Industrial Relations Commission New South Wales

• Medium Neutral Citation: Construction, Forestry, Mining and Energy Union (New South Wales Branch) v Port Kembla Coal Terminal Ltd [2013] NSWIRComm 92
• Hearing dates: 3, 9,10,11, 12, 15, 16, 22 ,23, 24 October, 2012; 18, 19, 20, 25 February 2013; 29, 30 April 2013; 1, 2 May 2013; Submissions: 30, 31 July 2013
• Decision date: 14 October 2013
• Jurisdiction: Industrial Court of NSW
• Before: Haylen J

Decision

(a) a declaration that the contracts of employment between Port Kembla Coal Terminal Ltd and the employees identified in the proceedings were unfair in failing to provide superannuation benefits equivalent in value to the benefits available under the provisions of the State Authorities Superannuation Scheme as at August1990;

(b) the said contracts of employment are varied to include a provision that each employee shall be paid a lump sum calculated by reference to:

(i) the salary payable to each employee at February 2004, or the salary payable on the last day of service if leaving employment prior to February 2004;

(ii) the completed years of service performed between August 1990 and February 2004;

(iii) the rate of 1.25 weeks of salary for each completed year of service with Port Kembla Coal Terminal Ltd.

(c) the amounts payable pursuant to order (b) above shall be subject to the payment of interest calculated in accordance with the provisions of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 and apply to the period from 12 December 2005 (the date of filing) until the date of this judgment;

(d) the matter will be relisted to deal with any submissions as to costs, or to deal with any unintended difficulty that may arise from the present form of the orders.

• Catchwords: INDUSTRIAL RELATIONS ACT - s 106 - alleged unfair contract arising from new superannuation arrangements - privatisation of coal terminal - former employees obtain employment with new terminal operator - employees no longer eligible to subscribe to public sector superannuation scheme - whether new coal terminal operator held out to employees that their superannuation arrangements would be equivalent to public sector superannuation and that they would be no worse off in relation to superannuation benefits - expert actuarial evidence for both parties - significant division of expert opinion - whether proceedings should be determined on actuarial evidence alone - Court not constrained to principles applicable to assessment of common law damages - compensation approach appropriate in exercising broad discretion to make a money order just in the circumstances of the case - laches - cross-claim - jurisdictional limit considered - contracts varied - interest payable; UNFAIR CONTRACT - INDUSTRIAL RELATIONS ACT - s 106 - alleged unfair contract arising from new superannuation arrangements - privatisation of coal terminal - former employees obtain employment with new terminal operator - employees no longer eligible to subscribe to public sector superannuation scheme - whether new coal terminal operator held out to employees that their superannuation arrangements would be equivalent to public sector superannuation and that they would be no worse off in relation to superannuation benefits - expert actuarial evidence for both parties - significant division of expert opinion - whether proceedings should be determined on actuarial evidence alone - Court not constrained to principles applicable to assessment of common law damages - compensation approach appropriate in exercising broad discretion to make a money order just in the circumstances of the case - laches - cross-claim - jurisdictional limit considered - contracts varied - interest payable
• Legislation Cited: Evidence Act 1995; Industrial Arbitration Act 1940; Industrial Relations Act 1996; State Authorities Superannuation Act 1987; Uniform Civil Procedure Act 2005; Uniform Civil Procedure Rules 2005; Workplace Relations Amendment (Work Choices) Act 2005
• Cases Cited: A & M Thompson Pty Ltd & ors v Total Australia Ltd [1980] 2 NSWLR 1; Abboud v State of New South Wales (Department of School Education) (No 2) [2000] NSWIRComm 110; (2000) 99 IR 299; Agius v Arrow Freightways Pty Ltd [1965] AR (NSW) 77; Amalgamated Metals, Foundry and Shipwrights Union v Broken Hill Pty Co Ltd Whyalla (Termination, Change and Redundancy Case) (1984) 8 IR 34; Barclays Australia Investment Services Ltd v Nordby (1996) 99 IR 258; Bennett v BP Australia Ltd [1984] AR (NSW)120; Brown v Rezitis (1970) 127 CLR 157; Caterpillar of Australia Ltd v Gough and Gilmour Holdings Ltd (2008) 170 IR 185; Construction, Forestry, Mining and Energy Union (New South Branch) v Port Kembla Coal Terminal Ltd [2007] NSWIRComm 296 (2007) 169 IR 141; Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588; Davies v General Transport Development Pty Ltd [1967] AR(NSW) 371; Eagle Boys Dial-a-Pizza v Clifford [2003] NSWIRComm 101 (2003) 125 IR 35; English v Aradlay Insurance Brokers Pty Ltd [2005] NSWIRComm 257; (2005) 145 IR 129; Falkner v Bourke (1990) 19 NSWLR 574; Hasyim v Lark (1979) AR (NSW) 909; Hurley v Art Printing Co Pty Ltd (1994) 54 IR 254; Haddad v S & T Income Aid Specialists Pty Ltd (1984) 13 IR 16; Incitec Ltd v Industrial Court of NSW (1992) 29 NSWLR 83; Irvine v Shell Co of Australia Ltd [1969] AR (NSW) 187; King v Cake it Away Pty Ltd [2002] NSWIRComm 140; King v The Industrial Relations Commission of NSW [2005] NSWCA 314; (2005) 146 IR 23; Makita (Australia) Pty Ltd v Sprowles [2001l NSWCA 305; (2001) 52 NSWLR 705; Masri v Santoso [2004] NSWIRComm 108; (2004) 134 IR 184; Myer Stores Ltd t/a Grace Bros v Stowart and ors (1994) 55 IR 21; O'Brien v Australian Native Landscapes Pty Ltd [2001] NSWIRComm 145; (2001) 105 IR 409; Port Kembla Coal Terminal Ltd v Industrial Court of New South Wales [2009] NSWCA 70; (2009) 182 IR 453; Re Lend Lease Investments Pty Ltd and ors; Re Cannon and ors (1986) 14 IR 301; Re Williams and Calmex Products Pty Ltd (1971) AR(NSW) 264; Re Witek v Starr (1971) AR (NSW) 1000; Saliba v John Hearder Pty Ltd (1986) 15 IR 36; Swann v Ultratune Aust Pty Ltd [1983] AR (NSW) 285; (1983) 5 IR 284; Stone Microsystems (Aust) Pty Ltd & Stone Group Asia Pacific Investment Ltd v Kwong & Datamax Pty Ltd (1997) 42 NSWLR 160; Terzian v Gattellari [1972] AR (NSW) 591; Transport Workers' Union of Australia v Veolia Environmental Services (Australia) Pty Ltd [2013] NSWIRComm 22; Transport Workers' Union of New South Wales v Toll Transport (No 2) [2012] NSWIRComm 25; Westfield Holdings v Adams [2001] NSWIRComm 293; (2001) 114 IR 241
• Category: Principal judgment
• Parties: Construction, Forestry, Mining and Energy (New South Wales Branch) (Applicant); Port Kembla Coal Terminal Ltd (Respondent)
• Representation: Mr Reitano of counsel with Ms Doust of counsel (Applicant); Mr Kenzie QC with Mr Prince of counsel (Respondent); Slater and Gordon (Applicant); Ashursts (Respondent)
• File Number(s): IRC 6506 of 2005

• A s106 CLAIM ARISING FROM SUPERANNUATION ARRANGEMENTS
• AN INDUSTRIAL DISPUTE REGARDING SUPERANNUATION
• EVENTS SUBSEQUENT TO DISPUTE HEARING
• EMPLOYEE EXPECTATIONS OF NEW FUND
• EVIDENCE OF UNION DELEGATES
• EVIDENCE OF PKCT MANAGERS
• THE EXPERT EVIDENCE
• THE EXPERTS CHALLENGED
• DELIBERATION
• (i) Common threads in the Evidence
• (ii) The Representation
• (iii) Relative Bargaining Strength
• (iv) Superannuation and the industrial context
• (v) Additional Issues
• (vi) The Operation of s 106(5) - What money order is appropriate?
• (vii) Consequential Issues
• (viii) Costs and Interest
• ORDERS

 

JUDGMENT

A s106 CLAIM ARISING FROM SUPERANNUATION ARRANGEMENTS

1 In December 2005, the Construction, Forestry, Mining and Energy Union (NSW Branch) ("the CFMEU") commenced proceedings seeking relief under the provisions of s 106 of the Industrial Relations Act 1996 ("the IR Act"). The respondent to the proceedings was the Port Kembla Coal Terminal Ltd ("PKCT"). Briefly stated, the application sought to avoid or vary the employment contracts of approximately 78 members of the CFMEU who had been employed by PKCT since mid-August 1990. The unfairness relied upon by the CFMEU related to the circumstances in which its members ceased working for the Maritime Services Board ("the MSB") and took up employment with PKCT following the Government's decision to privatise the coal terminal.

2 In essence, the claim by the CFMEU was that PKCT had represented to employees that superannuation arrangements would be made for them as employees of PKCT and they would be at least equal to their entitlements under public sector superannuation arrangements applicable whilst they were employees of the MSB. It was alleged that in several respects the superannuation scheme adopted by PKCT was inferior to benefits available under previous public sector superannuation arrangements to the extent that employees were misled as to the level of benefits available to them under the PKCT scheme and were thereby disadvantaged.

3 While employed by the MSB, coal terminal employees were engaged as public sector employees and were eligible to contribute to public sector superannuation funds, funds that were generally regarded as providing a superior superannuation entitlement than generally available to employees in private sector employment. While employed by the MSB some of the FEDFA (later CFMEU) members were contributing to the New South Wales Retirement Fund ("NRF") but by the time of privatisation in 1990, these MSB employees were entitled to and many did, contribute to the State Authorities Superannuation Scheme ("SASS") while some belonged to other schemes. Attempts to persuade the State Government to permit these employees to retain their entitlement to subscribe to SASS upon becoming employees of PKCT failed. On becoming employees of PKCT in August 1990 those previously employed by the MSB, left public sector employment and became employed in the private sector.

4 From 1990, PKCT and its employees in relation to the coal terminal were bound by a series of industrial agreements made under the IR Act. From 27 March 2006, the Workplace Relations Amendment (Work Choices) Act 2005 commenced with the effect that pre-existing State Enterprise Agreements became Preserved Collective State Agreements under the Work Choices provisions. Those agreements contained specific provisions prescribing the level of superannuation contributions required to be made by the employer on behalf of the employees. That situation led PKCT to challenge the jurisdiction of the Industrial Court of New South Wales to make the orders sought in these proceedings because of alleged inconsistency with the Commonwealth Work Choices legislation.

5 It is unnecessary to set out the full nature of that challenge but the proposition was rejected by the Full Court of the Industrial Court in December 2007 (see Construction, Forestry, Mining and Energy Union (New South Wales Branch) v Port Kembla Coal Terminal Ltd [2007] NSWIRComm 296; (2007) 169 IR 141). PKCT then took the same challenge to jurisdiction to the Court of Appeal but that challenge was also unsuccessful (see Port Kembla Coal Terminal Ltd v Industrial Court of New South Wales [2009] NSWCA 70; (2009) 182 IR 453.

6 Although unsuccessful in these jurisdictional arguments, the challenge by PKCT resulted in the CFMEU amending its summons for relief by limiting the claim to the period August 1990 (when employment commenced with PKCT) to 26 March 2006 (just prior to the coming into operation of the Work Choices legislation). The summons for relief in its final amended form and the respondent's reply are marked as Annexure 1 to this judgment.

AN INDUSTRIAL DISPUTE REGARDING SUPERANNUATION

7 On 8 May 1990, the FEDFA notified a dispute under the provisions of the then Industrial Arbitration Act 1940 relating to superannuation entitlements for current employees of the MSB after they transferred employment to Port Kembla Coal Terminal Ltd. The dispute came before Justice Hungerford on 11 May 1990 where both the union and the MSB were represented and an appearance was also entered on behalf of the PKCT consortium by its legal representative, Mr Bunting. Mr O'Connor represented the FEDFA.

8 At the time this dispute was listed, the Government was still considering whether or not it would allow employees of the MSB at the coal terminal to continue in SASS after they became employees of PKCT. Mr Bunting informed the Commission that, although the continuation of SASS was being considered, the consortium had engaged Mercer Campbell Cook and Knight ("Mercer") as consultants and they were working on a proposal for superannuation if the SASS fund was unavailable. His Honour recognised that the resolution of the question of superannuation was important to employees and it needed to be resolved in a timely way, having regard to the proposed takeover of the coal terminal by the consortium on 1 July 1990. The representative from the MSB also recognised the importance of superannuation to employees, but noted that nothing could occur until the Government's attitude to continuing membership of SASS was resolved.

9 Mr Bunting later informed the Commission that the consortium was unable to say if it would accept any conditions imposed by the Government on continuing superannuation arrangements under SASS. Because of the unknowns, the consortium was proceeding to look at other superannuation options. Mercer had contact with Government superannuation actuaries and was obtaining information so that when the Government's position was known, the consortium could move quickly thereafter. In adjourning the proceedings to await the Government's decision on the continuation of contributions to SASS, his Honour noted that an "important issue is superannuation" in the transfer of employees and accepted that the superannuation question was "complex." It was important for the consortium that the transfer took place "smoothly" and that it took place "with a settled and knowledgeable workforce."

10 The dispute proceedings returned to the Commission on 28 May 1990. A letter had been received from the relevant Minister stating that the SASS fund would not be available to transferring employees. The union spoke about waiting on Mercer for a superannuation proposal. It was submitted for the union that employees had suffered through privatisation and so any proposed superannuation scheme would need to "have benefits in the broad sense which are at least equal to what employees are presently receiving under SASS." It was submitted that this was now the "prime issue" in dispute. It was further submitted that there should not be "negative changes in conditions" because of privatisation: the "primary point" was that members should have "at least the same conditions under the superannuation arrangements as they enjoyed until today under SASS."

11 Mr Bunting informed the Commission that Mercer were working on a proposal for the consortium, but needed further statistical information from Government sources. Arrangements had been made for that to occur and that was likely in the next week. Mercer required a further week to then finalise the details for an appropriate fund and would then discuss a proposal with the Joint Working Party. The Joint Working Party consisted of three representatives of management and three union representatives. Mr Cram was the FEDFA representative on the Joint Working Party - his union had the largest membership at the coal terminal. At relevant times, Mr Atkin (ETU) and Mr Annesley (MSBSOA) were the other union representatives. Mr Coleman (general manager), Mr Dixon (finance manager) and Mr Kolln (human resources) represented management on the Joint Working Party.

12 Hungerford J then asked the consortium to respond to the union's "in principle" position that employees should be entitled, whatever scheme was selected, to benefits "in the broad sense equal to those as presently in SASS." Mr Bunting responded for the consortium that the fund was most unlikely to be the same so it would not be equal in that sense and noted that people should not have any misunderstanding on that matter. Mr Bunting then continued:

It will be of the same benefits. On the job people thought it had to be the same or equal in each respect. Taking it in the round it will be not less beneficial. As long as it is understood it is an overall assessment of it, not a benefit-by-benefit assessment of it, we are happy to give that indication. We expect it will be different in a number of respects from the existing fund. We expect it will be an accumulation style whereas the present is a defined benefits fund. It will be considerably simpler than the existing arrangements and much more readily understandable from the point of view of members and present arrangements so there will be differences, but our intention is that it will be taken in the round not less beneficial from the point of view of members.

13 After the union responded to Mr Bunting's statement, submitting that things needed to move quickly and the issue resolved between the parties or in further proceedings, his Honour observed that superannuation issues were not easy and then stated:

I make the observation that making a judgment as between one scheme as compared to another is not easy. Having said that, it follows that it makes it harder for the layman to be able to make an assessment and therefore the position that the employees would be in would not be easy. I only mention that because, having in mind the time, it provides a difficulty for them, in making an informed decision as to what they want to do.

14 His Honour went on to note the difficulties of comparison of superannuation schemes and the personal nature of the decisions being made by employees. There was no single approach that was often suitable. The union members themselves may differ about an appropriate package. Against those observations, his Honour noted that the FEDFA and the consortium should make progress on what had been indicated as the "in principle" way the benefits would apply, namely, they would "not be any less beneficial." He noted that Mr Bunting had stated that position and the position was "important." In concluding the proceedings on that day, his Honour noted there were some suggestions about establishing communications that should extend to individual employees should they require it. His Honour said he mentioned that point because superannuation was not easy, particularly for the layman to understand with all its ramifications and that it could be quite complex. He could imagine that whatever scheme was established, there would be cases on an individual basis where people had their own particular problems and that may require provision to be made for those people to be able to approach someone to assist them and to make a better informed decision.

15 The dispute returned to the Industrial Commission on 13 June 1990. On that day Mr Bunting opened proceedings and in reporting to the Commission, indicated that the consortium had received information and Mercer had been able to look at a proposed scheme and there had also been discussions with the Joint Working Party. The consortium had placed a proposal before a meeting of the Joint Working Party on 7 June 1990. The consortium was aware that the unions wished to take expert advice on the proposal and another meeting was scheduled for the following day. Any concerns could then be discussed.

16 The FEDFA informed his Honour that, upon receiving the consortium's proposal, it had been referred to Bain & Co as the ACTU's endorsed superannuation advisor and the unions had received a number of recommendations from that source based on what was pre-existing under the SASS scheme. The union's concern was that the consortium fund should provide benefits "which in the particular sense could be said to be as good as, if not better than, what was under the State superannuation schemes". The union also raised particular concerns that were to be discussed by the Joint Working Party. The matters raised by the union were said to be "crucial" to an acceptable package.

17 Mr Bunting, for the consortium, concluded the proceedings by responding to the union's concern. In that respect Mr Bunting stated:

The only other thing we wish to do is remind Mr O'Connor that on the last occasion when we gave an indication of the style of the fund that would be no less beneficial, that was expressly on the basis that taken in the round, it would not be any less beneficial and we do not want to be in a position of having to match SASS case by case. It has to be looked at in a global way but we have taken on board what Mr O'Connor has said and we will be happy to discuss those matters tomorrow in the working party context.

EVENTS SUBSEQUENT TO DISPUTE HEARING

18 As indicated above, the dispute proceedings were listed before Hungerford J on three occasions between 11 May and 13 June 1990. From the evidence before the Court it appears that the proceedings were not re-listed. A proposal was produced by the consortium to the Joint Working Party and it was discussed at a meeting of that group on 14 June 1990. The evidence for the applicant was that union representatives at that meeting of the Joint Working Party raised deficiencies in the proposed scheme and requested consideration be given to the matters raised in order to improve the proposed scheme. In due course, an amended superannuation scheme was proposed by Mercer that was meant to address concerns raised by the union representatives.

19 In a notice to employees dated 11 July 1990, the Joint Working Party recommended a new superannuation fund to employees. Employees were advised that a booklet explaining the new scheme was to be circulated by 20 July 1990. On 24 July 1990, a statement regarding superannuation was issued by the Joint Working Party. An explanatory leaflet was attached regarding the terms of the new superannuation scheme and again the Joint Working Party expressed its satisfaction that the proposed fund was "appropriate" for PKCT employees. On 9 August 1990, Mr Dixon, the finance manager, forwarded a letter to all employees advising that the new fund would be operative from 13 August 1990 and attaching a fund brochure. Employment with PKCT also commenced on 13 August 1990.

EMPLOYEE EXPECTATIONS OF NEW FUND

20 Almost all the employee witnesses gave evidence as to their expectation of how the new fund would operate in relation to available benefits, compared with benefits available under SASS and how they arrived at that position. Broadly, many witnesses identified statements made by Mr Cram to meetings, including mass meetings of employees, conveying what had been agreed with PKCT management. A smaller number had attended meetings at which members of management of PKCT had given assurances about the new fund being as good as SASS. Many of the witnesses regarded the recommendation made by the Joint Working Party and the comparative documents as confirming what they had heard in meetings about the same or similar nature of the new scheme as compared with the SASS scheme. In relation to those who had relied upon what Mr Cram had said at meetings, there was some uncertainty amongst such witnesses precisely at which meeting these statements had been made from time-to-time and there was some confusion about whether these meetings were mass meetings held in the quadrangle, mass meetings held in the large crib room or separate union meetings. Having regard to the number of meetings that were held as described in the evidence, after more than 20 years, this degree of uncertainty is entirely understandable.

21 In relation to employees who had acted on what Mr Cram had said at meetings, there were a variety of descriptions of what in fact he said. Most witnesses did not pretend to give a precise, verbatim account of what was said but gave evidence regarding the effect of what was said by Mr Cram.

The variety of understandings were expressed as follows:

• some witnesses had been informed by Mr Cram of the dispute proceedings in the Industrial Commission and told of the outcome. From then on, people understood that those taking up employment with the privatised coal terminal operator would not be "financially worse off" by leaving SASS (eg evidence of Mr Hooper);

• others understood that the delegates, including Mr Cram, had said that PKCT had given an undertaking that employees would be "no worse off" under the new scheme (evidence of Mr D Bagnall);

• Mr Cram was said to have addressed a meeting informing the employees that they could not stay in SASS, but commenting that the Judge in the dispute proceedings said that the new fund was to be "equally as good as the old fund, if not better." Mr Dixon and Mr Coleman were said to be present at this meeting (evidence of Mr Burke);

• a crib room meeting had been told by the delegates, including Mr Cram and Mr Aktin, that they could not remain in SASS but would be no worse off and actually, would be better off under the new scheme (evidence of Mr Mathieson);
• a meeting in the quadrangle was addressed by Mr Cram, Mr Atkin and Mr Annesley reporting on developments with superannuation from the Joint Working Party and informing employees that they could not stay in SASS. At a later meeting, those delegates reported on superannuation negotiations where Mr Cram reported on the dispute proceedings where the Judge decided that PKCT was to implement a superannuation scheme equal, if not better, than the SASS scheme. There was another meeting in the crib room regarding superannuation where management representatives Mr Coleman and probably Mr Dixon were present and that was a meeting of operators and both of those gentlemen said that the new scheme would be "similar or the same, if not better" than SASS and that they "wouldn't be disadvantaged" (evidence of Mr Chapman);

• in meetings in the quadrangle and also in the crib room employees were told that they could not stay in SASS, but PKCT was "guaranteeing workers" that they would not be "disadvantaged" financially if they went into the new scheme. It was explained that the new scheme would not be "exactly the same as SASS" but as close as possible to SASS (evidence of Mr Charlesworth);

• at one meeting the union delegates reported that the new scheme "would be as good as SASS" (evidence of Mr Formosa);

• at a union meeting, one union representative said that they would have "an equal superannuation scheme to SASS" and that they would "not be disadvantaged" (evidence of Mr Fryer);

• the Joint Working Party had advised that employees would not "be disadvantaged" and that the new super fund would be on a par with SASS, "if not better" (evidence of Mr Gee);
• at a mass meeting, Mr Cram told the employees that they could not stay in SASS and at another meeting, he said that they would not be "disadvantaged by the new scheme." Mr Cram had said that they would "definitely not be disadvantaged in relation to superannuation by the new arrangements." Mr Cram also said that the new scheme would be "as good as, if not better" than SASS (evidence of Mr Green);

• Mr Cram and Mr Bell attended a delegates' meeting of the FEDFA and said that they were "guaranteed" that all employment conditions would be the same, but that they would have to leave SASS. Mr Coleman had also given assurances that everything would be the same as it was in the MSB. In this comment, Mr Coleman might have said that the superannuation scheme would be "similar" to SASS (evidence of Mr Harvey);

• in a meeting in the quadrangle regarding superannuation, Mr Cram did most of the talking and said that after the PKCT takeover the "benefits will remain the same, including superannuation." PKCT would "make sure that the new superannuation scheme" would be as good as the one that they were leaving" (evidence of Mr Hennessey);

• at a mass meeting of the FEDFA, Mr Cram had reported that a Judge of the Industrial Commission had decided that any new fund "had to be equal or at least not disadvantage" employees (evidence of Mr Lynch);

• at a mass meeting in the quadrangle, Mr Cram addressed the employees and told them that there was an agreement between union and management that employees would not be disadvantaged in the changeover to the new fund (evidence of Mr McColm);
• at a mass meeting in the big crib room where superannuation was the main topic, Mr Atkin and Mr Cram addressed the employees, telling them that they could not stay in SASS but saying that they would not lose any benefits and that on retirement, they would be "no worse off" than if they had remained in SASS. At an earlier meeting of delegates, several members of management were present and in particular, Mr Coleman and Mr Tonnini. When the delegates reported that employers would be "no worse off" under the new scheme, that statement was not challenged by management (evidence of Mr Nicholls);

• at a meeting concerning superannuation, Mr Cram and Mr Bell told employees that they could not stay in SASS. The new superannuation scheme would be "roughly the same" as SASS and at worst, he might lose approximately $450 over the whole operation of the scheme. This was understood as the delegates (Mr Cram and Mr Bell) indicating the position of PKCT on the superannuation scheme (evidence of Mr Roach);

• in a mass meeting in the crib room, Mr Cram spoke saying that the superannuation scheme would be "equal to your existing SASS scheme, even though it is not a defined benefit scheme." From these meetings it was understood that employees were not going to be disadvantaged in regard to their conditions of employment. Even though there were differences in the scheme, employees would not be disadvantaged (evidence of Mr Waine);

• at a mass meeting, Mr Cram said that employees would not be "disadvantaged" under the new superannuation scheme. This was understood to be a re-statement of a commitment given by PKCT to the unions even though the new superannuation scheme would not be the same as SASS, but would be "just as good" (evidence of Mr Waters);
• At a mass meeting in the quadrangle regarding superannuation, Mr Cram and Mr Bell addressed the employees with Mr Cram saying "everything would stay the same and that their superannuation would just flow into a different fund." Nothing would change, there would be no disadvantage to changing superannuation schemes (evidence of Mr White).

These expressions, with some minor variations, were repeated by a large number of employee witnesses.

EVIDENCE OF UNION DELEGATES

22 Following the announcement of privatisation of the coal terminal, union representatives gave evidence about the work of the Joint Working Party and other union delegates who were involved in meetings in the first half of 1990 regarding superannuation. It was largely through these witnesses that a number of documents concerning the superannuation issue were brought into evidence, including the communications between the Joint Working Party and employees as the superannuation issue developed.

23 Mr Michael Atkin was a site delegate for the ETU at the coal terminal, together with Mr Wayne Strudwick. After commencing employment with the MSB, Mr Atkin became a member of the NSW Retirement Fund and in the 1980s that fund was transferred to the Public Authorities Superannuation Scheme ("PASS"), later becoming the State Authority Superannuation Scheme ("SASS"). Each new fund was an improvement on the previous fund. Mr Atkin was aware that SASS was a far superior scheme to other superannuation funds existing at the time. It was a defined benefit scheme where the final payout at the age of 65 was approximately seven times the final average salary over 40 years of service, with an average of 6 points each year. SASS also provided a pension option based on the equivalent of 80 per cent of the final average salary.

24 On the announcement of the privatisation of the coal terminal, there were a number of redundancies and many employees took voluntary redundancy. When the consortium was announced as the purchaser of the coal terminal, it was approximately at that time that a Joint Working Party was set up between management and the unions to deal with superannuation arrangements under privatised operations. There was some change to the membership of the Joint Working Party but Mr Atkin became a member with Mr Annesley and Mr Cram on behalf of the unions. When he joined the Joint Working Party, the consortium was represented by Mr Coleman, Mr Dixon and Mr Kolln. As superannuation began to emerge as an issue, Mr Atkin travelled to Sydney and purchased a copy of the State Authorities Superannuation Act 1987. He read the Act and in particular, Sch 5 dealing with the transfer of contributions out of SASS when membership of the fund was no longer available.

25 While a member of the Joint Working Party, that body met on seven or eight occasions. The consortium was seeking advice from an actuarial firm known as Mercer, but not all documentation provided by Mercer to the consortium was provided to Mr Atkin as a member of the Joint Working Party. By the end of May 1990, employees were advised that they would no longer be able to contribute to the SASS scheme. By 4 June 1990, the consortium was able to place its first offer before the Joint Working Party and that offer contained comparisons for employees at various ages in relation to their entry into the proposed fund. At this meeting, Mr Atkin stated that he complained "quite bitterly" that the proposed fund was not equivalent to SASS. He used a whiteboard to demonstrate the key elements of SASS to the Joint Working Party and in particular, referred to how the final payout was calculated and how the points system was utilised. He did so because he felt that the consortium representatives did not understand the workings of SASS. After he had completed his explanation of SASS, Mr Coleman said words to the effect:

That is absolutely disgusting. That is far too generous and there is no way the company can match that.

Mr Atkin replied that the consortium's proposal was unsatisfactory and fell far short of SASS and that they would have to come up with something better. It was ultimately agreed that the consortium would return to Mercer to see if a better proposal could be forthcoming.

26 Further proposals were brought forward by the consortium that ultimately led to the Joint Working Party, on 11 July 1990, recommending acceptance of a fund then known as the PKCT Ltd Fund. On 24 July 1990 the Joint Working Party issued a further statement recommending the fund to employees. Mr Atkin said that the main reason he ultimately agreed, as a member of the Joint Working Party, to this new proposed scheme was that Mr Dixon, Mr Coleman and Mr Kolln said words to the effect:

The new scheme will be the equivalent of SASS.

Mr Atkin stated that he would not have recommended the new superannuation scheme to the workforce had it not been for the representations made by Mr Dixon, Mr Coleman and Mr Kolln about the new fund.

27 On 13 August 1990, Mr Atkin's service with the MSB ceased and he was then employed by Port Kembla Coal Terminal Ltd. He received a lump sum payment from SASS. He subsequently became a contributing member to the PKCT fund. In due course, he became a director of that fund and remained in that position until approximately 1998/1999.

28 In approximately 1993, amendments were made to the PKCT fund to allow any member to make an additional 2 per cent contribution for a period of six years, rather than restricting this option to members aged between 52 and 58 years. In March 2007, Mr Atkin retired from PKCT. As he understood it, the PKCT fund was not the equivalent of SASS. In the last eight to ten years of his employment, he salary sacrificed approximately $26,000 per year being approximately 25 per cent of his salary, including company contributions.

29 In oral evidence, Mr Atkin said that in the first one or two years following the establishment of the new fund, employees complained to him that the new fund was not providing the same level of retirement benefits as SASS. In approximately 1992, he discussed this issue with Mr Strudwick and perhaps other union delegates, but Mr Atkin could not understand why there was such an apparent disparity. He thought the issue had become more widely known thereafter at the coal terminal.

30 Mr Atkin understood that, from the time he joined the Joint Working Party, the objective was to create a scheme that was equivalent to SASS. There was no dispute about that objective and all the documentation was always in relation to comparisons with SASS. No employer or union representative ever suggested to him that the objective was to achieve a fair and reasonable superannuation scheme. It was always a comparison with SASS and "trying to be equitable" to SASS. That was the agreed objective.

31 Mr Atkin was shown a document annexed to Mr Coleman's affidavit: that document was a letter dated May 1990 from Mercer concerning the proposed benefit design for the new superannuation scheme. That document stated that the consortium had two major objectives:

(a) benefits of equivalent value to those provided by SASS, and

(b) simplicity of administration and communications.

Mr Atkin had not seen that letter before but said that if he had read the letter at the time it was written, he would not have been surprised because they were all in agreement that was precisely what they were doing as a Joint Working Party, namely, attempting to establish benefits of equivalent value to those provided under SASS. He was not aware of the Joint Working Party having any other objective. At the meeting where Mr Coleman, Mr Dixon and Mr Kolln said that the new scheme would be the equivalent of SASS, Mr Cram and Mr Annesley were also present.

32 In cross-examination, Mr Atkin said his understanding at the time was that the vast majority of employees at the coal terminal were in SASS, although there were some other superannuation funds in operation. He understood that the Joint Working Party was initially set up with three CFMEU delegates as a result of a notification to the Industrial Commission. He was not party to that dispute. Later it was accepted that there should be other union representation on the Joint Working Party. In the early part of 1990, the coal terminal was in turmoil with a number of rumours and meetings. A large amount of information was circulated. Mr Atkin's early enquiries of the SASS fund indicated there had been other organisations that had been privatised, but employees had been able to remain members of the fund. Mr Atkin had no particular recollection of the FEDFA notifying a dispute to the Industrial Commission but he did find out about it later, although he could not recall precisely when.

33 At the meeting where the consortium's first proposal was rejected, Mr Atkin accepted there were calculations that showed some people, leaving at a certain age after ten years' entry level, would be better off than in the SASS scheme, but a person who stayed until 60 years of age would be considerably worse off than under SASS. The losses were between $20,000 and $30,000. When Mr Atkin wrote on the whiteboard explaining the SASS fund to the consortium representatives, he did not mention a pension. Mr Atkin understood that the proposal put forward by the consortium at that meeting was based on assumptions, but he did not know of those assumptions. In that discussion, the consortium had also provided figures based on the Kooragang Coal Loader Fund, a comparison that Mr Atkin rejected as being relevant. He did not see that fund having anything to do with the Joint Working Party's discussions that was to bring about equivalent benefits to SASS. SASS was the "yardstick."

34 Although the task was to achieve equivalent benefits available under SASS, Mr Atkin said he understood that it could not be matched in an identical way because the new fund would not be a defined benefit fund and by the time he recommended the scheme to employees as part of the Joint Working Party, he believed that the proposed scheme provided equivalent benefits to SASS. At no stage did he think that they would never be able to negotiate anything as good as SASS and that it could not be beaten as a fund.

35 Mr Atkin had a vague recollection of Bain & Co but he did not recall what they recommended. He did not specifically recall, at a Joint Working Party meeting, the unions submitting that Bain & Co had advised that the only way to equate the scheme was by increasing the percentage contributed by the employer. While he recalled Bain & Co, he could not remember under what circumstances. He thought the unions were obtaining their detailed advice from Mercer who were professionals but Mr Atkin did not recall obtaining further advice for the ETU, or suggesting that they obtain further advice. He had a faint recollection of sitting down with Bain & Co at some stage in the proceedings, but could not remember when. He may have attended a meeting with the other delegates because there was no way he alone would have gone to Bain & Co and asked for advice. If Bain & Co had any involvement, it was not at the request of the ETU. The FEDFA may well have asked Bain & Co for advice.

36 Mr Cram, on site, was considered to be top of the union tree. Mr Atkin did not regard Mr Cram as playing a leading role in the detailed discussions of the Joint Working Party - he presumed that Mr Cram spoke to the members about superannuation at meetings. If there was a general meeting of employees, he would expect Mr Cram to have chaired that meeting being from the senior union on site with the most members. He may not have led discussions, but there were a number of meetings with employers concerning superannuation. He was uncertain if there were meetings that took place where the only subject spoken about was superannuation. There were many things being discussed, but there would not be one meeting when superannuation was not raised. There were multiple unions on site and they were not always in agreement - it was "tribalistic. "

37 The documents sent to employees from the Joint Working Party recommending the new superannuation scheme had comparative tables at certain ages and the benefits applicable. Although those calculations were made in relation to particular age groups, Mr Atkin's experience was that there was zero employee turnover and the expectation was that every employee would go to age 58, 60 or beyond. He accepted that on the comparisons, even at 60, the PKCT fund would provide $4000 less than SASS, giving a benefit of $100,000. Mr Atkin said that, in the round, the scheme was equivalent to SASS and that is approximately what the employees received. They did not get identical figures as that was "impossible to presume" because the earning rate could vary. He regarded the amount to be below SASS as projected in the examples given to the employees and that difference was very marginal. It was understood that the result would be in the same "ballpark", but some benefits ultimately may be below SASS and others above SASS. Mr Atkin understood that he was recommending a fund that had a different element of risk to SASS and some benefits might equal, some might be superior and others inferior to SASS. He was judging the scheme as being "fair enough."

38 The documents sent out to employees used as an example a person entering the new fund at age 40 and that age was chosen because it was said to be the most common age of the employees. This information was sent out so that the employees could be properly informed. The information given to employees had to be kept simple so they did not become confused and so a particular example was given to assure them that it was the equivalent of SASS. The Joint Working Party did not know what would happen in the following 20 years and it then became "largely a guessing game", but that was the state of the knowledge that they had. The schemes were not precisely the same, but the result was as equitable as could be achieved.

