FEDERAL COURT OF AUSTRALIA

Local Government Superannuation Board v Thorne [2002] FCA 848

ADMINISTRATIVE LAW - review of decision of Superannuation Complaints Tribunal - whether the decision of the Tribunal was consistent with the proper construction of the rules of the superannuation scheme - whether Tribunal erred in not finding the respondent's complaint related to the management of the superannuation scheme as a whole - whether decision of Tribunal required the applicant as trustee of a superannuation scheme to do something contrary to the governing Rules of the scheme - whether the Tribunal erred in 're-writing' the respondent’s complaint.

SUPERANNUATION – transfer of member between superannuation schemes – whether member entitled to payment from new scheme equivalent to bonus accumulation paid by old scheme pursuant to a change in the rules in the old scheme subsequent to the member’s transfer – construction of rules of statutory scheme.

Superannuation (Resolution of Complaints) Act 1993 (Cth), ss 14, 37, 46

Superannuation Industry (Supervision) Act 1993 (Cth), ss 103-105, 111-113, 130

Local Government Act 1934 (SA) ss 73, 74, 75, 76, 78, 157a (repealed), 157b (repealed)

Local Government Act Amendment Act 1984 (SA)

Local Government Act Amendment Act (No. 3) 1984 (SA)

Briffa v Hay (1997) 75 FCR 428 - referred to

Wilkinson v Clerical, Administrative and Related Employees Superannuation Pty Ltd (1997) 79 FCR 469 - referred to

Lykogiannis v Retail Employees Superannuation Pty Ltd (2000) 97 FCR 361 - referred to

National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562 - referred to

Haematite Pty Ltd as Trustee for the BHP Superannuation Fund v Ristevski [2002] FCA 408 - referred to

Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 – discussed

Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 – referred to

Scully v Commissioner of Taxation (1990) 84 FCR 41 – referred to

Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 – referred to

LOCAL GOVERNMENT SUPERANNUATION BOARD v RAYMOND EDWARD THORNE

S 216 of 2001

MANSFIELD J

ADELAIDE

3 JULY 2002

THE COURT ORDERS THAT:

1.                  The application is allowed.

2.                  The order of the Superannuation Complaints Tribunal made on 18 November 2001 is set aside.

3.                  The decision of the Local Government Superannuation Board be reinstated, to the effect that the benefits to which Raymond Edward Thorne is entitled under the Local Government Superannuation Scheme upon his retirement from employment with the Corporation of the City of Adelaide do not include a payment equivalent to that to which he would have become entitled had he remained a member of The Corporation of the City of Adelaide Superannuation Plan upon the 1996 resolution of its trustee to distribute excess funds partially to its members at that time.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

introduction

1                     This is an application by way of appeal under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (the Act) from a decision of the Superannuation Complaints Tribunal (the Tribunal) given on 18 November 2001.  The appeal is confined to questions of law.

2                     The applicant, Local Government Superannuation Board, was established by s 157b of the Local Government Act 1934 (SA) by amendments effected to that Act by the Local Government Act Amendment Act 1984 (SA).  It was established to administer a scheme providing for superannuation and related benefits for the officers and employees of each local government body in South Australia.  Section 157a of the Local Government Actempowered the Minister to approve such a scheme, and to cause its implementation.  Under s 157a(5) of that Act, every local government body is bound to comply with the provisions of the scheme established and enforced from time to time.  It is apparent that the proposed superannuation scheme was to bring together all the superannuation plans operated by individual local government bodies in South Australia to that time, and to provide a common structure for superannuation benefits for all persons employed in the local government sector.  Amongst its benefits was the provision of full portability of benefits on transfer of employment between local government bodies in South Australia.

3                     The Local Government Act Amendment Act (No.3) 1984 (SA) was assented to but a short time later.  It extensively amended the Local Government Act; including repealing that Part which included ss 157a and 157b.  The substantial amendments included the insertion of Div IV of Part VI of the principal Act, under the heading “Superannuation”.  It included s 73 in identical terms to the repealed s 157a and s 74 is in virtually identical terms to the repealed s 157b.  Sections 75-78, being the balance of Div IV of Part VI, are in the same terms as the repealed ss 157c-157f.

4                     The Local Government Superannuation Scheme (the Scheme) as approved by the Minister of Local Government for South Australia was duly established on 30 April 1984.  It commenced on 15 May 1984.  It will be necessary to refer to provisions of the Scheme for resolution of the present application. 

