Red Flag Employers

Now while the Trustee has the legal obligation to pay entitlements only when a specified condition of release has occurred in accordance with the Governing Rules and to then pay the benefit in accordance with the Governing Rules, the Principal Employer also has legal obligations.

The obligation of good faith by an Employer was first recognised in a  superannuation (pensions)  context in Imperial Group  Pension  Trust Ltd v Imperial Tobacco Ltd { [1991] 2 All ER 597}. In that case, Browne-Wilkinson V-C noted that contracts of employment contain an implied term “that the employers will not, without reasonable and proper cause, conduct themselves in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee” and said (at 597) that that obligation (which Browne-Wilkinson V-C termed “the implied obligation of good faith”): “applies as much to the exercise of his rights and powers under a  Superannuation (pension) scheme  as they do to the other rights and powers of an employer“.

Browne-Wilkinson V-C went on to explain that a claim for breach of the obligation of good faith need not be founded “in contract alone” (597). He said (at 597-598):

Construed against the background of the contract of employment, … the  pension  trust deed and rules themselves are to be taken as being impliedly subject to the limitation that the rights and powers of the company can only be exercised in accordance with the implied obligation of good faith.”

Browne-Wilkinson V-C explained in his judgment that the obligation of good faith requires an employer to “exercise its rights (a) with a view to the efficient running of the  scheme  established by the fund and (b) not for the collateral purpose of forcing the members to give up their accrued rights in the existing fund subject to this  scheme ” (598-599).

The House of Lords in Malik v. Bank of Credit; Mahmud v. Bank of Credit [1997] UKHL 23 at 34-35 per Lord Nicholls, at 47 per Lord Steyn}, held that the duty was an objective one; the motives of the employer are irrelevant.  Moreover, the impugned conduct need not be directed specifically at employees to destroy or seriously damage the relationship of trust and confidence., nor is it necessary that the employees be aware of it whilst employees {[1998] AC 20 at 35 per Lord Nicholls, at 46-47 per Lord Steyn}.

However many Employers disregard their common law obligations as well as obligation that may be contained in the Governing Rules of the Fund.

The fact that the Superannuation Salary Fraud is such a common fraud is indicative that many Employers and the Heads of their Human Resources Department actually believe it to be lawful for the Employer to dictate to the Trustee how the Trustee is to administer the Government Regulated Superannuation Fund even though to do so is a breach of the general laws of trusts as well as Section 58 of the Superannuation Industry (Supervision Act 1993 and Regulation 4.03 of the Superannuation Industry (Supervision) Regulations 1994.

There is a well known legal Maxim: “Ignorance of the law is no excuse.”

Why should a large part of your superannuation entitlement be stolen, just because the HR Manager at your employer was ignorant of the law  and was focused on earning a large bonus for him or herself?

To find out of you have been a victim of Superannuation Salary Fraud or other Frauds, become a Member of Australian Guardians today.

Email or leave contact details below.

Membership is free.

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