39 Mr Coleman, Mr Dixon and Mr Kolln had said that the new scheme would be the equivalent of SASS. Mr Atkin understood "equivalent" did not mean equal but meant that, given that there were different variables between the two schemes, it was as close as possible to getting the same outcome. To the best of Mr Atkin's recollection, the Joint Working Party in completing its work agreed on the document to be sent to the employees and were also in agreement that they would receive something that was equivalent to SASS. The document that was sent out to employees did not use the words "equivalent to SASS", but everybody was in agreement that was the outcome. When he said in his affidavit that the management representatives on the Joint Working Party "sold" the new scheme, Mr Atkin accepted that was probably an inappropriate word, but there was an agreement. He accepted that he was assured by management representatives that they were aiming to get a result as close as they could to SASS.

40 In re-examination, Mr Atkin said that, although likely benefits at certain entry ages were circulated to the employees and some of those figures were less than benefits available under SASS, it was his understanding the reality was that the figures showed possibly less than 1 per cent difference to SASS - over 25 years that was not a large difference. It had to be kept in mind that the coal terminal was regarded as a very good employer and usually, people did not leave before they reached 60 years of age - there was a nil labour turnover. Some left for reasons of ill health but that was covered in a different provision of the superannuation scheme. Some of the projected figures in the booklet for a particular age had not been shown to Mr Atkin before being circulated to employees. He had seen other figures in the meetings of the Joint Working Party, but he did not play a role in formulating those calculations. The Joint Working Party operated on a level of trust and on his understanding, Mercer attended to these matters and he was not privy to the assumptions made. He pointed out that he was an electrician and not a superannuation expert.

41 Mr Peter Annesley was employed by the MSB at the coal terminal in a clerical capacity and was a member of the MSB Salaried Officers Association, later the MOA and possibly the ASU. By 1990, he was the MOA delegate at the coal terminal. When he joined the MSB he became a member of the State Superannuation Fund and remained in that fund throughout his employment with the MSB.

42 When privatisation arose again in 1990, he recalled there was great concern amongst the workforce at the coal terminal and there was a two-week strike of all employees. There was also a good deal of other industrial action related to privatisation. In approximately March 1990, a Joint Working Party was set up to deal with superannuation once the coal terminal was privatised. The workforce was concerned about a number of matters, including whether employees would no longer be eligible to remain in their existing State Superannuation Fund - the majority of employees were members of SASS.

43 Mr Annesley was nominated or elected to the Joint Working Party. At that time, his understanding was that the object of the Joint Working Party was to ensure that all employees were not to be disadvantaged in their superannuation arrangement as a result of privatisation. A position paper was published after three meetings stating that the MSB and other public sector authorities were examining the feasibility of employees who transferred to the consortium continuing in their existing State superannuation fund. The Joint Working Party was making every effort to obtain a speedy resolution of that matter.

44 In early May 1990, the New South Wales Government announced that the coal terminal had been sold to the consortium and from that point a large number of employees were retrenched. On or about 24 May 1990, Mr Annesley received a letter from the MSB stating that employees to be engaged by the consortium could not remain in their existing State superannuation fund. In early 1990, the consortium put forward a proposal for superannuation but the workforce rejected that proposal. The Joint Working Party continued to receive advice on how to achieve a superannuation scheme that was as close as possible to SASS as this was the overwhelming concern of employees.

45 On 11 July 1990, as a result of discussions, the Joint Working Party recommended a scheme to the workforce. That recommendation was made on the basis of advice received at that time from Mercer. The consortium had engaged Mercer and the unions had sought additional advice from Bain and Co on the final proposal. The Joint Working Party issued a further statement to the workforce on 24 July 1990, again recording that there was a recommended superannuation fund and a special leaflet was being prepared to explain its operation. A leaflet explaining the proposed fund was attached to the statement. On approximately 9 August 1990, Mr Annesley was invited to join the new fund - he completed the necessary forms to join that fund. He decided to join the new fund on the basis of the advice that had been received by the Joint Working Party. On 13 August 1990, he became an employee of PKCT. He accepted voluntary redundancy in August 1999.

46 As a member of the Joint Working Party in 1990, it was Mr Annesley's understanding that the union and management representatives on the Joint Working Party required Mercer to ensure that all employees were provided with a superannuation scheme, with benefits as close as possible to SASS. The scheme was to be more than "just and reasonable" at the time. The intention of all members of the Joint Working Party was that the scheme was not to disadvantage employees and that it was to deliver an outcome that provided benefits to those employees as close as possible to benefits available under SASS.

47 In other evidence, Mr Annesley said that it was reiterated through the workforce that a superannuation scheme was required that would not disadvantage employees and would provide something similar, or as close to SASS as possible. It was likely that the objectives of the Joint Working Party were discussed and he believed that the employer representatives were trying to find a reasonable superannuation scheme. He could not say whether, initially, they agreed with the terminology about being close to SASS or not. Mr Annesley was shown a letter from Mercer dated 22 May 1990 addressed to the consortium setting out the consortium's two major objectives in the design of benefits, being benefits that were of equivalent value to those provided by SASS and that there was to be simplicity of administration and communication. Mr Annesley confirmed that was his understanding of what was being sought by both management and union representatives on the Joint Working Party.

48 The State superannuation fund contributed to by Mr Annesley was not fully understood by him. He said it was geared to public sector employment, with a handsome payout on retirement. The scheme negotiated with PKCT was "okay" and he was comfortable with the idea of contributing 6 per cent and receiving approximately an extra 13 per cent. He thought the proposed new scheme for the coal terminal was "reasonable" having regard to SASS benefits.

49 In cross-examination, Mr Annesley said that, at the time of the discussions about superannuation, the MOA had 30 to 40 members but the FEDFA was the largest union on site. Mr Cram was the head delegate but there were shift delegates, co-delegates and an executive. During privatisation discussions, unions were represented by local delegates and also union officials. The meetings that were held at the site during this period took place in the quadrangle or in crib rooms: separate crib rooms were made available for electricians, mechanical tradesmen and plant operators. Mass meetings might be held in the large crib room, but the use of smaller crib rooms might indicate a meeting of a particular union.

50 The three union representatives on the Joint Working Party were not just representing their own union - they were representing the whole of the workforce. The union representatives did their best to keep employees informed of developments in relation to superannuation issues and there were many meetings and reports provided to employees. Mr Annesley did not recall an industrial dispute notified to the Industrial Commission in relation to superannuation.

51 Mr Annesley understood that PKCT had engaged Mercer to design a new superannuation scheme. There was a spirit of co-operation in the Joint Working Party about seeking a new superannuation scheme. In the projections given for various age groups, Mr Annesley understood that the older age groups were the most relevant because that was the norm. An earlier proposal showed a $3000 difference between the two funds, but that was based upon a lower contribution rate. He also understood that the new fund was to be an accumulation fund and it would be necessary, therefore, to have projections, but those projections might not be accurate over a number of years.

52 The first proposal from Mercer was not acceptable. It was not comparable to SASS. Mr Annesley did not remember a meeting where Mr Atkin used a whiteboard to demonstrate to management representatives how the SASS scheme worked and why their first proposal was inadequate. Mr Annesley did not have a precise recollection, but he recalled the first consortium proposal being rejected by a mass meeting of employees. He could not recall if he spoke at the meeting. Mr Cram spoke and possibly Mr Atkin, although he could not recall what was actually said. The figures used in the proposal for the Joint Working Party were likely to have been discussed. It was often the case that unions met independently and would then come together for a bigger meeting to discuss issues. There were frequent questions from employees and much discussion at these meetings.

53 The members overwhelmingly rejected the first proposal. Mr Annesley understood that, between this proposal and the next proposal, it was likely that Bain & Co were consulted, but that was not at the instigation of the MOA. He did not know how that company came to be instructed. He did not play a role in referring the first proposal to Bain & Co. He remembered some correspondence being received from Bain & Co between the first proposal and the second proposal. The Joint Working Party raised a number of matters that needed to be addressed, but Mr Annesley was unsure of what matters had been raised by Bain & Co. It was Mr Annesley's recollection that the contact with Bain & Co was driven by Mr Cram. He could not recall his discussions with that company. He did not know whether Bain & Co contacted Mercer.

54 Mr Annesley understood that some of the projections put forward with the recommendation for the new scheme showed that benefits were slightly less than SASS. Nevertheless, he was prepared to recommend the scheme to the members - it did not amount to perfection. The outcome was a compromise, but not of a sufficient nature to prevent the recommendation. He understood the result to be fair. Mr Annesley accepted that there was a recommendation, a leaflet and a booklet explaining the fund and ultimately, a mass meeting was held to vote on the proposal.

55 Mr Strudwick was employed by the MSB and in the mid-1980s, became the site delegate for the ETU. He recalled that, in 1990, when privatisation of the coal terminal was announced, a doubt arose as to whether employees could continue contributing to SASS. The MSB also undertook a large-scale retrenchment programme. As the ETU site delegate, Mr Strudwick was involved in negotiations concerning retrenchments and the terms and conditions to apply when the consortium took over. In those negotiations, the consortium was represented by Mr Coleman and Mr Beale. Superannuation was put to one side in those negotiations and that question was to be dealt with by a Joint Working Party comprising union and employer representatives.

56 Mr Strudwick was concerned about the loss of his SASS benefits. He had calculated that he could retire under the SASS scheme at age 57 and take an 80 per cent pension benefit, but there was no way under the current scheme that he could retire at 57 and it was likely that he would have to now retire at 65.

57 Documents were circulated relating to superannuation and finally a recommendation was made about a new scheme. Mr Strudwick attended a general meeting of employees to approve the new scheme and recalled that Mr Cram, the site delegate for the FEDFA, addressed the meeting. Mr Cram was also a member of the Joint Working Party. Mr Cram said words to the effect:

We have had the experts look at it and it is as close as we can get. We will get the same benefits. It has been checked by Mercer and cross-referenced to Kooragang and SASS and it is at least as good as SASS.

58 Mr Strudwick said he would not have supported the proposed new scheme if it had not been for the recommendation of the Joint Working Party and particularly because the Joint Working Party was comprised of representatives of unions and the consortium. In early August 1990, Mr Strudwick received an invitation to join the new superannuation scheme and he commenced employment with PKCT on 13 August 1990. On the basis of the recommendation of the Joint Working Party, he elected to join the new scheme.

59 Approximately two or three years into the operation of the new fund, Mr Strudwick was aware of "rumblings" amongst the workforce regarding the adequacy of the fund and whether it was in fact equivalent to SASS. He recalled that, at about that time, amendments were made to the fund to allow members, regardless of age, to contribute an extra 2 per cent of their salary to be matched by an extra 3.5 per cent by PKCT for a period of 6 years. This allowed those, especially on higher rates of pay, to maximise their ultimate payout.

60 By the late 1990s, Mr Strudwick had become the engineering Vice-President of the Port Kembla Coal Terminal Lodge ("the Lodge") and in that capacity took up the continuing issue of the inadequacy of the new superannuation fund. That matter was taken up with management on many occasions in the following years, with the Lodge hoping to resolve the issue at site level.

61 In early 2004, Mr Strudwick was involved in annual wage negotiations with representatives of PKCT. There was one meeting to address the resolution of superannuation issues. Mr Giddings, the Lodge President and Mr Strudwick attended and PKCT were represented by Mr Tonnini and Ms Hogan. A proposal was agreed between this group in the spirit of "co -determination." Under this agreement, each exiting employee would received two weeks' pay per year of service from 1990 (or when they commenced) to be paid into the PKCT employees' superannuation funds. The money was to be paid out of the entitlements fund that had been established by the PKCT enterprise agreement 2000. Mr Strudwick understood that this arrangement meant that PKCT would not have responsibility for the payments. At the end of the meeting he understood that there was an agreed position to be put to the current general manager, Mr Brannon. When that presentation was made, Mr Brannon responded that he would sleep on it, but on the following day Mr Brannon said that he could not sleep on it and could not do it and that the best option for the employees was "a legal one."

62 Mr Strudwick was aware that SASS benefits were far superior to private industry funds. He had previous experience with such a fund and had lost money in it. He joined the SASS fund after making some enquires to establish that it was a good fund. From his prior experience, Mr Strudwick had an understanding of the difference between a defined benefits fund and an accumulation fund. He was aware of the risk of exposure to the financial markets under an accumulation scheme. There was comparative safety in a scheme such as SASS. The pension option under SASS was very attractive to him. He was aware that many accumulation funds had no pension and that he was effectively buying a pension.

63 Mr Strudwick recalled that the FEDFA had a stoppage about superannuation but ultimately Mr Cram was not concerned because a promise was made about the type and level of the fund. There was going to be a Joint Working Party. Mr Strudwick's early expectation was that any new fund would be the same type of fund existing prior to privatisation. Mr Strudwick was aware that the FEDFA had lodged a dispute in the Industrial Commission but he did not know the details at the time. He was aware that there were proceedings in the Industrial Commission and recalled speaking to Mr Cram sometime afterwards. While everybody wanted to know what the superannuation arrangement was going to look like under the new employer, Mr Strudwick's own involvement was not with the superannuation issue - that came sometime later. He was concentrating on trying to ensure that ETU members had jobs with the consortium. In the early period, the ETU was pressing superannuation on behalf of all the unions but not on an individual union basis. This was reflected in the comparisons used by the Joint Working Party.

64 Mr Strudwick understood that the scheme recommended by the Joint Working Party was open to financial market changes. He had read the projections but there was no guarantee about them. It was the best that could be done at the time. He understood that the proposal resulted in some employees losing and others gaining in comparison with SASS. Nevertheless, his understanding at the time was that management had given an assurance that the employers would have an equivalent scheme. On an individual basis, however, there could be some losses.

65 Mr Strudwick had no involvement with Bain and Co. He recalled the meeting that accepted the new scheme had raised questions with union representatives and they had done their best to answer them: the representatives, however, were not superannuation experts. In assessing the benefits of the new scheme, Mr Strudwick assumed that he would be staying longer than 10 years and he would not lose out under its terms. From information that Mr Strudwick had obtained as a union delegate, he was aware that promises had been made in the Industrial Commission to the FEDFA that employees would receive the same benefits.

66 Mr Adam Giddings commenced employment at the MSB in 1980 and after his apprenticeship joined the AMWU. He was a member of the NRF that then became the Public Authority Superannuation Scheme which in turn ultimately became SASS. By late 1989, he had become a co-delegate for the AMWU at the coal terminal.

67 There was a good deal of industrial disputation in early 1990 concerning the conditions of privatisation. The main issues were firstly, the conditions made available by the new employer on leaving the MSB and secondly, the significant issue of superannuation. Mr Giddings referred to a dispute notified to the Industrial Commission by the FEDFA and heard by Hungerford J. He recalled that, in early June 1990, the consortium provided a proposal for superannuation and that matter was discussed approximately a week later at the relisted hearing of the FEDFA dispute before the Industrial Commission. Mr Giddings said he was particularly concerned that he was unable to continue in SASS at that time and was of the view that any new scheme would be a compromised process. He understood that any new scheme would be an accumulation scheme with the risks attending such a scheme. The Joint Working Party did reach an agreement on a proposed superannuation scheme after taking advice from Mercer.

68 In mid-June 1990, the Joint Working Party issued a position paper dealing with the proposed superannuation scheme and in late July 1990, a further statement was issued and signed by Mr Annesley, Mr Cram and Mr Atkin on behalf of the unions and also signed by Mr Kolln and Mr Dixon representing the consortium. Around that time there was a mass meeting of the workforce in the quadrangle to consider the proposed new fund. Mr Giddings recalled Mr Cram, as the FEDFA delegate, addressing the meeting and saying words to the effect:

As part of the arrangements concerning the new fund, you will not be worse off overall as compared to SASS.

It was on the basis of the recommendation of the Joint Working Party that Mr Giddings voted in favour of the new fund. Mr Giddings ultimately joined that fund when he obtained employment with PKCT in August 1990.

69 In approximately 1992, employees at the coal terminal were allowed to "flex" their superannuation contributions. Until then, only employees aged between 52 and 58 were able to contribute an extra 2 per cent of salary that was matched by an extra 3.5 per cent by the consortium. That option was now open to all employees provided they continued to do so for a period of six years.

70 In 1996, Mr Giddings joined the CFMEU and became the junior vice president of the maintenance stream at the coal terminal. He recalled that, in 1999/2000, a meeting of the Lodge was held on site concerning ongoing concerns about superannuation. Mr Donald Steel of Donald Steel and Associates Pty Ltd, consulting actuaries and superannuation consultants, was present at that meeting. Mr Steel thereafter provided advice to the Lodge on superannuation matters in dispute. In April 2000,Mr Giddings became President of the Lodge.

71 In late August 2001, Mr Steel wrote to the Premier's Department detailing employee complaints concerning the terms of the superannuation fund in operation at PKCT. Nothing came of that correspondence but further meetings were held between the Lodge, CFMEU and Mr Steel.

72 In early 2004, Mr Giddings was involved in annual wage negotiations between the Lodge and PKCT. These negotiations were normally concluded by April each year under the terms of the enterprise agreement. He conducted negotiations on behalf of the Lodge, together with Mr Strudwick who was the Secretary of the Lodge. In those negotiations, also present was Mr Tonnini, the finance manager and Ms Hogan, the human resources manager for PKCT. These negotiations were conducted under the principle of co-determination. There were three or four meetings during the negotiations (after wages were agreed following one or two meetings) and these discussions dealt with the outstanding dispute concerning the inadequacy of the superannuation fund. Following those discussions, Mr Giddings wrote the agreement on a whiteboard. This proposal was to be funded out of the "Capital Entitlements Fund" so that the respondent would not have any additional costs. The Entitlements Fund had been established under the 2000 enterprise agreement. Shortly after these discussions, a presentation was made to the general manager, Mr Brannon, by Mr Tonnini and Mr Giddings. At the conclusion of the presentation, Mr Brannon said words to the effect that he would like to sleep on it but on the following day, he spoke with Mr Giddings and Mr Strudwick and said that he could not agree to sign-off on such a deal - the only option was a legal one.

73 Over time, Mr Giddings received a number of complaints from employees about the new superannuation scheme, comparing it with what had been received under SASS and the concern that members were going to be worse off. A number of those issues were raised at the single Bargaining Unit and were discussed by combined union delegates. These matters were raised with members of management, including Mr Jones, the engineering manager and Mr Beale from Human Resources. Mr Giddings spoke of the enterprise agreement negotiated in late 1996 or early 1997 where increases in wages were foregone to obtain superannuation increases. In 1998/1999, a cost reduction team "forestalled" some of those superannuation increases, some wage increases and deleted some.

74 Issues raised by Mr Steel in relation to superannuation were discussed in the Lodge and also with PKCT managers. Discussions with managers occurred in the business development group, being a forum for managers and elected delegates on site. Representatives of management in this group were Mr Brannon, the general manager, Mr Hooper, the operations manager, Mr Chalk, the risk manager, Mr Tonnini, finance manager and several Human Resource managers including, Ms Hogan and Ms Digiorgio. The issue discussed was the fact that the new scheme was not the same as SASS and that employees were worse off. Mr Beale also took part in these discussions.

75 In 2004, there were further discussions about superannuation under the terms and conditions of co-determination set up under the enterprise agreement. Mr Giddings said that co-determination was a management and union arrangement where the best interests of the ongoing operation of the coal terminal were promoted. That arrangement had been in operation since 1997. During discussions with Mr Tonnini and Ms Hogan, Mr Giddings and Mr Strudwick again raised the issue of superannuation and whether it could be resolved. The discussions continued and as they reached agreement on an issue, Mr Giddings wrote it on a whiteboard. At one stage, Mr Brannon joined the meeting. There was one issue that agreement could not be reached upon and that was a proposal that all future CFMEU claims on superannuation would be waived. Mr Giddings and Mr Strudwick said that they could sign-off for current employees, but not people who potentially had claims and who were no longer employees. It was proposed that an additional clause would appear in the enterprise agreement and that a 5 per cent annual special purpose rate would be set for all PKCT services. This was to be funded out of the entitlements fund and was to be paid as compulsory employer contributions to superannuation.

76 The entitlements fund had been negotiated in 2000 and was to specifically cover the entitlements of PKCT employees. It was initially contributed through a levy at a level of 15 cents per tonne loaded in the first year, 12.5 per cent in the second year, 10 per cent for the third year with the goal of 33 per cent funded from entitlements by the end of the third year, in July 2003. The fund was to be used to pay out annual leave, long service leave and voluntary redundancy. It was to cover payments to be made where otherwise there might be a financial inability in the consortium to make those payments.

77 It was not Mr Giddings' understanding that Mercer were instructed to design a superannuation scheme that was "fair and reasonable" to employees: rather, his understanding was that the proposed new PKCT fund was to be "no less beneficial than SASS." He understood that the fund was to be of the same benefit to employees. In relation to the discussions with Mr Tonnini and Ms Hogan under the co-determination principle, Mr Giddings understood that, in reaching agreement in those discussions, there was no requirement to obtain additional approval from Mr Brannon. The consortium had not placed any of its money into the entitlement fund, but had levied users and that levy amount was placed in the entitlements fund to cover insolvency situations.

78 In cross-examination, Mr Giddings said that he did not have any dealings with the Joint Working Party on superannuation - his union representation was working at the single Bargaining Unit level. The FEDFA and the staff union were the principal unions. During this period leading up to PKCT running the coal terminal, there were many industrial issues and many meetings. Some meetings were single union meetings and others were mass meetings of all employees. There were also meetings with unions and employers. In relation to the Joint Working Party, Mr Cram was the leading union member. Mr Cram often played a prominent role in mass meetings and addressed those meetings.

79 Mr Giddings learned of the FEDFA notification of a dispute to the Industrial Commission concerning superannuation after it occurred. Mr Giddings did not have any recollection of the proceedings or attending the proceedings. He understood that at the time of the dispute hearings, the Joint Working Party was meeting and when appropriate, would report to the unions. The transcript of proceedings came into his possession well after the dispute hearings had concluded.

80 The first proposal from the consortium had tables and projected benefits for certain age groups, but Mr Giddings looked more closely at his own age for the figures presented. He did not think he had turned his mind to the assumptions behind the proposed figures but he realised that the proposal was not good enough and it was rejected by the unions. The matter was discussed at a mass meeting in the quadrangle.

81 At some point, Mr Giddings became aware that the FEDFA had engaged Bain & Co to give advice, presumably, in relation to the advice Mercer was giving to the consortium. The AMWU did not seek any additional specialist advice on the proposal. After the first proposal was rejected, he was aware of further proceedings in the Industrial Commission in Wollongong, but it may not have been the same proceedings as covered by the transcript he annexed to his affidavit. He did not recall knowing about Mr Bunting's statement to the Industrial Commission while representing the consortium and he was not aware of that submission in 1990. He did not recall any statement made around that time that the new scheme would be "in the round", the same as SASS. He did understand that the new scheme would have risks and would be a compromise.

82 In relation to some of the documents circulated about the new scheme, Mr Giddings did not form an opinion: he did not have an understanding of the details of some of those documents. He went along with the recommendation and did not regard himself as having any responsibility for informing members about this option - that lay elsewhere. It was very complex. Mr Giddings understood that employees expected to have extended tenure or a long term working life at the coal terminal and therefore, were more interested in retirement age issues under the new scheme. They had been told that they would be no worse off than under SASS. Mr Giddings remembered the address made by Mr Cram at the meeting when the new scheme was accepted when he said they would be no worse off. That stuck in his mind because it was the "key" and no other address was as strong as the one made by Mr Cram. He recalled that the company representatives were also present. He did not understand that the position of everybody would be precisely the same under the new scheme. Mr Giddings accepted that in 1990, private superannuation in the Australian workforce was in its infancy.

83 Mr Steel had compiled a list of complaints as to the inadequacy of the new fund as part of his role in assisting the unions. This had occurred in 2001. Mr Giddings accepted that, as at that date, it was noted that employees, at the time of privatisation, were promised superannuation equivalent to the future service components of their public sector scheme. It was pointed out that those who were in the NRF had a special scale of points in SASS: the purpose of the NRF scale was to enable members to obtain the maximum benefits in SASS that were obtainable in the original fund. Mr Steel complained that the special scale was not taken into account in the new fund. It was asserted that the employer contribution rate to the new fund was significantly understated. No account was taken of the reasonable expectations of employees who belonged to the SSF. No account was taken of vesting under SASS, the retirement fund or SSF. No account was taken of the fully vested preserved benefit available under SASS and SSF. It was asserted that benefits in the new fund should have been fully vested from its commencement. Mr Giddings accepted that Mr Steel did not specify any complaint concerning the absence of a pension or exposure to the market. It was his understanding that, at the time the list was compiled, they were attempting to find out why the new PKCT fund did not achieve SASS level of benefits.

84 Attention was drawn to wage negotiations in which Mr Giddings had participated. There were two occasions identified when the unions negotiated increases in salary but where at least part of the agreed increase was paid by way of increased superannuation entitlements. Mr Giddings regarded those increases as wage increases foregone, although there was a tax benefit in having such increases paid by way of superannuation rather than merely increases in salary. Mr Giddings said that, although tax effective, the increases in superannuation were not sought for tax reasons, although that was the result: the reason that superannuation increases were sought was to catch up and address the superannuation deficiency issue.

85 Mr John Hooper was not a union representative in early 1990 but by 1989, he had become the manager of the coal terminal. When it was announced that the coal terminal was to be privatised, he was called to a meeting with the chief executive officer of the MSB, Mr Max Moore-Wilton and the manager, corporate strategy, Mr John Hays. They informed him that he had to manage the coal terminal and prepare it for privatisation but at the same time, ensure that the loading operations continued with minimum disruption. When privatisation was publicly announced, he addressed a meeting of the workforce in the main meal room, informing employees that the coal terminal would be privatised through a lease agreement with a consortium and there would be redundancy packages available. During this time there was a two-week strike in protest at these proposals by all employees at the coal terminal.

86 At this early stage, the main concern of the workforce was the proposed redundancies. At approximately the same time, a management team from the consortium consisting of Mr Coleman, Mr Johns and Mr Kolln came on site. The role of the management team was to familiarise itself with the coal terminal and to participate in the process of restructuring and associated operational and engineering details. From that point on, a great deal of his time was occupied with issues of restructuring, redundancies and rationalisation of unions at the coal terminal.

87 From approximately March 1990, superannuation became a major issue. There were concerns in the workforce for employees who would be retrenched and how they would be paid out. There were also concerns about what superannuation arrangements would be adopted for those employees who would be transferring to the consortium. Mr Hooper asked why they could not stay in the same super funds or, at least leave their money in those funds, but was informed that those options were no longer available because of the privatisation and that the coal terminal was no longer part of public sector employment. It was against this background that the Joint Working Party was set up to deal with superannuation and to see if there was any way forward for transferring employees to stay in their existing funds. The Joint Working Party issued a document in April 1990 indicating that remaining in the fund was still an option being pursued.

88 In early May 1990, the sale of the coal terminal was announced. Mr Hooper recalled that there were proceedings in the Industrial Commission. From that point, it became known to Mr Hooper that those transferring employees would not be financially worse off by leaving their public sector superannuation funds. Thereafter, consideration of the Joint Working Party was based on that premise.

89 Mr Hooper ultimately joined the new fund after commencing employment as the operations manager for PKCT. He subsequently became a director of the PKCT Employees' Superannuation Fund. In approximately 1998, that fund was dissolved on a vote of employees and their contributions and benefits were rolled over to an industry fund now known as "AusCoal."

90 Some of his understanding concerning what was happening with superannuation was received from members of the Joint Working Party as they left their meetings, but he was never a member of the Joint Working Party. Mr Cram, as a member of the Joint Working Party, also kept him informed about the progress that was being made and what was happening on the superannuation issue. Towards the end of negotiations, Mr Cram said he was quite pleased and stated that it was coming together very much as he had hoped. Mr Cram did not provide any details. Mr Hooper noted from the documents that were sent from the Joint Working Party to employees that the point was stressed that the new provisions would be "equitable." He did not think the two funds could be compared, except for the lump sum payment and having regard to the lump sum payment, he regarded the outcome as "reasonable."

91 In cross-examination, Mr Hooper stated that people at the coal terminal, at least the majority, were covered by SASS although he was a member of SSF and had a pension option. Others who had been in the Retirement Fund also had a pension component. Mr Hooper learned about the proceedings in the Industrial Commission from the general Manager designate, Mr Russel Kolln (perhaps Mr Russell Coleman), who told him they were going to Court over the issue of superannuation. After that, Mr Cram informed Mr Hooper of the progress of the proceedings. Mr Cram did not provide any detail in these conversations. From discussions with Mr Cram, Mr Hooper gained the understanding that employees would not be financially worse off under the new scheme. Mr Cram's understanding was that suggestion arose from the proceedings before the Industrial Commission. Mr Hooper believed that employees, generally, would be financially no worse off rather than individual employees.

92 From documents distributed to employees concerning the new superannuation scheme, Mr Hooper understood that a number of assumptions underpinned the figures that had been provided. He believed that people would be looking at the figures for age groups for retirement because usually people continued in their employment and did not leave early. He accepted that position with disappointment because he wished to stay in the public sector superannuation fund because of its pension option. He did not know anything about the Kooragang superannuation fund. Mr Hooper did not attend any meetings of employees to vote on superannuation or receive reports because he was not a union member. Although he did not vote on accepting the fund, in the circumstances he agreed to it and regarded the outcome as being "appropriate." When the fund was dissolved and employees became employees of AusCoal, Mr Hooper was of the view that employees were going to "a better fund: and regarded it as a "good fund."

93 In relation to redundancies and the role he played, Mr Hooper said it was to be achieved within approximately one month of the privatisation announcement. The last people left employment just before privatisation took effect because part of his brief was to ensure that there were sufficiently skilled people to keep the coal terminal running. To achieve that aim, he arranged the actual time when people took redundancy otherwise the coal terminal would have been in trouble.

EVIDENCE OF PKCT MANAGERS

94 Mr Russell Coleman was the general manager of PKCT from April 1990 to the end of 1992. He was responsible for managing the transition and commencement of operations at the coal terminal and the day-to-day operations of the coal terminal. The PKCT consortium was a joint venture consisting of a number of partners who operated the coal terminal through PKCT. In the early stages of Mr Coleman's employment, prior to the privatisation of the coal terminal, his main focus was to oversee the arrangements for the smooth transfer of the operation from the MSB to PKCT. This role involved him representing the coal terminal in negotiations with the MSB and a number of unions, including the FEDFA, the ETU, the FIA, the MOA and the AMWU. At this early stage the consortium had a small management team to handle these negotiations and arrangements. Apart from himself, Mr Mike Kolln handled human resources, Mr Ken Dixon was finance manager and Mr Laurence Jones was the engineering manager.

95 Once privatisation was announced and prior to PKCT taking over the operation of the coal terminal, there were numerous industrial disputes that occurred in the first half of 1990 making it difficult for the MSB to keep the coal terminal operational prior to the changeover. Almost immediately upon commencing as general manager, Mr Coleman was required to attend numerous meetings with the MSB and union representatives, usually numbering four to five per day, relating to changeover issues. There were many issues, including manning levels, the transition from the conditions in 21 awards that applied to coal terminal employees, a new set of conditions and voluntary redundancy packages to be offered to employees not required after the changeover to PKCT. Mr Coleman recalled that superannuation entitlements were discussed in the later part of the negotiations from approximately April to August 1990. Employees of the MSB were members of various government superannuation funds but the SASS scheme was the main fund. The unions adopted a position that employees should be allowed to stay in SASS after commencing employment with PKCT.

96 In 1990, private sector employers were not under a legislative obligation to make superannuation contributions on behalf of employees. PKCT was prepared to include "a fair level of superannuation contributions" as part of an offer of employment to previous employees of the MSB. Superannuation was still a relatively new concept for the private sector and there were legal and financial complexities. Therefore, a Joint Working Party was formed during the first half of 1990 to discuss proposed superannuation arrangements for employees of PKCT at the coal terminal. The Joint Working Party approach was adopted to allow discussion and resolution of issues through mutual agreement. Mr Coleman and Mr Dixon initially represented the employers while the union representatives were Mr Cram, Mr Annesley (a MOA delegate) and Mr Atkin (an ETU delegate). In the early stages there was also a representative from the MSB. Mr Coleman's role was to chair meetings of the Joint Working Party. He did not have specialised financial training or detailed knowledge of superannuation and so Mr Dixon was responsible for monitoring the financial implications for PKCT of the various financial superannuation proposals. Mr Coleman was primarily responsible for industrial relations issues. The meetings of the Joint Working Party were generally held on site at the coal terminal but the meetings were not formal. No formal minutes were kept.

97 Mr Coleman stated that no person (including himself) within the management of PKCT or the consortium was experienced in superannuation. Mercer were engaged to initially advise concerning the ability of MSB employees to remain in SASS after commencing employment with PKCT and later on, the design and establishment of the PKCT fund. Mr Coleman believed that Mr Hugh Morris, a company secretary from one of the member companies of the consortium, was responsible for the decision to engage Mercer.

98 Prior to his employment at the coal terminal, Mr Coleman became aware that there had been discussions with the State Government regarding the possibility of employees taking up employment with PKCT remaining in the SASS fund. He stated that PKCT was happy for employees to remain members of SASS because that was one less issue to deal with in relation to the changeover. Advice on this issue was sought from Mercer, the unions sought advice from counsel and advice was also received from the Joint Coal Board. In mid-April 1990, the Joint Working Party issued a position statement indicating that there was to be an examination of the feasibility of employees, transferring to the consortium company, continuing membership in their existing State superannuation fund. By mid-May 1990, the New South Wales Government confirmed that such a step was inappropriate for transferring employees. In late May 1990, the Minister's letter was tabled at a Joint Working Party meeting. In that letter the Minister noted his understanding that the consortium intended to establish a private sector superannuation scheme for transferring employees. Following that correspondence, the Joint Working Party then concentrated on developing an appropriate superannuation arrangement to be offered to employees taking up employment with PKCT.

99 PKCT then sought advice from Mercer on the design of the superannuation fund for consideration by the members of the Joint Working Party. Mr Coleman's recollection was that the instructions to Mercer were to the effect that PKCT wanted Mercer to design a superannuation scheme that was "fair and reasonable to employees in that it was in line with current market standards with respect to superannuation funds." Mercer were instructed to use as a guide the recently established Kooragang Coal Ltd Superannuation Scheme as being an appropriate contemporary accumulation fund. Mr Coleman understood that union representatives on the Joint Working Party sought their own advice concerning proposals received from Mercer: he was not involved in seeking any such advice by the unions, nor was any such advice provided to the unions passed on to non-union members of the Joint Working Party. He recalled that the unions sought advice from Bain & Co.

100 Mr Coleman could not recall any discussion or opposition from union representatives on the Joint Working Party to the proposed scheme being an accumulation scheme rather than a defined benefits scheme, nor could he recall any discussion about pension benefits. Changes were made to Mercer proposals as a result of issues raised in the Joint Working Party. One example regarded employees in their late 50s, in relation to whom it was alleged were not being properly provided for in the initial proposal. An adjustment was made to amend the design of the proposed PKCT fund for employees over 55 "to address the shortfall" for those employees.

101 Correspondence annexed to Mr Coleman's affidavit from Mercer was addressed to Mr Morris although, by early June 1990, Mercer had also sent comparison projections to Mr Kolln as superintendent of BHP industrial relations. In mid-June 1990, Mercer again wrote to Mr Kolln requesting comments on issues raised by union representatives at meetings of the Joint Working Party. Among the issues raised was: the fact that SASS allowed employee contributions to vary between 1 per cent to 9 per cent of salary; higher employer contributions available in SASS; the payment of productivity contribution into a separate fund as arranged for public sector employees under schemes such as SASS; and fully vested benefits to be payable on retrenchment. Mercer in this period also corresponded with Mr Dixon. Mr Coleman did not recall anyone in the Joint Working Party raise the fact that, while the fund was being created, a pension was available to some employees under SASS but not available under the PKCT fund. Mr Coleman could not recall whether a number of letters annexed to his affidavit were provided to the Joint Working Party but the comparison tables were provided and discussed.

102 On 11 July 1990, the Joint Working Party issued a position statement indicating agreement with the form of the PKCT superannuation fund. All members of the Joint Working Party were agreed that it was appropriate to put that proposal to employees. On 24 July 1990, the Joint Working Party issued a further statement that was distributed to employees, together with a copy of a superannuation book designed by Mercer. There was a leaflet explaining the proposed superannuation fund and by late July 1990, Mr Coleman understood that every member of the Joint Working Party was in agreement as to the suitability and design of the PKCT fund.

