Journal of Australian Taxation
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THE TRUE NATURE OF A MEMBER'S INTEREST IN A SUPERANNUATION FUND
By the Honourable Justice Graham Hill[*]
Superannuation schemes may take many forms and the form may dictate the nature of the members’ interests. Statutory schemes apart, a superannuation fund will generally be a trust and the interest of a member a beneficial interest in that trust estate. Depending on the scheme a member's interest may be vested, contingent or merely a right to be considered for benefits by the trustee. While there may be a contract between the member and employer to provide the benefits it is not normal for there to be an enforceable contract between the member and the trustee and in any case the contract right may merge in the trust interest. The general law position is to be effected in the area of family law and is affected now in bankruptcy cases. There have been cases in the United Kingdom and Australia which put emphasis on contractual rights but there is a difficulty in the analysis, particularly in the question what consideration there is between the member and the trustee. The better view will usually be that the beneficiary's interest lies in trust even where some contractual relationship might be made out. In Canada it was suggested that a superannuation deed is really a purchase trust. That suggestion has now been disowned by the Canadian courts in favour of the view that there is normally at least, a trust for beneficiaries.
The title to this article[1] may create a false impression in a number of respects. First it may suggest that in all cases a member will have an interest in some fund. Secondly, it may suggest that every superannuation scheme (to use a more neutral expression than "fund") is actually a fund. Finally, the title may suggest that every member who does have an interest in a fund has the same kind of interest as every other member of every other fund. Put another way, the title suggests that every superannuation fund is the same with the consequence that the interest of every member in every superannuation fund will be the same and that all one has to do is to classify and examine the interest to explain its "true nature".
None of these propositions is true. It is true that for reasons that are largely historical, but which also reflect taxation or regulatory laws most superannuation schemes in Australia, or for that matter, the United Kingdom, are constituted by trust deeds and in consequence they may properly be characterised as funds in which a member might be said to have an interest (using the word "interest" in a non technical sense.) Certainly in both Australia and the United Kingdom the trust would have been the most obvious way to establish a scheme to provide funded superannuation benefits for employees or their dependants. A key element of a funded scheme is investment. Hence, just as the public unit trust provided an obvious vehicle for mutual investment even before the advent of the public company, so the trust provided an obvious vehicle for funded superannuation.
In Australia the emphasis which company law placed on par value and the maintenance of capital and the taxation consequences which flowed from distributions made by companies rendered the corporation generally undesirable as a vehicle for mutual investment. This was not so in the United States where the corporate form became the customary vehicle for public mutual investment. In that country different taxation laws encouraged deferred remuneration schemes and in consequence less reliance on the trust as the appropriate vehicle.
That, even in Australia, there is diversity in superannuation can be seen by comparing two superannuation or pension schemes that have been the subject of analysis by the High Court, as it happens, both in the context of stamp duty, although the context has no
relevance here. The first is that dealt with in Superannuation Fund Investment Trust v Commissioner of Stamp Duties;[2] the second, that dealt with in Tooheys Ltd v Commissioner of Stamp Duties ("Tooheys").[3]
The first of these cases dealt with the question whether the Commonwealth Superannuation Fund Investment Trust ("the Trust"), a corporate body established by the Superannuation Act 1976 (Cth) ("the Act") to manage superannuation funds created by the Act to provide superannuation benefits for Commonwealth public servants and others, was the Crown in the nature of the Commonwealth and thus exempt from stamp duty on the transfer of assets which it purchased. The High Court was equally divided on the question whether the Trust was the Crown, although in the end result that question was not determinative of the stamp duty question. Relevant to the issue whether the Trust was the Crown was whether there was indeed a trust established and, if so, who the beneficiary or beneficiaries of that trust were. In fact three separate views were expressed as to the general nature of the then Commonwealth superannuation scheme or fund.
Stephen J was of the opinion that while both the Commonwealth and members were in a practical sense interested in the management of the fund, it was not profitable to seek to identify any beneficiaries of the fund, although it would seem that his Honour would have generally accepted that there was a trust established if there were beneficiaries. Pension benefits were paid from Consolidated Revenue. Generally when pensions were paid monies held and representing contributions by the members who retired or died were paid into Consolidated Revenue, not to the member, although there were some occasions where the fund would pay accumulated member's contributions to the member, or dependents or legal personal representatives.
Mason J rejected an argument that moneys standing to the credit of the fund belonged in equity to the contributors.[4] In his Honour's view, while the Act prescribed the amounts of the benefits to which contributors became entitled, it did not give them any property or equitable interest in the fund. If any trust existed at all, the Trust was trustee of the monies for the Commonwealth, not the members.
Aickin J was of the view that the assets of the fund were held upon trusts to be ascertained from the statute. His Honour described those trusts briefly as trusts to accumulate and when an employee ceased to be an eligible employee, to pay to the Commonwealth a specified portion of the fund and in some cases to pay a portion of the fund to the employee or dependants or personal representatives. Hence the fund was held primarily, although not exclusively for the purpose of making payments to the Conunonwealth on the happening of certain relevant events. But the Commonwealth was not absolutely entitled, although it would become entitled to parts of the fund from time to time as members retired, or died, or otherwise became entitled to benefits. There was a statutory obligation then upon the Commonwealth to pay pensions as prescribed by the Act out of Consolidated Revenue.
Clearly governments may establish by statute superannuation schemes, providing for benefits to members, or dependents which do not operate in the form of a trust of which members are beneficiaries, and this may be so, irrespective of whether contributions are made by members or by the employer or both. In such cases it can be said that the relevant government or authority will have a statutory obligation to pay benefits in accordance with the statute defining the scheme. It may also be the case that there is a contract between the member and his or her employer relevant to the payment of benefits. The difficulties of characterising a member's interest as lying in contract will be explored below in this article. It may be that those entitled under statute to benefits would have a cause of action implied from the terms of the statute, against the relevant government or govermnent authority administering the scheme, although whether this is so will depend upon the terms of the statute defining the scheme.
By way of comparison the scheme considered by the High Court in Tooheys was a rather more typical private fund for employees of a public company who became members (and their dependants or legal representatives), providing defined end benefits funded by contributions to be made by the employer calculated actuarially. There were trustees, independent of the company. Employees were not parties to the trust deed, which, together with the rules, which were incorporated in the deed, contained many provisions, which might be expected to be found in private trust deeds. There were also other provisions which might operate to limit benefits in a way unusual for private trusts. The company bound itself to make both an initial contribution and subsequent contributions on actuarial advice.
