Federal Court of Australia

Brady v NULIS Nominees (Australia) Limited in its capacity as trustee of the MLC Super Fund [2026] FCAFC 68

ORDERS

THE COURT ORDERS THAT:

1.    Schedule A to the orders of the Court dated 12 February 2025 be varied so that the answer to question 22 is “No: the fees referred to were authorised to be charged by NULIS by cl 3.7 of Schedule 1 of the Trust Deed”.

2.    The appeal be otherwise dismissed.

3.    The appellant pay the respondent’s costs.

4.    Notwithstanding order 1 made on 12 February 2025 in proceeding NSD 1736 of 2019 that the representative proceeding be dismissed, that order be stayed for a period of 14 days in order for any application to be made by any group member to be substituted as representative applicant under s 33T or s 33ZF of the Federal Court of Australia Act 1976 (Cth) or any other application consequential upon the death of the representative applicant.

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

REASONS FOR JUDGMENT

LEE J:

A    INTRODUCTION AND THE NATURE OF THE APPEAL

1    This appeal is brought by a lead applicant in a class action commenced on behalf of members of the MLC Super Fund (Fund) whose memberships were transferred by a successor fund transfer (SFT) from The Universal Superannuation Scheme (TUSS) to the Fund. The respondent (NULIS or trustee) is the trustee of the Fund.

2    The detailed factual background is set out at length in the primary judge’s reasons, Brady v NULIS Nominees (Australia) Limited in its capacity as trustee of the MLC Super Fund (No 4) [2024] FCA 1374 (PJ) and does not require explication beyond what is necessary to contextualise the issues on appeal.

3    For many years, a significant part of the retail superannuation system operated through financial advisers and commission-based remuneration. Under that model, advisers received ongoing commissions funded from member fees, often embedded within the product’s overall cost, and those commissions were payable regardless of whether advice continued to be provided. Concerns about obvious conflicts of interest in this model led to substantial regulatory intervention, most notably the Future of Financial Advice (FoFA) reforms. From 1 July 2013, the FoFA legislative changes prohibited conflicted remuneration for new financial products and new advice arrangements, but deliberately allowed existing commission arrangements to continue if they pre-dated the reforms. This “grandfathering” regime reflected a deliberate legislative choice to permit the continuation of existing commission arrangements, notwithstanding the prohibition on conflicted remuneration for new products and advice, thereby facilitating what was described as an “orderly” transition rather than an immediate unwinding of legacy arrangements.

4    As a result, several closed or legacy products lawfully continued to pay adviser commissions, even though commissions were no longer permitted for new products. These legacy products increasingly sat uneasily with contemporary regulatory and community expectations, but they remained common, particularly in retail funds with longstanding adviser distribution networks. Trustees were therefore operating in a transitional environment; commissions were no longer favoured, but their continued existence was expressly contemplated pending eventual product rationalisation or so-called “trade-ups”.

5    It was in that context that National Australia Bank (NAB) undertook a major restructuring of what it called its “wealth business”, including the divestment of most of its life insurance operations. As part of that restructure, members of TUSS were proposed to be transferred into the Fund, with NULIS as trustee. Many TUSS members, now group members, held legacy products with embedded commission arrangements. In the lead up to the transfer, NULIS was required to decide how to deal with the commissions attached to TUSS products.

6    Management and the board considered whether commissions should cease at the point of transfer, be replaced with alternative fee-for-service arrangements, or continue on an interim basis. The primary judge found the board was advised that immediate termination of commissions carried risks, including adviser disengagement, accelerated member attrition from already closed products, increased costs for remaining members, possible litigation, and delay or disruption to the transfer itself and the associated programme of product upgrades funded by NAB. At the same time, the board recognised that commissions were increasingly out of step with revised regulatory requirements and would need to be addressed as part of future product trade-ups.

7    As the primary judge explained in detail, the board ultimately decided to allow the commission arrangements to continue at the point of transfer, on the basis that this preserved the status quo, enabled the SFT to proceed, and left open the possibility of removing commissions in an orderly way as part of later product rationalisation.

8    The case of the appellant below was framed against the backdrop of the regulatory shift away from commissions. He argued that, whatever the transitional position under the FoFA reforms, the MLC Super Fund Trust Deed (Deed) did not authorise fees used to pay commissions to financial services licensees in the period 1 July 2016 to 23 September 2020 (fees) and that the decision to continue paying those commissions was beyond power and, in the alternative, in breach of statutory duties contained in the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act).

9    More specifically, the appellant initially impugned two decisions made by NULIS. Only one decision is now the subject of challenge, being that made on 10 June 2016 “to approve to maintain the current grandfathered commission arrangements pertaining to the products which form part of TUSS following the proposed SFT to the [Fund]” (decision).

10    Two principal contentions are maintained on appeal: first, that NULIS lacked power under the Deed to charge the fees insofar as they represented revenue to NULIS that formed part of a pool of funds used to pay the commissions; and secondly, that NULIS breached its duties as trustee under the SIS Act by making the decision and paying or allowing commissions to be paid to financial services licensees and their authorised representatives that were funded by the fees, which were charged to the superannuation accounts of the appellant and group members.

11    It was common ground that the first of those contentions turns upon the construction of the Deed, and whether, on its proper construction, it authorised the charging of the impugned fees. However, it is necessary to be clear about the procedural context in which that issue arises.

12    The proceeding below was determined by the answering of a series of common questions, the answers to which were embodied in orders (s 33ZB Orders) made on 12 February 2025 binding group members under s 33ZB of the Federal Court of Australia Act 1976 (Cth) (FCA Act). Among those questions, a central question (Question 22) asked whether the charging by NULIS of fees to the accounts of the applicant, the sample group member, group members whose superannuation interests were held on the same product terms as the applicant or sample group member, or the “Legacy Product Holders”, for the purpose of funding commissions, was not authorised by the terms of the Deed, in particular Sch 1 cl 3.7 and cll 4.1 and/or 4.2.

13    The s 33ZB Orders provide that this question was answered: “No: J section 4 ([370]-[445]), [952], [956]” (being an express reference to part of the primary judge’s reasons). Other questions were framed in a similar way, by reference to identified cohorts of members and the charging of fees to them in particular circumstances, and were answered adversely to the appellant.

14    The appeal is not from her Honour’s reasons but from those orders, and therefore the task on appeal is to determine whether the primary judge erred in making the s 33ZB Orders as framed. That task necessarily involves resolving an issue of construction, but it is not an exercise in construing the Deed in the abstract or divorced from the circumstances identified in the questions.

15    In that respect, it is important to recognise that aspects of the argument during the appeal, particularly in submissions, were at times advanced as if the issue were a free-standing question of construction of the Deed untethered from how the questions were framed and answered below. That is not the correct frame of analysis. The construction issue arises in an applied setting, namely whether, on its proper construction, the Deed authorised the charging of fees in the circumstances identified in the questions answered by the primary judge and whether the impugned s 33ZB Orders were made correctly.

16    In addressing those issues, the primary judge had regard to the terms on which members participated in the relevant products, including as recorded in Product Disclosure Statements (PDS). I return below to the role of those materials.

B     A SUMMARY OF THE PRIMARY JUDGE’S RELEVANT REASONING

17    The appellant asserted that, on the proper construction of the Deed, the trustee’s power to charge fees was confined to fees referable to the “administration and operation” of the Fund. He argued that the Deed did not confer a general or free-standing power to levy fees simply because those fees were disclosed or embedded in a member’s product, but instead required a substantive connexion between the fee and the trustee’s administration and operation of the trust.

18    In particular, he contended that the trustee remuneration and indemnity clauses in the Deed constituted an exhaustive scheme governing what the trustee could extract from the Fund or from members, and that those clauses did not authorise the charging of fees for the purpose of the commissions. On that construction, once fees were applied to pay commissions, especially where no ongoing services were provided to members, they were no longer fees for the administration or operation of the Fund within the meaning of the Deed, with the result that the trustee lacked power to impose them and the decision to continue charging them was unauthorised.

19    The appellant’s submissions emphasised that the primary judge’s reasoning impermissibly shifted the focus from the source of the trustee’s power under the Deed to the structure of the products through which fees were charged. In particular, it was submitted that her Honour’s reliance upon the fee structures as disclosed in PDSs treated those disclosures as effectively supplying the content of the trustee’s charging power, rather than asking whether, on the proper construction of the Deed itself, the trustee was authorised to impose fees of that character. That submission was rejected by the primary judge while accepting the broader, indeed sweeping, construction of the Deed urged upon her by NULIS.

20    The primary judge characterised the appellant’s argument as being a narrow and artificial reading of the Deed. Her Honour accepted the Deed conferred a broad power to determine fee structures as part of the terms on which members participated in the Fund, and that nothing in the Deed confined the trustee to charging only those fees that could be directly matched to discrete acts of trustee exertion (PJ [389]–[397], [417]–[423]). Once charged in accordance with the Deed, those fees were not impressed with a trust for any purpose, and the use to which they were put did not retrospectively determine the validity of their imposition (PJ [425]–[427]).

21    In that regard, a significant feature of her Honour’s reasoning was the manner in which the terms of the relevant products, including their fee structures, were identified. Her Honour proceeded on the basis that the fees charged to members were those forming part of the terms on which members participated in particular products, and those terms were recorded and communicated through PDSs. The PDSs were thus used to identify, as a matter of fact, what fees were charged and how those fees were structured as part of the relevant Member Package.

22    In that regard, her Honour reasoned that, in a commercial, for-profit superannuation context, the expression “administration and operation” is not to be read narrowly so as to exclude costs embedded within the overall product structure, including distribution and legacy remuneration arrangements (PJ [417]–[423]). Her Honour further considered that the appellant’s construction would render significant aspects of the Deed inoperative and was inconsistent with its evident commercial setting, whereas the construction advanced by NULIS permitted the Deed to operate coherently as a whole (PJ [378]–[379], [405]).

23    In developing that reasoning, her Honour treated the fees disclosed in the PDSs as forming part of the terms of the relevant Member Package, and therefore as part of the amount which the trustee was entitled to charge under the Deed. In that way, the existence and disclosure of those fees in the PDSs formed an important part of the analytical path by which her Honour concluded that the impugned fees fell within the scope of the trustee’s charging power.

24    Having rejected the appellant’s construction, the primary judge turned to the SIS covenants case, which was framed as an attack on the decision itself. The appellant alleged that by deciding to continue commissions, NULIS breached the covenants of care, skill and diligence, best interests, conflicts, fairness, and proper exercise of powers. Her Honour rejected these claims because they were advanced by reference to the appellant’s preferred outcome, rather than by reference to the legal standard governing discretionary trustee decisions. The question was not whether another trustee might have made a different decision, but whether the decision was one that no reasonable trustee, acting in good faith and after proper consideration, could have made (PJ [488]–[491], [545]).

25    On the evidence, the primary judge was satisfied that the decision was made after an extensive and careful process. The NULIS board considered detailed board papers, obtained and considered legal advice on the continuation of grandfathered arrangements, engaged with regulatory risk, evaluated alternatives to continuation, and weighed the consequences of each option (PJ [544]–[591]). In particular, the board considered the risk that abrupt cessation of commissions could lead to significant adviser disengagement, member attrition, loss of scale, increased costs for remaining members, litigation risk, and delay or derailment of the SFT and its associated benefits (PJ [217]–[230]). The existence of those considerations meant the decision was not arbitrary, but the product of real and genuine deliberation.

