Re AUSCOAL Superannuation Pty Ltd atf the Mine Superannuation Fund; Application for Judicial Advice

1. [1]

   By summons filed on 2 November 2023, the plaintiff, AUSCOAL Superannuation Pty Ltd (AUSCOAL or the Trustee), seeks the opinion, advice or direction of the Court under s 63 of the Trustee Act 1925 (NSW) on a number of questions concerning the administration and management of the Mine Superannuation Fund (Mine Super or the Fund) of which AUSCOAL is the trustee, and the interpretation of the trust deed that governs Mine Super (Trust Deed), as well as certain consequential and associated relief.

2. [2]

   As a result of exchanges between the Court and senior counsel during the course of the hearing, AUSCOAL filed an amended summons in court on 16 November 2023.

3. [3]

   The context in which AUSCOAL makes this application is a proposed merger between Mine Super and another superannuation fund, which I will call TWUSUPER, under a deed (SFT Deed) executed on 27 September 2023, between AUSCOAL and TWU Nominees Pty Ltd (TWU), the trustee of TWUSUPER. In short, the application arises out of concerns that, if the merged Fund or any part of it is terminated or wound up in circumstances where there is a deficit in available assets to meet the Fund’s obligations to members, the distributions to the present members of TWUSUPER will be reduced in favour of certain classes of members of Mine Super.

4. [4]

   As a result of the need for expedition in the determination of the application arising out of the timetable in the SFT Deed, the application was heard in the Duty List on 6, 9, 10, 13, 16 and 17 November 2023.

5. [5]

   AUSCOAL’s application has been supported by a number of affidavits made by its solicitor, Mark Albert Bland, and by a Statement of Facts filed on 2 November 2023 and a Supplementary Statement of Facts filed in court on 13 November 2023. AUSCOAL provided written submissions to the Court dated 1 November 2023, supplementary written submissions dated 16 November 2023, and further supplementary written submissions dated 17 November 2023. Counsel for AUSCOAL have provided a number of confidential opinions on the issues raised by the application.

6. [6]

   Upon reflection, after the completion of the hearing, the Court posed a number of questions to AUSCOAL’s solicitors on 20 November 2023. That prompted AUSCOAL to deliver further post-hearing written submissions dated 8 December 2023, together with a folder containing documents that supported those submissions.

7. [7]

   During the course of the hearing, and after its completion, the Court has made orders under the s 8(1) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) on the application of AUSCOAL, restricting the publication or disclosure of certain documents, on the basis that the information the subject of the orders consisted of the confidential opinions provided by counsel to AUSCOAL or confidential information relating to the affairs of Mine Super or TWUSUPER that was not required to be disclosed publicly for the purpose of explaining the reasons for the orders that the Court will make in these proceedings. In making those orders, I applied the principles considered in Application by NGS Super Pty Ltd atf NGS Super [2021] NSWSC 1694 (NGS Super) at [90]-[107] per Henry J; Application by SCS Super Pty Ltd atf Australian Catholic Superannuation and Retirement Fund [2022] NSWSC 686 (SCS Super) at [46]-[63] per Hallen J; and Energy Industries Superannuation Scheme Pty Ltd as trustee of the Energy Industries Superannuation Scheme Pool A and Pool B (trading as EISS Super) [2022] NSWSC 1202 (EISS Super) at [39]-[45] per Ball J.

8. [8]

   The judicial advice sought by AUSCOAL in this application depends upon complex legal and factual issues that arise out of the terms of the Trust Deed and the regulatory regime that governs the operation of superannuation funds such as Mine Super and TWUSUPER, which for convenience I will call the SIS legislation.

Australian Prudential Regulation Authority

1. [9]

   AUSCOAL has informed the Australian Prudential Regulation Authority (APRA) of the present application and engaged in communications with APRA during the course of and after the hearing. This led to APRA writing a letter to the solicitors for AUSCOAL dated 11 December 2023. In the letter, APRA consented to the letter being provided to this Court to assist with the current proceedings. APRA advised that it did not seek any confidentiality orders in relation to the content of the letter. APRA further advised that it did not wish to join the proceedings or assume the role of amicus curiae.

2. [10]

   APRA’s 11 December 2023 letter conveyed APRA’s views on a number of important questions that have arisen during the course of the hearing. The Court is grateful for APRA’s assistance; in particular because APRA’s expressed views reinforced a number of tentative conclusions that the Court had reached concerning the effect of certain difficult aspects of the SIS legislation.

3. [11]

   Furthermore, as will be explained in more detail below, Part 29 of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) contains provisions that empower APRA to modify the operation of certain provisions in the SIS Act and the Regulations made under that Act. On 18 December 2023, the Court received from the solicitors for AUSCOAL a draft modification declaration under s 332 of the SIS Act which, as the Court was advised by the solicitors, APRA “would consider making”, and which might, if made, resolve some difficulties that have arisen in the determination of AUSCOAL’s application for judicial advice. I will explain the effect of those modifications below.

4. [12]

   APRA has cooperated with the Court and AUSCOAL in relation to the determination of the present application. I infer that APRA would have advised the Court if it wished to oppose any aspect of the application.

Absence of notice to members of Mine Super

1. [13]

   AUSCOAL has not given notice of this application to the beneficiaries of Mine Super, and has sought the leave of the Court to prosecute its application without that leave being given.

2. [14]

   I am satisfied that it will be appropriate for the Court to determine AUSCOAL's application for judicial advice without the Court requiring AUSCOAL to give notice to the beneficiaries of Mine Super or making arrangements for any beneficiaries who wish to do so to participate in the application.

3. [15]

   Section 63 of the Trustee Act provides in subsection (4): "Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person". Part 55 Division 1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), which deals with the giving of judicial advice by the Court, does not require AUSCOAL to give notice of the application to the beneficiaries of the Trust.

4. [16]

   As will be seen, Mine Super has approximately 56,660 members. It would not be practicable for the Court to require AUSCOAL to give notice of this application to the beneficiaries of Mine Super in the expectation that there was any realistic possibility that beneficiaries could take an effective part in the proceedings. Requiring AUSCOAL to give notice of the application to beneficiaries would impose an unwarranted cost on the Fund.

5. [17]

   Furthermore, as the objective of the application is for AUSCOAL to receive judicial advice from the Court so that it will be protected from actions for breach of trust if it acts upon that advice, the orders that the Court will make will not finally determine the rights of beneficiaries under the Trust Deed.

6. [18]

   Although APRA is not subject to an obligation to intervene in the proceedings in the interests of beneficiaries, the fact that APRA has provided the response to the Court that has been referred to above will, in practical terms, provide some protection to the interests of beneficiaries.

7. [19]

   In taking this course, the Court has acted on the same basis as has been done in NGS Super at [54]-[56]; SCS Super at [31]-[35]; and EISS Super at [39]-[45].

Applications for judicial advice

1. [20]

   Relevantly, s 63 of the Trustee Act provides:

2. [21]

   In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar, the Diocesan Bishop of Macedonian Orthodox Dioceses of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (Macedonian Church case), the plurality considered the application of s 63 of the Trustee Act at [54]-[76]. Their Honours held at [55]-[57] that there are no implied limitations on the power of the Court to give advice under s 63. Further, their Honours said:

3. [22]

   In JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis Butterworths), the learned editors say at [2021-34] (footnotes omitted):

4. [23]

   The questions upon which judicial advice has been sought in this case have arisen in the context of the management and administration of a large commercial superannuation scheme of which AUSCOAL is the trustee. The questions in substance do not directly concern the rights of beneficiaries. I am satisfied in principle that the subject matter of the advice sought falls within s 63(1) of the Trustee Act, as it concerns the management and administration of Mine Super, and also raises questions respecting the interpretation of the trust instrument.

5. [24]

   As will be seen, AUSCOAL's application has raised many issues, the resolution of which I have often found to be difficult. I am satisfied that, in principle, the Court should exercise its discretion to give advice in response to the questions posed by the amended summons if, at the end of these reasons, it is satisfied that it is able to do so with sufficient confidence concerning the validity of its advice, and that it is in the interests of both AUSCOAL and the beneficiaries of Mine Super for the Court to do so.

Judicial advice sought by AUSCOAL

1. [25]

   At the hearing, AUSCOAL withdrew its application in prayer 2 of the amended summons. The Court granted an oral application made by senior counsel for AUSCOAL to make a minor amendment to the wording of prayer 1(a) of the amended summons. The amended summons is in the following terms:

2. [26]

   The remaining orders concern the payment of AUSCOAL’s costs of the application out of the assets of Mine Super and the making of orders to ensure the confidentiality of aspects of the evidence relied upon by AUSCOAL on the application and the opinions delivered by counsel.

Background

1. [27]

   I will now set out in outline form the background to the application and the reasons why AUSCOAL has sought the judicial advice in its amended summons.

2. [28]

   Mine Super is a registrable superannuation entity within the meaning of s 10 of the SIS Act. Mine Super is a standard employer-sponsored fund within the meaning of s 16 of the SIS Act, and has, since 14 September 2011, also been a public offer superannuation fund within the meaning of s 18 of the SIS Act. Mine Super is authorised under s 29T of the SIS Act to provide a ‘MySuper product’ to accumulation members. Mine Super also has ‘choice’ accumulation members, members with pension benefits and members with ‘defined benefit’ interests.

3. [29]

   Mine Super is governed by the terms of a trust deed dated 31 January 1995, as amended. The terms of the original trust deed were replaced in their entirety by a deed of amendment executed on 28 June 2011, with effect from 17 June 2011 (the Replacement Deed). That deed has itself been amended many times, and the Court has been provided with a copy of that trust deed consolidated as at 22 August 2022 (which is the deed that I have called the Trust Deed).

4. [30]

   The governing law of the Trust Deed is the law of New South Wales, which relevantly includes the Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW) (the Principal Act).

5. [31]

   Mine Super has approximately 56,660 members across Australia. Most of those members work or have worked in the mining industry in Australia. AUSCOAL accepts as members persons from outside the mining industry. I will generally use the word "beneficiaries" to refer to the persons who have interests in Mine Super, as there are classes of persons who have interests in Mine Super but are not formally members. In some instances, it will be more appropriate to refer to persons who are strictly members.

6. [32]

   The Statement of Facts contains a detailed history of Mine Super that began with the report of the Royal Commission into the mining industry delivered in 1939, which led the New South Wales Parliament to enact the Principal Act in 1941, to provide for a pension to be paid to retired or incapacitated mine workers. After a significant number of changes to the arrangements made under the law of New South Wales for the provision of benefits to mine workers, during the 2000s, a number of mergers of funds took place through a series of “successor fund transfers” within the meaning of the Superannuation Industry (Supervision) Regulations 1994 (Cth) (the SIS Regulations). There was a merger with the Queensland Coal and Oil Shale Mining Industry Superannuation Fund in 2005, with the Western Australian Coal Industry Superannuation Fund in 2014, and with the Mines Rescue Stations Staff Superannuation Plan in 2016. The occurrence of these mergers is reflected in the structure of the present Trust Deed, because of the need to preserve the benefits to which the members of the earlier superannuation funds were entitled at the time of the succession of mergers. As will be seen below when the terms of the Trust Deed are analysed, the Trust Deed is in large measure an amalgam of the trust deeds that governed the merged trusts. The Trust Deed provides for separate Categories of members. The Categories largely represent the separate merged trusts. For the present, it is sufficient to note that there are two Categories of accumulation members, three Categories of defined benefit members and the Pension Category.

7. [33]

   The members of TWUSUPER are all entitled to accumulation benefits. The proposed merger between Mine Super and TWUSUPER gives rise to potential problems concerning the entitlements of members of the latter superannuation fund after it is merged with the former fund, which has both accumulation members and defined benefit members. The Court was advised by AUSCOAL’s further supplementary submissions, at [1] to [4], that the effect of terms of the SFT Deed will be that existing members of TWUSUPER will transfer to Mine Super their superannuation interests into existing Mine Super Categories on the basis specified in Schedules 2 and 3 of the SFT Deed. Other terms of the SFT Deed require AUSCOAL to assume liability for the benefits of all transferring members and the transferred assets, to admit those members into the corresponding Category and to establish beneficiary accounts and credit balances to those accounts and make proportionate allocations of the transferred assets to the beneficiary accounts or the equivalent investment option.

8. [34]

   The SFT Deed contains the following clause 4.1(b):

9. [35]

   Clause 4.1(b) distinguishes between members with a defined benefit interest and members with a defined contribution interest. I understand from the documents provided to the Court on the application that the reference to “members with a defined contribution interest” means the same as members with an accumulation interest: see, for example, the Statement of Facts at [26(c)].

Analysis of questions for judicial advice

1. [36]

   It will be convenient to provide a simplified explanation of the relevant difference between superannuation interests that are accumulation interests and those that are defined benefit interests. That may be of assistance to the reader who is unfamiliar with the matters dealt with in these reasons. The explanation will be an oversimplification because each case will depend upon the terms of the relevant trust deed and the financial circumstances of the particular superannuation fund. The question is: what happens if at a particular time when a superannuation fund, or part of a fund, is terminated or wound up, there is a deficit in the assets that are available to satisfy the full entitlement of members of the fund, as recorded in the accounts for those members. If the assets must be distributed to the members pari passu in proportion to their nominal entitlements as recorded in their accounts, there is scope for unfairness that may arise as a result of differences in the way the nominal entitlements of members with different types of interest are calculated in relation to the value of the assets attributed to the satisfaction of those entitlements.

2. [37]

   Broadly, members of superannuation funds with an accumulation interest are entitled to benefits that are measured by the accumulated value of the contributions and the product of their investment. In principle, the aggregate entitlement of accumulation interests should equal the aggregate value of the assets available to satisfy those interests. That is, if the value of the assets attributable to members with accumulation interests falls, their entitlements should be adjusted downwards to reflect the loss in value. All other things being equal, there should not be a deficit.

3. [38]

   Defined benefit interests are different, because the entitlement is defined by a prescribed formula that results in an arbitrary relationship between the aggregate entitlement of defined benefit interests and the aggregate value of the assets available to satisfy those interests. Consequently, to deal with potential deficits, the rules governing defined benefit superannuation funds must require regular monitoring and obligatory augmentation of the available assets by additional contributions, if necessary, with the objective of eliminating the difference between the aggregate entitlement of defined benefit interests and the aggregate value of the assets available to satisfy those interests. There is a greater inherent risk that there will be a deficit in available assets in defined benefit trusts at the time of the termination or the winding up of such trusts in insolvency. Hence the risk that, in a ‘hybrid’ superannuation scheme providing for both accumulation and defined benefit interests, rules that govern distributions to members upon termination or winding up may have the result that assets attributed to the satisfaction of the accumulation interests in the accounts of the trustee may be diminished to supplement the assets available to satisfy defined benefit interests.

4. [39]

   Clause 2.5 of the Trust Deed provides:

5. [40]

   This clause gives rise to the possibility that AUSCOAL is obliged to apply assets attributable to Accumulation Categories to satisfy the entitlements of members of Defined Benefits Categories, whose benefits are defined in a manner that exceeds the value of the assets attributed to those Categories.

