FEDERAL COURT OF AUSTRALIA

 

Kowalski v MMAL Staff Superannuation Fund Pty Ltd (ACN 064 829 616)

(No 3) [2009] FCA 53

PRACTICE AND PROCEDURE – summary dismissal – Federal Court of Australia Act 1976 (Cth) s 31A – Federal Court Rules O 20 r 5 – holding a “preliminary” trial” – application having no reasonable prospects of success.

SUPERANNUATION – grounds for challenging the decision of Trustee – alleged failure of Trustee to consider an employee’s entitlement to a total and permanent disablement benefit.

TRUSTS – judicial review of Trustee’s decisions – circumstances in which Trustee obliged to reconsider the exercise of a discretion previously exercised – duty of Trustees to give reasons to beneficiaries.

CONTRACTS – contract for the benefit of a third party – settlement of claims against employer in respect of superannuation entitlements – superannuation Trust not a party to the contract – whether promises held by employer trust for the benefit of the Trust – interaction of contract and trust – intention of contracting parties to create a trust.   

 

 

Federal Court of Australia Act 1976 (Cth)s 31A

Federal Court Rules O 20 r 5

Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2007) 242 ALR 370 cited

Kowalski v MMAL Staff Superannuation Fund Pty Ltd (No 2) [2008] FCA 691 cited

Paramasivam v University of New South Wales [2007] FCAFC 176 cited

Jefferson Ford Pty Ltd v Ford Motor Co of Australia Ltd (2008) 167 FCR 372 applied

White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 cited

Jeffrey Guy Baker v Local Government Superannuation Scheme Pty Ltd [2007] NSWSC 1173 cited

Hay v Total Risk Management Pty Ltd [2004] NSWSC 94 cited

Sayseng v Kellogg Superannuation Pty Ltd [2003] NSWSC 945 cited

Flegeltaub v Telstra Super Pty Ltd [2000] VSC 107 cited

Minehan v AGL Employees Superannuation Pty Ltd (1998) 134 ACTR 1 cited

Vidovic v Email Superannuation Pty Ltd (unreported, Supreme Court of New South Wales, Bryson J, 3 March 1995) cited

Karger v Paul [1984] VR 161 applied

Chammas v Harwood Nominees Pty Ltd [No 1] (1993) 7 ANZ Ins Cas 61-17 cited

Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 cited

Alcoa of Australia Retirement Plan Pty Ltd v Thompson (2002) 116 FCR 139 cited

Tonkin v Western Mining Corporation Ltd (1998) 10 ANZ Ins Cases 61-397 applied

Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913 cited

Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 applied

Bahr v Nicolay (No 2) (1988) 164 CLR 604 cited

Twinsectra Ltd v Yardley [2002] 2 AC 164 cited

Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 cited

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 cited

Lidden v Composite Buyers (1996) 67 FCR 560 cited

Butler LM, “Reviewing Trustees’ Decisions:  The Right to Reasons” (1999) 7 Aust Property LJ 251

Dal Pont and Chalmers, Equity and Trusts in Australia,727 ff (4^th ed, 2007)

Ford and Lee, Principles of the Law of Trusts, [17.11010]

Jacobs’ Law of Trusts in Australia, [2303] (7^th ed, 2006)

KAZIMIR KOWALSKI v MMAL STAFF SUPERANNUATION FUND PTY LTD (ACN 064 829 616) and AMP SUPERANNUATION LIMITED (ACN 008 414 104)

 

No SAD 11 of 2007

 

 

 

 

 

 

FINN J

5 FEBRUARY 2009

ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 11 of 2007

 

BETWEEN:	KAZIMIR KOWALSKI Applicant
AND:	MMAL STAFF SUPERANNUATION FUND PTY LTD (ACN 064 829 616) First Respondent   AMP SUPERANNUATION LIMITED (ACN 008 414 104) Second Respondent

 

JUDGE:	FINN J
DATE OF ORDER:	5 FEBRUARY 2009
WHERE MADE:	ADELAIDE

 

THE COURT ORDERS THAT:

 

1.                  The respondents’ motion be allowed.

2.                  The application be dismissed.

3.                  The applicant pay the respondents’ costs including any reserved costs and costs ordered to be the respondents’ costs in the cause. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SAD 11 of 2007

BETWEEN:	KAZIMIR KOWALSKI Applicant
AND:	MMAL STAFF SUPERANNUATION FUND PTY LTD (ACN 064 829 616) First Respondent   AMP SUPERANNUATION LIMITED (ACN 008 414 104) Second Respondent

 

JUDGE:	FINN J
DATE:	5 FEBRUARY 2009
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

1                     On two previous occasions I have refused summarily to dismiss Mr Kowalski’s application and gave him leave to file and serve an amended application and statement of claim:  see Kowalski v MMAL Staff Superannuation Fund Pty Ltd (2007) 242 ALR 370 and Kowalski v MMAL Staff Superannuation Fund Pty Ltd (No 2) [2008] FCA 691.  On the latter occasion I indicated that I was providing him with his last opportunity to provide an intelligible and unobjectionable pleading.  I have, though with little optimism, recommended to him that he obtain competent legal assistance.  He has to date demonstrated little understanding both of the law he seeks to invoke in his own favour and of how to present, albeit in lay form, a clear statement of the claim he seeks to prosecute.  My recommendation was not accepted.  As he has done in so many proceedings in this Court and in other courts and tribunals concerning his relationship with his past employer, Mitsubishi Motors Australia Ltd (MMAL), he acted without legal representation on the motion presently before me.  That motion, brought by the two respondents, again seeks the summary dismissal of the proceeding pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth)or else under O 20 r 5 of the Federal Court Rules.

2                     I intend to make a summary order under s 31A giving judgment for the respondents in relation to the whole proceeding.

Preliminary Matters

3                     As I indicated in both Kowalski (No 1) and Kowalski (No 2), the actual dispute between Mr Kowalski  and MMAL has a long history dating to before 16 March 1994 when his employment with that company ceased.  MMAL Super (“the Trustee”), a subsidiary of MMAL, was the trustee of the MMA Staff Superannuation Fund and was brought into that dispute because of claims Mr Kowalski has asserted as to his superannuation entitlements consequent upon the cessation of his employment with MMAL.  It is unnecessary for present purposes to outline the many proceedings he has brought against MMAL and the Trustee. 

4                     Though his complaints in substance relate to defaults of the Trustee, AMP Super has been joined in this proceeding because by a deed the trust fund was transferred to it as trustee on 15 June 2006 and the Trustee was then wound up as a superannuation entity.  The relief Mr Kowalski seeks includes an order for payment of a sum of money out of the fund, hence the joinder of AMP Super.

5                     The trust rules of the fund that was administered by the Trustee and on which Mr Kowalski seeks to rely as they relate to his alleged “entitlements” provide (Rule C7) that in the event of his retirement “from the employ of [MMAL] before his Normal Retirement Date due to his Total and Permanent Disablement”, he is to be paid a lump sum from the Fund in accordance with the relevant rules (“a TPD Benefit”) which lump sum, it is claimed in his pleading, represented an entitlement of $181,195.00 as at 1 July 1991.  Clause 1(6) of the fund’s Trust Deed defined “Total and Permanent Disablement” as follows:

“Total and Permanent Disablement” means in relation to a Member disablement due to illness accident or injury as a result of which –

(a)        he has been continuously absent from employment with the Employer for a period of at least six months (or such lesser period as the Trustee may determine in any particular case);  and 

(b)        he is, in the opinion of the Trustee after consideration of medical evidence satisfactory to them, incapacitated to such an extent as to render him unlikely ever to engage or work for reward in any occupation for which he is reasonably suited by education, training or experience. 

6                     As is not uncommon, the Deed authorises the Trustee to insure any benefit which might become payable in respect of any member:  cl 8.  If the Trustee effected a policy of insurance under which insurance was payable in the event of disablement of a member, the Deed’s definition of “Totally and Permanently Disabled” permits the Trustee in designated circumstances to modify the Deed’s definition so as to accord with that of the policy:  cl 1.  I mention this in passing because, as will be seen, the Trustee took out such insurance in respect of Mr Kowalski but allowed it to lapse.  Mr Kowalski seems to consider he was prejudiced by its so doing.

7                     The Rules relating to the benefits to which a member is entitled by virtue of the circumstances of his or her retirement or resignation are set out in Schedule C to the Deed:  Rules C3 to C9.  While the Rules impose an obligation on the Trustee to make a prescribed payment to a member who satisfies the criteria etc for that payment, as a practical matter it is for the Trustee to be satisfied that the relevant criteria have been met before a payment of that benefit is to be made. 

8                     It is his alleged entitlement to a TPD Benefit that Mr Kowalski seeks to have enforced, or else to be compensated for not receiving, in this proceeding.  Given its present significance, I would add that Rule C9(2) provides distinctly for the payment of a lump sum to a member of the Superannuation Fund on account of sickness “not constituting Total and Permanent Disablement who leaves his employment before his normal retirement date”.  In this proceeding this type of payment has been described as an “ill health benefit”.

