Case: Jeffrey Guy Baker v Local Government Superannuation Scheme Pty Ltd [2007] NSWSC 1173
Outcome: cited
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). 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. 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. 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