The Trustee’s “Offer”

After a former Member-elected Director commenced legal proceedings against the Employer and corporate Trustee after being retrenched with one day’s notice with effect the day before the Member was due to attend his first Board Meeting, the Division 2 final salary Defined Benefit Fund was closed to new Members on 1 December 1997.

New employees from then on were only offered membership of a new money purchase Defined Contribution fund as a condition of their Contract of Employment.

In 1998 an offer was made by the Trustee to existing Members of the Division 2 final salary Defined Benefit Fund to leave this Fund and join the the new Division 5 money purchase Defined Contribution Fund.

Now Trustees have a “Duty of Care” to the Members and Beneficiaries of the Fund, however Trustees are not required to be perfect. Trustee are however required to act honestly since there is a Fiduciary Relationship between the Trustee and the Beneficiaries if the Trust (Fund).

The Trustees should have acted honestly and advised members of the Division 2 Fund, that they would lose a valuable entitlement if they decided to accept the Trustee’s offer and transfer to the new Fund.

The new Fund had a “Cessation of Service Rule – Rule 5.7.2” that empowered the Trustee to terminate the Members Membership at any age in the event of either

  • Resignation, or
  • Retrenchment.

The Division 2 Fund has two “Resignation Rules

  • Rule 2.3.6 for Members who resigned before the Early Retirement Age of 55, and
  • Rule 2.3.3 for Members who were no longer in the service of the Employer and who voluntarily elected to resign from the Fund having attained the Early Retirement Age of 55

The “Retrenchment Rule” had been deleted by a Deed of Amendment executed on 20 December 1982.

The Trustee is only empowered to by the Governing Rules to terminate the Membership of a Member of the Division 2 Fund if the Member has attained the Normal Retirement Age of 65 {assuming the Member has not died or become totally and permanently disabled}.

Now the Trustees at the time failed to act honestly and advise the Members of the protection that had if they were retrenched by remaining Members of the Division 2 Fund.

Members who accepted the Trustee’s offer to leave the Division 2 Fund have a claim against these Trustees since they failed to act honestly and properly advise the Members of the important protection they would be abrogating if they accepted the Trustee’s “offer”.

Over the next decade many members were subsequently retrenched due to ill conceived and poorly executed business “expansion” plans gone wrong.

The election of the Members would be voidable since their Fiduciary (the Trustee) failed to act honestly when they made their election to leave the final salary Defined Benefit Fund.

Australian Guardians- Protecting your wealth when no on 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>