New South Wales Supreme Court CITATION : SMITH v UGLA [1999] NSWSC 1123 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3854/95 HEARING DATE(S) : 8 & 9/11/99 JUDGMENT DATE : 23 November 1999 PARTIES : James Robert Smith & Anor v UGLA Pty Ltd & 5 Ors JUDGMENT OF : Bryson J at 1 COUNSEL : N. Cotman S.C. with E. Finnane for Plaintiffs D. Williams for second to sixth Defendants SOLICITORS : Garrett Walmsley Madgwick for Plaintiffs Alan Jessup for second to sixth Defendants CATCHWORDS : TRUSTS and TRUSTEES - creation of trust by informal statements - decision on construction of words used in conversation - it was held that no trust was created. DECISION : See paragraph 51 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRYSON J. TUESDAY 23 NOVEMBER 1999 3854/95 JAMES R. SMITH & ANOR v UGLA P/L & 5 ORS JUDGMENT 1 HIS HONOUR: The plaintiff Dr Smith is a medical practitioner and he has been a director of the Eastern Suburbs Private Hospital since 1980 or earlier, and practiced professionally there. In 1980 the plaintiff Dr Smith and the fourth defendant Dr Tom Wenkart were directors of the Hospital. Dr Smith is still employed there and is a member of its superannuation fund, although having regard to his age and state of health he may well retire in the near future. In these proceedings he made a number of claims relating to the conduct of the superannuation fund and his interest in it, but all areas of dispute but one have been resolved, some by orders of the Court and some by an arrangement which I was told by counsel at the hearing would result in consent orders, although I have not yet been shown the form of orders. I was told that the effect of these arrangements and concessions is that it is conceded that certain of the defendants (and I am yet to learn which) are liable to pay $300,000 to Dr Smith as his retirement benefit under the Superannuation Fund when he should retire; or are liable to put UGLA in funds to make that payment to him. 2 The matter debated at the hearing on 8 and 9 November relates to Dr Smith's claim to be the beneficial owner of several life insurance policies on his own life; there have been five but two have lapsed. The Superannuation Fund was established in 1980 and its members were the directors of the Hospital, Dr Smith and Dr Tom Wenkart¸ and a number of employees. A large change in superannuation affairs followed the Occupational Superannuation Standards Act 1987 and Regulations thereunder. An industry-wide superannuation fund for private hospitals called the HESTA Fund was established about 1987 and the existing and new employees, but not (so far as appears) the directors became members of the HESTA Fund. As of 30 June 1989 Dr Wenkart ceased to be a member of the Superannuation Fund, in some manner which does not clearly appear, and at various times employees who were members before the establishment of the HESTA Fund have retired and their memberships have ended. In August 1997 three long-serving employees and Dr Smith remained; and apparently they are still members. Employer contributions ceased or became nominal after the establishment of the HESTA Fund. 3 The first defendant UGLA Pty Ltd is the trustee of the Superannuation Fund. It has no other activity or business (but Dr Smith alleges it is also and separately trustee of several life policies). The two shareholders in UGLA are the second plaintiff Shirim Pty Ltd and the sixth defendant Traknew Holdings Pty Ltd. Shirim is controlled by Dr Smith and owns 24 shares and Traknew is controlled by Dr Wenkart and owns 76 shares of the 100 issued shares in UGLA. The interest of these shareholders in the issue before me can be no more than nominal. 4 Dr Smith and Dr Wenkart are the directors of UGLA; they were its only directors in June 1980 when the events opened and they have remained its only directors until the present time. 5 The second defendant Fesena Pty Ltd owns and throughout the events has owned land including the land on which the Eastern Suburbs Private Hospital premises stand. The third defendant Eastern Suburbs Private Hospital Pty Ltd which was formerly named GAB No. 94 Pty Ltd carries on the private hospital and has been the employer to which the Superannuation Fund relates throughout. In 1980 Dr Smith and Dr Wenkart were directors. Dr Wenkart has a controlling majority interest in Fesena and Eastern Suburbs Private Hospital and Dr Smith has a minority interest in both. 6 Dr Wenkart is the fourth defendant. I was informed by counsel that he became a bankrupt on Friday 5 November 1999. However no evidence dealt with this. 7 Ultera Pty Ltd the fifth defendant is the trustee of Morlea Professional Services Superannuation Fund, a fund for employees of companies associated with Dr Wenkart, in which Dr Smith has no shareholding or other involvement. 8 The GAB No. 94 Superannuation Fund was established by a Trust Deed dated 27 June 1980 the parties to which were Eastern Suburbs Private Hospital by its then name and UGLA. 9 UGLA did not appear in the proceedings. It appears that it is not able to take any position in the proceedings because of the state of relations between Dr Smith and Dr Wenkart in which, as they are its only directors, it is not possible for the company to give instructions or come to any decision. It must be attributed to UGLA that it is fully aware of the litigation, although it has not filed an appearance. The second to sixth defendants had common representation in the proceedings and at the hearing. 