Case: Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359
Outcome: distinguished
its submissions in relation to ground (g) of the notice of appeal, the Tribunal submits that this issue whether the respondent's claim is a claim against the Fund or whether it is a claim against the applicant is to be determined by reference to whether or not the applicant, as trustee, has a right of indemnity against the trust assets. In other words, a right to indemnify itself in respect of the loss it will suffer as a result of payment of compensation. If it does, then the claim, so the submission goes, is a claim against the Fund; if it does not, so the submission goes, then the claim is a claim against the applicant. Reliance for this submission is placed on what was said by this Court (Allsop J) in Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359 at 389 ([140], [141]): '[140] Whether the tribunal deals with it or the Trustee deals with it, the parties concerned, including Ms Crocker, must appreciate that what is involved is not the determination of the rights of the parties. That is for suit in a court (which may, in the end, be the only appropriate forum in which to vindicate her position). Rather it is a decision whether, despite the lack of entitlement under the policy, it is appropriate for the Trustee to compound Ms Crocker's claim and, if it is, in what amount. [141] Of course, in that inquiry, some assessment of legal, as well as factual, issues will have to be made: Did the Trustee's conduct, which is said to give rise to the claim, exhibit a lack of honesty or an intentional or reckless failure to exercise care and diligence? (See cl 5.1(a)(i) or (ii) of the trust deed.) If so, then it is probably not a claim "against the Plan" (ie the trust) for the purposes of cl 7(c) because the Trustee, in these circumstances, has no right of indemnity against the trust assets. If not, it probably is such a claim, "against the Plan", for the purposes of cl 7(c), because the Trustee would have a right of indemnity. I agree with the Trustee's submissions in this regard.' These observations have to be understood in the context of Crocker as a whole. Ms Crocker's complaint was that the trustee had refused to pay her a benefit in consequence of her being totally and permanently disabled. The trustee determined that she was not. The Tribunal decided otherwise and remitted back to the trustee quantum related issues. Allsop J accepted that the Tribunal's reasoning that Ms Crocker was within the definition of totally and permanently disabled was wrong and he set it aside ([100] [111]). However, Ms Crocker also advanced a separate argument to the effect that even if she was not totally and permanently disabled, nevertheless, because the trustee had a power to compromise a claim, its discretionary decision not to do so was reviewable by the Tribunal. Clause 7(c) of the trust deed which applied to Ms Crocker was in the following terms: 'to institute, conduct, defend, compound or abandon any legal proceedings by or against the Plan or its officers or otherwise concerning the affairs of the Plan and also to compound and allow time for payments or satisfaction and allow time for payments or satisfaction of any debts due and of any claims or demands by or against the Plan.' Allsop J found that the trustee did not exercise the power in cl 7(c) at all ([129]). He noted an argument put by the trustee at [128]: '[128] It was said by the Trustee before me that the decision made by the Trustee was in respect of a claim by Ms Crocker for her entitlement (that is under the relevant policy) to disability benefits. The Trustee refused that claim. That decision was correct (by reference to the terms of the insurance policy). It was said that the question as to whether the Trustee would be entitled to use cl 7(c) and thereby trust funds to settle a different claim one for damages or compensation based on its conduct towards Ms Crocker in circumstances predicated upon her lack of entitlement, has not been the subject of a decision, or indeed a claim. Thus, it was said, to the extent that the tribunal dealt with that subject matter in respect of the second unit, it impermissibly embarked on an adjudication of the rights of the parties, not upon review of a decision; reference was made to Briffa v Hay at 444.' The trustee, therefore, ran an argument that the claim against it was a personal claim and was not a claim for a benefit due under the terms of the trust for which it would be indemnified. Thus, so the argument ran, this infringed the requirement that the Tribunal not deal with the adjudication of the rights of the parties. Of that topic, Allsop J had, himself, said at [15], [16]: '[15] In the context of a trustee acting as the trustee of a superannuation fund pursuant to a trust deed and an insurer issuing a policy to the trustee on behalf of the members of a fund, allegations of the kind just mentioned might throw up for consideration a number of matters if one were concerned with analysing or determining all the legal rights and obligations of the 3 parties (member, trustee and insurer) inter se: questions as to whether the member was entitled under the terms of the trust or the terms of the insurance policy to disability cover; questions as to whether, irrespective of the terms of the policy, the trustee had bound itself in some fashion to the member to provide disability cover; questions as to whether any such obligation had been created in contract, by estoppel or in some other legal or equitable framework; and questions as to whether, if the trustee had so bound itself and was not entitled to have the insurer pay the claim, it was