How trustees should make decisions
Trustees are required by law to make decisions solely with the interests of the beneficiaries in mind. They must exercise any powers and discretions under the A formal legal document setting out the rights and obligations of all the parties to a trust. in good faith, and for the purpose for which the powers were granted. Trustees must also give real and genuine Something of value, such as money, given by one person to another person as part of a contract. to the exercise of their Power to choose whether to do something or not. For example, a judge may have discretion to allow a party extra time to complete a document if it would be unfair to enforce the legal time limit.. They must not simply rely on the opinion of another person; for example, the opinion of the insurer or of the insurer’s medical practitioner.
Even where the A type of property ownership or arrangement where one party, known as the trustee, holds property or money for the benefit of another party, referred to as the beneficiary. A formal legal document that is used for specific purposes, such as trusts, some types of ownership of land, and agreements where no money is going to be paid. Deeds must clearly state that they are a deed, and they usually include the words ‘signed, sealed and delivered’. They are also called ‘contracts under seal’, although attaching a seal with wax is no longer necessary. gives the trustee the power to delegate the making of decisions, the decision has to be made within the The transfer of responsibilities from a higher authority to a lower one. For example, a government minister may have power to hand their decision-making responsibility for visa applications to a public servant. Whenever there is a delegation, the higher official continues to have the authority to make the decision. given. It may be possible to argue, depending on the terms of the trust deed, that a decision has been improperly delegated.
A trustee A document that sets out what a person wants to happen to their money and other property after they die. also fail to give a matter real and genuine consideration if the trustee asks itself the wrong question. One example would be a trustee refusing to pay a total and permanent disability benefit on the ground that the member could be retrained for a different job, when the definition required the trustee to ask itself whether the member was capable of carrying on a suitable occupation without retraining. In some circumstances, there may be a duty to make further enquiries (see Finch v Telstra Super Pty Ltd  HCA 36; (2010) 242 CLR 254).
However, in many cases judges have stated that trustees’ decisions are not required to be correct, in accordance with the weight of the Material presented to a court to prove or disprove a fact. It can include what witnesses say as well as documents and other objects., or even fair. Trustees are not required to give reasons for their decisions. However, if a trustee’s conduct is sufficiently unreasonable or unfair, it may suggest that they are not acting in good faith.
Although trustees cannot be required to give reasons for their decisions, if they do so voluntarily the reasons must be sound. If they are not, a An independent body that hears legal claims brought by parties and decides between them. Serious cases are heard by a judge and jury, or just a judge. Less-serious cases are heard by a magistrate. may set aside the decision.
Trustees and insurers ought to provide a claimant with information about Relevant or important. For example, material evidence is something that helps to prove an argument in a criminal case. adverse to the claim and with an opportunity of addressing those matters before dismissing a claim. If this is not done, a court may set aside the decision (see Hannover Life Re of Australasia Ltd v Sayseng  NSWCA 214).
Numerous observers have noted that these principles are inappropriate for determining rights to benefits provided in a commercial context, often as part of a An agreement that the law will enforce. of employment. It is unacceptable for members to be refused a payment when they are objectively disabled within the definition in the trust deed, because they are unable to show that the trustee’s decision was made in bad faith (even though it is shown to be wrong, careless, or based on inadequate evidence).
Although no English or Australian court has yet held that the traditional principles do not apply to superannuation trusts, in practice, Australian courts appear to interpret them in a way favourable to beneficiaries where it is clear that the trustee’s decision was not justified by the facts.
The first step in challenging a trustee’s decision about a benefit is to request reconsideration of the decision. Section 101 of the Superannuation Industry (Supervision) A written law made by parliament. Also called an ‘Act of parliament’, ‘statute’ or legislation. 1993 (Cth) requires regulated funds to ensure that enquiries or complaints made by beneficiaries are properly dealt with within 90 days.
Before requesting reconsideration, ask the trustee to provide a copy of the trust deed, a copy of any relevant insurance policy, an up-to-date statement of benefits, reasons for its decision, and copies of any documents it used in making its decision.
A member or other (1) Someone whose money or property is being looked after for them by someone else (called a trustee). (2) A person who is left something in a will, also sometimes called a legatee. See also trust. is entitled to copies of the first three documents, according to both the law of trusts and the Superannuation Industry (Supervision) Regulations 1994 (Cth), but cannot force the trustee to provide the last two.
The next step is to write to the trustee requesting reconsideration, setting out the reasons why you believe the original decision is wrong. In the case of a total and permanent disability benefit, you should mention any factors that limit your employment prospects, including your age, extent of educational and vocational qualifications, and your experience and ability to speak and write English. You should include copies of any supportive medical reports. It would be prudent to obtain legal advice at this stage.
