05/12/08
TURKALERT: Remittance of a Decision to the Trustee is the Rule, not the Exception
By: Lisa Norris (Partner)
Legal Expertise Area: Insurance & Financial Services
Summary: We recently reported on Alan Michael Finch v Telstra Super Pty Ltd [2008] VSC 481, in which the Supreme Court of Victoria found that a trustee can in certain circumstances be required to provide procedural fairness to a claimant.
The Court has now decided what should happen next with respect to Mr Finch’s claim.
Who Does This Impact? Claims teams of superannuation trustees, life insurers who extend indemnity to them, and their legal advisers.
What Action Should Be Taken? Even if they unsuccessfully defend a litigated claim, trustees can argue that the Court should not substitute its own decision and that the matter should be remitted back to the trustee in all but exceptional, limited circumstances.
BackgroundWe reported on the facts of this matter in our TurkAlert dated 21 November 2008. See our previous TurkAlert at http://www.turkslegal.com.au/TurkAlert/profile.asp?DocumentID=857&ShowAbs=false.
Mr Finch, an unsuccessful claimant for a Total and Permanent Invalidity (TPI) benefit, had commenced proceedings against Telstra Super Pty Ltd (the trustee) alleging that, inter alia, the Trustee’s determinations were arrived at following a breach of process because the trustee received and acted upon information which was not disclosed to Mr Finch and to which he was not given the opportunity to respond. This allegation was ultimately successful.
To recap, a committee member of the trustee had informed the committee assessing Mr Finch’s claim that Mr Finch had instigated a telephone call with him and had ‘volunteered the statement that his employment with Qantas had been a real job’. This was the only evidence that contradicted Mr Finch’s submissions and medical evidence that his subsequent employment should have been seen as rehabilitation. This information was not communicated to Mr Finch or his legal advisors for their response. His Honour found that a fair-minded trustee seeking to give genuine consideration to a TPI benefit claim ought to have investigated this information further, at least by inviting comment from Mr Finch.
The determination based on that information was found to be void as a result of the trustee’s failure to allow Mr Finch an opportunity to comment on this conversation. The Trustee’s decisions were declared to be void and of no effect.
His Honour did not substitute his decision for that of the trustee or refer the matter back to the trustee at that stage. Further argument was conducted regarding the appropriate orders to be made as a consequence of his Honour’s declarations.
Relief ConsideredThe Court was required to decide whether the matter should be remitted to the trustee for determination, or whether the Court should make its own determination by standing in the shoes of the trustee.
Mr Finch argued that the Court should not be confident the trustee would fairly and objectively assess the claim on its merits, given both the history of this proceeding and his Honour’s conclusion that the trustee had not complied with its obligations of good faith and genuine consideration. Therefore, it was argued, the Court should stand in the shoes of the trustee and make its own decision.
The Trustee argued that there were no exceptional circumstances that would require the Court to take on the duty of the trustee and itself determine the claim, and that there was no basis for any apprehension that the trustee would not adopt a fair and impartial approach to Mr Finch’s claim if it were remitted. Also, the Trust Deed made it clear that in this case, the Trustee was not acting as a self-insurer. Therefore it did not fall into the class of cases where the Court had substituted its decision for the decisions of a trustee acting as a self-insurer.
Relief GrantedHis Honour concluded this was not a case where he should depart from the normal practice of remitting the matter back to the trustee. The task of deciding claims, such as those of Mr Finch, had been entrusted to the trustee. His Honour was confident that the trustee would perform its functions in light of the observations in his earlier judgment and in accordance with the law. There was no reason to expect that that the trustee would approach the task in anything other than a fair and impartial way, paying due regard to the material presented by the claimant. His Honour pointed out that there had been a failure by the trustee to observe ‘due process’ only, not mala fides on its part. Finally, his Honour observed that Mr Finch had recourse to the Superannuation Complaints Tribunal should he be unhappy with the outcome of the trustee’s reconsideration of his claim.
Accordingly, the question was remitted to the trustee for its determination according to law. His Honour declined to impose any time limits for making the trustee’s determination, or to require the trustee to report back to the Court following the remitter. His Honour was confident that the trustee would determine Mr Finch’s claim within a reasonable time.
The trustee was ordered to pay the plaintiff’s costs, with an offset to be made regarding an earlier costs order in favour of the trustee.
ImplicationsThis case acts as a timely reminder that a Court should not generally substitute its decision for that of a trustee except in certain, limited circumstances, ‘where at the very least it is established that the existing trustees are unlikely to fulfil the relevant duty in a proper manner.’: Rapa v Patience. Compare this with the approach taken by the NSW Supreme Court in Jeffrey Guy Baker v Local Government Superannuation Scheme Pty Ltd [2007] NSWSC 1173. Darryl Pereira, TurksLegal Senior Associate, reported on that judgment in his recent TurkAlert which can be found at http://www.turkslegal.com.au/TurkAlert/profile.asp?DocumentID=732.
For more information, please contact:
Lisa Norris
Partner
T: 02 8257 5764
lisa.norris@turkslegal.com.au
This TurkAlert is current at its date of publication. While every care has been taken in the preparation of this TurkAlert it does not constitute legal advice and should not be relied upon for this purpose. Specific legal advice should be sought on particular matters. TurksLegal does not accept responsibility for any errors in or omissions from this TurkAlert. This TurkAlert is copyright and no part may be reproduced in any form without the permission of TurksLegal. For any enquiries, please contact the author of this TurkAlert. © TurksLegal 2008
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