6. [41]

   The Statement of Facts states that AUSCOAL manages Mine Super in a manner that accounts for the assets and liabilities of each of the Defined Benefit Categories separately. That arrangement is reflected in the manner in which the assets of each Defined Benefit Category are held in separate custodial ownership. Following the merger with TWUSUPER, members of that superannuation scheme will become members of Accumulation Categories within Mine Super, and the assets held by TWU will be transferred into the relevant Categories and accounted for and held for the benefit of those Categories.

Proposal to amend the Trust Deed

1. [42]

   Clause 4.1(b) of the SFT Deed seeks to deal with this risk in two alternative ways. The first uses the words “the effective change of the Mine Super Trust Deed”, which, in practical terms means the amendment of the Trust Deed to ensure that clause 2.5 does not have the undesired effect. Clause 4.1(b) does not specify the terms of the amendment required.

2. [43]

   I will consider Prayer 1(c) of the Amended Summons first because it responds to the first part of clause 4.1(b) of the SFT Deed. Prayer 1(c) responds to this problem not by seeking judicial advice that AUSCOAL would be justified in amending the Trust Deed to delete clause 2.5, or to include positive provisions to ensure that the Categories are always treated as separate trusts. The prayer only contemplates an amendment that states that, for the avoidance of doubt, clause 2.5 does not alter the benefit entitlements of members and other beneficiaries of Mine Super.

3. [44]

   The question asked in prayer 1(c) of the amended summons avoids the risk that clause 2.5 will have the undesirable effect of altering the benefit entitlements of the beneficiaries by assuming that effect away. It assumes that clause 2.5 does not have the effect of diminishing the assets that may be distributed to beneficiaries with accumulation interests in favour of defined benefit beneficiaries, and then asks the Court to provide judicial advice that AUSCOAL would be justified in amending clause 2.5 to make that outcome clear.

4. [45]

   Two observations should be made concerning the question in prayer 1(c). First, the Court could not properly answer the question in the affirmative without satisfying itself that clause 2.5 in fact had the effect that is assumed by AUSCOAL; that is, that the clause does not have the effect of benefiting one class of beneficiary to the disadvantage of another. Secondly, if the Court formed the view that clause 2.5 did have the assumed effect, the question would become a trivial one, as it is self-evident that it is justifiable for AUSCOAL to amend a provision in the Trust Deed to make its real effect clear.

Advice concerning the proper construction of the Trust Deed

1. [46]

   The second way that clause 4.1(b) seeks to deal with the risk stated above is to require judicial advice from the Court “to ensure” that the undesirable transfer of assets attributed to accumulation beneficiaries to defined benefit beneficiaries “will not be payable”.

2. [47]

   The questions in prayer 1(a) and (b) of the amended summons appear to seek substantially the same judicial advice, although question 1(a) is expressed in negative terms (with an uncomfortable double negative) and question 1(b) is expressed in positive terms. There is, however, a material difference. Question 1(a) concerns whether AUSCOAL would be justified in administering and managing Mine Super on a particular basis, while question 1(b) concerns the substantive issue of how benefits payable to beneficiaries with defined benefit interests should be satisfied, having regard to the terms of the Trust Deed and the SIS legislation.

3. [48]

   If the Court gives to AUSCOAL judicial advice that it has sought, the legal effect will be that AUSCOAL will not be liable for any action for breach of trust by any beneficiary in respect of the consequences of AUSCOAL acting in accordance with the judicial advice: see s 63(2) of the Trustee Act and the Macedonian Church case at [65].

Effect of clause 2.5

1. [49]

   Considered in isolation, the meaning of clause 2.5 of the Trust Deed is clear. Notwithstanding the separate accounting treatment for the different Categories, and the fact that the assets attributable to the Defined Benefit Categories are held separately by a custodian, the Fund is a single fund, and the assets held separately for each of the Categories are available to meet all of the liabilities of AUSCOAL as trustee, whether those liabilities are to the members of the different Categories, are to creditors or are to AUSCOAL itself. Clause 2.5 is explicitly inconsistent with the manner in which Mine Super has grown by the merger of separate superannuation funds, as well as the structure of the Trust Deed that treats the assets held for each Category separately, in contemplation that those assets in all circumstances will be the only assets available for distribution to the beneficiaries of that Category.

2. [50]

   There may, however, be circumstances that have the effect that clause 2.5 does not operate literally in accordance with its terms. I will now summarise those circumstances in the order that I consider is most convenient to their explanation (which is not the same order as their legal significance). They are:

3. [51]

   As the effect of clause 2.5 must be determined in the context of the Trust Deed as a whole, it will be necessary to analyse all relevant terms to see whether they have the effect, with a sufficient degree of confidence, of counteracting what would otherwise be the effect of clause 2.5.

4. [52]

   It will also be necessary to examine how the SIS legislation affects the distribution of the assets of the Fund, as the regulatory regime has a paramount effect over the terms of the Trust Deed. It may be that the regulatory regime requires that the assets of the Fund be applied in a manner that is inconsistent with the apparent effect of clause 2.5.

5. [53]

   It will be conducive to the avoidance of confusion if the effect of the relevant terms of the Trust Deed is considered first and separately from the application of the SIS legislation.

6. [54]

   It will be necessary to consider separately the circumstances where: (a) the Fund as a whole is terminated or wound up; (b) a particular Category is terminated or wound up; and (c) a relevant employer ceases to be a participant in the Fund.

Analysis of terms of the Trust Deed

1. [55]

   An understanding of the issues that may arise in the event of a deficit existing in relation to a Category or upon the winding up of a Category or of Mine Super therefore requires a close analysis of the terms of the Trust Deed.

Significance of the Relevant Law

1. [56]

   Clause 1.3 has the effect that, if the “Relevant Law” prescribes provisions that must be included in the governing rules of a regulated superannuation fund, those provisions are, to the extent relevant, deemed to appear in the Trust Deed and to override any inconsistent provisions. “Relevant Law” is defined in clause 1.1 to mean, relevantly, “the requirements set out in the SIS Act, any regulations made under the SIS Act, being primarily the Superannuation Industry (Supervision) Regulation 1994 (Cth) (the SIS Regulation), any prudential standards made by a Regulator under the SIS Act, the Coal and Oil Shale Miners (Superannuation) Act 1941 (NSW).”

2. [57]

   An unusual feature of the scheme in which the Trust Deed operates is that the Fund as a whole is subject to the effect of the SIS legislation, but different Categories are also subject to certain State laws that governed the former separate superannuation funds before they were merged into Mine Super and became Categories of that fund.

Terms implied by the SIS Act

1. [58]

   It will be convenient to interpose a reference to covenants that are taken to be contained in the Trust Deed, by operation of s 52(1) of the SIS Act. The covenants are contained in s 52(2), which provides:

2. [59]

   It is reasonably arguable that it would be unfair to the beneficiaries of one Category for AUSCOAL, in the case of the relative insolvency of another Category, to apply the assets attributed to the first Category to supplement the assets attributed to the second category for the purpose of satisfying the nominal entitlements of the beneficiaries in the second category that are unable to be paid out of the assets attributed to that Category. Put shortly, that is because of the structure of the Trust Deed and the provisions contained in it, and the practices of AUSCOAL in quarantining the assets attributed to the individual Categories, even extending to cases where assets are held in separate custodial ownership. Furthermore, it is likely to be the case that the circumstances in which mergers of superannuation funds have historically occurred would cause members of the relevant Categories to understand that the satisfaction of their own entitlements depended on the value of the assets attributed to their Category, and that satisfaction of their own entitlements was not at risk by reason of the possibility that the assets attributed to their Category might be applied by AUSCOAL to supplement the satisfaction of the entitlements of members of another Category in the case of a deficit of assets attributed to that Category.

3. [60]

   This argument does not in my view provide a satisfactory and complete solution to the problem created by the presence of clause 2.5 in the Trust Deed. Although the effect of s 52(1) of the SIS Act is to incorporate the covenants in s 52(2)(e) and (f) into the Trust Deed, it does not have the statutory effect of making those covenants paramount in their relationship to clause 2.5. The primary obligation of a trustee is to implement the terms of the trust instrument. In this case, that includes clause 2.5. The members of a Category that is in deficit will have a countervailing argument that they are entitled to the benefit of the application of clause 2.5 by AUSCOAL. It is not practicable on an application such as the present for the Court to resolve the tension between the two arguments. Consequently, it is necessary for the Court to examine the terms of the Trust Deed in its legislative context to determine whether there are positive reasons why AUSCOAL can administer the Trust in a manner that properly circumvents the literal application of clause 2.5.

The Fund

1. [61]

   “Fund” is defined in clause 1.1 as meaning “the Mine Superannuation Fund…”

2. [62]

   Clause 2 concerns “THE FUND”. Clause 2.1 provides:

3. [63]

   I have already set out clause 2.5 above at [39].

4. [64]

   As I have explained above, the starting point is that the combined effect of clause 2.1 and clause 2.5 is that there is one Fund that comprises all of the Assets (as defined), and the Fund is not divided into separate sub-funds, so that the assets of each sub-fund are only available to meet claims in respect of the Category identified with a particular sub-fund. To the extent that AUSCOAL accounts for the assets relevant to each Category separately, and causes those assets to be held separately by a custodian, that arrangement will only take effect for accounting purposes. If that is the final position, all assets of the Fund will be legally available to meet all claims in respect of any of the Categories.

5. [65]

   So long as the Fund is solvent and being operated effectively in accordance with the terms of the Trust Deed, so that assets are allocated on an accounting basis to the members of the particular Categories, and assets held separately by the custodian of the Fund’s assets to match the assets attributed to particular Categories, the business of the Fund will in fact operate as if the benefits payable to beneficiaries of particular Categories were only payable out of notional sub-funds maintained in respect of those Categories.

6. [66]

   The purpose of the following analysis of the terms of the Trust Deed will be to determine whether those terms have the effect of limiting the assets that may be distributable to beneficiaries of particular Categories to the assets, or to amounts calculated by reference to the value of the assets, that have been attributed to the particular Category.

Categories of Members

1. [67]

   Clause 2.3 effectively establishes membership Categories. I will insert in square brackets after each Category the number of members in that Category, as taken from the Statement of Facts.

2. [68]

   Thus, each Category is governed by a separate set of rules contained in the relevant Schedule. This reflects the growth of Mine Super through historical mergers and the need to retain the rules that governed the pre-existing superannuation trusts to ensure that the rights of beneficiaries were not adversely affected by the merger.

3. [69]

   The Schedules that contain the rules that govern the Categories do not match the paragraphs of clause 2.3.1, as Schedule E deals with the fees that may be imposed in relation to the Fund.

4. [70]

   It is to be noted that rule 2.3.4 gives AUSCOAL a discretion to close a Category at any time, subject to the Relevant Law. However, rule 2.3.4 does not give AUSCOAL power to determine how the assets attributed to the Category should be distributed to beneficiaries in the event of a deficit in the value of those assets relative to the aggregate entitlement of the beneficiaries of the Category.

5. [71]

   The Court received confidential information concerning the one remaining member of Category G, the Mines Rescue Stations Staff (MRSS) Category. All that should be said is that the single member in that Category has already reached retirement age. That member may take steps that will lead to AUSCOAL terminating the Category in circumstances where there is expected to be a surplus after the provision of the member’s entitlement. However, as matters stand, AUSCOAL’s application must be decided on the basis that the MRSS Category is open with a single member.

6. [72]

   Attachment B to AUSCOAL's post-hearing submissions dated 8 December 2023 is a spreadsheet entitled: "Treatment of different classes of Mine Super member on Fund wind-up if the whole Fund is considered a defined benefit fund." I have referred above to the separate Categories of beneficiaries established by the Trust Deed. Attachment B arises out of clause 2.3.5 of the Trust Deed, which empowers AUSCOAL to establish divisions within any Category. Attachment B does not analyse the relevant circumstances in terms of the six Categories, but does so in terms of 13 divisions within Categories. Without being exhaustive, within a particular Category there may be separate divisions according to whether an employer is obliged to contribute funds to the Category for the benefit of members, and where that is so, there may be different classes of obligation imposed upon the employers.

7. [73]

   Attachment B provides an outline description of how the assets allocated to a particular division may be relevant to what is called the "Solvency Requirement calculation" in regulation 9.15 of the SIS Regulations. This is a conceptually complicated matter to which brief reference will be made below. Attachment B also makes reference to the nature of the minimum entitlement of particular classes of member in the case of the winding up of Mine Super. Attachment B then sets out a schedule containing an outline of the nature of the benefit entitlement of members within a particular division, the consequences of employer default, where that is relevant, the consequences of the termination of the Category, the termination of Mine Super and its winding up, and the winding up of Mine Super under the relevant SIS Regulations in the case of a deficit.

8. [74]

   I have found Attachment B to be a useful document as a cross-check, for the purposes of these reasons, with my analysis of the effect of the Trust Deed and the SIS Regulations. Having completed that exercise, it is my judgment that, generally, it will be adequate for the Court to analyse relevant circumstances at the Category level, without descending to the different circumstances of the individual divisions within some of the Categories. An analysis at the division level would probably involve the Court in introducing a level of complexity and opacity in the expression of these reasons that is not warranted for the purpose of the Court providing a proper response to the questions upon which the Court's advice is sought in prayer 1 of the amended summons.

Management of Fund by AUSCOAL

1. [75]

   It will be necessary to refer to a number of clauses in the Trust Deed that govern relevant aspects of the management of the Fund by AUSCOAL, as a precursor to considering the operation of the clauses that govern the entitlement of beneficiaries to be paid benefits in relevant circumstances. For the sake of brevity, I will paraphrase the clauses where convenient.

2. [76]

   Clause 4.1 gives AUSCOAL a general power to do anything whatsoever necessary or desirable for the purpose of operating the Fund, subject to the Relevant Law. This general power is not so extensive as to authorise AUSCOAL to vary the entitlements of beneficiaries, including in circumstances where there is a deficiency of assets available to satisfy the entitlements of members. The provision has the effect that any power apparently specifically granted to AUSCOAL, on the proper construction of other clauses in the Trust Deed, will be subject to the Relevant Law permitting AUSCOAL to exercise that power. Clause 4.3 elaborates the qualification in clause 4.1, by authorising AUSCOAL to do anything that it considers necessary or desirable to comply with the Relevant Law or to do what the Relevant Law permits, or to refrain from actions in order to comply with the Relevant Law.

3. [77]

   Clause 4.2 contains examples of the powers vested in AUSCOAL. Relevantly, for present purposes, AUSCOAL is empowered by clause 4.2(b) to attribute assets and fund expenses to beneficiaries’ accounts and Categories and to change the attribution as it considers appropriate. “Beneficiaries’ Accounts” is defined in clause 1.1 as follows:

4. [78]

   “Beneficiary” includes any Member, Spouse Member or Non-Member Spouse. In essence, the term relates to the classes of person who may have a right to a benefit under the Trust Deed.

