TelstraSuper did fall foul of IDR obligations: Federal Court

TelstraSuper failed to respond to many complaints within the mandated 45-day period and, in some cases, failed to justify the delay or inform members of their right to complain to the Australian Financial Complaints Authority (AFCA), the Federal Court found.

In a judgment handed down on April 30, the Federal Court found TelstraSuper - which has since merged with Aware Super - did indeed fail to comply with its internal dispute resolution (IDR) procedures.

The case was brought by ASIC in November 2023, the first time a super trustee was pinged for failures related to the IDR regime, which was introduced in 2021. However, it did not find in ASIC's favour in relation to all it was accused of.

ASIC claimed TelstraSuper had failed to satisfy the 45-day response requirement and that it did not adequately communicate with members in relation to complaints. It also claimed it did not have adequate resources to comply with the IDR regime and did not sufficiently train its staff.

In all, TelstraSuper admitted to 38 failures to comply, but otherwise denied ASIC's allegations, which accused it of over 4000 contraventions in total.

The Federal Court was satisfied TelstraSuper had breached its obligations by failing to respond to 125 of the 323 complaints it received between 22 October 2021 and 13 January 2023 within 45 days. In about 30% of those cases, members were left waiting for more than 100 days for a response.

It also found that for some complaints the super fund didn't explain to members what the delay was, nor did it inform them of their right to escalate the issue to AFCA.

On this note, the judge stated: "It was not sufficient...for the IDR delay notifications issued by TelstraSuper to merely state that "the investigation into the cause of your complaint is ongoing", or words to that effect. This statement is an incident of the circumstance that the investigation into the complaint was incomplete and was not a "reason" for the delay in providing an IDR response."

However, the court did not find TelstraSuper failed to act efficiently, honestly and fairly when it failed to comply with its procedures, and it didn't agree the fund had failed to adequately resource its IDR process; ASIC claimed the fund should have had four people working on complaints, not three.

The court acknowledged that the lingering impacts of the COVID-19 pandemic, an increase in complaints and the extended absence of a key team member contributed to the delays and therefore didn't amount to failing to act efficiently, fairly and honestly. It also determined three people was enough to support the complaints process.

"This outcome sends a clear message that compliance with mandatory internal dispute resolution standards is not optional, but a legal obligation," ASIC deputy chair Sarah Court said.

"Financial service providers must invest in robust systems and devote adequate resources to ensure complaints are managed promptly and fairly. This protects consumers from harm and underpins trust in the superannuation system."

She added that the case provides useful guidance and confirms the enforceability of the IDR obligations.

The court has now told both ASIC and TelstraSuper to agree on a statement of facts in relation to the contraventions admitted or established by the fund ahead of a penalty hearing, which is yet to be scheduled.