The court’s power to review the discretionary decision-making power of a superannuation trustee was recently examined.
In Manglicmot v The Commonwealth Bank Officers Superannuation Corporation Limited,  NSWSC 363
Justice Rein examined issues for superannuation trustees which included:
- how a trustee should act when considering whether to enter into a new insurance policy
- whether a trustee should give reasons for its decisions, and the scope of the review of a trustees decision by a court, and
- whether the Superannuation Industry Supervision Act (1993) and specifically section 52(2) alters the general law duties owed by trustees to members.
The plaintiff was a bank teller employed by the Commonwealth Bank and a member of The Officers’ Superannuation Fund. He suffered a series of injuries which made him unfit for full-time work so he reduced his hours from full-time to 15 hours per week, spread over three days. He eventually accepted voluntary redundancy then subsequently made a claim for Total and Permanent Disablement.
A group life policy, originally with Hannover was changed to CommInsure by the trustee of the fund during the course of the plaintiff’s fund membership. The TPD definition in the CommInsure group life policy expressly provided that a person was not TPD if they were able to work part-time. Accordingly, Mr Manglicmot could not recover TPD benefits under the CommInsure policy since he did not meet the definition of TPD.
In the proceedings, the main issue was whether the Trustee breached its duties at general law and under statute in deciding to change the fund’s group life insurance policy. The plaintiff argued that the breach lay in moving from a policy with a “common” TPD definition (the previous policy with Hannover) to a policy with a narrower TPD definition (the CommInsure policy).
The NSW Supreme Court found that a properly considered decision to change insurer was not reviewable by the court. Specifically, Rein, J. confirmed that a court can only review a trustee discretion if the trustee has:
- acted for an indirect motive
- acted without honestyof intention
- acted without fair and genuine consideration of whether and how the discretion should be exercised, or
- acted for a purpose beyond the scope of the power and discretion1.
The Trustee disclosed its reasons for entering into the CommInsure policy which included a significantly reduced premium which was guaranteed for a number of years.
Justice Rein confirmed that the grounds for the review of a trustee decision are the same, whether or not the trustee gives reasons for its decision. The court however can consider any reasons given to help it to determine whether a breach of these principles has occurred. In this case there was no such evidence. Rather, the trustee considered the benefits provided under the policy, including that premiums were significantly less than Hannover’s premiums, and that premium rates were frozen for three years, and took legal advice in relation to the new policy terms. Accordingly, there was no indication that the trustee’s process in making the decision was improper, or flawed, and accordingly it was not reviewable by the court.
The Judge also thought it would be undesirable for trustees to be discouraged from giving reasons for a decision for fear that the provision of reasons would expand the court’s power of review than if they gave no reasons. He undertook a detailed review of relevant authorities to support his determination that the giving of reasons did not change the role of review by the court to ensure that proper process had been followed.
Interestingly, Rein, J. also concluded that the duty of a trustee under section 52(2) of the SIS Act does not substantially alter the obligation of a trustee under the general law.
“I do not accept that the trustee is made liable for any outcome which turns out to be unbeneficial to members, even if the original decision which led to that outcome was taken with the best interests of all members in mind. Another way of describing this approach is to say that s52(2) is concerned with process, not outcome…[The plaintiff’s submission] came close to a submission that the trustee was subjected to a regime of strict liability, and I do not accept that the legislative regime intended to create such a radical departure from the existing law…”2 …I do not accept that s 52 imposes a higher standard on a trustee than the general law3 …”
On the question of whether a person is TPD if they can only return to work part-time rather than full-time, Justice Rein concluded that there were a number of reasons that undercut the plaintiff’s argument that the words “unable ever to engage in or work for reward in any occupation or work..” must necessarily be construed as connoting full-time work.
Insurers and super funds wishing to argue that an ability to work full-time should not be imported into a usual TPD definition can draw comfort from Justice Rein’s approach in this case.
Henry Davis York acted for the trustee of The Officers’ Superannuation Fund.