D02-03\190 [2003] SCTA 35 (12 February 2003)

• Katy Adams, Presiding Member
• Michael Baume AO, Member
• Ross Christie, Member

In a letter dated 17 July 2000 the Trustee advised that it had decided to allocate the death benefit of $54,850.56 to the Estate of the Deceased.

In a letter dated 19 September 2000 the Trustee advised that it had re-considered the matter and affirmed its original decision.

*Copied with names deleted, for public distribution

Although lawyers had represented both the Complainant and the Spouse in early correspondence referred to the Tribunal, they did not seek legal representation before the Tribunal.

The Tribunal conducted the Review on the papers. Pursuant to s32 of the Complaints Act, it requested submissions from the Parties. Submissions were received and exchanged and responses invited. The Complainant's mother (the Former Wife) responded on behalf of the Complainant and on behalf of the Second and Third Sons of the Deceased. The Spouse also responded. The Trustee declined to lodge a response.

All documents are retained on the Tribunal file for record purposes and all documents had been copied and distributed to the parties before the Review meeting.

On 13 October 2000 the Complainant lodged a complaint, on unspecified terms, with the Tribunal against the decision of the Trustee to pay the whole of the benefit to the Estate of the Deceased. The Tribunal advised the Trustee of this complaint on 17 October 2000. In a subsequent supporting statement received by the Tribunal on 6 November 2000, the Complainant said the Trustee's decision was unfair or unreasonable by not giving sufficient consideration to the Complainant's financial circumstances in view of her continuing need for the Deceased's financial support in accordance with what the Complainant believed would have been the Deceased's wishes. The Complainant requested that the benefit be split three ways between the Second and Third Sons of the Deceased and the Complainant.

The Tribunal is satisfied as to the following facts:

4 February 2000 date of death of Deceased, aged 46.

7 February 1976 date of birth of First Son, aged 23 at death of Deceased.

30 May 1979 date of birth of Second Son, aged 20 at death of Deceased.

17 September 1981 date of birth of Third Son, aged 18 at death of Deceased.

1 July 1983 date of birth of Complainant, aged 16 at death of Deceased.

14 July 1995 date of dissolution of first marriage to Former Wife.

26 March 1999 date Spouse was nominated as beneficiary.

The Deceased died intestate. The Spouse's solicitor stated that the Spouse's legal entitlement on intestacy exceeds the value of the assets, as the marital home is held in a joint tenancy and is subject to a mortgage of $130,000, with the only other substantial asset being the superannuation benefit. This statement has not been confirmed by the Spouse who has not responded to requests for copies of Letters of Administration or an inventory of Assets and Liabilities of the Estate. Litigation relating to the distribution of the Estate is in process under the Family Provision Act of 1982.

This complaint was investigated by the Tribunal only once confirmation had been received that the Trustee had dealt with the complaint under s101 of the Superannuation Industry Supervision) Act 1993 (Cth) ('the SIS Act'). The Tribunal therefore has jurisdiction pursuant to s19 of the Complaints Act.

The Trust Deed in effect at the date of death provided as follows relevant to the complaint:

(1) If a benefit becomes payable in respect of a Beneficiary's death ("Death Benefit"), the Trustee must collect all moneys payable in respect of the Beneficiary under the Policy (including all investment moneys and any insurance moneys payable in respect of the Beneficiary) together with any other moneys held in respect of the Beneficiary.

(2) The Trustee must pay the Death Benefit of a Member in accordance with Rule 6(e)(5).

(3) If Rule 6(e)(5) does not apply, the Trustee must pay a Death Benefit payable under Rule 6(e)(1) as a lump sum or by way of an annuity or pension as the Trustee may determine in such proportions and to any one or more of:

(B) the legal personal representative of the Beneficiary;

(D) any other person as permitted by the Relevant Law.

The Former Wife and the stepchildren from the second marriage have all stated that they do not wish to make a claim on their own behalf. Of the remaining family members with a potential interest in the benefit, none of the three sons of the Deceased has established financial dependency on the Deceased at the time of his death. Only the Complainant, as a 16 year-old schoolgirl, appears to have been a financial dependant at the time of the Deceased's death, despite the absence of any evidence of actual payments, such as child support, after she left the home of the Deceased to live with her mother (the Former Wife). The financial affairs of the Spouse and the Deceased are sufficiently intermingled, with their mortgaged marital residence being held as tenants in common, for dependency to be established, and both contributed to household income. While the Deceased's four children and five step-children of the second marriage could all have a potential claim under the Trust Deed's definition of 'Dependants', the Trust Deed gives absolute discretion to the Trustee to pay a death benefit to any one or more of a Dependant or Dependants of the beneficiary, the legal personal representative of the beneficiary, another person in respect of the beneficiary and any other person as permitted by the relevant law, in such proportions as the Trustee may determine.

