In the decision of Brine v Carter [2015] SASC 205, the South Australian Supreme Court has ruled that the obligation of Administrators to claim superannuation and death benefit entitlements for the benefit of the estate (which was established in McIntosh v McIntosh [2014] QSC 99) applies equally to executors appointed under a Will.
The deceased in Brine was survived by three children and a de facto, whom he appointed as executors of his estate. He had two superannuation benefits exceeding $630,000: an indexed pension annuity, which he nominated his de facto spouse to receive, and a lump sum benefit, with a non-binding nomination in place to his estate.
The de facto executor made an application for the benefits to be paid to her (as a financial dependant). She then misled her co-executors to believe that the benefits were payable only to minor and disabled children or spouses.
The co-executors ultimately made their own enquiries with the superannuation fund and submitted an application for the lump sum benefit to be paid to the estate.
After considering all applications, the superannuation trustee determined to pay all benefits to the de facto.
In response, the children executors submitted an objection to the superannuation fund on behalf of the estate, but consented to the de facto making submissions in response in her own capacity.
Ultimately, the benefits were paid to the de facto. The children executors then sued the de facto for breach of her fiduciary duty and sought orders for her to account to the estate, as in the Queensland decision of McIntosh.
The Court determined that although the de facto was strictly in breach of her fiduciary duty, she was not required to account to the estate. That is because she was ultimately authorised by her co-executors to make the application on her own behalf and there was no causal connection between her application and the ultimate outcome.
On the issue of authorisation, the Court said:
“By their conduct, the [children executors] consented to [the de facto] pursuing her own interests by claiming payment of the benefit in her personal capacity without resigning as an executor.”
As to causation, the Court commented:
Unisuper gave no consideration to the exercise of its discretion until it had received the competing contentions from [the de facto] on the one hand and the other three executors on behalf of the estate on the other hand … In these circumstances, there was no connection between [the de facto’s] breach of duty and the benefit she received.
Nevertheless, if no competing contention had been advanced on behalf of or in favour of the estate, equity would not have enquired into the prospect that the discretion would have been exercised in favour of the estate and [the de facto] would have been liable to account.”
Importantly, the Court did not acknowledge any distinction between the role of administrator and executor in this regard and commented that they owe the same fiduciary duties. Further, the Court did not accept that the mere appointment of a person as executor amounts to authorisation to act notwithstanding a conflict, in the absence of express consent from the testator.
This decision is yet to be tested in other states in Australia. However, it arguably imposes new obligations on executors (as well as Administrators) when dealing with superannuation and death benefits, in respect of which a legal personal representative can be personally liable for breach of these duties.
For more information or advice in relation to estate or superannuation disputes, please contact a member of our team today.
This article was posted by the Bennett & Philp marketing team on behalf of the Estate Litigation practice group. The article was authored by a former team member while they were under the employ of Bennett & Philp Lawyers. Final revisions were made by a Director in charge prior to publishing.
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