mixed. Orders made (pursuant to s 64 NSW Trustee and Guardian Act 2009): (1) plaintiffs (managers) permitted to transfer the protected estate, in whole or part, into Regulated Superannuation Funds in which...
Key principles
The NSW Trustee has power under the NSW Trustee and Guardian Act 2009 (notably sections 16, 64, 65 and 66) to invest, or to authorise a private manager to invest, a protected...
The statutory power to invest a protected estate in a Regulated Superannuation Fund does not, and the NSW Trustee cannot, authorise a protected estate manager to make a binding...
A protected estate manager is an officer exercising fiduciary powers for the protective purposes of the Act and is not a trustee in the ordinary sense; decisions by a manager...
Investment in a Regulated Superannuation Fund may be an appropriate and secure way to manage a protected estate where the terms of the fund's trust deed and governing rules...
Issues before the court
Whether the NSW Trustee (or a private protected estate manager authorised by the NSW Trustee) has power under the NSW Trustee and Guardian Act 2009...
Plain English Summary
The Supreme Court (Lindsay J) held that under the NSW Trustee and Guardian Act the NSW Trustee (and, where authorised, private managers) may invest a protected person's estate by acquiring membership of a Regulated ('retail') Superannuation Fund, provided such investment is in the protected person's interests and subject to safeguards (accessibility during life and protection against diversion on death). However, a protected estate manager does not have authority to make binding death benefit nominations on behalf of the protected person; any such nomination by a manager is void. The Court excused past transfers made with NSW Trustee knowledge and ordered managers to revoke any death benefit nominations, with costs to be paid from the estate.
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Deep Dive
2,048 words · generated 29/06/2026
What happened
Background and parties
Whether a protected estate manager may make a binding death benefit nomination under the SIS Act/regulation on behalf of a protected person.
Whether past transfers of protected estate funds into Regulated Superannuation Funds by the managers should be excused (relief from breach).
What practical safeguards should govern investment of protected estates in Regulated Superannuation Funds.
Cited legislation
5 cited instruments linked from this judgment.
The proceedings concerned management of the protected estate of an adult person (the first defendant) whose estate had been placed under protective management. The plaintiffs are the managers of that estate (the father and a sister), and the NSW Trustee and Guardian (NSW Trustee) was joined as the second defendant. The managers had, with the knowledge and approval of the NSW Trustee, invested a substantial portion of the protected estate in Regulated Superannuation Funds (retail superannuation funds). The managers sought declaratory and consequential orders to confirm that such investments were within the powers of the NSW Trustee and managers, and, alternatively, for orders under the Court's inherent protective jurisdiction. They also sought orders excusing any breach of duty for past transfers and concerning death benefit nominations they had purportedly made (Judgment, Introduction and Terms and Scope of the Plaintiffs' Motion).
What was in issue
Two principal issues were placed before Lindsay J:
Whether the NSW Trustee (and a private manager authorised by it) has power under the NSW Trustee and Guardian Act 2009 (NSW) to invest a protected estate in membership of a Regulated Superannuation Fund.
Whether a protected estate manager can validly make a binding death benefit nomination under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) and the Regulations on behalf of the protected person (Adoption of the NSW Trustee's Report, Executive Summary).
How the dispute was resolved
Lindsay J adopted the NSW Trustee's Report. The Court concluded:
The NSW Trustee has statutory power to invest, or to authorise a private manager to invest, a protected estate by membership in a Regulated Superannuation Fund, subject to the protective statutory principles and safeguards about accessibility and avoiding diversion of estate assets upon death.
That power does not extend to authorising a manager to make a binding death benefit nomination for the protected person; any purported nomination by a manager is void.
Orders were made permitting the managers to transfer the estate into Regulated Superannuation Funds, excusing past transfers (on agreed terms), declaring any death benefit nomination made by the managers void, noting their undertaking to revoke such nominations, and that costs be paid from the protected estate (Orders).
Why the court decided this way
Statutory foundation and purposive reasoning
The Court grounded its decision principally in the statutory scheme of the NSW Trustee and Guardian Act 2009 (the Act). Key provisions were singled out:
Section 65(3)(c): authorises the Supreme Court or the NSW Trustee to authorise the investment of money comprising all or part of a managed estate 'in such manner as the Court or the NSW Trustee thinks fit'.
Section 16(1)(y): grants the NSW Trustee power to 'do or omit all things, and execute all documents, necessary to carry into effect the functions of the NSW Trustee'.
Sections 64-66: confer broad managerial and supervisory powers, and permit the NSW Trustee to authorise private managers to exercise functions necessary to management (Legislation sections).
The decision emphasised the protective purpose of the statutory regime. Section 39 prescribes principles: the welfare and interests of protected persons are paramount; restrictions on freedom should be minimal; the person's views and normal life in the community are to be respected. The Court read the investment power through that lens: investments must be for the benefit of the protected person and comply with s 39 (Adoption of the NSW Trustee's Report, Elaboration).
Distinguishing trust analysis in Perpetual v Cheyne
The plaintiffs raised doubts based on Edelman J's observations in Perpetual Trustee Co Ltd v Cheyne (WASC), where payments into superannuation were characterised as not being 'investments' by a trustee since they involved divesting trust property and yielding only future personal benefits to the beneficiary. Lindsay J accepted that Cheyne contained observations that could be read that way, but concluded that Cheyne's reasoning did not control the interpretation of the NSW statutory scheme. The Court accepted the NSW Trustee's submission that a protected estate manager is not an ordinary trustee, and that the protective statutory powers provided in the NSW Act were wider and purposively framed to permit investments including membership in regulated superannuation funds where appropriate (Intro paras 5-6; Adoption of the NSW Trustee's Report, Contextual Analysis and Elaboration).
Fiduciary limits and death benefit nominations
The Court drew a clear distinction between investment during the protected person's lifetime (which is within the protective powers if done for the person's benefit) and post-mortem dispositions. A death benefit nomination (binding nomination under s 59(1A) and reg 6.17A SIS Regs) operates on death and, in effect, determines to whom benefits should be paid after death. The NSW Trustee and the Court concluded that managers lack authority to make such testamentary or post-mortem dispositions; the manager's office is a protective office exercisable during the person's life and ordinarily terminates at death. Consequently, any purported death benefit nomination by a manager is void (Adoption of the NSW Trustee's Report, Elaboration; Practical Litmus Tests).
Practical safeguards and supervisory mechanisms
The Court required that investments be scrutinised against fund trust deeds and governing rules to ensure accessibility and that there be no realistic risk of estate assets being diverted on death. Practical litmus tests were identified: (1) investments must be withdrawable on reasonable terms to meet the protected person's needs during life; (2) the terms must not permit practical diversion of estate benefits on death away from the deceased's legal personal representative without court leave. The Court suggested (obiter) the NSW Trustee might publish notices to superannuation trustees to forestall improper reliance on managers' nominations (Practical Litmus Tests).
Before and after state of the law
Before
There was uncertainty in New South Wales following obiter observations in Western Australian decisions (notably Perpetual v Cheyne) and elsewhere suggesting that payment into superannuation might not be an 'investment' by a trustee because it divests property and confers only future benefits on the beneficiary. That line of reasoning led to doubts whether managers of protected estates or trustees could invest estate funds into regulated superannuation funds without Court authorisation, and whether death benefit nominations made by third parties (including managers) could validly bind trustees (Intro paras 5-7).
After
G v G (No 2) clarifies that, under the NSW Trustee and Guardian Act 2009, the NSW Trustee has power to authorise investments in Regulated Superannuation Funds and to authorise private managers to make such investments, subject to strict protective principles and safeguards. However, the decision also firmly establishes that managers have no authority to make binding death benefit nominations on behalf of the protected person; such nominations are void, and trustees may be relieved from compliance where court orders so provide (Adoption of the NSW Trustee's Report, Executive Summary and Orders). The judgment thus resolves a key practical question in favour of regulated superannuation as a permissible investment vehicle under the NSW statutory protective regime, while protecting the post-mortem distributive field from manager-made nominations.
Key passages with plain-English translation
"The NSW Trustee has power under the NSW Trustee and Guardian Act to invest, or to authorise a private manager to invest, a protected estate in membership of a Regulated Superannuation Fund." (Executive Summary)
Plain English: The law in New South Wales allows the official trustee, and those it authorises, to place a protected person's money into retail superannuation funds, provided the decision is made for the protected person's benefit and consistent with the Act.
"Neither that power ... extends to the making of a binding nomination ... for the payment of a death benefit payable by the trustee of a superannuation fund." (Executive Summary)
Plain English: However, the manager cannot legally tell the superannuation trustee who should receive the money when the protected person dies; managers cannot make binding post-death directions.
"A manager ... has no power or authority ... to give a death benefit nomination so that, for want of actual authority, the nomination is void." (Elaboration)
Plain English: If a manager tries to make such a nomination, it has no legal effect because the manager did not have the legal power to do it.
"A decision to invest ... requires compliance with section 39 of the Act ... that whatever is done ... should be that which is calculated to be in the interests, and for the benefit, of that person." (Elaboration)
Plain English: Any investment decision must put the protected person's welfare first.