103 In all his dealings regarding the effect of the PKCT fund, Mr Coleman said he relied on the model and advice provided by Mercer, including the comparisons they provided. The comparisons contained in the final offer indicated "employees would not be disadvantaged from a financial perspective as compared with SASS": Mr Coleman said he had no reason to doubt those comparisons. Also annexed to Mr Coleman's affidavit were his personal notes taken during meetings of the Joint Working Party. His notes for 14 June 1990 refer to matters raised by the FEDFA and "Bain's advice." There was an issue of employer contributions: the following handwritten note on this topic was as follows:

Looking for equal benefit to be the same at the end of the day -

Advice is that this is the only way to equate the schemes by increasing the percentage.

Earlier, in the same working notes, Mr Coleman recorded matters arising in relation to MSB classifications where the following note was entered:

SSA fund members to be treated the same a SAS ie retrenchment benefit.

104 PKCT left it to the union representatives on the Joint Working Party to report to their members regarding the progress of negotiations and discussions within the Joint Working Party. To the best of his knowledge, no company representative, including himself, ever said to employees or to union representatives on the Joint Working Party that employees "would not be worse off" under the PKCT fund as compared with their projected positions under SASS. Mr Coleman said that, other than signing position statements, he did not have any personal role in communicating with employees regarding the details of Mercer proposals or the final form of the superannuation fund decided upon by the Joint Working Party. The only mass meeting he recalled addressing at the coal terminal was in early 1992 and took place in the crib room and related to a strike. He had not said anything about superannuation at that meeting and at that time the question had been settled. He did not discuss with union representatives on the Joint Working Party or other union representatives what he should say to employees about the proposed superannuation fund. At no stage did PKCT request that the unions communicate with employees as an "agent for PKCT." Union communications were in the hands of the unions.

105 Mr Coleman stated that he was very clear in his understanding that the SASS and PKCT funds were very different. He denied that, at any stage, he would have promised employees that they would never be worse off under the PKCT fund because his clear understanding was that an accumulation scheme depended on the performance of the market and therefore there could not be any guarantee that an employee would not be worse off because PKCT would not have any control over that in the future. He understood, nevertheless, that the scheme prepared by Mercer was designed to take into account "to the extent possible, of such fluctuations in the market and provide a scheme that was fair and reasonable at the time."

106 Mr Coleman then commented on statements of witnesses for the applicant concerning himself:

• Mr Buckley had said that at a mass meeting in 1990 where superannuation was the main topic, Mr Coleman, as well as union representatives, addressed the meeting and there was a slide presentation comparing the funds. The point of the slides was to show that employees would be no worse off in the new Fund. Mr Coleman did not recall any mass meeting of that type and said the only mass meeting he attended earlier referred to occurred in 1992 and related to a strike;

• Mr Jaffray had stated that in early 1990 he attended an Industrial Commission hearing in Wollongong as an observer and Mr Coleman had also attended. Mr Jaffray said he had a conversation about superannuation with Mr Coleman and expressed his view that the workers were going to lose money in the new scheme planned by PKCT. He recalled that Mr Coleman had said words to the effect that he would not be worse off by leaving the Government super scheme for the private scheme. Mr Coleman said he did not recall this conversation taking place;

• Mr Bekir Musker, in his affidavit, recalled a meeting addressed by Mr Coleman prior to transferring employment when Mr Coleman said words to the effect that the new superannuation fund being offered was as good as if not better than the SASS scheme. Mr Coleman denied that such a meeting took place;

• Mr Shane Tierney, in his affidavit, recalled a meeting in 1990 where there was a mass meeting in the big on site crib room where superannuation was the main topic. A number of union representatives addressed the meeting and also Mr Dixon and Mr Coleman. There were a number of slide presentations comparing the funds. The slides were to show that they were no worse off in the new fund. Mr Coleman denied that such a meeting took place, reiterating that he had only gone to the employee crib room once in 1992 and that Mr Dixon was not with him on that occasion;

• in his affidavit, Mr Michael Atkin recalled a meeting of the Joint Working Party where comparisons had been tabled. Mr Atkin was very concerned that the proposed new fund was not the equivalent of SASS and he wrote the key elements of SASS on a whiteboard because he felt that consortium representatives did not understand how SASS worked. On the whiteboard he also set out how final payments were calculated and stated that Mr Coleman had responded that proposal was "absolutely disgusting", was too generous and there was no way the company could match it. Mr Atkin said that he responded by saying that the company's

proposal was unsatisfactory and fell far short of SASS and that something better had to be achieved. It was then agreed that the company would go back to Mercer. In relation to this statement, Mr Coleman recalled attending meetings where Mr Atkin was present and where SASS was discussed but could not recall this instance and denied using the words "absolutely disgusting." When there was some disagreement of the Joint Working Party regarding the company's initial proposal, it was amended in response to the union's concern and any amendment was based on advice provided by Mercer;

• later in his affidavit, Mr Atkin stated that the main reason he agreed as a member of the Joint Working Party to the new proposed superannuation scheme was that Mr Dixon, Mr Coleman and Mr Kolln said words to the effect that the new scheme would be the equivalent of SASS. Mr Coleman denied ever saying those words to Mr Atkin or hearing any member of the Joint Working Party say those words. He did not hear Mr Dixon or Mr Kolln say those words.

107 In cross-examination Mr Coleman said that, in designing the new superannuation scheme, he was not dealing directly with Mercer - that person was Mr Hugh Morris. Mr Coleman was the representative on the Joint Working Party asking questions and seeking answers from Mercer although he did not do that directly. Mercer were advising the consortium and not the Joint Working Party. He accepted that one of the objectives of the consortium was to achieve a superannuation scheme where employees received benefits that were of equivalent value to SASS. It also needed to be administratively easy to operate. These were the two main objectives of the consortium for the new scheme. Those objectives were not a secret. Mr Dixon would have corresponded with Mr Morris but Mr Coleman did not do so. Mr Dixon, Mr Coleman, Mr Morris and Mr Kolln were instructing Mercer either directly or indirectly and everybody had the same objective.

108 Mr Coleman was aware that the proposed scheme was moving from a defined benefit to an accumulation scheme and was aware that involved transferring the investment risk from the employer to the employee. He did not give any instructions to Mr Morris or Mercer in relation to that point. He was unaware if instructions about that issue were given to Mercer by anybody else. Mr Coleman understood a benefit of a defined scheme was that the risk was borne by the employer and that a detriment of the accumulating scheme was that employees bore the risk: he did not give any instructions to Mercer, directly or indirectly about that aspect, nor was he aware of anybody who did so. He did not recollect the matter being raised in any conversation or documents in relation to Mercer.

109 The Joint Working Party discussed providing a scheme with "equivalent benefits." Mr Coleman had told the union representatives that the company wanted a new superannuation scheme with benefits equivalent to SASS that were fair and reasonable. The letters to Mercer did not use the words "fair and reasonable." Mr Coleman agreed that what was sought and obtained from Mercer was advice about a scheme that had equivalent values to SASS benefits, being as close as possible considering differences in the scheme. Mr Coleman accepted that the letter of instruction to Mercer did not use those qualified terms. There was no reference to "fair and reasonable" in directions to Mercer nor was there any reference to varying any investment risk. The Joint Working Party were told of these instructions and it was not kept a secret from the union representatives. Mr Coleman accepted that if a scheme provided equivalent value to SASS, the employees would not be any worse off. He accepted that employees were not to be disadvantaged by reason of moving from SASS to PKCT.

110 Mr Coleman did not recall speaking to Mr Morosin or Mr Sanson giving them assurances that they would not be disadvantages by moving from SASS to the PKCT fund. He could not recall speaking in front of approximately 150 employees assuring them that they would not be disadvantaged in any way and could even be in a better superannuation fund. He did not recall attending meetings of employees in 1990 where superannuation was discussed.

111 There were documents prepared by Mercer comparing SASS and the PKCT scheme. Those documents identified a return on retirement and gave a figure but Mr Coleman did not recall anything in the documents that stated that because it was an accumulation scheme, they may do better or less than that number. He could not recall any statement to the effect that the figure depended on the investment returns. He could not recall if he had ever told employees that they might be worse off under the PKCT fund. He recalled that the Joint Working Party discussed that Mercer had been asked to design a scheme with benefits equivalent to those of SASS, but he had trouble recollecting whether he said to anyone that the benefits provided by the PKCT scheme would simply be fair and reasonable.

112 Mr Coleman agreed that his management style was to talk to employees at various places and times. He accepted that he became involved with employees and did not sit in his office. He became aware of their personal circumstances and history. If an employee wished to discuss a matter and talk to him about it, they were welcome to do so. He could not recall talking to anybody about issues relating to superannuation, but it could have happened. He had an "open door for discussion."

113 The consortium had decided that the fund should be an accumulation fund and Mercer were not asked to advise about the type of fund. Mr Coleman did not know why that was decided. To his knowledge, no consideration was ever given in trying to establish a fund that replicated SASS, but as a private scheme. The consortium would have preferred the employees stay in SASS because it was one less problem to solve but Mr Coleman was unaware of any representations to achieve that result. He did not know if that preference was ever discussed with the Government and was not aware of any such representation. Mr Coleman did not know why the decision was made to have an accumulation fund rather than a defined benefit fund but it was the preference of the consortium to stay in the SASS fund.

114 Mr Kenneth Dixon was employed from 1 April 1990 to February 1996 by BHP Steel (AIS) Pty Ltd as finance manager of the Port Kembla Coal Terminal operated by PKCT. In that position he was responsible for financial matters relating to the day-to-day operations of the coal terminal. From the commencement of his employment there were negotiations regarding the takeover from the MSB. One of the issues that arose was the superannuation entitlements to apply to employees of PKCT.

115 In early 1990, a Joint Working Party was established to discuss and resolve superannuation issues and reach agreement on that matter. Mr Dixon was a PKCT representative on that body. Mercer had been engaged by PKCT to design the super fund for employees transferring to the coal terminal. Mr Dixon stated that he relied on Mercer to design a superannuation fund that met the needs and objectives of the members of the Joint Working Party. He could not recall much of what was discussed at each Joint Working Party meeting. He did recall that, in approximately in mid-1990, the unions sought their own independent advice in relation to the structure and details of the final version of the proposed PKCT superannuation fund prepared by Mercer but he could not recall receiving a copy of that advice.

116 The Joint Working Party came to an agreement regarding a structure for the new fund and that was acceptable to all members of the Joint Working Party. He had no clear recollection of the obligations of union representatives in relation to communication with employees but basically, it was left to them to communicate with their members in relation to the issues surrounding superannuation and the new fund. In other evidence, Mr Dixon stated that the purpose of the Joint Working Party was that, after discussions with the representatives, these issues would be discussed with union members.

117 In cross-examination, Mr Dixon agreed that when he arrived at the coal terminal there were many industrial issues, including redundancies. Over a period of months the coal terminal was being prepared for private operation by PKCT. Superannuation was one of the many issues that arose with the workforce. When he arrived the three most senior managers were: Mr Coleman, general manager; Mr Dixon, finance manager and Mr Beale, human resources manager. Mr Dixon and Mr Coleman were working on superannuation. Mr Kolln also worked on superannuation. Mr Coleman was very involved in dealing with the workforce and the unions, while Mr Dixon was essentially an accounting person. He did not have a hands-on industrial role. In relation to superannuation, he was considering the financial implications and was liaising with Mercer. He stated that he was the person who gave instructions to Mercer in relation to superannuation and he did not deal with anyone else, nor did he deal with Bain & Co. Mr Dixon said he received his instructions from the Joint Working Party but essentially from Mr Coleman and Mr Kolln. Mr Coleman was his "boss."

118 SASS was the "yardstick" for the design of the new superannuation scheme at the coal terminal. The instruction given to Mercer was to design a superannuation fund with benefits of equivalent value as provided by SASS. It was also to be administratively easy because there were difficulties with different funds. Benefits of equivalent value as provided by SASS remained one of the main objectives throughout the discussion. It was the charter of the Joint Working Party to produce a scheme of equivalent value.

119 In the first six months of his employment at the coal terminal there were meetings in the large conference room, firstly, to introduce the new organisation and then general updates concerning the general state of the business. A number of matters were discussed and superannuation could have been one of them because it was, certainly, a "hot topic" so it may have been talked about: it was very close to their hearts.

120 Mr Dixon was aware that Mr Morris came from one of the consortium partners and was familiar with superannuation. Mr Morris commenced the discussions with Mercer because he had some relationship with them and he continued in that role until Mr Dixon came on the scene and essentially took over. Mr Morris did not attend any Joint Working Party meetings. Mr Dixon did not really know what Mr Morris did in relation to the new superannuation scheme as that occurred before his own involvement. There may have been some correspondence still addressed to Mr Morris but Mr Dixon would deal with it after he assumed his role at PKCT.

121 There was some correspondence from Mercer in May 1990. Mr Dixon said he had some knowledge of the operation of SASS and that would have come from Mercer. They were relying on Mercer for information about SASS, although they may have taken some information from the Internet. Information may have also been obtained from the MSB. Mercer were to model an equivalent scheme and Mr Dixon agreed that if there was any complexity in that scheme and SASS benefits, it was important that Mercer understood those complexities and benefits. It was not a case of Mr Dixon instructing Mercer that SASS provided an identified benefit, that was the role of Mercer.

122 In a letter from Mercer dated 4 June 1990, Mercer were looking at the Kooragang Coal Loader Superannuation Fund. Mr Coleman had previously worked there and the company secretary of the Port Kembla Coal Terminal had been finance manager prior to transferring to BHP's colliery office and both those people had an intimate knowledge of that scheme. Looking at that scheme was seen as a good starting point to design the PKCT scheme. SASS was not the best starting point because it was a defined benefits scheme. The letters from Mercer were not generally given to the union representatives on the Joint Working Party, but the comparative tables were passed on.

123 Mr Dixon said he prepared the brochure that was sent to employees explaining the new scheme. He was responsible for sending it out, although he may have had information from other people as part of the process. Mercer performed all the calculations and prepared the table of benefits. The example used a number of ages and although there were other age groups, these were the most populated age groups for employees at the coal terminal. Mr Dixon did not think it was necessary to place a warning on the comparative documents that the figures provided for a new fund member at age 40 did not relate to any other age. He understood that, in an accumulation fund, the risk of fund investment lay with the employee. If investments were bad, the projected figures could be lower but if things went well, the figures could be higher. There were no guarantees or certainties with an accumulation fund. In SASS, the benefits were defined, known and certain. The retirement benefit was known because it was calculated to a formula. Mr Dixon accepted that there was nothing in the documents sent to employees pointing out those facts. Mercer had said in correspondence that it was very difficult to compare a defined benefit scheme with an accumulation scheme.

124 Mr Dixon did not have any recollection of Mr Coleman giving instructions to Mercer in respect of the fund they were designing for the coal terminal. At no time after commencing employment did Mr Dixon change the instructions about the design of the fund, namely, a fund of equivalent value to those provided under SASS benefits. There was no monetary limitation placed upon the design by Mercer. There were, however, time frame restraints. There was also a practical consideration not to further ignite an already volatile industrial situation. They were seeking to achieve a situation where the workforce and the unions would agree about the superannuation fund to be implemented and that would smooth the transition to privatisation.

125 The changeover to PKCT occurred in August 1990. People were offered employment on the basis that the superannuation scheme would be equivalent in value to the SASS scheme. That was the purpose of the Joint Working Party. It was the intention that scheme would be offered to new employees.

126 The tables that were distributed to the employees were designed to show that the proposed scheme was better than the Kooragang scheme and were designed to give a benefit that was equivalent "or somewhere equal" to what they could have expected in SASS. It was to show that, at various stages, there was minimal difference. As to the ages used, a person younger than 40 could expect to do better than the tables because that person would be in the scheme for longer: a person older than a bench mark age would not do as well based on the assumptions. Those documents were given to the workforce to show that they would not be disadvantaged but if they were, it would be minimal. There was no disclaimer with the distributed tables indicating that, depending upon age, an employee might be better or worse off than the figures provided.

127 From 1990 to December 1991, Mr Paul Beale was employed as human resources superintendent for PKCT. He was responsible for day-to-day employment related matters on site. From December 1991 to approximately 1997, he held the role of operations manager at PKCT but continued to assist with human resources matters until Mr John Brannon commenced as general manager of PKCT in approximately 1999.

128 In early 1990, prior to PKCT assuming management of the coal terminal, Mr Beale commenced work at the coal terminal for PKCT. Throughout 1990 there were negotiations between PKCT management and various unions concerning the changeover and the movement of employees from the MSB to PKCT. He worked closely with PKCT senior management, including the General Manger Mr Coleman, finance manager Mr Dixon and Mr Mike Kolln.

129 In early 1990, one of the unions notified an industrial dispute to the Industrial Commission regarding superannuation entitlements to be offered to employees of PKCT who were transferring from the MSB. As a result of that dispute, PKCT established a Joint Working Party made up of representatives from unions and PKCT management to address superannuation issues.

130 Although not a participant in the Joint Working Party and not involved in its meetings, Mr Beale was aware of the superannuation issues being considered by the Joint Working Party through discussions with Mr Coleman, Mr Dixon and Mr Kolln. This arose because superannuation was his area of responsibility. He worked closely with this management team. During the Joint Working Party's deliberation, PKCT engaged Mercer to advise on the design and establishment of the PKCT fund. He understood the intention of PKCT was to create a scheme that provided a benefit to employees based on full service and assumptions comparable to the "end benefit public sector superannuation schemes" in operation for employees at MSB, based on a typical employee. He was also aware that the unions had engaged their own experts, Bain & Co, to advise on the design of this new fund.

131 During 1990, the relevant officers of PKCT expressed a preference for the new fund to be an accumulation fund rather than a defined benefit fund as available to MSB employees. The preference for an accumulation fund was, firstly, because the State Government had refused to allow employees transferring to PKCT to stay in SASS and secondly, PKCT did not have any asset backing for the establishment of defined benefit funds. PKCT did not own the coal terminal but leased it from the New South Wales Government. The consortium, therefore, did not have substantial assets to support a defined benefit fund and any superannuation scheme put in operation would therefore be an unfunded liability. PKCT therefore proposed an accumulation scheme which meant that superannuation contributions could be made over time. While efforts were made to approximate the public service superannuation entitlements, inevitably there were a number of assumptions required in relation to future wage growth and interest rates.

132 The Joint Working Party ultimately recommended the PKCT fund to employees. It was the Joint Working Party that communicated results of Joint Working Party decisions to employees, not PKCT. To the best of his recollection, Mr Beale said that PKCT management did not host any mass meetings with employees at which superannuation or the proposed fund was discussed, prior to or after it was established. To the best of his recollection he did not attend any mass meetings of employees at which Mr Coleman, Mr Dixon or any other member of PKCT management addressed employees regarding the position employees would be in under the new PKCT fund compared with public sector superannuation schemes applicable at the MSB.

133 The PKCT fund was established in mid-September 1990 with six members on the Board of Trustees. Three trustees were employee elected members of the Board and three were appointed by PKCT. Mr Beale was the secretary of the Trustee Board. At the time the fund was established, Mr Beale could not recall any concerns or issues raised by anyone, including union representatives or employees, regarding the design of the fund or its features. He did not recall anyone raising concerns about the absence of a pension entitlement while he was employed at PKCT.

134 A number of amendments were made to the fund after it was established. In 1992, due to the superannuation guarantee charge, the fund was amended so that non-contributing members would receive employer contributions to the statutory requirement of 3 per cent. There was also an extension of what was referred to as a "flexing-up" opportunity. Under the PKCT fund there was an option for employees aged 52 to 58 to elect to contribute an extra 2 per cent of their salary to superannuation that would be matched by an additional 3.5 per cent contribution by the employer for a continuous period of 6 years. That option was included after union representatives on the Joint Working Party argued that the initial fund design proposed by PKCT was insufficient. To address this complaint, amendments were made to the fund design, including the introduction of flexing-up enabling older workers to top up their superannuation, if needed, prior to retirement.

135 In early 1993, the Trustees proposed to amend the Trust Deed to extend the flexing-up option to all employees regardless of age. Younger employees would be able to top up their superannuation earlier and thereby benefit from the accumulation effects over time. The Trustees wished to extend an existing benefit to all employees. A proposal was put to the PKCT Single Bargaining Unit comprising each union with employees at the coal terminal and it was accepted in late April 1993. During this period, Mr Beale could not recall any expression of concern, including from the single bargaining unit, regarding the adequacy of the PKCT fund by reason of it being an accumulation fund rather than a defined benefit fund. No amendments to the fund were sought to address such concern.

136 In October 1994, the fund deed was amended to allow PKCT to contribute superannuation in relation to the bonus performance incentive paid to employees. There were other changes. People transferring from the MSB to PKCT in 1990 had a wide range of superannuation arrangements and a number of older employees were keen to increase their superannuation entitlements in preparation for retirement. In these circumstances, there were times when employees sought that wage increases be provided in the form of increased superannuation contributions, thus, providing a tax effective way of obtaining an increase in employment benefits, yet enabling a boost to their superannuation balance. The 1998 enterprise agreement was made under Commonwealth legislation and certified by the Australian Industrial Relations Commission in November 1998. The 1998 agreement increased employees' superannuation contributions by 1 per cent with a corresponding employer superannuation contribution of 1.75 per cent from July 1999. The agreement also dealt with salary sacrifice arrangements whereby employees could elect to contribute further amounts as an employer contribution. Those amounts would not attract matching employer contributions.

137 So far as Mr Beale was aware, the increase in superannuation contributions under the 1998 agreement were not sought by unions of employees arising from concerns about inadequacies in the design of the PKCT fund, but arose from seeking a tax effective alternative to wage increases. The 1998 agreement also introduced the concept of a "superannuation rate" defined as 150 per cent of the applicable special purpose rate. That clause was introduced because PKCT had moved to annualised salary. This move meant that employer superannuation contributions would be calculated based on 150 per cent of the employees' base (annualised) wage rates. The 2000 enterprise agreement certified by the Industrial Commission provided an option of salary sacrificing with any additional superannuation contributions to be treated as employer contributions. That arrangement was continued in the 2005 and 2008 enterprise agreement.

138 In 1999, PKCT became a participating employer in the Coal Super Retirement Income Fund and transferred to the AusCoal Superannuation Fund from 1 October 1998. The PKCT fund was wound up and the superannuation management company was de-registered shortly thereafter.

139 Mr Beale acknowledged that, while on several occasions additional superannuation contributions were negotiated as part of the wage increases, he did not understand from union negotiators at that time that their concern related to an attempt to catch up to SASS benefits, or to ameliorate any alleged deficiencies in the PKCT fund design. Prior to complaints in approximately 2004, no employee or officer of a union raised with him, or to his knowledge anyone else, concern about the absence of a pension option in the PKCT fund.

140 In oral evidence, Mr Beale stated that, although management did not host any mass meetings in relation to superannuation, some members of PKCT management attended mass meetings concerning that subject. He recalled that Mr Dixon and Mr Coleman attended such a meeting and he helped prepare some overheads that were used in the presentation.

141 In cross-examination, Mr Beale agreed that in the early months of 1990 there was a great deal of disputation with unions trying to settle upon the conditions under the new privatised operator and that superannuation was one of the issues agitated by unions. In his role, he was not a member of the superannuation Joint Working Party but he was advised as to progress and then became involved in its administration once it was agreed. The negotiations regarding formation of a superannuation scheme were in the hands of Mr Coleman and Mr Dixon.

142 There was a dispute notified to the Industrial Commission concerning superannuation. Mr Beale did not attend those proceedings that were between the unions and the MSB, but PKCT did intervene. He believed that Mr Coleman engaged a legal representative, Mr Bunting, to intervene in those proceedings. Mr Beale did not give any instructions to Mr Bunting about the issues then before the Industrial Commission.

143 In relation to instructions given to Mercer, Mr Beale was unaware of those instructions nor did he have any dealings with Mercer. He was not aware of instructions given relating to the objectives of the PKCT superannuation scheme. In his affidavit evidence he reflected on what had been discussed in the management team. Mr Beale was aware that an objective of PKCT management was to have a superannuation scheme with benefits equivalent to those available in SASS as long as it was in an accumulation fund. Mr Beale did not have any knowledge of the benefits available under the SASS scheme because it was not discussed with him. There were assumptions as to how the accumulation scheme was designed, but it was to lead to the outcome that the new scheme would provide benefits of equal value to SASS. Mr Beale had not seen any advice provided by Mercer or from Bain & Co. He did not see correspondence from either company.

144 It was accepted by Mr Beale that the table of comparative benefits proceeded on the basis of using a small number of ages, rather than being a comprehensive document representing the ages of all employees. He did not have any first-hand knowledge of the involvement of Bain & Co either with the unions or the Joint Working Party. Mr Beale understood that PKCT wanted an accumulation fund and he understood that such a fund transferred the investment risk from the employer to the employee. He did not have any recollection of seeing a document that, in terms, stated for employees that this was the result of joining an accumulation fund. He did not have any recollection of telling any employee of that result. He could only remember one mass meeting where members of management were present, but he did not attend that meeting and was not present at any of the meetings with employees regarding superannuation. He understood that management were making a presentation on superannuation to one meeting because he had prepared the overhead slides. He did not prepare the contents of that presentation but prepared the overheads containing that information.

145 It was understood that there were a variety of assumptions made to calculate benefits available under the new scheme. One factor was the current age of employees and Mr Beale understood that there might be a variety of reasons why people might retire earlier or later in their working life. He was not aware of any analysis performed in 1990 in relation to giving a particular value to benefits for individual employees. Calculations were performed on the basis of three or six "average" or "typical" employees. Mr Beale understood that there were many more age groups within the workforce than the three or six chosen. Mr Beale accepted that there was no single employee who was representative of the whole workforce and a small number was chosen for the purposes of calculation relating to a workforce of approximately 200.

146 The flexing-up provision was introduced in the original plan following negotiations with the unions that the plan was insufficient. The 1993 extension to the flexing-up option was introduced to improve employee benefits. Mr Beale did not understand that this improvement to the scheme was in recognition that the new fund was not equivalent in value to SASS, it was just an improvement made to the fund. He was unaware that the 1993 extension of the fund was as a result of a union complaint that the benefits did not equate to SASS benefits. There were wage increases in 1998 or 1999 but Mr Beale was not involved in those negotiations. He had no direct involvement in superannuation increases being contained in enterprise agreements. He did not have a direct role in negotiations concerning salary sacrifice arrangements.

147 The movement to an accumulation fund came from PKCT, not from Mercer. An accumulation fund was simpler and easier to manage and it was "fundable" for the company and affordable in terms of contributions. Mr Beale was unaware of any action taken by PKCT to have employees remain in SASS. When asked if that lack of involvement meant that there was no intrinsic interest by the company whether employees were in SASS or not, Mr Beale replied that the company had a view that it wanted an accumulation scheme and that was a view formed "right from the word go." That was his understanding gained from discussions internally with senior management in PKCT, namely, Mr Dixon and Mr Coleman.

148 Mr John Brannon was the general manager of the coal terminal operated by PKCT from June 1999 to approximately November 2007. In this position he was responsible for the overall management of the company. He was aware that the company superannuation fund had been established and had functioned for over eight years.

149 Mr Brannon's evidence concerned discussions and negotiations that took place in 2004 and proposals put forward to enhance employees' superannuation benefits, using money from an entitlements fund. Mr Brannon understood that the entitlements fund was created and owned by members of the consortium who contributed to the fund to ensure that employee entitlements could be met, if there was an insolvency situation or redundancies. The contributions were held in a trust fund set up jointly by PKCT and the CFMEU and the Public Trustee was nominated as holding "legal title" to the fund. A proposal had been put forward as a result of discussions between Mr Strudwick and Mr Giddings for the unions and Mr Tonini and Ms Hogan for the employer to have two weeks' pay per year of service paid into each employee's PKCT superannuation fund. This payment was to come from the entitlement fund. Mr Brannon was aware that, for some time and in 2004, the unions had expressed dissatisfaction with the PKCT superannuation fund. It was Mr Brannon's view that the proposal was one that he had to approve, but he was not satisfied that any case had been made out by the unions that supported the payment into employees' superannuation fund accounts. Further, it was his view that the entitlement fund had a quite specific and separate purpose, namely, to protect against insolvency situations or redundancies. It was his view that, notwithstanding the terms of the Trust Deed, the consortium members who contributed to it owned the funds.

150 The discussions in which Mr Giddings, together with management representatives, were involved were not part of the co-determination process adopted by PKCT. Mr Beale described that process as being one whereby employee representatives were involved in discussion of management issues and objectives, in circumstances where they might not otherwise be involved. The issues discussed were relevant to the running of the coal terminal. PKCT desired the participation of local Lodge officials and a trip to New Zealand was organised where the Lodge President and Mr Brannon attended in an attempt to obtain more business for the running of the coal terminal. This was separate from the process of wage negotiations. The number of people involved in co-determination was a much larger group than for wage negotiations.

151 The meetings with management involving Mr Strudwick and Mr Giddings for the unions was part of annual wages negotiations and the proposal that came out of that negotiation was meant to be about wages. Mr Brannon was unaware that there were any negotiations relating to superannuation. Mr Brannon was, however, aware that unions were dissatisfied with the PKCT superannuation fund but he did not recall the substance of their dissatisfaction, or whether it was explained to him: he could not recall whether the substance of the union's complaint had been explained to him. He could not recall the period over which the unions' dissatisfaction was raised with him. The proposal that came out of the meeting between Mr Strudwick and Mr Giddings for the unions and Mr Tonini and Ms Hogan for the employers was one that Mr Brannon did not accept it as the general manager, nor was it accepted by PKCT. In his view, the unions had not made out a case for such a contribution to superannuation.

THE EXPERT EVIDENCE

152 Both parties provided expert evidence through actuaries of long experience. The applicant filed seven reports prepared by Mr John Rawsthorne: those reports were provided in October 2009, September 2010, March 2011, April 2011, February 2012, September 2012 and April 2013. The respondent tendered reports from Mr Michael Murphy dated July 2010, February 2012 and March 2013. No issue was taken in relation to the professional capacity of each expert to provide opinions and make calculations in relation to benefits available under the two funds at the centre of the proceedings. Extensive cross-examination was largely confined to competing contentions about the range of values attributed to various aspects of both schemes and how the benefits of the SASS scheme might be appropriately reflected in the PKCT scheme so as to provide an equivalent benefit to employees moving from the MSB to the new entity operating the coal terminal.

153 An issue arose in relation to an aspect of Mr Rawsthorne's opinions and calculations insofar as they were said to be deficient in not disclosing his reasoning. That issue will be dealt with later in this judgment. The reports provided by both experts accepted that they were bound by the Expert Witness Code of Conduct appearing in Sch 7 of the Uniform Civil Procedure Rules 2005.

154 The parties also provided an agreed bundle of documents extending to some 14 folders. Included in those documents were instructions provided to Mr Rawsthorne in 2007 and a draft and final report prepared by him in late March 2007. On its face, that report does not appear to have been structured for the purposes of tendering in proceedings and did not specifically acknowledge the Expert Witness Code of Conduct. The 2007 document was not separately tendered by the applicant but Mr Rawsthorne was closely cross-examined upon it in the course of giving his evidence.

155 In light of the extensive and technical nature of the expert reports and the fact that over a period of time issues were narrowed between the experts, what follows is a summary of the essential elements of those reports.

156 A review of the expert evidence might be conveniently placed in the context of the final conclusion reached by Mr Rawsthorne in his seventh report. In that report he made calculations assessing the loss to 63 former SASS members. Those calculations produced, at the highest, a loss of approximately $180,000 and a low of approximately $29,000. One person was assessed as having suffered no loss. The average loss was approximately $84,750.

157 In mid-February 2007, solicitors acting for the applicant had written to Mr Rawsthorne in relation to these proceedings that had already been commenced in the Court. Reference was made to reports secured from a retired Actuary, Mr Steel, but it was noted that after perusal of subpoenaed material, doubt was cast as to the validity of his opinion on the question of whether the members of the PKCT fund were not receiving equivalent benefits to those available under SASS. Mr Rawsthorne was then asked to report on the applicant's claim and asked whether the members concerned were in fact worse off under the PKCT superannuation arrangement than they would have been if those arrangements had not been altered in 1990. In essence, his opinion was sought on the question:

Are employees at PKCT in no less favourable position in respect to their superannuation entitlements today (and into the future) than they would have been had they remained members of the State Authority Superannuation Scheme in 1990?

158 In his late March 2007 report, Mr Rawsthorne summarised his finding that the PKCT scheme resulted in the removal of several existing options and rights for SASS members. He pointed out that there was a risk of investments under-performing compared to the position with SASS where the employer was responsible for making up any shortfalls in investment returns. Mr Rawsthorne categorised this as the investment risk being transferred from the employer to the workers. He pointed out that members had lost the ability to receive a guaranteed indexed lifetime pension therefore being at risk of having insufficient savings if they lived for a long time after retirement. He described this as a longevity risk being transferred from the employer to the workers. The workers had not received any compensation for or recognition of these losses. He did note that offsetting those losses and risks were some "valuable additions to rights in certain circumstances" which may not have been recognised at the time. He noted in particular that the right to receive employer contributions for all years of service, rather than just in the first 30 years (as applied in SASS), was a valuable addition to overall superannuation for workers who commenced service in their twenties and remained until retirement.

159 Mr Rawsthorne noted that information to workers in 1990 did not show all relevant benefits in the comparison. Deferred benefits in SASS, prior to retirement and pension benefits (where eligible), were ignored, despite being the most valuable SASS benefits available to most workers. There were small problems with the stated projections. He concluded that the comparison between outcomes for a new entrant provided to workers was unrealistic in several aspects and generally unhelpful in the context.

160 The major area where the PKCT scheme was "demonstrably inferior" to SASS in 1990 was the removal of the right to a pension for ex-NRF members of SASS. While the pension may not have been highly valued in 1990 it was, nevertheless, an option. In concluding he stated that, based on "limited hindsight information", it would appear that the experience between 1990 and the present time had been "relatively unfavourable to workers" with the assumptions made in demonstrative projections in 1990 not being borne out in practice. He concluded that most members would probably have been better off had they remained in SASS.

161 Mr Rawsthorne then compared defined benefit schemes with accumulation schemes noting that, while the PKCT scheme was an accumulation fund, SASS was a defined benefit scheme with a mixed benefit whereby the member accumulation was provided separately to the defined employer benefit. He noted several features of a defined benefit scheme such as SASS, including the provision of: a known benefit allowing employees to plan for retirement with some certainty and where a pension was provided post-retirement; income that was known and where there was no longevity risk; a deferred benefit as an alternative to a cash resignation benefit; additional benefits such as generous retrenchment benefits; and; death and disability benefits generally unavailable in accumulation schemes, although noting that the PKCT scheme provided a generous defined benefit style prospective component on death and disability.

162 In relation to accumulation schemes, Mr Rawsthorne noted that all investment risk was borne by the worker whereas, under defined benefit schemes, the employer bore the risk. He acknowledged that this could turn out to be a positive or negative from the point of view of the workers' benefits, depending on the performance of markets close to their retirement. Members were also given investment choice but this was described as a double-edge sword whereby financially naive members tended to make inappropriate choices for their circumstances, typically being too conservative when younger and too aggressive towards retirement. There were benefits for the employer in providing a stable cost and certainty in budgeting in accounting, generally leading to a lower employer cost. He noted that PKCT, apparently, was intended to be roughly cost-neutral relative to SASS. He noted an important distinction when comparing SASS and PKCT was that the pension option existed for ex-NRF workers who were the bulk of the employees covered by the application. The pension option provided a guaranteed lifetime income and therefore retained all investment risk for the pension benefit for the life of the worker. It also provided insurance against the worker outliving their savings. These were described as significant risks borne by the employer and SASS, but not by PKCT.

163 In dealing with forms of loss and gain, Mr Rawsthorne noted that SASS was a residual scheme after a number of mergers and takeovers of older schemes. He noted the existence of at least three schemes that had moved into SASS, including the NRF scheme. The transition of these schemes were described as complex and poorly understood, even by those close to them. He was not surprised that those transitional arrangements were ignored when the comparison of scheme benefits for relevant employees was made by Mercer in 1990. He stated that, unfortunately, the omission of these matters appeared to have understated the available benefits in SASS for some members and may have caused some misapprehension amongst members about the relative value of SASS and PKCT benefits. While the bulk of workers were members of the NRF, they subsequently went into another scheme before ending up in SASS. Some of these consequences were considered.

