FEDERAL COURT OF AUSTRALIA
Qantas Superannuation Limited v McAulay [2019] FCA 109
ORDERS
QANTAS SUPERANNUATION LIMITED ACN 003 806 960 Applicant | ||
AND: | Respondent | |
DATE OF ORDER: | 13 February 2019 |
THE COURT ORDERS THAT:
1. The applicant’s interlocutory application filed on 21 September 2018 to lead further evidence on the appeal is dismissed.
2. On or before 4pm on Friday 22 February 2019, the parties are to file and serve proposed consent orders as to the costs of and incidental to the interlocutory application or, if not agreed, proposed minutes of order setting a timetable for the filing of short written submissions with the question of costs of the interlocutory application to be determined on the papers.
3. The appeal is allowed.
4. The determination of the Superannuation Complaints Tribunal dated 29 January 2018 is set aside.
5. Subject to order 2, there will be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
PERRY J:
1 The applicant, Qantas Superannuation Limited (the trustee), is trustee of a regulated superannuation fund governed by the Qantas Superannuation Plan which is constituted by the Trust Deed and Rules (the Superannuation Plan). The respondent, Thomas Anthony McAulay (Mr McAulay), is a fund member who joined the fund on 24 May 2001. Mr McAulay made a claim for a Total and Permanent Disablement Benefit (the TPD benefit) from the fund which was accepted by the trustee. However, the trustee also offset estimated future social security benefits expected to be received by Mr McAulay to the age of 67 against the TPD benefit payable to him, in addition to social security benefits actually received by Mr McAulay at the time of the trustee’s decision, based on its construction of rule 23.10 of the Superannuation Plan.
2 The member made a complaint to the Superannuation Complaints Tribunal (the Tribunal) pursuant to subs 14(2) of the Superannuation (Resolution of Complaints) Act 1993 (Cth) (the SRC Act) that the Trustee’s decision was unfair or unreasonable. While Mr McAulay did not dispute the deduction of $11,994.48 for social security benefits already received by him as at 20 October 2015, he sought payment of the benefit in the sum of $296,993.18 i.e. without deduction for estimated social security benefits to which he may become entitled in the future. The Tribunal agreed with Mr McAulay’s construction of rule 23.10. As a result, it set aside the trustee’s decision and substituted a decision to pay Mr McAulay a total benefit of $308,987.66, less $11,994.48 (being the sum of social security benefits actually received), plus interest.
3 This is an appeal by the trustee on a question of law pursuant to s 46 of the SRC Act from the determination of the Tribunal given on 29 January 2018. The sole issue concerns whether, on a proper construction of rule 23.10 of the Superannuation Plan, the Trustee was required to offset the estimated value of future social security payments against the TPD benefit.
4 For the reasons set out below, the appeal must be allowed and the decision of the Tribunal set aside.
5 The Superannuation Plan was established by a declaration of trust and administered by regulations which came into effect on 1 June 1939. The regulations were replaced by rules from 21 September 1989 which have been amended from time to time by deeds of amendment.
6 Mr McAulay is now 54 years of age and joined the Superannuation Plan on 24 May 2001. It is not in issue that Mr McAulay is a Division 3 member of the Superannuation Plan within the meaning of rule 20.1.
7 Mr McAulay last physically worked on 12 September 2012 and ceased employment with Qantas Airways Limited (the Principal Company) on 13 January 2015. Mr McAulay lodged a total and permanent disablement (TPD) claim with the trustee on 28 August 2015. That claim was admitted by the trustee and Mr McAulay was notified of that decision by letter dated 7 December 2015. In that letter, the trustee informed Mr McAulay that the TPD benefit ($308,987.66) was to be offset by social security benefits actually received by him for the period from 1 June 2015 to 20 October 2015 in the sum of $11,994.48. The trustee also advised that estimated future social security benefits expected to be received by the member to the age of 67 and calculated by the fund’s actuary to be $332,882.57, must also be offset against the TPD benefit. The social security benefit apparently used by the Trustee’s actuaries in calculating the present day value of the future payment stream for this purpose was the Disability Support Pension (the DSP). The trustee further advised that:
(1) the net amount payable on account of the TPD benefit was reduced to zero once the estimated future social security benefits expected to be received were factored into the calculations; and, as a consequence,
(2) the member was entitled instead to his minimum withdrawal benefit in the amount of $179,292.27 (i.e. $180,647.49 less $1,354.22 being the amount of an overpayment of his temporary disability payments).
8 The trustee paid to Mr McAulay the withdrawal benefit in the sum of $178,427.65 on 29 September 2017 (see the affidavit of Emma Brodie at EB-6). I note the discrepancy between this amount and the amount advised by the trustee in the letter dated 7 December 2015 which was not explained by the evidence. However no issue arose in relation to this discrepancy.
9 On 16 December 2015, Mr McAulay lodged a complaint and request for review by the trustee of the trustee’s decision pursuant to s 101 of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) and s 19 of the SRC Act. On 17 February 2016, the trustee advised Mr McAulay’s solicitors that the original decision had been upheld.
10 Mr McAulay lodged a complaint under s 14 of the SRC Act against the decision by the trustee on 4 April 2016 with the Superannuation Complaints Tribunal. Agreement was not able to be reached at the conciliation conference ordered by the Tribunal and held on 5 July 2017. The parties made submissions in writing to the Tribunal pursuant to a request by the Tribunal and the Tribunal conducted the review meeting based on the material contained in the papers provided to it (Tribunal reasons at [11]).
11 There was no dispute before the Tribunal:
• that the [member] is totally and permanently disabled for all relevant purposes;
• that he has an entitlement to a TPD benefit from the Fund;
• as to the calculation of the gross amount of the Benefit, against which the Trustee seeks to offset the estimated present value of future social security payment; or
• as to the correctness of the Trustee netting-off against the Benefit the amount of any social security payments actually received by the [member] before he became entitled to the TPD Benefit.
(Tribunal reasons at [24] (emphasis added))
12 On review of the trustee’s decision, the Tribunal was vested with all of the powers, obligations and discretions conferred on the trustee and required to make a determination in writing affirming the trustee’s decision, or remitting the matter to the trustee, or varying the decision, or setting aside the decision and substituting its own decision (subss 37(1) and (3), SRC Act).
13 On 29 January 2018, the Tribunal made a determination that the trustee’s decision to offset the TPD benefit amount by estimated future social security benefits was not fair and reasonable as it was not supported by sub-rules 23.10(c)(iv), (c)(v) and (d) of the Superannuation Plan. As a result, the Tribunal set aside the trustee’s decision and substituted it with a decision to pay to Mr McAulay a total net benefit of $296,993.18, being a total gross benefit of $308,987.66 less $11,994.48, plus interest on the total net benefit at the Superannuation Fund’s cash rate commencing on 7 December 2015.
