D04-05\142 [2005] SCTA 41 (1 April 2005)

Joined Party 2 (Daughter of the Deceased Member)

Conducted under the provisions of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ('the Complaints Act') and held on 9 March 2005 before:

• Graham McDonald, Chairperson
• Marita Wall, Member
• Bill Hassell, Member

*Copied with names deleted for public distribution.

The Complainant sought review of a decision of the Trustee to pay the Deceased Member's death benefit to the Estranged Second Wife of the Deceased Member. The Complainant claimed that the Deceased Member's estate was insolvent and, unless at least part of the benefit was applied to the payment of the estate debts, "the children of the deceased will be liable for payment of estate debts". The Complainant sought that payment be made to him in his capacity as executor of the Deceased Member's estate, to pay the debts and funeral expenses of the Deceased Member, with the balance being paid to the Estranged Second Wife.

A determination of the Tribunal dated 23 May 2003 ('the first determination'), remitted the matter to the Trustee to reconsider on the basis of a submission made on behalf of the Complainant, viz, at the time of the Deceased Member's death the Deceased Member was living in a de facto relationship with a named woman. That information was not before the Trustee when it made its initial decision, nor when it reviewed that decision.

Additionally, in the first determination the Tribunal directed the Trustee to consider the payment of the Deceased Member's funeral expenses claimed to have been incurred by the Complainant, with a contribution of $500 from the Daughter of the Deceased Member.

Following the first determination, the Trustee sought information to confirm the assertion of the Complainant that the Deceased Member was living in a de facto relationship as at the date of death and had been so living for a period of two years. Evidence obtained from the named woman, and corroborated by the Deceased Member's then landlady, categorically rejected the existence of any such relationship. Despite an earlier-given undertaking by the Complainant's legal representative that evidence would be provided as to the existence of the relationship, and despite the Complainant having been given copies of the statutory declaration by the named woman and ample opportunity to respond, no further evidence or submission was made on behalf of the Complainant. There being no contradictory evidence the Trustee, quite properly, accepted the evidence of the named woman as corroborated as determining that there was no de facto relationship between the Deceased Member and the named woman.

The Tribunal decided to determine the matter on the papers. With respect to the second hearing, the parties were invited to make submissions. Submissions were received from the Trustee and the Estranged Second Wife. Those submissions were circulated among the parties and responses invited. No responses were received.

It is unnecessary for this Tribunal to set out the background facts, the Trust Deed provisions, the potential beneficiaries and their financial circumstances or the wishes of the Deceased Member, which are adopted and incorporated as set out in the first determination with the exception of that section appearing under the heading "Alleged De Facto Spouse".

FURTHER MATERIAL SUBMITTED SINCE THE FIRST DETERMINATION

Letter and attachments dated 29 September 2004 to the Tribunal

The Trustee set out steps taken by it to investigate the claim of the Complainant that the Deceased Member had a de facto spouse relationship. The Trustee also expressed its previous view that the Estranged Second Wife was financially dependent on the Deceased Member and consequently entitled to the payment of the benefit in full.

The Trustee reiterated its view that the circumstances of the Estranged Second Wife established:

• that while estranged from the Deceased Member she continued to be employed in the family business until after the death of the Deceased Member and had continued to share some household domestic responsibilities with the Deceased Member. The Trustee reiterated its view that while the relationship between the Deceased Member and the Estranged Second Wife was "complicated" there was ongoing interdependence at the date of death.

• that the Estranged Second Wife's financial circumstances are modest and that she works part time and, due to her age, has little prospect of accumulating significant retirement income.

• that the adult children from the Deceased Member's former marriage were not considered financially dependent and had capacity to save and accumulate assets for their retirement.

• that assertions by the Complainant that the Estranged Second Wife was paid for cleaning the Deceased Member's house in the period leading up to his death were unsubstantiated and the evidence pointed to a sharing of household duties rather than a commercial arrangement.

• while there had been a property settlement endorsed by the Family Court, certain aspects of the agreement had not been completed [Tribunal note: including the transfer of the Estranged Second Wife's shares in one of the family businesses operated by the Deceased Member].

• that with respect to a claim for funeral expenses, the following was stated:

... the Trustee considered the cost to arrange a "fitting memorial", but in its absolute discretion, did not believe that a distribution from the benefit to cover these expenses was warranted. It viewed the Complainant as a creditor of the estate in respect of these costs.

The Estranged Second Wife expressed the view that the Complainant was on purpose delaying the finalisation of the benefit in order that the superannuation money would be used up in legal fees, thwarting her receipt of it.

The Estranged Second Wife drew attention to the values ascribed to her property by the Complainant over-valuing it, stating he had not considered that she only held a half-interest in the property (the other half being held by her daughter). Additionally, the Estranged Second Wife challenged, as a gross under-valuation, the value ascribed by the Complainant to his two properties.

There were several other matters included, not any of which were considered relevant by the Tribunal to the determination of this case.

It is the Tribunal's role to determine whether the decision of the Trustee was fair and reasonable in its operation in relation to the parties, being the Complainant, the Estranged Second Wife and the Daughter, in the circumstances.

