In brief

Judicial thinking about the principles of construction applicable to the interpretation of written documents evolves over time. Most of the commentary naturally focuses on contract law. Although the discussion rarely turns to the application of these principles to the construction of a trust deed, the Courts in Australia and in England have consistently accepted that the principles governing the interpretation of a contract apply equally to the interpretation of deeds including trust deeds.1 It follows that the principles applied in several recent decisions concerning the interpretation of contracts are equally applicable to the interpretation of trust deeds, even where the question is whether the deed actually created a trust.2

A recent summary of the principles

The decision of the High Court in Electricity Generation Corporation v Woodside Energy Ltd3 contains a recent and valuable summary of the Court’s current thinking on the matter. The main issue in the case involved the interaction between an obligation on the part of the sellers to use 'reasonable endeavours' to supply additional gas and a possible qualification to that obligation based on the sellers’ entitlement to take into account 'all relevant commercial, economic and operational matters'. In their joint judgment French CJ, Hayne, Crennan and Kiefel JJ said:

"… this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean. That approach is not unfamiliar. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract. Appreciation of the commercial purpose or objects is facilitated by an understanding "of the genesis of the transaction, the background, the context [and] the market in which the parties are operating". … unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption "that the parties … intended to produce a commercial result". A commercial contract is to be construed so as to avoid it "making commercial nonsense or working commercial inconvenience".

In upholding the qualification, the High Court confirmed that the rights and liabilities of a party to a contract are to be interpreted objectively. The subjective intention of the parties is not relevant, however their knowledge of surrounding circumstances may be relevant in determining the meaning and legal effect of the contractual terms.4 The Court emphasised that, unless a contrary intention is indicated, a commercial contract is to be construed so as to avoid it 'making commercial nonsense or working commercial inconvenience'. With the possible exception of the reference to 'commercial inconvenience', the approach taken in Woodside is consistent with that of the High Court in Codelfa Construction Pty Limited v State Rail Authority of New South Wales where Mason J said:5

"The true rule is that evidence of surrounding circumstances is admissible 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".

The status of Codelfa as a binding authority has been emphatically affirmed by the High Court in taking the unusual course in publishing the reasons of Gummow, Heydon and Bell JJ for refusing the application for leave to appeal in Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45. Their Honours said:6

"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 Council7 and it should not have been necessary to reiterate the point here".

Their Honours quoted with approval the comment of the primary judge in that case that:

"A court is not justified in disregarding unambiguous language simply because the contract would have a more commercial and businesslike operation if an interpretation different to that dictated by the language were adopted".

The principles are agreed but, as they say, 'the devil is in the detail'. Informed minds may differ as to whether the language of a contract has a plain meaning or is ambiguous. They may differ as to what is 'commercial nonsense' or 'commercial inconvenience' or, in an extreme case, whether a particular interpretation produces an absurd result.8

What is clear is that the principles in Codelfa and in Woodside Energy apply not only to deeds in general but also to superannuation or pension scheme documents. InAnsett Australia Ground Staff Superannuation Plan Pty Limited v Ansett Australia Limited in the course of a comprehensive examination of the issue, Warren J (as the Chief Justice then was) held that 'there are no special rules governing the construction of pension scheme documents' and added that:

"… It is repeated throughout the authorities that the approach of the court on construction [of such documents] should be practical and purposive".9

Consistently with the rule articulated in Codelfa, where the Court finds itself asked to consider unambiguous language in a trust deed it will not ignore the plain meaning of that language. Ambiguous language, however, calls for a different approach.

In Cadbury Pty Ltd v Mercer Investment Nominees Ltd,10 for example, the Court had to consider instances of both unambiguous and ambiguous language. The case concerned the proper interpretation of a clause which provided for a greatly enhanced benefit to be paid to Senior Executive Members of a superannuation fund who left the 'the service of the Employer before the Normal Retirement Date following a Change of Control but not more than 12 months after Relevant Date' [emphasis added]. Two questions as to the interpretation of this provision were raised: first, whether, in the context of a demerger, an internal reorganisation which inserted another group company (Cadbury plc) as the ultimate holding company above the previous holding company (Cadbury Schweppes plc) was a 'change of control' within the meaning of the provision, and second, whether the word, “following” indicated a temporal or a causative relationship.