14 In so finding, the Tribunal accepted at [25] the description of the DSP in the Commonwealth Government’s on-line Guide to Social Security Law as “… an income support payment… for people who are unable to work… due to permanent physical, intellectual or psychiatric impairment”. On this basis the Tribunal also accepted at [25] that, on its face and reading sub-rule 23.10(c)(iv) in isolation, it was arguable that the DSP is:
• an ‘… income payment ...’, in that its function is to act, according to the Commonwealth Government, as ‘… an income support payment…’;
• which comes ‘… from any source…’, since this expression is clearly wide enough to include the Commonwealth Government as the payment’s source; and
• granted ‘in respect of or arising out of the [relevant] disability …’; the tests for eligibility summarised in the Guide to Social Security Law referred to above clearly link eligibility for the DSP to the existence of an identified disability which impairs the recipient’s ability to work, and as a factual matter this disability is clearly identical with the disability which triggers the [member’s] entitlement to the TPD Benefit…
so that in consequence the DSP falls within the scope of paragraph 23.10(c)(iv).
15 However the Tribunal rejected that construction for the following reasons.
16 First, applying the ejusdem generis principle, the Tribunal found at [26]-[27] that sub-rule 23.10(c)(iv) should be read down by reference to the examples of other offset amounts given in the sub-rule. Specifically, the Tribunal considered that the examples of payments given in sub-rule 23.10(c)(iv), i.e., compensation for personal injury and any payment for loss of income due to injury or illness, were materially different in nature from the DSP as:
Their purpose is to compensate a person for personal injury or for loss of income as a result of disability, and their value is typically dependent on the value of the past and future income lost by the claimant. The DSP, however, serves as a safety net, which provides a basic level of income support without regard to the cause of the disability, pre-disability earnings or earning capacity of the disabled person.
17 Secondly, the Tribunal considered that sub-rule 23.10(c)(iv) should be read in the context of rule 23.10 as a whole and, in particular, having regard to the differences between the approaches adopted in sub-rules 23.10(c) and (d) with respect to TPD benefits, on the one hand, and “disability benefits” in sub-rules 23.10(a) and (b), on the other hand. Thus:
(1) The Tribunal pointed out that under sub-rule 23.10(a)(vi), disability benefits must be offset against “any amounts which the Trustee considers may become payable under (i) and (v) inclusive above at a future date” providing that such future payment is “in relation to the period to which the Disability Benefit relates”. Relevantly, sub-rule 23.10(a)(ii) specifies that any social security payments are to be offset. As a result, the Tribunal found at [31] that the amounts able to be offset against the Disability Benefit “specifically include the estimated present value… of social security payments expected to be received in consequence of the relevant disability.”
(2) By contrast the Tribunal pointed out that sub-rule 23.10(c)(v) does not specifically include social security payments in the future payment streams in respect of which the estimated present value may be offset against TPD benefits, but only income or payments falling within sub-rule 23.10(c)(iv).
(Tribunal reasons at [31])
18 In the Tribunal’s view that difference of approach between disability and TPD benefits in the treatment of future income streams referable to social security payments supported the restrictive reading of sub-rules 23.10(c)(iv) and (v) contended for by Mr McAulay, namely, that it did not include social security payments to which the member is expected to become entitled as income support on account of her or his disability (Tribunal reasons at [32]-[33]).
19 Furthermore, given these differences the Tribunal considered at [33] that:
… to disregard this context substantially strips paragraphs 23.10(a)(ii) and (c)(ii) of any independent utility, since any social security payment whose availability to a member is enlivened by a relevant disability is necessarily covered by paragraphs 23.10(a)(iv) and (c)(iv); the apparent redundancy of paragraphs 23.10(a)(ii) and (c)(ii) under the interpretation which the Trustee argues for is a result which legal interpretation generally does not favour.
20 Thirdly, the Tribunal considered that this construction best served the objectives of the Superannuation Fund. In particular at [34] of its reasons the Tribunal said:
These [objectives] are to provide retirement income and, relevantly, to ensure replacement income is available to members who are unable to work. Where the disabled member has actually received social security income support it is consistent with that objective to offset it against his TPD benefit; in the present case, however, there is no certainty that the [member] will obtain the DSP for the rest of what would, but for his disability, have been his working life.
(emphasis added)
21 As to the lack of certainty in receiving the DSP in the future, the Tribunal pointed out that the rules governing entitlement to the DSP may change before the end of the member’s working life in a manner which excludes him from receiving the DSP. This may therefore leave the member entirely without income support or replacement income, which is in turn an outcome which the Tribunal considered was inconsistent with the objects of the Superannuation Fund (Tribunal reasons at [35]).
22 Finally, the Tribunal considered the objection that its preferred approach opens the way for claimants entitled to a TPD benefit to “double dip” by obtaining both social security support via the DSP as well as the TPD benefit. However, the Tribunal found that:
36. … This objection is not, however, particularly convincing, since if the [member’s] TPD benefit is paid without deduction for anticipated future DSP benefits, his entitlement to DSP benefits (and thus the risk of “double dipping”) is to be determined in accordance with the rules from time to time applicable to the DSP. If the Commonwealth Government has no objection to him receiving the DSP in addition to the TPD benefit, then that is a matter for the Commonwealth Government, and it is no part of the Trustee’s role to pre-empt the Government’s policy decisions on such matters.
23 As such, the Tribunal concluded that the Trustee’s decision to offset the present value of the member’s future DSP payments as against the TPD benefit was not fair or reasonable for the purposes of s 37 of the SRC Act, and substituted a decision to pay to Mr McAulay the amounts earlier referred to.
24 The appeal to this Court was filed by the trustee on 7 March 2018.
3. RELEVANT PROVISIONS OF THE SUPERANNUATION PLAN
25 As I have set out above, the fund is a regulated superannuation fund, the purposes of which are prescribed by s 62 of the SIS Act. A trustee of a regulated superannuation fund must ensure that the fund is maintained solely for one or more of the core purposes set out in subs 62(1)(a) including the provision of retirement benefits, and for one or more of the ancillary purposes under subs 62(1)(b) including relevantly:
(ii) the provision of benefits for each member of the fund on or after the member’s cessation of work, if the work was for gain or reward in any business, trade, profession, vocation, calling, occupation or employment in which the member was engaged and the cessation is on account of ill-health (whether physical or mental);
26 It was not in issue that the TPD Benefit for which provision is made under sub-rule 10.6(c) is a prescribed ancillary purpose within the meaning of s 62(1)(b)(ii) of the SIS Act. It was also common ground, as the Tribunal found at [17], that the Superannuation Plan as at 12 September 2012 applied to the determination of the member’s entitlement because this was the version in force when the member ceased active employment. That version was (relevantly) last amended on 27 June 2012 and was reproduced at annexure SJY2 to the affidavit of Ms Sarah Yu, solicitor, affirmed on 5 March 2018. A later version of the Superannuation Plan in force as at 13 January 2015 when the member ceased employment with Qantas was also reproduced at annexure SJY3 to Ms Yu’s affidavit. While the trustee relied upon this later consolidated version of the Plan in making its decision, the differences between the two versions are immaterial to the present case given that the member did not have any Additional (i.e. voluntary) TPD insurance.