5                     The respondent was employed with the Corporation of the City of Adelaide (the CCA) in about 1970.  The CCA then operated The Corporation of the City of Adelaide Superannuation Plan (The CCA Plan).  The respondent became a member of The CCA Plan at about the time of his employment with the CCA and remained a member of that plan until about December 1985.  At that time he ceased his membership of The CCA Plan and became a member of the Scheme.  The CCA Plan had been established, under a different name, on 30 November 1925.  Relevantly to the respondent, under The CCA Plan at the time he ceased his membership of it, he had a contribution rate specified at a rate of 5 per cent of his annual salary.  His retirement benefit under The CCA Plan was an amount equal to 17.5 per cent of his final salary for each year and completed month of service from his superannuation date to the date on which he ceased to be an employee of the CCA.  The superannuation date is the date upon which he was last admitted to membership of The CCA Plan.  He retired from employment with the CCA on 28 August 1998.  The CCA Plan defined benefits upon his retirement were in substance of 17.5 per cent of his average final salary for each year of service with the CCA from the time when he first joined The CCA Plan to his retirement.  There were of course other benefits provided under The CCA Plan in other circumstances, but it is not necessary to refer to them.

6                     The Scheme contemplated that persons who were members of superannuation plans operated by the particular local government bodies of which they were employees would be able to transfer to the Scheme.  Consequently, it contained transitional arrangements to accommodate the transfer of members from a former scheme such as The CCA Plan to the Scheme.  Those transitional arrangements included Rule 14 and Rule 15 of the Scheme in the following terms:

“14.     Each Council shall do all things necessary (consistent with its obligations under its Previous Plan) to close its Previous Plan to new entrants from 1 July 1984 or as soon as possible thereafter.

15.       (a)        Each Council shall do all things necessary (consistent with its obligations under its Previous Plan) to arrange for the transfer, at a date specified by the Board, of the members of its Previous Plan to this Scheme.  

(b)                Each Council shall do all things necessary (consistent with its obligations under its Previous Plan) to arrange for the transfer of the funds of its Previous Plan to the Fund on a date or dates and in a manner acceptable to the Board.

(c)                The Board shall accept as a Member of the Scheme any Employee who is a member of a Previous Plan and in respect of whom arrangements acceptable to the Board have been made in accordance with paragraphs (a) and (b) of this Rule and such acceptance shall take effect from the date on which that Employee ceases to be a member of his Previous Plan.”

Each superannuation plan operated by a local government authority up to that time was called a Previous Plan.

7                     The Scheme recognised that the benefits available under the Scheme may not be the same as those available to a particular employee under a Previous Plan.  Rule 18 provided:

“A person who has been transferred from a Previous Plan to the Scheme and who has not elected to transfer to the benefits provided by the Scheme shall be treated by the Board as an Old Benefit Member.”

8                     In the respondent’s circumstances, as they have occurred, the defined benefits available under the Scheme, if he were a transferred member, would have been the number of years of service since he first joined The CCA Plan multiplied by 15 per cent of his final average salary.  His contribution rate remained at 5 per cent of his annual salary.  The level of benefits so defined was therefore a little lower than that to which he was entitled under The CCA Plan.  Understandably therefore, he did not elect to transfer to the benefits provided by the Scheme.  Rather, upon his transfer to the Scheme, he became an “Old Benefit Member”.  Rule 21 of the Rules of the Scheme provided:

“Notwithstanding anything else contained in these Rules an Old Benefit Member shall, while he remains in the service of the Council which employed him on 30 June 1984, pay contributions to and be entitled to receive benefits from the Fund in accordance with the provisions of his Previous Plan.”

9                     It is Rule 21 which is the genesis of the present issue. 

10                  As an Old Benefit Member of the Scheme continually employed by the CCA, the respondent remained entitled to a defined benefit payment upon his retirement of 17.5 per cent of his final average salary for each year of service since he first joined The CCA Plan, that is the benefit determined under the terms of The CCA Plan.  The issue arises because of events which subsequently occurred in respect of The CCA Plan.  The CCA Plan was guaranteed by the CCA by its resolution on 30 November 1925 establishing the plan.  According to the applicant, the consequence of that guarantee is that the trustee of The CCA Plan could not reduce the accrual rate or vesting arrangements for future benefits, not just accrued benefits, so that it was not possible to wind up The CCA Plan as occurred with other local government bodies’ superannuation funds.  Consequently, following the introduction of the Scheme, for members of The CCA Plan, there were three choices available to them when the Scheme was established:

·               to transfer to the Scheme and to fully participate in the Scheme as a transferred member;

·               to retain the benefits of The CCA Plan but to transfer to the Scheme and participate in it as an Old Benefit Member; or

·               to remain in The CCA Plan, although it was by virtue of the implementation of the provisions in Rule 14 closed to new members.

Other local government bodies’ superannuation plans were wound up following the establishment of the Scheme, so the third of those options was not available to employees of other local government bodies.

