As reported in our Super Update August 20101, this case arose from the rejection by Telstra Super Pty Ltd (Trustee) of Mr Finch’s claim for a total and permanent invalidity (TPI) benefit from the Telstra Superannuation Scheme (which was a ‘self insured’ benefit).

The matter was first heard by Byrne J in the Supreme Court, in which Mr Finch was successful, then the Trustee appealed to the Court of Appeal and won. Mr Finch then applied for special leave to appeal the decision of the Court of Appeal to the High Court, which application was referred to an enlarged bench of five for hearing as if on appeal on 2 September 20102. The special leave application as well as the substance of the appeal were then heard by the enlarged bench at the same time.

One of Mr Finch’s arguments for special leave to appeal was that the principles set out in the case of Karger v Paul [1984] VR 161 should not be applied to decisions of superannuation fund trustees because of the special nature of superannuation funds. That is, he argued that the standard of review should not be set too high because otherwise it is difficult for members of superannuation funds to challenge trustee decisions. The argument was that the High Court should redesign the test so that a court can review a trustee’s decision if it is unfair or unreasonable (like the SCT review test). This argument was not put at trial or in the Court of Appeal.

The High Court’s decision was delivered on 20 October 2010, Finch v Telstra Super Pty Ltd.3 The High Court granted special leave to appeal and found for Mr Finch, remitting the matter back to the Trustee for reconsideration. The orders of the Court of Appeal were set aside, effectively restoring the orders made by Byrne J of the Supreme Court at first instance. The decision is significant in terms of the court ‘raising the bar’ for trustee decision-making. Although the law was not changed as significantly as counsel for Mr Finch had argued it should be, there is a qualification to be placed on the old Karger v Paul test which will have practical ramifications for trustees.

High Court’s decision

The principal issue concerned the duty of a trustee to give genuine consideration in the exercise of its powers. The High Court found that the Trustee had not satisfied this test in the particular (and complex) circumstances of this case.

Six month aspect of TPI definition

Under the relevant division of the Telstra Superannuation Scheme trust deed, a member was entitled to a TPI benefit if the member ceased employment because of TPI. Relevantly, the TPI definition had 2 limbs:

‘Total and Permanent Invalidity’ means, in relation to a Member, disablement as a result of which –

a.unless otherwise agreed between the Trustee and the Principal Employer from time to time either generally or in any particular case, the Member has been continuously absent from all active Work for a period of at least six months…; and the opinion of the Trustee after consideration of any information, evidence and advice provided to the Trustee by the Employer and any other information, evidence and advice the Trustee may consider relevant, the Member has ceased to be an Employee and is unlikely ever to engage in any gainful Work for which the Member is for the time being reasonably qualified by education, training or experience.  

Mr Finch contended that the requirement in ‘limb (a)’ regarding the six month absence was satisfied because he was absent from all work for over 6 months by the time the Trustee made its decision (whereas the Trustee contended that the absence had to have been before ceasing employment with Telstra, the Principal Employer, which requirement he did not satisfy).

The High Court found for Mr Finch, and held that limb (a) of the definition did not require Mr Finch to be continuously absent from work for 6 months before leaving Telstra’s employment. His absences from work after he left Telstra’s employment enabled him to satisfy that part of limb (a).


On the question regarding the nature of a trustee’s decision concerning a member’s claim for a disablement benefit, the Court of Appeal had treated the decision of the Trustee to form or not form an opinion under limb (b) of the definition of TPI as a discretionary decision.

However, the High Court found that the present case was not one involving a discretion. In forming an opinion on whether the member was unlikely ever to engage in gainful work, the High Court held that –

there are no doubt factors to be examined which are difficult to weigh, impressions to be formed, and judgments to be made, but the field is quite different from fields in which the competing claims of potential candidates for bounty are compared. [paragraph 29]  

Accordingly, the Trustee had a ‘duty’ to distribute to those who fell within the TPI definition, and forming that opinion was an ingredient in the performance of a trust duty and not a matter of discretionary power. The High Court found that Mr Finch ‘was not the object of a discretionary power of appointment’, he was instead:

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. [paragraph 30]  

In supporting this conclusion, the High Court then made some comments about various factual aspects of this case. One of these was the nature of this trust as a superannuation fund. The High Court held:

Different criteria might be thought to apply to the operation of a superannuation fund from those which apply to discretionary decisions made by a trustee holding a power of appointment under a non-superannuation trust. … Superannuation is not a matter of mere bounty, or potential enjoyment of another’s benefaction. It is something for which, in large measure, employees have exchanged value… The legitimate expectations which beneficiaries of superannuation funds have that decisions about benefit [sic] will be soundly taken are thus high. [paragraph 33]  