27 There are a number of different categories of membership created by the Superannuation Plan. These are called “divisions”, and all but one are now closed to new members. Each division is governed by a specific group of articles in the rules of the Superannuation Plan. The relevant category of membership for the member in this case is Division 3 which is governed by Articles 1-10 and 20-23 inclusive of the Rules.
28 Sub-rule 10.6(c) provides that a member who is Totally and Permanently Disabled is entitled to receive a TPD Benefit. Total and Permanent Disablement is defined by sub-rule 1.1. Relevantly, the TPD event must occur before a member’s “Superannuation Date”. The “Superannuation Date” is defined in article 1.1 and occurs on the member’s 65th birthday. Rule 23.6 relevantly provides for a TPD Benefit to be payable by way of a lump sum calculated as follows:
Subject to Rule 23.11, the Death Benefit and the Total and Permanent Disablement Benefit in Respect of a Member who dies or becomes Totally and Permanently Disabled prior to the Superannuation Date shall be a lump sum equal to the sum of:
(a) the Member’s Projected Retirement Benefit;
(b) the Supplementary Benefit.
Provided that in the case of a Total and Permanent Disablement Benefit the amount determined in accordance with this Rule shall be reduced by any Offsetting Amounts determined in accordance with Rule 23.10.
(emphasis original)
29 By rule 23.2, the Member’s Projected Retirement Benefit is equal to 18% of her or his Final Year Salary for each year of Credited Service, calculated as if Credited Service included the period from, relevantly, the date on which the member became Totally and Permanently Disabled (as determined by the Trustee) up to the Member’s Superannuation Date. As such, the Projected Retirement Benefit is similar to what would have been the Member’s Accrued Retirement Benefit (as defined in rule 23.1) if she or he had remained fit and healthy and in employment until age 65, the superannuation scheme created for members under Div 3 being a defined benefit scheme.
30 As earlier explained, the issue in this case concerns the proper construction of sub-rule 23.10(c) providing for amounts to be offset against the TPD Benefit which would otherwise be payable under rule 23.6 in the manner set out above. Sub-rule 23.10(c) provided as follows:
(c) Where a Member becomes entitled to a Total and Permanent Disablement Benefit, the benefit otherwise payable shall be reduced by any of the following amounts, such amounts being referred to as “Offsetting Amounts”:
(i) any workers’ compensation payment;
(ii) any social security payment;
(iii) one third (1/3rd) of any payment under Loss of Licence Insurance;
(iv) any income or lump sum payment from any source which the Trustee determines to be in respect of or arising out of the disability, including, but not restricted to, any compensation for personal injury, and any payment for loss of income due to injury or illness;
(v) any amounts which the Trustee considers may become payable under (iv) above at a future date, but in relation to the condition that resulted in the Member being eligible for a Total and Permanent Disablement Benefit.
(emphasis added)
31 Sub-rules 23.10(c)(iv) and (v) of the Superannuation Plan were incorporated into the Plan by a Deed of Amendment dated 21 February 2001.
32 With respect to the manner in which income is to be offset against the lump sum entitlement otherwise payable under rule 23.6, sub-rule 23.10(d) provides that:
(d) where a Member becomes entitled to a Total and Permanent Disablement Benefit and one or more of the items under paragraph (c) above is in the form of income, the income shall be converted to an equivalent lump sum for the purpose of determining the Offsetting Amount, in such manner as the Trustee, with the approval of the Principal Company, considers equitable.
33 As rule 23.10 should be read as a whole, sub-rule 23.10(a) dealing with offsetting amounts against an entitlement to a Disability Benefit is also relevant to the construction of sub-rule 23.10(c) even though there is no question here of any entitlement to a Disability Benefit. Sub-rule 23.10(a) reads as follows:
(a) Where a Member is entitled to a Disability Benefit the benefit otherwise payable shall be reduced by the total of the following amounts, such amounts being referred to as “Offsetting Amounts”:
(i) any workers compensation payment;
(ii) any social security payment;
(iii) any payment under Loss of Licence Insurance;
(iv) any other income or lump sum payment from any source which the Trustee determines to be in respect of arising out of the disability, including, but not restricted to, any compensation for personal injury, and any payment for loss of income due to injury or illness;
(v) any income from employment to the extent to which that income together with the Disability Benefit otherwise payable exceeds the Member’s Superannuation Salary that would have been payable had the Member continued in Employment in the same classification as the Member was in immediately prior to commencing to receive a Disability Benefit;
(vi) any amounts which the Trustee considers may become payable under (i) to (v) inclusive above at a future date, but in relation to the period to which the Disability Benefit relates.
(emphasis added)
34 Finally, sub-rule 23.10(e) provides that:
(e) Where the Trustee determines that a future income or lump sum benefit may become payable from a source what [sic] would otherwise require it to be treated as an Offsetting Amount in terms of paragraph (a) or paragraph (c) above, the Trustee may ignore that potential benefit subject to the Member providing an undertaking acceptable to the Trustee that the Member will reimburse the Trustee if such future benefit does in fact become payable.
35 The questions of law raised on the appeal by the trustee are whether the Tribunal erred by:
a. construing clause 23.10(c)(iv) of the Trust Deed as not applying to any income or lump sum social security payments in respect of or arising out of the Respondent’s disability; and
b. construing clause 23.10(c)(v) of the Trust Deed as not applying to any income or lump sum payments which the Applicant considers may become payable under clause 23.10(c)(iv) at a future date, in relation to the condition that resulted in the Respondent being eligible for the TPD Benefit.
36 As such, the trustee submits that the DSP payments which it calculated the member can be expected to receive until he is 67, qualify as “… income… from any source which the Trustee determines to be in respect of or arising from the disability…” within the meaning of sub-rule 23.10(c)(iv). As a result, the trustee submits that the present day value of that future payment stream may be calculated in accordance with sub-rule 23.10(d) and treated as an amount to be offset against the TPD Benefit under rule 23.10(c), contrary to the Tribunal’s decision.
37 It is helpful at this point to set out certain matters which were not in dispute in relation to the questions of law the subject of the appeal.
