I have a confession to make: I think that the trustee's duty to promote the financial interests of its MySuper beneficiaries is an outcomes-based duty. And, for those of you who do not spend your life considering the duties of trustees, you may well ask: 'so what'? In the end, I suspect it doesn't amount to much, but it is worth thinking about. Lawyers, including this one, are always keen to point out that a trustee's duty to act in the best interests of beneficiaries is a process-based duty and not an outcomes-based duty. The duty to promote the financial interests of beneficiaries looks sort of the same and therefore, the reasoning goes, it too must be about process, not outcome. But they are not the same.

The duty to act in the best interests of beneficiaries depends on a prior duty or power

The duty to act in the best interests of beneficiaries applies to a trustee of a superannuation fund under the SIS Act, and of a managed investment scheme under the Corporations Act 2001 (Cth). But the duty does not exist at large – it depends on the trustee performing a duty (to a limited extent) or (more relevantly) exercising a power given to it as trustee. This means that a trustee does not need to consider whether it is acting in the best interests of beneficiaries at, for example, each board meeting. Instead, the trustee needs to consider whether it is doing so each time (but only each time) it performs another duty or exercises a power.

The courts have said that these statutory best interests duties are expressions of the general law duties of trustees and they have looked to the general law to give the statutory duties content. The content protects beneficiaries from an improper exercise of power by the trustee. It prohibits the trustee acting with a conflict of interest or obtaining an unauthorised benefit. Provided the trustee does not do so, the trustee will act in the best interests of its beneficiaries, irrespective of the way in which the power is ultimately exercised. And so, the duty goes to process – the courts will investigate whether the trustee has exercised its powers to benefit itself or a third person, but they will not consider the outcome of the exercise of power (at least, not to determine whether the trustee has acted in the best interests of its beneficiaries) and they will not ask whether the outcome is, in fact, in the best interests of beneficiaries.

None of this applies to the new statutory duty of a trustee that offers a MySuper product to promote the financial interests of MySuper beneficiaries.

The duty stands on its own feet

The duty to promote the financial interests of MySuper beneficiaries does not depend on the exercise of a power by the trustee; instead, it is a duty that stands on its own. This means that it is a duty that the trustee needs to consider on a regular basis, but it also means that it is not a duty that needs to be considered each time the trustee exercises a power.

The last point might be contested, but I think it is right for two reasons – first and again, the duty is not expressed to apply each time the trustee exercises a power (like the best interests duty is); and, second, because the duty is owed to MySuper beneficiaries at large. The duty does not apply to each exercise of power by each MySuper member, and a MySuper member could not, I think, complain (at least legitimately) because the trustee had failed to promote his or her financial interests. Any such complaint would have to be made on the grounds that the trustee had failed to promote the financial interests of the MySuper beneficiaries as a class.

This leaves open the question of whether the duty applies if the trustee is considering exercising a power that affects a group of MySuper beneficiaries: for example, a proposal to transfer them to a successor fund. Again, I prefer the answer that it does not, for the reasons I have just given, but also because I don't know what the duty could require if I am wrong. If the trustee is satisfied that the successor fund will provide each MySuper member with equivalent rights to benefits and that it is in the interests of beneficiaries to approve the transfer, then it is really hard to think what more might be needed for the trustee to form the view that the transfer promotes the financial interests of MySuper beneficiaries.

Of course, there is no case law yet and it is possible that there could be facts where the duty might add something more, although, in the context of a successor fund transfer, I struggle with what more the duty might require that isn't already answered by the equivalence test and best interests duty. If more is required, it would be reasonable for a transferring trustee to ask how much more and how does it secure the 'more' for the MySuper beneficiaries.

Morally bound to provide for MySuper beneficiaries

So, then, where does this leave a trustee? In my view, it means that a trustee's duty to promote the financial interests of its MySuper beneficiaries is something that it must consider regularly. It should ask whether the MySuper product it offers – the investment strategy, insurance strategy and the product fees and costs – promote the financial interests of its MySuper beneficiaries. And this leads to a couple of things.

First, I think it is hard to avoid the conclusion that the duty is outcomes based – the law does not prescribe any process and it does not say that a trustee has a duty to try to promote the financial interests of the MySuper beneficiaries. The plain words of the provision will, I think, make it very difficult for a court to form a view about whether a trustee has complied with the duty unless it looks at outcomes and, no matter how hard the trustee tried to promote the MySuper beneficiaries' interests, it will not be an answer if the trustee in fact failed to do so.

Second, despite my view that the duty goes to outcomes, it is going to be really hard to know whether a trustee has in fact promoted the financial interests of MySuper beneficiaries – when should success or failure be measured and compared with what? There are lots of possibilities. And that is why I am not convinced that the debate about whether this duty is process or outcomes based matters so much. The duty does not require the trustee to achieve a particular outcome and, while this creates uncertainty, it also makes it really hard to determine that a trustee has, in fact, breached the duty, especially for trustees that run with the pack. And that isn't intended as a criticism – the old cases on trusts say trustees shouldn't take risks with trust assets. The former SIS Act duty of care said that a trustee must exercise the degree of care, skill and diligence it would exercise if the beneficiaries were people for whom the trustee felt morally bound to provide. (And this is another process-based duty.)

It might be that, in a roundabout way, the duty to promote the financial interests of MySuper beneficiaries creates a class of beneficiaries for whom the trustee might feel morally bound to provide – from ignorance, indifference or choice, these fund members depend on the trustee to decide how to invest their superannuation and to choose their insurance. The world is a funny place. Not so long ago, moral obligations were very much out of favour; now they are popping up all over the place.