“What does it matter a hill of beans which fund merges into which?” Commissioner Kenneth Hayne asked the deputy chair of Catholic Super Fund, as the Hayne royal commission explored the fund’s arduous and ultimately unsuccessful attempt to merge with Australian Catholic Superannuation and Retirement Fund.

Catholic Super (CSF) ended the negotiations in October 2017, the same day it received a letter from Australian Catholic reiterating established merger terms that the board contain six directors from each fund plus an independent chair, with the CSF chief executive retaining that position in the new entity.

Peter Haysey, deputy chair of Catholic Super, had insisted under questioning from counsel assisting, Albert Dinelli, that CSF was a fund with superior performance and should be the dominant fund in any merger.

At one point during Wednesday’s hearings at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Hayne interjected to ask whether there was any real dispute that led the talks to collapse, given there was no dispute about the board weighting and CSF had been the party to insist on having an independent chair.

Haysey said CSF members’ retirement savings could be put at risk if there were no guarantee that the policies and procedures in place to produce those returns would continue to apply.

“Well, those are set by the board, aren’t they?” the commissioner replied, before telling Dinelli to continue.

Haysey had previously acknowledged the benefits to members that a merger would achieve, including added scale that would increase funds under management and decrease the cost per member.

Despite Haysey’s position that Catholic Super should have the upper hand in any tie-up, it soon emerged that the fund had some serious governance issues it was working through – particularly related-party deals to the tune of $2 million.

CSF general manager of investor relations Robert Clancy did not disclose until 2015 that his wife worked for a company called Australian Family that had been doing marketing and market research work for CSF since 2010.

The owner of Australian Family is Robert’s brother, Paul Clancy, and that conflict wasn’t disclosed to the organisation until July this year. Up to that point, CSF had done $1.5 million in business with Australian Family and handed over $500,000 in sponsorship expenses.

Robert Clancy disclosed confidential information about the fund to Paul, and the two communicated via email about business matters as recently as May 29 this year – in some cases approving payments – despite a decision in 2010 that only chief executive Frank Pegan would deal with Australian Family.

Additionally, policy on the use of corporate cards had been breached at CSF; unauthorised expenses totalling $46,000 were made on Robert Clancy’s card between 2013 and 2016. These have since been repaid but more may have been made. Staff have long been allowed to make personal purchases on their corporate cards and then repay the money.

CSF has commissioned an independent review into the matter, which will be completed by the end of this month.

Ben Hurley is a journalist and editor with more than a decade of experience in the industry. He has written for The Australian Financial Review, Business Review Weekly, The Guardian and a range of specialised and industry publications.