WA court case highlights lessons on death benefit conflicts

The deceased, Mr Bienias, died intestate on 4 August 2017, aged 58 years. Those entitled to distribution of the estate under the intestacy were the plaintiff, Ms Gonciarz, the first defendant, who lives in Poland, and the second defendant who lives in Belgium.

The deceased was a member of the Retail Employees Superannuation Trust (REST) and his death gave rise to a death benefit of $541,412.20. The deceased had not made a binding beneficiary nomination, but before marrying the plaintiff, he had made a non-binding beneficiary nomination in favour of the second defendant.

On 26 October 2017, the plaintiff’s solicitor sent a death benefit claimant statement which had been completed by the plaintiff in her capacity as the spouse of the deceased to the trustee of REST.

In the letter from the plaintiff’s solicitor to the trustee that accompanied the claimant statement, the solicitor stated that the plaintiff had applied for a grant of letters of administration and that a copy would be sent to the trustee as soon as it became available.

On 21 May 2018, the trustee sent a letter to the plaintiff informing her that the trustee had directed that the total death benefit less any applicable tax was to be paid to her as the deceased’s lawful spouse.

On 8 June 2018, the trustee wrote to the plaintiff informing her that, on 5 June 2018, it had received an objection to the proposed distribution.

Although the plaintiff was not informed of who had made the objection, it subsequently transpired that the objection had been made by the second defendant and that the ground of the objection was that the second defendant did not believe that the plaintiff and the deceased were living together at the date of the deceased’s death.

On 13 June 2018, the plaintiff commenced an application under the Family Provision Act 1972 (WA). The plaintiff named herself in her capacity as the administrator of the estate as the first defendant to that application, and the first and second defendants to the present application were the second and third defendants, respectively.

In correspondence between the plaintiff and the Australian solicitors for the defendants about the administration of the estate, defendants’ solicitors complained on their clients’ behalf about delay on the plaintiff’s part in administering the estate and, in particular, the delay in selling the former matrimonial home in which the plaintiff continued to reside.

The defendants’ solicitor requested that the court make orders requiring the plaintiff to file and serve accounts and a plan of distribution.

Then on 7 September 2018, the solicitors for the defendants sent an email to the plaintiff attaching a copy of the decision of Kenneth Martin J in Burgess v Burgess.

The defendants’ solicitors claimed that, based on the outcome of the Burgess v Burgess case, by making an application to REST Super for the payment of superannuation monies to herself, the plaintiff had acted in conflict of interest to her duties as administrator.

On 14 March 2019, the plaintiff’s solicitors, who act for the plaintiff in the current proceedings, sent a letter to the defendants’ solicitors enquiring whether the defendants would consent to the plaintiff resigning as administrator of the deceased’s estate and being replaced with a suitable substitute, suggesting a legal practitioner, Simon England.

The plaintiff’s solicitor stated that the need for their client to be replaced as administrator was urgent.

“That is because my client wishes to object to the decision of the superannuation trustee to pay the death benefits to the estate. As you are aware, any objection must be lodged by no later than 28 March 2019,” they stated.

The defendants refused to allow the plaintiff to resign as administrator of the deceased’s estate, stating that the applicant was motivated “entirely by self-interest” and that it would be both inconvenient and expensive to the estate to replace the administrator.

The plaintiff submitted that the appointment of an independent experienced administrator is desirable given the degree of animosity and distrust between the beneficiaries.

In his decision, Justice Tottle said that this case yet again “highlights the importance of making wills and making binding beneficiary nominations in respect of superannuation benefits”.

“Upon the deceased’s death, the plaintiff was placed in a difficult position of potential conflict,” Justice Tottle stated.

“Although she may not have appreciated it, the plaintiff faced a dilemma: the estate required an administrator and, in a practical sense, she was the only person in a position to undertake that role, but as the deceased’s widow she had a strong claim to payment of the death benefit — as the trustee’s original decision demonstrated.”

By accepting the grant of administration, the plaintiff was obliged to subordinate her claim to the death benefit to that of the estate, he stated.

“This difficult situation was not of the plaintiff’s making. That is not to suggest that the fiduciary principles discussed in the authorities should be applied with any less rigour, but it is a factor to be taken into account when considering whether to exercise the discretion to revoke the grant.”

Justice Tottle decided to grant the plaintiff’s request to be removed as administrator, and to appoint Mr England in her place.

“Mr England is an experienced and reputable legal practitioner who is capable of administering the estate efficiently,” he stated.

“Whilst it is true that he will charge professional fees for so doing, having an independent and impartial administrator should assist in avoiding the controversies that have beset this administration, thus permitting an efficient and cost-effective administration — an outcome that is in the interests of all beneficiaries.”