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Superannuation Legislation Amendment (Resolution of
Complaints) Bill 1998
Date Introduced: 26 November 1998
House: House of Representatives
Commencement: On Royal Assent
To introduce an
interim solution to the difficulties encountered by the
Superannuation Complaints Tribunal (the Tribunal) as a result of
Federal Court decisions which have effectively stripped the
Tribunal of its review powers leaving it with an inquiry and
conciliation role only.
The intention of the Superannuation Legislation
Amendment (Resolution of Complaints) Bill 1998 (the Bill), is to
allow the Tribunal to arbitrate disputes by consent. This
represents an interim solution to provide a form of superannuation
complaints dispute resolution.
1. Federal Court Decisions
On 14 February 1998, the Federal Court found
that section 37 of the Superannuation (Resolution of
Complaints) Act 1993 (SRC Act) purported to confer on the
Tribunal judicial power of the Commonwealth contrary to Chapter III
of the Constitution.(1)
In addition, the Federal Court found that as a
matter of interpretation of the SRC Act the Tribunal is only
entitled to receive complaints concerning discretionary decisions
made by a trustee as opposed to decisions which are not
2. Constitutional Issue
2.1 The Doctrine of the Separation of
It is now generally accepted by commentators on
the Constitution and the courts that the doctrine of separation of
powers applies at the federal level in Australia in relation to the
distinction between executive and judicial functions. This is a
longstanding doctrine which owes its genesis to the philosopher
As Brazier(2) explains, the doctrine of the
separation of powers asserts that governmental functions can be
divided into three categories: legislative, executive and judicial;
that the organs of government should similarly be divided into the
legislature, the executive and the judiciary; and that each
function of government should be exercised only by the relevant
organ of government - so that the functions and institutions of
government are kept strictly separate.(3)
2.2 Judicial Power May Only be Exercised by
The High Court and the Privy Council have
established two basic propositions reflecting the structural
separation of the judicial powers of the Commonwealth from its
- First, that the functions of government that are properly
characterised as judicial functions may only be given to, and
exercised by courts,(4) and
- Secondly, that the functions of government that are properly
characterised as non-judicial may not be given to, or exercised by,
The proposition that only courts may be
authorised to exercise the judicial power of the Commonwealth, is
deeply entrenched in Australian constitutional orthodoxy.(6)
There is no standard description, let alone
definition, of judicial power for the purposes of the Constitution.
The apparently simple descriptions of judicial power mask the
complexities and ambiguities of the concept.(7)
The reality is that, in this area, one must move
with considerable care, particularly when drafting Commonwealth
legislation, to draw a sharp distinction between judicial and
non-judicial functions, so as to ensure that the former are not
given to the bodies which are not courts and that the latter are
not given to bodies which are courts.
3. Superannuation Complaints Tribunal -
Under the SCR Act the Tribunal was established
to hear complaints from members concerning decisions made by the
trustees of regulated superannuation funds. The SRC Act allows for
an inquiry and conciliation process. In the event of the
conciliation process failing to resolve a dispute, the Tribunal
makes a formal determination, after reviewing the matter, as to
whether a decision made by trustees was fair and reasonable.
Statistics published by the Tribunal show that
approximately 79 per cent of all 'within jurisdiction' complaints
have been resolved at the inquiry and complaint stages, with the
remaining 21 per cent of complaints proceeding to review.(8)
The Federal Court's ruling removed the Tribunals
determinations power and consequently no Tribunal review meetings
have been held since February 1998 and no further determinations
have been released. As at 31 March 1998 the Tribunal had a backlog
of 211 matters awaiting review and by 23 November 1998 the number
had increased to nearly 300 matters.
The Tribunal is placing greater emphasis on
inquiry and conciliation in an effort to resolve more complaints
prior to review. The Tribunal's inquiry and conciliation role is
apparently unaffected by the Court's ruling on the validity of its
4. Senate Select Committee on
Following the Federal Court decision both the
government and the superannuation industry have been working to
address the problems which the ruling has created for dispute
resolution in the industry.