11                  At the time the respondent, and other employees of the CCA, transferred to the Scheme, the value of the liabilities transferred was in excess of the amount of the assets transferred.  The deficit was made up by the CCA by a payment to the Fund conducted under the Scheme.

the issue

12                  In 1996, The CCA Plan, following an actuarial report, had excess or surplus assets not required to meet its future liabilities.  The trustee of The CCA Plan at the time was City of Adelaide Superannuation Pty Ltd.  The CCA Plan at that time was of course a closed fund, having admitted no new members since about mid 1984, and therefore with a diminishing number of members and apparently significant excess assets.  An amendment was made to the trust deed of The CCA Plan on 27 March 1996 which authorised the trustees, with the consent of the CCA, to deal with surplus or excess funds by allocating any amount to or for the benefit of the members, or by paying or allocating any amount to or for the benefit of the CCA itself, or to reduce or satisfy the ongoing contributions of members or of the CCA in respect of the members, or a combination of those options.  Any such allocation to or for the benefit of a member was to be payable in addition to the benefits otherwise payable under The CCA Plan upon the member ceasing employment with the CCA.  In the event, the trustee resolved to distribute the excess funds in The CCA Plan partly to its existing members and partly to the CCA.  The resolution of the trustee is not in evidence.  It is unclear how much the level of that benefit was to persons who, like the respondent, were long term employees of the CCA, but unlike the respondent had remained members of The CCA Plan rather than transferring to the Scheme.  I was informed by the respondent that it was in the order of $40,000.  I do not think the evidence discloses that figure.

13                  At the time, the respondent and others who had transferred to the Scheme as Old Benefit Members, and who had remained throughout employees of the CCA, were not members of The CCA Plan.  They were not entitled to, and did not directly, participate in the distribution of excess funds in The CCA Plan.

14                  The present application concerns the respondent’s claim to be entitled under the Scheme to a payment equivalent to that to which he would have become entitled by decision of the trustees of The CCA Plan in 1996 had he remained a member of The CCA Plan at that time, instead of having transferred to the Scheme in 1985.  His claim, in essence, is based upon Rule 21 of the Rules of the Scheme.  He also refers to the booklet which was published to him and others at the time of the commencement of the Scheme by the applicant.

15                  There were apparently two booklets, one specifically for members of a local government body superannuation plan at 30 June 1984, and a separate one for other local government employees.  Relevantly, the booklet provided:

“The Local Government Superannuation Scheme has been established under the Local Government Act to provide superannuation for employees of all local government bodies in South Australia.

The Scheme brings together all the superannuation plans operated by individual bodies.  It provides a common structure for superannuation benefits no matter where a person is employed in the local government sector and thus can provide full portability of benefits on transfer between local government bodies.

The Scheme however allows any employee the option of remaining upon the same benefits, contributions and conditions as applied to him under a local government superannuation plan on 30 June 1984.  Thus no one will be disadvantaged by the introduction of the new Scheme.”

It is upon the promise or representation that “no one will be disadvantaged by the introduction of the new Scheme” that the respondent places much weight.  He indicated in the course of submissions that he is one of a number of employees on the CCA who transferred from The CCA Plan to the Scheme in 1985 and who, at 1996, was still employed by the CCA.  Each wishes to receive under the Scheme, in some way, a benefit equivalent to that which they would have received by virtue of the 1996 decision of the trustee of The CCA Plan for the distribution of excess funds from The CCA Plan had they remained members of The CCA Plan.  They claim that they will otherwise be disadvantaged by having transferred to the Scheme as Old Benefit Members, compared to their co-workers who remained in The CCA Plan.

16                  It is desirable to note one other event.  In respect of each of the years ended 30 June 1994 and 30 June 1997 the applicant, following certain amendments to the Rules of the Scheme, resolved to allocate a “Bonus Multiple” to defined members of the Scheme.  The Bonus Multiple for 1994 was equal to 10 per cent of the sum of the particular member’s “scheme benefit percentage” and that member’s “previous plan accrued percentage”.  The 1997 Bonus Multiple was equal to 16.25 per cent of that sum.  Old Benefit Members of the Scheme did not receive the 1994 Bonus Multiple or the 1997 Bonus Multiple because, as implemented, those payments applied only to members of the Scheme making contributions under a Part of the Rules of the Scheme which was not the Part under which Old Benefit Members made their contributions.

17                  Following his retirement on 28 August 1998, the respondent complained to the Tribunal.  He identified the complaint as concerning a decision of the trustee (the applicant) of the Scheme:

“which he claims financially disadvantaged him contrary to an undertaking given that he would not be financially disadvantaged upon transferring”

from The CCA Plan to the Scheme.  He complained that the applicant:

·               had not provided him with a benefit equivalent to that paid from the excess distribution made by The CCA Plan to its then members in 1996;  or alternatively

·               had excluded him from participating in the Bonus Multiple distributions made by the Scheme in 1994 and 1997. 

the tribunal’s decision

18                  The Tribunal concluded that the respondent is entitled to receive under the Scheme a benefit equivalent to that paid to members of The CCA Plan in 1996 from the excess distribution made to the then members of The CCA Plan.  It rejected his claim to be entitled under the Scheme to participate in the 1994 and 1997 Bonus Multiple distributions.

