The Matter of the “Missing” Fund Surplus

The Fund now know as the Ausbev Superannuation Fund (ABN 60 171 679 448) was established in 1913 and by the early 1980s had a substantial surplus. This was a very tempting target for a new management team who gained control of the Principal Employer in 1982.

There was a problem however, the governance of this fund had five natural person Trustees:

  • two nominated by the Employer
  • two elected by the Members, and
  • one elected by the Pensioners (Beneficiaries).

The Employer could be outvoted 3:2. What to do?

The Employer put a proposal to these Trustees that they be replaced by an existing  corporate Trustee where all the Directors were nominated by the Employer.

Of course to gain acceptance additional Member benefits and protections were included in the proposal which was executed as Deed of Amendment in 1982.

One protection was to delete the Retrenchment Rule so as to covert this Fund to a Deferred Benefits fund for Members who in future would be retrenched by the Employer. Members who were trenched were entitled to remain Members of the final salary Defined Benefit Fund until they attained the Normal Retirement Age of 65.

Once control of the Members’ and Beneficiaries’ Superannuation Fund was solely in the hand of Directors nominated by the Employer an extended period of asset striping ensued that has been confirmed from audited accounts obtained from ASIC {Docs No. 930178 -647, 648, 649 & 650}.

The general administrative expenses were around $1 million per annum and were paid directly from the funds assets. There can be no legitimate reason that over $100 million in “liabilities” were properly incurred in the administration of this Fund.

There was a substantial surplus available and this surplus was stripped from the Fund, since the Members and Beneficiaries were in no position to prevent this from happening.

If this surplus had not been unlawfully stripped from this Fund and instead had been re-invested, this Fund would not have assets of around $0.5 Billion instead of only $50 Million.

The Trustee unlawfully terminated the membership of Members who were retrenched to further reduce the vested benefits liability and so further increase the amount that would be available to be stripped from the Fund.

Without the asset stripping  Benefits of Members and Beneficiaries could have been increased above their lawful entitlement.

Even though this Fund became a Government Regulated Superannuation Fund after the enactment of the Superannuation Industry (Supervision) Act 1993, the stripping of the surplus continued.

Under Section 117 of the Superannuation Industry (Supervision) Act 1993 Members of the Fund have to be notified of any proposal to return surplus funds to the Employer-Sponsor and the Fund Actuary has to also approve of such a proposal.

There is no evidence to suggest that the Members of this Government Regulated Superannuation Fund were advised of the ongoing stripping of the Fund Surplus after 1993.

The periodic Actuarial Reports should help members understand how around $0.5 Billion (if re-invested) could be “stolen” from their Superannuation Fund. Money that is rightfully theirs. The Division 2 final salary Defined Benefit Fund now has assets of only around $50 Million, far less than the $0.5 Billion that should be there!

However the Member-elected Directors do not want to provide copies of the periodic Actuarial Reports to the Membership, even though it is a criminal offence to refuse to provide copies of the period Actuarial Reports to a Member or a Beneficiary of a Government Regulated Superannuation Fund.

Do not Members and Beneficiaries have a right to understand what happened to $0.5 Billion of their money?

Perhaps the Member-elected Directors do know what happened to the Members’ “missing” money? When are they going to tell the Members who elected them to look after their interests?

Trustees have a legal obligation to commence legal proceedings against former Trustees if it is discovered that a Breach of Trust was committed by a former Trustee. The incumbent Trustee has a legal obligation to recover Trust Property lost due to the Breach of Trust and to restore the Trust Property for the benefit of the beneficiaries of the Trust.

So why has not the incumbent Trustee initiated legal proceedings against the Directors of the former corporate Trustee, FBG Superannution Limited, to recover the Trust Property passed away in Breach of Trust?

Rule 1.10.1 of the Elder Smith Goldsbrough Mort Provident Fund Rules foreshadowed what should happen to the Fund Surplus in the event that it was necessary to terminate the Fund if the Principal Employer ceased to carry on a business.

After all fund expenses had been paid and all accrued benefits paid then the Fund Surplus was to be allocated to the current Members and former Members, the Pensioners, on an equitable basis.

The Fund surplus was not to be returned to the Principal Employer to satisfy creditors for example.

The Fund Surplus was stripped from this fund by Directors of the previous corporate Trustee (ACN 005 027 707). The incumbent Trustee has a legal obligation to take proceedings against the former Trustee and its Directors to recover this trust property passed away in Breach of Trust.

So why has the incumbent Trustee failed to take this action and so put itself in the position of committing a Breach of Trust itself on this account?

A leading case where there was an attempt made to capture the Fund Surplus is Imperial Group Pensions Trust Ltd and others v Imperial Tobacco Ltd and others [1991] 2 All ER 597.

In this case the Trustees of the Imperial Tobacco Pension Fund sought a direction from the Court about proposed alterations to pensions arrangements so that Hanson might gain access to the £130 million surplus in the pension fund.

Under the Rules of the Trust Deed the surplus had to be applied for the benefit of the Members and did not revert to the Company (Employer-Sponsor).

Hanson attempted to close the existing fund and to “encourage” Members to move to a new fund, taking their share of the surplus with them. In the new fund, however, any surplus would revert to the Company.

Lord Browne-Wilkinson held that in every contract of employment there is 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...”

This is the “Implied obligation of good faith“.

In this case the Employer had ulterior motives in wanting Employees to transfer from the existing pension scheme to a new scheme and so the proposal did not receive the support of the High Court.

Australia Guardian – Protecting your wealth when no one else will®

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>