The Green Light for Fraud

{Published on 3 October 2014}

Letter sent to the Joint Committee on Corporation and Financial Services:

Joint Committee 3 October 2014
 

PR 3 Oct 14

 

It is the role of our elected represenatatives in Canberra to make the law and it is the role of unelected Public Servants to enforce these laws so a to protect the Australian Public and especially the weak and vulnerable who do not have the means of protecting themselves from financial predators.

However the unelected public servants at ASIC believe that they should be able to re-write any law that is not to their liking.

To allow “white collar criminals” who gain control of large superannuation fund to steal tens of millions of dollars so that they can live “the lifestyles of the rich and famous”  whilst leaving the beneficiaries of the fund destitute and denied Government compensation, ASIC has re-written Regulation 7.9.45 of the Corporations Regulations 2001.

Regulation 7.9.45 is reference by subsection 1017C(5) of the Corporations Act 2001. Since superannuation is COMPULSORY, the Parliament of Australia has made it a criminal offence for a Trustee of large superannuation fund to wilfully conceal the “governing rules” of the fund from a person who has a beneficial interest in that fund.

Palmer J in Chang  v Tjiong & Ors [2009] NSWSC 122 stated at [45]:

“ It is the duty of a trustee to ensure that beneficiaries are made aware of their rights: see In re Emmet’s Estate (1881) 17 Ch D 142, at 149; Hawkesley v May [1956] 1 QB 304, at 322. A trustee can hardly comply with this duty unless he or she keeps the terms of the trust readily available so that they may be explained, or produced, to beneficiaries and made known to successor trustees: see Ford & Lee Principles of the Law of Trusts [9150].”

In the case of a pension fund, fund membership terminates with death and not with the termination of contract of employment. Therefore a member of a pension fund  clearly has a beneficial interest in that fund for life once he or she becomes a member of that fund.

Butterworths Australian Legal Dictionary define the “governing rules” as follows:

“In relation to a superannuation fund, approved deposit fund or a unit trust, any trust instrument, other document or legislation, or a combination of these, governing the establishment and operation of the fund or unit trust”

A superannuation trust is established by a founding “Trust Deed”. To allow the terms of the trust (Regulations of the Fund) to be amended from time to time the founding Trust Deed must contain a Power of Amendment that nominates who holds the power to amend the terms of the trust and what conditions must be complied with to amend the terms of the trust.

If a Power of Amendment has been omitted from the founding Trust Deed, then the terms of trust are “locked in stone”.

This was the case with a superannuation fund established for officers of the Australian Mutual Provident Society (AMP). It required an enactment of the Parliament of New South Wales to amend the Trust Deed to insert a power to amend the terms of this trust {“Australian Mutual Provident Society’s Officers’ Provident Fund Trustees Enabling Act 1912”}.

If the founding Trust Deed does include a Power of Amendment any subsequent Deed of Variation (Amending Deed) must comply with the conditions imposed by the Power of Amendment otherwise the purported Deed of Variation is void and the terms of the trust remain unaltered { Re Cavill Hotels Pty Ltd [1998] 1 Qd R 396}.

Furthermore a Power of Amendment is provided in the Trust Deed to further the “authorised purpose” of the trust and the Power of Amendment must be used for this purpose in the interests of the beneficiaries and not for an improper purpose or for an ulterior motive to benefit third parties or the Trustees. A purported Deed of Variation that reduced the entitlement of the beneficiaries without their informed consent would be void under the doctrine of a “Fraud on a Power”.

The unelected Public Servants at ASIC are ignoring the legal dictionary definition of “governing rules” and making their own definition which restricts the meaning of “governing rules” to the “latest compilation of the rules” or the most recent “rules for the management” of the superannuation fund.

However Allsop J in Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 stated at [23]:

“The phrase “governing rules of the fund” means the terms governing the conduct of the superannuation fund, which was a regulated superannuation fund under the Superannuation Industry (Supervision) Act 1993 (Cth). It is not limited to the schedule to the trust deed which set out the “rules for the management” of the fund. It means the terms of the trust under which the fund is carried on, which includes the “rules for the management” of the fund: clause 1.2 of the annexure to the deed of amendment dated 13 December 1988.”

The “governing rules” of a superannuation fund therefore includes but is not limited to:

  • The Deed that established the superannuation trust
  • Any subsequent Deed of Variation or other instrument that purports to vary the terms of the founding Trust Deed
  • Any Act of Parliament specific to the trust
  • Any direction from the court in relation to the administration of the trust or the interpretation of the terms of the trust
  • The relevant State Trustee Act
  • Any relevant Commonwealth Legislation

Trustees hold money “under trust” for the members and beneficiaries. It is their money and not the Trustee’s money.

The High Court of Australia has ruled in Finch v Telstra Super Pty Ltd [2010] HCA 36  at [33]:

“For some people, superannuation is their greatest asset apart from their houses; for others it is even more valuable…..Superannuation is not a matter of mere bounty, or potential enjoyment of another’s benefaction. It is something for which, in large measure, employees have exchanged value – their work and their contributions. It is “deferred pay“”

The High Court continued at [35]:

“The government considers that the taxation advantages of superannuation should not be enjoyed unless superannuation funds are operating efficiently and lawfully.”

If the Parliament of Australia has made it a criminal offence to wilfully conceal the governing rules of a superannuation fund from a person who has a beneficial interest in that fund , then clearly if the governing rules (as properly defined) are wilfully concealed from members of that fund then that fund is not being operated “efficiently and lawfully”.

Parliamentary Joint Committee on Corporations and Financial Services

The question now is will the Parliamentary Joint Committee on Corporations and Financial Services which has Parliamentary oversight over ASIC now seek to uphold the sovereignty of the Parliament of Australia as the Commonwealth’s law making body or will the Joint Committee now allow unelected public servants to make laws that are favourable to “white collar criminals”.

If public confident is to be maintained in Australia’s Trillion dollar superannuation industry, the Joint Committee must now seek to have the Parliament amend Regulation 7.9.45 of the Corporations Regulations 2001 to include the following definition:

Definition:

Governing rules” means:

“In relation to a superannuation fund, approved deposit fund or a unit trust, any trust instrument, other document or legislation, or a combination of these, governing the establishment and operation of the fund or unit trust”

The “governing rules” includes, but is not limited to:

  • The Deed that established the superannuation trust
  • Any subsequent Deed of Variation or other instrument that purports to vary the terms of the founding Trust Deed
  • Any Act of Parliament specific to the trust
  • Any direction from the court in relation to the administration of the trust or the interpretation of the terms of the trust
  • The relevant State Trustee Act
  • Any relevant Commonwealth Legislation

 

If the Parliamentary Joint Committee on Corporations and Financial Services fails to have this definition inserted into Regulation 7.9.45 then ASIC will continue to allow dishonest Trustees to conceal the very legal documents that confirm they have been robbing the members and beneficiaries of the fund.

A Trustee has a right to seek advice and directions from a Court of competent jurisdiction as to how to interpret the governing rules of the fund.

Ford and Lee in The Law of Trusts state at [17.160]:

“Trustees may approach the court if they are in any doubt as to any course of action they are contemplating, whether it concerns the rights of beneficiaries, the performance of any duty or the exercise of any discretion; and sometimes it is their duty to do so. In Re Atkinson (dec’d) [1971] VR 612 at 615 Gillard J said:

Where an executor or trustee is in doubt as to the course of action it should adopt, it is always entitled to take the opinion of the court as to what it should do

ASIC should be upholding these basic legal principles and not seek to be the “white collar criminal’s” best friend.