Supreme Court New South Wales

• Medium Neutral Citation: Sharp v Maritime Super Pty Ltd [2012] NSWSC 1350
• Hearing dates: 17 October 2012
• Decision date: 07 November 2012
• Jurisdiction: Equity Division
• Before: Ward J

Decision

Order that matter be remitted to trustee for determination (and report back to Court thereon) as to total and disablement benefit having regard to proper construction of relevant rule in Trust Deed

• Catchwords: DEEDS - question of construction of superannuation trust deed - consideration of principles applicable to contractual construction; TRUSTS - duty of trustee to determine application by plaintiff - where trustee proceeded on basis of what has now been found to be an incorrect construction of the relevant Rule - whether matter should be remitted to trustee to make determination having regard to proper construction or whether Court should make a determination as to the entitlement claimed - where no evidence that trustee previously acted in bad faith - HELD - matter remitted to trustee for determination
• Legislation Cited: Civil Procedure Act 2005 (NSW); Superannuation (Resolution of Complaints) Act 1993 (Cth); Superannuation Industry (Supervision) Act 1993 (Cth); Trustee Act 1925 (NSW)
• Cases Cited: AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985; Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238; Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99; Bank of New Zealand v Simpson [1900] 1 AC 182; Byrnes v Kendle (2011) 243 CLR 253; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; Finch v Telstra Super Pty Ltd [2010] HCA 36; Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; Gilberg v Maritime Super Pty Ltd [2009] NSWCA 325; Gilberg v Stevedoring Employees Retirement Fund Pty Ltd [2008] NSWSC 1318; Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28; Karger v Paul [1984] VR 161; Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601; Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 283; Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449; Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; Re Media Entertainment & Arts Alliance; Ex Parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379; Scott v National Trust [1998] 2 All ER 705; Shore v Wilson (1839) 8 ER 450; Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1935) 52 CLR 618; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Vidovic v Email Superannuation Pty Ltd (unreported, NSWSC, Bryson J, 3 March 1995); Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522
• Texts Cited: K Mason AC QC, "The Distinctiveness and Independence of Intermediate Courts of Appeal" (2012) 86 ALJ 308
• Category: Principal judgment
• Parties: Ben Sharp (Plaintiff); Maritime Super Pty Ltd (Defendant)
• Representation: Counsel: B W Rayment QC with M J Gollan (Plaintiff); R A Cavanagh SC (Defendant); Solicitors: Firths - The Compensation Lawyers (Plaintiff); King & Wood Mallesons (Defendant)
• File Number(s): 11/147892

Judgment

1 HER HONOUR: This matter involves a dispute between a member of a superannuation scheme (Mr Ben Sharp) and the trustee of the scheme (Maritime Super Pty Ltd) in relation to Mr Sharp's claim for payment of a total and permanent disablement benefit. In essence, Mr Sharp's claim is that (having regard to the provision to the trustee of medical opinions attesting to the grounds on which his employment was terminated and his incapacity to work in the future) he has an entitlement under the scheme's Trust Deed to the said benefit or (if, on the proper construction of the Maritime Super Trust Deed, there remains any determination to be made by the trustee once such medical reports have been obtained) that the trustee has failed to make the requisite determination under the relevant provision of the Trust Deed and should now be ordered to do so.

2 Mr Sharp's employment as a stevedore was terminated by his employer (Toll Stevedoring) on 23 June 2006. Shortly thereafter, he was diagnosed as suffering from a chronic psychiatric disorder (described variously as a Stimulant Substance, or drug induced, psychiatric disorder or paranoid schizophrenia). Mr Sharp contends that his employment was terminated solely by reason of an event (or a number of events) demonstrating permanent incapacity to perform his duties satisfactorily and/or exhibiting symptoms of a psychiatric condition demonstrating him to be a danger to others in the workplace. On that basis he claims an entitlement to a total and permanent disablement benefit in accordance with Rule 23 of the Trust Deed (calculated as a lump sum of $453,000).

3 Senior Counsel for the trustee, Mr Cavanagh SC, made it clear that the trustee does not dispute that Mr Sharp has (since his termination) been diagnosed with a serious psychiatric illness nor that he is both unfit for work and likely to be unfit for work on a long term basis. However, the trustee contends that Rule 23(a) has not been satisfied in that the grounds for termination of Mr Sharp's employment were not (or have not been established to its satisfaction to be) solely those falling within that sub-rule. In particular, Mr Cavanagh submits that the evidence does not establish that the workplace incidents for which warnings were received by Mr Sharp prior to his dismissal were attributable to his later diagnosed psychiatric illness (and he submits that the exercise of determining whether those incidents were attributable to Mr Sharp's mental condition at the time cannot be undertaken on a retrospective basis, at least where that is dependent on Mr Sharp's retrospective account of events).

4 By way of declaratory relief, Mr Sharp seeks the following:

(i)that the trustee's decisions (on 3 October 2007 and 8 May 2008) to decline his claim for total and permanent disablement benefits were wrong in law and in fact;

(ii)that the trustee has constructively declined a request made on 6 December 2010 for a reconsideration of the claim;

(iii)that Mr Sharp is totally and permanently disabled (as defined in Rule 23); and

(iv)that the trustee breached its duty owed pursuant to s 14 of the Superannuation (Resolution of Complaints) Act 1993 (Cth).

5 An order is sought that the Court substitute its own discretion for that of the trustee and order the trustee to pay to the plaintiff a lump sum benefit pursuant to Rule 23 in the amount of $453,000, together with interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) (alternatively, equitable interest is claimed).

6 As originally put, Mr Sharp's claim included both a claim for interest on the benefit (from 2007, when it is contended it should have been paid to him) and payment of damages for alleged breach of the trustee's duty or breach of the Superannuation Industry (Supervision) Act 1993 (Cth) (those damages being referable to the position he would have been in had he received the money in 2007 and paid off his mortgage at that time, as he says he would have done). However, during the course of the hearing, Senior Counsel for Mr Sharp, Mr Rayment QC, made it clear that Mr Sharp does not now press his damages claim (and on that basis there seems no utility in any declarations as to breach of duties implied under the superannuation legislation).

Issues

7 In essence, the issues in the proceedings fall within a relatively narrow compass:

(i)whether, on the proper construction of Rule 23 of the Trust Deed, a member is entitled to a total and permanent disablement benefit on the provision to the trustee of medical opinions unanimously attesting to the matters provided for under Rules 23(b) and (c), including the opinion that the member's employment was terminated solely on the grounds specified in Rule 23(a) (irrespective of whether the trustee is satisfied, or whether it is the objective fact, that Rule 23(a) was satisfied at the relevant time); in other words, whether unanimous (or a deciding) medical opinion is decisive of the entitlement to a benefit (assuming certain other conditions, in sub-rules (aa) and (e) for example, are satisfied); this being, as I understand it, broadly the construction of Rule 23 that is contended for by the plaintiff;

(ii)if the above is the proper construction of Rule 23(a), whether the plaintiff is presently entitled to a total and permanent disablement benefit; and

(iii)if the construction of Rule 23 is not as the plaintiff contends (and there remains room for the trustee to make a determination as to the matters set out in Rule 23(a) notwithstanding the receipt of unanimous medical opinions as provided for under Rules 23(b) and (c)), whether the trustee has failed to consider the matters required under Rule 23 and should now be ordered to make a determination of the plaintiff's claim based on those medical reports (which is the alternative basis on which the plaintiff's claim is put).

Summary

8 For the reasons set out below, I am of the view that neither of the constructions advanced is the proper construction of Rule 23 of the Trust Deed (but, rather, that the clause, properly construed, occupies what might colloquially be described as a middle ground between the two contentions).

9 I accept that the Rule sets out an objective process (one that does not depend on any exercise of discretion by the trustee) to be satisfied before an entitlement to a total and permanent disablement benefit arises and it applies to a termination of employment by any means (such as for dismissal, redundancy or resignation).

10 As part of that objective process a number of conditions must be satisfied (though not necessarily in any particular order other than as follows logically from the terms of the rule itself). Those conditions include (in my view as an objective fact) that the member's employment came to an end solely on the ground (or grounds) that the member's physical or mental condition at that time was such as to have the effect that the member was permanently incapable of performing his or her duties or a danger to others. (I construe the words "on the grounds that" as requiring a determination as to the basis on (or objective reasons for) which the employment relationship came to an end.)

11 I do not consider that the employer's stated ground(s) or subjective reasons for termination (in the case of a dismissal of employment) is or are necessarily determinative (though I consider it not inappropriate for the trustee to take such matters into account in determining whether Rule 23(a) has been satisfied).

12 If, as I consider has been established in this case, the sole ground (or basis) on which a member's employment is terminated (or comes to an end) is a particular incident or pattern of behaviour in the workplace (or, more particularly, a concern raised by such an incident or behaviour), then the question (ultimately to be determined by unanimous or, in the case of a division of opinion, a deciding medical opinion) is whether that incident (or pattern of behaviour) was caused by a mental or physical condition suffered by the member at that time, such that the member is (or, more relevantly, was) at that time permanently incapable of performing the member's duties satisfactorily or is/was a danger to others.

13 I do not accept that the construction of Rule 23 is as contended for by the plaintiff, since I consider that the condition in Rule 23(a) must have a meaningful operation and is not satisfied simply by the provision of medical reports (unanimous or otherwise) attesting to the opinion as to the said matters (at least one of which - the identification of the grounds of termination - is not a medical issue at all).

14 However, nor do I consider that the trustee would be justified in determining the claim (as it acknowledges it did) solely on the basis that the condition in Rule 23(a) had not been satisfied once it was provided with medical opinions that suggested or confirmed a causal link between the ground(s) of termination and a medical condition within Rule 23(a) (or raised a question as to the basis on which the employment may have come to an end.

15 I consider that it has been established on the evidence before me that the sole (objective) ground (or basis) for termination of Mr Sharp's employment contract on 23 June 2006 was an incident on 6 June 2006 that gave rise to serious safety concerns in the workplace. The doctors' reports served by the plaintiff in support of his claim in 2007 in my view raised a sufficient issue as to whether Mr Sharp's behaviour on 6 June 2006 had been caused by, or was referable to, an underlying mental condition having the effect specified in Rule 23(a), such as to require (at the least) further investigation by the trustee (having regard to the trustee's duties as identified in Finch v Telstra Super Pty Ltd [2010] HCA 36 and Alcoa of Australia Retirement Plan Pty Ltd v Frost [2012] VSCA 238).

16 The unanimous medical evidence (albeit with some qualification by Drs Reutens and Rees insofar as their opinions were based on an assumption as to the correctness of Mr Sharp's history of events) was that the sole ground of termination was a physical or mental condition such that Mr Sharp was permanently incapacitated or a danger to others at the time. I have considerable difficulty accepting that any of the doctors was in a position to determine (from a medical perspective) what was or was not the sole ground of termination of the employment. However, they were in a position to give expert medical opinion as to whether an incident (or behaviour) of the kind that had occurred on 6 June 2006 (which I have found to be the sole objective ground for termination of the employment) was caused by a mental condition suffered by Mr Sharp at the relevant time.

17 While I consider that the evidence is such that it is likely that the definition of total and permanent disablement has been satisfied in the circumstances of Mr Sharp's case, I am not persuaded that the determination of that issue should be removed from the hands of the trustee (in circumstances where the trustee accepts that it has not yet addressed all of the matters required by Rule 23 and appears to be willing, once the construction of the rule has been determined, to do so). In particular, it seems to me that it is for the trustee to determine (at least in the first instance) whether it is satisfied that the medical reports obtained by the trustee (some of which in their terms are based on assumptions untested by the doctors) address in sufficiently unqualified terms the matters required under sub-rules (b) and (c) respectively. (It may be, though I do not suggest that it should necessarily be the case, that the trustee considers that further enquiry is necessary for it properly to satisfy itself that the doctors' reports do unanimously confirm the necessary causal link between the incident grounding the termination - ie the 6 June 2006 incident - and a mental condition suffered at the time.)

18 The trustee should in my opinion be directed now to consider, and make a determination on, Mr Sharp's claim (having regard to the construction of Rule 23 set out in these reasons and the medical reports provided to it, as well as any further material arising out of any enquiries that it considers reasonably necessary in order to enable it to make the necessary determination) and then to provide a report to the Court thereon.

Background

19 Mr Sharp was employed (by Toll Stevedoring and before that BHP Stevedoring) as a stevedore from 1997 to June 2006. At the time Mr Sharp commenced his employment he became a member of Maritime Super, a superannuation fund formerly known as the Stevedoring Employees' Retirement Fund, of which fund the defendant (Maritime Super Pty Limited) is the trustee. As noted earlier, Mr Sharp's employment with Toll was terminated by letter dated 23 June 2006.

• Mr Sharp's employment history

20 In the time from 1997 to 2006, Mr Sharp progressed to the position of Stevedore Grade 5 (the grade which his father had occupied as at Mr Sharp Snr's retirement in mid-2005). Work assessment reports for Mr Sharp were included in the Court Book. Those reports, and the statements of fellow workers (as well as his father's, perhaps understandably biased, view), indicate that there had not been serious issues raised in relation to Mr Sharp's work performance for much of the time he was employed as a stevedore by BHP/Toll. However, by 2004/2005 that position seems to have begun to change.

21 There was an incident in November 2002, recorded in the employer's records, in which damage was caused to a straddle driven or operated by Mr Sharp (although there does not seem to be a record of a warning in relation thereto). In 2004, the employer's incident reports indicate that (during the course of the one nightshift) damage was caused to two straddles driven or operated by Mr Sharp. (There was in evidence a file note of those incidents on 18 April 2004, on which there is a handwritten annotation referring to "driving habits" and reference to the earlier incident in November 2002.)

22 By mid 2005, an issue had also arisen as to absenteeism on Mr Sharp's part (or what he referred to colloquially, in the witness box, as his "sickies"). In a file note of 4 May 2005 (produced from the employer's files), reference is made to frequent unexplained absences from work (the recorded explanation from Mr Sharp for those absences being that Mr Sharp's partner was suffering from post-natal depression). By letter dated 4 May 2005, the Operations Manager at Toll (Mr Kevin Smylie) recorded what he said had been "stipulated and agreed to" at a meeting with Mr Sharp that day, namely that Mr Sharp was required to supply a medical certificate for any future absence from work as a result of illness and that he was required to inform the team leader prior to the commencement of the shift if he were unable to attend work through illness. (This is inconsistent with Mr Sharp's oral evidence that he was required to inform his employer 24 hours before he became ill but nothing turns on this other than it perhaps indicates some tendency on the part of Mr Sharp to consider himself unfairly treated by the employer, which may or may not be an instance of the paranoid delusions to which some of the doctors have referred.)