164 It was noted that a particular feature of SASS (said to be unusual amongst similar benefit point-passed schemes) was the right of workers to contribute at low rates early in service and at higher rates late in service without missing out on the opportunity to achieve the maximum benefit based on six benefit points per year. Similar schemes generally had no similar right to catch-up benefit points. In the operation of this part of SASS, Mr Rawsthorne was of the view that Mercer understated the true value of total benefits by ignoring the value of the option to catch-up on contributions.

165 Mr Rawsthorne then returned to the pension option available under SASS, noting that the Mercer paperwork had indicated that this matter had not received attention either in providing information to members and valuing the loss of pension option for those retiring at or above the age of 60. He noted that this aspect may not have concerned members in their 30s or early 40s in 1990, but was viewed as a valuable option for those now approaching retirement age. He explained the operation of the pension scheme and stated that the NFR pension option was "significantly more valuable than the alternative lump sum." Mr Rawsthorne, after setting out a table of comparisons to substantiate this finding, noted that in the current environment of self-funding of retirements, the guaranteed lifetime pension could be perceived as having an even higher value than the relativity shown in his table due to the provision of longevity insurance. The value of this benefit was also approached on the basis of an employee taking a lump sum and then attempting to purchase a pension on the open market (an annuity). Mr Rawsthorne noted that a 60 year old with a lump sum of $324,000 would purchase a reversionary pension in the retail market of approximately $10,400 per annum compared to the available scheme pension of $25,2000 per annum. To purchase a non-reversionary pension, the retail amount would be approximately $12,600 per annum compared to a scheme pension of $31,500 per annum. These differences were descried as "dramatic" and accurately portraying the value of the SASS scheme provided pension.

166 Further, he expressed the opinion that, because SASS was marketed as a lump sum scheme with a pension option, there may have been a lack of education regarding that option. In similar public sector schemes that were known and marketed as a pension scheme, the take-up was much higher than in SASS despite similar relativities in pension and lump sum values.

167 Next, Mr Rawsthorne noted that, unlike the SASS scheme, in PKCT there was no maximum amount of employer accrual and so it was possible for an employee to receive a subsidy on the 6 per cent member contribution for a period longer than 30 years. This affected those who joined the PKCT scheme prior to age 30. A member starting work at age 25 and working through to age 60 would receive the benefit of not having any maximum in the PKCT scheme and so the retirement benefit would be higher by approximately one year's salary. For those who worked beyond age 60, the additional benefit available in the PKCT scheme would be greater.

168 Consideration was given to two schemes that had merged with SASS but in relation to these people, Mr Rawsthorne concluded that it was likely that they would transfer to PKCT on not inferior terms. He could not find any evidence that any of the members of these funds were among the 78 who were the subject of the current proceedings. He then considered the death and disability benefits under both schemes and concluded that the PKCT benefit was "reasonable." There were some differences in the mechanism for claiming the benefit. Overall, Mr Rawsthorne formed the opinion that the PKCT death and disability benefit was superior to SASS benefits. He did note, however, that the actual rate of take up of the benefits was generally very low and while their absolute value was high, the value of the benefit provided to a working member was, on average, "very low."

169 In relation to expenses, the PKCT fund administration expenses were met

by deductions from the employer contribution while in SASS, administration expenses were met by the employer and were provided for, in addition to the defined benefit. Documentation about the PKCT scheme indicated that the costs of administration and insurance premiums and the death and disability benefits would be paid from the company's contribution: assuming a 1 per cent of salary as estimated by Mercer, the employer contribution rates for the scheme of 13.5 per cent or 17 per cent needed to be considered as reduced to 12.5 per cent or 16 per cent in light of these expenses.

170 The retrenchment benefit in SASS in 1990 was considered to be "quite generous" and was higher than the members' deferred benefits. The excess was regarded as a form of compensation for the actual retrenchment bearing in mind the uncertainty that faced a retrenched employee.

171 Consideration was then given to the withdrawal benefit available in the PKCT scheme after 1990. Mr Rawsthorne considered that the provision in the scheme was "particularly harsh" as it provided for partial vesting for the first ten years, regardless of the worker's past employment history. The definition of salary for the purposes of contributions under the scheme was then mentioned. Mr Rawsthorne stated that the PKCT scheme had a restricted salary definition, referring to the award rate, plus up to 50 per cent in shift allowances without such a restriction in SASS. He was, however, unable to determine whether the restriction had any practical effect on the superable salary. He also noted, if the PKCT salary definition proved to be lower than the SASS definition, then PKCT benefits would tend to be overstated, relative to SASS benefits.

172 It was noted that, under SASS, many members had used a provision to contribute at lower rates in the early years of service and catch-up with higher rates in later years in order to achieve the maximum available benefits. The PKCT scheme did not have that arrangement, nor any ability to contribute at lower rates during earlier periods of service. There was a special contribution option from ages 52 to 58. This removal of flexibility in contribution arrangements represented a loss.

173 Mention was then made of new arrangements introduced since 1990 in relation to the PKCT fund. There was now an ability to salary sacrifice with the level of employer contribution rising to 3.5 per cent. The 2 per cent additional contribution to earn extra employer contributions could be made over any six consecutive six-year period. Mr Rawsthorne did not make any allowance for these changes, but did taken into account the extra 3.5 per cent employer contribution when considering salary increases between 1990 and 2007.

174 It was noted that employees were provided with a comparison for a new entrant member at age 40 in 1990 as a means of comparing entitlements under both schemes. Using as a comparison the circumstances of new entrants, Mr Rawsthorne had concerns about comparing the rights of ongoing workers as that omitted several important features applying in 1990. A total was then compiled, comparing a 40 year-old new entrant exiting at five-year intervals from ages 45 to 60. In each case, the benefits available in SASS were higher and could be greatly so, depending on the option chosen.

175 Mr Rawsthorne, dealing with individual circumstances, then undertook an overall comparison. He noted this comparison told only part of the story and that it might have been more helpful and relevant to compare total employer funded superannuation benefits and what each individual would receive from the two arrangements over their working life with PKCT, based on their individual circumstances. He noted that the member financed accumulation benefits were quite similar in SASS and the PKCT scheme and were not considered further in the comparisons.

176 In this part of his analysis, Mr Rawsthorne looked at comparative benefits in projecting SASS members' circumstances from 1990 to various retirement ages. This was to be based on what he identified as fairly simple assumptions about contribution rates. He noted that the members' accumulations made in SASS and PKCT would not be the same, but both would have an average contribution rate for the post-1990 period of a little higher than 6 per cent and therefore, were broadly comparable. He thought it was necessary to include something in respect of the SASS benefit at transfer and putting aside that part of the retrenchment benefit as compensation for the uncertainty of changing employer, he included the deferred benefit at 1990 on transfer to PKCT. In doing so, he assumed that members' preserved benefit within SASS that earned interest in the SASS fund earning rate but recognised that, in practice, members would have received a retrenchment lump sum that most of them would have rolled into PKCT where it would have received PKCT fund earnings.

177 In summarising the findings for individual comparisons, it was noted that the expected PKCT benefit was lower than the SASS benefit at younger ages but gradually caught up and exceeded the SASS benefit in the majority of cases. The exception was in the SASS pension option at age 60 that was found to be of "greater value than the PKCT lump sum in most cases." It was clear from the data that those who joined before age 30 received a relative advantage in the PKCT scheme compared to SASS. That followed because their employer benefit at retirement in PKCT was not capped at 180 benefit points as it would in SASS and so employer contributions continued, regardless of the period of past service.

178 As a result of this exercise, losses and gains to members were identified. At retirement, the comparison was largely dependent upon the age of the member at entry and those who entered before age 30 and it was found that the PKCT scheme provided a better lump sum benefit because of a lack of a cap on employer contributions. The value of the SASS pension where available, however, was superior to the PKCT lump sum benefit in virtually all cases and the annual amount of the SASS pension was vastly superior to that which could be purchased in the retail market with a PKCT lump sum.

179 Consideration was then given to actual salary growth and investment returns between 1990 and 2007. Mr Rawsthorne noted some difficulties in relation to salary and the annualisation process. Ultimately, he was able to conclude that the actual experience between 1990 and 2007 had changed the relativities between benefits. The comparison of the benefits assumed earnings and actual earnings in each case and showed that the actual PKCT benefit was lower than expected and in many cases, was now significantly lower than the available SASS lump sum benefit.

180 The last matters dealt with in this report concerned possible remedies. Mr Rawsthorne acknowledged that, particularly, because of the time frame the re-introduction of the pension option was probably impracticable and so there had to be some form of compensation. He calculated that the pension option was at least 40 per cent more valuable than the lump sum payment at age 60. He then made calculations on a number of assumptions, resulting in an estimate of the value foregone at about 5 per cent of the lump sum benefit at retirement: it could be compensated for by increasing all employer contributions by 5 per cent, noting that was a little over 1 per cent of salary and that sum would be appropriately grossed up for taxation contributions. Five per cent would cover losses between 1990 and 2007 and future service would be dealt with by a 1 per cent increase in the net employer contribution rate.

181 Mr Rawsthorne then looked at the period to 2007 in relation to investment earnings, noting that they were assumed to be higher than salary growth by 2 per cent in 1990. By reference to four individuals, investment earnings were 0.3 per cent per annum greater than salary growth so that the accumulated benefits were approximately 14 per cent lower than they were projected to be relative to members' salaries and a number of matters were noted: firstly, this assessment was taken on the basis of the PKCT accumulated contributions, plus the SASS preserved benefit; secondly, actual differences for individuals would vary around the 14 per cent estimate due to variations in the amount of SASS benefits at 1990 and to variations to actual salary growth experienced between 1990 and 2007. In relation to this shortfall, it was suggested that it could be made up by directly increasing each member's accumulation balance by the amount of a loss, either an average or actual outcome based on the member's circumstances or, by making an equivalent adjustment over time. It was noted that the small sample available to Mr Rawsthorne meant that an adjustment that was reasonable for all workers could not then be determined.

182 Mr Rawsthorne then looked at investment experience after 2007 and expressed the opinion that future investments would continue to be unfavourable to members and that adjustments in the future would need to be made to address such an unfavourable experience. In the alternative, he proposed a settlement with employees bearing investment risks in the future after receiving appropriate advice and compensation for bearing the investment risk. He had not estimated an amount of compensation for the transfer of investment risk to the member.

183 Mr Rawsthorne's first report dated October 2009 (as tendered in the proceedings) referred to an earlier letter of 2009 from the applicant's solicitors requesting his assistance as an expert witness in the proceedings. In the letter of instructions, his opinion was sought on whether the members were worse off under their current superannuation arrangements than they would have been if they remained in SASS and if so, what rate of contribution would or should have been made between 1990 and March 2006 to ensure that the members concerned were in the same position as under SASS. It appears that the March 2007 report prepared by Mr Rawsthorne was delivered to solicitors for the applicant prior to the jurisdictional issue heard later that year by the Full Court of the Industrial Court.

184 In this report, Mr Rawsthorne was asked to focus on the period from 1990 to March 2006, thus recognising the prospect of the jurisdictional limitation arising from the introduction of the Work Choices legislation. Mr Rawsthorne again stated that, after consideration of relevant matters, including information provided to members and "available benefits in the two arrangements", he considered that members were worse off in the PKCT super scheme in two ways, namely, the option of a pension was removed from the new scheme and further, being transferred from a defined benefit scheme to an accumulation scheme the investment risk was transferred from the employer to the employees. He stated that there was no apparent compensation provided for this transfer of investment risk.

185 He had performed a projection based on an average ex- NRF member

to determine a typical value of pension lost on transfer by comparing the pension to the alternative SASS lump sum benefit. Full details of those projections were included as an appendix. Mr Rawsthorne calculated that a typical ex-NRF member could be compensated for the loss of the pension option for the period 1990 to March 2006 by compensation at "about 10.8 per cent" of salary for a typical ex-NRF member.

186 In relation to the transfer of investment risk, Mr Rawsthorne pointed out that a principal advantage of a defined benefit scheme compared to an accumulation scheme was that the first provided a post-retirement benefit that was fixed and a known proportion of pre-retirement income, thereby, giving workers a fair degree of certainty and security. In contrast, accumulation schemes did not explicitly link benefits to pre-retirement income and volatility in investment returns, particularly in the years immediately before retirement, could dramatically affect post-retirement incomes. He acknowledged that there was a potential for windfall gains if markets performed well, but he regarded it more important that there was potential for significant losses if markets failed. It was the prospect of significant losses and the greater volatility of investment returns relative to salary growth that represented "a significant new risk" for workers under the PKCT arrangement.

187 Mr Rawsthorne then considered actual past experience and potential future experience to determine appropriate compensation for members taking on additional investment risk under the new scheme. The calculations he performed indicated that, from 1990 to 2007, there were no significant losses to members during that period. He also considered potential future losses after 2009 and quantified compensation that may be appropriate for members in that respect. He noted that from 2007 to 2009, investment returns were negative. Contributing members continued to be exposed to investment variability after 2009. He performed a "stochastic simulation" (Mr Rawsthorne's explanation of this term appears as annexure 2 to this judgment) comparing prospective outcomes under investment and wage related growth scenarios after June 2009. He then calculated an amount of compensation that might be appropriate, noting that the compensation varied with the age of the member and hence, their future period of exposure to investment variability. He concluded that a typical member of the group could be compensated for all past and potential future investment losses, bar an additional contribution for all service between 1990 and retirement at an approximate rate of 3.69 per cent of salary. Limiting compensation to March 2006, an appropriate amount of compensation for actual past and potential future investment loss at June 2009 would be approximately 73.7 per cent of salary for a typical member of the group. Detailed calculations were included supporting this view.

188 The September 2010 report was the second of the reports tendered by the applicant in its case. This report followed a request from solicitors acting for the applicant for Mr Rawsthorne to comment on a July 2010 report prepared by Mr Murphy for the respondent. In this report, Mr Rawsthorne agreed with Mr Murphy's conclusion that Mercer did not ascribe any positive value to the pension option while undertaking the conversion offer process. Mr Murphy had suggested, however, there might be some implicit allowance within the working papers and while admitting that possibility, Mr Rawsthorne stated there was no evidence of any implicit allowance. He agreed with Mr Murphy that in usual actuarial practice, small or minor differences might be ignored but pointed out that here, the context was that employees had understood that they would be provided with equivalent benefits to those available in SASS and would be no worse off. In that situation, all variations needed to be considered. There was an exchange concerning mortality rates. In relation to the low level of pension take-up of NRF members, Mr Rawsthorne noted that the fund had only been operating for some 15 years and it was highly unlikely that less than a few retirements had occurred. He also noted that a 1988 regulation for superannuation funds in New South Wales introduced automatic indexation of pensions in line with the CPI, increasing the security and attractiveness of the pension option for members. There were many changes in the following years affecting superannuation that rendered the low initial take-up of the pension in the NRF as being of no great consequence.

189 There was also disagreement between Mr Murphy and Mr Rawsthorne regarding the approach to the transfer of investment risk from the employer to the employee. Mr Murphy had identified the driving force behind employers moving from defined benefit schemes to accumulation schemes. Because the employers' growing awareness of the impact of volatile investment returns and from a long-term risk mitigation planning perspective, they formed the view that it would be preferable to move away from supporting defined benefit funds. As Mr Rawsthorne noted, transferring investment risk to members saved the employers money. It was then noted that, in relation to the effect of the transfer of investment risk to the member, Mr Murphy had treated this as a zero impact matter because some members would sometimes be better off, worse off at other times and that situation should be accepted. Mr Rawsthorne's point was that in the context of the representations made to the members, this was not an appropriate approach in this case.

190 Mr Murphy had expressed the view that it was misconceived to treat the transfer of risk assessment as a specific item for which some form of compensation should be provided. Mr Rawsthorne relied upon a 2001 paper delivered to the International Actuarial Association on conversion of funds in the South African context. That paper supported some allowance being made for the investment risk passed on to employees when transferring from a defined benefits fund to an accumulation fund. In addition, Mr Rawsthorne disagreed with Mr Murphy's expressed view that it provided some form of compensation to the transfer and investment risk. There was also a detailed discussion of the two per cent gap and its effect in the Mercer design.

191 In March 2011, Mr Rawsthorne produced the third report tendered by the applicant in the proceedings. In this report he explained how he had chosen the age of a typical ex-NRF member at age 30 in 1990 as an appropriate demographic assumption for the group of workers, the subject of the claim. In April 2011, Mr Rawsthorne provided the fourth report tendered by the applicant in the proceedings. In this report he considered the impact of the use of a typical member in estimating the total loss of compensation due pre-2006 periods for ex-NRF members. In this report, Mr Rawsthorne said he had been of the view that the question of compensation had been one of determining an average amount of compensation to apply to all impacted workers, rather than trying to determine more precisely the impact on each individual. In those circumstances, an average approach was appropriate. Mr Rawsthorne repeated his calculations to test for distortion and concluded that the use of a typical member did not materially distort the estimation of total loss for these members because of removal of pension options

192 In February 2012, Mr Rawsthorne provided his fifth report tendered by the applicant in the proceedings. This report followed a conference of experts chaired by Marks J. The conference was in part designed to clarify the different approaches taken by the experts to the central question of disadvantage in changing funds raised by the proceedings. In this report, he updated his calculations from his October 2009 report taking in new information on investment returns, salary growth rates from 2009 to 2012 and other data available from the 2009 SASS tri-annual Actuarial Review. After taking these matters into account, Mr Rawsthorne continued with the view that members were worse off in the PKCT super fund in the two ways he had previously identified, namely, compensation for the loss of the pension option and no compensation for assuming the investment risk previously undertaken by employers.

193 In September 2012, Mr Rawsthorne produced his sixth report tendered in the proceedings by the applicant. He had been asked by instructing solicitors to perform further calculations, taking into account more recent data and material put forward in Mr Murphy's February 2012 report. This report dealt with issues raised by Mr Murpy regarding the loss of the pension option and how it should be compensated. Mr Murphy had raised four particular matters and after re-consideration, Mr Rawsthorne confirmed his own view as to the appropriateness of his approach and calculations. Some further information was being sought but Mr Rawsthorne did not believe it would materially affect the calculations and view he had formed. New calculations of loss were provided having regard to a 2006 cut-off point.

194 An issue had arisen about the components of the retrenchment benefit given to employees in 1990 from SASS. There appeared to be a payment higher than the deferred benefit for the 63 workers for whom Mr Rawsthorne had data. He had formed the view that the additional amount was compensation for the uncertainty of being retrenched and transferred to a private sector employer and should not be considered in any assessment of the equivalence of provisions in the PKCT arrangement. He then quantified the impact of this factor on the basis that it was found that his approach was incorrect. The result was to reduce the estimate of loss and compensation, however, this would not fully offset the loss to workers in respect of transfer of investment risk and a substantial loss due to transfer of investment risk would remain.

195 Mr Murphy had identified areas where members' superannuation conditions had improved since 1990 and that they should act as an offset against calculated losses to transferring members. Mr Rawsthorne formed the view that this was not a safe conclusion because it was unclear on what basis these changes were made. Further, his view was that those increases to superannuation entitlements were probably more than offset by reduction in effective entitlements due to a change in salary definition, a matter not identified in Mr Murphy's report. Mr Rawsthorne then concluded that if these post-1990 changes were deemed to be relevant, based on the changes he was aware of, it appeared that for most workers the net impact of changes had probably been a reduction in entitlements rather than an increase as argued for by Mr Murphy.

196 In late April 2013, Mr Rawsthorne provided his seventh and last report tendered by the applicant in the proceedings. In this report, Mr Rawsthorne dealt with criticisms raised by Mr Murphy of the approach adopted to calculate the loss to transferring members to the PKCT fund. This report took into account new information on investment returns for PKCT workers that had become available since Mr Rawsthorne's last report. The new information did not significantly change the conclusions he reached earlier. He had provided alternative calculations on some part of the costings. He concluded that none of the issues raised by Mr Murphy caused him to significantly change his previously expressed views or conclusions. He then provided a table setting out the current estimate of relief due to each individual, stating an estimate of what was due because of the loss of the pension option and losses due to the assumption of investment risk. These estimates of compensation were calculated only up to March 2006.

197 A significant issue was how to treat the annualised salary rate introduced for PKCT employees. The relevant industrial instruments allowed a lower rate to be used for superannuation purposes in the PKCT fund, but Mr Rawsthorne appeared to be of the view that in relation to the SASS fund, for purposes of comparison, the annualised rate was appropriate. Mr Rawsthorne had been instructed that the applicable annualised rate of pay for each individual worker was the appropriate figure to use as a SASS superable salary. He stated that he did not profess to be an expert in the derivation of superannuable salaries in relation to explicit allowance being rolled in to create a single annualised rate. His understanding of the practice applied by New South Wales public sector agencies was that, where an allowance had been rolled into a single annualised rate of pay, the resulting annualised rate became the SASS superannuable salary. Mr Rawsthorne therefore proceeded on the basis of his instructions and his understanding of the practice of public service superannuation funds. In dealing with investment returns, Mr Rawsthorne noted that the rates used by Mr Murphy were an improvement on the information he had originally received and he had accepted those rates for a particular period for the purpose of this report. In adopting Mr Murphy's preferred rates, he thought that the difference in the calculations would be very small and made calculations accordingly.

198 The treatment of transferred investment risk as undertaken by Mr Rawsthorne was criticised by Mr Murphy, primarily on the basis that the calculations of the upside and downside risk should equally be taken into account. Essentially, Mr Rawsthorne's response was that, depending on when a person retired, they could be seriously up or down in their investment and there should be a form of compensation, especially as they had been told they would be no worse off or paid equivalent SASS benefits. Mr Rawsthorne's approach was that the possibility of significant losses was sufficiently important to try to build an element of compensation. It was possible to top-up individual PKCT benefits lower than SASS benefits, but that approach was considered prohibitatively difficult and expensive to apply in practice. A simpler approach was to determine some form of accepted value of losses in advance for possible future losses and provide it as a once and for all compensation. He offered options of pricing techniques as a way of determining the compensation and also raised stochastic simulation. In addition, Mr Murphy had raised the validity of using actual investment choices after 2006 where data was available, suggesting it was illogical to compensate a person for their own choices. Mr Rawsthorne could see some validity in that argument and then considered an alternative position, conducting alternative calculations using the default option for post-2006 members. Under this approach, 12 workers had zero loss with a high 107.3 per cent of salary and an average across 63 individuals with a loss of 44.3 per cent of 2012 salary.

199 Mr Murphy had raised a number of issues regarding the loss of pension option. There was a lively debate about pension and mortality in determining the present value of future pension streams and it was noted that Mr Murphy had identified errors in previous workings. Mr Rawsthorne had revised his assumptions, but had become aware of further apparent errors and inconsistencies in the annuity calculations in Mr Murphy's 3 February 2012 report. He set out reasons why Mr Murphy's calculations were "serially flawed." Using Mr Murphy's annuity values, Mr Rawsthorne pointed out that his own calculations were very closely aligned with those of Mr Murphy.

200 There was also disagreement about a discount rate when valuing the amounts of pension foregone, with Mr Rawsthorne assuming a nominal net discount factor of 3 per cent per annum higher than the assumed CPI inflation factor. Mr Murphy had previously preferred a real discount rate of 5.2 per cent for valuing pensions, but by his March 2012 report he had changed his view and agreed his initial reasoning was flawed and suggested that a discount rate of 3 per cent was appropriate for calculations of pension value in recent years. Mr Murphy maintained that calculations at 1990 should be subject to a discount range between 4 and 5 per cent per annum, with 4.5 per cent being his preferred discount rate. Mr Rawsthorne considered that there was an actuarial inconsistency in Mr Murphy's approach. Mr Rawsthorne pointed out that an assessment of what Mercer did with the discount rate was required and he rejected Mr Murphy's assessment that 4.5 per cent was appropriate as representing a very high end of the range assessment. He thought it was implausible that Mercer would have adopted such a high rate of discount. He concluded that the most likely rate adopted by Mercer in 1990 was a little less than 3 per cent.

201 There was an issue about Mercer having to contemplate assessing the pension take-up rate as at 1990. Mr Rawsthorne rejected a nil approach and set out a basis for assessing the take-up at 20 per cent, but Mr Murphy had been arguing for a 10 per cent assumption. There was some debate about the way to approach the subject but it appears that, ultimately, Mr Murphy agreed with Mr Rawsthorne's reasoning on the point. Also, there was some consideration about the take-up rate in 2006 and 2012 or, at the present time. Mr Rawsthorne set out the basis for assuming a 15 per cent take-up in March 2006 and a take-up rate of 20 per cent in 2012: Mr Murphy appeared to concur with those assumptions.

202 Another issue concerned the costings of compensation for the foregone pension. Essentially, Mr Murphy was of the view that any pension loss should only relate to benefits accrued after the transfer to PKCT. While Mr Rawsthorne conceded that there was an actuarial basis to that approach, it was not the only approach available. Mr Rawsthorne commenced his analysis from the point of view that the pension option did not exist until age 60 and being forced to exit from SASS earlier than 60 meant that members should be compensated for the loss of the entire pension, not just that part assigned to the post-1990 accrual. After considering Mr Murphy's perspective, Mr Rawsthorne confirmed his own view as being "compelling", noting that if Mr Murphy's position was accepted then the loss due to the removal of pension option, in Mr Rawsthorne's calculations would be reduced by approximately 30 per cent. Another issue related to Mr Murphy's criticism that Mr Rawsthorne had made calculations of loss, but excluded the actual knowledge of employees who had retired before age 60 while employed by PKCT. Mr Rawsthorne pointed out that his calculations were based upon the fact that it could not be assumed that a person with a pension choice would have retired earlier in circumstances, where under employment with PKCT, that choice was not available. This was a question of valuing the loss of the option.

203 Mr Murphy again raised the issue of additional benefits provided by PKCT after 1990 and that was dealt with by Mr Rawsthorne in this report. In his view, Mr Murphy's approach ignored the "reality" that additional benefits could have been delivered to the employees in many different ways, other than through SASS, that is, by contributing to First State Super, a pay rise or other means. In other words, these arrangements could have been made with the employees after 1990, even if they had remained in SASS.

204 A question also arose about the effective date for the calculations of any loss. Mr Murphy was of the view that date was 1990 when the pension option was lost and an assessment could then be made of what additional contribution might have been determined by Actuaries involved in the calculation of equivalence of the schemes at that time. Mr Rawsthorne thought that was an interesting question but not an actuarial question. Mr Murphy agreed with that proposition. There were five possible scenarios, including what Mercer would have done in 1990 that included what was the actuarial value of the pension option as at 2006 or, what was the cost of purchasing a replacement pension in 2006 or, what was the actuarial value of the pension option currently or, what was the cost of purchasing a current replacement pension. Mr Murphy's view treated all post-1990 events as irrelevant in determining compensation for any loss and according to Mr Rawsthorne, that view was open, but not the only view. Mr Rawsthorne then performed calculations based upon Mr Murphy's preference.

205 In adopting Mr Murphy's preference, Mr Rawsthorne, nevertheless, identified four different matters he would take into account in making those calculations. Mr Rawsthorne was using a 20 per cent take-up assumption (compared with Mr Murphy's 10 per cent); he used a 3 per cent real discount rate (compared with Mr Murphy's 4.5 per cent); he would use the1988 SASS demographic basis to determine the probability of reaching age 60 and would use 1988 rather than the 1991 SASS pension and mortality rates. Using this approach, he determined an additional employer contribution at 1990 was required for ex-NRF members at approximately 0.6 per cent of salary. Mr Murphy reached a conclusion that the contribution rate difference was only 0.1 per cent of salary and was so insignificant as to be ignored. Although normally that might be the case, Mr Rawsthorne considered it was appropriate that the figure be included because of the undertaking to produce an equivalent benefit to those available under SASS.

206 Mr Rawsthorne proceeded to consider the 1990 calculation of additional contributions for the transfer of investment risk against this background and discussed appropriate methods to do so. He had selected stochastic projection that introduced random variation for the investment returns to determine the extent higher variability in investment return might leave members worse off than if they had benefits linked to wages growth This projection could be used as a very basic option pricing technique. The technique was not in general practice in 1990 but models became part of Australian actuarial practice shortly after 1990. The calculation he performed was not intended to be a replication of what Mercer would have done or could reasonably be expected to have done in 1990 if they had made an allowance for transfer of investment risk. It was, however, a calculation designed to demonstrate the broad quantum of allowance that should have been included, however Mercer might have arrived at the figure. Mr Rawsthorne then calculated an additional contribution at 1990 required to compensate for the transfer of investment risk, referring by age and initial starting balance at 1990. His general finding was that a contribution rate that was moderately higher than that determined by Mercer would be required to compensate the transfer of investment risk.

207 Mr Murphy's initial report dated 12 July 2010 contained a note as to his instructions and the scope of his report. He had been informed that the CFMEU had made a claim on behalf of a number of employees in relation to an alleged unfairness in the operation of the PKCT fund since its establishment in 1990 arising from "an alleged representation made by PKCT to the effect that employees would be no worse off in the PKCT fund when compared to SASS." Mr Murphy had been provided with an October 2009 report prepared by Mr Rawsthorne where two heads of loss had been identified, namely, the loss of the pension option and the assumption of investment risk. He was instructed to provide an opinion in relation to the following matters:

• whether it was possible to state if the pension available under the SASS fund was taken into account by Mercer in determining the PKCT structure of the fund, in determining the level of contributions to the fund and calculating the projected benefits for employees under SASS and the fund in a document provided to employees in late July 1990 (the fund being the PKCT fund);

• assuming the pension benefit was not taken into account by Mercer in all of the scenarios above, whether the omission was reasonable, taking into account the known circumstances, industry based accepted actuarial practices as at 1990 and taking into account the circumstances known and the current industry accepted actuarial practices;

• whether it was possible to state if the transfer of an investment risk arising from moving from a defined benefit to an accumulation scheme was or was not taken into account by Mercer in determining a structure of the fund, in determining the level of contribution to be made into that fund and calculating the projected benefits for employees under SASS and the fund as contained in the document provided to employees;

• assuming the transfer of investment risk was not taken into account in these scenarios, whether such an approach was reasonable taking into account the circumstances and industry based accepted actuarial practices as at 1990 and taking into account the circumstances in the industry current accepted actuarial practices;

• to provide a comparison, as far as possible, between the estimated financial position of employees at March 2006 under the fund compared with what they had if they remained in the SASS scheme. Those considerations should include: the value of additional contributions and benefits provided to employees after the fund had been established up until March 2006, including the ability to flex-up; wage rises received by PKCT to employees not available to employees doing similar work in the public sector between 1990 and 2006 and the projected benefit of employees having been paid their SASS benefit as retrenchment benefit with the ability to invest this sum in other income producing investments.

208 Mr Murphy's instructions were also to comment on: Mr Rawsthorne's assumptions, calculations and conclusions and their appropriateness having regard to the circumstances and events that occurred after March 2006; whether any additional benefits available to employees in the fund, either in its formulation or subsequently that were not otherwise available under SASS that were not taken into account by Mr Rawsthorne; the impact, if any, of these omissions on his calculations and whether the data available to Mr Rawsthorne was sufficient to support the conclusions made in the report. Mr Murphy listed other aspects of Mr Rawsthorne's report for consideration and he was asked to comment generally on the approach taken by Mercer in designing the fund and whether the Mercer advice was consistent with standard actuarial practice in 1990.

209 In relation to these questions, Mr Murphy formed the view that, when determining the level of contributions to be made into the PKCT fund, Mercer did not explicitly take into account the pension option in ascribing it as a positive additional value in SASS. He offered the opinion that it was possible that there was an implicit allowance in relation to this matter. He then addressed the questions that flowed from that assessment. Mr Murphy proffered the view that it was impossible to include a pension option in the accumulation fund because, by definition, that made it a defined benefit.

210 He then offered a number of reasons why, as an Actuary in 1990, or currently, no explicit allowance for the benefit of the pension option would be included in the calculations. It was said that the benefit option was generally worth less than the primary benefit and that the benefit option was defined as being the equivalent value of the primary benefit, or the benefit option was rarely, or never, taken up. The 1998 figures from SASS indicated that the pension option was rarely, or never, taken up. He also expressed the view that it would be consistent with common actuarial practice at the time to have considered, as an overall assessment, at the outset, but to have deliberately omitted it from the calculations on the basis of the benefit being of low value to a typical member. Mr Murphy was of the view that the actuarial practice had not changed in any relevant respect. He understood that the pension option had since increased to 15 per cent in the 2006 figures available relating to SASS. Having regard to that development, he thought it would be reasonable to include the pension option in determining contributions to be made to the PKCT fund as at March 2006 or currently, but that factor could not be isolated from other factors relevant to a complete re-assessment of the relative position of SASS and PKCT if it was to be made in March 2006, or currently.

211 On the materials available from Mercer, it appeared that Mercer did not explicitly take into account transfer or investment risk in ascribing a positive additional value to that matter in calculating benefits to be made available under the PKCT fund. Mr Murphy was not surprised as he did not regard it to have been common actuarial practice to do so in 1990, 2006 or at the time of writing his report in 2010. In his view, it was misconceived to treat the transfer of investment risk as a specific item in calculating new benefits divorced from the determination of the assumptions to be used generally. If transfer investment risk was to be the subject of specific compensation, then other matters were required to be taken into account. Full credit for investment in an accumulation fund being a benefit to the member and the fact that an accumulation fund is fully funded at all times would have to be taken into account. Mention was also made of any increased "leaving service benefits" provided by an accumulation fund.

212 It was Mr Murphy's view that in trying to produce an accumulation fund benefit designed to produce no less benefits than a defined fund, it was critical to determine an appropriate "gap." It was common actuarial practice in the 1990s to do projection calculations and not produce lesser benefits on retirements. That approach reflected the general position that the retirement benefit was the most generous benefit in a typical defined benefit arrangement. The most important actuarial assumption was the assumed rates of future investment returns and salary increase rates. The gap was the margin that the rate of assumed investment returns for the future exceeded the rate of assumed salary increase rates for members in the future. This was a convenient shorthand way of assessing the relative generosity of the actuarial assumptions in favour of the member because the lower the gap, the greater the likelihood that the assumption would be exceeded, with actual investment returns in excess of salary increase rates exceeding the assumed returns such that members received benefits that exceed the projected retirement benefits. So long as an appropriate gap was applied, it was not necessary or appropriate to provide a specific compensation amount in respect of the transfer of investment risk.

213 In Mr Murphy's view, significant additional data would be required for each individual in order to provide a reasonably full and accurate comparison between the estimated financial positions of employees at March 2006 under the fund compared with what they might have been entitled to had they remained in the SASS scheme. The calculation may involve a range of variables for each employee who may have made different choices.

214 Mr Rawsthorne's comparison of average investment returns compared to wages growth was questioned and it was pointed out by Mr Murphy that the methodology did not sufficiently allow for the increased company contribution rates available for six years to PKCT fund members. Mr Murphy was also critical of the use of the stochastic projection. Also, he also queried the use of the "typical worker" in 1990 in undertaking a projection for the balance from 1990 to 2007. It was pointed out that Mr Rawsthorne did not observe the jurisdictional issue expressed in the decision of the Court of Appeal in relation to calculations that went beyond March 2006.

215 While Mr Rawsthorne had identified two factors that made the benefits appear unfavourable to SASS, he had overlooked improvements in the fund, including the flex-up arrangement, the vesting of employer contributions from reserve funds of money brought forward in time compared with SASS and the benefit of the distribution of monies accruing by reason of forfeiture by employees by leaving prior to full vesting of the employer contributions. There was also a criticism of Mr Rawsthorne in relation to the specific impact on individual members of investment choice. It was noted that Mr Rawsthorne's report showed a scenario where a member would be better off for the next seven years and in fact for nine out of the next sixteen years in the projection yet, all those better off situations were ignored in the calculation of compensation.

216 It was stated that Mr Rawsthorne appeared to be adopting a one-sided approach to his report and an approach that was not consistent with the principles of a "pure defined benefit superannuation fund." There was also a questioning of years selected by Mr Rawsthorne for his calculations in relation to the transfer of investment risk.

217 When commenting on the task facing Mercer in 1990, Mr Murphy observed that it would be difficult and costly to establish a defined benefit fund to mirror the complex benefit design of the SASS fund, especially in relation to approximately 200 employees. It was also a fairly substantial consulting task to identify the value and the style of existing benefits and construct an appropriate plan to deliver benefits of equivalent value. In his view, such an exercise would normally take into account not only the benefits received on retirement at normal retirement age and earlier, but would need to take into account benefits payable on death and disability or earlier leaving service resignation benefits and sometimes, retrenchment benefits.