19                  The Tribunal’s reasoning for its conclusion is contained in the following passage:

“As is pointed out in the 1984 booklet, it is the terms of the Trust which are to be determinative not statements contained in the booklet.  Clause [sic Rule] 21 is clearly intended to have broad application commencing as it does with the words ‘Notwithstanding anything else contained in these Rules …’  The Clause connects the Complainant’s employment in the service of the Council which employed him as at 30 June 1984 to the receipt of benefits.  The words sought to be emphasised by the Trustee from the pamphlet, namely that the benefits were limited to those applying as at 30 June 1984, is not reflected in the words of the Trust Deed and consequently is irrelevant for consideration.

Clause 21 entitles the Complainant to receive benefits from the Fund ‘… in accordance with the provisions of his previous Fund’.  If as appears to be the case here, the previous Fund was amended in or about 1996 to provide for the distribution of surplus allocation, then there is no reason why the Complainant should not receive the equivalent benefit from the Fund.  There is no reason to limit the distribution of benefits only to those benefits which may have accrued as at 30 June 1984, even if this was not the Trustee’s intention.  This is so particularly given that the Complainant continued to pay contributions between 30 June 1984 and his date of retirement in August 1998.

Clause 21 limits the Complainant as an Old Benefit Member to receive those benefits which are payable under the former Fund.  Accordingly, in the opinion of the Tribunal, he has no entitlement to receive the bonus benefits payable by the Fund in 1994 and 1997.  This contrasts to those Members of the former Fund who on transfer to the Fund elected to receive the benefits provided by the Fund rather than retain the benefits provided by the former Fund.  The definition contained in Clause 2 of  ‘Old Benefit Member’ limits the Complainant from participating in the benefits paid by the Fund.”

The third paragraph of those reasons concerns the claim that the respondent should have been entitled to participate in the Bonus Multiple benefits paid by the Scheme in 1994 and 1997.  It is unnecessary to address whether the Tribunal correctly decided that issue.  Its decision in that regard has not been challenged by the respondent by way of cross appeal or cross contention.

20                  The consequence of the Tribunal’s decision about the operation of Rule 21 of the Rules of the Scheme in relation to the distribution of excess funds in 1996 under The CCA Plan was expressed by the Tribunal in the following terms:

“In the instant case the Tribunal is not satisfied that the decision of the Trustee is fair and reasonable in its operation in relation to the Complainant because it deprives him of the benefit to which he is entitled under the provisions of Clause [sic, Rule] 21 of the relevant Trust Deed.  Accordingly, the decision under review is set aside and the matter is remitted to the Trustee with the direction to calculate and pay the benefit otherwise payable to the Complainant equivalent to the surplus distribution benefit payable under the former Fund with interest at the Fund’s relevant rate.”

21                  The reason why the Tribunal’s decision was expressed in that way is found in s 37 of the Act.  On reviewing the decision of a trustee of a superannuation fund, the Tribunal is empowered to affirm the decision, remit it to the decision-maker for re-consideration in accordance with the directions of the Tribunal, or set it aside and substitute a fresh decision.  Section 37(4) of the Act provides:

“The Tribunal may only exercise its determination-making power under subsection (3) for the purpose of placing the complainant as nearly as practicable in such a position that the unfairness, unreasonableness, or both, that the Tribunal has determined to exist in relation to the trustee’s decision that is the subject of the complaint no longer exists.”

If the Tribunal is satisfied that the decision, in its operation in relation to a complainant was fair and reasonable in the circumstances, it is directed to affirm the decision.

22                  The general nature of the Tribunal’s powers, and how it may properly exercise them, has been considered in a number of decisions of the Court, including Briffa v Hay (1997) 75 FCR 428; Wilkinson v Clerical, Administrative and Related Employees Superannuation Pty Ltd (1997) 79 FCR 469; Lykogiannis v Retail Employees Superannuation Pty Ltd (2000) 97 FCR 361; National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562; and Haematite Pty Ltd as Trustee for the BHP Superannuation Fund v Ristevski [2002] FCA 408.  No issue arises on this application directly concerning those principles.

the grounds of appeal

23                  The grounds of appeal are quite extensive.

24                  Firstly, it was contended that the Tribunal erred in not holding that the complaint of the respondent related to the management of the Scheme as a whole.  Section 14 of the Act prescribes the circumstances in which a complaint about a decision of the applicant (or any decision of a trustee of a regulated superannuation fund) may be made.  Section 14(1) and (2) provide:

“(1)     This section applies if the trustee of a fund has made a decision (whether before or after the commencement of this Act) in relation to:

(a)               a particular member or a particular former member of a regulated superannuation fund; or

(b)               a particular beneficiary or a particular former beneficiary of an approved deposit fund.

…

(2)       Subject to subsection (3) and section 15, a person may make a complaint (other than an excluded complaint) to the Tribunal, that the decision is or was unfair or unreasonable.”

