Reported Decision : (2001) 37 ACSR 167 New South Wales Supreme Court CITATION : Tyndall Superannuation Limited & 1 Ors v Commercial Nominees of Australia Limited & 2 Ors [2001] NSWSC 162 revised - 16/03/2001 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 1645/01 HEARING DATE(S) : 7 March 2001 JUDGMENT DATE : 7 March 2001 Tyndall Superannuation Limited, ABN 61 063 427 958 (First Plaintiff) Royal & Sun Alliance Financial Services Limited ABN 64 001 698 228 (Second Plaintiff) PARTIES : Commercial Nominees of Australia Limited, ACN 054 235 853 (First Defendant) Strategic Superannuation Solutions Pty Limited, ACN 052 126 664 (Second Defendant) Power Capital Group Limited (Third Defendant) JUDGMENT OF : Santow J J E Marshall (Plaintiffs) COUNSEL : J Campbell, QC (Defendants) W E Stow (Sol.) (APRA) SOLICITORS : Clayton Utz (Plaintiffs) Phillips Fox (Defendants) CATCHWORDS : PROCEDURE — Interlocutory mandatory injunctions — Did interlocutory relief have practical effect of final relief — Serious question to be tried or prima facie case — Making available of trust records under superannuation trusts by manager to new trustee — Construction of trust deed — Confidentiality claim by manager can't prevail over obligations under s52(2) of Superannuation Industry (Supervision) Act 1993 (Cth) — Manager not entitled to insist on practical benefit of lien — Role of APRA. LEGISLATION CITED : Corporations Law s9 Superannuation Industry (Supervision) Act 1993 (Cth) s52(2)(c) and (e) Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 136 CASES CITED : Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209 DECISION : Access granted to the Plaintiffs. _________________________________________________________________________________ REVISED — 16 March, 2001 IN THE SUPREME COURT OF NEW SOUTH WALES IN EQUITY SANTOW J No. 1645/01 Tyndall Superannuation Limited, ABN 61 063 427 958 First Plaintiff Royal & Sun Alliance Financial Services Limited ABN 64 001 698 228 Second Plaintiff Commercial Nominees of Australia Limited, ACN 054 235 853 First Defendant Strategic Superannuation Solutions Pty Limited, ACN 052 126 664 Second Defendant Power Capital Group Limited Third Defendant JUDGMENT — ex tempore 7 March 2001 INTRODUCTION 1 The Plaintiffs seek mandatory injunctions which are opposed by the Defendants. Those injunctions have been modified from the form originally sought. They are sought in a context where the interests of superannuants are vitally affected under two superannuation funds. I have had the benefit of helpful submissions from Mr Stow, solicitor for Australian Prudential Regulation Authority ("APRA") as amicus. These support the mandatory orders sought, in the interests of those beneficiaries under the relevant trusts. 2 The orders sought are essentially to the effect that, upon the usual undertaking as to damages, the Defendants who include the administrator of two superannuation funds, provide copies of the relevant records pertaining to those funds to the Plaintiffs who include the current trustee of those funds. The First Plaintiff Tyndall Superannuation Limited is the recently appointed trustee, replacing the First Defendant Commercial Nominees of Australia Limited ("CNA"). This followed APRA's decision to revoke its approval for CNA to act as trustee generally (see 22 below). CNA's related company is the Second Defendant, Strategic Superannuation Solutions Pty Limited ("SSS"). SSS claims to be still the administrator of the trusts though conceding the trustee CNA has been replaced by the Plaintiff. That is hotly disputed by the Plaintiffs. 3 Importantly, the orders sought require only a duplicate of those records. It is to be provided in form electronically readable by their recipient and in electronic format for that purpose. This is to enable the First Plaintiff as Trustee to perform immediately the functions of administrator as well as trustee under the relevant Trust Deed (PX2). In saying that I do not pre-empt the dispute yet to be resolved separately as to whether, as the Plaintiffs contend, SSS has already ceased to be administrator. The Plaintiffs contend that without the information contained in the records, there would be no administrator in a position and entitled to carry out the relevant administrative functions. I do not need to resolve that question to-day, other than to note that even if the Defendants be right that no termination has yet occurred of the administrator's function, the letter agreement relied upon by both parties dated 16 February 2001 (affidavit of Ogier dated 5 March 2001, p16) provides for the new administration agreement being terminable on one month's notice. That notice was given to-day (PX3). So on any view of matters SSS will have ceased a month from now as administrator, if not already. 