What fact patterns trigger this precedent
This judgment will be directly engaged where:
A protected person's estate (under the NSW Trustee and Guardian Act) is proposed to be invested by the NSW Trustee or an authorised private manager by acquiring membership of a Regulated Superannuation Fund.
Managers have already transferred estate funds into a retail superannuation fund and seek retrospective approval or forgiveness for alleged breaches.
Managers or third parties have purported to give death benefit nominations or other post-mortem directions on behalf of a protected person.
A trustee of a superannuation fund receives a nomination from a person purporting to be a protected estate manager and must decide whether to comply or seek court directions.
Key triggers: presence of a protected estate, significant estate funds being moved into regulated superannuation, and any purported post-mortem directions originating from managers.
How later courts have treated it
As this judgment is a principal NSW Supreme Court decision adopting the NSW Trustee's Report and making substantive orders, it stands as persuasive authority in NSW for the proposition that investment in Regulated Superannuation Funds is within the statutory powers of the NSW Trustee and authorised managers, subject to safeguards, and that managers cannot make binding death benefit nominations.
Future courts will apply the statutory analysis here when questions arise about the interaction between protective-management statutes and Commonwealth superannuation laws, and when assessing whether managers exceeded their authority in making post-mortem directions. Given the Court's reliance on the statutory scheme and protective purpose (rather than treating the matter as purely trust-law), the decision will be influential in similar statutory contexts.
Still-open questions
Self-Managed Superannuation Funds (SMSFs): The judgment expressly confined its scope to Regulated (retail) Superannuation Funds and did not address SMSFs, where different control and trustee issues arise, and which may pose distinct practical and legal problems for protected estates (Terms and Scope, para 5). Whether an SMSF can ever be an appropriate vehicle for a protected estate remains unresolved.
Scope of Court's inherent jurisdiction: The judgment did not need to resolve the full scope of the Court's inherent parens patriae jurisdiction in authorising post-mortem directions or binding nominations; Lindsay J observed that the Court might, in an appropriate case and with due regard to probate practice, exercise such jurisdiction, but left this undecided (Terms and Scope, paras 7-11).
Precise content of protective safeguards: Although the Court articulated working litmus tests (withdrawability, no practical diversion risk), the precise documentary assurances that trustees must provide, and the accepted evidentiary standard for 'no practical possibility' of diversion on death, remain matters for practical development and future litigation.
Interaction with family provision claims and 'notional estate' constructs: The judgment prefers that death benefits be paid to the legal personal representative so they form part of the deceased's estate for family provision jurisdiction. How courts will manage complex factual situations where a death benefit legitimately could go to dependants or where family provision claimants assert competing entitlements will require future procedural and substantive applications.
National regulatory impact: The suggested administrative practice (NSW Trustee notifying superannuation trustees) and the interplay with Commonwealth regulatory schemes (e.g. reg 6.17A(4A)(b)) raise questions about the best mechanisms to achieve cross-jurisdictional certainty and whether uniform administrative practice or judicially authorised general orders are necessary.
Concluding note
G v G (No 2) produces a balanced result. It recognises regulated superannuation as a legitimate investment option for protected estates under the NSW Act while preserving the protective boundary between lifetime management and testamentary disposition. Practitioners managing protected estates need to ensure due process: review fund rules and deeds, secure trustee assurances where necessary, avoid attempting post-mortem nominations, and seek Court directions where testamentary or high-risk post-mortem effects may flow from an investment decision.
Catchwords
Application of JR FenwickRe "Charles" (2009) 76 NSWLR 22
Re Hoang Minh Le
Judgment (14 paragraphs)
[1]
Solicitors:
Plaintiffs: Walker Legal and Conveyancing
Second Defendant: The Office of the NSW Trustee
File Number(s): 2016/00006045
[2]
INTRODUCTION
Before the Court (by a notice of motion filed in proceedings in which management orders were earlier made under the NSW Trustee and Guardian Act 2009 NSW) is an application made by the plaintiffs as managers of the protected estate of the first defendant for orders confirming whether the NSW Trustee (joined in the proceedings as the second defendant) has power to authorise them to invest the estate in a "Regulated Superannuation Fund" as that term is defined in section 19 of the Superannuation Industry (Supervision) Act 1993 Cth. Such a fund, colloquially described as a "Retail Superannuation Fund", stands in contrast to a "Self Managed Superannuation Fund" ("SMSF").
The first plaintiff is the father, and the second plaintiff is a sister, of the first defendant.
The first defendant is a "protected person" within the meaning of section 38 of the NSW Trustee and Guardian Act 2009 because there are in force orders of the Court to the effect that: (a) he be declared to be a person incapable of managing his affairs; (b) his estate (a "protected estate") be subject to management under the Act; and (c) the plaintiffs be appointed as managers of the estate.
The second plaintiff joined the first plaintiff as a manager of the first defendant's protected estate by orders made in 2016, reported as G v G [2016] NSWSC 511 at [12].
The plaintiffs' motion is the product of their doubts about the NSW Trustee's powers of "investment" (and those of a private manager of a protected estate) arising from observations made in Perpetual Trustee Company Limited v Cheyne [2011] WASC 225 at [52]-[56] and Re Hoang Minh Le; Ex parte The Public Trustee [2012] WASC 31, critically noticed in Public Trustee of Queensland v Tracey [2013] QSC 183.
Observations in Cheyne can be read as a ruling that a payment by a trustee (which the plaintiffs in these proceedings apprehend may, by analogy, include a protected estate manager) into a superannuation fund is not an "investment" of trust property by the trustee because, by the payment into the fund, the trustee divests itself of trust property, loses control of that property and puts the property beyond the protective control of the Court, albeit that, as a member of the fund, but without a property interest in the fund, the beneficiary (not the trustee) obtains a right to future benefits.
As illustrated by Cheyne itself, at [46], an assumption underlying such a reading of the case may be that the beneficiary is not a person whose estate is under protective management.
Be that as it may, an occasion arises in these proceedings for examination of the availability of membership of a Regulated Superannuation Fund as a form of investment in management of a protected estate.
With the knowledge and approval of the NSW Trustee, a substantial part of the large estate of the first defendant has been invested by the plaintiffs in a Regulated Superannuation Fund, upon a common assumption (thought by the plaintiffs to have been called into doubt by Cheyne) that the NSW Trustee's powers extend to authorisation of such an investment.
The plaintiffs' motion serves as a vehicle to clarify the existence, nature and scope of the power to "invest" property forming part of a protected estate in a Regulated Superannuation Fund.
[3]
THE TERMS AND SCOPE OF THE PLAINTIFFS' MOTION
By their notice of motion the plaintiffs seek, so far as is material, the following orders:
1. An order pursuant to either or both section 64 and/or 65 of the NSW Trustee and Guardian Act that the plaintiffs are justified in investing and/or continuing to invest any part of the estate of the [first] defendant ("Estate") in "Regulated Superannuation Funds" as that term is defined in the Superannuation Industry (Supervision) Act 1993 Cth ("Funds") which has been, or is to be effected by a transfer of a part of the estate into the Fund in exchange for the [first] defendant obtaining a limited interest as a member of such Fund(s).
2. Further and/or in the alternative to order 1, an order pursuant to the parens patriae power of the Court that the plaintiffs are justified in investing and/or continuing to invest any part of the estate in "Regulated Superannuation Funds" as the term is defined in the Superannuation Industry (Supervision) Act 1993 Cth which has been, or is to be effected by a transfer of a part of the estate into the Fund in exchange for the [first] defendant obtaining a limited interest as a member of such Fund(s).
In written submissions filed in support of their motion the plaintiffs sought, in addition to the orders sought in the motion, an order that they be excused by the Court of any breach of duty as a result of: (a) past transfers of parts of the first defendant's protected estate into a superannuation environment; or (b) their execution of "binding death benefit nominations" in favour of the deceased estate of the first defendant.
Although the language employed in the plaintiffs' claims for relief is reminiscent of an application for judicial advice (insofar as the motion seeks orders to the effect that the plaintiffs "are justified"), and although the motion refers in terms to both the NSW Trustee and Guardian Act and the Court's parens patriae jurisdiction (that is, the Court's inherent, protective jurisdiction), the focus for attention is essentially upon the power (if any) of the NSW Trustee under the Act to invest, or to authorise the investment of, the whole or part of a protected estate in a Regulated Superannuation Fund.
With that in mind, upon referral of the motion to me as Protective List Judge, the NSW Trustee was joined as a defendant in the proceedings, with a direction that the protected person be designated as the first defendant and the NSW Trustee be designated as the second defendant.
[4]
The NSW Trustee and Guardian Act 2009 NSW
Sections 64 and 65 of the NSW Trustee and Guardian Act (referred to in the plaintiffs' motion) are in the following terms:
"64 Orders by Supreme Court and NSW Trustee as to management of estates
(1) The Supreme Court or the NSW Trustee may make such orders as it thinks fit in relation to the administration and management of the estates of managed persons.
(2) The Supreme Court or the NSW Trustee may also make such orders as it thinks fit in connection with authorising, directing and enforcing the exercise of the functions of managers under this Act.
