Flexiplan Australia Ltd v Pankhurst & Others

[Third Respondent] - Is a higher degree student at an overseas university. Has bank or term deposits in foreign denominations with an estimated value of $140,000 Australian. - An annual income of $45,500 and bank deposits and shares valued at $38,000. [Fourth Respondent] [Fifth Respondent] - An annual income of $36,000. Spouse with a similar income although now pregnant and soon to cease work. A house valued at $160,000 and an interest in a business valued at $50,000. [Second Respondent] - An annual income of $18,000. Bank deposits of $36,000 and a home valued at $185,000.

On or about 12 August 1998 the [fifth respondent], purporting to be acting on behalf of the three sons, sent a facsimile to the Trustee indicating that none of the sons was financially dependent on the Deceased." 11 The Tribunal recited the submissions made by the first respondent, and by solicitors on behalf of the second - fifth respondents, and then provided the following reasons for its determination that the decision of the Trustee was unfair or reasonable in the circumstances: "The duty of the Tribunal is to make a de novo decision on the distribution of the benefit from the Fund in respect of the Deceased, although it must affirm the Trustee's decision if satisfied that the decision was fair and reasonable in all the circumstances. The Tribunal must make this assessment having regard to all the circumstances. In doing so it seeks to determine the wishes of the Deceased as a relevant factor. The existence of the will provides one possible source of guidance. The extent of its relevance is influenced by the date it was prepared and the circumstances that then existed compared with the present position. It must always be considered that the Deceased may well have known that the superannuation benefit would be determined at the discretion of the Trustee and that the outcome may not be the same as the will. The Trustee and now the Tribunal has a duty to make a fair and reasonable determination having regard to all the circumstances and without allowing the will to have an overriding influence. Unfortunately the Deceased did not complete a Nomination of Beneficiary form which might have been a truer indication of his wishes regarding his superannuation benefits. The Tribunal had difficulty with the fact that [the second - fifth respondents] were represented by the same firm of solicitors. The relative claims of the [third - fifth respondents] and the [second respondent] require independent consideration by the Tribunal. The Tribunal was advised that the [second respondent] is not making any claim but if the Tribunal is of a mind to determine that the share going to the [third - fifth respondents] is not in accordance with the will then the [second respondent] seeks to make a claim. This suggests to the Tribunal that the claims of the [third - fifth respondents] and the [second respondent] are competing claims and should have been separately represented. In deciding a fair and reasonable distribution the tribunal believes that the nature of superannuation should establish some guiding principles. Had the deceased remained alive then this benefit would clearly have been applied to support the Deceased and the [first respondent] in retirement. On this basis, and in the absence of pressing claims from other parties, the primary entitlement rests with the surviving person or persons who would otherwise have enjoyed, together with the Deceased, this benefit in retirement. In this case the will, rather than providing a guide to the basis for the distribution of the benefit, causes the Tribunal to be more strongly of the view that the fundamental entitlement rests with the [first respondent]. It is because the [third - fifth respondents] have benefited from the estate and only a minor portion went to the [first respondent] that the superannuation benefit with its primary role of providing for retirement should be distributed to the [first respondent]. The solicitors for the [second - fifth respondents] submitted that: "…unless the circumstances of the relevant parties would warrant a different division the payment should be made in accordance with the wishes set out in the will." The Tribunal believes that the circumstances do warrant a different division because the [first respondent], as the Deceased's current partner, could reasonably have expected to be supported by this benefit in retirement, whether with or without the Deceased. The [third ‑ fifth respondents] have no such claim and it is acknowledged that they are not financially dependent. Having formed this view the Tribunal then looked at the position of the [second respondent]. The Tribunal does not consider that the absence of a divorce, despite over 20 years of separation, creates any greater entitlement for the [second respondent] than if there had have been a divorce. During that time the [second respondent] had available to her the mechanisms for seeking an adequate property settlement including the provision of support for the [third - fifth respondents]. To the extent that such matters may not have been resolved is now, in the Tribunal's view, of no relevance because of the time that has elapsed and the remedies that were then available. The Tribunal believes that there is no evidence of any outstanding obligations to the [second respondent] that should be met by the Deceased's death benefit. As a result of its deliberations the Tribunal concludes that the Trustee's distribution was not fair and reasonable in all the circumstances and finds that the whole benefit should be payable to the [first respondent]." 