4 The Defendants resist the mandatory injunction by recourse to the principles applicable to such injunctions. These are not in dispute. One may accept for present purposes that the balance of convenience onus upon the party seeking a mandatory injunction will in practice be heavier (see R P Meagher, W M C Gummow and J R Lehane, "Equity Doctrine and Remedies" 1992 at 600-1). There is however a threshold question as to whether the granting of this interlocutory relief would have the practical effect of granting final relief. If so, the threshold requirement moves from the lesser one of a serious issue to be tried to the more stringent requirement equating to that of a prima facie case, in which the court will necessarily evaluate the case for final relief. See Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 (McLelland J), at 536; National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 22 FCR 209 (Gummow J), at 231; Australian Rugby Union Ltd v Hospitality Group Pty Ltd [1999] FCA 136 at [31] per Sackville J. 5 The form of order sought does not deprive SSS of the relevant records. So if SSS does succeed in establishing its continued entitlement to be administrator, albeit for no more than one month, it could not be said that the interlocutory relief would have the practical effect of granting final relief on that issue. However, the Defendants put their case also in other ways. They contend that the release of these records, albeit duplicated, would deprive them of contractually protected confidential information so far as the system for manipulating those records is concerned. It would also, they contend, deprive the Defendants of a lien over the relevant documents. This they wish to exert in relation to fees which they claim are presently owing and are the subject of the last dot point in the letter agreement of 16 February 2001. 6 So far as the confidential information is concerned, the form of order which I have earlier described should not deprive the Defendants of confidential information. This is unless they are unable to put in electronic format and electronically readable form for their intended recipient, that information without handing over the relevant electronic administration system. But if that were so, that consequence would simply be the result of the Defendants' own inability to make the information available in a proper and useable form. This is their own fault because of the way they have kept it so it cannot be separated from the operating system, if indeed that be the case. 7 The Defendants rely upon an Administration Services Agreement dated 1 July 1998 between the First Defendant and SSS when the former was a trustee for establishing that confidentiality. To-day each are owned in excess of 90% by the Third Defendant, Power Capital Group Limited so as to be related companies. I am entitled to infer CNA and SSS were also then related companies, in the absence of evidence to the contrary. One may accept that that agreement (DJO2) between affiliates did distinguish between stored "Fund Data" files (as that expression is defined in Cl 1.1 of the ASA) and the system said to be confidential for the manipulation and ongoing recording of that data. Clause 1.1 defines "Fund Data" as meaning "information and data about the Funds, the assets of the Funds, the Members, the Employer Sponsors and Member Instructions". But it by no means follows that the orders sought should be denied on that account. Clause 11 of that agreement provides for what occurs on termination of the agreement such as has now occurred. The Administrator must "prepare and promptly deliver stored Fund Data files in a format agreed by the parties but at least in electronically readable form or in such other format as the trustee may reasonably require". This must be provided to the trustee or its agent. So confidentiality is not there a barrier so why should it be here? It is wholly reasonable that these termination requirements be substantially mirrored in the Court's mandatory orders as I have done, without this being constrained by any supposedly confidential system for the storage and manipulation of the data. 8 Finally, as APRA point out, were the trustee to have entered into confidentiality obligations which precluded it from properly performing its functions and powers, including the capacity to effect such a hand-over, the trustee CNA would be in breach of s52(2)(c) and (e) of the Superannuation Industry (Supervision) Act 1993 (Cth). Those sections require covenants in governing rules of the trust deed ensuring that obligation will be fulfilled. Thus the agreement between the two affiliates should not be construed to have the opposite result. Because the construction contended for by the Defendants would have that result it must be rejected for that reason alone. 