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Trustee vs trustee: resolving a dispute between SMSF members

There are clear processes to follow should conflict arise between members of a self-managed superannuation fund (SMSF).



These are in place to reduce any negative impact on SMSF fund members in the event there is a disagreement.

The Super Complaints Tribunal should generally be the first port of call when there is a dispute involving an SMSF. 

It is a completely impartial body of 21 members, and cannot represent either side. Members cross a number of areas including superannuation, insurance, actuary, law, medicine, rehabilitation and sociology.

The tribunal makes inquires into complaints and endeavours to achieve a resolution through conciliation. If that’s not possible, the next step is a formal review of the issue by up to three members of the tribunal panel, subsequent to which it will issue a determination on the matter.

The tribunal is governed by the Superannuation (Resolution of Complaints) Act 1993, which outlines its functions, powers and procedures. The tribunal has a mandate to be fair, economical, informal and quick about its work.

It examines complaints about trustees of regulated superannuation funds other than SMSFs; approved deposit funds; life companies as providers of immediate and deferred annuities; and providers of retirement savings accounts.

However, It’s important for trustees to understand the tribunal can only deal with certain disputes.

For instance it is not able to adjudicate any disputes between trustees. It also can’t intervene if a member believes he or she should have been paid a benefit. Additionally, it cannot make a determination if a member, or a relative of a member, thinks they should have been paid a death benefit. 

“They cannot go to the Super Complaints Tribunal, there's no jurisdiction there to do that,” explains Peter Hogan is the Self-Managed Super Fund Association’s head of technical.

Aside from having a dispute heard by the Super Complaints Tribunal, the way conflicts are dealt with in the SMSF environment depends on whether the fund has a company or individual trustee.

“If they have a company acting as trustee then often, the rules of the company will provide for circumstances in which the directors are deadlocked and they can't make a decision,” Hogan explains.

“This is especially the case if the company has been set up to specifically act as a trustee of a superannuation fund. In the event of a dispute, trustees would refer to the rules of the company and follow those terms and conditions,” he says.

Alternatively, if the fund has an individual trustee, the SMSF’s trust deed will generally set out how to deal with conflict. 

“The deed will provide a mechanism to allow the trustees to make a decision where there's a fifty fifty split. What tends to happen is one of the trustees has a casting vote,” he adds.

Alternatively, the deed may carry instructions such as: “Unless there's a clear majority, a decision shall not be passed." 

If for some reason there's no mechanism for resolving disputes, or if the trustees cannot resolve the dispute based on the rules outlined in the trust deed, the trustees or the directors of the corporate trustee may need to go to the supreme court, as it has jurisdiction for trust law. 

“The court can only really make orders in relation to the rules of the fund as they stand,” Hogan adds.

The court will adjudicate and make a decision about the dispute. For instance, let’s assume one member with a power to cast a deciding vote takes a decision about the fund about which other members don’t agree. 

They may argue the member acted beyond the powers that were given in the trust deed. The court would adjudicate whether that's the case, based on the rules of the fund. 

“Generally you would look to the rules of the company if you have a corporate trustee, or the trust deed if it’s an individual trustee and see if there's an answer there. Then it's off to court after that if you're still can't agree,” says Hogan.

The message for SMSF trustees is to ensure the trust deed or company rules clearly set out how conflict between members or trustees should be resolved. That will give all parties guidance about how to act when disputes arise. 
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