New South Wales Supreme Court CITATION : Personalised Transport Services Pty Ltd v AMP Superannuation Ltd [2005] NSWSC 396 HEARING DATE(S) : 15/04/05 JUDGMENT DATE : 29 April 2005 JURISDICTION : Equity Division JUDGMENT OF : Barrett J DECISION : Stood over for submissions by plaintiff as to re-constitution of proceedings. CATCHWORDS : PROCEDURE - action for recovery of contributions paid to trustee of superannuation fund - persons in respect of whom contributions made not joined as parties - trustee adopting neutral stance - whether proceedings properly constituted LEGISLATION CITED : Supreme Court Rules, Part 8 rule 15, Part 68 rule 5 Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431 Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 CASES CITED : Merit Protection Commissioner v Nonnenmacher (1999) 86 FCR 112 Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 Sydney City Council v Greek Australian Finance Corporation Pty Ltd (1974) 32 LGRA 32 Personalised Transport Services Pty Limited - Plaintiff PARTIES : AMP Superannuation Limited as trustee for AMP Superannuation Savings Trust - Defendant FILE NUMBER(S) : SC 5475/03 Mr J.E. Armfield - Plaintiff COUNSEL : Mr M.R. Elliott - Defendant Gells - Plaintiff SOLICITORS : Mallesons Stephen Jaques - Defendant LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BARRETT J FRIDAY, 29 APRIL 2005 5475/03 – PERSONALISED TRANSPORT SERVICES PTY LIMITED v AMP SUPERANNUATION LIMITED AS TRUSTEE FOR AMP SUPERANNUATION SAVINGS TRUST JUDGMENT 1 The plaintiff carries on business as a freight courier and transport broker. In or about 1992, the plaintiff entered into an arrangement with the defendant (the trustee of a superannuation fund) under which the plaintiff paid to the defendant superannuation contributions for the benefit of persons working in the plaintiff's business. The plaintiff says that it paid over a total of $133,475.19 in this way by way of contributions between March 2000 and November 2001 in respect of certain persons for whom it believed it was required by Commonwealth law to provide superannuation. The plaintiff also says that that belief was incorrect because the persons in question were sub-contractors, not employees. The plaintiff therefore contends that the purpose for which the payment of $133,475.19 was made wholly failed; and that the moneys were paid under a mistake on the part of the plaintiff. 2 On the basis thus pleaded in its statement of claim, the plaintiff originally claimed, as against the defendant, a declaration that the moneys totalling $133,475.19 are held by the defendant on trust for the plaintiff and an order that the defendant repay those moneys. 3 The defendant, by its defence, denies liability as to moneys of two kinds. First, it says that it is not liable in respect of a total of $34,735.84 allocated to the accounts of beneficiaries and later paid out to those beneficiaries. Second, it says that it is not liable in respect of so much of the remainder of the total claimed as was applied by it as administration fees and in payment of insurance premiums to AMP Life Limited. Otherwise, the defendant, by the defence, did not admit the plaintiff's claims. 4 The plaintiff filed a reply to the defence by which it made it clear that it did not press its claim in respect of the sums paid out to beneficiaries and those applied as administration fees and insurance premiums. It was agreed at the hearing that those items together totalled $47,831.06, with the result that the plaintiff ultimately sought relief in terms of the statement of claim as to the balance of $85,644.13. 5 It will be clear at once that persons with a clear interest in the subject matter of the proceedings are not parties. I refer, of course, to the persons for whose benefit moneys were paid by the plaintiff to the defendant on the express footing that those moneys should be allocated to accounts of those persons in the books of the defendant and held, together with accretions, as part of a fund for the provision of superannuation benefits in respect of those and other persons. 6 That fund is known as the AMP Superannuation Savings Trust. The trust deed and rules according to which it is administered are in evidence. It is common ground that the persons I have called beneficiaries (of whom there are some 78) are "members" for the purposes of the trust deed and rules. The structure of the fund is such that the defendant, as trustee, may receive contributions from or in respect of a member and that the making of contributions causes to arise a duty of the trustee to pay a benefit to or in respect of the member upon any of several specified future events. 7 Given the structure of the fund, there can be no doubt that the defendant is a trustee and each of the members has a beneficial interest in the fund, although the situation is not one in which an identified part of the fund can be said to be held upon trust for each member. 8 The plaintiff says that there was no need for it to make the members (or even a representative of them) parties to the proceedings. It takes the view that the proceedings are "proceedings relating to a trust", as referred to in Part 68 rule 5 of the Supreme Court Rules so that, if the members are properly regarded as having "a beneficial interest under" the trust of which the defendant is trustee, there was no requirement that they be joined as parties. Part 68 rule 5(2) says: "In proceedings relating to a trust, all the persons having a beneficial interest under the trust need not be parties." 