5. [79]

   Thus, as an accounting matter, AUSCOAL has power to attribute the assets and liabilities of the Fund to the accounts of the Categories and to the accounts of the individual beneficiaries. Given the wording of clause 2.5, those attributions to individual accounts will not create separate trusts over the property attributable to any Categories or beneficiary’s account. The conclusion that attributions are notional is supported by the wording of clause 9.7.6, which provides that when a member changes Category, as is permitted by clause 9.7, AUSCOAL “will adjust the notional attribution of Assets between Categories…as it considers appropriate” [Emphasis added]. Clause 9.10.1 provides that no beneficiary has any interest in any particular asset of the Fund. That reinforces the conclusion that the effect of clause 2.5 of the Trust Deed is that all of the assets of the Fund are legally available to satisfy all of the Fund’s liabilities.

6. [80]

   In effect, clause 4.4 gives AUSCOAL an absolute and uncontrolled discretion in exercising its powers under the Trust Deed. That discretion is necessarily subject to any restrictions contained in other clauses.

7. [81]

   Clause 4.6 deals with the remuneration of AUSCOAL and its directors. Relevantly, clause 4.6.1 provides:

8. [82]

   The authorisation given to AUSCOAL to deduct its remuneration from the Fund does not specifically deal with the distribution of the liability to meet the remuneration as between the assets of the Fund that are attributed for accounting purposes to the separate Categories. However, as explained above, clause 4.2(b) authorises AUSCOAL to determine how its remuneration should be borne as between the separate Categories.

9. [83]

   Clause 6.1 provides for the usual trustee’s indemnity in favour of AUSCOAL, and clause 6.2 permits AUSCOAL, subject to the Relevant Law, to recover from the Fund amounts necessary to meet its indemnity and to meet all other liabilities that it incurs as trustee of the Fund. These provisions are relevant to the consideration of prayer 3 of the amended summons.

Relationship of Members to the Fund

1. [84]

   Clause 9.6 provides:

2. [85]

   Members and beneficiaries are not parties to the Trust Deed, and there is no provision that makes them parties when they are accepted as such. Clause 9.6 has the effect that they are bound by the Trust Deed. As beneficiaries of a trust, they will have rights in equity governed by the terms of the Trust Deed to enforce it to protect their equitable interest in the Fund. It does not follow that they will have standing to enforce every term of the Trust Deed as if they were parties to it. As they are not parties, it is not obligatory that they be made parties to these proceedings, although the fact that they have beneficial interests in relation to the Fund is a matter that is relevant to the right of AUSCOAL to make the present application without having joined all of the beneficiaries.

Accounts

1. [86]

   Clause 9.11 deals with accounts. Relevantly, it provides:

2. [87]

   Clause 9.11.4 sets out verbal formulae for determining the amounts that should be credited and debited to each account in respect of the beneficiary.

3. [88]

   Clause 12 deals with benefits, and relevantly provides:

4. [89]

   Thus, the entitlements of beneficiaries within each Category are to be calculated in accordance with the Schedule relevant to that Category. Beneficiaries are only entitled to require payment from the Fund to the extent that the Trust Deed expressly provides for the payment. This provision gives rise to the possibility that, notwithstanding the terms of clause 2.5, AUSCOAL may only be empowered by the terms of the Schedules governing each Category to pay beneficiaries out of the assets attributed to that Category as an accounting matter, or in amounts calculated by reference to the value of those assets. Alternatively, as AUSCOAL must be satisfied that a particular benefit is payable to the beneficiary, and as beneficiaries are not entitled to require any payment from the Fund except to the extent that the Trust Deed expressly provides, it may be that beneficiaries' entitlements are limited by the exercise of powers available to AUSCOAL, which will limit the effect of clause 2.5 of the Trust Deed.

Termination of Fund

1. [90]

   Clause 21 of the Trust Deed deals with the termination of the Fund, rather than the termination of individual Categories. By clause 21.1, the Fund will be terminated if the Trustee’s office becomes vacant and no new Trustee is appointed within 60 days, or AUSCOAL resolves to terminate the Fund. In either event, clause 21.4 deals with the application of the Fund’s assets. It relevantly provides:

2. [91]

   It is not necessary to set out clause 21.4(e) and (f), which deal with the case where surpluses are available for payment on termination of the Fund.

3. [92]

   Clause 21.4 does not deal with the distribution of assets attributable to members in the MRSS Category. It deals with members of the Pension Category if they have an Account-Based Pension. If there are members who are entitled to other types of pension referred to in rule D1.2, they are not specifically dealt with.

4. [93]

   Clause 21.4(c)(i) would require AUSCOAL on the termination of the Fund to pay to Accumulation Members and members with an Account-Based Pension an amount equal to the Member’s Account Balance. However, the Member’s Account Balance will be determined in accordance with clause 9.11.4, which provides for how the amount standing to the credit of any beneficiary’s account will be determined. That process includes crediting “positive investment returns” and debiting “negative investment returns, fees, amounts on account of actual or anticipated Liabilities”. The result of this process should be that the aggregate of the amounts payable by AUSCOAL to Accumulation Members should be no more than the net value of the assets notionally attributed by AUSCOAL to the Accumulation Member Categories.

5. [94]

   The information provided to the Court does not address the possibility that there may be a deficit of assets attributed to an Accumulation Category upon the termination of the Fund, or the Category. As explained above, ordinarily, the aggregate value of the accumulation interests in a Category should approximate, if not equal, the value of the assets attributed to the Category. There may still be scope for deficits as a result of the prices achieved on the sale of the assets and the costs of the termination process. It is not clear whether AUSCOAL, in administering the Trust Deed in relation to an Accumulation Category, would make a final adjustment so that the aggregate of the members' benefits equals the net proceeds of the sale of the attributed assets.

6. [95]

   In the case of Defined Benefit Members and Category A members of the WA Coal Industry Category (who have defined benefit interests), clause 21.4(c)(ii) will apply. AUSCOAL would be required to provide benefits in amounts determined by AUSCOAL based upon any priority as between different groups of members that AUSCOAL determines is equitable having regard to the advice from the Actuary and to the value of Assets and Liabilities attributable to the Defined Benefit Category and WA Coal Industry Category (Category A) Members respectively.

7. [96]

   Clause 21.4(c)(ii), as well as a number of other provisions applicable under the Trust Deed, give powers to AUSCOAL to determine "priority" on the termination of the Fund or a Category. That raises the question of what is meant by a power to determine priorities. Priority is generally relevant where there is a deficit and the value of the available assets is not sufficient to satisfy the claims of all persons entitled to share in the assets. Normally, the concept of priority arises where there are different classes of claimant, and there are reasons why it is necessary to determine the order in which the claims of the different classes should be satisfied out of the available assets. So, in the winding up of a corporation, secured creditors, particular types of employees, and unsecured creditors will have different priorities in the distribution of the available assets of the corporation. Generally, a class of claimant with a higher priority is entitled to be paid the whole of its claims before anything is paid to the class with the next priority. As between members of a class, their claims are usually required to be met pari passu on some fair basis. An entitlement to determine the priority of classes or individual claimants would not usually include a right to make adjustments to the nominal amount of the individual claims. The individual claims would be satisfied in full or in part pari passu with the other claimants within a class depending upon their priority.

8. [97]

   It is therefore significant that the power granted to AUSCOAL by clause 21.4(c)(ii) of the Trust Deed arises in the context of the termination of the whole Fund, and applies to two classes of beneficiaries with defined benefit interests. The power to determine priority is "as between different groups of Members" of the Fund as a whole – not the priority of members of a particular Category. AUSCOAL is required to consider the advice of the Actuary, "having regard to the value of the Assets and Liabilities attributable to" the relevant Category.

9. [98]

   Consequently, clause 21.4(c)(ii) gives AUSCOAL a power on the termination of the Fund, if there is a deficit in the value of the assets attributable to the Defined Benefit Category, or Category A of the WA Coal Industry Category, to decide that those members have priority in relation to the net value of the assets attributed to those Categories, and not any priority in relation to the assets attributed to any other Category. That power may be exercised by AUSCOAL without the need to make any adjustment to the amounts in individual beneficiaries' accounts in response to the deficit in the value of the assets attributed to the Categories.

10. [99]

    The result is that, on the termination of the Fund, if AUSCOAL makes an appropriate determination under clause 21.4(c)(ii), the beneficiaries of those Categories will only be entitled to benefits measured by reference to the net value of the assets attributed to those Categories. This result will not be inconsistent with the operation of clause 2.5, because even though the beneficiaries may have a right to be paid their entitlements out of the assets of any Category, the amount they receive will be limited by AUSCOAL's priority determination. In cases where AUSCOAL manages the termination of the Fund, it can choose how to satisfy the entitlements of the beneficiaries of the Categories. By the realisation of the assets attributed to those categories, rather than the assets attributed to other Categories, clause 2.5 will have no practical effect.

Termination of Accumulation Categories

1. [100]

   I will now consider the provisions in the Trust Deed that govern the termination of separate Categories. I will consider the termination of the Accumulation Categories, as the question in prayer 1(c) of the amended summons is expressed in general terms that extend to the benefit entitlements of beneficiaries of the Accumulation Categories.

2. [101]

   Clause 19 of the Trust Deed deals with the termination of an Accumulation Category by AUSCOAL. The effect of the definition of “Accumulation Category” in clause 1.1 is that it is a Category governed by the rules in Schedule A or Schedule B. Clause 19 provides:

3. [102]

   If AUSCOAL determines to terminate either of the Accumulation Categories, in circumstances where there is a deficit between the value of the assets attributed to the Category and the aggregate entitlements of members, clause 19.2 specifically empowers AUSCOAL to make fair and equitable adjustments to the relevant Beneficiary's Account Balances.

4. [103]

   If there is a deficit in an Accumulation Category when it is terminated by AUSCOAL, clause 2.5 would operate to entitle beneficiaries to claim the shortfall in satisfaction of their entitlements in their Beneficiaries' Account Balances from the assets attributed to other Categories, subject to the fact that clause 19.2 gives AUSCOAL the power to make equitable adjustments to the beneficiaries' entitlements so that, in aggregate, they do not exceed the net value of the assets attributed to the Category to which the beneficiaries belong. In this case, AUSCOAL must exercise a power given to it to counteract the effect of clause 2.5 of the Trust Deed.

Termination of Defined Benefit Category

1. [104]

   Clause 20 of the Trust Deed deals with the termination of the Defined Benefit Category. It provides:

2. [105]

   Two aspects of this rule must be noted. First, it deals with the priority of claims, and secondly, it deals with how the entitlements of members must be paid from the available assets. Where clause 2.2 and the chapeau to clause 20.3 refer to the determination of "the priority of claims for payment", the priority referred to will be as between the beneficiaries of the Category, and not the class of members of different Categories, as was the case for the termination of the whole Fund. The reference in clause 20.2 to "pensions, lump sum benefits, refunds of contributions and any other benefits" suggests that "priority" has its usual meaning in insolvency, as going to the relative entitlements of different classes of claimant.

3. [106]

   However, in this case, the rule deals specifically with how beneficiaries' entitlements are to be paid.

4. [107]

   Clause 20.3(a) permits AUSCOAL to “realise the assets of the Category”. If that happens, the assets that are realised will be only the assets that have been attributed to the Category in AUSCOAL’s accounts. Clause 20.3(b) will lead to the determination of the amount payable to each beneficiary “having regard to the amount of assets in the Category”. The expenses attributable to the Category will then be paid out of the amount realised. It is implicit in clause 20.3(c) that AUSCOAL is required to pay whatever beneficiaries' entitlements can be paid out of the proceeds of the Category out of those proceeds. That, in my view, is a specific requirement that, in the case of a deficit of net assets attributed to the Defined Benefit Category upon the determination of that Category, beneficiaries are only entitled to be paid out of the net proceeds of the realisation of the assets attributed to the Category.

5. [108]

   That conclusion suggests that clause 20.3 of the Trust Deed is inconsistent with clause 2.5. To the extent that that is so, on the proper construction of the Trust Deed as a whole, in my view, the provision dealing with the specific circumstances of the termination of the Defined Benefit Category should prevail over the general provision in clause 2.5: see the explanation in JD Heydon, Heydon on Contract (2019, Thomson Reuters) at [8.770], where the learned author explained the effect of the Latin maxim that means “that special words derogate from general words.” The Learned author added: “The significance of the [maxim] is that where a contract contains general and specific provisions on the same subject matter which are inconsistent, the specific provisions will prevail over the general provisions." Reference was made to the observation of O’Connor J in the context of statutory construction in Goodwin v Phillips (1908) 7 CLR 1; [1908] HCA 55 at 14, where his Honour said:

6. [109]

   That construction is supported by the scheme of the Trust Deed as a whole, which generally exhibits an intention that the entitlements of beneficiaries in Categories should be satisfied out of the assets attributed to those Categories. Clause 2.5 would still have some residual work to do, because it would empower AUSCOAL to satisfy the limited entitlements of beneficiaries of the Defined Benefit Scheme, if that were convenient, from the sale of assets attributed to other Categories, even though it would then be required to make good those assets by exercising its power in clause 4.2(b) by attributing assets formally attributed to the Defined Benefit Category to the other Category: see Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd [2002] VSC 576; (2002) 174 FLR 1 at [215]-[216] per Warren J (as her Honour then was) and the authorities there cited for a discussion of the principles that generally apply to the construction of superannuation and similar trust deeds.

Termination of other Categories

1. [110]

   The Trust Deed does not deal separately with the termination of any Category other than the two Accumulation Categories and the Defined Benefit Category.

2. [111]

   It will now be appropriate to analyse the rules in the Schedules relevant to each of the Categories to ascertain their effect.

Accumulation Category (Employer) Rules

1. [112]

   Schedule A, which contains the Accumulation Category (Employer) Rules, contains rules governing the contributions of members and employers.

2. [113]

   In relation to contributions, clause A4.6.2 provides:

3. [114]

   This provision has the result that, in the manner described, AUSCOAL may adjust the benefits payable to any member in cases where AUSCOAL is advised by the Actuary that the assets of the Accumulation Category (Employer) are inadequate to provide for the actual and expected liabilities of the Category, so that the aggregate entitlement of beneficiaries in that Category will match the available assets. There is thus inherent flexibility in the operation of the Trust Deed in relation to this Accumulation Category, such that the obligation of AUSCOAL to pay benefits to those beneficiaries should not be greater in aggregate than the value of the assets of that Category.

4. [115]

   Clause A6 governs the benefits payable to beneficiaries in the Category. Clause A6.1.1 specifies the circumstances in which benefits are payable, and then clause A6.1.2 provides:

5. [116]

   The combined effect of Rules A4.6.2 and A6.1.2 is that, provided that AUSCOAL performs the necessary adjustments, beneficiaries within this Category will only be entitled to be paid their Member’s Account Balance, and the aggregate of those balances will equal the total value of the assets that are notionally available to that Category in the accounts maintained by AUSCOAL.

6. [117]

   Thus, even though clause 2.5 has the literal effect that AUSCOAL can pay beneficiaries of Category A out of any assets of the Fund, the amount of that payment is limited to the relevant Member’s Account Balance, which is able to be adjusted from time to time to match the beneficiary’s share of the value of all of the assets in the Category. The consequence is that, at least for all beneficiaries of this Category, the application of clause 2.5 of the Trust Deed will only be nominal, in the sense that, whatever assets are actually used to pay the entitlements of all beneficiaries in the Category, the total amount payable will equal the value of the assets attributed to the Category. This is a case where AUSCOAL must exercise a power to adjust benefits to avoid clause 2.5 having an effect on beneficiaries' entitlements.

