Commercial Law Update - Construction of a Superannuation Deed to be "practical and purposive"

Commercial Law
List G Mw 6786

In FSS Trustee Corporation v Eastaugh [2017] VSCA 218 the Victorian Court of Appeal (Keogh AJA with Tate and Santamaria JJA agreeing) was required to construe the definition of "salary" in a Health Industry defined benefits fund to determine whether it included payments made to a rostered on-call doctor when he was required to attend the hospital during the roster. If these "recall payments" were included in his salary, the difference in his lump sum entitlement upon retirement was approximately $500,000.

Needless to say, the definition of "salary" within the Deed was complex and capable of yielding more than one interpretation.

In that context at [61] the Court reaffirmed the principles to be applied when construing Superannuation Deeds as follows:

"[61] A superannuation trust deed is a commercial document and should be given a business like interpretation, which requires attention to be paid to the language used in the deed, the commercial circumstances which the deed addresses, the context in which it operates and the objects it is intended to secure. [1]  It is necessary to consider what a reasonable person would understand by the language used in the deed and the rules. [2] The Rules must be interpreted to give the words used their ordinary and fair meaning. [3] When questions arise as to the meaning of words used in the Rules they are ‘to be answered in a practical and realistic way, not in a way which adopts an overly fine or theoretical approach that is alien to commercial agreements.’ [4]  The words or terms used are to be understood in the context and in relation to the circumstances in which they are used. [5] A practical and purposive approach should be applied to the interpretation of superannuation schemes. [6]" (footnotes omitted)

The Court undertook a close analysis of the language of the provisions in the context of the Deed itself: [62] - [76]. The Court then said:

"[77] It is relevant to consider which of the alternative constructions contended for by the parties best achieves the purpose of the Rules and a practical outcome . It is not possible to determine whether shift and roster related payments are ordinarily payable regularly and periodically without considering the individual circumstances of an employee who is a member of the Fund, including any enterprise agreement or individual contract which applies and the circumstances of that employee’s employment including the pattern of work hours and duties. The Rules do not clarify what will qualify payments as being made regularly and periodically. There will be instances where shift and roster related payments are payable regularly and periodically, and instances where they are not. This will vary between employees, and possibly for an individual employee over time and between different payments." (emphasis added)

The Court identified two purposes of the Fund Rules to be "to provide short-term certainty as to ‘salary’ and contributions, and long-term certainty as to funding and the benefit payable to members."  Measured against the analysis of the language of the provisions earlier carried out by the Court, it held that the contention of the Fund did not advance the identified purposes whereas that of the Member did.

The Court's ultimate finding on the primary construction point was:

"[80] The construction of r 3.B.11.1(b)(ii) for which [the Member] contends sits best with the ordinary meaning of the language used in the definition as well as achieving certainty of outcome . All shift and roster related payments are included in ‘salary’. No enquiry or evaluation is required of the patterns of payment for individual members. It is a construction which achieves a practical and purposive outcome ." (emphasis added) 
List G Mw 6786

Michael Wise practises in commercial law and intellectual property law

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