The High Court & Sir Robert Menzies

{Published on 12 October 2014} PR 12 Oct 14   The Chairman of the National Australia Bank (NAB), Mr Michael Chaney AO, and other Board Members have been recently provided with copies of genuine Deeds of an occupational pension fund established in South Australia on 23 December 1913 {Refer below}. This fund was once known as The Provident Fund. Under the provisions of the Trustee Act 1936 (SA), trustees of trusts established in South Australia must be resident in South Australia and can only be temporarily absent for 12 months unless on military service. The reason for this provision is that a trustee has a right to seek advice and directions from the Supreme Court of South Australia if required to ensure that the trust is administered in a lawful manner. The genuine Deeds have until recently been criminally concealed from the members and beneficiaries of this fund by a Victorian resident “Trustee” and were only obtained with the assistance of the Deputy Premier and Attorney-General of South Australia, the Hon John Rau MP, and the Attorney-General’s Department. It is trite law that a trustee has to obey the founding Trust Deed as lawfully amended. The name of The Provident Fund was changed to the Elders IXL Superannuation Fund in 1982. A Select Committee of the Legislative Council of South Australia has confirmed that the benefit provided by The Provident Fund for a male officer who has completed at least 15 years of service is a pension for life that is payable immediately in the event of retrenchment. A widow also has an entitlement to a survivorship pension. However a Members’ Booklet which bears the signature of John D. Elliott purports that amendments were made to replace the pension entitlement with a lump sum benefit which reduced the values of retirement and retrenchment entitlements by around 80%.   This raises the question as to whether such a reduction in benefits could be lawfully made assuming the Trustee or Trustees agreed to such a large reduction and other conditions in the Power of Amendment clause were satisfied. Trustees are supposed to act in the best interests of the Members and Beneficiaries. A “legal looking” document could be drafted that might purport to provide reduced benefits but would such document actually be legally valid? (Sir) Robert Menzies is Australia’s longest serving Prime Minister and was the Attorney-General of Victoria before becoming Prime Minister. In 1932 the Federal Commissioner of Taxation became concerned that Pension Funds could be used as a means of tax avoidance since it was typical for senior executives of companies to also be trustees of the employees’ pension fund. (Sir) Robert Menzies appeared before the High Court of Australia for the Commissioner.   Gas Case The Commissioner was concerned that the employer would claim large tax deductions on contributions made to the pension fund and then amend the regulations of the fund to provide lower benefits to members. This would create an actuarial surplus in the fund that could then be returned to the employer thus escaping taxation. Making reference to the Power of Amendment contained in the Trust Deed Rich J ruled: “It is not the purpose of the provision to enable the destruction of any substantive right to pensions, and an exercise such is apprehended would be not unlike a fraud on a powerMetropolitan Gas Co v FCT [1932] HCA 58; 47 CLR 621 at 635. Therefore the High Court of Australia has affirmed the same principle of law what was referred to by Millett J in The Courage Case “It is trite law that a power can be exercised only for the purpose for which it is conferred, and not for any extraneous or ulterior purpose” Re Courage Group’s Pension Schemes Ryan and others v Imperial Brewing and Leisure Ltd and others [1997] 1 All ER 528 at 537(e) ; [1987] 1 WLR 495 at 505(e). This is a long standing principle of trust law. In 1758 Lord Northington ruled: “No point is better established than that, a person having a power, must execute it bona fide for the end designed, otherwise it is corrupt and void.” Aleyn v Belchier (1758) 1 Eden 132, at p. 138; [1758] EngR 208; 28 E.R. 634, at p. 637. Cited by Dixon J in Mills v Mills  [1938] HCA 4; (1938) 60 CLR 150 A recent survey of members of The Provident Fund who are no longer in the service of the sponsoring Employer found that 75% had been retrenched before attaining the age of 60 and that the average age at the time of retrenchment was 52  and the average period of service was 26 years. Based on an indicative Final Average Salary of $100,000 per annum, the value of this pension entitlement to a married male member of the fund is approximately $1.9 million. However a different benefit is purportedly provided in a Members’ Handbook that has been signed by John D. Elliott. This Members’ Handbook purports that such a member would only be entitled to a lump sum benefit of $337,500 or only 18% of the value of the benefit confirmed by the Select Committee of the Legislative Council of South Australia. Both the High Court of Australia and the High Court of England and Wales (Chancery Division) have affirmed an important legal principle of trust law, namely – the value of a beneficiary’s entitlement under the trust cannot be reduced without the informed consent of that beneficiary. There can be no legally valid Deed of Variation that would eliminate the widow’s survivorship pension or reduce the value of the retrenchment and retirement benefit by 80%.