9 Turning to the second element relied upon by the Defendants as pointing to the interlocutory relief having the practical result of final relief, this relates to the supposed loss of the lien over the Fund Data. In fact the orders proposed expressly preserve that lien, though its practical leverage may be reduced by the fact that the information would be handed over in duplicate form thus diminishing any value in the duplicate retained. But in any event the proposition put by the Defendants is intrinsically most unattractive. It presupposes that sums of money said to be owing in relation to the relevant trusts must be secured by such a lien in circumstances where there can be no question of the financial capacity of the Plaintiffs to make such payments if properly due, nor their willingness to pay what is properly due, and where superannuants' interests are at risk by the frustration of the orderly hand-over sought also by APRA. 10 That unattractive aspect includes the implication that the lien might be used as leverage beyond the legitimate one of being paid what is properly due. In any event, in framing orders with the usual undertaking as to damages, it should be understood that to the extent damage properly recoverable is determined to flow from the loss of the lien in its practical sense (by furnishing duplicates), that would be covered by the undertaking as to damages. Accepting that the Plaintiffs have every intention of fulfilling their obligations in regard to the making of payments properly due to the Defendants arising out of the termination, there can be no justification for maintaining the leverage of a lien. Any lien continues to exist over the information from which the duplicate is taken, though concededly that may be worth somewhat less, once the duplicates are handed over. Nonetheless, if SSS were adjudged still to be in office, they can still perform their administrator functions for the one month remaining. In saying this, I am not to be understood as accepting (or rejecting) that submission. The submission that such a lien may properly be exerted is affected also by the question to which I now turn. 11 The Plaintiffs rely for access to the information on two documents. The first is the "Deed of Retirement and Appointment of Trustee" dated 16 February 2001 at clause 6 (see affidavit of Ogier of 5 March 2001, DJO1). Clause 6 is in the following terms: "The Retiring Trustee must immediately deliver to the New Trustee all Records in its possession." 12 The term "Records" is defined in clause 1.2 in these terms: "Records means any books or records relating to the Division, or the Retiring Trustee's trusteeship of the Division required to be kept by the Retiring Trustee in accordance with clause 16 of the Trust Deed;" 13 The Plaintiffs contend that the concluding words "required to be kept by the Retiring Trustee in accordance with clause 16 of the Trust Deed" either do not qualify what precedes or are in any event wide enough to encompass more than mere accounting records. Both propositions are disputed by the Defendants. For present interlocutory purposes I am satisfied that the Plaintiffs have even at a prima facie level much the better of the argument, though that is a matter for final determination later. In particular, one would not expect a retirement to be effected in such a way as to preclude the new trustee doing its job, more especially in light of s52(2) of the Superannuation Industry (Supervision) Act 1993 (Cth) to which I have earlier made reference. 14 Indeed when reference is made to clause 16.1(d) of the Trust Deed, which refers to "accounts, statements and returns of each division to be conveniently and properly audited" by reference to accounting records, it is sufficiently arguable that accounts here would encompass the kind of Fund Data maintained by electronic means. It should be noted that s9 of the Corporations Law defines "record" as including "information stored or recorded by means of a computer". 15 But whatever debate there may be on the first document, there is the letter agreement of 16 February 2001 which leaves little room for argument. It provides in the second last dot point as follows: "• RSA will make an unconditional payment on 23 February 2001 of $300,000 (three hundred thousand dollars) to SSS for provision of records relating to the funds;" 16 It is undisputed that RSA has made the unconditional payments of $300,000 on 23 February 2001. This was accepted by SSS without reservation yet still without SSS carrying out its reciprocal obligation of providing "records relating to the funds". 17 The Defendants weakly argue that there is nothing in the quoted clause which says when the records are to be provided. But that argument has no merit whatsoever. They should be provided in response to the payment accepted by the Defendants, and promptly. 