26    The appellant’s best interests case was rejected for similar reasons. Her Honour emphasised that the best interests covenant does not require a trustee to maximise immediate fee reductions for some members in isolation from the broader context. It is an evaluative judgment directed to members’ interests as a whole, assessed at the time of the decision and in the light of the available alternatives (PJ [648]–[667]). The board was entitled to conclude that maintaining the status quo on commissions, pending planned product trade-ups, better protected members overall than an immediate termination that carried significant downside risks. The fact that some members might, in hindsight, have paid less if commissions had ceased did not establish a breach (PJ [664]).

27    The conflicts and fairness allegations similarly failed because the appellant could not show that NULIS preferred its own interests, or those of advisers, over the interests of members. Her Honour found the evidence demonstrated conflict-management arrangements and a conscious focus on member impacts (PJ [684]–[697]). Maintaining existing arrangements for a defined cohort did not amount to unfairness, but rather preserved intra-class consistency and avoided disorderly outcomes for remaining members (PJ [720]–[734]). Nor did the decision involve an improper exercise of powers; the trustee acted within the powers conferred by the Deed and did not disable itself from revisiting commissions in the future as part of the planned trade-up process (PJ [215], [735]–[748]).

28    Before going further, at the risk of repetition, it is necessary to stress that the proceeding below was determined by the identification and answering of common questions, which were set out in the s 33ZB Orders, and the task of this Court is to determine whether the answers given to those questions were correct to the extent those answers are impugned.

29    For present purposes, two groups of questions are relevant to the issues agitated on the appeal.

30    First, there are the questions directed to the construction of the Deed and the authority of NULIS to charge fees to members’ accounts. As I observed above, Question 22 asked whether the charging of fees to members’ accounts for the purpose of funding commissions was not authorised by the terms of the Deed, including cl 3.7 and cll 4.1 and/or 4.2, and thereby constituted a breach of trust.

31    Secondly, there are the questions directed to the alleged contraventions of the statutory covenants in s 52(2) of the SIS Act. Questions 7 to 13 required the Court to identify the content of those covenants and to determine whether NULIS had contravened them in making and implementing the decision.

32    The primary judge answered Question 22 in the precise terms contended for by NULIS and which reflected the acceptance of the primary argument made by the trustee, and answered Questions 8 to 13 “No”. It is those answers which are the subject of the present appeal.

33    Having identified the background and why the appellant failed below, it is convenient to turn directly to dealing with each of the appellant’s contentions separately.

C    THE CONSTRUCTION ARGUMENT

C.1     The Relevant Provisions

34    The relevant provisions were set out by the primary judge at PJ [355]–[356].

35    The definition of “Member Package” in Sch 1 provided that it was a part of the Division which, relevantly, “has terms (e.g. a fee structure and Investment Options) determined under clause 4.2”.

36    Clause 3.7 of Sch 1, under the heading “Remuneration”, provided:

(a)    The Trustee may charge for the administration and operation of this Division, a Member Package or a class of Members of a Member Package an amount the Trustee determines.

…

37    Clause 4.2 of Sch 1 provided:

(a)     The Trustee must administer a Member Package in accordance with the terms of the Member Package from time to time.

(b)    The terms of a Member Package are to be determined and recorded in writing by the Trustee and made available to a current or potential Member (and, if relevant, Standard Employer Sponsor) in a manner determined by the Trustee.

…

38    Clause 4.7(a), in the body of the Deed, provided that the trustee “is entitled to be paid, and retain for its own benefit, the fees that are disclosed to members in one or more of the [PDS], member communications, or the Fund Website as otherwise determined by the [t]rustee”.

39    Clause 4.8(b), also in the body of the Deed, provided that the trustee “may be indemnified (or exonerated) from the Fund in respect of a liability (including a Fund Expense), incurred while acting as Trustee or a director or officer of the Trustee”: PJ [355].

40    Those provisions must be read in their immediate context. Clause 3.7 is found among the constitutive provisions concerning the trustee and its remuneration. Clause 4.2 appears in the provisions dealing with the establishment and termination of Member Packages. In the body of the Deed, cl 4.7(a) confers remuneration powers and cl 4.8(b) is a conventional indemnity clause. As I will explain, like many, if not all, constructional questions, the structure of the relevant instrument matters; the Deed does not throw these provisions together indiscriminately; and each clause, properly read in the context of where it appears, has a distinct function unless the text compels a different conclusion.

41    The significance of those provisions arises in the context of the questions answered below, and in particular, Question 22. The construction exercise which follows is therefore directed to whether, on the proper construction of these provisions, the Deed authorised the charging of the impugned fees in the circumstances identified in those questions.

C.2    The Primary Judge’s Reasoning in More Detail

42    Aspects of the primary judge’s dispositive reasoning appear at PJ [402]–[405]. Her Honour rejected the submission that cl 3.7 of Sch 1 and cl 4.8(b) constituted a code for the withdrawal of trust monies. Her Honour accepted the submission of NULIS that the Deed was “replete with powers that overlap”, and reasoned that “the only safe course is to construe each duty and power in accordance with orthodox principles of contractual construction, which require each duty and power to be read according to its own terms”: PJ [402].

43    Her Honour further rejected the submission that this construction of cl 4.2 would render the indemnity and remuneration provisions redundant: PJ [403]–[404]. Her Honour observed that cl 4.2 “permits NULIS to charge the fees identified in the Member Package and no more”, but reasoned that cl 4.8 might still be required if the trustee set those fees at a level that failed to take account of expenses which it has incurred, and that cl 3.7(a) or (b) might still operate if the trustee determined that its remuneration should exceed the fees charged or that specific directors should be remunerated. Her Honour concluded that the construction of NULIS “permits each clause to have work to do”: PJ [404]–[405].

44    In that context, her Honour’s reasoning proceeds on the footing that the fees which the trustee was entitled to charge were those identified as part of the terms of the relevant Member Package. As explained in Section B above, those terms were identified by reference to the products in which members participated, and were recorded and communicated through PDSs. The PDSs were thus used to identify, as a matter of fact, what fees were charged and how those fees were structured as part of the relevant Member Package.

45    In developing that reasoning, her Honour treated the fees disclosed in the PDSs as forming part of the terms of the relevant Member Package, and therefore as part of the amount which the trustee was entitled to charge under the Deed. In that way, the existence and disclosure of those fees in the PDSs formed an important part of why her Honour concluded that the impugned fees fell within the scope of the trustee’s charging power.

46    It is in this way that the acceptance of “overlapping powers”, and the rejection of the appellant’s submission concerning the effect of cl 3.7 of Sch 1 and cl 4.8(b), assumes significance. Her Honour’s reasoning was that the existence of a fee structure at the level of the Member Package, as identified through those product terms, is sufficient to support the imposition of the fee, without requiring that the fee be justified by reference to the purposes identified in cl 3.7.

C.3    Consideration 

C.3.1    Clause 3.7 as the operative charging clause  

47    In my view, the correct starting point is recognising that cl 3.7 is the operative charging clause. There are several reasons for that conclusion.

48    First, it is the only provision in the Division which expressly authorises the trustee to “charge” members. That is not mere happenstance of draftsmanship. The Deed could have stated in cl 4.2 that the trustee may charge whatever fees it specifies in the Member Package fee structure. It did not. Where a Deed expressly confers a power of exaction in one clause, it is a strong indication that that clause, not some other clause using different language, supplies the source of authority.

49    Secondly, cl 3.7 does not authorise charging in the abstract. It authorises a charge “for the administration and operation” of the Division, a Member Package or a class of members. The preposition “for” is purposive. It indicates the matter in respect of which the charge may be exacted. The nouns “administration” and “operation” are broad, but they are not devoid of content and hence limitation. They refer to the trustee’s own functions in administering and operating the Division. They do not naturally encompass any outgoing or commercial objective which the trustee may think beneficial to pursue.

50    Thirdly, it is no answer to say, as NULIS submitted, that remuneration may include profit. Of course it may. The appellant never contended otherwise. The point is not whether cl 3.7 is confined to bare cost recovery. It plainly is not. The point is whether a charge exacted from members must answer the description given by the clause. A power to charge for administration and operation may include a margin of profit; but that does not turn it into a power to charge for anything the trustee regards as commercially expedient.

51    Fourthly, the location and heading of cl 3.7 are consistent with that reading. The clause appears under the heading “Remuneration” in the Schedule governing the Division. I recognise cl 1.2 of the Deed provides that headings are for convenience only and do not affect interpretation, but the location and overall structure of the Deed (and the Schedule) confirm this clause is the Deed’s instrument for authorising the trustee’s extraction of remuneration from members. It is not naturally read as a mere adjunct to the Member Package machinery.

52    Fifthly, and tellingly, the proper construction of cl 3.7 is reinforced when the relevant provisions are read in the context of the Deed as a whole. In the operative part of the Deed, the trustee is conferred with a broad remuneration power. Clause 4.7 provides that the trustee “is entitled to be paid … fees … determined by the Trustee” and that such amounts may be paid out of the assets of the Fund. That provision is expressed in general and unconfined terms. However, cl 4.7 is not the source of the present charges impugned (concerning amounts deducted from members’ accounts within a particular Division by reference to the member-specific charging regime, not by NULIS exercising its general entitlement to remuneration from the Fund as a whole). What matters is that by contrast, the presently relevant charging power in the Schedule is expressed in materially narrower language. As we have seen, cl 3.7 permits NULIS to recover charges only “for the administration and operation of the Division”. This is simply not a general remuneration clause, but a confined power to charge members’ accounts in respect of a defined category of services.

53    On the construction of NULIS, however, that limitation does no work. If any type of fee may be recovered from members’ accounts provided it is called an administration fee, the confined language of cl 3.7 would operate in the same unconfined way as the general remuneration power in cl 4.7. There is no sensible reason why the draftsman would confer a broad and unconfined remuneration power in the body of the Deed, and then repeat that same power in materially narrower language in the Schedule if no difference in operation was intended.

54    The more natural inference is that cl 4.7 performs the distinct function of entitling the trustee to remuneration from the Fund generally, whereas cl 3.7 governs the separate and more confined question of what may be charged to members’ accounts. The latter is therefore a limiting provision, not merely a descriptive one, and cannot be treated as co-extensive with the former.

C.3.2    Clause 4.2 as machinery, not a source of power  

55    Clause 4.2 serves a different purpose. It provides that the trustee must administer a Member Package in accordance with its terms and that those terms are to be determined and recorded in writing. The definition of “Member Package” confirms that those terms may include “a fee structure”. That language is entirely apt to describe the recording and communication of the financial incidents of a product. But it does not follow that cl 4.2 thereby confers a substantive power to impose any fee the trustee records in the package terms.

56    A machinery clause is not transformed into a source of substantive authority merely because the subject matter it regulates includes a fee structure. A contract commonly authorises one thing and then prescribes the way that authorised thing is to be documented, disclosed or administered. The latter does not enlarge the former. Clause 4.2 assumes the validity of the terms determined under it.

