Federal Court dismisses appeal over death benefit dispute

The member married the first respondent in this case on 26 April 2017 at a time when he was undergoing chemotherapy for cancer, and he was readmitted to the hospital on the following day. The member executed his will shortly thereafter on 5 July 2017. He died on 8 October 2017, after being admitted to the hospital on 20 September.

When he passed away, the member and his wife were living together with his brother, sister, and the sister’s husband. The member had no children.

On 19 January 2018, the wife submitted a statutory declaration of dependency and applied to the trustee for the member’s superannuation. The sister and brother each provided a statutory declaration of interdependency to the trustee on 17 April 2018 and 8 May 2018, together with attached supporting documents.

The sister also provided a statutory declaration dated 16 April 2019 to the trustee, seeking payment of the member’s superannuation to the member’s estate in her capacity as administrator of the member’s estate.

On 4 June 2018, the trustee decided to give 100 per cent of the death benefit to the wife. That decision was communicated to the sister and brother by letter dated 6 June 2018. By a notice dated 5 July 2018, the sister and brother objected to that decision.

On 7 August 2018, the trustee again determined on review that 100 per cent of the death benefit should be given to the wife on the basis that she was the member’s spouse and a dependant. The trustee provided reasons to the wife, the estate, the sister and the brother by letter dated 8 August 2018.

The trustee stated that as the member account held a preferred nomination, the trustee was required to pay the death benefit to the member’s dependants or to the legal personal representative in proportions determined by the trustee in accordance with rule 7.4 of the Trust Deed Rules.

Rule 7.4 of the Trust Deed Rules stated that the trustee must pay the death benefit of a member for whom it holds a preferred nomination to one or more of the member’s dependants or legal personal representative in proportions which the trustee determines or, if there is no dependant and no legal personal representative appointed within a reasonable time, to any other person or persons in proportions which the trustee determines.

The trustee said that the wife was a spouse, which fell within the meaning of dependant under the Trust Deed Rules and if the member had survived, it is fair and reasonable to state that he would have continued to be married and living a shared life together.

It also determined that neither the sister nor the brother met the definition of dependant in the trust deed rules or were in an “interdependency relationship” under s 10A of the SIS Act.

The trustee also stated that it had not been advised that a legal personal representative had been appointed by the Supreme Court to administer the estate, and in any event, it would not be fair nor reasonable to pay the estate given that a dependant had been identified.

The brother and sister then filed a complaint with the Superannuation Complaints Tribunal, which affirmed the trustee’s decision to pay the entire death benefit arising on the death of the member to his wife. The applicants then applied for an appeal of the tribunal’s decision.

The sister and brother argued that the benefit should be paid to the estate for distribution in equal shares between the sister, brother and wife, in accordance with the member’s will having regard to a number of considerations.

These considerations they submitted included the shortness of the marriage, which was less than six months, insufficient evidence that the wife was financially dependant on the member and that the wife was aware of the member’s terminal illness when she married him and that his life expectancy was short.

The sister also challenged the trustee’s view that the member would have continued to be married to the wife and shared his life with her.

The brother and sister also claimed that there was evidence of interdependency of the member and the sister and brother based on the fact they had lived together continuously for 16 years and the brother, as carer for the member for some six weeks prior to his death, and the sister, as the member’s carer and de facto nurse, had provided the member with both “substantial and mutual” emotional and cultural support.

According to their custom and culture, they also stated that the member, being the eldest of the family, was to support the sister and brother.

They also stated that the member had expressed his intentions within the preferred beneficiary nomination, the will, and verbally before his death that his superannuation be distributed in “equal thirds” between the wife, sister and brother, and the member was not aware that the trustee may ignore his testamentary wishes.

On the other hand, the wife pointed, among other things, to ways in which she cared for the member during their marriage, the fact that she did not earn an income when the member died but was supported financially by him, and the fact that she resided with him. The wife also submitted that she and the member lived with the sister as a matter of convenience and had plans to live on their own

Justice Perry noted that while the member’s wishes were relevant in considering whether the trustee’s decision was fair and reasonable, “those intentions [were] considered relevantly in the context of rule 7.4 of the Trust Deed Rules conferring a discretion on the trustee to determine whether to pay the death benefit directly to the member’s dependants or to his legal personal representative”.

“Moreover, it is evident from the presence of a discretion to pay the death benefit directly to the member’s dependants that the death benefit did not automatically form part of the member’s estate to be distributed under his will, reflecting the fact that it is not the purpose of superannuation to give effect to the terms of a will,” stated Justice Perry.

“Nor was the trustee bound to accept the description of the sister and brother as dependants in the computer printout apparently generated by the trustee which, at best, recorded the member’s understanding in August 2016.”

In relation to the submission by the brother and sister that the tribunal had failed to have regard to the long history of interdependence between themselves and the member, the tribunal had provided rational and logical reasons for its finding that they were not in an interdependency relationship.

“The tribunal expressly considered both the sister’s and brother’s claims to be a dependant under superannuation law by reason of being in an interdependency relationship, but after a careful analysis of the evidence, found that they had not established that they or the member provided each other with financial support at the time of the member’s death,” she explained.

“In this regard, the tribunal also found that the trustee had asked the brother for evidence of his financial dependency but that none was provided, with the brother and sister submitting that they did not keep such documents.”

Justice Perry said that cultural considerations might, in an appropriate case, be relevant to establishing financial dependency or other aspects of a dependency relationship.

“The difficulty here is that the cultural practice whereby the member, as the eldest of the family, was to support the sister and brother, was not relied upon to establish dependency at the time of the member’s death, but rather to establish that the member intended to make financial provision for them after his death,” said Ms Perry.

“As such, the cultural considerations relied upon by the sister and brother could not overcome the lack otherwise of evidence of financial dependency as found by the tribunal, which was fatal to their claims.”

She also noted the applicants’ submission that the wife married the member in circumstances where there was no prospect of a shared life together.

“However, the applicants’ contention does not overcome the difficulty that the tribunal found that the wife alone met the criteria in the definition of a ‘dependant’ at the time of the member’s death and therefore it was open to the tribunal to accept as fair and reasonable, the trustee’s decision under rule 7.4 to distribute the whole of the death benefit to her,” she explained.

Justice Perry said that while it is a serious matter if the member “was not properly advised at to the consequences of his investment in the fund vis-à-vis his intentions to provide financially for the sister and brother, as well as the wife”, this was not the question before the tribunal.

“[The tribunal] was bound to determine whether the trustee’s decision was fair and reasonable in the context of the trust deed and superannuation law,” she stated.

The Federal Court determined that the tribunal’s finding that the trustee’s decision to distribute 100 per cent of the death benefit to the wife was fair and reasonable and dismissed the appeal with costs.