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Supreme Court clarifies applicability of NSW Crimes Act provision to successor fund transfers

05 July 2023

4 min read

#Superannuation, Funds Management & Financial Services

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Supreme Court clarifies applicability of NSW Crimes Act provision to successor fund transfers

The NSW Supreme Court recently handed down judgment finding that section 249E(2) of the Crimes Act 1900 (NSW) (NSW Crimes Act) has no application to the circumstance of a Successor Fund Transfer (SFT). This is welcome news for superannuation trustees, in light of the 2022 decision in BT Funds Management Limited (ACN 002 916 458) as trustee for the Retirement Wrap Superannuation Fund [2022] NSWSC 401 (BT case), which raised concerns about the need for court consent for SFTs involving trustees in NSW.

Crimes Act provisions

Section 249E(2) provides:

“Corrupt benefits for trustees and others

. . .

(2) Any person who offers or gives a benefit to a person entrusted with property, and any person entrusted with property who receives or solicits a benefit for anyone, without the consent –

(a) of each person beneficially entitled to the property, or

(b) of the Supreme Court,

as an inducement or reward for the appointment of any person to be a person entrusted with the property, are each liable to imprisonment for 7 years.”

Similar provisions exist in Victoria, Queensland and Western Australia.

The BT case

In early 2022, BT Funds Management Ltd brought an application before the court seeking consent to be given under section 249E(2) regarding a proposed SFT. In that matter, Ball J proceeded on the assumption that 249E(2) was applicable to the proposed SFT and gave consent for the solicitation, receipt and enforcement of the benefits which, in effect, authorised the trustee of the subject fund to proceed with the proposed transfer. Had the consent not been given, the proposed conduct “may have amounted to a breach of s 249E”.

The BT case raised concerns for the superannuation industry as to whether a SFT would require court consent (or at least consider receiving court consent) if a SFT was to involve a trustee residing in NSW

The Queensland Supreme Court subsequently handed down a judgment in H.E.S.T Australia Ltd v Attorney-General (Qld) & Anor; Mercy Super Pty Ltd v Attorney-General (Qld) [2022] QSC 221 (HESTA case) that considered the applicability of the equivalent provisions in Queensland and Victoria and made a declaration that neither Queensland nor Victorian criminal provisions applied on the basis that the relevant SFT did not constitute a ‘substituted appointment’ as required by those provisions. However, the court was not required to consider the NSW Crimes Act.

Following the BT case and the HESTA case, it was unlikely that the Queensland and/or Victorian provisions would apply to a SFT. However, given the differences in drafting between the Victorian and Queensland provisions and the NSW Crimes Act, it remained unclear as to whether a SFT could still be caught by the NSW Crimes Act.

Hostplus v Maritime Super

The court in Host-Plus Pty Ltd v Maritime Super Pty Ltd [2023] NSWSC 725 (in which Holding Redlich acted for the plaintiff, Host-Plus Pty Ltd) found that section 249E(2) of the NSW Crimes Act has no application to the circumstance of a SFT and was not engaged in the circumstances of the SFT between Host-plus and Maritime Super. 

In that case, the court noted the following arrangements between the two trustees, which all SFTs that we have acted on have in common:

  • there will be the transfer of assets from one trustee to another
  • there will be the transfer of members and their benefits from one fund to the other
  • Host-Plus will assume the liability for all benefits of the transferring members
  • Host-Plus will indemnify Maritime Super against its liabilities.

Stevenson J concluded that the proposed transfer does not involve the “appointment” of a trustee so as to engage section 249E therefore giving consent to the offering, giving, receipt or solicitation of benefits under the SFT was unnecessary. In reaching that conclusion, Stevenson J distinguished the application before him from that in BT Funds which, had been made without the benefit of any submissions from a contradictor. Before Stevenson J, APRA and Maritime Super submitted that section 249E did not apply in the circumstances and, while it had made the application for consent, Host-Plus adopted a neutral position on the provision’s applicability.

His Honour also drew a distinction from his own conclusion in MLC Investments [2022] NSWSC 1541 (an earlier application under section 249E(2) in which consent was given) on the basis that the earlier case did not concern a SFT, but rather the retirement of one trustee of a managed investment scheme and the appointment of a new trustee in that role.

Superannuation trustees may take some comfort as Justice Stevenson’s decision appears to have resolved the applicability of the provision of the NSW Crimes Act to SFTs, with the position in relation to the Victorian and Queensland provisions previously determined by Kelly J in the Queensland Supreme Court. This is a welcome development which should help to avoid unnecessary applications to the court for consent.

If you have any questions regarding successor fund transfers or the article, please get in touch with a member our team below.

The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

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