CHAPTER 2
Government and Industry Briefing
2.1 Following the Full Federal Court decision in the Wilkinson
and Leshem cases, both Government and industry have been working
to address the problems which the ruling has created for dispute resolution
in the superannuation industry.
Government
Insurance and Superannuation Commission
2.2 Mr John Larkin, Assistant Commissioner, Policy, Insurance and Superannuation
Commission, briefed the forum on Commonwealth initiatives in response
to the ruling, and policy issues under consideration for addressing the
issue.
2.3 He advised that the Government had lodged an application for special
leave to appeal the Federal Court decision to the High Court. [1]
The High Court has now granted leave to appeal, however, the case may
not be heard until the last quarter of this year.
2.4 Given the likely delay in obtaining a High Court ruling, the Superannuation
Complaints Tribunal (SCT) is placing greater emphasis on inquiry and conciliation
in an effort to resolve more complaints prior to review. The government
has obtained legal advice that the SCT's inquiry and conciliation role
is unaffected by the Court's ruling on the validity of its review powers.
2.5 Mr Larkin told the forum that, following consultation with peak industry
associations, consumer groups, the SCT and legal advisers, the ISC had
identified a number of options to address the complaints review void left
by the Tribunal's loss of power to make determinations. They are:
- to create a special division of the Federal Court to exercise the
SCT's review function;
- to amend the SRC, SIS and RSA Acts to overcome the current jurisdictional
and constitutional problems;
- to dismantle the Tribunal and establish an industry based complaints
handling scheme; and
- to amend the SRC Act to enable the tribunal to arbitrate with the
consent of the parties.
2.6 The first three options are identical to those identified in the
IFS Fairley background paper.
2.7 The fourth option would require the parties to a dispute entering
into agreements to be bound by a Tribunal award which would be enforceable
under contract law and state arbitration laws. Since such a scheme would
rely on the consent of the parties on a case by case basis, it is not
considered a viable long- term option but rather, an interim measure to
deal with the growing backlog of SCT review cases, pending a permanent
solution.
2.8 Mr Larkin indicated that the Government is continuing to work through
the policy issues associated with each of the options, while remaining
`fully committed to an accessible, low-cost and effective alternative
dispute resolution mechanism for fund members'. [2]
He noted, however, that there is no single perfect solution:
All of the options have certain disadvantages and advantages in terms
of sustainability against future legal challenge, workability, efficiency,
flexibility, cost, enforcement, accessibility, coverage and implementation
time frames. This means the government's eventual decision on this matter
will inevitably involve some risk management compromises and trade-offs.
[3]
Superannuation Complaints Tribunal
2.9 In the wake of the Federal Court decision, the SCT has concentrated
on investigating the prospects of legislative solutions to the problem,
among them the possibility of establishing a merits review body. Mr Neil
Wilkinson, Chairperson of the Tribunal, pointed out the benefits, in terms
of its considerable expertise accumulated over the past four years, of
making the Tribunal the basis for any new body. He indicated that, in
his view, setting up such a statutory scheme, or an industry body were
`the two most serious options' meriting the forum's attention.
2.10 However, he noted the difficulty of gaining the degree of coverage
and compliance necessary for establishing a viable industry-based dispute
resolution scheme in the extremely diverse superannuation sector. Comparable
schemes in banking and insurance have a relatively small number of member
companies in contrast to the many thousands of regulated superannuation
funds, RSA deposit takers and insurers who would need to be involved in
a superannuation industry body. [4]
Industry
2.11 Ms Philippa Smith, Chief Executive Officer, Association of Superannuation
Funds of Australia Limited (ASFA), briefed the forum on the results of
two workshops her organisation had recently held on the SCT impasse. The
workshops, which focussed on the structural and operational issues to
be considered before adopting any solution, were attended by a range of
lawyers, representatives from industry, corporate and retail superannuation
funds, and Government, consumer groups and statutory bodies.
Structural issues
2.12 The principal structural aspects identified in the ASFA workshop
discussions were governance (or confidence) and trustee matters. It was
seen as vital to public confidence in any dispute resolution scheme that
legislative changes ensure:
…coverage of the industry,100 per cent if possible,the ability
to enforce decisions so that they are determinative, and some relative
certainty into the future about what is happening. [5]
2.13 Ms Smith indicated that workshop participants were concerned that
proposed attempts to shore up the SCT legislatively could fail to deliver
certainty.
2.14 On trustee matters, the ASFA workshops stressed the need for any
replacement scheme to balance trustee responsibilities with legitimate
consumer rights, flagging the duty to give reasons for trustee decisions
and the duty to act `fairly and reasonably' as issues requiring further
consideration. Workshop participants highlighted the need for special
expertise concerning trust responsibilities in any new superannuation
disputes body.
Operational issues
2.15 ASFA discussions to date have indicated a strong preference for
a dispute resolution scheme that operates in a `non-legalistic, accessible
and low-cost' manner. The key to achieving this outcome is flexibility
- the ability to draw on a range of alternate dispute resolution tools
to suit the circumstances of a particular case. This could include using
single-member panels or adjudicators in cases involving small amounts,
and panels drawn from consumer and industry groupings where cases involve
larger amounts or are complex in nature. [6]
2.16 Ms Smith also indicated that it was important that any new body
be able to report to industry regulatory bodies or to the public on systemic
problems identified by the complaints resolution process.
2.17 Finally, Ms Smith noted the industry's strong caveat that, should
the preferred option be the establishment of an industry scheme, the body
should be funded from the existing levy on superannuation funds and involve
no additional cost to industry.
Footnotes
[1] Evidence, p. 3
[2] Evidence, p. 5
[3] Evidence, p. 4
[4] Evidence, p. 9
[5] Evidence, p. 6
[6] Evidence, pp. 7-8
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