CHAPTER 9
Status of Matters Already Decided by the SCT
Introduction
9.1 Because the SCT has been found to exercise powers without proper
authority, it may be held that any past decisions it had made are, in
fact, invalid. Mr John Larkin of the ISC confirmed this view. He advised
the Forum that:
Our view is that compliance with an invalid SCT determination will
not provide a defence for a trustee in an action for breach of duty.
So in other words, if a trustee has otherwise breached their fiduciary
duty and implemented an SCT determination, the full Federal Court ruling
will not provide the trustee with a defence.
9.2 However, Mr Larkin emphasised that whether or not trustees encounter
difficulties as a result of having implemented invalid SCT determinations
ultimately depends on how they have exercised their fiduciary duties:
If they have complied with their governing rules and fully complied
with their fiduciary obligations they seem to be at a pretty low risk
of being exposed to legal action, but it depends on a case-by-case basis.
[1]
9.3 Several Forum participants questioned whether the government had
given consideration to introducing legislation to validate past decisions
of the SCT. Mr Dennis Rose AM QC advised the Forum that there were
precedents for taking this course of action. Mr Larkin advised that, at
this stage, the Government had not considered legislation to validate
past decisions.
9.4 Forum participants expressed a range of different opinions as to
whether this matter was of sufficient importance to justify special legislation
to validate decisions.
9.5 Mr Michael Lillicrap of REST was of the view that the cases concerned
were not of sufficient monetary value to justify the expense of introducing
legislation. He said that REST had nine of the 50 or 60 cases where the
Tribunal had varied the decision of the trustee. If REST had to pay out
on all the nine cases, the total cost would be an additional $49,000.
He was of the view that it would be infinitely cheaper for funds to pay
out twice. [2]
9.6 Other forum participants disagreed and suggested that the Government
look at this issue to see whether it could be rectified by a relatively
simple piece of legislation or whether it was a more complex matter. Mr
David Maclean illustrated how, if legislation wasn't passed to validate
past decisions, considerable problems could be created for trustees. He
explained that if a trustee had a decision overturned by the Tribunal
and acted upon the Tribunal's invalid determination, the trustee would
probably be obliged to try to get the money back from the beneficiary
of the Tribunal's decision upon the basis that money had been paid out
by mistake. He concluded, 'legislation, if it can be done, would be a
very good idea'. [3]
9.7 Mr John Larkin advised that the possibility of a High Court appeal
(leave to appeal having subsequently been granted) might well be forestalling
litigation in respect of past SCT decisions. Mr Andrew Fairley agreed,
noting that:
I think it would be a pretty ambitious litigant that would commence
proceedings before the High Court came to its determination. [4]
Conclusion
9.8 It was clear during the forum that there is some concern about the
possibility that persons affected by past decisions of the SCT may seek
to re-open these decisions. The financial impact on the parties to these
decisions is unknown. It is also unclear where liability may lie or how
invalid awards might be recovered, if at all.
Recommendation
The Committee recommends that the Government investigate the feasibility
of introducing legislation to validate past decisions of the SCT.
Footnotes
[1] Evidence, p. 69.
[2] Evidence, p. 70.
[3] Evidence, p. 71.
[4] Evidence, p. 71.
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