38 First, it was common ground that the construction of the Superannuation Plan is a question of law for the purposes of s 46 of the SRC Act. In this regard, Allsop J (as his Honour then was) explained in Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 the task of the Tribunal under s 37 of the SRC Act as follows:
27. The task of the Tribunal and the meaning of the phrase “unfair or unreasonable” are inextricably intertwined and both are governed by the Act, and, especially, by s 37. It is the decision of the Trustee, recognising its obligation to act in conformity with the governing rules of the fund, and the decision of the Insurer, recognising its obligation (and entitlement) to act in conformity with the terms of the relevant policy, which must be reviewed for unfairness or unreasonableness. The unfairness or unreasonableness must be of the decision (as expanded by s 4) under, and in conformity with, the governing rules or the terms of the policy. It is not some other perceived (rightly or wrongly) unfairness or unreasonableness in and about the conduct of the fund.
28. The question as to whether a decision was unfair or unreasonable cannot be judged otherwise than by having regard to the conformity of the decision with the governing rules of the fund and the terms of the policy. The conformity of the decision with those matters is therefore a relevant consideration in the sense discussed in Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 at 39-40 and see Telstra Corporation Ltd v Seven Cable Television Pty Ltd (2000) 178 ALR 707 (special leave refused on 20 August 2001). If conformity with the governing rules or the terms of the policy required the very decision, which was made, to be made, the strictures of subs 37(5), the universe of possible conduct under subs 37(3) and the balance of the Act, including subs 37(6), would require a conclusion of the Tribunal that the decision was not unfair or unreasonable.
39 Those principles have been approved on numerous occasions subsequently: see AIA Australia Ltd v Lancaster [2017] FCA 962 at [32]-[33] (Allsop CJ) and the authorities referred to therein. As such, neither party contends that there is any question of fairness or reasonableness beyond the question of construction of the Superannuation Plan according to law.
40 Secondly, neither party seeks to have the matter remitted to the Tribunal. Rather if the appeal is dismissed, the parties are agreed that it would follow that the Tribunal’s decision will stand and the trustee’s determination to offset the TPD Benefit by the future DSP would fall away. On the other hand, they agree that if the appeal is allowed, the trustee’s decision to allow the future DSP offset will stand, as will the trustee’s determination to pay the net Withdrawal Benefit to Mr McAulay. As Mr McAulay submitted, this is because a member’s entitlement to a Withdrawal Benefit depends upon the member not being entitled to receive certain other benefits, including a TPD Benefit: see sub-rule 10.7(b).
41 Thirdly, I note that no argument was addressed to the question of what was meant by the words “in relation to the condition that resulted in the Member being eligible for a [TPD] Benefit” in sub-rule 23.10(c)(v) although for reasons I later explain, those words cannot be ignored in resolving the question of construction in the present case. It would appear to have been assumed by both parties that this criterion would be met if the DSP was a payment of a kind described in sub-rule 23.10(c)(iv), at least in the circumstances of this case.
42 In the fourth place, as I have earlier noted, the Tribunal took into account the uncertainty relating to a member’s continuing entitlement to future payments of DSP in construing rule 23.10(c). The trustee submitted that this concern did not assist in construing the rule. Nonetheless, in submissions in reply at [58], the trustee stated that it was open to reassessing the quantum of the offsetting amount for Mr McAulay’s TPD benefit within the constraints of the Superannuation Plan on receipt of any further evidence or submissions by Mr McAulay.
43 Finally, argument on the appeal focused upon the construction of the words “any income … from any source which the Trustee determines to be in respect of or arising out of the disability” in sub-rule 23.10(c)(iv). While the member submitted that the ultimate outcome of the trustee’s submission as to the proper construction of this sub-rule was that the trustee could “pick the subparagraph it wishes”, no submissions were made which explained why it was suggested that the criterion in rule 23.10(c)(iv) and (v) that the Trustee must determine the income to be of a relevant kind should be construed as importing a discretion. The matter was, with respect, not raised beyond mere assertion. In any event, in my view the trustee rightly submitted that there was no discretion vested in the trustee with respect to the offsetting amounts. Rather, in their terms both rules 23.6 and sub-rules 23.10(a) and (c) require the trustee to reduce the TPD Benefit by the offsetting amounts by use of the word “shall”. Read in context, therefore, the reference in sub-rules 23.10(c)(iv) and (v) to the trustee determining that amounts have the requisite connection to the TPD condition does no more than recognise that the question of whether income has that connection may require an evaluative judgment to be made based upon a proper characterisation of the payments in question.
4.2 Principles of construction
44 The principles governing the construction of a trust are relevantly the same as those governing construction of a contract in that construction turns upon the terms of the trust objectively construed and not upon the subjective intentions of the settlors/parties. Thus, in Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 (Byrnes), Gummow and Hayne JJ at [58] approved the following exposition of principle in Scott and Ascher on Trusts (5th ed, 2006, vol. 1) at [4.1]:
In some situations, legal consequences do turn on actual intentions, as in the case of those charged with certain crimes. Ordinarily, however, the legal effect of the transaction does not depend on the parties’ secret intentions, but on the outward manifestations of their intentions. For practical reasons, we disregard the parties’ undisclosed states of mind. To be accurate, therefore, it is necessary, when dealing with the creation of a trust and its terms, to speak not of the settlor’s intention but of the settlor’s manifestation of intention.
45 Justices Gummow and Hayne then continued:
59. Likewise, the “objective theory” of contract formation which, as Mason A-CJ, Murphy and Deane JJ put it in Taylor v Johnson [(1983) 151 CLR 422 at 429], stands “in command of the field”, is concerned not with “the real intentions of the parties, but with the outward manifestations of those intentions”. While the origins and nature of contract and trust are quite different, there is, as Mason and Deane JJ observed in Gosper v Sawyer [(1985) 160 CLR 548 at 568-569], no dichotomy between the two. For example, a common form of express trust is that created by covenant between settlor and trustee. Hence the significance of consistency between trust and contract with respect to matters of intention in contract formation and trust declaration.
46 Similarly, Heydon and Crennan JJ in Byrnes held that:
102. … The rules for the construction of contracts apply also to trusts. Although the two institutions are distinct, that is not surprising.
103. For one thing, as Mason and Deane JJ said [in Gosper v Sawyer [(1985) 160 CLR 548 at 568-569]: “The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust.” By “establishment” their Honours referred to deciding whether a trust existed. By “definition” they referred to ascertaining its terms. The two enquiries are closely related: for the terms of a document or oral dealing determine whether it creates a trust.
104. For another thing, the same considerations which limit recourse to surrounding circumstances and oral testimony in relation to contracts applies in relation to trust. In 1877 Lord Gifford said: “The very purpose of the written contract was to exclude disputes inevitably arising from lubricity, vagueness, and want of recollection, or want of accurate recollection, of mere oral conversations occurring in the course of negotiations more or less protracted”. And three centuries earlier Popham CJ said:
“it would be inconvenient, that matters in writing made by advice and on consideration and which finally import the certain truth of the agreement of the parties should be controlled by averment of the parties to be proved by the uncertain testimony of slippery memory.”
