Are “Former Members” Beneficiaries?

Are former “members” beneficiaries?This question was addressed in HIH Superannuation [2003] NSWSC 65

28 The term “beneficiary” has no fixed meaning. This is shown by the observations of Dixon CJ and Williams J in their joint judgment in Crooks National Stores Pty Ltd v Collier [1957] HCA 80; (1957) 97 CLR 581where differences between the terms and scope of English and Victorian landlord and tenant legislation was seen as making applicable to the latter a meaning of “beneficiary under the trust” different from that given to the expression by the English Court of Appeal when called upon to construe and apply the former. Nor, of course, is the term “beneficiary” confined in ordinary parlance to someone regarded by equity as a cestui que trust. The word “beneficiary” has meanings outside the narrow confines of principles of equity concerned with trusts and trustees.

29 In the present case, the word “beneficiary” is used in relation to a superannuation fund created and maintained to benefit a body of employees existing from time to time. The fund has a continuing existence of unspecified duration. Indeed, like all such schemes established for the benefit of employees of a corporation, it is put by s.1346 of the Corporations Act 2001 (Cth) beyond the operation of the rule against perpetuities. In general concept, the Fund consists mainly of moneys contributed by employees, moneys contributed by employers and the return on investments. Employees, or their estates or dependants, receive benefits according to various circumstances related to cessation of employment. No such person can point to particular moneys as being held upon trust for him or her. Leaving aside any impact of statute, the most anyone has by way of legal claim, pending crystallisation of an entitlement to receive benefits, is a claim to have the Fund properly administered in accordance with the rules and other applicable provisions. The extent of any individual’s benefits depends entirely on the provisions of the rules and may bear no direct or clear relationship to the individual’s contributions or those made by his or her employers that are referable to him or her. Each individual, by contributions, obtains a right in relation to the Fund as a whole, being a right the quantum of which is measured according to the rules. The right does not inhere in the Fund in the form of an interest in any separately identifiable property.

30 A person to whom, in consequence of cessation of employment or some other specified event in relation to that or some other person, a sum is paid out of the Fund under the rules in that event thereby receives a benefit out of the fund and may be said to have become a “beneficiary” according to one of the meanings of that term in the 1993 edition of The Shorter Oxford English Dictionary:

“A person who receives or is entitled to receive a favour or benefit, esp. under a trust or will or life insurance policy” [emphasis added]

31 In the whole of the context, I do not consider “beneficiary” to be confined to a person who stands to receive something in the future if and when events crystallising some entitlement come to pass. Given the ongoing nature of the fund and the way in which persons participate, I consider it correct to regard as a “beneficiary” someone who has received a benefit payment. Such a person’s realisation of fruits of participation in the form of what the rules clearly label “benefit” should be regarded as causing the person to become a “beneficiary”, that is, someone who has derived a benefit from the Fund. By receiving a realised benefit, the person is to be regarded as a “beneficiary”, even though he or she may also have been a “beneficiary” beforehand by reason of the entitlements or expectations that existed under the rules and in relation to the Fund before receipt of the realised benefit. Cessation of employment or some other defined event is the occasion for receipt of the realised benefit, but there is not, as I see it, anything in the rules compelling the conclusion that the receipt puts an end to the recipient’s status as a beneficiary, assuming that that status existed at an earlier stage.

32 A particular example confirming this meaning of “beneficiary” is found in the rules concerning benefits in consequence of a Member’s death. In such a case, the relevant benefit is payable to such of the Member’s “Dependants” and the legal personal representative as the trustee decides. If there is no “Dependant” or legal personal representative, the benefit may be paid to “any other person”, provided superannuation legislation so permits. “Dependant” includes, in relation to a Member, any person who, in the trustee’s belief, was dependent on the Member. Clearly, it is not possible to say at any time before a relevant determination is made by the trustee that a particular person will receive anything under these provisions as a result of the death of a member. It is only upon that determination being made as part of the process for payment of the benefit in consequence of the Member’s death that a particular person is shown to be one who will receive a benefit. And that process, in my view, causes such a person to become a beneficiary.