Section 249E corrupt benefits for trustees and others – Standing in the way of super fund mergers?

14 June 2022
Matthew Bode, Partner, Brisbane

On 23 March 2022, in BT Funds Management Limited (ACN 002 916 458) as trustee for the Retirement Wrap Superannuation Fund the Court made orders giving its consent to certain conduct engaged in or proposed to be engaged in by the plaintiff, BT Funds Management Limited (ACN 002 916 458) (BTFM/Trustee) as trustee for the Retirement Wrap Superannuation Fund (the Fund), which, absent consent, may have amounted to a breach of s 249E of the Crimes Act 1900 (NSW).

The conduct consented to by the Court included:

  • consent to the Trustee soliciting and receiving ‘Transaction Costs Payments’ and ‘Special Losses Payments’ from the prospective successor trustees, and consent to the prospective successor trustees offering and giving same to the Trustee; and
  • consent to the Trustee soliciting, receiving and enforcing, the promises set out in the ‘Transaction Documents’ from the prospective successor trustees, and consent to the prospective successor trustees offering, giving and performing same to the Trustee.

Relevant facts

BTFM is a wholly owned subsidiary of Westpac Banking Corporation (Westpac). As of 31 January 2022, the Fund had approximately 580,000 members which a combined value of $37.6 billion.

Following its review, Australian Prudential Regulation Authority (APRA) concluded that two of the products offered by the Fund did not meet the minimum requirements of the annual performance test conducted pursuant to Part 6A of the Superannuation Industry (Supervision) Act 1993 (Cth).

As a result, BTFM investigated potential strategies which may result in improved returns for members, including consideration of the potential transfer of the Fund and all its members to another fund.

Typically, there are two types of costs associated with any such transfer if it proceeds. First, the transaction costs incurred by BTFM. Generally, BTFM would be entitled to be indemnified against such costs out of the Fund. Second, are the costs and losses individuals may suffer on transfer of the Fund. As part of the negotiations for the transfer of the Fund and its members to another trustee, BTFM sought to pursue negotiations with potential transferees and Westpac regarding the possibility of either party: (a) paying all or part of BTFM’s transactions costs; (b) compensating members for any losses they suffer as a consequence of the transfer; and (c) indemnifying BTFM for claims against it in respect of those which it would otherwise be entitled to be indemnified out of the assets of the Fund. In each case, the intention was that those benefits would be passed on to members of the Plan.

S 249E of the Crimes Act 1900 (NSW) (equivalents – Criminal Code Act 1899 (Qld) s 442F, Crimes Act 1958 (Vic) s 180, Criminal Code Act Compilation Act 1913 (WA) s 535) (the Provision) makes it a crime for a trustee to receive or solicit a benefit from a person as an inducement or reward for the appointment of any other person to be entrusted with the property without the consent of each person beneficially entitled or of the Supreme Court. The Trustee, concerned that the Provision would apply to the solicitation from or payment by a potential transferee or Westpac of the costs, losses or indemnities aforementioned, sought the consent of the Court to the same.


In granting consent, the Court noted that:

  • it was clear the Provisions were broad enough to catch the payments or benefits contemplated in this case;
  • it was apparent that it would not be practical to obtain the consent of individual members to the conduct caught by the Provisions. Consequently, unless the Court gave its consent, it would not be open to BTFM to negotiate to recover the relevant costs and loss from a potential transferee or Westpac or to obtain the indemnity it was seeking. Consequently, if the sale proceeded those costs and losses would have to be borne by the members. That, in turn, may affect the appropriateness of any transfer; and
  • the purpose of the Provision is to prevent a trustee from being persuaded by the prospect of personal gain to exercise its power to appoint a substitute trustee. It would, therefore, normally be appropriate for the Court to give its consent to the proposed conduct if it was satisfied that the appointment of the new trustee was in the best interests of beneficiaries or if it was satisfied that the proposed conduct did not provide an inducement to the transferor to act other than in the best interests of the beneficiaries. However, Justice Ball considered it unnecessary to address that question in this case, as he was satisfied on both counts.

Key takeaways

  • Provided the actions of the trustee are in the best interests of the beneficiaries and they could not serve as an inducement to act contrary to the interests of the beneficiaries, consent should be provided by the Supreme Court.
  • Failure to obtain the Court’s consent to the type of conduct in this case may impact the appropriateness of any transfer (and it should be noted, an offence under s 249E carries with it a term of imprisonment for seven years).
  • In-house and external lawyers should be consulted early to assist with addressing the above risks, protecting the interests of members, of trustees and of the individual directors serving on the boards of those trustees.

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Authored by:

Matthew Bode, Partner

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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