The goal of excluding disputes of this kind from litigation is thwarted by recourse to the same material in order to discover the background, and that is so whether the disputes are about whether a particular contract was created or a particular trust.
(citations selectively excluded)
47 Their Honours therefore concluded that:
105. The authorities establish that in relation to trusts, as in relation to contracts, the search for “intention” is only a search for the intention as revealed in the words the parties used, amplified by facts known to both parties.
48 In line with these principles, the New South Wales Court of Appeal has held that a TPD insurance policy must be given a business-like construction having regard to the words used in light of their context, purpose and object: Hannover Life Re of Australasia Ltd v Dargan [2013] NSWCA 57; (2013) 83 NSWLR 246 (Hannover Life) at [35] (Bathurst CJ (MacFarlan, Meagher and Hoeben JJA and Tobias AJA agreeing) (citing McCann v Switzerland Insurance Australia Limited [2000] HCA 65; (2000) 203 CLR 579 at [22] (Gaudron J)); see also by analogy Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 (Woodside) at [35] (French CJ, Hayne, Crennan and Kiefel JJ)). In this regard, it is also important to emphasise that members of a superannuation scheme are not mere volunteers. This is because the benefits that they receive under the scheme comprise part of their remuneration for services, placing them in a different position in some respects from beneficiaries of a private trust. As such, the relationship of the members to the employer runs in parallel with the employment relationship: see Stevens v Bell [2002] EWCA Civ 672 (Stevens v Bell) at [27] (Arden LJ (with whom Waller and Auld LLJ agreed)).
49 Consistent with these authorities, it is not the task of the Court or Tribunal to rewrite such documents so as to reflect a position that the Court or the Tribunal considers would be more fair or reasonable, or would have made more commercial sense: Re Golden Key Ltd (in receivership) [2009] EWCA Civ 636 at [25] (Arden LJ) (approved in Visy Paper Pty Ltd v Glass Granulates Pty Ltd [2014] NSWSC 1387 at [22]-[23] (Sackar J) and generally in Woodside at [35]); Stevens v Bell at [31] (Arden LJ (whose statement of principles as to the construction of pension schemes was quoted with approval in Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd (subject to a deed of company arrangement) [2002] VSC 576; (2002) 174 FLR 1 at [216] (Warren J (as her Honour then was))).
50 Finally, after referring to the decision in Hannover Life, the trustee submitted that:
The court’s commercial approach to the construction of superannuation documents reflects the circumstances in which the trustee’s and sponsoring employer’s commitments are created. It is necessary for liabilities in relation to a superannuation scheme to be capable of calculation with precision. The trustee needs to determine whether the scheme is adequately funded, and to calculate the contributions required to meet outgoings in accordance with actuarial assessments. Those calculations must be reflected in the financial statements for the scheme, and the funding obligations must be reflected in the financial statements for the sponsoring employer.
51 It follows that a construction of the Superannuation Plan which does not depart from the plain meaning of the words used, promotes certainty for both the trustee and sponsoring employer in meeting their obligations to ensure that sufficient trust funds are available to meet members’ anticipated future entitlements as and when they are likely to fall due. As the trustee submits, these considerations are reflected in the specific obligations imposed upon superannuation entities and sponsoring employers with respect to the disclosure in their financial statements of information relevant to ensuring those entitlements can be met in the Accounting Standards AASB 119 (applicable to sponsoring employers) and AASB 1056 (applicable to superannuation entities) made pursuant to s 334 of the Corporations Act 2001 (Cth): see also the Superannuation Industry (Supervision) Regulations 1994 (Cth), regs 9.09(1) and 9.10(1) regarding the requirement for the trustee to obtain a funding and solvency certificate. The trustee also submitted that the importance of not departing from the plain meaning of the superannuation documents is heightened in the case of defined benefit superannuation schemes (as here) where, as the High Court has explained, “each Member gets the benefit defined whatever the state of the trust investments” as opposed to an accumulation scheme in which “each Member’s benefit rises or falls with the prosperity of the trust investments”: Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254 at [16] (the Court).
52 Ultimately, in my view such considerations form part of the context in which the superannuation documents fall to be construed and their purpose discerned. As the member submitted, any interpretation of a rule should be consistent with the trustee fulfilling its obligations at general law and as a trustee of a “regulated superannuation fund” within the meaning of the SIS Act, given that the fulfilment of those obligations is itself an object of the Superannuation Plan.
4.3 The Tribunal erred in its construction of sub-rules 23.10(c)(iv) and (v)
53 Applying these principles, in my view the Tribunal erred in its construction of the phrase “any income … from any source which the Trustee determines to be in respect of or arising out of the disability” in sub-rule 23.10(c)(iv) and therefore in its conclusion that sub-rule 23.10(c)(v) had no application to Mr McAulay’s case.
54 First, the words used in sub-rule 23.10(c)(iv) are words of wide import. Not only does the rule refer to “any income … from any source”, but, while they must be read in context, the words “in respect of” “have the widest possible meaning of any expression intended to convey some connexion or relation between the two subject-matters to which the words refer”: Trustees Executors & Agency Co Ltd v Reilly [1941] ALR 105 at 111 (cited with approval by Gibbs J in McDowell v Baker (1979) 144 CLR 413 at 419).
55 Secondly, bearing in mind the width of the language used, in my view the DSP is income of a kind falling within sub-rule 23.10(c)(iv) if construed in accordance with its ordinary and natural meaning and in a business-like manner.
(1) Turning first to the word “income”, this has been described as “a known legal and commercial term”: Federal Commissioner of Taxation v WE Fuller Proprietary Limited (1959) 101 CLR 403 at 409 (Dixon CJ). So understood, the term is apt to embrace annual or periodic receipts of money by a person commonly as consideration for their exertion, but is not limited to income derived by such means. For example, an income may derive from a trust without any exertion on the part of the beneficiary. The DSP provides an income for the recipient who is deprived by reason of her or his disability of the capacity to earn an income or a sufficient income through her or his own exertions where other statutory criteria are met. As such, and as the Tribunal appears to have accepted, the DSP can properly be characterised as income.
(2) Further, it was not in issue as the Tribunal found at [25], that the eligibility criteria for the DSP are clearly linked to the existence of an identified disability which impairs the recipient’s ability to work. In this case, the disability was identical to that which had triggered the member’s entitlement to the TPD Benefit. As such, in my view it is income “in respect of or arising out of the disability”.
