Arorangi Timberland Ltd and Others v Minister of the Cook Islands National Superannuation Fund (Cook Islands)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Neuberger,Lord Mance,Lord Sumption |
| Judgment Date | 17 November 2016 |
| Neutral Citation | [2016] UKPC 32 |
| Docket Number | Appeal No 0033 of 2015 |
| Court | Privy Council |
| Date | 17 November 2016 |
[2016] UKPC 32
Lord Neuberger
Lord Mance
Lord Clarke
Lord Sumption
Lord Toulson
Appeal No 0033 of 2015
Privy Council
From the Court of Appeal of the Cook Islands
Appellants
Dr Gerard McCoy QC Timothy ArnoldZoe McCoy (Instructed by Tim Arnold PC)
Respondent
Michael Ruffin David James (Instructed by Crown Law Office (Cook Islands))
Lord Neuberger AND Lord Mance
This is an appeal brought by seven appellants against a decision of the Cook Islands' Court of Appeal (Williams P, Barker and Paterson JJA), reversing the first instance decision of Weston CJ, who held that the superannuation scheme set up by the Cook Islands' National Superannuation Act 2000 ("the 2000 Act") was unconstitutional and therefore invalid. The respondent to the appeal is the Minister of Cook Islands' National Superannuation Fund ("the Minister").
Prior to 2000, the only forms of financial support for retired people provided by the Cook Islands' Government were (i) a universal old age pension for all those over 60 years of age (which the Court of Appeal described as "very modest"), and (ii) a pension under a defined benefit scheme which was limited to public servants, and which had been closed to new entrants since 1995. During the 1999 general election, the New Alliance Party's manifesto included a policy for establishing a national superannuation scheme for all employed Cook Islanders.
After the general election, this policy was then implemented through the presentation to Parliament by the new Government of a Bill ("the Bill") which in due course became the 2000 Act. The 2000 Act set up a National Superannuation Fund ("the Fund") to which contributions were to be made by employees and employers, and from which superannuation payments were to be made.
The appellants raise two principal arguments to challenge the validity of the 2000 Act. The first is that the 2000 Act, or the Scheme established pursuant to that Act, is invalid as it involves a taking or deprivation contrary to article 40(1) and/or 64(1)(c) of the Cook Islands Constitution ("the Constitution"). The second principal argument is that section 53 of the 2000 Act is unjustifiably discriminatory contrary to article 64(1) of the Constitution. At first instance, in a judgment given on 31 January 2014, the Chief Justice accepted both these arguments, but on appeal, in a judgment of the court given on 17 November 2014, the Court of Appeal rejected them — [2014] CKCA 4.
The Court of Appeal helpfully set out at [2014] CKCA 4, para 14 the main features of the 2000 Act. With a couple of omissions (which are more comments than descriptions) and with a few small additions and alterations, that summary is as follows:
(a) The compulsory nature of contributions to the Fund. The membership of the Scheme set up by the 2000 Act ("the Scheme") and, thus, an obligation to contribute to the Fund is compulsory for every person who is in employment in the Cook Islands or whose employment is outside the Cook Islands while the employer is resident in the Cook Islands and for every employer in respect of an employee who is so employed — see section 36 of the 2000 Act.
(b) The quantification of contributions to the Fund. The Scheme was phased in and, once it applied to an employee's class of employment, the contributions were calculated as a percentage of the employee's earnings. For one year following the date on which the Scheme becomes applicable to a class of employees, the employer and employee are both required to pay 3% of the employee's earnings. That percentage rises to 4% in the second year and thereafter 5% per annum. These rates may be amended by Order-in-Council in accordance with a recommendation of the Board and the Trustee — see section 39 of the 2000 Act.
(c) National Superannuation Board ("the Board"). The Board comprises five members. One is the Financial Secretary of the Cook Islands who is to be a permanent member while the other four are nominees of particular interest groups. Those groups are the Cook Islands' Workers Association Inc, the Cook Islands' Chamber of Commerce Inc, the private sector employers who are not members of the Chamber of Commerce, and one member nominated by contributors to represent them. Only one member of the five member Board has any association with the Cook Islands' Government — see section 4(2) of the 2000 Act.