4.1 Appeal to the High Court
The government lodged an application to the High
Court for special leave to appeal the Federal Court decision, which
the Court has granted. Mr John Larkin, ISC Assistant Commissioner
has noted, however, that the case is not likely to be heard until
the end of 1998, and a decision could be delayed for a further few
4.2 Senate Select Committee on Superannuation 'Round
The Senate Select Committee considered that the
most appropriate way of considering options for dispute resolution
following the Federal Court decision was to conduct a 'round table'
forum, for which a legal and structural framework was provided by
the preparation of a background briefing paper.(10)
The Committee made recommendations in relation
to long term and short term strategies.
4.3 Interim Solution
The forum participants supported an initiative
to urgently implement an interim solution to the current impasse,
pending determination of a longer-term solution to the problem.
Discussion of a possible interim solution
focussed on two models:
- A non-legislative voluntary arrangement using Tribunal
- Amending the SRC Act to enable the Tribunal to arbitrate with
The Committee considered that the most feasible
interim solution would to be to introduce legislation allowing the
Tribunal to arbitrate disputes by consent.
Parties would enter into agreements to be bound
by a Tribunal award on a case-by-case basis and the award would be
enforceable under contract law and State arbitration laws.(11)
Some forum participants raised the concern that
agreement to such an arbitration system would constitute a
fundamental breach of trustees' fiduciary duties. It is for this
reason that an amendment to the Superannuation Industry
(Supervision) Act 1993 was also suggested to override any
restriction arising from trustees' equitable obligations and any
restriction on trustees entering into such arbitration agreements
on a voluntary basis.
1. Schedule 1 - Amendment of the
Superannuation (Resolution of Complaints) Act 1983.
- Amendment of the Objectives and Functions of the
To reflect the conferral of arbitration powers
on the Tribunal:
- Item 5 repeals the existing paragraph 11(b)
and substitutes new paragraph 11(b), which states
that the Tribunal must, in carrying out its functions or exercising
its powers, pursue the objectives of providing mechanisms for the
conciliation of a complaint or the arbitration of a complaint.
- Item 6 repeals existing paragraphs 12(1)(a)
and (b) and substitutes new paragraphs 12(1)(a)
and (b) which state that the functions of the
Tribunal are to try to resolve complaints by conciliation and if
this is not possible to conduct an arbitration in respect of the
References to the review powers of the Tribunal
remain. This is appropriate because the outcome of the High Court
challenge is not yet known and the resolution of the problem in
respect of a long term solution remains outstanding.
- Complaints may be made about Discretionary or
To ensure that the Tribunal's ongoing functions
of inquiry, conciliation and arbitration, extend to
non-discretionary decisions Item 8 inserts
new section 14AA which states that to avoid doubt,
a complaint may be made about a decision whether or not the
decision involved the exercise of a discretion.
It continues in new subsection
14AA(2) to specify that a non-discretionary decision is
taken to have been unfair and unreasonable if the decision was
contrary to law. This should resolve the tension between the
requirement to determine a complaint by reference to the 'fair and
reasonable test' and the requirement not to do anything that is
contrary to law.
- Part 7A - Arbitration
Item 1 of Schedule 1 inserts
new Part 7A, which confers arbitration
powers on the Tribunal.
1.3.1 Notification of Entitlement to Refer Complaint to
Pursuant to new subsection
48B(2), where the Tribunal has unsuccessfully tried to
settle a dispute by conciliation, it must give a notice to the
parties telling them that they may, within 28 days, enter into an
agreement to refer the complaint to arbitration by the
1.3.2 Obligation to Conduct Arbitration
If the arbitration agreement is lodged with the
Tribunal, the Tribunal must conduct an arbitration. New
1.3.3 Nomination of State or Territory Law to Apply
Under new subsection 48B(4) an
arbitration agreement must be executed under seal as a deed and
nominate the law of a particular State or Territory as being the
law that is to govern the operation of the agreement.
1.3.4 How Arbitration is to be conducted
Pursuant to new subsection
48C(1) arbitration is to be conducted by the Tribunal, as
it thinks fit in accordance with the law of the nominated State or
Territory relating to commercial arbitration. The appropriate State
or Territory Law will therefore also govern procedural matters.