The Full Court of the Supreme Court of NSW noted that the employees had no contractual entitlement to benefits. Immediately after execution of the trust deed there were no members of the fund. Before there could be members of the fund the fund rules provided a system of nomination and acceptance to membership. At the time of execution of the deed there was not, it was held, a completely constituted private trust of property for the benefit of a class, then and there enforceable as such. No employee of the company at that time could be said to have a contingent interest which would entitle him or her to enforce the trust. That would happen only when an employee was nominated, and accepted as a member. At that point of time, but only then, the employee would have an interest in a trust fund.
Walsh J, then a Judge of the Supreme Court of NSW, whose judgment was adopted by the majority of the High Court on the appeal, noted that the entitlement of employees once they became members would not rest solely, if at all, in contract but that rather the trustee would hold the fund upon trust for a class of persons being the members and dependants. The trustees had fiduciary obligations to persons becoming entitled to benefits and were bound to administer the fund in accordance with the deed and the rules. Further, despite the fact that the deed and the rules limited benefits in some circumstances and conferred broad discretions upon the trustees to decide questions affecting the rights of beneficiaries, the exercise of those powers could be controlled by the Court if it could be sbown that the trustees were not acting bona fide and for the proper administration of the fund, but were using the powers given to them in an arbitrary or unreasonable fashion.
Property lawyers of the 19th century were often engaged in characterising interests under trusts, particularly deciding whether they were vested or contingent, defeasible or mere expectancies. Indeed, it was this process of characterisation and the difficult if not then meaningless distinctions involved in it which moved Diplock LJ (as his Lordship then was) to commence his judgment in In re Kilpatrick 's Policies Trusts[5] by saying:
The argument in this appeal is not about "How many angels can stand on the point of a needle." It is about £26,000, but it would have a familiar ring to the schoolmen of the fifteenth century.
At least in relatively recent times the need for such characterisation was largely restricted to the law of death and succession duties. Such cases as there were involving superannuation schemes considered, for the purpose of the relevant revenue statute, such questions as whether a person, usually the widow or some dependant of a deceased employee member, had at the time of death of the member an interest that was "property" or was such as to bring some asset into the dutiable estate of the deceased member in accordance with the language used by the relevant statute.[6]
One such case in the United Kingdom was Re Bibby & Sons Ltd ("Bibby").[7] It concerned a pension scheme which was non contributory, provided under a trust deed constituted by an initial contribution by the employer which was vested in trustees. The trust deed and rules scheduled to it provided for the employee or in the event of the employee's death his widow or children to be paid a pension which related to years of service which the member had with the employer and the employee's remuneration but capped to a certain limit. The statutory issues were whether the widow had an annuity which was purchased or provided by the deceased (alone or jointly with the employer) and if so whether there was a beneficial interest which arose on the deceased's death. Harman J, as his Lordship then was, held that while the deceased's work may have been the causa sina qua non of the granting of the pension, it was the provider of the contribution money (the employer) who purchased the annuity and not the employee either alone or together with the employer. After a careful consideration of the deed Harman J expressed the view that it established a purely discretionary trust under which, so far as the employee or for that matter the widow was concerned, the trustees had an absolute discretion to give or withhold payment of a pension. All the widow had was a right to be considered as an object of the trustee's bounty which was not, as such, a species of property in the sense that word was used in the Finance Act 1894 and there was no beneficial interest which arose in the widow on her husband's death.
His Honour commented:[8]
It is true it is a trust, but it is a trust under which, so far as any employee is concerned, it seems to me the trustees have an absolute discretion either to give or to withhold a pension according to their views of the desirability of paying it. They are not bound, I think, to give any reason, nor bound to do anything but honestly consider the merits of the plaintiff's case. It is true that the plaintiff, perhaps by herself or it may be, in a representation [sic] action, might come to the court for this much assistance, that she could prevent the trustees from embezzling the fund or paying it back to the company and thereby defeating what is called the main object ... Every person wanting a share in this fund must submit himself or herself to the judgment of the trustees, and, if there was a threatened diversion of the money so that the trustees could not perform their part of that function I conceive the Court of Chancery might protect the fund, or might even administer it by way of scheme, but it would still remain vis-à-vis any one widow or any one ex-employee or child of an ex-employee completely discretionary in the trustees either to withhold or to give any moneys at all.
A similar kind of issue arose in Australia in Wayne v Commissioner of Stamp Duties ("Wayne").[9] In that case, however, the deceased had contributed to a compulsory superannuation scheme under which policies of assurance were effected on the life of the deceased in the name of the trustees of the fund to whom the proceeds of those policies were payable. On the member's death a lump sum (which included the policy proceeds) was payable at the discretion of the trustees to the dependants of the deceased. It was held that the dependant to whom the benefit was paid had an interest which had been purchased or provided by the deceased member who had contributed. In the course of his judgment Jacobs J (then of the Supreme Court of NSW and with whose conclusions Asprey JA agreed) made a number of points which may be noted here. His Honour said that under the deed the member had a contingent interest in the policies and other assets of the fund. There was no relation in contract between the member and the trustees, but rather the trustees were under an equitable obligation once moneys had been deducted from the salary of the deceased to use those moneys to pay the premiums on the policies. Further, a beneficial interest in the trust fund arose on the employee's death. On death the dependants, on one view, or the personal representatives of the deceased, or next of kin on the other view, obtained vested rights subject to being divested when the dependants were selected by the trustee as the persons to whom the benefit became payable. It was the dropping of the contingency which caused an interest to arise on the death of the member.
Fortunately, death duties have disappeared in Australia so that issues of this rather technical kind have much less importance than they did. They are not, however, wholly irrelevant in other contexts. The question whether an interest in a superannuation fund is an interest in property may arise under the Duties Act 1997 (NSW) or comparable stamp duties laws in other States or Territories which follow the NSW template for a standardised stamp duty law, where a member transfers or, at least, agrees to transfer, such interest as he has in the fund[10] or perhaps where the member declares a trust of that interest. The question of the effect of provisions against alienability in fund deeds is outside the ambit of the present article. It may also be relevant to consider the nature of a member's interest in determining whether there is a taxable capital gain under the Income Tax Assessment Act 1997 (Cth) arising from a taxable event.
