In the decision of Australian Annuities v Rowley Super, the Victorian Court of Appeal has held that over $1.6 million of super contributions made by a discretionary trust and members to a self managed superannuation fund (SMSF) could be clawed back to a liquidator on the basis that the director of the corporate trustee breached his fiduciary duties to the corporate trustee.
This case involved what many advisors would consider to be a relatively normal commercial transaction of a corporate trustee borrowing money, making employer super contributions, paying eligible termination payments and making loans to a beneficiary. It also took place in the period where up to $1 million of contributions could be made to super before 30 June 2007 (when many similar transactions took place). In simple terms, the breach occurred because the director sought to benefit himself (and his immediate family) and didn’t consider the other beneficiaries of the trust.
Some of the key take-aways from the case include:
- Considering whether trustees of discretionary trusts should give reasons to show the trustee (and the directors) have properly considered all beneficiaries of the trust;
- Ensuring shareholders of corporate trustees assent to, or ratify, breaches of fiduciary duties;
- Ensuring that different people act as directors/trustees of different entities;
- Ensuring, where there are multiple directors, that one of those directors is not the “controlling mind”.
For further information please contact:
Phil Broderick
Principal
Sladen Legal
03 9611 0163
pbroderick@sladen.com.au