The Courage Case

{Published on 10 October 2014}

A transcript of this important case can be found on the following link:

Courage Pensions Case [1997] 1 All ER 528

PR 10 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.

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.

A “Members’ Handbook” signed by John D. Elliott purports to eliminate survivorship pensions for widows and reduce the value of retrenchment and retirement benefits for male officers by around 80%.

However the “Members’ Handbook” has no legal substance, and benefits are legally determined by the terms of the trust {Regulations of the Fund}.

This then raises the question as could such a reduction in entitlements be legally made to the terms of the trust {Regulations of the Fund}?

The answer this question has been answered in another pension fund case involving Elders IXL Limited and an “actuarial surplus” in three pension funds. This is the Courage Pension Funds Case {Re Courage Group’s Pension Schemes Ryan and others v Imperial Brewing and Leisure Ltd and others [1997] 1 All ER 528}

An attempt was made by Elders IXL Limited and another party to procure the surplus of assets held by these pension funds when Elders IXL Limited purchased Courage Breweries in the United Kingdom in 1986.

The Committee of Management (Trustees) sought legal directions from the UK High Court to determine if proposed amendments to the Regulations of the Fund would be lawful.

That is, could the Power of Amendment contained in Trust Deed of each of the pension funds be used to amend the Regulations of the funds allow the surplus of assets amounting to £80 million to be “extracted” from the three funds.

Millett J ruled:

“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).

Millett J was applying a legal principle of long standing.

In 1758 Lord Northington stated:

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

 

The power to amend the terms of a trust in the Trust Deed is there to promote the purpose of the trust and must be used in the best interests of the beneficiaries. Any purported Deed of Variation that reduced the entitlement of a beneficiary, without the informed consent of the beneficiary, would be held to be void since the amending power had not been used for “the end designed”.

Therefore a purported Deed of Variation may at first glance appear to be a lawful document, however any such document, even if it complied with conditions imposed by the Power of Amendment such as being attested by a majority of Directors, would still be held to be void if the power was used for “any extraneous or ulterior purpose”.

It is extremely easy for a dishonest Trustee to deceive members of the fund who generally have no knowledge of the laws of trusts.

Therefore Mr Elliott will be unable to produce any legally valid Deeds of Variation that would give legal substance to the purported lump sum benefit described in his “Members’ Handbook”.

The terms of the trust established on 23 December 1913 therefore remain unchanged from what they were before 20 December 1982 and qualifying male officers are still entitled to a pension for life and their widows are still entitled to a survivorship pension.