9                     I should also note two further provisions in the Fund’s Deed and Rules.  Rule A7, subject to not presently relevant provisos, authorises the Principal Employer (ie MMAL) from time to time to “direct the Trustee to augment the amount of any benefit payable pursuant to the … Rules”.  Clause 3(1) of the Trust Deed provides (inter alia) that:

Except to the extent otherwise provided in the Deed or the Rules the Trustee have in the exercise or non-exercise or partial exercise of each and every power exercisable by the Trustee an absolute and uncontrolled discretion and are not bound to give to any person any reason for or explanation of their exercise, non-exercise or partial exercise of any such power.

10                  In Kowalski (No 2) I indicated that Mr Kowalski had by then filed an ever growing mosaic of evidence covering in the main, a 15 year period.  The documents filed (often as annexures to submissions) are for the most part unexplained;  their context is often lacking;  and if they refer to annexures, the annexures are often missing.  The re-pleading has only added to the evidentiary morass. 

11                  While the respondents have attempted to provide some order to Mr Kowalski’s material they have for understandable, prudential reasons limited the Kowalski material to which they refer (supplemented by documents of their own) to what can reasonably be said to be related to Mr Kowalski’s case as now pleaded.  Nonetheless, they have as well dealt with certain matters (concerned primarily with events in 1998) which, while not founding any claim in the pleading, were referred to as a cause of complaint in Mr Kowalski’s filed statement of issues and formed part of his oral submissions.

12                  Put in summary form – and hence somewhat inexactly – Mr Kowalski’s claims as they emerge from the pleading (as supplemented by his filed statement of issues relating to 1998) are fourfold, the first three being founded on alleged breaches of fiduciary duty and breaches of trust. 

            (i)         The Trustee should have considered, but failed properly to do so, his entitlement to a TPD Benefit at the time he was paid a resignation benefit in August/September 1994. 

            (ii)        The Trustee should have considered, but failed properly to do so, his entitlement to a TPD Benefit at the time he was paid his ill-health benefit in November 1998.

            (iii)        The Trustee should have but failed properly to consider his claim for a TPD Benefit in November 2005.

            (iv)       The Trustee was negligent in failing to perform its duty to Mr Kowalski in not making a correct and proper determination of his entitlement to a TPD Benefit.

13                  The consequential relief sought (I disregard much of what is misguidedly claimed in the Further Amended Statement of Claim:  see paras 23 to 28) is, in substance, that the Trustee be ordered to pay him his TPD Benefit with interest or else damages or compensation for breach of fiduciary duty, breach of trust or negligence. 

14                  The final preliminary comment I should make is this.  There is a considerable number of paragraphs in the Further Amended Statement of Claim that are manifestly irrelevant or are misconceived:  see eg paras 9.1–9.10 and 23–28.  I do not intend further to identify what is on any view unnecessary in the pleading.  Rather I will only address the sufficiency and prospects of the four claims I have identified.

15                  As the first three arise in chronological order, I will outline them sequentially.  Before doing so it is appropriate to refer both to the emerging principles informing the Court’s power to give summary judgment under s 31A of the Federal Court of Australia Act and to the nature of the obligation of a trustee or fiduciary to consider the exercise of a power held by virtue of office.

1.         Summary Judgment

16                  Section 31A, insofar as presently relevant, provides:

31A      …

            (2)        The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: 

                       (a)        the first party is defending the proceeding or that part of the proceeding;  and

                       (b)        the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

            (3)        For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: 

                       (a)        hopeless;  or

                       (b)        bound to fail;

                       for it to have no reasonable prospect of success.

17                  This is not a matter in which it is necessary to consider in detail the varying and by no means harmonious views that have been expressed by judges as to the burden of the “no reasonable prospect of successfully prosecuting” formula and of the nature of, and limits to, the assessment it requires be made.  As I have indicated, I have a plethora of evidence before me and the principal task it presents is the making of an assessment of it, as a matter of fact, as to whether Mr Kowalski has no reasonable prospect of proving each of the facts necessary to perfect the elements of the causes of action he advances in his pleading:  cf Paramasivam v University of New South Wales [2007] FCAFC 176 at [41];  see also Jefferson Ford Pty Ltd v Ford Motor Co of Australia Ltd (2008) 167 FCR 372 at [23].  Beyond that, as I will indicate, there is also a question whether his claims are legally untenable in any event.

18                  Section 31A is not concerned as such with the bare question whether a person’s pleading discloses a reasonable cause of action.  Its concern is with substance and not just form.  But as Lindgren J observed in White Industries Aust Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at [47], while the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts –

[a] failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success.

19                  It is well accepted that the moving party bears the onus of persuading the Court that the applicant has no reasonable prospects of success.  But once that party has established a prima facie case that the applicant has no reasonable prospect of success, the applicant must respond by pointing to specific factual or evidentiary disputes that make a trial necessary:  Jefferson Ford at [127]. 

20                  Importantly for present purposes, as Gordon J observed in Jefferson Ford at [130] (citations omitted): 

… where there is a real issue of fact relevant to a pleaded cause of action, it is unlikely that that part of the proceeding has no prospect of success … So, for example, if the pleadings, affidavits, and other materials considered in connection with the summary judgment motion, reveal a factual dispute and that factual dispute must be resolved to determine whether or not the claim succeeds, it cannot be said that the claim has “no reasonable prospect of success” … On the other hand, if the factual contest is unnecessary to the resolution of the cause of action pleaded, then in the absence of other relevant material, there is nothing to prevent the court entering judgment on that claim.

Breach of Trust/Fiduciary Duty

21                  In Kowalski (No 2) I set out in relatively short form the principles governing the review of a decision of a superannuation trustee denying a member’s entitlement to a claimed benefit.  As I then indicated there is now a significant body of Australian case law dealing with that matter and many of the cases have involved claims for total and permanent disability benefits having criteria similar to those embedded in cl 1(6) of the Deed:  see eg Jeffrey Guy Baker v Local Government Superannuation Scheme Pty Ltd [2007] NSWSC 1173;  Hay v Total Risk Management Pty Ltd [2004] NSWSC 94;  Sayseng v Kellogg Superannuation Pty Ltd [2003] NSWSC 945;  Flegeltaub v Telstra Super Pty Ltd [2000] VSC 107;  Minehan v AGL Employees Superannuation Pty Ltd (1998) 134 ACTR 1;  Vidovic v Email Superannuation Pty Ltd (unreported, Supreme Court of New South Wales, Bryson J, 3 March 1995). 

22                  For present purposes, I accept that the grounds upon which a court will review an exercise of a superannuation trustee’s discretionary determination are essentially those stated by McGarvie J in Karger v Paul [1984] VR 161, though they have been somewhat elaborated – if not adapted:  see Baker v Local Government Superannuation Scheme Pty Ltd at [8] – in the superannuation context.  They are that (i) the discretion was not exercised in good faith;  (ii) there was not a real and genuine consideration of the correct question;  (iii) the discretion was not exercised for the purpose for which it was conferred;  (iv) if the trustee has given reasons for its exercise of discretion, those reasons were not sound;  and (v) if the material before the trustee can be identified, that the trustee’s decision was one that no reasonable person could come to on that material.

23                  I note in passing that, while Mr Kowalski has not been hesitant in alleging bad faith, the challenges he has made in substance seem addressed to grounds (ii), (iv) and (v) of the above.

24                  There are three additional matters I should emphasise.  First, I have emphasised that it is the review of the Trustee’s decision that is of present concern.  The present is not a case in which the Trustee was, in substance, deciding a question that was assigned by the Deed itself to an insurer:  cf Chammas v Harwood Nominees Pty Ltd [No 1] (1993) 7 ANZ Ins Cas 61-175.  Secondly, while both under the general law and under cl 3(1) of the trust deed the Trustee had no duty to give reasons for a determination adverse to Mr Kowalski, a failure to give reasons in circumstances where explanation might be called for is another matter.  As Young J observed in Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601 at 604, in dealing with the suggestion that because a trustee is not bound to give any reasons, therefore the matter is completely unreviewable:

Nothing could be further from the truth.  Indeed, whilst trustees do not have to give reasons in a case where a plaintiff puts forward a prima facie case that the trustee’s discretion has miscarried, the absence of reasons and the absence of any evidence before the Court as to what happened, will tend to make that prima facie case a virtual certainty.