9 Part 68 rule 5(3), so far as is relevant, provides: "In proceedings relating to … a trust, the plaintiff may make parties such as he thinks fit of the persons mentioned in subrules … (2)." 10 Reference may also be made to Part 8 rule 15: "(1) Where any proceedings, including proceedings to enforce a security by way of foreclosure or otherwise, are brought by or against a trustee, executor or administrator: (a) it shall not be necessary to join as a party any of the persons having a beneficial interest under the trust or in the estate, (b) a judgment or order in the proceedings shall, subject to subrule (2), be as binding on those persons as it is on the trustee, executor or administrator. (2) Where a judgment is entered or an order is made in proceedings to which subrule (1) applies and it appears to the Court that in those proceedings the trustee, executor or administrator could not or did not in fact represent the interests of the persons having a beneficial interest under the trust or in the estate, the Court may, in those or other proceedings, order that the judgment so entered or the order so made shall not be binding on those persons. (3) Subrule (1) does not limit the power of the Court to order the addition of parties under rule 8." 11 The applicability and implications of these provisions of the rules must be considered in the light of the actions the defendant took after it was served. Its first reaction was to file the defence to which I have referred. Thereafter, however, the defendant sought judicial advice on the approach that it should take to the proceedings. 12 The opinion, advice and direction of the court were given by Nicholas J on 3 September 2004. His Honour directed that the defendant, as trustee, was justified in responding to the proceedings by (a) maintaining the defences already filed; (b) "otherwise adopting a neutral position in relation to the relief presently sought by PTS in the Proceedings"; and (c) sending a particular form of letter to each member by registered post. 13 The defendant acted in accordance with paragraph (c) of the direction by sending a letter to each relevant person by registered post on 21 September 2004. The letter enclosed a copy of the plaintiff's statement of claim and the defendant's defence. It was pointed out that, if the plaintiff obtained the order it sought, the defendant would be required to refund the contributions the plaintiff made for the addressee and that the addressee's benefit "may be reduced, possibly to $0". The letter went on: "You will see from the Trustee's defence that it is not in a position to defend the proceedings on your behalf as all the circumstances surrounding the superannuation contributions paid by PTS are unknown to us." 14 After referring to the application for judicial advice and its result, the letter said: " However, if you wish to contest PTS' claim to recover your superannuation benefit you may request to be joined as a defendant to the proceedings. If you wish to pursue this matter then you will need to contact the Court Registry and ask the Court Registry staff how you can be joined to the proceedings as a defendant. The Court Registry is located as follows: Supreme Court of NSW Law Courts Building Queens Square 184 Phillip Street Sydney NSW 2000 The Registry can be contacted on (02) 9230 8055. You may wish to seek legal advice before applying to the Court to become a Defendant. Please note that if you wish to be joined as a Defendant to the proceedings then you will need to apply to the Court within 28 days of the date of this letter, that is by 19 October 2004. Please also note that the matter is listed for directions hearing in the Court at 9.30am on 12 October 2004. You may wish to attend Court on that day and advise the Court if you will be seeking to defendant the proceedings. What about costs? The legal costs incurred by the Trustee in obtaining the orders on 2 September 2004 are payable from the superannuation fund as a whole. However, some of the costs incurred to date and going forward may be deducted from your account depending on the orders of the Court. How can I get further information? We will write to you with any material news. In the meantime, you may be able to get more information from the Transport Workers Union or PTS. Alternatively, you can contact Janice McBlane on (02) 9257 9427 or Audrey Bower on (02) 9257 7724 if you require any further information." 15 On 8 November 2004, the defendant wrote to the members again reporting an order of the court on 26 October 2004 that the plaintiff provide its evidence to all defendants by 14 December 2004. The letter pointed out that if the addressee had not been joined as a defendant, he or she would not receive this evidence. Information was again given as to how the addressee could become a party, should he or she wish to do so. None of the members appears to have taken steps to become a defendant. 16 The evidence shows that there are 78 affected members, of whom only twelve responded to the defendant's letters. The responses are not in evidence, but their effect is reported as being that three of the twelve informed the defendant that they "did not wish to challenge the assertions made by" the plaintiff in these proceedings, while nine stated to the defendant that "they do not accept the assertions made by" the plaintiff in these proceedings. 