Hot topics at the Superannuation Complaints Tribunal

• Topic?

a) Death Benefits

b) Administration

c) TPD

*****

• Outside jurisdiction?

• Binding death benefit nominations?

• Case study: Death benefit - outside jurisdiction

– The complainant (the deceased member’s father) lodged a complaint with the Tribunal regarding the trustee’s decision to pay the benefit to the mother as an interdependent

– As the complaint was not lodged within the prescribed 28 day period, the Tribunal determined that under subsections 14(3) and 14(4) of the Complaints Act, it did not have jurisdiction to deal with the complaint.

• The complainant and the mother are the parents of the deceased member

• On 5 January 2009, the complainant lodged a complaint with the Tribunal (dated 23 December 2009) that the decision to pay the whole of the death benefit to the mother as an interdependent was unfair and unreasonable

• The resolution sought by the complainant was that the benefit be split equally between them

• Subsections 14(3) and 14(4) of the Complaints Act states that the Tribunal cannot deal with a complaint under section 14 about a decision of a trustee relating to the payment of a death benefit if the complaint is not lodged within the prescribed period

• The prescribed period is 28 days after the person has been given written notice of the trustee’s decision

• The trustee wrote to the complainant and the mother on 21 August 2008 advising that it proposed to pay the benefit to the mother as an interdependent

• By letter dated 11 September 2008, the complainant’s representatives advised the trustee that they acted for the complainant and that they objected to the proposed payment of the benefit

• On 17 September, the trustee wrote to the complainant’s representative seeking further information which was provided by the representative on 26 September

• By letter dated 13 October, the trustee gave notice that it affirmed its original decision. Not having received any further objections, the trustee paid the benefit to the mother on 24 November 2008

• The complainant’s complaint was lodged on 5 January 2009 – outside the prescribed 28 days.

• The issue in dispute was whether the complainant’s representative had received the letter

• Section 29 of the Acts Interpretation Act 1901 deals with the meaning of service by post and states:

• In other words, if the letter was properly addressed, stamped and posted then it is deemed to have been delivered unless the contrary can be proved

“Where an Act authorises or requires any document to beserved by post…then unless the contrary intention appearsthe service shall be deemed to be effected by properlyaddressing, prepaying and posting the document as a letter,and unless the contrary is proved to have been effected atthe time at which the letter would be delivered in theordinary course of post.”

• The complainant’s representative submitted that the contrary should be considered to have occurred because the trustee did not have a procedure for recording outgoing mail and the representative did have a procedure for recording incoming mail, and there was no record of receipt of the letter

• However, the letter was correctly addressed, as evidenced by a copy of the letter which was emailed to the representative on 10 December 2008; and an identically addressed letter dated 17 September 2008 was received by the complainant’s representative

• The letter dated 13 October 2008 was not returned to the trustee, as would have been likely to have occurred had the letter not been delivered

• Also, the Tribunal was satisfied that the mother had received her copy of the letter

• On balance, the Tribunal was not persuaded that the deemed delivery should be rebutted and, accordingly, the letter of 13 October was deemed to have been delivered on or about 16 October 2008

• The complainant’s complaint of 5 January 2009 was therefore received outside the prescribed time and, consequently, was outside the Tribunal’s jurisdiction

• In reaching its determination, the Tribunal observed that a simple way for trustees to avoid this type of complaint was to send all notices relating to disputed death benefit distributions to potential beneficiaries by registered mail. As the prescribed period of 28 days is calculated from the date of receipt of the notice, there will be probative evidence to support the receipt date of the notices.

• (D10-11\067)

Case study: Binding death benefit nomination

• The de facto spouse of a deceased member complained about the decision of

the trustee to treat a nomination of beneficiaries made by the deceased

member as a non-binding nomination

• On 25 January 2007 the deceased member completed a ‘nomination of

beneficiaries’ form

• The nomination form included the following statement:

“Please note: Witnesses must witness at the same time and on the same date

as this form is signed. If these dates are not the same or are not provided, the

nomination will not be valid.”

• The deceased member and two eligible witnesses completed and signed the

form. The witnesses dated the form 25 January 2007 but the deceased

member inserted his date of birth instead of the date of making the

nomination

• The trustee wrote to the deceased member on 1 February 2007 and advised

him that his nomination form was not valid and could only be processed as a

non-binding nomination

• A new nomination form and a reply paid envelope were enclosed with the letter with a request that the form be completed and returned to the trustee

• The deceased member did not complete the form. He made a Will on

2 March 2008 which purported to leave his superannuation to his sons, and

he died on 1 April 2008

• The trustee advised the complainant that it had decided to pay the death

benefit to the deceased member’s legal personal representative

• The Tribunal observed that the nomination form was incorrectly dated by the

deceased member and agreed with the trustee that this made the form invalid

as a binding death nomination.

