Commonwealth Bank Officers Superannuation Corporation Pty Ltd & Anor v Beck & Anor

BATHURST CJ: This is an appeal against declarations and orders made by the primary judge relating to what broadly may be described as the entitlement of the first respondent (Mr Beck) to discretionary pension benefits out of the Commonwealth Bank Officers Superannuation Fund (OSF) administered by the first appellant (CBOSC).

There was little dispute about the primary facts, which are set out exhaustively in the primary judgment.

Mr Beck was born in South Africa and qualified as an actuary. In 1981, he commenced employment in South Africa with Colonial Mutual Life Assurance Society Limited (Colonial Mutual). He commenced contributing to that company’s South African superannuation fund.

In February 1987, Mr Beck migrated from South Africa, relocating his employment to the Melbourne office of Colonial Mutual, and became a member of that company’s Australian superannuation fund (the Old Colonial Fund). That fund was a defined benefit fund, contributors being entitled to pension payments calculated generally by reference to a formula in the rules based on salary and years of service and irrespective of the value of the fund at any given time. The contributor was thus insulated from market movements which would affect the value of the fund.

The Old Colonial Fund, which was constituted by deed dated 30 June 1978, provided for pension benefits to be paid at retiring age, namely 62, and benefits on death or total and permanent disablement of contributors. In addition, the deed provided for certain payments to be made to a contributor who had attained the age of 55 years on retirement but not reached the retiring age. By deed dated 28 August 1985, the Old Colonial Fund deed was amended to provide for a discretionary benefit in what were described as exceptional circumstances to persons who had retired prior to reaching the age of 55: cl 22(b) of the Old Colonial Fund deed

On 2 July 1996, the rules of the Old Colonial Fund were restated and amended (the July 1996 deed). Division 1 of the amended deed contained some general provisions relating to the fund, including a power to amend the deed. The amendment provision, cl 33, was in the following terms:

There are a number of other matters which should be noted about the general provisions. Clause 31 required the trustee to appoint an actuary who was required to meet “Relevant Requirements”. Relevant requirements were defined as follows:

Clause 31.2 of the general provisions required the trustee to cause the actuary to conduct an actuarial investigation of the fund at intervals of not more than three years and report on matters stipulated by the relevant requirements, including recommendations on the level of contribution to be made by employers. Clause 32 provided that any surplus disclosed by the actuarial investigation could be used to increase benefits payable out of the fund or reduce contributions payable to it. Clause 32.2 contained the proviso that no contribution or any part thereof was to revert to, or become charged in favour of, an employer.

Divisions 2 and 3 of the deed contained the rules of the fund. Clause A1.1 of Div 3 provided for members’ contributions at the rate of either 3% or 5% of members’ salaries. Clause A1.2 provided for a member to make voluntary contributions, whilst cl A1.5 obliged the employers participating in the fund to pay such amount of contributions as were agreed between the trustee and the employer, having regard to the recommendations of the actuary under cl 31 of the general provisions.

The trustee was obliged by cl 7 of Div 2 to record certain matters in what was described as a “Voluntary Contribution Account”. The provision was in the following terms:

It is to be noted that there was no requirement to record in that account any reserve or notional reserves held against future liability to pay members’ benefits in respect of the fund.

Clauses A2.1 to A4.1 of Div 3 provided for what were described as “Normal Retirement Benefits”, “Early Retirement Benefits” and “Late Retirement Benefits”. They are in the following terms:

It can be seen that to obtain a benefit under any of the provisions set out above, it was necessary to attain at least the age of 55 years. Members who ceased employment with the employer prior to attaining that age were dealt with under cl A11. As originally inserted into the July 1996 deed, the clause provided as follows:

By deed dated 30 December 1996 (the December 1996 deed), the deed constituting the fund was amended by the deletion of cl A11.3. Its deletion formed the principal basis of Mr Beck’s complaint in the proceedings. It was contended by Mr Beck that the amendment deleting cl A11.3 was not authorised by cl 33 of the deed and constituted a contravention by the trustee of s 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act) and reg 13.16 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations).

I have set out these provisions later in this judgment. The primary judge accepted this contention.

It should be noted that Part B of cl A11.1 was also amended to provide as follows:

The primary judge accepted that the deletion of A11.3 was a result of the trustee’s in-house lawyer informing it that the benefit structure of the deed “was likely to offend the provisions of the Victorian Age Discrimination legislation which effectively comes into force on 1 July 1997”. However, as will appear, the primary judge concluded that this did not justify the amendments.

In July 1998, following the diversification of the business of Colonial Mutual, the board of that company resolved to merge different superannuation arrangements for different parts of its business into a single superannuation fund. As a result, the assets held by the trustee of the Old Colonial Fund were transferred into a new fund, the Colonial Group Staff Superannuation Scheme (the New Colonial Fund). The deed constituting this fund did not contain an equivalent provision to the repealed cl A11.3.

The New Colonial Fund had a defined benefit plan, effectively providing the same benefits as the Old Colonial Fund (excluding cl A11.3), or an accumulation plan, in which a contributor bore, at least in part, the risk of market fluctuations and had the potential to gain from those fluctuations. Mr Beck was offered the opportunity to transfer to the accumulation plan. He declined. The primary judge concluded that one of the reasons was that he believed he was already entitled under the plan to a pre-aged 55 discretionary benefit equal to what he regarded as the reserve value of his pension.

In July 2000, Colonial Mutual was acquired by the second appellant (CBA). Mr Beck had discussions with officers of CBA concerning the continuation of his employment with that company. These included conversations with Mr John Mulcahy and Mr Les Cupper, which gave rise to Mr Beck’s claim that the trustee and CBA were estopped from contending that he was not entitled to the retirement benefit which he sought. Mr Beck, who was not cross-examined, gave the following evidence of the conversation and the effect which it had on him:

Mr Mulcahy subsequently sent a letter to Mr Beck on 26 June 2000, which stated that his [Mr Beck’s] existing superannuation arrangements would continue to apply.

Mr Beck’s contract of employment with CBA provided for termination by either party on six months’ notice.

Following commencement of his employment with CBA, Mr Beck was required to move to Sydney to carry out his duties, while his wife and children remained in Melbourne, each sharing the commuting on weekends.

In mid-2001, Mr Beck and his wife attended a dinner at Aria Restaurant with Mr Mulcahy, Mr Cupper and their respective spouses. Mr Beck’s evidence concerning this meeting and its aftermath was accepted by the primary judge. It was in the following terms:

Mrs Beck’s evidence of this conversation was as follows:

Following this conversation, after Mr Beck’s daughter had completed her year 12 schooling, Mr Beck and his family relocated to Sydney.

On 3 October 2003, the administration of the New Colonial Fund was merged with the OSF, of which CBOSC was the trustee. Division CH of the rules of that fund contained similar provisions to those in the New Colonial Fund. In particular, provisions to which I have referred above (excluding cl A11.3) were incorporated into Div CH.

In 2002, Mr Beck was appointed Chief Executive Officer of CBA’s insurance arm, Comminsure. In August 2004, he was informed he was to be replaced. In negotiations concerning his future, he was informed that his request for a pre-age 55 discretionary benefit had been denied.

On 11 May 2005, he became aware for the first time that cl A11.3, which dealt with the pre-age 55 discretionary benefit, had been deleted by the amending deed and not carried over into the successor funds.

On 11 July 2005, Mr Beck’s employment with CBA was terminated. The proceedings giving rise to this appeal were commenced on 7 July 2011.

Section 52 of the SIS Act provides that the governing rules of the fund are taken to contain certain covenants. Relevantly, it is in the following terms:

Section 55 provides for the consequences of a contravention of the covenants in s 52. Relevantly, it is in the following terms:

As there was no claim for damages for contravention of s 52(2)(c) in these proceedings, the limitation period referred to in s 55(4) has no relevance.

Section 31 of the SIS Act provides that the SIS Regulations may prescribe standards including, relevantly, for the preservation of benefits. Regulation 13.16, made pursuant to this provision, relevantly provides as follows:

The definition of accrued benefit is contained in reg 9.27. So far as is relevant, at the time of the December 1996 deed, it was in the following terms:

The relevant division in which this definition applied related to defined benefit funds (reg 9.26). Regulation 13.16 did not fall within that division.