Accumulation Category (Personal) Rules

1. [118]

   Schedule B contains the Accumulation Category (Personal) Rules. It is not as elaborate as Schedule A. Clause B5.1 provides for the Trustee to establish and maintain such accounts as it considers convenient and appropriate for members in this Category. The Schedule does not contain a term comparable to clause A4.6.2, but it does contain in clause B6.1.2 a term that is the same as clause A6.1.2; that is, “the benefit payable will be the value of the Member’s Account Balance”, subject to a qualification that is not presently relevant. Clause B4 governs contributions to the Member’s Account.

2. [119]

   Schedule B therefore does not deal specifically with the possibility that a Member’s Account Balance may exceed the member’s share of the assets attributable to Category B, so that in aggregate, there is a deficiency of assets attributed to this Category to satisfy the entitlements of all beneficiaries in this Category. It is not therefore clear from Schedule B whether AUSCOAL has the same power to make adjustments to the benefits payable to Category B members on the basis of actuarial advice that the actual and expected assets of the Category are inadequate to provide for the actual and expected liabilities.

3. [120]

   However, as has been seen above, the absence of an equivalent in Schedule B to clause A4.6.2 does not matter, because clause 19 of the Trust Deed contains a general provision governing the termination of an Accumulation Category, and clause 19.2 has an equivalent effect for Category B as does rule A4.6.2 for Category A.

Defined Benefit Category Rules

1. [121]

   The rules governing the Defined Benefit Category are the most complicated for the purposes of these reasons. That is because rules in Schedule C govern the Category. But those rules indicate that the rules in Part 3 of the trust deed that governed the superannuation scheme that merged into Mine Super also apply to the Category. The matter is further complicated, because Part 3 makes it clear that any other provisions in any other part of the earlier trust deed that may affect benefits under Part 3 are also to apply. This possibility introduces doubt, as it requires a judgment about whether a particular provision that is not included in Part 3 is required to be applied. Finally, the provisions of the Principal Act continue to have force in relation to the Defined Benefit Category.

2. [122]

   It will be convenient to deal with these four sources of rules governing the Defined Benefit Category in the order that I have listed them, even though it is the Principal Act that has paramount force.

3. [123]

   The Defined Benefit Category Rules are contained in Schedule C. That Schedule relevantly provides:

4. [124]

   “Effective Date” is defined in clause 1.1 of the Trust Deed as meaning 17 June 2011. “Previous Trust Deed” is defined in clause 1.1 as meaning the trust deed of the Fund dated 31 January 1995, as amended and in force immediately prior to the Effective Date. Schedule C has the effect that the rights, obligations and entitlements of members shall be determined in accordance with Part 3 of the Previous Trust Deed, as if that Part had not been replaced by the Replacement Deed. These provisions have the effect that the Defined Benefit Category Rules are as set out in Part 3 of the deed of trust that governed the Fund dated 31 January 1995, as amended and in force immediately prior to 17 June 2011 (which was the date of the making of the Replacement Deed). However, rule C1.2 and rule C3.4 have the effect that, as well as the provisions in Part 3 of the Previous Trust Deed, effect must also be given to provisions that appeared in other parts of the Previous Trust Deed that affected the entitlements of persons with entitlements under that Part.

5. [125]

   It will be convenient to begin by referring to provisions in the Previous Trust Deed that are not found in Part 3, but which may have affected the entitlement of members under that Part. It will be necessary to remember that there is some uncertainty in this aspect of the analysis, because it depends upon a judgment about which terms of the Previous Trust Deed that did not appear in Part 3 must be applied because they "affected the entitlements of persons with entitlements under that Part".

6. [126]

   Clause 1.6.7 gave the Trustee a power to “notionally treat the Fund’s assets as attributable to different Parts of the Fund, to different categories or classes of Member or to different Members” for the proper operation and administration of the Fund. The use of the word “notionally” is consistent with the effect of clause 2.5 of the Trust Deed that the assets are the subject of a single trust constituted by the Fund.

7. [127]

   Clause 1.12.1 authorised the Trustee to determine the Income Entitlement each financial year that should be attributable to each Member “which may be positive for negative”. Under clause 1.12.2, the Income Entitlement was to be the total of all types of receipts by the Trustee attributable to each member, including “realised and unrealised gains and losses on those investments”. Provision was made for the deduction of negative investment returns, fund expenses, prepayments and allowance for doubtful debts, and “provision for such other contingencies as in the opinion of the Trustee are necessary to bring to account in order that the Income Entitlement for the particular distribution period may fairly represent the results of that period”.

8. [128]

   Clause 1.17.1 provided for the discontinuance of Part 3 of the Fund, including if “(c) there occurs an event that, in the opinion of the Trustee, makes the discontinuance of Part 3 necessary or appropriate.” Clause 1.17.2 gave the Trustee a power to “determine the priority of claims for payment from Part 3 of pensions, lump sum benefits, refunds of contributions and any other benefits required or authorised to be paid under the Current Act and the Deed.” Clause 1.17.3 required the Trustee, if it decided that it was necessary or appropriate to realise the assets of Part 3, to obtain advice from the Actuary as to the amount properly payable to each Member and other Beneficiary of Part 3 having regard to the amount of assets in Part 3, and after payment of fund expenses properly payable from Part 3, to “allocate the proceeds of Part 3 in accordance with the priority determined under clause 1.17.2 and the Actuary’s advice.”

9. [129]

   Under clause 1.29:

10. [130]

    In my view, these provisions of the Previous Trust Deed that were not included in Part 3 did affect the entitlements of persons with entitlements under that Part. Clause 1.12 empowered the Trustee to adjust the account balances of members of what has become the Defined Benefit Category in a way that would reflect losses or devaluations in the assets attributed to the Category.

11. [131]

    Further, clause 1.17 had the same effect on the discontinuance of Part 3 of the Fund that clause 20 of the Trust Deed has in respect of the termination of the Defined Benefit Category.

12. [132]

    Clause 1.29 limited the entitlement of a member or beneficiary to the payments that were expressly provided for in the Previous Trust Deed.

13. [133]

    I will now turn to a consideration of the relevant provisions of Part 3 of the Previous Trust Deed.

14. [134]

    The definitions relevant to the operation of Part 3 are found in rule 3.1.1. “Pension” is defined as meaning “a pension payable under this Part of the Fund and includes any amounts payable as an addition to a pension”.

15. [135]

    “Pension Account” is defined as meaning “the account established under Section 18(3)(b)(i) of the Current Act which consists of the AUSCOAL Services Pty Ltd sub-account and the Column 5 pensions inquiries and indexation sub-account.”

16. [136]

    The “Current Act” means the Coal and Oil Shale Mine Workers (Superannuation) Act 1941 (NSW) (i.e., the Principal Act) as in force after the commencement of a number of Acts referred to in the definition. Thus, somewhat confusingly, the Trust Deed is subject to the New South Wales Act that has been called on this application the Principal Act, as part of the Relevant Law.

17. [137]

    As noted above, the governing law of the Trust Deed is the law of New South Wales, which includes the Principal Act, and the definition of Relevant Law in clause 1.1 includes the Principal Act. The Trust Deed is therefore subject to the Principal Act.

18. [138]

    Section 15C(4A) of the Principal Act therefore has effect in relation to the Defined Benefit Category, and provides:

19. [139]

    This provision expressly refers to the payment of claims "out of the Amalgamated Fund."

20. [140]

    Section 15C(6) provides that: “The AUSCOAL Trust Deed is invalid to the extent that it is inconsistent with this Act.”

21. [141]

    These provisions appear to require that the Trust Deed, as the deed that now governs the Defined Benefit Category, contain a power in AUSCOAL “to determine the priority of claims for payment out of” what was the Amalgamated Fund, on the winding up of that fund.

22. [142]

    Section 18 of the Principal Act provides:

23. [143]

    As is evident from the terms of the provision, what was called the Amalgamated Fund was created as a result of the amalgamation of two separate funds that was effected by the Act. Section 18(3)(b)(i) required AUSCOAL to establish a separate fund within the Amalgamated Fund as a reserve in respect of Part 3 of the Fund as a pension account. As of the time of Part 3 of the Previous Trust Deed, the pension account consisted of the sub-accounts identified in the definition of Pension Account in Part 3.

24. [144]

    “AUSCOAL Services Pty Ltd sub-account” means “the account established under Section 18(3)(b) of the Current Act (referred to in the Current Act as the Approved Company sub-account) and is a continuation of the account referred to as the “Pension Account” immediately before 1 July 2000”.

25. [145]

    The effect of these provisions is that the Pension Account is an account consisting of two sub-accounts.

26. [146]

    Returning to Part 3 of the Previous Trust Deed, Part 3.5 deals with “Owner Contributions”. Rule 3.5.1 requires an “Owner” to pay to AUSCOAL “for crediting to this part of the Fund those contributions prescribed under Section 19 of the Current Act to be credited to this Part”. Rule 3.5.5(a) authorises AUSCOAL to “receive amounts required to be contributed by Owners to the Subsidy Fund under Section 19C and 19D of the Current Act into this Part of the Fund”. These provisions establish that there was intended to be a separate Part of the Fund.

27. [147]

    Rule 3.5.5(c) authorises AUSCOAL to pay any amount which it determines to be payable under Part 4A of the Principal Act “out of any amounts received into this Part of the Fund pursuant to this Rule”. Part 4A of the Principal Act concerns the payment of subsidies to mine workers in respect of incapacity due to the inhalation of dust in coal or oil shale mines. The relevant point for the purposes of these reasons is that the subsidies must be paid out of the Part of the Fund identified.

28. [148]

    Rule 3.6 is concerned with accounts and relevantly provides:

29. [149]

    The significance of rule 3.6.1 is that it requires that all pensions and other benefits payable to members be paid out of the Pension Account.

30. [150]

    The rules that govern the Defined Benefit Category are plainly obscure. Provisions of the Principal Act feed into those rules by their own force, and through the operation of Part 3 of the Previous Trust Deed that is made applicable to the Defined Benefit Category by Schedule C to the Trust Deed. The Court has not been given an explanation, or at least an obvious one, as to how the various Funds and Accounts required by the Principal Act are maintained in relation to AUSCOAL's management and administration of the Defined Benefit Category. However, unless there is some disjunction between the accounting requirements of the Principal Act and the way the Defined Benefit Category is administered, the Principal Act has the effect that the assets required to be attributed to the Defined Benefit Category are to be held in a separate trust fund and that benefits payable to members of the Defined Benefit Category are required to be paid out of that fund.

31. [151]

    That legislative requirement is inconsistent with the operation of clause 2.5 of the Trust Deed insofar as it would literally apply to the Defined Benefit Category, and s 15C(6) would have the effect that clause 2.5 is invalid to the extent that it is inconsistent with any matter required by the Principal Act.

32. [152]

    As I have explained above, I have concluded that, upon the termination of the Defined Benefit Category, clause 20 of the Trust Deed has the effect that, in a deficit situation, beneficiaries of the Category can only be paid out of the proceeds of sale of the assets attributed to the Category. That would, by itself, have the effect of countering the operation of clause 2.5. If my understanding of the operation of the Principal Act is correct, then that conclusion is a fortiori true. Clause 2.5 is invalid insofar as it would operate in relation to the Defined Benefits Category, and the assets attributed to that Category must be held as a separate trust fund, and entitlements of members only paid out of those assets.

Pension Category Rules

1. [153]

   Schedule D contains the rules for the Pension Category. Rule D1.1 governs the eligibility of persons to join in the Pension Category. In essence, members of other Categories may join in the Pension Category if a benefit in the form of a pension may be payable to the member under the Relevant Law, or the Relevant Law permits the person to transfer an amount into the Fund for the purpose of receiving a pension benefit. Subsequent rules describe the type of pensions that may be provided and the terms on which pensions will be paid.

2. [154]

   Rule D3.3.1(b) provides that a benefit payable by reference to a Pension Account will terminate when the amounts standing to the credit of the Pension Account is nil.

3. [155]

   Rule D3.3.2 governs the establishment and maintenance of Pension Accounts. AUSCOAL is required to establish and maintain a Pension Account in respect of each member to whom an Account-Based Pension is payable. The account is required to be credited with the amount deducted from one or more of the member’s accounts in an Accumulation Category under clause 12.6.1(f) and rule D1.1. Certain other amounts may be paid into a Member’s Pension Account. Any Account-Based Pension payment paid in respect of the member is required to be debited from the Pension Account, as well as certain other payments made for the benefit of the member.

4. [156]

   In essence, the Pension Category works on the basis that, when a member joins the Pension Category, an amount will be credited to their Member’s Account equal to the amount that is paid in, and the pension and other payments may be made for the benefit of the member until the amount standing to the credit of the member in the Pension Account is nil. There is no provision in Schedule D that expressly deals with the consequences of the termination of the Pension Category. The result appears to be that the member is entitled to be paid the balance in the Member’s Pension Account, whatever that balance may be at the time.

5. [157]

   Schedule D does not contain any specific provisions to deal with the possibility that the aggregate of the balances of all members in the Category exceeds the value of the assets that are attributable to the Category. The information provided to the Court on this application did not explain whether the Pension Category operates in a way that assets are attributed to the Category, so that a deficit may arise if the value of those assets falls relative to the aggregate of the members' Pension Accounts. This uncertainty does not affect the Court's response to prayer 1 of the amended summons, which is only concerned with the consequences of a deficit in a Defined Benefit Category and the funding of defined benefit entitlements.

WA Coal Industry Category Rules

1. [158]

   The Statement of Facts describes this Category as being a Defined Benefit Category. Clause 2.3.2 of the Trust Deed provides that the rules in Schedule F apply to this Category.

2. [159]

   The effect of rule F4.1 is that the rules made by the Coal Industry Superannuation Regulations 2014 (WA) (the WA Superannuation Rules) apply as if set out in Schedule F.

3. [160]

   Rule F4.2 provides:

4. [161]

   The WA Superannuation Rules establish a comprehensive superannuation regime for what are called Categories A to D Members. A review of the WA Superannuation Rules shows that both defined benefit contributions and accumulation contributions can be made in respect of members. Regulation 24 concerns the application of defined benefit contributions, and inter alia, requires AUSCOAL to create a reserve for the payment of benefits calculated by reference to regulation 27. That regulation provides for the determination of an “accrued benefit” for a Category A member calculated as a multiple of the “benchmark amount” (which is a specific amount of money determined in accordance with regulation 6) and a specified percentage. Regulations 28 to 32 establishes for Category A Members retirement benefits, death benefits, total and permanent disablement benefits, partial and permanent disablement benefits and leaving service benefits. Those benefits are all determined in part by reference to the “accrued benefit” to which the member is entitled.

5. [162]

   The analysis of the WA Superannuation Rules is complicated by the fact that accumulation contributions may also be made for members, which are required to be credited to the members’ accumulation accounts. The benefits payable under regulations 28 to 32 to Category A members may have a defined benefit component and an accumulation account component.

