In one sense, the answer to this question is simple. No. And yet, Australian courts have grappled with the issue over several decades.
These courts have generally leaned towards the negation of a duty of a superannuation trustee to exercise natural justice in its decision-making. But at the same time this conclusion has clearly sat uncomfortably with key judges.
To choose an arbitrary starting point, in the case of Pope v Lawler 21, Justice Nicholson pointed out: ‘… the decision-making process of Trustees should not have applied to them the rules deriving from administrative law’, citing Karger v Paul 22. The judgment of Justice Byrne in Flegeltaub v Telstra Super Pty Ltd 23 (‘Flegeltaub’) was more emphatic: ‘It is clear that the trustee is not bound by the rules of natural justice …’.
What Justice Byrne then said is of particular significance, ‘but the circumstances of the case may demand, as a matter of fairness, that, on a particular matter, the position of the applicant be sought so that a proper decision can be made on that matter’.
This is the first aspect to note in relation to a decision of a trustee’s duty in this area, namely that a trustee may have a positive obligation to ascertain information in particular circumstances.
That positive obligation may stem from the existence of what Justice Byrne called ‘an apparently adverse matter of fact’ which he went on to say ‘is peculiarly within the knowledge of the applicant or for which the applicant may reasonably be expected to have an explanation’.
Such a positive duty could also extend to more mundane facts where the duty to ascertain information derives not so much from any adverse matter of fact but rather from the nature and dimensions of the trustee’s duty itself.
One example of this situation cited by Justice Campbell in his paper ‘Exercise by Superannuation Trustees of Discretionary Powers’24 is the determination of a death benefit payment:
‘In the case of a superannuation fund, the trustee will frequently not know the sort of information that is needed to decide, for instance, who are the dependants of a member at the date of his death, or what are the facts that might warrant the payment of a death benefit to one or other of them. If the trust documentation calls for the trustee to form an opinion about who are the dependants of the member, or to decide who (if anyone) among his dependants ought to receive a death benefit, proper performance of the trustee’s duty to act bona fide and ‘upon genuine consideration’ may well require the trustee to find these matters out. Frequently that will involve asking the various people who might be candidates for receiving the benefit what their claims are, and, if the facts alleged by the various claimants do not match up, taking steps to decide whose version of the facts is correct. This exercise need not necessarily be done in an exhaustive fashion, but it would need to be done to the extent that was needed for the decision of the trustee to be a bona fide one, made upon a genuine consideration of the correct question.’
His Honour then makes the observation:
‘While carrying through that procedure is certainly not identical to according a claimant the same rights of natural justice as an administrative decision-maker would be obliged to accord to someone whose interests might be affected by an administrative decision, it covers at least some of the ground.’
Another manifestation of this positive duty is the duty of a superannuation trustee to disclose adverse material to a particular claimant. As was observed by Justice Byrne in the Flegeltaub decision: ‘It may involve a disclosure to the applicant or to her representative of the adverse material…’.
This process was described by Justice Callaway on appeal in the Flegeltaub case in the following terms:
‘... One cannot ordinarily decide a question of fact in good faith and give it real and genuine consideration without conducting some investigation and in some cases that will entail making an inquiry of a person who is willing to provide information and is in the best position to do so. It is not a matter of natural justice but bona fide inquiry and genuine decision making.’25 This positive duty can be seen as extending further in particular circumstances to actively seeking a response from the relevant claimant.
In the recent case of Tuftevski v Total Risks Management Pty Ltd 26 Acting Justice Smart noted that the trustee in the case did not engage in genuine decision-making by not seeking from the claimant any information or response to various potentially adverse matters, in particular doctors’ reports and surveillance material. This case involved a disputed disablement claim where the trustee did not reveal adverse medical reports and surveillance reports to the member or provide him with an opportunity to respond to these reports.
The aspect of a positive duty to actually elicit responses from an affected person is very reminiscent of the duty to afford natural justice and leads to two further observations.
The first is the observation by Acting Justice Smart in Tuftevski to the effect that the principle in Karger v Paul should arguably not apply to decisions of superannuation trustees. His Honour discerned a need for legislative reform. Noting that the trustee had delegated its powers to a committee, he observed:
‘It is absurd that such a committee has a power which is substantially unreviewable in contested cases. It acts as both investigator and judge. Principles as to the exercise of the powers of a trustee borrowed from earlier days are inappropriate. What is required is a review of the merits and not the application of a system of trustee principles taken from bygone eras and different circumstances. The matter is far too important to employees and workers to be left in its present state. Their future and those of the families are at issue. The unfairness of the present system is highlighted by adverse decisions being made by the [committee] without the employee being told of all the material adverse to his application.’
The second observation is from Justice Campbell’s paper to the effect that the principle of natural justice is not necessarily excluded from the trust law arena. In commenting on the proposition that the principle of natural justice does not apply to trustee decisions, he said:
‘In my view that statement is too unequivocal. Rather, in my view the private law context in which trustees make their decisions usually does not give rise to an obligation to adhere to rules of natural justice. But that this is so is a matter of construction of the constitutive documents of the trust. It is not as though there is a rule of law that says that trustees never have to accord natural justice. Rather, it is just a matter of fact that the constituent documents of a trust rarely if ever impose an obligation for trustees to observe natural justice.’
Although the state of case law to date indicates that superannuation trustees are not technically bound by the rules of natural justice, it is interesting to note that recent cases and extra-judicial comments are leaning towards some aspects of natural justice being imposed on trustee decision-making processes.