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                                                                                   Issue No. 49
                                                            1 July 2007 – 30 September 2007

Acting Chairperson’s Report

Retirement of Graham McDonald
After seven and a half years, Graham McDonald retired as Chairperson of the SCT on 7 September
2007, and has returned to his substantive position as a presidential member of the AAT, as well as
undertaking some ongoing work in the superannuation industry.

During his time at the SCT, Graham made a substantial contribution to the operations of the Tribunal
and was pro-active in ensuring ongoing liaison between the SCT and trustees, insurers and consumer
groups.

On assuming office in March 2000, Graham also worked hard and successfully to clear the backlog
of complaints arising as a result of the constitutional challenge to the SCT. He went on to steer the
Tribunal on a path of continuous improvement.

On behalf of the members and staff of the SCT, past and present, I wish to record our appreciation of
Graham's significant contribution. He will be sorely missed.


Amendment to the Federal Court Rules
As foreshadowed in the March 2007 Bulletin, the Federal Court has amended Order 53B of the
Federal Court Rules and has advised the SCT that, with effect from 25 July 2007, any Notice of
Appeal from a determination of the SCT must be filed in the Registry in the State or Territory in
which the complainant resides.

Before this amendment, a Notice of Appeal had to be filed in the "District Registry in the State or
Territory in which the Tribunal heard the matter".

The SCT supported the amendment, in the interests of access to justice, particularly by unrepresented
complainants.




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Quarterly Statistics

During the quarter ended 30 September 2007, telephone enquiries rose by 10% and complaints rose
by 7.4%. The number of complaints finalised rose by 10.3%. At conciliation, the Tribunal achieved
a settlement rate of 76.5%. Forty-two determinations were issued during the quarter. The Trustee's
decision was affirmed in 59.5% of these cases.

The Tribunal has made some changes to the format of the quarterly statistics, to streamline the
reporting whilst, it is hoped, continuing to provide useful data to readers on the operations of the
Tribunal. If you have any feedback on the new reporting, the Tribunal would welcome your
comments.




                                                                                      Jocelyn Furlan
                                                                                 Acting Chairperson




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Performance
Statistical Overview


 Written Complaints

 This quarter, the Tribunal received 579 written
 complaints (last quarter – 539), which is an
 increase of 7.4% compared with the previous
 quarter.




 Telephone Enquiries

 The Tribunal received 4,264 telephone calls this
 quarter (last quarter – 3,878), which is an
 increase of 10.0% compared with the previous
 quarter.

 The Tribunal dealt with a wide range of
 enquiries, the most popular questions were
 requests for information about the
 Tribunal itself (42.5%), followed by
 complaint related enquiries (30.1%),
 general superannuation enquiries (6.7%)
 and employer related enquiries (3.8%).


 Jurisdiction

 Of the 579 written complaints received this
 quarter, 313 (54.1%) complaints were within
 jurisdiction (previous quarter – 56.4%) and 266
 (45.9%) were outside jurisdiction (previous
 quarter – 43.6%). Of the 266 complaints closed
 as outside jurisdiction, 183 (68.8%) were closed
 pursuant to s.19 of the SRC Act because the
 complainant had failed to lodge a complaint with
 the trustee prior to lodging a complaint with the
 Tribunal, (last quarter – 61.7%).




 Nature of Written Complaints Within



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 Jurisdiction

 Complaints fall into four major categories –
 ‘Death’, ‘Disability’, 'Administration' and the
 ‘catch-all’ category of ‘Other’.

 Leaving aside the 'Other' category,
 ‘Administration’ complaints comprised the
 largest category of all written complaints
 received within jurisdiction – 55.0%. ‘Death’
 complaints made up the second-largest
 category at 28.8% (last quarter – 30.9%),
 followed by ‘Disability ’ at 14.1% (last
 quarter – 14.5%).




 Complaints Finalised

 The Tribunal finalised 600 written complaints
 this quarter, up from 544, or 10.3%, in the last
 quarter, including some complaints carried
 over from the previous quarter.