In the view of the Tribunal, the evidence does not support the Estranged Second Wife as being financially dependent upon the Deceased Member at his date of death. She appears to have been in receipt of a commercial rate of remuneration for her work in the two businesses, both operated by the Deceased Member in conjunction with the Complainant. If anything, it was open to the Trustee to consider the Deceased Member as a dependant of the Estranged Second Wife by virtue of her statement that she lent money and supported the Deceased Member's business from time to time and that she carried out domestic duties for the Deceased Member after her separation and otherwise supported in him in taking him to doctors' appointments. However, it is not necessary to determine that the Estranged Second Wife was financially dependent on the Deceased Member. The Estranged Second Wife remained his spouse, despite their separation. As such, she is automatically included in the definition of 'dependant' provided in the Trust Deed. The Complainant and the Daughter are also dependants, as children of the Deceased Member, and the Complainant in his further capacity as executor of the Deceased Member's estate.

The Trustee has correctly referred to the fact that the Deceased Member made no nomination at the time he joined the Fund, nor has he done so subsequently. The only indication as to his wishes with respect to the superannuation benefit is to be found in his will dated 26 September 1991. In the will, the Deceased Member directed that his superannuation life benefit be paid to the executor of his estate and applied to the payment of debts, testamentary and funeral expenses with the balance being paid to the Estranged Second Wife. While that was his last expressed wish, the Trustee, as the Trustee is entitled to do, took into account the changed circumstances arising as the result of the separation from the Estranged Second Wife and the fact that the will was made approximately 10 years before the death of the Deceased Member.

It is clear from the material submitted on behalf of the Complainant that the indebtedness to which he refers are debts incurred by the businesses he and his father, the Deceased Member, operated. Both businesses are or were at the date of death incorporated. No personal liability to pay the debts, in the absence of any guarantee or other security given, attaches to the children of the Deceased Member to make payment if the estate is unable to do so. There is no suggestion that any guarantee or other security existed. The original purpose behind the payment of death benefits was to avoid the payment of estate duty otherwise payable if the benefit was directed to be paid through the estate. In more recent times, following the repeal of estate duties, one of the advantages ascribed to the payment of the benefit otherwise than through the estate is to ensure the beneficiaries do not lose the benefit in favour of payment of debts of the estate. One of the debtors is/are the company(ies) now operated by the Complainant. The Complainant does not seek to be paid the benefit claiming in his capacity as a son of the Deceased Member but, rather, he seeks payment in order to pay the company debts. In the circumstances, and having regard to one of the stated purposes behind the payment of death benefits, the Tribunal can well understand why the Trustee decided not to pay the Complainant any part of the benefit.

It should be pointed out the will is not binding on the Trustee. The Trust Deed provides the Trustee with a discretion as to between which dependants the benefit is most appropriately distributed. The expressed wishes of the Deceased Member in his will are a factor to be taken into account but are not conclusive. There is nothing before the Tribunal which suggests that the Trustee did not take into account the wishes of the Deceased Member as expressed in his will. It is also clear that the Trustee took into account the financial circumstances, age and future retirement prospects of the parties. The Trustee chose to place more emphasis on the Estranged Second Wife being less likely to be able to secure any independent retirement income other than her entitlement to a veteran's pension, as the result of her age, and that in the circumstances she ought therefore be paid the benefit. That is an entirely proper course for the Trustee to have pursued and the Tribunal, with one exception, sees no reason to interfere in the way in which the Trustee has exercised its overall discretion.

The one exception relates to funeral expenses. It is asserted on behalf of the Complainant that funeral expenses of $3,157 were incurred and, of that sum, the Daughter contributed $500. The Daughter's financial circumstances are not strong, as she is the single supporting parent of two children and is currently in receipt of social security payments. It was unclear from the Trustee's submission whether it in fact considered the payment of funeral expenses or limited its consideration purely to the erection of some suitable funereal monument. It was not the latter which was being referred to in the Complainant's request for reconsideration but the former. Given that the Deceased Member requested that his funeral expenses be paid from the superannuation benefit and given that the Trustee was aware of the financial circumstances of the Daughter and that the Daughter had contributed to the payment of those funeral expenses, then the Tribunal is satisfied that it was unfair and unreasonable for the Trustee not to reimburse the Complainant and the Daughter from the benefit for the payment of those funeral expenses. In order to rectify that unfairness and unreasonableness, the Tribunal is satisfied that the decision under review ought be varied and that, upon production by the Complainant to the Trustee of receipts relating to the funeral expenses supported by a statutory declaration as to who, between the Complainant and the Daughter, had contributed and in what proportion to the payment of those expenses, those sums ought be paid by the Trustee to the Complainant and the Daughter, with the balance of the benefit being paid to the Estranged Second Wife.

The Tribunal has, under s.36(3), power to vary the decision of a Trustee if it considers that the decision under review was not fair and reasonable in its operation to all the parties in the circumstances. The Tribunal considers in this case that the decision did not operate fairly or reasonably in that the Trustee has not apparently considered, or sufficiently considered, the wishes of the Deceased Member with respect to the payment of his funeral expenses and, to the extent that those expenses can be verified as set out above, the Tribunal varies the decision under review, directing the Trustee to pay the funeral expenses to the Complainant and the Daughter and the balance of the benefit be paid to the Estranged Second Wife.