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Vale The Hon. Margaret Stone AO FAAL

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Michael Vrisakis and alumnus David Cooper reflect on one of the many significant contributions that Margaret made to 'the law' during her impressive career.

As many will know, the legislative and regulatory bedrock underpinning the $3.3 trillion Australian superannuation industry is contained in the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS).

In 2007, 13 years after the commencement of that legislative regime in 1994, debate raged in the legal profession and the regulator about the precise meaning of one of the pivotal obligations of a superannuation fund trustee, namely:

‘to perform the trustee's duties and exercise the trustee's powers in the best interests of the beneficiaries’ of the fund (as set out in section 52(2)(c) of SIS at that time) (emphasis added). 

In summary, one side of the debate argued that the ‘best interests’ obligation of a trustee was to be tested by way of an ‘outcomes’ test (ie having regard to the adjective ‘best’) and the other side argued that it was a test to be viewed by the process undertaken by a trustee in making a decision. Indeed, much had been written on the duty, but there was much more froth and fiction than fact or critical legal thinking on the topic.

Given the divergent views and the critical nature of this trustee duty to a trustee’s important superannuation obligations, Michael Vrisakis, a partner of law firm (then) Freehills (now Herbert Smith Freehills), asked Margaret if she would enter into this debate, and tackle the issue of the true legal nature of a superannuation fund trustee’s ‘best interests’ duty, by presenting a paper on this topic at the Law Council of Australia Superannuation Conference in 2007.

In Margaret’s characteristic, enthusiastic way, she leapt at the opportunity and, speaking extra judicially at the time, presented her seminal paper ‘The Superannuation Trustee: Are Fiduciary Obligations and Standards Appropriate?’ at that Conference.

In that paper and presentation, Margaret quashed the ‘outcomes’ proponents and, with her usual authority and intellectual acumen, reminded those present at the Conference that the duty was about adherence to process, loyalty and the proper motivation of the pursuit of the interests of beneficiaries. Indeed, Margaret propounded that the word ‘best’ in the ‘best interests’ duty was otiose. At that point, ‘jaws dropped’, and you could have heard a pin drop in the room!

Margaret’s paper acted as an ‘anchor’ by arresting the runaway ‘outcomes’ interpretation of the ‘best interests’ duty and she changed the legal landscape on this critically important point in superannuation law. Subsequent to Margaret’s seminal paper, the New South Wales Supreme Court, the New South Wales Court of Appeal and the High Court of Australia have weighed in to support Margaret’s ‘anchor’ view.

Margaret’s presentation at the Law Council Superannuation Conference in 2007 was instrumental in changing (and correcting) the profession’s and the regulator’s thinking on the ‘best interests’ duty from that time forward.

Michael Vrisakis and David Cooper