12 The Tribunal determined that the benefit payable to the first respondent was to be "increased in accordance with the earning rate of the Fund from the date of death of the Deceased until the date of payment". The Tribunal also stated that that sum was not to be reduced by reason of "a payment made by the Trustee, in error, to the [fifth respondent]." 13 The grounds of "appeal" relied upon by the Trustee pursuant to the question or questions of law on which the "appeal" was brought were expressed as follows: 1. A 'de facto' spouse could not have a reasonable expectation that a death benefit payable on the death of the other spouse, would be paid to her where the deceased was survived by a legal spouse and children of that marriage. 2. The death benefit was a form of property and the principles applied to determine distribution thereof should have been those applied by laws relating to the adjustment of testamentary dispositions to provide maintenance for the members of the family of a testator. 3. The distribution of the death benefit should have been in accordance with the will of the deceased. 4. It was "inappropriate" to award the entire benefit to the first respondent when 25 percent of the benefit had already been paid to the fifth respondent in error. 5. The Tribunal erred in failing to consider the central issue of whether the Trustee's decision was fair and reasonable in the circumstances or by applying a different test from that which it was required to apply, namely whether the Trustee's decision was fair and reasonable in the circumstances. 14 The first respondent was unrepresented at the time the "appeal" was commenced. Pursuant to O 80 of the Federal Court Rules "pro bono" counsel was appointed to make submissions as a contradictor to the arguments of the Trustee. On the hearing of the "appeal" counsel for the Trustee acknowledged that it was inappropriate for the Trustee to seek an order for costs against the first respondent and the hearing proceeded accordingly. 15 The starting point in the "appeal" is s 46 of the Act, which, as noted earlier, provides that the appeal is on a question of law only. The controversy that constituted the matter arising under the Act in respect of which the Court had jurisdiction was an issue in respect of a question of law and not an issue in respect of a question of fact. 16 Findings of fact made by the Tribunal are not reconsidered by this Court. A ground of "appeal" that challenges findings of fact open on the evidence, or the weight attributed to those facts, does not identify a question of law. (See: Jedko Game Co P/L v Collector of Customs (NSW) (1987) 12 ALD 491; Jeffcoat v Queensland Coal & Oil Shale Mining Industry (Superannuation) Ltd (2000) FCA 655 per Kiefel J at par [18]-[21]). 17 The first ground relied upon by the Trustee raised no question of law. Whether a "de facto" spouse has a "reasonable expectation" that a death benefit would be paid to that person pursuant to the terms of a superannuation fund is a matter of fact and, in this case, was a question duly addressed by the Tribunal. 18 In respect of the second ground the death benefit was not an asset of the deceased but an asset of the Fund to be distributed in accordance with the rules of the Fund. The discretion exercised by the Tribunal was broad and not confined by any principles, or implied criteria, said to be relevant to the determination of issues arising in proceedings under "testator family maintenance" legislation. 19 Ground three referred to no question of law. The Tribunal in exercising the Trustee's discretion was not bound by the terms of the will of Mr Gallagher. Whatever the circumstances were when Mr Gallagher made his will in 1989, the Tribunal had to look at all relevant circumstances to determine what was fair and reasonable after the death of Mr Gallagher in 1998. 20 The terms of the will were matters for the Tribunal to take into account but the will in itself did not determine what was fair and reasonable in the circumstances. Furthermore, Mr Gallagher had not requested the Trustee, by a nomination of beneficiary form, to pay monies payable on his death to his personal representative. 21 Ground four of the "appeal" plainly raised no question of law. The Tribunal had to make its determination as if no error had been committed by the Trustee by making a partial distribution of the benefit. 