Neither s 14(3) nor s 15 are relevant to the present circumstances.  Section 14(4)-(6B) prescribe circumstances in which the Tribunal may not deal with a complaint.  Relevantly for present purposes, s 14(6) provides:

“The Tribunal cannot deal with a complaint under this section that relates to the management of a fund as a whole.”

The applicant contended that the Tribunal was disentitled from considering the particular complaint of the respondent by reason of s 14(6).

25                  The Tribunal did not address that aspect of the applicant’s submission at all.  It did not refer to it when summarising the respective submissions of the parties.  The contention was that the applicant’s decision to grant the Bonus Multiple benefits in 1994 and 1997 concerned the available level of assets in the Scheme Fund at the time, so its decision to apply those benefits selectively so as to exclude Old Benefit Members of the Scheme from those distributions were generic decisions falling within the management of the Fund as a whole rather than decisions with respect to particular members of the Scheme.

26                  Similar contentions were advanced in relation to the claim of the respondent to be entitled to payment of a benefit equivalent to the distribution of excess funds made to members of The CCA Plan in 1996.  The material before the Tribunal indicated that the respondent is not the first Old Benefit Member of the Scheme who sought from the Scheme a sum equivalent to the amount of the distribution of excess funds to which members of The CCA Plan became entitled in 1996.  The board of the applicant on 13 September 1999, and again on 8 November 1999, resolved in respect of Old Benefit Members of the Scheme, that they should receive benefits under the Scheme at the level specified in The CCA Plan at the time of their transfer to the Scheme and in accordance with the Rules of the Scheme.  Effectively it is contended, that was a policy decision made in relation to the management of the Scheme as a whole, even though it was made in the context of several individual members of the Scheme then seeking payment of benefits under the Scheme equal to the amount of the excess distribution paid to on-going members of The CCA Plan in 1996.

27                  As I propose to set aside the decision of the Tribunal on a discrete ground, distinct from those issues, I do not need to address those contentions.  Further, it would be unnecessary to address those contentions in so far as they relate to the Tribunal’s consideration of the claim to be entitled to participate in the 1994 and 1997 Bonus Multiple benefits, as the Tribunal rejected that claim and the respondent has not sought to revisit that ruling on this application.

28                  It was next contended that the direction made by the Tribunal as to the entitlement of the respondent obliges the applicant as trustee of the Scheme to do something which is contrary to the governing Rules of the Scheme.  It was argued that to require the applicant to provide a benefit entitlement under the Scheme by reference to a distribution made by the wholly separate and independent superannuation fund, namely The CCA Plan, would be contrary to s 37(1)(a) of the Act.  Section 37(1)(a) of the Act provides that:

“(1)     For the purpose of reviewing a decision of the trustee of a fund that is the subject of a complaint under section 14:

(a)        the Tribunal has all the powers, obligations and discretions that are conferred on the trustee …”

Again, I do not need to finally resolve that issue.  As presently minded, I do not consider that the applicant would have been required to go beyond its powers by complying with the direction which the Tribunal gave.  It follows that I do not consider that the Tribunal contravened s 37(1)(a) of the Act by making that direction.  That is simply because, if the respondent had an entitlement under the Rules of the Scheme to the benefit he claimed, it could not be inconsistent with the proper discretion of the applicant to have decided to grant that benefit.

29                  It was also argued that the Tribunal’s direction cannot stand, because it requires a calculation to be made by reference to a distribution from a separate and independent superannuation fund with a different level of assets, different criteria for funding benefits and a different membership.  If the respondent were entitled under the Scheme to a benefit of the amount to which he would have been entitled if still a member of The CCA Plan in 1996, I regard compliance with the Tribunal’s direction as no more than a mechanical difficulty.  It would not demonstrate legal error on the part of the Tribunal.  To the extent it was suggested that the applicant could not make appropriate enquiries to ascertain the necessary matters to comply with the direction, I reject that suggestion.

30                  The third contention of the applicant is that the decision of the Tribunal was not consistent with the proper construction of Rule 21 of the Rules of the Scheme.  It is upon this ground that, in my judgment, the application must succeed.  I explain my reasons for any conclusion below.

31                  Finally, it was argued that the Tribunal erred in “re-writing” the respondent’s complaint.  His complaint to the Tribunal was that he had been disadvantaged “contrary to an undertaking given” in the booklet which accompanied the presentation of the Scheme.  I do not think that the Tribunal erred in treating the respondent’s complaint as invoking the proper construction of Rule 21 of the Rules of the Scheme.  It is true that the complaint refers to the booklet itself, but it clearly indicated in substance that the foundation of the complaint was under the Rules of the Scheme.  That was understood by the applicant, as the resolutions of its board to which I have referred above indicate.  It is also clear from the submissions made by the applicant and the respondent to the Tribunal. 

The Construction of Rule 21

32                  Rule 21 is set out above.  In my judgment, its proper construction is that an Old Benefit Member should, whilst remaining in the service of the CCA which employed him on 30 June 1984, pay contributions to, and be entitled to receive benefits from, the Scheme in accordance with the provisions of The CCA Plan as it stood at 30 June 1984.