57    This is reinforced by cl 4.2(d), which provides for the resolution of inconsistency between a term of a Member Package and a provision relating to the Division, and stipulates that the latter prevails unless the contrary is expressly stated. That provision would be strangely framed if cl 4.2 were intended to be a free-standing and potentially overriding source of authority to charge. It instead suggests that the terms of a Member Package sit beneath, and are constrained by, the Deed’s substantive charging provision.

58    Finally, cl 4.8(b) is an orthodox indemnity clause. It protects the trustee against liabilities incurred while acting as trustee, but does not supply an alternative source of authority to exact funds from members.

59    The appellant’s reply analysis, which in my view is correct, captured the relationship succinctly: cl 3.7 is the clause that tells one when and why the trustee may charge; cl 4.2 is the clause that tells one how the authorised charges are to be expressed in the package terms and administered. To invert that relationship is to permit the machinery to become the source of substantive power.

C.3.3 The primary judge’s reconciliation

60    The question is not whether two clauses touch the same subject matter. In accordance with orthodox principles of construction that apply to commercial documents generally, the question is what work each clause is to do in a coherent reading of the instrument as a whole. If cl 4.2 is treated as independently authorising the trustee to determine and impose any fee structure it chooses, then cl 3.7 is reduced either to surplusage or to a merely supplemental source of additional exaction. The only way NULIS can avoid saying that cl 3.7 is redundant is by assigning it a residual function: the trustee may use it to take remuneration beyond the fees identified in the Member Package if it so determines. That was, in substance, the primary judge’s reconciliation at PJ [404].

61    But, with respect to the careful reasons of the primary judge, that reconciliation exposes rather than resolves the flaw. It means that cl 4.2 sets one level of fees, while cl 3.7 and cl 4.8 may be called in aid if the trustee later decides that remuneration or expenses exceed that level. The supposed limit represented by the package fee structure then becomes illusory. It is a structure in which one drives a lorry through one clause’s limitations by resort to others.

62    More fundamentally, that reading changes the nature of cl 3.7. A remuneration clause ordinarily authorises the trustee to take remuneration within the bounds prescribed by the Deed. On the construction of NULIS, cl 3.7 partly becomes something quite different: a residual extraction mechanism. Similarly, cl 4.8 becomes not simply an indemnity, but also a pricing correction device. That is not how these sorts of clauses are naturally read.

63    The better reading is not that the clauses overlap in a way that permits each to undermine the limits of the others, but that they address distinct questions. Clause 3.7 asks: in what circumstances may the trustee charge? Clause 4.2 asks: how are the terms, including authorised fee structures, to be determined, recorded and administered? Clause 4.8 asks: against what liabilities may the trustee be indemnified? Once the clauses are assigned their proper functions in a coherent fashion, there is no redundancy.

64    The trustee’s “complete answer” submission must also be addressed directly. It is clever, but ultimately cannot be accepted. The argument was, in substance, that once a fee is validly charged as an administration fee, it becomes part of the trustee’s corporate revenue; and once it is corporate revenue, the trustee may do what it likes with it, including using it to fund commission liabilities. Therefore, it was said, the fact that the fee ultimately funded commissions tells one nothing about its validity.

65    That argument contains a truth, but cannot be reconciled with the proper starting point. It is true that money validly received by a trustee in its corporate capacity is its own money and may be spent as it wishes. But that proposition presupposes that the money was validly received in the first place and, in that sense, begs the very question in issue. Put another way, by asserting that the fee is validly received as corporate revenue to justify how the trustee may spend it, the trustee is using the result or consequence of a valid fee to prove the validity of the imposition of the fee. That is not the correct way of framing the analysis.

66    If the fee was not validly imposed because it was not a charge for administration and operation, it avails the trustee nothing to say that, once received, it could have been used in any way it liked. This is, after all, a trust. The issue is not resolved by looking at the character of the money after receipt while ignoring the basis on which it was exacted from members.

67    Properly analysed, the argument of NULIS elides two distinct enquiries. Once the question is framed correctly, the factual linkage between the fee and commission assumes significance. If the fee exists only because commission is being paid, and disappears if commission disappears, and if its cessation leaves trustee services unchanged, that strongly indicates that the fee is not being exacted for the trustee’s administration and operation but for a different purpose altogether.

68    Those features are revealed by six factual consequences of the evidence and findings below.

69    First, the impugned fees were linked directly to the continuation of commissions. The primary judge recorded that if commissions were grandfathered the trustee would continue to charge fees to members which were then to be applied to the payment of commissions: PJ [563]. The evidence elsewhere showed the same link in practical operation. If commission stopped, the fee stopped.

70    Secondly, if the fee ceased, there would be no change in the rights of a member or in the services provided by the trustee. This is of significance. A charge exacted for the trustee’s administration and operation would ordinarily be expected to correspond to the performance of some administrative or operational function. Yet the evidence was that the fee could disappear without any corresponding diminution in trustee services.

71    Thirdly, the fee could be “turned off” and rebated automatically. This feature sits awkwardly with the idea that the fee remunerated the trustee for the exercise of its own functions. There is a need to approach the construction task with a degree of commercial commonsense. A charge that can be removed and rebated without the trustee ceasing or altering any administrative activity looks very much like a pass-through amount attached to an external commission arrangement than remuneration for trustee administration.

72    Fourthly, the evidence demonstrated that identifiable components of the administration fee were used to fund commissions. For asset-based commissions, a specific portion of the administration fee was referable to commission. For contribution commissions, the equivalent logic applied. This was not a case where one could say only at some diffuse or impressionistic level that the trustee’s overall revenue happened to fund commissions among many other outgoings. The linkage here was direct.

73    Fifthly, there was no legal requirement that advisers provide ongoing services in exchange for the receipt of trailing commissions: PJ [85]–[86]. That fact, again, does not itself resolve the construction issue. But it militates against any suggestion that the fee was exacted in order to fund some continuing service delivered to the member. If there was no legal obligation of ongoing service, and if the trustee’s own services did not change when the fee was “turned off”, the character of the fee is more readily seen for what it was.

74    Sixthly, NULIS never suggested that the payment of commissions was justified under cl 4.8 by way of indemnity. That is significant because it confirms that the trustee’s case was not that the trustee was reimbursing itself for a trust liability incurred in administration. The trustee’s case was, and remained, a charging-power case. The fee had to stand or fall as an authorised charge. It cannot be saved by a clause on which NULIS did not, and could not naturally, rely.

75    Taken together, those matters support the appellant’s construction. They show that the impugned fees functioned, in substance and operation, as a mechanism to fund commissions, not as remuneration for the trustee’s administration and operation of the Division.

76    It should be emphasised that none of this requires rejection of the broader commercial case of NULIS. It may readily be accepted that the trustee regarded continuation of commissions as commercially desirable; that scale and attrition were genuine concerns; that trade-ups were intended and thought beneficial; and that the board and management acted against that background. Those matters may explain why the trustee preferred the course it took. But they do not enlarge the Deed.

77    The Deed is the source of the relevant power. Commercial convenience or prudence cannot supply authority where the Deed withholds it. To accept the commercial narrative of the trustee is therefore not to accept its construction.

C.3.4    The Alternative View  

78    I have had the advantage of reading in draft the reasons prepared by Hespe and Button JJ (majority reasons). I agree with important parts of the majority reasons. In particular, I agree that cl 4.2 of Sch 1 is not itself a provision authorising NULIS to impose administration fees. In that respect, the majority reasons depart from the primary judge’s principal route of reasoning.

79    The point at which I respectfully part company with the majority reasons concerns what follows from that conclusion. The majority reasons proceed on the footing that, although cl 4.2 is not itself a source of charging power, cl 3.7 nevertheless authorised the administration fees in question because what NULIS charged members was identified by reference to the PDSs for the relevant products, because the administration fee was a disclosed component of the product’s overall cost, and because once those fees were received by NULIS in its corporate capacity they became its own earnings, with the result that the use later made of a portion of that revenue to fund commissions was directed to the wrong question.

80    In that way, the PDSs perform a central role. They are used not merely to identify, as a matter of fact, what fee was charged to members, but as part of the reasoning by which it is concluded that the fee formed part of the permissible “price” of participation in the product and thus fell within the trustee’s charging power.

81    In my respectful view, as would already be apparent from my analysis above, this elides two distinct questions: the first is factual: what fee was charged to a member under the terms of the product in which that member participated; the second is legal: whether the Deed authorised the trustee to exact that fee. The PDS may answer the first question, but does not answer the second.

82    It is necessary to engage more directly with the way in which that distinction is deployed in the argument of NULIS. That is, in substance, the reasoning adopted in the majority reasons. Emphasis is placed on the fact that the administration fee payable by a member did not vary depending upon whether the member had an adviser in respect of whom grandfathered commissions were paid, and that the PDS disclosed such commissions as “not an additional charge”.

83    Those matters, however, do not answer the anterior question of power. The fact that a fee is expressed as a single administration fee, and does not vary between members with and without advisers, does not determine whether the Deed authorised the exaction of that fee in the first place. Nor does the description of commissions in the PDS bear upon the source of authority under the Deed. That language describes the form in which the fee is presented; it does not expand the trustee’s powers.

84    It is also not to the point that the impugned exaction took the form of a single administration fee, rather than a separately identified commission charge. The absence of a distinct charge for commissions does not determine the character of the exaction. The question remains whether, in substance, the fee was exacted for a purpose falling within the scope of the trustee’s charging power. That question cannot be answered by reference to the form of the charge alone.

85    This also explains why the way in which the case was conducted matters. The case was not advanced on the footing that there existed some separate, identifiable “commission charge”. Rather, the record below makes plain that it proceeded on the basis that the administration fee, as charged, functioned in part to fund the continuation of commission arrangements. The issue, therefore, is not the identification of a distinct charge, but the character and purpose of the exaction. To focus upon the absence of a separate commission charge is to shift the analysis away from the question that was in fact litigated, namely whether the fees charged were within the scope of charges authorised.

86    The majority reasons also caution against describing commissions as, in substance, “fees for no service”, noting that such commissions may represent deferred remuneration for earlier advice. That observation may be accepted as a matter of commercial characterisation, but it does not resolve the present question. The commercial justification for the commission model does not enlarge the trustee’s powers. Moreover, this was an answer to a common question: both parties ran the case on the basis that the answer was accurate in those cases where no service was provided for the fee.

87    Their Honours’ analysis treats the administration fee as having its character fixed at the point of imposition, by reference to the fact that it is a fee charged by the Trustee for administering and operating the Division, and regards the subsequent use of the funds by NULIS in its corporate capacity as irrelevant to that characterisation. In that respect, their Honours emphasise that once the fee is levied, it becomes part of NULIS’ general revenue, and that the payment of commissions is no different in principle from the application of profit to dividends or other corporate purposes.

88    With respect, the issue is not how NULIS, in its corporate capacity, may deploy monies once validly received, but whether the exaction of those monies from members’ accounts was authorised in the first place. Where, as here, the evidence establishes that the fee was set at a level, and maintained in a form, which incorporated an allowance for the funding of commissions, the inquiry required by cl 3.7 is not exhausted by describing the fee as an “administration fee”. To treat it as such is to assume the conclusion.

89    That conclusion may be tested by a simple illustration: on the construction advanced by NULIS, it would be sufficient that a fee be described and disclosed as an administration fee for it to fall within the trustee’s charging power, even if, in substance, the fee was exacted for a purpose manifestly unconnected with the administration or operation of the Fund. In that way, the limitation expressed in cl 3.7 would be illusory. The Deed should not be construed as conferring so unconstrained a power.