While it may not now generally be relevant to know whether a member of a superannuation scheme which is constituted as a trust fund has an interest which is vested, contingent, defeasible or but a mere spes in a discretionary trust, there are other reasons why the nature of the member's interest may be important. The question whether a member (or dependants etc) has (or have) an interest in a trust fund will be relevant in determining whether the member has a right to approach a Court in its equity jurisdiction and if so the nature of the relief which may be available and in what circumstances. If there is no trust fund, any remedy the member or dependants may have to approach a Court in the event of non-payment of a benefit or other cause might be regulated in contract (with or without additional statutory remedies under the Superannuation Industry (Supervision) Act 1993 (Cth) ("the SIS Act"). It would be a rare case where there was no remedy available at all.[11] In other words, the protection which the law and the Courts afford members of a superannuation fund is linked to the nature of the member's interest, if any, in that fund.[12]
Even where a member's interest in a superannuation fund is a beneficial but discretionary interest, that is to say where the member may have no specific equitable interest in the fund assets, the member, as a beneficiary, will have a right to approach the Court in equity to ensure the due administration of the fund. However, the exercise of discretion by the trustees will be for the trustees and not the Court, so that the Court will only interfere where the discretion has been exercised on wrong principles, has taken into account irrelevant considerations or failed to take account of relevant considerations or the outcome was so unreasonable that no reasonable person acting properly as trustee could arrive at it.[13] It might be added that in respect of preserved benefits which are payable to the member provided the member reaches the retirement age, the member's interest will be more than a mere spes, but rather will be an interest in the technical sense, contingent upon his or her attaining that age.
Another area where it became necessary to consider the nature of a member's interest in a superannuation fund in Australia was the area of family law. In making orders for the adjustment of property between the parties to a marriage the question arose whether, for the purposes of s 4 of the Family Law Act 1975 (Cth), a member's interest in a fund was "property". It was a question upon which there was a division of opinion in the Family Court of Australia. Ultimately the controversy was settled that the interest of a member who had not yet retired was not, in the legislative sense, property. The decision was arrived at not only because the interest was contingent, but also because it was inalienable.[14] While I understand that the Family Court in fact developed ways in which superannuation benefits might indirectly be taken into account in dividing property between spouses, a direct solution was only possible legislatively.[15]
Another reason for understanding the nature of a member's interest in a superannuation fund may be the consequence of the operation of bankruptcy law upon it. Caboche v Ramsay ("Caboche"),[16] which is discussed below is one example. Re Coram; Ex parte Official Trustee in Bankruptcy v Inglis[17] is another. A recent example is to be found in the decision of the Full Federal Court in Benson v Cook.[18] In that case the member, upon termination of the business of his employer, obtained a vested interest in the fund of which he was a member. He directed that his entitlement to benefit be rolled over into superannuation funds conducted by financial institutions for his benefit. Thereafter he committed an act of bankruptcy and subsequently became a bankrupt. The issue which arose was whether the rolled over benefits became an asset in the bankruptcy. It was held by Beaumont and Kiefel JJ (Hely J, dissenting on the issue of consideration) that the bankrupt had made a disposition of property which was a settlement within s 120 of the Bankruptcy Act 1966 (Cth) but that the financial institutions were purchasers for valuable consideration so that the settlement could not be set aside in bankruptcy. Since the transactions took place the bankruptcy law was amended to exempt from the operation of bankruptcy the interest of a bankrupt in a regulated superannuation fund, but subject to s 116(2)(d)(iii)(A) of the SIS Act. An application for special leave to appeal to the High Court against this decision has been filed, but not yet heard.
Finally, it is necessary to understand the nature of a member's interest in a fund when coming to interpret regulatory legislation directed at superannuation funds, for example, the SIS Act and the Regulations made there under. That legislation proceeds, it may be said, generally upon the basis that a member's interest in a superannuation fund will be a beneficial interest in a trust estate. However, it is also clear from the definition of "governing rules"[19] that the ambit of the legislation extends beyond superannuation funds established as trusts and includes "schemes" as well as "funds" or "trusts".
A convenient starting point for analysing the nature of a member's interest in a superannuation scheme is to distinguish the two main kinds of funds commonly used in Australia and elsewhere. It is not proposed to discuss further, statutory funds or other schemes provided for by statute.
The earliest (and perhaps the simplest) superannuation schemes implemented in Australia took, and probably still take, the form of accumulated benefits funds. Under such schemes contributions are made by the employer and/or the employees, usually on a regular basis, and it is required that the accounts of the fund record separately, for each member, the contributions received. The deed requires the trustees to invest contributions in investments which the deed authorises and to allocate the income arising from such investments yearly (or at some more regular basis) to the accounts of members, usually pro rata to the member's interest valued at a particular time. Gains or losses on investments (and administration or other expenses) are likewise allocated among members. When a member retires (or perhaps in circumstances of incapacity or other defined circumstances) he or she is paid out of the fund an amount equal to the member's interest (with or without pro rata allocation of interest up to the date of retirement and with or without at the time a revaluation of investments). Likewise, when the member dies a benefit is payable to the legal personal representative or dependants of the member and the calculation of that benefit is made on the same basis as the calculation would be made if the member retired rather than died.
It will be noted that the accounting procedure adopted in this kind of fund is not unlike that adopted in mutual funds where annual income, profits or losses will be allocated or born among unit holders pro rata to unit holdings and where the deed permits redemption of units and in consequence the payment out of the fund of a share of the trust assets pro rata to unit holding where a unit is redeemed. What may differ is the extent to which the deed provides for benefits (or at least those funded from employer contributions) to be forfeited. For example, it is not unusual for a fund deed to permit the trustee to forfeit benefits where the member has embezzled funds from the employer and the forfeited benefit to be either paid to the employer or allocated among other fund members. It must be noted, however, that forfeiture and the times where benefits may be paid are affected by legislation such as the Occupational Superannuation Standards Act 1987 (Cth).
An example of such a scheme can be found in Caboche.[20] In that case there was only one member of the fund, Mr Bond, although the principles relevant in that case would have been the same, even if there had been other members. The deed provided that on retirement and in other circumstances, but subject to preserved benefits, members became entitled to what was in essence the amount standing to the credit of the member's account. The issue which arose was whether, when Mr Bond ceased to be a director of certain companies, his benefit (or at least that part of it which was not a preserved benefit) vested absolutely in him and in consequence was property which on his bankruptcy vested in his trustee in bankruptcy. A subsidiary question was whether a provision in the deed which provided for benefits to be forfeited should an act of bankruptcy be committed, was valid to defeat the interest of the trustee in bankruptcy.