18 There can be no suggestion of any plausibility that "records" here mean mere accounting records not encompassing the full scope of Fund Data. 19 It was made clear by the Defendants that if the payments were made which it claimed were still owing as referred to in the quoted last dot point below, along with the other items the subject of two invoices, duplicate records would be handed over. The last dot point reads as follows: "• RSA will, by 9 March 2001, pay SSS a termination fee determined in accordance with the old administration agreement, subject to RSA being satisfied after undertaking its due diligence review that [the termination fee is properly payable] all the January 2001 fees payable to SSS as invoiced is correct for determining the termination fee calculation." 20 It will be apparent that there is no immediate entitlement to payment of the termination fee until such time as the First Plaintiff has completed its due diligence review. In any event the two provisions are not mutually interdependent and there is no suggestion that the First Plaintiff will fail to honour its obligations. 21 It accordingly follows that the Plaintiffs have comfortably satisfied any requirement, were it to rise so high, of a prima facie case for orders in the form I have described. There is certainly a substantial question to be tried. 22 Balance of convenience factors strongly favour the granting of the orders particularly taking into account the interests of the beneficiaries as emphasised by APRA and the Plaintiffs. Indeed there is material before me in the affidavits of the Plaintiffs together with the public fact that CNA has had its approval revoked by APRA to act as trustee (PX4), to indicate that the interests of the beneficiaries are certainly not assisted by the Court declining these orders. Indeed those interests may be at real risk. Of concern is that one of the deponents for the Defendants, Mr Endresz, is the subject of comment by APRA, which could not in context be said to be favourable, in its reasons accompanying its conclusion; that the First Defendant "can no longer be relied on to perform in a proper manner, the duties of a trustee of each relevant entity of which you are a trustee". Such a conclusion concerning the First Defendant leaves room for serious concern about management functions being carried out by its affiliate the Second Defendant. 23 Finally, I should add that merely proffering continued access to the information, as the Defendants have done, is no substitute for carrying out the obligation of handing over that information. CONCLUSION AND ORDERS 24 The Plaintiffs are entitled to orders as follows which include cost orders. (1) The Court, upon the Plaintiffs by their counsel giving to the Court the usual undertaking as to damages: (a) Orders the defendants grant access to the Plaintiffs or the nominee of the Plaintiffs, namely Financial Synergy, to enter on the premises of the defendants and to furnish to the Plaintiffs a working copy in electronically readable form and electronic format of the records contained in its electronic/computerised administration system which contains and administers the records of the Royal & SunAlliance Workforce Superannuation Fund and the Royal & SunAlliance Personal Retirement Plan (together "the Funds") such to be furnished in such a way as will enable the First Plaintiff as trustee of the relevant fund to perform immediately the functions of administrator and trustee; (b) Orders the Defendants make available to the Plaintiffs all the paperwork relating to transactions in respect of the Funds which have not yet been entered into the administration system; (c) Grants to the Plaintiffs unlimited access to the balance of all records relating to the Funds in the possession of the Defendants; (d) Directs that Defendants take all steps reasonably necessary to effect the matters in the subparagraphs above by 3.00 pm Thursday 8 March 2001. (2) Orders that upon receipt of the documents and materials the subject of the order above, the Plaintiffs hold and maintain those documents and materials until further order provided that the Plaintiffs shall be at liberty to utilise those documents and materials in such way as they consider necessary so that the First Plaintiff can carry out the role of trustee of the Funds. (3) Notes the Plaintiffs acknowledge and agree that the making of the orders above will not be relied upon by them as a basis for asserting that the lien alleged by the Second Defendant has been waived and/or destroyed. (4) Orders that the defendants pay the costs of today and reserves the balance of the costs of the Plaintiffs' notice of motion. ********** Last Modified: 03/19/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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