22 The only question of law raised in the notice of appeal is that set out in the fifth ground, a ground the applicant was given leave to insert in the course of the hearing. That ground is the essence of the appeal. 23 As explained by Allsop J in Retail Employees Superannuation Pty Ltd v Crocker [2001] FCA 1330 at [21]-[32], the Tribunal's task, standing in the shoes of the decision-maker, is to determine whether the Trustee's decision was unfair or unreasonable in the circumstances. This task may be ascertained by reference to several considerations: that a complaint may be made to the Tribunal under s 14(2) as to the unfairness or unreasonableness of the Trustee's decision; that, pursuant to s 37(4), the Tribunal may only exercise its determination-making power under subsection 37(3) for the purpose of placing the complainant in a position such that the unfairness or unreasonableness no longer exists; and that the Tribunal is required to affirm the Trustee's decision if satisfied it was fair and reasonable to the parties in the circumstances (s 37(6)). 24 In carrying out its task of considering whether the Trustee's decision was unfair or unreasonable in the circumstances, the Tribunal must not make a determination that would be contrary to law, to the governing rules of the fund, or, where relevant, to a contract of insurance. Subsections 37(1) and (2) state that the Tribunal has all the powers, obligations and discretions that are conferred on the Trustee. The broad discretion and subjective nature of the Tribunal's (and, necessarily, the Trustee's) task of determining what is unfair and unreasonable in the circumstances was considered by Kirby J in Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at [87]: "…by s 37, the Tribunal is restricted in the response which it may give to such a complaint. Specifically, it must not do anything "that would be contrary to law, to the governing rules of the fund concerned" and, if relevant, to the terms of a contract of insurance. In effect, these restrictions require the Tribunal to form a view (necessarily not conclusive) about the requirements of the applicable law, including the meaning of the rules of the fund and of any relevant contract of insurance." And further, at [88]-[89]: "Obviously, the occasions for the intervention of the Tribunal on the grounds of "unfairness, unreasonableness, or both" (s 37(4)) may, as a practical matter, be confined to cases where the law, the rules of a fund or the terms of the contract of insurance do not yield a single result. The "unfairness" or "unreasonableness" which the Tribunal may address will thus arise where the exercise by a trustee of its powers involves an element of discretion, opinion or judgment. … What is involved is not a determination that the trustees misapplied the law to the facts. Nor that they mistook their powers and obligations under the governing rules of the fund. Rather it is a determination by the Tribunal of its own opinion that the trustees' decision is, or was, unfair, unreasonable or both." And at [90]: "…the criteria of "unfairness" and "unreasonableness" are so general and controversial that the trustees' assessment in a particular case might be quite different from that of the Tribunal whose determination alone would resolve the difference." 25 The words "unfair" and "unreasonable" as used in the Act are of broad content and purpose, and are not to be read restrictively. (National Mutual Life Association of Australia Ltd v Campbell (2000) 99 FCR 562 at [36] (FC)). 26 Although the Tribunal did not state that the decision to distribute the benefit was a discretionary one, the Tribunal's decision and reasons therefore indicate it assumed this was so. The rules of the Fund did not specify that benefits were payable to a particular beneficiary but identified a class of beneficiaries. It was not in issue in the "appeal" that the Trustee had a discretion to decide which member of a class of potential beneficiaries should receive the benefit and in what proportion. The nature of the discretion was set out in "Pension Rules" of the Trust Deed, cl 25.2 of which stated: "The Trustee shall in its absolute discretion determine whether the death Benefit is to be paid to: (a) more of them to the exclusion of the other or others of them as the Trustee in its absolute discretion determines having regard to, but not being bound by, any nomination made in that regard by the Pension Member in his Application or any variation thereof PROVIDED THAT such Dependants were Dependants in respect of the deceased Pension Member at the date of his death; or (b) the Pension Member's Legal Personal Representative." 27 Having identified the potential beneficiaries, the Tribunal then had to determine whether the Trustee's decision was unfair or unreasonable in the circumstances. The Tribunal's reasons indicate that it properly understood its function and the test to be applied, although it may have misstated the appropriate sequence of decision‑making when it said: "The duty of the Tribunal is to make a de novo decision on the distribution of the benefit from the Fund in respect of the Deceased, although it must affirm the Trustee's decision if satisfied that the decision was fair and reasonable in all the circumstances." 