This view has been endorsed in many subsequent cases:  see Baker v Local Government Superannuation Scheme Pty Ltd;  Hay v Total Risk Management Pty Ltd;  Alcoa of Australia Retirement Plan Pty Ltd v Thompson (2002) 116 FCR 139 at [37];  Flegeltaub v Telstra Super Pty Ltd;  see also Butler LM, “Reviewing Trustees’ Decisions:  The Right to Reasons” (1999) 7 Aust Property LJ 251.  Thirdly, as the Trustee has considered Mr Kowalski’s entitlement to a TPD Benefit on a number of occasions and has decided against it, an issue that presently arises is whether, if at all, it is obliged to reconsider that matter and, if so, in what circumstances.  These issues have helpfully been considered by the Full Court of Western Australia in Tonkin v Western Mining Corporation Ltd (1998) 10 ANZ Ins Cases 61-397 and in a context not dissimilar from the present.  In a judgment endorsed by the other members of the Court, Franklyn J made observations which though lengthy are presently relevant in several respects (at 74,270):

In my view, having regard to the terms of the Deed and the relevant definition, there is no obligation on the trustee, on an application for the TPD Benefit supported by evidence inadequate to give rise to the necessary opinion, to seek out, on its own initiative, evidence for its consideration and so strain to obtain evidence relevant to the formation of the necessary opinion, thereby attempting to bring within the definition a member not otherwise within its terms.  It may, however, in the exercise of its fiduciary duty and as a matter of discretion, if it considers it appropriate, seek and obtain additional medical evidence.  It may also, as a matter of discretion, require medical evidence to be submitted to it for the purposes of its consideration.  As trustee, it is not an adversary either for or against an applicant for the benefit.  Relevantly, it has a duty only to act in accordance with the trust.  If it fails to perform the same, the court will compel it to do so or do so for it.  It is not bound by any rules as to how it exercises a discretion conferred on it, save such as it is obliged to comply with by the terms of the Deed, provided always that it must act honestly and in good faith, on an informed view of whether or not to exercise its discretion, and exercise the power with due consideration for the purpose for which it was conferred and for no ulterior purpose.  In the case of powers conferred on it and as to whether it should do or refrain from doing something, it must exercise its judgment actively and honestly and act accordingly.  The court will not control a trustee in the exercise of its purely discretionary powers unless it is acting mala fide or has misconceived the nature of its discretion and acted upon that misconception.  When appointed to exercise a trust according to discretion, a trustee is not bound to state reasons for any conclusion at which it may have arrived and on which it has acted, but again the discretion must be exercised with an absence of indirect motive with honesty of intention and on a fair consideration of the issues.  The duty of the court generally is to see that the discretion of the trustee has been exercised in this manner and not to deal with the accuracy of the conclusion at which it may have arrived.  See Jacobs’ Law of Trusts in Australia, 5^th Ed, p 372-379.

In my opinion, it has at all times been open to the appellant to submit further medical evidence, including the reports relied on in para 17.2A to the respondent for its consideration pursuant to the Deed definition in respect of the claim for the TPD Benefit.  In such case the respondent is bound to give them proper consideration.  No time limit is fixed or imposed by the Deed for making application for the Benefit or for the required consideration of medical evidence.  Whether any statutory limitation might apply is not relevant to our consideration as no issue in that respect has been raised.  In the event of the respondent, having considered medical evidence before it, failing to form the necessary opinion there is nothing in the Deed or rules to inhibit the appellant from providing, for its further consideration, further medical evidence relevant to the formation of that opinion.  There is nothing in the Deed to lead to the conclusion that, once having failed or refused to form the necessary opinion after consideration of the medical evidence then before it, the respondent is under no obligation to consider further medical evidence relevant to the formation of that opinion.  Indeed, in my opinion, on the proper construction of the Deed and having regard to the fiduciary nature of the trustee’s obligations, the respondent, if requested to do so, is bound to consider such evidence relevant to formation of the opinion as may from time to time be put before it.  Consequently, medical evidence, whether coming into existence prior or subsequent to any particular failure or refusal to form the necessary opinion will necessarily have to be considered if made available by or on behalf of the applicant for that purpose.

I should note that for present purposes the respondents have conceded that, beyond medical evidence, if other material is provided to a trustee and is of such character as would lead a reasonable trustee to consider whether or not to reconsider its former opinion, that material will have to be considered. 

25                  Finally, though it is not a matter which it is appropriate for me to enter upon in this proceeding, I acknowledge that there remains a real question as to the appropriateness of applying to superannuation trusts as of course principles of review evolved in contexts of settlor bounty and charity – contexts which are remote from the modern employment relationship:  see eg Vidovic v Email Superannuation Pty Ltd;  Baker v Local Government Superannuation Scheme at [8];  and see generally Dal Pont and Chalmers, Equity and Trusts in Australia,727 ff (4^th ed, 2007). 

The Claims

(i)         The 1994 Claim:  FASC paras 14, 16, 29.1 and 30

26                  The essence of this claim is revealed in part of the relief sought in para 30 of FASC.

27                  The applicant seeks damages and compensation from the respondents to be determined by the Court:

“… on the grounds that in April and May 1994 ASL/MMASSF breached its fiduciary relationship with the applicant of potential beneficiary and trustee of a superannuation fund by refusing to make a correct determination of the applicant’s superannuation entitlement in accordance with the undisputed fact that on 16 March 1994 the applicant’s employer had informed him that as a consequence of the applicant’s psychological or psychiatric medical illness his contract of employment with his employed was frustrated by operation of law and by refusing to consider Prof AC McFarlane’s medical report dated 28 April 1993, and by refusing to determine and/or failing to determine [his] application for a TPD Benefit dated 3 November 2005, therefore, in 1994 and in 2005 ASL/MMASSF had breached its fiduciary relationship with the applicant of potential beneficiary and trustee of a superannuation fund, which the Plaintiff had entered into with the Respondents on or about 17 March 1970, breached the Respondents fiduciary obligation or duty to the Applicant under the Trust Deed and Rules, was in breach of good faith and the Respondents was negligence [sic] in it refusing to perform or in it failing to perform its duty to the applicant in not making a correct and proper of the applicants superannuation benefits in April 1994 and in refusing to make a determination or failing to make a determination on the applicant’s application for a TPD benefit dated 3 November 2005.” 

28                  To understand both the claim itself and the respondents’ challenge to it, it is necessary to set out briefly the essence of the relevant factual material identified in FASC, Mr Kowalski’s affidavits and, to a minor extent, in an affidavit of David Smelt who at all relevant times was an employee of the corporate administrator of the Trustee.  In doing this I largely follow as a matter of convenience the chronology prepared by the respondents and for which I am grateful.  As I noted in Kowalski (No 2) at [11], I was then unable to develop any real understanding of the sequence of events since 1991 or of the relevance or significance of much of the documentary material.

29                  (i)  On 7 March 1970, Mr Kowalski joined the MMAL Super Fund.  He alleges that on 16 August 1991 he suffered a psychological injury/mental breakdown at work and that from that date until 16 February 1992 he was paid “his statutory entitled sickness benefit” as a consequence of that injury/breakdown.

30                  (ii)  On 20 February 1992 Mr Kowalski made a Total Disablement claim.  In para 13.2 of the FASC it said the Trustee commenced paying him “Totally and Permanent Disability Benefits”.  In contrast, a letter to Mr Kowalski of 28 April 1992 in Mr Smelt’s affidavit stated (in part):

Further to your request to be considered for Total and Permanent Disability Benefits, the Trustees have advised that they are still reviewing your claim, but in the meantime, they are prepared to consider you for Temporary but Total Disability Benefits from 19/02/92.

This benefit takes the form of a monthly income, calculated as one twelfth of 12.5% of your Total and Permanent Disablement Benefit payable to you will be reduced if necessary (as provided in the Trust Deed) by the aggregate of any amounts payable under any provision (statutory or otherwise) for Workers Compensation and/or Sick Leave.

To enable us to process the payment please complete the enclosed statements for the period 19/02/92 to 30/04/92 and return to me at your earliest convenience.

31                  (iii)  Because it is a matter of some, albeit unfounded, concern to Mr Kowalski, I note that as of 31 March 1992, MMA Super Fund terminated the life insurance policy for Mr Kowalski that it had in place with SGIC.

32                  (iv)  On 4 August 1992, the insurer, SGIC informed the Fund’s administrator that Mr Kowalski would continue to be eligible for a Total and Temporary Disablement Benefit (TTDB) but, in light of his treating psychiatrist’s report, he was assessed as not “Totally and Permanently Disabled”:  his condition “can only be approximated with Total and Temporary Disablement.  Chronicity of his condition is not implied”.  On 18 August 1992, the Trustee of the Fund agreed to decline Mr Kowalski’s TPD claim “based on the evidence provided”.  I interpolate in passing that this 1992 TPD Benefit decision of the Trustee has not been challenged in this proceeding.

33                  (v)  Mr Kowalski had been involved in litigation in the South Australian District Court with MMAL and then in consequential proceedings over a settlement in the period 1991–early 1993.  In April 1993 MMAL’s solicitor made a conference note of a meeting he had with a Dr McFarlane, a psychiatrist, which recorded (in part):

Dr McFarlane said that the value of an overall settlement in a person’s rehabilitation should not be underestimated.  He said that he believes Mr Kowalski’s chances of a productive life are much better if a settlement is achieved.  The possibility exists that he may become a chronic invalid;  for that reason an agreed settlement would be much more beneficial to him.  (Emphasis added.)