6. [163]

   It appears from regulations 33 and 35 that Category B, C and D Members only have accumulation accounts. Regulation 26(1) requires the Trustee to keep an account for each member in respect of accumulation contributions. It does not appear that a separate account is required for Category A Members in respect of their defined benefit entitlement. That may be because the amount of the defined benefit component of the member’s entitlement is determined by relevant formulas in the WA Superannuation Rules.

7. [164]

   The result is that Category A Members of the WA Coal Industry Category may in part be entitled to defined benefits.

8. [165]

   The WA Superannuation Rules deal in regulation 48 with the "Termination of a part of the scheme", in the following terms:

9. [166]

   Regulation 11 deals with the consequence of default by an employer, regulation 12 deals with the dissolution of an employer, and regulation 25 deals with a funding shortfall in respect of benefits for category A members. Consequently, regulation 48 is applicable. Generally, where there is a funding shortfall for the payment of the beneficiaries with defined benefit interests in Category A of the WA Coal Industry Category, regulation 48(1) deals with the application of the "interest in the scheme of any members", which must be an interest in the assets attributed to the Category. Regulation 48(1)(b) requires AUSCOAL to provide benefits to the members concerned, "as far as possible" out of the assets attributed to the Category. By regulation 48(2)(b), the benefits provided are "in full discharge of all claims by or in respect of them in relation to any rights or benefits under these regulations, or in connection with or arising out of the scheme."

10. [167]

    The WA Superannuation Rules therefore have the effect that, where there is a shortfall in funding the benefits payable to category A members, AUSCOAL must provide benefits as far as possible from the assets attributed to the Category, and the provision of those benefits will be in full discharge of the beneficiaries' claims.

11. [168]

    The consequence is that the relevant beneficiaries will not be entitled to claim under clause 2.5 of the Trust Deed a right to have satisfied a deficiency in payment of their Members' Account Balances out of the assets attributed to other Categories, because their entitlement to receive benefits will be discharged following the payment to them of the benefits required by regulation 48.

12. [169]

    In the case of all other shortfalls in respect of benefits payable to category A beneficiaries within the WA Coal Industry Category, regulation 48 of the WA Superannuation Rules will have the effect that those beneficiaries will only be entitled to receive the benefits that AUSCOAL determines can be paid out of the assets attributed to the Category in order, as far as possible, to satisfy their entitlements, and the payment of those benefits will fully discharge the entitlements of those beneficiaries.

Mines Rescue Stations Staff (MRSS) Category Rules

1. [170]

   The Statement of Facts also describes this Category as being a Defined Benefit Category. The rules governing the Category are in Schedule G.

2. [171]

   In a similar fashion to Schedule F, Schedule G provides in rule G3.1: “The MRSSS Plan Parts A and B apply to this Schedule G.” That Plan is defined in rule G2.1 as the provisions of Parts A and B of the MRSSSP Trust Deed, excluding clauses 1 to 8, 14 and 16 to 36. Rule G3.4(c) requires AUSCOAL to provide and pay benefits to or in respect of a Mines Rescue Stations Member as provided under, or in accordance with, MRSSS Plan Parts A and B and the Trust Deed.

3. [172]

   After the clauses in the MRSSSP Trust Deed that are required to be excluded, it appears that the attachment to the MRSSSP Trust Deed, described as “Rules for the Management of the Mines Rescue Stations Staff Superannuation Plan” (in the context of Schedule G, “the Rules”) is intended to contain the applicable rules. (That is so even though that conclusion is based on clause 1.2 of the MRSSSP Trust Deed which provides: “The Rules forming part of this Deed set out the benefits and contributions in relation to the Plan and otherwise regulate its management…”; but that clause is excluded from operating as part of Schedule G).

4. [173]

   Rule 4.3 of the Rules provides for the making of contributions by employers. Rules 7 to 18 provide for various types of benefits to be payable to members. Rule 7 provides for a retirement benefit on or after the normal retirement date. As the benefit includes an amount of “seventeen and one-half per cent of the Member’s Final Average Salary multiplied by his Years of Membership”, the benefit is, at least in part, a defined benefit. The same is true for early retirement benefits (rule 8), death benefits (rule 10), total and permanent disablement benefits (rule 12), temporary total disablement benefits (rule 13) and withdrawal benefits (rule 14). That is because, directly or indirectly, these other benefits are calculated by reference to the manner of calculation of the retirement benefit.

5. [174]

   The Rules do not contain any specific provision that requires AUSCOAL to maintain individual accounts for members, and the rules that deal with the payment of the different benefits to members simply require AUSCOAL to make the payments (sometimes in the manner to be agreed with the member and sometimes involving the exercise of discretions by AUSCOAL). In particular, the Rules do not specifically require AUSCOAL to pay benefits to members in the amounts standing to their credit in specific accounts maintained by AUSCOAL in the name of the members.

6. [175]

   Clause 12 of the MRSSSP Trust Deed deals with the discontinuance of the plan. Clause 12.1(i)-(iii) and (a) and (b) have the effect that the Plan will be discontinued if Employers obliged to contribute to the Plan cease to do so in certain circumstances. Clause 2.3.4 of the Trust Deed appears to give AUSCOAL an additional power to close this Category at any time.

7. [176]

   The provisions that govern what happens on the discontinuance of the plan are contained in clause 12.1, as follows:

8. [177]

   The result is that, if Category G is terminated, and even if the single remaining member is entitled to a defined benefit interest, the entitlement of the member in the case of a deficit between the member's defined benefit and the value of the available assets in the Plan will be limited to the amount that AUSCOAL in its absolute discretion determines should be paid. Consequently, clause 2.5 of the Trust Deed will not have the effect that the member will be entitled to claim the unpaid balance of the member's defined benefit from the assets attributed to other Categories.

Consequences of employer default

1. [178]

   This issue only arises in relation to divisions within Categories where the assets needed to be available to provide the benefits to which members are entitled under the Trust Deed are to be provided, in part, by employers, including, in particular, in the case of members with defined benefit interests, to ensure that the assets attributed to Categories with defined benefit members are adequate to satisfy the defined benefits.

2. [179]

   The Court has been informed by Annexure B to AUSCOAL's post-hearing submissions dated 8 December 2023 that there is no employer sponsor relevant to the "Accumulation (employer) non-employer sponsor member" division of Category A”, Category B, Category D and the divisions of Category F described as "accumulation (non-employer-sponsored) member and (defined benefit deferred member".

3. [180]

   Clause 10 of the Trust Deed deals with the admission of employers. Relevantly, clause 10.4 entitles the Trustee to require the employer to sign an Employer Registration Deed in a form determined by the Trustee.

4. [181]

   Clause 10.7 specifies the circumstances in which an employer's participation in the Fund terminates. Clause 10.8 deals with the effect of the termination in the following terms:

5. [182]

   The effect of clause 10.8.2 is that, in the case of members of Category A whose employer's participation in the Fund terminates, their Beneficiary's Account Balance may remain in the Fund, effectively as a member without a sponsoring employer.

6. [183]

   Clause 10.8.4 empowers the Trustee to adjust any benefits which are payable to a member of a defined benefit fund whose employer's participation terminates, which will enable the Trustee to adjust the benefits to which the member may be entitled, so that they reflect the cessation of the Employer's sponsoring of the member.

7. [184]

   Rule 3.5 of the Previous Deed in relation to Category C deals with "Owner Contributions" that are required to be paid to the Trustee "for crediting to this part of the Fund": see rule 3.5.1. Rule 3.5.6 authorises the Trustee to recover unpaid contributions by owners.

8. [185]

   It has been necessary to consider the consequences of employer default, because the effect of such defaults may be a cause of a deficit in the value of the assets attributable to a Category whose members have defined benefit interests. Where the employer was contributing to fund an accumulation interest, the member may continue to have an accumulation interest, but without the benefit of payments by the employer. Where the member has a defined benefit interest, clause 10.8.4 empowers AUSCOAL to adjust the member's benefits, which should mean that there is an adjustment to remove the possibility of a deficit existing between the defined benefit to which the member is entitled, and the value of the assets available to satisfy that entitlement. If that is the case, then there will not be any unsatisfied defined benefit that the member may seek to recover from assets attributed to other Categories.

Summary of the effect of the Trust Deed

1. [186]

   I will now summarise the results of the analysis of all of the rules governing the administration of Mine Super that has been undertaken above in order to collect the conclusions that are relevant to the judicial advice that the Court should give to AUSCOAL.

2. [187]

   I repeat that the problem is that clause 2.5 of the Trust Deed, considered in isolation, expressly provides that the Fund is a single trust fund and the Categories are not separate trust funds, and AUSCOAL’s liability to pay entitlements to beneficiaries relates to all of the assets of the Fund and is not limited to the assets attributable to any particular Category. The risk therefore is that, in any situation where AUSCOAL is obliged to pay benefits to beneficiaries where there is a deficit in the value of the net assets attributed to a particular Category, and the beneficiaries in aggregate are entitled under the Trust Deed to be paid an amount greater than the available assets within the Category, those beneficiaries will be entitled to claim payment out of assets attributed to other Categories. If all beneficiaries are entitled to share pari passu in accordance with their nominal entitlements, as measured by their Beneficiaries Account Balances, the amounts payable to the beneficiaries of the other Categories will be proportionately reduced below their own Beneficiary’s Account Balances. The occurrence of this risk is greatest for beneficiaries of the Defined Benefit Category, or beneficiaries of other Categories with defined benefit interests, because their defined benefits may be greater than the assets attributed to the satisfaction of those entitlements.

3. [188]

   The issue is whether, notwithstanding the clear effect of the wording of clause 2.5 of the Trust Deed, by one of the processes listed above at [50], clause 2.5 either does not have effect in accordance with its terms, or the Trust Deed vests some power in AUSCOAL to make adjustments to the beneficiaries’ nominal entitlements to ensure that, in aggregate, they are not entitled to be paid any more than the value of the assets attributable to the satisfaction of those entitlements.

4. [189]

   When the separate superannuation funds that have been merged into Mine Super under the Trust Deed were first created, the very fact that they were separate necessarily meant that beneficiaries could only be paid their entitlements out of the assets attributed to the funds. There was no need for the drafters of the relevant trust deeds to address the possible consequences of a provision such as clause 2.5 of the Trust Deed. At the time that the Replacement Deed introduced clause 2.5 into the Trust Deed, the existing Categories within Mine Super became subject to this risk. When other separate superannuation funds later merged into Mine Super, they became subject to this risk. The result is that it is a matter of fortuity whether the rules governing the individual Categories counteract the effect of clause 2.5, and if they do, the result is likely to be a patchwork resulting from the fortuity. As will be seen, this has the subtle consequence of requiring the Court to characterise the provisions in the Trust Deed that regulate how beneficiaries’ entitlements are to be paid in the event of deficiencies in the assets attributed to different Categories, according to whether those terms directly limit the assets that are available or whether AUSCOAL is given some power that will have the practical effect of limiting the beneficiaries entitlement, so that the ultimate result is the same. This introduces complexity in the answers to the questions for judicial advice, which ultimately may be debatable and inconsequential in practical terms.

5. [190]

   I am satisfied that in cases where contributing employers cease to participate in the Fund, AUSCOAL is empowered to adjust the entitlements of beneficiaries with defined benefit interests so that deficits should not arise between the nominal entitlements of beneficiaries and the value of the assets attributed to the satisfaction of those entitlements.

6. [191]

   I have explained above why the Court should not decide that the terms implied into the Trust Deed by s 52(2)(e) and (f) of the SIS Act directly override the literal operation of clause 2.5 of the Trust Deed. However, I am satisfied, on the information provided to the Court, that the beneficiaries in the different Categories will have a clear and fair expectation that their own entitlements cannot be diluted by reason of the assets attributed to their Categories being applied to satisfy the entitlements of beneficiaries of other Categories, where the assets attributed to those Categories are insufficient to satisfy those entitlements. It is clear, in my view, that AUSCOAL is entitled to decide that the fair dealing required by the implied covenants justifies AUSCOAL in exercising any powers vested in it by the Trust Deed to adjust the nominal entitlements of beneficiaries of a Category to ensure that their aggregate entitlements do not exceed the net value of the assets attributed to that Category. Generally, AUSCOAL should exercise such powers to achieve that result.

Defined Benefit Category

1. [192]

   If my understanding of the effect of the Principal Act is correct, then, ss 15C(4A) and 18, together with the operation of rules 3.5.5(c) and 3.6 of Part 3 of the Previous Trust Deed, have the effect that the Defined Benefit Category is required to be operated as a separate trust fund, and payments to the beneficiaries of that Category are required to be paid out of the assets of that fund. I repeat that any doubt about the validity of that conclusion arises out of some factual uncertainty as to the historical relationship between the operation of the funds required by the Principal Act and the Defined Benefit Category under Schedule C of the Trust Deed.

2. [193]

   In any event, upon the termination of the Defined Benefit Category, clauses 20.2 and 20.3 of the Trust Deed, as well as clauses 1.17.2 and 1.17.3 of the Previous Trust Deed, have the effect that, whatever is meant by the grant of power to AUSCOAL to “determine the priority of claims for payment from the Category”, the rules have the effect that the entitlements of beneficiaries are to be paid out of the realised assets of the Category.

3. [194]

   Upon the termination of the whole Fund, clause 21.4(c)(ii) empowers AUSCOAL to determine “priority as between different groups of members…having regard to the value of the Assets and Liabilities attributable to the Defined Benefit Category.” As the priority concerned is between different groups of members, which would include members of different Categories, and is not as to the rights of beneficiaries within Categories, AUSCOAL is entitled to make a determination on the termination of the Fund that the beneficiaries of the Defined Benefit Category are only entitled to be satisfied out of the net value of the assets attributed to that Category.

Category A within the WA Coal Industry Category

1. [195]

   If AUSCOAL determines to terminate the whole Fund, clause 21.4(c)(ii) of the Trust Deed gives AUSCOAL the same power in relation to beneficiaries within Category A of the WA Coal Industry Category as it has for beneficiaries of the Defined Benefit Category. AUSCOAL can exercise that power, so that Category A beneficiaries will only be entitled to be paid benefits out of the assets attributed to the WA Coal Industry Category.

2. [196]

   If AUSCOAL only determines to terminate Category A within the WA Coal Industry Category and there is a shortfall of benefits for Category A, AUSCOAL will be required to provide the beneficiaries of Category A their interests as far as possible through the scheme, which will discharge all claims of those beneficiaries. That will have the effect that those beneficiaries’ entitlements will be fully discharged out of the realisation of the assets of the Category.

MRSS Category

1. [197]

   In the case of any termination of this Category, called the Plan in the MRSSSP Trust Deed, clause 12.1 of the deed gives AUSCOAL a power to deal with a deficit in the net value of the attributed assets to allocate those assets “in such shares and proportions and in such manner as the Trustees consider to be fair and equitable in their absolute discretion.” That means that AUSCOAL can limit the entitlements of beneficiaries of the Category, including those with defined benefit interests, to shares in the assets attributed to the Category in the manner determined by AUSCOAL to be fair and equitable.