33                  There are in effect two possible alternative constructions of Rule 21.  One is that the level of contributions and the entitlement to benefits of the respondent may be varied from time to time under the Scheme by reason of variations in the contributions payable by and benefits receivable by continuing members of The CCA Plan subsequent to 1984.  The alternative construction is that the level of contributions and the entitlement to benefits under the Scheme should be in accordance with The CCA Plan as it stood at 30 June 1984 or at the time of the respondent transferring from The CCA Plan to the Scheme.

34                  In selecting which of those two alternatives is the appropriate one, I am mindful of the nature of the Scheme and of The CCA Plan.  In Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1610, Warner J said:

“ … the court’s approach to the construction of documents relating to a pension scheme should be practical and purposive, rather than detached and literal … [A]lthough there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed - their ‘matrix of fact’ to use the modern phrase coined by Lord Wilberforce - include four special factors.  The first factor is that … the beneficiaries under a pension scheme such as this are not volunteers.  Their rights have contractual and commercial origins.  They are derived from the contracts of employment of the members.  The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions.  Secondly, … pension scheme documents have to be construed in the light of the requirements of [the relevant statutory authorities] …”

The remaining two factors are not relevant for present purposes.  Those remarks were cited with approval by Waddell CJ in Eq in Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 at 602.  See also per Ryan, Tamberlin and Finkelstein JJ in Scully v Commissioner of Taxation (1990) 84 FCR 41 at 49-50.

35                  In endeavouring to discover the intention of the parties to the Scheme, having regard to its words, it is necessary to have regard to the whole of the wording of the Scheme.  The meaning of Rule 21 may be informed by other parts of it.  It is also appropriate to prefer a construction of Rule 21 which will avoid consequences which appear to be “capricious, unreasonable, inconvenient or unjust”:  per Gibbs J in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.

36                  In my judgment, there are several considerations which point towards Rule 21 of the Rules of the Scheme meaning that the entitlement “to receive benefits from the Scheme in accordance with the provisions of ” The CCA Plan is an entitlement to receive those benefits in accordance with the provisions of The CCA Plan as it stood at 30 June 1984.  The first consideration is found in the precise words of Rule 21.  The entitlement is to receive benefits in accordance with the provisions of the “Previous Plan”.  The term “Previous Plan” is defined in Rule 2 of the Rules of the Scheme in the following terms:

“Previous plan means –

(1)               in relation to a Council, any superannuation plan in which the Council participated on 30 June 1984; and

(2)               in relation to a Member, the superannuation plan operated by a Council or a group of Councils of which plan he was a member on 30 June 1984.”

The definition focuses on the terms of the superannuation plan of local government bodies at a particular date.  The CCA Plan as in force at 30 June 1984 is the “Previous Plan” by which Rule 21 fixes the contributions payable, and the entitlement to receive benefits, under the Scheme.  It is not defined as the superannuation plan of a local government body as in force from time to time.  Specifically, the definition of “Previous Plan” does not in my view accommodate The CCA Plan as amended over 10 years later on 27 March 1996.

37                  Secondly, the desirability of selecting the level of contributions, and the entitlement to receive benefits under a Previous Plan at a particular time is evident having regard to the statutory obligations of the applicant under the Scheme, and under the Superannuation Industry (Supervision) Act 1993 (Cth).

38                  Under the Local Government Act, following the amendments effected by the Local Government Amendment Actand replaced in the same terms by the Local Government Amendment Act (No.3), the accounts of the applicant are required to be audited annually by the Auditor-General, and the applicant is required to report annually on its operations to the Minister including providing its audited accounts:  ss 75 and 76.  It is also required by s 78 on a triennial basis to procure an actuarial report on the state and sufficiency of the funds held in the Scheme, and to provide that report and any recommendations to the Minister.  Those documents must all be tabled in the Parliament.  The Scheme itself imposes further obligations on the applicant.

39                  Under the Scheme, the applicant is obliged to maintain such accounts, registers and records as are necessary for the proper operation of the Scheme:  Rule 8(a)(c).  It is empowered to arrange life insurance policies to cover death and disablement risks in respect of the Scheme:  Rule 8(b).  It is obliged to administer the “Local Government Superannuation Fund” to provide benefits to members of the Scheme:  Rule 10, and the state and sufficiency of the fund is to be investigated by the actuary appointed by the applicant at three-yearly intervals:  Rule 12(a).  The actuary is required to report on the investigation, including stating:

“… any variation necessary in contributions, given no change in benefits, and any variation necessary in benefits, given no change in contributions.”

40                  It is necessary to note only briefly the obligations of the trustee of a regulated superannuation fund under the Superannuation Industry (Supervision) Act.  The general recording obligations are set out in ss 103-105, and the general accounting and audit requirements in ss 111-113.  The obligations of actuaries and auditors are set out in Part 16, including s 130 which obliges them to report if the financial position of a regulated superannuation fund is unsatisfactory as defined in the regulations under the Act.