90    A further matter should be noted. The submissions and argument at trial and on appeal were overwhelmingly directed to asset-based commissions funded through administration fees. There was little separate analysis of contribution-based commissions. My reasoning proceeds on the footing on which the case was conducted, namely that the impugned fees were those linked, in substance and operation, to the continuation of commission arrangements of the kind identified above.

C.4    Conclusion of Construction

91    For these reasons, the appellant’s construction should be preferred. Clause 3.7 is the operative charging clause. Its words “for the administration and operation” impose a controlling limitation. Clause 4.2 is machinery for the determination, recording and administration of Member Package terms, including fee structures, within the bounds otherwise imposed by the Deed. Clause 4.8 is an indemnity provision. The impugned fees were not charges for the administration and operation of the Division. They were charges imposed in direct and functional connexion with the continuation of adviser commissions.

92    The consequence is that Question 22 should not have been answered “No”. To the extent that question asked whether the charging by NULIS of fees to the accounts of the applicant, the sample group member, group members on the same product terms and Legacy Product Holders for the purpose of funding commissions was not authorised by the Deed, the correct answer, on the footing on which the case was conducted, is “Yes”.

D    STATUTORY COVENANTS

D.1 Why it is convenient to deal with the issue  

93    It is necessary to say something about the way in which this aspect of the case was conducted at trial. The case advanced by the applicant in relation to the statutory covenants was not a free-standing challenge to the charging of fees in circumstances where those fees were said to be unauthorised by the Deed. Rather, the statutory case was advanced on the footing that the Deed permitted the charging of the fees, and that, notwithstanding that premise, the making and implementation of the Decision contravened the covenants in s 52(2) of the SIS Act.

94    That is consistent with the structure of the questions posed. Questions 7 to 13 proceed on the basis that the answer to Question 2 is “yes” and require an evaluation of the conduct of NULIS by reference to the statutory norms, not a reconsideration of whether the fees were authorised under the Deed. The statutory case was thus framed as an alternative to the construction argument, not as an additional route to impugn the same conduct on the footing that it was unauthorised.

95    It follows that, in addressing Questions 7 to 13 on the appeal, the issue is whether it was open to the primary judge to conclude that, on the premise that the Deed authorised the charging of the fees, NULIS did not contravene the statutory covenants. It is not necessary, and it would not be appropriate, to consider whether the charging of fees, if unauthorised, would itself constitute a breach of those covenants. That was not the case which was run.

96    Although, for the reasons given earlier, I would allow the appeal in part in relation to the construction issue, the appellant also challenges the primary judge’s answers to the common questions concerning the statutory covenants implied into the governing rules of the Fund by s 52(2) of the SIS Act. It is therefore necessary to consider whether error has been demonstrated in relation to those answers.

97    The statutory norm in s 52(2)(c) requires a trustee to perform its duties and exercise its powers in the best interests of beneficiaries. The covenant is normative but does not impose a standard of perfection. Nor does it require the Court to determine with hindsight what the best possible decision would have been. The inquiry is whether the course adopted by the trustee was one which could reasonably be regarded, objectively and prospectively, as being in the interests of beneficiaries at the time the decision was made.

98    The primary judge approached the issue in accordance with the principles articulated in Karger v Paul [1984] VR 161 and Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521; (2019) 138 ACSR 459. Her Honour emphasised that the inquiry must be conducted prospectively from the circumstances as they existed at the time of the decision, that more than one course of action may be capable of satisfying the covenant, and that the fact that another decision might have been available does not establish breach. The appellant initially had a ground of appeal which suggested that the primary judge erred in applying, or alternatively failed to correctly apply, the standard of review stated in Karger v Paul (considered in Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254) when considering whether the making and implementation of the decision breached the covenants in s 52(2) of the SIS Act: PJ [472]–[491].

99    The standard of review ground was not pressed as initially indicated. Rather, the appellant asserted it was the role of the Court to make an evaluative judgment, taking into account all the circumstances including the commercial judgments made by the trustees, as to whether the decision was one that was consistent with the statutory norm.

100    As it happens, this judgment does not provide the occasion to wade into the question of the appropriate standard of review of such decisions including the issues raised recently, and extra-curially, by Justice Jackman in his comprehensive article, “Superannuation Trustees’ Duty to Make Money for their Beneficiaries”, which was delivered to the Law Council of Australia Superannuation Lawyers’ Conference on 28 March 2025. As I will now explain, the insuperable difficulty confronting the appellant’s attack lies in the evidentiary record as reflected in the findings of the primary judge.

D.2 The nature of the appellant’s attack and the answer of NULIS

101    The appellant’s case proceeds, in substance, by isolating the continuation of commission payments and treating that feature as determinative of breach. The applicant submitted that no reasonable trustee acting in the best interests of beneficiaries could have decided to continue arrangements which resulted in members bearing the cost of commissions, particularly in circumstances where, as it was put, those commissions were not matched by the provision of ongoing services.

102    The answer advanced by NULIS, both below and on appeal, relied upon the detail of the decision-making process, the contemporaneous materials before the board, and the range of considerations which, on the primary judge’s findings, were considered. NULIS submitted that the appellant’s case impermissibly abstracted one feature of the arrangements from that broader context and invited the Court to substitute its own evaluation of what ought to have been done for the evaluative judgment made by the trustee at the time.

103    On the primary judge’s findings, that answer must be accepted.

D.3 The board process and the contemporaneous materials  

104    Her Honour undertook a careful and detailed examination of the contemporaneous documentary materials which recorded the board’s deliberations concerning commissions and the proposed restructuring of the superannuation business. Those materials included workshop papers, briefing memoranda, board papers and board minutes spanning the period in which the relevant decisions were considered.

105    The chronology reconstructed by the primary judge demonstrates that the issue was the subject of sustained deliberation by the board over a period of months. A series of workshops and board meetings addressed the implications of the proposed SFT and the broader strategy for transitioning members from legacy commission-based products to new product structures. Her Honour found that the documentary record showed that the board initially declined to approve continuation of the commissions and sought further information before reaching a final decision.

106    The primary judge’s findings make clear that this was not a single-step decision. The board did not immediately approve the continuation of commissions. Rather, it required further work to be undertaken and further material to be provided before it was prepared to resolve the issue. The materials before the board included successive papers addressing the consequences of cessation, the feasibility and timing of the proposed trade-up programme, and the interaction between those matters and the proposed SFT. The board was also apprised of the potential impact of different courses upon members’ rights and the continuity of their arrangements. That process, as her Honour found, involved iterative consideration of alternatives rather than the acceptance of a predetermined course.

107    That feature of the chronology is of significance. It demonstrates that the decision was not adopted as a default position or without scrutiny, but only after the board had required further analysis and was satisfied, on the material provided, as to the consequences of alternative courses.

108    The board materials, as described in the primary reasons, addressed: (a) the continuation of existing commission arrangements on the receiving trust side following the proposed SFT; (b) the treatment of members whose accounts were subject to those arrangements; (c) the impact of continuation upon member fees and rights; and (d) the consequences of alternative courses, including cessation.

109    It was open to the primary judge to regard that process as one involving real and genuine deliberation directed to the interests of members.

D.4 Trade-up, operational feasibility and timing  

110    A central premise of the appellant’s case was that commissions could and should have been discontinued immediately. The primary judge rejected that premise after considering the evidence concerning the proposed trade-up programme and the practical realities of implementing it.

111    Her Honour accepted evidence that the migration of members from legacy commission-based products to new product structures required substantial preparatory work, including systems changes, product redesign and regulatory engagement. The transition could not be implemented instantaneously.

112    That finding is critical. The case is not one in which the primary judge found that cessation was straightforward but declined to require it. Rather, the finding was that the pathway away from legacy arrangements required time and sequencing. In those circumstances, it was open to the trustee to conclude that maintaining existing arrangements for a period pending that transition was consistent with the interests of members considered as a whole.

113    In that regard, the evidence accepted by the primary judge was that the transition away from legacy arrangements was itself a planned process, involving product redesign, systems changes and regulatory engagement. The continuation of commissions was considered in that setting as an interim measure pending the implementation of that transition. The board was entitled to take into account that an immediate cessation would not simply remove a cost, but would do so in circumstances where the replacement arrangements were not yet capable of being implemented across the relevant membership base.

114    The board also considered the implications of termination for the timing of the SFT. The materials indicated that discontinuing the arrangements could delay the transaction and thereby disrupt the broader restructuring. The primary judge rejected the appellant’s contention that the transfer would have proceeded unaffected, concluding that there was a reasonable basis for treating delay as a real risk.

D.5 Litigation risk, adviser behaviour and attrition  

115    The board also considered the potential litigation risk associated with terminating commissions abruptly. The primary judge accepted that the board was entitled to treat that possibility as a relevant consideration. It was not necessary for the trustee to demonstrate that such litigation would succeed; it was sufficient that the risk was reasonably regarded as material.

116    The board further considered the likely response of financial advisers and the potential for member attrition. The evidence accepted by the primary judge indicated that advisers played a significant role in directing members into and out of retail superannuation products. The board therefore considered that the removal of commissions might lead advisers to recommend that their clients transfer to other products.

117    The possibility of adviser-driven attrition was regarded as having implications for the scale of the Fund and the costs borne by remaining members. Evidence accepted by the primary judge indicated that a reduction in funds under management could lead to increased costs for those members.

118    These were plainly relevant considerations. They were directed to the impact of the decision upon members as a whole.

119    The primary judge’s findings also record that these matters were not treated in isolation. The board considered the interaction between adviser behaviour, member retention and the scale of the Fund. The potential for member attrition was not viewed merely as a commercial inconvenience to the trustee, but as a matter capable of affecting the cost structure borne by remaining members. It was in that sense that the board treated those risks as bearing upon the interests of members as a whole, rather than as reflecting any preference for the interests of advisers or the trustee.

D.6 The broader restructuring context  

120    The continuation of commissions was considered by the board in the context of a broader restructuring of the wealth management business, including the proposed SFT and planned product changes.

121    The primary judge accepted evidence that the trustee was pursuing a strategy directed to improving product offerings and administrative systems, and that the continuation of existing arrangements during the transitional period formed part of that broader strategy.

122    The case of NULIS, accepted by the primary judge, was not that commissions were desirable in themselves, but that their continuation for a limited period was justified as part of an orderly transition to a different product structure.

D.7 Best interests and fairness  

123    It should be acknowledged that, viewed at a level of generality, the result of the decision gave rise to a form of structural inequality. Members were charged the same administration fee irrespective of whether commissions were payable in respect of their interests. In that sense, some members bore, through the common fee structure, costs associated with commission arrangements from which they did not directly benefit. It is unsurprising that such an arrangement may, at an intuitive level, be thought to engage notions of fairness.

124    However, the statutory covenants do not require that all members be treated identically in all respects, nor do they mandate that each component of a fee structure operate with perfect equivalence as between members. The question is whether, in the circumstances as they existed at the time, and having regard to the range of considerations before the trustee, the continuation of those arrangements as part of a broader transitional strategy was one which it was open to the trustee to regard as consistent with the interests of all members. For the reasons given above, it was.

