FEDERAL COURT OF AUSTRALIA Jeffcoat v Queensland Coal & Oil Shale Mining Industry (Superannuation) Ltd 2000 [FCA] 655 SUPERANNUATION - decision by Superannuation Complaints Tribunal affirming trustee's determination of benefits - whether membership ceased on retirement de-activating trustee's obligation to pay fund monies to dependants - payment to de-facto following death of fund member - membership retained between retirement and death where entitlements not paid - Trustee's findings as to appropriate recipient of monies not justiciable JURISDICTION - accrued jurisdiction to review trustees' decisions under Trusts Act 1973 (Qld), or general equitable jurisdiction Superannuation (Resolution of Complaints) Act 1993 (Cth) s 46 Trust Acts 1973 (Qld s 8 Jedko Game Co Pty Ltd v Collector of Customs (NSW) (1987) 12 ALD 491 Cited In the Marriage of Smith (No 3) (1986) 161 CLR 217 Cited The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572 Cited Edensor Nominees Pty Ltd v Australian Securities and Investments Commission [1999] FCA 1722 Cited Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 36 FCR 250 Discussed Re Wakim; Ex parte McNally [1999] 163 ALR 270 Refd to CHRISTINE O JEFFCOAT and ALAN J CORNICK v QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY (SUPERANNUATION) LIMITED as Trustee of the QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY SUPERANNUATION FUND and ELSIE I W ROUNTREE QG 12 of 1997 KIEFEL J BRISBANE 19 MAY 2000 IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 12 OF 1997 BETWEEN: CHRISTINE O JEFFCOAT FIRST APPLICANT ALAN J CORNICK SECOND APPLICANT AND: QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY (SUPERANNUATION) LIMITED as Trustee of the QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY SUPERANNUATION FUND FIRST RESPONDENT ELSIE I W ROUNTREE SECOND RESPONDENT JUDGE: KIEFEL J DATE OF ORDER: 19 MAY 2000 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application is dismissed. 2. The applicants pay the respondents' costs of the application. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 12 OF 1997 BETWEEN: CHRISTINE O JEFFCOAT FIRST APPLICANT ALAN J CORNICK SECOND APPLICANT AND: QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY (SUPERANNUATION) LIMITED as Trustee of the QUEENSLAND COAL AND OIL SHALE MINING INDUSTRY SUPERANNUATION FUND FIRST RESPONDENT ELSIE I W ROUNTREE SECOND RESPONDENT JUDGE: KIEFEL J DATE: 19 MAY 2000 PLACE: BRISBANE REASONS FOR JUDGMENT 1 The applicants appeal to the Court pursuant to s 46(1) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) from the determination of the Superannuation Complaints Tribunal of 2 January 1997. The appeal is limited to questions of law. The Tribunal affirmed the decision of the Trustee of the Queensland Coal and Oil Shale Mining Industry Superannuation Fund, to pay a benefit of $104,934.62 to the second respondent, Ms Rountree, following upon the death of Geoffrey N Cornick. The applicants are two of the children of the deceased, his personal representatives under his will and two of the beneficiaries. Background 2 Prior to his retirement in June 1990, Mr Geoffrey Cornick ("the deceased") was a member of the Fund. The principal question which arises in these proceedings is whether he remained a member up to and including the time of his death. On 20 April 1989, he signed a form entitled "Nomination of Preferred Beneficiary". It acknowledged the Trustee's "absolute free and unfettered discretion" but expressed the wish that, in the exercise of that discretion, the Trustee give consideration to paying any lump sum death benefit to Ms Rountree who was described as his "fiancee". Indeed, Ms Rountree and the deceased had known each other for some years. On 14 June 1990, the deceased lodged an "Application For Payment Of Benefit" nominating retirement as the ground for the application and 15 June 1990 as the date of cessation. The sum to be paid was calculated, but on 21 December 1990 the "Statement Of Termination Payment" which had been prepared had annotated upon it the words "Mr Cornick advised today payment not required. Leave the benefit in the fund…". The instructions on the form were then noted as "Hold payment until advised". There is no dispute that the deceased gave advices in the terms noted, but the effect of those advices is an issue on the appeal. On 14 April 1995, Mr Cornick died. His interest as a joint tenant in his residence passed to Ms Rountree. Apart from the monies held by the Trustee and to which he was entitled, his estate totalled a little over $120,000. Ms Rountree was not a beneficiary under the terms of his will. Clause 9 of the will provided: "I have not made a specific provision in my Last Will and Testament for my de-facto wife ELSIE ISABEL WINIFRED ROUNTREE. During the course of our relationship we purchased, as joint tenants, a house at Berserker Street, North Rockhampton, and upon my death she receive(s) my interest in that house. Additionally, during the course of our relationship, we have acquired furniture and motor vehicles which she will retain upon my demise, and I believe, taking these matters into consideration, adequate provision has been made for her during my lifetime." 