(3) The Supreme Court may also make such orders as it thinks fit in connection with supervising the exercise of the functions of managers under this Act.
(4) An order by the NSW Trustee is subject to the regulations or to any direction by the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship).
65 Orders by Supreme Court and NSW Trustee as to property
(1) General power. The Supreme Court or the NSW Trustee may make such orders as appear to it necessary for rendering the property and income of a managed person available for the following purposes--
(a) the payment of the debts and engagements of, and otherwise for the benefit of, the person,
(b) the maintenance and benefit of the family of the person,
(c) otherwise as it thinks necessary or desirable for the care and management of the estate of the person.
(2) Orders as to disposal of estate. Without limiting the generality of subsection (1), the Supreme Court or the NSW Trustee may order that any property of the person be sold, mortgaged, dealt with or disposed of as the Court or the NSW Trustee thinks most expedient for the purpose of raising or securing or repaying with or without interest money which is to be or which has been applied to any one or more of the following purposes--
(a) payment of the person's debts or engagements,
(b) discharge of any encumbrance on property of the person,
(c) payment of any debt or expenditure incurred for the maintenance (including future maintenance), or otherwise for the benefit, of the person,
(d) payment of the costs of any proceeding under this Act or of any sale or other disposition made under this Act,
(e) payment of such other sum or sums to such person or persons as the Court or the NSW Trustee thinks fit.
(3) Orders as to application of money. Without limiting subsection (1), the Supreme Court or the NSW Trustee may authorise and direct the application of money comprising the whole or any part of the estate of the person to any one or more of the following purposes--
(a) the preservation and improvement of the estate of the person,
(b) the taking up of rights to issues of new shares, or options for new shares, to which the person may become entitled by virtue of any shareholdings,
(c) the investment of money, being money not required for the time being for any of the other purposes specified in this subsection, in such manner as the Court or the NSW Trustee thinks fit.
(4) An order by the NSW Trustee is subject to the regulations or to any order of the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship)."
[5]
The Superannuation Industry (Supervision) Act 1993 Cth and Regulations
Section 55A of the Superannuation Industry (Supervision) Act 1993 Cth is in the following terms:
"Rules about cashing benefits after death of members
(1) The governing rules of a regulated superannuation fund must not permit a fund member's benefits to be cashed after the member's death otherwise than in accordance with standards prescribed for the purposes of section 31.
(2) If the governing rules of a fund are inconsistent with subsection (1):
(a) subsection (1) prevails; and
(b) the governing rules are invalid, to the extent of the inconsistency."
With emphasis added, section 59 of the Act is in the following terms:
"Exercise of discretion by person other than trustee
(1) Subject to subsection (1A), the governing rules of a superannuation entity other than a self managed superannuation fund must not permit a discretion under those rules that is exercisable by a person other than a trustee of the entity to be exercised unless:
(a) those rules require the consent of the trustee, or the trustees, of the entity to the exercise of that discretion; or
(b) if the entity is an employer-sponsored fund:
(i) the exercise of the discretion relates to the contributions that an employer-sponsor will, after the discretion is exercised, be required or permitted to pay to the fund; or
(ii) the exercise of the discretion relates solely to a decision to terminate the fund; or
(iii) the circumstances in which the discretion was exercised are covered by regulations made for the purposes of this subparagraph.
(1A) Despite subsection (1), the governing rules of a superannuation entity may, subject to a trustee of the entity complying with any conditions contained in the regulations, permit a member of the entity, by notice given to a trustee of the entity in accordance with the regulations, to require a trustee of the entity to provide any benefits in respect of the member on or after the member's death to a person or persons mentioned in the notice, being the legal personal representative or a dependant or dependants of the member.
(2) If the governing rules of a superannuation entity are inconsistent with subsection (1), that subsection prevails, and the governing rules are, to the extent of the inconsistency, invalid."
With emphasis added, regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 Cth is in the following terms:
Payment of benefit on or after death of member (Act, s 59(1A))
(1) For subsections 31(1) and 32(1) of the Act, the standard set out in subregulation (4) is applicable to the operation of regulated superannuation funds and approved deposit funds.
(2) For subsection 59(1A) of the Act, the governing rules of a fund may permit a member of the fund to require the trustee to provide any benefits in respect of the member, on or after the death of the member, to the legal personal representative or a dependant of the member if the trustee gives to the member information under subregulation (3).
(3) The trustee must give to the member information that the trustee reasonably believes the member reasonably needs for the purpose of understanding the right of that member to require the trustee to provide the benefits.
(4) Subject to subregulation (4A), and regulations 6.17B, 7A.17 and 7A.18, if the governing rules of a fund permit a member of the fund to require the trustee to provide any benefits in accordance with subregulation (2), the trustee must pay a benefit in respect of the member, on or after the death of the member, to the person or persons mentioned in a notice given to the trustee by the member if:
(a) the person, or each of the persons, mentioned in the notice is the legal personal representative or a dependant of the member; and
(b) the proportion of the benefit that will be paid to that person, or to each of those persons, is certain or readily ascertainable from the notice; and
(c) the notice is in accordance with subregulation (6); and
(d) the notice is in effect.
(4A) The trustee is not required to comply with subregulation (4) if the trustee:
(a) is subject to a court order that has the effect of restraining or prohibiting the trustee from paying a benefit in respect of the member in accordance with a notice of the kind described in that subregulation; or
(b) is aware that the member of the fund is subject to a court order that:
(i) requires the member to amend or revoke a notice of that kind that the member has given the trustee; or
(ii) has the effect of restraining or prohibiting the member from giving a notice of that kind.
(5) A member who gives notice under subregulation (4) may:
(a) confirm the notice by giving to the trustee a written notice, signed, and dated, by the member, to that effect; or
(b) amend, or revoke, the notice by giving to the trustee notice, in accordance with subregulation (6), of the amendment or revocation.
(6) For paragraphs (4)(c) and (5)(b), the notice:
(a) must be in writing; and
(b) must be signed, and dated, by the member in the presence of 2 witnesses, being persons:
(i) each of whom has turned 18; and
(ii) neither of whom is a person mentioned in the notice; and
(c) must contain a declaration signed, and dated, by the witnesses stating that the notice was signed by the member in their presence.
(7) Unless sooner revoked by the member, a notice under subregulation (4) ceases to have effect:
(a) at the end of the period of 3 years after the day it was first signed, or last confirmed or amended, by the member; or
(b) if the governing rules of the fund fix a shorter period--at the end of that period."
[6]
QUESTIONS RAISED ON THE PLAINTIFFS' MOTION
Upon a review of written submissions filed by the plaintiffs in support of their motion, I formally noted that questions for consideration arising on the motion included the following:
a) whether the plaintiffs or any person other than the first defendant related to them has an interest in decisions made about superannuation for the first defendant which is in conflict with their duty as managers of the first defendant's protected estate.
b) whether any (and, if so, what) death benefit nominations have been made or might be proposed to be made, in respect of any superannuation entitlements of the first defendant.
c) whether the first defendant has a will (be it a statutory will or otherwise) which might be the subject of impact if superannuation arrangements are authorised.
d) whether there is a need to review the prospective entitlements of potential beneficiaries if the first defendant were to die intestate.
e) whether there is any (and, if so, what) need to make orders excusing such, if any, breach of duty as may have occurred with superannuation arrangements hitherto put in place by the plaintiffs.
f) whether there are any (and, if so, what) concerns about supervision of management of the first defendant's protected estate in the event that his estate is put into superannuation.
g) whether the terms of any superannuation arrangements made for the first defendant are appropriate for a person who is a protected person.
h) whether the decisions about superannuation made, or proposed to be made, by the plaintiffs vis a vis the first defendant are properly characterised as arrangements for his benefit and in his interest.
In addition to receipt of further submissions (and evidence) from the plaintiffs, I invited the NSW Trustee to file and serve a report responsive to the plaintiffs' motion.
In response to that invitation, the NSW Trustee filed and served a "Report to Court", a version of which (redacted to maintain anonymity of the parties) is reproduced as an annexure to these reasons for judgment.
Upon receipt of that Report I ordered that the parties provide to the Court a draft of orders upon which they might agree as appropriate to dispose of the plaintiffs' motion upon an assumption that the Court adopts the NSW Trustee's Report. This they did.
[7]
Executive Summary
For reasons substantially set out in the NSW Trustee's Report, I am of the opinion that:
1. The NSW Trustee has power under the NSW Trustee and Guardian Act to invest, or to authorise a private manager to invest, a protected estate in membership of a Regulated Superannuation Fund.
2. Neither that power, nor any authorisation granted by the NSW Trustee pursuant to that power, extends to the making of a binding nomination (of the type for which section 59(1A) of the Superannuation Industry (Supervision) Act 1993 Cth and regulation 6.17A of the Superannuation Industry (Supervision) Regulations 1994 Cth provide), or any other form of nomination, for the payment of a death benefit payable by the trustee of a superannuation fund.
[8]
Contextual Analysis
In a practical sense, the vice in a death benefit nomination made by a protected estate manager is the possibility that the manager might induce the trustee of a superannuation fund to make a payment from the fund otherwise than to the deceased estate of the protected person. In that sense, a nomination that a death benefit be paid to the deceased estate of the protected person, if acted upon, may involve no detriment to the protected person or his or her estate.