The definition of “successor fund” contained in reg 1.03 is also of relevance. It is in the following terms:

It should be noted that cl 13 of Div 2 of the July 1996 deed entitled the trustee, with the consent or at the request of the company, to transfer the members’ entitlements together with money and other assets of the fund to a successor fund (the equivalent rights provision). “Successor Fund” was defined in the deed to have the same meaning as contained in the regulations.

After setting out the facts which I have summarised above, the primary judge stated that the actuarial evidence gave meaning to the technical terms used in cll 33 and A11.3 of the July 1996 deed. He said that this evidence dealt with three matters:

The primary judge referred to the evidence of Mr Furlan, the appointed actuary of the OSF and the evidence of Mr Newman, the actuary called by Mr Beck. He accepted the evidence of both actuaries that defined benefits funds do not maintain a reserve value in respect of each individual member, rather, they were individually calculated as part of a periodic investigation. He accepted evidence that it was not necessary to review individual member’s projections, but that if a current projection was required for an individual member, it could be provided.

The primary judge referred to the evidence of Mr Newman concerning the actuary’s involvement in considering the exercise of discretion to grant a pre-age 55 discretionary benefit. Mr Newman stated, also relying on the evidence of Mr Furlan, that the reserve would be calculated using a computer program “Topact”. The primary judge then referred to Mr Furlan’s evidence that no part of the reserve included provision for the possibility of a discretionary uplift in a defined benefit payment. His Honour stated that what that answer meant was important. He said he understood Mr Furlan to be saying that reserves do not cover a discretionary payment that exceeded what had been calculated as the present value of future payments of a member’s benefit. He said, however, that this contradicted the words of cl A11.3, which limited the discretionary payment to a maximum not exceeding the reserve value in respect of such a member.

The primary judge referred to the evidence of Mr Newman that any surplus in the OSF is a net balance remaining after calculation of all members’ reserves, including Mr Beck’s. However, he referred to the evidence of Mr Furlan that if a member retired early and received a pre-age 55 discretionary benefit that was less than the member’s aggregate reserve as calculated by the actuary, then the unused share would return to and become part of the surplus.

The primary judge then referred to the evidence of Mr Furlan that the “concept of a reserve is trying to set aside enough money to pay benefits as they fall due” and is really an accounting concept being a prudential “financial provision”. He pointed out the OSF had always been in surplus.

In dealing with the construction of cl A11.3 and its predecessor, cl 22(b), the primary judge pointed out that the matrix of fact was that the superannuation deed formed part of the employer/employee relationship and should be construed in a practical and purposive manner to give reasonable and practical effect to the scheme.

The primary judge described the critical question of construction as whether the value of the benefits accrued in respect of any member prior to the amendment deleting cl A11.3 encompassed such rights as a member had under that clause.

The primary judge stated that the actuarial evidence shows that cl A11.3 does something “slightly artificial” for a defined benefits fund because it proceeds on the assumption that there is a reserve value. However, he said that it was true to say that reserves are held in respect of a member because they can be defined, in an accounting sense, as “amounts representing the actuarial probability that such member’s contingent entitlements will become vested entitlements over the course of time”. He stated that cl A11.3 “treats this accounting reserve value as notionally representing a part of the Fund securing a member’s future entitlements … and in the short term before the member can call for those entitlements, as the available resource for the exercise of the clause A 11.3 discretion”.

His Honour then concluded that it was not difficult to describe the benefit conferred by cl A11.3 as a benefit accrued in respect of any member and something which accrues in an accounting sense as “the member’s service changes”. He stated that nothing which appeared elsewhere in the deed was inconsistent with that conclusion. His Honour concluded that the amendment to Part B of cl A11.1 (to which I referred above at [16]) did not provide an equivalent benefit to that provided by the former cl A11.3. He also considered that the augmentation rule (see above at [16]) did not provide an equivalent benefit as a trustee could only act under that rule at the direction of an employer.

His Honour concluded that the deletion of cl A11.3 disadvantaged members in three respects. First, before the December 1996 amendments, the Old Colonial Fund contained both cl A11.3 and the augmentation rule; the trustee would exercise its discretion under cl A11.3 on the basis it was additional to the augmentation rule. Second, under cl A11.3 the trustee was required to give consideration to a member’s request for a benefit. He stated that this was better for a member as the company may not decide to give a direction under the augmentation rule and the company could act in its own interest in deciding whether or not to give a direction. Third, the trustee would never have to seek funds from the company because any payment would always be covered by the reserves “held in the Fund in respect of such member”.

The primary judge concluded that, in those circumstances, the power of amendment contained in cl 33 of the Old Colonial Fund could not be used to delete cl A11.3. His Honour concluded that the words in parenthesis in cl 33.2, “the value of the benefits accrued being such amount as the Trustees, after considering the advice of the Actuary, determine has accrued”, show that the trustee was required to obtain the advice of the appointed actuary before deciding whether or not the amendment would detrimentally affect those benefits. He said that such an investigation would have revealed that there were members, such as Mr Beck, who had accrued benefits “in the form of reserves held in the Fund on account of the probability that they would in due course obtain vested entitlements to pensions”. In those circumstances, his Honour concluded that the cl 33.2 power could not be exercised without an actuarial opinion and that the discretion miscarried.

The primary judge held that cl 33.3 did not apply as the anti-discrimination legislation referred to by the solicitor for the trustee (see above at [17]) was not a law “governing or regulating the operation or maintenance of superannuation funds”.

In dealing with the question of whether the trustee contravened s 52(2)(c) of the SIS Act in resolving to make the amendment, the primary judge noted that it was common ground that the s 52(2)(c) covenant did not expand the general law. The primary judge concluded that removal of cl A11.3 was not in the best interests of the beneficiaries as it took away rights, which Mr Beck and other members had, to consideration for discretionary benefits.

The primary judge also concluded that the deletion of cl A11.3 from the Old Colonial Fund rules contravened reg 13.16(1) of the SIS Regulations. He pointed to the fact that the regulation declares that what must not be adversely affected is a beneficiary’s right or claim to accrued benefits and the amount of those benefits. He said that a right to accrued benefits encompasses a presently vested right in possession. He stated, however, the addition of the word “claim” in reg 13.16(1) “weakens any limitation on the accrued benefits to the present time”. Referring to the expression “the amount of benefits”, he said that even if the right to make future claims is not impaired, the amount of such claims must also not be impaired. He said the “amount”, in the sense of their “quantity or extent” and in the sense of their “full effect, value or import”, includes that a characteristic of the benefits is that the accounting accrual that represents them may, in certain circumstances, be able to be engaged before the age of 55.

The primary judge also placed reliance on the definition of “accrued benefits” in reg 9.27 of the SIS Regulations. He stated that “Division 9.5 provides a regime for the actuarial reporting upon defined benefits funds that can be assumed when reg 13.16 is being applied”. His Honour presumably was referring to the fact that reg 13.16 could apply to defined benefit funds. He referred to the requirement in Div 9.5 that the actuary consider the position of the fund as at valuation date and the likely position of the fund in the next three years. He stated, referring to the definition of “accrued benefit” in reg 9.27, that the value of liabilities of a defined benefit scheme include all benefits that may become payable in the future but which, as yet, have not yet become payable. He stated they would include future potential benefit entitlements. He stated that if “accrued benefit” did not have the same meaning in reg 13.16(1), the odd consequence would follow that the trustee could amend the governing rules so as to adversely affect the amount of a beneficiary’s potential entitlements even though the purpose of the report was to ensure the solvency of the fund on the basis of those entitlements. He said, in those circumstances, “accrued benefits” in reg 13.16 should be construed so as to prohibit adverse alteration of potential entitlements claims or adverse alteration of the amounts of such claims.

