own published standards
Legislation: Australian Securities and Investments Commission Act 2011 (Cth) s 12CB
Corporations Act 2001 (Cth) Pt 7.9
Superannuation (Resolution of Complaints) Act 1993 (Cth) ss 3, 11, 14, 32, 33, 34, 35, 36, 37, 40, 46
Superannuation Industry (Supervision) Act 1993 (Cth) ss 52, 55, 101
Trustee Act 1925 (NSW) s 49(1)(d)
Cases cited: Board of Trustees of the State Public Sector Superannuation Scheme v Edington (2011) 119 ALD 472; [2011] FCAFC 8
Cameron v Board of Trustees of the State Public Sector Superannuation Scheme (2003) 130 FCR 122
Clements v Independent Indigenous Advisory Committee [2003] FCAFC 143
Commissioner for Australian Capital Territory Revenue v Alphaone Pty Ltd (1994) 49 FCR 576
Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26
Employers First v Tolhurst Capital Ltd (2005) 143 FCR 356; [2005] FCA 616
Goldie v Minister for Immigration and Multicultural Affairs (1999) 56 ALD 321; [1999] FCA 1277
Guo Wei Rong v Minister for Immigration and Ethnic Affairs (1995) 38 ALD 38
Kioa v West (1985) 159 CLR 550
Marks v CSS Board of Trustees [2005] FCA 797
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
NABE v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) (2004) 144 FCR 1
NAHF v Minister for Immigration and Multicultural and…
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Details
Case
[2015] FCA 536
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, the appellants, Mr and Mrs Southwell, challenged a decision of the Superannuation Complaints Tribunal (SCT) concerning a superannuation fund. The Tribunal had substituted its own decision for that of the trustee, Equity Trustees Limited, in relation to the Southwells' complaint that the trustee had failed to process their requests to switch investment options and had not advised them of increased fees. The primary legal issues were whether the SCT had denied procedural fairness by not allowing an oral hearing, whether the SCT had failed to take into account relevant considerations, whether it had failed to make necessary findings of fact, and whether it had erred in not finding that the trustee's decision was vitiated by a failure to comply with its own published standards.

The Court held that the SCT had not erred in declining to hold an oral hearing, as the SCT was entitled to decide the case on the papers. While the SCT was required to give the Southwells an opportunity to make submissions in response to the trustee's submissions, it was not required to hold an oral hearing. The Court found that the SCT had considered relevant material and had not failed to make necessary findings of fact. The Court found that the SCT had erred in not considering whether the trustee's failure to comply with its own published standards invalidated its subsequent conduct. However, given that the Court found that the SCT's decision was correct in any event, the error did not affect the outcome.

The Court dismissed Mr Southwell's appeal and allowed Mrs Southwell's appeal. The matter was remitted to the SCT to determine, according to law, the decision it will substitute for the decision of Equity Trustees Limited. The parties were to file agreed short minutes of order with respect to costs by 12 June 2015 or, failing agreement, the parties might file by that date submissions of no longer than three pages each concerning the orders they seek as to costs.

Orders

Orders of the court

1. Mr Southwell’s appeal be dismissed.

2. Mrs Southwell’s appeal be allowed and the matter be remitted to the Superannuation Complaints Tribunal for the purpose of determining according to law the decision it will substitute under s 37(3)(d) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) for the decision of Equity Trustees Limited.

