By Björn Lambrenos
|Law Applied||Civil Law|
|Key Words||Corporations; Federal Court of Australia; Civil Law|
Court: Federal Court of Australia
Dissenting judgement? No
Filing Date: 2018
Last Update: 2020
Whether an Australian pension fund violated the law by failing to disclose information on climate change business risks and its strategies to address those risks. The plaintiff sought information as to what actions the respondent were taking regarding the financial risks posed to the plaintiff’s superannuation by climate change; in the alternative, the plaintiff sought a declaration and injunction in equitable jurisdiction.
The plaintiff, Mark McVeigh, was an Australian pension fund member of Retail Employees Superannuation Trust (REST), the defendant. McVeigh had contributed to REST since 2013 and made contributions to his REST account including by way of the 9.5% employer-contributed sums prescribed by s19 of the Superannuation Guarantee (Administration) Act 1992 .
THE ARGUMENTS OF THE PARTIES
The Plaintiff’s Arguments:
The plaintiff alleged that the defendant violated the Corporations Act 2001 by failing to provide information related to climate change business risks as well as proposals to address those risks. The plaintiff’s case developed in two phases .
The First Complaint
In the first phase, McVeigh alleged that:
- Section 1017C of the Corporations Act 2001 (“CA”) required the defendant to provide to him, as a fund member, information which, among other things, would allow him to make an informed judgement about the management and financial condition of his REST product and about its investment performance . In light of this, McVeigh requested relevant information concerning each of REST’s and the Trustee Directors’:
- knowledge of REST’s climate change business risks;
- opinion on “Climate Change”; the “Physical Risks”; the “Transition Risks”; and REST’s “Climate Change Business Risks”;
- actions responding to REST’s “Climate Change Business Risks”;
- compliance with the obligations in the Corporations Act and other law (concerning appropriate due care, skill and diligence) with respect to REST’s Climate Change Business Risks .
The first complaint, issued 26 July 2018, alleged that REST failed to fulfil the above obligations . As a result, the plaintiff sought declaratory relief that REST violated CA by failing to disclose the requested information and an injunction requiring REST to provide that information. In the alternative, the plaintiff sought a declaration and injunction in equitable jurisdiction .
The Revised Complaint
In the second phase, the plaintiff issued a revised complaint on 24 September 2018 [reference]. In addition to the complaints above, McVeigh further alleged that:
- REST breached its duties as a trustee by not having a more developed climate change policy than it had indicated . Consequently, McVeigh argued that REST violated the Superannuation Industry (Supervision) Act 1993 (“SIS Act”), which requires trustees to act with care, skill and diligence, and to perform their duties and exercise their powers in the best interests of their beneficiaries . McVeigh’s amended complaint alleged that a prudent superannuation trustee would have required its investment managers to provide information similar to that requested by McVeigh and, furthermore, would have ensured that the processes for managing investments and disclosing REST’s Climate Change Businesses risks to beneficiaries was compliant with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) .
The Defendant’s Arguments:
The respondent pointed to publicly available information on its website, which outlined that REST takes environmental risks seriously . Furthermore, the respondent told McVeigh that REST acknowledges that climate change is a relevant consideration in the context of fund investment and management; as such, REST’s expert investment managers are required to consider a full range of factors in making investment decisions including issues relating to the environment and sustainability . REST declined to provide any information any more specific than that .
On 17 January 2019, the court issued an order on the plaintiff’s application for maximum costs pursuant to Federal Court Rules 2011 (“FCR”) r 40.51, a mechanism which allows individuals bringing cases in the public interest to avoid legal costs . The Respondent advanced a number of reasons why a maximum costs order should not be made; most of these reasons were rejected. The plaintiff obtained an indemnity from Friends of the Earth Australia Inc (“FOE”) for the sum of $310,450 in the event of an adverse costs order. The plaintiff’s principal argument for why an order should be made under FCR 40.51 was that the suit raised questions involving the public interest . The court concluded that, whilst the case raised a socially significant issue about the role of superannuation trusts and trustees in the current context of climate change, more information and clarity was required about:
- the plaintiff’s ability to proceed if the application was denied ;
- the plaintiff’s own financial position in order to determine whether a costs capping order was necessary ;
- how the FOE raised its funds .
The court concluded that the case addresses pressing problems: it raises a socially significant issue about the role of superannuation trusts and trustees in the current public controversy about climate change. As such, it is legitimate to describe McVeigh’s litigation as being of a public interest nature .
On 2 February 2010, the parties reached a settlement—the details of which were set out in a press release . REST acknowledged that:
- The superannuation industry is a cornerstone of the Australian economy and that climate change is a material, direct and current financial risk to the superannuation fund across many market categories within this economy. Accordingly, REST, as a superannuation trustee, promised to implement a series of strategies that could help identify and manage these issues, and to develop systems, policies and processes to ensure that the financial risks of climate change are contextualised and mitigated .
- Alongside this, REST also agreed with McVeigh to continue developing its management processes for dealing with the financial risks of climate change on behalf of its members.
In turn, McVeigh supports REST’s initiatives to implement a net-zero carbon footprint by 2050 goal for the fund, which would measure, monitor and report climate progress in line with the TCFD; ensure investee climate disclosure; and publicly disclose portfolio holdings, among other commitments .
Please find the full judgement here. Last edited 27 May 2022; with thanks to the case editor, Charlie Bevis.
| McVeigh v Retail Employees Superannuation Pty Ltd  FCA 14 (‘McVeigh v REST, Federal Court Judgement’), para. 3|
 Ibid., para. 4.
 McVeigh v Retail Employees Superannuation Pty Ltd  ACN 001 987 739 (‘McVeigh v REST, Original Complaint’), paras. 11-12.
 Ibid., para 12.
 McVeigh v REST, Federal Court Judgement, para. 23.
 Ibid., para. 7.
 McVeigh v REST, Original Complaint, para. 3.
 Ibid., para. 15.
 McVeigh v REST, Federal Court Judgement, para. 5.
 Ibid., para. 5.
 Ibid., para. 5.
 Ibid., para. 1.  Ibid., para. 2.
 Ibid., para. 14.  Ibid., para. 15.
 Ibid., para. 16.
 Ibid., para. 9.
 Media Release, ‘Statement From Rest’ (Rest, 2 November 2020), available at http://climatecasechart.com/climate-change-litigation/wp-content/uploads/sites/16/non-us-case-documents/2020/20201102_NSD13332018_settlement-agreement-1.pdf [Accessed 15 May 2022].