125    Her Honour concluded that the trustee was entitled to determine that maintaining the status quo pending the implementation of the trade-up programme better protected members overall than immediate cessation with the attendant risks identified in the evidence.

126    The fairness covenants were also rejected. Her Honour held that those covenants do not require identical treatment of all members and do not preclude differential treatment where there is a rational basis for it. Maintaining existing arrangements for a defined cohort during a period of transition was not, on her Honour’s findings, unfair.

D.8 Conclusion  

127    When the evidence is considered as a whole, the appellant’s case largely isolates one feature of the arrangements and treats it as determinative. On the primary judge’s findings, that approach does not engage with the full body of considerations which informed the trustee’s decision.

128    Once those findings are accepted, as they must be absent demonstrated error, it was open to the primary judge to conclude that the trustee’s conduct did not contravene the statutory covenants.

E    DISPOSITION

129    I would allow the appeal in part.

130    The appellant has established error in the primary judge’s answers to the common questions concerning the proper construction of the Deed, including, in particular, the question whether NULIS had power to charge the impugned fees for the purpose of funding grandfathered adviser commissions.

131    The answer given by the primary judge to Question 22 should not stand and must be set aside. In its place, Question 22 should be answered “Yes”. It is also appropriate to address Question 23. Although that question was not answered by the primary judge, it is, in substance, directed to the same issue of construction, namely whether the fees in question were for the “administration and operation” of the Fund within the meaning of cl 3.7. For the reasons given in Section C, that question should also be answered “No”.

132    It is neither necessary nor appropriate to set aside the answers given by the primary judge to Questions 7 to 13. If my construction analysis set out in Section C is correct, those answers do not bear upon the disposition of the proceeding, because the charging of the fees was not authorised in the first place. If, on the other hand, that analysis is incorrect, then the answers given by the primary judge to those questions stand as the determination of the alternative case which was run at trial. In those circumstances, no error has been shown in those answers, and they should remain undisturbed.

133    I would have ordered the parties to provide short minutes of order giving effect to these reasons, including: (a) identifying the answers to the common questions which are to be set aside; (b) providing for the substitution of answers reflecting these reasons; and (c) making provision for the remitter of the proceeding to the primary judge for the determination of all questions concerning relief.

134    I would have also ordered NULIS to pay the appellant’s costs of the appeal, and made a further order providing that the costs of the hearing below be resolved following the determination of the appellant’s entitlement to any relief.

135    Of course, the orders I propose will not be made because the majority take a different view as to the construction issue. Notwithstanding this, it is appropriate to make a further point. Even accepting the construction analysis of the majority, the orders proposed by NULIS are wrong because I do not consider the s 33ZB Orders can remain in their present form.

136    As I have already noted, the s 33ZB Orders made below do not merely record abstract answers. Rather, the orders expressly identify and incorporate sections of the primary judge’s reasons, including portions of the construction reasoning now rejected by the majority. In particular, the incorporated passages include reasoning at PJ [390]–[405] proceeding on the footing that cl 4.2 operated as an independent source of charging power and that the Member Package/PDS structure supplied authority for the impugned fees. Although those aspects of the reasoning are rejected, they remain expressly incorporated into the s 33ZB Orders. This is problematical because answers to common questions operate as a form of declaration of legal rights, binding not only the parties but also non-parties to the litigation, being group members who have not opted out (as I noted in McNickle v Huntsman Chemical Company Australia Pty Ltd (Initial Trial) [2024] FCA 807 (at [1163])).

137    Mr Brady is correct in his assertion that the primary construction argument advanced by NULIS, and accepted by the primary judge, was wrong. The s 33ZB Orders, as framed, incorporate reasoning proceeding upon that footing. Section 28 of the FCA Act confers ample power on the Court to vary orders on appeal. In my respectful view, the proper exercise of that appellate power requires the s 33ZB Orders to be varied so that they accurately reflect the proper construction accepted on appeal.

138    It follows that, even on the majority’s approach to construction, the appeal should be allowed to the extent necessary to vary the s 33ZB Orders so that they accurately reflect the legal basis upon which the common questions have been determined, and should otherwise be dismissed. It is notable that the construction analysis accepted by the majority involves a more detailed use of the PDS terms than was central to the primary judge’s reasoning. Although it may be accepted that the appeal was not conducted on the footing that different commission-paying products or different PDS terms gave rise to materially distinct issues of construction, the Full Court was principally taken to the Gold Star PDS applicable to Mr Brady. In those circumstances, curiously, both below and on appeal, no detailed product-by-product analysis was undertaken of the relevant PDS terms applicable to all group members when answering the common questions. In any event, I would hear from the parties on costs, given that the primary construction argument advanced by NULIS, both below and on appeal, was rejected.

139    Finally, upon notification to the parties as to the delivery of this judgment, the Court was informed of the unfortunate death of the representative applicant, Mr Brady. This does not preclude the delivery of judgment (see r 30.34 of the Federal Court Rules 2011 (Cth)) but given the likely delays associated with the granting of probate (and complications associated with obtaining an order appointing an administrator ad litem) the demise of the representative applicant may be problematical in the event any further step is contemplated in relation to this matter. Accordingly, we propose to stay the order of the primary judge dismissing the proceeding for a short period so that any application by those associated with class action may consider appropriate can be made to the Full Court (including an application by a group member for substitution of the applicant under s 33T and/or s 33ZF of the FCA Act).

Associate:

Dated:    21 May 2026

REASONS FOR JUDGMENT

HESPE AND BUTTON JJ:

INTRODUCTION

140    The Respondent (NULIS) was the trustee of the MLC Super Fund (the Fund). The Fund had various Divisions, one of which was The Universal Superannuation Fund Scheme (TUSS). Members of TUSS, which included the Appellant (Mr Brady) were transferred to the Fund on 1 July 2016, pursuant to a successor fund transfer (SFT). Prior to the SFT, the trustee of TUSS was MLC Nominees Pty Ltd (MLCN).

141    In the lead-up to the SFT, the board of NULIS gave consideration to whether to continue to pay grandfathered commissions to financial advisers of TUSS members for whom such commission arrangements were in place, and whether to continue the existing practice whereby administration fees charged by the trustee (previously MLCN) and the funds thereby accrued were, in part, used to fund the payment of those commissions. On 10 June 2016, the board of NULIS decided to continue the grandfathered commissions arrangements. That decision is referred to as the Grandfathering Decision. The board’s resolution was expressed as follows in the minutes of its meeting (emphasis in original):

The Directors of NULIS RESOLVED TO APPROVE to maintain the current grandfathered commission arrangements pertaining to the products which form part of TUSS following the proposed SFT to the MLC Super Fund.

142    Subject to some matters, addressed later in these reasons, concerning commissions paid upon members making contributions to their accounts (contribution commissions), this appeal is only concerned with the payment of asset-based trail commissions. These commissions are not to be confused with contribution commissions or with “adviser service fees” (fees for services provided by financial advisers, paid for via superannuation funds) and “plan service fees”. Adviser service fees and plan service fees were not grandfathered commissions (primary judgment (J) at [86], [214]).

143    While the ambit of issues arising below was broader than the issues going forward on appeal, the relevant issues determined by the primary judge in NULIS’ favour were as follows:

(a)    whether NULIS had the power under the trust deed to charge the administration fees to the extent that revenue from those fees was used by NULIS to fund the payment of commissions;

(b)    whether, in making and implementing the Grandfathering Decision, NULIS was in breach of the best interests covenant under s 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act); and

(c)    whether, in making and implementing the Grandfathering Decision, NULIS was in breach of the fairness covenants under ss 52(2)(e) and (f) of the SIS Act.

144    The parties agreed that although the case below and the appeal papers also addressed what was referred to as the LRA Approval Decision, it was not necessary for the Full Court to address that decision. The LRA Approval Decision was the decision by NULIS to bind itself to pay commissions from the date of the SFT by way of the Licensee Remuneration Agreement (LRA) and amending the Internal Remuneration Agreement (IRA).

145    No factual findings of the primary judge were challenged on the appeal.

THE POWER ISSUE

Facts concerning charging of fees and payment of commissions

146    Financial advisers received commissions pursuant to arrangements set out in the LRA and related Remuneration Schedules. Various versions of the LRA were before us on the appeal, but not the Remuneration Schedules (although the primary judge referred to one such schedule (from the pre-SFT period) at J [860]).

147    Under the IRA, and before the SFT, National Wealth Management Services Ltd (NWMS) paid remuneration to the financial advisers on behalf of the relevant “MLC Issuer” entity and was reimbursed by the MLC Issuer. After the SFT, the IRA was amended to include NULIS as an “MLC Issuer” under the IRA. The arrangement otherwise remained in place after the SFT (ie, NWMS paid remuneration to the financial advisers and was reimbursed by MLC Issuers, including NULIS).

148    Members of TUSS were invested in various superannuation “products”. Members who were invested in products in the TUSS Division were charged fees by NULIS, but not all of those products involved the payment of commissions to financial advisers. The primary judge listed and explained some features of the commission-paying products in TUSS as at June 2016 (J [71]). It was not suggested, on the appeal, that the answer to any of the issues arising on the appeal might differ from one commission-paying product to the next.

149    As noted already, NULIS charged members administration fees. These fees were charged by NULIS in its capacity as trustee and then retained by NULIS in its own corporate capacity (J [442], [786], [797]–[798]). In its corporate capacity, NULIS used some of the funds it obtained by charging members administration fees to fund the payment of grandfathered commissions to financial advisers. There was no separately identified charge levied by NULIS as trustee to fund the payment of these commissions. As the findings of the primary judge, and evidence referred to by the primary judge, made clear — see J [68], [83]–[85], [331], [336], [442], [795], [797]–[798] and the primary judge’s answer to common question 2(b)(ii) — funds collected through the levying of administration fees by NULIS in its capacity as trustee constituted the source of the pool of funds from which NULIS in its corporate capacity paid grandfathered asset-based trail commissions.

150    The question of whether NULIS was empowered by the trust deed to charge these administration fees, to the extent that they were used to fund payment of grandfathered trail commissions, must be addressed by reference to what it was that NULIS, in its capacity as trustee, was in fact charging; whether or not a charge is authorised under the terms of the trust deed cannot be assessed at large, unanchored to the facts of what was charged.

151    What NULIS, as trustee, was charging is to be identified by looking to the terms of the Product Disclosure Statements (PDS). Relevantly to the period with which we are concerned, the fees charged to members for a specific product were set out in the PDS for that product (there were some other types of disclosure documents in earlier periods, which are not relevant). Attention must be given to the PDSs not because their terms are to be treated as conclusive in determining what the fees charged were “for” — and specifically whether the fees were charged for the “administration and operation” of the TUSS Division — but because the PDSs set out what the fees in fact were (particularly the amounts of fees and percentage rates at which they were levied), how they were imposed, and how they could vary (as we come to in relation to refunds and rebates below).

152    The Court was taken to the post-SFT PDS for the MLC MasterKey Allocated Pension Gold Star product, which is the product in which Mr Brady was invested from 2004 until 5 June 2020, when he was traded up to the MasterKey Pension Fundamentals product (J [100], [103]–[104], [113]–[114]).