I held at first instance that Mr Bond on ceasing to be a director of the group of companies referred to in the deed had vested in him an interest in the fund assets (subject to the preserved benefit which did not vest) so that he became absolutely entitled to the fund assets. Further, I held that the provision relating to forfeiture was void. The decision was unanimously affirmed by the Full Court. Gummow J, then a Judge of the Federal Court, discussed the nature of the interests which the trust deed created. His Honour said:[21]
In Cowan v Scargill [1985] Ch 270 at 292, Sir Robert Megarry V-C reached the "unhesitating conclusion" that the trusts of pension funds are in general governed by the ordinary law of trusts, subject to any contrary provisions in the rules or other provisions which govern the trust. See also Lock v Westpac Banking Corp (1991) 25 NSWLR 593 at 610. I have earlier pointed out that although all the money forming the corpus of the fund was originally contributed by one or more employers of Bond, the bulk of the money was settled on the trustees of the fund by the trustee of a previous fund. The remainder was settled on the trustees of the fund by BCH, an employer of Mr Bond. Therefore, strictly speaking, there may be two separate trusts administered by the same trustees and governed by the same trust deed; see Atwill v Commissioner of Stamp Duties (1970) 72 SR (NSW) 415 at 426, per Mason JA.
The property forming the fund was settled on the trustees for the benefit of Mr Bond. Upon the constitution of the fund Mr Bond obtained an equitable proprietary interest in the fund, albeit one which did not carry an immediate right to payment ...
The interest of Mr Bond was conditional in the sense that no benefit might be paid until certain conditions were satisfied. ... Upon the occurrence of any of these conditions, Mr Bond's interest is altered. For example, if Mr Bond were to retire from the employment of an employer but not from the workforce, then under r 9(2) he would obtain two further interests, one being a right to immediate payment of so much of his member account balance as is not required to be preserved, and the other being a further conditional interest in so much of his member account balance as is required by the Standards Act or the regulations to be preserved ...
Following the events in Caboche the bankruptcy legislation was amended[22] in 1993 so as to render void provisions in the rules of superannuation funds having the effect of cancelling, forfeiting, reducing or qualifying the beneficial interest of a member in a fund and exempting from the property of a bankrupt divisible among creditors his or her interest in a regulated superannuation fund within the meaning of the SIS Act, but subject to s 116(5) of that Act.
In principle, there is little difference between the normal end benefit scheme, on the one hand and the accumulated benefit type of scheme on the other, in that both generally take the form of a trust as Tooheys, referred to above, shows. Generally the deed will require the employer to make contributions from time to time in accordance with actuarial advice and in order to fund the benefits which the deed provides for employees or dependants, benefits which may be based on final end salary, average salary over a period or some other formula.
Subject to matters of discretion, however, a member will clearly not have an interest in the fund, that is quantified in money terms, before an event occurs which entitles that member to a benefit. However, it will be accurate, subject to special provisions in the deed, to say that each member has an interest in the fund which is contingent upon reaching retiring age before dying. This will clearly be the case with preserved benefits. It may not be accurate, however, to say that each member has an interest in each and every asset of the fund, even if the fund deed is not discretionary in the sense that the deed in Bibby was. There is an unresolved conflict of authority on the question whether trust beneficiaries, having more than a spec but less than an absolute interest, do have an interest in each asset of the fund.[23] Whatever the correct view may be, the more important question may be what the assets of the trust estate are. To the extent that there are investments in the trust the answer is clear enough. A more difficult question will be whether the trust assets includes a covenant on the part of the employer to make the requisite contribution to fund the benefits. Assuming that the employer has so covenanted (and that will be a matter of construction of the trust deed or agreement entered into between the employer and the trustee) there is no reason why the benefit of the covenant should not be viewed as a trust asset. The issue was side-stepped in Tooheys, but it must be said that at the time the issue was raised there were no members in the fund, so that the value of the covenant, if there was one, would have been nominal.
Even where the member's interest is properly to be characterised as an equitable interest, it is possible for the member to have, as well, a right in contract.
To some extent the question of characterisation of a member's interest in a scheme can be blurred by the existence of two distinct legal relationships and perhaps in some cases two distinct deeds or agreements − the one a deed of trust where clearly the relationships of trustee, trust property and beneficiary are present and what one may refer to as a plan to which the employer and employees are parties which embodies the terms of a contractual relationship. Awards regularly require for superannuation benefits to be provided by employers. A recent example in the context of the Commonwealth superannuation guarantee levy is to be found discussed in the decision of the Full Federal Court in DFC of T v Australian Communication Exchanges Ltd.[24]
In a paper delivered at the Law Council Superannuation Conference in 1992 Lord Browne-Wilkinson suggested that there were special features of superannuation schemes which raised "fundamental questions" as to whether the traditional law of trusts was properly applicable to them. His Lordship referred to the fact that the beneficiaries were not volunteers but gave valuable consideration for the benefits they enjoyed under the scheme. He went so far as to suggest that there was no settlor in the case where both employer and employee contributed, or at least that the employer could not be seen to be the only settlor. His Lordship has made similar comments in Imperial Group Pension Trust Ltd v Imperial Tobacco Ltd,[25] a case concerned with the ability of the committee of management of a defined benefits plan to amend the benefits payable. There, his Lordship said:[26]
Pension scheme trusts are of quite a different nature to traditional trusts. The traditional trust is one under which the settlor, by way of bounty, transfers property to trustees to be administered for the beneficiaries as objects of his bounty. Normally, there is no legal relationship between the parties apart from the trust. The beneficiaries have given no consideration for what they receive. The settlor, as donor, can impose such limits on his bounty as he chooses, including imposing a requirement that the consent of himself or some other person shall be required to the exercise of the powers.
As the Court of Appeal have pointed out in Mihlenstedt v Barclays Bank International Ltd ... a pension scheme is quite different. Pension benefits are part of the consideration which an employee receives in return for the rendering of his services. In many cases, including the present, membership of the pension scheme is a requirement of employment. In contributory schemes, such as this, the employee is himself bound to pay his or her contributions. Beneficiaries of the scheme, the members, far from being volunteers have given valuable consideration. The company employer is not conferring a bounty. In my judgment, the scheme is established against the background of such employment and falls to be interpreted against that background.
There have been statements in other cases to the same effect. For example, Santow J in Uncle v Parker, Warner and Millott[27] said that:
In construing the provisions of a superannuation trust deed, I accept that while the document reflects a trust relationship it is also a contract struck against an employment background which creates rights that increasingly are an important part of the employees' remuneration package.