10 The Schedule to the Trust Deed sets out the rules of the fund including rule 5 dealing with benefits. I set out parts of rule 5: "5. Benefits 5.1 The benefit of a member in the Fund (herein called 'the member's benefit') at any time shall be the sum of: (a) The amount standing to the credit of the member's Contribution Account and the employer's Contribution Account for such member compiled in accordance with these Rules, and in computing the amount of a member's benefit at any time, interest shall be added from the date of the last preceding valuation to the date of the happening of the event upon which the member's benefit becomes payable and such interest shall be calculated at that such rate as the Trustee shall from time to time in its discretion determine; and (b) The amount (if any) payable on the happening of the insured event under any policy of assurance or endowment or disability and/or sickness effected by the Trustee in respect of such member pursuant to the Deed and the Rules. 5.2 The amount of any member's benefit shall become payable on the first to occur of the following dates, namely:- (a) the date upon which such member reaches his normal retirement date and ceases to be employed by the employer; (b) upon the date of the happening of one of the events referred to in sub.Rule 5.4 or sub-Rule 5.5 hereof." 11 Subrules 5.4 and 5.5 deal with contingencies other than retirement in which a benefit for the amount standing to the members' credit may be paid out. These events include (5.4(c)) - death of a member before reaching his normal retirement date. Definitions in the Trust Deed establish the normal retirement date as the 65th birthday, which Dr Smith has passed. Dr Smith's case at the present time is dealt with by cl.5.3 in these terms: "5.3 In the event of any member remaining in the employment of the Employer after reaching his normal retirement date he shall at his option be entitled to remain a member of the Scheme and continue to be entitled to benefits thereunder until he ceases to be employed by the employer, at which date the member's benefit shall become payable." 12 The amount of death benefit payable can under provisions in r.5 be affected by discretionary decisions of the trustee; whereas on retirement Dr Smith will be entitled under subr.5.3 to the whole benefit prescribed by subr.5.1. 13 Late in 1980 three life insurance policies on Dr Smith's life were taken out by Ultera, and on the face of the documents they were taken out for the Morlea Professional Services Superannuation Fund, of which Dr Smith was not in fact a member. The court's order of 8 December 1998, which was made by consent, ordered that the three policies which remain current be transferred by Ultera to UGLA "who will hold the same as trustee of the GAB No. 94 Superannuation Fund or upon such other trust as the court may otherwise declare." The order was based not only on the parties' consent but also on an admission in pleadings by Ultera. 14 The three policies referred to in the Order are described in para 10 of the Amended Statement of Claim at subpars 10(a), 10(b) and 10(c): 10(a) ANZ Life Insurance Company Ltd (then named Greater Pacific Life Insurances Company Ltd) Policy No. 10019297R Date commenced 1.11.80 Amount insured $150,000 10(c) Colonial Financial Management Ltd (then named Scottish Amicable Life Assurance Society). Policy No. 87920 Amount Insured $100,000 Date commenced 16.12.80 15 The ANZ Life Insurance Policy is still current. The Colonial Financial Management Policy still exists but premiums on it are unpaid so that it has a present value of approximately $4,000. 16 At about the same time Policy 10(d) issued as follows: Oceanic Life Limited (then named APA Life Assurance Ltd) Policy No. 5883012 Date commenced 15.11.80 Amount insured $100,000. At some time this policy has lapsed because premiums have not been paid. 17 In 1984 Ultera obtained two further policies: 10(b) Sun Alliance Life Assurance Ltd. Policy No. 0484KZ01 Amount insured $100,000 Date commenced 1.4.84 10(e) Lumley Life Ltd (then named Security Life Assurances Ltd) Policy No. 112091 Amount Insured $100,000 Date commenced 1.4.84. 18 The Sun Alliance Life Assurance is still current but the Lumley policy has lapsed, apparently for non-payment of premiums. The circumstances which brought the Sun Alliance policy into existence in April 1984 are not explained and have no apparent relationship with the arrangements made in June 1980. 19 On the probabilities, the source of all moneys paid as premiums has been that GAB No. 94 has put UGLA in funds to pay them. 20 Dr Smith's case is to the effect that arrangements made orally between Dr Wenkart and himself about the time in June 1980 when the Trust Deed was executed, but before it was executed, establish that the trustee of the superannuation fund which was to be created was to obtain policies on the lives of the two directors, and that those policies would be held by the trustee on trust for the respective directors whose lives were insured, not as assets of the fund and not subject to the trusts of the fund. 21 The conversation occurred in a factual context in which formation of the Superannuation Fund was under consideration, and was being recommended and managed by Mr Reg Austin who was the principal of a business of setting up superannuation funds. Mr