23 A file note of 13 May 2005 (from the employer's files) records that Mr Sharp was late for his shift on that date. Then, by letter dated 20 May 2005, Mr Smylie wrote to Mr Sharp referring to deliberations that had taken place as to what, if any, further action should be taken regarding his absenteeism from work. In that letter, Mr Smylie noted that Mr Sharp had failed to report for work (when rostered) on a total of 22 occasions since July 2004 and that Mr Sharp had failed to provide a medical certificate for an absence on 10 May 2005 (which absence, I note, was after the 4 May 2005 letter). The 20 May letter stated that this was a "final warning" and that any further absence from work without the supervisor being notified prior to the commencement of the shift or failure to produce a valid medical certificate as verification for absence through illness on any shift or part thereof would result in dismissal. (As it transpired, the employer did not adhere to that position.)

24 A counselling session apparently took place with Mr Sharp on 27 May 2005 (to which reference was made in a later letter of 28 February 2006). A file note (again from the employer's files) records that on 30 May 2005 Mr Sharp was again late for his shift. (There is no record of any action being taken in relation to this incident.)

25 On 5 July 2005 there was a further incident where Mr Sharp failed to attend for work (Mr Sharp's reason for non-attendance on that occasion apparently being that he was unaware that he was supposed to be at work).

26 By letter dated 28 February 2006 (in which the reference was made to a counselling session with Mr Smylie and the Business Manager, Mr Gordon McMaster, on 27 May 2005), the employer noted that Mr Sharp had called in sick and failed to produce medical certificates on six occasions. That letter stated (as had the 20 May 2005 letter) that it was a final warning and any further instance of absenteeism would result in the commencement of procedures for his dismissal. (There was a notation on the copy letter that suggested that a copy of that letter had been given to Mr Sharp at a counselling session on 2 March 2006.)

27 Pausing there, Mr Cavanagh submits that the evidence suggests that Mr Sharp's work attendance improved after the first "final warning" letter and that this is inconsistent with a pattern of frequent absences referable to a psychotic disorder at that time. Certainly, the incidence of absenteeism (at least according to the employer's records) seems to have decreased from 22 occasions over the first ten month period to around six occasions in the ensuing nine months.

28 Meanwhile, there was a further incident report as to Mr Sharp being involved in damage occasioned by a forklift hitting a coil in the warehouse on 20 January 2006.

29 On 5 May 2006, a letter was sent to Mr Sharp from the Operations Manager (then Mr Grant Russell) concerning an instance of reckless driving (by Mr Sharp of his own vehicle) in the car park on 3 May 2006. The letter stated that:

We are extremely concerned at the correlation between the way you behave in charge of vehicles outside of work and operating machinery safely when on the job. The behaviour displayed in these observations is unacceptable and I am taking this opportunity to inform you that any further instances will not be tolerated and may result in your dismissal.

30 The employer's records also include a file note recording a failure by Mr Sharp to report to work on 3 June 2006.

31 On 6 June 2006, there was the incident that (on any view of the employer's records) precipitated Mr Sharp's ultimate dismissal. In a file note held in the employer's records, Mr Sharp is recorded as having driven a forklift at excessive speed, having entered an area that had been designated an isolated area, and having failed to observe a compulsory stop. In the witness box, Mr Sharp maintained that this incident was "not speed related at all", though that is inconsistent with the contemporaneous records.

32 I note that (consistent with the nature of his now undisputed mental condition) Mr Sharp was unable to recall with any accuracy the timeline of events (such as when he was first employed by BHP/Toll) or the occasions on which warnings were given to him. Without any criticism of Mr Sharp, it was clear that his memory was vague and unreliable. So, for example, the exchange from T 14.25, when Mr Sharp was giving evidence in chief:

Q. Now, Mr Sharp, do you have any memory of what was actually said, forgetting about whom it was that told you or said it to you, but what was actually said to you when you have characterised them or when you have referred to them as warnings, what the content of those discussions were, are you able to assist her Honour?

A. Not really, your Honour. Like, I'm actually having a hard time remembering specifics on something that happened years ago where I can't really remember last week to some degree. You know, I wrote this a few years ago and I was trying to remember back then when I was writing it. I don't know what else to say. I mean, sorry.

Q. Do you have a memory of receiving some written warnings from time to time?

A. Written warnings?

Q. Not what was in them, but

A. I'm trying to think. There's a chance I'd have written warnings, there's a good chance, somewhere, maybe even at home. I got provided copies. I don't know off the top of me head.

Q. Do you remember being given warnings in addition to any written warnings that you might have received?

A. From supervisors?

Q. Yes?

A. No.

[This last answer is inconsistent with the broad reference to verbal warnings in Mr Sharp's own affidavit evidence.]

33 In cross-examination, Mr Sharp was quite candid as to his problem with memory:

Q. You said that you have a bit of problem with your memory; is that right?

A. Yeah.

Q. And as you sit there now are you having trouble remembering things?

A. If I am years ago, yeah. Like specific events that I find relevant I would remember and what I don't find relevant it's pretty much either dismissed, I don't know. It's just how I am.

...

Q. You are not able to really remember; is that right?

A. It depends on what you're asking.

Q. Would it be that what you remember of the years and dates is a bit hazy now?

A. Some of it is good and some of it is just, yeah, it's what's relevant, sometimes dismissed, and sometimes past brings up years later and it causes anxiety, which is what I am a under now too, you know.

Q. Would it be that your memory for this specific incident, that happened years ago, is a bit hazy now?

A. Some is and some isn't. My whole life is not hazy, if that's what you are trying to get at, I remember part of my life quite clearly and other parts where I have had conversations with somebody that I wouldn't think I have to remember or write it down, I don't remember.

34 I cannot place any weight on the reliability of Mr Sharp's evidence (expressed in very general terms in his affidavit or in his earlier statement served on the trustee) due to the vagueness of his memory and the generality of his evidence. What did, however, emerge clearly from his evidence in the witness box was that resentment towards his former employer (which may well have preceded his dismissal given that his somewhat emotional explanation for the speed related incident was that it was a "trust issue" and done out of "anger and hate"; and might provide some support for the view that he was suffering feelings of persecution or paranoia at the time).

35 Mr Sharp's father (Mr William Sharp) gave evidence in these proceedings. Without criticism of Mr Sharp Snr, he was clearly loyal to his son (describing him emphatically as an exceptional worker). He has been (I would infer from the correspondence) the driving force behind the claim for the payment of a disablement benefit to his son.

36 At one time, Mr Sharp Snr had worked with his son at the Port Kembla plant but not for a time prior to the former's retirement in mid June 2005. Somewhat surprisingly, Mr Sharp Snr was reluctant to concede that, had he considered his son to be a danger to others in the workplace, then he would have raised this with someone at Toll at least while he was still employed with Toll. (Mr Sharp Snr had not done so before he himself retired in mid 2005.) He seemed to explain the position as being that he did not observe his son at the workplace in the 12 months or so leading up to his son's dismissal (from which I understood him to be saying that he had not observed his son's behaviour in the workplace at that time). He then gave a lengthy explanation, which was not responsive to the question he had been asked, to suggest that there was an explanation for the incident which had led to his son's dismissal that he accepted could (depending on one's definition of extenuating circumstances) have amounted to extenuating circumstances.

37 Although Mr Sharp Snr accepted that he had seen his son socially since his own retirement (and hence was presumably in a position to form a view as to his son's behaviour in that context) he could not recall having raised with the employer any concerns as to his son being a danger to others in the workforce in the period from June 2005 to June 2006. (This evidence seems to be relied upon in part by the trustee as being inconsistent with Mr Sharp manifesting a psychotic condition at the time. However, it may equally be consistent with Mr Sharp Snr being reluctant to jeopardise his son's employment at the time and ultimately I draw little from this evidence.) Mr Sharp Snr did accept that his knowledge of any warnings his son had received from his employer was based solely on what his son had told him (much as the history recounted by the doctors was based on what they had been told by Mr Sharp or his family).

• Termination of Mr Sharp's employment

38 Mr Sharp was suspended from work (or "stood down") as a result of the 6 June 2006 incident. Tellingly, when considering the employer's subjective reasons for dismissal (although I accept that Mr Rayment contends that these are not relevant on a proper construction of Rule 23), the very next day Mr McMaster wrote to lawyers (Leigh Virtue & Associates) enclosing details of Mr Sharp's history with the company and stating that:

The grounds I have for dismissal are twofold:

1.Frequent and persistent attendance issues.

2.The reckless driving of mobile equipment causing damage to plant and customer product and the breaching of site cardinal rules.

The latter issue being the one for which he was suspended on 06/06/06.

39 It is clear from the letter dated 7 June 2006 that Mr McMaster was seeking advice as to the best course of action to initiate the termination of his employment "and to make sure we have suitable grounds and follow the appropriate process" (my emphasis). It is also clear that Mr McMaster's complaint at that time as to Mr Sharp's work performance related not simply to the reckless driving incident but also to the earlier work attendance issues (or absenteeism), though the frequency of those had seemingly declined in the period after the final warning letters were issued.

40 On 21 June 2006, a Notice of Termination - Award Employee form was completed by Mr McMaster (in his capacity as Manager of Toll Stevedoring's plant at Port Kembla). This appears to be an internal record of the employer. There is no evidence that it was provided to the trustee. The nature of termination is stated in that notice as being "Termination through misconduct and poor performance". It is not apparent whether this notice was ever provided to Mr Sharp. Nor is it clear that absenteeism was a component of the poor performance to which this Notice referred.

41 A meeting was held with Mr Sharp (attended by representatives of both the employer and the Maritime Services Union) on 23 June 2006. A typed file note of that meeting (apparently emanating from the employer's records, though its authorship is unknown) attributes to Mr McMaster the following statement:

GM [Mr McMaster] stated the company opinion that BS [Ben Sharp] posed a risk to self and other employees. Being charged with the duty of care of all employees, the company is not prepared to take further risk with BS

...

GM reiterated the issue regarding unsafe working practice (driving into an isolated zone, speed and failing to stop).

GM reiterated the company position regarding duty of care.

42 The file note also makes reference to there being "discussion regarding previous incidents and letters". (The reason I infer that this is a file note prepared by a representative of the employer is that the last sentence records that "The termination of employment letter has been subsequently sent to the latest address of Ben Sharp by Registered Post. Delivery confirmation will be provided", a statement that would logically be made only by someone in the management of the employer.)

43 A handwritten file note that seems to record some at least of what occurred at that meeting (the authorship of which is again unclear but which was provided to the trustee by or on behalf of Mr Sharp and therefore seems to have emanated from someone on his behalf) was in evidence. That file note records the attendance of various persons (identified by Mr Sharp in cross-examination as being persons in the management or employ of Toll). The note (written in a mixture of capitals and lower case but not so reproduced here) is as follows:

Want to talk about 6/6/06 re w/hse [presumably warehouse] incid[ent] and want to go back to the reasons for this meeting.

The history is a) Jan '06 significant damage to f/l & coils by Ben to the amount of $135,000

b) Letter issued 5/5/06 re driving own car

c) Letter issued re sickies

Also in '04, he also did straddle damage

In regards to the incident which led to this suspention [sic], Ben entered an w/hse that had been isolated.

Ben's reply at the time was he had forgotten and said he had to keep cargo up to ship

Gordon continues by saying he has a duty of care to the co. He tells Bens is a danger to himself and fellow workers. (emphasis as per the copy note in evidence)

Gordon says "I will listen to anything but am today handing this letter of termination"

44 The termination letter dated 23 June 2006 (that was handed to, but not accepted by, Mr Sharp at the meeting) stated:

We refer to our recent discussion concerning the incident which resulted in your being stood down from employment on 6 June, 2006 and we advise that we have now concluded our investigation in respect of that incident and concluded a review of your previous work performance.

As you will no doubt recall we had warned you on a number of previous occasions regarding deficiencies in your work performance and in particular regarding your inappropriate and incorrect handling of equipment and reckless and dangerous operation and driving of machinery. You were advised by letter dated 5 May, 2006 that if there was any repeat of your poor performance in this area that this may result in your dismissal.

It is of course extremely disappointing that despite being given this final warning you have once again involved yourself in an incident involving danger to others because of your inappropriate operation of equipment.

Having regard to all of these matters we now have no alternative but to terminate you effective as at the date of this letter.

We would point out that as the termination of your employment arises from your repeated poor performance and misconduct it is strictly not necessary for us to provide any notice to you. Despite this we have decided on this occasion to assist you by providing to you two (2) weeks pay in lieu of notice although we do so without resiling in any way from our belief that we are entitled to dismiss you summarily. (my emphasis)

45 The letter enclosed what was referred to as "an employment separation certificate" (which I assume was the Termination Notice signed by the payroll officer and later provided to the trustee), though this is not clear.

46 Significantly, the 23 June termination letter, consistently with the above notes of the meeting, based the dismissal on the incident that had occurred on 6 June 2006 (which, it seems, was a combination of Mr Sharp's disobedience with a strict safety compliance direction - by entry into an isolated area - and his reckless driving of machinery in that area). Other than by reference in the typed file note to a discussion as to the history leading up to the meeting, there is no reference to any statement at the meeting nor is there any in the letter of termination to attendance issues or absenteeism.

47 Based on the above, I would conclude that, although the history of absenteeism may well have been a factor in Mr McMaster's decision to recommend the dismissal of Mr Sharp (as evidenced in his letter to Leigh Virtue & Associates), it was not a ground on which the employer ultimately relied in order to justify Mr Sharp's almost immediate dismissal from employment. It is not clear what legal advice the employer had at the time, but it would seem that a decision was made to dismiss Mr Sharp on the basis solely of the work safety issues arising from the 6 June 2006 incident. (Hence, if Rule 23(a) were to require an assessment as to the employer's subjective reasons for dismissal, then I would have had little difficulty concluding that the sole grounds for Mr Sharp's termination of employment on 23 June 2006 were his non-compliance with a safety direction and his reckless driving of machinery - both emanating from a concern as to the safety of persons in the workplace).

48 If the test is as to the objective grounds for the termination of employment (as Mr Rayment contends it must be) or (to adopt the terminology propounded for the plaintiff) the grounds by reference to which the termination of employment is "fully accountable", then while Mr Sharp's history of absenteeism may well have been made it more likely that the employer would act decisively when faced with the incident on 6 June (and may even have welcomed the opportunity it presented in providing a justification for bringing Mr Sharp's employment to an end), that does not mean it was a ground or basis for that decision.

49 It seems to me that it is unlikely that, absent the 6 June 2006 incident, Mr Sharp's employment would have been terminated on 23 June 2006 (for the reason that if absenteeism alone had been sufficient then there is no reason why his employment would not have been terminated at the earlier time at which there was a breach of the final warning in that regard). Relevantly, in circumstances where the test focusses on what are the 'sole' grounds for termination, there was no reference to this issue in the termination letter.

50 Therefore, although there was clearly dissatisfaction on the part of the employer as to Mr Sharp's history of absenteeism (and there had been a number of warnings issued to Mr Sharp prior to his dismissal relating to absenteeism), I do not consider that this was objectively a ground upon which his employment was ultimately terminated. (Nor, tested subjectively, was it a ground on which the employer chose to rely when issuing the termination letter.)