However, in due management of protected estates, importance may attach to recognition of a manager's lack of authority, in effect, to give a direction to the trustee of a superannuation fund (whether "binding" or not) that property forming part of a protected person's estate be transferred otherwise than to the person or persons entitled, after the death of the protected person, to administer his or her estate.
The prevailing view in Australia is that a binding death benefit nomination, communicated to the trustee of a superannuation fund under the rules governing the fund as contemplated by section 59(1A) of the Superannuation Industry (Superannuation) Act 1993 and regulation 6.17A of the Regulations under that Act, is not a testamentary act (so as to attract the operation of sections 6 and 8 of the Succession Act 2006, respectively governing the formal requirements of a will and informal wills) either because: (a) it is merely the exercise of a contractual right; or (b) the rules of the fund pursuant to which the nomination is given to the trustee confer a discretion on the trustee as to the identity of the person, or persons, to whom the benefit is to be paid: GE Dal Pont and KF Mackie, Law of Succession (Lexis Nexis Butterworths, Australia, 2nd ed, 2017), paragraphs [P.5] and [1.11]-[1.12]; Mason and Handler, Succession Law and Practice (NSW), paragraph [s 3.5.6].
An investment in a superannuation fund on behalf of a protected person is not to be taken as an indirect means for effecting the equivalent of a testamentary (or an inter vivos) gift. In due management of a protected estate, neither an investment in membership of a superannuation fund, nor the making of a death benefit nomination, can properly be viewed as an available form of "will-substitute".
A correct course for a manager who seeks authority to make a gift on behalf of the person whose estate is under protective management is: (a) to conform to the requirements of section 76 of the NSW Trustee and Guardian Act, which authorises the making of a gift that is not more than what is reasonable; (b) to make an application to the NSW Trustee or the Court for an exercise of the powers for which section 65 of the Act provides; or (c) to apply to the Court, upon an exercise of its inherent jurisdiction, for authorisation of a voluntary allowance out of the protected estate (Protective Commissioner v D (2004) 60 NSWLR 513 at 540-542, 543 and 544-555).
[9]
Elaboration
Where a protected estate manager purports to give to the trustee of a superannuation fund of which the protected person is a member a binding death benefit nomination:
1. regulation 6.17A (4A) of the Superannuation Industry (Superannuation) Regulations may operate, in terms, together with management orders affecting the protected person made by the Court, to release the trustee from any obligation to comply with the nomination because by virtue of such orders the manager has no power to give such a notice on behalf of the protected person and (by operation of section 71(1) of the NSW Trustee and Guardian Act) the power of the protected person to deal with his or her estate is suspended in respect of so much of that estate as is subject to management under the Act;
2. as found in this judgment, a manager (whether appointed by the Court or NCAT) has no power or authority, by virtue of the office of protected estate manager (or, if appointed by NCAT, the equivalent office of "financial manager"), to give a death benefit nomination so that, for a want of actual authority, the nomination is void; and
3. as a fiduciary called upon to exercise fiduciary powers, it is not open to a protected estate manager (or financial manager) to exercise the powers of that office for a purpose other than one protective of the protected person (for example, by diverting estate property away from the ownership of the protected person, or away from the control of those charged with management of his or her estate on his or her behalf) so that the act of communicating a nomination, or acting upon it, may be a breach of fiduciary obligations owed to the protected person or his or her estate.
The critical point in analysis of protected estate investment powers vis a vis superannuation is recognition that the manager of a protected estate -although a fiduciary, exercising fiduciary powers in the interests, and for the benefit, of a person in need of protection - is not a trustee, but the holder of an office which is unique: Ability One Financial Management Pty Ltd and Anor v JB by his tutor AB [2014] NSWSC 245 at [113]-[175]. It is governed by the purpose (recognised in Marion's Case [1992] 175 CLR 218 at 258) for which the protective jurisdiction exists, be it the Court's inherent jurisdiction or the statutory jurisdiction governed by the NSW Trustee and Guardian Act and cognate legislation.
[10]
Terminology : "Substitute" and "Assisted" Decision Making
In making this point, and in distinguishing the office of a protected estate manager from that of a trustee, the Report of the NSW Trustee characterises a protected estate manager (itself or a private manager) as "a substitute decision maker".
In the context of this Report, there may be no harm in the use of such terminology. However, in broader debates about management of a protected estate the expression "substitute decision-making" is contrasted, problematically, with the idea of "assisted decision-making".
Such labels are not always helpful. Their simplistic, binary form fails to capture the more subtle essence of decision-making in management of a protected estate. The expression "substitute decision making" could be taken, incorrectly, as condoning a process of decision making that excludes consultation (where consultation is possible) with a protected person. The expression "assisted decision making" could be taken, equally incorrectly, as condoning a process of decision making in which the manager of a protected estate disclaims responsibility for making decisions and takes cover behind a protected person under his or her influence.
Use of the expressions "substitute" and "assisted" decision making introduces a rigid, false dichotomy in the management of protected estates. Both under the general law and under the NSW Trustee and Guardian Act, an obligation on the part of a protected estate manager to consult the views of a protected person and his or her "significant others" is given primacy in the management of an estate: NSW Trustee and Guardian Act, sections 39, 72 and 102; Holt v Protective Commissioner (1993) 31 NSWLR 227 at 240.
The protective jurisdiction exists to enable care to be taken of those who are not able to take care of themselves (Marion's Case (1992) 175 CLR 218 at 258, citing Wellesley v Duke of Beaufort (1827) 38 ER 236 at 243; 2 Russ 1 at 20), not to impose a decision on a person who is capable of self-management. What is required of a protected estate manager, vis a vis the person whose estate is under management, depends on the nature and extent of the protected person's capacity.
[11]
Practical Litmus Tests for Protected Estate Investments in Superannuation
Before any determination can be made in favour of investment of a protected estate (in whole or part) in a superannuation fund, a decision-maker (be it the NSW Trustee or a private manager) needs, in each case, to review the terms of the trust deed governing the fund to ensure its compatibility with principles governing the management of a protected estate. In particular:
1. a decision-maker has to be satisfied that any investment in a superannuation fund can be withdrawn (in whole or part), on reasonable terms, in the event (at least) that it is required for the maintenance, education or advancement in life of the protected person during his or her lifetime.
2. upon an assessment of any security risk attaching to the investment, a decision-maker must also be satisfied that, upon the death of the protected person, there is no practical possibility (by means of a purported "death benefit nomination", an exercise of a discretion by the trustee of the superannuation fund or otherwise) that the estate of the protected person will, in whole or part, be paid otherwise than to the legal personal representative of the deceased person.
If any part of a protected estate is to be invested in membership of a superannuation fund, upon a due exercise of powers of investment given by the NSW Trustee and Guardian Act, these fundamental requirements of such an investment must ordinarily be satisfied.
As a working assumption, a Regulated Superannuation Fund might, because it is regulated, be regarded as a secure investment. However, a decision-maker involved in management of the estate of a protected person must remain mindful of a need to ensure that any investment is in fact secure.
A superannuation fund must generally be accessible, as well as secure, if needed during the lifetime of the protected person.
Neither during the lifetime of a protected person, nor upon his or her death, can a protected estate be diverted away from that person in the interests, or for the benefit, of some other person without the leave of the Court.
An investment in a superannuation fund by a protected estate manager on behalf of a protected person may require a preliminary assurance by the trustee of the fund that a death benefit payable from the fund will not be paid otherwise than to the "legal personal representative" of the protected person (as that expression is understood in probate law and practice) without the leave of the Court.
[12]
ORDERS
With the agreement of both the plaintiffs and the NSW Trustee, but incorporating minor changes of form, I make orders to the following effect:
1. Subject to the necessary orders, authorities and directions being made by the Court or the NSW Trustee, ORDER (pursuant to section 64 of the NSW Trustee and Guardian Act 2009 NSW) that the plaintiffs, in their capacity as managers of the protected estate ("the protected estate") of the first defendant ("the protected person"), be permitted to transfer the protected estate, in whole or part, into Regulated Superannuation Funds as that term is defined in section 19 of the Superannuation Industry (Supervision) Act 1993 Cth wherein the protected person obtains a membership interest.
2. ORDER that the plaintiffs be excused for any breach of duty (if any) for past transfer of parts of the protected estate into Regulated Superannuation Funds as that term is defined in section 19 of the Superannuation Industry (Supervision) Act 1993 wherein the protected person obtained membership interest.
3. NOTE that such past transfers:
1. were made by the Managers following a letter issued by the then Protective Commissioner in a letter dated 16 May 2008, in which no objection was raised by the then Protective Commissioner;
2. have been continuously disclosed by the Managers to the NSW Trustee and Guardian; and
3. were disclosed to the Court in the process of receiving judgment in G v G [2016] NSWSC 511.
1. DECLARE that any death benefit nomination made by the Managers in relation to the protected person's membership interest in any Regulated Superannuation Fund is void.