153    This PDS for the post-SFT MLC MasterKey Allocated Pension Gold Star product is dated September 2016. The PDS contained a section setting out “Fees and other costs”. That section identified that members would be subject to an “Investment fee” and an “Administration fee” (amongst other fees and charges). The administration fee for this product at that time had two components: a fixed “Account fee” of $6.50 per month, and a “Base Administration fee”, which was set at 1.32% per annum, subject to a “refund” that, though only paid quarterly, would effectively reduce the percentage fee, depending on the account balance of the investor (and any eligible linked investors) in MLC MasterKey accounts. For example, a combined account balance of $400,000 or more would see the “after refund” base administration fee component reduced to 1.00% per annum.

154    In a note accompanying the reference to the base administration fee in the breakdown of fees and other costs, the PDS stated that (emphasis in original):

We may pay your financial adviser an ongoing asset-based commission from the base administration fee charged. You can negotiate with your financial adviser to reduce the asset-based commission at any time which will mean that you will get a rebate to your account. Please see the Additional explanation of fees and costs section for more information.

155    Under the heading “Adviser remuneration” within the “Additional explanation of fees and costs” section, the PDS explained that the member’s financial adviser “may receive a payment from us in one or more of the following ways: asset based commission, and/or an Adviser service fee”. As explained in the PDS, and as was generally accepted in the proceeding, adviser service fees were amounts that the member authorised be deducted from their account to pay advisers for the cost of their services, and are not commissions with which this proceeding is concerned. In explaining adviser service fees, the PDS stated that any such fee “will be in addition to the other fees described in this [PDS]”.

156    The “Asset-based commission” was explained as follows:

Your financial adviser may receive ongoing commission from us. This is not an additional charge to your account. We pay this to your financial adviser.

You can negotiate with your financial adviser to reduce the asset-based commission at any time. Any negotiated reduction will be paid to your account as a rebate.
The rebate paid may be less than the amount negotiated due to the impact of tax.

The rate of asset based commission is based on the account balance that you (or if applicable the combined account balances you, or any eligible linked investor have with us) hold in MasterKey products which are serviced by the same financial adviser.

After setting out a table specifying the percentage rate of commission for different account balances, the PDS stated that advisers “may receive alternative forms of remuneration, such as conferences and professional development seminars”. The PDS stated that: “These are paid from the Administration fee and are not an additional cost to you.”

Terms of the Trust Deed

157    The Fund was governed by the MLC Super Fund Trust Deed dated 9 May 2016 (the Deed). The Fund was established in anticipation of the SFT occurring on 1 July 2016. TUSS was one of the Divisions established under the Deed (with pre-SFT TUSS members to be transferred to the TUSS Division of the Fund upon the SFT). The Deed was structured on the basis that Division-specific provisions were set out in the relevant Schedules to the Deed, and certain provisions applying across the board were identified in cl 1.3(a)(2). NULIS was named as the Trustee.

158    The generally applicable provisions of the Deed included the general powers of the Trustee, specified in cl 4.1, and the specific powers of the Trustee listed in cl 4.2. The specific powers included the power to “make rules and adopt procedures in relation to the Fund” (cl 4.2(j)), and the power to “do anything that is necessary or incidental to the exercise of any Power by the Trustee” (cl 4.2(n)), where “Power” was defined as “a power, right, discretion, remedy, determination or authority of any nature and howsoever arising…” (cl 1.1). Clause 14.1 conferred on the Trustee a broad power to amend or replace any or all provisions of the Deed and to do so prospectively or retrospectively.

159    The provisions specific to TUSS were set out in Sch 1 to the Deed. It was common ground that, unless cll 3.7 or 4.2 of Sch 1 conferred on NULIS the power to charge administration fees to the extent they were used to fund the payment of grandfathered commissions, NULIS did not have the power to levy the fees to that extent.

160    Those two provisions are of central importance and were in the following terms (including cl 4.8 and cl 4.1 of Sch 1 as necessary context) (underlined emphasis added):

4.8    Liability and indemnity

To the extent that is permitted by the Relevant Law, the current and former Trustee and each current and former director or officer of the Trustee is:

(a)    exempted from any liability; and

(b)     may be indemnified (or exonerated) from the Fund in respect of a liability (including a Fund Expense), incurred while acting as Trustee or a director or officer of the Trustee.

…

Schedule 1:    TUSS Division

3.7     Remuneration

(a)     The Trustee may charge for the administration and operation of this Division, a Member Package or a class of Members of a Member Package an amount the Trustee determines.

(b)     If the Trustee or a director, officer or employee of the Trustee performs work in relation to this Division in a personal capacity, he or she can be paid all their usual fees for the work they do or work that is done by a firm in which that person is a partner or an employee, including anything which could be done by an unqualified person.

…

4.1     Establishment and termination of a Member Package

The Trustee may:

(a)     establish one or more Member Packages; and

(b)     terminate a Member Package and apply the assets in accordance with clause 2.3(c).

4.2     Terms of a Member Package

(a)     The Trustee must administer a Member Package in accordance with the terms of the Member Package from time to time.

(b)     The terms of a Member Package are to be determined and recorded in writing by the Trustee and made available to a current or potential Member (and, if relevant, Standard Employer Sponsor) in a manner determined by the Trustee.

…

The primary judge’s decision regarding power

161    The primary judge concluded that cl 4.2 of Sch 1 provided the primary source of power to charge the fees in question because it imposed a mandatory duty on NULIS to administer a “Member Package” in accordance with its terms. The definition of a Member Package in cl 1.1 of Sch 1 expressly provided that its terms may include a “fee structure … determined under clause 4.2” (J [356(1)], [390]). Accordingly, her Honour reasoned, the power to determine and charge those fees was a necessary implication of the imposition of the duty by cl 4.2 to administer the Member Package (J [392]–[394]). The primary judge found that once NULIS determined the terms of a product and recorded the terms in a PDS, the Trustee was both empowered and obliged by cl 4.2 to charge the fees set out in those terms (J [395]–[397]).

162    The primary judge also found that cl 3.7 of Sch 1 provided a separate basis for charging the fees in question, rejecting Mr Brady’s narrow construction of the phrase “for the administration and operation” as requiring a specific nexus between the remuneration and the exertion of skill or effort by the Trustee in administering the trust (J [425]). Her Honour held that there was no special rule requiring such a narrow interpretation to be given to a trust deed (J [417]), nor was there any justification for it on the terms of the Deed (particularly since it disapplied the self-dealing rule) or as a matter of principle, given that a for-profit superannuation trustee operates a business with the intention of deriving a profit and is entitled to charge fees it may retain for its own use (J [423]–[425]). The primary judge found that it was open to conclude that the fees formed part of the amount (ie, the “pool of funds”: J [445]) that NULIS charged for the “administration and operation” of the Fund, within the meaning of cl 3.7 of Sch 1, on the basis that: (a) each of the fees was referable to an aspect of members’ superannuation interests, had been adequately disclosed, and formed part of the terms of the relevant Member Package; and (b) the fees were, in aggregate, the price to participate in a for-profit superannuation scheme, and represented payment for NULIS’ service as a commercial trustee in administering and operating the Fund (J [418]).

163    To reconcile these findings with Mr Brady’s argument — that the power to charge under cl 3.7 of Sch 1 and the power to claim an indemnity under cl 4.8 set out the only circumstances in which NULIS may take trust funds for itself — the primary judge found that “[n]either the text of, or context relevant to, the Trust Deed would give those clauses that character” (J [399], [402]). Rather, her Honour determined that the Deed was “replete with powers that overlap” such that the “only safe course” is to construe each duty and power according to its own terms (J [402]). Her Honour also rejected the notion that treating cl 4.2 of Sch 1 as a separate source of power to charge fees effectively rendered cl 3.7 of Sch 1 and cl 4.8 otiose, finding instead that the Trustee may need to call on those powers to make up for any shortfall in the fees charged to members under cl 4.2 of Sch 1 (given they require disclosure to members in advance, usually via a PDS) (J [403]). On the contrary, her Honour found that Mr Brady’s construction of cl 4.8 and cl 3.7 of Sch 1 arguably rendered cl 4.2 of Sch 1 otiose, as it would prohibit the Trustee from carrying out its duty to administer a Member Package unless the fees were otherwise capable of withdrawal under cl 4.8 or cl 3.7 of Sch 1, which would not accord with the business common sense with which trust deeds are to be construed (J [407], see also [411]–[413]).

Clause 3.7 of Sch 1 conferred on NULIS the power to charge administration fees, however the funds were used

164    Contrary to the conclusion of the primary judge, we do not consider that cl 4.2 provided an independent power for the Trustee to levy fees. The Deed must be construed in its entirety. We agree with Lee J that, for the reasons his Honour gives, the power of the Trustee to levy fees for its own account (as opposed to indemnifying itself for expenses incurred by it in its capacity as trustee) is to be found in cl 3.7 of the Deed.

165    The issue for determination is whether NULIS was authorised by cl 3.7 of the Deed to charge administration fees to the extent that part of the administration fee funded NULIS’ payment of trail commissions to financial advisers.

166    The primary judge referred to the authorities concerning the approach to be adopted in construing the terms of trust deeds. As set out in the primary judge’s reasons, there are no special rules of construction relating to pension or superannuation trusts; trust deeds in the superannuation field are to be given a practical, purposive and business-like construction, requiring that attention be paid to the language used as well as the commercial circumstances the deed addresses, the context in which the deed operates and the objects it is intended to secure: (J [378]–[379], referring to Vision Super Pty Ltd v Poulter (2006) 154 FCR 185; [2006] FCA 849 at [66] (Young J) and FSS Trustee Corporation v Eastaugh [2017] VSCA 218 at [61] (Keogh AJA, with whom Tate and Santamaria JJA agreed)).

167    The Appellant was at pains to make plain that he did not contest the proposition that, as a “for-profit” trustee, NULIS could charge administration fees that exceeded its actual costs, leaving it with a profit to do with as it pleased. The Appellant did not take issue with the primary judge’s decision to that extent (eg, J [425]).

168    The Appellant contended, however, that in order to be authorised by cl 3.7 of Sch 1, any fees charged “must have a real connection with the exercise by NULIS of some function or exertion on the part of NULIS in administering and operating the trust”, otherwise such fees cannot be said to be for “administration and operation”. The Appellant contended that the primary judge did not engage with this argument. In amplifying this contention, the Appellant submitted that the words “administration and operation” in cl 3.7 of Sch 1 cannot be ignored as they “reflect the recognised principle that there must be some nexus between the remuneration and the exertion of skill or effort by the trustee in administering the trust”.

169    The Appellant’s central contention, then, was that an identifiable part of the “administration fees” were “not for any recoupment of costs or for any work done in the administration and operation by NULIS as trustee of the [Fund]”, rather that part of the administration fee was just a “pass-through”. This conclusion was said to be supported by three factual findings:

(1)    That there was no legal requirement for the financial services licensee (ie, the adviser) to provide any ongoing services to members in exchange for the receipt of commission payments (J [851]–[878]).

(2)    NULIS did not suggest that the payment of commissions was something it could recover from the assets of the Fund under the indemnification provisions of cl 4.8, as that provision was concerned only with liabilities incurred by NULIS as trustee, whereas the commission payments were made by NULIS in its corporate capacity (J [442], [786], [798]).

