CHAPTER 1
Background
History and functions of the Superannuation Complaints Tribunal
1.1 In its first report, Safeguarding Super - the Regulation of Superannuation,
the Committee recommended 'the establishment by legislation of an external
disputes resolution mechanism'. [1]
1.2 The Government accepted the Committee's recommendation with modification
and subsequently established an independent statutory authority, the Superannuation
Complaints Tribunal (SCT), following passage of the Superannuation
(Resolution of Complaints) Act 1993 (the Complaints Act). The SCT
commenced operating on 1 July 1994.
1.3 The SCT provides a mechanism for superannuation fund members to resolve
complaints about decisions or conduct of trustees, insurers, Retirement
Savings Accounts (RSA) providers, superannuation providers and certain
other decision makers in relation to regulated superannuation funds, approved
deposit funds, life policy funds, annuity policies and RSAs. [2]
1.4 In the first instance, the SCT is required to attempt to resolve
disputes without resorting to arbitration and resolves the majority of
disputes in this way. However, where conciliation proves ineffective,
S37 of the Complaints Act gives the SCT the power to review trustees'
decisions.
1.5 The Complaints Act requires the Tribunal to affirm trustees' decisions
if it finds them to be 'fair and reasonable in the circumstances'. [3]
Where this is not the case, the Tribunal has a number of options:
- remit the matter to which the decision relates to the trustee, insurer
or other decision-maker for reconsideration in accordance with the directions
of the Tribunal; or
- vary the decision; or
- set the decision aside and substitute a decision for the decision
set aside.
1.6 However, in making a decision, the Tribunal must not do anything
that would be contrary to law, to the governing rules of the fund concerned
and, if a contract of insurance between an insurer and trustee is involved,
to the terms of the contract.
The Wilkinson v CARE decision
1.7 On 14 February 1998, the Federal Court handed down a decision in
Wilkinson V CARE [4] which effectively
removed all of the SCT's powers to make determinations.
1.8 In the first instance, the Court unanimously found that the SCT was
only entitled to receive (and therefore, resolve) complaints concerning
trustees' discretionary decisions. [5]
1.9 A majority of the Court also found that the exercise by the SCT of
its determination making power under S37 of the Complaints Act constituted
the exercise of a judicial power, in breach of the Constitution.
1.10 The Tribunal's conciliation powers remain in place. However, the
Court's decision means that where conciliation fails, the only avenue
for fund members to resolve disputes with trustees is through the courts.
1.11 In its first Report, Safeguarding Super, the Committee noted
that the predominant view in evidence supported establishing a dispute
resolution mechanism that 'avoided the courts as far as possible'. The
Committee held the view that the cost of litigation in the courts was
so high that it offered no real rights to members. [6]
The loss of the SCT's determination powers must therefore be considered
a serious setback for superannuation fund members, leaving them with no
effective avenue of pursuing complaints about trustee decisions.
1.12 The gravity of this situation led to a number of initiatives, including
a series of workshops sponsored by the Association of Superannuation Funds
of Australia (ASFA) and the forum sponsored by this Committee which forms
the basis of this report.
Senate reference
1.13 Following a proposal from within the Committee, on 7 April 1998
the Senate referred the following matter to the Committee for inquiry
and report:
Options for dispute resolution consequential on the Federal Court decision
concerning the powers of the Superannuation Complaints Tribunal.
1.14 The Committee decided that the most appropriate way of approaching
this reference would be to conduct a "round table forum", at
which representatives from the Government, the superannuation industry,
the legal profession and consumer groups could freely exchange views about
the most appropriate method of addressing the problem.
1.15 The Committee invited a range of representatives of these groups
to attend the forum, which it conducted in Sydney on 28 April 1998. A
list of those who participated in the forum appears at Appendix A.
Background briefing paper
1.16 In order to provide a legal and structural framework for the forum
discussion, the Committee commissioned a Melbourne firm of superannuation
lawyers, IFS Fairley, to prepare a background briefing paper. The Committee
circulated the paper to the forum participants to provide a foundation
for the subsequent discussions. A copy of the paper appears at Appendix
B.
1.17 The background paper is divided into several parts. Firstly, the
paper identifies ten essential features of any future superannuation complaints
handling mechanism. (described in paragraph 3.3)
1.18 Having identified the essential features of a complaints handling
scheme, the paper went on to canvass three alternative dispute resolution
models that might be established in the aftermath of the Federal Court
decision. These were:
- establish a complaints body to be run by the industry;
- reconstitute the Tribunal as part of the Federal Court. This solution
would see the abolition of the Tribunal and effectively, the creation
of a division within the Federal Court dealing with superannuation;
and
- rewrite the law to ensure constitutional validity of the SCT.
1.19 The paper concluded:
- If the Commonwealth wishes to bypass the courts, there is no easy
route to solving the difficulties exposed by Wilkinson for
the Complaints Act. Whilst it is highly desirable to be pursuing the
creation of a system which replicates that of the Tribunal, it may
be that the nature of Australia's Constitutional arrangements is such
that some elements of the Tribunal's objectives (fair, just, economical,
informal and quick) will need to be sacrificed at the altar of practical
expedience in the light of difficult Constitutional issues.
Conduct of the Forum
1.20 The forum's program was divided into four distinct sessions:
- reports on Government and industry responses to the Federal Court
decision;
- discussion on criteria to be used for selecting a method of resolving
disputes;
- discussion on options; and
- discussion on status of matters previously determined by the SCT.
1.21 The following chapters of the Committee's report reflect this structure.
Footnotes
[1] Safeguarding Super - the Regulation of
Superannuation, First Report of the Select Committee on Superannuation,
June 1992, recommendation 11.4.
[2] Superannuation Complaints Tribunal Annual
Report 1996-97, p. 90.
[3] S37(6) of the Act.
[4] Also referred to informally as the Bishop
case.
[5] A discretionary decision is one where the
trustee is lawfully entitled to choose between different results, for
example, the allocation of a death benefit among one or more deserving
dependants of a deceased member of a fund. A non-discretionary decision
is one where the law allows there to be only one correct decision, for
example, whether or not the death of a member of a fund gave rise to a
death benefit or not. Source: Paper prepared for the Committee by IFS
Fairley, p. 2.
[6] Safeguarding Super - the regulation of
superannuation, First Report of the Select Committee on Superannuation,
June 1992, p. 136.
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