51 The termination of Mr Sharp's employment as at 23 June 2006 was in my view fully accountable by (or solely on the grounds of) the incident on 6 June 2006 and the danger to the safety of both Mr Sharp and others that this kind of behaviour posed (Mr Sharp previously having been warned as to the likely consequences of any such behaviour).

• Request by Union for reconsideration by the employer of the termination

52 Mr Gary Keane, a Deputy Branch Secretary of the Southern New South Wales Branch of the Maritime Union of Australia (in a statement on which Mr Rayment relies as pointing to the employer's awareness that a mental or physical condition might have impacted on Mr Sharp's behaviour), states that he had placed on the record at the meeting of 23 June 2006 that the meeting was not a fair result for Mr Sharp to address the issues raised and that possible significant health issues had not been taken into consideration. He indicated that the Union was seeking a further meeting.

53 By letter dated 5 July 2006, Mr Keane wrote to Mr McMaster, asserting that there was an "absolute lack of procedural fairness" in the handling of the hearing on 23 June 2006, seeking a reconsideration of the company's position and stating:

Secondly, as I advised at the meeting Ben, his family and his general practitioner have reason to believe that there may be an underlying medical problem that could well have a bearing on the company's position and affect the outcome of a further meeting.

54 By letter dated 11 July 2006, Mr McMaster replied to Mr Keane:

On the information presently provided, we are not prepared to revisit our decision. [ie the decision to dismiss Mr Sharp]

This is particularly so as you have not given us any information as to the alleged medical condition which you say has some relevance to the company's decision. If you do wish us to consider the matter further we would firstly require that you identify, with precision, the nature of the medical problem you say exists.

55 A medical certificate was then obtained (dated 17 July 2006) from Dr N Samaraweera (a general practitioner who had treated Mr Sharp, on occasion, since 2003 as a patient in his practice) and provided to the employer, stating:

This is to certify that I saw Benjamin Sharp on 11/5/2006 with what appeared to be short-term memory loss. I therefore referred him to Dr Pakula a specialist psychiatrist for further management.

56 On 18 July 2006, Mr Keane wrote again to Mr McMaster:

At the disciplinary hearing of 23 June 2006 the company raised Ben's failure to report without producing certificates [this being consistent with the reference in the employer's typed file note to the history of attendance issues] but what wasn't mentioned and what I have been told from some of your other employees is that Ben would also occasionally turn up for work on days he wasn't rostered on day shift only to have to come back in for the evening shift he was actually rostered.

Once again we request that Toll reconsider their previous position on Ben's case until we can present any evidence from Dr Samir that may have some influence over your consideration of Ben's case.

57 The letter referred to a referral for Mr Sharp to see a psychiatrist prior to the referral to Dr Benjamin (and stated that Mr Sharp had been to see his practitioner prior to the incident that had led to the current position). (The suggestion that Mr Sharp had been to see his practitioner prior to his termination about concerns in relation to his memory seems to be supported by Dr Samaraweera's earlier referral of Mr Sharp to a Dr Pakula, although there is no evidence that Mr Sharp had in fact seen a psychiatrist until after his termination - the evidence being that his first such examination was by Dr Benjamin on 2 August 2006.)

58 Mr McMaster replied by letter dated 24 July 2006 stating that:

The further information you have provided makes it quite clear, however, that the decision which we have made is entirely correct in all respects, particularly having regard to the company's obligations in respect of health and safety. It would also appear that the decision is actually in the best interests of your member. We are therefore not prepared to change the decision we have made however we do wish your member well in his recovery. (my emphasis)

59 Reliance is placed by Mr Rayment on this letter for the proposition that the underlying reason for the termination of Mr Sharp's employment was that Mr Sharp was a danger to himself and others.

60 Produced on subpoena from the employer (and not shown to have been forwarded to or considered by the trustee) was an email dated 20 November 2006 from Mr McMaster to Mr Matt Tamplin (the General Manager of Patrick Stevedoring as Toll Stevedoring is now known), responding to a request for Mr McMaster's thoughts in relation to correspondence received from Mr Keane (apparently requesting a reference for Mr Sharp), in which Mr McMaster stated that at no time during Mr Sharp's employment or during the "standdown period" had Mr Sharp indicated that there was a concern over his health and indicating that instead the concern was as to safety issues. Mr Rayment points to the statements in that email (with no express reference to absenteeism) to the effect that:

Ben was dismissed for misconduct after numerous warnings. I'm no medical specialist, but I don't think this is due to progressive illness such as the one Garry Keane is describing more one of susbstance [sic] abuse over a period of time. [Pausing here, if what this comment suggests is that the employer considered the misconduct in question to be more likely to be referable to substance abuse than an illness or that the condition was self-induced, that is not the issue; rather, what is relevant is whether the incident that was the objective cause of the termination was causally linked to a relevant mental condition, whether or not that condition may have been self-induced]

...

The guys [sic] cost the company a lot of money through the forklift incident. The potential of incidents he was associated with were very high, fortunately they did not result in injury. Perhaps if he is charged with a similar role a future employer may not be so fortunate

61 Mr McMaster, who seems to have regarded Mr Keane's position as an understandable attempt retrospectively to procure a benefit for a union member, expressed the view that there was no legal obligation for the employer to provide a reference.

• Claim for total and permanent disablement benefit

62 In May 2007, Mr Sharp made a claim for a total and permanent disablement benefit. There is no copy in evidence of the application made by Mr Sharp for such a benefit but there is no dispute that Mr Sharp's claim was lodged within the two-year period specified in Rule 24 of the Trust Deed.

63 On 7 May 2007, the trustee received an advice of termination of Mr Sharp's employment from the employer. That document, headed Advice of Termination of Employment, was signed by the employer's Payroll Officer. It appears to be a standard form document intended for provision to "Maritime Financial Services" (having regard to the instruction at the foot of the form), presumably to enable calculation of employee benefits on termination of the employment. It identifies Mr Sharp's "Fund Number", and specifies his date of exit (inconsistently with the termination notice) as 22 June 2006 and the cause of exit (out of a list of possible causes) as "Resignation (Standard) includes Dismissal". (There was a separate box to be ticked for "Resignation on Medical Grounds".)

64 The document contained provision for information for "all members" and additional information for those who were "defined benefits members". On its face, it was clearly a document intended to be for use in relation to employee fund benefits. (Whether it was a certificate for the purposes of Rule 41 is an issue perhaps open to debate. However, if this was the document to which reference was made in the 23 June termination letter (and I understand that to have been the case although the attachment was not part of the document included in the Court Book) then the employer has itself identified this as an "employee separation certificate" and there would seem to be no reason not to accord it that status. For present purposes, however, it is sufficient to note that it formally attests to the circumstances of Mr Sharp's dismissal from the perspective of the employer.)

65 By letter dated 22 May 2007 (to which Mr Rayment points as evidencing the first of the errors he identifies in the trustee's consideration of Mr Sharp's claim), the trustee referred to Mr Sharp's application and said:

We have since received a termination advice from your employer Patrick. This states that you terminated employment on the grounds of "resignation (standard) includes dismissal".

The trustee then quoted the terms of Rule 23 and requested that Mr Sharp "contact [his] employer to discuss the reason for [his] termination". In its terms, that letter does not communicate nor is it contended that it communicates a formal rejection of the claim (and on one view the reference to a discussion with the employer as to the reason for termination might be thought to be indicating that further information might be able to be provided in relation to the claim), but I accept that the letter would at the very least be read as indicating that the trustee did not consider that the termination advice established the grounds necessary to bring Mr Sharp within the ambit of Rule 23. (Mr Rayment submits that reliance on the termination advice, to which reference was made in various of the trustee's minutes of meetings over the period from 2007-2008, could not be sufficient to reject the claim.)

66 On 31 May 2007, the trustee wrote to Mr Sharp as to his ability to access his accumulated benefits in the fund (stating that in order for him to withdraw his accumulated benefits it would be necessary for Mr Sharp to withdraw his total and permanent disablement benefit claim), advising that two doctors' certificates confirming that he was permanently incapacitated would be required. (That letter stated that the report from Dr Benjamin "notes only that you are currently incapable of performing such work" and that it was necessary for there to be an opinion as to the likelihood of Mr Sharp ever being able to return to work.) The accumulated benefits (which form a component of the total and permanent disablement benefit) were subsequently paid out to Mr Sharp and do not form part of the present claim. Similar advice was given to Mr Sharp in the trustee's letter of 3 July 2007.

67 In the period from 19 July 2007, Mr Sharp's father corresponded with the trustee in relation to his son's claims. Objection was taken by Mr Cavanagh to the relevance of such material (and Mr Rayment in submissions accepted that not much turned on that correspondence). I note, however, in passing that by letter dated 3 October 2007 the trustee confirmed to Mr Sharp's father that the Benefit Sub-Committee had made a "second and separate determination" (to the determination as to the withdrawal of accrued benefits), namely that Mr Sharp was not entitled to a total and permanent disablement benefit "because in the first instance, he does not satisfy the criteria in Rule 23(a)". The letter states:

That is because, according to the advice we have received from his employer, his employment was not terminated solely on the grounds that his condition was such that he was permanently incapable of performing his duties satisfactorily or was a danger to others. The Trustee has not assessed whether your son meets any of the other pre-conditions for a Total and Permanent Disablement Benefit under Rule 23, on the basis that he does not meet the first pre-condition set out in Rule 23(a). As I mentioned in my letter of 3rd July 2007, the determination by the Benefit Sub-Committee that your son should be considered "permanently incapacitated" for the purposes of Regulation 6.01 does not mean he would qualify for a Total and Permanent Disablement Benefit under Rule 23, even if his employer were now or in the future to advise an alteration to the reason his employment was terminated. Rule 23 would require the Trustee to obtain other evidence and consider additional factors to those outlined in Regulation 6.01. (my emphasis)

68 By letter dated 5 February 2008, the lawyers then acting for Mr Sharp formally requested a reconsideration by the trustee of the decision to decline the application for a total and permanent disablement benefit, asserting that reliance on the payroll officer's termination advice was not reasonable for the purposes of discovering "the reason or reasons why Ben's employment was terminated" and submitting that consideration be given to two contemporaneous documents (being the termination letter of 23 June 2006 and the file note of the meeting on that date at which Mr Sharp's employment was terminated). That letter asserted that Mr Sharp was dismissed summarily because he was a danger to himself and fellow workers.

69 By letter dated 4 April 2008, the trustee wrote to the employer, noting that the trustee was considering Mr Sharp's eligibility to be paid a disablement benefit and enclosing the three items of written information it said it had relating to the termination of his employment: the termination advice signed by the employer's payroll officer (said to have been received from the employer) and the 23 June 2006 termination letter and file note (the authorship of which was said to be unclear), the latter two documents having been received from Mr Sharp. The trustee requested the employer to review its records, consult with relevant personnel and answer questions as to whether Mr Sharp's employment "was, or was not, terminated due wholly or partially" to Mr Sharp being permanently incapable of performing his duties satisfactorily or a danger to others or both; and, if so, whether that was in turn due to his physical or mental condition at the time or something else. If due to his physical or mental condition at the time, the employer was requested to advise whether that was the sole ground for his termination or whether there was another ground or other grounds. Information as to the authorship of the file note was requested. The letter stated:

It may well be that you do not have any information about any physical or mental condition that Mr Sharp had at the time his employment with Toll Stevedoring terminated. If so, please let us know.

70 The letter also sought details as to the reference in the letter of termination to "repeated poor performance and misconduct", observing that this suggested that there may have been independent grounds for terminating Mr Sharp's employment.

71 By letter dated 1 May 2008, the employer responded to the trustee as follows:

In regards to your question as to whether Mr Sharp's employment was, or was not, terminated due wholly or partially due to Mr Sharp being permanently incapable of performing his duties satisfactorily and/or a danger to others, we can confirm that neither of these issues were factors in the decision.

I can confirm that the management of Toll Stevedoring at the time of Mr Sharp's termination were not aware of any mental or physical condition that may have been impacting on Mr Sharp and that there were other grounds relating to Mr Sharp's termination.

72 The letter did not respond to the request for provision of details in relation to the "repeated poor performance and misconduct" due to stated privacy concerns.

73 By letter dated 8 May 2008, the trustee's solicitors (Mallesons Stephen Jaques) responded to the 5 February 2008 request for re-consideration of the decision in relation to Mr Sharp's application for a total and permanent disablement benefit. After referring to the contents of the termination letter and commenting on the file note Mr Sharp had provided to the trustee, they advised:

In this case, the Trustee's duty is to determine under Rule 23(a) of the Trust Deed whether Mr Sharp's employment was, or was not, terminated solely on the grounds that his physical or mental condition at the time was such that he was permanently incapable of performing his duties satisfactorily or was a danger to others.

74 (Mr Rayment submits that this suggests that the test here being applied was as to the subjective reasoning process of the employer, which he identifies as the second of the errors by the trustee in its consideration of Mr Sharp's claim.)

75 The letter noted that the trustee had made further investigations into the circumstances of Mr Sharp's termination of employment, enclosing a copy of the correspondence with the employer and noting that the response of 1 May 2008 was considered at the Benefit Sub-Committee meeting on 5 May 2008. The letter confirmed that the trustee "remains unsatisfied" that Mr Sharp's employment was terminated solely on the grounds that his physical or mental condition at the time was such that he was permanently incapable of performing his duties satisfactorily or was a danger to others. The letter continued by drawing attention to the following aspects of Rule 23(a):

the claimant's employment must have been terminated "solely" on the stated grounds. The available evidence does not establish that Mr Sharp's employment was terminated solely on the stated grounds and, in fact, points strongly to the contrary conclusion;

the termination must relate to the claimant's "physical or mental condition at the time. Again, the available evidence does not establish that this element has been satisfied and once again, in fact, points strongly to the contrary conclusion; and

the claimant's physical or mental condition at the time must have been such that the claimant was "permanently incapable of performing his duties satisfactorily or was a danger to others". Again, the available evidence does not establish that this element has been satisfied. There is only your assertion that "Given the medical evidence submitted it is evident that Ben's mental state was the reason he was a danger to himself and others". (emphasis in original)

76 The letter concluded that the trustee was not satisfied that Mr Sharp was entitled to an insured benefit from the Fund based on total and permanent disablement and noted that the claim had been considered by the Benefit Sub-Committee on six occasions (25 June 2007, 31 July 2007, 19 September 2007, 28 November 2007, 10 March 2008 and 5 May 2008).

77 (Mr Rayment relies on this letter, and particularly the statements in the respective bullet points, as evidence that, as at 8 May 2008, there had been non-compliance by the trustee with its duties as considered in Finch and Alcoa; and as constituting a further or independent error in 2008.)

