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 trust deed in good faith, and for the purpose for which the powers were granted.
Trustees must also give real and genuine consideration to the exercise of their discretion. 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 trust deed gives the trustee the power to delegate the making of decisions, the decision has to be made within the delegation given. It may be possible to argue, depending on the terms of the trust deed, that a decision has been improperly delegated.
A trustee will 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).
However, in many cases judges have stated that trustees’ decisions are not required to be correct, in accordance with the weight of the evidence, 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 court may set aside the decision.
Trustees and insurers ought to provide a claimant with information about material 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 contract 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) Act 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 beneficiary 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.
If internal review is unsuccessful, the next step to consider is legal action. It is essential to obtain advice from a solicitor 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 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”. 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 hearing. Almost all are settled by agreement before trial. An experienced solicitor can advise you on the likelihood of your case being settled.
The SCT was set up under the Superannuation (Resolution of Complaints) Act 1993 (Cth) (“SRC Act”) to provide a forum for the speedy, informal and inexpensive resolution of complaints about regulated superannuation funds. From 1 November 2018, the the Australian Financial Complaints Authority (AFCA) will replace the SCT.
One significant advantage of the SCT is that legal costs cannot be awarded against the complainant; however, neither can the complainant recover legal costs from other parties to the dispute. The other main advantage is that the SCT can alter a decision that was not fair or reasonable. As mentioned above, a court has no power to set aside a decision by a trustee simply because it was unfair or unreasonable.
However, there is no right of oral advocacy to the SCT and no right of cross-examination. Also, it can take two or three years for the SCT to make a decision about a dispute. Some consider that a member may be better off choosing the court system, as the courts provide a greater likelihood of settlement and higher settlement amounts.
The SCT can resolve disputes with trustees whether that decision was made before or after the SRC Act commenced on 1 July 1994, so long as the fund was a regulated fund. Since November 1995, the SCT has had the power to determine disputes about whether a person is disabled. However, there are the following restrictions on the disability claims that the tribunal is able to consider:
• the claim for disability benefit must be made to the superannuation fund within two years of the member permanently ceasing employment (a person on sick leave or in receipt of WorkSafe payments may not have permanently ceased employment, although absent from work) (s 14(6B));
• the first decision of the trustee or insurer to refuse to pay the benefit must have been made on or after 1 November 1994; and
• the complaint to the SCT must be made within two years of the first decision of the trustee or insurer to refuse to pay the benefit (s 14(6A)). If the first decision of the trustee or insurer was made on or after 1 July 2013, less stringent time limits apply.
Before the SCT can deal with a complaint, the beneficiary must have attempted to resolve it by making a complaint to the trustee. If the trustee has failed to resolve the matter satisfactorily within 90 days of the complaint being made, a complaint may be made to the SCT (s 19). The complaint must be in writing. A “registration of complaints” form may be obtained from the SCT.
The complaint must allege that the trustee’s decision was unfair or unreasonable (s 14(2)). “Fair” means just, unbiased, equitable and impartial. “Reasonable” means “within the limits of reason; not greatly less or more than might be thought appropriate” (see Pope v Lawler  FCA 1080 (Nicholson J); National Mutual Life Association of Australia Ltd v Jevtovic  FCA 359; Board of Trustees of the State Public Sector Superannuation Scheme v Edington  FCAFC 8; 119 ALD 472).
The SCT does not have the power to deal with complaints relating to the management of the fund as a whole (e.g. investment decisions) (s 14(6)).
A beneficiary is not entitled to legal representation unless the SCT is satisfied that they require representation as a result of disability or for some other reason. The SCT allows a solicitor to act for a complainant who is unable to present their own cases effectively for any reason (including lack of fluency in written English or the complexity of the issues to be considered). However, it cannot prevent a solicitor preparing a submission on a party’s behalf.
The SCT must attempt to resolve the complaint by conciliation. If this is unsuccessful, the SCT holds a “review meeting”. Submissions to the review meeting are in writing unless the SCT orders oral submissions (s 32). Prior to the review meeting, the SCT asks the complainant and the trustee to provide a written submission. Each submission is sent to the other party, who can reply in writing.
If, as a result of the review meeting, the SCT decides that the trustee’s decision was not unfair or unreasonable, it must affirm the decision. If the SCT decides that the decision was unfair or unreasonable, it may substitute the trustee’s decision with its own.
The basis on which the SCT reviews decisions is more favourable to beneficiaries than review by the courts, because a tribunal can look at the effect of the decision on the beneficiary. The courts can only look at the process by which the trustee made the decision. The SCT has frequently substituted its decision for that of the trustee in circumstances where the complainant may not have been successful in a court challenge. However, the process can be lengthy.