Case 1:
While this was not specifically mentioned in the Tribunal’s decision, it appears to us that the fund in question provided defined benefits and had complex governing rules. The member had a number of employers and one of those employers failed to make a small dollar amount of contributions way back in 1995. The issue in the case was the trustee’s decision to reduce the member’s final payout as a consequence of that underpayment.
The total amount of the shortfall was $224.02. After nineteen years (1995 to 2014), the trustee advised the member of the shortfall and the member personally paid the shortfall into the fund. The trustee then advised the member that as interest would have been earned on the shortfall amount over the years, the trustee would now calculate the unearned interest and this interest component would continue to accumulate until the member’s benefit was finally paid out. At that payout time, the member’s benefit would be reduced by the final accumulating interest component. As at 3 October 2017, the interest amount was $797.52. Needless to say, the member was unimpressed with the trustee’s decision, so he complained to the Tribunal that it was not fair and reasonable.
The trustee advised that it relied on a section in the relevant Act of Parliament which basically provided that any contribution payable by a person to the trustee under the rules of the particular fund that remained unpaid when the person ceased to be a member, could be deducted from any final payment made to that member. The trustee argued that it was fair and reasonable for it to interpret this section as permitting it to add forgone earnings. The trustee also submitted it would not be equitable to all of the other members if it did not take into account the accumulating interest component.
The Tribunal studied the relevant legislation and disagreed with the trustee’s interpretation. In its view, the wording in the relevant Act of Parliament did not give the trustee power to deduct interest from the member’s benefit. It was of this view because interest on unpaid contributions is not a contribution of itself. “A contribution is an amount payable by an Employer or the [member] to fund the benefit payable to him. Interest does come within that description”.
The Tribunal went on to hold that even if it was wrong with respect to its statutory interpretation, the trustee had the power under the ACT Trustee Act 1925 to compromise the claim. At some point in this dispute and well before the Tribunal matter commenced, the trustee should have asked itself whether it was fair and reasonable to refuse to compromise the claim. In determining what to do it should have given weight to the small amount of money involved and the fact it had taken many years to advise the member of the unpaid amount which he then personally paid into the fund. The Tribunal, in effect, chastised the trustee for the course of action it adopted, commenting that it “resulted in reams of correspondence and inordinate expense being incurred” by both the fund and the member. That cost far outweighed the amount of the accumulating interest. For these reasons, the Tribunal ordered that the trustee’s decision be set aside. It substituted its own decision that the trustee had no power to deduct interest or, if it did have that power, it should have compromised the member’s claim by deciding to not deduct from the member’s final benefit the accumulating interest component.
D17-18158
Case 2:
In this case the Tribunal was once more reviewing the trustee’s decision to not compromise a claim and, on the facts here, concluded the trustee’s decision was not fair and reasonable.
The facts were relatively simple. The member tragically died aged only 34 years. He had no spouse but did have two minor sons to different women. The children resided with their respective mothers and the deceased had never completed a nomination of beneficiary form.
The deceased member’s death certificate only recorded the deceased as having one minor son. The trustee simply did not know of the existence of the second child when it decided to pay the entire death benefit to the deceased’s own mother to be held on trust for her grandson. The trustee had not required letters of administration to be obtained as the deceased had died with very few assets. The trustee did enter into discussions with the deceased’s mother and obtained a deed of release from the mother of the first minor son who would benefit from the superannuation payout. None of these communications elicited the existence of the second minor son when the trustee made its decision to pay the entire death benefit for the benefit of the first minor son.
The mother of the second son (the Complainant) sought to be paid half of the superannuation death benefit (plus interest) and for this benefit to be paid to her to be held, on trust, for her son’s maintenance, support and education.
The Tribunal was somewhat concerned by the abrupt written response the Complainant received from the trustee which basically told her it was too late as the trustee had already paid out the benefit and if she did not like that she should “contact the other party directly”. This written communication also made no reference to the existence of the Tribunal and failed to provide any reasons for the trustee’s decision.
The decision of the Tribunal quotes APRA’s Prudential Practice Guide SPG 280 which, among other things, states:
“The discretionary nature of the payment of death benefits can be difficult and costly for an RSE licensee, particularly if a deceased member has complex or unknown relationships. The Superannuation Complaints Tribunal commonly receives complaints that deal with death benefits. Therefore, it is important that an RSE licensee has appropriate policies, systems and procedures to adequately manage all aspects of the data collection, verification and decision-making procedures involved in the death benefit payment process.
A prudent RSE licensees policies and procedures dealing with the payment of death benefits would not only ensure compliance with SIS requirements, an RSE’s governing rules and any binding nominations, but would also take into account practical concerns, the sensitive nature of such payments and processes to ensure that decisions are fair and reasonable”.
The trustee’s submission before the Tribunal was insufficient for the Tribunal to be satisfied the trustee had in place policies, systems and procedures that satisfied SPG 280. The Tribunal noted that in the trustee’s own submission it advised it had relied on the information provided by family members. There was also no newspaper advertisement and no minutes of the trustee’s decision. In these circumstances, the Tribunal found it could not be satisfied that everything that could reasonably be done to ascertain the existence of the further potential beneficiary had been done. The second son had an entitlement equal to his half-brother.
The Tribunal concluded that in these circumstances the trustee should have decided to compromise the claim by agreeing to pay an amount equal to half of the death benefit, plus interest, to the complainant to be held on trust for her minor son’s maintenance, support and education. Interest was at the cash rate of the fund (or its equivalent investment strategy) and from the date the benefit was originally paid out for the first minor son’s benefit. The Tribunal substituted this decision for the trustee’s earlier decision to not compromise the claim and it did so on the grounds the trustee’s original decision was not fair and reasonable.
D17-18121