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member’s adjusted final fund salary (AFFS) for
the purpose of calculating his defined benefit
The member received lump sums representing
compressed long-service leave in November 2008
and October 2009.
In March 2009, the member noticed that
the first LSL payment had not been recognised
in his online account balance. After a chain of
correspondence, on 29 April 2009 the former
trustee stated to the member that “long-service
leave entitlements (paid as a lump sum in lieu
of leave) are to be included in fund salary”. The
member argued that he planned his retirement on
the basis of this information.
On 22 October 2009, the former trustee wrote
to the member, referring to a significant increase
in his salary as a result of the first LSL payment.
The letter stated that the trustee could require
the member’s employer to undertake to pay
additional contributions where the member’s
salary increased substantially within a two year
period. The trustee did not intend to proceed with
such an undertaking at that stage, but the letter
strongly suggested that the trustee would do so if
the member left the fund within two years.
The member responded by referring to the
former trustee’s statement on 29 April 2009. The
trustee did not directly respond.
Six months later, in April 2010, and after
notifying his employer of his intended retirement,
the member requested a benefit estimate from
the trustee. The trustee queried the member’s
increase in salary with the employer and wrote
to the member a month later, saying it was not
possible to estimate his benefit until it finalised a
review of his account.
The member responded to the trustee two
days later, again referring to the former trustee’s
statement on 29 April 2009.
On 16 July 2010, the trustee finally responded
to the member, refusing to include his unused
LSL as ‘salary’ for the purpose of calculating his
benefit. The trustee had received legal advice that
the LSL payments did not satisfy the trust deed
definition of ‘salary’, and that the statement of 29
April 2009 was “at odds” with this advice.
The trustee argued that, in order to constitute
‘salary’ under the specific wording of the
deed, the lump-sum LSL payment must either
constitute a member’s ordinary rate of pay or an
allowance, which is ordinarily payable regularly
and periodically for at least a 52-week period. The
member argued that he was entitled under his
employment contract to take pay in lieu of LSL,
taken as salary over 26 fortnightly pay periods.
The Tribunal, however, ruled that entitlements
under the employment contract were not relevant
to the interpretation of the trust deed and agreed
with the trustee’s interpretation.
The question therefore turned to whether the
member had relied on the trustee’s statement
on 29 April 2009 to his detriment and suffered a
The Tribunal considered that the former
trustee’s statement on 29 April 2009 was a clear
misrepresentation, and the trustee’s conduct in
making the representation and failing to retract
the representation within a reasonable time was
unfair and unreasonable.
However, the Tribunal decided that the
member did not suffer a compensable loss.
The Tribunal did not consider that the member
would have delayed his retirement had the former
trustee informed him that the lump-sum payments
would not count toward his ‘salary’ before he
committed to claim his retirement benefit.
Despite the misrepresentation and the trustee’s
failure to retract the statement reasonably, the
Tribunal considered that the former trustee’s
statements and queries in October 2009 and April
and May 2010 should have reasonably alerted
the member that the trustee’s position was in
doubt. This was particularly so as the member
had a background in finance, with substantial
There was also evidence that the member
weighed up many factors in deciding to retire,
including the appointment of a new chief
executive officer by his employer and health
issues, despite his consistent assertions that he
would have delayed retirement if the trustee had
correctly informed him of his entitlements.
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