I do not read his Lordship or for that matter Santow J as really saying either that the benefits of a member are necessarily contractual rather than beneficial, or for that matter that the traditional law of trusts has no longer any application to superannuation schemes. The comments, and there are others to the same effect, are directed at a different question, namely that in construing the terms of a superannuation trust deed, the issue of construction must necessarily take place against the background of the employment relationship between employer and employee, particularly where superannuation forms a term of the employment. Indeed, it is an unexceptional statement of principle that in construing any instrument, whether it is a superannuation deed, or any other deed, regard must always be had to the context, using the word "context" in its broadest sense.[28]
In parenthesis it may be said that the unit trust as an investment vehicle is one where there is no bounty on the part of any settlor and the beneficiaries are not volunteers in any real sense yet the unit interest is a beneficial interest in a trust estate and the interest sounds in equity, not contract. And this will be so even if the unit trust deed provides for a prospective unit holder before units are allotted to sign an application form addressed to the trustee agreeing to abide by the terms of the trust deed.[29] In a technical sense, each unit holder settles an amount representing the subscription moneys for the unit upon the trustee, so that there is no one settlor, just as contributions made, whether by the employer or by the employee or both, can be seen as moneys settled by the person who pays them. If a unit holder contracts with the trustee to pay for a unit the agreement of the unit holder is an asset of the trust, just as a covenant by the employer to make a contribution would be an asset of a superannuation fund. And questions of whether there is a resulting trust should, subject to special provision in the trust deed, require no different answer whether the trust is a normal unit trust, or a superannuation fund.
There will be cases where the provision of superannuation benefits is a term of the employment contract. Generally that means no more than that the employer agrees with the employee that the employer will contribute an amount to a fund which provides those benefits. It does not necessarily follow that the trustee of the fund is a party to any contract with the employee. Nor does it mean that the interest of the employee should be seen to arise in contract. For that matter, the author does not see how the existence of that contract in any way impinges upon the analysis of the interest which the employee has in the superannuation fund, save in the familiar way that the employment relationship may be relevant in construing the superannuation fund deed.
Before mentioning some of the case law which might be called upon to support the view that superannuation benefits should be seen through the law of contract, rather than the law of trust, or even as sui generis, it may be useful to state some obvious propositions for which no authority is needed at all.
First, before a relationship of contract could exist between the trustees of a superannuation fund and employees there would have to be some agreement reached between them. It is unusual for employees to be parties to a superannuation scheme deed. That, prima facie, would suggest that there is no agreement between them, although, it is possible that there could be some verbal agreement outside the provisions of the trust deed. The existence of such a verbal agreement is a matter of fact. However, the reality is that it would be most unusual for such an agreement to exist. As discussed above there will, however, often be an application for membership signed by the employee and addressed to the trustee as a condition of the employee becoming a member. That application form might go so far as to acknowledge that the employee agrees to be bound by the trust deed and rules establishing the scheme. Such an application form might, at least, enable there to be found an agreement between member and trustee, although whether it would suffice to constitute a contractual relationship between them would depend upon the existence of any consideration.[30]
Secondly, therefore, for there to be a relationship in contract between the trustee and an employee member there would need to be consideration in the relevant sense passing between the parties to the contract.
It may be that there is a contract between employer and employee under which the employee is to contribute for the benefit of the employee some amount to provide some superannuation or pension benefit. Whether there is, may, if the plan is established at a time later than the employment relationship, depend upon whether the employee alters his or her position to his or her detriment. It will be easier to fmd a contract for consideration where the provision of superannuation is agreed at the time employment commences, than it will be if superannuation is offered in the course of an existing employment contract. However, awards now regularly provide for superannuation contributions to be made by employers, generally of a specified percentage of usual pay rates, a consequence of the superannuation guarantee levy. Since the award will, where applicable, form the basis of the employment relationship, the existence of a contractual obligation on the part of the employer to contribute will in such cases be readily found.
However, it is one thing to find a contractual relationship between employer and employee obliging the employer to contribute and another to find there to be a binding contract between the employee and the trustee of a fund. Without labouring the point the difficulty in finding such a contract lies not only with finding the existence of an actual agreement between the employee and the trustee, but with finding that there is consideration passing between them.
Thirdly, even if the establishment of a trust to provide superannuation benefits becomes a matter of contract, or the making of contributions to an existing fund becomes a matter of contract, that does not mean that the rights of the beneficiaries under the fund (members or their dependants) are governed by contract. Once the fund is constituted (and in principle, that includes when equity impresses contributions when received with the trusts of an already constituted trust in respect of past contributions) the rights of the beneficiaries thereafter are equitable.
Finally, there is nothing by way of principle which would prevent the rights of a beneficiary in a fund being both contractual and equitable. Whether that is the case must depend upon the circumstances of a particular case
Tooheys, discussed above, involved specifically the question whether there was consideration in the broader conveyancing sense (and thus including consideration in the contractual sense) for the trustee of a superannuation scheme's obligations to hold contributions and investments upon the trust set out in the scheme deed and rules. The argument that there was consideration given was rejected by Walsh J, whose judgment was adopted by a majority of the High Court.[31] His Honour said:[32]
An acceptance of a trust and an agreement to hold the trust property upon the terms of the trust and to administer it accordingly, do not constitute the giving of consideration by the trustees for the property so accepted. If it were so, every trust would have to be regarded as created for full consideration.
Having rejected the argument that there was consideration, his Honour then turned to consider whether the scheme could be regarded as in substance a contract between the company and the employees, by which the former promised to pay certain benefits to those who worked for it for a long period as part of their remuneration for their doing this and under which all employees, to whom benefits accrued, furnished consideration by means of supplying such services. The argument was also rejected. The employees were not parties and no obligation was imposed by or in consequence of the deed upon any employee to continue to work for any period. If an employee elected to become a member he or she would be bound to do certain things such as furnishing evidence of age and entitlement to the trustee and become bound by the rules. This was not consideration. The benefit the employee received was voluntary and it did not matter that it was motivated on the part of the company by commercial reasons, rather than philanthropic reasons.
Dixon CJ was quite brief in rejecting the argument. In his Honour's view the placing of the trust fund in the trustees' hands was no consideration for the present or future equitable interests created by the deed.
Windeyer J made the following comment:[33]
I also agree with Walsh J, that it cannot be said to have been made "for money or moneys worth" passing from those who may become entitled to benefits under it. It is, of course, true that the relationship of master and servant to-day often involves much more than an obligation to pay wages on the one hand and to render services on the other. The right or the opportunity to participate in benefits provided by an employer, such as superannuation schemes, is something that a servant gains by working for that employer. It is part of the rewards of his labours. It is not the produce of pure philanthropy on the part of the employer. But that does not, I think, mean that in cases such as this the advantage that the servant gets from such schemes is for the purposes of the Stamp Duties Act purchased by him for money's worth.