 Of the 600 finalised complaints, 7.0% were
 finalised at review (last quarter – 6.8%),
 43.5% were finalised at the inquiry and
 conciliation stage (i.e., prior to a review
 hearing) (last quarter – 53.1%) and 49.5%
 were outside jurisdiction (last quarter –
 40.1%).



 Conciliation Conferences

 The Tribunal conciliated 99 cases in the
 quarter, a decrease of 31 (23.8%) on last
 quarter's 130.

 Of the 85 cases concluded, settlement was
 achieved in 65, resulting in a settlement rate
 of 76.5% (up from 68.4% in the last quarter).
 The outcome is pending in 14 cases (14.1%)
 compared to 16 cases (12.3%) for last quarter.



 Nature of Conciliation Cases

 The categories of note in the quarter are as




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 follows:
 Death Benefits – Of the 46 concluded cases,
 40 (87.0%) were settled.
 Disability – Of the 20 concluded cases, 13
 (65.0%) were settled.
 Administration – Of the 16 concluded cases,
 11 (68.8%) were settled.
 Other – Of the 3 concluded cases, 1 (33.3%)
 was settled.




Review Determination Outcomes for the Quarter

The Tribunal issued 42 determinations this quarter (last quarter – 37 determinations).

The largest category of complaints determined at review was disability complaints – 23 (54.8%).
Death complaints made up the second largest category – 11 (26.2%).

                Death         Disability            Admin            Other                 Total
               Qtr  YTD      Qtr     YTD      Qtr       YTD    Qtr       YTD    Qtr        YTD       YTD %
   Affirmed     7      7       15        15         2      2         1      1         25      25        59.5
  Remitted      0      0         1        1         1      1         0      0          2       2         4.8
     Varied     0      0         0        0         0      0         0      0          0       0         0.0
  Set aside     4      4         7        7         4      4         0      0         15      15        35.7
       Total   11     11       23        23         7      7         1      1         42      42       100.0

59.5% of Trustee decisions were affirmed during the quarter, which is the same result as in the June
quarter, compared with 52.8% in the March quarter.

Efficiency

Median number of days from receipt of complaint to date closed.




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Recent Determinations of Interest

Death benefits and lost dependants
(D06-07\161)

After separating from his wife, the deceased member had come from overseas in 1995 to live in
Australia with his sister, the complainant. His wife and children remained overseas. The Trustee,
unable to locate the deceased member's spouse or children, decided to pay 20% of the benefit to the
complainant, as a dependant, and 80% to the Registrar of Unclaimed Moneys. The deceased
member's sister complained about the Trustee’s decision not to pay the whole of the death benefit to
her.

It seemed to the Tribunal that where the Trustee, having discharged its duty to make reasonable
enquiries, was unaware of the whereabouts, existence or financial circumstances of the spouse or the
children, it was not possible to make a determination that any part of the benefit should be paid to the
spouse or the children. This is because there was no information upon which to base such a
decision. In this case, it seemed that the Trustee had, by implication, made a decision to pay 80% of
the benefit to the spouse and the children. Then, despite having no evidence of their existence,
whereabouts or financial circumstances, regarded the amount that it had determined ought to be paid
to the spouse and children as unclaimed money and paid it to the Registrar.

In the absence of an explicit and unambiguous decision to pay some proportion of the deceased
member’s benefit to the spouse and the children, which the Tribunal believed would be unfair or
unreasonable for the Trustee to make in the circumstances, the money cannot be regarded as
unclaimed. Thus, the Trustee’s decision to categorise the remaining portion of the benefit that way
was, in the Tribunal’s view, unfair and unreasonable.

The Tribunal set aside the decision on the grounds that it was not fair and reasonable

and substituted its own decision that the whole of the death benefit be paid to the complainant.

Disablement and further education
(D07-08\007)

The complainant was a former police officer in her 30s. After 6 years with her employer and
following workplace stress, she had ceased work in February 2000. She applied for Permanent
Disability citing “major depression caused by work related stress” but the Trustee determined that
she was only partially disabled under the terms of the Trust Deed.