41                  The ability of the trustee of a regulated superannuation fund to meet those obligations, as a matter of common sense, requires objective and ascertainable data to be available.  If the level of contributions or the entitlement to benefits of a group of members of the Scheme, such as Old Benefit Members, could be significantly altered in ways which the applicant could not be expected to know or predict by the actions of the trustee of an independent and unrelated superannuation fund, it could not meet those obligations.  Indeed, in this matter, it is not apparent that the applicant knew in advance of the decision of the trustee of The CCA Plan of its proposal to change the trust deed of The CCA Plan in 1996 or of its resolution to distribute excess funds in that plan.  Nor is it apparent that the applicant knows the details of the resolution of the trustee of The CCA Plan in 1996.

42                  Thirdly, in my view, the introduction of the Scheme in 1984 was part of the process by which the South Australian government intended all local government bodies’ superannuation funds would cease operating in the relatively near future.  As noted, the Local Government Act Amendment Act 1984 introduced s 157a of the Local Government Act.  It contemplated a scheme which would provide superannuation and related benefits for officers and employees of every local government body in South Australia.  That position was preserved by Div IV of Part VI of the Local Government Act, introduced by the Local Government Amendment Act (No.3).

43                  The Scheme approved by the Minister under the Local Government Act then, by Rule 14, directed each local government body to do all things necessary (consistent with its obligations under its Previous Plan) to close its Previous Plan to new entrants from 1 July 1984 or as soon as possible thereafter.  Rule 15 required each local government body to do all things necessary (consistent with its obligations under its Previous Plan) to arrange at a date specified by the applicant for the transfer of the members of its Previous Plan to the Scheme, and to arrange for the transfer of the funds of the Previous Plan to the fund of the Scheme.  The applicant was obliged to accept as a member of the Scheme any employee who was at the time a member of a Previous Plan in respect of whom arrangements acceptable to the applicant had been made under Rule 15.  Rule 16 ensured that each member of a Previous Plan was notified of the accrued entitlement under the Previous Plan at 30 June 1984 and the basis of the entitlement.  Rule 17 entitled a person transferred from a Previous Plan to the Scheme to adopt the benefits available under the Scheme, and as noted Rule 18 gave such persons the option of electing not to receive benefits provided by the Scheme but to be treated as an Old Benefit Member so as to receive benefits under the Scheme as if those benefits were payable under the Previous Plan.

44                  The process of transfer clearly sought to provide existing members of superannuation funds of local government bodies with an informed choice whether to transfer to the Scheme and make contributions and receive benefits as it provided, or by Rule 21 to transfer to the Scheme and make contributions and receive benefits in accordance with the Previous Plan.  The combination of those provisions confirms what is apparent from the amending legislation, namely that the Scheme was to replace the superannuation funds up to then conducted by local government bodies.

45                  That picture is fortified by the expression of Rule 17 and Rule 18.  Each refers to an employee who “has been transferred from a Previous Plan to the Scheme” in the passive tense, that is to infer that the transfer may take place irrespective of the wishes of that member.  Moreover, Rule 19 of the Rules in the transitional provisions provides for a member of a Previous Plan who dies or becomes totally and permanently disabled after 30 June 1984 but before being transferred from the Previous Plan to the Scheme because the applicant had not by that date specified a date for that transfer in accordance with Rule 15(a) or, having transferred has not made an election as to whether to adopt the benefits provided by the Scheme or to become an Old Benefit Member, to be entitled at least to the benefits that that person would have received as a transferred member on 1 July 1984 and had contributed to the fund at that date.

46                  The expectation derived from my consideration of the amending legislation and from the Rules of the Scheme that, as soon as reasonably practicable after 30 June 1984, the superannuation funds operated by local government bodies would generally cease to exist is generally reinforced by s 73(5) of the Local Government Act (originally, s 157a(5)).  It provides:

“Every Council is bound to comply with the Superannuation Scheme as from time to time in force pursuant to this section.”

The legislative intention as to how, generally, the Scheme would operate in relation to the Previous Plans of local government bodies points strongly towards Rule 21 having its focus upon the contributions payable and the entitlement to benefits under a Previous Plan as at 30 June 1984.  In effect, it was generally intended that the Previous Plans would themselves cease to operate some short time after that date.

47                  Nevertheless, The CCA Plan continued to do so.  Rules 14 and 15 of the Scheme oblige each local government body to cease admitting new members to existing superannuation plans from 1 July 1984 and to do all things necessary to transfer members of existing superannuation plans to the Scheme only so far as those actions were “consistent with its obligations under its Previous Plan”.  As noted earlier in these reasons, there were features of The CCA Plan which required its continuation.  Moreover, the obligations imposed by s 73(5) of the Local Government Act and Rules 14 and 15 of the Scheme were upon local government bodies, and not upon the trustees of the particular Previous Plan.  I do not think those considerations point to any different conclusion about the general legislative intent, or the intent of the Minister, about the desirability of the Scheme replacing the existing Previous Plans at 30 June 1984.  It is that intent which, in my view, points towards Rule 21 identifying the contribution level and entitlement to benefits as provided for under the Previous Plan in its terms as they stood at 30 June 1984, rather than at some potentially remote time in the future.

