The Matter of “Missing” Fund Documents

A Member of the Government Regulated Superannuation Fund (ABN 60 171 679 448) now known as the Ausbev Superannuation Fund in January 2007 requested a copy of the version of the Trust Deed and Governing Rules extant at the time promises were made to this Member as to his future superannuation entitlements before he accepted an Offer of Employment on 25 March 1985.

Members are advised in the Trustee’s own Product Disclosure Statement of their legal right to obtain copies of certain prescribed Fund Documents (Trust Documents).

A Trustee of a Government Regulated Superannuation Fund is required to provide copies of the Governing Rules, which included Deeds of Amendment, to a Member or Beneficiary of the Fund who lodges a request in writing as required by subsection 1017C(5) of the Corporations Act 2001 and Regulation 7.9.45 of the Corporations Regulations 2001.

There is a statutory period of one month for the Trustee to comply with such a written request. It is a criminal offence for a Responsible Officer of a Trustee to contravene subsection 1017C(5) of the Corporations Act 2001 under Item 297B of Schedule 3 of the Corporations Act 2001, with a penalty of a fine and up to two years imprisonment.

Despite it being a criminal offence not to provide copies (or allow photocopies to be taken) of the prescribed Trust Documents requested, the Trustee refused to comply with subsection 1017C(5). So in early 2009, the Member contacted ASIC and asked ASIC to ensure the Trustee’s complied with the Trustee’s disclosure obligations under subsection 1017C(5) of the Corporations Act 2001.

It is a requirement under Section 52(2)(a) of the Superannuation Industry (Supervision) Act 1993 for the Trustee to act honestly in all fund matters.

It is a requirement under subsection 1041H(2)(vi) of the Corporations Act 2001 for a Trustee not to engage in conduct that is misleading or deceptive or is likely to mislead or deceive a beneficiary of a Government Regulated Superannuation Fund (NB “beneficiary” also includes s “member“).

In a letter dated 21 August 2009 the Fund Secretary claimed that the Trustee was not in possession of the founding Trust Instrument nor any Deeds of Amendment until the late 1985. That is after this particular Member had accepted the Offer of Employment.

Now this Fund was established in the State of Victoria on 23 December 1913 and since the set of Trust Documents known as the Governing Rules includes the founding Trust Deed plus all subsequent Deeds of Amendment, this Member knew that it would be a Prudential Matter of Concern if the Trustee was not in possession of the founding Trust Instrument and many of the subsequent Deeds of Amendment. The Member therefore contacted the Prudential Regulator APRA and asked APRA to investigate The Matter of the “Missing” Trust Documents.

In letter marked “strictly confidential” dated 24 June 2010, the then CEO of the Trustee assured APRA that the Trustee was in fact in possession of the founding Trust Instrument and all subsequent Deeds of Amendment and that APRA was welcome to come an inspect these Trust Documents. The Member later obtained a copy of this letter by way of the Freedom of Information Act 1982.

Armed with this knowledge the Member again contacted ASIC and asked ASIC to enforce subsection 1017C(5) of the Corporations Act 2001. The Member also wrote to the former Chairman Mr Tony D’Aloisio and sought the Chairman’s assistance.

However unbeknownst to the Member, the former Chairman of ASIC had a direct pecuniary interest in a commercial winery in financial distress – Oakridge Wines Pty Ltd. The Chairman had not disclosed his holding of this direct pecuniary interest as required by Section 123 of the ASIC Act 2001 to two Ministers of State responsible for ASIC {Details are provided here}.

The Chairman should have advised the Complainant of this direct pecuniary interest since the alleged contravention of subsection 1017C(5) of the Corporations Act 2001 related to the superannuation fund associated with Australia’s Largest Maker and Distributor of Wines.

Under Section 124 of the ASIC Act 2001 the Chairman should have either sought “waiver” from the Complainant or “stood aside” from the investigation and handed the investigation over to another Commissioner of ASIC who did not have a real or apparent Conflict of Interests. All members of the public when dealing with Government Agencies such as ASIC have the legal right to be afforded Natural Justice (Procedural Fairness).

The Chairman did neither and failed to enforce subsection 1017C(5) of the Corporations Act 2001. The Member therefore initiated proceedings against the former Chairman in the Federal Court of Australia {VID 323 of 2011} once the Member became aware of the former Chairman’s Conflict of Interests after Fairfax Media published an exposé into the Chairman’s winery interests.