2. NOTE the undertaking of the Managers to revoke all death benefit nominations purportedly made by the Managers in relation to the protected person's membership interest in any Regulated Superannuation Fund.
3. ORDER that the costs of the plaintiffs and the NSW Trustee be paid from the protected estate on the indemnity basis.
The NSW Trustee's view is that, because the plaintiffs' superannuation decisions have been duly made with its approval, there is no necessity for an order excusing a breach of duty on the part of the plaintiffs, as to which see C v W (No 2) [2016] NSWSC 945 at [45]-[47]. Nevertheless, at the request of the plaintiffs, and with the acquiescence of the NSW Trustee, the order is made "for more abundant caution", the plaintiffs having acted honestly and reasonably (and to the economic advantage of the first defendant) in their investment of his protected estate in superannuation.
[13]
NSW TRUSTEE REPORT TO COURT (Redacted)
Scope of the report.
This report has been ordered by the Court and seeks to respond to material filed by the Plaintiffs in respect of a Notice of Motion filed 4 December 2018.
NSW Trustee and Guardian (NSW Trustee) has reviewed the material filed and served on it in these proceedings to date.
NSW Trustee does not cavil with the factual background outlined by Counsel for the Plaintiffs, XXX and XXX (hereafter "the Managers"). Whilst the affidavits contain some minor factual errors (for example the October 2004 Order was that of the Guardianship Tribunal, not the Office of the Protective Commissioner), by and large NSW Trustee agrees that
a) The estate of XXX (hereinafter "T" ) has been under management for many years.
b) The current estate is valued in the order of $15 million with some $10 million held in a superannuation environment.
c) The Financial Manager(s) have lodged annual accounts in a timely manner and have been approved by NSW Trustee to date.
d) NSW Trustee has always been kept informed about significant changes in the estate and proper authorities and directions have been sought by the Managers.
The current matter before the Court goes to the issue of placement (present and potential future) of T's personal injury settlement funds into a retail superannuation scheme and the Court has posed questions for consideration in the Orders and Notations of 18 February 2019.
Before addressing the specific questions, NSW Trustee makes the following general comments regarding the application.
The Argument by the Managers
Case law
The Managers rely upon Western Australia precedents to support the proposition that the power of investment is not available to them, nor the NSW Trustee without the imprimatur of the Supreme Court.
Perpetual Trustee Company Ltd v Cheyne [2011]WASC 225 ("Cheyne") dealt with a "Court Compensation Trust", [1] which was ultimately decided on the basis that the Trust Deed itself permitted the transfer of monies into a superannuation fund.
The relevance to this situation however is Edelman J's obiter dicta to the effect that:
• s17 of the Trustees Act 1962 (WA) which has its equivalent in s14 of the Trustee Act 1925 (NSW) does not permit the transfer of trust funds to superannuation, because superannuation is not an "investment" in that it does not give to the trustee anything in return.
• the Court's parens patriae power found in s16 of the Supreme Court Act 1935 (WA) (the comparable provision being s23 in the Supreme Court Act 1970 (NSW) would have permitted orders to be given to allow the transfer of the funds into superannuation
The argument appears to be in the present case, that it is only within the parens patriae jurisdiction that the power to make the investment into superannuation can be found.
It is the position of NSW Trustee that reliance on this case misconceives the nature and role of a protected estate manager, and more importantly the purpose of the protected estates regime.
At its base (although any definition is problematic) a trust requires the essential elements as described in Jacob's Law of trusts [2] :
[14]
Endnotes
There appears to be no corresponding vehicle in NSW where monies are paid pursuant to s77 of the Civil Procedure Act 2005 (NSW) - generally called damages trust. Once the trust is established in NSW by way of the court order, that "issuing" court no longer has a supervisory role. The provisions of the Trustee Act 1925 (NSW) apply and the Supreme Court has jurisdiction.
Jacobs Law of Trusts in Australia 8th ed (2016) at [1.04]
For a further discussion in this regard see Re X [2016] NSWSC 275
see paragraph 46(1) of Perpetual Trustee Company Ltd v Cheyne [2011]WASC 225
see for example "A Struggle For Perfection In An Imperfect World: Dignity of the Individual, Incapacity for Self-Management, Rights, Duties and Conflicts of Interest" by Justice G Lindsay paper delivered at the STEP (WA) Incapacity Conference, 26 October 2018 at paragraph 121
A Struggle For Perfection In An Imperfect World: Dignity of the Individual, Incapacity for Self-Management, Rights, Duties and Conflicts of Interest by Justice G Lindsay paper delivered at the STEP (WA) Incapacity Conference, 26 October 2018 at paragraphs 143 and following
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 01 July 2020
Orders made (pursuant to s 64 NSW Trustee and Guardian Act 2009): (1) plaintiffs (managers) permitted to transfer the protected estate, in whole or part, into Regulated Superannuation Funds in which the protected person obtains a membership interest; (2) plaintiffs excused for any breach of duty (if any) for past transfers into such Funds; (3) declaration that any death benefit nomination made by the Managers in relation to the protected person's membership interest is void; (4) Managers to revoke such nominations; (5) plaintiffs' and NSW Trustee's costs to be paid from the protected estate on an indemnity basis.
In what follows, two preliminary observations should be borne in mind.
First, the subject matter of the plaintiffs' motion is confined to investment of a protected estate in a Regulated Superannuation Fund. It does not extend to a Self Managed Superannuation Fund, to which different considerations may apply.
Secondly, by this judgment the plaintiffs' motion can be, and is, disposed of by reference only to the powers of the NSW Trustee as a statutory corporation constituted, and governed, by the NSW Trustee and Guardian Act.
It is not necessary to explore the limits of the powers of the Court. This is particularly so insofar as they involve an exercise of the Court's inherent protective jurisdiction derived, historically, from the New South Wales Act 1823 (Imp), the Third Charter of Justice 1823 (Imp) and the Australian Courts Act 1828 (Imp), preserved by section 22 of the Supreme Court Act 1970 NSW and reinforced by section 23 of the Supreme Court Act: PB v BB [2013] NSWSC 1223 at [27]-[30]; IR v AR [2015] NSWSC 1187 at [100]-[118]; Re AAA [2016] NSWSC 805 at [22]-[23]; Estate Polykarpou; Re a Charity [2016] NSWSC 409 at [138]-[189].
As was observed by the High Court of Australia in Secretary, Department of Health and Community Services v JWB and SMB (Marion's Case) (1992) 175 CLR 218 at 258, the limits of that jurisdiction (to do what is for the benefit of a person incapable of managing his or her own affairs) have not been, and cannot be, defined.
It is sufficient to note that management of the affairs of an incapable person (under the NSW Trustee and Guardian Act or upon an exercise of the Court's inherent jurisdiction) ordinarily comes to an end with the death of the person. After that time management of a protected person's estate is governed by the law and practice involving an exercise of the Court's probate jurisdiction (depending upon whether the person dies testate or intestate) or otherwise by reference to the general law.
At the intersection of the Court's protective and probate jurisdictions is a statutory power (presently embodied in sections 18-26 of the Succession Act 2006 NSW), vested in the Court, to authorise the making of a will on behalf of a person who lacks testamentary capacity. A comparable power is not vested in the NSW Trustee or a private manager of a protected estate.
If (as I assume, without deciding) the Court's inherent protective jurisdiction extends in an appropriate case to authorisation of: (a) the making of a binding death benefit nomination for a superannuation fund of which a protected person is a member; (b) the making of a will on behalf of an incapable person; or (c) the making orders after his or her death affecting his or her estate, a reasonable expectation would be that no such jurisdiction would be exercised without due regard being had to probate law and practice (including the jurisdiction to authorise the making of a "statutory will") and the rights of persons who are, or might be, interested in the incapable person's deceased estate.
In the context of the present proceedings, those provisions should be read also with section 66 of the NSW Trustee and Guardian Act (relied upon by the NSW Trustee), which is in the following terms:
"66 NSW Trustee may authorise and direct functions of other managers
(1) The NSW Trustee may, by order--
(a) authorise a manager to have all, or any specified, functions necessary and incidental to the management and care of an estate and such other functions as the NSW Trustee may direct or authorise the manager to have or exercise, and
(b) give a manager such directions in respect of the orders, authorities and directions authorised by this subsection as the NSW Trustee thinks fit.
(2) Without limiting any other provision of this Division, the NSW Trustee may authorise a manager to have functions of a kind specified in section 16.
(3) An order by the NSW Trustee is subject to the regulations or to any order of the Supreme Court or to any order of the Civil and Administrative Tribunal (in the case of a person under guardianship).
(4) This section is in addition to sections 64 and 65."
Section 16, to which reference is made in section 66, is in the following terms:
"16 Powers of NSW Trustee relating to property and other matters
(1) The NSW Trustee may exercise the following functions when acting in a trust capacity or protective capacity--
(a) receive money, rent, income and profit of real and personal property,
(b) grant leases of property for a term not exceeding 10 years and give to a lessee an option of renewal if the aggregate duration of the lease and any such renewal does not exceed 10 years,
(c) enter into a share-farming agreement for a period not exceeding 3 years,
(d) surrender a lease and accept a new lease,
(e) accept a surrender of a lease and grant a new lease,
(f) execute a power of leasing vested in a person having a limited estate only in the property over which the power extends,
(g) buy, sell, realise and mortgage (with or without a power of sale) real and personal property,
Note : Mortgage includes charge (see section 3 (1)).
