United Superannuation Pty Ltd v Harrison - [2001] FCA 1468

FEDERAL COURT OF AUSTRALIA
United Superannuation Pty Ltd v Harrison [2001] FCA 1468
SUPERANNUATION – Death benefit – Superannuation Scheme provided for automatic death cover – No insurance effected by trustee of superannuation fund – Doubt as to date on which employer nominated deceased employee to fund – Determination by Superannuation Complaints Tribunal to remit matter to trustee for purpose of considering possible recompense – Validity of that decision – Discussion concerning Tribunal’s powers – Comment on undesirability of a scheme that makes employees’ cover dependent on nomination by employer to trustee and nomination by trustee to insurer.
Superannuation (Resolution of Complaints) Act 1993: ss 37, 46 and 47.
UNITED SUPERANNUATION PTY LIMITED As the Trustee for The Statewide Superannuation Trust v IAN DOUGLAS HARRISON As executor of the Estate of Kerry Joy Reynolds
N 928 of 2001
WILCOX J
SYDNEY
19 OCTOBER 2001

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 928 of 2001

BETWEEN:

UNITED SUPERANNUATION PTY LIMITED
As the Trustee for The Statewide Superannuation Trust
APPLICANT

AND:

IAN DOUGLAS HARRISON
As executor of the Estate of Kerry Joy Reynolds
RESPONDENT

JUDGE:

WILCOX J

DATE OF ORDER:

19 OCTOBER 2001

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.The determination of the Superannuation Complaints Tribunal dated 16 May 2001 be set aside and, in lieu thereof, it be ordered that the respondent’s complaint to that Tribunal be dismissed.
2.The New South Wales District Registrar draw the Court’s reasons for judgment to the attention of the Minister for Financial Services and Regulation and the Australian Prudential Regulatory Authority.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 928 of 2001

BETWEEN:

UNITED SUPERANNUATION PTY LIMITED
As the Trustee for The Statewide Superannuation Trust
APPLICANT

AND:

IAN DOUGLAS HARRISON
As executor of the Estate of Kerry Joy Reynolds
RESPONDENT

JUDGE:

WILCOX J

DATE:

19 OCTOBER 2001

PLACE:

SYDNEY

REASONS FOR JUDGMENT

This is an appeal under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (“the Complaints Act”) against a determination of the Superannuation Complaints Tribunal (“the Tribunal”). The Tribunal upheld a complaint made to it by Ian Douglas Harrison, executor of the estate of the late Kerry Joy Reynolds, against United Superannuation Pty Limited (“United”), trustee of a superannuation fund known as Statewide Superannuation Trust (“the Fund”). Unhappily, the evidence reveals confusion and error, at every stage, by those dealing with Ms Reynolds or her executor.
The documents
The relevant trust deed was made on 9 May 1996, in substitution for an original trust deed made in 1986. The substituted deed provided that the fund should continue to be vested in United as trustee.
The scheme of the substituted deed is that an application may be made by an employer who desires to become a “Participating Employer”. The trustee may accept or reject such an application. In the present case it is clear the…

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: [2001] FCA 1468
Decision Date: 19 OCTOBER 2001

CaseChat Overview and Summary

The matter before the court was between United Superannuation Pty Ltd and Harrison, the executor of the estate of the deceased, Ms Reynolds. The dispute involved the entitlement to death benefits under a superannuation scheme, specifically whether Ms Reynolds was covered by automatic death insurance at the time of her death. The issue was whether she had been properly nominated to the superannuation fund by her employer, United, before her death. This nomination was a prerequisite for her to be covered under the automatic insurance policy held by the trustee of the superannuation fund, Citicorp.

The legal issues that the court had to decide included whether the Superannuation Complaints Tribunal had the authority to remit the matter to the trustee for consideration of recompense and whether the trustee's failure to correctly inform members about the nomination process constituted a reckless failure to exercise the required degree of care and diligence. The court also had to consider the validity of the Superannuation Complaints Tribunal's decision in light of the evidence and submissions provided.

The court found that the Superannuation Complaints Tribunal had correctly decided the matter based on the documents and submissions provided, focusing on whether Ms Reynolds was a member of the Fund at the date of her death. The court agreed with the Tribunal's conclusion that Ms Reynolds had been nominated by the employer and accepted by the trustee as a member of the Fund. However, the court highlighted the misleading information provided by the trustee regarding the nomination process, which did not align with the terms of the insurance policy or the trustee's actual processes. The court noted that this mis-information constituted a reckless failure to exercise the required degree of care and diligence, and while the Tribunal could not make a final determination, it could remit the matter to the trustee for consideration of appropriate recompense.

The final orders of the court were to set aside the determination of the Superannuation Complaints Tribunal and dismiss the respondent’s complaint to that Tribunal. The court also directed that its reasons for judgment be brought to the attention of the Minister for Financial Services and Regulation and the Australian Prudential Regulatory Authority.

Orders

Orders of the court

1. The determination of the Superannuation Complaints Tribunal dated 16 May 2001 be set aside and, in lieu thereof, it be ordered that the respondent’s complaint to that Tribunal be dismissed.

