The Crimes Amendment (Corrupt Benefits for Trustees) Act 2023 (NSW) has become law
On 12 September 2023, the New South Wales Parliament passed the Crimes Amendment (Corrupt Benefits for Trustees) Bill 2023 (NSW) (Crimes Amendment Bill) and it received Royal Assent on 20 September 2023. The primary purpose of the Crimes Amendment (Corrupt Benefits for Trustees) Act 2023 Crimes Amendment Act ) was to replace the previous section 249E of the Crimes Act 1900 (NSW) with a new section 249E that includes an element of corrupt intent. The new section 249E operates retrospectively.
In this note, we discuss the reasons why the Crimes Amendment Bill was introduced into the Legislative Assembly, examine what is meant by ‘corruptly’ in the new section 249E and explain the implications for trustees.
How was the old section 249E interpreted?
Before the Crimes Amendment Act, section 249E made it a crime for any person to offer or give a benefit to a trustee, and for any trustee to receive or solicit a benefit for anyone, without the consent of each person beneficially entitled to the trust property or the Supreme Court, as an inducement or reward for the appointment of any person as the new trustee of the trust. Despite the heading to section 249E, which referenced ‘Corrupt benefits for trustees’, the operative wording of the section made no reference to an element of ‘corruption’ or ‘corrupt intent’.
The lack of an element of corrupt intent in section 249E caused confusion and concern for incoming and outgoing trustees and their advisors. On its plain reading, and despite the section heading, a trustee seeking to retire may have committed a criminal offence under the previous section 249E if it had asked for, or received (or both), a benefit for anyone as an inducement or reward for its retirement. Similarly, a person may have committed a criminal offence under the previous section 249E if the person had offered, or given, the outgoing trustee a benefit as an inducement or reward for the appointment of a new trustee.
Section 249E received greater attention following BT Funds Management Limited (ACN 002 916 458) as trustee for the Retirement Wrap Superannuation Fund [2022] NSWSC 401 (BT case). The BT case raised the possibility of section 249E extending to superannuation successor fund transfers (SFTs). That decision led to a string of cases in which trustee sought court consent, including Application of MLC Investments Limited [2022] NSWSC 154 (MLC case).
The MLC case concerned a trustee retiring and a new trustee being appointed, rather than an SFT. Stevenson J found that a corrupt purpose was not an element of the offence under the previous section 249E. Further, Stevenson J declined to provide a declaration that indemnities proposed to be provided to the retiring trustee did not constitute an “inducement or reward” for the purposes of section 249E.
In the Trustee for Host Plus Superannuation Fund trading as Host-Plus Pty Limited v Maritime Super Pty Limited trading as Maritime Super Pty Limited [2023] NSWSC 725, Stevenson J held that section 249E has no application to an SFT because an SFT does not involve the “appointment” of a trustee. However, fears remained over trustee retirement and appointment scenarios. Given it is common for an outgoing trustee to seek an indemnity from the incoming trustee, there was concern that many standard trustee retirement and appointment transactions were inadvertently criminal, despite there being no corrupt intent on the part of any person involved.
The previous section 249E did provide for two exceptions. The conduct was only an offence where it occurred without the consent of each person beneficially entitled to the trust property or without the consent of the Supreme Court. However, it was frequently entirely unworkable to seek the consent of each beneficiary and going to court had the potential to be time consuming and expensive.
Then what happened?
The Crimes Amendment Bill was introduced to the New South Wales Parliament to, amongst other things, clarify that section 249E was intended (and was always intended) to require an element of ‘corrupt intent’ on behalf of the parties involved in an outgoing trustee seeking or receiving a reward for agreeing to retire as trustee of a trust.
In his second reading speech introducing the Bill to Parliament, the Attorney-General made reference to the concerns raised by trustees and representative bodies to the Attorney-General’s office following the MLC case. The Attorney-General told the House of Representatives that many routine, good-faith transactions were potentially criminal offences under the previous form of section 249E and that it was impractical for a trustee of a trust with a large number of beneficiaries to obtain the consent of each of the trust’s beneficiaries to any inducement or reward should that trustee wish to retire. In those circumstances, the trustee had no practical option but to request consent from the Supreme Court to the proposed inducement or reward in order to avoid any potential criminal act.
When does a retiring trustee commit a crime under the new section 249E?
Now that the Crimes Amendment Act has become law, a trustee will be guilty of an offence under section 249E if the trustee corruptly receives or solicits a benefit for any person as an inducement or reward for another person to become trustee. A person will also be guilty of an offence if the person corruptly offers or gives a benefit to a trustee as an inducement or reward for the appointment of a person as trustee.
The Crimes Act does not define the term ‘corruptly’. The Explanatory Note to the Bill states that it would include dishonestly offering, giving, receiving or soliciting the benefit. The extent to which it includes any other conduct is yet to be determined. Case law around similar offences suggests that whether a person is soliciting, offering, giving or receiving a benefit corruptly will likely turn on whether the conduct occurs in circumstances in which it would be regarded as being corrupt according to standards of conduct generally held.
The Crimes Amendment Act inserted savings and transitional provisions, including to provide that section 249E (as inserted) applies and extends to conduct engaged in before commencement and section 249E (as in force before the commencement) no longer applies to conduct engaged in before the commencement, other than in limited circumstances.
How does the Crimes Amendment Act affect trustees?
Thanks to a period of lobbying and discussion between trustees, their legal representatives, representative bodies, and the Attorney-General’s department following the BT case and the MLC case, section 249E now has the purpose and scope that it was always intended to have.
Introducing the element of corrupt intent to this section allows trustees, both retiring and incoming, to engage in good faith transactions without exposure to potential criminal charges and without the administrative and financial burden of first needing to obtain the consent of all beneficiaries or the Supreme Court.
For once, corruption is a welcome addition.