The first question - unambiguous language

In relation to the first question, it was argued that the clause was intended to apply only if the change vested control in an outsider to the group and not to a purely internal reorganisation. Windeyer AJ rejected this submission, with respect correctly, holding that there was no question of ambiguity in the definition of 'Holding Company' which specifically named Cadbury Schweppes plc or in the definition of 'Change of Control' which expressly stated that there would be a change in control where 'Cadbury Schweppes plc ceases to be the Ultimate Holding Company'. That being so, the Court would not have been justified in disregarding the unambiguous language and considering whether the contract would have a 'more commercial and businesslike operation' if a different interpretation were adopted.

His Honour therefore went on to consider if the effect of the plain words was 'so absurd that this could not be what the parties intended'. Relying on the Court of Appeal decision in Jireh International11 and the cases mentioned therein, his Honour was not persuaded that an unearned and unexpected windfall for the Senior Executives was a sufficient basis to conclude that the literal words led to an absurdity. As his Honour said, 'An unexpected result is not an absurd result'. His Honour admitted that, 'To some extent absurdity relies on impression', to which one may add that cases of absurdity are few and far between. They are at the extreme of the leeways of choice open to a court and it would be difficult to argue with Windeyer AJ’s decision on this point.

The second question – ambiguous language

So much may be accepted in relation to the first question. However the second question raises a different issue. Dictionary definitions of 'following' cited to the Court included both the temporal and causative meanings and, at the outset of his reasons on this point, Windeyer AJ stated, 'There is no doubt that there is ambiguity here'. This is precisely the circumstance which calls for the constructive interpretation sanctioned in Codelfa and reaffirmed in Woodside Energy and the practical and purposive approach to which Warren J referred in the Ansett Superannuation case.

In addressing the question Windeyer AJ said that 'as a matter of impression' he considered the more usual meaning of 'following' to be 'after'. His Honour found some support for this meaning in other provisions of the document which referred to benefits being payable or not 'due' to some contingency. There was also a reference to the retirement of a member from the service of the employer 'as a result of' a particular event. His Honour said that as 'clear causative words have been used in closely related provisions', this pointed to the temporal meaning. His Honour referred to evidence of surrounding circumstances being admissible but said that it was of little assistance. It is not clear to what evidence his Honour was referring and he did not elaborate. Regrettably his Honour did not appear to consider the purpose of the clause or to explore why the document would provide for a very significant additional benefit to be given to those who happened to leave after a change of control but without there being any connection to the event. Consideration of the commercial purpose of the deed might have suggested that the enhanced benefit was intended to compensate for the premature departure of senior executives where a change of control led to their departure. The compensation aspect would also explain why the benefit decreased the closer the departing employee was to retirement age. It would have been helpful to have had the benefit of an analysis along these lines but in the absence of an appeal the matter must rest there.

Superannuation trusts involve a commercial relationship

Any doubt that the principles articulated in Woodside concerning commercial contracts apply to superannuation trusts must be laid to rest given that the courts, particularly in New South Wales, have consistently recognised that the benefits conferred by the trust are to be interpreted in the context of the fact that the superannuants are not volunteers but have effectively purchased their benefits by, in the case of an employer-sponsored fund operated by the employer, the provision of labour by them to the employer.

In the case of public offer funds, superannuants have similarly purchased their benefits, either by way of labour which translates to employer contributions and/or money in the context of personal contributions.

Against this backdrop, one needs to consider the availability of remedies where there is an apparent anomaly between the plain meaning of a key provision or provisions of a superannuation trust deed and an equally clear commercial intention.


Rectification involves judicial intervention to make an order to correct the trust instrument which by mistake does not reflect the true intention of the parties. It may also apply where only one party is mistaken if the other party has acted unconscionably in the adoption of the document.12 The remedy is applicable to correct the instrument so that it accurately reflects the relevant intention.13

At the first level of interpretation, it follows from the above that rectification would not be necessary if, in fact, the proper interpretation of the relevant provisions is consistent with the intention of the parties.14 But if that test is not met (albeit, in the wake of Woodside and Visy Paper Pty Ltd v Glass Granulates Pty Ltd15 it should be easier to substantiate those intentions) then rectification should be considered.

A useful expression of the nature and effect of rectification emerged in the case ofExxonMobil Superannuation Plan Pty Ltd v Esso Australia Pty Ltd16 where there was a discord between the provisions of a written instrument and the intention of the parties.17

For rectification to be granted evidence needs to be adduced to the effect that, as a result of the mistake, the document which purports to state or record the terms of the transaction does not accurately express the intention of the parties at the time when the document was adopted. This will be relevant when there are at least two parties to the superannuation trust deed at the time that the relevant trust was settled or amended. However, it is more common now for a superannuation trust deed to be deed poll executed by the fund trustee. In that case (where there is a mistake), it must also be shown that the Trustee made a mistake in expressing the terms of the trust.18

In Cadbury Pty Ltd v Mercer Investments Nominees Ltd19rectification was not mentioned presumably because the requisite evidence was not available. However, had there been such evidence the remedy may have been appropriate. In AMP (UK) plc v Barker20a very similar claim was held to attract the remedy of rectification. InAMP, the parties had intended to amend the governing rules of a pension fund to improve the benefits that were payable in the case of incapacity. The error in the deed of amendment was that the parties had unintentionally also increased benefits to those who were not incapacitated.