(3) Finally, sub-rule 23.10(c)(iv) expressly applies to income “from any source”. As such, read literally the fact that the DSP is a social security payment emanating from government is irrelevant.
56 Thirdly, the natural and ordinary meaning of sub-rule 23.10(c)(iv) accords with the context in which it appears, including its purpose as revealed by the language used.
57 In this regard, as I have earlier explained rule 23.10 deals with offsetting amounts with respect to two different kinds of benefits under the Superannuation Plan, namely, the Disability Benefit in sub-rules 23.10(a) and (b), and the TPD Benefit in sub-rules 23.10(c) and (d).
58 Taking each of these benefits in turn, rule 23.7 provides that a Disability Benefit is an annual pension payable in monthly instalments, or as determined by the trustee, equal to 75% of the member’s final year salary and reduced by offsetting amounts as determined by the trustee under rule 23.10. Importantly under sub-rule 23.7(b)(ii), a Disability Benefit ceases when, among other things, the member ceases to be “Totally but Temporarily Disabled”, upon the member’s return to full-time duty, upon the Disability Benefit having been paid for two consecutive years, or upon the member reaching the Superannuation Date.
59 The kinds of amounts required to be offset against the Disability Benefit under rule 23.10 are greater than those required to be offset against the TPD Benefit. This is clear from the following matters:
(1) the preamble to sub-rule 23.10(a) requires the Disability Benefit to be reduced “by the total of the following amounts” (emphasis added); and
(2) sub-rule 23.10(a)(vi) expressly requires the trustee to offset any amounts which the trustee considers may become payable at a future date under (i) to (v) inclusive in relation to the period to which the Disability Benefit relates.
60 It follows that, unlike sub-rule 23.10(c)(v), social security and other payments must be offset under sub-rule 23.10(a)(vi) even if they are not in respect of, or do not arise out of, the disability and do not relate to the condition that resulted in the member being eligible for the Disability Benefit, providing those payments occur in the period to which the Disability Benefit relates. It can be inferred that this is because the Disability Benefit provides only a short term pension for a total but temporary disability, the purpose of which is to provide a “safety net” in the sense of ensuring that an income stream to a minimum level is available to members who are temporarily unable to work. Subject therefore to a person’s entitlement to another benefit crystallising during the period of disability by virtue of the member turning 65, the scheme applying to the Disability Benefit effectively envisages that a person will be able to resume paid employment within the two year period.
61 By contrast, the TPD Benefit proceeds on the assumption that the member will never be able to resume paid employment. It is payable as a lump sum only which is measured by the member’s projected retirement benefit plus a supplementary benefit and subject to the offsetting amounts under sub-rule 23.10(c): see rule 23.6 set out at [28] above. No provision is made in the Superannuation Plan for the replacement of income by an annual pension in lieu of the lump sum in the case of Total and Permanent Disablement. As such, the TPD Benefit serves a different purpose from the Disability Benefit. Thus, contrary to the Tribunal’s assumption, the purpose of the TPD Benefit is not “to ensure replacement income is available to members who are unable to work.” (Tribunal reasons at [34]).
62 The different purpose served by the TPD Benefit is reflected in the different criteria in terms of what is required to be offset. Thus only income or lump sum payments that may become payable in the future and which are determined to be “in respect of or arise out of the disability” and are “in relation to” the condition which resulted in the member being eligible for the TPD benefit must be offset under sub-rule 23.10(c)(v). Thus, by reason of the words “in relation to” the TPD condition in sub-rule 23.10(c)(v), a stricter nexus is required between future amounts required to be offset and the condition giving rise to the TPD entitlement than is imposed with respect to past payments required to be offset under sub-rule 23.10(c)(iv). The circumstances in which future income or lump sum payments may be offset are therefore limited to payments which serve a similar purpose to that served by the TPD Benefit. This reveals a clear and plain intention to avoid “double-dipping” with respect to future income, that is, the member being effectively paid twice in relation to the impact of the TPD condition (and the TPD condition alone) upon her or his capacity to earn an income through employment. I deal separately later with the Tribunal’s rejection of the relevance of “double-dipping” to the question of construction.
63 The purpose of these provisions, as revealed by a consideration of their text, in turn explains important differences in the wording of sub-rules 23.10(a) and (c).
(1) Thus, it makes sense for sub-rule 23.10(a)(iv) to refer to “any other” income or payment (i.e. other than a payment under 23.10(a)(i) to (iii)), in circumstances where sub-rule 23.10(a)(vi) requires all future payments of a kind referred to sub-rule 23.10(a)(i) to (v) to be offset. Conceptually, in other words, the payments referred to in 23.10(a)(i) to (v) do not overlap. Consistently with this, the preamble to sub-rule 23.10(a) requires that the Disability Benefit be reduced “by the total of the following amounts” (emphasis added). As the trustee submitted, this requires the enumerated amounts to be assessed cumulatively in determining the total amount to be offset.
(2) Turning on the other hand to the TPD Benefit, it makes sense for sub-rule 23.10(c)(iv) to refer simply to “any” income or payment so as to include payments of a kind described relevantly in sub-rule 23.10(c)(ii) (i.e. social security payments) given that sub-rule 23.10(c)(v) requires only future payments of a kind described in sub-rules 23.10(c)(iv) and (v) which have the requisite connection to the disability to be offset. Consistently with this, the preamble to sub-rule 23.10(c) requires simply that the TPD Benefit be reduced “by any of the following amounts” (emphasis added). This requires, as the trustee submitted, a distributive reading of the enumerated subparagraphs.
64 It follows that the Tribunal fell into error at [31]-[33] of its reasons in drawing support from these differences between sub-rules 23.10(a) and (c) for the view that sub-rules 23.10(c)(iv) and (v) do not include social security payments to which the member is expected to become entitled as income support by reason of his disability. Nor does the construction which I favour render sub-rules 23.10(a)(ii) and (c)(ii) of the Rules otiose, contrary to the Tribunal’s reasoning at [33]. In the case of sub-rule 23.10(a)(ii), social security payments constitute one of a number of separate amounts which must be excluded from the calculation of the Disability Benefit. Under sub-rule 23.10(c)(ii), social security payments which have been made must be offset, but in the case of future possible social security payments, only those of a kind which have the necessary connection to the disability may be offset.
65 Fourthly, counsel for Mr McAulay submits that this construction may have anomalous results, rendering it unlikely that it reflects the settlors’ intentions. In particular, the member emphasised that sub-rule 23.10(c)(iii) requires only one third of any Loss of Licence Insurance (LLI) payment to be offset. The member submitted however, that that limit on the amount to be offset would be undermined on the trustee’s construction. Specifically, Mr McAulay submitted that, if an LLI payment had already been made, the trustee would have a discretion as to whether or not to offset the whole of the LLI payment under sub-rule 23.10(c)(iv) or only one third of the payment under sub-rule 23.10(c)(iii). Equally, in his submission, the trustee would have a choice as to whether or not to characterise estimated future LLI payments as payments which may become payable under sub-rule (iv) so as to require that they be offset under sub-rule 23.10(c)(v).