Austin pointed out in his general letter of advice of 2 June 1980 that the formation of the Superannuation Fund and the need to obtain life insurance cover which was necessary to put the fund in a position to pay benefits before the completion of an ordinary working lifetime created an opportunity to obtain life insurance over the lives of directors with a "free cover" limit in the vicinity of $300,000. "Free cover" meant that life insurance was obtainable without submitting the life insured to medical examination. When discussing death cover Mr Austin said: "We can offer the easiest and most convenient method of providing Death Cover for all employers (including yourselves). By the signing of a certificate stating all employees are actively working, all employees will be covered for a maximum of $10,000 WITHOUT ANY HEALTH EVIDENCE of any kind. This could be increased to $15,000 for Directors. If we were to include the other business of Dr. [Wenkart], purely for MEDICAL FREE Death Benefit, the FREE COVER LIMIT would be in the vicinity of $300,000. This cover, once effected, can be transferred out of the Superannuation Funds to individual policies, if so desired. There would be no loss of benefit if this was done." 22 What seems to underlie this is that life insurers were prepared to accept the fact that an employee was in active employment as a sufficient indication of facts material to the quality of the life assured if the insurers were to get a block of business associated with a superannuation fund covering a number of lives, and would not require medical examination. The advantages would be at their greatest if a large block of superannuation business associated with Dr Wenkart's affairs were brought in, and as a speculation I suppose that this may have some connection with the circumstances in which policies were issued to Ultera and not to UGLA. 23 It will be seen that Mr Austin's advice referred to the transfer of the specially high cover which could be effected on directors' lives as a later stage, a transfer out of the superannuation funds to individual policies, after the cover had been effected, if so desired. The contemplation was that when first effected the cover on the directors' lives would be within the superannuation fund. 24 Dr Smith's evidence dealing with the relevant events was not challenged by any evidence of Dr Wenkart. His evidence appears in paras 8 to 13 of Dr Smith's affidavit of 6 October 1995 which I set out: "8. On or about 5 March 1980 I had a meeting with Dr Wenkart at Netherleigh Private Hospital in Randwick and I said to him words to the following effect: 'I think we should consider starting a Superannuation Fund both of us have medical problems and we should give some consideration to it for this financial year.' Dr Wenkart said to me words to the following effect: 'Yes, I think that's a good idea. I'd like to put a Superannuation Fund in place.' I then said to him words to the following effect: 'I have a friend, Reg Austin who is in the business of setting up Superannuation Funds. I'll get him to put a proposal to us.' Dr Wenkart said to me words to the following effect: 'Yes, go ahead and do that. He can contact me directly.' 9. I subsequently had a conversation with Reg Austin and he informed me that he would prepare a letter of recommendation. At pages 336 to 340 in the exhibit is a copy of a letter from Reg Austin Superannuation adderessed to me and dated 2 June 1980. 10. On or about 6 June 1980 I had a conversation with Mr Austin and he said to me words to the following effect: 'I have spoken to Tom Wenkart. He is happy with the recommendations. I should be able to arrange whole-of-life insurance policies without the need for medical examinations for both of you. Are you prepared to go ahead with it?' I then said to him words to the following effect: 'Yes, I'm happy with all that recommendation. I am most interested in getting the whole-of-life insurance policy put in place.' 11. Towards the latter part of June 1980 I spoke to Reg Austin and he said to me words to the following effect: 'In regard to the whole-of-life insurance for you and Tom, I can get you each $300,000 cover.' 12. On or about 27 June 1980 the fund was established. At that time I recollect having a conversation with Dr Wenkart where I said to him words to the following effect: 'Has Reg Austin spoken to you about the whole-of-life insurance for $300,000 for you and me? It would be very good as we don't have to do a medical.' Dr Wenkart then said to me words to the following effect: 'Yes, Reg Austin is organizing the insurances. He is going to put Superannuation Funds in place for all my businesses. This means that we will effectively get whole-of-life insurance for $300,000 each without medicals. I am very pleased about that as you and I would have difficulty in passing a medical considering our heart problems. This insurance is a bonus for us as directors. This is on top of our other benefits in the Super Plan.' 13 Some time after the fund was established Reg Austin sent me copies of the insurance policies covering my life. In the exhibit at pages 142 to 146 are copies of Certificates of Insurance (hereinafter called 'the whole-of-life insurance'). To the best of my knowledge and belief the fourth defendant also received Certificates of Insurance on his life." 25 The documents which Dr Smith produced as the copies of insurance policies are certificates of insurance relating to policy 10(a) the Greater Pacific Life Insurance Company Policy, 10(c) the Scottish Amicable Policy and 10(d) the APA Life Assurance Policy (which has lapsed). The Scottish Amicable certificate states distinctly that the Superannuation Trustees (referring to Morlea Professional Services Pty Ltd and by inference to Ultera) are the proposer to whom insurance moneys are payable and the APA certificate clearly relates the insurance to the GAB No. 94 Staff Superannuation Fund. The Greater Pacific Life certificate is less distinct in its indications but shows the policy owner as GAB No. 94. 