So how is the construction of documents different from rectification? In Pink Floyd Music Ltd v EMI Records Ltd21, Lord Neuberger MR considered that the ‘fundamental difference between interpretation and rectification’ is, in the case of rectification, the ability to use prior negotiations to establish the intention of the parties. However, an alternative view put forward by Professor John Carter takes account of the availability of rectification where there has been unconscionable conduct:

‘[A]s a matter of principle there is a difference between mistakes which can be ‘corrected’ by construction and mistakes for which a formal order is required. The fact that rectification is a remedy informed by matters such as the prevention of unconscionable conduct must still have some relevance.’22


This then leads to the third area of focus which is the amendment of a superannuation trust deed. It is beyond the scope of this article to expound or expand on the powers of a superannuation trustee when making amendments to a trust instrument. Clearly, cases such as Lock v Westpac Banking Corporation23AMP (UK) plc v Barker24 and ExxonMobil Superannuation Plan have added materially to the jurisprudence in this area.

Similarly, the judicial reasoning by the Court of Appeal of the Supreme Court of New South Wales (NSWCA) in Manglicmot v Commonwealth Bank Officers Superannuation Corporation Pty Ltd25 emphasised that the key duty of best interests attaching to trustee powers, including the power of amendment, is one that is primarily focussed on inputs and on the proper motivation of the trustee in exercising that power.

In the case of amendments, this equates to the trustee making an amendment which is consistent with the interests of the members and other beneficiaries. This is not to say that the amendment may not serve other purposes, but its validity must be evaluated always through the prism of the interests of all beneficiaries. It is also important to remember the statement of Lindley LJ in Re Hurst26:

“The conduct of trustees ought to be regarded with reference to the facts and circumstances existing at the time when they had to act and which were known or ought to have been known by them at the time”.

Hoffmann J in Nestle v National Westminster Bank27 also stated:

"in reviewing the conduct of trustees over a period of more than 60 years one must be careful not to endow the prudent trustee with prophetic vision or expect him to have ignored the received wisdom of his time".

An important qualification to this discussion is where the purpose of the amendment would arguably conflict with the interests of beneficiaries. Various cases in this vein have been considered by the Courts, mostly where the amendment sought concerned remuneration of the trustee. For example, in Cuesuper28 and most recently in the REST29 case, the Court was approached to confirm the validity of an amendment which would enable directors of the trustee company to be paid even though, at least in the REST case, payment of directors’ fees was provided for by the trust deed as a third party expense rather than, technically, as an issue of the remuneration of the trustee. The applicant trustee in each case was concerned to obtain the Court’s approval so as to resolve address any potential conflict. In each case the Court approved the amendment.

If an amendment cannot be validly made, Courts have varying powers under the relevant State Trustee Acts to order an amendment of a trust deed in certain situations. In this context, the recent decision of the New South Wales Court of Appeal in Re Dion Investments Pty Ltd30 is relevant. The case concerned a question of statutory construction, namely whether section 81(1) of the Trustee Act 1925(NSW) permits the Court to confer on a trustee the power to alter the terms of the trust. In summary, the section authorises the Court, among other things, in the management or administration of trust property, to confer on the trustees 'either generally or in any particular instance' the power to enter into, 'any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction' if the Court is satisfied that it is expedient to do so.

In Dion the Court of Appeal held that section 81(1) does not permit the Court to make an order allowing a trustee a general power of amendment. The Court held that s 81(1) permits the Court to authorise transactions (whether generally or in particular) that in the management or administration of trust property are 'expedient' to be undertaken, even where to do so supplements or overrides the terms of the trust but it does not permit alteration of the terms of the trust instrument.

The Court made it clear31 that its position does not affect the operation of a provision of the trust instrument permitting variation of the terms of the trust, nor does it affect the power of beneficiaries who are all absolutely entitled and all sui juris, unanimously, to put an end to the trust or to vary its provisions. Nor would it affect either the availability of rectification where the conditions outlined above can be met or a trustee’s right to seek judicial advice about the interpretation of a trust deed under section 63 of the Trustee Act 1925 (NSW).