Gummow J in Caboche, took a similar view when considering the question whether the forfeiture clause in the superannuation deed should be seen as a contractual restraint on alienation and rejecting the suggestion that it could. His Honour said:[34]
This is not a case involving a contractual restraint ... Mr Bond was not a party to the deed and his rights as a beneficiary are not contractual. Whether the trust was established voluntarily or pursuant to a binding agreement does not affect the nature of rights over the assets of the fund, which are governed by trust law.
In Gosper v Sawyer [1985] HCA 19; (1985) 160 CLR 548 at 568-9; 58 ALR 13 at 26, Mason and Deane JJ said:
The origins and nature of contract and trust are, of course, quite different. There is however no dichotomy between the two. The contractual relationship provides one of the most common bases for the establishment or implication and for the definition of a trust. Conversely, the trust, particularly the resulting and constructive trust, represents one of the most important means of protecting parties in a contractual relationship and of vindicating contractual rights.
Many equitable rights and interests have their genesis in contract or voluntary covenant. An obvious example is the constitution by A of a trust of Blackacre upon performance by A of a voluntary covenant with B to convey Blackacre to B on trust for C. This may be distinguished from a voluntary declaration of trust by A of Blackacre immediately in favour of C. Another example is a promise for value to settle specific property on trust, which creates equitable rights forthwith, because equity would compel performance of the contractual promise. ... But once the trust is constituted, it is accurate to characterise the rights of the beneficiary simply as equitable. It may be, as Warner J pointed out in Mettoy Pension Trustees Ltd v Evans [1991] 2 All ER 513 at 537 that where the rights of beneficiaries under a pension scheme, in a practical sense, have been "earned" by reason of their derivation from the contracts of employment of members, the provisions of the pension scheme would be construed in a manner "practical and purposive, rather than detached and literal"; cf Re Wilkinson [1926] 1 Ch 842 at 847. However that may be, and whether in this country, there is any need for any such special principle, the present case falls for decision by application of well-settled and fundamental rules of property law.
The principle of construction in Mettoy to which Gummow J referred had, in fact, prior to the decision in Caboche been adopted by Waddell CJ in Eq of the Supreme Court of NSW in Lock v Westpac Banking Corporation ("Lock"),[35] a case in which a deed amending the Westpac fund to permit a surplus in the fund to be returned, as to half, to Westpac and as to the remaining half to be used to increase members' benefits was attacked, as was also the consent to the amendment given by the trustees. It was argued that there could be no power to effect the amendment because the fund was established solely to provide superannuation for eligible employees and the amendment would destroy the substratum of the trust. It was held that both the amending deed and the consent of the trustee to it were valid. The Court would not interfere, except in a case, which this was not, where a discretion or power was being exercised so unreasonably that no reasonable decision maker would so exercise it.
In the course of the judgment Waddell J said:[36]
As has been pointed out in a number of decisions, pension plans are different in nature from traditional trusts. They are based upon a contract between the employer, the trustee, and employees pursuant to which both the employer and the employees contribute to the fund for the purpose of providing defined benefits in defined circumstances to employees. The usual form of trusts involve the creation of a benefit by the settlor for which the beneficiary gives no consideration. Pension schemes are created in the context of the employer/employee relationship and are part of the terms of engagement. The provisions reflect the provisions of laws relating to income tax which are intended to encourage the creation of such schemes. They also reflect the nature of competition between employers for the engagement of suitable staff. An employer who has a power to amend a scheme would naturally take into account the effect of the amendment upon its industrial relations with its staff and the terms of the scheme provided by other employers in the same sphere of activity.
I agree with the following comments of Warner J in Mettoy Pension Trustees Ltd v Evans ...
... the court's approach to the construction of documents relating to a pension scheme should be practical and purposive, rather than detached and literal ... although there are no special rules governing the construction of pension scheme documents, the background facts or surrounding circumstances in the light of which those documents have to be construed − their "matrix of fact" (to use the modem phrase coined by Lord Wilberforce) include four special factors. The first factor is that, as the Court of Appeal pointed out in two unreported cases ... namely Kerr v British Leyland (Staff) Trustees Ltd (unreported) 26 March 1986 ... and Mihlenstedt v Barclays Bank International Ltd ... the beneficiaries under a pension scheme such as this are not volunteers. Their rights have contractual and commercial origins. They are derived from the contracts of employment of the members. The benefits provided under the scheme have been earned by the service of the members under those contracts and, where the scheme is contributory, pro tanto by their contributions.
Finally, reference may be made to Wayne, discussed above, where the argument that there was a contractual basis for the benefits under the fund was rejected by the NSW Court of Appeal.[37]
Regulatory legislation, such as the SIS Act operates, at least in relation to regulated superannuation funds, as defined, to create statutory rights of action in members of superannuation funds who suffer loss or damage, where, for example, the trustee breaches the terms of covenants that the legislation incorporates in the fund rules.[38] Such legislation, while creating new causes of action, operates against the background of the general law analysis of the member's benefit. It does not, by the creation of new remedies in members, substantially alter the underlying legal nature of the member's benefit, which generally will be an interest in a trust fund.
The idea that a superannuation scheme in some way involves a special form of trust, namely, a trust for purposes, and thus a trust without beneficiaries held sway for some time in Canada as a result of dicta to be found in Hockin v Bank of British Columbia (“Hockin”).[39] I should say that the concept of a trust for purposes has never been one looked at with favour by the law (except in the case of charitable trusts) and was described by Dixon J in Tooheys as “anomalous”. Presumably, if the view that a superannuation fund was a trust for purposes were correct, then the orthodox analysis of a member's interest being a beneficial interest in equity would be wrong, for the trust would not be a trust of monies to be held on behalf of members and their dependants on certain contingencies. Perhaps a consequence would be that the rule that a trustee should put the interest of beneficiaries first might require some rethinking.
Hockin was one of the many cases throughout the common law world, like Lock which had to grapple with the problem of the validity of the exercise of a power of amendment of a superannuation plan so as to permit "surpluses" in a defined benefits fund to be returned to the employer who had contributed to the fund.