His Honour distinguished the authorities cited by CBA in support of the contrary conclusion. He stated that in Auspine Staff Superannuation Pty Ltd v Henderson [2006] FCA 1281 (Auspine), there was no argument about the interplay of reg 9.27 and reg 13.16 as the discretionary provision in Auspine was unconfined and not limited to the amount of the members’ reserves which, the primary judge concluded, was the case in respect of cl A11.3. He stated that Asgard Capital Management Ltd v Maher [2003] FCAFC 156; 131 FCR 196 (Asgard) was not concerned with a trustee’s discretion to make payments to beneficiaries, but with the construction of reg 6.22 of the SIS Regulations, which prohibits members’ benefits in a regulated superannuation fund being cashed in favour of a person other than a member. He stated that what was said by Branson J in Employers First v Tolhurst Capital Limited [2005] FCA 616; 143 FCR 356 at [56]-[58] supported his construction.

In dealing with the effect of the contravention of the deed and the legislative provisions, the primary judge found that compliance with cl 33.2 and the relevant requirements were conditions precedent to the power to amend. In those circumstances, he concluded that the amendment was invalid. He stated that Mr Beck was entitled to declaratory relief to this effect and that, subject to the estoppel case, Mr Beck’s request for a cl A11.3 benefit should be remitted to CBOSC for further consideration. He stated that CBOSC could take into account his findings on the estoppel case in determining whether or not to grant a benefit.

In relation to estoppel, the primary judge noted that Mr Beck’s contention was that CBA was estopped from denying its approval to CBOSC’s exercise of discretion under cl A11.3 and that Mr Beck was entitled to a pension.

The primary judge noted that Mr Beck’s case was that, as a result of the statements made to him by Mr Mulcahy and Mr Cupper, to which I have referred above at [20], he assumed or expected CBA would pay the reserve which was held on his behalf if he called for it in the future. His Honour held that this assumption or expectation could not be inferred from the words used by either Mr Mulcahy or Mr Cupper.

However, his Honour concluded that the words led Mr Beck to hold a closely related assumption or expectation. His Honour expressed the assumption in the following terms (J346):

The primary judge stated that what occurred during the restaurant conversation in 2001 strengthened the assumption or expectation. He said Mr Mulcahy and Mr Cupper asked for a commitment in respect to Mr Beck’s relationship with the bank. He concluded that, although it was not expressly stated, CBA was offering an equivalent commitment. He said it was repugnant to that request that CBA could give six months’ notice, if and when it suited them.

His Honour stated the representations were sufficiently clear to ground an estoppel “in the context of the high level of expertise that Mr Beck and Mr Mulcahy were dealing with one another about Mr Beck’s superannuation future”. He stated that the circumstances strongly suggested that CBA induced Mr Beck to adopt the assumption or expectation he referred to and that Mr Beck relied upon it in taking employment with CBA and not exploring other options.

The primary judge found that CBA intended that Mr Beck would rely on the assumption or representation induced by its conduct, noting that Mr Mulcahy described Mr Beck as “a key keep” and stating that it was consistent with Mr Mulcahy and Mr Cupper’s conduct in 2001.

His Honour stated that the relevant detriment which made the estoppel enforceable was that which the party asserting the estoppel would suffer as a result of his or her original change of position. He described the relevant detriment as one that the parties’ action or inaction will bring about if the assumption is not fulfilled. He said the detriment in the present case was Mr Beck’s reliance on the promise in not making any arrangement for his pension future other than committing himself to CBA.

In the circumstances, the primary judge made orders effectively declaring that at all times Div CH of the OSF included a power of appointment to the effect of cl A11.3 and ordering that CBOSC give due consideration to Mr Beck’s application for a benefit under that rule. He further declared that CBA was estopped from denying that Mr Beck was entitled to an accrued pension when he attained the age of 55. On this basis, CBA was obliged to provide him with an age 55 pension, to the extent he did not receive a benefit in that amount as a consequence of his claim under cl A11.3.

In relation to costs, the primary judge concluded that Mr Beck’s claim, so far as it related to the proper construction of cl 33 and the application of the SIS Act and SIS Regulation, was in the nature of a construction suit. In the circumstances he ordered that CBA pay 40% of Mr Beck’s costs on an indemnity basis and the balance on the ordinary basis.

The appellants challenge each of the conclusions of the primary judge to which I have referred above. It is convenient to deal with them separately.

The appellants emphasised three features of the early retirement benefits rule contained in cl A11.3. First, there were three conditions to its exercise, namely that it only applied to persons who were not entitled to any other benefit from the fund, that exceptional circumstances must exist and that usually, the member must have had a long period of service. Second, even if the pre-conditions were satisfied, there was no entitlement to the benefit, rather, it was a matter for the trustee’s discretion. Third, it could not be exercised by the trustee unilaterally, but only with the approval of the company.

The appellants submitted that in those circumstances, the finding that Mr Beck, at the time of the amendment, had a right to consideration for an early retirement benefit was plainly wrong as he remained in the employ of the company and no occasion to give consideration to that question had arisen.

Further, it was submitted that the primary judge erred in concluding that any benefit was an accrued benefit. The appellants submitted that accrual was equivalent to vesting in ordinary trust law. They submitted that a person who may qualify in the future to be the object of a general discretion to make a payment in an undefined amount does not have an accrued benefit, rather, their position can be no better than having a right to be considered or a mere expectancy.

The appellants submitted that this conclusion was consistent with Auspine where the Court, in dealing with reg 13.16(1), stated at [47] that on no view could a possibility that the trustee might make a discretionary payment in favour of a member in excess of his entitlement be regarded as an accrued benefit.

The appellants submitted the primary judge’s conclusion was also inconsistent with Asgard, where the Full Court held that an accrued benefit for the purpose of cl 13.16 was a benefit in which the beneficiary has an absolute interest.

The appellants also submitted that their submissions were supported by cases dealing with distributions of surplus, namely, Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 (Lock), Hockin v Bank of British Columbia (1990) 46 BCLR (2d) 382 (Hockin) and the decision of Hedigan J in Gas and Fuel Corporation of Victoria v Fitzmaurice (1991) 22 ATR 10 (Fitzmaurice).

The appellants submitted that its contentions were supported by the fact that cl 33.2 spoke of “the value of benefits accrued” and the trustee being able to “determine” the “amount” of such benefits. They submitted the language of “value” and “amount” is inconsistent with the conclusion of the primary judge that a discretionary right to be considered was an accrued benefit.

The appellants submitted that the primary judge erred in concluding that the benefit could properly be described as an accrued benefit because, in an accounting sense, it does accrue as the funds available to meet the benefit enlarge. They submitted that that construction was inconsistent with the principles and authorities on which they relied. The appellants submitted the reliance by the primary judge on Wilson v Metro Goldwyn Mayer (1980) 18 NSWLR 730 was misplaced. That case concerned an amendment power that had a proviso that it could not be exercised if it prejudiced “any benefit secured by contributions”. They pointed out that the words “accrue” and “accrued” did not appear in the relevant provision.

The appellants also contended that the primary judge erred in his conclusion that the obtaining of an actuary’s report was a necessary precondition to the exercise of discretion under cl 33. They submitted that the finding was inconsistent with the language of cl 33.2, which does not refer to obtaining the advice of the designated actuary to determine whether accrued benefits were detrimentally affected but rather, to determine the value of such benefits. They submitted the general amendment power in cl 33.1 should not be read as subject to such a proviso. They submitted it would not be a sensible construction of cl 33.1 and cl 33.2, nor a sensible use of trust funds, for the trustee to be compelled to seek actuarial advice even when the amendments were not capable of affecting accrued benefits.

The appellants submitted that it was not correct to say that, in light of the decision in Finch v Telstra Super Pty Ltd [2010] HCA 36; 242 CLR 254 (Finch), cl A11.3 was not properly to be regarded as a discretionary power. They pointed to the difference between that clause and the total and permanent disablement provision under consideration in Finch. In particular, it was pointed out that, unlike the discretionary power in cl A11.3, the trustee in Finch had a duty to distribute to those members who qualified as totally and permanently disabled. They pointed out, in addition, that unlike the rule in Finch, cl A11.3 did not give a right to a defined benefit and a duty to pay it on a specified event occurring. Senior counsel for the appellants pointed out that even if the trustee had formed the view that there were exceptional circumstances for the purposes of cl A11.3, it did not follow that a benefit or a benefit in a particular amount need be paid.