218 The single most important issue to be addressed would be the employer contribution rate required in order to produce a comparable retirement benefit to the benefit that would have been produced under the previous defined benefit plan. Mr Murphy's view was that an overall level of equivalence had to be attained. An Actuary would compare the total package of benefits offered by each fund and would make assumptions about the future as well as certain trade-offs between different components of the benefit package and between members' different circumstances. In the conversion, if it was necessary to ensure that no single member would receive a lower benefit in any circumstances than had previously been available, Mr Murphy's view was that the result would not be an accumulation arrangement but would be a "greater of" plan comprising defined benefits and accumulation elements where the employees would receive the best of both worlds and the employer would pay the higher of both contribution obligations - this would "clearly defeat the purpose of the conversion" and therefore, the gap had to be appropriate and Mercer had appeared to adopted a conservative gap. The two per cent gap set by Mercer represented assumptions that were well within normal actuarial ranges.

219 Mr Murphy's second report was provided in February 2012 and followed a conference of experts chaired by Marks J. Mr Murphy's further attention was drawn to a range of issues, identified by the respondent's solicitors, arising out of the experts' initial reports and the conference of experts. In this report, in broad terms, Mr Murphy again drew attention to the difficulties faced in dealing with the issues and he considered some of the questions to be very difficult to answer due to the lack of relevant data - the answers depended on considering some 16 identified matters. In relation to the individual situation of members and whether they were worse off, Mr Murphy continued with the view that it was not possible on the evidence available to make individual assessments. There were too many variables to reliably answer the questions. In relation to the question of what rate of contribution should have been made by the employer between 1990 and March 2006 in order to ensure that members concerned were in the same position they would have been under SASS involved an analysis of each individual member's situation. For similar reasons, as expressed above, Mr Murphy was unable to reliably answer that question. He continued with the view that it was not usual actuarial practice to make any specific allowance for the transfer of investment risk. Mr Murphy then dealt with these general issues raised on instructions in a detailed analysis.

220 Taking Mr Rawsthorne's 2009 report and figures, Mr Murphy calculated that the pension option deficiency equated to 0.54 per cent of salary between 1990 and 2006. Mr Rawsthorne had used an average age of 38 as a proxy for individual membership. Mr Murphy's calculations demonstrated that the pension option was substantially lower than the 40 per cent extra used by Mr Rawsthorne. The use of a more realistic interest rate in the annuity calculation indicated an additional benefit value of 7 per cent or less and at most, 15 per cent. In Mr Murphy's view, there were other identified deficiencies. On Mr Murphy's approach, taking into account the matters he thought were relevant, if this was a valid exercise, the deficiency was equivalent to an employer contribution rate of 0.04 per cent of salary for the period 1990 to March 2006. Mr Murphy, however, reiterated his view that Mr Rawsthorne's approach to this factor was erroneous.

221 Mr Rawsthorne's treatment of the transfer of investment risk was criticised by Mr Murphy on the basis of actuarial practice, taking into account this aspect was supported by only one actuarial opinion published in South Africa in 2001. Mr Murphy thought that approach did not have any relevance to the PKCT situation because it dealt with the transfer of values payable from the former defined benefit fund in respect of benefits accrued for service prior to the transfer date. He was unaware of other actuarial papers suggesting there should be a specific allowance for the transfer of investment risk. In Mr Murphy's view, the potential deficiency for all employees in relation to the transfer invested risk was "zero."

222 Mr Murphy returned to Mr Rawsthorne's failure to give any value to improvements in the PKCT fund. In this analysis, he also drew attention to the fact that employees leaving the MSB were paid a retrenchment benefit that was significantly higher than a resignation benefit. It was postulated that, if members rolled over this more generous benefit into any superannuation fund and the assumptions by Mercer were borne out, members could expect a higher benefit at retirement in PKCT than under SASS. In light of this analysis, Mr Murphy then stated that if it was decided to pay out any potential deficiency because of the loss of the pension option or the transfer investment risk or, for "any other reason", then he strongly believed that the value of any advantageous benefits received in the PKCT fund should be offset against the calculation of any deficiency.

223 In relation to the superannuation booklet, Mr Rawsthorne had expressed an opinion that it wrongly represented and underestimated the members' future projected entitlements under SASS. Mr Murphy put this down to a difference between using one type of assumption or an assumption chosen by Mercer: both were reasonable and there was little difference in the result of choosing one over the other. Mr Murphy noted that the superannuation booklet clearly showed that projected benefits in SASS were higher for ages 58 and 60 than in the PKCT fund and it was clear, therefore, to employees that there were circumstances where they could be worse off. In his view, the superannuation booklet was not inaccurate in that regard. In Mr Murphy's view, the other way the booklet was said to be inaccurate by not informing members that they would be foregoing valuable pension rights (and that had not been included in the comparison) did not arise on the assumptions adopted by the Joint Working Party.

224 It was accepted by Mr Murphy that the booklet did not contain information identifying the preserved benefit option under SASS at each relevant age point. There was nothing in the booklet that stated that the preserved benefits under SASS prior to retirement and other pension benefits associated with SASS would no longer be available to members. Mr Murphy did accept that, usually, it was "more desirable for more information to be included rather than less information" and that it would therefore have been more desirable for the preserved benefit option to be included in the table. He thought this exclusion was reasonable in the circumstances, namely, that the table did not purport to be an examination of individual circumstances and that the table clearly identified the assumptions upon which the calculations were based.

225 Mr Murphy pointed out that Mr Rawsthorne's evidence did not identify any other particular benefits under SASS that were not included in the table and noted that the complaint highlighted the difficulty in drawing a line as to what information should be included in formulating a comparison table for illustrative purposes only. Mr Murphy also rejected suggestions that the assumptions did not clearly state to employees the investment risk that they faced under the new PKCT scheme. In part, he relied upon the booklet stating that the assumptions for projections were that the interest paid on contributions was 2 per cent per annum greater than salary increases. Mr Murphy also noted that the unions had the benefit of an expert firm, Bain and Co, who would have known the nature of these risks.

226 Mr Murphy could not see any detriment to employees having had past service that had not been recognised in the PKCT fund. He did not accept that there was any relevant past service but if there was, their vested entitlements in PKCT nullified the issue. In dealing with this issue in a number of respects, Mr Murphy pointed out the difficulty of making relevant calculations in any event.

227 Mr Murphy's third report was produced in March 2013. In this report, Mr Murphy stated the difficulty of commenting on Mr Rawsthorne's assumptions and calculations as put forward in his February and September 2012 reports because of what was suggested to be the lack of comprehensive, reliable and relevant data due to the time lapse since members first transferred to the PKCT fund. Mr Murphy's conclusions were drawn dependent upon 16 specified factors. In this report, Mr Murphy stated that in all his reports to date, Mr Rawsthorne had focused only on two distinct and isolated areas where he contented that employees were worse off in the PKCT fund. These were the only areas of asserted loss. These were, of course, the transfer of risk issue and the loss of the pension.

228 In his third report, Mr Murphy repeated the objections he had raised in his earlier reports regarding Mr Rawsthorne's approach and he also undertook calculations on figures more recently put forward by Mr Rawsthorne in support of his often stated views on appropriate methodology. In this report, the focus was on the position of employees in 2006 and 2012. In particular, Mr Rawsthorne had made calculations for one employee, Mr Daskowski. Mr Murphy stated that these calculations were flawed because of the use of a salary rate which did not meet the superable rate specified for the purposes of PKCT and further, there was said to be errors in the actual wages used by Mr Rawsthorne. It was suggested that Mr Rawsthorne had significantly overstated the salary growth rate.

229 In his 2012 report, Mr Murphy noted that Mr Rawsthorne had changed his approach to calculating the transfer of investment risk in calculating compensation as at 2012. In 2009, Mr Rawsthorne accepted that there was no significant transfer investment risk loss and Mr Murphy agreed with that conclusion. The 2012 calculations in relation to Mr Daskowski therefore had to focus on investment losses between 2006 and 2012. He had also adopted the stochastic method which Mr Murphy had previously regarded as inappropriate. By September 2012, Mr Rawsthorne had quantified their alleged loss as an average amount of 37.1 per cent of salary as at June 2012, compared with a calculation of 40 per cent of salary in his 3 February 2012 report and a 73.7 per cent of salary loss at June 2009 as appearing in the October 2009 report.

230 Mr Murphy repeated his fundamental disagreement with the concept of providing compensation in relation to the transfer of investment risk. He also identified a number of errors in Mr Rawsthorne's investment return assumptions. Mr Murphy had been able to obtain further information from AusCoal demonstrating that, for some six specified years, the figures used by Mr Rawsthorne were incorrect. Mr Rawsthorne also looked at actual employment choices after 2006 from available data, but Mr Murphy questioned the validity of that approach because information about investment choices was unavailable for all members and in any event, he thought the approach was illogical because losses would be attributed to the employer for choices made by the employee.

231 Mr Murphy had re-worked Mr Rawsthorne's calculations using corrected investment returns and salary information and those calculations showed there was no loss, with zero compensation, rather than the 36.2 per cent of salary calculated by Mr Rawsthorne as at January 2012. Mr Murphy expressed the view that Mr Rawsthorne's approach was "extremely biased" in allowing for compensation for the entire shortfall in any situation where future investment returns after 2012 were lower than expected, without any offset at all for the value of all the future situations when investment returns were higher than expected.

232 Mr Murphy then analysed the pension conversion option as at 2012. The 2012 calculations assumed that all employees who were claimants in the case were "in service" in 2006 and had certain age-related probabilities of continuing service until reaching age 60. On the evidence, that was an unsupportable assumption. Allowance had to be made for this aspect. It was also noted that Mr Rawsthorne had recent experience in deriving his assumptions and making his compensation calculations. In Mr Murphy's view and having regard to market conditions and assumptions that were relevant at that time, the calculations and assumptions should be primarily considered from the viewpoint of the situation in 1990. Other points of difference were identified. Issues of the real discount rate, pension take-up and mortality were repeated. Again, Mr Murphy expressed the view that any Actuary, directed to value the pension conversion option in the conditions known in 1990, would most likely have considered increasing the level of annual contribution by PKCT to the fund by 0.1 per cent of salary. Having regard to the re-worked figures, including some assumptions that Mr Murphy would not adopt, the result was very small by way of identifying loss to employees transferring to PKCT.

233 Mr Murphy was then instructed to calculate for the individual claimants where SASS benefit details were available in September 1989, the employer-financed benefit that would have been received under the PKCT scheme, compared with the employer finance benefit received, had the employees remained with SASS. Comparisons should be based on the position at 2006 and 2012. Two scenarios were envisaged and additional assumptions were required. In calculating the employer-financed PKCT benefits, Mr Murphy detailed five assumptions. He also set out his method of calculation of employer financed SASS benefits based on three assumptions. After performing those calculations in March 2006, there were no individuals whose PKCT employer-financed benefit were less than what would have been available under SASS, assuming MSB service was included. One person had a $3000 deficit, but treating claimants as a whole, the benefit was higher than under SASS. As at 2012, one person was $5000 worse off than under SASS, assuming MSB service was included but otherwise, the remaining claimants were entitled to greater benefits than under SASS.

THE EXPERTS CHALLENGED

234 In cross-examination, the reports prepared by the two experts were closely scrutinised. With the agreement of the parties, objections to the experts' evidence was reserved, allowing such matters to be dealt with in addresses. In this case it was not a totally appropriate course because, in addresses, the respondent challenged the entire admissibility of Mr Rawsthorne's evidence although, ultimately, conceding that the issues raised as to admissibility might not "necessarily lead to decisions about the inadmissibility about the totality of his evidence." The primary position of the respondent was that the totality of the evidence should be rejected, not that Mr Rawsthorne was unqualified to express an opinion about the operation of superannuation funds, including public sector superannuation funds and valuing their benefits by carrying out an actuarial exercise, but because it was alleged that he had not stated his reasoning for important conclusions he had drawn about the inadequacy of the PKCT fund. Essentially, this challenge relied on well known passages found in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 and a more recent re-statement of the principles by the High Court in Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588.

235 A fuller statement of the principle relied upon was encapsulated in the decision of Heydon J in Dasreef, namely, that for an expert opinion to be admissible under s 79(1) of the Evidence Act 1995, the expert must disclose the facts and assumptions on which his opinion is founded, those facts and assumptions must be proved by otherwise admissible evidence and the expert must give a statement of reasoning showing how the facts and assumptions relate to the opinion stated so as to reveal that the opinion was based on the expert's expertise. The respondent's objection, shortly stated, was that Mr Rawsthorne had identified two matters that resulted in the PKCT fund being inferior to the SASS scheme being the failure to value the loss of the pension option and the failure to include a valuation for the transfer of investment risk from the employer to the employees. In reaching this conclusion, Mr Rawsthorne had not considered all the benefits under each scheme and had not specifically valued each component to enable a conclusion to be reached that overall there was a loss under the PKCT scheme. Mr Rawsthorne stated this view in his first opinion provided to the applicant (although that report was not tendered as expert evidence by the applicant in the proceedings, it appeared in a bundle of agreed documents tendered by the parties). It was evident, however, that Mr Rawsthorne's initial report became the foundation upon which his further seven reports were based, although additional information informed some of the reports and some of the criticisms of Mr Murphy resulted in calculations being made, either taking into account new factors or leaving out of consideration some factors that had previously been relied upon.

236 The respondent's submission pointed to the fact that Mr Murphy had drawn attention to the fact that Mr Rawsthorne had proceeded on the basis of these two identified areas which Mr Murphy had considered to be "limited areas of asserted loss." In cross-examination, Mr Rawsthorne agreed that he had focused on two distinct and isolated areas where he identified that employees were worse off than under the SASS fund. He understood that Mr Murphy was making the point that he had not examined the scheme as a whole. In earlier reports, he had identified "valuable additions to rights" as offsetting factors to the major areas where the PKCT scheme was "demonstrably inferior to the SASS benefits in 1990." In particular, he identified the right to receive employer contributions for all years of service (rather than just the first 30 years as applied in SASS) as being a valuable addition to overall superannuation for workers who commence service "in their 20s and remain until retirement." The major area where the PKCT scheme was inferior was in the removal of the right to a pension for ex-NRF members of SASS. There was limited information also suggesting that the experience between 1990 and 2007 had been relatively unfavourable to workers and that the assumptions made in the projections in 1990 had not been borne out in practice. In this respect, particular attention was drawn to investment returns being lower than expected relative to salary growth.

237 It is of some importance to place those comments in the context of Mr Rawsthorne's "summary of findings" in his March 2007 letter to solicitors acting for the applicant. He commenced that summary as follows:

The terms of the PKCT super scheme resulted in the removal of several existing options and rights for SASS members. PKCT super scheme members' end benefits are at risk if investments under-perform where as in SASS the employer was responsible for making up any shortfalls in investment returns, ie investment risk was transferred from the employer to the workers. Similarly, members lost the ability to receive a guaranteed indexed lifetime pension, and so now are at risk of having insufficient savings if they live for a long time after retirement, ie longevity risk was transferred from the employer to workers. Workers received no compensation or even recognition of these losses.

238 Having regard to the manner in which the respondent's challenge to Mr Rawsthorne's evidence was framed, it is necessary to return to the first 2007 report. In this report, the following matters were considered:

• the advantages and disadvantages of accumulation and defined benefits schemes;

• forms of loss and gain arising from the transfer of superannuation funds and in this section, rather than dealing with 'generalities' as occurred in the earlier pages of this report, considered "the issues specifically relevant to the circumstances of this transfer." In doing so he tried to identify: "all the issues relevant to this transfer, considering both the benefits and disadvantages of this transfer." Mr Rawsthorne then looked at 11 issues (transitional arrangements for pre-SASS employees; the SASS catch-up rights; the pension option for ex-NRF members; overall maximum benefit in SASS, SSS and SPFSS members; death and disability benefits; expenses; retrenchment benefit at 1990; withdrawal benefit post-1990; salary definition; member contributions; and, post-1990 superannuation changes);

• the comparisons provided to him for workers, expressing concern about comparing the rights of ongoing workers using a comparison of circumstances for new entrants because it omitted several important features of the circumstances that applied in 1990;

• overall comparison being individual circumstances, noting that the consideration under "'forms of loss or gain" was only part of the story and that it would be more helpful and relevant to compare the total employer funded superannuation benefits each individual would receive from the two arrangements over their working life, using a number of fairly simple assumptions about contribution rates. Under this heading, the following were considered: comparative benefits; actual comparisons; summary of findings from individual comparisons; reasonableness of findings from individual comparisons; and, actual salary growth and investment return between 1990 and 2007;

• potential remedies by considering the removal of the pension options, the experience between 1990 and 2007 in relation to investment earnings and the experience after 2007.

239 It appears from consideration of these matters, Mr Rawsthorne identified seven areas where employees suffered a loss by transferring into the PKCT fund and found one area of significant gain, with a possible second area of either a gain or an assessment of being neutral in its effect. There appeared to be four matters that were considered to be neutral or non-significant in their effect. It is to be noted that Mr Rawsthorne did not specifically total all the areas of loss as against areas of gain or areas of neutral effect, but a consideration of the report permits this analysis

240 In cross-examination, however, Mr Rawsthorne accepted that he had not exposed his reasoning and calculations in specifically valuing each of the areas of loss compared with each of the areas of gain under the PKCT system. He accepted that it would have been preferable had he done so but at the same time, he stated that he had looked at these matters in a general way and adopting a swings and roundabouts approach, these features of loss and gain had balanced themselves out to the extent there were two clear areas of loss, namely, the loss of the pension option and the potential loss flowing from employees taking up the investment risk under an accumulation fund. Mercer's working documents showed that these two items had not been explicitly taken into account in valuing the SASS scheme and Mr Murphy agreed with that analysis.

241 During cross-examination, Mr Rawsthorne pointed out that his first report did not simply identify investment risk and lack of pension as deficiencies in the PKCT fund, the right to contribute or the right to receive contributions, saying there were "other things as well." He stated that his intention in that report was to identify several areas where things were taken away, not just the two areas of lack of pension and transfer of investment risk but acknowledged that there were some areas where things were "improved." He then stated:

... After consideration of all of that, we were left with two issues, after consideration of all of that."

242 During the course of his evidence, Mr Rawsthorne said he considered all benefits in the two funds and by and large they cancelled each other out, except for the two identified areas that had not been compensated for in the PKCT scheme. Under cross-examination, in another part of his evidence, Mr Rawsthorne said that in his first report he had identified an offsetting feature of more than one year's salary for those in their 20s and under 30 who would benefit under the PKCT scheme by up to or more than one year's salary, but again stated that "a whole lot of matters" had to be considered and he, nevertheless, ended up with two heads of loss after everything had been considered. These two issues were left after what he described as his "swings and roundabouts approach."

243 When later pressed that his first report had identified a "very significant offset" of up to one year of salary, Mr Rawsthorne stated that he would not describe that as significant in actuarial terms and it was quite a bit less than that when taking into account the probabilities of exiting the fund early and all the other circumstances where such employees would not end up with one year of salary. Mr Rawsthorne spoke of the benefit available to those under 30 and especially in their early 20s under the PKCT scheme, that might not materialise because of early retirement, voluntary redundancy or leaving the workforce. In re-examination, Mr Rawsthorne said that there were limited circumstances where the additional year's salary would have eventuated, mainly when people commenced in their early 20s but they had to reach a period of long service and that did not happen "particularly often." His understanding of the age spread of the workforce when he began working on the their reports was that there was a wide range, with many people over 30 and many under 30 at the commencement of service. This was another factor that informed his view of the limited circumstances of the benefit available for those starting at a very young age and going beyond age 60. It was one possible circumstance that those people would be worth up to one year of extra salary.

244 When asked what use he made of this benefit for young entrants under the PKCT scheme in assessing the value of that benefit, Mr Rawsthorne replied that, his broad assessment in his first report, taking other matters into account and applying his swings and roundabouts approach, led him to his more general conclusion that there were two outstanding losses. He noted that some things were a little too hard to directly compare with each other. Mr Rawsthorne stated that his subsequent reports were built upon the first report, but it was in the first report that he was informing his client that he had recognised valuable additions as offsets. In the opening sentence he had referred to the removal of existing options and rights and did not restrict it to the two items of loss he identified and in fact, had identified several items. The report as a whole identified a series of losses and gains. The opening sentence of the paragraph referred to several existing options. When he spoke of offsetting those losses, he was referring to all the identified losses. When he was offsetting those gains, he was doing so against the "entire sweep of losses" he had identified in that report, although there were valuable rights of significance.

245 At this point it is worthwhile recording the initial instructions given to Mr Murphy. He was specifically asked about the pension entitlement and whether or not Mercer took it into account with questions flowing from that issue. He was asked whether it was possible to determine if the transfer of investment risk was taken into account by Mercer, and if not, what might flow from that and then to provide a comparison, so far as possible, between the estimated financial position of employees as at 26 March 2006 under the fund compared with what they had if they remained in the SASS scheme. He was then asked to comment on the assumptions, calculations and conclusions of Mr Rawsthorne. In particular, he was asked to identify whether there were any additional benefits available to employees in the fund and its formulation in 1990, or subsequently, that were not otherwise available under SASS and not taken into account by Mr Rawsthorne. These instructions did not request Mr Murphy to determine, by a comparison of the two funds, whether the PKCT fund provided equivalent benefits or ensured that the members were no worse off than under SASS. That was the task Mr Rawsthorne had been instructed to undertake and for a considerable period, the exchange of the reports centered primarily on Mr Murphy's differing opinions about the correct actuarial approach to be taken to matters relied upon by Mr Rawsthorne.

246 In cross-examination, Mr Murphy agreed that if there was a SASS benefit that had not been considered by Mercer, then Mercer had not provided a scheme consistent with the objective for its design as required by the consortium, namely, that it deliver equivalent benefits to SASS. He agreed that a necessary step to attain equivalence of value in the new scheme meant that Mercer had to identify each benefit in the SASS scheme and provide it with a value. He also agreed that if Mercer did not take into account at all any particular benefit available in SASS, then it could not have fulfilled the objective of providing equivalent benefits. Similarly, if a benefit under SASS was under-valued, the objective of equivalence would not be met.

247 Mr Murphy appeared to reject this line of questioning, stating that he was now being asked to identify all the nuances of the words of the objective, but agreed that one would have to look at the benefits available under SASS and those available under the replacement scheme. Mr Murphy accepted that the ability to catch up on points foregone under the SASS scheme had "some value": he was then asked whether Mercer would have assessed the value of this benefit. In response he stated that, in practical terms, the plethora of benefits in the SASS fund in particular and in any superannuation fund involved "little things" in various places, such as special deals. Those matters were not normally valued in a situation such as this and an Actuary would not attempt to look at absolutely every particular benefit in detail - he would go through to look at the impact of that approach. An Actuary would certainly look at valuable benefits and value them. Mr Murphy pointed out that Mercer was looking at obtaining "Equivalent value to SASS in the new scheme in a scenario allowing for a number of future unknown circumstances and looking at the superannuation package and ascribing a lot of probabilities as to what the value of package A might be against package B." However, the working out of any individual entitlement down the track when they may resign, retire or die and if they retire, they might take a pension involved a "huge range of possible outcomes."

248 In Mr Murphy's approach, there was considerable flexibility in the term "equivalent benefits" under SASS. He regarded that term as open to a reasonably broad interpretation. The word "equivalent" could be interpreted in terms of benefits to a new member of SASS at the time, to existing members of SASS who joined in recent years, people who had joined from other funds with special benefits and those who had joined from other funds with special benefits, such as NFR pension members. There was also a question of whether it was equivalent for the totality of members, the number of employees who were there at the time of the change over or, equivalent benefits in respect of a new member of either fund.

249 In the exercise he conducted there were different schemes and there were two ways to look at it - either from the view of an individual member that no one could be worse off or, alternatively, looking at the scheme as a package. That package was of equivalent value for the group of members involved. Mr Murphy did not seek any instructions as to what was meant by the words "equivalent value." In his 2012 report, he addressed issues in the context that the instructions could potentially relate to seven different scenarios of what was meant by "equivalent." It was obvious to him that the instructions meant a package of benefits that was more broadly equivalent where there could be winners or losers, but not that any single member will be no worse off in any circumstances.

250 Mr Murphy accepted that the notion of winners and losers was a direct inference from the fact that the package of equivalent benefits was required and that this was to occur in an accumulation fund, rather than a defined benefit fund. Those circumstances meant "it was absolutely impossible for it to be no worse off for any member in any situation environment." Mr Murphy qualified that response by saying that a contribution rate of 200 per cent of salary might address equivalence, but there was no chance at all, under any reasonably assumed circumstances, that any person would be no worse off, even if the investment returns were different. It was still possible that an individual would obtain salary increases, rapid promotion or alternatively, move from day work to shift work and get extra money within the definition of salary. The communications to members showed that there could be situations where an individual would be worse off under the PKCT fund than under SASS.

251 It is against all of this material that the challenges to Mr Rawsthorne's evidence must be assessed. It is somewhat surprising that Mr Rawsthorne accepted the fundamental proposition put to him by senior counsel, namely, that he had identified a significant benefit to people in their 20s under the PKCT scheme but after his initial consideration, that matter was not revisited. He also accepted the proposition that, in valuing the benefits of the two schemes, they had largely cancelled out each other, leading to major areas of loss. Mr Rawsthorne agreed that he did not give a precise value to each element of both funds in concluding that, broadly, the other benefits were not significantly different. The respondent's analysis, however, pays no attention to the identification of numerous benefits in Mr Rawsthorne's 2007 first report, particularly as set out in [238] and [239]. The analysis ignores the fact that Mr Rawsthorne demonstrated that the two identified heads of loss had not been taken into account by Mercer and that he had then calculated the level of each loss. His "general" and "swings and roundabouts" approach was not dissimilar to the approach adopted by Mr Murphy. Mr Murphy's description of what would be required when valuing the two schemes was that an Actuary would not attempt to value every small aspect in a complex fund, but would approach the task more generally in assessing whether or not there was an equivalence of benefits.

252 Viewed against that background, the Court is unable to agree that Mr Rawsthorne's reports, as a whole, are inadmissible. Mr Rawsthorne's detailed reports and the flow of discussion backwards and forwards through Mr Murphy's reports provide a great deal of information about the operation of these two superannuation funds and how their equivalence or lack of equivalence might be gauged. As already noted, senior counsel for the respondent accepted that it might well be open to accept Mr Rawsthorne's evidence, but not his assessment as to losses said to be suffered by employees in transferring to the PKCT fund. As will become clear in the concluding paragraphs of this judgment, while the Court has been assisted by the experts' reports, it has found neither conclusion appropriate in exercising the jurisdiction under s 106 of the Act in determining the fairness of the superannuation arrangements, nor in coming to a conclusion in applying s 106(5) in arriving at a money order that is just in all the circumstances of the case.

253 Having regard to the evidence of both experts concerning the complexity of the valuing and comparison exercise, it appears to be common ground that one acceptable method of valuation would be to consider the SASS scheme in an overall, general manner and then, in a general way, assess whether the PKCT fund was as good as or, worse than the SASS fund. Both experts, at times, adopted this approach. Mr Rawsthorne looked closely at the SASS scheme (contrary to the respondent's submission) and indicated a number of losses and few gains: in this sense, he disclosed the facts and assumptions upon which he formed his view as to losses arising in the PKCT fund. In doing so, he exercised his knowledge and experience as an expert. Ultimately, the Court cannot conclude that, Mr Rawsthorne's views, formed in general, are inadmissible: in particular, Mr Rawsthorne was entitled to express the view that, after consideration of the elements of both schemes, there were primarily two areas of loss. Significantly, Mr Murphy expressed the broad view that once an accumulation fund was chosen for the new scheme, it was impossible to ensure equivalent benefits to SASS for new employees: there would be winners and losers.

DELIBERATION

(i) Common threads in the Evidence

254 Evidence was received from more than 70 employees or ex-employees at PKCT who were covered by the claim filed by the CFMEU. Not surprisingly, there were common themes running through much of that evidence, although attention was drawn to a myriad of individual circumstances. Once privatisation of the coal terminal was announced, many industrial issues arose concerning the future of the existing MSB workforce, the number of employees who might be taken up by PKCT and the terms and conditions upon which employment with PKCT might be offered. There were many industrial disputes and industrial action taken by unions with members at the coal terminal. The atmosphere of industrial tension was confirmed by the consortium's general manager, Mr Coleman, who gave evidence of being involved every day in four or five meetings with unions from the time he came to the coal terminal as the representative of the consortium prior to employees being engaged in August 1990. A programme of voluntary redundancy was undertaken by the MSB and by the time PKCT took control of the operation of the coal terminal, in broad terms, the original workforce was cut from approximately 400 to approximately 200 people. Almost all employees were contributors to the SASS fund, with some having a background of being contributors of up to two other public sector funds before merging or transferring to SASS.

255 Many employees were anxious to retain their jobs and did not wish to take voluntary redundancy offered by the MSB. A number of employees were below 35 years of age and wished to continue their employment at the coal terminal as an ongoing career until retirement. Again, a variety of personal circumstances influenced the decision whether to take voluntary redundancy, or to continue to seek employment with the consortium. For a number of employees, the ability to obtain alternative employment in the Wollongong labour market was also a factor to be considered.

256 There were union meetings concerning industrial issues connected with the privatisation of the coal terminal in the first half of 1990. While individual unions held meetings of their own members, there were also a number of mass meetings held in the quadrangle or in the large crib room where major industrial issues were discussed. Apart from the elements of the voluntary redundancy package, there appeared to be two significant issues: firstly, the conditions under which ex-MSB employees would be offered employment with the consortium and secondly, the superannuation rights that would apply under the consortium's management. A number of employee witnesses and some employer witnesses spoke of superannuation being a "hot topic", or at least a most important issue in the context of continuing employment with the consortium.

257 In particular, Mr Coleman accepted that future superannuation provisions was a hot industrial topic and was one of some complexity. The same observation was made by Hungerford J during the FEDFA dispute proceedings: his Honour noted that the industrial tension in the workforce was only exacerbated by uncertainty about superannuation and that it was appropriate that the employees had a clear statement of the proposed superannuation scheme under privatised ownership, having regard to the consortium's statement in the proceedings that any scheme "in the broad" would be the same as SASS. His Honour also emphasised the need for the workforce to be fully informed and knowledgeable about their new conditions, including superannuation before they were required to make a decision about their future employment: he suggested that people might be made available to advise employees about the scheme due to the complexity of the issues and the needs of individuals.

258 His Honour acknowledged a benefit to the consortium in having a skilled workforce who knew the coal terminal operations and that the transfer of their employment should be "smooth." It is of some significance that, in the dispute proceedings, the FEDFA had drawn attention to the fact that employees had suffered a lot in the privatisation process and therefore any replacement superannuation scheme needed to contain benefits that were at least equal to SASS benefits. This was stated to be the primary issue in the dispute. The union submitted that there should not be "negative changes in conditions because of privatisation." The members should have "at least the same conditions under the superannuation arrangements as they enjoyed until today under SASS". Indeed, the MSB representative acknowledged the importance of superannuation to the coal terminal employees. That was the industrial background to the operation of the Joint Working Party.

259 Early in the process, after privatisation was publicly announced, a Joint Working Party had been set up with representatives of the consortium, the MSB and the unions to deal with the question of superannuation. Over time, Mr Cram, the FEDFA delegate, appeared to take a leading role on the superannuation issue, along with Mr Annesley (a member of the MSB Officers' Association and later the MOA) and Mr Atkin (a member of the ETU). The union members of the Joint Working Party reported on developments regarding superannuation at various meetings of union members, including mass meetings. Management representatives on the Joint Working Party expected information obtained in the Joint Working Party discussions to be passed on to the union membership, although how that was achieved was left up the union representatives. Many witnesses stated that when they attended meetings addressed by union representatives on the Joint Working Party, they understood that on certain matters, such as the new scheme being the same as SASS, that was a statement or undertaking that had been agreed to by not only the employee representatives, but also management representatives on the Joint Working Party.

260 The initial aim of the unions was to seek Government approval for employees to be able to remain in the SASS fund upon taking up employment with the consortium. This appeared to be supported by consortium representatives on the Joint Working Party and Mr Coleman, in particular, said that result was acceptable and one less problem that he was required to deal with in the privatisation of the coal terminal. There was no evidence, however, of the consortium making representations to Government to achieve that end: Mr Coleman knew nothing of any such representations to the Government.

261 By mid-May 1990, the Government had announced its opposition to the retention of consortium employees as contributors to the SASS fund. A new focus then arose as to the terms upon which MSB employees at the coal terminal might leave the SASS fund. Ultimately, it was agreed that payments from the SASS fund could be treated as redundancy payments. When those payments were made from SASS to MSB employees, the new PKCT fund had not been established and therefore these superannuation funds could not be directly rolled into the new PKCT fund, nor did PKCT require this to occur. Many employees rolled this money into other funds, but a number of employees took the opportunity to use the money to reduce their debt (including their home mortgage), for home renovation or to make significant personal purchases such as a new car.

262 As might be expected after more than 20 years, witnesses for both the applicant and the respondent were sometimes vague about details that occurred at that time. Many employees were not clear about the documentation they received in relation to the proposal for the new superannuation fund although some, when shown documents that were circulated at the time, were able to say that they had received the documents but were often vague about how much detail they took in at the time. Other witnesses were aware of the documentation and had read it, at least to some extent. It was a common theme, regardless of the extent of recall, that reliance was placed upon the recommendation of the Joint Working Party and therefore employees voted to accept the scheme proposed in July 1990 as representing an equivalent scheme to SASS.

263 There appeared to be a very wide range of understanding of superannuation amongst employees who gave evidence. Witnesses for both the applicant and the respondent generally accepted that, in 1990, little was known about private or public sector superannuation: indeed, the management team for the consortium felt it necessary to obtain expert advice from Mercer and were not prepared to proceed simply on their own limited knowledge of the subject. In the early stages they used information from the internet to obtain some understanding of how SASS operated: even Mr Annesley admitted that he did not fully understand SASS.

264 Amongst employees, a number of witnesses stated that they broadly understood the difference between a defined benefit scheme such as SASS and an accumulation scheme such as that offered by PKCT. A small number of employee witnesses had taken time to obtain information about the operation of SASS, but none of them stated that they had conducted any research into the operation of accumulation funds. Having regard to the fact that the relevant events took place more than 20 years ago, it may well be that the scope of understanding of superannuation funds provided in the evidence of employees was added, to some extent, by subsequent experience over the years. There appeared to be a general understanding amongst employees that the SASS fund provided a good or high level of benefit because it was a public sector fund. At least one employee witness spoke of his opposition to leaving the SASS fund because, as a blue collar worker, it provided a high level of benefit. Other witnesses spoke of not paying a great deal of attention to the comparative material forwarded by the Joint Working Party or, not fully understanding the differences between the funds and relying on the Joint Working Party's recommendation.

265 Employee witnesses generally had little knowledge of the role of Bain & Co in advising the unions or the Joint Working Party in relation to the proposed new PKCT superannuation scheme. Bain & Co had been engaged by the FEDFA: Mr Giddings, a co-delegate for the AMWU, was not sure of the role played by Bain & Co and pointed out that his union did not engage that company as an expert advisor. He did not know what advice had been provided by Bain & Co and he had never asked about their advice. It appears from the evidence that the FEDFA took a leading role in the superannuation issue, especially in notifying the dispute to the Industrial Commission and then engaging Bain & Co. Many of the witnesses also spoke of Mr Cram being the leading spokesman at meetings and mass meetings of employees in relation to superannuation, although it is clear that other union representatives, including those on the Joint Working Party, also addressed these meetings.

266 The extent of employees' appreciation of the detailed operation of a superannuation scheme and the difference between a defined benefit scheme and an accumulation scheme was mentioned, in particular, by Mr Giddings. Mr Giddings said that he was unsure that "everyone understood these things", although he knew the difference between a defined benefit scheme and an accumulation scheme. Mr Giddings could not say that the workforce, generally, was aware that the pension option was no longer available under the proposed PKCT scheme. He referred to the detail accompanying the superannuation scheme as being a "difficult topic to get peoples' heads around." He accepted that the unions were doing their best to explain the situation to members, but stated that the absence of a pension in the new scheme was not discussed. In his own case, Mr Giddings said he did not pay a great deal of attention to the annexure to the recommendation of the Joint Working Party and a number of other witnesses made similar statements. There were, however, others who looked closely at the proposal.