He said that he believes it fictitious to seriously suggest a return to work in a case like this.  He said that it has been demonstrated in patients with stress-related conditions that only one out of 32 patients were effectively rehabilitated back to work.  That was despite the fact that their rehabilitation was very carefully monitored.  Therefore, he does not see rehabilitation back to his previous employment as an option with any significant chance of success.

As the note indicates, Dr McFarlane had not examined Mr Kowalski at the time of the interview.  I would also interpolate that there is nothing in the evidence to suggest that this note was supplied to the Trustee at that time.  However, it is clear that by June 2001 the Fund administrator had a copy of the notes:  see letter of that date from David Smett to Colonial.  The letter suggests the notes were provided by Mr Kowalski at about that time.  It can also be inferred from a file note of Mr Smett of 27 October 1998 that he was made at least aware on that day of what Mr Kowalski described as “Dr McFarlane’s report” of April 1993. 

34                  (vi)  Mr Kowalski’s employment contract was terminated by MMAL on 16 March 1994.  The letter notifying him of this which is a central plank in his claims, stated insofar as presently relevant:

We have now received a copy of the determination of Review Officer Fender made on 9^th March 1994 in relation to your workers compensation claim.

During the course of your evidence at the review hearing you stated that you continue to be incapacitated for work.  Since the review hearing has concluded, you have continued to provide prescribed medical certificates that certify you totally unfit for work as a result of a pathologically intense anxiety condition.  Review Officer Fender made a finding that you did not suffer a disability arising from your employment with us.  She also made a finding that even if you suffered an incapacity resulting from the meeting on 16 August 1991, that incapacity was temporary in nature and has long since abated.  She found that your incapacity for work has resulted from the ramifications of the common law proceedings since, at the latest, 10^th July 1992.

As you continue to be unfit for your normal duties with us, your contract of employment with the company is frustrated.  On that ground, your contract of employment with the company is now at an end, and accordingly you are no longer required to report for work.

Again I note in passing that the respondents accept that the letter did not give an accurate indication of how the parties’ legal relationship came to be terminated.  On 31 March 1994 MMAL informed the Trustee that Mr Kowalski had “resigned” from his employment:  FASC para 15. 

35                  (vii)  On 22 March 1994 Dr Jagermann, Mr Kowalski’s treating doctor, gave a workers compensation certificate relating to an examination of Mr Kowalski of that date.  He certified that his condition had “abated” and that he was fit for normal duties from “28.3.94 and continuing”, with capacities “commensurate with [his] work skills, practice and experience”.

36                  (viii)  There does not appear to be any contemporaneous evidence of how the Trustee was notified of Mr Kowalski’s termination.  A letter written on behalf of the Trustee to Mr Kowalski in November 1997 suggested that that notification occurred by means of an electronic transfer to the Trustee of MMAL’s payroll which indicated employees who had terminated and the termination dates.  The letter went on:  “If no other correspondence is received by the Fund the superannuation benefit paid is either a normal resignation or a retirement benefit, depending on the member’s age.” 

37                  (ix)  On 23 May 1994 Mr Kowalski requested the Trustee to stop processing his superannuation entitlements until two proceedings were finalised.  The first was a claim against MMAL for unfair dismissal;  the second, an appeal against the WorkCover ruling of 9 March 1994 which was referred to in the letter notifying him of his termination.

38                  (x)  In late August 1994 the Trustee paid Mr Kowalski a resignation benefit of $27,664.54 under Rule C9 of the Trust Rule.

39                  The 1994 claim is that, before so doing, the Trustee did not consider the 1993 conference note with Dr McFarlane or any other medical evidence (unspecified) available to it at the time “and which was satisfactory to the Trustee” which proved he was entitled to be paid a TPD Benefit instead of a resignation benefit.  As I will later indicate, there is no arguable basis at all for alleging a breach of fiduciary duty or breach of trust on the Trustee’s part at that time.  The Trustee was not put on notice at the time that Mr Kowalski’s termination was other than by way of resignation and it acted accordingly. 

The 1998 Claim:  (Not Pleaded)

40                  The respondents properly address this matter notwithstanding it has not been pleaded in the FASC but did appear in its predecessors.  Mr Kowalski has provided material bearing on it and has clearly relied upon it in his submissions.

41                  (i)  Sometime in 1997 Mr Kowalski made a claim to the Trustee for an ill-health benefit pursuant to Rule C9(2)(a) of the Rules.  As earlier noted, this benefit is payable in circumstances of resignation due to sickness that does not constitute Total and Permanent Disablement.  On 27 November 1997 he informed the Trustee he did not wish it “to make a determination in regards to my entitlement [to that benefit]” until his claim for unfair dismissal had been finalised. 

42                  (ii)  Sometime in 1997 Mr Kowalski suffered a heart attack (or attacks).  The material before me suggests both that the heart attack became the subject of a workers compensation claim and that it intruded itself in some way into the TPD Benefit discussions at the mediation and with Mr Smelt on 27 October 1998.  For example, Mr Kowalski said in his letter of 28 July 2001 to the Trustee that:

I confirm that on 26 October 1998 my claim for a TPD benefit, after my heart attack and open heart surgery, was rejected on the basis of a decision, by an insurer in 1993, which was a decision that was made prior to my heart attack and open heart surgery.

43                  (iii)  On 18 April 1998 Mr Kowalski sent a facsimile to a Mr Breugem in Human Resources at MMAL.  He referred to the letter of 16 March 1994 terminating his employment which was signed by a Mr Beer and went on:

(2)        Mr Beer claimed that because I was “… absent from work on unpaid leave with a certificate of incapacity extending past the period of notice” I had ‘frustrated’ my contract of employment with Mitsubishi. 

(3)        In light of the claim by Mr Beer I should have been paid my superannuation benefits pursuant to Rule C9(2)(a) of “Mitsubishi Motors Australia Staff Superannuation Fund”, however, this did not occur because the Fund Secretary and the Actuarys were not advised, by Mitsubishi, that Mr Beer of Mitsubishi claimed that I left on account of sickness.

(4)        My family & I request that you correctly inform the Fund Secretary, Trustees and the Actuarys of the reason that Mr Beer claimed that I left Mitsubishi, that is sickness.

(5)        My family &I request that the proposed settlement has to include a resolution of my superannuation entitlements pursuant to Mr J Beer’s letter dated 16-3-94 and Rule C9(2)(a) of the Fund. 

44                  (iv)  Later in that year Mr Kowalski and MMAL participated in a mediation before a Mr Walsh QC.  The Trustee was not a participant in that process.  The mediation occurred on 26 October 1998 and resulted in the signing of Heads of Agreement on 27 October 1998 by Mr Kowalski, his wife and MMAL.

45                  (v)  MMAL prepared a document for that mediation of what it wished to achieve.  It stated in part:

There are at the present time some 10 actions pending before various courts, tribunals or review officers and that is without having regard to appeal processes which may flow from any decisions on those matters. 

Mitsubishi wishes to try to reach a final and overall settlement of all outstanding matters between itself and Mr Kowalski including the payment to Mr Kowalski of Superannuation and taking into account the amounts which are owed by Mr Kowalski to Mitsubishi for costs of his unsuccessful claims.

Under the heading “SUMMARY OF MITSUBISHI ISSUES” appeared the item:

2.         Clarifying the amount payable to Mr Kowalski for superannuation. 

46                  (vi)  The mediator, Mr Walsh QC, in turn prepared a document identifying the matters in dispute.  That document was initiated by Mr Kowalski, Mr Walsh and Mr Breugem for MMAL.  That document identified as an issue: 

1.         Any entitlement that Kazimir Kowalski has as a result of the termination or cessation of his employment with Mitsubishi Motors Australia Ltd including superannuation, sickness benefits or otherwise.

47                  (vii)  At 9.00 am on 27 October 1998, Mr Kowalski had a meeting with Mr Smelt.  The purpose of the meeting, according to Mr Smelt’s file note, was for Mr Kowalski to discuss his arrangements with MMAL and the benefit he would receive on reaching agreement with MMAL.  The note recorded:

·               He [Mr Kowalski] went into yesterday’s meeting with a view within himself that he was going to receive a permanent disablement benefit even though this had never been suggested by MMAL.

·               He stated that he believes that he is effectively still employed as Justice Von Doussa stated that MMAL have not provided formal notice of termination of employment.  He also stated that as he has been taking action in respect of his employment with MMAL and unfair dismissal that under workers compensation legislation his is still considered to be employed by MMAL and therefore should now be considered for a TPD benefit.

·               Kaz has a copy of a report from a Dr McFarlane dated April 93 in relation to his condition suggesting that he should not return to work.