Other Categories

1. [198]

   As I have explained above, the questions in prayer 1(a) and (b) of the amended summons are concerned with whether circumstances may arise in which beneficiaries with defined benefit interests will be entitled to have those interests satisfied out of assets attributed to Accumulation Categories. The focus of the application was on that issue. However, the question in prayer 1 (c) concerns the effect of clause 2.5 of the Trust Deed on the benefit entitlements of beneficiaries generally. Clause 21.4(c)(i) of the Trust Deed requires AUSCOAL in the case of the termination of the whole Fund to pay Accumulation Members and Members with an Account-Based Pension an amount equal to the Member's Account Balance. Accumulation Members are defined to be members of the Categories governed by Schedule A and B of the Trust Deed. The term does not include beneficiaries of other Categories who have accumulation interests. If it is possible for there to be a deficit of assets attributed to the Accumulation Categories, clause 21.4(c)(i) would require AUSCOAL to pay to the beneficiaries of those Categories the full amount of the Member's Account Balance. In that event, clause 2.5 might entitle those beneficiaries to be paid part of their benefits out of the assets attributed to other Categories. The same is true for beneficiaries with an Account-Based Pension, who will belong to the Pension Category.

2. [199]

   However, if that result is possible, AUSCOAL could avoid that consequence in relation to beneficiaries of the Accumulation Categories by exercising its power to terminate the Categories before it terminated the Fund. Clause 19.2 would then entitle AUSCOAL to make fair and equitable adjustments to the Beneficiary's Account Balances to ensure that, in aggregate, the beneficiaries' entitlements did not exceed the net value of the assets attributed to the relevant Category.

3. [200]

   AUSCOAL does not appear to have an equivalent power in relation to beneficiaries of any other Category who are entitled to accumulation interests.

Application of the SIS legislation

1. [201]

   I will now turn to a consideration of the effect of the SIS legislation on the issues upon which judicial advice has been sought.

2. [202]

   The SIS legislation is of paramount effect, of its own force, and by clause 1.3 of the Trust Deed, as has been noted above.

3. [203]

   As considered above, the Trust Deed deals in different ways with the possibility that a deficit may arise between the aggregate entitlement of beneficiaries and the value of the assets available to satisfy those entitlements in the context of a decision by AUSCOAL to terminate a Category or the Fund, or where an employer ceases to participate in the Fund.

4. [204]

   The SIS legislation deals with the insolvency of superannuation funds in a manner that may require the winding up of a fund, or other action, in circumstances that may arise independently of a decision made by the trustee of the fund to terminate it. The circumstances that may require the winding up of the fund may be different than those that may cause AUSCOAL to exercise its own power.

5. [205]

   Consequently, it is necessary to consider the effect of the SIS legislation separately and in addition to the application of the terms of the Trust Deed. The SIS legislation may lead to a different outcome to that which has been considered above, and may require changes to the judicial advice that the Court could give based solely on the effect of the Trust Deed.

6. [206]

   The financial management of superannuation funds is dealt with in Part 9 of the SIS Regulations. It is appropriate to note the following Divisions within Part 9 and the associated subject matter of the Divisions.

7. [207]

   As appears from the relevant Division headings, Part 9 of the SIS Regulations deals separately and differently with defined benefit funds and accumulation funds. The different treatment is required because of the essential differences between defined benefit and accumulation interests. If a particular superannuation fund only contained members with either defined benefit or accumulation interests, then the application of the relevant provisions in Part 9 of the SIS Regulation would be relatively straightforward, even if technically obscure in the case of defined benefit funds. The problem that the Court must deal with in determining the present application arises because Mine Super is a fund with both defined benefit and accumulation members. In particular, a difficulty arises in relation to (a) how the SIS Regulations categorise individual funds as being defined benefit or accumulation funds; and (b) how the SIS Regulations distinguish between funds and sub-funds.

8. [208]

   Clause 2.5 of the Trust Deed has the effect that in principle, as a matter of law, the Fund is a single trust fund, notwithstanding the history of the mergers and the preservation of members' rights, and the other provisions of the Trust Deed, that in isolation may have had the effect of creating separate sub-trusts. Notwithstanding the unequivocal nature of the statement in clause 2.5 that the separate categories are not separate trusts, in the manner that I have discussed above, the legal consequences of clause 2.5 are altered by the fact that the rules relating to some Categories require that payments only be made to beneficiaries out of the assets attributed to the Categories, in some cases AUSCOAL has a power to make appropriate adjustments to the Member’s Account Balances, and the apparent effect of the Principal Act is that the Defined Benefit Category is required to be administered as a separate trust.

9. [209]

   It is necessary to consider whether, in the application of Part 9 of the SIS Regulations, the Fund is to be treated as a single fund, or whether the different Categories must be dealt with as if they were separate sub-funds. If the Fund is required to be treated as a single fund, then in a situation of insolvency of the Fund as a whole, or of any of the Categories, there will be a risk that clause 2.5 will have the effect that a deficiency in assets attributed to a Defined Benefit Category, or a member with a defined benefit interest, will be supplemented by the application of assets attributed to the Accumulation Categories. That will not be the case if the SIS Regulations require the Categories to be treated as separate sub-funds in insolvency.

10. [210]

    Part 29 of the SIS Act confers power on APRA to grant exemptions from, and make modifications of, certain provisions of the Act and the regulations: see s 326. Section 327 of the SIS Act provides that the meaning of "modifiable provision" includes: "(h) a provision of any regulations made for the purposes of a provision referred to in paragraphs (a) to (g) [of s 327].” One of the provisions referred to in paragraph (a) of s 327 is "a provision of Part…3." Part 3 concerns "Operating Standards", and s 31, within Part 3, provides in subsection (1): "The regulations may prescribe standards applicable to the operation of regulated superannuation funds (funds) and to trustees and RSE licensees of those funds." Subsection (2) contains, on an inclusive basis, the matters in relation to which standards may be prescribed. They include: "(s) the financial position of funds…(t) the funding and solvency of funds; (u) the winding-up of funds." Section 332(1) of the SIS Act has the effect that APRA may, in writing, declare that a modifiable provision is to have effect as if it were modified as specified in the declaration. Section 334 has the effect that a declaration made by APRA may relate to a particular superannuation entity.

11. [211]

    As has been noted above, APRA has provisionally indicated a preparedness to exercise its power in s 332 of the SIS Act to modify the application of certain regulations as they are to have effect in relation to AUSCOAL as trustee of Mine Super. The process by which APRA has advised AUSCOAL that it would make a modification declaration has occurred during the course of the hearing of AUSCOAL's application for judicial advice. Accordingly, the substratum upon which the Court has been considering the exercise of its power in s 63 of the Trustee Act has evolved between the commencement of the hearing and the delivery of these reasons for judgment.

12. [212]

    As will be seen, I am satisfied that, if APRA issues the proposed declaration to modify the effect of the relevant regulations, the potential problems caused by the fact that Mine Super is a ‘hybrid’ superannuation fund will be resolved in relation to the application of the SIS legislation. However, as APRA has not yet formally made the declaration, and as AUSCOAL has provided submissions in support of an argument that the Categories should be treated as separate sub-funds under the SIS Regulations, even without the modifications proposed by APRA, it will be necessary to consider the effect of the relevant provisions in the SIS Regulations.

13. [213]

    Part 9 of the SIS Regulations distinguishes between defined benefit funds, members and interests and accumulation funds, members and interests.

14. [214]

    Section 10 of the SIS Act contains definitions of “defined benefit fund” and “defined benefit member”, which in the present circumstances, have the effect that the terms are as defined in the SIS Regulations.

15. [215]

    Regulation 1.03 of the SIS Regulation contains the following relevant definitions:

16. [216]

    Relevantly, it is necessary to determine first whether a particular fund is a defined benefit fund, or an interest is a defined benefit interest, because accumulation funds and accumulation interests are all superannuation funds and interests that are not defined benefit funds and interests.

17. [217]

    Regulation 1.03AAA, referred to in the definition of defined benefit fund, provides:

18. [218]

    The combined effect of the definition of "defined benefit fund" and regulation 1.03AAA is that a regulated superannuation fund is a defined benefit fund if it has at least one defined benefit member or at least one member of the fund receives a defined benefit pension.

19. [219]

    The effect of these provisions is that, if Mine Super is required to be treated as a single fund for the purposes of the application of Part 9 of the SIS Regulations, it will be a defined benefit fund, notwithstanding that the majority of its members by number and beneficial entitlement are members with accumulation interests. Consequently, the provisions of Chapter 9 of the SIS Regulations dealing with defined benefit funds will be applied to the whole Fund as a single entity, including to the two Accumulation Categories, and to the members of other categories with accumulation interests.

20. [220]

    If under Part 9 of the SIS Regulations, the Accumulation Categories were required to be dealt with separately as accumulation sub-funds, then their solvency would be determined by the application of Division 9.6 and their winding up would be governed by Division 9.7. In particular, the priorities as between members in a winding up would be the subject of regulation 9.45, which provides:

21. [221]

    Sub-regulation 9.45(5) would have the effect, if the sub-fund was insolvent at its winding up date, that the assets available for distribution to individual members would be divided in proportion to each member's minimum guaranteed benefit. That would be a fair basis for distribution in accordance with the expectations of members of a superannuation fund with exclusively accumulation members.

22. [222]

    However, if Mine Super is required to be treated as a single defined benefit fund for the purposes of Part 9 of the SIS Regulations, on a winding up of the Fund under Division 9.4, the members of the Accumulation Categories will not enjoy the benefits of the distribution of the available assets attributed to the Accumulation Categories in accordance with regulation 9.45.

23. [223]

    Before I consider the operation of Divisions 9.3 and 9.4 in relation to Mine Super, it will be appropriate to deal with the issue of whether Mine Super is required to be dealt with as a single fund, or whether each Category should be treated as a separate sub-fund.

24. [224]

    Part 9 contains regulations that require sub-funds to be treated as funds for certain purposes. As noted above, Division 9.2A is concerned with the size of defined benefit funds. The Division includes the following regulation:

25. [225]

    Division 9.2B is concerned with the provision of defined benefit pensions. It includes the following regulation:

26. [226]

    I note that s 69A of the SIS Act has a similar effect to these two regulations in relation to when a sub-fund should be treated as a fund, but that is only for the purposes of Part 8, which concerns in-house asset rules applying to regulated superannuation funds.

27. [227]

    The Categories within Mine Super satisfy the requirements of pars (a) and (b) of both of these regulations. However, in each case, the stipulation that a sub-fund is to be treated as a separate fund is expressly stated to apply "for the purposes of this Division". Those purposes are different to the funding and solvency and winding up purposes of Divisions 9.3 and 9.4. Significantly, Divisions 9.3 and 9.4 do not contain regulations that are equivalent to regulations 9.04B and 9.04G.

28. [228]

    In its 11 December 2023 letter, referred to above, APRA stated:

29. [229]

    It is apparently on the basis of this understanding of the operation of Part 9 that APRA has advised AUSCOAL that it would consider exercising its power in s 332 of the SIS Act to modify the operation of certain relevant regulations in their application to Mine Super.

30. [230]

    The draft declaration by APRA contains a schedule that identifies the modifications to the regulations that APRA will consider making. The draft declaration includes an interpretation provision in the following terms:

31. [231]

    If the declaration is made containing that provision, the effect will be that the three Categories that AUSCOAL treats as defined benefit Categories will be treated as separate defined benefit sub-funds, as AUSCOAL accounts separately for the identifiable assets and identifiable beneficiaries of each of those Categories. Although the two Accumulation Categories will not be treated as separate sub-funds, the fact that the three Defined Benefit Categories will each be treated as separate sub-funds should have the effect that the Accumulation Categories will be treated as accumulation funds, and the consequences of the winding up of the separate Defined Benefit Categories should not spill over into or affect the two Accumulation Categories.

32. [232]

    It will now be appropriate to set out the regulations in Divisions 9.3 and 9.4 as they would apply to the three Defined Benefit Categories, after the modifications to the regulations proposed by APRA. The regulations are technical and complex and all are material to the operation of the two Divisions. There is no need for the Court to set out all of the regulations, and to do so would make these reasons more opaque than is necessary. I will set out the regulations that I think require consideration. The modifications are indicated in the conventional way by the underlining of additional wording and the striking through of wording to be deleted:

33. [233]

    The following are material conclusions to be drawn from an analysis of these provisions.

34. [234]

    The first is that regulation 9.23 has the effect that the trustee of a defined benefit fund that is insolvent in the relevant sense must initiate winding up proceedings in accordance with Division 9.4 if the criteria in regulation 9.23(1)(a) or (b) are satisfied and regulation 9.24 does not apply. Insolvency is determined according to the complex process in Division 9.3. The winding up proceedings must be carried out in accordance with Division 9.4 unless, as provided for in regulation 9.23(4), APRA formulates a scheme for the winding up of the fund, or APRA approves a specified alternative course of action.

35. [235]

    In the case of accumulation funds, regulations 9.43 and 9.44 have a comparable effect in cases of the insolvency of the fund.

36. [236]

    The relevance of the provisions of the SIS Regulations dealing with the consequences of the insolvency of a fund is that the trustee may be required to wind up the fund in different circumstances, and according to different rules, than would apply if AUSCOAL had exercised its power under the Trust Deed to terminate a Category or the Fund, or it had responded to the determination of an employer’s participation in the Fund. Consequently, it is necessary for the Court to consider the advice that should be given in response to the questions posed in prayer 1 of the amended summons in two separate circumstances. While this is necessary, it is somewhat arbitrary, because it will always be open to APRA to exercise its modification powers to modify the manner in which certain regulations operate, or its powers under regulations 9.23(4) or 9.24 in the case of defined benefit funds.

37. [237]

    The second matter that requires attention is the effect that Divisions 9.3 and 9.4 would have in the absence of the modifications proposed by APRA. The making of those modifications may supersede the need for this consideration, but it should be recorded as it was the basis upon which AUSCOAL initially sought judicial advice from the Court.

38. [238]

    If Mine Super was required to be treated as a single defined benefit fund, then the unmodified regulations 9.08, 9.09 and 9.17 would have had the effect that the insolvency of the fund would have to be determined on the basis of all of the assets and liabilities of the Fund. The unmodified regulation 9.23 would have required AUSCOAL to initiate the winding up proceedings of the whole Fund, if the criteria contained in regulation 9.23(1) applied. As noted, this would have been subject to any alternative course authorised by APRA under regulation 9.23(4) or regulation 9.24.

39. [239]

    If, under regulation 9.23, the winding up of the Fund was required to be carried out in accordance with Division 9.4, then the distribution of the remaining assets to persons entitled to benefits from the Fund would be governed by regulation 9.25(3)-(5). The application of these sub-regulations depends upon the fund's minimum benefit index, which is a concept dealt with in regulation 9.15. Although the issue is a complex one, the effect of the formula for the determination of the minimum benefit index in regulation 9.15(1) is that, if at the winding up date the fund's minimum benefit index is equal to or greater than 1, regulation 9.25(4) will apply. In that case, individual former members will be entitled to receive their benefits and individual existing members will be entitled to receive not less than the funded minimum requisite benefit.