17 The context cannot be regarded as one in which rights and obligations of relevance have existed only between the plaintiff and the defendant. As was noted by Warner J in Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at p.1610, the beneficiaries under a pension or superannuation fund to which an employer makes contributions are not mere volunteers: "Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions." 18 Considerations of this kind led Waddell CJ in Eq, in Lock v Westpac Banking Corporation (1991) 25 NSWLR 593, to observe that superannuation funds are "different in nature from traditional trusts", being "based upon a contract between the employer, the trustee and employees pursuant to which both the employer and the employees contribute to the fund" and thus "part of the terms of engagement". 19 In the present case, of course, the plaintiff says that the superannuation fund members in question were independent contractors rather than employees. Also, there is no evidence to suggest that the persons concerned made contributions, in addition to the plaintiff's contributions. But those points of distinction, if they exist, do not detract from the point that the contributions the plaintiff made were not in the nature of gifts per se. They were made in a contractual context where, it may be inferred, the persons concerned were informed week by week or month by month that the plaintiff had made superannuation contributions for their benefit; and the provision of services by those persons continued against the background of an expectation engendered by the plaintiff that the making of contributions would be ongoing. 20 The members in respect of whom the plaintiff made payments to the defendant are, in a substantive sense, persons who will suffer deprivation if the orders sought by the plaintiff against the defendants are made. It may be that the recovery of moneys the plaintiff seeks will amount to a breach of contract by the plaintiff against the persons for whose benefit moneys were paid by the plaintiff to the defendant and are held by the defendant as part of the fund. 21 This last point highlights what I consider to be a serious defect in the constitution of these proceedings. The defendant, as trustee, has no means of knowing the facts germane to the plaintiff's case – that case being, essentially, that the circumstances in which the several relevant persons provided services to the plaintiff were such as to make them independent contractors under contracts for services rather than employees under contracts of service. Determination of that issue qua each of those persons can only be undertaken in any reliable and definitive way in proceedings to which those persons are parties. There is also a possibility that they will say that, regardless of whether they were independent contractors or employees, the contracts under which they provided services positively required the plaintiff to make the contributions it made and that it would be a breach of an express or implied term for the plaintiff now to re-possess the contributions and to deprive the relevant members of the benefit of those contributions. And to the extent that the plaintiff seeks to rely on the doctrine of mistake, it may be relevant that any of those persons said that they have changed position to their detriment since the contributions were made. 22 It is often the case that trust beneficiaries, although proper parties to litigation, are not necessary parties. The need for them to be parties will not, in a practical sense, arise if their interests are to be represented by the trustee. The matter is put thus at p.187 of the eighth edition (1914) of "Daniel's Chancery Practice": "According to the practice of the Court of Chancery all cestuis que trust were, subject to certain exceptions and statutory relaxations, necessary parties to suits against their trustees, by which their rights were likely to be affected; but according to the practice of the High Court, trustees may be sued on behalf of or as representing the property or estate of which they are trustees without joining any of the persons beneficially interested in the trust or estate, and are to be considered as representing such persons in the action; but at any stage of the proceedings any of such persons may be ordered to be made parties either in addition to, or in lieu of, the previously existing parties." 23 In the present case, the trustee has, in accordance with judicial advice, declined to act on behalf of the beneficiaries. Knowing that, the plaintiff has pressed on without seeking to have any of the beneficiaries made parties. Its reliance on Part 68 rules 5(2) and 5(3) as a basis for that course is, in my opinion, misguided. Part 68 rule 5(2) is not a mandate to omit beneficiaries as parties in all circumstances. When it says that "all the persons" having a beneficial interest under the trust "need not" be parties, its message is that fewer than all may be sufficient. And when Part 68 rule 5(3) leaves it to the plaintiff to cause to be parties such of the beneficiaries as it thinks fit, it does not legitimise a situation where none is joined and the interests of the beneficiaries are thereby entirely unrepresented. In addition, Part 8 rule 15(2) presents in stark terms the risk run by a plaintiff who proceeds against a trustee without joining the beneficiaries (or at least a representative of them) after it has become obvious that the trustee will not represent the interests of the beneficiaries. The risk is that the court will not allow any judgment to be binding on the beneficiaries. 