Re QSuper Board[2021] QSC 276

SUPREME COURT OF QUEENSLAND

Introduction

2. [1]
   The applicant (the QSuper Board) applies to the court for a direction, in the nature of advice, pursuant to s 96(1) of the Trusts Act 1973 (Qld) (the Trusts Act). The QSuper Board is a body corporate created pursuant to s 3 of the Superannuation (State Public Sector) Act 1990 (Qld) (the QSuper Act). Pursuant to s 4 of the QSuper Act, the QSuper Board’s principal function is to administer a scheme (the QSuper Scheme) established by a Deed (the QSuper Deed) for the provision of superannuation, retirement, provident or other similar benefits payable from the State Public Sector Superannuation Fund (the QSuper Fund).
3. [2]
   The QSuper Board is a trustee for the purposes of s 96(1) of the Trusts Act. The QSuper Board is described by the QSuper Act as “a Board of Trustees”.^[1] This court has recognised that the QSuper Board is to be regarded as a trustee and subject to trust obligations in relation to the QSuper Fund.^[2] Notably, “the demonstrated intention of both [the QSuper Act] and [the QSuper Deed] is that [the QSuper Board] is to have the custody and administration of [the QSuper Fund] on behalf of others, namely the members of [the QSuper Scheme] from time to time”.^[3]
4. [3]
   The QSuper Deed may be amended with the consent of the QSuper Board.^[4]  The QSuper Board is considering whether to consent to a proposed amendment to the QSuper Deed (the Proposed Amendment).  The effect of the Proposed Amendment would be to confer upon the QSuper Board powers to charge, and retain for its own benefit, remuneration which it determines to be reasonable and to deduct such remuneration from the assets of the QSuper Fund. The QSuper Board presently has no entitlement to remuneration under the QSuper Deed. The QSuper Deed provides that the QSuper Board is entitled to pay from the QSuper Fund all taxes and all expenses for the operation of the QSuper Fund from time to time. The QSuper Board also presently has a right to reimbursement from the assets of the QSuper Fund under s 72 of the Trusts Act. The exercise of the power to consent to the Proposed Amendment will give rise, prima facie, to a conflict of interest and duty.  As the result of the prospective conflict of interest and duty, the QSuper Board has sought the advice of the court.
5. [4]
   The question then posed by the application is as follows: “Is the QSuper Board justified in consenting to the Proposed Amendment?” (the Question).^[5]

The Proposed Amendment

5. [5]
   The Proposed Amendment is in the following form:

“Remuneration

[1.1] The Trustee is entitled to be paid (and retain for its own benefit) such reasonable remuneration as is determined by the Trustee.

[1.2] The Trustee’s remuneration may be deducted, in the manner determined by the Trustee, from the assets of the Fund.

[1.3] The Trustee may charge a different fee or amount to any Member (or class of Members) based on such criteria as it determines is fair and reasonable.

[1.4] In addition to the remuneration under clause [1.1], the Trustee is entitled to charge and retain for its own benefit from the Fund an amount equal to any fee that it would be entitled to charge any person under the Family Law (Superannuation) Regulations 2001 (Cth).”^[6]

Section 96 of the Trusts Act

6. [6]
   Section 96 of the Trusts Act is in the following terms:

“96  Right of trustee to apply to court for directions

3. (1)
   Any trustee may apply upon a written statement of facts to the court for directions concerning any property subject to a trust, or respecting the management or administration of that property, or respecting the exercise of any power or discretion vested in the trustee.

3. (2)
   Every application made under this section shall be served upon, and the hearing thereof may be attended by, all persons interested in the application or such of them as the court thinks expedient.”

Matters of jurisdiction and discretion 

7. [7]
   The QSuper Board has filed a detailed Amended Statement of Facts and affidavit material. I am satisfied that the information contained within the Amended Statement of Facts and affidavit material sufficiently identifies the relevant factual matters which are to be assumed to exist for the purpose of answering the Question.^[7]
8. [8]
   To engage s 96, the QSuper Board must establish the existence of a question respecting the management or administration of the trust property or the exercise of any power or discretion vested in the trustee. These requirements, if established, confer jurisdiction on the court under the Trusts Act to provide relief under s 96.^[8] The QSuper Deed is subordinate legislation.^[9] It may be amended by regulation.^[10] The QSuper Act provides that the Governor in Council must not make a regulation amending the QSuper Deed without the consent of the QSuper Board.^[11] The source of the Board’s power to consent is the QSuper Act and the power is properly regarded as a power conferred by law and vested in the QSuper Board.  I am satisfied that the application for advice is made in respect of a power vested in the QSuper Board as a trustee and is also in respect of the management of trust property, namely the QSuper Fund.
9. [9]
   Once the relevant jurisdictional facts are established, the court has a discretion whether to provide the requested advice.^[12] The judicial advice procedure is intended to be summary in nature.^[13] In Marley v Mutual Security Merchant Bank and Trust Co Ltd,^[14] the Privy Council observed that “[I]n exercising its jurisdiction to give directions on a trustee’s application, the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties.” The High Court has interpreted this statement as meaning that “the court’s sole purpose in giving judicial advice is to determine what ought to be done in the best interests of the trust estate.”^[15]  The existence of a prospective conflict of interest and duty is a recognised circumstance in which a trustee may approach the court for advice.^[16] The QSuper Board seeks advice in circumstances of a prospective conflict of interest and duty and the advice is of a kind which does not involve the determination of substantive issues as to rights or powers but rather concerns whether proposed conduct would be in the best interests of the members of the QSuper Fund. The advice is sought in circumstances where the Proposed Amendment is acknowledged by APRA as having given rise to “a difficult question subject to contention”. 
10. [10]
    Section 96(2) of the Trusts Act refers to “all persons interested in the application or such of them as the court thinks expedient”. There is no definition of the terms “persons interested” or “expedient”. The corresponding statutory provision in Western Australia has been interpreted as meaning that “service is required only on those persons whose interests are impacted by the application or who the court thinks it expedient to serve.”^[17] In Riddle v Riddle,^[18] Dixon J said that a court’s opinion of what is expedient is “a criterion of the widest and most flexible kind.” Given that the court’s sole purpose in giving judicial advice under s 96(1) is to determine what ought to be done in the best interests of the trust estate, any consideration of who it is expedient to serve must have due regard to what is expedient in the interests of the beneficiaries. In this regard, in MTM Funds Management v Cavalane Holdings Pty Ltd,^[19] Austin J said:

“In my view, there are occasions when judicial advice is an appropriate procedure even though the advice affects the rights of persons who are not represented at the hearing of the application … In many cases the crucial issue for the court will be whether the giving of advice might operate unfairly as regards a person not before it. That, in turn, requires an assessment of whether the court might fail to take into account some relevant submission in the absence of representation of the affected person. But these matters fall within the ambit of the court’s discretion, and the absence of representation of an affected party is not a jurisdictional bar.”

11. [11]
    In KordaMentha Pty Ltd v The Members of the LM Managed Performance Fund (No 2),^[20] Williams J noted that there has been recognition in the authorities that it is important for beneficiaries to be engaged in a dialogue with the trustee. A practical consideration in this regard is that a court is more likely to be able to determine what ought to be done in the best interests of the beneficiaries if it is appraised of competing views and arguments.^[21]
12. [12]
    The QSuper Fund is one of Australia’s largest superannuation funds.  As at 30 June 2021, the QSuper Scheme had more than 620,000 members and more than $120 billion in funds under administration. The membership of the QSuper Scheme is drawn primarily from the Queensland public service. Since 30 June 2017, membership has extended to members of the public.^[22] The QSuper Board is made up of nine members appointed by the Minister,^[23] four representing employers, four nominated by member associations and one being an independent director within the meaning of sections 10(1) and (2) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). The four nominating member associations are the Queensland Nurses and Midwives’ Union, the Queensland Police Union of Employees, the Queensland Teachers’ Union of Employees and Together – ASU.
13. [13]
    To notify the members of the QSuper Scheme of a matter individually would involve the QSuper Board following a procedure described as a “significant event notice”. This process would involve approximately 75% of the members receiving an email and 25% of the members receiving notification by way of the ordinary post. The costs involved in conducting a significant event notice would be approximately $275,000.00. In the ordinary course, members would be allowed up to five weeks to respond to an email or letter sent as part of a significant event notice.
14. [14]
    Each of the nominating member associations have been provided with a copy of the application and advised of the material to be filed in support of the application. The correspondence forwarded to the nominating member associations relevantly stated:^[24]

“Should you have any queries, we would be very happy to respond to them, but we would recommend that, if you have any concerns, you seek your own professional advice regarding the nature of the Application, the impact of [the Proposed Amendment] and the interests of your represented members.

Consistent with its duty of candour, [the QSuper Board] will communicate to the Court any objection to the proposed amendment notified to it by your organisation. Should you, or any of your represented members, wish to present your views in writing or otherwise, please use the details below to contact the Trustee’s solicitors who have been retained to assist the Trustee in making its application to the Court.”

15. [15]
    There has been subsequent interaction between the QSuper Board and the nominating member associations involving follow up emails and telephone calls. The nominating member associations have not expressed any objection or communicated any concerns about the Proposed Amendment.^[25]
16. [16]
    The QSuper Board has also provided APRA with notice of the application. There has been dialogue between APRA and the QSuper Board in the months leading up to this application.^[26] APRA provided written submissions and appeared by senior counsel on the hearing of the application. APRA’s written submissions relevantly noted that its intention was “to assist the court by identifying the legal principles and the discretionary considerations which, in APRA’s view, bear upon the decision whether to grant the relief sought in the Application”.^[27] APRA’s written submissions emphasised that “member outcomes are a critical consideration in the determination of the Application.”^[28]
17. [17]
    Given the large number of individual members, the costs and time involved in complying with the significant event notice procedure, the fact that the nominating member associations have been appraised of the content of the application and the involvement of APRA, I do not see a need for any wider notification of the proceedings. In this regard, I note that a similar course was adopted in Re Cuesuper Pty Ltd^[29] and Re Retail Employees Superannuation Pty Ltd^[30]. I find that the QSuper Board has served the application upon all persons who ought to have been served as a matter of expediency.

The context in which the Question has arisen

18. [18]
    To understand the logic, significance and implications of the Proposed Amendment, it is necessary to outline some of the facts relevant to the operation of the QSuper Scheme and the regulatory landscape within which it is operated. 
19. [19]
    The QSuper Board presently holds a Registrable Superannuation Entity licence (the RSE Licence) issued under the SIS Act and an Australian Financial Services Licence (the AFS Licence) issued under Chapter 7 of the Corporations Act 2001 (Cth) (the Corporations Act). The RSE Licence and the AFS Licence have the effect of making the QSuper Board’s activities subject to regulation by APRA and ASIC. In this regard, for the purposes of the SIS Act and Chapter 7 of the Corporations Act, the QSuper Board does not represent the State, is not an agent or instrumentality of the State and does not have the immunities and privileges of the State.^[31]
20. [20]
    In terms of the RSE Licence, APRA:

    0. (a)
       has the power to suspend or remove the QSuper Board as trustee of the QSuper Fund, including for breaches of any of the conditions of the RSE Licence;^[32]
    1. (b)
       has the power to determine standards relating to prudential matters that must be complied with by the QSuper Board;^[33]
    2. (c)
       has relevantly determined prudential standards which, in terms of their specific application to the QSuper Board:

       1. require the QSuper Board to have in place a conflicts management framework aimed at identifying all potential and actual conflicts in its business operations and ensuring that they are avoided or prudentially managed;^[34]
       2. make the QSuper Board responsible for maintaining the solvency of the QSuper Board and ensuring that the QSuper Board’s business operations have adequate resources to undertake the activities for which it holds the RSE Licence;^[35]
       3. require the QSuper Board to have a strategic objective that supports it in achieving the outcomes it seeks for beneficiaries and the sound and prudent management of its business operations.^[36]
21. [21]
    In terms of the AFS Licence, ASIC has the power to suspend or cancel the AFS Licence.^[37] Sections 52 and 52A of the SIS Act contain trustee covenants which, among other things, require a trustee to act in the best financial interests of its beneficiaries, and to prioritise their interests in the event of a conflict.
22. [22]
    Historically, a breach of the trustee covenants in sections 52 and 52A of the SIS Act did not create the risk of an imposition of a pecuniary penalty. The situation changed as the result of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 (Cth) (the Improving Accountability Act). Relevantly, the Improving Accountability Act inserted sections 54B and 54C into the SIS Act, which prohibit the contravention of a covenant referred to in sections 52 and 52A of the SIS Act and provide that the contravention of such covenants is a civil penalty provision as defined by section 193 of the SIS Act.
23. [23]
    The Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth) (the Strengthened Penalties Act) has amended a number of Acts administered by ASIC, including Chapter 7 of the Corporations Act, increased the severity of penalties for criminal offences, enlarged the scope of the civil penalty regime and the range of scenarios for which infringement notices can be issued and lowered the threshold for establishing “dishonesty” under dishonesty offences under the Corporations Act. The new test for dishonesty is a “single limb” test: conduct is dishonest if it is “dishonest according to the standards of ordinary people”. It is no longer necessary to prove that the conduct was known by the person to be dishonest, according to the standards of ordinary people. The Treasury Laws Amendment (Your Super, Your Future) Act 2021 (Cth) (the Your Super Act) introduced amendments to the regulatory regime to change the statutory duty to act in sections 52(2)(c) and 52A(2)(c) of the SIS Act by substituting the phrase “best financial interests” for the phrase “best interests”.
24. [24]
    Finally, the Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth) (the Hayne Royal Commission Act) also introduced three important legislative changes.
25. [25]
     First, the Hayne Royal Commission Act amended Chapter 7 of the Corporations Act to the effect of providing that a person provides a financial service within the meaning of section 766A (and therefore is subject to regulation under Chapter 7 of the Corporations Act) if they “provide a superannuation trustee service”, which is defined to include any circumstance in which a person operates a registrable superannuation entity as trustee of the entity.^[38]
26. [26]
    Secondly, the Hayne Royal Commission Act introduced a condition that an RSE licensee must not have a duty to act in the interests of another person other than a duty that arises in the course of performing its duties or exercising its powers as a trustee of a registrable superannuation entity or providing personal advice.^[39]
27. [27]
    Thirdly, the Hayne Royal Commission Act amended sections 56(2) and 57(2) of the SIS Act with effect from 1 January 2022. These amendments are shown in mark-up in the passage set out below.

“Section 56(2): A provision in the governing rules of a superannuation entity is void in so far as it would have the effect of exempting a trustee of the entity from, or indemnifying a trustee of the entity against:

(a) liability for breach of trust if the trustee:

(i) fails to act honestly in a matter concerning the entity; or

(ii) intentionally or recklessly fails to exercise, in relation to a matter affecting the entity, the degree of care and diligence that the trustee was required to exercise; or

(b) liability for a monetary penalty under a civil penalty order an amount of a criminal, civil or administrative penalty incurred by the trustee of the entity in relation to a contravention of a law of the Commonwealth (including this Act); or

(c) the payment of any amount payable under an infringement notice (however described) given under a law of the Commonwealth (including this Act); or

(d) liability for the costs of undertaking a course of education in compliance with an education direction (within the meaning of this Act).; or

(e) liability for an administrative penalty imposed by section 166. 

Section 57(2): A provision of the governing rules of a superannuation entity is void in so far as it would have the effect of indemnifying a director of the trustee against:

(a) a liability that arises because of the director:

(i) fails to act honestly in a matter concerning the entity; or

(ii) intentionally or recklessly fails to exercise, in relation to a matter affecting the entity, the degree of care and diligence that the director is required to exercise; or

(b) liability for a monetary penalty under a civil penalty order an amount of a criminal, civil or administrative penalty incurred by the trustee of the entity in relation to a contravention of a law of the Commonwealth (including this Act); or

(c) the payment of any amount payable under an infringement notice (however described) given under a law of the Commonwealth (including this Act); or

(d) liability for the costs of undertaking a course of education in compliance with an education direction (within the meaning of this Act).; or

(e) liability for an administrative penalty imposed by section 166.”

28. [28]
    The amendments to ss 56(2) and 57(2) were discussed in the explanatory memorandum to the Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 in the following terms:

“Extending the SIS Act indemnification prohibitions

9.164 Sections 56 and 57 of the SIS Act currently operate to prevent a superannuation trustee or a director of a superannuation trustee from using trust assets to pay a penalty that they incurred for liabilities arising from breach of trust in certain circumstances or the contravention of certain provisions and types of provisions under the SIS Act.

9.165 In view of the extension of the Australian financial services licensing regime to cover the provision of a superannuation trustee service, Schedule 9 also extends the existing indemnification prohibition. Specifically, sections 56 and 57 of the SIS Act now prevent trustees and directors from using trust assets to pay a criminal, civil or administrative penalty incurred in relation to a contravention of a Commonwealth law.

[Schedule 9, items 63 and 64, sections 56(2) and 57(2) of the SIS Act]

9.166 This means that a superannuation trustee or a director of a superannuation trustee cannot use trust assets to pay a penalty that they incur for the contravention of a provision of the Corporations Act or ASIC Act.

9.167 An application provision clarifies that these amendments apply in relation to liabilities imposed on or after this Schedule’s commencement date.

…

9.168 Note that a contravention of a state or territory law, depending on the circumstances, may amount to a breach of trust within the meaning of sections 56 and 57 of the SIS Act. Such a law would prevent a trustee or director using trust assets to pay a penalty for such a contravention if they fail to act honestly, or intentionally or recklessly fail to exercise the requisite care and diligence, as set out in those sections.”

29. [29]
    Prior to these amendments, sections 56(2) and 57(2) had been understood to allow superannuation fund trustees, and directors of the trustees, to indemnify themselves for all liabilities they incurred by acting as trustee, or as a director of the trustee, even if those liabilities were incurred in breach of trust, except for liabilities which were attributable to dishonest, intentional, or reckless conduct, or a liability with respect to a statutory penalty.
30. [30]
    When the amendments to sections 56(2) and 57(2) take effect, the QSuper Board anticipates that there will be a wide range of potential liabilities from which it will be unable to be indemnified from the QSuper Fund.  The penalties and infringement notices to which the amended sections 56 and 57 apply will arise in a broad range of circumstances, including where the trustee has not engaged in criminal conduct and has not acted dishonestly.^[40] Further, the amendments will take effect in the particular context of the heightened risks of exposure of trustees to penalties arising out of the legislative changes effected by, in particular, the Improving Accountability Act and the Strengthened Penalties Act.

Consideration of the Question and the Court’s Advice

31. [31]
    There is a preliminary issue as to whether the Proposed Amendment contravenes the amendments to sections 56(2) and 57(2) of the SIS Act. APRA’s written submissions described this issue as raising “a difficult question, subject to contention.”^[41] APRA’s ultimate submission was that it “[did] not contend that the Proposed Amendment to introduce a power to charge a fee in order to accumulate resources with which to meet liabilities covered by the preclusion in [the amended s 56(2)] of the SIS Act, engages that preclusion itself.”^[42] The QSuper Board agreed with this submission.^[43]  APRA submitted that “the levying of a fee which is motivated by the need to build up a financial resource that may be deployed by [the QSuper Board] in the event that it becomes subject to a liability against which it cannot be indemnified” would not involve the giving of an exemption or the grant of an indemnity.^[44] APRA submitted that the better view is that the amendments to ss 56(2) and 57(2) of the SIS Act do not prohibit a trustee from using resources that may have come from members in discharging a personal liability but rather are intended to prohibit the trustee from being insulated from personal liability by way of an indemnity.^[45] APRA did not submit that there was any identifiable basis on which equity might seek to preclude the adoption of the Proposed Amendment.^[46]
32. [32]
    In my consideration, the Proposed Amendment is not precluded by the amendments to ss 56(2) and 57(2) of the SIS Act. The provisions appear in a statute which has, as one of its main objects, the prudent management of superannuation funds.^[47] The Proposed Amendment is directed towards conferring upon the QSuper Board a power to charge remuneration which is sought in aid of its obligations to keep itself in a sound financial position. This is fundamentally a prudential matter.^[48] I accept that a trustee with insufficient personal assets to meet a potential liability which might previously have been the subject of an indemnity now precluded by the amendments to ss 56(2) and 57(2) of the SIS Act must be able to arrange access to funds by some different means or face the unacceptable risk of insolvency.^[49] Section 56(2) is directed to provisions in the governing rules of a superannuation entity^[50] which would have the effect of “exempting a trustee … from” or “indemnifying a trustee … against” certain liabilities. Section 199A of the Corporations Act contains similar language. The concern of this type of provision is what might be described as “blank cheque indemnification and exemption”.^[51] These features are not apparent in the Proposed Amendment. The statutory provision also uses technical language, namely “exempting” and “indemnifying”, which is apt to apply to liabilities which have arisen, as distinct from possible, prospective liabilities.^[52] In my consideration, the levying of a fee, which is meant to build up over time into an asset that may be deployed by the trustee in the event that it becomes subject to a liability against which it cannot be indemnified, does not have the substantive effect of conferring an exemption from or indemnifying against that liability. Notably, the fee charged may prove to be insufficient, or excessive, to cover the extent of the liability and does not have the effect of excusing or extinguishing the liability of the trustee.
33. [33]
    APRA made it clear that it did not submit that the Proposed Amendment altered the substratum of the QSuper Fund or was so foreign to the purpose for which the QSuper Fund was established as to characterise any consent to the Proposed Amendment as an improper exercise of power.^[53] Rather, APRA submitted that, having regard to the purpose and nature of the Proposed Amendment, the pertinent inquiry was whether the QSuper Board, in consenting to the Proposed Amendment, would be complying with its general law duties and statutory covenants as the trustee of the QSuper Fund.^[54]
34. [34]
    At the outset of any consideration of the QSuper Board’s general law duties and statutory covenants, it should be observed that, in relation to its prospective consent to the Proposed Amendment, the QSuper Board has obtained legal advice, engaged independent experts and explained its proposed course of conduct to its regulators.  The material before the court evidenced that, in giving consideration to the Proposed Amendment, the QSuper Board has endeavoured to give genuine consideration to the issues posed by the Proposed Amendment and is acting responsibly. There is no suggestion that the QSuper Board is acting in bad faith or that the Proposed Amendment would achieve a grotesquely unreasonable result.^[55]
35. [35]
    To the extent that APRA provided submissions directed towards identifying the legal and factual issues bearing upon the court’s answer to the Question, the substantive issues which emerged concerned whether the court could be satisfied that the QSuper Board was reasonably justified in consenting to the Proposed Amendment, having regard to its general law duty to exercise reasonable care and statutory covenants to act in the best financial interests of the members, avoid conflicts and be impartial. 
36. [36]
    With reference to s 52(2)(c) of the SIS Act, APRA emphasised that, when considering whether to exercise the power to consent to the Proposed Amendment, the QSuper Board is under a duty to act in the best financial interests of the members of the QSuper Fund.^[56]   I consider that a relatively broad and practical approach should be adopted when assessing whether this type of proposed amendment is in the best financial interests of the beneficiaries.^[57] In this regard, the court should consider the interests of present and future beneficiaries and have regard to the commercial and practical realities of the superannuation industry generally. Ultimately, the relevant inquiry for this court is not whether the decision to consent to the Proposed Amendment is in the best financial interests of the members but rather whether it is reasonably justifiable on that basis. In APRA v Kelaher,^[58] Jagot J noted that a reasonably justifiable decision is one where “good and sufficient reasons in support of the decision … exist at the time the decision is made”.
37. [37]
    At a meeting of the trustees of the QSuper Board on 24 June 2021, the trustees of the QSuper Board authorised the QSuper Board to make this application seeking judicial advice. At that meeting, the trustees approved the introduction of “a trustee fee charging power on the basis that it is in the best financial interests of members that the QSuper Board has access to sufficient capital to meet potential liabilities and to mitigate the risks associated with such liabilities (including insolvency risk).”^[59] The conclusion formed by the trustees of the QSuper Board took particular account of the recent amendments to ss 56 and 57 of the SIS Act. However, through the Amended Statement of Facts, the QSuper Board has identified a litany of relevant matters as providing, in effect, the good and sufficient reasons for consenting to the Proposed Amendment. Those matters may be set out as follows:

    0. (a)
       the QSuper Board is not aware of any allegations that it is in breach of trust;
    1. (b)
       the QSuper Board is not aware of any current investigation or enforcement proceeding by APRA or ASIC or any other Commonwealth regulator with respect to it, or any of its individual trustees or officers;
    2. (c)
       there is a high degree of responsibility, range, volume, standard, and complexity of work required of the QSuper Board in circumstances where the QSuper Fund has more than $120 billion under administration and over 620,000 members, belonging to one or more of eleven categories of membership, including accumulation and defined benefits categories;
    3. (d)
       the broad range of highly complex work undertaken by the QSuper Board carries with it the risk of future liabilities being incurred as a trustee holding the AFS Licence and the RSE Licence;
    4. (e)
       the risk of future liabilities is particularly noteworthy given that, from 1 January 2021, a broad range of the QSuper Board’s activities as a “superannuation trustee service” will be subject to regulation under Chapter 7 of the Corporations Act;
    5. (f)
       the QSuper Board expects it will be unable to rely on the immunities and privileges of the State of Queensland for the purposes of any obligations arising under Chapter 7 of the Corporations Act and the SIS Act;^[60]
    6. (g)
       the QSuper Board anticipates that there will be a wide range of potential trustee liabilities that will be unable to be indemnified from the QSuper Fund, by reason of sections 56(2) and 57(2) of the SIS Act and that the range of potential trustee liabilities will expand because of the legislative amendments commencing on 1 January 2022;
    7. (h)
       where the QSuper Board is not able to be indemnified from the QSuper Fund for a liability, the QSuper Board will need to attempt to meet that liability from its own available resources (including insurance and retained earnings);
    8. (i)
       where an individual QSuper Trustee is not able to be indemnified from the QSuper Fund for a liability, the QSuper Board anticipates that he or she will need to meet that liability from the resources of the QSuper Board (if available), or otherwise his or her own available resources (including insurance);
    9. (j)
       the QSuper Board’s historical practice has been to accumulate reserves for liability risks within the QSuper Fund rather than on its own balance sheet;
    10. (k)
        the QSuper Board’s capacity to generate its own resources is restricted by an absence of relevant rights and powers because the QSuper Board has no:

        1. right to remuneration or to charge a fee for profit;
        2. share capital;
        3. right to issue capital;
        4. power to borrow; or
        5. right or power to call on a guarantee or indemnity from the State;
    11. (l)
        the QSuper Board’s capacity to generate its own resources is limited because:

        1. the QSuper Board’s only function is to administer a scheme under s 5 of the QSuper Act; and
        2. since 1 July 2021, the QSuper Board is required to not have a duty to act in the interests of another person other than a duty that arises in the course of performing its duties or exercising its powers as trustee of the QSuper Fund;
    12. (m)
        there has been a recent significant increase in the potential for, and quantum of, fines and civil penalties for contraventions of Chapter 7 of the Corporations Act, and the QSuper Board anticipates that those penalties will be unable to be indemnified from the QSuper Fund;
    13. (n)
        civil penalties for contravention of the trustee covenants in sections 52 and 52A of the SIS Act have been introduced for conduct occurring from 6 April 2019, and those penalties are unable to be indemnified from the QSuper Fund;
    14. (o)
        recent amendments to the duty to act in the best financial interests of beneficiaries in sections 52(2)(c) and 52A(2)(c) of the SIS Act may do more than simply ‘clarify’ existing law, and together with the reversal of the evidentiary burden of proof, may make it more difficult to defend claims for breach of that duty, with any civil penalties incurred unable to be indemnified from the QSuper Fund;
    15. (p)
        APRA and ASIC have indicated an active enforcement agenda with respect to regulated superannuation funds post the Hayne Royal Commission;
    16. (q)
        with a view to mitigating its possible future liabilities for which it will not be able to be indemnified from the QSuper Fund and to promote, facilitate and ensure trustee resilience, the QSuper Board is continuing to make enhancements to its internal risk management systems and processes;
    17. (r)
        the QSuper Board anticipates it could generate a capacity to manage the residual risk of these unfunded potential future liabilities by accumulating retained earnings from its activities;
    18. (s)
        if the Proposed Amendment is made, management can be expected to recommend to the QSuper Board that it establish its own reserve on its own balance sheet, provided that it is satisfied that it has complied with its duties under the QSuper Deed, statute and general law;  
    19. (t)
        the QSuper Board will adapt and adopt compliant reserving policies pursuant to which it anticipates it can smooth the initial impact on current and future members by deducting its remuneration, at least in part, from the QSuper Fund’s reserves rather than immediately increasing the administration fee charged to member accounts;
    20. (u)
        the QSuper Board is unable to obtain a variation to the QSuper Deed by other means;
    21. (v)
        the trustees of the leading retail and industry superannuation funds in Australia are able to rely upon remuneration or fee-charging clauses; and
    22. (w)
        in all of the circumstances, payment of remuneration to a professional trustee with expertise appropriate to the nature of the demands of the trust is in the interests of, and benefits the beneficiaries because it ensures, or is more likely to ensure, the due or proper administration of the trust.
38. [38]
    It is clearly in the best financial interests of the members of the QSuper Scheme that the QSuper Board take steps to ensure the due and proper administration of the QSuper Fund. One important aspect of the due and proper administration of the QSuper Fund involves protecting against any risk of its trustee becoming insolvent. The QSuper Board is required to undertake complex work carrying with it a high degree of responsibility. Given the nature of that work, it is in the best interests of the members of the QSuper Scheme that the QSuper Board be comprised of highly competent, reputable and experienced individuals who are prepared to undertake obligations which have been recognised as significant and burdensome.^[61] Such persons are unlikely to be attracted, or prepared, to serve on the QSuper Board if it is required to operate under the spectre of an insolvency risk.  
39. [39]
    APRA has identified the matters which it considers are particularly relevant to the court’s assessment as to whether the QSuper Board, having regard to its general law duties and statutory covenants, would be justified in consenting to the Proposed Amendment. As a starting point, when addressing these matters, it is relevant to bear in mind that the QSuper Board is seeking advice as to whether it would be justified in consenting to the Proposed Amendment, as distinct from seeking advice as to how the power conferred by the Proposed Amendment ought be exercised in the future. Having made that initial observation, the statement of facts before the court extended to a detailed identification of the facts, matters and circumstances which the QSuper Board can be expected to consider when deciding whether to exercise the remuneration power the subject of the Proposed Amendment. This present expectation forms part of the material on which I am asked to decide whether there exist good and sufficient reasons for the QSuper Board to consent to the Proposed Amendment.
40. [40]
    Relevantly, if the QSuper Deed is amended to provide the QSuper Board with a remuneration power, in exercising that power, the QSuper Board can be expected to do so with reference to the following facts, matters and circumstances:

    0. (a)
       the terms of the Proposed Amendment;
    1. (b)
       the duties and services it has provided and will provide in connection with its role as trustee of the QSuper Fund;
    2. (c)
       the responsibility of the QSuper Board for maintaining its solvency and ensuring that its business operations have adequate resources to undertake the activities for which it holds the RSE Licence;
    3. (d)
       the increase in financial soundness of its operations resulting from accumulation of sufficient capital on the QSuper Board’s balance sheet;
    4. (e)
       the QSuper Board’s risk appetite statement;
    5. (f)
       the risk of regulatory action by ASIC or APRA;
    6. (g)
       forward looking risk indicators, such as internal and external complaint trends and general market conditions;
    7. (h)
       the availability, and timeliness, of any other personal resources, including insurance, the scope of indemnities from third parties including service providers, and the ability of those third parties to satisfy those indemnities;
    8. (i)
       the limitation preventing the QSuper Board from owing a duty to act in the interests of another person other than a duty that arises in the course of acting as an RSE licensee or providing personal advice;
    9. (j)
       the QSuper Board’s ability to generate and maintain capital in its own right and to create and maintain a personal reserve from fees it earns;
    10. (k)
         the reasonableness of any reserve that would be required to offset the risk of potential loss and liabilities in connection with its role as trustee, to the extent the trustee is not otherwise indemnified for those losses or liabilities;
    11. (l)
        the fees necessary and reasonable to charge in order to meet any reasonable reserve in a timely manner, and with regard to the likelihood from time to time of incurring a liability in respect of which the QSuper Board would not be indemnified from the QSuper Fund;
    12. (m)
        that payment of remuneration to a professional trustee with expertise appropriate to the nature of the demands of the QSuper Fund is in the interests of, and financially benefits, the members because it ensures, or is more likely to ensure, the due or proper administration of the trust, particularly having regard to the complexity of work required by the QSuper Board in relation to the QSuper Fund and the need for a degree of financial resilience of the QSuper Board;
    13. (n)
        the financial and disruptive impact on members if the QSuper Board is required to resign or be removed as trustee of QSuper Fund as a result of not being able to satisfy a liability for which it is not entitled to be indemnified for from the assets of the QSuper Fund (e.g. an administrative penalty);
    14. (o)
        the impact on members of charging the fee and the appropriateness of the basis for setting the fee, having regard to factors such as market analysis on the level of fees charged for trustee services, fairness between classes of members and members within a class, intergenerational equity, the circumstances in which the capital will be returned to the QSuper Fund, the impact that charging the fees will have on the QSuper Fund’s performance and comparative analysis between the QSuper Fund and other superannuation funds;
    15. (p)
        the impact of charging a fee for trustee services, including its likely impact on the annual member outcomes assessment and the appropriateness of the basis for setting fees;
    16. (q)
        the impact that charging the fee will have on the annual performance test for each relevant product pursuant to the “Your Future, Your Super” reforms;
    17. (r)
        taxation considerations; and
    18. (s)
        legal advice concerning, and the QSuper Board’s own satisfaction of, its compliance with duties under the QSuper Deed, trust law, the SIS Act and the Corporations Act.
41. [41]
    In the event that the remuneration power is inserted into the QSuper Trust Deed, that power must be exercised for the purposes for which it was given, a matter which is acknowledged by APRA. I am prepared to decide this application on the basis that the QSuper Board is required to, and can be expected to, comply with its duties as a trustee which, inter alia, require the remuneration power to be exercised for a proper purpose having regard to the best financial interests of the members.
42. [42]
    In APRA v Kelaher,^[62] Jagot J observed that “…the best interests of beneficiaries is to be assessed by reference to the circumstances as they exist when the decision is made and not by reference to subsequent unforeseen events.” I accept the QSuper Board’s submission that a significant consideration for this court is that the QSuper Board recognises that it is, and will be, subject to continuing legal obligations in respect of the future manner of exercise of the remuneration power and has indicated a preparedness to continually take and abide by legal advice in relation to the future manner of exercise of that power. In the present case, it can reasonably be assumed that the future exercise of the power conferred by the Proposed Amendment would occur in a regulated environment, following the receipt by the QSuper Board of legal and independent expert advice as to the manner in which the power should be exercised. 
43. [43]
    The Proposed Amendment speaks in terms of “reasonable remuneration”. APRA submits that a reasonable fee would be informed by the fees generally charged by superannuation fund trustees who provide similar services and products.^[63]  APRA has noted that the QSuper Board has not identified the amount which it proposes to charge as a fee and has not indicated whether it will cease to charge for remuneration once a sufficient capital reserve has been established. I consider that it is appropriate that the form of the Proposed Amendment is couched in terms of “reasonable remuneration”. I do not consider it necessary for the QSuper Board to have identified the amount proposed to be charged in any further detail. In this regard, I note that in Re Cuesuper Pty Ltd,^[64] Darke J was prepared to advise the trustees of a large, regulated superannuation fund that they were justified in amending the trust deed to provide for remuneration which “the trustee determines is fair and reasonable”.  Whilst this court has not been provided with a copy of any document governing the future exercise of the remuneration power contemplated by the Proposed Amendment, APRA accepted that the introduction of the power to charge remuneration did not mean that, when the QSuper Board later decided to impose a fee or to continue a fee in operation, its decision making would be entirely unconstrained.^[65] Rather, the same legal duties and obligations, including the statutory covenants, would apply to the QSuper Board in the subsequent exercise of any remuneration power conferred by the Proposed Amendment.^[66] The QSuper Board accepts that APRA would have continuing oversight of the exercise of any remuneration power and that it would be an appropriate exercise of APRA’s regulatory function to assess and regulate the future exercise of the remuneration power.^[67] The fact that the Proposed Amendment is couched in terms of “reasonable remuneration” also means that it would be open to the QSuper Board to seek judicial advice as to whether it was justified in imposing a proposed charge or charges as constituting reasonable remuneration.^[68]
44. [44]
    The Amended Statement of Facts provided that, if the QSuper Board consented to the Proposed Amendment, in later exercising the remuneration power, the QSuper Board could be expected to do so by reference to the impact on members of charging the fee and the appropriateness of the basis for setting the fee, having regard to factors such as market analysis and the level of fees charged for trustee services, fairness between classes of members and members within a class, intergenerational equity, the circumstances in which the capital will be returned to the QSuper Fund, the impact that charging the fees will have on the QSuper Fund’s performance and comparative analysis between the QSuper Fund and other superannuation funds.^[69] It was also accepted by the QSuper Board that the remuneration charging power would only be exercised having regard to legal advice concerning, and the QSuper Board’s own satisfaction of its compliance with, duties under trust law, the SIS Act and the Corporations Act. It can be expected that the future manner of exercise of the remuneration power will at least include a review mechanism to ensure that the amounts charged remains appropriate. This approach is consistent with a trustee’s duty of care, skill and diligence and duty to act in the best financial interest of members. The QSuper Board’s recognition of the applicability of its legal obligations to the future exercise of the remuneration power was appropriate and important for the purpose of providing the advice sought by the application. I regard this recognition as consistent with the conduct of a reasonable trustee in the position of the QSuper Board.
45. [45]
    It should also be observed that the context in which the Proposed Amendment falls to be considered involves not just the QSuper Fund being operated in a regulated environment but also in a competitive environment subject to market pressures. There is a commercial imperative for any remuneration charged by the QSuper Board to be reflective of the fees generally charged by superannuation fund trustees who provide similar services and products. This commercial imperative should not be ignored when construing the Proposed Amendment, ascertaining its objective intent and considering whether the QSuper Board has good and sufficient reasons for consenting to the Proposed Amendment. One of the commercial realities governing the exercise of any power conferred by the Proposed Amendment was explained by the QSuper Board’s submissions as follows:^[70]

“…APRA is required to undertake an annual assessment of superannuation fund products under the ‘Your future, Your super’ reform. This assessment considers the investment returns net of fees and/or tax and compares those against benchmark returns. … this assessment takes into account the actual administration fees and expenses charged in relation to the product being assessed. If the product fails this assessment, the trustee must notify each beneficiary that holds the product that, amongst other matters:

‘Your superannuation product…has performed poorly under an annual performance test that was introduced by the Australian Government… as a result, we are required to write to you and suggest that you consider moving your money into a different superannuation product’

If a trustee is notified that a product has failed the annual performance assessment for two consecutive years, no new beneficiaries can be issued with the product. Accordingly, there is a commercial disincentive that is built into the statutory regime for the applicant to charge administration fees that will result in a product failing APRA’s annual assessment.”

46. [46]
    APRA raised the broad scope of the proposed remuneration power and the current absence of any arrangements to limit its future exercise as issues relevant to whether the QSuper Board’s consent to the Proposed Amendment was in the best financial interests of the members.^[71] I do not consider that the broad scope of the power and the present absence of any documented arrangements governing the future exercise of the power require me to conclude that there is no reasonable justification to consent to the Proposed Amendment. The broad scope of the power would appear to be appropriate given the complex and varied nature of the QSuper Scheme. Further, although broadly drafted, the remuneration power can be expected to be exercised with reference to specific considerations including fairness between classes of beneficiaries and intergenerational equity. The QSuper Board has stated that it will adopt and adapt compliant reserving polies and intends to, and expects that it can, smooth the initial impact on current and future members by deducting its remuneration, at least in part, from an existing reserve rather than immediately increasing the administration fee charged to the member accounts. These statements have been made after the QSuper Board has received independent expert advice.  
47. [47]
    APRA expressed a concern that the broad nature of the charging power and the absence of any documentation in relation to its future exercise might not satisfy the prudence and best financial interests covenants because it may countenance imposing a cost on members “with a view to catering for the reasonable likelihood of liability for seriously delinquent conduct.”^[72] The concern was expressed in terms that^[73] “a trustee might not satisfy the prudence and best financial interest covenants if the trustee’s scheme was to introduce a fee directed to the creation of a capital reserve sufficient to cater not only for regulatory liabilities and infringements of an inadvertent and honest kind, but to cater for any and all non-indemnifiable liabilities that a trustee may incur including where it has acted inappropriately.” I regard these submissions as primarily directed to how the power the subject of the Proposed Amendment might be exercised in the future. The QSuper Board submitted that it had not yet quantified the requisite target amount for any reserve, would do so by reference to loss and probability parameters applying across a range of penalties and would finalise any such amount by reference to the acknowledged need to minimise the impact on members. Further, the QSuper Board submitted that, as APRA had “articulated its opposition to a ‘more significant cost on members with a view to catering for the reasonable likelihood of liability for seriously delinquent conduct’, the [QSuper Board], necessarily, being prudently mindful of its risk appetite and the implicit risk of regulatory action, can be expected to act accordingly when it comes to exercising the remuneration power, once given”.^[74] I accept this submission and treat as an assumed fact for the purpose of this application that the QSuper Board, when it comes to exercise the remuneration power, can be expected to be mindful of, and have due regard to,  APRA’s expressed concern that any charge ought not impose a cost on members to cater for seriously delinquent conduct.
48. [48]
    Finally, APRA submitted that a trustee could be expected to have explored all reasonably available alternative means of establishing sufficient financial resilience, or otherwise mitigating the relevant risk, before imposing a fee upon members. APRA submitted that it was contextually relevant that, until this point in time, the QSuper Board had acted gratuitously. APRA rightly emphasised that, before providing the advice sought, the court needed to be satisfied that the QSuper Board had made an assessment that the fund could not, without any reasonable expectation of stability, continue to be operated without the introduction of a fee charging power as identified by the Proposed Amendment.^[75] The material before me demonstrates to my satisfaction that the QSuper Board has in fact conducted a diligent and conscientious assessment of the reasonably available alternative means of establishing sufficient financial resilience or otherwise mitigating against relevant risks.
49. [49]
    In all of the circumstances, I am prepared to provide the advice requested by the applicant. I answer the Question in the affirmative.

Confidentiality Claims

50. [50]
    The QSuper Board has applied for confidentiality orders in relation to some of the material that has been relied upon on the hearing and determination of this application. The proposed confidentiality orders take two different forms. First, to the extent that entire documents are sought to be made the subject of a confidentiality order, orders are sought that the document be placed in a sealed envelope, marked ‘Confidential – not to be opened without an order of a judge of the court’ and not to be made available for inspection without such an order. Second, in relation to confidential information which has been included in various documents provided to the court, an order is sought that particular parts of the documents be kept confidential, not be published and not made available for inspection without an order of a judge of the court and, to the extent that the document is to be otherwise published, that the confidential parts be redacted.
51. [51]
    The starting point in determining such an application is that the business of this court is to be conducted in public.^[76] The court may, if the public interest or the interests of justice require, by order limit the extent to which the business of the court is open to the public.^[77] The court has the power to limit the extent to which documents received by the court are made available to the public. In Velocity Frequent Flyer Pty Ltd v BP Australia Pty Ltd,^[78] Jackson J observed:

“...it is clear now that this court has a general discretionary statutory power, if the public interest or the interests of justice require, to limit the extent to which the business of the court is open to the public, under s 8(2) Supreme Court of Queensland Act 1991 (Qld).

On the proper construction of that sub-section, the business of the court that is open to the public, that may be limited by order, is not confined to that part of the business that is constituted by hearing in open court, but properly includes the part of the court’s business encompassed by the documents published by the court in the form of orders and reasons for judgment and the documents that are received onto and kept on the court’s file that would otherwise be open for public inspection.”

52. [52]
    Whether the public interest or the interests of justice require confidentiality or non-publication orders depends upon the circumstances of each case. Commercial information which is regarded as “commercial-in-confidence” can be protected by a non-publication order, the rationale being that the integrity of the litigious process would likely be jeopardised if commercial competitors could benefit from court ordered production of commercially confidential material.^[79]
53. [53]
    In the present case, the asserted confidential material falls into three categories.
54. [54]
    The first category concerns confidential legal opinions which have been relied upon in support of the application for judicial advice. Those opinions are clearly subject to a valid claim of legal professional privilege and the QSuper Board has not waived privilege in respect of those opinions.
55. [55]
    The second category concerns information which is regarded as confidential and commercially sensitive. That information, broadly stated, pertains to the QSuper Board’s insurance arrangements, internal processes and accounting and legal advice. To the extent that it involves correspondence with APRA, the claim to confidentiality is made in respect of that correspondence because it discloses this confidential information. I have considered this information and regard the information as either subject to a valid claim of legal professional privilege to the extent that it involves legal advice or as being otherwise confidential in the sense that it comprises commercially sensitive information which, as a matter of justice, should be kept confidential.
56. [56]
    The third category concerns an entity risk assessment of the QSuper Board conducted by APRA. This information is required to be kept confidential by APRA pursuant to s 56(9) of the Australian Prudential Regulation Authority Act 1998 (Cth). I consider that it is in the public interest and the interests of justice to prevent this information from being disclosed other than to the court in the circumstances of this application.

Orders

57. [57]
    The orders I make are as follows:

1. 1.Pursuant to s 96(1) of the Trusts Act 1973 (Qld), I direct that the QSuper Board is justified in consenting to the proposed amendment to the Superannuation (State Public Sector) Deed 1990 (Qld) (Deed) as set out in paragraph 97 of the Amended Statement of Facts.
2. 2.Pursuant to s 8(2) Supreme Court of Queensland Act 1991 (Qld):

0. (a)
   each of the following documents, being the documents included in exhibit DW-1 to the affidavit of Deanne Wilden sworn 28 September 2021, namely:

   1. the confidential opinion of counsel dated 24 June 2021;
   2. the confidential opinion of counsel dated 24 September 2021;
   3. the confidential letter dated 22 September 2021 from the QSuper Board to APRA and its enclosure, being a draft proposed Amendment Statement of Facts;

is to be:

1. (A)
   placed on the court file in a sealed envelope marked ‘Confidential – not to be opened without an order of a judge of the court’; and
2. (B)
   not made available for inspection without an order of a judge of the court.

0. (b)
   the affidavit of Deanne Wilden sworn 18 October 2021 and the accompanying exhibit DW-2 is to be:

   1. placed on the court file in a sealed envelope marked ‘confidential – not to be opened without an order of a judge of the court’; and
   2. not made available for inspection without an order of a judge of the court.
1. (c)
   the affidavit of Deanne Wilden sworn 26 October 2021 and the accompanying exhibit DW-3 is to be:

2. (i)
   placed on the court file in a sealed envelope marked ‘confidential – not to be opened without an order of a judge of the court’; and
3. (ii)
   not made available for inspection without an order of a judge of the court.

0. (d)
   the paragraphs of the Amended Statement of Facts described at paragraphs 8(a) to 8(e) of the affidavit of Deanne Wilden sworn 28 September 2021 is to be:

1. (i)
   kept confidential and will not be published;
2. (ii)
   not made available for inspection without an order of a judge of the court; and
3. (iii)
   to the extent the Amended Statement of Facts is to be otherwise published, redacted.

5. (e)
   paragraph 99C of the Amended Statement of Facts is to be:

   1. kept confidential and will not be published;
   2. not made available for inspection without an order of a judge of the court; and
   3. to the extent that the Amended Statement of Facts is to be otherwise published, redacted.
6. (f)
   paragraph 80 of the submissions filed by APRA on 29 September 2021 is to be:

   1. kept confidential and will not be published;
   2. not made available for inspection without an order of a judge of the court; and
   3. to the extent those submissions will otherwise published, redacted.
7. (g)
   paragraph 78 and footnotes 107, 108, 109 of the submissions filed by the QSuper Board on 1 October 2021 in reply to the APRA submissions filed on 29 September 2021 will be:

   1. kept confidential and will not be published;
   2. not made available for inspection without an order of a Judge of the court; and
   3. to the extent those submissions will otherwise published, redacted.

1. 3.Within seven (7) days of the making of these orders, the QSuper Board is to file, in conformity with order 2:
   1. (a)
      a redacted copy of the Amended Statement of Facts;
   2. (b)
      a redacted copy of the APRA Submissions filed on 29 September 2021; and
   3. (c)
      a redacted copy of the QSuper Board’s submissions filed on 1 October 2021.
2. 4.The QSuper Board’s costs of this application are to be paid or reimbursed out of the assets of the fund administered under the Deed on an indemnity basis.