·               I suggested that Kaz would not be TPD based on the information within the file held within our office.  I also advised that I was not aware of the reports considered by SGIC as the Fund’s insurer when declining him for TPD in August 1992 and whether McFarlane’s report was available to SGIC.

·               I also advised that his current situation and his heart and blood pressure condition did not automatically make him TPD as they have happened after he ceased employment and were not a factor in his cessation of employment.

·               He again stated that he felt the trustees had been derelict in their duties as they had not considered his situation for the correct benefit.  I advised that the trustees are not always fully aware of each and every case as the Fund Secretary acts as an agent of the Fund to ensure that actions occur in a timely manner so the trustees are not full time on superannuation matters.

·               Kaz questioned the amount of the ill health benefit and how it was calculated.  I advised that I had previously provided a letter dated 1 May 1998 which provided details of the amount of the ill health benefit.  Kaz stated that he did not have a copy of this letter and suggested it had not been provided.  I advised that I had personally delivered it to his letterbox on Saturday morning the 2^nd May 1998.

·               I further explained the ill health benefit and the discount that applies at which point he advised that the amount that had been agreed as settlement was confidential and he shouldn’t talk about it.  He did not advise that the total agreement was confidential and that he should not be discussing it with me.

·               I advised that in respect of his TPD claim that I would need to contact SGIC which had been bought by Legal and General and subsequently Colonial to find out which doctors reports were considered when he was assessed for TPD but it would take some time due to the changes since 1992, the date his claim was originally declined.

·               I advised him that I had spoken to Tony Breugem yesterday and provided copies of pages from the Fund’s trust deed in respect to TPD.

·               I advised I would contact Tony Breugem and discuss his case to determine what further consideration his claim should receive. 

·               Kaz also suggested that Tony Breugem was acting as an employer appointed trustee and therefore making decisions that were in the interest of the employer.  I strongly disagreed and advised that Tony’s role as a trustee was to act in the interest of the members.

·               My discussion with Kaz concluded at approximately 10.00 am at which time I contacted Tony Breugem to discuss Kaz’s concerns.

48                  (viii)  Sometime on 27 October the Heads of Agreement was signed.  It recited that the parties “have reached an agreement in relation to the resolution of all issues” which it recorded as including for present purposes that:

1.         Kowalski on behalf of himself and his dependants hereby agrees to accept the sum of $200,000 in full and final settlement of any entitlements he may have to superannuation, sick leave, compensation and damages arising out of or in the course of his employment with MMAL.  In particular, the said sum to be paid with a denial of liability, includes payment in full and final settlement of: 

            …

            1.3        Any matters related to the termination of his employment with MMAL.

            1.4        Any superannuation payable by the MMAL Staff Superannuation Fund. 

2.         The said sum of $200,000 is to be paid to Kowalski as follows:

            2.1        The sum of $64,691.43 to be paid from the Superannuation Fund by way of an ill health benefit being the entitlement with respect to the period from 7 March 1970 to the date of cessation of his employment. 

            2.2        The sum of $125,308.57 to be paid by MMAL as an ex gratia payment as compensation for permanent disability impairing his future earning capacity arising from the injuries and disabilities mentioned above.

            2.3        The sum of $10,000 to be paid by MMAL in consideration of Kowalski forgoing any claims or future claims in any way arising from his employment.

            …

4.         In consideration of the matters set out in paragraphs 1 and 2 above, Kowalski and his dependants agree: 

            4.1        Not to institute any legal proceedings and or legal complaints with any Court, Tribunal or body in respect of the matters set out in paragraph 1 hereof …

49                  (ix)  On 3 November 1998, MMAL gave a direction to the Trustee (presumably under Rule A7) in the following terms:

Mr Kowalski’s termination has now been determined as being as a result of ill health.  Would you please ensure that his benefits are paid in accordance with the relevant terms of the Superannuation Trust Deeds.

Further to a telephone call he had with an officer of the Trustee, Mr Kowalski indicated by facsimile to her that he wished to rollover the sum paid by the Fund for the ill-health benefit to another fund.  The Trustee paid that sum to the designated fund on the following day.  On 17 November the Trustee formally confirmed the decision to admit his claim for an ill-health benefit.

50                  As I will later indicate it is not at all obvious how Mr Kowalski reasonably could found any challenge to the decision making/actions of the Trustee in November 1998.  . 

The 2005 Claim:  FASC paras 16.1 and 30

51                  This claim mirrors the 1994 claim save that the failures attributed to the Trustee related to its consideration of an application for a TPD Benefit made by Mr Kowalski on 3 November 2005.

52                  In dealing with the period 1999 to 2005 I rely on material filed by Mr Kowalski.

53                  (i)  It is apparent that by March 1999 Mr Kowalski believed an error had occurred in relation to the calculation of his superannuation benefit for the purposes of the mediated agreement.  He was sent a letter from Mr Breugem who signed the agreement for MMAL indicating that he participated in the mediation on behalf of MMAL and not as a director of the Trustee and that he excluded himself “from any consideration in regard to the issues involved with respect to your Superannuation calculation”.  Mr Breugem reminded Mr Kowalski that he had entered a legally binding agreement in settlement of (inter alia) superannuation entitlements arising out of his employment.  The agreed total Mr Breugem stated was made up of components (which included superannuation) which were specified and allocated “at your discretion in accordance with your financial advice”.  On the material before me this last observation seems incorrect and that the superannuation amount was advised by the representatives of MMAL.  The letter there indicated that while he understood the Trustee was considering “your issues”, Mr Breugem indicated that Mr Kowalski’s concerns should be dealt with in the context of the Agreement.  He proposed that the matter be dealt with in a meeting with Mr Walsh QC. 

54                  (ii)  By June 2000 Mr Kowalski had lodged a complaint with the Superannuation Complaints Tribunal in relation to his benefits from the Fund.  The Tribunal later determined it had no jurisdiction in relation to the matter.

55                  (iii)  By a letter of 5 June 2001 the Trustee told Mr Kowalski that it was not authorised to give him a copy of the Heads of Agreement:  it was not a party to it;  only MMAL could authorise its release.  The letter went on:

In addition, the Trustee has no involvement with this agreement and have therefore had no communication with any person involved with the agreement other than to be aware of its existence.  Accordingly, any questions relating to this agreement should be directed to MMAL.

The letter also indicated that the Fund Secretary had been provided with a copy of the 27 October 1998 file note where numerous matters including issues relating to a TPD claim with the fund were discussed. 

56                  (iv)  Having been asked (seemingly in about June 2000) to review Mr Kowalski’s 1992 claim for a TPD Benefit, the insurer, Colonial (the successor to SGIC), advised Mr Smelt by letter of 13 June 2001 of its decision to decline the claim.  On 22 June Mr Smelt sent an email to Colonial concerning Mr Kowalski and Colonial’s decision.  It stated in part:

You state in your letter that his condition was not chronic but in light of the fact that Mr Kowalski has not returned to work since 1991, and that he continued to receive TTD benefits for some 12 months after he was originally declined, we request that you further reconsider his TPD claim.  After some discussions with our legal people in Melbourne we believe the fact that these payments continued for the period they did suggest there is a chronic situation and a full review of his case is warranted.

This email was sent to Mr Kowalski at his request in February 2003.  What I would note is that it reveals plainly enough both an awareness on behalf of those acting for the Trustee of the issue posed by the TPD claim that needed address and, equally significantly, the obtaining of legal advice in relation to the issue. 

57                  On 27 June Mr Smelt again requested Colonial to review Mr Kowalski’s claim for the benefit and provided Colonial with further material for that purpose which included the notes from the meeting with Dr McFarlane of April 1993 and a report from McFarlane of 16 September 1998. 

58                  (v)  On 3 July 2001 Mr Smelt yet again requested the insurer to reconsider the TPD Benefit claim.  His letter stated in part: 

To consolidate and ensure that this TPD claim is properly considered and a decision reached based on all relevant factors, we reiterate that the original decision to decline Mr Kowalski’s TPD claim was made part way through the maximum 2 year benefit period applicable to the TTD benefit.  Whilst the decision to decline may have been reasonable at that time, there is nothing on file from SGIC to indicate that the same decision was reasonable more than a year later ie at 19 February 1994 when payment of temporary disablement benefits ceased.

SGIC’s liability in relation to Mr Kowalski’s TPD claim did not cease as a result of the policy termination in early 1992.  The incident leading to the claim occurred whilst SGIC was the insurer on risk and total disability had been established.  It remained to address the question of whether the disablement was temporary (as initially assessed) or in reality it was permanent.

For the TTD benefit to continue for the maximum benefit period of 2 years the medical information must have indicated that Mr Kowalski remained totally and temporarily disabled.  The continuance of the TTD benefit would not have been dependent upon the permanency of his condition and accordingly it appears the question of permanency was not again considered.  By virtue of the fact that Mr Kowalski had not recovered sufficiently to resume any work, without such reconsideration, it is not clear whether or not he was totally and permanently disabled.