(3)    Members could have requested commissions be “dialled down to zero at any point”, which would have been implemented without NULIS’ agreement, and effect would be given to this by NULIS increasing the administration fee rebate to 100% and reducing the contribution fee to 0%. Such a reduction in fees would not result in any ascertainable change to the services being provided to the member by NULIS, which highlighted that the fees were “unrelated to the trustee’s remuneration for administration of the fund”, as was the fact that the “fee” may be different between members in the same product having regard to individual adviser commission rates.

170    The Appellant’s submissions must be rejected. They conflate the use to which NULIS, in its corporate capacity, put a portion of the funds it received as a result of the levying of administration fees, with the activity of NULIS, as trustee, which supported the charging of the administration fees.

171    The Appellant did not dispute that NULIS did in fact administer and operate TUSS and was entitled to, and did, charge administration fees for so doing under cl 3.7 of Sch 1. In its trustee capacity, NULIS charged administration fees at a stated percentage rate, in accordance with the disclosures made in the PDSs. In the case of the MLC MasterKey Allocated Pension Gold Star product, in which Mr Brady was invested (see paragraph 152 above), the administration fee was a fixed 1.32% per annum, although there were varying “refunds” depending on the overall combined account balances of the member and their eligible linked investors. The other two PDSs before us on the appeal and which postdated the SFT, similarly provided for a stipulated percentage administration fee.

172    In some instances, the administration fee percentage varied with the member’s account balance, and in others was fixed (but subject to an account balance-based “refund”). However, in all cases the administration fee that applied to a member’s account was the same whether or not the member had a third-party financial adviser to whom grandfathered commissions were paid. The rebate arrangements on which the Appellant relied do not change the fact that the administration fee remained a fixed percentage rate. We return to the rebate arrangements, and the significance of trustee service levels, below.

173    On the Appellant’s argument, the disclosure in the PDS about the fact that financial advisers may receive ongoing commission from NULIS at no additional charge to the member revealed what the administration fee, or at least part of it, was “for”. As set out above (see paragraphs 154–155), this part of the PDS informed members of several things:

(a)    their financial advisers may receive ongoing commission “from us”;

(b)    the ongoing commission would be paid from the base administration fee;

(c)    where such additional commissions were paid, that was not an additional charge to the member’s account; and

(d)    if a member negotiated with the financial adviser to reduce the asset-based commission, such a negotiated reduction would be paid to the member’s account “as a rebate”.

174    In considering the contents of PDSs for NULIS’s products, it should be noted that, both before and after the Future of Financial Advice (FoFA) reforms, the disclosure requirements applicable to PDSs issued by superannuation entities have been highly prescriptive. The prescriptive requirements have extended to the form and contents of tables specifying the types of fees that may be charged, and the details to be provided concerning commissions.

175    The legislative context also raises another point, which regrettably cannot be taken further given it was not addressed at all in submissions before us. That point is whether, and if so how, the regulatory context in which the terms of the Deed were formulated in 2016 bears on the construction of the relevant provisions of the Deed. That regulatory context includes the SIS Act and governing aspects of the Corporations Act 2001 (Cth) and the Corporations Regulations 2001 (Cth) (Corporations Regulations). The language used in cl 3.7 of Sch 1 to the Deed — “administration and operation of this Division” — mirrors the language used in s 29V(2) of the SIS Act, which defined “administration fee” as a fee that “relates to the administration or operation of a superannuation entity” (with some additional inclusions and exclusions). That definition was then picked up by Pt 2 of Sch 10 to the Corporations Regulations which, as just noted, prescriptively specified the disclosure requirements to be adhered to by NULIS in PDSs issued in respect of TUSS products.

176    Turning back to the case as it was argued: it may be accepted that NULIS set the administration fees it charged as trustee at a level that it considered (in addition to other considerations) would enable it to meet its out of pocket costs as trustee, and provide a profit margin.

177    Once levied, administration fees were to the account of NULIS in its corporate capacity. Revenue received by NULIS from fees was recognised and disclosed in NULIS’s financial statements as part of its “investment management and administration fee revenue”, and treated as “monies in” in NULIS’s corporate cheque account (J [786(3)]). It was up to NULIS to decide what it wanted to do with the revenue it held in its corporate capacity. NULIS could invest in upgraded office facilities. It could (as the Appellant explicitly accepted) engage in an advertising campaign or it could, after discharging its expenses, pay a dividend from its profit to its shareholder(s). Likewise, NULIS could pay grandfathered commissions. The disclosure, in PDSs, of the fact that asset-based commissions may be paid by NULIS to financial advisers did not stamp some portion of the administration fee charged by NULIS with a different character that is specific to the use to which NULIS, in its corporate capacity, would put some of the funds accrued by levying that fee.

178    In other words, the administration fee that was charged was a fee charged by NULIS as trustee for administering and operating the Division; what NULIS did with the funds it accumulated in its corporate capacity does not alter the character of the administration fee charged to members, being one for the service of administering and operating TUSS.

179    The Appellant disavowed that his arguments entailed any restriction on the level of profit a “for-profit” superannuation trustee could generate in setting its administration fees. It may be accepted that the amount of the administration fee was set with a view to ensuring sufficient funds remained to allow for the payment of grandfathered commissions and that such commissions would be paid from the funds thereby accumulated. But that is no different in concept from a for-profit trustee setting its fees at a level that enables it to meet the dividend expectations of its shareholders. To set a fee at a level that will generate profit available for distribution as dividends does not render the fee, to that extent, one charged “for” paying dividends to a shareholder.

180    Contrary to the Appellant’s submissions, this does not involve ignoring the words “for the administration and operation” of the Division in cl 3.7 of Sch 1. Nor does it involve reading them so broadly as to authorise the Trustee to take from the Fund, by the levying of charges, any amounts the Trustee might find it convenient to have in order to pursue some ambition or commercial end. Rather, the conclusion we have reached is driven by recognising the distinction between what was charged — fees charged to members for administering and operating TUSS — and what NULIS intended to do, and did do, with some of the money it collected by charging administration fees for its services in administering and operating TUSS. The character of a fee charged is not determined by tracing the use of the funds raised by the charging of the fee.

181    At many points, both orally and in writing, the Appellant’s arguments addressed the fees charged as though NULIS charged a specific and identifiable fee that it then passed on to financial advisers as trail commissions. The Appellant referred repeatedly to “the fee” being paid, “the fee” being passed on, back-to-back to financial advisers, and “the fee” stopping when commissions were no longer paid. That approach departs from the facts, and erects a straw man to shoot down. As set out, NULIS charged administration fees in its trustee capacity and, from the revenue so collected, in its corporate capacity NULIS funded the payment of trail commissions (which, as we have noted, are to be distinguished from adviser service fees, and plan service fees, which are not grandfathered commissions: see J [86], [214]). There was no specific or hypothecated fee charged to members that was then passed on to financial advisers as asset-based commissions through the posited back-to-back arrangement.

182    Much was made, both before the primary judge and on the appeal, about rebating arrangements. The evidence and submissions concerning “dialling up” rebates referable to reduced asset-based commissions, and “dialling down” contribution fee percentages, in relevant systems, was primarily directed to the contentions raised regarding contravention of the SIS Act covenants (the contention being that the commissions could be turned off almost instantly, across the board). In the context of the power issue, it appears that the Appellant relied, in the appeal, on rebating to suggest that the “reduction of fees” by NULIS in such circumstances, which resulted in no ascertainable difference in the services provided to the member by NULIS, “highlighted the true character of the fees: to fund payments to so-called advisers”.

183    The primary judge observed, in connection with the making of the Grandfathering Decision, that if commissions were grandfathered (ie, continued to be paid to financial advisers after the SFT), NULIS would continue to charge fees to members which were then to be applied to the payment of commissions (J [563]). There was no conclusion that, if trail commissions were no longer to be paid to financial advisers across the board, the administration fees charged to members would necessarily be reduced. On the contrary, in presenting “option 2” to the NULIS board during a workshop with the board in the weeks leading up to the making of the Grandfathering Decision — option 2 being to stop paying grandfathered commissions to advisers, without setting up alternate remuneration arrangements — management’s draft paper raised with the board that, if that option were taken, the Trustee would then need to decide whether the amounts charged to members that hitherto had funded the payment of commissions should be retained by the Trustee as “additional revenue”. This matter arose in connection with the question of the potential cessation of payment of grandfathered commissions across the board, as distinct from what occurred at the level of individual members. Although the final version of the paper did not include reference to the potential for option 2 to be implemented without changing administration fees, the raising of this issue in the draft paper highlights the distinct decisions to be made: whether to stop paying grandfathered commissions; and what the Trustee might decide to do in relation to fees charged to members.

184    The evidence concerning rebating arrangements where a particular member removed their financial adviser, or negotiated for lower trail commissions, was limited and unclear in some respects. The primary judge’s consideration of arrangements by which commissions could be reduced or removed, and a member could receive a rebate to their fees, was undertaken in the context of the proposition that commissions could be “turned off” immediately, across the board. This arose as part of the case on contravention of the SIS Act best interests covenant (see J [638], [670]–[679]); the primary judge did not address the operational detail or extent of mechanisms by which trail commissions might be reduced on a member-by-member basis, and related rebates paid to members. In the absence of findings of fact addressing those matters, care is required not to overlook limitations on the evidence or to seek to draw too much from such references as exist to arrangements for the reduction or removal of commissions and the impact of such changes on members’ net costs.

185    As to those limitations, we note as follows. The board was advised by management that “[s]ome products allow members to negotiate a lower commission amount with their financial adviser”, but which products were being referred to was not specified. There was also an internal document dated May 2015 (referred to by the primary judge at J [672]) which set out the action that would be taken if a member asked to “turn off” commissions to their adviser, or asked to “remove” or “change” their adviser, but this document only concerned two of the TUSS products (MasterKey Personal Super and MasterKey Business Super). Mr Brady was not invested in either of those products. The evidence of a witness, Ms Stansell (set out by the primary judge at J [673]) was that she was not aware of any similar document for other products and was not aware of what would happen if a member invested in other products made similar requests. A 2005 “MasterKey Enhancements Adviser Guide” relied on by the Appellant — which referred to the capacity for financial advisers and their clients to “dial down” ongoing commission payments, which would be rebated to the client — likewise only concerned a number of products in the MasterKey product suite.

186    The Appellant also relied on an email dated 8 May 2016, which was part of an email chain between management. The email referred to the existence of business processes to “switch off commission” when a member changes or removes their financial adviser by “dialling down the commission” using functionality that already existed to “rebate the commission to the members based on pre-existing product rules”. A management email dated 6 April 2016, relied on by the Appellant, identified what would have to occur “if” NULIS decided to discontinue grandfathering in the new Fund, not existing rebating practices. Various other documents referred to by the Appellant in footnotes to his written submissions mostly concerned what would or should occur as trade-ups were implemented, rather than directly addressing rebating arrangements prior to trade-ups.

187    While the evidence concerning rebating arrangements was limited, it was accepted that, prior to the planned trade-ups, members of at least some commission-paying products could, in effect, reduce the net administration fee charged to their member account by two means: negotiating with their financial adviser for the trail commission rate to be reduced and receiving the benefit (subject to a tax-related adjustment) of that reduction by a rebate to their account, or removing their financial adviser. Removing or changing a financial adviser meant any commissions paid to the financial adviser would no longer be grandfathered under FoFA.

