As a matter of law an entitlement under a superannuation fund (for example, death benefits or life insurance) does not form part of a deceased estate.  However, superannuation trustees may exercise their discretion to pay a deceased’s superannuation death benefits to an estate.

Recent Supreme Court decisions in WA have clarified in what circumstances and, perhaps more importantly, at what time an applicant in WA may apply personally for payment of superannuation death benefits.

Recent Developments in Superannuation Case Law in WA

1.    Case Study: Burgess v Burgess [2018] WASC 279

In Burgess v Burgess, the deceased died intestate (that is, without a Will) and without making any nominations with respect to any of his four superannuation policies.

The deceased’s widow applied to each superannuation provider, as an eligible dependant, to receive personally his superannuation death benefits.

There were 4 different scenarios for the Supreme Court to consider:

(a)  Prime Super paid the proceeds of the policy to the widow before the widow had applied to the Supreme Court to be appointed as the Administratrix of her late husband’s estate;

(b)  REST paid the proceeds of the policy to the widow approximately six months after the Supreme Court had appointed her to be the Administratrix; and

(c)  IOOF Super Fund paid the proceeds of the policy to the deceased’s Estate; and

(d)  AMP had not yet made a decision regarding the policy at the time the matter was heard.

An issue of conflict arose as a result of the widow seeking for her late husband’s superannuation proceeds to be paid to her in her capacity as a spousal dependant, whilst at the same time acting as Administratrix of the Estate.  In the latter case, under the Administration Act 1903 (WA), which governs how an intestate estate must be distributed, the widow swore an affidavit to the effect that she would administer “the estate according to law”.  As both she and her two children were persons entitled to participate in the distribution of her late husband’s estate, there was potentially a direct conflict between her personal interests and those relating to her children.  One of the questions for the Court to decide was: at what point does this conflict arise?

As we see it, potentially, there could have been three possible times when the proposed Administratrix became a fiduciary, such that after that time she could not act inconsistently with her duties.  Those times were:

• the time of swearing the Affidavit in support of the application for the Grant wherein she made the statement that she would administer “the estate according to law”; or
• the time of lodging with the Supreme Court the Affidavit in support of the application for the Grant; or
• the time the Supreme Court issues the Grant to the Applicant.

The timeframe selected by the Court was (c) – the date on which the Supreme Court issues the Grant to the Applicant.

In terms of the 4 different scenarios, the Court held:

(a)  that, in respect of the date of the payment of the Prime Super superannuation, the Supreme Court held that the conflict of interest was not present because the Supreme Court had not yet appointed the widow as the Administratrix of her late husband’s Estate and therefore she could retain the funds paid to her;

(b)  that, in contrast, in respect of the REST superannuation, a conflict existed at the time the REST superannuation proceeds were paid personally to the widow, because by this time the Supreme Court had appointed her to be the Administratrix before the payment was made to her.  The Court held that, in this case, the fidelity required of the Administratrix (ie the widow) was not just to disclose the existence of the ‘rival’ Estate interest when claiming the superannuation death benefits in her own personal right from the fund trustee.  It required more – that is, it required her to apply as the Administratrix of the Estate for the Estate to receive the superannuation death benefits in any exercise of the fund trustee’s discretion.  To summarise, it required the fiduciary’s undivided loyalty in pursuing exclusively the interests of the beneficiaries to the exclusion of all other rival interests (in this case, the rival interest being her own personal interest);

(c)  that there was no present concern in relation to the payment of the superannuation death benefits by IOOF Super Fund because payment had been made to the Estate rather than to the widow personally; and

(d)  that the outcome of its decision in this matter would impact upon the decision rendered by the trustee of AMP in relation to the policy held with AMP by the deceased.

The practical effect of the Burgess v Burgess decision is that an Administrator or Administratrix has a positive duty to apply on behalf of an intestate Estate for payment of any superannuation death benefits that are not the subject of a binding nomination.

2.    Gonciarz v Bienias [2019] WASC 104

In Gonciarz v Bienias, the Plaintiff applied on an urgent basis for revocation of a Grant of Letters of Administration which the Supreme Court had issued to her in respect of her late husband’s estate, and for the appointment of an independent solicitor in her place.

The deceased died intestate.  He had a superannuation policy with REST and had not made a binding nomination.  The Plaintiff had made a claim to the trustees of REST in her capacity as a spousal dependant.  The Plaintiff indicated in correspondence to REST that she had applied for a Grant of Letters of Administration and would supply a copy of the Grant as soon as it became available.

REST corresponded with the Plaintiff to ascertain details of other family members of the deceased (including his brother (the second Defendant) and the deceased’s step-children (the plaintiff’s daughters), which information was provided.  After consideration, REST’s trustees decided to pay the deceased’s superannuation death benefits to the Plaintiff as the deceased’s lawful spouse.   An objection was made by the Second Defendant on the basis that the Plaintiff was not living with the deceased at the time of his death.

The solicitors for the Defendants then brought to the Plaintiff’s attention a copy of the decision in Burgess v Burgess.   It should be noted that the dispute between the parties was acrimonious, particularly so in respect of the way in which the Plaintiff had been administering the Estate, which included a requirement for the Plaintiff to pass the Estate’s accounts.

As a result of the Defendant’s correspondence, the Plaintiff wrote to REST’s trustees seeking to withdraw the claim she had made personally for the superannuation death benefits and instead sought to comply with her fiduciary duty as Administratrix to claim the superannuation death benefits on behalf of the Estate.

By letter, REST’s trustees informed the Plaintiff and the Second Defendant that they had reversed their original decision and instead sought to pay 100% of the death benefits to the Estate.  It was at that time that the Plaintiff became aware of the basis of the Second Defendant’s objection, that is, she was not living with the deceased at the time of his death.

The Plaintiff then filed her application to the Supreme Court to revoke the Grant of Letters of Administration.  In support of her application the Plaintiff made a number of submissions including that there was no good reason to require her to subordinate her personal interests in respect of the death benefits to the interests of the estate.  She argued that doing so operates to favour the other beneficiaries at the expense of enabling the Plaintiff to challenge the trustee’s decision.  The Plaintiff should be free to challenge the decision of the Trustee, a decision which she says was ‘infected by the Second Defendant’s mistaken and flawed belief as to her living arrangements’.  The Second Defendant refused to consent to the Plaintiff resigning as Administratrix.

The Court said that, upon the deceased’s death, the Plaintiff was placed in a difficult position of potential conflict. The estate required an administrator and, in a practical sense, the Plaintiff was the only person in a position to undertake that role, but as the deceased’s widow she had a strong claim to his superannuation death benefits.   It is in the interests of the Plaintiff to challenge the trustees’ decision, but it was her duty not to do so.  Accordingly, the Court held that it should not compel the Plaintiff to continue acting as the Administratrix, and to do so would be obstructive to the due and proper administration of the estate and to the interests of the parties beneficially entitled to it.

These cases highlight the importance in WA of making valid up to date Wills and binding death benefit nominations in respect of superannuation death benefits and ensuring that those documents are consistent with each other.

If you would like advice, please contact Jacinta Binstead on (08) 6166 9000.