Court case highlights conflict of interest issues with death benefits
A decision handed down by the Supreme Court of Western Australia on a death benefit case provides further clarity on where conflicts of interest might arise in relation to superannuation death benefit claims, says an industry law firm.
Sladen Legal principal Phil Boderick said the decision of Burgess v Burgess is similar to a number of other cases relating to death benefits in recent years, including Re Narumon Pty Ltd, Brine v Carter and McIntosh v McIntosh, and demonstrates that the courts will strictly uphold fiduciary duties, even if they have unfair outcomes.
This case, Mr Boderick explained, involved an application to the court by a widow as to whether a conflict of interest arose from her position as administrator of her husband’s estate and her personal claims for his super death benefits. The parties were the wife and her minor children, represented by the public trustee.
The husband died intestate and was survived by his wife and their two minor children. Under the Western Australian intestacy laws, the bulk of his estate was to be paid one third to each of the wife and the two children.
“The husband, relevantly, had interests in three public offer super funds. The wife claimed, and was paid, the death benefits from the first super fund prior to her appointment as administrator. She claimed, and was paid, the death benefits from the second super fund after her appointment as administrator. At the time of the application, she had not made a claim to the third super fund,” said Mr Boderick.
The court found that the principles laid down by McIntosh v McIntosh should be followed.
“That is, an administrator of an estate is bound to claim death benefits for the estate and any claim made personally is a breach of prohibition against conflicts of interest,” he said.
In relation to the first super fund, because the wife was not an administrator when she claimed the death benefit, there was no conflict of interest and that amount could be retained by the wife.
In terms of the second fund, there was a conflict of interest as she was bound to claim the benefits on behalf of the estate.
“Therefore, the death benefits from the second super fund had to be paid to, or accounted for, the estate,” he said.
In relation to the third super fund, the wife was bound to claim the benefits on behalf of the estate even though the third super fund was not bound to pay it to the estate.
“Importantly, the court distinguished merely informing the super fund of the existence of the estate as a potential beneficiary and actually making a claim on behalf of the estate,” he said.
“This is another important case in highlighting the importance of conflicts of interest in the context of super death benefit claims and payments.”
