FEDERAL COURT OF AUSTRALIA

Rhodes v Tower Australia Superannuation Limited as Trustee for Tower Superannuation Fund  [2004] FCA 812

COSTS – superannuation – appeal from Superannuation Complaints Tribunal – termination of membership – exit fee – preliminary question first taken on hearing of appeal – alleged want of authority by Tribunal to review decision of Trustee – no relevant decision of Trustee – exit fee fixed by insurance policy – no basis for Tribunal interference – costs – principles governing discretion – failure by respondent to take preliminary point or objection as to competency – appropriate order no costs – each party to bear its own costs.

Superannuation (Resolution of Complaints) Act 1993 (Cth)

Federal Court of Australia Act 1976 (Cth)

Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 followed

Arrowcrest Group Pty Ltd v Gill (1993) 46 FCR 90 cited

Microsoft Corporation v Marks (No 2) (1996) 69 FCR 144 cited

Coal & Allied Operations Pty Ltd v Industry Research & Development Board  [1992] FCA 890 cited

Robinswood Pty Ltd v Commissioner of Taxation [1998] FCA 729 cited

ALLYSON JANE RHODES v TOWER SUPERANNUATION FUND

W87 OF 2003

FRENCH J

25 JUNE  2004

PERTH

THE COURT ORDERS THAT:

            Each party bear its own costs of the appeal.

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

REASONS FOR JUDGMENT ON COSTS

1                     On 17 April 2000, Allyson Rhodes lodged a complaint with the Superannuation Complaints Tribunal (‘the Tribunal’).  The complaint related to a superannuation plan into which she had entered with the FAI Life Group in 1994.  FAI Australia Superannuation Ltd was trustee of the Fund of which Ms Rhodes became a member.  It was succeeded by Tower Australia Superannuation Ltd (‘the Trustee’).

2                     Ms Rhodes’ complaint related to a number of matters including the fee imposed by the fund insurer in respect of her proposed exit from the Fund.  The Tribunal affirmed what it described as the Trustee’s decision and held, inter alia, that the exit fee was equitable.  Ms Rhodes’ appealed to this Court, in the exercise of its original jurisdiction, against the decision of the Tribunal.  The appeal was dismissed on 27 April 2004.  It was dismissed upon a threshold point taken by the Trustee that there was no relevant decision made by it which could have been reviewed by the Tribunal as the exit fee was required to be deducted under the terms of the policy and the rules governing the Trust Deed – Rhodes v Tower Superannuation Fund [2004] FCA 510.

3                     In dismissing the appeal, I observed that the Tribunal was not a forum in which the question of the level of the exit fee could be canvassed.  However having regard to the basis upon which the Trustee had succeeded in resisting the appeal, I allowed the parties time to consider my reasons and to make written submissions on the question of costs.  Written submissions were subsequently filed.

The Contentions

4                     It was submitted for the Trustee that it had been entirely successful in the appeal on a point which it was open for it to take namely that there was no relevant decision made by the Trustee which could be reviewed by the Tribunal. 

5                     Ms Rhodes submitted that the Trustee had not taken the threshold point before the Tribunal and that the Tribunal was in error in affirming its ‘decision’ when there was no decision at all.  She also argued that the Trustee did not raise the threshold point in the appeal until ‘well after the eleventh hour’.  It did not appear in the Trustee’s written submissions.  She submitted that had the point been raised at the Tribunal she would not have lodged the appeal.  She referred to authorities to the effect that if an appellant from a judicial decision succeeds on a point not raised in the court below, costs may be declined in relation to the appeal.  This same principle was said to apply in a case such as the present. 

6                     Ms Rhodes also complained that the Trustee put her to unnecessary costs in that the original draft appeal book index which she submitted had only nine documents.  It was because of the insistence of the Trustee that it contained documents unnecessary to the appeal.  She argued that not only should there be no award of costs in favour of the Trustee but that it should pay at least her costs of preparing the appeal book and the disbursements.

7                     The Trustee replied that there was no occasion prior to the appeal when it could have raised the threshold point.  Moreover, the Tribunal being an administrative body, authorities relating to appeals from judicial decisions were not apposite. 

8                     The Trustee also contended that, as Ms Rhodes had argued error of law on the part of the Tribunal in its finding that the exit fee was equitable, the draft appeal book index was inadequate.  All documents before the Tribunal except those that clearly had no evidentiary value should have been included in the appeal books.

Statutory Framework

9                     The relevant parts of s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (‘the Act’) are as follows: 

‘(1)      A party may appeal to the Federal Court, on a question of law, from the determination of the Tribunal.

...

(3)       The Federal Court is to hear and determine the appeal and may make such order as it thinks appropriate.

...

(5)       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.’

10                  This must be read with s 43 of the Federal Court of Australia Act 1976 (Cth) which provides, inter alia:

‘(1)  Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.

(1A) [Concerns only representative proceedings]

(2)  Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.’

11                  The Tribunal is empowered, inter alia, to entertain complaints under s 14 of the Act which are complaints about decisions of trustees.  Section 37 sets out the powers of the Tribunal in relation to such complaints.  Section 37(5) provides:

‘The Tribunal must not do anything under subsection (3) that would be contrary to law, to the governing rules of the fund concerned and, if a contract of insurance between an insurer and trustee is involved, to the terms of the contract.’