188    It was also accepted that if a member did receive a rebate occasioned by the fact that NULIS was no longer paying that member’s financial adviser a trail commission, the services provided by NULIS to that member did not change. Nor did what NULIS have to do as trustee to administer and operate TUSS change. Do these matters compel a conclusion that the administration fees levied were, to the extent that they were applied to payment of grandfathered commissions, not charged by NULIS “for the administration and operation” of TUSS? We think not.

189    The significance, or otherwise, of services provided by a trustee to members and the tasks performed by a trustee remaining constant needs to be considered in context.

190    Clause 3.7 of Sch 1 to the Deed refers to the Trustee charging “for the administration and operation of this Division”. It does not refer to the administration and operation of a particular member account. The text of the clause did not require a direct nexus between the level of service provided to a particular member in the Division and the charging of a fee.

191    NULIS was the trustee of a large Fund with many thousands of members. The provision of standard services to all members is only to be expected; it would be most surprising if the services provided by NULIS as trustee were to vary from member to member on a bespoke basis, depending on whether the member had a linked financial adviser receiving trail commissions. Additionally, it must be remembered that for-profit superannuation funds were in a period of transition in which conflicted remuneration was still grandfathered, but it was recognised that the industry needed to move away from commission-based arrangements. In this transitional period, TUSS had many members with commission-based financial advisers, but also had many members without such third-party advisers, and, in addition, as members’ arrangements changed, some previously commission-related members became non-commission-related members. The variation that came with this transitional environment also tells against conclusions being reached on the character of the administration fees charged by NULIS on the limited basis that the services NULIS provided did not vary when members removed their financial advisers (or arranged for reduced commissions) and benefitted from rebates, or that NULIS, as the trustee of such a large Fund did not structure its operations differently in respect of different member cohorts within each Division.

192    It is also relevant to observe that members invested in TUSS products might be charged different net administration fee levels for a variety of reasons without there being any difference in service levels. An obvious example is the payment of refunds on administration fees to members based on the balance of their, and linked investors’, combined eligible accounts. The fact that there may be a different net administration fee payable, once rebates and refunds are taken into account, without the trustee providing different levels of service, does not thereby expose that the administration fee was not, to the extent of the difference, one levied “for” the administration and operation of TUSS.

193    Likewise, there is no suggestion that members of TUSS who did not have a financial adviser eligible to receive asset-based commissions, but who paid the same administration fees as members with such financial advisers, did not pay the entirety of their administration fees “for” the administration and operation of TUSS.

194    In this regard, it should be noted that members in commission-paying products were reported to the board as holding 47.7% of the funds under management in TUSS as at the end of 2015. If members without commission-receiving financial advisers paid the whole administration fee — and there is no suggestion that fee was imposed by NULIS as trustee other than being “for” the administration and operation of TUSS — it begs the question why the same charge imposed by NULIS as trustee on members in respect of whom NULIS (in its corporate capacity) did pay trail commissions, was charged by NULIS as trustee for a different, or mixed, purpose.

195    As mentioned above, the Appellant relied on the grandfathered commissions being payable even if no ongoing services were provided to the member by their financial adviser. It is not clear how this contention logically bears on the question of the characterisation of the administration fees charged by NULIS and whether, to the extent that revenue from such fees was used to fund payment of grandfathered commissions, the administration fees were levied by NULIS without power. In any event, one should be cautious in describing grandfathered commissions as, in substance, “fees for no service”. In the course of argument, the Court was taken to the Statement of Advice prepared for Mr Brady, and his wife. As is apparent from that Statement of Advice, no initial fee was charged for the extensive advice; rather, commissions, including trail commissions, were disclosed. Of course, such payment mechanisms were precluded by the FoFA reforms for new arrangements from 1 July 2013, and grandfathering was no longer available from 1 January 2021. Although the commissions may certainly be regarded as a form of “conflicted remuneration”, nevertheless, deferred payment for services, by way of commissions, is not the same thing as “fees for no service”.

196    As we have noted above (at paragraph 165), the terms of superannuation trust deeds are to be given a practical, purposive and business-like construction, and one that has regard to the commercial circumstances the deed addresses, and the context in which it operates. As the primary judge pointed out (J [425]–[426]), and as was also addressed by Blue J in AustralianSuper Pty Ltd v McMillan [2021] SASC 147 at [5], for-profit superannuation trustees operate in an environment where they can, and do, take profit, consistently with the SIS Act. This aspect of context tells against a narrow construction of cl 3.7 of Sch 1 of the Deed that fastens on assessing exactly what the Trustee did, and whether it applied funds exacted as administration fees for purposes that cannot be tied to some exertion on the Trustee’s part. In our view, the primary judge was correct to reject the Appellant’s suggestion that any remuneration NULIS paid to itself must have a direct connection with the exercise by NULIS, as trustee, of some particular function in undertaking the administration of the trust (see J [425]).

197    Once it is accepted, as it is here, that the Trustee could make a profit, it cannot be the case that the question of whether fees charged by NULIS as trustee fell outside the authorisation conferred by cl 3.7 of Sch 1 depends on the ultimate destination of the funds so received (whether that be payment of dividends, or advertising or payment of commissions to build or sustain scale and secure the distribution channel). The question cannot be answered by a kind of tracing analysis.

198    Other aspects of context are relevant as well. The context in which the Deed governing the Fund was formulated and operated involved a set of circumstances under which: grandfathered commissions were permitted to be paid; grandfathered commissions had been paid to some TUSS members’ financial advisers prior to the SFT; and the board of the incoming, post-SFT trustee (NULIS) considered whether to, and decided to, continue to pay grandfathered commissions. The fact of such commissions being paid, and the revenue acquired from charging administration fees being used, in part, to fund the payment of those commissions was disclosed in PDSs.

199    It is worth pausing to note that the view the Appellant takes of the ambit of cl 3.7 of Sch 1 would lead to the outcome that the architecture of this aspect of the operations of a commercial, for-profit superannuation fund was fatally flawed on the basis that the concept of a charge “for the administration and operation” of TUSS did not allow for the levying of an administration fee to the extent that part of the funds raised by the levying of that charge was to be passed on to financial advisers by way of commission payments. Of course, the far-reaching ramifications of such charges not being within power does not establish that they were within power. Nevertheless, the commercial context is relevant to the construction issue and tends against the expression “for the administration and operation” being narrowly construed so as to exclude the levying of an administration fee where part of the funds accumulated by levying that charge will be passed on to financial advisers as trail commissions.

200    Although the primary judge focused on cl 4.2 of Sch 1 as providing the source of power to charge the fees in question, her Honour went on to consider whether cl 3.7 of Sch 1 provided an independent basis for the charging of administration fees to the extent that the revenue was used to fund payment of grandfathered commissions (J [414]–[445]). Consistent with our analysis above, the primary judge focused on the fact that the fees charged by NULIS, once paid, were earnings of NULIS in its corporate capacity, were no longer trust monies, and could be spent in the same way as any other revenue earned by the company (J [442]). In our view, the primary judge was correct to reject Mr Brady’s focus on the “purpose” for which a portion of the fees would be applied as being directed to the wrong question (J [443]–[445], referring to Re HEST Australia Ltd (2021) 66 VR 338; [2021] VSC 809 at [95] and [101] (Button J)).

201    It is for these reasons that we do not share Lee J’s view that cl 3.7 of Sch 1 did not authorise NULIS to charge administration fees including to the extent that a portion of the revenue accruing to NULIS through charging administration fees was applied by NULIS to the payment of grandfathered commissions.

A note on contribution commissions

202    The reasons of the primary judge, and her Honour’s answers to common questions, reflect that the Appellant’s pleaded case was not confined to asset-based commissions, but included contribution commissions as a form of conflicted remuneration (see the Appellant’s Fifth Further Amended Statement of Claim at [24] and [29], his Amended Reply at [1A(d)(ii)], J [83], [795]–[798], and the definition of “Commissions” in the primary judge’s answers to the common questions). Nevertheless, the primary judge’s reasons do not separately address contribution commissions.

203    No submission was made on the appeal that the primary judge ought to have addressed contribution commissions separately from the asset-based trail commissions. On the contrary, the appeal before us was conducted almost entirely on the basis of the asset-based commissions. We say “almost entirely” because the Further Amended Notice of Appeal may, by cross-referencing to the paragraphs of the primary judge’s reasons cited, be read as extending to contribution commissions, and there were one or two references to contribution commissions in written submissions.

204    The case, as it was presented by the Appellant on the appeal, addressed the asset-based commissions. In the course of oral submissions, counsel for the Appellant was asked: “Is this case concerned with the contribution commissions”, to which counsel answered: “No”. In light of this unqualified answer, the inclusion of reference to contribution commissions in the post-hearing list of relevant facts filed by the Appellant, is unexplained.

205    Accordingly, we have addressed our analysis on the power issue to the asset-based trail commissions, funded through the administration fee. We note, in any event, that in the absence of submissions on contribution commissions, this Court, on the appeal, is not in a position to address all matters that may bear on the analysis of power. Those matters include the question of whether the contribution commissions were funded by a fee exacted by NULIS as trustee from the Fund at all, as distinct from being funded by a deduction from the member’s contribution before those funds were deposited into the Fund. On this matter, we note that the material before us includes a management email dated 6 April 2016 which states that only the amount net of the contribution commission is “invested”, while “trail commission is taken from the Admin fee”, and Appendix 3 to the 6 June 2016 paper to the board, which states that the “contributions fee” (which term is used to describe the contribution commission to the adviser), is “deducted at the time that the investment is placed into the member’s account”. This leaves open that such commissions may have been funded by a deduction being levied directly against the member’s contribution prior to its deposit into the Fund.

THE SIS ACT CLAIMS

206    We agree with Lee J that, for the reasons his Honour gives, the Grounds of Appeal directed to the primary judge’s rejection of the contentions that, by making and implementing the Grandfathering Decision, NULIS contravened the best interests covenant (s 52(2)(c) of the SIS Act) and the obligation to act fairly (ss 52(2)(e) and (f) of the SIS Act), ought to be dismissed. The Appellant has not demonstrated any error in the primary judge’s reasoning or conclusions.

CONCLUSION

207    In view of our conclusion on the power issue, the substance of Ground 1 of the Further Amended Notice of Appeal must be rejected. However, given that the primary judge’s orders, which were made under s 33ZB of the Federal Court of Australia Act 1976 (Cth), included references to specific paragraphs of the primary judge’s reasons, and as we have departed from her Honour’s course of reasoning in concluding that the relevant charges were authorised by cl 3.7 (but not cl 4.2) of Sch 1 to the Trust Deed, the final orders will modify the answer to question 22 in Schedule A to the Court’s orders dated 12 February 2025.

208    Ground 2 (concerning Karger v Paul [1984] VR 161) does not arise for the reasons given by Lee J. Ground 3 (concerning the SIS Act best interests and fairness covenant contraventions) must be rejected for the reasons given by Lee J. It follows that Grounds 4 and 5 (concerning the primary judge’s rejection of the claims of Mr Brady and Ms Atkinson) also fail. The substantive appeal grounds having been rejected, Ground 6 (concerning pre-judgment interest) does not arise. Grounds 7 and 8 were dependent on the Appellant succeeding on the substantive grounds, which he has not.

209    The appeal is to be dismissed, with costs.

Associate:

Dated:    21 May 2026