Senior counsel for the appellants submitted that neither a person in employment aged less than 55, nor one in employment beyond that age, was entitled to be considered for a benefit under cl A11.3. He submitted that that could not be overcome by calling the benefit “contingent”. He submitted that there could be no accrued right until the person in question left employment.

Senior counsel for the appellant, referring to Kennon v Spry [2008] HCA 56; 238 CLR 366 at [161], submitted that Mr Beck was in no better a position than being the object of a bare power of appointment.

Mr Beck submitted that, having regard to the reasoning in Finch, the right to due administration of the early retirement benefit rule was a benefit which had accrued to him at the time the rule was removed. The respondent submitted that Finch was of particular importance in that it indicated the true nature of the right of a member of a superannuation fund to the grant of a benefit defined in terms which involved a discretion in the trustee. He submitted that the critical concept which emerged from Finch was that even though the grant of a benefit was couched in the language of discretion, such provisions do not constitute discretionary powers in relation to which members are to be regarded as mere objects of the power. He submitted that the existence of the duty in the trustee has the consequence that the members have a beneficial interest, albeit subject to contingencies. He submitted that that interest is something which is valuable and which can be enforced.

In those circumstances, Mr Beck submitted that a benefit had accrued in his favour, notwithstanding that the precise form and quantum of his beneficial interest is contingent on an event which has not happened.

Mr Beck submitted that in Finch, the Court emphasised the fact that benefits under employees’ superannuation schemes are part of the remuneration of employees and, in those circumstances, the legitimate expectation of beneficiaries that decisions will be soundly taken are high.

Mr Beck stated that, in considering whether the right to consideration for an early retirement benefit had accrued, the question is whether the right to consideration is itself a benefit. He said the fact that at the time of the amendment no occasion for consideration of whether he should be given a benefit had arisen was irrelevant because all members of the fund had the right to due consideration.

Mr Beck submitted the concept of accrual is not related to the concept of vesting but relates to accumulation and is apt to describe a beneficial interest which is contingent as well as one which has become absolute or vested. He submitted that the authorities on which the appellant relied were either distinguishable or no longer good law in light of Finch.

In relation to Auspine, Mr Beck adopted the primary judge’s reasoning to which I have referred above at [54] and submitted that the Court did not turn its mind to the definition of accrued benefit in reg 13.16(1) or a proviso equivalent to cl 33.2. Alternatively, he submitted that the decision was inconsistent with Finch and should not be followed.

So far as Asgard was concerned, Mr Beck submitted that the meaning of the word “accrued” was not in issue and the Full Court was unlikely to have opined on the important question of its meaning within the confines of one sentence.

Mr Beck submitted that neither Lock nor Hockin supported the proposition that amendments which affect the discretionary distribution of surplus assets to beneficiaries did not alter accrued benefits. He pointed out that Hockin was disapproved by the Supreme Court of Canada in Schmidt v Air Products of Canada Ltd (1994) 115 DLR (4th) 631 (Schmidt) and subsequently overruled by the British Columbia Court of Appeal Hockin v Bank of British Columbia (1995) 123 DLR (4th) 538. Mr Beck also pointed out that in Lock, there was no claim that the beneficiaries had an accrued right to the surplus in the fund the subject of the proceedings. Similarly, he submitted that the word “accrued” in the context of a provision such as cl 33.2 was not considered in Fitzmaurice.

Mr Beck submitted that the word “accrued” should be given its ordinary and natural meaning. He submitted his Honour’s construction (see above at [47]) was correct and consistent with authority. He also submitted the primary judge was correct in concluding that the failure to obtain the advice of an actuary on the question of the value of the benefit accrued is independently fatal to the amendment.

Senior counsel for Mr Beck submitted that regardless of whether the deletion of cl A11.3 had a detrimental effect on the value of benefits accrued, the failure to obtain an actuary’s opinion was a separate failure. He submitted that what was relevant was “the affected population” as at the date of the amendment and that it was necessary for the actuary to inform the board of the trustee who was affected and how such persons were affected.

Notwithstanding, senior counsel for Mr Beck acknowledged that the threshold point in the appeal was whether every member of the fund who had not reached the age of 55 had an accrued benefit under cl A11.3. He submitted that a benefit was a right or parcel of rights which either confers an absolute or conditional entitlement to be paid money potentially on satisfaction of any conditions which need to be satisfied. He submitted that a member of a fund has a right to due administration from the day he or she joins the fund.

It is well accepted that superannuation funds are different in nature from traditional trusts. As Waddell CJ in Eq pointed out in Lock at 601-602, they are based upon a contract between the employer, the trustee and employees pursuant to which both the employer and the employees contribute to the fund to provide defined benefits. He further noted, citing Mettoy Pension Trustees Ltd v Evans [1990] 1 WLR 1587 at 1610, that the construction of the documents constituting the fund should be practical and purposive.

In Air Jamaica Ltd v Carlton [1991] 1 WLR 1399, the Privy Council described the nature of the rights of a member of a superannuation scheme in the following terms (at 1407):

The particular nature of such arrangements was emphasised by the High Court in Finch. The Court explained that superannuation is not a matter of mere bounty as, in large measure, employees have exchanged value for the benefits conferred by the deed and that furthermore, superannuation is a matter of public significance: at [33]-[34]. In that context, the Court concluded that the decisions of superannuation trustees are not likely to be largely immune from judicial control without clear contrary language: at [36].

In the present case, Mr Beck submitted that the effect of the decision in Finch was that the power to give the additional benefit in cl A11.3 could not be described as discretionary. He relied in particular on the following passages from the judgment:

However, the nature of the benefit under consideration in Finch must be contrasted with the nature of the benefit said to be conferred by cl A11.3. As was pointed out in Finch, the trustee in that case had a duty to distribute to those who fell within the definition of total and permanent disablement and not to distribute to those who did not fall within the definition. By contrast, under cl A11.3, the trustee had to determine whether the service of the person in question was exceptional and, if so, whether a benefit should be conferred and in what amount. Even then, the benefit could not be given without the consent of the company.

Whilst it may be correct that a person who retired before attaining the age of 55 years may be entitled to consideration for such a benefit, he or she has no proprietary interest in the assets out of which the benefit is to be paid, but only a mere expectancy or hope that the power will be exercised in his or her favour: see Kennon v Spry at [160].

The primary judge seemed to suggest that for some reason, the reserves held in respect of a member form part of his or her entitlement to the fund. As was stated in the evidence, the reserves are a prudential financial provision. The members have no proprietary interest in such reserves either under cl A11.3 or otherwise. Their right is to receive the benefit provided for under the deed, which may be greater or less than the provision made by the trustee for its contingent liability.

In the case of cl A11.3, any benefit is at the discretion of the trustee and the company and whilst the quantum of such a benefit is capped at the level of reserves, any benefit given may be less than that amount. The position in that context may be contrasted with cl A11.1 which gives a member retiring prior to the age of 55 years a right to receive a specific amount.

Further, in the case of Mr Beck, the benefit had not accrued. Mr Beck had not retired at the time of the amendment and had no right at that point of time to be considered for an early retirement benefit. In considering the position of a member of a superannuation fund prior to retirement, the High Court in Macoun v Federal Commissioner of Taxation [2015] HCA 44; 90 ALJR 93 (Macoun) made the following remarks (citing Federal Commissioner of Taxation v James Flood Pty Ltd [1953] HCA 65; 88 CLR 492 at 507-508):

In my opinion, what was said in that passage is apposite to the present case. It is not necessary to determine whether or not a person who has become entitled to a defined benefit contingent only upon retirement (such as an employee who has attained the age of 55 years) has an accrued benefit within the meaning of cl 33. However, in my opinion, an employee in the position of Mr Beck did not have such an accrued benefit at that time.

In written submissions filed at the direction of the Court after the hearing, Mr Beck, again referring to Finch, contended that the reasoning in Macoun demonstrates that accrued benefit in reg 13.16 should be properly construed to include “inchoate rights in the process of accrual”. He submitted that once it is appreciated that the relevant right is in the process of accrual, the word “accrued” in reg 13.16(1) and in cl 33.3 of the rules of the Old Colonial Fund could only be taken to mean rights which are growing or building up as distinct from rights finally formed or vested.

