Leading class action firm, Maurice Blackburn Lawyers, has reached a $56.3 settlement on behalf of a hundred thousand super fund members with Colonial First State who had alleged that Colonial’s delays in transferring them to MySuper products left them languishing in high-fee accounts, bearing the cost of commissions to financial planners, and receiving lower investment returns.
The class action was filed in October 2019 in the Federal Court (Victoria), against Colonial First State Investments Limited, the trustee of the Colonial First State FirstChoice Superannuation Trust. The lead applicant bringing the claim, Lesley Coatman, was a street sweeper driver who retired with less than $35,000 in superannuation.
This week, Colonial settled the class action for $56.3 million, inclusive of legal fees, subject to Court approval. A trial was due to start next week but it has now been vacated. The agreement means class action members should start receiving compensation proceeds into their superannuation accounts this year. Colonial has not admitted wrongdoing in the case. It is the first superannuation class action to settle.
The class action alleged contraventions of superannuation law in Colonial’s slow implementation of the MySuper reforms for members of the FirstChoice Employer Super division, in particular that Colonial breached its duties to super members, because it failed to:
· exercise the degree of care, skill and diligence required of a prudent superannuation trustee;
· perform its duties and exercise its power in the best interest of beneficiaries; and
· give priority to the interests of beneficiaries where a conflict of interest arose.
Miranda Nagy, Principal Lawyer at Maurice Blackburn, said the case had alleged that Colonial failed to transition $3.2 billion of accrued default amounts (ADAs) over to the lower-cost, higher-performing MySuper product in a timely way and did not act in the best interests of superannuation fund members.
“As the High Court has recognised, superannuation is often the greatest asset Australians have. It is deferred pay and it is critical to a dignified retirement. Fund members are entitled to expect that superannuation trustees put their interests first.
This is the very first settlement of a super class action since the Financial Services Royal Commission shone a light on the conduct of retail super fund trustees. We are very pleased to have secured a settlement that will see fund members’ accounts augmented to the tune of millions, and their retirement incomes protected.
“The whole point of the MySuper reforms was to make sure that millions of everyday Australians who hadn’t made an active decision about their super, were not ‘getting charged for valet parking when they were taking the train’, as Minister Shorten said at the time.
“MySuper was introduced to protect the retirement outcomes of Australians by ensuring that consumers weren’t losing money on unnecessary fees and products, and Colonial had a legal obligation over and above a basic moral obligation to move default member balances into MySuper at the time that best met their members’ needs, not their own,” Ms Nagy said.
The conduct was the subject of a case study in the Financial Services Royal Commission. Commissioner Hayne made the following reference with respect to Colonial: “the trustee’s covenant to act in the best interests of members. Absent reason to the contrary, and none was identified, trustees were bound to transfer ADAs promptly. CFSIL [Colonial] did not.”