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Monday, 30 August 1993
Page: 530

Senator WATSON (8.51 p.m.) —by leave—I move:

  That the Senate take note of the report.

When the Senate Select Committee on Superannuation was initially reappointed on 30 May 1993, a specific term of reference was to inquire into and report on the operations of the Queensland Professional Officers Association Superannuation Fund, known as the QPOASF. This report, the eighth report of the Select Committee on Superannuation, is actually being debated before the sixth and seventh reports, which you presented to this Senate during the last sitting period, Mr President.

  These earlier reports were developed under the dedicated and efficient chairmanship of Senator Nick Sherry. I remind the Senate that under Senator Sherry's leadership the committee met on 93 occasions during a two-year long inquiry. I think it is a tribute to both the chair and to the members that only on two or three occasions did that committee divide. By any standard, that is a remarkable achievement and a tribute to the potential that parliamentary committees have in breaking down party political differences, which are often based on ideology as opposed to sound logic. I trust that under my chairmanship the committee will continue to work in that way.

  This inquiry into the Queensland Professional Officers Association Superannuation Fund grew out of a submission from one Mr Desmond O'Neill, received by the committee in November 1992 under its original terms of reference. While this submission included material and various allegations outside the scope of the committee's work, one significant matter involved the transfer of funds out of the QPOASF to certain beneficiaries in 1987. That transfer and matters related to it provided the focus for this report.

  The QPOASF was established under a trust deed on 11 June 1985. It was sponsored by the QPOA and the Professional Officers (Queensland) Credit Union for the benefit of the employees of those two organisations. As provided in the trust deed, the trustees change over time but are always the president, the treasurer and general secretary of the QPOA.

  The initiative to pursue an inquiry was not without precedent. In its earlier work, the committee's attention had been drawn to a number of instances of maladministration of superannuation funds. In its first report, Safeguarding Super, the committee reported on two funds, ABC Engineering and Byrnwood, where trustees had not properly discharged their duties. With the QPOASF the issues raised were germane to several of the committee's original terms of reference.

  The committee also saw the opportunity to reassess the adequacy of superannuation supervisory legislation now proposed by the parliament. After receipt of the O'Neill submission, the inquiry actually followed three stages. The first involved seeking the responses of persons and organisations named in the submission. In the next stage the committee held two public hearings in Brisbane in April and May 1993 where a number of witnesses gave oral evidence and various documents were tabled. Finally, the report on the inquiry was drafted and discussed.

  During the course of its inquiry, the committee experienced problems in confining the evidence to matters relevant to its work. This was because amongst those involved with this fund were complainants about various activities of the executive of the QPOA which were not necessarily connected with superannuation. Some of these matters have been examined by the Cooke inquiry and the Criminal Justice Commission in Queensland and debated in that state's parliament. The committee encountered claim and counterclaim in connection with the QPOASF.

  But in spite of the obvious differences of opinion on the part of the witnesses about the operations of the fund, a number of unanimous conclusions and recommendations have been made by the committee. The first and the most important is that in a number of respects the trustees of the fund breached their fiduciary responsibility to their beneficiary members. The committee was unable to examine a proper set of minutes for meetings of trustees but was informed that trustee decisions were taken when the trustees were present at council meetings of the employer, namely QPOA.

  The committee was unable to establish that the trustees treated fund members equally. It would appear from the evidence available that trustees decided that four of the beneficiaries should be singled out for special treatment and then allowed to transfer their superannuation entitlements into a private super fund. As these four members were not leaving the service of the QPOA or the credit union, the trustee proscribed this action. This wrongful action was compounded by the fact that two of the beneficiaries received entitlements beyond the vesting provisions of the fund. A report of the actuaries, Towers Perrin, who were contracted by QPOA, found that the excess withdrawals by three of the fund members would require the employer sponsor topping the fund up by $34,000. Incidentally, Towers Perrin congratulated the committee on the production of its report.

  But the story does not end there. The committee found that there was an attempt to ensure that the membership did not find out about the wrongful transfers. Members claimed that they were not provided with information about the fund, not given details of retrospective changes to the trust deed to legitimise the transactions, and not given the opportunity to participate in the scheme to allow for private superannuation accounts. Had the trustees been doing their job, they would have sought proper advice from the fund administrators or consulted with somebody with expertise in trust law prior to sanctioning the withdrawals. The trustees were unable to provide the committee with any evidence of their seeking expert advice. Had they sought that advice, one of the trustees who stood to gain from the transfers would have stepped aside when the decision was taken. By his own admission that trustee became involved in a conflict of interest.