3 The Trustee of the Fund decided to pay the entire benefit to Ms Rountree and the Tribunal affirmed that decision on 16 December 1996. The basis for the Trustee's decision, as disclosed in the submission to the Tribunal (the Trustee did not give reasons at the time) was that Ms Rountree was the de-facto spouse of Mr Cornick at the date of his death and, whilst the Trustee noted that she would assume full ownership of the house, it took into account the provisions of the will under which Ms Rountree obtained no benefit. In a later submission Ms Rountree's account of conversations with the deceased, when he would talk about the superannuation monies being for their retirement, was said to lend further support to the Trustee's decision. The applicants in these proceedings submitted before the Tribunal that the reference in clause 9 of the will, together with the deceased's inclusion of the benefit as part of his assets, when he came to have the will drawn up, should be taken as strong indications that he did not intend Ms Rountree to receive the monies held by the Trustee. The Tribunal was not satisfied that the deceased had overlooked the fact that he had named Ms Rountree as his nominated beneficiary. There were other monies in the estate which benefited his children. Whilst he had made provision for Ms Rountree to be suitably housed, no provision had been made for her financial support. The Tribunal concluded that the decision of the Trustee to pay the benefit to Ms Rountree was fair and reasonable in its operation to all potential claimants: "GC had made provision for his children in the Will. ER was the nominated beneficiary and no other provision has been made for her to have a secure source of income." It affirmed the Trustee's decision. Statutory Provisions 4 Pursuant to s 14(2) of the Act, a person having an interest in the benefit may make a complaint to the Tribunal that the decision of the Trustee was "unfair or unreasonable". Section 14AA, which became effective on 11 December 1998 (see s 3, No 118 of 1998), provides: "(1) To avoid doubt, a complaint may be made under this Part about a decision whether or not the decision involved the exercise of a discretion. (2) However, a decision that did not involve the exercise of a discretion is taken to have been unfair and unreasonable if the decision was contrary to law." Senior Counsel for the Fund submitted that it should be taken to have been intended that the provision apply to complaints about decisions made at any earlier time. 5 Section 37(1) of the Act provides that the Tribunal has all the powers, obligations and discretions that are conferred upon the Trustee by law or under the governing rules of the Fund and that it is to make a determination in writing either affirming the decision, remitting it for further consideration, varying the decision or setting it aside and substituting its own decision. Subsection (6) provides that the Tribunal: "…must affirm a decision … if it is satisfied that the decision, in its operation in relation to: (a) the complainant; and (b) so far as concerns a complaint regarding the payment of a death benefit - any person (other than the complainant, a trustee, insurer or decision-maker) who: (i) has become a party to the complaint; and (ii) has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death benefit; was fair and reasonable in the circumstances." 6 As earlier mentioned, an appeal may be brought to this Court from the Tribunal's decision only with respect to questions of law: s 46(1). The Court may affirm or set aside the decision or remit it to be determined again: s 46(4). Issues on the Appeal 7 The applicants' principal submission is that the Trustee had no power to determine who might receive the monies to which the deceased was entitled. The submission raises the question whether the deceased remained a member of the Fund to the date of his death. If that be the case, the applicants submit that the Trustee's decision was not, as the Tribunal found, "fair and reasonable" within the meaning of s 37(6). Lastly, the applicants seek review of the Trustee's decision under the Trusts Act 1973 (Qld) or general equitable supervisory jurisdiction and rely upon the accrued or associated jurisdiction of this Court. Whether Trustee Entitled to Make Determination 8 The Deed in force at the date of the deceased's retirement and up to 18 February 1991 defined "member" to mean: "… an Eligible Employee in respect of whom a Participating Employer has made a contribution pursuant to Clause 4.3.1 or in respect of whom the Trustee has accepted the transfer of an amount from the Pensions Fund in accordance with Clause 4.1.4 hereof and to or in respect of whom the whole of the benefits provided by the Deed in respect of that Eligible Employee have not been paid out of the Fund;" (emphasis added). 