2. The New South Wales District Registrar draw the Court’s reasons for judgment to the attention of the Minister for Financial Services and Regulation and the Australian Prudential Regulatory Authority.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

WILCOX J

Citicorp’s submission stated it had no knowledge of Ms Reynolds prior to her death; she had never been nominated by United to Citicorp.The Tribunal’s decision It appears the Tribunal decided not to conduct a formal hearing, but to determine the matter on the basis of the documents supplied to it, including the parties’ submissions. The Tribunal correctly appreciated there was an issue between the complainant and the trustee concerning a critical question (whether Ms Reynolds was a member of the Fund at the date of her death) and this question turned on whether Ms Reynolds was “nominated” by Lorjona to United prior to her death, rather than the date upon which the contribution was received. The Tribunal determined the issue, apparently, by reference to the letter of Ms Curtale quoted at para 12 above. In its reasons for decision, the Tribunal said:“In accordance with Clause 2.4.1, the Deceased could only become a member of the Fund on the date the nomination (or if there be a written application the application) is accepted by the Trustee. In this case the Tribunal is satisfied from the evidence that there was no written application requested by the Trustee and none was made by the Complainant. However, there existed a nomination for membership by the Employer.The Trustee reports that the Deceased was nominated for full membership of the Fund on 1 July 1997 (mistakenly described in the letter of the Trustee to the Complainant’s solicitor dated 5 June 1998 as ‘1996’). From oral information provided by the Trustee to the Tribunal, the Tribunal understands that nomination occurs when the employer forwards the nominated employee’s name to the Trustee and acceptance is confirmed when the name is entered in the Trustee’s records.The Trustee in a letter of 15 April 1999 to the Tribunal stated that payments were not received by the Trustee until after the Deceased’s date of death. Under the Trust Deed there is no necessary link between payment and the acceptance of a nomination. Accordingly, the fact that the payment was not received by the Trustee until after the date of death is not determinative in deciding whether or not the Deceased has been accepted as a member. From the above information it is reasonable to conclude, and the Tribunal so concludes, that the Deceased was nominated for membership of the Fund on 1 July 1997 by the Participating Employer and that on the day or shortly thereafter and certainly before the date of death of the Deceased, the Deceased was accepted as a Member of the Fund.” The Tribunal then dealt with the position of Citicorp. It concluded there was no evidence that United had nominated Ms Reynolds to Citicorp; accordingly, Citicorp had no liability. No challenge to that conclusion is made in this proceeding. Returning to the position of United, the Tribunal said:“The Tribunal is, however, satisfied that the Deceased was nominated by the Employer and accepted by the Trustee as a member of the Fund. As required under Rule B.4 the Trustee is to ensure that the employee who wishes to become a member of the Fund is notified in writing before joining of his/her right to receive benefits. Information is given in ‘a Member Application’ brochure apparently published in February 1979. Under the heading of ‘Insurance Cover’ the member is informed that he or she has an automatically granted cover subject to the person being at work on the day application to join the Fund is made and providing the person is nominated by the participating employer within 90 days of becoming eligible and importantly ‘providing you, [i.e. the member] do not elect to decline the insurance over’. There is no evidence that the Deceased Member declined insurance cover. Accordingly, the Tribunal is satisfied that she did not decline cover.The Trustees’ submission that the Deceased did not satisfy the conditions because she did not forward an application pre-supposes it was the Deceased Member who needed to satisfy the conditions. However, it is quite plain that under clause 1.1(b)(I) of the Insurance Policy, it is the ‘Policy owner’, i.e. Trustee which is responsible for making the nomination. The information provided by the Trustee to the Member is wrong in suggesting that it is the Member who needs to nominate him/herself within 90 days of being first eligible for membership. In the Tribunal’s view, the information contained in the pamphlet is misleading.The Tribunal notes the contents of Clause 15(a) of the Trust Deed, in particular sub-clause (ii) which does not exempt a liability arising as the result of inter alia ‘a reckless failure to exercise the degree of care and diligence that … is required to exercises[sic]’. The facts of this case illustrate the need, particularly in cases where the Trust Deed requires information to be given, for the Trustee to take care in ensuring correct information is provided to members and/or potential members. The Tribunal notes the general need for trustees of funds to give members all information that the trustee reasonably believes the member needs for purposes of understanding his/her benefit entitlements. (Generally Regulation 2.22 of the Superannuation Industry (Supervision) Regulations and specifically in Regulation 2.24(1)(i) the amount of any sum assured).The Tribunal is, however, concerned that the information given by the Trustee in its information pamphlet:(a)does not accord with the terms of the Policy vis a vis automatic cover; and(b)does not accord with the manner in which the Trustee processes nominations for membership of the Fund, in particular a sub-set of membership not provided for in the Trust Deed is created (i.e. provisional members).Such mis-information is considered by the Tribunal to constitute a reckless failure to exercise a degree of care and diligence that is required to be exercised and that accordingly the Trustee should consider recompensing the Estate of the Deceased in an amount equivalent to the level of one unit of insurance cover. The Tribunal itself in an administrative de novo review and should not reach such a determination. It can, however, set aside the decision under review and remit the matter to the Trustee to consider whether recompense as suggested would be appropriate.If the Complainant is not satisfied with the Trustee’s consideration pursuant to this issued direction of the Tribunal he may again approach the Tribunal after giving the Trustee an opportunity to reconsider any initial decision it reaches.”

Ratio Decidendi

Legal Principle Established

Established by: WILCOX J

Full text does not contain this section.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 928 of 2001

BETWEEN:	UNITED SUPERANNUATION PTY LIMITED As the Trustee for The Statewide Superannuation Trust APPLICANT
AND:	IAN DOUGLAS HARRISON As executor of the Estate of Kerry Joy Reynolds RESPONDENT
JUDGE:	WILCOX J
DATE OF ORDER:	19 OCTOBER 2001
WHERE MADE:	SYDNEY

JUDGE:	WILCOX J
DATE:	19 OCTOBER 2001
PLACE:	SYDNEY