78 By letter dated 8 December 2009, Mallesons Stephen Jaques responded to a letter of 1 October 2009 from Firths Compensation Lawyers, who were by then acting for Mr Sharp, in which Firths had requested the provision of information in relation to Mr Sharp's claim. That letter conveyed certain observations that, it is said, the trustee had instructed its lawyers to make in relation to Mr Sharp's claim, including as to the condition to be satisfied in order for Mr Sharp to be entitled to a benefit exceeding his accumulation benefit. Reference was made to the condition in Rule 23(a) and to the other conditions set out Rules 23(b) and (c) (as well as the provision dealing with the situation where there is a division of medical opinion - sub-rule (d)).

79 The condition in Rule 23(a) was interpreted as being directed at the grounds of termination given by the employer in respect of the member's employment (and reference was made in this regard to the fact that in the Termination Advice received by the trustee on 7 May 2007 from the employer the "Resignation (Standard) includes dismissal" box was ticked, not the "Resignation on medical grounds" box). Reference was also made to the subsequent information received by the trustee - namely the 23 June 2006 termination letter and the handwritten file note provided by Mr Sharp of the meeting on that date.

80 The letter stated that "In view of matters including those described above, the Trustee has determined that Mr Sharp has not satisfied the condition in Rule 23(a). Accordingly the Trustee has determined that Mr Sharp is not entitled to a benefit that exceeds his accumulation benefit".

81 The letter went on to state that:

In this case, the Trustee has had to consider a narrow question about the grounds of termination of Mr Sharp's employment. As Mr Sharp has not satisfied the condition in rule 23(a), no question has arisen (or arises) about medical opinions for the purpose of satisfying the other paragraphs of rule 23.

82 It is clear from this that the trustee approached the matter (and this was confirmed by Mr Cavanagh in his submissions) on the basis that unless and until Rule 23(a) was satisfied it was not necessary to deal with the other conditions in Rule 23 (what I might refer to as the 'gateway' construction of Rule 23). In other words, as I understand it, on such a construction of the clause, if the first of the conditions in Rule 23 was not satisfied then (since it was necessary for each of the conditions in Rule 23 to be satisfied for a member to be entitled to a total and permanent benefit under the Rule) no such entitlement could arise (whatever any subsequent medical reports might say as to Mr Sharp's condition at the time of termination or otherwise) and hence the claim failed at the first gateway. Mr Rayment submits that what this fails to deal with is the question whether the cause of the termination of Mr Sharp's employment was a medical condition that caused him to be permanently incapable of performing his duties satisfactorily or a danger to others.

83 By letter dated 6 December 2010, Firths requested that there be a reconsideration of the claim, enclosing copies of various statements (signed by Mr Sharp and other Toll employees) and medical reports of Dr Samaraweera (dated 31 October 2010) and Dr Benjamin (dated 30 July 2010), those medical reports largely updating the earlier medical opinions.

84 Mr Sharp's statement refers to him having had difficulty performing his duties for the last 6-12 months prior to his termination in June 2006, to him taking regular sick leave "as a result of my paranoid state of mind" and to warnings he received from his employer. He states among other things "I also crashed a few machines leading up to my termination. One was a fork lift and the other a straddle carrier". These statements were in evidence in the proceedings before me only as going to what information was before the trustee. They included statements from two co-workers attesting to concerns as to Mr Sharp's work performance, and particularly as to the danger it posed to fellow workers, in the period 6-12 months prior to the termination of his employment (see the statements of Mr George Boyatzis signed on 4 March 2010 and Mr Gennaro Acunzo signed on the same date.)

85 By letter dated 22 December 2010, the trustee's lawyers wrote confirming that the trustee would reconsider Mr Sharp's claim in light of the further information and materials provided and sought Mr Sharp's permission to the release of materials from his employer concerning the circumstances surrounding the termination of his employment and the grounds upon which that termination had occurred. (The letter also invited Mr Sharp's lawyers to contact the employer in order to discuss the matter and to elicit further information about the termination, something Firths declined to do.)

86 There was no evidence as to what the outcome of any such enquiries by the trustee had been (though by letter dated 11 January 2011 Mallesons Stephen Jaques confirmed that the trustee would seek to carry out and complete its consultations with the employer as expeditiously as possible - the employer's response being something on which it was said the timing of the benefits committee's consideration of the matter would at least in part depend). By letter dated 5 April 2011, Firths wrote, indicating that if no response was received within 7 days they would regard the claim as constructively dismissed and considered it likely that they would receive instructions to commence proceedings. These proceedings were then commenced in May 2011.

• Medical reports

Dr Samaraweera

87 By letter dated 25 April 2007, Dr N Samaraweera, a general practitioner, forwarded to the trustee his medical report with regard to the application by Mr Sharp for a total and permanent disablement benefit. That report notes that Dr Samaraweera had referred Mr Sharp to a consultant psychiatrist (Dr Samir Benjamin) on 17 July 2006. Dr Samaraweera's report recounts the history taken by him (presumably from Mr Sharp and/or whoever may have accompanied him to the consultation) including that his employment "was terminated in June 2006 due to poor concentration and interpersonal difficulties" and states that "Since then he has been depressed, anxious, paranoid and this in turn made him to use excessive amounts of cannabis and other stimulants including ice."

88 As to the exact nature of the illness or injury that Mr Sharp was suffering at the time his employment ceased, Dr Samaraweera said:

At the time Ben ceased his employment he was suffering from poor concentration and interpersonal difficulties and chronic psychotic disorder which in my opinion is attributable to a great extent to Stimulant Substance Dependence.

89 Dr Samaraweera considered that the cause of the illness was stimulant substance dependence over many years and stated that "It is a well known fact that chronic stimulant dependence can lead to a psychotic disorder". He stated that Mr Sharp had not seen a specialist psychiatrist until he was referred to Dr Benjamin. Dr Samaraweera considered that the illness was permanent and prognosis for recovery poor. He concluded (at 7(iii)) that:

I am of the opinion that is that the member's employment as an Employee or a Permanent Employee was terminated solely on the grounds that the Member's physical or mental condition at that time is such that the Member is permanently incapable of performing the Member's duties satisfactorily or is a danger to others.

90 Dr Samaraweera's report indicates that Mr Sharp had been a patient of Dr Samaraweera's practice since about June 2003 (although it is not clear from the report that the previous consultations had related to symptoms of the condition diagnosed in July 2006).

91 Dr Samaraweera's updating opinion of 31 October 2010 similarly confirmed his diagnosis of Stimulant Substance Dependence and Chronic Psychotic Disorder. Dr Samaraweera stated:

In my opinion upon review of the statements of co employees forwarded with Firths letter of 30 June 2010 Mr Sharp for some time prior to his termination on 23 June 2006 was permanently incapable of performing his duties satisfactorily (and or) was a danger to others.

My reasons for the above opinion is that on examination prior to the termination on 23 June 2006 Mr Sharp was found to be mentally disturbed with agitation and restlessness. He was also found to be rather paranoid with a psychotic disorder including symptoms of schizophrenia. (my emphasis)

92 (Pausing there, it is by no means clear to what occasion Dr Samaraweera is there referring in the last paragraph extracted above, since his earlier report makes no reference to any diagnosis of mental disturbance, paranoia or psychotic disorder prior to 23 June 2006. However, it does support a conclusion that the condition was existing at the time of termination.)

Dr Benjamin

93 Dr Samir Benjamin's first report was made on 12 April 2007. Dr Benjamin states that he first saw Mr Sharp on 2 August 2006. He recounts that Mr Sharp gave him a two year history of increasing psychotic symptoms (including paranoid and persecutory beliefs related to workmates and people in public places, bizarre delusions and feelings that people or vehicles were spying on him, and the hearing of voices). Dr Benjamin states that Mr Sharp "eventually lost from [sic] his job because of his inability to perform his work duties".

94 Dr Benjamin diagnosed Mr Sharp on 2 August 2006 as suffering from Stimulant Substance Dependence and Acute Psychotic Disorder with a "differential diagnosis of Schizophrenia and Drug induced Psychosis". His observation from subsequent consultations was that Mr Sharp's condition was chronic and his prognosis poor. He concluded that:

Because of the above psychiatric condition, Ben is incapable of ever performing his previous work duties or any other work duties which he is suitably qualified for, experienced in or trained to do.

95 It is submitted by Mr Rayment (and I accept) that, at least by the time that the 2007 medical reports were received, there was a duty on the part of the trustee to investigate the question as to whether there was an underlying medical condition which lay behind the causes of the termination of Mr Sharp's employment. He notes that the termination letter is not predicated on a complaint about absenteeism as such but, rather, relates to a particular incident involving danger to others by reason of the inappropriate operation of equipment (the letter referring to previous instances of incorrect handling of equipment and the reckless and dangerous operation and driving of machinery). He contends that this, coupled with the later medical reports, raised the question as to whether the incidents that led to the termination of Mr Sharp's employment were a result of a mental condition.

96 Dr Benjamin's subsequent report of 30 July 2010 stated his opinion that Mr Sharp was suffering with a chronic psychiatric disorder for "several months" prior to his termination from this employment on 23 June 2006; that due to his psychiatric illness Mr Sharp was incapable of performing his work duties satisfactorily and was also dangerous to others; that he remained incapable of performing his work duties satisfactorily; and that his psychiatric impairment was likely to be permanent.

Subsequent medical reports obtained by the trustee

97 By letter dated 16 November 2011, the trustee's solicitors served medical reports from two doctors (Dr Reutens and Dr Rees), noting that each doctor had concluded that Mr Sharp's "employment as an Employee or a Permanent Employee was terminated solely on the grounds that the Member's physical or mental condition at that time is such that the Member is permanently incapable of performing the Member's duties satisfactorily or is a danger to others" (for the purposes of rule 23(c)(i)) but stating that a key issue was whether Mr Sharp had also satisfied rule 23(a) (noting that this mirrored the wording of rule 23(c)(i)).

Dr Reutens

98 Dr Reutens, a consultant psychiatrist, prepared a report dated 16 October 2011, relying in preparation of that report on her interview with Mr Sharp and documents provided to her by the trustee's solicitors. Dr Reutens confirmed that in her opinion Mr Sharp displayed symptoms of a chronic psychotic illness (most likely schizophrenia) that was triggered or manifested in the context of illicit drug use. She considered that his prognosis for Mr Sharp returning to his premorbid level of functioning was poor, given the duration of psychoses and the lack of response of the delusional system to his current antipsychotic regime. Significantly, in my opinion, Dr Reutens said:

If Mr Sharp's chronology of events is accepted, and the symptoms of psychosis and methamphetamine use began in 2004, it would be a plausible reason for his failure to attend work punctually, his absences and poor concentration. [I note that this does not refer to the unsafe driving or the like but the significance I attach to this is not as to the opinion as to what may have been a cause for the absenteeism itself, but to the indication it gives as to a time frame for the development of problems likely to have affected Mr Sharp's work performance and to have made him a danger to others in the workplace]

99 Dr Reutens considered that Mr Sharp was unfit to work in employment suited to his education, training and experience for a number of reasons: he demonstrated ongoing paranoid delusions and would be a risk to his colleagues' health and safety in that regard; his use of sedating psychotropic medication would make him unfit to operate machinery; and because of the significant impairment of motivation described by him (which she considered was most likely due to his illness and exacerbated by the sedating properties of his medication).

100 Dr Reutens completed the medical assessment form by answering "yes" to the relevant questions (namely, that his employment was terminated solely on the grounds specified in 23(a) and that he remained permanently incapable and unable ever to work again). In the medical report, Dr Reutens' answer to the question as to the likely state of Mr Sharp's medical or physical condition at the date the employment was terminated was expressly based on the history recounted by her (that history leading her to conclude that "Mr Sharp had a psychotic illness exacerbated by paranoid beliefs that he was under surveillance and bizarre delusions of control over objects").

Dr Rees

101 Dr Rees provided a report dated 13 October 2011. She is also a consultant psychiatrist. She was provided with copies of correspondence, the statements provided to the trustee and other documents including material produced under subpoena in these proceedings. Dr Rees again recounts the history given to her at the consultation in relation to Mr Sharp's background and also from Mr Sharp's father. Her report contains the following:

They [Mr Sharp and his father] explained that he was dismissed from work for poor performance and being a danger to himself and others and he has been on a disability support pension for several years. Mr Sharp wants to make the case that he was unwell at the time he was dismissed and therefore should have gone off work on medical grounds. (my emphasis) [From this statement it seems that Dr Rees was conscious of the possibility that Mr Sharp may have unconsciously or otherwise sought to tailor his account of events and I would assume Dr Rees took that into account in assessing Mr Sharp]

Mr Sharp and his father have listened to me dictate the above section of the report (Family/Personal History) and agrees [sic] it is an accurate account of what he has told me. They had nothing else to add.

102 Dr Rees noted in summary that Mr Sharp presented with the onset of a psychotic illness occurring during 2006:

His persecutory delusions, ideas of reference and abnormal perceptions were impacting on his judgement and ability to function and this was particularly problematic in the workplace ... and resulted in him being terminated due to poor performance and being perceived as a risk particularly to others due to his inability to operate machinery properly.

103 In relation to total and permanent disablement, Dr Rees' opinion was that Mr Sharp's employment as a stevedore "was terminated solely on the grounds that [his] mental condition at the time is such that [he] is permanently incapable of performing his duties satisfactorily and could be a danger to others". Dr Rees noted that psychotic illnesses can usually have an "insidious onset" and that it is likely that Mr Sharp had been becoming gradually unwell for at least a year prior to his employment coming to an end. She considered the statements provided by other workers to be consistent with this.

104 Dr Rees answered "yes" to the relevant questions in the medical assessment form; in the medical report she stated that in her opinion Mr Sharp was very unwell at the time his employment was terminated - that he was acutely psychotic and that he therefore had a severe form of mental illness. She considered that the illness could have been considered permanent at that time on the basis that the chances of the illness becoming chronic were highly likely.

105 As part of her report, Dr Rees answered the question as to the sole ground for termination of his employment as follows:

Yes. In my opinion if Mr Sharp was acutely psychotic during 2006 which from all accounts it appears that he was, then the impact that this would have had on his ability to perform his duties at Toll would have been very significant. It would be impossible to assess his performance given the significance of his mental illness. From the reports provided it would appear that he was a good and reliable worker prior to this period which would suggest to me that his psychotic illness was the main reason why he could not perform his duties adequately and was therefore terminated. (my emphasis)

106 Dr Rees also confirmed that Mr Sharp could have been a danger to others at the time, due to his psychotic illness.

Trustee's position

107 By way of comment on the medical reports, the letter of 16 November 2011 with which they were served, stated:

While rule 23(c)(i) requires the doctors to express a view on the grounds on which Mr Sharp's employment was terminated, that does not make the doctors the arbiters of the question of fact posed by clause 23(a). The grounds upon which Mr Sharp's employment was terminated were the grounds upon which the employer, in fact, acted. [A statement described by Mr Rayment as the furphy that subjective reasons of the employer were determinative of the question] In this case, the employer has consistently advised the Trustee that it did not terminate Mr Sharp's employment on the grounds of any physical or mental condition that Mr Sharp had at the time, but rather on other grounds. In our opinion and without limiting any other basis on which the Trustee may defend the proceedings, there remains a serious issue to be tried in relation to whether Mr Sharp has satisfied rule 23(a).