(h) pay interest secured by a mortgage out of capital, if income is insufficient,
(i) postpone the sale, calling in and conversion of any property that the NSW Trustee has a duty to sell, other than property that is of a wasting, speculative or reversionary nature,
(j) settle, adjust and compromise a demand made by or against the estate,
(k) exchange or join in a partition of property and give or receive money for equality of exchange or partition,
(l) carry on a business, so far as may appear desirable for the purpose of more advantageously disposing of, or winding up, the business or preserving the business of a managed person until the managed person is able to carry it on,
(m) agree to an alteration of the conditions of a partnership into which a managed person has entered, for the purpose of more advantageously disposing of an interest in the partnership or terminating liability,
(n) carry out a contract entered into before the appointment of the NSW Trustee or enter into an agreement terminating the liability,
(o) surrender, assign or otherwise dispose of, with or without consideration, onerous property,
(p) exercise a power, or give a consent required for the exercise of a power, where the power is vested in a managed person for the benefit of the person or the power of consent is in the nature of a beneficial interest in the person,
(q) sequestrate the estate under the bankruptcy laws,
(r) take proceedings to cause a company to be placed in liquidation and vote or act by proxy at meetings of creditors or shareholders, whether the company is in liquidation or not,
(s) bring and defend actions, suits and other proceedings,
(t) without limiting paragraph (s), take criminal proceedings touching or concerning property,
(u) pay rates, taxes, assessments, insurance premiums, debts, obligations, costs and expenses and other outgoings,
(v) without limiting paragraph (u), pay the reasonable costs of the erection of a memorial or a tombstone over the grave of a deceased person or, if a deceased person is cremated, the reasonable costs of a memorial or any arrangements for the preservation of the ashes of the deceased person,
(w) repair and insure against fire or accident any property and charge the cost of repairs to capital or income, or apportion the cost between capital and income, as the NSW Trustee considers equitable,
(x) bring land under the Real Property Act 1900 ,
(y) do or omit all things, and execute all documents, necessary to carry into effect the functions of the NSW Trustee.
(2) The functions conferred by this section are in addition to, and do not restrict, any other functions of the NSW Trustee."
The scheme of the NSW Trustee and Guardian Act requires reference also to section 39 of the Act, which is in the following terms:
"39 General principles applicable to Chapter
It is the duty of everyone exercising functions under this Chapter [Chapter 4 of the Act, which includes sections 41, 64, 65 and 66 of the Act] with respect to protected persons or patients to observe the following principles--
(a) the welfare and interests of such persons should be given paramount consideration,
(b) the freedom of decision and freedom of action of such persons should be restricted as little as possible,
(c) such persons should be encouraged, as far as possible, to live a normal life in the community,
(d) the views of such persons in relation to the exercise of those functions should be taken into consideration,
(e) the importance of preserving the family relationships and the cultural and linguistic environments of such persons should be recognised,
(f) such persons should be encouraged, as far as possible, to be self-reliant in matters relating to their personal, domestic and financial affairs,
(g) such persons should be protected from neglect, abuse and exploitation."
It is not necessary, here, to elaborate references to the Civil and Administrative Tribunal (NCAT) beyond noticing that a person may become a "protected person" by virtue of an order made by the Court (under section 41 of the NSW Trustee and Guardian Act), an order made by the Guardianship Division of NCAT (under the Guardianship Act 1987 NSW), or an order made by the Mental Health Review Tribunal (under sections 43-52 of the NSW Trustee and Guardian Act). In each case, the estate of a protected person is managed "under" the NSW Trustee and Guardian Act.
Under that Act, although the NSW Trustee may itself manage a protected estate (as recognised by sections 55-62 of the Act), it is charged with the supervision (perhaps, more accurately, the monitoring) of management of estates by "private" managers (as recognised by sections 63-70 of the Act), subject to the oversight of the Court.
With emphasis added, regulations 6.21(1), 6.21(3) and 6.22 of the Regulations are in the following terms:
"Compulsory cashing of benefits in regulated superannuation funds
(1) Subject to subregulation (3), a member's benefits in a regulated superannuation fund must be cashed as soon as practicable after the member dies…
(3) For the purposes of subregulation (1) , it is sufficient if, instead of being cashed, the benefits are rolled over as soon as practicable for immediate cashing.
Limitation on cashing of benefits in regulated superannuation funds in favour of persons other than members or their legal personal representatives
(1) Subject to subregulation (6) and regulations 6.22B, 7A.13, 7A.17 and 7A.18, a member's benefits in a regulated superannuation fund must not be cashed in favour of a person other than the member or the member's legal personal representative:
(a) unless:
(i) the member has died; and
(ii) the conditions of subregulation (2) or (3) are satisfied; or
(b) unless the conditions of subregulation (4) or (5) are satisfied.
(2) The conditions of this subregulation are satisfied if the benefits are cashed in favour of either or both of the following:
(a) the member's legal personal representative;
(b) one or more of the member's dependants.
(3) The conditions of this subregulation are satisfied if:
(a) the trustee has not, after making reasonable enquiries, found either a legal personal representative, or a dependant, of the member; and
(b) the person in whose favour benefits are cashed is an individual.
(4) The conditions of this subregulation are satisfied if:
(a) the superannuation provider has been issued a release authority in respect of the member under section 131-15 or 135-40 in Schedule 1 to the Taxation Administration Act 1953 ; and
(b) the benefits are cashed in favour of the Commissioner of Taxation in accordance with the authority.
(5) The conditions of this subregulation are satisfied if the member's benefits are cashed in favour of the Commissioner of Taxation to pay an amount to the Commissioner of Taxation under the Superannuation (Unclaimed Money and Lost Members) Act 1999 .
(6) This regulation does not apply if, under a law of the Commonwealth, a State or a Territory mentioned in the table, a court makes a forfeiture order (however called) forfeiting part or all of the member's benefits in the fund to the Commonwealth, a State or a Territory."
Sections 31 and 32 of the Superannuation Industry (Supervision) Act respectively authorise the making of regulations governing "operating standards" for "regulated superannuation funds" and "approved deposit funds". The focus for attention in this judgment is on "regulated superannuation funds".
Regulation 6.17B provides that, "if an item of information given by a member in a notice under subregulation 6.17A(4) is not sufficiently clear to allow the trustee to pay the benefit, the trustee must seek from the member a written statement to clarify the item as soon as practicable after the trustee receives the notice". Regulations 6.22B, 7A.13, 7A.17 and 7A.18 have no bearing on a determination of the plaintiffs' notice of motion.
For the avoidance of doubt, when, in this judgment, reference is made to the "legal personal representative" of a deceased person, that expression is used, as it is in probate law and practice, to refer to the executor of a will admitted to probate or an administrator appointed by the Court to administer a deceased estate.
The necessity for such a declaration arises from the definition of "legal personal representative" in section 10(1) of the Superannuation Industry (Supervision) Act: "… the executor of the Will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person".
The reference here to "the trustee of the estate of a person under a legal disability" may be taken to include a reference to a protected estate manager; section 10(1) points in that direction when, in defining the word "trustee" in relation inter alia to a fund, it provides that, "if there is a trustee (within the ordinary meaning of that expression)" it means the trustee and, in any other case, "the person who manages the fund, [etc]".
However, the authority of both a protected estate manager and an enduring attorney terminates on the death of the person who, before death, was in need of protection. And, ordinarily, by virtue of section 50 of the Powers of Attorney Act 2003 NSW, an enduring power of attorney is suspended during the operation of a protected estate management order.
Use of terminology in the Commonwealth legislation does not always accord with that found in NSW legislation or in general use.
A correct course for a manager, or other interested person, who seeks to have a protected person (lacking testamentary capacity) make a testamentary gift is to make an application to the Court for leave to apply for a "statutory will": Succession Act 2006, sections 18-26; Re Fenwick; Application of JR Fenwick; Re "Charles" (2009) 76 NSWLR 22.
As a matter of practice, such an application should be made on notice to the NSW Trustee if only because its imprimatur is generally necessary for the purpose of authorising expenditure from the protected person's estate on the costs of the application. The prudence of seeking such authorisation is reinforced by recognition that the pendency of a protected estate management regime is not of itself conclusive that the protected person lacks testamentary capacity: Perpetual Trustee Company Ltd v Fairlie-Cunninghame (1993) 32 NSWLR 377.
The interaction of protective estate management and post mortem litigation concerning superannuation entitlements of the protected person is facilitated if a death benefit payable out of a superannuation fund is paid by the trustee of the fund to the legal personal representative of the deceased person whose estate was under protective management. It facilitates the conduct of an application for a family provision order, against the estate of the protected person, under Chapter 3 of the Succession Act by a person who (under section 57 of the Succession Act) has standing as an "eligible person" to make such an application. A death benefit paid to the legal personal representative of a deceased protected person is able to be treated as part of the estate of the deceased without resort to the "notional estate" provisions of Chapter 3.