28 The reference to a 'de novo' decision reflected statements made in several decisions of this Court. (See: Lykogiannis v Retail Employees Superannuation Pty Ltd [2000] FCA 327 at [47]‑[48]). 29 The Tribunal sought to determine whether the Trustee's decision was unfair or unreasonable in the circumstances by considering firstly, the deceased's wishes, as far as they were discernible or relevant and secondly, the nature - or role - of superannuation. Turning to the circumstances of the case, the Tribunal noted that under the will, the third ‑ fifth respondents collectively, had received three quarters of the residuary estate whereas only a quarter thereof had been received by the first respondent. It also took into account that the first respondent, as the deceased's common law wife, could reasonably have expected to have been supported in retirement, or upon the death of the deceased, by benefits payable under the Fund. The Tribunal would have had in mind the mutuality that was part and parcel of the relationship between the first respondent and Mr Gallagher pursuant to which the first respondent could be taken to have contributed to the expectation held by Mr Gallagher of receiving benefits from the Fund. The Tribunal concluded that the second ‑ fifth respondents had no such claim. In effect the Tribunal took into account that the first respondent had ordered her affairs according to the mutual expectations that arose from her relationship with Mr Gallagher. 30 In the course of the applicant's submissions counsel sought to argue that the Tribunal had erred in law by determining that the first respondent as a "de facto" spouse had an 'entitlement' to the superannuation benefit and that in the circumstances it was unnecessary to look at the "fairness or reasonableness" in making such a payment to the first respondent. That submission misstated the Tribunal's approach to the decision it made. It had regard not to an "entitlement" but to the reasonableness of the expectation of the first respondent that such a benefit would be paid to her. That was a relevant consideration. 31 Counsel then submitted that there was no evidence before the Tribunal to permit it to find that the first respondent had a "reasonable expectation" that the superannuation benefit would be paid to her to the exclusion of others. 32 That submission must fail also. It was for the Tribunal to draw inferences from the material before it and there was more than an adequate foundation in that material for the Tribunal to conclude that the first respondent had reasonable grounds for anticipating that after 20 years of cohabitation as husband and wife, superannuation benefits would be available from the Fund to provide for her maintenance in the event of Mr Gallagher's retirement or death. 33 The Tribunal did not merely prefer its view to that of the Trustee without regard to whether the decision of the Trustee was unfair or unreasonable in the circumstances. It found, after examining all relevant matters including the circumstances of all parties, that the decision of the Trustee subordinated the interests of the first respondent to the extent that it should be concluded that the decision of the Trustee was unfair or unreasonable (in the words of the Tribunal, "not fair and reasonable"). The Tribunal then decided that to be able to place the first respondent in a position where that unfairness or unreasonableness was removed it was necessary to set aside the decision of the Trustee and direct that the whole of the death benefit be paid to the first respondent. 34 The question before this Court was not whether the Tribunal's decision was to be preferred to the decision of the Trustee on matters of fact or degree, but a question of law, namely, did the Tribunal misdirect itself or fail to ask, and answer, the right question. (See: National Mutual v Campbell at [32]-[33]). 35 The Tribunal properly instructed itself on the requirements of the Act and, thereafter, made a decision based on the opinion it formed on the question posed by the Act, namely, was the decision of the Trustee unfair or unreasonable in the circumstances. Once the Tribunal was satisfied that the decision of the Trustee was not a just result it became empowered, and obliged, to give effect to its view of what was required to remove that unfairness or unreasonableness. 36 The appeal must be dismissed with costs.

I certify that the preceding thirty‑six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee J.

Associate: Dated: 31 October 2001 Counsel for the Applicant: D H Solomon

Solicitor for the Applicant: Solomon Brothers

Pro BonoCounselfor the 1st Respondent: G Castledine

Pro Bono Solicitors for the 1st Respondent: Minter Ellison

Counsel for the 2nd, 3rd, 4th & 5th Respondents: A Mason

Solicitor for the 2nd, 3rd, 4th & 5th Respondents: Tottle Christensen

Date of Hearing: 9 May 2001

Date of Judgment: 31 October 2001