The principles applicable are not really difficult to state. Presumably the principles would not differ whether the trust were a trust for purposes on the one hand, or in the orthodox way of thinking, a trust for beneficiaries. It is for that reason that the comments made in Hockin can be said to have been dicta and not relevant to the decision at all. Briefly, they can be stated as follows: If the deed permits amendment (and most scheme deeds will), the question is whether, in the context of the deed, the power prohibits the return of the surplus. The interpretation of the power will, of necessity, take into account all the provisions of the deed, including any provision which may operate to prohibit the employer benefiting from the fund. No doubt, it will be relevant in deciding the issue of interpretation to have regard to whether the exercise of the power to permit the return of surpluses will be repugnant to the settlement, having as its main purpose the benefit of employees and their dependants. No doubt it may be relevant to know that equity would prohibit a trustee doing indirectly, what the trustee is prohibited by the deed from doing directly. However, ultimately the question will be one of construction and with the result that the cases will really turn on their own facts, since it is unlikely that one trust deed will be identical to another.
In Hockin, for example, there was a specific power of amendment under which the employer, a bank, reserved to itself the power to amend. The only limitation on the power expressed in the clause dealing with amendment was that the power could not be exercised so as to reduce benefits of members which had accrued or which were funded prior to the amendment without a majority of members giving their approval. It was held that the power could be exercised by the bank to amend the deed and so permit the return of the surplus. This was despite another provision that on termination of the plan the entire fund was to be used for the benefit of retired members and dependants with no part of the fund being returned to the bank. The other provision was held, in the circumstances of the case, not to restrict the power of amendment prior to the termination of the plan and termination had not happened.
In the course of his judgment Carrothers JA of the British Columbia Court of Appeal, delivering the judgment of that Court said:[40]
What we find is not what might be called a classic of standard trust, that is a trust of a certain property or right capable of being subjected to a trust, specified by the settlor, transferred to the trustee, held and administered by the trustee and distributed by the trustee to ascertained or ascertainable beneficiaries, as determined either by the settlor or by the trustee under power of appointment. What we find is not an immutable and completely closed trust for specified beneficiaries, such as may be found in a testamentary document, but rather an accommodating, open trust to provide a range of pension benefits to fluctuating groups of beneficiaries in a range of circumstances.
Here, the Bank as settlor does not settle the trust with a specific property but with the Plan. Fundamentally it is a trust, not of property, but for a purpose. Neither is it an executory trust. The settlor's contributions to the trust are not by the direction of the settlor or trustee ascertained or ascertainable but are calculated and certified from time to time by the actuary. The beneficiaries of the trust, that is the members and other claiming through them, come and go and are determined at any given time not by the settlor or the trustee but by the pension committee. It is the pension committee, not the settlor or the trustee, that dictates payment by the trustee out of the fund of specific pension benefits to specific beneficiaries. In certain circumstances, the pension committee, not the settlor or the trustee, directs a refund from the trust of an ex-employee's own contributions with interest. Here the Bank is not alone as settlor. Strange as it may seem, it is to be observed that the beneficiary employees themselves also effect settlement of the trust with their own contributions. The foregoing exposition ... suggests that the trustee is, in this case, entrusted with the contributions of the employer and employees more in the character of a stakeholder than a trustee.
Although Hockin was referred to with approval by Waddell J in Lock and also by Santow J of the Supreme Court of NSW in Uncle v Parker[41] the concept that a pension fund was a purpose trust was rejected by the Supreme Court of Canada in Schmidt v Air Products Canada Ltd[42] and with respect correctly. As Cory J said:[43]
Trusts for a purpose are a rare species. They constitute an exception to the general rule that trusts for a purpose are void ... The pension trust is more akin to the classic trust than to the trust for a purpose. I agree with the following comments ...
Purpose trusts are trusts for which there is no beneficiary; that is, they are trusts where no person has an equitable entitlement to the trust funds. Funds are deposited in trust in order to see that a particular purpose is filled: people may benefit, but only indirectly.
People are clearly direct beneficiaries of pension trusts. Pension trusts are established not to effect some purpose, such building [sic] a recreation centre, but to provide money on a regular basis to retired employees. It misconceives both the nature of a purpose trust and of a pension trust to suggest that pensions are for purposes, not persons. It is important to recognize that the characterization of pension trusts as purpose trusts results in the pension text, a contract, taking precedence over the trust agreement. That is, in making common-law principles of contract paramount to the equitable principles of trust law. It is trite law that where common law and equity conflict, equity is to prevail. In light of that rule, it seems inappropriate to do indirectly that which could not be done directly.
To repeat, the first step is to determine whether or not the pension fund is in fact a pension trust. This will most often be revealed by the wording of the pension plan itself, but may also be implied from the plan and from the way in which the pension fund is set up. A pension trust is a "classic" or "true" trust and not a mere trust for a purpose.
In 1995 Hockin again came before the British Columbia Court of Appeal.[44] On that occasion the Court abandoned the concept of the purpose trust and applied the principles espoused by the Supreme Court of Canada in Air Products.
More recently in Australia, Beach J of the Supreme Court of Victoria likewise refused to accept what was said in Hockin and, more relevant for present purposes, the analysis of a superannuation fund being a trust for purposes, rather than a trust for beneficiaries.
In an article, "Legal Darwinism; The Evolution of a New Trust Species"[45] Mr Chareneka, clearly a supporter of the view that superannuation funds are a different species to private trusts, and, it would seem of the dicta in Hockin, referred to the decision of the Full Federal Court in FC of T v Commercial Nominees of Australia Ltd[46] in support of his position. The decision of the Federal Court was affirmed by the High Court on appeal.[47] With respect I have some difficulty reading either the decision of the Full Federal Court or for that matter the decision of the High Court as in any way supporting the argument. It is true that the High Court, like the Federal Court took account of "the legal and commercial incidents of superannuation funds" in concluding that the amendments made, substantial as they were, had not brought into existence a new trust estate, with the consequences that losses incurred could not be carried forward. However, there is nothing in the judgment of either Court which would lead to the conclusion that there should be applied to superannuation funds any different equitable analysis than any other form of trust.
It seems to me that there has been some loose thinking in the case law, particularly where comments have been made as to the nature of the interest of a member in a superannuation fund. In part, this has arisen from a dissatisfaction in some as to the adequacy of remedies available in courts of equity. In part it has arisen because, in modem labour relations, superannuation is usually a term of employment. In part, as I have suggested, it has arisen because it is possible for there to coexist both contractual rights, (whether between employer and trustee, between employee and trustee or between employer and employee relating to superannuation) and trust rights, not only as between the trustee of the scheme and the trust property, but as between the trustee and the employee.
