AMP Superannuation Limited as Trustee of the AMP Superannuation Savings Trust [2011] NSWSC 1439 (22 November 2011)

Last Updated: 1 December 2011

Supreme Court New South Wales

Case Title:	AMP Superannuation Limited as Trustee of the AMP Superannuation Savings Trust
Medium Neutral Citation:	[2011] NSWSC 1439
Hearing Date(s):	22/11/2011
Decision Date:	22 November 2011
Jurisdiction:	Equity Division
Before:	Acting Justice Windeyer
Decision:	Answers to questions in the summons : 1A: Not answered. 1B: The trustee has power to implement the employer proposal, and it is open to it the trustee to be satisfied implementation of the proposal is reasonable. If after considering the reasons I have given it forms the opinion it should no longer pursue the implementation of proposal A, in that case it would be justified in implementing the employer's proposal. I order that the plaintiff's costs be paid on the indemnity basis be paid out of the assets of the Chartwell Industry Superannuation Plan. The exhibits can be returned.
Catchwords:	CORPORATIONS - Judicial advice - Proposal to distribute surplus in superannuation fund
Legislation Cited:	Superannuation Industry (Supervision) Act 1993 Trustee Act 1925
Cases Cited:	Invensys Australia Superannuation Fund Pty Limited v Austrac Investments Limited (2006) 15 VR 87 Macedonian Orthodox Community Church Saint Peter Incorporated v his Eminence the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Texts Cited:
Category:	Principal judgment
Parties:	AMP Superannuation Limited as Trustee of the AMP Superannuation Savings Trust
Representation
- Counsel:	Counsel: Mr MJ Leeming SC, Mr SM Nixon (AMP Superannuation Ltd) Mr B Katekar (Chartwell Industries Ltd, Minsmere Pty Ltd, ASHCA Pty Ltd)
- Solicitors:	Solicitors: Clayton Utz (AMP Superannuation Ltd) Allens Arthur Robinson (Chartwell Industries Ltd, Minsmere Pty Ltd, ASHCA Pty Ltd)
File number(s):	2011/00361175
Publication Restriction:

JUDGMENT

1. This is an application for judicial advice under s 63 of the Trustee Act 1925. The plaintiff is trustee of the AMP Superannuation Savings Trust. As a result of what is called a participation deed, Chartwell Industries Limited became a participant under the trust deed and subject to its own participation plan.

2. There are now only four members in the plan; two are defined benefit members, and two are accumulation benefit members.

3. At the present time, there is a surplus in the fund, and both the trustees and Chartwell wish to distribute that surplus. The rules have no provision for distribution prior to termination, and although it is proposed to terminate the plan, the judicial advice sought is given, the desired result cannot be achieved on termination.

4. The surplus in the plan amounts to about $1,473,000. This has arisen as a result of employer contributions in excess of those required to cover expected defined benefits. To a large extent, the surplus exists because the subsidiary of Chartwell carrying on business in Australia, now named Minsmere Proprietary Limited, closed down at the end of 2005, and the number of employees was quickly reduced from over 200 to four.

5. No contributions have been made to the fund since November 2005 as a result of advice from the actuaries. When the business shut down, the employees dismissed were paid out their entitlements under the plan and, I am told by counsel who appeared today for the companies, an additional retrenchment payment.

6. The trustee has formulated a proposal which would provide for distribution of the surplus. The actuaries have calculated the difference between payments received by dismissed members and the amounts which would have been received by them on retirement due to age or with permanent disability as at the date of dismissal. On average that would result in an amount of increase 8.1 per cent over the amount paid on dismissal. The proposal is to pay that increase to the former members of the plan who retired after 1 February 2006, and to pay the entitlement of the existing members on the same basis, except that interest would be calculated on the additional payments received by the former members. Any balance after those payments would go to Chartwell.

7. To achieve this result, it would be necessary to amend the plan rules. Rule 1.8.1 provides for this, subject either to the actuaries certifying the amendment would not prejudice the value of their rights secured in respect of members, or in the alternative, subject to 80 per cent of the members agreeing. The former course would be necessary as the four members will not agree.

8. The fund deed being the principal deed provides in rule 2.86 for the making of rules covering a particular plan, here the Chartwell plan. The plan rules prevail unless they contain a provision requiring the trustee to act in a manner contrary to superannuation law.

9. In addition, any amendment requires the written consent of AMP Life Limited and of Chartwell. But in the case of the latter, such consent is not to be unreasonably withheld.

10. At the present time, it appears that Chartwell will not consent to this proposal. It has put forward an alternative plan under which three of the current members would be paid $55,000 each, and the fourth member would be paid $35,000. The balance would be paid to Chartwell. The four current members of the plan would consent to this alternative proposal.