Mr Beck also referred to statements made by the High Court in Kennon v Spry at [75] and [125] to the effect that the right of a residuary legatee or a member of a superannuation fund to due administration of the trust did not depend on the existence of any fixed or transmissible right in the fund: see also CPT Custodians Pty Ltd v Commissioner of State Revenue of the State of Victoria [2005] HCA 53; 224 CLR 98 at [17]; Schmidt v Rosewood Trust Ltd [2003] UKPC 26; 2 AC 709 at 729-731 [50]-[55].

I am unable to accept this submission for three reasons. First, I have already pointed out the differences between the right of the beneficiary in Finch to have his claim for total and permanent disablement properly considered and the position in the present case and why Finch does not lead to the conclusion that the benefit asserted in the present case was an accrued benefit: see [93]-[95] above.

Second, Mr Beck appears to accept that any benefit arising under cl A11.3 was properly described as an inchoate right in the process of accrual. Assuming in Mr Beck’s favour that a possibility of a payment at the trustee’s and the company’s discretion, if he retired before the age of 55, could properly be described as an inchoate right in the process of accrual, the difficulty is that reg 13.16 and cl 33.3 of the rules of the Old Colonial Fund each speak of accrued benefits. An inchoate right in the process of accrual is not an accrued benefit.

Third, it is undoubtedly correct that Mr Beck, along with other members of the fund, had a right to due administration. That does not mean that any potential benefit was an accrued benefit. If in fact the removal of cl A11.3 was in breach of the trustee’s duty at general law, then Mr Beck would be entitled to succeed in a claim against the trustee for such breach. However, for the reasons set out below at [135]-[139], I do not consider there was a breach in the present case.

The conclusion I have reached is consistent with authority. In Asgard, the Full Court stated that an accrued benefit was a benefit in which a person has an absolute interest. Although, as Mr Beck submitted, it is correct that the question of what constitutes an accrued benefit must be considered in the context of the deed itself, the decision does provide some support for the conclusion which I have reached.

Auspine concerned an employee whose claim for a total and permanent disablement benefit had been disallowed. The employee sought the exercise by the trustee of a discretion under r 4.7, which had been removed from the rules of the fund prior to the claim being made. The rule was in the following terms:

Jessup J held that the removal of the rule did not contravene regulation 13.1.6(1). He made the following remarks at [47]:

The primary judge distinguished this decision first on the basis that the discretion was unconfined and second, because there was no argument about the interplay of reg 9.27 and reg 3.16. With respect to His Honour, it does not seem to me of significance that the discretion was unconfined as distinct from being capped at the limit of reserves. So far as reg 9.27 is concerned, there seems to me to be two difficulties in His Honour’s reasoning. First, reg 9.27 was expressed in terms only to apply to Div 9.5 of the SIS Regulation. Second, the purpose of that division was to lay down requirements for the content of actuaries’ reports including, in particular, statement of the actuaries’ opinion of whether, at the valuation date, the amount in the fund was adequate to meet the value of liabilities in the fund in respect of accrued benefits: reg 9.31(2) of the SIS Regulation (as in force at the relevant time). It is entirely consistent with that requirement that accrued benefits extend to benefits to which a member has a potential entitlement. It does not follow that that is the meaning of the expression where it is contained in the deed or, for that matter, in reg 13.16.

Whilst it is true, as Mr Beck submitted, that Hockin was effectively overruled by the Supreme Court of Canada in Schmidt, I do not think that cases dealing with the distribution of surplus funds are of particular assistance in the present case. In Schmidt, Cory J held that any surplus held after payment of defined benefits was held on trust for employees and the fund deed could not be amended to provide that the surplus reverted to the employer. His Lordship stated his reasons as follows at 665-666:

The reasoning, in my view, goes no further than supporting the proposition that members of the fund had the right to due administration and that any surplus on termination cannot be used for a purpose foreign to the trust. His Lordship explained that during the operation of the trust, the surplus exists only on paper resulting from actuarial calculations and the employees can claim no entitlement to it because it is not definite. This seems to me to compel the conclusion that any so called “right” to reserves is not an accrued benefit.

In what might be described as a subsidiary point, Mr Beck submitted that an actuary’s report was a precondition to the exercise of the power under cl 33.

I do not think that that is correct. Clause 33.1 contains the relevant amendment power. The proviso in cl 33.2 only applies when the value of accrued benefits is detrimentally affected. Once it is concluded the amendment in question does not affect accrued benefits, there was no reason to require an actuary to make any determination of value.

In these circumstances, the primary judge, in my respectful submission, erred in determining that the amendment affected accrued benefits.

The appellants submitted that whilst the word “governing” in cl 33.3 may only pick up laws directed to superannuation funds, the word “regulating” must go further and bring in all laws that apply to or affect the operation or maintenance of such funds, whether or not they can be described as governing.

The appellants also submitted that the judge read the words “laws governing or regulating” narrowly on the footing they were “bracketed with the Relevant Requirements”. They submitted the reference to relevant requirements compels a wider construction because it makes laws “governing or regulating” additional to the relevant requirements. They pointed to the fact that the primary judge had made unchallenged findings that the amendments were made for the purpose of ensuring that the rules of the fund complied with the relevant anti-discrimination legislation.

Senior counsel for the appellants submitted that what cl 33.3 is referring to is amendment to ensure conformity with the law. He submitted it was absurd to suppose that an amendment can be made to deal with a legislative provision specifically directed to superannuation funds but cannot be done so as to ensure compliance with a law that catches superannuation funds as well as other persons.

Mr Beck submitted that the appellants’ construction produced the result that any form of amendments considered necessary or desirable to achieve compliance with a statutory provision could override the protection afforded to accrued benefits. He submitted there was no relevant connection between putting an end to age discrimination and taking away accrued rights. Further, he submitted the proviso to cl 33.2, contained in cl 33.3, did not apply to reg 13.16, which, without a similar proviso, was sufficient to invalidate the amendment.

Senior counsel for Mr Beck submitted that the relevant requirements was not a closed list, rather, the legislation to which cl 33.2 directed itself was legislation which governed or regulated the operation or maintenance of superannuation funds in the same way as the relevant requirements.

Having regard to my conclusion that the amending deed did not affect the value of accrued benefits, this will not impact on the result of the appeal.

Little attention was paid either in the written submissions or in argument to the manner in which cl A11.3 was said to infringe the anti-discrimination legislation.

In a memorandum of 11 December 1996, the trustee’s then in-house lawyer, Ms Horan, explained that the exercise of discretionary powers can infringe the legislative requirements and that no discretionary power should be exercised in a manner which would discriminate on the grounds of sex, age or marital status “unless it can be justified on actuarial, statistical or other data or is otherwise considered reasonable”.

In her memorandum, Ms Horan also expressed the view that the amendment did not detrimentally affect accrued benefits.

A summary of the amending deed prepared by Ms Horan stated that the bulk of the alterations required to remove discrimination applied to Div 3 of the deed (of which cl A11.3 formed part). She suggested the preferable course was to delete Div 3 and replace it with a non-discriminatory alternative. In this regard, she made the following comments:

The memorandum does not make it clear that cl A11.3 itself infringed the provisions of the Victorian anti-discrimination legislation. I am of the opinion, in those circumstances, that if the amendment in fact affected accrued benefits, it could not be justified on the ground that it was necessary to comply with the anti-discrimination legislation.

It seems to me that legislation “governing or regulating” the operation of superannuation funds refers to legislation that is either directed to or specifically impacts on the operation or maintenance of the funds. Clause 33.3 recognises that there is legislation other than that referred to in the relevant requirements which may have this effect. However, it seems to me that for cl 33.3 to apply, it would need to be demonstrated that the amendment was necessary because the particular provision the subject of the amendment, either in its form or in the manner in which it was required to operate, contravened the legislation in question.

In the present case, it has not been demonstrated that cl A11.3, either in its form or in the manner in which it was required to operate, contravened the Victorian anti-discrimination legislation. In these circumstances, this ground of appeal has not been made out.

The appellants submitted that the trustee’s duty to act in the best interests of the beneficiaries was not an unqualified duty always to do what is financially best for a member or group of members. It pointed out that if that was the case, it would always be necessary for a trustee to ensure its discretion under cl A11.3 be exercised in favour of the member in question. They submitted that an amendment does not fail to be in the best interests simply because it removes a beneficial discretion which is only to be exercised in exceptional circumstances.