Thus the public significance of superannuation and the close attention paid to it through statutory regulation support the conclusion that the decisions of superannuation trustees are not likely to be largely immunised from judicial control without clear contrary language in the relevant trust document. Decisions like those which the Trustee made in this case are not discretionary decisions in the sense used in Karger v Paul. [paragraph 36]  

Duty of inquiry

In the Supreme Court, Byrne J found that the Trustee had failed in some respects to give Mr Finch’s claim ‘genuine’ consideration in that the Trustee had failed to pursue specific factual inquiries. The High Court examined the findings of Byrne J regarding the Trustee’s failure to make inquiries in three respects regarding the last months of Mr Finch’s employment with Telstra, whether his periods of employment with Foxtel and Qantas were really failed attempts at rehabilitation and Mr Finch’s views on whether he had made the ‘real job’ statement and, if so, what he had meant by it. The High Court upheld Byrne J’s opinion that the Trustee did not comply with ‘a duty of inquiry’.

Status of Karger v Paul

Throughout much of the judgment, the principles developed in the case of Karger v Paul were mentioned. The traditional formulation of these principles is that a court will be able to set aside the discretionary decision of a trustee if the relevant discretion was not exercised by the trustee in good faith, upon real and genuine consideration or in accordance with the purposes for which the discretion was conferred. Conversely, if the trustee satisfies these conditions, then its decision is not generally reviewable by a court.

Although the High Court did not negate the applicability of these principles, it did query their applicability to superannuation trustees. In doing this, it left open the possibility that a different view could be taken in a subsequent case. However, in this particular case it was implicit in the High Court’s judgment that Karger v Paul was still relevant, but not without qualification.

The qualification relates to the ‘real and genuine consideration’ principle. The High Court found that:

the decision of a trustee may be reviewable for want of ‘properly informed consideration’. If the consideration is not properly informed, it is not genuine. The duty of trustees properly to inform themselves is more intense in superannuation trusts. [paragraph 66]  

Further, the High Court found that ‘failure to seek relevant information in order to resolve conflicting bodies of material, as here, is … a breach of duty’ [paragraph 66].

This more ‘intense’ duty to properly inform itself was expressed in terms of a ‘high duty on the Trustee to make inquiries for “information, evidence and advice” which the Trustee may consider relevant’ to forming an opinion about the likelihood that he would ever engage in gainful work [paragraph 66]. The primary rationale for this intensified duty is because of the unique context of superannuation trusts, including that each beneficiary ‘is entitled as of right to a benefit provided the beneficiary satisfies any necessary condition of the benefit’ [paragraph 66].

Another very interesting point is that the High Court left open the question whether the duty of a superannuation trustee at general law may be aligned with other statutory obligations and, accordingly, whether the duty of a superannuation trustee in forming an opinion might in future be found to be ‘a duty to form a fair and reasonable opinion, or even a duty to … form a correct opinion’ [paragraph 66].

It is true that these propositions are consistent with a general trend in case law to place superannuation trustee duties at a higher level than for trustees of discretionary trusts. This case continues, and in fact escalates, that trend by virtue of the authority conferred by the High Court and the suggestions that the duty could evolve to even higher levels.

Remitting to trustee

The Court confirmed that remitting the matter back to the trustee is the usual course a court should follow in the absence of bad faith or except in a case where it is only possible for any decision-maker to reach one conclusion on the materials. That is, despite Mr Finch’s submission that the Trustee could not fairly and objectively assess his claim on its merits given the history of events, the court found that it would only be appropriate not to remit the matter to the Trustee ‘if it were to be concluded that the Trustee was incapable of approaching the task of forming its opinion satisfactorily’ [paragraph 67]. In this case, the Court found that that conclusion should not be drawn, and also went further to say that ‘it cannot be said that a conclusion in [Mr Finch’s] favour on limb (b) [of the TPI definition] is the only possible conclusion’ [paragraph 68].


In short, when assessing a member’s disablement benefit claim, a superannuation fund trustee must ‘properly inform’ itself, must ‘seek relevant information in order to resolve conflicting bodies of material’ and must be mindful of its ‘high duty … to make inquiries’. In this way, the duty to give real and genuine consideration to disablement benefit claims has now been intensified. Trustees must ensure that they understand these duties, and be satisfied that their processes for seeking out information in relation to disablement claims are sufficiently robust. If not, a member will now find it easier to allege that a trustee failed to give their claim genuine consideration.