1.3.5 Sunset Clause
In view of the interim nature of the Tribunal's
arbitration powers pursuant to new section 48F,
Part 7A will cease to have effect on a day to be
fixed by proclamation.
2. Schedule 2 - Amendment of the
Superannuation Industry (Supervision) Act 1993
The object of the Superannuation Industry
(Supervision) Act 1993 is to make provision for the prudent
management of certain superannuation funds, approved deposit funds
and pooled superannuation trusts and for their supervision by the
Australian Prudential Regulation Authority and the Australian
Securities and Investments Commission.
Item 1 of Schedule 2 inserts
new section 337A, which states that nothing in any
law or in any governing rules of a fund, scheme or trust, shall
prevent a trustee from entering into an arbitration agreement nor
from giving effect to an award made by the Tribunal in an
This is to ensure no occurrence of any
fundamental breach of trustees' fiduciary duties.(12)
1.Validation of Past Decisions
In its report, the Senate Select Committee on
Superannuation recommended that the government investigate the
feasibility of introducing legislation to validate the past
decisions of the Tribunal.(13) The Bill does not address this
Forum participants apparently expressed a range
of different opinions as to whether this matter was of sufficient
importance to warrant special legislation, however, on balance it
was considered an appropriate course of action.
In any event it is possible that the current
High Court appeal may be forestalling any litigation and it would
seem to be a sensible approach to delay introducing legislation in
this area until the outcome of the challenge is known.
- Wilkinson v Clerical Administrative and Related Employees
Superannuation Pty Ltd (1998) 152 ALR 332. See also the
unreported decision of Brekler v Leshem  57 FCA
(unreported, 12 February 1998) The Federal Court found that two
aspects of the Tribunal's work were found to breach the separation
of powers doctrine in the Constitution. It was found the Tribunal's
ability to review the decision of a trustee on the basis that it
was 'fair and reasonable' and the enforceable nature of its
determinations indicated the exercise of judicial powers.
- De Smith and Brazier R, Constitutional and Administrative
Law, 6th ed, Penguin, London, 1989.
- Hanks P, Constitutional Law in Australia, 1996, p 464.
- The proposition emerged in New South Wales v
Commonwealth, the Wheat case (1915) 20 CLR 54.
- The proposition was established in R v Kirby; Ex parte
Boilermakers' Society of Australia, the Boilermakers
case, (1956) 94 CLR 254.
- The decision of the High Court in Brandy v Human Rights and
Equal Opportunity Commission (1995) 127 ALR 1, served to
emphasise the entrenchment. The court was unanimous in holding that
sections of the Racial Discrimination Act 1975 (Cth) were
invalid because those sections had the effect of conferring
judicial power on the Human Rights and Equal Opportunity
- In Precision Data Holdings v Wills (1991) 173 CLR 167
the High Court referred to the acknowledged difficulty, if not
impossibility, of framing a definition of judicial power that is at
once exclusive and exhaustive. The difficulty they said, was caused
by the fact that many features that were essential to the exercise
of power were not by themselves conclusive of the question and
could also be elements in executive or legislative power.
- Superannuation Complaints Tribunal Annual Report, No
11, p 8-9.
- John Larkin, 31st Report of the Select Committee
on Superannuation, Resolving Superannuation Complaints,
Canberra, July 1998, Evidence p 3.
- Superannuation Complaints Tribunal Round Table Discussion with
Senate Select Committee on Superannuation, Sydney, Tuesday
28th April 1998, Background Briefing Paper Prepared
for the Committee by Andrew Fairley of IFS Fairley.
- Select Committee on Superannuation, Resolving
Superannuation Complaints, Canberra, July 1998, p 15.
- George Raitt of Blake Dawson Waldron, Report of the Select
Committee on Superannuation, Resolving Superannuation
Complaints, Canberra, July 1998, p.16, drew attention to the
power for a trustee to compromise disputes contained in many trust
deeds and a similar implied power in most state trustee
legislation. In his opinion: '...if those either expressed
provisions or implied provisions under state law have sufficient
coverage of the industry it may not be necessary to amend the act
or the regulations.'
- Report of the Select Committee on Superannuation, Resolving
Superannuation Complaints, Canberra, July 1998, p 56.
30 November 1998
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