The Australian Prudential Regulation Authority (APRA) has successfully taken action in the Supreme Court of South Australia to recover assets for members of the failed Harts Australia Staff Superannuation Fund.
The matter involved a dispute over a mortgage given to the Fund, which forced APRA to take legal action on behalf of the Fund’s Acting Trustee in order to sell the property and recover the assets.
In 2001, APRA appointed the Acting Trustee who was vested with the Fund’s assets, including a mortgage over a property in South Australia. Although a second mortgage on the property existed, the former Trustee of the Fund had an agreement with the property’s owner that the Fund’s mortgage had priority over the property. However, the other mortgage holder disputed the validity of the mortgage, the priority agreement and the vesting of the mortgage with the Acting Trustee.
As the Acting Trustee did not have the funds to commence legal action to enforce the mortgage in order to sell the property and recover the money, APRA decided to instigate proceedings in the Supreme Court of South Australia on behalf of the Acting Trustee using its power under section 298 of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
On 5 June 2009, the Hon. Justice Robyn Layton found in favour of the Acting Trustee. Justice Layton upheld the agreements giving the Fund’s mortgage priority over the other mortgage, the validity of the mortgage to the Acting Trustee and the vesting of the mortgage in the Acting Trustee.
On 27 July 2009, a declaration was made that the amount owing to the Acting Trustee under the mortgage was $900,000 principal and $890,175.81 interest. Further orders were made allowing the Acting Trustee to sell the property to recover those amounts. Orders were also made so that APRA can recover costs as a result of the legal action.
Since this judgement was given, the other mortgage holder filed a notice of appeal and has sought a stay of all orders.
APRA Deputy Chairman Ross Jones said that without the power in section 298 of the SIS Act, APRA would not have been able to initiate legal action to recover the amounts owing under the mortgage.
‘The success of this recovery action reinforces the importance of APRA’s powers, which enable it to instigate legal proceedings in the name of a fund’s Acting Trustee in order to recover assets that are due to — and would otherwise be lost to — members of a superannuation fund’, Mr Jones said.