Questions on Notice for the Member Elected Directors

The introduction of the Superannuation Industry (Supervision) Act 1993 required that there be an equal number of Member-elected Directors on the Board of the corporate Trustee as there were Employer-nominated Directors.

The Member-elected Directors are supposed to represent the interests of the Members and the Beneficiaries of the Fund.

There are currently two Member-elected Directors representing the “Beer Business” on the Board of the corporate Trustee.

The following Questions on Notice are questions on behalf of the Membership of the Division 2 final salary Defined Benefit Fund.

Q1 – A Member wrote to both Member-elected Directors in a letter dated 8 January 2012, advising these representatives of the Membership that the first obligation of any Trustee is to read and understand the Trust Instrument upon taking office and to seek legal advice in order to understand the Trust Instrument and the obligations of Trustees. Therefore has either Member-elected Director bothered to read the Trust Deed and Governing rules and sought independent legal advice so as to avoid any personal liability for a Breach of Trust?

Q2 – A Member wrote to both Member-elected Directors in a letter dated 17 January 2012, advising both Member-elected Directors that it is a criminal offence to contravene subsection 1017C(2) and 1017C(5) of the Corporations Act 2001. The Member requested a copy of the “most recent” actuarial report in accordance with subsection  1017C(5) and Regulation 7.9.45 of the Corporations Regulations 2001. Why have both Member-elected Directors committed a criminal offence by contravening subsection 1017C(5) of the Corporations Act 2001 by refusing to provide a copy of the most recent actuarial report. A second request also ignored was made on the 1 March 2012. What are these Member-elected Directors attempting to hide from the Members who elected them? Where do their loyalties lie?

Q3 – A Member wrote to both Member-elected Directors in a letter dated 22 January 2012, requesting a copy of the advice from the Fund Actuary that would have been required for the Trustee to grant a “one-off” $1.3 Million pension in 2009. Why have the Member-elected Directors not provide a copy of this advice from the Fund Actuary to the Membership given the unusual nature of this $1.3 Million pension increase?

Q4 – A Member wrote to both Member-elected Directors in a letter dated 5 March 2012 requesting Fund Information under Subsection 1017C(2) of the Corporations Act 2001 about which fund $200,000 in contributions had been placed and what had been the earnings rate on these contributions.  Why have neither Member-elected Director responded to this request nor provided the Fund Information requested even though it is a criminal offence to contravene Subsection 1017C(2) of the Corporations Act 2001?

Q5 – A Member wrote to both Member-elected Directors in a letter dated 16 March 2012 and advised them that the “Retrenchment Rule” had been deleted in a Deed of Amendment executed on 20 December 1982. Why have neither Member-elected Directors communicated this fact to the Fund Secretary so that this important information could be provided to fellow Members during the recent “information” sessions? Why do the Member-elected Directors want this fact concealed from the Members who elected them to protect their interests? Where does the loyalty of the Member-elected Director lie?

Q6 A Member wrote to the Member-elected Directors in a letter dated 12 June 2012, referring them to Arakella Pty Ltd V Paton (no. 2) [2004] NSWSC 605. In this case, the trustees sought to be excused from a number of breaches of their duties under the trust deed. Austin J accepted that their mistakes had been honest, but refused to grant relief in relation to a number of the breaches. These had taken place because the trustees had relied on the advice of their accountant and had not informed themselves adequately as to their duties. Austin J said a paragraph [38]:

“38 The first duty of a trustee on appointment, and one of the most fundamental, is to become acquainted with the terms of the trust instrument. In the case of a corporate trustee, that duty is to be discharged on its behalf by its directors. I cannot see how it could be reasonable for the directors of Arakella to believe that they could administer the affairs of the Trading Trust without personally reaching an understanding of the way in which the trust instrument affected the operation of the GNS business. While company directors are permitted to delegate certain tasks, and to rely on others, within the limits prescribed by the Corporations Act and the general law, it is clearly not reasonable, in my opinion, for the directors of a corporate trustee to rely on external advice from an accountant as to all structural matters, without any personal attention to the constitutional structure of the business.

So why have the Member-elected Directors ignored the the ruling of Austin J in Arkella?

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