Conclusions on Costs

12                  The general principles governing the exercise of the discretion to award costs were discussed in Ruddock v Vadarlis (No 2) (2001) 115 FCR 229.  At 235 [12] in the joint judgment of Black CJ and French J it was said:

‘The award of costs to a successful party is principally by way of perceived restorative justice.  The general rule assumes that where an applicant succeeds it will have incurred costs because the respondent’s conduct made it necessary for the applicant to bring the proceedings.  If the applicant fails, the respondent will have incurred costs defending an action which ought not to have been brought against it.  The order made in such cases is compensatory....’

13                  The circumstances in which a successful party is denied all or part of its costs usually have to do with its conduct of the proceedings.  Costs may be refused where, for example, an applicant has made an exaggerated claim which has occupied a significant proportion of the proceedings and has succeeded on a minor aspect.  Costs may also be apportioned according to success or failure on distinct or severable issues.  A successful party may recover only a proportion of its costs if its conduct at trial was such as to unreasonably prolong the proceedings  - Ruddock v Vadarlis at 236 [15].

14                  In the exercise of the appellate jurisdiction of this Court the rules provide that where an appeal is dismissed as incompetent the Court may order a respondent, who has not moved for dismissal on that basis, to pay the appellant’s costs of the appeal proving useless or unnecessary – O 52 r 18(3).  The purpose of that provision, it has been said, ‘is to ensure that preliminary points going to the competency of the appeal are taken prior to the hearing of the appeal... the onus is squarely on the respondent to an appeal to raise issues of competency at an early stage’ – Arrowcrest Group Pty Ltd v Gill (1993) 46 FCR 90.  See also Microsoft Corporation v Marks (1996) 69 FCR 144. 

15                  In proceedings under the Administrative Decisions (Judicial Review) Act 1977 (Cth), which are in the original jurisdiction of the Court, O 54 r 4 requires a respondent objecting to the competency of an application to file and serve any notice of objection to competency within 14 days after service of the application.  It has been suggested that the policy in O 52 r 18(3) may inform the discretion as to costs where a respondent has succeeded on a point of competency in ADJR proceedings and where no prior motion was given as required by O 54 r 4 – Coal & Allied Operations Pty Ltd v Industry Research & Development Board [1992] FCA 890; Robinswood Pty Ltd  v Commissioner of Taxation [1998] FCA 729.  In the latter case costs were awarded to the successful respondent where the objection to competency was known well in advance of the hearing.

16                  The exercise of this Court’s original jurisdiction on an appeal from the Administrative Appeals Tribunal is regulated by O 53, which by operation of O 53B r 3 also applies to appeals from the Tribunal.  There is no provision for a notice of objection as to competency in O 53 nor in O 53B but there is provision for the filing of a notice of contention under O 53 r 13(3).  Such a notice is to be given when the respondent ‘proposes to contend that some matter of law has been erroneously decided against him but does not seek a discharge or variation of a part of the decision actually pronounced or made’.

17                  In the present case the Trustee raised for the first time at the hearing of the appeal the contention that the Tribunal’s decision was beyond its authority by virtue of s 37(5) of the Act.  Up to the hearing of the appeal the debate about the Tribunal’s decision, as reflected in the written submissions filed by the parties, revolved around its approach to the question whether the exit fee was an equitable portion of the costs.  In the face of a ‘no evidence’ ground the Trustee asserted that the Tribunal was entitled to rely upon its ‘specialist knowledge’ in determining whether the fee was equitable.  Section 37(5) was mentioned in the last paragraph of the first set of written submissions lodged with the Tribunal as an answer to characterisation of the exit fee as a penalty. 

18                  In the end, the substantive basis upon which the appeal was dismissed was that the Tribunal had no authority to vary the terms or set aside the imposition of the exit fee.  That was so for two reasons.  The first was that the imposition of the exit fee was not made pursuant to any decision taken by the Trustee and was therefore beyond the authority of the Tribunal to adjudicate.  The second was that the Tribunal was prevented, by s 37(5) of the Act, from doing anything contrary to the terms of the contract of insurance or the rules of the fund.

19                  In my opinion the discretion to award costs to a successful respondent may be informed by its failure to take a preliminary objection until the very last minute.  I would not go so far as to say that it would be appropriate in any but exceptional cases to award costs against such a respondent.  However it may be appropriate to refuse the benefit of an order for costs in such a case.

20                  In the present case I have regard to the following factors:

1.         The Tribunal’s authority to hear and determine the application was not challenged before the Tribunal.

2.         The question of the Tribunal’s authority was not raised until the hearing of the appeal.

3.         The Trustee is involved in the superannuation industry on a day-to-day basis and would be expected to have access at a much earlier stage than the hearing of the appeal to advice in relation to the powers of the Tribunal.

4.         Much of the debate in the written and oral submissions at the appeal was wasted in light of the preliminary point taken.

5.         There was no prior notice of the intention of the Trustee to take the preliminary issue. 

21                  In the circumstances, in my opinion, the appropriate course in an appeal largely directed to argument on a false premise and determined upon a previously unannounced threshold submission by the Trustee, is to require each party to bear its own costs.  I will so order.  I do not consider that any order should be made in respect of the costs of the appeal book.   Given the basis upon which the appeal was brought the inclusion of the documents which were included was not unreasonable. 

Associate:

Dated:              25 June 2004