Rights of Beneficiaries

A “beneficiary“, in ordinary language, is a person for whose benefit a trust is to be administered and who is entitled to enforce the trust according to its terms {Kafatatis v The Deputy Commissioner of Taxation [2008] FCA 1454 at [42]}

Section 10 of the of the Superannuation Industry (Supervision) Act 1993 defines a “beneficiary” as follows:

“beneficiary” , in relation to a fund, scheme or trust, means a person (whether described in the governing rules as a member, a depositor or otherwise) who has a beneficial interest in the fund, scheme or trust and includes, in relation to a superannuation fund, a member of the fund despite the express references in this Act to members of such funds.

“It is a necessary part of any trust that there is a beneficiary capable of enforcing the trustees’ performance of their duties under the trust.” 

Bowman v Secular Society Ltd [1917] AC 406,  441 per Lord Parker.

Beneficiaries of a trust have important legal rights. Where the trust is a superannuation trust, the Members of the fund are considered to be beneficiaries and they also have important legal rights.

Beneficiaries, whether of fixed or discretionary trusts, have rights to:

  1. prevent misappropriation by the trustees;
  2. have the trustees act bona fide;
  3. inspect trust documents;
  4. enjoy any distribution made; and
  5. have the trust properly administered

The later right confers standing to enforce the trust by way of legal proceedings against the trustee for breach of trust, and the right to petition the court for the removal of the trustee.

The  Western Australia Court of Appeal in Schreuder v Murray [No. 2] 41 WAR 169; 260 ALR 139 ;[2009] WASCA 145 stated at [10]:

“A trustee is the trustee of property for the benefit of the beneficiaries of the trust. The trustee and beneficiaries have a correlative duty and interest in the proper administration of the trust. The duty of the trustee includes a duty to properly perform the trust by adhering to and carrying out the terms of the trust. The beneficiaries have an interest and, indeed, a right to compel proper administration of the trust.

French J stated in Australian Securities and Investments Commission In the Matter of Richstar Enterprises Pty Ltd (ACN 099 071 968) v Carey (No 6) [2006] FCA 814 at [30]:

“I accept that there are some rights enjoyed, even by the beneficiaries of a non-exhaustive discretionary trust with an open class of beneficiaries. They include the right to inspect the trust documents – Re Londonderry’s Settlement[1965] Ch 918 and the right to require the trustee to provide information about management of the trust fund – Spellson v George (1987) 11 NSWLR 300Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405. There is also a right to enforce the proper management of the trust by the trustee – Commissioner of Stamp Duties (Qld) v Livingston [1964] UKPC 2[1965] AC 694Re Atkinson [1971] VR 613.

The High Court of Australia in Kennon v Spry [2008] HCA 56 at [125] confirmed the right of a beneficiary to the due administration of a trust citing the judgement of French J above. The High Court described the right to the due administration of a trust as an “equitable chose in action” at [75].

{Also refer to McPhail v Doulton [1971] AC 424 at 456-7; [1970] 2 All ER 288 at 247; [1970] 2 WLR 1110 at 1132, HL; Johns v Johns [2004] 3 NZLR 2002 at [34] per Tipping J CA(NZ) Elovalis v Elovalis [2008] WASCA 141 at [50] per Martin CJ}

Retirement benefits are not paid by the Employer, but by a legally independent Trustee or Trustees from a Trust Fund and these rights continue long after a Contract of Employment may have ceased.

Superannuation trusts are strict trusts. The money and assets in the fund are held on trust for the beneficiaries. It is their money and not the Trustee’s money.

“The basic right of a beneficiary is to have the trust duly administered in accordance with the provisions of the trust instrument, if any, and the general law”

“The basic equitable principle applicable to breach of trust is that the beneficiary is
entitled to be compensated for any loss he would not have suffered but for the breach.”

 

Trustees have a duty to account to the beneficiaries for their stewardship of the trust and the beneficiaries have a right of access to most “trust documents” held by the Trustee or Trustees.

Since superannuation has been made compulsory as a matter of Government Policy, the Parliament of Australia has made it a criminal offence for Trustees to wilfully conceal prescribed “fund documents” from persons who have a beneficial interest in the trust and who lodge a request in writing for copies of these documents. {Refer to Items 296C and 297B in Schedule 3 of the Corporations Act 2001}.

Trustees are required to provide copies of the following documents, “free-of-charge”  to a person who has a beneficial interest in the superannuation fund:

  • Any Deed of the Fund or other instrument in writing that purports to very the terms of the trust,
  • Any annual audited set of accounts and the associated auditor’s report, and
  • The “most recent” actuarial report

The relevant legislation is subsection 1017C(5) of the Corporations Act 2001 and Regulation 7.9.45 and Schedule 10A Part 11.1

Trustees are also required to provide copies of other non-exempt documents provided the applicant pays a “cost recovery fee“.

The relevant legislation is subsection 1017C(2) of the Corporations Act 2001 and Schedule 10A Part 11.1

 South Australia

Section 84B of the Trustee Act 1936 (SA) requires trustees to keep such records as may be prescribed. Beneficiaries are entitled to see these records. Failure to comply led to the discharge of an executor-trustee in Longworth v Allen [2005] SASC 469.

H Stanke & Sons Pty Ltd v Von Stanke, O’Meara [2006] 95 SASR 425; [2006] SASC 308.

 

 

 

 

 

 

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