Review by the courts
If internal review is unsuccessful, the next step to consider is legal action. It is essential to obtain advice from a A legal practitioner (lawyer) who sees clients and opens files to deal with their legal matters but usually does not appear in court. See also barrister. experienced in acting for members of superannuation funds before undertaking this step. Some firms of solicitors will act in these matters without payment until the matter is resolved. Nevertheless, substantial The amount charged by a lawyer for legal work. Lawyers can only charge the amount agreed with the client in a costs agreement or the amount stated by a court in its rules. The party who loses a case usually has to pay all their own costs plus most of the costs reasonably incurred by the other side. See also indemnity costs. may be incurred and, if unsuccessful, a member may have to pay the legal costs of both parties to the dispute.
A court will only review a decision of a trustee on the basis of the principles set out in the section ‘How trustees should make decisions’, above. This means that if the trustee has not voluntarily given reasons for its decision, you will have to show that the trustee failed to give the matter real and genuine consideration, acted in bad faith or acted for an improper purpose. If the trustee gave reasons for its decision, it will be set aside if the court accepts that the reasons were not sound.
Statements by trustees that ‘the medical evidence does not establish that you are disabled within the meaning of the trust deed’, or that ‘in our opinion you are not disabled within the meaning of the trust deed’ have been held to be reasons by the courts. However, a court will not set aside a trustee’s decision simply because the judge would have made a different decision. Even if the court does set aside the decision, it may not always substitute its own decision for that of the trustee. It may instead allow the trustee to make the decision again.
In practice, very few of these cases go as far as a court The time and place at which a court or tribunal hears the parties argue their case and makes a decision.. Almost all are settled by agreement before trial. An experienced solicitor can advise you on the likelihood of your case being settled.
Review by the Australian Financial Complaints Authority
Complaints about superannuation and insurance can be made to the Australian Financial Complaints Authority (AFCA). There are some exclusions. AFCA can only deal with complaints about certain types of general insurance policies.
AFCA cannot deal with complaints about:
- workers’ compensation insurance;
- the level of an insurance fee, premium, (1) A statement giving the details of a crime an accused person is claimed to have committed. (2) A personal property security. (3) A judge’s directions to a jury at the end of a case., rebate or interest rate – unless the complaint concerns the non-disclosure, Making a statement or doing something that is false, to try to get someone to do something they would not otherwise do, for example buy goods of poor quality. or incorrect application of a fee, or a breach of any legal obligation or duty by the insurance firm;
- decisions to refuse to provide insurance cover; except where:
- the complaint is that a decision was made indiscriminately, maliciously or on the basis of incorrect information,
- the complaint is that the A person who begins a criminal prosecution against another in the Magistrates’ Court, or formally starts an action in a court or tribunal or makes a complaint to a complaint-handling body. In a civil action they could also be referred to as a plaintiff or an applicant. was misinformed about the insurance cover, or
- the complaint relates to a medical A promise to pay compensation to cover losses or expenses that may arise in the future if some stated event occurs. For example, if a business partnership ends and one partner continues to run the business, they generally agree to indemnify the others against any claims against the business in the future. Insurance contracts also indemnify the insured against stated risks. insurance product;
- underwriting or actuarial factors leading to an The first step in agreeing to make a legally binding agreement. An offer must be accepted before there can be a legally enforceable contract. For example, a person can offer to sell their car for $5000 and a buyer can accept the offer and pay that purchase price. of a life insurance policy on non-standard terms;
- rating factors and weightings an insurer applies to a general insurance policy to determine the insured person’s (or proposed insured person’s) base premium that is commercially sensitive information.
AFCA can deal with claims up to $1 million.
For claims relating to an income stream (e.g. income protection insurance), AFCA can deal with claims relating to policies paying up to $13 400 per month.
AFCA has a compensation limit of $500 000 per claim (except for superannuation and some other matters), plus interest and limited costs.
For a complaint relating to superannuation, AFCA must affirm a decision, if it is satisfied that the decision is fair and reasonable in all the circumstances.
Other AFCA decisions are based on what is fair in all the circumstances, considering:
- legal principles;
- applicable industry codes or guidelines;
- good industry practice; and
- previous relevant decisions made by AFCA or its predecessors (e.g. the Superannuation Complaints A body set up to hear and decide disputes, usually with less formality and less strict rules of evidence than in a court proceeding.).
This is different to the approach applied in a court.
If AFCA decides in favour of the financial firm, the complainant is not bound by the decision. The complainant retains the right to take the complaint to court.
For information about how to prepare to submit a complaint, see AFCA’s website at www.afca.org.au/make-a-complaint/complain.