66 There is some force in the member’s submission that this would seem to give rise to an unlikely result. On the other hand, it must be borne in mind that in order for any LLI payment to fall within sub-rules 23.10(c)(iv) and (v), it would still be necessary for the trustee to find that the LLI payments have the requisite connections with the disability and the TPD condition. It is not obvious that an LLI payment would have these connections.
67 It is ultimately unnecessary to resolve this issue in the circumstances of this case. In my view, even if sub-rule 23.10(c)(iv) as it applies to LLI payments were read down in the manner suggested by the member to avoid these consequences, that would not suffice as a reason for rejecting the force of all of the other considerations to which I have referred in determining how sub-rules 23.10(c)(iv) and (v) operate with respect to social security payments. In this regard, I would stress that different implications may be drawn as to the intended interaction between sub-rules 23(c)(iii), (iv) and (v), bearing in mind that the documentation governing superannuation schemes is often complicated and obscure, tending to be a “patchwork put together partly by way of reaction to legislative change, including (but not limited to) changes as to contracting out, preservation of benefits, equal treatment and taxation”, as Walker J of the High Court (Ch Div) observed in The National Grid Company Plc v Laws [1997] PLR 157 at [65] (aff International Power Plc v Healy [2001] UKHL 20; see also Stevens v Bell at [29] (Arden LJ)).
68 Fifthly, as I have foreshadowed, the Tribunal rejected what it described as the “objection” that its preferred approach opens the way for claimants entitled to a TPD benefit to “double dip”, finding that:
36. … This objection is not, however, particularly convincing, since if the [member’s] TPD benefit is paid without deduction for anticipated future DSP benefits, his entitlement to DSP benefits (and thus the risk of “double dipping”) is to be determined in accordance with the rules from time to time applicable to the DSP. If the Commonwealth Government has no objection to him receiving the DSP in addition to the TPD benefit, then that is a matter for the Commonwealth Government, and it is no part of the Trustee’s role to pre-empt the Government’s policy decisions on such matters.
69 However, in so reasoning, with respect, the Tribunal erred in dealing with the so-called “objection” at an abstract level and from the perspective of Commonwealth laws governing the DSP, instead of determining whether this was the intended purpose and effect of the rule objectively construed. For the reasons I have earlier given, it is apparent from the text of sub-rule 23.10(c)(v) that its purpose is precisely to avoid this sort of “double-dipping”, notwithstanding the possibility to which the Tribunal referred that the laws governing eligibility to the DSP may change to the detriment of the member in the future. In effect, with respect, the Tribunal appears to have construed the document in light of what it regarded as the correct philosophical approach. Yet, as Arden LJ observed in Stevens v Bell at [31], the function of the Court (and equally of the Tribunal) is “to construe the document without any predisposition as to the correct philosophical approach”.
70 Sixthly, the member submitted that the trustee’s construction:
… has the result that a member’s benefit is offset (and offset to $0) by the possibility that he may continue to be entitled to a social security payment. That is, the member loses the benefit of membership because he may continue to receive something to which any citizen is entitled whether or not they are a member of the fund. That construction is antithetical to the statutory purpose.
71 I do not accept that submission. As earlier explained, the Fund must be maintained relevantly for the ancillary statutory purpose in subs 62(1)(b)(ii) of the SIS Act of providing benefits for members of the fund where the member ceases paid work on account of ill-health: see above at [25]. Rule 23.6 provides a benefit for this purpose in order to address the members’ financial needs in circumstances of Total and Permanent Disability and, together with sub-rule 23.10(c), makes provision as to how the amount of the benefit is to be calculated. In the case of the TPD Benefit, as the trustee submits, this targeted benefits approach implies that it is appropriate to reduce the benefits payable by reference to other receipts which are also likely to be payable with respect to the same events. The member’s entitlement was only ever to a benefit calculated in accordance with these provisions. While from the member’s perspective the result may be a harsh one, the fact that the amount offset in the individual case under a provision to avoid “double-dipping” reduced the benefit payable to nil does not therefore mean that the member has lost the benefit of membership as a matter of law. Nor does it follow that the entitlement to the benefit does not accord with the relevant ancillary purpose of SIS Act. The SIS Act does not require the trustee to provide a scheme in lieu of, or in addition to, social security.
72 Finally, contrary to the Tribunal’s reasoning at [26], the examples given in clause 23.10(c)(iv) do not provide a basis for reading down the reference to “any income or lump sum payment from any source” by reference to the ejusdem generis principle. This reasoning suffers from a number of difficulties. It runs counter to the purpose of the scheme, as explained above. Furthermore, the words immediately preceding the examples given in sub-rule 23.10(c)(iv), namely “including but not restricted to”, make plain the intention that the examples do not limit the kind of payments falling within the rule. By analogy, in PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2012] HCA 33; (2012) 247 CLR 240, French CJ, Gummow, Hayne and Crennan JJ held at [37]-[38] that the words “without limiting the generality of the foregoing, includes…” in a statutory definition of the term “commercial transaction” had the effect of precluding “resort to the ejusdem generis principle to limit the generality of the preceding words in the definition of ‘commercial transaction’.” In so holding, their Honours approved the statement by Mason J in Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 679 that:
In this case the words “without limiting the generality of the foregoing” evince an intention that the general power should be given a construction that accords with the width of the language in which it is expressed and that this construction is not to be restricted by reference to the more specific character of that which follows. The clause therefore operates to negative the restrictive implication which might otherwise have been derived from the presence of the specific power to lend contained in para (a).
73 Further and in any event, the ejusdem generis principle can apply only where general words follow specific references and it is possible to identify a genus: Commonwealth Superannuation Scheme Board of Trustees v Kitching [2004] FCAFC 299; (2004) 139 FCR 272 at [88] (the Court). Neither requirement is met here. The general words precede the specific examples, and there is no indication that the two examples were intended to form a genus as I have explained.
5. THE INTERLOCUTORY APPLICATION FOR LEAVE TO ADDUCE FURTHER EVIDENCE
5.1 The interlocutory application
74 On 5 September 2018 the applicant filed an interlocutory application seeking leave pursuant to rule 33.29 of the Federal Court Rules 2011 (Cth) (FCR) to file and rely upon the affidavit of Mr Neil Simpson sworn on 28 August 2018, together with exhibit NS1, (the further evidence) in support of its construction of rule 23.10. That affidavit was annexed to the affidavit of Ms Yu, solicitor, affirmed on 31 August 2018 and filed in support of the interlocutory application.