3. The parties are to file agreed short minutes of order with respect to costs by 12 June 2015 or, failing agreement, the parties may file by that date submissions of no longer than three pages each concerning the orders they seek as to costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The grounds as amended are (as written):1.The Tribunal failed to grant an oral hearing to the applicant in circumstances where the applicant requested an oral hearing before the Tribunal, and there was a significant issue of fact as to whether or not the applicant gave oral instructions to the respondent.1A. The Tribunal failed to take into account the relevant consideration that the applicant had provided written reasons seeking an oral hearing.2.The Tribunal failed to make its own finding of fact as to whether or not the applicant gave oral instructions to the respondent.3.The Tribunal failed to consider the issue raised by the applicant, that in acting on the applicant’s alleged oral instructions the respondent failed to act on the applicant’s written instructions, and the Tribunal failed to consider the consequence of the respondent failing to act on the applicant’s written instructions.4.The Tribunal failed to find that in acting on the applicant’s alleged oral instructions in breach of its own published standards, the respondent’s conduct was invalid.BACKGROUND There was a significant flow of correspondence between the Southwells, the Fund, Equity Trustees and the Tribunal canvassed in submissions. What follows does not purport to be a complete summary and some factual matters will be referred to in consideration of the individual grounds. Mr Southwell retired from the NSW Police on a medical pension in 1999. He was due to turn 60 in early 2006. He had the choice of remaining on the medical pension, at that time $90,000 per annum increasingly yearly with inflation, or converting the pension into a lump sum of $1.1 million in order to invest it in superannuation. Following advice from Mr Ian Buxton, a fellow member of Mr Southwell’s golf club, Mr Southwell became a member of the Fund in 2006; Mrs Southwell was also a member in 2006. The Fund was established by the NSW Bookmakers Co-operative Society Limited on 10 June 1974. In about July 2004, the Society was replaced as trustee by Equity Trustees and the Fund became a public offer fund. At about this time, individuals who had been involved with the Fund and the Society established companies offering administration and promotion services to Equity Trustees. These individuals included Mr Buxton, Mr John Kennedy, Mr Peter Mueller and Mr Peter Hayes-Williams. On 2 March 2009, Mr Southwell lodged two documents titled “Bookmakers Superannuation Fund Investment Switching Form (Form BSF5)” (the Switching Forms) signed by Mr and Mrs Southwell respectively to change all of their respective investments from the “Balanced” option to the “Conservative” option. By letter dated 9 March 2009, Mr Hayes-Williams advised “Mr & Mrs R Southwell” that the Switching Forms had been received and that: This request will usually be actioned within 30 days of the date of receipt of a fully completed switching form. You will be informed in writing once the switch has been completed. The copy of the letter on the administrator’s file has a handwritten annotation “PHW phoned Ray on 15/04/09 – Ray to stay in balanced until further notice”. Mrs Southwell’s Switching Form bears the annotation “Janette to stay in balanced until further notice. 15/4/09”. Both annotations appear to be initialled. The Switching Forms were never acted upon.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Tribunal held that the Trust Deed “does not have a specific power allowing the Trustee to compromise a claim and therefore that power is derived from the relevant Trustee Act”. In New South Wales, the power of a trustee to compromise a claim is provided in s 49(1)(d) of the Trustee Act 1925 (NSW). Decisions under review The Tribunal described the decisions under review as follows:2.The decisions under review are those of the Trustee refusing to compromise the claims of [Mr Southwell] and [Mrs Southwell] (‘the Complainants’) for losses incurred as a result of the failure on the part of the Trustee to activate investment switch requests made by the Complainants and the losses due to the alleged increases in fees without prior advice to members.3.The Trustee notified the Complainants of its decisions by an email to [Mr Southwell] dated 5 November 2010 and, following review, by letters to [Mr Southwell] and [Mrs Southwell] dated 28 July 2011.Mr Southwell The Tribunal noted: ·A letter to the Trustee in April 2011, in which Mr Southwell told the Trustee that “it took a lot of badgering for (sic) [Mr Hayes-Williams] for me to reluctantly change my mind”; ·The hand-written notation concerning staying in the “Balanced” option “until further notice”; ·The statutory declaration of 12 September 2013 in which Mr Southwell had declared that no instruction to remain in the “Balanced” option was given to Mr Hayes-Williams; and·The claims made by the Southwells that the Administrator did not adhere to the Trustee’s published standards by not processing the Switching Forms by 1 April 2009 and that Mr Hayes-Williams had no authority from the Trustee to place the call to Mr Southwell on 15 April 2009 or to provide financial advice. The Tribunal’s view was that “no weight” could be placed on the fact that Mr Hayes-Williams called Mr Southwell on 15 April 2009. Noting that the Southwells claimed that the administrator did not adhere to the Trustee’s published standards and that Mr Hayes-Williams had no authority from the Trustee to call Mr Southwell or give financial advice, the Tribunal determined that it was not inappropriate for Mr Hayes-Williams as a representative of the Trustee to contact a member if he thought there was an issue to be discussed. Even though the call occurred after 1 April 2009, had Mr Southwell confirmed that the Switching Forms should be acted on, the Administrator would be required to process the Switching Forms effective on that date. Accordingly, the “key question” was whether the Trustee’s decision that Mr Southwell had given Mr Hayes-Williams an instruction that he remain in the “Balanced” option was a fair and reasonable one. Having noted that there was “conflicting evidence” from Mr Southwell about what he said to Mr Hayes-Williams, the Tribunal went on to consider that Mr Southwell received a benefit statement for the year ending 30 June 2009 on 29 January 2010 which clearly showed that he was in the “Balanced” option and Mr Southwell wrote letters on 26 August 2010 and 16 September 2010 raising issues about the investment performance of the “Balanced” option. The Tribunal found that those communications indicate that Mr Southwell believed that he was still in the “Balanced” option and therefore Equity Trustees’ decision that Mr Southwell gave a direction that he remain in the “Balanced” option was fair and reasonable. Whether the advice Mr Hayes-Williams gave Mr Southwell constituted general or personal advice (as to which Mr Southwell may have remedies against the Trustee or the Administrator respectively) did not alter the Tribunal’s view that Equity Trustees’ decision that the instruction was given was fair and reasonable. Mrs Southwell

