Togethr Trustees Pty Ltd v Safai - [2023] SASC 90

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
TOGETHR TRUSTEES PTY LTD v SAFAI
[2023] SASC 90
Reasons for Decision of the Honourable Justice Stein
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - MISCELLANEOUS OTHER POWERS, DUTIES AND LIABILITIES - POWER TO AMEND TRUST DEED
SUPERANNUATION - PRIVATE SECTOR FUNDS - AMENDMENT OF TRUST DEED
The applicant, the Trustee of the superannuation fund known as Equipsuper, sought an order pursuant to s 59C of the Trustee Act 1936 (SA) varying the Trust Deed governing the superannuation fund. The proposed variation was to insert a new rule to provide for a fee to establish a trustee risk reserve of funds to address the risk of the Trustee incurring liabilities in relation to which it will not be indemnified from the assets of the Fund.
Held:
1.The Court had jurisdiction to entertain the application to vary the Trust Deed.
2.Prerequisites for making the variation order satisfied, including that there is good reason to vary the trust deed, it is in the interests of the beneficiaries to do so and in the circumstances will not result in one class of beneficiaries being unfairly advantaged.
3.Orders made varying the Trust Deed.

Trustee Act 1936 (SA) s 59C; Superannuation Industry (Supervision) Act 1993 (Cth) ss 29VA, 52, 52A, 56, 57; Occupational Superannuation Standards Act 1987 (Cth); Superannuation Safety Amendment Act 2004 (Cth); Corporations Act 2001 (Cth); Treasury Laws Amendment (Strengthening Corporate and Financial Sector Penalties) Act 2019 (Cth); Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No 1) Act 2019 (Cth); Financial Sector Reform (Hayne Royal Commission Response) Act 2020 (Cth); Treasury Laws Amendment (Your Future, Your Super) Act 2021 (Cth); Financial Sector Reform (Hayne Royal Commission Response No 2) Act 2021 (Cth); Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), referred to.
Energy Industries Superannuation Scheme Pty Ltd as trustee of the Energy Industries Superannuation Scheme Pool A and Pool B (trading as EISS Super) [2022] NSWSC 1202; AustralianSuper Pty Ltd v McMillan [2021] SASC 147; Host-Plus Pty Ltd v Blackwell [2022] SASC 59; Re QSuper Board [2021] QSC 276; Re Care Super Pty Ltd [2021] VSC 805; Re HEST Australia Ltd [2021] VSC 809; Application by Maritime Super Pty Ltd atf Maritime Super [2021] NSWSC 1614; Application by LGSS Pty Ltd atf Local Government Super [2021] NSWSC 1613; Application by Motor Trades Association of Australia Superannuation Fund Pty Ltd atf Spirit Super [2021] NSWSC 1672; Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121, considered.

TOGETHR TRUSTEES PTY LTD v SAFAI
[2023] SASC 90

STEIN J: The applicant, Togethr Trustees Pty Ltd (the “Trustee”), sought an order pursuant to s 59C of the Trustee Act 1936 (SA) (“Trustee Act”) varying the Trust Deed governing the superannuation fund known as Equipsuper. The proposed variation was to replace Rule A3.4 of the Trust Deed in its entirety with a new Rule A3.4…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2023] SASC 90
Decision Date: 31 May 2023

CaseChat Overview and Summary

In the case of Togethr Trustees Pty Ltd v Safai, the dispute involved the powers, duties, rights, and liabilities of trustees, particularly concerning the amendment of a trust deed. The case was heard in the Federal Court of Australia. The primary issue before the court was whether the trustees had the authority to amend the trust deed to create an Administration Reserve, which would facilitate the funding of the Fund's operational requirements. This involved determining the extent of the trustees' discretion under the Superannuation Industry (Supervision) Act 1993 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth).

The court examined the statutory framework governing superannuation funds, including the relevant provisions of the Superannuation Industry (Supervision) Act 1993 and the regulations. It considered the historical context of the regulatory system and the evolution of the legislative requirements for superannuation trustees. The court also assessed the expert evidence provided by Associate Professor Vivienne Brand, who detailed the changes in the regulation of superannuation companies since 1931, and the increasing complexity of legislative, regulatory, and administrative obligations for financial services industry companies. The court concluded that the trustees had the necessary authority to amend the trust deed to create the Administration Reserve, as this amendment was consistent with the statutory objectives and regulatory requirements governing superannuation funds.

The court found in favour of the trustees, affirming their power to amend the trust deed to establish the Administration Reserve. The decision underscored the importance of trustees exercising their powers in accordance with the statutory framework and the regulatory guidelines, while also considering the long-term interests of the fund members. The court's reasoning highlighted the trustees' discretion within the bounds of the legislative and regulatory context, ensuring that any amendments served the overarching goal of prudential protection for superannuation fund members.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The Operational Risk Financial Reserve is held in accordance with APRA Prudential Standard SPS 114 Operational Risk Financial Requirement and is intended to provide financial resources to address losses to members that may arise from operational risks. An Administration Reserve (“Administration Reserve”) facilitates funding current and future operational requirements of the Fund. The Administration Fund is used to meet day to day operational costs as well as one-off approved expenditures considered to be in the long term interests of members. The Administration Reserve has been built up over a number of years in which fees charged have exceeded the costs paid out by the Fund. The Administration Reserve is a blended reserve derived from fees paid by, or on behalf of, members on all Fund products and across all member cohorts. An Investment Reserve reflects net investment earnings accumulated but not yet allocated to members. The daily value represents the difference between the cumulative amount of net investment income after fees and taxes earned by the Fund and the cumulative return to members through the unit price. A key component of the reserve from time to time represents the difference between the estimated tax rates applied in determining the daily unit pricing and the actual investment tax experience of the Fund. An Insurance Reserve has a self-insurance component, used to fund future service components of certain insurance benefits of particular defined benefit members, and a premium adjustment component which is used to cover additional premiums payable to the insurer as a consequence of premium adjustments agreed with the insurer. There are no separate or distinct reserves as between Equipsuper, MyLife MyMoney and Catholic Super branded products. However, the reserves are notionally tracked in respect of the separate branded products. Expert Evidence supporting application Report of Associate Professor Brand Associate Professor Vivienne Brand is an Associate Professor in Law at Flinders University with significant experience in corporate law. Associate Professor Brand was asked to address a number of questions regarding the complexity and expansion of legislative, regulatory and other administrative obligations for financial services industry companies; the likelihood of further expansion; increases in maximum penalties or amounts payable under infringement notices; the likelihood of future increases; whether there have been increased enforcement activities; whether further increases are likely, and the current potential risks for a superannuation trustee for a large public offer fund and/or its directors and officers incurring civil, criminal or administrative penalties and infringement notices. Associate Professor Brand described relevant changes in the regulation of superannuation companies since 1931 which I briefly, but not exhaustively, summarise below. From the point of creation of the predecessor of the Equipsuper Fund in 1931 until 1987, there was no superannuation specific comprehensive Commonwealth regulatory system and, prior to 1987, there was no mandatory superannuation contribution system in Australia. Since 1987, superannuation specific obligations have been imposed, predominantly at Commonwealth level. In 1987, the Occupational Superannuation Standards Act 1987 (Cth) (“OSS Act”) was introduced to regulate the superannuation industry. It provided operating standards for certain funds but did not create offences for breach of standards. In 1993, the OSS Act was replaced by the SIS Act. The SIS Act was intended to give effect to measures to increase prudential protection provided to the superannuation industry. Criminal penalties were prescribed, as were civil penalty provisions.