267 Mr Giddings said he did not have a detailed understanding of the comparison document at the time it was issued. He did not participate in any detailed discussions about that document at the time. It was the task of others to be responsible for explaining the proposal because he regarded it as very complex. While he did not read the proposal closely, he accepted the recommendation because it was made by the Joint Working Party. He also adopted that position because he had been told he would not be any worse off. One point of significance from Mr Giddings' evidence was that, in his position as a co-delegate, he found the issue of superannuation complex and ultimately relied upon the recommendation of the Joint Working Party and what he understood to be the effect of the superannuation arrangements for PKCT leaving him, overall, no worse off than if he had been able to remain in SASS. This was also a common theme in the evidence of other employees.

268 Employee witnesses were also cross-examined about their participation in improved elements of the superannuation scheme. A significant number of employees took part in "flexing-up" arrangements when more generous payments were made and also participated, to varying degrees, in salary sacrifice arrangements. Some witnesses understood that going into an accumulation superannuation fund meant that the returns could fluctuate depending on the money market movements - the investment could increase or decrease. Others understood that, by becoming a member of an accumulation fund, the investment risk was passed from the employer to the employee. Other witnesses understood that, although the schemes would be different, the outcome would be much the same. The result might be a compromise, but it would be as close as possible to SASS.

269 During cross-examination, a number of employees felt moved to state that they were not experts in superannuation in 1990 or they were not "financial people." Some described the documents distributed as "double Dutch." The employer was "trusted" to look after the employment arrangements for those taking up with PKCT. Those statements can be readily accepted and applied also to some management representatives, including those on the Joint Working Party. A number of witnesses understood, on the basis of documents distributed by the Joint Working Party, that depending on future investment returns, they might end up better or worse off compared with SASS. Despite this possibility, witnesses generally placed reliance on the Joint Working Party recommendations and their understanding that they would receive equivalent benefits to SASS and would be no be worse off. That approach was understandable - the idea that they would be no worse off had achieved a high level of acceptance in the workplace and PKCT representatives did not suggest otherwise.

270 Importantly, the documents circulated contained no direct warnings about the assumptions and the volatility of the investment market - there was no warning that there could be winners and losers as part of the assumptions used in the documents circulated. There was no warning that the proposed accumulation scheme could not guarantee equivalence of benefits. Even Mr Coleman and Mr Dixon understood that the final scheme prepared by Mercer would not disadvantage employees when compared with SASS.

(ii) The Representation

271 In the final amended summons for relief the CFMEU claimed that, at the time its members were offered employment with PKCT, they were assured "that the entitlements under the new superannuation scheme that was to be established by the respondent would at least be equal to what they had under SASS." The reply filed by PKCT asserted that, to the respondent's knowledge, no assurance had been given by the respondent in these terms. Observations were then made by the respondent about the role of the unions and the Joint Working Party in the introduction of the new superannuation scheme, but there was no acknowledgement of any relevant respondent representation about that scheme, nor in terms alleged by the CFMEU. This remained the respondent's position when providing instructions to its expert witness, Mr Murphy, in July 2012. In those instructions, Mr Murphy was informed that the applicant's claim was based on "alleged representations" to employees that they would be no worse off under the new PKCT scheme.

272 During the course of evidence, the respondent frequently suggested in cross-examination of employees that the representation as to the nature and operation of the new superannuation fund that they had heard of had emanated from the unions and not from any member of the respondent's management. A number of witnesses accepted that proposition but there were others (who will be referred to later) who claimed direct representations were made by members of management to them in terms that were not inconsistent with the representations claimed by the CFMEU in its further amended summons for relief.

273 It was in written and oral submissions that the position of the respondent, PKCT, was clarified: the respondent accepted that the submissions made by its legal representative (Mr Bunting) in dispute proceedings before Hungerford J in 1990 were the extent of representations made publicly (and apparently at large) concerning the proposed new superannuation fund. In those submissions it was emphasised that the fund would not be the same as SASS because it would be an accumulation fund rather than a defined benefit fund and therefore, there would be differences. The two funds were not to be compared on a benefit-by-benefit assessment but in the round -the new fund would not be "less beneficial" than SASS. The intention of PKCT was said to be that, "taken in the round", it would not be less beneficial from the point of view of members. In saying that the new fund would be no less beneficial, the respondent was pointing out that it was not a matter of matching SASS "case-by-case" but the scheme would have to be looked at in a "global way."

274 It is surprising that for a long period of time there appeared to be a significant issue about the assurances of PKCT. The evidence of many employee witnesses was broadly to the same effect although their recollections (understandably, after 20 years) were not precisely the same. Regardless of minor differences in language, by late May 1990 the position of PKCT was clear and contained in correspondence from Mercer to one of the companies that was part of the consortium. Mercer recorded their instructions from the consortium in the following way:

The consortium has two major objectives in the design of benefits:

(a) benefits that are of equivalent value to those provided by SASS; and

(b) simplicity of administration and communication.

It is not surprising then that employees generally had formed the view that the new fund would be equivalent to SASS and that they would be no worse off regarding superannuation.

275 Curiously, these written instructions to Mercer do not appear to have been given to the union members of the Joint Working Party but their evidence was that it represented, in any event, their understanding not only of the purpose of PKCT but indeed, the purpose of the Joint Working Party. These instructions to Mercer were never withdrawn nor altered, as confirmed by Mr Coleman. In his evidence, Mr Coleman stated that he relied on the model and advice provided by Mercer, including comparisons they provided and noted that the comparisons contained in the final offer indicated "employees would not be disadvantaged from a financial perspective as compared with SASS." This contrasts with submissions for the respondent that the same documents showed there would not be equivalence of benefits, but there would be winners and losers.

276 The two main objectives contained in Mercer's letter to a consortium member in May 1990 were "not a secret" and Mr Coleman expected that the union representatives would report to members matters discussed by the Joint Working Party. The Joint Working Party had been told of the instructions sent to Mercer. Mr Coleman accepted that if the scheme provided equivalent value to SASS then employees would not be any worse off. He accepted that employees were not to be disadvantaged by reason of moving from SASS to PKCT. Mr Coleman also confirmed that the Joint Working Party discussed providing a fund "with equivalent benefits" to SASS.

277 Mr Coleman confirmed that the consortium had decided that the fund should be an accumulation fund and that Mercer were not asked to advise about the type of fund to be offered to PKCT employees. He did not know why that decision was made and to his knowledge, no consideration was ever given to establish a fund that replicated SASS as a private scheme. The consortium preferred that employees stay in the SASS fund but he was unaware of any representations made to the Government for that to occur.

278 Seven witnesses gave specific evidence relating to assurances they had received from management that they would be no worse off under the new superannuation scheme. Mr Buckley said that there was a mass meeting where superannuation was the main topic and Mr Coleman and others attended a slide presentation showing that employees would be no worse off in the new fund. Mr Coleman did not recall this meeting. Mr Tierney recalled a mass meeting addressed by union representatives and also Mr Dixon and Mr Coleman. There were a number of slide presentations and they showed employees would be no worse off in the new fund. Mr Coleman denied that such a meeting took place.

279 Mr Musker recalled a meeting addressed by Mr Coleman where he said words to the effect that the new fund was as good, if not better, than the SASS scheme. Mr Coleman denied that such a meeting took place.

280 Mr Jaffray and Mr Coleman attended a hearing in the Industrial Commission. Mr Jaffray said that he had a conversation about superannuation with Mr Coleman and expressed his view that the workers were going to lose money in the new scheme. Mr Coleman said words to the effect that they would not be worse off by leaving the Government super scheme. Mr Coleman said he did not recall this conversation taking place.

281 Mr Atkin stated that as a member the Joint Working Party, Mr Dixon, Mr Coleman and Mr Kolln said words to the effect that the new scheme would be the equivalent of SASS. Mr Coleman denied ever saying those words to Mr Atkin or hearing any member of the Joint Working Party say those words. Mr Coleman's responses in this regard are surprising in light of the instructions given to Mercer that the benefits would be of equivalent value to those provided by SASS and Mr Coleman's earlier evidence that this position never changed.

282 Mr Coleman did not recall speaking to Mr Morosin or Mr Sanson giving them assurances that they would not be disadvantaged by moving from SASS to the PKCT fund. He could not recall speaking in front of a meeting and assuring employees that they would not be disadvantaged in any way and could even end up being in a better superannuation fund.

283 There were other employees who gave evidence of meetings where management assurances regarding the new fund and SASS were discussed by union representatives, but those assurances were not called into question by Mr Coleman or Mr Dixon. Mr Bourke said that Mr Coleman and Mr Dixon were present at a meeting when Mr Cram said that the new scheme would be equally as good, if not better than SASS, while reporting on negotiations with management. Mr Cram was not corrected by Mr Coleman or Mr Dixon. Mr Mathieson said that members of management were present in a meeting, including Mr Coleman. At this meeting, Mr Cram and Mr Atkin said they would be no worse off and actually better off under the new scheme. Mr Chapman said that Mr Coleman was at a meeting and perhaps Mr Dixon, when Mr Cram stated that the new scheme would be "similar, if not better" than SASS and that they would not be "disadvantaged." Mr Harvey said that Mr Coleman reassured a meeting of employees that everything would be the same as it was in the MSB. Mr Coleman had said in the quadrangle meeting that the new scheme would be "similar" to SASS. He had a "vivid memory" of these events. Mr Nicholls had a similar recollection.

284 In cross-examination, as earlier observed, Mr Coleman accepted that his management style was to keep an open door for discussions and that he would talk to employees at various places and times. He did not just sit in his office but became involved with employees and was aware of their personal circumstances and history. Any employee wishing to discuss a matter could talk with him and they were welcome to do so. Although he could not recall speaking to anybody about issues relating to superannuation, he said that could have happened. It was clear from Mr Coleman's evidence that the period leading up to the August 1990 commencement of the coal operation by PKCT was extremely busy and required him to attend many meetings each day. He accepted that the superannuation issue was a "hot topic" and was one that had to be favourably concluded with union members before the formal takeover date.

285 In relation to the witnesses who gave evidence of seeing Mr Coleman at certain meetings, or having personal discussions with him, where assurances were provided as to the new superannuation scheme being equivalent to SASS or the employees being no worse off under the new scheme as compared with SASS, Mr Coleman's response was that mostly, he could not remember such discussions although there were some aspects of the evidence that he did not think occurred. The Court accepts that Mr Coleman was giving evidence to the best of his recollection but it is likely that employees who attended when Mr Coleman was present or, spoke to him personally about the superannuation issues, would have a clearer memory of those events having regard to the fact that Mr Coleman was the general manager and that they were being informed or seeking information about the hot topic of the new superannuation scheme and what it would mean for them as individuals. Mr Coleman's lack of recollection of these occasions may have resulted from his obviously busy work schedule at the time and the numerous industrial issues he was facing on a daily basis.

286 Mr Coleman frankly conceded that he could have spoken to individuals about superannuation. Indeed, Mr Beale's evidence was that some members of management did attend mass meetings concerning superannuation. Mr Beale had prepared "overheads" for such a presentation to be given by Mr Coleman and Mr Dixon. As recounted below, Mr Dixon stated that he did attend meetings of employees. It is in those circumstances that the Court accepts the evidence of the individual witnesses who recounted Mr Coleman's presence at meetings or, who had discussions with Mr Coleman about the equivalent nature of the new superannuation scheme to the SASS scheme and the assurances that they would be no worse off.

287 Mr Dixon described himself as one of the three senior managers (together with Mr Coleman and Mr Kolln). He was an accountant but did not have a hands-on role like Mr Coleman in liaising with the unions. Because of his position he was deeply involved in the superannuation discussions, not only by participating in the Joint Working Party but also in giving instructions to and receiving advice from Mercer. He relied on Mercer to design a superannuation fund that met the needs and objectives of the members of the Joint Working Party; the purpose of the Joint Working Party was to come to an agreement regarding the structure of the new fund that was "acceptable" to all members of the Joint Working Party. The SASS fund was the "yardstick" for the design of the new superannuation scheme. He spoke of instructions being given to Mercer to design a superannuation fund with benefits "of equivalent value" as provided by SASS: the new fund was to be administratively easy because there were difficulties with different funds then operating at the coal terminal.

288 Mr Dixon acknowledged that benefits of equivalent value to that provided by SASS remained one of the main objectives throughout the discussions of the Joint Working Party and he regarded it as the charter of the Joint Working Party to produce a scheme of equivalent value. At no time after he commenced at the coal terminal did Mr Dixon change the instructions about the design of the fund and they remained as an instruction to fashion a fund of equivalent value to the benefits available under SASS. There was no monetary limitation placed upon the design to be undertaken by Mercer but there were time frame constraints and a practical consideration, namely, not to further ignite an already volatile industrial situation. Management were seeking to achieve a situation where the workforce and the unions would agree about the superannuation fund to be introduced that would smooth the transition to privatisation.

289 In relation to initial instructions given regarding superannuation before his engagement with PKCT, Mr Dixon said that Mr Morris, a person who came from one of the consortium partners, was familiar with superannuation and had commenced discussions with Mercer having had some relation with that firm in the past. Mr Morris continued in that role with Mercer until Mr Dixon took up that function. He was unaware of what Mr Morris did in relation to superannuation and Mr Morris did not attend any meetings of the Joint Working Party. Mr Dixon confirmed that, in his first six months at the coal terminal, there were meetings in the large conference room including, meetings to introduce the new organisation and then to provide up-dates concerning the general state of the business. While a number of matters were discussed, superannuation could have been one such matter because it was a "hot topic" and may have been talked about as it was very close to the hearts of the employees.

290 Mr Dixon's evidence provides some additional details that were not recalled by Mr Coleman and in particular, confirmed that management did have a number of meetings with employees where a number of issues were raised. It is likely that, at these meetings, superannuation was raised because of its importance to employees. Having regard to the instructions given to Mercer about the design of the new fund (instructions that were never altered), it is likely that those instructions or, words to similar effect, were passed on to the workforce by management during such discussions. As Mr Coleman said, there was no secret about that objective.

291 Reference has already been made to the evidence of over 70 witnesses that they had understood that the benefits would be the same or no less than SASS benefits or, they would be no worse off than under SASS. Given the importance of the issue of superannuation arising, as it did, in a time of industrial volatility at the coal terminal, it is also likely that Mr Bunting's announcement in the dispute proceedings before Hungerford J came to be discussed initially by FEDFA members and then passed on to other employees by word of mouth, but perhaps by not using precisely the same words used by Mr Bunting. It might be noted that Mr Bunting's announcement did not adopt the clear direction given to Mercer that the benefits under the new fund would be of equivalent value as provided by SASS. It is curious that different words were used to express a similar proposition when the more precise instructions to Mercer had been confirmed in a letter dated approximately one week before the late May 1990 hearing before Hungerford J where Mr Bunting made another announcement as to the nature of the new superannuation scheme to be made available to employees.

292 Mr Beale was human resources superintendent for PKCT at the time there were discussions about the new superannuation fund to be introduced for coal terminal employees after privatisation. While he was not on the Joint Working Party he worked closely with PKCT senior management including, Mr Coleman, Mr Dixon and Mr Kolln. He was aware of superannuation issues and the matters being considered by the Joint Working Party through discussions with those senior managers: superannuation was also a part of his role. It was his understanding that PKCT had engaged Mercer to advise on the design and establishment of the new superannuation fund and that the intention of PKCT was to create a scheme providing benefits equivalent to those available in SASS as long as the fund was an accumulation fund.

293 As earlier noted, the PKCT management expected that the discussions held within the Joint Working Party would be passed on to the workforce through the union delegates and representatives on the Joint Working Party. Those discussions at Joint Working Party level proceeded from at least May 1990 on the instructions given to Mercer by PKCT management, namely, that there were two objectives, firstly, that benefits were to be of equal value to those provided by SASS and secondly, there should be simplicity of administration and communication. It is also to be noted that there was never any suggestion in the evidence of PKCT management witnesses that the need for simplicity of the administration of the scheme and communication would impact in any way on the first objective of equivalent SASS value to be provided in the new superannuation fund: nor was it suggested that "simplicity" would compromise the final form of the scheme so that it would no longer be "equivalent" to SASS or that there could be winners and losers.

294 These objectives were recorded at a time when the decision had already been made that the new fund would be an accumulation fund and not a defined benefits fund. Nevertheless, at all relevant times, the objective was to create a superannuation fund providing benefits equivalent to that provided under SASS. That was the objective that PKCT management said guided the discussions of the Joint Working Party and that is undoubtedly how the union representatives on the Joint Working Party came to accept that was the objective of the Joint Working Party and passed that objective on to members through mass meetings and individual union meetings over the period of negotiations.

295 On the evidence, it is firmly established that in the ways described above, PKCT represented to potential employees of the privatised operation that if they took up employment with the new entity, the new superannuation scheme would provide equivalent benefits to the SASS scheme even though it would be an accumulation scheme rather than a defined benefits scheme. The employees would be no worse off under this new superannuation fund.

296 The Court is unable to accept the respondent's submission that the relevant representation was only that made by Mr Bunting in the dispute proceedings heard by Hungerford J in May 1990. Although similar to the objective identified by PKCT management of providing equivalent benefits to those provided by SASS, the Bunting representation introduced concepts of overall benefits "in the round" and would not provide a line-by-line equivalent. There is no evidence of the instructions given to Mr Bunting regarding his appearance for PKCT in the FEDFA dispute. None of the management witnesses appearing in the proceedings had given instructions to Mr Bunting and it may well have been that Mr Bunting was given instructions by Mr Morris or, some other person from the consortium. Importantly, there was no PKCT or Joint Working Party document provided to employees stating that "in the round" the new fund would be no less beneficial, yet there might be winners and losers. Similarly, there was no statement in these documents that only some of the workforce would benefit. It was the workforce as a whole that would not be "disadvantaged."

297 However those instructions to Mr Bunting came about and whatever their terms, the evidence is unfaltering that at all relevant times (including at the time of the dispute), the firm objective of PKCT was to create a new fund providing benefits of equivalent value to those available under SASS. The statements made by Mr Bunting are not totally inconsistent with that proposition (although submissions for the respondent relied upon the difference in language to allow a conclusion that a much more flexible and inexact objective was to be considered as the relevant representation to the workforce), but those statements cannot be used to significantly undermine the clear and constant objective of PKCT and the Joint Working Party to provide benefits of equivalent value to those available under SASS.

298 There was some debate about what was meant by "equivalent" benefits in the views exchanged by the experts.

The objective adopted by PKCT (and never altered) was to have Mercer design "benefits that are of equivalent value to those provided by SASS" (emphasis added). The word "equivalent" is in common usage in the English language - there is some precision in its meaning. The Macquarie Dictionary gives that word the following meaning:

equal in value, measure, force, effect, significance etc;

corresponding in position, function.

299 No reason was ever proffered as to why a pension such as available in SASS could not have been provided in the PKCT fund. (Mr Murphy thought that the fund would not be a pure accumulation fund if that occurred, but that is of no relevance for present purposes). Importantly, the objective focused not only on equivalent benefits, but also the "value" of such benefits. If there was some understandable reason for not making the pension available then some other benefit of equal value had to be included in the new fund. The same approach applies to the transfer of investment risk: here, there was no option because of the nature of an accumulation fund. In this circumstance, Mercer had to value the lost stability of a defined benefits fund with the known certainty of its benefits at retirement and provide an equivalent benefit in the PKCT fund.

(iii) Relative Bargaining Strength

300 It was the respondent's submission that this was not a case where there was such an inequality of bargaining strength between the parties that required intervention by the Court to address unfairness arising from that relationship. It was pointed out that employees were represented on the Joint Working Party in equal numbers to the management representatives and while management had the benefit of expert advice from Mercer, the unions also had expert advice from Bain and Co. In addition, the employees were provided with comparative figures demonstrating the fact that some may be better off under the PKCT scheme, while others could be worse off. The employees were, in these ways, well informed when they voted to accept the PKCT scheme and in effect, entered into that scheme with their eyes wide open.

301 In a more general sense, these issues have been canvassed when considering other aspects of the case, but it is appropriate to draw those observations together under this sub-heading. The first issue, relating to the availability of expert opinion on both sides, is not so clear cut as suggested by the respondent. Mercer was certainly engaged to provide expert opinion to the consortium, but their reports on those issues were not routinely made available to the employee members of the Joint Working Party. The evidence establishes that Bain and Co were engaged as expert consultants by the FEDFA, but the terms of that engagement were not clear from the evidence, nor is it clear that Bain and Co considered the variety of benefits available under the SASS fund as undertaken by Mr Rawsthorne in 2007.

302 There is evidence of Bain and Co dealing with Mercer, apparently after the first proposal was rejected as being inadequate, but the full nature of that exchange was not known. There is some evidence of Bain & Co making representations regarding the second proposal, possibly both before and after that proposal was finalised: again, the full nature of these exchanges are unknown. Union representatives from organisations, other than the FEDFA, could not recall being involved with Bain and Co or, at best, having a meeting of some type with that company: they were firm in their evidence that their union had not engaged Bain and Co and it appears that the other unions did not routinely seek advice from that company. Mr Giddings did not know what advice had been provided by Bain & Co.

303 Mr Murphy readily accepted that it was a most complex task to attempt to identify all the benefits that might arise under the SASS scheme and then attempt to provide equivalent benefits in an accumulation fund to be operated by PKCT. The fundamental difference was the fact that the new fund would be an accumulation fund and not a defined benefit fund and that itself created a number of difficulties in creating equivalence of benefits. There is evidence that there were matters that were not taken into account by Mercer in its ultimate design and those omissions may well have arisen because of the complexity of the SASS fund and its benefits. That assessment was made, albeit, by an expert actuarial firm, at a time when the extent of superannuation was not well understood, especially in relation to public sector schemes and where broad comparisons were being attempted. In that context it is entirely understandable that there were gaps not only in the engaged experts' knowledge at the time, but that the workforce itself was entirely reliant on others to provide assistance and information to help them in what Hungerford J described as the difficult task of comparing different schemes of superannuation, particularly having regard to the specific requirements of individuals and the fact that one set of options or benefits may not suit all employees.

304 The evidence of the members of the Joint Working Party, both management and unions, was to the effect that they were not experts in superannuation and were simply attempting to do their best to craft a new superannuation fund in a time of industrial unrest and employee concern about the ramifications of privatisation and the short timeframe available to the consortium to introduce an acceptable superannuation scheme that would be supported by employees before the coal terminal passed into the hands of the new operator. The Court has earlier referred to the evidence of Mr Giddings, an active union representative, who candidly stated that he had only considered the documents circulated in a very limited way and basically had relied upon the Joint Working Party to deliver an equivalent fund to SASS. There were union delegates as well as ordinary union members who gave similar evidence, although there were some who appeared to be better informed about superannuation than others.

305 Mercer had written to the consortium in March 1990 pointing out the impractability of replicating multiple funds as found in SASS. Mercer/PKCT provided employees with projections of possible future benefits that were reliant on assumptions about interest rates and market returns into the future and which could not be guaranteed (see [153] of the respondent's outline of submissions). The projections were thus based on imponderables. The calculations and assumptions were drawn by Mercer and not the members of the Joint Working Party.

The complexity of the task of creating a scheme of equivalent value to SASS and to do so in a short time frame, fraught with industrial tension, left employees to be guided by the assurances that they would not be worse off. Employees could not realistically have been expected to conduct their own assessment of assumptions drafted by someone else on these highly technical issues.

306 These factors make it difficult to conclude that the employees were well informed and accepted the new superannuation scheme with their eyes wide open, or to accept that there was such an equality of bargaining strength that it was not open to find that there was unfairness arising from the superannuation arrangements ultimately agreed to by the parties. This was not a simple case such as considered by Watson J in Swann v Ultratune Aust Pty Ltd (1983) 5 IR 284; [1983] AR (NSW) 285 who observed that the previous s 88F was not a provision designed simply to provide a form of "rescue" to entrepreneurs who wittingly or advisedly entered into business arrangements which, contrary to expectations, turned out to be unprofitable and resulted in loss and other difficulties. This is clearly not such a case.

307 As long ago as 1980, a majority of a Full Bench of the Commission (Perrignon and Dey JJ) in A & M Thompson Pty Ltd & ors v Total Australia Ltd [1980] 2 NSWLR 1 at 13 stated:

Again, in our opinion, a case involving the issue of unfairness of a

contract cannot be disposed of simply by concluding that the complaining party was fully aware of the nature of the transaction before entering into it and later came to regret the bargain. It is insufficient to claim, as Total has done here, that the Thompsons "had their eyes open" when they entered into the subject licence agreement in 1977. Section 88F envisages a much more searching examination of the circumstances than that.

Otherwise, its purpose would not be achieved.

In what might be described as a view having regard to the real world, in Bennett v BP Australia Ltd [1984] AR 120, Macken J observed:

Inequality of bargaining power is frequently a reason for an unfair or harsh contract to be struck down under s 88F but standing alone it is not sufficient. In one sense, parties to a contract are never in an equal bargaining position; there must always be some differences between them and some advantages attaching to one side or the other.

308 Over the years, the Commission and the Court has rejected a simplistic approach that placed relevant experience/full disclosure/legal advice as barring relief under unfair contract provisions. Thus, in Hasyim v Lark (1979) AR(NSW) 909, an allegation of lack of knowledge or appreciation of the arrangement succeeded, notwithstanding the applicant's level of education and business experience. In Terzian v Gattellari [1972] AR (NSW) 591, the applicant succeeded although fully aware of the details of the arrangement and being independently advised about it. In Haddad v S & T Income Aid Specialists Pty Ltd (1984) 13 IR 16 a restraint of trade clause was declared void where the applicant had received legal advice not to enter into the contract. The applicant had negotiated the terms of a relevant clause and was considered to be of "considerable experience" in the field of income tax. Similarly, in Re Williams and Calmex Products Pty Ltd (1971) AR(NSW) 264, Sheldon J stated that few applicants would succeed in s 88F cases if it was a defence to show that they should have known better.

309 In the circumstances of this case it would be not be appropriate or fair that relief be withheld from the employees because they had some level of expert assistance and union representation prior to accepting the scheme offered by PKCT. The experts' evidence in this case demonstrates the complexity of the task of matching benefits under different superannuation schemes. The employees were entitled to rely upon the respondent's representation that they would be provided with benefits equivalent to SASS and that they would be no worse off.

(iv) Superannuation and the industrial context

310 The Court has previously referred to the industrial context in which the PKCT superannuation issues arose. Evidence from PKCT managers demonstrated a concern about the volatile industrial atmosphere engulfing the privatisation of the coal terminal and the numerous industrial issues that had to be faced, including retrenching approximately half of the workforce but ensuring that those who remained would continue working for the consortium at the coal terminal. In the dispute proceedings, Hungerford J also drew attention to the desirability of PKCT having a stable and skilled workforce who were well versed in the operation of the coal terminal facilities. It was in the interests of PKCT to provide a new superannuation scheme that would not cause further industrial unrest or provide another reason for the workforce to be industrially unsettled and anxious about the new employer. That was a significant industrial context in which the representations were made concerning the nature of the PKCT superannuation scheme and the importance of the workforce being assured that the new superannuation scheme would provide benefits equivalent to SASS and that the employees would be no worse off than under the SASS arrangements.

311 Although arising in very different factual circumstances, the decisions of the Commission in Myer Stores Ltd t/a Grace Bros v Stowart and ors (1994) 55 IR 21 and Transport Workers' Union of New South Wales v Toll Transport (No 2) [2012] NSWIRComm 25 are of some relevance to the current proceedings.

312 Although these cases deal with the ongoing debate about goodwill arising from the sale or purchase of a truck with work, both cases regarded it as relevant that the arrangements surrounding the sale of a truck with work engendered a stability for the fleet operator and was thereby of some commercial value. Similar commercial benefits have been recognised in transfer arrangements in the waste contracting area following the termination or loss of a contract (see Transport Workers' Union of Australia v Veolia Environmental Services (Australia) Pty Ltd [2013] NSWIRComm 22). The simple point of relevance for the present matter is that PKCT's continued objective of providing benefits equivalent to those available under SASS where no employee would be worse off was a representation designed, at least in part, to make the workforce more likely to remain in employment at the coal terminal and to diffuse the difficult industrial environment. Mr Dixon was alive to that consequence. In that context, the representation was a matter of real significance both to the employees and to management.

313 The role of superannuation in the industrial context was explained by Fisher P in Re Lend Lease Investments Pty Ltd and ors; Re Cannon and ors (1986) 14 IR 301. In dealing with superannuation issues arising in an employment protection case concerning severance pay and retrenchment on economic grounds, Fisher P stated (at 315 - 316):

Why does as employer set up a superannuation fund? What are the economic and industrial objectives of superannuation? little direct evidence was given on these topics. To the employers' advantage the superannuation scheme has the effect of attracting labour to his enterprise and retaining it in his service. It leads to a more contented and secure work force who after years of membership would tend to be tied to the employer even when offered preferred employment elsewhere. A superannuation fund therefore acts to attract labour of the right kind, to make labour more contented and productive, to retain it and to bond it to the employer's enterprise. These industrial objectives are both proper and appropriate.

While I accept that an employer may be genuinely compassionate and solicitous for the welfare of his employees, my conclusion is that superannuation essentially results from policy decisions made by an employer acting according to what he perceives to be his commercial advantage. While the employer does make a contribution to the fund he does so for cause and for value and his contribution cannot accurately be assessed in terms of compassion and generosity. Put bluntly, the payment of employers' contribution need be no more compassionate or generous than the payment of wages.

In terms of social objectives, the material before me tends to suggest that superannuation is a desirable form of saving and as a consequence is encouraged, by government, by departure from tax neutrality and special tax benefits.

... An employee by joining a superannuation fund in fact expresses a preference for a form of savings. The inducement to prefer a form of saving that bonds him to this employer lies substantially in the fact that an employer advertises his contribution to the fund at a rate higher than the employees rate, but from which the employee in due course hopes to benefit.

These observations have relevance for the present proceedings and spell out the benefits employers derive from providing a superannuation scheme for their employees. The industrial volatility existing at the coal terminal by July/August 1990 undoubtedly influenced PKCT to offer a scheme equivalent to SASS where employees would be no worse off - anything less than that would have been likely to court further industrial unrest and employee dissatisfaction.

(v) Additional Issues

314 The respondent raised additional issues that may be briefly considered. The first such issue raised was the application of the equitable principle of laches. It was submitted that there was inordinate delay in articulating the case now expressed by Mr Rawsthorne in his reports. It is also part of the respondent's criticism that, for some period of time, the applicant was searching for a properly based case that would support the orders sought.

315 In the long history of the unfair contracts jurisdiction operating under current and predecessor legislation, it has been held that the equitable principle of laches is available, but it has rarely been relied upon and even more rarely, has been applied to defeat a case of established unfairness.

316 The principle of laches not only rests upon unjustified delay and refusing to aid parties who "sleep on their rights" but also looks to the prejudice that has been caused by the delay. The principle, therefore, recognises the practical difficulties of delay such as the loss of relevant evidence, the availability of necessary or essential witnesses, such that the opposing party's capacity to meet the case brought against it is seriously impaired.

317 Hungerford J considered the principle of laches in Hurley v Art Printing Co Pty Ltd (1994) 54 IR 254. His Honour noted that Sheehy J in Irvine v Shell Co of Australia Ltd [1969] AR (NSW) 187 at 189 had commented that, under the provisions of s 88F there was no provision limiting the time in which action could be commenced under the provision, but the provision requiring the Commission to be governed in its procedures and decisions by equity and good conscience made it appropriate to have regard to the equitable principle of laches. In Irvine, Sheehy J dismissed the application for relief having regard to the unexplained delay of bringing a case where the representations relied upon had almost immediate effect, yet were not acted upon over a significant period of time during which further agreements were entered into. No formal complaint was ever made by the applicant, apart from occasional comments made to company representatives when they visited the premises. The passage of time had created difficulties for the respondent to call evidence concerning those alleged conversations.

318 Hungerford J noted that in Saliba v John Hearder Pty Ltd (1986) 15 IR 36 at 38, Macken J had stated that there was a wealth of authority that one should not sleep on one's rights and that an applicant coming before the Industrial Commission under s 88F should do so with clean hands. Notwithstanding these approaches, his Honour was not satisfied that altogether, the conduct of the applicant should defeat his claim in that case. Macken J was faced with the evidence of the applicant that, essentially, he had been engaged on a contract and after seeking advice from the Department of Industrial Relations about award rates, he had set about his work in a way that enabled him to portray it as work of an employee, rather than a contractor, and he had done so over a period of time in order to justify his claim brought later under s 88F. It was in those circumstances that the submission was made that he had rested on his rights and should not be able to pursue the claim. While Macken J accepted that the applicant had engaged in a course of attempting to portray himself as an employee, in fact he was a contractor and was able to pursue his case under s 88F.

319 In Hurley, Hungerford J considered the delay in bringing the proceedings, but ultimately dismissed it as a consideration. In that case there had been related proceedings unsuccessfully brought in the Federal Court, prior to the initiation of unfair contract proceedings in the Industrial Court. His Honour stated that it was important to his determination of the issue that delay had not been relied upon by the respondent as causing any resultant prejudice in meeting the applicant's case. In O'Brien v Australian Native Landscapes Pty Ltd (2001) 105 IR 409, Hungerford J decided to exclude delay as a consideration, inter alia, because of the fact that the respondent had been on notice of the dispute for a considerable period of time.

320 In the present case there is no doubt that witnesses were not able to be precise about representations made to them, but many witnesses were able to give evidence as to the thrust of those representations. The issue of the nature of the representation, ultimately, was not a significant issue to the extent that the respondent was not able to meet the case or was severely inhibited in fully meeting the case because of the passage of time: rather, there was an acceptance of a relevant representation made in dispute proceedings and the argument for the respondent turned more on the terms of that public statement of the respondent's position on superannuation. Importantly, although witnesses for the respondent (also witnesses for the applicant) were unable to be precise as to conversations concerning superannuation held more than 20 years ago, there was extensive documentary material before the Court. Indeed, quite apart from numerous exhibits and affidavits, there were 14 volumes of agreed documents. Importantly, there was no evidence from the respondent specifically directed to the issue of prejudice to the preparation of its case because of the lapse of time since the original representations were made.

321 The bulk of the argument in the case did not revolve around the representations, but whether it could be established that inadequate arrangements were made in the PKCT fund to ensure that it provided benefits equivalent to those available under SASS. It should also be mentioned there was evidence that, shortly after the commencement of the PKCT scheme, queries were raised as to the adequacy of that scheme compared to SASS. Mr Beale acknowledged that the first "flex-up" arrangement in 1992 resulted from union complaints about the insufficiency of the PKCT scheme. In addition, the question of superannuation appears to have arisen during wage negotiations. From time-to-time unions raised the need to improve the superannuation scheme, including the 2004 discussions, which led to representatives of the unions and management agreeing to a proposal to be put to the general manager to finally address the continuing issue of the inadequacy of the superannuation scheme.

322 Mr Atkin gave evidence about the inadequacy of the PKCT fund being discussed by delegates as early as 1992 and then being more widely discussed. Mr Strudwick said that in the late 1990s, as vice president of the local Lodge, he had taken up the issue and had raised it on many occasions. He was aware of rumblings about the adequacy of the new fund in the first few years of its operation and whether or not it was in fact equivalent to SASS. In 1999/2000, Mr Giddings conducted Lodge meetings arising from ongoing concerns about the new fund. Through Mr Steel he had written to the Premier's Department, Mercer and to public sector superannuation funds raising the issue of inadequacy - he received no response. In 2001, Mr Steel was engaged as a consultant to report on the adequacy of the fund compared with SASS in circumstances where Mr Giddings could not identify the reason for the relative inadequacy of the new schemes. Mr Giddings also gave evidence of meetings with approximately six members of management where he claimed the employees were worse off under the new superannuation fund. He spoke of retirement figures provided each year by SASS not being matched by PKCT fund figures. Mr Brannon was aware for some time of union concerns about the level of superannuation and in 2004, was informed of union negotiations with other management representatives about the level of PKCT superannuation benefits.