Medical reports regarding the nature and extent of the complainant’s medical condition led the
Tribunal to find that the diagnosis was not in dispute; the complainant had a major depressive
disorder with general anxiety, both of moderate severity.

In 2006, the complainant completed a law degree with an overall high credit rating. While the
Tribunal acknowledged she required a great deal of assistance and special consideration throughout
her course, the fact remained that over a 6-year period she had completed, with honours, a law
degree and she should be able to obtain employment in many areas which did not expose her to the
type of pressures to which she was subject in her former employment.

The Tribunal was satisfied that the medical evidence was open as to whether or not it was
more likely than not that the complainant would, at some time within the foreseeable future,
return to work. While the Tribunal considered that having the capacity to undertake and
complete the law degree does not necessarily equate to the realities associated with the
complainant being able to secure employment, it felt that a law degree was no longer




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considered to limit the holder to employment as a solicitor or barrister, where it might be
considered that a person will need to pass through hierarchical levels. It was considered
reasonably open for someone suffering the complainant’s condition to undertake, for instance,
legal research, assess files for costing or work in a law library, which do not involve the
pressures said to aggravate her condition or involve her in a hierarchical structure.

Having regard to all of the circumstances, the Tribunal was unable to discern any unfairness or
unreasonableness in the operation of the decision of the Trustee to find that the complainant was
‘partially’ but not ‘totally’ disabled.

Death benefit distributions should take all circumstances into account (D07-08\009)

The Tribunal received a complaint from the former de facto spouse of the deceased member and
father of their infant daughter. He complained that the decision of the Trustee to pay 50% of the
death benefit to the spouse of the deceased member and 50% for the benefit of the daughter was
unfair or unreasonable. The resolution sought by the complainant was that an amount greater than
50% be paid for the benefit of the daughter.

The spouse also had a daughter, aged 8 years at the time of the deceased's death, the Tribunal
expressed disappointment that the Trustee did not comment on its consideration of the step-
daughter. The Tribunal did not know whether the Trustee did not think that she was a dependant or
whether it determined that her needs were not as great as the other two, or whether the distribution to
the spouse included an implied distribution to her. The Tribunal was also concerned at the
implication in the Trustee’s submission that, having found two dependants, the benefit was split
50/50 without any consideration of the circumstances of each party.

The thrust of the complainant's claim was that because the daughter was only 6 years old, her needs
were greater than the spouse's, and therefore she should get more than 50% of the benefit. The
complainant also suggested that because the other fund paid only one third of the benefit to the
daughter, the Trustee should have made a decision to give the daughter more to redress that alleged
imbalance.

The Tribunal believes the role of the Trustee is to make a distribution amongst the eligible parties
having regard to all the circumstances and that includes considering any benefits the parties may
have already received or are likely to receive as a result of the death of the deceased member. It
should also be noted that the Tribunal’s test is not whether the process was fair and reasonable but
rather whether the decision operates fairly and reasonably in relation to the parties in the
circumstances.

The Tribunal has often said that the objective and purpose of superannuation is to provide for the
member or the member and his or her partner in retirement. In the event that one of those parties
dies then, in the absence of some significant circumstances such as making provision for minors, the
benefit should remain with the surviving party for the purpose of providing ongoing support.

In this case it was appropriate to have regard to the needs and financial dependency of the daughter.
The evidence before the Tribunal suggested that prior to her death the deceased member was liable
to pay child support to the complainant for the benefit of the daughter. The amounts varied between
$100 per month and $500 per month. In addition, it might be reasonable to consider that both the
daughter’s parents would have wished her to attend the private school and might therefore have
agreed to share the cost of school fees. Taking into account these factors, the Tribunal considered
that the Trustee, in making its decision, has ensured that it had provided fair and reasonable support
for the daughter having regard to the support that she will also be provided with from the
complainant and affirmed the Trustee's decision.