48                  Finally, I note that Rule 12(f) of the Rules of the Scheme provides:

“The Board shall not recommend any change to the Scheme which will detrimentally affect any of the rights of an Old Benefit Member or which will reduce the benefits of a Transferred Member arising from his membership of a Previous Plan without the consent of that Member.”

Subrule 12(f) comprises part of the Rule by which changes in the relationship between contributions and benefits may be made, following the triennial actuarial report referred to in [38-39] above.  The applicant is required to make any recommendations for such a change to the Minister.  The “rights” of an Old Benefit Member which qualify the power of the applicant to recommend any change in the Scheme, because no recommendation may detrimentally affect those rights, must refer to rights measurable by reference to a Previous Plan at a point in time.  It cannot have been intended that, in the case of a Previous Plan such as The CCA Plan which has continued to function to the present time, the applicant should be inhibited from recommending actuarially advised changes to the Scheme because of changes to the trust deed of a Previous Plan made many years after the Scheme commenced operations, especially as there is no ongoing mechanism provided in the Local Government Act or in the Scheme (which, by s 73(5) all local government bodies are bound to comply) for the applicant to be informed or to learn of any such changes.

49                  The respondent placed great emphasis upon the particular terms of the booklet published by the applicant to him and to others as members of The CCA Plan following 30 June 1984, including in particular the passage set out in [14] above.  In his supplementary written submission dated 18 June 2002, he also referred at some length to an explanatory letter dated 30 August 1985 provided to him and other members of The CCA Plan.  He described the message of those communications as “loud and clear”, namely that so long as he remained an Old Benefit Member of the Scheme, he would be entitled to receive the benefits applicable to ongoing members of The CCA Plan.  I have given his contentions earnest consideration.

50                  In the result, I do not think those matters impinge upon the construction of Rule 21 of the Rules.  I have sought to construe Rule 21 in its context in the Rules of the Scheme, and in the circumstances as they existed at the time the Scheme was introduced.  The Rules are in the nature of a statutory instrument.  The Scheme was approved by the Minister, and was required to be gazetted and tabled in the Parliament:  s 73(2) of the Local Government Act.  It was subject to disallowance by resolution of either House of the Parliament:  s 73(3).  Any amendment to the Scheme is also required to undergo that process.  In those circumstances, the booklet or correspondence to which the respondent referred should not be used as an aid to discerning the proper meaning of Rule 21.  In any event, I am not persuaded that the representation that “no one will be disadvantaged by the introduction of the new scheme” was misleading in any way.  It accurately reflected the state of affairs as it was at the time.  I do not think that it constituted a promise made by the applicant about the entitlement to benefits under the Scheme following any change to The CCA Plan at any time in the future, particularly in circumstances where it was desired to achieve the result that within a relatively brief period of time after 30 June 1984 there would be no ongoing local government bodies’ superannuation plans.

51                  For those reasons, in my judgment, the Tribunal fell into error in its construction of Rule 21 of the Rules of the Scheme.  Upon its proper construction, Rule 21 did not entitle the respondent, or other Old Benefit Members of the Scheme who were at 1996 still employees of the CCA, to a benefit under the Scheme equivalent to the benefit granted to members of The CCA Plan at 1996 by participating in the distribution of excess funds then made by the trustee of The CCA Plan.  Accordingly, I consider that the appeal should be allowed.  The order of the Tribunal should be set aside, and the decision made by the applicant should be reinstated.

costs

52                  The respondent appeared in person on this application.  Section 46(5) of the Act provides:

“The Federal Court must not make an order awarding costs against a complainant if the complainant does not defend an appeal instituted by another party to the complaint.”

The respondent, however, did make relatively brief oral submissions in support of the decision of the Tribunal as presenting written submissions.  In doing so, he did not unduly prolong the hearing, and his contentions were brief and to the point.  I do not think the applicant has been put to any expense additional to that which it would have incurred had the respondent not “defended” the appeal by the applicant.  The applicant, in any event, would have had to prepare the appeal book, and the outline of argument, and to present submissions to the Court.  The brief additional period of time which was spent by reason of the respondent’s participation in the hearing did not prolong the hearing beyond that which would be covered by a normal fee on brief.  I note that the respondent produced the full version of The CCA Plan, including the 1996 amendment.  The applicant, through its counsel, indicated that it did not otherwise have access to that material.  In those circumstances, in my judgment, it is appropriate that there be no order for costs of this application.

Associate:

Dated:              2 July 2002