The contractual relationship that may exist between employer and employee will usually govern the contribution which the employer is required to make for the provision of benefits for the employee and that relationship will be a relevant factor in construing the terms of the superannuation deed, particularly where it has come into existence as the vehicle for the provision of the superannuation benefits contracted for. However, the situation in Australia will be that the true nature of the employee's interest in the normal scheme, whether contributory or non contributory, and whether the benefits may be accumulations or defined end benefits, is a beneficial interest in a trust estate governed wholly (subject to legislative intervention or administrative action, for example by the Superannuation Complaints Tribunal) by the law of trusts.
[*] Justice of the Federal Court of Australia.
[1] This article is based on a paper delivered at the Law Council Superannuation Conference, Adelaide 20-23 February 2002 in memory of the late Libby Slater.
[2] [1979] HCA 34; (1978-79) 145 CLR 330.
[3] [1961] HCA 35; (1960-61) 105 CLR 602. A detailed description of the deed and rules will be found in the decision of the Full Court of the Supreme Court of NSW at [1960] SR (NSW) 539.
[4] [1979] HCA 34; (1978-79) 145 CLR 330, 354.
[5] [1966] 1 Ch 730, 763.
[6] The relevant English provision was s 2(1)(d) of the Finance Act 1894 (Eng). The comparable NSW provision was s 102(2)(i) of the Stamp Duties Act 1920 and there were similar provisions in some States of the Commonwealth. The NSW provision included in the dutiable estate by reference to which death duty was to be calculated: "Any annuity or other interest purchased or provided by the deceased ... either by himself alone or in concert or by arrangement with any other person, to the extent of the beneficial interest accruing or arising by survivorship or otherwise on the death of the deceased".
[8] Ibid 486.
[10] See s 11(1) which includes in the definition of "dutiable property" any interest in any of the other kinds of dutiable property listed in the section, such as land or shares.
[11] There can be cases where a member who has an equitable interest in a fund also has rights in contract against the trustee of that fund as well as rights in equity. However, the converse is not the case. A member who has no equitable interest in the broadest sense in a fund obviously can have no rights in equity against the trustees, although the member might or might not have rights in contract.
[12] A case where the obligations owed by an employer to members might have differed, depending upon whether the member's rights were analysed solely by reference to trust law or by reference to the law of contract is Mihlenstedt v Barclays Bank International Ltd [1989] IRLR 522, discussed below.
[13] See, for example, Hillsdown Holdings v Pension Ombudsman [1997] 1 All ER 862; and Edge v Pensions Ombudsman [1999] EWCA Civ 2013; [1999] 4 All ER 546.
[14] Bailey v Bailey [1978] FamCA 20; (1978) 33 FLR 10; and see R Ingleby, "Superannuation and Divorce" [1990] HCA 11; (1990) 64 ALJR 244.
[15] Family Law Legislation Amendment (Superannuation) Act 2001 (Cth), expected to come into effect towards the end of 2002.
[16] [1993] FCA 611; (1993) 119 ALR 215.
[19] See s 10(1).
[20] [1993] FCA 611; (1993) 119 ALR 215.
[21] Ibid 228 and 230.
[22] See now Bankruptcy Act 1966 (Cth), s 302A.
[23] See, for example, In re Young, Trustees, Executors & Agency Co Ltd v Young [1941] VicLawRp 47; [1942] VLR 4, 8 (per Martin J), which suggested that persons entitled to successive interests in a trust estate had no equitable interest in the actual assets of the trust estate, even where administration was complete, Favorke v Steenkopf [1922] 1 Ch 174, which held that an annuitant did not have an interest in the assets of the trust estate out of which the annuity was payable, but cf Commissioner of Stamp Duties v Perpetual Trustee Co Ltd [1926] HCA 14; (1926) 38 CLR 12, which suggested that a life tenant did have an interest in the underlying assets of a trust estate.
[25] [1991] I WLR 589.
[26] Ibid 597.
[27] (1994) 55 IR 120, 123.
[28] CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384.
[29] There is a requirement in publicly offered superannuation funds that prospective members complete an application form addressed to the trustee before becoming a member and such a procedure is also quite usual in smaller private funds as well. There can be a question whether the completion and acceptance of such applications, usually containing an undertaking on the part of prospective members to adhere to the fund rules, can operate to create a contractual relationship between trustee and member completed by acceptance to membership. In United Super Pty Ltd v Built Environs Pty Ltd [2001] SASR 339, a case concerning an industry fund for workers in the building industry, the fund member signed an application form which summarised the benefits payable under the fund and applying to the trustee for admission as a member of the scheme upon the terms and conditions contained in the Deed by which the Scheme was established. It was held by Gray J of the Supreme Court of South Australia that, in addition to a trust relationship between the trustee and the member, there was also a contractual relationship between them, the contract being formed upon acceptance of the application form by the trustee. The judgment contains no discussion of what the consideration was, which passed between the trustee and the member. It merely states the conclusion. Further, the case held that the contract was itself an insurance contact for the purposes of the Insurance Contracts Act 1984 (Cth). Both conclusions would seem to the author, with respect, arguably wrong.
[30] Reference should be made to the discussion in note 29 above.
[31] If there was such consideration and it was at least full consideration in money or moneys worth a lower rate of stamp duty would have been payable under the law as it then stood.
[32] [1960] SR (NSW) 539, 548.
[33] [1961] HCA 35; (1960-61) 105 CLR 602, 624.
[34] [1993] FCA 611; (1993) 119 ALR 215, 232-233.
[36] Ibid 601-602.
[37] The decision in Benson v Cook [2001] FCA 1684, discussed above, which held, by majority, that the roll-over of a vested benefit into another superannuation fund was a settlement made for consideration may be distinguished as depending upon the bankruptcy context in which it was decided. In bankruptcy the question whether the trustee of the fund was a bona fide purchaser for consideration has to be decided "commercially". It can be said that commercially, superannuation, particularly when backed by insurance, is a product which is sold for a price. However, as is shown by United Super Pty Ltd v Built Environs Pty Ltd (see note 29 above) Gray J of the Supreme Court of South Australia appeared to have no difficulty in finding in that case a binding contract between trustee and member of an industry fund formed by the member completing an application for membership of the fund and that application being accepted. The decision would seem to fly in the face of what was said by the High Court in Tooheys.
[39] (1990) 7 DLR (4th) 11.
[40] Ibid 19-20.
[43] Ibid 640.
[44] [1995] BCJ 688.
[45] (2000) 11 Insurance Law Journal 120.
[46] 99 ATC 5115.
[47] 2001 ATC 4336.
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