The appellants pointed out that the primary judge did not find that there was not an objectively reasonable basis to hold that the removal was necessary to comply with anti-discrimination legislation. They submitted that if this was the case, compliance with the anti-discrimination legislation was in the best interests of the members of the fund.

In response to Mr Beck’s submission that this was a new argument, the appellants noted that submissions were made below that cl A11.3 was deleted for the purpose of complying with anti-discrimination legislation. They also submitted that Mr Beck’s submission ignored the fact that the onus was on Mr Beck to establish why the amendment was not in the best interests of the fund where his Honour found it was made for the purpose of removing unlawfully discriminatory provisions and where the trustee had received legal advice that the provisions were likely to offend that legislation and did not in fact detrimentally affect accrued benefits.

The appellants submitted that the proposition put by Mr Beck that even if cl 33.3 was satisfied, that would not prevent invalidity for contravention of s 52(2)(c) and reg 13.16(1), was not put at the trial as a separate basis for invalidity but rather, as a failure to comply with the relevant requirements. They submitted there was no notice of contention on this issue.

The appellants also referred to the provision of s 55(2) of the SIS Act, which provided that non-compliance did not result in the invalidity of a transaction.

Mr Beck submitted the primary judge was correct in concluding that the removal of cl A11.3 was not in the best interests of the fund because it took away both Mr Beck’s and other members’ rights to consideration for a discretionary benefit.

Mr Beck submitted that it was not put in the Court below that if the removal of cl A11.3 was warranted on the basis that it was necessary or desirable to comply with the law, it necessarily followed it was in the best interests of members as a whole. First, he submitted this argument could not be addressed without actuarial opinion going to the number of affected members and the value of their interest. Second, he submitted that it could not be said on the existing evidence that the deletion was necessary to comply with the legislation. Somewhat surprisingly, it was submitted that this was because the trustee received advice from a solicitor, not an actuary. Third, Mr Beck submitted that nothing was advanced to show why it was necessary that the accrued rights be removed in the process of addressing compliance and finally, that to the extent the Victorian legislation required the removal of the provision whilst s 52(2)(c) of the SIS Act compelled its retention, the Commonwealth Act prevailed.

Senior counsel for Mr Beck submitted that there was no challenge to the proposition that the trustee breached its duty as trustee. With respect, this is incorrect. Ground 3 of the Notice of Appeal is in the following terms:

In that context, senior counsel for Mr Beck explained that the breach of duty at least involved making the amendment without obtaining the opinion of the actuary. He relied in particular on what was said by the primary judge (at J259) that the actuary’s report would show there were members, such as Mr Beck, who had accrued benefit in the form of reserves and the possibility of early access to those reserves.

Senior counsel for Mr Beck, referring to Finch, stated that regardless of whether what was taken away was a mere expectancy or a species of property, its removal deprived members such as Mr Beck of the right to consideration for such a benefit which, of itself, had to be contrary to the best interests of the members. He submitted the best interests of members are necessarily the best financial interests.

It was common ground between the parties, both on the appeal and in the Court below, that the covenants in s 52(2)(c) of the SIS Act did not expand the general law. It should be noted that there was no allegation that, in exercising its discretion to make the amendment, the trustee of the Old Colonial Fund contravened s 52(2)(b) of that Act. In Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; 282 ALR 167, Giles JA with whom Young and Whealy JJA agreed, stated that s 52(2)(c) does not materially add to the general law duty of the trustees to act in the best interests of the fund. He stated that, in dealing with the discretionary power, liability arises if the discretionary power is exercised improperly but otherwise it does not: at [121]. In Karger v Paul [1984] VR 161, McGarvie J stated that the exercise of a discretion by a trustee will not be reviewed if the discretion is exercised in good faith upon real or genuine consideration and in accordance with the purposes for which the discretion was conferred: at 163.

In Finch, the Court left open the application of Karger v Paul principles to superannuation funds: at [64]. However, it emphasised that so far as they may apply, the decision may be reviewable for want of properly informed consideration: at [66]. The importance of this matter in the context of superannuation funds was explained by Nettle JA in Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238; 36 VR 618 at [59] in the following terms (Redlich JA and Davies AJA agreeing):

In the present case, the trustee exercised the power of amendment on legal advice that the amendment had no effect on accrued benefits and that it was necessary to comply with the provisions of the Victorian anti-discrimination legislation. The explanation for the removal of cl A11.3 was given in that context.

In those circumstances, I do not think that it has been shown that the trustee failed to give proper consideration to whether or not the amendment was in the best interests of the beneficiaries. The fact that it may have taken away a possible right to confer a discretionary benefit on some members in the future does not, in my view, alter the position, particularly as the augmentation rule in cl 10.1 of the deed provided an alternative basis for providing such a benefit and in light of the explanation given for the change, namely the amendment to Part B of cl A11.1.

In reaching this conclusion, I am conscious of the fact that it has been commonly stated that the best interests of beneficiaries in a superannuation fund are normally their best financial interests: Cowan v Scargill [1985] Ch 270 at 287. Whether the amendment in the present case had any material effect on members’ financial interests is doubtful. However, it seems to me that the trustee gave proper consideration to the issue. There was no suggestion that it did not act in good faith and, in those circumstances, it seems to me that there was no contravention of either s 52(2)(c) or the general law. The trial judge, in my respectful submission, erred in finding such a contravention.

The appellants submitted that the primary judge erred in relying on reg 9.27, which was expressly provided to be applicable to Div 9.5 of the SIS Regulations.

The appellants submitted that even if the definition of “accrued benefits” in reg 9.27 was read into reg 13.16, removal of cl A11.3 did not affect the potential entitlement on account of the length of time the member has been a member of the fund on that date. They submitted a potential entitlement was one that a member has by length of service, subject to a particular contingency. They submitted that in the case of cl A11.3, termination of a member’s employment would not give rise to a potential entitlement but only to the exercise of a discretion that might be unfavourable and if favourable, would be for an indeterminate amount.

The appellants also submitted there was no relevant distinction between the present case and Auspine. They submitted the fact that the discretionary payment in the present case was capped, whilst in Auspine it was not, was a distinction without a difference.

The appellants also pointed out that cl 13.16 speaks of a “right” or “claim” to a benefit. They submitted that at the time of the amendment, Mr Beck did not have any such right or claim.

Mr Beck relied on his submissions on the first issue in respect of these grounds of appeal.

Above at [107], I indicated why I was of the view that reg 9.27 has no bearing on the meaning of the expression “accrued benefit” in reg 13.16. In my opinion, the expression has the same meaning as contained in cl 33.2 of the July 1996 deed. For the reasons given, the early retirement benefit was not an accrued benefit either for the purpose of the deed or reg 13.16. The primary judged erred in concluding to the contrary.

The appellants submitted that the effect of the equivalent rights provision in the July 1996 deed (see above at [37]-[38]), read with the relevant regulation, was that the Old Colonial Fund and the rights of its members could be transferred to a fund that conferred equivalent rights. They submitted that this operated as a restriction on the trustee and did not deem the new fund to contain such rights. They pointed out that Mr Beck disclaimed reliance on any breach of the equivalent rights provision.

The appellants submitted, contrary to what was contended by Mr Beck, that this submission was made in the Court below. It also submitted that the respondent’s submission that CBOSC breached its obligation to confer equivalent benefits should be rejected as Mr Beck did not contend below that there was any breach of that requirement. They further submitted that OSF did confer equivalent rights to the New Colonial Fund, pointing out that the benefit in cl A11.3 never formed part of the rules of the New Colonial Fund.

Senior counsel for the appellants submitted that the primary judge did not explain how, what he described as, “successor liability” operated to impose on the trust the term removed by an amendment by another trustee or without involvement of the present trustee and without account being taken of intervening interests.