By listing his Spouse as his preferred beneficiary in his March 1999 Superannuation application form, the Deceased was clearly indicating his wishes within one year of his death. The form included the words: "The Trustee when paying death benefits is not bound by your nomination. The law restricts the Trustee to paying the Benefit in the first instance to any of the following -- your spouse and/or children, individuals who are financially dependent on you, your legal representative. When completing the question you should take this restriction into account."

In addition to outlining her emotional link with the Deceased, with whom she lived after her parents divorced, the Complainant indicated her continuing need for financial support from the Deceased after reaching the age of 18 and having completed her schooling, because of her hopes to undertake university courses to qualify as a teacher, and because of health problems.

With her brothers, she expressed concern at the "unfairness" of the inequitable payment of the benefit to the spouse who has received, the Complainant claims, approximately $580,000 from the Deceased.

He described the happy relationship he had when living with the Deceased after his parents divorced until, at age 16, his father asked him to leave after a 'rather large argument' with his stepmother (the Spouse). There was a restoration of good relations with the Deceased who telephoned the Third Son on his 18th birthday in September 1999 and then spent a friendly day at Christmas with the First and Second Sons and the Complainant.

Since the Deceased's death, the Third Son has been denied access to any of the Deceased's possessions. The Spouse has two previous husbands who pay financial support for their five children and the Deceased financially supported none of these children.

The Third Son is, along with his brother and sister, in financial hardship, finding it difficult to obtain casual work while enrolled in a TAFE course in the hope of becoming a teacher and writer, in which endeavour he is "positive" the Deceased would have aided him and his siblings in both education and accommodation. He believed the Trustee had erred in paying the benefit entirely to the Spouse, who is capable of financially supporting herself, without taking into account the Deceased's three dependent children who are in need at a critical stage of their development, with the payment being made despite the timely prior lodgement of an objection by their mother on their behalf. The Deceased knew his responsibility as a father and would, if he could, have seen to his children's needs.

The Second Son relied on his father's support emotionally, physically and financially, having lived with the Deceased for 17 years until "forced out of the house" by the Spouse while still in Year 12 at school. The Deceased had helped with the Second Son's living costs while he was unemployed. Over 10 years the Second Son worked for up to 12 hours a day for the Deceased and had spent most days with him before the Spouse "blocked phone calls and physically stopped me from keeping a day to day communication with my father" and similarly with the Third Son and the Complainant.

The Second Son has a newborn son and is "positive my father would have helped me support his grandson". In view of the many assets the Spouse has received from the short period she was married to the Deceased, the payment of the benefit to her is unfair.

The Spouse denied the claims by the other Joined Parties that she had received substantial benefits from the Deceased. After selling her own business in 1996 she received a property settlement and owned her own car and contributed an equal amount with the Deceased into their joint property. The Deceased had been on unemployment benefit since selling his business in 1999, resulting in the Spouse re-entering the workforce as his income was not enough to support them. He was not in a position to financially support his children, despite their claims of financial dependency and there was no support after they left the family home. The Spouse is unemployed with three children under 13 still in her care and her only sources of income are a single parent pension and a family tax benefit (approximately $700 a fortnight in total), out of which mortgage payments must be made. The cruise to Vanuatu shortly after the Deceased's death that was criticised by the other Joined Parties had been booked months previously and the First Son took the place of the Deceased.

A supporting submission from a neighbour was attached, alleging, in similar terms to the Spouse's submission, that the Third and Second Sons of the Deceased were required to leave the Deceased's house because they brought drugs into the home and were destructive, violent and abusive.

The First Son did not meet the Deceased until a few years before his death as he lived with his mother until her death in 1988 and then in group homes and refuges. "Throughout my whole life I have never financially benefited from my father like my other three siblings have? I believe that if there is to be any financial payment awarded I, of the four children, should benefit the greatest as I did for so long without".

In a submission on behalf of the Complainant and the Second and Third Sons of the Deceased, the Former Wife noted that maintenance has to be paid until a child turns 18 years of age or has finished schooling; the Complainant had done neither at the date of death and was clearly a dependant of the Deceased.

The supporting submission by the Spouse's neighbour is dismissed as being nearly word for word the same as the Spouse's and her credibility is questioned.

In denying the claim by the First Son that he received nothing from the Deceased, it is alleged that he had both received, and at times improperly taken, money and benefits, including use of a car.

The Complainant and the Second and Third Sons of the Deceased "only want some belongings of his (the Deceased) and some money that he would have given them anyway".

The Tribunal must determine whether the decision of the Trustee to pay the death benefits to the Deceased's Spouse was fair and reasonable in its operation in relation to the Complainant and all other interested parties in the circumstances. Relevant to this determination are the wishes of the Deceased, the financial circumstances of the potential beneficiaries, the nature of their relationship with the Deceased, the relative financial needs of the Parties and the terms of the Trust Deed.