A decision to invest, or to authorise investment of, a protected estate (governed by the NSW Trustee and Guardian Act) in a superannuation fund, or to make a death benefit nomination, requires compliance with section 39 of the Act, a statutory reformulation of the general law principle (reflected in Holt v Protective Commissioner (1993) 31 NSWLR 227 at 238 and 241-242) that whatever is done, or not done, on behalf of a protected person, should be that which is calculated to be in the interests, and for the benefit, of that person.
A decision to invest in a superannuation fund might meet this test more readily than a decision to make a death benefit nomination. A purported nomination that directs the trustee of a superannuation fund to pay a benefit otherwise than to the estate of the protected person cannot be taken, ordinarily, to satisfy the test. A protected estate manager is charged with management of the protected person's estate during the lifetime of the protected person, not beyond it.
Although the trustee of a superannuation fund may ostensibly have a discretion to pay a death benefit otherwise than to the estate of a deceased member who was, in life, a protected person, it can not do so without exposing itself to a liability to the estate for breach of a fiduciary obligation (or participation in a breach by the manager) where the deceased's membership of the fund is a consequence of an investment by a protected estate manager on behalf of the protected person.
In the interests of due management of protected estates generally, the NSW Trustee might be prudent to publish that fact to the trustees of superannuation funds of which a protected person is a member.
This could serve two purposes. First, it could preclude a trustee from contending that payment of a death benefit on the basis of a protected estate manager's death benefit nomination was justified by reason of the manager holding himself or herself out, or being held out, as authorised to make the nomination. Secondly, it could brand the trustee with knowledge which warns against the consequences of committing, or participating in, a breach of fiduciary obligations owed to a protected person (and his or her estate) or exposes the trustee to those consequences upon an unauthorised payment of a benefit.
For completeness, I note that the Court has not been requested to make an order of general application (under section 64 of the NSW Trustee and Guardian Act) affecting the exercise of functions of managers under the Act, vis a vis investment in a superannuation fund, such as was made in Re Managed Estates Remuneration Orders [2014] NSWSC 383.
Nevertheless, the NSW Trustee might give consideration to the possibility that regulation 6.17A(4A)(b) of the Superannuation Industry (Supervision) Regulations might conveniently be engaged, on notice to trustees of superannuation funds, by a general form of order by the Court under section 64 of the NSW Trustee and Guardian Act to the effect that each person whose estate is under protective management be restrained by self, servants and agents (including the manager of his or her protected estate) from giving a death benefit nomination to the trustee of any superannuation fund of which the protected person is a member.
With these observations, I adopt the NSW Trustee's Report.
It is not necessary to give separate consideration to section 67 of the NSW Trustee and Guardian Act (which authorises a protected estate manager to act under the direction of the Court, the NSW Trustee or NCAT) or sections 101-102 of the Act (which permit a manager to invest estate funds in accordance with the Trustee Act 1925 NSW or in accordance with a protected person's preferences) as they add nothing of practical significance to the analysis in the NSW Trustee's Report.
The orders made for appointment of a protected estate manager (as contemplated by section 41(1)(a) of the NSW Trustee and Guardian Act) subject the estate of a protected person to management under the Act. Sections 64 and 65 (and other provisions) of the Act vest in the NSW Trustee (and the Court) powers of control over management of a protected estate. Upon the appointment of a protected estate manager, the Court routinely orders that the manager may not do anything in reliance on the appointment until the NSW Trustee has authorised the manager to assume management of the protected person's estate. That provides a window of opportunity for the NSW Trustee to issue to the manager, as it routinely issues to managers, "directions and orders" for management of the estate. The investment powers of a manager are routinely subject to the NSW Trustee's supervision.
A trustee who holds the legal or equitable interest in the trust property;
the trust property
the beneficiary
with personal obligations on the trustee annexed to the property.
A trustee holds (and deals) with trust property in the interest of beneficiary. A trustee is certainly a fiduciary as is a protected estate manager, but the relationships are fundamentally different. All trustees are fiduciaries, but not all fiduciaries are trustees. A protected estates order it is submitted, is wider reaching that just a trust. It has a greater flexibility [3] , informed by the purposive nature of the jurisdiction. A trustee holds identifiable property for a specific but limited purpose - as defined in the trust deed or the terms of the trust upon establishment. A protected estates manager holds (unless limited by the Financial Management Order) the entirety of the persons estate for a much wider purpose.
A protected estate manager stands in the shoes of the protected person and is the substitute decision maker. A protected estate manager does not hold property for the benefit of the protected person. Rather the protected estate manager controls the property which always remains in the name of the protected person.
Put another way a court ordered damages trust (for example) has as its purposes the holding of property by the trustee for "the maintenance, welfare, advancement of the cestui que trust.. The protected estates regimes seeks to protect a person from "neglect, abuse and exploitation" by inserting a substitute decision maker who recognizes and as much as possible respects the autonomy of the individual.
The argument then that underpins Cheyne - i.e. that an investment requires an exchange of money from which a return or profit is expected by the trust - simply does not fit in the context of a protected estate. The "return" or "profit" is received by the person in whose name the investment is made by way of tax advantages and the like. It is merely that the protected estate manager makes the decisions (and executes the documents) which puts the investment into effect.
That s17 of the Trustees Act 1962 (WA) which is mirrored in s14 of the Trustee Act 1925 (NSW) does not allow a Trustee to invest in superannuation is also not to the point. A protected estate manager is not a trustee in the sense that there is a trust separate from the beneficiary. The "extension" in the NSW Trustee and Guardian Act, 2009 ,NSW, to grant a manager some of the powers under the Trustee Act,1925 NSW the Trustee Act is not meant to limit a protected estates manager's powers and fundamental role.
It is submitted that this fundamental distinction was recognized by the WA Supreme Court itself. In Cheyne, there was sought an appointment of the trustee as (limited) administrator - the equivalent of a protected estate manager in NSW - over the rights held by Mr. Cheyne as a member of the superannuation fund. This was so that Mr. Cheyne could have the same degree of "scrutiny and protection" that he would have were the monies retained by the trustee in that role alone. [4]
The legislation: NSW Trustee and Guardian Act 2009, NSW
Everything that is done in respect of a protected estate is done with the principles espoused in s39 of the NSW Trustee and Guardian Act 2009, NSW. At the forefront: the welfare and interests of the person are the paramount consideration; following thereafter in s39 (b), (c) and (d) which speak to the need as far as possible to respect the autonomy of the individual, namely that freedoms of the person to act and make decisions should be the least restrictive, that the person should be encouraged to maintain "normalcy" as far as possible, and the place that the persons views have in the decision making process.
This no doubt leads the comment that that the "human rights narrative" informing the protective jurisdiction [5] .
The starting position is to consider the case where NSW Trustee is the appointed manager. One looks to Division 1 of Part 4.5 of the NSW Trustee and Guardian Act 2009, NSW. NSW Trustee has all the functions necessary and incidental to the management and care of the estate by s56. The "estate" is defined as the "property and affairs of the person"( s38).
57 NSW Trustee has all functions of managed person
(1) For the purposes of its protective capacities in respect of a protected person or patient, the NSW Trustee has, and may exercise, all the functions the person or patient has and can exercise or would have and could exercise if under no incapacity.
This underlines the earlier argument that a protected estate manager is more than a trustee and underpins NSW Trustee's argument that as a substitute decision maker, NSW Trustee stands in the shoes of and takes action in the name of the protected person.
In addition to the powers of the NSW Trustee with respect to property - s16 - (and equally importantly 16(1)(y) which extends the power to "do all things and execute all documents to carry into effect the functions of the NSW Trustee ), the NSW Trustee may apply the money of the estate towards any of the following:
59 Application of money of managed estates
The NSW Trustee may apply money of the estate of a managed person towards any one or more of the following purposes:
(a) the payment of the debts and engagements of the person and the repayment of expenses chargeable to the estate of the person,
(b) in the event of the death of the person, the person's funeral expenses,
(c) the maintenance of the spouse of the person or any child, parent or other person dependent upon the person, or for whose maintenance the person provided when not a managed person or would be expected to provide,
(d) the payment of all proper costs incurred in or about the care, protection, recovery, sale, mortgage, leasing, disposal and management of the estate of the person,
(e) the preservation and improvement of the estate of the person,
(f) the taking up of rights to issues of new shares, or options for new shares, to which the person may become entitled by virtue of any shareholdings,
(g) the maintenance (including future maintenance), clothing, medicine and care, past and present, of the person.
NSW Trustee says that the powers granted to it under Part 4.5 Divisions 1 (and 3) coupled with s16, of the NSW Trustee and Guardian Act, 2009 NSW allow the application of monies into a superannuation scheme.
Where, as in the present case there is the management of the estate by a person other than NSW Trustee, it is submitted that ss64-66 generally, give to NSW Trustee (and the court) the power to authorize and direct the Managers to exercise such functions as are available to NSW Trustee as manager.
The Managers submit that there is no power specifically allowing the power to "justify" the payment of monies into superannuation. NSW Trustee respectfully disagrees.