Investment switches gone wrong, and mitigation of loss (D07-08\012)




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The complainant had requested “future funds” (ie contributions to be made in the future) be allocated
to two specific funds but the Trustee had also transferred all his existing funds to the two specified
funds. The complainant complained that the transfer of existing funds was contrary to his
instructions and sought to have the matter resolved by a manual reversal of the rebalancing.

In 2005 the complainant altered his investment allocation online, so that future contributions were
allocated equally to two specific funds. The complainant said that this instruction was to apply to
future contributions only, but the trustee’s computer system automatically altered the allocation so
that the existing funds were “rebalanced”. The trustee asserted that the contents of the web page and
the PDS should have alerted the complainant that his funds would be rebalanced immediately after
he gave instruction altering the allocation of future contributions. The trustee argued that this meant
that the rebalancing should have been treated as having been authorised.

The complainant’s investments after the 2005 rebalancing performed worse than would have been
the case had the rebalancing not occurred. The Trustee argued that it should not have to bear the
consequences of this difference in investment performance because the complainant failed to
mitigate his loss by taking reasonable steps to reduce or minimise his loss. The Trustee said that two
months after the rebalancing, the complainant was provided with information which would have
enabled him to reverse the rebalancing and had he done so, the difference in the investment
performances would have been much less than it subsequently became.

Mitigation is a principle of law applied by courts. While the Tribunal is not a court, there will be
circumstances where the Tribunal may have regard to similar considerations in considering the
exercise of its powers. For example, there may be cases where loss suffered by a complainant does
not arise from the unfair or unreasonable conduct of the Trustee but from the complainant’s own
conduct or some other cause. In these cases, any remedy would be limited to addressing the
“original” unfairness or unreasonableness.

In this case however, the Tribunal considered that the appropriate determination would be for the
Tribunal to set aside the decision under review and direct that the effect of the rebalancing be
reversed. The auto-rebalancing was not authorised and was unfair and unreasonable for that reason.
Setting aside the auto-rebalancing most closely addressed the unfairness and unreasonableness in the
decision under review.

Decision-making: Flawed reasoning v the operation of a decision (D07-08\016)

The complainant originally made a complaint about delay in the TPD decision-making process,
which was withdrawn when the decision to deny her claim was made. The complainant then
complained that the decision to deny her claim was unfair and unreasonable because she was totally
and permanently disabled. In 2005, the Tribunal affirmed the decision under review.

The complainant appealed to the Federal Court but was unsuccessful. She then appealed to the Full
Court of the Federal Court and was successful. The Full Court ordered that the matter be remitted to
the Tribunal to “consider again, this time applying the correct test for “disablement”, whether the
Trustee acted in a fair and reasonable manner when it rejected the appellant’s claim”. The
constitution of the Tribunal on this occasion was different from its constitution when the
determination of 2005 was made.

The complainant asserted that her multiple chemical sensitivity was debilitating and had prevented
her working since November 1997. While there was evidence that supported this view, there was
also substantial medical evidence that suggested that the complainant suffered from psychological
disorders instead and that these disorders were capable of treatment. There was also material which
suggested that the complainant was capable of some remunerative work. In light of this material, the
Tribunal considered that it was open to the Trustee to conclude that complainant did not suffer



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disablement, within the meaning of that expression in the Trust Deed. Accordingly, the Tribunal
was satisfied that the decision of the Trustee was fair and reasonable in the circumstances.

It was clear that the wrong definition was used in originally assessing the complainant’s claim, and
the different effects of the two definitions of disablement were at the heart of the complainant’s
successful appeal to the Full Court of the Federal Court. However, it does not follow that the
operation of the decision under review was not fair and reasonable, in the context of the Complaints
Act. The process of reasoning by which the Trustee arrived at its decision may have been flawed but
if the decision itself is fair and reasonable in the circumstances, the Tribunal is not empowered to
interfere. The fact that the wrong definition of disablement was used does not, of itself, mean that
the decision under review operated unfairly or unreasonably.