entitled to indemnify itself out of the trust fund to meet such obligation. [16] However, the Tribunal's task was not to determine all such rights and obligations of the parties. To do so would, in all likelihood, see it purport to engage in the exercise of judicial power. Rather, the Tribunal's task was confined to the role given to it by the Act. At this point I gratefully adopt the description of the legislative scheme set out by the full court in National Mutual Life Association of Australia Ltd v Campbell [2000] FCA 852 ; (2000) 99 FCR 562 at 565-68 [10] to [20]. This relieves me of referring to the Superannuation (Resolution of Complaints) Act 1993 (Cth) , other than to the provisions essential to these reasons.' The argument put by the trustee at [128] potentially involved Allsop J in having to consider whether the argument he touched upon at [15] [16] that the determination of rights involved the exercise of judicial power was correct. His Honour circumvented this problem by holding that the compromise clause applied because Ms Crocker's claim was against the fund and was not a personal claim against the trustee. At [130] [131] his Honour said: '[130] It would have been open to the Trustee on the claim before it to deal with the matter not only by reference to r 5A.1 of the trust deed, but also (having concluded that no entitlements arose under the policy and thus no requirement lay on it to pay an Insured Benefit by reason of the terms of r 5A.1) by reference to cl 7(c). That is, it would have been open to the Trustee to consider whether, in the circumstances, it was appropriate to compound the claim of Ms Crocker under cl 7(c). [131] Any such decision would have raised questions as to whether that would be a proper exercise of power (in particular in the light of the expression "the Plan" in cl 7(c), Recital A and r 1 and the basis for the exclusion of the Trustee's personal liability under cl 5.1). If it were to be concluded that the exercise of the power could possibly be made (that is, bearing in mind cl 5.1, it would not be an exercise in self dealing by the Trustee) any such decision would then have raised questions about the merits of the claim both factually and legally. In these circumstances these questions would not be arising in the context of the Trustee deciding the rights of Ms Crocker against itself, but in the context of making a decision as to whether or not it should compound the claim.' Explicitly, therefore, Allsop J rejected the argument at [128] that what was being compromised was a personal claim against the trustee. His Honour then reasoned that the Tribunal had not considered the re-exercise of this power and remitted the matter back to it for it to do so ([135] [137]). The applicant submits that the following propositions emerge from the foregoing analysis of Crocker : (a) Crocker expressly proceeded on the basis that the claim made was not a claim for compensation from the trustee for breach of trust but rather a claim under the policy for a benefit due from the fund ([131]); (b) it not being a personal claim, it was able to be compromised under clause 7(c) ([130] [131]); (c) had the claim been a personal claim, it would have been necessary to deal with the argument at [128] that the determination of the claim would have involved the adjudication of rights ([131]); and (d) had those issues arisen and they did not his Honour's expressed view (at [15] [16]) was that such a process by the Tribunal would have involved the exercise of judicial power. I agree with this submission. Understanding the observations of his Honour at [140] and [141] extracted at [47] above in this context, what his Honour was considering at [141] was whether a claim, which was clearly a claim 'against the Plan', was a claim against the trustee because of the lack of any indemnity against the trust assets. That is not this case. Here the claim of the respondent is clearly a claim against the applicant and not against the Fund. In any event, there is no right of indemnity against the trust assets because by the time the claim was made there were no trust assets. It was tentatively suggested by Senior Counsel for the Tribunal that the applicant would have been insured against any loss it suffered as a result of paying compensation to the respondent and in that sense the applicant had the benefit of an indemnity. But even if the applicant carried such insurance, it would be an indemnity sourced outside its position as trustee of the Fund and nothing that was said in the passages extracted from Crocker would work a conversion of the claim from one against the applicant to one against the Fund. On the view I take, the respondent's claim is against the applicant and not against the Fund. As such, the provisions of cl 10.7(d) of the 2000 Trust Deed and s 49(d) of the Trustee Act 1925 (NSW) have no relevance or role to play. The decision under review, namely the applicant's refusal to compensate the respondent for his loss alleged to result from the applicant's contravention of SIS Act covenants in the investment strategy it adopted, was not a decision the Tribunal had jurisdiction to review under s 37 of the Complaints Act. In the circumstances, it is not necessary to consider ground (f). The determination of the Tribunal dated 20 February 2006 must be set aside and, in lieu thereof, the respondent's complaint to the Tribunal be dismissed. This ground of the amended notice of appeal was predicated on the unstated premise that cl 10.7(d) of the 2000 Trust Deed did confer a power on the applicant, as trustee, to compromise a claim against itself. On the views expressed in [40] [54] above, the ground does not arise.