323 In addition, the evidence shows that, despite their concerns about what they regarded as inadequate superannuation arrangements, the local union representatives were unable to pinpoint why that was so and therefore, what measures were required to address the inadequacies. A consultant was ultimately engaged but the assumptions identified by the consultant proved to be inaccurate and as a consequence, Mr Rawsthorne was instructed. The case commenced in 2005 and the interlocutory challenges and the size of the case itself have meant that it has finally come before this Court for determination in 2012 and 2013.

324 All the factors identified above are important considerations in applying the doctrine of laches. The evidence amply demonstrates that from the inception of the PKCT scheme, superannuation was still evolving as an industrial issue and that local representatives of both employees and management did not consider themselves to be experts in the field. It is not surprising that, in those circumstances the new superannuation fund had to operate for a period before any defect in its benefits, compared to SASS, could be understood, let alone identified. Having regard to these matters, this is not an appropriate case for the application of the principle of laches.

325 The second matter relates to what was described as a "cross-claim" by the respondent. The nature of that cross-claim was that if any finding of unfairness was to be made resulting from the communications to the membership, then the primary responsibility for those communications rested with Mr Cram who acted with the ostensible authority of the FEDFA to which the CFMEU is the legal successor. Mr Cram featured prominently in the evidence, addressing members on the basis that they would not be worse off and they would obtain equivalent benefits to those available under SASS. The respondent argued that the FEDFA had the benefit of expert advice from the consultants, Bain & Co and the advice of other union members of the Joint Working Party. The only representation that the respondent made was the statements made in the dispute proceedings by its solicitor, Mr Bunting. Any mutation or widening of that representation by Mr Cram was unjustified and essentially, Mr Cram and the FEDFA and successors, should bear the responsibility for any misunderstanding amongst the workforce or any reliance upon what was said by Mr Cram.

326 In oral submissions, it was stated that issue may largely go away because of the way in which the applicant's submissions were structured. Those submissions focused upon what the employer had said in a public way and there did not appear to be a submissions that it was turned into some wider form of promise. If that was the case, then it became a theoretical issue. If wider assertions were made, then that would lay at the feet of the union. It was not abundantly clear what possible concession was being made here. It appears to proceed on the basis that, if reliance is confined to representations made on behalf of the respondent by Mr Bunting in the dispute proceedings, the cross-claim is unnecessary in light of the acceptance by the respondent that Mr Bunting's statements were the limit of the respondent's representations as to the nature of the PKCT superannuation scheme.

327 The Court has examined the representations made by Mr Bunting on behalf of the respondent in the dispute proceedings and has also heard evidence from both union and management witnesses. The Court has concluded that at all relevant times, the objective of the consortium was to provide the employees with a superannuation scheme of equivalent value to the benefits available under SASS. That objective was passed on to members of the Joint Working Party and it was expected that the members of the Joint Working Party would convey that type of matter to employees. In addition, the Court has accepted the evidence of employees that the members of management informed them they would be no worse off under the PKCT scheme or, they could be even better off. All this was consistent with the respondent's choice of an accumulation fund rather than a defined benefit fund and the possibility that, with good investment returns, there was a possibility of higher benefits than available under SASS.

328 After all the evidence has been considered, the Court has accepted that the representations made to the workforce concerning superannuation by PKCT were arguably more definite than Mr Bunting's statement to the Industrial Commission in the dispute proceedings. There was a consistent flavour that although the precise terms may be different, the outcome would be such that they would have equivalent benefits. Mr Cram, in addressing members during this period of intense industrial pressure, was doing no more than passing on to the workforce what the management members of the Joint Working Party expected him to do. Having reached that conclusion, there is no basis for the cross-claim.

329 A related issue raised by the respondent concerned the absence of Mr Cram as a witness, despite the prominent role he had played in the Joint Working Party and in addressing employees on superannuation benefits and how employees would be no worse off under the new fund.

Mr Giddings was cross-examined on Mr Cram's whereabouts. He said that Mr Cram had left PKCT around 1994 and that he did not know where Mr Cram was now living, although he had "asked around." No one seemed to know Mr Cram's current address. Having regard to the views expressed in the previous paragraph and the evidence of Mr Giddings, the absence of Mr Cram as witness in the proceedings is not capable of sustaining any adverse finding against the applicant's case.

(vi) The Operation of s 106(5) - What money order is appropriate?

330 In light of the findings made and the reasons given above, the Court determines that the contract (in its widest meaning) was unfair, both in its inception and the way in which it worked out. From the time it was decided by PKCT that the new scheme would be an accumulation fund, detailed consideration had to be given to the means by which the new fund could provide benefits equivalent to SASS. Mr Murphy thought it was nearly impossible to do so under a strict accumulation fund. PKCT proceeded with a scheme where there could be winners and losers, quite contrary to its representation. On the evidence, it is not possible to conclude that the representation "benefits equivalent to SASS" somehow became "there will be winners and losers." No management witness, in terms, says this occurred. The applicant's case as to unfairness is made out.

331 This conclusion as to unfairness is also supported by the following matters:

(a) both Mr Coleman and Mr Dixon agreed that the comparative tables and information provided to employees was designed to show that they would not be disadvantaged in their superannuation arrangements. Despite this undisputed evidence of the PKCT purpose, witnesses were nevertheless cross-examined on the basis that the comparative tables provided to them clearly showed that there would be losers as well as winners - in other words, employees could be disadvantaged under the new scheme;

(b) Mr Dixon stated that, in August 1990, employment was offered at the coal terminal by PKCT on the basis that superannuation would be equivalent to SASS.

In this context it is also to be noted that, although the detail of the design of the scheme by Mercer was central to the issues raised, no witness was called who worked on the proposed PKCT scheme for Mercer, especially as to what elements of SASS were considered and valued and if any benefits were not included and the reasons why that approached was adopted. In addition, Mr Morris was not called, although he provided the initial instructions about the scheme.

332 This is a case where variation of the contract requires consideration, especially since many employees remain engaged by the respondent. It then becomes necessary to consider the related question, namely, what, if any, money order is appropriate having regard to the circumstances found by the Court. Section 106(5) empowers the Court to make such order as to "the payment of money in connection with any contract declared wholly or partly void, or varied, as the Commission considers just in the circumstances of the case."

333 During the course of proceedings, the Court reminded the parties that if relevant unfairness was found in relation to the superannuation scheme introduced at PKCT, the terms of s 106(5) did not confine the Court to awarding damages as might be appropriate in common law or equity proceedings. That comment was made in relation to the expert actuarial evidence filed by each party that attempted to establish, on actuarial principles, that either there had been a loss incurred by employees or, that there was little or no relevant loss incurred by employees transferring from SASS to the PKCT superannuation scheme. Very early in the history of the unfair contracts jurisdiction, in Re Witek v Starr (1971) AR (NSW) 1000, Perrignon J, as a matter of discretion, refused to make an order in the nature of general damages. In Brown v Rezitis (1970) 127 CLR 157, Menzies J spoke of the wide discretion available under the then s 88F in determining not only what money should be paid, but by whom it should be paid. Barwick CJ (at 164) pointed to the fact that, underlying s 88F, there was a broad concept of restitution of the parties to a situation which existed before the making of arrangements as well as, in an appropriate case, to make a remedial provision in the meantime for what had taken place or, had been done under the contract.

334 By the time the Full Bench of the Commission came to decide Westfield Holdings v Adams (2001) 114 IR 241 the Commission had exercised its jurisdiction under various unfair contract provisions and had made a wide variety of money orders, taking into account many different circumstances where such orders were justified "in the circumstances of the case." In the course of deciding Westfield Holdings and applying the provisions of s 106(5), the Full Bench came to consider the principles relating to the determination of compensation and the making of a money order. So far as relevant to the present proceedings, the Court stated:

120 We do not consider the appellant was correct in contending that in determining loss or damage under the Trade Practices Act, the courts commonly turn to either the tort or contract tests as a useful benchmark. As evidenced by the earlier references to Marks, all members of the High Court in that case expressly disavowed an approach to the measure of damages under s 82 that the appropriate guide in most cases will be found by asking what would have been the measure if the common law applied. As Gaudron J said:

... the task is simply to identify the loss or damage suffered or likely to be suffered and, then, to make orders for recovery of that amount under s 82 or to compensate for or prevent or reduce that loss or damage under s 87 of the Act.

121 It was also said by McHugh, Hayne and Callinan JJ in Marks at 510-512 that the High Court in Gates, Wardley and Kizbeau did not hold that the remedies provided by ss 82 and 87 of the Trade Practices Act are to be confined by analogies, whether with tort or otherwise. At 512, their Honours added, however, that:

This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas ((1985) 157 CLR 215 at 223-224, per Gibbs CJ) the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act (our emphasis).

122 We think it is clear from Marks that whilst it could not be said that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52, the primary focus of the court must be on the requirements of the statute. Under the Trade Practices Act, that focus gives rise to the question: what loss or damage has been caused by the conduct contravening the Act?

123 In Marks, McHugh, Hayne and Callinan JJ elaborated this test at 513:

If loss or damage is shown to have been suffered or to be likely to be suffered, orders of the kind prescribed by s 87 may be made. Proof of loss or damage (actual or potential) is therefore the gateway to the s 87 remedies. But the identification of loss or damage is important in the operation of s 87 not only for this reason but also because the power to make orders under s 87 is limited to making orders "if the Court considers that the order or orders concerned will compensate ... in whole or in part for the loss or damage or will prevent or reduce the loss or damage..." (s 87(1) and (1A)). That is, the Court can make orders under s 87 only in so far as those orders will compensate (or will prevent or reduce) the loss or damage that is identified.

124 The test, however, under s 106 is not "what loss and damage has been caused by the conduct contravening the Act". The test under s 106 may be expressed as follows:

(1) If the contract or arrangement was an unfair contract in terms of s 106, should the contract or arrangement be avoided or varied?

(2) If it is decided that the unfair contract should be avoided or varied, should an order be made for the payment of money in connection with the unfair contract declared void or varied?

(3) If a money order is to be made, what order is just in the circumstances of the case?

...

129 We think that Mr Shaw was correct in submitting that if one were to follow Marks in proceedings under s 106 involving misrepresentation, the appropriate question to be considered in determining loss or damage would be "what is the position that the Respondent would have been in but for the alleged misrepresentation?" However, we reiterate that the power to make money orders under s 106(5) is not limited by analogy or otherwise with either the power to award compensation for loss or damage under ss 82 and 87 of the Trade Practices Act or with common law principles relating to the assessment of damages. Consequently, we do not accept the appellant's contention that in determining what might be appropriate compensation under s 106(5) in circumstances where unfairness may have been caused by misrepresentation, it is necessary to have regard to the test applied by McHugh, Hayne and Callinan JJ in Marks or any other decision under ss 82 and 87 of the Trade Practices Act.

130 We have, of course, acknowledged earlier in this judgment that whilst orders made pursuant to s 106(5) should not be limited by drawing some analogy with the law of contract, tort or equitable remedies, it is proper to have regard to common law and equity principles but recognising that, in particular cases, some of the principles will be inappropriate. This means that, for example, where a contract or arrangement has been found to be unfair, and the unfairness has been caused by fraudulent misrepresentation or negligent misstatement, in making any money orders under s 106(5) it is proper for the trial judge, in appropriate cases, to have regard to the common law principles relating to the assessment of damages. It may also be helpful to have regard to approaches taken to the assessment of damages in decisions under ss 82 and 87 of the Trade Practices Act, especially where the common law principles may have been a consideration. However, given the different statutory requirements of ss 82 and 87 of the Trade Practices Act as opposed to s 106(5) of the Industrial Relations Act, particular caution needs to be exercised. Ultimately, the relevant guiding principle for the Commission in Court Session under s 106(5) is not confined to a question of what loss or damage an aggrieved party has suffered but rather a wider test, namely, what is just in the circumstances of the case. That is not to say that the discretion of a trial judge under s 106(5) is at large. The jurisprudence developed by the extensive case law on the subject enables, and requires, limits on what orders may or should be made. The statements of principle in these reasons should also assist in the clarification of any doubts that may be said to exist.

...

158 Mr Kimber, on the other hand, submitted that:

Given the broad nature of the discretion under s 106(5), there could be little doubt His Honour could have considered the value of the options that he was proposing to award to be so significant that it would not be "just" to award any further sum by way of bonus or redundancy payment: see Westfield Limited v Helprin (1997) 82 IR 411 at 439.6. Indeed, it is impossible to rule out the idea that His Honour rejected the claim for twelve months notice or payment in lieu thereof on this basis. However, given the broad discretion bestowed on His Honour by s 106(5) it cannot be suggested that His Honour was required to desist from awarding bonus or redundancy payments because of the size of the award that His Honour was contemplating with respect to the options or vice versa. Nor could it be seriously contended that His Honour was somehow required to "set off" his proposed award with respect to any one or more head(s) of claim because of the award that His Honour was proposing for any other particular head of claim. In this regard see Baker v National Distribution Services Limited 50 IR 254 at 274.9-276 generally, where the issue was whether the superannuation payments made to the employee on termination served to "remove or modify" the unfairness that had been found in the redundancy arrangements allowed to the employee.

159 The approach contended for by Mr Kimber is, in our opinion, essentially correct. We would expect that in arriving at any tentative conclusions regarding money orders under s 106(5), prior to making any final determination, a trial judge would, metaphorically speaking, take a step back and consider the overall quantum of what he or she was proposing to order and whether or not it was just in the circumstances of the case. If the overall amount was considered to be excessive it would be appropriate for the trial judge to review his or her approach to each of the elements in respect of which money orders were proposed, eg, bonus, superannuation, payment in lieu of notice, redundancy, share options, etc, and to determine whether he or she may have fallen into error. This approach is consistent with the cautionary note struck by Barwick CJ in Stevenson v Barham at 192 and with the approach taken by the Full Bench (Cahill V-P, Hungerford and Schmidt JJ) in Westfield v Helprin where at 439 their Honours said:

A variation to a contract found to be harsh, unfair or unconscionable under s 275 is a discretionary matter, as is the making of any monetary order in connection with such a variation. In this case the question of whether that discretion should be exercised in relation to the question of notice arises for consideration in the context of all of the circumstances before us, which include the other orders which we have decided to make in relation to the giving of a warning before termination and the option scheme and the orders as to the payment of moneys which flow from those variations. It is also relevant that reasonably generous discretionary benefits flowed to Mr Helprin on his resignation from Westfield and withdrawal from the superannuation scheme.

The adoption of this approach is likely to lead to a limitation on some of the larger verdicts that have been awarded.

...

Principles to be applied under s 106(5)

161 In summarising our conclusions in relation to the principles proposed by the appellant in these proceedings, we consider that the correct principles to be applied in the making of money orders under s 106(5) of the Act are as follows:

1) Any order must be in connection with the making, variation or avoidance of the contract or arrangement that has been varied or avoided

2) Where appropriate, an order may be made restoring a party or parties to the situation that existed before the making of the contract or arrangement that has been varied or avoided.

3) Whether or not an order has been made providing for restitution, in appropriate cases the Commission in Court Session may make remedial provision for what has taken place or been done under the contract or arrangement that has been varied or avoided.

4) Any order shall be what the Commission considers just in the circumstances of the case. Whilst such orders should not be limited by drawing some analogy with contractual, tort or equitable remedies it is proper to have regard to the common law or equitable principles, but recognising that in particular cases those principles may be inappropriate. That is not to say that the discretion under s 106(5) is at large. As with any judicial discretion it must be exercised judicially having regard to the accepted jurisprudence which enables, and requires, limits on what orders may or should be made.

5) It follows that in making an appropriate monetary order under s 106(5) it is proper to have regard to the common law principles relating to mitigation but recognising that in particular cases it will be inappropriate to apply mitigation. Ordinarily, where an employee has been successful in avoiding his or her loss, or has failed to take reasonable steps to avoid loss in the period following dismissal, the Court, in determining what is just in the circumstances of the case, should give consideration to whether, and to what extent, any money amount in respect of notice of termination that is contemplated to be the subject of an order under s 106(5), should be reduced by monies earned, or imputedly earned, in the relevant post-termination period. We emphasise that the application of the principle of mitigation in cases brought under s 106 represents one aspect of the consideration of what orders are "just in the circumstances of the case".

6) Further, the differing purposes of a payment in lieu of notice and a payment for redundancy or severance are important matters to be taken into account when considering the application of the principle of mitigation to a sum which may otherwise be ordered under s 106(5) of the Act. The principle of mitigation is unlikely to be a central consideration when assessing the appropriateness or magnitude of any payment the Court may order for redundancy or severance. Unless these are special considerations, it will not ordinarily be appropriate to reduce any redundancy or severance payments otherwise to be made as a result of orders under s 106 of the Act because of the efforts or success of an employee in obtaining alternative employment.

7) In making orders under s 106(5) it may be helpful to disaggregate payments for notice and payments for redundancy and, in the reasons for judgment, to explain how the respective amounts were arrived at. This may assist in an appropriate case in avoiding the prospect of double counting that could arise out of the overlapping purposes of redundancy pay and payment in lieu of notice.

8) It is neither logical nor appropriate when assessing compensation under s 106(5) of the Industrial Relations Act to follow the approach adopted by other courts to the assessment of compensation under the Trade Practices Act. Nevertheless, it may be helpful to have regard to approaches taken to the assessment of damages in decisions under ss 82 and 87 of the Trade Practices Act, especially where the common law principles may have been a consideration. However, given the different statutory requirements of ss 82 and 87 of the Trade Practices Act as opposed to s 106(5) of the Industrial Relations Act, particular caution needs to be exercised. Ultimately, the relevant guiding principle for the Commission in Court Session under s 106(5) is not confined to a question of what loss or damage an aggrieved party has suffered but rather a wider test, namely, what is just in the circumstances of the case.

9) In assessing whether unfairness has occurred and in making money orders under s 106(5) it would be appropriate to have regard to the following principles regarding the relevance of general industrial standards. In doing so, however, the individual contract or arrangement concerned remains the primary consideration:

a) Whether or not a contract or arrangement is unfair within the meaning of ss 105 and 106 is a matter to be decided upon examination of the facts of each particular case; section 106 deals largely with private rights inter partes; the focus of attention is the contractual relationship between a particular employer and employee;

b) Subject to the primary focus being the particular circumstances of the individual contract or arrangement concerned, in assessing whether unfairness has occurred general standards or levels of what is considered to be fair, including general standards of redundancy pay applying to employees covered by industrial awards or legislation, will be factors to be considered;

c) Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair benefits;

d) The scale fixed in the Redundancy Awards Case was fixed on a "safety net" basis. In making money orders under s 106(5) the court may have regard to the Redundancy Awards Case scale but is not bound to apply it.

10) If the overall amount proposed to be ordered under s 106(5) was considered to be excessive, it would be consistent with an appropriately cautionary approach for the trial judge to review his or her approach to each of the elements in respect of which money orders were proposed, eg, bonus, superannuation, payment in lieu of notice, redundancy, share options, etc, and to determine whether he or she may have fallen into error. In correcting any error it would not be appropriate to "set off" a proposed money amount in respect of one head of claim against the money amount proposed to be ordered in respect of another head of claim where the heads of claim are entirely unrelated and serve different purposes.

335 The decision in Westfield Holdings encapsulated the developing jurisdiction regarding the making of money orders in the variety of circumstances that come before the Commission in unfair contract cases. In King v The Industrial Relations Commission of NSW (2005) 146 IR 23, the Court of Appeal was moved to make comment about the nature of the unfair contracts jurisdiction. Young (CJ in Eq) stated:

16 That may be the situation of a court of law that was hearing an application under the Trade Practices Act or a court of equity hearing a case to set aside a contract on the ground of misrepresentation. However, it must be remembered that the present application was neither of these. It was an application to a

statutory body, the NSW Industrial Relations Commission, under a particular statute which gives the Commission limited powers. The authorities tend to show that the Industrial Relations Commission has no jurisdiction to exercise the powers under the Trade Practices Act or indeed any Commonwealth Act. It is a body that has been created for particular purposes, including to exercise the

jurisdiction under s 106.

17 I have set out the text of s 106(1) and that does appear to give the Commission a discretion as to whether it will make any order, even if it finds that there is an unfair contract - note the word "may". Indeed, consistent decisions of the Commission, which as far as I know have not been attacked, such as Finch v Copperart Pty Ltd (No 2) (1995) 62 IR 162 and Westfield Holdings v Adams (2001) 114 IR 241, show that that is a way in which the Commission has consistently carried out its jurisdiction under that particular section.

336 In English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129, a Full Court made further observations consistent with the cases referred to above: at [30] the Full Court stated:

In dealing with these submissions, it is necessary to keep in mind the nature of the jurisdiction under s 106 exercised by the Court and to understand how her Honour approached this application. It seems abundantly clear from the terms of her Honour's judgment that she was adopting a global approach to what actually happened to the appellant in assessing whether the contract or any associated arrangement was unfair in its terms or operation. Her Honour accurately recorded the evidence called by both sides, including the evidence critical to the appellant's case where the appellant says he was advised that employment was not open to him with Elders but only a franchise. Her Honour spoke of looking at the reality of the matter and thereby disclosed an intention not to be diverted by technicalities but rather looking at all the circumstances for their general effect in assessing whether or not there was unfairness. Such an approach demonstrates no error: for nearly 40 years the Court and its predecessors have been guided by the words of Sheldon J in Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 that the provision provides, in appropriate cases, the power to depart from the classic principles of contract law and to deal with "arrangements" between parties whether or not they have formally entered into a contractual relationship. Nor is the Court involved in a rigid exercise of awarding damages calculated on the strict application of common law principles although the approaches of the law in a variety of fields often provides guidance for the just disposition of an application and the making of a money order that is just in the circumstances of the case, once unfairness has been disclosed in the arrangements between the parties: see, for example, Westfield Holdings v Adams (2001) 114 IR 241 at 282-284.

337 The scope of money orders was again considered in Caterpillar of Australia Ltd v Gough and Gilmour Holdings Ltd (2008) 170 IR 185. The Full Court, in considering what kind of monetary orders were appropriate stated:

75 The trial judge noted that the respondents sought in their Sixth Further Amended Summons compensation for a range of matters, including loss of opportunity by reason of the first respondent's alleged non-compliance with the Last Resort Policy and the Fourth Assurance; damages in respect of alleged losses flowing from post-Gough & Gilmour (No 15) events (which have not been particularised in part B of the Sixth Further Amended Summons); and an amount for compensation for losses arising out of the management distraction and disruption caused by these proceedings.

76 The trial judge addressed the appellants' contention that s 106(5) only authorised an order for the payment of money in the nature of restitution. It had been submitted that none of the above matters were restitutionary in nature and that s 106(5) did not speak in terms of damages or compensation, let alone damages in the nature of expectation loss.

77 The trial judge cited Westfield Holdings v Adams (2001) 114 IR 241 (Westfield Holdings) at [102] where the Full Bench had specifically addressed the basis upon which monetary relief might be granted under s 106(5):

102 We do not think that Brown v Rezitis mandates an approach to the assessment of compensation under s 106(5) on the basis that restitution in the sense referred to, is to be the fundamental guiding principle. Restitution so understood may be appropriate in particular cases, but the fundamental guiding principle is that which is stated in the statute itself, namely, what is just in the circumstances of the case.

78 The trial judge also noted (at [88]) that the decision in Westfield Ltd v Helprin (1998) 82 IR 411 (Westfield) had seen compensation awarded under s 106(5) for lost opportunity:

88 It is not unusual in the cases to find compensation having been awarded under s 106(5) for the loss of opportunity. In Westfield Ltd v Helprin (1998) 82 IR 411, for example, the Full Bench agreed with Marks J's conclusion at first instance that Mr Helprin's contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Thus, the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent's failure to provide the opportunity to the applicant to improve his performance.

...

229 The second issue relates to the possible form the monetary orders may take. The primary contention of the appellants in this respect was that monetary orders needed to be restitutionary in nature. We reject this aspect of the appellants' challenge.

230 The trial judge was correct to find that the nature of monetary orders that may be made under s 106(5) are not so limited. In the first instance judgment the trial judge had (correctly in our view) relied on the decision in Westfield Holdings, where the Full Bench specifically addressed the basis upon which monetary relief might be granted under s 106(5) and in doing so had regard to Brown. After addressing at some length the decision of Barwick CJ the Full Bench stated at [98] to [102]:

98 So, the formulation by Barwick CJ as to the nature of the power to make money orders under s 88F(2) of the 1940 Act may be said to be, strictly speaking, obiter. However, the main point we wish to make about Brown v Rezitis is that in arriving at his formulation, the Chief Justice did so against the background of the facts of the case. He was required to focus on the question of restitution because of the order of Richards J that the appellants repay the $2,000 paid by the respondents for the contract, thus restoring 'the aggrieved party to a situation which existed before the making of the contractual arrangement'. Understandably then, the concept of restitution figured prominently in the Chief Justice's judgment. Given the other orders by Richards J requiring the appellants to pay the respondents for work done and expenses incurred, Barwick CJ was also required to address the question of making remedial provision for what had taken place or been done under the contract.

99 In these circumstances, given the particular facts of the case with which Barwick CJ was dealing, it could not be said that the formulation by the Chief Justice regarding the nature of the power to make money orders under s 106 is to be taken as the exclusive, or even the primary, test to be applied universally to all of the diverse circumstances that arise under s 106. Restitution has been said to be concerned with restoring or giving back something to its proper owner or making reparation for loss or injury previously inflicted. As the Full Industrial Court (Fisher CJ, Bauer and Hill JJ) observed in State of New South Wales v Health and Research Employees Association of New South Wales (unreported, 31 March 1993) (at 82): ... 'restitution' seems to involve a reversion to a position as if the contract had never been entered into."

100 In Harris v Dealing Information Systems Pty Ltd (unreported, Schmidt J, 11 December 1997) in considering the effect of Brown v Rezitis, her Honour rejected a submission that 'all monetary orders under s 106(5) are to be understood as restitutionary, rather than compensatory in nature'. Having regard to our analysis of Brown v Rezitis, we respectfully agree with her Honour.

101 Restitution may be an appropriate approach where a franchisee has paid money for a franchise and the contract has been found to be unfair. But restitution, as a basis for compensation, is rarely relevant to contracts of employment found to have operated unfairly.

102 We do not think that Brown v Rezitis mandates an approach to the assessment of compensation under s 106(5) on the basis that restitution in the sense referred to, is to be the fundamental guiding principle. Restitution so understood may be appropriate in particular cases, but the fundamental guiding principle is that which is stated in the statute itself, namely, what is just in the circumstances of the case.

231 It can be seen that the decisions in Westfield Holdings and David Jones are authorities which support the proposition that the scope for monetary orders under s 106(5) is not limited to restitutionary orders. Those decisions indicate that other types of monetary orders have been awarded by the court and are examples of where monetary orders have been in the form of compensation for lost opportunity. The trial judge sets out a consideration of this aspect of those decisions in the first instance judgment, as follows:

88 It is not unusual in the cases to find compensation having been awarded under s 106(5) for the loss of opportunity. In Westfield Ltd v Helprin (1998) 82 IR 411, for example, the Full Bench agreed with Marks J's conclusion at first instance that Mr Helprin's contract was unfair in that it did not require a counselling and warning process, including an opportunity for Mr Helprin to improve his performance, prior to the exercise of the right of termination. Both Marks J and the Full Bench considered it appropriate to vary the contract to incorporate a requirement that the respondent provide the applicant with a period in which to improve his performance. Thus, the variation to remedy the unfairness in Mr Helprin's case enabled the Court to make a consequential order awarding monetary compensation to reflect the respondent's failure to provide the opportunity to the applicant to improve his performance. Another example is David Jones Ltd v Cukeric (1997) 78 IR 430 where, notwithstanding Mr Cukeric's employment had been terminated, the Full Bench varied the contract ab initio to provide that the employment was not to be terminated as a result of any restructuring without fair consideration first being given to Mr Cukeric's future position in any new structure. The Full Bench also concluded at 462 that:

[I]t would be just in the circumstances to make a monetary order in favour of Mr Cukeric in connection with the arrangement as varied by us. The Company is to pay to Mr Cukeric an amount of money (additional to that already paid) to reflect entitlements in respect of a further period of 6 months' notice of termination.

We see no error in his Honour's approach in that respect. On the basis of Westfield Holdings and David Jones it is open for the Court to determine that the respondents' claims for monetary orders in nature of compensation in D2, D3, D4 and D5 are not inconsistent with s 106(5).

338 In Stone Microsystems (Aust) Pty Ltd & Stone Group Asia Pacific Investment Ltd v Kwong & Datamax Pty Ltd (1997) 42 NSWLR 160, the Full Bench at 200 characterised the order made at first instance as compensation for loss in relation to the respondent Datamax. The Full Bench referred to the decision of the Full Court in Barclays Australia Investment Services Ltd v Nordby (1996) 99 IR 258 at 279 that:

... The task of assessing a 'just' monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage.

See also Masri v Santoso (2004) 134 IR 184 at [177] et seq.

339 In Nordby, the Full Court was required to consider the method or formula adopted at first instance for the calculation of an amount referrable to compensation. In relation to this task, the Full Bench stated:

The amount of money which was "just" to be awarded in the circumstances was an issue which understandably must have caused considerable difficulty for her Honour, as it has for us. There was no apparent compromise position adopted by the parties before her Honour; the matter was therefore polarised with the respondent contending for a full payment of commission on the literal terms of the February 1990 memorandum, that is until the end of December 1992, with the appellants contending that the contract providing for two weeks notice was not unfair and/or that there was no entitlement to any commission.

The parties, having chosen to run their respective cases on the bases described, left her Honour with the unenviable task of determining an appropriate monetary order under s 275(3) unassisted by detailed submissions of the parties.

After May 1991 and the Mirvac purchase, there were three persons employed in the promotion of the appellants' products whereas prior thereto there had been only one, the respondent. That change involved, from the commercial point of view of the appellants, a revisiting and reappraisal of the respondent's prior commission arrangement. But, whatever the problems which that exercise may have presented to the appellants, the respondent had nevertheless been assured, by the appellants and after the Mirvac purchase was made known to him, that he would be "no worse off" under the new "pooling" arrangement than he had been under his prior one. ...

Once it was found that the respondent should in fairness have been entitled to payment in respect of commission, first for the period of notice found reasonable, and secondly for the last quarter of December 1991 and the month of January 1992, in the context that he had been assured he would be "no worse off" under the new arrangement, it then became a matter of broad judgment as to how the respondent's loss was to be measured in the context of the changed circumstances. ...

Her Honour applied a divisor of three to 50 per cent of the net ISC referable to commissions largely on the basis of the Exhibit K9 arrangement - having regard to the ''no worse off'' assurance but nevertheless taking into account the increase in the marketing team. While there may be fine issues which arise in relation to the precision of the formula adopted by her Honour to calculate the amount considered ''just in the circumstances'', it nevertheless represents a fair and reasonable basis of assessment. The task of assessing a ''just'' monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage. The discretion was, in our view, both properly and correctly exercised in this case.

340 In this consideration of relevant authorities, it should be mentioned that in this case the Court will be guided by the statement of the Full Court in Eagle Boys Dial-a-Pizza Aust Pty Ltd v Clifford (2003) 125 IR 35 at 42, that it must be kept firmly in mind that orders made, including variations to any contract, should not travel beyond what is required to ensure a just result between the parties having regard to the circumstances of the case.

341 A consideration of the authorities regarding the scope and operation of s 106 and its predecessors would not be complete without reference to two seminal judgments that continue to have relevance and resonance for the exercise of this unique jurisdiction.

In the first case brought under s 88F, Agius v Arrow Freightways Pty Ltd [1965] AR(NSW) 77, Beattie J (as he then was) emphasised that the Commission's approach to unfairness was not legalistic, but required the application of common sense. At p 89, his Honour spoke of each particular case being decided by "the application of the tribunal's common sense and sense of justice."

In Davies v General Transport Development Pty Ltd [1967] AR(NSW) 371, Sheldon J famously spoke of the fairness of a contract as being determined according to "the common sense approach characteristic of the ordinary juryman" - the enquiry was "a plain matter of morals, not law" (at 374).

This approach continues to be followed, such that Marks J in King v Cake it Away Pty Ltd [2002] NSWIRComm 140 at [84] was moved to state

In determining whether there is an unfair contract for the purpose of proceedings brought under s 106 and especially taking into account subs (2), the Court is required to exercise a value judgment reflecting contemporary community values derived from the commonsense approach characteristic of the ordinary, reasonable, hypothetical "standard" member of the community. The value judgment must obviously take into account the totality of the circumstances of the relationship between the parties and the totality of the interests of each of the parties.

342 These authorities emphasise the width of the power to make a money order in connection with a contract that has been declared unfair and where the Court has varied or voided the contract or arrangement. The parties in the present proceedings have spent considerable financial resources on expert evidence that focused upon an actuarial assessment of whether or not the employees suffered a loss in their superannuation arrangements when joining PKCT. The expert reports were detailed and at many points, developed into a spirited debate of often arcane valuing and actuarial principles. Both experts were closely cross-examined as to their reports and the views they had formed. In addresses, each party made complaints about the lack of objectivity of the other side's expert, but the severest criticism emanated from the respondent. While both experts, at times, expressed a view that suggested they were advocates for the party who had engaged them, considered overall, the Court is satisfied that their strongly espoused views were genuinely held. It is somewhat surprising then to find the experts so far apart, with Mr Rawsthorne able to calculate individual losses of tens of thousands of dollars and Mr Murphy unable to find any loss whatsoever.

343 What is to be made of these divergent expert views in these proceedings? It should, firstly, be noted that the initial reports for each expert broadly set out their approach, although in subsequent reports there was some movement and even agreement, on issues where each expert recognised that the approach of the other fell into an acceptable actuarial range. Mr Murphy's approach, however, appeared to be relatively inflexible, especially in applying actuarial principles while, nevertheless, accepting a number of approaches put forward by Mr Rawsthorne as falling within an acceptable range. In this respect, Mr Murphy set himself against any approach that might compromise a strict accumulation fund - any suggestion of including provisions to protect employees against losses compared with SASS was rejected as turning the PKCT fund into a defined benefits fund.

344 At one point in his analysis, Mr Murphy spoke of such moves as defeating the purpose of converting the fund to an accumulation scheme. There is no evidence, however, that the consortium had as a primary objective, the conversion of the employees' superannuation scheme to an accumulation fund with the benefits that flow to employers from such a conversion. Indeed, the evidence was that PKCT were content to stay in SASS with its defined benefit obligations borne by the employer. The only reason a new fund became necessary was the Government's refusal to allow PKCT employees to remain in SASS. While it is true that PKCT alone chose an accumulation scheme as the appropriate superannuation vehicle, neither Mr Coleman nor any other hands-on managers made that decision. Why it was unilaterally determined and the reasons for selecting an accumulation scheme were not disclosed in the evidence. Mr Beale offered an explanation based on things he had been told by Mr Coleman and Mr Dixon, but their evidence was that they were not informed of the basis of the consortium's choice of an accumulation fund. There was no explanation of how PKCT's representation that the new scheme would provide equivalent benefits to SASS and that no one would be worse off, could be met by operating an accumulation scheme. Clearly, such representations could have been met by creating a new defined benefit fund or, by including a safety net within the accumulation scheme to ensure that equivalence of benefits were maintained. It can be accepted that both these options would introduce a level of complexity in the operation of the new fund, but that difficulty arose because of the important representation of ensuring equivalence of SASS benefits made by PKCT to its employees.

345 Mr Murphy did acknowledge that the easiest way to match SASS and provide equivalence of benefits in the new PKCT fund was to increase the employer's rate of contribution. Mercer did not explicitly embrace that approach, in a global sense, in its design, nor did Mercer consider such an approach in setting the rate of employer contributions. There is no practical way that this can now be achieved as the PKCT fund has been closed.

346 Mr Murphy was critical of Mr Rawsthorne's approach in concentrating upon two areas of asserted loss, namely, the loss of the pension option and valuing the passing of the investment risk from the employer to the employee. This criticism was enthusiastically taken up in cross-examination of Mr Rawsthorne and ultimately, the submission was made that Mr Rawsthorne's calculations could not be accepted and the basis of his calculations was not properly exposed in his reports. This evidence has been dealt with earlier in this judgment.