Mr Kowalski continues to believe that the decision to decline is TPD claim is incorrect and he continues to provide further material in support of his TPD claim.  Until the matter has been concluded one way or the other it is incumbent upon the insurer and the Trustee to re-assess his TPD claim in its entirety.

On 28 July 2001 Mr Kowalski provided the Trustee with further additional medical evidence which he asked to be considered by the insurer.  That material was forwarded to Colonial on 31 July 2001. 

59                  (vi)  As appears from a letter of 8 March 2004 from the Trustee’s lawyers to Mr Kowalski, both Colonial and the Trustee reconsidered his application for a TPD benefit “in July August/2001.  At that time, Colonial and the Trustee rejected your application.” 

60                  (vii)  On 16 April 2003, Colonial wrote to Mr Smelt concerning Mr Kowalski and the life insurance policy relating to him.  The letter stated in part:

We refer to the claim by Mr Kowalski who was a life insured covered under a group life insurance policy (“the policy”) issued by the State Government Insurance Commission (SGIC) (“now Colonial”) to Mitsubishi Motors Australia Employees’ Superannuation Fund.

Mr Kowalski made a claim for Total and Permanent (“TPD”) benefit on 20 February, 1992 claiming that the Life Insured had been absent from employment since 16 August, 1991 as a result of emotional stress and pathologically intense state of anxiety and that he was TPD.

After considering medical evidence available to it, SGIC denied the claim for TPD benefits on 4 August, 1992 on the basis that the evidence supported that the insured was not TPD.  We note that Colonial subsequently re-examined Mr Kowalski’s claim and affirmed its decision to deny the claim by letter dated 13 June, 2001.

We note you subsequently requested that Colonial review the claim on 3 July, 2001 taking into consideration further medical evidence.  Colonial reviewed the claim at this time and communicated its decision to you via email correspondence on or about August, 2001.  Mr Kowalski however, alleges that Colonial did not re-examine his claim as requested.  We deny this allegation.

Mr Kowalski has contacted Colonial on a number of occasions regarding his claim including a recent letter dated 14 February, 2003.  We note that the policy is between Colonial and the Trustee.  Therefore, we are writing to Mr Kowalski informing him that any future questions he has about the policy should be directed to the Trustee and not Colonial.

We have examined our file and provide the following summary of the assessment of Mr Kowalski’s claim for your information: 

The insured’s claim has been assessed by determining whether he was TPD as at February, 1992.  We refer to the policy provisions for an explanation of the assessment of the insured’s claim in this way.  Under the policy the period of cover ends on the earliest to occur of:

            -  the end of the term of group life policy or its earliest termination, or

            -  the termination of employment, or

            -  cessation of gainful employment by the life insured as reflected in the following provisions of the Group Life Policy. 

Clause 4 (Duration of Cover) of the Group Life Policy provides:

            “The insurance cover evidenced by this Policy issued pursuant to the Proposal shall be effective from midnight of the Commencement Date until midnight of the same date of the month as the anniversary in which the contract guarantee period expires.”

            “Contract Guarantee Period” in the Group Life Policy is defined to mean the period from the commencement date to 1^st February, 1992.

            Clause 5(2) of the policy provides that “Cover in respect of a Life Insured ceases at the earliest of the following events” including:

            (ii)        termination of service with the employer and

            (v)        cessation of gainful employment

Accordingly, the insured’s claim must be assessed by determining whether he was TPD as at February, 1992 or any earlier date on which the insured’s employment was terminated prior to this date or the insured ceased gainful employment prior to this date. 

 

If you would like us to reassess the life insured’s claim then you should provide us with documents that you consider relevant to whether the life insured was TPD as at February, 1992.

We note that we are already in possession of copies of the following documents: 

·                    Medical Report of Dr Scanlon dated 28 October, 1991

·                    Workers Compensation Medical Certificate dated 23 February 1993 including comments by Dr Jagerman

·                    Notes of JA Fountain, solicitor acting for Mitsubishi Motors Australia Ltd attending Dr McFarlane dated 29 April 1993. 

Please note that we are in possession of several other documents however these are not relevant to the reassessment of the life insured’s TPD claim as at February, 1992 and therefore have not been listed.

Please provide any additional documents, which you consider are appropriate if you consider that Mr Kowalski’s claim should be reassessed.

(Emphasis added.)

This letter was copied to Mr Kowalski.  There is nothing in the material to which I have been taken to suggest that the Trustee sought the reassessment referred to in the last quoted paragraph or that it disputed the insurer’s view as to the period of cover.  I should add I have emphasised the paragraph where Colonial limited its liability to February 1992.  While this may have been the case insofar as concerned Colonial in respect of any TPD Benefit claim, it was not the case for the Trustee.  From February 1992 until the termination date in 1994, the Trustee “self insured” in respect of any possible TPD Benefit claim by Mr Kowalski:  on insuring benefits see Trust Deed cl 8;  see also Halloran v Harwood Nominees Pty Ltd [2007] NSWSC 913. 

61                  (viii)  In mid-2003 Mr Kowalski and others acting on his behalf sought to obtain a copy of Colonial’s determination of August 2001.  The Trustee’s solicitors denied having a copy of it.

62                  (ix)  In March and April of 2004 the Trustee’s solicitors wrote to Mr Kowalski and to his union indicating on instructions that no formal application for a TPD Benefit was made to the Trustee in October 1998.  In the letter to Mr Kowalski, the solicitors further observed that, in consequence, no such application was considered or rejected at that time.

63                  (x)  On 3 November 2005 Mr Kowalski wrote to the Trustee:

Re:  My formal application for a Total and Permanent Disability Benefit

I provided you with a copy of a letter from Mr J K Beer, Manager Human Resources, Mitsubishi Motors Aust. Ltd. Lonsdale Plant, to myself, dated 16 March 1994, in which he and MMAL informed me that “… As you (I) continue to be unfit for your (my) normal duties with us, your (my) contract of employment with the company is frustrated.  On that ground, your (my) contract of employment with the company is now at an end, and accordingly you are no longer required to report for work …”. 

I also provide you with a copy of a letter from Senator Grant Chapman to Mr Tom Phillips dated 19 October 2005.  The letter is self explanatory, however, I draw your attention to the parts of the letter that I have underlined.

In view of the above, I formally apply for a TPD Benefit from the MMA Staff Superannuation Fund on the grounds found in Mr Beer’s letter to me, dated 16 March 1994, and Senator Grant Chapman’s letter to Mr Tom Phillips dated 19 October 2005. 

The letter of Senator Chapman reiterated Mr Kowalski’s grievances and invited MMAL’s consideration of the matter.  The following day Mr Kowalski wrote to the Trustee attaching documents to prove that the Trustee was not a party to the mediation and settlement agreement and that he was not in 1998 paid his correct entitlement according to law.  Though para 18 of the FASC refers to these documents as including “medical” documents, such if any were not exhibited, or referred to, by Mr Kowalski. 

64                  (xi)  On 20 December 2005 the Trustee through its solicitors indicated it had “previously considered and declined applications made by you for a TPD benefit and that you have been informed of the Trustee’s decision.”

65                  (xii)  On 21 February 2006, Mr Smelt wrote to the Fund’s sub-committee that was to deal with the 3 November application.  It indicated:

The Fund’s insurer, Colonial, have previously advised that they have completed their assessment of the above member, and have declined his claim for Total and Permanent Disablement.  Mr Kowalski claims to have lodged a fresh claim for a TPD claim via Doug Clutterbuck (as representative of the Trustee) on 3 November 2005.

Attached for your information is selected correspondence in respect to Mr Kowalski’s previous application and responses provided by both the Trustee and Colonial (as insurer).

Mr Kowalski maintains that he is entitled to a TPD claim on the basis of his heart attacks suffered in 1997 and that his employment did not terminate until he signed a Heads of Agreement to settle all his claims against Mitsubishi on 27 October 1998.

(Emphasis in original.)

The “selected correspondence” is not before me.  The same day the sub-committee confirmed the decision to decline the 3 November 2005 TPD Benefit claim “as it is not relevant to the date of cessation of employment and that the claim for TPD had previously been considered and declined by the Fund’s insurer and Trustee”.

66                  (xiii)  On 24 February the Trustee’s solicitors wrote to Mr Kowalski indicating on instruction that

… the Trustee has previously considered and declined your claim for a TPD Benefit arising from your employment to 16 March 1994 and including its cessation on that date.  The trustee is of the opinion that your letter of 3 November 2005 and its annexures raise no new issues.

We have again been instructed by the Trustee that we will not be responding to any matters that you have previously raised and which have been dealt with.  The Trustee has made its position clear in respect to your entitlement to a TPD benefit from the Fund in previous correspondence and this position remains unchanged.

(Emphasis added.)