11. The plaintiff seeks judicial advice on the following questions:

A. Assuming the amendment conditions and other implementation conditions for the ASL proposal are satisfied, does ASL are have power to implement the ASL proposal, would it be justified in so doing, and in particular, would it be open to ASL to be satisfied for the purposes of s 117(5)(c)(ii) of the Superannuation Industry (Supervision) Act 1993 that the implementation of the ASL proposal was reasonable.

B. In the event that the amendment conditions and/or implementation conditions for the ASL proposal are not satisfied, and assuming that the amendment conditions and other implementation conditions for the employer proposal are satisfied, does ASL have power to implement the employer proposal, would it be justified in so doing, and in particular, would it be open to ASL to be satisfied for the purposes of s 117(5)(c)(ii) of the SIS Act that the implementation of the employer proposal was reasonable.

12. Mr Leeming SC and Mr Nixon have appeared for the trustee. Chartwell was served with the papers, and Mr Katekar of counsel appeared for it and its two subsidiaries in court. He made submissions, but those companies have not been joined as defendants.

13. Mr Katekar opposed what I will call the trustee's preferred plan. He said:

(1) It was not appropriate to seek judicial advice as alternatives had not been sufficiently canvassed. I should say I do not agree with this;

(2) That the proposed plan was not reasonable because the source of the surplus had not been properly taken into account;

(3) The proposal, insofar as it provided as it would provide benefits to former members, was not lawful as it was contrary to the provisions of s 52(2)(c) on s 62 of the Superannuation Industry (Supervision) Act 1993 .

14. Section 62 of that Act headed the sole purpose test in essence provides that the trustee of a regulated superannuation fund must ensure (a) the fund is maintained solely for the provision of benefit of members, this being what is described as a core purpose, in addition can be linked with an ancillary that relevant here being the provision of benefits for each member of the fund on or after the termination of a member's employment with an employer who had or any of whose associates had at any time contributed to the fund in relation to the member. The argument so far as this section is concerned is that a member did not embrace former members, albeit that they seem to have been referred to in s 62(b)(i).

15. This matter was considered by Justice Byrne in Invensys Australia Superannuation Fund Pty Limited v Austrac Investments Limited [2006] VSC 112. In that case, there were numerous parties representing trustees members, former members in the employer, all of whom supported or did not oppose the view that the member in s 62 included former members, and his Honour found that to be the position. There was no attention given to s 52(2)(c).

16. That s 52 deals with covenants to be included in governing rules one of which is to ensure that the trustee's duties and powers are performed and exercised in the best interest of the beneficiaries. Beneficiaries is defined in s 10 as follows:

"Beneficiary in relation to a fund, scheme or trusts means a person (whether described in the governing rules as a member, a depositor or otherwise) who has a beneficial interest in the fund, scheme or trust and includes in relation to a superannuation fund a member of the fund despite the express references in this Act to members of such funds."

17. This definition in some ways does not appear to be very helpful, but it does at least speak in the present tense and appears to regard beneficiaries as people who at the present time have a beneficial interest in the fund.

18. I said during the hearing that I did not consider this was a question which could or should be decided on an application for judicial advice, as it involved not just interpretation of the trust deed, but the interpretation of a Commonwealth Act of Parliament, where the proper result was not clear.

19. I appreciate that an advice was obtained by the then Mr Bathurst QC indicating that member in clause 1.8.1 of the plan rules could include former members. But that would in any event not assist without amendment to the rules. No attention in that advice was given to s 52.

20. I remain of the view that it is not appropriate to give the advice first sought without this question being determined by someone seeking an appropriate declaration and joining at least as a defendant a person to represent former members of the that view. Although the contrary has been pressed on me in light of the decision of the High Court in Macedonian Orthodox Community Church Saint Peter Incorporated v his Eminence the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, I do not think that the general points there made about the width of s 63 of the trust's deed make it proper to determine this matter on this hearing.

21. It is for that reason that I decline to give the advice sought in paragraph 78A of the statement of facts. If the question of power were answered in the affirmative, I would have given the advice.

22. Insofar as the second question is concerned, the answer must be given subject to what I have just stated. If the trustees consider that it is proper for it to proceed to implement the second proposal, for the reason that it does not wish to spend further funds, and the matter is open to doubt, and if it brings its mind properly to consider this matter, then I am of the view that it would be justified in acting in accordance with proposal two, but that whether it should do so is for it to decide.

23. I will answer the questions in the summons as follows:

1A: Not answered.

1B: The trustee has power to implement the employer proposal, and it is open to it the trustee to be satisfied implementation of the proposal is reasonable. If after considering the reasons I have given it forms the opinion it should no longer pursue the implementation of proposal A, in that case it would be justified in implementing the employer's proposal.

24. I order that the plaintiff's costs be paid on the indemnity basis be paid out of the assets of the Chartwell Industry Superannuation Plan. The exhibits can be returned.

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