9 There is no dispute that the deceased was an eligible employee. "Deed" was defined to include the rules contained in the schedule. In the event of an inconsistency between the provisions of the Deed and anything expressed or implied in the Rules, the Deed was to prevail (clause 16.1). Clause 2.1 provided for the establishment of the Superannuation Fund for the provision of benefits to eligible employees and their dependents "which shall be administered and controlled by the Trustee subject to the trusts and in accordance with the terms covenants and conditions of this Deed and the Rules". By clause 2.4 it was declared that the Trustee hold the assets of the Fund upon the trusts, terms and conditions of the deed. Each member was to be entitled to a beneficial interest in the Fund, but not the right to require the transfer of any assets of the Fund (clause 2.5). By clause 4.1.1, the Trustee was entitled to make such arrangements as it thinks fit with a member "in relation to any matter that the Trustee considers incidental to or consequent upon the participation of the Member in the Fund…". The Trustee was obliged to invest the assets of the Fund in authorised investments (clause 6.1), and to hold the assets of the Fund upon trust "for the Members entitled thereto upon the terms of this Deed" (clause 8.1.4). The powers of the Trustee contained in clause 8.3 included the power to pay benefits out of the Fund to members entitled (clause 8.3.11) and to invest in accordance with clause 6.1 (clause 8.3.14). It had power to enter into contracts and do all things as it may consider expedient "for or in relation to any of the matters aforesaid or otherwise for the purpose of the Fund" (clause 8.3.13). With respect to the exercise of its powers and discretions, it was provided that its discretion was absolute and that it may exercise, or may refrain from exercising, all or any of those powers, authorities and discretions from time to time (clause 8.4.1). 10 Rule 4.1 "Notification of Benefits Payable" provided: "Upon notification to the Trustee by or in respect of a Member in such form or forms as the Trustee shall prescribe that a Benefit is due to be paid in respect of that Member as a consequence of his Retirement, his death, his Total and Permanent Disablement or his withdrawal from the Fund the Trustee shall determine the Benefit in accordance with the provisions of Rule 4.2 hereof …". The benefit spoken of was the balance standing in various accounts with respect to the member including contributions (rule 4.2). Pursuant to rule 4.3, subject to requirements with respect to preservation of benefits, the Trustee was required to "…pay within one (1) month of the determination of the Benefit an amount equal to the Benefit in the following manner:…". There followed provisions with respect to whom the payment was to be made. Paragraph (b) provided: "(b) where the Member's Cessation of Membership of the Fund has occurred: (i) as a result of his death, or (ii) for any other reason but the Member has died before receiving the whole of his Benefit; pay the Benefit to the Dependants of the Member or to any one or more of them to the exclusion of the other or others of them as the Trustee in its absolute discretion determines PROVIDED THAT in the event that the Trustee is unable to determine any Dependants to whom any portion of the Benefit should be paid such portion shall be paid to the Member's Legal Personal Representative…" 11 At the date of death, the Trust Deed and rules then in force contained provisions in substantially the same terms as the earlier Deed referred to above. An additional rule, rule 4.2.2, had been inserted and the determination of the benefit under rule 4.1 was to be made in accordance with that rule if appropriate. It provided that the benefit in respect of a member "who retires or leaves the industry shall be so much of the balance standing to the credit of the Member's accounts as the Member requests and the Trustee agrees from time to time may be drawn down". This would not have relevance to the request made by Mr Cornick at the time he retired. The proviso to rule 4.2.2 also provided that the whole of the amounts in the member's accounts were to be paid out by age sixty-five, where the "Member or former Member" was not gainfully employed on a full-time or part-time basis; or by age seventy where they were not gainfully employed on a full-time basis. The applicants rely upon the reference to "former Members" in the provision in aid of their submissions. It may also be noted for present purposes that Mr Cornick was aged sixty at retirement and died about two months prior to his sixty-fifth birthday. 12 The applicants submitted that on the event of his retirement the deceased ceased to be a member, and referred to Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis (1992) 36 FCR 250. In that case O'Loughlin J held that, in the context of superannuation schemes, an expectancy crystallises into an actual entitlement on the happening of a prescribed event. On his resignation his rights were no longer an entitlement to a future benefit; they had become a debt owing to him by the Trustees at a future ascertainable date. There can be no doubt, under the terms of the Deed here, that the deceased was entitled to be paid his benefit upon the event of his retirement. That does not, in my view, mean that he ceased to be a member so that the provisions of the Deed and rules, and in particular the discretion given to the Trustee under rule 4.3, no longer applied to him. The definition of "member" is plain. Pursuant to it, the deceased remained a member because he was not paid his entitlement, which circumstance was brought about by his own request that monies to which he was entitled remain with the Fund. This amounted to a waiver of the entitlement to be paid at that time. Further, no support can be placed upon the requirement, under rule 4.3, that the Trustee pay out in a month. If there was failure on its part and it remained unwilling to do so, no doubt the deceased could have obtained an order requiring the payment of his benefit, but he did not. It is not however possible to construe the rule so that the sum due is to be taken as paid at the expiration of one month, given the definition of "member" and that provisions of the Deed, which include the definition, are to prevail. 