Plaintiff Trustee appeal dismissed by the Federal Court of Australia

The Full Court of the Federal Court of Australia has dismissed an appeal by a plaintiff Trustee who alleged the Superannuation Complaints Tribunal had erred in finding that the decision by the Trustee was unfair and unreasonable in calculating the ‘transfer value’ of a beneficiary’s pension.


The respondent, Mr Billinghurst, was a former Managing Director of Grosvenor International Australia Pty Ltd and a member of its corporate superannuation fund. Mr Billinghurst was receiving a lifetime pension from the fund. The applicant, Mercer Superannuation (Australia) Limited (Trustee), was the trustee of the fund.

In August 2011, the Employer, Grosvenor Australia Asset Management Pty Ltd, received advice from the Plan Actuary about the possible termination of the Plan.

In November 2011, the Employer notified the Trustee that it would be ceasing to operate as a business effective 31 December 2011 and therefore it would automatically cease to participate in the Plan. The Employer requested the Trustee to prepare calculations of the ‘transfer value’ for each member. The Trustee engaged with the same Plan Actuary that advised the Employer to recommend the basis for determining the transfer value for each member. This basis was ultimately adopted by the Trustee.

Mr Billinghurst complained to the Trustee and provided advice from another actuary, which valued the lump sum equivalent of the pension at a sum higher than the one reached by the Plan Actuary. The differences in the basis used to calculate the lump sums related to the discount rate used and to no allowance being made for pension increases or indexation in the future. However, after obtaining further advice from the Plan Actuary, the Trustee maintained that the lump sum amount was ‘fair and reasonable’.

In February 2013, Mr Billinghurst complained to the Superannuation Complaints Tribunal (Tribunal) on the basis that the Trustee’s decision was unfair and unreasonable pursuant to section 13(2) of the Superannuation (Resolution of Complaints) Act 1993.

The Tribunal’s decision

The Tribunal determined that it was not satisfied that the Trustee’s decision in relation to the calculation of the amount of the lump sum was fair and reasonable in the circumstances. It determined to set aside the Trustee’s decision and remit the matter to the Trustee for reconsideration, obtaining the advice of an actuary not having a conflict of interest. The Trustee was also directed to calculate the lump sum payable without acting on any directions or request by the Employer.

In particular, the Tribunal found that:

  • Under section 52(2)(c) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the Act), in determining the lump sum equivalent to Mr Billinghurst’s pension, the Trustee was required to perform its duty in the best interests of the beneficiaries, including Mr Billinghurst, and to give priority as regards conflicting interests to the interests of the beneficiaries. There was no evidence before the Tribunal that clearly demonstrated that the Trustee gave priority to the interests of the beneficiaries.
  • The Trustee had adopted a discount rate that it considered was ‘fair and reasonable’, rather than what was in the best interests of the beneficiaries.
  • The Trustee had improperly taken into account what the Employer wanted. The Plan Actuary had indicated that he had been asked to provide advice “taking into account the wishes of [Grosvenor] and the top-up contribution it is prepared to make”.
  • The Plan Actuary had a conflict of interest in advising the Trustee because he had already advised the Employer in relation to the calculations and termination of the Plan. It was therefore unreasonable for the Trustee to rely on the recommendations of the Plan Actuary.

First instance decision

The Trustee argued in the Federal Court that the Tribunal erred in approaching its task primarily as a form of judicial review of the Trustee’s decision and by focusing upon whether the Trustee’s reasoning and decision-making process was fair and reasonable, rather than looking at whether the decision itself was fair and reasonable.

The Court rejected the Trustee’s appeal. Moshinsky J noted that whilst the reasons of the Tribunal appeared in some respects to be expressed in the language of judicial review, the Tribunal’s statements needed to be read in the context of the reasons as a whole. In doing so, Justice Moshinsky found that the Tribunal addressed the correct question, namely whether the decision of the Trustee was fair and reasonable in the circumstances. He said that ‘There is, and can be, no hermetically sealed boundary between process and outcome.’

Federal Court of Australia Full Court decision

The Trustee appealed the decision on substantially the same grounds, that the primary judge and the Tribunal misconceived their duty to consider whether the decision was fair and unreasonable, rather than the process.

The appeal was dismissed (2:1, Justice Pagone dissenting).

Justice Flick and Justice Kerr endorsed the approach of the primary judge. They noted that Justice Moshinsky was expressly mindful that the Tribunal’s role was to consider whether the actual decision, as opposed to the process by which the decision was reached, was fair and reasonable. They concurred with the primary judge’s conclusions that, in substance, the Tribunal had addressed the correct question.

Justice Flick and Justice Kerr affirmed the position in Citicorp Life Insurance Ltd v Smith [2005] FCAFC 102 at [19] that:

“depending upon the circumstances, unfairness in process may lead to unfairness in decision”.

Therefore, the Tribunal and his Honour’s findings that the Trustee had acted on the basis of a flawed process was logically capable of supporting a conclusion that the outcome had been unfair.

The Court also held that, in the event of a conflict of duties, it was the Trustee’s duty under s 52(2)(d) of the Act to give priority to Mr Billinghurst’s full pension entitlements. It also stated that there was no reason why the Trustee should not have been obliged to ask the Employer to make additional voluntary contributions to allow it to commute Mr Billinghurst’s pension entitlements to a lump sum if the available funds were insufficient. The Trustee had apparently not considered asking for an additional contribution.


The Court has reinforced that whilst the Tribunal’s role is to consider whether the actual decision of a trustee is unreasonable or unfair, it may also be relevant to look at the process by which the decision was reached.

The decision highlights the restraints on judicial review, that the reasons for a decision under review should not be construed narrowly with an eye attuned to the perception of error. A broad approach should be taken so that:

“a Tribunal’s decision, otherwise comprehensible and legally sound, is not to be set aside on the basis of infelicities in the manner of expression”.

The decision also highlights issues for Trustees who are faced with the termination of defined benefit arrangements. In particular, there is a danger in having the same actuary act for both the Employer and the Fund. There is also danger in paying too much attention to what the employer wants to happen in the circumstances of the termination, and in accepting that a particular level of funds is available for allocation, without at least considering asking the employer for more funds.

Mercer Superannuation (Australia) Limited v Billinghurst [2017] FCAFC 201


Anne MacNamara

Anne advises on regulatory reform, superannuation fund product offerings, licensing, disclosure, fee arrangements and more.

Adrian Verdnik

Adrian’s financial services law practice covers superannuation, managed funds, insurance, and financial advice.

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