session 8 - jocelyn furlan · 2. tal life ltd v shuetrim, metlife insurance ltd v shuetrim [2016]...

SESSION 8:TRENDS IN COURT

DECISIONS AFFECTING SUPERANNUATION FUNDS

Jocelyn Furlan Furlan Consulting

© Jocelyn Furlan, Furlan Consulting 2016

Disclaimer: The material and opinions in this paper are those of the author and not those of The Tax Institute. The Tax Institute did not review the contents of this presentation and does not have any view as to its accuracy. The material and opinions in the paper should not be used or treated as professional advice and readers should rely on their own enquiries in making any decisions concerning their own interests.

Agenda

1. Overview2. Recent judicial decisions

Campbell’s case Shuetrims’s case The REST case

3. Questions

2. Campbell v Superannuation Complaints Tribunal [2016] FCA 808

Background Relevant Family Law provisions The Tribunal’s decision The appeal Questions of law The Court’s rulings Implications of the decision


Background

Mr Campbell requested information for family law purposes

The Fund he was a member of provided him with details of his accumulation benefit as well as details of an invalidity pension he was receiving


Background

The Fund classified the invalidity pension as a defined benefit

Mr Campbell complained about receiving information in relation to his invalidity pension, arguing it was not a defined benefit and was not a superannuation benefit at all


Relevant Family law provisions

Section 90MZB - Trustee to provide information Section 90MD – definition of eligible superannuation plan Reg 5 of the Family Law (Superannuation) Regulations –

definition of ‘defined benefit’


The Tribunal’s decision

The Tribunal withdrew the complaint on the basis that it was misconceived and lacking in substance


The appeal

Mr Campbell appealed to the Federal Court from the Tribunal’s decision pursuant to s 46 of the Complaints Act


Questions of law

Whether Mr Campbell’s entitlement to receive an invalidity pension benefit was a “superannuation interest” as defined by s 90MD of the Family Law Act 1975 ; and

if “Yes”, was CSC required to furnish him with information which valued that interest on the basis that it was a “defined benefit interest” or, instead, on the basis that it was an “accumulation interest”?


The Court’s rulings

The Court held that Mr Campbell’s invalidity pension benefit was not a defined benefit interest.

The Court also held that Mr Campbell’s benefit is a “superannuation benefit” which should have been valued as an “accumulation interest”


Implications of the decision

Any funds that pay defined benefit invalidity benefits will need to report these as accumulation benefits for family law purposes

A defined benefit invalidity benefit in the payment phase is a superannuation benefit.

Appeal rights from decisions by the Tribunal declining to deal with complaints

2. TAL Life Ltd v Shuetrim, MetLife Insurance Ltd v Shuetrim[2016] NSWCA 68

Background Supreme Court decision Appeal Court’s findings

Delay TAL’s conduct MetLife’s conduct ‘Unlikely ever’ The medical evidence



Background Mr Shuetrim was a policeman. During his police service he was exposed to a series of

traumatic events. He injured his left elbow at work in September 2011 and ceased work in November 2011. He received workers' compensation payments after he ceased work.

He was diagnosed with an anxiety disorder and was medically discharged in November 2012.


Background Mr Shuetrim was a member of a superannuation fund and

held total and permanent disablement (TPD) cover with the Fund. TAL and MetLife were the insurers of the Fund. TAL offered insurance to all members of the Fund, and MetLife provided additional cover to members of the police force.

In early 2013 Mr Shuetrim lodged a claim for TPD benefits from the Fund.


Background

Both insurers declined his claim and Mr Shuetrimappealed to the Supreme Court of NSW


Supreme Court decision Mr Shuetrim succeeded. Both insurers had breached their duties - the Court held

that these failures were so unreasonable as to invalidate the insurers' decisions.

His Honour then determined the claims himself, and determined that Mr Shuetrim satisfied both definitions of TPD.

