Australian Prudential Regulation Authority v Kelaher

• Jurisdiction: Australia Federal only
• Judge: JAGOT J
• Judgment Date: 20 September 2019
• Neutral Citation: [2019] FCA 1521
• Court: Federal Court
• Date: 20 September 2019

FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Kelaher [2019] FCA 1521

File number:	NSD 2274 of 2018
Judge:	JAGOT J
Date of judgment:	20 September 2019
Catchwords:	SUPERANNUATION – whether two entities and their directors contravened s 52 and s 52A of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) – trustee’s duties – duties of trustee directors – alleged contraventions of statutory covenants – care, skill and diligence – best interests of the beneficiaries – conflicts of interest – whether the governing rules of the trusts exclude liability for the alleged contraventions – prudent person and prudent superannuation trustee standards of care – inadequate proof of contraventions – application dismissed
Legislation:	Corporations Act 2001 (Cth) s 601FB(2), Pt 2D.1 Evidence Act 1995 (Cth) s 140 Explanatory Memorandum, Superannuation Legislation Amendment Trustee Obligations and Prudential Standards) Bill 2012 (Cth) Superannuation (prudential standard) determination No. 1 of 2012 (Operational Risk Financial Requirement SPS 114) Superannuation (prudential standard) determination No. 7 of 2012 (Prudential Standard SPS 521) cll 8, 10, 11, 16 Superannuation Industry (Supervision) Act 1993 (Cth) ss 3, 7, 10(1), 51, 51A, 52, 52(a), 52(b), 52(2)(b), 52(2)(c), 52(2)(d), 52(d)(i), 52(2)(d)(iv), 52(4), 52(8), 52(8)(a), 52A, 52A(d)(i), 52A(2)(b), 52A(2)(c), 52A(2)(d), 52A(2)(f), 52A(3), 54B(1), 54B(2), 55, 55(1), 55(3), 56, 56(1), 56(1)(a), 56(2), 56(2)(a)(1), 56(2)(a)(ii), 56(2A), 57, 57(2), 60A, 115 Superannuation Legislation Amendment (Trustee Obligations and Prudential Standards) Act 2012 (Cth) Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Act 2019 (Cth)
Cases cited:	Apostolovski v Total Risk Management [2010] NSWSC 1451; (2010) 79 NSWLR 432 Australian Securities Commission v AS Nominees (1995) 62 FCR 504 Australian Securities and Investments Commission v Drake (No 2) [2016] FCA 1552; (2016) 340 ALR 75 Australian Securities and Investments Commission v Healey [2011] FCA 717; (2011) 196 FCR 291 Australian Securities and Investment Commission v Letten (No 17) [2011] FCA 1420; (2011) 286 ALR 346 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Commonwealth Bank Officers Superannuation Corporation Pty Ltd v Beck & Anor [2016] NSWCA 218 Cowan v Scargill [1985] 1 Ch 270 Daniels v Anderson (1995) 37 NSWLR 438 Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 Elder’s Trustee and Executor Co Ltd v Higgins (1963) 113 CLR 426 Finch v Telstra Super Pty Ltd [2010] HCA 36; (2010) 242 CLR 254 HIH Insurance Limited (in prov liq) v Adler [2002] NSWSC 171; (2002) 41 ACSR 72 In re Chapman [1896] 2 Ch 763 Karger v Paul [1984] VR 161 Manglicmont v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2010] NSWSC 363; (2010) 239 FLR 159 Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd [2011] NSWCA 204; (2011) 282 ALR 167 Mercer Superannuation (Australia) Limited v Billinghurst [2017] FCAFC 201; (2017) 255 FCR 144 Morley v ASIC [2010] NSWCA 331; (2010) 81 ACSR 285 Nestle v National Westminster Bank [1993] 1 WLR 1260 Saker Re; Great Southern Managers Australia Ltd (recs and mgrs. apptd) (in liq) (No 2) [2011] FCA 958; (2011) 85 ACSR 211
Date of hearing:	1 - 3, 10 - 12, 15 - 17 July 2019
Registry:	New South Wales
Division:	General
National Practice Area:	Commercial and Corporations
Sub-area:	Regulator and Consumer Protection
Category:	Catchwords
Number of paragraphs:	873
Counsel for the Applicant:	Mr R Dick SC with Ms F Roughley and Mr J Entwisle
Solicitor for the Applicant:	Gadens Lawyers
Counsel for the First Respondent:	Mr R Newlinds SC with Mr R Yezerski
Solicitor for the First Respondent:	Arnold Bloch Leibler
Counsel for the Second Respondent:	Mr AJL Bannon SC with Ms S Mirzabegian and Ms S Palaniappan
Solicitor for the Second Respondent:	Jones Day
Counsel for the Third Respondent:	Mr DB Studdy SC with Ms S Tame
Solicitor for the Third Respondent:	Watson Mangioni Lawyers
Counsel for the Fourth, Fifth, Sixth and Seventh Respondents:	Mr N Hutley SC with Mr N Owens SC, Mr J Redwood, Ms D Forrester and Mr B Holmes
Solicitor for the for the Fourth, Fifth, Sixth and Seventh Respondents:	King & Wood Mallesons

ORDERS

		NSD 2274 of 2018
BETWEEN:	AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY Applicant
AND:	CHRISTOPHER FRANCIS KELAHER First Respondent ; GEORGE VENARDOS Second Respondent ; DAVID COULTER (and others named in the Schedule) Third Respondent

JUDGE:	JAGOT j
DATE OF ORDER:	20 September 2019

THE COURT ORDERS THAT:

1. The amended originating application be dismissed.

2. The applicant pay the respondents’ costs as agreed or taxed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1 THE PROCEEDING	[1]
2 SECTIONS 52, 55, 56 AND 57 OF THE SIS ACT	[8]
3 THE STATUTORY COVENANTS	[23]
3.1 The legislation	[23]
3.2 Care, skill and diligence covenant, s 52(2)(b) and s 52A(2)(b)	[27]
3.3 Bests interests of beneficiaries, s 52(2)(c) and s 52A(2)(c)	[47]
3.4 No conflicts, s 52(2)(d) and 52A(2)(d)	[66]
4 CORPORATE STRUCTURE	[82]
5 THE SERVICES ARRANGEMENTS	[90]
6 RESERVES	[113]
6.1 The ORFR	[113]
6.2 The general reserve	[128]
7 ADDITIONAL PRELIMINARY MATTERS	[134]
7.1 The use of IOOF documents as admissions	[134]
7.2 The use of APRA opinions	[137]
7.3 The Group’s alleged profit motive	[141]
7.4 APRA’s use of the minutes of board meetings

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