26 In seeking to understand what was said in the conversation with Dr Wenkart given in Dr Smith's evidence, the context set by Mr Austin's letter of advice is the predominating element. The later behaviour of the parties can also be looked to, in so far as it gives any indication of their intention, for the purposes of making findings about the meaning of what was said in the conversation or of any arrangement or agreement which was then made. 27 A trust of personal property such as a life insurance policy may be created by a declaration of trust by the beneficial owner of the property in terms which establish an intention then and there to create a trust. A trust should be treated as having come into existence where there was an agreement for consideration to create a trust, and the circumstances in which it was to be created later happened; in that case it should be accepted that a trust came into existence even if no evidence of an express declaration of trust were available, or even if it were established that there had not been one. The creation of a trust may be established by circumstantial evidence even though no direct evidence of a declaration of trust may be available and no particular event which brought the trust into existence can be identified. In the affairs of companies entries in business records can from time to time be found to show that a trust exists even though no event in which it was created can be identified; and similar results can be attributed to estoppels arising from company records when they have been acted on. Where there is no evidence of an express declaration of trust an arrangement which was not made for value will not be enforced as there is no equity to perfect an imperfectly constituted voluntary trust. 28 Several things should be observed about seeking to come to an understanding of the meaning and effect of the conversation or arrangements between Dr Smith and Dr Wenkart. At the time of the conversation no life policies existed; they did not come to existence until some months later. Nor did Ultera have any interest in any life policies. When it became a trustee UGLA would as a practical business matter need to obtain insurance on the lives of members of the superannuation fund which was about to be established, but no steps had been taken to do that; there was no superannuation trust or superannuation fund and there were no members. Protecting the financial position of the Superannuation Fund when formed and its ability to pay benefits would require UGLA to have term insurance on the lives of members. Term insurance is considerably cheaper than whole-of-life insurance; naturally enough, as no value is built up over time while term insurance is maintained. Whole-of-life insurance would cost more and provide more than the superannuation fund itself would need in terms of benefits available; as the years pass and premiums are paid, asset value accumulates, and continues to be available even after a member has retired and the fund is no longer exposed to the contingency of liability for death benefit. 29 I do not see the oral arrangement between Dr Smith and Dr Wenkart as an agreement for value to which UGLA was a party. There is no element in the arrangement referred to in which UGLA obtained consideration for declaring or agreeing to declare a trust of life policies which were to be effected. 30 At the time of the conversation Dr Wenkart and Dr Smith were not trustees, UGLA was not a trustee and there was no trust. They spoke in contemplation of the creation of the superannuation trust in the near future, and no trust existed until that was done. An arrangement between the controlling minds of the trustee company, made before the trust was brought into existence, about what some discretionary decision of the trustee company would be is in my opinion incapable of bringing any rights into existence; the manner in which discretionary powers of the future trustee will be exercised and the discretionary decision which it will make, whether with respect to making an arrangement to convert insurance policies into individual policies for the benefit of members, or with respect to any other matter, cannot be effectually decided or pre-committed in advance in a binding way. 31 On the terms of the conversation given in evidence I am unable to see the arrangement as an arrangement to which UGLA was a party at all. In my understanding Dr Wenkart spoke of an arrangement which could prospectively be made by Dr Wenkart and Dr Smith or by the trustee of the Superannuation Fund under their control in the future when the Superannuation Fund was established. Dr Smith and Dr Wenkart were already directors of UGLA, but they did not speak in terms which suggest that they intended to made a decision on behalf of UGLA, and they did not express what they said in terms appropriate to a resolution of UGLA's directors, or record any decision in a manner appropriate for a decision of UGLA's directors. 