40. [240]

    As I understand it, the winding up of the Fund will not give rise to concern if the Fund's minimum benefit index at the date of winding up is equal to or greater than one. The concern arises if the Fund's minimum benefit index at the winding up date is less than 1, in which case regulation 9.25(5) must be satisfied. For ease of exposition, I will repeat that sub-regulation here. It provides:

41. [241]

    Unlike regulation 9.45(5), which governs priorities in the winding up of an accumulation fund, and which contains a formula for the distribution of the remaining assets as between accumulation members, in the case of the winding up of defined benefit funds, regulation 9.25(5) merely states that in cases where the minimum benefit index is less than 1, the benefit entitlement allocated to each individual member of the fund must not be greater than the amount to be allocated if the minimum benefit index was equal to or greater than 1 or less than an amount calculated by multiplying that amount by the fund's minimum benefit index at the winding up date.

42. [242]

    Regulation 9.25(5) does not contain a clear formula that would enable the Court to determine whether, and if so, to what extent, the inclusion of defined benefit members in Mine Super would disadvantage accumulation members in the case of the winding up of the Fund under Division 9.4, as a result of clause 2.5 of the Trust Deed having the effect that Mine Super is a single defined benefit fund.

43. [243]

    This consideration led the Court to pose a question to AUSCOAL's solicitors on 20 November 2023, that sought an explanation of the way that regulation 9.25(5) would work in cases where the one fund contained members with accumulation interests and others with defined benefit interests. That was necessary because the range of the benefit entitlements to be allocated to each individual member stated in regulation 9.25(5) did not distinguish between the different types of the member's interests. If the outcome were to be that members with accumulation interests shared in assets attributed to those interests and members with defined benefit interests were to be restricted to assets attributed to those interests, that result would have to depend upon some operation of the rules governing the superannuation scheme that is not evident in regulation 9.25(5).

44. [244]

    In its 11 December 2023 letter, APRA made the following observations about the application of the SIS legislation to hybrid funds:

45. [245]

    In its post-hearing submissions dated 8 December 2023, AUSCOAL made submissions to the effect that the relevant regulations should be interpreted in a “purposive way" rather than literally. That was for practical reasons arising out of the consequences of applying regulations that were suitable only for application to pure defined benefit funds or pure accumulation funds to 'hybrid' funds. AUSCOAL submitted that, as historically it has maintained the assets attributed to the separate Categories in the manner that in other contexts the SIS Regulations would treat as a separate sub-fund, the word "fund" where it appears throughout Part 9 of the SIS Regulations should be given an equivalent meaning. AUSCOAL provided the following response to this question (footnotes omitted):

46. [246]

    I infer from this response and my consideration of the definition of minimum benefit index in regulation 9.15(1) that, if Mine Super is required to be treated as a single defined benefit fund for the purpose of the application of the Regulations, the following propositions are likely to be true. First, because the risk of the insolvency of a defined benefit fund is greater than that for an accumulation fund, because of the possibility that employers will not satisfy their obligations to meet the funding standard in regulation 9.08, a hybrid defined benefit and accumulation fund, such as Mine Super, is more likely to become insolvent than if the accumulation members were part of a separate accumulation fund. Secondly, if distributions are made to all members in the winding up of a hybrid fund in insolvency, the distributions will be based upon the individual members' entitlements, so there will be a risk of defined benefit members receiving part of their distributions out of assets that had been attributed to accumulation members.

47. [247]

    If that would have been the case had divisions 9.3 and 9.4 not been modified, then the Court could not have answered the questions posed in prayer 1(a) and (b) of the amended summons in the manner sought by AUSCOAL.

48. [248]

    However, I am satisfied that if APRA makes the proposed modifications, the effect will be that the three defined benefit Categories in Mine Super will be required to be treated as separate sub-funds for all relevant purposes in the case of the winding up of those sub-funds under Division 9.4. At least in relation to that context, the modifications would enable the Court to answer the questions posed in prayer 1 (a) and (b) of the amended summons in the manner sought by AUSCOAL, insofar as the answers depend on the application of the SIS legislation.

49. [249]

    I have reached this conclusion without the information provided to the Court on this application being sufficient to explain the principles that would be applied in the winding up of a hybrid fund such as Mine Super, if it were treated as a single defined benefit fund for the purposes of Divisions 9.3 and 9.4. The Court has not been given a clear explanation as to how the rules in the Trust Deed may operate in the case of a winding up of the Fund required by the SIS Regulations because of an insolvency of the technical nature that will trigger the requirement for a winding up under the SIS Regulations. As noted above, regulation 9.25(5) requires that a benefit entitlement be allocated to each individual member of the fund within a range. The regulation appears to assume that there is some other effective rule to govern the winding up. It is not clear whether, and if so how, the application of any rules in the Trust Deed would operate to cause a result that satisfied regulation 9.25(5). As I understand par 163 of AUSCOAL's post-hearing submissions, it asserts that regulation 9.25(5) will not work in the case of a hybrid fund, because it requires all of the members to have a minimum requisite benefit, but some members with an accumulation interest will not be allocated a minimum requisite benefit. If the consequence of treating a hybrid fund in the same way as a pure defined benefit fund is that the regulations that govern the winding up of the fund simply do not work, the only salvation may be the application by APRA of its power to modify the applicable regulations.

50. [250]

    The third matter for consideration by the Court is AUSCOAL's submission that it is not necessary for the modifications proposed by APRA to be made before the separate Categories within Mine Super should, as a matter of law, be treated as a single funds for all purposes in the application of Divisions 9.3, 9.4, 9.6 and 9.7 of the SIS Regulations.

51. [251]

    AUSCOAL's submissions on this issue are most fully contained in Part 1, (pars 8-115) of AUSCOAL's post-hearing submissions dated 8 December 2023.

52. [252]

    I have considered all of those submissions but, for the following reasons, I am not satisfied that it would be appropriate in this case for the Court to respond to the request for judicial advice in prayer 1 of the amended summons by proceeding on the basis that, as a matter of law, each Category within Mine Super is to be treated as a separate fund for the purposes of the application of the SIS Regulations.

53. [253]

    In essence, as stated above, AUSCOAL’s submissions propose a “purposive approach to [the] interpretation" of the relevant SIS Regulations, in order to make the whole regulatory scheme workable to achieve the result intended in respect of members with accumulation or defined benefit interests, having regard to the legislative scheme as a whole, including the requirements of the Superannuation Guarantee (Administration) Act 1992 (Cth) and the regulations made under that Act. AUSCOAL also relied upon the submission that this approach would be more consistent with the implied covenants imposed upon it by s 52(2)(e) and (f) of the SIS Act to act fairly in dealing with classes of beneficiaries and to act fairly in dealing with beneficiaries within a class.

54. [254]

    AUSCOAL relied upon the submission that Divisions 9.3 and 9.4 concerning defined benefit funds, and Divisions 9.5 and 9.6, concerning accumulation funds only work clearly and fairly in cases where all members of the fund either have defined benefit interests or accumulation interests, as the case may be. They do not work clearly and fairly in the case of hybrid funds. Accordingly, AUSCOAL submitted, the Court should interpret the SIS Regulations on the basis that, where a single superannuation fund provides defined benefit and accumulation interests to its members, but separately attributes the assets and the liabilities relevant to the defined benefit members and accumulation members, those separate accounting entities should be treated as separate funds for the purposes of the relevant Regulations.

55. [255]

    First, I am mindful that the present application only seeks judicial advice and is not a proceeding inter partes in which the Court has had the benefit of a contradictor. The Court has received the assistance of APRA, but that assistance opposes the interpretation of the SIS Regulations for which AUSCOAL contends. In those circumstances, it will not be appropriate for the Court to give judicial advice that is dependent on the Court's own view as to the probable proper interpretation of the relevant regulations, even if it had been minded to accept AUSCOAL's submissions.

56. [256]

    Secondly, it is obvious from a consideration of the SIS Act, the SIS Regulations and the relevant Prudential Standards that the superannuation industry is a highly and precisely regulated industry. As explained above, regulations 9.04B and 9.04G expressly require that sub-funds be treated as funds for the purposes of Divisions 9.2A and 9.2B. Had the same result been intended to apply to Divisions 9.3, 9.4, 9.6 and 9.7, it would have been a simple matter to amend the SIS Regulations to insert regulations that would have that effect. That has not been done. I do not intend the following proposition to have a general effect, but it will usually not be desirable for the Court to interpret the SIS Regulations in a purposive manner such that the wording of the regulations does not have its literal effect, and where the meaning of some parts of the Regulations is inconsistent with the express meaning of other parts.

57. [257]

    That conclusion is reinforced by the existence of the exemption and modification power vested in APRA by Part 29 of the SIS Act. As the Regulator has power to declare exemptions and modifications where that is necessary and appropriate for the proper and fair operation of the SIS legislation, it is a preferable approach for the Court to allow APRA to exercise its powers, rather than to be too ready to interpret provisions of the SIS legislation in a purposive manner, so that the relevant provisions do not operate clearly and literally in accordance with their terms. That observation is not meant to exclude the possibility that cases will arise where a purposive interpretation is warranted, even where that may appear to depart from the literal wording of the relevant provision (see Greylag Goose Leasing 1410 Designated Activity Co v PT Garuda Indonesia Ltd [2023] NSWCA 134; (2023) 410 ALR 371 at [14] per Bell CJ, Meagher and Kirk JJA agreeing).

58. [258]

    AUSCOAL based its submissions in part on the argument that the Divisions in the SIS Regulations that deal separately with defined benefit funds and accumulation funds appear to assume that the subject funds provide pure defined benefit or accumulation interests, and that this approach is inappropriate to regulate the historical process of mergers that has led to the creation of hybrid funds. Of course, if the SIS Regulations were intended to have a particular effect when they were made in 1994, it is not a valid ground to interpret the Regulations differently to accommodate subsequent structural changes in the superannuation industry in the nature of the creation of hybrid funds by mergers, that may have the effect that the operation of the Regulations as originally made has become impracticable. In any event, even though the definition of "defined benefit fund" in Regulation 1.03 has been amended since the Regulations were first made in 1994, the regulation in its original form provided:

59. [259]

    It has always been the case that a fund is a defined benefit fund, if it has one or more members who are entitled to a defined benefit interest, and an accumulation fund is a fund that is not a defined benefit fund. Thus, the difficulties that may arise from the application of the SIS Regulations to hybrid funds have always been apparent in the Regulations, even if the seriousness of the difficulties may not have been fully appreciated in 1994.

60. [260]

    Although the Court is not called upon to decide the issue, in my view, it will not necessarily follow that, when separate defined benefit funds and accumulation funds are merged into a single trust deed with a single trustee, it will be necessary to treat them as a single fund, and consequently a defined benefit fund for the purposes of the SIS Regulations. On the principles of equity, assets held on trust do not necessarily form part of a single trust just because a single trustee is the holder of the assets, or because a single trust deed governs the obligations of the trustee and the rights of the beneficiaries. The subject matter of a trust is the asset that is held by the trustee on the terms of the trust. It is possible for a single trustee under a single trust deed to hold separate assets on separate trusts. Whether that is the case in a particular situation will in the ordinary case depend upon whether the assets are sufficiently separated and the beneficiaries entitled to the benefit of the trust in respect of those assets are sufficiently separated and defined. It is at least arguable that Divisions 9.3, 9.4, 9.6 and 9.7 of the SIS Regulations may be required to be applied separately to assets held by a single trustee under a single trust deed where in equity there are a number of separate trusts. The fact that the Divisions contemplate pure defined benefit trusts and pure accumulation trusts would support that approach. However, for the argument to be tenable, it would be necessary for the trust deed to confine the entitlements of beneficiaries to the separate, identified assets the subject of the particular trust.

61. [261]

    The problem in the present case is the effect of clause 2.5 of the Trust Deed, which expressly states that the Categories are not separate trusts, and that the liability of the Trustee to pay amounts in respect of beneficiaries relates to all assets of the Fund and is not limited to the assets attributable to any particular Category. It is clause 2.5 that undermines AUSCOAL's argument that the effect of the Trust Deed as a whole is that the Categories are separate funds for the purpose of the operation of the SIS Regulations.

62. [262]

    If the conclusion that I have stated above that the effect of the Principal Act is that the Defined Benefit Category is a separate trust fund is correct, that would strengthen the argument that the Defined Benefit Category is a separate fund for the purposes of the SIS Regulations. However, the legal position would remain uncertain. Clause 2.5 says what it says, and it would be unsatisfactory to determine by the meaning of "fund" where it is used in the SIS Regulations as having the consequence that, notwithstanding clause 2.5, the Defined Benefit Fund is a separate fund, because State legislation in the form of the Principal Act has the effect of invalidating clause 2.5 insofar as it would otherwise apply to the Defined Benefit Category. Furthermore, the issue of what is meant by the word "fund" in the SIS Regulations, and whether it is confined to a single trust fund recognised by the principles of equity, or whether it has a more technical meaning derived from a consideration of the effect of the SIS legislation as a whole, is not a question that I would be prepared to determine on an application for judicial advice, and in the absence of comprehensive submissions concerning the significance of funds in the context of the whole of the SIS legislation.

63. [263]

    The result is that the Court will only be able to give AUSCOAL the judicial advice that it seeks on the condition that APRA will make the declaration modifying relevant regulations, as has been discussed in these reasons.

Response to question in prayer 1(a) of the amended summons

1. [264]

   For convenience, I will restate this question, as follows:

2. [265]

   I make the following initial observations about this question. First, as observed above, in a sense, it is formulated in terms of a double negative, as a result of the use of the expressions "does not expose" and "will not be restricted". Put affirmatively, the question is whether AUSCOAL would be justified in administering and managing Mine Super on the basis that, notwithstanding the presence of clause 2.5 in the Trust deed, in all circumstances the entitlements of beneficiaries with defined benefit interests must be satisfied out of the net value of the assets attributed by AUSCOAL to the Category or division within a Category to which the beneficiaries with defined benefit interests belong. I propose to give the Court's advice in response to the question framed positively.

3. [266]

   Secondly, the question is framed in terms of whether clause 2.5 exposes beneficiaries with an accumulation interest to a risk. Clause 2.5 in its express terms will have that effect unless (a) the provision is invalid in a particular context; (b) some other paramount term of the Trust Deed negates that risk by limiting the assets available to fund defined benefit entitlements; or (c) some term of the Trust Deed gives AUSCOAL a power to limit the assets available to pay defined benefit entitlements, or to adjust those entitlements so that the ultimate result is the same as if the assets available to pay those entitlements had been limited to the assets attributed to the defined benefit Category. In a strict sense, clause 2.5 will create the risk in cases where AUSCOAL must exercise some power in the trust deed to avoid clause 2.5 having the undesired effect. There will be a risk because AUSCOAL will have to act to avoid the undesirable consequence. However, that may be an artificial distinction because AUSCOAL can be expected to exercise the power to avoid the risk.

4. [267]

   It will be convenient to deal first with the situation of a winding up under the SIS Regulations. As explained above, it may be on the proper interpretation of the SIS Regulations that Mine Super is a single fund, without taking into account the effect of clause 2.5. Clause 2.5 makes it clear, however, that Mine Super is a single fund. Consequently, the risk of clause 2.5 having the undesired effect can only be avoided if APRA makes the proposed modifications to the operation of the Regulations in relation to Mine Super.

5. [268]

   Therefore, the judicial advice sought by the question in prayer 1(a) can only be given in the affirmative on the proviso that APRA makes the proposed modifications.