108 Mr Rayment points to the last sentence extracted above and submits that, if it is the case that there is a serious question to be tried on that point then the trustee should have dealt with it consistently with Alcoa. Insofar as Mr Rayment submits that there is an admission of breach in this regard, Mr Cavanagh contends that the letter cannot be so construed, noting that it was written in the context of litigation then on foot. Mr Cavanagh informed me that the medical opinions had been obtained by the trustee in light of the proceedings and in anticipation that the Court might wish to have the benefit of such reports.

109 Mr Rayment submits (and this goes to the alternative basis on which the claim is put) that the trustee has not performed its duty by giving proper consideration to the two medical reports obtained on its instructions. Mr Rayment submits that the trustee was on notice that there was good reason to believe that Mr Sharp's employment was terminated because his work performance was unsatisfactory and he was a danger to others and that this raised the question whether that was due to some underlying medical condition (a question that he submits has been answered in the affirmative by the four doctors). It is submitted that the medical explanation for the conduct is the question posed by Rule 23(a) (given that the conditions of that rule are otherwise satisfied).

Issues for determination

110 I turn then to the issues for determination.

(i)Construction of Rule 23

111 The relevant rule in the Trust Deed that falls to be construed is Rule 23. That Rule, headed Total and Permanent Disablement, provides as follows:

23. As from 29 August 2002, a Contributing Member or a Non-Contributing Member is entitled to a total and permanent disablement benefit if:

(a)the Member's employment as an Employee or a Permanent Employee is terminated solely on the grounds that the Member's physical or mental condition at that time is such that the Member is permanently incapable of performing the Member's duties satisfactorily or is a danger to others;

(aa)subject to Rule 24, the Member applies to the Trustee for a total and permanent disablement benefit within 2 years of ceasing employment as an Employee or Permanent Employee;

(b)the Trustee has received a report from each of at least two medical practitioners which satisfies the guidelines established by the Trustee from time to time and which expressly states that in the medical practitioner's view, the Member is by virtue of the Member's physical or mental condition:

(i)incapable of performing the Member's duties or may be a danger to others because of his or her physical or mental condition; and

(ii)unable ever to work again in a job for which the Member is qualified by education, training or experience; and

(c)the Trustee has received a report from each of at least two medical practitioners which have been appointed by the Trustee which satisfies the guidelines established by the Trustee from time to time and which expressly states that in the medical practitioner's view:

(i)the Member's employment as an Employee or a Permanent Employee was terminated solely on the grounds that the Member's physical or mental condition at that time is such that the Member is permanently incapable of performing the Member's duties satisfactorily or is a danger to others; and

(ii)by virtue of the physical or mental condition referred to in paragraph (i), the Member remains:

(A)permanently incapable of performing the Member's duties or may be a danger to others because of his or her physical or mental condition; and

(B)unable ever to work again in a job for which the Member is qualified by education, training or experience; and

(d)after receiving the reports referred to in paragraphs (b) and (c) of this Rule, the Trustee determines that the Member is entitled to a benefit under this Rule PROVIDED THAT in the event of a division of medical opinion expressed in the medical reports referred to in paragraphs (b) and (c), the Trustee shall appoint (at the election of the Trustee) an additional medical practitioner and the Trustee shall base its determination solely on the medical opinion of the additional medical practitioner so appointed; (my emphasis) and

(e)the Member has not received or is not due to receive a benefit under Rules 19, 20, 21 or 22 and the Member has not received or is not due to receive a payment as part of a redundancy or early retirement scheme.

112 The Guidelines for Medical Practitioners issued by the trustee (to which reference is made in Rule 23(b)) include the request that the report specifically cover, among other things, questions as to the member's capacity and the question:

(iii)is or is not that the member's employment as an Employee or a Permanent Employee was terminated solely on the grounds that the Member's physical or mental condition at that time is such that the Member is permanently incapable of performing the Member's duties satisfactorily or is a danger to others.

113 In terms, therefore, what is contemplated by Rule 23(b) (as is also required by Rule 23(c)) is the provision of medical opinions not simply as to the member's future capacity but also as to the very question posed by Rule 23(a), namely whether the member's employment was terminated "solely on the grounds" of a physical or mental condition at that time that gave rise to such an incapacity (or danger to others).

Legal Principles

114 The principles applicable to the construction of the Trust Deed are those applying generally to commercial contracts or instruments.

115 In Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1935) 52 CLR 618 at 636, Rich, Dixon, Evatt and McTiernan JJ stated that a:

... contract must be interpreted like any other contract, and the natural meaning of the language used must receive its effect unless, upon a proper application of the rules of interpretation, a contrary intention is found to be contained within the instrument.

116 This was echoed in the oft-quoted passage in Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 by Gibbs J (as his Honour then was):

It is trite law that the primary duty of a court in construing a written contract is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another. If the words used are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that may be guessed to suspected the parties intended something different. The court has no power to remake or amend a contract for the purpose of a voiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, most obvious, or the most grammatically accurate'...Further, it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument. Finally, the statement... that the court should construe commercial contracts ' fairly and broadly, without being too astute or subtle in finding defects', should not, in my opinion, be understood as limited to documents drawn by businessmen for themselves and without legal assistance...

117 The endeavour of construing a contractual clause then requires that it be interpreted consistently, and in the context, of every other clause comprising the contract, as per Isaacs and Rich JJ in Metropolitan Gas Co v Federated Gas Employees' Industrial Union (1925) 35 CLR 449 at 455:

It is a received canon of interpretation that every passage in a document must be read, not as if it were entirely divorced from its context, but as part of the whole instrument: Ex antecedentibus et consequentibus fit optima interpretatio. In construing an instrument 'every part of it should be brought into action, in order to collect from the whole one uniform and consistent sense, if that may be done; or, in other words, the construction must be made upon the entire instrument, and not merely upon disjointed parts of it; the whole context must be considered, in endeavouring to collect the intention of the parties, although the immediate object of inquiry be the meaning of an isolated clause.

118 Similarly, Gleeson CJ, McHugh, Gummow and Kirby JJ said in Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at [16] said that:

In construing the Policy, as with other written documents, preference is given to a construction supplying a congruent operation to the various components of the whole.

119 Where there is inconsistency as between contractual clauses (as is the case here), the approach proposed in Re Media Entertainment & Arts Alliance; Ex Parte Hoyts Corp Pty Ltd (No 1) (1993) 178 CLR 379 by Mason CJ, Brennan, Dawson, Toohey, Gaudron and McHugh JJ was that:

A conflict...involving apparently inconsistent provisions in the one instrument, is to be resolved, if at all possible on the basis that one provision qualifies the other and, hence, that both have meaning and effect. ... That rule is an aspect of the general rule that an instrument must be read as a whole... (my emphasis)

120 The need to construe a contract or instrument so as, where possible, to give those words a meaningful operation was considered by Ball J in AFC Holdings Pty Ltd v Shiprock Holdings Pty Ltd [2010] NSWSC 985. His Honour said at [13]:

The general principle is that the words of a contract should be interpreted in a way which gives them an effect rather than a way in which makes them redundant: North v Marina [2003] NSWSC 64 at [45]; Davuro Pty Ltd v Wilkins [2000] FCA 1902, (2000) 105 FCR 476 at [152], [230]. That principle does not operate as an invariable rule. In some cases, it may be appropriate to interpret words in a way that makes them redundant. That may be appropriate where the alternative construction of the words is inconsistent with other provisions of the contract or where the alternative construction is inconsistent with the commercial purpose of the contract or where it appears that the words have been included out of abundant caution: see Re Strand Music Hall Co Ltd; Ex parte European and American Finance Co Ltd (1865) 35 Beav 153 at 159; 55 ER 853 at 856 per Sir John Romilly MR; Dryden Construction Co Ltd v New Zealand Insurance Co Ltd [1959] NZLR 1336; Beaufort Developments (NI) Ltd v Gilbert-Ash NI Ltd [1999] 1 AC 266 at 273-4 per Lord Hoffmann.

121 In Finch, the High Court considered (at [27]) (and expressed scepticism as to) an argument that there should be a special approach to the construction of a deed such as that there under consideration. Their Honours said:

...The applicant advanced arguments to the effect that the approach to the construction of the deed should be "practical and purposive, rather than detached and literal", so as to give it a "reasonable and practical effect". Even on the questionable assumption that in this context there can be different approaches, it is not necessary to resort to this aid to the construction of the deed. The applicant also submitted that the trustee's construction was "arguably ambiguous" and that the deed should be construed contra proferentem. There is no need to invoke that aid to construction either.

122 No suggestion that the deed should be construed contra proferentem in the present case was made. However, the purpose underlying Rule 23 of the Trust Deed (namely, for the provision of a benefit to members whose employment has come to an end in circumstances of total and permanent disablement) was emphasised.

123 The position in Australia with respect to use of extrinsic materials in order to aid interpretation of a contractual clause was considered by Mason J (as his Honour then was) in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352:

The true rule is that evidence of surrounding circumstances is inadmissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they are known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.

124 There has been some judicial and academic debate as to whether subsequent High Court decisions have suggested that recourse may be had to the surrounding circumstances when construing commercial contracts even where there is no 'ambiguity' in the contract (whether patent ambiguity as in the case where the written instrument is ambiguous on its face, as considered in Bank of New Zealand v Simpson [1900] 1 AC 182 or latent ambiguity in the text, being ambiguity that arises upon having regard to the surrounding circumstances, as considered in Shore v Wilson (1839) 8 ER 450).

125 In Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 462, the High Court said that the construction of a clause was:

...to be determined by what a reasonable person in the position of [the party claiming under the contract] would have understood them to mean. That requires consideration, not only of the text of the documents, but also the surrounding circumstances known to [the parties], and the purpose and object of the transaction: Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28. In Codelfa Construction Pty Ltd v State Rail Authority of NSW, Mason J set out with evidence approval the statement by Lord Wilberforce in Reardon Smith Line Ltd v Hansen-Tangen:

In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and thus in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

126 In Investors Compensation Scheme Ltd v West Bromwich Building Society [1997] UKHL 28, to which their Honours referred in Pacific Carriers, Lord Hoffman was of the opinion that the approach in England with respect to contractual construction did not require there to be ambiguity before extrinsic material could be taken into account. Lord Hoffman there noted that the "background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even...to conclude that the parties must, for whatever reasons, have used the wrong words or syntax."

127 The passage extracted above from Pacific Carriers was cited with approval in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, where the High Court said at 179 (with respect to the general principles of contractual construction):

References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.

128 However, doubt has more recently been cast as to the status of the above dicta in Pacific Carriers and Toll v Alphapharm. By way of footnote in Byrnes v Kendle (2011) 243 CLR 253 at [99] (fn 155), Heydon and Crennan JJ observed that the High Court has not pronounced on the question whether there is an inconsistency between Investors Compensation Scheme and Codelfa (or, if there were an inconsistency, as to which approach was to be preferred). Their Honours commented that opinions in intermediate appellate decisions (such as those of Masterton Homes Pty Ltd v Palm Assets Pty Ltd (2009) 261 ALR 283 at 384-385, 406-407 and Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 616-619, 621-622, 626, 663-678) must be read in that light.

129 In Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45, the High Court (there refusing special leave) emphasised the principles of construction as outlined in Codelfa and said (at [4]-[5]):

The position of Codelfa, as a binding authority, was made clear in the joint reasons of five Justices in Royal Botanic Gardens and Domain Trust v South Sydney City Council ...

We do not read anything said in this court in Pacific Carriers Ltd v BNP Paribas; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd; Wilkie v Gordian Runoff Ltd and International Air Transport Association v Ansett Australia Holdings Ltd as operating inconsistently with what was said by Mason J in the passage in Codelfa to which we have referred.

130 It is not necessary in the present case to consider the precedential status of dicta contained in the footnote in Byrnes v Kendle and the observations in Jireh (an issue considered by the former President of the Court of Appeal, the Hon K Mason AC QC, in "The Distinctiveness and Independence of Intermediate Courts of Appeal" (2012) 86 ALJ 308), since it seems to be accepted by the parties (and in my view it is clearly the case) that there is ambiguity on the face of the Trust Deed as to the manner in which Rule 23(a) is to have any meaningful operation consistent with the provisions of Rule 23(b) and (c).

131 Helpfully, the commercial context in which this particular Rule is to operate has already been considered in Gilberg v Stevedoring Employees Retirement Fund Pty Ltd [2008] NSWSC 1318 and the context in which provisions in relation to the entitlement to benefits in superannuation schemes has been considered more generally in Finch and Alcoa. Other than by reference to the observations there made as to the context in which a superannuation trust deed of the present kind is to be construed, it was not suggested by the parties that it would be necessary to take any other material into account when construing Rule 23 in the context of the present dispute.

Construction of the rule

132 At the outset, I note that Mr Rayment contends (and it is not, as I understand it, disputed) that Rule 23 deals comprehensively with the circumstances in which an entitlement to total and permanent disablement benefit arises and extends beyond the situation where a member's employment comes to an end (as did Mr Sharp's) by reason of dismissal by the employer to the situation where the employee resigns or is made redundant. Mr Rayment refers to the slightly different language in clause 24 as supporting the construction of clause 23 as extending to all circumstances in which the member's employment comes to an end (not simply in the case of a dismissal by the employer).

133 Clause 24(a) relevantly provides:

24.(a) Subject to paragraph (b) to this Rule, the Trustee must not consider any claim for a benefit under Rule 23 after the expiration of two years from the date on which the Member ceased to be an Employee or Permanent Employee unless ... (my emphasis)

134 Mr Rayment relies on this as indicating that Rule 23(a) cannot require consideration of the subjective grounds upon which the employer acted in terminating the member's employment (since, in the context of a resignation, no reasons might be proffered by the member). Mr Rayment submits that the trustee has erroneously relied (or has given undue or unnecessary weight) upon the views expressed by members of the then employer as to the reasons for termination.

135 Insofar as the plaintiff sought to draw support for its construction from the fact that Rule 23 extends to termination of employment arising otherwise than from dismissal alone (since in contexts other than dismissal there might be no reasons proffered at the time for the employment coming to an end), I think little can be taken from this since it is by no means inconceivable that in the context of a resignation there could similarly be an ex post facto exploration of the subjective reasons of the employee in tendering his or her resignation. I am not persuaded that reliance on subjective reasons is a necessary or inevitable consequence of the "gateway" approach. In such a case there would still seem to be a question as to how the provisions relating to medical opinions would operate (which I consider below).