32 The context set by Mr Austin's letter suggests that what was under consideration was whether the Superannuation Fund and its trustee should take out insurance for large sums free of medical examination, with the prospect that those insurances could later be transferred out of the fund into individual policies. The result contemplated could only be brought about by a series of steps which had yet to be taken, and there was nothing concrete about the steps unless and until they were taken. As a first step, policies had to be obtained. Then as later steps the course which Mr Austin indicated would be available and individual policies could be obtained instead of the policies of the Superannuation Fund; but nothing would be effected unless and until those steps were taken. 33 I see nothing in the evidence of the conversation or of the surrounding circumstances which supports a finding that Dr Smith and Dr Wenkart decided to set up, in effect, another trust or trusts of which UGLA would be trustee in addition to the Superannuation Trust, being trusts for them individually of life policies which were to be obtained. The circumstances strongly suggest that this was not in contemplation; these circumstances are that they were proceeding to cause UGLA to enter into the Trust Deed, which it did soon after, and were doing so on the basis that its resources would be contributions to the Superannuation Fund paid by GAB No. 94 for the purpose of paying benefits to its directors and employees; there is no indication of any kind that there was to be any other source than money contributed to the Superannuation Fund under the Trust Deed for payment of premiums on the lives of individual directors. I do not think that the conversation given in evidence, notwithstanding the reference to the insurance being a bonus to the directors and being on top of other benefits, establishes that there was any intention to create beneficial interests in prospective policies other than interests in benefits in accordance with the Trust Deed. 34 It would indeed be a bonus for directors if the fund of which they were members had the benefit of large insurances on their lives, and if the possibility existed of those large insurances being converted into individual policies, as Mr Austin indicated was a possible course. There is quite enough advantage for the directors in creating the opportunity for future conduct of those kinds to explain the language used. The language used does not on a fair view evince a binding commitment to carry out the several steps which it would be necessary to perform in order actually to confer individual policies on directors, and does not, in my finding, evince an intention then and there by a few spoken words to cover the whole ground which it would require several decisions and several courses of conduct executing them to cover. Even if that intention had then and there existed and had been expressed in the conversation, I am of the view that the conversation would not be effective to constitute a trust. 35 Evidence of events and dealings of UGLA including the terms of directors' minutes, accounts and financial statements and returns to superannuation industry regulatory authorities was examined minutely, and it was contended that material in these sources supports the case of one party or the other. In my view not much confidence can be put in indications from these sources because it is clear that the affairs of UGLA were not handled in a regular or consistent way; its records are not reliable indications of its rights. Dr Smith's evidence shows that for, over 10 years he did not attend any meetings of directors or of members of the company; he says that he did not sign the Trust Deed of 27 June 1980 or make any formal decision to enter into it, although he did not attempt to disavow it. He says that he did not see the deed or a copy for about twelve years. Whatever persons and events produced the series of annual financial statements, which at least on their face appear to have been adopted by directors, have not been proved. 36 For a first phase which lasted some years, the financial statements of the Superannuation Fund did not refer to the whole-of-life policies on Dr Smith's life, or to any corresponding policies on Dr Wenkart's life. This is not a sound basis for any inference that the company regarded the whole-of-life policies as not being assets of the superannuation fund; it is at least equally possible that whoever prepared the accounts did not include them in the company's assets (and there is no comprehensive list of the company's assets) because that person was unaware of the circumstances in which Ultera was holding the policies; or was unaware that they were not term insurance policies; or it may be that in their early stages the policies had no surrender value or their surrender value was so small that they were not regarded as appropriate to be accounted for; or there may have been simple carelessness. There is no general scheme of regularity which would make inferences from the financial statements reliable; in any event there is no clear inference. From 1988 onwards the policies are or appear to be reflected in the balance sheets as assets of the Superannuation Trust. 