Both insurers appealed


Appeal Court findings

Delay

Caused by Mr Shuetrim, not the insured


Appeal Court findings TAL’s conduct

TAL had breached the duties it owed to Mr Shuetrim by not considering medical evidence produced after the date of Mr Shuetrim’s disability


Appeal Court findings MetLife’s conduct

MetLife had not breached the duties it owed to Mr Shuetrim by not placing greater emphasis on the vocational assessment report


Appeal Court findings ‘Unlikely ever’

“Unlikely ever” does not mean merely less than a 50% probability. The fact that there is a “real chance” that the person will return to relevant work, even if it is less than a 50% chance, means that person is not TPD.


Appeal Court findings The medical evidence

Mr Shuetrim was not TPD.

In making its determination, the Court took account of his age (he was 35 at the time he ceased work).



The Court’s interpretation of “unlikely ever” will make it more difficult for claimants to satisfy that term, particularly the finding that “unlikely ever” did not mean merely less than 50%, but rather whether there was a real, and not merely remote or speculative, possibility of return to work.



The Court also found that an opinion to the effect that “in the ordinary course and with appropriate treatment” a person could return to relevant work, may be sufficient to find that a claimant was not TPD.

The Court did not find that MetLife had an obligation to seek the further physical and psychological assessments recommended by the vocational assessor.



Significantly, the Court awarded costs against Mr Shuetrim.

2. Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121

Background Retail Employees Superannuation Trust (the Trust) was

established in 1987 Since 1987, the trustee has made numerous amendments

to the trust deed of the Trust The Trustee was concerned that some of the amendments

may arguably not have complied with clause 19 of the Trust Deed, which empowers the Trustee to amend the Trust Deed.


Background The Trustee sought an order varying the Trust Deed to

validate all previous amendments with prospective effect. The Trustee also sought a variation of the Trust Deed to

substitute a new clause 19 and to amend some of the substantive provisions of the Trust Deed.


The Court handed down its 162 page decision on 8 August 2016.

Many of the industry’s luminaries acted for the Trustee (the Plaintiff) or on behalf of Ms Pain, a member of REST (the defendant) or provided evidence as experts


Main areas considered Financial advice – the Court determined that it was

appropriate that the Trust Deed be amended to give the Trustee power to pay for financial product advice

However, in setting the fees, the Trustee has to take account of the cost of providing advice to MySupermembers compared to the cost for non-MySupermembers


Main areas considered Transfer to successor fund – the Court allowed the

Trust Deed to be amended to allow the transfer for members to a successor fund without their consent in very limited circumstances and subject to a number of conditions


Main areas considered Binding death benefit nominations – the Court

considered at length Regulation 6.17A of the SIS Regulations, in particular, the expressed 3 year limitation on the validity of binding death benefit nominations


Main areas considered Binding death benefit nominations – the Court said:

The structure and drafting of sections 58 and 59 of the SIS Act and regulation 6.17A of the SIS Regulations give rise to ambiguities, uncertainties and potentially unintended consequences. The difficulties … are exemplified by the numerous issues examined below in relation to proposed rule 9 of the Trust Deed. It is highly desirable that those provisions be reviewed by the Commonwealth and recast


Main areas considered Binding death benefit nominations – after noting that

the Trustee’s proposed amendment assumed that the SIS Regulations prevent the making of non-lapsing binding death benefit nominations, (which in the Court’s view was open to some doubt), the Court approved the proposed amendment.


Conclusion The Court exercised its discretion to validate the 40

previous amendments to the Trust Deed and allowed the requested amendment to Clause 19, subject to some variations.

This case is significant for all trustees considering amendment to their Trust Deeds.


Conclusion It will be interesting to see if any legislative or regulatory

activity arises from the Court’s statement that:

It is in the interest of members to be able to nominate to whom their benefits are payable on their death and, if they wish, to do so by a nomination that does not lapse after three years.

Questions?Jocelyn FurlanFurlan [email protected]

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session 8 - jocelyn furlan · 2. tal life ltd v shuetrim, metlife insurance ltd v shuetrim [2016]...

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