Mr Beck submitted that, in advancing this proposition, CBOSC was seeking to rely on its own default to acquire the reserves of Mr Beck. He submitted the proposition was not put below and that, had it been put, the circumstances surrounding the transfers between successor trustees would have required investigation. He submitted that amalgamation does not terminate a trust if the parties contemplate a change of trustee. He also contended that the submission had no merit as equity regards as done that which ought to have been done and will not permit CBOSC to retain the fund other than on trust for members, including Mr Beck.

Senior counsel for Mr Beck described the right conferred by cl A11.3 as a right in rem, submitting “the obligation is annexed to the property and the obligation travels with the property”.

Contrary to Mr Beck’s submission, it seems to me that this issue was raised below. Paragraph 75 of the appellant’s opening submissions were in the following terms:

I have set out the definition of “successor fund” in the July 1996 deed and the SIS Regulations above at [37]-[38]. A successor fund must satisfy two requirements: first, the fund must confer equivalent rights and second, the trustee of the new fund must have agreed that the new fund will confer equivalent rights.

There is some force in Mr Beck’s contention that the matter was only faintly argued and no investigation of the circumstances of the transfer took place. However, the claim by Mr Beck in the Third Further Amended Statement of Claim to have the New Colonial Fund deed and the OSF deed rectified by the addition of a clause equivalent to cl A11.3 was denied.

As I indicated, the matter was raised in opening. Further, irrespective of any agreement between the trustees of the Old Colonial Fund and that of the New Colonial Fund, the fact is that the provision was not included in either the New Colonial Fund deed or the OSF deed. Mr Beck, apart from submitting that the point was not taken below and that the circumstances surrounding the transfer would need to be investigated, submitted first, that amalgamation does not terminate a trust where the parties contemplate a change of trustee. However, it does not seem to me in the present case there was an amalgamation of trusts, rather, the funds in the Old Colonial Fund were transferred to the New Colonial Fund with the members of the Old Colonial Fund having the rights and benefits conferred by the new fund. The fact that the new fund did not confer equivalent benefits may give rise to a claim against the trustee but it does not deem the new fund to contain provisions which it does not in fact have.

The second submission made by Mr Beck was that equity regards as done that which ought to have been done. Senior counsel, in elaborating that submission, submitted that the right to consideration was a right in rem attached to the property and travelling with the property.

There are two difficulties with this submission. First, it is difficult to see how a future right to be considered for a benefit can be described as a species of property. Further, even assuming in some way the Old Colonial Fund was impressed with an obligation to consider prospective pre-55 retirees for a benefit, there is nothing to suggest that the trustee of the New Colonial Fund, much less CBOSC, took with notice of that obligation. It follows that there was no basis for imposing on the trustees of those funds an obligation in the terms of cl A11.3. Indeed, in providing such a benefit contrary to the terms of the trust administered by them, they would be acting in breach of those trusts.

It follows this ground of appeal is made out.

The appellants submitted that, as pleaded, the alleged representations were first, that if Mr Beck joined CBA, he would retain his pension entitlements as they then existed under the New Colonial Fund and second, that if his employment was terminated before he attained the age of 55, he would be paid the reserve held in respect of him. The appellants submitted that the primary judge was correct in rejecting this claim.

The appellants submitted that an estoppel based on an assumption on the part of Mr Beck that CBA would not interfere with Mr Beck continuing to work until he reached the age of 55 (the no termination assumption) was neither pleaded nor argued. They submitted that the outcome was that, by representations that Mr Beck’s superannuation entitlement would continue to apply and that he would be better off accepting employment with CBA rather than taking redundancy at that time, CBA is estopped from denying that Mr Beck was entitled to be paid a pension when he attained the age of 55 and CBA was obliged to provide him with a pension based on him attaining that age, even though he did not work until that age and his contract did not give him that right.

The appellants submitted it was never part of Mr Beck’s case at trial that he had adopted the no termination assumption or relied on it in agreeing to join CBA in 2000. They submitted that in closing, Mr Beck indicated that the burden of the estoppel was that CBA was prevented from withholding its approval to a favourable exercise of the early retirement benefits rule in the event of termination before the age of 55.

The appellants submitted that if Mr Beck had advanced an estoppel case based on the no termination assumption, there would have been cross-examination to the effect that first, it was contrary to Mr Beck’s pleaded case in which he accepted that his employment could be terminated before he attained the age of 55 and second, that the no termination assumption was contrary to the terms and conditions of his employment.

So far as it was contended that par [96] of the Third Further Amended Statement of Claim raised the issue, the appellants submitted that par [96] formed no part of the estoppel claim but was pleaded in support of a separate unconscionability claim. They also submitted that the estoppel claim as pleaded was to the opposite effect to the claim now advanced and that the expectation pleaded in par [96] was not pleaded to have arisen from the undertaking but from different representations.

The appellants submitted that Mr Beck did not point to any written or oral submissions made in support of the no termination assumption.

The appellants also submitted that, irrespective of the failure to take the point in the Court below, the conclusion of the primary judge was not open as a matter of substance. They submitted there was no evidence that CBA encouraged Mr Beck to hold the no termination assumption. They submitted the general assurances given by Mr Mulcahy could not be said to amount to a representation sufficient to found the assumption. They pointed to Mr Beck’s evidence on this issue to which I have referred above at [20]. They submitted the effect of that evidence was that Mr Beck would get an accrued pension if he attained the age of 55 and would be paid his reserve if his employment was terminated before that time.

Senior counsel for the appellants submitted there was no evidence to suggest that any one from CBA was authorised to commit the bank to a particular person being free of the bank’s reorganisation of its staff from time to time. He referred also to the difficulty of maintaining an estoppel in the face of clear contractual terms to the contrary.

Mr Beck contended the estoppel case found by the primary judge was expressly pleaded in par [96] and also made clear in particular (i) to par [83] of the Third Further Amended Statement of Claim. He also contended that it was incorrect to say that the estoppel case was not argued. He submitted the primary judge indicated this was the case. He referred to the remarks of the primary judge to the following effect:

Mr Beck submitted that the only point taken by the appellants at the trial was that the representations were not sufficiently clear to found an estoppel. He submitted the primary judge was correct in finding the representations were clear enough to ground the estoppel in light of the high level of expertise with which Mr Mulcahy and Mr Beck were dealing with each other (see above at [60]). He submitted that a representation that a right to terminate would not be exercised is not inconsistent with the existence of that right but is rather a necessary precondition to the making of such a representation.

In contending that the point was raised, senior counsel for Mr Beck pointed to pars [94]-[95] of Mr Beck’s opening written submissions in the Court below.

In considering this issue, it is important to have regard to the case pleaded. The estoppel case pleaded was contained in pars [78]-[87] of the Third Further Amended Statement of Claim. These paragraphs were in the following form:

Under the heading “The termination” in the Third Further Amended Statement of Claim, a number of alternative claims were made. Of particular relevance are pars [96] and [97]:

In his note on estoppel provided to the primary judge at the hearing, counsel for Mr Beck identified the estoppel as that pleaded in par [87] of the Third Further Amended Statement of Claim and the basis for it in pars [78]-[86]. The note continued:

However, in his opening submissions, Mr Beck’s estoppel case was put somewhat more widely:

The primary judge rejected an estoppel based on an expectation that CBA would pay the reserves held on his behalf in the New Colonial Fund if he called for it in the future or if his employment was terminated prior to him attaining the age of 55. That was the basis of the estoppel pleaded in par [87] of the Third Further Amended Statement of Claim.

The ultimate conclusion reached by the primary judge finds some expression, however, in par [96] of the Third Further Amended Statement of Claim, particularly par [96(d)].

I am of the view, albeit with some hesitation, that the manner in which the case was conducted in the court below provided a sufficient basis for Mr Beck to argue that CBA was estopped from asserting an entitlement to terminate his employment prior to him attaining the age of 55 years as found by the primary judge: see above at [58]. However, I do not think his Honour was correct in reaching his conclusion.

In concluding that the conduct of the relevant bank officers, Mr Mulcahy and Mr Cupper, induced Mr Beck to adopt the assumption that he would not be terminated until he attained the age of 55, his Honour relied on the conversation which took place prior to Mr Beck accepting employment with CBA. The difficulty with that finding is that Mr Beck neither asked for, nor was told, that to protect his pension he would not be terminated until age 55. Such a statement would, of course, be quite inconsistent with the employment agreement entered into subsequently and, for that matter, the estoppel pleaded in par [87].