37 In the early years the financial statements show receipts in and payments out of (generally) corresponding sums for premiums on policies; but the policies referred to are not identified, and this pattern in the accounts while consistent with a pattern of events in which GAB No. 94 paid UGLA amounts of money specifically to be paid for insurance policies does not confirm that that happened; and if it did confirm that that happened the pattern would not show that the policies were held on any trust separate to the trusts of the Superannuation Fund. 38 The financial statements for later years become more markedly irregular. Large sums are accounted for as having been paid to GAB No. 94 on forfeiture of the interests of members, but there are no records showing such forfeitures, or directors' decisions relating to forfeitures, and no reason on the face of the Trust Deed and its amendments why such events would produce an entitlement of GAB No. 94 to any payment. During this phase there were marked inconsistencies in statements in the accounts and elsewhere about the entitlements of Dr Smith and Dr Wenkart. The accounts reflect a supposed withdrawal by Dr Wenkart from the fund as of 30 June 1989, although there are no records of decisions which reflect that event. First the death benefit was to be $100,000; the policies obtained greatly exceeded this. At a later stage the amount of death benefit was treated as having in some way been increased to $300,000, and as Dr Wenkart was treated as having withdrawn from the fund, can have applied only to Dr Smith. 39 From about 1990 onwards, when there were few members left apart from Dr Smith, records of UGLA begin to reflect his increasing concern; but the financial statements did not acknowledge clearly, or to my reading at all, any interest such as is alleged. If the theory of the financial statements was that they accounted for the affairs of the Superannuation Trust as an entity different to the affairs of UGLA as a whole it may be that the whole-of-life policies, according to the plaintiff's case, would not have any part in them; but if that were so, one would expect to find them accounted for elsewhere. 40 Returns to regulatory authorities, after a period when they did not show any life policies as assets of the Superannuation Fund, eventually came to show the value of life policies as relatively small proportions of those assets; without identifying the policies. Dr Smith signed some of these documents, but on the evidence it must be said that he did so irresponsibly, signing what was put before him without checking or understanding their contents or implications. The fact that at some times such returns appear to include some unidentified life policies among assets of the superannuation fund is no real indication about the beneficial entitlement to any particular identified policy. 41 The first statement in accounts or returns to regulatory authorities which could possibly reflect the view that a life policy was an asset of the Superannuation Fund (and it is very unlikely that a term policy would be such an asset) is in the return to the Superannuation Commission for 1988; unlike the previous returns it shows insurance policies as assets of the funds and attributes 8% of the assets of the fund to them. The financial statements for the year 1989 appear to treat life policies as assets of the fund; however there are marked irregularities in the financial statements for 1989. Thereafter financial statements could possibly reflect the view that the life policies were assets of the Superannuation Fund; although this is not altogether clear. 42 When calculations were made from time to time by actuaries or other experts relating to the sufficiency of the assets of the Superannuation Trust to meets its obligations the policies were not brought into account as assets. However these circumstances do not appear to me to be of any weight because the evidence does not explain the basis on which instructions were given to the actuaries or other experts; they were certainly not given by the directors of UGLA, and at times the instructions given, when they can be seen, were plainly incorrect. 43 After Dr Smith began to exhibit interest and concern in what he thought of as his entitlement to some interest related to the whole-of-life insurance policies on his life, a meeting of directors, which in fact occurred and was recorded in a minute (which does not bear any date), took place late in 1991 and resolved as follows: DEATH BENEFIT: It was resolved that under the powers given to them by the Deed and Rules of the Gab No. 94 Superannuation Fund trhat in the event of the death of Dr. J.R. Smith whilst a member of the Gab No. 94 Superannuation Fund a benefit equal to the proceeds of the insurance policies from the Sun Alliance, ANZ Life and Victory Insurance Co. be paid to his estate. RETIREMENT BENEFIT: It was resolved by the Trustee that under the powers given to them by the Deed and Rules of the Gab No. 94 Superannuation Fund to fix the retirement benefit in terms of the Deed and Rules for Dr. J.R. Smith at the sum of three hundred thousand dollars ($300,000). 