It is the Trustee’s adherence to its previous stated position as to Mr Kowalski’s entitlement to a TPD Benefit which founds his claim that it has refused properly to consider his claim and hence its breach of trust or of fiduciary duty.   

Consideration

67                  While Mr Kowalski vigorously disputes the accuracy and often the veracity of much of the documentary evidence before me, his concerns have only slight bearing on the issues I need address.  I have little regard for his regular assertions of bad faith, as freely made as they are unsubstantiated.  And I treat with considerable reserve his interpretation of the motives of others, his own evidence from the bar table and his general narrative of the events.  Moreover, his application and pleading, as will be seen, are as notable for what they leave unchallenged as for what they challenge.

68                  Doing the best I can with the underlying material which is said to found the complaints made, and conscious of the opportunities I have given Mr Kowalski to propound a cause of action, albeit in lay terms, I have as I have foreshadowed, concluded that the proceedings should be summarily dismissed.  While it will not often be the case that a Court will be required to – or should properly – conduct as detailed an examination of the materials put on by the parties as I have, this is not an ordinary proceeding with an ordinary and uneventful provenance.  The evolving manner in which Mr Kowalski has perceived his grievances and has formulated them to secure the relief he has in mind, has necessitated that I conduct in essence a “preliminary trial”:  Jefferson Ford, at [23]. 

69                  I intend to deal briefly with the factual material chronologically, focussing primarily upon those matters which have led me to my conclusion.

70                  It is, I consider, important to acknowledge that in 1992 both the insurer and the Trustee declined Mr Kowalski’s formal application for a TPD Benefit.  The Trustee’s decision has not been challenged in this proceeding.  I mention this decision because, as the Trustee later recognised, it did not preclude the further consideration of whether Mr Kowalski may have been entitled to a TPD Benefit when his employment terminated in 1994.

71                  Turning now to the 1994 claim in the FASC, several matters seem indisputable.  First, no formal application was made of the time of termination for a TPD Benefit.  Mr Kowalski does not suggest otherwise.  Secondly, the Trustee was unaware that it should consider Mr Kowalski’s termination entitlements with such a benefit in mind.  It did not inquire into whether there was medical evidence capable of supporting such an entitlement.  It had no need, or obligation, to in the circumstances:  cf Tonkin, at 74,269.  I note that before it could pay a member a TPD Benefit under Rule C7, the Trustee was required to be of the opinion “after consideration of medical evidence satisfactory to them [sic]” that the member is incapacitated to the extent required by the Rule.

72                  The Trustee in this matter simply paid a Rule C9 retirement benefit.  If the Trustee was later presented with an application for, or medical evidence in support of, a TPD Benefit, the paying of the Rule C9 benefit would not have relieved the Trustee of its obligation to consider that application.  This is not to say that the C9 decision was vitiated by some breach of duty on the Trustee’s part.  Rather, its correctness was examinable because an error may have been made in providing the member with his or her entitlement as a member.  Under the Rules of Annex C, the member was entitled to be paid the benefits of the particular Rule which his or her circumstances required.  The Trustee may have had to be satisfied that the member met the criteria of a particular rule, but it did not have an unfettered discretion to decide which benefit might be provided to a member.  As I will indicate below, the Trustee subsequently considered and rejected Mr Kowalski’s claim for a TPD Benefit from the cessation of his employment in 1994.

73                  Mr Kowalski’s 1994 claim proceeds on two false assumptions.  The first, is that the Trustee had, in the circumstances, a duty to consider whether he had an entitlement to a TPD Benefit.  I need not repeat what I have said above.  The second is that the Trustee was obliged to consider Dr McFarlane’s “report” (as the 29 April 1993 interview notes are misdescribed).  There is no evidence at all that the Trustee was informed of, or provided with the report, at any time relevant to the determination of Mr Kowalski’s 1994 retirement benefit.  Mr Kowalski does not contend to the contrary.

74                  Mr Kowalski’s 1994 claim, in consequence, has no reasonable prospects of success as formulated or at all.  This is irrespective of whether the Trustee would otherwise have had a defence to it in any event, a matter referred to later in these reasons.

75                  Notwithstanding their complexity, I will deal with the events between 1994 and 1998 relatively shortly.  It needs to be emphasised that in 1997 Mr Kowalski made a claim for an ill health benefit.  This benefit, as I have emphasised, was payable in circumstances of resignation due to sickness “not constituting Total and Permanent Disablement”.  That he did so is of no little importance in understanding the events of 1998. 

76                  I will later indicate my view of the significance to be attributed to the mediation agreement of 27 October 1998.  What is clear is that all parties to the mediation understood that one of its purposes was to clarify and settle the amount payable to Mr Kowalski for superannuation.  That inquiry was to be made in a context in which Mr Kowalski had made a claim, reiterated in a facsimile to Mr Breugem on 18 April 1998, that he left MMAL “on account of sickness” and was entitled to an ill-health benefit.  It may be the case, though it is not evident on the material before me (but has been asserted by Mr Kowalski from the bar table), that he raised the question of a TPD Benefit during the mediation on 26 October 1998.  What is clear from his conversation with Mr Smelt on the following day (as revealed in the file note), is that he laboured under significant misunderstandings as to what founded his alleged TPD Benefit, eg he was then asserting he was still employed by MMAL and should “now” be considered for a TPD Benefit.  Nonetheless in that conversation he did discuss the amount of his ill-health benefit.  When he signed the Heads of Agreement, he must be taken as having done so on the basis that the ill-health benefit to be paid was “in full and final settlement of any superannuation payable” – albeit he had reason to be assured from what Mr Smelt told him on the same day that Colonial would be contacted in respect of his TPD Benefit claim but “it would take some time”.  Unsurprisingly, and in consequence of MMAL’s direction, the Trustee paid the ill-health benefit, formally confirming the decision to admit that claim on 17 November 1998.  I would interpolate in passing that the figure in question was, on the material before me, supplied by MMAL’s representatives as the appropriate amount for the ill-health benefit. 

77                  Pausing at this point it is not obvious at all how Mr Kowalski could purport to complain about the Trustee’s decision-making on, or prior to, 17 November 1998.  The Trustee did not participate in the mediation.  It was not a party to the Heads of Agreement.  It received and finally confirmed Mr Kowalski’s 1997 application for an ill-health benefit.  And it foreshadowed that it would – and it did – ask Colonial to consider his TPD Benefit claim.  Nonetheless, it is the case that there are a number of instances in correspondence by or on behalf of Mr Kowalski (eg from his union) asserting that he made a “formal claim” for a TPD Benefit on 26 October 1998.  There is nothing to suggest that such a claim was more than what Mr Kowalski might have said at the mediation.  Nor is there anything to reveal what was the basis of the “claim” as, for example, did it relate to his 1997 heart condition or his then apparent belief he was effectively still employed by MMAL.  As the Trustee later made plain (see letter of 8 March 2004), it denied receiving a formal application from Mr Kowalski in October 1998, nor did it consider and reject any application at that time. 

78                  No precise “claim” has been articulated in respect of the Trustee’s supposed wrongdoing in 1998.  I do not intend to speculate further on that matter.  I can discern no potential basis, let alone one having reasonable prospects, for a claim for breach of trust against the Trustee for its decisions etc in late 1998.

79                  It needs to be emphasised that the Trustee did ask Colonial to reconsider its 1992 decision in light of subsequent events.  I have set out in detail the exchanges between Mr Smelt and Colonial on this matter.  To be emphasised, the Trustee on legal advice considered a full review of Mr Kowalski’s case was warranted:  “it [was] incumbent upon the insurer and the Trustee to re-assess his TPD claim in its entirety”:  Smelt letter of 3 July 2001. 

80                  Mr Kowalski makes no claim in this proceeding in respect of the 2001 decisions of the insurer and the Trustee rejecting his application for a TPD Benefit, although there is a deal of material before me evidencing Mr Kowalski’s ongoing complaint about not being supplied with a copy of the “determination”.  Given the absence of any claim in relation to this matter, the absence of evidence relating to it is entirely understandable.  It would be unreasonable to draw any inference adverse to the Trustee from its not providing further illumination in this proceeding of its then decision.  All I will note is that the correspondence to which I have referred suggests there may have been some disagreement between the insurer and the Trustee as to the significance of the period of the insurance cover.  It also indicates that, unlike the insurer, the Trustee was not limiting its assessment to the situation in 1992.  I should further note that by that time both the insurer and the Trustee had copies of Dr McFarlane’s note.

81                  Turning finally to the 3 November 2005 application for a TPD Benefit, the material here suggests some of the confusion as to the nature and basis of Mr Kowalski’s claim that began to emerge in 1997 and then later at the time of the mediation.  It is clear from Mr Kowalski’s 3 November letter that his claim was related to the time at which he ceased employment with MMAL.  To anticipate matters somewhat, it was the claim directed to that time of cessation that the Trustee through its solicitors indicated on 24 February 2006 that they had previously considered and declined.  The reasonable inference to draw from this in light of the material before me is that the reference to previous consideration related back to the Trustee’s 2001 reconsideration decision.  Equally, and despite Mr Kowalski’s assertion to the contrary, there is no basis for regarding the statement as other than an honest reflection of what the Trustee had done.