6. [269]

   It is then necessary to consider the judicial advice that should be given on the basis that the Fund, or a Category, is terminated and wound up under the terms of the Trust Deed.

7. [270]

   If the Principal Act has the effect that clause 2.5 is invalid in respect of the Defined Benefit Category, the risk referred to in the question will not arise in respect of beneficiaries with interests in the Defined Benefit Category. However, as explained above, the problem is that the legislation is obscure, and it is not sufficiently clear to the Court that the Defined Benefit Category is in fact and law a successor to the separate funds created by the Principal Act, with the result that the entitlements to beneficiaries of the Defined Benefit Category can only be paid out of the assets that are attributed to that separate fund.

8. [271]

   As it happens, this element of uncertainty in relation to how the Principal Act operates does not appear to matter, because on the termination by AUSCOAL of the Defined Benefits Category and the termination of the Fund, the entitlements of beneficiaries in the Defined Benefit Category can be confined to the assets attributed to that Category: see [193] and [194] above. But that is not by direct operation of the Trust Deed. It depends upon AUSCOAL exercising a power that is given to it in those situations that will have that result. Because the question in prayer 1(a) is formulated in terms of whether AUSCOAL will be justified in administering and managing Mine Super on a particular basis, the question can still be answered in the affirmative. That is because the desired result can be obtained by AUSCOAL exercising a particular power of management. Put another way, AUSCOAL can exercise its power to override the general effect of clause 2.5. If that is so, it will not be critical whether or not the Principal Act invalidates clause 2.5 insofar as it applies to the Defined Benefit Category.

9. [272]

   In the case of beneficiaries with defined benefit entitlements of Category A within the WA Coal Industry Category, upon the termination by AUSCOAL of the whole Fund, the result will be the same as for the Defined Benefit Category: see [195] above. Upon the termination of the Category, AUSCOAL must pay benefits out of the assets of the Category, which will discharge the beneficiaries entitlements. There may be scope for difference of opinion as to how this outcome should be categorised, because it will be a result of the way that AUSCOAL realises the assets and pays the beneficiaries' entitlements, but the practical result will be the same as for the termination of the whole Fund.

10. [273]

    In relation to the MRSS Category, the position is more obscure. Upon the termination of this Category, AUSCOAL has a power to allocate the assets of the Category in the manner that it considers fair and equitable in its absolute discretion, which gives AUSCOAL a power to limit the way that the beneficiaries' entitlements are to be paid. This also allows an affirmative answer to the question, albeit that the avoidance of the risk created by clause 2.1 probably depends upon how AUSCOAL manages the Fund.

11. [274]

    The result is that the Court can answer the question in prayer 1(a) of the amended summons in the affirmative, but on the proviso that APRA modifies the application of the SIS Regulations to Mine Super, and that, to the extent necessary, AUSCOAL exercises its powers in the Trust Deed to neutralise the risk created by clause 2.5.

Response to question in prayer 1(b) of the amended summons

1. [275]

   The question in prayer 1(b) of the amended summons is:

2. [276]

   The question in prayer 1(b) is formulated in terms of the effect of the Trust Deed, rather than in terms of whether AUSCOAL can manage and administer Mine Super in a way that neutralises the risk created by clause 2.5.

3. [277]

   Strictly, that has the result that the question can only be answered affirmatively without qualification in cases where it is the direct effect of the terms of the Trust Deed that the payment of the benefits payable to beneficiaries with defined benefit interests cannot be made out of assets attributed to Accumulation Member Categories or any other Category treated as an Accumulation Category. Where it is necessary for AUSCOAL to exercise a power in the Trust Deed to achieve the same result, the question cannot be answered in the affirmative because the result depends upon AUSCOAL exercising the power to achieve the same result. That may be an artificial difference, as it may be assumed that AUSCOAL will exercise the power in that way.

4. [278]

   The judicial advice given in response to question 1(b) requires the same proviso concerning the modification of the application of the SIS Regulations to Mine Super by APRA, because in the absence of those modifications, the answer to question 1(b) would have to be in the negative. The affirmative answer to the question will also require the proviso that AUSCOAL must exercise its powers in the Trust Deed to confine the payment of benefits payable to beneficiaries with respect to their defined benefit interests to the assets attributed to the Category in which those beneficiaries belong.

Response to question in prayer 1(c) of the amended summons

1. [279]

   The question in prayer 1(c) of the Amended Summons is:

2. [280]

   As explained above, the question in prayer 1(c) is general and raises the issue of whether clause 2.5 alters the benefit entitlements of beneficiaries, which will mean beneficiaries with all of the types of interests that can exist in Mine Super. That will include beneficiaries in Accumulation Categories.

3. [281]

   The question can only be answered in the affirmative if clause 2.5 will not in any situation of its own force alter the entitlements of beneficiaries.

4. [282]

   It will do so in the case where there is a winding up under the SIS Regulations.

5. [283]

   It will not alter the benefit entitlements of beneficiaries in the case of a deficit in the assets attributable to Categories with defined benefit interests for the reasons explained in relation to question 1(a).

6. [284]

   If it is possible to have deficits in assets attributable to Categories with beneficiaries who have accumulation interests, the position may be different. Even if, on the termination of the Fund, AUSCOAL had to pay beneficiaries of Accumulation Categories the full amount of their Member's Account Balances, AUSCOAL could terminate the Accumulation Categories first, and then make fair and equitable adjustments to the entitlements of the beneficiaries of those Categories so that their aggregate entitlements were equal to the value of the assets attributed to the Accumulation Categories: see [198] and [199] above.

7. [285]

   In that case, clause 2.5 itself would alter the benefit entitlements of beneficiaries, but AUSCOAL could counteract that alteration by exercising its power to make appropriate adjustments to the beneficiaries' entitlements.

8. [286]

   The result is that the Court cannot give judicial advice that is an affirmative answer to question 1(c).

9. [287]

   The Court has not been asked to provide judicial advice as to whether AUSCOAL would be justified in amending the Trust Deed to delete clause 2.5. It follows from many of the observations that have been made above, that the introduction of clause 2.5 as part of the Replacement Deed probably changed the rights of existing beneficiaries in a way that may not have been appreciated, and is inconsistent with the fundamental structure of Mine Super, being that the satisfaction of the entitlements of beneficiaries in particular Categories should be paid out of the assets attributed to those Categories. There may, however, be an issue as to whether, clause 2.5 having been inserted in the Trust Deed, the deletion of the clause would affect existing rights of beneficiaries of Mine Super in an impermissible manner. That issue is a complex one that has not been dealt with on this application.

Amendment to Trust Deed to permit reliance upon expert advice

1. [288]

   For convenience, I will set out prayer 3 of the amended summons again. It provides:

2. [289]

   In SCS Super, Hallen J, following the decision of Henry J in NGS Super, said in relation to the application of s 63 of the Trustee Act, in the case where the approval of the Court was sought to an amendment to a trust deed:

3. [290]

   AUSCOAL proposes to amend clauses 4.2 and 6.1 of the Trust Deed. Clause 4 is concerned with trustee powers, discretions and duties. Clause 6 contains an indemnity for AUSCOAL in certain circumstances. If the Trust Deed is amended in the manner proposed, those provisions relevantly will read (putting aside the immaterial changes in punctuation):

4. [291]

   The TWUSUPER Trust Deed that is current as at 4 October 2023 contains in clauses 14(b)(vii) and 16(c) provisions that are materially identical to the provisions that AUSCOAL proposes to insert into the Trust Deed. The purpose of the proposal is to provide to AUSCOAL the benefit of those provisions, but also to cause the Trust Deed to conform in a material respect with terms of the TWUSUPER Trust Deed.

5. [292]

   As is explained above, on 28 June 2011, a new deed was executed to govern Mine Super that replaced the trust deed that had been executed on 31 January 1995, as amended up until that time. The deed that was replaced empowered AUSCOAL in clause 1.6.3(g) to act on the advice or opinion of any Qualified Adviser, without being liable to any person in respect of actions done in good faith based upon the advice or opinion. “Qualified Adviser” was defined in clause 1.1 in a broad way equivalent to the advisers listed in proposed clause 6.1(b). Clause 1.8 extended the indemnity to which AUSCOAL was entitled in a manner materially equivalent to the proposed clause 6.1(b). The provisions in the previous version of the Trust Deed referred to above had substantially the same effect as the provisions that are now proposed to be inserted in the Trust Deed. It is not clear why, in the process of reconstituting Mine Super that was involved in the Replacement Deed executed on 28 June 2011, the earlier provisions empowering AUSCOAL in relation to reliance upon expert advice and the extension of the indemnity were excluded. The proposed amendments therefore will not only conform the Trust Deed to the trust deed that governs TWUSUPER, but they will return the trust deed that governs Mine Super to what is, in substance, its former terms.

6. [293]

   AUSCOAL specifically acknowledged in its submissions in support of an affirmative answer to the question posed to the Court by prayer 3 of the amended summons that it has a conflict between its personal interests and its trustee duties and its obligations under s 52(2)(d) of the SIS Act, which materially provides that the covenants taken by s 52(1) to be contained in the Trust Deed include:

7. [294]

   This covenant recognises the practical reality that conflicts of interest will, from time to time, arise in the administration of superannuation funds as between the trustee and the beneficiaries, and lays down a regime for dealing with those conflicts. The trustee must give priority to the duties to and interests of the beneficiaries; it must ensure that the duties to the beneficiaries are met despite the conflict; and ensure that the interests of the beneficiaries are not adversely affected by the conflict.

8. [295]

   It is plain that, in the management of AUSCOAL as the trustee of a registrable superannuation entity under the SIS Act, the board of directors of the company will be responsible for making decisions on an extremely wide range of issues that will require expertise in many different fields. The directors individually and collectively cannot be expected to have the necessary expertise in all fields. That reality is recognised by APRA Prudential Practice Guide SPG 520 at [13], which includes "… each director is not generally expected to have all the competencies that the Board collectively needs if other directors have those competencies or they are obtained from external consultants or experts and the Board does not unquestionably [unquestioningly?] rely on their advice". It is self-evident that, in a wide range of situations in the proper management of AUSCOAL, the board of directors will be required to rely upon the advice of external expert consultants, subject to the caveat that they do not rely upon that advice unquestioningly.

9. [296]

   Proposed clause 4.2(l) of the Trust Deed recognises and acknowledges the reality that the board of directors of AUSCOAL must, from time to time, appoint expert advisors and consultants and act on the advice given.

10. [297]

    In the absence of such a power, the board of directors of AUSCOAL would have to rely upon their collective expertise, and, as that expertise could not possibly be sufficient to deal with all contingencies, the board of directors would be required to establish in-house expertise so that AUSCOAL would have the capacity to administer and manage Mine Super properly in all circumstances without the ability to rely upon the advice of external expert consultants. That is an impracticable and uneconomic proposition.

11. [298]

    Proposed clause 6.1(a) is present in the current wording of the Trust Deed, as clause 6.1. It is proposed that clause 6.1(b) be added to confirm that the indemnity shall extend to the circumstances where AUSCOAL acts upon the opinion or advice of the expert consultants referred to where AUSCOAL believes in good faith and upon reasonable grounds that those persons are experts in relation to the matters upon which they are consulted.

12. [299]

    As a practical matter, absent such an indemnity, AUSCOAL, its directors and officers would be put in the position where their potential legal liability for acting on the opinion or advice of the external expert consultants would be unclear. The natural consequence of that lack of clarity would be to cause AUSCOAL, in its own interests, to create in-house expertise that would enable it to minimise the risk of its own liability by having the expertise that would be necessary to assess the reliability of the opinions or advice given by external expert consultants. That would plainly be a costly and wasteful course that would not be in the interests of the beneficiaries of Mine Super.

13. [300]

    The most practical and economical result is that the Trust Deed authorise AUSCOAL to rely upon the opinion or advice of relevant external expert consultants who are believed in good faith and upon reasonable grounds to have relevant expertise, and that AUSCOAL be indemnified in respect of the consequences of its acting upon the opinions or advice that it is given.

14. [301]

    The result will be that the interests of the beneficiaries of Mine Super will be protected by the remedies that may be available in the law against external expert consultants, if the opinions or advice given to AUSCOAL causes Mine Super to suffer loss. It will obviate the need for AUSCOAL to duplicate necessary fields of expertise in-house.

15. [302]

    The power at to amend the Trust Deed is found in clause 22.1, which relevantly provides:

16. [303]

    Nothing in this clause precludes AUSCOAL from making the proposed amendment to the Trust Deed.

17. [304]

    On the basis of the considerations set out above, I am satisfied that the interests of the beneficiaries of Mine Super will be served by the making of the proposed amendment, and that the interests of the beneficiaries are not adversely affected by the technical conflict of interest in AUSCOAL in proposing the amendment. In essence, the board of directors of AUSCOAL must conduct its affairs by retaining and relying upon the opinion or advice of external expert consultants in many situations that are essential for the proper administration and management of Mine Super. The board of directors will follow that course, whether or not the proposed amendment is made, because they have no realistic choice. It is not in the interests of the beneficiaries of Mine Super that the board of directors be tempted to rely upon their own expertise, or to partially duplicate in-house the expertise that would be necessary to protect AUSCOAL if it did not have the proposed indemnity.

18. [305]

    Consequently, the Court will respond to the question in prayer 3 of the amended summons by providing advice in the form of an affirmative answer to the question.

Costs

1. [306]

   AUSCOAL is entitled, as trustee of Mine Super to an order that its costs of the proceedings be paid out of the Fund on the indemnity basis. That entitlement arises in equity and under clause 6 of the Trust Deed; it is also consistent with ss 59(4) and 93 of the Trustee Act and UCPR r 42.25: see NGS Super at [108]; SCS Super at [155] and EISS Super at [46].

2. [307]

   From the Court's perspective, this application has required very substantial forensic effort, but I am clearly satisfied that, having regard to the commercial context and the complexity of the issues that have arisen, the forensic effort that has been devoted to the application has been reasonable and well-warranted.

Orders

1. [308]

   The orders of the Court are:

   1. (1)

      Subject to order 3, order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court's opinion and advice that the plaintiff would be justified in administering and managing the Mine Superannuation Fund (Mine Super) on the basis that, on the proper construction of the trust deed, and notwithstanding the presence of clause 2.5:

   2. (2)

      Subject to order 3, order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court's opinion and advice that any benefits payable to a Beneficiary with respect to their defined benefit interest in Mine Super will not be payable from the Assets of Mine Super attributed to Accumulation Member Categories (or any other Category treated by the trustees as an Accumulation Category).

   3. (3)

      The opinion and advice given by the Court by orders 1 and 2 is subject to:

   4. (4)

      Order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court’s opinion and advice that the plaintiff would not be justified in amending the trust deed so as to clarify, for the avoidance of doubt, that clause 2.5 does not alter the benefit entitlements of Members and other Beneficiaries of Mine Super.

   5. (5)

      Order pursuant to s 63 of the Trustee Act 1925 (NSW) and r 55.2 of the Uniform Civil Procedure Rules 2005 (NSW) that it is the Court’s opinion and advice that the plaintiff would be justified in amending the trust deed so as to:

   6. (6)

      Order that the plaintiff’s costs of these proceedings be paid out of the assets of Mine Super on the indemnity basis.