44 This minute is the high point of written confirmation of the plaintiff's case; in my opinion however it does not, on proper consideration of what it says, actually confirm the plaintiff's case. The first paragraph appears to have established an entitlement of Dr Smith and his estate to a death benefit measured by reference to the amount of the policy, but its terms also strongly imply that he did not have any other entitlement to the proceeds of the policy. Dr Smith was a party to the resolution. I read this resolution as confirming and acknowledging that he did not have beneficial ownership of the policies referred to, and did not have an interest in them independently of any decision by UGLA or of any entitlement under the Superannuation Deed. The terms of the resolution impliedly but clearly contradict a conclusion that Dr Smith was regarded as the beneficial owner of the policy. As he is now past the age of 65 years I would not think that this decision could have any continuing effect, bearing in mind subr.5.3. In the event of his death before retirement I would think that the function of the policies would be to assist the Superannuation Fund to be in funds to meet the retirement benefit to which his estate would then be entitled, on the footing that, in terms of subr.5.3, he ceased to be employed at his death. 45 I see no reason to regard this resolution as a decision that Dr Smith would be entitled to both retirement benefit and death benefit cumulatively. That would be a marked departure from the operation of the rules in the schedule and from the ordinary workings of superannuation schemes. Cross-examination established that at the time of the resolution Dr Smith believed that the life policies were an asset of the superannuation fund - see transcript p8, l.57 to p9, l.1 and p.9, l.56 to p10, l.1. However Dr Smith's interpretation of the law and the facts is not determinative of his rights. 46 The body of evidence relating to events in the history of UGLA and the superannuation fund after 1980 is, in my opinion, of no real significance in coming to a conclusion of fact on the meaning and effect of what was said in the conversation of June 1980. Dr Smith's participation in these events and his acknowledgments, even if they appear to be contrary to his case have no great significance because the documents do not paint any clear picture, and the conclusion which the court should draw on the meaning and effect of the conversation of June 1980 should be based on an appraisal of the terms of that conversation rather than on Dr Smith's interpretation or on uncertain indications in his behaviour many years later. 47 It is to my mind altogether too much and quite wrong to suppose that the reference to the policies as a bonus for the directors had the meaning that directors were to be the beneficial owners of the policies to the exclusion of the fund created by the Superannuation Deed. The reference to a bonus is indeterminate, and its ordinary and natural meaning is fulfilled if the policies were to be brought into existence and were to be available to be converted into individual policies by the exercise described by Mr Austin, in the contemplation that that exercise would at some time be carried out; but it never was. 48 If Dr Wenkart's statement had truly meant, as it appears to mean, that the premiums were to be paid out of the superannuation fund, it would be improper to arrange that that should be done although the superannuation fund was not to own the policies. If it was truly intended and arranged that those things should happen is not surprising that the arrangement should not ever have been carried out, or that the arrangement should not ever have been recorded after the fund was established. 49 I hold that that conversation did not express an intention on behalf of Dr Smith and Dr Wenkart to create a trust in favour of their respective selves and separate from the superannuation fund of any policies on their lives which might be obtained by the means which Mr Austin had indicated. I also hold that the conversation did not constitute any agreement for value which was or could be binding on UGLA. I hold that the conversation did not constitute any decision of UGLA through its directors at all, and did no more than indicate that they were both contemplating carrying out some such course as Mr Austin had indicated could be carried out, and that they were contemplating deriving advantages from it. This contemplation has had no effect, because it remained in contemplation, and none of the various steps which would have constituted realising it was ever taken. 50 Overall the conclusion which should be reached with respect of beneficial ownership of the policies is that they, as assets acquired by a company which had no other business or affairs than to act as trustee of a superannuation fund in accordance with a trust deed, should be understood to be assets of the superannuation trust. This conclusion should be realised, on the general probabilities of UGLA's situation, for assets acquired through its own activity and also for assets conferred on it by some other person in circumstances which are not explained,. 51 The inference that some property right conferred on UGLA was conferred as an addition to the assets of the superannuation fund is no different whether the property right conferred was legal ownership of a whole-of-life policy or beneficial ownership of a policy taken out by Ultera. 52 The minutes of order which counsel are preparing should include orders giving effect to this decision. Last Modified: 11/30/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.