82                  It is, nonetheless, clear from Mr Smelt’s 21 February 2006 letter to the Trustee Sub-Committee, either that Mr Kowalski may have advanced additional bases for his TPD claim – the letter refers to his 1997 heart attacks and to his belief his employment did not terminate until the Heads of Agreement was signed – or else an error was made by Mr Smelt as to the bases he ascribed to the “fresh claim”.  Either may explain why the Trustee’s decision refers to the claim as not being “relevant to the date of cessation”.  Be this as it may, the Trustee reiterated that the claim for TPD had previously been considered and declined by the Fund’s insurer and Trustee.  While the evidence of the 2001 reconsideration is slight and might suggest that the insurer and the Trustee then had different temporal concerns as to the operative date for Mr Kowalski’s total and permanent disablement, there can be no doubt after the 24 February 2006 solicitors’ letter referred to above either that the Trustee in 2005 asked itself the correct question as to the time to which the claim related, ie 16 March 1994, or that it was that question that had previously been considered and answered.  It equally is clear from that letter that the Trustee did consider the annexures attached to the letter of 3 November.  It was reasonably open to it properly to take the view of those annexures that they raised no new issues, hence no reconsideration of the previously rejected claim was necessary.  Those annexures I would add contained nothing which would be likely to induce a reasonable trustee to take a different view.

83                  While it is a trustee’s duty to act in the interests of its beneficiaries, absent an express power of dictation, a trustee is not the pawn of a beneficiary.  As Tonkinindicates, a beneficiary is entitled to seek the reconsideration of a decision affecting his or her interests unless this is precluded by the nature of the decision itself or by the terms of the trust instrument.  But where the decision, as here, requires the Trustee to form a particular opinion and that opinion has previously been formed adversely to the beneficiary, the Trustee is not obliged to reconsider that opinion absent some reason for so doing.  Where, as here, what is raised by the beneficiary is matter which the Trustee has previously had raised before it and dealt with, the Trustee is entitled to decline to re-entertain that same matter in the future unless, because of change of circumstances or otherwise, that decision was not one that a reasonable person could then make.  Such is not the position here. 

84                  Accordingly, I am satisfied that having regard to the material underlying Mr Kowalski’s 2005 claim, that claim has no reasonable prospects of success.

85                  I am conscious that in reaching the conclusions I have, I have made no direct reference to the medical evidence or to issues of causation.  As to the medical evidence, I accept that there was material before the Trustee in 2001 which both supported and contradicted Mr Kowalski’s position.  The Trustee in light of this had to make its own decision.  While Mr Kowalski asserts the Trustee’s opinion was incorrect, that is not the question with which I am concerned.  Not being aware of all of the material that was before the Trustee when it took its decisions in 2001 and 2005, I am left to consider if it can properly be alleged that there was not a real and genuine consideration of the correct question by the Trustee.  There is nothing before me reasonably to suggest such was the case and hence should be examined at trial.

86                  A distinct matter which I consider to be quite unimportant but to which Mr Kowalski assigns great significance, is the reason given by Mr Beer in his letter of 16 March 1994 notifying Mr Kowalski of the termination of his employment.  Mr Beer did not represent the Trustee nor did he make statements binding upon it.  Whatever Mr Beer intended to convey by describing the contract as “frustrated,” he clearly was not speaking with legal exactitude.  It is unnecessary for me to speculate what the letter read as a whole was intending to convey as the actual reason MMAL had for the termination.  What is clear is that, when the Trustee was called upon to determine whether the cessation of employment in 1994 was caused by Mr Kowalski’s claimed total and permanent disability, that decision was, relevantly for present purposes, for the Trustee when the TPD claim was made.  It was neither fettered, nor determined in advance, by MMAL’s reason for terminating the employment. 

87                  I am satisfied there is no basis in the material relied upon by Mr Kowalski that reasonably suggests a breach of trust or of fiduciary duty such as has been alleged in the FASC in relation to the 3 November 2005 claim.  The pleaded assertion that the Trustee had deliberately and consciously acted in bad faith lacks any foundation and should never have been made.

88                  As I am satisfied that none of the actual or potential breach of trust or, relatedly, breach of fiduciary duty, claims have reasonable prospects of success, not only will I dismiss them, I will also dismiss the negligence claim which is premised upon the conduct said to give rise to the breaches of trust and of fiduciary duty.

Conclusion on the claims

89                  As I am satisfied that the claims actually made in the FASC as well such claims as may be said to be immanent in the material informing the proceeding have no reasonable prospects of success, I will order under s 31A of the Federal Court of Australia Act that the application be dismissed.

The Respondents’ Defence

90                  While this matter has been heard before the respondents put on a defence, they have foreshadowed that if they had been required to do so they would have raised the mediation agreement as a complete defence to the claim made. 

91                  The basis of this defence, as I understand it, is that when considered in its context, it is clear that, while the Trustee was not a party to the agreement, it was nonetheless the beneficiary of the promises made by Mr Kowalski that (i) the sum of $64,691.43 “to be paid from the Superannuation Fund” was payment in full and final settlement of any superannuation payable by the Trustee;  and (ii) that Mr Kowalski would not institute any legal proceedings in respect of the matter in (i) above.

92                  I readily acknowledge that the trust device has in practice proved “a disappointing and unreliable instrument” for circumventing the privity doctrine:  see Cheshire and Fifoot’s Law of Contract, [7.44] (9^th Aust ed, 2008).  Nonetheless, in this particular setting both where trust and contract so obviously interact:  see Dal Pont and Chalmers, at 727;  and where the contracting parties intent was, on the face of the Heads of Agreement, to bring the Trustee within its purview so both to benefit and to burden it, the observations of Deane J in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 147-148 are singularly apposite.  His Honour observed that the requisite intention of the contracting parties to constitute a trust of a promise for a third party should be inferred:

… if it clearly appears that it was the intention of the promise that the third party should himself be entitled to insist upon performance of the promise and receipt of the benefit and if trust is, in the circumstances, the appropriate legal mechanism for giving effect to that intention.  A fortiori, equity’s requirement of an intention to create a trust will be at least prima facie satisfied if the terms of the contract expressly or impliedly manifest that intention as the joint intention of both promisor and promise. 

… If the trustee of the promise declines to institute [proceedings for the enforcement of the promise or damages for its breach], the beneficiary can bring proceedings against the promisor in his own name, joining the trustee as defendant.

See also Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 618;  Ford and Lee, Principles of the Law of Trusts, [17.11010].  It is not necessary that the contracting parties know and understand that they are creating a trust.  It is sufficient that they intend to create a relationship which, in equity, conforms to that of a trust:  see Twinsectra Ltd v Yardley [2002] 2 AC 164 at [71];  Ford and Lee at [2035].

93                  While it is not strictly necessary that I express a concluded view on this foreshadowed defence, and while I share the view of Fullagar J in Wilson v Darling Island Stevedoring & Lighterage Co Ltd (1956) 95 CLR 43 at 67 that it is “difficult to understand the reluctance which courts have sometimes shown to infer a trust in such cases” – a reluctance I acknowledge – I am satisfied that having regard not only to the text of the agreement but also to the known surrounding circumstances and the purpose and object of the contract:  cf Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22];  a court would readily infer a trust intention in this matter.

94                  While ordinarily MMAL would be a necessary party to the raising of such a defence:  see Lidden v Composite Buyers (1996) 67 FCR 560;  see also Jacobs’ Law of Trusts in Australia, [2303] (7^th ed, 2006);  the respondents acknowledge were the matter to proceed to trial, MMAL could be joined as a party for the purpose of enforcing the trust. 

95                  I should add that, while the Trustee did not seek to insist on its rights for the purpose of the 2001 reconsideration – and properly so given Mr Smelt’s assurance at the time of the mediation agreement that he would raise the TPD claim with Colonial – the Trustee has done nothing that could be said (i) to amount to a renunciation of its rights;  or (ii) to found an estoppel against it for the future. 

96                  Given this available defence, I am satisfied it provides a further basis for concluding that Mr Kowalski’s application has no reasonable prospects of success.

Conclusion

97                  I will order that the respondents’ motion be allowed and that the application be dismissed.

98                  I will order Mr Kowalski to pay the respondents’ costs including any reserved costs and costs ordered to be the respondents’ costs in the cause.

 

I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate:

Dated:         5 February 2009

The Applicant appeared in person.
Counsel for the First & Second Respondents:	Ms V Heath
Solicitor for the First & Second Respondents:	Thomson Playford Cutlers

Date of Hearing:	19 August 2008
Date of Judgment:	5 February 2009