On any reading the application of monies into superannuation, being done in the name of the protected person by a financial manager, in circumstances where there is no constriction to the notions that it is in the interests, and for the benefit, of a person must be within the functions of a manager:
• in relation to the administration and management of the estate (s64(1))
• that it is necessary or desirable of the care and management of the estate (s65(1)(c))
• that it is an investment of money in such manner as is thought fit (s65(3)(c))
• that it constitutes actions be the manager in the name of the protected person which are necessary and incidental to the management and care of the estate (s66(1)(a))
There is, much to commend the sole reliance on s65(3)(c) as a complete source of power in this regard. :
65 Orders by Supreme Court and NSW Trustee as to property
(3) Orders as to application of money
Without limiting subsection (1), the Supreme Court or the NSW Trustee may authorise and direct the application of money comprising the whole or any part of the estate of the person to any one or more of the following purposes:
………………………
(c) the investment of money, being money not required for the time being for any of the other purposes specified in this subsection, in such manner as the Court or the NSW Trustee thinks fit.
Having earlier dealt with the "issue" regarding investment powers posed by Cheyne it is submitted that the application of monies into a superannuation fund falls squarely within this section.
It is submitted therefore that there is power within the NSW Trustee and Guardian Act, 2009, NSW to place the money from a protected estate into a superannuation environment.
Dealing whether the specific issues for consideration:
a) whether the plaintiffs or any person other than the first defendant related to them has an interest in decisions made about superannuation for the first defendant which is in conflict with their duty as managers of the first defendant's protected estate.
In the abstract, the answer must be that yes, there is the potential for conflict. Where a family member is appointed as the protected estate manager there are a number of considerations. The courts are "alive" to this issue which has been discussed both in papers delivered by the Protective List Judge [6] and in cases such as in Re X [2012] NSWSC 275 . The overarching question though is whether the action of the protected estate manager is ultimately in the interest, and for the benefit, of the protected person.
Because of the nature of the superannuation, the father and sister of T (and indeed other members of the family) have an interest in the Fund upon his death.
We know that there is a Will executed by T in which he names his parents and his siblings as beneficiaries. Were there no Will in existence, on present circumstances, an intestacy would result in T's father (one of the Managers) to benefit.
There is no escaping the fact that there could arise a conflict.
The question is however, does the conflict, and the self-interest, cause the Managers to fail in their duty to protect T's interests?
The inevitability of the conflict is apparent is almost all cases where a family member is appointed the financial manager.
In this case however, the fact the Managers have an interest in the deceased estate of T does not negate the fact that the decision to place the money in superannuation is in his best interests.
b) whether any (and, if so, what) death benefit nominations have been made or might be proposed to be made, in respect of any superannuation entitlements of the first defendant.
The Managers have made a Death Benefit Nomination ("DBN") in favor of the Legal Personal Representative.
NSW Trustee takes the view that regardless of whether the Managers were aware of the existence of or contents of a Will of T, it is not available to a Manager to make such as nomination. Management of an estate terminates on the death of the protected person (s93). Whilst it is accepted that decisions made by a protected estate manager may have consequences which become apparent on the death of the protected person (see for example s83), to accept that the manager has power to make a decision about what happens to the protected persons funds after his or her death cannot be within the spirit of the Act.
A binding DBN to a superannuation trustee as to what to do with funds upon the death of the fund member is in effect testamentary disposition. It is a direction post mortem which is not allowed by the Act. NSW Trustee notes the submission made by the Managers at paragraph 4.35 of the (first) outline of submissions, but says that those cases, and in particular McFadden v Public Trustee of Victoria [1981] 1NSWLR 15 are distinguishable on their facts.
Without wishing to divert into another complex area of law, NSW Trustee says that were DBN's allowable then this would potentially displace the utility of a protected person to make a Will at all. There is a mechanism to deal with the assets of a person lacking testamentary capacity (which is of course not the same as a lack of capacity to manage his or her affairs), by way of the statutory will provisions of the Succession Act 2006 NSW. To allow a protected estate manager the power to make a decision which affects the testamentary estate is tantamount to displacing the Courts powers.
If a nomination takes the superannuation trust outside the testamentary estate, it follows that the act of nominating is a testamentary act, which the Managers had no power to make.
c) whether the first defendant has a will (be it a statutory will or otherwise) which might be the subject of impact if superannuation arrangements are authorised.
As noted there is a Will, but it is not "impacted" by reasons of the DBN because the nomination places the funds proceeds back into the testamentary estate. That may appear contradictory, given the comments in b) above, but NSW Trustee says that even were there no valid and binding DBN, then for the reasons given by the Managers the funds would likely be given to the estate as there is no present "dependents" to whom the fund could be paid.
d) whether there is a need to review the prospective entitlements of potential beneficiaries if the first defendant were to die intestate.
Again, given that there is a Will, it is not likely that T will die intestate. That is not to say that the Will itself is not be open to challenge, but there is, at this stage no suggestion that this will happen.
Equally however, if there is a change in circumstance in the future (such as the development of a personal relationship, foreshadowed in the earlier affidavits, and indeed the earlier decision by the Court in this estate - G v G) there may arise the need to seek further direction of the Court, especially if the view of NSW Trustee that the DBN is not valid, is accepted.
It is suggested however that in the event that T does enter into a personal relationship in the future, the financial impact and consequences of that are best dealt with within a family law framework, for example by way of a Binding Financial Agreement.
e) whether there is any (and, if so, what) need to make orders excusing such, if any, breach of duty as may have occurred with superannuation arrangements hitherto put in place by the plaintiffs.
The Managers submitted that orders excusing the transfer of funds into a superannuation environment are required and indeed are sought. NSW Trustee does not agree.
For the reasons specified earlier, NSW Trustee says that there is power in the NSW Trustee and Guardian Act 2009, NSW to make the investment.
NSW Trustee says that it authorized the Managers to make the transfer in the approval(s) give to the protected estate manager following the statement of advice and manager's plan. In this regard the NSW Trustee supports the contention in the Managers submissions (and the evidence of XXX) that the intention to transfer the bulk of the estate was at all material times disclosed to NSW Trustee and the Court, and had the approval of NSW Trustee.
Insofar however, as the DBN [sic], NSW Trustee does accept that the Managers require an Order excusing these actions. For the reasons noted at (b) above, NSW Trustee believes that there is no power to make such a nomination.
f) whether there are any (and, if so, what) concerns about supervision of management of the first defendant's protected estate in the event that his estate is put into superannuation.
The essential problem identified by Cheyne was that transferring monies into a superannuation environment removes the part of the estate from the control of the Managers.
In response to this NSW Trustee says:
1. In a sense the control issue is a "non issue" inasmuch as in many investments there is a loss of control - for example the purchase of shares in companies which is specifically allowed in s59(f). There is always some degree of lost control.
2. Because of the reasons outlined earlier the Managers have the same "control" as T, because they are the substitute decision maker for T.
3. That being so, the "loss of control" is the same as any other member of a superannuation fund. A member of a superannuation fund does not have a direct interest in the assets of the fund; rather it is the purchase of a bundle of rights in the superannuation scheme. That is so, whether the member is "capable" or lacks capacity.
4. Standing in the shoes of the member then, the Managers can still control the fund to the extent that they can call upon the Fund Trustees to make payments in accordance with the Trust Deed.
5. In circumstance where in this case (and in most protected estates where superannuation is involved) the "disability clauses" are exercised, putting the fund into "retirement phase" and making the funds accessible to the member.
6. There are numerous protections to T (and any fund member) in terms of licensing and legislation applicable to superannuation funds and superannuation trusts and trustees as are detailed in the Managers' submissions.
7. This is a "retail" fund (not an SMSF) and the control over these funds is highly regulated.
8. Moreover, it is contrary to the very nature of the protective regime that a person who does not lack capacity, but is able to fetter their rights by becoming as superannuation fund member, has an advantage not available to a protected person.
g) whether the terms of any superannuation arrangements made for the first defendant are appropriate for a person who is a protected person.
h) whether the decisions about superannuation made, or proposed to be made, by the plaintiffs via a vis the first defendant are properly characterised as arrangements for his benefit and in his interest
NSW Trustee agrees with the submissions put by the Managers that the transfer of funds into a superannuation environment are both appropriate and are arrangements for the benefit and the interest of the protected Person.
In conclusion, having reviewed all material placed before the Court by the Managers, NSW Trustee view is that:
1) There is power with the NSW Trustee and Guardian Act 2009 NSW to make superannuation investments; and
2) The Managers in this case have received direction and authority from NSW Trustee in the past to make such contributions; in future upon submission to NSW Trustee, consideration as to further contributions can be made
3) The power to make the superannuation investment (and of NSW Trustee to authorize same) does not however include a power to make any form of death benefit nomination (binding or not).
These submission have not addressed the ability of the Court to make the orders sought by the Managers utilising the parens patriae powers. For all the reasons set out by the Managers it is agreed that the placement of some of the monies (even the majority of the monies) is in the interest and for the benefit of T as in this case. The advantages of the superannuation environment are unchallenged. The jurisdiction of the Court to make such orders as support the paramount considerations is undeniable.
Date: 21 May 2019