2. Case Law
2.1 Recent New Zealand Decisions
Perpetual Investment Management Limited (2006) 9 NZCLC 264, 207
Perpetual is an Australian based fund manager and offered interests in Australian unit trusts to the New Zealand public under the terms of the Securities Act (Australian Registered Managed Investment Schemes) Exemption Notice 1999 ("the Exemption Notice").
Perpetual failed to file certain documents with the Companies Office within the tight timeframes required by the Exemption Notice. As a consequence, void allotments arose and Perpetual was required to repay subscriptions, plus interest at 10%, to 375 investors.
Perpetual applied to the High Court for relief from the obligation to repay investors under the relief provisions introduced into the Securities Act in 2004. Perpetual notified all investors of its application for a relief order. 374 of those investors did not object, meaning that it was mandatory for the Court to grant relief orders relating to their investments.
One investor objected to the relief order being made. The Court had a discretion to grant relief in relation to that investor and, in deciding whether to do so, was required to have regard to whether the contravention materially prejudiced the investor. The judge observed:
"The Court must be mindful of the purpose of the legislation. If there are purely technical breaches such as late filing of documents and no cogent reasons given by an objector as to how his or her interests have been "materially prejudiced" by such technical contravention, then it is obvious that the purpose of the legislation was to ensure that relief be granted."
The Court held that the failure to file documents with the Companies Office was a technical breach and that it did not materially prejudice the investor. Accordingly, the Court granted the relief order sought.
Whilst registered superannuation schemes do not offer interests in reliance upon the Exemption Notice, the relief provisions under the Securities Act where void allotments have occurred are of general application. The Perpetual decision is relevant to superannuation schemes that may have offered membership in breach of the technical filing requirements of the Securities Act.
Manning & 29 Ors v Hewlett Packard NZ LTD 13 June 2007, R Arthur, AA 175/07
In this Employment Relations Authority decision, an order was made removing the matter to the Employment Court under section 178(2)(a) of the Employment Relations Act.
The 30 applicants were members of the Hewlett Packard (New Zealand) Limited Retirement Plan, an employee superannuation scheme. The respondent stopped paying superannuation contributions to the applicants without providing them with any compensation for loss of the contributions. The dispute centred on the process for change and closure of an employee superannuation scheme.
The case in the Employment Court will address "what amounts to a condition, the extent of obligations under such conditions and the ability to change those conditions". Those questions are of heightened interest and importance to both employers and employees looking at changes to their existing superannuation scheme arrangements with the introduction of KiwiSaver and the possibility of compulsory employer contributions to KiwiSaver schemes from1 April 2008.
The Dark v Weenink decisions
These three decisions of the High Court serve as a useful practical example of the circumstances in which trustees should consider seeking directions from the Court or at least the circumstances in which they should not rely solely upon legal advice obtained by an interested employer.
Dark v Weenink [2005] BCL 810
This decision involved a claim against the trustees of an employment superannuation scheme by the widow of scheme member Mr Dark.
The Court considered whether the circumstances in which Mr Dark died, owing money to the Company, prejudiced his death benefit. The decision confirmed that the trust deed provision at the centre of proceedings, involving forfeiture in circumstances where a member who was either dismissed from service or had left service to avoid dismissal on the grounds he owed money to the company, did not operate so as to override the death benefit. Further, the Court indicated that had it been relevant it would have been prepared to grant relief against forfeiture to the extent that operation of the defalcation clause would have reduced the benefit payable by more than the amount of the loss.
However, the Court dismissed Mrs Dark's claim, on the basis that she was only a potential beneficiary and the trustees needed to exercise their discretion to decide upon the recipient of the death benefit, before she could take things any further.
Dark v Weenink 5/2/07, Winklemann J, HC Auckland
The February decision related to a claim by Mrs Dark for her costs to be met out of the scheme. The trustees took the line that costs should lie where they fall, on the basis that Mrs Dark did not succeed in her pleaded causes of action. They argued that as they were successful on all causes of action, the fair outcome was for each party to meet their own costs.
The Court disagreed. The essential issues before the Court in 2005 were whether the forfeiture provision in the trust deed applied to death benefits. If it did, had Mr Dark been dismissed on the specified grounds, or had he left to avoid such dismissal. If not, the death benefit provision would come into play.
The February 2007 decision confirmed that the above issues could all have been the subject of an application for directions by the trustees. Whilst Mrs Dark's original claim had been unsuccessful in that the trustees were not required to exercise a discretion in her favour, she had successfully challenged the trustees' interpretation of the forfeiture provision. She had also successfully challenged the company's assertion that Mr Dark had been dismissed on specified grounds or left service in order to avoid such dismissal.
The trustees' argument that the situation should be treated as a hostile claim contrary to the interests of the scheme was rejected. If Mrs Dark had not brought the proceedings, then the forfeiture of the death benefit would have stood, meaning Mrs Dark was a necessary party to the proceedings and acted reasonably in bringing them.
The quantum of costs for which Mrs Dark was entitled to be indemnified was finally resolved in Dark v Weenink (No 2) 16/4/07, Winklemann J, HC Auckland
2.2 Significant Overseas Decisions
Steria Ltd and ors v Hutchison and ors [2006] EWCA 1551 and Hodgson v Toray Textiles Europe Limited [2006] EWHC 2612 (Ch)
Steria Ltd and Ors v Hutchison and Ors and Hodgson v Toray Textiles Europe Ltd are two recent British cases regarding pension schemes. They may have implications for the situation where informal documentation is at odds with formal trust deeds and scheme rules.
In both cases representations made in supporting documents were at odds with the information contained in the formal trust deeds. The supporting documents contained a statement to the effect that in any question of interpretation the trust deed and rules prevailed over the booklet.
Both cases gave rise to various claims of estoppel, as claimants contended that the informal documents conveyed a false impression of the benefits available under the scheme which they then relied on. In both instances it was found to be an insurmountable hurdle that the booklets in question contained statements that they were subject to the terms and conditions of the formal documents. Accordingly, claimants could not reasonably be held to have relied on the representations in the booklet.
In each Court's view, a decision to the contrary would mean a booklet of that kind would override the rules, when the booklet itself clearly says this is not the case.
These cases are a reminder of the importance of including statements to the effect that the relevant trust deed will prevail over conflicting terms in supporting documents. Given fair trading and employment law implications, however, the decisions do not detract from the importance of trustees ensuring that any documentation produced in support of a scheme is not at odds with the terms of the governing trust deed.
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