Just when you thought there could never be another superannuation death benefit case that would make you sit up – read on.
The facts are somewhat unusual. The deceased member and his son lived together and had argued the night before the member’s death. In the morning, the son was awakened by a loud noise which he investigated within five minutes and found his father had taken his own life. He checked for a pulse and found none. He then went on to attack his father’s head, neck and body. He rang triple zero and reported “My Dad just killed himself”. Paramedics arrived 10 minutes later and found the deceased member in cardiac arrest, which he had been for some minutes. So, was this suicide or murder/manslaughter? The Coroner’s report stated the member died from the “combined effects of neck injuries and blunt force head injury” and the final death certificate also stated this was the cause of death.
The son was charged with murder (or the manslaughter) of his father but in the Supreme Court he was acquitted of both charges. It was acknowledged that unless a person had medical training it would have been difficult to know the heart was still beating when the deceased was attacked by his son. The son was the sole beneficiary of the estate.
The insurer argued the suicide exclusion in the policy applied. The policy did not have a definition of "suicide" so it was appropriate to look at the dictionary definition for its meaning. In this instance, the insurer decided to adopt the definition in the American Merriam-Webster Dictionary which included not only the act of suicide but also attempting suicide. The Tribunal noted the definition in this dictionary may be appropriate for American usage but in interpreting a policy word in Australia, it was preferable to rely on a dictionary commonly employed in Australia, like the Australian Macquarie Dictionary or the English Oxford Dictionary. Under both of these dictionaries, attempted suicide was not suicide and so the Tribunal held that, based on the medical evidence before the Supreme Court, the suicide exclusion could not apply.
It was also argued that the "forfeiture rule" applied. This is a rule of common law to the effect that, for public policy reasons, it is inappropriate for a person who commits murder to benefit from their actions. But the forfeiture rule was not a term of the policy and regardless of whether the rule could apply, a threshold question was whether the facts permitted the rule to apply at all.
The Superannuation Complaints Tribunal felt the insurer should not consider the eventual recipient of the policy proceeds when determining whether it was required under the policy to pay the trustee as the policy owner. Further, the forfeiture rule only applied in cases of unlawful killing and here the son had been acquitted of both murder and manslaughter. The Tribunal held that “the son’s attack on his father was in the firm believe [sic] that his father was already dead. He did not attack him to achieve that outcome or to unlawfully wound him. Nor objectively was the attack likely to lead to death when the perpetrator could reasonably conclude that the person had already died”.
The Tribunal decided to set aside the decisions of the trustee and insurer and substitute its own. That was, for the insured portion of the death benefit to be paid to the trustee, plus section 57 interest under the Insurance Contracts Act 1984 and, once the insurance proceeds were received by the trustee, for it to pay out the death benefit in the fund’s usual manner.
This case highlights both the jurisdictional reach of the Tribunal and the need for trustees to carefully prepare their submissions.
The member was complaining about the trustee’s decision to impose a levy resulting in the debiting of an amount from the member’s account for the purpose of crediting that amount to the fund’s operational risk financial reserve (the "reserve").
The trustee submitted that the Tribunal did not have jurisdiction as this was a complaint about the management of the fund as a whole. The Tribunal disagreed, noting the principles enunciated by the Federal Court in Vision Super Pty Ltd v Poulter  FCA 849 and in Merkel v Superannuation Complainants Tribunal  FCA 564 gave the Tribunal the ability to hear a complaint as it affected an individual member.
The member argued that the trustee should finance the reserve from company profits. He also submitted that the trustee was not acting in his best interests in “charging him something that he had never requested” and it was not “fair and reasonable” to burden him with the levy for three years. The trustee had determined a target amount for the reserve of 0.25% of the assets of the fund. This was to be paid by each member in quarterly instalments over three years, as a percentage based fee of 0.116% per annum subject to a cap of $300 per member account. The levy was applied to all members’ accounts using the same method of calculation.
The trustee could only impose the levy if it had power to do so under the trust deed. The trustee referred the Tribunal to a clause in the trust deed which had the effect of where a provision of "Relevant Law" (as defined) is required to be included in the trust deed in order to comply with that law, such provision is deemed to be included.
The trustee then referred the Tribunal to section 34 of the Superannuation Industry (Supervision) Act 1993 (SIS) which requires the trustee to meet prescribed standards. The Tribunal did not agree with the trustee’s analysis and pointed out that section 34 does not have the effect of incorporating into the trust deed the power to impose the levy. However, the Tribunal did find that the ‘relevant law’ clause, when read in conjunction with the SIS covenant in section 52(8)(b), did give the trustee the necessary power. This was because the SIS section 52 covenants are deemed to be included in the rules of the trust and the covenant contained in section 52(8)(b) requires the trustee to maintain and manage, in accordance with the APRA Prudential Standards, financial resources to cover operational risk that relates to the fund.
Once the Tribunal found the trustee had the power to impose the levy, it then had to determine whether the trustee had imposed the levy in accordance with its legal obligations. Those obligations included determining a target amount, which was required to be approved by the board of the trustee. The Tribunal then criticised the trustee for not providing it with a copy of the minutes of the meeting where presumably, the trustee had determined the target amount and the manner in which it would create the reserve while acting fairly and not partially between different classes of beneficiaries.
The Tribunal pointed out that section 24 of the Superannuation (Resolution of Complaints) Act required all documents relevant to a complaint to be provided to the Tribunal – so why no minutes?
Notwithstanding the lack of minutes, the Tribunal went on to find that the trustee was obliged to create a reserve and it accepted that the method adopted by the trustee, having regard to the demographics of the membership and the size of their accounts, was fair and reasonable in the circumstances. The trustee’s decision was therefore affirmed.
This article was first published in Super Funds, 1 May 2017.