  The other matter which was a cause of considerable concern was the inability of agencies connected with the fund to provide the committee with copies of key documents. If the committee came close to establishing that there was contact which warranted prosecution, it was when it probed the benefit request forms. But it was unable to get them. In fact, the benefit request forms for the QPOASF provided the employer and the trustee with a mechanism to advise the administrator to transfer the benefits to the individual funds. The authorised officer who signed those forms apparently ticked the `leaving service' box. This box was ticked because leaving service was the only way under the trust deed other than the death of a member that allowed the funds to be transferred. The trouble with this is that none of the four beneficiaries was actually leaving the service of the employer.

  When the committee tried to obtain a copy of these forms, it entered into a round robin or `flick passing' competition which at best could be described as farcical and at worst an attempt to deprive the committee of its evidence. The QPOASF could not find a copy of these forms. National Mutual said that it had given its only copies of the forms to the Cooke inquiry. The Cooke inquiry by way of letters from the State Archivist and the Department of Industrial Relations informed the committee that it had forwarded the documents to National Mutual. National Mutual said that it had received a batch of documents but that the four benefit request forms were missing.

  There are a number of observations that I wish to make about this farce. The first is that none of the organisations contacted by the committee showed any evidence of keeping copies of documents. I find this an extraordinary state of affairs. The second is that none of the organisations showed any evidence of keeping a register of incoming or outgoing documents by name, by recipient or by donor. The committee was so concerned about this state of affairs that in an unusual move it has recommended that the Queensland Attorney-General and Minister for Justice investigate the circumstances surrounding this so-called loss of documents. The committee has further recommended that the Queensland government review its archiving policy to ensure that proper records are kept and that retention of evidence tendered at quasi-judicial inquiries becomes standard practice.

  While the sums of money involved in the irregular dealings of the QPOASF were small in comparison to the stock of national superannuation assets, the principles at stake were great. Those fund members and former members who were concerned about the administration of the fund were frustrated in their attempts to search for the truth. They tried the EARC, the CJC and the Cooke inquiry but it was the Select Committee on Superannuation which gave them a fair hearing without the need for the legal trappings. The cost of legal representation at some of the quasi-judicial hearings which preceded the committee's hearings could only be described as astronomical. The committee's hearing on the other hand provided witnesses with a low-cost yet equitable environment in which to express their views.

  Currently, the only other avenue for an aggrieved superannuation fund member is the state equity court, which has jurisdiction over trust law disputes. The committee is pleased that the government intends to set up some sort of legislation for a low-cost and accessible dispute resolution mechanism. This matter will be before the committee when it considers the superannuation industry supervision bills this month. The QPOAS report allowed the committee to consider yet again the need for far-reaching legislation to govern the way superannuation trusts operate.

  At the conclusion of the report the committee concludes that it will use a number of principles to test the legislation currently before the parliament. These principles are: trustees should give members access to any information about changes which may materially influence their superannuation fund; trustees should act in an impartial manner, ensuring that potential or actual conflicts of interest are avoided; trustees should become aware of the provisions of the trust deed which they administer and seek advice should they be uncertain about the correctness of their actions; trustees have an obligation to inform members about proposed changes to the trust deed and to seek their views; and, finally, members should have access to a low-cost dispute resolution mechanism should they wish to challenge a ruling of their trustees.

  The inquiry, therefore, has been a very productive exercise. It has established that there were irregularities in the operations of the QPOASF and it has allowed the committee to make further conclusions about the nature and shape of the new superannuation regulatory regime. In fact, one of the spin-offs of the inquiry is that a detailed report has been produced on what not to do on being a trustee or administrator of a superannuation fund. I expect that the report will be much sought after by trustees, employers and fund administrators.

  In conclusion, I note that this report has been commented on in the 7.30 Report in Queensland. It does distress me that the producer of this program has for some reason been sacked. I think this is a deplorable situation but I do commend the report to the Senate.