Published: 30 October 2012
Author: John Cramp
Landmark case strengthens injured workers' right to appeal super fund decision
A landmark case, which was settled last month in the Victorian Court of Appeal, has strengthened the rights of workers to contest the decisions of superannuation fund trustees who reject claims made for payments under Total Permanent Disability ("TPD") insurance cover.
Since TPD insurance became a standard inclusion of many superannuation funds, the law has struggled to accomodate TPD claims against them. Because the law governing trusts embraces a broad spectrum of applications, including the administration of Wills, it has been ill equipped to deal with the specific circumstances surrounding superannuation funds which, although also in law governed by trusts, operate more like large, modern companies with significant resources. By relying on the broad nature of the discretionary powers assumed under law by the trustees of a super fund, a claim could be rejected on the basis of insufficient information being included in the application or claim.
The decision of Karger -v- Paul  VR 161 determined the duties of trustees under a will and for many years has also been applied to the duty of trustees of superannuation funds. However, several judgements have clawed back some of worker's rights.
The duty of superannuation fund trustees to properly inform themselves was found in Finch -v- Telstra Super Pty Ltd  242 CLR 254 to be more intense that the duty of trustees of other discretionary trusts. This decision made significant inroads into restoring workers rights as it means in essence that the decision of the trustees of a superannuation fund are reviewable if the decision was formed without properly informed consideration and, importantly, it is incumbent on the trustees to make reasonable enquiries prior to making their decision.
The recent case mounted by Stringer Clark (Alcoa Australia Retirement Plan Pty Ltd -v- Frost) is equally signficant. In this matter, the client, an ex-employee of Alcoa Australia, had made a claim against the company's superannuation fund for a TPD insurance payment. In this case, there had been no clear medical opinion as to whether or not the worker satisfied the definition of Total Permanent Disability under the Trust Deed at the time of the termination of his employment and the trustees rejected the worker's claim.
The Court of Appeal agreed with the reasoning in Finch - v- Telstra Super Pty Ltd in that it held that the trustees' duty extended to making reasonable enquiries. However it found that it was not sufficient to merely inform the worker that further information was required and request that he provide it. Rather, the Court held that the trustees' duty to make reasonable enquiries increased in the situation where the material provided by the claimant indicated a strong prima facie case for the benefit to be granted and questioned, without formally deciding, whether a worker bears any onus of proof at all to show that he satisfies the definition of Total Permanent Disability.
Essentially, this landmark decision strengthens the right of a worker whose claim has been rejected by the trustees of his superannuation fund to appeal that decision. It is another important step in clarifying the law regarding superannuation funds and the duties of their trustees, imposing a higher level of care and consideration on these trustees when compared to the duty owed under other discretionary trusts such as those arising under a Will.
*Stringer Clark is part of the RCT legal group.