75 Rule 33.29 of the FCR appears in Division 33.2 dealing with so-called “appeals” from decisions of the Administrative Appeals Tribunal and provides that a party may apply to the Court to receive further evidence on an appeal supported by an affidavit. Rule 33.34 in Division 33.3 provides that Division 33.2 applies to an appeal, as here, under s 46 of the SRC Act. While described as an appeal, in either case the application is in the nature of an application for judicial review and therefore in the original jurisdiction of the Court.
76 Notwithstanding the application to lead further evidence, the trustee’s primary submission was that the present case belongs to the category of ordinary cases where the process of construction is possible by reference to the Superannuation Plan alone (citing Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 (Mount Bruce) at [48]-[49] (French CJ, Nettle and Gordon JJ)). For the reasons I have earlier given, I agree with the trustee’s primary stance.
77 In the event, however, that the Court considered that the meaning of the relevant provisions of the Superannuation Plan was ambiguous, the trustee submitted that the Court could have regard to the further evidence as evidence of the surrounding circumstances in which relevant amendments to the Superannuation Plan were made. The conclusion which I have reached as to the construction of the Superannuation Plan does not render it unnecessary to rule upon the interlocutory application. Quite apart from the possibility that a different view might be taken if the matter is the subject of an appeal, there is some force in the view expressed by Leeming JA that “ambiguity” in the context of the legal principles governing the construction of a contract (and by analogy, a trust deed) is a conclusion, rather than a precondition to the admissibility of evidence of surrounding circumstances: Cherry v Steele-Park [2017] NSWCA 295 (Cherry) at [79] (Leeming JA (with whose reasons Gleeson JA at [1] agreed)).
78 The further evidence comprised documents which were located only after the proceedings were commenced as a result of a search undertaken following the filing of the applicant’s submissions on 27 July 2018 in order to identify historical documents relating to the introduction of Division 3 into the Superannuation Plan. The historical documents in question comprised a Deed of Amendment dated 23 August 1995, minutes of meetings of the Board of Directors of the trustee preceding the 1995 Deed of Amendment, minutes and an agenda item of the board papers of a meeting of the Board of Directors held on 15 August 2000, and a letter of advice from solicitors to the Board of Directors in 1995.
79 Initially, counsel for Mr McAulay accepted that earlier iterations of the trust deed were admissible but opposed the tender of any of the other documents on the grounds that they were not relevant and could evidence no more than subjective intentions. Ultimately, however, he opposed the tender of all of the documents save for the 2001 version which had been admitted already without objection.
80 The trustee submitted first that, while part of the proposed evidence refers to the intention of the board of the trustee, the evidence as a whole is admissible as evidence of the history, background, context, and purpose of the adoption of the present wording of the offsetting rule. In support of this proposition, the trustee relied in particular upon the joint reasons of French CJ, Nettle and Gordon JJ in Mount Bruce where their Honours, after observing that ordinarily the process of construction of a commercial contract is possible by reference to the contract alone, continued:
49. However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice.…
50. Each of the events, circumstances and things external to the contract to which records may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
(citations omitted)
81 In this regard, it is important to emphasise that French CJ, Nettle and Gordon JJ in Mount Bruce explained at [52] that their observations were not intended to state any departure from the law as set out in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 (Codelfa Construction) and Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640. In Codelfa Construction at 352, Mason J (as his Honour then was) explained that:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although … if the facts are notorious knowledge of them will be presumed.
82 Despite a division in views among intermediate courts of appeal, the “true rule” in Codelfa Construction remains binding on this Court unless and until the High Court determines otherwise: Mount Bruce at [111] (Kiefel and Keane JJ) and [118] (Bell and Gageler JJ).
83 Secondly, the trustee submitted that where the decision to amend is made by one entity, it is relevant to take into account the history of the amendment, as well as anything bearing on the purpose or object of the amendment. The trustee also submitted that the fact that two of the further documents sought to be relied upon were in the nature of legal advice is not significant because they were part of, and therefore assumed the character of, a board paper and as such, comprised part of the history of the amendment. Further, the trustee submitted that the legal advices were not sought to be relied upon as such, but rather as evidence of the purpose of the amendments. In saying this, the trustee also argued that the board record was admissible as a business record and that tendering the legal advices in this way made clear that it was not tendered to establish subjective intention. The trustee further relied upon the fact that the Superannuation Plan is variable by the Principal Company with the trustee’s consent. The trustee submitted that its primary duty was to act in the best interests of the members as a fluctuating class.
5.3 The documents are not relevant and therefore the interlocutory application should be refused
84 I note that this is not a case in which it was submitted that the documents the subject of the interlocutory application were relevant to any issue other than the construction of rule 23.10. As such, argument proceeded on the basis that the relevance and admissibility of the documents turned upon whether they could be relied upon as evidence of surrounding circumstances to assist in that task of construction: cf Cherry at [49]-[56] (Leeming JA (with whose reasons Gleeson JA at [1] agreed)).
85 In my view, the documents the subject of the interlocutory application are not relevant and leave to file the further affidavit of Mr Simpson should therefore be refused. While the submission suffers potentially from a number of difficulties, the short point is that, despite the ingenuity of counsel’s arguments, the proposed evidence cannot be characterised as evidence of surrounding circumstances. The documents concern prior deliberations by the trustee charged with amending the Superannuation Plan, including the legal advices which informed those deliberations. As such, they evidence only the trustee’s subjective intention in relation to that amendment. Applying the authorities earlier cited, evidence of subjective intention is not relevant. As Lord Wright explained in Commissioners of Inland Revenue v Raphael [1935] AC 96 at 142-143 speaking of a failed attempt to settle property on trust (in a passage cited with approval by Heydon and Crennan JJ in Byrnes v Kendle at [106]):
… the principle of the common law has been to adopt an objective standard of construction and to exclude general evidence of actual intention of the parties; the reason for this has been that otherwise all certainty would be taken from the words in which the parties have recorded their agreement or their dispositions of property.
86 For these reasons, the appeal should be allowed and the decision of the Tribunal set aside. As earlier explained, the parties were agreed that in this event, no order was necessary in the circumstances remitting the matter to the Tribunal. The trustee also stated in its written submissions in reply that in the event that it succeeds, it will not seek an order for costs of the appeal against the member. However, I consider that the question of the costs of the interlocutory application should be reserved in order to afford the parties an opportunity to consider their position with respect to these costs and, if not agreed, to make submissions. Subject only to this caveat, there will be no order as to costs.
87 Finally, the Court expresses its appreciation to counsel for the respondent who appeared pro bono, having accepted the referral pursuant to the certificate issued under rule 4.12 of the Federal Court Rules 2011.
I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry. |
Associate:
