H.E.S.T Australia Ltd v Attorney-General (Qld) & Anor; Mercy Super Pty Ltd v Attorney-General (Qld) & Anor

This case arose out of a proposed transfer of superannuation fund assets and members. The applicant superannuation trustees were concerned that the proposed transaction might contravene certain offence provisions (including s 422F of the Criminal Code 1899), which relate to the provision of an inducement or reward for the substitution of a trustee. Justice Kelly concluded that the offence provisions would not be contravened, and made declarations to that effect. His Honour also gave directions that the trustees would be justified in effecting the transaction.

Kelly J

17 October 2022

Background

Mercy Super Pty Ltd is trustee of a superannuation fund, the governing law of which is the law of Queensland. [1]. It proposes to undertake a “successor fund transfer”, which will involve a transfer of its members and assets to another superannuation fund – the HESTA superannuation fund (for which the governing law is the law of Victoria). [3]. Such a transfer would be made pursuant to provisions in the Superannuation Industry (Supervision) Act 1993 (Cth). [4]. The proposed transaction would be effected by transaction documents which contain various promises, including that the Mercy Super trustee would be indemnified by HESTA in certain respects. [4].

This judgment concerns applications brought by both Mercy Super and HESTA (“the applicants”), seeking declarations that the proposed transactions (including the promises under the transaction documents) would not contravene s 442F of the Queensland Criminal Code 1899 or s 180 Crimes Act 1958 (Vic). [7]. Alternatively, the applicants sought assent or directions that it would be justified in entering the proposed transaction, pursuant to s 96 Trusts Act 1973 (and an equivalent provision in Victoria). [49], [54], [57].

Why the declarations / directions were sought

The impetus for the applications was a recent decision of the Supreme Court of New South Wales – BT Funds Management Ltd as trustee for the Retirement Wrap Superannuation Fund [2022] NSWSC 401. In that judgment, Ball J gave consent to a proposed superannuation fund transfer but indicated that without such consent the transaction “may have amounted to a breach” of s 249E Crimes Act 1990 (NSW). [6]. Queensland and Victoria have analogous provisions (discussed below).

The applicants were concerned that the proposed transaction (which includes the promises in the transaction documents) may, if Ball J’s view were accepted, contravene ss 442F Queensland Criminal Code 1899 and s 180 Crimes Act 1958 (Vic) (“the offence provisions”). [6]–[7], [14]. The offence provisions are both entitled “Secret commission to trustee in return for substituted appointment”. In broad terms, the provisions make it an offence for a person to give consideration to a trustee as an inducement or reward for being substituted as the trustee (unless the persons beneficially entitled to the estate, or a judge of the Supreme Court, assents). [9]–[10]. The purpose of the offence provisions is to prevent a trustee from being persuaded by the prospect of personal gain to exercise a power to appoint a substitute trustee. [18].

The applicants argued that, on their proper construction, the offence provisions would not be contravened by the proposed transaction. [20]. None of the respondents (the Attorneys General for Queensland and Victoria, or the Australian Prudential Regulation Authority) pressed the contrary view. [21].

Why the declarations sought were made

Justice Kelly accepted the applicants’ submission that the proposed transaction would not contravene the offence provisions because those provisions were concerned only with the “appointment” of a substitute trustee. [29]. His Honour considered that the term “appointment” has an established meaning, and is different from what was proposed here. In this case the transaction documents did not concern a power to appoint a substitute trustee to the Mercy Super trust, but instead to facilitate the transfer of members and funds to a different trust (the HESTA fund). [30]–[31]. As to the decision in BT Funds Management, Kelly J considered that this did not contain “a ratio decidendi directed to the principal question before me”. His Honour also observed that the judgment there had been given ex parte in circumstances of urgency. [19].

In this case, his Honour considered that the declarations sought – that the proposed transactions would not contravene the offence provisions – should be made. [47]. His Honour said he was “particularly influenced” by the fact that a “pure question of law” was involved, the conduct “has not yet occurred”, and that there is “significant utility in the declarations” (amongst other matters). [47]. To the extent the declaration sought concerned s 180 Crimes Act 1958 (Vic), jurisdiction was afforded by cross-vesting legislation. [48].

Assent or directions to the trustees

In the alternative, the applicants sought assent or directions about entry into the proposed transaction. [49]. Notably, the offence provisions both indicated that they would not be contravened where the “assent … of a judge of the Supreme Court” had been provided. [9]–[10]. Justice Kelly considered that this should be construed as a reference “to the supervisory jurisdiction of a judge of the Supreme Court with respect to trust administration”. [51]. In Queensland, a power to give directions to a trustee is provided by s 96 Trusts Act 1973. [54]. There is an equivalent provision in Victoria’s Supreme Court Rules. [57].

His Honour considered that this was also an appropriate case to make the directions sought – namely, that the applicants would be justified in effecting the proposed transaction. [61]. In particular, his Honour observed that the proposed transaction was considered by the Mercy Super trustee to be in the best financial interests of its members. Similarly, the HESTA trustee considered the proposed transaction would be in the best interests of the members of both funds. [61]. Again, his Honour considered that the jurisdiction to give directions pursuant to the equivalent Victorian provision was enabled by cross-vesting provisions. [60].

W Isdale