13 The applicants sought to draw support for the coincidence of the cessation of membership with the event which entitled the deceased to payment, from rule 4.3. For consistency with the definition of "member" it is necessary to read the rule as referring to cessation of membership as resulting from disablement, retirement or death, but not coinciding with it, as Senior Counsel for the Trustee submitted. The definition is paramount. Further, the definition of member as extending to a person entitled to, but not yet having received payment is consistent with the limitation upon the Trustee's ability to deal with monies in the Fund and with persons who may be entitled to those monies. Those powers come only from the Deed and are limited to such actions as may only be necessary and consequential upon the purposes of the Fund. 14 The applicants also submitted that the direction given by the deceased in December 1990, to leave the benefit in the Fund, read with his earlier request for payment, should be taken to amount to one to re-invest with the Fund. The submission assumes a notional payment out and cessation of membership on that basis. The payment of which the definition of "member" speaks is a real payment and one out of the Fund. This must be so given the Trustee's inability to deal with a person's investment other than as part of the Fund and as that of a member. I did not understand the applicants to suggest that it was acting without power and in breach of trust by entering into some arrangement to treat monies of a non-member as part of the Fund. There is in any event, in my view, no basis for attributing a notional payment and a direction to re-invest. The payment was not made and the consequence was that the deceased remained a member to the time of his death. The point had not been reached when the Trustee was obliged to pay out under rule 4.2.2. So far as the deceased's own expressed intentions are relevant, the later statements that suggest he regarded the monies as invested are consistent with his having waived entitlement to payment and simply leaving that to which he would be entitled as part of the Fund as invested by the Trustee from time to time. The Tribunal's Decision 15 The Act formerly required the Tribunal to affirm the Trustee's decision if it was satisfied that it was fair and reasonable in its operation in relation to the complainant: Section 37(6). It now obliges the Tribunal to have regard to both the complainant and any other party who maintains an interest in the benefit, in determining that question. 16 The task undertaken by the Tribunal had regard to Ms Rountree's relationship with the deceased, her contributions to the property held by them and the property she received automatically upon his death. It also had regard to the position of his children and the amount available to them under the estate without the monies from the Fund. It took into account the Trustee's reliance upon the fact that the deceased had named Ms Rountree as his nominated beneficiary with respect to the Fund at an earlier time and that she relied upon him for financial support. It is clear that these two factors, combined with the provision made by the deceased for his children from his estate, were regarded by the Tribunal as lending support to the Trustee's decision as being one fair and reasonable in its operation to all. 17 The applicants' contentions may be summarised as follows: (a) the only inference to be drawn from the deceased's description of the assets at the time he drew his will, and the inclusion in it of reference to his monies held in the Fund, was that those monies were to go to his estate and not to Ms Rountree; (b) The Deceased had expressed the wish on other occasions that he wanted his children to receive the benefit and not Ms Rountree, because her daughter might ultimately receive it or a portion of it; (c) The decision unfairly favoured Ms Rountree and therefore could not be said to be unbiased, equitable or impartial; (d) The decision was unreasonable; (e) The nominated beneficiary form was irrelevant given the time at which it had been drawn and the deceased's belief, apparent from his statements, that the monies from the Fund were already his to control; (f) No inquiry was made as to Ms Rountree's true position; (g) No regard was had to her rights to apply for testator's family maintenance. 