136 On the trustee's approach, each of the sub-rules must be satisfied for an entitlement to a benefit to arise. That does not mandate acceptance of whatever might be the employer's subjective reasons. It seems to me that what Rule 23(a) requires is for the trustee to determine objectively (albeit having regard to any objectivity ascertainable subjective reasons of the employer and any other relevant information) what were the grounds for (or what was the basis of), the termination or cessation of Mr Sharp's employment. If there were underlying grounds or reasons for that termination that did not relate solely to (or to an event caused by) a physical or mental condition having the effect specified in the rule - such as, for example, unsatisfactory work performance or absenteeism not referable to a relevant physical or mental condition, then the condition in Rule 23(a) would not have been satisfied.

137 It seems to me unlikely that the operation of the scheme would have been intended to have the effect that entitlement to a benefit of this kind (based on what is clearly a serious event - total and permanent disablement) would be dependent on what were stated to be the reasons for termination of employment (in a dismissal case), particularly where, as here, the employer may not have had any knowledge of an underlying physical or mental condition that may have caused or resulted in conduct on which it has based its decision to terminate the employment.

138 For example, it surely would not have been intended (in a trust deed making provision for disablement benefits of this kind) that, simply because an employer had not turned its mind to whether the ground on which the employment was to be terminated (here, that an employee was in breach of strict safety requirements and acting in a manner dangerous to others) was due to a physical or mental condition, this would have the result that the member could not be entitled to a temporary or total or permanent disablement benefit. It seems to me that the clause does not in terms preclude consideration later being given as to whether the cause of the ground for which the employment was terminated was an underlying physical or mental condition and nor would a commercial operation require the member to be so precluded from claiming a benefit.

139 Although some of the correspondence at the time suggested that the matter had been approached by reference to the employer's subjective reasons for dismissal, in the course of argument both sides seemed to accept (and I consider it to be the case) that Rule 23(a) requires it to be established as an objective fact that the member's employment has come to an end solely because of the member's physical or mental condition at that time. Where the parties differ is as to the role of the medical opinions in the determination of that fact (and what weight can be placed on the subjective view of the employer in that process).

140 The opposing constructions of Rule 23(a) that are put forward in the present case are:

(a)on the one hand, that it operates as a gateway to the balance of the rule (such that if the trustee is not satisfied as to the matters specified in that condition or that condition is not satisfied as an objective fact then there can be no entitlement to a benefit under the rule and it is not necessary to consider the balance of the rule) (which I understand to be the effect of the trustee's construction); and

(b)on the other hand, that it has an introductory (or definitional) role but that ultimately the determination of entitlement rests on the medical opinions required pursuant to Rules 23(b) and (c) (which I understand to be the construction placed on the rule by the plaintiff).

141 Neither construction is particularly persuasive to my mind. The gateway approach seems to me to give insufficient weight to the operation of sub-rules (b) and (c) whereas the introductory or definitional approach seems to me to be inconsistent with the contemplation in Rule 23(d) that there is a determination to be made by the trustee (and would render Rule 23(a) in effect meaningless).

142 Mr Rayment submits that the trustee is obliged to act upon the medical opinions provided to it (if unanimous) or the deciding medical opinion as provided for under Rule 23(d) (if there is not unanimity); and that therefore an entitlement to a total and permanent disablement benefit has been established in this case on the basis that the medical reports of Dr Samaraweera and Dr Benjamin satisfy Rule 23(b) and the reports of Dr Reutens and Dr Rees satisfy the terms of Rule 23(c). (In effect, on this view of the Rule, the medical opinions will always trump any determination by the trustee as to whether Rule 23(a) is satisfied.)

143 It is submitted by Mr Rayment (and I accept) that under Rule 23 the trustee has no discretion to formulate its own opinion as to the reason for termination (contrary to that of the medical providers), reference being made to the observations of McDougall J as to the provisions of the same Trust Deed in Gilberg (at [47]):

In this case, entitlement to a TPD benefit depends, not on the formation of an opinion by SERF, but on the satisfaction of an objective process. A worker must go through the clause 17 process [now clause 23], and that process must result in a medical opinion (either by consensus, or of a single medical practitioner appointed in the case of a division of opinion) that the requirements set out in paragraphs (b) and (c) of clause 17 have been satisfied. As I have said already, in reality there is no element of discretion reposed in SERF. Nor is there any real element of judgment. To the extent that there is an element of judgment, that is left to the medical practitioners. (my emphasis)

144 However, in my view, some meaningful operation must still have been contemplated by Rule 23(a).

145 It is submitted by Mr Cavanagh that the operation of Rule 23(a) is that it goes to a question of fact (not a question of expert medical opinion), namely whether the sole ground for termination at the time was that Mr Sharp's physical or mental condition was such so as to render him permanently incapacitated within the meaning of Rule 23(a) (such that a combination of relevant and irrelevant grounds, for the purposes of the definition, would render Mr Sharp ineligible for the benefit). He submits that the trustee must be satisfied that this is established and that only then would medical opinion become relevant. (However, that contemplates the later duplication of a question already determined by the trustee under Rule 23(a) with no obvious answer as to what should happen if the later medical opinion reached a diametrically opposed view, other than to the extent that this follows from sub-rule (d).)

146 The difficulty I have had in construing Rule 23 (as I indicated during the course of Counsels' oral submissions at the hearing) is in arriving at a construction that gives a sensible meaning and operation both to the condition in sub-rule (a) and at the same time to the requirement for there to be medical reports as to the very same matter covered by Rule 23(a) and on which (at least in the context of a division of medical opinion) the trustee is required to base its determination.

147 I do not read sub-rule (a) as being no more than an introductory or definitional clause. If that had been the intent of the Rule, then it would more logically have been drafted as expressed as a definition of total and permanent disablement with a statement to the effect that, in order to satisfy that definition, the trustee must receive (and act upon) the said medical reports; in other words a provision that makes clear that the definition of total and permanent disablement is to be determined solely by reference to the medical reports. The rule is not so drafted. There is nothing that indicates that sub-rule (a) is anything other than one of a number of conditions (such as sub-rule (aa), which requires the application to be made within two years, subject to Rule 24) each one of which must be satisfied in order for a member to be entitled to the benefit. If so, then it must have been intended to have some meaningful operation. (Furthermore, although there is some temporal logic to the order of the sub-rules, other than sub-rule (aa) none is expressed to be subject to another sub-rule.)

148 Nor, however, do I consider sub-rule (a) to be no more than some kind of gateway through which one passes to the balance of the clause. I accept that, from a practical point of view, it may well be that there will be no need for the trustee to consider whether other conditions have been satisfied if sub-rule (a) has not itself been satisfied. However, for this to have been a pre-condition to the operation of the balance of the rule, then I would have expected the clause to be drafted such that, relevantly, sub-rules (b) and (c) were expressed to operate only once sub-rule (a) had been satisfied. Again, the clause is not so drafted.

149 McDougall J, in his construction of the same clause in Gilberg, referred to the rule as an objective process through which a member must progress in order to be entitled to a benefit. As indicated above, the rule can be seen as operating in a logical chronological sequence: first, it directs attention to the position as at the time of termination of employment; then as to the time frame within which a claim must be made; then as to the provision of medical reports (and, in sub-rule (d), provides a mechanism by which a difference of opinion in those reports is to be resolved); then it contains an exclusion (in sub-rule (e)) for the circumstance where a member has received or is due to receive a benefit under other specified rules.

150 To give sub-rule (a) a meaningful operation it must in my view be construed as requiring it to be established, as an objective fact, that the member's employment was terminated solely on the stated grounds.

151 However, meaningful operation must also be given to sub-rules (b) and (c). The difficulty in so doing is not only that it makes no sense to have the same fact determined twice but the suggestion that medical practitioners some time after the event are in a position to provide an expert opinion as to the factual grounds on which a member's employment has come to an end flies in the face of common sense.

152 There is no reason to expect that medical evidence would be necessary to determine the subjective reasons for termination of the member's employment (were that to be the test contemplated by sub-rule (a)). Similarly, one might think that there is no reason why medical evidence would be necessary to make an assessment as to what, ascertained objectively, were the grounds on which the employment came to an end (or, to use Mr Rayment's terminology, the matter by reference to which the cessation of employment is fully accountable). (Indeed, the difficulty posed by a suggestion that the medical experts can properly attest to what were the "grounds" for termination of employment that occurred at some earlier time by a third party is illustrated by the qualifications that are contained in the body of the reports made by Dr Reutens and Dr Rees, each of whom makes clear that her opinion in this regard is based on an assumption that the chronology or history of events provided to her is correct. By contrast, the requirement for a medical opinion as to the member's future capacity makes sense since this falls squarely within the doctors' expertise.)

153 Mr Rayment submits that the construction advanced by the plaintiff is supported by the fact that, where there is a division of medical opinion, Rule 23(d) provides that the opinion of an additional medical practitioner must be sought and that "the Trustee shall base its determination solely on the medical opinion of the additional medical practitioner so appointed". In that regard, however, the question is what is meant by "shall base its determination solely on" such a medical opinion.

154 If, as Mr Rayment contends, that means the trustee must accept whatever conclusion is reached by the additional medical practitioner as to the matter in sub-rule (c)(i) (and hence, by extension, the matter in sub-rule (a)), then I accept that would be a powerful indication as to the manner in which the rule was intended to operate in relation to the situation where there was no such division of medical opinion (since it would be illogical to expect a different operation in the two situations). That said, what sub-rule (d) also seems to contemplate is that (notwithstanding the provision of medical opinions) there is a further determination still to be made by the trustee (such that it does not appear that the trustee is no more than a rubber stamp once the medical opinions have been received).

155 I accept the force of the submission by Mr Cavanagh that it makes little commercial sense for Rule 23 to operate such that, up to two years after the cessation of employment, a member might be able to provide his or her own version of events to a doctor and thereby retrospectively reconstruct the circumstances of his or her dismissal so as to bring it within the ambit of the disablement benefit entitlement. However, by the same token, if the member's employment is terminated solely for reasons or on grounds that (unbeknownst to the employer or otherwise) are later recognised by unanimous medical opinion to have been caused by an underlying physical or mental condition suffered by the member at that time (being a condition such that the member is permanently incapable of performing his or her duties or is a danger to others in the workforce) then it makes no sense that the member should later be unable to claim a total and permanent disablement benefit simply because the condition was not recognised at the time.

156 To give a meaningful operation both to the requirement for the condition in Rule 23(a) to be satisfied and to the requirement under Rules 23(b) and (c) for medical opinions to be provided as to the very same matter the subject of Rule 23(a), it seems to me that Rule 23 should be construed as requiring:

• under sub-rule (a), that it be established as an objective fact that the termination (or cessation) of employment was solely on the ground(s) relating to (or fully accountable by reason of) the member's physical or mental condition at that time (being such as to render him or her permanently incapable of performing satisfactorily or being a danger to others) or solely on the basis of a situation or event is that is causally linked to such a condition; and
• under sub-rules (b) and (c), that the causal link (if any) between the particular ground or grounds of (or the underlying facts that account for) the termination of the employment and the member's physical or mental condition at that time are to be determined by medical evidence obtained as provided for in sub-rules (b) and (c). (Of course, the medical reports also need to address future circumstances, namely the permanence of the incapacity or danger represented by the particular medical condition, but in the present case that is not in issue.)

157 Accordingly, it would be for the trustee in the present case to satisfy itself (and would fall to be determined, if there were to be a dispute, as an objective fact) as to the ground or grounds on which, objectively viewed, Mr Sharp's employment came to an end and, if those grounds were solely related to a particular incident or incidents (or a pattern of behaviour) that, either then or later, are said to be causally linked to a relevant medical condition there would need to be medical opinions to confirm whether the said incidents had a sufficient causal connection with a physical or mental condition from which the member was suffering from at the time (that made the member permanently incapacitated or a danger to others). (If there were any grounds on the basis of which the employment came to an end at the relevant time that were not causally connected with such a medical condition, then the Rule would not be satisfied due to the focus on what were the sole grounds for termination.)

158 So construed, the process thus requires the objective ground(s) of termination to be determined and then reliance on medical opinion to establish the connection (if any) between those grounds and any physical or mental condition from which the member was suffering at the time. Such an approach is not in my view inconsistent with the conclusion reached by McDougall J in Gilberg that the rule requires a member to go through a process resulting in a medical opinion (either by consensus, or of a single medical practitioner appointed in the case of a division of opinion) that the requirements set out in paragraphs (b) and (c) of clause 17 have been satisfied; but it still requires the trustee to make a determination as to the grounds on which the termination of employment came to an end (and as to whether the medical reports satisfy the requirements of sub-rules (b) and (c)) before accepting a claim (that determination not being an exercise of discretion as to the trustee's opinion of causal effect of the medical condition on the events in question).

159 Were I to be wrong in this construction of the Rule (and I am conscious that it might be suggested that it involves an impermissible re-writing of the relevant parts of the Rule), then I consider that the construction contended for by Mr Rayment must be the proper construction of the Rule (since there must be some weight given to the express need for medical reports to attest to the very matter otherwise determined by Rule 23(a)).

(ii)Is Mr Sharp totally and permanently disabled for the purposes of the Rule?

160 In the present case, the trustee determined that Rule 23(a) had not been satisfied because it considered that there were other grounds for the termination of Mr Sharp's employment than grounds connected to a relevant physical or mental condition (namely the absenteeism and earlier poor conduct).

161 Mr Cavanagh points to the fact that in none of: the letter of termination dated 23 June 2006; the advice of termination of employment provided to the trustee in May 2007; and the letter dated 1 May 2008 from the employer to the trustee concerning the reasons for termination of employment, is reference made to any physical or mental condition.

162 It is submitted that if the contention of the plaintiff is correct then a member could satisfy Rule 23(a) by seeking medical advice after termination; being diagnosed with a psychiatric condition after termination; personally attributing all his or her previous poor performance and incidents at work to that medical condition (attributing a causal connection between such illness and the actions of the employer); and subsequently obtaining medical evidence, based on his or her own history given to the doctors, relating that poor performance to the medical condition (a process described, not without some justification, by Mr Cavanagh as one of retrospective reconstruction). In this regard, it is submitted that the communications between the parties prior to the termination of Mr Sharp's employment make it clear that his employment was not terminated solely on the grounds of the subsequently diagnosed mental condition.

163 Mr Cavanagh submitted that Rule 41(1) (which provides that the trustee shall be entitled to act upon a certificate signed on behalf of the employer of an Employee or Permanent Employee as to the termination of the Member's employment and to the cause therefor, including death, retirement, disablement, resignation, retrenchment, dismissal for misconduct or other reason) makes it plain that the trustee is entitled to act on the advice of the employer as to the cause of the termination of employment. Mr Cavanagh notes that the word "disablement" is used in that context.

