AustralianSuper Pty Ltd v McMillan

AustralianSuper Pty Ltd sought a declaration and an order under section 59C of the Trustee Act 1936 (SA) that the Court should exercise its discretion to vary the Trust Deed governing the superannuation fund known as AustralianSuper. The proposed variation would permit the payment of a fee, the "Trustee Risk Reserve Fee", to the Trustee by the Fund, with the consent of the Trustee, on the terms set out in the proposed variation. The purpose of the fee is to provide the Trustee with a capital reserve to enable it to meet future non-indemnifiable penalties imposed on it by regulators. The applicant argues that the Trustee would become insolvent if it were to incur a penalty in any significant amount. If the Trustee were to become insolvent, it would be unable to continue as trustee of the Fund. The proposed variation is opposed by the respondent, Mr McMillan, who holds a benefit interest in the Fund. The respondent contends that the proposed variation is contrary to the spirit of the trust. The court was required to determine whether the Court should exercise its discretion to vary the Trust Deed governing the superannuation fund known as AustralianSuper in accordance with the proposal. The court found that it is appropriate to exercise the discretion under section 59C of the Trustee Act to make a variation to the Trust Deed. The court concluded that the proposed variation accords as far as reasonably practicable with the spirit of the trust, will not disturb the trust beyond what is necessary to give effect to the reasons for the variation and is not motivated by taxation minimisation considerations. The variation will not result in one class of beneficiaries being unfairly advantaged to the prejudice of another class. The variation is in the interests of the beneficiaries. The variation is not rendered void by subsections 56(2) and 57(2) of the Superannuation Industry (Supervision) Act 1993 (Cth). Given current legislative provisions and time constraints, it is not possible to satisfactorily mitigate that risk by 1 January 2022 other than by the introduction of a trustee risk fee of the type proposed. It is appropriate to exercise the discretion under section 59C of the Trustee Act to make a variation to the Trust Deed. For the reasons given above, it will be limited as to amount. The court proposes to make the following orders: 1 Pursuant to section 59C of the Trustee Act 1936 (SA), the trust deed dated 13 December 1985 (as amended) (Trust Deed) governing the superannuation fund known as AustralianSuper be varied by inserting: (a) immediately after rule 3.1(3) a new paragraph (4) as follows: “(4) has a Constitution that requires that: (a)all shares in the Trustee (other than any shares beneficially owned by the Fund) have no right to a dividend; and (b)on a winding up, any surplus must not be paid to any shareholders (other than in respect of any shares beneficially owned by the Fund) and must (unless paid in respect of any shares beneficially owned by the Fund) be paid to the Fund or a successor fund (as defined in the Relevant Requirements) to the Fund.” (b)immediately after rule 4 a new rule 4A as follows: “4A Trustee Risk Reserve Fee 4A.1 For each financial year of the Fund commencing with the financial year ending on 30 June 2022, a fee is payable to the Trustee in an amount equal to 0.015% per annum of the net assets of the Fund calculated as at the end of the previous financial year (the "Trustee Risk Reserve Fee"). 4A.2 The Trustee Risk Reserve Fee is to be paid in such periodic instalments as are determined by the Trustee from time to time. 4A.3 The Trustee: (1)must suspend payment of further amounts of the Trustee Risk Reserve Fee if and to the extent and for so long as (but only for so long as), immediately following such payment, the balance of the Trustee Risk Reserve would exceed the greater of: (a)an amount equal to the Trustee Risk Reserve Fee in respect of that financial year calculated under clause 4A.1; and (b)such amount (if any) as the Superannuation Industry (Supervision) Act 1993 or regulations made thereunder or licensing provisions of the Corporations Act 2001 or regulations made thereunder require or as a Responsible Authority directs the Trustee to hold as capital on its own account; and (2)may otherwise determine in its absolute discretion to reduce, waive, suspend or postpone the Trustee Risk Reserve Fee (or any part of it) and, subject to Rule 4A.3(1) to cease such reduction, waiver, suspension or postponement. 4A.4 For the purpose of this Rule 4A, a reference to the "Trustee Risk Reserve" is to the balance of funds held by the Trustee as capital on its own account which is referable to the Trustee Risk Reserve Fee which has been paid from time to time. For the avoidance of doubt, the Trustee Risk Reserve does not form part of the assets of the Fund and (other than as set out in this Rule 4A) is not subject to the terms of this Deed. 4A.5 The Trustee must disclose the following information to members within three months after the end of each financial year: (1)details of the amount(s) of the Trustee Risk Reserve Fee paid in the previous financial year; (2)the balance of the Trustee Risk Reserve as at the end of that financial year;(3)details of any earnings from the investment of the Trustee Risk Reserve; and (4)details of any amounts paid out of the Trustee Risk Reserve including, in respect of each payment:(a)the date and amount of the payment;(b)the date and amount of the liability the subject of the payment; and(c)details of the contravention giving rise to the penalty comprising the liability where applicable, by publishing this information on the website of the Fund or by other equivalent technological means of communication.” 2 The Applicant’s and the Respondent’s costs of this proceeding are to be met by the Applicant from the assets of the superannuation fund known as AustralianSuper. 3 Liberty to apply to any party to further vary the Trust Deed.