18 The applicants' principal contention related to the statement made by the deceased in his will with respect to Ms Rountree and the list of his assets referred to in (a) above. The matter does not however fall to be determined as a question of law by reference to the interpretation of the will. It has regard to the way in which the Trustee and the Tribunal dealt with the evidence as to the deceased's intention. The submission assumes as a fact that the deceased had forgotten about the nomination and that clause 9 was intended as a complete list of the arrangements he had made. The Tribunal however found that it was not satisfied that the deceased had overlooked the fact that he had named Ms Rountree as his beneficiary. It considered that he may well have continued to wish to ensure that she had financial support. It was entitled then to make findings, given that the evidence could not be said to have compelled only one conclusion, and one to the contrary. The question is one of fact and not law: see Jedko Game Co Pty Ltd v Collector of Customs (NSW) (1987) 12 ALD 491. 19 Further, in the process of fact finding, the Tribunal was not obliged to act upon the applicants' evidence of statements by their father of a preference to support them. The question raised is merely whether the Tribunal was entitled to conclude that he may have wished to secure Ms Rountree's position whilst at the same time making provision for his children and no question of law arises (ground (b) above). 20 It was likewise a matter for the Tribunal, but not this Court, whether it regarded the nomination of beneficiary form as indicative of the deceased's intention (ground (e)). As to (f) and (g) above, there is nothing which obliged the Tribunal to take into account the fact that Ms Rountree may have had a right to apply for maintenance out of the estate, in the event that the monies from the Fund were paid to the estate, even if she was still able to do so at that time; nor was it obliged to enquire as to her full financial position. I did not understand the submission to involve some aspect of want of procedural fairness, for instance that the applicants were prevented from raising these questions. Different approaches are open as to whether the Trustee's decision to pay the monies to Ms Rountree was "fair and reasonable". One is that undertaken by reference to whether provision was made for each. Insofar as the Tribunal's reasoning had regard to the financial circumstances of Ms Rountree, there was some evidence that, absent the benefit, she would be in receipt only of the aged pension. So far as that reflected a perception of the deceased as to her needs, the continuance of the nomination form tended to suggest this. 21 The only basis given for the general contentions advanced in (c) and (d) was the decision itself. No error of law is pointed to. It could not be said that the Tribunal failed to address the question posed by the statute; nor that there was no basis in the evidence for the conclusion it reached. The applicants' complaints relate to the facts as found by the Tribunal, or the weight afforded them, and do not involve questions of law, to which this appeal is limited. Further Relief against the Trustee 22 Since these proceedings were commenced, Re Wakim; Ex parte McNally [1999] 163 ALR 270 was decided and the applicant no longer relies upon the cross-vesting legislation to provide the Court with jurisdiction to conduct further review or inquiry. Nevertheless they submit that the Court may exercise jurisdiction under s 8 Trust Acts 1973 (Qld) which provides for the review of acts and decisions of trustees. The statutory provision modifies the general powers of control of trustees exercising discretions by requiring reasons and a justification for a decision. It may be doubted whether the Courts would regard it as justifying an interference with the exercise of a discretion within power and bona fide made. In any event, as the Trustee submitted, the question whether this Court has accrued jurisdiction to review the Trustee's decision under that legislation is answered by the definition of "Court" in the State Act as "the Supreme Court of Queensland". The Federal Court cannot make an order under that legislation: see In the Marriage of Smith (No 3) (1986) 161 CLR 217; The Rochester Communications Group Pty Ltd v Adler (1996) 65 FCR 572; and Edensor Nominees Pty Ltd v Australian Securities and Investments Commission [1999] FCA 1722. 23 The applicants then submit that the Court may in any event possess jurisdiction to make orders which can be made by a Court exercising a general equitable jurisdiction to control trustees in the exercise of their discretion. Even if that was so, however, the supervision exercised by the Court with respect to the discretion given to a Trustee under clause 8.3 would not extend to the appropriateness or correctness of the decision arrived. It would be limited to the integrity of the process undertaken: see Ford and Lee, "Principles of the Law of Trusts", 3rd edn [12730] and Meagher and Gummow, "Jacobs' Law of Trusts in Australia, 6th edn [1611] and the cases therein referred to. The applicants' case seeks only to challenge the fairness of the decision or the correctness of the Trustee's view of the facts. Conclusion 24 The application should be dismissed with costs. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel. Associate: Dated: 19 May 2000 Dated: 19 May 2000 Counsel for the Applicant: Mr L Harrison QC Solicitor for the Applicant: Tobin Lawyers Counsel for the First Respondent: Mr P McMurdo QC Solicitor for the First Respondent Minter Ellison Counsel for the Second Respondent: Mr R Galloway Solicitor for the Second Respondent Bressington & Partners Date of Hearing: 13 December 1999 Date of Judgment: 19 May 2000