The Tribunal notes that the Complainant and the Joined Parties have differing degrees of financial difficulty. However, only the Spouse and the Complainant, on the material before the Tribunal were in fact dependent upon the Deceased at the time of his death. The Spouse had been married to the Deceased for only a short time but had shared financial arrangements with the Deceased and had contributed to the payment of assets being acquired.

The Tribunal notes that the primary purpose of a superannuation death benefit is to make provision for those persons who were dependent on the Deceased at the date of death or who might have expected to receive financial support from the Deceased. In this respect a member's retirement savings are somewhat different from the assets of a deceased estate. In this case only the Spouse and the Deceased's Daughter (the Complainant) fall strictly into this category. The Sons were all financially independent of the Deceased at the time of his death, although they have expressed hopes of some financial support.

As there was no Will made by the Deceased after his marriage to the Spouse, the only indication of the Deceased's intentions relating to the benefit is contained in his nomination of the Spouse as beneficiary of his superannuation. Her solicitors have stated that the marital home, which was held in joint tenancy, is subject to a mortgage of $130,000, that the only other asset is the death benefit and that the Spouse's legal entitlement on intestacy exceeds the value of the assets. However, the Spouse has not responded to requests for Letters of Administration or an inventory of assets and liabilities of the Estate.

Despite this, and in the face of a timely notice of complaint by the Complainant, the Trustee nevertheless proceeded to pay the Benefit to the Estate. The Trustee has advised that there are no minutes held of any meetings at which this matter was considered, either initially or on review, before payment was made. This lack of appropriate procedure by the Trustee raises a doubt over whether due and proper consideration was given to the claims of the potential beneficiaries. In particular, the lack of any explanation for the failure to recognise the clear legal claims to dependency of the Complainant could indicate an excessive reliance on the absolute discretion of the Trustee under the Trust Deed without an appropriate recognition for the need for such decisions to be fair and reasonable.

A primary, but not exclusive, purpose of the payment of a Death Benefit is to substitute the payment of a lump sum for income that would otherwise have been earned by the member. Since part of that income is required to be applied to pay the legal and moral obligations owed by the Deceased to his Daughter (the Complainant) during the period of her minority, so, too, should the lump sum be considered to be so applied. In most cases, that obligation would usually be expected to finish as a child attains adulthood (i.e. 18 years of age) or commences full-time remunerated work. Of course there are exceptions where a young adult may be undertaking or may be expected to undertake tertiary study or training or where the young adult may suffer from a handicap in which circumstances some level of dependency may be anticipated to continue.

In the case under review, the Complainant was only 16 at the time of her father's death and ceased unequivocal legal dependency after reaching the age of 18. In view of the Deceased's financial position, it is not clear that there would have been much financial support for the Complainant after that age.

The Tribunal is not unsympathetic to the position of the three adult (but non-dependent) Sons who have been deprived not only of their father's advice and guidance but also possible financial support in the event of his financial position improving from the unemployed state in which he was situated at his death. However, the Tribunal's function differs from that required in determining a testator's family maintenance payment. As a result, in the Tribunal's view, a fair and reasonable distribution of the death benefit would not include a proportion being paid to the Sons.

Pursuant to s37(1)(a) of the Complaints Act, the Tribunal has all of the powers obligations and discretions of the Trustee. Sub-section 37(6) of the Complaints Act provides that the Tribunal must affirm the decision of the Trustee if it is satisfied that it was fair and reasonable in the circumstances, in its operation in relation to the Complainant and any person who has become a party to the complaint and who either has an interest in the death benefit or claims to be, or to be entitled to benefits through, a person having an interest in the death benefit. The Tribunal is not so satisfied. By virtue of s37(3) the Tribunal may make a determination:

· remitting the matter for consideration in accordance with the Tribunal's directions;

· setting aside the decision and substituting its own decision.

In accordance with the requirements of sub-ss.37(3), (4) and (5) of the Complaints Act, the Tribunal determines to set aside the decision that the benefit be paid to the Deceased's Estate on the grounds that it was not fair and reasonable and substitutes its own decision that the Complainant is entitled to 10 per cent of the death benefit in view of her dependency for the period between the death of her father and her reaching 18 years, with the remaining 90 per cent being paid to the Spouse, in keeping with both her dependency and the written nomination of the Deceased.

The Tribunal notes that clause 10.1(c) states of the Fund's Trust Deed provides:

"A benefit of a Beneficiary is calculated as at the date the event which gave rise to the entitlement of the Beneficiary occurred and shall include Net Earnings on the benefit up to the date of payment if the Trustee so determines or the Relevant Law requires."

The Tribunal also determines that interest in the amount of the greater of :

• Net Earnings calculated from the date of the Deceased's death until the date of payment; or

shall be included in the benefit payable to the Complainant.