(d) The Board's functions. The initial function of the Board was to prepare a Trust Deed ("the Trust Deed") to establish the Fund. Other functions include the appointment and removal of the Trustee administering the Scheme under the Act ("the Trustee"), enforcing collection and payment of contributions to the Fund, monitoring the performance of the Trustee under the Trust Deed, advising the Trustee and reporting to and advising the Minister as the Minister requires. The usual obligations of members of the Board to act in good faith, with reasonable care, diligence and skill and with honesty and integrity are stated in the Act — see sections 11 and 12 of the 2000 Act.
The Trust Deed
(e) The obligation to prepare the Trust Deed rested with the Board and not the Government. The Board was required to appoint the initial Trustee and to submit the Trust Deed to the Minister and provide him with a certificate from the Chairman of the Board certifying that the Trust Deed was not inconsistent with the 2000 Act. Under section 16 of the 2000 Act certain provisions were mandatorily to be included in the Trust Deed. They included obligations:
(i) To establish the Fund;
(ii) To appoint the initial Trustee;
(iii) To provide for the conditions of entry of members to the Fund;
(iv) To provide for the conditions as to termination of membership of the Fund;
(v) To provide for the conditions under which benefits become payable and the way in which the benefits are to be determined;
(vi) To provide for the circumstances in which the Fund may be wound up, and the way in which the assets of the Fund are to be distributed in the event of a winding up;
(vii) To contain no restrictions on the Trustee's powers of investment other than which is provided in section 19 of the 2000 Act;
(viii) To subject the Trustee to all equitable duties and responsibilities that a trustee has at law;
(ix) To provide for separate accounts for each contributor;
(x) To give the Trustee power to borrow money for the purposes of making any investment or paying any benefit or meeting any liability or for the purpose of management of the Fund;
(xi) To give the Trustee power to enter into any insurance or reinsurance contract relating to the payment pursuant to the Fund of any pension or other benefits contingent on the death or survival of human life; and
(xii) To provide for the remuneration and reimbursement of expenses of the Trustee, investment manager and agents.
(f) The Trustee. The Trustee must be a company under the Trustee Companies Act 1967 (New Zealand) or the Public Trust Office Act 1957 (New Zealand), or an independent professional corporate trustee of similar standing and experience in the trusteeship of superannuation schemes or plans. The Trustee must be appointed by the Board which has the power to replace a Trustee. Another provision requires the Trustee to be appointed "following a transparent and contestable process" — see sections 2 and 11 of the 2000 Act.
(g) The investment of the Fund. The Trustee is responsible for investing the Fund on a prudent commercial basis consistent with best practice portfolio management. It is required each year to provide to the Board its investment strategy for the year which is to include the Trustee's expectation as to risk and return and anticipated specific investments and class of investments. Under section 19 of the 2000 Act, the Board does have a power to direct the Trustee to invest the Fund:
(i) To meet the Government's expectation as to the Fund's performance, including the Government's expectation as to risk and return;
(ii) Not to invest in a specified investment or class of investments to which the Crown already has a direct or indirect exposure, for the purpose of limiting the exposure; and
(iii) To invest a proportion of the Fund not exceeding 20% within the Cook Islands. (This direction can only be given after consultation with the Minister).
(h) Amendment of Trust Deed. The Board has the right after consultation with the Trustee to rescind, alter or add to any of the provisions of the Trust Deed. However, an amendment is not adversely to affect a contributor's right or claim to benefits or the amount of those benefits that have accrued up until the date of the amendment without the consent of the contributor, unless the amendment is required to comply with the Act or is solely to correct a mistake which has advantageously altered a contributor's right or claim to accrued benefits of the amount of those accrued benefits — see section 21 of the 2000 Act.
(i) Taxation. By virtue of section 27 of the 2000 Act, the Trustee on behalf of the Fund and the Fund are exempt from income tax. An employer's contribution is deductible for tax purposes and an employee pays tax on the employee's contribution to the Fund. Benefits received by a member are free of tax in the hands of the member.
(j) Transfer between Funds. An employee who was in an existing superannuation fund may cease contributions to that fund if the fund so permits and transfer the employee's benefit in the fund to the Fund. If the employee's existing superannuation fund does not permit withdrawal of funds to enable them to be transferred to the Fund, the employee is exempted from the provisions of the Act and...
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