(D09-10\052)

• Case study: Administration

The complainant's defined benefit account had commenced in 1978 and his

membership of the fund in 1996. He was made redundant on 12 October 2008

and as he had satisfied a condition of release, his defined benefit crystallised

Following his retirement, the complainant contacted the trustee to rollover his

crystallised benefit to another fund

He was advised that he would have to wait receipt by the fund of his final

employer contribution

He also had a small accumulation account, invested in the growth investment

option

The complainant believed that his defined benefit would be held uninvested until

rollover and he continued to receive periodic statements and website information

that re-assured him that was the case

In his rollover benefit statement and exit statement he discovered that his defined

benefit had been treated by the trustee as held in his existing separate

accumulation account and invested in the growth investment option, between the

date of his retirement and the date of rollover

During this period the defined benefit amount was reduced through negative

investment returns

The complainant lodged a complaint with the trustee alleging action was taken

without his consent or authority and requested that the negative returns be

reversed. The trustee rejected his complaint

The trustee stated that the process of applying investment earnings based upon

the member's investment choice had been consistently applied to all defined

benefit members

The trustee contended that to freeze a defined benefit until finalisation would

place the investment risk with other members

There was no evidence that the complainant was told of the policy of

transferring a defined benefit into an accumulation account

There was no rationale for the trustee’s claim that treating a sum as uninvested

pending payment to the member could prejudice other members

The fund website continued to reflect that the defined benefit was intact

The defined benefit amount was significantly higher than the existing

accumulation account balance so to presume that, without authorisation, a

member would make the same investment choice for the larger amount was

not reasonable

The Tribunal affirmed that the complainant was entitled to receive the

amount of his defined benefit at rollover without adjustment by investment

earnings between the date of retirement and the date of rollover

The Tribunal further considered that as, due to the trustee's refusal to

compromise his claim, the complainant lost the benefit of the additional

amount due to him, he should receive interest representing the earnings

which would have accrued on that sum after the date of rollover.

(D10-11\047)

Case study – Total and permanent disability (TPD)

• Mr Edington commenced employment with the Queensland Department of Primary Industries in the Fire Ant Eradication Department in September 2001 and joined QSuper

• He applied for 13 additional units of cover in December 2001

• He did not disclose that he had a pre existing condition of schizophrenia, but under the rules of the fund he was not required to do so. He had been diagnosed with schizophrenia in 1994

• In January 2002, he entered a property to inspect it for fire ants. While on the property, he thought that two Rottweiler dogs were attacking him. To escape the dogs, he ran to the front gate and jumped over it. In the process he fell and injured his back and his right foot. The dogs were tethered.

• Mr. Edington subsequently claimed to have suffered an injury to his right foot and either post traumatic stress disorder (PTSD) or an anxiety disorder as a result of the incident

• The QSuper Trust Deed provided as follows:

6.2(c) No insurance benefit will be paid for a claim unless:

(i) The member has been an insured member for fewer than 10 continuous years; and

(ii) the member did not lodge a personal medical statement at or about the date on which the member became an insured member; and

(iii) it is established to the satisfaction of the board that the total and permanent disablement…was not related to a condition that ought reasonably to have been disclosed had a personal medical statement been submitted…

• The trustee considered the member’s total and permanent disability claim (TPD) and determined that:

– He was TPD under QSuper’s governing rules

– However, the cause of his TPD was related to his pre-existing condition

– As a consequence, he was not entitled to a TPD benefit

• The trustee therefore declined the claim

• Mr Edington complained to the Tribunal

• On its review of the evidence, the Tribunal affirmed the operation of the trustee’s decision as fair and reasonable in the circumstances.

Mr Edington appealed the Tribunal’s determination to the Federal Court

• The Federal Court affirmed the Tribunal’s decision and dismissed the appeal (Edington v Superannuation Complaints Tribunal [2007] FCA 1989)

• On appeal to the Full Federal court, the court allowed the appeal by consent and remitted the matter to the trustee (Edington v Superannuation Complaints Tribunal [2008] FCA 78)

• The trustee reconsidered Mr. Edington’s claim and again rejected it on the basis that the condition rendering him TPD was related to his pre-existing schizophrenia

• Mr. Edington again complained to the Tribunal and the Tribunal again affirmed the trustee’s decision

In so doing, the Tribunal referred to DSMIV criteria for PTSD and conducted its own analysis of the medical evidence

Mr Edington (again) appealed the Tribunal’s determination to the Federal Court

The Federal Court set aside the Tribunal's decision and remitted the matter to the Tribunal for reconsideration as follows:

– The Tribunal affirmed the trustee's decision to decline Mr Edington's TPD claim but for different reasons. The Tribunal therefore conducted a fresh review of the matter and this constituted an error of law

– To follow proper process the Tribunal should:

1. Identify the trustee's reasoning process

2. Analyse the reasoning process to assess whether fair and reasonable

The trustee appealed to the Full Federal Court

• On appeal, the Full Federal Court set aside the first instance decision

• It found that the Tribunal had properly conducted its review of the decision of the Board of Trustees in accordance with s37 of the Superannuation (Resolution of Complaints) Act 1993

• The role of the Tribunal is to undertake a fresh hearing for the purpose of determining for itself whether the decision of the trustees was fair and reasonable. The Tribunal was required to undertake its own assessment of the evidence and information before it

• The correct test is whether the actual decision, rather than the process that led to it, was fair and reasonable [para. 46]

• The Tribunal is not required to focus on the reasoning process underlying the trustee’s decision.

• “Thus, even if the Tribunal’s factual findings differed from those of the previous decision-maker, the Tribunal might nonetheless be satisfied that, in the circumstances, the decision under review was in fact fair and reasonable in the relevant way.”

• The court confirmed that the Tribunal is not limited in its review to the material which was before the trustee or, as the case may be, the insurer [para. 78]

• “…the Tribunal, with great respect, exercises a very peculiar form of external merits review indeed.” [para. 85]

Board of Trustees of the State Public Sector Superannuation Scheme v Edington[2011] FCAFC 8

Questions?

www.sct.gov.au

“A community better informed about superannuation”