164 Mr Rayment accepts that, on the strict wording of Rule 41, the trustee may not be "imprisoned" by such a certificate but argues that this simply indicates that if the trustee does have a decision-making role in respect of some aspects of Rule 23 then it may be authorised to act on the basis of the certificate about some matters relevant to that. However, Mr Rayment submits that Rule 41 does not mandate a particular construction of Rule 23 and, as I understand it, would not accept that this provision of the Trust Deed would go so far as to obviate the need for further enquiry by the trustee if it were presented with information to warrant such an enquiry. I agree.

165 In my opinion, the evidence establishes that the sole operative ground of termination was the conduct on 6 June 2006 that posed a danger to the safety of the plaintiff (and others) in the workplace, having regard to Mr Sharp's non-compliance with the safety rule when entering the isolated area on 6 June 2006 and his excessive speed when driving the machinery on that occasion. It is submitted by Mr Cavanagh that the suggestion that the ground for termination was solely the incident on 6 June 2006 is negated by an analysis of the file notes in the earlier correspondence. I disagree. I consider that the earlier warnings for absenteeism (while forming part of the history to which reference was made in the 23 June 2006 meeting) were not the operative cause of the termination. Ironically (given that Mr Rayment argued staunchly against reliance on the employer's subjective reasons) if one has regard to the subjective grounds for termination (in the sense of the reason(s) proffered by the employer for the termination), the actual termination letter seems to be predicated on the incident that occurred in early June 2006 (notwithstanding that reference is made to previous occasions on which deficiencies in work performance had been noted and had been the subject of warnings). In any event, I place weight on the fact that there was no attempt to terminate for absenteeism prior to the 6 June incident (although it was put forward as a ground for termination by Mr McMaster). The timing of the termination (and the justification based on danger to others) points to the dangerous conduct as the motivation for the termination.

166 Therefore I consider that for the purposes of Rule 23(a) the termination of Mr Sharp's employment was solely on the grounds of the incident on 6 June 2006 (although no doubt dissatisfaction with Mr Sharp's performance or work history may have played a part in making the employer more willing to rely upon that incident in order to bring the employment to an end, just as a sterling work record to that time might have led the employer to take a different course when faced with what seems to have been a clear breach of work safety directions).

167 While Mr Cavanagh submits that the employer's records and file notes (including the warning letters) are in evidence and are inconsistent with the evidence that Mr Sharp now gives as to the course of events (pointing to contrary explanations proffered by Mr Sharp to complaints of his work performance), it seems to me not implausible that Mr Sharp was attempting to mask the symptoms of his developing illness at the time, or that those symptoms were considered to be referable to things other than a recognised psychotic mental condition (and I note that the oral evidence given by Mr Sharp in cross-examination to the effect that employees on the waterfront tended to cover for each other might explain a lack of formal complaints by them as to his conduct).

168 The medical reports are unanimous that the termination was solely on grounds referable to the (subsequently diagnosed) mental condition. Relevantly, the medical reports obtained on instructions from the trustee indicate the likelihood that the mental condition had been developing over a period leading up to the time of termination and that it would be likely to have affected Mr Sharp's performance at that time.

169 Dr Rees' opinion was that one might not be able to pinpoint exactly at what time the mental condition was developing. If, shortly after the termination the employee is assessed and appears to be suffering from that kind of condition, then it might well be that there is an inference open that at the time of termination he was suffering from a mental condition that was likely to pose a danger to others and that a termination of employment based on the grounds of an incident causing a danger to others in light of that medical opinion might put it in the context of Rules 23(a), (b) and (c), meaning that there was objectively total and permanent disablement at that time.

170 It is submitted by Mr Rayment that, if Rule 23(a) requires determination of the underlying explanation for the termination of the employment relationship and the trustee is "imprisoned" by unanimous medical opinion, then this is not a case where there is a need to remit anything to the trustee (because the trustee was in the position where there was unanimous medical opinion about the relevant matters in sub-rules (b) and (c)) and the Court should simply make a determination as to total and permanent disablement. (Hence it is submitted that the Trust Deed can be enforced against the trustee without the need for establishing misconduct on the part of the trustee.) I do not accept that the trustee is "imprisoned" by the medical opinions insofar as the issue as to the identification of the sole cause for termination of the employment relationship is concerned (though it would be bound by unanimous medical opinion as to the causal link if any between that cause and a medical condition).

171 To the extent that the medical reports of Dr Reutens and Dr Rees are expressly predicated upon the chronology or history of events provided to them by or on behalf of Mr Sharp being correct, I consider that it is a matter for the trustee to consider whether it accepts that those medical reports do in fact satisfy sub-rule (c). If, for example, it were concerned as to the qualifications raised in the body of those reports as to the basis on which the apparently unqualified answers to the specific questions were given, then (consistently with the authorities on which reliance is placed by Mr Rayment) it would have a duty to make further enquiries or to seek further information in order to be satisfied that what had been provided by the doctors was an unqualified statement of opinion of the kind required by the rule.

172 I do not suggest that the trustee could not properly have acted on the basis of those medical reports having regard to the other information already provided, but I note that, at least to the extent that the Reutens/Rees reports are not on their face unqualified, this might have given rise to a not unreasonable query on the trustee's part as to whether the doctors' answers were or were not qualified.

173 (For completeness, I also note that although there is no reference in the incident reports to matters of the kind reported by Mr Sharp to the doctors examining him later (such as the paranoid delusions and the like), there are statements from work colleagues as to concerns they held in relation to Mr Sharp's work from a safety point of view (and to those concerns having been raised at least informally with the employer) that, if tested, might well disabuse the trustee of concern that this has been no more than an exercise in retrospective reconstruction.)

174 Therefore, while I do not consider that it would be open to the trustee simply to disregard medical reports (and to refuse a benefit) on the basis of its view that sub-rule (a) had not been satisfied, if (as I consider to be the case here) the respective medical reports raise a real question as to whether there was the necessary connection between the sole grounds for termination identified in accordance with sub-rule (a) and a relevant medical condition suffered at the time, and the trustee has not yet made any determination in that regard, I do not consider that the Court should usurp the trustee's role in making its own determination as to the entitlement to a benefit based on those reports (at least where there is nothing to suggest bad faith or an inability or unwillingness on the trustee's part to fulfil that function).

(iii)Alternative basis of plaintiff's claim

175 Mr Cavanagh submits that the claim brought by the plaintiff involves a challenge to the decision made by the trustee and that such a challenge is governed by the principles in Karger v Paul [1984] VR 161, though accepting that the application of those principles was considered in Finch (there in the context of a deed conferring a discretion on the trustee).

176 It has been accepted that there are circumstances in which, notwithstanding what was said in Karger v Paul, a trustee may practically speaking be compelled to articulate the reasons for a decision and those reasons may be the subject of review. In Maciejewski v Telstra Super Pty Ltd (1998) 44 NSWLR 601, Young J (as his Honour then was) referred with approval to what was said by Robert Walker LJ in Scott v National Trust [1998] 2 All ER 705 at 719, namely that:

If a decision taken by trustees is directly attacked in legal proceedings, the trustees may be compelled either legally (through discovery or subpoena) or practically (in order to avoid adverse inferences being drawn) to disclose the substance of the reasons for their decision.

and observed that:

Indeed, whilst trustees do not have to give reasons in a case where a plaintiff puts forward a prima facie case that the trustee's discretion has miscarried, the absence of reasons and the absence of any evidence before the Court as to what happened, will tend to make that prima facie case a virtual certainty.

177 As to the extent of the obligations owed by a trustee in making decisions in exercise of their fiduciary functions, his Honour there adopted the statement set out in Scott v National Trust (at 717):

Certain points are clear beyond argument. Trustees must act in good faith, responsibly and reasonably. They must inform themselves, before making a decision, of matters which are relevant to the decision. These matters may not be limited to simple matters of fact but will, on occasion (indeed, quite often) include taking advice from appropriate experts, whether the experts are lawyers, accountants, actuaries, surveyors, scientists or whomsoever. It is however for advisers to advise and for trustees to decide: trustees may not (except in so far as they are authorised to do so) delegate the exercise of their discretions, even to experts.

178 In Gilberg, where the plaintiff sought, in essence, the same relief that was here sought by Mr Sharp (in that he asked the Court to order that he receive the amount of the total and permanent disablement benefit to which he said he was entitled and interest or alternatively to award damages equivalent to the benefit for the alleged breach of duties implied by s 52 of the Superannuation Industry (Supervision) Act), on the basis that the trustee's failure to reconsider his application amounted to a breach of trust and hence that the Court should exercise the power in the trustee's place, McDougall J said at [14]-[18]:

Where, under a trust instrument, the powers of a trustee are discretionary, the basis on which the courts may review a trustee's exercise of discretion are limited. I summarised the position in Baker v Local Government Superannuation Scheme [2007] NSWSC 1173 at [2]-[8] as being that there are four recognised grounds of intervention:

(1) the trustee does not exercise the discretion in good faith;

(2) the trustee does not give real and genuine consideration to the exercise of the discretion.

(3) the trustee does not exercise the discretion in accordance with the purpose for which it was conferred; and

(4) if the decision was one to which no reasonable trustee could have come in the circumstances, taking into account the material available to the trustee.

It is clear that these grounds may, and in the usual case will, overlap to some extent.

There is sometimes identified a further ground for intervention. Where a trustee gives reasons, the Court may examine those reasons (unless the reasons were given in or for the purpose of proceedings in which the exercise of discretion is challenged). If, upon examination, the reasons are found to be unsound, then the Court may intervene. It may do so if (by way of example only) the reasons show that the trustee took into account irrelevant matters, or failed to take into account relevant matters.

The principles that I have stated find their source in cases dealing with discretionary trusts, other than superannuation or pension fund trusts. They have, however, been extended to, and applied in, cases dealing with such funds.

There is a real question as to whether those principles should be so applied, without modification; or whether some more specific principles should be evolved. In the case of an "ordinary" discretionary trust, the beneficiaries - or the members of the classes of beneficiaries - do not give value for their "rights". They are the objects of the settlor's bounty. But, in the usual case, members of a superannuation or pension fund do give value. They make contributions to the fund. Membership of a fund, and the benefits under it, are customarily part of a package of rights that attend contracts of employment. Further, the benefits are designed not to provide some windfall, but to secure the future of the members upon the occurrence of the events that give rise to the exercise of a relevant discretion. (my emphasis)

179 Weight was also placed by Mr Rayment on what was said by Nettle JA (with whom Redlich JA and Davies AJA agreed) in Alcoa, his Honour referring to the statement in Finch that "The duty of trustees properly to inform themselves is more intense in superannuation trusts in the form of the Deed than in trusts of the Karger v Paul type. It is extremely important to the beneficiaries of superannuation trusts that where they are entitled to benefits, those benefits be paid".

180 In Finch, unlike in the present case, the claim to the benefit in question depended on the formation of an opinion by the trustee as to the likelihood that he would ever engage in "gainful work". The High Court said that this was not a mere discretionary decision; rather, the power to take into account "information, evidence and advice the trustee may consider relevant" was coupled with a duty to do so. (Hence the Court considered that failure to seek relevant information in order to resolve conflicting bodies of material was a breach of duty, noting that the scheme was a strict trust and that "[a] beneficiary is entitled as of right to a benefit provided the beneficiary satisfies any necessary condition of the benefit".)

181 In Alcoa, at [40] and [41] Nettle JA said:

... In view of the importance of the trustee's opinion and its place in the scheme of the Fund, the availability of those powers imported a duty on the part of the trustee to exercise them to the extent reasonably considered necessary or expedient in order to reach a properly informed decision.

I allow that, on one possible view of Finch, it decided no more than that the trustee there was under a duty to seek relevant information in order to resolve conflicting bodies of opinion. If so, however, I agree with the judge that, in this case, the trustee was faced with conflicting bodies of opinion and so, in accordance with Finch, was under a duty to make the inquiries necessary to resolve the conflict.

and that (since the trustee was not satisfied the claim was made out) the prima facie inconsistencies between the medical reports required investigation.

182 In obiter dicta, his Honour then considered, at [47]-[48], the duty to make inquiries for reasons other than conflicting opinions:

So to conclude is sufficient to determine the outcome of this appeal. In case it matters, however, I add that I do not regard it as essential to the disposition of the appeal that it be possible to characterise the material before the trustee as comprised of conflicting bodies of opinion. Arguably, Finch may not have decided more than that a trustee faced with bodies of conflicting material is under duty to seek relevant information sufficient to resolve the conflict. But I do not regard that as setting the limit on a superannuation fund trustee's obligations to make inquiries. The better view of the cases seems to me to be that Mr Frost did not bear any onus of proof and that it was productive of error that the trustee proceeded as if he did. (my emphasis)

Perhaps it was incumbent on Mr Frost to put forward some material in support of his claim. Counsel for the trustee submitted that there was support for that proposition in the judgment of the New South Wales Court of Appeal in Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd. But assuming without deciding that it was incumbent on Mr Frost to put forward material in support of his claim, it is plain that he did just that. On any reasonable view of the matter, the material which he provided to the trustee in support of his application was capable of yielding an inference that he was TPD at the time of termination. Thereupon at least, if not before, the trustee came under a duty to give properly informed consideration to the application. Assuming, as the trustee says, it reached the view that Mr Frost's material was insufficient to found a properly informed decision (whether because of competing bodies of material or simply because of a dearth of material), the trustee was thereupon bound to make further inquiries.

183 Nettle JA at [54] confirmed that it was not a case that the member bears an onus of providing the trustee with sufficient evidence to prove his or her claim (referring to the statement of Bryson J (as his Honour then was) in Vidovic v Email Superannuation Pty Ltd (unreported NSWSC, Bryson J, 3 March 1995) that "The formation by the trustee of an opinion is not analogous to judicial or arbitral decision of a disputed question" and that there is no onus of proof on any person; there are no adversaries).

184 At [57], his Honour said:

As has been seen, in Finch the High Court held that the duty of a trustee properly to inform itself is "more intense in superannuation trusts in the form of the Deed than in trusts of the Karger v Paul type". It follows that, where a member of a superannuation trust fund claims to be entitled to a total and permanent disability benefit, and the claim depends on the formation by the trustee of an opinion by the trustee as to the likelihood of the member ever again engaging in work for which he is reasonably suited by education, training or experience, the formation of the opinion is not a "mere discretionary decision". The trustee is under a duty to give "properly informed consideration" to the application and, because "it is extremely important to the beneficiaries of superannuation trusts that where they are entitled to benefits, those benefits be paid", there is a "high duty" on trustees to make such inquiries as they may reasonably consider relevant in order properly to determine the application. (my emphasis)

and went on to say at [58]:

For the same reasons, I reject the trustee's alternative contention that, if it had a duty to make further inquiries, it discharged the duty by inviting Mr Frost to submit further material. As Young J (as his Honour then was) said in Maciejewski v Telstra Super Pty Ltd:

Very often if a trustee and its officers have acted fairly and conscientiously they will have ensured that sufficient material is before them, so that they can make a decision. However, it is just a complete "cop out" to act on material which ... is inadequate, and then say that the plaintiff has not supplied sufficient material. If the plaintiff has not supplied sufficient material then, if that is necessary to make a proper decision, it has to be obtained somehow or other. One cannot merely dismiss the plaintiff's claim out of hand.