24 The reality in this case is that the plaintiff has caused the proceedings to be constituted and conducted in such a way that there has been no means by which its contentions, both as to fact and law, may be contradicted, even though the outcome the plaintiff seeks, if achieved, will adversely affect the interests of the beneficiaries. The plaintiff takes the view that it is sufficient that the beneficiaries have been put on notice of the proceedings and given information about how they may go about becoming parties if they wish to do so. The plaintiff's attitude was spelled out in a passage in argument concerning the following statement of Lightman J in Alsop Wilkinson (a firm) v Neary [1995] 1 All ER 431, referred to by Nicholas J: "… The duty of the trustee is to remain neutral and (in the absence of any court direction to the contrary …) to offer to submit to the court's directions, leaving it to the rivals to fight their battles." 25 The passage in argument to which I refer is: "HIS HONOUR: In this case one party to the battle is conspicuously absent from the battle field. ARMFIELD: Without wishing to be rude, that's their problem. But test it this way, the way I have suggested, namely, the AMP said: We have got this money, we don't know what the position is. They receive a summons. They send a letter to each of the 78 members and say to them: You are the person who is really going to be affected by this fight. If we lose, it could be reduced to $0. We don't have a fund from which we can indemnify yourself. We are not going to fight for you if you don't put us into funds. We are going to file a submitting appearance [scil. "except"] as to costs and tell the Court we are [scil. "not"] appearing for you. If someone decides not to come on to the field of battle and remain in their hut, they cannot then expect anyone else, whether it is my client or the trustee, to suffer a prejudice for that. " 26 By adopting this approach and failing to join a contradictor or contradictors, the plaintiff has caused its claims for declaratory relief to be pursued in a way that offends against the requirement with respect to the grant of declaratory relief most often associated with a passage in the judgment of Gibbs J in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at pp.437-8. The matter is dealt with thus in the joint judgment of Beaumont, Lee and Dowsett JJ in Merit Protection Commissioner v Nonnenmacher (1999) 86 FCR 112: "[11] The use of the term 'contradictor' appears to have confused the issue to some extent. As we understand it, the notion of a contradictor comes from a line of decisions concerned with the appropriateness of declaratory relief. See, for example, Forster v Jododex Aust Pty Ltd (1972) 127 CLR 421 at 437 - 438 per Gibbs J (as his Honour then was), where his Honour approved the following passage from Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448: 'The question must be a real and not a theoretical question; the person raising it must have a real interest to raise it; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.' [12] This rule was designed to ensure that merely theoretical questions or requests for advisory opinions were not brought to the court under the guise of applications for declarations. The intention was to ensure that any issue brought for adjudication would relate to a genuine dispute. The term 'contradictor' describes the person with whom the applicant for relief is in dispute. That person must be joined in the proceedings as a party thereto, but it is not necessary that he or she attend to resist the application. If he or she does not do so, a binding order may still be made. The requirement for a 'contradictor' is not designed to secure actual opposition. In our view the difficulties correctly identified by her Honour in these proceeding were attributable, not to the absence of any party willing to take an opposite view in court, but to the non-joinder of Ms Hay. She was a necessary party." 27 The plaintiff has not joined any of the persons actually affected by its claim and with whom it is actually in dispute. It is not sufficient that it should merely acquiesce in and seek to take indirect advantage of steps taken by the defendant trustee to inform the members about the proceedings and to make them aware of the right they have to take positive steps to become involved. To employ language used by Moffitt P (with whom Glass and Mahoney JJA agreed) in Sydney City Council v Greek Australian Finance Corporation Pty Ltd (1974) 32 LGRA 32 at p.35, the plaintiff is really asking the court to "embark ex parte without a 'proper contradictor' upon a consideration of the merits of" the plaintiff's claim to recover moneys previously paid by it for the benefit of individuals with whom it stood in a contractual relationship. 28 It is not clear from pleadings whether the plaintiff sues the defendant (trustee) at law (for money had and received) or seeks to mount some equitable claim of a restitutionary kind; but, either way, the proceedings are not constituted in a way that enables the court to grant the relief the plaintiff seeks. Rather than simply dismissing the plaintiff's claims, I shall hear in due course such submissions as the plaintiff wishes to make regarding the re-constitution of the proceedings. I shall thereafter address the question of costs to date on which submissions are complete. ********** 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.