It is well established that to ground a promissory estoppel, the representation said to give rise to it must be clear and reasonably understood by the person to whom it is addressed: Legione v Hately [1982] HCA 11: 152 CLR 406 at 435-436; Foran v Wight [1989] HCA 51; 168 CLR 385 at 411, 435-436. In the present case, neither Mr Mulcahy nor Mr Cupper made the representation contended for but rather, said that CBA would protect his pension rights going forward. Mr Beck contended he understood that to mean that CBA would pay him the reserve that was held on his behalf in the New Colonial Fund and that he would be paid his accrued pension or the reserve if he resigned. This is consistent with the particulars to par [83] of the Statement of Claim and what is pleaded in par [84]. There is no suggestion of the representation or assumption found by the primary judge.

It does not seem to me that what the primary judge described as a high level of expertise with which Mr Beck and Mr Mulcahy were dealing with each other about Mr Beck’s superannuation future assists. It is not entirely clear, with respect, what his Honour meant by the remarks, although he did add, somewhat obscurely, that the words “protect”, “enhance” and “pension” would have a precise meaning in a conversation with an actuary, the fact remains that all that was said by Mr Mulcahy was that he intended to protect whatever rights Mr Beck had. It did not amount to an undertaking to employ him until further rights accrued.

The primary judge also relied on the 2003 conversation as strengthening the representation. The statement by Mr Cupper or Mr Mulcahy, as recorded by Ms Beck, could not, in my opinion, be construed as a representation that the bank would not exercise its contractual right to terminate his employment if it considered it appropriate to do so.

I accept that Mr Beck laboured under the misapprehension that the New Colonial Fund rules contained an equivalent provision to cl A11.3. However, there is nothing to suggest that Mr Mulcahy knew that Mr Beck laboured under that belief or did anything to induce it.

In my opinion, the primary judge erred in concluding that CBA was estopped from denying that it would not exercise its rights to terminate Mr Beck’s contract of employment prior to him attaining the age of 55.

In these circumstances, it is not necessary to deal with the question which remains controversial, namely, whether the doctrine can operate to impose positive obligations rather than having a preclusionary effect: Saleh v Romanous [2010] NSWCA 274; 79 NSWLR 453 at [73]-[74]; DHJPM Pty Ltd v Blackthorn Resources Ltd [2011] NSWCA 348; 83 NSWLR 728 at [93]-[94].

The appellants submitted that the principle which led the primary judge to order indemnity costs had no application where Mr Beck was seeking to advance the construction argument only to advance his personal financial position and not acting in a representative capacity, and where he advanced a number of other grounds.

Mr Beck submitted that the order was appropriate. He submitted the question raised regarding the invalidity of the amendment was important in the administration of the trust and it may never have been squarely raised but for the proceedings.

Although this ground of appeal does not arise in light of my earlier conclusions, it is necessary to consider the appropriate costs order which should be made in circumstances where Mr Beck’s claim was unsuccessful.

Mr Beck sought to challenge an amendment to a trust deed made in 1996. There was nothing to suggest there were other former members who claimed to be affected in the manner in which he contended. In the circumstances, the proceedings, in my opinion, could not on any view be described as representative proceedings so as to make it appropriate that the former trustee, much less CBOSC, bear any part of the costs incurred by Mr Beck.

In the result I would make the following orders:

MACFARLAN JA: I agree with the orders proposed by Bathurst CJ and, subject to one matter, with his Honour’s reasons for judgment.

My qualification relates to the question of whether, in light of the manner in which Mr Beck’s case was conducted at first instance, it was open to the primary judge to find an estoppel on the basis that he did (Judgment [346] quoted in [58] above) and for Mr Beck to seek to support that finding on appeal.

On that issue, I agree with Gleeson JA that the finding was inconsistent with Mr Beck’s submissions to the primary judge. Whilst the finding reflected the allegations contained in para [96] of the Third Further Amended Statement of Claim (quoted in [171] above), that paragraph comprised part of Mr Beck’s unconscionability claim and, notably, was not relied upon by him in final address as relevant to his estoppel claim. His estoppel claim was expressly put upon the different basis pleaded elsewhere in the Third Further Amended Statement of Claim. Given that reliance by Mr Beck on an estoppel of the type found by the primary judge may have affected the course of evidence, particularly the nature and extent of cross-examination of Mr Beck, he should not be permitted to rely on it on appeal.

I add the following observations in relation to Bathurst CJ’s reasoning, with which I agree, in relation to Ground 1 of the appeal.

Clause 33.2 of the “Old Colonial Fund” trust deed proscribed an amendment to it “whereby the value of the benefits accrued in respect of any Member prior to the effective date of the amendment is detrimentally affected” (emphasis added). The prohibition was subject to certain exceptions. The primary judge found that “Mr Beck’s right to consideration for a pre-55 discretionary benefit […] under clause A11.3 was itself a ‘benefit accrued in respect of’ him as [a] member within clause 33.2 of the Old Colonial Fund” (Judgment [217]). The appellants challenged this finding by Ground 1 of their appeal.

As Bathurst CJ points out ([97]), the High Court decision in Macoun v Federal Commissioner of Taxation indicates that Mr Beck did not at any time have any accrued right to a benefit under Clause A11.3. Just as the appellant in that case had “at best an inchoate rather than accrued right to a pension”, here Mr Beck did not have any accrued right to a benefit under cl A11.3, the word “benefits” in cl 33.2 clearly being a reference to entitlements afforded to members pursuant to the provisions of the Fund trust deed.

Description of Mr Beck’s right as one “to consideration for a pre-55 discretionary benefit […] under Clause A11.3” (Judgment [217]) does not advance his case. It may be accepted that by reason of his membership of the Fund, Mr Beck had “a right to be considered as a potential recipient” of a pre-55 discretionary benefit under cl A11.3 “and a right to have his interest protected by a court of equity” (Gartside v Inland Revenue Commissioners [1968] AC 553 at 617-8 per Lord Wilberforce; see also Kennon v Spry [2008] HCA 56; 238 CLR 366 at [161]). However, while a right of this type may in some circumstances have value, Mr Beck’s right, at its highest, merely enabled him to compel the due administration of the Fund by, for example, requiring the trustees to exercise their discretion properly. It was not a right to any “benefits” of the type to which cl 33.2 referred and its abrogation was not therefore prohibited by this clause.

GLEESON JA: I agree with the orders proposed by Bathurst CJ for the reasons given by his Honour save in relation to whether Mr Beck was entitled to rely upon the estoppel case, accepted by the primary judge.

The history of the pleadings and Mr Beck’s submissions with respect to the estoppel case are set out at [170]-[175] of the reasons of Bathurst CJ. In this Court, Mr Beck contended that the estoppel case found by the primary judge was expressly pleaded in par [96] and referred to in Particular (i) to par [83] of the third further amended statement of claim. The estoppel case pleaded in par [83] was rejected by the primary judge (at J [345]) and there is no notice of contention in this regard. Further, the appellants correctly pointed out that par [96] formed no part of the estoppel claim, but was pleaded in support of a separate unconscionability claim which was rejected by the primary judge.

That Mr Beck did not rely upon par [96] as part of the estoppel claim was made clear in Mr Beck’s closing submissions where it was stated in a summary note on the estoppel claim that the basis for the estoppel was pleaded in par [78]-[86] of the third further amended statement of claim. Nor did the oral closing submissions of Mr Beck seek to rely upon the no termination assumption pleaded in par [96] as part of the estoppel case. Senior counsel for Mr Beck confirmed before the primary judge that the summary note and the oral closing submissions encapsulated the way in which the estoppel case was advanced by Mr Beck.

In my view, Mr Beck cannot seek to support the primary judge’s finding in relation to the estoppel claim in a manner which departs from the way in which he advanced his case in closing submissions.

In any event, if (contrary to my view) Mr Beck was entitled to rely upon the no termination assumption as part of his estoppel case, I agree with Bathurst CJ, that the primary judge erred in concluding that the second appellant (CBA) was estopped from denying that it would not exercise its rights to terminate Mr Beck’s contract of employment prior to him attaining the age of 55.