Ratio Decidendi

Legal Principle Established

The questions of law raised for determination by Mr Southwell are:1.The Tribunal erred in law by denying the applicant procedural fairness.1A. The Tribunal erred in law by failing to take into account a relevant consideration.2.The Tribunal erred in law by failing to make its own finding of fact necessary to support its decision in relation to the applicant.3.The Tribunal erred in law by failing to consider an issue raised by the applicant.4.The Tribunal erred in law by failing to find that the respondent’s failure to comply with its own published standards invalidated its subsequent conduct. The grounds as amended are (as written):1.The Tribunal failed to grant an oral hearing to the applicant in circumstances where the applicant requested an oral hearing before the Tribunal, and there was a significant issue of fact as to whether or not the applicant gave oral instructions to the respondent.1A. The Tribunal failed to take into account the relevant consideration that the applicant had provided written reasons seeking an oral hearing.2.The Tribunal failed to make its own finding of fact as to whether or not the applicant gave oral instructions to the respondent.3.The Tribunal failed to consider the issue raised by the applicant, that in acting on the applicant’s alleged oral instructions the respondent failed to act on the applicant’s written instructions, and the Tribunal failed to consider the consequence of the respondent failing to act on the applicant’s written instructions.4.The Tribunal failed to find that in acting on the applicant’s alleged oral instructions in breach of its own published standards, the respondent’s conduct was invalid.BACKGROUND There was a significant flow of correspondence between the Southwells, the Fund, Equity Trustees and the Tribunal canvassed in submissions. What follows does not purport to be a complete summary and some factual matters will be referred to in consideration of the individual grounds. Mr Southwell retired from the NSW Police on a medical pension in 1999. He was due to turn 60 in early 2006. He had the choice of remaining on the medical pension, at that time $90,000 per annum increasingly yearly with inflation, or converting the pension into a lump sum of $1.1 million in order to invest it in superannuation. Following advice from Mr Ian Buxton, a fellow member of Mr Southwell’s golf club, Mr Southwell became a member of the Fund in 2006; Mrs Southwell was also a member in 2006. The Fund was established by the NSW Bookmakers Co-operative Society Limited on 10 June 1974. In about July 2004, the Society was replaced as trustee by Equity Trustees and the Fund became a public offer fund. At about this time, individuals who had been involved with the Fund and the Society established companies offering administration and promotion services to Equity Trustees. These individuals included Mr Buxton, Mr John Kennedy, Mr Peter Mueller and Mr Peter Hayes-Williams. On 2 March 2009, Mr Southwell lodged two documents titled “Bookmakers Superannuation Fund Investment Switching Form (Form BSF5)” (the Switching Forms) signed by Mr and Mrs Southwell respectively to change all of their respective investments from the “Balanced” option to the “Conservative” option.