Insurance and a complainant's duty of disclosure (D07-08\018)

The complainant complained about the decision to deny his Income Protection (‘IP’) claim.

In this case, the sole point at issue was whether, in the circumstances, the complainant failed to
disclose the fact that he suffered from insulin dependent diabetes when he joined the Fund, and when
he applied for extra insurance and made a declaration about the state of his health.

The complainant submitted that he had good reason to omit reference to the fact that he was a
diabetic. The application did not specify diabetes as being a condition to be notified (unlike the
Fund’s more recent application forms) and he was not required to undergo a medical examination as
a pre-requisite to being insured. He claimed that his declaration was true because, at the time, he
was in good health and was not aware of any circumstances that might affect his longevity.

However, it seemed to the Tribunal that it would be fair to say that despite the complainant’s
assertions about his health, and the fact that, for some time, he had been symptom-free, he was a
person with a serious and potentially life-threatening illness. The fact that, in order to keep his
heavy haulage licence, he was required to undergo regular medical examinations ought to have
alerted him to the fact that he was not in good health. A person who is in good health is not
dependent on daily insulin to prevent blackouts or convulsions.

Given the well known potential for complications to arise during the life of a person such as the
complainant, the Tribunal found that it was neither unfair nor unreasonable for the Insurer to decide
that it would not have provided insurance if it had been advised of the fact that the complainant was
an insulin dependent diabetic. The complainant ought to have disclosed his medical condition when
he completed the relevant part of his application and he ought not to have declared that he was in
good health and knew of nothing that would affect his normal life expectancy.

The Tribunal found that it was fair and reasonable in the circumstances for the Trustee, like the
Insurer, to conclude that the complainant had failed in his duty of disclosure by not referring to his
illness when he applied for insurance.
Insurance and heroin addiction
(D07-08\024)

The complainant, the father of the deceased member, complained about the Trustee's decision that
the insured death benefit was not payable because the death, from an opiate overdose, had occurred
within two years of the deceased member joining the Fund and resulted from the deceased member's
heroin addiction, a condition in existence at the time the deceased member became a member of the
Fund. The complainant requested that the decision be reviewed.

On behalf of the complainant it was submitted that there was no material that indicates that the
deceased member died ‘as the result of’ his heroin addiction. It was submitted that it was open
from the Coroner’s enquiry and no finding was made on whether or not the deceased member



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took his own life, or whether or not the injection was administered by a third party. Even if,
which was not conceded, the Tribunal found as a fact that the deceased member died from a
self-injected heroin overdose, there was nothing which connected that with his addiction.
Examples were relied upon, including:
       If a person has cancer and for purpose of treatment for that cancer that person is given toxic drugs (as cancer
       patients are), and if that person is accidentally given or takes an excessive dose which results in the person's
       death it could not be said that the person died “as a result of” cancer. What the person would have died from is
       accidental overdose of a drug.

The Tribunal has previously determined that the taking of drugs, even illicit drugs, may not in itself
support a finding that a person has a ‘condition’. However, when treatment, whether voluntarily
entered into or arising as the result of compulsion, is administered then that confirms the person as
having a ‘condition’. The admissions to undertake rehabilitation for drug addiction left the Tribunal
satisfied that the deceased member suffered a condition arising from his taking of heroin, that
condition existed at the time he joined the scheme, and he died within two years of joining the
scheme. The issue was whether his death had resulted from the described condition.

In cases such as this, where an onus rests on an insurer to establish the connection between the pre-
existing condition and the death, the Insurer is not required to prove beyond a reasonable doubt that
it was the pre-existing condition which resulted in the death. It is fair and reasonable for the Insurer
to conclude that the deceased member was experiencing considerable difficulty in overcoming his
heroin addiction, and that the condition remained with him in the period leading to his death. While,
no doubt, other causes were also present, there was a continuing, constant presence of heroin
addiction.

The Tribunal was satisfied that the decisions of the Trustee and Insurer were fair and reasonable in
their operation in relation to the complainant in the circumstances.

 



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