Who is a “beneficiary”?

“A ‘beneficiary’, in ordinary language, is a person for whose benefit a trust is to be administered and who is entitled to enforce the trust according to its terms.”

Kafataris v The Deputy Commissioner of Taxation [2008] FCA 1454 at [42]

A person who may be entitled to a benefit under a trust is known as an “object” of the trust”

In a “discretionary trust” the Trustee has a discretion as to the payment of benefits. However in a “strict” the Trustee in under a duty to pay benefits to the “beneficiaries” {ie “objects”} when certain conditions are satisfied, such as reaching a certain prescribed age.

The High Court of Australia confirmed that regulated superannuation trusts are “strict” trusts in Finch v Tesltra Super Pty Ltd [2010] HCA 36 and that members have a “beneficial interest” in the trust, even if that interest was contingent on particular events.{Refer below}

The Applicant was no longer employed by Testra, however the High Court held that he still had a “beneficial interest” in the superannuation trust for Telstra employees.

For example a wife of a member has a “beneficial interest” in the superannuation fund of her husband, if the fund provides a survivorship pension, even though if the wife pre-deceases her husband, she will never receive a benefit under the fund (trust).

Members

Sir Andrew Park in Smithson v Hamilton [2007] EWCH 2990 (Ch) ),[2008] 1 All ER 1216, [2008] WLR 1453 provided the following definition of a “member” of a pension fund.

Actual or prospective pensioners are commonly described as members of their schemes. There are three main kinds of members, usually referred to as pensioner members, active members (or simply ‘actives’), and deferred members (or simply ‘deferreds’)

.

(i) Pensioner members are pensioners who have retired and whose pensions are already in payment. This case is not primarily concerned with the treatment of pensioner members under the PFP scheme, though it could affect the rate at which some parts of their pensions are taken to have accrued.

(ii) Active members are current employees of a participating employer who have not yet retired and whose pensions are not yet in payment. This case is not concerned with the treatment of them under this scheme (or at least it is not directly so concerned).

(iii) Deferred members are former active members of a scheme who have ceased to be employees of a participating employer, who remain entitled under the rules of the scheme to receive pensions in future, but who have not commenced to receive them yet. A conventional example is someone who was employed by a participating employer under a scheme and was an active member of that scheme, but who has left the employment and taken a job elsewhere before he or she has reached the qualifying retirement age specified in the scheme. In such a case statute law generally requires that he or she should have ‘preserved rights’. One thing that he or she can do is to stay in the scheme, but as a deferred member. In that case he or she remains prospectively entitled to a future pension under the scheme of the former employer. Typically the pension will become payable when the deferred member reaches the qualifying retirement age under the scheme. The part of this case which deals with the claim is concerned with one aspect of the pensions payable to deferred pensioners under the PFP scheme.

Some funds provide a immediate pension to qualifying members who have complete a prescribed minimum years of service, so in the case of these funds there are no “deferred Members”.

Misrepresenting Membership

The former Fund Secretary falsely claimed that a member of the Fund who had received a lump sum “payout”:

  • was no longer a “member” of the fund, and
  • was no longer a “beneficiary” of the fund as well.

  • Therefore the Fund Secretary claimed that the Trustee was under no legal obligation to provide access to the original Trust Deed and instruments of variation.

    Several Officers of ASIC have made the same false representations.

    If this was in fact the case then Trustees would be in the position to commit the “perfect crime”.

    This is contention is dis-proven by Byrne J who ruled that former members were “members” for the purpose of s 62(1) of the Superannuation Industry (Supervision) Act 1993 and thus retained a “beneficial interest” in the superannuation fund in question {Invensys Australia Superannuation Fund Pty Ltd v Austrac Investments Ltd [2006] VSC 112; (2006) 15 VR 87}.

    The Privy Council also agreed that former members retained a beneficial interest in their fund.

    Furthermore in a pension fund, a qualifying member remains a member of the fund until death, and the membership does not terminate with the termination of a Contract of Employment.

    Geraint Thomas in Thomas on Powers

    {2nd Edition} states at [16.07]:

    “An exercise of a Power of Amendment is subject to the same rules and controls as other powers. For example, it can be exercised only for the purpose or purposes for which it was conferred1; and it may not be exercised beyond the reasonable contemplation of the parties. Thus, ‘if the purpose of a superannuation scheme was recognised as being to provide pensions or other benefits for “members and pensioners” it would be wholly inconsistent with that purpose to suggest that the expression did not include ex-employees’2

    Notes:

    (1) Re Courage Group’s Pension Schemes [1987] 1 WLR 495, 505-6; Society of Lloyd’s v Morris [1993] 2 Re LR 217; (2) Re Ball’s Settlement Trusts [1968] 1 WLR 899; Kearns v Hill (1990) 21 NSWLR 107; Re Internine Trust [2010] WTLR 443 (RC Jersey). (2) Bank of New Zealand v Bank of New Zealand Officers Provident Association Management Board [2003] UKPC 58; UEB Industries Ltd v WS Brabant and Others [1992] 1 NZLR 294.

    [Note] One of the cases cited by Bryne J and Privy Council was Courage Group’s Pension Schemes, which was a pension fund case involving Elders IXL Ltd in the United Kingdom.

    [2010] HCA 36 p236

    [2010] HCA 36 p237

    [2006] VSC 112

    [2003] UKPC 58
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    This tab updated on 22 August 2015