347 It is convenient at this point to also state, in broad terms, the Court's assessment of the competing expert evidence. As already mentioned and having regard to the nature of the jurisdiction being exercised, there were aspects of both approaches that the Court found inappropriate. Overall, the Court would prefer the evidence of Mr Rawsthorne as his assessment was framed in the context, not of a strict actuarial approach, but against the necessary background that the PKCT scheme had to provide equivalent benefits to those available under SASS. In addition, although both experts were experienced in superannuation matters, Mr Rawsthorne had a closer involvement over a significant period of time with public sector superannuation schemes. Mr Murphy's approach, as mentioned earlier, proceeded upon the application of actuarial principles he held to be appropriate, although there was some disagreement about actuarial approaches as well as agreement that some of the differences between the experts fell within the range of acceptable actuarial differences of approach. The most significant aspect of Mr Murphy's assessment, rendering it significantly less useful in the exercise of this unfair contracts jurisdiction, was his interpretation of the consortium's guiding objective that the new scheme would provide equivalent benefits to those available under SASS. Initially, Mr Murphy regarded that objective as being impossible to achieve because of the fundamental difference between the two schemes, with SASS being a defined benefit scheme and the PKCT fund being an accumulation scheme. He later modified that view to the extent that equivalence might be achieved by a very high rate of employer contribution that resulted in a number of employees being much better off than under SASS. Mr Murphy therefore approached his task, for the great majority of the exchanges between himself and Mr Rawsthorne, by analysing the schemes against a broader objective of ensuring that, in general, the group would get much the same benefit as under SASS but inevitably, there would be winners and losers. In the Court's view that approach was not justified, having regard to the findings it has made in relation to the nature of the representation and the particular circumstances in which that representation was made.

348 Having regard to the considerable detail in the reports of each of the experts and their vigorous debate as to the inadequate or inappropriate approach of the other, the Court is left in the situation of having little confidence in adopting the entire propositions or final conclusions put forward by either of the experts. While the experts' reports have focused on numerous elements in the SASS scheme and how they have or have not been reflected in the PKCT scheme, ultimately, the Court is unable to meet the requirements of s 106(5) by primarily applying one of the actuarial scenarios presented by the experts in making a money order that is just in the circumstances of the case. While their debate and the issues they have raised will be helpful in assisting the Court in its task under s 106(5), ultimately, the Court must make its own determination on the issues of fairness and then make its own assessment on how to compensate for that unfairness.

349 The Court is not satisfied that a strict actuarial approach would satisfy the statutory requirements in this particular case. From the case law canvassed in the paragraphs above, it can be seen that over a number of decades in exercising the unfair contracts jurisdiction, the Court has repeatedly avoided urgings that, in exercising its power to make a money order, it should follow common law principles in assessing damages or that it should be limited to a pure restitution approach. The present case is another example of where it would be inappropriate to adopt those approaches or a strict actuarial approach. This is a case where broader considerations lead to a compensation approach. It is worthy of note that, during the debate with Mr Murphy, Mr Rawsthorne came to the view that the best remedy to meet deficiencies in the PKCT fund was to provide a once and for all amount of compensation rather than attempting to top- up benefits that were lower than SASS. This top-up option was appropriately described as being "prohibitatively difficult and expensive to apply in practice."

350 There are, nevertheless, aspects of Mr Rawsthorne's approach that the Court would accept as appropriate in assessing the money order that should be made. In the Court's view, although criticised by Mr Murphy, Mr Rawsthorne was correct to approach the task by having regard to the representation made by PKCT that the new scheme would be of equivalent value to benefits available to employees under SASS. Although both experts, at different times, accepted that the complexity of the task was such that an overall or averaging approach was appropriate, Mr Rawsthorne was correct in not ignoring relatively small losses associated with certain benefits that had not been replicated in the PKCT fund. In applying the wider concepts of fairness, it was unfair that no explicit or any other consideration was given to the loss of the pension option or, to the passing of the investment risk from the employer to the employee. The importance of these two issues is that the evidence supports Mr Rawsthorne's conclusion that these matters were not taken into account by Mercer in designing the new fund. It is also significant that Mr Murphy accepted that these two matters were not explicitly taken into account on any consideration of the working papers made available by Mercer. The evidence supports Mr Rawsthorne's opinion that no consideration was given to these two elements in setting the design of the new superannuation scheme.

351 The loss of the pension option could not be set aside, in fairness, by the simple consideration of its take-up rate early in the operation of the SASS scheme. The availability and the take-up rate of the pension option was unlikely to be of immediate concern to young employees, but was a benefit that came under closer examination as employees grew older and closer to retirement. It could not be ignored in the design of the new scheme, regardless of the difficulty of valuing it. Of course, one simple means of addressing the issue, nominated by Mr Murphy, was to make the best estimate of its value and increase the employer's contribution rate to cover this aspect so as to ensure that there was an equivalence of benefit. Indeed, in 1990, the PKCT scheme could not provide the equivalent value of benefits under SASS unless the issue of the pension option was addressed. It could not, in fairness, be ignored.

352 In relation to the transfer of the investment risk from the employer to the employees, both Mr Murphy and the respondent engaged in semantics in suggesting that there was no such transfer of risk because this was not a case where PKCT was closing down a defined benefit fund and was converting it to an accumulation style fund. That actuarial approach fits uneasily in a contest about unfairness in circumstances where the respondent had represented that the new fund would provide benefits of equivalent value to those available to employees under SASS.

353 Again, the valuing of this detriment unilaterally imposed upon the employees raised complex issues, but the complexity of those issues could not, properly, result in this aspect being ignored in designing the new fund. PKCT had a choice: it could have adopted the most efficient scheme it could devise to provide defined benefits or, adopt an accumulation scheme but either way the benefits had to be equivalent to those under SASS. Once it chose an accumulation style fund, there were obvious benefits to the respondent as employer (as detailed in both expert reports) and there was clearly a possibility of losses to employees. Indeed, many of the employee witnesses were cross-examined on the basis that the material provided to them by the Joint Working Party concerning the new fund clearly showed that there could be winners and losers and depending on the state of the markets when a person retired, they may be better off, much better off, worse off or much worse off. Those possibilities, so strongly relied upon by the respondent in cross-examination, was a two-edged sword: it demonstrated that no attempt had been effectively made to replicate the certainty of the benefit under SASS , or factor in necessary elements of a new scheme that would at least adequately address that risk.

354 In this context, it is pertinent that Mr Murphy identified increased employer contributions as the easiest way of addressing these concerns. In answer to questions raised by the Court, Mr Murphy rejected the idea that there should have been some provision in the new scheme allowing a calculation to be made of any losses compared to SASS and compensating for those losses, if they eventuated at retirement. That approach was rejected, not because it was said to be incapable of implementation but because Mr Murphy supported a strict delineation between accumulation funds and defined benefit funds and was of the view that any safety net proposition would simply turn the accumulation fund back into a defined benefit fund.

355 It is to be remembered, however, that what was of primary importance to the consortium was the creation of a superannuation fund, acceptable to employees that would ensure benefits equivalent to SASS so that it could take up the operation of the terminal with experienced employees and free from continual industrial unrest. The evidence before the Court demonstrates that the consortium and the PKCT management appeared to have an open mind as to the terms of the new superannuation scheme and were not wedded to traditional approaches or opposed to novel provisions, so long as the scheme provided equivalent benefits and was relatively easy to administer. Once the position was reached where the new scheme did not address the possibility of the risk of loss by the employees, then it was fundamentally flawed as a scheme that could meet the description of ensuring benefits equivalent to those available under SASS.

356 There was also considerable debate concerning the effect of Mr Rawsthorne's calculations that, under the provisions of an industrial agreement, an annualised rate was introduced at the terminal. It is not necessary to plumb the depths of this debate in light of the course that the Court has determined to follow, but it is not entirely clear that Mr Rawsthorne or those who gave him instructions on this matter were incorrect. This issue focused upon allowances, especially for shift workers, being recognised under SASS and how SASS might treat the annualised rate introduced by PKCT. One aspect of the debate centered upon whether, under SASS, the annual rate would be recognised in its totality and not disaggregated as occurred under the PKCT fund.

357 Essentially, this was described as an argument about statutory construction. No evidence was called from public sector superannuation administrators as to how similar provisions operated in relation to annualised salaries which took into account incidents of employment, for example: overtime, shift allowance and tool allowance. While it is unnecessary to determine this matter, it should be noted that there appears to be a respectable argument that under SASS, an annualised rate that did not specify within it what was paid by way of a tool allowance, overtime or shift work, would be the rate by reference to which superannuation would be calculated. Such an "all incidents of employment" type provision has a long industrial history and often represents an amount of compensation for being available to perform all work without requiring the employer to engage in costly timekeeping arrangements and to value each element as and if it arose. Those arrangements were often entered into, regardless of the likelihood of all employees performing regular shift work, overtime or, for example, having recourse to a tool allowance. The all incident rate frequently represented an industrial compromise that suited both parties, with the employer given some flexibility in work arrangements and avoiding expensive timekeeping arrangements. The employees received an increase in wages to cover the eventuality that such work could be, at any time, called upon to be performed without further pay. Having regard to these matters, the Court prefers the approach adopted by Mr Rawsthorne but that element will be treated with caution in determining a "just" amount of compensation.

358 It has previously been noted that both experts adopted, for the most part, a generalised or averaging approach in order to determine whether or not there had been losses suffered by employees after enrolling in the PKCT superannuation scheme. In his last report, Mr Murphy made a calculation for individuals but did so based on a number of assumptions and therefore, did not purport to show the actual position for employees. It seems that a calculation of an actual loss by each employee by reference to what they may have obtained under SASS and what they did obtain under the PCKT scheme was so complex and/or time consuming, neither side undertook that task. It may well have been not only onerous, but one that involved costs that could not otherwise be justified. There was also the difficulty of many employees not yet retired with their final benefits unknown. For the most part, the experts adopted a generalised approach that, at best, represented a professional estimate. It would be wrong, therefore, to proceed on the basis that, accepting one of the approaches proffered by the experts would lead the Court to a comfortable satisfaction that its order represents a just result, or a sum that was just in all the circumstances.

359 Another issue that divided the experts concerned the treatment of "improvements" in the PKCT fund after 1990. As earlier mentioned, Mr Rawsthorne did not take into account these improvements because he was unaware of their origin and left unexplained, they may well have arisen by way of wage offsets. Mr Murphy was of the view that, essentially, these improvements had the effect of improving the benefits available under the fund and needed to be fully taken into account.

360 Submissions for the applicant emphasised the importance of the scheme introduced in 1990 as providing equivalence of benefits available under SASS. In this context, it was noted that the representation in 1990 did not make any mention of employees being responsible for financing or sharing the costs of making the PKCT scheme equivalent to SASS. In particular, they were not told that to achieve equivalence of benefits, in the future, they would be required to either give up wages or forego wage increases that might otherwise be granted.

361 The applicant's submissions focused on what appeared to be the three main areas claimed as necessary offsets by the respondent, resulting from improvements in the PKCT scheme. The submissions noted that after a year or two, complaints surfaced about benefit equivalence not being obtained under the scheme and in particular, the evidence of Mr Giddings in that regard. This perceived problem led to the first change whereby the respondent brought forward the capacity of employees to make a 2 per cent additional contribution for 6 years after age 52 and that became generally available. Where employees took up this benefit, their 2 per cent contribution was matched by an additional 3.5 per cent contribution by the employer. The applicant's submissions noted that employees were always able to make additional contributions but here, the attractiveness of the proposal was the additional 3.5 per cent contribution by the employer. It was pointed out to employees that it was not mandatory to flex-up in this way but if they did, they had to pay an additional 2 per cent themselves. This was described as a change of "marginal significance." Employees who did not flex-up in this way for six years did not obtain any benefit. It was then submitted that at no stage were employees ever informed that paying an additional 2 per cent for 6 years into the superannuation fund was required in order to obtain equivalent benefits with SASS.

362 It was next pointed out that in 1998 and 2000, wage increases were foregone at the level of 1.75 per cent and were taken as enhanced superannuation contributions. Mr Giddings' evidence in this regard was relied upon. The point was made again in submissions that employees were not told in 1990 that they would have to forego wage increases in order to obtain equivalence of SASS benefits. The two increases, on the evidence, occurred in the course of enterprise agreement and wage negotiations., It was submitted that the context of the negotiations supported Mr Giddings' evidence.

363 The third matter was the introduction of salary sacrificing. The applicant submitted that this was a factor that should not be open to the respondent as an offset: the amounts of salary sacrifice were, at all times, the employees' money and there was no matching of any amount by additional employer contributions. The argument was repeated that, in 1990, employees were not informed that if they were to achieve equivalences of benefits, they would have to finance their own investments by way of salary sacrifice.

364 While there is force in these submissions, it appears that at least some credit needs to be given for the 3.5 per cent additional contribution made by the employer at an earlier time than previously available, even though the employees were required to increase their own contributions by 2 per cent to obtain this further benefit. It also needs to be understood that not all employees took up this option. Because it was an existing benefit brought forward for people at a younger age and bearing in mind that employees had to undertaken to contribute 2 per cent for six years, it is difficult to treat the entire 3.5 per cent as an appropriate offset: indeed, Mr Rawsthorne did partially account for this element. Bearing in mind the approach the Court ultimately takes to calculating the extent of any shortcomings in equivalence in the PKCT scheme, it is not necessary to precisely quantify the level of discount of the 3.5 per cent that would be appropriate, but it is sufficient to say that it should, nevertheless, be taken into account. Importantly, the Court's approach to these matters has a real impact on the approach adopted by Mr Murphy and the results he achieved.

365 Further mention needs to be made of wages said to be foregone by employees to improve their superannuation. Although Mr Beale was of the view that wage increases taken as superannuation benefits were only motivated by taxation considerations, the evidence of Mr Geddings in this respect is preferred. In particular, Mr Beale was not involved in negotiations for two increases granted in 1998 and 1999, nor was he involved in the salary sacrifice negotiations. Mr Giddings was firm in his evidence that at least two wage increases were foregone so that improvements could be made in the PKCT superannuation fund. Although there were tax benefits, the wages were foregone because of the need to address inadequacies in the superannuation scheme. In the light of this evidence, the full force of Mr Murphy's contention that all improvements in the fund had to be taken into account in valuing the PKCT scheme against SASS, loses a good deal of its impact.

366 In calculating whether or not employees had incurred a loss as at 2006 and 2012, Mr Murphy relied on a number of assumptions and in essence, made two calculations, including as a benefit under PKCT, the lump sum payments made out of the SASS fund and then a separate calculation that did not include that redundancy payout. Part of the rationale for this approach appeared to be that the lump sum benefit only became available because of the sale of the coal terminal and the respondent should be able to rely on this payment in assessing the equivalence of the two schemes..

367 There is considerable force in the submissions for the applicant that those lump sum retrenchment payments have nothing to do with ensuring the equivalence of the PKCT scheme with SASS benefits. Mr Rawsthorne was correct to identify the usual industrial principle that retrenchment payments are made to address a number of issues, including the loss of security of employment (here, importantly, public sector employment) and the uncertainty of new employment. As a matter of fairness, the inclusion of those lump sum payments in the employers' calculations as PKCT benefits is also unjustified, having regard to the scope of the representation made by the respondent that employees would have equivalent benefits to those available under SASS and they would be no worse off under the PKCT scheme. It was never indicated to the employees at any time that the representation depended upon including the lump sum benefit paid out under SASS, especially in circumstances were it was never a requirement of the PKCT fund that those lump sum payments made by another entity had to be rolled over into the PKCT fund or, that such a rollover was required to ensure equivalence of benefits. The Court, as a matter of fairness when comparing the two schemes, is unable to offset in favour of the respondent, the lump sum payments made under SASS by way of retrenchment payments.

368 In dealing with Mr Rawsthorne's approach to redundancy, it is necessary to briefly consider some long standing authorities. In the first Termination, Change and Redundancy Case (1984) 8 IR 34 at p 71, the then Australian Conciliation and Arbitration Commission acknowledged that material examined by the Commission indicated many different heads of loss or damage had been considered as relevant in matters involving the assessment of redundancy. Some of those matters included: the degree of hardship likely to be suffered by way of loss of accumulated benefits of service, lost opportunity of other and more secure employment and the cost of movement, financial hardship, fear of such hardship caused by interruption to employment, disruption to a worker's routine, society and social contact and the fact that legitimate expectations came to an abrupt end through no fault of their own. At p 73, the Commission stated its preference for the view that severance pay was justifiable as compensation for non-transferable credits and the inconvenience and hardship imposed on employees. That assessment would be made by reference to standards adopted over the years by the Commission.

369 At p 57 of the TCR case, the ACTU submitted that there were common hardships that employees suffer when they were terminated on the grounds of redundancy, including the loss of security of regular and continuous employment, the possible loss of earnings and accumulated benefits associated with employment such as seniority, promotion prospects and other benefits, especially the loss for long serving employees. Job security was also mentioned. At p 70, the cases surveyed by the Full Bench referred to a number of losses suffered and where the compensation addressed the loss suffered as a result of dismissal not due to the fault of the worker, the need to recognise past services, income, maintenance during any period of unemployment following the loss of a job or compensation for employees for leave entitlements which would have accrued if not for the dismissal. In this regard, the Full Bench noted that retrenchment benefits should be paid whether or not the termination was followed by a period of unemployment. It is also to be noted that the TCR case made a provision excluding employees who were transferred under a transmission of business arrangement. There has never been any suggestion here that there was such a transmission of business from the MSB to PKCT. Moreover, the Full Bench discussion is supportive of Mr Rawsthorne's treatment of the redundancy payments made under SASS provisions.

370 Mr Murphy accepted that under SASS, the ability to catch-up points and thereby regulate contributions was "of some value." However, in his assessment, it was of a relatively low value and in an exercise of this nature, he would not have expected Mercer to take it into account: it would be appropriate to look at "valuable benefits" and to value them in the comparative exercise but here, there were very many little or small benefits found in various places and special deals that would not be attempted to be valued. This was consistent with Mr Murphy's approach that the comparisons for working out equivalence had to be made on a broad basis with the aim of generally achieving equivalence for the group over time, but was not an exercise whereby every element of the SASS package would be valued and reflected in some way in the PKCT scheme, nor was it appropriate to attempt to establish that individuals would, over the years, not be worse off or have equivalent benefits for those available under SASS.

371 Mr Rawsthorne's view was that the benefits that could be identified should be valued because of the instructions he had received that the PKCT scheme was to provide equivalent benefits to those available under SASS and that the employees would be no worse off. This was a very significant difference between the experts and the way they approached their calculations. In this important difference between the experts, the approach of Mr Rawsthorne is to be preferred, particularly in relation to the nature of the exercise to calculate the equivalent benefits consistently with the representations made to the employees by PKCT. It might be that in another context an available actuarial approach may be unexceptional, but in the context of a finding of unfairness in relation to the representations made by the PKCT consortium, the potential for under-valuing the consequence for employees is of such significance that Mr Murphy's approach should not be adopted. It is to be noted that in cross-examination, Mr Murphy accepted that in the nature of the exercise being undertaken by Mercer, they should have priced all the benefits in the SASS fund - although he disagreed that investment risk was a benefit under SASS.

372 In relation to transfer of investment loss, it is necessary to consider what needed to be added to the PKCT fund from its date of operation to ensure equivalence of benefits.

This approach flows directly from the respondent's representation that the new fund would provide benefits of equivalent value to SASS and that employees would be no worse off. As earlier pointed out, this was not a global representation, meaning that, nevertheless, there could be winners and losers. An element, therefore, had to be included at the outset of the new scheme to ensure that there would be no losers, but that task was not attempted.

373 This approach was criticised by Mr Murphy, in part, because it could lead to windfall gains in the future whereby some employees might obtain even higher benefits because of high interest rates in the market simply to ensure that other members did not lose when they retired in a period of slow economic returns. In considering fairness in the context of s 106, this approach cannot be accepted. The representation was not that there would be equal benefits, but that there would be equivalent benefits and an employee would not be worse off. This meant that, regardless of the complexity of the task, the respondent and Mercer had to address methods that would avoid creating losers in the operation of the new fund. Again, the complexity of the task does not permit the Court to calculate a precise figure to address this element of unfairness, but it does result in this element being included in the overall assessment of compensation that is just in the circumstances of the case.

374 Mr Rawsthorne, from the outset, had identified a significant benefit under the PKCT fund for employees who commenced in their 20s and who stayed employed until retirement. They would be entitled to uncapped pension benefits and would not be restricted to points contributed for until age 60 in SASS.

This benefit was taken into account by Mr Rawsthorne, although he did not regard it as a significant benefit in the overall scheme having regard to the need to commence work at a very young age and continue until age 60 or over. The evidence shows that there was a wide range of ages in the workforce when comparison documents were being prepared. There was no precise analysis as to whether or not there was a significant component of the workforce who had commenced in their 20s. The applicant in its written submissions drew attention to the fact that the benefit would require employees to work more years than they would in SASS. In any event, Mr Rawsthorne took this benefit into account, yet still found two important areas where no equivalent benefit was provided in SASS. In the exercise being conducted by the Court, all these factors will be taken into account.

375 There are other matters that need to be considered in assessing any loss in achieving equivalent SASS benefits.

Firstly, the employees had lost the certainty and security of a defined benefit fund. Secondly, under the PKCT fund, the administrative costs of operating the fund were to be paid out of the fund, thereby reducing returns: in SASS, the employees paid the administrative costs. Thirdly, the 2 per cent gap chosen by Mercer and regarded as "reasonable" by Mr Murphy (see [218] herein) could not be regarded as reasonable if it excluded consideration of ensuring employees would be no worse off, regardless of the fact that might result in the scheme becoming a hybrid accumulation fund with a safety net benefit. Fourthly, the PKCT assumptions treated everyone as new starters, when under SASS they would have had continuity of membership. While these matters are not easily quantified, they should be placed in the balance when assessing deficiencies in the PKCT fund.

376 The evidence of the experts amply demonstrated the complexity of the task involved in trying to ascertain the relative gains and losses under the two superannuation schemes. The calculations performed by both the experts, of necessity, proceeded on a number of assumptions. This became necessary, particularly in view of employees who had not yet retired and for whom no calculations could be readily made about actual gains or losses, especially through investment of the superannuation funds. The difficulty was clearly identified by Mr Murphy who had acknowledged that, once the decision was made to create the PKCT fund as an accumulation scheme, it was "absolutely impossible" for participants to be no worse off "in any situation environment." Whether there were potential gains or losses depended upon the performance of investment markets and in particular, the state of the market when retirement occurred.

377 Against this background there were a number of issues (as discussed above) that arose concerning the approach of both experts, not only in relation to an actuarial assessment, but also in relation to what might be regarded as appropriate and fair when those questions arose in proceedings brought under s 106 of the Act. Those aspects of the experts' reports leaves the Court in the invidious position of being unable to wholly accept Mr Murphy's opinion that there are no losses, or to wholly accept Mr Rawsthorne's conclusion that there were losses for the group running in total into millions of dollars. It is, however, implicit in Mr Murphy's approach that the PKCT fund did not, at its inception, provide for equivalent benefits to SASS, or benefits of equivalent value. From the preceding analysis, the Court confirms its conclusion that the PKCT scheme, at both its inception and in its operation, did not provide benefits equivalent in value to SASS benefits. The defects identified in the PKCT scheme leads to the further conclusion that it is just in the circumstances of this case to make a money order to compensate for these defects. In performing this task, the nature of the numerous considerations, (together with the Court's view that in the calculation of each expert there were matters that should either be eliminated or significantly modified), unfortunately, does not allow the Court to simply conduct its own exercise based on the actuarial evidence, including some factors and excluding others relied upon by the experts. Fundamentally, the Court in this case is not engaged in an actuarial exercise but must mould a money order that is just in the circumstances of the case.

378 There appear to be two important considerations that impinge upon the exercise of the discretion in s 106(5). The first is the seeming inability to now create an accumulation scheme that accurately reflects the defined benefit scheme available under SASS. The second important consideration is that the Court is constrained from making orders that would operate beyond 2006, thus, removing from consideration actual results (if available) demonstrating losses or gains after 2006. In the peculiar circumstances of this case, there is merit at looking at the position at 1990 when the PKCT accumulation scheme was introduced and making some provision at that point which would address the deficiencies in the PKCT scheme. Mr Murphy accepted that one way the possibility of loss could be addressed would be by increasing the employer contributions to the scheme, perhaps significantly. It may well be that a calculation could be made as to what increase in contributions might yield a result that was "just in all the circumstances", but there appears to be nothing in the evidence that would allow that figure to be determined by the Court and at the same time ensure that the figure did justice to both parties. In any event, the PKCT scheme has now been closed and there are jurisdictional issues concerning any order operating beyond 2006. Further, it is not possible to simply re-create the SASS fund.

379 There is one area of the evidence, however, that recommends itself for closer attention. Both Mr Strudwick and Mr Giddings gave evidence that in the context of wage negotiations in 2004, representatives of the parties attempted to resolve, once and for all, the perceived inadequacy of the superannuation arrangements under the PKCT scheme. The evidence of Mr Giddings (Lodge President) and Mr Strudwick (Lodge Vice President) was that those discussions resulted in an agreement that the issue could be totally resolved by a payment to employees of two weeks' salary for every year of service. The union and PKCT was represented at a senior level with the finance manager (Mr Tonnini) and the human resources manager (Ms Hogan) participating in the discussion and agreeing to the proposal. The proposal was then put to the general manager of the coal terminal (Mr Brannon). The arrangement was explained to him and he agreed to sleep on the issue, but the next day he rejected the proposition which included paying the money out of a jointly operated fund specifically set up to meet emergent issues such as employee entitlements if the consortium venture failed.

380 The circumstances of the 2004 negotiations were dealt with in the evidence of Mr Giddings and Mr Strudwick. It was responded to in the evidence of Mr Brannon. Both parties referred to this evidence in their submissions and the Court referred to it during the course of submissions. The attitude of the parties to this 2004 event is, therefore, fully disclosed to the Court. The importance of the proposal framed by senior representatives of the unions and management, however, is that it represented their solution to a most difficult problem. The unions embraced that approach as a common sense way of addressing continuing concerns about the inadequacy of the PKCT scheme. That is a significant factor to be considered in this case when fashioning an appropriate money order. The fact that senior management representatives agreed with that proposal does not carry with it any notion that management was somehow bound by the proposal , but the proposal does represent perhaps a somewhat novel solution that senior managers could accept as concluding the ongoing issue about the adequacy of the PKCT superannuation scheme.

381 Although Mr Brannon thought that the unions had not made out a case, the proposal had also come from senior managers who were selected to negotiate with the unions over wages and conditions. In cross-examination, Mr Brannon said he was aware that the unions were dissatisfied with the PKCT superannuation arrangements but he did not recall the substance of that dissatisfaction, nor could he recall whether it was explained to him. He could not recall a period when the union's dissatisfactions were raised with him. There was nothing in that evidence to suggest that Mr Brannon had identified any fundamental flaws with the proposal, and he may well have had reservations about paying for such a proposal out of the jointly managed entitlements fund.

382 The Court has accepted that there were at least two significant defects in the PKCT scheme by that new scheme failing to factor in, on an equivalent basis, the availability of a pension for a large number of employees and the transfer of investment risks from the employer to the employees. Other, but less significant, defects have also been identified. In the broad exercise of its jurisdiction to make a money order that is "just in all the circumstances of the case" it appears to the Court that the 2004 proposal is a relevant starting point. It appears prudent to the Court, in light of the very different and extensive evidence before it, that the 2004 proposal should be trimmed to ensure that the resultant money order does not inadvertently impose an inappropriately larger burden upon the respondent.

383 It must be borne in mind, however, that the difficulties addressed in this case primarily arose because of representations made to the employees that were difficult to meet in an accumulation fund. Having considered all those matters, the Court is of the view that the employees identified in this case should have their contracts varied to provide for the payment of a lump sum calculated by reference to their service between August 1990 and February 2004 at the rate of 1.25 weeks' salary for every completed year of service. That sum should be calculated at the salary payable to each individual as at February 2004 or, their salary at the last day of employment if they left work prior to that date. As discussed in [ 390], it is appropriate in this case that interest on that sum should be paid in accordance with the provisions of the Uniform Civil Procedure Act 2005 and the Rules made thereunder.

(vii) Consequential Issues

384 The first matter relates to the jurisdiction of the Court to make an order that will not become "inextricably intertwined" with service after March 2006. The jurisdictional challenge was heard before the Full Court of the Industrial Court and in the Court of Appeal. These matters have been referred to earlier in this judgment. The challenges arose because of the Commonwealth's Work Choices legislation and the effective transfer, from the end of March 2006, of New South Wales industrial jurisdiction in private sector employment to the Commonwealth.

385 Written submissions for the respondent pointed out that the Full Court of the Industrial Court noted that the relief framed had the prospect of conflicting with the preserved collective State agreement, given force under the Commonwealth Workplace Relations Act from the end of March 2006. Prior to that time, there had been industrial instruments entered into between PKCT and its employees made under New South Wales Industrial legislation. In those industrial instruments provisions were made in relation to superannuation, including nominating the superable amount of wages payable under those instruments. The Full Court raised concerns that orders sought under s 106 would require variation of the preserved agreements and would have the effect of altering, impairing or detracting from the operations of the Workplace Relations Act. While expressing serious reservations about whether the Industrial Court could make orders that did not conflict with relevant Federal law, the Full Court identified the essence of the claim as compensation for the shortfall between what its members were entitled to under the alleged representations. There was a concern that the claim, nevertheless, regardless of its form, may amount to a mere artifice. The Court of Appeal also identified the possibility that the computation of payments resulting from an order made in the s 106 proceedings might well be referrable to service after March 2006 and accordingly, would give rise to inconsistencies. Nevertheless, the Court of Appeal concluded that an order was capable of being devised that was limited in its effect and while the relationship was governed by State law.

386 Having regard to these matters, it is necessary to indicate that the orders proposed by the Court do not directly or indirectly impinge upon awards made in either the Federal or State industrial jurisdictions. At all relevant times, the PKCT superannuation scheme was governed by a trust deed. It was primarily the definition of superable salary that was dealt with by industrial instruments up until 2006. Nothing in the Court's orders changes the definition of superable salary in those instruments, nor are the orders referrable to any service after March 2006, The proposed orders are directed to the variation of contracts of employment as at 2004. The importance of the fact that the orders address only contracts of employment and not award provisions or legislative entitlements was emphasised by the Court of Appeal in Incitec Ltd v Industrial Court of NSW (1992) 29 NSWLR 83, where Gleeson CJ (speaking for the Court ) at 84 stated:

Section 88F is concerned with alleged unfairness or harshness or unconscionability of individual contracts of employment. The focus of attention is the contractual relationship between a particular employer and employee. The employment protection legislation, concerned, as it is, with the matter of awards and industrial agreements, directs attention to more general industrial issues. Hill J said, in his judgment at first instance Barry v Incitec Ltd (1991)45 IR 146:

On the other hand s 88F of the Act deals with the matter of what for present purposes may be briefly described as unfair contracts. It applies to a contract or arrangement between the particular persons who are party there to. Unfairness may arise either from the terms of the contract itself, the surrounding circumstances, and/or from the manner of performance or operation of the contract. The section deals largely with private rights inter partes. Despite that a general and relevant industrial prescription governing benefits payable to employees in termination of employment situations may exist, unfairness in relation to a particular contract of employment may nevertheless arise in a situation of redundancy or termination of employment for reasons unrelated to or not relevant to the basis of award prescription of an objective and fair general standard of redundancy or severance benefits. It may arise simply in the special circumstances of and surrounding the particular contract.'''

387 The respondent then submitted that calculations made by Mr Rawsthorne relied on investment losses incurred during the GFC from 2007. Any order relying on those calculations would confront the difficulties identified by the Full Court and the Court of Appeal. As will be seen, however, the Court has not relied on Mr Rawsthorne's calculations in determining the money order that is just in the circumstances of this case. The money order to be made is calculated by reference to service between 1990 and 2004 when State Industrial instruments were operative, but in any event, does not have the effect of interfering with the operation of those documents. Here, the orders address the employment contracts of the nominated employees and not the industrial instruments under which they were otherwise engaged. The orders drawn in this matter do not travel into the area of inconsistency identified by either the Full Court or the Court of Appeal.

388 The last point raised in submissions was the fact that there were ten employees (Messrs Brett, Byrnes, Davis, Kaletta, Nicholls, Rosewarn, Royters, Stoyles, Waine and Waters) for whom there were no SASS records. Although the SASS records had been produced on summons, it was unexplained why there was no reference to these people being members of SASS. There were two employees, Mr Faint and Mr Mascioli, who gave evidence that they were not in SASS but there were statements produced by solicitors acting for the applicant that showed otherwise. It would appear that the submission for the respondent was that it was difficult to understand the unfairness in relation to people who were not members of SASS.

389 It is difficult to determine any issue relating to entitlement to orders in these proceedings based on whether SASS records were produced or not. The fact that two people gave evidence they were not in SASS and it later appears they were members of that fund may cast doubt on the completeness of records held by the superannuation authorities, dating back to 1990. There is a more fundamental point. The claim ultimately pursued by the applicant did not hinge on employees already being members of SASS, although that represents the situation of the vast majority of employees who will be beneficiaries of any order made by the Court. The case was squarely based upon a representation that the superannuation benefits, available under the PKCT scheme, would be equivalent to benefits available under SASS and employees would be no worse off. SASS was known to be a generous public sector superannuation and defined benefit scheme. Those representations were clearly significant to all employees, not only those who were in SASS as they were looking to their future with PKCT. All the employees who gave evidence joined the PKCT scheme and therefore it appears clear that, whatever their past view as to superannuation or their personal circumstances in relation to affording contributions to a superannuation fund, they all joined the PKCT fund after the representation of equivalent benefits was made and widely discussed. Having regard to these matters, no issue of fairness to the respondent arises, nor can it be said to be inappropriate that these employees be subject to the same orders as the vast bulk of employees claiming compensation in these proceedings.

(viii) Costs and Interest

390 The applicant has sought an order for costs and interest should it succeed in this application. The normal approach in cases arising under the unfair contracts jurisdiction is that costs would follow the event, although in some circumstances there may be a departure from that approach. The parties have not addressed in any detail the issue of costs and having regard to the many issues canvassed during the proceedings, they should have an opportunity to consider the Court's judgment and to confer as to an appropriate costs order. The Court will shortly list the matter again to deal with any submissions as to costs. At that time, the Court would be prepared to hear any further brief argument as to possible unintended consequences of the orders made.

391 In relation to the payment of interest, the Court and its predecessors have on many occasions considered this issue in exercising the unfair contracts jurisdiction. It is accepted that, in the general law, the purpose of awarding interest is to allow a successful party to be properly compensated for the identified loss (see Falkner v Bourke (1990) 19 NSWLR 574). In this Court a Full Bench considered the relevant authorities in Abboud v State of New South Wales (Department of School Education) (No 2) (2000) 99 IR 299. Having regard to the thrust of the authorities, it is judged to be just in the circumstances of this case to award interest from the date of filing of the application in 2005 until the date of this judgment. Interest is to be calculated in accordance with the provisions of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005.

ORDERS

392 The Court makes the following orders:

(a) a declaration that the contracts of employment between Port Kembla Coal Terminal Ltd and the employees identified in the proceedings were unfair in failing to provide superannuation benefits equivalent in value to the benefits available under the provisions of the State Authorities Superannuation Scheme as at August1990;

(b) the said contracts of employment are varied to include a provision that each employee shall be paid a lump sum calculated by reference to:

(i) the salary payable to each employee at February 2004, or the salary payable on the last day of service if leaving employment prior to February 2004;

(ii) the completed years of service performed between August 1990 and February 2004;

(iii) the rate of 1.25 weeks of salary for each completed year of service with Port Kembla Coal Terminal Ltd.

(c) the amounts payable pursuant to order (b) above shall be subject to the payment of interest calculated in accordance with the provisions of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 and apply to the period from 12 December 2005 (the date of filing) until the date of this judgment;

(d) the matter will be relisted to deal with any submissions as to costs, or to deal with any unintended difficulty that may arise from the present form of the orders.

**********

Annexure 1  |  Annexure 2

Amendments

23 October 2013 - The word "Union" added to case title so that it reads: Construction, Forestry, Mining and Energy Union (New South Wales Branch) v Port Kembla Coal Terminal Ltd
Amended paragraphs: Coversheet/Case Title

23 October 2013 - The word "per" deleted from (b)(iii)
Amended paragraphs: Coversheet/Decision

23 October 2013 - The word "per" deleted
Amended paragraphs: 392(b)(iii)

Decision last updated: 23 October 2013