Finally after a battle lasting four and a half year the Member obtained a copy of a Deed of Amendment (Resolution) executed on 20 December 1982.

Why was this Deed of Amendment so important?

This Deed of Amendment deleted the “Retrenchment Rule” and turned the final salary Defined Benefit Fund into a “Deferred Benefit” Fund for Members who through no fault of their own found that their positions had become redundant and the Employer has then decided to terminate their Contracts of Employment since suitable alternative positions were not available (ie the Employer retrenched the Employee because his or her position was deemed to be redundant).

This was an important Member protection in 1982 since superannuation was not compulsory until 1992, so even if a retrenched Member found other employment the new Employer may not have had a superannuation scheme on offer. By remaining a Member of this fund, which at the time had a large surplus, these Members retained Death and Disability cover and their entitlement continued to accrue (but at a slower rate compared to that if they had remained Employees of the Principal or associated Employer).

To re-introduce a “Retrenchment Rule” would require the approval of at least 75% of the Membership of the Fund under the Rules of the Fund. This has never happened.

Members of the Division 2 final salary Defined Benefit Fund are therefore legally entitled to retain their Fund Membership until they attain the Normal Retirement Age of 65 or unless they decide to voluntarily retire from the Fund at any time after attaining the Early Retirement Age of 55. The Members retain Death and Disability cover as well.

If the Trustee or an agent of the Trustee terminates the Membership of a Member who has been retrenched before attaining the Normal Retirement Age of 65, the Trustee will have committed a Breach of Trust and that Member will have a claim against the Trustee and Directors of the Trustee and other parties who may have assisted in the Breach of Trust.

There is no Rule, since 20 December 1982, contained within the Governing Rules of the Division 2 fund to empower the Trustee or an agent of the Trustee to release a lump sum benefit to a Member who has been retrenched by the Principal or associated Employer before the Normal Retirement Age of 65 {Note: All Members should obtain a copy of the Trust Deed and Governing Rules from the Trustee and seek their own legal advice on their entitlements under the Rules of the Division 2 Fund. The Trustee has to provide copies “free-of-charge” under Schedule 10A 11.1 of the Corporations Regulations 2001 to Members or Beneficiaries of the Fund}.

The following disclaimer was included in the 1983 Members’ Handbook.

The current Trustee should include this disclaimer on all documents provided to Members, including Member Benefit Statements. Member Benefit Statements have no legal substance in themselves. In the Trio Capital Fraud bogus “Member Benefit Statements” were produced for a number of years to deceive the Members of the Trio Capital Funds.

The Trustee cannot “act under the dictation” of the HR Department of the Employer-Sponsor. The Employer-Sponsor can only “give direction” to the Trustee in accordance with Section 58 of the Superannuation Industry (Supervision) Act 1993 and Regulation 4.03 of the Superannuation Industry (Supervision) Regulations 1994.

In evidence given in the Supreme Court of Victoria in a case where a former Member elected Director of the previous Trustee had his employment terminated with one day’s notice the day before he was due to attend his first Board Meeting, after requesting to see copies of the Trust Deed and Governing Rule to prepare for the meeting, a former Vice President of Human Resources, Mr Rick Beker, stated before Hedigan J:

He (Beker) accepted that Human Resources took a pro-active role on behalf of the company with respect to determining benefit levels of employees but not of anything in relation to the activities of the Fund Board.”

In a Defined Benefit Fund the Members’ “benefit levels” are determined by the Governing Rules of the Fund and the Trustee in this case can at any time seek a direction from the Supreme Court of Victoria if the Trustee is in any doubt as to how the Governing Rules of the Fund should be interpreted.

Under subsection 52(2)(c) of the Superannuation Industry (Supervision) Act 1993, a Trustee has to act at all times in the best interests of the Members and Beneficiaries of the Fund.

Under Section 57 of the Superannuation Industry (Supervision) Act 1993 the Directors of a corporate Trustees are not indemnified from the assets of the Fund for dishonest or negligent Breaches of Trust. Professional Indemnity Insurance polices also would not cover dishonest Breaches of Trust.

Members of the Division 2 Fund now have large claims against the incumbent corporate Trustee as well as the former corporate Trustee (and parties who may have assisted) for a Breach of Trust where their Fund Membership was unlawfully terminated when they were retrenched.

These Members are currently being advised as to how they can assess their own claims and seek additional legal assistance.

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