This article considers:
- the recent decision in HEST Australia Ltd v Attorney-General (Qld); Mercy Super Pty Ltd v Attorney-General (Qld) & Anor  QSC 221 (the HESTA case) which concerned the application of the secret commission offence provisions in section 442F of the Criminal Code Act 1899 (Qld) and section 180 of the Crimes Act 1958 (Vic) (Offence Provisions); and
- the implications for other successor fund transfers (SFTs).
In the HESTA case, Kelly J decided not to follow the decision of the Supreme Court of New South Wales in BT Funds Management Limited as trustee for the Retirement Wrap Superannuation Fund  NSWSC 401 (the BTFM case) in which Ball J gave consent to certain conduct engaged in or proposed to be engaged in which, absent consent, “may have amounted to a breach” of the secret commission offence provision in section 249E of the Crimes Act 1900 (NSW) and similar provisions in Queensland, Victoria and Western Australia. The BTFM case led to some uncertainty in the industry regarding the application of the statutory secret commission provisions and whether a transferee trustee needed Court approval to give an indemnity as part of an SFT.
Background: HESTA Super Fund and Mercy Super
The HESTA case concerned a proposed successor fund transfer of the members of the Mercy Super superannuation fund (Mercy Super), their member benefits and matching assets to the HESTA Superannuation Fund (HESTA). As part of the SFT, it was negotiated that H.E.S.T. Australia Ltd (the HESTA Trustee) would make various promises to Mercy Super Pty Ltd (the Mercy Super Trustee) as follows:
- to indemnify the Mercy Super Trustee, each former, present and future director of the Mercy Super Trustee, and each former, present and future officer or delegate of the Mercy Super Trustee with respect to certain liabilities;
- to agree to the novation to the HESTA Trustee of all agreements relating to the provision of services by the Mercy Super administrator;
- to agree to the novation to the HESTA Trustee of all policies and agreements relating to the provision of group insurance arrangements;
- to represent and warrant the status, authority, capacity, and legal and regulatory compliance of the HESTA Trustee;
- to transfer all Mercy Super employees to the HESTA Trustee, where possible to a comparable role, and where a comparable role is not available, to a non-comparable role; and
- to conduct negotiations on an exclusive basis for a period of 6 months from the date a ‘Letter of Intent’ is signed or until the execution of the Successor Fund Transfer Deed (whichever occurs earlier),
(collectively, referred to as the Promises).
The HESTA Trustee and the Mercy Super Trustee sought declaratory orders that an SFT of the members of Mercy Super and their assets to HESTA is not a substituted appointment for the purposes of the Offence Provisions, submitting that the BTFM case should not be followed.
In the alternative, they sought directions and assent in relation to the offering, giving, solicitation, enforcement and receipt of the Promises.
The decision of Kelly J
Kelly J made the declaration sought by the applicants that the SFT of the members of Mercy Super and their assets to HESTA is not a substituted appointment for the purposes of:
- section 442F of the Criminal Code Act 1899 (Qld); and
“Any person who offers or gives any valuable consideration to a trustee, or any trustee who receives or solicits any valuable consideration for himself or herself or for any other person, without the assent of the persons beneficially entitled to the estate or of a judge of the Supreme Court, as an inducement or reward for appointing or having appointed, or for joining or having joined with another in appointing, or for authorising or having authorised, or for joining or having joined with another in authorising, any person to be appointed in the person's stead or instead of the person and any other person as trustee, commits a crime”.
- section 180 of the Crimes Act 1958 (Vic) (which is in substantially similar terms).
Kelly J agreed with the applicants’ primary argument that, upon proper construction of the Offence Provisions, the proposed SFT did not involve an appointment of a fund trustee in the stead of an existing trustee but rather the transfer of assets and members from one trust to a different trust.
In reaching this decision, his Honour observed that the Offence Provisions use the language of a trustee “appointing or having appointed or … joining or having joined with another in appointing or for authorizing or having authorized or for joining or having joined with another in authorizing any person to be appointed in his stead or instead of him and any other person as trustee”. Although the term “appointment” is not defined for the purposes of the Offence Provisions, his Honour considered that it should be construed in accordance with its established meaning in the law of trusts as the “placing or designation of a person in the office of trustee” rather than the effect of a dealing with assets.
His Honour also observed that the historical legislative purpose of the Offence Provisions was to prohibit a known practice of a trustee company giving a secret commission to an executor for appointment as a replacement trustee under the same trust.
Kelly J observed that it was not clear whether Ball J had been asked to address the specific question whether section 249E of the Crimes Act 1900 (NSW) and the similar provisions in Queensland, Victoria and Western Australia were engaged on the facts of the BTFM case and that the decision was made in apparent circumstances of urgency. Kelly J stated that he did not read the BTFM case as containing reasons for deciding directed to the principal question before him, and that he was not obliged (or minded) to follow the BTFM case in dealing the applicants' primary argument.
Implications for other Succession Fund Transfers
The HESTA case provides new certainty for a superannuation trustee registered in Queensland or Victoria, or which is the trustee of a super fund governed by the law of Queensland or Victoria. However, it did not consider the prohibitions in Western Australia or New South Wales.
The prohibition in Western Australia is worded very similarly to the prohibitions in Queensland and Victoria, so the HESTA case is also excellent news for a superannuation trustee registered in Western Australian or which is the trustee of a super fund governed by the law of Western Australia.
Section 249E of the Crimes Act 1900 (NSW) refers to “an inducement or reward for the appointment of any person to be a person entrusted with the property” instead of “an inducement or reward for appointing or having appointed, or for joining or having joined with another in appointing, or for authorising or having authorised, or for joining or having joined with another in authorising, any person to be appointed in the person’s stead or instead of the person and any other person as trustee”. Although the difference in language, particularly, the reference to being appointed “in the person’s stead or instead of the person” is noteworthy, we suggest that it is unlikely to lead to a different outcome in New South Wales. In our view, the key for section 249E of the Crimes Act 1900 (NSW) is that the receiving trustee is not being appointed to be a person entrusted with the property.