185 At [59] - [60], Nettle JA said:

As the decision in Finch has enabled us better to understand, trustees of superannuation funds are no longer to be conceived of in the same way as custodians of charitable or family settlements through the exercise of whose absolute discretion settlors have chosen to channel their beneficence. The economic, industrial and ultimately social imperatives which inform the advent of the superannuation industry, not to mention that beneficiaries of the kind with which we are concerned in one way or the other invariably purchase their entitlements, are productive of legitimate expectations which the law will enforce. Superannuation fund trustees are bound to give properly informed consideration to applications for entitlements and, if that necessitates further inquiries, then they must make them. (my emphasis)

So to say does not mean that a trustee is required to do the impossible. Nor is it to suggest that a trustee is expected to go on endlessly in pursuit of perfect information in order to make a perfect decision. The reality of finite resources and the trustee's responsibility to preserve the fund for the benefit of all beneficiaries according to the terms of the deed means that there must be a limit. Like the judge below, I accept that a trustee is not under an obligation to go on endlessly seeking more and more information. It may also be that a trustee is not required to undertake any inquiries until and unless a claimant puts forward sufficient material to show that there is a case to be investigated. But, in this case, the trustee's failure in neglecting to make further inquiries is palpable. As I have said, the material which Mr Frost put forward in support of his claim went at least as far as establishing that he had a strong prima facie case of entitlement. If the trustee regarded that as insufficient, it was bound to make further inquiries sufficient to confirm or allay its concerns. (my emphasis)

186 In Finch, the High Court said:

The Trustee was trustee of a trust. It had a duty to distribute to those who fell within the definition of "Total and Permanent Invalidity" and a duty not to distribute to those who did not. That affected its role in relation to the forming of its opinion under limb (b). Forming that opinion was not a matter of discretionary power to think one thing or the other; it was an ingredient in the performance of a trust duty. That duty was owed to the Members, including the applicant. The applicant was not the object of a discretionary power of appointment. He was the beneficiary of a trust, and although the precise form and quantum of his beneficial interest was contingent on particular events, he did have a beneficial interest.

187 Finally, in relation to the question of relief for a breach of trust constituted by the failure by the trustee properly to consider an application made to it, I note that, on appeal, in Gilberg v Maritime Super Pty Ltd [2009] NSWCA 325, Hodgson JA (with whom Allsop P and Campbell JA agreed) said at [34] :

... where a Trustee has breached a trust by failing properly to consider an application made to it by a beneficiary, prima facie the applicant is entitled to an order that the Trustee properly consider the application. The court may decline to make such an order if the court is of the view that there is no reasonable possibility that the application will be acceded to, that is, that the material in support of the application is not such as to give a reasonable possibility that the Trustee, acting reasonably, will accede to it.

188 Mr Cavanagh submits that in the present case the approach of the trustee was supported by Rule 41(1) (to which I have referred above), which permits the trustee to rely on a certificate issued by the employer, and points out that the trustee has obligations to all members (including a duty not to pay benefits where entitlement thereto is not established). It is submitted that the trustee was entitled to act on the basis of information supplied by the employer as to the grounds that existed at the time of termination and that Trust Deed should not be interpreted in such a way that the trustee is obliged to 'second guess' the grounds of termination, since this would necessarily involve acting as the referee in a dispute between an employer and a member and that is not the trustee's duty.

189 Assuming for present purposes that the 22 June 2006 Notice of Termination form was the employee separation certificate to which the 23 June 2006 letter of termination referred, I accept that Rule 41 would permit the trustee (at least in the first instance) to rely on it, but this cannot in my view excuse the trustee from the duty to make further enquiries where it is on notice that the certificate might be incomplete or incorrect or where there is a basis on which the rule might otherwise apply even if the ground of termination was as stated in the certificate. (To that extent, reliance on the employer's Notice of Termination, even accepting it to be a certificate for the purposes of Rule 41(1), would seem to me to beg the question as to whether the conditions in Rule 23 have been satisfied since the Notice says nothing as to whether there was a causal connection between the stated ground of termination and any relevant medical condition.)

190 As to the proposition that the trustee is not required to 'second guess' the employer (or become embroiled in a dispute as to the basis of dismissal as between the employer and the employee), this seems to me to be inconsistent with what is recognised in Alcoa to be required on the part of the trustee in such a situation. Whether or not there be a dispute between employer/employee as to the lawfulness of the dismissal (and there was no indication in the present case as to whether there was any such dispute), the duty of the trustee is properly to consider a claim for the benefit provided under Rule 23 and to the extent that this requires a determination to be made as to the objective grounds for termination of the member's employment, then the trustee must make proper enquiries to satisfy itself as to what those grounds were (and as to the causal link between those grounds and any relevant medical condition of which it is made aware).

191 As noted earlier, Mr Cavanagh submits that what the plaintiff is endeavouring to do is retrospectively to reconstruct a position (through generalised evidence in statements, generalised submissions and incorrect histories given to doctors) to the effect that everything that happened at the workplace in 2006 or leading up to 2006 was because he was suffering from a mental condition (schizophrenia). I accept that there is some force to that contention - in the sense that the psychiatrists' reports are dependent on the history provided to them by Mr Sharp.

192 There was, however, other material also available against which Mr Sharp's subjective history of events might be tested (including the fact that Dr Samaraweera had first referred Mr Sharp to a psychiatrist prior to the termination of the employment and the signed statements provided to the trustee by the Toll employees in which concerns as to Mr Sharp's behaviour prior to the termination of his employment were noted). Further, the medical reports support a conclusion that the psychiatric disorder must have been developing over a period while Mr Sharp was employed (given the progressive nature of his condition). This does not seem to me to be a case where someone who was to all intents and purposes perfectly well at the time of termination of employment has retrospectively created a psychiatric disorder after termination in order falsely to claim a benefit. It seems more likely to be the case that it was not recognised until after termination of Mr Sharp's employment that he had been suffering at the time from such a medical condition (or that the condition that had led Dr Samaraweera before his termination to refer him to a psychiatrist was so serious as it subsequently transpired to be).

193 Mr Cavanagh relies on the Trustee Benefits Sub-committee meeting minutes as indicating that the investigation as to the position between 2007 and 2008 took place; that the trustee received relevant documents (and legal advice), on the basis of which it is said that the trustee made a decision that Rule 23(a) was not satisfied. I accept that the trustee did engage in a process of further investigation by raising the issue again with the employer both in 2008 and 2010. However, those enquiries did not produce much in the way of a meaningful response and I have some doubt as to whether it was consistent with the scope of the trustee's duty identified in Finch and Alcoa for the trustee to take what seems to have been a largely reactive role at that point (that said, once litigation was on foot it might well be said that the matter had been to some extent taken out of the trustee's hands and the decision was then before the Court for review).

194 Mr Cavanagh made plain that the trustee's view of the relevant provision is that this is not simply a medical exercise; rather, that the trustee takes the view that what is required by the Rule is, first, a consideration as to whether, as a question of fact, the matters referred to in sub-rule (a) are satisfied and, second, if those matters are satisfied then the process of obtaining medical evidence to support the member's incapacity or unfitness for work. In part I accept that submission, in the sense that if (on the material before the trustee) there is no basis to suggest that the matters in sub-rule 23(a) are satisfied then there surely would be no duty on the part of the trustee to incur the costs of obtaining medical reports. However, I do not accept that once medical reports were received that raised an issue as to the causal link between conduct on the basis of which Mr Sharp was dismissed and a mental condition, it would then be open to the trustee not to consider whether those reports relevantly affected the determination required to be made under Rule 23(a) (and, in any event, I do not consider that the trustee correctly determined the objective facts on which its decision under sub-rule 23(a) was based).

195 Pursuant to s 52 of the Superannuation Industry (Supervision) Act 1993, certain covenants are taken to be included in the governing rules of superannuation entities. These include, relevantly, covenants:

(a)to act honestly in all matters concerning the entity;

(b)to exercise, in relation to all matters affecting the entity, the same degree of care, skill and diligence as an ordinary prudent person would exercise in dealing with property of another for whom the person felt morally bound to provide;

(c)to ensure that the trustee's duties and powers are performed and exercised in the best interests of the beneficiaries; ...

196 Pursuant to s 55(3) of that Act, a person who suffers loss or damage as a result of conduct of another person that was engaged in contravention of subsection (1) (which provides that a person must not contravene a covenant contained, or taken to be contained, in the governing rules of a superannuation entity) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention. It is submitted by Mr Cavanagh that the trustee was not in breach of the obligations under the Act on the basis that it had formed its opinion in a fair and reasonable way. I accept that the trustee appears to have acted at least from 2008 with the benefit of legal advice and has on a number of occasions considered the matters relevant to Mr Sharp's claim and I do not consider that there could be said to be any finding that the trustee had behaved unfairly. In any event, this claim is no longer pressed and it is not necessary to make any finding on that aspect of the matter.

197 Mr Cavanagh's position ultimately was that if it were to be found that the trustee had misinterpreted sub-rule (a) (and had not performed some duty that it should have performed having regard to the proper construction of sub-rule (a)), then the matter should be remitted back to the trustee because it is in a position, having undertaken the steps required in sub-rules (b) and (c) now to make the requisite decision (having regard to what is found to be the correct construction of sub-rule (a)). It is submitted (and I agree) that this is not a case where there would be a concern that the trustee had in some way demonstrated through prior conduct that it would not make the right decision or had demonstrated some bad faith or a exercise a failure to take care; rather, all that would on that hypothesis have happened was that the trustee had acted on a misunderstanding or misinterpretation of the Trust Deed and it is said that the appropriate course in those circumstances is just to direct that the trustee make a decision based on that correct interpretation, and the result will follow.

198 I consider that the matter should be remitted to the trustee for consideration of the claim based on the finding I have made as to the sole ground for termination of the employment and the medical evidence that such a ground (the danger to safety posed by the 6 June 2006 incident) was caused by a mental condition falling within Rule 23(a). The trustee, at least from 2008, has acted with the benefit of legal advice. It has acted on a construction of the Rule that, on balance, I consider to be wrong but in circumstances where the Rule is by no means felicitously expressed. Had the issue arisen as to whether the trustee should be excused for breach of trust, then s 85 of the Trustee Act 1925 (NSW) would in my view be likely to have applied. As it is, it is not necessary to make any findings as to breach of duty.

Conclusion

199 I have set out above the construction that I consider gives a meaningful operation to the various parts of Rule 23 and is consistent with the commercial purpose of the deed (seen in the context that it is part of a superannuation scheme for members of the fund and intended to deal with all circumstances in which a member's employment comes to an end solely on grounds that are explicable by or referable to a physical or mental condition that renders the member totally and permanently disabled). (As noted earlier at [159], were that construction to be said to involve an impermissible re-writing of the Rule, then I would have adopted the construction contended for by Mr Rayment as being the proper construction of the Rule.)

200 I have found that the sole objective ground on which Mr Sharp's employment came to an end was the danger to safety posed by his conduct on 6 June 2006 in disobeying a direct safety order (by entry into an isolation area) and his excessive speed in operating the machinery in that area.

201 Each of the medical reports provided to or obtained by the trustee contains an express finding to the effect that the employment of Mr Sharp was terminated solely on the grounds that he had a mental condition at the time that rendered him permanently incapable of performing his duties satisfactorily or a danger to others. (I consider that those medical reports, though in terms addressing the question posed by sub-rule (a) should be read as relevantly determining the existence of a causal link between Mr Sharp's mental condition at the relevant time and the incident that is found to have caused the termination of his employment.)

202 As I understand it, the trustee has not, for the purposes of making the determination required under Rule 23, addressed the import of those reports on the matter required to be satisfied under sub-rule (a) (on the basis that the trustee, wrongly in my view, considered that the requirement for the termination to be solely on the stated grounds in sub-rule (a) had not been satisfied and, hence, that irrespective of whether the balance of the Rule was satisfied, the condition in Rule 23(a) had not been met).

203 If, as I consider to be established, the sole ground for termination objectively ascertained is as stated above, then Rule 23 requires consideration of whether that ground (namely the concern as to the danger posed to others by Mr Sharp's conduct on 6 June 2006) was attributable to a physical or mental condition of the kind described in Rule 23(a). That is a matter on which the clause contemplates that medical opinion will be relevant (and, to the extent that it goes to medical matters, ultimately decisive).

204 Although in the body of the medical reports obtained by the trustees it is clear that the opinions stated by Dr Reutens and Dr Rees are based on an assumption that the medical history provided to them by or on behalf of Mr Sharp is correct, it seems to me that there is material in the statements provided to the trustee (particularly the reference to concerns held and/or expressed by fellow workers as to Mr Sharp's conduct at the time) to support a conclusion that Mr Sharp's mental condition was developing prior to the event on 6 June 2006 and was manifesting itself in behaviour likely to be a danger to others. That, coupled with the apparent preparedness of the doctors (whose reports appear to me to be carefully considered) to provide unqualified answers to the particular questions posed of them, would seem to me to provide a sufficient basis on which the trustee (acting in accordance with its duties) could determine that the balance of the requirements in Rule 23 had been satisfied and that an entitlement to a total and permanent disablement benefit had been established.

205 However, it seems to me that it is not appropriate for the Court to assume the decision-making role of the trustee in that regard. There is no basis for any suggestion that the trustee will not properly carry out its duties in making a further determination as to the claim now that it has the benefit of a judgment in which the Rule is construed in its application to the present claim. It is clear that the trustee has not made a decision as to the claimed benefit having regard to the construction of the clause that I consider to be the correct one. Moreover, I do not accept that, simply because seemingly unanimous medical opinions have been obtained, the trustee is bound thereby (other than in relation to strictly medical opinion).

206 It may be (though I am by no means suggesting that this should be the case) that the trustee considers that further enquiry should now be made in order to satisfy itself as to the correctness of the matters or assumptions on which the medical reports of Dr Reutens and Dr Rees were issued.

207 Therefore, I consider that the appropriate course is to remit the matter to the trustee for further determination having regard to the above construction of the clause and to require the trustee to report back to the Court as to its determination of the claim within a specified period. I will hear Counsel as to the appropriate time frame for such a report.

208 As to the question of interest, I understand the position of the trustee to be that if the Court were to be satisfied that there was a total and permanent disablement claim established as at 2007 then interest would run from that time. However, I will hear any further submissions as to interest in light of the above findings (and costs) before making final orders.

209 At this stage, the orders that I propose to make are simply:

1.The plaintiff's application for total and permanent disablement benefit under Rule 23 of the Trust Deed be remitted to the trustee for further consideration having regard to the proper construction of the clause as found in these reasons.

2.Direct the trustee to report to the Court on or before a date to be fixed as to the further determination of the said claim.

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Decision last updated: 07 November 2012